Food for thought A central problem in organizational change is that “the whole burden of change typically rests on so few people. In other words, the number of people at every level who make committed, imaginative contributions to organizational success is simply too small.” --- Pascale (et al. 2000)

Session 4 Managing Change at the inter-personal Level

Topics for Today The role of incentives for individual behavior. –Debate: Extrinsic or intrinsic motivation? –Summary and takeaways Interpersonal relationships and organizational change –Topic 1: The social capital of entrepreneurial managers –Case study: Managing Xerox’s MDC –Topic 2: Empowerment as a strategy for organizational change –Summary and takeaways

Theme 2: On Motivating People Management is about managing people –The mission of business school training –The cases of Silicon Valley and Morgan Stanley Is incentive an indispensable managerial tool? –What is incentive? –Do people respond to incentives? –The folly of rewarding A, while hoping for B What kinds of incentives? –Incentive pay or intrinsic motivation? –Individual-based or collective-based –Short-term based or long-term based? –Types of jobs (professional versus nonprofessional)

Debate: Extrinsic or Intrinsic Motivation?

Extrinsic motivation For –The bottom line: economic rewards have to be competitive –Economic rewards are indicators of achievement and status –Incentive pay (to induce higher level of efforts) –Labor costs versus labor investment. Against (Kohn): –Induces only temporary compliance. –Pay is not a motivator. –Rewards punish. –Rewards rupture relationships. –Rewards ignore reasons. –Rewards discourage risk-taking. –Rewards undermine interest.

Intrinsic Motivation For: –The Hawthorn experiment; –Individuals enjoy work, collective activities; –Individuals respond to peer pressures, social comparison; –Socialization, professional training shape behaviors; Against (?): –To what extent? –Under what conditions?

In general, the more cognitive sophistication and open-ended thinking that was required, the worse people performed when working for a reward. — Aflie Kohn (2000, p. 55)

Summary and takeaways Motivation and incentive matter. Incentives take different forms –Financial, social recognition –Individual-based, collective-based –Short-term, long-term Motivations vary with— –Work environments –Different types of career lines –Stages in the life course A key managerial task is to figure out what motivates your employees and design your ‘incentive plan’ accordingly.

Managing changes at interpersonal level Beyond individuals and into social relations Types of social relations –Organization chart versus informal social groups –Social capital –Corporate culture: mutual expectations, tacit knowledge Implications for entrepreneurial managers –The use of social capital –Empowerment

Social Capital Definition: the wealth of a manager’s relationships within and beyond the firm -Relationship and information -Relationship and opportunities -Relationship and control -Relationship and solidarity Social capital versus human capital -Investment in social relationships pays! -Relational property versus individual property -Focuses on the value a manager adds through other people A form of network structure

Strength of Weak Ties (Granovetter 1973, 1983) Actors gain novel information from less intimate ties than close ties –actors who are strongly connected share information directly, therefore they possess the same knowledge –new information comes from external connections which are likely to be weak Example –Job search –Adoption of innovation –Learning among managers

Tie Strength Argument A B C D E F Actors B & D have a weak link thus are in a more likely position to acquire novel information which gives them a better opportunity for early adoption

Structural Equivalence (Burt 1987) Actors who are identically positioned within a network use one another as a frame of reference to evaluate their relative adequacy –actors are not necessarily directly connected –actors are in competition with one another –actors who are in the same equivalence class (status) tend to adopt at the same time

Structural Equivalence Argument A B C D Actors B & D are structurally equivalent and have an indirect awareness of one another; thus they will adopt similarly

Structural Holes (Burt 1992) An actor is in a more advantageous position to gain and control novel information if s/he is connected to others who themselves are not directly connected to one another. –Nonredundant sources of information allow efficiency with little constraint –Developed to explain interpersonal communication in a competitive environment

Structural Holes Argument A B C W X Y Both actors A & B are connected to 4 others. Actor A is highly constrained with only 1 nonredundant tie. Actor B has 4 nonredundant ties and is in a better position to access novel information and adopt early. D E Z F

Efficiency in social network

Structural hole versus solidarity Structural holes facilitate efficiency in information exchange and control But solidarity requires dense and redundant ties Examples –Informal groups –Promotion

Case Study: John Clendenin and Xerox’s MDC

What do you think of Clendenin in his managerial role? Professional goals –Career goals –Where he fits Entrepreneurial –Building social capital –Creating opportunities –Getting resources –Expanding power As a manager –The management of MDC

How Social Capital Helps? Parts and Supply Administration Manager –key contact: Tom Gunning –Gaining information and cooperation Access to Opportunity in MSDC –Key contact: Les Elstein –Creating opportunities Developed plan for new MDC –Key contact: Sy Zivan –Mobilizing resources

The political lens MDC’s growth threatens other corporate units and causes tensions with Hewitt; Conflicts between MDC and other units in overlapping authorities (p. 7). At MSDC, the interests of the lower-level managers are not consistent with that of Xerox. Conflict management: building coalitions

The cultural lens The Corporate culture of Xerox is in many ways the same as the Marine Corps. There is a definite way of doing things and an “order” to things that was often explicit. I feel very comfortable working there. A close-knit society – a strong in-group culture

Strategic design Between MDC and other parts of Xerox –Changes in Xerox, MDC’s mission, and MDC’s reporting lines –Tension with other units Within MDC –Charismatic leadership –Human resource management: informal, trust –Culture and incentives at MDC

Clendenin’s Decision Stay at MDC Pros - Use of existing Social Capital - Past experience -Independence -Discretion with regard to decisions Cons -2 year commitment -Reduced Scope - Relationship with Hewitt -Diminished reputation and role

Clendenin’s Decision Accept Corporate Position Pros - Expanded responsibilities - Opportunity to expand network -Possibility to jump ship Cons -Uncertainty of “The fit between Situational Requirements and Personal Traits” -Lateral Move -Pressure to Succeed

Summary and takeaways Key ideas from social capital argument –Actors and their actions are viewed as interdependent units –Relational ties between actors are channels for transfer of resources –Network structures provide opportunities as well as constraints on individual action Different network structures facilitate different types of strategic action –Structural holes – information –Dense social relations – social integration For entrepreneurial change agent: Social capital plays an important role in the change process –acquiring information –creating opportunities –mobilizing resources –Making things happen