Coaching
Firms' responses to changes in frictions in related human capital factor markets
David Allen, Donald Schepker & Clint Chadwick
Strategic Management Journal, forthcoming
Abstract:
Strategic human capital scholars suggest that firms' human capital rents are greater when labor market frictions are more prevalent. Taking this argument further, we suggest that when frictions for one type of human capital decrease, firms are motivated to place greater emphasis on human capital that is interdependent in production where frictions are unchanged. Empirically, we exploit an exogenous institutional change in the National Football League to demonstrate that coaching (managerial) dismissal and replacement is more likely to occur (and is influenced by a wider variety of information) after frictions for player (production worker) human capital decrease. Our findings suggest adding a new dimension -- tradeoffs between related labor market segments -- to the scholarly conversation about how firms manage their human capital (and other resources) strategically.
At the Helm, Kirk or Spock? The Pros and Cons of Charismatic Leadership
Benjamin Hermalin
American Economic Journal: Microeconomics, forthcoming
Abstract:
Charismatic leaders are often desired. At the same, experience, especially with demagogues, as well as social science studies, raise doubts about such leaders. This paper offers explanations for charismatic leadership's "mixed report card." It offers insights into why and when charismatic leadership can be effective; which, when, and why certain groups will prefer more to less charismatic leaders; and how being more charismatic can make leaders worse in other dimensions, particularly causing them to work less hard on their followers' behalf.
"Just Words? Just Speeches?" On the Economic Value of Charismatic Leadership
John Antonakis et al.
Management Science, forthcoming
Abstract:
Leadership theories in sociology and psychology argue that effective leaders influence follower behavior not only through the design of incentives and institutions, but also through personal abilities to persuade and motivate. Although charismatic leadership has received considerable attention in the management literature, existing research has not yet established causal evidence for an effect of leader charisma on follower performance in incentivized and economically relevant situations. We report evidence from field and laboratory experiments that investigate whether a leader's charisma - in the form of a stylistically different motivational speech - can induce individuals to undertake personally costly but socially beneficial actions. In the field experiment, we find that workers who are given a charismatic speech increase their output by about 17% relative to workers who listen to a standard speech. This effect is statistically significant and comparable in size to the positive effect of high-powered financial incentives. We then investigate the effect of charisma in a series of laboratory experiments in which subjects are exposed to motivational speeches before playing a repeated public goods game. Our results reveal that a higher number of charismatic elements in the speech can increase public good contributions by up to 19%. However, we also find that the effectiveness of charisma varies and appears to depend on the social context in which the speech is delivered.
Nowhere to Grow: Ranking Success and Turnover Composition in Elite Employers
Benjamin Pratt, Brian Dineen & Lusi Wu
Journal of Organizational Behavior, forthcoming
Abstract:
The rankings literature implicitly assumes that rankings success universally benefits organizations. However, in some instances, this assumption may be unwarranted. In this study, we employ a mixed-methods approach that moves the literature beyond examining whether employees leave, to examine who leaves elite Best Places to Work (BPTW), defined as organizations which place in the top ten in BPTW rankings perennially (i.e., year after year). In Study 1, examination of elite BPTW organizations shows that proportions of voluntary turnover comprising high performers increase over associated BPTW ranking cycles. Study 2 commences with 40 semi-structured interviews among employees in an elite BPTW organization, from which two relevant and explanatory themes emerge. First, some employees interpret BPTW success as restricting opportunities for advancement within the organization, a phenomenon we term "perceived promotion constraint." Second, some employees perceive BPTW success as building their own personal resumes. Integrating our findings from Study 1 and the qualitative portion of Study 2 with the career management literature, we propose and deductively test "perceived promotion constraint" and "perceived resume building" as two potential high performer turnover mechanisms; finding that perceived promotion constraint mediates the relationship between performance status and turnover intentions.
Victorious and Hierarchical: Past Performance as a Determinant of Team Hierarchical Differentiation
Christopher To, Thomas Taiyi Yan & Elad Sherf
Organization Science, forthcoming
Abstract:
Hierarchies emerge as collectives attempt to organize themselves toward successful performance. Consequently, research has focused on how team hierarchies affect performance. We extend existing models of the hierarchy-performance relationship by adopting an alternative: Performance is not only an output of hierarchy but also a critical input, as teams' hierarchical differentiation may vary based on whether they are succeeding. Integrating research on exploitation and exploration with work on group attributions, we argue that teams engage in exploitation by committing to what they attribute as the cause of their performance success. Specifically, collectives tend to attribute their success to individuals who wielded greater influence within the team; these individuals are consequently granted relatively higher levels of influence, leading to a higher degree of hierarchy. We additionally suggest that the tendency to attribute, and therefore grant more influence, to members believed to be the cause of success is stronger for teams previously higher (versus lower) in hierarchy, as a higher degree of hierarchical differentiation provides clarity as to which members had a greater impact on the team outcome. We test our hypotheses experimentally with teams engaging in an online judgement task and observationally with teams from the National Basketball Association. Our work makes two primary contributions: (a) altering existing hierarchy-performance models by highlighting performance as both an input and output to hierarchy and (b) extending research on the dynamics of hierarchy beyond individual rank changes toward examining what factors increase or decrease hierarchical differentiation of the team as a whole.
