Content and process: organizational conflict and decision making

The foundational work in the Carnegie perspective established conflict as endemic to organizations and a driver of organizing behavior and decision making. Organizations as a system of coordinated action among interdependent individuals and groups with different preferences, interests, information, or knowledge create the potential for pervasive and ongoing latent goal conflict. At the same time, extant psychology research has devoted considerable attention to identifying the content and intensity of conflict, focusing on the relationship between different types of conflict and their impact on group outcomes. The Carnegie perspective also assumes that the need for joint decision-making and the differences in goals or perception of reality are never fully resolved. As a result, it has paid attention to the processes through which conflict is addressed - by attending sequentially to goals, decentralizing information, accumulating excess resources, and forming coalitions rather than formal mediating procedures. The assessment of the psychology and organizational theory research also suggests that future work focusing on organizational conflict as latent, situated, and dynamic would enable greater clarity on how organizations make decisions.

Decoding cultural conflicts

As pioneers of the Carnegie Perspective recognized, conflicts in organizations can exist even when incentives of all parties are aligned. These can often be traced to differences in cognitions such as beliefs and values, which are foundational components of any given culture. This paper refines the operationalization of cultural clashes by identifying differences in beliefs about causality ("which actions cause which outcomes") and morality (in the broad sense of "what is evaluated as desirable") as two fundamental sources of conflict. In our first study, we demonstrate empirically that participants recognize and distinguish between these two sources of conflict. In our second study, we test the hypotheses that while misalignments in either causal or moral codes increase observers' perceptions of relationship conflict, negative affect, likelihood of avoidance, and lower perceived likelihood of conflict resolution, the effects are stronger for misalignments in moral codes than misalignments in causal codes and strongest when both causal and moral codes are misaligned. We test these arguments using vignette-based experimental studies. Our findings support our hypotheses. This research has significant implications for the understanding of conflict dynamics within and beyond organizational contexts. By recognizing the pivotal role of cultural differences in shaping conflicts, organizations and decision-makers can better anticipate, manage, and potentially preempt such conflicts.

Structuring the situation: Organizational goals trigger and direct decision-making

Organizational goals are assigned to individuals, and thus differ from goals that individuals voluntarily adopt. The Carnegie School has a significant research stream on how organizations are affected by goals, with a focus on how disappointing performance disrupts regular organizational behavior and triggers a search for alternative actions. We have a good understanding of the organization-level process of setting aspiration levels, triggering search for alternatives, and making decisions, but the individual-level mechanisms contributing to it are less well known. An assessment of the progress of Carnegie School research so far reveals a list of research questions that should be resolved in order to understand how individual updating of aspiration levels, triggering of search, directing of search, and decision-making help explain organizational responses to goals. The role of construal, or interpretation, in guiding these processes is a central theoretical mechanism that needs further investigation.

Looking for Greener Grass? Prior Status and Exploration-Exploitation Decisions in Job Search

Research on the returns to specialist versus generalist careers has largely neglected what drives individuals’ motivations to build different career profiles in the first place. Although specialization is widely associated with benefits, generalist careers are seen as more at risk except in certain mitigated conditions. At the same time, given the uncertainty in labor markets, future returns to specialization cannot simply be assumed. We introduce in this paper a novel mechanism behind the formation of generalist careers, opportunity-enhancing generalism, whereby workers willingly give up the benefits to specialization to dissociate from a past expertise considered to yield relatively poor future prospects. On the premise that one’s prior experience provides the basis for exploration-versus-exploitation decisions, we argue that aspects of one’s previous jobs, including status, will importantly affect decisions about whether to continue specializing. Specifically, negative feedback about prospects for advancement in their prior jobs will increase workers’ motivation to search for jobs in new areas of expertise. Focusing on managerial workers’ job search decisions, we predict that individuals who come from low-status firms, low-status work domains, or both will be more likely to search for jobs in a new area than job seekers coming from high-status firms and work domains. Using data on job searches in a Master in Business Administration labor market, we find support for our prediction and suggestive evidence for the opportunity-enhancing mechanism we propose.

