Organizations →
- 10 May 2012
- Working Paper Summaries
The Flattened Firm—Not as Advertised
For decades, management consultants and the popular business press have urged large firms to flatten their hierarchies. Flattening (or delayering, as it is also known) typically refers to the elimination of layers in a firm's organizational hierarchy, and the broadening of managers' spans of control. While flattening is said to reduce costs, its alleged benefits flow primarily from changes in internal governance: by pushing decisions downward, firms not only enhance customer and market responsiveness, but also improve accountability and morale. But has flattening actually delivered on its promise and pushed decisions down to lower-level managers? In this paper, Julie Wulf shows that flattening actually can lead to exactly the opposite effects from what it promises to do. Wulf used a large-scale panel data set of reporting relationships, job descriptions, and compensation structures in a sample of over 300 large U.S. firms over roughly a 15-year period. This historical data analysis was complemented with exploratory interviews with executives (what CEOs say) and analysis of data on executive time use (what CEOs do). Results suggest that flattening transferred some decision rights from lower-level division managers to functional managers at the top. Flattening is also associated with increased CEO involvement with direct reports—the second level of top management—suggesting a more hands-on CEO at the pinnacle of the hierarchy. In sum, flattening at the top is a complex phenomenon that in the end looks more like centralization. Yet it is crucial to consider different types of decisions and activities and how they vary by level in the hierarchy. Key concepts include: Firms may flatten structure to delegate decisions, but doing so can lead to unintended consequences for other aspects of internal governance. For instance, a manager may flatten structure to push decisions down and then hire and develop division managers suited to "being the boss." If flattening actually pushes decisions up, division managers are now out of sync with the organization: They don't have autonomy to make decisions and there is a mismatch between managerial talent and decision rights. A change in structure has implications not only for who makes decisions, but also for how decisions are made. Flatter structures involve different roles for the CEO and the senior team. Closed for comment; 0 Comments.
- 04 May 2012
- Working Paper Summaries
No News Is Good News: CSR Strategy and Newspaper Coverage of Negative Firm Events
This study examines the gatekeeping role of the media in determining which negative corporate events reach a broader audience. Jiao Luo, Stephan Meier, and Felix Oberholzer-Gee test the idea that investments in corporate social responsibility (CSR) create public good will, leading the media to treat companies with a superior CSR track record in a favorable manner. They find the opposite. Newspapers are more likely to report negative news about companies if the companies invested heavily in CSR. For example, oil companies that invest in clean energy face a greater risk of media coverage in the event of an oil spill. An analysis of the tone of media coverage shows that news reports are no more positive for CSR leaders than for the average company. Key concepts include: As expectations about a company's performance rise with past investments in CSR, the cost associated with negative corporate events increases. News editors favor two types of stories: surprising incidents and events that conform to widely-held beliefs. Executives who wish to minimize the risk of media attention to negative events need to be careful not to place their organizations at the very top or the very bottom of CSR rankings. Being in the middle of the pack generates the least amount of coverage. Closed for comment; 0 Comments.
- 26 Apr 2012
- Working Paper Summaries
What Makes a Critic Tick? Connected Authors and the Determinants of Book Reviews
The professional critic has long been heralded as the gold standard for evaluating products and services such as books, movies, and restaurants. Analyzing hundreds of book reviews from 40 different newspapers and magazines, Professor Michael Luca and coauthors Loretti Dobrescu and Alberto Motta investigate the determinants of professional reviews and then compare these to consumer reviews from Amazon.com. Key concepts include: The data suggest that media outlets do not simply seek to isolate high-quality books, but also to find books that are a good fit for their readers. This is a potential advantage for professional critics, one that cannot be easily replicated by consumer reviews. Expert ratings are correlated with Amazon ratings, suggesting that experts and consumers tend to agree in aggregate about the quality of a book. However, there are systematic differences between these sets of reviews. Relative to consumer reviews, professional critics are less favorable to first-time authors. This suggests that one potential advantage of consumer reviews is that they are quicker to identify new and unknown books. Relative to consumer reviews, professional critics are more favorable to authors who have garnered other attention in the press (as measured by number of media mentions outside of the review) and who have won book prizes. Closed for comment; 0 Comments.
