Strong Faultlines Research Articles

On the Right Side of the Faultline: Effects of Subgroups and CEO Inclusion on CEO Compensation

AbstractThis study examines how subgroup formation resulting from group faultlines can affect corporate boards’ CEO compensation‐setting process. Group faultlines are hypothetical dividing lines that can split the board into subgroups based on directors’ diversity characteristics. Using a sample of US firms for the period 2007–2019, we find that if the CEO demographically belongs to the same faultline‐based subgroup as corporate directors who are members of the compensation committee, strong faultlines lead to higher CEO compensation. Furthermore, we show that joint tenure of directors and the CEO strengthens this relationship. Our results are robust to endogeneity concerns and a battery of sensitivity tests. Our findings make important contributions to the literature on CEO compensation, corporate governance and faultlines, as we consider not only the existence of faultlines in the board context but also how the composition of identity‐based subgroups affects CEO compensation.

Fostering collaboration through inclusive leadership: Exploring the behaviour of childcare and school leaders in Dutch child centres

More collaboration between primary schools and childcare providers is increasingly considered a crucial factor to optimally support children's development. However, due to disparities between these two sectors, fostering collaboration proves problematic in practice. Inclusive leadership is seen as a promising approach in contexts with strong fault lines, but whether school leaders and childcare leaders apply this leadership approach is not clear. To fill this gap, our qualitative study aimed to explore whether a recent theoretical model for inclusive leadership can be used to identify inclusive leadership behaviours of school and childcare leaders who work together in child centres. Data was collected through in-depth interviews with 12 school leaders and 12 childcare leaders. Our results showed that the theoretical model of inclusive leadership used is suitable for interpreting inclusive leadership behaviours in interprofessional educational settings. Based on the data, adding non-positive behaviours to the model was appropriate, to account for behaviours that may discourage experiences of belongingness and valuing uniqueness. The theoretical contribution of this study lies in refinement of this model and its application in the education sector. We also make practical recommendations based on our findings, and advocate professional development for school and childcare leaders in child centres, not only because of the non-positive behaviours taking place in practice but also because inclusive leadership behaviours valuing uniqueness appeared to be less common.

Effects and mechanisms of board faultlines on decision quality

PurposeThe inconsistent results shown in previous group faultline research have created a need for investigating the underlying mechanisms of the faultline's effects. This study focuses on clarifying the competing mediating roles of information diversity and team conflict in the nonlinear relationship between board faultlines (BF) and decision quality.Design/methodology/approachThis study is empirically tested with the questionnaire data from 105 Chinese listed companies.FindingsThis study finds: (1) an inverted U-shaped curve relationship between BF and board decision quality and (2) that the joint mediating effect of team conflict and information diversity leads to the inverted U-shaped curve relationship between BF and decision quality. Specifically, BF shows a U-shaped curve relationship with team conflict and an inverted U-shaped curve relationship with information diversity. Either too weak or too strong faultlines will inhibit the positive effects of information diversity and amplify the negative effects of team conflicts, leading to low-quality decisions.Originality/valueThis study contributes to the research on: (1) board governance as it clarifies the effect of BF on the board decision-making process and its quality, which helps to open the black box of board decision-making and (2) group faultlines as it reveals how information diversity and team conflict can play a joint mediating role in the functioning of team faultlines.

Ripple effects of hospital team faultlines on patient outcomes

Medical errors are rampant across healthcare settings, imposing a significant burden on patient safety. Here, we examined the ripple effects of diversity splits, or faultlines, within hospital teams on patient safety and care. Hospitals consist of hierarchical, mixed-gender, and multiracial units that are prone to conflict. Within a diverse unit, faultlines can occur when multiple attributes (e.g., gender and race) of unit members align and divide a unit into two or more homogeneous subgroups. Yet, little is known about how such faultlines influence patients. Hierarchical path modeling of data collected from 1,102 hospital employees and 4,138 patients across 38 hospital units illustrated that when strong faultlines formed through homogenous subgroups within hospital units resulted in decreased civility among staff. This incivility was related to higher rates of medical error and patient deaths. A 10% increase in unit incivility was linked to a maximum 8.87% increase in healthcare-associated infection rates and a maximum 10.59% increase in mortality rates. However, we found patients within units high on collaborative cultures for managing conflicts—that fostered mutual respect, active listening, and openness to differing opinions—experienced fewer medical errors and lower mortality rates, regardless of strong faultlines. These findings offer an evidence-based, culture-focused approach to reducing medical errors and improving the quality of patient care.

