Thursday, September 21, 2017

Harm to Similar People: What Awards Can Do

I recently discussed in this blog how status and prestige can do good things for a person, an organization, or a product. This effect has seen much study because it is a social fact that is very influential, and it seems arbitrary and illogical. Identical items are valued differently by supposedly smart people. We have lots of evidence that status gives benefits, including to those who are in some way connected to others with high status. To be seen with the elite is to gain some elite-ness, and casual observation of how people crowd the most prominent people in receptions will tell you they know that.

Can status also cause harm? A new article in Administrative Science Quarterly by Brian Reschke, Pierre Azoulay, and Toby Stuart found an example of this. They looked at the very prestigious appointment to the Howard Hughes Medical Institute (HHMI), which marks appointees and their research as especially accomplished, so much so that it can be used to predict future Nobel Prizes. Receiving this appointment is clearly a good thing. But what happens to those who are doing similar research but were not appointed to the HHMI? Is the similar research a connection that lets them gain some status? Or does it mark them as losers in a race for who is most important and should receive attention? Even worse, does someone else’s HHMI appointment determine what the final answer to a research question is, so that others conclude that this question can now be ignored?

Of course the blog title gave it away: prizes harm the status of similar others. Once a prize is announced, their work is seen as less and less important—their influence erodes. This erosion increases over time, and it is greater for younger (so less established) similar work. This is important to learn about on its own, because it is so different from the positive “status contagion” that we are used to finding. But there is also an exception to this finding, and it is just as interesting. Circling back to the logic that being near the elite can give some elite-ness, a prize might be able to bring recognition to similar others, and through that give them status. Resche, Azoulay, and Stuart found that can be true, but only if the similar others have little recognition to begin with. Once their work is established enough to be seen as important, the prize has negative effects.

So, prizes can give status to the less established, lifting them up. More often, what prizes do is to settle who among the established are most important, bringing one up and pushing the rest down. Anyone working in an area in which prizes are given—and pretty much any occupation or industry that involves design has prizes—will appreciate this research, because it confirms a basic intuition. You should hope to get the prize and fear that the prize is given to someone like yourself. 

Sunday, August 20, 2017

Power from Arbitrary Places: What Awards Can Do

We have a general idea that status and prestige can do things – good things – to a person or organization. We are all familiar with how the prestigious classes of wine demand higher prices, even for a given quality level; there is evidence on this in research on French and California wines. Status effects are also well known from many other contexts, and a more-consequential example is financial markets, in which the most prestigious banks gain price and distribution advantages over all others.

A new paper by Anne Bowers and Matteo Prato in Administrative Science Quarterly gives interesting new details on the effects of status. They look at equity analysts, who seek to help investors in the stock market by issuing reports on firms and estimating their future earnings. This is difficult work, both in getting the estimates right and in gaining the confidence of investors, but some analysts are so highly regarded that their estimates can move the price of stock they report on. They have market power even though they just act as observers and forecasters. But how can an investor determine what analyst to pay attention to?

Conveniently, there is the magazine Institutional Investor, which caters to the large (and very powerful) institutional investors such as mutual funds and pension funds, as well as ordinary investors. The magazine has an annual All-Star award, given mostly for accurate estimates but also for other qualities such as high service to customers (again, institutional investors). This award is prestigious, but it is also a sign of quality. If the market could consider the quality and prestige aspects of the award separately, someone who was nearly good enough for the award should gain nearly as much power as someone actually getting it. You are probably guessing that this is not what happens. And you are right.

Bowers and Prato had a very clever way of finding this out. The award is given across many categories of equities, and these categories often change through addition, deletion, combination, and splitting.  This is neat because it means that an analyst could become an All-Star, or lose an All-Star award designation from a prior year, simply because the categories changed. Focusing only on these changes in awards, they found that the difference between having an award and not having one was a great deal of market power. Gaining an award meant that an analyst moved stock prices much more; losing one meant that an analyst moved prices much less.

The second of these effects should give you pause. Financial markets are supposed to be smart and to be able to predict the average outcome of many future events. But the loss of market power when an analyst loses the All-Star distinction because of a category change suggests that the markets are forgetting what they knew. The quality of an analyst doesn’t suddenly change, so if the market power changes, we know that the market has forgotten the quality. This is not good news for those of us who let institutional investors such as mutual funds or pension funds hold our pension investments.

