Creativity and Diversity: More Lessons from Management

The idea that creativity is stimulated by combining different kinds of information has been shown to be true many times, most recently in research showing that network brokerage of different groups is most effective when there is also instability of membership. Interestingly, the simplest way to combine different kinds of information is the hardest: bringing together a diverse group of people to work as a team is sometimes good for creativity, sometimes bad, and sometimes there is no effect.

How can we make sense of this? First, we can be patient. Teams trying to be creative quickly face a difficult task that many of them will fail. Instead, looking at creative efforts over time, by multiple teams, gives clearer results. Second, separate different types of diversity. Knowledge diversity creates creativity, but many other kinds of diversity have no effect on creativity but can create discomfort and difficulty working together. Unfortunately, people get along more easily with those who look like them and talk like them, so any team of people who work together can be divided by gender, race, or nation of birth. This is the reason that team diversity often has unclear effects: those who would benefit the most from working with each other often have difficulty doing so.

Alina Lungeanu and Noshir Contractor looked at the effects of knowledge diversity and cultural diversity in teams of scientists involved in the ultimate creative task: the generation of the new scientific field of oncofertility. Creativity in science is demanding because it not only requires new ideas; the ideas also must be objectively correct. Science is stricter than art in assessing the value of creativity. Creativity in science is demanding also because it requires time; it takes many years and publications to produce useful knowledge.

So, what did they find? For scientists collaborating, knowledge diversity means that they draw on different knowledge of past research, which happens to be easily measurable. More diversity produced more creativity. Cultural diversity produced less creativity. As added evidence that difficulty working together held back collaboration, they also found that scientists were especially likely to repeat collaborations with prior collaborators and were also more likely to collaborate with friends of friends than with total strangers.

This repeats a lesson that is worth repeating because it is so often ignored. The creative spark comes from encountering different knowledge, ideas, or norms. Different forms of thinking help creativity. But to make that encounter happen, people need to open up to each other and communicate freely. That requires some level of comfort with each other, so team-building efforts may be needed when team members come from different backgrounds. So first, facilitate communication, then let the communication generate creativity.

Lungeanu, A., N.S. Contractor. 2014. The Effects of Diversity and Network Ties on Innovations: The Emergence of a New Scientific Field. American Behavioral Scientist 59(5) 548-564.

Hiring Mental Disorder: How Employee Mobility Spreads Depression, Anxiety, and Stress

Mental disorders should be taken seriously because a condition such as depression, anxiety, and stress takes a significant toll on those who suffer it and their families, and it affects their work performance. Particularly tragic events occur when stressed operators of hazardous equipment (such as trucks, trains, or planes) make mistakes that threaten safety. The only good thing about mental disorders compared with other diseases is that they are not contagious.

Except, asdiscovered in new research by Julia M. Kensbock, Lars Alkærsig, and Carina Lomberg published in Administrative Science Quarterly, they are.

Focusing on the workplace, the authors found that mental disorders are contagious. The behavior of a person suffering from a mental disorder affects others by making their interactions and the work more problematic. The end result is that some coworkers end up with the same disorders of depression, anxiety, and stress. This is especially problematic because mental disorders spread through behaviors, so an undiagnosed patient in the organization is particularly threatening as no treatment or adaptation is possible. In a way, this is similar to how patients with contagious diseases can transmit even when they are undiagnosed or asymptomatic.

But this is not the worst part of the story. Organizations in which many employees have mental disorders – maybe because they have spread within the organization – become unhealthy, so hiring one of their employees carries a similar risk of hiring mental disorder as hiring an employee who has a mental disorder diagnosis. Of course, unhealthy organizations are exactly the places that employees want to leave in order to escape depression, anxiety, and stress, but they do not realize that they may be bringing it to their next workplace.

And there is an even worse part of the story too. To see why, ask yourself who in the organization affects coworkers the most. The answer is obvious – managers do. A manager interacts with many, influences many, and has the power to affect the work and rewards of many others. Hiring a manager with a mental disorder or from an unhealthy organization means that the organization now has a person who is fully capable of transmitting depression, anxiety, and stress to others, and the researcher team found that managers indeed have disproportionately high effects on the mental health of the organization.

We already know how the climate of a workplace, and the work done in it, is negatively affected by hiring jerks, especially jerk managers. The damage from having a manager with a mental disorder is similar, or possibly worse. But, the takeaway here is not that organizations should shun employees and managers with mental health disorders. Given their prevalence, trying to do so would have negative consequences for everyone involved. Instead, this research should be a wakeup call for any organization that is not already educating its people about mental disorders and working to improve their mental health. Mental health disorder is a treatable condition (unlike most jerks, I suspect). Given the dangers of contagion, there is no time to waste.

