It's common sense that managers should deliver on promises and demonstrate the values they preach, but what's the real cost when bosses fail to "walk the talk?" A hotel-industry study shows a stunning association between profitability and how workers perceive their managers' behavioral integrity.
Women tend to be less enthusiastic than men about hierarchies, says Kim Campbell, Canada's first female prime minister and minister of national defense, and that can be good for business. When women join leadership teams, hierarchies become less rigid and can lose their power to protect bad leaders.
A temporary discount can generate a lot of customer excitement, but the revenue effects can be short lived. Price promotions commonly increase manufacturer revenue and depress retailer revenue in the short term but have no persistent effect. Promotions are tactical, not strategic, and they need to be managed that way.
Groom your executives to leave--enhance the skills that make them attractive in the marketplace--and they'll remain committed to their jobs. This counterintuitive finding, based on a study of 400 midlevel executives, has an important corollary: Fall short on your promises to develop executives' employability, and loyalty will diminish.
Paragon Tool, a thriving machine tool company in an increasingly tough industry, has been pouring money into growth initiatives. These efforts have shrunk the company's margins, but CEO Nikolas Anaptyxi believes they'll provide the foundation for a profitable future. Now Paragon is weighing the acquisition of MonitoRobotics, a company with proprietary technology for monitoring the functioning of robotics equipment. The acquisition, which would nearly double Paragon's revenue, could help transform Paragon from a slow-growth manufacturer into a high-growth technology company, bolster its struggling services business, and ultimately allow it to set the standard for how machines communicate with one another. At least, that's what the CEO thinks. Paragon's CFO, William Littlefield, isn't so sure. He says the move would introduce all the risks that come with acquisitions and put further downward pressure on profits. Paragon's management team is divided, and Anaptyxi must decide how to move forward. This case study explores growth issues that companies in many industries currently face. The specific dilemma here is, How far should Paragon go in sacrificing profits up front with the aim of generating real profits down the line? In R0209A and R0209Z, commenting on this fictional case are Rand Araskog, former CEO of ITT; Ken Favaro, CEO of consulting firm Marakon Associates; W. Brian Arthur, an economist known for his work on the idea of increasing returns; and Jay Gellert, CEO of Health Net, a managed-health-care company.
By stimulating commerce and development at the bottom of the economic pyramid, multinationals could radically improve the lives of billions of people and help create a more stable, less dangerous world. Achieving this goal does not require MNCs to spearhead global social-development initiatives for charitable purposes. They need only act in their own self-interest. How? The authors lay out the business case for entering the world's poorest markets. Fully, 65% of the world's population earns less than $2,000 per year--that's 4 billion people. But despite the vastness of this market, it remains largely untapped. The reluctance to invest is easy to understand, but it is, by and large, based on outdated assumptions of the developing world. Although individual incomes may be low, the aggregate buying power of poor communities is actually quite large, representing a substantial market in many countries for what some might consider luxury goods like satellite television and phone services. Because these markets are in the earliest stages of economic development, revenue growth for multinationals entering them can be extremely rapid. Business leaders must confront their own preconceptions--particularly about the value of high-volume, low-margin businesses--for companies to master the challenges or reap the rewards of these developing markets.
When struggling companies look for a new chief executive today, the one quality they prize above all others is charisma. But once they've recruited a larger-than-life leader, they often find that their troubles only get worse. Indeed, as the author's new research painfully reveals, the widespread belief in the powers of charismatic CEOs can be problematic. Why? First, Khurana says, there's no conclusive evidence that charismatic leadership affects an organization's performance. Second, the insistence on finding a charismatic leader, combined with the undefinable nature of charisma, results in selection processes that are overly conservative and even irrational. Boards end up considering only candidates who have already achieved the rank of CEO or president at a high-performing, high-profile company, even if they are not right for the job. Third, charismatic leaders deliberately destabilize organizations. This can result in a more vibrant company, as it did at General Electric during Jack Welch's tenure, but it can also leave a troubled legacy for the organization to overcome, as GE, Ford, and Enron have all found. Faith in a company, a product, or an idea can unleash tremendous innovation and productivity.
