The long-awaited policy seeks to sustain rapid economic growth of 9% while tackling the threat of climate change, but stops short of setting targets for reducing emissions
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The long-awaited policy seeks to sustain rapid economic growth of 9% while tackling the threat of climate change, but stops short of setting targets for reducing emissions
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In a memorandum of understanding that was signed today, the Department of Defense and the National Science Foundation agreed to work cooperatively to support social-science research on topics of interest to the Pentagon.
As widely expected, the NSF has agreed to help review proposals submitted to the Pentagon’s Minerva Research Initiative, a fledgling program that will offer grants to university-based scholars to study the Chinese military, the records of Saddam Hussein’s regime, and other specific topics.
The two agencies will soon — possibly within a week — release a joint request for Minerva-related proposals. Those proposals will be judged by the NSF’s typical merit-review panels, though both the science foundation and the Pentagon will have the right to nominate experts to serve on those panels. (The Pentagon is also accepting Minerva proposals through a separate pathway known as a broad agency announcement. Proposals that are submitted via this second track will reviewed through the Defense Department’s usual processes, not by NSF panels.)
But today’s agreement is broader than Minerva: It also creates a mechanism through which the Department of Defense can help to finance other national-security-related proposals submitted to the NSF. In such cases, scholars will have the option to decline the Pentagon’s money.
“We’re delighted,” said David W. Lightfoot, the NSF’s assistant director for social, behavioral, and economic sciences, in an interview. “We’ve always been concerned to do research that helps to secure the national defense. That’s part of the NSF’s charter. This new agreement will allow the Department of Defense to help us to do more of that kind of work, subject to the usual NSF merit-review process.”
Mark L. Weiss, the NSF’s division director for behavioral and cognitive sciences, said that Minerva projects would meet the agency’s usual standards of transparency. “All of the work that we will be supporting will be unclassified,” he said. “And there will be no constraints at all on the researchers’ freedom to publish results.”
Some scholars have expressed deep skepticism about the Minerva initiative. In an essay published last week, David H. Price, an associate professor of anthropology and sociology at St. Martin’s University, warned that military-financed social science would crowd out other forms of academic inquiry. (This week’s Chronicle Review contains a selection of opinions on Minerva.) —David Glenn
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Wharton's admissions office may be in transition, but it's not missing a beat when it comes to the 2009 application. It posted the 2009 ...
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Former Australian foreign minister Alexander Downer confirmed he will become United Nations special envoy to the Cyprus peace process, quitting domestic politics this week
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Manufacturing businesses in the eurozone produced less in June than the month before, the first time in three years manufacturing activity has contracted in the 15-nation currency block and a sure sign that economic growth is slowing
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The western countries' energy watchdog warned that oil production is set to tighten over the next five years leaving consumers facing higher prices as demand remains relatively strong
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A former trustee of Monroe Community College, Lori A. Van Dusen, describes a politically tainted Board of Trustees in her recent resignation letter. Ms. Van Dusen’s departure followed widespread anger over a failed presidential search at the college, in Rochester, N.Y., including complaints from elected officials and overwhelming votes of no confidence in the trustees taken by students and faculty members.
The presidential search ended in a deadlock last month. The board, whose 10 members belong to the Republican or Conservative Parties, unilaterally added two Republican candidates to the list of finalists vetted by two search committees. The board was then split on the two late additions.
Ms. Van Dusen questioned the integrity of a new search process and whether the next president would be protected from “political self-interests,” according to the resignation letter, which was obtained by the Rochester Democrat and Chronicle.
Five members of the board are appointed by the county legislature, four are selected by New York’s governor, and one is a student. The newspaper reported that trustees on Monday had hired Larry W. Tyree, a former community-college president, to lead the college until a full-time replacement is found. —Paul Fain
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Saad Eskander, director of the Iraqi National Library and Archive, is still waging his public battle to wrest control back from a private foundation of key records taken from Iraq after the 2003 U.S.-led invasion, according to today’s New York Times.
In February, The Chronicle broke the news that about seven million pages of records on Iraq’s Baath Party held by the Iraq Memory Foundation would be transferred to the Hoover Institution, the conservative think tank and library affiliated with Stanford University. The deal between the foundation, which was founded by Kanan Makiya, an Iraq-born professor of Middle East studies at Brandeis University, and the institution followed a bitter and public dispute between Mr. Makiya and Mr. Eskander over the provenance of the records and the propriety of their possession by a private group.
The seven million documents in question are a subset of 100 million documents seized by the U.S. government after the downfall of Saddam Hussein, Iraq’s Baathist leader, in the wake of the invasion. Mr. Makiya asserts that he had permission from the U.S.-led coalition forces to remove those files from a series of basement rooms in Baghdad after the invasion, and that he now has legal authority from Iraq’s government to collect and possess them until the country is stabilized.
But Mr. Eskander believes that the records properly belong in his national library, and he has sent an open letter to the Hoover Institution demanding their immediate return to Iraq.
“The Baath documents are the property of the Iraqis and the institutions that represent them,” writes Mr. Eskander, “and so it is arrogant and unethical for one person (an émigré) to decide the destiny of millions of sensitive official documents that have had and will continue to have considerable impact on the private lives of millions of Iraqi citizens.” —Richard Byrne
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Hanoi, Vietnam — Vietnam has created nearly 100 universities in the past three years, yet the number of lecturers has increased only negligibly, VietNamNet Bridge, a state-controlled English-language news service, reported today.
Vietnam’s deputy minister of education and training, Banh Tien Long, said the shortage of professors means that the universities can function at only 60 percent of capacity, a situation that has affected the quality of education.
Vietnam, where two-thirds of the population is under the age of 30, is struggling to cope with a growing demand for higher education. In 2003, the last year for which official statistics were available, Vietnam had 111 universities and 119 colleges. Last year alone, according to the state-run news media, 40 universities were added.
But with faculty salaries averaging around $150 per month, there is little incentive for college graduates to go into teaching. Universities increasingly use moonlighting lecturers from other institutions to teach their classes.
This year, the Ministry of Education and Training started a program to produce 20,000 Ph.D.’s by 2020. Because Vietnam has a limited capacity to produce graduate students, the government will send half of that number abroad for training.
But Pham Phu, a professor and education activist at Ho Chi Minh City National University, said this month that such efforts would not yield a sufficient number of lecturers to staff all of the new universities. —Martha Ann Overland
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California’s oversight of for-profit colleges expired on Monday as a state law expired while state legislators battled over how to regulate the industry, which enrolls 400,000 students a year there.
Without state oversight, the students lack recourse if the proprietary colleges go out of business. The Bureau for Private Postsecondary and Vocational Education also went out of business last year, when lawmakers failed to reach agreement over renewing regulations that established it. A new law in 2007 subsequently re-established it.
Republicans in the Legislature rejected a bill on Monday that would have replaced the oversight law, which expired at midnight, the Los Angeles Times reported. The new bill would have offered protections for the students, including a state-run reimbursement fund. In exchange, the bill would have relaxed rules for the colleges, including dropping a requirement that 70 percent of their graduates must be placed in jobs.
Critics said the bill would have preserved too much red tape. “Certainly we need to protect students, but we also have to be mindful of the viability of the institutions,” an assemblyman, Roger Niello, told the Times.
The debate over regulating for-profit colleges has a long history in California, with consumer advocates arguing for stronger protection for students and better reporting of job-placement data. The colleges, meanwhile, have argued that bureaucracy and overregulation have hampered their efforts to expand in the state. —Kate Moser
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ExxonMobil, the world's biggest listed integrated energy group blamed the government of Kazakhstan for delaying the development of Kashagan, the world's biggest new oilfield
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Gerhard R. Andlinger, an investment manager, has pledged $100-million to Princeton University, in large part to stimulate research and education on efforts to prevent global warming.
Princeton’s School of Engineering and Applied Science plans to use $70-million of the gift to create a center for the study of energy and the environment. The remainder will go toward engineering-research laboratories, hiring four new faculty members, and an endowment to finance research in areas too new to qualify for federal support.
A portion of the money will also support a program to bring industry experts, policy makers, scientists, engineers, and scholars together to study and work on energy and environmental issues.
Shirley M. Tilghman, Princeton’s president, said the university hoped the new center would enable researchers to use their discoveries to help scientists and engineers create better ways to manage carbon-dioxide emissions and create new types of alternative energies.
“We also hope to educate the next generation of scientists, engineers, and policy makers, who will take out of Princeton a deep sensitivity to global warming, and educate citizens,” said Ms. Tilghman.
Mr. Andlinger, who is 77 and a Princeton graduate, is the founder and chairman of Andlinger & Company, an international investment and management firm in Tarrytown, N.Y. He was born in Austria and came to the United States in 1948, when he won an essay-writing contest sponsored by the New York Herald Tribune. He has previously donated $27-million to the university. —Maria Di Mento
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A report on state finances being released today delivers another round of bad news about budget conditions, signaling that more spending cuts could lie ahead for higher education and other state programs.
State tax collections are at their weakest in five years, according to the report, by the State University of New York’s Nelson A. Rockefeller Institute of Government.
Over all, tax revenues increased by only 1.7 percent during the first quarter of this year, compared with the same period a year ago, the report says, marking the slowest growth rate since 2003. During that same period, for the first time in six years, sales taxes (a key revenue source) showed no growth from the year before, the report says.
Today’s report follows the release last month of a similarly gloomy report by the National Governors Association and the National Association of State Budget Officers. Those groups found that overall growth in state spending had slowed significantly across the nation and that an increasing number of states faced revenue shortfalls.
Tighter state budgets often signal bad news for college officials and students, who face cuts in operating budgets and increases in tuition as legislatures struggle to make ends meet. —Sara Hebel
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Disunity and recrimination marked the start of France's European Union presidency as Nicolas Sarkozy exchanged accusations with the European Commission over world trade talks
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Turkish police have detained two retired generals hours ahead of the first hearing in a case against the ruling AK Party
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Global investment in renewable energy surged 60 per cent to $148 billion (74.3
billion) last year and is still accelerating despite the slowdown in the
wider economy, according to the United Nations.$
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Commendations go to several readers who, even if not coming up with the best word, identified key features of our current crisis, writes John Kay
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Inflation is accelerating in Asia, raising the likelihood that central banks will have to increase interest rates in spite of rising fears of slowing growth
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The aim of this year's report by the Bank for International Settlements is clear: it is to reduce the frequency and severity of crises. It is not enough to say that we can clear up afterwards. That is too complacent and too one-sided, writes Martin Wolf
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Iceland's 'great unwind' is the result of excesses built up in a framework of light regulation following hasty privatisation, writes Robert Wade
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An impression across Europe – not least among the young – is that the EU is in danger of offering pseudo-democracy, writes Larry Siedentop
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If you want to get a British entrepreneur worked up, one topic is bound to raise their temperature to boiling point: the clearing banks' behaviour, writes Luke Johnson
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ACT Inc. and the College Board have released updated concordance tables — estimates of how students of comparable abilities would score on the ACT and SAT examinations.
For instance, a composite score of 33 (out a of possible 36) on the ACT corresponds to a combined score of 1440 to 1480 (out of a possible 1600) on the SAT’s critical-reading and mathematics sections.
The tables, released on Tuesday, are based on a joint study of more than 300,000 high-school students who took both tests from 2004 to 2006. ACT Inc. and the College Board plan to release a report on the concordance study later this year. —Eric Hoover
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An online game developer, Giant Interactive was founded just four years ago. Since then, Shi Yuzhu has parlayed the success of its first game, ZT Online, into an $887m initial public offering on Nasdaq
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Angad Paul, chief executive of Caparo, is trying to inject innovation into the family-owned group founded 40 years ago by Lord Paul, his father
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The prospect of a nuclear-armed Iran is the biggest threat facing the world, according to one of Barack Obama's senior foreign policy advisers
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The rise in food and oil prices could 'severely weaken' the economies of up to 75 developing countries, including Pakistan and Indonesia, the International Monetary Fund said
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Institute of International Education, US Study Abroad White Paper Series
(252 KB) Study Abroad White Paper, Issue 2:
Exploring Host Country Capacity for Increasing U.S. Study Abroad
The May 2008 IIE White Paper represents the second publication of the study abroad policy research series on Meeting America's Global Education Challenge.
This new report highlights research and findings from a fall 2007
snapshot survey of over 500 host institutions abroad, and on the
efforts made by these institutions to increase their host capacity for
larger numbers of U.S. students. It also analyzes the challenges these
institutions face as well as their motivations and strategic plans to
undertake efforts toward internationalization. The report aims to
provide policy makers and international education administrators with
focused data on how host institutions and countries perceive greatly
expanding U.S. study abroad participation.
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Institute of International Education, US Study Abroad White Paper Series
(252 KB) Study Abroad White Paper, Issue 2:
Exploring Host Country Capacity for Increasing U.S. Study Abroad
The May 2008 IIE White Paper represents the second publication of the study abroad policy research series on Meeting America's Global Education Challenge.
This new report highlights research and findings from a fall 2007
snapshot survey of over 500 host institutions abroad, and on the
efforts made by these institutions to increase their host capacity for
larger numbers of U.S. students. It also analyzes the challenges these
institutions face as well as their motivations and strategic plans to
undertake efforts toward internationalization. The report aims to
provide policy makers and international education administrators with
focused data on how host institutions and countries perceive greatly
expanding U.S. study abroad participation.
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Chinese security forces are pressing parents to abandon demands for a full investigation into why so many schools collapsed in the May earthquake in Sichuan
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Chinese security forces are pressing parents to abandon demands for a full investigation into why so many schools collapsed in the May earthquake in Sichuan
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Small shareholders in Northgate, the largest van rental operator in the UK and
Spain, must look back ruefully at the £12 a share offer tabled by private
equity two years ago and subsequently withdrawn after the biggest
institutional investors held out for more. Since then the shares have fallen
more than 70 per cent.
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British banks may not be too hot at managing risk, but they are brilliant at
managing ministers.
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The US Government moved a step closer yesterday to ripping off the veil of
secrecy that for centuries has protected the identity of UBS clients as a
federal court took the unprecedented step of demanding that the Swiss bank
hand over the names of as many as 20,000 of its customers.
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Moody's Investors Service has ousted the head of a key division and pledged to
discipline other staff after an investigation concluded that staff at the
credit agency knowingly rated about $1 billion of securities incorrectly.$
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The battered stock market was on the brink of sliding into a new bear market
last night as mounting fears of stagflation, sparked by another spate of
bleak economic news, sent blue- chip shares plunging once more.
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Suddenly, it is not the customer who matters; it is the supplier. The stuff
that arrives at the factory loading bay is now expensive; shortages and
logistical logjams are playing havoc and the company that sells you a vital
commodity is digging in its heels, refusing to renew a long-term contract
without a big price increase.
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Lord Harris of Peckham, the founder and chairman of Carpetright, fears that
the high street is facing one of its toughest years for half a century, in
the bleakest warning yet about the fallout from the credit crunch.
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Alistair Darling confirmed yesterday plans to increase the guarantee on
depositors' savings to £50,000 if their bank fails, but said that the bill
would be met initially by taxpayers, not by the industry.
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Companies are calling for a law to allow them to set up charitable foundations independent from the government, a move that could open up space for civil society in Beijing
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The comments by a senior Chinese official underscore Beijing's resistance to imposing international sanctions on Zimbabwe in response to its alleged violations of human rights
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Indirect deals made by British companies through Mauritius, the British Virgin Islands and Cyprus push investments to more than ÂŁ8bn, outstripping those from the US
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| Published: | June 30, 2008 |
| Author: | Julia Hanna |
Many of us are sailing toward retirement with the hope that Social Security, personal savings, and money saved in an employer's 401(k) or 403(b) plan will add up to the magic sum required to enjoy our remaining years in reasonable style.
But how to reach that goal can be a bit of a mystery. We all know we should be saving for retirement, but how much should we be squirreling away? And of the funds our company's plan offers, which should we choose?
According to Harvard Business School professor Robert C. Merton, the defined contribution (DC) plans currently offered by the majority of employers place an undue burden on workers who don't have the interest, time, or expertise to manage their finances. A pioneer in translating finance and mathematics into practical, Wall Street-ready models, Merton was awarded the 1997 Nobel Memorial Prize in Economic Sciences for his work on what has come to be known as the Black-Scholes option pricing model.
"Don't misunderstand me—getting some education about your financial affairs is a good idea, just as having some understanding of your medical needs is a good idea," Merton says. "But that knowledge won't qualify you to decide how much mid-cap European stock you should have in your portfolio, any more than it would enable you to perform surgery on yourself."
Intelligence is not the issue, he emphasizes; it really is a question of knowledge and time. Retirement planning as it is currently administered is in a transition phase; it simply doesn't represent a sustainable solution for consumers.
Yet employers are the natural gatekeepers for retirement plans, he believes. For example, when focus groups were presented with a new retirement product, individuals balked at signing on until they were told that the product would be offered through their 401(k). "They didn't see anything wrong with it," Merton says. "They just didn't believe it could be that good until it had their employer's seal of approval. Most people trust their employer more than banks or some other third-party provider."
This trust was no doubt engendered in an earlier day when defined benefit (DB) pension plans were offered by lifelong employers like IBM and General Motors. Today, that system is all but extinct. Merton explains that employers underestimated the cost and risk of DB plans from the start.
"The accounting system in place projected a sure-thing return of 9 percent. The problem that we've seen in the past, and that we see in our current crisis, is the tendency to talk only about return and forget risk. Risk means risk, not just a wink and a nod. 'It will all work out in the end' is not a supportable claim."
When the global stock market and interest rates began to decline in 2000, many corporations faced a double whammy when returns on pension assets were well below expectations and pension liabilities rose by much more than expected.
"At that point, CEOs began paying attention to this as a strategic issue," Merton says. "They had been offering unions the choice of a dollar's worth of salary or what they thought was a dollar's worth of benefits. Most unions picked the benefits, which were in fact worth $1.50."
So where does this leave us? Still in transition, unfortunately, but Merton has an idea for a different approach that would provide an integrated solution to the retirement conundrum. "Think of it as an answer, but not the only answer," he says.
The plan incorporates many of the aspects of the current DC system, with one important difference: a focus on an inflation-protected annuity rather than an endpoint with a lump sum of accumulated wealth.
"This is not anything new or radical," says Merton. "In Pride and Prejudice, Jane Austen didn't describe Mr. Darcy by saying he was worth 100,000 pounds. She'd say that he was worth 4,000 pounds a year. That's how we usually think of our standard of living."
Merton says we're used to the mutual fund industry as a vehicle for getting to our retirement goal, yet few of us have a deep understanding of the mechanics behind it. "It's like compression ratios on car engines. Or dual overhead camshafts. What does that mean in terms of what matters to me? Does it get me more gas mileage? In the same sense, what you're really worried about is your standard of living, not what's under the hood in terms of the rate of return distributions to get you to that goal."
With that in mind, Merton and a team of financial engineers created SmartNest, an individually tailored pension program that requires just a few simple inputs from employees before they "set it and forget it"—what most of us do by default, anyway.
First off, employees are asked to input their desired annual income in retirement. If they are not sure, the recommended target to maintain one's standard of living is around 70 percent of your annual income earned in the last few years of your work life. They are then asked to input the minimum amount they would feel comfortable living on. ("It's a device to calibrate your risk tolerance," Merton says.)
That information is then integrated with the employee's additional sources of retirement income such as Social Security, a DB plan, or an IRA (when you leave an employer, you typically roll your 401k into an IRA) to determine and implement a dynamically optimized portfolio strategy that maximizes the chance of achieving your desired retirement income goal.
Over the years, that managed portfolio adjusts for factors such as increases or decreases in salary and takes into account explicitly the risks of changing life expectancy, inflation, and interest rates.
Merton uses the analogy of an ocean liner sailing from England to New York. When just out of port, there are many unforeseen things to correct for along the way so a precise course is not necessary. But as the ship nears port, greater and greater accuracy is required if it's to avoid running aground and miss achieving its goal.
"We have your goal in mind and do the dynamic trading with the target vision to get you there," Merton explains. "We don't try to pretend we can outperform the market. I'm not saying people can't do it, but if something is going to be scalable to the millions of workers who will be entering the system in the coming years, that idea doesn't work as a core strategy."
Participants in the system can view their account at any time and check the current probability of reaching their desired retirement goal. If they're uncomfortable with that figure, they can breathe a little easier by upping their contribution or deciding to add a year or two to their retirement age. Or they may decide to lower the annuity they'd feel comfortable living on. Any or all of these factors can be adjusted until a more acceptable probability is reached.
"These are real decisions for you, not how much mid-cap stock to buy," says Merton. "If you choose to save more, your paycheck will be smaller. You're trading off consumption now for consumption in retirement. This is real. The idea is to provide meaningful choice, objective analysis, and a system that will work even if you make no choices at all."
"I'm not saying it can't be done better," Merton says of the program. "We anticipate making continuous improvements. But this is something we've built with market-proven technologies that is addressing a real need right now. As more and more people are brought into employer retirement plans, it's going to have major implications for how this service is delivered."
SmartNest is currently used by Philips in Holland, Germany, and the United Kingdom.
So stay tuned. Retirement as we know it is an evolving concept. For one person it may be the classic vision of a condo on a golf course in Florida. For another, a sojourn in Africa with the Peace Corps. Now it seems that the way we achieve our retirement dreams, whatever they may be, soon could be changing as well. 
Julia Hanna is the associate editor of the HBS Alumni Bulletin.
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An indictment returned today by a Massachusetts grand jury accuses two former Tufts University administrators of separately stealing from student-activity funds, wrongfully obtaining a total of nearly $1-million, and spending the money on such items as luxury and designer goods, resort vacations, and tickets to concerts by Madonna and Celine Dion.
A news release from the Middlesex district attorney identifies the accused employees as Josephine Nealley, who was director of the university’s Office of Student Activities from 1996 to 2007, and Raymond Rodriguez, who was the office’s budget and fiscal coordinator from 2001 to 2007. Neither Ms. Nealley nor Mr. Rodriguez has yet appeared in court to respond to the charges.
The district attorney’s release quotes Patricia Campbell, executive vice president of Tufts, as saying that the university has “improved student-activities systems to prevent future incidents” and has “taken steps to assure that no student-activities programs are adversely affected.” —Charles Huckabee
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Marks & Spencer has issued a dramatic profit warning after a suffering
“marked deterioration” in sales, and announced that Steven Esom will be
leaving as head of its food business after just one year.
