Disagreement - not harmony - is key to business success, study says

June 03, 2001

PROVIDENCE, R.I. -- Relationships among co-workers have a powerful impact on organizational performance and ultimately on a firm's competitive advantage in the marketplace, according to a new study by a Brown sociologist.

The closer colleagues are - family and friends - the less apt they are to engage in constructive debate about business decisions. People linked through bonds such as professional relationships, however, draw from a larger pool of information and engage in more constructive debate, resulting in more profitable decisions.

"Good business has very little to do with liking each other and a lot to do with working together with respect, and that includes respectful disagreement," said Brooke Harrington, assistant professor of sociology, whose study was published in the 2001 Research in the Sociology of Organizations. "It's a line all organizations have to walk - the danger of things getting too chummy."

Harrington surveyed more than 11,000 individuals in 1,245 investment clubs in 1998. Investment clubs are voluntary organizations of about 15 to 20 people who pool their money to invest in the stock market. About 11 percent of American adults are involved in an investment club, according to an estimate by the National Association of Securities Dealers. Like small businesses, investment clubs have hierarchical leadership structures, file tax returns, and have profit-making as their main goal.

The more professional relationships a club had, the better it did, said Harrington. Each additional tie through work or school among members in the group resulted in an 8 percent increase in the club's financial performance.

The findings illustrate why family businesses frequently get into trouble; people may be reluctant to contradict a family member. A similar danger is present in all work organizations, since most recruit new hires through the friendship networks of current employees.

"To avoid this you may have to spread your net a little wider when hiring or recruit through a headhunter," said Harrington. "You don't want a homogenous work environment composed of friends who get along because they have similar sources of information and ways of thinking."

When it comes to decision-making in complex environments - a task common to many firms in the global economy - it is essential for business to maximize input from workers. Nowhere is that more evident than in industries where ideas are the central product, such as high-technology and finance, said Harrington.

Even an organization like a board of directors, which is given the challenge to hold management accountable for decision-making, can suffer when the managers become too friendly and close to board members.

One factor that is beyond the direct control of business - the high turnover of the current job market - may influence the makeup of organizations to some degree. When employees do not remain on the job long, they may not develop the type of close friendships that inhibit discussion. In those areas of the job market that do not experience high turnover, managers may need to reshuffle work groups, creating then disbanding groups to work together on specific projects, said Harrington.

While the study's findings provide new information about the factors that determine whether employees are either social capital or social liability, it also points out the need for further research. Additional study is needed to examine how networks among people who are in business together change - and perhaps become more alike - over time.

Brown University

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