grep -nA1 '\#\@\#' ~/mba/bizcit.txt | sed '/--/ d'| sed '/#@#/ d' > bizcit.idx #@# Distilled MBA Readings Indexed by line number. Line numbers approx as shifted by inserting index. #@# 191- Managing Orgs Nadler Tushman 1982 Little Brown 0-316-596833 306- Schermerhorn Management Wiley 2002 ISBN 0-471-43470-8 762- Thry Hum Motvn AH Maslow (1943) Psychol_Rvu, 50, 370-396 842- Janis Mann Decisionmaking 1977 Free Press 0-02-916190-8 1015- Janis 11/71 GroupThink PsyToday: powerful social pressures are brought ot 1049- Reason and EMotion, Nohria & Gurtler, HBS 9-404-104 2004 Micahel Jensen [JACF 1064- Character and Situation. Nohria & Gurtler, HBS 9-404-091 2004 Both 1085- Knowldege Management, HBS 9-398-031 [Arthur Andersen 1996] All knowledge 1089- Behavioral Pricing, HBS 9-599-114, Gourville, 1999 Actively Manage Price 1096- Hierarchy of Objective, Granger, HBR 5/64 64307 objectives - . . . need not 1109- Problems of matrix organizations, Davis & Lawrence, HBR 5/78 78303 A formless 1116- Corp Cult Deal & Kennedy AW 1982 0-201-10277-3 1224- Drucker HBR 3/71 Japanese management 1243- Mintzberg Manager's Job: Folklore & fact HBR 7/75 1264- Wv Hap Take-Charge Manager Nohria & Berkley HBR 1/94 1293- Skilled incompetence Argyris HBR 9/86 1309- Teaching Smart People How to Learn, Argyris, HBR 5/91 1338- Argyris Empowerment HBR 5/98 1347- Vroom Can Leaders Learn to Lead Org Dyn 4#1 1976 1363- Drucker Practice of Management Harper & Row 1954 1496- Influence Cialdini Quill Morrow 1998 1547- Get Anyone Do Anything Lieberman 2000 wtmartins.com 0312270178 1669- Reading People, Jo-Ellan Dimitrius, Ballantine, 1999 0345425871 1765- Tom Peters Symbols Patterns Settings Org Dyn 3-22 1978 1808- Preemployment honesty testing edJones Quorum1991 ISBN 0-89930-620-9 1820- Beyond Reason, Fisher & Shapiro, Harvard Negotn Proj, Penguin, 2005 1876- Kheel, Keys to Conflict Resolution,4w8w, 2001 1924- Negotiation Advice HBS 9-905-059 2006 Rob Walker [Inc 8/03 p75] - took a 1944- Critical Moments in Negotiation HBS 9-902-163 2001 Establish initial 1952- How to Manage Your Negotiating Team. Brett, Jeanne M. 1 1983- GETTING PAST YES. Ertel dertel@vantagepartners.com Harvard Business Review; 2020- Pondy Org Conflict Adm Sci Q 12#2 9/67 [excellent lit rvu] 2073- Assael Constr Role Interorg Confl Adm Sci Q 14#4 12/69 2082- Managing Conflict at Org Interfaces, Brown, 1983 AW 0-201-00884-x 2388- Walton Interpers Peacmkg 1969 AW 0-201-08435-x 2480- Gabarro & Kotter Managing your boss HBR 1/80 2506- Wm Evan Superior-Subordinate Conflict in Research Orgs Adm Sci Q 10#1 6/65 2518- Confl Mgt in PLC Thambain Sloan Mgt Rvu 16#3 1975 2574- Managmt Rights: Made in Japan M K Chandler Columbia J Wrld Biz Winter 1966 2595- Walton & Dutton Interdep Conflict Adm Sci Q 14#1 3/69 2620- Thompson Hierarchy Speclzn & Org Conflict Adm Sci Q 5#4 3/61 2630- Argyris Personality and Organizations Harper 1957 LC 57-11116 2717- Argyris Mgt&Org Dvp 1971 MGH 07-002219-4 2745- Argyris Personality & Org Thry Revis Adm Sci Q 18#2 1973 2773- HBR 12/01 79#11 Kotter What Leaders really do 2793- Crucibles of Leadership. Bennis, Warren Thomas, Robert Harvard Business 2828- Leadership Yukl 1981 PH 0-13-527176-2 3012- Ten Fatal Flaws That Derail Leaders. Zenger, Jack 1 Folkman, Joseph 2 3025- Salancik Pfeffer Power Strategic-contingency Org DYn 1977 (5) 3-21 3052- Salancik Commitment is too easy Org Dyn 1977 (6) 62-80 3087- Salancik Pfeffer Soc Info Job Att Task Dsn Adm Sci Q 23#2 1978 3114- John Kotter Power, dependence HBR 7/77 3176- Finding Your Innovation Sweet Spot. Goldenberg, Jacob 1 Mazursky, David 2 3197- Playing Around with Brainstorming. Schrage, Harvard Business Review; Mar2001, 3223- Networked Incubators. Hansen, Morten T.^1 Chesbrough, Henry W.^1 Nohria, 3234- Getting Unusual Suspects to Solve R&D Puzzles. Lakhani, Karim R. 1 3248- Mtg Challenge of Disruptive Change Christiansen & Overdorf HBR 3/00 3273- Value Innovation. Kim, W. Chan 1 Mauborgne, Renée 2,3 Harvard Business 3287- Managing Strategic change J B Quinn Sloan Mgt Rvu Summer 80 21#4 3318- Mgg Innov: Controlled chaos J B Quinn HBR 5/86 3348- Werther Berman Vasconcellos Fut Tec Mgt Org Dyn 22(3) 1994 3387- Drucker 12 Fables Research Mgt HBR 1/63 3410- Rdgs Mgt Innovn Tushman & Moore 1982 Pitman 0-273-01786-1 3574- Tech Innov Entrpsp & Strategy J B Quinn Sloan Mgt Rvu Spring 79 20#3 3588- Maidique Entrprs Champions & Tech Innovns Sloan Mgt Rvu Winter 80 21#2 3630- Utterbach Innovn in Indu & Diffusn Tech Sci 183#4125 15feb74 3654- Brozen Invention Innovn & Imitation AER 41#2 5.51 3691- Charles W. Prather Keeping Innovation Alive After the Consultants Leave 3711- D. Bruce Merrifield Growth Strategies for the "New" Economy Research 3744- Robert W. Rycroft and Don E. Kash Steering Complex Innovation Research 3766- Gregory Alexander HOW TO (ALMOST) SCHEDULE INNOVATION Research Technology 3795- 3810- Mel Perel CORPORATE COURAGE: BREAKING THE BARRIER TO INNOVATION Research 3837- Robert Waites REINVENTING CORPORATE RESEARCH Research Technology 3861- Reorienting R&D for a horizontal future Charles Downey, Daniel Greenberg, 3871- ANTICIPATING DISRUPTIVE INNOVATION Jay Paap, Ralph Katz. Research 3934- Accelerate Radical Innovation-Now! John P Dismukes. Research Technology 3947- DEVELOPING AN EFFECTIVE STRATEGY FOR MANAGING INTELLECTUAL ASSETS John 3963- 3990- BUILDING COLLABORATIVE INNOVATION CAPABILITY Morgan Swink. Research 4012- COLLOQUIUM: Innovation and Intellectual Property Protection in the 4068- A Patent Doctrine without Bounds: The "Extended" Written Description 4116- Antitrust and Sharing Information about Product Quality Summer, 2006 73 4165- VALUING RISKY PROJECTS WITH REAL OPTIONS Scott Mathews. Research 4180- Empir Pr Contingency Vars Biz Stg Hambrick Ac Mgt J 28#4 12/85 4188- J B Quinn HBR 11/69 Tech Xfr Multinat Cos 4206- Jagdish N Sheth Model of Industrial Buyer Behavior J Mktg v37 1973 p51 4239- How Rainmaker Jeffrey Fox 2000 Hyperion 4286- 4394- Mk Stevens Your Mktg Sucks Crown3River 2005 (msco.com) 4429- Purple Cow SethGoldin.com Portfolio/Penguin 2002 4468- Competitive Marketing O'Shaughnessy 1984 Allen Unwin 0-04-658243-6 4586- Loyalty, Reicheld, HBS, 1996 [1989 hbr?] 4604- CRM Done Right. Rigby, darrell.rigby@bain.com Ledingham, 4637- The Achilles' Heel of Supply Chain Management. Raman, Ananth 1 4678- Alsop, 18 Immutble laws of Corporate Reputation WSJ/fp2004 4725- Strategy in Action Yavitz&Newman 1982 FP 0-02-934670-3 4869- Greenwald Competition Demystified Penguin Portfolio 2005 4884- Porter, Competv Strategy 1980 FP 0-02-925360-8 5057- Hardball Stalk 2004 HBS/BCG 1591391679 5177- HARDBALL INNOVATION George Stalk Jr. Research Technology Management. 5191- Alfred duPont Chandler Strategy&Structure 1962 MIT 0-262-530009-0 5316- Strategy Implementn Galbraith&Nathanson 1978 West 0-8290-0214-7 5438- Legal COntext Hostile Takeovers HBS 9-904-005 2004 disclose its 5445- Strategic Alliances HBS 9-298-047 Gompers 2001 Williamson argued that, as 5456- Leadership and the Psychology of Turnarounds. Kanter, Rosabeth Moss 1 5482- Mergers That Stick. Kanter, Rosabeth Moss 1 rkanter@hbs.edu Harvard 5502- Integration Managers: Special Leaders for Special Times. Ashkenas, Ronald 5530- Your Best M&A Strategy. Rovit, Lemire Harvard Business Review; Mar2003, 5549- Desperately seeking synergy Goold, Campbell, Source: Harvard Business 5592- Getting Offshoring Right. Aron raviaron@wharton.upenn.edu Singh 5633- The PASSIVE-AGGRESSIVE Organization. Neilson neilson_gary@bah.com 5669- BREAK FREE FROM THE PRODUCT LIFE CYCLE. Moon ymoon@hbs.edu Harvard Business 5708- Hw Biz Stg Use Guerilla Warfare Tactics Ian MacMillan JBizStg Fall 1980 5739- Corp Ideology & Stg Delgn Ian MacMillan JBizStg Wtr 83 3 5755- Hickson Hinings Lee Schneck & Pennings Strat Contingencies Theory 5770- Org Design Galbraith 1977 AW 0-201-02558-2 5832- Limits of the Learning Curve Abernathy & Wayne HBR 9/74 5854- Rothschild How Ensure Continued Growth Strat Planning J Biz Stg 1#1 1980 5867- Competitive Marketing O'Shaughnessy 1984 Allen Unwin 0-04-658243-6 5984- Ray Ad & Commnxn Management 1982 PH 0-13-015230-7 6054- Customer Oriented Apr Id Product Mkts Day Shocker J Mktg 43#4 1979 6066- Abell Strategic Windows J Mktg 42#3 1978 6078- Hambrick&MacMillan Prod Pflo & Man's Best Friend Cal Mgt Rvu 25#1 Fall 1982 6097- HBR 3/93 71#2 93204 Hamel & Prahalad Strategy as Stretch and Leverage 6109- Product Portfolio Planning HBS 9-581-107 Yip 8/82 p8 [BCG Growth:Share] 6120- Market share - key to profitability [PIMS], HBS 1/75 75103 Buzzell Gale & 6131- Successful share-building strategies, HBR 1/81 81101 Buzzell & Wiersema [PIMS] 6139- Limits of the learning curve HBR74501 9/74 Aberarnathy & Wayne Product: 6163- Impact of strategic planning on profit performance HBR74210 3/75 6172- Industrial buyer behavior HBS 9-582-117 4/89 stage in the procurement 6178- Arthur Rock [Fairchild, Apple] HBR 11/87 Strategy vs Tactics from a 6196- Top Ten Lies of Entrepreneurs HBR 1/01 Guy Kawasaki Garage.com 6219- George Jenkins [Patricof] HBR 11/89 p117 we are trying to invest in 6228- How venture capital works Zider 11/98 hbr 6246- Bootstrap Finance Amar Bhide HBR 11/92 6291- Kaplan & Stromberg J_Finance LIX 5 10/04 6300- What do Venture Capitalists do? Gorman & Sahlman, HBS 9-288-015 1987 6324- Financial Contracting: "DEALS" HBS 9-288-014 6/89 p43 deals that have 6341- Amis & Stevenson, Winning Angels, FT/PH/Pearson 2001 ISBN 0-273-64916-7 6513- Ehernfeld on Doriot HBR 5/90 6520- Done Deals [VC] Gupta HBS 2000 6583- Venture Capitalists usually take convertible preferred stock for their 6588- Alternative Financing HBS 9-384-187 1984 convertible debt or preferred 6591- Venture Capital Method HBS 9-288-006 6/89 Sahlman Forecasting future 6602- Valuation of Venture Capital Hellmann Stanford E95 3/01 A valuation method is 6609- Venture Industry HBS 9-285-096 11/85 American Research and Development 6626- Attracting Shareholders Bhide HBS 9-389-139 Since irreversible investments 6634- Private Equity Fundraising HBS 9-201-042 2007 Lerner Hardymon & Leamon 6649- IPO Process HBS 9-200-018 2001 The legal, accounting and investment banking 6653- Angel Financing HBS 9-298-083 2001 Gompers Myers and Majluf (1984) and 6671- Private Equity Securities HBS 9-200-027 Lerner & Hardymon 2001 The driver 6681- Private Equity Partnership Agreements HBS 9-294-084 Lerner & Gompers 2001 6693- Elevator Pitch HBS 9-802-222 Applegate 2001 Our business [list name] will 6709- Valuation in Private Equity HBS 9-297-050 Lerner 2002 one should attempt to 6714- Pre-Start Analysis HBS 9-386-075 Van Style 1985 Considerations.. nature of 6720- Distributions of Venture HBS 9-295-095 Lerber 1995 Venture capitalists 6734- Valuing Equity Cash Flows HBS 9-295-085 Luerman 1994 impossible to apply 6743- Start-up Strategies HBS 9-394-067 Bhide 1993 entrepreneur does only enough 6753- Deal Structure HBS 9-384-186 8/88 Understanding the business.. amount of 6762- Entrepreneurship HBS 9-384-131 8/88 strategic orientation, the commitment 6769- New Venture Planning Karl Vesper J Biz Stg 6780- Diana I. Angelis Capturing the Option Value of R&D Research Technology 6789- Prahalad & Hamel Core Competence 5/90 HBR 6801- Strategies for Declining Industries J Biz Stg 1980 1#1 p27 Harrigan 6812- Funding Growth in an Age of Austerity, Hamel & Getz HBR 7/04 Strategos.com 6845- Economic decline Hayes & Abernathy HBR 7/80 6861- MacMillan & George Corp Vent J Biz Stg 6868- Corp Venturing Zenas BLock JBizStg 3#2 fall 1982 Review of the five 6882- Commercializing Technology HBS 9-694-102 9/94 Since innovative products and 6893- Nichols/Lewent/Sci Mgt Merck HBR 1/94 6916- R N Anthony We dont have the accounting concepts we need HBR 1/87 6935- Burton Malkiel Random Walk Dn Wall St 4ed ISBN 0-393-95460-9 6990- The Moral Hazard Economy. Bernstein, Peter L. 1 Harvard Business Review; 7015- Knee Accidental Investment Banker Random 2006 7098- Geisst Deals of the Century WIley 2004 7138- Lewis Panic Norton 2009 7192- Hedging Political Risk in China. Bremmer, Ian 1 Zakaria, Fareed 2 Harvard 7227- Management Lessons from the Bust; Joseph Weber; Business Week Aug. 27, 7239- Symposium: The Going-private Phenomenon: Venture Capital Limited 7296- Symposium: The Going-private Phenomenon: Does Private Equity Create 7403- Predicting Corporate Governance Risk: Evidence from the Directors' & 7463- Pernicious Art of Securities Regulation. Anglo-American Securities 7540- Implications of the Private Securities Litigation Reform Act of 1995 for #@# Managing Orgs Nadler Tushman 1982 Little Brown 0-316-596833 p68 [Ian MacMillan] Table 2. Strategic Options: Offensive Strategies [Rothschild 1979; Hofer & Schendel 1978] Market segmentation: Whereby the competitor identidies and focuses on specific segments of the market; Product innovation: Whereby the competitor introduces new products as the major thrust of competitive direction; Service competition: Whereby the competitor enhances service as a major competitive weapon; Distribution competition: Whereby the securing of major distribution channels and superior delivery is sought; Promotion competition: Whereby the major emphasis is on promoting of product; Process innovation: Reduction of costs of manufacturing, distribution, inventory; Price competition: Whereby pricing is used as the major competitive weapon; Market diversification: New Markets are sought, either geographically or market segments which were not previously served; Related & unrelated product diversification: New Products are sought for exositing markets; Credit competition: Typres of payment, and assistance in funding of purchases by the customer, are used as a means of securing sales; Supply control competition: Securing control if critical supplies or controlling costs of supplies; Forward integration: Moving into activities down the chain; Back integration: Moving into activities up the chain; Conglomerate diversification: New products are brough to new managers p69 Table 3 Strategic Options: Defensive Strategies [Hofer & Schendel 1978] Scope reduction: Divestiture of assets and reduction of costs to a level where small select segments can be served from an appropriately small asset and cost base; Merger: With some other competitor to pool market share and thus achieve economies of scale; Sale: Ro a copany outside the industry wanting access to the market; Liquidation: Liquidating of the business altogether p99 [pp11-40 Lawler Motivation 1973 Wadsworth] Needs can be thought of as groups of outcomes that people seek.. two-level hierarchy. At the lowest level are existence and security needs; at the other level are social, esteenm, autonomy, and self-actualization needs.. higher-level needs will appear only when the lower-level ones are satisfied.. All needs except self-actualization are satiable, and as needs become satisfied they decrease in importance.. motivated by mor than one need at a given point.. until either it is satisfied or satisfaction of the lower-level need is threatened p125 [Straw from Straw & Salancik New Dir Org Beh 55-95 Wiley] However, as noted by Wortman and Brehm (1976), it is possible to integrate learned helplessness and reactance.. If a person expects to be able to control or influence outcomes.. uncontrollable events should arouse psychological reactance and the individual should be motivated to re-exert control. But if the individual comes to learn through extended helplessness training that he cannot control his environment, he will stop trying. When a person has no expectation of control.. reactance will not precede helplessness and the individual is predicted to quickly become a passive receive rof future outcomes p238 [W Warner Burke after Zaleznik HBR 1977 55(3) 67-78] Table 1. Differences Between Managers and Leaders Dimension for comparison Managers Leaders Attitudes towards goals Impersonal, reactive, Personal, active passive Conceptions of work An enabling process of Projecting ideas into images coordinating and balancing that excite people Limiting options Developing options Relations with others Prefer to work with people Prefer solitary activities Relate according to roles Relate intuitively and emphatically Senses of self Belong to their Feel separate from thei environment environment Depend on memberships, Depend on personal roles, etc, for identity mastery of events for identity p273 [article from K W Thomas, Org_Beh, Kerr, 1979, Grid, fig in turn from Kilmann & Thomas "Interpersonal conflict-handling behaviors as reflections of Jungian personality dimensions", Psychological_Reports, 1975, 37, 971-80 Fig 1] Competing Collaborating \ / < - Integrative dimension Assertiveness Compromising / \ < - Distributive Dimension Avoiding Accomodating Cooperativeness p313 Figure 7 Organizational Design Tree Heuristic [R Duncan Org_Dyn Winter 1979] Static -> Low uncertainty -> Less information needed Simple .'. Functional Organization Nature of Dynamic -> High uncertainty -> High information needed goals and .'. Mixed functional organization (lateral relations) environemnt Static -> Low uncertainty -> Low information needed Yes .'. Decentralized organization Complex (can Dynamic -> High uncertainty -> High information needed we segment the .'. Mixed decentralized organization (lateral relations) environemnt) Static -> Low uncertainty -> Low information needed No .'. Functional organization Dynamic -> High uncertainty -> High information needed .'. Mixed functional (lateral relations) p418 Exhibit 2 The Five Phases of Growth [Larry Greiner HBR 7/72] Large Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Crisis of ? Size Growth through of Crisis of RED TAPE COLLABORATION Organization Growth through Crisis of CONTROL COORDINATION Growth through Crisis of AUTONOMY DELEGATION Growth through Small Crisis of LEADERSHIP DIRECTION Growth through CREATIVITY Young Age of organization Mature p422 [Greiner] Exhibit 3 Organization Practices During Evolution in the Five Pgases of Growth Category Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Management Make & Sell Efficiency of Expansions of Consolidation Problem solving focus operations market of organization & innovation Organization Informal Centralized & Decentralized Line-staff & Matrix of teams Structure functional & geographical product groups Top Individualistic management & Directive Delegative Watchdog Participative style enterpreneurial Control Market Standards & Reports & Plans & invest- Mutual goal system results cost centers profit centers ment centers setting Management Ownership Salary & Individual Profit sharing Team reward merit bonus & stock options bonus emphasis increases #@# Schermerhorn Management Wiley 2002 ISBN 0-471-43470-8 p93 1991 Frederick W Taylor published The Principles of Scientific Management.. 1. Develop for every job a "science" that includes rules of motion, starndardizer work implements, and proper working conditions. 2. Carefully select workers with the right abilities for the job. 3. Carefully train workers to do the job and give them the proper incentives to cooperate with the job "science". 4. Support workers by carefully planning their work and by smoothing the way as they go about their jobs.. Frank and Lillian Gilbreth pioneered motion studies p94 Practical lessons from scientific management: Make results-based compensation a performance incentive; Carefully design jobs wit efficient work methods; Carefully select workers with the abilities to do these jobs; Train workers.. 1916, after a career in French industry, Henri Fayol.. 1. Foresight - to complete a plan of action for the future. 2. Organization - to provide and mobilize resources to implement the plan. 3. Command - to lead, select, and evaluate workers to get the best work toward the plan. 4. Coordination - to fit diverse efforts together, and ensure information is shared and problems solved. 5. Control - to make sure things happen according to plan and to take necessary corrective action [C3I] p96 Max Weber.. bureaucracy.. Clear division of labor: jobs are well defined, and workers become highly skilled at performing them. Clear hierarchy of authority: Authority and responsibility are well defined for each position, and each position reports to a higher-level one. Formal rules and procedures: Written guidlines direct behavior and decisions in jobs, written files are kept for historical record. Impersonality: Rules and procedures are impartially and uniformely applied with no one receiving preferential treatment. Careers are based on merit: Workers are selected and promoted on ability and performance, and managers are career employees of the organization.. "highest degree of efficiency.. calculability of results" p99 "Hawthorne effect is the tendency of persons singled out for special attention to perform as expected" [Mayo, human relations movement, compare to guniea pig or placebo effect as it is called elsewhere].. Fig 4.3 Maslow's hierarchy of human needs: Self-actualization needs - Highest level: need for self-fulfillment; to grow and use abilities to fullest and most creative extent; Esteem needs - Need for esteem in eyes of others; need for respect,prestige, recognition and self-esteem, personal sense of competence, mastery; Social needs - Need for love, affection, sense of belongingness inone's relationships with other people; Safety needs - Need for security, protection, and stability in the events of day-to-day life; Physiological needs - Most basic of all human needs; need for biological maintenance; food, water and physical well-being p101 [Theory X] lack ambition, are irresponsible, are resistant to change, and prefer to be led rather than to lead. McGregor considers such thinking inappropriate. He argues for the value of Theory Y assumptions in which the manager believes people are willing to work, are capable of self-control, are willing to accept responsibility,a re imaginative and creative, and are capable of self-direction.. either set of assumptions can create self-fulfilling prophecies.. In his book, Personality and Oranization, Argyris contrasts the management practices found in traditional and hierarchical organizations with the needs and capabilities of mature adults p104 Contingency thinking tries to match management practices with situational demands p106 Ouchi used the term "Theory Z" to describe a managemnt framework that incorporates into North American practices a variety of insights found in Japanese modesl.. [Peters & Waterman] Eigth attributes of performance excellence: Bias toward action - making decisions and making sure that things get done. Closeness to customers - knowing their needs and valuing customer satisfaction. Autonomy and entrepreneurship - supporting innovation, change, and risk taking. Productivity through people - valuing human resources as keys to quality and performance. Hands-on and value-driven - having a clear sense of organizational purpose. Sticking to the knitting - focusing resources and attention on what the organization does best. Simple form and lean staff - minimizing management levels and staff personnel. Simultaneous loose-tight properties - allowing flexibility while staying in control p107 21st-century manager must be a: Global strategist - understands interconnections among nations, cultures and economies; plans and acts with due consideration of them. Master of technology - comfortable with information technology; understands technological trends and their implications; able to use technology tobest advantage. Effective politician - understands growing complexity of government regulations and the legal environment; able to relate them with the interests of the organization/ Inspiring leader - attracts highly motivated workers and inspires them with a high-performance culture where individuals and teams can do their best work p108 Peter Drucker considers knowledge the principle resource of a competitive society. Drucker, you should recall, also cautions that knowledge constantly makes itself obsolete. In a society where knowledge workers are increasingly important, new managers must be well-educated.. Success in turbulent times comes only through continuous improvement. The new economy requires everyone to be unrelenting in efforts to develop, refine, and maintain job-relevant skills and competencies. It requires leaders with strong people skills, ones attuned to the nature of an information/service society, ones who understand the international dimensions, and ones who establish commitments to work-life balance p109 The historic Hawthorne studies suggested that work behavior is influenced by social and psychological forces and that work performance may be improved by better "human relations".. Chris Argyris pointed out that people in the workplace are adults and may react negatively when constrained by strict managment practices and rigid organizational structures p173 plan is a statement of action steps to be taken in order to accomplish the objectives.. Define your objectives.. Determine where you are.. Develop premises regarding future conditions.. Analyze and choose among action alternatives.. Implement the plan and evaluate results p176 Tips on how to manage your time: Do say "No" to requests that divert you from work you should be doing. Don't get bogged down in details that should be left to others. Do establish a system for screening telephone calls and e-mail. Don't let "drop-in" visitors use too much of your time. Do prioritize work tasks in order of importance and urgency. Don't become "calendar bound" by losing control of your schedule. Do work tasks in priority order p185 historical comparison uses past performance as a benchmark for evaluating current performance. A relative comparison uses the performance achievements of other persons, work units, or organizations as the evaluation standard. An engineering comparison uses engineered standards set scientifically through such methods as time and motion studies p187 [sidebars] A feedforward [preliminary, input, prevent, spec] control ensures that directions and resources are right before the work begins.. A concurrent [steering] control focuses on what happens during the work process.. A feedback [output, inspection] control takes place after an action is completed p190 np7.2 "Hot stove rules" of employee discipline A reprimand should be immediate; a hot stove burns the first time you touch it A reprimand should be directed toward someone's actions, not the individual's personality; a hot stove doesn't hold grudges, doesn't try to humiliate people , and doesn't accept excuses A reprimand should be consistently applied; a hot stove burns anyone who touhes it and does so every time A reprimand should be informative; a hot stove lets a person know what to do to avoid getting burned in the future - "Don't touch" A reprimand should occur in a supportive setting; a hot stove onveys warmth but with an inflexible rule - "Don't touch" A reprimand should support realistic rules; the don't-touch-a-hot stove rule isn't a power play, a whim, or an emotion of the moment; it is a necessary rule of reason p193 General Electric, for example, a Six Sigma program drives the quest for competitve advantage. This means that statistically the firm's quality performance will tolerate no more than 3.4 defects per million - a perfection rate of 99.9997 percent [1-3.4/1E-6] Three types of objectives may be sepcified in an MBA contract. Improvement.. development.. maintenance.. p194 [MBO: SMART Specific, Measurable, Achievable, Realistic Timely]] Specific.. Time-defined.. Challenging.. Measurable p205 Drucker associates this process with a set of five strategic questions: (1) What is our business mission? (2) Who are our customers? (3) What do our customers consider value? (4) WHat have been our results? (5) What is our plan? p206 np 8.1 Five strategic management tasks.. Identify organizational mission and objectives.. Assess current performance vis-a-vis mission and objectives.. Create strategic plans to accomplish purpose and objectives.. Implement the strategic plans.. Evaluate results; change strategic plans and/or implementation processes as necessary p207 According to Peter Drucker, the operating objectives of a business might include the following: Profitability.. Market share.. Human talent.. Financial health.. Cost efficiency.. Product quality.. Innovation.. Social responsibility p208 SWOT analysis of the organizational Strengths [efficiency, skill, share, financing, reputation] and Weaknesses [Outdated, obsolete, weak management] as well as the external analysis of environmental Opportunities [markets, economy, weak rivals, growth of existing market,emerging technologies] and Threats [new rivals, shortages, taste trends, regul, subst] p209 Porter. five forces model.. competitors.. entrants.. Suppliers.. Customers.. Substitutes pp211-2 [sidebars] A growth strategy involves expansion of the organization's current operations. Growth through concentration is ihin the same business area. Growth through diversification is by acquisition of or investment in new and different areas. Growth through integration is by acquiring suppliers or distributors. A retrenchment strategy involves reducing the scale of current operations. Restructuring chanegs the scale and/or mix of operations to gain efficiency and improve performance. Downsizing decreases the size of operations in the intent to become more streamlined. Divestiture sells off parts of the organization to focus on attention and resources on core business areas. In a strategic alliance organizations join together in partnership t puursue an area of mutual interest pp214 major opportunities for competitive advantage are to be found in the following areas.. Cost and quality.. Knowledge and speed.. Barriers to entry.. Financial resources.. p215 Porter.. four genenric business strategies.. Differentiation.. Cost leadership. Focused diferentiation.. Focused cost leadership p218 BCG matrix approach [?shar] "Question Marks" - poor "Stars" dominant competitive competitive position position in a growing industry in a growing industry High Recommended strategy= growth growth; add resources or retrenchment; apply resource and build the business to accomplish positive further based on market turnaround or pull back projections if outlook is poor Market Growth Rate for "Dogs" "Cash Cows" - dominant SBU Products Services poor competitive position position in a low-growth in low-growth industry Low Recommended strategy = stability or modest growth; retrenchment; divest, sell maintain benefits of eliminate resource drain strong cash flow while keeping resource investments minimum p260 advantages of a functional structure.. Economies of scale with efficient use of resources. Task assignments consistnent with expertise and training. High-quality technical problem solving. In-depth training and skill development withnin functions. Clear career paths withing functions.. disadvantages.. difficulties in pinpointing responsibilities.. chimneys.. advantages of divisional structures.. More flexibility in responding to environmental changes. Improved coordination across functional departments. p261 Clear points of responsibility for product or service delivery. Expertise focused on specific customers, products, and regions. Greater ease in changingsize by adding or deleting divisions.. disadvantages..reduce economies of scale and increase costs through the duplication of resourses.. rivalries as divisions compete for resources and attention p263 matrix structures.. Better interfunctional cooperation and problem solving. Increased flexibility in adding, removing, and/or changing operations to meet changing demands. Better customer service, since there is always a program, product or project manager informed and available to answer questions. Better performance accountability through the program, product ot project managers. Improved decsion making as problem solving takes place at the team level, where the best information is available. Improved strategic management, sinmce top managers are freed from unnecessary problem solving to focus time on strategic value.. disadvantages.. power struggles.. frustrating.. confusion.. "groupitis" p264 np10.2 Guidelines for mobilizing horizontal structures. Focus the organization around processes, not functions. Put people in charge of core processes. Decrease hierarchy and increase the use of teams. Empower people to make decisions critical to performance. Utilize information technology. Emphasize multiskilling and multiple competencies. Teach people how to work in partnership with others. Build a culture of openness, collaboratiuon, performance commitment p271 Organizations are being "streamlined" by cutting unnecessary levels of management; flatter and more horizontal structures are viewed as a competiitve advantage.. Organizations are using more cross-functional teams, task forces, and horizontal structures, and they are becoming more customer conscious; as they do so, employees often find themselves working for more than one "boss" p272 Many organizations are shifting to wider spans of control as levcels of management are eliminated and empowerment gains prominance; individuals managers are taking responsibility for larger numbers [Fayol 7 now 15] of subordinates who operate with less direct supervision p273 np10.3 Ground ruls for effective delegation: Carefully choose the person to whom you delegate. Define the responsibility; make the assignment clear. Agree on perfromance objectives and standards. Agree on a performance timetable. Give authority; allow the other person to act independently. Show trust in the other person. Provide performance support. Give performance feedback. Recognize and reinforce progress. Help when things go wrong. Dont forget your accountability for performance results p273 Managers in progressive organizations are delegating more; they are finding more ways to empower people at all levels to make more decisions affecting themselves and their work p287 np11.1 Organizational design checklist: Does the design fit well with the major problems and opportunities of the external environment? Does the design support the implementation of strrategies and the accomplishment of key operating objectives? Does the design support core technologies and allow them to be used to best advantage? Can the design handle changes in organizational size and different stages in the organizational life cycle? Does the design support and empower workers and allow their talents to be used to best advanatge? p285 fig 11.2 Bureaucratic Adaptive Organizations Organizations mechanistic designs organic designs Centralized <------ Authority -------> Decentralized Many <------ Rules and procedures ---> Few Narrow <------ Spans of control ------> Wide Specialized <--- Tasks -----> Shared Few <----- Teams and task forces -----> Many [7 v 15] Formal and impersonal <--- Coordination ---> Informal and personal p288 [sidebar] Small-batch production manufactures a variety of products crafted to fit customer specifications p289 [sidebar] continuous-process production raw materials are continuously transformed by an automated system. The technological imperative states that technology is a major influence on organizational structure. Intensive technology focuses the efforts and talents of many people to serve clients. Mediating technology links together people in a beneficial exchange of values. In long-linked technology a client moves from point to point during service delivery. In the organizational life cycle an organization passes through different stages from birth to [youth, midlife, ] maturity p293 np11.2 How to improve systems integration: Rules and procedures: Clearly specify required activities. Hierarchical referral: refer problems upward to a common superior. Planning: set targets that keep everyone headed in the same direction. Direct contact: Have subunit managers coordinate directly. Liaison roles: Assign formal coordinators to link subunits together. Task forces: Form temporary task forces to coordinate activites nd solve problems on a timetable. Teams: Form permanent teams with the authority to coordinate and solve problems over time. Matrix organization: Create a matrix structure to improve coordination n speciic programs. p292 Hammer goes further to highlight the following key words in this definition and their implications: (1) group - tasks are viewed as part of a group rather than in isolation; (2) together - everyone must share a common goal; (3) result - the focus is on what is accomplished, not on activites; (4) customer - processes serve customers and their perspectives are the ones that really ocount p294 Process value analysis.. 