Research

September/October 2014

What Sparks Team Creativity?

Two students offer insights into how companies can boost the creativity and overall performance of their teams:

One study challenges the conventional wisdom that teams often do better with one person at the helm. In fact, teams may be more effective if leadership shifts from person to person over the course of a project, following a heterarchical rather than hierarchical pattern. That's the finding of Federico Aime, associate professor of management at Oklahoma State University's Spears School of Business in Stillwater; Stephen Humphrey, professor of management at Pennsylvania State University's Smeal College of Business in State College; D. Scott Derue, professor of management at the University of Michigan's Ross School of Business in Ann Arbor; and Jeffrey B. Paul, assistant professor of management at the University of Tulsa's Collins College of Business in Oklahoma.

In an experiment, 131 business students were divided into 45 teams, each with two to three study participants and two research assistants pretending to be participants. Teams were asked to prepare marketing plans, design websites, and prepare presentations related to the promotion of a new cell phone to college students. A panel of judges would give $500 to the team with the most creative approach.

Before starting the project, participants filled out questionnaires that supposedly rated their leadership skills on specific tasks, with the results posted to the entire group. The results, however, were arbitrary. The researchers chose, at random, two participants to rate highest in two tasks, while a research assistant was rated highest in a third. Once the project began, research assistants were instructed not to contribute ideas to their teams, but to monitor how power shifted from one team member to another when it came to assigning tasks or setting deadlines. Later, team members were asked to rate how legitimate they deemed each power shift to be on a scale of 1 to 7.

The panel found that the most creative work came from those teams that shifted power most often and were most likely to view those shifts as legitimate. This occurred even though participants had false beliefs about the extent of their teammates' expertise. The researchers speculate that participants' willingness to power shift might have been driven by "chemistry" among the team members.

The researchers acknowledge that achieving that kind of chemistry is more art than science. Still, they suggest that to encourage power shifting and boost team creativity, managers could strive to include several individuals with leadership potential when putting teams together. They also could choose people with diverse skill sets, ensure all team members are aware of those skill sets, and not be afraid to change out team members when new skills better suit the task at hand.

"The riddle of heterarchy: power transitions in cross-functional teams" appeared in the April/May 2014 issue of the Academy of Management Journal.

Another recent study looks at how standing up during meetings affects creativity. New research from two organizational behavior professors at the Olin Business School at Washington University in St. Louis, Missouri, finds that standing during meetings doesn't just boost creativity. It also can make people less territorial over their own ideas.

In an experiment, Andrew Knight and Markus Baer asked participants to work in teams for 30 minutes to develop a university recruitment video. Some teams worked in a room equipped with chairs around a table; others, in a room with no chairs at all. Research assistants rated the teamwork dynamic and the quality of the videos. Participants rated how protective their team members were of their own ideas. Participants also wore sensors around their wrists to measure their sweat responses, which indicated their levels of excitement during the process.

The researchers found that teams that stood exhibited greater physiological arousal, were less territorial, and were more likely to share ideas than those who were seated. These teams also produced higher quality videos than those who worked while seated.

While organizations can completely redesign their spaces to encourage more activity during meetings, Knight says that even small tweaks can make a big difference in how well people work. He suggests changes such as adding whiteboards to or removing chairs from a conference space; installing adjustable height desks that allow standing while working; and holding meetings while walking.

"Get up, stand up: the effects of a non-sedentary workspace on information elaboration and group performance" was published in the June issue of Social Psychological and Personality Science.

Alternatives to Affirmative Action

In a recent high-profile court ruling involving affirmative action in the United States, a judge found that the policy at the University of Texas to consider race in its admissions process was, in fact, constitutional. However, several researchers have explored what would happen if U.S. colleges and universities used socioeconomic factors instead of race in their admissions processes.

If that were to happen, African American and Hispanic enrollments at the 193 most selective U.S. colleges in the U.S. would more than double, according to The Future of Affirmative Action: New Paths to Higher Education Diversity after Fisher v. University of Texas, a book from the Century and Lumina foundations. The finding is based on research by Anthony P. Carnevale, Stephen J. Rose, and Jeff Strohl, all from the Center on Education and the Workforce at Georgetown University in Washington, D.C.

The team compared the effects of three raceneutral admissions plans to those of race-based and merit-based admissions models. They found that if schools simply admitted the top 10 percent of students from each high school class, they would increase African American enrollments from 4 percent to 6 percent and Hispanic enrollments from 7 percent to 11 percent. The mean SAT score would increase from the current 1230 to 1254.

If schools went one step further to also take into account factors such as family finances and education, African American and Hispanic enrollments would double to 9 percent and 14 percent, respectively. Mean SAT scores would lower slightly to 1160.

To access the full report, visit apps.tcf.org/ future-of-affirmative-action.

How MNCs Retain Top Talent

In March, the Institute for Emerging Market Studies at the Moscow School of Management Skolkovo in Russia and Ernst & Young released a report based on their survey of 1,109 professionals at multinational companies in the BRIC nations of Brazil, Russia, India, and China. The report outlines the trends driving the satisfaction, engagement, and retention of top talent in each market.

To keep top talent, companies in Brazil reported that they need to promote a high-energy, socially oriented culture within their organizations. Those in Russia cultivate positive work environments and create high potential for career growth. In India, companies emphasize fast promotions and salary increases. And in China, companies must demonstrate their rapid growth and desire to secure top talent.

The report also highlights strategies for attracting and retaining employees. These strategies include accommodating different career goals across countries and professions; differentiating brand, internally and externally, by country and profession; developing leader and team-based behaviors that engage employees; creating work environments that match national preferences; and tailoring compensation and benefits to individual cultural differences.

