Editor's note: This is part of a series of occasional columns on managing the family business written by Senior Lecturer John A. Davis. In this article, Davis discusses leadership roles.PART TWO: Structuring Leadership Roles
My previous article outlined what we know about leadership in family business systems worldwide, including how leadership affects performance. As an example of very capable leadership of a high performing family enterprise, I introduced Nelson Sirotsky, Chairman of RBS, who two years ago successfully passed the baton after leading his family's media business as CEO for decades.
Whether you adopt the one-leader model for your own family enterprise, as RBS has done, or whether you build a team of leaders, you still need to design, structure, and allocate all the necessary leadership roles. Why? Because wherever I see poorly designed, badly structured, and slap-dash leadership roles in action, I hardly ever see the decisiveness and unity that a family business system needs for long-term performance. How do you design, structure, and allocate all the leadership roles you need? That's what this article will focus on.
First recognize that for any group or organization to be successful, it needs to be led, managed, and governed well.Leading, Managing, and Governing
Governance provides a broad sense of purpose or mission for the group and gives the group a sense of stability. Without stability, we cannot plan long-term. Family business systems have an enduring advantage over all other kinds of enterprise in large part because of their long-term goals, plans, and commitments. Without stability, you lose your built-in advantage. Without adequate governance, you don't have adequate stability. The family business system absolutely must be governed, and governed well, for success.
Good governance for any group assures us that plans can be made, problems solved, leaders developed and chosen, and disputes settled in a way that preserves the purpose and unity of the group. Discipline and trust grow. Good governance is the product of having useful rules, policies, agreements, and plans, as well as forums (like boards, family councils, and annual meetings of the owners) to develop the plans, agreements, rules, and policies, to address important issues and to work out differences.
One very wise person with legitimacy, a lot of authority, and good intentions can provide good governance for a business, family, and ownership group. But unitary leaders, like the rest of us, only have so many hours in a day, and they can only focus on so many individual concerns before losing effectiveness. So in one-leader systems, governing well almost always requires that key stakeholders join together into one or more groups:
- A shareholders' council and an annual meeting of the owners to serve the governance needs of the owners.
- A board of directors to serve the governance needs of the business and owners.
- A family council to help provide governance for the family.
These groups all need their own good leaders to function well.
So you can see that a family business system leadership team could number four or more people: a leader of each governance forum plus an ultimate leader. The business leader could be different than the chairman of the board. The leader of the owners tends to be either the business leader or a group of leading owners. Often, the family council leader is different than the real family leader. Often the family leader is also the business leader, but not always. Even where there is a strong unitary leader of the family business system, there are usually deputy leaders that lead the different parts of the system in close coordination with the ultimate leader. This was the case for the RBS system.Leading
Besides developing, supporting, and participating in the governance system, leaders need to lead people, and this is different from managing their work. Leading is fundamentally about identifying where the group needs to go (developing a compelling vision for the future), strategizing how to get there, and getting people to change in order to get there. This is done by inspiring, persuading, and motivating people to work together to reach important goals, and by building coalitions to support needed change.
Leading is a very personal activity where the leader connects with people and convinces them, making use of compelling ideas and character appeal. Followers follow the leader because of their loyalty, because they identify with the leader, because they identify with the leader's cause, and sometimes because of all of those things. Followers need compelling reasons to file in behind any leader for the long-term, or for difficult missions. Since family business is focused on the long term, the family business leader or leaders must be personally compelling, not just good at making plans and managing activities. As the saying goes, you lead people into battle; you don't manage them into battle.
Effective leaders can have a charismatic style, like Nelson, or a more quiet approach. Regardless of style, the most effective leaders I have seen in family business systems are clearly "servant leaders" or more to the point, "servant partners." These leaders typically have strong ideas and principles about how their companies should be run, what their co-owners should invest in, and how their families should behave. They also have egos, personal needs, and sensitivities. At the same time, they want to do their best for their followers. They believe in partnering with others and treating partners fairly. And they behave like servants of the greater good. Finally, they are able to make tough decisions to protect the standards and aspirations of the group.Managing Managing, as opposed to leading, is about getting a group to operate efficiently and effectively. Managing is done by planning and budgeting, organizing, analyzing problems, building and using management systems, prudently allocating resources, and providing performance feedback. Managing is a complement to leading.
So much of business and family success has to do with good execution--getting jobs done well, on time, and on budget. Thank goodness for good managers of businesses and families. Like all CEOs that I teach at Harvard, Nelson Sirotsky spent a lot of his time as CEO of RBS managing (that is, developing the efficiency and effectiveness of) particular aspects of the business. He did a lot of planning, organizing, and problem solving.Most of the family business leaders that I see are strong managers. There is room for improvement in some management techniques, but these leaders are programmed to manage things. In fact, too much--to the point where they focus so much effort on management that their companies tend to be over-managed, under-led, and under-governed. It's natural for CEOs, particularly family members who grew up in the family company and know it well, to become focused on its operating effectiveness. But too much focus here generally means they give too little attention to the leadership and governance needs of the organization. We devote a lot of effort in the Owner-President Management program at Harvard correcting this pattern.