1. Identify the core processes. 2. Map the core processes in respect to workflows. 3. Evaluate all tasks for the core processes. 4. Search for ways to eliminate unnecessary tasks and work. 5. Search for ways to eliminate delays, errors, and misunderstandings. 6. Search for efficiencies in how work is shared and transferred among people and departments p338 np13.1 [Kouzes Posner Success 4/88] Five principles of visionary leadership - Challenge the process: Be a pioneer; encourage innovation and support people who have ideas. - Show enthusiasm: inspire others through personal enthusiasm to share a common vision. - Help others to act: Be a tem player and support the efforts and talents of others. - Set the example: Provide a consistent role model of how others can and should act. - Celebrate achievements: Bring emotion into the workplace and rally "hearts" as well as "minds" p339 [sidebars] Coercive power is the capacity to punish or withhold positive outcomes.. Legitimate power is the capacity to influence other people by virtue of formal authority.. Expert power is the capacity to influence others because of specialized knowledge. Referent power is the capacity to influence other people because of their desire to identify personally with you [and be like you] p342 np13.2 How to empower others - Get others involved in selecting their work assignments and the methods for accomplishing tasks. - Create an environment of cooperation, information sharing, discussion, and shared ownership of goals. - Encourage others to take initiative, make decisions, and use their knowledge. - When problems arise, find out what others think and let them help design the solutions. - Stay out of the way; give others the freedom to put their ideas and solutions into practice. Maintain high morale and confidence by recognizing successes and encouraging high performance. p343 Edwin Locke further identify [sic] these personal traits as being common among successful leaders. - Drive: successful leaders have high energy, display initiative, and are tenacious. - Self-confidence: Successful leaders trust themselves and have confidence in their abilities. - Creativity: Successful leaders hae the intelligence to integrate and interpret information. - Business Knowledge: Successful leaders know their industry and its technical foundations. - Motivation: Successful leaders adapt to fit the needs of followers and demands of situations. - Flexibility: Successful leaders adapt to fit the needs of followers and demands of situations. - Honesty and integrity: Successful leaders are trustworthy; they are honest, predictable, and dependable. p344 fig 13.3 Managerial styles in Blake & Mouton.. Low Concern for Production High High Country Club Team Manager Manager Focuses on building Focuses on people's needs, commitments to shared building relationships purpose Concern Middle-of-Road for Manager People Focuses on balancing work output and morale Impoverished Authority-Obedience Low Manager Manager Focuses on minimum Focuses on efficiency effort to get work done of tasks and operations p345 Matching leadership style and situation.. Fiedler's contingency.. Leader- Good Good Good Good Poor Poor Poor Poor member relation Task High High Low Low High High Low Low structure Position Strong Weak Strong Weak Strong Weak Strong Weak power Situational Very high <---------------------------------> Very low control Preferred Task oriented Relationship Task oriented leadershp styles oriented p347 fig 13.5 ..Hersey-Blanchard situational leadership.. Low <--- Task Behavior - Guidance Required ---> High High Participating - share ideas Selling - Explain decisions Relationship Followers able & Followers unable & behavior unwilling, insecure willing, confident Support Deleagating - Turn over decisions Telling - give instructions required Followers able & Followers unable & Low willing, confident unwillinf, insecure p350 fig 13.7 ..Vroom-Jago [Org_Dyn 3/73] leader-participation.. <-- Authority decision Consultative decision Group decision --> Leader Who has information/expertise? Followers No Acceptance critical for implementation Yes High Time pressure for decision making? Low p366 fig 14.2 Job Dissatisfaction Herzberg's Job Satisfaction | Two-Factor | V Principles V Influenced by Improving the motivator Influenced by Hygiene Factors factors increases Motivator Factors job satisfaction Working conditions Improving the hygiene Achievement Co-work relations factors decreases Recognition Policies and rules job disatisfaction Responsibility Supervisor Quality Work Itself Base wage, salary Advancement, Personal Growth p367 [sidebar, McClelland 1940s] Need for Achievement (nAch) is the desire to do something better, to solve problems, or to master complex tasks. Need for power (nPower) is the desire to control, influence, or be responsible for other people. Need for Affiliation (nAff) is the desire to establish and maintain good relations with people p368fig14.3 Maslow Alderfer Herzberg McClelland Higher-order Self-actualization Growth Satisfier Achievement Needs Esteem factors Power Lower-Order Social Relatedness Affiliation Needs Safety Existence Hygiene Physiological factors p371 Vroom suggests that the motivation to work depends on.. Expectancy - a person's belief that working hard will result in a desired level of task performance being achieved (this is sometimes called effort-performance expectancy ). Instrumentality - a person's belief that successful performance will be followed by rewards and other potential outcomes (this is sometimes called performance-outcome expectancy). Valence - the value a person assigns to the possible rewards and other work-related outcomes.. related to one another in multiplicative fashion p375 np14.2 Postitive Reinforcement: [Locke Goal Setting Theory] Clearly identify desired work behaviors. Maintain a diverse inventory of rewards. Inform everyone what must be done to get rewards. Recognize individual differences when allocating rewards. Follow the laws of immediate and contingent reinforcement. Punishment: Tell the person what is being done wrong. Tell the person what is being done right. Make sure the punishment matches the behavior. Administer the punishment in private. Follow the laws of immediate and contingent reinforcement. p381 Maslow's hierarchy of human needs suggests a progression from lower-order physiologial, saftey, and social needs to higher-order ego and self-actualization needs. Alderfer's ERG theory identifies existence, relatedness, and growth needs. Herzberg's two-factor theory points out the importance of both job content and job context factors in satisfying human needs. McClelland's acquired needs theory identifies the needs for achievement, affiliation, and power, all of which may influence what a person desires from work p382 Adams's equity theory recognizes that social comparisons take place when rewards are distributed in the workplace. People who feel inequitably treated are motivated to act in ways that reduce the sense of inequity; perceived negative inequity may result in someone working less hard in the future. Vroom's expectancy theory states that Motivation = Expectancy x Instrumentality x Valence. Expectancy theory encourages managers to make sure that any rewards offered for motivational purposes are both achievable and individually valued. Locke's goal-setting theory emphasizes the motivational power of goals; people tend to be highly motivated when the task goals are specific rather than ambiguous, difficult but achievable, and set through participatory means.. Reinforcement theory [B F Skinner] recognizes that human behavior is influenced by its environmental consequences. The law of effect states that behavior followed by a pleasant consequence is likely to be repeated; behavior followed by an unpleasant consequence is unlikley to be repeated. Reinforcement strategies include positive reinforcement, negative reinforcement, punishment, and extinction. Positive reinforcement works best when applied according to the laws of contingent and immediate reinforcement p426 STAGES OF TEAM DEVELOPMENT.. 1. FOrming - a stage of initial orientation and interpersonal testing. 2. Storming - a stage of conflict over tasks and working as a team. 3. Norming - a stage of consolidation around task and operating agendas. 4. Performing - a stage of teamwork and focused task performance. 5. Adjourning - a stage of task completion and disengagement. [Heinen & Jacobson Ac Mgt Rvu v1 1976 pp98-111; Tuckman Psy Bltn v63 1965 pp384-99; Tuckman & Jensen Group&Org Stud v2 1977 pp419-27] p447 fig17.2 The process of interpersonal ccommunication Noise Semantic problems Absence of feedback Improper channels Physical distractions Sender Status effects [filter] Cultural differences Receiver Encodes ----v----Message-------v----Channel--------> Decodes Intended meaning <----v--Feedback--------v-Channel--------- Perceived meaning [filter] p452 np17.2 Ten steps to good listening. 1. Stop talking. 2. Put the other person at ease. 3. Show that you want to listen. 4. Remove any potential distrctions. 5. Empathize with the other person. 6. Don't respond too quickly; be patient. 7. DOn't get mad; hold your temper. 8. Go easy on argument and criticism. 9. Ask questions. 10. Stop talking p453 fig17.2 Richness of communication channel Low Richness Postings, Memos, E-mail, Telephone, Face-to-face High Richness Impersonal <-- ---> Personal One-way, Fast e-bulletins letters voice-mail e-meetings meetings Two-way, Slow p462 fig17.5 Alternative conflict management styles High ^Accomodating or smoothing Collaboration or Problem Solving Degree of |Playing down the conflict and Searching for a solution that meets |seeking harmony among parties each other's needs Coopera- | Compromise -iveness | Bargaining for gains and losses to each party |Avoidance Competition or Authoritative Command |Denying the existence of conflict Forcing a solution to impose one's |and hiding one's true feelings will on the other party Low .--------------------------------------------------------------->High #@# Thry Hum Motvn AH Maslow (1943) Psychol_Rvu, 50, 370-396 p372 Thus it seems impossible as well as useless to make any list of fundamental physiological needs for they can come to almost any number one might wish, depending on the degree of specificity of description. We can not identify all physiological needs as homeostatic. That sexual desire, sleepiness, sheer activity and maternal behavior in animals, are homeostatic, has not yet been demonstrated. Furthermore, this list would not include the various sensory pleasures (tastes, smells, tickling, stroking) which are probably physiological and which may become the goals of motivated behavior. p373 It should be pointed out again that any of the physiological needs and the consummatory behavior involved with them serve as channels for all sorts of other needs as well. That is to say, the person who thinks he is hungry may actually be seeking more for comfort, or dependence, than for vitamins or proteins. Conversely, it is possible to satisfy the hunger need in part by other activities such as drinking water or smoking cigarettes. In other words, relatively isolable as these physiological needs are, they are not completely so p374 culture itself is an adaptive tool, one of whose main functions is to make the physiological emergencies come less and less often p375 gratification becomes as important a concept as deprivation in motivation theory, for it releases the organism from the domination of a relatively more physiological need, permitting thereby the emergence of other more social goals.. p376 If the physiological needs are relatively well gratified, there then emerges a new set of needs, which we may categorize roughly as the safety needs. p377 Another indication of the child's need for safety is his preference for some kind of undisrupted routine or rhythm. He seems to want a predictable, orderly world.. The central role of the parents and the normal family setup are indisputable. Quarreling, physical assault, separation, divorce or death within the family may be particularly terrifying p380 expression in a search for a protector, or a stronger person on whom he may depend, or perhaps, a Fuehrer.. If both the physiological and the safety needs are fairly well gratified, then there will emerge the love and affection and belongingness needs p381 All people in our society (with a few pathological exceptions) have a need or desire for a stable, firmly based, (usually) high evaluation of themselves, for self-respect, or self-esteem, and for the esteem of others. By firmly based self-esteem, we mean that which is soundly based upon real capacity, achievement and respect from others. These needs may be classified into two subsidiary sets. These are, first, the desire for strength, for achievement, for adequacy, for confidence in the face of the world, and for independence and freedom p383 clear emergence of these needs rests upon prior satisfaction of the physiological, safety, love and esteem needs p384 psychologically important if it contributes directly to satisfaction of basic needs. The less directly it so contributes, or the weaker this contribution is, the less important this act must be conceived to be from the point of view of dynamic psychology p385 This question is especially difficult because we know so little about the facts. Curiosity, exploration, desire for the facts, desire to know may certainly be observed easily enough. The fact that they often are pursued even at great cost to the individual's safety is an earnest of the partial character of our previous discussion. In addition, the writer must admit that, though he has sufficient clinical evidence to postulate the desire to know as a very strong drive in intelligent people, no data are available for unintelligent people. It may then be largely a function of relatively high intelligence.. hope of stimulating discussion and research, we shall postulate a basic desire to know p386 'psychopathic personality' is another example of permanent loss of the love needs p388 'strong' people who can easily weather disagreement or opposition, who can swim against the stream of public opinion and who can stand up for the truth at great personal cost. It is just the ones who have loved and been well loved, and who have had many deep friendships who can hold out against hatred, rejection or persecution.. may have given the impression that these five sets of needs are somehow in a step-wise, all-or-none relationships to each other. We have spoken in such terms as the following: "If one need is satisfied, then another emerges." This statement might give the false impression that a need must be satisfied 100 per cent before the next need emerges.. satisfied perhaps 85 per cent in his physiological needs, 70 per cent in his safety needs, 50 per cent in his love needs, 40 per cent in his self-esteem needs, and 10 per cent in his self-actualization needs.. needs are neither necessarily conscious nor unconscious.. Within the sphere of motivational determinants any behavior tends to be determined by several or all of the basic needs simultaneously rather than by only one of them. The latter would be more an exception than the former.. A conflict or a frustration is not necessarily pathogenic. It becomes so only when it threatens or thwarts the basic needs.. #@# Janis Mann Decisionmaking 1977 Free Press 0-02-916190-8 p22 number of critically relevant categories usually far exceeds 7+/- 2, the limits of man's capacity for processing information in immediate meory (see Miller, 1956 [63,81-97]).. ends up with an unsatisfactory suboptimizing p50 decisional conflict.. 1 The degree of stress genrated by any decisional conflict is a direct function of the goal settings that the decision maker expects to remain unsatisfied: the more goals expected to be unfulfilled and the more important the needs to which those goals correspond, the greater the stress.. 2. When a person encounters new threats or opportunities that motivate him to consider a new course of action, the degree of decisional stress is a function of the degree to which he is committed to adhere to his present course of action.. The greater the commitment to a prior decision, the greater the anticipated utilitarian losses, social disapproval and self-dispaproval from failing to continue the present course of action and hence the greater the degree of stress. 3. When decisional conflict is ssevere because each alternative poses a threat of serious risks, loss of hope about finding a better solution that the least objectionable one will lead to defensive avoidance of threat cues.. 4. In a severe decisional conflict, when threat cues are alient and the decision maker anticipates having insufficient time to find an adequate means of escaping seriou slosses, his level of stress remains extremely high and the likelihood increases that his dominant pattern of response will be hypervigilance p51 A moderate degree of stress in response to a challenging threat induces a vigiliant effort to scrutinize the alternative courses of action carefully and to work out a good solution, provided the decision maker expects to find a stafisfactory way to resolve the decison dilemma p78 Table 2 Manifestations of conflict and related symptoms of stress for each of the five basic patterns of decision making Pattern of Subjective Beliefs (Indicators of Degree of Vacillation Coping With mediating psychological conditions of Preference for Challenge specified in figure 3-2 Level of Stress Alternative.. 1. Unconflicted No serious risk from current Low: Persistently No Vacillation adherence course of action calm 2. Unconflicted Serious risk from curr.. Low.. No Vacillation change No serious risk from new course of action 3. Defensive Serious risk from current Variable.. Little or no.. avoidance Serious risk from new.. ..except.. No better solution can be found threat are salient 4. Hypervigilance Serious risk.. High.. anxiety Very high.. ..Insufficient time to search.. 5 Vigilance ..Sufficient time Moderate.. Moderate.. p130-1 eight symptoms of groupthink are: 1. an illusion of invulnerability, shared by most or all of the members, which creates excessive optimism and encourages extreme risks; 2. collective effort ot rationalize in order to discount warnings which might lead the members to reconsider their assumptions before they recommit themselves to their past policy decisions; 3. an unquestioned belief in the group's inherent morality, inclining the mebers to ignore the ethical or moral consequences of their decisions; 4. stereotyped views of rivals and enemies as too evil to warrant genuine attempts to negotiate, or as too weak or tupid to counter whatever risky attempts are made to defeat their purposes; 5 direct pressure on any member who expresses strong arguments aainst any of the groups stereotypes, illusions, or commitments, making claer that such dissent is contrary to what is expected of all loyal members; 6. self-censorship of deviations from the apparent group consensus, reflecting each member's inclination to minimize the importance of his doubts and counterarguments; 7. a shared illusion of unanimity, partly resulting from their self-censorship and augmented by the false assumption that silence implies consent; 8. the emergence of self-appointed "mindguards" - members who protect the group from adverse information that might shatter their shared complacency about the effectiveness and morality of their decisions p196-7 Figure 8 Combined Model Of Coping Patterns And Stages Of Decision Making START CHALLENGING NEGATIVE FEEDBACK OR OPPORTUNITY v STAGE 1 APPRAISING THE CHALLENGE V Q1.1 --> NO --> UNCONFLICTED ADHERENCE-> END: STAGE 3 OF ARE THE PRIOR DECISION RISKS SERIOUS IF I DON'T -> MAYBE OR YES CHANGE? v STAGE 2 SURVEYING ALTERNATIVES ,-----------> SEARCH FOR | | ANOTHER |DISCARD OF ALTERNATIVE |UNACCEPTABLE |ALTERNATIVE Q2.1 IS THIS | ALTERNATIVE | AN ACCEPTABLE | MEANS? | YES | Q2.2 ARE THE | RISKS SERIOUS | IF I CHANGE TO -> NO->UNCONFLICTED | THIS ALTERNATIVE? CHANGE -> ATTENUATED | MAYBE OR YES STAGE 3 & 4: | Q2.3 IS IT SUPERFICIAL END: WEAK | REALISTIC TO WEIGHING OF -> STAGE 5 HIGH | HOPE TO FIND -> NO ->DEFENSIVE -> ALTERNATIVES VULNERABILITY TO | A BETTER AVOIDANCE AND LITTLE UNANTICIPATED | ALTERNATIVE DELIBERATION CHALLENGES | MAYBE OR YES ABOUT | Q2.4 IS THERE COMMITMENT | SUFFICIENT TIME -> NO ->HYPERVIGILANCE-' | TO SEARCH FOR | AND EVALUATE A | BETTER ONE? | MAYBE OR YES -> VIGILANCE | Q2.5 HAVE I <-----------' | SUFFICIENTLY |- NO <-- SURVEYED THE | ALTERNATIVES? | YES <- Q3.4 STAGE 3 MIGHT A WEIGHING OF ALTERNATIVES MODIFIED -> YES ALTERNATIVE '-> FURTHER SEARCH FOR BE BETTER? EVALUATION OF CONSEQUENCES Q3.1 WHICH ALTERNATIVE IS Q3.3 CAN I BEST? RELAX THE YES REQUIREMENTS Q3.2 COULD THE '<-NO BEST ALTERNATIVE MEET THE ESSENTIAL REQUIREMENTS? -> YES STAGE 4 ^ DELIBERATING | ABOUT COMMITMENT? NO <------------- Q4.1 SHAL I ADOPT THE BEST ALTERNATIVES AND ALLOW OTHERS TO KNOW? YES END: STRONG STAGE 5 ADHERING DESPITE NEGATIVE FEEDBACK LOW VULNERABILITY TO CHALLENGES ANTICIPATING IN STAGES 1-4 p247 cognitive dissonance theorists.. degree of choice he perceives himself as having had prior to and at the time of commitment.. necessary condition for dissonance reduction is the decison maker's realization that he has made a choice freely.. able to forsee the consequences of his actions at the time he makes his decision.. preceives that he made a voluntary choice among the viable alternatives, and is responsible for the decison.. Freedom of choice.. major determinant of the consistency between a decison maker's attitudes andf actions.. forced by fear of censure to comply to group norms and standards p344 Cognitive confrontions that sensitize a person to the inconsistencies between his beliefs and his actions and make him uncomfortable about them have long been recognized as a means for challenging misconceptions, as exemplified by.. Socratic method of merely asking a person to verbalize his beliefs should be especially effective in inducing changes in the direction of internal consistency.. verbalize both of the isolated cognitions within the same conversation.. relationship between prejudiced attitudes and certain mechanisms of ego defense.. scapegoating, projection.. presents a case history of a.. similar in age and background p345 asked to state his position on a controversial issue.. arouse feeling of self-disatisfaction by emphasizing the inconsistencies. self-centered values, and implicit hypocisy.. "awareness-of rationalizations".. induced to acknowledge his tendency to make use of certain rationalizations for continuing potentially dangerous activity..given information refuting each rationalization, he will be less likely to use those rationalizations p407 The Balance Sheet grid [+ - columns] 1. Tangible gains + and losses - for SELF 2. Tangible gains + and losses - for OTHERS 3. Self-approval + or self-disapproval - 4. Social approval + or disapproval - #@# Janis 11/71 GroupThink PsyToday: powerful social pressures are brought ot bear by the members of a cohesive group whenever a dissident begins to voice his objections to a group consensus.. shared illusions.. Nor are they inclined to raise ethical issues that carry the implication that this fine group of ours, with its humanitarianism and its high-minded principles, might be capable of adopting a course of action that is inhumane and immoral.. Groupthink involves nondeliberate suppression of critical toughts as a result of internalization of the group's nroms.. The more amiability and espirit de corps there is among the members of a policy-making ingroup, the greater the danger that independent critical thinking will be replaced.. share an illusion of invulnerability.. ignore warnings; they also collectively construct rationalizations in order to discount warnings, and other forms of negative feedback.. believe inquestioningly in the inherent morlity of their ingroup; this belief inclines the members to ignore the ethical or moral consequences of their decisions.. Victims of groupthink hold stereotypes views of the leaders of enemy groups.. apply direct pressure to any individual who momentarily expresses doubts about any of the group's shared illusions.. keep silent about their misgivings and even minimize to themselves the importance of their doubts.. share an illusion of unanimity.. appoint themselves as mindguards to protct the leader and fellow members from adverse information that might break the complacency.. recommendations.. assign the role of critical evaluator to each.. When the key members of a hierarchy assign a policy-planning mission to any group withing their organization, they should adopt an impartial stance instead of stating preferences and expectations.. routinely should set up several outside policy-planning and evaluation groups to work on the same policy question.. require aeach member to discuss the group's deliberations with associates.. report back their reactions to the group.. outside experts.. staggered basis.. devil's advocate.. survey of all warning sugnals from the rivals and should write alternative scenarios on the rival's intentions.. divide into two or more subgroups to meet separately.. then come back together to hammer out differences.. "second-chance" meeting at which every member expresses as vividly as he can all his residual doubts #@# Reason and EMotion, Nohria & Gurtler, HBS 9-404-104 2004 Micahel Jensen [JACF 1994], for instance, argues that human beings are properly understood as REMMs: Resourceful, Evaluative, and Maximizing model.. behavioral economics.. Framing Effects.. how the alternative[sic] are presented.. Human beings tend to quickly latch on to readily available information or any available anchor to characterize their options.. human beings attach much greater value to immediate gains, as opposed to longer-term gains.. Thus despite our best efforts to be unbiased, we should be vigilant to how our in-group and self-serving biases may creep.. wary of actions and situations that generate emotions that may lead people to act impulsively or lose sef-control (eg, greed, hubris, anger, revenge, fear). Instead they should promote emotions that encourage deliberation adn self-control (eg, feelings of responsibility, accountability, and care)[Russell & Barrett JPSP 1999 76#5 p808] #@# Character and Situation. Nohria & Gurtler, HBS 9-404-091 2004 Both COnfucius and Aristotle held that the extent to whch character traits are internalized tends to obviate the need for conscious decision processes in many cases.. Three factors were found to influence the results of the Milgram experiments in a significant way: the "strength" or status of the individual giving the orders (subjects were less likely to obey the orders of someone who did not appear official), the immediacy (in space or time) of the experimenterand their target (subjects were lesss liley to obey orders if hey had direct contact with the victim), and the relative number of people exerting force in the situation (they were less lilely to obey of they were in a group taking orders from an individual). TIme and task pressures have also been found to lead to unreflective obedience to authority.. People do not work as hard in groups as they work alone.. Kitty Genovese.. Similar example of inaction or bystander behavior have been observed in numerous other real life and experimental conditions.. People also tend to adjust their beliefs to confirm to those of their peers or associates.. emotions are quite literally contagious.. Research has shown that negative emorions are more intense than positive ones. Most lilely this is as a result if a biologically innate survival mechanism - which enable humans to pick up on anxiety and other moods that might signal conflict or danger #@# Knowldege Management, HBS 9-398-031 [Arthur Andersen 1996] All knowledge managers.. should: Know their community.. Design the context.. Oversee the content.. Support the infrastructure.. ENhance the sharing process #@# Behavioral Pricing, HBS 9-599-114, Gourville, 1999 Actively Manage Price Expectations.. Establish credible reference prices.. Manage product price