Strategy - Costello

Costello Research Corporate Governance

Costello Research Competitive Strategy

Costello Research Internal Audit

Costello Research Market Efficiency

Brett Josephson’s GovCon research honored with coveted award

Nilesh Patel — Mon, 16 Jun 2025 18:40:36 +0000

Brett Josephson’s GovCon research honored with coveted award Nilesh Patel Mon, 06/16/2025 - 14:40

In This Story

Brett Josephson

The American Marketing Association (AMA) has awarded the prestigious Louis W. Stern Award for 2025 to a paper co-authored by Brett Josephson, associate dean for Executive Education at �鶹��Ƶ and associate professor of marketing at the Costello College of Business.

The award’s namesake, Louis W. Stern, is the John D. Gray Distinguished Professor Emeritus of Marketing at the Kellogg School of Management, best known for his influential work on marketing channels.

Josephson describes Stern as “one of the founding godfathers of marketing, especially on the interorganizational side, involving B-to-B channels and distribution.” Appropriately, the Louis W. Stern Award is given annually by the AMA’s Interorganizational Special Interest Group, in recognition of “a published article that has made a significant and lasting contribution to the field of interorganizational marketing and channels of distribution.”

The winning paper, “Uncle Sam Rising: Performance Implications of Business-to-Government Relationships,” was published in Journal of Marketing in 2019. Josephson’s co-authors were Ju-yeon Lee of Iowa State University, and Babu John Mariadoss and Jean L. Johnson of Washington State University-Pullman.

The paper proceeded from Josephson’s observation that “the notion of the government as a customer — not just any customer, but the largest, most impactful customer in the world — had been left out of the business scholarship consensus.”

To fill the knowledge gap, the researchers conducted in-depth interviews with sector experts, who highlighted the additional transaction costs inherent in the B2G (business to government) space. “The interviewees were saying that government contracting had all these idiosyncratic costs, and it was really hard to diversify away from government contracting,” Josephson says. “If you wanted to be in this space, you had to be all in.”

By the same token, companies were rewarded for upping their commitment to government clients. Comparing firm value metrics to actual government contracts, the researchers found that the more a company’s portfolio was weighted toward B2G, the more market benefits it enjoyed.

However, there can be risks associated with deepening involvement in government contracting. Because federal agency budgets are linked to political priorities, they can change quickly and unpredictably. Josephson and his co-authors discovered that companies could hedge against that risk by catering to a greater number of government clients. Those with a more concentrated B2G portfolio faced higher risks when taking on more government contracting, but saw higher gains in firm value on the whole.

The dynamics of the B2G sector lend themselves to increasing specialization, Josephson says. “Just because you have knowledge of a customer, there’s no guarantee you know how to translate that to someone else, and if anything, it can become a detriment because you don’t know how to speak that customer’s language.”

With the government contracting ecosystem adjusting to rapidly shifting political winds, Josephson’s findings may be even more relevant today than they were in 2019. The risks Josephson describes in his paper are hitting close to home for contractors with deep ties to civilian agencies, while military contractors may be basking in a proposed trillion-dollar budget for the Department of Defense.

Nevertheless, Josephson does not expect to see serious attrition in the B2G ecosystem anytime soon. “Even with cuts and uncertainty and ambiguity, the federal government is still the largest customer in the world, hands down.”

The Louis W. Stern Award stands as gratifying proof of the paper’s ongoing impact and influence. “Past winners include not only some of my academic advisors, but also many other people who have made major contributions to marketing scholarship,” Josephson says. “So it’s pretty awesome, even just to be on that list.”

The award will be granted at the AMA’s annual summer conference in Chicago.