Kensbock, J. M., Alkærsig, L., & Lomberg, C. (2021). The Epidemic of Mental Disorders in Business—How Depression, Anxiety, and Stress Spread across Organizations through Employee Mobility. Administrative Science Quarterly, forthcoming. doi:10.1177/00018392211014819

Organizations Rule! When Self-Organization Became Structured

We often overlook an interesting contrast between the workplace and our private lives. In the workplace, we have an organizational structure in which people have fixed authority, are grouped together in units, and have specified processes for regular operations and for how to handle many exceptions. In our daily life, we have none of these (unless we are the von Trapp family), but we still get things done. To the curious mind, this begs the question of what organizations are for, apart from controlling people who cannot be trusted on their own.

Felipe G.Massa and Siobhan O’Mahony have published research in Administrative Science Quarterly that gives a nice answer to that question. They examined the self-organized Anonymous movement, which started off radically different from normal organizations in structure (they had none), processes (they improvised them), and ethos (freedom of information and action is paramount). Anonymous earned a reputation as an unpredictable group of activists that could suddenly descend on targets through protests and hacker attacks, seemingly organized through little else than internet forum conversations.

The only problem with this reputation is that it is only true of early stages of the Anonymous movement. They did indeed organize through shared forums and used shared norms and jargon to define boundaries and direct action. But Anonymous attracted so many newcomers that these mechanisms were no longer enough to maintain the identity of the movement and the cohesion of their actions, resulting in chaos. Reacting to this, senior members of the movement sought to use norms both for integrating new participants and for directing the protest actions they had become famous for, which were becoming less systematic and predictable.

Norms work well, right? After all, the Catholic church has applied strong norms and has been in operations for a couple thousand years. But churches are organizations too, and they use structure and processes just like any other organization. And the time came when Anonymous started looking more and more like an organization.

Anonymous now has well-defined roles, with different levels of experience and expertise determining what role a member fills. Anonymous has a hierarchy, with decisions made centrally and communicated outwards to the peripheral members. Anonymous has training of new members, manuals for how to act, and tests that allow promotion into higher ranks. In short, Anonymous is an organization.

Is this controversial or surprising? My first guess is that the most surprised people share one of two very different beliefs. One is the belief of economists that coordination of many is a simple matter of aligning preferences through some simple device, such as a price. This belief is correct, but it turns out that prices and mass-market goods are one of the few contexts in which it holds. The other is the belief of ideologists that mass movements can be coordinated by shared beliefs and norms. That is also correct, but only for short periods of time, as Anonymous found.

My second guess is that organizational theorists are the least surprised. We should not be surprised because what we have learned time and time again is that organizations are unbeatable for coordinating the actions of many, whether they be friends, strangers, or in between. Just ask Anonymous, if you can find the right person to ask.

 Massa, F. G., & O’Mahony, S. (2021). Order from Chaos: How Networked Activists Self-Organize by Creating a Participation Architecture. Administrative Science Quarterly, forthcoming. doi: 10.1177/00018392211008880

Church or Science? Moral Authority in Stem Cell Research

Who decides what can be done in society and business? The conventional answer in Europe is that it was the church in medieval times, the state after that, and now it is a free-for-all with business having a prominent role. All parts of the conventional answer are inaccurate, and we know that the correct answer depends on the context. So, let us consider a context with very strong dividing lines: stem cell research. Stem cells are “primitive” cells that have not yet specialized into specific types, so they can be used to cure a wide range of medical conditions provided they can be coached into becoming a type of cell that needs to be replaced or repaired. They are also controversial cells because a primary source of stem cells for research and production is fetal tissue – early-stage embryos.

Church beliefs on what embryos are for and scientists’ ambitions to cure degenerative diseases like Parkinson’s and Alzheimer’s clashed, and this conflict was examined by Joelle Evans in research published in Administrative Science Quarterly. In her study, a research laboratory encountered outside pressures against the stem cell research and reacted by having internal debates and forming a response. In so doing, the scientists took on a second role as creators and marketers of a moral stance explaining why stem cell research was valuable and how it should be done.

What she documented is an unusual role for scientists. More commonly, science is thought to be a free exploration of questions for which there is no moral judgment until the time comes to use the insights. This type of scientific handoff is very common, although it has been known to create complications in some cases – such as among the scientists who developed the atom bomb, with full knowledge of the purpose of their research.