Funding: This work was supported by the French National Research Agency [Grant “Investissements d’Avenir” Labex Ecodec/ANR-11-LABX-0047] and the Spanish Ministry of Science and Innovation [Grant MCIN/AEI/10.13039/501100011033].

Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.1663 .

Ambidextrous strategies in turbulent times: the experience of manufacturing SMEs during the COVID-19 pandemic

Purpose

The paper refers to the framework of ambidexterity to explain the strategic paths of manufacturing SMEs in turbulent times, by investigating SMEs' strategic reaction to the COVID-19 pandemic.

Design/methodology/approach

The authors adopted an inductive approach methodology. Using a qualitative research method, Italian manufacturing SMEs in different industries were interviewed to outline how they have faced the negative effects of the COVID-19 by considering the strategies implemented during the pandemic.

Findings

The study identifies three ambidextrous strategies for manufacturing SMEs to positively overcome the COVID-19 crisis: (1) playing different roles within the same market (business-to-business and business-to-consumer) simultaneously, (2) simultaneous entrance and management of multiple markets and (3) exploiting manufacturing knowledge for exploring product and business model innovation (simultaneous learning processes).

Research limitations/implications

Results enrich the theoretical discussion on ambidexterity and SMEs, by stressing the strategic dimension of ambidexterity and including a more fine-grained analysis of the different firm’ strategic paths in times of crisis.

Practical implications

The paper provides practical suggestions for manufacturing SMEs on how they can react during turbulent times and crises by implementing ambidextrous strategies also thanks to the use of digital technologies.

Originality/value

This paper contributes to outlining the conditions for SMEs' resilience in the international competitive context by highlighting the perspective of ambidexterity based on the analysis of multiple case studies from manufacturing industries.

Dual Goals, Dual Agency: The Perils of Measurement and Control Comment on "Dual Agency in Hospitals: What Strategies Do Managers and Physicians Apply to Reconcile Dilemmas Between Clinical and Economic Considerations?"

This commentary to Waitzberg et al draws on the research stream on organizational goals in management to examine the findings they report, point out the correspondence of their findings and interpretation with existing theory, including development beyond it. Their work discusses these considerations very well. It also suggests paths to further theoretical development and proposes how their work demonstrate the potential for further research on multiple goals in hospitals. Such research will be important both for health policy and management and for management theory and practice generally.

Dual Agency in Hospitals: What Strategies Do Managers and Physicians Apply to Reconcile Dilemmas Between Clinical and Economic Considerations?

BACKGROUND

Hospital professionals are "dual agents" who may face dilemmas between their commitment to patients' clinical needs and hospitals' financial sustainability. This study examines whether and how hospital professionals balance or reconcile clinical and economic considerations in their decision-making in two countries with activity-based payment systems.

METHODS

We conducted 46 semi-structured interviews with hospital managers, chief physicians and practicing physicians in five German and five Israeli hospitals in 2018/2019. We used thematic analysis to identify common topics and patterns of meaning.

RESULTS

Hospital professionals report many situations in which activity-based payment incentivizes proper treatment, and clinical and economic considerations are aligned. This is the case when efficiency can be improved, eg, by curbing unnecessary expenditures or specializing in certain procedures. When considerations are misaligned, hospital professionals have developed a range of strategies that may contribute to balancing competing considerations. These include 'reshaping management,' such as better planning of the entire course of treatment and improvement of the coding; and 'reframing decision-making,' which involves working with averages and developing tool-kits for decision-making.

CONCLUSION

Misalignment of economic and clinical considerations does not necessarily have negative implications, if professionals manage to balance and reconcile them. Context is important in determining if considerations can be reconciled or not. Reconciling strategies are fragile and can be easily disrupted depending on context. Creating tool-kits for better decision-making, planning the treatment course in advance, working with averages, and having interdisciplinary teams to think together about ways to improve efficiency can help mitigate dilemmas of hospital professionals.

