Embracing Change with Executive Education in Qatar

No matter how we describe the world we live in, an essential element of it is change, and its triggers can have roots in any area that determines our lives. The last few months have provided many different examples. We have seen an increase in more and more sophisticated cyber attacks, a number of political developments that will let us reflect on the future of taken for granted ties between countries and Google’s virtual assistant, which might make us want to talk to Google. Also, 2017 was a year of extreme weather conditions in many parts of the world, with intense tropical storms, wildfires, and extreme heat. 

What do organizations and their leaders here in Qatar and elsewhere in the world need in order to successfully address these and all other changes inside or outside organizations, or to be the driver of productive internal and external change? While research and the popular press provide an extensive list of possible answers, HEC Paris can focus on one area and that is knowledge. 

As a member of the Qatar Foundation, we have the great pleasure of supporting its mission to nurture the future leaders of Qatar, and contributing to human development nationally, regionally, and internationally.

Since 2010, we could bring knowledge and develop it locally, which enabled us to educate an extensive amount of current and future leaders in a variety of organizations. This in turn allowed them to face change or to create productive change, for themselves, their teams, their organizations, and for their country. The discussions and sharing of knowledge have taken place in our degree programs at HEC Paris in Qatar, the EMBA and the Strategic Business Unit management master, in custom and open programs. Yet, we did not only engage in the dissemination of knowledge, but a number of professors have also written case studies about organizations in Qatar.

In this issue, we present studies of professors from HEC Paris in the area of business strategy and human resource management. The findings of these studies make some significant contributions to knowledge about change, and changing. 

At the beginning, we present research by Giada di Stefano (HEC Paris) and Elena Dalpiaz (Imperial College London) about how the art of storytelling can guide companies through transformative change. Analyzing books that present the development journey of the famous Italian houseware and kitchen utensil company, Alessi, the two scholars demonstrate that leaders should reflect about changes their organizations have to engage in, and then should share this reflection in order to get the buy-in of their internal and external audience.

Decision makers do not only have to address large internal changes, but they are also often confronted with individual level changes such as increased or decreased work efforts. Tomasz Obloj and his co-author have studied the role of envy and compassion for these motivational changes. The authors could successfully show how social comparison (one of the key cognitive processes that allow us to comprehend where we stand relative to others) can be a driver for changes in workplace motivation. They also presented possible ways for managers to address these motivational changes.

Among the different changes mentioned above were climate and environmental changes. Betrand Quélin and his co-authors discuss in the next study the positive financial impact of a firm’s proactive behavior towards the environment. Current and future leaders should try to build on the identified relationships and thereby potentially reduce future climate changes.

As we underline above, knowledge matters. Yet, it does not only allow you to address change; Denisa Mindruta also explains that previous knowledge development can make you attractive as a potential partner to face uncertainty in the future. 

Embracing change, one could argue that managers need to consider hiring new employees in order to bring in new ideas, talents, and skillsets. However, the work of John Mawdsley and Deepak Somaya emphasizes the necessity to take a more inclusive and holistic look at human resource management. 

All of these studies show HEC Paris’ strong commitment to the development of knowledge. Going forward, we hope that HEC Paris in Qatar can be the majlis of management knowledge with the aim to train current and future leaders and to continue being an active part in the production of management knowledge in Qatar and the region.

Every business has a story. Some are clear-cut journeys from start-up to multinational. Others are more intricate and include mergers, takeovers, acquisitions, and dramatic changes in company direction. Not everyone spends time reflecting on their company’s journey, but could this be a big oversight? Stories allow people to reflect and to learn, and telling them can strongly influence how company stakeholders interpret change. “Companies can use storytelling as a learning tool to increase their productivity,” says Associate Professor Giada Di Stefano. “It can also be used to implement successful company transformations - to make sure that everybody is on board and excited about change.” See the video: “A universe of stories: Mobilising narrative practises during transformative change”, created by the Imperial College Business School.

