This second part of a two-part case provides the epilogue to the story of BP's conflicts with Russian oil partners and underscores the importance of alliance management.
This note explains managing for stakeholders, an emerging view that, basically, businesses and the executives who manage them actually do and should create value for customers, suppliers, employees, communities, and financiers (or shareholders)--which contrasts with the dominant idea that businesses are to be managed solely for the benefit of shareholders. The note examines why the dominant model is no longer viable in today's business world and then goes on to define the basic ideas of managing for stakeholders (and why it solves some of the problems of the dominant model) and to sketch three primary arguments from ethical theory for adopting managing for stakeholders.
The difference between an effective and ineffective boardroom can be summarized in nine factors. While the existing corporate governance regime consists mostly of checklists, guidelines and best practices, the use of these tools and techniques results in liabilities of simplicity, misdiagnosis, sameness, and “the outsider.” The authors have responded to these liabilities by collecting feedback from 193 board members and have revealed five fundamental behaviours that must be developed for effective boardroom culture: a) a new approach on strategy-setting by the board; b) establishing support and respect among board members; c) encouraging director preparation; d) fostering a board that is open to change; and e) bolstering the active listening skills of directors. In addition, four secondary factors have been identified as playing an important supporting role: a) decision-making orientation; b) director satisfaction; c) curtailing rogue behavior; and d) director support for the chair, when deserved. The authors argue that the most effective corporate governance regime, based on board performance, has to originate with the board itself and the behaviours of its directors. Ultimately, the focus of all nine factors in boardroom culture is the performance of the board.
An effective board of directors is a prerequisite to a well-managed company. However, the components of an effective board are often neglected. Most boards lack a plan and instead conduct simple, routine board evaluations. Instead, they should determine key objectives and agree on what they want to accomplish in the future. They should not only provide corporate oversight, but should collaborate with management in running the company. Furthermore, consideration must be given to whether the roles of chairperson and CEO should be separated. Any board that creates a plan needs to hold itself accountable for achieving it. Unfortunately, many board members tell managers that performance and accountability are critical, but then bring a “tenure mentality” to the board. While both independence and diversity can be important considerations in the composition of a board, real performance and contribution are equally crucial. Ultimately, board culture must change. A board is not a dinner party; the shift from a friendly, collegial culture to a performance culture is essential.
Fire captains have only a few short minutes to pull together their team, develop an action plan, and communicate the situation to all team members. This article outlines some basic principles of firefighting and reveals lessons that business leaders can draw from firefighters regarding how to mobilize teams to address dynamic problems. 1) Simplicity: While problems are complex, the teaming process should be simple and the structure should provide all team members with a shared mental model. 2) Flexibility: This allows adjustments to a changing environment. 3) Standardization: Having a common approach to and understanding of team functioning is critical. 4) Modularity and Scalability: Allows leaders to add or scale down resources. 5) Unity of Command: One person takes on the leadership role. 6) Information Management: Business teams need to continuously collect information relevant to the problem. 7) Accountability: All functional areas and team members remain responsible for their actions. 8) Critique and Debrief: All team leaders must report on their performance, underline success factors, and reveal areas for improvement. 9) Interoperability and Integrated Communication: Allows team members from multiple levels and functions to work together on large-scale problems.
Innovative, high-performing workplace cultures enable business success. This article uses interviews with executives, researchers and authors to identify obstacles, enablers and solutions for workplace culture. Key obstacles to healthy workplace culture include poor leadership, employees’ selfish ambitions, and years of ingrained culture. Enablers of winning culture include employees believing firm success to be related to their own success, as well as open dialogue between leaders and employees. Leaders should define and share a clear picture of what the desired workplace should look like. They should also establish trust and embrace management training, while aligning culture, goals and performance. As this article explains, CEOs should understand the existing workplace culture and evaluate the tolerance for change; create a clear, shared vision of what they want the new culture to look like; be honest about why they are changing the culture, and about their own leadership abilities; take care of their team and ensure that team members feel connected; and build a strong management system and framework.
Inflation-adjusted CEO pay at Canadian big banks has nearly quadrupled since the early 1990s, leaving many observers outraged. The author suggests a benchmark for CEO pay at Canadian big banks that would effectively halt the ongoing pay escalation while allowing banks to stay competitive. He recommends that annual grant-date target total CEO pay should remain flat at $10 million until it is indexed to 100 times the median Canadian family income (i.e. until the median family income surpasses $100,000, from the current median of $70,000). This would not mean that actual realized pay would be flat at $10 million, as pay on incentives would continue to vary, and this benchmark could be implemented immediately without major pay cuts. It would also return CEO pay at the Canadian big banks to where it was at the end of the 1990s, before the dot-com bubble. Many boards, when setting executive pay, assume the transferability of executive talent as a reason to keep raising CEO pay. Yet opportunities for CEOs to switch from one CEO role to another are rare and often fraught with problems. In reality, the level of CEO pay matters less to many CEOs than their perception of that pay relative to their peers’ pay.
