First Look

May 1, 2018

What works better: layoffs or pay cuts?

In the wake of a downturn, employers often consider two alternatives: reduce everyone's compensation, or lay off a percentage of staff. Christopher Stanton and colleagues find that pay cuts can be worse for the organization by driving away your best people. Analyzing the Aftermath of a Compensation Reduction.

An ethical person can be an unethical negotiator

Max Bazerman and colleagues explain how "negotiators fall prey to bounded ethicality, engaging in behavior that is contradictory to their values without realizing they are doing so." Bounded Ethicality and Ethical Fading in Negotiations: Understanding Unintended Unethical Behavior.

Good news or bad? Presenting to the Chai Point Board

The founder of Chai Point, India’s largest organized chai retailer, is preparing a board presentation. His decision, as outlined in a new case study, is whether to focus on explaining the disappointing number of store openings or discussing a potentially exciting new product. The case was written by Shikhar Ghosh, Ramana Nanda, and Rachna Tahilyani. Chai Point: Disrupting Chai.

— Sean Silverthorne
  • 2018
  • Atlas of Moral Psychology

In Search of Moral Equilibrium: Person, Situation, and Their Interplay in Behavioral Ethics

By: Lee, Julia J., and F. Gino

Abstract—This comprehensive and cutting-edge volume maps out the terrain of moral psychology, a dynamic and evolving area of research. In 57 concise chapters, leading authorities and up-and-coming scholars explore fundamental issues and current controversies. The volume systematically reviews the empirical evidence base and presents influential theories of moral judgment and behavior. It is organized around the key questions that must be addressed for a complete understanding of the moral mind.

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  • in press
  • Academy of Management Perspectives

Bounded Ethicality and Ethical Fading in Negotiations: Understanding Unintended Unethical Behavior

By: Rees, McKenzie, Ann E. Tenbrunsel, and Max Bazerman

Abstract—The business scandals in the past several decades led to the rising importance of ethics as a topic central to management scholarship. Behavioral scientists in particular were attracted to the topic in far greater numbers, and the study of ethical decision-making emerged as a core subfield (Messick & Tenbrunsel, 1996). This paper draws on that framework and applies it to negotiations, arguing that not all unethical behavior is intentional; rather, negotiators fall prey to bounded ethicality, engaging in behavior that is contradictory to their values without realizing they are doing so. We further argue that ethical fading—when individuals do not “see” the ethical implications of the situation or their action—is central to explaining why this occurs. Relying on past empirical research, we identify negotiation “cues” that have been linked to unethical behavior and explore how they make a negotiator particularly vulnerable to ethical fading, resulting in subsequent unethical behavior. We discuss several opportunities for future research in the negotiation discipline and other disciplines that draw on motivated social exchange or assume intentionality and conclude with a call for scholars to define normative standards as they pertain to negotiator ethics.

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Analyzing the Aftermath of a Compensation Reduction

By: Sandvik, Jason, Richard Saouma, Nathan Seegert, and Christopher Stanton

Abstract—Wage rigidity creates real and financial frictions, though the real-world drivers of rigidities remain largely unstudied. We use staggered commission reductions at a sales firm to estimate effects on worker turnover and effort. In response to an 18% decline in commissions, we find turnover increases for the most productive workers. We detect limited effort responses and find no evidence of different effects based on workers’ expectations of fairness or future promotion. The findings suggest that adjustment constraints stem primarily from adverse selection concerns on the extensive (turnover) margin as opposed to asymmetric effort responses on the intensive margin.

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  • Harvard Business School Case 718-039

Lisbon Revisited

No abstract available.

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  • Harvard Business School Case 517-064

Note on the Impact of Millennials on the Food System

In 2016, the millennial generation (those age 19 to 35 in 2016), the largest generation by population in the U.S., was entering its prime home buying, family forming, earning and spending years. This generation was showing different beliefs and behaviors than previous generations—beliefs and behaviors that were having a significant impact on the overall economy and in particular on the food industry. This note explores the millennial generation, how it differs from previous generations, and examples of how it is impacting the food industry.

