First Look

October 3, 2006

Computers and machinery are changing the very nature of blue-collar work, putting longshoremen and other workers in more isolated roles, and breaking down traditional work relationships. As Kathleen L. McGinn asks in a recent book chapter, "How can positive communities among workers be enhanced while work becomes progressively more asocial?" The chapter appears in Exploring Positive Relationships at Work: Building a Theoretical and Research Foundation. Other ideas and publications surfacing from Harvard Business School faculty this week include a Debora Spar-authored article in the New England Journal of Medicine (written with Fiona Murray) on stem-cell research in China, a case study of a private all-girls school in New England facing a crisis in its mission, and the story of a footwear company undergoing growing pains: Should it agree to be acquired?
— Sean Silverthorne

Working Papers

Racial Diversity Initiatives in Professional Service Firms: What Factors Differentiate Successful from Unsuccessful Initiatives?


Diversity continues to be a key focus for organizations, driven by globalization and our understanding of the benefits associated with a diverse workforce. While it is critical for managers and researchers to understand the processes and outcomes associated with diversity, much work remains to be done in this important area of scholarship. This paper proposes a qualitative research project that will examine the racial diversity initiatives of eight professional service firms in an effort to identify the organizational elements that are critical to the success of diversity initiatives and differentiate successful from less successful initiatives. A conceptual framework is proposed that highlights the process through which diversity initiatives become successful and offers insight into how organizations can more effectively recruit and retain a diverse workforce.

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Manage Resource Allocation to Craft Strategy


Research from a set of studies conducted over thirty-five years shows that actual strategy rather than words on paper at corporate is crafted step by step as company resources are committed to policies, programs, people, and facilities. In turn the process of allocating resources is distributed across all levels of the company. Those activities go on simultaneously. As a consequence, the way in which the structure divides up responsibility and the way the processes of the organization distribute information have vital consequences. Senior managers often have less control over their strategy than they think while middle managers and operating managers can have a much greater role in strategy than is generally recognized by either those managers or by top management: But the complexity of the resource allocation process only increases the need for leadership at the top. This requires a more complete understanding of the processes of the company from a strategic perspective. That understanding implies that systems cannot substitute for management in the resource allocation process.

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Cases & Course Materials

Dansko, Inc.

Harvard Business School Case 606-071

For the past eighteen months, Mandy Cabot had worried that the shoe business she had built into a thriving operation with $90 million in annual revenue and over 110 employees might instead be a "house of cards." The management philosophy that had guided Dansko's growth, "home schooling"—taking young energetic employees with little business experience and mentoring them—seemed ill-suited for the next phase of growth. Equally as precarious was the fact that with few exceptions, none of the senior management team had any prior experience in the footwear industry. So when a well-respected industry leader asked to talk about a merger, Cabot had to admit that with her "crisis of confidence," it might just be time.

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Barry Riceman at NetDetector

Harvard Business School Case 606-090

Brandon Fogg must solve two seemingly unrelated problems in his management of creative R&D professionals. First, despite having hired brilliant research professionals, his firm is having problems commercializing their ideas. Second, his most brilliant engineer has invented a breakthrough, but refuses to assign the intellectual property to the firm, despite having agreed to do so in his employment contract. Fogg must choose from a variety of options, including prosecution of a noncompete agreement.

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Time-Driven Activity-Based Costing

Harvard Business School Note 106-068

Introduces the role for time-driven activity-based costing. Identifies the value from an accurate costing model, describes the difficulties of traditional ABC, and illustrates how time-driven ABC provides a simpler and more powerful method.

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Dana Hall: Funding a Mission (A)

Harvard Business School Case 306-090

Dana Hall is a private all-girls school in New England facing a crisis in its mission. As social norms shift away from single-sex education, the school's enrollment is falling and deficits are becoming the norm. At the same time, the modern vision for girls' education requires an even greater investment in science and sports—at a time when Dana Hall's resources are lower than ever before. Can the school stay true to its mission? How will it find the funding? Through the story of Blair Jenkins, head of school, this case examines the difficult mission and funding decisions facing many nonprofit organizations.