Stem cell research is not nuclear physics and has no weapons application, but the question of what kind of raw materials can be used, and how they can be used, is fraught with moral problems. These moral problems have practical implications. For example, the USA has rich access to surplus blastocysts (pre-embryos) because in vitro fertilization (IVF) procedures create more blastocysts than can be safely inserted. IVF clinics routinely destroy excess blastocysts because they are barred from turning them over for stem cell research. As of 2019, a few hundred stem cell lines had been approved for use, and these are called stem cell lines because each originates in a single blastocyst with cells that keep being reproduced.

The researchers in this study faced two debates. Externally, they faced criticism for their use of stem cells and calls to account for it morally. Internally, they differed in their views on what could and should be allowed, with the internal lines of contention being shaped by the external pressures. The need to make an external account for their work was unfamiliar for researchers and made complicated by their internal divisions.

How did they respond? Interestingly, the combination of external pressure and internal fissures helped the lead researchers formulate a set of moral values that they could justify through connecting with accepted forms of ethical reasoning and explain externally and internally.

This served two purposes. Externally, the scientists gained a role in defining the value of their work and the constraints on how it should be conducted. Internally, they unified an organization that could easily have become divided, maintaining motivation for the team members troubled by the apparent conflict of moral values. They achieved strength through unity while embracing the diversity of beliefs within their laboratory walls.

Evans J. 2011. How Professionals Construct Moral Authority: Expanding Boundaries of Expert Authority in Stem Cell Science. Administrative Science Quarterly Forthcoming.

Do People Governed by Algorithms Improve or Quit?

Wait, what does it mean to be governed by algorithms? If you do not know that yet, you are not working for any of the gig contracting platforms (Uber, TaskRabbit) or employers using algorithms to assess employees and predict and manage training and promotion. The increase in data processing capacity and machine learning tools means that algorithms have crept into a multitude of organizations and influenced how they manage people. Importantly, in some places the use of algorithms is acknowledged, and the results are shared with the employees, but in other places it is secret. Some workplaces make the algorithm transparent to employees, and others make it opaque. Because people usually learn how to game transparent algorithms to get high scores, opaque algorithms are becoming increasingly common and are currently the most important to understand.

So, what do opaque algorithms do to people? That is the topic of research by Hatim A.Rahman published in Administrative Science Quarterly. He focused on a labor platform that matches freelance workers with clients. The platform implemented an opaque evaluation routine that produced a new type of quality score for freelancers that was visible to them and to potential clients. How do people react to such scores? We know that scores become goals, and people commonly try to improve their performance by making changes. That is exactly why transparent algorithms result in inflated scores after a period of adapting to the algorithm. But opaque algorithms do not tell people how to improve, making the scores produced by those algorithms less useful as goals.

Instead of targeted improvements, opaque algorithms can produce experiments to find out what elements of the algorithm affect the score, and how. Many freelancers tried to change how they worked with clients through simple actions such as changing the type of work, length of contract, procedure for closing the contract, and so on. But these changes were unlike the changes made when decision-makers face goals that are more easily understood. As has been documented in research on performance feedback, it is very common for people facing low performance relative to a goal to react by making changes to improve the performance. That happened with the opaque algorithm too, but it was much more selective.

First difference: Not everyone tried to make changes. Many individuals who were not highly dependent on the platform responded by quitting it. And this was true whether they had high or low performance, so even many high-performing freelancers (according to the algorithm) simply left.

Second difference: Not everyone’s likelihood of making changes was a result of the algorithm score. Low-performing individuals were experimenting with different approaches regardless of whether they had setbacks in their scores or not. That was important because in the platform, a score below 90% was considered low, so the result was continuing turmoil in how freelancers were working.

Third difference: Among those who performed best and were dependent on the platform, those who experienced setbacks made changes to how they worked. So far so good, especially if those changes actually improved how they worked. But what about those who did not experience setbacks in the score? They tried to limit their exposure, including by not working with new clients on the platform. Having a high score was valuable, and accepting new work on the platform might endanger it, so they preferred to stick with existing clients or to find new clients that would let them work outside the platform.

Clearly, the opaque algorithm produced scores that made it easier for clients to distinguish between freelancers, and it also governed the freelancers by changing how they behaved. Were these changes improvements? Normally performance feedback on a meaningful goal results in improvements, but it is far from clear that an opaque goal has the same effect. Indeed, the three differences in how these freelancers reacted suggest that the opaque algorithm was a poor governance tool. 