- 20 Apr 2012
- Working Paper Summaries
Why Every Company Needs a CSR Strategy and How to Build It
Despite certain criticisms, more and more companies in the world practice some form of corporate social responsibility. This paper offers a pragmatic alternative framework for CSR with a view towards developing its practice in an evolutionary way. The authors' extensive experience working with CSR practitioners convinces them that exhorting companies to hone their CSR practice under a shared value framework does not reflect the reality for a majority of businesses. CSR executives oversee a variety of social initiatives that may or may not directly contribute to a company's business goals. The role of an executive is to achieve the difficult task of reconciling the various programs, quantifying their benefits, or at least sketching a logical connection to the business, and securing the support of his or her business line counterparts. This role, when performed well, would lead to the development of a CSR strategy for the company. Key concepts include: Ideally, well-managed CSR creates social and environmental value, while supporting a company's business objectives and reducing operating costs, and enhancing relationships with key stakeholders and customers. There is no one-size-fits-all CSR model. Individual companies typically engage in a variety of programs motivated by a wide range of perspectives and corporate protagonists. In current practice, the management of philanthropic initiatives happens in what the authors label as Theatre 1; supply chain and cause marketing initiatives happen in Theatre 2; and transformative ecosystem initiatives occur in Theatre 3. These different initiatives are typically managed at different management levels, and some are staff functions and others line functions, resulting in a messy state of affairs. Gaining a unified vision is a central challenge of coordinating CSR efforts in all three theatres. In addition to empowering CSR executives to practice strategic initiatives, strong leadership and support for CSR initiatives at the top levels of executive management is critical. The strategic role of a Corporate Responsibility Officer needs to be established as an independent full-time position having access to the CEO and having input to the development of the company's business strategy. Closed for comment; 0 Comments.
- 16 Apr 2012
- Research & Ideas
The Inner Workings of Corporate Headquarters
Analyzing the e-mails of some 30,000 workers, Professor Toby E. Stuart and colleague Adam M. Kleinbaum dissected the communication networks of HQ staffers at a large, multidivisional company to get a better understanding of what a corporate headquarters does, and why it does it. Closed for comment; 0 Comments.
- 11 Apr 2012
- Research & Ideas
The High Risks of Short-Term Management
A new study looks at the risks for companies and investors who are attracted to short-term results. Research by Harvard Business School's Francois Brochet, Maria Loumioti, and George Serafeim. Closed for comment; 0 Comments.
- 12 Mar 2012
- Research & Ideas
Crowded at the Top: The Rise of the Functional Manager
It's not lonely at the top anymore—today's CEO has an average of 10 direct reports, according to new research by Julie M. Wulf, Maria Guadalupe, and Hongyi Li. Thank a dramatic increase in the number of "functional" managers for crowding in the C-suite. Key concepts include: The number of managers reporting directly to the CEO has doubled, from an average of 5 direct reports in 1986 to an average of 10 today. In 2008, companies averaged 2.9 general managers, compared with 1.6 in 1986, according to data from several surveys. The average number of functional managers reporting directly to the CEO increased much more dramatically, from 3.1 in the late 1980s to 6.7 in 2008. Two main factors have driven the C-suite sea change: an overall increase in IT investments and an overall decrease in firm diversification. As hierarchical flattening occurs, companies are pushing some decisions toward the top, casting doubt on the common idea that firms flatten in order to push ideas down the organization. Closed for comment; 0 Comments.
- 05 Mar 2012
- Research & Ideas
Is JC Penney’s Makeover the Future of Retailing?
The stuffy department store chain has become emboldened under new CEO Ron Johnson, with plans for an innovative store upgrade, simplified prices, and a brand polish. Professor Rajiv Lal discusses whether Johnson can repeat his previous magic at Apple and Target. Closed for comment; 0 Comments.