I often wish there was an Owner-President Management program for the leaders of families! Families that own business have similar management problems. Many business families could do a better job of managing their financial life by setting clearer goals and by controlling spending better. They usually need to devote more attention to the development of the next generation. And business families, like all families, are typically poor at giving performance feedback to their members. These are all management issues.
But in my opinion, more problems in families are due to their lack of governance and leadership. In the governance area, family members are not clear about the family's mission or core values; or they lack adequate rules and policies to guide behavior; or maybe they haven't developed a forum and process to discuss important issues and mediate differences among family members fairly. In leadership, they lack a clear vision for the future; or they haven't accepted the need to change in order to adapt to the environment; or they are uninspired. It takes deep inspiration to tackle important challenges.
Governance, leadership, and management: businesses, families, and ownership groups need all three of these activities. If you observe an effective leader of a family business system, like Sirotsky, over the course of a month, you'll see him or her engaging in all three of these activities. The amount of time spent on each activity or group will vary with the leader and circumstances. Some leaders favor leading and let others manage; some leaders spend most of their time governing the system. A parent also does these three things in the family he or she leads. A good Chairman of the board or family council leader also does an appropriate amount of all three. In this way and others, leadership of a business, family, and ownership is similar.
In my next article, we'll take a look at what capable leadership actually entails for each of the three circles.
by Susan Helper and Rebecca Henderson
Executive Summary — What led to General Motors' decline? Long regarded as one of the best managed and most successful firms in the world, its share of the US market fell from 62.6 to 19.8 percent between 1980 and 2009, and in 2009 the firm went bankrupt. The authors argue that the conventional explanations for GM's decline are seriously incomplete. They discuss a number of causes for the firm's difficulties, and make the case that one of the reasons that GM began to struggle was because rival Toyota's practices were rooted in the widespread deployment of effective relational contracts--agreements based on subjective measures of performance that could neither be fully specified beforehand nor verified after the fact and that were thus enforced by the shadow of the future. GM's history, organizational structure, and managerial practices made it very difficult to maintain these kinds of agreements either within the firm or between the firm and its suppliers. The authors also argue that at least two aspects of GM's experience seem common to a wide range of firms. First, past success often led to extended periods of denial: Indeed a pattern of denial following extended success appears to be a worldwide phenomenon. Second, many large American manufacturers had difficulty adopting the bundle of practices pioneered by firms like Toyota. The paper concludes by discussing the implications of this history for efforts to revive American manufacturing. Key concepts include:
- Public support for economic growth has usually focused on the diffusion of technology-based insights. Learning more about when (and what type of) relational contracts are likely to be valuable may be just as important.
- For General Motors, the historical success of the firm led its senior managers to deny and/or misperceive the nature of the threat presented by Japanese competition for much of the 1970s and 1980s.
- GM faced difficulties in the 1990s once the firm had made the decision to adopt Toyota's managerial practices. It took time for GM to understand exactly what Toyota was doing. Then problems in building new relational contracts greatly slowed GM's efforts to respond effectively, either through innovation or by imitating Toyota's efforts.
General Motors was once regarded as one of the best managed and most successful firms in the world, but between 1980 and 2009 its share of the U.S. market fell from 62.6% to 19.8%, and in 2009 the firm went bankrupt. In this paper we argue that the conventional explanation for this decline-namely high legacy labor and health care costs-is seriously incomplete, and that GM's share collapsed for many of the same reasons that many of the other highly successful American firms of the 50s, 60s, and 70s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing. We discuss a number of possible causes for these difficulties: including GM's historical practice of treating both its suppliers and its blue collar workforce as homogeneous, interchangeable entities, and its view that expertise could be partitioned so that there was minimal overlap of knowledge amongst functions or levels in the organizational hierarchy and decisions could be made using well-defined financial criteria. We suggest that this dynamic may have important implications for our understanding of the role of management in the modern, knowledge-based firm, and for the potential revival of manufacturing in the United States.Paper Information
Should business play a role in supporting public institutions, and perhaps addressing the world's social challenges?
When Harvard Professor Rebecca Henderson asked her colleagues and business executives that question over the last few years, the reaction was often rather skeptical. Many believe this is not what business does or should do, Henderson said.
"They say the answer is regulation or the answer is taxation," said Henderson. "The idea that firms can set themselves up for public good is viewed with suspicion—in my view for very good reasons."
