Sunday, 24 October 2010

Corporate Reputations and Management Practices

I'm taking part in a forum on Corporate Reputations and Management Practices as part of an initiative organized by Macquarie University where I'm based for a brief period.  As part of my presentation, I'll refer to another recent session in Edinburgh in which I participated on the impact of new human rights developments arising from the Ruggie Report.  This report and indeed much of the discussion was relatively new to me but is likely to have major implications for multinational corporations and is already the subject of business school research.
You can find out a little more about it from the following Warwick University website, which has the details of the Edinburgh conference and the 'Edinburgh Declaration'.  For those of you interested in corporate responsibility and for those of you managing in multinationals this is essential reading. 

Corporate Reputation by Ronald J. Burke, Graeme Martin and Cary L. Cooper

We have a new book on Corporate Reputations coming out early next year on corporate reputations, which you may wish to consider for your library. 
Part I Importance of Corporate Reputation: Corporate reputations: development, maintenance, change and repair, Ronald J. Burke; The meaning and measurement of corporate reputation, Gary Davies; Measuring the impact of corporate reputation on stakeholder behavior, Manfred Schwaiger, Sascha Raithel, Richard Rinkenburger and Matthias Schloderer. 
Part II Developing a Corporate Reputation: Reputation and corporate social responsibility: a global view, Philip H. Mirvis; Organizational identity, corporate social performance and corporate reputation: their roles in creating organizational attractiveness, Kristin B. Backhaus. 
Part III Managing a Corporate Reputation: Employer branding, the psychological contract and the delicate art of expectation management and keeping promises, Kerry Grigg; managing corporate reputations, strategic human resource management (SHRM) and negative capabilities, Graeme Martin, Paul Gollan and Kerry Grigg; From applause to notoriety: organizational reputation and corporate governance, Charles McMillan; The role of the CEO and leadership branding – credibility not celebrity, Julie Hodges; The role of the news media in corporate reputation management, Craig E. Carroll; The impact of Web 2.0 and Enterprise 2.0 on corporate reputation: benefits, problems and prospects, Martin Reddington and Helen Francis; Re-creating reputation through authentic interaction: using social media to connect with individual stakeholders, C.V. Harquail. 
Part IV Reputation Recovery: Corporate governance and corporate reputation: a disaster story, Thomas Clarke; Corporate rebranding, Dale Miller and Bill Merrilees; Repairing damages to reputations: a relational and behavioral perspective, Moonweon Rhee and Robin J. Hadwick;

New Assumptions about Strategic HRM?

I attended the Strategic Management Society annual Conference in Rome where I went to find out about what strategy academics have to say about HRM as a source of value creation.  And I’m pleased that I went if only to confirm what I’ve said in other blogs about the search for new business paradigms. Like many of the other management scholars, strategy academics have fallen out of love with business and with some of their most treasured assumptions about shareholder value.  This was evidenced by two new special interest groups that have formed in the Strategic Management Society on human capital and on stakeholder theory.

The opening plenary session given by some of the most prominent strategy academics  - Jay Barney, Russ Coff, Ed Freeman and … - raised lots of questions and some answers on the topic of ‘where strategic thinking in business needs to go’.  Jay Barney, the man most associated with what has become one of the most discussed ideas among management academics – the resource-based view of strategy (RBV) – outlined some of the assumptions/ predictions it has made with respect to human capital.   One of the most important is that firm-specific, as distinct from general (or transferable), human capital is a potentially great source of competitive advantage because it can be valuable, rare and inimitable.  This is why firms seek to engage employees to secure their identification and willingness to ‘go the extra mile’.   It also explains why firms are much more eager to train employee in the routines, processes, and ways of ‘doing things around  here’ and much less eager to give them a more general education, such as an MBA, which  they can use for their own advantage and for the advantage of other firms.  This last point, however, highlights a problem for the RBV: rational employees recognise that they do not benefit as much as firms from investing in their own firm-specific human because of what is called asymmetric power relations.  Basically, this refers to the lack of power and knowledge of individuals in relation to firms.  Thus, we are left with a distribution problem:  after all costs are paid, who should benefit from residual profits and how should this residual amount be shared?

