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2002 26: 612Journal of Management EducationW. Glenn Rowe and James O'Brien

The Role of Golem, Pygmalion, and Galatea Effects on Opportunistic Behavior in the Classroom  

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10.1177/1052562902238321JOURNAL OF MANAGEMENT EDUCATION / December 2002Rowe, O’Brien / BEHAVIOR IN THE CLASSROOM

THE ROLE OF GOLEM, PYGMALION, ANDGALATEA EFFECTS ON OPPORTUNISTICBEHAVIOR IN THE CLASSROOM

W. Glenn RoweJames O’BrienThe University of Western Ontario

Trust can be a potential source of competitive advantage. Barney andHansen (1994) argue that trust can be, but is not always, a source of competi-tive advantage in economic exchanges. Warren Avis, the founder of AvisRent A Car, put it this way: “You should be able to trust anyone you workwith—and they have to be able to trust you” (2000, p. 9). Management educa-tors teach business students that trust is important and that they will need totrust themselves, their superiors, peers, and subordinates when they obtain amanagement position in for-profit, not-for-profit, or government organiza-tions after graduation. This increased emphasis on trust is important as moreorganizations become team based and organizational members have to relyon each other and not merely on hierarchical forms of governance. Trust isdefined as the mutual confidence that no party to an exchange will takeadvantage of another’s vulnerabilities (Barney & Hansen, 1994; Sabel,1993). The issue explored in this article is whether we, as management edu-cators, are doing what we can to enhance the ability of future managers to

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Authors’ Note: A previous version of this article was accepted for presentation at the proceed-ings of the Management Education Division, Administrative Sciences Association of Canada,1998 Annual Conference, where it won Best Paper Award. We want to thank the editor and twoanonymous reviewers from the Journal of Management Education, Fay Rowe, GeronaMcGrath, Dov Eden, and Albert A. Cannella Jr. for their constructive comments on previous ver-sions of this article. Address correspondence to W. Glenn Rowe, Richard Ivey School of Busi-ness, University of Western Ontario, London, ON, Canada, N6A 3K7; e-mail: growe@ivey.uwo.ca.

JOURNAL OF MANAGEMENT EDUCATION, Vol. 26 No. 6, December 2002 612-628DOI: 10.1177/1052562902238321© 2002 Sage Publications

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trust. Or, are we unknowingly creating a situation in our classrooms thatincreases the likelihood that students will engage in such opportunisticbehavior as lying, cheating, and/or misleading? We expect that the value-added contribution of this study will be to create a debate on this topic amongthose who teach in the management area.

In the following section, the genesis for this article is described with refer-ence to transaction cost and agency theories and their assumption of oppor-tunism. Next, we delineate some possible implications of well-establishedclassroom practices and their possible effects on students. In this section, weuse the Golem effect (Wiesel, 1983; Wolf, 1974) to illustrate how manage-ment educators may be creating a destructive, self-fulfilling prophecy in stu-dents and decreasing their ability to trust themselves, their peers, and theirinstructors while enhancing their propensity to lie, cheat, and/or mislead.Next, we discuss several alternatives to the Golem effect or how managementeducators could create a Pygmalion and/or Galatea effect (Eden, 1990) and,in so doing, enhance the ability of students to trust. In the final section, wedraw conclusions regarding the paradoxical nature of the problem facingmanagement educators who enact the assumption of opportunism.

Why Did We Write This Paper?

Being a management educator is a second career for the first author.1 Ispent 22 years in the Canadian Navy before becoming a university teacher. Ihad to learn to trust those with whom I worked while in the navy. This becameparticularly important when I became the commanding officer (CO) of train-ing ships that were responsible for training junior naval officers in ship han-dling, navigation, and seamanship. As the CO, it was essential that I trust mybridge watch-keeping officers (OOWs) who acted as the person in charge ofthe ship under my supervision. With the ship at sea 24 hours a day for severaldays at a time, there were periods when I could not personally supervise myOOWs. This was especially true at night when I slept. Consequently, I had totrust my OOWs or remove them from the watch-keeping rotation. This trustoccurred at two levels. First, I trusted that because of their training and expe-rience, they would make few honest mistakes and be quick to recognize andcorrect them when they did; and second, they would not deliberately misleador obfuscate any information I needed to make correct decisions when I wascalled—particularly at night.

