Board heterogeneity and organisational performance: The mediating effects of line managers and staff satisfaction

Upper Echelons (UE) theory posits that organisational performance reflect the personal values and cognitive frames of the top management team and, crucially, that greater heterogeneity in individual backgrounds of senior... [ view full abstract ]

Upper Echelons (UE) theory posits that organisational performance reflect the personal values and cognitive frames of the top management team and, crucially, that greater heterogeneity in individual backgrounds of senior executives leads to better outcomes. However, the extant empirical research provides mixed evidence on the main assumptions of the UE perspective. Focusing on the case of English National Health Services acute care hospital trusts, this study fills a gap in the literature by proposing and testing a multiple mediation model analyzing the relationship between board heterogeneity and performance. Specifically, it focuses on the mediating effects of internal organisational conditions. A variance-based structural equation modelling (Partial Least Square) is applied to a sample of 102 boards of directors. First, the results lend support to the UE hypothesis that there is a positive impact of board heterogeneity and hospital-level performance. Second, the analysis shows that the relationship heterogeneity-performance is positive influenced by 1) the styles and practices of line managers and 2) the levels of staff satisfaction, and by their mutually reinforcing roles.