The traditional answer, which has underpinned strategic management theory and corporate governance since the 1980s, is the normative theory of shareholder value.   Employees are paid a wage for their investment in general human capital in the firm and may gain in some of share ownership if they in invest in firm-specific human capital, but the shareholders have sole ownership rights and thus the only legitimate claim on residual profits.  Firms in the 1990s did try to limit their investment in firm-specific human capital by retrenching into employment contracts that were largely transactional rather than relational – the so called ‘employability contract’.  This, more or less stated that firms were unable or unwilling to guarantee the old style contract based on job security and firm-specific careers, but were willing to help employees develop skills (general human capital) that they could use to make them more employable in the future in return for their temporary demonstration of high commitment.  However, such psychological contracts have not proven successful, especially in attracting and engaging knowledge workers and senior managers, who often have high levels of general human capital and are capable of bargaining away much of the residual profits that would normally accrue to shareholders.  This is best exemplified by the case of premier league professional footballers and many CEOs and other star employees (who are both unique and capable of adding high value).

Russ Coff suggested the answer lay in developing a different theory of strategic management, one that is based on stakeholder theory rather than shareholder value.  This was hardly revolutionary stuff, but was positioned as such by these eminent strategy academics.  It was left to Ed Freeman, who has a new book coming out on stakeholder theory, to put the argument for a different view of what might count as useful theorising about strategy and where it may need to go.  His time seems to have come, especially given the weakening position of the US in the global economy.

I’m still stunned, however, over how large the gulf is between assumptions made by American scholars and those made by their (particularly continental) European counterparts.  However, we should be grateful for small mercies.

Saturday, 14 August 2010

A Final Blog from the AOM: New Developments in Strategic Human Resource Management

I’m about to begin writing a new book exploring the links between HRM and business strategy, a conjunction of ideas which has been at the core of my work for the last few decades. So, I was pleasantly surprised to see that the AOM conference had some core tracks on this subject, the main participants of which have organized an interest group - rather unfortunately in my view - labelled ‘strategic human capital' (are we really interested in human capital or even human resources, or should we be more interested in resourceful humans?). The first conference stream dedicated to research in this field is due to take place at the Strategic Management Society annual conference in Rome in September and fields an impressive array of American scholars, including Dave Lepak, Pat Wright and Russ Coff.

During the AOM conference there were some excellent papers mapping out the field and addressing the question of what it means to be strategic in HRM. Shad Morris used this session as an opportunity to explore how organizations manage their star performers and attempt to expropriate value from them to create firm specific human capital - a very tricky problem because stars often have an inbuilt incentive and the power to expropriate value from the companies with which they deign to work to build their own general human capital. Another paper by Dana Minbaeva from the Copenhagen Business School HR team explored the bridge between the macro-micro divide. This may sound like academic jargon but is an extremely important issue for practitioners to understand.  It is not enough to have a set of so called best HR practices in place to ensure desirable individual and group attitudes and behaviour; we also need understand how these practices are implemented, the signals they send out and how these signals are perceived by individuals in particular contexts. This signalling theory approach, of which we have written about in a new book chapter, was demonstrated in another paper entitled ‘ Why are job seekers attracted to socially responsible companies? Testing underlying mechanisms’ by David Jones and colleagues from the University of Vermont. One of the insights generated by this paper is that it is not CSR in itself that attracts potential employees, but the inferences that such people make from the signalling cues of such policies. In this paper, environmental oriented CSR policies did not have as big an impact on the attractiveness of an organizational to potential employees as those policies focusing on being community-oriented i.e. signals from the corporate citizenship elements of the CSR policy were picked up by potential applicants as ‘they treat the local community well, so they must treat employees well’ and 'if they treat there employees well, I will apply to this organization'.

The third and fourth papers, however, provided even better insights into how we can conceive strategic human resource management.  A presentation by Lisa Hisae Nishii outlined a process theory of SHRM. The main contribution of process theory lies in explaining how the success of HRM is very much down to the implementation of policies, especially in meeting the valued expectations of employees, i.e. meeting psychological contract expectations. We provided a similar explanation in 2001 in a paper entitled ‘Transforming multinational enterprises: towards a process model of strategic human resource management change’ in the International Journal of Human Resource Management, but it will take someone of the stature of Pat Wright to get this idea into practice. The final and probably best paper was presented by Robert Kaše from Ljubljana. His was an attempt to map out the relationship between HRM and organizational outcomes using a social network perspective. Robert’s ideas would be the most difficult to put into practice because they highlighted the complex and multiple relationships inside and outside of organizations which have to be understood before we can predict with any certainty the impact of HRM policies. However, to get an accurate picture of HRM in organizations, such complex understandings are needed. One of the few examples I have seen of this kind of social network mapping is IBM’s attempt to capture the informal communications patterns which only become evident through tracking online social network communications. Such an activity is only made possible because the company has access to the IP addresses of all users of the company’s social networking software and can trace their communications. The patterns that emerged showed the importance of ‘mavens’ and ‘connectors’ who were critical to knowledge creation and sharing in the organization, so allowing IBM to create organizational structures which built on the bottom-up informal organization structures rather than on the top down formal structures.