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Taylor Wimpey today admitted that it has been unable to secure nearly £500
million in funding from investors, putting Britain's largest house builder
at risk of breaching its banking covenants.
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Hundreds of angry lorry drivers converged on London today to demand the
Government lower fuel taxes which they say are forcing them out of business.
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The number of people out of work in member countries is expected to rise by 9% to 34.8m by the end of next year under the impact of the credit crunch, according to the OECD
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A Palestinian rammed a bulldozer into an Israeli commuter bus, cars and pedestrians in Jerusalem, killing at least three people and wounding dozens, emergency services said
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Shares in Deutsche Bank rose 3 per cent in pre-market trading after the bank
reassured investors that it would not call on them for extra cash to
strengthen its balance sheet.
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The amount of money homeowners are borrowing on their houses has slumped by 64
per cent in the first quarter to a seven-year low as banks continue to
withdraw cheap mortgage deals.
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TNK-BP's employees have been granted 49 visas by the Russian migration
service, ending fears its senior executives, including chief executive Bob
Dudley, might be forced to leave the country this month.
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Merrill Lynch warned bankruptcy was not out of the question for General Motors
after the car giant released grim sales figures last night.
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AstraZeneca, the pharmaceuticals giant, has secured sales of its blockbuster
anti-psychotic drug Seroquel until 2011, as a US court stopped cheaper
copies coming to market.
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Zimbabwean opposition leader Morgan Tsvangirai has spurned a call from African leaders for talks with President Robert Mugabe on forming a unity government, saying conditions were not yet right
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Last year, Princeton economics professor Alan S. Blinder reviewed more than 800 occupations in the United States, and estimated that between 22 and 29 percent of them were potentially offshorable. This year, 901 MBA students of Harvard Business School attempted to replicate Blinder's study, with largely similar results and two further insights.
As HBS research associate Troy Smith and Professor Jan W. Rivkin write in a working paper available for download [PDF], "First, Blinder's notion of assessing the 'potential offshorability' of an occupation is tricky. … [M]ore and more, the laws of economics drive the geography of business activity. Second, we feel that one misses something important when one thinks of moving occupations or jobs offshore. It is actually the tasks or activities associated with an occupation or job that move." Conceiving of offshoring in relation to tasks rather than jobs gives companies a broader global palette with which to manage differences across borders, the authors conclude.
Cases on, among other topics, lessons to be learned from the merger of Canada's Toronto-Dominion Bank and the more customer-service oriented Canada Trust, and the marketing dilemmas of software company ScriptLogic round out the week.
— Martha Lagace
| Authors: | Gary P. Pisano and Roberto Verganti |
|---|
Collaborative innovation has become a hot topic in innovation today. Scholars, consultants, and the business press all urge companies seeking to boost innovative performance to become more "collaborative." Too often, however, companies fail to distinguish among the various choices they face with respect to alternative modes of collaboration. Collaborative innovation can take a wide variety of forms, each with profound implications for innovative performance and the value a firm can capture from innovation. Building on a number of case studies, this paper presents a simple framework for categorizing different collaborative modes. The framework is based on the notion that there are two critical dimensions along which collaborative efforts can be characterized. The first dimension relates to the degree to which the collaborative network is "open" verses "closed." The second dimension relates to the degree to which the governance structure for collaboration is "hierarchical" verses "flat." While discussions of collaborative innovation often take the position that "open" networks are superior to "closed" networks, and that "flat" governance structures are superior to "hierarchical" structures, our framework provides a more nuanced view of the trade-offs. The choice among alternative collaborative modes should be driven by a number of factors including characteristics of the technology, the capabilities of the firm, and the distribution of competences in the environment. We develop a set of guidelines for helping firms choose among collaborative models and discuss critical enabling conditions required for each to work in practice. In the final section of the paper, we discuss how firms can "mix and match" multiple modes of collaboration into coherent "architectures" that lie at the heart of innovation strategy.
| Authors: | V. Kasturi Rangan, Herman B. Leonard, and Susan McDonald |
|---|
The Future of Social Enterprise considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. We trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs.
Download the paper: http://www.hbs.edu/research/pdf/08-103.pdf
| Authors: | Troy Smith and Jan W. Rivkin |
|---|
In a 2007 working paper, Alan Blinder assessed the "offshorability" of hundreds of U.S. occupations and estimated that between 22% and 29% of all U.S. jobs were potentially offshorable. This note reports the results of an exercise in which members of Harvard Business School's MBA Class of 2009 collectively attempted to replicate Blinder's study. Overall, the MBA students' assessments of offshorability matched Blinder's well. Across occupations, the correlation between Blinder's offshorability rating and the students' was 0.60. The students estimated that between 21% and 42% of U.S. jobs are potentially offshorable. Echoing Blinder, the student data suggested a positive correlation between offshorability and education. The student data also revealed a positive or inverted-U relationship between offshorability and wage level, where Blinder found no correlation. While Blinder found a slight wage penalty for the most offshorable jobs, the student data exhibited no evidence of wage depreciation from job contestability due to offshoring.
Download the paper: http://www.hbs.edu/research/pdf/08-104.pdf
| Authors: | Kathleen L. McGinn, Katherine L. Milkman, and Markus Nöth |
|---|
Past research has shown that communication in negotiations heightens social awareness, facilitates coordination, increases the utility for the other's positive outcomes, and thereby leads to more equal payoffs. But the role of specific communication strategies in shaping the terms of agreement is largely ignored in models of bargaining behavior. We propose that communication is used to frame negotiations around a logic of fairness or competition, moving parties toward or away from equal-division agreements. These effects outweigh any overall social cohesion effects due to the mere presence of communication. We offer evidence from two laboratory studies with three-party negotiations to support these hypotheses.
Download the paper: http://www.hbs.edu/research/pdf/08-032.pdf
Harvard Business School Case 508-003
Describes the dilemma facing Advanced Energy (AE), a $6 million nonprofit engaged in energy conservation in North Carolina. Most of the money for its programs comes from a Public Benefits Fund (PBF) enacted by the state legislature. With renewed effort by activists in 2006 to expand AE's role, there was a possibility of the PBF swelling to $50 to $80 million. Naturally, this put AE at conflict with electric utilities wanting to engage in efficiency programs as part of their overall business offering.
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Harvard Business School Case 708-485
In 2007, Allstate was the number two property and casualty insurer in the USA and had enjoyed five years of rapid profit improvement. The question facing CEO Thomas J. Wilson was how to maintain the momentum. This case tracks the evolution of Allstate's strategy over 20 years, examining the logic behind the strategic changes, and the challenges of implementing them. It identifies sources of inertia from within the organization and from without and summarizes the strategic issues facing Allstate in early 2007.
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Harvard Business School Case 108-092
An exercise that takes students through five stages of growth in an entrepreneurial start-up in the medical devices industry: 1) founding, 2) growth, 3) push to profitability, 4) refocusing process, and 5) takeover by new management. At each stage, students must confront tensions in balancing profit, growth and control. Difficulties encountered in the business are due to management's attempts to design and use formal control systems to achieve profit and performance goals.
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Harvard Business School Case 108-091
An exercise that takes students through five stages of growth in an entrepreneurial start-up in the medical devices industry: 1) founding, 2) growth, 3) push to profitability, 4) relocation process, and 5) takeover by new management. At each stage, students must confront tensions in balancing profit, growth and control. Difficulties encountered in the business are due to management's attempts to design and use formal control systems to achieve profit and performance goals.
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Harvard Business School Note 508-090
This note develops a framework for considering the challenges of incorporating marketing input when setting innovation strategy. The framework lays out the possible innovation opportunities a firm can entertain and describes how the customer knowledge gained from conducting market research at the front end of NPD affects which of these opportunities the firm should pursue. Pitfalls in analyzing the customer data are described, along with guidelines on how to overcome them. The impact of competition in the context of setting innovation strategy under market uncertainty is also addressed.
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Harvard Business School Case 308-065
China is an ancient civilization, but it is really a very young country. How we understand modern China is rooted in our understanding of history. Thus, the authors examine several myths surrounding important historical themes, including unity, economic and political isolation, the growth and development of capitalism, internationalization, and governance. Following the dispelling of these myths, the authors then examine several lessons of more recent Chinese history, exploring where this young country has been in its first century.
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Harvard Business School Case 508-114
ScriptLogic is a software company that has built a product portfolio that fits under a 'Point, Click, Done!' umbrella; its products are easy to download, easy to install, and easy to use. The company's online marketing program and inside sales force have been very successful in finding and bringing in new customers, in part because of a laser-like focus on increasing its marketing ROI. As ScriptLogic looks towards its next phase of growth, however, it is becoming clear that some changes need to be made in order to take full advantage of its growing product portfolio. Students debate the merits of going after new customers by building an enterprise sales force or mining the existing customer base with an inside sales force that already has a lot on its plate.
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Harvard Business School Case 808-112
Describes a set of key strategic decisions facing the scientific founder and CEO of a promising, early stage bio-pharmaceuticals company. Should the company establish a proposed alliance with a pharmaceutical firm? Should it create a nutraceuticals business in parallel to its effort to develop anti-aging therapeutics? And, should it in-license a second drug development candidate?
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Harvard Business School Case 208-137
Vikram Akula, CEO of SKS Microfinance, seeks a venture capital investment to fund his firm. SKS, one of the largest and fastest growing microfinance institutions in India, is a profitable, for-profit institution with a social mission. In what is one of the first commercial financing deals in the world, Akula must decide at what value to sell equity in SKS, and to whom to sell it. The case focuses on valuation, which is difficult because at the time there are no publicly traded comparable companies, and the strategic aspects of raising money.
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Harvard Business School Case 708-023
Describes the economics, technology, and politics of the oil sands industry, focusing on one of the industry's leading firms. Oil sands deposits in Alberta represent a potentially vast reserve of hydrocarbons, but the extraction, refining, and transportation challenges are formidable, and the environmental consequences of large-scare oil sands development potentially severe. Encourages students to examine Suncor's strategic positioning and cost structure, and the challenges that the firm's leaders confront as of 2007.
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Harvard Business School Case 308-057
After fifty-five years in the semiconductor industry, Morris Chang, founder and Chairman of Taiwan Semiconductor Manufacturing Company (TSMC), was seeing a change. After four decades of regular double-digit growth the industry was still growing-but now at a much slower pace. In 2004, TSMC entered the China market, the world's second largest for semiconductors, by building a fabrication plant in Shanghai. Was China the market opportunity in which TSMC could bet on for expansion, or should its strategy be to focus on new product development and innovation?
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Harvard Business School Case 108-005
The case series illustrates the role of performance measurement and analytics in translating TD-Canada Trust's service model of "comfortable banking" into operational terms. In 2000, in a banking market where consumers and regulators were typically hostile to mergers and acquisitions, Canada's fifth largest commercial bank, Toronto-Dominion Bank (TD Bank), undertook a merger with a relatively small trust company, Canada Trust, which was known for exceptional customer service. To assuage the concerns of regulators, consumer groups, and newly acquired customers, TD Bank made several public pronouncements promising to maintain Canada Trust's high customer service standards and to deliver a "comfortable banking" experience. Chris Armstrong, executive vice president and chief marketing officer, was now faced with the task of defining the comfortable banking model and consistently delivering on these promises. Armstrong and his team undertake a systematic analysis of the drivers of customer satisfaction and branch network profitability and, based on the results, must decide how to change TD-Canada Trust's branch compensation and performance reporting systems to consistently, and profitably, deliver a "comfortable banking" experience.
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Harvard Business School Case 708-036
By March 2008, the U.S. Government and the U.S. Federal Reserve Board had taken various policy measures over the last few months to tackle the subprime mortgage crisis that threatened to drag the economy into a recession. The Bush administration approved a fiscal stimulus package exceeding $150 billion. Interest rates had been repeatedly cut at the fastest pace in decades, to 2.25% as of March 2008. The Fed, in an unprecedented move, helped JPMorgan Chase to take over Bear Stearns, which was on the brink of collapse. Yet as the global economy faced slower growth stemming from the U.S. mortgage crisis, policy makers were caught in an intense debate over what the 'right' solution would be, and the implication of these policies on global imbalances.
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| Authors: | Rawi Abdelal, Ayesha Khan, and Tarun Khanna |
|---|---|
| Publication: | Harvard Business Review (forthcoming) |
The combination of the gigantic American trade deficit and the price of oil at more than $130 per barrel (at press time) have created an inevitable pool of financial liquidity among oil exporters in the Arabian Gulf. But this era of petrodollar surpluses is markedly different from the last one. In the 1970s, the member states of the Gulf Cooperation Council—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—outsourced the management of their petrodollars to American and U.K. bankers. This time around, they have adopted active investment and development strategies: They are investing heavily in large Western organizations as well as in emerging markets in Africa and India. They are spending lavishly at home to establish institutional infrastructures, create free-trade zones for manufacturing and services, and build recreational facilities that will attract businesses, skilled knowledge workers, and tourists. All of this is destined to have long-run effects not just on their local economies but also on regional and international trading, argue the authors. In fact, the authors say, the actions of the GCC states are pulling the Gulf closer than it has ever been to the center of the international financial system. In this article, the authors consider how the economic landscape in the West will be affected by oil exporters' new investment strategies and interests over the next decades, how proximate emerging markets will be reshaped, and finally, how the GCC home environment itself will be dramatically reconfigured.
| Authors: | Russell A. Eisenstat, Michael Beer, Nathaniel Foote, Tobias Fredberg, and Flemming Norrgren |
|---|---|
| Publication: | HBS Centennial Issue. Harvard Business Review 86, nos. 7/8 (July - August 2008) |
Managing the tension between performance and people is at the heart of the CEOs job. The firms they lead are at once economic organizations whose survival and prosperity depends on delivering superior value in an unforgiving global market place and social institutions that profoundly shape the lives and prospects of their employees. All too many leaders view their role through one or the other lenses, though in the strong market for corporate control that has emerged in the last twenty years shareholder value dominates. A study of CEOs in Americas and Europe selected because their companies are outperforming their competitors and also achieving commitment reveals a mindset and managerial practices discussed in this article that they employ to simultaneously solve for performance and commitment.
| Authors: | Ranjay Gulati and Jackson Nickerson |
|---|---|
| Publication: | Organization Science 19, no. 2 (March - April 2008): 1-21 |
This paper looks at when and how preexisting interorganizational trust influences the choice of governance and in turn the performance of exchange relationships. We theorize that preexisting interorganizational trust complements the choice of governance mode (make, ally, or buy) and also promotes substitution effects on governance mode choice while impacting exchange performance. We evaluate hypotheses using a novel three-stage switching regression model and a sample of 222 component-sourcing arrangements of two assemblers in the automobile industry. Analysis of our data broadly supports our hypotheses. High levels of preexisting interorganizational trust increased the probability that a less formal, and thus less costly, mode of governance was chosen over a more formal one. This finding suggests a substitution effect of interorganizational trust on governance mode choice that in turn shapes exchange performance. We also found a complementary effect of trust on performance: Regardless of the governance mode chosen for an exchange, trust enhanced exchange performance. Additional evidence of the complementary effect of trust on performance was that trust somewhat reduced interorganizational conflict.
| Authors: | Daniel J. Isenberg |
|---|---|
| Publication: | Innovations: Technology, Governance, Globalization 3, no. 1 (winter 2008) |
I first met Vinod Kapur in the summer of 2006 when I was conducting research in India on a case for my Harvard Business School class on international entrepreneurship. A friend of mine had invited me to attend the ceremony for the first Innovations for India Awards in Mumbai. Several Indian businesspeople received the award, but I was particularly struck by a dignified silver-haired gentleman who took the stage to receive the award for social innovation. He then proceeded to eloquently describe the development of a business concept centered on the rural poor of India, which was based on a specially bred "superchicken" that was twice as big and five times as productive as the typical backyard chicken. The incongruity of Vinod Kapur's elegant appearance and his subject matter struck me as fascinating, but the most intriguing element of the presentation was how he arranged an entire system of distribution to deliver the hatched chicks to these remote villagers and did so in a way that enabled everyone to profit in concrete financial terms, from Keggfarms itself to the rural villagers. Almost a million households are today affected by Keggfarms, and the numbers are constantly rising.
Download the paper: http://www.mitpressjournals.org/doi/abs/10.1162/itgg.2008.3.1.52
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Lorraine from Barrow-in-Furness, Cumbria was nominated for the award after winning the North West regional NES award. She impressed judges with her company, One to One Personal Care, which focuses on looking after elderly and disabled people who ne
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The title of companion was bestowed upon:Professor Sir George Bain (formerly of London Business School)Professor Dame Sandra Dawson (Judge Business School, Cambridge)Professor Peter McKiernan (School of Management, University of St Andrews)Profess
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The IDP has proved a popular choice, all the places have been snapped up -; plans are being made for next year's programme which will feature trips to business schools in : Dubai, Spain and Solvenia. For further information please contact Julie Davie
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The Web Works project evaluated 18 UK business school websites across ten key performance criteria and 30 further criteria dealing with access to and interest in the information provided. Interactive focus groups were held with 270 current and pro
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Please click here to access the latest media bulletin
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The ABS is delighted that over 100 people have registered for this years Conference and AGM.If you would like to register as a day delegate or would like us to source alternative accomodation please contact: Vicky Reid, Events Manager on: 020 7388 00
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The
study provides insights across ten key performance criteria and 30 further
criteria dealing with access to and interest in the information provided.
Findings are based on work carried out with270 current and prospective students
at bu
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'Talent Wars: the international market for academic staff' explores the international dimensions of academic staff recruitment and provides comparisons between UK and key competitor countries.The main findings include:There is not an academic 'brain-
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The three new departments are: The Department for Innovation, Universities and Skills (DIUS), which has been formed from the HE, FE and Skills Directorates of the former DfES and the Science and Innovation directorates of the former DTI; the Departme
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Upon being elected, Jonathan Slack said:"I am delighted to be given the opportunity to Chair such a prestigious group of national and international associations, particularly at a time when the ?Bologna? process is gaining momentum and impacting
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In this year?s HR Top 100 Most Influential compiled by Human Resources Magazine in association with Ceridian, Kai Peters is the joint second highest climber, going up 52 places from 78th last year. The list of HR practitioners, academics, authors, co
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The new scholarships will enable women owner-managers to participate in Cranfield School of Management?s acclaimed Business Growth and Development Programme (BGP), the leading programme of its kind in the UK.; ;The Scholarships are being provided by
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Stock exchanges in China and Hong Kong are set to host 86 more IPOs this year
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Bain Capital and Kohlberg Kravis Roberts join Silver Lake and a private equity unit of Goldman Sachs in the second round of bidding for a stake in the Chinese group's mobile devices division
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Mongolia's president has imposed an unprecedented state of emergency in the capital after post-election rioting in which the headquarters of the ruling Mongolian People's Revolutionary party was torched and five people reported killed
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Proposed changes to China's patent law will require Âforeign companies making discoveries in the country to file for a patent in China first or risk losing legal protection of their intellectual property
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Claremont McKenna College will use a $75-million donation for a building to house classrooms and offices, and to serve as a new gateway to the campus, the college announced on Tuesday.
The source of the gift is the Marie-Josée and Henry R. Kravis Foundation, which made the unrestricted donation three months into the college’s $600-million fund-raising campaign, which it describes as the largest ever undertaken by a liberal-arts college.
The building, to be called the Kravis Center, is scheduled for completion in 2010 and will include classrooms, research institutes, faculty offices, and the Office of Admission and Financial Aid. The building will incorporate sustainable design and “become both the literal and symbolic heart of our institution,” Claremont McKenna’s president, Pamela Gann, said.
Mr. Kravis, a founder of the private-equity firm of Kohlberg Kravis Roberts & Company, is a 1967 graduate of the college and member of its Board of Trustees. —Allie Grasgreen
Chronicle List: Major Private Gifts to Higher Education Since 1967
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The music industry has big problems that go much deeper than piracy. Should we worry about whether the labels succeed or fail? Only if you're a shareholder, says John Gapper. The day that Universal or EMI founders will not be the day the music dies
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The G8's plan for an 'equal and enduring partnership' with five emerging economies has fallen short, the co-ordinator on the G8 for the five countries believes
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The G8's plan for an 'equal and enduring partnership' with five emerging economies has fallen short, the co-ordinator on the G8 for the five countries believes
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A nasty combination of inflation and steep valuations suggests Chinese and Indian stock markets have not yet come to rest, says John Authers
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Washington — In this era of economic anxiety, college financial-aid administrators can often be heard worrying each time a student-loan company withdraws from the system of federally subsidized lending.
But there’s an exception.
MyRichUncle, which specializes in direct-to-consumer loans, stopped offering government-backed loans last Friday, and the response from college aid administrators appears to be barely restrained glee.
“Best news I’ve seen in weeks!” one aid administrator wrote to his colleagues on an electronic bulletin board.
Many aid administrators are angry with MyRichUncle over its business-building tactics, which include an ad on its Web site that promotes private student loans by depicting a lobotomized college student saying: “I didn’t use my brain. I went straight to the financial-aid office.”
MyRichUncle also gained a reputation for encouraging the investigation last year by New York’s attorney general, Andrew M. Cuomo, into the close ties between some loan companies and some college financial-aid officials.
A spokeswoman for MyRichUncle said the company was “pausing” its participation in the federal loan system until the Education Department begins buying up packages of loans from lenders, as promised by the industry-rescue legislation approved by Congress in May. In the meantime, MyRichUncle will continue offering its private student loans, which are issued without any government subsidy and are therefore often more costly to students than federal loans are.
“As always,” said the spokeswoman, Karin Pellmann, “we urge parents and students to thoroughly research their options when making education-finance decisions.”
