Ethan Bernstein

The Transparency Paradox A Role for Privacy in Organizational Learning and Operational Control

Using data from embedded participant-observers and a field experiment at the second largest mobile phone factory in the world, located in China, I theorize and test the implications of transparent organizational design on workers’ productivity and organizational performance. Drawing from theory and research on learning and control, I introduce the notion of a transparency paradox, whereby maintaining observability of workers may counterintuitively reduce their performance by inducing those being observed to conceal their activities through codes and other costly means; conversely, creating zones of privacy may, under certain conditions, increase performance. Empirical evidence from the field shows that even a modest increase in group-level privacy sustainably and significantly improves line performance, while qualitative evidence suggests that privacy is important in supporting productive deviance, localized experimentation, distraction avoidance, and continuous improvement. I discuss implications of these results for theory on learning and control and suggest directions for future research.

Facts and Figuring: An Experimental Investigation of Network Structure and Performance in Information and Solution Spaces

Using data from a novel laboratory experiment on complex problem solving in which we varied the structure of 16-person networks, we investigate how an organizations network structure shapes the performance of problem-solving tasks. Problem solving, we argue, involves both exploration for information and exploration for solutions. Our results show that network clustering has opposite effects for these two important and complementary forms of exploration. Dense clustering encourages members of a network to generate more diverse information but discourages them from generating diverse theories; that is, clustering promotes exploration in information space but decreases exploration in solution space. Previous research, generally focusing on only one of those two spaces at a time, has produced an inconsistent understanding of the value of network clustering. By adopting an experimental platform on which information was measured separately from solutions, we bring disparate results under a single theoretical roof and clarify the effects of network clustering on problem-solving behavior and performance. The finding both provides a sharper tool for structuring organizations for knowledge work and reveals challenges inherent in manipulating network structure to enhance performance, as the communication structure that helps one determinant of successful problem solving may harm the other.

STRATEGIC CHANGE AND THE JAZZ MINDSET: EXPLORING PRACTICES THAT ENHANCE DYNAMIC CAPABILITIES FOR ORGANIZATIONAL IMPROVISATION

How can leaders adopt a mindset that maximizes learning, remains responsive to short-term emergent opportunities, and simultaneously strengthens longer-term dynamic capabilities of the organization? This chapter explores the organizational decisions and practices leaders can initiate to extend, strengthen, or transform “ordinary capabilities” (Winter, 2003) into enhanced improvisational competence and dynamic capabilities. We call this leadership logic the “jazz mindset.” We draw upon seven characteristics of jazz bands as outlined by Barrett (1998) to show that strategic leaders of business organizations can enhance dynamic capabilities by strengthening practices observed in improvising jazz bands.

All's Fair in Love, War & Bankruptcy? Corporate Governance Implications of CEO Turnover in Financial Distress

Prior discussions of management turnover during financial distress have examined bankrupt and non-bankrupt firms as distinct groupings with little overlap. Separately investigating rates of turnover in-bankruptcy and out-of-bankruptcy, without a direct comparison between the two, has resulted in a narrowing of the accepted influence of bankruptcy law to post-petition, in-court decisions. Based on new evidence of CEO turnover in 2001, I argue empirically that this distinction between in-court and out-of-court restructuring has become meaningless from a governance perspective. In 2001, filing for bankruptcy did not change the rate of CEO turnover when one controls for financial condition. This statistically significant finding indicates that the shadow of bankruptcy has lengthened, making bankruptcy law a central tenet of governance policy regardless of whether a Chapter 11 petition is ever filed. After presenting these results, this article considers the implications of these results on the changing perceptions of the role of CEOs and the evolution of the multi-pronged U.S. corporate governance system.

How intermittent breaks in interaction improve collective intelligence

Significance Many human endeavors—from teams and organizations to crowds and democracies—rely on solving problems collectively. Prior research has shown that when people interact and influence each other while solving complex problems, the average problem-solving performance of the group increases, but the best solution of the group actually decreases in quality. We find that when such influence is intermittent it improves the average while maintaining a high maximum performance. We also show that storing solutions for quick recall is similar to constant social influence. Instead of supporting more transparency, the results imply that technologies and organizations should be redesigned to intermittently isolate people from each other’s work for best collective performance in solving complex problems. People influence each other when they interact to solve problems. Such social influence introduces both benefits (higher average solution quality due to exploitation of existing answers through social learning) and costs (lower maximum solution quality due to a reduction in individual exploration for novel answers) relative to independent problem solving. In contrast to prior work, which has focused on how the presence and network structure of social influence affect performance, here we investigate the effects of time. We show that when social influence is intermittent it provides the benefits of constant social influence without the costs. Human subjects solved the canonical traveling salesperson problem in groups of three, randomized into treatments with constant social influence, intermittent social influence, or no social influence. Groups in the intermittent social-influence treatment found the optimum solution frequently (like groups without influence) but had a high mean performance (like groups with constant influence); they learned from each other, while maintaining a high level of exploration. Solutions improved most on rounds with social influence after a period of separation. We also show that storing subjects’ best solutions so that they could be reloaded and possibly modified in subsequent rounds—a ubiquitous feature of personal productivity software—is similar to constant social influence: It increases mean performance but decreases exploration.

Seeing Too Much: Too Much In Sight, Too Little Insight? An Attention-Driven View of Productivity

To enhance others’ performance in organizations, when should we observe others, and when should we not? To enhance our own performance, when should we be observed, and when should we not? Despite the logical need for congruous answers to those two sets of questions, answers remain asymmetrical: we demand transparency of others but want privacy for ourselves, and centuries-old, separate literatures on transparency and privacy are sufficiently siloed to permit thriving yet inconsistent theory for organizations. While a recent ASQ article identifies a “Transparency Paradox” and concludes privacy may be productive for organizations (Bernstein, 2012), it fails to identify the detailed mechanisms for how privacy supports productive deviance, experimentation, and avoidance of costly hiding. Using new data from the field experiment which demonstrated the Transparency Paradox, conducted at the second largest mobile phone factory in the world, I draw on micro-level burgeoning theory and research on selective attent...