trents.. Encourage favorable comparisons.. Avoid unfavorable comparison through product differentiation.. Actively Manage Perceptions of Cost of Good Sold.. Focus attention of fully-loaded cost of good sold.. Bundle products to obscure cost of goods sold.. Focus attention of customer value #@# Hierarchy of Objective, Granger, HBR 5/64 64307 objectives - . . . need not begin with the braod grand design of the enterprise, but all objectives in the hierarchy should be consistent with it; . . . should make the people in the enterprise reach a bit; . . . should be realistic in terms of (a) the internal resources of the enterprise, and (b) the externam opportunities, threats, and constraints; . . . should take into account the creative conception of a range of alternatives and the relative effectiveness of each; . . . should be known to each person so that he understands the goals of his own work and how they relate to the broader objectives of the total enterpise; . . . should be periodically reconsidered and redefined, not only to take accout of changing conditions, but for the salutary effect of rethinking the aims of organizational activities #@# Problems of matrix organizations, Davis & Lawrence, HBR 5/78 78303 A formless state of confusion where people do not recognize a "boss" to whome they feel responsible.. Managers jockey for power in many organization, but a matrix design almost encourages them to do so.. As executives develop greater confidence witht he matrix form, they bring the dotted line relationship out of the closet, and grant it legitimacy #@# Corp Cult Deal & Kennedy AW 1982 0-201-10277-3 p39-41 Heroes.. Making Success Attainable and Human.. Providing Role Models.. Symbolizing the Company to the Outside World.. Preserving What Makes the Company Special.. Setting the Standard of Performance.. Motivating Employees p48 Some of the most successful companies in America believe so strongly in heroes that they regularly and subtly make them.. Watson was a visionary hero for IBM; his salesperson of the month was a situational hero..charge out of the foxhole before everyone else are not heroes, they're csaualties [cf Turks in Korea] p50-2 Hundred Percent Club.. IBM deliberately sets their sales quotas so roughly 80 percent of the force makes the club.. motorcycle inside the research center.. roaring down the [IBM] corridors.. extremely good.. lightening rod for releasing people's tension.. scientists like hime because he was a lunatic.. Outlwas are eccentric but highly competent.. violators of cultural norms.. keep the company evolving.. In a weak culture, however, mavericks can't identify with the culture's vague or contradictory values and so they turn against those value and become whistle blowers.. second type of "made" hero is the compass-hero.. role models for change p66 "This is awful, do it again.".. "This is worse that the first version; can't you do better?".. third rewrite.. "It may not be good enough and I'm sorry for wasting your time. But this is the best I can possibly do on this subject. I'm sorry it took so long." In response came Kissinger's note: "I'll read it now" [Winston Lord] p69 most managers today would be very reluctant to admit that their cherished procedures are no more nor less than rituals p76 By dictating which individuals spend how much time on what process, senior management knows that it is continuing to control the company. It will influence what middle management talks about, what it thinks about, and the homewoek it will be doing. These rituals become powerful levers that top management can pull to maintain its control p87-93 informal system of checks and balances to gather and disseminate information.. STORYTELLERS.. PRIESTS.. worriers.. guardians of the culture's values.. WHISPERERS.. powers behind the throne.. GOSSIPS.. troubadors.. SECRETERIAL.. observant.. SPIES.. liked and have access to many p95 Dutch Admirals's Paradigm.. two junior officers.. made a pact.. go out of their way to tell people what a great guy the other guy was.. revealed this pact.. day they were both made admirals.. youngest ever p101-2 cultivating a network.. each person with whom you come in contact with deference you would reserve for the CEO..Ask people to explain the meaning of what you have seen. Ask them about histoy.. Ask each contact for the names of others to talk to.. storytellers, cultivate a special relationship with them p103 network to work for the bulk of their communications with the poeple in the organization p107 tough-guy macho culture.. take high risks and get quick feedback p108 work hard/play hard culture. Fun and action.. few risks, all with quick feedback.. bet-your-company culture.. big-stakes.. high-risk, slow-feedback.. process culture.. little or no feedback.. hard to measure what they do; instead they concentrate on how it's done.. bureaucracy p108-111 Tough-Guy.. Police.. surgeons.. consulting.. venture.. entertainment.. speed, not endurance.. best the most senior.. tolerate all-or-nothing.. rituals.. wax poetic.. "problem-solving" or "strategizing".. slow the work routine.. sense of safety.. rituals become superstitions p113-6 Work Hard..sales.. real estate.. stays in the field and gets closely involved with the customer's problems.. super salespeople.. energetic games.. singing the IBM song.. Language.. Volume can displace quality.. lack of thoughtfulness or attention.. short-term p116-9 Bet.. drilling rig.. Aircraft.. smelting.. investment.. architectural..risk the future of the entire company.. character and confidence tha can carry them through the waiting.. Immaturity is not tolerated.. never know whether they are right or wrong p119-123 Process.. government.. regulated.. no idea how effective they are until someone blames.. "cover your ass".. trivial event becomes the subject for a memo.. prove they didn't make the mistake, should someone mention it five years from now.. protect the system's integrity more than their own.. orderly, punctual, attend to detail, and survive on their memories.. carry out the procedures as they ar written down without asking whether they make sense in the real world.. real world ceases to exist.. assistant does most of the work and is loved by all.. lack of identifiable succes.. tightly structured hierarcies come very close to a class system.. No one can say they really like an efficient administrator p123-5 Tough.. "in fashion".. Workers.. avoid extremes.. Bettors aand process.. conserative.. coincide with their rank.. tough.. receptionist harly pays any attention.. wait.. worker/player.. meet you at the door, slap you on the back.. bettor and process.. elaborate sign-in.. Tough guys score points off one another; worker/players drink together; bettors mentor each other; process people discuss memos p135-9 Signs of a Culture in Trouble.. no clear values.. cannot agree.. heores of the culture are destructive.. contradictory.. stop paying attention to what is going on in the real world.. Short-term focus.. Morale Problems.. Fragmentation/Inconsistency.. Emotional outbursts.. exclusive.. subculture values preempt shared company values p146-150 Macho managers back the stars.. rushed off independently to solve the problem.. manager's job, then, is to force a consensus.. WOrker/player managers take advantage of the frenetic place.. task-force.. Deadlines, of course, would be tight, since energy is the engine.. Bettors.. every issue is considered from every possible angle.. Process. good chance that the problem won't be noticed..allow the process to manage itself.. Tough-guy cultures have a difficult time marshalling their forces.. Work/play.. potential for superficiality.. Bettor cultures have a hard time moving very quickly.. Process cultures can be stymied by any major change p153 Encourage each subculture to enrich its own culturals life.. Try to focus subcultures and cabals on understanding the problems of the other.. Point out how the overall culture is richer because of the strength of the subculture p175-6 Change.. Position a hero in charge of the process.. Recognize a real threat from outside.. Make transition rituals the pivotal elements of change.. Provide transistion training in new values and behavior patterns.. Bring in outside shamans.. Build tangible symbols of the new directions.. Insist on the importance of security in transition.. jobs p184 people are more effective when they are in control.. Peer-group pressjure is widely believed to be the single strongest motivating factor.. Strong cultures are more easily built in smaller units.. computer and communication links that bond individual units into corporations will be far cheaper than the layers of middle management.. Atomization #@# Drucker HBR 3/71 Japanese management p111 The Japanese, we are told, debate a proposed decision throughout the organization until there is agreement on it. And only then do they make the decision p112 The Japanese, by contrast, need to spend absolutely no time on "selling" a decision. Everybody has been presold p116 Our training is promotion-focused; the Japanese training is performance-focused p118 Still, it is not really true, as Japanese [and Steppes Mongolian] official doctrine asserts, that "men are freely moved from job to job within a plant" p119 It is still almost unheard of for a young man to take a job in another company except with the express permission of his previous employer p120 In other words, godfathers are people who know, having been passed over at age 45 for the top management spots, that they are not going to "make it" in their organizations. Therefore, they are not likely to build factions of their own or to play internal politics. At the same time, they are the most highly respected members of the upper-middle management group #@# Mintzberg Manager's Job: Folklore & fact HBR 7/75 p49 plans, organizes, coordinates and controls.. these four words, which have domionated management vocabulary since the French industrialist Henri Fayol first introduced them in 1916, tell us little about what managers actually do p50 unrelenting pace, that their activities are characterized by brevity, variety, and discontinuity, and that they are strongly oriented to action and dislike reflective activity p51 performing a number of regular duties, including ritual and ceremony, negotiations, and processing of soft information that links the organization with its environment p52 giant MIS systems are not working.. Managers strongly favor the verbal media - namely, telephone calls and meetings.. manager's extensive use of verbal media helps explain why he is reluctant to delegate p53 The manager's programs - to schedule time, process information, make decisions, and so on - remain locked deep inside their brains p55 [Exhibit I] the Manager's roles: Formal authority and status -> Interpersonal roles (Figurehead, Leader, Liaison) -> Informational roles (Monitor, Disseminator, Spokesman) -> Decisional roles (Entrepreneur, Disturbance handler, Resource allocator, Negotiator) #@# Wv Hap Take-Charge Manager Nohria & Berkley HBR 1/94 p129 The widespread adoption of trendy management techniques during the 1980s allowed managers to rely on ready-made answers instead of searching for creative solutions p131 TQM programs are derided for their incremental nature, while reengineering is championed as the key to achieving "breakthrough" performance. THe half-life of such ideas is becoming so short that we find managers shifting abruptly from one idea tot he next. Employees wise up tot he syndrome very quickly. Experience teaches them not to get terribly enthused about any new idea.. Every managerial situation, we believe, demands a pragmatic attitude. For purposes of discussion, we can divide this approach into four general components: sensitivity to context, willingness to make do, focus on outcomes, and openness to uncertainty p132 public setting also forced reticent managers to faceup to pressures for change. Welch insisted that managers give on-the-spot responses to employee proposals. Nothing was considered sacred.. Willingness to Make Do.. We call this aprect of pragmatism bricolage, a word French anthropologist Claude Levi-Strauss used to describe the thought processes of primitive societies p133 reason inductively.. play with possibilities and use available resources to find workable solutions. THey tinket with systems and variables, constantly on the lookout for improved configurations.. When a bricoleur is making do, solutions are never fixed or final p134 Focus on Outcomes p135 People become caught up in the novelty [instead of outcomes] p136 Openness to uncertainty.. To quote economist Kenneth Arrow, in many situations, "we must simply act, fully knowing our ignorance of possible consequences".. Pragmatists understand that iti is unrealistic to try to avoid uncertainty #@# Skilled incompetence Argyris HBR 9/86 p74 By adeptly avoiding conflict with coworkers, some executives eventually wreak organizational havoc.. practiced routine behavior (skill) to produce what they do not intend (incompetence) p77-8 1. In one paragraph describe a key organizational problem as you see it. 2. In attacking the problem, assume you could talk to whomever you wish. Descirbe, in a paragraph or so, the strategy you would use in this meeting. 3. Next, split your page into two columns. On the right-hand side, write how you would begin the meeting: what you would actually say. Then write what you would believe the other(s) would say. Then write you response to their response. Continue writing this scenario for two or so double-spaced typewritten pages. 4. In the left-hand column write any of your ideas or feelings that you would not communicate for whatever reason.. In analyzing their left-hand columns, the executives found that each side blamed the other for difficulties, and they used the same reasons #@# Teaching Smart People How to Learn, Argyris, HBR 5/91 p101 react defensively. They projected the blam for any problems away from themselves and onto what they said were unclear goals, insensitive and unfair leaders, and stupid clients p103 One of the paradoxes of human behavior, however, is that the master program people actually use is rarely the one they think they use.. remain in unilateral control.. maximize "winning" and minimize "losing".. supress negative feelings.. be as "rational" as possible.. Defensie reasoning encourages individuals to keep private the premises, inferences, and conclusions that shape their behavior and to avoid testing them in a truly independent and objective fashion.. short-circuits learning p104 People who rarely experience failure, however, end up not knowing how to deal with it effectively p105 professionals seemed to hold management to a different level of performanc that they held themselves p106 [defensive reasoning:] 1. When criticising the company state your criticism in ways that you believe are valid - but also in ways that prevent others from deciding for themselves whether your claim to validity is correct. 2. When asked to illustrate your criticisms, don't include any data that others could use to decide for themselves whether the illustrations are valid. 3. State your conclusions in ways that isguise their logical implications. If others point out these implications to you, deny them.. Until senior managers become aware of how they reason defensively and the counterproductive consequences that result, there will be little real progess. Any change activity is likely to be just a fad p108 And in turn, everyone would have understood that act of questioning not as a sign of mistrust or an invasion of privacy but as a valuable opportunity for learning #@# Argyris Empowerment HBR 5/98 p101 executives do not always seem to want what they say they need p104 Empowerment too often enters the realm of political correctness, which means that no one can say what he or she is thinking.. if you challenge the change agent, you become an enemy of change p105 Calculate factors such as morale, satisfaction, and even commitment into your human relations policies, but do not make them the ultimate criteria. They are penultimate. The ultimate goal is performance. #@# Vroom Can Leaders Learn to Lead Org Dyn 4#1 1976 p17 I share with Fiedler (and probably disagree with Argyris) a conviction that a contingency model is required p20 neither universally autocratic nor universally participative but utilizes either approach in response to the demands of a situation as he perceives them. Above all, he is a flexible leader who has thought through his values and who has a repertoire of skills necessary to execute effectively each of the decision processes p26 I am persuaded by Argyris's evidence that many people are unaware of discrepancies between their espoused theories and their actions. Small groups are helpful in pointing out these discrepancies p28 In short, like Argyris and unlike Fiedler, I believe that managers can learn to become more effective leaders. But like Fiedler (and unlike Argyris), I believe that such effetciveness requires matching of one's leadership style to the demands of the situation #@# Drucker Practice of Management Harper & Row 1954 p63 There are eight reas in which objectives of performancs and results have to be set: Market standing; innovation; productivity; physical and financial resources; profitability; manager performance and development; worker performance and attitude; public responsibility p105 Unique-product production has high costs for the individual product but great flexibility in the plant. Mass production "new style" has the ability to supply wants cheaply and within a wide and flexible range of products. But it requires much higher capital investment than unique-product production and a much higher level of continuous activity; it involves inventory risks; it needs a distributive organization that can sell continuously rather than one that goes after a specialized, individual order. Process production requires the highest capital investment - in absolute dollars - and the most nearly continuous operation.. Under the unique-product system the time-span of decisions is short. Under mass production it becomes longer p107 I have learned to be extremely skeptical of any prediction of imminent revolution or of sweeping changes in technology or business organization p127 The objectives of every manager should spell out his contribution to the attainment of company goals in all areas of the businees.. This is necessary both to give full scope to the craftsmanship of each function and specialty, and to prevent empire-building and clannish jealousies of the various functions and specialties. It is necessary also to avoid overemphasis on any one key area p129 To "give him a sense of participation" (to use a pet phrase of the "human relations" jargon) is not enough. Being a manager demands the assumption of a genuine responsibility.. must be a "meeting of minds" within the entire management of each unit p131 To be able to control his own performance a manager needs to know more that what his goals are. He must be able to measure his performance and results against the goal p135 At least once every five years every form should be put on trial for its life p136 establish team work and harminize the goalsof the individual with the common weal. The only priniple that can do this is management by objectives and self-control. It makes the common weal the aim of every manager. It substitutes control from outside the stricter,more exacting and more efficient control from the inside. It motivates the manager to action not becausesomeone tells him to do something or talks him into doing it, but because the objective needs of his taks demand it. He acts not because somebody wants him to - he acts in other words, as a free man p150 Appraisals must be based on performance. Appraisal is judgement; and judgement walways requires a definite standard.. Not only are few of us reliable judges of a man; nothing, also, may change as much as potential. THe world is full of men whose youthful promise of excellence has turned into middle-aged mediocrity p187 No amount of activity will develop tomorrow's managers in a functionally centralized organization; all that is likely to produce are tomorrow's specialists. Conversely, genuine federal decentralization will develop, train, and test a fair number of managers for tomorrow without any additional manager-development activity as such p199 A decision should always be made at the lowest possible level and close to the scene of action as possible. Moreover, a decision should always be made at a level insuring that all activities and objectives affected are fully considered p205 It must whenever possible integrate activites on the principle of federal decentralization, which organizes activites into autonomous product business each with its own market and product and with its own profit and loss responsibility. Where this is not possible it must use functional decentralization, which sets up integrated units with maximum responsibility for a major and distinct stage in the business process p208 Yet the functional specialist may become so narrow in his vision, his skills and his loyalties as to be totally unfit for general management p213 There is, however, one requirement that must be satisfied if federal decentralization is to result. The managerial unti must contribute a profit to the company rather than merely contribute to the profit of the company. Its profit or loss should directly become company profit or loss. In fact, the company's total profit must be the sum total of the profits - not arrived at by manipulating accounting figures, but determined by the objective and final judgement of the market place p243 The root of the trouble is the concept of staff-and-line. The root of the trouble is the belief that there is such a thing as staff functions. There are only management functions, either running a business, managing a business-producing function or manageing a supply function. Above all, service work does not belong in top managment. It does not belong in the central office. For service work does not affect the business as a whole - it only deals with techniques and tools. Since service work is s help to operating managers, it should be organized as the tool of operating managers p249 Growth always requires new and different competence in top managment. It requires that top managment realize that its own function is no longer to know what goes on in the plant or in the regional sales offices. It is important indeed for top management to learn that the problem of size cannot be met by trying to keep in communication with managers and employees as far down as possible - that is neither required nor even desirable p266 Finally, man is distinguished from all other resources in that his "development" is not something that is done to him; it is not another or better way of using existing properties. It is growth; and growth is always from within p272 To assume that people do not want to work would make the job of managing worker and work totally hopeless. THe task facing management therefore is to reach the worker's motivation and to enlist his participation, to moblize the worker's desire to work. What basic concepts, what tools, and what experience do we have for this task? p288 Technological changes will force new thinking, new experimentation, new methods. And there are signs that the process has already begun. The relationship between a man and the kind of work he does, which traditional Human-Relations thinking pushed aside as almost irrelevant, is now being studied by men close tot he Human-Relations school. [cites Walker & Guest] The problem of the human resource, rather than on the assumption of man as a badly designed machine tool, is being given serious attention by men of standing in Scientific Management [cites Juran!] p306 The worker should be enabled to control, measure and guide his own performance. He should know how he is doing without being told. THe rules for procedures and information that apply to managers apply to workers as well p328 If it be argued that, in the guise of making it manageable and meaningful, I propose to abolish the "supervisor's job," I would answer that this is indeed my intention. What the enterprise needs to obtain peak performance from the worker is a manager instead of a supervisor p345 Setting objectives, organizing, motivating and communicating, measuring and developing people are formal, classifying categories. Only a manager's experience can bring them to life pp372-3 We can summarize by saying that the new demads require that the manager of tomorrow acquit himself of seven new tasks: 1. He must manage by objectives. 2. He must take more risks and for a longer period ahead. And risk-taking decisions will have to be made at lower levels in the organization. The manager must therefore be able to calculate each risk.. 3. He must be able to make strategic decisions. 4. He must be bale to build an integrated team each member of which is capable of managing and of measuring his own performance and results in relation to the common objectives.. 5. He will have to be able to communicate information fast and clearly. He will have to be able to motivate people. He must, in other owrds, be able to obtain the responsible participation o fother managers, of the professional specialists and of all other owrkers. 6. Traditionally a manager has been expected to know one or more functions. THis will no longer be enough. The manager of tomorrow must be able to see the business as a whole and to integrate his function with it. 7. Traditionally a manager has been expected to know a few products or one industry. This, too, will nolonger be enough. The manager of tomorrow will have to be able to relate his product and industry to the total environment, to find what is significant in it and to take it into acocunt in his decisions and actions.. integrate world-wide trends into his decisions #@# Influence Cialdini Quill Morrow 1998 p12 estimate the second object to be heavier than if we lifted it without first trying the light one. The contrast principle is well established in the field of psychophysics and applies to all sorts of perceptions besides weight.. Even though both hands are in the same bucket, the hand that has been in the cold water feels as if it is now in hot p13 sell the costly item first p18 Richard Leakey escribes the essence of what makes us humn to the reciprocity system: "We are human becase our ancestors learned to share their food and their skills in an honored network of obligation".. widely shared and strongly heldfeeling of future obligation.. result was the lowering of the natural inhibitions against transactions that must be begun by one person's providing personal resources to another p19 rule for reciprocation is so deeply implanted in us by the process of socialization.. against all countervailing forces, obligation triumphed p65 They undersupply the stores with the toys they've gotten the parents to promise.. forced to substitute other toys.. [but later] adults go trudging off to the store to live up dutifully to their words p67 you to make a commitment.. your automatic and ill-considered consistency wit that earlier commitment p118 Sales and motivation consultant Cavett Robert captures the principle nicely in his advice to sales trainees: "Since 95 percent of the people are imitators and only 5 percent initiators, people are persuaded more by the actions of others by any proff we can offer".. principle of social proof p132 [Kitty] Genovese incient.. no one had helped precisely because there were so many observers.. someone else will help or has helped, no one does..pluralistic ignorance effect p133 In times of such uncertainty, the natural tendency is to look around at the actions of others for clues. We can learn from the way the other witnesses are reacting, whether the event is or is not an emergency.. pluralistic ignorance "in which each person decides that since nobody is concerned, nothing is wrong" p204 factors leading to liking - physical attractiveness, familiarity, association.. vigilance should be directed not otward the things tha may produce undue liking for a compliance practitioner [eg salesman], but toward the fact that undue liking has been produced. The time to act protectively is when we feel ourselves liking the practitioner more than we should under the circumstances By concentrating out attention on the effect rather than the causes, we can avoid the laborious, nearly impossible task of trying to detect and deflect p205 The stronger the force, the more conspicuous it becomes and, consequently, the more subject to our alerted defenses.. unwarranted liking should be enough to get us to react p213 deep-seated sense of duty to authority with us all. According to Milgram, the real culprit in the [electrocute the other subject] experiments was his subject's inability to defy the wishes of the boss of the study [Milgram j Abn Soc Psy 67 (1963) 371-78] p232 assure us of their sincerity: They will seem to argue to a degree against their own interests. Correctly done, this can be a subtly effective device for proving their honesty #@# Get Anyone Do Anything Lieberman 2000 wtmartins.com 0312270178 p27 People want what they can't have and they want more of what they have to work for.. Introduce an element of uncertainty to instantly reignite the passion.. Make her feel good and she will feel good about you p37-381 If She's A True Friend.. Tell her about something significant that is going on in your life and see if she calls to follow up and find out what happened.. Tell a secret about a mutual friend and see if it gets back to him.. lots of people who are willing to "cheer us up" when things aren't doing well. But it's more difficult to find someone who will congratulate us when things are going well.. Does she tell you things for your benfit even though she knows that it might make you upset with her.. If she "must know" then she's just interested in gossip and not in you. A good friend will respect your wishes and give you space.. Is she willingto give up something if it means making you happy.. Is the word compromise in her vocabulary p42 powerful manipulators are: guilt, intimidation, appeal to ego, fear, curiosity, our desire to be liked, and love p45 If he is sincere in his stance that he will leave if he doesn't get his way, then he will appear almost reluctant and not overly confident in his stance because he's not pleased that it has come down to this.. It's the insecure who has to tell you how confident he is because that's the only way that we're going to find out p49 Ask a question that does not accuse the person of anything but rather alludes to it p52 Just get her to commit to liking the idea, person, or object. Then simply ask her how she thinks that it can be improved p60 narrow a person's options to avoid extensive deliberation.. Give a deadline for taking action.. Engage the law of consistency by first having and individual commit to a smaller request.. reducing whatyou want to do in simple, easy-to-follow steps p64 when we feel our freedom is being restricted or limited we tend to move further toward what is being limited.. Ninety percent of the decisions we make are based on emotion.. Offer a specific game plan with a clear-cut course of action.. how your idea will prevent negative or unpleasant consequences.. remind him how he is in some way the one who first gave you the idea. Let him know too that this new way of thinking is really consistent with who he is p78 align yourself with a greater and more important value to which this person holds p79-80 her agreeing to take the chance. Again, if at this point she absolutely refuses, then you know that there is no way that she is likely to comply.. reluctant to change her mind without any new information because she will think of herself as inconsistent.. Adopt a two-sides argument to increase your cerdibility, being sure to present the evidence to support your position first p87-8 not preoccupied with something else.. reciprocity by doing something for him.. personal responsibility.. no one else to turn to.. (a) specifically what you want, (b) how he will in some way feel good about doing you the favor, and (c) the relative ease with which he can accomplish the task. If your situation is due to your incompetence, you will generate apathy, not