- 25 Aug 2010
- Working Paper Summaries
Managerial Practices That Promote Voice and Taking Charge among Frontline Workers
How can front-line workers be encouraged to speak up when they know how to improve an organization's operation processes? This question is particularly urgent in the US health- care industry, where problems occur often and consequences range from minor inconveniences to serious patient harm. In this paper, HBS doctoral student Julia Adler-Milstein, Harvard School of Public Health professor Sara Singer, and HBS professor Michael W. Toffel examine the effectiveness of organizational information campaigns and managerial role modeling in encouraging hospital staff to speak up when they encounter operational problems and, when speaking up, to propose solutions to hospital management. The researchers find that both mechanisms can lead employees to report problems and propose solutions, and that information campaigns are particularly effective in departments whose managers are less engaged in problem solving. Key concepts include: Front-line workers offer more solutions to operational problems in departments whose managers are more engaged in problem solving. Information campaigns that promote process improvement generate more solutions from front-line workers, especially from workers whose managers are less routinely engaged in problem solving. Efforts at the organizational level can compensate for managers who cannot or do not create an environment that inspires front-line workers to speak up. Closed for comment; 0 Comments.
- 18 Aug 2010
- Working Paper Summaries
The Role of Organizational Scope and Governance in Strengthening Private Monitoring
Governments have long debated which tasks should be outsourced to the private sector. Although often justified on the basis of the cost-efficiencies of market competition, outsourcing to private firms carries its own risks, which can reduce the quality of services provided. In addition to more conventional services such as garbage and recycling collection, some governments outsource the enforcement of laws and regulations. This paper by Olin Business School's Lamar Pierce and HBS professor Michael W. Toffel examines the automobile emissions testing market in one state where this form of regulatory enforcement has been outsourced to the private sector. Their analysis illustrates the importance of considering organizational scope and private governance mechanisms such as monitoring provided by corporate headquarters and independent third-parties in efforts to assure the reliability of firms that provide outsourced services. Key concepts include: The risk of poor enforcement quality is greatest among firms whose organizational scope includes products and services where enticing customer loyalty can enhance profits. Enforcement quality is higher at subsidiaries and branded affiliates than at independent facilities. Because subsidiaries and branded affiliates will face worse consequences if leniency were to be exposed, they are more likely to invest in private governance mechanisms including standard operating procedures and internal policing. Third-party certification of related services can also be an indicator of higher enforcement quality. Closed for comment; 0 Comments.
- 28 Apr 2010
- Working Paper Summaries
Environmental Federalism in the European Union and the United States
Under what circumstances will individual states take the lead in passing the most stringent environmental regulations, and when will the federal government take the lead? When a state takes a leadership role, will other states follow? HBS professor Michael Toffel and coauthors describe the development of environmental regulations in the U.S. and EU that address automobile emissions, packaging waste, and global climate change. They use these three topics to illustrate different patterns of environmental policymaking, describe the changing dynamics between state and centralized regulation in the United States and the EU. Key concepts include: State governments have been an important source of policy innovation and diffusion for automobile emissions in the EU and the U.S., and packaging waste policies in the EU. In these cases, state authorities were the first to regulate, and their regulations resulted in the adoption of more stringent regulatory standards by the central government. With climate change policies, the EU and its member states have developed regulations in tandem, reinforcing each other. In the U.S., state governments developed more innovate regulations than the federal government for both climate change and packaging waste, but these policies have not substantially diffused to other states. Closed for comment; 0 Comments.
- 23 Sep 2009
- Working Paper Summaries
Operational Failures and Problem Solving: An Empirical Study of Incident Reporting
Operational failures occur within organizations across all industries, with consequences ranging from minor inconveniences to major catastrophes. How can managers encourage frontline workers to solve problems in response to operational failures? In the health-care industry, the setting for this study, operational failures occur often, and some are reported to voluntary incident reporting systems that are meant to help organizations learn from experience. Using data on nearly 7,500 reported incidents from a single hospital, the researchers found that problem-solving in response to operational failures is influenced by both the risk posed by the incident and the extent to which management demonstrates a commitment to problem-solving. Findings can be used by organizations to increase the contribution of incident reporting systems to operational performance improvement. Key concepts include: Operational failures that trigger more financial and liability risks are associated with more frontline worker problem-solving. By communicating the importance of problem-solving and engaging in problem-solving themselves, line managers can stimulate increased problem-solving among frontline workers. Even without managers' regular engagement in problem-solving, communication about its importance can promote more problem-solving among frontline workers. By explaining some of the variation in responsiveness to operational failures, this study empowers managers to adjust their approach to stimulate more problem-solving among frontline workers. Closed for comment; 0 Comments.