Later, as a doctoral student in a strategic management program, I wasstruck by a radically different perspective regarding trust. As I started toreceive an in-depth understanding of transaction cost and agency theories,2 I

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was somewhat taken aback at the theoretical and practical assumption of self-interested behavior; however, I eventually came to understand that from aneconomic perspective, such an assumption was reasonable. I was even moredisturbed, however, by the discovery that my professors and fellow doctoralstudents seemed to readily accept the assumption of opportunism (defined asself-interested seeking behavior with guile3). As I progressed through thedoctoral program and the entrenched acceptance of opportunism, I began towonder about the impact the acceptance of opportunism had on students asfuture managers and, through them, on organizations in the United States andCanada.

In addition, I was surprised to learn the extent of pedagogic activitydesigned to keep a few students from engaging in opportunistic behavior inthe classroom. This list of activities is impressive. Students are spread outduring examinations. Different examinations are devised.4 Senior studentsare engaged to act as monitors in large classes. In small classes, instructors sitand watch students endlessly as they write so that if they lift their eyes theysee the eye of the professor upon them. One colleague, suspecting that a fewstudents were cheating, had students write the names of those seated on theirleft and right on their examination booklets. Recently, another colleaguestated that he is under pressure to publish a new edition of his strategic man-agement textbook every 2 years: not to change the content but to change thecases. This pressure is coming through his publisher from large businessschools concerned that students will find solutions to cases from more seniorstudents and present these solutions as their own.

As I engaged in some of these activities, I began to wonder what effectthese activities had on the students who were not prone to opportunism andwhose intention it was to not engage in cheating no matter how much latitudethey were given by their professors. These reflections led me to the self-fulfilling prophecy literature and, in particular, to discussions of the “GolemEffect.”

The Golem Effect in the Classroom

In Hasidic mythology, the Golem is a monster created by Rabbi Loew ofPrague during the 16th century (Wiesel, 1983; Wolf, 1974). In this myth, lifeis infused into a creature made of clay so it can be a servant to its creator.Unfortunately, on the Sabbath, the Golem needs to be shut down or it willbecome destructive. One Sabbath, Rabbi Loew forgets to shut the Golemdown and it runs amok and must be destroyed. In this version of the story,there is an expectation of destruction if the Golem is left to its own devices on

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the Sabbath. In education, the Golem effect represents the concerns of educa-tors and social scientists that focus on the negative effects of self-fulfillingprophecies (Babad, Inbar, & Rosenthal, 1982). In management education,the Golem effect depicts the debilitating effect of low expectations on perfor-mance (Babad et al., 1982; Eden, 1990). In modern day Yiddish and Hebrewslang, the word Golem is now used to denote a dumbbell (Eden, 1990).

Eden (1990) argues that low expectations have negative performanceeffects. Babad et al. (1982) found that when teachers harbored naturally lowexpectations regarding the performance of some students, the performance ofthose students was significantly lower than that of those students for whomteachers had intermediate or high natural expectations. The Golem effectbegins with initially low expectations on the part of an authority figure suchas a manager or a teacher. Low expectations cause the authority figure tocommunicate low expectations to subordinates/students and to provide lessfavorable leadership. When this happens in a classroom, students expect lessof themselves, develop a lower level of motivation, exert less effort, performat a lower level, and achieve less. These low achievements reinforce thedepressed performance expectations of both students and teachers and rein-force the Golem effect. Unfortunately, this negative self-fulfilling prophecyis likely to happen when the teacher and student attribute the low perfor-mance to students’ stable, internal traits such as the propensity to behaveopportunistically.

This triggering of a Golem effect can be explained by using transactioncost and agency theories. Transaction cost and agency theory suggests thatprofessors can expect a few students in each of their classes to be opportunis-tic and that they will not be able to identify these students. Therefore, theyconsider that it is necessary to monitor all students to keep the unknown fewfrom behaving opportunistically. The monitoring of all students may suggestto some students that their professor does not trust them and these studentsmay engage in opportunistic behavior because it is expected of them. Thus,believing in the assumption of opportunism, and acting in accordance withthis belief, may cause a Golem effect in the classroom.