Yet more than three dozen faculty and doctoral students from a variety of institutions gathered January 30 to give the idea serious consideration during the first of 13 HBS workshops on the subject. The Business and the Public Sector seminar series, which runs through May, is designed to induce lively conversation, build a community of scholars, and create a research agenda exploring the possible role of the private sector in shaping the institutions of capitalism.
Henderson, who co-hosted the event, began her presentation by suggesting that talking about business and the public sphere was like "dancing about architecture." Business often has no incentive to grapple with public sector problems, and those businesses that choose to embrace a 'stakeholder' orientation may be perceived as misusing shareholder funds or as trying to subvert democratic institutions, she said.
She suggested, however that there are three reasons to at least explore the topic including:
Growing global corruption, particularly when business gets close to the public sector and tries to skew the rules in its favor.
Environmental pressures, including the risk that we could destabilize the climate through the emission of green-house gases.
Poverty and inequality, with fewer people taking greater pieces of the earnings pie.
"Should business get involved?" Henderson asked the group. "If I could choose, I'd like a renewed democratic process and appropriate regulatory regimes. I believe that these problems are usually best dealt with by the state, but in many cases that is not happening." Moreover the private sector has resources and capabilities that the public sector does not and, potentially, a substantial business interest in seeing the public sector succeed. "Sitting in a business school, this is something we should look at very seriously."
Henderson noted that there are opportunities for firms to address public goods problems and make money at the same time, citing the example of IBM reducing electricity consumption significantly between 1990 and 2012 and saving $477 million in the process.
The role of academics in this process, she said, is the traditional one: to think clearly, see what is true, not what we wish was true. "Once we are thinking clearly about these things, (we) can be a source of ideas in the world."POTENTIAL INQUIRY
Henderson identified two broad areas of inquiry to consider. First, she suggested it might be worth exploring the potential role of "inducement" mechanisms—including regulations, taxes, and ownership structures—in changing the constraints under which firms operate. Are there changes that would make it easier for business to contribute to the public good? Would these kinds of shifts be desirable or would they have unexpected side effects?
And second, she posed the fundamental question of whether it is feasible or desirable to think about changing firms themselves. Can firms create shared value? Can industries regulate themselves? What are the responsibilities of managers? Does "purpose" matter?
If academics chose to focus on these particular areas of study, it just might provide the kind of encouraging push that companies sometimes need to make changes.
"You might ask, why should one do research in this area? If managers can support public institutions and provide public goods and make money, why aren't they?" she said. One of the goals of the research is to explore exactly this question, particularly since if this is a question of coordinating efforts, highlighting the risks and benefits of action may help to create a critical mass of firms working together.
"Could we build a private sector in which actively subverting accounting rules was widely agreed to be bad behavior? Can we imagine firms mutually agreeing not to try and capture their regulators? To support appropriate environmental or social legislation? If a significant faction of the private sector started to act in this way consistently, might it change public attitudes and beliefs about how to act properly? Possibly," she said. "Could they potentially put social pressure on CEOs who are acting badly?"GLOBAL THREATENS LOCAL
Harvard Business School's Jan W. Rivkin, the Bruce V. Rauner Professor of Business Administration, said that historically in the United States, government and business created a set of public goods that were beneficial for everyone. But around 1980, a shift occurred as a result of changes in geopolitics and other factors that made it possible for firms to do business "from anywhere to anywhere," he said. This not only weakened the connection between companies and their communities, but also put pressure on the middle class, which were suddenly in competition for jobs with skilled workers around the globe.
"And how did our society respond to pressures on the middle class?" Rivkin asked. "The dominant response of our society was to make a series of unsustainable promises that sustained the illusion of prosperity" by extending easy credit to fuel consumption, covering health care and retirement costs, and directly employing people while lowering tax rates.
"You take that and combine it with the recession and two wars, and you have a hobbled government that is not making investments in the commons," Rivkin said.
Many companies have recognized the problem and are already making investments in public goods, he said. For example, Southwire, a manufacturer of electrical wire, cable, and cord in rural Georgia, partnered with a local school district that had a dismal graduation rate. The company staffed its factory with the district's most at-risk kids, leading to a graduation rate that soared among those students as well as other at-risk students.
The evidence that more businesses and their "purpose-driven managers" are investing in society also comes from CEOs at several multibillion-dollar organizations, including Unilever, Nestle, Nissan, United Stationers and Aetna, who are trying to simultaneously make money and make a difference. Thousands of smaller firms are also creating change.
"My reading of some of these CEOs is that they're charging and looking back over their shoulders saying, 'Come on, guys. We can get to another place," Henderson said. Many other executives are concerned enough about the social problems we face that they may also be willing to jump on board and do their part.