Brandon Pierce, director of financial aid at Friends University, in Kansas, had one of the more measured responses to MyRichUncle’s announcement, saying he would “wish them the best in the private-student-loan arena.” Mr. Pierce also expressed his hope that MyRichUncle, if it returns to the federal program, “will decide to work with financial-aid administrators in providing students the best products, services, and benefits instead of against them by undermining their knowledge of the industry.” —Paul Basken
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As Tehran has accelerated its uranium enrichment programme instead of suspending it, speculation has mounted that Israel is considering a military attack
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Mothercare, the UK mother-and-baby products retailer, is reaping dividends from its franchisees
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Motorsport is balanced on a cusp where other previously praiseworthy activities – including smoking, elephant shooting and western military imperialism – teetered before becoming uncool, says Jonathan Guthrie
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By campaigning to invest new powers in the forum, the US could show it is serious about spurning arrogant unilateralism, writes William Drozdiak
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Whatever policies the European Central Bank follows over the coming year, they are bound to be found wanting, writes Ciaran O'Hagan
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Beijing's new architecture is not the fruit of home-grown creativity: it is created by foreigners and its function expresses the dead hand of state power, writes Geoff Dyer
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Beijing's new architecture is not the fruit of home-grown creativity: it is created by foreigners and its function expresses the dead hand of state power, writes Geoff Dyer
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The housing meltdown is likely to be extended and 'continues to pose a considerable downside risk to the US economy', the US Treasury secretary said in a speech in London
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China announced a major strengthening of capital controls in an attempt to limit the amount of speculative "hot money" entering the economy, which is frustrating its efforts to contain inflationary pressures
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China announced a major strengthening of capital controls in an attempt to limit the amount of speculative "hot money" entering the economy, which is frustrating its efforts to contain inflationary pressures
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The Pell Institute for the Study of Opportunity in Higher Education has just released the inaugural issue of a peer-reviewed research journal focusing on issues related to college access and student retention.
The institute, the research arm of the nonprofit Council for Opportunity in Education, expects to publish Opportunity Matters: A Journal of Research Informing Educational Opportunity Practice & Programs once a year.
“While there has been a great deal of recent scholarly attention paid to the challenges faced by low-income and first-generation students, there is a paucity of research about which strategies can help disadvantaged students overcome the documented barriers they face,” Jennifer Engle, the editor of Opportunity Matters and the interim director of the Pell Institute, said this week in a written statement announcing the new publication.
“We want,” she said, “to provide a scholarly forum for discussion and dissemination of the latest relevant research and make that research more accessible and useful to opportunity educators.”
In an introductory note in the first issue, Ms. Engle, a senior research analyst at the Pell Institute, said the journal also would examine programs serving minority students and students with disabilities. A chief goal, she said, would be to encourage more researchers to vigorously study opportunity programs and their effects on students.
The first issue includes articles on learning communities, civic engagement, the preparation of students for graduate school, and efforts to improve the college-going rate in Britain. —Peter Schmidt
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In the labyrinthine relations of Turkey's military and the country's politicians, this week's arrests might have a more encouraging import
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Click here for reports and webpage of "Where Will They Lead? 2008" Aspen Institute
Aspen Institute's Center for Business Education has just released two research reports on MBA student attitudes about the role of business in society:
The first surveyed 1943 students at 15 leading business schools in the U.S. , Canada and the U.K. Where Will They Lead? 2008 MBA Student Attitudes about Business & Society was released in April 2008.
The second surveyed 748 students attending leading business schools in China. Where Will They Lead? China 2008 MBA Student Attitudes about Business & Society was released in June, 2008.
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Click here for reports and webpage of "Where Will They Lead? 2008" Aspen Institute
Aspen Institute's Center for Business Education has just released two research reports on MBA student attitudes about the role of business in society:
The first surveyed 1943 students at 15 leading business schools in the U.S. , Canada and the U.K. Where Will They Lead? 2008 MBA Student Attitudes about Business & Society was released in April 2008.
The second surveyed 748 students attending leading business schools in China. Where Will They Lead? China 2008 MBA Student Attitudes about Business & Society was released in June, 2008.
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The huge growth in revenues from Bollywood blockbusters is matched only by the wage demands of Indian film stars, according to the Indian Film Company
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A consortium led by Indian billionaire Anil Ambani is considering taking a majority stake in South African mobile operator MTN to help stave off a potential legal challenge from his elder brother, Mukesh Ambani, to the deal that has been under discussion
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When Balfour Beatty tapped shareholders for £186 million in a surprise placing
in May, it risked being bracketed with all those other FTSE 350 constituents
that this year have called for cash to strengthen stretched balance sheets.
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America officially entered a bear market last night, for the first time in six
years, as the oil price hit a new record high.
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I'm not saying that corporate governance is unimportant. But you can't help
wondering whether the Marks & Spencer shareholders who kicked up so much
fuss over Sir Stuart Rose's elevation to executive chairman a couple of
months ago were missing the big story - the business was about to fall off a
cliff.
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At the time of the last energy shock in the 1970s, Sheikh Yamani, the shrewd Saudi Oil Minister, famously told his greedier Opec colleagues that they would encourage replacement of oil by other energy sources and kill the golden goose that had made them wealthy if they kept pushing the oil price too high. “Remember,” he said, “the Stone Age didn't end because the cavemen ran out of stone.”
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A fugitive hedge fund fraudster who faked his own death to avoid a 20-year
jail term has given himself up after nearly a month on the run.
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India's 4.8m truckers launched an indefinite strike against rising diesel prices and government taxes in an attempt to capitalise on public discontent over inflation
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John McCain has reshuffled his senior campaign staff amid mounting Republican concern at his ability to compete with Barack Obama in November's election
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Texas Tech University has named Guy Bailey, chancellor of the University of Missouri at Kansas City, as its sole finalist for president, the West Texas institution announced today.
Mr. Bailey will take over at a time when Texas Tech’s chancellor, Kent R. Hance, is pursuing an ambitious and controversial plan to expand enrollment by 42 percent, to 40,000 students by 2020. Texas Tech’s departing president, Jon S. Whitmore, made it clear that he was uncomfortable leading an expansion that some faculty members fear could jeopardize academic quality. Mr. Whitmore will become president of San Jose State University on August 1.
Bold growth plans are nothing new to Mr. Bailey, who was provost and executive vice president for academic affairs at the University of Texas at San Antonio from 1999 to 2005 — a period when the enrollment jumped from 18,000 to 27,000 students, according to an article in the Kansas City Business Journal. During that time, Mr. Bailey also doubled external research support and oversaw the hiring of hundreds of tenure-track faculty members, the article noted. —Katherine Mangan
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One of the operators of a notorious diploma mill, Dixie E. Randock, was sentenced today to three years in prison, according to the federal prosecutor’s office in Spokane, Wash. Ms. Randock, along with her husband, Steven K. Randock, had pleaded guilty to fraud-conspiracy charges in March.
The Randocks made millions of dollars selling fake degrees online, usually issued under the name Saint Regis University. The bogus institution was based in Spokane but had ties to the government of Liberia and claimed accreditation through that country’s ministry of education. Representatives of the fake university bribed Liberian officials and created seals and stamps to make their diplomas appear authentic, according to court documents.
A good deal of the credit for bringing down Saint Regis belongs to George Gollin, a physics professor at the University of Illinois at Urbana-Champaign who investigates diploma mills as a pastime and helped bring the fraudulent operation to federal attention. —Thomas Bartlett
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Last year, Princeton economics professor Alan S. Blinder reviewed more than 800 occupations in the United States, and estimated that between 22 and 29 percent of them were potentially offshorable. This year, 901 MBA students of Harvard Business School attempted to replicate Blinder's study, with largely similar results and two further insights.
As HBS research associate Troy Smith and Professor Jan W. Rivkin write in a working paper available for download [PDF], "First, Blinder's notion of assessing the 'potential offshorability' of an occupation is tricky. … [M]ore and more, the laws of economics drive the geography of business activity. Second, we feel that one misses something important when one thinks of moving occupations or jobs offshore. It is actually the tasks or activities associated with an occupation or job that move." Conceiving of offshoring in relation to tasks rather than jobs gives companies a broader global palette with which to manage differences across borders, the authors conclude.
Cases on, among other topics, lessons to be learned from the merger of Canada's Toronto-Dominion Bank and the more customer-service oriented Canada Trust, and the marketing dilemmas of software company ScriptLogic round out the week.
— Martha Lagace
| Authors: | Gary P. Pisano and Roberto Verganti |
|---|
Collaborative innovation has become a hot topic in innovation today. Scholars, consultants, and the business press all urge companies seeking to boost innovative performance to become more "collaborative." Too often, however, companies fail to distinguish among the various choices they face with respect to alternative modes of collaboration. Collaborative innovation can take a wide variety of forms, each with profound implications for innovative performance and the value a firm can capture from innovation. Building on a number of case studies, this paper presents a simple framework for categorizing different collaborative modes. The framework is based on the notion that there are two critical dimensions along which collaborative efforts can be characterized. The first dimension relates to the degree to which the collaborative network is "open" verses "closed." The second dimension relates to the degree to which the governance structure for collaboration is "hierarchical" verses "flat." While discussions of collaborative innovation often take the position that "open" networks are superior to "closed" networks, and that "flat" governance structures are superior to "hierarchical" structures, our framework provides a more nuanced view of the trade-offs. The choice among alternative collaborative modes should be driven by a number of factors including characteristics of the technology, the capabilities of the firm, and the distribution of competences in the environment. We develop a set of guidelines for helping firms choose among collaborative models and discuss critical enabling conditions required for each to work in practice. In the final section of the paper, we discuss how firms can "mix and match" multiple modes of collaboration into coherent "architectures" that lie at the heart of innovation strategy.
| Authors: | V. Kasturi Rangan, Herman B. Leonard, and Susan McDonald |
|---|
The Future of Social Enterprise considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. We trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs.
Download the paper: http://www.hbs.edu/research/pdf/08-103.pdf
| Authors: | Troy Smith and Jan W. Rivkin |
|---|
In a 2007 working paper, Alan Blinder assessed the "offshorability" of hundreds of U.S. occupations and estimated that between 22% and 29% of all U.S. jobs were potentially offshorable. This note reports the results of an exercise in which members of Harvard Business School's MBA Class of 2009 collectively attempted to replicate Blinder's study. Overall, the MBA students' assessments of offshorability matched Blinder's well. Across occupations, the correlation between Blinder's offshorability rating and the students' was 0.60. The students estimated that between 21% and 42% of U.S. jobs are potentially offshorable. Echoing Blinder, the student data suggested a positive correlation between offshorability and education. The student data also revealed a positive or inverted-U relationship between offshorability and wage level, where Blinder found no correlation. While Blinder found a slight wage penalty for the most offshorable jobs, the student data exhibited no evidence of wage depreciation from job contestability due to offshoring.
Download the paper: http://www.hbs.edu/research/pdf/08-104.pdf
| Authors: | Kathleen L. McGinn, Katherine L. Milkman, and Markus Nöth |
|---|
Past research has shown that communication in negotiations heightens social awareness, facilitates coordination, increases the utility for the other's positive outcomes, and thereby leads to more equal payoffs. But the role of specific communication strategies in shaping the terms of agreement is largely ignored in models of bargaining behavior. We propose that communication is used to frame negotiations around a logic of fairness or competition, moving parties toward or away from equal-division agreements. These effects outweigh any overall social cohesion effects due to the mere presence of communication. We offer evidence from two laboratory studies with three-party negotiations to support these hypotheses.
Download the paper: http://www.hbs.edu/research/pdf/08-032.pdf
Harvard Business School Case 508-003
Describes the dilemma facing Advanced Energy (AE), a $6 million nonprofit engaged in energy conservation in North Carolina. Most of the money for its programs comes from a Public Benefits Fund (PBF) enacted by the state legislature. With renewed effort by activists in 2006 to expand AE's role, there was a possibility of the PBF swelling to $50 to $80 million. Naturally, this put AE at conflict with electric utilities wanting to engage in efficiency programs as part of their overall business offering.
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Harvard Business School Case 708-485
In 2007, Allstate was the number two property and casualty insurer in the USA and had enjoyed five years of rapid profit improvement. The question facing CEO Thomas J. Wilson was how to maintain the momentum. This case tracks the evolution of Allstate's strategy over 20 years, examining the logic behind the strategic changes, and the challenges of implementing them. It identifies sources of inertia from within the organization and from without and summarizes the strategic issues facing Allstate in early 2007.
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Harvard Business School Case 108-092
An exercise that takes students through five stages of growth in an entrepreneurial start-up in the medical devices industry: 1) founding, 2) growth, 3) push to profitability, 4) refocusing process, and 5) takeover by new management. At each stage, students must confront tensions in balancing profit, growth and control. Difficulties encountered in the business are due to management's attempts to design and use formal control systems to achieve profit and performance goals.
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Harvard Business School Case 108-091
An exercise that takes students through five stages of growth in an entrepreneurial start-up in the medical devices industry: 1) founding, 2) growth, 3) push to profitability, 4) relocation process, and 5) takeover by new management. At each stage, students must confront tensions in balancing profit, growth and control. Difficulties encountered in the business are due to management's attempts to design and use formal control systems to achieve profit and performance goals.
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Harvard Business School Note 508-090
This note develops a framework for considering the challenges of incorporating marketing input when setting innovation strategy. The framework lays out the possible innovation opportunities a firm can entertain and describes how the customer knowledge gained from conducting market research at the front end of NPD affects which of these opportunities the firm should pursue. Pitfalls in analyzing the customer data are described, along with guidelines on how to overcome them. The impact of competition in the context of setting innovation strategy under market uncertainty is also addressed.
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Harvard Business School Case 308-065
China is an ancient civilization, but it is really a very young country. How we understand modern China is rooted in our understanding of history. Thus, the authors examine several myths surrounding important historical themes, including unity, economic and political isolation, the growth and development of capitalism, internationalization, and governance. Following the dispelling of these myths, the authors then examine several lessons of more recent Chinese history, exploring where this young country has been in its first century.
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Harvard Business School Case 508-114
ScriptLogic is a software company that has built a product portfolio that fits under a 'Point, Click, Done!' umbrella; its products are easy to download, easy to install, and easy to use. The company's online marketing program and inside sales force have been very successful in finding and bringing in new customers, in part because of a laser-like focus on increasing its marketing ROI. As ScriptLogic looks towards its next phase of growth, however, it is becoming clear that some changes need to be made in order to take full advantage of its growing product portfolio. Students debate the merits of going after new customers by building an enterprise sales force or mining the existing customer base with an inside sales force that already has a lot on its plate.
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Harvard Business School Case 808-112
Describes a set of key strategic decisions facing the scientific founder and CEO of a promising, early stage bio-pharmaceuticals company. Should the company establish a proposed alliance with a pharmaceutical firm? Should it create a nutraceuticals business in parallel to its effort to develop anti-aging therapeutics? And, should it in-license a second drug development candidate?
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Harvard Business School Case 208-137
Vikram Akula, CEO of SKS Microfinance, seeks a venture capital investment to fund his firm. SKS, one of the largest and fastest growing microfinance institutions in India, is a profitable, for-profit institution with a social mission. In what is one of the first commercial financing deals in the world, Akula must decide at what value to sell equity in SKS, and to whom to sell it. The case focuses on valuation, which is difficult because at the time there are no publicly traded comparable companies, and the strategic aspects of raising money.
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Harvard Business School Case 708-023
Describes the economics, technology, and politics of the oil sands industry, focusing on one of the industry's leading firms. Oil sands deposits in Alberta represent a potentially vast reserve of hydrocarbons, but the extraction, refining, and transportation challenges are formidable, and the environmental consequences of large-scare oil sands development potentially severe. Encourages students to examine Suncor's strategic positioning and cost structure, and the challenges that the firm's leaders confront as of 2007.
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Harvard Business School Case 308-057
After fifty-five years in the semiconductor industry, Morris Chang, founder and Chairman of Taiwan Semiconductor Manufacturing Company (TSMC), was seeing a change. After four decades of regular double-digit growth the industry was still growing-but now at a much slower pace. In 2004, TSMC entered the China market, the world's second largest for semiconductors, by building a fabrication plant in Shanghai. Was China the market opportunity in which TSMC could bet on for expansion, or should its strategy be to focus on new product development and innovation?
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Harvard Business School Case 108-005
The case series illustrates the role of performance measurement and analytics in translating TD-Canada Trust's service model of "comfortable banking" into operational terms. In 2000, in a banking market where consumers and regulators were typically hostile to mergers and acquisitions, Canada's fifth largest commercial bank, Toronto-Dominion Bank (TD Bank), undertook a merger with a relatively small trust company, Canada Trust, which was known for exceptional customer service. To assuage the concerns of regulators, consumer groups, and newly acquired customers, TD Bank made several public pronouncements promising to maintain Canada Trust's high customer service standards and to deliver a "comfortable banking" experience. Chris Armstrong, executive vice president and chief marketing officer, was now faced with the task of defining the comfortable banking model and consistently delivering on these promises. Armstrong and his team undertake a systematic analysis of the drivers of customer satisfaction and branch network profitability and, based on the results, must decide how to change TD-Canada Trust's branch compensation and performance reporting systems to consistently, and profitably, deliver a "comfortable banking" experience.
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Harvard Business School Case 708-036
By March 2008, the U.S. Government and the U.S. Federal Reserve Board had taken various policy measures over the last few months to tackle the subprime mortgage crisis that threatened to drag the economy into a recession. The Bush administration approved a fiscal stimulus package exceeding $150 billion. Interest rates had been repeatedly cut at the fastest pace in decades, to 2.25% as of March 2008. The Fed, in an unprecedented move, helped JPMorgan Chase to take over Bear Stearns, which was on the brink of collapse. Yet as the global economy faced slower growth stemming from the U.S. mortgage crisis, policy makers were caught in an intense debate over what the 'right' solution would be, and the implication of these policies on global imbalances.
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| Authors: | Rawi Abdelal, Ayesha Khan, and Tarun Khanna |
|---|---|
| Publication: | Harvard Business Review (forthcoming) |
The combination of the gigantic American trade deficit and the price of oil at more than $130 per barrel (at press time) have created an inevitable pool of financial liquidity among oil exporters in the Arabian Gulf. But this era of petrodollar surpluses is markedly different from the last one. In the 1970s, the member states of the Gulf Cooperation Council—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—outsourced the management of their petrodollars to American and U.K. bankers. This time around, they have adopted active investment and development strategies: They are investing heavily in large Western organizations as well as in emerging markets in Africa and India. They are spending lavishly at home to establish institutional infrastructures, create free-trade zones for manufacturing and services, and build recreational facilities that will attract businesses, skilled knowledge workers, and tourists. All of this is destined to have long-run effects not just on their local economies but also on regional and international trading, argue the authors. In fact, the authors say, the actions of the GCC states are pulling the Gulf closer than it has ever been to the center of the international financial system. In this article, the authors consider how the economic landscape in the West will be affected by oil exporters' new investment strategies and interests over the next decades, how proximate emerging markets will be reshaped, and finally, how the GCC home environment itself will be dramatically reconfigured.
| Authors: | Russell A. Eisenstat, Michael Beer, Nathaniel Foote, Tobias Fredberg, and Flemming Norrgren |
|---|---|
| Publication: | HBS Centennial Issue. Harvard Business Review 86, nos. 7/8 (July - August 2008) |
Managing the tension between performance and people is at the heart of the CEOs job. The firms they lead are at once economic organizations whose survival and prosperity depends on delivering superior value in an unforgiving global market place and social institutions that profoundly shape the lives and prospects of their employees. All too many leaders view their role through one or the other lenses, though in the strong market for corporate control that has emerged in the last twenty years shareholder value dominates. A study of CEOs in Americas and Europe selected because their companies are outperforming their competitors and also achieving commitment reveals a mindset and managerial practices discussed in this article that they employ to simultaneously solve for performance and commitment.
| Authors: | Ranjay Gulati and Jackson Nickerson |
|---|---|
| Publication: | Organization Science 19, no. 2 (March - April 2008): 1-21 |
This paper looks at when and how preexisting interorganizational trust influences the choice of governance and in turn the performance of exchange relationships. We theorize that preexisting interorganizational trust complements the choice of governance mode (make, ally, or buy) and also promotes substitution effects on governance mode choice while impacting exchange performance. We evaluate hypotheses using a novel three-stage switching regression model and a sample of 222 component-sourcing arrangements of two assemblers in the automobile industry. Analysis of our data broadly supports our hypotheses. High levels of preexisting interorganizational trust increased the probability that a less formal, and thus less costly, mode of governance was chosen over a more formal one. This finding suggests a substitution effect of interorganizational trust on governance mode choice that in turn shapes exchange performance. We also found a complementary effect of trust on performance: Regardless of the governance mode chosen for an exchange, trust enhanced exchange performance. Additional evidence of the complementary effect of trust on performance was that trust somewhat reduced interorganizational conflict.
| Authors: | Daniel J. Isenberg |
|---|---|
| Publication: | Innovations: Technology, Governance, Globalization 3, no. 1 (winter 2008) |
I first met Vinod Kapur in the summer of 2006 when I was conducting research in India on a case for my Harvard Business School class on international entrepreneurship. A friend of mine had invited me to attend the ceremony for the first Innovations for India Awards in Mumbai. Several Indian businesspeople received the award, but I was particularly struck by a dignified silver-haired gentleman who took the stage to receive the award for social innovation. He then proceeded to eloquently describe the development of a business concept centered on the rural poor of India, which was based on a specially bred "superchicken" that was twice as big and five times as productive as the typical backyard chicken. The incongruity of Vinod Kapur's elegant appearance and his subject matter struck me as fascinating, but the most intriguing element of the presentation was how he arranged an entire system of distribution to deliver the hatched chicks to these remote villagers and did so in a way that enabled everyone to profit in concrete financial terms, from Keggfarms itself to the rural villagers. Almost a million households are today affected by Keggfarms, and the numbers are constantly rising.
Download the paper: http://www.mitpressjournals.org/doi/abs/10.1162/itgg.2008.3.1.52
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The provost of North Carolina State University is defending a pay increase of nearly $80,000 awarded this week to Mary Easley, who is the wife of Gov. Michael F. Easley and has been an “executive in residence” and senior lecturer at the university for three years. The increase, which comes with new responsibilities and a five-year commitment to the institution, brings her pay to $170,000, according to The News & Observer.
“Her salary is within the range of similar management and law faculty and administrators at N.C. State and other universities,” the provost, Larry Nielsen, said in a written statement, the Raleigh newspaper reported.
Ms. Easley previously was a law professor at North Carolina Central University, in Durham. At N.C. State, she has directed the university’s principal speakers program and run a spring-semester course called “Public Law for Public Administrators,” among other duties. Her new responsibilities will include directing and expanding a Public Safety Leadership Initiative, and helping develop partnerships with legal professionals and law schools in the area.
According to the Carolina Journal, which first reported the pay raise, Ms. Easley’s new salary is substantially higher than the university’s average for full professors, and nearly $35,000 more than her husband makes as governor. She rejected the criticism of her new contract, telling the television station WRAL that “negative stories and exaggerations and partial stories go with the territory, and that’s part of public life.” —Charles Huckabee
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American Airlines, the US airline which is close to seeking a merger with
British Airways, has told staff thta it will cut 7,000 jobs by the end of
the year, as it grounds aircraft in a bid to mitigate the impact of soaring
fuel prices.
