Corporate Culture Directly Affects Financial Performance

The question as to whether corporate culture has an effect on financial performance has been asked before and it will likely be asked again. In a study published in the Cornell Hospitality Quarterly, research demonstrated a link between corporate culture and financial performance. However, not all corporate cultures are created equal. Some corporate cultures had a positive effect, some had no effect, and some even had a negative effect.

First, let’s look at the 4 kinds of corporate culture from this study (there’s a picture above for those that prefer to see it visually):

  • Market – (External, Controlled) – Tend to be results-oriented, with a focus on competition.
  • Adhocracy – (External, Flexible) – Tend to be dynamic and entrepreneurial, with a focus on innovation.
  • Clan – (Internal, Flexible) – Tend to be family-like, with a focus on mentoring.
  • Hierarchy – (Internal, Controlled) – Tend to be structured and formalized, with a focus on efficiency.

It’s important to note that the research was conducted on a group of hotels in South Korea, so the generalizability of the findings is a bit limited. Nonetheless, this research could provide a foundation from which future studies can be conducted. Here are the findings between culture and financial performance:

  • Market - no significant effect on financial performance.
  • Adhocracy - positive effect on financial performance.
  • Clan - positive effect on financial performance.
  • Hierarchy - negative effect on financial performance.

The researcher went one step further and tested how strategic orientation effected financial performance in the context of these corporate cultures. Before we look at the effect strategic orientation had on corporate culture, we need to look at how the researcher delineated strategic orientation:

  • Leading: always trying to innovate
  • Future analytic: focusing on research for future activities
  • Aggressive: undercutting competitors
  • Defensive: maintaining careful control
  • Adventurous: risk taking
  • Conservative: avoiding risk

Some of the strategic orientations have obvious clashes with corporate culture. For instance, a Hierarchy culture would be ill-advised to try and implement a Leading strategic orientation. Likewise, we wouldn’t expect an Adhocracy culture to successfully implement a Conservative strategic orientation. The research found that Clan, Adhocracy, and Hierarchical cultures could improve their financial performance if the adopted a Leading or Defensive strategic orientation.

The one finding that I found interesting had to do with the Aggressive strategic orientation. The researcher found that this strategic orientation didn’t have a significant impact on any of the culture’s financial performance. Meaning, undercutting a competitor in an effort to gain market share was not an optimal strategy for any of the corporate cultures. Of course, as stated earlier, this study was only conducted on Korean hotels, but it would be very interesting to see if this particular finding help up when studying hotels in a different part of the world. Moreover, I’d be interested to see if this finding would also remain true across industries. That is, some folks think that competing on price is the way to go (Hi Walmart!), so if this study’s findings can be replicated in another industry, it might have an effect on the way that some firms compete. In particular, it might dissuade some from competing on price.

ResearchBlogging.orgHan, H. (2012). The Relationship among Corporate Culture, Strategic Orientation, and Financial Performance Cornell Hospitality Quarterly, 53 (3), 207-219 DOI: 10.1177/1938965512443505

What Do You Want to Hear First: Good News or Bad News?

As it turns out, our answer to this question is different depending on whether we’re the one delivering the news or we’re the one receiving the news. If we’re delivering the news, we’re more likely to want to lead with the good news and if we’re receiving the news, we’re more likely to want to hear the bad news before the good news. Research published in last month’s Personality and Social Psychology Bulletin indicates that the order the news is delivered has implications for both the deliverer and the recipient.

The deliverer, wanting to avoid the ‘pain’ of delivering bad news and acting on egocentric biases, prefers to lead with the good news. The receiver, wanting to allay their anxiety about the bad news, much prefer to receive it before the good news. There’s certainly a disconnect here between the giver and the receiver. The giver, wanting to delay the painful experience of delivering bad news, prefers to save it for the end of the conversation. Conversely, the receiver would rather get the bad news out of the way from the outset.