During visits to companies, she said, executives always stress the money-making part of business. But during social get-togethers with these same executives, they admit to also being worried about the world and the future for their children.
"The students here and the global leaders I meet are beginning to think quite hard about addressing their role in these problems," Henderson said. "There is so much power at firms. They have the ability to make a difference."
Henderson is the John and Natty McArthur University Professor at Harvard University, with a joint appointment at Harvard Business School and co-director of the Business and Environment Initiative.
The seminar series is being sponsored by the Division of Research and Faculty Development at Harvard Business School.About the author
Dina Gerdeman is a writer based in Mansfield, Massachusetts.
Grocery customers who bring their own reusable shopping bags tend to purchase more environmentally conscious goods (organic) but also more indulgent items (chips), according to new research by Uma R. Karmarkar and Bryan Bollinger. "These findings have implications for decisions related to product pricing, placement and assortment, store layout, and the choice of strategies to increase the use of reusable bags," according to the authors of BYOB: How Bringing Your Own Shopping Bags Leads to Treating Yourself, and the Environment.Electronic health records and doctor productivity
Using electronic health records (EHR) can increase the productivity of clinicians, especially when some EHR work tasks are delegated to staff, according to research by Julia Adler-Milstein and Robert S. Huckman, published in the American Journal of Managed Care. One caveat: smaller practices are not so benefitted, and in fact physicians might experience productivity decreases by using flawed delegation processes.Goldfinger in South Africa
The James Bond character Auric Goldfinger was fictional, but his inspiration in the mind of author Ian Fleming may have been real: American mining magnate Charles W. Engelhard. A new case study by Geoffrey G. Jones and Elliot R. Benton explores the political and ethical responsibilities of businesses in repressive regimes, in this case apartheid-era South Africa, where Engelhard has significant investments.
— Sean SilverthornePublications
- August 2013
- American Journal of Managed Care
Abstract—Objectives: To examine the impact of the degree of electronic health record (EHR) use and delegation of EHR tasks on clinician productivity in ambulatory settings. Study Design: We examined EHR use in primary care practices that implemented a web-based EHR from athenahealth (n = 42) over 3 years (695 practice-month observations). Practices were predominantly small and spread throughout the country. Data came from the athenahealth practice management system and EHR task logs. Methods: We developed monthly measures of EHR use and delegation to support staff from task logs. Productivity was measured using work relative value units (RVUs). Using fixed effects models, we assessed the independent impacts on productivity of EHR use and delegation. We then explored the interaction between these 2 strategies and the role of practice size. Results: Greater EHR use and greater delegation were independently associated with higher levels of productivity. An increase in EHR use of 1 standard deviation resulted in a 5.3% increase in RVUs per clinician workday; an increase in delegation of EHR tasks of 1 standard deviation resulted in an 11.0% increase in RVUs per clinician workday (P <.05 for both). Further, EHR use and delegation had a positive joint impact on productivity in large practices (coefficient, 0.058; P <.05), but a negative joint impact on productivity in small practices (coefficient, -0.142; P <.01). Conclusions: Clinicians in practices that increased EHR use and delegated EHR tasks were more productive, but practice size determined whether the 2 strategies were complements or substitutes.
- August 2013
- Journal of Development Economics
Abstract—This paper studies how land reform and population growth affect land inequality and landlessness, focusing particularly on indirect effects owing to their influence on household divisions and land market transactions. Theoretical predictions of a model of household division and land transactions are successfully tested using household panel data from West Bengal spanning 1967-2004. The tenancy reform lowered inequality through its effects on household divisions and land market transactions, but its effect was quantitatively dominated by inequality-raising effects of population growth. The land distribution program lowered landlessness, but this was partly offset by targeting failures and induced increases in immigration.
Publisher's link: http://people.hbs.edu/mluca/Papers%20on%20RIS/Land%20Reform.pdf
- August 2013
- Psychological Science
Abstract—We propose that dishonest and creative behavior have something in common: they both involve breaking rules. Because of this shared feature, creativity may lead to dishonesty (as shown in prior work), and dishonesty may lead to creativity (the hypothesis we tested in this research). In five experiments, participants had the opportunity to behave dishonestly by overreporting their performance on various tasks. They then completed one or more tasks designed to measure creativity. Those who cheated were subsequently more creative than noncheaters, even when we accounted for individual differences in their creative ability (Experiment 1). Using random assignment, we confirmed that acting dishonestly leads to greater creativity in subsequent tasks (Experiments 2 and 3). The link between dishonesty and creativity is explained by a heightened feeling of being unconstrained by rules, as indicated by both mediation (Experiment 4) and moderation (Experiment 5).
