GDPR Compliance in Light of Heavier Sanctions to Come: at Least in Theory
[su_pullquote align=”right”]By W. Gregory Voss & Hugues Bouthinon-Dumas[/su_pullquote]
Ridiculously low ceilings on administrative fines hindered the effectiveness of EU data protection law for over twenty years. US tech giants may have seen these fines as a cost of doing business. Now, over two years after the commencement of the European Union’s widely heralded General Data Protection Regulation (GDPR), the anticipated billion-euro sanctions of EU Data Protection Authorities, or ‘DPAs’, which were to have changed the paradigm, have yet to be issued.
Newspaper tribunes and Twitter posts by activists, policymakers and consumers evidence a sense of unfulfilled expectations. DPA action has not supported the theoretical basis for GDPR sanctions—that of deterrence. However, the experience to date and reactions to it inspire recommendations for DPAs and companies alike.In our working paper, EU General Data Protection Regulation Sanctions in Theory and in Practice, forthcoming in Volume 37 of the Santa Clara High Technology Law Journal later in 2020, we explore the theoretical bases for GDPR sanctions and test the reality of DPA action against those bases. We use an analysis of the various functions of sanctions (confiscation, retribution, incapacitation etc) to determine that their main objective in the GDPR context is to act as a deterrent, inciting compliance.
To achieve deterrence, sanctions must be severe enough to dissuade. This has not been the case under the GDPR as shown through an examination of actual amount of the sanctions, which is paradoxical, given the substantial increase in the potential maximum fines under the GDPR. Sanctions prior to the GDPR, with certain exceptions, were generally capped at amounts under €1 million (eg £500,000 in the UK, €100,000 in Ireland, €300,000 in Germany and €105,000 in Sweden).
Since the GDPR has applied, sanctions have ranged from €28 for Google Ireland Limited in Hungary to €50 million for Google Inc in France, far below the potential maximum fine of 4% of turnover, or approximately €5.74 billion for Google Inc. based on 2019 turnover. While the highest sanctions under the GDPR have been substantially greater than those assessed under the prior legislation, they have been far from the maximum fines allowed under the GDPR.
Nonetheless, this failure of DPAs, especially the Irish DPA responsible for overseeing most of the US Tech Giants, has not gone unnoticed, as shown by EU institutional reports on the GDPR’s first two years. Indeed, increased funding of DPAs and greater use of cooperation and consistency mechanisms are called for, highlighting the DPAs’ current lack of means. Here, we underscore the fact that, in the area of data protection, there has been perhaps too much reliance on national regulators whereas in other fields (banking regulation, credit rating agencies etc), the European Union has tended to move toward centralization of enforcement.
Despite these short-fallings, the GDPR’s beefing-up of the enforcement toolbox has allowed for actions by non-profit organizations mandated by individuals (such as La Quadrature du Net that took action against tech giants after the GDPR came into force), making it easier for individuals to bring legal proceedings against violators in the future, and an EU Directive on representative actions for the protection of consumer collective interests is in the legislative pipeline.
On the side of businesses, there has been a lack of understanding of certain key provisions of the GDPR and, as compliance theorists tell us, certain firms may be overly conservative and tend to over-comply out of too great of a fear of sanction. This seems to be the case with the GDPR’s provisions regarding data breach notifications, where unnecessary notifications have overtaxed DPAs. The one-stop-shop mechanism, which is admittedly complex, also created misunderstanding.
This mechanism allows the DPA of the main establishment in the European Union of a non-EU company to become the lead supervisory authority in procedures involving that company, which potentially could lead to companies’ forum-shopping on this basis. However, there is also a requirement that the main establishment has decision-making power with respect to the data processing to which the procedure relates. Failure to consider the latter requirement could result in companies selecting main establishments in countries where there is not such decision-making power, and thereby halt attempts at forum-shopping for a lead supervisory authority for certain processing. One example of this culminated in the French DPA (CNIL)’s largest fine so far, imposed on Google, whereas the latter argued that the Irish DPA was its lead supervisory authority.
As we explain in our paper, a lack of GDPR enforcement carries risks. Not only does it undercut the deterrent effect of the GDPR, but it also provides a tenuous basis for risk assessment by companies. While the GDPR’s first two years involved a sort of grace period when DPAs focused on educating companies and spent time painfully investigating complaints to litigation-proof their cases, some companies model their risk assessment of regulation based on enforcement histories. If there is a push for greater enforcement, which EU institutional reports would tend to foreshadow, the basis for companies’ models will be inaccurate. Furthermore, such dependence on risk evaluation ignores potential benefits to firms of increased trust and efficiency involved with expanding compliance to adopt a higher data protection compliance standard applied to customers worldwide.