Radical and Incremental Innovation: The Roles of Firms, Managers and Innovators
Daron Acemoglu, Ufuk Akcigit & Murat Alp Celik
American Economic Journal: Macroeconomics, forthcoming
Abstract:
This paper investigates the determinants of radical ("creative") innovations - innovations that break new ground in terms of knowledge creation. After presenting a motivating model focusing on the choice between incremental and radical innovation, and on how managers of different ages and human capital are sorted across different types of firms, we provide firm-level and patent-level evidence that firms that are more open to hiring younger managers (those that are more "open to disruption") are significantly more likely to engage in radical innovation. Our measures of radical innovations proxy for innovation quality (average number of citations per patent) and creativity (fraction of superstar innovators, the likelihood of a very high number of citations, and generality of patents). We present robust evidence that firms that have a comparative advantage in new innovations (e.g., because they are more open to disruption) generate more creative innovations, but we also show that once the effect of the sorting of young managers to such firms is factored in, the (causal) impact of manager age on creative innovations, though positive, is small.
Abstract Versus Concrete: How Managers' Construal Influences Organizational Control Systems and Problem Solving
Bijuan Zhong, Mona Makhija & Shad Morris
Organization Science, forthcoming
Abstract:
This research considers how frontline managers' construal affects their conceptualization of organizational problems, which in turn influences how they incentivize employees to search out appropriate solutions. Depending on whether they conceptualize problems in more abstract or more concrete ways, frontline managers will vary in organizational control mechanisms they use to incentivize their employees to engage in exploration and exploitation. Based on these relationships, we expect the solutions achieved by employees to vary in terms of efficiency and effectiveness. Using a database of 267 projects in a single firm, we find that, after holding project attributes constant, concrete-oriented managers tend to utilize more process controls that lead employees to solve organizational problems more efficiently, whereas abstract-oriented managers tend toward use of more outcome controls that lead to more effective problem solving. When employees engage in ambidextrous learning, both effectiveness and efficiency of outcomes are enhanced. This research sheds light on important microfoundational influences on organizational outcomes.
To Engage or Not to Engage with AI for Critical Judgments: How Professionals Deal with Opacity When Using AI for Medical Diagnosis
Sarah Lebovitz, Hila Lifshitz-Assaf & Natalia Levina
Organization Science, January-February 2022, Pages 126-148
Abstract:
Artificial intelligence (AI) technologies promise to transform how professionals conduct knowledge work by augmenting their capabilities for making professional judgments. We know little, however, about how human-AI augmentation takes place in practice. Yet, gaining this understanding is particularly important when professionals use AI tools to form judgments on critical decisions. We conducted an in-depth field study in a major U.S. hospital where AI tools were used in three departments by diagnostic radiologists making breast cancer, lung cancer, and bone age determinations. The study illustrates the hindering effects of opacity that professionals experienced when using AI tools and explores how these professionals grappled with it in practice. In all three departments, this opacity resulted in professionals experiencing increased uncertainty because AI tool results often diverged from their initial judgment without providing underlying reasoning. Only in one department (of the three) did professionals consistently incorporate AI results into their final judgments, achieving what we call engaged augmentation. These professionals invested in AI interrogation practices-practices enacted by human experts to relate their own knowledge claims to AI knowledge claims. Professionals in the other two departments did not enact such practices and did not incorporate AI inputs into their final decisions, which we call unengaged "augmentation." Our study unpacks the challenges involved in augmenting professional judgment with powerful, yet opaque, technologies and contributes to literature on AI adoption in knowledge work.
Employee Turnover and Firm Performance: Large-Sample Archival Evidence
Qin Li et al.
