Thursday, October 31, 2019

Rational Fouls? Yes, Professional Soccer Players Mostly Cheat Rationally

Fans usually watch soccer games with a great deal of excitement and passion. The players look excited too, even passionate. But remember, they are professional soccer players, hired and paid well to perform at top levels. Your local team may not be all that good (it depends on where you live), but the games broadcast on television involve top league sides that can hire elite players from anywhere in the world. Has it occurred to you that they may actually be more calculating than passionate when playing the game?

They are, at least most of the time. In a forthcoming paper in Organization Studies, Nils Rudi, Anup Walvekar, and I studied how soccer players foul each other. In other words, we studied how a soccer player decides to slide down, kick down, elbow, or pull an opposing-team player so that the referee calls a foul.

Fouls are an interesting topic, for a few reasons. First, fouls are against the rules of the game, but can benefit their team. They are a good comparison with other things employees can do that are illegal or immoral but benefits their firm in the short term, such as misleading or defrauding customers. Second, fouls are risky for the player. The referee is watching, and a violent foul not only gives a free kick, but also a yellow card to the fouling player. That can be very expensive for a player who gets a per-game bonus payment, as many of them do. Finally, fouls often look like acts of passion, as when a defending player slides into the attacker to knock him down.

So how do soccer players decide when to foul? Mostly they are rational. We were able to calculate the cost of fouling as change in likelihood that the team of the fouled player will score as a result of the foul. Intuitively, this is easy – fouls lead to free kicks, which can give goals. (Mathematically it is more complicated, but it is completely doable.) We were able to show that players choose are more likely to foul more the better it is for the team to do so. Not exactly surprising, except that the effect was quite strong. Many of you know enough about the off-the-field antics of some soccer players to doubt that they are fully rational, but on the field, they are complete professionals and experts in what they do.

But there are two exceptions, and both are interesting. First, there is the organizational goal of winning the game. Players and teams hate to lose a lead, and they foul less rationally when they are defending a lead. Second, there is the individual goal of looking good. Players hate to lose the ball, and they foul less rationally when they have just lost the ball to the opposing team. In fact, they completely lose their rationality if they are near the player who stripped them of the ball.

We know this because we can measure not only whether organizational and individual goals affect the likelihood of fouling, but also whether it affects how much the cost of fouling is taken into consideration. Defending a lead and becoming hot-headed after losing the ball both make the player think less of the cost of fouling. So, we know that in one type of organization with a highly expert team, decisions are made rationally except for when it really matters to the decision maker.

Tuesday, October 22, 2019

Punch or Block? How Organizational Members React to Social Movement Anger

The Dick’s Sporting Goods chain store stopped selling military-style semiautomatic rifles after the Marjory Stoneman Douglas High School mass shooting. No wonder: the Stoneman terrorist had bought a gun from one of their stores. Even though he didn’t use it in the attack, the store was one decision away from becoming an accessory to a mass shooting of school children.

Gun control is an issue that provokes significant anger from people on both sides. People who advocate for stricter controls express anger over the lives lost and the failure to quell domestic terrorism. People on the side of no gun control express anger over losing their right to buy any weapon they like.

Not all social movements provoke the degree of anger gun control does, but we have more to learn about those that do. A recent article by Katherine A. DeCelles, Scott Sonenshein, and Brayden G. King in Administrative Science Quarterly shows us something new about social movements that provoke anger and how organizations respond to them. The authors find that anger related to a social movement affects the response of organizational insiders who agree with the social movement, but not in the way we might expect. In the case of Dick’s Sporting Goods, the organizational insiders would be employees who agree that gun control is necessary and that the store should limit its gun sales and/or have stricter background checks.

Employees’ reaction to a social movement they agree with would seem fairly simple to predict: they would express their support of the social movement and try to influence the organization to agree to its demands. This is often the case, and employees are often successful: organizational insiders who agree with a social movement make organizations much more likely to change. In other words, a social movement often creates an opportunity to push an organization for change.

But this article points out that social movements invoking anger are different. Anger leads to a feeling of being under siege, so employees agreeing with the movement face a dilemma. They are angry too and would like to express it. Yet they also depend on the organization for work and pay, and they have reasons to fear that involvement in an angry social movement will lead to negative repercussions, whether from coworkers who disagree or from management. In other words, they have to decide whether an angry social movement is a good opportunity to punch for change.

