New research co-authored by Professor Olav Sorenson finds that managers are biased against ideas that are proposed by employees outside of their own work groups, hurting innovation and performance.
Mid-level managers favor ideas that emerge from their own company units, particularly when they belong to small or high-status groups, according to research from the Yale School of Management and the University of Vienna.
"Managers systematically undervalue ideas that are proposed by employees who work outside of their own units," says Professor Olav Sorenson of the Yale School of Management. "This bias can lead to a failure to adopt promising new ideas, hurting company innovation and performance."
Sorenson and co-author Markus Reitzig analyzed data from a large, multinational consumer goods company that solicited ideas from its employees as part of an initiative to spur innovation throughout the firm. The data included more than 10,000 ideas submitted for evaluation, the outcomes of those evaluations, and the identities of the evaluators and the submitters. The researchers estimated the degree to which the idea evaluations depended on the identities of the evaluators and the submitters.
Sorenson and Reitzig found that managers accepted ideas from their own units at a rate nearly 16 percentage points higher than the baseline acceptance rate of 42%. The size and status of units affected the degree of bias. Bias against ideas from other units was greatest when the ideas were submitted by individuals from smaller units and from lower-status units. Evaluators from larger units exhibited less bias in favor of their own groups. Ideas submitted by individuals from high-status groups experienced less bias when evaluated by managers from other units.
According to the researchers, their findings suggest that managers psychologically identify more strongly with their units, rather than with their organizations as a whole. As a result, they favor ideas proposed by their fellow group members. "We think of this tendency to favor ideas from the group with which managers most closely identify as intra-organizational provincialism," says Sorenson.
The study demonstrates the importance of appropriately assigning managers to evaluation roles. Sorenson and Reitzig say that the solution is not to assign idea evaluation to managers who work outside of the unit that is proposing an idea. Although that would eliminate in-group bias, it would also relegate decisions to those with little relevant expertise, introducing more error into the process. Instead, they suggest embracing the bias. Idea evaluators should always be from the same unit as the person submitting the idea. "The process will be biased, but the bias will operate similarly across ideas," says Sorenson.
Olav Sorenson is the Frederick Frank '54 and Mary C. Tanner Professor of Management at the Yale School of Management. Markus Reitzig is professor of strategic management and subject area chair at the University of Vienna.
"Biases in the Selection Stage of Bottom-Up Strategy Formulation" is published in the July 2013 issue of the Strategic Management Journal.