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Cathay Pacific

Harvard Business School Case 307-009

This case explores the various aspects of information technology that can be outsourced. Cathay Pacific outsourced a significant part of its vital operations from Hong Kong to Sydney, Australia. A rewritten version from an earlier case.

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LinkedIn (A)

Harvard Business School Case 707-406

In the summer of 2005, LinkedIn, a two-year-old start-up, was choosing between two options to monetize its five million business people network. Members could contact each other through trusted intermediaries on the network to offer or seek jobs, consulting engagements, expertise, and financing. The company had outpaced its competitors by building the most populous online business network, but it had little revenue to show its investors. The first revenue option entailed keeping the existing features unchanged and rolling out a bundle of eight new services for a monthly fee of $15. These services would be targeted at network members who had forged many connections, logged in frequently, and viewed the profiles of many other members. The second proposal involved changing a basic design feature of LinkedIn by allowing members to contact each other without intermediaries for a fee. Fewer members would avail themselves of this feature, but those who did would be willing to pay as much as $5-$15 per message. This option ran a substantial risk of alienating members and would prompt some to abandon LinkedIn.

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Rwanda: National Economic Transformation

Harvard Business School Case 706-491

Set in the year 2004, when Rwanda commemorated the tenth anniversary of a genocide that had claimed the lives of over 10 percent of its population. The case focuses on the formulation of an economic strategy to rebuild the economy and its institutions after the devastation. Rwanda, one of the poorest countries in the world, highlights the challenges of economic development in Africa and in other low-income countries. Provides a brief political and economic history of Rwanda, but focuses on the country preceding and after the genocide. A description of government policies since 1994 enables discussion of the efforts of the transitional government under Bizimungu (1994-2000) and the first Kagame government (2000-2004) to restore and build the economy. Provides detailed economic and social data as of 2004, allowing evaluation of policy results. Concludes as President Kagame, now formally elected as head of state, considers an economic strategy to meet Rwanda's current challenges and increase the country's prosperity over the next decade.

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Massachusetts General Hospital and the Enbrel Royalty

Harvard Business School Case 206075

Massachusetts General Hospital is considering selling its royalty interest in Enbrel, Amgen's blockbuster drug for the treatment of rheumatoid arthritis. In assessing whether to sell, and at what price, the hospital must determine its value to a potential buyer as well as its own value of the royalty income.

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Are Hedge Fund Fees a Bargain? And Other Conundrums of Balancing Active and Passive Management


Although the breezes of change have been in evidence for a number of years, it remains true that most pensions and institutional investors maintain outsized allocations to active long-only (ALO) managers, with comparatively high fees. The question is: Why? Evidence that long-only managers are unable to outperform after fees has long been in plain view. And the economic advantages of passive index funds have been touted for over a decade, this being especially true in strong markets.

The thesis of this article is quite simple: Responsible pensions and institutional money managers should work to develop deliberate and optimal allocations to passive and highly skilled active investment vehicles, and they should eliminate commitments to structurally underperforming long-only active managers, unless the evidence of ability to generate alpha (rare) is clear, and the duration of the outperforming track record is compelling. Active hedge fund managers who aim their sights directly at alpha generation are a much better deal, as are passive index funds that secure market exposure or beta at a cheap cost (and, perhaps, a small subset of low-fee, active long-only funds that fill a similar niche). Darwin has seemingly been forgotten for decades now, but his insights should be decisively resurrected in the money management business.

