by J.L.H.D. | ATLANTA
OF ALL the hassles Big Government imposes upon the hapless citizen, finding coins for the parking meter must surely rank among the smaller. Nonetheless, in 2010, the District of Columbia Department of Transportation (DDOT) thought it had spotted a way of improving commuters' lives. It paired with a firm called Parkmobile to test a small number of meters for which, instead of using the traditional change, drivers could use their smartphones to pay for parking. Now all 17,000 metered spaces in Washington, DC offer the pay-by-phone option, allowing DDOT to collect parking fees more efficiently and drivers to venture far from their car without having to run back and feed the meter.
The DDOT/Parkmobile collaboration is one of five case studies cited in a new article for the Stanford Social Innovation Review by Nikhil Sahni and and Maxwell Wessel, until recently fellows at Harvard Business School’s Forum for Growth and Innovation, and Clayton Christensen, a Harvard professor and longtime writer on innovation. The public sector is capable of implementing new ideas, they argue, so long as the right conditions are in place. The two most crucial conditions are the ability to experiment and being able to get rid of outdated infrastructure. Also useful are incentives to improve the system, ways of measuring how the experiments work out, and budget constraints (which work as another incentive to get things done well and more cheaply).
by J.L.H.D. | ATLANTA
THE recent archives of this newspaper are full of examples of corrupt politicians manoeuvring to stay in office—in Italy, India and even sleepy Slovenia. Yet many of these countries—along with most democracies—have explicit provisions of immunity written into their constitutions: certain hurdles have to be cleared before elected politicians can be removed from office and charged with crimes. In a new working paper, Karthik Reddy of Harvard Law School, Moritz Schularick of the Free University of Berlin and Vasiliki Skreta of New York University’s Stern Business School explore the relationship between the two phenomena. “Whether immunity is a vice or a virtue,” they write, “depends on whether stronger immunity is relatively more valuable to corrupt politicians or to honest ones.”
The authors set up a model of how politicians, their constituencies and interest groups interact. Their model suggests that stronger immunity protections lower the costs of being corrupt. The strength of the judiciary plays a part, too. Immunity provisions are more likely to benefit crooks in countries where judges are relatively powerful and honest. Where they are not, giving immunity protects politicians from being removed on politically-motivated trumped-up charges.
In a guest article, Joachim Schwass, a professor at IMD business school in Switzerland, says that business schools can help resolve tricky succession problems at family-run firms
Most family businesses are not very good at handling a succession. This is partly because they lack regular practice. Handovers in a family firm might only happen once every few decades, far less often than in public companies. Then there is emotion. In addition to family politics and feuds, parents are often unable to make a rational assessment of their children’s leadership abilities. Disputes at handover time are inevitable.
This is worrying, because succession is a much bigger deal for family firms than for public companies. When a family business has been led by one personality for decades, passing the torch to the next generation can be a disruptive, even traumatic event. Since the long-term survival of the business may be at stake, family firms often turn to business schools for help.
by J.L.H.D. | ATLANTA
EXPERIENCES at the annual office party generally fall into one of three categories: one goes and has a relatively enjoyable time; one goes and grits one’s teeth until going home is socially excusable; or one goes and wakes the next morning with a terrible headache and a nagging feeling of dread. Now comes a paper from Organisation Science, investigating what factors may influence how much fun people have at office parties, and what implications that might have for their firms.
The co-authors of “Getting Closer at the Company Party”, Tracy Dumas of the Fisher College of Business at Ohio State University, Katherine Phillips of Columbia and Nancy Rothbard of Wharton, set out to investigate “integration behaviours”. These are times when people bring their work and personal lives closer together, such as attending office parties. Previous research has suggested that they can help employees feel closer to each other and, by extension, to their firm. But, the authors guessed, that would only work if the employees actually enjoyed being brought together; those who ended up standing on the side at the party would be reminded of differences between them and their colleagues and would be less likely to take pleasure in integration behaviours.
Andy Molinsky, a professor at Brandeis International Business School, says that MBA programmes must work harder to produce students who can work effectively overseas
THE future for MBA graduates is clear. Regardless of the country in which they build their careers, they will come into ever closer contact with foreign markets. It may seem obvious, but as companies go global it is the employees, not the organisations, who do the grunt work. They are the ones managing teams, forging networks, resolving conflicts and conducting negotiations. For a company to succeed, those who work on its behalf must be able to operate effectively abroad.
