Resources and culture in organizations

Abstract

We look at how an organization's level of resources interacts with its culturethat is, its shared beliefs and preferences. We consider an organization where workers exert effort to develop projects. These projects (a) have externalities for other members, (b) compete for funds when resources are scarce, and (c) can be implemented in various ways, which members have beliefs and preferences over. When resources are plenty, so that all feasible projects are funded, workers' efforts are independent of each other and a coherent culture is optimal. By contrast, when resources are scarce, competition across workers with diverging beliefs or preferences (competing cultures) can be optimal. 1 | INTRODUCTION When thinking about motivation in organizations, economists tend to emphasize pay for performance, where a worker's pay is tied to outcomes that benefit the organization. In practice, however, organizations rely on a richer set of instruments to solve the motivation problem. One such instrument is the culture of the organization-that is, the extent to which beliefs and preferences are shared across members of the organization. The purpose of our paper is to provide an economic way to think about some aspects of how culture motivates workers. To see ways in which culture might serve as a motivational lever, consider the examples of the National Forest Service (NFS) and the National Park Service (NPS)-two U.S. government agencies with roughly similar functions, each responsible for managing large tracts of land. In the NFS, new recruits who are selected carefully, undergo rigorous training and are immediately indoctrinated in the ways of professional forest management. This ensures that their performance is always in line with the overarching goal of the organization. In fact, as Herbert Kaufman notes in his study of the NFS, foresters are if anything "too zealous in their conformance" toward organizational policy (see Kaufman, 1960, pp. 4, 5). We refer to such an organization, where members with shared beliefs and preferences work toward the same outcome, as one with a coherent culture. To compare, there is often conflict within the NPS over the proper way to manage these resources. Arguably, this is driven by an "inherent duality" in the self-stated purpose of the organization, which is to both "conserve the scenery and the natural and historic objects" whilst at the same time "providing for the [public's] enjoyment" of these natural resources. With proponents on both sides of this argument within the organization, a question as simple as "Should this section of trees be cut back to enable easier access to camping grounds?" can be hotly debated (Goodsell, 2011, pp. 111, 112.). Borrowing a phrase from James Q. Wilson in his book Bureaucracy (p. 92), we refer to this type of an organization, where members have diverging beliefs or preferences over outcomes, as one with competing cultures. These views held by members of an organization matter in business settings too. At Facebook, for example, disagreements over a plan to...

Mediating Internal Competition for Resources*

“…Prasad & Tomaino [2020] show that the asymmetric agent control structure can lead to a higher probability of an implemented project when b is sufficiently close to c. In this paper, however, Assumption 1 which is needed for the concavity of the expected surplus function rules out this case.© 2023 The Authors. The Journal of Industrial Economics published by The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd.…”

“…Building on a paper by Prasad & Tomaino [2020], we construct a model to examine how decision rights affect incentives and the overall surplus from conflict. We start with a benchmark model that compares two decision rights structures.…”

“…In the first structure, also considered by Prasad & Tomaino [2020], decision rights over resources are assigned ex‐post (after the development of the project) to one of the agents. When an agent succeeds alone in the development phase, he is given decision rights.…”

“…First, they both assume limited liability and thus abstract away from analyzing the expected surplus. 7 Second, Prasad & Tomaino [2020] consider a wider range of loss functions, allowing for both linear and concave loss functions, whereas we restrict our attention to strictly convex loss functions to emphasize the insurance provided by mediation. Third, in Prasad & Tanase [2021], effort affects project quality which is the basis for project selection by the principal.…”

Effects of inventive capabilities on new product development performance: the knowledge combination view

“…The suboptimal performance delivered by the hybrid strategy exacerbates the scarcity of resources. Different projects in the firm compete for scarce resources (Prasad and Tomaino, 2020). Increasing costs involved in novel combination would distract resources from NPD, which finally inhibits NPD performance.…”