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business school research

Researchers found that workplace segregation actually has less to do with who is making the referral than it does with how often a referral is being made by a particular individual or group.

The Globe's monthly roundup of research from business schools.

Striving for greater diversity in the workplace – be it gender, race, age or experience levels among employees – is a long sought-after goal by business leaders looking for a competitive advantage.

Several studies show that companies with a diverse workforce are more likely to outperform others in the field. So, with so much on the line, why do so many firms still struggle with a lack of gender, race or age diversity within their ranks?

Brian Rubineau, of McGill University's Desautels Faculty of Management in Montreal, and Roberto Fernandez of MIT Sloan in Massachusetts tackled that question in a recent study examining the role of recruitment techniques in workplace make-up and how employers can influence the process to ensure greater diversity.

Specifically, the study, published in Organizational Science, looked at word-of mouth recruiting, the most common way for organizations to fill jobs.

Using mathematical modelling, the researchers challenge a long-held belief that the referral method serves to preserve and, often, worsen job segregation. The theory, based on previous research, posits that people are most likely to recommend others who are most like themselves.

Women, for example, tend to reach out to women in their networks, and men do likewise. The same is thought to be true across other demographics, including age, experience, religion or ethnicity, says Dr. Rubineau, an assistant professor of organizational behaviour.

But the researchers found that workplace segregation actually has less to do with who is making the referral than it does with how often a referral is being made by a particular individual or group.

Unchecked, members of even the smallest groups will, over time, dominate. All it takes is for its members to be more active than other groups in recruiting from within their own community network.

"If you have a group that is referring at a higher rate than other groups, then that group is – over time – going to become the majority, no matter how small it was to start with," says Dr. Rubineau.

Dr. Rubineau says employers can use the study findings to their advantage. By tracking referral patterns, organizations can map hiring trends and determine whether word-of-mouth recruiting is helping or hurting diversity goals. They can also urge underrepresented groups to be more active in suggesting prospective employees.

"Organizations can't realistically eliminate word-of-mouth recruitment because it is such a dominate tool," says Dr. Rubineau.

How to schedule consumer satisfaction

The Nike swoosh is forever tied in the minds of millions of consumers with speed and agility thanks to the clever (and enduring) work of sports marketers.

But Mike Dixon, assistant professor of operations management at the University of Western Ontario's Ivey Business School in London, Ont., says the swoosh also serves to illustrate how managers of cultural events and festivals should think of scheduling their shows to maximize both profits and customer satisfaction.

Dr. Dixon's most recent paper on the subject is published in Production and Operations Management. He and co-author Gary Thompson of Cornell University in Ithaca, N.Y., explore the influence of event sequencing on repeat season-ticket sales at venues such as a concert hall.

Their findings run counter to a commonly held notion to "save the best for last."

Instead, Dr. Dixon advises companies that are scheduling events over a long period (in this case, a year or season) to start and end with a bang, with an emotional dip in the middle – just like that famous swoosh.

"So what results is a series of events that start exciting, go down immediately and then gradually increase again," says Dr. Dixon.

"Intuitively, this makes sense if you consider that for longer sequences the customers might get put off if they don't get something juicy right up front."

The final high note should be sufficient to drive another round of series ticket sales.

It's important to note that shorter events, such as a three-day festival, don't follow the same pattern. In that case, says Dr. Dixon, "the optimal design is just to start small and work your way to the end on the peak."

The study taps into previous work on the topic by Dr. Dixon, who is also looking into how the element of anticipation plays into event sequencing.

The theory suggests that if a customer knows that the peak will come later, he is less reliant on early peaks.

"However, we also find that surprise peaks [peaks that are unknown to customers before the event] can amplify the final effect – meaning they are even more memorable and salient in customers' minds," he says.

Equity incentives good over the long term

Jeff Bezos, chief executive officer of e-commerce giant Amazon, has made no bones about what he thinks about cash bonuses that are based on company profits. He doesn't pay them – "because [they] are detrimental to teamwork," he has said in past media interviews.

That doesn't mean Amazon employees aren't rewarded. The company offers one of the most equity-heavy management compensation packages in business. It's a practice grounded in the theory that the rewards become valuable only over the long term, and only if the company grows.

For Joanne Oxley, the McCutcheon Professor in International Business at the University of Toronto's Rotman School of Management, the Amazon incentive structure raised an intriguing question.

She wondered, "How do equity incentives play into the mix when you are trying to design good incentives for firms?"

To date, there's been little research examining these changing compensation practices at a time when a new breed of high-tech-oriented companies are on the rise, bringing with them leaders who "are still taking bets on the future when it comes to the investments that they make."

In a paper co-authored with Gurupdesh Pandher of the University of Windsor in Windsor, Ont., Dr. Oxley developed a theoretical model to examine compensation more closely, especially as it relates to co-operation across different business units and divisions.

They found that, while salaries and cash bonuses are appreciated, managers put themselves out more when shares in the company were included in an incentive package. That finding held true whether the managers were working at their own unit's tasks or pitching in to help managers of other units.

The model predicts that future-oriented companies, where short-term profits are uncertain but long-term growth looks good, are most likely to benefit from a shift to more equity-based incentives.

"Our model suggests, with [these] companies, the more you are trying to build and grow the company, the more that you might want to give your managers some skin in that game," says Dr. Oxley, a professor of strategic management.

That doesn't mean the move is right for every company. Equity incentives got a bad rap after the 2008 financial crisis for putting too much incentive on stock performance and creating short-term planning.

Those critics aren't necessarily wrong, says Dr. Oxley. But the research suggests, in the right circumstances, the same incentives can also be effective. "We're saying it is a useful tool in the tool kit when it comes to designing incentives."

The paper was published in the Strategic Management Journal.

Story ideas related to business school research in Canada can be sent to Darah Hansen at