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Improving Work Conditions in a Global Supply Chain
This is an MIT Sloan Management Review article. Many multinational companies attempt to monitor working conditions in suppliers' factories in developing countries through corporate codes of conduct, along with monitoring to determine compliance. There is considerable debate about the merits of this approach. As part of a larger research project on globalization and labor standards, the authors conducted a comparison of two Mexican garment factories that supply Nike. Both plants (referred to as Plant A and Plant B) received very similar scores on a Nike factory audit, and both manufacture T-shirts for Nike and other companies. Workers in both plants are unionized. However, a closer examination reveals that working conditions in the two factories are in some respects quite different. Compared to workers in Plant B, those in Plant A earn more per week, report greater job satisfaction, and have greater say in workplace decisions. Furthermore, in Plant A overtime is voluntary and kept within Nike workweek limits, but in Plant B both forced overtime and excessive overtime occur. What factors contribute to these differing working conditions? The authors conclude that, while there are a number of differences between the factories, a key variable is the way each plant is managed. Plant A has made the transition to lean manufacturing and, in the process, workers received training and were empowered to participate in more decisions on the shop floor. Quality, worker productivity, and worker salaries all increased at Plant A. The authors conclude that global brands could help improve working conditions in supply chain factories by working with suppliers to help them introduce new management systems. -
Continuing Power of Mass Advertising
This is an MIT Sloan Management Review article. For several years now, marketers have been urged to embrace one-to-one marketing and to offer micro-segmented consumers customized products and services through targeted outreach. While the "market of one" approach can pay off, say the authors, it requires a significant upfront investment, including: implementing customer relationship management software applications; filtering, enhancing, and cleaning customer data; and personalizing interactions (e-mail, billing, offers, and so on). These activities take time and the coordination of multiple parts of the organization (marketing, customer service, sales, information technology), which can be daunting for companies trying to react quickly to a changing environment. In addition, those systems have often produced disappointing results because their use was not well integrated with corporate strategy. Also, micro-marketing strategy, on its own, is too narrow. Companies still need to reach broad groups of people with messages that are not dependent on an individual's decision to open an envelope (whether virtual or physical), pick up the phone, or click on a box. But broad-based, broadcast media is ineffective and expensive. Fortunately, there are alternative solutions, such as one-to-one targeting and the broadcasting of 30-second television spots. The author's research on trends in marketing spending and consumer attitudes about advertising reveals four strategies available to companies that want to reach broad groups of people without breaking their marketing budget. The strategies are liberally illustrated with examples from Nike, Microsoft, UBS, Delta, Sony, Procter & Gamble, Citibank, Nextel, Honda, Nokia, and McDonald's, among others. -
Decision Downloading
This is an MIT Sloan Management Review article. Organizations often try to include as many people as possible in the decision-making process, but sometimes it's just not possible to involve anyone beyond a small group. The need for confidentiality and speed are constraints, as is the sheer difficulty of polling an entire organization regarding decisions that will affect an entire company. Managers or executives must sometimes "download" a decision to their people after the fact--and this is where many a decision crashes on rocky shoals. Mergers fail as key employees leave and others resist change; union contracts are rejected after months of negotiation; and changes in employee benefits meet with strident protest. What's behind these failures, and what can be done to avert them? The authors lay out reasons for ineffective downloading: a disconnect between the two sides as the negotiating parties fails to see the negatives of a decision; a failure to clarify responsibilities, which results in rumor and word-of-mouth being the primary channels of communication; a desire to inform people quickly--which often means superficially; and a paternalistic desire to protect members of an organization when people would prefer to just hear the truth. Against this record of mistakes and misguided notions, the authors set their four-stage process for robust decision downloading. Their process is informed by survey research of several hundred employees in a variety of organizations, as well as interviews with dozens of executives. -
Sustainability Through Servicizing
This is an MIT Sloan Management Review article. As companies are increasingly taking on the challenge of global sustainable development, they are forced to rethink the standard business plan based on increasing consumption of products. Drawing from case studies involving Gage Products, PPG Industries Inc., and Xerox Corp., the author shows that some companies are already building their business plans around services and a few key products, and that they are seeing benefits both to the bottom line and in customer retention and acquisition. The author identifies six keys to the new model: building on existing service strengths, redesigning contracts to redefine the basis of profit to create win-win situations when product consumption is reduced and services are improved, communicating the new business plan to current customers, changing sales incentives, acquiring new organizational skills to ensure a better understanding of consumption, and learning to highlight the potential benefits of taking steps to improve the environment. -