Monday, August 14, 2017

Underselling Labors of Love: Why Give Discounts to Rich Tourists?

The world is full of people in creative occupations. Taking a broad view of creative occupations as those involving work with personal shaping of the product and service, about 40 percent of the world’s workers are in these occupations. Among them, artists and craftspeople are the ones we most readily associate with creative work because they instill their work not only with personal design and careful craftwork but also with a passion that makes each piece a labor of love. We recognize this most readily with artists making one-of-a-kind works, but many craftspeople turning out decorative items also make each piece an individual expression. They should get paid well for this, right?

Maybe not. In a new article in Administrative Science Quarterly, Aruna Ranganathan studied the pricing of wood bangles made by craftspeople in southern India, finding that the artistic ambitions of the craftspeople had a surprising effect on the prices they charged, relative to prices charged by traders selling exactly the same goods but not involved in their creation: they gave a discount to buyers who appeared to be especially appreciative of their work. The reason became clear from how they described their work. Unlike traders, who freely admitted selling crafted work just to make money, the craftspeople took personal pride in every piece they made and were especially attached to the best ones. Some items they refused to sell; others they made sure to sell to people who seemed likely to appreciate them and display them prominently.

This makes sense, because every artist wants to be acknowledged and wants the work to be appreciated. Indeed, this was especially important to the craftspeople Ranganathan studied, who saw their work as having such strong elements of the sacred that they viewed their workshops as being like temples. But what’s harder to understand is how craftspeople determine whether someone will appreciate their work. Not every transaction involves words, especially in an area that attracts many tourists who don’t speak the local language, as was the case in Ranganathan’s study. Instead, the craftspeople looked at the customers. And the financial decisions they made based on what they saw might be surprising.

If a customer wore handcrafted jewelry or clothing, or carried a handbag made from natural fibers, the craftspeople considered these clear signals that they would appreciate great craftwork. The craftspeople also believed that foreign tourists, who are fairly easily identified, would see their work as more exotic and be more likely to appreciate it. These two groups have something in common: they are likely to be wealthier than local customers wearing inexpensive items such as plastic jewelry and carrying synthetic handbags. Yet the craftspeople offered discounts to both of the wealthier groups and charged more—market price or even above—to the poorer customers. Market price (or higher) for the poor, discounts for the rich. It seems strange and unfair, but in creative work money is just part of the transaction—appreciation is the other part, and for the artist, this is a tradeoff.

In reporting evidence from social science, we often end up looking at behaviors that make sense on one dimension and not on another. I perfectly understand the artist who is willing to give a discount to have a piece appreciated. I don’t like the idea of the richest customers getting discounts. I suppose the best thing to do is not to bargain too much when buying art as a tourist. Hand-crafted items from local artisans should provide the artisan with both appreciation and a better standard of living.

Wednesday, August 9, 2017

When Occupations Rule the Workplace, Which Matters Most?

 “The modern workplace” is an expression often used as if there is just one kind, while the reality is that workplaces are complex and differentiated. But if one workplace deserves to be ranked as increasingly important, it is the multi-occupational workplace that has not only multiple occupations creating a product or service together, but also no order in the form of top-down hierarchy or start–finish sequence. The occupations in such a workplace work together, and the potential for failure anywhere to ruin the output gives every one of them power. Think of the large and growing medical sector, the many new services using information and communication technology, and the increased customization allowed by computer-aided design and manufacturing.

So how do occupations interact when all are interdependent, all at once? Beth Bechky and Daisy Chung showed in a new article in Administrative Science Quarterly that it depends on how the organization acknowledges occupational power. They studied firms doing equipment manufacturing and film production: both places with multiple occupations interacting at a high level of expertise to achieve customized, high-quality output. It turns out that the procedures in the two types of workplaces were very different, although they shared the feature of each occupation having significant power over its own work and influence on the other occupations. This combination of having power and being influenced was not a battleground, but a complicated and pragmatic interaction.

The differences in procedures were clear. The equipment-making firm maintained the semblance of hierarchy and temporal order, with products starting out as engineering documentation and proceeding to test assembly and manufacturing, but the actual work involved feedback and adjustments that led to cycles as the later stages made clarifications and corrected mistakes. Importantly, everything was in theory documented formally, even the adjustments, and work was done “by the book.” Film production, on the other hand, did not seek to define a hierarchy among occupations and had simultaneous interaction as production proceeded. In film production, the power of each occupation over its own work was fully acknowledged, and interaction among various occupations was direct and egalitarian; in equipment production, the power of each occupation over its own work was hidden, and interaction among various occupations was channeled through the process of documenting the product specifications.

