The Investment Committee of New England Healthcare must decide how to invest three long-term investment pools: a long-term, endowment-type fund and two pension plans. In particular, the committee is evaluating whether the two pension funds--one is a "final salary" pension plan, the other a "cash balance" pension plan--should have special investment considerations due to the unique characteristics of these plans' liabilities.
Harvard professor Henry Chesbrough takes a look at leading-edge companies' latest moves to harvest ideas from outside and to benefit from sharing their own R&D with others--even with competitors.
In his book and TV series Commanding Heights, Daniel Yergin traces the arc of globalization, illuminating the vitality of market capitalism and the unpredictability and fragility of markets. In this conversation, he considers where the growth will be in the next 20 years, what oil companies know about managing through uncertain times, and the unexpected course that globalization is currently taking.
The same question posed on the web and in print can yield very different answers, dramatically distorting survey results and misleading management. But, as psychologist Palmer Morrel-Samuels demonstrates, the problems are readily fixed.
Sherron Watkins, who was selected as one of Time magazine's "Person of the Year" for her role as the whistleblower in the Enron scandal, presents her personal opinions on what went wrong at Enron as well as what is wrong with the whole system that this country's equity market relies on to function properly. Not only did Enron's management and consultants fail the company's shareholders and employees, but the market and watchdog agencies also failed to protect shareholder interests as well. The successful functioning of the capitalist system requires the exercise of moral as well as economic and political responsibility.
Organizational culture can be a powerful force that clarifies what's important and coordinates the work of employees without the costs and inefficiencies of close supervision. Culture also identifies an organization's distinctive competence to external constituencies. To employ culture effectively as a leadership tool, managers must recruit and select employees who fit the firm's culture, socialize and train employees to share the firm's values, and reward employees whose efforts reflect and reinforce the firm's culture. In addition, managers must both act and be perceived as acting in ways that are consistent with the values they want employees to share.
Value is often viewed in either economic or social terms. The Blended Value Proposition asserts that true value is nondivisible, consisting of a blend of economic, social, and environmental components. This perspective requires us to re-examine our understanding of the nature of capital, the methodology for calculating rates of real return to investors, and the role of for-profit and nonprofit organizations in the value creation process.
Corporate social responsibility (CSR) is not a new idea. However, CSR has never been more prominent on the corporate agenda than it is today. Examines the pressure for increased corporate attention to CSR and whether it is warranted and likely to be sustained. Differentiates between the business case for CSR and the normative case and concludes that individual firms must assess the extent to which the general business case for CSR applies to their specific circumstances. For some firms, CSR may be a major influence on corporate strategy.
Most companies believe that successful entry into lower income, emerging markets requires price slashing by subtracting product features. Moreover, companies generally believe that it is appropriate to appeal to potential customers strictly as consumers who want their needs satisfied. Demonstrates that companies can appeal to customers as productive agents who want to build and transform their lives. Offering customers productivity-enhancing systems coupled with culturally appropriate offerings allows companies to charge appropriately and succeed in lower income, emerging markets. Provides examples of such successful competitive differentiation in the global marketplace.
The vast majority of companies today use fixed performance contracts to drive performance improvement. The core elements of this contract are fixed annual targets reinforced by financial incentives. It is the intense pressure placed on meeting these contracts that leads to "gaming the numbers," as managers at every level of the firm fight tooth and nail to meet their targets and earn their bonuses. Not only is this process often stressful, but it can also lead to actions that destroy value for the firm. There are, however, a number of companies that have broken free from reliance on contracts and incentives. They have typically changed their evaluation and rewards processes from fixed to relative measures. Explores the problems of fixed contracts and how alternative rewards programs can be used to avoid gaming and provide managers with more honest numbers.
