November 17, 2010

Racial Stereotypes Can Be Unconscious but Reversible

STANFORD GRADUATE SCHOOL OF BUSINESS—Negative stereotypes about various racial groups bombard us every day in the mass media and deposit their residue deep into our minds, often without our realizing it, says Brian Lowery. Even among the most well-intentioned and consciously egalitarian people, says the associate professor of organizational behavior, non-conscious associations about ethnic groups still have a pernicious effect on behavior and attitudes.

The good news, he says, is that we can also be influenced for the better, particularly by social relationships with people who strongly value egalitarian ideals.

Lowery's work moves the dialogue on racism beyond simple dichotomies that divide people into categories of "good" and "bad"according to their views on people of a different race or ethnicity."The situation is much more complex," he says. Even people who consciously disavow prejudice can fall into racist traps.

In one study, for example, Lowery demonstrated how racial stereotypes subtly operate in the penal system. Los Angeles police and probation officers were asked to make judgments about a hypothetical adolescent(whose race was not identified) who had allegedly either shoplifted or assaulted a peer. Certain officers were first subliminally exposed towords commonly associated with African Americans (such as ghetto, homeboy,dreadlocks, etc.) on a rapidly flashing computer screen so that they took in the information subconsciously. In contrast to subjects who did notreceive this "priming," officers with the subconscious messaging attributed more negative traits and greater culpability to the hypothetical offenders, and they endorsed harsher punishment—all typical responses to black as opposed to white offenders.

In other words, by simply unconsciously thinking about black people, officers suddenly began seeing a neutral situation in racially stereotypical terms—without even knowing it. The subliminal priming was all it took to activate the entire program of material these officers held about African Americans.

The phenomenon held sway even for officers who reported—and truly believed—they were tolerant and non-biased toward non-whites."What's particularly interesting is that many of the officers were African Americans themselves," Lowery notes. "This shows the degree to which even African Americans can be affected by the negative associations in the environment."

When participants who had received the subliminal priming were later debriefed and told about the results, Lowery reports, they were extremely uncomfortable. "People are very reluctant to believe their scoresreflect anything about their attitudes, and they instead try to invalidatethe measures," he says.

In other research, Lowery examined just how readily people associate particular social groups with certain kinds of feelings. In a subliminal word-association exercise, black people's faces were more quickly associated with negative words, while white faces were linked with positive words.

Lowery found, however, that such associations would change when subjects were exposed to someone who displayed egalitarian attitudes (as evidenced by wearing a T-shirt with an anti-racism message). The presence of an egalitarian African American person or white person who was friendly and appealing was enough to shift participants' unconscious racial associations to become less negative about blacks. Interestingly, the presence of an unfriendly though egalitarian researcher did not result in such a shift. "When we like or identify with people, we're more likely to emulate their attitudes and behaviors," Lowery explains.His research also confirms that children who identify strongly with parental figures tend pick up their parents' racial views.

What's hopeful about these latter results, Lowery says, is that a change in viewpoint toward another ethnic group can come from within a social group through positive and appealing role models who exhibit justice-minded attitudes—an important factor given that widespread segregation often makes it difficult for various groups to interact. By exploring such possibilities, Lowery's work is helping to expand there search on ethnic stereotyping in new directions. In addition, by working with participants in live settings such as the juvenile justice system—and not relying exclusively on student subjects as researchers in the laboratory typically do—he is also helping to demonstrate how racism operates in populations where such issues can literally be a matter of life and death.

Untested Assumptions May Have a Big Effect

STANFORD GRADUATE SCHOOL OF BUSINESS—Offering incentive pay makes organizations perform better. Driving down product and wage costs is essential for success in low-margin businesses. Holding people accountable results in fewer screw-ups. All fundamental truths of business, right? Wrong, says Jeffrey Pfeffer. These are merelyassumptions about what makes organizations competitive. Change your assumptions and you might find your company—and your profitability—improving, he says.

Pfeffer, the Thomas D. Dee II Professor at the Stanford Graduate School of Business, has observed that numerous, often hidden, assumptions underlie the mental models or mindsets of senior leaders. These assumptions inform the design of specific business practices—the particular compensation mechanisms, performance management systems, new measurement practices, and the like that define an organization. If such underlying assumptions are correct reflections of what truly produces employee and organizational effectiveness, you're golden. But if they turn out to be erroneous, you could be headed for trouble.

As Pfeffer notes in a recent article, the mental model driving Southwest Airlines puts employees first, customers second, and shareholders third. Company practices such as not serving meals or flying only 737s on short hauls are an outgrowth of this model, he argues. It's the philosophy, not the techniques, that has led to Southwest's growth and consistent profitability.

And it is why other airlines have not been able to replicate Southwest's success, despite having copied their practices, Pfeffer observes. "When managers want different results, they need to do things differently. But doing things differently on a consistent, systematic basis requires thinking differently—something managers often don't realize."

Helping senior leaders understand why mental models affect organizational performance is a high-leverage place for human resources to focus its organizational interventions, Pfeffer maintains. And the first step is to sit managers down and get them to bring their assumptions to light.

"I use an exercise, for example, where I ask participants to associate various pilots' wages with various airlines," Pfeffer says. "People generally assign the highest wages to the airlines that are having the most trouble. Their assumption is that lower wages lead to lower overall costs—and thus greater financial stability and profitability."