Thus, we argue, not only should DPAs sanction offenders, but DPAs should sanction them severely when justified, establishing the necessary deterrence effect for EU data protection law. Moreover, DPA’s communication should in many cases be modified to stop downplaying sanctions: such communication is counterproductive to the desired effect of sanctions. Companies, on the other hand, should take efforts to understand fully the GDPR, and embrace compliance, leaving behind data protection forum-shopping as a potentially ineffective action. Furthermore, the typical securities lawyer warning that, ‘past performance is no guarantee of future results’, may be a forewarning to companies using past sanctions to create their compliance risk-assessment models that the results may not be accurate for the future.
Gregory Vossis an Associate Professor in the Human Resources Management & Business Law Department at TBS Business School.
Hugues Bouthinon-Dumasis an Associate Professor in the Public and Private Policy Department at ESSEC Business School.
Discover TBS professor Louise Curran’s point of view on the effect of COVID-19 on international trade policies.
As COVID-19 has spread across the world it has had major impacts on supply chains. It is reasonable to assume that the impact on trade flows may be even greater than that for the GFC in 2009, where world trade fell by over 20%. Most of this is an entirely natural result of the closure of many production structures around the world. However, some trade impacts are the direct result of trade policy interventions by governments, which presage a more major and long-term impact from the current crisis. Discover more in the video below:
Discover TBS professor Timo Mandler’s point of view on building brands in markets that have reached the post-globalization stage.
Consumers in Western markets are increasingly critical towards globalization and re-embrace local values. Companies thus must decide whether to continue to pursue global branding strategies and/or rejuvenate local branding strategies. To explore the implications of market globalization for consumer preferences, we use signaling theory to investigate the role of perceived brand globalness and localness as signals of brand credibility, related downstream effects and boundary conditions, across two countries with differing levels of globalization. In globalized markets, brand globalness is a weaker signal of brand credibility than brand localness, whereas in globalizing markets, the two signals are of equal importance.
[su_pullquote align=”right”]By Denis Lacoste[/su_pullquote]Based on the article “La recherche dans les écoles de management apporte une réelle valeur ajoutée” – Published in News Tank.
While the relevance of research in business schools is now widely recognized, two criticisms resurface from time to time and cast doubt on this faculty activity.
The first criticism concerns the synergy between research and teaching. Detractors state that business schools, under the pressure of accreditations and rankings, pay consequent amounts to resident professors whose sole activity is to conduct research. The task of teaching is therefore left to non-research teachers, which implies that students don’t benefit from the skills of the most expert professors in their discipline.
The second criticism deals with the very nature of research. Academic journals select articles based on academic rigor. They don’t take into account their interest for practitioners. Students have no interest in joining a school whose research will be of no use to them.
In an article published last October 25th in News Tank, I show that these criticisms erroneously depict the state of research in business schools for at least three reasons.
First, rankings and accreditations don’t only take into consideration research performance, far from it. Consequently, business schools do not base their entire policy on this sole component: they evaluate teachers using many other criteria such as quality of teaching, innovation, engagement, institutional involvement, managerial responsibilities ….
Second, if the most active researchers have indeed lighter course loads (which is a common practice in higher education), it is wrong to say that students do not benefit from their skills. Many business schools have defined a minimum threshold for teaching hours, which cannot be crossed by any teacher, regardless of his/her research activity.
Finally, most of the research articles published in the best-ranked scientific journals have managerial implications and are selected with this criterion in mind. In addition, schools are increasingly aware of the impact of their professors’ research on stakeholders.
All in all, questioning research in business schools on the grounds that researchers do not teach and that research is not relevant does not hold up to serious scrutiny. On the contrary, over the past fifteen years, research in business schools has made remarkable progress both in terms of quantity and quality, and fully contributes to the schools’ success with students and companies !
Before giving fund managers credit for good work, check how much of it could have been done by a monkey.
What may seem to be monkeys’ great handicap – their utter lack of interest in publicly traded companies – turns out to work to their advantage when it comes to portfolio formation. The stock market index represents companies in proportion to their size and is therefore dominated by large and fast-growing firms. By contrast, randomly selecting stocks into a portfolio tends to allocate more money to smaller and less glamorous companies, as well as breaking the link between portfolio weight and recent performance. Over extended periods, this blindness to company characteristics is rewarded with better investment returns. (While the reasons for this are subject to debate, overvaluation of in-vogue stocks seems to be one plausible explanation.)
Active managers exploit the “Monkey Effect”
If being oblivious to what’s going on in the market is what it takes to beat it, then you may not need a professional stock picker to manage your money. Or at the very least, you shouldn’t give investment managers credit for “the monkey effect” in their performance. This is the basic premise of our recent research paper.