- 17 Feb 2012
- Working Paper Summaries
Breaking Them In or Revealing Their Best? Reframing Socialization around Newcomer Self-Expression
How can organizations build strong, sustainable employment relationships from the very start? To date, the socialization literature has focused on transmitting and maintaining culture so that new employees accept the organizational values and behavioral norms. Many organizations require newcomers to wear standard wardrobes, forbid personal possessions, follow detailed verbal scripts, and enforce appropriate displays of emotion all designed to hinder individuality. In two studies described in this paper, the authors found that organizational and employee outcomes were better when socialization tactics encouraged authentic self-expression of newcomers' personal identities and signature strengths. Organizational socialization is optimized when organizations start by recognizing and highlighting newcomers' unique identities at the very beginning of the employment relationship, when identity negotiation is a critical concern for both parties. Key concepts include: Given the appropriate encouragement, newcomers can frame their new role and the necessary tasks as opportunities to use their personal strengths, thereby engaging with the work in a more personally fulfilling and productive manner. Both organizations and their members benefit when the concepts of newcomer authenticity and self-expression are integrated into socialization processes. There are surprisingly large and valuable changes in employees' quality and retention when organizations make relatively small investments in socialization practices that focus on newcomers' personal identities. Perhaps the best way to develop organizational commitment is for the organization to commit to each of its individuals by highlighting and encouraging the daily use of their unique strengths. Closed for comment; 0 Comments.
- 08 Feb 2012
- Working Paper Summaries
Team Scaffolds: How Minimal In-Group Structures Support Fast-Paced Teaming
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. Key concepts include: Team scaffolds, as team shells that can be instantly populated with transitory teams, is an organizational structure that may have broad applicability for supporting teams of people who work intense shifts together in virtual or actual settings. Implementing the team scaffolding organizational design in a city hospital triggered significant changes in teaming networks and behaviors in ways that improved operational performance. With team scaffolds the hospital supported teaming among people who were often strangers and among people who might work together intensely for six hours and then not again for a month. In the team scaffold, people starting a shift would come in and occupy their place in the role set. Closed for comment; 0 Comments.
- 27 Jan 2012
- Working Paper Summaries
Discretion Within the Constraints of Opportunity: Gender Homophily and Structure in a Formal Organization
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. Key concepts include: There are significant differences in how gender interacts with organizational and geographic boundaries to influence individuals' tendency to communicate with members of their same sex. In the large company under study, men engage in same-sex interaction within the opportunity structure created by organizational structure, while women tend to connect with other women who are outside their business units and offices. It is business unit and office boundaries that most strongly influence the opportunity set of potential interaction partners for organizational actors. One of the conventional wisdoms is that same-sex interaction among marginalized people tends to reinforce the stratification of power in organizations. But these findings suggest that communication among women could serve to reinforce, not undermine, their positions in the organization. Closed for comment; 0 Comments.
- 25 Jan 2012
- Working Paper Summaries
Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management
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. Key concepts include: Standard classifications of firms as being either "centralized" or "decentralized" are too simple to accurately represent the organizational changes firms undergo at the top level. Evidence suggests that firms are doing both. General managers of business units perform more activities as they move closer to the CEO, which is reflected in higher pay and a higher fraction of firm-performance based pay—consistent with decentralization or delegation to general managers. Yet, as shown in this paper, there are also more functional managers in the executive team coordinating across business units and performing some activities of the general manager's job, which is reflected in lower pay for general managers—consistent with centralization of certain functional activities within headquarters. In addition, CEOs seem to be more involved in internal operations in firms with broader spans of control—again a form of centralization. CEOs should design the structure of their top teams based on firm scope and the opportunities for synergies, while recognizing the distinction between different types of functions and the importance of the nature of the information that is required to perform different activities. Closed for comment; 0 Comments.
- 09 Jan 2012
- Research & Ideas
Location, Location, Location: The Strategy of Place
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. Key concepts include: Many companies think of geographic strategy as a short-term checkers match rather than as a long-term chess game. Establishing new locations is resource intensive, so a wrong decision can sap the energy out of an organization and cause it to lose focus. Open for comment; 0 Comments.
- 18 Nov 2011
- Working Paper Summaries
The Dynamics of Firm Lobbying
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. Key concepts include: Few firms lobby, even among publicly traded firms, only 10 percent of the firms in this sample. Lobbying is strongly related to firm size — larger firms participate more than smaller ones. The probability that a firm lobbies in the current year given that it lobbied in the previous year is 92 percent. Up-front costs associated with beginning to lobby may be a deterrent for firms that do not lobby. The persistence induced by these costs likely allows firms and politicians to be able to predict what groups will work to support or oppose various policy changes. Moreover, stability in this relationship between government and firms may induce persistence in political and economic institutions or raise the prospects of regulatory capture. Closed for comment; 0 Comments.