The next step is to evaluate whether or not the assumptions are correct. The equation "low wages equals lower costs," for instance, is false, Pfeffer argues. "If you're operating from that framework, you might decide that the only way to become competitive is to cut costs by reducing wages, as United Airlines has. But what's been the outcome? United has experienced turnover, disaffected employees looking to sabotage the organization, and problems with customers. People are abandoning the airline in droves and the company is in a death spiral."

Many beliefs taken for granted nowadays, such as the idea that incentive pay for teachers will improve educational outcomes and that creating strict accountability mechanisms improves performance, have turned out to be patently false. "The last 100 years' worth of research shows that incentive pay does not produce better results in education, even though this is a lesson that seems to be continually relearned," Pfeffer says. Similarly, systems designed to pin blame on individuals and departments for mistakes and problems only create a culture of fear and infighting. "Many managers are operating in ignorance," he says.

The third step in the process? "Sometimes you have to be a bit courageous and go your own way," Pfeffer advises. That's what the natural foods grocery store chain Whole Foods has done. It has given up on the conventional theory that driving product costs as low as possible is critical for profitability in the grocery industry. Instead, it has embraced the seemingly counterintuitive idea that people actually will pay more for high-quality food they want to eat. This strategic insight has led the company to customize prepared food and even packaged goods selections. As a result, the chain has (as of summer 2004) a price/earnings ratio on its stock of about 40 and a five-year return to shareholders of more than 330 percent.

"Clearly, what we do comes from what and how we think," says Pfeffer. "Intervening to uncover and affect mental models may be the most important activity HR can perform."

Let Them Eat Cake: How Thoughts of Death Affect Consumer Behavior

STANFORD GRADUATE SCHOOL OF BUSINESS—After the Sept. 11, 2001, terrorist attacks many Americans reported dramatic changes in their behavior, from increased church attendance and charitable giving to—at the other end of the scale—overeating and overspending.

Intrigued by these anecdotal reports, Baba Shiv, associate professor of marketing at Stanford Graduate School of Business, and colleagues Rosellina Ferraro and James R. Bettman from Duke University's Fuqua School of Business set out to discover what might be driving these changed behaviors.

They discovered that when confronted with thoughts of death, people tend to act in ways that will boost their self-esteem. They also have fewer cognitive resources to resist behaviors that are not central to their self-image. People for whom being slim or fit is important to their self-image, for instance, will not be as likely to overeat, but if physical appearance isn't as important, the willpower to resist that fudge sundae will plummet.

As a basis for the study, the researchers built upon an existing body of work on "Terror Management Theory," which attempts to explain how people cope when faced with a threat to their mortality. The theory holds that when reminded of their own mortality people first tend to cope in two ways: forcefully defending their cultural worldview (which could manifest itself in forms such as acting more aggressively toward someone with different political beliefs); or behaving in ways most likely to bolster their self-esteem.

The researchers decided to test the second part of this theory by examining two possible sources of self-esteem: physical appearance and being virtuous.

Researchers told 115 student subjects that they would be entered into a $200 lottery as part of their compensation for participating in a study. All participants first answered a questionnaire that measured the importance of virtue to their self-esteem. Half were then asked questions about the prospects of their own deaths while the other half were asked about dental pain. At the end, subjects in each group were asked how much of the $200 they would be willing to donate to charity if they won the lottery.

Participants for whom virtue was an important source of self-esteem offered significantly higher donations (an average of $65) when reminded of their mortality than when they were not (an average of just $34.50). Participants for whom virtue was not an important source of self-esteem actually donated less when reminded of their own deaths (an average of $20.36 compared with $28.60).

A second part of the study investigated body image as a source of self-esteem. Participants were first asked questions to determine how their attitude toward their bodies contributed to their sense of self. Half were then asked about their reactions to September 11 while the others were asked about a recent local fire in which a building was destroyed but no one was hurt.

Afterward, all participants were given the choice between two snacks—chocolate cake or fruit salad—ostensibly as part of their reward for participating in the study.

Among women whose bodies contributed greatly to their self-esteem, only 23 percent chose cake when their sense of mortality was high; a dramatic drop from the 38 percent that chose cake when their sense of mortality was low.

These numbers make perfect sense, according to Shiv. "When people are reminded of their deaths, they are desperately seeking to cope, and if a decision can help them boost their self-esteem, they will make that decision. Thus women whose bodies were important to their self-esteem were much more likely to reject the offer of chocolate cake when their sense of mortality was heightened."

However, among women whose bodies did not contribute significantly to their sense of self-esteem, 94 percent chose chocolate cake when reminded of 9/11—more than twice as many as those who chose cake when their sense of mortality was low (44 percent).

"If you are using all your resources to focus on some important aspect of self-esteem in order to cope with thoughts of death, and body esteem is not central to you, then you simply have fewer resources to help you resist that tempting piece of chocolate cake," said Shiv.

Interestingly, there was no difference between the men's choice of cake or fruit salad based on their sense of mortality. The researchers attributed this to the fact that physical appearance is more of a "hot button" for women than for men.

Shiv pointed out that this study might provide clues to precisely why life-changing behaviors often take place after a death has occurred. "A friend passes away and you say: ‘I will spend more time with my kids; I'll get into shape; I'll give more to charity.' This gives us a handle on why that happens."

Diverse Backgrounds and Personalities Can Strengthen Groups

STANFORD GRADUATE SCHOOL OF BUSINESS—Human resource executives say that diversity in the workplace can have a number of benefits, including improved understanding of the marketplace, enhanced creativity and problem-solving ability in teams, and better use of talent. But social science research is mixed on whether diversity does indeed have a positive effect on work-group performance or not. So what's the story? Is diversity a help or a hindrance?

