Abstract: Cognitive diversity is thought to help organizations explore because employees with differing perspectives can collectively recognize more promising new ideas. However, cognitive diversity can also prevent an organization from reaching consensus about the quality of new ideas, leaving the organization in gridlock. In this paper, I develop a mathematical model to analyze how organizational structure moderates the effect of greater cognitive diversity on the organization’s propensity to pursue exploratory ideas. I find that greater cognitive diversity leads hierarchical organizations to pursue exploratory ideas less often, but it leads flat organizations to pursue exploratory ideas more often. After presenting this model, I empirically show that cognitive diversity and exploration are negatively correlated in hierarchical organizations and positively correlated in flat organizations. I do so in the context of product introductions in the Consumer-Packaged Goods (CPG) sector. Finally, I conclude with a discussion of managerial insights. My results speak to how organizational structure can play a valuable role in helping managers harness the benefits of cognitive diversity.
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Abstract: Decentralization is often praised for its ability motivate employees. The thinking goes that centralization stifles motivation as powerful supervisors micromanage employees. However, many companies that empower employees are also reluctant to delegate many decision rights to them. For instance, former Apple CEO Steve Jobs was famous for both empowering his industrial designers and for holding them to a meticulously high standard. In this paper, we develop a mathematical model to analyze when delegation does, and does not, motivate employees. We show that delegation may be demotivational in collaborative team settings where team members have competing interests. Our results imply an additional managerial role in motivating a collaborative team with heterogeneous preferences.
Abstract: This study develops and empirically tests a formal model for how organizational hierarchy affects demand for data-driven decision-making. The model shows that although data can substitute for hierarchy by establishing a framework for consensus, hierarchy also increases demand for data because hierarchies require legible and commensurable results. We empirically validate the model using data from employee profiles on a career networking website. We use job titles to measure the span of control across levels of hierarchy in 61 consumer product organizations, and job descriptions to measure the prevalence of data-driven decision-making.