First Look

October 19, 2010

Mom told us that giving to others makes us happier. Now new research backs her up. In a chapter for the new book, The Science of Giving, researchers including Harvard Business School's Michael Norton demonstrate that happier people give more, that giving indeed causes increased happiness, and that these two relationships may operate in a circular fashion. So should we advertise this effect to spur more giving? Not so fast. Doing so may have the unwelcome outcome of decreasing charitable giving.

An article in a forthcoming American Economic Review claims that U.S. firms are more productive in using information technologies, but the advantage is not in where they are located. Instead, "the explanation for these patterns is that U.S. firms are organized in a way that allows them to use new technologies more efficiently," according to a research team that includes Raffaella Sadun of HBS. Look for the paper "Americans Do I.T. Better: U.S. Multinationals and the Productivity Miracle."

Traditional marketing segmentation looks at consumer demographics such as gender, age, and education level. Professor Clayton Christensen offers an alternative approach: jobs-based segmentation. Think about what job the consumer wants to hire your product to do. His note highlights three levels in the architecture of a job: What is the fundamental job or problem the customer is facing? What are the experiences in purchase and use that, if all provided, would sum up to nailing the job perfectly (the "hiring criteria")? What do we need to integrate, and how must we knit those things together so that we can provide these experiences? Read his note, "Integrating Around the Job to Be Done."

— Sean Silverthorne


Feeling Good about Giving: The Benefits (and Costs) of Self-interested Charitable Behavior


While lay intuitions and pop psychology suggest that helping others leads to higher levels of happiness, the existing evidence only weakly supports this causal claim: research in psychology, economics, and neuroscience exploring the benefits of charitable giving has been largely correlational, leaving open the question of whether giving causes greater happiness. In this chapter, we have two primary aims. First, we review the evidence linking charitable behavior and happiness. We present research from a variety of samples (adults, children, and primates) and methods (correlational and experimental) demonstrating that happier people give more, that giving indeed causes increased happiness, and that these two relationships may operate in a circular fashion. Second, we consider whether advertising these benefits of charitable giving—asking people to give in order to be happy—may have the perverse consequence of decreasing charitable giving, crowding out intrinsic motivations to give by corrupting a purely social act with economic considerations.

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Americans Do I.T. Better: U.S. Multinationals and the Productivity Miracle


The U.S. has experienced a sustained increase in productivity growth since the mid-1990s, particularly in sectors that intensively use information technologies (IT). This has not occurred in Europe. If the U.S. "productivity miracle" is due to a natural advantage of being located in the U.S., then we would not expect to see any evidence of it for U.S. establishments located abroad. This paper shows in fact that U.S. multinationals operating in the U.K. do have higher productivity than non-U.S. multinationals in the U.K., and this is primarily due to the higher productivity of their IT. Furthermore, establishments that are taken over by U.S. multinationals increase the productivity of their IT, whereas observationally identical establishments taken over by non-U.S. multinationals do not. One explanation for these patterns is that U.S. firms are organized in a way that allows them to use new technologies more efficiently. A model of endogenously chosen organizational form and IT is developed to explain these new micro and macro findings.

Fluid Tasks and Fluid Teams: The Impact of Diversity in Experience and Team Familiarity on Team Performance


In this paper, we consider how the structures of tasks and teams interact to affect team performance. We study the effects of diversity in experience on a team's ability to respond to task changes by separately examining interpersonal team diversity (i.e., differences in experience across the entire team) and intrapersonal team diversity (i.e., whether individuals on the team are more or less specialized). We also examine whether team familiarity—team members' prior experience working with one another—helps teams to better manage challenges created by task changes and greater interpersonal team diversity. Using detailed project—and individual—level data from an Indian software services firm, we find that the interaction of task change with intrapersonal diversity is related to improved project performance, while the interaction of task change with interpersonal diversity is related to diminished performance. Additionally, the interaction of team familiarity with interpersonal diversity is related to improved project performance in some cases. Our results highlight a need for more nuanced approaches to leveraging experience in team management.

Deed, Clear Conscience: When Cheating Leads to Moral Disengagement and Motivated Forgetting


People routinely engage in dishonest acts without feeling guilty about their behavior. When and why does this occur? Across four studies, people justified their dishonest deeds through moral disengagement and exhibited motivated forgetting of information that might otherwise limit their dishonesty. Using hypothetical scenarios (Studies 1 and 2) and real tasks involving the opportunity to cheat (Studies 3 and 4), we find that one's own dishonest behavior increased moral disengagement and motivated forgetting of moral rules. Such changes did not occur in the case of honest behavior or consideration of the dishonest behavior of others. In addition, increasing moral saliency by having participants read or sign an honor code significantly reduced unethical behavior and prevented subsequent moral disengagement. While dishonest behavior motivated moral leniency and led to forgetting of moral rules, honest behavior motivated moral stringency and diligent recollection of moral rules.

