Great management
How Much Does Your Boss Make? The Effects of Salary Comparisons
Zoë Cullen & Ricardo Perez-Truglia
NBER Working Paper, July 2018
Abstract:
We study how employees learn about the salaries of their peers and managers and how their beliefs about those salaries affect their own behavior. We conducted a field experiment with a sample of 2,060 employees from a multi-billion dollar corporation. We combine rich data from surveys and administrative records with data from the experiment, which provided some employees with accurate information about the salaries of others. First, we document large misperceptions about salaries and identify some of their sources. Second, we find that perceived peer and manager salaries have a significant causal effect on employee behavior. These effects are different for horizontal and vertical comparisons. While higher perceived peer salary decreases effort, output, and retention, higher perceived manager salary has a positive effect on those same outcomes. We provide suggestive evidence for the underlying mechanisms. We conclude by discussing implications for pay inequality and pay transparency.
The impact of the ‘open’ workspace on human collaboration
Ethan Bernstein & Stephen Turban
Philosophical Transactions of the Royal Society: Biological Sciences, 19 August 2018
Abstract:
Organizations’ pursuit of increased workplace collaboration has led managers to transform traditional office spaces into ‘open’, transparency-enhancing architectures with fewer walls, doors and other spatial boundaries, yet there is scant direct empirical research on how human interaction patterns change as a result of these architectural changes. In two intervention-based field studies of corporate headquarters transitioning to more open office spaces, we empirically examined — using digital data from advanced wearable devices and from electronic communication servers — the effect of open office architectures on employees' face-to-face, email and instant messaging (IM) interaction patterns. Contrary to common belief, the volume of face-to-face interaction decreased significantly (approx. 70%) in both cases, with an associated increase in electronic interaction. In short, rather than prompting increasingly vibrant face-to-face collaboration, open architecture appeared to trigger a natural human response to socially withdraw from officemates and interact instead over email and IM. This is the first study to empirically measure both face-to-face and electronic interaction before and after the adoption of open office architecture. The results inform our understanding of the impact on human behaviour of workspaces that trend towards fewer spatial boundaries.
Smile intensity in social networking profile photographs is related to greater scientific achievements
Lukasz Kaczmarek et al.
Journal of Positive Psychology, September/October 2018, Pages 435-439
Abstract:
Theory and research indicates that individuals with more frequent positive emotions are better at attaining goals at work and in everyday life. In the current study we examined whether the expression of genuine positive emotions by scientists was positively correlated with work-related accomplishments, defined by bibliometric (e.g. number of citations) and sociometric (number of followers for scholarly updates) indices. Using a sample of 440 scientists from a social networking site for researchers, multiple raters coded smile intensity (full smile, partial smile, or no smile) in publicly available photographs. We found that scientists who presented a full smile had the same quantity of publications yet of higher quality (e.g. citations per paper) and attracted more followers to their updates compared to less positive emotionally expressive peers; results remained after controlling for age and sex. Thin-slicing approaches to the beneficial effects of positive emotionality offer an ecologically valid approach to complement experimental and longitudinal evidence. Evidence linking positive emotional expressions to scientific impact and social influence provides further support for broaden and build models of positive emotions.
Starstruck: How Hiring High-Status Employees Affects Incumbents’ Performance
Matteo Prato & Fabrizio Ferraro
Organization Science, forthcoming
Abstract:
This study investigates the effects of high-status inbound mobility on the performance of incumbents. Leveraging sociological theory on status, we suggest that high-status newcomers generate only limited knowledge spillovers compared to the resources they drain from incumbents. Building on this mechanism, we formulate our first hypothesis that hiring stars negatively affects incumbents’ performance. We argue that this effect is asymmetric across incumbents. Because high-status incumbents can better cope with the shock in the internal allocation of resources produced by high-status newcomers, we expect that they will experience a lower performance decline than low-status incumbents. We test our hypotheses by studying the change in recommendation profitability of incumbent securities analysts experiencing inbound mobility events in the period 1996–2007. Our results show that the higher the status of the hired analyst, as captured by the Institutional Investor ranking history, the greater the decline in the incumbent analyst’s recommendation profitability, and that this decline is moderated by the status of the incumbent analyst.
Termination Risk and Agency Problems: Evidence from the NBA
Alma Cohen, Nadav Levy & Roy Sasson
NBER Working Paper, June 2018
Abstract:
When organizational structures and contractual arrangements face agents with a significant risk of termination in the short term, such agents may under-invest in projects whose results would be realized only in the long term. We use NBA data to study how risk of termination in the short term affects the decision of coaches. Because letting a rookie play produces long-term benefits on which coaches with a shorter investment horizon might place lower weight, we hypothesize that higher termination risk might lead to lower rookie participation. Consistent with this hypothesis, we find that, during the period of the NBA’s 1999 collective bargaining agreement (CBA) and controlling for the characteristics of rookies and their teams, higher termination risk was associated with lower rookie participation and that this association was driven by important games. We also find that the association does not exist for second-year players and that the identified association disappeared when the 2005 CBA gave team owners stronger incentives to monitor the performance of rookies and preclude their underuse.