The research showed that this conflict between anger and fear was resolved in favor of fear. While people outside the organization were more likely to act in response to the social movement when they were angry, organizational insiders were less likely to act. This was because greater anger also led them to fear negative consequences of acting. Employees often did not act on their anger but instead sought to protect themselves. In other words, they decided that the best response to an angry social movement was to block punches that might come from management, not to punch for change.

In Dick’s Sporting Goods, change happened. Not only did they stop selling the semi-automatic rifles that are favored by mass shooters, but they also destroyed them. They are considering stopping sales of guns of all types in their stores. Why did this happen? The decisive factor was that, angry or not, the CEO got on the side of the social movement. Management does matter, especially when there is controversy and anger.

DeCelles, K. A., Sonenshein, S., & King, B. G. 2019. Examining Anger’s Immobilizing Effect on Institutional Insiders’ Action Intentions in Social Movements. Administrative Science Quarterly, Forthcoming.

Monday, October 7, 2019

Angry Friends: How Past Collaboration Can Increase Conflict

Let’s look at something that most of us would agree is true: People and firms that have collaborated in the past will treat each other better in the future. This behavior is widely accepted to be true in business, and plenty of research evidence backs it up. It is part of what we call network theory, where one of the central ideas is that past collaboration or contact between two people creates a tie between them that facilitates future collaborations.

Like all things we believe to be true, we think about this one only when we see that it’s not. A recent article in Administrative Science Quarterly by Jose Uribe, Maxim Sytch, and Yong H. Kim looks at collaborations among lawyers. In most collaborations, people or firms work together for their own benefit. Lawyers also seek to benefit themselves, of course, but they do so by acting as representatives for others. In this paper the lawyers represent firms involved in disputes over intellectual property, which can be a very important and potentially valuable form of legal action.

A past collaboration means that the lawyers have been on the same side in an earlier lawsuit, usually representing different firms that have the same goal. This study considers what these lawyers do when they later represent firms on opposite sides of a lawsuit. One might think that lawyers who have collaborated in the past will treat each other better and come to a better solution in a shorter time. This is possible, but if the firms they now represent are strong rivals, the opposite happens: The lawyers are more aggressive if they have collaborated in the past. That means longer time to settle the case and fewer cases settled out of court.

Does this make sense? It does not if we assume that the firms observe and care about only the final outcome of the case. This article shows that having more-aggressive lawyers on each side typically leads to worse outcomes for both sides, such as dings to their stock prices. But it turns out that firms also look at their lawyers’ history with the other side’s counsel and care about the process, not just the outcome, and that is where things go wrong. Lawyers who have collaborated with opposing counsel in the past know they need to prove their loyalty to their current client, and the easiest way to do so is to be aggressive – the firm is watching the process and will see this as a sign of loyalty.

The results of this research do not mean that what we know about collaborations is wrong – only that it is incomplete. A history of collaborating would likely make most lawyers want to collaborate, but they are trapped by the need to prove loyalty to clients that are strong rivals. There is no way out of this trap, which also hurts the client, but they can make it less serious by agreeing to act collaboratively on smaller procedural steps that simplify the case for the judge and lawyers but are not inspected closely by the client. And indeed, some lawyers did exactly that, presumably because they still wanted some level of collaboration and also knew that this would be better for the client.

So we still know that past collaborations make people want to treat each other better, but the role of representing someone else can reverse that. To represent someone you need them to trust you, and if that takes some aggression against a past collaborator you will consider doing that. At least if you are a lawyer.

Uribe, J., Sytch, M., & Kim, Y. H. 2019. When Friends Become Foes: Collaboration as a Catalyst for Conflict. Administrative Science Quarterly, forthcoming.

Friday, September 27, 2019

Rise of the Moderately Capable: Succession in Family Business

How can the prince of an absolute monarch survive and inherit the throne? How can the child of a family business founder take over the business? Two different questions with the same answer: Don’t be too ambitious, and don’t be too capable. This sounds like a bleak story, so I should explain the research behind it.

The theory and evidence are found in a recent article in Administrative Science Quarterlyby Xu Huang, Louis Chen, Erica Xu, Feifei Lu, and Ka-Chai Tam. They look at the problematic situation that parents and successors of family businesses find themselves in. Family business founders believe that success comes from exactly their actions and values, so successors should imitate them exactly. Yet imitating them too closely creates competition, which encourages the parent to dominate the child instead of giving the successor freedom.

How can this domination be avoided? The answer is simple and discouraging. The successor should not be too ambitious or too capable, because these attributes would increase the competition and lead to dominance by the founder. In fact, highly ambitious and capable children will be dominated by the family business founder because they are too good, just as unambitious and incapable children will be dominated because they are not good enough.

