Management, Social Sustainability, Reputation, and Financial Performance Relationships

[We’re pleased to welcome authors, Dr. Robert Sroufe of Duquesne University Pittsburgh and Dr. Venugopal Gopalakrishna-Remani of The University of Texas at Tyler. They recently published an article in Organization & Environment entitled “Management, Social Sustainability, Reputation, and Financial Performance Relationships: An Empirical Examination of U.S. Firms,” which is currently free to read for a limited time. Below, Dr. Sroufe discusses the motivations for this research:]

O&E_72ppiRGB_powerpointThe motivation for this study on Management, Social Sustainability and Reputation can be found in our profound interest in how innovative organizations integrate sustainability. We developed a unique sample of top ranked Fortune 500 multinational companies to better understand how sustainability practices lead to improved performance. In doing so, we propose new constructs and item development while testing relationships to tradition measures of financial performance. This study looks at exemplary MNCs as identified by Newsweek, The Corporate Knights, and Best Corporate Citizens rankings. Firm level performance is assessed during the time of country level cuts to GHG emissions set by the Kyoto Protocol, and during a period of time in which there was a difficult recession in the U.S. The uniqueness of our study and the results operationalize multiple dimensions of sustainability and ask the question has social performance lived up to the promises made on its behalf?

A challenging aspect of this study is the development of new sustainability constructs involving management, social performance and reputation. We were able to utilize multiple measures from both Newsweek and Bloomberg to develop and assess new constructs. We found there are significant benefits to sustainability management practices, yet there is more to explore and learn about the practices and relationships involving social sustainability performance. We hope this study provides a foundation for future research into social sustainability and evolving management practices.

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Argument Complexity and Discussions of Political/Religious Issues

[We’re pleased to welcome authors, Dr. Lyn M. Van Swol of the University of Wisconsin–Madison, Dr. Cassandra L. Carlson-Hill Carolina of Coastal Universit, and Dr. Emily Elizabeth Acosta Lewis of Sonoma State University. They recently published an article in Small Group Research entitled “Integrative Complexity, Participation, and Agreement in Group Discussions,” which is currently free to read for a limited time. Below, Dr. Van Swol discusses some of the findings of this research:]

SGR_72ppiRGB_powerpointPolitical and religious issues can be difficult to discuss in a group, and it can be especially difficult to convince others who disagree with your viewpoint. This paper examined the role of complexity of arguments in a group discussion of a political/religious issue. Groups discussed whether or not the words “under God” should be in the United States Pledge of Allegiance. We had hypothesized that group members whose opinion were more similar to their fellow group members would increase the complexity of their contributions to the group when they were exposed to group members with more fringe opinions, but this was not supported. However, members with more fringe opinions in the group were more successful in influencing the group towards their opinion when they used more complex arguments. Argument complexity did not matter for group members with more mainstream views in terms of how much they influenced the group decision. Because group members with more fringe and discrepant opinions cannot appeal to their opinion being normative and aligned with the majority in the group, it may be important for them to have complex arguments to be persuasive. Complex arguments tend to be more nuanced and less dogmatic, which may make someone with an opinion more different from others in the group seem more flexible and informed. Finally, arguments used by members in the group discussion were more complex when the group had a longer discussion. This highlights the benefits of extending group discussion to let more nuances of the topic of discussion get expressed.

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CEO Characteristics That Influence A Firm’s Investing Strategy

[We’re pleased to welcome author Bruce C. Rudy of The University of Texas at San Antonio. He recently published an article in Business & Society entitled “The Chief Political Officer: CEO Characteristics and Firm Investment in Corporate Political Activity,” co-authored by Andrew F. Johnson. From Rudy:]

In setting outB&S_72ppiRGB_powerpoint.jpg to study what drives organizations to engage in corporate political activity (CPA), my coauthor (Andrew F. Johnson, Ph.D.) and I were struck by how little was known about the role that the firm’s leader played in this regard.  This was especially surprising considering that we have a well-researched theory on the influence of the firm’s leader on its strategic choices (i.e., Upper Echelons Theory).  When we combined the concepts underpinning CPA and Upper Echelons Theories, a number of novel ideas emerged and we knew we had the opportunity to make important contributions to both theories.  The data we collected supported many of these ideas.  We are thrilled that Business & Society has provided us the opportunity to share our research with you.

