TO AGREE OR NOT TO AGREE - CONSENSUS AND PERFORMANCE IN NEW VENTURES

It is an intuitively appealing notion that enhanced firm performance i s associated with agreement by top managers on a fundamental set of st rategic goals and on methods to accomplish those goals. Nowhere should this relationship be more pronounced than in new ventures. New ventur es tend to focus on narrow sets of products or markets; therefore the range of conceivable goals and methods should be narrower than would b e the case if these firms were competing with many products in diverse markets. In addition, younger companies suffer from a ''liability of newness,'' and lack the accumulated resources which allow more establi shed firms to weather rough rimes. These conditions place an even high er premium on the need for top management of new ventures to agree on doing a few things very well. Previous research has evaluated the rela tionship between performance and top management consensus. Interesting ly, the results have been mixed and have sometimes contradicted intuit ion that top management agreement is related to better performance. Wh ereas previous studies have for the most part examined this relationsh ip in larger companies competing in stable industries, the study repor ted here provides findings from newer entrepreneurial ventures in dyna mic industries. Several important findings emerge from this study. Fir st, managers' assessment of better performance is not related to agree ment on a primary set of strategic goals and means. Instead, perceived better performance is significantly and positively related to disagre ement on secondary sets of strategic goals and means.(1) Second, power ful individuals in top management teams have an important impact on th e nature of the consensus-performance relationship. In new ventures th e influence of the CEO's perspective and behaviors in forging agreemen t cannot be overlooked. Third, these results are evident during the ea rlier life cycle stages of a venture's development, and in dynamically changing competitive environments. The findings of this study have im plications for new ventures and the venture capital firms which suppor t them, and for established corporations seeking to become more entrep reneurial. Entrepreneurship may be viewed as thriving in a world of id eas. This study shows a strong correlation between perceptions of supe rior performance and the presence of idea diversity within top managem ent teams. The importance of idea diversity in earlier stages of a ven ture's development is especially interesting and contrasts with the tr aditional view of new ventures as being highly dependent on adherence to the founder CEO's initiating vision. The relationships studied here also provide prescriptive advice for new ventures. Gaining agreement on all strategic issues by all top managers is not productive. Superio r performance is not associated with this level of complete agreement. Attempting to force consensus among all managers on all issues may pr event important new ideas from being considered. In addition, we surmi se that valuable firm resources may be used up in attempting to gain a greement across such a broad spectrum of strategic goals and means: th eir use in this manner may detract from their application toward other more substantive organizational issues. Both entrepreneurial firms as well as established companies seeking to become more entrepreneurial should find ways to encourage the generation of idea diversity, partic ularly in the incipient stages of their new ventures. For established firms simply flattening a corporate hierarchy to create more of an ent repreneurial type of organizational structure may not be sufficient. I n this research some of the younger ventures, which presumably enjoyed the benefits of such structure, did not enjoy the benefits of broad i dea diversity and performed less well. In established companies the pr esence of ''corpocracy'' may still overshadow and constrain both initi ating vision and the subsequent generation of multiple perspectives af fecting new ventures. These firms should seek to develop and improve o rganizational communications systems to enhance the production and flo w of new idea. The generation of idea diversity within start-up compan ies is particularly challenging. Often founder CEOs have technical bac kgrounds, but lack managerial experience. They may thus have difficult y in managing professionals in top management teams to generate divers ity, and adherence to their initiating visions may also block consider ation of other ideas. We suggest that firms therefore consider two alt ernatives to assist in the generation of multiple, challenging perspec tives within the top management team. First, consideration might be gi ven to hiring top managers with different industry and company backgro unds and who have not worked together previously. In addition, hiring practices might consider more subtle measures of managerial diversity, such as future time orientation or other cognitive dimensions such as integrative complexity. Second, new ventures might consider alternati ves to traditional organization by function. This may include the crea tion of a position solely responsible for managing planning and develo ping idea diversity within the top management group. Firms might also consider rotating functional assignments among top managers in order t o broaden each manager's perspective. (C) 1998 Elsevier Science Inc.