Faculty from the Department of Management and Human Resources at the Wisconsin School of Business share key ideas from their research as featured on the Forward Thinking blog.
Associate Professor Martin Ganco: 5 Things To Know About Noncompete Clauses and Constrained Employee Mobility
In our research, my co-authors, including Evan and Benjamin Campbell of Ohio State University, and I wanted to find out whether the effects of noncompetes depend on the skill transferability of an employee across industries—something that was unique to our study and had not been used in combination before. The premise of our study was that employees who face noncompetes and have low skill transferability across industries would be effectively locked into their jobs.
Our research echoes the traditional literature that says that workers bound by noncompetes are essentially stuck; they have constrained mobility choices. What should corporations do with these employees? Invest in their professional growth. Give them training opportunities and options. This may not apply to a sandwich company employee or a warehouse worker but it might fit individuals in, for example, engineering, managerial, or top executive positions.
Companies may spring for more training—if they feel safe. Let’s say I’m a company manager. I train an engineer, teach her how to program, and she leaves the firm six months later, taking her knowledge investment with her. From a company standpoint, why would I want to do that? We found that, with noncompetes in place, companies may be more likely to invest in training opportunities than they normally would because they feel safer making that financial investment.
Associate Professor Hart Posen: Survival of the Fittest for Firms Is About Flexibility in the Face of Change
Short of possessing a crystal ball, it’s pretty hard to predict the future regardless of whether you’re an individual or an organization. From Sears to Blackberry to Blockbuster, time and time again we see firms failing in response to technological change. Why do these successful and powerful firms—experienced in the market with big resource and brand advantages—ultimately fail in response to the advent of new technology?
The results of our study suggested that the organizations that survive and prosper, adapting to the shock most successfully, had a degree of adaptability, even when faced with entrapping change. An organization’s adaptability was enhanced if it could prepare—what we call in the study “formative exploration”—for change in advance. Formative exploration involves individuals and departments experimenting with new ways of doing things, well before technological change is on the horizon.
As an entrepreneur for ten years, I relate to that business drive to find the one right way of doing things. The problem is there is no one right way. Survival hinges on a bundle of ever-changing factors and the organizational factor never seems to be given much weight. Yet, it’s the organizational makeup that gives a company the capabilities to achieve, move forward, and innovate. We ignore that aspect, for the most part. Yes, the world might not change in a particular area of industry for 10 years; there is always a degree of risk in that tradeoff between the benefits of stability and the benefits to building flexibility into those processes.
Assistant Professor Sarada: Household Wealth Via Business Ownership: Passing It On or Passing Families By?
While the self-made millionaire narrative seems to be an intrinsic part of our cultural makeup, the truth about wealth generation and wealth mobility in America is a lot less flashy. Keeping with the trend of the past 30 years, my research shows that much of American wealth is actually built through small, lesser-known family businesses.
In my recent work with Oana Tocoian of Claremont McKenna College, we look at the relationship between business ownership and wealth. More specifically, we want to know if businesses generate wealth at the household level. Does wealth create businesses or do businesses create wealth? Causality is a tough thing to establish, so instead we look at the broad patterns of how business ownership relates to wealth through intergenerational mobility—where children stand in relation to their parents when it comes to wealth.
What we found in our data is this: Business ownership and wealth go hand in hand, with some caveats. Seventy percent of the households in the top one percent wealth decile own a business. If their children owned a business, particularly in the same industry, they benefit as well. College-educated children of business-owning parents have no distinct advantage, however, if they work traditional wage-earning jobs. If the new generation neither owned a business nor finished college, parental business ownership did not automatically offer any pluses in wealth accrual.
Associate Professor Alex Stajkovic: How To Predict Academic Achievement
In a series of studies I conducted with my co-authors—Albert Bandura of Stanford University, Edwin Locke of the University of Maryland, Dongseop Lee of Korea University, and Kayla Sergent, a doctoral student at the Wisconsin School of Business at the University of Wisconsin–Madison—I looked at whether self-efficacy predicts academic achievement above and beyond personality.
Personality was measured by the Big Five traits: conscientiousness, agreeableness, extroversion/introversion, openness to experience, and emotional stability. General mental ability and grade-point average were controlled for in the analyses. Academic performance was assessed over a semester.
The traits are defined as innate dispositions. The behaviors they predispose one to can vary across activities, social milieus, and time; they are uniformly coherent with the trait. Self-efficacy, a personal can-do belief, is the focal determinant of behavior in social cognitive theory.
Three of the Big Five traits (agreeableness, extroversion, and openness) decreased in significance across the models tested. Conscientiousness and emotional stability were predictive of self-efficacy and performance in half of the analyses. However, self-efficacy was predictive of academic achievement above and beyond personality in all of the analyses.
Professor Charlie Trevor: Increase Your Work Productivity and Stick Around: Refer a Friend
Referral hiring programs—where employees can recommend contacts for a position within their workplace—are not a new phenomenon among firms. They’re popular for good reason: they work. The likelihood of a good fit is much greater thanks to the free exchange of information on both sides. As a current employee (the referrer), if I refer you to my organization and you are subsequently hired (the referral hire), it becomes a more socially enriched environment for both of us. Drawing on social enrichment theory, the notion that “the people make the place,” (Schneider, 1987), it’s natural that we would prefer to work where we have strong social ties with others.
Despite the fact that referral hiring programs are extremely common with firms, and that those hired under such programs tend to do well, we have known relatively little about how these programs impact the employee referrer. In my research with Jenna Pieper and Dennis Duchon of the University of Nebraska–Lincoln and Ingo Weller of Ludwig-Maximilians-Universität München in Munich, Germany, we wanted to address this knowledge gap by examining the relationship between the referrer and the referral hire. Specifically, is the referrer’s behavior impacted by the referral hire? We examined this question in the context of what we defined as referral hire presence (RHP), the period of overlap where the referrer and referral hire are working together at the same organization. To the best of our knowledge, our research is the first to quantify the referrer impact empirically.
The results: Referrers were 27 percent less apt to leave than employees who did not have a referral hire on site, and they also handled 5.1 percent more calls each week when the referral hire was present. That is, in response to RHP, referrer performance actually increases and the likelihood of the referrer quitting decreases. Evidence from the second supplemental study helps to explain how this occurs, showing that referring leads to a greater degree of the social enrichment that is believed to result in enhanced job performance and reduced turnover.
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