Your company knows its investors pretty well, right? But do you know how they'll react to any particular strategic decision your company might make? Probably not. The consequences of not knowing can derail your strategy, leading you to miss out, for example, on acquisition opportunities. Authors Coyne and Witter claim that in most companies, the decisions of fewer than 100 investors typically account for about 70% of the changes in a company's share price. They also claim that a new approach to investor relations, drawing on the one used to manage customer relations, can help companies paint a more complete picture of their investors' behaviors and motivations. Investor-based finance first has you identify four groups of actual and potential key investors: large shareholders that suddenly become active, past shareholders that seem to be buying back in, smaller shareholders you think are poised to increase their holdings, and potential shareholders that own shares in comparable companies but not yours. By analyzing the patterns in the buying and selling behaviors of investors in those groups, you can ascertain which investors have the power to move your share price. Once you've determined who your key investors are, compare their horizon of analysis (long, medium, or short term) and the dominant content they analyze (information about organizational structure, strategy, or financials). In doing so, you'll come to understand what's most important to those investors, and you'll be able to predict how they'll likely react to different kinds of news and thus buy or sell shares in your company.
Traditionally, the people responsible for positioning brands have concentrated on the differences that set each brand apart from the competition. But emphasizing differences isn't enough to sustain a brand against competitors. Managers should also consider the frame of reference within which the brand works and the features the brand shares with other products. Asking three questions about your brand can help: Have we established a frame? A frame of reference signals to consumers the goal they can expect to achieve by using a brand. Are we leveraging our points of parity? Certain points of parity must be met if consumers are to perceive your product as a legitimate player within its frame of reference. Are the points of difference compelling? A distinguishing characteristic that consumers find both relevant and believable can become a strong, favorable, unique brand association, capable of distinguishing the brand from others in the same frame of reference.
Most executives know how pricing influences the demand for a product, but few of them realize how it affects the consumption of a product. In this article, the authors argue that the relationship between pricing and consumption lies at the core of customer strategy. The extent to which a customer uses a product during a certain time period often determines whether he or she will buy the product again. So pricing tactics that encourage people to use the products they've paid for help companies build long-term relationships with customers. The link between pricing and consumption is clear: People are more likely to consume a product when they are aware of its cost. But for many executives, the idea that they should draw consumers' attention to the price that was paid for a product or service is counterintuitive. Companies have long sought to mask the costs of their goods and services to boost sales. And rightly so--if a company fails to make the initial sale, it won't have to worry about consumption. The problem is that masking how much a buyer has spent on a given product decreases the likelihood that the buyer will actually use it.
In the wake of meltdowns at WorldCom, Tyco, and Enron, enormous attention has been focused on the companies' boards. It seems inconceivable that business disasters of such magnitude could happen without gross or even criminal negligence on the part of board members. And, yet, a close examination of those boards reveals no broad pattern of incompetence or corruption. In fact, they followed most of the accepted standards for board operations: Members showed up for meetings; they had money invested in the company; audit committees, compensation committees, and codes of ethics were in place; and the boards weren't too small or too big, nor were they dominated by insiders. Corporate governance expert Jeffrey Sonnenfeld suggests that it's time for some new thinking about how corporate boards operate and are evaluated. He proposes thinking not only about how to structure the board's work but also about how to manage it as a social system. Good boards are, very simply, high-functioning work groups. They're distinguished by a climate of respect, trust, and candor among board members and between the board and management. Information is shared openly and on time; emergent political factions are quickly eliminated. Members feel free to challenge one another's assumptions and conclusions, and management encourages lively discussion of strategic issues. Directors feel a responsibility to contribute meaningfully to the board's performance. In addition, good boards assess their own performance, both collectively and individually.
