Abstract:

Whether power hierarchy benefits or hurts team performance is a paradoxical question in the current literature. While functionalists contend that power hierarchy is likely to resolve conflicts and promote coordination within teams, in turn improving team performance, dysfunctionalists argue that power hierarchy can entail struggle and conflicts, in turn impairing team performance. This study suggests that this discrepancy can be reconciled by considering the effect of hierarchical consistency. Hierarchical consistency describes the degree of alignment between power hierarchy and status hierarchy within a team. We propose that hierarchical consistency may moderate the relationship between power hierarchy and team performance. Specifically, when status hierarchy and power hierarchy are aligned, power hierarchy will produce elevated team performance. Meanwhile, when status hierarchy and power hierarchy are misaligned, power hierarchy is likely to attenuate team performance. Furthermore, we suggest that the interaction of power hierarchy and hierarchical consistency may impact team performance via the mediating effect of power struggle.
We tested our hypotheses through a multimethod approach that included survey, experiment, and archival data analysis. In Study 1, we collected data from 46 student teams in a four-week entrepreneurial practice program. The power and status of the team members were measured using the round-robin method, where each team member was asked to rate his or her teammates’ power and status. The data were collected through surveys at the beginning of the third week of the entrepreneurial practice program. Team performance was measured based on the overall profit of each team earned from this program. The financial data were collected at the end of the entrepreneurial practice program. In Study 2, we conducted a 2 (power hierarchy: power differentiation vs. power equality) × 2 (hierarchical consistency: consistent vs. inconsistent) between-subject design with a multiparty negotiation task. Overall, 192 undergraduates and postgraduates participated in our experiment, and they were randomly assigned into 64 three-person groups. Each group was randomly assigned to one of four experimental conditions. Finally, in Study 3, data from 203 observations from 169 listed companies in the Internet industry were collected to retest the moderating effect of hierarchical consistency on the relationship between power hierarchy and team performance. In this study, we measured power hierarchy based on the difference in equity among TMT members, hierarchical consistency was calculated through the absolute difference between TMT members’ equity and team tenure, and team performance was measured based on return on equity (ROE).
We used hierarchical linear regression, ANOVA, a fixed effect model, and bootstrapping methods to test our hypotheses. As predicted, we found that the effects of power hierarchy on team performance are contingent on the degree of hierarchical consistency in Study 1. That is, when status hierarchy and power hierarchy were aligned, the power hierarchy was positively related to team performance; yet when status hierarchy and power hierarchy were misaligned, power hierarchy was not significantly related to team performance. The results of Study 2 showed that power struggle played a mediating role between hierarchical consistency combined with power hierarchy and team performance. Specifically, power hierarchy was likely to attenuate power struggle in the presence of a high level of hierarchical consistency, and hence improved the team’s performance. However, power hierarchy had no significant impact on power struggle and team performance in the presence of a low level of hierarchical consistency. In Study 3, we found that power hierarchy was not significantly related to team performance when hierarchical consistency was high, while power was negatively related to team performance when hierarchical consistency was low.
Our study contributes to the literature in several ways. First, our findings help to reconcile the antithetical arguments and evidence in research on the relationship between power hierarchy and team performance. Although power hierarchy can increase team performance in the presence of high hierarchical consistency, it is likely to decrease team performance in the presence of low hierarchical consistency. Second, this study suggests that the legitimacy of a power hierarchy may be influenced by its alignment with a status hierarchy. Third, this study extends the research on hierarchical consistency. While contemporary studies focus on the effects of power and status consistency at an individual level, this study is among the first to introduce hierarchical consistency into group-level research and empirically test its important effect on the relationship between power hierarchy and team performance.

Key words: power hierarchy, hierarchical consistency, power struggle, team performance.