2010 08
New Management Focus: Invest in Relationships!
Designing an organization requires making a million decisions both large (e.g. picking a strategy) and small (e.g. picking out paper for the PC printer). It is easy to get lost in the trivial instead of focusing on getting the critical elements right. In my courses, I try to present ideas and frameworks that help identify what is important. At the recent Academy of Management Conference in Montreal I came across a phrase that was new to me. In my view, it crystallizes what managers need to do to design an organization that is able to respond to all the unexpected events that invariably occur in the life of an organization:
You Don’t Have to Pay Employees More Than the Competition to Keep Them Happy
Returning to Chicago for the first time in three years, I went to two of my favorite restaurants. In one, Lulu’s, most of waitresses and busboys I had seen three years ago were still there. In the other, I recognized no one except for the owner. So I asked the owner of Lulu’s if he was paying his people more. He said: “No.” I asked him a second time. He still said: “No.” Confirming the lesson that many management professors emphasize in the context of the Southwest airline example, you don’t have to pay people more than the competition to keep them happy. Lulu’s is a fun place and the interior design is attractive, providing employees non-monetary rewards. Evidently the owner is also not getting on the nerves of his staff. Jokingly he says in front of one of his female employees: “I cannot even get rid of the people I would like to see go.” The lady—who must have been working there for at least 8 years—interjects: “I knew you were going to say this.” The general lesson (except perhaps for Wall Street before the crash) is: You don’t need to pay people more than the competition. But the total rewards of working for you have to be more than the total rewards of working for someone else. Otherwise people will leave.
2010 07
We seem to have a built-in tendency to want to learn from successful people and pay little attention to failures. We also have a hard time admitting mistakes. In fact, what dintinguihses mature and, dare I say, clever, indivdiuals is precisely that they can admit mistakes and learn from them. Kathryn Schulz, who is about to publish a book on the subject, has published on Slate a number of great interviews and reflections on being wrong. The one with Alan Dershowitz is particularly interesting. If you want to start with the most recent entry, start here: The Wrong Stuff
2010 05
What is your number-one tip for managing people?
Be empathetic: When you understand the issues that constrain staff from doing their job you will usually identify bigger issues in the organization.
Is there a lesson you have never forogotten?
Progress is not perfection.
From BRW, April 29-June 2, 2010, p. 12.
2010 04
What has been your greatest regret in Business?
That I didn’t really get to know and accept my strengths and weaknesses earlier.
From BRW, April 15-21, 2010, p. 10.
2010 03
Warren Buffet’s Symbolic Leadership
Watch this great advertisement staffed by employees of Geico. Warren Buffet, whose companey fully owns Geico, participates in the ad to demonstrate that he is one the many co-workers. It is funny to see the 80-year-old billionaire impersonate Axl Rose.
2009 12
Apple did not forsee the success of the application store
It is hard to forsee the future as the recent episode with Apple’s application store demonstrates. The NY Times reports:
The App Store’s success — as much a surprise to Apple as it has been to competitors — has given rise to a new digital ecosystem. Today, hundreds of software aspirants, from individuals tinkering in their bedrooms late at night to established companies looking for lucrative new revenue streams, are jumping into the App Store fray.
When making a decision, managers often make the mistakes of only considering the potential upsides, but not the cost of downsides. Positive surprises don’t kill firms. It is the negative surprises that bring you down.
2009 11
Benefits of the Knwoledge Economy
Figure 1 from the ETH Strategy Report: Knowledge is the main engine of economic growth. A strong correlation can be observed between the Knowledge Economy Index (KEI) and GDP per capita. The KEI is calculated by the World Bank and is based on the four pillars of the Knowledge Economy framework: 1. An economic and institutional regime to provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship; 2. An
educated and skilled population to create, share, and use knowledge well. Click on More to see a powerful picture.
2009 10
The Economist on Annoying Bussiness Guru and the Problems with MBA Curricula
The Economist has a wonderful new column called Schumpeter. The October 22 issue revists the shortcomings of management gurus that I highlight in my classes. The Sepember 24 column encourages business schools to teach people to be more sceptical.
The three habits…of highly irritating management gurus
Business schools have done too little to reform themselves in the light of the credit crunch
2009 08
Phil Tetlock Critically Reviews Three Books on Forecasting the Future
Telock does us the service of giving a close reading of three books that what to overcome the obstacle that Yogi Berra identified in his qib: “Prediction is very hard, especially about the future.”
The Fat Tail: The Power of Political Knowledge for Strategic Investing by Ian Bremmer and Preston Keat.
