R &D
Trust Me: Assistant Professor Deepak Malhotra
Rating Better: Assistant Professor Randoph Cohen and Associate Professor Joshua Coval
Visionary of the Year: Professor Rosabeth Moss Kanter
Service with a Smile: Assistant Professor Laura Morgan Roberts
People Power: Professor Christopher Bartlett
Post-Soviet Purpose: Assistant Professor Rawi Abdelal
Trust Me
The old adage “get it in writing” may be sound advice, but if you are looking to build trust, you might want to think twice about signing a contract. Recent research by HBS assistant professor Deepak Malhotra and Keith Murnighan (of the Kellogg School of Management) suggests that binding contracts can erode trust. As the pair write in “The Effects of Contracts on Interpersonal Trust,” forthcoming in the Administrative Science Quarterly, those who engage in nonnegotiable contracts often attribute their counterpart’s cooperative actions to the existence of the contract rather than to his or her level of integrity.
“You build trust when you are vulnerable. If the person you are dealing with has an incentive to harm you but comes through and does not, then you learn to trust him or her,” Malhotra explained in a recent interview. “But when a contract is there and the person cooperates, you might attribute the cooperation to the existence of the contract. This will inhibit the development of trust.”
In an experiment where subjects interfaced with a computer program that Malhotra and Murnighan designed to test trust, the pair found that parties that relied on contracts to achieve cooperation were subsequently less trusting than parties that did not. “When we took the contracts away from those who had used them previously, trust diminished,” Malhotra noted. “In fact, there was less trust in those parties than there was in parties that had never interacted before.” While one would ssume that you are better off interacting with someone with whom you have had positive interactions before, the researchers found that many people placed more trust in complete strangers. “The groups that had no history and had not cooperated before had more trust than the groups that had been cooperating successfully under a binding, strictly enforceable contract,” observed Malhotra.
Whether negotiating a joint venture, a merger, or a prenuptial agreement, Malhotra believes that nonbinding (or less binding) contracts may be one way to solve the problem of risk while simultaneously building trust. “The aspect of a contract that hurts the building of trust is its binding nature. When I know that you are forced to cooperate, it takes away all of the risk. If I leave some element of risk in, by using a contract that isn’t completely binding — like a verbal agreement or a handshake or a formal contract that does not attempt to delineate every right and responsibility — then we might learn to trust each other.”
Rating Better
Three finance professors have devised a new mutual fund rating system that appears to do a better job of separating fund managers whose performance reflects genuine ability from those whose results depend on luck alone. The authors of the research, HBS assistant professor Randolph Cohen, HBS associate professor Joshua Coval, and Lubos Pastor of the University of Chicago’s business school, conclude that a manager’s ability can best be detected by comparing his or her portfolio with those of other fund managers with stellar records. In contrast, according to a January 5, 2003, New York Times article, “current systems focus on results alone. They overlook a wealth of information that can give insight into a manager’s ability.”
Visionary of the Year
HBS professor Rosabeth Moss Kanter was named the Intelligent Community Visionary of the Year in 2002 by the Intelligent Community Forum. The award recognizes an individual or group that has taken a leadership role in promoting broadband technology as an essential utility for communities in the digital age and has brought about effective cooperation between the public and private sectors in the development of the intelligent community or property.
Service with a Smile
In an effort to understand the role that suppressing or exaggerating emotions has on employees, HBS assistant professor Laura Morgan Roberts and a colleague from the University of Toronto, Stéphane Côté, set about to measure the relationship between emotion regulation and job satisfaction. Using data from 111 workers — college students who labored in service jobs — the pair measured job satisfaction and its relationship to whether workers were being asked to hide or exaggerate emotions. Their study, “A Longitudinal Analysis of the Association between Emotion Regulation, Job Satisfaction, and Intentions to Quit,” was published in the December 2002 Journal of Organizational Behavior.
Not surprisingly, the researchers found that workers who are asked to suppress negative or unpleasant emotions are often unhappy at work and consider leaving their jobs. Using the inability to tell a boss when one is angry or disappointed as an example, Roberts and Côté advise employers to “minimize the frequency of unpleasant emotions that employees need to suppress.” Thus, as Roberts said in a recent interview, “It’s best to create a work environment where people can be authentic. If they are unsatisfied, they need to have a means of communicating their emotions.” Interestingly, when employees are asked to amplify certain positive emotions — to deliver a product with a smile, for instance — their job satisfaction increases. “Display rules that call for pleasant emotions appear to benefit both the individual and the organization,” write the authors. “People who are asked to exaggerate positive emotions tend to be fairly satisfied with their work,” said Roberts. “It’s a social catalyst that not only benefits those around you, it also makes you feel better.”
Roberts, who studies how people manage the impressions they make on others, believes that impression management is an ever-present and important element of organizational life. “People are always thinking about how others view them and how they would like to be viewed. Fostering authentic interpersonal relations among coworkers and enabling people to feel comfortable being themselves contribute to organizational success,” she concluded.
People Power
HBS professor Christopher Bartlett and Sumantra Ghoshal (DBA ’86) of the London Business School have won the 2002 Award for Leadership and Corporate Governance from the Association of ExecutiveSearch Consultants for their article “Building Competitive Advantage through People,” published in the Winter 2002 issue of MIT’s Sloan Management Review.
Post-Soviet Purpose
HBS assistant professor Rawi Abdelal’s 2001 book National Purpose in the World Economy: Post-Soviet States in Comparative Perspective (Cornell University Press) was awarded the 2002 Shulman Prize for Outstanding Book on International Relations, given by the American Association for the Advancement of Slavic Studies. The book describes how national identities influence the world economy and explains patterns of economic disintegration and reintegration among Russia and the other fourteen states that composed the Soviet Union
