Friday, December 18, 2020

You Want to Control Us? But We Are Your Employees!

Organizations control people and processes – that is how organizations organize. It is unpleasant to some employees and surprising to others, but it is true. A serious concern employees have is that often the forms of control are designed by people who do not understand their work because they are too high up in the organization, as managers often are. If new instructions that control employees do not fit their work, what happens?

This very important question is addressed in research by Jillian Chown published in Administrative Science Quarterly. She looked at an interesting and typical case of control. A new process that improves work has been discovered elsewhere in the organization, executives love the process and its results, and now they are instructing new departments to follow the process. Except that those departments work differently from the ones that initially benefited from it. Everyone knows that people are stuck in their habits and often resist change that is good for them, but they also resist change that is bad for them and the organization. It is important to tell these apart. Chown focused on a work practice used successfully in the inpatient wards of a hospital and then transferred to outpatient clinics. 

Guess what? Outpatient clinics have patients who come and go every day, which makes them very different from inpatient wards. The new process did not work in any of the six clinics, and in response, the staff of the clinics started modifying it to make improvements. This is where things got interesting. Usually, we think of modification as a form of customization. If a meeting in the morning does not help a team schedule processes and assign work and equipment well enough, they may change who attends, what information is brought up, and what kind of decisions are made in the meeting. A team can customize, learn from the customization, customize again, and repeat this until they have a process that works well. Top-level executives and managers further below can see that a customized process is a great way to implement something similar to what they intended, but better. In Chown’s research, customization was an easy and good outcome for half of the clinics. But the other half did not customize. What about them?

In these clinics, the staff saw the new process as completely unfit to the problems they faced and did not see a path toward fixing it through customization. The result was conflicts with the program managers trying to start the process adoption, and these conflicts had interesting outcomes. The clinics were able to halt the process adoption in the original intended form and even the customization of it. But also, the clinics knew that change was needed to improve their workflow, and executives demanded it happen urgently. In response, they started innovating processes. These had some minor resemblance to the original process but were different in form and content, so they were transmutations of it.

Transmutations were not easy to develop because the learning process was harder than with customization and also had less support from the program managers, but all the clinics in question managed to find new processes that improved their work. This is a great testament to how well teams can find new forms of control of their own work. It also brings up a small puzzle: If these improvements were always possible and were so different from what the executives tried to introduce, why had they not happened already? People do resist change, but when they are pushed, they can identify change that works. The specifics of a new form of control may matter less than the effort to enact it.

Chown, Jillian. 2020. "The Unfolding of Control Mechanisms inside Organizations: Pathways of Customization and Transmutation." Administrative Science Quarterly, forthcoming.

Thursday, December 3, 2020

Changing Lenses: Using a Different Theory to Look at Internationalization

Here is a slightly nerdy question for those interested in social science: How attached are theories to fields of investigation? For example, in business schools we have marketing and organization theory. So marketing is about markets, and organization theory is about organizations, right? Not to mention all the subfields within marketing and organization theory, which are dedicated to understanding specific topics. Consumer Behavior in Marketing is about (drumroll…) how consumers behave. But is it so simple?

It is not. Many fields of investigation have been dominated by specific theories, making thinking about them so uniform that much can be learnt from other theories making inroads. To take two examples that I know well: Finance studies financial markets, but organization theory has shown that the status of investment banks affects decisions in those markets, which is against finance scholars’ belief that pricing is pure demand and supply. Organization theory studies organizations, but the entry of economists have increased awareness of how contingent rewards (incentives) can have a big role in organizing.

This means we should look around for opportunities to give established fields of investigation new ideas. That is exactly the purpose of an article by Irina Surdu, Gabriel Benito, and me in Journal of International Business Studies looking at the theory of International Business and arguing that the behavioral theory of the firm, which is an organizational theory, can inform international business studies. Why do we think this will happen? First, addressing a field of investigation with a new theory always brings out something interesting, so it would be surprising if it did not.