If  anyone is interested in these papers, which are unlikely to be published for a year or two, the authors may be willing to share their work with you if you email them.  Most can be found using a Google search.

However, no matter how many times I attend the AOM conference – I’ve been going for a dozen or so years – I’m always amazed by the differences between business and management and HR on this side of the pond from what goes on in the USA. One example that rammed this point home to me this year was the statement by one of the leaders of the new strategic human capital interest group that I began this post with. He proposed a ‘revolutionary’ idea that US scholars and practitioners took the shareholder value perspective as given, arguing that this assumption needed to be questioned for the field to move on. Quelle surprise! I felt obliged to point out to the largely US audience that shareholder value was not a given outside of the USA, especially in some parts of Europe and Asia, and that we had recently written a 'not so revolutionary' paper on four configurations relating different corporate governance assumptions (shareholder value, stewardship theory, stakeholder theory and context-bound theory) to different sets of ethical and strategic assumptions, and through these to particular strategic HR policies. I also felt obliged that this notion was not even revolutionary among scholars in the USA. In a manner reminiscent of the love affair with Japanese management in the 1980s and 1990s, Peter Cappelli from the Wharton School and his Indian colleagues have just produced a piece of research in the Academy of Management Perspectives extolling the virtues of an Indian approach to management and what US firms can learn from them. The single most important feature they found of corporate governance among Indian companies was the ‘determination to balance the interests of the firm’s diverse stakeholders’. Being a representative of shareholders came only fourth on a list of priorities for business leaders. First was acting as a guardian for the mission driven strategy, which embodied social as well as economic goals, second was as guardians of the firm’s culture, and third was as acting as guide or teacher for employees.

Friday, 13 August 2010

Making Academics More Relevant: Useful Research

Perhaps the most important session I've attended at the AOM conference featured six of its  'biggest hitters', including past presidents and genuine world class researchers who have made a significant impact on practice and published in top tier journals.  Their messages deserved a larger audience and I'm sure they will get it in the near future through their new book, 'Useful Research: Advancing Theory and Practice', edited by Susan Mohrman and Ed Lawler. 

The title of the book invoiced its key message and also the impassioned pleas by the presenters for academics to focus on doing more useful research which has an impact on practice (as well as theory) and for the top tier journals to reflect use value to practice in their review processes and acceptance rates.  On this last point, some revealing statistics were laid out.  For example, in the Academy of Management Journal, probably the top of the top tier, only 16% of articles were based on qualitative case study research - the kind of research closest to practice and most likely to influence practitioners.  Apparently, however, this rates as a significant  improvement on the 6% that made it a few years ago!

All six presenters grounded their talks in the notion of academic knowledge chain or system, a development of the Mode 1 and Mode 2 distinction of a few years ago.  Upstream activities included Pure Research in the traditional disciplines of business and management, e.g. economics, sociology, psychology, philosophy etc., which provide the theory for the Traditional Organizational and Management Research that appear in the so-called top tier journals.  Downstream activities include the development of intermediate bridging knowledge, which is really a form of 'knowledge for sale' to practice - very much the province of consultants, professional bodies such as the CIPD, and the writers of textbooks - and Practice-oriented Knowledge Products including talks and keynotes to practitioners, teaching through executive education, blogging, writing in practitioner journals, newspapers, TV and radio, etc.  The main message of the presenters was that business schools should require at least some of their (senior) academics to operate in these critical downstream activities as well as the upstream ones.  By engaging in 'engaged research' with practitioners - not just on them - academics benefit from grounding their upstream work in relevant problems and can make a significant impact on policy and practice.  By doing so they lay claim to be genuine intellectuals in the traditional sense of that term.

All presenters were also highly critical of the current systems in elite university business schools whic rewards only publication in a limited range of highly self-referential top tier journals.  As Andy Van de Ven, the doyen of engaged research has demonstrated,  these journals have almost zero impact on practice and often little impact on science (some 60% of articles published in top tier management journals are never cited by other academics!).

