First Look

October 3, 2017

Among the highlights included in new research papers, case studies, articles, and books released this week by Harvard Business School faculty:

How management feedback can backfire

Interpersonal management feedback to employees has proven largely ineffective, according to various studies, but why? A new research paper by Paul Green Jr., Francesca Gino, and Bradley Staats provides several possible answers. Looking to the problem through the lens of social psychology, they find that if negative feedback represents a threat to the recipent’s positive self-concept, “… recipients will flee these threats or otherwise reshape their network to attenuate the negative psychological effects of the threat.” In other words, they might end social relationships with those providing feedback and form new relationships that ultimately lead to lower productivity. Shopping for Confirmation: How Disconfirming Feedback Shapes Social Networks

Hospitals that overbill as a financial strategy

Forthcoming research by Jonas Heese looks at some European hospitals where overbilling is used as a method for managing earnings. “As overbilling allows hospitals to increase revenues without altering operations, affecting costs, or having to reverse such behavior in the future, I propose and find that overbilling reduces hospitals’ use of managing accruals or cutting discretionary expenditures,” Heese writes. The Role of Overbilling in Hospitals' Earnings Management Decisions

Using artificial intelligence to gauge human intelligence

A case study available to educators looks at the increasing use of artificial intelligence (AI) in human resource decisions. Students reading the case consider how three companies are using GROW, an AI platform, “to manage talent recruiting, screening, hiring, placement, and development.” The case was written by Ethan S. Bernstein, Paul D. McKinnon, and Paul Yarabe. GROW: Using Artificial Intelligence to Screen Human Intelligence

Other new publications from Harvard Business School faculty are listed below.

by Sean Silverthorne
 
  • 2017
  • Emerald Group Publishing

Extreme Teaming: Lessons in Complex, Cross-Sector Leadership

By: Edmondson, Amy C., and Jean-François Harvey

Abstract—Today's global enterprises increasingly involve collaborative work by teams of experts operating across different professions, organizations, and industries. Extreme Teaming provides new insights into the world of complex, cross-industry projects and the ways they must be managed. The authors analyze contemporary cases that expose the complex demands of cross-boundary collaboration on management and inform our understanding of teams. Containing powerful insights and practical guidelines that allow managers to bridge professional divides and organizational boundaries in order to work together effectively, this is a new exploration of the challenges involved in today's global enterprises. The authors demonstrate that the work done in the modern organization is less and less about looking inward and creating strong teams inside the company and more about teaming across boundaries—that often are in flux. Extreme Teaming is a must-read book for all courses related to leading open innovation, teamwork and collaboration, project management, and cross-boundary work.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=53289

  • forthcoming
  • Organization Science

Blurring the Boundaries: The Interplay of Gender and Local Communities in the Commercialization of Social Ventures

By: Dimitriadis, Stefan, Matthew Lee, Lakshmi Ramarajan, and Julie Battilana

Abstract—This paper examines the critical role of gender in the commercialization of social ventures. We argue that cultural beliefs about what is perceived to be appropriate work for each gender influence how founders of social ventures incorporate commercial activity into their ventures. Specifically, we argue and show that although cultural beliefs that disassociate women from commercial activity may result in female social venture founders being less likely to use commercial activity than their male counterparts, these effects are moderated by cultural beliefs about gender and commercial activity within founders’ local communities. The presence of female business owners in the same community mitigates the role of founders’ gender on the use of commercial activity. We examine these issues through a novel sample of 584 social ventures in the United States. We constructively replicate and extend these findings with a supplemental analysis of a second sample, the full population of new nonprofit organizations founded during a two-year period in the United States (n = 31,160). By highlighting how gendered aspects of both the social and commercial sectors interact to shape the use of commercial activity by social venture founders, our findings contribute to research on hybrid organizations in the social sector, communities as a context for the enactment of gender, and the enactment of gender in entrepreneurship.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=53161

  • forthcoming
  • European Accounting Review

The Role of Overbilling in Hospitals' Earnings Management Decisions

By: Heese, Jonas

Abstract—This paper examines the role of overbilling in hospitals’ earnings management choices. Overbilling by hospitals is a form of revenue manipulation that involves misclassifying a patient into a diagnosis-related group that yields higher reimbursement. As overbilling allows hospitals to increase revenues without altering operations, affecting costs, or having to reverse such behavior in the future, I propose and find that overbilling reduces hospitals’ use of managing accruals or cutting discretionary expenditures. Next, I find that hospital managers prefer overbilling to managing accruals (cutting discretionary expenditures) when cutting discretionary expenditures (managing accruals) is constrained and vice versa. Collectively, my findings suggest that overbilling is an important alternative manipulation tool in hospitals.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=53299