Second, who does international business? Firms do. Firms are organizations, and the most man-hours spent studying organizations are logged by organizational theorists, not scholars in international business. Yes, internationalization is a specific action taking by a minority of all firms, but knowing how firms act in general is very useful for understanding any specific action they do.

Behavioral theory is particularly important because it is about how firms learn, and how their managers cope with bounded rationality. This is very important for internationalization because firms that engage in international business repeatedly step into areas of uncertainty that are too great for the boundedly rational manager to make flawless decisions. Instead, they probe, get feedback, adjust, and learn. That is what the behavioral theory of the firm is about.

We do not yet know what will come from an investigation of internationalization through the lens of behavioral theory. That’s part of the beauty, because there are so many ways that this theory can be used, and so many things that can be discovered and can improve our knowledge of international business. In the end, this will feed into how we teach students to manage the complex international world that they are facing. We have now issued an invitation to researchers to change lenses, and we think it will be productive.

Surdu I, Greve HR, Benito GRG. 2020. Back to basics: Behavioral theory and internationalization. Journal of International Business Studies forthcoming.

Tuesday, December 1, 2020

Sprinters or Legionnaires? Why Entrepreneurs Benefit from Collaboration

What happens when you put talented and ambitious people together? That is an important question in many contexts, and a currently popular version is accelerators for entrepreneurs. Accelerators select the most promising venture plans from many applicants, giving them a pool of talent and ambition. They have training programs, coaches, and access to industry and funding contacts, and their goal is to help the participating entrepreneurs produce valuable ventures. Importantly, accelerators also house the venture teams together and have them interact in the training program and during their regular work.

But how should we think about their interaction? In sports, talented and ambitious people are brought together because they improve through competition. Sprinters run faster, and gymnasts develop better routines. But people are also brought together because they improve through collaboration. Soccer teams fine-tune their attacks and defenses, and Caesar’s veterans were so coordinated that they could beat other Roman armies in the civil war. Competition and collaboration can both be effective, maybe even simultaneously, but which one is best for entrepreneurs?

Thanks to research by Rekha Krishnan, Karen S. Cook, Rajiv Krishnan Kozhikode, and Oliver Schilke published in Administrative Science Quarterly, we can now answer that question. They had access to an accelerator in Silicon Valley and followed three cohorts of selected ventures, with enough differences in training and other events that it was possible to discern the formula for success. The answer may be a surprise: entrepreneurs are legionnaires, not sprinters. Collaboration with other ventures in the cohort first improved their social connections and then improved their resource access.

How did this happen? The paper has such a rich description that I cannot do justice to it here, but the main events are easy to summarize. The training included exercises that can be described as bonding rituals, such as social or sporting events. Even a simple game such as talking about hobbies or other personal information can be a bonding event. They also included exercises that can be described as tournament rituals, such as reporting of their progress toward many goals, in front of all the others. Bonding rituals and tournament rituals had very different effects. Bonding rituals led to social interactions not organized by the accelerator and generated friendships and openness. This made it easier for the entrepreneurs to ask questions and share important information. Importantly, bonding rituals made entrepreneurs comfortable with giving valuable tips to each other without getting anything back in return.

And the tournament rituals? They became show of strengths, just like a 100-meter sprint is, and they failed to create friendships and social interaction. Even worse, tournament rituals made entrepreneurs think that valuable tips should not be given away for free – they should be traded. But of course, this does not work. Unlike goods, information cannot be priced and traded well, and two people rarely have needs for each other’s information at exactly the same time.

This is where the legionnaire entrepreneurs win. Tightly bonded, they are willing to give without asking for anything in return, but they still get much in return. Not at the same time, and often not even from the same entrepreneur, but they know that in a group that collaborates, everyone is better off. Maybe entrepreneurs are not so different from everyone else after all.

Krishnan, R., K. S. Cook, R. K. Kozhikode, and O. Schilke

2020 "An Interaction Ritual Theory of Social Resource Exchange: Evidence from a Silicon Valley Accelerator." Administrative Science Quarterly: forthcoming.