Our approach is simple. On average, the performance of randomly chosen portfolios over the market index is similar to that of a portfolio where all stocks are weighted equally. We therefore study the correlation between the performance of active fund managers’ investment portfolios and the spread between equal-weighted and market-weighted portfolios’ performance. This can tell us how much of a fund’s performance could be replicated by mechanically tilting its portfolio toward an equal-weighted one. Of course, we also control for a range of other factors that have been known to impact investment returns.
Our results are striking. The equal-weight tilt is common among more than one thousand US mutual funds seeking to beat the S&P500 market index, and its extent is a key factor in explaining fund performance. On average, the size of the tilt is equivalent to investing 20 to 30% of a fund in an equal-weighted portfolio. Recognizing this fact in performance evaluation lowers the average fund’s risk-adjusted performance by as much as 0.7% percent per year.
Isolating the “Monkey Effect” in manager performance
Why might actively managed portfolios have a tilt toward equal weights? There are two possible explanations. One is that fund managers do this intentionally as they are aware that portfolios with random or equal weights generally outperform the market. Another is that this tilt is an unintended byproduct of their investment process (for example, the hit-and-miss nature of stock analysts’ recommendations could be analogous to throwing darts). Regardless of the underlying cause, an investor can acquire an equal-weight tilt much more cheaply than delegating the task to an expensive active manager – it is enough to combine a passively managed index fund (which can have fees of as little as 0.02% per year) with an equally-weighted one (with fees of as little as 0.2% per year).
After a series of legal and public-opinion battles, the credit for the monkey selfie was deemed to belong to the photographer; he did, after all, go to the trouble of travelling to the jungle, befriending the monkey, and setting up the camera – all necessary steps for us to enjoy the surprising photo. But when you come across surprisingly good performance by active fund managers, think twice whether they should get the credit (and the fees). Hint: they shouldn’t if a monkey could do it.
The authors evaluated the investment performance of actively managed U.S. mutual funds benchmarked against the S&P500 market index over the 1980-2009 period. They focused on the performance evaluation impact of including the spread between equal-weighted and market-value-weighted portfolios’ returns alongside established factors commonly used to assess fund performance. The article, titled “The equal-weight tilt in managed portfolios”, was published in Economics Letters in June 2019.
[su_pullquote align=”right”]By Secil Bayraktar[/su_pullquote] Based on the article “How Leaders Cultivate Support for Change: Resource Creation through Justice and Job Security” – Published in Journal of Applied Behavioral Science in 2018.
Change is inevitable in the agenda of the 21st century. Consequently, organizations must adapt to the rapidly shifting business contexts through ongoing reorganizational practices to increase their effectiveness and stay competitive in the market. In this context, employees’ behavioral support is crucial for the success of change initiatives since it facilitates reaching strategic change objectives. On the other hand, lack of employee support usually is associated with failed change efforts.
Helping employees deal with the stress of change
Unsurprisingly, leaders have an essential role in creating behavioral support for change. Compared to senior managers, the immediate supervisors are more influential on employee attitudes and behavior during change since they have more direct contact with their team members. Research shows that the quality of the relationship between a supervisor and a subordinate influences employees’ behavioral support during organizational change.
Change is a stressful experience for employees. Many employees are unwilling to support the change because of feelings of anxiety, negative emotions, and uncertainty. In that context, employees need more resources than during stable times to cope with this stressful event, reduce strain, and increase positive reactions such as support for change. Moreover, during an organizational change, employees already face loss in their resources (e.g. increased workload, change of positions, or losing good coworker relationships) which in turn increases their stress and may lead to change-resistant behaviors. Under such circumstances, receiving sufficient resources from the supervisors is expected to help to reduce the stress, cope with change with more resources, and hence be more positive towards the change.
Two key resources to obtain employee support
In my recent study, I found that two resources, namely perceptions of procedural justice and job security, help employees to cope with the stress and uncertainty of the changing situation, to overcome their challenges, and subsequently to display supportive behaviors. Moreover, I found that leaders have a crucial role in building up such resources by establishing high-quality supervisor-subordinate relationships. These two types of resources are especially crucial during organizational change periods (i.e. context of uncertainty). First employees become more sensitive to justice related acts and fairness becomes particularly critical when a high level of uncertainty is experienced. Secondly, during change periods, substantial concerns about job insecurity persevere among employees.
