Category Archives: Organizational Performance
When Retailers Screw Up: How Can they Win Customers Back? (IO Psychology)
Retailers aren’t perfect. When they screw up, how do they try to get you to fall in love with them again?
Science to the rescue! In this study, researchers investigated customers’ spending after filing of a customer service complaint to a grocery retailer. Some customers received a coupon after complaining. Some didn’t. Some customers received a quick response from the retailer. Others received a slower response. Overall, they found that those who received the coupon actually spent less after filing their complaint, and those who received a quick response spent more in the time following.
Upon further digging, they found that for customers who received a slower response, the coupon made a big difference; a slow response AND a coupon reduces future spending greatly. This tells retailers to respond quickly to all customer complaints. However, if you can’t respond fast, giving a coupon may hurt your bottom line even more.
When you think about a coupon versus a quick response solution, it makes me think of being in a relationship. Ladies, when your man screws up, he might immediately apologize. He might buy you flowers. He might do both. (He might do neither; let’s be real.) If he chooses to buy you flowers, but never apologizes, you constantly look at those crappy, unattractive flowers as the cheesy substitute “thing” you got… the thing that now represents his second mistake. The flowers represent what you really wanted but didn’t get: your man immediately owning up to his mistake and sincerely apologizing for it. The flowers become undesirable in your eyes. Unhappy customers see the coupon as a reminder of being treated like crap.
But when your man immediately owns up to his mistake, apologizes, and you talk it through, ladies feel better. They feel listened to; they feel their point of view matters; they feel understood, attended to, and cared for. (This is starting to sound like a Lifetime movie…) It’s the timing and the care that matters, and this treatment impacts how you feel and act going forward.
This is a common “how” versus “what” scenario. The “how” you treat me is much more important that the “what” you give me. Coupons don’t fix the mistake. When not apologized for in a timely fashion, they represent the mistake. And they don’t help.
So apologize. Quickly. (And white tulips certainly don’t hurt…!)
Good Stats Make Us Uncomfortable (IO Psychology)
Topic: Organizational Performance, Statistics, Strategic HR
Publication: Harvard Business Review (OCT 2012)
Article: The True Measures of Success
Authors: M. J. Mauboussin
Reviewed By: Megan Leasher
In striving for profitability, companies often rely on key indicators of organizational performance. Common indicators like sales growth, customer loyalty, and earnings per share often guide strategy decisions and resource allocation. But sometimes key indicators may not be that “key” after all. They may have little or no true connection to profitability.
Organizations might not be aware of this and continue to rely on these same measures because they feel as though they matter. Their intuition overrides everything else and as a result they don’t do the due diligence to determine what actually leads to profit. They become overconfident, grab onto any numbers that are easily available, and rely on things they have always looked at in the past. They choose what they like and what feels comfortable. But they don’t actually analyze. So how can we know if something truly predicts value? We cannot leverage something we don’t know.
This article focuses on identifying indicators that serve as true statistical predictors of value. The author emphasizes that for an indicator to be truly connected to value it must be both predictive and persistent. Indicators that are predictive demonstrate a statistical link to value; a link strong enough that we feel confident saying there is a connection that has meaning and is not due to chance. Indicators that are persistent stand the test of time; they reliably show that that an outcome is controlled by applying skill or knowledge, and is not random.
The author advocates several steps in selecting the best indicators of organizational performance. These steps include defining a clear business objective, developing theories to determine what measures might link to the objective, and statistically testing the relationship between the measures and the objective.
As I read these steps they made complete sense to me, but my data-happy left brain went nuts, thinking about others questions that should be considered. Like: “What else do we already measure?…Could it matter?” and “What else can we measure?…What else should we measure?” and “What other viewpoints are we not taking into account?” and “What curveballs could come our way?”
Sometimes a meaningful statistic can push us out of our comfort zone. Actually, sometimes a meaningful statistic should push us out of our comfort zone. It might not make automatic, inherent sense to us, especially at first. If all statistics made complete, gut-happy sense to us we wouldn’t need them. We could always rely on our intuition because it would always be correct. But statistics are useful because they not only tell us how meaningful things might be related; they can surprise us with the sheer fact of what things might be related.
If a predictor of success isn’t pointing in the direction of success, it’s not a predictor. It’s simply a number. And a useless one at that.