Field disasters, routine shifts, and adaptation performance: Evidence from the Chernobyl disaster

Following a field disaster, organizations must be able to adapt to complicated new requirements like improved safety standards by changing their existing routines. Post-disaster, fewer deviations attributed to internal factors are expected and seen as evidence of adaptation. Using a difference-in-differences approach with data on nuclear power plants (NPPs) in 33 countries from 1976 to 2004, this study finds that, contrary to expectations, operational deviations attributed to human factors at NPPs increased globally for a long period after the Chernobyl disaster. This study argues that this counterintuitive performance is a manifestation of adaptive routines. To adapt to the environmental requirements for heightened safety standards, organizations may tend to alter their routines for attributing deviation causes by facilitating and transparently reporting the classification of more deviation causes as internal factors. These arguments extend organizational adaptation theory by suggesting that explicit performance does not necessarily manifest as adaptive routines because of the potential conflict between explicit and implicit performance dimensions in the context of complicated adaptation goals.

Prior Experience of Managers and Maladaptive Responses to Performance Feedback: Evidence from Mutual Funds

In this study, we examine how the prior experiences of decision makers systematically influence their assessment of and responses to negative performance feedback. We posit that, although greater and more specialized experiences enable managers to build relevant knowledge and expertise in specific domains, they also make them overconfident in their abilities and strategies. Such experience-induced overconfidence further leads to distortions in the performance assessment process, hindering a firm’s ability to recognize and respond to poor performance. We empirically test these arguments in the context of U.S. mutual fund managers making investment decisions in response to fund performance below aspirations. As hypothesized, we find that more experienced and more specialized fund managers change their investment decisions less when faced with negative performance feedback than managers who are less experienced and less specialized. In additional analyses, we further show that the lower responsiveness of more experienced (specialized) managers is associated with the fund’s lower future performance, supporting our proposed theoretical mechanism (overconfidence). This study augments existing performance feedback research by showing how decision makers’ prior experience can impede problem-solving behavior in organizations. It also contributes to the literature on human capital and organizational learning by documenting an unintended consequence of accumulated human capital on firm adaptive behavior.

What role does generic strategy play in how managers adapt their aspirations in response to performance feedback?

Purpose

When managers set aspirations for their firms, they typically compare their own firms' performance to past aspirations as well as to the performance of social reference groups. The authors explore how firm generic strategy affects managers' adaptation of firm aspirations in response to feedback from three social reference groups that vary in terms of breadth (population average, strategic group, and one direct rival).

Design/methodology/approach

The authors propose that firm generic strategy (low-cost or differentiation) functions as an organizational information filter through with managers interpret performance feedback. The authors test for whether generic strategy has a moderating effect on the influence of performance feedback from social reference groups.

Findings

Based on a longitudinal sample of US airlines, the study shows that all firms are influenced most strongly by their strategic groups. Low-cost and differentiation generic strategies differ in terms of which social reference group motivates a larger reaction when overperforming: low-cost firms are more influenced by the population average which is contributed to by the entire industry than are differentiating firms, while differentiating firms are more swayed by the narrow focus of their direct rivals than are low-cost firms.

Originality/value

Although firm strategy represents a core decision at the firm level, to the best of the authors’ knowledge, performance feedback research, surprisingly, has not yet integrated generic strategy into its models.

Caught in an Expectations Trap: Risks of Giving Securities Analysts What They Expect

