https://herd.typepad.com/files/market_failure_provocation_nesta.pdf

The failure of market failure Towards a 21st century Keynesianism

This paper explores the processes of knowledge generation and sharing among the employees of a multinational business organisation. We consider the generation and sharing of knowledge as crucial for the process of organising, especially in situations in which new businesses are being developed. In particular this paper examines the new ways of organising that emerged within the multinational organisation following the creation of a new internet business unit. The paper elaborates on the effects of those changes in the way people make sense of the new working contexts through the stories they share. Considering knowledge as dynamic, generative and emergent; rooted in social practice and (re)produced and shared in social interactions has led us to focus on the study of organisational collectives such as work teams. In interpreting the findings from the empirical study, it is suggested that the interactions among those collectives are the medium through which sense making and knowledge generation occur in the organization resulting from the web of relationships developed, maintained and sustained through the participation of people within different networks. However, it becomes also apparent that the participation in those networks does not only enable but can also inhibit both the generation and sharing of new knowledge as well as the development of new ways of organising.

Organisational Complexity: Organizing Through the Generation and Sharing of Knowledge

This article focuses on the micro-level phenomena related to emergent ways of organizing. It explores how new ways of organizing might be enabled or inhibited through the networking activities and knowledge flows that organizational members engage in within a multinational business organization after the set-up of an innovative Internet business unit. The article considers innovation and networking as social practices mediated in this particular case study through knowledge-sharing activities. This perspective on innovation, networking, and knowledge leads to a conceptualization of organizations that stresses their inherent complexity and their interactive and co-evolving nature with their environments.

/pdf/networking-in-organizations-developing-a-social-practice-4aniyoipva.pdf

Networking In Organizations: Developing A Social Practice Perspective For Innovation And Knowledge Sharing In Emerging Work Contexts

We show that access to finance may affect firms through the labour market. Talented workers want to realise their ideas but also seek insurance against income risk. Large firms default less often than small firms but they investigate more thoroughly and reject more good ideas. With easier access to consumer credit, talented workers become less averse to the income risk of working in small firms. Thus, small firms gain an advantage on the labour market, their profit volatility increases and large firms react by creating spin-offs. Existing and original empirical evidence is consistent with the implications of our theory.

/pdf/fighting-for-talent-risk-taking-corporate-volatility-and-1vx98eowsz.pdf

Fighting for talent: risk-taking, corporate volatility and organisation change*

We show that the availability of finance affects firms not only through financial markets, but also through the labor market. In our model, talented workers care for realizing their ideas because this can increase their lifetime income, but they also wish to be insured against income risk. Large firms are less likely to default and thus offer a safer income stream than small firms. But having assets, reputation or future cash flows of other projects at stake, large firms investigate new ideas more thoroughly than small firms. This investigation produces valuable but noisy information about the success probability of ideas. For this reason, large firms are more likely to reject good ideas than small firms. Workers thus face a trade-off between better insurance and lower probability of realizing their own ideas. If access to consumer credit increases, talented workers become less averse to the income risk of working in small firms and start spurning large firms. We show that this increases small firms' profit volatility and may induce large firms to create spin-offs. We also provide empirical evidence consistent with the implications of our theory.

/pdf/fighting-for-talent-risk-taking-corporate-volatility-and-ryb5ee25lz.pdf

Fighting for Talent: Risk-Taking, Corporate Volatility, and Organizational Change