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The FTSE 100 today recovered after falling into bear market territory in early
trading as the US revealed it had managed to maintain its jobless rate at
5.5 per cent in June.
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Ălvaro Uribe, Colombia's president, secured one of the most significant triumphs of his political career when troops freed Ingrid Betancourt and 14 other hostages held by the leftwing Farc guerrillas
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The agreement, still subject to final approval, removes a big obstacle to a defence system that is controversial within Washington and viewed with suspicion by Russia
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America's anti-trust regulators have given partial approval to BHP Billiton's
$38 billion ($£19.1 billion) offer for Rio Tinto but the deal is still
awaiting the opinion of the European Commission, expected to prove a tougher
hurdle.
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Banks and building societies are set to further tighten the screws on
borrowers as a Bank of England survey revealed a growing reluctance to lend
and surprise at the rising rate of customers defaulting on home loan
payments.
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Increasing numbers of hard-pressed homeowners and tenants are turning to
personal loans and credit cards to fund their housing costs.
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Vital west coast ports in the US could face significant disruption after a key contract between workers and employers expired and unions refused to allow a temporary extension
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Chrysler has signed an agreement with China's Great Wall Motor to study the feasibility of sharing each other's distribution networks, components, and technology
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The European Central Bank (ECB) today defied deepening gloom over the
eurozone's economic prospects and intense political pressure when it pressed
ahead with a rise in interest rates to their highest level for almost seven
years.
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ScS Upholstery, the sofa retailer, has become the latest British victim of the
credit crunch as it was put into administration today and its trading arm
sold in a private equity deal.
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New Delhi — An Indian industry group has estimated that students here spend $2.3-billion annually on coaching to prepare for the entrance tests to the prestigious Indian Institutes of Technology and other engineering colleges, The Times of India reported today.
“The amount of money which goes to these institutions is enough to open 30 to 40 IIT’s with lots of seats that can ensure admission to average candidates,” Sajjan Jindal, president of the Associated Chambers of Commerce and Industry, told the newspaper. Mr. Jindal urged the deregulation of Indian higher education, saying that the chief beneficiaries of the current system are big coaching centers.
A spokesman for the industry group said its figures were based on the assumption that 600,000 students attend coaching classes every year and that the average cost per student is $3,950. At least half the students who sit for the exams use coaching centers to beat the cutthroat competition, the spokesman said. A record 320,000 applicants took the entrance exam for the elite IIT undergraduate engineering program in April.
Some 80,000 to 90,000 students go abroad for higher education, leading to a high foreign-exchange outflow, the industry group said. “If quality institutions are provided, a large number of students will stay back and contribute to the nation,” the group said, adding that private players and big industrial groups should be allowed to contribute to higher education. —Shailaja Neelakantan
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The European Central Bank raised eurozone interest rates by a quarter percentage point as it stepped up efforts to control mounting inflation pressures
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Chancellor Alistair Darling and Henry Paulson, the US Treasury Secretary,
today admitted mistakes by regulators, banks and investors had led to the
credit crunch but fell short of critising the huge pay packets awarded to
failed financial executives.
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The University of Chicago is offering cash advances and other assistance to thousands of its graduate students after losing one of its major lending partners, the Illinois Student Assistance Commission.
The state-chartered commission has found itself unable to renew its line of credit, due to the current economic conditions, the Chicago Tribune reported today. That’s forced an end to its “school as lender” relationship with the university, leaving some 3,000 students, or about a third of its graduate enrollment, suddenly needing a new lender, the newspaper said.
“The majority of our students will be able to get loans from other providers,” the university’s dean of students, Kimberly Goff-Crews, told the Tribune. But, she said, “they will probably have to pay fees.”
School as lender is an option in which graduate schools lend money directly to their students, then quickly sell the loans to a partner loan company for a profit. The federal government has already been phasing out the program, in response to concerns that it constitutes an improper kickback to colleges by lenders to the disadvantage of the students.
University of Chicago officials have said that students who have difficulties finding new loans before the start of the fall semester can obtain a cash advance from the university to cover living expenses, the Tribune reported. —Paul Basken
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A weak Hong Kong stock market has prompted the Macao gaming company controlled by tycoon Stanley Ho to limit its initial public offering to less than half of the $1bn it originally sought to raise in January
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Barratt Developments is about to make about 1,000 people redundant, taking job
losses in the construction industry to nearly 2,500 in just two gloomy days.
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The US lost jobs in June for the sixth month in a row while jobless numbers remained at an elevated level, signalling an ongoing deterioration in the labour market and helping to push back thoughts of a hike in interest rates
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Italian-American groups and the Italian ambassador to the United States are working to save the Italian Advanced Placement test, The Washington Post reported this morning.
The College Board announced this spring that it would eliminate the test after the 2008-9 academic year, along with the exams in French literature, Latin literature, and computer-science AB, because of low participation. While other AP tests are available in French, Latin, and computer science, there is only one Italian test. It has been offered since 2006.
The Italian ambassador, Giovanni Castellaneta, and the College Board’s president, Gaston Caperton, announced in June that a task force had been formed to attempt to raise the money needed to continue the test, according to the Post. Italian Embassy officials told the newspaper they expected to learn this month how much money was needed. They said the money would have to be raised by October. —Beckie Supiano
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British Airways flights are now taking off with almost a quarter of their
seats empty after higher airfares and a slowing economy led to 87,000 fewer
passengers using the airline last month.
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If investors in India's beleaguered stock exchange were looking for a sign of the times, they were provided with one this week by DLF, the country's biggest publicly listed developer
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Google
car causes chaos in Rome
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Big problems will come with the Olympics. Chinese scholars have proposed that the Chinese and Taiwanese teams enter the stadium together at the opening ceremony
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Big problems will come with the Olympics. Chinese scholars have proposed that the Chinese and Taiwanese teams enter the stadium together at the opening ceremony
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Instead of helping to clear Oklahoma’s $225-million backlog of matching-gift obligations, a July 1 moratorium enacted by the state Legislature on the program has set back the state even more.
That’s because the June 30 deadline for gifts to qualify for matching funds spurred $128-million in new donations to the state’s universities, The Oklahoman reported today. Now the backlog stands at $353-million.
In the two months after the moratorium was enacted, the University of Oklahoma raised $61-million for endowed chairs. Oklahoma State University raised more than $66.8-million, not counting a $100-million gift this spring from the billionaire oilman T. Boone Pickens.
The backlog could take years to clear, the newspaper reported. Until it is fulfilled, the moratorium will remain.
“At some point, you just can’t keep up with it,” said Rep. Ken Miller, chairman of the state’s House Appropriations and Budget Committee. —Kathryn Masterson
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First off, let me say how underated the MBA program is at the University of Utah. Not to sound too pedantic, but the faculty are amazing, the graduate staff offices stay afloat despite frequent turnover, and the students are extremely brig...
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America’s Internal Revenue Service (IRS) has solicited the help of some of the
world’s biggest accountants to help broaden its campaign against tax
dodgers, two days after securing the unprecedented backing of a federal
court to track down UBS customers suspected of evading US taxes.
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Bank raises key interest rate 25 basis points to 8.75 per cent
in a move designed to control soaring inflation, which hit a 21-month high in June
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MPs are to examine the role of speculators in driving oil prices to their
current high levels.
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Manmohan Sing is ready to risk snap elections to finalise a nuclear energy pact that is at the heart of a domestic political crisis threatening to break apart his coalition government
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Manmohan Singh is ready to risk snap elections to finalise a nuclear energy pact that is at the heart of a domestic political crisis threatening to break apart his coalition government
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The contract underpinning the controversial planned investment by Carlyle Group in a Chinese machinery maker has lapsed, raising the prospect that the three-year-old deal will have to be revised again to secure regulatory approval
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On the face of it, China might not seem the obvious place to invest at the moment. Yet that has not prevented a record flood of capital inflows
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On the face of it, China might not seem the obvious place to invest at the moment. Yet that has not prevented a record flood of capital inflows
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Millions of bank customers face a new threat to their money after it emerged
yesterday that hackers had cracked PIN codes used in cash machines.
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| Published: | July 3, 2008 |
| Paper Released: | June 2008 |
| Authors: | V. Kasturi Rangan, Herman B. Leonard, and Susan McDonald |
This paper considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. The authors trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. They further examine how these organizations can best access the untapped resources by demonstrating mission performance, and then propose three potential scenarios, outlined below, for how this sector might evolve. Key concepts include:
The Future of Social Enterprise considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. We trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. We examine how these organizations can best access the untapped resources by demonstrating mission performance and then propose three potential scenarios for how this sector might evolve:
Consolidation: In this scenario, funding will keep growing in a gradual, linear fashion and organizations will compete for resources by demonstrating performance, with a focus on efficiency. The sector will consolidate, with some efficient organizations gaining scale, some merging and then growing, and some failing to achieve either scale or efficiency and eventually shutting down.
Entrepreneurial: In a more optimistic future, existing and new enterprises will apply strategies to achieve and demonstrate performance, improving efficiency and effectiveness and attracting new funding sources. More organizations will enter a reformed, competitive field of social change with new entrepreneurial models, established traditional organizations, and innovative funding strategies fueling widespread success.
Expressive: Rather than focusing exclusively on performance, funders and organizations may view their investment as an expressive civic activity. As much value is placed on participating in a cause as on employing concrete measures of impact or efficiency. In this scenario, funding will flow as social entrepreneurs experiment with new models based on a range of individual priorities and relationships.
General Management Filed under: Business Schools, Deans, management, Management education
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| Published: | July 3, 2008 |
| Author: | Jim Heskett |
Recent books have examined every aspect of leadership. Few have addressed challenges for those of us who follow, that is to say everyone at some time in our lives. There are a few exceptions. Abraham Zaleznik wrote about "The Dynamics of Subordinacy" more than four decades ago. Fifteen years ago, Jack Gabarro and John Kotter published a piece called "Managing Your Boss," in which they advocated: (1) understanding your boss and his or her "goals and objectives, pressures, strengths, weaknesses, blind spots, and preferred work styles"; (2) understanding yourself and your needs, including "strengths and weaknesses, personal style, and predisposition toward dependence on authority figures"; and (3) developing and maintaining a relationship that is centered around such things as frequent communication, an understanding of mutual expectations, dependability and honesty, and selective use of "your boss's time and resources."
Now Barbara Kellerman in her new book, Followership, asks where leaders would be without good followers. This question may be particularly significant in an age when followers find it easier to organize by means of the Internet at the same time that, in Kellerman's opinion, "cultural constraints against taking on people in positions of power, authority, and influence have been weakened." Kellerman goes on to say: "The fact is that followers are gaining power and influence while leaders are losing power and influence." In fact, in recent years we have seen management experiments with teams in which it is difficult to identify a leader.
Kellerman describes five types of followers: isolates (completely detached), bystanders (observers only), participants (engaged), activists (who feel strongly and act accordingly, both with and against leaders), and diehards (deeply devoted). Dismissing the first two groups as antithethical to good followership, and by extension, potentially supportive of bad leadership (as in Nazi Germany), she focuses on behaviors of the other three types. Of these three, "participants" seem to me to offer the most potential for long-term, productive relationships between subordinates and their bosses, particularly in large organizations. Participants work hard either in support of or against the policies and practices of their leaders. As Kellerman puts it, "they care enough … to try to have an impact."
Clearly it's in the best interests of successful leaders to understand and capitalize on the needs of such subordinates. Leaders need to be constantly aware of something that several of us have discovered in our research: Every decision made by a leader—particularly decisions involving hiring, recognizing, and firing people—is judged by 10 or 15 subordinates, who regard the "fairness" of those decisions as one of the most important factors in the quality of their work life.
This observation raises some questions for us. As a follower, what advice would you give to other followers wishing to have an impact on their jobs and organizations? As a leader, what do you do to foster good followership? Why isn't followership addressed by business school curricula along with leadership? Does it belong in a course of study? Or does this just run the risk of deteriorating into a discussion of how to manipulate your boss? What do you think?
John J. Gabarro and John P. Kotter, "Managing Your Boss," Harvard Business Review, May-June, 1993
Barbara Kellerman, Followership: How Followers Are Creating Change and Changing Leaders (Boston: Harvard Business Press, 2008)
Abraham Zaleznick, "The Dynamics of Subordinacy," Harvard Business Review, May-June, 1965
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Rod Wilkes, Chief Executive of the CIM said:"CIM is all about marketing excellence and recognising professional development, which is why we fully endorse the DPMAR programme from the ABS. The programme is providing marketers from within the b
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This prestigious honour will be received later in the year at an official ceremony at Buckingham Palace.Commenting on being named in the QueenÂ’s Birthday Honours List, Professor Michael Osbaldeston, said: "I am delighted to receive this award
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UK Business Schools have grown rapidly over the last forty years. Despite a tentative start, where many commentators (including some vice-chancellors) appeared to question the status of management as an academic discipline, business schools have no
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The first session is due to start on the 9th and 10th of October 2008 and will focus on an overview for marketers in business schools and higher education, the first lunch-to-lunch session willl focus on how to preapre a winning integrated market
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In partnership with EFMD: Programme for Business School Deans.The first cohort has recently visited six business schools Boston including: Babson, Bentley, Boston University ,Harvard, MIT Sloan and North Eastern.The second IDP cohort starts in Dec
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Companion is the highest category of membership and is awarded only to individuals who have a distinguished record of achievement in senior management. Companions form an exclusive group of the InstituteÂ’s membership and include other leading busin
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By competing in Start Up Stars you'll raise your business profile and could win ÂŁ50,000 click here to access further information.
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The IDP comprises three modules of 2-3 days each in different countries. The sessions focus on high level strategic discussions, benchmarking and new developments in the global business and management education field. A cohort of 22 business school
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Please click here to access the new Guide.
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Last year, Rochdale entrepreneurs Paul and Jerry set up JPM ECO Logistics Limited, an eco-friendly haulage company which runs its vehicles on 100 per cent bio-diesel. Although they knew they had a sound business premise, they admit they weren't bus
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Please click here to read our formal response, please direct any enquiries to Julie Davies.
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The ÂŁ6 million programme has six
years experience in helping people in the most disadvantaged areas of the
English regions set up successful and sustainable businesses and the results of
the evaluation highlight how much of a positive impact t
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Members of the ABS Executive are meeting with Rama Thirunamachandran, Director for Research and Knowledge Transfer, HEFCE, and Alan Palmer, Policy Officer, Learning and Teaching, HEFCE, on 15th January 2008 at ABS to discuss the Research Excellence F
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Businesses in the EU and Russia are looking forward to official talks in the expectation that formal links between the two economies might match the maturing business relationship, say Nils Andersen and Anatoly Chubais
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A safer way of helping the poor would be through increases in taxes at all incomes or targeted cuts in spending, writes Samuel Brittan
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Japan's pre-eminent interest lies in working to extend and strengthen the rules-based international order to draw in China and other rising powers. More than anything else, this part of the world needs a robust mutual security system, writes Philip Stephens
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Japan's pre-eminent interest lies in working to extend and strengthen the rules-based international order to draw in China and other rising powers. More than anything else, this part of the world needs a robust mutual security system, writes Philip Stephens
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A group of ruling party politicians advising Yasuo Fukuda has called for the setting-up of a $93.7bn sovereign wealth fund
to improve returns to the
underperforming public pension fund
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The French president appears torn between his reflexes to intervene and his instinct to let people shape their destiny, writes John Thornhill
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Markets were relieved by a less hawkish tone from the European Central Bank, which damped fears of further rises to come
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A rich acquaintance asked for, and received, a refund for the time one of his children had spent at home during term time, writes Jane Owen
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You might recall a blog entry that I posted about Business@Work, a BusinessWeek effort to survey readers and have them decide the most important issues facing people in the office today. The results came back a...
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State organizations affiliated with Ward Connerly’s American Civil Rights Institute said today they had gathered more than enough signatures to get measures limiting affirmative-action preferences on the November ballot in Arizona and Nebraska.
With petitions having been submitted on behalf of a similar ballot measure in Colorado in March, there appears to be a good chance that three states will vote this fall on the proposals, all of which would bar public colleges and other state and local agencies from granting affirmative-action preferences in employment, contracting, and decisions related to education. Mr. Connerly, the institute’s chairman, had hoped to put similar measures on the ballot in Missouri and Oklahoma as well, but his organizations in those states failed to gather enough signatures before deadlines earlier this year.
Mr. Connerly’s Arizona organization, the American Civil Rights Initiative, announced today that it had submitted more than 330,000 petition signatures to state officials, well over 100,000 more than required under state law. His Nebraska organization, the Nebraska Civil Rights Initiative, announced that it had submitted more than 167,000 signatures, or at least 54,000 more than required.
A group that has opposed Mr. Connerly’s efforts in several states, the Coalition to Defend Affirmative Action, Integration, and Immigrant Rights and Fight for Equality by Any Means Necessary, announced on Sunday that it would file a lawsuit — as well as complaints with various state officials — alleging that the petition signatures in Arizona had been gathered fraudulently. The group, known as Bamn, has filed a similar legal challenge to the signatures submitted in Colorado, which state officials certified in March. —Peter Schmidt
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A mood of jubilation swept across the country following the dramatic rescue of Ingrid Betancourt and 14 others from Farc guerrillas after more than six years in captivity
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The University of Evansville’s president was arrested last night for driving while intoxicated, and in a statement released today by the university, he acknowledged making “a very serious mistake,” apologized, and pledged to “take every necessary action to ensure that it doesn’t happen again,” according to the Evansville Courier & Press.
The president, Stephen G. Jennings, who is 61, will participate in a special program for first-time drunken-driving offenders. He also will face charges that include operating a vehicle while intoxicated and refusing a chemical test, the newspaper reported.
According to an affidavit filed by the police officer who made the arrest, Mr. Jennings weaved among lanes, drove over a median, and almost hit several barrels marking off a construction site. When he pulled the car over, the officer said Mr. Jennings responded to questions with slurred speech, initially stating he had not consumed alcohol, but later saying he had drunk two beers. Mr. Jennings then failed three physical tests of his sobriety, the police officer said, and a breath test indicated a blood-alcohol content of 0.14 percent, nearly twice the legal limit in Indiana.
Mr. Jennings, who has been president of the university since 2001 and previously was president of Oklahoma City University, was released from custody this morning. —Andrew Mytelka
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Reliance Industries said it had taken the first formal step towards enforcing a claimed right of first refusal on the sale of shares in Indian mobile operator Reliance Communications to MTN
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Google has been ordered to hand over details of YouTube users' viewing habits
by a judge presiding over a copyright infringement case against the site.
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Aspen Institute Guide to Socially Responsible MBA Programs: 2008-2009
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Families facing escalating household bills are turning to video games on the
Nintendo Wii and PlayStation 3 for affordable fun.
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Chinese spending on technical consumer equipment is set to overtake that of western Europe some time in 2009-2010, with revenues set to exceed $100bn by 2009
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Britain is increasing financial assistance to ÂŁ480m by 2011 to channel more cash into areas on the Afghan border that are plagued by Islamist militancy
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MIT Sloan has posted its 08-09 essay questions. Sloan's deadlines
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In a show of conciliation between the long-time rivals that could bring large numbers of mainland Chinese visitors to the island, historic flights between Taiwan and China have begun
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In a show of conciliation between the long-time rivals that could bring large numbers of mainland Chinese visitors to the island, historic flights between Taiwan and China have begun
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The higher-than-expected rate – the country's highest in 14 years – triggered a sell-down of the peso on the exchange market, prompting the central bank to intervene
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Any MBA programs are especially been designed to furnish its students with required knowledge, be it theoretical or practical th...
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The endgame of a 10-month stalemate could mean early elections, political realignment for the Congress party-led coalition or the anti-climactic end to an elaborate game of chicken
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Berlin has signed its first tax information exchange agreement with an offshore centre, as the crackdown on secrecy continues in the wake of the Liechtenstein scandal
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Zimbabwe's political crisis deepened as Robert Mugabe said there could be no dialogue with the opposition unless it accepted his victory in last week's presidential run-off
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The Dutch ban on tobacco smoking – even in 'coffee shops' that serve cannabis – proves yet again that nanny knows best, writes Simon Kuper
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Tehran has sent a written response to an offer from the world's leading powers regarding its nuclear programme, amid hopes in the west that formal negotiations could begin
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Australian Federal Treasurer Wayne Swan has told the Australia-China Business Council that Canberra was examining Chinese bids for Australian miners and there was no truth in claims there was a policy of blocking or delaying Chinese applications for investment approval
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The high street has been expanding for so many years that some contraction is due, and that reality is finally sinking in to companies, writes John Gapper
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Generosity often means relinquishing power. It does not mean assigning armies of the less wealthy to tasks of one's own devising, writes Christopher Caldwell
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Europe's divisions over inflation were highlighted on Friday when José Manuel Barroso, European Commission president, defended the European Central Bank against political critics
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Israel's security officials this week saw that not even the highest walls and strictest checks can stop an attacker who lives in their midst, as a resident of the city killed three Israelis with a bulldozer
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Competitors and former investors in Northern Rock have filed complaints with European antitrust regulators, who are looking into the legality of the government's rescue plan for the stricken lender
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The move from the left seems to be working but policy refinements may just look like flip-flops, reports Andrew Ward
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A top Beijing security official has warned that hostile movements are intensifying their efforts to sabotage next month's games
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A top Beijing security official has warned that hostile movements are intensifying their efforts to sabotage next month's games
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With his blockbuster bestseller The Innovator's Dilemma, Clayton M. Christensen created the classic model for growth and change in corporations and cultures. Now, taking a cue from Bill Gates' 2005 critique of the American school system, he applies his theory of "disruptive innovation" to a much-needed evolution in educational technologies-offering new opportunities and challenges for the business community. Christensen brilliantly shows how tomorrow's innovations in education will change the way the world learns-and what businesses can do to meet those changing demands today.
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With his blockbuster bestseller The Innovator's Dilemma, Clayton M. Christensen created the classic model for growth and change in corporations and cultures. Now, taking a cue from Bill Gates' 2005 critique of the American school system, he applies his theory of "disruptive innovation" to a much-needed evolution in educational technologies-offering new opportunities and challenges for the business community. Christensen brilliantly shows how tomorrow's innovations in education will change the way the world learns-and what businesses can do to meet those changing demands today.