Although recent research shows that there is mounting pressure on firms to achieve earnings expectations of securities analysts, firms are far from being passive conformers; many firms proactively manage such pressure, particularly with earnings management tools. Yet why does the pressure to meet analyst expectations persist despite firms’ efforts to reduce it? To address the question, we develop an intertemporal model of the mutually reinforcing relationships between analyst expectations and firms’ strategic response, combining the behavioral theory of the firm and the concept of expectations trap. We argue that firms’ efforts to meet analyst expectations strengthen their salience as a predominant performance benchmark and, in doing so, ironically put them under greater pressure from analysts in three sequentially related steps—escalating future earnings expectations, imposing more severe penalties for failure to meet heightened expectations, and generating compensatory action for missed expectations. Our analysis, using data on more than 700 of the largest listed U.S. firms between 1986 and 2015, supports our arguments. Our study expands the scope of the behavioral theory of the firm, by demonstrating the increasing importance of performance feedback based on analyst expectations. Our study also contributes to the research on earnings pressure, by illuminating why the pressure persists despite firms’ efforts to reduce or evade it, and finally to the literature on strategic management of external expectations, by elaborating its unintended, long-term consequences.

Driven to Distraction: The Unintended Consequences of Organizational Learning from Failure Caused by Human Error

Research to date offers inconclusive and even conflicting evidence regarding whether organizations learn from failure. The present study sheds new light on this debate by highlighting a previously overlooked factor: whether the failure was caused by human error. In attempts to learn from failure, organizational members tend to focus on simplified representations of experiences and, in doing so, distinguish between failures attributed to human errors versus other causes. Our core thesis is that failures resulting from human error attract significant amounts of attentional resources, thereby depleting the limited stock of organizational attention otherwise directed at managing the risk of failures resulting from other causes. We hypothesize that this disproportionate allocation of attention simultaneously is associated with both positive learning outcomes and negative side effects, specifically, a subsequent decrease in failures resulting from human error and also an increase in failures resulting from other causes. We also hypothesize that failures resulting from causes other than human error attract less organizational attention and, thus, lead to weaker learning outcomes. The proposed hypotheses were tested and supported using data from accident reports filed by natural gas pipeline operators with the U.S. Pipeline Hazardous Materials Safety Administration from 2002 to 2012. Additional analyses, including text analysis of accident reports, a series of simulations, and a supplementary study, point to organizational attention as the mechanism at play. Taken together, these findings suggest that organizational learning from failure caused by human error produces not only benefits, but also unintended consequences.

Effects of Social Information on Risk Taking and Performance: Understanding Others’ Decisions vs. Comparing Oneself with Others in Short-Term Performance

When a problem leaves decision makers uncertain as to how to approach it, observing others’ decisions can improve one’s own decisions by promoting more accurate judgments and a better insight into the problem. However, observing others’ decisions may also activate motives that prevent this potential from being realized, for instance, ego concerns that prompt excessive risk taking. Our experimental study investigates how two features of the social environment influence the effect of observing others’ decisions on individual risk taking and performance. We manipulated (1) the psychological distance to others whose decisions could be observed (and thereby the tendency to seek self-enhancing social comparison) and (2) the opportunity for interaction (and thereby for a cumulative effect of any such tendency on decisions over time and for an effect on social information itself). Because the two features covary in real-world settings, we designed two treatments corresponding to the two natural combinations. Both treatments provided participants with two other participants’ period decisions in a multiperiod problem under uncertainty. No new objective information about the problem could be inferred from these decisions. We predicted that participants who observed the decisions of distant others (who had solved the same problem earlier) would perform better than participants in a control sample without any information about others’ decisions and that participants who observed the decisions of proximal others (with whom interaction could arise) would take more risk and perform worse than those who observed distant others’ decisions. The data corroborate our predictions. We discuss implications for organizational learning.

Iterative Coordination and Innovation: Prioritizing Value over Novelty

An innovating organization faces the challenge of how to prioritize distinct goals of novelty and value, both of which underlie innovation. Popular practitioner frameworks like Agile management suggest that organizations can adopt an iterative approach of frequent meetings to prioritize between these goals, a practice we refer to as iterative coordination. Despite iterative coordination’s widespread use in innovation management, its effects on novelty and value in innovation remain unknown. With the information technology firm Google, we embed a field experiment within a hackathon software development competition to identify the effect of iterative coordination on innovation. We find that iterative coordination causes firms to implicitly prioritize value in innovation: Although iteratively coordinating firms develop more valuable products, these products are simultaneously less novel. Furthermore, by tracking software code, we find that iteratively coordinating firms favor integration at the cost of knowledge-creating specialization. A follow-on laboratory study documents that increasing the frequency and opportunities to reprioritize goals in iterative coordination meetings reinforces value and integration, while reducing novelty and specialization. This article offers three key contributions: highlighting how processes to prioritize among multiple performance goals may implicitly favor certain outcomes; introducing a new empirical methodology of software code version tracking for measuring the innovation process; and leveraging the emergent phenomenon of hackathons to study new methods of organizing.