In terms of the Golem effect, it is important to distinguish between self-fulfilling and self-sustaining prophecy (Eden, 1990). Self-fulfilling prophecyis the operation of an expectation that changes a student’s performance bychanging it to conform to the teacher’s expectation. Self-sustaining prophecyis an expectancy effect created by teachers’expectations for the maintenanceof a past level of performance in spite of students’actual level of ability. Eden(1990) argues that self-sustaining prophecies may be more prevalent in naturefor two reasons; first, access to knowledge regarding prior performance, andsecond, the expectation regarding future performance because of this knowl-

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edge. Further, he argues that ability places a ceiling on performance thus lim-iting the effect of positive expectancies, but that there is no parallel floor thatlimits poor performance. Following this logic, he posits that self-sustainingGolem effects are more likely to occur than self-sustaining positive expec-tancy (Pygmalion) effects.

As management educators, we implicitly or explicitly (based on ourknowledge of the assumptions of transaction cost and agency theories)expect that a few students in our classes will succumb to the propensity tobehave opportunistically. Some management educators (those who teachstrategic management and organization theory) may teach these assumptionsas they teach transaction cost and agency theories. Then, because of ourexpectations and the prior acts of a few students, we put in place stringentmonitoring and control systems to ensure that these few students cannotengage in opportunistic behaviour. Finally, in an effort to control these fewstudents and because we do not know who these few students are (an assump-tion of transaction cost and agency theories), all students feel the effects ofhaving these monitoring and control systems imposed on them.

In effect, some of us teach opportunism, most of us expect opportunism,and then most of us act as if opportunism will take place. Is it possible that weare unwittingly creating a Golem effect in our classrooms? Is it possible thatthe expectation on the part of the teacher that a few students will cheat, ifgiven the opportunity, leads to the communication of this expectation in theclassroom and to less favorable leadership in the classroom? We would arguethat it is a possibility and that management educators need to be aware, and tomake our students aware, of this possibility.

Generally, expectation is implicit. However, some strategic managementeducators explicitly teach the assumption of opportunism. Most of us expectsome students to behave opportunistically. And most of us explicitly demon-strate less favorable leadership by imposing controls that treat every studentas if he or she is prone to opportunism (and can be expected to act opportu-nistically if not stringently controlled). It seems possible that this will leadstudents to develop a lower level of motivation to not cheat, exert less effort tonot cheat, and then achieve less than they expect of themselves by engaging incheating. The corollary to this possibility is that as students come to expectless of themselves, they also expect their peers will cheat if not monitored andcontrolled. This may lower trust among students and their peers.

We are not arguing that this will be the case for all students who are sub-jected to a classroom Golem effect. The impact of the Golem effect may bemoderated by attribution or by a person’s self-concept. Attribution is a cogni-tive process through which the cause of our own or someone else’s behavior

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is inferred. If we attribute our opportunistic behavior to our own propensity toact opportunistically, then the Golem effect operating in the classroom willenhance this attribution. However, if our self-concept is one of “I would nevercheat,” this may negate the operation of the Golem effect in the classroom.Our concern is for those students who would not have acted opportunisticallywithout the Golem effect but will in the future because they were subjected toit. They may develop less trust in themselves, their peers, and their teachersand subsequently in their superiors, peers, and subordinates in an organiza-tion. We believe that this destruction of trust and the increased propensity tobehave opportunistically are two inherent dangers in the assumption ofopportunism in our management education classrooms—especially withouta discussion of the possibly debilitating implicit effects.

Does this mean that we should not teach transaction cost and agency theo-ries in our strategic management classes? Of course, the answer is no. How-ever, those who do teach them need to be aware of the triple effects of expect-ing opportunism, teaching opportunism, and then putting into place amonitoring and control system that treats all students as if they are prone toopportunism and will behave opportunistically if they are not controlled. Inaddition, we need to develop techniques in the classroom that lessen theGolem effect and enhance Pygmalion and Galatea effects. In the next section,we describe some interventions the first author has deployed in undergradu-ate and MBA strategic management classes that he believes helps to accom-plish these goals.