In a recent article disentangling what researchers have learned over the past 50 years, Margaret A. Neale finds that diversity across dimensions, such as functional expertise, education, or personality, can increase performance by enhancing creativity or group problem-solving. In contrast, more visible diversity, such as race, gender, or age, can have negative effects on a group—at least initially.

However, says Neale, fault lines that emerge as a result of such demographic factors can be parlayed to a group's advantage too.

"In fact, the worst kind of group for an organization that wants to be innovative and creative is one in which everyone is alike and gets along too well," she says. And the key to making nearly any kind of diversity work is managing it well.

"One of the most interesting recent findings in the area of work-team performance," says Neale, the John G. McCoy-Banc One Professor of Organizations and Dispute Resolution, "is that the mere presence of diversity you can see, such as a person's race or gender, actually cues a team in that there's likely to be differences of opinion. That cuing turns out to enhance the team's ability to handle conflict, because members expect it and are not surprised when it surfaces." A more homogeneous team, in contrast, won't handle conflict as well because the team doesn't expect it. "The assumption is that people who look like us think like us, but that's usually just not the case," Neale says.

It's group conflict that actually makes a team function with more of the razor's edge it needs to be innovative. "Of course, we're talking about intellectual conflict, debate, and controversy, not personality conflict," says Neale, who recently coauthored an article with Elizabeth Mannix, a professor of management at Cornell. "A good manager wants to encourage the former but squash the latter."

One ramification of the finding that diversity stirs up the pot in healthy ways is that managers need to rotate the composition of their groups periodically to keep things fresh. But newcomers to the team should be different in some critical way, be it in an area of expertise, level of education, manner of thinking, or some similar dimension. In a study with Katherine Phillips, an associate professor at Northwestern, and Katie Lillenquist, a doctoral student at Northwestern, Neale looked at the impact of newcomers to a group. When the newcomers were socially similar to the team, old team members reported the highest level of subjective satisfaction with the group's productivity. However, when objective standards were measured, they performed the worst on a group problem-solving task. When newcomers were different, the reverse was true. Old members thought the team performed badly, but in fact it accomplished its task much better than the homogeneous group.

"What feels good may not always reflect the performance of the team," Neale explains. "In fact, teams with a very stable membership deteriorate in performance over time because members become too similar in viewpoint to one another or get stuck in ruts."

One rut for individuals is that of continually playing the same role in the group. That's why Neale suggests managers purposefully assign roles such as "devil's advocate," or "cheerleader," and occasionally switch around those roles. "In time, a chronic devil's advocate will simply be ignored, to the detriment of the group," she says. "But if a manager publicly assigns someone else to play that role for a while, that new person initially will be much more influential, even if he or she doesn't do it as well."

Since not all teams have managers insightful enough to make such interventions, Neale recommends that team players consider how they may change their own role spontaneously from time to time to surprise the group and keep it on its toes. "You need to constantly ask yourself: Do I want to be right or do I want to be effective?" she says.

One area in which diversity is absolutely, positively a liability, warns Neale, concerns a group's goals and values. "Conflicts and differences in this area will generally destroy a team," she says. "Managers simply must get team members to be in agreement about what the task is and the values that drive its pursuit." The tone that a manager sets from the very beginning in meetings around a group's mission and values can go a long way toward bridging diversity along both visible and invisible lines.

While it may seem paradoxical, one way to foster cooperation is to create an atmosphere in which dissenting views can be freely aired. "The minority viewpoint, whatever that may be, and whether it comes from a person who looks different or not, needs to be supported," she says.

Also counterintuitive is the idea that "a lot of diversity is better than a little diversity." The worst scenario is one in which a member is seen as a token representative of any given group. In her work studying dynamics of race, Neale, along with her colleagues Katherine Phillips of Northwestern and Gregory Northcraft of University of Illinois, found that three-person teams performed better when each person was a member of a different ethnic or racial group. "Two-on-one scenarios with, say, two Caucasians and an African-American, resulted in poorer performance than when the team comprised a Caucasian person, an African-American person, and an Asian-American person," she says.

Most of the research findings, Neale notes, are unexpected. "You wouldn't necessarily think that the conflict caused by diversity could lead to better performance, or that a team that feels more comfortable with itself in fact underperforms, but that's what studies show," she says. Her most important recommendation to managers? "Pay attention to the research. It will help you figure out whether what you're learning by doing is really the right thing."

The Key to a Successful Merger of Cultures? Look at Employee Demographics

STANFORD GRADUATE SCHOOL OF BUSINESS—You're a manager in a company that has recently merged. Despite aggressive coaching to help your employees understand and embrace a new corporate culture, you have some employees who are unwilling or unable to change their behavior. The success of the merger hinges on the employees from both organizations making a smooth transition to the new way of working. What do you do?

According to a new book from Glenn Carroll, the Laurence W. Lane Professor of Organizations at the Stanford Graduate School of Business, making it clear to such employees that they do not fit in—and thereby encouraging them to leave of their own accord—is an effective way to build a homogenous and harmonious organization.

The recommendation sounds harsh. "Although the implication of this finding for managerial policy is straightforward, it should be treated with caution—it is based on specific assumptions in a theoretical model. It is also only one of several effective demographic factors to merge the cultures; other options might be more attractive," says Carroll, whose book Culture and Demography in Organizations was published this year by Princeton University Press.

And the stakes are high. Although financial or strategic goals are usually the publicly stated reasons for most mergers or acquisitions, the success of any given one often depends heavily on the ability of the two firms to integrate their workforces into a unified whole. A merger can fail for any number of reasons, says Carroll, but cultural differences are increasingly thought to be a major cause of post-merger dysfunction.

