Making Work Work

Kevin Lewis

October 07, 2009

Another great study from one of my favorite management researchers:

"Making Time Off Predictable
& Required," by Leslie A. Perlow and Jessica L. Porter, Harvard Business Review, October 2009.


Learning Through Rare Events: Significant Interruptions at the Baltimore & Ohio Railroad Museum

Marlys Christianson, Maria Farkas, Kathleen Sutcliffe & Karl Weick
Organization Science, September-October 2009, Pages 846-860

The collapse of the roof of the Baltimore & Ohio (B&O) Railroad Museum Roundhouse onto its collections during a snowstorm in 2003 provides a starting point for our exploration of the link between learning and rare events. The collapse occurred as the museum was preparing for another rare event: the Fair of the Iron Horse, an event planned to celebrate the 175th anniversary of American railroading. Our analysis of these rare events, grounded in data collected through interviews and archival materials, reveals that the issue is not so much what organizations learn "from" rare events but what they learn "through" rare events. Rare events are interruptions that trigger learning because they expose weaknesses and reveal unrealized behavioral potential. Moreover, we find that three organizing routines — interpreting, relating, and re-structuring — are strengthened and broadened across a series of interruptions. These organizing routines are critical to both learning and responding because they update understanding and reduce the ambiguity generated during a rare event. Ultimately, rare events provoke a reconsideration of organizational identity as the organization learns what it knows and who it is when it sees what it can do. In the case of the B&O Railroad Museum, we find that the roof collapse offered an opportunity for the organization to transform its identity from that of a museum to that of an attraction.


Information and Incentives Inside the Firm: Evidence from Loan Officer Rotation

Andrew Hertzberg, Jose Maria Liberti & Daniel Paravisini
Journal of Finance, forthcoming

We present evidence that reassigning tasks among agents can alleviate moral hazard in communication. A rotation policy that routinely reassigns loan officers to borrowers of a commercial bank affects the officers' reporting behavior. When an officer anticipates rotation, reports are more accurate and contain more bad news about the borrower's repayment prospects. As a result, the rotation policy makes bank lending decisions more sensitive to officer reports. The threat of rotation improves communication because self-reporting bad news has a smaller negative effect on an officer's career prospects than bad news exposed by a successor.


Displaying Employee Testimonials on Recruitment Web Sites: Effects of Communication Media, Employee Race, and Job Seeker Race on Organizational Attraction and Information Credibility

Jack Walker, Hubert Feild, William Giles, Achilles Armenakis & Jeremy Bernerth
Journal of Applied Psychology, September 2009, Pages 1354-1364

This study investigated participants' reactions to employee testimonials presented on recruitment Web sites. The authors manipulated the presence of employee testimonials, richness of media communicating testimonials (video with audio vs. picture with text), and representation of racial minorities in employee testimonials. Participants were more attracted to organizations and perceived information as more credible when testimonials were included on recruitment Web sites. Testimonials delivered via video with audio had higher attractiveness and information credibility ratings than those given via picture with text. Results also showed that Blacks responded more favorably, whereas Whites responded more negatively, to the recruiting organization as the proportion of minorities shown giving testimonials on the recruitment Web site increased. However, post hoc analyses revealed that use of a richer medium (video with audio vs. picture with text) to communicate employee testimonials tended to attenuate these racial effects.


Allocation and productivity of time in new ventures of female and male entrepreneurs

Ingrid Verheul, Martin Carree & Roy Thurik
Small Business Economics, October 2009, Pages 273-291

This paper investigates time allocation decisions in new ventures of female and male entrepreneurs using a model that distinguishes between effects of preferences and productivity on the number of working hours. Using data of 1,158 entrepreneurs we find that the preference for work time in new ventures relates to start-up motivation, propensity to take risk and availability of other income. Productivity of work time relates to human, financial and social capital endowments and the prevalence of outsourcing activities. This study also evaluates actual profit effects 1 year after start-up. We find that on average women invest less time in the business than men. This can be attributed to both a lower preference for work time (driven by risk aversion and availability of other income) and a lower productivity per hour worked (due to lower endowments of human, social and financial capital).