sympathy. Focus on any elements of your predicament that were not your own doing. Reshape his self-concept to include the idea that helping you is something consistent with who he is. Knowing others "did the right thing" invokes an unconscious desire to do the same. Have him witness or simply tell him about those who have helped in similar situations. Studies conclude that if she feels theatened by your success you will not get her cooperation.. keep asking. Many times people just say no because it's easy and they're used to it p92 remain one of the crowd. Humility is one of the most powerful character traits for effective leadership.. vision must be clear, simple, and organized.. Overly passionate leaders are believable but few people want to follow them. Never yell or publicly chastise.. charisma by making others feel important p95 overview before going into the details. This puts the new information into an understandable context. Use the law of expectation. Simply stating that you expect this information will be understood quickly and easily greatly increases comprehension and retention pp98-9 consistent in the opposition to majority.. avoid appearing rigid and dogmatic.. Divide and conquer.. additional information.. social proof by finding other people, outside your group, who share your view p100 When your mind has nothing to focus on it divides against itself and creates a breeding ground for worries and anxieties. Yet once you get a clearly defined outside goal that you are passionate about these divisions cease p110 Never do anything out of fear. If you need to win then you will lose. You must only focus on the game, not the outcome p117 Human beings have an inherent curiosity, and by not making your message clear, it forces the person you/re trying to reach to clarify what it's about [and call back] p125 apology should be sincere and specific. Let the person who that you are prepared to face and accept any consequences for your actions.. restore her sense of power p132 Present the situation when possible (or aspects of it) as temporary, isolated, and insignificant. Use the law of contrast and comparison by illustrating how it could have been worse than it actually turned out p136 When you turn down the favor (that's being asked of you) ask for a favor from that person right after you say no to his request. By asking a favor of him that he can't come through on, you've in effect canceled your debt as soon as he declines your request p140 Tell a third party that you genuinely like, admire, and/or respect this person.. showing an interest in her you will get her to like you faster than if you spent all day trying to get her interested in you. Talk about those things that you share and have in common.. likes you based on how you make her feel about herself p142 Let her know that there is a real person behind the rumors.. rumors spread is that they are interesting and that they sound believable.. simply spread a more outrageous rumor that overshadows that one, but incorporates it as well [ad absurdum] p148 So let him say everything he wants to say without interruption and then agree.. If you don't iterrupt, then they will eventually run out of things to say. If you interrupt you are going to give him more ammunition and risk a heated argument instead of a monologue.. listening, agreeing, and stroking his ego p153 most likely to feel jealous in areas that are specifically relevant to his self-worth p160 best time to criticize is when you are removed from the event.. because you care.. Always criticize in private. Preface your criticism with a compliment. Criticize the act not the person. Share some of the responsibility if you can. Offer the solution. Let him know that he is not alone p162 highly stressed situation, self-focusing on emotions led to increased emotional awareness and a strong desire to seek social support (Strentz and Auerbach, 1988).. By making the person think about his emotions, you unconsciously force him to seek support from you, to open up, and to share p170 The minute you try to defend yourself, you've lost. Don't automatically accept the person's premise or you may be starting at a disadvantage. Instead gain leverage and ask him to explain why he thinks the way he does. Don't be goaded into responding to a vague statement. You can't win. Change the question, reduce it to specififc, then answer p176 "Never argue with anyone who is crazier than you." Do whatever you can to make him think you're nuts. Scream, yell, talk to imaginary people, [bark, glossalalia] whatever #@# Reading People, Jo-Ellan Dimitrius, Ballantine, 1999 0345425871 p17 best weapon against fear is knowledge p63 Any trait that shows tension, nervousness, or secretiveness indicates possible dishonesty p65 Stillness, a fixed or set gaze, and the chin on the hand are all signs of pensiveness or attentiveness p66 people who are bored usually distract themselves with physical activity p67 Anger usually manifests itself in one of three was: aggression, defensiveness, or withdrawal p73 nervous will need an outlet for his nervous energy p85 comparing the public persona with the person's home, you can learn how contented they are, whether they feel insecure or confident, what they spend most of their time doing, and in general what matters most to them p99 sizing up someone's friends and associates will give you a pretty reliable indication of his or her character p102 how everything is maintained and positioned; and always ask how much choice the peson had p115 Generally speaking, I hav found that people who have a loud, dominant voice bu use it courteously and appropriately are confident. Those who abuse others with their loud voice, like a bully with a big stick, are often insecure p130 To encourage candid conversation, resist the urge to correct, criticize, or gloat p136 come around their desk and sit next to them. If you want to have an unconstrained conversation with someone, get rid of any obstacles between the two of you pp150-1 good listening are: Don't interrupt. Be empathetic; don't condemn, argue, or patronize. Maintain a comfortable physical distance. Be involved, but not too intense. Don't let your body language impact the free flow of information. Self-disclose, but not too much, too soon. Don't tkae what someone says out of context. "Listen" with all your sences.. don't leave the setting to chance.. speed with which they are comfortable.. questions to keep the conversation moving and information flowing your way. Questions which call for information about the three most predictive traits - socioeconomic background, satisfaction with life, and compassion.. Open-ended questions are an invitiation to chat.. Leading questions focus.. on track, but may produce less spontaneous or complete answers.. Argumentative questions are usually your last resort, but may be necessary to ferret out the truth when you have to be confrontational p155 Most of us are quick to deny any hint of wrongdoing and happy to explain ourselves if we have nothing to hide. That's why, in nearly every courtroom, judges instruct juries that they may draw a negative inference if one party has a chance to explain an important issue but doesn't p157 People who want to avoid lying outright often try to spread the truth sround in a long answer so that, in order to discover it, you have to pick out a piece here, a piece there.. When someone doesn't want to commit himself, he will often answer a question with a question. He's waiting for more information from you, so he can tailor his answer accordingly pp180-1 silence usually means your concerns are well-founded.. interrutions. The motive may be to control the conversation, get attention, or just excitement or enthusiasm.. Unsolicited boasting reflects not just the obvious arrogance, but an insincere streak as well.. Humility is great. But in the extreme it reflects deep insecurity.. Whatever warrants obvious repetition by someone is very important to her. Don't ignore it.. gossip. Consider it the tool of the unhappy, insecure, mean-spirited, and manipulative.. Unsolicited self-disclosure, especially in large doses, signals an attempt to connect, impress, persuade, brag, test, or deceive.. With few exceptions, sarcasm is a way to get a laugh or make a point indirectly - usually at someone else's expense p186 how someone acts towards "everyday people" can give you a pretty good idea how he or she will act toward you when the bloom is off the rose p206 life's highly charged situations that reveal a person's strength of character.. unkept promises. Sometimes the motive is evil, sometimes it's not; but whatever the motive, don't expect to be able to rely on them.. Sometimes what someone doesn't do is as important as what they do.. Preachers always have an agenda - persuasion, control, attention. But don't assume they practice what they preach.. fanfare.. sure sign of insecurity.. any extreme in spending habits usually arise from deep seated insecurities p223 more frequently one lies, the less it bothers him and more difficult it is to spot the lies from voice and mannerismas.. Sometimes we unwittingly fool ourselves.. not a lie, but a blind spot p283 A would-be king holds himself above the masses. A true prince walks among them p284 politician sits quietly, back straight, eyes forward, hands still in his lap, a slight smile on hs ace, as he waits for the debate to begin p286 Confusion. Vizualize the windup toy, scurrying in one direction until it hits the wall, rebounding and heading off in another direction. The movement is random, not orderly.. Defensivenese. Picture a cat cornered by a dog. It's backed against a wall, hair standing on end. It's looking for a chance to run away, but ready to attack if necessary p288 Embarassment. Think o fa young boy strutting into the cafeteria. He trips and falls in front of everyone. His face turns red. He brushes himself off, awkwardly trying not to show his embarrassment, and lsinks off to a table in the corner p289 Fear Visualize a deer, frozen in ithe middle of the road, eyes wide, body stiff p290 Resentment. Picture a high school girl who wasn't picked to be a cheerleader, watching as the squad practices. Her arms are folded, her eyes are slightly closed, her body stiff.. Secretiveness.. THink of a poker player, expressionless, peering over his cards, which he is holing tight and close to his face p293 surprise: quick body movememnt and a temporary loss of control over the smaller muscles #@# Tom Peters Symbols Patterns Settings Org Dyn 3-22 1978 p6 fig 1 RULES FOR MANAGING CHANGE: 1. Spend Time: Spending time exerts, in itself, a "claim" on the decision-making system. 2. Persist: Having more patience than other people often results in adoption of a chosen course of action. 3. Exchange status for substance: One of the most effective ways to gather support for programs is to reward allies with visible tokens of recognition. 4. Facilitate opposition participation: Often those outside the formal decision enters overestimate the feasibility of change; encouraged to participate, they will often become more realistic. 5. Overload the system: Bureaucracies chew up most projects, but on the other hand, some sneak through; merely launching more projects is likely to result in more successes. 6. Provide garbage cans: Organizations endlessly argue issues; to induce desired outcomes, put "throw-away" issues at the top of agendas (to absorb debate) saving substantive issues for later. 7. Manage unobstrusively: Certain actions can influence the organization pervasively but almost imperceptibly; moreover, the resulting changes will persist with little further attention. 8. Interpret history: By articulating a particular version of events, the leader can alter people's perception of what has been happening; whoever writes the minutes influences the outcome p9 fig 3 MUNDANE TASKS: a. Symbols: Calendars, Reports, Agenda, Physical Settings, Public Statements, Staff organization. b. Patterns: Positive reinforcement, Frequency and consistency of behavior, Implementation/solution bias, Experimenting mode. c. Settings: Role of modeling, Location, Agenda control, Presentation format, Questioning approaches, Deadline management, Use of minutes p16 Most important of these is singleness of focus. That is, the single-element focuser should not be confused with multiple-team project management. Its effectiveness rests on achieving a limited, temporary focus on one or at most two, major new items. Note, also, that the structural manifestations then to be about half staff, half line. On one hand, the focusing element often has the look of a traditional staff unit, but its manager, as the unmistakable agent of the top team's highest priority, visiby intrudes on operating managers' territory. p19 lessons extracted by business leaders, the crucial role in central beliefs emerges.. stress the quest to give operational force and meaning to a dominant, though imprecise idea p20 Just as it cannot be imposed by fiat, it cannot be changed at will. Typically, a major shift in the dominant belief can be brought about only when an important change is perceived to be at hand. The process of gaining commitment requires so much emotional commitment and institutional energy that it can be repeated only infrequently. It has a reasonably predictable life cycle.. It suggests movement #@# Preemployment honesty testing edJones Quorum1991 ISBN 0-89930-620-9 p65 Basic psychometric Properties of a Preemployment honesty test: Reliability, validity, and fairness. Dennis S Joy.. Employees who steal tend to view themselves as average people in a basically dishonest world. THese individuals project their own dishonesty and thus see theft as prevalent. This allows them to rationalize that everyopne steals, so they feel they are acting according to accepted norms. The typical dishonest employee is also more tolerant of theft in others and holds less punitive attitudes about theft. Dishonest employees are more tmpted to steal, ruminate about more theft-related activities, exhibit more interthief loyalty, and more readily accept commom rationalizations for their theft #@# Beyond Reason, Fisher & Shapiro, Harvard Negotn Proj, Penguin, 2005 p204 core concerns are: 1. Appreciation. Feeling unappreciated puts people down. We can appreciate others by understanding their point of view; finding merit in what tey think, feel, or do; and communicating our understanding through words or action. We can appreciate ourselves, too. 2. Affiliation. Rather than having each negotiator feel alone and disconnected, we can try to build structural connections as colleagues and personal connections as confidantes. 3. Autonomy. Recognize that everyone wants freedom to affect or make a great many decisions. We can expand our autonomy and avoid impinging upon theirs. 4. Status. No one likes to feel demeaned. Rather than compete with others over who has the higer social status, we can acknowledge everyon's areas of [articular status, including our own. 5. ROle. An unfulfilling role leaves us feeling trivialized and unengaged. Yet we are free to choose roles that help us and others work together. And we can expand the activites within any role to make them fulfilling. p208 The Seven Elements: The Anatomy of a Negotiation Element Some Diagnostic Questions Some Prescriptive Advice Relationship How does each negotiator Build rapport and a good think and feel about working relationship with the other? fellow negotiators. Work together, side by side. Communication Is communication poor, Build easy two-way deceptive, one way? Are communication. Inquire negotiators telling one listen, be worthy of trust. another what to do? Avoid fuzzy promises. Interests Are negotiators making Respect the interests of demands and stating others. Understan and positions while concealing disclose your own inter- their true interests that ests. (You need no dis- underlie them? close how highly you value what you want.) Options Does the negotiation look With no commitment, like a zero-sum game jointly brainstorm pos- where each side's choice sible ways of meeting is between winning or legitimate interests of losing? both. Legitimacy Does no one seem to Look for and request care about being fair? Are external standards of they simply haggling by fairness that will be per- saying what they are suasive to both. willing or unwilling to do? BATNA Is each side theatening Consider your walk-away (Best Alternative the other without know- alternative as well as to Negotiated ing what they will do if theirs. Recognize that Agreement) no agreement is reached? any agreement must be better for both than walking away without an agreement. Commitments Have negotiators de- Draft fair and realistic manded unrealistic com- commitments that each mitments from the other side could make. side? Have they failed to draft commitments they would be willing to make? #@# Kheel, Keys to Conflict Resolution,4w8w, 2001 p48 TEN COMMANDMENTS FOR NEGOTIATORS. I. Seek agreement on a clear definition of the issues in dispute at the earliest possible time. II.. try to see yourself as your opponent sees you. III. Try also to see your opponent as he sees himself. IV. Fals statements of material facts can be illegal. They are also unwise, especially in consintuing relationships. V. Puffing-and-bluffing.. if they do not include fals eor misleading statements of material facts. VI. Credibility is key... VII. Silence and body laguage can be as significant.. VII. In negotiation, timing is critical.. IX. Keep cool.. X. Be ready for decision-making at the crunch. It is time to put up or shut up p82 TEN COMMENDMENTS FOR MEDIATORS: I. Emphasize at the outset the importance of clearly defining the issues in dispute and gathering and assessing the relevant facts. II. Take control of the "housekeeping" aspects of the dispute such as wehr eand when the meetings should be held, how long they should last and whether and when public statements should be made to the media. III. Remember, your goal is to get the disputants to agree with each other; it is not to get them to agree with your views on the merits of their respective claims. IV. Avoid any statements or actions that will prejudice the bargaining position of either side. V. Make no formal recommendations for settlement unless both sides specifically ask you to do so and, if requested, bear in mind that your ability to continue mediating may be prejudiced if one side accepts your recommendations and the other side rejects them. VI. You may offer suggestions for discussion purposes, separately or to both parties, but not as a recommended solution. VII. Convey accurately any messaqges or proposals you are asked to relay to the other side. VIII. Respect any confidences you are given by either side. IX. Never go around the individuals designated.. X. Bear in mind at all times that you are the friend of contesting adversaries. Give them no reason to share you as an enemy p96 TEN COMMENDMENTS FOR ARBITRATORS: I Decide the dispute strictly in accordance with the mandate the parties have given you; do not substitute your judgement of fairness for the criteria you are called upon to apply. SImply splitting the difference is a cop-out. II. If the dispute involves the rights of the parties under a contract, guide yourself by the contract's terms, which usually limit you to an interpretation and application of the cobtract. You have no authority to add to, subtract from or modify its terms. III. If interest claims are involved, guide yourself by the criteria in the stipulation of the parties submitting the dispute to arbitration. IV. COnduct yourself as a judge would.. V. Avoid speaking to one party in the absence of the other.. VI. Try to mediate if the opportunity arises. But neither say, nor do, anything in mediation that might prejudice your ability to make a decision on the merits. VII. Confine your decision and opinion to the case before you. Omit any incidental or supplementary remarks.. VII. Do not allow anyone unconnected with the arbitration to be present at the hearing without the consent of both sides. IX. Do not release your decision to the public without the consent of both sides. X. agree in advance how you will be paid #@# Negotiation Advice HBS 9-905-059 2006 Rob Walker [Inc 8/03 p75] - took a fresh look at aome classic texts.. "self-respect," "high self-esteem," "self worth," and "utter clarity.".. Successful negotiating requires a host of traits - poise, curiosity, creativity, and stamina.. Getting to Yes [Fisher Ury Patton 1991].. generating mutual gains: Focus on interests, not positions. Invent options for mutual gain. Insist on objective criteria.. Negotiating with Difficult People [1991], WIlliam Ury.. importance of deep listening ang giving other people an opportunity to save face.. detachment of a disinterested observer seted way up in the balcony.. Douglas Stone, Bruce Patton, and Sheila Heen, authors of Difficult Conversation [1999].. Have your feeling (or they will have you). Don't assume they mean it: disentagle intent from impact. Begin with the third story (the account a dispassionate observer would offer).. Bazerman and Neal [Negot Rationally 1992] also state that sound decision making in negotiation can be promoted by asking yourself questions such as: Are you pursuing a negotiated course of action only to justify an earlier decision? Is there another frame that would put a different perspective on the negotiation? Are you being affected by readily available information and ignoring other valid, but less, accessible data? Have you fully thought out the decisions of your opponent? #@# Critical Moments in Negotiation HBS 9-902-163 2001 Establish initial conditions carefully.. Continually test your assumptions.. strategic turns if your role or position are challenges.. develop rescue and recovery routines for moments of high conflict.. caucuses and time-outs to interrupt destructive beahvior and to gain perspective.. develop a shared language.. tolerance for ambiguity.. critical moments as a transistional device to reframe the process #@# How to Manage Your Negotiating Team. Brett, Jeanne M. 1 jmbrett@kellogg.northwestern.edu Friedman, Ray 2 ray.friedman@vanderbilt.edu Behfar, Kristin 3 kbehfar@uci.edu Harvard Business Review; Sep2009, Vol. 87 Issue 9, p105-109, Even though team members are all technically on the same side, they often have different priorities and imagine different ideal outcomes: Business development just wants to close the deal. Finance is most concerned about costs. The legal department is focused on patents and intellectual property. Teams that ignore or fail to resolve their differences over negotiation targets, trade-off s, concessions, and tactics will not come to the table with a coherent negotiation strategy. They risk ending up with an agreement that's good for one part of the company but bad for another. On the basis of our research, we recommend four techniques for managing conflicts of interest within the team. Plot out the conflicts.. Work with constituents.. one leader sent his team members back to their own departments with the worst-case outcome for the company and individual units. This sobering hypothetical softened up hardliners and allowed members to align their interests.. Mediate conflicts of interest.. Persuade with data.. Gaffes made at the bargaining table are usually the result of genuine differences in participants' negotiation styles, a lack of preparation, or frustration. Although rarely intentional, breakdowns in discipline sabotage a team's strategy in ways that are almost impossible to recover from. Such breakdowns reveal fissures that the other party eagerly exploits.. Simulate the negotiation.. Rehearsals like that enable individuals to determine when they should contribute -- and when they should keep silent. They help people anticipate their own and others' likeliest emotional responses, predict where team discipline might break down, and clarify who has authority to make concessions and decisions.. Assign roles to capitalize on team members' strengths and interests.. Large teams using text messaging or chat technology often had a gatekeeper decide when the lead negotiator needed to be alerted about new ideas bubbling up during the course of the talks #@# GETTING PAST YES. Ertel dertel@vantagepartners.com Harvard Business Review; Nov2004, Vol. 82 Issue 11, p60-68 The real challenge lies not in hammering out little victories on the way to signing on the dotted line but in designing a deal that works in practice.. People who view the contract as the conclusion and see themselves as solely responsible for getting there behave very differently from those who see the agreement as just the beginning and believe their role is to ensure that the parties involved actually realize the value they are trying to create. These two camps have conflicting opinions about the use of surprise and the sharing of information. They also differ in how much attention they pay to whether the parties' commitments are realistic, whether their stakeholders are sufficiently aligned, and whether those who must implement the deal can establish a suitable working relationship with one another.. Unfortunately, many organizations structure their negotiation teams and manage the flow of information in ways that actually hurt a deal's chances of being implemented well.. The deal maker mentality also fosters the take-no-prisoners attitude common in procurement organizations.. The deal structure that both customer and provider teams are left to implement is the one that was easiest to compare with other bids, not the one that would have created the most value. Worse yet, when the negotiators on each side exit the process, the people responsible for making the deal work are virtual strangers and lack a nuanced understanding of why issues were handled the way they were. Furthermore, neither side has earned the trust of its partner during negotiations.. Making the leap to an implementation mind-set requires five shifts.. WHAT CAPABILITIES ARE NECESSARY TO ACCOMPLISH OUR OBJECTIVES?.. Encourage the other party to do its homework and consult with its internal stakeholders before and throughout the negotiation process.. If their interests are not aligned, and they cannot deliver fully, that's not just their problem--it's your problem, too.. Turning a blind eye to likely alignment problems on the other side of the table is one of the leading reasons alliances break down.. Complex deals require the participation of many people during implementation, so once the agreement is in place, it's essential that the team that created it get everyone up to speed on the terms of the deal, on the mind-set under which it was negotiated, and on the trade-offs that were made in crafting the final contract.. You must worry about the costs and challenges of execution rather than just getting the other side to say yes #@# Pondy Org Conflict Adm Sci Q 12#2 9/67 [excellent lit rvu] p297 Bargaining model. This is designed to deal with conflict among interest groups in competition for scarce resources. This model is particularly appropriate for the analysis of labor-managment relations, budgeting processes, and staff-line conflicts. 2. Bureaucratic model. This is applicable to the analysis od superior-subordinate conflicts or, in general, conflicts along the vertical dimensions of a hierarchy p300 Latent conflict.. (1) competition for scarce resources, (2) drives for autonomy, and (3) divergence of subunit goals.. Conflict is said to occur when the focal person receives incompatible role demands or expectations p301 Perceived conflict.. misunderstanding of each others' true position p301 Felt conflict.. personalization.. Anxieties may also result from identity crises or from extra-organizational pressures.. to dissipate accumulated hostilities, total institutions require certain safety-valve institutions such as athletic activites or norms that legitimize solitude and withdrawal, such as the noncommunication norms prevalent in religious orders p303 Manifest conflict.. revolutions.. aggressive and defensive coalitions.. apathy or rigid adherence p304 consciously but not necessarily deliberately blocks another member's goal achievement.. interface between perceived conflict and manifest conflict and the interface between felt conflict and manifest conflict are the pressure points where most conflict resolution programs are applied p305 if the conflict is merely suppresses but not resolved, the latent conditions or conflict may be aggravated and explode p307 some optimum level of conflict and associated personal stress and tension are necessary forprogress and productivity p308 if it pursues policies and actions that guarantee stability, it may inhibit its adaptive abilities. It is argued here that a given conflict episode or relationship may have beneficial or deleterious effects on productivity, stability, and adaptibility p309 To say that (perceived) conflict represents a state of disequilibrium and generates pressures for conflict resolution, is to say three things: (1) that perceived conflict is a cost of participation; (2) that the conflict distrurbs the inducements-contributions balance; and (3) that organization members react to perceptions of conflcit by attempting to resolve the conflict p315 [bureaucratic] autocrats seldom are or seldom remain benevolent... (1) organizations are so large that the leaders cannot identify personally with the rank and file; (2) responsibilities are delegated to organiztional subunits, and subunit goals, values, etc. become differentiated from those of the hierarchy; and (3) procedures are formalized, and the organization leaders tend to treat rank and file members as mere instrumentlities or executors of the procedures p316 The "man-in-the-middle" must align himself with the interest of either his superior or his subordinate, and in so doing he laienates the other p318 [System model] If in turn, two subunits having differentiated goalsare functionally interdependent, then conditions exist for conflict. Important types of interdependence matter are: (1) common usage of some service or facility, (2) sequences of work or information flow prescribed by task or hierarchy, and (3) rules of unanimity or consensus about joint activity #@# Assael Constr Role Interorg Confl Adm Sci Q 14#4 12/69 p574 This high level of interdependence has lead to persistent economic conflicts between manufacturers and dealers p574 requirements for constructive conflict: 1. A critical review of past actions. 2.More frequent and effective communications between disputants, and the establishment of outlets to express grievances. 3. A more equitable distribution of system resources. 4. Standardizations of modes of conflict resolutuion. 