"Differentiating for Success: Securing Top Talent in the BRICs" is available at www.skolkovo.ru/public/ media/documents/research/SIEMS_ research_2014-03_eng.pdf.

Quant Thinking May Weaken Ethics

Business schools that emphasize quantitative approaches to leadership and decision making in their curricula could be setting up their graduates to be more selfish and less ethical in the workplace. That's according to a study by J. Keith Murnighan, professor of management and organizations at Northwestern University's Kellogg School of Management; Long Wang, assistant professor of organizational behavior at the City University of Hong Kong; and Chen-Bo Zhong, associate professor of organizational behavior and human resource management at the University of Toronto's Rotman School of Management in Canada.

The researchers conducted several experiments using two classic exercises from game theory. In the "dictator game," participants can give away or keep all of a set amount of money. In the "ultimatum game," participants must offer some or all of the money to a stranger, keeping the remainder only if the stranger accepts their offer; in addition, only they know the amount and can lie about it if they choose.

In one experiment, one group of participants read a quantitative tutorial on the business concept of net present value before playing the game; another read a historical overview of the industrial revolution. Those in the first group offered less money and were more likely to lie than those in the second.

The researchers acknowledge that quantitative analysis has its place, but that an overemphasis on that skill could have negative consequences. "If you're a CEO of a company where everyone approaches every decision with only this kind of analysis, our research suggests that the likelihood of someone acting unethically increases," says Murnighan in a July article in Kellogg Insight. The act of quantifying blocks aspects of a person's ethical awareness, such as guilt, honesty, and fair play, he explains.

In a second experiment, the researchers "reactivated" that awareness. This time, participants who read the quantitative tutorial also reviewed a set of family photographs before playing the dictator game. Although they still exhibited dishonest and selfish behavior, they did so to a lesser extent than those in the previous experiment who had not viewed the photographs.

Given these findings, the trio would like to see business curricula put greater emphasis on maximizing value for shareholders rather than on maximizing profits, so that students learn to take a long-term view and maintain their awareness of the social consequences of their actions.

"Maximizing value is still selfinterested, but it takes into account the fact that other people and their organizations are also relevant," says Murnighan in Kellogg Insight. "A value-maximizing approach expands the pie so that there's more to go around for yourself and for others."

"The Social and Ethical Consequences of a Calculative Mindset" appears in the September issue of Organizational Behavior and Human Decision Processes.

Higher Pay, Lower Returns

Companies that pay their CEOs sky-high salaries, beware: That decision could lower financial performance. In fact, according to a working paper, stock returns for companies with the highest paid CEOs can remain lackluster for up to three years, and CEOs whose compensation averages US$20 million or more correlate to annual losses averaging $1.4 billion.

The research was conducted by Mike Cooper, professor of finance at the Eccles School of Business at the University of Utah in Salt Lake City; Huseyin Gulen, associate professor of finance at the Krannert School of Management at Purdue University in Lafayette, Indiana; and Raghavendra Rau, professor of finance at the University of Cambridge Judge Business School in the United Kingdom.

The more executives are paid, the more overconfident they tend to become, say Cooper and Rau. As a result, these CEOs invest in riskier projects, approve more aggressive mergers and acquisitions, and spend more wastefully. The study also finds that, over long periods of time, returns for companies with highly paid CEOs are worse by approximately 12 percent.

"While this study doesn't prove that increased pay is necessarily bad, it does show there is a link between increased pay and decreased financial performance," says Cooper. "Businesses should reexamine how they approach executive compensation and incentives to maximize the financial performance of their business."

"Performance for pay? The relation between CEO incentive compensation and future stock price performance" is available at ssrn.com/ abstract=1572085.

Connecting Scholars and Business

Two years ago, Harvard Business School added a feature to HBS Working Knowledge, the school's website that aims to disseminate its faculty's research to practitioners. Called the Research Exchange, the page allows HBS faculty to invite the participation of companies in their experimental field studies. So far, the school has promoted field studies for ten professors and doctoral students.

The idea originated from Michael Norton, associate professor of business administration, and Carmen Nobel, editor of HBS Working Knowledge. "Carmen and I wanted to make this process more active, where managers not only learned about faculty research but served as partners in the research process," says Norton.

The exchange has developed slowly—currently, one field experiment is underway with a company that learned about the research through the exchange. But Norton's goal is for the site to become an "iterative process" where initial collaborations lead to more research collaborations in the future.

"I think it is only a matter of time. An increasing number of researchers are interested in direct collaboration with companies," says Norton. "Matchmaking services like the Research Exchange have the potential to meet this interest."

The topics currently listed on the Research Exchange can be found at hbswk.hbs.edu/classified/.

More Options, More Money

In traditional markets, offering consumers too many options can lead them to purchase nothing at all. In crowdfunding, however, the more options and price points consumers have to choose from, the more they tend to contribute, according to a study by three researchers at the University of Toronto's Rotman School of Management in Canada. They include Ming Hu, assistant professor of operations management; Xi Li, a doctoral student; and Mengze Shi, associate professor of marketing.

Creators of typical crowdfunding campaigns inform people of their projects, post fundraising targets, and work to reach those targets by set deadlines. If their targets are not reached, any contributions made by funders—whom the researchers call "pre-buyers"—are refunded.

When campaigns set a range of higher-priced incentives (such as a VIP pass to a concert) and lower-priced incentives (a regular ticket), early prebuyers may opt for the higher-priced option. The reason? They want the project to succeed, and they fear that others might not pay as much. By offering highend pre-buyers a reason to commit early, campaigns also attract pre-buyers who are waiting for others to participate.

"Product and Pricing Decisions in Crowdfunding" is available online at papers.ssrn.com/sol3/papers. cfm?abstract_id=2405552.