- 17 Nov 2011
- Sharpening Your Skills
Sharpening Your Skills: Organizational Design
In this collection from our archives, Harvard Business School faculty discuss specific challenges that can be solved with the right organizational design. Closed for comment; 0 Comments.
- 14 Nov 2011
- Working Paper Summaries
The Impact of Corporate Sustainability on Organizational Process and Performance
Robert G. Eccles, Ioannis Ioannou, and George Serafeim compared a matched sample of 180 companies, 90 of which they classify as High Sustainability firms and 90 as Low Sustainability firms, in order to examine issues of governance, culture, and performance. Findings for an 18-year period show that High Sustainability firms dramatically outperformed the Low Sustainability ones in terms of both stock market and accounting measures. However, the results suggest that this outperformance occurs only in the long term. Managers and investors who are hoping to gain a competitive advantage in the short term are unlikely to succeed by embedding sustainability in their organization's strategy. Overall, the authors argue that High Sustainability company policies reflect the underlying culture of the organization, where environmental and social performance, in addition to financial performance, are important, but these policies also forge a strong culture by making explicit the values and beliefs that underlie the mission of the organization. Key concepts include: Organizations voluntarily adopting environmental and social policies represent a fundamentally distinct type of modern corporation, characterized by a governance structure that takes into account the environmental and social performance of the company, in addition to financial performance, a long-term approach towards maximizing inter-temporal profits, and an active stakeholder management process. Societal concern about sustainability, at both the level of the firm and society as a whole, has been growing from almost nothing in the early 1990s to rapidly increasing awareness in the early 2000s, to being a dominant theme today. The High Sustainability firms in this study pay attention to their relationships with stakeholders—such as employees, customers, and NGOs representing civil society—through active processes of engagement. The Low Sustainability firms, by contrast, correspond to the traditional model of corporate profit maximization in which social and environmental issues are predominantly regarded as externalities created by firm actions which only need to be addressed if required to do so by law and regulation. The group of firms with a strong sustainability culture is significantly more likely to assign responsibility to its board of directors for sustainability and to form a separate board committee for sustainability. Moreover, High Sustainability companies are more likely to make executive compensation a function of environmental, social, and external perception (e.g., customer satisfaction) metrics. Closed for comment; 0 Comments.
- 14 Nov 2011
- Research & Ideas
Creating a Global Business Code
In the wake of corporate scandals, many companies are looking more closely at how to manage business conduct worldwide. Professors Rohit Deshpandé, Lynn S. Paine, and Joshua D. Margolis evaluate standards of corporate conduct around the world. Open for comment; 0 Comments.
- 25 Oct 2011
- Research & Ideas
Chasing Stars: Why the Mighty Red Sox Struck Out
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. Key concepts include: Firms and sports teams alike often make the mistake of believing that star quality is portable from one organization to the next. In addition to an employee's innate talent, star performance is often also dependent on factors such as organizational culture, networking opportunities, and the general team dynamic. After luring a star performer away from a competitor, it behooves an organization to invest some resources in integrating that person into the new environment. Open for comment; 0 Comments.
- 17 Oct 2011
- Research & Ideas
How ‘Hybrid’ Nonprofits Can Stay on Mission
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. Key concepts include: In order to avoid mission drift, hybrid organizations need to focus on whom they hire and whether their employees are open to socialization. Because early socialization is so important, hybrid firms may be better off hiring new college graduates with no work background rather than a mix of seasoned bankers and social workers. The longer their tenure in a hybrid organization, the more likely top managers may be to hire junior people. Closed for comment; 0 Comments.
Can Decades of Military Overspending be Fixed?
Costs tend to rise in all organizations unless managers and their staffs have the motivation and skill to control them. Professor emeritus J. Ronald Fox analyzes this phenomenon during 50 years of US military overspending. Key concepts include: Costs tend to rise in all organizations unless managers and their staffs are skilled in industrial management and strongly motivated to control and reduce costs. In the US military, weapon programs can take 10 or more years to design, develop, produce, and deploy, with cost increases of 20 to 40 percent occurring frequently. More than 20 reform initiatives have been offered over the decades, but cultural barriers to change have worked against change. Open for comment; 0 Comments.