Transcript Slide 1
HRM, Knowledge Creation & Innovation
Seminar Series on Organizational Innovation, People Management and Sustained Performance
October 29, 2012 Aston University
• • •
The best way to have a good idea is to have a lot of ideas -
--Dr. Linus Pauling, Nobel Laureate
Employees working on the business, not in the business -- contributing ideas to improve products, service, process, etc.
Employees with an “owner” mentality vs. a “renter” mentality
Knowledge Economy
Knowledge creation/innovation critical for the success of small, medium, large, private and public sector firms
E.G., Competitive pressure at universities to commercialize and monetize faculty ideas (“academic entrepreneurship”) ...
Knowledge creation and innovation have become dominant issues in many academic disciplines
What about HRM Research?
HRM research --- especially SHRM research – needs to contribute more to the “knowledge creation/innovation” literature (S)HRM research hasn’t invested enough helping to understand relationships between contstructs at the center of today’s seminar People Management innovation Sustained performance
What about HRM Research?
Despite the fact that we have people doing good/interesting work (see Juani Swart’s work on “strategic knowledge management”; see James Hayton’s work on HRM and corporate entrepreneurship) …….
Reviews of the “knowledge” literature do not indicate much of a “presence” by HRM academics in this literature (e.g., Foss et al., 2010, JMS) Special issues on “knowledge” do not indicate much of a “presence” by HRM academics (e.g., 2007 OS special issue on “Innovation at and across multiple levels of analysis”)
Knowledge Creation, Innovation
Knowledge creation (KC) = cognitive activities leading to new solutions, novel ideas (i.e., innovations) Innovation = emergence of a new idea (i.e., knowledge creation) Most new ideas or knowledge emerge from re combinations of existing knowledge
Knowledge Creation, Innovation
In organizations, knowledge creation results in:
• • • • • • •
technological innovations marketing innovations Organizational/administrative innovations strategic innovations product innovations service delivery innovations process innovations, etc.
Shouldn’t HR research be more prominent?
• • • • • Knowledge creation is a (voluntary) human endeavor People, both as individuals and collectives, are at the heart of knowledge creation Knowledge creation is a particular form of performance that depends on the capabilities and motivation of
individuals and groups of employees
KC is a bottom-up, emergent process centering on the
capabilities and motivation of individuals and groups
HR policies and practices (“people management”) can affect the capabilities and motivation of individuals
and groups
Shouldn’t HR research be more prominent?
In knowledge scholarship, economists and strategy scholars have traditionally focused on firm-level constructs, BUT they are beginning to “discovering” that: 1. ……. “understanding the fundamental cogs and wheels of what happens in organizations requires beginning from their fundamental constituents, namely individuals” (Foss et al, 2010) and …… 2. Not a lot is known about the organizational practices (i.e., people management practices) that influence the sharing, integration, creation and use of knowledge by individuals and teams “Micro-foundations”
Shouldn’t HR research be more prominent?
The micro-foundations literature is invoking (S)HRM literature to do what (S)HRM researchers have not done: 1. Try to trace group and organizational-level knowledge creation back to individual-level ability, motivation & behavior and …..
2. Try to understand the role of “new organizational practices” (citing Guthrie, 2001; Datta, Guthrie & Wright, 2005; Huselid, 1995. etc) in this process (Foss, Laursen & Pederson, OS, 2011)--- the link between individual, team and organizational level outcomes • Sociologists: invoke (S)HRM research (e.g., Lawler, 1998; MacDuffie, 1995) to understand firm success in the “knowledge economy” (see Powell & Snellman, Annual Review of Sociology, 2004).
Shouldn’t HR research be more prominent?