In an ideal world, a subordinate would accept critical feedback from a manager with an open mind. He or she would ask a few clarifying questions, promise to work on certain performance areas, and show signs of improvement over time. But things don't always turn out that way. Fearing that the employee will become angry and defensive, the boss all too often inadvertently sabotages the meeting by preparing for it in a way that stifles honest discussion. This unintentional--indeed, unconscious--stress-induced habit makes it difficult to deliver corrective feedback effectively. Insead professor Jean-Francois Manzoni says that by changing the mind-set with which they develop and deliver negative feedback, managers can increase their odds of having productive conversations without damaging relationships. Manzoni describes two behavioral phenomena that color the feedback process--the fundamental attribution error and the false consensus effect. Managers tend to frame difficult situations and decisions in a way that is narrow (alternatives aren't considered) and binary (there are only two possible outcomes--win or lose). And during the feedback discussion, managers' framing of the issues often remains frozen. Manzoni says that bosses need to consider an employee's circumstances rather than just attribute weak performance to a person's disposition.
Paragon Tool, a thriving machine tool company in an increasingly tough industry, has been pouring money into growth initiatives. These efforts have shrunk the company's margins, but CEO Nikolas Anaptyxi believes they'll provide the foundation for a profitable future. Now Paragon is weighing the acquisition of MonitoRobotics, a company with proprietary technology for monitoring the functioning of robotics equipment. The acquisition, which would nearly double Paragon's revenue, could help transform Paragon from a slow-growth manufacturer into a high-growth technology company, bolster its struggling services business, and ultimately allow it to set the standard for how machines communicate with one another. At least, that's what the CEO thinks. Paragon's CFO, William Littlefield, isn't so sure. He says the move would introduce all the risks that come with acquisitions and put further downward pressure on profits. Paragon's management team is divided, and Anaptyxi must decide how to move forward. This case study explores growth issues that companies in many industries currently face. The specific dilemma here is, How far should Paragon go in sacrificing profits up front with the aim of generating real profits down the line? In R0209A and R0209Z, commenting on this fictional case, are Rand Araskog, former CEO of ITT; Ken Favaro, CEO of consulting firm Marakon Associates; W. Brian Arthur, an economist known for his work on the idea of increasing returns; and Jay Gellert, CEO of Health Net, a managed-health-care company.
Paragon Tool, a thriving machine tool company in an increasingly tough industry, has been pouring money into growth initiatives. These efforts have shrunk the company's margins, but CEO Nikolas Anaptyxi believes they'll provide the foundation for a profitable future. Now Paragon is weighing the acquisition of MonitoRobotics, a company with proprietary technology for monitoring the functioning of robotics equipment. The acquisition, which would nearly double Paragon's revenue, could help transform Paragon from a slow-growth manufacturer into a high-growth technology company, bolster its struggling services business, and ultimately allow it to set the standard for how machines communicate with one another. At least, that's what the CEO thinks. Paragon's CFO, William Littlefield, isn't so sure. He says the move would introduce all the risks that come with acquisitions and put further downward pressure on profits. Paragon's management team is divided, and Anaptyxi must decide how to move forward. This case study explores growth issues that companies in many industries currently face. The specific dilemma here is, How far should Paragon go in sacrificing profits up front with the aim of generating real profits down the line? In R0209A and R0209Z, commenting on this fictional case are Rand Araskog, former CEO of ITT; Ken Favaro, CEO of consulting firm Marakon Associates; W. Brian Arthur, an economist known for his work on the idea of increasing returns; and Jay Gellert, CEO of Health Net, a managed-health-care company.
Focuses on modifying operations to increase profitability at an upscale senior care facility in California. Jennifer Raiser, president of Raiser Senior Services, opened the Stratford in 1992 as a high-end, continuing-care retirement community. Ten years later, the Stratford was known as one of the most prestigious senior care communities in the Bay Area, but management struggled to keep the facility from losing money each year. Raiser and her management team were finding it difficult to raise the monthly fees each year to match the increasing costs of providing services to the aging residents. As a result, the team needed to find ways to take costs out of running the business. Contains an in-depth review of the operations associated with the primary expense categories--health care and dining services--allowing students to find specific opportunities for savings.