Taking charge
Why Whine about Wining and Dining?
Benjamin Hermalin
Journal of Law, Economics, and Organization, forthcoming
Abstract:
Given potential abuse, conflicts of interest, and other issues, why do companies routinely pay for their managers to entertain the managers of other firms and allow their own managers to be so entertained? An answer that such practices facilitate interfirm cooperation is incomplete because it fails to address why companies cannot or do not induce such cooperation directly via their own incentive systems. This article addresses these issues. It shows, inter alia, that even when firms can induce cooperation via their own incentive systems, they will do better obtaining that cooperation via cross-firm entertaining and other favor granting. This remains true even if "entertainment" budgets are subject to corruption, including excessive use or potential embezzlement. Furthermore, the results are wholly independent of any favorable tax treatment such practices may receive.
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Expressive Effects of Ethics Codes
Maryam Kouchaki, Yuval Feldman & Francesca Gino
Northwestern University Working Paper, May 2015
Abstract:
We focus on understanding how employees perceive and interpret ethics codes. Research on ethics codes suggests that they may play an important role in the overall attempt to curb unethical behavior. Codes are viewed as an important form of organizational discourse, which is crafted, implemented, and interpreted within particular social and organizational systems. Given the mixed results in the existing business ethics literature on the effectiveness of ethics code, an important question is to examine whether an organizational code of conduct reduces unethical behaviors or not. Thus, the overall objective of this project is to identify and evaluate factors that will increase compliance with codes of conduct. In particular, the studies reported in this paper focus on the relationship between the language used in the codes of conduct and individuals' likelihood of compliance. We examine the differences in employees' compliance with codes of conduct and behaving in the interest of the company when the corporation uses a language that induces strong identification with the company as compared to a more formal language (i.e., refers to its employees as "we" as compared to "employees"). Our coding of the Fortune top 50 companies showed that 38% used an informal language while 62% used a formal language. We suggest that when a corporation uses a language that induces strong identification, the emphasis on identification will increase employees' likelihood to engage in unethical self-interested behaviors, because such emphasis suggests high trust in employees and thus a perception of leniency. In contrast, when the corporation refers to its employees as "employees" it signals to them a more formal approach, where the expectations from them to behave ethically are based on notions of rule. Three studies, a field experiment and two online studies, lend support to our predictions. We found that employees who were hired into an organization with a less formal and more family-like codes of conduct ("we") were more likely to choose their own self-interest over the interest of company and their perception of the group as being more forgiving for the violation of group's code of conduct and more trusting was responsible for this decreases in compliance with the code of conduct.
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Organizational Income Inequality and Precarious Employee Relations: The Role of Social Distance
Sreedhari Desai
University of North Carolina Working Paper, May 2015
Abstract:
At the societal level of analysis, researchers often have examined the potential dysfunctional consequences of income inequality. Wilkinson and Pickett (2005), for example, identified 155 papers reporting findings on the association between income distribution and population health and observed that a large majority of those studies suggest that health is worse in those cities where income differences are larger. A key setting in which societal income inequality is produced are organizations (e.g., Baron, 1984; Davis & Cobb, 2013). In this paper, we examine the size of the income gap between top managers and rank-and-file workers and the experienced job security of those workers. We focus, in this initial effort, on experienced job insecurity or what Kalleberg (2009) labels, "precarious employment relations" because while such employment is viewed by managers as a source of flexibility, it is seen by workers as uncertain, unpredictable, and risky, and thus, an undesirable aspect of a job (Kalleberg, 2011), one that is on the rise in the United States (e.g., Cappelli, 1999; Farber, 2008; Fullerton & Wallace, 2005; Hecker, 2006; Jacoby, 2001). Over the last several decades, income inequality in organizations, or what top managers make relative to average employees, has increased dramatically. Here, we suggest that an increase in organizational income inequality results in top executives perceiving increased social distance between themselves and ordinary employees in the organization. Social distance is a reflection of the ways in which individuals see each other as different from one another (Eveland, Nathanson, Detenber, & McLeod, 1999; Fiedler, 1953). Research suggests that the greater the social distance, the less positive individuals feel about the out-group, the less likely they are to think of them as individuals, the more likely they are to engage in uncooperative or even predatory behavior (Brescia, 2011). Moreover, construal level theory suggests that social distance predisposes people to construe information abstractly (Magee & Smith, 2013) and focus on the central aspects of situations such as profit maximization, disregarding secondary aspects such as moral concerns related to business decisions. Thus, we argue that increased social distance as a consequence of income inequality may cause executives to think of their relationship to ordinary employees in primarily short run economic terms and treat their employees in ways that maximize their short-term value to the firm by resorting to work practices such as summary dismissal and layoffs. In sum, we propose that as income inequality in an organization increases, its top managers are more likely to formulate policies that adversely affect employee relations. We present evidence from two archival studies as well as a lab experiment that support our conjecture.