The researchers found that if deliverers were to take the perspective of news-recipients, they’d be more inclined to lead with the bad news. While not specifically labelled as such, in testing this hypothesis, the researchers have found another positive to empathy. If the deliverers were to empathize with the the news-recipients, that is, pretend as if they were the ones receiving the news, they’d much rather hear the bad news first.

As it happens, hearing the bad news first might not be what’s best for the recipient.

If there is behaviour that needs to be changed, hearing the good news after the bad news might leave the recipient on their preferred high note, but also might diminish any motivation they might have had to act on the bad news. In Study 3:

News-recipients who received bad news first were less likely to take an easy opportunity to improve, choosing instead to engage in a boring and personally unproductive task (i.e., stapling papers for the researcher).

While deliverers of bad news might be acting out of their own self-interest when they prefer to deliver the good news first, they might actually be doing what’s in the best interest of the receiver. So, what order should you deliver the news? Well, that seems to depend on whether you want to motivate the receiver to act on the bad news.

One other implication of the good then bad sequence is that sometimes people like to tack on another piece of good news after the bad news to soften the impact. This is often referred to as a sandwich. While this may make the deliverer feel better, it tends to quash the motivational effect of ending with the bad news.

ResearchBlogging.orgLegg, A. M., & Sweeny, K. (2014). Do You Want the Good News or the Bad News First? The Nature and Consequences of News Order Preferences Personality and Social Psychology Bulletin, 40 (3), 279-288 DOI: 10.1177/0146167213509113

An Alternative to Coffee During the Afternoon Lull — Meditation

No doubt you’ve come across articles that explain that we have a tendency to fall into an afternoon lull. There have also been a number of article that offer a solution to beating this afternoon lull. However, I’ve yet to see any of these articles offer what could be the best use of that time, yet — meditation.

The benefits of meditation are endless not the least of which is mitigating the effect of cognitive biases. So, instead of reaching for another cup of coffee, why not try doing a quick 2-, 3-, 5-, or 10-minute meditation when that afternoon lull comes along. In fact, to up the stakes, I’d be interested to see some research on this. My bet is that meditation would be more effective (and sustainable) than coffee in picking you up. Of course, researching this might prove a bit difficult, but I think it’s doable. Let’s break it down.

I’d want to see three groups: meditation, coffee, and control. Of course, we’d need to have a representative sample, controlling for people who already have a proclivity towards meditation and/or coffee. If at all possible, it’d be great to have two meditation groups, actually: one that already regularly meditates and one that doesn’t.

Initially, I hypothesized that meditation would be more effective. We’d need to determine how we were going to measure effectiveness. I suppose one could consider the remaining hours at work, as the pick-me-up during the afternoon lull is likely a way to get one to the end of the day. In that sense, we’d also want to control for the amount of hours that people continued to work after the meditation/coffee break. At a minimum, it’s something we’d need to measure to maintain internal validity.

I also hypothesized that meditation would be a more sustainable solution to the afternoon lull. Again, how are we going to measure this. My thinking would be including some sort of fatigue/health factor in the study. I suspect that those inclined to have a cup of coffee as an afternoon pick-me-up are probably already drinking coffee to start their day and as a result, might just be taxing their system by having that extra hit of caffeine in the afternoon. Conversely, plenty of research has been conducted on the health benefits of meditation. So, not only would some folks be eliminating the overtaxing nature of a second dose of caffeine, they’d also be reaping the benefits of meditation.

A Can’t-Miss Strategy for Making the MLB Playoffs

The baseball season is long — the regular season lasts more than half of the year. And that’s just the regular season. It doesn’t even include the preseason or postseason. As the season spans six months, one would think that it might be hard for some players to keep their focus during the middle of the summer.

In fact, this past Sunday while watching a Blue Jays game, I saw a graphic that depicted the wins/losses of the teams in the division during the last game of the series for the 2013 season. The graphic showed how the other teams were far more successful than the Blue Jays when it came to the last game in a series. As a result, it got me thinking about how to better incentivize players (maybe managers, too?)

