In a series of studies, Francesca Gino and Dan Ariely found that inherently creative people tend to cheat more than noncreative people. Furthermore, they showed that inducing creative behavior tends to induce unethical behavior. It's a sobering thought in a corporate culture that champions out-of-the-box thinking.
Summing Up Readers of Jim Heskett's column this month offer guidelines for when to think fast and when to think slow, from author Daniel Kahneman's book, Thinking, Fast and Slow.
Economists have been paying increasing attention to the role that culture plays in a firm's overall performance. This paper focuses on how trust—a key cultural factor—affects firms' decision-making process, size, and productivity. Research was conducted by Nicholas Bloom of Stanford University, Rafaella Sadun of the Harvard Business School, and John Van Reenen of the London School of Economics.
Sum-up Nontraditional performance measures, as highlighted in the movie 'Moneyball', will become an increasingly important part of the young manager's toolkit, Jim Heskett's readers say.
Forum Closed Summing Up: Is experience really the best teacher? Sure—when not much is on the line, according to readers commenting on Professor Jim Heskett's column on common sense.
"Show me a company or nonprofit or government in trouble, and I will almost invariably show you a set of leaders who are asking absolutely the wrong questions," says professor Robert Steven Kaplan. He discusses his new book, What to Ask the Person in the Mirror. Plus: book excerpt.
Summing Up Managers like to think they act ethically, but at the end of the day ethical action is subjective, readers tell Jim Heskett. Reaction to the new book Blind Spots.
Economists love menus, which can be used to help understand people's choices. For example, do we prefer more choices (larger menu) or fewer (shorter menu)? But the menu itself has to be pre-selected. Research by David Goldreich (Rotman School of Management, University of Toronto) and Hanna Halaburda (Harvard Business School) focuses on the menu setter's decisions about what to include, and how large a menu to construct in the context of 401(k) plan choices.
Even when we think we are making principled decisions, recent research reveals we are not as ethical as we would like to believe. Professor Max H. Bazerman discusses his new book, Blind Spots: Why We Fail to Do What's Right and What to Do about It. Plus: Book excerpt.
In the management literature, some theories hold that corporate actions and strategic choices can be partially predicted by knowing the functional background of executives. The authors provide evidence on how CEOs and CFOs who were former investment bankers, auditors, and private equity/venture capital executives managed decisions around goodwill impairments (essentially goodwill charge-offs)—a complex accounting choice involving a high degree of managerial discretion. Research by HBS professor Francois Brochet and doctoral candidate Kyle Welch.
A common business (and life) practice involves delaying a decision in order to avoid immediate commitment. James J. Anton (Fuqua School of Business) and Dennis A. Yao (HBS) discuss ways in which delaying or, alternatively, speeding up commitment can be a valuable tactic, how these tactics influence the actions of other decision makers, and ways in which such actions affect other decisions. Changing the speed at which a decision is made affects how others allocate resources to influence how that and other decisions will eventually be made. The researchers identify two tactics associated with changing decision speed: "pinning" and "focusing."
If time is money, as the old adage goes, then a CEO's schedule is especially important to a firm's financial success. This raises a fair question: What do CEOs do all day? To that end, researchers followed the activities of 94 CEOs in Italy over the course of a pre-specified week, enlisting the CEOs' personal assistants to track their bosses' activities with time-use diaries. Research was conducted by Raffaella Sadun of Harvard Business School, Luigi Guiso of the European University Institute, and Oriana Bandiera and Andrea Prat of the London School of Economics.
In the course of making a decision, managers often err in one of two directions—either overanalyzing a situation or forgoing all the relevant information and simply going with their gut. HBS marketing professor Michael I. Norton discusses the potential pitfalls of thinking too much or thinking too little.
Leading a doomed company can often help a career by providing experience, insight, and contacts that lead to new opportunities, says professor Shikhar Ghosh.