Master storytelling at Alessi 

There is no better example of a company that has used storytelling to successfully navigate its strategic transformation than the case of Italian housewares and kitchen utensil company, Alessi. From 1979 to 2010, CEO Alberto Alessi mastered the art of storytelling to lead his firm through a successful repositioning. The company went from being a manufacturer of steel serving tools for bars and restaurants to a world-renowned industrial design game-changer.

Companies can use storytelling as a learning tool to increase their productivity. 

Over that time, Alessi produced iconic items so special that they have been featured in museums as objects of art. This evolution was documented in over 30 internally produced books. These allowed the firm to distribute stories to all its stakeholders, including the employees, customers, retailers, and visitors to Alessi’s exhibitions. They influenced both outsider and insider perceptions of the company’s trajectory. According to Di Stefano of HEC Paris and her colleague Elena Dalpiaz of Imperial College London, Alessi’s books provide an exceptional example of what happens when an organisation uses storytelling to reflect on its actions.

Three narrative practices increase impact

The duo conducted a thematic and narrative analysis of Alessi’s chronicles to understand how they were used, and how they changed, over time. They found that the books tell a coherent story, despite being written over three decades and by different authors with different goals. “Alessi’s story is like a woven fabric made by interlacing distinct sets of threads,” says Di Stefano. “Our analysis uncovers three narrative practices that enabled Alessi to create a single piece of fabric and tell the coherent story of a successful transformation.” 

1. “Memorializing”: to create a shared understanding and memory of change over time, by identifying moments, persons, and events key to the transformation. 

2. “Revisioning”: to rewrite the company’s past to ensure consistency with the current direction – and ensure that story is interesting, exciting, and inspiring.

3. “Sacralising”: to present the change as a transcendent endeavour, depicting the change leader as a prophet, organizational artefacts as icons, and the old strategy as conservative, or orthodox. 

How storytelling and reflection lead to successful change 

These three narrative practices were used consistently in Alessi’s books to prevent resistance to change, garner support for it, and mobilize advocacy. The strategy seems to have worked, as the transformation was widely supported, and even embraced, inside and outside the organization. “We ascribe many of the reasons for Alessi’s success to the fact that it kept reflecting on its actions and on changing its trajectory, making sure all relevant audiences were on board,” Di Stefano says. “The exceptional, 30-year long Alessi case provides us with the unique opportunity of observing how telling a story can help a firm thrive during times of change, in slow-motion. We don’t suggest that other firms should follow exactly the same path, but we are sure they can learn something from it.”

As humans, we continually compare ourselves to our peers and those in close proximity. But, how does this natural propensity for social comparison effect how people behave at work? Tomasz Obloj says, “There is emphasis on increasing transparency in the modern workplace. There are many good reasons to do so, reduced discrimination being an important one. However, this can also lead to envy between employees with detrimental effects on productivity.”

Selfish comparisons at work

Obloj and Zenger wanted to find out what increases social comparison in the workplace and how this would influence a firm’s performance. Transparency can reduce discrimination and lead to a more even playing field at work, but it can also foster social comparison between co-workers. “People tend to compare themselves to others who are in close proximity,” Obloj explains. “This may be geographical proximity (those in the same office), structural proximity, (those in the same organizational unit), or social proximity (friends or colleagues).” He adds: “When we look at someone and compare ourselves to them, we decide if they are better or worse off than us. Those that are worse off might induce compassion, and those better off tend to induce envy.”

Transparency can reduce discrimination and lead to a more even playing field at work, but it can also foster social comparison between co-workers.

Studying envy in social comparison 

Within an organization there are complex behavioral micro-mechanisms that can be difficult to untangle. An employee may envy another because their results are better, but what if the person who obtains better results simply works harder? “We were able to carry out an empirical investigation using data from a retail bank that had organized a tournament between its branches. Each branch was assigned to a tournament group where they competed for a different number of prizes: 1-4. If a branch happened to be allocated to a good tournament group, it had a higher probability of winning.” Group allocation was not based on skill or talent which meant that any element of envy or compassion observed in employees could be narrowed down to social comparison alone. 