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| Published: | July 3, 2008 |
| Paper Released: | June 2008 |
| Authors: | V. Kasturi Rangan, Herman B. Leonard, and Susan McDonald |
This paper considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. The authors trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. They further examine how these organizations can best access the untapped resources by demonstrating mission performance, and then propose three potential scenarios, outlined below, for how this sector might evolve. Key concepts include:
The Future of Social Enterprise considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. We trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. We examine how these organizations can best access the untapped resources by demonstrating mission performance and then propose three potential scenarios for how this sector might evolve:
Consolidation: In this scenario, funding will keep growing in a gradual, linear fashion and organizations will compete for resources by demonstrating performance, with a focus on efficiency. The sector will consolidate, with some efficient organizations gaining scale, some merging and then growing, and some failing to achieve either scale or efficiency and eventually shutting down.
Entrepreneurial: In a more optimistic future, existing and new enterprises will apply strategies to achieve and demonstrate performance, improving efficiency and effectiveness and attracting new funding sources. More organizations will enter a reformed, competitive field of social change with new entrepreneurial models, established traditional organizations, and innovative funding strategies fueling widespread success.
Expressive: Rather than focusing exclusively on performance, funders and organizations may view their investment as an expressive civic activity. As much value is placed on participating in a cause as on employing concrete measures of impact or efficiency. In this scenario, funding will flow as social entrepreneurs experiment with new models based on a range of individual priorities and relationships.
General Management Filed under: Business Schools, Deans, management, Management education
Posted by Management Education Update
| 0 comment(s)
| Published: | July 3, 2008 |
| Author: | Jim Heskett |
Recent books have examined every aspect of leadership. Few have addressed challenges for those of us who follow, that is to say everyone at some time in our lives. There are a few exceptions. Abraham Zaleznik wrote about "The Dynamics of Subordinacy" more than four decades ago. Fifteen years ago, Jack Gabarro and John Kotter published a piece called "Managing Your Boss," in which they advocated: (1) understanding your boss and his or her "goals and objectives, pressures, strengths, weaknesses, blind spots, and preferred work styles"; (2) understanding yourself and your needs, including "strengths and weaknesses, personal style, and predisposition toward dependence on authority figures"; and (3) developing and maintaining a relationship that is centered around such things as frequent communication, an understanding of mutual expectations, dependability and honesty, and selective use of "your boss's time and resources."
Now Barbara Kellerman in her new book, Followership, asks where leaders would be without good followers. This question may be particularly significant in an age when followers find it easier to organize by means of the Internet at the same time that, in Kellerman's opinion, "cultural constraints against taking on people in positions of power, authority, and influence have been weakened." Kellerman goes on to say: "The fact is that followers are gaining power and influence while leaders are losing power and influence." In fact, in recent years we have seen management experiments with teams in which it is difficult to identify a leader.
Kellerman describes five types of followers: isolates (completely detached), bystanders (observers only), participants (engaged), activists (who feel strongly and act accordingly, both with and against leaders), and diehards (deeply devoted). Dismissing the first two groups as antithethical to good followership, and by extension, potentially supportive of bad leadership (as in Nazi Germany), she focuses on behaviors of the other three types. Of these three, "participants" seem to me to offer the most potential for long-term, productive relationships between subordinates and their bosses, particularly in large organizations. Participants work hard either in support of or against the policies and practices of their leaders. As Kellerman puts it, "they care enough … to try to have an impact."
Clearly it's in the best interests of successful leaders to understand and capitalize on the needs of such subordinates. Leaders need to be constantly aware of something that several of us have discovered in our research: Every decision made by a leader—particularly decisions involving hiring, recognizing, and firing people—is judged by 10 or 15 subordinates, who regard the "fairness" of those decisions as one of the most important factors in the quality of their work life.
This observation raises some questions for us. As a follower, what advice would you give to other followers wishing to have an impact on their jobs and organizations? As a leader, what do you do to foster good followership? Why isn't followership addressed by business school curricula along with leadership? Does it belong in a course of study? Or does this just run the risk of deteriorating into a discussion of how to manipulate your boss? What do you think?
John J. Gabarro and John P. Kotter, "Managing Your Boss," Harvard Business Review, May-June, 1993
Barbara Kellerman, Followership: How Followers Are Creating Change and Changing Leaders (Boston: Harvard Business Press, 2008)
Abraham Zaleznick, "The Dynamics of Subordinacy," Harvard Business Review, May-June, 1965
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The Times: " The following case studies show all the business studies theory you need to know in practice. By studying real life business case studies, you will see how business & marketing work and therefore learn quicker.
Each
of the following case studies show a different aspect to business and
marketing that you can use as a revision tool for your business studies."
 | View:
| Embracing and pursuing changeThis case study shows how AEGON has responded to its changing business environment to achieve its goals. |
 | View:
| Corporate Social ResponsibilityThis case study describes how the work Amway does with UNICEF supports its Corporate Social Responsibility strategy. |
etc. etc.
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The Times: " The following case studies show all the business studies theory you need to know in practice. By studying real life business case studies, you will see how business & marketing work and therefore learn quicker.
Each
of the following case studies show a different aspect to business and
marketing that you can use as a revision tool for your business studies."
| | View:
| Embracing and pursuing changeThis case study shows how AEGON has responded to its changing business environment to achieve its goals. |
| | View:
| Corporate Social ResponsibilityThis case study describes how the work Amway does with UNICEF supports its Corporate Social Responsibility strategy. |
etc. etc.
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US National Groups Offering Business School Scholarships:
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US National Groups Offering Business School Scholarships:
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BAA’s controversial plans for a second runway at Stansted will be sent to a
public inquiry by ministers this week - but the company will at the same
time be given permission for a big increase in passenger numbers at the
Essex airport.
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In the old days the bellwether of the British economy was ICI, then the
country’s biggest industrial company. If ICI was hurting, so was the rest of
the economy.
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BRITISH companies will be able to admit bribery offences in return for more
lenient sentences under a plea bargain-style system to be put forward by the
Serious Fraud Office (SFO) this week.
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THE Royal Bank of Scotland (RBS) is holding discussions about merging the Priory and Four Seasons, a move that would lead to a radical shake-up of Britain’s healthcare sector.
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THE leisure group Inspired Gaming, which makes and distributes amusement
machines, is close to a deal to sell its pubs division to rival Danoptra in
a move that could save 850 jobs.
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BP’s bitter battle with the four billionaires who control half of its Russian
joint venture has escalated to new heights, with the drama poised to move to
a British courtroom.
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DUBAI International Capital is working with former Yahoo and Warner boss Terry
Semel on a bid for sports and entertainment agency IMG.
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THE biggest surprise about Southern Cross Healthcare’s profit warning last
week was not that the nursing-homes group could find no buyers for some of
its freeholds.
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ALLIANCE & LEICESTER is plotting a savage dividend cut to shore up its finances in a move expected to save the mortgage bank about £80m a year.
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One of the most remarkable things about Britain’s economy in recent years has
been its ability to keep growing. Through thick and thin, even at times when
the battery threatened to give up entirely, the long expansion has
continued.
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THE housebuilding entrepreneur Tony Pidgley and three fellow directors are to
defy the gloom pervading the sector by getting a £60m share payout.
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MERRILL LYNCH is in talks to sell its $6 billion ($£3 billion) stake in
Bloomberg back to the financial data and news company in a cash-raising move
designed to shore up the American bank’s balance sheet.
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SHORTLY after 2am last Monday morning, Citigroup bankers began to hear their
Blackberrys chirp. Vikram Pandit, the bank’s recently installed chief
executive, had just sent an e-mail to every employee in the company.
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SHAREHOLDERS in Marks & Spencer will stage the biggest revolt in recent City
history this week when up to a third of them vote against or abstain from
the election of Sir Stuart Rose as executive chairman.
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BUSINESS has urged the Bank of England to keep interest rates on hold at 5%
this week and be ready to cut them in the coming months to head off a
recession.
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FOR the past few months many chief executives have brushed aside fears of a
downturn, saying that it if was coming, they hadn’t seen it yet. Not
anymore.
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Lorraine from Barrow-in-Furness, Cumbria was nominated for the award after winning the North West regional NES award. She impressed judges with her company, One to One Personal Care, which focuses on looking after elderly and disabled people who ne
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The title of companion was bestowed upon:Professor Sir George Bain (formerly of London Business School)Professor Dame Sandra Dawson (Judge Business School, Cambridge)Professor Peter McKiernan (School of Management, University of St Andrews)Profess
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The IDP has proved a popular choice, all the places have been snapped up -; plans are being made for next year's programme which will feature trips to business schools in : Dubai, Spain and Solvenia. For further information please contact Julie Davie
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The Web Works project evaluated 18 UK business school websites across ten key performance criteria and 30 further criteria dealing with access to and interest in the information provided. Interactive focus groups were held with 270 current and pro
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Please click here to access the latest media bulletin
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The ABS is delighted that over 100 people have registered for this years Conference and AGM.If you would like to register as a day delegate or would like us to source alternative accomodation please contact: Vicky Reid, Events Manager on: 020 7388 00
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The
study provides insights across ten key performance criteria and 30 further
criteria dealing with access to and interest in the information provided.
Findings are based on work carried out with270 current and prospective students
at bu
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'Talent Wars: the international market for academic staff' explores the international dimensions of academic staff recruitment and provides comparisons between UK and key competitor countries.The main findings include:There is not an academic 'brain-
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The three new departments are: The Department for Innovation, Universities and Skills (DIUS), which has been formed from the HE, FE and Skills Directorates of the former DfES and the Science and Innovation directorates of the former DTI; the Departme
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Upon being elected, Jonathan Slack said:"I am delighted to be given the opportunity to Chair such a prestigious group of national and international associations, particularly at a time when the ?Bologna? process is gaining momentum and impacting
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In this year?s HR Top 100 Most Influential compiled by Human Resources Magazine in association with Ceridian, Kai Peters is the joint second highest climber, going up 52 places from 78th last year. The list of HR practitioners, academics, authors, co
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The new scholarships will enable women owner-managers to participate in Cranfield School of Management?s acclaimed Business Growth and Development Programme (BGP), the leading programme of its kind in the UK.; ;The Scholarships are being provided by
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Nearly half of the chief executives of Britain's biggest companies have gained awards for their prowess in the field of sport, writes Lucy Kellaway
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The Unilever chief executive, Patrick Cescau, wants to be remembered for bringing the group back to its historical values of sustainability
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The opposition Bharatiya Janata party is pushing for the dissolution of the government amid discussions in the ruling coalition over a nuclear energy pact with the US
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The opposition Bharatiya Janata party is pushing for the dissolution of the government amid discussions in the ruling coalition over a nuclear energy pact with the US
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Tibetan envoys accused China of failing to take any 'tangible steps' in last week's talks between the sides and questioned whether the negotiations had served any purpose
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Tibetan envoys accused China of failing to take any 'tangible steps' in last week's talks between the sides and questioned whether the negotiations had served any purpose
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Commercial real estate investments, offering strong income and growth, are historically viewed as a hybrid of bond and equity. With mortgage securitization and REITs going p...
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To many observers, a club of the world's leading nations is starting to look hollow without China, the fourth-largest economy in dollar terms, according to the World Bank
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To many observers, a club of the world's leading nations is starting to look hollow without China, the fourth-largest economy in dollar terms, according to the World Bank
Filed under: Business Schools, China, Deans, management, Management education
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To many observers, a club of the world's leading nations is starting to look hollow without China, the fourth-largest economy in dollar terms, according to the World Bank
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The educational quality of US workers is in decline. If the country is unable to mend its school system, and unwilling to open its doors wider to skilled immigrants, then the current gloom about its longer-term economic prospects may be justified, writes Clive Crook
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A narrow view of its Russian joint venture's capabilities might be in BP's interests but is not in the interests of the company, writes Mikhail Fridman
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We might want to question whether the recipes that got us into the current financial mess are also most suited to get us out again, says Wolfgang MĂĽnchau
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From the moment that Israeli munitions fall on Iran, all western hopes of stabilising Afghanistan will be lost, writes Anatol Lieven
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President George W. Bush said he was prepared to be 'constructive' in discussions on climate change, but he insisted any deal was contingent on the participation of China and India
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President George W. Bush said he was prepared to be 'constructive' in discussions on climate change, but he insisted any deal was contingent on the participation of China and India
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Iran's top security negotiator will this month meet the EU's foreign policy chief, amid continuing hopes that Tehran will soon begin formal talks on its nuclear programme
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South Africa's MTN is considering walking away from a tie-up with Reliance Communications of India because of fears an acrimonious spat between the Indian telecom operator's owner and his brother could leave the deal open to legal action
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Efforts to end the crisis in Zimbabwe suffered further blows as the opposition leader spurned mediation talks and the government stepped up intimidation of opponents
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Abu Dhabi has reignited speculation that the United Arab Emirates, one of the world's main holders of dollar-denominated assets, might break its peg to the US dollar
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Several members have resigned from the board of the Institute for Turkish Studies to protest what they characterize as an infringement of the board chairman’s academic freedom. The chairman, Donald Quataert, a professor of history at the State University of New York at Binghamton, resigned in late 2006, according to an article in The Washington Post, after writing a book review in which he used the word “genocide” to describe the mass killing of Armenians in 1915.
This past May, Mervat F. Hatem, a professor of political science at Howard University who is the president of the Middle East Studies Association, wrote to Turkey’s prime minister, Recep Tayyip Erdogan, requesting that Mr. Quataert be returned to his position and that funds for the institute be placed in a trust to avoid political interference. The institute is supported by a grant from the Turkish government. In her letter, Ms. Hatem wrote that Mr. Quataert had stepped down after refusing to accede to the Turkish ambassador’s demand that he retract his review, or face the loss of the institute’s funds.
But the Turkish ambassador, H.E. Nabi Sensoy, as well as the institute’s director, David C. Cuthell Jr., denied any infringement of Mr. Quataert’s scholarly freedom, according to the Post.
Critics have accused the Turkish government for years of trying to manipulate scholarly studies, conferences, encyclopedia articles, and even novels that discuss the mass killings. —Lila Guterman
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Risks posed by employees linked to terrorist groups have been inadequately addressed by companies managing Britain's infrastructure, officials say
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The British premier will today use an expert study by a UK scientist to warn other world leaders that a rush to increase biofuel use could exacerbate rising food prices
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Click here for the article of The New York Times, June 23, 2008.
A prominent education professor at Harvard
has begun leading “reflection” seminars at three highly selective colleges,
which he hopes will push undergraduates to think more deeply about the
connection between their educations and aspirations.
The professor, Howard
Gardner, hopes the seminars will encourage more students to consider public
service and other careers beyond the consulting and financial jobs that he says
are almost the automatic next step for so many graduates of top colleges.
...I don’t think I would have applied if it wasn’t almost an automatic option,”
said Neil Sawhney, 21, a recent graduate who turned down a management consulting
job for a paralegal job, and plans to go to law school. “It’s hard to overstate
how much everyone is doing it.” ...
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Click here for the article of The New York Times, June 23, 2008.
A prominent education professor at Harvard
has begun leading “reflection” seminars at three highly selective colleges,
which he hopes will push undergraduates to think more deeply about the
connection between their educations and aspirations.
The professor, Howard
Gardner, hopes the seminars will encourage more students to consider public
service and other careers beyond the consulting and financial jobs that he says
are almost the automatic next step for so many graduates of top colleges.
...I don’t think I would have applied if it wasn’t almost an automatic option,”
said Neil Sawhney, 21, a recent graduate who turned down a management consulting
job for a paralegal job, and plans to go to law school. “It’s hard to overstate
how much everyone is doing it.” ...
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The Canadian Association of University Teachers has set up a blue-ribbon panel to determine whether Kwantlen Polytechnic University breached academic freedom by halting a professor’s study of assisted suicides. Russel Ogden, a professor of sociology at the institution’s Surrey campus, in the Vancouver area, had obtained an ethics board’s approval of his right-to-die research project, but the university later told him that he could not observe assisted suicides, according to the National Post newspaper.
“I’m not aware of any university in North America giving permission for research and then stopping it,” James Turk, the faculty association’s executive director, told The Chronicle. “It certainly appears to be a flagrant violation of academic freedom and has serious implications for controversial research on any campus.” Mr. Turk said the university’s ethics board and vice president for research had signed off on the project and its protocol. “Although assisting in a suicide is illegal in Canada, it is my understanding that observing illegal behavior is not forbidden by law,” he said.
The university says it changed its mind about allowing the research after getting two legal opinions that stated there were “real and unacceptable legal risks,” The Surrey North Delta Leader, a local newspaper, reported.
Mr. Ogden, who has championed the right of researchers to protect the privacy of people involved in assisted suicides, has told news organizations that he would like to speak publicly about the latest controversy but cannot because it would jeopardize his job. —Karen Birchard
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The French presidency of the European Union will be an exercise in 'crisis management', says Peer SteinbrĂĽck, German finance minister, particularly with soaring oil prices
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Genetically modified crops hold the key to solving the food price crisis, Sir David King, the government's former chief scientific adviser, has said
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One of India's most influential bankers has cautioned against the "exuberance" fuelling overseas acquisitions by its companies, and has said that prosperity for the country's financial sector lay in domestic opportunities
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A Barack Obama administration would seek to ban risk-based pricing on all individual health insurance plans to stop companies cherry-picking healthy customers, a senior adviser has said
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David Cutler tells Krishna Guha how Obama plans to help uninsured Americans
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Australia has insisted that it will not attempt to deter Chinese investment in its natural resources, in spite of domestic fears over foreign sovereign wealth funds
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Australia has insisted that it will not attempt to deter Chinese investment in its natural resources, in spite of domestic fears over foreign sovereign wealth funds
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Economics
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General Electric’s NBC Universal and Bain Capital and Blackstone, the private
equity groups, are to buy The Weather Channel, one of the largest cable
channels in the United States still in private hands.
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Rivals to Royal Mail now handle one in every four letters and are poised to
increase volumes further, The Times has learnt.
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Ministers have whittled down the contenders for a £1 billion-a-year contract
to clean up the Sellafield nuclear site to two, with a decision expected to
be announced next Friday, The Times understands.
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The past decade has been little short of amazing. Storms that might once have
driven the world on to the rocks of recession - the Asian and Russian
financial meltdowns, 9/11 and the grim and costly business of confronting
Islamist terrorism, not to mention a slew of exceptionally destructive
natural disasters - have been weathered with surprising ease.
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Merrill Lynch is believed to be in talks with Bloomberg over the sale of the
bank's 20 per cent stake in the news service-to-trading data group.
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The guard is changing in Threadneedle Street this week. Just as Britain's
rapidly deteriorating prospects are raising pressure on the custodians of
the nation's economic fortunes at the Bank of England, there will be an
important reshuffle among the nine figures who meet at the Bank each month
to set interest rates.
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British Gas, the country's largest energy supplier, is preparing for a fresh
round of energy price rises of at least 15 per cent, which could hit its 16
million customers within a matter of weeks.
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Some say the world will end in fire, some say in ice.
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Sir Stuart Rose faces a protest vote from shareholders this week over his
decision to become both executive chairman and chief executive of Marks &
Spencer.
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John Fingleton has a confession to make. The scourge of British business, the
man who, as chief executive of the Office of Fair Trading (OFT), issued £237
million of fines last year, has raided supermarket head offices and gone
toe-to-toe with the banks on overdraft fees is, well, a bit of a softie.
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Aldi, Lidl and Netto, the discount supermarkets, are forecast to increase
their share of Britain's grocery market by 60 per cent over the next four
years as the middle classes trade down because of the credit crunch.
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Three separate funds are being created to exploit investment opportunities in
the battered aviation, hotels and property sectors, The Times has
learnt, in a sign that some investors are calling the bottom of the market.
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A bitter feud between two brothers - India's two richest men - and the
collapse of the country's stock markets threatens to derail the creation of
a new powerhouse in the world mobile phone market.
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Yahoo! spent the July 4 bank holiday weekend in discussions with its lead
adviser, Goldman Sachs, and potential bid partners including Time Warner to
defend itself from a break-up by Microsoft.
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The University of Nevada at Reno has spent about $1.7-million on outside law firms to help staff lawyers defend against just four of dozens of lawsuits filed by current or former employees, the Reno Gazette-Journal reported. More than 70 complaints — including civil-rights, defamation, discrimination, and wrongful-termination lawsuits — have been filed against the university since 2000, and more than 30 are now working their way through the courts or the appeals process.
The university says most of the cases are meritless and were filed by a single lawyer. But the lawyer, Jeff Dickerson, told the newspaper that he turns away 85 percent of the prospective plaintiffs who ask him to sue the university on their behalf. “Many cases are not taken,” he said, “because although the working environment is hostile, it does not rise to the level of legal liability under the law.”
Two of the four cases that outside lawyers are assisting on were dismissed last month, but Mr. Dickerson said he plans to appeal. He filed those cases on behalf of Hussein S. Hussein, a former professor who says his firing in April was in retaliation for whistle-blowing about the mistreatment of animals at the university. —Charles Huckabee
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I don't know if many of you have heard about the PMP certification. This is a project management certificate and allows one to operate in many different fields. For one I have seen this certificate being used in the insurance fie...
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Rod Wilkes, Chief Executive of the CIM said:"CIM is all about marketing excellence and recognising professional development, which is why we fully endorse the DPMAR programme from the ABS. The programme is providing marketers from within the b
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This prestigious honour will be received later in the year at an official ceremony at Buckingham Palace.Commenting on being named in the QueenÂ’s Birthday Honours List, Professor Michael Osbaldeston, said: "I am delighted to receive this award
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UK Business Schools have grown rapidly over the last forty years. Despite a tentative start, where many commentators (including some vice-chancellors) appeared to question the status of management as an academic discipline, business schools have no
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The first session is due to start on the 9th and 10th of October 2008 and will focus on an overview for marketers in business schools and higher education, the first lunch-to-lunch session willl focus on how to preapre a winning integrated market
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In partnership with EFMD: Programme for Business School Deans.The first cohort has recently visited six business schools Boston including: Babson, Bentley, Boston University ,Harvard, MIT Sloan and North Eastern.The second IDP cohort starts in Dec
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Companion is the highest category of membership and is awarded only to individuals who have a distinguished record of achievement in senior management. Companions form an exclusive group of the InstituteÂ’s membership and include other leading busin
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By competing in Start Up Stars you'll raise your business profile and could win ÂŁ50,000 click here to access further information.
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The IDP comprises three modules of 2-3 days each in different countries. The sessions focus on high level strategic discussions, benchmarking and new developments in the global business and management education field. A cohort of 22 business school
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Please click here to access the new Guide.