The Influence of a Pay Increase on Job Satisfaction: A Study with the Chinese Army

Hai Yang, Danmin Miao, Xia Zhu, Yunfeng Sun, Xufeng Liu & Shengun Wu
Social Behavior and Personality, 2008, Pages 1333-1339

The aim of this study was to investigate the influence of a pay increase on job satisfaction among junior officers in the Chinese Army. A job satisfaction questionnaire was devised for the study and was used both before and after a raise in pay with junior military officers from one military region to detect changes in job satisfaction. Before the pay increase, job satisfaction was at a comparatively low level; after the pay raise, it improved significantly. This improvement also occurred in all facets of job satisfaction. It was concluded that pay satisfaction plays an important role in job satisfaction for Chinese junior military officers.


Wellsprings of Creation: How Perturbation Sustains Exploration in Mature Organizations

David James Brunner, Bradley Staats, Michael Tushman & David Upton
Harvard Working Paper, June 2009

Organizations struggle to balance simultaneous imperatives to exploit and explore, yet theorists differ as to whether exploitation undermines or enhances exploration. The debate reflects a gap: the missing theoretical mechanism by which organizations break free of old routines and discover new ones. We propose that the missing link is perturbation: novel stimuli that disrupt the execution of specialized routines. Perturbation creates opportunities for organizations to invoke exploratory, general-purpose problem-solving routines. In mature organizations, exogenous perturbations become increasingly scarce to the point that exploration is stifled and inertia sets in. We theorize that mature organizations can sustain exploration by deliberately inducing perturbations in their own processes. Our theory yields testable hypotheses about the relationships between exploitation, perturbation, and exploration. We provide illustrations from The Toyota Motor Company to show how deliberate perturbation enables efficient exploration in the midst of intense exploitation.


Does Performance Pay Increase Job Satisfaction?

Colin Green & John Heywood
Economica, November 2008, Pages 710-728

This paper investigates the influence of performance-related pay on several dimensions of job satisfaction. In cross-sectional estimates performance-related pay is associated with increased overall satisfaction, satisfaction with pay, satisfaction with job security and satisfaction with hours. It appears to be negatively associated with satisfaction with the work itself; yet, after accounting for worker fixed effects the positive associations remain and the negative association vanishes. These results appear robust to a variety of alternative specifications and support the notion that performance-related pay allows increased opportunities for worker optimization and does not generally demotivate workers or crowd out intrinsic motivation.


Effects of Positive Attitude on Happiness and Wage: Evidence from the US Data

Madhu Mohanty
Journal of Economic Psychology, forthcoming

Using samples from the National Longitudinal Survey of Youth (1979), a longitudinal data set from the United States, this study demonstrates that the worker's positive attitude affects his/her wage not only directly, but also indirectly through its effects on happiness. Assuming endogeneity of the positive attitude variable and estimating happiness and attitude equations simultaneously by a two-step procedure, the study further finds the evidence that happiness also affects the worker's earnings both directly and indirectly. These findings suggest that any attempt to raise workers' earnings potentials should focus not only on the development of their human capital endowments, but also on improvement of their attitudes.


The Organization of Firms Across Countries

Nicholas Bloom, Raffaella Sadun & John Van Reenen
London School of Economics Working Paper, June 2009

We argue that social capital as proxied by regional trust and the Rule of Law can improve aggregate productivity through facilitating greater firm decentralization. We collect original data on the decentralization of investment, hiring, production and sales decisions from Corporate Head Quarters to local plant managers in almost 4,000 firms in the US, Europe and Asia. We find Anglo-Saxon and Northern European firms are much more decentralized than those from Southern Europe and Asia. Trust and the Rule of Law appear to facilitate delegation by improving co-operation, even when we examine "bilateral trust" between the country of origin and location for affiliates of multinational firms. We show that areas with higher trust and stronger rule of law specialize in industries that rely on decentralization and allow more efficient firms to grow in scale. Furthermore, even for firms of a given size and industry, trust and rule of law are associated with more decentralization which fosters higher returns from information technology (we find IT is complementary with decentralization). Finally, we find that non-hierarchical religions and product market competition are also associated with more decentralization. Together these cultural, legal and economic factors account for four-fifths of the cross-country variation in the decentralization of power within firms.