Yet despite their arguments and positions of influence - not to mention the constant soul searching by the Academy over the last twenty years to make itself more relevant - we seem to be no further forward.  The research assessment exercise in this country (the REF) with its near exclusive focus on publishing in top tier journals and the requirements for tenure in the USA have led to a 'trained incapacity' among the academic community which has made the divide even greater over the last twenty years.  This divide has resulted in practitioners regarding most of  us as 'skilled incompetents' at best and only good for teaching MBA courses and undergraduates (the main finding of some research I conducted with a colleague a few years ago on the views of the Scottish business community of the Scottish business schools). 

Will books such as this one and the constant exhortation of senior academics in business schools that featured in this session change the system?  I doubt it: what gets measured gets managed, and the new research evaluation framework for the British universities shows no real desire to measure impact, despite its ambitions to be more impactful.  Maybe the new (much reduced) funding regime will though?

Sunday, 8 August 2010

Just How Important is National Culture in Explaining the Effectiveness and Transfer of HR Practices in Multinationals?

The second of these two quick posts reflects on some excellent work in the Handbook of Research on Comparative Human Research Management edited by Chris Brewster and Wolfgang Mayerhofer and to be published by Edward Elgar in April 2011.  Those HR readers who are involved in managing in multinationals should read this book if you are concerned about the global-local problems. and developing employer brands. 

The chapter by Barry Gerhart looks like being a standout in this respect.  We've been trained as scholars and practitioners to emphasise national cultural differences as a constraint on transferring practices across cultures, in part because of the influence of work by Hosftede, Trompenaars and others on dimensions of national culture.  These ideas have been at the core of teaching on international management courses, as most MBA students would know.  Barry has spent a number of years re-examining the evidence produced by Hofstede in particular and reflecting on the messages this work has sent out.  He does not deny that national cultural differences exist, but argues (1) that you cannot equate culture with nation states and (2) that it is not national dimensions of culture that are the major constraints in transferring practices but organizational cultures, or industry cultures.  According to Gerhart, Hofstede used poor standards of proof and over-interpreted the importance of national cultural variables to the point that they seem to play less and less importance in constraining the ability of corporate HR departments to develop corporate identities and employer brands.  Instead he proposed that those firms which buck the shibboleths associated with transferring invidualist HR practices such as performance related pay, performance appraisal, etc, will actually gain a competitive advantage over those firms which follow the received wisdom in this field.

Healthcare HR at the AOM

One of two quick posts on excellent workshops at the AOM, both of which have important lessons for readers of this blog.

The first is about the influence of context and the disconnections between managers and employees over the effectiveness of HR practices.  Jaap Paauwe introduced a session that featured Louise Fitzgerald from Manchester Business School, Corine Boon from Amsterdam University and David Guest from Kings College.  Louise's work raised the importance of receptive contexts for change in that most complex of industries.  Her research over the past number of years has shown that transferring 'best practice' from the commercial sector to healthcare and even within the the healthcare sector itself is fraught with problems, e.g. lean service delivery and HR best practices.  Context matters a great deal, and if ever we needed lessons on this two of the most important dimensions of receptive contexts were (1) the relationships between managers and clinicians and the relationships among clinicians themselves, and (2) the extent of distributed leadership and willingness of clinicians to engage in leadership.  However, she also pointed out the impact of senior leadership actions on shaping such contexts, which is a lesson that most recent research has shown.  You need both transformational and distributed leadership to make things work.

The second point on the impact of HR practices on change was made by Corine Boon and re-inforced by David Guest's research in healthcare.  It is not the fact that HR practices exist but the signals they send and how they are perceived by employees that is important in predicting performance.  The correlation between managers reporting that they had such practices in place and the views of employees on their effectiveness was very low (0.25).  David Guest argued that there was a general lack of a strategic perspective on HR among his healthcare organizational sample, and a 'huge gap between what was intended and what actually happened' in HR.  He further proposed that the adoption of so called best HR practice was linked to low performance, a finding that is not without parallel in the private sector.  If everyone is doing the same thing, where is the advantage in that?

So beware of poorly researched case studies reporting only managers' views on the existence of best practices and beware of the airport books promulgating these views.  You have to understand the context in which these practices are adopted, how these practices are implemented, they signals they send and how effective they are perceived to be by staff.  Simple but powerful lessons.