In business and in life, it's important to strike a smart balance between naïveté and cynicism. Act too naïvely, and someone is bound to take advantage of you. Skew cynical, and you may miss out on new opportunities with good people. This paper discusses the decision errors inherent in leaning too far in either direction. Research was conducted by Chia-Jung Tsay, Lisa. L. Shu, and Max H. Bazerman of Harvard Business School.
Published in 2010
Summing Up Is choice an art or science? Jim Heskett's readers wonder whether the question is the right one to ask. (Online forum has closed; next forum opens January 6.)
Successful business strategy lies not in having all the right answers, but rather in asking the right questions, says Harvard Business School professor Robert Simons. In an excerpt from his new book, Seven Strategy Questions, Simons explains how posing these questions can help managers make smart choices.
Executives at public companies are always under pressure to "meet the numbers" each quarter, often so much so that they sacrifice long-term investments in order to make everything look rosy in the short term. In this paper, Harvard Business School professor Rebecca M. Henderson and Sloan School of Management professor Nelson P. Repenning set out to reconcile the apparently contradictory strategies of short-term results and long-term investments.
At what point in the corporate food chain are big decisions made? It depends on technology, according to new research, which finds that information-based software will help to push decisions further down the corporate ladder, whereas communication technologies will push decisions up to the top. Research was conducted by Nicholas Bloom of Stanford University; Assistant Professor Raffaella Sadun of Harvard Business School; and Luis Garicano and John Van Reenen of the London School of Economics.
Even the best leaders can be in denial—about trouble inside the organization, about onrushing competitors, about changing consumer behavior. Harvard Business School professor Richard S. Tedlow looks at history and discusses how executives can acknowledge and deal with reality. Plus: Book excerpt.
"Toyota can only regain its footing by transforming itself from top to bottom to deliver the highest quality automobiles," says HBS professor Bill George of the beleaguered automobile company that in recent months has recalled 8 million vehicles. He offers seven recommendations for restoring consumer confidence in the safety and quality behind the storied brand.
Managers who merely put in time "walking the floor" are not doing enough when it comes to problem solving; in fact, it can make employees feel worse about their situation, says HBS professor Anita Tucker.
Summing up reader responses, Professor Jim Heskett finds compelling arguments for a process involving intuition based on analysis and experience. Should people also make their own decision-making process more transparent to others and to themselves? (Next forum begins March 3.)
How can managers better lead their organizations to improve work processes? Describing their study of hospitals over an 18-month period, HBS professor Anita L. Tucker and Harvard School of Public Health professor Sara J. Singer detail how and why managers' taking action was more effective than their communicating about actions taken. Findings suggest, first, that taking action on known problems in specific work areas on at least a quarterly basis may improve the organizational climate for improvement. Second, the study indicates that managers would be well advised to take action-preferably substantive and intense action-in response to frontline workers' communications about problems. Overall, the research provides insight for senior managers who want to improve their organization's climate for process improvement.
Published in 2009
We have spent the past year mired in a global financial crisis that few saw coming and that will plague us for years to come. Such crises are gut-wrenching. Collectively and individually, we search for causes and solutions. Too often, we look for quick fixes that do long‐term damage, or we put the equivalent of duct tape on obvious problems, missing the true root causes. HBS professor William A. Sahlman argues that the macroeconomic problems were the result of terrible microeconomic decisions. The root cause of bad decision‐making resides in the nexus of culture, incentives, control and measurement, accounting, and human capital. We now have a unique opportunity to force a review of all the players in the financial system, from individual consumers to politicians and regulators to management teams at financial services firms.
We want others to find us good, fair, responsible and logical; and we place even more importance on thinking of ourselves this way. Therefore, when people behave in ways that might appear selfish, prejudiced, or perverted, they tend to engage a host of strategies designed to justify questionable behavior with rational excuses: "I hired my son because he's more qualified." "I promoted Ashley because she does a better job than Aisha." Or, "I read Playboy for the articles." In this chapter from a forthcoming book, HBS doctoral student Zoë Chance and professor Michael I. Norton describe various means of coping with one's own questionable behavior: through preemptive actions and concurrent strategies for re-framing uncomfortable situations, forgoing decisions, and forgetting those decisions altogether.