Topics

Marketing - Costello

Costello Research Competitive Strategy

Costello Research Managing Change

Faculty and Staff News

Costello College of Business Dean's Teaching and Faculty Awards

Marketing Faculty Research

Why it doesn’t—and shouldn’t—always pay to be a super-successful CEO

Jennifer Anzaldi — Wed, 07 May 2025 12:46:40 +0000

Why it doesn’t—and shouldn’t—always pay to be a super-successful CEO Jennifer Anzaldi Wed, 05/07/2025 - 08:46

In This Story

JK Aier

Are corporate boards acting as stabilizing forces for their firms, or enablers of extreme greed? That’s one of the questions implied by current debates about so-called “runaway CEO pay.” It’s not entirely clear how the CEO incentives set by the board can be squared with its fiduciary duty to safeguard long-term shareholder value. That’s largely due to the mystery surrounding how CEO compensation is determined in the first place.

“It’s a black box,” says JK Aier, senior associate dean for academic affairs and global engagement and associate professor of accounting at the Donald G. Costello College of Business at �鶹��Ƶ. “We don’t know why boards give bonuses, why CEOs get a raise—in other words, what goes on behind the scenes.”

JK Aier

Aier’s academic paper, forthcoming in Accounting and Business Research, circumvents this problem by focusing on cases posing stark contrasts between short- and long-term value. (Jian Cao of Florida Atlantic University, Zhanel DeVides of Penn State Abington and Ki Kyung Song of West Chester University co-authored.) When a company reports increased earnings year after year, a short-sighted board would raise CEO compensation in line with that performance, incentivizing the CEO to keep up the good work. To cooler heads, however, such a long “earnings string” would raise red flags, prompting a more cautious stance toward compensation.

“Continuous growth or expectations of continuous growth create adverse incentives and challenges because it’s not possible, given how business cycles work,” says Aier. “It may create undue pressure on CEOs to maintain growth somehow if it is strongly tied to compensation.” A strict pay-for-performance approach could induce CEOs to take risks that endanger long-term firm value, such as engaging in managerial manipulation. But how religiously do boards adhere to pay-for-performance?

The researchers examined earnings patterns and CEO compensation for thousands of firms during the period 1999-2018 (11,197 firm-year observations in all). �鶹��Ƶ two-thirds of the firm-years saw an increase in earnings; of those, fewer than 20 percent were in their sixth year or later in an unbroken earnings string.

Across the sample, CEO compensation over time was responsive to earnings patterns. For the first few years of the string, boards lavished their outperforming CEOs with expanding pay packets. But rewards tapered off in subsequent years, indicating that boards may be aware of the risks of over-incentivizing long patterns of increased earnings.

A similar relationship existed for firms with negative earnings strings. After sharply reducing compensation in the first two years of losses, boards stopped penalizing struggling CEOs and kept compensation fairly flat.

“If a company continues to have losses, will directors keep penalizing the CEO? If they do, no one will want to work for that company,” Aier says. “Instead, giving CEOs a runway during a string of continuous losses provides them the opportunity to turn things around.”

The researchers also looked at the probability of CEO turnover as it related to earnings patterns. Surprisingly, CEOs who presided over uncommonly long upward strings faced increased odds of turnover, which Aier attributes in part to board suspicions. “On the profit side, there seems to be a loss of trust that this is even possible,” he says. “Boards are willing to look at changing the CEO because they believe these strings may be unsustainable. In other words, something smells fishy to them.”

The opposite dynamic held true for poorly performing firms. CEO turnover risk declined over the longer downward strings, presumably reflecting broader concerns about retaining talent during prolonged periods of financial difficulty.

In sum, board compensation committees seem highly attentive to earnings patterns, monitoring them for long-term risks and adjusting CEO pay packets accordingly. This cuts against the idea that directors may be complicit in a CEO money grab that imperils firms’ long-term standing.

Moreover, the researchers found that the above-mentioned relationship between earnings patterns and CEO compensation was much stronger for firms experiencing lower competition and higher earnings persistence. This suggests that where market discipline is lacking, directors will pay even closer attention to earnings strings in order to keep CEOs honest.

“Our research suggests that boards pay attention to their monitoring role,” Aier concludes. “Boards are proactive; they care not only about whether the company is doing well, but also how performance is achieved.”