Time for Design
Cities, buildings, products, services, systems, and strategies all face the same need to combine expertise, insight, engagement, and adaptation. As a result, it is time to confront the tensions of design, say the authors, who then define three approaches to design: the formulaic approach, exemplified by planned-city Brasilia; the visionary approach, exemplified by IKEA; and the evolutionary approach, exemplified by Linux. Along the way they show that design is not just a metaphor for management, but the very essence of it. -
The End of Exponential Growth: Why Real Growth May End Soon
Exponential economic growth in the western world began in the late-18th century and has continued, more or less unabated, until the present. However, the author warns that anyone who believes that the future will be a straightforward continuation of the past must address the fact that seven key drivers of past growth in industrialized countries are showing signs of saturation or exhaustion. Only one of the seven is a viable driver of future economic growth: increasing the technological efficiency of converting resource inputs into 'useful work' and power. The author also looks ahead to the next century and outlines the key obstacles to sustainability by 2100, outlining some of the harsh realities that our mistreatment of the environment will reap. -
The China Riptide: Threat or Opportunity?
Retailers live or die by a simple creed: stock products that sell, and don't stock products that don't sell. As North American and European companies source more of their goods from China, the risk of getting this wrong increases dramatically. Some companies - including Wal-Mart, Home Depot and Toyota -- are having second thoughts about their China-sourcing strategies, and are either reworking their North American logistics networks or even retreating from China. The authors argue that a firm focus on reducing time and variability in the China-anchored supply chains serving North America and Europe can help companies dramatically reduce their costs, improve their margins, and build competitive advantage. They show why North American and European companies should be looking closer to home, where the cost-of-labor penalty (relative to labor rates in China) is more than compensated for by superior supply-chain performance that is significantly less variable and virtually unaffected by port and surface-capacity constraints. -
NeuroEconomics: How Neuroscience Can Inform Economics
In the last two decades, Behavioral Economics (the importation of ideas from Psychology to Economics) has become a prominent fixture on the intellectual landscape. In turn, it has spawned the field of 'Neuroeconomics', whereby ideas from Neuroscience are imported into Economics. The study of the human brain and nervous system is beginning to allow for direct measurement of thoughts and feelings; and this, in turn, is challenging our understanding of the relation between mind and action, leading to new theoretical constructs and calling old ones into question. The authors describe the findings to date, covering automatic vs. controlled processes and cognitive vs. affective processes, and their general implications for Economics. -
Designing the Thinker of the Future
Yesterday's approaches to problem solving just won't cut it in today's complex environment, say the authors. The high-value decision maker of the future will be characterized by a capacity for Integrative Thinking. They show that Integrative Thinking stands not as an enemy to traditional business disciplines, on whose shoulders it can be seen to squarely rest, but rather as a constructive challenge to produce more adaptive-reasoning patterns, more valuable instruments of prediction, and a more inclusive approach to inter-disciplinary dialogue. The new model for business education they argue for acknowledges the vital role of integration in modern business, stressing the virtues of 'nimble mindedness', 'big mindedness' and 'tough mindedness' over the seductive trap of narrow perfectionism. -
Bank Reform in China: What it Means for the World
A combination of sheer size and spectacular growth has China on course to become the world's largest economy by 2020. It is also the world's second-largest recipient of foreign direct investment, behind the U.S. Continued balanced growth for China will require an increasingly-sound financial system, says the author, who explains the consequences of China's forthcoming banking and financial sector reform and why such reform presents a unique and crucial challenge within China's economic transition from central planning to a market economy. -
Moments of Truth: Global Executives Talk About the Challenges That Shaped Them as Leaders
