Business research not necessarily academic

April 7, 2008 -- Two professors at the Olin Business School are the winners of the first annual "Olin Award: Recognizing Research that Transforms Business." Jackson Nickerson, Ph.D. and Todd Zenger, Ph.D. will share the $10,000 honorarium in recognition of their research that examined on the negative impact that social comparison, or envy, causes in the workplace.

The Olin Award was initiated by Richard J. Mahoney, former chairman and CEO of Monsanto and a current executive-in-residence at Olin. Mahoney said creating an award that recognizes the link between academic research and business practice was motivated by his exposure to the variety and quality of work the Olin Business School professors produce.

In addition to showcasing Olin's excellent research, the award is designed to remind researchers that the ultimate purpose of all business research is to improve business results. "Often the applied portion of research builds on highly theoretical basic research models. Both kinds of research — theoretical and applied — are highly valued and receive equal consideration for the Olin Award," Mahoney said.

Olin professors have been recognized internationally for their prolific research. The Financial Times, for example, ranked the school 14th worldwide for research productivity.

"The Olin Award is designed to encourage the continuation of that great strength," Mahoney said.

The competition's winners, Nickerson and Zenger, succeeded in doing just that, according to the remarks made by members of the 10-judge panel.

For example, James H. Quigley Global CEO, Deloitte Touche Tohmatsu said of the winning paper: "With respect to my first choice, I appreciated the discussion of 'social comparison costs' and agree that they should play a critical role in shaping the design of the work, employee rewards, and the organization itself. The supporting examples are strong and the arguments are financially significant to most businesses across all industries."

Nickerson and Zenger's research examined how firms design and structure their organizations to minimize what the researchers call "comparison costs," the costs brought on when individuals feel slighted in their rewards.

"Comparison costs are incurred when people within a firm have the perception of being treated unfairly," said Zenger, the Robert and Barbara Frick Professor of Business Strategy. "Workers begin to reduce their efforts or lobby management to change the distribution of rewards. They might actually try to sabotage the firm. Any of these actions becomes costly to the firm; these are comparison costs."

The professors contend that managers consistently underestimate and misunderstand comparison costs. Consequently, they make poorly informed decisions about such things as adopting incentive programs, acquiring another company and even outsourcing.

"Social comparison costs can cause all kinds of problems for organizations. Three-quarters of all mergers and acquisitions fail, and we believe social comparison is a prime culprit," said Nickerson, the Frahm Family Professor of Organization and Strategy. "Our theory helps managers figure out when and what to outsource, how to compensate employees, and even where to locate them. This new theory improves our understanding of how social phenomena shape organizational choices."

Nickerson and Zenger foresee future applications of their research to predict when and how to make acquisitions successful. "Despite sophisticated financial analyses, three-quarters of all mergers and acquisitions fail, and we believe social comparison is a prime culprit," Nickerson added.

"Be suspicious of claims an acquisition will be untouched, because workers from the acquiring company may become dissatisfied," cautioned Zenger.

Nickerson and Zenger will be honored at the 2008 Distinguished Alumni Awards presentation on Thursday, April 24, at The Ritz-Carlton, St. Louis.

The panel of judges included:

• Robert Dilenschneider, principal and founder, The Dilenschneider Group
• Hugh Grant, CEO, chairman and president, The Monsanto Company
• Michael Heinz, president, MHH Systems Corporation — former VP & GM, Boeing
• Jean P.L. Montupet, executive vice president, Emerson
• Joseph McCue, visiting professor, University of Edinburgh Management School in Scotland — former director and executive VP of Barclays Bank
• David Peacock, executive vice president of Marketing, Anheuser-Busch Cos.
• James H. Quigley, Global CEO, Deloitte Touche Tohmatsu
• James Weddle, managing partner, Edward Jones
• Murray Weidenbaum, Edward Mallinckrodt Distinguished Professor of Arts & Sciences and chairman of the Weidenbaum Center on the Economy, Government, and Public Policy, Washington University in St. Louis
• Virginia Weldon, chairman of the board, St. Louis Symphony, and former director for the Study of American Business, Washington University in St. Louis