One effective technique that a company can use to encourage innovative thinking is to imagine what it might have to do if its assumptions (e.g. about customer needs, costs and product design) are no longer valid — that is, to use “contrarian assumptions.” This article proposes ten no-cost, contrarian ideas that firms and individuals can apply to improve innovation and productivity. 1) Innovation is something everyone should strive for in their products, services and activities. R&D teams may not be needed if innovation targets and key performance indicators are present. 2) A meeting agenda should not feature a list of topics, but a list of questions. 3) Meetings should be held in spaces that encourage innovation, not just in the boardroom. 4) Meetings should be run in a way that suits the specific problem. 5) Three feasible answers should always be proposed for a problem, rather than one. 6) The prevailing assumptions in an industry are only held dear by the current players. 7) Emotion, far from having no place in business, is the root of loyalty, service and gaining buy-in. 8) Perfect certainty cannot be acquired before taking action; hold only three meetings on a specific problem. 9) Reward not only successful innovations, but also successful efforts. 10) Innovation does not come primarily out of research labs.
If leadership is important to performance, then followership must be too, yet followership is a comparatively neglected concept. This article defines followership as the ability to take direction well, adhere to a program, be part of a team and deliver what is expected. In fact, how well followers follow is almost as important as how well leaders lead. The article identifies eight qualities of followers. 1) Judgment: The key is knowing the difference between a directive that a leader gives that is questionable and a directive that is truly wrong. 2) Work Ethic: This includes diligence, motivation, commitment, attention to detail, and effort. 3) Competence: Followers must be competent, although leaders are obligated to assure this. 4) Honesty: Followers owe leaders honest and forthright assessments, especially when a leader’s agenda seems flawed. 5) Courage: Followers need the courage to be honest. 6) Discretion: Gossiping and speaking inappropriately about work matters is unhelpful and often harmful. 7) Loyalty: This is particularly important when problems exist with leaders. 8) Ego Management: Followers need to remember that they are team players.
Governments around the world are strained financially, yet the potential of the crowd has begun to transform the way firms do business, the way ideas come to fruition, and the way social change is catalyzed. While governments increasingly offer web services that reflect citizens’ needs, there is great scope for the internal equivalent. Beyond better linkages between departments, there are at least three ways that governments can harness the wisdom of the crowd internally: a) pool resources, b) encourage agency-to-agency services and c) explore government-to-government services. Effective governments should also take steps to harness the crowd externally. Policymakers and public managers may consider the potential of the crowd in three key areas: a) the delivery base (e.g. Seniors Helping Seniors in the United States), b) the funding base (e.g. social finance) and c) the evidence base (e.g. crime mapping in Chicago). Ultimately, there are three ways to accelerate the diversification of delivery models, funding options, and evidence-based policy making: a) open up government, b) get better at working with the small details of citizens’ lives and c) trust the ability of citizens to make decisions and help shape the services they receive.
Strategic planning is among the most widely used and, often, abused management terms. This article attempts to show some of the misconceptions in the strategic planning process and to touch upon the strategic planning process in a corporate setting. It defines “strategic” and then presents a seven-part framework that practicing strategic planners can use to craft strategies for their organizations: 1) Get clarity on the boundary conditions and on the specific decision criteria upfront. 2) Conduct an industry analysis. 3) Conduct a status quo analysis to see where the firm might be in the near future in the absence of strategic planning. 4) Generate strategic options — often the most complicated step — by articulating the logic behind decisions without moving directly to the evaluation stage. 5) Assess and evaluate options using financial analysis and modern tools of sensitivity analysis and scenario planning. 6) Articulate a strategic roadmap, including goals, risks, returns, investments, etc. 7) Deploy the strategy, using a tool such as the Balanced Scorecard. The article finishes by explaining the difference between budgeting and strategic planning, terms often confused.
Austal, Ltd. was an Australian builder of high-speed passenger ferries. It had translated that expertise into a foothold in the defense market on the US Navy Littoral Combat Ship (LCS) program with an Alabama assembly facility. In January 2009 it had just completed the construction of its first LCS, but the global economic crisis put the company in a difficult position. Its commercial order book had dried up, yet it needed to preserve capabilities in its Australian workforce in now underutilized facilities near where its design capabilities were centered. Was this a short term problem, or had the commercial market changed forever? The (A) case examines possibilities that company might pursue to bridge the presumed gap until market conditions improve, and the (B) case recounts some of those choices. The case focuses on the question of the importance for Austal to maintain manufacturing close to its design center, and how will it do this as its center of gravity increasingly shifts to other regions?
Course Overview and Syllabus for RSME. This note outlines the learning objectives, course goals, module structure and class details along with the cases, dates and supplemental readings for the Running Small and Medium Size Enterprises (RSME), Winter Term 2013 course.
Managers at Cabot Corporation are faced with deciding the future of its fuel cell program. The (A) case recounts the view of the business manager and the technical project lead, and the (B) case describes the perspective of a senior manager who is the head of the New Business Segment. Used in combination, the cases explore these very different perspectives, the different levels of subject matter expertise brought to the table by each team member, and they highlight the criteria and decision-making process used by the management of the company.