Hedging long-term risks by changing CEO compensation is one way directors can prevent misaligned incentives from forming. “The board’s role goes beyond making sure things go smoothly. It is also looking into the future in terms of what’s needed for the company and its stakeholders, and making sure the operations and the management of the company are also looking at performance from that perspective,” Aier says.

Topics

Costello Research Risk Management

Costello Research Corporate Governance

Accounting Faculty Research

Study: Left-handed CEOs are more innovative

Jennifer Anzaldi — Wed, 30 Apr 2025 02:32:28 +0000

Study: Left-handed CEOs are more innovative Jennifer Anzaldi Tue, 04/29/2025 - 22:32

In This Story

Long Chen

June Woo Park

Q: What do Steve Jobs, Bill Gates and Mark Zuckerberg have in common (besides the obvious)?
A: All three belong to a community comprising about 10% of the population—the community of the left-handed.

And they’re far from the only business luminaries who are members. Steve Forbes, Oprah Winfrey and Lou Gerstner (of IBM fame) are left-handed, as were John D. Rockefeller, Henry Ford and Ratan Tata.

Of course, this could be a mere coincidence—but perhaps not. The popular belief that left-handers think more creatively—and hence may enjoy an innovative edge in business—has been supported by cognitive neuroscience research, which shows that the left hand is controlled by the brain’s right hemisphere, a region closely associated with creative thinking. However, conflicting findings and limited research evidence prevent broad conclusions about the correlation between creativity and handedness, let alone its potential implications for business leadership.

A forthcoming research publication by Long Chen and June Woo Park, two accounting professors at the Costello College of Business at �鶹��Ƶ, constitutes the first rigorous scholarly investigation into whether—and how—handedness plays a role in business innovation.

June Woo Park and Long Chen

The paper was co-authored by Albert Tsang of Southern University of Science and Technology and Xiaofang Xu of Beijing Technology and Business University.

The researchers searched Google for photos and videos of S&P 500 CEOs engaged in activities like writing, throwing, drawing, and eating to determine their dominant hand, if wasn’t already disclosed in published sources. “We looked at pictures of them on the golf course to see how they held their clubs,” Park explains. “We also noted which wrist they wore their watch on; left-handed people often wear it on the right.” When in doubt, they followed up with calls or emails to the respective companies. All in all, they were able to identify the handedness of 1,008 CEOs across 472 companies: 91.4 percent were right-handed, 7.9 percent left-handed, and 0.7 percent mixed.

The researchers then looked at the numbers of patents and citations received by the firms from 1992 to 2015. They controlled for firm and industry characteristics, as well as other personal traits known to affect CEO innovativeness (such as age, education, risk preference shaped by experience, birth order, and founder status).

In addition, they performed several follow-up tests, including one focused on a narrow subset of firms that unexpectedly switched from a right-handed CEO to a left-handed one due to unforeseeable circumstances such as death or illness.

Every variation of the study produced essentially the same result: Firms led by left-handed CEOs demonstrate significantly higher innovative output. The differences were qualitative as well as quantitative. Patents under left-handed leadership were more likely to represent something new under the sun, rather than a spin-off from established technology.

The researchers hypothesized that the left-handers’ creative orientation would impact the way they ran their firms, including hiring decisions. Indeed, they found that companies applied for more H-1B and STEM visas when left-handers were at the helm. This emphasis on talent acquisition was not only a key indicator of innovation commitment, but may have also contributed to the firms’ creative advantage.

“We find that left-handed CEOs are more likely to hire immigrant inventors in STEM fields, and are also more likely to be inventors themselves,” Chen says. “These findings strengthen our argument by highlighting specific ways in which left-handed CEOs may directly enhance firm innovation.”

Still, piling up patents doesn’t automatically produce outcomes that will make customers and shareholders happy. Ultimately, firm performance is what matters in evaluating business success. As additional analyses in the study suggest, firms led by left-handers had higher return on assets and stronger buy-and-hold returns than peers with a right-handed leader.