The effect of faultline and incentive schemes on knowledge-sharing behaviour

Purpose This study aims to examine the effect of faultline based on job responsibility and their interaction with the incentive scheme on knowledge-sharing behavior. Design/methodology/approach This research is an experimental study with a 2 × 2 factorial design between subjects. Faultline and incentive schemes are manipulated into two groups (strong faultline–weak faultline and group incentive–individual incentives). This study involved 89 undergraduate accounting students as participants. Findings This research shows that a strong faultline created a strong social identity effect. Hence, the knowledge-sharing behavior among group members tends to be lower than the weak faultline. Knowledge-sharing behavior tends to be higher in group incentive schemes than individual ones. However, there is no support for interactions between incentive schemes and faultline effects on knowledge-sharing behavior. The results indicate that forming a working subgroup based on informational characteristics attributes reduces cooperative behavior and knowledge sharing between groups. Originality/value This study adds a new addition to faultline literature by examining the effect of faultline and incentive schemes on knowledge-sharing behavior based on informational characteristics attributes. Previous research on faultline and knowledge sharing was limited and primarily focused on faultlines created by demographic attributes. This study also enriches faultline literature on knowledge-sharing behavior using an experimental design.

Exploring an inverted U-shaped relationship between top management team task-related faultlines and top executive hubris

PurposeTop executive hubris is associated with positive/negative outcome. Little is known about the antecedent of hubris in top management team (TMT) and how they can be weakened to capitalize on TMT size and market complexity. This paper aims to address these issues.Design/methodology/approachThis study draws on the social information processing theory. Subsequently, it proposes and tests an inverted U-shaped relationship between task-related faultlines and top executive hubris. Top management team size and complexity can weaken the relationship between them. Panel data were collected longitudinally from 2011 to 2016 on China's listed firm on growth enterprises board.FindingsHierarchical regression analyses indicate that medium task-related faultlines experience stronger than weak and strong faultlines. TMT size and market complexity can weaken the inverted U-shaped relationship between them.Originality/valueThis study provides pioneering evidence for an inverted U-shaped relationship between task-related faultlines and top executive hubris. These findings inform practice by suggesting a tipping point of team faultlines.

A new methodology to measure faultlines at scale leveraging digital traces

The definition of society is tight with human group-level behavior. Group faultlines defined as hypothetical lines splitting groups into homogeneous subgroups based on members’ attributes have been proposed as a theoretical method to identify conflicts within groups. For instance, crusades and women’s rights protests are the consequences of strong faultlines in societies with diverse cultures.Measuring the presence and strength of faultlines represents an important challenge. Existing literature resorts in questionnaires as traditional tool to find group-level behavioral attributes and thus identify faultlines. However, questionnaire data usually come with limitations and biases, especially for large-scale human group-level research. On top of that, questionnaires limit faultline research due to the possibility of dishonest answers, unconscientious responses, and differences in understanding and interpretation.In this paper, we propose a new methodology for measuring faultlines in large-scale groups, which leverages data readily available from online social networks’ marketing platforms. Our methodology overcomes the limitations of traditional methods to measure group-level attributes and group faultlines at scale.To prove the applicability of our methodology, we analyzed the faultlines between people living in Spain, grouped by geographical regions. We collected data on 67,270 interest topics from Facebook users living in Spain, France, Germany, Greece, Italy, Portugal, and the United Kingdom. We computed existing metrics to measure faultlines’ distance and strenght using our data to identify potential faultlines existing among Spanish regions. The results reveal that the strongest faultlines in Spain belong to Spanish Islands (the Canary Islands and the Balearic Islands), Catalonia, and Basque regions. These findings are aligned with the historical secessionist movements and cultural diversity reports supporting the validity of our methodology.