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Last year, Rochdale entrepreneurs Paul and Jerry set up JPM ECO Logistics Limited, an eco-friendly haulage company which runs its vehicles on 100 per cent bio-diesel. Although they knew they had a sound business premise, they admit they weren't bus
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Please click here to read our formal response, please direct any enquiries to Julie Davies.
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The ÂŁ6 million programme has six
years experience in helping people in the most disadvantaged areas of the
English regions set up successful and sustainable businesses and the results of
the evaluation highlight how much of a positive impact t
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Members of the ABS Executive are meeting with Rama Thirunamachandran, Director for Research and Knowledge Transfer, HEFCE, and Alan Palmer, Policy Officer, Learning and Teaching, HEFCE, on 15th January 2008 at ABS to discuss the Research Excellence F
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It seems that oil prices will never go down, so this is a world that we are going to have to get used to. It is nuts what a effect oil prices have on my job and company. It is crazy everyday to look in the Wall Street Journal and New York Times and...
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A suicide car bomb struck the Indian Embassy in the Afghan capital on Monday, killing or wounding at least 15 people
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Britain’s biggest trade union is threatening strike action at four key
regional distribution centres that supply Argos, the high street chain, in a
fierce row over pay.
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As he graduates from London Business School, William McKenzie finds that he is now equipped with the skills to be a business leader
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While most business schools do not track applications from service personnel,some offer special tuition breaks to military personnel
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How rising currency values in Europe and China, coupled with a low US dollar, have created heightened interest in US MBA programmes
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Michael Scotti, an analyst at Credit Suisse, has his fair share of stressful days – but nothing compares to his time as a marine leading troops in Afghanistan and Iraq
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Michael Page, the international recruitment group, said today that recruitment
in London’s financial services sector has ground to a halt in the latest
sign of the economic gloom sweeping Britain.
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Austria faces elections in September after the conservative People's party quit the government saying it could no longer work with the Social Democratic chancellor
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European industry showed fresh signs of spluttering in the wake of global economic storms, with Germany and the UK reporting sharper than expected falls in output
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The government said a foreign intelligence agency was behind a blast at the Indian embassy in Kabul that killed at least 41 people, including two Indian diplomats
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ÂżQue es Politing?Politing es un termino utilizado para denominar al Marketing PolĂtico. Aunque existen discrepancias sobre las posibilidades reales de trasladar las tĂ©cnicas convencionales del marketing el mercado pol...
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This is an ongoing blog about business in China from the international students currently studying in the MBA program at Tsinghua University in Beijing. Today's post is from Mr. Yoshihito Furuta. His good friends call him Jacky. Jacky is from J...
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Dispute between Hindu and Muslim residents of Jammu and Kashmir brings down the Indian state's chief minister, as the tensions reverberates through local and national politics
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Dispute between Hindu and Muslim residents of Jammu and Kashmir brings down the Indian state's chief minister, as the tensions reverberates through local and national politics
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Big news! Now everyone who visits Veritas Prep can get a free practice GMAT exam. Veritas Prep students get 15 sample GMAT tests...
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Throughout the disaster zone in Sichuan province, China, an estimated 10m homeless people are settling into a possible permanent life in temporary housing
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Throughout the disaster zone in Sichuan province, China, an estimated 10m homeless people are settling into a possible permanent life in temporary housing
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Brussels will take a step towards stricter regulation of credit rating agencies by backing calls to register them and make them answerable to financial market supervisors
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G8 leaders are under intense pressure to follow through on aid pledges to Africa amid concern that they are breaking promises and endangering agreed development goals
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It’s been just over a year since DePaul University denied the tenure bid of Norman G. Finkelstein, the political scientist who has attracted both venom and praise for his writings on the Holocaust and the Israeli-Palestinian conflict. Now no one in academe will give him another job — not even as an adjunct, he told The Jewish Week this month.
In an article, Mr. Finkelstein said he had lectured at 40 campuses in the last year. “I would ask faculty there about a position and was told it was out of the question,” he said. “I can’t even get an adjunct appointment for one semester.”
Mr. Finkelstein is living in Brooklyn, N.Y., where he grew up, in the apartment of his deceased father. He told The Jewish Week, a local newspaper, that he doubted he could get even a job teaching high school.
“The way they do background checks is to Google your name,” he said. “With me, they would get 30,000 Web sites, one-third of them saying I am a Holocaust denier, a supporter of terrorism, a crackpot, and a lunatic.”
Mr. Finkelstein said he was working on a new book, A Farewell to Israel: The Coming Break-Up of American Zionism, although he does not yet have a publisher. —Robin Wilson
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Former British soldier sentenced to 34 years in jail after being found guilty by a court in Equatorial Guinea of leading failed plot to overthrow the government in 2004
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The Iraqi prime minister has for the first time suggested establishing a timetable for the withdrawal of US troops, a step that the Bush administration has long opposed
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The names of more than 10,000 customers of a now-defunct diploma mill will be kept secret, according to today’s Spokesman-Review, a newspaper in Spokane, Wash.
Releasing the names would apparently violate the policy of the U.S. Justice Department, which prosecuted the operators of the Spokane-based diploma mill, known as Saint Regis University. Last week one operator was sentenced to three years in prison.
In 2006 a lawyer for one of the diploma mill’s employees said that more than 100 federal workers, including a White House staff member, had purchased Saint Regis degrees. —Thomas Bartlett
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Managing commodity risk has emerged as a key issue in today's economy. Consider airlines, which have seen fuel costs rise seven-fold over the last few years, says Bob Tevelson, a partner and managing director at BCG. In this interview, Tevelson says commodity risks are associated with both price volatility and supply availability. More and more companies may wish to turn to hedging strategies to manage commodity risk, he notes, but such strategies can pose risks themselves unless they are properly implemented.
Filed under: Business Schools, Deans, management, Management education, Wharton
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TNK-BP has the best performance record in the Russian oil industry on almost all measures on which serious investors focus, writes Lord Robertson
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Members of the Group of Eight leading industrialised nations on Monday night sought to damp down expectations that they could rescue the global economy from the impact of high oil prices
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Companies hope personal relationships with campaigners will give them time to prepare a response before they are criticised, writes Michael Skapinker
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The government's and the prime minister's standing in the polls mirrors almost precisely the decline in economic optimism, writes Philip Stephens
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A new national study of male students who are black or Hispanic suggests that they get better grades in college if they go through college-preparatory outreach programs before their freshman year.
Terrell L. Strayhorn, an assistant professor of higher education and sociology at the University of Tennessee at Knoxville, conducted the study by analyzing data on black and Hispanic males collected as part of the U.S. Education Department’s National Education Longitudinal Study. He found that those who had gone through “bridge” programs intended to help their transition to college went on to earn higher grades than comparable students who lacked such additional college preparation.
On most college campuses, the difference between the two groups was equivalent to the difference between a C+ or B- grade-point average and a solid B average, Mr. Strayhorn says. Black men appeared to benefit slightly more from such programs than Hispanic men did.
Mr. Strayhorn notes in a paper summarizing his findings that such outreach programs differ in their offerings, with some focusing on specific academic subjects, others on building self-esteem or teaching practical skills such as financial planning. Because his analysis lumped all such programs together, it leaves open the question of whether some programs help students significantly more than others. Being focused entirely on black or Hispanic men, his analysis also leaves open the question of how such programs benefit women or male students of other races or ethnicities. —Peter Schmidt
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As it celebrates its 10th anniversary, the International Criminal Court is facing its own indictment. Its critics charge that its work is often counter-productive, politicised and plain incompetent. Gideon Rachman considers the future
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Nukamatt supermarkets are a symbol of the country's changing consumption
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No amount of talk about 'diversity and inclusion' is going to persuade some managers that they may need to do things differently – but the right arguments could win them over, writes Stefan Stern
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It?s been a few days since I?ve written anything on the blog, but I wanted to write about something that is probably considered a bit out of the ordinary for some of you. This weekend I got to spend some time with a friend of mine who l...
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The British government signalled a retreat on its biofuels targets after the publication of a report showing the fuels contributed to rises in food prices
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Nearly 80 per cent of senior executives at small and medium-size US manufacturing companies are pessimistic about the prospects for economic growth, according to a survey to be published
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If you are in need of money for business school, you may be interested to know about a new student loan program that was launched on June 4th.
Known as GreenNote, the program allows you to obtain low-cost student loans from family, friends, or anyone willing to give you some extra cash. There is no bank to go through, which means there are no credit checks and no co-signers required.
Key Terms of GreenNote Loans:
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If you are in need of money for business school, you may be interested to know about a new student loan program that was launched on June 4th.
Known as GreenNote, the program allows you to obtain low-cost student loans from family, friends, or anyone willing to give you some extra cash. There is no bank to go through, which means there are no credit checks and no co-signers required.
Key Terms of GreenNote Loans:
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Production at Mexico's Cantarell oil complex, one of the world's largest, has plummeted by a third in the past year, an indication the country could lose self-sufficiency in oil in the medium term
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The takeover of Norway's Awilco is a sign that rigs are themselves valuable resources, giving CNOOC further capacity to explore the seas for fruitful territory
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To satisfy many of the largest sources of grants in the biomedical sciences, including the National Institutes of Health, researchers must place copies of their published papers in free online repositories, like the NIH’s PubMed Central. That requirement is one of the successes of the open-access movement’s push to making research journals available to anyone, regardless of whether they subscribe.
Now a leading subscription-based journal, Nature, along with many of its offshoots, like Nature Cell Biology and Nature Neuroscience, have announced that they will offer to deposit authors’ papers in the repositories.
The journals will begin offering the service at the end of the summer, according to Tara Packer, head of author and referee services for Nature Publishing Group. She thinks the service will prove useful, she told The Chronicle, as several authors have already contacted the publishers for assistance with uploading their manuscripts to the repositories.
Nature Publishing Group, Ms. Packer said, will be the first publisher to offer the archiving service whose publications are not themselves open-access journals. The Nature journals allow, and now will facilitate, archiving that goes public six months after papers are published. —Lila Guterman
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Bradford & Bingley (B&B) is heading for one of Britain’s most
expensive rights issues with a £55 million bill to raise only £400 million,
according to information released to shareholders.
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As the credit crisis lightens middle-class wallets, the super-rich are
continuing to buy the finest art, antiques and wine, according to the Royal
Institution of Chartered Surveyors (RICS).
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There are new signals today that Britain is on the brink of recession, with
confirmation that the bulk of the economy is sliding rapidly into a severe
downturn.
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Microsoft will renew takeover talks with Yahoo! if the search engine group’s
board is replaced at next month’s annual meeting.
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Economics
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Robert Dudley, the embattled chief executive of TNK-BP, has held on to his job
after a quartet of Russian billionaires failed in their attempt to fire him.
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Paul Myners, the former Marks & Spencer chairman, has jumped to the
defence of his close friend Sir Stuart Rose and said that there was nobody
better to revive the retailer, despite its present problems.
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Harbinger Capital, the activist American hedge fund investor, admitted making
a tentative bid approach to Inmarsat yesterday, sending shares in the £2.4
billion satellite operator soaring.
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Herm, the tiny island off Guernsey that spent much of the Second World War
under German occupation, looks set to be acquired by the hotel company that
owns Cliveden, the Berkshire stately home at the centre of the Profumo
affair.
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InBev’s campaign to buy Anheuser-Busch (AB) gathered pace yesterday after a
senior member of the Busch family threw his weight behind the Belgian
brewer’s $47 billion ($£23.8 billion) bid for the Budweiser maker while
Barack Obama said it would be “a shame” if the deal went through.
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Europe's chief financial regulator will tell its finance ministers today that
he intends to table legislation in the autumn to regulate the activities of
credit-rating agencies. The move by Charlie McCreevy, the European Internal
Markets Commissioner, comes as Alistair Darling is expected to press for
Brussels to begin a more wide-ranging review of the role of ratings agencies
in Europe's broader system of financial regulation.
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The European Commission proposed a shake-up of its value added tax and state
aid rules yesterday in an attempt to help small businesses, to promote
economic growth and to cut administrative red tape.
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General Motors, the world's biggest carmaker, is considering thousands of job
cuts in a radical restructuring of its North American business as it
struggles with a dire domestic market.
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The G8 summit is supposed to bring together the most powerful leaders in the
world, but seldom have they formed a less credible group than the one that
meets in the Japanese resort of Lake Toya today.
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Almost four years ago to the day, Sheila Frost summed up the feelings of the
“grey army” attending Marks & Spencer's annual shareholders'
meeting as Philip Green circled the retailer with a £9 billion takeover
offer. Ms Frost, a pensioner from Enfield, delivered a withering verdict on
the BhS billionaire. “He's just a barrow boy. He's not the sort of man we
need at M&S.”
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Those who do not study history, it is said, are doomed to repeat it. Nobody
could accuse Ben Bernanke of being insufficiently historically minded, but
is it possible that the world's most powerful central banker learnt the
wrong history?
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More news of doom and gloom in the financial services sector has failed to
rattle Steve Ingham, Michael Page’s chief executive.
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Brave investors were urged to buy beleaguered British retailers, banks and
housebuilders last week, despite warnings that the bear market could last
well into next year.
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Increasing numbers of hard-pressed homeowners and tenants are turning to
personal loans and credit cards to fund their housing costs.
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Gas and electricity customers have been warned to be on their guard against
energy companies seeking to squeeze extra profit out of fuel price rises.
Energywatch has received complaints that companies are tilting the scales in
their own favour when working out consumption levels when a price rise has
taken place.
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| Q&A with: | Malcolm S. Salter |
| Published: | July 7, 2008 |
| Author: | Martha Lagace |
"In the end, Enron was at the center of a truly delinquent society. Once Enron's ethical drift took hold, its collapse was only a matter of time," says HBS professor emeritus Malcolm S. Salter. As he explains in this Q&A and in his new book, Innovation Corrupted: The Origins and Legacy of Enron's Collapse (Harvard University Press), the devastation of Enron was total—yet there is much that business today can gain from a postmortem of the once-triumphant company.
Salter had access to an extensive library of public information, including volumes of technical analyses and sworn testimonies in court documents, sources that were not yet available for earlier books on Enron. In addition, he interviewed former Enron executives and acquired internal Enron documents, which extended and deepened his research.
"Earlier descriptive narratives of Enron's collapse either downplay or fail to analyze the utter breakdown in board governance and Enron's internal controls, and the failure of credit rating agencies to blow the whistle," he says. "They also overlook the collusion of investment banks in misrepresenting the true financial condition of Enron, the inattentive regulatory agencies, and the absence of Enron's ethical discipline while choosing to live in the murky borderlands of the law."
Our Q&A follows.
Martha Lagace: In a nutshell, why did Enron succeed insofar as it did? How did it collapse, and was its downfall inevitable?
Malcolm S. Salter: Enron was an innovative company, and its downfall can be traced to supreme arrogance bred by considerable success, some extremely poor diversification decisions, and poorly conceived and implemented administrative practices that led, over time, to reckless gambling and ethical drift. This drift was facilitated by Enron's bankers and advisors and largely missed by its board of directors and other watchdogs.
Here are some "high level" details:
Jeffrey Skilling had begun working with Enron in 1986 as a consultant with McKinsey & Co., and joined Enron in 1990 when then-chief executive officer Ken Lay made him president of Enron's new trading operations. In 2001, Skilling was named CEO. Before 1997, Enron was an innovative and profitable player in the newly deregulated natural gas industry. Skilling's big idea was to create fluid and transparent markets for commodities like natural gas that were burdened with highly inefficient delivery systems. In time, the company supported his basic concept with EnronOnline, a Web-based trading platform that instantly became the world's largest e-commerce system in 1999. Skilling also created what was known as a gas bank to provide a "reserve requirement" to back up supply commitments. Enron had a major advantage over competitors as a middleman between producers and consumers because it operated one of the nation's largest natural gas pipeline networks.
These innovations enabled Enron to develop and run a futures market for natural gas, and to create derivative supply contracts that could help customers manage the risks of demand volatility and price swings more effectively than before. In this way, Skilling and his colleagues solved a major contracting problem between the producers and the users of natural gas, and the rewards were great.
This initial success prompted Enron to extrapolate its business model to other markets. In 1994, Enron officials started trading wholesale electricity after Congress deregulated the industry; Enron analysts estimated the electricity market to be 10 times larger than the natural gas market. Diversification into water utilities and broadband soon followed, as did expansion to other countries that promised to deregulate and privatize energy production and distribution.
Unfortunately, applying the company's middleman skills to other commodities and developing power projects in diverse markets proved a significant challenge. Still, supreme overconfidence and perverse financial incentives led to a gladiator culture in which executives proposed—and risk managers and the board of directors approved—a growing number of risky gambles with high expected returns. Meanwhile, building on intense lobbying to encourage further domestic deregulation and limit federal oversight of the energy industry, Skilling encouraged Enron executives to exploit to the hilt recent Securities and Exchange Commission rule changes as well as then-current tax rules.
Many of Enron's investment gambles failed to satisfy its voracious appetite for cash to support its commodity-trading operations, and in 1997, profits declined. This prompted the company to sell overvalued, underperforming assets to off-balance-sheet partnerships controlled by chief financial officer Andy Fastow—a conflict of interest approved by the board. The idea was to use these mind-numbingly complex entities to manage reported earnings, minimize reported debt, and maintain the company's all-important credit rating and overvalued stock price. Enron also used the off-balance-sheet entities to hedge its more successful investments—to avoid having to report any declines in their value. The problem was that many of these hedges were not real, because Enron was essentially hedging with itself.
To help disguise the company's deteriorating financial position, many outside advisors and bankers either colluded in or acquiesced to these questionable transactions. Enron's sophisticated risk analysis and control system also experienced serious breakdowns. These breakdowns, along with management's increasing aversion to truth telling, isolated the board from many evolving realities. In addition, Enron's supernormal growth and skyrocketing stock price made it difficult for most directors to challenge management's strategy and tactics.
Still, board members understood that Enron was trying to move underperforming assets and potential investment losses off its balance sheet. Red flags should have alerted them to the fact that the company was short of cash as well as profits. Yet Enron's board failed to detect and prevent violations of accounting principles and rules.
In the third week of October 2001, Arthur Andersen, Enron's highly compromised outside auditor, "discovered" several large accounting irregularities related to the off-balance-sheet partnerships. This forced Lay—who returned as CEO after Skilling resigned that August—to announce a $544 million charge against earnings, and a $1.2 billion write-down in shareholders' equity, largely related to the impending closure of Enron's Raptor partnerships. Within weeks, Enron collapsed into bankruptcy as its trading partners quickly lost faith—proving, once again, that even a hint of negligence or misconduct can be devastating to a company.
In the end, the Justice Department took more than three years to master the financial complexities and legal ambiguities of the Enron case, and to indict Skilling, Lay, and former chief accounting officer Rick Causey. Federal prosecutors claimed that Enron used the Raptors and other off-balance-sheet entities to inflate its reported earnings from the third quarter of 2000 through the third quarter of 2001 by more than $1 billion. The government also claimed that the Raptors did not hold the required amount of independent equity, thereby invalidating their purpose. An examiner appointed by the bankruptcy court claimed even larger-scale violations of Generally Accepted Accounting Principles and SEC regulations.
Throughout the ensuing trial, Skilling and Lay strenuously denied knowledge of any conspiracy to defraud shareholders, despite the fact that 15 of 34 other Enron executives indicted for conspiring to defraud shareholders had already entered guilty pleas. Skilling and Lay argued that these 15 plea bargainers were all honest men who had been bullied into false confessions by the "witch hunt" tactics of the Justice Department. Lay maintained to his dying day that he was innocent of all charges brought against him. Skilling held fast to a similar position. On September 14, 2007, Skilling submitted a 60,000-word appellant brief demanding that his conviction be reversed and that his case be either dismissed or retried outside Houston under "lawful procedures and a properly instructed jury." The appeals court is scheduled to report within weeks.
Q: What does Enron's collapse mean for the future governance and control of public companies?
A: The lessons of Enron relate to
(1) Strengthening board oversight
(2) Avoiding perverse financial incentives for executives
(3) Instilling ethical discipline throughout business organizations
With respect to strengthening board governance, I argue that a potentially powerful remedy for the governance breakdown that afflicted Enron as a public company can be found outside the legislative and legal arena, in the neighboring world of private companies. This remedy is best observed in formerly public companies that—aided by professional buyout firms—have been taken private and armed with active directors who pursue commonsense governance practices that have stood the test of time.
In arguing for the private-equity model of corporate governance, which I describe in detail, I do not suggest that boards of public companies can or should copy it directly. Public and private companies clearly differ markedly in their ownership structures and in the rules governing director independence. I do suggest, however, that directors of public companies can adapt key aspects of the private-equity governance model to ensure that they fulfill their oversight responsibilities.
With respect to avoiding the perverse financial incentives that corrupted Enron, my book makes specific recommendations for designing executive pay in public companies, including the effective use of stock-based compensation and comparative performance measures, and the need to balance turbocharged incentives with turbocharged controls.
With respect to the challenge of how to preserve ethical discipline when the legal rules of the game are ambiguous and executives stand to reap enormous rewards by exaggerating or camouflaging a company's true economic performance, I outline organizational processes that are required to reinforce the kind of discipline that was noticeably lacking at Enron.
These processes include:
(1) Liberating evaluation processes by adding qualitative judgment to whatever standard quantitative measures of performance that business plans may require
(2) Designing and implementing incentive systems that reward accomplishments other than economic performance, and penalize failures
(3) Conducting routine, systematic audits of critical decisions by key executives where the rules of the road are clearly ambiguous
(4) Helping senior executives avoid the two sources of leadership failure at Enron: personal opportunism and flights to utopianism
At Enron there were many opportunities for enormous personal gain that distracted top executives from the essential tasks of maintaining institutional integrity and building stable relationships with shareholders and employees. Similarly, Enron's leaders perpetuated a kind of utopianism that ended up distracting them from hard choices by a flight to abstractions. In Enron's case, its stated purpose—at first, to be the world's best energy company, and later to be the world's best corporation—was too general to permit disciplined and responsible decision-making in the face of difficulty. In this vacuum, abstract definitions of purpose unrelated to corporate ideals, distinctive competences, and organizational opportunities easily gave way to uncontrolled criteria such as personal preference and opportunism. As a natural result, immediate exigencies came to dominate actual choices. This loss of ideals sums up Enron's history and its enduring legacy.
Q: Can an Enron-type calamity happen again? Why or why not?