The full abstract to their article is below:

Research on corporate political activity has considered a number of antecedents to a firm’s engagement in politics. The majority of this research has focused on either industry or firm-level motivations that lead to corporate political activity, leaving the role of the firm’s leader noticeably absent in such scholarship. This article combines ideas from Upper Echelons Theory with research in corporate political activity to bridge this important gap. More specifically, this research utilizes CEO demographic characteristics to determine (a) whether a firm will invest in political activity and (b) how these characteristics influence the particular approach to political activity the firm undertakes. Considering 27 years of data from large U.S. firms, we find that a CEO’s age, tenure, functional, and educational backgrounds influence whether and how the firm invests in political activity.

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Gerstner, König, Enders, and Hambrick (2013). CEO Narcissism, Audience Engagement, and Organizational Adoption of Technological Discontinuities

[We’re pleased to welcome Johnathan Cromwell and Michael Lee, both of Harvard Business School. Jonathan and Michael recently had the opportunity to interview the authors of “CEO Narcissism, Audience Engagement, and Organizational Adoption of Technological Discontinuities” from Administrative Science Quarterly.]

Republished with permission. The original post was published on the ASQ Blog.

Wolf-Christian Gerstner – University of Erlangen-Nuremberg
Andreas König – University of Passau
Albrecht Enders – IMD International
Donald C. Hambrick – The Pennsylvania State University

Johnathan Cromwell – Harvard Business School
Michael Lee – Harvard Business School

Question 1. One of the aspects about this paper that we found so fascinating was that it integrated two sets of literatures in a way ASQ_v60n2_Jun2014_cover.inddthat hadn’t been done before. We can imagine that while this leads to highly novel and interesting research, it can also add additional challenges during the review process. Were there any specific challenges that you had to overcome during the review process in communicating your research to these different audiences?

This is, in fact, a very good question, and something that one should always be aware of when integrating two streams of research. In a way, doing so is in and of itself a discontinuous change because it means applying a new theoretical lens to an already studied phenomenon, with potentially challenging epistemological and theoretical contradictions. However, in our case, we were lucky because, although the upper echelons literature and the literature on discontinuous change have not yet been integrated to a great extent by previous studies, the theoretical assumptions underlying these two fields and the foci of their analyses are highly compatible and complementary. In particular, the discontinuous change literature has always had a top executive view on strategic decision making, which stems from the fact that decisions in turbulent times are typically top management decisions. As such, it was somewhat intuitive to envision that CEO narcissism has a stake in decisions about technology adoption in large companies.

Question 2. We were struck by the amount of work that was put into constructing the main independent variable on CEO narcissism. If students were interested in testing a different cognitive attribute or personality characteristic to explain organizational decisions, how would you recommend trying to measure them? What might be a common mistake that we should try to avoid?

Of course, gathering the data on CEO narcissism involved a lot of meticulous work, in particular because we had to collect data from years back, even before 1980. To get access to these sources, which can’t just be downloaded from an online database, we ended up having to visit places like the Chicago Public Library and order microfiche copies. However, we benefited greatly from the fact that the measure itself had already been developed by Chatterjee and Hambrick (2007).

As for measuring other CEO attributes, we see numerous new opportunities for further research. In particular, new ways of using language, voice, and body language are emerging, which might just allow us to gauge numerous facets of personality, both stable traits and more transient states. For instance, at the Academy of Management last year in Philadelphia, we organized a symposium on the use of content analysis to further advance this area of upper echelons research. The diverse approaches presented there included aspects such as perceptions of time and cognitive structures as reflected in conceptual metaphors. Moving forward, we believe it is pivotal to focus on aspects of executive personality that are influential, but whose influence, at the same time, is not unilateral but rather dependent on context. This is surely one of the features that make narcissism so interesting to study (apart from the fact that almost everyone who has worked in an organization has experienced working with a narcissist, with all its upsides and downsides).

Question 3. We usually think of the discussion section as a place to interpret results, discuss strengths and weaknesses of analysis, or discuss broader implications of the research. We found the discussion section in this paper to be interesting, because it also introduced new quantitative analyses to help support the main findings of the paper. Why were these included in the discussion instead of as a robustness check in the results section?

That is an interesting question, particularly because there seem to be different perspectives on such post-hoc analyses. Some colleagues do not think they should be part of a paper; conversely, others, including ourselves, believe that these elaborations illuminate interesting aspects and add to the liveliness and granularity of the research presented. Note also that, in our case, the post-hoc discussion is not a robustness check but rather an exploration of the reasons why we did not find significant results for our last hypothesis.