Examples abound of merged organizations that failed to come together culturally. There's the merger of Compaq and Digital Equipment Corp. that was unsuccessful largely due to a culture clash that pitted Compaq's high-volume, fast-to-market strategic focus against DEC's more convoluted and lengthy sales cycles. Indeed, the business challenges created by the culturally troublesome merger are viewed as a reason that Compaq lost its position as the No. 1 computer maker to Dell, its longtime competitor.

"These problems can linger on for years after the merger has been completed," says Carroll. "Failing to successfully integrate the cultures is a very serious thing."

Talk about integrating two corporate cultures typically revolves around "cultural content"—the norms, beliefs, and values that lead to general descriptions of the firms such as bureaucratic, entrepreneurial, free-wheeling, or conservative. The predicted success or failure of any given merger is based upon an analysis that takes this cultural content into consideration.

"The problem is that people can make up any number of stories that can justify any type of merger," says Carroll. "You'll hear that a merger will be successful because two organizations are very similar in their cultural content. Another merger will be hailed as a good one because the organizations' cultures are so different, and will therefore complement each other."

As a result, Carroll and his co-author, J. Richard Harrison of the University of Texas, Dallas, reasoned that it would make sense to analyze cultural integration by looking at the demographics of the merging organizations. Demography is the study of population dynamics. Carroll and Harrison developed a demographic model of culture that encompasses a host of factors, including the growth rates of the firms, the selectivity of the hiring processes, the type and extent of socialization that occurs once employees are members of the organization, the rates of employee turnover, and the degree of alienation felt by employees.

Hiring selectivity refers to how carefully management selects new workers who fit into the culture. Selectivity can include personality testing as well as extensive interviewing by multiple employees—both peers and management—before a candidate is hired.

Socialization refers to how employees are indoctrinated into the new corporate culture. This can involve the pressure exerted by colleagues on each other to adapt to the new organization—or socialization by management, which can include such things as incentive bonuses, training classes, and corporate retreats.

Finally, alienation is the degree to which employees who don't fit in come to leave of their own volition. Either peers or management could ignore the employee in question, or give him or her difficult or unpleasant assignments until the employee simply quits.

Although the success of post-merger cultural integration is influenced by many demographic processes, the strongest effects seen in the Harrison-Carroll model are associated with hiring selectivity, management-based socialization, and alienation, Carroll says. Although alienation was found to be a strong factor, says Carroll, it wasn't the only one.

"The demographic way of thinking about mergers and acquisitions could be very useful to firms considering such a step," says Carroll. "It provides a whole new set of insights."

Financial Incentives Can Create Bad Employee Behavior

STANFORD GRADUATE SCHOOL OF BUSINESS—Offering financial incentives to motivate employees and executives has been a common management practice for decades. Car salesmen get higher commissions for selling more automobiles. Teachers get bonuses when their students score higher on standardized tests. Executives get generous stock options for boosting the company’s stock price.

Professor Jeffrey Pfeffer of the Stanford Graduate School of Business warns that using monetary incentives can backfire, especially if they are offered mainly to influence behavior.

“Incentives should be used not to drive behavior but instead to provide recognition and to share the company’s success with its employees,” he writes in the July/August 2007 issue of The Conference Board Review. “There are, unfortunately, few shortcuts in leadership—and using financial incentives to fix companies isn’t one of them.”

The article is based on a chapter in Pfeffer’s latest book, What Were They Thinking?: Unconventional Wisdom About Management, Harvard Business School Press, 2007.

Pfeffer, who is the Thomas D. Dee II Professor of Organizational Behavior, writes that increasingly companies and organizations have been using individual incentive pay—including sales commissions—to inspire employees to be more productive or efficient.

He cites a report by Hewitt Associates, the compensation and human resources consultancy, which said the percentage of companies participating in its salary survey that offered at least one plan that tied pay to performance jumped from 51 percent in 1991 to 77 percent in 2003.

Pfeffer said organizations use incentive pay based on the belief “that if employees were just compensated appropriately, virtually every organizational and management problem could be solved.”
However, that view can be misguided, he adds.

Pfeffer cites his own experience in buying a car on the San Francisco Peninsula. When he and his wife told a salesman that they were not planning to make a purchase that afternoon, the representative—who was paid by commission—began ignoring them. Pfeffer and his wife ended up buying a car from another dealership where more attentive salespeople “tried to build a customer-service culture and encourage dealer loyalty.”

Pfeffer also cited the experience of the city of Albuquerque where officials, hoping to slash overtime costs in garbage collection, began paying truck crews for eight hours of work no matter how long it took them to complete their routes.

The city hoped the new policy would encourage the workers to finish the job quickly. Instead, some crews cut corners—missing pick-ups; speeding, which caused accidents; or driving to the dump with overloaded trucks, which led to fines.

The controversial practice of awarding stock option grants to top executives has also been problematic, Pfeffer writes. “There is evidence that the higher the option grants to senior executives, the more likely it is that their companies will have to subsequently restate their financial statements.”

Corporations and organizations should not assume that their employees and members are motivated primarily by money, he writes. Financial incentives can play a role, but the key is still to build a supportive culture in an organization.

“You want rewards to be large enough to be noticed, and you want to use them to provide an occasion for celebration and recognition, to let the group come together and share successes and enjoy each other’s companionship,” Pfeffer writes. “But you certainly don’t want to make the incentives so large that they begin to drive, and thereby distort, behavior.”