• • “People management” scholars have a rich, deep understanding of the “new organizational practices” and their effects on individuals and teams Many “people management” scholars (not me!) have great potential to apply their knowledge and skills to delineate the multi level, emergent nature of knowledge creation in creating competitive advantage
High performance work systems, productivity & innovation: A comparison of MNCs and indigenous firms*
James P. Guthrie (KU) Patrick Flood (DCU) Wenchuan (Victor) Liu (CUEB – Beijing) Sarah Mac Curtain (U of Limerick) *I will generously call this a “working paper”, although not much work has been done on it in quite some time
HPWS, Productivity and Innovation
We make the general argument that HPWS will enable and motivate employees to work both hard and smart leading to increased productivity and innovation (note: see Patel et al. forthcoming AMJ paper on HPWS and “ambidexterity”) • ↑ Human capital • ↑ Social capital • Decentralized decision-making • Participatory mechanisms • “New combinations” through team-structures • Better understanding through information dissemination • Elicitation of tacit knowledge via group reward systems
Participating Companies
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“Matched” surveys from 165 companies
GM Survey Respondent HR Survey Respondent 95 Irish-owned; 70 Foreign-owned (U.S./Canada, Germany, UK, Netherlands, France, East Asia) Median firm age – 27 years Median number employees – 246 Median sales revenue – EUR 78 million Wide industry distribution
The HR Survey
Measured percentage of firms’ employees covered by each of 18 HPWS practices (from Datta et al., 2005) E.G., Hired based on sophisticated selection Routine use of performance appraisals Participatory mechanisms, etc., etc.
Group A:
production, maintenance, service, clerical employees
Group B:
executives, managers, supervisors, professional/technical Weighted average summed into a single HPWS index
Company age Sales Revenue
The GM Survey
Number of employees
Innovation
: Proportion of sales revenue from products/services introduced in the last 12 months
Workforce Innovation
: New sales rev/# emps R&D expenditures Primary Industry Competitive Strategy
What proportion of your employees...
Irish owned Are administered one or more employment tests (e.g., skills tests, aptitude tests, mental/cognitive ability tests) prior to hiring?
Hold non-entry level jobs as a result of internal promotions (as opposed to hired from outside of the organisation)?
20.2% Are hired on the basis of intensive/extensive recruiting efforts resulting in many qualified applicants?
46.4% 37.1% Hold non-entry level jobs due to promotions based upon merit or performance, as opposed to seniority?
Receive formal performance appraisals or evaluations on a routine basis?
41.6% 55.8% Receive formal performance feedback from more than one source (i.e., feedback from several individuals such as supervisors, peers etc.)?
24.7% Non Irish 43.7% 66.5% 31.4% 40.4% 72.7% 26.6% Receive compensation partially contingent on group performance (e.g., profit-sharing, gainsharing, team-based)?
28.3% Are paid primarily on the basis of a skill or knowledge-based pay system, versus a job-based system? (That is, pay is primarily determined by a person's skill or knowledge level as opposed to the particular job that they hold.) 28.0% 51.5% 23.0%
What proportion of your employees...
Have been trained in a variety of jobs or skills (are "cross trained") and/or routinely perform more than one job (are "cross utilised")?
Have received intensive/extensive training in company-specific skills (e.g., task or firm-specific training)?
Have received intensive/extensive training in generic skills (e.g., problem-solving, communication skills, etc.)?
Irish owned 47.0% 58.7% Are involved in programmes designed to elicit participation and employee input?
Are provided with relevant operating performance information (e.g., quality, productivity, etc.)?
Are provided with relevant financial performance information?
Are provided with relevant strategic information (e.g., strategic mission, goals, tactics, competitor information, etc.) 26.4% 28.2% 61.6% 43.2% Are routinely administered attitude surveys?
Are organised in self-directed work teams in performing a major part of their work roles?
Have access to a formal grievance/complaint resolution procedure?
