Showing posts with label financial networks. Show all posts
Showing posts with label financial networks. Show all posts

Friday, February 1, 2013

The Cost of Embedded Group Networks within the Workplace

Workplace groups create their own values over time through social and economic associations that can damage the efficiency and financial viability of any organization. When organizations develop their own group standards, that lay in productive and accurate perceptions, their premises can encourage higher levels of organizational performance. Inappropriately socialized members often develop their own groups which influence the organizational culture and costs of transactions throughout their networks.  Left untouched the groups’ decisions become less logical and more damaging to the financial success of the total organization. It is important for executives to understand how they groups form and the potential wide reaching problems they can create.

It is first beneficial to define what a group is. Groups perceive themselves as belonging to the same social unit (Lawler, Thye, and Yoon 2008). Their place in society is defined by their shared experiences and understandings. To change a group member’s identity and perceived station in life requires the ability to change both self-perception and the members of their social group. This is one of the reasons why a poor organizational culture can be improved by moving employees to new locations and bringing in fresh members with outside perceptions.

When members see themselves as part of a group they begin to view each other as having similar characteristics and traits that bind them together. The group is a method of moderating self-interest and seeking positive perceptions of each other (Ellemers, Spears, and Doosje, 1997). Once initiated into a group, the members begin to view each other as more worthwhile and having more positive traits than those who exist outside the group.  Within an organization, in and out-group mentality can create encampment, hoarding of resources, and influence the financial success of the entire organization through poor decision making.

This can be expected as groups seek to create advantages for their individual members at the exclusion of competing organizational interests. They do this through the formation of a group network that continues to expand throughout the organization. According to Thye, Lawler and Yoon actors a) perceive the network as a group;  and , b) share rewards and resources with each other when opportunities arise (2011).  Such networks will continue to seek additional rewards and resources even at the expense of their employer and society.

Within the group certain behaviors will produce certain reactions and results from participating members. As long as these behaviors continue to produce the expected results the group members will remain entrusted to each other. The actions that become dependent on the response from other members are called social exchanges (Blau 1964). Groups live and breed these social exchanges and common rules of engagement. Outside intervention by managers and investors can be resented creating difficulty and passive resistance to requested changes.

Since such groups have social, as well as economic purposes, they create higher forms of identity the more these needs are gratified. Such relational commitment further solidifies the identity of group members which separates them from other groups (Cook and Emerson, 1984). Each group has their own relational commitment assumptions that help them define their distinct identities and existence. Outsiders may have difficulty understanding the unique set of underlining assumptions the group is using to define their identity and social interaction.

Over time the group becomes so distinct that their identity creates new realities of perceiving the world. According to social constructionists the group eventually uses their assumptions to create “objective” perceptions of the world (Berger and Luckmann 1966).  The person is thus fully embedded in the group and therefore sees their existence from the vantage point of the group assumptions and uses these assumptions to judge others and make strategic decisions. Any management team, new executive, or consulting firm is seen as an outsider attempting to intrude upon the groups identity which damages self-identity. This is one reason why outside intervention is often staunchly opposed.

Such similarity in subjective truth can define “stickiness” in economic decisions that are weighted and judged against societal norms. Independent objective thought becomes more difficult the more people define themselves based upon their distorted group identity. Such relational identities impact both the sociological and economic transactions of the members (Emerson 1981). Having two different economic approaches within an organization can damage that organizational viability through waste and inefficiency that is rooted in inappropriate premises.

At times the group identity can be so far removed from organizational and societal norms that they run counter to these wider expectations. Socially embedded market transactions can defy rational thought and logic (DiMaggio and Louch 1998). Such logic creates their own market influence based upon information sharing and thought patterns of members who interpret environment actions from a skewed lens. Changing the group identity and thought patterns requires exposing them to new people, methods of needs attainment, and ways of thinking.

Group identity can either encourage productive behavior or be destructive by nature. In organizations group identity that is stronger than organizational norms should concern both executives and investors. Such networks continue to expand their influence and waste of organizational resources by financially and socially feeding group members at the expense of more logical choices. It is through the development of strong cultural assumptions and organizational identity that more effective uses of organizational resources can be achieved.

Berger, P. and Luckmann, T. (1966). The Social Construction of Reality. New
York: Doubleday.

Blau, P. (1964). Exchange and Power in Social Life. New York: John Wiley.

DiMaggio, P. and Louch, H. (1998). Socially Embedded Consumer Transactions:
For What Kinds of Purchases Do People Most Often Use Networks? American Sociological Review 63:619–37.

Ellemers, N., Spears, R. and Doosje, B. (1997). Sticking Together or Falling Apart: In-group Identification as a Psychological Determinant of Group Commitment versus Individual Mobility.
Journal of Personality and Social Psychology 72:617–26.

Emerson, R. (1981). Social Exchange Theory. pp. 30–65 in Social Psychology: Sociological Perspectives, edited by M. Rosenberg and R. H. Turner. New
York: Basic Books, Inc.

Cook, K. and Emerson, R. (1978) Power, Equity, and Commitment in Exchange Networks. American Sociological Review 43:721–39.

Lawler, E., Thye, S, & Yoon, J. (2008). Social Exchange and Micro Social Order. American
Sociological Review 73:519–42.

Thye, S., Lawler, E. & Yoon, J. (2011). The emergence of embedded relations and group formation in networks of competition. Social Psychology Quarterly, 74 (4).

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