However, Pfeffer laments that many corporations and organizations have come to rely too heavily on financial rewards.

“One can change a pay system or a set of financial rewards fairly quickly and easily,” he writes. “It is much harder to change organizational culture, people’s mindsets and beliefs, their knowledge and skills, and how effectively they work and communicate with each other. Thus, financial incentives offer the mirage of a quick fix—and contemporary management seems to be enamored of that idea.”

Challenging Work and Corporate Responsibility Will Lure MBA Grads

STANFORD GRADUATE SCHOOL OF BUSINESS—A survey of 759 graduating MBAs at 11 top business schools reveals that the future business leaders rank corporate social responsibility high on their list of values, and they are willing to sacrifice a significant part of their salaries to find an employer whose thinking is in synch with their own.

The study by David Montgomery and Catherine Ramus of UC Santa Barbara examines the tradeoffs students are willing to make when selecting a potential employer. They found that intellectual challenge ranked number one in desirable job attributes, while money and location were essentially tied for second, each roughly 80 percent as important as the most important factor. “Had money not been ranked high, I would have thought I’d made a mistake,” says Montgomery, the Sebastian S. Kresge Professor of Marketing Strategy, Emeritus.

A reputation for ethical conduct and caring policies towards employees ranked high as well—75 percent as high as intellectual challenge and 95 percent as important as the financial package. “I was frankly surprised that ethics and caring about people came up so important as they did,” says study coauthor Montgomery of the Stanford Graduate School of Business. “This augurs well for the character of the 21st century MBA.”

Other attributes of corporate social responsibility, including environmental sustainability and care for the community and other stakeholders, was weighted with over half the importance of the top job criterion, intellectual challenge.

Montgomery first looked at MBA job preferences some 30 years ago, but his initial interest was really methodological, he says. He wanted to demonstrate that conjoint analysis could predict behavior with a reasonable degree of accuracy. It does.

Montgomery and the late Dick Wittink, the George Rogers Clark Professor of Management and Marketing at the Yale School of Management and editor of Journal of Marketing Research, conducted interviews with MBA students early in the winter quarter of 1978, and used the results to make predictions about the types of jobs the graduates would accept. When the researchers compared the jobs the grads actually accepted the following spring, they found that the results of the conjoint analysis made a correct prediction 68 percent of the time. Chance alone was below 30 percent.

Because conjoint analysis has been shown to successfully predict MBA job preferences and choice, it answers one obvious objection to Montgomery’s work: “Aren’t the answers influenced by the subject’s desire to appear (both to the interviewer and to him/herself) socially conscious or at least, not greedy?” What’s more, the recent interviews were not conducted in person, but anonymously online, so there is also less chance of bias contaminating the answers.

Montgomery developed his own software to administer conjoint testing in the 1970s. A more sophisticated, commercial product called Sawtooth Software was used in the recent studies. The software poses questions to the subject; follow-up questions vary according to the content of the previous answer.

Montgomery, the former dean of the School of Business at Singapore Management University, travels widely and uses those opportunities to gather data. During appearances at business conferences in such venues as Seoul, Singapore, and Dubai he asked the largely American audiences how much of their salary they thought graduating MBA students would forego to work with an employer who shared their values of corporate responsibility. The majority (55.8 percent) thought the grads would sacrifice between zero and $3,000 a year, while just 5.4 percent put the number at $9,000 a year or more.

Seem accurate? It wasn’t. The attendees greatly underestimated the dollar amounts the grads would be willing to give up, a finding that shows the results of the broader study are far from intuitive.

Montgomery and Ramus broke down corporate responsibility into four categories: caring about employees, caring for stakeholders (such as community residents), environmental sustainability, and ethical business conduct. A fifth category was a model that shared all of the above characteristics.

The researchers found that the students expected to earn an average of $103,650 a year at their first job. Nearly all (97.3 percent) said they would be willing to make a financial sacrifice to work for a company that exhibited all four characteristics of social responsibility. They said they would sacrifice an average of $14,902 a year, or 14.4 percent of their expected salary.

Montgomery concedes that the students may have inflated the dollar amounts they would be willing to sacrifice, but because those numbers are very consistent with other data within the study, he said he believes the overstatements are not large.

Montgomery says he finds the results hopeful. “I wouldn’t have been surprised if the financial package had turned out to be most important,” he says.

As for the future, he and his colleague are broadening their sample and looking to see how gender and nationality figure into MBA job choices. His preliminary take: “It’s not a ‘Men are from Mars and Women are from Venus’ sort of thing,” though women do seem more concerned with social factors than men are, he says. Regional variations exist as well, with Europeans less likely to be concerned with attributes of corporate social responsibility than their counterparts in North America.

It appears, then, that recruiters may need to fine-tune their pitches to take into account the rising social consciousness of business students.

The Thought of Acquiring Power Motivates People to Act

STANFORD GRADUATE SCHOOL OF BUSINESS—In the wake of Barack Obama’s “yes we can” victory, a timely study has emerged from the Stanford Graduate School of Business about what motivates people to take action. The prime mover, say researchers, is acquiring a position of power.

Specifically, it is people’s new, more elevated perception of themselves after assuming a position with more power that inspires them to take more risks and pursue goals more confidently. Taking on a formal position of power—be it managerial, political, or cultural—gives people the illusion they have more control over their organization and their world, which, in turn, can propel them to go for the gusto. In the best-case scenarios, this can lead to achieving unimaginable accomplishments. In the worst, it can lead to poor decision making and devastating losses.