Publisher's link: http://francescagino.com/#/morality_research
- August 2013
- Contemporary Perspectives on Organizational Social Networks
Abstract—We propose a framework of constrained agency grounded in the actors' resources and motivations within their structurally constrained context. Structural positions influence the resources available to actors and color the motivations that shape their actions. Resources equip actors to exert agency, while motivations propel them to do so. We derive a typology of network actions and illustrate how the form of constrained agency through which a particular network action is taken can affect actors' ensuing structural positions and the nature of the constraints they subsequently face. Our conceptualization of constrained agency identifies new sources of endogenous change in network structure.
- August 2013
Abstract—Current public and private healthcare information technology initiatives have failed to achieve secure integration among providers. Applying the "keep it simple, stupid" principle offers the key guidance for solving this problem.
- August 2013
- Notizie di Politeia
Abstract—Do multinational corporations (MNCs) have a responsibility to address unjust conditions-not simply by refraining from contributing to injustice, but also by actively working to bring about a just state of affairs? This paper examines whether this question can be meaningfully addressed without having to engage two contentious debates in contemporary scholarship: the debate about the moral agency of corporations and the debate about the purpose of the for-profit corporation. Finding it difficult to avoid the second debate, the paper examines the extent to which prevailing accounts of corporate purpose (e.g., shareholder primacy, stakeholder theory, corporate citizenship) support attributing responsibilities of justice to MNCs. The paper concludes that a more promising account is one that frames the purpose of the for-profit corporation in terms of its function in allowing members of society to meet their wants and needs by coordinating labor and capital in the production of goods and services.
- August 2013
- The Handbook of Global Ethics
Abstract—A central question that arises from the perspective of global ethics is what standards ought to apply to the activities of multinational corporations (MNCs). This chapter surveys the contemporary theoretical literature on this question. The first section provides background on MNCs and their rise. Section two summarizes attempts to promulgate global standards for MNCs in relation to human rights, labour, bribery, and the natural environment. Section three surveys the literature on the theory and practice of corporate social responsibility (CSR)-those corporate activities and policies that are not legally mandated and are framed in terms of the corporation's impact on society. The remaining sections consider the ethical dimensions of the question. Section four introduces the debate surrounding the universality of moral standards in the context of business activity. Section five describes attempts to specify standards for MNCs that involve taking a position on two key debates in the broader literature: the debate over the purpose of the for-profit business corporation and debate about the moral agency of corporations. The sixth section of the chapter summarizes accounts that aim to specify standards for MNCs without having to take a position on the purpose of the corporation or the moral agency of corporations.
- August 2013
- Review of Economics and Statistics
Abstract—We model spatial clusters of similar firms. Our model highlights how agglomerative forces lead to localized, individual connections among firms, while interaction costs generate a defined distance over which attraction forces operate. Overlapping firm interactions yield agglomeration clusters that are much larger than the underlying agglomerative forces themselves. Empirically, we demonstrate that our model's assumptions are present in the structure of technology and labor flows within Silicon Valley and its surrounding areas. Our model further identifies how the lengths over which agglomerative forces operate influence the shapes and sizes of industrial clusters; we confirm these predictions using variations across patent technology clusters.
Publisher's link: http://www.people.hbs.edu/wkerr/Kerr_Kominers_Clusters_121115.pdf
- August 2013
- Permanente Journal
Abstract—Frontline care providers in hospitals spend at least 10% of their time working around operational failures, which are situations where information, supplies, or equipment needed for patient care are insufficient. However, little is known about underlying causes of operational failures and what hospitals can do to reduce their occurrence. To address this gap, we examined the internal supply chains at two hospitals with the aim of discovering organizational factors that contribute to operational failures. We conducted in-depth qualitative research, including observations and interviews of over 80 individuals from 4 nursing units and the ancillary support departments that provide equipment and supplies needed for patient care. We found that a lack of interconnectedness among interdependent departments' routines was a major source of operational failures. The low levels of interconnectedness occurred because of how the internal supply chains were designed and managed rather than because of employee error or a shortfall in training. Thus, we propose that the time that hospital staff spend on workarounds can be reduced through deliberate efforts to increase interconnectedness among hospitals' internal supply departments. Four dimensions of interconnectedness include (1) hospital-level-rather than department-level-performance measures; (2) internal supply department routines that respond to specific patients' needs rather than to predetermined stocking routines; (3) knowledge that is necessary for efficient handoffs of materials is translated across departmental boundaries; and (4) cross-departmental collaboration mechanisms that enable improvement in the flow of materials across departmental boundaries.