This is an MIT Sloan Management Review article. As competition intensifies and profit margins shrink, managers are under overwhelming pressure to create value. Traditional prescriptions such as cost reduction, reengineering, and outsourcing, although critically important, cannot solve the problem. The need to innovate is greater than ever, but the focus of innovation must change, say the authors. By synthesizing societal trends and early experimentation in companies such as General Motors, LEGO, and Medtronic, the authors paint a picture of the "next practices" of innovation in which the locus of value creation will inevitably shift from products and services to "experience environments." The intent of experience innovation is not to improve a product or service, per se, but to enable the co-creation of an environment in which personalized, evolvable experiences are the goal, and products and services are a means to that end. Profitable company growth results from individual consumers co-creating their own unique value, supported by a network of companies and consumer communities. From that perspective, say the authors, managers must learn to view existing and emerging technologies not as enhancers of products, features, and functions, but as facilitators of experiences. They offer examples of how technological capabilities such as miniaturization, networked communication, and adaptive learning are fostering experience innovation at companies such as Sony, Apple, Microsoft, and TiVo, illustrating their contention that technology will be the key facilitator of the nascent trend toward experience innovation.
This is an MIT Sloan Management Review article. Established businesses usually consider innovation as an attack to be met with defensive measures. And, indeed, disruptive technologies and business models have toppled many established industry leaders and will likely continue to do so. The real story behind disruptive innovation, however, is not one of destruction, but its opposite: In every industry changed by disruption, the net effect has been total market growth. Moreover, disruption can be a powerful avenue for growth through new market discovery for incumbents as well as for upstarts. There are several keys to the successful navigation of this growth path: to recognize that disruption is not an immediate phenomenon--it can take years and even decades before the upstart business encroaches heavily on the established market; to find new customers who are eager to be served by the disruption; and to build an organization that is capable of serving the new customers. The author explains each aspect in detail, drawing on extensive research involving online newspapers, minicomputers, cardiology, and semiconductors.
This is an MIT Sloan Management Review article. Modern models of leadership generally acknowledge that effective leaders must possess a number of seemingly contradictory qualities and skill sets. However, say the authors, inadequate performance is usually defined as displaying a lack of those qualities and skills; the idea that performance problems can just as easily spring from taking a given behavior to an extreme has received far less attention. Therefore, those models miss the chance to identify imbalance, which in the authors' view is the most common impediment to developing effective leadership. The authors view versatility, the absence of imbalance, as the key to high performance levels. Versatile leaders are able to continually adjust their behavior, deftly applying the right approach or blend of approaches to the right degree for the circumstances at hand. The authors' research, comprising comprehensive assessments of scores of senior managers, indicates that most managers, when presented with two opposing approaches, such as forceful vs. enabling leadership, will lean strongly toward one and be biased against the other. Employing a 360-degree survey they designed to measure such imbalance, called the Leadership Versatility Index, the authors then demonstrate clearly that high performance levels are correlated with balance and versatility. The challenge for the versatile leader is, thus, to meet what F. Scott Fitzgerald called "the test of a first-rate intelligence": to hold two opposed ideas in the mind at the same time and still retain the ability to function. The authors conclude with a discussion of how leaders can begin to improve themselves and those they manage. They identify a number of root causes of imbalance and suggest ways to moderate these factors.
This is an MIT Sloan Management Review article. People in organizations commonly talk about the energy associated with a project, team, or individual. But is energy related to performance or learning in organizations? And how is it created and transferred in groups? To answer those questions, the authors assessed energy within seven large groups in different organizations. They collected data that allowed them to map social networks and, more specifically, determine who the "energizers" and "de-energizers" were in those groups. Their analyses, supplemented by interviews with network members, also reveal why energy is important for performance and learning and how it is created (or destroyed) in organizations. And they gave rise to a set of questions that can help managers and the people they oversee increase the energy they generate in their interactions with colleagues. By mapping relationships, managers can see where energy is being created and where it is being depleted. They can then take action, encouraging simple changes in behavior to increase energy in places where its absence hinders the progress of important organizational initiatives.