Isolating and analyzing the data on envy

In analyzing the data, Obloj used an instrumental approach to find contexts that would unambiguously allow him to identify objects of envy. “The data provided by the bank created a perfect quasi-laboratory,” he reports. With the data provided by the bank, Obloj followed an ‘insider econometrics’ approach using a combination of all the big data from the organization relating to individual bank branches, coupled with detailed information from employee interviews, emails and company memos. “This enabled me to understand what was going on inside the organization and interpret the data,” he explains. “In the context of this bank, we see an upward social comparison where employees focus on those that are more advantaged. They only pay attention to objects of envy and show no signs of compassion,” Obloj reports. “We also see that when objects of envy are more proximate (structurally, socially, or physically), individuals become demotivated and reduce the amount of effort they make at work.” 

From a strategy perspective, Obloj concludes: “Organizations can use different levers to reduce the potentially harmful social comparison that we observe. They could make structural changes to their organization and alter the work culture to decrease the proximity of those likely to be affected by social comparison and become objects of envy.”

Companies face increasing pressures to reduce the negative impacts of their activities on the environment. As always, they are also under pressure to increase profits. Is it difficult to combine these two achievements, or can they come hand-in-hand? Professor Bertrand Quélin asks, “If a company improves its environmental sustainability – does it pay?”

Balancing act: weighing up stakeholder interests

Every company has a variety of stakeholders (employees, customers, suppliers, shareholders, organizations and associations of professionals and consumers) – and they all have different interests and priorities. Invariably some stakeholders will favor environmental sustainability policies. Whatever their interests are, they need to be strategically managed by companies to ensure maximum profitability. To gain insight into what is often a tangled knot of opposing and aligning interests, Quélin and his research team measured how attentive a company is to the interests of all its relevant stakeholders. “We wanted to see how company stakeholder orientation impacts profitability. At the same time, managers are increasingly concerned about their corporate social and environmental responsibilities and are proactive about this, so we also wanted to understand the impact of these behaviors.” 

The intersection between environmental proactivity, stakeholder interests, and profitability 

To understand the links between stakeholder orientation, environmental proactivity and profitability, the team collected data on the food and beverage industry and the household and personal products industry. These sectors were selected as they are essential to our modern lives. They also have significant socio-environmental impact through their manufacturing, packaging and distribution processes. Stakeholders then include suppliers of packaging, spare parts and equipment; wholesalers and distributors, transport companies, factories-stores...

A company that is attentive to a broad range of stakeholders will improve its profitability if it is also environmentally proactive. 

Analysis by structural equation modelling found that, overall, it does not seem to pay if too much attention is given to too many stakeholders. There is a negative link between companies with high stakeholder orientation and their profitability. One of the main reasons for this is thought to be that when resources are dedicated to a wide range of stakeholders to create long-term value, what you see is an immediate loss in profitability. In addition, Quélin notes that although there is added value in the company, this is not reflected in traditional monetary profits. 

However, when environmental proactivity is added to the mix, this effect is reversed. High stakeholder orientation coupled with company investment in environmental sustainability becomes a positive driver of company profitability: “Environmental proactivity mediates the link between stakeholder orientation and profitability. This means that a company that is attentive to a broad range of stakeholders will improve its profitability if it is also environmentally proactive.” 

Environmental innovation drives profits 

The two industries examined in this study are oligopolies: they are dominated by a few large companies that call the shots. “In contrast to economic theory, our results show that members of an oligopoly can benefit if they innovate,” Quélin explains. “In acting fast to redesign processes to become more environmentally friendly, they become recognized by customers as an environmental leader. Consequently, they benefit financially.” Quélin then broadens the view to include other industries: “Stakeholders and end-users are sensitive to environmental policies, so it is important that all industries start to adopt proactive environmental policies. Management theory says that innovation comes at a cost, but here we show that proactivity can pay.”

In acting fast to redesign processes to become more environmentally friendly, they become recognized by customers as an environmental leader. Consequently, they benefit financially.