Why new ventures need more than a room of their own Companies can grow quickly without sacrificing performance discipline. The trick is to balance partitioning and integration. The idea that new businesses prosper best when separated from their corporate parents has become a commonplace. Separation is no doubt the model of choice when the new and the old differ greatly--for example, an Internet start-up launched by an industrial company. But the simple injunction to cordon off new businesses is too narrow. Although ventures do need space to develop, strict separation can prevent them from obtaining invaluable resources and rob their parents of the vitality they can generate. Two-way relationships are needed, though only a few companies have developed organizations in which such relationships thrive. Yet a delicate blend of separation and cooperation is a prerequisite for satisfying the twin demands of today's investors: focused performance and faster growth. The 1980s were mostly concerned with performance. [1] Under-performing assets were to be fixed--or sold. Diversification was viewed at best with suspicion and, when it took companies outside their areas of "core competence," regarded as a managerial crime. [2] Accordingly, the decade witnessed a wave of "bust-up takeovers as acquirers split conglomerates into focused components and sold them to buyers in related industries. The past few years have told a different story. Investors still expect top performance from a company's core business and high returns on existing assets. But they also demand growth: new assets and entry into new business arenas. Mergers increasingly aim to generate horizontal synergies, creating corporate behemoths of unprecedented size and strategic diversity. How can companies deliver this combination of focus and flexibility, performance and growth? The conventional advice has been to plant the seeds of "foreign" businesses, acquired or developed internally, in walled gardens so that established businesses can't trample them. Citing the experiences of companies that have failed to take advantage of opportunities to innovate, a number of authors [3] have argued that greenfield units should be kept far away from operating businesses, even to the extent of physically separating their headquarters. We believe that partitioning is desirable but can easily go too far. A company that seeks both performance and growth should give entrepreneurial activities plenty of space but also connect them, from the outset, to its parent's resources, knowledge, and goals. Achieving this balance of separation and integration calls for the full range of organizational and leadership interventions: structure as well as management processes, human-resources policies, and corporate culture. Separate and integrate Planning and resource allocation processes designed for established businesses can wither the prospects of a new one. Established businesses have customers, organizational structures, and prejudices that dispose them to stick with the familiar when they decide where to make their investments. Spending on core businesses, where risks are relatively easy to identify and control, can be defended without great difficulty. Investments in the discontinuous innovations that transform industries but pose greater risks are harder to justify, and the business case for these investments is harder to make without ambiguity. [4] In the fight for corporate capital, talent, and commitment, new ideas often fail to attract managerial attention, particularly in their early stages: compared with an existing business, an idea of unproven worth can seem insubstantial. But by planting new ideas in separate organizational structures, managers can change the scale of comparison and create roles focused on nurturing new ideas rather than minimizing or squelching them. Of course, leaders of existing businesses know that new initiatives may eventually replace them. …

The innovative organization

Pay for performance has these days achieved the status of a management mantra. A generation of executives, motivated by performance-measurement systems linking their actions to results and, ultimately, to compensation, has embraced the creed and practice of making assets "sweat." To continue flourishing, however, companies need to innovate as well as to exploit their existing assets. Yet most find it very hard to motivate their people to develop new business ideas and, simultaneously, to manage current performance. The natural reflex might be that people should receive higher pay for innovating effectively. But our research (1) suggests otherwise. Surprisingly, the secret of persuading people to focus simultaneously on developing new businesses and managing current operations may be to rely less on pay for performance. In fact, companies that achieve both objectives de-emphasize performance pay or use it in a more nuanced, less intense manner. Crucially, they combine it with an unusually inclusive culture. In these companies, employees feel that their interests and those of the business are much the same, so they naturally try to do what is best for its current and long-term welfare, just as they do for themselves in their personal lives. Pay for performance may still have an important job to do in such a culture, but as a supplemental boost rather than a primary driving force. Encouraging growth and performance With few exceptions, corporate incentive schemes encourage managers to concentrate either on executing current tasks or on developing and implementing new business ideas to fuel future growth, but not both. Most such schemes are designed to motivate current performance: retail organizations, for example, tie rewards to current sales, manufacturing companies to production costs and volumes. In such companies, the need to meet performance targets leaves people with little time to innovate. As one harried manager in a global industrial company put it, "We are very welcome to do innovative stuff--after 11:30 PM." Incentive mechanisms emphasizing current performance tend to be more common because measuring the familiar tasks that boost it--the exploitation that leverages existing competencies--is so much easier than measuring the exploration and experimentation that may lead to future growth. (2) So, for example, a company that wants to motivate its sales representatives to sell more goods or services will track how many contracts its agents close, adjust the scores for differences beyond their control (such as the number of customers in each area), and reward them accordingly. Effort and score are usually clearly linked, so the company can expect agents to work hard if high scores are well rewarded. But the achievements of these agents would be a lot harder to measure if the company wanted them to bring back ideas for new product offerings based on the changing needs of its customers. A simple tally wouldn't do. since it might be years before an idea's real value could be assessed. The company would also have to adjust for more elusive factors, such as the willingness of customers to provide information about their preferences. All this is so difficult to quantify that to use formal incentives effectively a company would have to monitor, in minute detail, the way each sales agent actually behaved with customers. And performance in highly exploratory tasks--biochemical research, for instance, or scenario planning--can't really be measured at all. Who knows, in advance, which experiments will yield fruitful results or which scenarios will yield valuable insights? Proxy measurements can give a rough idea in some contexts. Management consultants, for example, who often work in teams, use peer observation to assess one another's ability to come up with new ideas. But few companies have a performance-management system that assesses how well employees deal with growth-oriented tasks as accurately as it assesses their current performance. …

Has Pay for Performance Had Its Day? the Way to Get Your Employees to Focus on Both the Present and the Future Is to Adjust Your Culture and to Weaken Your Financial Incentives

Jonathan D. Day

Papers

The innovative organization

Has Pay for Performance Had Its Day? the Way to Get Your Employees to Focus on Both the Present and the Future Is to Adjust Your Culture and to Weaken Your Financial Incentives