Take it up with management
The team scaling fallacy: Underestimating the declining efficiency of larger teams
Bradley Staats, Katherine Milkman & Craig Fox
Organizational Behavior and Human Decision Processes, forthcoming
Abstract:
The competitive survival of many organizations depends on delivering projects on time and on budget. These firms face decisions concerning how to scale the size of work teams. Larger teams can usually complete tasks more quickly, but the advantages associated with adding workers are often accompanied by various disadvantages (such as the increased burden of coordinating efforts). We note several reasons why managers may focus on process gains when they envision the consequences of making a team larger, and why they may underestimate or underweight process losses. We document a phenomenon that we term the team scaling fallacy - as team size increases, people increasingly underestimate the number of labor hours required to complete projects. Using data from two laboratory experiments, and archival data from projects executed at a software company, we find persistent evidence of the team scaling fallacy and explore a reason for its occurrence.
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Adam Goldstein
American Sociological Review, April 2012, Pages 268-294
Abstract:
Institutional changes associated with the rise of shareholder value capitalism have had seemingly contradictory effects on managers and managerialism in the United States economy. Financial critiques of inefficient corporate bureaucracies and the resulting wave of downsizing, mergers, and computerization subjected managers to unprecedented layoffs during the 1980s and 1990s as firms sought to become lean and mean. Yet the proportion of managers and their average compensation continued to increase during this period. How did the rise of anti-managerial investor ideologies and strategies oriented toward reducing companies' labor costs coincide with increasing numbers of ever more highly paid managerial employees? This article examines the paradoxical relationship between shareholder value and managerialism by analyzing the effects of shareholder value strategies on the growth of managerial employment and managerial earnings in 59 major industries in the U.S. private sector from 1984 to 2001. Results from industry-level dynamic panel models show that layoffs, mergers, computerization, deunionization, and the increasing predominance of publicly traded firms all contributed to broad-based increases in the number of managerial positions and the valuation of managerial labor. Results are generally consistent with David Gordon's (1996) fat and mean thesis.
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Does Working from Home Work? Evidence from a Chinese Experiment
Nicholas Bloom et al.
Stanford Working Paper, March 2012
Abstract:
The frequency of working from home has been rising rapidly in the US, with over 10% of the workforce now regularly work from home. But there is skepticism over the effectiveness of this, highlighted by phrases like "shirking from home". We report the results of the first randomized experiment on home-working in a 13,000 employee NASDAQ listed Chinese firm. Call center employees who volunteered to work from home were randomized by even/odd birth-date in a 9-month experiment of working at home or in the office. We find a 12% increase in performance from home-working, of which 8.5% is from working more minutes of per shift (fewer breaks and sick-days) and 3.5% from higher performance per minute (quieter working environment). We find no negative spillovers onto workers left in the office. Home workers also reported substantially higher work satisfaction and psychological attitude scores, and their job attrition rates fell by 50%. Despite this ex post success, the impact of home-working was ex ante unclear to the firm, which is why it ran the experiment. Employees were also ex ante uncertain, with one half of employees changing their minds on home working after the experiment. This highlights how the impact of new management practices are unclear to both firms and employees.
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The Impact of Trade on Organization and Productivity
Lorenzo Caliendo & Esteban Rossi-Hansberg
Quarterly Journal of Economics, forthcoming
Abstract:
A firm's productivity depends on how production is organized. To understand this relationship we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other firms' outcomes. We use the theory to analyze the impact of international trade on organization and calibrate the model to the U.S. economy. Our results indicate that, as a result of a bilateral trade liberalization, firms that export will increase the number of layers of management. The new organization of the average exporter results in higher productivity, although the responses of productivity are heterogeneous across these firms. Liberalizing trade from autarky to the level of openness in 2002 results in a 1% increase in productivity for the marginal exporter and a 1.8% increase in its revenue productivity. Endogenous organization increases the gains from trade by 41% relative to standard models.
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Employer and Occupational Instability in Two Cohorts of the National Longitudinal Surveys
Matissa Hollister
Sociological Quarterly, Spring 2012, Pages 238-263
Abstract:
Previous research on trends in employer and occupational stability found evidence of declines in stability among men but contradictory results for women. I provide new insights into these patterns by simultaneously analyzing employer and occupation changes, and by examining a more detailed set of transition types. I show that the patterns for women are quite similar to those of men but are masked by declines in transitions from employment to out of the labor force. Finally, I find that while some of the changes may bring increased opportunities for wage increases, they bring even greater risks of wage losses.
