Balancing the drive for profits with the conflicting demands of other stakeholders is a common concern for progressive organizations. Finding this balance is nowhere more difficult than in the pressurised world of financial trading and lessons learnt from this sector can be applied elsewhere.
A recently published paper from Michael Smets of Oxford’s Saïd Business School and Paula Jarzabkowski of the Cass Business School, draws on a ‘fly on the wall’ study of reinsurance trading at Lloyd’s of London to show how successful traders balance the need to generate profits for their own companies while still meeting the need to operate well as members of the tight-knit Lloyd’s community.
The authors identify three mechanisms - segmenting, bridging, and demarcating - that traders employ to ensure balance and avoid focusing on a single demand at the expense of others, allowing them to see competing demands as complementary rather than as causes for conflict. These mechanisms can help individuals manage competing logics and their shifting relevance within their everyday work. The three mechanisms are:
Segmenting – protecting work from scrutiny by those with competing demands reduces conflict and pressure from stakeholders and preserves professional independence. This can be done by for example doing different types of work in different locations e.g. if professionals do some of their work at their clients’ premises, it is important they do not get too ‘close’ and some of their work should also be done in the office.
Bridging – this is about connecting the segmented practices and sources of pressure. It can involve for example using information gained in one area to reassess a decision made in another. This approach enables individuals to assess and prioritize different demands. It is however important to ensure one set of demands is not consistently prioritized. Failure to do this can lead to what the authors call “slippage” – a consequence they point to as the cause of several recent corporate scandals.
Demarcating – this is a mechanisms to protect against slippage and to make sure an overall balance between competing demands is maintained. This is likely to be a role best carried out by an independent, diverse company board challenging the actions of executives. “Where individuals know they will inevitably be held accountable for their actions by stakeholders representing different demands, they are much more likely to factor in the full spectrum in their original decisions,” says Smets.
Smets and Jarzabkowski go on to describe a theoretical model that integrates these three mechanisms and to show how individuals can balance what they describe as “coexisting logics”, maintaining the important distinction between them, but at the same time realizing the benefits of their interdependence. Finally they also point to how leaders should develop “a more nuanced understanding of the nature of conflicting purposes within their organizations” in order to institutionalise these good practices. By applying their model in a conscious and consistent fashion the authors believe leaders can empower employees to balance more effectively the competing demands they face.
Where these lessons clearly apply to profit driven organization, they can also apply in less obvious places – hospitals where clinicians must balance patient care with the need to prioritise resource allocation, not-for-profit organizations where pro-social zeal must be squared with the demands of corporate sponsors, and law firms where obligations to the client must be weighed against the need to maximise income for the firm.