Humility Empowers: How CEOs’ Attitudes and Actions Cascade Down the Firm

Managers are often given advice that combines research-based buzzwords with fundamental misunderstandings. Empowerment is a good example. The word contains “power,” and advice is usually given to those who feel a need to improve, so it was perhaps inevitable that empowerment should be associated with ideas of individuals becoming or feeling empowered through some action of their own, such as attending a course or a coaching session on how to become empowered. That’s not what empowerment means or how it works: people are empowered when someone else gives them power and authority to make their own decisions.

The distinction is important because if empowerment improves organizations, then we should start by looking at the person who empowers others. That’s exactly what was done in research published in Administrative Science Quarterly by Amy Ou and collaborators. They looked at how a CEO’s humility could empower others in the firm. Their central insight is simple and powerful: a CEO’s humility makes it easier for the top management team to work together, because each feels empowered and comfortable, and that effect on the top management team cascades down the organization.

They found that the humble CEO is the opposite of the showy CEO in two key ways. First, the humble CEO does not dominate but instead is understated and makes it easier for the closest executives to stand up and perform. For example, the humble CEO does not make public performances and speeches to the whole organization but instead lets the empowerment of the closest executives cascade down. Second, humble CEOs encourage communication to give shared understanding, which in turn lets subordinates feel motivated and confident about their decisions and helps their managers trust their judgment and commitment. This cascading down of shared understanding and trust can bring whole organizations together more effectively than inspirational speeches by showy CEOs.

There is much about that research that appeals to us, because most of us share the suspicion that showy, self-promoting, narcissist CEOs must be flawed in some way. Yet such CEOs are very common, and part of the reason is that it is easier to imagine people who make a big impression also having big effects on the firms they lead. Humility is such a low-key behavior and such (what else can I say?) humble thinking that it is hard to imagine it having a big effect. But it does. How?

The keyword is empowerment.  Humble CEOs empower their top management teams. Empowered top management teams create an organizational climate that empowers workers all the way down. A top management team that has been empowered and in turn empowers others creates norms that are so strong that it is hard to be an authoritarian manager. That’s how humility has big effects on organizations: it creates an expanding circle of empowerment.

Ou, Amy Y., Anne S. Tsui, Angelo J. Kinicki, David A. Waldman, Xiao Zhixing, and Lynda Jiwen Song. 2014. "Humble Chief Executive Officers' Connections to Top Management Team Integration and Middle Managers' Responses." Administrative Science Quarterly 59(1):34-72.

Post the Job or Slot a Person? It Depends on Whether You Want Performance

Five years ago, I posted a blog on award-winning research showing that firms pay more and get less when hiring from the external labor market. The reason is that managers know more about their current employees, and they overestimate the value of external hires because they focus on their formal qualifications. When it comes to filling jobs internally in the organization, a manager still has to choose between placing a known worker into a job or posting the job and assessing applicants, who may or may not be familiar to the manager. With internal hiring, do managers still undervalue the workers they know?

Research in Administrative Science Quarterly by JR Keller answers that question. He looked at the difference in job performance and pay between jobs that were filled through posting and applying, and jobs that were filled through the manager picking someone (slotting).  Managers could choose which way to fill each job, and naturally they used slotting when they knew someone who fit and posting when they were not so sure. This is the same as choosing between internal job mobility and the external job market, because managers pick internal candidates when they know someone who fits the job and hire externally when they are not so sure. They also have more candidates when posting, and they know less about the applicants because they are usually from other parts of the organization. In every way you can imagine, the choice between posting and slotting is similar to the choice between external and internal hiring.

So how wrong is it to fill an internal hire through posting instead of slotting? Here is the surprise: It is not worse to fill by posting, but better. Posting means higher job performance, both absolute and compared with others. It means lower chance of leaving the job, except for leaving for a promotion, which is more likely when filling through posting. Oh, and it also means higher pay for the employee filling the job. So, for the employee this looks like a good thing; more pay and better chance of a promotion. For the firm, it looks like paying more to get more, so the net effect depends on how much more the firm is getting. In this case the answer is easy because the lower turnover from the job alone shows that the firm benefits from using posting. The better job performance is icing on the cake.

But this raises the question of why markets work better inside an organization than outside it. What is it that the manager can see better when posting internally? The answer is, nearly everything. Organizations know a lot about their employees, and this knowledge is readily available when filling jobs through posting. Not only that, the posting process forces the hiring manager to think carefully about what information to use and how to weight it in the decision, giving a more systematic and higher quality choice. All the information is there, and posting gives more choices and a better choice process.

There is an important lesson in this that goes beyond filling positions. We often have beliefs about the benefit of markets relative to social arrangements like networks. We forget that there are many kinds of markets and many kinds of social arrangements, and ultimately decision making comes down to what to choose from and how to make the choice.

Keller, JR. 2017

Posting and Slotting: How Hiring Processes Shape the Quality of Hire and Compensation in Internal Labor Markets. Administrative Science Quarterly: forthcoming.