“They outperformed their counterparts,” Park summarizes. “Investors are drawn to innovative firms, and left-handedness is one of the factors investors could use in their stock-picking.”

Yet innovative success is complex and multifaceted. Left-handedness is only one potentially meaningful trait among many—a lot more are yet to be explored.

“Our results are based on a large sample. But investors should not assume a CEO that is not left-handed lacks innovative potential,” Chen says.

For their ongoing and future research projects, Chen and Park are looking beyond left-handedness to explore other deeply personal CEO traits that may have business implications.

“We find it fascinating to draw on insights from disciplines outside accounting and finance,” Chen says. “CEO decisions may be shaped by factors like family experiences, genetics, academic background, career paths, and more—really, the full range of experiences that makes them who they are. Understanding that can help market participants better interpret and predict CEOs’ decision-making.”

Topics

A.I. & Innovation - Costello

Costello Research Careers

Costello Research Recruiting

Costello Research Evaluating Performance

Costello Research Teams

Accounting Faculty Research

When CEOs are haunted by memories of past recessions

Jennifer Anzaldi — Tue, 12 Nov 2024 19:43:41 +0000

When CEOs are haunted by memories of past recessions Jennifer Anzaldi Tue, 11/12/2024 - 14:43

In This Story

David S. Koo

The economy, we’re often reminded, is cyclical. But we all hope our careers won’t be. That means those of us who make it to the very top—CEOs, for instance—may be unduly influenced by memories of prior economic go-rounds. David Koo, assistant professor of accounting in the Donald G. Costello College of Business at �鶹��Ƶ, has found that memories of past recessions, triggered by recent ones, can weigh on chief executives’ decisions, literally for years.

Koo’s paper, co-authored by Isabel Wang of Michigan State University and Shuting Wu of Cal State Fullerton, is forthcoming in Management Science.

David Koo

The paper was inspired by trends in research outside the accounting field. “In the economics area, they have started looking at how executives’ memories of recessions can affect important decision-making right now,” Koo says. “We are trying to connect these emerging trends to the accounting area by focusing on pessimistic bias in their outlook of the company’s performance.”

The researchers adopted the 2008 financial crisis as a key moment for triggering veteran CEOs’ memories of prior financial downturns. They analyzed annual management earnings forecasts for U.S. public companies for the period 2002-2018, alongside the characteristics and career histories of the CEOs who issued them. “We used the first forecast of the year for each year, because on average these are more optimistic,” Koo explains. “Usually, nobody wants to say anything negative at the beginning of a year.” The final data-set comprised 3,678 earnings forecasts from 466 CEOs.

Koo and his co-authors discovered that CEOs who had previously led companies through at least one past recession issued significantly more pessimistic forecasts post-2008 than they had before the crisis. As a general rule, the more recessions a CEO had undergone in their tenure at the top, the more pessimistic their post-crisis forecasts tended to be.

The same pessimistic pattern was not evident for CEOs who had not experienced a recession before 2008. Translating their findings into economic terms, the researchers concluded that one standard deviation of the memory-triggered pessimism effect was equivalent to 0.23-0.29 percent of share price.

Further, the post-crisis pessimism did not make the forecasts more accurate. It’s safe to say, then, that the memory-triggered CEOs were, knowingly or not, displaying excessive caution and conservatism in their earnings forecasts. To be sure, anyone’s outlook can darken with age, independent of their real-world experience. So the researchers performed subsequent checks to determine whether the increased pessimism was more closely related to growing older, or to specific memories of past recessions.

“Our takeaway is, if we have two same-age CEOs, one who has experience navigating recessions as a CEO and one who does not, the first one will become more pessimistic after the crisis,” Koo says.

The more highly skilled CEOs (as measured by a widely accepted scale for managerial ability) exhibited less memory-induced pessimism, while CEOs who led more complex firms with a lot of moving parts were more prone to pessimism. “We expected that the manager-specific effect would be more significant when managers were under more demanding pressure or had more discretion,” Koo explains.