Engaging Encounters at the AOM on Talent Management and Engagement

I'm posting from the annual conference of the Academy of Management in Montreal, where I took part in a workshop organized by a close colleagues of mine, Kerry Grigg from Australia, who has recently crossed the academic-practitioner divide.  Kerry's intention in this workshop was facilitate a discussion on the problems that many academics have in engaging with practitioners by bringing together four practically-oriented academics and forty plus practitioners, practitioner/academics and academics new to the profession.  My thanks go to her for the excellent facilitation and thought that went into this engaging encounter, which provoked some excellent interaction with the audience and allowed me to work (again) with Paul Sparrow from Lancaster and Elaine Farndale from Penn State  and Tilberg, and to work with for the first time with  John Boudreau from the University of Southern California, whose books have also featured on this blog.

Although this divide has been explored a number of times in the past, we don't seem to be much closer to a resolution.  The increasingly dominant publish or perish culture that dominates the lives of academics working in business schools in the USA and UK has had the paradoxical effect of creating disincentives for academics to get too close to practice.  For example, it is difficult to get published in top journals using (a) the research methods most valued by practitioners, i.e., single case studies, qualitative research, action research etc., on (b) the topics of the day of most interest to practitioners, talent management and engagement being such two examples.   Practitioners, on their part are usually looking for results that are 'roughly right but fast' and wish to use these results to secure some kind of competitive advantage, either for their organizations or in career terms.  At minimum they do not want to be disadvantaged as a result of their links with academics, which can be the case when results are unearthed that show these practitioners, or more likely their senior managers, to be part of the problem rather than the solution.

What came through strongly in terms of advice was the need for younger academics to do a major risk assessment before tying their careers to research that can go dangerously wrong, so preventing them from publishing.   They need to recognise that they are entering into an exchange relationship, in which both parties have to gain for the relationship to flourish.  This means that the 'terms of trade' have to be made explicit at the beginning of the relationship, and the lines in the sand clearly delineated.  What happens if the results of the research show that organization or key individuals in a bad light - which is often the case in engagement research?  Typically this exchange is best approached in a gradual manner, perhaps through pilot studies that allow both parties to learn about each other and about the benefits of working together.  

What has also to be made clear is the distinction between a consulting and a research relationship.  At their best, academics can produce consulting advice to organizations on par or better than anything produced by the major consultants  - for example, providing insights into the nature and factors influencing employee engagement, or the alignment between HR and strategic advantage.  Consulting (and executive educations) can also lead to follow up projects with major academic spin-offs. Consulting, however, is based on a different kind of relationship, which places academics in a role of service providers and that needs to be recognised by unwary scholarly entrepreneurs.  The advice from the panel for less experienced academics was to ensure they and the service commissioners understood the distinction and for both parties to be ready to walk away if the terms of engagement didn't feel or look right.

Tuesday, 20 July 2010

One of the Book of (Last) Year: Management by the Markets

I'm doing some work with colleagues on HR and governance and writing another paper on HR and the global financial crisis.  Both projects have been influenced by my book of the year (which came out last year - takes me a while to get up to speed) and some academic papers that have shaped its formation.  The book is by Gerald Davis and is entitled 'Managed by the Markets: How Finance Re-shaped America' published by Oxford University Press.

As Jeff Pfeffer described it and I agree, this book is an intellectual tour de force account of the American economy by a sociologist who is as comfortable with financial economics as he is with history.  To quote, his core argument is that 'financial markets have shaped the transition from an industrial to post-industrial society.  For most of the twentieth century, social organization in the United States was shaped by the gravitational pull of the large corporation.  It is now oriented around financial markets to a degree that was unfathomable until it was revealed by a global economic crisis' (p. 1).  Given the UK's dependence on the financial services sector, the argument applies with almost equal force to this country, though with a few differences.

Davis provides compelling evidence of rise of shareholder value as a mantra for corporate governance and the decline of the traditional corporation.  This was associated with increased stock ownership in the early 1980s, mainly resulting from George W Bush's plan to privatise Social Security so ending defined benefit pensions.  What emerged was what Davis describes as a portfolio society in which 'free agent' individual investors began to treat themselves, their homes and their colleagues as human and social capital with a view to securing financial returns on their investments.  This was evidenced by the huge take up of 401 (k) pension plans and the purchase of investment properties (not just second homes) that individuals felt free to walk away from if their speculations turned sour.  It also resulted in the growth of the bond market and the growth of the shadow banking sector, which forced changes in behaviour among the traditional banks, most notably the growth of investment banking.  The rest as they say is history. 