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  • Harvard Business School Case 218-085

Patent Trolling

The U.S. Intellectual Property (IP) Ecosystem is one of the most robust and dynamic in the world—and has been for centuries. The bedrock of this system is the "patent," a legal document that allows its holder exclusive commercialization rights of a part of the "idea space" granted through the patent. Strong legal protection of IP has made the U.S. a destination of great thinkers and innovators worldwide in order to enjoy this legal protection of their valuable insights. A new threat, however, looms. The same legal system that has protected IP has been used to create an organizational form known as a "Patent Troll." Patent Trolls amass patents for the sake of opportunistically extracting rents from firms producing and commercializing products. In this Industry Note, we describe the origin, evolution, costs, benefits, and future outlook for Patent Trolling in the United States.

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No abstract available.

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  • Harvard Business School Case 818-020

Chai Point: Disrupting Chai

Chai Point is India’s largest organized chai retailer. It has missed its target for retail store openings by approximately 25%, goals that are very important to its investors who are also board members. However, it has developed an exciting new internet-based tea dispenser that has the potential to dramatically increase Chai Point’s market opportunity and growth rate but can be seen as a change in their growth strategy. The founder needs to decide his strategy for his next board meeting. Should he focus on past performance? Or should he spend time outlining’s technology and potential, since this will be the first time that the institutional investors will be seeing this new capability?

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No abstract available.

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  • Harvard Business School Case 518-071

Huawei: How Can We Lead the Way?

On September 12, 2017, just as Apple’s Tim Cook was unveiling the iPhone X, Richard Yu, CEO of Huawei’s Consumer Business Group (CBG), and Glory Cheung, his Chief Marketing Officer, were discussing some key strategic issues regarding Huawei’s smartphone business. Established in 1987, Huawei was the largest telecom equipment company in the world. Huawei established the CBG in 2012 to focus on Huawei-branded smartphone models and within five years had risen to be the No. 3 player in the market in terms of shipments—next only to Apple and Samsung. As they finished watching Cook’s presentation, Yu and Cheung thought about the Mate 10 series, Huawei’s most advanced smartphone that would be launched on October 16, 2017, in Germany. The new models would include Huawei’s proprietary Kirin 970 chipset, which boasted having the world’s first artificial intelligence (AI) mobile processor. They had to decide how to position, communicate, and price the new phones. Yet beyond these near-term decisions, a major challenge facing Huawei was how to make good on Yu’s bold vision to overtake Apple and Samsung in market share within three to five years, while maintaining healthy profits. This task seemed particularly daunting given the difficulties the company had encountered in penetrating the lucrative U.S. market. What would it take for Huawei to be the number one smartphone brand globally?

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  • Harvard Business School Case 918-041

Happy UAE

This case centers on the United Arab Emirates' (UAE) national goal of raising the happiness of its residents and visitors through ambitious government initiatives. They combined this bold national goal with an accountability structure (incentive plan) built on Key Performance Indicators (KPIs), as more typically done at a company level. A key case protagonist is Ohood Al Roumi: the UAE and the world's first dedicated Minister of State for Happiness and Well-being. She was assigned to this role by Sheikh Mohammed, the Prime Minister and Vice President of the UAE and Ruler of Dubai. Al Roumi attempted to drive national progress towards happiness in UAE society through several means: measuring happiness in the community and happiness with government services, aligning and coordinating government entities towards promoting happiness and positivity at work, and promoting happiness as a lifestyle more generally. The case details the UAE's progress through February 2018. The class discussion gives students a chance to reflect on the role of government in promoting happiness and well-being and how a government could go about encouraging happiness. The UAE in effect implemented a complex incentive scheme with the aim of coordinating attempts to increase happiness and well-being. The connection between the UAE's efforts and incentive schemes emerges in the course of the class discussion, which enables students to reflect on concrete managerial implications of the analysis.

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  • Harvard Business School Case 118-047

PrimeStone Capital and dormakaba

London-based activist hedge fund PrimeStone Capital identifies a potential investment in Swiss security company Kaba. PrimeStone believes that the company is undervalued because it has been pushing back various financial targets and thinks it can help by proposing a new, incentivized executive compensation plan. The company's performance improves, and PrimeStone needs to decide whether its presence can continue to add value or whether it should exit the investment.

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