Mauboussin, M. J. (October 2012). The true measures of success. Harvard Business Review, 46-56.
human resource management, organizational industrial psychology, organizational management
source for picture: http://www.freedigitalphotos.net/images/Charts_and_Graphs_g197-Down_3D_In_Prospettiva_p13892.html
Getting by Giving: Why Leaders Succeed by Serving (IO Psychology)
Topic: Leadership, Organizational Performance
Publication: Personnel Psychology
Article: CEO Servant Leadership: Exploring Executive Characteristics and Firm Performance
Authors: Peterson, S. J., Galvin, B. M., Lange, D.
Reviewer: Neil Morelli
Sometimes you have to give more to get more. The same is true when it comes to how CEOs lead their company and how well their company performs. According to Peterson and her colleagues, when the CEO (usually the most powerful and influential player in the organization) demonstrates servant leadership their firm becomes more successful.
Recently, organizational research, in combination with business strategy, has shifted its interest to study how the more relational styles of leadership have an impact at the organizational level. In this study, servant leadership was the style of choice and is defined as leading by placing a heavy weight on personal integrity, caring for the needs of followers, and having a “strong moral compass.” Peterson and colleagues not only wanted to see the organizational outcomes of servant leadership, but also to understand what determines this leadership style.
After sampling 126 CEOs from the technology industry, the researchers found that narcissism negatively predicted servant leadership, and founder status (whether the CEO founded the firm) positively predicted servant leadership. They also found that these two characteristics were mediated by organizational identification—whether a CEO sees his or her identity as being synonymous with the identity of the organization. As for firm performance, servant leadership positively predicted return on assets, meaning that there is a relationship between leading by valuing others more highly than oneself and organizational performance.
Of course, the most obvious practical implication is that the non-narcissistic, founding CEO who highly identifies with his or her organization and displays servant leadership will be more successful, but there are other important points to note. As the authors suggest, having leaders at any level share a “we” mentality over a “me” mentality will help leaders at any level develop more servant leader behaviors. Also, knowing what kind of characteristics to look out for will be helpful to anyone involved in the decision-making process in promoting or selecting new leaders for the future.
human resource management, organizational industrial psychology, organizational management
Why Should Managers Care about Being Fair? (Human Resource Management)
Topic: Fairness, Organizational Justice, Organizational Performance
Publication: Journal of Applied Psychology
Article: Fairness at the collective level: A meta-analytic examination of the
consequences and boundary conditions of organizational justice climate.
Authors: Whitman, D. S., Caleo, S., Carpenter, N. C., Horner, M. T., and Bernerth, J.
B.
Reviewer: Neil Morelli
Organizational justice, or how fairly an organization treats its workers, is a big deal to employees. To an individual employee, organizational justice helps determine his or her attitude about the job and as well as his or her productivity. But this perception doesn’t exist in a vacuum. Because this perception is often shared with co-workers and team members, called justice climate, Whitman and his co-authors conducted a meta-analysis to summarize and clarify how organizational justice climate exists at the team (unit) level and can influence team effectiveness.
Being an ambiguous term in itself, Whitman et al. defined effectiveness as having four main parts: attitudes (e.g., job satisfaction), processes (e.g., citizenship), withdrawal (e.g., turnover), and performance (e.g., profit). They predicted that a more positive justice climate at the team-level means that workers would be able to trust their leaders to a greater extent, which would result in the team achieving more group goals. The authors also predicted that the different parts of organizational justice, distributive (i.e., how fair rewards are to input), procedural (i.e., how fair company policies are), and interactional (i.e., how fair workers are treated interpersonally by their managers), would be related to the components of effectiveness in different ways.
Using 37 studies that totaled 4,600 teams (units) with 11 employees per team on average, the authors discovered that the mean-corrected correlation between justice climate and effectiveness was .40—this means that how fair the team perceives the organization to be overall, the more likely they are to be effective. As for the separate pieces of organizational justice, the authors found that distributive justice has a stronger relationship (than the other two justice climate types) to both performance and attitudes. This means that the rewards have to be judged as fair when compared to the work performed by the team. Procedural justice had the strongest relationship with how often team members are absent or turnover. And last but not least, interactional justice had the strongest relationship with process effectiveness—teams are unlikely to go above and beyond if they do not view their interaction with leaders as fair.