When did you realize you had the right stuff to lead? HBR's editors put that question to a group of business leaders representing different industries, nationalities, executive tenures, and company sizes. The answers were as diverse as the group itself. Nokia CEO Olli-Pekka Kallasvuo recounts a lesson in humility, learned when he was a young CFO and it wasn't clear each month that the company would be able to pay salaries the next. Gary Jackson describes the challenge of preserving his military-training company's high-energy culture, largely through his own example. Arthur Gensler's story highlights the importance of vision in growing his architectural firm and refusing to be constrained by the traditions of a hidebound industry. A world away, Alexander Cummings tells the harrowing tale of withstanding quarter after quarter of declining margins and market share--and intense pressure from his boss, and his boss's boss--because he had conviction that a controversial decision he made at Coca-Cola Africa would prove right in the end. Roche CEO Franz Humer recounts how he learned to trust his intuition, particularly when the rest of his organization was inclined to see only the downside risk in a deal. Other leaders' moments of truth involved tests of still different qualities. Duleep Aluwihare of Ernst & Young in Poland learned from painful encounters with a mentor in his old firm, Arthur Andersen, that he must change his leadership style. Sergey Petrov, the founder of Russia's largest car importer, developed the perspective required of a leader when he was a young dissident held for questioning by the KGB. Finally, Alan Klapmeier of private-aircraft manufacturer Cirrus Design tells of the passion required to bring something truly innovative to market despite recalcitrant board members and the catastrophic loss of a prototype. -
How Leaders Create and Use Networks
Most people acknowledge that networking is an essential activity for an ambitious manager. Indeed, it's a requirement even for those focused simply on doing their current jobs well. For some, this is a distasteful reality. Working through networks, they believe, means relying on "who you know" rather than "what you know"--a hypocritical, possibly unethical, way to get things done. But even people who understand that networking is a legitimate and necessary part of their jobs can be discouraged by the payoff--because they are doing it in too limited a fashion. On the basis of a close study of 30 emerging leaders, the authors outline three distinct forms of networking. Operational networking is geared toward doing one's assigned tasks more effectively. It involves cultivating stronger relationships with colleagues whose membership in the network is clear; their roles define them as stakeholders. Personal networking engages kindred spirits from outside an organization in an individual's efforts to learn and find opportunities for personal advancement. Strategic networking puts the tools of networking in the service of business goals. At this level, a manager creates the kind of network that will help uncover and capitalize on new opportunities for the company. The ability to move to this level of networking turns out to be a key test of leadership. Companies often recognize that networks are valuable, and they create explicit programs to support them. But typically these programs facilitate only operational networking. Likewise, industry associations provide formal contexts for personal networking. The unfortunate effect is to give managers the impression that they know how to network and are doing so sufficiently. A sidebar notes the implication for companies' leadership development initiatives: that teaching strategic networking skills will serve their aspiring leaders and their business goals well. -
Becoming the Boss
Even for the most gifted individuals, the process of becoming a leader is an arduous, albeit rewarding, journey of continuous learning and self-development. The initial test along the path is so fundamental that we often overlook it: becoming a boss for the first time. That's a shame, because the trials involved in this rite of passage have serious consequences for both the individual and the organization. For a decade and a half, the author has studied people -- particularly star performers -- making major career transitions to management. As firms have become leaner and more dynamic, new managers have described a transition that gets more difficult all the time. But the transition is often harder than it need be because of managers' misconceptions about their role. Those who can acknowledge their misconceptions have a far greater chance of success. For example, new managers typically assume that their position will give them the authority and freedom to do what they think is best. Instead, they find themselves enmeshed in a web of relationships with subordinates, bosses, peers, and others, all of whom make relentless and often conflicting demands. "You really are not in control of anything," says one new manager. Another misconception is that new managers are responsible only for making sure that their operations run smoothly. But new managers also need to realize they are responsible for recommending and initiating changes--some of them in areas outside their purview--that will enhance their groups' performance. Many new managers are reluctant to ask for help from their bosses. But when they do ask (often because of a looming crisis), they are relieved to find their superiors more tolerant of their questions and mistakes than they had expected. -
Courage as a Skill