5. Creation of a balance of power within th esystem #@# Managing Conflict at Org Interfaces, Brown, 1983 AW 0-201-00884-x p15 The more numerous and diverse the levels and specialized divisions within an organization, the more opportunities for conflict at their interfaces.. more interdependence between the parties, the higher the cost of poorly managed conflict at their interface pp29-30 Table 2.1 Characteristics of underorganized and overorganized interfaces ATTRIBUTE UNDERORGANIZED INTERFACE OVERORGANIZED INTERFACE Boundary permeability Inputs Open to disruptive inputs of Closed to necessary inputs of information, resources,people information, resources,people Outputs Open to "leaks" of critical Closed to export of problem energy, information, people energy, information, people Interface organization Leadership No clear authority; Centralized, unquestioned competing authorities authority Goals No clear goals; multiple Goals clear but conservative conflicting goals and not subject to challenge Formal Fragmented, conflicted, isolated Well-defined and clearly structure or undefined roles enforced roles Poorly defined ineffectual rules Rules and procedures defined and procedures and inforced in detail Informal Values and theories not Values and theories coherent, culture articulated of conflicting shared, and conservative Feeling that chaos is imminent Feelings that interface will and fight/flight is appropriate continue and conformity is required Technology Not routine; artistic; poorly Routine; assembly-line; well- understood work procedures understood work procedures Relevant Culture differences are critical; Task differences are critical; differences environment dominates interface goals dominate Critical problems Resources Interface is resource-poor, and Interface is innovation-poor, and needs more to survive and needs more to survive Energy Energy is diffused, leaked poorly Energy is directed but channeled restricted and constrained Conflict Differences produce withdrawal or Differences produce suppression escalation and threaten or harmonizing that prevents interface continuation exploration or constructive conflict p34 Under conditions of high threat, people act competitively no matter what their personal characteristics.. Walton and McKersie (1965) argue that bargaining tactics (in situations dominated by conflicting interests) involve selective misrepresentation, withholding information, commitment to positions that reduce flexible discussion, and threats.. problem-solving tactics (where common interests prevail) require exchanges of accurate information, flexible search for alternative solutions that meet the needs of both parties, and willingness to influence and be influenced on the basis of trust.. representatives are seldom skilled at both p36-7 Table 2.2 Diagnostic questions; interface elements Interface How is the interface defined? What goals are shared and what interdependencies are important (tasks, social identifications, common authorities, physical space)? What is included in the interface (people, resources)? How clearly defined (by what criteria) are interface boundaries? How is the interface organized? How open or closed are interface boundaries? by what mechanisms? How tight or loose is interface regulation of activity? by what mechanisms? What kind of interface organization is created by the combination of boundary permeability and internal regulation? Is it appropriate to interface activity? overorganized? underorganized? Parties What interests do the parties bring to the interface? What is the mix of conflicting and common interests? What interests are perceived and what not perceived? How large are the stakes at issue? Are the parties equally interested? What internal characteristics of the parties are relevant? To what extent are parties mobilized or unmobilized for conflict? Do parties have iunrealistic stereotypes of themselves or others? Representatives How are representative roles defined? What responsibilities and expectations are important? What resources, discretion, and autonomy are available? How do personal representative characteristics affect events? What are their relevant personal traits and characteristics? What are their relevant skills and tactical competencies? Context How does the next level of social unit affect interface events? If both parties belong to the same unit, how do hierarchies, reward systems, and other unit features affect relations? If parties belong to different larger units, how do these memberships affect interface events? What part do third parties play at the interface? What stances do they take vis-a-vis th eparties? Do they intervene directly or indirectly? How does the larger context affect interface events? p45 Table 2.3 Diagnostic questions: interface dynamics Dynamics of representtaive behavior How do representtaive perceptions, communications, and actions interact? bargaining: negative perceptions, guarded communications, coercive tactics? problem-solving: positive perceptions, open communications, cooperative tactics? Is the pattern of interaction stable or changing? Are the outcomes of interaction positive or negative? productive conflict (bargaining or problem-solving)? too much conflict (escalation)? too little conflict (withdrawal or supression)? Dynamic sof interface development How do outcomes of representatives' interaction, contextual forces, and party characterstics interact over time to alter or maintain the interface? direct impacts on interfaces? mutual interface over time? Is the interface stable or changing over time? Is the organization of the interface appropriate? underorganization that encourages too much or too little conflict? overorganization that encourages too little conflict? appropriate organization that encourages productive conflict? p48 Too much conflict.. perceive themselves as innocent victims and their opponents as malignant villains.. antagonism, hostility, and extreme distrust p49 Too little conflict.. withdrawal can produce low attendance, low commitment to decisions, infrequent participation, and decisions based on little or low-quality information [cit Janis Groupthink 1972] pp52-3 Table 3.1 Assessing levels of conflict: choosing to intervene CONFLICT PERCEPTIONS COMMUNICATIONS ACTIONS OUTCOMES LEVEL Common interests Extreme restriction Exaggerate Discussion on Too much unrecognized Serious distortion differences information, Escalation Extreme distrust of information Coercive influence low commitment Hostility Violence and Harm to parties sabotage Future relations deteriorate Productive Conflicting Exchage guarded Preserve Decisions distribute Bargaining interests Selective offer differences fixed resources dominate and acceptance of Rigid commitments Accepted process Common interests known informaton Threats and Future relations Opponent recognized promises in bargaining mode Distrust Problem- Common interests Open exchanges Explore differences Decisions provide solving dominate Accurate information Flexible mutual benefits Conflictin interests known generation of alternatives Creative Friendliness and trust Consensus decisions alternatives Future relations in problem-solvng mode Too little Conflicting Controversial Deny differences Decisions based Suppression interests information suppressed Supress on little information, unrecognized Agreement emphassized disagreement analysis, or Differences denied challenge to myths Future relations as parties without differences Withdrawal Conflicting Controversy avoided Avoid differences No decisions, or interest recognized Low exchange of Reduce investment decisions by but avoided information Decide by default default Fear of other party Low commitment and and conflict participation Future relations in doubt p54 conflict management intervention.. redirect immediate behavior.. reallocate relevant resources.. reframe perspectives.. realign structural forces.. new issues or alternatives.. altering flows of information.. new tactical options.. large issues may be "fractionated" to reduce conflict p59-60 Table 3.2 Interventions for redirecting behavior INTERVENTION FOR TOO MUCH CONFLICT FOR TOO LITTLE CONFLICT Control Fractionate issues to reduce size: Consolidate issues to enlarge: issues smaller parties larger parties smaller problems larger problems principles not involved involve principles no procedural precedent set procedural precedents no substantive precedent set substantive precedents Refocus Create alternatives that unfreeze Clarify hard choices and alternatives deadlocks and revise commitments trade-offs in noncontroversial alternatives Alter Increase believable communications Raise suppressed or communications Build mechanisms that ensure avoided issues trustworthy Encourage investigation and information exchange discussion of potential problems Guard against within-party Focus attention on lost or distortions of information ignored information Discuss excalation impacts on Discuss withdrawal and supression information flows impacts on communications Change Initial presentations that Initial presentations that tactics permit cooperation; concessions encourage examining differences; evidence of peaceful intent clear positions and demands Conflict-reducing initiatives: Conflict-promoting initiatives: minimize risks minimize risks clear intentions identify issues unilateral peaceful step explore differences expected reciprocation require interaction Self-defense tactics against Self-defense tactics for escalation: withdrawal/suppression: deterence for high identify withdrawal/ threat situations suppression maneuvers nonpunitive response to confront maneuvers to encourage cooperation undercut their impact pp60-1 Resource allocation interventions expand or contract the available personnel, information, or other resources relevant to conflict or its management at the interface.. Altering resources interdependence.. Glabraith (1973) suggests that resource reallocation is often used by default to manage conflict.. slack resources p67 Table 3.4 Interventions for reframing perspectives INTERVENTION FOR TOO MUCH CONFLICT FOR TOO LITTLE CONFLICT Reformulate Clarify and encourage work Clarify and encourage work party interests for superordinate goals for diversity of interests Revise Reduce unrealistic stereotypes Reduce unrealistic stereotypes unrealistic of opponent's villauny of opponent's similarity or stereotypes dangerousness Reduce unrealistic stereotypes of Reduce unrealistic stereotypes own innocence or victimization of own similarity or inability to confront Reconceptualize Construct theories that include Construct theories that the include both perspectives differentiate perspectives situation Clarify forces operating to Clarify forces operating to promote conflict reduce conflict Recognize Understand escalatory interaction Inderstand withdrawal/ conflict of perceptions, communications, suppression interaction of dynamics and tactics communications and tactics p73-4 Table 3.5 Interventions for realigning underlying forces INTERVENTION FOR TOO MUCH CONFLICT FOR TOO LITTLE CONFLICT SUPPRESSION WITHDRAWAL Redefine Create new interface to Deemphasize to Clarify boundaries unit manage conflict reduce supression to prevent avoidance boundaries Include new parties (eg Include assertive Include trouble co-opt outsiders) representatives makers (eg consultants) Define parties to Define parties to Define parties to cope with conflict (eg reduce "fusion" and reduce distance matrix organization) overlap and clarify or to reduce interdependence interdependence Alter Open party boundaries to new Close party boundaries Open party boundary information and personnel to establish boundaries to permeability rotation difference stimulate information and personnel Close interface to Open interface to Close interface to escalatory inputs, stimulating inputs, disruptive inputs provocative outputs ventilating outputs outputs that drain critical resources Revise Define rules and procedures Loosen overly detailed Tighten rules and formal legitimate to both parties rules and procedures procedures that rules and that suppress debate permit withdrawal procedures Renegotiate Negotiate shared standards Loosen shared standards Negotiate shared shared norms of appropriate behavior that restrict debate standards and and values and dirty tricks values that support debate Refocus Clarify incentives for Clarify incentives for Clarify incentives incentives reduced conflict more debate for more debate Emphasize costs of Clarify costs of Clarify costs of continued conflict continued suppression continued withdrawal p85 Lawrence and Lorsch (1967) found that departments in some business organizations differed in time orientation, interpersoanl culture, and formality of structure in addition to their diverse task objectives p89 larger organization depends on interfaces among interdependent departments for accomplishing its goals, so problematic conflict at those interfaces may draw rapid response.. limits extremes of immediate interaction.. Walton, Dutton, and Fitch (1966) found self-maintaining patterns of interface organization pp126 Lower parties fear upper parties as wholly malevolent and overpowering, and upper parties often stereotype lower parties as weak and subhuman, Both parties bring to authority relations strong feelings derived from their experiences as parents and children (Bion, 1959). Communications between unequal parties are particularly vulnerable to distortion and restriction. The lower party's fear reduces its communication to upper parties, particularly of information that might provoke retaliation; the upper party's ignorance o flower party concerns blinds them to areas of controversy. When lower parties voice long-suppressed antagonisms, upper parties are often surprised into responding with injured innocence or outrage p211-2 Too much conflict at culture interfaces is associated with culture shock, personal prejudice, and cultural polarization that may produced deep antagonism and intense fightig. Too little conflict between cultures, on the other hand, is associated with enforced cultural homogeneity and institutional discrimination in some cases and cultural isolation and withdrawal in others.. interventions may emphasize altering the patterns of representatives' interaction by changing their perceptions, communications, or actions Or they may focus on reshaping interface definition and organization by altering the interplay of parties, the context, and the interface itself.. issues at conflict interfaces can have symbolic value well beyond their obvious importance and representatives of one culture may be very much unprepared for the depth of feeling the issue sets off in the other.. often peripheral to organizational.. dispersion increases the likelihood of unplanned negotiations between self-appointed representatives of relatively unorganized cultural parties at informally defined cultural interfaces pp308-9 Table 9.2 Intervention characteristics INTERVENTION TARGET DYNAMICS RESOURCES REQUIRED AVANTAGES/DISADVANTAGES Redirect Representative Skills With good timing can interrupt behavior interaction Imagination can interupt sycles of issues (quick impact) (low cost) problematic interaction alternatives Effective when interface and communications contect moderate conflict tactitcs problems (eg at departmental interfaces Vulnerable to continuing cycles and structural pressues Reframe perspectives interests Representative Information Can alter highly charged stereotypes interaction Interpretations perspectives (eg at level, situations (quick impact) Persuasion skills Complements other dynamics Interface (low cost) interventions development Vulnerable to continuing cycles (slower impact) and structural pressures Reallocate resources interdependence Representative Resource Can match resources to central conflict interaction control issues (eg task, power, management (quick impact) (moderate culture issues) resources Interface cost) Creates press for long-term development solutions (slower impact) Relatively visible and expensive Realign structural forces boundaries Interface Formal,informal Complements changes in permeability development influence interaction dynamics by rules, procedures (slower (moderate to altering long-term pressures norms, values impact) high cost) (eg at level, culture incentives interfaces) Creates press for long-term solutions Expensive and disruptive to other parts of system #@# Walton Interpers Peacmkg 1969 AW 0-201-08435-x p73 Substantive issues involve disagreements over policies and practices, competitive bids for the same resources, and differing conceptions of role relationships. Emotional issues involve negative feelings between the parties (eg, anger, distrust, scorn, resentment, fear, rejection).. "philosophical differences," which of course are usually manifested in conflicts over the substance of policies and practices p74 Some substantive issues centered on a type of "role invasion".. Perhaps opposite to role invasion is "task deprivation," whereby one party is not getting the services which he requires in order to perform effectively.. Another very frequently encountered source of interpersonal conflict in organizations is a "competitive incentive structure".. Turning to emotional issues, one type is "personal need deprivation," wherein the situation is currently failing to satisfy some salient personal needs.. In the case of "incompatible personal needs," two persons make contradictory demands on their situation or on their relationship, demands which are based directly on their repsective interpersonal needs p75 Even where it is not clear what personal needs are being blocked, "differences and similarities in personal styles" may be threatening to the persons involved p76 obstacles to interaction.. Task requirements.. Group norms.. Personal role concepts.. Public images.. Perception of the other's vulnerability.. Perception of one's own vulnerability.. Fear that a conciliatory overture won't be reciprocated p83 conflict-resolution behaviors.. agreeing to meet.. listened to each other.. regret for having "piled on".. acknowledgement.. authentic expression of regret.. nondefensive acknowledgement of the fact p84 Diagnosing the conflicts requires determination of which issues are basic and which are merely symptomatic, representing a proliferation of the basic issues.. party may inject a second or substitute issue into the conflict because it provides a more legitimate umbrella for the conflict. Sunstantive issues are often injected into a basically emotional conflict for this reason p85 basic issue sometimes risks so much embarrassment for one or both persons that they can save face by acting as if their differences centered on some other issue. Second, if this is so, it i smore "expressive" and therefore more gratifying for a person to engage another around a surface issue which is, nevertheless, similar to (rather than different from) the underlying issue. Third, by identifying a surface issue which resembles the basic issue, one is better able to exchange ideas (one's own perceptions of other's views) which are also relelvant to the basic issue.. Substantive issues may develop subconsciously from emotional conflicts, as merely another way one person can differentiate himself from a person toward whome he feels antagonistic p86 sometimes a new substantive issue is injected tactically into the conflict by a party who wishes to gain the offensive or counter an opponent's offensive.. Additional issues result from attempts to cope with the consequences of primary conflict p90 control strategies.. eventual results may be less desirable that an early expression of the conflict.. may tend to go underground.. result in accumulation// more complex strategy.. cooling off period.. temporarily protecting the larger system from disruption.. second operational objective does not try to prevent all conflict interchanges, but attempts to set limits on the tactics and weapons p91 prevent a conflict from escalating.. achieve some de-escalation p94 following ingredients in an interpersonal setting are postulated as strategic to productive confrontation: 1. mutual positive motivation, 2. balance in the situational power of the two principals, 3. synchronization of their confrontation efforts, 4. appropriate pacing of the differntiation and integration phases of a dialogue, 5. conditions favoring openness in dialogue, 6. reliable communicative signs, 7. optimum tension in the situation p129 tactical interventions.. refereeing the interaction process, suggesting agenda, clarifying participants' messages, eliciting and offering interpersonal feedback, diagnosing the conflict issues, prescribing discussion methods, diagnosing difficulties in the dialogue process, and counseling p146-7 If there is no sufficient immediate desire on both sides to ensure a give-and-take, the third party can move to avoid or delay the direct confrontation.. third party works to achieve more symmetry in the motivational forces.. third party can attempt to achieve as much balance as possibe; for example, by offsetting an organizational power advantage of one, by involving more allies for the other. THe third party can regulate the interaction process in a way that favors a person with lesser verbal or fighting skills. Thus, again we propose that the third party attempt to achieve symmetry.. third party can ensure that one principal's initiative to confront is synchronized with the other's readiness for the dialogue, in order to avoid abortive confrontations.. related funtion is to ensure either that the differentiation phase of the dialogue is worked out fully before moving on to the integrative phase, or at least, that a sufficient amount of differentiation has occured to provide a basis for the amount of integration contemplated for the time being.. extent to which various factors contribute to openness in a confrontation; in particular these factors are organizational norms pertaining to expression of differences, emotional reassurance available to participants, and the skills at hand for facilitating dialogue.. translating or restating the messages until the sender and receiver agree on the meaning; by procedural devices which require one to demonstrate that he understands what the other has said; and by contributing to the development of a common language with respect to substantive issues, emotional issues, and the dialogue process itself.. optimum level of tension.. sense of urgency.. rleaxig.. rigidity of individual thought processes #@# Gabarro & Kotter Managing your boss HBR 1/80 p94 requires the following: That you have a good understanding of the other person and yourself, especially regarding strengths, weakenesses, work styles, and needs. That you use this information to develop and manage a healthy relationship - one which is compatible with both persons' work styles and assets, is characterized bymutual expectations, and meets the most critical needs of the other person p96 vice president made three basic errors. He took information supplied to him at face value, he made assumptions in areas where he had no information, and - most damaging- he never actively tried to clarify what his boss' objectives were p97 Although a superior-subordinate relationship is one of mutual dependence, it is also one in which the subordinate is typically more ependent on the boss.. frustration, sometimes anger, when his actions or opinions are contstrained by his boss;s decisions.. Both counterdependence and overdependence lead managers to hold unrealistic views of what a baoss is p99 Managing the relationship with your boss: Make sure you understand your boss and his context, including: His goals and objectives; The pressures on him; His strengths, weaknesses, blind spots; His preferred work style. Asses yourself and your needs, including: Your own strengths and weaknesses; Your personal style; YOur predisposition toward dependence on authority figures. Develop and maintain a relationship that: FIts both your needs and styles. Is characterized by mutual expectations. Keeps your boss informed. Is based on dependability and honesty. Selectively uses your boss's time and resources. #@# Wm Evan Superior-Subordinate Conflict in Research Orgs Adm Sci Q 10#1 6/65 p54 generally on an ad hoc basis. Management is neither self conscious about the judicial function it is performing nor is it inclined to formalize and establish it as an impersonal control mechanism p59 supervisors report more conflicts: they are more likely to have administrative conflicts because of the nature of their jobs. In the absence of a due process mechanism, superior-subordinate conflicts are either unilaterally settled or else remain unresolved.. higher proportion of personnel in the government laboratory report bilaterla or multilateral conflci resolutions, whereas a higher proportion of personnel in the industrial laboratory report unresolved conflicts #@# Confl Mgt in PLC Thambain Sloan Mgt Rvu 16#3 1975 p33 various conflict resolution modes. Blake and Mouton [Mgrl Grid Gulf 1964], for example, have delinieated five modes for handling conflicts: Withdrawal. Retreating or withdrawing from an actual or potential disagreement. Smoothing. Deemphasizing or avoiding areas of difference and emphasizing areas of agreement. Compromising. Bargaining and searching for solutions which bring some degree of satisfaction to the parties in a dispute. Characterized by a "give-and-take" attitude. Forcing. Exerting one's viewpoint at the potential expense of another. Often characterized by competitiveness and a win/lose situation. Confrontation. Facing the conflict directly which involves a problem-solving approach whereby affected parties work through their disagreements. p46-7 TABLE 1 Major Conflict Sources by Product Life-Cycle Stage PROJECT MAJOR CONFLICT SOURCE AND RECOMMENDATION LIFE-CYCLE FOR MINIMIZING DYSFUNCTIONAL CONSEUENCES PHASE CONFLICT SOURCE RECOMMENDATIONS PROJECT PRIORITIES - Clearly define plans. Joint decision making and/or FORMATION consultation with affected parties - Stress imprtance of project to goals of the organization PROCEDURES - Develop detailed administrative perating procedures to be followed in conduct of project. Secure approval from key administrators. Develop statement of understanding or charter SCHEDULES - Develop schedule commitments in advance of total project commencements - Forecast other departmental priorities and possible impact on project BUILD-UP PRIORITIES - Provide effective feedback to support areas on forecasted PHASE project plans and needs via status review sessions SCHEDULES - Carefully schedule work breakdown packages (project subunits) in cooperation with functional groups PROCEDURES - Contingency planning on key administrative issues MAIN SCHEDULE - Continually monitor work in progress. Communicate PROGRAM results to affecte darties. TECHNICAL - Early resolution of technical problems - Communication of schedule and budget restraints to technical personnel - Emphasize adequate, early technical testing - Facilitate early agreement on final designs MANPOWER - Forecast and commuicate manpower requirements early - Establish manpower requirements and priorities with functional and staff groups PHASEOUT SCHEDUES - Close monitoring of schedules throughout product life cycle - Consider reallocation of available manpower to critical project areas prone to schedule slippages - Attain prompt resolution of technical issues which may impact schedules PERSONALITY - Develop plans for reallocation of manpower upon AND project completion MANPOWER - Mantain harmonious working relationships with project team and support groups. Try to loosen up "high-stress" environmnet #@# Managmt Rights: Made in Japan M K Chandler Columbia J Wrld Biz Winter 1966 p132 Jpanaese firms have had less of a "do-it-yourself" tradition than those in America. Subcontracting is more fully accepted as a way of life, but it is a planned and managed self-contracting p133 These managerial actions easily could have served to further "divide and conquer" an already badly split work force composed of a core group of permanent employees whose status was protected by a sundry and changing collection of temporary and contractors' workers. The permanent workers and their unions were well known for their indifference to the fate of these lower-status elements, but now the permanent or core group was threatened and was being used in much the same way as temporary workers, that is, to provide greater flexibility for the firm p139 In the US an endless series of pronouncements have specified the conditions under which manangement does or does not have the right to contract-out. From the standpoint of organizational flexibility, this is certiany the wrong place to introduce regulation, to say nothing of the confuson stemming from the myriad of confliting opinions. For both Japanese managements and unions, management rights as an abstract principle does not have the psychological value ound in the United States. The Japanese approach is pragmatic and geared to achievement through organization #@# Walton & Dutton Interdep Conflict Adm Sci Q 14#1 3/69 p73 Mutual taks dependence is the key variable in the relevance of the interunit conflict.. Overload conditions may intensify th eproblem of scarce resources and lead to bargaining p76 Role dissatisfaction and ambiguity are related to mor ebasic organizational variables, including growth rate, organizational level, and hierarcical differences. Organizational growth appears to have offsetting consequences p81 Table 3 Consequences of interunit coflict Attributes of confluctful Illustrative consequences lateral relationships Competition in general Motivates or debilitates Provides checks and balances oncealment and distortions Lowers quality of decisions Channeled interunit contacts Enhances stability in the system Rigidity, formality in Enhances stability in the system decision procedures Lowers ability to change Appeals to superiors Provides more contact for superios for decisions May increase of decrease uality of decisions Decreased rate of Hinders coordination and interunit interaction implementation of tasks Low trust, suspicion, Psychological strain and turnover of hostility personnel or decrease in individual performance #@# Thompson Hierarchy Speclzn & Org Conflict Adm Sci Q 5#4 3/61 p485 Abstract.. Specifically, intraorganizational conflict, to the extent that it is organizationally determined, is a function of (1) disagreement over necessity of authoritatively created interdependence, (2) growing disparity between rights ad abilities, (3) scalar status violations involve din technologically created interdependencies, and (4) differentiation of values and reality perceptions brought about by the controls over interpersonal communication exercised by the hierarchical system, the ststus system, and the technical system (specialization) #@# Argyris Personality and Organizations Harper 1957 LC 57-11116 p39 conflict harms a person's personality when the personality uses incorrect ways of dealing witht he conflict. Conflict when dealt with correctly, is an experience of growth for the personality p41 One of the common results of regression is aggression.. Guilt is, therefore, aggression from ourselves to ourselves.. Sometimes the conflict is not resolved but the person continues to live by making another choice which is "second best".. list of the reasons and then pick.. on a conscious level.. when the personality is healthy and the conflict is not strong p42 denial is that the employees do not allow what has been said to penetrate into their consciousness.. Repression is thus forcing down into the unconscious that part of a threat which we do not like.. suppression we push things into the unconscious and generally know.. inhibition the person purposely and knowingly refrains p43 converting his difficulty into a physical problem.. resolves his fear of not being able to to do something by working so hard that he accomplishes his goal and usually goes way beyond.. Rationalization occurs when we an alibi is created for otherwise untenable behavior.. Identification refers to the desire to be like someone else p44 projection is a mechanism whereby we "see" in other people a quality which would embarass us greatly if we were to admit it as our own.. constant rejection and acceptance and never coming to a conslusion is called vacillation.. People attempt to resolve some conflict situations by hating and liking the same person who is the focus of the threat.. Every slip of the toungue has some meaning p78 may adapt by: (1) Regressing, ie, becoming less mature and less efficient (2) Giving up and leaving the situation (3) Becoming agressive, hostile, and attacking what is frustrating him. Developing a tendency to blame others (4) Remaining frustrated by doing nothing.. Failure may cause the employee to: (1) Lose interest in his work (2) Lose self-conflidence (3) Give up quickly (4) Lower work standards (5) Fear new tasks (6) Expect more failure (7) Develop a tendency to blame others p120 Turning to the impact of the organization upon the individual, we may begin to wonder what kind of an individual would feel adapted and adjusted on the job. In a preliminary analysis by Argyris of interviews of 10 assembly line workers who were judged to be adapted and adjusted, it was found that they tended top have the following personal characteristics: a. THey value money as most important. Seniority is second most important. b. They all perceive themselves as having poor education. c. THey are unable to perform several different things at the same time. "I can use a screwdriver, but I can't talk at the same time." d. They aspire to doing the minimum quantity of work. They do not tend to aspire for quality work. They do not feel badly about doing work that is of poor quality. e. They tend to desire to be isolated and alone. They express no desire for group cohesiveness or "we-feeling". They are not loyal to their company and would leave to go to another if they could be guaranteed a few cents more and their present seniority g. THey feel satisfied with the foreman because they hardly see him and he hardly contacts them. h. THey tend to be satisfied with the working conditions i. They are hardly ever late or absent from work. j. They tend to dislike changes and are very rigid in their attitudes. They place a great deal of emphasis on predictability and surety in life. Change tends to threaten them p133 [Whyte Money & Motivn p37 Harper 1955; Meltzer, Am J Orthopsy 26#2 4/56 pp 394-400] Piece work has a chance to succeed: 1. When outcome is reasonably possible, but not completely certain. Piecework will tend to fail: 2. If quota earnings seem clearly unattainable... the worker abandons the goal. 3. If quota is completely predictable and certain, the work becomes monotonous and meaningless. 