Can Membership Change Bring Beneficial Outcomes to Strong Faultline Teams?

Membership change is common in organization. However, extant research generally suggests that teams with low temporal stability (i.e., frequent membership change) tend to perform worse than teams with high temporal stability (i.e., stable membership), because membership change often disrupts team coordination. In this paper, we examine whether membership change can also bring beneficial outcome to strong faultline teams by ‘disrupting’ team conflict. We conduct experiment on 179 student teams and field survey on 71 organizational teams to test this idea. Our finding reveals a mixed benefit and cost of low temporal stability on strong faultline teams. Our experiment result supports that low temporal stability has beneficial effect to newly formed strong faultline teams by reducing conflict and increasing team performance growth. However, temporal stability does not moderate the effect of faultline on team conflict in our field survey. Instead, when strong faultline teams experience task conflict, such conflict would reduce team performance when temporal stability is low. While further research will be needed, our results provide some evidence that low temporal stability may sometimes reduce conflict of newly formed strong faultline teams, but may also intervene with effective conflict resolution among long-standing teams.

Does deal size moderate the effects of board faultlines? Evidence from acquisitions

PurposeBoard faultlines, which reflect intrinsic divisions of board members into relatively homogeneous subgroups, are associated with poor firm performance. This paper aims to extend the existing board faultline research by examining how acquisition deal size moderates the negative implications of board faultlines.Design/methodology/approachThis paper uses a sample of acquisitions and a quantitative research approach to conduct statistical analysis.FindingsUsing a sample of acquisitions announced between 2007 and 2016, this paper finds evidence suggesting that strong faultlines are associated with poorer acquisition outcomes in the long-term, but not in the short term. Further, this paper finds that the effect of faultline strength on long-term acquisition outcomes is weaker for larger acquisition deals than smaller acquisition deals. The findings are consistent with deal size moderating the relation between faultlines and acquisition outcomes.Research limitations/implicationsThis paper addresses possible endogeneity through firm fixed effects and instrumental variable analysis. Although this paper provides evidence on the moderating role of deal size in the context of faultlines, future research could examine the role of additional moderators, such as pro-diversity, trust, board leadership and board and task characteristics.Practical implicationsThe findings suggest that boards need to be aware of situations where the negative effects of faultlines are more likely to come to the fore. For example, faultlines are more likely to play a role in more routine, obscure monitoring than for high-profile strategic decisions.Originality/valueThe study is multidisciplinary as it draws on the management, organizational behaviour and psychology and finance literature. It contributes to the developing literature on faultlines in several important ways. First, this paper supports their view that faultlines have adverse effects on board performance by showing that faultlines negatively impact discrete strategic investment decisions. Second, this paper provides evidence that deals size moderates the faultline-acquisition performance relation, indicating that the role of faultlines is contextual. Third, this paper finds evidence that suggests investors do not factor in board faultlines when responding to acquisition announcements.

The curvilinear effect of professional faultlines on team innovation: The pivotal role of professional identity threat

AbstractPast research into team faultlines has provided important insights, however, as with other aspects of compositional diversity, findings are somewhat ambiguous. This suggests the need to examine more complex and interactive effects. We draw on theorising in social categorisation and subgroups to argue that, under specific circumstances, a positive relationship between professional faultlines and innovation may exist beyond moderate (threshold) faultline strength. We posit that below this threshold, weaker faultlines have no positive impact on innovation. Further, we argue that this curvilinear relationship will be contingent on professional identity threat, such that, only when teams are characterised by identity threat will strong faultlines have a U‐shaped impact on innovation. Thus, we build and investigate a model in which professional faultlines have a contingent curvilinear (U‐shaped) effect on innovation, moderated by professional identity threat. Based on quantitative data from two surveys completed by leaders and members from 70 UK healthcare teams, our analyses support our hypothesised moderated curvilinear model.