Healthy Business? Managerial Education and Management in Healthcare

By: Bloom, Nicholas, Raffaella Sadun, Renata Lemos, and John Van Reenen

Abstract—We investigate the link between hospital performance and managerial education by collecting a large database of management practices and skills in hospitals across nine countries. We find that hospitals that are closer to universities offering both medical education and business education have higher management quality, more MBA trained managers, and lower mortality rates. This is true compared to the distance to universities that offer only business or medical education (or neither). We argue that supplying joint MBA-healthcare courses may be a channel through which universities increase medical business skills and raise clinical performance.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=53281

Abstract—Using retail chain data, we study the effects of a tournament incentive plan incorporating objective and subjective criteria. In principle, such plans could motivate employees to perform both at a high level, based on objective criteria, and in accordance with company values, considered via subjective criteria. However, they could be counterproductive if enough participants (especially those who don’t win) perceive that subjectivity adds unfairness. We show that the managers choosing winners relied on both objective and subjective criteria—rather than relying only on objective criteria or on subjectivity unrelated to the stated criteria. On average, the tournament incentive plan was associated with improved store sales. We also find that such plans can be more beneficial for geographically isolated participants, where the potential for improving alignment is greater.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=50575

Abstract—Most research on the effects of violence on civilian attitudes and behavior during civil war presumes that civilians are trapped in the conflict zone, with incumbents and insurgents competing for their loyalties. Yet in many cases—such as the current conflict in Syria, which we examine—large numbers of civilians leave the conflict zone, at least temporarily. How does indiscriminate violence affect civilian attitudes when exit is an option? Using a natural experiment owing to the inaccuracy of barrel bombs, we examine the effect of having one's home destroyed on a cluster of attitudes of Syrian refugees in Turkey related to their personal security, side-taking, and social engagement. While losses from barrel bombing represent only one component of wartime harm, they nevertheless have profound effects. Specifically, civilians who lose a home to barrel bombing are more likely to see the Assad regime as a greater threat to themselves personally and to the whole of Syria. Such harm does not, however, increase civilians' support for the opposition, who failed to protect them. Instead we show that such violence increases parochial forms of solidarity and social engagement within the refugee community. Altogether this suggests that, when civilians can escape the conflict zone, they no longer need to choose sides as they seek safety, but rather may object to all armed groups. One implication of this logic is that for the armed groups—and particularly the incumbent in this case—indiscriminate violence may be a tragically effective tool for driving out populations that could have otherwise provided support and cover to the opposition. This argues for a "draining the sea" logic to indiscriminate violence, distinct from the logic described in the cases of captive civilian populations.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=53274

Shopping for Confirmation: How Disconfirming Feedback Shapes Social Networks

By: Green, Paul, Jr., Francesca Gino, and Bradley Staats

Abstract—Many organizations employ interpersonal feedback processes as a structured means of informing and motivating employee improvement. Ample evidence suggests that these feedback processes are largely ineffective, and despite a wealth of prescriptive literature, these processes often fail to lead to employee motivation or improvement. We propose that these feedback processes are often ineffective because they represent threats to recipients’ positive self-concept. Because the self-concept is socially sustained, recipients will flee these threats or otherwise reshape their network to attenuate the negative psychological effects of the threat. Analyzing four years of peer feedback and social network data from an agribusiness company in the western U.S., we find that employees, in the face of feedback that is more negative than their own self-assessment in a given domain (i.e., disconfirming feedback), reshape their network in ways designed to attenuate the threat brought about by the feedback, and that this behavior is detrimental to their performance. In a laboratory study, we replicate these findings conceptually, showing that disconfirming feedback has such effects on one’s relationships and performance because it is perceived as threatening to one’s self-concept.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=53291