4. If ahievement depends upon factors outside worker's control. Conclusions of researchers on psychological success: 1. Barrier tot he goal must be strong enough to require effort but not so strong as to prevent achievement. 2. Same as above. 3. The barrier is so weak that no sense of success is achieved by overcoming it. 4. Barrier must be overcome and goal achieved through individual's own effort. Help or hindrance from outside leads to failure p233 lack of congruency between the needs of healthy individuals and the demands of formal organizations.. resultants of this disturbance are frustration, failure, short time perspective, and conflict p234 disturbance in the organization will tend to increase.. as the individual agents increase in degree of maturity.. dependence, subordination and passivity increase.. down the chain of command.. directive leadership.. controls.. specialized.. exactness.. The nature of the formal principles of organization cause the subordinate, at any given level, to experience competition, rivalry, inter-subordinate hostility, and to develop a focus on parts rather than the whole p235 The employee adaptive behavior maintains self-integration and impedes integration with the formal organization.. THe adaptive behvior of the employee has a cumulative effect, feedbacks into the organization, and reinforces itself p236 Certain management reactions tend to increase the antagonisms underlying the adaptive behavior p237 Other management actions can decrease the degree of incongruency between the individual and formal organization.. Job or role enlargement and employee-centered leadership will not tend to work to the extent that the adaptive behavior.. has become embedded in the organizational culture and the self-concept of the individuals.. minimized by the use of reality-centered leadership #@# Argyris Mgt&Org Dvp 1971 MGH 07-002219-4 p133 Behavior tending to be more frequent: Owning up to ideas, Conforming to ideas, Concern for ideas, Openness to ideas, Not helping others to express ideas and feelings, Inconsistent behavior; Behavior tending to be less frequent: Owning up to feelings, Individuality of ideas, Helping others to express ideas, Consistent behavior; Rarely observed behavior: Experimenting with ideas or feelings, Concern for feelings, Trust of ideas or feelings, Helping others to express feleings.. Under stress, groups seemed to magnify their pattern rather than change p169 personal causation and responsibility. If that is low, then externally induced change (eg, changes in the organizational structure) will tend to be effective.. Where effective change does depend upon individual's personal responsibility, changes in interpersonal relationships are necessary before structural changes can be introduced p170 The further one goes down the hierarchy, the higher the probability that the potent variables will be found in the technology, administrative controls, and organizational structure. The higher one goes up the hierarchy, the greater the probability that the potent variables will be found in interpersonal and group relations (perhaps administrative controls if one thinks of financial controls) p195 willingness and internal commitment may not be sufficient.. An executive group requires continual help, especially in three critical areas. They are (1) giving and receiving valid information; (2) creating effective group behavior and norms; and (3) designing new kinds of organizational structures, managerial controls, and reward systems that reinforce the new behavior so that the managerial behavior, the organizational structure, etc., become congruent with the OD philosophy #@# Argyris Personality & Org Thry Revis Adm Sci Q 18#2 1973 p141 Organnizations come into being when goals to be achieved are too complex for any one individual p151 Hackman and Lawler defined six dimensions of jobs. They are variety, autonomy, task identity, feedback, dealing with others, and friendship opportunities ([J App Psy mgrf55]1971;256) They identified the first four as core dimensions. THese core dimensions are the higher order need items reconceptualized in terms of job characteristics.. higher jobs are on core dimensions, the more employees tend to report feeling internal pressures to take personal responsibility and do high-quality work.. higher intrinsic motivation.. control over one's own work, feeling of worthwhile accomplishment, personal growth, and self-esteem p155 those with jobs in the higher occupational classes selected more active recreational pursuits while those in the lower occupational classes selected more passive recreational pursuits (Parker, 1971[Praeger]; 60) p159 Personality and organization theory predicts that the younger people (more oriented toward self-actualization) will find increasingly intolerable those organizatins that do not encourage people to aspire toward relative independence, psychological success, and the expression of their feelings and their abilities. THis prediction is congruent with Maslow's, where he states that as a society progresses tot he point that survival and security needs are fulfilled, then the desire will be to express more of the higher order needs (Maslow, 1970).. Over time such individuals resolve their self-actualizing tendencies by any one or a combination of approaches: suppressing them, denying them, or distorting them p162 degree of deprivation on the job signiicantly influences the kind of fulfillment employees seek outside their job #@# HBR 12/01 79#11 Kotter What Leaders really do p104 Management is about coping with complexity.. Leadership by contrast is about coping with change p105 Planning works best not as a substitute for direction setting but as a complement to it. A competent planning process serves as a useful reality check on direction-setting activites p107 Leadership is different. Achieving grand visions always requires an occassional burst of energy. Motivation and inspiration energize people, not by pushing htem in the right direction as control mechanisms do but by satisfying basic human needs for achievement, a sense of belonging, recognition, self-esteen, a feeling of control over one's life, and the ability to live up to one's ideals. Such feelings touch us deeply and elicit a powerful response p109 Depsite the increasing importance of leadership to business success, the on-the-job experiences of most people actually seem to undermine the development of attributes needed for leadership p111 Corporations that do a better-than-average job of developing leaders put an emphasis on creating challenging opportunities for relatively young employees #@# Crucibles of Leadership. Bennis, Warren Thomas, Robert Harvard Business Review; Sep2002, Vol. 80 Issue 9, p39-45, one of the most reliable indicators and predictors of true leadership is an individual's ability to find meaning in negative events and to learn from even the most trying circumstances. Put another way, the skills required to conquer adversity and emerge stronger and more committed than ever are the same ones that make for extraordinary leaders.. A crucible is, by definition, a transformative experience through which an individual comes to a new or an altered sense of identity.. did not allow his spirit to be broken.. certain that absolutely nothing in his professional life could break him.. Dickerson set the highest standards for Jones, especially in the area of communication skills- a facility we've found essential to leadership.. His mentor also expected the teenage Jones to speak correctly at all times and would hiss discreetly in his direction if he stumbled. Great expectations are evidence of great respect, and as Jones learned all the complex, often subtle lessons of how to succeed, he was motivated in no small measure by his desire not to disappoint the man he still calls "Mr. Dickerson.".. We believe that great leaders possess four essential skills, and, we were surprised to learn, these happen to be the same skills that allow a person to find meaning in what could be a debilitating experience. First is the ability to engage others in shared meaning.. Second is a distinctive and compelling voice.. Third is a sense of integrity (including a strong set of values).. But by far the most critical skill of the four is what we call "adaptive capacity." This is, in essence, applied creativity-an almost magical ability to transcend adversity, with all its attendant stresses, and to emerge stronger than before. It's composed of two primary qualities: the ability to grasp context, and hardiness.. Hardiness is just what it sounds like the perseverance and toughness that enable people to emerge from devastating circumstances without losing hope.. It is the combination of hardiness and ability to grasp context that, above all, allows a person to not only survive an ordeal, but to learn from it, and to emerge stronger, more engaged, and more committed than ever. These attributes allow leaders to grow from their crucibles, instead of being destroyed by them-to find opportunity where others might find only despair. This is the stuff of true leadership. #@# Leadership Yukl 1981 PH 0-13-527176-2 p11 Table 2-1 Typology of Different Forms of Influence Form of Influence Agent Requirements Target Person Requirements 1. Legitimate Request Legitimate Justification Relevant Values 2. Intrumental Control over Rewards; Relevant Needs, Openness Compliance Credibility of Promise to Manipulation 3. Coercion Control over Punishments; Fear,Openness to Intimidation Credibility of Threat 4. Rational Insight; Technical Relevant Values and Needs Persuasion Expertise; Persuasive Ability 5. Rational Faith Technical Expertise; Low Expertise, Relevant Need; Credibility Trust of Agent 6. Inspirational Insight into Values and Relevant Values and Beliefs Appeal Beliefs; Persuasive Ability 7. Indoctrination Control of Social Situation; Alienation, Relevant Needs Relevant Skills 8. Information Credibility as Information Use of Information for Distortion Source Impression Formation and Decision Making 9. Situational Control of Relevant Aspects Willingness to Engineering of Situation Accept Situation 10. Personal Attractiveness, Charisma Admiration of Agent Identification 11. Decision Willingness to Allow Desire to Participate, Identification Participation; Relevant Goals Consistent with Skills Agent Goals p45 Table 3-2 Major Sources of Leader Influence over Subordinates and Likely Outcomes Source of Leader Type of Outcome Influence Commitment Compliance Resistance REFERENT LIKELY** POSSIBLE POSSIBLE POWER If request is believed If request is If request is for to be important to perceived to be something that will leader unimportant to bring harm to leader leader EXPERT LIKELY** POSSIBLE POSSIBLE POWER If request is persuasive If request is If leader is arrogant and subordinates share persuasive but and insulting, or leader's task goals subordinates are subordinates oppose apathetic about task goals task goals LEGITIMATE POSSIBLE LIKELY** POSSIBLE POWER If request if polite If request or If arrogant demands and very appropriate order is seen as are made or request legitimate does not appear proper REWARD POSSIBLE LIKELY** POSSIBLE POWER If used in a subtle, If used in a If used in a very personal way mechanical, manipulative, arrogant impersonal way way COERCIVE VERY UNLIKELY POSSIBLE LIKELY*** POWER If used in a helpful,If used in a hostile nonpunitive way or manipulative way pp73-4 Table 4-2 Most Effective Trait Predictors of Managerial Advancement.. Trait Description Correlation 1. ORAL COMMINATION SKILL: How good this person would be in .33** presenting an oral report to a small conference group on a well-known subject 2. HUMAN RELATIONS SKILL: How effectively this person can lead a .32** group to accomplish a task without arousing hostility 3. NEED FOR ADVANCEMENT: How much this person wants to be promoted .31** significantly earlier than his or her peers 4. RESISTANCE TO STRESS: How well this person's work performance will .31** stand up in the face of personal stress 5. TOLERANCE OF UNCERTAINTY: How well this person's work performance .30** will stand up under uncertian or unstructured conditions 6. ORGANIZING AND PLANNING: How effectively this person can organize .28** his or her work and plan ahead 7. ENERGY: How continuously this person can sustain a high level .28** of work activity 8. CREATIVITY: How likely this preson is to solve a management .25** problem in a novel way 9. RANGE OF INTERESTS: The extent to which the person is interested in.23* a variety of fields of activity,such as science,sports,music,and art 10.INNER WORK STANDARDS: The extent to which the person wants to do a .21* good job, even if lesser performance is acceptable to his or her boss and others 11.BEHAVIORAL FLEXIBILITY: How readily this person,when motivated,can .21* modify his behavior to reach a goal 12.NEED FOR SECURITY: The extent to which this person desires a -.20* secure job 13.ABILITY TO DELAY GRATIFICATION: The extent to which this person -.19* is able to work over long periods without great rewards to attain later rewards 14.DECISION MAKING: The person's readiness to make decisions, and .18* the quality of his or her decisions 15.PRIVACY OF WORK: The extent to which this person finds .18* satisfactions from work more important than satisfactions from other areas of life 16.GOAL FLEXIBILITY: The ability of the person to change his life -.18* goals in accordance with reality opportunities SOURCE: Adapted from: D W Bray, R J Campbell and D L Grant, Formative Years in a Business: A Long Term AT&T Study of ManagerialLives, New York: John WIley & Sons, Inc. 1974 *p<.05 **p<.01 p107 Table 5.3 Definition of Leadership Scales [Stodgill 1974 p143] CONSIDERATION: rgeards the comfort, well-being, status, and contributions of his followers. INITIATION OF STRUCTURE: clearly defines own role, and lets followers know what is expected. REPRESENTATION: speaks and acts as the representative of the group. DEMAND RECONCILIATION: reconciles conflicting organizational demands and reduces disorder to the system. TOLERANCE OF UNCERTAINTY: is able to tolerate uncertainty and postponement without anxiety or upset. PERSUASIVENESS: uses persuasion and argument effectively; exhibits strong convictions. TOLERANCE OF FREEDOM: allows followers scope for initiative, decision, and action. ROLE RETENTION: actively exercises leadership role rather than surrendering leadership to others. PREDICITIVE ACCURACY: exhibits foresight and ability to predict outcomes accurately. PRODUCTION EMPHASIS: applies pressure for productive output. INTEGRATION: maintains a closely knit organization; resolves intermember conflicts. INFLUENCE WITH SUPERIORS: maintains cordial relations with superiors; has influence with them; is striving for higher status pp192-8 GUIDELINES FOR DETERMINING THE RELEVANCE OF SPECIFIC BEHAVIORS.. Performance Emphasis.. When subordinate errors and quality deficiencies are costly.. direct competition with other units.. unit is highly interdependent.. failure to meet deadlines.. would seriously disrupt.. leader is under extreme pressure from higher management.. subordinates are not highly motivated.. / .. Consideration.. work is boring.. subordinates lack self-confidence.. depend on the leader for support and encouragement.. strong affiliation needs.. acceptance by the leader.. leader is in close proximity to subordinates.. interact frequently with them.. subordinates have substantial counterpower.. / .. Inspiration.. Commitment (eg enthusiastic effort, self-sacrifice, initiative) is essential.. work is difficult and frustrating.. dangerous.. ideals and values that are relevant.. competition with other units.. / .. Praise-Recognition.. leader is able to obtain reliable information about subordinate performance.. subrodinates are not able to get much feedback.. from the work itself or from clients.. subordinates lack self-confidence.. / .. Structuring Reward Contingencies.. leader has substantial authority.. subordinates value the rewards.. performance outcomes are primarily determined by subordinate effort and skill.. possible to measure subordinate performance accurately.. work is repetitive, boring, and tedious.. / .. Decision Perticipation.. subordinates possess relevant knowledge.. share the leader's concern.. adequate time.. group of subordinates is small and working in close proximity.. unlikely to accept an autocratic.. / .. Autonomy-Delegation.. competent professionals.. performance can be measured.. without close supervision.. errors.. not extremely costly.. leader is overloaded.. subordinates have strong needs for achievement.. / .. Role Clarification.. subordinates lack experience.. work is complex and unstructured.. organization has elaborate rules.. many short tasks.. frequently give new assignments to subordinates.. changes in the nature of the work or the organization of activities require a redefinition of subordinate work roles.. /.. Goal Setting.. objective performance indicators are available for use in setting specific goals.. performance outcomes are highly dependent on subordinates.. moderate amount of achievement motivation to be aroused by challenging goals and deadlines.. / .. Training-Coaching.. complex and highly technical.. experience.. technology is changing.. skill deficiencies.. frequently.. train ne subordinates.. high turnover.. new responsibilities and advance to higher positions.. / .. Information Dissemination.. changing policies.. strongly affected by developments in other parts of the organization.. deals diretly with outside organizations.. leader has exclusive access to important information.. crisis or emergency.. / .. Problem Solving.. hostile environment.. competitiors and external opponents.. inadequate equipment, inappropriate procedures, delays.. disruptions.. equipment breakdowns, supply shortages.. / .. Planning.. activities must be sequenced.. several types of tasks.. contingency plans.. sharp variations in the demand.. / .. Coordinating.. interdependent tasks.. synchronization of actions.. sequentially.. turns using the same equipment.. need for uniform practices.. number of interdependent subordinates.. large.. / .. Work Facilitation.. large variety and amount of supplies.. support services.. information, approvals, cooperation.. /.. Representation.. competing with other units for scarce resources.. highly dependent on other.. lobbying and public relations efforts are necessary to obtai support and resources for the unit from superiors and/or outside sources.. negotiate agreements and contracts directly with outside organizations.. / .. Internal Facilitation.. close proximity.. highly interdependent.. unit is large.. highly mobile.. cooperation and teamwork are essential.. / .. Conflict Management.. subordinates are in copetition with each other.. interdependent jobs.. differnt values.. / .. Criticism-Discipline.. dangerous substances.. compliance with rules.. subordinates are likely to ignore rules p244 Table 9-1 Major Types of Leadership Behavior in Decision Groups Task-Oriented Behavior Specific Objective 1. Initiating-Structuring Guide and Sequence Discussion 2. Stimulating Communication Increase Information Exchange 3. Clarifying Communication Increase Comprehension 4. Summarizing Check Understanding and Monitor Progress 5. Consensus Testing Check on Agreement Group-Maintenance Behavior Specific Objective 1. Gatekeeping Increase and Equalize Participation 2. Harmonizing Reduce Tension and Hostility 3. Supporting Prevent Withdrawal 4. Standard Setting Regulate Behavior 5. Process Analyzing Discover and Resolve Process Problems #@# Ten Fatal Flaws That Derail Leaders. Zenger, Jack 1 Folkman, Joseph 2 Harvard Business Review; Jun2009, Vol. 87 Issue 6, p18-18, 2/3p The worst leaders: Lack energy and enthusiasm They see new initiatives as a burden, rarely volunteer, and fear being overwhelmed.. They live by the mantra "Underpromise and overdeliver.".. They believe their only job is to execute.. Have poor judgment.. They avoid peers, act independently, and view other leaders as competitors.. They set standards of behavior or expectations of performance and then violate them. They're perceived as lacking integrity.. They reject suggestions from subordinates and peers.. Don't learn from mistakes.. They make sins of both commission (they're abrasive and bullying) and omission (they're aloof, unavailable, and reluctant to praise). Fail to develop others #@# Salancik Pfeffer Power Strategic-contingency Org DYn 1977 (5) 3-21 p3 "political" power, far from being a dirty business, is, in its most naked form, one of the few mechanisms available for aligning an organization with its own reality. However, institutionalized forms of power - what we prefer to call the cleaner forms of power: authority, legitimization, centralized control, regulations, and the mor emodern "management information systems" - tend to buffer the organization from reality, and obscure the demands of its environment. Most great states and institutions declined, not because they played politics, but because they failed to accomodate to the political realities they faced. Political processes, rather than being mechanisms for unfair and unjust allocations and appointments, tend toward the realistic resolution of conflicts among interests. And power, while it eludes definition, is easy enough to recognize by its consequences - the ability of those who posses power to bring about the outcomes they desire p7 Power is shared in organizations out of necessity more than out of concern for principles of organizational development or particiaptory democracy. Power is shared because no one person controls al the desired activites.. power derives from the activities desired in an organization p8 The amount of power an individual has at any one time depends, not only on the activities he or she controls, but also on the existence of other persons or means by which the activities can be achieved and on those who determine what ends are desired and, hence, on what activities are desired and ciritical for the organizations p17 "job" to be done has a way of expanding itself until it becomes less and less clear what the job is.. power tends to take on institutionalized forms that enable it to endure beyond its usefulness #@# Salancik Commitment is too easy Org Dyn 1977 (6) 62-80 p62 Commitment is a state of being in which an individual becomes bound by his actions and through these actions to beliefs that sustain the activities and his own involvement. COmmitment is ubiquitous, so common that we are often unaware of its constraining effects and its subtle control over our behavior. Commitment is what makes us like what we do and continue doing it, even when the payoffs are not obvious p63 sustain us in the cafe of difficulties.. outcomes are uncertain p64 Three characteristics bind an individual to his acts and hence commit him. They are the visibility, the irrevocability, and the volitionality of the behavior p69 Without volition, a behavior is not necessarily committing, for the person can always assert that he really did not cause the behavior himself p71 One significance of myths lies in justifying actions that otherwise might appear senseless and meaningless p74 Participation undercuts opposition and objections. When this is true, goals are more likely to be accomplished. Involving persons or groups in the design of a project or policy ensures their support. Their hand leaves its imprint not only on the design but on them p77 only places them in the position of having to justify a position that is being attacked.. allow a person to become committed to his objections in the first place.. Instead, the manager should let the person keep track of the problems with the new program on his own and should not ask for a report.. coomunicate only expectations that he thinks the program is workable p78 constanty reminded of the money they are paid.. do not evaluate the job on the intrinsic features p79 public statement regarding your position is being made, and while it is clear at the time that it comes from someone else, if you sit idly by, it will be taken by all - including yourself - as your opinion.. distancing and segregating personal responsibilitis plays an important role in reducing other persons' commitments when they are no longer desirable.. loosening a person's commitment to a position is t provide him with substantial external justifications for his position p80 commitment is a strikingly powerful and subtle form of coopting #@# Salancik Pfeffer Soc Info Job Att Task Dsn Adm Sci Q 23#2 1978 p228 Perception is a retrospective process: though the experienc eis immediate, it derives from recall and reconstruction. An object exposed to the individual is coded and briefly stored in short-term memory, where it will deteriorate unless renewed by active coding processes or transferred into long-term memory p232 Instead of proposing that individuals have an inherent need to make sense of their activities, one could argue that the tendency for them to do so derives from the demands and constraints of their social environment for meaningful and justifiable behavior p237 A given culture may add external rewards and pressures to tasks to compensate for the culturally devalued properties of such tasks. Such practices may lead to a generalized negative association between paying for the task and its inherent enjoyment p245 person who takes a job because it is the only one available will be less satisfied than one who picks it from several offers p249 (1) workers, when committed to a situation or responsible for it, can find satisfaction and meaning in it; and (2) the critical varaible in positive job attitudes is the construction of the environment and the appropriate attitudinal responses. Again satisfaction is partly outside the control of the individual, but the capability to restructure and adapt to situations cognitively is more explicitly recognized.. Even the setting of the questioning may affect the responses. Asking about work when one is enjoying hte fruits if that work, such as sailing a boat, may elicit a different response than if the attitude is sought while the individual is hard at work at the task that led to the wherewithal to purchase the boat #@# John Kotter Power, dependence HBR 7/77 p126 manager can be dependent in varying degrees on superiors, subordinates of peers, outside suppliers, customers, competitors, unions, regulating agencies p128 Successful managers cope with their dependence on others by being sensitive to it, by eliminating or avoiding unnecessary dependence, and by establishing power over those others. Good managers then use that power to help them plan, organize, staff, budget, evaluate, and so on. In other words, it is primarily because of the dependence inherent in managerial jobs that the dynamics of poer necessarily form an important part of a manager's process p133 Methods of influence Face-to-face methods What they can influence Advantages Drawbacks Excercise obligation-based Behavior within zone Quick. Requires If the request is outside the power that the other perceives no outlay of acceptable zone, it will fail; as legitimate in light tangible resources if it is too far outside, others of the obligation might see it as illegitimate Excercise power based on Attitudes and behavior Quick. Requires If the request is outside the perceived expertise within the zone of no outlay of acceptable zone, it will fail; perceived expertise tangible resources if it is too far outside, others might see it as illegitimate Excercise power based on Attitudes and behavior Quick, Requires no Restricted to influence attempts identification with a that are not in conflict expenditure of that are not in conflict with the manager with the ideals that underlie limited ideals that underlie the the identification resources identification Excercise power based on Wide range of behavior Quick. Can often Repeated influence attempts perceived dependence that can be monitored succeed when other encourage the other to gain methods fails power over the influencer Coercively exercise power Wide range of behavior Quick. Can often Invites retaliation. based on perceived depenedence that can be easily succeed when other Very risky. monitored methods fail. Use persuasion Very wide range of attitudes Can produce internalized Can be very and behavior motivation that does not time-consuming. require monitoring. Requires other Requires no power or people to listen outlay of scarce material resources Combine these methods Depends on the exact Can be more potent and More costly than using combination less risky than using a single method a single method Indirect methods What they can influence Advantages Drawbacks Manipulate the other's Wide range of behavior Can succeed when face-to-face Can be time-consuming. environment by using any and attitudes methods fail Is complex to implement. or all of the face-to-face Is very risky, especially if methods used frequntly Change the forces that Wide range of behavior and has continuous influence, Oftenr equires a continuously act on the individual; attitudes on a not just a one-shot effect. considerable power outlay Formal organizational arrangements. continual basis Can have a very powerful impact. to achieve Informal social arrangements Technology Resources available Statement of organizational goals #@# Finding Your Innovation Sweet Spot. Goldenberg, Jacob 1 Mazursky, David 2 Horowitz, Roni 3,4 Levav, Amnon 5 Harvard Business Review; Mar2003, Vol. 81 Issue 3, p120-129, MARKETERS WILL TELL YOU that the best sources of new product ideas are customers, both current and potential. Increasingly, though, we're seeing that customers lack the imagination to envision innovative products that address their emerging, or even existing, needs or desires.. systematic inventive thinking. It represents a complete overhaul of traditional brainstorming, replacing the creative free-for-all with a highly disciplined "inside the box" approach to idea generation. And, unlike most new product development methods, it starts with an existing product and its characteristics rather than with customers and their unmet needs. The method's main thrust: Don't just listen to the voice of your customers; listen to the voice of your product.. You begin by listing the essential elements of a product, both its physical components and its attributes.. manipulate these elements to come up with something new.. emerges initially seems more bizarre.. At the core of our process are the five innovation patterns.. Subtraction.. Multiplication.. Division.. Task Unification.. Attribute Dependency Change.. Function Follows Form.. The patterns of innovation work the same way: They upset developers' assumptions about the fixedness of products.. #@# Playing Around with Brainstorming. Schrage, Harvard Business Review; Mar2001, Vol. 79 Issue 3, p149-154, The Art of Innovation: Kelley.. The ability to generate "effective surprise.".. "Aha ... of course!".. far less about the art of innovation than about a culture of innovation. Practically every page and paragraph reflects the cultural values that make IDEO a uniquely innovative organization. How IDEO brainstorms, how it rapidly prototypes both ideas and products, how it sets up and runs design teams-- all are the antithesis of a cookie-cutter, replicable process. What's more, the people IDEO (carefully) hires either enjoy the firm's crazy "We-need-ten-ideas-a-minute-and-don't -forget-the-deadline-for-the -design-is-Wednesday" atmosphere or else they don't last. IDEO succeeds precisely because it's not typical.. The sad fact confronting Kelley is that most organizations--including some of IDEO's clients-- seem more comfortable going through the methodological motions than making the cultural commitment that ongoing innovation demands.. In reality, most organizations don't practice brainstorming with the frequency, intensity, or sincerity that IDEO believes is required for innovation.. As long as they share the underlying faith, people are encouraged to question any and all assumptions about what innovation means. In IDEO's culture, you aren't innovative unless you are challenging the client's, the team's, and your own preexisting notions.. This dichotomy calls to mind the terrific line of Ethernet inventor and 3Com founder Bob Metcalfe: "Invention is a flower; innovation is a weed." Invention is about the challenge of bringing something new to life; innovation is the challenge of spreading something new so that it becomes a marketplace presence #@# Networked Incubators. Hansen, Morten T.