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Critical initiatives stall for a variety of reasons--employee disengagement, a lack of coordination between functions, complex organizational structures that obscure accountability, and so on. To overcome such obstacles, managers must fundamentally rethink how work gets done. Most of the challenges stem from broken or poorly crafted commitments. That's because every company is, at its heart, a dynamic network of promises made between employees and colleagues, customers, outsourcing partners, or other stakeholders. Executives can overcome many problems in the short term and foster productive, reliable workforces for the long term by practicing what the authors call "promise-based management," which involves cultivating and coordinating commitments in a systematic way. Good promises share five qualities: They are public, active, voluntary, explicit, and mission based. To develop and execute an effective promise, the "provider" and the "customer" in the deal should go through three phases of conversation. The first, achieving a meeting of minds, entails exploring the fundamental questions of coordinated effort: What do you mean? Do you understand what I mean? What should I do? What will you do? Who else should we talk to? In the next phase, making it happen, the provider executes on the promise. In the final phase, closing the loop, the customer publicly declares that the provider has either delivered the goods or failed to do so. Leaders must weave and manage their webs of promises with great care--encouraging iterative conversation and making sure commitments are fulfilled reliably. If they do, they can enhance coordination and cooperation among colleagues, build the organizational agility required to seize new business opportunities, and tap employees' entrepreneurial energies.

Senior leadership teams whose members play complementary roles have been chronicled as far back as Homer's account of the Trojan War: Although King Agamemnon commanded the Greek army, Achilles, Odysseus, and Nestor each played a distinct role in defeating Troy. Today, complementary leadership structures are common and, in some cases, even institutionalized. Think of a CEO concerned mainly with external issues and a COO who focuses internally. The authors describe four kinds of complementarity: task, expertise, cognitive, and role. The two top executives at the software company Adobe Systems, for example, represent the second kind. As CEO, Bruce Chizen draws on his sales and marketing knowledge, while COO Shantanu Narayen adds his engineering and product development expertise. Roberto Goizueta, formerly the CEO of Coca-Cola, and Douglas Ivester, his COO (who later became CEO), were famous examples of the fourth type: Goizueta, the diplomat, maintained good relations with external stakeholders; Ivester, the warrior, drove the company to defeat the competition. Bringing together two or more people with complementary strengths can compensate for the natural limitations of each. But with the benefits comes the risk of confusion, disagreement about priorities, and turf battles. Leadership succession also presents substantial challenges, especially when a COO or president who has worked in a complementary fashion with the CEO moves into the top role. An organization's board of directors and CEO can manage the risks by fostering a shared vision, common incentives, communication, and trust. They can also ensure smooth succession processes in various ways, such as brokering a gradual transfer of responsibilities or allowing the CEO and the COO to share duties as long as they maintain the logic of complementarity.

How does a large multinational keep thousands of employees, operating in hundreds of countries, honest in a high-pressure business environment? As the chief legal officer at General Electric for nearly 20 years, Ben Heineman was part of the senior management group that sought to do just that--to make sure its executives and employees are moved to do the right thing as strongly as they are motivated to make their numbers. Heineman describes a set of systems that combine the communication of clear expectations with oversight, deterrence, and incentives. Nowhere are the expectations higher--and the sanctions more powerful--than for top executives. Heineman recounts example after example of senior leaders terminated for ethical lapses even when the business consequences of doing so were painful--and even when they had no direct knowledge of the violations occurring on their watch. To make expectations clear throughout the company, GE has systematically sought to set uniform standards that stay well ahead of current legal developments and stakeholders' changing attitudes about corporate accountability. Responsibility for implementing those standards, which are embedded in GE's operating practices, rests with the business leaders in the field. Oversight is both methodical and multifaceted. A host of auditing and assessment systems enables GE to compare the performance of its various business units against one another and against industry benchmarks. Perhaps the most powerful is the company's ombudsman system, which doesn't just allow but requires employees to lodge concerns. Failures to report into the system or up the line, or retaliation in any form, are firing offenses. The current intense focus on board-level governance has missed the point, Heineman argues. It is time to shift the debate from board oversight of the CEO to how top company leaders can most effectively infuse integrity at all levels of the corporation.