The importance of justice and fairness
Leaders and their attitudes and behaviors are an important source of justice perceptions in the workplace. Employees who are treated in a fair manner tend to reciprocate by their favorable attitudes and behavior. When their leaders use fair procedures in allocating outcomes, their team members become more supportive of their goals and act in more cooperative ways. Procedural justice becomes even a more crucial resource under uncertain situations like change because employees are more sensitive to justice in the decision-making procedures and they expect more constantly applied, bias-free and ethical decisions in order to support the change. Moreover, fairness makes employees feel as valued members of the organization.
Value of clear communication throughout change process has been confirmed to increase the perception of fairness. In addition, managers also need to make sure that employee concerns are heard before making decisions. These decisions should be applied consistently across all affected employees, additional information should be provided about decisions when requested, and employees should be allowed to challenge the choices made by managers.
Make your employees feel safe
The second resource that leaders can generate is the perception of job security. Job insecurity refers to a sense of powerlessness and a subjectively perceived likelihood of involuntary job loss. Especially during an organizational change, job insecurity may constitute an important variable that is negatively related to behavioral support for change. On the other hand, when employees are equipped with the valuable resource of employment (i.e. perceptions of job security), they will be less likely to withdraw from their work, identify more with corporate objectives without the anxiety of a possible job loss, feel more powerful and acquire predictability over their future jobs. Consequently, they will be less likely to display change resistant behaviors and be more supportive.
Leaders are found to be influential in this subjective appraisal: high-quality relationships with the leader involving open communication, empowerment, support, assurance, and trust may play a role in increasing the controllability, predictability, and perceptions of security. In addition, individuals who have high quality relationships with their supervisors may receive updated and transparent information about the ongoing changes and may feel more certain as to whether they will keep their jobs. Such high-quality relationships with the supervisor may create a supportive workplace which makes the employees feel less threatened by the uncertainty. For those reasons, leaders provide an important job resource for employees to reduce the threat to their future jobs, which in turn leads to better coping with the uncertainty of change.
Transparency is key
On the other hand, there may be times in which managers may not guarantee job security in the future. Some types of changes (e.g. restructuring, downsizing, mergers) by their nature involve the reality that some people will lose their jobs, by either being laid off or being reassigned to new positions. Even in such cases, it is crucial that managers act transparent and do not lie and demolish trust. Moreover, when job elimination may be a reality, managers can use certain levers to reduce the adverse effects of such an environment by, for example, discussing the personal situation of each employee and planning the steps ahead with them. Although the current environment may not promise job security, organizations may offer re-employment counseling or outplacement assistance services to dismissed employees to increase their likelihood of future employability.
Given the significance of organizational change in today’s business context, it is vital to understand how to successfully manage change. Managers who want to increase their employees’ behavioral support for change need to consider providing them with certain resources to help them cope with change. This study demonstrates the positive role that leaders can play in the success of change initiatives by providing the right set of resources that employees need during the organizational change process. Justice and job security are two of these critical resources. Therefore, it is suggested that managers create the perception that processes are conducted in a fair manner and that the employees feel secure about their jobs. In other words, a climate of justice and security would help employees to be more supportive and thus less resistant to ongoing changes.
In this study, a survey was conducted with 269 employees and their supervisors from 30 organizations going through a significant change process. Examples of types of changes that the organizations were going through included mergers and acquisitions, restructuring, downsizing, CEO change, sector change, ERP system change, new markets, and new processes. All organizations were private companies in a variety of industries, including electronics, information technologies, food, finance, health, logistics, manufacturing, and media. The majority of the organizations were mid-sized firms in Turkey.
[su_pullquote align=”right”]By Christina Theodoraki[/su_pullquote] Based on the article “A social capital approach to the development of sustainable entrepreneurial ecosystems: an explorative study” published in Small Business Economics, 51(1), 153-170.
The creation of sustainable entrepreneurial ecosystems is at the heart of public policy concerns. This type of ecosystem is composed of interconnected actors, within a territory, committed to facilitating the creation of new sustainable businesses. In this context, many questions need to be asked: Is it possible to replicate Silicon Valley’s success? Should governments continue to ‘infuse’ the ecosystem eternally with financial endowments or can the ecosystem reach a maturity threshold that allowed it to self-finance itself to evolve? What action plan must be considered to reach this maturity threshold? The social capital perspective is an interesting integrative framework that deserves to be analyzed to answer these questions.
The context and its evolution
The evolution of the entrepreneurial environment reinforces these questions. The economic crisis, the decline in public funding, the increase in the number of actors who revolve around the entrepreneur, competition between public, semi-public and private actors, the emergence of new entrants are new factors that threaten the survival of existing actors and force them to review their economic model or their contribution to the proper functioning of the ecosystem.