The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future by Bruce Bueno de Mesquita
The Next 100 Years: A Forecast for the 21st Century by George Friedman
Read Telock’s excellent review at National Interest.
Debate: Do Women Make Better Managers
The jury is still out. But read this interesting exchange on NYTimes.com. Rember that just because on average women may be different than men, this does not mean that it is true for the person in front of you.
Susan Pinker: Whether we’re talking about mentoring, managing or office politics, the research is clear: “Men and women together are the best.”
Sharon Meers: Women often take an alternative approach to leading teams — encouraging more open discussion, cultivating talent and sharing credit. Feedback is the place where women bosses may add the most value.
2009 06
Three Books on the Origins of the Financial Crisis and its Lessons
John Lanchester reviews three books on the origins of the financial crisis and its lessons in the New Yorker. Two of them are useful for the general reader.
I personally personally found Fools Gold the most rewarding of all the books and a higly recommend it to anyone who works in the finance industy or simply wants to understand what caused the recent financial crisis.
Read full review here.
2009 04
Chief executive, Meyer (Australia)
What is your number-one tip for managing people?
You never get in trouble for over-communicating with them.
What is your number-one tip for managing a business?
Give the team more responsibility than they expect and measure everything in the business that can be measured.
A lesson you have never forgotten?
How the mighty have fallen. Some six of the top 10 retailers in 1987 don’t exist today and that is a sign that you can never be complacent in retailing.
Excerpted from BRW, Vol. 31, No. 12, FYI.
2008 11
Radical Rethinking of Cash Management
The Economist summarizes the profound implications of the financial crisis for the management of cash in firms.
SELDOM has corporate strategy been turned on its head so quickly. Barely a year ago, cash was a dangerous thing to accumulate: activist investors stalked companies, urging boards to return it to investors, to pay special dividends or to buy back shares. Ever since the 1980s the fashion had been to make companies as lean as possible, outsourcing all but your core competencies, expanding your just-in-time supplier system around the globe, loading up with debt to “leverage” your balance-sheet. Old-style defensive conglomerates, such as Arnold Weinstock’s General Electric Company, were dismantled. Companies that hoarded cash—even ones as good as Toyota and Microsoft—were viewed with suspicion.
2008 10
THE RECKONING: As Credit Crisis Spiraled, Alarm Led to Action
Background:The NY Times reports on the what triggered Paulson and Bernacke to seek an immediate 700 billion fund to prevent the American markets from collapsing. Read full story on NYTimes.com.
2008 09
Risk will always equal potential reward
Greed, as it periodically does when traders and bankers forget the lessons of the past, clouded judgments. Some very smart people talked themselves into believing in the repeal of one of the fundamental laws of economics: risk will always equal potential reward. The idea that risk can be eliminated and high yields guaranteed is as idiotic as the idea that gravity can be suspended. Remember Long-Term Capital Management? Ten years ago it figured out how to eliminate risk using highly sophisticated computer programs and rolled up annual returns averaging 40 percent — until it collapsed in a heap.
Read more by John Steele Gordon on the Financial Mess: Greed, Stupidity, Delusion — and Some More Greed here.
The F.A.Q.’s of Lehman and A.I.G.
Doug Diamond and Anil Kashyap of the University of Chicago explain the recent financial crisis.
For most of the last 20 years we have been studying banks, monetary policy, and financial crises. So for us the events of the last year have been especially fascinating.The last 10 days have been the most remarkable period of government intervention into the financial system since the Great Depression. In talking with reporters and our noneconomist friends, we have been besieged with questions about several aspects of these events. Here are a few of the most frequently asked questions with our best answers.
Read more on NYTimes.com
Management Wisdom Courtesy of Jeff Pfefer
Jeff Pfeffer has spent the past twenty years figuring out what management ideas have some systematic data behind them and what ideas are make for a good story but are simply wrong. Guy Kawasaki (who wrote a fantastic little book on entreprepreurship, The Art of the Start, which I am using in one of my classes) has sat down with Pfeffer and asked him questions on his book What were they thinking?. Read the interview.
2008 05
Taming Your Inner Homer Simpson
My Kellogg students will remember that I asked them to rate their intelligence vis-a-vis the average member of the class. I routinely had 75 percent of all student who rate themselves above average. That is 25% too many. A colleague of mine warned me that 90% academics feel undervalued by their institution. But until now I read Dahlia Lithwick review of Richard Thaler’s and new book Nudge: Improving Decisions About Health, Wealth, and Happiness I did not know that 94 percent of professors at large universities to believe themselves better than the “average professor.” Read Lithwick excellent review of the book.