Beyond Ethnic Diversity: The Role of Teacher Care for Interethnic Relations

Drawing on the role of teachers for peer ecologies, we investigated whether students favored ethnically homogenous over ethnically diverse relationships, depending on classroom diversity and perceived teacher care. We specifically studied students' intra- and interethnic relationships in classrooms with different ethnic compositions, accounting for homogeneous subgroups forming on the basis of ethnicity and gender diversity (i.e., ethnic-demographic faultlines). Based on multilevel social network analyses of dyadic networks between 1299 early adolescents in 70 German fourth grade classrooms, the results indicated strong ethnic homophily, particularly driven by German students who favored ethnically homogenous dyads over mixed dyads. As anticipated, the results showed that there was more in-group bias if perceived teacher care was low rather than high. Moreover, stronger faultlines were associated with stronger in-group bias; however, this relation was moderated by teacher care: If students perceived high teacher care, they showed a higher preference for mixed-ethnic dyads, even in classrooms with strong faultlines. These findings highlight the central role of teachers as agents of positive diversity management and the need to consider contextual classroom factors other than ethnic diversity when investigating intergroup relations in schools.

Persuasion without polarization? Modelling persuasive argument communication in teams with strong faultlines

Strong demographic faultlines are a potential source of conflict in teams. To study conditions under which faultlines can result in between-group bi-polarization of opinions, a computational model of persuasive argument communication has been proposed. We identify two hitherto overlooked degrees of freedom in how researchers formalized the theory. First, are arguments agents communicate influencing each other’s opinions explicitly or implicitly represented in the model? Second, does similarity between agents increase chances of interaction or the persuasiveness of others’ arguments? Here we examine these degrees of freedom in order to assess their effect on the model’s predictions. We find that both degrees of freedom matter: in a team with strong demographic faultline, the model predicts more between-group bi-polarization when (1) arguments are represented explicitly, and (2) when homophily is modelled such that the interaction between similar agents are more likely (instead of more persuasive).

The Effects of TMT Faultlines and CEO-TMT Power Disparity on Competitive Behavior and Firm Performance

Although upper echelons scholars have drawn from the demographic faultlines concept to study top management team (TMT) subgroup dynamics, the effects of TMT faultlines on competitive behavior and performance outcomes have not been well documented. To gain greater insight, we develop a model that connects TMT faultlines, CEO-TMT power disparity, competitive behavior, and firm performance. We hypothesize that TMT faultlines and CEO-TMT power disparity jointly determine a firm’s competitive aggressiveness and simplicity, and these two competitive behaviors influence firm performance. Using a sample of 295 U.S. firms in 146 industries from 2000 to 2013, our findings indicate that (a) TMTs with strong faultlines take fewer and simpler competitive actions, and CEO-TMT power disparity further worsens the negative effect on the volume of competitive actions, and (b) fewer and simpler competitive actions benefit short-term firm performance; however, they hurt the long-term firm performance trend. These findings contribute to the upper echelons and competitive dynamics research and suggest important managerial implications.

Effects of Media Compensation on Team Performance: The Role of Demographic Faultlines

Modern-day communication in teams is characterized by a frequent and flexible use of various communication technologies. To understand the relationship between this new way of communication and team performance, research suggests incorporating contextual factors. In this study, we explore the role of demographic faultlines and subsequent subgroup formation using data from 164 students nested in 34 software engineering teams working together over the course of 14 weeks. Multilevel modeling revealed a three-way interaction between media richness, communication intensity, and demographic faultlines on team performance. Weak faultline teams evaluated their performance more positively when they compensated for low communication intensity by using richer communication channels and vice versa. In contrast, strong faultline teams were less able to adapt their communication behavior to increase performance. We discuss theoretical implications for team communication and diversity research and provide guidelines for improving communication in diverse teams.

It’s About “Who Agrees With Whom When”: Exploring Group Consensus During Strategic Decision-Making

To date, strategic consensus research is mostly silent about the identity processes accompanying the dynamics of consensus and their joint influence on group behavior and outcomes. Applying the lenses of self-categorization and social identity theory to strategic consensus research, this paper examines the interaction between identity configurations (i.e., demographic faultlines) and particular distributions of strategic orientation within decision- making groups in their influencing information-processing behavior. We hypothesize, in particular, that 1) sharing a strategic orientation more with similar group members than dissimilar ones 2) the level of understanding of each other’s strategic orientation and 3) highly diverging orientation between two individuals from opposing faultline subgroups, crowd out positive effects of strong demographic faultlines on salient subgroupings. Panel data from 48 groups undertaking a strategic business simulation at a UK University provide support for some of our predi...