My idea: incentivize winning series.

Before I get into the details, I want to preempt the argument that baseball players get paid too much. Grant Brisbee of SB Nation had an all-around great response:

The problem with these comparisons is that baseball isn’t the real world. There is no comparison for baseball. Try to invent one without devolving into ridiculousness. Okay, so there are 30 Walmarts in America. And there are laws that protect Walmart’s monopoly, which means there aren’t any Targets. But those 30 Walmarts can be run only by people with Ph.D.’s who graduate in the top one percent of their class from the top 10 universities. And the Walmarts are in competition only with each other, which means …

… a ridiculous scenario all around, of course. Baseball players shouldn’t be compared to the average American worker. They’re specialized, elite talents in an entertainment industry that’s sitting on a money spigot. And I feel like I should mention this at least once: If the players didn’t get the money, it would just go to the owners. You can argue that owners should get a larger share because they take the investment risk. I’m not sure I’d agree, but that’s at least a consistent argument. Saying that players should make less because it offends your sensibilities isn’t quite as compelling.

Now that we’ve gotten that out of the way, we can focus on how to incentivize players to win series. Well, just before that, let me talk a little bit about why I chose series as a unit of measurement. As there are 162 games in a season, it seemed like incentivizing a player to win every game might superfluous, as players always want to win the game. I chose a series because there are a little more than 60 of them and it seemed like a good intermediate goal (or project milestone, if you want to put it in the language of project management) between winning every game and making it to the playoffs.

Most series are 3 games long, so we can think of winning the series as winning 2 out of the 3 games. If the team wins two out of the three games, then the players all get a bonus. To guard against them mailing it in during the last game, there could be another bonus if they sweep the series and win all 3 games. What happens when the team loses the first 2 games of the series — what do you incentivize then? Well, you’d incentivize not being swept. That is, if the team loses the first 2 games, the players get a bonus if they win the 3rd game and avoid being swept.

For those series that are 4 games long, the same incentivizes for winning/sweeping a series still apply, but we’d add another one — tying a series. That is, if a team is down 2 games to 1 in the series, the players would get a bonus if the won the last game to tie the series 2-2.

Now, my first thought would be to use money as the incentive to win these games, but with the salaries that players have, one may wonder whether there could be enough money offered to actually make the incentives work. The more I thought about it, though, the more I thought that even players with massive salaries could be motivated by money.

Let’s use last year’s MLB salary figures as a basis. Fangraphs had an article that detailed the average MLB salary last season ($3.4 million) and the median ($1.1 million). The median salary is probably a better representation, so let’s use it. The median salary equates to approximately $20,000/week, assuming that players get paid every week of the calendar year. Let’s also assume that there are 60 series in a season. That means, there will be approximately 60 times to offer players this bonus incentive. There are also 25 players that are on the active roster. As a result, we’d have to decide whether we wanted to reward all players or just the players that played in the game.

With 25 players on the active roster, the calculation for offering a bonus of $1000 makes it quite the expense, but not as much as you might think. 25 players getting a bonus of $1000 across 60 games equates to an extra 1.5 million that needs to be budgeted. Given that this is approximately the median salary of an MLB player, one would think that teams could afford this. It’s also important to note that these calculations didn’t include the possibility that teams would win the series and sweep the series. In those cases, players could get a bonus for winning the second game of a three game series and then get another bonus if they win the third game of the three game series. A quick look at the total number of sweeps last year tells us that the average number of sweeps was 7. So, we can add another $175,000, which brings the total expense to $1.675 million. While certainly not a small amount of money, in the context of how much teams spend, it seems like it might be worth it to try and win a few extra games.

