Tag: Business Research Series

How humans perceive and interact with algorithms matters. A growing concern for businesses is that algorithms may reproduce or even magnify inequality in the workplace.

Associate Professor Dennis J. Zhang and coauthors researched how people perceive the fairness of algorithmic decisions in comparison with human decisions. Zhang discussed the findings last week at Olin’s virtual Fall 2021 Business Research Series.

The researchers studied how a task assignment from an algorithm, versus one from a person, changes workers’ perceptions of fairness—and changes the workers’ productivity. For instance, a worker might feel treated unfairly if he thinks he’s asked to pick too many items or if he thinks someone is playing favorites.

They conducted a 15-day randomized field experiment in 2019 with Alibaba Group in a warehouse where workers pick products to box based on orders known as “pickbills.” The experiment involved 50 workers randomly assigned to one of two groups.

What goes in which box?

Retailing platforms such as Alibaba, the largest online retail platform in China, use algorithms to determine which set of items will be packed into which box. They need humans to then follow the algorithmic prescriptions to pack the items. Basically, workers follow an order to pick certain items from different shelves that belong to a specific set of packages. In the past, people distributed pickbills to workers in Alibaba’s warehouses. But Alibaba had started assigning pickbills algorithmically, in which case workers could receive picking tasks by scanning a bar-code with their radio-frequency hand-held monitor.

Alibaba’s interest in switching to an algorithmic task assignment process was mainly motivated by hope it could improve efficiency. The researchers, however, wondered whether this change could also bring productivity benefits by changing workers’ perceptions of fairness.

Half of the workers in the field experiment were randomly assigned pickbills from a machine that ostensibly relied on an algorithm. The other half received pickbills from a person who secretly followed the assignments from the same algorithm.

The researchers studied the question of how people perceive the fairness of algorithmic judgment and how such perceptions affect their behavior. During the experiment, they collected performance data about 4,486 pickbills along with 108 daily questionnaires from workers.

Results surprise researchers

As it turned out, workers perceived the algorithmic assignment process as fairer than the human process.

“That’s one of the results that actually surprised us the most,” Zhang said. In existing literature, “there is a huge discussion” about how algorithms are not fair. “But what we actually show is in simple settings workers actually think algorithms are more fair.”

Receiving tasks from an algorithm (relative to a human) also significantly increased workers’ picking efficiency by 17-19%.

The productivity gain from the algorithmic assignment was larger for more educated workers and workers who cared more about the difficulty of their pickbills, groups for which perceived fairness has a stronger effect on productivity.

The idea of algorithms being fairer than humans can be generalized in other settings where workers are evaluated and affected by algorithms and can be used to create more fair and productive working environments, the authors say. “The Impacts of Algorithmic Work Assignment on Fairness Perceptions and Productivity” is under review at Manufacturing & Services Operation Management.

Combatting cybersecurity threats. Guiding space exploration. Developing novel healthcare management systems. Major business and government innovations often rely on multiteam systems, or teams of teams.

But when people work within such systems, known as MTSs, they face challenges. An MTS is a nebulous organization of component teams of specialists that link together to accomplish a broad and overarching objective. That objective exceeds the capacity of any one person or team.

Andrew Knight, Olin professor of organizational behavior, researched the challenges people face when working within team of teams. Specifically, he delved into how the component teams can best coordinate their activities—both within and between teams—to achieve the overarching goals of the whole system.

In the past, scholarship had advanced a perspective that informal modes of coordination—such as informal, interpersonal interactions between MTS members—undermine MTS effectiveness because of their complexity.

A channel for the flow of information

But that view is pessimistic and flawed, Knight and his coauthors argue. Drawing from theory and their research, they derived important implications for those who must lead an MTS.

“Informal interpersonal interactions actually can enable coordination by serving as a channel for the flow of information and a means by which MTS members can mutually adjust their work,” Knight said.

But whether informal coordination helps or hinders MTS functioning depends on how much time team members spend interacting with other members of their own component team, relative to the time that they spend interacting with the members of other teams.

“Members must balance their informal interactions,” Knight said.

Knight discussed his research at a virtual event September 29 as part of Olin’s Business Research Series.

“Our analysis underscores that leaders must carefully manage MTS members’ informal coordination efforts,” he said. Too much time spent focused internally—on coordinating with the members of one’s own component team— detracts from system performance. But too much time spent focused externally—toward other component teams in the system—breeds intrateam conflict that disrupts team performance.