Davis concludes with some speculations on a 'society of investors', in which everything and everyone is commoditised, a continued decline in the power of corporations and a rise in importance of the financial services industry - broadly defined.  These developments will have important implications for employees, with a continued decline in the potential for them to form long term 'resourceful human' attachments to corporate 'feudalists'. Instead they are likely to treat themselves (and be treated) as 'human resources' or 'human capital', which will lead to a further erosion of employee engagement levels, commitment to and identification with individual employers.  It will also lead to less mobility, more inequality, educational insecurity (already happening in this country) and the end of the corporate safety net (again already happening).  Is this what is driving David Cameron and Vince Cable to reduce the reliance on increasingly dangerous financial services?

Sunday, 11 July 2010

There's Something Interesting Going On at the Academy of Management for Practitioners

It's nearly time for the annual bash at the Academy of Management.  For those readers not familiar with this annual event, it is probably the biggest and most important event on the academic management calendar.  However, very few practitioners attend, which is a great shame because if you attend the rights sessions it really does deliver some excellent, well researched ideas of great value that you are unlikely to get from going to much more expensive practitioner events.  As an example from the last two years, there were ground-breaking sessions on employee engagement and management consulting, which went far beyond the usual fare at SHRM/CIPD events.

One of the reasons guess that practitioners don't go is because of the divide between academics and industry.  Many of the sessions at the AOM display this in spades, especially those following the traditional hypothesis testing approach of old and safe ideas (nothing new here), which get wrapped up in statistical proofs and arguments that few people understand.  However, when you get good academic work aimed at theory generation or providing solid evidence on management fads, there is nothing so practical (as good theory!).

With this in mind, two practitioners with an academic backrgound are putting on a symposium with some practically minded HR academics (including this one) to help bridge this gap.  If you can't attend, please do follow the blog for the event.  You can participate from afar and help us in our quest to become more relevant while remaining rigorous.

Wednesday, 24 March 2010

Senior Leaders, Organizational Performance and Sir Fred

When I'm doing presentatations on leadership, I often like to throw in the quotes from Jeff Pfeffer and Robert Sutton's well known book,  'Hard Facts, Dangerous Half Truths and Total Nonsense', which summarises the academic evidence on the (lack of) impact of senior leaders on organizational performance. 

'Scholars who conduct and evaluate the best peer-reviewed studies argue over how much leadership matters and when it matters most. But when they set aside their petty differences, most agree that the effects of leadership on performance are modest under most conditions, strong under a few conditions, and absent in others.
'Studies from leaders from large samples of CEOs…, university presidents to managers of colleges and professional sports teams show that organizational performance is determined largely by factors that no individual - including a leader - can control’. Pfeffer & Sutton, 2006 (p. 192).

However, they do make the point that senior leaders that senior leaders can have an enormous negative effect, especially on reputations!

In the august Academy of Management Journal this month, there is an excellent article which explains why Sir Fred Goodwin may have be one of the few leaders to have had a strong effect, positively and negatively on RBS - he went from hero to zero in a few years, like many of his counterparts in the banking crisis.  For those interested, the reference is Li, J. & Tang, Y. (2010) CEO hubris and firm risk taking in China: the moderating role of managerial discretion, Academy of Management Journal, 53: 45-68.

Popular views of the impact of leadership are that CEOs have a big effect on firm performance, partly explained by our need to attribute relatively simple causes to complex issues.  The underlying theory and data that Pffeffer and Sutton are referring to, however, comes from two different stables of research - popular ecology and neoinstitutionalist theories - both of which argue that CEO and senior leaders can have little effect on firm performance, except under certain conditions, because of overwhelming external forces such as market pressures, etc.  The two Chinese authors point to recent attempts to reconcile these views through something called 'Upper Echelon' theory, which highlightlights the role of managerial discretion.  In bringing this idea together with the notion of managerial hubris - the exagerated belief that some managers have about the their own judgements against objective standards - they help us understand the dark side of management.  For example, they point to research which shows that CEO hubris is associated with paying over the odds for acquisitions, and that cross-border acquisitions are often driven by managerial hubris.  Which brings us to Sir Fred Goodwin's impact on RBS's failure.