The art and science of negotiation has evolved greatly over the past three decades, thanks to advances in the social sciences in collaboration with other disciplines and in tandem with the practical application of new ideas. In this paper, HBS doctoral student Chia-Jung Tsay and professor Max H. Bazerman review the recent past and highlight promising trends for the future of negotiation research. In the early 1980s, Cambridge, Massachusetts, was a hot spot on the negotiations front, as scholars from different disciplines began interacting in the exploration of exciting new concepts. The field took a big leap forward with the creation of the Program on Negotiation, an interdisciplinary, multicollege research center based at Harvard University. At the same time, Roger Fisher and William Ury's popular book Getting to Yes (1981) had a pronounced impact on how practitioners think about negotiations. On a more scholarly front, a related, yet profoundly different change began with the publication of HBS professor emeritus Howard Raiffa's book The Art and Science of Negotiation (1982), which for years to come transformed how researchers would think about and conduct empirical research.
Policy decisions may be the most important set of decisions we make as a society. In this realm, moral rules often play an active and dysfunctional role. The typical way in which we make decisions—by weighing them individually—leads us to overuse moral rules in a manner that is inconsistent with the more reflective set of preferences we would identify through joint consideration of options. In their response to a companion article in Perspectives on Psychological Science, Max Bazerman, of HBS, and Joshua D. Greene, of Harvard University, argue that cost-benefit analysis (CBA) is unfairly stereotyped. The critique of CBA in the companion article could be better framed as a set of considerations that can contribute to more careful CBAs.
Published in 2008
The Gambler's Fallacy refers to the belief that chance is a self correcting process. The longer the random run of one outcome, the stronger the belief that the opposite outcome is due to appear. This paper asks whether the way we acquire information, by sequential experience or by simultaneous description, plays a critical role in the emergence of the bias in a binary prediction task (betting on red or black roulette outcomes, for example). The results show that the fallacy only occurs when decision makers experience outcomes over time and not when past outcomes are revealed all at once. The question is interesting since several recent papers on decisions from experience and descriptions suggest that the way people acquire information can have a significant effect on behavior.
While scholars can describe how people make decisions, and can envision how much better decision-making could be, they still have little understanding of how to help people overcome blind spots and behave optimally. Chugh, Milkman, and Bazerman organize the scattered knowledge that judgment and decision-making scholars have amassed over several decades about how to reduce biased decision-making. Their analysis of the existing literature on improvement strategies is designed to highlight the most promising avenues for future research.
Managers of the ABRY Fund V were so successful they had investors waiting to pour in an additional $3 billion. But to invest that much would require trade-offs that could jeopardize the chemistry that made the fund successful in the first place. Take the money or walk away? From HBS Bulletin.
Online forum closed. Summing Up. According to Gerald and Lindsay Zaltman, nearly all research techniques commonly used today probe humans only at their conscious level, though it is the subconscious level that really determines behavior.
This paper considers allocation and bargaining problems, and introduces conditions that one might expect fair procedures to satisfy. However, not all conditions one might hope for can be satisfied simultaneously. Furthermore, some apparently plausible and widely proposed axioms and procedures have consequences whose undesirability clearly goes far beyond what can be excused in this way. Thus pitfalls lurk in the field of fair division.
Earnings management behavior may be divided into two categories: 1) the opportunistic exercise of accounting discretion; and 2) the opportunistic structuring of real transactions.
This paper focuses on the latter by providing evidence that managers use retail-level marketing actions (price discounts, feature advertisements, and aisle displays) to influence the timing of consumers' purchases in relation to their firms' fiscal calendars and financial performance. The results will be of interest to practitioners negotiating with suppliers as well as those responsible for setting price and promotion strategy in response to competitor actions, and practitioners responsible for designing incentive-based compensation as well as regulators monitoring reporting of fiscal period-ending promotion.