Business schools recognise this, at least in theory. Most try to prepare students for leadership positions overseas through study-abroad programmes, international consulting projects or immersion trips. Students emerge with a general grasp of how business gets done in other countries—how the Shanghai Stock Exchange differs from the Deutsche Börse, say, or how deals are structured in Tokyo as opposed to in London. But they do not come away with the ability to perform effectively in foreign cultures. This requires something that I call “global dexterity”: the ability to adapt your behaviour when faced with cultural norms very different from your own. It could be anything from how to pitch a company to an investor, how to motivate employees or how to give performance feedback. In many cases, these norms aren’t just different, they require behaviour that is far outside one’s comfort zone. This makes adaptation a challenge.
THERE is a wonderful and pithy critique of business books on Quartz.com, written by William MacAskill, an ethicist at Oxford and Princeton. The premise is that there is a single, recurring mistake that all management writers make: they draw lessons on how to run a successful company by citing companies that happen to be successful. As Mr MacAskill explains, this is basically useless:
In a pool of thousands of companies, inevitably some are going to end up highly successful purely through luck—and by looking just at performance, you’ve got no way of distinguishing luck and solid business strategy. Take a distinctive and successful company—you’ve got no idea if the factors that make them distinctive helped them, hindered them, or were completely irrelevant to their success.
In other words, they are all suffering from survivor bias. Mr MacAskill goes on to look at three of the best known books of the genre, “In Search of Excellence” by Tom Peters and Robert Waterman, “Built to Last” by Jim Collins and Jerry Porras, and “Good to Great” also by Jim Collins. In each, many of the “model companies” held up as examples of great management failed to outperform the market after they were cited as such. Some, such as Fannie Mae and Atari, now look horribly misjudged. This is more than just the wisdom of hindsight:
by J.L.H.D. | ATLANTA
JOURNALISTIC convention requires that a news story about a company ends with its most recent stock price. This suggests that the two are somehow correlated. Indeed, journalists would very much like to believe that the pieces they publish end up influencing the stock market. But the academic research on this relationship has, so far, been surprisingly mixed. An influential 1988 article in the Journal of Finance found that news articles were not a good predictor of stock-price changes.
Researchers from Arison School of Business and HebrewUniversity, both in Israel, and McCombs School of Business in Texas and the Stern School of Business in New York, revisit the issue in a new NBER working paper. Previous research, they say, suggests that stock trading is either irrational or influenced chiefly by private information. But perhaps, they go on, the problem is not how news influences the stock market, but that finance researchers have been bad at identifying whether “news” is either true or relevant.
by J.L.H.D. | ATLANTA
THE crowdfunding site Indiegogo—post your project, ask for donations—has supported everything from museums-in-the-making to nascent films to couples needing medical (and thus financial) assistance to get pregnant. “Light the Future for Rural Ugandans,” hoping to raise $20,000 by April 22nd, is one of thousands of potential funding recipients Indiegogo lists under “Technology”. What makes it noteworthy is not just its goal, whether rural Ugandans might adopt new solar-powered lights over traditional kerosene, but its provenance. The project was put up by David Levine, William Fuchs and Brett Green, all professors at Berkeley’s Haas business school.
Mr Levine specialises in corporate social responsibility and development economics; Mr Fuchs, on doing business in environments where contract law is thin on the ground; Mr Green, on the dissemination of information in markets. The three found common cause with Vastinah Kemigisha, a Ugandan economist, on an experiment aimed at encouraging the adoption of solar lights, which have the advantage of being more efficient and less dangerous than kerosene. They plan to encourage recipients of microfianance loans, already acting as vendors of small items such as toiletries and cigarettes, to act as saleswomen for the lamps. The vendors will be split into a control group and an experimental group, which will be offered the opportunity to sell the lamps on credit. Mr Levine ran a similar experiment towards the adoption of efficient cookstoves.
by J.L.H.D. | ATLANTA
ON OCCASION—more frequently since the financial crisis began—one hears the suggestion that you need to be a remorseless psychopath to be a successful capitalist. This is a blunt rhetorical instrument and thus not very effective. However upset people are with Jon Corzine, who was the head of MF Global, a finance firm, when it went bankrupt and was later found to have misplaced billions of its clients' dollars, he is hardly comparable to a mass murderering (albeit fictional) gangster like Tony Soprano (pictured).
For an alternative, see a new working paper by Manfred Kets de Vries, a professor at INSEAD with training in psychotherapy and a long history of publishing on leadership issues. Psychopathy occurs by degrees, he explains. While some psychopaths may be so profoundly disturbed as to become murderers, others have an easier time playing by society’s rules. Yet they remain narcissistic, manipulative, overbearing, and far more likely to humiliate and belittle than support their co-workers or underlings. Mr Kets de Vries calls such behaviour “psychopathy lite”, and coins a new term: Seductive Operating Bully, or, yes, SOB.