Structural Redundancy & Robust...

Structural Redundancy & Robust Organizations NED SMITH University of Michigan

YUAN HOU University of Chicago

Duke Strategy Conference 10 . 16 . 12

1 Redundant Heterogeneity & Robust Organizations

Problems we want to solve. a.  The benefits of interpersonal (functional) heterogeneity

(e.g., recombinant knowledge, creativity, flexibility, etc.) are many but difficult to realize.

b.  Heterogeneous people (hell…even dogs and people) tend to homogenize—talking like, thinking like, acting like—one another over time, with repeated exposure.

c.  Heterogeneous groups are fragile. d.  Heterogeneous groups tend to fragment into

homogeneous subgroups. e.  How can we structure a team to sustainably

experience the benefits of interpersonal heterogeneity?

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a.1 Theory 1.a Benefits of heterogeneity

A B C

Interpersonal heterogeneity engenders creative problem solving (McLeod, Lobel, Cox 1992; Hoffman and Maier 1961; Bantel and Jackson 1989; Mannix and Neale 2005)

…by increasing breadth of perspective and improving the quality of ideas (Hoffman 1979; Milliken and Martins 1996; Burt 2004)

…through extended search (Hastie 1986; Bantel and Jackson 1989; Eisenhardt and Schoohoven 1990; Wiersema and Bantel 1992)

…to positively affect performance (Hambrick, Cho, and Chen 1996; Burt 2004)

…especially when the environment is uncertain (Boeker 1997; Canella et al. 2008)

a.1 Theory 1.b Identifying points of failure

A B C A A A

Failure point #1 Homogenization

With time and repeated exposure, heterogeneous people start to think, talk, and act alike (Carpenter 2002)

…in part as a function of the “group paradox” (Berg & Smith 1995; Bourdieu 2002)

…in part as a function of etiquette biases and “discussion cascades” (Burt 2007; Sunstein & Hastie 2008)

…all resulting in group-think (Janis 1972; Preffer 1983; Bantel & Jackson 1989)

…and leading the performance of heterogeneous groups to converge to the performance of homogenous groups over time (Watson, Kumar, and Michaelson 1993)

A B C A A A A C



Failure point #2 Fragility

Heterogeneous groups are inherently fragile (Bothner, Smith, & White 2010)

…both structurally as knowledge is idiosyncratic and distributed, raising the group’s collective dependence on each individual member …and empirically, as interpersonal heterogeneity elevates group turnover (Jackson et al. 1991; Millikin & Martin 1996; O’Reilly, Caldwell, & Barnett 1989; See also Smith-Lovin 2007, p. 116)

A B C A A A A C

A/A’ B/B’ C/C’




Homogenization & Fragility may be overcome by redundancy …structurally, as the group becomes less fragile to shocks such as deletion …and behaviorally, as individuals are more inclined and able—feel “psychologically safer”—to express their opinions, and thus less subjective to homogenization, when they are part of a like-minded subgroup (Asch 1952; Gibson and Vermeulen 2003)

A B C A A A A C






Failure point #3 Fragmentation

Homophily leads similar people to associate with one another (Blau 1977; McPherson, Smith-Lovin, & Cook 2001)

…leading homogeneous subgroups within a larger collective to fragment along “fault lines” (Blau 1977; Lau & Murnigham 1998)

…thereby undermining the benefits of heterogeneity and impeding group-level cohesion (Blau 1977; Lau & Murnighan 1998; Akerlof & Kranton 2010; O’Leary & Mortensen 2010)

…explaining, perhaps, the results of a review illustrating that 40 years worth of papers on interpersonal heterogeneity (80 papers) indicate that interpersonal heterogeneity has, on average, a negative effect on group performance (Williams & O’Reilly 1998)

A B C A A A A C A B C A’ B’ C’



a.1 Theory 1.c Redundant heterogeneity




Teams, groups, and organizations are often divided into two or more distinct levels or have core-periphery structures (Harrison & Klein 2007)

Diversity- (knowledge) and Disparity- (hierarchy) based faultlines operating simultaneously (Carton and Cummings 2012)

Proposition: Cross-level homogenous subgroups continue to solve the problems of homogeneity and fragility and are also less likely to result in fragmentation, in either direction (knowledge or hierarchy). e.g., Academic departments, medical teams, professional service firms, sports teams, etc.




a.2 Hypotheses & Measurement 2.a Hypotheses




H0: Heterogeneity, in theory, has a positive effect on group performance, but empirically often has a negative effect. H1: Redundancy has a positive effect on group performance.








H0: Heterogeneity, in theory, has a positive effect on group performance, but empirically often has a negative effect.

H2: Redundancy slows the decay rate of a positive effect of heterogeneity on performance.

H3: Groups with redundancy are less (negatively) affected by disruptions, such as turnover.

H4: Group cohesion (lack of fragmentation) mediates some of the positive effect of redundancy on performance.

H1: Redundancy has a positive effect on group performance.

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Concentration, primary = 0.20Concentration, total = 0.08Redundancy = 0.56

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An example, Strategy Department in a Business School Primary Level: Senior faculty Secondary Level: Junior faculty A: Micro economics training/focus B: Macro economics, IB training/focus C: Sociology training/focus D: Strategy training/focus E: Entrepreneurship training/focus F: Social psych training/focus G: ? H2 (Homogenization): Heterogeneity in the primary level will be better preserved. Anecdote, “I go to my junior colleagues in my field to keep up with the literature and latest methods.”

H3 (Fragility): Profile of heterogeneity will be more robust. Anecdote, “We lost two econ-oriented senior faculty over the last three years and our seminars are now really missing a sense of formal rigor.”