So, noticing that your team’s performance has leveled off or team attitude and morale is spoiling? You have to make sure you’re seen as being fair. Also, keep in mind that you should not just focus at the individual perception of fairness, you should also focus on making sure rewards are appropriate for the team, team-level policies and procedures are fair, and they have treat each team equitably in their day-to-day interactions.
human resource management, organizational industrial psychology, organizational management
source for picture: http://www.freedigitalphotos.net/images/Other_Objects_g271-Balance_p11750.html
Improve service climate to retain customers and increase profitability
Topic: Organizational Performance, Strategic HR
Publication: Human Resource Management (MAY/JUNE 2011)
Article: The service climate-firm performance chain: The role of customer retention
Authors: Towler, A., Lezotte, D. V., & Burke, M. J.
Reviewed by: Alexandra Rechlin
When an organization wants to improve customer retention and therefore its profitability, it will often turn to marketing. But could HR provide another option? In this study, Towler, Lezotte, and Burke (2011) tested a model of the way in which service climate (conceptualized and measured by concern for employees and concern for customers) affects profitability.
The authors hypothesized that showing concern for employees would lead to employees showing concern for customers, which in turn would lead to customer satisfaction. Satisfied customers are more likely to return, so customer satisfaction was predicted to lead to customer retention, which in turn was predicted to lead to store profitability. This model was tested using a huge sample of over 12,000 employees in 1,500 tire retail/vehicle service stores. The authors found full support for the model.
The results of this study indicate that if you want your employees to show concern for customers, you must first show concern for your employees. Their subsequent showing of concern for customers leads to more satisfied customers, who in turn become repeat customers, and that means profitability. Marketing therefore is not the only group that the organization should turn to for advice on customer retention – they should look to HR as well!
Increase generic human capital to increase unit-specific human capital
Topic: Organizational Performance, Talent Management, Strategic HR
Publication: Academy of Management Journal (APR 2011)
Article: Acquiring and developing human capital in service contexts: The interconnectedness of human capital resources
Authors: Ployhart, R. E., Van Iddekinge, C. H., & MacKenzie, W. I.
Reviewed by: Alexandra Rechlin
It is widely acknowledged that human capital is important, but does it matter whether the capital is generic (transferable to other organizations) or unit-specific (valuable to that particular work unit and not to others)? In this article, Ployhart, Van Iddekinge, and MacKenzie (2011) assessed both generic and unit-specific human capital in a large fast-food organization. They created and tested a model for how the two kinds of human capital relate to each other and to performance and effectiveness outcomes.
The level of generic human capital was based on the cognitive ability and personality of hired applicants, while unit-specific human capital was based on employees’ additional training. The authors found that changes in generic and unit-specific human capital were positively related over time; that is, as generic human capital increased, so did unit-specific human capital. In addition, changes in unit-specific human capital were positively related to changes in unit service performance behavior (efficiency, service, quality), and changes in unit service performance behavior were positively related to changes in unit service effectiveness (unit financial success).
In other words, hire employees who are smart and whose personalities fit with their jobs. This will establish strong bench strength and will set the organization up for success as employees are trained to build the skills necessary to excel in specific roles.
What are the performance implications of your organization’s culture?
Topic: Culture, Human Resources, Organizational Performance
Publication: Journal of Applied Psychology (JULY 2011)
Article: Organizational Culture and Organizational Effectiveness: A Meta-Analytic Investigation of the Competing Values Framework’s Theoretical Suppositions
Authors: Hartnell, C.A., Ou, A.Y., & Kinicki, A.
Reviewer: Neil Morelli
Try to define your organization’s culture in one word… The word you came up with may be a predictor of how your organization is performing. Although organizational culture is assumed to be a key component of organizational effectiveness, the theoretical connection between these two important concepts remains fuzzy. Hartnell, Ou, and Kinicki conducted a meta-analysis to explore how a prolific taxonomy of organizational cultures, called the competing values framework (CVF), may help connect our understanding of organizational culture to organizational effectiveness.
Briefly, the CVF arranges organizational cultures into four categories: clan (internal focus on human capital and membership), adhocracy (external focus on adapting through creativity, innovation, and gathering of resources), market (external focus on competitiveness and aggressiveness to meet customer demands), and hierarchy (internal focus on maintain predictability and performance through precise control and clearly defined roles).