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Byron Lee & Sanford DeVoe
Industrial Relations, April 2012, Pages 298-316
Abstract:
Despite the well-documented benefits of flexible work schedules (flextime), generalizable assessments of how flextime influences organizational profitability have proven elusive. Using a unique data set representative of organizations in Canada, we examine the effect of flextime in combination with organizational strategies to predict profitability. Using fixed effects and controlling for prior profitability, we find that flextime increases profitability when implemented within a strategy centered on employees but decreases profitability when implemented within a strategy focused on cost reduction.
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Paying More to Get Less: The Effects of External Hiring versus Internal Mobility
Matthew Bidwell
Administrative Science Quarterly, September 2011, Pages 369-407
Abstract:
Individuals often enter similar jobs via two different routes: internal mobility and external hiring. I examine how the differences between these routes affect subsequent outcomes in those jobs. Drawing on theories of specific skills and incomplete information, I propose that external hires will initially perform worse than workers entering the job from inside the firm and have higher exit rates, yet they will be paid more and have stronger observable indicators of ability as measured by experience and education. I use the same theories to argue that the exact nature of internal mobility (promotions, lateral transfers, or combined promotions and transfers) will also affect workers' outcomes. Analyses of personnel data from the U.S. investment banking arm of a financial services company from 2003 to 2009 confirm strong effects on pay, performance, and mobility of how workers enter jobs. I find that workers promoted into jobs have significantly better performance for the first two years than workers hired into similar jobs and lower rates of voluntary and involuntary exit. Nonetheless, the external hires are initially paid around 18 percent more than the promoted workers and have higher levels of experience and education. The hires are also promoted faster. I further find that workers who are promoted and transferred at the same time have worse performance than other internal movers.
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Flexibility for Whom? Control over Work Schedule Variability in the US
Elaine McCrate
Feminist Economics, Winter 2012, Pages 39-72
Abstract:
According to the May Work Schedules and Work at Home Supplement of the Current Population Survey in 1997, 2001, and 2004, the proportion of employees in the United States with variable starting and/or stopping times who do not control their schedules has increased rapidly since the late 1990s. This category included one out of nine civilian employees ages 18-65 in 2004. These jobs have increased rapidly within industries and occupations. The incumbents of these jobs are more likely to be men, black, and immigrant; white, US-born women' chances of holding such jobs are greatly reduced by their responsibility for children. These findings identify a growing tendency to structure jobs so as to exacerbate the conflict between family work and paid employment, and to reinforce the gender division of labor between home and wage labor, especially in the most disadvantaged communities within the US.
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Ian Larkin, Lamar Pierce & Francesca Gino
Strategic Management Journal, forthcoming
Abstract:
Most research linking compensation to strategy relies on agency theory economics and focuses on executive pay. We instead focus on the strategic compensation of nonexecutive employees, arguing that while agency theory provides a useful framework for analyzing compensation, it fails to consider several psychological factors that increase costs from performance-based pay. We examine how psychological costs from social comparison and overconfidence reduce the efficacy of individual performance-based compensation, building a theoretical framework predicting more prominent use of team-based, seniority-based, and flatter compensation. We argue that compensation is strategic not only in motivating and attracting the worker being compensated but also in its impact on peer workers and the firm's complementary activities. The paper discusses empirical implications and possible theoretical extensions of the proposed integrated theory.
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Graduating High School in a Recession: Work, Education, and Home Production
Brad Hershbein
B.E. Journal of Economic Analysis & Policy, January 2012
Abstract:
This paper explores how high school graduate men and women vary in their behavioral responses to beginning labor market entry during a recession. In contrast with previous related literature that found a substantial negative wage impact but minimal employment impact in samples of highly educated men, the empirical evidence presented here suggests a different outcome for the less well educated, and between the sexes. Women, but not men, who graduate high school in an adverse labor market are less likely to be in the workforce for the next four years, but longer-term effects are minimal. Further, while men increase their enrollment as a short-run response to weak labor demand, women do not; instead, they appear temporarily to substitute into home production. Women's wages are less affected than men's, and both groups' wages are less affected than the college graduates previously studied.
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The Cost of Job Loss in the Great Recession: How Bad Has it Been?