A division vice president blows the whistle on corruption at the highest levels of his company. A young manager refuses to work on her boss's pet project because she fears it will discredit the organization. A CEO urges his board, despite push back from powerful, hostile members, to invest in environmentally sustainable technology. What is behind such high-risk, often courageous acts? Courage in business, the author has found, seldom resembles the heroic impulsiveness that sometimes surfaces in life-or-death situations. Rather, it is a special kind of calculated risk taking, learned and refined over time. Taking an intelligent gamble requires an understanding of what she calls the "courage calculation": six discrete decision-making processes that make success more likely while averting rash or unproductive behavior. These include setting attainable goals, tipping the power balance in your favor, weighing risks against benefits, and developing contingency plans. Goals may be organizational or personal. Tania Modic had both types in mind when, as a young bank manager, she overstepped her role by traveling to New York -- on vacation time and on her own money -- to revitalize some accounts that her senior colleagues had allowed to languish. Her high-risk maneuver benefited the bank and gained her a promotion. Lieutenant General Claudia J. Kennedy weighed the risks and benefits before deciding to report a fellow officer who had plagiarized a research paper at a professional army school. In her difficult courage calculation, loyalty to army standards proved stronger than the potential discomfort and embarrassment of "snitching" on a fellow officer. When the skills behind courageous decision making align with a personal, organizational, or societal philosophy, managers are empowered to make bold moves that lead to success for their companies and their careers. -
CEO's Second Act
When a CEO leaves because of performance problems, the company typically recruits someone thought to be better equipped to fix what the departing executive couldn't--or wouldn't. The board places its confidence in the new person because of the present dilemma's similarity to some previous challenge that he or she dealt with successfully. But familiar problems are inevitably succeeded by less familiar ones, for which the specially selected CEO is not quite so qualified. More often than not, the experiences, skills, and temperament that yielded triumph in Act I turn out to be unequal to Act II's difficulties. In fact, the approaches that worked so brilliantly in Act I may be the very opposite of what is needed in Act II. The CEO has four choices: refuse to change, in which case he or she will be replaced; realize that the next act requires new skills and learn them; downsize or circumscribe his or her role to compensate for deficiencies; or line up a successor who is qualified to fill a role to which the incumbent's skills and interests are no longer suited. Hewlett-Packard's Carly Fiorina exemplifies the first alternative; Merrill Lynch's Stanley O'Neal the second; Google's Sergey Brin and Larry Page the third; and Quest Diagnostics' Ken Freeman the fourth. All but the first option are reasonable responses to the challenges presented in the second acts of most CEOs' tenures. And all but the first require a power of observation, a propensity for introspection, and a strain of humility that are rare in the ranks of the very people who need those qualities most. There are four essential steps executives can take to discern that they have entered new territory and to respond accordingly: recognition that their leadership style and approach are no longer working; acceptance of others' advice on why performance is faltering; analysis and understanding of the nature of the Act II shift; and, finally, decision and action. -
Firing Back: How Great Leaders Rebound After Career Disasters
Among the tests of a leader, few are more challenging--and more painful--than recovering from a career catastrophe. Most fallen leaders, in fact, don't recover. Still, two decades of consulting experience, scholarly research, and their own personal experiences have convinced the authors that leaders can triumph over tragedy--if they do so deliberately. Great business leaders have much in common with the great heroes of universal myth, and they can learn to overcome profound setbacks by thinking in heroic terms. First, they must decide whether or not to fight back. Either way, they must recruit others into their battle. They must then take steps to recover their heroic status, in the process proving, both to others and to themselves, that they have the mettle necessary to recover their heroic mission. Bernie Marcus exemplifies this process. Devastated after Sandy Sigoloff fired him from Handy Dan, Marcus decided to forgo the distraction of litigation and instead make the marketplace his battleground. Drawing from his network of carefully nurtured relationships with both close and more distant acquaintances, Marcus was able to get funding for a new venture. He proved that he had the mettle, and recovered his heroic status, by building Home Depot, whose entrepreneurial spirit embodied his heroic mission. As Bank One's Jamie Dimon, J.Crew's Mickey Drexler, and even Jimmy Carter, Martha Stewart, and Michael Milken have shown, stunning comebacks are possible in all industries and walks of life. Whatever the cause of your predicament, it makes sense to get your story out. The alternative is likely to be long-lasting unemployment. If the facts of your dismissal cannot be made public because they are damning, then show authentic remorse. The public is often enormously forgiving when it sees genuine contrition and atonement. -
What to Ask the Person in the Mirror