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When 3 + 1 > 4: Gift Structure and Reciprocity in the Field
Duncan Gilchrist, Michael Luca & Deepak Malhotra
Harvard Working Paper, April 2015
Abstract:
Do higher wages elicit reciprocity and lead to increased productivity? In a field experiment with 266 employees, we find that paying higher wages, per se, does not have a discernible effect on productivity (in a context with no future employment opportunities). However, structuring a portion of the wage as a clear and unexpected gift - by offering a raise (with no additional conditions) after the employee has accepted the contract - does lead to higher productivity for the duration of the job. Gifts are roughly as efficient as hiring more workers.
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Does experience imply learning?
Jaideep Anand, Louis Mulotte & Charlotte Ren
Strategic Management Journal, forthcoming
Abstract:
Research traditionally uses experiential learning arguments to explain the existence of a positive relationship between repetition of an activity and performance. We propose an additional interpretation of this relationship in the context of discrete corporate development activities. We argue that firms choose to repeat successful activities, thereby accumulating high experience with them. Data on 437 aircraft projects introduced through three governance modes show that the positive performance effect of the firm's experience with the focal mode becomes insignificant after accounting for experience endogeneity. We suggest that in a general case, experience with corporate development activities may be tinged with both learning as well as selection effects. Therefore, omitting to account for experience endogeneity may lead to incorrect conclusions from an "empirically observed" positive experience-performance relationship.
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Positional WAR in the National Football League
Andrew Hughes, Cory Koedel & Joshua Price
Journal of Sports Economics, forthcoming
Abstract:
We empirically estimate positional "wins above replacement" (WAR) in the National Football League (NFL). Positional WAR measures the value of players in the NFL, by position, in terms of generating wins. WAR is a commonly used metric to evaluate individual players in professional baseball and basketball in the United States, but to the best of our knowledge, this is the first study to construct WAR measures for American football. A key challenge in constructing these measures is that individual statistics for many football players are not as well developed as in baseball and basketball. Related to this point, the productivity of individual football players, perhaps more than players in any other major sport, is highly dependent on context. We circumvent issues related to measuring productivity for individual players by constructing WAR measures at the position rather than individual level. The identifying variation that we leverage in our study is generated by arguably exogenous player injuries and suspensions. Using data from three seasons and all 32 NFL teams, we show that the most valuable positions in the NFL are quarterback, wide receiver, tight end/fullback, and offensive tackle. Perhaps our most surprising finding is that positional WAR for all positions on the defensive side of the football is zero.
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Mie Augier, James March & Andrew Marshall
Organization Science, forthcoming
Abstract:
Much of intellectual history is punctuated by the flaring of intellectual outliers, small groups of thinkers who briefly, but decisively, influence the development of ideas, technologies, policies, or worldviews. To understand the flaring of intellectual outliers, we use archival and interview data from the RAND Corporation after the Second World War. We focus on five factors important to the RAND experience: (1) a belief in fundamental research as a source of practical ideas, (2) a culture of optimistic urgency, (3) the solicitation of renegade ambition, (4) the recruitment of intellectual cronies, and (5) the facilitation of the combinatorics of variety. To understand the subsequent decline of intellectual outliers at RAND, we note that success yields a sense of competence, endurance in a competitive world, and the opportunity and inclination to grow. Self-confidence, endurance, and growth produce numerous positive consequences for an organization; but for the most part, they undermine variety. Outliers and the conditions that produce them are not favored by their environments. Engineering solutions to this problem involve extending time and space horizons, providing false information about the likelihoods of positive returns from exploration, buffering exploratory activities from the pressures of efficiency, and protecting exploration from analysis by connecting it to dictates of identities.
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Does Experience Help or Hinder Top Managers? Working with Different Types of Resources in Hollywood
Michael Mannor, Jamal Shamsie & Donald Conlon
Strategic Management Journal, forthcoming
Abstract:
Research on the resource-based view has begun to place more emphasis on the ability of managers to extract better performance from the resources that are available to them. In this paper, we show that prior experience can both help and hinder their ability to generate performance from various categories of resources. Further, we argue that the fungibility of each resource influences the opportunities managers have to use their experience in order to find the best method to deploy them. We test our hypotheses by examining the ability of Hollywood film producers to generate results from financial, brand, and human resources. Our findings show that experienced producers can generate better performance from more fungible resources, but they actually achieve weaker results with less fungible resources.
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Stephen Courtright et al.