^1 Chesbrough, Henry W.^1 Nohria, Nitin^2 Sull, Donald N.^1 Harvard Business Review; Sep/Oct2000, Vol. 78 Issue 5, p74-84, When properly designed, networked incubators combine the best of two worlds- the scale and scope of large, established corporations and the entrepreneurial spirit of small venture-capital firms - all while providing unique networking benefits.. incubators offer preferred rates and terms from top-tier service providers.. Many start-up managers report spending upwards of half their time in the first six to nine months setting up the basic infrastructure to run their businesses.. preferential access to a network of companies #@# Getting Unusual Suspects to Solve R&D Puzzles. Lakhani, Karim R. 1 klakhani@hbs.edu Jeppesen, Lars Bo 2 lbj.ivs@cbs.dk Harvard Business Review; May2007, Vol. 85 Issue 5, p30-32, For even the toughest of R&D problems, there are often people out there with innovative solutions already on their shelves or in their back pockets. The trick for corporate executives is finding and gaining access to those individuals. Our research with a company that broadcasts technological problems into the ether -- and gets back solid results -- has given us a profile of the kind of people most likely to solve R&D puzzles.. Open-source software communities have shown that broadcasting technical conundrums to a broad network of individuals can yield effective solutions. Open-source problem solving has now migrated beyond software to industries as diverse as custom integrated circuits, biotechnology, pharmaceuticals, content production, and music. #@# Mtg Challenge of Disruptive Change Christiansen & Overdorf HBR 3/00 p72 Sustaining technologies are innovations that make a product or service perform better in ways that customers in the mainstream market already value.. Disruptive innovations create an entirely new market through the introduction of a new kind of product or service, one that's actually worse, initially, as judged by the performance metrics that mainstream customers value.. Sustaining innovations are always developed and introduced by established industry leaders.. But those same companies never introduce - or cope well with - disruptive innovations p73 managers must create a new organizational space.. three possible ways.. new organizational structures.. spin out an independent organization.. acquire a different organization whose processes and values closely match the requirements of the new task p76 first determine whether they have hte resources required to succeed.. Does the organization have the processes and values it needs to succeed in this new situation?.. very capabilities tah make their organizations effective also define their disabilities.. Are the processes by which work habitually gets done in the organization appropriate for this new problem? And will the values of the organization cause this initiative to get high priority or to languish?.. The reason that innovation often seems to be so difficult for established companies is tha thay employ highly capapble people and then set them to work within organizational structures whose processes and values weren't designed for the task at hand #@# Value Innovation. Kim, W. Chan 1 Mauborgne, Renée 2,3 Harvard Business Review; Jul/Aug2004, Vol. 82 Issue 7/8, p172-180, Section: BEST OF HBR 1997 First, they must identify and articulate the company's prevailing strategic logic. Then they must challenge it. They must stop and think about the industry's assumptions, the company's strategic focus, and the approaches- to customers, assets and capabilities, and product and service offerings- that are taken as given. Having reframed the company's strategic logic around value innovation, senior executives must ask the four questions that translate that thinking into a new value curve: Which of the factors that our industry takes for granted should be eliminated? Which factors should be reduced well below the industry's standard? Which should be raised well above the industry's standard? Which factors should be created that the industry has never offered? #@# Managing Strategic change J B Quinn Sloan Mgt Rvu Summer 80 21#4 p4 Early signals may come from anywhere and may be difficult to distinguish from the background "noise" of ordinary communications.. Effective change managers actively develop informal networks to get objective information p8 Barring a major crisis, a frontal attack on an old strategy could be regarded as an attack on those who espoused it - perhaps properly - and brought the enterprise to its present leve of success p9 Logic dictates, therefore, that managers purposely design flexibility into their organizations and have resources ready to deploy incrementally as events demand.. Very often the specific strategy adopted depends on the timing or sequence of such random events [cf Yavitz strategic opportunism] p13 Radical crusades become the new conventional wisdom, and over time totally new issues emerged. Participants or observers were often not aware of exactly when a particular decision had been made or when a subsequent consensus was created to superses or modify it; the proces sof strategic change was dynamic.. In the large enterprises observed, strategy formulation was a continuously evolving analytical-political consesnus process with neither a finite beginning nor a definite end p14 Top executives deliberately manage the incremental process within each subsystem to create the basis for consesnus. They also manage the coalitions that lie at the heart of most controlled strategy developments. They recognize that they are at the confluence of innumerable pressures - from stockolders, environmentalists, governmnet bodies, cutomers, supliers, distributors, producing units, marketing groups, technologists, unions, special issue activists, individual employees, ambitious executives, and so on - and that knowledgeable people of goodwill can easily disagree on proper actions. In response to changing pressures and coalitions among these groups, the top management team constantly forms and reforms itsown coalitions on various decisions #@# Mgg Innov: Controlled chaos J B Quinn HBR 5/86 p73 sheer number of attempts - most by small-scale entrepreneurs - means that some ventures will survive. The 90% to 99% that fail are distributed widely throughout society and receive little notice. On the other hand the big comapny that wishes to move a concept from invention tot the marketplace must absorb all potential failure costs itself [Milton Friedman disagrees] p74 new companies do not face the psychologicla pain ans the economic costs of laying off employees, shutting down plants and even communities, and displacing supplier relationships built with years of mutual commitment and effort.. COmpany founders tend to be pioneers in their technologies and fanatics when it comes to solving problems. THay are often described as "possessed" or "obsessed,".. THeir fanticism may cause inventor-entrepreneurs to underestimate the obstacles and length of time to success.. Innovators tend to work in homes, basements, warehouses, or low-rent facilities p76 Only highly committed entrepreneurs can tolerate (and even enjoy) this chaos p77 Continuous innovation occurs largely because top executives appreciate innovation and manage their company's value system and atmosphere to support it p78 Innovative companies tie their visions to the practical realities of the marketplace.. most innovative large companies in my sample try to keep the total organization flat and project teams small p79 Many companies structure shoot-outs among competing approaches only after they reach the prototype stages.. Every highly innovative enterprise in my research sample emulated smalle sompany proactices by using groups that functioned in a skunkworks style #@# Werther Berman Vasconcellos Fut Tec Mgt Org Dyn 22(3) 1994 p23 "fourth generation" of technology management is characterized by a seamlss stewardship that stretches from the idea stage through to the delivery of higher value added outcomes for customers. It requires the orchestration of technologies, customers, competitors, and the organization's internal social structures. Specifically, a sustainable competitve advantage comes from technologies that are proprietary, customers are "locked in," and competitors that are "locked out" through high barriers to entry and social structures that support effective strategic execution p25 Although resistance can be expected when technology is developed externally (encountering the "not-invented-here" syndrome) or is a radical departure from present technologies (engendering defensive reactions from the guardians of present technologies), these technologies may hold the greatest opportunity to realign the competitive structure of the industry. p26 chief technology officer or senior scientist as an internal technology champion. These champions serve as boundary spanners to continuously educate all levels of the organization about technology's strategice contribution. By interfacing with other executives, R&D labs, project teams, and technology managers, they facilitate an internal flow of information throughout the organization and serve senior manegemtn as internal technology consultants.. Internal resistance and informational barriers are most commonly found at departmental boundaries p27 Relative organizational resistance to technology acquisition.. Source\Type Incremental Radical Internal Low High External High Very High p28 Value chain grid.. Applications\Uses Offensive Defensive Customers Value Added Lock-in Competitor Preempt Block p30 Leading firms will continuously refine their abilities to acquire and deploy relevant technologies that have already become an integral part of corporate strategies.. Internally, emphasis will fall on the ability of technology champions to create within their organizations a higher level of receptivity that continuously embraces new technologies, regardless of their source or type, uses, or applications.. Shifting to a process orietnation that requires executives and chief technology officers to evaluate communication flows, interdepartmental cooperation, and teamwork is not easy #@# Drucker 12 Fables Research Mgt HBR 1/63 p104 But paralyzing projectitis sets in predictablly unless the number of projects is very much smaller than the number of researchers - one to five, perhaps, or even one to ten. Otherwise, research people are much too busy holding meetings about what they should go to work on ever tp do any real work, much too busy writing metaphysical memoranda on the true inwardness of research ever to do research itself p105 lazy and ineffectual PhD is perhaps a greater drain on the organization than is a lazy man without such intellectual references.. knowledge, especially of the basic kind, does not come out of industrial research unless it is focused on economic performance p106 first goal of effective research management should be to convert the maximum of research dollars into actula research time.. Of course, by climbing on th ebandwagon one avoid thse disagreeable arguments which might be caused by proposing something new, original, and therefore questionable p107 research group is not encouraged t do "preventive" research, to find new and better products to take the place of the present successful product line.. If a company does not want to "rock the boat," wouldn't i be better off having no research? At least then it would not have to pay for reseaerch.. one cannot "market research" a truly new product.. requires insight into economic, social, and technological developments, potentials, and changes, not just the present and the past #@# Rdgs Mgt Innovn Tushman & Moore 1982 Pitman 0-273-01786-1 p125 [Howard & Moore] influence the speed of diffusion. Characteristics positively related to adoption are: 1. Rekative advantage - The degree to which it is superior to competitive products. 2. Compaatibility - How consistent the innovation is with the values and experiences of potential adopters. 3. Divisibility - The degree to which it can be tried on a limited basis. 4. Communicability - The relative ease of observing and describing the benefits to others p279 [Maidique & Patch HBS Case Corp Stg & Tech Policy] Typical Functional Requirements of Alternative Technological Strategies R & D Manufacturing Marketing Finance Organization Timing First- Requires Emphasis on Emphasis on Requires Emphasis on Early-entry to-Market state of pilot and stimulating access to flexibility inaurgurates the art medium-scale primary risk over the product R & D manufacturing demand capital efficiency; life cycle encourage risk taking Second- Requires Requires Must Requires Combine Entry Early to-Market flexible, agility in differentiate rapid elements of in growth responsive setting up the product; commitment flexibility stage and advanced manufacturing stimulate of medium and efficiency R&D capability medium scale secondary to large demand quantities of capital Late-to- Requires Requires Must Requires Emphasis on Entry Market or skill in efficiency and minimize access to efficiency during Cost process automation selling and capital in hierarchical late Minimization development for distribution large control; growth and cost large-scale costs amounts procedures or early effective product production rigidly enforced maturity Market- Requires Requires Must identify Requires Flexibility Entry Segmentation ability flexibility and reach access to and control during in applications, on short- favorable capital in required growth custom engineering, medium segments medium or in serving stage and advanced runs large amounts different product design customers' requirements p350 [Tushman Sloan Mgt Rvu Winter 1979 v20] Field studies indicate that engineers and applied scientists spend between 50 and 75 percent of their time communicating ;Rosenbloom & Wolek Tek Info Indu R&D HBS 1967; Sales Mgrl Beh MGH 1964] pp359-61 [Tushman SMR79] managing communication networks.. 1. Analyze information processing requirememnts of each project based on the uncertainty posed by the task characterisitics and the task environments.. 2. Based on the information processong requirements processing requirememnts of each project, determine appropriate intra-project communication patters.. 3. Analyze information processing requirements between the project and other areas of the firm.. Based on information processing requirements between the project and other areas of the firm, choose appropriate linking mechanism.. Analyze the need for information from areas outside the firm.. 6. Based on the project's external information requirements, choose appropriate linking mechanisms.. 7. If information processing requirements facing the project change over time, then the project's communcations network must be adopted to these changes p428 [Tauber J Mktg 1977] Summary of Measurement of Sales Elements by Each Technique Sales Concept and Historical Data Laboratory Sales Wave Elements Product Tests Regression Models Test Markets Experiment Trial Purchase Past Observed Purchase intention behavior current behavior intention First Repurchase Repurchase Repurchase intention Observed Repeat intention intention or observed current current behavior behavior Adoption Not Decay function Decay function Observed measurable model- applied model or observed current to first repeat current behavior behavior Frequency Not Past behavior- Past behavior- Observed of Purchase measurable data of other data of other current products in category products in category bahavior p458 [Sales & Schmenner HBR 1/78 How Org Mfg?] Differences betwen product-focused and process-focused manufacturing organization Product focus Process focus Profit or cost Product groups Central organization responsibility: where located Size of corporate staff Relatively small Relatively large Major functions of (a) Review capital (a) Coordinating with marketing corporate staff appropriation requests (b) Facilities decisions (b) Communicate corporate (c) Personnel policies changes and requests (d) Purchasing (c) Act as clearinghouse for (e) Logistics-inventory manag.. personnel information (f) Coordination of management recruiting production schedules purchasing (g) Make versus buy, used equipment vertical integration decision management development programs (h) recruit future plant managers (d) Evaluate and reward plant managers (i) Review plant perfomace, (e) Selelct plant managers and manage career cost center basis paths - possibly across product group lines Major (a) Coordination with marketing (a) use materials and facilities responsibilities efficiently of plant (b) Facilities decisions (b) Recruit production, clerical, organizations (subject to marketing) and lower management workers (c) Purchasing and logistics (c) Training and development (d) Production scheduling of future department and inventory control and plant managers (e) Make versus buy (d) Respond to special requests (f) Recruit management from marketing within limited ranges p475 [Skinner, Mfg Corp Stg 1978 WIley] Technology Economics and Manufacturing Management Preliminary Technology Understand Equipment Physical and ----------------------------> Economics Operations process | | What it costs | | Original cost and life | Total costs (vs price) | Working capital | (vs life) | Cost mix | Cost breakdown | Support costs V Costs vs volume | What it does | (break-even) V Output/time (cycle and capacity) | Economics of scale | Quality/specs of product | Costs of product changes | What it requires | Paybacks - cash flow/ | Manning - skills, set up | equipemtn costs | numbers, operate | | Set up - changeovers down time | | Material specs | | Maintenance-building, utilities | V Certainty/uncertainty V Constraints---------------------------> Manufacturing For example, Management problems Product/meterial flexibility What must be good at Volume limitations "The Name of the Game" Spare - manning, maintenance, For example, utilities required Changes in volume Uncertainties Changes in Product (old)/(new) Quality/specs limitation Cost (key) to control Supervisory/work force management Production planning and controled use of inventory Maintenance Choice equipment /proces technologies Plant size/balance (internal) (external) Purchasing - make/buy Materials handling, transportation, location p481 [LorschORg_Dyn Autumn 1977 Org Design] Contrasting Organization Designs DESIGN DIMENSION R&D LAB MANUFACTURING PLANT Structure Spans of control Wide Narrow Number of levels Many Few in hierarchy Job definitions General and broad Specific and detailed Measurement General and less frequent Specific and frequent (for example, quarterly) (for example,daily or even hourly) Planning General and as related Specific, with detailed to goals methods Rewards Money, professional recognition, Money, scientific careers management careers Selection Qualified technically Leadership ability Interest in industrial research Process knowledge Cost analysis Scheduling and so on Training Professional conferences Human skills Quantitative skills Technology #@# Tech Innov Entrpsp & Strategy J B Quinn Sloan Mgt Rvu Spring 79 20#3 p20 system allows talented fanatics a way to pursue their ideals.. inventor/ entrepreneur is not bound to formal plans or PERT charts of progress p21 overhead costs is minimal.. FOr every success there are hundreds of failures.. Because the only solution that survives is the one that will sell, the individual inventor/ entrepreneur keeps his eyes glued to the market need p24 1. A Strong incentive existed for successful [large scale] development.. 2. A Clearly Defined Need was specified in economic/technical performance terms for the whole system.. 3. Multiple Competing Approaches.. 4. User Guidance.. 5. High Expertise.. 6. Time Horizons in successful innovative enterprises were longer than those common in their fields p25 7. Commited Champions.. 8. Top Level Risk-Taking Support.. 9. Morale-Discovery Mode #@# Maidique Entrprs Champions & Tech Innovns Sloan Mgt Rvu Winter 80 21#2 p63 Table 2 Key Roles and FUnctions According to Different Investigator Function Bower Schwartz SAPPHO Kusiatin Roberts This Article (1972) (1973) (1974) (1976) (1968,1972, 1977,1978) Business Context Context Chief - - Business Structure & Executive Definition, Definition Technological Entrepreneur Sponsorship Impetus Impetus Business Manager Sponsor, Executive Innovator, Champion, Product Champion, Product Technical Champion, Product Champion Champion Project Champion, Manager, Technological Entrepreneur Entrepreneur Technical Definition Technical Technical Technical Creative Technical Definition Definition,Innovator Champion Scientist Definiton, Factoring Technologist Technical - - - Technical Gatekeeper - Information Champion Market - - - - Market - Information Gatekeeper p64 Table 3 Definitions of Key Roles. Technological Entrepereneur: The organizer of a technological venture who excercises control of the venture (Typically by owning a substantial portion of the equity) and assumes the risks of the business. Usually he is the chief executive officer. Product Objective: A member of the organization who creates, defines, or adopts an idea for a new technological innovation and who is willing to risk his or her position and prestige to make possible the innovation's successful implmementation. Executive Champion: An executive in a technological firm who has direct or indirect influence over the resource allocation process and who uses this power to channel resources to a new technological innovation, thereby absorbing most, but usually not all, the risk of the project. Technical Definition: The basic performance requirements and associated specifications that characterize a proposal for a new technological innovation. Sponsorship: The actions by which executives channel resources to innovative projects that they have chosen to support. Business Definitions: A description of the business within which a firm chooses to compete and of the overall administrative practices that the firm will follow in that business. [Hyperbolic Product innovation curve crosses negative parabolic process innovation curve at dominant design emergence] #@# Utterbach Innovn in Indu & Diffusn Tech Sci 183#4125 15feb74 p621 From 60 to 80 percent of important innovations in a large number of fields have been in response to market demands.. most of the ideas successfully developed and implemented by any firm came from outside of the firm.. cost of originating and developing a successful innovation is a minor part (probably 15 to 30 percent) of the total cost of bringing it into use p622 stronger market orientation on the part of smaller firsm.. substantial lag, 8 to 15 years, between the time technical information is generated and the time it is used in an innovation p623 government-held patents [before Baye-Dole?] and technical reports are seldom used in a commercially or socially important application other than the specific one from which the patent or information arose.. roughly half of all information that stimulated innovations came from communications initiated by someone other than the innovator.. during problem-solving, fully 86 percent of the important information used was the result of communication initiated by the innovator.. oral sources were important both during idea-generation (45 percent of all information) and during problem-solving (32 percent of all information) p625 One possibility is to use the strategy for growth or competition evident in a firm or an industry, such as sales maximization (automotive), cost minimization (transportation, communications), performance maximization (aircraft, chemicals), or control of materials resources (mining, petroleum) as a basis for drawing distinctions #@# Brozen Invention Innovn & Imitation AER 41#2 5.51 p239 Schumpeter has pointed out that innovation (change in technological possibilites) may occur without innovation (change in th eproductive methods of technical leaders) and innovation may occur without invention p240 "Advanced" Techniques Uneconomic for Some Resource and Market Patterns. [Appropriate Technology] What happens to be an advanced technology may not be used by some enterprises because of differences in relative scarcities of resources available to different marets. In that case, different technologies are appropriate to different enterprises. No one technique can be designated as best for all different resource patterns and all scales of production. pp240-1 SEC studies have shown that the cost of raising capital is in excess of 20 per cent of the proceeds of security issues of small firms in contrast to less than 5 per cent in large firms. The cost of capital inhibits the use of "advanced" techniques by small concerns p243 Social structure may inhibit the imitation of desirable innovations. In a class-divided society, with income distributed on the basis of caste or power rather than on the basis of productivity, ther eis little incentive to invent, innovate, or imitate better technicways [sic].. Lagging technology is sometimes the result of managerial and entrepreneurial decadence p244 Yet they may fail to do so for lack of proper standards as to what constitutes best practice p257 In attacking the problem of furthering economic development, particularly in underdeveloped areas, a decision must be made as to whether effort should be lavished upon the dimunition of the gap between technological possibilites and the level to which it is economic to develop them, upon the dimunition of the gap between the level of the technological leaders and that of the technological possibilites, or upon the dimunition of the gap between the average technology of the area and that of the leaders. Here, the considerations previously described must rule. A determination must be made of whether a gap of more than an economic amount exists between leadership and the possibilites and between the average technology and that of the leaders. The efficacy of an additional unit of effort in diminishing one or the other gap must be measured and the effort then put where it can accomplish most #@# Charles W. Prather Keeping Innovation Alive After the Consultants Leave Research Technology Management 43 no5 S/O 2000 A better way to sustain innovation is to make it as much a part of the organization's value system as, say, honesty and integrity. This, in turn, requires making values "real" by taking action in the "support legs" of awards, taboos and repetitive reinforcement. The first arena is Education, and it is focused on the individual.. The second arena is Application, and it is focused on the team. Teams are formed to solve problems or to take advantage of opportunities, and a shared problem-solving process common to all team members is needed. The third arena is Environment, and it is focused on the organization.. values expressed in the behavior of the leadership. I believe strongly that the Environment arena has the greatest impact.. Ekvall's work has been further refined and validated by Scott Isaksen and others who have clarified nine dimensions of the climate for innovation.. 1. Challenge.. 2. Risk-taking.. 3. Trust and openness.. 4. Idea time.. 5. Idea support.. 6. Valuing diversity in thinking style.. 7. Freedom.. 8. Playfulness and humor.. 9. Absence of interpersonal conflicts.. 10. Debates [Isaksen, Scott G., Dorval, Brian K. and Treffinger, Donald J. Creative Approaches to Problem-Solving. Dubuque, Iowa: Kendall-Hunt Publishing Company, 1994, thinksmart.com] #@# D. Bruce Merrifield Growth Strategies for the "New" Economy Research Technology Management 43 no6 9-11 N/D 2000 The entrepreneurial process responsible for averting what otherwise would have been another serious Depression, was jump-started by the Economic Recovery Tax Act of 1981, which reduced taxes by $500 billion over the next four years, but even more importantly, also reduced the capital gains tax from 70 percent in early 1980 to 20 percent. This stimulated the creation of $35 billion of venture capital, "almost overnight," and began an explosion of new business formations, from about 200,000 to 800,000 per year.. There are three special conditions for significant commercial success and sustained growth of new Initial Public Offerings (IPOs). 1. The new product, process or service must have both a significant sales and profit potential with substantial growth projected, as well as a "first-mover" advantage. 2. The new operation should be strongly protected by patents or copyrights in order to stall market entry of "fast followers." 3. Once launched as an IPO, an already-prepared strategy needs to be in place for rapid acquisition of both pre-commercial startups and public low-price/earnings-ratio companies whose capabilities may be complementary to the new IPO operations. Given these conditions, the market tends to provide a high market capitalization and a high P/E ratio for the new business. This, in turn, permits rapid and continuous growth through acquisition, which can far exceed that which otherwise might be possible through internal resources alone. Also, the valuation of low-P/E ratio-companies acquired immediately rises to that of the acquiring company, a strong incentive for acquired personnel to cooperate. Bruce Merrifield is chairman and CEO of Pridco Management, Inc. Washington, D.C., and professor emeritus of the Wharton School of Business, University of Pennsylvania. As Assistant Secretary of Commerce for Technology and Under Secretary for Economic Affairs during the Reagan Administration, he spearheaded changes in the antitrust, technology transfer and patent laws, and put through the Malcolm Baldrige Quality Award and the National Technology Medal. He received his Ph.D. in physical organic chemistry from the University of Chicago. dr.bmerrifield@erols.com #@# Robert W. Rycroft and Don E. Kash Steering Complex Innovation Research Technology Management 43 no3 18-23 My/Je 2000 THE NORMAL PATTERN Within this pattern, managers need to: * Enhance core capabilities by improving performance. * Acquire complementary assets to exploit established core capabilities. * Engage in local learning. * Pay close attention to well-defined markets.. Speed is the key to success when incremental innovations are the dominant pattern. A premium is placed on the ability to operate with "minimum information" and that means at least two things: solve problems, but don't try to understand them, and recognize that excess information is an enemy. The network must be focused on building upon existing knowledge and skills and not be diverted by knowledge or skills that are not immediately useful.. THE TRANSITION PATTERN Here managers need to: * Expand (and eliminate) core capabilities.