47.2% 22.8% 39.7% 85.2% Non Irish 49.6% 74.7% 42.6% 38.8% 81.7% 66.4% 72.6% 43.5% 30.9% 98.0%
Average use of High Performance Work Systems
Irish Owned 41.4% Non-Irish Owned 53.3% Note: “HPWS” gap remains after controlling for
differences in industry, R&D, size, age, unionization, competitive strategy
Results
• Irish-owned firms had (significantly) lower: Productivity: Sales/employee Innovation: Proportion of revenue from new sales Workforce innovation (revenue from new products/ no. of emps) • HPWS (partially) mediates the relationship between “ownership” and outcome variables
Lower productivity and innovation in Irish-owned firms partially due to less use of HPWS
HPWS and Innovation in SMEs
• • • • • • Promotes employee discretionary behavior (Hayton, HRM, 2003) Builds intellectual capital: human capital, social capital, organization capital (Subramaniam & Youndt, AMJ, 2005; Youndt & Snell, JMI, 2004) Enhances exploratory learning (Shipton, West, Dawson, Birdi & Patterson, HRMJ, 2006) Creates a positive social climate: trust, cooperation, shared codes & language (Collins & Smith, AMJ, 2006) Improves relational quality, affective commitment, psychological contract fulfillment (Thompson & Heron, HRMJ, 2006) Promotes organization ambidexterity (Patel, Messersmith & Lepak, AMJ, forthcoming)
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Levels
“At a fundamental level, knowledge is created by individuals. Organizational knowledge creation, therefore, should be understood in terms of a process that ‘organizationally’ amplifies the knowledge created by individuals, and crystallizes it as a part of the knowledge network of the organization.” • Nonaka (1994) • Knowledge is derived from individual activity, collective activity and interactions across these levels
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Levels
As with other dimensions of performance, knowledge creation requires both capabilities and motivation Individual-level vs. organizational level capabilities/KSAs and motivation are qualitatively different – For example: Individual knowledge is the specialized knowledge held by individuals – Collective knowledge is meta-knowledge embedded among a group of individuals as to how to coordinate, share, distribute and combine this specialized knowledge
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Levels
If we assume that collective-level capabilities are not a simple aggregation of individual-level capabilities and ……… If we assume that collective-level motivation is not a simple aggregation of individual-level motivation ………..
Then maybe we should also think about – sets of HR policies & practices that affect individual level capabilities/motivation – sets of HR policies and practices that affect collective level capabilities/motivation – And interactions (both positive and “deadly combinations”) across levels
Multilevel HRM-Knowledge Creation Model Collective KSAs Collective-oriented HRM
P1a P2a P2c P1c
Collective Motivation Individual-oriented HRM
P1d P2d P1b P2b
Individual KSAs Individual Motivation
P3a P3b
Collective Knowledge Creation Individual Knowledge Creation Solid thick arrows
: positive links
Solid thin arrows:
weak links
Dashed arrows
: negative links
Shaded boxes:
higher level constructs
White boxes
: individual-level constructs Zhao, Guthrie & Liao, “The role of collective- and individual-oriented HRM configurations in knowledge creation: A multi-level model”
Individual vs. Collective-Oriented HRM Configurations Individual-oriented HRM Collective-oriented HRM Staffing Training Work Design
Decision making Job scope Knowledge management Task design Recruit based on individual KSA and initiatives Training aimed at improving the depth of individual KSA
Performance Management
Appraisal Reward/incentive Appraisal based on individual performance Individual pay-for-performance Pay dispersion Skill-based pay that focus on the depth of individual skills Centralized decision making Narrow job specialization Compartmentalized control of knowledge asset Individual-based task structure Recruit based on group-oriented characteristics and team skills Personal-org fit (select to fit collective) Interviews with members of potential work team Training aimed at improving team skills Training as a collective Cross-training in teams or training aimed at improving the breadth of individual KSA Appraisal based on team performance Evaluation based peer feedback Gain sharing Compensation/bonus based on group performance Egalitarian pay Internal promotion Skill-based pay that focus on the breadth of individual skills Participative decision making Broad job specification and job rotation Knowledge sharing mechanisms (formal and informal). Team-based task structure Socialization tactics
More Challenges …
• The integration of unique knowledge and perspectives offers the potential for high-quality decisions and higher levels of knowledge creation, creativity and innovation • However ……… even with the “right” capabilities and motivation, groups may fall short of their knowledge creation potential
Distribution x Information Sharing
• • • In an era of (specialized) knowledge and team intensive work, groups of individuals often have both common knowledge (shared) and specialized knowledge (unshared) The distribution and specialization of critical knowledge magnifies the importance of effective knowledge sharing In addition to intentional behaviors (e.g., information “hoarding”, disparate goals, etc.), systematic, unintentional information “processing” errors often occur
“This idea first emerged in a brainstorming meeting when one of the designers, who had previously designed an inflatable splint, suggested that by building ankle support into a basketball shoe such splints might prevent injuries. Another participant, who had worked on hospital equipment before, recognized that existing medical IV bags could be modified to provide the oddly shaped air bladders that would make this ‘splint-in-a shoe’ concept work. During a subsequent brainstorming meeting with several other designers, who had worked with diagnostic instruments (and the little pumps, tubing, and valve components that made up those products), a solution emerged for how to inflate and deflate the shoe easily.” Description of the development of the Nike “pump” design (Hargadon and Bechky, 2006: 485)
Group Incentives and Task Performance: The Role of Knowledge Sharing A Tale of Money, Motivation and Murder
“Hidden Profile” Research
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In 1985, Stasser & Titus introduced the topic of asymmetric information distribution research; aka, “hidden profile” research
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Stasser created group situations with both shared and unshared information
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Years of research has suggested that groups exhibit a consistent bias towards shared, as opposed to unshared information (i.e., information processing asymmetry), leading to a consistent pattern of sub optimal group performance
Information Processing Asymmetry
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Collective information sampling bias/Repetition Bias: Shared information has a probabilistic advantage because more group members can mention it. Once mentioned, shared information is proportionally more likely to be repeated.