Thus, the university is one of the historical and founding actors of entrepreneurial ecosystems. The contribution of universities to the sustainability of the entrepreneurial ecosystem is important. They contribute to the creation of knowledge that they transfer to students in order to prepare them to integrate the entrepreneurial ecosystem. In parallel, the establishment of academic incubators promotes technology transfer, commercialization and value creation through the creation of spin-offs and young innovative companies. These incubators are intermediate actors who build the bridge between the supported companies and their external environment. Their objective is “to act as a neutral coordinator to promote the interests of academic entrepreneurs, remove barriers to their success, and connect them to entrepreneurship support mechanisms both inside and outside the university” (Hayter 2016, p. 651-652).
However, even if the role and contribution of some actors in the ecosystem seems obvious, current research fails to explain why some ecosystems are more “sustainable” than others. The synthesis of studies in this field distinguishes three characteristics to promote a sustainable ecosystem: (i) the consideration of territorial specificities; (ii) the effect of a supportive entrepreneurial culture; and (iii) the continuous interaction and interdependence of its components. The social capital perspective represents the configuration of a sustainable entrepreneurial ecosystem.
The key role of social capital
Social capital is composed of tangible and intangible elements grouped into three dimensions: the structural one, the cognitive one and the relational one (see figure 1). The structural dimension describes the properties of the ecosystem (the number of ties between members, the configuration of these ties and their stability); the cognitive dimension refers to the shared culture within the ecosystem (shared goals and language, shared narratives); the relational dimension refers to the behavior of members (the norms to be respected, the members’ obligations, the identification of each member – who does what -, and the trust they build between them). Combining these dimensions promotes the optimal configuration of the ecosystem and contributes to its sustainability.
We can therefore assume that if we have devoted resources to structuring the ecosystem, creating a shared culture and languages, and fostering stakeholder relationships with norms and obligations of members, our ecosystem will be sustainable. Unfortunately, it is not enough to only build the structural, cognitive and relational dimensions of the ecosystem. These dimensions are interconnected, and their interactions promote the adaptation of the ecosystem to the specificities of each territory and each ecosystem.
The key ingredient for the well-functioning of the ecosystem is to consider the interactions of its dimensions. It is important to build bridges between these dimensions to promote exchanges and the interconnectivity of the elements. It is this interconnectivity that is the key to the success of a sustainable entrepreneurial ecosystem.
Figure 1: The Social Capital Perspective of the Entrepreneurial Ecosystem
Source: Theodoraki et al., 2018, p.163
Managerial applications in different contexts
This study provides a better understanding of the composition of the entrepreneurial ecosystem and proposes a framework (through the social capital perspective) for configuring a sustainable ecosystem. Despite the focus of this study on academic incubators, our results are applicable in different sectors and contexts. In order to build a sustainable entrepreneurial ecosystem, it is advisable to: 1) create dense and strong relationships between members to compensate for the scarcity of resources; 2) develop a common culture and values within the ecosystem to ensure solidarity among members; 3) develop trust and rules respected by members to strengthen a climate of security conducive to value co-construction; 4) create bridges between mechanisms to fluidize and make flexible the evolution of the ecosystem.
The qualitative method using multiple case studies was conducted in Montpellier between 2013 and 2014 on 3 academic incubators. The choice of these incubators met four selection criteria: (i) proximity and commitment to an academic university, (ii) access to university services, (iii) transfer of scientific knowledge and support for the creation of new innovative businesses, (iv) geographical area. In total, we conducted 48 semi-directive interviews with all members of the entrepreneurial ecosystem (incubator managers, staff, incubatees, academic partners, funding entities, other types of incubators, etc.). This collection of ecosystem data with various groups of stakeholders allowed us to have a holistic view of the observed phenomenon, to cross-reference different points of view and to generate results by triangulation. The interviews were conducted using an interview guide, recorded, transcribed and coded to provide a synthesis of the results.
Co-authored by Christina Theodoraki (Professor, TBS Business School), Karim Messeghem (Professor, University of Montpellier, co-director of the Jacques Cœur Chair at Labex Entreprendre), and Marc P. Rice (Provost at Babson College).
[su_pullquote align=”right”]By Lambert Jerman and Evelyne Misiaszek[/su_pullquote] Successful companies like Sigfox, BricoPrivé or Hellocasa all belong to the world of scale-ups. Whether these companies are young or old, their hypergrowth phase is a highly critical period.
These days, the idea of « scale-up » includes businesses with an annual turnover greater than €5m, with growth of at least 10 to 20% over three years. After graduating from being a start-up and having validated its business model, the scale-up must transform rapidly on several levels : internationalization, recruitment, new business, technical or financial partnerships. Its internal piloting system must keep evolving so that the company can face new challenges, while at the same time the director has to ensure that any new management tools put in place are adapted for hypergrowth. It’s a situation that requires a delicate balance between short-term decisions and the company’s long-term strategy.