Creating Pygmalion/Galatea Effects in the Classroom

In this section, I describe some of the activities I use to enhance the feelingof trust among students and to create a discussion regarding their ability totrust themselves and each other. The goal is to create an atmosphere support-ive of Pygmalion and/or Galatea effects. Before describing these activities, itmight be instructive to discuss the mythological contexts associated withPygmalion and Galatea. Pygmalion is the name given to a poem written bythe Greek poet Ovid (Miller, 1990; Parker, 1977). The poem is about a youngsculptor named Pygmalion, who basically hated women and swore he wouldnever have anything to do with a woman. Ironically, he became addicted tomaking sculptures of women. In time, he became very proficient and sculpteda statue of a woman so beautiful that he fell in love with her. He would dressher up, bring her flowers, and lay her on a soft bed and pillow at night. Oneday, while in the temple, he asked Venus, the Goddess of love, to make thestatue into a living, breathing woman. When he returned home, he touched

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the statue and it felt warm and alive; so he kissed it on the lips and the statuekissed him back. Venus had granted his wish. They subsequently married andhad at least one child.

Today, this story of infusing life into an inanimate object by use of a strongwish, love, or belief for a positive outcome has come to be known as thePygmalion Effect. This Pygmalion effect describes the idea that raising asuperior’s expectations concerning a subordinate’s performance may causean increase in that subordinate’s performance (Eden, 1990). The woman inthe poem, the statue sculpted by the mythical Pygmalion, has come to beknown as Galatea. In management, the Galatea effect refers to the idea thatraising the self-expectations of subordinates regarding their own perfor-mance will also raise their level of performance (Eden, 1990). Now, I willdescribe some of the activities I have developed to create Pygmalion andGalatea effects in the classroom.

First, students (seniors and MBAs) are allowed to determine, within arange, the worth of each component of the course. If there are four compo-nents, students allocate weights within a range of 10% to 40%, for a total of100%. Normally, there is a midterm, a research paper, case analyses, andclass participation. With five components, there is a range of 10% to 30%.Each student’s individual grading scheme must be submitted prior to gradingthe first component. The allocation of component weights has several pur-poses. First, it forces students to think about their individual strengths andweaknesses. This is very apropos in a strategic management class where weteach how to analyze an organization’s strengths and weaknesses. Second, itmeans that students have to assign weight to each component on the basis oftheir own internal analysis and develop a strategy for how they want to begraded, with little or no knowledge of the professor (or the external environ-ment). Again, this is appropriate for the development of managers who willhave to make decisions under conditions of uncertainty and incomplete infor-mation. Third, students are made to feel responsible for their own grade andhave to risk that they may not assign the appropriate weighting. A curious andrealistic outcome is the anguish when students do really well on a componentthat they weighted low, or anticipate, sometime into the semester, that theymay do poorly on a component that they weighted highly. Finally, and mostappropriate for this study, this activity gives students the sense that they aretrusted, in that the professor is allowing them some freedom of action indetermining the evaluation scheme that will affect them. Student feedbacksuggests that they appreciate the trust and like this method of determiningtheir grading scheme.

Next, I use a detailed feedback instrument to assess individual contribu-tion in the group case analyses. These cases are graded and then students are

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assigned an individual grade based on their individual contribution to thegroup effort as determined by the group itself. This individual contribution isdetermined by having the students evaluate each group member and them-selves on six dimensions and then assessing each student’s total score on alldimensions. To determine individual grades, each of the group members’total scores is divided by the highest individual score on the feedback instru-ment in each group to obtain a percentage for each group member. This indi-vidual percentage is then multiplied by the group grade to determine eachstudent’s individual grade for the case analysis. There is great potential foropportunism here as it is made clear that there will be no deviation from thisprocedure. For example, students could give themselves the highest possiblerating and give every other member of the group the lowest possible rating.To my knowledge, this has not happened in the several years I have used thisprocedure. In fact, exactly the opposite happens. If students rate themselveslow, generally others do as well, whereas if students rate themselves high,generally others do the same. The values may differ but the ranking is gener-ally close. I believe this may partially help to neutralize a Golem effect as itindicates that I trust each student to honestly evaluate himself or herself andeach other. In addition, I believe that it engenders trust among the students forthemselves and each other.

Flexible, individualized allocation in the marking guide and group-basedmarking make for interesting class discussions. The discussion occursbecause of the interaction between these two practices. Students quicklydetermine that having both features in the grading scheme means they may bein a group in which members have differential interests because of varyingweights allocated to the group component. One member may put a weight of10% whereas another puts a weight of 40% on a project on which they collab-orate. As students figure this out, it leads to a discussion of resources andcapabilities within the group—another strategic management issue. As onestudent said,

The case work in teams has put another slant on teamwork. Each of us in thegroup has placed different marks on what the case is worth. This has given thepossibility of some people not working as hard because they don’t have asmuch interest in doing as well as others.