- 11 Dec 2008
- Working Paper Summaries
Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers
Nearly 900,000 organizations in 170 countries have adopted the ISO 9001 Quality Management System standard. This is a remarkable figure given the lack of rigorous evidence regarding how the standard actually affects organizational practices and performance. Proponents claim that quality programs such as ISO 9001 improve both management practices and production processes, and that these improvements, in turn, will increase both sales and employment. Documenting and training proper work practices can also reduce potentially dangerous "work arounds," and thus could reduce the risk of workplace accidents and injuries. Some critics, on the other hand, point to the potential for quality programs such as ISO 9001 to be detrimental to employees by documenting work practices, resulting in routinization that may reduce skill requirements and increase repetitive motion injuries. This paper reports the first large-scale evaluation of how ISO 9001 affects workers, focusing in particular on employment, total payroll, average annual earnings, and workplace health and safety. Key concepts include: Companies that adopt ISO 9001 subsequently grow faster in sales, employment, payroll, and average annual earnings than a matched control group. ISO 9001 adopters are also more likely to remain in business. ISO 9000 adopters subsequently become more likely to report zero injuries eligible for workers' compensation. However, there is no evidence that a firm's total or average injury costs improved or worsened subsequent to adoption. Closed for comment; 0 Comments.
- 06 Nov 2008
- Working Paper Summaries
Extending Producer Responsibility: An Evaluation Framework for Product Take-Back Policies
Managing products at the end of life (EOL) is of growing concern for durable goods manufacturers. While some manufacturers engage in voluntary "take back" of EOL products for a variety of competitive reasons, the past 10 years have seen the rapid proliferation of government regulations and policies requiring manufacturers to collect and recycle their products, or pay others to do so on their behalf. Toffel, Stein, and Lee develop a framework for evaluating the extent to which these product take-back regulations offer the potential to reduce the environmental impacts of these products in an effective and cost-efficient manner, while also providing adequate occupational health and safety protection. The evaluation framework is illustrated with examples drawn from take-back regulations in Europe, Japan, and the United States. Key concepts include: The authors identify key policy levers that promote cost efficiency while reducing risks to the environment, public health, and the workers involved in recovery operations. Key policy decisions include setting the scope of manufacturer responsibilities, the stringency of recovery and recycling targets, design-for-environment requirements and substance bans, restrictions on when customer fees can be imposed, and limitations on the industrial organization of the recycling market. Closed for comment; 0 Comments.
- 01 Oct 2008
- Working Paper Summaries
Responding to Public and Private Politics: Corporate Disclosure of Climate Change Strategies
Social activists are increasingly attempting to directly influence corporation behavior, using tactics such as shareholder resolutions and product boycotts to encourage companies to improve their environmental performance, increase their transparency about operations and governance, and more stringently monitor their suppliers' labor practices. This paper examines how companies are responding to these pressures, in the context of requests for greater transparency about the risks climate change poses to their business—and the strategies these companies have developed to address these risks. This paper reveals that a company is more likely to comply with social activists' requests for greater transparency about climate change when the company itself, or other companies in its industry, has been targeted by formal shareholder resolutions on environmental topics—and when the company is facing potential regulations restricting greenhouse gas emissions. These findings demonstrate that changes in corporate practices may be sparked by both social activists and by the mere threat of government regulations, and that challenges mounted against a specific firm may inspire broader changes within its industry. Key concepts include: Firms are more likely to acquiesce to a shareholder request if they or other firms in their industry have already been targeted by a shareholder resolution on a related issue. Political context affects the success of private politics, in that firms under threat of regulation are more likely to acquiesce to a shareholder request. Closed for comment; 0 Comments.
- 18 Jun 2008
- Working Paper Summaries
Evaluating the Impact of SA 8000 Certification
The Social Accountability 8000 Standard (SA 8000), along with other types of certification standards and corporate codes of conduct, represents a new form of voluntary "private-governance" of working conditions in the private sector, initiated and implemented by companies, labor unions, and nongovernmental activist groups cooperating together. There is an ongoing debate about whether this type of governance represents real and substantial progress or mere symbolism. This paper reviews prior evaluations of private codes of conduct governing workplace conditions, including Ethical Trading Initiative's Base Code, Nike's Code of Conduct, and Fair Trade certification. The authors then discuss several best practices that should be employed in future evaluations of such codes of conduct. Key concepts include: An ongoing debate is raging about whether such codes represent substantive efforts to improve working conditions or are merely symbolic efforts that allow organizations to score marketing points and counteract stakeholder pressure by merely filing some paperwork. Evaluations designed with the features described in this paper will help introduce systematic evidence to these important debates. This could help identify which particular codes are best able to distinguish organizations possessing superior working conditions. Such evaluations may shed light on which elements of the codes are most effective, which types of monitoring systems represent best practices, and which areas are most in need of improvement. Closed for comment; 0 Comments.
