Saturday, October 27, 2012

Looking a Leader, Becoming a Leader: Assertiveness versus Deference

The third presidential debate between President Barack Obama and Governor Mitt Romney had a one-on-one format that was in part a dialogue of the two, in part each of them addressing the camera and the moderator. In a dialogue format they get a chance to show how they address each other. Now, if you saw the debate, can you recall whether they were assertive in their style or whether you heard clauses that appeared to hedge their position or make disclaimers? Probably you remember an assertive style throughout, which is the style a politician who wants to be elected wants to cultivate. It is also the style that many leaders choose. Assertiveness is associated with self-confidence, which can make others confident in that person (or so it is thought). It also maintains an air of status and high position in a hierarchy. This is how we expect leaders in government and business to behave.

If so, is that how you should behave in order to become a leader? That is a trickier question. For one thing, people who are trying to advance up a career ladder may find it unwise to behave assertively toward their managers. It is widely thought to be bad idea, though the evidence of what would happen if you did so is not so rich. That's because people avoid assertiveness when interacting upwards in the hierarchy - they prefer to be a little deferential - and maybe we can't blame them for not running that experiment on themselves.. But what about the choice of assertiveness or deference in peer interactions? There one might see more of a battle for superiority through showing assertiveness, at least if we think of human workplaces as roughly akin to chimpanzee tribes with their dominance contests. But what a drag on productivity and strain on work relations that would be.

I can imagine workplaces that descend into dominance contests given the right (wrong?) kind of circumstances. But research by Alison Fragale and colleagues shows that the normal pattern is actually the opposite of this expectation: when interacting with peers in the workplace, people are especially careful to show deference in their statements. That is because peers have a greater need to signal friendly, non-threatening intentions to each other than individuals who interact up or down the hierarchy. Fragale and colleagues were able to show this through analysis of email logs in two studies, which was a clever design because people do tend to think a little longer before hitting “send” than they do before engaging vocal cords, so email communications are well-calibrated for tone as well as content.

I thought there was an interesting message in this research because it does suggest that an ability to get along and smooth social interactions is important in a career-oriented workplace where individuals want to get ahead. It is not just about sounding assertive and looking “leaderly.” And there is one detail about this research that I found particularly delightful: One of the studies used email records from the West Power Trading division of Enron; not an organization known for its warm and fuzzy organizational culture!

Monday, October 15, 2012

Matching: A Nobel Prize, and Some Evidence from Networks

The Nobel Prize in economics in 2012 was given to Lloyd Shapley and Alvin Roth for their contributions to the theory of matching. Matching is when two sides of a relation needs to find a suitable other in order to make something of value. For example, workers need to be matched with jobs that match their skills and interests, students need to be matched with schools and subjects, and cargos need to be matched with ships and routes. Each match can have varying quality, and an objective may be to get the best possible match quality in total – but of course that does not mean that each individual match is perfect. In fact, often the best one can do is to make sure that the match is stable, meaning that nobody wants to trade places. Because the units that are being matched are selfish, so they don't care about the total quality of matches, only their own match quality, the theory and practice of matching is complicated and well worth studying. In fact, it gets even worse if one lets the quality of matches become uncertain, but that is another field of research again. 

Most of the matching studies have been in markets that have been allowed to operate freely, or have been given specific mechanisms to improve efficiency. Economists are particularly interested in efficient markets, and Shapley, Roth, and others inspired by them have made great progress in market matching. To show some of the range, Roth has been involved in applications as varied as medical resident assignment, school choice, and organ donor matching.

Management scholars have recently taken an interest to matching too, but in a different context: networks. The idea is that we now know much about what networks do, but not enough about where they come from. Matching seems like a logical explanation because networks in business are relations where two sides need to find a suitable other in order to make something of value. That's exactly a matching problem. Following that logic, Hitoshi Mitsuhashi and I found that alliances in the shipbuilding industry could be explained by matching based on compatibility of resources and complementarity of markets. Moreover, alliances that are better matched also show better performance.

That study was done on firms operating trans-oceanic container routes, which means that they are sizable corporations. But it also works for small entrepreneurs who are making interpersonal networks to start a new business. Balagopal Vissa looked at their intention to form a tie with others they had met and the actual establishment of exchange between the two ties, and found that – again – compatibility and complementarity played a role, this time in the form of social similarity and task complementarity.  Entrepreneurs want to be reassured by having someone similar to themselves on social dimensions in the other firm, but they also want the businesses to complement each other in value creation.

For network scholars, this is a new way of thinking because it means looking inside each node in the network and comparing it with the others. Now it matters who you are and what you can do. For those who are used to thinking about matching, that has always mattered, so it is an easy logic to follow. It is a powerful combination of ideas, and now matching is becoming increasingly important to understand the networks that connect firms, both large and small.

Tuesday, October 9, 2012

Zynga’s Falling Shares, and the Fall of Entrepreneurship as Internet Firms Grow (Old)

We have just been treated to news on how many publicly listed Internet firms that gave stock or stock options to their employees have seen major declines in the value of their stock. Famous firms like Zynga and Facebook have been hit, as well as some less well-known ones. The immediate concern for these firms is that they are losing some of their employees, who have seen the big stock payoffs they anticipated (and briefly had) disappear. In fact, this has not happened yet, at least on a large scale, but executives worry that employees might leave once the job market gives them better outside options.

The successful Internet firms were built on entrepreneurship and have thrived on quick adaptation and exploitation of business opportunities, and these may be necessities rather than just virtues in such a fast-moving industry. The longer term worry is that it is not clear that this entrepreneurial spirit can be maintained as these firms grow and age. First, the most entrepreneurial employees may find that they prefer to start their own business, or even join another startup, rather than to work in a growing and increasingly bureaucratic firm. As star employees they have probably been given larger managerial responsibilities, but not every entrepreneur wants to become a manager. Second, even if they stay, they may find that it is harder to drive through new initiatives in a larger organization with more complex procedures and more boxes to tick before anything new can happen. They may stay, and may try to find and exploit new opportunities, but they are wrapped inside a structure that makes it harder to be timely to the market.

All this sounds very reasonable, but actually the fall of entrepreneurship is not as inevitable in larger and older firms as it seems. Aleksandra Kacperczyk recently published an article in Administrative Science Quarterly on development of new business opportunities inside firms, or intrapreneurship, finding that while employees of large and old firms were less likely to leave in order to start a new business, they were more likely to create business opportunities inside their own firm. This may sound surprising from the description of large and old firms as more bureaucratic, and to some extent it is. But larger firms also have more resources to put behind new business generation (would you rather have your business be backed by Google or someone else?). Many older firms have become pretty experienced at what they are doing, and good at it. So the conventional wisdom that not much entrepreneurship happens inside the larger and older firms needs a second look. There is evidence that seems to disagree.

Ovide, Shira and Scott Thurm. 2012. Silicon Valley’s Stock Funk. Wall Street Journal, October 5, 2012.