Abstract—Sex ratios at birth have risen steadily over the last three decades across much of the developing world. Many attribute this rise to improved access to sex selection technologies such as ultrasound since 1980. This study seeks to understand the effect of access to sex selection technologies such as ultrasound, and consequently skewed sex ratios, on the marriage market and intrahousehold outcomes of females in India. Existing economic theory and literature view male-skewed populations as a boon to the marital prospects of females. However, Edlund (1999) proposes an (as yet untested) theory that, in environments where hypergamy is practiced and parents derive utility from married children, a male-skewed sex ratio can generate a permanent female underclass. I extend this theory to argue that if sex ratios are skewed disproportionately amongst the rich, as the evidence suggests, then poorer matching in the marriage market will in turn lead to weaker bargaining positions for females. I test this theory and examine its implications for later life outcomes using India-wide household level data on ultrasound use and bargaining power. I present evidence that village-level ultrasound is an exogenous source of variation for access to sex selection technology, demonstrate that parents are indeed considering the sex ratio of their unborn child’s future marriage market when determining the sex composition of their own family, and utilize a difference-in-difference approach to identify the effect of ultrasound access on intrahousehold outcomes of affected women. I find evidence that greater parental access to sex selection technology at a child’s birth is related to poorer outcomes in her marriage: greater marriage age gaps, increased marital abuse, lower reported autonomy, and poorer health. My results are robust to a TS2SLS specification employing distance to a major health center as my instrument. As the first cohort of females affected by ultrasound at birth have only recently entered the marriage market, this study provides timely and compelling empirical evidence of the unintended consequences on later life outcomes of sex selection in India.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=53295

Habit Formation and Rational Addiction: A Field Experiment in Handwashing

By: Hussam, Reshmaan, Atonu Rabbani, Giovanni Reggiani, and Natalia Rigol

Abstract—Regular handwashing with soap is believed to have substantial impacts on child health in the developing world. Most handwashing campaigns have failed, however, to establish and maintain a regular practice of handwashing. Motivated by scholarship that suggests handwashing is habitual, we design, implement, and analyze a randomized field experiment aimed to test the main predictions of the rational addiction model. To reliably measure handwashing, we develop and produce a novel soap dispenser, within which a time-stamped sensor is embedded. We randomize distribution of these soap dispensers as well as provision of monitoring (feedback reports) or monitoring and incentives for daily handwashing. Relative to a control arm in which households receive no dispenser, we find that all treatments generate substantial improvements in child health as measured by child weight and height. Our key test of rational addiction is implemented by informing a subset of households about a future boost in monitoring or incentives. We find that (1) both monitoring and incentives increase handwashing relative to receiving only a dispenser, (2) these effects persist after monitoring or incentives are removed, and (3) the anticipation of monitoring increases handwashing rates significantly, implying that individuals internalize the habitual nature of handwashing and accumulate habit stock accordingly. Our results are consistent with the key predictions of the rational addiction model, expanding its relevance to settings beyond what are usually considered “addictive” behaviors.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=53296

Games of Threats

By: Kohlberg, Elon, and Abraham Neyman

Abstract—A game of threats on a finite set of players, N, is a function d that assigns a real number to any coalition, S ⊆ N, such that d(S) = -d(N\S). A game of threats is not necessarily a coalitional game as it may fail to satisfy the condition d(Ø) = 0. We show that analogs of the classic Shapley axioms for coalitional games determine a unique value for games of threats. This value assigns to each player an average of the threat powers, d(S), of the coalitions that include the player.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=53275

Abstract—Relative TSR (rTSR) is increasingly used by market participants to judge and incentivize managerial performance. We evaluate the efficacy, reasons, and implications of firms' benchmarks in rTSR-based contracts. Although compensation consultants suggest that a primary objective of rTSR is to filter shocks unrelated to managerial performance, following the informativeness principle, we document that a significant subset of firms that choose index-based benchmarks do not adequately achieve this objective. Further, the index-benchmark selection is associated with governance-related frictions and not driven by plausible alternative theories. Both structural calibration and reduced-form estimates reveal significant negative performance implications from suboptimal peer selection.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=51919

Abstract—Firms that use consultants have higher-paid CEOs. We show that this positive and robust association is not only driven by consultant conflicts of interest but also (and even to a larger degree) by the composition and complexity of pay: firms using consultants compensate their CEOs with a higher percentage of incentive pay and more complex incentive plans, which, in turn, are associated with higher levels of pay. We also show that, among firms that do not retain consultants, firms that pay more to their CEOs and use more complex incentive plans are more likely to hire compensation consultants the following year. Finally, we show that shareholders “Say-on-Pay” votes are more favorable for companies using compensation consultants, but this association is also explained by the composition and complexity of CEO pay.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=53288

  • Harvard Business School Case 818-007

Entrepreneurship for All

Entrepreneurship for All (EforAll) is a Lowell, Massachusetts–based nonprofit that hosts business accelerators for entrepreneurs in underserved communities. By mid-2017, EforAll has five office locations in Massachusetts, and its leadership and the Board of Directors must decide whether EforAll is ready to open its first out-of-state office. Students are asked to consider a variety of factors—including funding, hiring, population demographics, and distance from Massachusetts—to determine whether EforAll has the capacity to expand, and if so, which new city it should expand to first.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/818007-PDF-ENG