This is an MIT Sloan Management Review article. People often talk about business competition as if it's a short race: Get to market first and you are bound to win. Indeed, the importance of first-mover advantage has been drummed into the heads of many business executives, and some have almost been brainwashed to think that speed is everything. But when a new technology like the Internet threatens to transform an industry, the companies that are quickest to respond aren't necessarily the ones that reap the greatest benefits. In fact, choosing a fast strategy can lock them into a set of decisions that actually hurt them in the long run. Instead, organizations that choose the right strategy for the entire race--both for the early and late stages--will come out ahead. The authors have found that companies that respond quickly by launching a spin-off usually have difficulty achieving true staying power in the market. For enduring success, incumbent companies are better off creating a group that is--or will eventually be--integrated within their organizations. Only then will they be able to tap fully into their numerous strengths and assets, leveraging their incumbent's advantage.
This is an MIT Sloan Management Review article. Having received a great deal of attention for decades now, customer satisfaction practices have become one of the core prescriptions for managers and organizations. Indeed, for many companies, customer satisfaction has become the guiding principle, as they increasingly initiate all manner of strategies and processes under its banner. But more and more, says Fredrik Dahlsten, these practices are losing their effectiveness for companies and their customers alike. Using qualitative research at Volvo Cars, the author illustrates how the interpretation of customer satisfaction can become skewed, employing rigorous and extensive customer satisfaction measurements, but measuring the wrong variables and using the information in mainly reactive ways. Many companies have only an intrinsic customer satisfaction focus--a product orientation based on attribute quality and a short-term internal perspective triggered by surveys and aimed at cost control. With an intrinsic focus, customer satisfaction is seen mostly as the absence of dissatisfaction. In contrast, an extrinsic customer satisfaction focus emphasizes finding new ways to increase the positive, emotional aspects of the customer experience over time. The author argues that managers who wish to climb out of their customer satisfaction rut must move beyond the mere measurement of quality, refocus their practices on the customer's actual experience, and formulate a comprehensive strategy for using that knowledge throughout the organization.
Lynne Tabor, an IT manager at manufacturing giant MMI, has a great team. Everyone works hard and gets along, except Max Dyer, a talented programmer who is terrible in the interpersonal skills department. Three years ago Tabor reworked his job after employees complained that he was unengaged and even belligerent. Since then, he's been a solid worker, putting in extra hours and meriting good performance evaluations. But recently, Dyer's coworkers have noticed a change for the worse in him. Everyone at MMI is on edge after a round of layoffs. Reports of a workplace shooting in Seattle are all over the news. One coworker finds Max pinning up a certificate from a shooting range in his cubicle, and another worries that they will all end up as statistics of office violence. They want to know how Tabor plans to ensure their safety. Dyer thinks his coworkers are out to get him. They believe he fits the profile of a man on the edge. But what can Tabor do about an employee who has never made so much as a veiled threat to anyone? In R0307A and R0307Z, commentators James Alan Fox, a professor of criminal justice at Northeastern University; Steve Kaufer, a cofounder of the Workplace Violence Research Institute; Christine Pearson, a management professor at Thunderbird; Christine Porath, a professor of management and organizational behavior at the University of Southern California's Marshall School of Business; and Ronald Schouten, the director of the Law and Psychiatry Service at Massachusetts General Hospital, offer advice on this fictional case study.
For much of the 20th century, labor and capital fought bitterly for control of the industrialized economy. The titans of industry ultimately won a resounding victory over the unions, but the story doesn't end there. In today's economy, value is largely the product of knowledge and information. Companies cannot generate profits without the ideas, skills, and leadership capabilities of knowledge workers. It's these factors--not technologies, not factories, and certainly not capital--that give the most successful companies their unique advantages. As knowledge workers come to realize this, and see that the demand for their talent outstrips the supply, they are steadily wresting more and more of the profits from shareholders. This time the battle is between the sources of capital and the producers of value, and how it will end is far from clear. With this new battle, we're also witnessing a fundamental change in the political alignment of capital. The Left is now siding with "the common shareholder" against the well-compensated top tier of the labor pool. Shareholders seeing an unprecedented proportion of the return on their investments siphoned off to employees may well ask, Is there no end to it? The growing tensions between shareholders and managers cannot be ignored, and capitalism is at a crossroads--again.