Every leader gets off track from time to time. But as leaders rise through the ranks, they have fewer and fewer opportunities for honest and direct feedback. Their bosses are no longer monitoring their actions, and by the time management missteps have a negative impact on business results, it's usually too late to make course corrections that will set things right. Therefore, it is wise to go through a self-assessment, to periodically step back from the bustle of running a business and ask some key questions of yourself. Author Robert S. Kaplan, who during his 22-year career at Goldman Sachs chaired the firm's senior leadership training efforts and cochaired its partnership committee, identifies seven areas for self-reflection: vision and priorities, managing time, feedback, succession planning, evaluation and alignment, leading under pressure, and staying true to yourself. The author sets out a series of questions in each of the areas, illustrating the impact of self-assessment through vivid accounts of real executives. Although the questions sound simple, people are often shocked-even horrified-by their own answers. Executives are aware that they should be focusing on their most important priorities, for instance, but without stepping back to reflect, few actually know where they are allocating their time. Kaplan advocates writing down what you do every working hour for a week and checking how well your actions match up with your intentions. As for feedback, managers should ask themselves whether they're getting truthful evaluations from their subordinates. (In all likelihood, they aren't.) It takes time and discipline to persuade your employees to tell you about your failings. -
Leading Change: Why Transformation Efforts Fail
Businesses hoping to survive over the long term will have to remake themselves into better competitors at least once along the way. These efforts have gone under many banners: total quality management, reengineering, rightsizing, restructuring, cultural change, and turnarounds, to name a few. In almost every case, the goal has been to cope with a new, more challenging market by changing the way business is conducted. A few of these endeavors have been very successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale. John P. Kotter is renowned for his work on leading organizational change. In 1995, when this article was first published, he had just completed a ten-year study of more than 100 companies that attempted such a transformation. Here he shares the results of his observations, outlining the eight largest errors that can doom these efforts and explaining the general lessons that encourage success. Unsuccessful transitions almost always founder during at least one of the following phases: generating a sense of urgency, establishing a powerful guiding coalition, developing a vision, communicating the vision clearly and often, removing obstacles, planning for and creating short-term wins, avoiding premature declarations of victory, and embedding changes in the corporate culture. Realizing that change usually takes a long time, says Kotter, can improve the chances of success. -
When a New Manager Takes Charge (HBR Classic)
When some managers take over a new job, they hit the ground running. They learn the ropes, get along with their bosses and subordinates, gain credibility, and ultimately master the situation. Others, however, don't do so well. What accounts for the difference? In this article, first published in 1985, Harvard Business School professor John J. Gabarro relates the findings of two sets of field studies he conducted, covering 14 management successions. The first set was a three-year study of four newly assigned division presidents; the second consisted of 10 historical case studies. The project comprised American and European organizations with sales varying from $1.2 million to $3 billion. It included turnarounds, normal situations, failures, and triumphs. According to the author, the taking-charge process follows five predictable stages: taking hold, immersion, reshaping, consolidation, and refinement. These phases are characterized by a series of alternating periods of intense learning (immersion and refinement) and action (taking hold, reshaping, and consolidation). The study's results put to rest the myth of the all-purpose general manager who can be dropped into any situation and emerge triumphant. Understanding a situation and effecting change do not occur overnight, says Gabarro, and human variables such as managerial styles and effective working relationships make a difference. -
Managing the Right Tension
Of all the competing objectives every company faces, three pairs stand out: profitability versus growth, the short term versus the long term, and the whole organization versus the units. In each case, progress on one front usually comes at the expense of progress on the other. The authors researched the performance of more than 1,000 companies worldwide over the past two decades and found that most struggle to succeed across the three tensions. From 1983 to 2003, for example, only 32% of these companies more often than not achieved positive profitability and revenue growth at the same time. The problem, the authors discovered, is not so much that managers don't recognize the tensions--those are all too familiar to anyone who has ever run a business. Rather, it is that managers frequently don't focus on the tension that matters most to their company. Even when they do identify the right tension, they usually make the mistake of prioritizing a "lead" objective within it--for example, profitability over growth. As a result, companies often end up moving first in this direction, then in that, and then back again, never quite resolving the tension. The companies that performed best adopted a very different approach. Instead of setting a lead objective, they looked at how best to strengthen what the two sides of each tension have in common: For profitability and growth, the common bond is customer benefit; for the short term and the long, it is sustainable earnings; and for the whole and its parts, it is particular organizational resources and capabilities. The authors describe how companies can select the right tension, what traps they may fall into when they focus on one side over the other, and how to escape these traps by managing to the bonds between objectives.