Incentives to lose revisited: The NHL and its tournament incentives
Helena Fornwagner
Journal of Economic Psychology, forthcoming
Abstract:
This paper analyzes data from a tournament, namely the National Hockey League regular scheduled season of games, which provides incentives to increase effort in order to reach the playoffs and incentives to decrease effort once a team has been eliminated from playoff considerations because of the entry draft. Our results show that teams react to these dual incentives - they win more games when there is still a chance to reach the playoffs and lose more after being eliminated from playoff considerations. One can argue that losing more games after having no more chance to reach the playoffs could be the result of lower motivation or disappointment. This is the first study to show that this is not the only explanation for a higher amount of lost games. Instead, we find that there is a concrete strategy behind losing.
Pro Bono as a Human Capital Learning and Screening Mechanism: Evidence from Law Firms
Vanessa Burbano, John Mamer & Jason Snyder
Strategic Management Journal, forthcoming
Abstract:
Inquiry into CSR as a human capital management tool has suggested that firms benefit from such activities because employees value the meaningfulness of these activities, which influences motivation and retention. We propose an alternate avenue through which firms can benefit from an important type of socially responsible activity – pro bono services – that does not require that employees derive utility from the meaningfulness of the activity. We propose that pro bono activities can benefit firms through human capital learning and screening mechanisms, given the stretch roles that pro bono engagements allow. We formalize this argument in the legal services industry, where we provide primary evidence, a formal model, and empirical results using a panel dataset of the top 200 law firms to support this argument.
Ideas are cheap: When and why adults value labor over ideas
Pascal Burgmer, Matthias Forstmann & Olga Stavrova
Journal of Experimental Psychology: General, forthcoming
Abstract:
What do people value about a creation: the idea behind it or the labor needed for its implementation? Recent developmental research suggests that children by the age of 6 begin to value ideas over labor. Yet, much less is known about whether adults similarly attribute a higher value to ideas and idea givers than to labor and idea executors. In seven studies (N = 1,463), we explored the relative valuation of ideas versus labor in adults, its mechanisms and boundary conditions. Participants learned about an idea giver and a laborer who collaborated to create a product and indicated who deserves ownership and monetary compensation for the product. Contrary to what has been reported for children, Studies 1a–1c found that participants valued the contribution of the laborer more than the contribution of the idea giver. This labor-valuation effect emerged even when participants themselves were idea givers (Study 1b), and it was replicated across different populations (including legal professionals, Study 1c) and contexts (e.g., art works and businesses, Study 2). Studies 3a and 3b established perceived effort as a central psychological process behind the labor-valuation effect. Finally, Study 4 extended the effect to the realm of praise and blame judgments, showing that laborers receive more praise for positive outcomes, but less blame for negative outcomes, relative to idea givers. The current findings may provide a useful framework for understanding the role of effort in lay people’s valuation of ideas and labor, thereby bridging research on creativity, effort, and valuation judgments.
When Does Advice Impact Startup Performance?
Aaron Chatterji et al.
NBER Working Paper, July 2018
Abstract:
Why do some entrepreneurs thrive while others fail? We explore whether the advice entrepreneurs receive about people management influences their firm's performance. We conducted a randomized field experiment in India with 100 high-growth technology firms whose founders received in-person advice from other entrepreneurs who varied in their managerial style. We find that entrepreneurs who received advice from peers with an active approach to managing people – instituting regular meetings, setting goals consistently, and providing frequent feedback to employees – grew 28% larger and were 10 percentage points less likely to fail than those who got advice from peers with a passive people-management approach two years after our intervention. Entrepreneurs with MBAs or accelerator experience did not respond to this intervention, suggesting that formal training can limit the spread of peer advice.
Multiple team membership and empowerment spillover effects: Can empowerment processes cross team boundaries?
Gilad Chen et al.