Students learn to trust that each of their peers will exert a reasonable effort,even though they have differential weights. From the instructor’s perspective,this strategy allows the monitoring of individual effort in a group and therewarding of such effort appropriately. Alchian and Demsetz (1972) suggestthat metering individual effort in a team is very difficult and needs a

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monitoring device. As the students make the connection between the peerevaluation and the problem outlined by Alchian and Demsetz, it generatesconsiderable discussion about appropriate monitoring activities.

In addition, when oral case presentations are used as a component of thegrade, I make my assessment of the presentation worth 50%. To obtain theother 50%, each nonpresenting student fills out an assessment sheet identicalto mine. These nonpresenting students’ responses are averaged and added tothe instructor’s to obtain the group grade for the presentation. Thus, studentstrust that other students will give them an appropriate grade. Students con-sider that they have been treated fairly with respect to this grading processbecause of several reasons: Students are randomly assigned to each group,cases to be presented are randomly assigned to each group, and each group’sorder of presentation is randomly determined. Student feedback suggests thatmost appreciate this part of the overall grading scheme as well. I will nowdescribe a final activity I have used to create a Galatea effect within each stu-dent. I have done this in several MBA and two undergraduate strategic man-agement classes.

At the beginning of each semester, I had students read about agency andtransaction cost theories. These theories and their assumptions were dis-cussed in class with special emphasis on the concepts of opportunism andexpectations presented earlier in this article. After this discussion, it wasannounced that students would get a chance to be trusted in the form of aclosed book, take-home, 3-hour midterm examination. The exam was issuedin a sealed envelope during the last class before the midterm break, and stu-dents were free to determine when they would set aside the specified time towrite the exam during the midterm break. When this time came, they were tounseal the envelope, write the exam without benefit of any material, and at theend of 3 hours, they were to seal the exam in the envelope and return it duringthe first class after the midterm break. As you can appreciate, this generatedmore discussion and caused students to give some interesting responses.

Some like the concept of being trusted whereas others do not like beingtrusted because of the potential for some of their colleagues to act opportu-nistically. Those who do like the concept are not sure that it is not some kindof trick on the part of the instructor. One undergraduate student asked, “If Ido well on this midterm, will you think I cheated?” An MBA student, afterreceiving the best grade in her class’s midterm, said, “I was afraid to do wellbecause I was afraid you would think I had cheated.” The colleague fromwhom I borrowed this idea first attempted it with one of his executive MBAcourses. He said that “their chins hit the floor” and 4 of his 10 students

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demanded, and obtained, from the department head an on-campus invigilatorfor when they wrote their exam.

There are several benefits to an approach such as this. First, students feel asense of being trusted more than they have ever felt it in their academic career.One student, a mature, part-time MBA student, sent me the following in an e-mail:

You have wowed me! I have never been made to feel that a professor in thisbusiness school is so trusting of his/her students or so accessible to students.Thanks for that! It’s a first and I know that the whole class is going to learn a lotfrom you and from one another.

This student was experiencing a Galatea effect as her expectation forimproved performance was increasing because of my trust in her and herclassmates.

Second, anecdotal feedback indicates that students study more for thistype of exam. They are responsible for scheduling the 3 hours when they aregoing to write the exam during the midterm break. They report that theywould think they had finished studying and decide to write the exam butwould then remember one more topic about which they should know more.This would happen several times and, consequently, they would be more pre-pared when they did write.

Third, and most important, the take-home exam allows an in-depth discus-sion on ethics, cheating, being trusted as a student, trusting other students andthose with whom one works, and one of the differences between leaders andmanagers—leaders make value-based decisions, whereas managers may beamoral in decision making (Rowe, 2001). We are not suggesting that all man-agers are immoral or even amoral in their own personal, individual lives butthat as managers in an organization, they may make bottom-line decisionsthat are not value constrained (Evans, 1997; Sooklal, 1991; Zaleznik, 1990).