- August 2013
- Production and Operations Management
Abstract—Management-By-Walking-Around (MBWA) is a widely adopted technique in hospitals that involves senior managers directly observing frontline work. However, few studies have rigorously examined its impact on organizational outcomes. This paper examines an improvement program based on MBWA in which senior managers observe frontline employees, solicit ideas about improvement opportunities, and work with staff to resolve the issues. We randomly selected 19 hospitals to implement the 18-month long MBWA-based improvement program; 56 work areas participated. We find that the program, on average, had a negative impact on performance. To explain this surprising finding, we use mixed methods to examine the impact of the work area's problem-solving approach. Results suggest that prioritizing easy-to-solve problems was associated with improved performance. We believe this was because it resulted in greater action taking. A different approach was characterized by prioritizing high-value problems, which was not successful in our study. We also find that assigning to senior managers responsibility for ensuring that identified problems get resolved resulted in better performance. Overall, our study suggests that senior managers' physical presence on their organizations' frontlines was not helpful unless it enabled active problem solving.Working Papers Management Practices, Relational Contracts and the Decline of General Motors By: Helper, Susan, and Rebecca Henderson
Abstract—General Motors was once regarded as one of the best managed and most successful firms in the world, but between 1980 and 2009 its share of the U.S. market fell from 62.6% to 19.8%, and in 2009 the firm went bankrupt. In this paper we argue that the conventional explanation for this decline-namely high legacy labor and health care costs-is seriously incomplete, and that GM's share collapsed for many of the same reasons that many of the other highly successful American firms of the 50s, 60s, and 70s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing. We discuss a number of possible causes for these difficulties: including GM's historical practice of treating both its suppliers and its blue collar workforce as homogeneous, interchangeable entities, and its view that expertise could be partitioned so that there was minimal overlap of knowledge amongst functions or levels in the organizational hierarchy and decisions could be made using well-defined financial criteria. We suggest that this dynamic may have important implications for our understanding of the role of management in the modern, knowledge-based firm, and for the potential revival of manufacturing in the United States.
Download working paper: http://www.hbs.edu/faculty/Publication%20Files/14-062_29ad7901-c306-44fa-88df-31e97a17cbbf.pdfBYOB: How Bringing Your Own Shopping Bags Leads to Treating Yourself, and the Environment By: Karmarkar, Uma R., and Bryan Bollinger
Abstract—As concerns about climate change and resource availability become more central in public discourse, using reusable grocery bags has been strongly promoted as an environmentally and socially conscious virtue. In parallel, firms have joined policy makers in using a variety of initiatives to reduce the use of plastic bags. However, little is known about how adopting reusable bags might alter consumers' in-store behavior. Using scanner panel data from a single California location of a major grocery chain, and completely controlling for consumer heterogeneity, we demonstrate that bringing your own bags simultaneously increases your purchases of environmentally conscious and indulgent (hedonic) items. Supporting these effects, we use experimental methods to demonstrate that participants who imagined shopping with their own bags are more likely to spontaneously consider purchasing chips or dessert items and indicate relatively higher willingness to pay for foods in these categories, as well as for organic foods. Furthermore, we show that the impact on organic and indulgent items is dissociable in a manner dependent on the consumers' motivation for bringing bags. These findings have implications for decisions related to product pricing, placement and assortment, store layout, and the choice of strategies to increase the use of reusable bags.
Download working paper: http://www.hbs.edu/faculty/Publication%20Files/14-065_a44e93a2-3a28-4768-ac18-6e0925699d3f.pdfStepping Stone, Stopping Point, or Slippery Slope? Negotiating the Next Iran Deal By: Sebenius, James K.
Abstract—The November 2013 "interim" nuclear deal between Iran and the "P5+1"-the United States, Russia, China, Britain, France, and Germany-raises challenging questions. Will the initial deal function as a stepping stone toward a more comprehensive deal? Or will it drift into becoming a stopping point that leaves Iran dangerously close to nuclear weapons capability with the sanctions regime in decline? Or will it devolve to a slippery slope that would end up requiring a painful choice for key players between either acquiescing to a nuclear-capable Iran or attacking Iran's nuclear facilities? With Iran and the P5+1 each splintered into contending factions, a successful stepping stone strategy requires converting enough "persuadable skeptics" on each side to forge a "winning coalition" on behalf of the next nuclear deal. This supportive group must be strong enough to overcome the potent "blocking coalition" that will oppose virtually any larger, next-stage agreement. The best chance for the interim accord to become a stepping stone to a more valuable deal calls for a two-prong negotiating strategy with both value-enhancing and cost-imposing elements. The first prong of this strategy should strive to craft the most valuable possible next deal that credibly offers Iran a range of benefits, not limited to sanctions relief, that are greater and much more salient than those available from the interim agreement. The second prong should significantly worsen the consequences of failing to reach the next nuclear deal by automatically imposing enhanced sanctions if negotiations toward an acceptable, but relatively narrow, nuclear agreement do not succeed by a reasonable but firm deadline.
