Share a Little, Save a Lot
When Michael Bloomberg moved into New York City Hall in 2002 at the beginning of his first mayoral term, he revamped the office. Key city officials sat bullpen style, side by side in wall-less cubes designed to maximise transparency and communication, allowing the mayor to foster the same kind of management style — information sharing in the name of efficiency and productivity — he’d so successfully employed at his own firm, Bloomberg, LLP.
Conventional corporate wisdom does not always readily endorse so much transparency and information sharing. “There are plenty of reasons a firm or its staff might resist information sharing,” Professor Marco Di Maggio says. “First, it’s not easy to demonstrate that it’s productive.” Consider a taxation expert at a law firm. “She may not work directly with clients and so produces no billable hours — but her expertise is
sought out by colleagues who are producing many billable hours. By serving as a source of expertise on tax questions, she’s undoubtedly improving the firm’s productivity, but the firm can’t readily measure just how much.” Even if a firm’s managers want to facilitate information sharing, a lesser-skilled or newer employee who could benefit from tapping his more able peers might hesitate to do so out of concern that he is showing ignorance or lack of skill. High-skilled workers may feel they confront a double-edged sword: being tapped as an expert by one’s peers can signal expertise to superiors, but spending time answering questions may seem like an inefficient use of time.
Di Maggio, working with Marshall Van Alstyne of Boston University, was able to tease out the realities of information sharing by working with a multinational bank that made available detailed performance data for about 4,000 loan officers from 400 branches. The bank scored each loan officer based on how well she hit established performance targets for each six-month evaluation period over two-and-a-half-years, which gave the researchers an objective measure of loan officers’ performance. The researchers’ additional data came from an internal online information-sharing platform the bank had recently implemented. The platform was a reference source — employees could download key documents and forms, for example — but it also allowed them to anonymously ask as well as answer questions, enabling horizontal as well as vertical communication. (Anonymity allowed staff to forgo concerns about their supervisors’ perceptions about skill or productivity). “They could ask anything — about a legal issue, a taxation issue, a risk assessment question about a new client,” Di Maggio says.
The platform’s effects on productivity were impressive: allowing loan officers in the corporate division of a bank to share information anonymously on this online platform generated a productivity gain for each lower-skilled loan officer of about 10 percent, or about one additional year of education. Those who performed poorly in previous terms saw the largest increases. Higher-level employees who regularly shared their knowledge with lesser-skilled peers were, over time, more likely to get promoted than their high-skilled peers who shared their knowledge less often.
The information-sharing platform also offset the costs of conforming to a new anti-corruption regulation mandating that loan officers switch branches every two to five years through random reassignment. (The regulation was designed in part to prevent loan officers from becoming too familiar with their clients and colluding). Every time loan officers rotate they take with them valuable knowledge about the local credit market, but the researchers found that the negative effect was less pronounced for officers that came from branches that used the platform. “That’s because officers from branches that encouraged the use of the platform were better prepared to learn about local credit market conditions more quickly when they move to a new branch,” Di Maggio says.
A similar dynamic reflects the important role of norms. “Officers coming from branches that used the platform were more productive once they moved to a new branch because they were accustomed to and willing to using the platform to overcome any difficulties in their new work environment,” Di Maggio explains. The platforms can also help firms capture soft information. Loan officers can use fairly objective data points like credit scores and income to assess risk, but proposal quality is still part of the overall picture of the loan applicant that isn’t as easy to paint in a spreadsheet. “Organisations don’t want to waste knowledge,” Di Maggio says. “Our paper shows that for large organisations who have a lot of dispersed employees working on related projects, information sharing produces a sizable productivity effect.”
NEWSLETTER | TITANS
by Marco Di Maggio