After examining 84 studies across three dimensions of organizational effectiveness (employee attitudes, operational effectiveness, and financial effectiveness), the authors found that clan cultures were more positively associated with job satisfaction than were adhocracy cultures, subjective innovation was more strongly related to market cultures than adhocracy cultures, and market cultures had stronger positive relationships with financial effectiveness criteria than were clan or adhocracy cultures.
All that to say, each of the CVF culture types were related to organizational effectiveness criteria in varying ways; this highlights the importance of organizational culture’s role in predicting firm performance. However, the authors concluded that more work is needed regarding the CVF’s nomological validity—as researchers and practitioners look to “tried and true” methods of defining organizational culture, they must also be careful to not ignore both the role of culture in organizational functioning or the theoretical foundations of their taxonomies.
human resource management,organizational industrial psychology, organizational management
Put a Frame on It! Goal Framing to Improve Performance
Topic: Motivation, Organizational Performance, Human Resources
Publication: Journal of Applied Psychology
Article: Managing joint production motivation: The role of goal framing and governance mechanisms.
Authors: S. Lindenberg, N. J. Foss
Reviewer: Rachel Marsh
Organizations often have many goals. The organization has a goal, the department has goals and each individual has their own goals. But how often to those goals align? Lindenberg and Foss argue that to get the most out of your employees you need to align all these goals, and set up governance mechanisms that support the alignment of goals. They suggest you can do this by utilizing goal framing theory.
There are three main elements of goal-framing theory, the normative, hedonic and gain. When framing goals through the normative view, one thinks of the ‘we’ first, and what is better for the group (this person is focused on benefitting the organization). The hedonic goal applies when a person is trying to improve their current situation. The focus is on the ‘now’ (in the workplace this person wants to have fun avoid difficult tasks). The gain goal is when someone tries to improve the resources they have (in the workplace this person is looking to increase their status or income).
By understanding that people have these three types of goals and utilizing that understanding to the company’s advantage, an organization can improve the performance of its employees. Organizations need to ensure that the normative goal is the supraorbital goal, or the goal in the forefront of their employees’ minds.
Do you care about human capital? You should!
Topic: Organizational Performance, Talent Management, Strategic HR
Publication: Journal of Applied Psychology (MAY 2011)
Article: Does human capital matter? A meta-analysis of the relationship between human capital and firm performance
Authors: Crook, T. R., Todd, S. Y., Combs, J. G., Woehr, D. J., & Ketchen, D. J.
Reviewed by: Alexandra Rechlin
It is often assumed that human capital is related to organizational performance, but the research literature provides mixed support for that assumption. In this article, the authors conducted a meta-analysis of 66 studies to clarify the seemingly contradictory research on the relationship between human capital and firm performance.
The authors found that human capital was positively related to firm performance, but that the relationship was moderated by the type of measure used and the type of human capital. The relationship was stronger when performance was measured with operational performance measures (e.g., customer service satisfaction or innovation), as opposed to global performance measures (e.g., returns on assets or returns on sales). The relationship between human capital and performance was also stronger when the human capital was firm-specific as opposed to being general human capital.
Want CEO Success? Then Focus on Task and Performance
Topic: Leadership, Organizational Performance
Publication: The Leadership Quarterly (FEB 2011)
Article: CEO leadership behaviors, organizational performance, and employee’s attitudes
Authors: Hui Wang, Anne S. Tsui, & Katherine R. Xin
Reviewed by: Chelsea Rowe
In a study of top and middle managers (CEOs, VPs, and senior managers) in 125 Chinese firms, Wang, Tsui, and Xin (2011) investigated the degree to which CEO leadership behavior influenced the performance of the firm. They took this a step further, also looking at the degree to which employee perceptions of the CEO impacted firm performance. Firm performance was measured in terms of profitability, asset & sales growth, market share, and competitive status within the industry.
Leadership behavior can be broken down into two categories: task- and relationship-oriented. Task-related behaviors include goal-setting & articulation and monitoring of progress. Relationship-oriented behaviors focus on developing employee-leader relationships that include trust, understanding of and concern for employee problems, and supporting employees.
Wang, Tsui, and Xin (2011) showed that CEO leadership behaviors can impact a firm’s performance both directly and indirectly. Task-focused behaviors have a direct relationship with the firm’s performance. This finding is pretty straight forward—when leaders set goals and communicate those goals clearly to employees while monitoring progress, the goals are more likely to be met, ergo the firm performs well.