When asked for any concluding advice, Quelin offers: “There is an ethical responsibility for all companies to pay attention to environmental issues. They need to consider what is being left for the next generation and this goes beyond imposed regulations. They have a responsibility to engage in proactive behavior towards the environment and, when combined with stakeholder orientation, this can drive profits up.” 

Firms form strategic alliances and combine resources and capabilities. To fill gaps in research pipelines, partnerships between pharmaceutical and biotechnology firms are commonplace. “Pharma-biotech alliances are often made before discoveries, when firms don’t know if the outcome will be commercialized,” says Denisa Mindruta. “Since contracts are made based on products that don’t yet exist, it is the attributes of the partners that are important when an alliance is made.” There are many factors involved in forming an alliance. Each party will have expectations of what their partner will supply. But no one really knows what determines the success of any given pharmaceutical-biotechnology firm partnership.

Two sides to every partnership

The study of business alliances has previously assumed that picking a partner to ally with is like buying a product. “If a firm wants to buy a computer, they will need to choose between computers with different configurations and select the one that best matches requirements and budget,” Mindruta explains. “When considering a biopharmaceutical partnership, the pharma firm will assess all potential biotech partners and then decide on their ally.” In this scenario, it is assumed that the chosen biotech firm will agree to the partnership. But, what if there are other, more attractive, pharma firms to ally with?

A pharma-biotech matching game

Mindruta and co-workers saw that they needed to look at the partnership as a whole, and also take into account both partners’ perspectives. They developed a matching game for biopharmaceutical alliances, based on previous research carried out by sociologists and economists. “Matching processes have been studied in many real-life contexts,” Mindruta explains. “From marriage to college admissions to recruitment; in all cases, partnerships are made, but it is not always obvious how desired partners were attained.” 

The synergy created through partnership is a result of both partners being able to bring something to the table.

Competition is key

When a matching game was played in the context of marriage, Nobel Laureate Gary Becker found that it is not all about love. When choosing a spouse, factors such as education, income, religion, and psychological traits create a sorting market. Individuals have preferences for attributes that they want in their spouse but cannot attain. As Mindruta explains, “They may want to marry Marilyn Monroe, but she might have better options to choose from and won’t be available. In the case of business alliances, one firm might be attractive to another because it fills some gaps in knowledge or expertise, but the firm in search of an alliance also needs to think about what it can offer other potential partners.”  In other words, whether in marriage or in business, the synergy created through partnership is a result of both partners being able to bring something to the table. 

Inequalities reveal partnership synergy

The team created their own matching game and played it with a number of pharmaceutical and biotechnology firms. They looked at existing pharma-biotech partnerships during 1996-2006, and switched partners around to simulate what partnerships might look like if competitors had made alliances. Real alliances were thought to create more value than the theoretical ones created through swapping. Through analysis using mathematical inequalities, Mindruta and colleagues could determine what drives alliance formation. They found that this new way of thinking about biopharmaceutical partnerships is far more accurate than previous methods that omit competition and look at partnerships from a one-sided buyer perspective. They saw that it accurately predicted partnerships and the synergies that lie behind them. 

Patterns of partnership

In creating a large dataset from multiple partnerships, Mindruta and colleagues were able to find the patterns behind matching. They observed top-down sorting in that pharmaceutical and biotech firms with greater research capabilities ally with one another. Mindruta notes, “This shows that research investments made by a pharma-firm in the past make it a more attractive partner to biotech than a firm that has outsourced all of its research capabilities. We conclude that investing more in research will enable firms to make stronger alliances.” This top-down sorting was also seen in terms of firm size. Greater size translates into more extensive research facilities and development programs, and so larger companies tend to ally with other large companies.