However, there are disadvantages associated with this practice. Studentswhose performance does not match their expectations might ask themselvesthe following questions: Did the other students cheat while I did not? Can Itrust that they did not cheat? Of course, if a student did not cheat and does notdo as well as others who did cheat, there are potentially serious ramificationsin terms of scholarships and job opportunities that may be related to perfor-mance as expressed in grades. It is very hard on the professor’s psyche toknow (based on theory and practical experience) that a few may have cheatedto the detriment of the many who did not.

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Do all students like this part of the grading scheme? In one strategic man-agement MBA class, where there were only nine students, the following wasasked as part of a question on transaction cost and agency theories: Shouldprofessors utilize stringent monitoring activities to ensure that students whoare prone to opportunistic behavior do not engage in opportunistic behavior?Five students answered the question with four favoring trusting students andone favoring stringent monitoring activities. The following comments areillustrative of the students’ responses:

Like this test, I was so surprised because no other teacher has trusted us before.I had the feeling that something was wrong or it was a setup. This confusion, Iguess, still comes from the lack of trust we are confronted with all the time.

This student did not initially trust me, the professor, to do what I said I would.This could be a result of the lack of trust experienced by students during theiruniversity experiences.

The second student found the trust exhibited in the course a novel andstimulating experience as expressed in the following comment:

I have always known that opportunistic behaviour exists in our lives and thatmany people act in their own self-interest with guile, however, I never looked atit from so many points of view. This test, for example, is a way of putting trustin us and not putting in place monitors for opportunistic behaviour. I have tosay that having a professor put so much trust in students is very new and it puts awhole new light on the issue of opportunistic behaviour.

The third student suggested that the assumption of opportunism might be cor-rect but that if the level of trust can be increased, the cost of monitoring maybe decreased. But, to drive this point home, the student felt it was necessaryfor professors to not only teach trust but to practice trusting as well.

Based on these theories, it is practical for professors to assume that studentswill behave in opportunistic ways and to assume that stringent monitoringactivities need to be implemented to limit these opportunistic practices. Asindicated, it is expected that actors will behave opportunistically, thus studentsare likely to cheat given such opportunity. However, one of the things that thetheories imply is that if the level of trust can be increased, the level of monitor-ing can likely be decreased. If this is being taught to students to try to instill thisbehaviour in them, and yet they are taught that they cannot be trusted, by usingstringent monitoring, then I believe that the impact is lost and that students willlearn based on the actions of professors [italics added]. They are likely to leave

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university taking this untrusting mentality into the workplace and acting andmaking decisions based on this. This will mean that as practising managers,they will want to increase controls and monitoring activities and thus increasethe level of governance costs.

The final student considered that the cost to students, if a fellow studentacted opportunistically, was not worth the benefits gained. This studentwanted stringent monitoring activities retained:

I am still [of] the view that professors should utilize stringent monitoringdevices to ensure that opportunistic behaviour does not occur. Unfortunately, Icome to this conclusion because I feel that there is a great deal of transactionspecific investment involved in attaining a higher level of education and as suchthere will be a greater potential for opportunistic behaviour to be engaged in. Inaddition, upon graduation, marks may be used as a comparative measure to setcandidates apart. As a result, the introduction of inconsistencies in the methodin which performance is evaluated has the potential to result in distortions thatwould not be readily apparent to those outside the academic institution. Thus,to insure that apples are compared to apples and that all candidates are treatedfairly, I would recommend that stringent monitoring devices be retained.

Ironically, this student was also one of the leading proponents in not wantingthe peer evaluation used to monitor individual effort in groups because he feltthat at the MBA level, all students could be trusted to put forth the requiredeffort in the analysis of a case.

These students all gave thoughtful, well-considered answers to thisdilemma. More important, the answers are indicative of the discussion thathas been generated in several classes about the assumption of opportunism. Itis gratifying to see students apply the concepts of agency theory to a real-lifesituation—how they are treated as students—and to discuss how they want tobe treated as managers and how they should treat others when they becomemanagers. In addition, it leads to a discussion of the costs and benefits associ-ated with monitoring activities. For me, one such cost is the loss of a 3-hourclass in which the midterm is written instead of using the class for discussionand learning.

The intended, global effects of the overall grading scheme outlined here isto enhance the learning experience for students, generate considerable dis-cussion about opportunism, create Pygmalion/Galatea effects, and reduce apossible Golem effect. However, we would not presume to argue that oneprofessor in one class can completely eradicate what 4 to 6 years of universityeducation may have negatively engendered in students.