It’s about balance

“To maximize system performance, which is ultimately the most important objective, leaders must ensure that team members balance their allocation of time between the local team and the more global system,” he said.

Knight and his coauthors present their findings in “Performance tensions in multiteam systems: Balancing informal mechanisms of coordination within and between teams,” in press at the Academy of Management Journal. Coauthors are Jonathan C. Ziegert and Christian J. Resickof Drexel University and Katrina A. Graham of Suffolk University.

In addition to his position as a professor, Knight is associate dean of WashU at Brookings and academic director of Olin Lifelong Learning. His areas of expertise are entrepreneurship, leadership, team development and diversity, and his research interests include virtual work, people analytics, collaboration and relationships.

See Knight’s presentation here.

Do you believe the company you work for cares about you? Do you feel you have a purpose at work?

“Sixty percent of employees express a need for purpose at work,” Anjan Thakor, Olin’s John E. Simon Professor of Finance, said during a recent Business Research Series event. “But they don’t get it at work.”

In addition, “88% of employees in US companies feel that the company they work for does not care for them,” Thakor said in his March 3 virtual presentation titled “How Can You Create a Purpose-Driven Organization?”

“Everybody hungers for purpose.”

The answer lies in organizations’ embracing an authentic higher purpose, he said, with the higher purpose as the “arbiter of all decisions.”

Thakor’s research shows employees of organizations with higher-purpose statements are happier and prouder of their organizations than are employees at workplaces without such a statement. The effects were stronger when the purpose statement was written—and tied to society, employees and customers, rather than shareholders.

From theory to practice

Here are eight guidelines, which are drawn from research and interviews with leaders of higher-purpose organization:

• Envision a purpose-driven organization.
• Discover the purpose.
• Meet the need for authenticity.
• Turn the higher purpose into a constant arbiter of all business decisions.
• Stimulate learning.
• Turn mid-level managers into purpose-driven leaders.
• Connect the people to the purpose.
• Unleash the positive energizers.

Thakor, along with University of Michigan colleague Robert Quinn, collaborated on the research, which culminated in a 2019 book entitled The Economics of Higher Purpose: Eight Counterintuitive Steps for Creating a Purpose-Driven Organization. The pair also collaborated on a 2018 cover story on the topic for the Harvard Business Review.

A central puzzle of corporate strategy is whether headquarters can add value to their business units beyond the burden of their own overhead. The record is bleak: On average, corporations trade at a 20% discount relative to their breakup value.

“This is the problem that we want to try fix,” said Anne Marie Knott, Olin’s Robert and Barbara Frick Professor of Business.

She proposed and tested a theory of how corporations could overcome that record. On November 10, she presented the findings as part of the Olin Business Research Series. More than 60 people tuned in for the virtual event.

The 20% discount could mean that multibusiness firms fundamentally destroy value or that they are poorly managed. Regardless, a whopping $5 trillion economic gain could be had from a better understanding of how headquarters add value in multibusiness firms, Knott says.

Bank One and its return on assets

Bank One, a bank holding company, motivated the theory. Knott and co-author Scott Turner, of the University of South Carolina, explain how in “An Innovation Theory of Headquarters Value in Multibusiness Firms” in Organization Science.

Bank One increased the return on assets of its target banks by 40-70%.

“This would be really easy if they were purchasing underperforming banks,” Knott said. But they weren’t. They were buying well-managed banks.

The theory relies upon dynamics between business units where laggard units improve their performance by imitating leaders. In turn, this “competition from below” stimulates leaders to innovate more.

Beyond demonstrating that headquarters can add value through innovation and growth, the theory offers prescriptions on how to do that. For instance, they can establish systems that create norms for sharing, which eases innovation. They also can offer high-powered incentives to fuel innovation.

In general, Knott’s research examines the optimal environment and policies for innovation, which she summarizes in her book, “How Innovation Really Works” (March 2017). This interest stems from issues arising during an earlier career in defense electronics at Hughes Aircraft Company.

KEY TAKEAWAYS:

• A $5 trillion economic gain could be had from a better understanding of how headquarters add value in multibusiness firms.
• Bank One increased the return on assets of its target banks by 40-70%.
• The theory relies upon dynamics between business units where laggard units improve their performance by imitating leaders.
• In turn, this “competition from below” stimulates leaders to innovate more.