Henry Farber
The Economists' Voice, March 2012
Abstract:
Job losers in the Great Recession have had substantially more difficulty finding employment than in earlier recessions, according to Henry Farber of Princeton. Roughly fifty percent of those who lost jobs between 2007 and 2009 remained without work in 2010 and and even those full-time job losers who did find jobs are more likely to be part time than in past recessions.
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Jone Pearce & Qiumei Jane Xu
Organization Science, March/April 2012, Pages 373-385
Abstract:
We propose and test an argument in which the well-documented skew in supervisory performance appraisal ratings toward those with the same demography as themselves is better explained by the status contests than the reigning theory of homophily. We conduct the test in a field study of 358 supervisor-subordinate dyads in 10 organizations, using hierarchical linear modeling with various controls. We find that supervisors' ratings of subordinates' contextual and task performance only skew toward similar subordinates when supervisors' status is contested by a higher demographic status subordinate, as predicted by social dominance and status characteristics theories. None of the general homophily preference hypotheses is supported. This study provides a richer theory more consistent with the accumulating evidence about demography effects in organizations and demonstrates the value of head-to-head strong inference tests and status explanations for the field of organizational behavior.
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David Wagner et al.
Journal of Applied Psychology, forthcoming
Abstract:
The Internet is a powerful tool that has changed the way people work. However, the ubiquity of the Internet has led to a new workplace threat to productivity - cyberloafing. Building on the ego depletion model of self-regulation, we examine how lost and low-quality sleep influence employee cyberloafing behaviors and how individual differences in conscientiousness moderate these effects. We also demonstrate that the shift to Daylight Saving Time (DST) results in a dramatic increase in cyberloafing behavior at the national level. We first tested the DST-cyberloafing relation through a national quasi-experiment, then directly tested the relation between sleep and cyberloafing in a closely controlled laboratory setting. We discuss the implications of our findings for theory, practice, and future research.
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Why do low-educated workers invest less in further training?
Didier Fouarge, Trudie Schils & Andries de Grip
Applied Economics, Spring 2012, Pages 2587-2601
Abstract:
Several studies document that low-educated workers participate less often in further training than high-educated workers. This article investigates two possible explanations: low-educated workers invest less in training because of (1) the lower economic returns to these investments or (2) their lower willingness to participate in training. Controlling for unobserved heterogeneity, we find that the economic returns to training for low-educated workers are positive and not significantly different from those for high-educated workers. However, low-educated workers are significantly less willing to participate in training. We show that this lesser willingness to train is driven by economic preferences, and personality traits.
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The Lot of the Unemployed: A Time Use Perspective
Alan Krueger & Andreas Mueller
Journal of the European Economic Association, forthcoming
Abstract:
This paper provides new evidence on the time use of employed and unemployed individuals in 14 countries. We devote particular attention to characterizing and modeling job search intensity, measured by the amount of time devoted to searching for a new job. Job search intensity varies considerably across countries, and is higher in countries that have higher wage dispersion. We also examine the relationship between unemployment benefits and job search.
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David Autor, Susan Houseman & Sari Pekkala Kerr
NBER Working Paper, April 2012
Abstract:
Federal and state employment programs for low-skilled workers typically emphasize rapid placement of participants into jobs and often place a large fraction of participants into temporary-help agency jobs. Using unique administrative data from Detroit's welfare-to-work program, we apply the Chernozhukov-Hansen instrumental variables quantile regression (IVQR) method to estimate the causal effects of welfare-to-work job placements on the distribution of participants' earnings. We find that neither direct-hire nor temporary-help job placements significantly affect the lower tail of the earnings distribution. Direct-hire placements, however, substantially raise the upper tail, yielding sizable earnings increases for more than fifty percent of participants over the medium-term (one to two years following placement). Conversely, temporary-help placements have zero or negative earnings impacts at all quantiles, and these effects are economically large and significant at higher quantiles. In net, we find that the widespread practice of placing disadvantaged workers into temporary-help jobs is an ineffective tool for improving earnings and, moreover, that programs focused solely on job placement fail to improve earnings among those who are hardest to serve. Methodologically, one surprising result is that a reduced-form quantile IV approach, akin to two-step instrumental variables, produces near-identical point estimates to the structural IVQR approach, which is based on much stronger assumptions.
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Per Gustafsson et al.