A loss of proximity and a delicate balance to be achieved
Recruitment needs being, by definition, substantial in companies in hypergrowth, employee numbers are inclined to increase so quickly that before long the director finds him or herself unable to directly supervise the workforce or get to know them personally. This loss of hierarchical proximity is often exacerbated by an ever greater geographical distancing. Information flow can be threatened within that structure, and jeopardise the business’s culture and cohesion. The director’s charisma, values and personal commitment are no longer enough.
To get to grips with this new reality, the director of a scale-up has to adapt and reinforce the way the company is governed and strengthen its piloting system, without curbing the creativity and innovation so vital so its development.
Achieving this delicate balance in a way that maintains responsiveness and the informal coordination inherited from the start-up alongside more formal and rationally-defined procedures necessary to a larger group, is anything but easy. Four drivers of action can nonetheless be identified to make transforming the company less complex, and to maintain as far as possible the proximity necessary for it to remain cohesive.
The redefinition and effective delegation of responsibilities, by upskilling staff, particularly those with high potential. This requires the director to listen to and support his or her staff, and to trust them and include them in decision-making.
Possible actions :
Create centres of responsibility with real decision-making powers.
Follow the new prorogatives in their entirety, despite the temptation to take « shortcuts » in urgent situations.
Information transmission should be agile and reliable. To be able to delegate, the director must implement a reliable information system which can be flexibly adapted to the needs of the company’s decision-makers.
Possible actions :
Communicate on a regular basis summary reports and key indicators describing the firm’s strategic levers, with the intention to ‘objectivize’ the activity, and in time, to better anticipate and facilitate decision-making.
A combination of formal and informal controls.. Alongside the establishment of indicators, the director could create opportunities for regular exchange of ideas with his or her teams to encourage better upward and downward circulation of information.
Possible actions :
Setting up recurring meetings where technical ideas can be exchanged, as well as more informal and occasional encounters to encourage team involvement.
Maintaining the entrepreneurial spirit. The setting up of a more structured piloting system should not put a brake on innovation and creativity within the company. It’s the director’s responsibility to maintain the spirit and values of his or her company by spending time with the teams on a regular basis to share his or her vision, without threatening their much-needed autonomy.
Communicate on a regular basis the goals and values of the company, the director’s strategic vision, day-to-day issues and more strategic ones aimed at successful hypergrowth.
To tackle the two major risks associated with piloting hypergrowth – a more complex business environment and the loss of proximity to its teams – the director of a scale-up needs to let the company find a balance between the very informal piloting system of a start-up and the more formal control of the big groups.
This article has been written under the partnership “Scale UP – Gérer l’hypercroissance”
[su_pullquote align=”right”]By Ingrid Molderez and Kim Ceulemans [/su_pullquote] Will our future business managers be able to tackle sustainability challenges? Can art contribute to acquiring sustainability competencies in management education? Our study explored the power of art to foster systems thinking, one of the key competencies of sustainability, and to help business students think more creatively about divergent views on sustainability.
Thirty years after the Brundtland Commission popularized the concept of sustainable development, the issue has become more urgent than ever. Global challenges such as climate change, loss of biodiversity, poverty and migration are omnipresent and are affecting everybody in spite of place and time. There are no easy or instant solutions, but education plays an important role in raising awareness on sustainability and in how to respond to these challenges.
Paul Shrivastava, an influential management and sustainability scholar, argues that education for sustainability requires more than just cognitive understanding. We need alternative ways of teaching that incorporate physical and emotional engagement (Shrivastava, 2010). However, pedagogical approaches that combine head, heart and hand are rare in management education. Management students are used to studying topics that immediately impact the knowledge and skills that they will need in a business context. Spiritual and/or creative ways of teaching are nearly absent. Yet, this is what we focused on in our research. We used art as a pedagogical way to enrich the whole person, to encourage critical and creative thinking around sustainability and we explored how management students react to this.
The concept of sustainability brings the importance of interconnections between human beings and nature back to the surface. The boundaries that have been created as splitting forces between humans and their environment have to be perceived as binding again, so that we can see ourselves again as functioning in togetherness. Changing towards sustainability generates intense emotions and at the same time, intense emotions are needed to be able to make a change towards sustainability. Art generates and encourages emotions, triggers our criticism and challenges our comfort. In relation to systems thinking and sustainability, art can help us to regain focus on the connections and interdependences of our systems.