A: Perverse incentives are legion throughout our system today. For example, perverse incentives for both mortgage brokers and investment bankers helped create the subprime crisis that we are now living through. Many boards are also still struggling to improve their oversight. Preventing future Enron-type disasters will require the kind of attention to board oversight, financial incentives, and ethical discipline that I address in Innovation Corrupted.
Q: As you note in your book, there is much that we still do not know—and may never know—about Enron's failure. Having studied the company intensively for years, what would you most like to know?
A: There is still much that we do not know about the perceptions, intentions, thought processes, and apparent failings of Enron's leaders and its board of directors. For example, why didn't Skilling and Lay see more clearly the risks and increasingly adverse effects of the extreme, performance-oriented management system that they had created? How could Skilling—a very public proponent of earning more money with less assets (the so-called asset light strategy)—rationalize Enron spending so heavily, and so beyond established capital budgets, on capital projects with highly speculative returns?
According to what logic did Skilling and Lay, and ultimately the board, approve using the company's own stock to capitalize its own hedging counterparties? (This was an extremely risky hedging arrangement that required Enron to issue more stock if either the current value of its stock or the future value of its commodity contracts declined and that, in addition, left Enron with no effective hedge on its contracts if both values declined at the same time—which they did.) Why did Skilling, at critical moments, treat differences of opinion, pushback, and penetrating questions from both insiders and outsiders as either stupid comments or narcissistic insults rather than opportunities for constructive dialogue?
Why did Skilling, Lay, and Enron's board of directors fail to understand and act decisively upon increasing internal evidence that Enron was financially distressed and heading toward insolvency? Why did Lay's espoused faith and Christian values fail to guarantee his moral leadership and protect the enterprise from increasing immoral behavior? How did Skilling and Lay imagine that their personal conduct could influence the behavior of others within the company? What internal images of personal leadership and stewardship did their behavior reflect? How did they reassure themselves that they were doing "the right things" all along?
Congressional hearings and courtrooms are not venues conducive to revealing deep insight to these lingering questions. The only window of inquiry to these questions leads to Skilling himself (since Lay has died).
A deep biography or autobiography, linked to the essential questions of Enron's conduct and performance, is the missing link in a full understanding of Enron's collapse and its lessons for the leaders of 21st-century business enterprise.
Innovation Corrupted at Harvard University Press:
http://www.hup.harvard.edu/catalog/SALINN.html
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Amazon.com
Martha Lagace is the senior editor of HBS Working Knowledge.
Filed under: Business Schools, Deans, management, Management education
Posted by Management Education Update
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| Published: | July 8, 2008 |
Date: March 27-28, 2008
Chairs: V. Kasturi Rangan, Herman B. Leonard, and Susan McDonald
Colloquium: The Future of Social Enterprise
In our working paper, The Future of Social Enterprise, we consider the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. Our paper traces a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. We examine how these organizations can best access the untapped resources by demonstrating mission performance and then propose three potential scenarios for how the sector might evolve.
Read the working paper.
Participate in a discussion with the authors
Filed under: Business Schools, Deans, management, Management education
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Online channels are changing markets in select ways, according to new research by HBS professor Anita Elberse detailed in the July-August issue of Harvard Business Review. Elberse's study of strategies that emphasize niche offerings or blockbusters in the music and home-video industries, "Should You Invest in the Long Tail?", offers advice to producers as well as retailers. "Hits are and probably will remain dominant," she concludes.
This week also sees an exploration of factors to explain the increased prevalence of nongovernmental organizations ("What Do Nongovernmental Organizations Do?" by HBS professor Eric D. Werker and Faisal Z. Ahmand). And while communities are considered essential in open source innovation, what exactly is a community? Karim R. Lakhani and colleague Joel West seek definitions and aim to extend the research agenda ("Getting Clear About Communities in Open Innovation").
— Martha Lagace
| Authors: | Francesca Gino, Don A. Moore, and Max H. Bazerman |
|---|
We present three studies demonstrating that outcome information biases ethical judgments of others' ethically questionable behaviors. In particular, we show that the same behaviors produce more ethical condemnation when they happen to produce bad rather than good outcomes, even if the outcomes are largely determined by chance. Our studies show that individuals judge behaviors as less ethical, more blameworthy and to be punished more harshly when such behaviors led to undesirable consequences, even if they saw those behaviors as acceptable before they knew its consequences. Furthermore, our results demonstrate that a rational, analytic mindset can override the effects of one's intuitions in ethical judgments. Implications for both research and practice are discussed.
Download the revised paper: http://www.hbs.edu/research/pdf/08-080.pdf
| Author: | Anita Elberse |
|---|---|
| Periodical: | HBS Centennial Issue. Harvard Business Review 86, nos. 7/8 (July-August 2008): 88-96 |
The blockbuster strategy is a time-honored approach, particularly in media and entertainment. When space is limited on store shelves and in traditional distribution channels, producers tend to focus on a few likely best sellers, hoping that one or two big hits will carry the rest of their lists. But online retailing and the digitization of information goods have changed the commercial landscape: Virtual shelf space is infinite, consumers can search through innumerable options, and the marginal cost of reproducing and distributing products is low. What does that mean for the blockbuster strategy? In his 2006 book, The Long Tail: Why the Future of Business Is Selling Less of More, Chris Anderson, editor of Wired magazine, argues that the sudden availability of niche offerings more closely tailored to their tastes will lure consumers away from homogenized hits. The "tail" of the sales distribution curve, he says, will become longer, fatter, and more profitable. Elberse set out to investigate whether Anderson's long-tail theory is actually playing out in today's markets. She focused on the music and home-video industries—two markets that Anderson and others frequently hold up as examples of the long tail in action-reviewing sales data from Nielsen SoundScan, Nielsen VideoScan, the online music service Rhapsody, and the Australian DVD-by-mail service Quickflix. What she found may surprise you: Blockbusters are capturing even more of the market than they used to, and consumers in the tail don't really like niche products much. Elberse outlines the implications of her research for producers and retailers, and offers strategic advice to both groups.
| Authors: | Boris Groysberg, Paul M. Healy, and Yang Gui |
|---|---|
| Periodical: | Journal of Financial Transformation (forthcoming) |
Since 1949 Lehman Brothers has used an investment committee to select the top ten recommendations made by its analysts each year. We examine the performance of this committee's recommendations and find that on average its selections generated abnormal returns of 2.7% at the recommendation announcement and 4.5% for the remainder of the year. This performance cannot be explained by changes in analyst recommendations and/or target prices that accompany the committee report. Nor was it due to analyst screening ability since the returns were higher than those that earned from investing in analysts' top stock picks that were not selected by the committee. Finally, we find that abnormal announcement returns and trading volume at the report publication are correlated with market-adjusted returns for the prior year's stock selections, suggesting that investors believe that a successful process in one year is likely to be repeated the following year. We believe that these findings are particularly interesting given recent efforts to require firms to use research recommendation committees to improve the quality of research.
| Authors: | Ranjay Gulati and Maxim Sytch |
|---|---|
| Periodical: | Managerial and Decision Economics 29 (March - April 2008): 165-190 |
This paper investigates how the history of interaction between organizations and between organizational boundary spanners contributes to the formation of trust between firms. Our findings, using data on the supplier-buyer relationships of two major US auto manufacturers, suggest that history affects trust formation in a complex non-linear fashion, involving a period of ambivalence early in a relationship. We show that certain kinds of exchange partners can systematically reap differential returns from a common history of interaction. Organizational similarity significantly enhances the ability of exchange partners to translate the benefits of the joint history of interaction into a stock of trust.
| Authors: | Ranjay Gulati and P. Puranam |
|---|---|
| Periodical: | Organization Science (forthcoming) |
We develop a theoretical perspective on how inconsistencies between formal and informal organization arising from reorganization can help create ambidextrous organizations. We argue that under some conditions, the informal organization can compensate for the formal organization by motivating a distinct but valuable form of employee behavior that the formal organization does not emphasize and vice versa, an effect we label compensatory fit. We illustrate the concept of compensatory fit by drawing upon qualitative data from a re-organization at Cisco Systems. We also derive formal boundary conditions for compensatory fit using a simple game theoretic representation. We show that compensatory fit can only work when there is a powerful informal organization already in existence and when the gains from ambidexterity are substantial. Further, depending on the strength of the informal organization, breakdown in the conditions necessary for compensatory fit may lead to performance declines and further re-organizations.
| Author: | William C. Kirby |
|---|---|
| Periodical: | Daedalus: Journal of the American Academy of Arts and Sciences 137, no. 3 (summer 2008) |
In North America and in Europe, the past three decades have seen an unprecedented expansion of higher education and, in the most recent time, efforts at reform and restructuring. Harvard has overhauled its undergraduate curriculum in a comprehensive fashion for the first time in 30 years. European universities have witnessed even more thoroughgoing changes in the structure of undergraduate education. But perhaps nowhere on earth have recent decades seen more revolutionary change in higher education than in the People's Republic of China. Thirty years ago, Chinese universities were just reopening after the catastrophe of the Cultural Revolution. Today they are poised for positions of international leadership in research and education.
| Author: | Ian Larkin |
|---|---|
| Periodical: | Best Paper Proceedings of the Academy of Management (2008). |
In industries with quick innovation cycles and switching costs, vendor profitability is often driven by the ability to "lock in" customers. Despite a large theoretical literature, there are few empirical studies on the success of vendor pricing and product strategies to achieve lock-in. This paper uses a comprehensive database of transactions in two major product lines for a large enterprise software vendor to examine the use and success of pricing and product strategies. Regarding pricing, the paper demonstrates that the vendor engages in significant "bargain-then-ripoff" pricing; customers completely new to it receive discounts that are nearly 50% greater than existing customers who are purchasing upgrades of a product. On the product side, one common lock-in strategy—the offering of broad product "suites" which span multiple product lines—appears to be of limited effectiveness. The vendor cannot limit its initial "bargain" to customers new to a product line, even if the customer has bought a different product from the vendor previously. This suggests that lock-in is product-, not vendor-specific. Finally, not all customers get locked in; I find that customers with high IT capabilities, and/or those with strong financial performance (which are very highly correlated), are likely to receive an "initial bargain" and then switch suppliers or use legacy systems, rather than pay locked-in rates. The "best" customers in terms of future revenue potential therefore avoid getting locked in.
| Author: | F. Warren McFarlan |
|---|---|
| Periodical: | China Journal of Information Systems 1, no. 1 (October 2007): 8-15 |
In the early 21st century, IT has become more important than ever. Technology evolution, the creation of new channels to global resource pools, increased corporate operational dependence on IT, and enhanced application opportunities have combined to drive this topic much higher on many companies' agendas. Different companies are impacted in different ways. Embedded in this chapter are two analytical frameworks often used by managers to understand this different impact; namely, the strategic grid and technological learning. Some aspects of IT have remained unchanged over a 40-year period. These include the constant emergence of new technologies, the obsolescence of technical skills, and the need for strong leadership. For many firms, however, this technology now has a much deeper impact on the transformation of their operations than could have been conceived several decades ago. The chapter successively describes how Otis, World Bank, COSCO and Cathay Pacific have each been utterly transformed by IT.
| Authors: | Tim Pollock and Ranjay Gulati |
|---|---|
| Periodical: | Strategic Organizations 5, no. 4 (November 2007). (A shorter version of this paper appeared in Academy of Management Best Papers Proceedings, pp 11-16, 2002) |
In this study, we explore how multiple signals related to entrepreneurial companies at the time of their initial public offering (IPO) influence the firms' ability to acquire non-financial resources over time. Specifically, the study looks at how signals based on investors' initial reactions to the IPO, analyst coverage and affiliations with experienced venture capitalists and prominent underwriters combine to enhance the IPO firm's visibility and reduce uncertainty, thereby influencing its ability to form post-IPO alliances. We also consider the extent to which the effects of each of the signals are sustained or diminish over time. Their analysis of 404 IPOs conducted by technology companies between 1995 and 2000 shows that these signals are positively related to alliance formation patterns and that the effects of these signals deteriorate at different rates over time.
| Authors: | Eric D. Werker and Faisal Z. Ahmand |
|---|---|
| Periodical: | Journal of Economic Perspectives 22, no. 2 (spring 2008) |
Nongovernmental organizations are one group of players who are active in the efforts of international development and increasing the welfare of poor people in poor countries. Nongovernmental organizations are largely staffed by altruistic employees and volunteers working towards ideological, rather than financial, ends. Their founders are often intense, creative individuals who sometimes come up with a new product to deliver or a better way to deliver existing goods and services. They are funded by donors, many of them poor or anonymous. Yet these attributes should not be unfamiliar to economists. Development NGOs, like domestic nonprofits, can be understood in the framework of not-for-profit contracting. It is easy to conjure up a glowing vision of how the efforts of NGOs could focus on problem solving without getting bogged down in corruption or bureaucracy. But the strengths of the NGO model have some corresponding weaknesses—in agenda setting, decision making, and resource allocation. We highlight three factors in explaining the increased presence of NGOs in the last few decades: a trend towards more outsourcing of government services; new ventures by would-be not-for-profit "entrepreneurs"; and the increasing professionalization of existing NGOs.
| Authors: | Joel West and Karim R. Lakhani |
|---|---|
| Periodical: | Industry & Innovation 15, no. 2 (April 2008) |
Research on open source software, user innovation and open innovation has increasingly emphasized the role of communities in creating, shaping and disseminating innovations. However, the comparability of such studies has been hampered by the lack of a precise definition of the community construct. In this paper we review prior definitions (implicit and explicit) of the community construct and other suggestions for future research.
Harvard Business School Module Note 607-014
Summarizes a model that helps managers determine what sorts of initiatives an organization is capable and incapable of managing successfully. The factors that affect what an organizational unit can and cannot accomplish can be grouped as resources, processes, and the priorities embedded in the business model. Demonstrates what kinds of changes are required in an organization and team structure for each different type of innovation.
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Harvard Business School Note 208-086
The goal of these simulations is to understand the mathematics of mean-variance optimization and the equilibrium pricing of risk if all investors use this rule with common information sets. Simulation A focuses on five to 10 years of monthly sector returns that are initially drawn from a known multivariate normal distribution. Mean-variance optimization is designed to produce the highest ratio of excess portfolio return to portfolio standard deviation (i.e. the highest Sharpe ratio) in this setting. Simulation B alters the setting by allowing students to determine expected returns through a simultaneous auction. We continue to have agreement over the covariance matrix, and implicitly over expected payoffs, but allow students to set market prices. The average portfolio weights across the 10 sectors is calculated and is used as the vector of market capitalization weights. With these market weights (w) and the given covariance matrix, the capital asset pricing model (CAPM) implied expected returns are calculated for each sector and compared with the student set expected returns.
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Purchase the supplement "Asset Allocation II," 208-087:
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Purchase the supplement "Asset Allocation III," 208-088:
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Harvard Business School Note 208-113
This lesson integrated Merton's (1974) contingent claims model of debt and equity claims with the CAPM, which allows us to examine the risks and pricing of credit portfolios and the derivative claims issued against them. In particular, this model is used to make investment and risk management decisions in the market for collateralized debt obligations (CDOs).
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Harvard Business School Note 208-103
The announcement of merger or acquisition conveys new information to the capital markets. This note describes how the stock prices of a Buyer and Target behave after the announcement of a deal. First, for an all-stock deal that is certain to go through, the note defines accouchement effects and describes the fundamental arbitrage relationship between Target and Buyer stock prices. It shows how post-announcement prices may be used to infer the market's estimate of synergies. It then explains how the betas of the two companies change post-announcement and the arbitrage relationship between prices in a cash-and-stock deal. Finally, it defines event risk and explains how it affects the prices of the Buyer and the Target.
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Harvard Business School Note 208-090
The event arbitrage module includes two simulation sessions. The first simulation focuses on analyzing and evaluating individual merger transactions, while the second simulation emphasizes managing a portfolio of individual positions and the limitations of arbitrage investing in real-world capital markets. The underlying data and information are derived from actual merger transactions and have been disguised to prevent students from knowing the outcome ahead of time.
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Harvard Business School Case 808-044
This case chronicles the role that Harvard Business School alumni play in the healthcare industry. Overall data on alumni is given, and the industry is broken into seven areas in which the careers of twenty-five alumni are highlighted.
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Harvard Business School Case 708-446
Chronicles the globalization of the Tata Group, one of India's largest business groups. Since 2000, many Tata Group operating companies have aggressively built international businesses, particularly through overseas acquisitions. After describing the globalization rationales and approaches of the major Tata Group companies, the case asks students to consider whether Tata Motors should pursue the acquisition of the Jaguar and Land Rover brands owned by US-based Ford Motor company.
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Harvard Business School Case 708-052
What caused the 1997 Korea crisis? Did the International Monetary Fund (IMF) help or hinder recovery? Did democracy help or hinder recovery? Seen as an economic miracle, Korea succumbed to the wave of currency crises sweeping Asia in late 1997. Did the same state-led export growth strategy that had brought about such spectacular success cause this financial meltdown? Conversely, what role had foreign investors played in setting up the crisis by pouring short-term capital into Korea's partially and unevenly liberalized financial system? When it arrived on the scene, did the IMF do more to help Korea recover from its economic distress, or did it just bail out foreign investors and prepare the way for Wall Street to up buy Korean banks and firms? Had Korea's long move toward democracy helped or hindered government efforts to reform its economic strategy and to resolve the current crisis? This case explains the background to explore these questions.
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Harvard Business School Case 908-061
Despite strong appeal among job seekers and outside recruiters, TheLadders' corporate job listings seem to lag. Could raising prices help solve the problem? TheLadders considers this strategic paradox.
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Harvard Business School Note 208-110
Examines various approaches to measuring investment performance. The approaches include the use of risk exposure and the Sharpe and Information Ratios. Applies the approaches to a variety of mutual funds to demonstrate the effect of using different metrics to measure fund performance.
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Harvard Business School Case 308-033
This note introduces students to the current state of the nonprofit sector around the world. It also provides insight into the sector's origin and purpose as well as the identifying important current trends. The note draws on numerous sources to provide a single resource for readers to gain understanding of this complex sector. The intended audience includes students, prospective professional leaders, those considering joining a board, consultants to the sector, or anyone wishing to learn more about the field.
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Harvard Business School Case 108-069
Leading index company Dow Jones recently signed a license and joint marketing agreement with Transparent Value LLC, the creator of a new fundamentals-based valuation methodology. The agreement allowed Dow Jones to offer a family of indexes based on the Transparent Value methodology. The methodology viewed stock prices as the clearest and most reliable signals of the market's expectations about a company's future performance and employed a Reverse Discounted Cash Flow (RDCF) valuation model to calculate the revenue required to support a given stock price for a given company. Then, the methodology applied a probability that the company would achieve the needed revenues in the next 12 months, based on its recent track record. Moreover, the methodology endeavored for specificity. For example, when possible, Transparent Value strove to determine what the company needed to do in its business activities to achieve the required revenues. Called "business performance requirements," these could include the number of new store openings, or the number of product unit sales needed, as two examples. The fictitious case protagonist, a business development manager at a leading money management firm, is looking to launch an exchange-traded fund (ETF) using a fundamentals-based index as the underlying index. She needs to decide whether to base her ETF products on the Dow Jones Transparent Value indexes. The case study provides an overview of equity indexes and ETFs and a step-by-step description of Transparent Value's methodology.
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Harvard Business School Case 208-111
This lesson develops the classical structural approach to pricing and hedging credit risk: Merton's (1974) contingent claims model of debt and equity claims. This model is used to make investment and risk management decisions in an over-the-counter (OTC) market for distressed bonds.
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Harvard Business School Case 808-123
This case examines the effect of environmental activism on China's investment climate, focusing on the petrochemical sector. It shows how tensions between a country's national economic development goals and political constraints make for a more unpredictable investment climate, despite considerable improvements in the rule of law within China. This case is suitable for courses in international business, business and society, and doing business in China and/or the developing world.
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Filed under: Business Schools, Deans, management, Management education
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| Published: | July 3, 2008 |
| Paper Released: | June 2008 |
| Authors: | V. Kasturi Rangan, Herman B. Leonard, and Susan McDonald |
This paper considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. The authors trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. They further examine how these organizations can best access the untapped resources by demonstrating mission performance, and then propose three potential scenarios, outlined below, for how this sector might evolve. Key concepts include:
The Future of Social Enterprise considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. We trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. We examine how these organizations can best access the untapped resources by demonstrating mission performance and then propose three potential scenarios for how this sector might evolve:
Consolidation: In this scenario, funding will keep growing in a gradual, linear fashion and organizations will compete for resources by demonstrating performance, with a focus on efficiency. The sector will consolidate, with some efficient organizations gaining scale, some merging and then growing, and some failing to achieve either scale or efficiency and eventually shutting down.
Entrepreneurial: In a more optimistic future, existing and new enterprises will apply strategies to achieve and demonstrate performance, improving efficiency and effectiveness and attracting new funding sources. More organizations will enter a reformed, competitive field of social change with new entrepreneurial models, established traditional organizations, and innovative funding strategies fueling widespread success.
Expressive: Rather than focusing exclusively on performance, funders and organizations may view their investment as an expressive civic activity. As much value is placed on participating in a cause as on employing concrete measures of impact or efficiency. In this scenario, funding will flow as social entrepreneurs experiment with new models based on a range of individual priorities and relationships.
General Management Filed under: Business Schools, Deans, management, Management education
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| Published: | July 3, 2008 |
| Author: | Jim Heskett |
Recent books have examined every aspect of leadership. Few have addressed challenges for those of us who follow, that is to say everyone at some time in our lives. There are a few exceptions. Abraham Zaleznik wrote about "The Dynamics of Subordinacy" more than four decades ago. Fifteen years ago, Jack Gabarro and John Kotter published a piece called "Managing Your Boss," in which they advocated: (1) understanding your boss and his or her "goals and objectives, pressures, strengths, weaknesses, blind spots, and preferred work styles"; (2) understanding yourself and your needs, including "strengths and weaknesses, personal style, and predisposition toward dependence on authority figures"; and (3) developing and maintaining a relationship that is centered around such things as frequent communication, an understanding of mutual expectations, dependability and honesty, and selective use of "your boss's time and resources."
Now Barbara Kellerman in her new book, Followership, asks where leaders would be without good followers. This question may be particularly significant in an age when followers find it easier to organize by means of the Internet at the same time that, in Kellerman's opinion, "cultural constraints against taking on people in positions of power, authority, and influence have been weakened." Kellerman goes on to say: "The fact is that followers are gaining power and influence while leaders are losing power and influence." In fact, in recent years we have seen management experiments with teams in which it is difficult to identify a leader.
