Understanding the Quality of Relationships in order to Understand the Firm
When personal relationships aren't good, the fate of an organization is doomed: conflicts and the resulting clunky organizational processes lead to bad decisions and, eventually, bad financial results. The latest publications of Carlo Salvato, a scholar of strategy at Bocconi's Department of Management and Technology, stem from the above observation. "I analyze the quality of personal relationships because it's the basis for a fruitful cooperation and, at the end of the day, a source of competitive advantage".
In Routine Regulation: Balancing Conflicting Goals in Organizational Routines (with Claus Rerup, Frankfurt School of Finance, forthcoming in Administrative Science Quarterly, available online before print at doi: 10.1177/0001839217707738), Salvato shows how certain mechanisms, activities or even artifacts can bend organizational routines to serve conflicting goals. "Routines turn out to be more flexible and dynamic than presumed", Salvato says. The paper studies the Italian design firm Alessi, a company with an incredibly diverse range of products, worth from €20 to €3,000, some of them exposed at New York's MOMA, others advertised by supermarkets among the products customers can obtain collecting points.
By gathering detailed data on 214 new product development projects that unfolded over 36 years (1970-2006), the authors were able to distinguish between two patterns of the same product development routine, the so-called Dream Factory and Efficiency Factory. Designers and some managers were oriented towards the development of artistic objects, never minding costs (the Dream Factory), while other managers and engineers looked for feasibility and low costs (the Efficiency Factory), thus risking a state of perennial conflict. "We observed that the routine was directed towards one of the two patterns through a series of activating, repressing or alternative splicing activities that, in a sense, represented the rules to be used in assembling the same set of bricks, as happens with DNA, just to use a metaphor with 40 years of history", Salvato says. "As long as Alessi considered itself only a producer of artistic objects, for instance, all projects included a majestic kick-off workshop with prestigious guests and expensive activities. When it became clear that such a workshop made no sense in case of Efficiency Factory projects, a briefing was introduced to decide which activities to include in the workshop – an 'alternative splicing' mechanism".
"In my view", Salvato continues, "these are organizational tools that help people solve conflicts and hence improve the quality of their relationships".
In Cooperation across Disciplines: A Multilevel Perspective on Cooperative Behavior in Governing Interfirm Relations (forthcoming in Academy of Management Annals, available online before print at doi: 10.5465/annals.2014.0001) Salvato explores inter-firm relations with the help of an American expert of strategic decision making (University of Colorado's Jeffrey Reuer) and a game theorist (Bocconi's Pierpaolo Battigalli). "We find micro-mechanisms that make alliances more effective", Salvato summarizes. "It's interesting to note that, in searching for the microfoundations of collaboration, managerial literature is of little help, while game theorists such as Pierpaolo have extensively explored motives other than self-interest that can inform people's behavior".
In The Sources of Dynamism in Dynamic Capabilities (with Roberto Vassolo, IAE Business School, forthcoming in Strategic Management Journal) Salvato sees the quality of relationships not as an effect, as in the Alessi study, but as a cause – the feature that allows internal dialogue and the flexibility needed for a business to fit in with a dynamic environment.