Few executives question the idea that by redesigning business processes--work that runs from end to end across an enterprise--they can achieve extraordinary improvements in cost, quality, speed, profitability, and other key areas. Yet in spite of their intentions and investments, many executives flounder, unsure about what exactly needs to be changed, by how much, and when. As a result, many organizations make little progress--if any at all--in their attempts to transform business processes. Michael Hammer has spent the past five years working with a group of leading companies to develop the Process and Enterprise Maturity Model (PEMM), a new framework that helps executives comprehend, formulate, and assess process-based transformation efforts. He has identified two distinct groups of characteristics that are needed for business processes to perform exceptionally well over a long period of time. Process enablers, which affect individual processes, determine how well a process is able to function. They are mutually interdependent--if any are missing, the others will be ineffective. However, enablers are not enough to develop high-performance processes; they only provide the potential to deliver high performance. A company must also possess or establish organizational capabilities that allow the business to offer a supportive environment. Together, the enablers and the capabilities provide an effective way for companies to plan and evaluate process-based transformations. PEMM is different from other frameworks, such as Capability Maturity Model Integration (CMMI), because it applies to all industries and all processes. The author describes how several companies--including Michelin, CSAA, Tetra Pak, Shell, Clorox, and Schneider National--have successfully used PEMM in various ways and at different stages to evaluate the progress of their process-based transformation efforts.

Most companies do a thorough job of financial due diligence when they acquire other companies. But all too often, deal makers simply ignore or underestimate the significance of people issues in mergers and acquisitions. The consequences are severe. Most obviously, there's a high degree of talent loss after a deal's announcement. To make matters worse, differences in decision-making styles lead to infighting; integration stalls; and productivity declines. The good news is that human due diligence can help companies avoid these problems. Done early enough, it helps acquirers decide whether to embrace or kill a deal and determine the price they are willing to pay. It also lays the groundwork for smooth integration. When acquirers have done their homework, they can uncover capability gaps, points of friction, and differences in decision making. Even more important, they can make the critical "people" decisions--who stays, who goes, who runs the combined business, what to do with the rank and file--at the time the deal is announced or shortly thereafter. Making such decisions within the first 30 days is critical to the success of a deal. Hostile situations clearly make things more difficult, but companies can and must still do a certain amount of human due diligence to reduce the inevitable fallout from the acquisition process and smooth the integration. This article details the steps involved in conducting human due diligence. The approach is structured around answering five basic questions: Who is the cultural acquirer? What kind of organization do you want? Will the two cultures mesh? Who are the people you most want to retain? And how will rank-and-file employees react to the deal? Unless an acquiring company has answered these questions to its satisfaction, the acquisition it is making will be very likely to end badly.

Galvatrens, a consumer products company in Houston, has a whistle-blower's lawsuit on its hands. Mike Fields, a former divisional sales manager, claims that he was wrongfully terminated for trying to report an illegal scheme designed by a colleague to inflate numbers. He'd left the company's COO a confidential voice mail about it, but the COO referred the matter to Mike's boss rather than following up on it himself. Mike says his boss subsequently told him his performance wasn't up to snuff and he'd have to accept a demotion and a transfer if he wanted to stay with the company--knowing that Mike, a divorced father with joint custody of his kids, couldn't leave town. How could all of this have happened? Chip Brownlee, the CEO of Galvatrens, had taken steps a while back to upgrade the company's procedures for uncovering misconduct and solving conflicts. He and the general counsel had instituted a number of changes, including a new open-door policy for raising workplace concerns. Although the policy encouraged employees to go to their immediate supervisors, it emphasized that they could approach any manager at any level for assistance, and it included a ban on retaliation against whistle-blowers. Chip and the board need to figure out why, with all those channels in place, only one person came forward with information about the sales scheme--and why that person ended up suing the company. How should Galvatrens strengthen its system for uncovering misconduct, and what roles should the board and management play?