- 04 Jun 2008
- Working Paper Summaries
Coming Clean and Cleaning Up: Is Voluntary Disclosure a Signal of Effective Self-Policing?
This paper demonstrates some of the benefits and limitations of industry self-policing programs. Many self-regulation programs are operated exclusively by the private sector, often in the hope of garnering goodwill with consumers or staving off more stringent government regulation. Less well known are voluntary self-regulation programs operated by government regulators seeking innovative approaches to further regulatory objectives and to stretch shrinking agency budgets. Little is known about the effects of these programs, or how they might contribute to the overall effectiveness of a regulatory regime. Michael Toffel and Jodi Short seek to determine whether the self-policing required under the U.S. Environmental Protection Agency's Audit Policy affects the behavior of regulators and participating facilities and the relationship between them. Specifically, the researchers examine whether self-policing is associated with improved environmental performance at these facilities and whether regulators reduce their scrutiny over self-policing facilities. Key concepts include: Among the facilities that participated in this self-policing program, only those with superior compliance records actually improved their environmental performance. Regulators rewarded self-policing facilities that already had clean past compliance records with an inspection holiday, but they did not significantly decrease scrutiny of self-policing facilities that had poor past compliers. Closed for comment; 0 Comments.
- 17 Apr 2008
- Working Paper Summaries
Diffusing Management Practices within the Firm: The Role of Information Provision
Managers face a range of options to diffuse innovative practices within their organizations. This paper focuses on one such technique: providing practice-specific information through mechanisms such as internal seminars, demonstrations, knowledge management systems, and promotional brochures. In contrast to corporate mandates, this "information provision" approach empowers facility managers to decide which practices to actually implement. The authors examine how corporate managers diffused advanced environmental management practices within technology manufacturing firms in the United States. The study identifies several factors that encourage corporate managers to employ information provision, including subsidiaries' related expertise, the extent to which the subsidiaries were diversified or concentrated in similar businesses, and the geographic dispersion of their employees. Key concepts include: This research can help managers better understand when to employ an "information provision" approach to facilitate knowledge transfer within their organizations. Corporate managers in the information and communication technology sector were more likely to use information provision to diffuse advanced environmental management practices when their subsidiaries on average possessed modest levels of related expertise, and when the levels of expertise varied greatly between subsidiaries. An information provision diffusion strategy was used more heavily by corporate managers of firms that were more diversified and where employees dispersed across more facilities. Closed for comment; 0 Comments.
- 14 Jan 2008
- Research & Ideas
Mapping Polluters, Encouraging Protectors
Where are the biggest polluters? And what is your company doing to protect the environment? A new Web site—both a public service and a research tool—posts managers' data in real time, allowing a balanced view of industrial environmental performance. HBS professor Michael W. Toffel and senior research fellow Andrew A. King explain. Key concepts include: The Web project was started to get around an information bottleneck. Users of MapEcos can easily find detailed information on the environmental performance of facilities across the United States. Managers can monitor peer companies' environmental information as well as disclose information about their own facilities. The scholars use the site to examine what industrial facilities do and what the public at large is concerned about. Closed for comment; 0 Comments.
- 11 Oct 2007
- Working Paper Summaries
How Firms Respond to Being Rated
(Previously titled "Shamed and Able: How Firms Respond to Information Disclosure.") As national governments lose the ability to regulate business activities, interest groups and concerned citizens are turning to private governance to monitor global supply chains, ensure product safety, and provide incentives for improved corporate environmental performance. Proponents hope that private governance incentives will encourage firms to act responsibly, but critics worry that these developments will merely forestall necessary government regulation. Social ratings provide one way to benchmark and compare firms' social performance. But are such ratings schemes effective? This paper investigates the effects of third-party environmental ratings, and finds that firms are particularly likely to respond to such ratings by improving their environmental performance when two circumstances arise simultaneously: (1) when the ratings threaten their legitimacy, and (2) when they face relatively low cost improvement opportunities. Key concepts include: Ratings provided by nongovernment organizations will be more influential on firm behavior if they do 2 things: highlight poor social issue management and performance while at the same time help firms identify low-cost improvement opportunities. The role of third-party monitoring will be increasingly important as private governance replaces government regulations around the world. Closed for comment; 0 Comments.