Money cannot buy partnership

Mindruta concludes by stating, “It is important to realize that, just like love, money can’t buy a better alliance partner. When it comes to business partnerships in a competitive market, both partners must contribute something and contributions go beyond financial resources. Firms cannot buy their way up the hierarchy and ally with top research firms. They have to make the necessary initial investment into their capabilities to have access to key allies in the future.” The research team is now looking at other aspects of biopharmaceutical alliances to see how aspects such as the drug pipeline, drug manufacturing specializations and networks of doctors influence partnership creation.

Not so long ago you got a job for life. Joining a firm or entering public service, you worked your way up the ranks, retiring after 40 or so years with a decent pension (and a shiny golden pocket watch). Perhaps this career path is more stereotype than truth, but one thing is certain: it hardly ever happens today. Today, most organizations place greatest value in soft skills and digital knowhow, letting employees change jobs with alarming alacrity. It is thus no surprise that retention, recruitment and talent management figure so prominently in business strategy. 

The need for a bird’s eye view 

There is plenty of academic research to help human resource (HR) managers develop evidence-based company policies and procedures, but it is spread across many disciplines. Each study focuses on different details and perspectives. Professor John Mawdsley says this fragmentation is a problem. “It’s virtually impossible to get the big picture,” he states. “There’s no coherent theory that holds everything together. If you find a research study that looks at your exact industry then great, but be cautious when trying to draw make generalizations about anyone else.”

Working with Professor Deepak Somaya from the University of Illinois at Urbana-Champaign, Mawdsley gathered all the available research on employee mobility published over the last few decades to see if he could build a model to help people understand what goes on when workers move between organizations. “We tried to corral everything together and make sense of it as a whole,” he explains. “We quickly discovered that you can’t just look at the employees or the businesses in isolation. Context is everything. It is only when you get the bird’s eye view that some of the counterintuitive aspects of recruitment start to make more sense.”

When an employee changes job, they transfer two types of capital: human and relational.

The transfer of two types of capital

The review concludes that when an employee changes job, they transfer two types of capital: human and relational. Human capital includes all the person’s knowledge and skills — everything from general industry expertise to their experience of specialist software. They may know trade secrets (that they usually cannot share) or bring ideas on how to improve business processes and workflows. This is what the old employer loses and what the new employer could gain. Mawdsley cautions that ‘could’ is the operative word. “Our review shows that the organizational environment plus the hire’s relational capital really affect how much of the human capital the new company gets to see.” 

Relational capital refers to all the relationships that an employee has nurtured during their tenure. They could be internal (e.g. team dynamics) or external (e.g. interactions with customers and suppliers). “When an employee moves, sometimes these relationships break, sometimes they are transferred. There can be loss and gain for both the new and old organisations,” Mawdsley observes. He cites the example highlighted in a seminal study by Harvard Business School’s Boris Groysberg, who found that high-performing investment analysts often performed at no more than average levels when they moved to competitor firms. The study found that — since team dynamics are at the heart of star performance in this industry — their decrease in performance stemmed from a loss of relational capital. 

The holistic view developed by Mawdsley also cautions against firms seeing the departure of employees as a loss. “It all depends on where they go,” he says. “If it is a competitor firm then yes, it probably is a loss, but only if the new firm can actually exploit the human and relational capital of the new hire and that isn’t always guaranteed. And if an employee moves to a partner company, say a customer, often relational capital is strengthened. The move could improve the performance of both sides.”

The importance of asking the right questions

The review also helps researchers to discover gaps in their knowledge and decide what to study next. “It has revealed some big questions we need to answer,” Mawdsley continues. “For example, in this era of remote working, what is the role of specialist knowledge like how to operate a particular machine? In the past, this played a key role in mobility, but now I’m not so sure? We also need to investigate what constrains mobility; conventional wisdom on recruitment and retention may be based on studies that are decades old.” In fact, Mawdsley and Somaya’s model suggests recruitment may not be the answer at all.

“Our findings show that organizations should consider alternatives before they go through the expense and effort of hiring new people. New people often don’t perform as you would expect. So ask what human and relational capital you are looking for and see if there are alternative ways to acquire it, perhaps through partnerships, collaboration or even informal networking in the local bar.”