Galvatrens, a consumer products company in Houston, has a whistle-blower's lawsuit on its hands. Mike Fields, a former divisional sales manager, claims that he was wrongfully terminated for trying to report an illegal scheme designed by a colleague to inflate numbers. He'd left the company's COO a confidential voice mail about it, but the COO referred the matter to Mike's boss rather than following up on it himself. Mike says his boss subsequently told him his performance wasn't up to snuff and he'd have to accept a demotion and a transfer if he wanted to stay with the company--knowing that Mike, a divorced father with joint custody of his kids, couldn't leave town. How could all of this have happened? Chip Brownlee, the CEO of Galvatrens, had taken steps a while back to upgrade the company's procedures for uncovering misconduct and solving conflicts. He and the general counsel had instituted a number of changes, including a new open-door policy for raising workplace concerns. Although the policy encouraged employees to go to their immediate supervisors, it emphasized that they could approach any manager at any level for assistance, and it included a ban on retaliation against whistle-blowers. Chip and the board need to figure out why, with all those channels in place, only one person came forward with information about the sales scheme--and why that person ended up suing the company. How should Galvatrens strengthen its system for uncovering misconduct, and what roles should the board and management play? Commenting on this fictional case study in R0704A and R0704Z are Stephen R. Hardis, the nonexecutive chairman of Marsh & McLennan; Hal Shear, the managing director of Board Assets; Mary Rowe, an ombudsperson for the Massachusetts Institute of Technology; and Jackson W. Robinson, the founder and president of Winslow Management.

Health insurer IFA and grocery chain ShopSense have formed an intriguing partnership, but it threatens to test customers' tolerance for sharing personal information. For years, IFA's regional manager for West Coast operations, Laura Brickman, had been championing the use of customer analytics--drawing conclusions about consumer behaviors based on patterns found in collected data. She came away from a meeting with the grocer's analytics chief, Steve Worthington, convinced that ShopSense's customer loyalty card data could be meaningful. In a pilot test, Laura bought ten years' worth of data from the grocer and found some compelling correlations between purchases of unhealthy products and medical claims. Now she has to sell her company's senior team on buying more information. Her bosses have some concerns, however. If IFA came up with proprietary health findings, would the company have to share what it learned? Meanwhile, Steve is busy trying to work out details of the sale with executives at ShopSense. Many have expressed support, but COO Alan Atkins isn't so sure: If customers found out that the store was selling their data, they might stop using their cards, and the company would lose access to vital information. Though CEO Donna Greer agrees, she knows that if things go well, it could mean easy money. How can the two companies use the customer data responsibly? Commenting on this fictional case study in R0705A and R0705Z are George L. Jones, the CEO of Borders Group; Katherine N. Lemon, an associate professor of marketing at Boston College; David Norton, the senior vice president of relationship marketing for Harrah's Entertainment; and Michael B. McCallister, the president and CEO of Humana.

This is an MIT Sloan Management Review article. The way a company views its markets determines what it decides to produce, how it will take those products to market, who it believes its competitors to be, and how large it believes its market opportunities are. Most companies segment along lines defined by the characteristics of their products (category or price) or customers (age, gender, marital status, and income level) since that is the most easily accessible type of data, but product and customer characteristics are poor indicators of customer behavior because that is not how markets are structured from the customer's perspective. Customers simply need to get things done, whether that is fixing their car, staving off boredom, or finding something fun to do with their kids. These situational needs for which customers are looking to "hire" products or services go unnoticed during traditional market research and segmentation. As a result, the true breadth of competition often goes unnoticed too. When companies understand what they are up against in the mind of the customer, they can piece together the real size of the market in which they compete. Using examples from the fast food industry, furniture retailing, the automobile industry, and health care, and citing a wide variety of companies and brands, including FedEx, Starbucks, Google, Blackberry, TurboTax, and OnStar, this article describes the benefits that executives can reap when they segment their markets by job (the risk and cost of innovation is minimized), the methods that those involved in marketing and new product development can use to identify the job-based structure of a market (interviews, surveys, observation, empathic and co-evolution techniques), and how the details of business plans can be made more coherent and focused when innovators understand the job to be done.