In our study, we exposed management students to paintings during their Master’s level corporate social responsibility course. We did not especially focus on artists that use their art to criticise the negative environmental impacts human beings have. We opted for painters who are not known for their ecological engagement, but whose artwork makes us reflect upon the role human beings have in society. René Magritte’s painting Les Jours Gigantesques was a source of inspiration and reflection to help them think about and discuss boundaries as connecting and disconnecting forces in a sustainability context.
After class, we surveyed the participating students to study their receptiveness towards art in a management course. We explored whether they found art relevant to study three aspects of systems thinking, i.e., the system/environment relationship, thinking in patterns and relationships, and understanding the interactions between system and environment. For each of these aspects, the majority of the surveyed students agreed that art can be very relevant to discuss such issues. The students noted that using art was helpful for showing different points of view, that it facilitated understanding the topic from another perspective, and that it helped them to see the importance of connections within sustainability.
In this study, the majority of the students were receptive for using art because it acts as an eye opener and makes them think differently about sustainability. Nevertheless, some students were also very critical, because they had a fixed idea about art, i.e. only being relevant for an exhibition about sustainability rather than in a more abstract way to understand or discuss sustainability. They thought that showing pictures about what is really happening in the world would be more effective. However, it has to be underlined that art cannot be used in a functional way, as this goes counter to the core concepts of what art is about. Hence, we were not looking for a causal relationship between using art and effectively learning about sustainability, but we intended to explore ways to connect head, hand and heart in management education.
What can we learn from this research?
While management education is known for its functionalist approach, we should remember that business students can be receptive to alternative learning methods. Using paintings can be a relevant method for explaining sustainability topics, encouraging critical thinking, and adopting a holistic approach by triggering their creativity. Art can help students to think critically about sustainability concepts addressed in class, and shows them that there is space for different approaches and interpretations of such complex concepts.
Higher education has an important role to play in sensitising students towards sustainable development, and in helping them to develop competencies for addressing sustainability issues. Art and artists have a gift to make people think in a critical way, to go beyond boundaries, to initiate emotions which are all very relevant if we want to change our mindset on a topic (such as sustainability). Higher education could consider no longer reserving art for students in art-related disciplines, but to surpass the strict boundaries between disciplines. Art can be inspirational for every discipline and is worthy of a place in every study programme, including disciplines that are perceived as less receptive, such as management, engineering, law among many others.
[su_pullquote align=”right”]By Amadou LÔ[/su_pullquote] Order or disorder? Stability or flexibility? Control or ‘laissez faire’? Issues linked to the management of long-term collective action have long been presented in a binary logic where choice fell within the scope of exclusivity. Today more than ever, the development of competitive strategies involves a logic suited to economic dynamics whose trends appear contradictory at first glance. At the same time, the evolution of collaborative practices and spaces are playing an important role in the transformation of our ways of working. The company Fab Lab is a manifestation of this which is interesting to analyse.
What is a company Fab Lab?
Recently, a new collaborative workspace dedicated to exploration was born: the Fab Lab. The Fabrication Laboratory  – commonly abbreviated to Fab Lab – is a workshop given over to innovation and rapid prototyping. It’s a space where people are free to come and go, swap ideas in a non-formal setting. The Fab Lab was developed at the Massachusetts Institute of Technology (MIT) by professor Neil Gershenfeld in the 2000s. It’s a place that’s open to all, complete with equipment ranging from simple – like a soldering iron – to very sophisticated – like a 3D printer or a laser cutter. Creative and prototyping activities emerge through the interactions of an active community made up of individuals with a range of skills. This all takes place without hierarchies or orders being given.
Originally, Fab Labs were open areas, free and independent facilities located in community settings, whether educational or open to the general public. Up until now, this type of facility existed only in this form. Today, though, big businesses are getting interested in the concept and wish to put it to use in their own organisations in order to stimulate innovation. By opening its exploratory activities to members of production teams, the company Fab Lab poses an interesting challenge: how to reconcile employee production activities and exploratory activities. We worked within the innovation directorate of the French car manufacturer Renault, which has been a pioneer of this process since 2011.
The company Fab Lab, a chance for employees to explore
The Renault Group operates an internal Fab Lab which is a carrier for the upstream phase of the innovation process which is transversal to Renault’s matrix organisation. This process is defined as a regulatory process for all the “vehicle projects,” using precise signposting and a formal distinction in the distribution of functions. However, the people belonging to units of this process dedicated to production activities have complained about poor access to exploration activities.
The Fab Lab was therefore developed within Renault with the aim of bringing new opportunities for employees to get involved in exploratory activities alongside their usual activities. Through its location, its charter, its activities and its digitally-operated machines and tools, the company Fab Lab aspires to be a codified space which is also inclusive and permissive. It was conceived to be directly accessible by employees, so that they can individually carry out exploration activities alongside their production activities, ie, develop their individual ambidexterity.