Over 10% of all 2017 university graduates in Japan used GROW, an artificial intelligence platform and mobile app developed by Tokyo-based people analytics startup IGS, to recruit for a job. This case puts participants in the shoes of IGS founder and CEO Masahiro Fukuhara, a first-time entrepreneur, as he considers the varied ways the "big data" he is collecting is being used—and whether some uses promised more meaningful (or less potentially misleading) impact than others. After briefly introducing IGS, Fukuhara, and GROW, the case outlines exactly how GROW works, starting with a mobile app to assess competencies and personalities of candidates and ending with artificial intelligence (machine learning) to produce high-quality recommendations to companies about whom they should hire. The case then articulates precisely how three companies—airline ANA (All-Nippon Airways), global conglomerate Mitsubishi Corporation, and advertising/media company Septeni—use GROW in very different ways to manage talent recruiting, screening, hiring, placement, and development. The case asks students to consider two questions: (1) Which of the three companies' approaches to using people analytics for talent acquisition and development is most appealing (or most concerning)? and (2) Should Fukuhara turn on the most advanced part of the artificial intelligence engine, allowing GROW not just to provide recommendations to clients about whom they should hire, but also (based on performance and attribute data of previous hires) to overrule clients' specifications (or biases) about the competencies they should be targeting in their ideal hires? Accompanying the case are the (anonymized) data one of these companies used to make its hiring decision so that students can experience first-hand the opportunities and challenges of using people analytics in hiring. The case also provides an accessible yet thorough explanation of the key aspects of artificial intelligence (supervised, unsupervised, and reinforcement machine learning). The case is well suited to courses in Managing Human Capital, People Analytics, Talent Development, Organizational Behavior, and General Management.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/418020-PDF-ENG

  • Harvard Business School Case 718-414

Enel: The Future of Energy

Enel has transformed from the Italian state-owned energy monopoly into a global leader in renewable energy and shared value creation. Through its open innovation model, the company has catapulted to the cutting edge of electric mobility and distributed power generation, partnering with the likes of Google and Tesla. Under the leadership of Mr. Francesco Starace, the company has gone through a significant change in organizational culture and structure, committing to 100% renewables while placing an emphasis on growth in middle-income countries and capturing and new revenue sources from energy management services. At the same time, Starace has had to balance stockholder pressure for short-term earnings with a legacy of coal and gas fired power plants against its futuristic vision.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/718414-PDF-ENG

  • Harvard Business School Case 517-009

Zalora Philippines: From Growth to Profitability

In May 2015 Paulo Campos, co-founder and CEO of Zalora Philippines, found himself at a crucial turning point in his young company’s development. In just three years, Zalora had come from entering the Philippine fashion retail industry as an unknown quantity to becoming a household name across the Southeast Asian archipelago. Campos and his team had achieved much in this time: launching one of the first online retailers in the country, building a logistics network from scratch, acquiring customers at an astonishing pace, and signing up major brands to offer on Zalora.com.ph. But now his investors were ready for him to shift gears and focus on turning a profit within the next two years. Zalora Philippines was part of Zalora Group, a Singapore-headquartered online fashion retailer that operated across Southeast Asia. Zalora Group, in turn, was part of a global entity called Global Fashion Group (GFG), which owned online fashion retailers and brands in emerging markets across the world. In addition to Zalora in Southeast Asia, GFG owned Dafiti in South America, Namshi in the Middle East, Jabong in South Asia, Lamoda in Eastern Europe, and The Iconic in Australia. GFG’s principal investors were Kinnevik, a Swedish investment company, and Rocket Internet.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/517009-PDF-ENG

  • Harvard Business School Case 717-027

Mexico's Energy Reform

Energy—both petroleum and electricity—had been terribly managed for decades in Mexico. The two national monopolies—PEMEX and CFE—were inefficient, overstaffed, corrupt, rife with subsidies, and losing money. Finally, in 2012, President Enrique Peña Nieto announced his intent to drastically reform both. Over the next two years, the Mexican constitution was amended, and a dozen implementing laws were passed to break up the CFE, reorganize PEMEX, and impose competition between the pieces. By 2017, tracts of offshore oil were auctioned, renewable contracts were auctioned, and new regulators were trying to impose competition downstream in electricity.

Purchase this case:
https://cb.hbsp.harvard.edu/cbmp/product/717027-PDF-ENG