These differences also affected how each occupation functioned internally. Because some occupations in equipment manufacturing were formally seen as subordinate, they conducted close internal quality checks to ensure that their members’ work was perfect along the dimensions they controlled. That way they maintained as much control as possible. Because film production lacked such ranking, the emphasis was not on internal control to keep quality uniformly high, but more on recognizing each member’s specific strengths and mentoring junior members into the occupation.

Why the differences? Keep in mind that these occupations are working together in a pragmatic way to solve organizational problems. The main class of problem has to do with time. Any organization dealing with occupations with well-established hierarchies is dealing with historical time and must not deviate too far from how things were done before, when interdependence was less. So they make the documentation system work in ways that maintain history and handle interdependence. Any organization dealing with unfolding events is dealing with the event clock and must not slow down direct interaction among whatever combination of occupations has the capability to deal with the current emergency; even as the occupations have widely differing formal authority, scarcity, and pay, they interact as equals. Organizations operate to deal with time.

Bechky, Beth A. and Daisy Chung. 2017. Latitude or Latent Control? How Occupational Embeddedness and Control Shape Emergent Coordination. Administrative Science Quarterly, forthcoming

Thursday, July 27, 2017

What Is Healthcare All About? Care, Science, or Just Cost?

I am writing this blog post while Congress is debating whether and how to change the U.S. healthcare system. This is something that, according to the news, will be determined in three days and will be decided by a simple majority without analysis of consequences by the Congressional Budget Office and without hearings involving the affected parties. This seems like a bad time to talk about long-term planning and a broader view of healthcare.

Let me do it anyway, starting with an important research paper by Mary Dunn and Candace Jones in Administrative Science Quarterly.  They looked at a central input to healthcare: medical schools, which educate the doctors who are in charge of providing the type of medical care that requires the MD degree and who direct the medical care done by others, such as nurses and lab technicians.  Although medical care is much bigger than doctors, they are at its core, so how they are educated is consequential. The paper found that medical schools have had an enduring division between two logics on how to think about healthcare, and one of these has become more influential over time. This view of education, and healthcare, is very new and needs some explanation.

Much simplified, the logics are as follows. One is that education is the transfer of scientific knowledge, so that this knowledge can be used in practice. So, medical school is about the science of medicine.  The other is that education instills values, and the guiding value for medicine is to care for people. So, medical school is about care, which can include care for people who are not yet patients and people who cannot be cured.

Dunn and Jones wrote a fascinating paper on how these two logics were in contention over decades. Advocates of each logic recognized the conflict with the other and fought for resources and attention to be devoted to their own logic. They saw an emphasis of their favored logic as essential for the health of medical education and the health of the nation more broadly. I don’t have room to describe their discussion here, but an important conclusion is that the care logic has grown in importance, and a key element of its growth was greater public discussion on managed care, with its emphasis on preventive medicine and focus on reducing costs.

This conclusion has become even more important in light of recent events. Managed care helped make the care logic more prominent, which facilitated useful initiatives such as thinking of public care more broadly to include prevention of disease and thinking of patients as individuals in need of care instead of just as cases with prognoses. But it also had two other effects that play a role in current politics around healthcare. First, the science part of medicine became less important, which now has become part of a greater movement against science having a role in state decisions overall. Second, cost is now a key consideration in health, which is clear given that estimates of tens of millions of people losing health insurance are acceptable as long as costs go down. Cost savings are even more important than the science behind estimating that tens of millions will lose their insurance, with the health consequences this will have.

Thursday, July 20, 2017

The Manager as a Temp: Preparing for the Modern Labor Market

The news keeps telling us that employment is becoming a more-temporary state, with job changes both the result of footloose employees and of firms treating their workers as easily replaced, downsized, and upsized as needed. Not to mention that many now work as contractors, not employees, like Uber drivers. In these stories, the managers are typically cast as the bad guys treating everyone else as expendables. There is some truth to that, but there is a flip side: managers are also temporary. They are quickly moved around or even fired, and they also try to use job changes to move up faster than they could by staying in place.

