I remember my economics…

In these days, when the fundamentals of financial economics are getting a public bashing by adacemics and laypeople alike, it is confiding to turn to those great works that cuts across disciplines and streams of though alike, and tells us something important.

For example, have a look at the Akerlof and Kranton paper on the economics of identity, which incorporates social identity to agent-principal models to investigate the consequences of when employees consider themselves insiders or outsiders. A simple yet beautiful economic model with implications for a HRM, entrepreneurship, feminism and other important topics. Citing Mahatma Ghandi and Jacob Mincer in the same paper is always nice

Boye-Dohle, Passion and Neuroentrepreneurship

Today I’m juggling some notes from last week’s Summer School in Entrepreneurship at the Max Planck Institute of Economics. Among the interesting presentations, Melissa Cardon was speaking about entrepreneurial passion, Arvids Ziedonis held an in-depth discussion about the development of University-Industry relationships in the United States and in particular the role of innovations and patents following the Baye-Dohle act in 1980. Norris Krueger talked about the emerging research strand of “neuroeconomics” and “neuroentrepreneurship” (is it the future or simply a fad? – I remain undecided). In all, it was a splendid week with lots of interesting conversations, good food, and inspiring speakers.

The demography of organizational culture and organizational (un)innovativeness

I have been reading Harrisson and Carroll’s excellent book “Demography and culture of organizations“.  There are many accounts of roganizational culture (see for example the works of O´Reilly, Schein,  or Alvesson) but Harrisson and Carroll’s perspective is unique in that they emphasise how the demographics of organizational members affects culture.  The book’s perspective highlights the composition, turnover, and socialization of an organization’s workforce as the predominant factors shaping organizational culture.  The  surprising durability of organizations’ culture across members and time is incorporated in this model through the socialization of new organizational members into the existing culture, examplified by a quote from Alphonse Karr (1849): “the more things change the more the remain the same”. In other words: Culture is not easily malleable by leaders through new slogans, training sessions, or other “quick fixes”.

The rigorous yet simple models in Harrisson and Carroll should be seen in the light that “Organizational culture” is often deemed a “mushy” area for organizational research and consulting work. In a summer issue of Sweden’s chief business tabloid Dagens Industry (June 21st), the CEO of the merging Swedish and Danish postal services dismissed the need for “cultural integration” of the two former monopolies with the comments “We have the right experiences and competencies on both side”. From an organizational demographic perspective, this statement could not be more misstaken: it is not the formal competencies among organizational members, nor their nationality as in Hofstedes’ work on national culture, but precisely their systematic differences in experiences that are explanations for the divergent organizational cultures between two distinct organizations such as those of the Swedish and Danish postal services. Yet, Olsson is probably right in his conclusions: deep-rooted systematic differences in experiences are unlikely to be bridged by consulting-type workshops or training sessions.

A constrasting case was given to me by a friend working for a massive public organization that has decreased numerically and geographically during latter years: the Swedish Armed Forces. Today, this organization employees the equivalent of 17,000 middle managers (senior officers) but only 2000 low-level managers (junior officers). It is often depicted as an organization in crisis. In addition, the military training systems with its recruitment of young officers after graduation from conscription ensures strong pressures for socialization . And since officers commonly socialize with each other off-duty, the internal networks and trust fostered during their training (intended, indeed, to maintain order and save lives during times of crisis) turns increasingly to what the social network literature characterize as “closed” networks with strong intra-organizational ties and “full closure” .  In such an organization, it is easy to understand that external pressure for increases in efficency and decreases in personell makes organizational members wary of outsiders and resistent to change. Adding to this picture of a conservative and very internally oriented organizational culture in the armed forces, from an demographic perspective the Swedish tenure-based employment system makes average age in organizations high, increasingly so during times of personnel cutbacks when the strict labor laws strongly favors keeping long-tenured employees and prohibits the sacking of excess personnel instead of rotating them from one part of the organization to another. The officers’ union is one of the strongest labor unions in Sweden, meaning that if a division is suspended, senior officers will almost always be transferred to some other duties at the military headquarters in Stockholm, regardless of the value that the organization puts on their skills and experience.