In one study, researchers stimulated thoughts of empowerment among a group of participants by having them describe in writing a time when they had power over others. Another group was asked to write about a time when they were not empowered. Researchers then measured participants’ mindsets by asking them to predict the outcome of a roll of a die. Participants’ choice either to roll the die themselves or have another person roll it for them served as an indicator as to whether they were feeling confident or not in the moment.

“When people feel they can control the outcome, they want to roll the die. It’s a classic measure of the ‘illusion of control,’” explains Nathanael Fast, a doctoral candidate in organizational behavior at the Graduate School of Business, who conducted the study with Deborah Gruenfeld, Moghadam Family Professor of Leadership and Organizational Behavior at the Business School; Niro Sivanathan of the London School of Business, and Adam Galinsky of Northwestern University. In this experiment, 100 percent of the “high power” group chose to roll the die themselves, as opposed to only 58 percent of the “low power” group. “This shows that power boosts people’s sense of control over outcomes, even when the outcomes are based entirely on chance,” Fast says.

In a second study, one group was assigned to the role of manager, another to the role of subordinate. All participants were told they would do a role play, but first they were asked to complete an unrelated activity that involved reading about an organization and rating how much control they thought they could have working in that organization, as well as how optimistic they were that the organization could do well.

Those designated as managers were significantly more optimistic about the organization in the material they read; they thought they would have more control over the organization’s fate than those in the subordinate group. “People with a position of power believed they could control outcomes that stretched beyond their actual power,” says Fast.

This finding may explain why CEOs sometimes make over-optimistic decisions, such as paying too much for mergers or acquisitions. “Because of the illusion of control that their role gives them, they may tend to overestimate how much influence they will have in turning such transactions into huge profits,” Fast observes.

In a third study, participants were again primed by being asked to write about situations in which they had been either empowered or disempowered. They then took a self-esteem test and were asked questions such as whether they would vote in the next election, to what extent they thought their vote would affect the outcome, and how much influence they believed they had over the national economy.

Participants who were primed for power had much higher self-esteem scores and a much greater illusion of control than those primed for disempowerment. They were more likely to say they would vote and that their actions could have an impact on the world.

The investigators ruled out the argument that mood drives people to act. They found that “happiness” levels were similar regardless of which group they were in. “It’s because power gives people a sense of control, not happiness, that it inspires more confident action taking,” he said.

“One implication of this work is that powerful people shape our world not just because they have resources, but because they believe they can shape the world –– and therefore they try,” says Fast. “People with low power mindsets do less than they otherwise could.”

Because those who believe they are empowered are more active and productive, managers may want to create more confident employees by giving them a say in their organizations, he suggests. On the other side, leaders need to caution against over confidence. “When someone takes on an air of invincibility after being promoted to a more powerful position, the effects on an organization can be devastating,” says Fast.

What is required, he suggests, is a system that ensures critical thought. “Research shows that carefully evaluating the pros and cons of a decision tends to reduce the illusion of control,” he says. Instituting mechanisms that require deliberation is the key to preventing snap decisions by CEOs with little time and big egos.

It Really IS The Thought That Counts

STANFORD GRADUATE SCHOOL OF BUSINESS—’Tis the season, and if you’re like most people you’ll probably end up dropping a heftier sum of cash than you’re comfortable with on presents for loved ones and colleagues. The findings of a recent study, however, might encourage you to think twice about what you really need to spend.

Two investigators from the Stanford Graduate School of Business have found that when it comes to putting out money for gifts, less may well be more. In several studies, they discovered that although most gift givers assume that a more expensive present will be more appreciated, receivers don’t appreciate expensive gifts that much more. In fact, the old aphorism still holds true: money can’t buy you love.

In one study, researchers looked at one of the most common large-ticket items purchased year-round: the engagement ring. Surveying recently engaged couples online, they found that, on a scale of one to seven, men consistently thought their rings were more appreciated by their fiancées the more expensive they were. Fiancées themselves, however, did not rate themselves as any more appreciative if the rings were more costly.

“This shows that men shouldn’t feel bad if they can’t afford to buy the ring they really want,” says Frank Flynn, associate professor of organizational behavior at the Stanford Graduate School of Business and a co-researcher on the study. “The fact that the thought counts more than the price tag is important for people to realize, especially in these challenging economic times when people are really strapped for cash.”

In a second study, Flynn and an associate asked a nationwide sample of participants to think about a recent birthday gift they had either given or received. Participants described a variety of gifts, including t-shirts, CDs, jewelry, wine, books, and home décor items. Again, those who were givers expected that more expensive gifts would make the recipients feel significantly higher levels of appreciation. In contrast, the recipients said they did not feel greater appreciation levels for gifts that had cost more.

“You simply don’t have to spend that extra hundred dollars to get the same level of appreciation for a gift,” observes co-researcher Gabrielle Adams, a doctoral student in organizational behavior at the Business School. In fact, say the investigators, givers are likely to spend $100 to buy a gift that receivers would only spend $80 to purchase for themselves. Economists call the excess $20 “deadweight loss”—money consumers could have better spent in other ways.

In Flynn and Adams’s third study, participants were asked to think about giving or receiving either a CD or an iPod as a graduation present. Once again, those who were randomly assigned to be “givers” thought by giving the more expensive iPod their present would be appreciated more in contrast to the CD. The “receivers” rated no difference in appreciation levels, regardless of which item they were told to think about getting.