As the 2008 financial crisis itself faded into memory, seasoned CEOs gradually let go of their pessimistic bias. But it took three years, on average, for their forecasts to fully recover. We normally think of past experience as an aid to learning, but here it seems that the opposite was the case: Memories of past experiences with recessions slowed down CEOs’ post-crisis learning process.

“Prior research has found that past experiences can help people more rationally and then more wisely handle an ongoing crisis,” Koo says. “But at the same time, executives are also human beings. They may be scarred by their experiences and that can induce them to be excessively negative or pessimistic when they go through a financial crisis.”

Of course, that doesn’t mean that the veteran CEOs were less effective at guiding their firms through post-crisis recovery. Koo emphasizes that his findings do not capture whether, and how quickly, companies bounced back from the 2008 recession.

“Memory may not be the most dominant factor in our decision-making, but it still can influence executives even in their managerial decision-making,” Koo advises.

The lesson, then, is one for investors and other market players to store in their own memories for the next economic downturn: Take CEOs’ post-crisis predictions with at least a grain of salt.

Topics

Costello Research Evaluating Performance

Costello Research Strategic Management

Costello Research Risk Management

Costello Research Corporate Finance

Costello Research Financial Crises

Costello Research Health & Well-being at Work

Accounting Faculty Research

Costello College of Business leads the way in entrepreneurship research

Jennifer Anzaldi — Thu, 21 Mar 2024 15:37:47 +0000

Costello College of Business leads the way in entrepreneurship research Jennifer Anzaldi Thu, 03/21/2024 - 11:37

In This Story

Toyah Miller

Heather Vough

*This article was originally published in the January 2024 edition of Impact magazine.

The college that now bears Donald G. Costello’s name is a fitting testament to his entrepreneurial legacy. This extends not only to coursework and outreach programs, which have long stressed entrepreneurship, but also to the faculty’s research expertise. Indeed, a number of Costello College of Business professors were key contributors to �鶹��Ƶ's being named the #2 university for entrepreneurship research in North America by independent ratings agency EduRank.

Here are just a few examples of researchers who have made meaningful contributions to the field in recent years:

Mahesh Joshi

MAHESH JOSHI
Associate Professor, Management

Mahesh Joshi’s more than 30 peer-reviewed publications mostly focus on fostering qualities and skills essential to entrepreneurial success, both within and outside large organizations.
For Joshi, good entrepreneurs are primarily defined by how they think and what they do. Start-up founders and small business owners share a problem-solving skill set with change agents working in big corporations.

“For long-term success of corporations or start-ups, every person has to think like a change agent,” Joshi says. “And that change agent’s approach comes through understanding certain variables like risk-taking, innovativeness, and how to handle the political situation whether you have autonomy or not. And if we do that, we are building the whole toolkit of corporate entrepreneurship or regular entrepreneurship.”

For example, Joshi’s co-authored 2015 paper in Decision Sciences elaborates on the delicate balance between proactiveness and innovativeness within technology-based services firms. With too much proactive change agency, strategy execution (which contributes to innovativeness) suffers. Joshi found that a formalized organizational structure can moderate the tensions between these two factors, while helping firms reap more innovative benefits from risk-taking.

Most recently, Joshi has been looking at how entrepreneurship education can be most effective in driving students’ behavior once they graduate, especially for groups that have been historically excluded from entrepreneurship. His co-authored 2022 paper in Journal of Enterprising Communities suggested a new potential method to narrow the well-established gap in “entrepreneurial intention” between male and female students. He found that for entrepreneurship students from four universities in India, entrepreneurial intention was linked to a sense of career-readiness. Where that sense was present, the gender gap in intention disappeared.