Li and Tang demonstrate in a Chinese context that CEO hubris is postively related to firm risk-taking, which is facilitated by the market context to support risk, the complexity of the market, room for opportunities to take risk and the degree of market uncertainty. When the context is munificent, when there are opportunities and when information is ambigious, overconfident CEOs can, and do, feel compelled to take greater risks.  At the organizational level, there are also key constraints on CEOs, including the age of the firm, its size, its resources and the governance structures of the board.  If a CEO has greater control over the board and has resources, s/he is more likely to act on the basis of hubris in making risky decisions.  What is evident from the RBS case is that most of these factors were evident, so providing a better good explanation than  some of the woolier theories of semi-detached, narcisisstic leadership and its negative effects.  What do readers think?

Saturday, 6 March 2010

Employee Voice and Engagement

A very good colleague of mine, Paul Gollan, from Macquarie University in Sydney has been writing and researching on employee voice for a number of years, assessing whether employee voice has a positive impact on participation and through it, key outcomes for organizations and employees. The usual distinction made in this important stream of literature is 'between direct communication, upward problem-solving, or representative participation. The first two of these are essentially direct and individually focused, often operating through face-to-face interactions between supervisors/first line managers and their staff. Some take the form of informal oral or verbal participation, while others are more formalized in the form of written information or suggestions. The third form centres on the role that employee or trade union representatives play in discussions between managers and the workforce, via mechanisms such as joint consultation, worker directors or collective bargaining in the form of problem solving communications' (Budd, Gollan & Wilkinson, 2010).
Paul and his colleagues have just produced a special issue on this topic for the journal Human Relations, which has some excellent articles in it.  He is also running a seminar series this month at the LSE which looks excellent (and, he tells me, is free!), where he will also launch a new book on this important strand of work.
Among the best (for me) papers in the Human Relations collection is one by Kim, McDuffie and Pil, who write about the impact of different kinds of voice and engagement in the automative industry, and their impact on productivity (see the last post).  The results of this study are complex but generally support the importance of employee voice as an engagement strategy, so resonating with the findings in the earlier post on Steve Wood's research.  Here's a summary of the Kim et al paper by the editors - no need for me to do it. 
'Turning from the determinants of individual participation in voice mechanisms to the effects of employee voice and participation, Jaewon Kim, John Paul MacDuffie and Frits Pil (this issue) analyse the effects of team voice and worker representative voice, as well as their interaction, on labour productivity in ‘Employee voice and organizational performance:

'Of particular note, this research centres on teams’ influence on key work-related issues and worker representatives’ influence on collective voice issues rather than simply assessing the presence of teams or unions. Drawing data from automotive assembly plants from around the globe, the findings reveal that when examined solely, neither channel of voice has a significant effect on labour productivity. Rather, the influence of team voice and representative voice on worker efficiency depends on the interaction between these channels of voice. These findings challenge the conventional assumptions of advocates of both direct and indirect voice because neither type of voice on its own consistently predicts better labour productivity. Significantly, even when the two forms of voice are combined, these findings suggest their relationship with labour efficiency is complex because the positive effects of one type of voice are partly offset by them being partial substitutes. Consequently, the two forms of voice can interfere with, or neutralize, each other’s positive effects on productivity. The findings suggest that this occurs more frequently than the mutual reinforcement some might expect. However, consistent with recent European policy-making on employee participation and voice, the combination of both forms of voice does ultimately have a positive impact on performance and productivity. Overall, the findings therefore reinforce the importance of increasing various forms of employee voice for greater positive organizational outcomes'.

Solid Evidence that HRM and Engagement can Work

As HR academics and practitioners we are consistently looking for good evidence that HRM actually works - that the adoption of high performance work practices pays off in terms of ley measures of performance, such as productivity, quality, customer service, etc. We need such evidence to build our respective cases, and there has been quite a bit of it around for the last twenty years beginning the Mark Huselid's large-scale statistical studies in the 1990s. Often, however, the academics have have failed to look at this issue over long periods of time, so demonstrating consistent and long terms effects of the use of high performance work practices and related engagement strategies, which, if done well, would represent something of a gold standard of proof that investment in HRM actually works.

This morning I and quite a few of my HRM academic colleagues were sent the results of a paper that goes some way to delivering such proof, though they are more modest and, like good academics, highlight their study's shortcomings. The work comes out of the Institute of Work Psychology stable at Sheffield University, run by Stephen Wood. Here's his summary of the paper and its contribution in the email he sent out.