Corporate Performance Variability: Faultline Strength and Power Concentration within TMTs

This study examines the effect of different types of faultlines on the variability of corporate performance, and furthermore investigates the consequence of the interaction between faultline strength and power concentration for the variability of corporate performance. Using data from companies listed in Shenzhen and Shanghai stock markets, I find firms with stronger variety-based faultlines strength or separation-based faultlines strength within TMTs will exhibit less variable performance. However, when the strong faultlines exist, the presence of the powerful person can not overcome the effect of faultlines on the corporate performance variability.

“Early Split Wins It”: A Repeated Measures Study Of Faultline Activation And Group Performance

In this study we examine the categorization processes implied in demographic faultlines and both the direct and complex effects of faultline strength and activation on group performance. Using panel data from 48 groups undertaking a strategic business simulation at a UK University, we find that activated faultlines have both positive and negative effects on group performance depending on when activation occurs in the group life cycle. Surprisingly, we did not detect any significant relation between faultline strength and the process of activation over time. Rather, once activated strong faultlines lead to powerful and stable subgroups for the entire duration of the simulation. Overall our results undermine the centrality of faultline strength for predicting the process of activation and group performance and call for further research on factors other than compositional that may activate demographic splits.

Beyond Diversity: A Tale of Faultlines and Frictions in the Board of Directors

ABSTRACT Various regulatory governance initiatives have strived for board diversity, as diversity stimulates creativity, encourages discussion, and enlarges the board's knowledge base. However, increased diversity results in superior decision-making only when the board is free from conflicts and acts as a cohesive group. In this paper, we extend existing corporate governance research by introducing faultline theory to the board of directors (Lau and Murnighan 1998). The idea is to show how a board's diversity structure can give rise to the formation of subgroups along faultlines. The resulting subgroup formation may, in turn, reduce board effectiveness. Using a sample of U.S.-listed firms between 2008 and 2012, results suggest that boards with strong faultlines are associated with lower firm performance, lower CEO turnover-performance sensitivity, and higher abnormal CEO compensation. Understanding potential unintended consequences of board diversity could be of interest to regulators and companies that plan to appoint new directors to the board. JEL Classifications: G30; G38; D70; M41.

When Stakeholder Representation Leads to Faultlines. A Study of Board Service Performance in Social Enterprises

AbstractFollowing the growing interest in sustainability and ethics, organizations are increasingly attentive to accountability toward stakeholders. Stakeholder representation, obtained by appointing board members representing different stakeholder groups, is suggested to be a good ethical practice. However, such representation may also have nefarious implications for board functioning. Particularly, it may result in strong faultline emergence, subsequently mitigating board performance. Our study aims at understanding the process through which faultlines affect board performance, and particularly the board service role through which the board is involved in providing counsel and strategic decision‐making. We study the relationship between faultlines and board service performance in the particularly relevant context of social enterprises. We find that faultline strength is negatively related to board service performance and that this relationship is mediated by board task conflict. Furthermore, our study reveals the importance of clear and shared organizational goals in attenuating the negative effects of faultlines.

How Leaders’ Diversity Beliefs Alter the Impact of Faultlines on Team Functioning

Teams with strong faultlines often do not achieve their full potential because their functioning is impaired. We argue that strong diversity beliefs held by team leaders mitigate the negative impact of socio-demographic and experience-based faultlines on team functioning. In a heterogeneous multisource field sample of 217 employees nested in 44 teams and their leaders, we tested our assumptions. Results of a path-analytic model showed that socio-demographic faultlines were negatively related to perceived cohesion and positively related to perceived loafing. The impact of socio-demographic faultlines on team functioning was less detrimental when leaders held strong diversity beliefs. Against our expectations, we found no support for an impact of experience-based faultlines on perceived cohesion or a moderating role of leaders’ diversity beliefs in this context. Potential explanations for these results and implications for organizations and team leaders are discussed.