The Plural of Goal: Learning in a World of Ambiguity

In the Carnegie School tradition of experiential learning, learning processes are driven by the encoding of performance outcomes as a success or failure relative to a goal. We expand this line of inquiry by highlighting how conflicting and thus ambiguous outcomes across multiple goals make interpretation a critical aspect of organizational learning processes. In early work in the Carnegie tradition, interpretation played a role in the demarcation between what constituted success or failure on a given outcome metric. However, in March’s latter writings, learning and decision making produce an arena or even an opportunity for generating interpretations and broader meanings regarding roles, values, and identities. We explore how the two interpretive approaches in March’s work play out across three modes of responses to ambiguity. First, the process of self-enhancement whereby participants interpret conflictual outcomes so that they, the participants, appear in a positive light. Second, an explicit political process regarding the contestation of how to interpret conflicting outcomes. Third, from the perspective of the organizations’ literature on wisdom, participants may embrace ambiguity either to enhance learning or simply to enrich individuals’ interpretation of their experiences. Although these three modes of response do not offer a complete set of responses for learning in a world of ambiguity, they constitute valuable touchstones for the perspective we wish to put forward and, collectively, help enrich our understanding of the role of learning, ambiguity and interpretation within the Carnegie School.

Organizational Adaptation

Organizational adaptation is equivocal. On the one hand, the concept is ubiquitous in management research and acts as the glue binding together the central issues of organizational change, performance, and survival. On the other hand, it lurks around in various guises (e.g., "fit," "alignment," "congruence," and "strategic change") studied from multiple theoretical streams (e.g., behavioral, resource based, and institutional) and at different levels of analysis (e.g., organization and industry levels). In a novel approach to reviewing 443 adaptation articles that leverages both computational and hand-coded analysis, we produce an interactive visual of the themes most studied by adaptation scholars. We inductively draw out a definition of adaptation as intentional decision making undertaken by organizational members, leading to observable actions that aim to reduce the distance between an organization and its economic and institutional environments. We then review the literature across three main areas of inquiry and six theoretical perspectives that surfaced from our analysis and identify 11 difficulties that have hampered adaptation research in the past 50 years. Our review suggests ways to address these difficulties to enable future research to develop and cumulate.

Learning from Digital Failures? The Effectiveness of Firms’ Divestiture and Management Turnover Responses to Data Breaches

We examine whether firms learn from digital technology failures in the form of data breach events, based on the effectiveness of their failure responses. We argue that firms experiencing such technological failures interpret them broadly as organizational problems, and undertake unrelated divestitures and top management turnover to achieve better standardization and to remove dysfunctional routines. We test our hypotheses on unrelated subsidiary divestitures and chief technology officer (CTO) turnovers undertaken by 8,760 publicly traded U.S. firms that were at risk of experiencing data breaches involving the loss of personally identifiable information during the period 2005–2016. We find that data breaches significantly increase the hazard of unrelated divestitures and CTO turnover, and that these failure responses are sensitive to firms’ aspiration-performance feedback. However, whereas unrelated divestitures reduce the reoccurrence of data breaches, CTO turnover has no significant effect. Our findings suggest a corrective role of unrelated divestitures for failure learning, and the symbolic nature of CTO turnover as a failure response. Our study unpacks failure learning that hitherto has been inferred from a firm’s own failure experience and industry-wide failures, and highlights the interplay between the digital and nondigital components of a firm in the understudied context of data breaches.