How federal monetary policy can influence equity (and inequity) in home buying.
Conflict Among Senior Managers Leads to Worse Organizational Outcomes
- It’s common wisdom among management researchers that senior management teams with diverse opinions about the strategic direction of the company make better decisions — even when there is conflict.
- A Rice Business professor was part of a research team that came to the opposite conclusion. After integrating data from dozens of scholarly articles, the team determined that diverging views about a company’s strategic direction among senior managers has a negative impact on strategic decision making and firm performance.
- Whereas diversity of thought can be an asset, this does not apply to diversity of opinion about the firm’s strategic direction among senior managers.
For the past 40 years, management researchers have assumed that diversity of opinion about company strategy, even when it causes conflict among senior managers, leads to higher-quality strategic decisions and improved firm performance.
It turns out there isn’t evidence to support that belief.
Rice Business Professor Daan van Knippenberg has spent his career studying topics related to team performance, decision making, diversity and conflict. When a research team led by Codou Samba, an assistant professor at the University of Tennessee, Knoxville, approached him with an offer to test longstanding assumptions about conflict related to company strategy in senior management teams, he jumped at the opportunity.
In his experience, the business case for diversity is strong, but it comes with caveats. “Diversity of perspectives can lead to better solutions to complex problems, but only when team members are open-minded enough to listen carefully to each other and really integrate another point of view into their decision-making process,” he says. This does not seem to apply to differences in opinion about what company strategy should be.
When managers dig in their heels and refuse to consider and integrate other perspectives, that two-way door of communication slams shut and conflict ensues. “The popular idea that conflict is actually good for firms went against all my knowledge,” says van Knippenberg. “It’s annoying that this idea has floated around in my field for so long when the evidence really points the other way.”
The team led by Samba, which also included C. Chet Miller, a professor at the University of Houston, conducted a quantitative summary and integration of 78 papers that provide data about strategic dissent — a term used to describe diverging opinions about strategic goals and objectives on senior management teams — and its influence on strategic decision making and firm performance.
Every paper that made a prediction about strategic dissent (only a few did not) posited that strategic dissent leads to better outcomes for firms.
In their paper, “The impact of strategic dissent on organizational outcomes: A meta-analytic integration,” the research team used a deep well of empirical data to demonstrate that the opposite is true. Turning common wisdom on its head, they found that strategic dissent among senior managers actually leads to lower-quality decisions and impaired firm performance.
The authors identify two major reasons for the negative impact of strategic dissent on firm outcomes.
First, strategic dissent causes relational breakdown among senior managers. “If managers walk away from a team meeting thinking they just had a conflict instead of a productive discussion, the outcome is rarely positive,” says van Knippenberg. The two sides retreat into their respective corners, believing the other side to be wrong and closing their minds to further information.
Second, strategic dissent leads to less relevant information being exchanged among managers. Inevitably, this blockage impairs the decision-making process. If a marketing director and an operations director are at odds, for example, they are less likely to share the marketing- or operations-specific information that is needed to make an optimal team decision.
Teams can benefit from diversity of thought, but it is not always clear what conditions need to be in place for that to happen on senior management teams that disagree about the firm’s strategic direction. CEOs — the leaders of senior management teams — would do well to realize that it takes an effortful investment to foster open-minded discussions of diverging views on the organization’s strategy, to create an environment that encourages members to express dissenting perspectives while absorbing the perspectives of others, and to prevent vested interest and power dynamics from determining the outcomes of such discussions.
Codou Samba is an assistant professor at Haslam College of Business at the University of Tennessee, Knoxville.
Daan van Knippenberg is the Houston Endowment Professor of Management at the Jones Graduate School of Business at Rice University.
C. Chet Miller is the C.T. Bauer Professor of Organizational Studies at C. T. Bauer College of Business at the University of Houston.
To learn more, please see: Samba, C., van Knippenberg, D., & Miller, C. C. The impact of strategic dissent on organizational outcomes: A meta-analytic integration (2018). Strategic Management Journal, vol. 39, issue 2, 379-402.