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Discussion and Conclusion

Do we encourage students to trust or to engage in opportunistic behaviorin the classroom? Our sense is that we may be doing the latter more than weshould. Students may even be unwitting victims (Eden, 1990) and may not beaware that by the actions their professors engage in to prevent opportunisticbehavior, they are being affected adversely. As this article was being written,I wondered if I should use a take-home, closed-book exam again. I was think-ing that after using a take-home, closed book, 3-hour midterm for severalsemesters, the word may get around that I am an easy mark because I givesuch an exam and some students (a few) would take my course for that reason.Therefore, I considered doing it somewhat differently. I thought about givingstudents 10 questions the week before and randomly selecting 4 with studentsrequired to answer 3 of the 4 in an in-class exam. Then I realized that even thisindicated a lack of trust in students, the thing I was trying to give, and that itwould cost me a 3-hour class.

As I thought back to the really good students who want monitoring toensure that a colleague does not receive a higher mark and adversely affecttheir chances for scholarships and jobs, I realized that this is an indicator thatstudents do not trust each other. But I had to admit that it is for a realistic andlegitimate reason. On the other hand, I thought of the students who areimplicitly subjected to a Golem effect and how we should reduce, neutralize,or eradicate these effects, and I was left with a seemingly unanswerable prob-lem. I concluded that maybe Eden (1990) is right when he posits that we needto educate students to Pygmalion, Galatea, and Golem effects. At least, thiscould enable those who would be victims of a Golem effect to guard againstit, and we still would meet the goal of those students who cannot trust theircolleagues and want monitoring activities.

As the CO of a ship, I had monitoring activities in place for navigation,confidential books, and cash. However, it was not because I did not trust mysubordinates (to be blunt, those who violated my trust were not long on myship)—it was because they were prone, as we all are, to making honest mis-takes. Consequently, it may be that motivation is another important part ofmonitoring activities. I made it clear to my navigator that I would be checkingon her but that I wanted her to check on me in navigational matters as well. Idid this to ensure that together we kept the ship from going aground, notbecause I did not trust her. In the same way, we need to make it clear to ourstudents that when we have monitoring and control activities in place, it is toensure a level playing field for all students, not to implicitly suggest that weexpect all students to be opportunistic.

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Avis (2000) said that you have to trust the people you work with and thatthey have to trust you. If we do not trust our students in the classroom and theyconsequently do not trust themselves or each other, will they trust their subor-dinates, peers, and superiors in the workplace when they become managers?Or, will they impose monitoring and control activities that cost more thanthey benefit? We need to teach our students that if the level of trust can beincreased, then the level of monitoring can be decreased. However, if we onlyteach this and do not also model it, the impact will be lost and the students willmodel the actions of their professors. This means that as managers they willbe less trusting, increase the level of monitoring and control activities inap-propriately and increase the cost of governance.

We are not arguing for the total lack of monitoring and control either in theclassroom or in the workplace. We believe that students, managers, andemployees need to be treated with dignity and respect while understandingthe need for, and being subjected to, an appropriate level of monitoring andcontrol. We believe that as students are trusted within a hierarchical system(the classroom) while being monitored appropriately, they will see the bene-fits of doing the same thing as managers. Some of these benefits are employ-ees who trust themselves and their managers and improved performance inthe work unit because of this trust.

Another important point is the importance of socialization. In my strategicmanagement classes, I encourage students (as much as one can in a 3-hoursession for 12 sessions a semester) to understand transaction cost and agencytheories and opportunism and its possible implicit effects. In addition, I makeit clear that this is not what I expect from them and not what they shouldexpect from each other and themselves. Do I achieve my goal? I will neverknow. My expectation is to generate a discussion and to create a debatearound the issues. In a larger context, it is our goal to create that same debateamong our colleagues who teach in the management area.