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Identity-Based Leader Development


Despite the wealth of managerial and scholarly attention paid to leadership development, only recently has a new perspective emerged that explicitly links leadership and identity. Research and theorizing on leadership development have yet to specify the processes that account for identity transformations in role transitions. This paper proposes a new, identity-based model of leader development that focuses attention on the key transitions that shape leaders' careers, specifying processes and moderating conditions for identity transformation. Implications for designing experiences and training that take identity processes into account are drawn.

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Big Five Personality Factors, Hardiness, and Social Judgment as Predictors of Leader Performance


Purpose-The purpose of this paper is to evaluate the influence of psychological hardiness, social judgment, and "Big Five" personality dimensions on leader performance in U.S. military academy cadets at West Point.

Design/methodology/approach-Army cadets were studied in two different organizational contexts, i.e., summer field training and during academic semesters. Leader performance was measured with leadership grades (supervisor ratings) aggregated over four years at West Point.

Findings-After controlling for general intellectual abilities, hierarchical regression results showed leader performance in the summer field training environment is predicted by Big Five extroversion, hardiness, and a trend for social judgment. During the academic period context, leader performance is predicted by mental abilities as well as Big Five conscientiousness and hardiness, with a trend for social judgment.

Research limitations/implications-Results confirm the importance of psychological hardiness, extroversion, and conscientiousness as factors influencing leader effectiveness and suggest that social judgment aspects of emotional intelligence can also be important. These results also show that different Big Five personality factors may influence leadership in different organizational contexts.

Practical implications-The study identifies personality factors related to leader performance in different types of work environments or contexts. Results can be used to improve leader selection and development programs.

Originality/value-This is the first study to examine the influence of psychological hardiness together with Big Five personality factors on leader performance. It identifies hardiness as an important predictor of leadership, while also showing that organizational context makes a difference for what Big Five personality factors influence leader performance: extroversion appears to be more influential in highly social and active work environments, whereas conscientiousness has greater salience in academic and business settings.

Antitrust-What Role for Strategic Management Expertise?

An abstract is unavailable at this time.

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Working Papers

Valuation when Cash Flow Forecasts Are Biased


This paper focuses adaptations to the discount cash flow (DCF) method when valuing forecasted cash flows that are biased measures of expected cash flows. I imagine a simple setting where the expected cash flows equal the forecasted cash flows plus an omitted downside. When the omitted downside is temporary, the adjustment is to deflate the forecasts and to set the discount rate equal to the cost of capital. However, when the downside is permanent, the adjustment is to deflate the cash flows and to increase the discount rate so that it includes the cost of capital plus the probability of a downside

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Cases & Course Materials

Pricing, Profits and Customer Value

Frank V. Cespedes, Benson P. Shapiro, and Elliot B. Ross
Harvard Business School Note 811-016

This note discusses how some firms (start-ups and established companies) maximize customer value and profits via their pricing processes. It is aimed at companies that compete on the basis of performance initiatives rather than absolute cost advantages and low price. It is suitable for use in courses or modules in pricing, entrepreneurial management, strategy, or marketing.

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Integrating Around the Job to Be Done

Clayton M. Christensen
Harvard Business School Module Note 611-004

Unlike traditional market segmentations that are based on a correlation of product sales or service with the attributes of the purchaser (such as age, gender, income level, and education level), jobs-based segmentation seeks to understand the causal roots of purchase—when a buyer needs to "hire" a product or service to get a "job" done. This note details the thought process and the methodology behind a jobs-based segmentation and provides numerous examples. It highlights three levels in the architecture of a job: 1) What is the fundamental job or problem the customer is facing? This includes political, functional, emotional, and social dimensions; 2) What are the experiences in purchase and use that, if all provided, would sum up to nailing the job perfectly? (The "hiring criteria"); and 3) What do we need to integrate, and how must we knit those things together, so that we can provide these experiences?

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Southwest Airlines One Report TM

Robert G. Eccles, Beiting Cheng, and Susan Thyne
Harvard Business School Case 411-042

In 2009, Southwest Airlines produced its first integrated annual report, the Southwest Airlines One Report, combing financial and nonfinancial performance information. This case examines Southwest's environmental and corporate social responsibility (CSR) reports produced in the two years preceding 2009 and follows the company's decision to transition to a new reporting format. Preparing for the 2010 report, the Southwest reporting team contemplates how to improve the One Report. The case also allows for debate on the future of integrated reporting, including its impact on internal management processes, integrated audits, and mandated nonfinancial reporting.

