It is increasingly necessary for 24/7 shift operations to include some component of team-based work. But how can organizations support such work among constantly changing groups of people in a setting where stable teams are not feasible? This research investigates an organizational structure the authors call team scaffolds: a role set with collective responsibility for accomplishing interdependent tasks. Studying the implementation of team scaffolding in a high-stakes setting, a city hospital emergency room, the authors observed that workers readily affiliated with the temporary teams—even without ongoing relationships—and worked together intensely during the short duration of these groupings, even developing a competitive dynamic with other team scaffolds. The role sets established job placeholders in an interdependent group so that people starting up a shift could take their places in the set and immediately understand the interdependence and accountability they shared with others. Overall, this design improved the ability and motivation of clinicians to engage in teaming.
Many studies as well as anecdotes document a link between the structure of chief executive officer (CEO) compensation and various measures of earnings manipulation. In this paper, HBS professors Oberholzer-Gee and Wulf analyze all components of compensation packages for CEOs and for managers at lower levels in a large sample of firms over more than 10 years, between 1986 and 1999. Results suggest that the effects of incentive pay on earnings management vary considerably by both type of incentive pay and position. Overall, it appears that the primary focus of compensation committees on equity incentives for CEOs overlooks a critical component in curbing earnings manipulation. If one wanted to weaken incentive pay to get more truthful reporting, diluting bonuses-particularly that of the chief financial officer (CFO)-would be the place to start. This may be the first study to analyze the relationship between CEO, division manager, and CFO compensation and earnings management.
Research has demonstrated that people associate most with others who are similar to themselves, including others of the same sex. What are the implications of such patterns for organizations? This study, written by Adam M. Kleinbaum, Toby E. Stuart, and Michael L. Tushman, offers evidence of how and by whom formal lateral structures serve to link together an otherwise siloed organization. Analyzing millions of e-mail interactions among tens of thousands of employees of a single large firm, the researchers find that it is women more than men who tend to bridge formal structural boundaries in organizations. Thus women play a potentially valuable role in creating ties throughout an otherwise siloed multidivisional corporation. Despite the influence of a firm's formal organizational structure, people often have plenty of discretion to exercise choice. Same-sex interaction results from discretionary choice within the boundaries of the firm's opportunity structure. These results suggest (but do not prove) that same-sex interaction especially by woman can help to span formal organizational boundaries that are otherwise difficult to traverse. The findings raise questions for future research about whether conventional wisdoms regarding gender differences in social network structure remain accurate in current-day organizations.
The size of a CEO's executive team has increased dramatically in recent decades, but little has been known about its composition. Using a rich dataset of US firms from 1986 to 2006, this paper documents the dramatic increase in the number of functional managers in the executive team. The size of the team in these firms doubled over the time period from five to 10 positions, with approximately three-fourths of the increase attributable to functional managers (such as Chief Financial Officer, Chief Marketing Officer, and so on) rather than general managers. The paper explores the drivers of these changes. Findings are critical for practitioners, and specifically CEOs, as they structure their executive teams and more generally as they make decisions to implement or execute strategy.
New research by Harvard Business School Associate Professor William R. Kerr suggests the number of companies affecting government policy through lobbying may be smaller—but more powerful—than previously thought.
Business success in one geographic location doesn't necessarily follow a company to a new setting. Professor Juan Alcácer discusses the importance of taking a long-term strategic view.
Published in 2011
Oil and gas companies face asset expropriations and corruption by foreign governments in many of the countries where they operate. In addition, most of these companies operate in multiple host countries. What determines their disclosure of business activities and hence transparency? Paul Healy, Venkat Kuppuswamy, and George Serafeim examine three forms of disclosure costs that oil and gas managers could potentially consider. Both the US government and the European Union are currently considering laws that would require oil and gas companies to disclose information about operations in host countries.
Lobbying is a primary avenue through which firms attempt to change policy in the United States, with total expenditures outnumbering campaign contributions by a factor of nine. While lobbying by businesses is a frequently debated issue, there has been little systematic empirical evidence on these behaviors at the firm level. This paper is one of the first to begin to fill this gap. To do so, the researchers constructed an empirical model of lobbying behavior of publicly traded, US-headquartered firms between 1998 and 2006. They also looked in depth at a specific policy shift that has been the subject of significant public debate: the dramatic decline in the limit on H-1B visas that occurred in 2004. Findings show that the decline in the limit on H-1Bs did not induce new firms to lobby that were not previously lobbying on other issues. The decline did, however, significantly shift lobbying resources towards high-skilled immigration issues amongst firms that had lobbied previously for other issues. Moreover, the manner in which this shift occurs among firms already lobbying indicates little constraint on adjustments across issues important for firms.
In this collection from our archives, Harvard Business School faculty discuss specific challenges that can be solved with the right organizational design.