The Latest Reasoning about our Irrational Ways
Elizabeth Kolbert reviews in the New Yorker the latest on findings on how people behave in irrational ways when making economic decisions. Read her Reviews of two new books.
“Predictably Irrational: The Hidden Forces That Shape Our Decisions” (Harper; $25.95); by Ariely, Dan;
“Nudge: Improving Decisions About Health, Wealth, and Happiness” (Yale; $25); by Thaler, Richard H.
2008 03
Irrational fear: No good at risk
The Economists reviews of “Risk: The Science and Politics of Fear” by Dan Gardner
THE official death toll from the September 11th terrorist attacks in 2001 was 2,974. But in 2002 America’s death toll on the roads grew by more than 1,500—casualties of the terrorism-inspired exodus from safe aeroplanes to dangerous motor cars. A swan washes up on a British shore, dead from bird flu, and the press panics, while the 3,000 people who die every year on the country’s roads (13 times the number of people who have ever died from bird flu) go largely unremarked. Human beings are notoriously bad at dealing with risk. Two new books explore why, and investigate the effects that misunderstanding risks can have on public policy. The first, an excellent work by a Canadian writer, Dan Gardner, is a broad meditation on the nature of risk, beginning with a psychological explanation for why people find it so difficult to cope. Mr Gardner analyses everything from the media’s predilection for irrational scare stories to the cynical use of fear by politicians pushing a particular agenda.
2007 08
2007 07
The common perception is that CEOs are reading the latest popular management books to help them with their difficult job. An article in the New York Times suggests otherwise. I am not sure if the CEOs that Harriet Rubin portrays in here article are representative of all CEOs and I think the title of the article “C.E.O. Libraries Reveal Keys to Success” is an overstatement, but any manager should read what she has to say.
Harriet Rubin: Michael Moritz, the venture capitalist who built a personal $1.5 billion fortune discovering the likes of Google, YouTube, Yahoo and PayPal, and taking them public, may seem preternaturally in tune with new media. But it is the imprint of old media — books by the thousands sprawling through his Bay Area house — that occupies his mind. “My wife calls me the Imelda Marcos of books,” Mr. Moritz said in an interview. “As soon as a book enters our home it is guaranteed a permanent place in our lives. Because I have never been able to part with even one, they have gradually accumulated like sediment.” Serious leaders who are serious readers build personal libraries dedicated to how to think, not how to compete. Ken Lopez, a bookseller in Hadley, Mass., says it is impossible to put together a serious library on almost any subject for less than several hundred thousand dollars. Perhaps that is why — more than their sex lives or bank accounts — chief executives keep their libraries private.
2006 11
The website for An Inconvenient Truth provides the basics facts about the science of climate change. Watch the trailer for film.
Give the DVD to your friends this holiday season.
Commissioned by the British government, the economist Stern published on October 30th his study evaluating the economic consequences of global warming. He writes: “The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response (p. i) ...There is still time to avoid the worst impacts of climate change if strong collective action starts now.” (p. xxvii) You can download a summary of his review here. If you don’t have time to read the 27 page summary of the 600 page report, here is a short review of its conclusions in the New Yorker.
2006 07
Reflections On “The Long Tail” - Give me Good Data!
A few days ago, I came across a very positive review of The Long Tail, a new book by Wired Maganize writer Chris Anderson. The book’s main thesis is that “the future of commerce and culture isn’t in hits, the high-volume head of a traditional demand curve, but in what used to be regarded as misses - the endlessly long tail of that same curve.” The books purports to show that the 80/20 rule (most sales derive from a few products) does not apply any more with internet retailing because internet retaling can stock many more items. This morning Lee Gomez in his Wall Street Journal column trashed Anderson’s analysis, claiming that Anderson’s data was flawed. (You can read the Gomez colum “Long Tail’ May Not Wag the Web Just Yet” on WSJ.com or through your library’s article database.) Anderson in turn claims that Gomez did not get the data right and wrote a facinating rebutall on his website. What this exchange underlines is that getting good data and working meticulously to draw the correct conclusion often is worth a “fortune” for managers. More broadly, before you adopt a new fashionable business idea, ask yourself what data supports that the idea in fact is going to work. With more data you might have realized that the idea hurts as often as it helps.