Question 4. Given your interesting findings, what do you feel are the most important implications for managerial practice from this work?

It’s indeed interesting to see how executives respond when we present our findings and related findings made by colleagues. What resonates most profoundly with decision makers is the idea that narcissistic leaders have both a dark side and a bright side, and that the bright side might in fact be most salient in times of radical change when tough decisions need to be made. Another aspect they can relate to is our recommendation to be more aware of how external stimuli, including from the media, affect how decision makers and their organizations act. These insights are also – and perhaps most importantly – crucial for board members of companies that “missed the boat” on disruptive innovations (that the board believes will pan out) and need to catch up. In this case, a narcissistic CEO might, ceteris paribus, be an advantage as she or he will drive change on a larger scale than less a narcissistic CEO.

Question 5. Is there anything about this paper that you think is particularly interesting that we didn’t ask about? Please tell us about it.

Thank you for asking! One thing that we think is particularly important is the role of audience engagement in spurring company behavior, especially responses to innovation. While there is increasing debate about how companies’ communication and actions shape the responses of stakeholders such as analysts and journalists, we still know too little about how pressures from these stakeholders affect company behavior. This is especially the case in the context of innovation, which happens in a social environment that surrounds companies and their executives and might influence technological trajectories more than we have previously thought.

Finding the Balance Between Greed and Altruism

yin-yang-1024035-mAre greedy managers or altruistic managers more successful? The answer may not be so black and white. According to Katalin Takacs Haynes, Matthew Josefy, and Michael A. Hitt, authors of “Tipping Point: Managers’ Self-Interest, Greed, and Altruism” from Journal of Leadership and Organizational Studies, harmony between the two characteristics is actually the most beneficial to firm performance.

The abstract:

We explore the potential effects of managers’ greed and altruism on their behaviors and firm outcomes. Greed represents extreme self-interest whereas altruism reflects concern for others. We argue that managerial greed leads to a focus on short-term decisions JLOS_72ppiRGB_powerpointand short-term firm performance. Alternatively, managerial altruism normally produces a focus on longer term decisions and long-term firm performance. Managerial greed is also more likely to produce wrongdoing, whereas managerial altruism produces greater corporate citizenship behaviors. Managerial greed is likely to lead to turnover for non-performance–related reasons whereas managerial altruism is more likely to produce managerial turnover for performance reasons. Overall, we conclude that measured self-interest keeps managers focused on the firm’s goals and measured altruism helps the firm to build and maintain strong human and social capital. The extremes of either greed or altruism likely will harm firm performance. Thus, balance between managerial self-interest and managerial altruism leads to the greatest success.

You can read “Tipping Point: Managers’ Self-Interest, Greed, and Altruism” from Journal of Leadership and Organizational Studies for free by clicking here. Want to know about all the latest research like this from Journal of Leadership and Organizational Studies? Click here to sign up for e-alerts!

Albert Bandura Responds to Commentaries: “On the Functional Properties of Perceived Self-Efficacy Revisited”

JOM 41(3)_Covers.inddIn his paper entitled “On the Functional Properties of Perceived Self-Efficacy Revisited,” Albert Bandura discussed the functional properties of perceived self-efficacy. He concluded with an invitation to readers to submit commentaries on his article. Since the paper made its appearance in the January 2012 issue of Journal of Management, this call was answered by Jeffrey B. Vancouver; Joshua J. Jackson, Patrick L. Hill, and Brent W. Roberts; Gillian B. Yeo and Andrew Neal; and Ronald Bledow. Dr. Bandura recently published a response to these commentaries in the OnlineFirst section of Journal of Management entitled “On Deconstructing Commentaries Regarding Alternative Theories of Self-Regulation.”

The abstract:

The present commentary addresses issues raised in four replies to my editorial on the functional properties of perceived self-efficacy (Bandura, 2012). In my comments on the paper by Jackson, Hill, and Roberts (2012), I discuss the arbitrary nature of “disposition” and question whether an essentially atheoretical computer-structured inventory based on a mixture of superficially assessed habitual behaviors constitutes a theory of personality. In another set of comments, which speak to the paper by Vancouver (2012), I identify two major flaws in Powers’ (1991) perceptual control theory and document experimental compromises in Vancouver’s efforts to demonstrate that goals and self-efficacy operate counteractively. My comments on the Yeo and Neal (2013) paper center on their unsuccessful efforts to explain and verify the proposition that general and specific self-efficacy work at cross-purposes. In response to Bledow’s (2013) entry, I address the conceptual ambiguity of his theory of unconscious self-motivation, misconstruals of the role of self-efficacy in the process of change, and marginalization of the functional role of consciousness in human behavior.