- 03 Oct 2007
- Working Paper Summaries
The Causes and Consequences of Industry Self-Policing
The corporate confession is a paradox, as described in this paper aimed at managers, policymakers, and citizens. Why would a firm that identifies regulatory compliance violations within its own operations turn itself in to regulators, rather than quietly fix the problem? Economic intuition suggests that firms will self-disclose violations only when the cost of doing so is less than the expected cost of hiding violations. However, while the cost of doing so can be increased regulatory scrutiny, there is often almost no expected cost of hiding violations. To explore the complex behavior of corporate self-disclosure, Short and Toffel conducted a large-scale analysis in the context of the U.S. Environmental Protection Agency's Audit Policy. They investigated what factors lead organizations to self-disclose violations that went undiscovered by regulators, and asked whether these self-disclosing organizations were obtaining any unofficial regulatory benefits above and beyond formal penalty mitigation. They also evaluated whether self-policing promotes the regulatory objective of improving compliance records. Key concepts include: Government regulatory scrutiny is a leading factor that drives firms in a public-private partnership where firms self-police their own regulatory compliance and self-disclose violations. Self-policing and self-disclosing provide mutual benefits for regulators and firms, although ongoing investment in government enforcement remains a critical success factor. Closed for comment; 0 Comments.
- 25 May 2007
- Working Paper Summaries
Self-Regulatory Institutions for Solving Environmental Problems: Perspectives and Contributions from the Management Literature
What role can business managers play in protecting the natural environment? Academic research on when it might "pay to be green" has advanced understanding of how and when firms achieve sustained competitive advantage. The focus of such research, however, has begun to change in light of limits to available "win-win" opportunities and to gaps in regulation. This paper, intended as a book chapter, reviews current literature and explores the potential of self-regulatory institutions to solve environmental problems. Key concepts include: Firms have created self-regulatory institutions to mitigate the risk of common sanctions and to address information asymmetries regarding production and employment practices. Some self-regulatory institutions appear to reduce asymmetries in information, others to facilitate coordinated investment in solutions to common problems. Future research needs to identify the factors that lead some, but not all, self-regulatory institutions to be effective routes to solving environmental problems. The literature reviewed here is proving valuable to scholars who study the self-regulation of standards, knowledge sharing, and open-source software development. Closed for comment; 0 Comments.
- 09 Apr 2007
- Research & Ideas
Industry Self-Regulation: What’s Working (and What’s Not)?
Self-regulation has been all over the news, but are firms that adopt such programs already better on important measures like labor and quality practices? Does adopting a program help companies improve faster? In this Q&A, HBS professor Michael Toffel gives a reality check and discusses the trends for managers. Key concepts include: Many more of these programs are targeted at business customers than at end consumers. Most studies that have examined industry-initiated programs have found that, at the time of adoption, participants are no better than others. The results of government-initiated programs, however, are more ambiguous. Managers increasingly realize that some so-called voluntary programs are actually not very voluntary. In order to really deliver on the promise of these programs, third-party verification will become increasingly important. Closed for comment; 0 Comments.
- 09 Feb 2007
- Working Paper Summaries
Do Corporate Social Responsibility Ratings Predict Corporate Social Performance?
Ratings of corporations' environmental activities and capabilities influence billions of dollars of "socially responsible" investments as well as consumers, activists, and potential employees. But how well do these ratings predict socially responsible outcomes such as superior environmental performance? Companies can enhance their environmental image in one of two ways: by reducing or minimizing their impact on the environment, or by merely appearing to do so via marketing efforts or "greenwashing." This study evaluates the predictive validity of environmental ratings produced by Kinder, Lydenberg, Domini Research & Analytics (KLD), and tests whether companies that score high on KLD ratings generate superior environmental performance or whether highly rated firms are simply superior marketers of the factors that these rating agencies purport to measure. The data analysis examines all 588 large, publicly-owned companies in the United States that were both regulated by the U.S. Environmental Protection Agency and whose social performance was rated by KLD at least once during 1991-2003. This paper may be the first to examine the predictive validity of social or environmental ratings. Key concepts include: KLD ratings for environmental "concerns," such as hazardous waste and regulatory problems, have small but statistically significant effects in predicting future emissions and regulatory violations. KLD ratings for environmental "strengths," such as environmentally beneficial products or pollution prevention, do not predict future environmental outcomes. Most, but not all, of the predictive power of KLD ratings is due to the fact that lagged emissions and regulatory violations predict both lagged KLD ratings and future emissions and regulatory violations. KLD expends substantial resources attempting to measure the quality of companies' environmental management systems. The results suggest that this measurement is difficult to do well. Closed for comment; 0 Comments.