Kellerman describes five types of followers: isolates (completely detached), bystanders (observers only), participants (engaged), activists (who feel strongly and act accordingly, both with and against leaders), and diehards (deeply devoted). Dismissing the first two groups as antithethical to good followership, and by extension, potentially supportive of bad leadership (as in Nazi Germany), she focuses on behaviors of the other three types. Of these three, "participants" seem to me to offer the most potential for long-term, productive relationships between subordinates and their bosses, particularly in large organizations. Participants work hard either in support of or against the policies and practices of their leaders. As Kellerman puts it, "they care enough … to try to have an impact."
Clearly it's in the best interests of successful leaders to understand and capitalize on the needs of such subordinates. Leaders need to be constantly aware of something that several of us have discovered in our research: Every decision made by a leader—particularly decisions involving hiring, recognizing, and firing people—is judged by 10 or 15 subordinates, who regard the "fairness" of those decisions as one of the most important factors in the quality of their work life.
This observation raises some questions for us. As a follower, what advice would you give to other followers wishing to have an impact on their jobs and organizations? As a leader, what do you do to foster good followership? Why isn't followership addressed by business school curricula along with leadership? Does it belong in a course of study? Or does this just run the risk of deteriorating into a discussion of how to manipulate your boss? What do you think?
John J. Gabarro and John P. Kotter, "Managing Your Boss," Harvard Business Review, May-June, 1993
Barbara Kellerman, Followership: How Followers Are Creating Change and Changing Leaders (Boston: Harvard Business Press, 2008)
Abraham Zaleznick, "The Dynamics of Subordinacy," Harvard Business Review, May-June, 1965
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Last year, Princeton economics professor Alan S. Blinder reviewed more than 800 occupations in the United States, and estimated that between 22 and 29 percent of them were potentially offshorable. This year, 901 MBA students of Harvard Business School attempted to replicate Blinder's study, with largely similar results and two further insights.
As HBS research associate Troy Smith and Professor Jan W. Rivkin write in a working paper available for download [PDF], "First, Blinder's notion of assessing the 'potential offshorability' of an occupation is tricky. … [M]ore and more, the laws of economics drive the geography of business activity. Second, we feel that one misses something important when one thinks of moving occupations or jobs offshore. It is actually the tasks or activities associated with an occupation or job that move." Conceiving of offshoring in relation to tasks rather than jobs gives companies a broader global palette with which to manage differences across borders, the authors conclude.
Cases on, among other topics, lessons to be learned from the merger of Canada's Toronto-Dominion Bank and the more customer-service oriented Canada Trust, and the marketing dilemmas of software company ScriptLogic round out the week.
— Martha Lagace
| Authors: | Gary P. Pisano and Roberto Verganti |
|---|
Collaborative innovation has become a hot topic in innovation today. Scholars, consultants, and the business press all urge companies seeking to boost innovative performance to become more "collaborative." Too often, however, companies fail to distinguish among the various choices they face with respect to alternative modes of collaboration. Collaborative innovation can take a wide variety of forms, each with profound implications for innovative performance and the value a firm can capture from innovation. Building on a number of case studies, this paper presents a simple framework for categorizing different collaborative modes. The framework is based on the notion that there are two critical dimensions along which collaborative efforts can be characterized. The first dimension relates to the degree to which the collaborative network is "open" verses "closed." The second dimension relates to the degree to which the governance structure for collaboration is "hierarchical" verses "flat." While discussions of collaborative innovation often take the position that "open" networks are superior to "closed" networks, and that "flat" governance structures are superior to "hierarchical" structures, our framework provides a more nuanced view of the trade-offs. The choice among alternative collaborative modes should be driven by a number of factors including characteristics of the technology, the capabilities of the firm, and the distribution of competences in the environment. We develop a set of guidelines for helping firms choose among collaborative models and discuss critical enabling conditions required for each to work in practice. In the final section of the paper, we discuss how firms can "mix and match" multiple modes of collaboration into coherent "architectures" that lie at the heart of innovation strategy.
| Authors: | V. Kasturi Rangan, Herman B. Leonard, and Susan McDonald |
|---|
The Future of Social Enterprise considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. We trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs.
Download the paper: http://www.hbs.edu/research/pdf/08-103.pdf
| Authors: | Troy Smith and Jan W. Rivkin |
|---|
In a 2007 working paper, Alan Blinder assessed the "offshorability" of hundreds of U.S. occupations and estimated that between 22% and 29% of all U.S. jobs were potentially offshorable. This note reports the results of an exercise in which members of Harvard Business School's MBA Class of 2009 collectively attempted to replicate Blinder's study. Overall, the MBA students' assessments of offshorability matched Blinder's well. Across occupations, the correlation between Blinder's offshorability rating and the students' was 0.60. The students estimated that between 21% and 42% of U.S. jobs are potentially offshorable. Echoing Blinder, the student data suggested a positive correlation between offshorability and education. The student data also revealed a positive or inverted-U relationship between offshorability and wage level, where Blinder found no correlation. While Blinder found a slight wage penalty for the most offshorable jobs, the student data exhibited no evidence of wage depreciation from job contestability due to offshoring.
Download the paper: http://www.hbs.edu/research/pdf/08-104.pdf
| Authors: | Kathleen L. McGinn, Katherine L. Milkman, and Markus Nöth |
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Past research has shown that communication in negotiations heightens social awareness, facilitates coordination, increases the utility for the other's positive outcomes, and thereby leads to more equal payoffs. But the role of specific communication strategies in shaping the terms of agreement is largely ignored in models of bargaining behavior. We propose that communication is used to frame negotiations around a logic of fairness or competition, moving parties toward or away from equal-division agreements. These effects outweigh any overall social cohesion effects due to the mere presence of communication. We offer evidence from two laboratory studies with three-party negotiations to support these hypotheses.
Download the paper: http://www.hbs.edu/research/pdf/08-032.pdf
Harvard Business School Case 508-003
Describes the dilemma facing Advanced Energy (AE), a $6 million nonprofit engaged in energy conservation in North Carolina. Most of the money for its programs comes from a Public Benefits Fund (PBF) enacted by the state legislature. With renewed effort by activists in 2006 to expand AE's role, there was a possibility of the PBF swelling to $50 to $80 million. Naturally, this put AE at conflict with electric utilities wanting to engage in efficiency programs as part of their overall business offering.
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Harvard Business School Case 708-485
In 2007, Allstate was the number two property and casualty insurer in the USA and had enjoyed five years of rapid profit improvement. The question facing CEO Thomas J. Wilson was how to maintain the momentum. This case tracks the evolution of Allstate's strategy over 20 years, examining the logic behind the strategic changes, and the challenges of implementing them. It identifies sources of inertia from within the organization and from without and summarizes the strategic issues facing Allstate in early 2007.
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Harvard Business School Case 108-092
An exercise that takes students through five stages of growth in an entrepreneurial start-up in the medical devices industry: 1) founding, 2) growth, 3) push to profitability, 4) refocusing process, and 5) takeover by new management. At each stage, students must confront tensions in balancing profit, growth and control. Difficulties encountered in the business are due to management's attempts to design and use formal control systems to achieve profit and performance goals.
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Harvard Business School Case 108-091
An exercise that takes students through five stages of growth in an entrepreneurial start-up in the medical devices industry: 1) founding, 2) growth, 3) push to profitability, 4) relocation process, and 5) takeover by new management. At each stage, students must confront tensions in balancing profit, growth and control. Difficulties encountered in the business are due to management's attempts to design and use formal control systems to achieve profit and performance goals.
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Harvard Business School Note 508-090
This note develops a framework for considering the challenges of incorporating marketing input when setting innovation strategy. The framework lays out the possible innovation opportunities a firm can entertain and describes how the customer knowledge gained from conducting market research at the front end of NPD affects which of these opportunities the firm should pursue. Pitfalls in analyzing the customer data are described, along with guidelines on how to overcome them. The impact of competition in the context of setting innovation strategy under market uncertainty is also addressed.
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Harvard Business School Case 308-065
China is an ancient civilization, but it is really a very young country. How we understand modern China is rooted in our understanding of history. Thus, the authors examine several myths surrounding important historical themes, including unity, economic and political isolation, the growth and development of capitalism, internationalization, and governance. Following the dispelling of these myths, the authors then examine several lessons of more recent Chinese history, exploring where this young country has been in its first century.
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Harvard Business School Case 508-114
ScriptLogic is a software company that has built a product portfolio that fits under a 'Point, Click, Done!' umbrella; its products are easy to download, easy to install, and easy to use. The company's online marketing program and inside sales force have been very successful in finding and bringing in new customers, in part because of a laser-like focus on increasing its marketing ROI. As ScriptLogic looks towards its next phase of growth, however, it is becoming clear that some changes need to be made in order to take full advantage of its growing product portfolio. Students debate the merits of going after new customers by building an enterprise sales force or mining the existing customer base with an inside sales force that already has a lot on its plate.
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Harvard Business School Case 808-112
Describes a set of key strategic decisions facing the scientific founder and CEO of a promising, early stage bio-pharmaceuticals company. Should the company establish a proposed alliance with a pharmaceutical firm? Should it create a nutraceuticals business in parallel to its effort to develop anti-aging therapeutics? And, should it in-license a second drug development candidate?
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Harvard Business School Case 208-137
Vikram Akula, CEO of SKS Microfinance, seeks a venture capital investment to fund his firm. SKS, one of the largest and fastest growing microfinance institutions in India, is a profitable, for-profit institution with a social mission. In what is one of the first commercial financing deals in the world, Akula must decide at what value to sell equity in SKS, and to whom to sell it. The case focuses on valuation, which is difficult because at the time there are no publicly traded comparable companies, and the strategic aspects of raising money.
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Harvard Business School Case 708-023
Describes the economics, technology, and politics of the oil sands industry, focusing on one of the industry's leading firms. Oil sands deposits in Alberta represent a potentially vast reserve of hydrocarbons, but the extraction, refining, and transportation challenges are formidable, and the environmental consequences of large-scare oil sands development potentially severe. Encourages students to examine Suncor's strategic positioning and cost structure, and the challenges that the firm's leaders confront as of 2007.
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Harvard Business School Case 308-057
After fifty-five years in the semiconductor industry, Morris Chang, founder and Chairman of Taiwan Semiconductor Manufacturing Company (TSMC), was seeing a change. After four decades of regular double-digit growth the industry was still growing-but now at a much slower pace. In 2004, TSMC entered the China market, the world's second largest for semiconductors, by building a fabrication plant in Shanghai. Was China the market opportunity in which TSMC could bet on for expansion, or should its strategy be to focus on new product development and innovation?
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Harvard Business School Case 108-005
The case series illustrates the role of performance measurement and analytics in translating TD-Canada Trust's service model of "comfortable banking" into operational terms. In 2000, in a banking market where consumers and regulators were typically hostile to mergers and acquisitions, Canada's fifth largest commercial bank, Toronto-Dominion Bank (TD Bank), undertook a merger with a relatively small trust company, Canada Trust, which was known for exceptional customer service. To assuage the concerns of regulators, consumer groups, and newly acquired customers, TD Bank made several public pronouncements promising to maintain Canada Trust's high customer service standards and to deliver a "comfortable banking" experience. Chris Armstrong, executive vice president and chief marketing officer, was now faced with the task of defining the comfortable banking model and consistently delivering on these promises. Armstrong and his team undertake a systematic analysis of the drivers of customer satisfaction and branch network profitability and, based on the results, must decide how to change TD-Canada Trust's branch compensation and performance reporting systems to consistently, and profitably, deliver a "comfortable banking" experience.
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Harvard Business School Case 708-036
By March 2008, the U.S. Government and the U.S. Federal Reserve Board had taken various policy measures over the last few months to tackle the subprime mortgage crisis that threatened to drag the economy into a recession. The Bush administration approved a fiscal stimulus package exceeding $150 billion. Interest rates had been repeatedly cut at the fastest pace in decades, to 2.25% as of March 2008. The Fed, in an unprecedented move, helped JPMorgan Chase to take over Bear Stearns, which was on the brink of collapse. Yet as the global economy faced slower growth stemming from the U.S. mortgage crisis, policy makers were caught in an intense debate over what the 'right' solution would be, and the implication of these policies on global imbalances.
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| Authors: | Rawi Abdelal, Ayesha Khan, and Tarun Khanna |
|---|---|
| Publication: | Harvard Business Review (forthcoming) |
The combination of the gigantic American trade deficit and the price of oil at more than $130 per barrel (at press time) have created an inevitable pool of financial liquidity among oil exporters in the Arabian Gulf. But this era of petrodollar surpluses is markedly different from the last one. In the 1970s, the member states of the Gulf Cooperation Council—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—outsourced the management of their petrodollars to American and U.K. bankers. This time around, they have adopted active investment and development strategies: They are investing heavily in large Western organizations as well as in emerging markets in Africa and India. They are spending lavishly at home to establish institutional infrastructures, create free-trade zones for manufacturing and services, and build recreational facilities that will attract businesses, skilled knowledge workers, and tourists. All of this is destined to have long-run effects not just on their local economies but also on regional and international trading, argue the authors. In fact, the authors say, the actions of the GCC states are pulling the Gulf closer than it has ever been to the center of the international financial system. In this article, the authors consider how the economic landscape in the West will be affected by oil exporters' new investment strategies and interests over the next decades, how proximate emerging markets will be reshaped, and finally, how the GCC home environment itself will be dramatically reconfigured.
| Authors: | Russell A. Eisenstat, Michael Beer, Nathaniel Foote, Tobias Fredberg, and Flemming Norrgren |
|---|---|
| Publication: | HBS Centennial Issue. Harvard Business Review 86, nos. 7/8 (July - August 2008) |
Managing the tension between performance and people is at the heart of the CEOs job. The firms they lead are at once economic organizations whose survival and prosperity depends on delivering superior value in an unforgiving global market place and social institutions that profoundly shape the lives and prospects of their employees. All too many leaders view their role through one or the other lenses, though in the strong market for corporate control that has emerged in the last twenty years shareholder value dominates. A study of CEOs in Americas and Europe selected because their companies are outperforming their competitors and also achieving commitment reveals a mindset and managerial practices discussed in this article that they employ to simultaneously solve for performance and commitment.
| Authors: | Ranjay Gulati and Jackson Nickerson |
|---|---|
| Publication: | Organization Science 19, no. 2 (March - April 2008): 1-21 |
This paper looks at when and how preexisting interorganizational trust influences the choice of governance and in turn the performance of exchange relationships. We theorize that preexisting interorganizational trust complements the choice of governance mode (make, ally, or buy) and also promotes substitution effects on governance mode choice while impacting exchange performance. We evaluate hypotheses using a novel three-stage switching regression model and a sample of 222 component-sourcing arrangements of two assemblers in the automobile industry. Analysis of our data broadly supports our hypotheses. High levels of preexisting interorganizational trust increased the probability that a less formal, and thus less costly, mode of governance was chosen over a more formal one. This finding suggests a substitution effect of interorganizational trust on governance mode choice that in turn shapes exchange performance. We also found a complementary effect of trust on performance: Regardless of the governance mode chosen for an exchange, trust enhanced exchange performance. Additional evidence of the complementary effect of trust on performance was that trust somewhat reduced interorganizational conflict.
| Authors: | Daniel J. Isenberg |
|---|---|
| Publication: | Innovations: Technology, Governance, Globalization 3, no. 1 (winter 2008) |
I first met Vinod Kapur in the summer of 2006 when I was conducting research in India on a case for my Harvard Business School class on international entrepreneurship. A friend of mine had invited me to attend the ceremony for the first Innovations for India Awards in Mumbai. Several Indian businesspeople received the award, but I was particularly struck by a dignified silver-haired gentleman who took the stage to receive the award for social innovation. He then proceeded to eloquently describe the development of a business concept centered on the rural poor of India, which was based on a specially bred "superchicken" that was twice as big and five times as productive as the typical backyard chicken. The incongruity of Vinod Kapur's elegant appearance and his subject matter struck me as fascinating, but the most intriguing element of the presentation was how he arranged an entire system of distribution to deliver the hatched chicks to these remote villagers and did so in a way that enabled everyone to profit in concrete financial terms, from Keggfarms itself to the rural villagers. Almost a million households are today affected by Keggfarms, and the numbers are constantly rising.
Download the paper: http://www.mitpressjournals.org/doi/abs/10.1162/itgg.2008.3.1.52
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| Published: | June 30, 2008 |
| Author: | Julia Hanna |
Many of us are sailing toward retirement with the hope that Social Security, personal savings, and money saved in an employer's 401(k) or 403(b) plan will add up to the magic sum required to enjoy our remaining years in reasonable style.
But how to reach that goal can be a bit of a mystery. We all know we should be saving for retirement, but how much should we be squirreling away? And of the funds our company's plan offers, which should we choose?
According to Harvard Business School professor Robert C. Merton, the defined contribution (DC) plans currently offered by the majority of employers place an undue burden on workers who don't have the interest, time, or expertise to manage their finances. A pioneer in translating finance and mathematics into practical, Wall Street-ready models, Merton was awarded the 1997 Nobel Memorial Prize in Economic Sciences for his work on what has come to be known as the Black-Scholes option pricing model.
"Don't misunderstand me—getting some education about your financial affairs is a good idea, just as having some understanding of your medical needs is a good idea," Merton says. "But that knowledge won't qualify you to decide how much mid-cap European stock you should have in your portfolio, any more than it would enable you to perform surgery on yourself."
Intelligence is not the issue, he emphasizes; it really is a question of knowledge and time. Retirement planning as it is currently administered is in a transition phase; it simply doesn't represent a sustainable solution for consumers.
Yet employers are the natural gatekeepers for retirement plans, he believes. For example, when focus groups were presented with a new retirement product, individuals balked at signing on until they were told that the product would be offered through their 401(k). "They didn't see anything wrong with it," Merton says. "They just didn't believe it could be that good until it had their employer's seal of approval. Most people trust their employer more than banks or some other third-party provider."
This trust was no doubt engendered in an earlier day when defined benefit (DB) pension plans were offered by lifelong employers like IBM and General Motors. Today, that system is all but extinct. Merton explains that employers underestimated the cost and risk of DB plans from the start.
"The accounting system in place projected a sure-thing return of 9 percent. The problem that we've seen in the past, and that we see in our current crisis, is the tendency to talk only about return and forget risk. Risk means risk, not just a wink and a nod. 'It will all work out in the end' is not a supportable claim."
When the global stock market and interest rates began to decline in 2000, many corporations faced a double whammy when returns on pension assets were well below expectations and pension liabilities rose by much more than expected.
"At that point, CEOs began paying attention to this as a strategic issue," Merton says. "They had been offering unions the choice of a dollar's worth of salary or what they thought was a dollar's worth of benefits. Most unions picked the benefits, which were in fact worth $1.50."
So where does this leave us? Still in transition, unfortunately, but Merton has an idea for a different approach that would provide an integrated solution to the retirement conundrum. "Think of it as an answer, but not the only answer," he says.
The plan incorporates many of the aspects of the current DC system, with one important difference: a focus on an inflation-protected annuity rather than an endpoint with a lump sum of accumulated wealth.
"This is not anything new or radical," says Merton. "In Pride and Prejudice, Jane Austen didn't describe Mr. Darcy by saying he was worth 100,000 pounds. She'd say that he was worth 4,000 pounds a year. That's how we usually think of our standard of living."
Merton says we're used to the mutual fund industry as a vehicle for getting to our retirement goal, yet few of us have a deep understanding of the mechanics behind it. "It's like compression ratios on car engines. Or dual overhead camshafts. What does that mean in terms of what matters to me? Does it get me more gas mileage? In the same sense, what you're really worried about is your standard of living, not what's under the hood in terms of the rate of return distributions to get you to that goal."
With that in mind, Merton and a team of financial engineers created SmartNest, an individually tailored pension program that requires just a few simple inputs from employees before they "set it and forget it"—what most of us do by default, anyway.
First off, employees are asked to input their desired annual income in retirement. If they are not sure, the recommended target to maintain one's standard of living is around 70 percent of your annual income earned in the last few years of your work life. They are then asked to input the minimum amount they would feel comfortable living on. ("It's a device to calibrate your risk tolerance," Merton says.)
That information is then integrated with the employee's additional sources of retirement income such as Social Security, a DB plan, or an IRA (when you leave an employer, you typically roll your 401k into an IRA) to determine and implement a dynamically optimized portfolio strategy that maximizes the chance of achieving your desired retirement income goal.
Over the years, that managed portfolio adjusts for factors such as increases or decreases in salary and takes into account explicitly the risks of changing life expectancy, inflation, and interest rates.
Merton uses the analogy of an ocean liner sailing from England to New York. When just out of port, there are many unforeseen things to correct for along the way so a precise course is not necessary. But as the ship nears port, greater and greater accuracy is required if it's to avoid running aground and miss achieving its goal.
"We have your goal in mind and do the dynamic trading with the target vision to get you there," Merton explains. "We don't try to pretend we can outperform the market. I'm not saying people can't do it, but if something is going to be scalable to the millions of workers who will be entering the system in the coming years, that idea doesn't work as a core strategy."
Participants in the system can view their account at any time and check the current probability of reaching their desired retirement goal. If they're uncomfortable with that figure, they can breathe a little easier by upping their contribution or deciding to add a year or two to their retirement age. Or they may decide to lower the annuity they'd feel comfortable living on. Any or all of these factors can be adjusted until a more acceptable probability is reached.
"These are real decisions for you, not how much mid-cap stock to buy," says Merton. "If you choose to save more, your paycheck will be smaller. You're trading off consumption now for consumption in retirement. This is real. The idea is to provide meaningful choice, objective analysis, and a system that will work even if you make no choices at all."
"I'm not saying it can't be done better," Merton says of the program. "We anticipate making continuous improvements. But this is something we've built with market-proven technologies that is addressing a real need right now. As more and more people are brought into employer retirement plans, it's going to have major implications for how this service is delivered."
SmartNest is currently used by Philips in Holland, Germany, and the United Kingdom.
So stay tuned. Retirement as we know it is an evolving concept. For one person it may be the classic vision of a condo on a golf course in Florida. For another, a sojourn in Africa with the Peace Corps. Now it seems that the way we achieve our retirement dreams, whatever they may be, soon could be changing as well.
Julia Hanna is the associate editor of the HBS Alumni Bulletin.
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