Leader Communication About Crowdsourcing and Participative Management: More Rhetoric Than Reality?

In this post authors Jim Westphal of the University of Michigan, David H. Zhu at Arizona State University, and Rajyalakshmi Kunapuli of Southwestern University reflect on their article, “Seeking input when the train has left the station: The decoupling of participative strategic decision-making processes and the role of new technology in symbolic management,” appearing in Strategic Organization.

crowdsurfing at rock concert
When you hear business leaders start adopting cool-kid rhetoric, it may be that their company stock is heading for a fall.

Do top managers walk the talk about participative management and their use of new technology in strategic decision making? Often not, as it turns out. We conducted longitudinal surveys of CEOs and top managers at 181 companies that disclosed participative strategic decision-making (PSDM) programs, which purportedly used crowdsourcing technology to solicit input on strategy below the executive suite.

Our results indicated that a large majority of these companies decided on a strategic option before seeking input about it under the program, a kind of “decoupling” between rhetoric and reality in strategic decision making. Yet, firms also derived significant reputational benefits from communicating about these programs. Disclosure of a PSDM program in communicating with security analysts was associated with more positive analyst appraisals, despite not using the input, and the benefits were especially high when they highlighted their use of crowdsourcing technology in seeking input. For example, an increase of one standard deviation in the extent to which CEOs highlighted the use of crowdsourcing technology in a PSDM program in communicating with analysts was associated with an average increase in earnings forecasts of approximately 33 percent.

James Westphal, David H. Zhu and Rajyalakshmi Kunapuli
James Westphal, left, David H. Zhu and Rajyalakshmi Kunapuli

Further analysis showed that these effects were mediated by reduced questioning from analysts about strategic decision making. In effect, talking about the use of crowdsourcing technology had a pacifying effect on the critical evaluations of security analysts.

What’s the larger lesson from this research? Modern technologies like crowdsourcing appear to increase the efficiency, objectivity, and quality of decision making, but they can have a biasing influence. At least in Western culture, people tend to assume that new technologies are free of social and political influences. In cultural anthropology, this is called the “dualist” bias. As Langdon Winner put it, “[modern] technology seems to operate beyond human control and to embody the result of an automatic, inevitable process.” He described a kind of “technological somnambulism”, in which people “ignore…choices [that] exist in the process of technology deployment…while, in a trance-like state, [they] blindly accept whatever implementation of technology those in power choose to foist upon [them].” Or lack of implementation, as the case may be.

Our research suggests that the dualist bias can have a profound effect on perceptions, not only of technology users, but of professionals like security analysts who are responsible for critically evaluating its use. The implications go well beyond PSDM programs and crowdsourcing technology. Organizational communications about a variety of new technologies, from artificial intelligence to blockchain to robotics, are likely to bias stakeholder evaluations of the policies, processes, and leaders associated with them. Educating analysts, journalists and investors about the dualist bias would improve corporate evaluation and control. In the meantime, our research suggests a new short-selling strategy: when you hear corporate leaders talk about their use of technologies like crowdsourcing, it may be time to sell!

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James Westphal

Jim Westphal conducts research in the areas of strategic management and organizational theory, with a focus on social and psychological processes in corporate governance and strategic decision making. Jim's research has been referenced in Business Week, CNBC, The Economist, The Financial Times, Fortune, Harpers, National Public Radio, The New York Times, The New Yorker, The Wall Street Journal, and The Washington Post, among other publications. He has taught courses in strategic management and organizational behavior at the undergraduate, M.B.A., and Ph.D. levels.

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