Aggressive, ethically dubious business practices may result from the culture
HOBOKEN, N.J. — Stringent board oversight, threats of prompt dismissal for poor performance, compensation contracts with heavy contingent pay elements, and other mechanisms designed to maximize shareholder value may actually hinder the performance of top executives according to research co-authored by Dr. Ann C. Mooney of Stevens Institute of Technology’s Howe School of Technology Management.
“Executive Job Demands: New Insights for Explaining Strategic Decisions and Leader Behaviors,” which is forthcoming in the journal Academy of Management Review, analyzes how the level of difficulty faced by executives influences their actions and performance. The study – co-authored by Sydney Finkelstein from the Tuck School at Dartmouth College and Donald C. Hambrick of Penn State’s Smeal College of Business – is the first to address the topic of executive job demands.
“CEOs at Mattel, Bristol-Myers Squibb, K-Mart, as well as highly visible cases at Enron, Tyco, Worldcom, and Adelphia, were all widely criticized for aggressive, even ethically dubious acts,” the authors write. “Some observers would attribute their actions to hubris or to greed, but in our estimation, extremely intense job demands also may have played a major role.”
The study suggests that the varying levels of demand facing top executives is determined by three factors: task challenges, performance challenges (i.e., requirements or expectations imposed by the firm’s owner, directors and other constituencies), and executive aspirations (i.e., the internal drive to succeed). Combined, these factors make the work of executives more (or less) difficult and result in a variety of consequences or behaviors with the potential to negatively impact the organization.
For example, executives under extreme job demands will exhibit more extreme strategic behaviors such as large-scale acquisitions, divestitures, reorganizations, downsizing, and aggressive accounting practices; leaders who have successfully weathered difficult conditions will develop a sense of invincibility; and as executive demands increase, so does the tendency to imitate the strategic actions of other firms without the necessary analysis.
“We do not wish to be seen as apologists for the recent mistakes of executives,” the authors write. “America’s corporate leaders were fully responsible for their actions. Nor are we saying that executives should necessarily be spared any pressure. As the old adage goes, ‘If you can’t stand the heat, get out of the kitchen.’ We are simply proposing that the heat in the kitchen, or executive job demands, is an instrumental factor in shaping executive behavior.”
Dr. Mooney conducts research on strategic decision making. Among other things, she has explored conflict management in top management teams, the importance of effective process in boards of directors, and the pressures and constraints on CEOs and its effect on CEOs’ outside board memberships. She serves as an ad-hoc reviewer for The Journal of Management and The Academy of Management Journal. Mooney has also served as a consultant to several Fortune 500 companies as an independent consultant and formerly as an employee of Coopers & Lybrand (predecessor of PriceWaterhouseCoopers) and Arthur Andersen.
Source: Eurekalert & othersLast reviewed: By John M. Grohol, Psy.D. on 21 Feb 2009
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