Culminating events and time working together in top management teams: insights from private equity

In some managerial contexts, performance is measured by the results of a rare event that is itself the culmination of a long and ongoing process of daily decision making. In the private equity (PE) industry, for example, a firm makes a limited number of investments throughout its life. However, selecting these few investments requires the firm to engage in a large number of decision-making activities to evaluate the much larger array of potential investments. This raises the interesting possibility that the performance of each culminating event is not a function of the number of previously completed tasks, as it has been conceived previously, but is in fact a function of the accumulation of daily decision making that may or may not culminate in actual buyouts. To understand performance drivers in this and similar contexts, we examine and test the performance effect of the time that members of a PE top management team (TMT) spend working together to evaluate potential investments, and untangle this effect from the number of investments the TMT has bought and sold previously. Our data reveal a U-shaped relationship between time working together (TWT) and buyout performance, and a moderation effect of TMT heterogeneity and TMT support staff size. These findings extend our knowledge of executive decision making in PE firms, and in all managerial contexts where rare decision events are the culmination of an extended process of daily decision making.