Journal of Applied Psychology, forthcoming
Abstract:
In today’s organizations, employees are often assigned as members of multiple teams simultaneously (i.e., multiple team membership), and yet we know little about important leadership and employee phenomena in such settings. Using a scenario-based experiment and 2 field studies of leaders and their employees in the People’s Republic of China and the United States, we examined how empowering leadership exhibited by 2 different team leaders toward a single employee working on 2 different teams can spillover to affect that employee’s psychological empowerment and subsequent proactivity across teams. Consistent across all 3 studies, we found that each of the team leaders’ empowering leadership uniquely and positively influenced an employee’s psychological empowerment and subsequent proactive behaviors. In the field studies, we further found that empowering leadership exhibited by one team leader influenced the psychological empowerment and proactive behaviors of their team member not only in that leader’s team but also in the other team outside of that leader’s stewardship. Finally, across studies, we found that empowering leadership exhibited on one team can substitute for lower levels of empowering leadership experienced in a different team led by a distinct leader. We discuss our contributions to the motivation, teams, and leadership literatures and provide practical guidance for leaders charged with managing employees that have multiple team memberships.
Social decoys: Leveraging choice architecture to alter social preferences
Linda Chang & Mina Cikara
Journal of Personality and Social Psychology, August 2018, Pages 206-223
Abstract:
Many of society’s most significant social decisions are made over sets of individuals: for example, evaluating a collection of job candidates when making a hiring decision. Rational theories of choice dictate that decision makers’ preferences between any two options should remain the same irrespective of the number or quality of other options. Yet people’s preferences for each option in a choice set shift in predictable ways as function of the available alternatives. These violations are well documented in consumer behavior contexts: for example, the decoy effect, in which introducing a third inferior product changes consumers’ preferences for two original products. The current experiments test the efficacy of social decoys and harness insights from computational models of decision-making to examine whether choice set construction can be used to change preferences in a hiring context. Across seven experiments (N = 6312) we find that participants have systematically different preferences for the exact same candidate as a function of the other candidates in the choice set (Experiments 1a–1d, 2) and the salience of the candidate attributes under consideration (Experiments 2, 3a, 3b). Specifically, compromise and (often) asymmetric-dominance decoys increased relative preference for their yoked candidates when candidates were counterstereotypical (e.g., high warmth/low competence male candidate). More importantly, we demonstrate for the first time that we can mimic the effect of a decoy in the absence of a third candidate by manipulating participants’ exposure to candidates’ attributes: balanced exposure to candidates’ warmth and competence information significantly reduced bias between the two candidates.
Disadvantaged but not dissatisfied: How agency ameliorates negative reactions to unequal pay
Shoham Choshen-Hillel, Alex Shaw & Eugene Caruso
Journal of Experimental Psychology: Applied, forthcoming
Abstract:
Workers tend to be dissatisfied when their peers receive more than them for doing the same work. The fear of creating such dissatisfaction may cause leaders in organizations to waste resources that cannot be allocated equally between their workers. Here we explore the effectiveness of a procedure designed to reduce such waste by empowering workers with the agency to decide whether or not to pay other workers more. We predict that workers’ sense of agency reduces their dissatisfaction with others’ better outcomes. Seven studies supported this prediction by demonstrating that agentic participants, who were involved in creating allocations, tended to be more satisfied with others’ better outcomes than nonagentic participants, who were not involved in creating allocations. Longitudinal lab studies, measuring real behavior, showed that agentic participants remained more satisfied than nonagentic ones even five weeks after their initial decision. The findings provided evidence for two mechanisms underlying the effect: increased feelings of generosity, and reduced perception of unfairness. We found that the agency procedure was comparable with other fair procedures in its ability to improve worker satisfaction. We discuss our findings in relation to the literatures on social preference, fairness, and voice, and highlight the implications for organizational efficiency.
When Lying Does Not Pay: How Experts Detect Insurance Fraud
Danielle Warren & Maurice Schweitzer
Journal of Business Ethics, July 2018, Pages 711–726
Abstract:
A growing literature has focused on understanding how to detect and deter unethical consumer behavior. In this work, we focus on a particularly important type of unethical consumer behavior, consumer insurance fraud, and we analyze a unique dataset to understand how experts investigate suspicious claims. Two separate but related literatures inform the process of investigating suspicious insurance claims. The first literature is grounded in field research and emphasizes the importance of secondary sources. The second literature is grounded in laboratory studies that emphasize the importance of interpersonal interactions. Here we draw upon both literatures to consider the importance of claimant interviews within the context of many investigative actions and the potential for claimants to avoid interviews. In an empirical study using qualitative and quantitative data from auto insurance claim investigations, we analyze investigative chronologies conducted by skilled experts. In doing so, we find that even when investigators can access information from a variety of sources such as witnesses, databases, and physical evidence, claimant interviews are the most important step in determining whether or not claims are denied or paid. Furthermore, we identify interpersonal avoidance as an important signal of unethical claimant behavior. Our findings inform deception detection theory and practice. We identify implications for deception detection in business, particularly for consumer unethical behavior and insurance fraud investigations.