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Preference consistent bias: Group members will evaluate and accept information consistent with their pre discussion preferences more quickly, uncritically and favorably
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Social comparison/validation: When mentioned, shared information will be socially validated by others (in part due to “ownership bias”), whereas unshared information will be met with more skepticism
Previous Research
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Information
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Total & proportion of shared vs. unshared;
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Influence of negative vs. positive distributed information
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Salience of unshared information
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Pre-discussion preferences/diversity of preferences Task
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Demonstrability (intellective vs. judgmental)
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Time pressure
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Information access
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Communication medium Group
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Size, composition, norms, roles, prior experience
Hidden Profile Tasks
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Best student body president Best job candidate Best drug to market Best faculty candidate for an endowed chair Correct medical diagnosis Best company for investment The correct homicide suspect The correct terrorist suspect The “mole” within the FBI
Our Research Question
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Can group pay-for-performance help overcome processing biases and facilitate effective knowledge exchange and decision quality?
Group Pay-for-Performance
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Theoretical arguments:
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Pay based upon group performance can elicit cooperative commitment towards achieving a common goal; expectancy theory (Vroom), goal setting theory (Locke), goal congruence theory (Deutsche), componential theory of creativity (Amabile)
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Counterarguments suggest that while extrinsic rewards may induce effort, will have deleterious effects on quality of effort (CET; Deci, Pink)
Method
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Experimental design to increase internal validity (tradeoffs with external validity)
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Participants = 240 undergraduate students (60 groups of n = 4 students)
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Task = “The Case of the Fallen Businessman”, a murder mystery
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20+ pages of interviews, pictures of the crime scene, etc.
Task
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Robert Guion, a prominent local businessman was found dead behind his Crestview home this morning. Detective Lt. Mark Moody of the Hilltown precinct reported that Mr. Guion had apparently been assaulted when leaving his home to play golf early this morning. He was struck on the head over the left eye and fell down a flight of stairs leading from a second story deck at the rear of the house. The preliminary coroner’s report concluded that death was caused by injuries sustained from the fall and not from the blow to the head. The report estimated that Mr. Guion’s death occurred between 6:30 and 7:00 AM. Lt. Moody would neither confirm nor deny rumors that Mr. Guion had been robbed. “We’re following all leads. That’s all I have to say for now,” said Lt. Moody.
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Source: Article in the local newspaper, the Valley Sentinel
Task
Major Characters
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Robert Guion: The victim
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Lt. Mark Moody: Detective in charge of the investigation
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Sgt. Cassini: Police officer assisting in the investigation
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**Eddie Sullivan: Handyman who worked for the Guions
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**Billy Prentice: Yardman who worked for the Guions
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**Mickey Malone: business associate of the victim
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**Marion Guion: The victim’s wife
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Sam Nietzel: Parts manager for Guion Lincoln/Mercury
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Dave Daniels: Owner of Dave’s Quick Stop ** Suspects
Task
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Asymmetric Information Distribution
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9 “unshared” pieces of information distributed to 3 of the 4 participants
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Including 3 pieces of information incriminating the real “bad guy” (“Eddie”)
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15 pieces of “shared” information common to all 4 participants
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Including “shared” information implicating “Billy”
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A very challenging, “classic” hidden profile task:
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The “shared” info misleads towards the “wrong” choice
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The “unshared” info must be combined in order to get the “right” choice
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Fourth suspect, “judge” vs. “solve”, large total info load
Procedure
1. Individual rankings: 25 minutes to read materials and record rankings from “most likely to least likely of being guilty” ….