AppendixTransaction Cost and Agency Theories

Transaction Cost Theory

Transaction cost theory explains why firms exist (Barney & Hesterly, 1996). Thistheory argues that firms exist to reduce the cost of a transaction relative to what itwould be in the market. This happens because the cost of opportunism is reduced in ahierarchy. Williamson’s (1975) version of transaction cost theory is the most perva-sive and is considered the core of transaction cost economics by several management

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researchers (Barney & Hesterly, 1996; Ghoshal & Moran, 1996). This theory is basedon two essential assumptions regarding economic actors such as firms and individu-als: bounded rationality and opportunism. Simon (1947) argued that bounded ratio-nality meant that those who participate in economic transactions are “intendedlyrational, but only limitedly so” (p. xxiv). Opportunism is self-interested seekingbehavior with guile.5 This is different from mainstream economics, wherein theassumption is that economic actors are only self-interested. Williamson’s (1985,p. 47) definition of opportunism or self-interested seeking behavior with guileinvolves lying, stealing, and cheating but more generally refers to “the incomplete ordistorted disclosure of information, especially to calculated efforts to mislead, distort,disguise, obfuscate, or otherwise confuse” partners in an economic exchange. Trans-action cost theory assumes opportunism but not on the part of all economic actors atall times—only that a few economic actors will act opportunistically at some time inan exchange relationship. In addition, it assumes that “it is costly to distinguish thosewho are prone to opportunism from those who are not” (Barney & Hesterly, 1996, p.118). Given that a few economic actors may, and sometimes do, act opportunistically,some believe (Barney & Hesterly, 1996; Williamson, 1985) that organizations mustdesign safeguards so that they will not be victimized by their partners in an economicexchange.

Agency Theory

Agency theory seeks to answer the question “Do those associated with the organi-zation agree about how it should be managed” (Barney & Hesterly, 1996)? Like trans-action cost theory, agency theory assumes that humans who work in an organizationare boundedly rational, self-interested, and prone to behave opportunistically (Barney& Hesterly, 1996; Eisenhardt, 1989). Agency theory differs from transaction cost the-ory in that it emphasizes the risk attitudes of principals and agents (Eisenhardt, 1989).When one partner (the principal) in an economic exchange delegates authority toanother (the agent) and the principal’s welfare is affected by the agent’s choices, anagency relationship exists. If there is a convergence of interest between the principaland the agent, this is not problematic. However, if their interests diverge, if the agent’sactions cannot be perfectly and costlessly monitored by the principal, and if the prin-cipal cannot costlessly and perfectly monitor and acquire the information possessedby the agent, then the possibility of opportunism on the part of the agent that worksagainst the interest of the principal exists.

Two sources of agency problems are moral hazard and adverse selection (Barney& Hesterly, 1996). Moral hazard is the possibility of opportunistic behavior whenagents engage in actions that are hidden from the principal or are costly to observe(Barney & Hesterly, 1996). Adverse selection is the possibility of opportunisticbehavior when agents have information that is unobserved or costly to obtain by theprincipal and it results in the wrong person being selected for a job (Barney &Hesterly, 1996). Principals and agents may resolve agency problems (e.g., opportu-nistic behavior) through monitoring and bonding. Monitoring refers to the

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mechanisms the principal puts in place to reduce the cost of agency or opportunisticbehavior by the agent. Bonding involves the mechanisms agents use to assure theirprincipals that they are not behaving opportunistically. In the classroom, professorsengage in monitoring activities that give them some confidence that those few stu-dents who are prone to opportunism are kept from engaging in opportunistic behavior.On the other hand, it is not unusual for students to engage in bonding mechanisms toassure their professors that they are not engaging in opportunistic behaviour.

Notes

1. For ease of readability, we will use the pronouns “I or my,” as appropriate, when describingthe first author’s experiences in the navy and the university classroom. The second author is anMBA graduate who was a member of one of the first author’s MBA strategic managementclasses.

2. For those not familiar with transaction cost and agency theories, there is a brief descriptionin the appendix.

3. Opportunism is self-interested seeking behavior with guile. This is different from main-stream economics where the assumption is that economic actors are only self-interested. Wil-liamson’s (1985) definition of opportunism involves lying, stealing, and cheating but more gen-erally refers to “the incomplete or distorted disclosure of information, especially to calculatedefforts to mislead, distort, disguise, obfuscate, or otherwise confuse” (p. 47) partners in an eco-nomic exchange.

4. One colleague uses multiple-choice questions. This colleague randomly orders questionsand randomly orders the answers to each question to create different versions of the examination.

5. For a complete discussion of opportunism, see Ghoshal and Moran (1996).

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