Hierarchical decision-making produces persistent differences in learning performance

The Dual Function of Organizational Structure: Aggregating and Shaping Individuals’ Votes

How do organizational structures influence organizational decision making? This article reveals organizational structures’ dual function: they both (1) aggregate and (2) shape individuals’ decisions. What makes this dual function so remarkable is that the two effects are diametrically opposed to one another. Ceteris paribus, a less stringent decision-making structure reduces the amount of support required for a given project to be greenlit at the organizational level, which should result in more investments getting approved. However, we find that this ceteris paribus assumption does not hold, because a less stringent decision-making structure also reduces individuals’ tendency to provide their support for an investment. Our experimental investigation of organizational voting provides evidence for our position that organizational structure plays an important role beyond mere aggregation: voting thresholds also affect individuals’ voting behavior. The combination of both effects explains why the organizational adoption of a new voting threshold may not yield the intended outcome.

Funding: This work was supported by a National Science Foundation CAREER Award from the Directorate for Social, Behavioral and Economic Sciences [Grant 1943688] granted to O. Schilke.

Supplemental Material: The online appendices are available at https://doi.org/10.1287/orsc.2023.1653 .

Insights about the common generative rule underlying an information foraging task can be facilitated via collective search

Social learning is beneficial for efficient information search in unfamiliar environments ("within-task" learning). In the real world, however, possible search spaces are often so large that decision makers are incapable of covering all options, even if they pool their information collectively. One strategy to handle such overload is developing generalizable knowledge that extends to multiple related environments ("across-task" learning). However, it is unknown whether and how social information may facilitate such across-task learning. Here, we investigated participants' social learning processes across multiple laboratory foraging sessions in spatially correlated reward landscapes that were generated according to a common rule. The results showed that paired participants were able to improve efficiency in information search across sessions more than solo participants. Computational analysis of participants' choice-behaviors revealed that such improvement across sessions was related to better understanding of the common generative rule. Rule understanding was correlated within a pair, suggesting that social interaction is a key to the improvement of across-task learning.

The Aggregation–Learning Trade-off

Organizational decision making that leverages the collective wisdom and knowledge of multiple individuals is ubiquitous in management practice, occurring in settings such as top management teams, corporate boards, and the teams and groups that pervade modern organizations. Decision-making structures employed by organizations shape the effectiveness of knowledge aggregation. We argue that decision-making structures play a second crucial role in that they shape the learning of individuals that participate in organizational decision making. In organizational decision making, individuals do not engage in learning by doing but, rather, in what we call learning by participating, which is distinct in that individuals learn by receiving feedback not on their own choices but, rather, on the choice made by the organization. We examine how learning by participating influences the efficacy of aggregation and learning across alternative decision-making structures and group sizes. Our central insight is that learning by participating leads to an aggregation–learning trade-off in which structures that are effective in aggregating information can be ineffective in fostering individual learning. We discuss implications for research on organizations in the areas of learning, microfoundations, teams, and crowds.

Too Much Trust in Group Decisions: Uncovering Hidden Profiles by Groups and Markets

A crucial challenge for organizations is to pool and aggregate information effectively. Traditionally, organizations have relied on committees and teams, but recently many organizations have explored the use of information markets. In this paper, the authors compared groups and markets in their ability to pool and aggregate information in a hidden-profiles task. In Study 1, groups outperformed markets when there were no conflicts of interest among participants, whereas markets outperformed groups when conflicts of interest were present. Also, participants had more trust in groups to uncover hidden profiles than in markets. Study 2 generalized these findings to a simple prediction task, confirming that people had more trust in groups than in markets. These results were not qualified by conflicts of interest. Drawing on experienced forecasters from Good Judgment Open, Study 3 found that familiarity and experience with markets increased the endorsement and use of markets relative to traditional committees.