In the wake of corporate scandals, many companies are looking more closely at how to manage business conduct worldwide. Realizing the complexity of this issue, Harvard Business School professors Rohit Deshpandé, Lynn S. Paine, and Joshua D. Margolis decided to evaluate standards of corporate conduct around the world—one of the most daunting research projects the three faculty have undertaken.
Discussions about incentives for CEOs in the United States begin, and often end, with equity-based compensation. After all, stock options and (more recently) grants of restricted stock have comprised the bulk of CEO pay since the mid-1990s, and the changes in CEO wealth due to changes in company stock prices dwarf wealth changes from any other source. Too often overlooked in the discussion, however, is the role of annual and multiyear bonus plans—based on accounting or other non-equity-based performance measures—in rewarding and directing the activities of CEOs and other executives. In this paper, Kevin J. Murphy and Michael C. Jensen describe many of the problems associated with traditional executive bonus plans, and offer suggestions for how these plans can be vastly improved. The paper includes recommendations and guidelines for improving both the governance and design of executive bonus plans and, more broadly, executive compensation policies, processes, and practices. The paper is a draft of a chapter in Jensen, Murphy, and Wruck (2012), CEO Pay and What to Do About it: Restoring Integrity to both Executive Compensation and Capital-Market Relations, forthcoming from Harvard Business School Press.
When evaluating compensation issues, economists often assume that both an employer and an employee make rational, albeit self-interested choices while working toward a goal. The problem, says Assistant Professor Ian Larkin, is that the most powerful workplace motivator is our natural tendency to measure our own performance against the performance of others.
When the Red Sox announced they had signed away veteran pitcher John Lackey from the Anaheim Angels, it was the start of one of the most expensive talent hunts in baseball history. So why were the Red Sox an epic failure in 2011? Lackey's lackluster performance is a case study in the perils of chasing superstars, says Professor Boris Groysberg.
As nonprofits add more for-profit elements to their business models, they can suffer mission drift. Associate Professor Julie Battilana says hybrid organizations can stay on target if they focus on two factors: the employees they hire and the way they socialize those employees.
Environmental ratings of companies are based on "green" management efforts and the environmental performance of their operations. In this paper, Michael Toffel and Auden Schendler argue that these ratings neglect companies' actions that seek to influence environmental policy, which can have a much broader impact than their internal efforts. As a result, sustainability ratings risk seriously misleading consumers and investors, and can even enable "greenwashing" by allowing corporations to game the system, gaining high rankings for greening their operations despite advocating for less stringent environmental policy. Toffel and Schendler argue that environmental ratings should factor in political contributions, CEO advocacy work, and engagement with non-governmental organizations, among other actions. This would erode the environmental ratings of companies advocating weaker environmental policy, and bolster the ratings of those advocating more stringent environmental policy.
In the new book The Culture Cycle, Professor Emeritus James L. Heskett demonstrates that developing the right corporate culture helps companies be more profitable and provides sustainable competitive advantage.
Summing Up: Steve Jobs' influence on Apple is pervasive--maybe too much so. Jim Heskett's readers think Apple faces an almost impossible task in replacing the visionary founder.
Between 2005 and 2008, the world saw a dramatic increase in corporate environmental reporting. Yet this transition toward greater transparency and accountability has occurred unevenly across countries and industries. Findings by professors Christopher Marquis and Michael W. Toffel provide the first systematic evidence of how the global environmental movement affects corporations' environmental management practices. Firms' use of symbolic compliance strategies, for instance, is affected by specific corporate characteristics and by institutional context. This study contributes to a larger body of research on the effects of global social movements and environmental reporting.
What are the costs and benefits of auditors providing non-audit services? In this paper, the authors investigate whether high non-audit services (NAS) fees relative to audit fees are associated with poor quality financial reporting. Associate Professor Suraj Srinivasan and colleagues look specifically at a sample of S&P 500 firms during the years 1978-80. The authors thus provide an early history analysis of a long-standing regulatory concern that NAS fees create an economic dependence that causes the auditor to acquiesce to the client's wishes in financial reporting, reducing the quality of the audit. This concern led the Sarbanes-Oxley Act to prohibit auditors from providing most consulting services. The authors find that, contrary to regulatory concerns, NAS are associated with better quality financial reporting: lower earnings management and higher earnings informativeness. Conclusions rely on the specific institutional features of the years 1978-80.
Companies are facing increasing pressure to reveal information about their operations, including their environmental performance. This research examines which types of organizations are especially likely to reduce their pollution levels once they face mandatory disclosure requirements. Research conducted by Anil Doshi and Michael Toffel of Harvard Business School, and Glen Dowell of the Johnson School of Management at Cornell University compares the responses of companies based on their proximity to headquarters and to corporate siblings, organizational size and the density of their surrounding communities, and whether they are part of publicly- or privately-held firms.