The same attitudes that we show towards gifts wrapped with a bow can be seen in the business arena. Flynn and Adams say companies do not necessarily have to go overboard in rewarding employees for a job well done. “In the dot com boom, you heard about excesses such as organizations rolling out Harley Davidsons as Christmas gifts for staff,” Flynn says. “The recognition that’s conveyed through smaller gestures, perhaps done more frequently, is just as meaningful, if not more so, than large, splashy gifts.”

And on the home front, the research shows that people need not feel guilty about putting spending caps on their holiday gift budgets—which should be a welcome balm in these financially troubled times. “The people for whom your gifts are destined won’t necessarily know you were weighing and measuring items with different prices,” Adams says. “They’ll more than likely just be happy to get any gift at all.”

How to be a good boss in a bad economy

When cutbacks are necessary, can a good boss do right by the company's finances and by its staff? Some pain is probably unavoidable, but Stanford management science and engineering Professor Bob Sutton says that psychological and organization theory research suggests clear ways to handle such situations with a minimum of harm to the people and company involved. He makes that case in this month's issue ofHarvard Business Review.

"The best bosses understand that there is a difference between what they do and how they do it," says Sutton, author of the 2007 New York Times bestseller on bad bosses,The No A**hole Rule. "This article is about evidence-based ways to make and implement tough decisions such as layoffs, pay cuts and the like in ways that protect both human dignity and organizational performance."

Bosses often mishandle the organizational psychology of recessions because they get caught in a Catch-22 of human nature that Sutton calls the "toxic tandem." Many researchers have shown that people in power tend to become somewhat oblivious to the needs of their subordinates, Sutton says, but subordinates usually watch their bosses intently for any sign of what's going on and typically assume the worst—and they watch their bosses even more closely during scary economic times. As bad as times may truly be, Sutton says, the toxic tandem magnifies fear and paranoia, which undermine morale and productivity.

In the article "How to Be a Good Boss in a Bad Economy," Sutton brings a number of sources together in concluding that good bosses are those who can look beyond their own needs and stresses, and attend to four of their employees' psychological needs: predictability, understanding, control, and compassion.

Four ways to be a good boss

Predictability: Studies of people and animals show that the ability to predict pain not only makes experiencing it much more bearable but also offers sufferers the ability to enjoy relative calm when they can be sure the pain isn't imminent. Bosses who can give employees definitive warning of when the ax will fall and when it won't can help make the process of making cutbacks less disruptive. In the article, Sutton presents as models managers who guaranteed to employees that no layoffs would be made "for at least three months'' or others who made deep cuts up front but with the guarantee there would be no more for at least six months.

Understanding: People are also much more able to tolerate adversity if they know why it is upon them, Sutton says. Bosses therefore probably cannot go too far in offering a sincere and informative explanation over and over again.

"Your job as boss is to design messages that will get through to people who are distracted, upset and apt to think negatively given any ambiguity," Sutton wrote for the journal's decidedly managerial audience.

Control: Few bosses are likely to give the rank and file control over cutbacks, but they can give employees some hope that their hard work to keep the company afloat will be successful. Citing the research of University of Michigan organizational theorist Karl Weick, Sutton advises bosses to engage employees in the process of breaking down the company's big-picture challenges into manageable parts. That exercise will help ensure that the work gets done, and will give employees a sense that they can have a positive impact on their situation.

Compassion: In the article, Sutton describes an Ohio State University study in which manufacturing employees who were treated callously by their boss during the process of closing their plant stole more from the company than workers at a nearly identical plant who were given a compassionate and detailed hearing by their boss during the same process. Respecting the dignity of those laid off, Sutton says, will help preserve the loyalty and productivity of the workers who stay.

Sutton emphasized that managing during rough times challenges even the most experienced bosses, but "the best find ways to preserve the dignity of everyone affected and look beyond the immediate crisis, often asking themselves, 'When I look back on what I did, will I be proud or ashamed?'"

Are Wall Street Careers Just the Luck of the Draw?

STANFORD GRADUATE SCHOOL OF BUSINESS—Paul Oyer backs away from using the word "luck." But nevertheless his research shows that many young MBAs who go into investment banking might just follow that career due to happenstance as much as because of a die-hard allegiance to Wall Street. And those who graduate during a bear market may never get the chance later to start a Wall Street career—a fact that dramatically cuts down on their lifetime earnings.

"It always struck me that being in the right place at the right time was important in career paths," said Oyer, a professor of economics at the Stanford Graduate School of Business who studied the long-term career choices and salaries of more than 35 years' worth of the School's graduates. Oyer, who also researched career choices of PhD students, said he’s not surprised by recent research that finds the same career pattern for undergrads’ career tracks.

Oyer conducted surveys in 1996 and 1998 and concluded that random factors play a large role in determining the kinds of jobs that MBAs take upon graduation. Specifically, the proportion of graduating MBAs who manage to get hired into lucrative investment banking positions shrinks or expands depending on how well the stock market is performing in a given year.

For example, more than a quarter (26 percent) of Stanford MBAs who graduated two years before the stock market crash of 1987 became investment bankers. But just 17 percent of the MBA graduates two years after the crash took that career path. And the difference in payoff was huge. Based on the salaries provided by thousands of MBAs in this self-reported survey, Oyer calculated the present value of lifetime income of an MBA who went into investment banking to be $2 million to $6 million higher than an MBA who went into a non-banking career. "Thus the classes of 1988 and 1989 could expect significantly lower lifetime income due to the timing of their graduation than the classes of 1985 and 1986," said Oyer.

