Why Individuals In Larger Teams Perform Worse

The University of Pennsylvania's Jennifer Mueller has published an interesting new study regarding team effectiveness.  She examines why individuals in larger teams tend to perform worse than individuals in smaller teams.  For many years, scholars have argued that motivation and coordination problems tend to worsen performance in larger teams.  Mueller does not dispute that these effects exist.  However, she demonstrates another factor that may play an important role.  Mueller's work shows that intra-group relationships may not be as strong in larger groups, and that may decrease individual performance.  She writes:

"Specifically, there may be process losses due to relational losses- individuals in larger teams perceive that support is less available in the team. Hence, the current paper expands the theory of group size and performance by identifying that individuals in larger teams also experience relational loss, and this additional source of process loss contributes uniquely to poor individual performance."

What's the implication for team leaders?  Based on this research, leaders ought to spend more time with larger groups focused on making sure that helping and supporting relationships exist among team members.  They need to identify key team members who may play a role in facilitating support for their fellow team members.  Moreover, they need to encourage team members to reach out if they need support from peers. 

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Do we complicate easy decisions unnecessarily?

Knowledge@Wharton has profiled a new paper, "Complicating Choice," by Wharton marketing professor Rom Schrift and co-authors Oded Netzer and Ran Kivetz of Columbia University.  They find that consumers tend to feel that a certain amount of effort should be associated with making a buying decision.  The notion comes from people's belief that hard work pays off, and that a lack of appropriate effort will lead to a bad outcome.  If a decision appears "too easy" to us, we sometimes come to the conclusion that the seemingly obvious choice is "too good to be true."   As a result, we over-complicate the decision.  We make it more complex in order to make ourselves feel as though we have exerted appropriate effort.  Of course, such over-complication may lead us to choose a less desirable option or to waste time and energy.   We may end up moving far too late and missing a golden opportunity. 

The scholars discovered three ways in which consumers over-complicate easy decisions.  First, they "make the unimportant important."  In other words, they end up deliberating about an attribute that they didn't even care about at the initial stages of the decision process.  Second, they make two alternatives appear more equal than they actually were.  Third, people actually alter their preferences about specific attributes of one of the the options in order to make their decision harder.

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HP's Exit from PC Business

While I was away on vacation, HP announced that it was exploring the sale of its PC business.  Naturally, the news surprised many journalists and investors, given how much attention the company has focused in recent years on the unit.  I don't find it shocking though.  As my students learn in their strategic management course, the Wintel portion of the PC industry is incredibly unattractive.  If you conduct a five forces analysis, you come to the conclusion that the industry is characterized by low product differentiation, massive supplier power (Microsoft, Intel), and substantial price rivalry.   More recently, substitutes have become problematic (smartphones, slates, etc.).  

As a result, the margins in the PC business prove incredibly thin for many players.  HP generated a large portion of its revenues from the PC business, but only a small slice of its profits.  Over the years, the incredible profitability of HP's printer business has masked many sins, including the thin margins on PCs and ill-fated new product introductions such as HP's TouchPad.  

The unattractive industry structure has led many firms to exit thePC business over the years, most famously IBM with its divestiture to Lenovo.  Even Dell has struggled on the consumer side of the PC business, though it has been very profitable with its core business focused on the corporate customer.  Of course, Dell has had a tremendous low cost position for many years.  

What's the lesson of this story?  As Warren Buffet once said, "When an industry with a reputation for tough economics meets a manager with a reputation for excellent performance, it’s usually the industry that keeps its reputation intact."

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Why ESPN should embrace crowdsourcing

In the National Football League, statisticians have compiled a measure called "passer rating" to evaluate quarterbacks since 1973. Many people have criticized this statistic since it's inception. This year ESPN invested a great deal of time and effort to develop a better measure that they call "total QBR.". They unveiled the rankings of QBs based on this measure in a TV special recently. They argued that this rating includes a much better evaluation of how QBs perform in key situations.

Interestingly, ESPN did not disclose the actual formula and methodology for compiling the rating. I think this was a mistake. These days so many statistics experts love to dissect sports. They would love to sink their teeth into this rating. If ESPN embraced crowd sourcing, they could create a contest whereby many people could compete to refine and improve the measure. They could offer a special prize for the winner - think one day at the firm's Bristol headquarters complete with a lunch with a top ESPN personality. Such a contest wouls be very inexpensive to run, but it would have many benefits. It would engage many rabid sports fans, who are ESPN's core customers. The contest would specifically build connections with stats-obsessed fans. It could yield a better measure. Moreover, being open about the method could enhance the acceptance and use of this new rating by fans, media folks, and teams. Think of the hoopla that they could create and the attention it would draw.

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Changing the Culture at Ford

I watched a CNBC special last night about the transformation taking place at Ford under Alan Mullaly. I found one story particularly interesting. Ford had a culture in which managers feared disclosing problems or admitting problems in front of senior executives. During the early months of Mullaly's tenure, EVP Mark Fields spoke about a planned new product launch. He disclosed a problem with the vehicle and recommended a launch delay. As Mullaly tells it, many people looked around the room wondering what would happen next. Putting a problem out in the open like that did not happen usually at Ford. If it did occur, the consequences were not typically positive. Mullaly did something rather remarkable. He started applauding right there in the meeting! He celebrated Fields' openness and willingness to confront the problem head-on. He told team that he didn't want managers keeping bad news from him. What a terrific leadership moment!

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Reverse Innovation

Vijay Govindarajan of Dartmouth's Tuck School of Business gave a terrific presentation yesterday at the Academy of Management conference. He spoke about reverse innovation, a concept he introduced in an HBR article he wrote with GE CEO Jeff Immelt. Vijay described how most multinationals develop innovations in industrialized nations and then try to sell them in emerging markets. Reverse innovation occurs when innovations arise in emerging markets and then multinationals find markets for those products in the developed world. He gave the example of a EKG machine that GE sells in the US for $25,000. Naturally most Indian health care providers cannot afford these machines, particularly in rural areas. Thus, GE developed a simple $500 mobile device well-suited to rural India. Then, they realized a market for those devices exists in the US. Specifically, they have found that ambulances can carry these low cost mobile devices. Vijay argued that reverse innovation represents a huge opportunity for many multinationals. I think it's a fascinating phenomenon to watch.

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Reviewing Organizational Failures: The Case of Medical Accidents

NYU professor Lucy MacPhail has earned a best paper award here at Academy of Management for her paper examining how an academic medical center conducts reviews of medical accidents. In healthcare, regulators dictate that certain types of errors must be subjected to a formal organizational review. MacPhail found that the hospital did indeed conduct systematic reviews in accordance with regulatory oversight. However, her research shows that the hospital did not review a number of incidents which had the potential to provide substantial learning opportunities. Why not? Those incidents did not fall under the regulatory rules. In other words, the focus on compliance may steer managers away from investigating failures which may yield key learning. I believe that similar experiences may exist in a number of other industries. MacPhail recommends that organizationals their own learning goals, independent of compliance concerns. Those learning goals should drive the selection of projects to review in a systematic manner.

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