'My colleague, Lilian de Menezes, and I examined the integrated use in British manufacturing of a set of lean management practices in which employee empowerment was a major component over 22 years. We found in all 22 years that those firms that used the integrated lean approach (my emphasis) has higher levels of productivity (measured by value-added). In addition, we found that the pioneers of the high lean approach continued to outperform even those that subsequently adopted it. These later adopters gained the performance advantages associated with the integrated approach, but their productivity growth was not sufficient to catch up with those which had adopted it earlier. This shows that the employee engagement, so central to lean production, achieves its aim of continuous improvement.

The practices included in the study are: empowerment, intensive training and development, team work, TQM, Just-in-time, integrated computer-based technology, and supply-chain partnering

The study was financed by the ESRC and will appear in: L. de Menezes, S. Wood and G. Gelade, ‘A longitudinal study of the latent class clusters of modern management practices and their
association with organizational performance in British manufacturing’, Journal of Operations Management'.

Lilian, Steve and Gerry acknowledge the limitations of their study, suggesting that gold standard proof would need to consider not only productivity data but also evidence on quality and lead times in manufacturing. Nevertheless, this study represents an important step forward and substantial argument for integrating engagement strategies - team working and empowerment - with lean techniques. Given the widespread adoption of the latter in healthcare in the UK, maybe its time to puut in place a similar study to test the impact of these large scale and somewhat controversial initiatives.

Thursday, 18 February 2010

Back in the Frame and Following up on Engagement

I’ve had a (partly enforced) break over the holiday period (and beyond), due to some many writing deadlines, being overseas and being laid low for a few weeks (first time for me), so I'm likely to be a little ring rusty in the blogging sense. Anyway I would like to follow on with the post from November regarding engagement. In that post I was critical of the Macleod report’s discussion on the subject because it lacked the necessary rigour to make engagement a useful practitioner tool that would stand real scrutiny. Susan Hetrick and I first raised this issue of engagement in our 2006 book on corporate reputations and HR, suggesting it was little more than consultancy re-packaging of old ideas designed to refresh their HR product portfolio. Since then, I’ve come around to the idea of engagement, in part because it is so big in practice. So I’ve been working on developing a model of how leadership and high performance HR work systems influence different components of engagement to produce critical business and public sector outcomes. This model will be published in a forthcoming chapter on employer branding (with Saskia Dyke from Switzerland) and another in an article on leadership branding (with Julie Hodges from Durham). Susan and I will also be using it as the basis for a forthcoming financial services presentation.
Co-incidentally, two prominent HR academic colleagues of mine, Elaine Farndale from Tilburg and Paul Sparrow from Lancaster have been working on engagement, both of whom have made major contributions to the literature on the topic and have influenced my thinking significantly.
I’ve mentioned Paul’s work before and his Centre for Performance-led HR at Lancaster University. Along with Shashi Balain, he produced a really insightful contribution to the notion of engagement in a white paper. As part of that contribution, Paul and his colleagues have also made a series of short videos summarising their work. These are really worth looking at.
However, to my mind Elaine’s work on engagement with colleagues from Tilberg, represents a major breakthrough in bringing some rigour and evidence to the topic and anyone seriously interested in engagement should contact Elaine to get a hold of this paper by Bejier, Farndale and Van Veldhoven . For me , the most important contribution has been to define two different foci of engagement – work engagement, which I’ve already written about on this blog, and organizational engagement, which is what most consultants typically refer to as employee engagement. It also makes a key distinction between state engagement (attitudes and emotions which people hold to work and their organization) and behavioural engagement (actions that employees report taking to display engagement with their work and the organization). For example, many professionals are engaged in their work but not the organization, often to the point of over-engagement or burnout. Conversely, managers can become over-engaged (or over-identified) with the organization, which can lead to a form of collective blindness, intolerance of others who are not ‘organization men’ and a failure to privilege professional and moral values in decision-making. This is a topic that Elaine, Japp Paauwe and I hope to be discussing at a forthcoming symposium on HR’s contribution to corporate governance at the Academy of Management in August – the ‘darkside of engagement’ – something most of us can recognise but which has rarely featured in the practitioner literature..
Currently, we’re working on expanding the range of engagement foci – what people at work engage with – to show how they are distinct but related. For example, in healthcare and financial services, it is clear that people are engaged or can become disengaged with the industry, which is very important in explaining recruitment and retention. It is also clear that people can be more or less engaged with each other in the performance of their work, which is related to team-working and distributed leadership, both critical drivers of effective performance.