The research team found evidence for this through surveys of family business founders and successors in China. But they went further than that: One part of their study looked at how princes of Chinese monarchies before 1000 AD fared, finding that those who were not too ambitious and capable had the best chance of succeeding the king. Of course, not succeeding an absolute monarch is a little worse than not taking over a family business – those who failed might be killed by their father and replaced by a more amenable prince.

So in some ways the world has improved, because the price of being too capable is no longer death. But this research still does not deliver good news. Family businesses are very important in most parts of the world. If only the moderately capable successors gain freedom, these firms will not become as successful as they might, to the cost of the family, the employees, and society. Strictly speaking this effect has been shown for only the founder generation of family businesses, and we could hope that it disappears in the second or third generation.  

Family businesses are complicated because they mix family and business, which are usually kept apart in modern society. In the ancient world family and business were the same thing, and I can’t help wondering whether that meant they had better mechanisms for dealing with the mix than we do now.

Monday, September 2, 2019

Buying Elections: How State-Owned Enterprises Can Serve Politicians

Getting re-elected is much easier when voters are content, such as when the economy is doing well and everyone has work. No wonder we see a president tell media that the U.S. economy is fantastic but also tell the Fed that the economy is in trouble and needs a strong boost from a prime rate cut. This is crude, but if everyone complies it will work. However, in nations with a stronger blend of state and private sectors, more sophisticated approaches are also available.

Scholars have long thought that state-owned enterprises (SOEs) have political uses, and in a recent paper in Administrative Science Quarterly by Carlos Inoue we learn more about how politicians can use them. The trick in this case is over-employment, which has to be done very selectively because voters in most nations are wary of the state, or the enterprises it owns, running up excessive bills that have to be paid through taxes. That’s why the use of SOEs has to be sophisticated, not crude.

What to do? Inoue looked at the water-supply sector in Brazil, which has exactly the blend of municipal authorities, SOEs, and privately owned firms needed to check whether SOEs are special. And indeed, they are special. SOEs hired additional staff exactly during election years (for governors, who are the ones controlling them). To maximize the electoral impact, they were careful to hire more staff in communities with greater poverty. Some SOEs also had private investors, who resisted effectively enough that the over-hiring in election years was less. So we see a sophisticated effort to buy elections through influencing SOEs: hire more when needed, where the creation of jobs is most effective, and whenever possible.

What was the cost of all this? In general, SOEs were not costlier than other firms, because they diverted resources from other areas to create jobs. But they did have lower profitability as a result of the greater employment during election years. They spent money – sacrificed profits – exactly when it was useful for politicians seeking re-election, but not otherwise.

Organizations are used in so many ways, some of which are far away from their original purpose. The water-supply industry is important in any nation, because abundant and clean water helps the society and economy, but at least some of these firms have a second purpose. This is something that both scholars and practical readers dislike, but at the same time we have to admire how skillfully it was done in this case.

Friday, July 26, 2019

My power-hungry, algorithmic boss

They say that computers will not replace workers but instead become their bosses. It makes sense. Humans can do many things that computers cannot, but computers are more rational decision makers. That presents all sorts of problems for the humans who have an algorithm for a boss. Praise and ingratiation do not work anymore because algorithms don’t have emotions, only data and processing rules. Algorithms give no explanations of what went wrong and encouragement to do better, or at least not the type of explanations that make sense to a human. What to do?

This question is the topic of a recent article in Administrative Science Quarterly by Corentin Curchod, Gerardo Patriotta, Laurie Cohen, and Nicolas Neysen. They looked at eBay sellers, who are a good example because they had algorithm bosses long before the Uber drivers and Upwork programmers did. As you might imagine, they found that algorithm bosses can be quite difficult.

The main problem with algorithm bosses is their power. They make decisions based on rules and data, and no one can question or appeal their decisions. For example, they can downgrade eBay sellers or even exclude them from the platform if buyers’ feedback is poor. But what if the data are manipulated? For eBay sellers, that is a serious problem because buyers can rate the sellers, which means they can use the threat of low ratings to negotiate better deals. There are ways to use the algorithm to detect manipulative buyers, but these don’t work well because such buyers understand the algorithm well enough to avoid detection, such as by changing identities. That leaves sellers vulnerable because they can’t change identities, so they are stuck with the buyers’ manipulation and the algorithm’s power.