Career readiness (“a proxy for confidence,” as Joshi terms it) is emotional and subjective, and is not something that can be learned from a book. Therefore, Joshi advises policymakers and pedagogues, “Just classroom education is not enough…If educators want to create an entrepreneurial mindset free of gender bias, they have to create an environment where there are co-curricular activities like pitch competitions and site visits.”

Toyah Miller

TOYAH MILLER
Professor, Management
Serving as research director for the Center for Innovation and Entrepreneurship, Toyah Miller is a leading thinker in the burgeoning field of social entrepreneurship research. Where the standard entrepreneur strives simply to maximize profit, social entrepreneurs attempt to solve a difficult social problem while keeping their business viable. Miller’s published research delves into the unique motivations and challenges involved in social entrepreneurship.

In a 2013 paper for Academy of Management Review, Miller theorized that compassion and caring served as a joint catalyst for social entrepreneurship activity, and thus not all entrepreneurs fit the mold of rationally self-interested businesspeople. Although her view validates entrepreneurs seeking to make the world a better place, it also suggests that the primacy of “heart over head” could lead social entrepreneurs to take on undue business risks.

In an ongoing research study, Miller looks at how the idealism of entrepreneurs affects their crowdfunding pitches to potential investors. Surveying more than 200 Kickstarter creators, she finds that idealistic creators posted fewer informative updates on their campaign pages, and as a result were less likely to get funded. In Miller’s view, this provides yet more evidence of heart-based entrepreneurs making sub-optimal choices, in this case by overestimating potential backers’ willingness to help and underestimating their need to be convinced.

Cognitive biases such as idealism are not limited to entrepreneurs. Another one of Miller’s in-progress studies examines the types of feedback given to start-up founders within accelerators and incubators. Generally, entrepreneurs were more likely to take negative feedback on board when it came with concrete recommendations. When feedback was more abstract, urging change with no specific alternative mentioned, it was less influential on decision-making. Therefore, the framing of feedback could, in some cases, make the difference between success and failure for entrepreneurs whose venture is in need of a pivot.

Heather Vough

HEATHER VOUGH
Associate Professor, Management
One of Heather Vough’s chief research specialties is professional identity. Her 2023 paper for Academy of Management Discoveries considers the effects of entrepreneurship’s cultural centrality—as reflected in hit shows such as Shark Tank and movies like Wolf of Wall Street—upon actual practitioners’ sense of themselves.

Through multiple rounds of exhaustive interviews with 29 entrepreneurs from North America and Australia, the authors discovered that while founders readily self-identify as entrepreneurs, they are reluctant to present themselves as such in social situations. Instead, they will use substitute self-descriptors such as job titles or company names—basically, anything except “entrepreneur.”

Analyzing interview responses alongside existing research on professional identity, the authors posit that founders decline to call themselves “entrepreneurs” because: a) they fear they would be misunderstood; and/or b) they believe the label would make them seem unrelatable to nonentrepreneurs. In other words, the cultural and economic emphasis on entrepreneurship has backfired to an extent. By flooding the zone with misleading or ambiguous impressions (e.g., entrepreneurs are all rich Silicon Valley “bros”), entrepreneurship’s exponents have inadvertently turned the term into a social liability.

Topics

entrepreneurship

Center for Innovation and Entrepreneurship

entrepreneurship

Future of Work & Leadership - Costello

What’s worse than a ‘toxic’ workplace? One that gaslights employees

Marianne Klinker — Mon, 11 Sep 2023 19:15:18 +0000

What’s worse than a ‘toxic’ workplace? One that gaslights employees Marianne Klinker Mon, 09/11/2023 - 15:15

When it comes to relationships between co-workers, organizations’ stated priorities must match what’s happening under the hood.

These days, we hear a lot about “toxic bosses,” “toxic companies,” and the like. It’s easy to forget that non-toxicity is not all we want from an employer. If we’re really honest, most of us want to be part of an organization where working relationships are consistently healthy and supportive. Our dream company would also be a place where advancement opportunities were available to all, not only those who regularly have lunch or go golfing with the right people.