You can read “On Deconstructing Commentaries Regarding Alternative Theories of Self-Regulation” from Journal of Management free for the next 30 days by clicking here. Interested in reading the original and commentaries as well? Click here to view the collection. Want to know about all the latest research and commentaries like this from Journal of Management? Click here to sign up for e-alerts!

Throwback Thursday: What is Organizational Performance?

[Happy #ThrowbackThursday! We’re excited to revisit one of our most read posts on Organizational Research Methods‘s article “Exploring the Dimensions of Organizational Performance: A Construct Validity Study.”]

kenteegardin (cc)

kenteegardin (cc)

Editor’s note: We are pleased to welcome P. Maik Hamann, Frank Schiemann, Lucia Bellora, and Thomas W. Guenther, all of Technische Universitat Dresden, whose paper Exploring the Dimensions of Organizational Performance: A Construct Validity Study was published in Volume 16, Number 1 (January 2013) of Organizational Research Methods. The raison d’être of management research is to prove that management instruments and management methods, such as strategic planning, zero based budgeting, or the balanced scorecard, are able to enhance organizational perfUntitledormance. In addition, major theories in management research, for instance all contingency theories, include organizational performance as an important dependent variable in their conceptual arguments. But what is organizational performance? How can it be defined and measured in a reliable and valid manner? The Organizational Research Methods article Exploring the Dimensions of Organizational Performance: A Construct Validity Study provides answers to these questions.

home_coverEvery time we review existing literature on the effect of management methods on organizational performance, we find it hard to compare results across studies. The contradictions between studies are mostly caused by different concepts and measurement approaches of organizational performance. If, due to completely different concepts and measurement systems, we are not able to combine study results, how can we as researchers even pretend to contribute to management research by the newest study applying a new construct measurement approach on organizational performance? Consequently, the interest into measurement approaches, construct validation and conceptual nature of organizational performance was triggered in our research team. After reviewing previous literature on this subject we recognized that no construct validation study addressing jointly the conceptual level of organizational performance and the construct validity of a comprehensive set of indicators at the operational level had been published before. This was the gap we wanted to close with our study.

Following Combs, Crook, and Shook (2005)1 we distinguish between operational and organizational performance. In this framework operational performance combines all non-financial outcomes of organizations. Furthermore, the conceptual domain of organizational performance is limited to economic outcomes. On this basis, we identify four organizational performance dimensions: profitability, liquidity, growth, and stock market performance. For each of these dimensions, we propose and test a set of construct valid indicators on a large panel data set with 37,262 firm-years for 4,868 listed US-organizations.

Interestingly, the growth dimension is troublesome under conditions of high environmental instability (e.g., in 2002 after the dotcom bubble or at the beginning of the financial crises in 2008). We perceive two possible explanations for this finding. First, growth is examined based on three aspects of size: sales, employees, and assets. These aspects differ in their reactivity with regard to increasing environmental instability (e.g., although sales might decrease immediately, investments already under way will be finished, thus increasing an organization’s assets base). Second, Higgins (1977)2 introduced the concept of a sustainable growth rate that must be in alignment with overall organizational performance, the financial policy, and the dividend payout ratio. If an organization grows at a rate above its sustainable growth rate, the other aspects (e.g., other dimensions of organizational performance) will eventually decrease. Fully developing these two arguments was beyond the scope of our article. However, they pose interesting research questions for future research on the growth dimension of organizational performance.

In summary, we propose a validated set of measurement indicators for the organizational performance construct for future management research. Furthermore, we highlight situations, in which construct validity is hampered.

1 Combs, J. G., Crook, T. R., & Shook, C. L. (2005). The dimensionality of organizational performance and its implications for strategic management research. In D. J. Ketchen (Ed.), Research methodology in strategy and management (Vol. 2, pp. 259-286). Amsterdam: Elsevier.

2 Higgins, R. C. (1977). How Much Growth Can A Firm Afford? Financial Management, 6(3), 7-16.

Read the paper, “Exploring the Dimensions of Organizational Performance: A Construct Validity Study,” online in Organizational Research Methods.