The goverment new strategy ro rewamp this infested system is to simply disband the current legal unit that comprise the armed forces and setting up a new one, necessitating military personnel to apply for new positions in a quasi-new organization. This would ensure that applicants can be selected based on merits rather than tenure. I wonder how the union will respond to that one?

In stark contrast is the story Sweden’s “super-telecom-company” Ericsson, internationally a quite ordinary blue-chip tech firm but historically the home to a multitude of innovations and parent of numerous spin-off firms. After its near-bankruptcy and turnaround in 2002 Ericsson shrank in size from about 110,000 employees world-wide to less than 60,000. A hiring freeze in 2001-2003, dismissal of consultants and many of the younger employees (due to the  tenure-based employment system) meant that the mean age and company tenure of employees in the surviving organization was very high. It was apparent that the firm needed to reinvent itself to continue to develop innovativions and to attract talented employees.

What happened is pretty straightforward from an HRM perspective but quite remarkably compared to the prior case of the military forces: Ericsson issued a generous retirement scheme that allowed all employees above the age of 40 (!) to retire with 12-18 months of salary and benefits. The firm thereby reinvented themselves by loosing many 50+ and hiring young graduates after prior years of severe financial cutbacks.

It is interesting that among all of these 3 organizational events, a cross-country merger of two recently deregulated public monopolies (the postal services of Sweden-Denmark), an increasingly aging and resource-stripped organization (the military forces), and a rapidly changing high-tech corporation operating globally, the demographic composition and types of internal socialization seems like a key strategic issue for their future sucess. This lends credibility to the book by Carroll and Harrisson. Highly recommended reading.

Summer watch

For those eager blog readers out there without a life – I sincerely apologize for the long summer delay. Intercontinental moves, sailboats and dissertations have taken their toll, but no despair: I am crafting a macro cultural analysis that explains what really ails the Swedish military forces – and how lessons from organizational demography and turnarounds in the telecom sector can help public decision makers to rebuild this important national institutions.

In the meanwhile I offer some summer temptations:

1. Why research has been wrong about the reasons for Entrepreneurs to sell their firms – all explained here in our new paper awarded the best paper prize from the Entrepreneurship Division at the Academy of Management Meeting in Anaheim, California. Slides on the talk are aom-exit.

2. The best places to live in the world from Monocle.com. No-one could be surprised to see Scandinavia on top and unfortuntately neither is it a surprise to see Stockholm is constantly lagging behind Copenhagen due to Xenophobia. Portland and Minneapolis (!) are the first US city ever to make the list (not counting Honolulu), but is anyone surprised Germany as the rising star with 3 cities in the top compared to obvious top-notch places such as Canada, Australia and Japan? Yes, nerdy, and of course extremely subjective. But the ranking of cities is a multi-billion dollar business – and an increasingly accepted area of research.

…and finally this email (in Swedish) that I recently submitted to the IT department:

—–Original Message—– 

From: Karl Wennberg

Sent: den 30 juli 2008 11:42

To: IT Support

Subject: byte ned till office XP?

 

Hej IT Support!

 

 

 

 

 

Jag är supertacksam för datorn ni räddade åt mig men även om jag lärt mig leva i någon form av respektfullt krigsstillestånd med Vista (något kärleksförhållande blir det aldrig) så har jag beslutat mig för att jag måste separera från Office XP. Vi bråkar hela tiden, och dom är ju flera stycken mot mig som ensam användare (Word, Powerpoint…) så det är en ojämn kamp…

 

Pirates, hackers, and the (discriminatory) freedom of organizing

I have been reading Empire of Blue Water by Stephan Talty. This is not only a musing for those who enjoy pirate stories as well as an excellent historical epic describing the how Captain Morgan and his pirate army helped Cromwell and Charles II turn the favors in the New World from the receding Spanish Empire to the British. The organization of pirating and society at large in Jamaica is an historically fascinating case of collective action (yeah, pirating) achieved through extremely individualized decision-making. This was not exactly what the Spanish, nor the British, envisioned for the New World, as these excerpts indicate:

“As a young man, Cromwell had himself almost joined his Puritan brethren in their voyage to Massachusetts; the idea of founding a new and pure land had always had great appeal for him. Hispaniola was something of a second change. ‘Set up your banners in the name of Christ’”.