- 02 Nov 2006
- Working Paper Summaries
Resolving Information Asymmetries in Markets: The Role of Certified Management Programs
Hundreds of thousands of firms rely on voluntary management programs to signal superior management practices to interested buyers, regulators, and local communities. Such programs typically address difficult-to-observe management attributes such as quality practices, environmental management, and human rights issues. The absence of performance standards and, in most cases, verification requirements has led critics to dismiss voluntary management programs as marketing gimmicks or "greenwash." Toffel examines whether a voluntary environmental management program with a robust verification mechanism attracts participants with superior environmental performance, and whether the program elicits improved environmental performance. His study focuses on the ISO 14001 Environmental Management System Standard, but the results have implications for voluntary management programs that govern many other difficult-to-observe management issues. Key concepts include: A voluntary management program with robust verification, such as independent certification, can distinguish organizations based on their difficult-to-observe management practices. Third-party certification may be a critical element to ensure that voluntary management programs legitimately distinguish participants. This finding is in sharp contrast with prior studies that found no evidence that superior performers disproportionately adopted voluntary management programs with weak or no verification mechanisms. For firms, the evidence that ISO 14001 distinguishes adopters as less pollution-intensive many encourage firms to use ISO 14001 to screen suppliers. Regulators should seriously consider using ISO 14001 as an indicator of superior performance. The results of the study should encourage those who have designed or adopted other voluntary management programs that lack robust verification mechanisms to consider whether adding such a mechanism would substantially bolster the credibility of the program. Closed for comment; 0 Comments.
- 02 Nov 2006
- Working Paper Summaries
Organizational Response to Environmental Demands: Opening the Black Box
How and why do organizations respond differently to pressures from different stakeholders? This question is central to organizational theory and feeds into strategic management research as well. Delmas and Toffel develop and test a model that describes why organizations respond differently to similar stakeholder pressures. They suggest that differences in how organizations distribute power across their internal corporate departments lead their facilities to prioritize different institutional pressures and thus adopt different management practices. Key concepts include: Stakeholder pressures are channeled to different organizational functions, which influence how they are received—and acted upon—by facility managers. As a result, managers of facilities that are subjected to comparable institutional pressures may adopt distinct sets of management practices to appease their external constituents. Closed for comment; 0 Comments.
- 13 Oct 2006
- Working Paper Summaries
Coerced Confessions: Self-Policing in the Shadow of the Regulator
Are regulators necessary? In industry, self-regulation and self-policing have been touted as a new paradigm of regulation that trades outmoded "command-and-control" strategies for industry-directed, market-based solutions. Short and Toffel's work, one of the first empirical studies to address self-policing behavior, examined a rich data set of companies' voluntary disclosures of regulatory violations under the U.S. Environmental Protection Agency's Audit Policy. The goal: to learn how violators behave when offered the option of voluntarily self-disclosing. The results show that even as corporations are given an expanding role in their own governance, the success of "voluntary" self-policing depends on the continued involvement of regulators with coercive powers. Key concepts include: Despite the rhetoric of cooperation surrounding self-policing programs, self-disclosures of violations are motivated by coercive regulatory enforcement activities. Facilities in the study were more likely to self-disclose violations if they were recently inspected, subjected to an enforcement action, or narrowly targeted for heightened scrutiny by a compliance incentive program. There was some evidence that facilities were more likely to "turn themselves in" in states where statutory immunity shielded their self-disclosed violations from prosecution. There was no evidence that facilities protected by state-level audit privilege were more likely to self-disclose. This research counsels caution regarding the extent to which government should cede regulatory monitoring to companies themselves, and suggests that self-policing can complement, but not substitute for, government regulatory inspections. Closed for comment; 0 Comments.
Turning Employees Into Problem Solvers
To improve patient safety, hospitals hope their staff will use error-reporting systems. Question is, how can managers encourage employees to take the next step and ensure their constructive use? New research by Julia Adler-Milstein, Sara J. Singer, and HBS professor Michael W. Toffel. Key concepts include: Patient-safety information campaigns can help hospital staff do more than just report problems when they occur. Thanks to information campaigns, frontline workers increased the rate of suggesting constructive solutions to problems by 74 percent. The frequency increased even more when unit managers joined in problem solving. By serving as role models, managers who actively engage in problem solving can lead their frontline workers to create and share solutions. Closed for comment; 0 Comments.