Let’s look at the Baltimore Orioles last season as an example. They finished 85-77, 6.5 games out of making the playoffs. Meaning, if they were to win 7 of the games that they lost, they would have made the playoffs. Looking at their streak data from last season, they were swept 5 times. In addition, they were stopped from sweeping a team 8 times. Together, that’s 13 games. If the Orioles could have won half of those (6.5, so let’s round it to 7), they would have made the playoffs.

Put differently, if they would have employed this strategy and it was successful at least 50% of the time just in the series where they almost swept a team and were swept, they would have made the playoffs.

Why Humanistic Psychology is Still Relevant

The development of humanistic psychology began in the late 1950s and was ‘born‘ in the early 1960s. Given the time that humanistic psychology grew, there’s no doubt that it informed the civil rights movement. However, some say that humanistic psychology peaked in the 1970s. An article last year in the Journal of Humanistic Psychology argued that humanistic psychology is, in fact, more important in the 21st century than many had previously thought.

DeRobertis enumerates the ways in which, “numerous contemporary transformations in the field are directly attributable to humanistic currents of thought within psychology.” Among those ways:

  • Qualitative research subgroup within the APA
  • Humanistic neuroscience
  • Hermeneutic approach to cognition
  • Social constructivist movement in the psychology of education
  • Student enthusiasm in the classroom
  • Ecological perspectives in perception
  • Existential-phenomenological thought in developmental psychology
  • Positive psychology
  • Discussion of the feasibility of reconceptualizing psychological suffering
  • Shift to holistic and relational processes in psychotherapy
  • Emotion-focused therapy
  • Peace psychology

The author also argued that humanistic psychology is making waves in other areas of psychology, but that aren’t directly attributable to humanistic psychologists. Among those ways:

  • Changes in emotion and intelligence research
  • Shift away from ‘testing the null’ to ‘building a model’

Towards the end of the article, DeRobertis pointed out that “the second postulate of humanistic psychology, the fact that human beings have their being in a context, has seen the most widespread application across academic areas.” While I’d love to see the four other postulates have widespread application in addition to the above-mentioned postulate, it’s great that the one about context is proliferating in influence. Context is so important — I’ve written about it before, even in the context of psychological research.

Humanistic psychology certainly has applications outside of psychology, but it’s important for psychology writ large to take humanistic psychology seriously or, at a minimum, take its findings seriously. The positive effects that humanistic psychology has had on psychology and continues to have on psychology, are growing. For instance, I’d be interested to see a collaboration between humanistic psychology and international relations. Of course, the obvious place for humanistic psychology in international relations would be in the context of nation states negotiating, but what about in the context of how a nation state views itself and its citizens? That is, do world leaders look at their countries from a behavioral perspective or do world leaders look at their countries from an humanistic perspective? And if world leaders did look at themselves from a humanistic perspective, would that make them less likely to violate the sovereignty of another nation or start a war?

ResearchBlogging.orgDeRobertis, E. M. (2013). Humanistic Psychology: Alive in the 21st Century? Journal of Humanistic Psychology, 53 (4), 419-437 DOI: 10.1177/0022167812473369

How Big Data Can Make Watching Baseball More Fun

I like baseball. I played it all throughout my youth and my years as a teenager. So, not surprisingly, I also like to watch baseball. Watching baseball on TV has come quite a ways. While baseball was first televised in the 1930s, instant replay didn’t come along until almost 1960. Nowadays, you can’t watch a game without seeing just about every “key play” replayed. From the replay of the last double in the gap to the last pitch that was so close to being called a strike. And on that note about strikes, we can now see a makeshift strike zone on the screen next to the batter/catcher.

My post today is a pitch (pardon the pun) about how to improve the viewing experience in the context of that makeshift strike zone, which on some networks, is called pitch tracker.

On the pitch tracker, we can see a few things that have happened during the at bat. We can see where each pitch crossed the plate and at what height. We can also see if the pitch was fouled off and if the pitch was a ball. While all of this great, in my opinion, there is one major flaw to all of this — the “strike zone” isn’t universal. That is, as many players will tell you, each umpire has a different “strike zone.” Some umpires like to call a “wider” strike zone. Meaning, on the screen, it will appear as though the pitch is quite a few inches outside of the strike zone, the umpire calls that pitch a strike.