“Cromwell asked Thomas Gabe the preacher to write up a paper detailing how the Spanish empire in the Americas could be attacked and overthrown. Cromwell had no intelligence service, no spies, to rely on: Gage was it. [---] Gage predicted that an invasion of Hispaniola, followed by Cuba, would result in the toppling of Spain’s Central American kingdom”

“Twenty-nine year since he first sailed to the Americas [Gabe---] was again on a religious mission: to exterminate Catholics from the new world and to claim it for Protestantism [---] but he little realized that the war he was relishing would take a far different shape: It would be a confrontation not between two traditional faiths but between two radically different visions of men and society. Cromwell’s ‘Banner of Christ; had been folded up and put away; in their place would come the flag of the pirates, whose way of life was utterly foreign to both Catholics and Protestants. Port Royal would not mark the beginning of Spain’s replacement with another theocratic empire. The town and its pirates would follow another path, once focused more intensely on the individual than on the kingdom of belief”

Indeed, the life and workings of pirates and buccaneers remained characterized by highly individualized decision-making, quite an achievement given that the pirates also managed to organize themselves into very efficient criminal warfare ventures. This organizing is discussed in a recent issue of Journal of Political Economy by Peter Leeson. Leeson’s explanation is that pirate organizations were indeed highly individualized and used both political checks- and balances and democratic constitutions to balance the need for autocratic power for ships captains’ efficient managing of the plundering campaigns on the one hand, while minimize the risk of internal predation and conflict on the other. Leeson portrays his paper as a case study in functioning anarchy, but an interesting sociological point of his paper is the ethnic diversity of pirate organizations, according to Leeson’s historical records the racial composition of ships varied between 13 and 98 percent black. Further, there seem to have been quite some class diversity as well (especially among the buccaneers) with also highly educated persons joining pirate crews. Thus, both the organizing and the demographic structure of pirate groups differed radically from their organizations – from what I remember of my little industrial sociology it took far into the 20th century until organizations became ethnically mixed. The diversity of pirate ventures can be seen in the comparative light of the homophilic structure of modern entrepreneurial ventures, most of which are very homogenous in terms of ethnicity, education and gender (see e.g. the work by Howard Aldrich, Martin Ruef, and Karin Hellerstedt). This begs some interesting questions: to what extent were 16th century pirates more equal in their organizations than other criminal organizations throughout history? And did their egalitarian decision-making structure contribute to their success in warfare against the vast more resourceful fleets of Spain and Enland?

There might be historical studies tending to these questions but I have yet to see an example of contemporary organization operating at par with the historical pirate ventures in maintaining democratic decision-making together with high efficiency. However, an interesting recent paper address the organizing efforts of what some consider the “modern” pirate – hackers and coders. The study, written by Linus Dahlander and Siobhán O’Mahony shows how coders created a virtual community where everyone could contribute code to a project. As the community grew, the need to formalize organization became apparent since it was impossible to “freeze” the development of a project and thus launch it as a completed product. The community therefore elected a governing board whose decision could overrule those of ordinary member, much like ordinary corporations. Dahlander and O’Mahony show how evolving political processes affect the ways in which, first, coders became accepted as members, and subsequently, which members became elected to the board. Using network analysis, they find that individuals that frequently contribute code are more likely to be elected to the board, but contributing code has no effect on the probability of becoming a board member. Rather, being an early member in the growing network, “socializing” by being active on the electronic discussion boards, and last but not least, being male led members to become elected to the board. And is it not ironic that the coders of these seemingly “anarchistic” modern network organizations quickly adapt to formal decision structures and gender discrimination – much like the organizations they so vehemently criticized?

Maybe we haven’t come so far since the pirate ages. Comments welcome.