History, Structure, and Practices: San Pedro Longshoremen in the Face of Change


White-collar workers increasingly rely on group interaction rather than individual expertise to generate knowledge and create innovative responses to new questions (Bechky, 2003). Blue-collar workers, in contrast, increasingly work outside the archetypal work gang and operate machinery or computers in isolation from others. As manual labor evolves to require more interaction with machines and less coordination and communication with other workers, highly valued relational aspects of blue-collar work are dwindling. How can positive communities among workers be enhanced while work becomes progressively more asocial?

My Policies or Yours: Do OECD Agricultural Policies Affect Poverty in Developing Countries?


This paper investigates the impact of rich-country agricultural support on the poor. Using non-parametric analysis we establish that the majority of poor countries are consistently net importers of food products that are heavily supported by OECD governments. Using a cross-country regression framework we measure the overall impact of agricultural support policies in rich countries on poverty and average incomes in poor countries. We find no support in the cross-country analysis for the claim that OECD polices worsen poverty in developing countries. To better understand what might drive these results, we turn to national employment and household consumption and expenditure surveys from Mexico. There are four important findings from the country case study: (1) the majority of the poorest corn farmers in Mexico report that they never sell any corn, (2) Mexico's own policies (signing NAFTA) have dramatically reduced the Mexican producer price of corn, (3) U.S. corn subsidies have had a limited impact on this price and, (4) domestic policies have largely cushioned Mexican corn farmers from the drop in corn prices. Taken together, the evidence suggests that a reduction in rich-country agricultural support that raises world food prices is likely to hurt the poorest countries but may have little impact at all on the poorest farmers within these countries.

Bit Player or Powerhouse? China and Stem-Cell Research


For more than a decade, China has been shocking the West. Although it is still poor and officially Communist, the world's most populous country has turned old convictions on their heads, emerging from decades of isolation to become a hive of high-tech manufacturing, a major diplomatic and military power, and one of the world's largest holders of U.S. securities. The subtitle of a recent book described the China phenomenon most succinctly when it promised, breathlessly, to explain "how the rise of the next superpower challenges America and the world." In the area of scientific research, by contrast, both fact and prediction are more ambiguous. On the one hand, Chinese authorities clearly have bold ambitions. President Hu Jintao has repeatedly stressed the importance of "scientific development" to China's continuing growth, and in January he vowed that "China over the next 15 years will join the list of innovative countries." The natural sciences figure prominently among the government's areas of focus, and government spending on science and technology has more than doubled since 1999. On the other hand, China remains an exceedingly poor country, with a per capita annual income of only $1,284 in 2005; hundreds of millions of Chinese peasants lack access to even the most basic medical services. China is still governed by a staunchly Communist regime, and both its industrial infrastructure and capital markets are dominated by state-owned enterprises. These are not the kinds of conditions that typically catalyze scientific advances.

Buying Our Children. Selling Our Souls? The Commodification of Children


When people choose their sperm online, when they contract with an egg broker or adoption agency, when they pay $18,000 to create a child of a particular gender, they are transacting in what feels awfully like a market.

Continuity and Change in the International Diamond Market


The international diamond cartel, which presides over the production side of the industry, may be the most successful and longest-lasting cartel in the world. The dominant company in the industry, DeBeers, has been around since 1880 and has been controlled by a single South African family, the Oppenheimers, since 1925. Eight countries produce the bulk of the world's gem diamonds, and most of the producing entities within these countries conform to a set of rules. This conformity is the product of over a century of careful planning and negotiation, in which DeBeers has undertaken largely successful efforts to control the diamond trade and maximize its long-term prospects. The past decade has seen the end of apartheid in South Africa, the fall of communism in Russia, the opening of major mines in Canada, and the emergence of a worldwide movement against so-called "blood" or "conflict" diamonds. While, these developments have pummeled the diamond industry and forced its central players—most notably DeBeers—to change the nature of their trade, these changes have not affected the core dynamic of the global diamond market. It remains an industry dominated by a single firm and an industry in which, perhaps uniquely, all of the major players understand the extent to which their long-term livelihood depends on the fate and actions of the others.