To the casual fan this may be confusing, but to a fan who watches baseball frequently, this may be frustrating. Especially as the game wears on, you might hear the announcer state that the last pitch was called a strike earlier in the game, but now it’s being called a ball. I’d like to eliminate the need for the announcer to tell me this. I’d also like to eliminate the confusion of the fan who sees a pitch that appears outside the strike zone, but is called a strike. How can we do this? Big Data.

Umpires go through a rigorous process before becoming an MLB umpire. As a result, their strike zone will probably be pretty much set in stone by the time they get to umpire their first MLB game. I propose that instead of using the “standard” or traditional strike zone on the screen during the game that networks show us the strike zone of the umpire. So, if an umpire usually calls strikes that appear 6 inches outside, we can see that because that’s the strike zone on the screen. We could even using a rolling average of the umpire’s career, such that only the last 3 seasons are taken into account when creating the strike zone on the screen.

The reason I suggested Big Data as the solution to this is because of all the sports, baseball is one of the ones with reams of data. Bill James did an excellent job of using data to allow us to better understand the success and failure of players, I think it’s time we use some of that data to make watching baseball just a bit more interesting.

Labor is the Superior of Capital, and Deserves Much the Higher Consideration

Do you recognize those words? Scholars (and/or) American history buffs just might. They were spoken by one Abraham Lincoln on December 3rd, 1861, as part of his first State of the Union address. The quote comes from very near to the end of the speech; the beginning of the third last paragraph. The sentence on its own is worth pondering, but let’s put it in context:

Now there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.

Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital producing mutual benefits. The error is in assuming that the whole labor of community exists within that relation. A few men own capital, and that few avoid labor themselves, and with their capital hire or buy another few to labor for them.

As is clear, Lincoln is referring to what was a major problem at the time — slavery. While those words were initially spoken with regard to slavery, I think that they have a broader application. That is, labor really is the superior of capital and not just in the context of slavery. Without labor, there’d be no capital. Labor is the backbone of any economy — local or global. As a result, it’s frustrating to see how poorly mismanaged the workforce can be.

From a business standpoint, I can understand why managers would want to crimp on labor, both in the number of employees and their However, I see this as extremely short-sighted. Whatever short-term gains are made from this strategy, they’re lost in the longer term when one has to replace the employee because they’ve either quit or because they’re overworked (and needed time off because of stress and/or fatigue).

I wonder if treating labor as if it’s another “expense” or “liability” is endemic to the culture of work in America. If we revisit the chart about vacation from this past summer, we see that just about every country on that list is in Europe and from what we know about the culture of many European countries, there’s an air of slowness that you just don’t find in America. Maybe it’s that European businesses have already learned this lesson of treating the workforce like an expense and realizing that it’s just easier to pay up front. How different would business look like in the US if the workweek went from 40 to 30 and the number of mandatory paid vacation days went from 0 to 20? Even if the US workweek went from 40 to 37.5 as is the case in Canada, how different would things be, then?

This focus on the short-term seems to be in more places than one. It’s even present in the way public companies are structured — they have to report their earnings every quarter. That is, every 90 days — 90! – a company gives a report to their shareholders (and the public) about their earnings. Predominantly, people are looking to see whether a company “beat” estimates. If (when?) a company doesn’t meet estimates, the stock price usually takes a tumble. But what if this incessant push to meet estimates and focus on these 90-day windows doesn’t allow for an appropriate longer term strategy? What if this 90-day crunch is preventing a company from pursuing a strategy that would make it far more sustainable in the long run and if they attempted to pursue that strategy, their stock price would plummet?

I don’t have all the answers to these questions, but I believe the beginning of the answer starts with labor. Companies that honor and respect their workforce tend to perform better.