“Companies are social organisations, consisting of people. People have feelings and how you accommodate these feelings and deal with them can have significant consequences within a company.
A lot of strategic issues are influenced by emotions on different levels. So not just by emotions of executives, but also by the feelings of people on the work floor.” Speaking is Alan Muller, associate professor of the University of Amsterdam Business School. Muller and two colleagues of the University of Georgia, Michael Pfarrer and Laura Little, recently published “A Theory of Collective Empathy in Corporate Philanthropy” in this quarter’s issue of the Academy of Management Review.
“Our paper was placed as the lead article, which is an honour. It caught the attention of the editor and the reviewers because of our perspective on how emotions play a role within companies. While they might be less interested in corporate social responsibility (CSR) or corporate philanthropy than we are, they liked the processes we described. Our theoretical model consists of three levels that explain how the emotions of individuals on the work floor can influence strategic decision-making at the senior executive level. The emotion we considered is empathy, in reaction to major disasters as the 2004 tsunami, hurricane Katrina and the 2010 earthquake in Haiti. The first level is about how individual employees’ empathy gets aroused by these events, even though such events are external to the firm (affective events theory). The next level describes how these individual feelings become collectively shared through explicit and implicit exchange processes (intergroup emotions theory). That leads to the affect infusion model in the third stage, in which collective emotions influence strategic decisions in the boardroom. In our case, the choice to engage in corporate philanthropy.”
“These days everything is expressed in terms of economic value. Read the papers, watch the news, it’s all about economics, everywhere. Thanks to the rise of behavioural economics, however, we realise increasingly that people aren’t as economical, as rational, as we have liked to think for the past hundred years. But businesses are still portrayed as strongholds of economical thinking and people, as soon as they go to work, are assumed to be completely rational beings. I see companies more as groups of people who work together to achieve common goals, not unlike a church or a baseball club.”
“When people tell me that companies cannot experience feelings, my reaction is that it depends on one’s conceptualization of what a ‘company’ is. Is the company simply the building it is housed in? Or all of the machines that manufacture its products? Or do all the hundreds or thousands of employees together form the company? That ‘human aspect’ is the recurring theme in my research. The fact that companies consist of people who remain human beings even after they’ve put on their manager hat or their Shell-employee-hat. Of course our perspective is just one part of the picture, but it’s important enough that it too deserves to be told.”
“According to the prevailing paradigms in CSR and corporate philanthropy research, companies are supposed to have mainly strategic goals when they think about their societal role. CSR research is all about strategic motives, how it can generate financial benefits to the firm. A company might donate to a museum in order to enhance its reputation and so attract more customers. Better treatment of employees is good because then people will work harder. But I think reality is a lot more nuanced. When you think about how individuals deal with charity decisions, most people’s first thought isn’t usually: ‘oh, I’m making a good impression in order to make new friends’. People don’t deal with these issues in such a rational way, so why should we assume that business managers do?”
“I hope that managers and executives pulling the strings realise that the human aspect is important within companies. And that they contribute to a business culture in which it is natural to open up to your feelings and where people aren’t embarrassed to admit that feelings influence their decisions. Because it goes without saying that emotions are an important factor in decision making anyhow. Maybe we just call it ‘gut feeling’. We all hear stories about how managers use their ‘instincts’ or about hedge fund managers who can ‘smell’ a good deal.”
“Our paper is premised on the notion that the sentiments of people in the workplace can also influence decision making on the highest level. But this is not restricted to corporate social responsibility issues. Our theory can apply equally in the case of mergers and acquisitions or reorganizations. The executive may not even be aware of this emotional influence and might still justify his or her decision based on completely different arguments, including strategic ones. In that sense, the human and strategic aspects cannot really be considered in isolation.”