Practices promoting employee ambidexterity within the company Fab Lab
We have been able to put forward four main practices (table) which characterise the Fab Lab and which explain the emergence of this dynamic: improvisation, innovative design, DIY and rapid prototyping.
Table – practices promoting employee ambidexterity within the company Fab Lab
Practices within the Fab Lab
Promoting employee ambidexterity
Adopting a heuristic process and offering employees the chance to adapt their projects at any time
“Ah, but we didn’t have a model.. I tell you, I went in convinced it had to be done, but we took our first steps with enthusiasm”.
Offering employees methodological support in their creative and innovative activities
“We need people who have time to help us get into this deeply, and that’s where I can see that it’s very complementary. We’re more on the operational side, so there are things that we might miss, with the Fab Lab methods, we can get a wider and deeper perspective, and because of that we come up with different ideas than we would usually.”
By manipulating and reorganising what is available, individuals learn to cope with a lack of resources and surmount conceptual obstacles “by doing”
“People who try to explain things with slides when they’ve never even touched the products they’re talking about are fooling themselves! You need to touch things, see them, put them to use. And the Fab Lab helps us with that, with making little models very quickly, with creating little processes very quickly, and to turn our ideas into reality.”
Through activities that bring ideas to life and accelerate the development of innovative projects
“And what also happened here is that we have a concept that’s a bit complicated and which we can’t get to ripen, and that’s when Eric went to see someone at the Fab Lab, and they created a scenario and a model with the 3D printer which showed exactly what we wanted to do.”
Our results show that the company Fab Lab constitutes a space conducive to exploration which supports employees wishing to carry out innovative projects alongside their usual production tasks.
It’s a space conducive to social interaction, open to all and all occupations, giving employees the opportunity to organise their time as they wish, between their usual occupation and their exploratory projects. Through this structure, employees get support for their exploratory activities, in the form of the practices we have highlighted – DIY, improvisation, prototyping and innovative design. The Fab Lab acts as an additional support alongside ordinary work, thus rectifying the lack of exploratory activities for employees. It therefore constitutes a facility for the development of employee ambidexterity.
As a physical space lending itself to social interaction, it is open to all and to all types of occupations, offering employees the chance to freely organise their time between their usual production activities and their exploratory projects. This facility allows employees to avail of assistance for their exploratory activities in the form of the practices already highlighted – DIY, improvisation, prototyping and innovative design. So the Fab Lab offers support that complements the workers’ ordinary activity by fulfilling employees’ need for exploratory activities. It therefore constitutes a facility which allows employees to develop ambidexterity.
The in-house Fab Lab offers an opportunity for businesses to use the digital revolution to deal with and adapt to the ever-changing environment of the markets and innovative practice. By offering employees in production units the chance to carry out exploratory activities, we’ve seen that the in-house Fab Lab plays the role of a valuable tool and a support for emerging employee ambidexterity. It takes the form of a safe space for exploratory activities and offers every employee the chance to manage their own work, between production and exploration, and hence to become ambidextrous.
We saw that when offering employees in production roles the opportunity to carry out exploratory activities, the internal Fab Lab is a useful tool and a support to the emergence of employee ambidexterity.
[su_spoiler title=”Methodology”]Table 1 summarises our collection methodology and the analysis of our research.
Synthesis of the methodological framework of our research
Our research was qualitative. The case study being the preferred methodological approach for exploring and understanding a complex phenomenon, we carried out a single, illustrative case study as part of this exploratory and descriptive research. Faced with the inherent complexity of our research subject and therefore the difficulty of drawing firm conclusions, we opted for an abductive reasoning process.
Data collection and processing method
We worked with Renault from September 2013 and we stopped gathering in June 2014 – a period of 10 months. However, our collaboration is ongoing. Everyone was aware of our research activities, so we opted for the observer-participator model because the aim was to understand Renault’s innovation processes on three levels: the official version, the employee version, and our own observations. Thus, our empirical work is based on semi-directed interviews carried out with different players in the company (managers, Fab Lab members, innovation specialists and non-specialists). Over 43 days at the site, we carried out 42 semi-directed interviews of an average duration of 1 hour and 26 minutes, all recorded and transcribed in their entirety. We also kept a working journal where we were able to note the context of our observations during the creativity sessions and meetings we attended. Finally, we had access to a number of internal documents which allowed us to get to grips with the way the business is organised. Our data collection therefore adheres to the principal of data triangulation, and is therefore valid as a research framework.
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