It might not shock you to learn that few companies have fully achieved this sort of actively anti-toxic as opposed to superficially non-toxic working culture. Those that have, though, tend to be more resilient when crisis hits, according to Kevin Rockmann, professor of management at �鶹��Ƶ School of Business.

Kevin Rockmann

“If even one person is an isolate, that’s a problem,” Rockmann says. “That’s information you’re not benefiting from…It’s not about everybody being best friends, it’s just about having productive working relationships that are characterized by respect, so that when the [expletive] hits the fan, people are going to step up.”

In a recently published paper for Strategic Organization, Rockmann and co-author Caroline A. Bartel (of University of Texas-Austin) theorize that such working cultures require concerted and sustained attention at all organizational levels—especially the top. Unstinting focus from above spurs the creation of structures and practices for supporting positive interpersonal relationships, which the paper terms “systems for relational advocacy.”

Rockmann’s theory adopts the attention-based view of the firm as an interpretive framework for organizational activity, as opposed to its chief competitor, the resource-based view. While the latter, according to Rockmann, centers on “the resources that an organization has or can access,” the former recognizes that “Resources are important, but it’s really about how we leverage those resources. What are organizational leaders paying attention to?” His paper forms part of a special issue of Strategic Organization devoted to the attention-based view.

Outside of relational advocacy—which relatively few firms actually practice—the paper identifies two main types of relational systems, reflecting different ways senior leaders can manage their attention.

Relational antipathy describes organizations that have made a strategic decision to deprioritize relationship-building among employees. This may be because senior leaders believe that a culture of competition rather than cooperation would be better for their firm, or because the business model is thought to lend itself to more transactional relationships (e.g. gig economy start-ups). In any case, Rockmann emphasizes that relational antipathy can be a workable system, especially when characterized by fairness as opposed to exploitation.

Rockmann reserves his strongest criticism for systems of relational indifference, where lip service may be paid to the importance of positive relationships (“we care about everyone!”), but senior leaders do not allocate the attention needed to create and maintain those relationships long-term.

“I was talking to an HR person at this company, who said, ‘We started this awards program to recognize employees who helped each other out.’ I asked them, ‘That’s great, so how many people are getting awards?’ They said ‘Well, no one’s been getting the awards recently. We keep forgetting to send the announcement out and the rewards behind it are pretty minimal.'”

To Rockmann, this is a quintessential example of the dangers of relational indifference because it shows how espoused good intentions become mere gaslighting without organizational follow-through. “Nobody was told that part of their job evaluation that year was to make sure they do that awards program,” he explains. “What could have been a way to bring people closer together and incentivize stronger relational connections falls by the wayside. And that weakens the organization, because relationships are how we’re going to solve crises.”

Instead of a tightly woven, resilient network of relationships, relationally indifferent organizations are susceptible to cliquishness and a social order split into in-groups and out-groups. As with any laissez-faire system, the concentration of capital—in this case, social capital—is much less democratic. This can torpedo morale throughout the organization, as mutual resentment and incomprehension sets in among outsiders and insiders.

Due to these dynamics, leaders of relationally indifferent organizations cannot necessarily trust what their own employees are telling them. “Typically, what happens is you do a survey and the people that feel like they aren’t going to be listened to don’t fill it out. And so you get results that are positive or very positive, and you think, well, our workplace is great.”

Rockmann therefore advises that leaders should “realize that they are products of the clique-ish system, so they need objective data. Be willing to listen to ombuds or consulting companies who come in to assess your workforce.”

If they find there’s a need to move from relational indifference to relational advocacy, what should leaders pay attention to first? “To me, the lowest-hanging fruit are the job descriptions. Put in the manager’s job description that part of their incentive is how well-connected their people are. Put in the employee's job description that ‘part of your job is helping other people do theirs’.

“A lot of people are not intrinsically motivated to form supportive working relationships,” Rockmann summarizes. “So if they’re not relationally motivated, you have to be explicit.”