Oyer also discovered that MBAs who go into investment banking—a category in which he includes money managers and venture capitalists—tend to stay there for the long term. For example, in the first few years after receiving their MBA degree, 5 to 10 percent of the people in investment banking leave, but attrition slows significantly after the fifth year and the percentage of a typical graduating class that works in investment banking does not change significantly after that point.

Thus although it might seem intuitive to believe that there are a limited number of MBAs who have a natural aptitude for investment banking, there's no evidence to support that. Instead, the significantly greater numbers of MBAs who go into investment banking during bull markets are just as dedicated to banking in terms of how long they stay there and how much money they make. "This tells me that there is a deep pool of potential investment bankers in any Stanford MBA class," said Oyer.

Another of the surprising things Oyer found during his research is that MBAs are not hopping in and out of investment banking in search of the perfect job. "The idea has long been that MBAs change jobs all the time. But what this study shows is that they are not jumping in and out of investment banking. It's pretty sticky. Once you're there you tend to stay; once you've started down another path, you're not likely to move to a Wall Street firm."

The research also suggests that bull markets might discourage entrepreneurs. "One question you would naturally ask, if in bull markets more people go into investment banking, what they are not doing?" asked Oyer. "And because there are a fairly limited set of things that MBAs do, there's some evidence that when bull markets move people onto Wall Street, it takes away from consulting and entrepreneurial careers."

On thing that the study does bear out is that graduating MBAs are correct in perceiving that general economic factors in the year they graduate will have profound long-term implications on their careers. "Every year our students get very anxious about the state of the job market. I always thought we—because I was the same way when I was finishing school—were being silly," said Oyer. "But as it turns out, we had pretty good reasons to be worried about the state of the job market, as it would affect a lot of us for a long time to come."

Self-Identified Multiracial Individuals Realize Real Benefits

STANFORD GRADUATE SCHOOL OF BUSINESS—At some point in your life, you've probably checked off a box on a form that asks you to specify your ethnicity. But educational and governmental organizations are under increasing pressure to include a multiracial option rather than forcing individuals with complex racial heritages to choose just one category.

For Kevin Binning, Miguel Unzueta, Yuen Huo, and Ludwin Molina, this raised a provocative question: Does identifying themselves as multiracial help or hinder the psychological well-being of individuals of diverse ethnicity?

Previous studies had assumed that if an individual had a multiracial heritage that he or she automatically identified with that heritage. Yet Binning and his fellow researchers hypothesized that simply belonging to multiple racial groups did not guarantee that a person would psychologically identify with all of those groups. "We thought that digging deeper into the multiracial category to examine how such individuals interpreted their racial identity would help our understanding of multiracial psychology," said Binning, a post-doctoral scholar at the Stanford Graduate School of Business and coauthor of "The Interpretation of Multiracial Status and Its Relation to Social Engagement and Psychological Well-Being," published recently in the Journal of Social Issues.

In the study, high school students who belonged to multiple racial groups were asked to indicate their ethnic heritage by checking as many boxes as necessary on a form. They were also asked an open-ended question about which groups they primarily identified with. They were then classified as identifying with a group the researchers had designated as having a relatively low social status (black or Latino), a relatively high social status, (Asian or white), or multiple groups (for example, black and white or "multiracial"). Those who identified with multiple groups reported either equal or higher psychological well-being and social engagement than those who identified primarily with a single group.

Interestingly, it didn’t matter whether the groups the students identified with were characterized as low or high-status. "We were surprised to find virtually no differences between individuals who identified with either low- or high-status groups," said Binning. "What mattered was whether they acknowledged their multiracial identity." In the past, research suggested that members of high- and low-status groups differed psychologically.

Binning and his associates have some theories about why there might be some psychological benefits associated with having a multiracial identity. "For one, perhaps being able to 'stand one’s ground' and reject social pressure to identify with a single racial group indicates resiliency," said Binning. Additionally, instead of falling between the cracks of two separate cultures, individuals who identify with multiple groups might be better equipped to assimilate into both racially homogenous and racially mixed environments. In this way, multiracial individuals in diverse environments might have a broader sense of "fitting in," which can boost both their psychological and social well-being.

Alternatively, being forced to identify with one race over another can be disconcerting. "If I'm a member of multiple groups and forced to identify with only one group, I'm—by necessity—rejecting part of my identity," said Binning. "Typically, this means taking on the race or ethnicity of one parent over another. This can put people on the defensive, emotionally."

The authors also felt that individuals who feel comfortable in several different cultures might be able to better "frame switch" between different cultural mind sets.

"Such individuals might be able to seamlessly switch between their different cultures' ways of perceiving the world, which could help them navigate through racially diverse environments," said Binning.

Given that this research highlights the benefits of possessing a multiracial identity, should society encourage individuals to adopt this attitude? "Much more research is needed to determine an answer to this," said Binning. A major question, for example, is whether adopting a multiracial identity causes psychological and social well-being, or if the reverse is true. "It could simply be that better-adjusted individuals tend to accept their multiracial identity," said Binning. "We're not sure at this point what the causal relationship is."

The data reported in this article is part of a larger data set collected with a UCLA Center for Community Partnership Grant awarded to Yuen J. Huo, an associate professor in social psychology at the University of California, Los Angeles. Coauthor Unzueta is an assistant professor at the UCLA Anderson School of Management. Molina is an assistant professor of social psychology at the University of Kansas.

One of the reasons that this research study is getting a lot of attention is President Barack Obama’s own mixed-race heritage. "In his books he stresses his own mixed ethnicity, and how he struggled with that during his teenage years," said Binning. And as the U.S. population becomes increasingly heterogeneous, "this issue is only going to become more important in coming years."