H4 (Fragmentation): Cross-level redundancy lowers the probability for the group to fragment along either knowledge-based or hierarchical fault lines. Anecdote, “C’s not the only one making my tenure decision. I guess I need to keep all those economists happy as well.”


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a.2 Hypotheses & Measurement 2.b Measuring redundant heterogeneity

vector of heterogeneity = ABCDEFG[ ]

Ri,t =p•sNi,t

, where p•s = pi∑ si

p = 1111100[ ]s = 2113211[ ]

Ri,t =1*2+1*1+1*1+1*3+1*2+ 0*1+ 0*1

16

Ri,t = 0.563

€

Ti,t =S j

Ni,t

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j∑

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a.3 Empirical Analysis 3.a The NBA

Scope: 30 teams. 1986-2008 seasons (dropped 1998 due to failed contract negotiations and shortened season). Heterogeneity: Exposure to style of play (i.e., knowledge and experience), as proxy’d for by college conferences.* Levels: “Primary” and “Secondary” players, according to the number of minutes played (threshold of 22 min/game, or 1800 minutes, or 2/3 of a standard deviation over average number of minutes played…lots of robustness tests). Average # in primary group = 4.7, min = 2, max = 8.

€

Ti,t =S j

Ni,t

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Pi,t =S j

ni,t

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Ri,t =p • sNi,t

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0.08 0.20 0.56

Three (four) measures of team composition

a.3 Empirical Analysis 3.a The NBA

1988 Charlotte Hornets (20 wins) Redundancy = 0.063; Homogeneity, T = 0.10; Homogeneity, P = 0.24

Tripucka (Other)

Other

Rambis (WCC)

Reid (WCC)

Chapman (SEC)

Cureton (Horizon)

ACC (x2) WAC (x2) PAC10 BIG12 MIAC USA BIG10 ATL10

Wade (USA)

USA

Payton (PAC10)

PAC10

Haslem (SEC)

SEC

Walker (SEC)

SEC

Williams (SEC)

SEC

O’Neal (SEC)

SEC

Posey (ATL10)

ACC BIG12

OTHER MIAC WAC

2005 Miami Heat (52 wins) Redundancy = 1.00; Homogeneity, T = 0.30; Homogeneity, P = 0.39

a.3 Empirical Analysis 3.b Main effects & Robustness checks

Outcome: Performance as wins (out of 82 games in a season). Mean = 41, sd = 12.9, max = 72 (‘da Bulls), min = 11 (Mavericks and Nuggets)

= Heterogeneity of the team +

Heterogeneity of the levels +

Redundancy +

Controls [age, average draft selection, pointst-1, offensive reboundst-1, defensive reboundst-1, turnoverst-1,

shooting percentaget-1, free throw percentaget-1, coaching experience, team

experience, # in primary group, “retooling”] +

33 count variables for conferences, FE, AR(1)

a.3 Empirical Analysis 3.b Main effects & Robustness checks Heterogeneity is bad

Heterogeneity in the primary

group is good (1 sd increase = 8% more

wins for average team). So what does the positive effect of

homogeneity at the team level mean?

H1

2.2*

a.3 Empirical Analysis 3.b Main effects & Robustness checks

a.3 Empirical Analysis 3.c Mechanism tests (H2, H3, H4)

Outcome: Performance as wins (out of 82 games in a season). Mean = 41, sd = 12.9, max = 72 (‘da Bulls), min = 11 (Mavericks and Nuggets)

= All prior coefficients

+

Heterogeneity of the primary group * Team Experience * Redundancy (H2)

[Homogenization: Positive effect of heterogeneity on performance

will decay over time, except among teams with redundancy]

+

Turnover in the primary group * Redundancy (H3)

[Fragility: Turnover in the composition of heterogeneity will have a negative effect on performance, except among teams with

redundancy]

+

Mediation by Team Cohesion (H4), where cohesion is measured using Ethiraj & Garg’s measure of team

“complementarity”

[Fragmentation: Redundancy’s positive effect on performance is due in part to its positive effect on group cohesion]

a.3 Empirical Analysis 3.c Mechanism tests (H2, H3, H4)

H2, low R H2, high R H3 H4

Decay. After 4 seasons, positive effect of heterogeneity is gone.

No evidence of decay among teams with higher than average redundancy.

5.5 additional losses due to turnover in P. Offset by R.

Interpret with caution

1 Redundant Heterogeneity & Robust Organizations

Scope conditions. a.  Primacy of single goal across levels. b.  Costs of redundancy? c.  Hierarchy only? Or other “structural” divisions? d.  Size effects of subgroups?

Implications. a.  Effect of team-level homogeneity was spurious. It’s only

a particular kind of team-level homogeneity that is achieved via redundancy.

b.  Unlike heterogeneity or homogeneity, redundancy is realized between different levels of a group or organization.

c.  Groups and teams researchers should consider more fully the implications of structure when analyzing the traditional constructs of heterogeneity (diversity).

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a.4 Conclusion

a.5 Supplemental materials 5.a Descriptive statistics and correlations

a.5 Supplemental materials 5.b Conference – Playing Style

“There are definitely distinct playing styles by conference.” (e.g., pressure defense in the ACC, fast breaks and physicality in the Pac-10 and Big East) “Conference-specific styles result from intense competition and inter-team mimicry that occurs primarily within conferences. Standout college coaches such as Bob Knight, Gean Keady, Dean Smith, or Mike Krzyzweski are imitated by rival coaches and therefore drive the playing styles of their respective conferences.” “To compete against a set of teams with a certain style of play, learning that style is necessary.”

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