Topics

Costello Research Careers

Costello Research Teams

Management Faculty Research

Costello Research Careers

More School of Business Faculty Research

Are there upsides to “overboarding”?
July 14, 2025
“Doing well by doing good”? There’s a framework for that
July 2, 2025
In the workplace, relationships equal reality
May 28, 2025
Why it doesn’t—and shouldn’t—always pay to be a super-successful CEO
May 7, 2025
Study: Left-handed CEOs are more innovative
April 29, 2025

In This Story

Kevin Rockmann

Should you always negotiate? Not always, according to this �鶹��Ƶ expert

Colleen Rich — Tue, 28 Feb 2023 20:09:34 +0000

Should you always negotiate? Not always, according to this �鶹��Ƶ expert Colleen Rich Tue, 02/28/2023 - 15:09

In This Story

Einav Hart

Negotiation is a critical skillset in business and in society. Negotiation is a complicated, joint decision problem where parties can, potentially, make each other better off—but also have some competing interests. For example, you might want a higher bonus while your boss wants to keep expenses low.

Einav Hart. Photo provided

Much of the advice about how to negotiate focuses on the terms of the negotiated deal. You might think, then, that more—and more aggressive—negotiations would always lead to better outcomes. Einav Hart, assistant professor of management at �鶹��Ƶ, suggests that our relationships and context influence how we should negotiate—and even whether it is a good idea to negotiate at all.

“The idea that we can ‘win’ a negotiation reflects a belief that we are competing and need to take as much as we can,” said Hart, “but focusing on the short-term gains might lead to worse outcomes in the long term.”

For example, negotiating aggressively with a new hire might cause them to agree to a lower salary, but it might also harm their morale, their commitment to the organization, and their work effort. As a result, your outcome—even if you saved a few thousand dollars on salary—may be worse than it would be if you had built a relationship through a more collaborative negotiation process.

Hart’s research introduces the concept of “ERRO”—the “Economic Relevance of negotiators’ Relational Outcomes”—to help us decide when and how to negotiate. These decisions should depend on how much your relationship with your negotiation counterpart matters economically.

“When you buy a barbecue grill, for instance, the price you pay may determine your economic outcome more than your relationship with the seller,” said Hart. “However, when you hire a service provider—such as a babysitter, a caterer, or a contractor—a poor relationship following the negotiation may harm the economic value you derive from the agreement, and a positive relationship might increase the economic value you derive.”

Thus, buying a grill has low ERRO, but hiring a babysitter has high ERRO.

In a low ERRO context (like that BBQ grill), aggressive or competitive negotiation tactics that sacrifice relational outcomes may work just fine. But in high ERRO contexts (think babysitter), negotiating aggressively is likely to backfire in the long term. Collaborative tactics ,such as asking questions, expressing empathy, and making concessions (or even not negotiating), may get you the best outcome overall—even if you seemingly leave some money on the table.

In most cases, Hart said, the real value of a negotiation is created after parties leave the bargaining table. Thus, the decision to enter a negotiation is a decision that should be made carefully and strategically.

Hart’s research on organizational behavior and decision making explores how people communicate about conflict and sensitive topics, and how negotiating affects people's future, post-agreement relationships and performance. Her work integrates insights from psychology, and game theory. Prior to joining �鶹��Ƶ, Hart was a data scientist at Uber and a visiting scholar at Wharton.

To reach Einav Hart directly, contact her at ehart8@gmu.edu.

For more information, contact Benjamin Kessler at bkessler@gmu.edu.

�鶹��Ƶ George �鶹��Ƶ
�鶹��Ƶ is Virginia’s largest public research university. Located near Washington, D.C., �鶹��Ƶ enrolls nearly 40,000 students from 130 countries and all 50 states. �鶹��Ƶ has grown rapidly over the past half-century and is recognized for its innovation and entrepreneurship, remarkable diversity and commitment to accessibility. Learn more at www.gmu.edu.

Topics

Costello College of Business

Tip Sheet

negotiations