Board Heterogeneity and Organisational Performance: The Mediating Effects of Line Managers and Staff Satisfaction

Upper echelons (UE) theory posits that organisational performance reflects the personal values and cognitive frames of the top management team (TMT) and, crucially, that greater heterogeneity in individual backgrounds of senior executives leads to better outcomes. However, often missing from this research is a more developed account of how this relationship between the characteristics of TMTs and performance is also mediated by internal conditions within organisations. In this paper we begin to address this deficiency focusing on the mediating impact of employee satisfaction and the styles and practices of line managers. Looking at the empirical case of English National Health Services acute care hospital trusts, we use a multiple mediation model to analyse the relationship between board heterogeneity, performance and these two (internal) organisational factors. A variance-based structural equation modelling approach (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 positively influenced by: (a) the styles and practices of line managers; (b) the levels of staff satisfaction; and by their mutually reinforcing roles.