This is an MIT Sloan Management Review article. In recent years, companies have developed much more sophisticated strategic measurement systems, based on such tools as the balanced scorecard, key performance indicators, computerized dashboards, and the like. Nonetheless, there seems to be a widespread consensus that they measure too much, too little, or the wrong things, and that in any event, they don't use their metrics effectively. Why? On the basis of discussions with hundreds of managers, noted management thinker, author, and professor Michael Hammer (Hammer and Co.) concludes that the operational metrics that companies commonly use make little or no sense. In the core article of this special report, "The 7 Deadly Sins of Performance Measurement and How to Avoid Them," Hammer identifies seven common mistakes--the deadly sins--that seriously impede the relevance and usefulness of operating measures. He also offers managers some means for redemption. In addition, four prominent managers--Carole J. Haney (Boeing Co.), Anders Wester (Tetra Pak Group), Rick Ciccone (Procter & Gamble Co.), and Paul Gaffney (Desktone Inc.)--comment on Hammer's thesis through the prism of their own experience in the field and offer insights from their own philosophy of performance measurement.

This is an MIT Sloan Management Review article. What is the optimum growth rate to maximize total return to shareholders? This is a critical question facing both managers and investors. An answer is found in the concept of a company's growth corridor, which is set by the upper bounds of a financially sustainable growth rate and the lower bounds of the competitive growth rate. Using data from Fortune Global 500 companies, the authors find that those companies that grow within their respective growth corridor create above average total shareholder returns. Drawing examples from companies such as AES, BMW, Marks & Spencer, Ao, and Wal-Mart, they show how managers can identify their growth corridors, and how they can restore healthy and smart growth.

This is an MIT Sloan Management Review article. Faster time to market and shorter product life cycles are pushing companies to introduce new products more frequently. While new products can offer tremendous value, product introductions and transitions pose enormous challenges to managers. In studying product introductions, the authors found that a common handicap was the lack of a formal process to guide managerial decisions. Drawing from research at Intel and examples from General Motors and Cisco Systems, the article develops a process to facilitate decision making during new product transitions. The proposed process analyzes the risks impacting a transition, identifies a set of factors across departments tracking those risks, monitors the evolution of these factors over time, and develops playbook mapping scenarios of risks and responses. The process helps level expectations across the organization, lessens the chance and impact of unanticipated outcomes, and helps synchronize responses among different departments. It assists managers in designing and implementing appropriate policies to ramp up sales for new products and ramp down sales for existing products, balancing the supply and the demand for both so that combined sales can grow smoothly.

This is an MIT Sloan Management Review article. Even the most seasoned executives may have strongly opposing views about the wisest course of action for an organization, particularly given their diverse personal backgrounds or previous immersion in other corporate cultures. But such differences in approach don't necessarily lead to conflicts that are unproductive and damaging to an organization. To investigate such issues, the authors conducted a study of the organizational values (objectives that an individual or group believes are important in running a business, such as industry leadership, employee welfare, and profit maximization) of the top management teams in 31 companies. The authors investigated two specific types of team conflict: task and relationship. Task conflict is characterized by substantive, issue-related differences in opinion. This type of disagreement can be beneficial when it ensures that a greater number of possible solutions are explored. In contrast, relationship conflict--characterized by disagreements over personalized, individually oriented matters--is generally detrimental. It corrodes trust, hinders communication, slows the acceptance of ideas, and leads to isolation and politicization among group members. The study results showed that behavior is driven by perception rather than reality. Specifically, the greater the perceived difference in organizational values among members of a top management team and their CEO the greater the conflict. Interestingly, any actual dissimilarity was not a factor. Thus, the bottom line is that many top management teams are unnecessarily encountering difficulties because of members' faulty assumptions. To lessen this tendency, the authors advise companies to consider the following: establish an appropriate atmosphere for the team; because perceptions become reality, understand and manage them; investigate the gaps between perceptions and reality; and act decisively to correct gross misperceptions.