From an eBay seller’s point of view, the algorithm as a boss starts to look like a prison. The boss is always right, even when the data it uses are wrong, and the data are often wrong because buyers use the system to manipulate the seller. There is a way to appeal, but the answers to appeals also sound like they come from an algorithm: eBay can’t monitor buyers’ behaviors because it is a platform that helps buyers find sellers, not more than that. It is not in the business of policing people.

So what to do when the boss is an algorithm? The eBay sellers know the answer, and their approach will work for others too. With human bosses, you manipulate emotions. With algorithm bosses, you manipulate the data. eBay sellers with some experience are always on the alert for buyers who look suspicious. Maybe their profile matches that of a known manipulative buyer. Maybe the buyer is very recently registered, as would happen if someone changes identities often. Maybe their behavior matches that of a manipulative buyer – the tone or content of email messages before agreeing to buy gives out warning signs. In each case, the response is the same: refuse to sell to that buyer, avoiding the risk of buyer data manipulation. Naturally, these refusals to sell are a form of seller data manipulation because they are done to avoid low ratings.

Of course, eBay sellers protecting themselves by excluding buyers is bad news for buyers who are innocent but match the profile of manipulative buyers. That’s not news in management research, because we know that workers who need to protect themselves against overly powerful bosses end up harming someone or something else. Making the boss non-human does not change the problem for the worker or their need to solve it one way or the other. I find it interesting to see that one can take human bosses out of organizations without also removing the problems that human bosses cause.

Curchod, C., et al. 2019. "Working for an Algorithm: Power Asymmetries and Agency in Online Work Settings." Administrative Science Quarterly, forthcoming.

Wednesday, June 19, 2019

Government by Blackmail: How States Can Influence States

We know that there is a big difference between theory and practice in how states relate to states. The theory is that each state is autonomous and rules what goes on inside it, and for anything that connects states they either follow treaties and conventions or interact as equals. The practice is that larger nations have the most say. The Mekong River goes through China, Laos, Myanmar, Thailand, Cambodia, and Vietnam, but the Mekong River Patrol jointly operated by some of these nations was a Chinese initiative involving significant Chinese police south of China’s border. US drug control south of its border is similar. 

What accounts for the difference between theory and practice? Research by Florian Überbacher and Andreas Georg Scherer looked at this question by examining a specific example: how the famous Swiss banking secrecy was eliminated. Although there can be many ways that large states influence smaller ones, this example is a good illustration of one simple approach: it was done through blackmail by the US. The interesting part is how the blackmail was done.

The problem with states blackmailing states is that statecraft is supposed to be different from running a mob, and any state action resembling what mobsters do can create resistance in the short run and hurt the blackmailing state in the longer run. As of May 2019, we are observing the US placing tariffs on Chinese exports with the explicit purpose of forcing a more favorable trade agreement, an obvious blackmail tactic, and China responding by doing … nothing. The US actions against Swiss banks were more effective, not just because Switzerland is smaller but also because they did not target Switzerland. Instead, they targeted the Swiss banks and used the potential damage to the banks as a way of blackmailing Switzerland, which cares about its banks because they are a large part of the economy.

The script was simple. A whistleblower revealed (to no one’s surprise) that Swiss banks held money that should have been taxed in the US, and US authorities proceeded to demand that the Swiss government turn over information about suspicious accounts. In addition—and this is the important point—US authorities turned increasingly aggressive in pressuring Swiss banks, to the point of making it clear that they were ready to inflict significant economic damage. It was the state version of telling potential snitches that the boss knows where their families live and children go to school and can act on this information. It worked: banks panicked, and the Swiss government agreed to release much more information than before.

All this sounds unusual as a state behavior, and maybe it is something done only when authorities are getting tired of tax evasion and want to act on banks making it easy and on states protecting the banks. But wait, does this resemble something we are also seeing now? The Chinese firm Huawei’s chief financial officer is currently under arrest in Canada at the request of the US, which is seeking extradition. By President Trump’s executive order, Huawei has been banned from using US technology in its products, ranging from mobile telephone infrastructure equipment (such as 5G gear) to components of phones its sells outside the US. The ban is formally for security reasons, but in an interview, the president has explicitly linked its fate to the outcome of the trade negotiations. So statecraft still has a component of blackmail, and we can look forward to seeing how states like Russia and China will learn from this and change how they do statecraft in their vicinity.

Überbacher, F. and A. G. Scherer 2019. "Indirect Compellence and Institutional Change: U.S. Extraterritorial Law Enforcement and the Erosion of Swiss Banking Secrecy." Administrative Science Quarterly, forthcoming.