Academy of Management Journal, forthcoming
Abstract:
Drawing on resource drain theory, we introduce self-regulatory resource (ego) depletion stemming from family-to-work conflict (FWC) as an alternative theoretical perspective on why supervisors behave abusively toward subordinates. Our two-study examination of a cross-domain antecedent of abusive supervision stands in contrast to prior research, which has focused primarily on work-related factors that influence abusive supervision. Further, our investigation shows how ego depletion is proximally related to abusive supervision. In the first study, conducted at a Fortune 500 company and designed as a lagged survey study, we found that after controlling for alternative theoretical mechanisms, supervisors who experience FWC display more abusive behaviors toward subordinates, and that this relationship was stronger for female supervisors and for supervisors who operate in environments with greater situation-control. These results were then replicated and expanded in an experience sampling study using a multi-organization sample of supervisors. This allowed us to study the FWC-abusive supervision relationship as it emerges on a day-to-day basis and to examine ego depletion as an explanatory mechanism. Consistent with our hypotheses, we found that FWC is associated with abusive supervision, ego depletion acts as a mediator of the FWC-abusive supervision relationship, and that gender and situation-control serve as moderators.
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The Contingent Effect of Management Practices
Steven Blader, Claudine Madras Gartenberg & Andrea Prat
NYU Working Paper, April 2015
Abstract:
This paper investigates how the success of a management practice depends on nature of the long-term relationship between the firm and its employees. A large US transportation company is in the process of fitting its trucks with an electronic on-board recorder (EOBR), which provide drivers with information on their driving performance. In this setting, a natural question is whether the optimal managerial practice consists of: (1) Letting each driver know his or her individual performance only; or (2) Also providing drivers with information about their ranking with respect to other drivers. The company is also in the first phase of a multi-year "lean-management journey". This phase focuses exclusively on changing employee values, mainly toward a greater emphasis on teamwork and empowerment. The main result of our randomized experiment is that (2) leads to better performance than (1) in a particular site if and only if the site has not yet received the values intervention, and worse performance if it has. The result is consistent with the presence of a conflict between competition-based managerial practices and a cooperation-based relational contract. More broadly, it highlights the role of intangible relational factors: the optimal set of managerial practices depends on the long-term relationship the company chooses to have with its workers.
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Employee rights and acquisitions
Kose John, Anzhela Knyazeva & Diana Knyazeva
Journal of Financial Economics, forthcoming
Abstract:
This paper examines the outcomes and characteristics of corporate acquisitions from the perspective of stakeholder-shareholder agency conflicts. Using state variation in labor protections, we find that acquirers with strong labor rights experience lower announcement returns. Combined acquirer and target announcement returns are also lower in the presence of strong labor rights. Our findings remain statistically and economically significant after we control for a range of deal, firm, industry and state characteristics and explore various channels for the labor rights effect. Overall, the evidence indicates that employee-shareholder conflicts of interest reduce shareholder gains from acquisitions.
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Who Gets Credit for Input? Demographic and Structural Status Cues in Voice Recognition
Taeya Howell et al.
Journal of Applied Psychology, forthcoming
Abstract:
The authors investigate the employee features that, alongside overall voice expression, affect supervisors' voice recognition. Drawing primarily from status characteristics and network position theories, the authors propose and find in a study of 693 employees from 89 different credit union units that supervisors are more likely to credit those reporting the same amount of voice if the employees have higher ascribed or assigned (by the organization) status ― cued by demographic variables such as majority ethnicity and full-time work hours. Further, supervisors are more likely to recognize voice from employees who have higher achieved status ― cued by their centrality in informal social structures. The authors also find that even when certain groups of lower status employees speak up more, they cannot compensate for the negative effect of their demographic membership on voice recognition by their boss. The authors underscore how recognition of employee voice by supervisors matters for employees. It carries (mediates) the effects of voice expression and status onto performance evaluations 1 year later, which means that demographic differences in the assignment of credit for voice can serve as an implicit pathway for discrimination.
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Equality under threat by the talented: Evidence from worker-managed firms
Gabriel Burdín
Economic Journal, forthcoming
Abstract:
Does workplace democracy engender greater pay equality? Are high-ability individuals more likely to quit egalitarian organisational regimes? The paper revisits this long-standing issue by analyzing the interplay between compensation structure and quit behavior in the distinct yet underexplored institutional setting of worker-managed firms. The analysis is based on novel administrative data sources, which allow constructing a simple ordinal measure of the workers′ ability type. The paper's key findings are that (1) worker-managed firms have a more compressed compensation structure than conventional firms; and (2) high-ability members are more likely than other members to exit.