Psychoneuroendocrinology, June 2012, Pages 789-800
Abstract:
Temporary employment is an increasingly common contract type, which has not been investigated in a psychoneuroendocrinological context despite previous observations of associations between adverse work and employment conditions and hypothalamic-pituitary-adrenal (HPA) axis dysregulations. The present study aims to examine whether the 12-year accumulation of temporary employment is related to circadian cortisol levels, and if any association is independent of current employment conditions. Participants were drawn from the prospective Northern Swedish Cohort (n = 791, 74% of the original cohort). At age 43 years, retrospective reports of employments over the last 12 years and of current social conditions were collected by questionnaire, and one-day salivary cortisol profile was measured (at awakening, +15 min post-awakening, pre-lunch, bedtime). Results indicated a gradually higher magnitude of the cortisol awakening response (CAR) in subjects with no (0 months in temporary employment; mean CAR = 34%), moderate (1-25 months in temporary employment; mean CAR = 41%) and heavy (>25 months in temporary employment; mean CAR = 51%) exposure (p = .020), remaining after adjustment for potential confounders and for current employment conditions (p = .028). The higher CAR was explained by lower awakening rather than higher post-awakening cortisol levels. Cortisol levels at all times of the day except post-awakening displayed tendencies to negative relations to temporary employment; as indicated by a lower Area Under of Curve (regression coefficient = 5.0%, p = .038 after adjustment). This study thus suggests that the long-term exposure to temporary employment might confer HPA dysregulations in the form of increased dynamics of the CAR and circadian suppression.
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Scouts versus Stats: The impact of Moneyball on the Major League Baseball draft
Tony Caporale & Trevor Collier
Applied Economics, Spring 2012, Pages 1983-1990
Abstract:
Michael Lewis' influential book Moneyball (2003) discusses several sources of inefficiency in the Major League Baseball (MLB) labour market; one of these being the failure of baseball scouts to place a draft premium on college players. We test this implication of the Moneyball thesis - the superiority of college players - by measuring the productivity of players who were drafted in the first round of five MLB drafts covering the years 1995-1999. Employing a variety of specifications, we find that the performance of college draft choices is no better than those of high school picks and argue that this is consistent with Hayek's (1944) work on the economics of information and his emphasis on the importance of localized knowledge. Additionally, we utilize data on the first three rounds of the MLB draft from 1965 to 2010 to test whether Lewis' book had any impact on teams' draft strategies. We find no significant structural change in the draft following the publication of Moneyball.
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Casey Ichniowski & Anne Preston
NBER Working Paper, March 2012
Abstract:
Using a detailed personally-assembled data set on the performance of collegiate and professional basketball players over the 1997-2010 period, we conduct a very direct test of two questions. Does performance in the NCAA "March Madness" college basketball tournament affect NBA teams' draft decisions? If so, is this effect the result of decision making biases which overweight player performance in these high-visibility college basketball games or rational judgments of how the players later perform in the NBA? The data provide very clear answers to these two questions. First, unexpected March Madness performance, in terms of unexpected team wins and unexpected player scoring, affects draft decisions. This result persists even when models control for a direct measure of the drafted players' unobserved counterfactual - various mock draft rankings of where the players were likely to be drafted just prior to any participation in the March Madness tournament. Second, NBA personnel who are making these draft decisions are certainly not irrationally overweighting this MM information. If anything, the unexpected performance in the March Madness tournament deserves more weight than it gets in the draft decisions. Finally, there is no evidence that players who played in the March Madness tournament comprise a pool of players with a lower variance in future NBA performance and who are therefore less likely to become NBA superstars than are players who do not play in MM. Players with positive draft bumps due to unexpectedly good performance in the March Madness tournament are in fact more likely than those without bumps from March Madness participation to become one of the rare NBA superstars in the league.
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Darren Treadway et al.
Journal of Management, forthcoming
Abstract:
The recruitment and selection of human resources represent the most important activities in which organizations of all types engage. However, there is much scholars still need to know about the predictors of recruitment effectiveness. Using a sample of Football Bowl Subdivision (FBS) university football coaches (N = 175) and their recruiting outcomes, the authors hypothesized that recruiting effectiveness is specifically affected by the individual qualities of the recruiters, in addition to the past performance of the team under the current head coach. The results supported the hypothesis, demonstrating that the interaction of recruiter political skill and head coach performance explained significant variance in recruitment effectiveness. Implications of these results and directions for future research are discussed
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The Returns to Scarce Talent: Footedness and Player Remuneration in European Soccer
Alex Bryson, Bernd Frick & Rob Simmons
Journal of Sports Economics, forthcoming
Abstract:
The authors investigate the salary returns to the ability to play football (soccer) with both feet. The majority of footballers are predominantly right footed. Using two data sets, a cross section of footballers in the five main European leagues and a panel of players in the German Bundesliga, the authors find robust evidence of a substantial salary premium for two-footed ability, even after controlling for available player performance measures. The authors assess how this premium varies across the salary distribution and by player position.