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MacroMarkets LLC

Robin Greenwood and Luis M. Viceira
Harvard Business School Case 211-006

MacroMarkets co-founder and CEO Samuel Masucci III is meeting with a strategic partner for his firm. Co-founded with Yale University Professor Robert Shiller, MacroMarkets' main innovation is the "MacroShare," which allows investors to take long or short, levered or unlevered, positions based on the value of any index. Both Shiller and Masucci are hopeful that MacroShares can help investors hedge all kinds of macroeconomic risks, including exposure to residential housing. The firm has "battle-tested" two products—one linked to oil, and one linked to housing—with mixed success and is evaluating its strategy going forward. Specifically, Masucci wonders whether the MacroShare structure might come to replace the ETF as the predominant technology for index trading.

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Batson International, S.A. (A)

David F. Hawkins
Harvard Business School Case 111-023

seeking to make up a shortfall in interim period earnings is seeking an accounting solution to close the gap.

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Batson International, S.A. (B)

David F. Hawkins
Harvard Business School Supplement 111-024

A surprise internal audit of a division's accounting practices reveals a number of possible earnings management and accounting irregularities.

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Batson International, S.A. (C)

David F. Hawkins
Harvard Business School Supplement 111-025

Senior management must sign a management letter. An internal audit reveals a number of questionable accounting practices (B case). How should senior management respond?

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Roshan: Light at the End of the Tunnel in Afghanistan

Herman B. Leonard and Qahir Dhanani
Harvard Business School Case 310-041

Roshan is a highly successful telecommunications company founded by the Aga Khan fund for economic development in Afghanistan during an ongoing civil conflict. Company leaders must now decide financial and market strategy for the next phase of development of the company. Should they sell the company—and reinvest the proceeds in another socially oriented venture? Continue to operate and expand the company? Expand to other neighboring countries?

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JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

Anette Mikes, Clayton Rose, and Aldo Sesia, Jr.
Harvard Business School Case 311-003

Mary Erdoes, the CEO of JP Morgan's asset management business, and three colleagues provide insights into risk management issues faced by the firm's private bank during the financial crisis in 2008-2009. The case provides perspective on the philosophy with which they approach risk management, issues of greatest concern, tools and processes used in practice, the benefits and limitations of quantitative models and balance between the use of models and exercising judgment, and lessons learned from the crisis about risk management.

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Harvard Management Company (2010)

Andre F. Perold and Erik Stafford
Harvard Business School Case 211-004

In February 2010, Jane Mendillo, CEO of Harvard Management Company, was reflecting on the list of issues facing Harvard University's endowment in preparation for the upcoming board meeting. The recent financial crisis had vividly highlighted several key issues including the adequacy of short-term liquidity, the effectiveness of portfolio risk management, and the balance of internal and external managers.

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The UCLA Medical Center: Kidney Transplantation

Michael E. Porter, Jennifer F. Baron, Jacob M. Chacko, and Robin Tang
Harvard Business School Case 711-410

In 2010, organ transplantation remained among the few sets of medical conditions in the U.S. for which bundled payments were a dominant reimbursement model, and for which patient health outcomes were universally measured and reported. In 1986, UCLA Medical Center was approached by Kaiser to develop a new bundled-pricing approach to kidney transplant care that was quickly adopted by many payers and providers for various transplant types. This case study examines the history and current state of care delivery, reimbursement, and measurement for the UCLA Kidney Transplant Program, among the nation's highest-volume transplant providers. The UCLA Kidney Program is an interdisciplinary unit that involves clinicians from multiple departments and engages in continuous care management throughout the often protracted transplant care cycle.

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Ganeden Biotech, Inc.

Robert C. Pozen, Dale Winger, and Matthew Ahlers
Harvard Business School Case 310-073

The CEO of Ganeden Biotech, a small firm with several viable probiotic products but limited resources, must decide what markets to invest in and what intellectual property strategies will best serve its immediate and longer-term business interests.

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Cosan: Thinking Outside the Barrel

Forest Reinhardt, Noel Maurer, and Ricardo Reisen de Pinho
Harvard Business School Case 710-017

The Cosan case introduces students and executive education participants to political economy and business strategy in the biofuels industry. Cosan, based in Brazil, is the largest grower and processor of sugarcane in the world and the largest sugar and ethanol producer in Brazil; it is also the world's largest exporter of ethanol for vehicle fuels. Rubens Ometto, Cosan's CEO, has staked out a leading position in the Brazilian ethanol and sugar industries by virtue of his efficiencies in agricultural production and in downstream logistics. He now needs to consider whether, and how aggressively, to expand abroad, either with production facilities or by exporting Brazilian output. He also needs to decide the appropriate vertical structure for the firm: whether he should be involved more extensively in agriculture, processing, distribution, or retail. The answers to these questions depend on his views of the future of the industry and on the governmental institutions that will affect the distribution of value along the value chain.

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