The Sulzberger family owns 20% of the New York Times Co. (NYT) but controls 70% of the board through a dual-class share structure. At the company's April 2006 annual shareholder meeting, Morgan Stanley Investment Management (MSIM) and other investors, holding 28% of the company's stock altogether, withheld their votes for the 30% of directors that they could vote on as a sign of protest against the management of Arthur Sulzberger, Jr. and the dual-class structure that protects him. MSIM later submitted a proposal urging the NYT to subject the dual-class structure to a vote. In evaluating the proposal, Sulzberger feels torn by his responsibilities to three different constituencies: his readers, his family, and all other NYT shareholders.     

Spreadsheet Supplement for case 207113

Faurecia is a world-class player in the automotive components sector, active in four main areas: automotive seating, vehicle interiors, exhaust systems and front-end module. With some 60,000 employees, 160 industrial sites and presence on four continents, Faurecia, is the third largest car seat supplier worldwide and among the twenty largest suppliers to the automotive industry. The ESMT case study focuses on the passenger car seating business unit (its largest in terms of revenues), analyzing the evolution of the supply chain for car seats, its market demand, the evolving business model imposed by carmakers and the impact it has on sourcing and manufacturing. The central issue of the case is how Faurecia should organize its new product development process in order to increase its performance and involve its customers and its suppliers earlier in the process. The case provides an opportunity to discuss how a large multinational company can leverage a changing market demand by tuning its business model and adapting its product offering while staying abreast of competition with increasingly innovative solutions.

Describes a series of three vignettes confronted by a fast-growing extended warranty services company, Extended Service Plans of America (ESPA). Doug Tudor had become the company's president after completing its acquisition for Asurion Corporation in June 2006, after a two-year search and negotiation process. Ninety-four days later, three situations occur simultaneously: one of Tudor's two top managers improperly leaks confidential information to the company's former owners; a terminated employee threatens to badmouth the company to its highest-profile customer; and new information regarding a VP's drinking and performance problems seems to call for urgent action. Allows students to understand how to deal with typical issues faced by small companies, including the dynamics of family-owned businesses, barriers faced when trying to professionalize management, and challenges faced by a new manager trying to build credibility in such an environment.

Deals with approaches to alleviating poverty and how firms, governments, and NGOs are able to work together to accomplish these goals.

Why do so many corporate initiatives, such as mergers and acquisitions, downsizings, or re-engineerings, look good on paper and turn out so poorly? This case offers the beginnings of one example of a corporate initiative: General Mills' acquisition of the Pillsbury subsidiary from Diageo PLC. Although General Mills financial advisors seemed to think that the balance sheets and products of the two corporations complemented each other and made a perfect match, the organizations were very different. Any shift in corporate control meant things were going to change. Kevin Wilde, the vice president and chief learning officer for General Mills, was part of the transition team responsible for helping the postacquisition integration go smoothly. The B case identifies several issues relevant to managing the integration and includes human resource and organizational information, marketing initiatives, strategy statements, plant closings, and operational changes. Together these cases were meant to motivate students with regard to the importance of understanding human systems and developing people management skills. As an introductory case to Leadership and Organizational Behavior courses, these cases encourage students to think about the skills required of them to be effective in human systems.

With Method standing at number seven on Inc. magazine's list of the 500 fastest-growing companies in 2006, cofounder Adam Lowry is searching for a biodegradable cleaning cloth to expand Method's line of "green" household products. Sustainable design principles have been a guiding force in Method's strategy, and being biofriendly is critical. So is sourcing in the United States. But only China can manufacture the corn-based cloth Lowry has in mind, and there is no way to certify that the product is free of genetically modified organisms. Lowry has to balance his firm's fundamental commitment to environmental sustainability against the fact that some retailers refuse to carry products containing GMOs.