Management Science, forthcoming
Abstract:
Employee turnover is a significant cost for businesses and a key human capital metric, but firms do not disclose this measure. We examine whether turnover is informative about future firm performance using a large panel of turnover data extracted from employees' online profiles. We find that turnover is negatively associated with future financial performance (one-quarter ahead return on assets and sales growth). The negative association between turnover and future performance is stronger for small firms, for young firms, for firms with low labor intensity, when the local labor market is tight, and when the firm is trying to replace departing employees. The negative association disappears when turnover is very low, suggesting that a certain amount of turnover can be beneficial. Consistent with the concern that turnover increases operational uncertainty, we find a positive association between turnover and the uncertainty of future financial performance. Finally, we find a significant association between turnover and future stock returns, suggesting that investors do not fully incorporate turnover information. Our findings answer the call from the Securities and Exchange Commission to determine the importance of turnover disclosure.
Chain Affiliation and Human Resource Investments: Evidence from the Restaurant Industry
Tashlin Lakhani & Can Ouyang
Organization Science, forthcoming
Abstract:
Drawing on organizational theory, agency theory, and research in strategic human resource management, this study explores how chain affiliation influences human resource (HR) investments using data from a nationally random survey of restaurant establishments. We propose that chain-affiliated units will make different investments in those areas of the HR system where chains establish superior organizational routines compared with nonaffiliated units. By contrast, we argue that in the absence of chain routines, ownership incentives will drive differences in human resource investments. Specifically, we find that franchisee-owned units focus more on cost reduction by underinvesting in human resource practices compared with company-owned units and independently owned units when organizational routines are not provided by the chain. We provide further support for our theoretical arguments using additional data on multiunit ownership and franchisor influence. Finally, we conduct supplemental analyses to explore the relationship between different human resource investments and two important organizational outcomes: employee turnover and customer satisfaction ratings from Yelp. Our results highlight the types of human resource practices that are important for service work and suggest that the provision of organizational routines can have important implications for the long-run success of chains and their units.
A Tale of Two Hierarchies: Interactive Effects of Power Differentiation and Status Differentiation on Team Performance
Nicholas Hays et al.
Organization Science, forthcoming
Abstract:
Scholars have long wrestled with whether hierarchical differentiation is functional or dysfunctional for teams. Building on emerging research that emphasizes the distinction between power (i.e., control over resources) and status (i.e., respect from others), we aim to help reconcile the functional and dysfunctional accounts of hierarchy by examining the effects of power differentiation on team performance, contingent on status differentiation. We theorize that power differentiation is dysfunctional for teams with high status differentiation by increasing knowledge hiding, which undermines team performance. In contrast, we predict that power differentiation is functional for teams with low status differentiation by decreasing knowledge hiding, which improves team performance. In a field study, we found that power differentiation harmed team performance via knowledge hiding in teams with high status differentiation, but power differentiation had no effect on knowledge hiding or performance in teams with low status differentiation. In an experiment, we again found that power differentiation harmed team performance by increasing knowledge hiding in teams with high status differentiation. However, power differentiation improved team performance by decreasing knowledge hiding in teams with status equality. Finally, in a third study, we confirm the role of status differentiation in making team climates more competitive and examine the effect of power-status alignment within teams, finding that misalignment exacerbates the dysfunctional effects of power differentiation in teams with high status differentiation. By examining how power and status hierarchies operate in tandem, this work underscores the need to take a more nuanced approach to studying hierarchy in teams.
When Reflection Hurts: The Effect of Cognitive Processing Types on Organizational Adaptation to Discontinuous Change
Marlon Fernandes Rodrigues Alves et al.
Organization Science, forthcoming
Abstract:
Technological breakthroughs, institutional disruptions, and natural disasters often alter the course of organizations and entire industries. Such discontinuous changes threaten organizations' survival by affecting the value of the knowledge accumulated in routines and capabilities. Although it is widely acknowledged that managerial cognition is a critical antecedent of organizational responses to discontinuous change, the role of type 1 (intuitive) and type 2 (reflective) processing in the adaptation of shared patterns of behavior, that is, routines, remains understudied. Drawing on dual-process theory, we propose that particular features of type 1 processing render this approach superior to type 2 processing, especially in highly ambiguous environments in which information is limited and difficult to verify. We tested our hypotheses in a longitudinal experiment linking individual-level factors with organizational-level practices of routine adaptation. Experienced managers, paired in 80 groups, developed routines in a first round of a simulation game; in a second round, we then introduced a discontinuous change making previous routines obsolete in order to observe how they adapted. The data show that priming type 1 processing facilitates organizational adaptation more than type 2 processing by providing faster, more routinized, efficiently coordinated, and optimal responses. In addition, type 1 appears to be more functional in highly ambiguous environments, whereas type 1 and type 2 processes yield similar levels of performance under low levels of ambiguity. Overall, our study advances the understanding of the nondeliberative dimension of organizational adaptation to discontinuous change.