How can managers be temps? Not only are managers credible to their subordinates only if they are expected to stick around for a while, but their chances of being promoted depend—ironically—on being able to signal that they are in it for the long run, even in a firm that habitually lets managers go. Well, for every problem that can’t be solved, there is a business school claiming to solve it. Research in Administrative Science Quarterly by Gianpiero Petriglieri, Jennifer Petriglieri, and Jack Denfeld Wood looked at how the participants in an MBA program used their education to make themselves more portable across firms and jobs. They were learning to turn themselves into managerial temps and use it to benefit their careers.

Like any education, business school is a journey, and the path and destination are unique for everyone. But there were clear patterns that tell us a lot about careers, and about management, in the current labor market. One path was to use the education to adapt both skills and identity to how firms now treat their workers, including managers. This is an instrumental pathway, where the idea is to understand the rules of the game and play it well. The other path was to use the pathway to explore one’s own preferred role in this world, and shape an identity that matches this discovery. This is a humanistic pathway, where the idea is to understand the parts available in the play and audition for the one that is the best fit.

These paths cannot easily be taken while working, because the everyday demands of actually managing make the learning process difficult, and changing identity isn’t possible either because everyone looks for and values constancy. So education acts as a valuable hiding place—a bubble, or a deep dive—where changes can happen and it is possible to emerge fully formed, or at least nearly so.

The next question is of course what the manager temps will do when they manage worker temps. Will work get easier when both manager and managed understand that they are not in the firm to stay, and the most stable part of their identity is its portability? To know that we have to wait for more research.

Wednesday, July 5, 2017

Committing to Change: How Change Agents Become Effective

Management practice has its fair share of cynics, and one story that many cynics will tell is that there are three sources of inefficiency in organizations. The first is that they can’t change into better practices, the second is that they pay for consultants who can’t help them change into better practices, and the third is that they pay for business schools to teach their managers, who end up not being able to change them into better practices. As a faculty member of a school that benefits a lot from the third source, I can at least say I agree with the cynics on the first two. But then, what can be done?

New research by Melissa Valentine in Administrative Science Quarterly has looked closely at consultants and organizational change, and offers some very helpful insights. She studied efforts to improve a cancer treatment center, so the changes were not just simple matters of reducing cost but had significant health outcomes. What did she find? First, it is completely true that significant consultant effort can be invested with no real change as a result. Money wasted, in other words, but perhaps worth trying because it is likely that nothing would have happened without the consultants either.

But consulting changing nothing was just one result – there were also some consultant efforts that did produce better practices. Importantly, the difference in how the consultants and the cancer center interacted in the unsuccessful  and successful cases was so systematic that this research gives clear guidance on what needs to be done to improve organizations. The difference can be summed up in one word: commitment.  And I will write the rest of the blog without any reference to interpersonal relationships, although I admit to being tempted.

Consultants hear from organizational members what works well and what does not, and they collect ideas on how improvements can be done and who would be in favor of them and under what conditions. This is done every time and has nothing to do with success or failure.  The success came from taking one more step. Whenever possible improvements were suggested and had some level of support across the organization, the managers who would be responsible for making changes were asked to renegotiate their obligations to each other and to implement the necessary changes. The renegotiation is needed because changes in complex organizations typically cross boundaries of managers and are most effectively handled by direct negotiation, not by referring up to the shared manager. Immediate implementation is needed because it is easy to give nice-sounding promises without accepting the cost of actually following through.  In other words, the success came from making managers decide what to commit to and then making them commit.

This was not just done as a final set of activities after delivering a report. It was a continuous effort, step by step, in which managers made adjustments and re-adjustments, set time tables and expected commitments, set new goals and measures, and followed up. The process also went far beyond managers, because hospitals also have another very powerful group: the doctors. Efforts to integrate their concerns were made in both the successful and unsuccessful project, but again, the successful project pushed all the way to commitment. In the successful case, the key decision makers ended up feeling obliged to fulfill promises they had made to others in the organizations – not to the consultants – and as a result, the organization changed.

The implication is clear. Consulting is often seen as an effective way of making changes because changes require a time investment, and organizations typically don’t have the resources to do their regular work and make time investments all at once. But increasing the capacity to propose change does not relieve the organization of the responsibility to negotiate, decide, and commit. Without those added activities, it is paying for nothing.