Rahman, Hatim A. 2021. "The Invisible Cage: Workers’ Reactivity to Opaque Algorithmic Evaluations." Administrative Science Quarterly, Forthcoming.

CEO Power: Who is it Good For?

The CEO of a firm is given power to control the firm. That is because the purpose of the CEO role is to create a position that has centralized control, to enable consistent formulation and execution of strategy. The CEO is in turn governed by the board of directors, who also have a say on the strategy and who assess the results of the strategy execution. So far so good, but then there is the question of how much power the CEO should have, and what happens when the CEO has too much power.

Here is a classic example of too much power: The CEO can influence how the board of others assesses the CEO by choosing the reference group of other firms and CEOs that this firm is compared against. Do some CEOs really have this power? Does it benefit them? Does it harm the firm? Research by Pino G. Audia, Horacio E.Rousseau, and Sebastien Brion published in Organization Science gives the answers: Yes, yes, and yes.

The key here is that a firm can be compared either against a standard reference group such as an industry average or a reference group that is tailor-made to suit someone in the firm. Remarkably, even though the SEC guidelines strongly warn against tailor-made reference groups, 30% of the firms in the data they analyzed had them. Interviews indicated that although this choice of reference group should be done by the Chief Financial Officer (CFO), the reality was that the CEO was often deeply involved. So yes, at least in some firms CEOs had the power to change how they were assessed.

Did they benefit from this power? The simplest and arguably most meaningful measure of benefit is how much the CEO is paid. Controlling for everything else that influences pay, CEOs of firms with tailor-made reference groups were paid more when the firm performance was lower. So, clearly the point of a tailor-made reference group was to get paid more when firm performance indicated that they did not deserve it. It was an insurance policy.

Were firms harmed? The question of harm is difficult to answer, but it is easy to discover whether others tried to penalize the firm. This they did. Securities analyst coverage and rating of a firm’s stock is very important for the firm value, and securities analysts quite systematically downgraded firms to a lower rating or even stopped following them if they had tailor-made reference groups. The firm’s owners also reacted, as they saw an increase in governance resolutions filed by shareholders at the annual meetings.

The CEO use of power to shape the assessment of the firm’s performance was consequential for the CEO and the firm, and as we might expect, in opposite directions. The CEOs used their power to benefit themselves in ways that hurt their firms. This, at least, gives one answer to the question of what it means to give a CEO too much power to control the firm.

Audia PG, Rousseau HE, Brion S. 2021. CEO Power and Nonconforming Reference Group Selection. Organization Science, forthcoming.

How Much to Know? Entrepreneur Experience and Venture Failures

We are well aware of the advantages of knowledge, both when doing something conventional and when making innovations. People who teach entrepreneurship do it because knowledge helps the foundation of a successful venture. But is there such a thing as too much knowledge?

When I work alone, more knowledge is better – it generally gives performance at a higher level, and it gives the creativity that can yield outstanding outcomes. My earlier research on innovations in the comic book industry is one of many research projects showing this effect. Things get more complicated when multiple people come together to do something complex like founding a new venture. The great benefit of having much knowledge and many kinds of knowledge is the potential for combinations that others cannot think of. The problem with doing this in a team is that combining knowledge requires communication, and communication gets harder when each member has different types of knowledge.

So how to resolve this dilemma? Research by Florence Honoré published in Academy of Management Journal shows a nice path.
The idea is simple: variety in knowledge is great as long as it stays within one person, but teams should also have shared knowledge that transfers directly to the problem they are solving.

This makes sense if we think of specialized knowledge as roughly equivalent to languages. People with shared experience speak the same language, while people who have different experiences need to translate. A person with many kinds of knowledge is a polyglot, and that is OK because we are all good at talking to ourselves.

So what did the research show? New ventures were at great risk of failing if their venture team had a mixture of experiences across team members, and this problem got worse the more founders had earlier been employed by multiple firms. On the other hand, more shared experience among the founders helped the firms survive, and this was especially true if the venture had multiple founders who transitioned from the same prior employer to founding a venture together.  

The implication for entrepreneurship is obvious. A team with experience in the same industry that they are forming a venture in will perform better, and they will do especially well if they make sure to also have one member with a variety of experiences. And, they should listen carefully to that person, because it is exactly the integration of knowledge from this polyglot member that can benefit the venture most. In other words, this research is another win for diversity in business.

Honoré, Florence. 2021. "Joining Forces: How Can Founding Members’ Prior Experience Variety and Shared Experience Increase Startup Survival?" Academy of Management Journal forthcoming.