How do chief executives establish strategic practices around their visions and intents? How do such practices make it possible to create both high commitment and high performance? The central puzzle for HBS professor emeritus Michael Beer and colleagues is not the creation of high commitment per se, but the kind of commitment that is useful for the implementation of strategy and sustainable performance. Beer et al. sought out major companies in North America and Europe that had a history of sustainable, above-average financial performance, and where there were indications of the companies being high-commitment organizations. They then conducted in-depth interviews with 26 CEOs of such companies, asking about activities and practices that help create commitment and performance.
Online forum now closed. For managers, sustainability can mean the integration and intersection of social, environmental, and economic responsibilities. The concept is admirable, says Jim Heskett, but does it also confuse managers entrusted with the bottom line? How should they make trade-offs? Jim sums up reader responses.
Published in 2007
"Fair" could be defined as what people of good will would want to be. This does not constitute an operational definition, however. This paper provides a specific procedure to calculate what could be considered fair and reasonable for various situations that require a fair division. A simple example would be a family that has inherited objects of artistic and/or sentimental value and wants to divide them up fairly while taking into account differences in taste. Laymen, mathematicians, and economists all have their own proposals for creating a fair division. Pratt suggests a procedure that, when put to the test of a range of examples, produces outcomes that accord with our intuitive sense of what is fair and desirable while previously proposed procedures do not.
People commonly predict that they will behave more ethically in the future than they actually do. When evaluating past (un)ethical behavior, they also believe they behaved more ethically than they actually did. These misperceptions, both of prediction and of recollection, have important ramifications for the distinction between how ethical we think we are and how ethical we really are, as well as understanding how such misperceptions are perpetuated over time. This paper draws on recent research in psychology and decision-making to gain insight into these forces. It also provides recommendations for reducing them.
"Uncertainty sometimes is essential for success" asserts a new book, How Doctors Think. The work of doctors raises intriguing questions about managing, says Jim Heskett, since diagnostics are an important part of managerial decision-making, too. Jim sums up nearly 60 responses from readers around the world, including practicing physicians.
Feeling "stuck," as psychologically painful as it is, is the first step to awareness of new opportunities in career and in life, says Harvard Business School's Timothy Butler. In this Q&A and excerpt from his new book, Getting Unstuck, he explains six steps for getting from here to there.
For many firms, the ability to create, organize, and disseminate know-how is a key factor in their ability to succeed. But should all companies engage in formal knowledge management? If not, which companies derive most value from a formal knowledge system? Conditional on implementing such a system, should the company focus more on learning from successes or learning from failures? Should such knowledge systems simply capture all experience, or should they be more selective? This paper develops and applies an economic framework to examine these questions.
Published in 2006
Following the adoption of a collective bargaining agreement in 2005, National Hockey League GMs had one month to absorb the new rules and put a team together. How to best negotiate in an uncertain environment? Michael Wheeler advises looking to military science for winning strategies.
Most of us trust our intuition more than we should, especially when the pressure is on in negotiations. Professors Max Bazerman and Deepak Malhotra on negotiating more rationally. From Negotiation.
Company-specific skills may be valuable in a new job under the right conditions, say Harvard Business School's Boris Groysberg, Andrew N. McLean, and Nitin Nohria. They studied GE; here's an excerpt from Harvard Business Review.
In a recent HBS Working Paper, HBS professor Max Bazerman and colleagues explore how biases and human psychology impede policy-making efforts that could vastly improve people's lives.
Published in 2005
Malcolm P. McLean (1914-2001) hit on an idea to dramatically reduce labor and dock servicing time. An excerpt from In Their Time: The Greatest Business Leaders of the Twentieth Century by Harvard Business School's Anthony J. Mayo and Nitin Nohria.
We make most of our choices by weighing other people's advice counter to our own opinions. People generally underweight advice from others, though the practice is not universal. In two studies, it is determined that people overweight advice on difficult tasks but underweight it on the easy ones.