2. Experimental manipulation 3. Group rankings: “up to 20 minutes” to discuss with group and record rankings
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Feel free to use all 20 minutes but if you finish early, just step out of the room and let us know.
4. Complete questionnaires
Manipulation
“After completing this task and questionnaire:
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(FIXED PAY) ……………….. you will each be paid a fixed
rate of $15.
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(VARIABLE PAY)………… you will be paid. The pay that
you receive will be partly based on your group’s performance. You will receive a base pay of $12 and a bonus of between zero and $6, depending on the quality of your group’s performance on the task.”
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Note: bonus depended on group ranking of Eddie
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#1 = $6, #2 = $4, #3 = $2, #4 = $0
Measures
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Pay Type:
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Fixed (=0); Group PFP (1) Discussion Time:
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Minutes (max = 20) Information Sharing:
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all 24 items (unshared & shared) rated by each group member
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Likert scale, 1
5 Group Performance
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Eddie ranked #1 = 4
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Eddie ranked #2 = 3
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Eddie ranked #3 = 2
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Eddie ranked #4 = 1
Discussion Time across Pay Conditions 16.6
13.6
fixed pay performance-based pay
Number of Groups Using All Discussion Time 16(53%) 7 (23%) fixed pay performance-based pay
Shared vs Unshared IS across All Groups 3.00
2.72
mean of shared IS mean of unshared IS
Shared and Unshared IS across Pay Conditions 3.11
2.90
2.87
2.56
fixed pay mean of shared IS performance-based pay mean of unshared IS
30% 20% 10% 0% 60% Percentage of Individuals vs Groups ranking Billy as #1 50%
50% 45%
individual rank group rank
40.8%
40%
20% fixed pay performance-based pay
15% 10% 5% 0% 35% Percentage of Individuals vs Groups ranking Eddie as #1 30%
30%
individual rank group rank 25%
21.60% 20% 20%
20%
fixed pay performance-based pay
Between group
Pay-Type
MSEM Estimate
0.295 ** 0.023 (ns) Discussion Time Group Performance (ranking of Eddie) 0.365 ** .
095(ns)
Within group
Knowledge Sharing (Critical Clues – Eddie)
RMSEA = 0.00
; SRMR B = 0.00; SRMR w = 0.00; CFI = 1.00; NNFI = 1.00 ** ICC (Knowledge Sharing) = 0.467
R-squared for G-Perf = 0.351 p=0.00
0.579 **
Group Level
Pay-Type
Indirect Effects
0.295 ** 0.023 (ns) Discussion Time Group Performance (ranking of Eddie) 0.365 ** .
095(ns)
Individual Level
Knowledge Sharing (Critical Clues – Eddie)
Indirect Pathway: Pay Type
Discussion Time
KS Discussion Time
Pay Type
KS Disc Time
Group Performance KS
Group Perf Mplus: Sobel test (raw)
Coeff = .138 Coeff = .035 Coeff = .105 0.579 **
Monte Carlo bootstrapping: (normal dist.)
95% CI = (.01425, .3255) 95% CI=(.008505, .06925) 95% CI=(.01285, .3202)
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Group incentives can help improve information sharing and knowledge creation
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How?
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In our study it leads to greater effort/engagement (“discussion time”) which leads to higher quality information exchange
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Especially fuller discussion of critical unshared knowledge Why?
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More “time on task” helps to overcome “sampling bias” -- premature discussion termination precludes possibility of sampling “not yet” mentioned unshared information (Larson et al., 1994; 1996)
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A “false dichotomy” separating “incentive effects” on effort versus quality?
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In “knowledge work”, “time on task” may increased knowledge sharing, new insights and knowledge creation
Limitations
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“Real world” work teams much, much more complicated:
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Intentional information hording Multiplicity of goals/incentives The “framing” of shared information to color perceptions
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Many variations in asymmetric info distribution with extreme “hidden profile” the exception, rather than the norm
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Multiple interactions, experiences with group members outside of formal meeting time