How a CEO thinks, determines what he does

Corporate strategy, managerial discretion, commitment to the status quo, temporal focus, CEO succession, legitimacy effects of CSR, controlling instruments in start-ups, cultural differences in diversity management – Kerstin Fehre’s research interests seem broad and varied. “But they can all be summarised under the umbrella of strategic decision-making”, she says smiling. Kerstin was recently appointed professor of strategy. She will also be closely involved in the new Centre for Excellence in Adaptive Strategy.

One common theme

Kerstin is interested in the cognitive individual or group, and the cognitive processes involved in strategic decision making. “I attempt to understand the relationship between the cognition of executives i.e. the CEO and other top managers, and organisational outcomes. The general public and even some areas of research tend to assume that executives are all rational human beings. But I’d rather prefer to look at them as mere human beings, which means they have limited rational capacity. Different people can interpret the same situation differently, and as a result take different decisions. And that’s what I like to analyse, e.g.  why do some CEOs choose to strengthen their CSR practices whereas others don’t care about them?”

But no matter what the focus or the context is, all Kerstin’s research boils down to strategic decision-making. To give us a flavour of her areas of expertise, she highlights three examples of papers she’s been working on.

Commitment to the status quo

A first one is about CEO succession and the CEO’s commitment to the status quo. “A change in CEO is often followed by a change in strategy,” she says. “Why? Some assume it’s because the new CEO can question the status quo. Being a newcomer he’s not responsible for past decisions, so he’s entitled to challenge almost everything. But that’s only an assumption. After all, there are indeed companies in which the new CEOs continue the strategy of their predecessors. If the company is performing well, for example, then there’s no incentive to change tack. We simply don’t know if new CEOs have a low level of commitment to the status quo. That’s what we need to analyse.”

Water scarcity: opportunity or threat?

A second paper is in the area of grand challenges. “We analyse how the temporal focus of the CEO, i.e. the extent to which they base their decisions on the past, present, or future, impacts the way in which companies address the issue of water scarcity. We’ve found that CEOs with a focus on the present tend to approach water scarcity as a threat, whereas future-oriented CEOs see it as an opportunity to innovate. Heineken, for example, has adapted its production processes and instead of 30 they now need only 7 litres of water to produce 1 litre of beer. Several chemicals companies have taken similar measures.”

Cognitive processes and diversity

Finally, a third paper addresses the issue of diversity, which is a double-edged sword, as Kerstin explains: “On the one hand it’s fascinating to have all these different perspectives, but on the other hand, communication issues are particularly common in diverse teams. So far, we still don’t really know if and to what extent diversity improves organisational outcomes. Mind you, in this paper diversity is not approached from a sociological perspective, again, we try to understand the organisational cognitive processes associated with it.”

Upper echelon theory revisited

Strategic decision-making is a dynamic and complex process that still requires further investigation.

From the many hot topics, one springs to mind: the question of how much the CEO and the top management team really matter. “The upper echelon theory states that organisational outcomes essentially reflect the values and cognitions of the top executives”, says Kerstin. “Researchers in this area have mostly used demographic characteristics, such as age, gender and educational background of the members of the top management team, to explain organisational outcomes and they have assumed these demographic characteristics are closely related to cognitive traits that impact the decision-making. But these demographics are imperfect proxies at best. Only recently have they started to measure real psychological constructs.” 

“And then,” she adds, “there is this call for further research on grand challenges, such as natural resource scarcity. Here the question is how strategic management and strategic decision-making could help to overcome this grand challenge.”

Coming home

Having once studied at a business school, Kerstin is very much looking forward to experiencing the other side.  “I have fond memories of the professors and lecturers and their interactive approach to teaching, of the dialogue they managed to establish. It’s going to be a challenge, but I’m determined to give it my best!”

Incidentally, one of the reasons for joining us was that she was looking for a new challenge. “I like to step out of my comfort zone every now and then. You see, I’m not one to rest on my laurels. That’s why I want to work in an environment where you’re asked to go the extra mile, where you can’t hide behind your desk. Vlerick seemed to provide the ideal opportunity to further develop myself. I love both research and teaching. I’m interested in theory development, but I’ve also got several years of industry experience. And Vlerick values all of this equally. It feels like coming home.”

No time to waste!

“Let’s build the future together.” Kerstin remembers reading this call to action in one of our brochures, and it struck a chord. “My motto is carpe diem noctemque. Seize the day and night. I want to make the most of every minute!” She thinks for a moment before continuing: “In Europe we’re privileged: we have enough food and water, we have access to education and healthcare and we live in relative safety. I believe it’s my duty to help build the future, to try and have an impact. And Vlerick is a place where I can do that.”

Profile
  • Akademische Rätin and Habilitandin (∼Assistant Professor), Institute of Management (IBU) Karlsruhe Institute of Technology, DE (2010-2018) L
  • ecturer, Hector School of Engineering and Management, Karlsruhe, DE (2010-2018)
  • Lecturer, RWTH Aachen University/RWTH International Academy, DE (2008-2018)
  • PhD at the chair Innovation and Entrepreneurship, RWTH Aachen University, DE (2007)
  • Senior Associate Mergers & Acquisitions, Bankhaus Metzler, Frankfurt, DE and secondment at Edmund de Rothschild Corporate Finance, Paris, FR (2006-2010)
  • Researcher Assistant at the chair Innovation and Entrepreneurship, RWTH Aachen University, DE (2003-2006)
  • Analyst Mergers & Acquisitions, Goldman, Sachs & Co. oHG, Frankfurt, DE (2002-2003)
  • Graduate studies Business Administration & Management, Leipzig Graduate School of Management, DE (2000-2002)

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