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Leaders' Use of Moral Justifications Increases Policy Support
Alex Van Zant & Don Moore
Psychological Science, June 2015, Pages 934-943
Abstract:
Leaders must choose how to justify their organization's actions to stakeholders. We differentiate moral frames, or justifications based on moral values, from pragmatic frames, or justifications based on practical costs and benefits. In Experiments 1a and 1b, we found that moral policy frames elicited more support than pragmatic frames across a variety of scenarios. This effect was mediated by the perception that leaders who offer moral justifications possess relatively greater moral character. In Experiment 2, we found that perceptions of a leader's private motives had a stronger influence on policy support than did the leader's public stance. Experiment 3 demonstrated that, irrespective of how a policy was framed, people were most supportive of a policy championed by a leader high in moral character. In Experiment 4, we documented an additional benefit of moral policy frames: They allow leaders to mitigate the moral outrage generated by reneging on a policy.
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Project Characteristics, Incentives, and Team Production
Richard Fu, Ajay Subramanian & Anand Venkateswaran
Management Science, forthcoming
Abstract:
We develop a model to show how agency conflicts, free-rider effects, and monitoring costs interact to affect optimal team size and workers' incentive contracts. Team size increases with project risk, decreases with profitability, and decreases with monitoring costs as a proportion of output. Our predictions are consistent with empirical evidence that firm-specific risk has increased over time, average corporate earnings have declined, and firms' organizational structures have also flattened. The predicted effects of monitoring costs on team size are supported by evidence that improvements in information technology likely to lower monitoring costs lead to larger teams. Further, firms with relatively more intangible assets, where monitoring costs are likely to be higher, are smaller. Optimal incentive intensities decrease with risk and increase with profitability. The endogenous determination of team size accentuates the positive effects of a decline in risk and an increase in profitability on incentives.
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Different Views of Hierarchy and Why They Matter: Hierarchy as Inequality or as Cascading Influence
Stuart Bunderson et al.
Academy of Management Journal, forthcoming
Abstract:
Hierarchy is a reality of group life, for humans as well as for most other group-living species. And yet, there remains considerable debate about whether and when hierarchy can promote group performance and member satisfaction. We suggest that progress in this debate has been hampered by a lack of clarity about hierarchy and how to conceptualize it. Whereas prevailing conceptualizations of hierarchy in the group and organization literature focus on inequality in member power or status (i.e., centralization or steepness), we build on the ethological and social network traditions to advance a view of hierarchy as cascading relations of dyadic influence (i.e., acyclicity). We further suggest that hierarchy thus conceptualized is more likely to capture the functional benefits of hierarchy whereas hierarchy as inequality is more likely to be dysfunctional. In a study of 75 teams drawn from a wide range of industries, we show that whereas acyclicity in influence relations reduces conflict and thereby enhances both group performance and member satisfaction, centralization and steepness have negative effects on conflict, performance, and satisfaction, particularly in groups that perform complex tasks. The theory and results of this study can help to clarify and advance research on the functions and dysfunctions of hierarchy in task groups.
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Game Changer: The Topology of Creativity
Mathijs de Vaan, Balazs Vedres & David Stark
American Journal of Sociology, January 2015, Pages 1144-1194
Abstract:
This article examines the sociological factors that explain why some creative teams are able to produce game changers ― cultural products that stand out as distinctive while also being critically recognized as outstanding. The authors build on work pointing to structural folding ― the network property of a cohesive group whose membership overlaps with that of another cohesive group. They hypothesize that the effects of structural folding on game changing success are especially strong when overlapping groups are cognitively distant. Measuring social distance separately from cognitive distance and distinctiveness independently from critical acclaim, the authors test their hypothesis about structural folding and cognitive diversity by analyzing team reassembly for 12,422 video games and the career histories of 139,727 video game developers. When combined with cognitive distance, structural folding channels and mobilizes a productive tension of rules, roles, and codes that promotes successful innovation. In addition to serving as pipes and prisms, network ties are also the source of tools and tensions.
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Guozhen Zhao, Ya-Ru Chen & Joel Brockner
Journal of Experimental Social Psychology, July 2015, Pages 96-112
Abstract:
Four studies examined when and why the trustworthiness of subordinates influenced their managers' procedural fairness towards them. Subordinates seen as having more benevolence trustworthiness elicited greater procedural fairness from their managers, whereas subordinates seen as having less integrity trustworthiness elicited greater procedural fairness. Moreover, the positive (negative) relationship between subordinates' benevolence (integrity) trustworthiness and managers' procedural fairness was more pronounced when subordinates were perceived as higher in ability trustworthiness. Additional moderating and mediating findings suggest that managers' tendencies to show high procedural fairness towards their subordinates reflect two different underlying motivations: (1) to help managers maintain or cultivate good working relationships with their subordinates, and (2) to maintain control over their subordinates, that is, to make it less likely for subordinates to behave in ways that disrupt managers from attaining their goals. Implications for the organizational justice and trust literatures are discussed.