It's hard to dream five years out when your organization is doing all it can to take care of the here and now. This article from Harvard Management Update offers a new lens for positioning growth efforts within your company while staying focused on your core strengths today.
Business leadership is at the core of Asian economic development, says HBS professor D. Quinn Mills. As he explained recently in Kuala Lumpur, the American and Asian leadership styles, while very different, also share important similarities.
It's essential for leaders to spark conflict in their organizations, as long as it is constructive. A Q&A with Professor Michael Roberto, author of the new book Why Great Leaders Don't Take Yes for an Answer.
Malcolm Gladwell's popular new book is about the power of snap judgements and the ways in which people develop the ability to make them. Can—and should—people make typical business decisions in the blink of an eye?
Published in 2004
New research suggests that large groups of people are better than a few experts at everything from estimating the true magnitude of things to diagnosing causes of problems to predicting outcomes. If this is correct, what does it say about the true nature of effective leadership?
A company doesn't need a crystal ball to see impending disasters. Harvard Business School professor Max H. Bazerman and INSEAD professor Michael D. Watkins explain how to foresee and avoid predictable surprises.
People make decisions every day by weighing their own opinions with advice from other sources. But do we know whether people use advice in a way that is helpful to them? In two experiments performed under controlled, laboratory conditions, Gino found that all else being equal, people weigh advice differently according to the amount of money they pay for it. Also, the cost of advice affects the degree to which people use it.
Published in 2003
What are the critical skills global managers need today compared to ten years ago? An interview with Harvard Business School professor Christopher A. Bartlett.
Professor David A. Garvin offers a rare inside glimpse at how the case method is used by both faculty and students in classrooms at Harvard Business School.
Polar explorer Sir Ernest Shackleton is the subject of a new HBS case study. Professor Nancy F. Koehn discusses lessons for leaders from the voyage of the Endurance.
Let’s say you are left in charge of an MBA program. How would you and your students sort through the tensions in corporate life vis-à-vis society, employees, and investors? How would you build those learnings into your program and make them stick?
Most top executives are smart and far sighted, so why can't they change gears fast enough to meet change? Professor Donald N. Sull provides answers in a new book.
SEC Commissioner Harvey J. Goldschmid blames corporate failures in part on inadequate gatekeepers, but sees healing in history.
Can you predict a business disaster? In this Harvard Business Review excerpt, professors Michael D. Watkins and Max H. Bazerman outline the keys for disaster prevention: recognition, prioritization, and mobilization.
No one doubts business schools are expert at teaching management theory. But
what about teaching real-world basics? In short, can students be taught
execution?
Published in 2002
Sometimes a seemingly harmless corporate decision such as a budget trim can lead to big problems elsewhere. HBS professor W. Earl Sasser tells what happens when budget constraints and customers collide.
Shooter on site. Epidemic. Major power outage. Is your organization prepared to deal with crisis? HBS professor Michael Watkins explains what you need to know, and offers a checklist to evaluate your preparedness.
On May 10, 1996, five mountaineers from two teams perished while climbing Mount Everest. Is there anything business leaders can learn from the tragedy? HBS professor Michael A. Roberto used the tools of management to find out. Plus: Q&A with Michael Roberto
It's not easy to transform a trusty but ailing old stalwart. In an excerpt from their book, Changing Fortunes: Remaking the Industrial Corporation, HBS professor Nitin Nohria and co-authors Davis Dyer and Frederick Dalzell discuss how General Motors and Kodak are attempting precisely that.
Your chief competitor creates a breakthrough technology. Should you frame that event inside your company as a threat or opportunity? The answer in this Harvard Business Review excerpt by HBS professors Clark Gilbert and Joseph L. Bower just may surprise you.
Published in 2001
As you weigh the options for your company's next step, how do you decide which way to turn? HBS professors David A. Garvin and Michael A. Roberto offer some tips in this excerpt from Harvard Business Review. Plus: Q&A with Garvin and Roberto