Download working paper: http://www.hbs.edu/faculty/Publication%20Files/14-061_51d0227f-ea86-40f7-957f-be8d25bb3517.pdfCases & Course Materials
- Harvard Business School Case 714-431
After reaching the limits of its successful expansion in the United States in the early 1990s, Walmart sought growth opportunities in markets abroad. This case describes Walmart's attempts to replicate its successful U.S. business model in Mexico, Canada, Brazil, Argentina, Central America, China, South Korea, Japan, Germany, the UK, and Africa. Students reflect on the mixed results of these ventures and identify elements in the company's location choices, times of entry, and modes of entry that may explain the outcomes observed. They then formulate a set of recommendations for Walmart to maximize its chances of success when the company expands into India in 2013.
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- Harvard Business School Case 714-023
No abstract available.
- Harvard Business School Case 314-035
No abstract available.
- Harvard Business School Case 914-016
Supplements the (A) case.
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- Harvard Business School Case 714-436
This note offers an analysis of four fundamental strategic decisions and associated tradeoffs that set MSPs apart from other types of businesses (e.g., product firms) and that every MSP entrepreneur and investor should carefully consider. In the last section I also discuss an important boundary condition: when is the MSP business model dominated by related-but distinct-business models?
- Harvard Business School Case 313-148
This case considers the strategies of Charles W. Engelhard, an American mining magnate who made large investments in apartheid-era South Africa. Engelhard was widely believed to have been the model for the James Bond villain Auric Goldfinger. During the 1950s and 1960s Engelhard, who was well-connected with the leadership of the Democratic Party in the United States including President Lyndon B. Johnson, was one of the largest American investors in that country. His close relationship with Harry Oppenheimer, the head of the Anglo-American Corporation, gave him substantial influence within the South African business system. The case starts with anti-apartheid demonstrators protesting outside a ceremony awarding him a prize in Newark, New Jersey. It provides an opportunity to debate the political and ethical responsibilities of businesses in repressive regimes as well as the challenges faced by entrepreneurs operating in countries with different value systems and political regimes.
- Harvard Business School Case 714-021
No abstract available.
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One morning last fall, Gautam Mukunda told the MBA students in his first-year Leadership and Organizational Behavior class to crawl under their desks and stay there. He wanted them to experience a sense of how it feels to work in a platinum mine, where the distance from ceiling to floor can be less than a meter.
"The students wanted to get out right away," recalls Mukunda, an assistant professor in the Organizational Behavior unit at Harvard Business School. "But I said, no! (Luckily I have a loud voice.) And I told them to imagine being like this for 12 hours. Except it's dark, it's dusty, and over your head is a mile of solid rock. Oh, and you are doing heavy physical labor for 12 hours. That's being in the mines."
The class was discussing "Cynthia Carroll at Anglo American," a case study authored by Mukunda with Lisa Mazzanti and Aldo Sesia (both case researchers at HBS). The case follows several key events in the career of Cynthia Carroll (HBS MBA 1989), who from 2007 to 2013 served as chief executive of the mining giant Anglo American plc, a London-based multinational that employs more than 150,000 people and produces 40 percent of the world's platinum. She was the first woman and first non-South African to head the company.
Addressing how to change the culture of a large and diverse organization using safety as a key lever, it's an apt teaching case for the required Leadership and Organizational Behavior course (commonly known as LEAD), which focuses on how managers become effective leaders by addressing the human side of the enterprise.The elements of the case Click on image to enlarge
As part of his case research, Gautam Mukunda spent a day in a platinum mine. Photo: Gautam Mukunda
The authors' research for the case study comprised more than 50 hours of interviews on three continents, not to mention some applied experience; Mukunda flew to South Africa and spent a day in Anglo American's Rustenburg mines. "Before the first class I posted a slide show of pictures, and several of them were of me working a steam drill," Mukunda says. "I was buried under so much gear that, as I discovered weeks later, the students had no idea that was me."
While Mukunda initially pursued Carroll's story simply because it intrigued him, he and his research team ended up with enough material for a three-part case.
Part A opens in June 2007, when the newly appointed Carroll faced a spate of fatalities at the Rustenburg mines. (Anglo American Platinum, which runs the mine, is majority-owned by Anglo American plc.) While the company boasted the nation's best safety record at the time, it still averaged 46 deaths per year. Four months into her tenure, Carroll learned of a fatality that occurred during her first visit to Rustenburg. "This organization is out of control," she told the head of Anglo American Platinum. "I will not support operations that are killing people."