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Speaking Up vs. Being Heard: The Disagreement Around and Outcomes of Employee Voice
Ethan Burris, James Detert & Alexander Romney
Organization Science, forthcoming
Abstract:
This paper contributes to research on the outcomes of employee prosocial voice to managers by focusing on the relationships between voice and two managerially controlled outcomes: managerial performance ratings and involuntary turnover. Past research has considered voice from either the managerial or subordinate perspective individually and found that it can lead to positive outcomes because of its improvement-oriented nature. However, others have argued that voice can lead to unfavorable outcomes for employees. To begin resolving these competing perspectives, we examine agreement and disagreement between employees and their managers on the extent to which employees provide upward voice, proposing and demonstrating that considering either perspective alone does not fully capture how voice is related to employee outcomes. Findings from a study of 7,578 subordinates and their 335 general managers within a national restaurant chain indicate that agreement between employees and managers that employees display a high level of voice leads to favorable outcomes for employees. Our findings then extend existing research by showing that supervisor-subordinate disagreement around voice also helps explain employee outcomes - namely, how negative outcomes arise as a result of employees overestimating their voice relative to their managers' perspective and how positive outcomes result when employees underestimate their upward voice.
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How Much Do Employers Learn from Referrals?
Joshua Pinkston
Industrial Relations, April 2012, Pages 317-341
Abstract:
This paper tests the hypothesis that referrals from various sources provide employers with more information about job applicants than they would have with-out a referral. The study uses data that contain information on two workers in the same job, allowing the differences in job and firm characteristics to be canceled out and controlling for the possibility that workers with referrals from different sources (or no referral at all) sort into jobs that put different weights on individual performance. The estimation results are consistent with referrals from current employees providing employers with more information than they would have otherwise. Additionally, it appears as though hiring through friends or relatives of the employer may involve some favoritism that results in employers either collecting less information than they would otherwise or ignoring information when setting wages. The study finds weak evidence consistent with referrals from other firms or labor unions providing useful information, and no evidence that referrals from community organizations or other sources have any effect.
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The Effect of Linkedin on Deception in Resumes
Jamie Guillory & Jeffrey Hancock
Cyberpsychology, Behavior, and Social Networking, March 2012, Pages 135-140
Abstract:
This study explores how Linkedin shapes patterns of deception in resumes. The general self-presentation goal to appear favorably to others motivates deception when one's true characteristics are inconsistent with their desired impression. Because Linkedin makes resume claims public, deception patterns should be altered relative to traditional resumes. Participants (n=119) in a between-subjects experiment created resumes in one of three resume settings: a traditional (offline) resume, private Linkedin profiles, or publicly available Linkedin profiles. Findings suggest that the public nature of Linkedin resume claims affected the kinds of deception used to create positive impressions, but did not affect the overall frequency of deception. Compared with traditional resumes, Linkedin resumes were less deceptive about the kinds of information that count most to employers, namely an applicant's prior work experience and responsibilities, but more deceptive about interests and hobbies. The results stand in contrast to assumptions that Internet-based communication is more deceptive than traditional formats, and suggests that a framework that considers deception as a resource for self-presentation can account for the findings.
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Employee Selection as a Control System
Dennis Campbell
Journal of Accounting Research, forthcoming
Abstract:
Theories from the economics, management control, and organizational behavior literatures predict that when it is difficult to align incentives by contracting on output, aligning preferences via employee selection may provide a useful alternative. This study investigates this idea empirically using personnel and lending data from a financial services organization that implemented a highly decentralized business model. I exploit variation in this organization in whether or not employees are selected via channels that are likely to sort on the alignment of their preferences with organizational objectives. I find that employees selected through such channels are more likely to use decision-making authority in the granting and structuring of consumer loans than those who are not. Conditional on using decision-making authority, their decisions are also less risky ex post. These findings demonstrate employee selection as an important, but understudied, element of organizational control systems.