Individual accountability in teams

Leslie Marx & Francesco Squintani
Journal of Economic Behavior & Organization, October 2009, Pages 260-273

We consider a model of team production in which the principal observes only the team output, but agents can monitor one another (at a cost) and provide reports to the principal. We consider the problem faced by a principal who is prevented from penalizing an agent without evidence showing that the agent failed to complete his assigned actions. We show the first-best (high effort but no monitoring) can be achieved, but only if the principal assigns second-best actions. The principal requires monitoring, but agents do not monitor, and as long as output is high, the principal does not penalize agents who fail to monitor. If the principal has the responsibility for monitoring, the first-best outcome cannot be achieved, thus we identify an incentive for delegated monitoring even when agents have no informational advantage.

Intrapreneurship or entrepreneurship?

Simon Parker
Journal of Business Venturing, forthcoming

I explore the factors that determine whether new business opportunities are exploited by starting a new venture for an employer (‘nascent intrapreneurship') or independently (‘nascent entrepreneurship'). Analysis of a nationally representative sample of American adults gathered in 2005-06 uncovers systematic differences between the drivers of nascent entrepreneurship and nascent intrapreneurship. Nascent entrepreneurs tend to leverage their general human capital and social ties to organize ventures which sell directly to customers, whereas intrapreneurs disproportionately commercialize unique new opportunities which sell to other businesses. Implications of the findings are discussed.


Big causes and small events: QWERTY and the mechanization of office work

Andreas Reinstaller & Werner Hölzl
Industrial and Corporate Change, October 2009, Pages 999-1031

This article studies the adoption of typewriters in the United States, France, and Germany in the period between 1870 and 1930. The aim of the article is to show how specific problem-solving heuristics and routines, which have been developed to solve technical and social problems on the shop floor, have also shaped the organization of work and complementary technologies at the administrative level. We argue that performance criteria other than pure typing speed were relevant to the adoption of typewriters and the QWERTY keyboard, and reconsider the debates on path dependence surrounding the QWERTY keyboard.


Are All Managers Created Equal?

Avi Goldfarb & Botao Yang
Journal of Marketing Research, October 2009, Pages 612-622

Some managers are better than others. Based on the cognitive hierarchy framework of Camerer, Ho, and Chong (2004), the authors develop a structural econometric model that estimates the level of strategic thinking. In the model, firms with a high level of strategic thinking are more likely to correctly conjecture the expected actions of their competitors. The authors apply this model to decisions by managers at 2,233 Internet Service Providers to offer their customers access through 56K modems in 1997. The model is validated by showing that firms with a higher estimated probability of strategic thinking were more likely to have survived through April 2007. The estimation results show considerable heterogeneity in the degree to which firms behave strategically and suggest that strategic ability affects marketing outcomes: a simulated increase in strategic ability means that fewer firms offer the technology to their customers.


Do unions protect injured workers from earnings losses?

Christopher Woock
Conference Board Working Paper, August 2009

Using the National Longitudinal Survey of Youth 1979 I employ a longitudinal framework to examine the impact of union membership on the earnings losses following a workplace injury, and explore some possible avenues through which unions can mitigate earnings losses. The annual earnings results suggest that those injured workers who were not under union contract the year of injury suffer large and persistent losses in the years following injury. In contrast, union workers who suffer an injury do not suffer significant post-injury earnings losses. Probit estimates suggest that following injury union workers are less likely to change occupations or be fired from their job, but no more likely to be accommodated for their injury.

A Behavioral Account of the Labor Market: The Role of Fairness Concerns

Ernst Fehr, Lorenz Goette & Christian Zehnder
Annual Review of Economics, 2009, Pages 355-384

In this paper, we argue that important labor market phenomena can be better understood if one takes (a) the inherent incompleteness and relational nature of most employment contracts and (b) the existence of reference-dependent fairness concerns among a substantial share of the population into account. Theory shows and experiments confirm that, even if fairness concerns were to exert only weak effects in one-shot interactions, repeated interactions greatly magnify the relevance of such concerns on economic outcomes. We also review evidence from laboratory and field experiments examining the role of wages and fairness on effort, derive predictions from our approach for entry-level wages and incumbent workers' wages, confront these predictions with the evidence, and show that reference-dependent fairness concerns may have important consequences for the effects of economic policies such as minimum wage laws.

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