As with most teaching cases at HBS, Part A focuses on a key dilemma: What should Carroll have done? In short, should she have ordered the company to close the mine, to shut it down temporarily, or to leave it open? "This decision dropped straight to the bottom line," Mukunda says. "Mining is a fixed-cost industry."
The situation made international headlines, and a quick web search will reveal what Carroll actually decided to do. But when he assigns the case in class, Mukunda asks students to resist the urge to Google. "If you know what happened then you lose the wonderful tension of the situation," he says. "And it's important for the students to feel that tension because someday they may have to face this kind of decision."Click on image to enlarge
Anglo American produces 40 percent of the world's platinum. Photo: Gautam Mukunda
Part B of the case, taught later in the course, tackles a question that confronts CEOs in many industries: How do you change the culture of an organization, let alone an industry? No easy feat, especially in this case.
"This was postapartheid South Africa," Mukunda says. "You had white supervisors who grew up under apartheid overseeing black mine workers. And there's a culture of command and control—some people would have said a culture of bullying. Not because Anglo was especially bad, but because that was the culture of mining."
The culture problem was partly linguistic. South Africa has 11 official languages: Xitsonga, Tshivenda, siSwati, Setswana, Sesotho, Sesotho sa Leboa, IsiZulu, IsiXhosa, IsiNdebele, English, and Afrikaans. (The national anthem incorporates 5 of them.) Among the miners, 9 of the languages are spoken natively; the supervisors speak the other 2. To bridge the gap, the mining industry long ago adopted the use of Fanagalo, a pidgin language developed in the nineteenth century so colonists could communicate with their servants.
The glitch with Fanagalo: "Because of the way it has evolved, it can only be used to give orders," Mukunda explains. "It's not really possible to have a dialogue in Fanagalo. So, how do you create a culture of collaboration and communication when the language has made that impossible?"
Carroll told the executives to figure it out.
As the case explains, Anglo hired an industrial theater group to act out various safety-related interactions between miners and supervisors, using large visuals to illustrate safety points—along with the idea that it was OK for workers to bring concerns to their supervisors. In addition, Carroll mandated that Anglo executives fly to Rustenburg and meet with every one of some 30,000 miners, encouraging them, sometimes through translators, to speak up about safety problems.
The case's Part C looks at the challenge of sustaining a culture change in the years leading up to Carroll's resignation in 2013. "They've addressed the safety issue and taken major steps to change the culture," Mukunda says. "And the next question is, are they done? And the answer, of course, is that no, they're not done. They've hardly begun."
Mukunda says the case illustrates what HBS Professor Rosabeth Moss Kanter describes as "bold strokes" and "long marches." As Kanter explained in a Harvard Business Review blog post, "Bold strokes are decisions that can be made at the top, implemented pretty quickly by command—acquisitions, divestitures, real estate purchases, layoffs. Long marches take time and the involvement of many people who must produce new elements and coordinate their actions before the change can be successful."A case about valor
While Carroll made a point of making sure her gender would not be the focus of the case, Mukunda certainly considered the fact that she was the first woman to take the helm at Anglo American—and took note of the singular challenges therein. Even before they started conducting interviews, the case writers' research uncovered blatant sexism directed toward Carroll during her tenure as chief executive. (Take for example the 2012 article Against the Current on the Boat of an Old Mining Boss, in which Business Day's Michael Bleby profiles Graham Boustred, a former deputy chairman of Anglo American whose vitriolic statements about Carroll spoke volumes.)
Mukunda says he and his students were primarily struck by Carroll's valor. When she visited the class, Carroll received a standing ovation. Several of the students were moved to tears. Many of them sent Mukunda thank-you notes for teaching the case.
"My research is in particular about leaders who do things that nobody else would have done," Mukunda says. "Great leadership requires courage, and Cynthia was courageous. Every single lever you could pull to change an organization, she pulled it. From a learning perspective, that's what makes this story so remarkable."
For Mukunda, the case changed his perspective on the world of business. When he first began teaching at HBS, he thought business schools sometimes valorized business leaders too much. Doctors and veterans were real heroes, he'd tell his students. Nobody dies in business, he'd say.
"Well, every time I told them that, I was wrong," Mukunda reflects. "This case taught me that. In the past, 50 people a year were dying working for this company."
Last year was the company's best in terms of safety performance, with the lowest injury frequency rates ever recorded, according to Anglo American Platinum's annual report, which was released on February 3. The number of fatalities was halved from 25 miners in 2007 to 12 in 2011, and then halved again in 2013. The goal is still zero harm.
"The people working in the mines are some of the poorest people on the planet," Mukunda says. "And now they're paid better, they're treated with more respect and dignity, their lives are better, and many of them are alive, all because of Cynthia Carroll. That's heroism. And that's a great story."About the author
Carmen Nobel is senior editor of Harvard Business School Working Knowledge.