2005 11
The Essential Drucker: The Best of Sixty Years of Peter Drucker’s Essential Writings on Management
2005 09
Even the Best Cannot Predict the Future
It is very useful to recognize that the social world is too complex to predict well what will succeed and what will fail. Those who think they know with great certainty what will succeed run the danger of overinvesting in their pet scenarios. What is the lesson? Just like with stocks, we should always have a portfolio of beliefs about the future, reducing the risk of getting stuck with the wrong scenarios.
Who Says Elephants Can’t Dance: Inside IBM’s Historic Turnaround
In the early 1990s, IBM was in danger of going bankrupt. Loius Gerstner was called in to turn the company around. Anyone who is trying to change a formerly successful orgazation will benefit from reading Gerstner’s thoughts on change management. Beware: the book starts out slow, turning off many readers. But after the first 20 pages, Gerstner’s training as an organizational consultant provides him the analytic language to lay out what are the key challenges in changing large organizations. Because he was an outsider at IBM, he has no reservations to analyze how IBM got itself into a near death experience. I highly recommend this book.
2005 07
The Freedom Tower Case: Why is group decision making not better individual decisions
Individual human beings have limited skills, knowledge, and expertise can get carried away by emotions when making decisions. One would think that involving multiple people in a decision could overcome the limitations of individual decision making but social psycholgoists have long known that groups have their own limitations. The New York Times published a pertinent article on how a comittee came up with the redesigned Freedom Tower that architectual critics find dissappointing given the grandeur of the originial proposal.
2005 04
Commanding Heights: The Battle for the World Economy
Rarely have I seen such a powerful documentary about how ideas shape the world. The film traces the ideas that shaped macro-economic policy making over the course of the 20th century. The film will be eye-opening for people who know very little how economic policy powerfully effects the welfare of societies all over the world. Even if you are a scholar familiar with the history of the 20 century, you will enjoy this fantastic piece of work. One word of clarification. Sophisticated scholars who believe in “free” markets believe in a need for laws. (The film originally aired on PBS and is now available on DVD.)
2005 01
What Companies do to Make Life Easier for Their Employees
The WSJ in today’s report on leadership published an interesting article on what kind of perks companies provide to boost the morale of people and to make work life easier. “Fun perks didn’t end with the dot-com bust. They just changed,” reports Jennifer Saranow.
Read the full article on WSJ.com.
Harvard pychology professor Daniel Gilbert predicts that most democrats will not be depressed during the next four years of George Bush. Here is the rationale that he offers in today’s New York Times: Research suggests that human beings have a remarkable ability to manufacture happiness. For example, when people in experiments are randomly awarded one of two equally valuable prizes, they quickly come to believe that the prize they won was more valuable than the prize they lost. They are often so surprised by their apparent good fortune that they refuse to believe the prize was awarded randomly, and they are generally unwilling to swap their prizes even when the experimenter offers to sweeten the deal with a little extra cash.
Malcom Gladwell’s Book “Blink” is out!
In my introductory management class I discuss the how cognitive heuristics (rules of thump) help us navigate our complex daily lives and make decisions before it is too late. Malcom Glawell new book describes this quick decision-making capability with many examples. I will review the book during the next couple of months, but in the meantime you can read excerpts from the book on Gladwell’s website. David Brooks has written a very thoughtful review of the book in the New York Times that you can read here.
Gladwell and Surowiecki Debate How Good Decisions are made
Galdwell and Surowiecki have a new books coming out concerned with good decision making. I am presently reading Surowieki’s The Wisdom of Crowds and have Blink on my reading list. You can read a debate they both had about their books in Slate
2004 12
My former student John Tsau forwarded me some other examples of pictures that can be seen in different ways. What we can see is to a large extent conditioned what we expect to see in the world in the first place…
2004 11
Defining that precise moment when a trend becomes a trend, Malcolm Gladwell probes the surface of everyday occurrences to reveal some surprising dynamics behind explosive social changes. He examines the power of word-of-mouth and explores how very small changes can directly affect popularity. Perceptive and imaginative, The Tipping Point is a groundbreaking book destined to overturn conventional thinking in business, sociological, and policy-making arenas.
Overall judgement: This is a superb book and should be read by every student of the social world.
Economics
Management
Psychology
Publications
- RT @FortuneMagazine Sal Khan: Bill Gates' favorite teacher - Aug. 24, 2010 http://bit.ly/bqM08C
- New Management Focus: Invest in Relationships! http://lnkd.in/mF5ceT
- The End of Management. Exaggeration? http://lnkd.in/yQwpEU
- Money is a limited tool to motivate employees! http://lnkd.in/3he6bf