* Acquire complementary assets to explore new areas of core capability. * Engage in regional learning. * Balance market and non-market linkages in the selection environment.. Because the transition will cause some existing core capabilities to decline in value, some "unlearning" must take place.. THE TRANSFORMATION PATTERN Managers need to: * Create new core capabilities. * Invest in highly diversified complementary assets. * Engage in cosmopolitan learning.. * Develop strong non-market relationships.. Uncertainty is pervasive and unavoidable #@# Gregory Alexander HOW TO (ALMOST) SCHEDULE INNOVATION Research Technology Management 45 no1 31-40 Ja/F 2002 * What is the repeatability of an individual experiment? * Based on the data, is there more than one possible cause for any given observation (i.e., is it one cause or a combination of causes)? * Do inexplicable observations imply there may be "lurking" variables? That is, are there experimental variables whose values I did not consider that could have drifted from one experiment to the next and caused large differences in observed results?.. What statistical design of experiments, or SDE, offers in many cases is a methodical approach to give the maximum information, together with a measure of the uncertainty of the results, while conducting the least number of experiments. It also contributes to the likelihood that the data obtained will indeed test the hypotheses.. Prioritize the variables to be studied by making, articulating, and documenting some simplifying assumptions.. WORK-BREAKDOWN STRUCTURE (WBS) At this point, most of the work in getting to a WBS is complete. All that remains is to determine if the elements (pieces of work) are defined in enough detail for determining schedule and budget. The literature offers various criteria for making this decision. Answering yes to a set of six questions for each activity is a good way to ensure that the project can be scheduled (8). We call these the WBS criteria: * Is each activity bounded (has a clear beginning and end)? * Does each activity have a clear work product? * Is each activity independent (can proceed to completion, once begun, without need for additional input)? * Is the duration easily estimated? * Can the status of the activity be easily measured (you can tell at any time if it is 25%, 50%, 75%, 100% complete)? * Is the duration acceptable for preventing scope creep (a good rule of thumb is <2 weeks)? #@# Michael D. Santoro and Stephen C. Betts MAKING INDUSTRY--UNIVERSITY PARTNERSHIPS WORK Research Technology Management 45 no3 42-6 My/Je 2002 Moreover, while the Bayh-Dole Act has stimulated industry-university research by promoting additional investments from the private sector, many legal constraints exist.. Unfortunately, by insisting on full disclosure, universities signal the industrial community that academe is overly self-centered, rigid and unresponsive to industry's needs.. Even a university's insistence on non-exclusivity can work in the firm's favor, for instance, when a new technology requires a technology infrastructure based on a socially accepted dominant design.. With respect to revenue sharing of patents, firms often receive in the range of 1-3 percent of sales, although this depends upon the technology and the industry #@# Mel Perel CORPORATE COURAGE: BREAKING THE BARRIER TO INNOVATION Research Technology Management 45 no3 9-17 My/Je 2002 three basic requirements for success: * Creating and sustaining a supportive corporate culture. * Generating a flow of ideas. * Relying on creative champions to spark and lead breakthrough efforts.. Executive champions do not recognize corporate culture as an obstacle to innovation and are best placed to break innovation barriers.. clearly articulated goals (qualitative or quantitative) in the often fuzzy arena of breakthrough innovation will empower people to address and persevere with unusual opportunities..Ensure that potential breakthrough initiatives are funded (modestly at the outset) and are assigned a dedicated team (small at the outset). Then allow the team time and freedom to get on with the job.. apply standards fairly and consistently to select only the best ideas so that employees don't assume that rejection of ideas implies a negative innovation climate. This requires CEOs to invest considerable time and patience.. Trust and patience are key underpinnings of a supportive corporate culture.. Consider some form of vested "equity" rights to enable breakthrough innovation team members to benefit financially if developments are transferred to a different group for commercialization or are licensed out.. Learn from failures rather than punish or stigmatize them.. Focus communication about breakthrough activities on those technologies or capabilities that end-users recognize as the basis of value.. Keep initial new venture investments relatively small by seeking external sources to co-fund higher-risk breakthrough developments.. There is little correlation between stage-gate project selection and commercial success--that is, there is no assurance that a product that passes all the gates will be commercially successful [Whiteley Bean Russo RTM July-Aug. 1998, pp. 15-16.] #@# Robert Waites REINVENTING CORPORATE RESEARCH Research Technology Management 45 no4 15-22 Jl/Ag 2002 Bob Zider points out that, "Contrary to popular perception, venture capital plays only a minor role in funding basic innovation" [HBR 1199 pp. 131-139] This is because most venture fund managers are looking for businesses that can become successful in a few years. Thus, basic innovation remains the domain of government labs, universities and labs in medium and large companies. ADAPTING VC PRACTICES TO CORPORATE R&D.. In his article on "How to bring the valley inside," Gary Hamel describes the reluctance of existing companies to pursue ideas that will "kill an existing business" [Hamel HBR 9/99 pp. 71-84].. we challenge the researchers to develop effective elevator pitches for their research proposals, and challenge them to condense the value of their proposed research into a short presentation. This exercise helps them understand the essence of their ideas. Although much has been written about "phase-gate" management processes for product development, in most large enterprises the objective of "phase exit reviews" is for communication and refinement of objectives rather than making crisp "go/no-go" decisions. Venture capitalists allocate capital to start-ups in phases and insist on concrete milestones.. ask the corporate researchers to identify comparables for their work and to compare the technology and business models.. focus on growing a particular business or market segment. Often there are attractive emerging businesses that leverage existing corporate competencies.. Many of the contractors and consultants who work for start-ups will also work for existing enterprises., #@# Reorienting R&D for a horizontal future Charles Downey, Daniel Greenberg, Vivek Kapur. Research Technology Management. Washington:Sep/Oct 2003. Vol. 46, Iss. 5, p. 22-28 These are complex questions, but tools and techniques that can help businesses manage innovation are evolving quickly. Integrated product innovation.. * More-and more valuable-ideas generated by improved market planning. * Better investment decisions because of disciplined portfolio management. * Faster time-to-market through more effective pipeline management. * Greater flexibility offered by platform management. #@# ANTICIPATING DISRUPTIVE INNOVATION Jay Paap, Ralph Katz. Research Technology Management. Washington:Sep/Oct 2004. Vol. 47, Iss. 5, p. 13-22 (10 pp.) This pathological trend, described by many as the (tyranny of success-in which winners often become losers and firms lose their innovative edge-has been a worldwide dilemma.. The leadership, vision, strategic focus, valued competencies, structures, policies, rewards, and corporate culture that were all so critical in building the company's growth and competitive advantage during one period can become its Achilles heel as technological and market conditions change over time.. Not only must business organizations be concerned with the financial success and market penetration of their current mix of products and services, but they must also focus on their long-term capabilities to develop or commercialize what will emerge as the most customer- valued technical advancements into future offerings in a quick, timely and responsive manner.. Interestingly, most studies of innovation show that incumbent leaders were very aware of the new technologies that eventually disrupted their business successes [Utterback, J. Mastering the Dynamics of Innovation. Cambridge: Harvard Business School Press, 1994] In fact, the incumbents not only invested in the development of these technologies, they were often the creators or the technical pioneers of them. The watch industry provides one of the most vivid examples.. Edward Roberts, who presented an expanded flow chart complete with feedback loops in his often- cited retrospective article on the nature of Technology Management (9). [Roberts, E. B. "Managing Invention and Innovation: What We've Learned." Research-Technology Management, Jan-Feb 1988, pp. 11-29.].. Technology does not directly lead to a return; all it does is create change.. * An investment in technology creates a change (lower-right S-curve). * That change has an impact on the internal or external customer (upper-left S- curve). * The change has to take the performance to a minimum level before the customer (internal or external, current or prospective) responds-this is the leverage minimum. * At some point the customer no longer values improvements, and further investments to create change provide no return-this is the leverage limit. * The driver in a particular market segment is the performance characteristic whose leverage is the greatest and thus represents the major consideration potential customers use when selecting a process, product or service. (In most products and services there are multiple drivers, each of which must be addressed in concert).. The Nature of Technology Substitution.. * The old technology matures relative to the dominant driver.. * The previous driver matures, a new driver emerges and the old technology is unable to meet unmet needs of the new dominant driver.. * The environment changes creating a new dominant driver.. The lesson: Focus on understanding the leverage of needs and drivers, not on hunting for a technology that will change everything.. If technology planning is to anticipate "disruptive technologies," it must not start with technology but with needs, and assess how current and future customers' needs will evolve into different generations of drivers. This is done by considering the driver's leverage, not just its importance.. Of greater interest is when the new driver cannot be well served by the existing technology. In such cases there is pressure for a new technology that will satisfy the new drivers.. Understand the dynamics of innovation and substitution.. Do not ignore your customers (current or potential). However, do not focus solely on what your current customers ask for. More important, focus on what they need.. Do not abandon an old technology just because it appears mature.. Moving to newer technologies that can deliver performance at the leverage limit of the old drivers (even though below your technology's performance level) may be necessary to meet the leverage minimum of a new driver. * Implement processes that help anticipate and manage change. * Collect intelligence on changing needs, technologies, customers, and competitors. * Use planning frameworks that consider the leverage of a need-not just its importance, and that take into account technology maturity and substitution. * Ensure that project approval frameworks promote the disciplined early-stage exploration of the viability of potential new technologies. * Adopt development mechanisms that promote the dualism #@# Accelerate Radical Innovation-Now! John P Dismukes. Research Technology Management. Washington:Sep/Oct 2004. Vol. 47, Iss. 5, p. 2-3 (3 pp.) The conferees concluded that radical innovation and its importance need to be defined before it can be accelerated. While acknowledging that radical versus incremental innovation is a relative term, varying by industry, organizational culture and stage in societal development, the group nevertheless identified a self-consistent set of key factors that encourage and promote non-incremental change, and particularly major (discontinuous, disruptive) changes. These factors include technological performance, application, products, processes, markets, users, organizational behavior, speed, and societal acceptance. They will result in drastic transforming capabilities for new technology systems that lead to profitable enterprises. #@# DEVELOPING AN EFFECTIVE STRATEGY FOR MANAGING INTELLECTUAL ASSETS John Tao, Joseph Daniele, Edward Hummel, David Goldheim, Gene Slowinski. Research Technology Management. Washington:Jan/Feb 2005. Vol. 48, Iss. 1, p. 50-58 (9 pp.) Alignment Creates Value.. * Competencies of the business unit. * Needs of the market. * Required infrastructure. * Financial and human capital. * Required technologies. * Competitive environment. * Execution risks.. 1. Which internal patents support your current business? Which ones are key? 2. Which external patents could block you, now or in future? 3. Which internal patents can block your competitors, now or in future? 4. Which intellectual assets (internal and external) provide you with the freedom to practice? 5. Can you identify the IA that drive or protect market share in key areas of your business today and in the future? 6. What IP or know-how can you acquire externally? 7. What is the total value contributed by your IA in your protected products and services, licensing revenues, tax savings, and in equity of your joint ventures and other ventures? #@# ALLOCATING PATENT RIGHTS IN COLLABORATIVE RESEARCH AGREEMENTS Gene Slowinski, Matthew W Sagal. Research Technology Management. Washington:Jan/Feb 2006. Vol. 49, Iss. 1, p. 51-59 (9 pp.) Linking Patent Rights to Marketplace Intents Experienced alliance managers understand the connection between patent rights and "marketplace alignment.".. Severe problems can arise in alliances when boundaries are not clearly defined.. There are at least six reasons an alliance can be terminated: 1. The objectives of the alliance are successfully achieved and the partners want to proceed in the marketplace independently. 2. One of the partners changes its strategic direction or decides that other projects have a higher priority. 3. One of the firms identifies a more attractive partner, and wants to terminate the current alliance and create a new collaboration with a new partner. 4. One or both firms decide that the implementation results are less successful than expected and future prospects are not encouraging. 5. One partner has not performed adequately or has breached the terms of the contract. 6. One partner is acquired or merged with another firm.. While this is a complex subject, we hope to have persuaded readers of three things: 1. A clear understanding of both firms' marketplace intents should guide patent allocation negotiations with an initial focus on rights to use. 2. Combining the Intellectual Property Needs Matrix with careful thinking about alliance boundaries and the "joint versus sole" question facilitates clear understanding and communication of both firms' RTU needs. 3. Early and ongoing involvement of legal counsel in the planning and negotiation process enables optimum selection of the legal structure that maximizes the value of the collaboration. #@# BUILDING COLLABORATIVE INNOVATION CAPABILITY Morgan Swink. Research Technology Management. Washington:Mar/Apr 2006. Vol. 49, Iss. 2, p. 37-47 (11 pp.) * 3-D product information-with graphics-based mark-up ability. * Product platform, bill-of-materials and configuration data. * Product and process specifications. * Part classification/group technology for searching. * Preferred suppliers sortable by product capabilities. * Competitive product data. * Market demand and customer preference data. * Means for rapid identification of experts, posting of needs for assistance. * Workflow definitions to direct people's interactions with the data.. * Accommodate change in configuration management data and related knowledge. * Facilitate reuse of standards and practices. * Assure that all requirements remain clear, concise and valid. * Communicate changes, standards and requirements promptly and precisely. * Assure conformance in each case.. Process-oriented Key Performance Indicators: * Frequency of input to the PLM database. * Number of identifiable collaborative events: meetings, research ventures. * Number of identifiable collaborative relationships. * Traffic on electronic communication networks. Outcome-oriented Key Performance Indicators: * Number of new product ideas evaluated. * Time to development for new ideas. * Time to market for new products or process improvements. * Time to break-even for new product introductions. * Reduction in travel and overhead costs. * Revenue from new products. #@# COLLOQUIUM: Innovation and Intellectual Property Protection in the Software Industry: An Emerging Role for Patents? Winter, 2004 71 U. Chi. L. Rev. 241 Bradford L. Smith + Susan O. Mann Given the growing need for interoperability, governments have sometimes concluded that it is necessary, under carefully defined circumstances, to permit certain forms of "reverse engineering" of software programs.. Software developers and their customers typically had a direct contractual relationship with one another, and because most software programs were task-specific and customized to the customer's unique needs, vendors had little incentive to make their systems interoperable with those offered by others.. Moreover, the Register noted that software programs might, in certain circumstances, not qualify as a "writing of an author," and that programs in executable-code form might not qualify as "copies" within the meaning of the 1909 Copyright Act then in effect. n4 Given these hurdles, relatively few software developers took advantage of copyright protection for their [*244] programs.. Rather than entrenching the positions of the leading IT firms of the day, copyright protection provided the foundation for a new generation of software providers that greatly expanded the range and diversity of costeffective software options available to consumers.. In the seminal case of Apple Computer, Inc v Franklin Computer Corp, n23 for instance, the Third Circuit held that computer programs, whether in source or object code form, qualified as "literary works" under the Copyright Act and that a competitor's wholesale copying of software infringed on the original developer's copyrights in such programs.. U.S. courts generally came to endorse the view that, to the extent necessary to promote interoperability, unauthorized decompilation normally does not violate copyright.. On appeal as Lotus Development Corp v Borland International, n47 the First Circuit held that Lotus's menu command hierarchy constituted a "method of operation" and, as such, was expressly excluded from copyright protection under $ S 102 of the Copyright Act.. In Diehr, the Supreme Court held that, although a mathematical formula embodied in a software program might not qualify for patent protection on its own, application of the formula to perform a useful process--in Diehr, a process for curing synthetic rubber--did qualify for patent protection.. existence and significance of a "mathematical algorithm" with a claim that defined the applicant's invention, using the so-called Freeman-Walter-Abele test.. after Alappat, patent applicants needed only to define their claims in terms of a computer program implemented in a machine in order to bring their claims within the scope of patentable subject matter.. in contrast to copyrights and trade secrets, a prerequisite for patent protection is that the inventor must disclose a clear and precise description of his or her invention, thereby promoting the goals of technological disclosure and IT product transparency.. patents protect the actual invention, not just a single implementation of it. Thus, patent protection enables software developers to share key technologies with partners, customers, and others.. twenty years or less of protection from the time the patent application is filed. This period of exclusivity is decades shorter than the fifty-plus years of protection generally afforded by national copyright regimes and the theoretically unlimited term of protection available under trade secret law. Thus, patented innovations are likely to enter the public domain more rapidly.. Efforts to improve examiner training and increase patent office funding have met with some success. Contrary to conventional wisdom, references to prior art in software patents appear to be equal or superior to the norm, while ongoing efforts to further harmonize patent law and procedures hold promise in the effort to bring global patent protection within the financial reach of smaller firms. #@# A Patent Doctrine without Bounds: The "Extended" Written Description Requirement Spring, 2004 71 U. Chi. L. Rev. 617 Guang Ming Whitley Adequate disclosure is the "quid pro quo" of the patent system: the public grants exclusive rights to the patent holder for a limited time, and in exchange, the patent holder divulges the operating principles of the invention to the public. Since adequacy of disclosure determines a patent's validity and scope, the Supreme Court has cautioned against "fundamental alterations in disclosure rules" that may "risk destroying the legitimate expectations of inventors in their property" by invalidating pending or issued patents.. foiled attempts to add new matter to a patent through the amendment process while retaining the benefit of an earlier filing date. enablement requirement ensures that "public knowledge is enriched by the patent specification to a degree at least commensurate with the scope of the claims.".. The enablement requirement, as articulated in In re Wands, once served as the primary method for determining whether a patent claim was adequately disclosed.. The enablement analysis must be sufficient to distinguish overbroad claims from claims that are adequately disclosed by the patent specification.. lack of clear boundaries and retroactive application, which allow the decisionmaker to invalidate almost any patent claim for lack of written description.. proposes that the test for written description be combined with the original Wands enablement factors, using the goal of adequate disclosure to cabin discretionary application of the written description requirement. This solution limits judicial discretion, lends clarity to the adequate disclosure requirements, and simultaneously harmonizes existing case law and alleviates concerns about adequate disclosure in emerging technologies.. PTO Written Description Factors: Wands Enablement Factors: Evidence of support in the application, Actual reduction to practice, Clear depiction in detailed drawings or chemical formulas, Disclosure of relevant, distinguishing, and identifying characteristics, Level of skill and knowledge in the art, Predictability of the art, Full scope of the claim, Quantity of experimentation necessary, Amount of direction or guidance presented, Presence or absence of working examples, Nature of the invention, State of the prior art, Relative skill of those in the art, Predictability or unpredictability of the art, Breadth of the claim.. Combining the factors for the extended written description and enablement requirements would assist courts in invalidating claims that may satisfy the current enablement factors without fulfilling the requirement of adequate disclosure. Such a change would not disturb the general structure of patent law, but would merely collapse a recently created disclosure doctrine into the established enablement requirement. Altering the extended written description requirement in this manner would also preserve the expectations of inventors. The extended written description requirement is not well established, well defined, or deeply rooted. Enablement is a powerful disclosure doctrine that should not be relegated to secondary importance. Collapsing the extended written description requirement into the enablement requirement is a positive, feasible, and necessary step in the development of patent law. #@# Antitrust and Sharing Information about Product Quality Summer, 2006 73 U. Chi. L. Rev. 995 John Han The Antitrust Division alleged that PCIC's dissemination of "competitively sensitive information" violated § 1 of the Sherman Act; n7 by sharing information about one feature of otherwise independent insurance products, insurers reduce the "potential for losing clients to firms not using [limitation of liability].".. Price fixing is a per se violation of § 1. In markets with significant quality-oriented competition, standardizing product quality can also violate § 1.. Markets for physical products with dominant designs by definition possess (a) high scale economies and (b) low market demand for improvements. n62 With such products, standardization is typically procompetitive.. Standardization increased price competition by making previously differentiated products comparable and reducing buyer search costs.. Markets for nonphysical products without dominant designs, such as markets for contract terms, have (a) limited scale economies in production, and (b) high market demand for improvements. In such markets, standardization can sometimes be anticompetitive and independently violate § 1.. Quality standardization invigorates price competition by making previously differentiated products fungible. Buyers find it easier to compare prices between standardized products, subjecting sellers to heightened price competition. Firms have an incentive to differentiate their products in order to mute this increased price competition.. Market dispersion is inconsistent pricing between firms in the marketplace. Knowing what competitors charge for similar products facilitates pricing consistency and reduces price dispersion. Minimizing price dispersion has a procompetitive effect that should be taken into account in any rule of reason analysis. n98 Because uniform prices can be produced either by collusion or efficient markets, evidence of price uniformity only becomes significant when considered in connection with separate evidence of an agreement to fix prices.[62 Antitrust L J 465, 479 (1994)].. closer prices are to value, the less sellers over- or underinvest in production, and the less buyers over- or underpurchase., Increased information sharing should lead to price reductions as competition forces cost savings to be passed on to consumers. Information sharing is less important for reducing price dispersion in (a) markets selling products with a naturally uniform composition such as sugar, (b) markets where prices are regulated, n105 (c) "stable industries" with low demand variance and little innovation (as compared with turbulent markets, which require "specialized, risky investments"), n106 and (d) concentrated markets.. When an underperforming rival uses benchmarking to improve its competitive position, its peers are subject to enhanced price and quality competition.. information sharing may facilitate both competitive and anticompetitive ends. In evaluating its legality as a precursor act, courts are ill-equipped to make fine distinctions between the anticompetitive and procompetitive case. The cost is greater for erroneously enjoining vital procompetitive behavior than for not considering information sharing as evidence of cartel action. Given all of this, courts hearing cases involving sharing information about product quality should exclude that behavior from their larger antitrust inquiry. #@# VALUING RISKY PROJECTS WITH REAL OPTIONS Scott Mathews. Research Technology Management. Arlington:Sep/Oct 2009. Vol. 52, Iss. 5, p. 32-41 (10 pp.) To extend the NPV analysis beyond a single most-likely scenario, a common practice is to assess several scenarios. Typically, two additional scenarios are considered: an optimistic and a pessimistic one, which refl ect different outcomes, more or less favorable, of the assumptions applied in the most likely case.. Monte Carlo simulation offers the ability to incorporate into the analysis hundreds of scenarios, including those that are plausible albeit lower probability, but potentially consequential to the outcome of the project such as the optimistic and pessimistic scenarios.. The Datar-Mathews option pricing model has provided a better sense of value on some of Boeing's largest projects.[ Mathews, Scott H., Datar, Vinay T. and Johnson, Blake. 2007. A Practical Method for Valuing Real Options. Journal of Applied Corporate Finance, Spring (19), No. 2, pp. 95-104.] #@# Empir Pr Contingency Vars Biz Stg Hambrick Ac Mgt J 28#4 12/85 p779 Examining the relative results of the Chow tests reveald that user sector, consumer or industrial, and purchase infrequency were by far the most significant of the variables tested.. Stage of product life cycle, instead of being th emost significant - as both Hofer (1975) [Ac Mgt J 18 784-810] and the present study hypothesized - ranked a distand but still very strong third among the ten variables examined #@# J B Quinn HBR 11/69 Tech Xfr Multinat Cos p 149 In fact, throughout many societies the pirmary force needed to stimulate growthis not so much capital investment as technological advance p161 Widen markets.. easier for well-managed multinational companies to introduce full-scale operations. invest in the communications, transportation, and power networks that are essential to modern industry.. Eliminate cartel and monopoly arrangements.. force both foreign and domestic companies to compete and innovate.. Eliminate barriers to industry-university relationships in scientific, technical, and management spheres and encourage domestic technical-management programs which diffuse tehcnology to domestic concerns.. Offer incentives for training in certain disciplines.. Aggressively seek foreign technology and not attempt the impossible task of creating all needed technologies internally.. Create local "free trade" complexes [incubators?] where companies can bring raw materials [research resources?] tax free to process for immediate re-export.. Allow foreign companies to bid on high-technology prime contract provided they subcontract and train domestic producers to supply major portions #@# Jagdish N Sheth Model of Industrial Buyer Behavior J Mktg v37 1973 p51 (1b) Specialized Role Life (4) Information Education Orientation Style Situational Sources `--------'-----------' Factors | | Salesmen <-- (1c) (1a) V (1e) | Active <-. Background of Satisfaction | Search | the Individuals with Purchase <----------. | Exhibitions & | V | | | Trade Shows (1) Expectations of <-' Autonomous | | 1. Purchasing Agents --. Decisions--, | | Direct Mail 2. Engineers | ^ V | V 3. Users (2) Industrial---> | Supplier or Press Releases 4. Others Buying Process | Brand Choice ^ V ^ Journal | Joint | Advertising | Decisions (3) Conflict | Resolution Professional ,-------------, 1. Problem and Technical (2a) Product-Specific (2b)Company-Specific Solving Conferences Factors Factors 2. Persuasion ^ ^ 3. Bargaining Trade News | | 4. Politicking | | Word of Mouth | | | | Others ---->(1d) | | Perceptual| | Distortion| | ,--------,----------, ,-------------,-----------, Time Perceived Type of Organization Organization Degree of Pressure Risk Purchase Orientation SIze Centralization #@# How Rainmaker Jeffrey Fox 2000 Hyperion p7 "Why should this customer do business with our company, with me?" pp16-7 precall planning checklist should include: 1. Written sales call objective. 2. Needs analysis questions to ask. 3. Something to show. 4. Anticipated customer concerns and objectiosn. 5. Points of difference vis-a-vis competitors. 6. Meaningful benefits to customers. 7. Dollarization approach; investment return analysis. 8. Strategies to handle objections and eliminate customer concerns. 9. Closing strategies. 10. Expected surprises p29 "Do you have your appointment calendar handy?".. make appointments to make rain p41 By agreeing to decide for herself, the customer eliminates the option of not deciding. The customer is now engaged and can't ignore the facts p55 "Yes, that is a good company. Would you like to know our points of difference?".. not knock the competitor. To do so would be to impugn the intelligence of the customer p63 Ninety-five percent of all salespeople will dilute themselves, by calling on too many customers and not allocating enough sales calls to close each sale p81 be on high receive.. Don't start talking until the customer has completely stopped talking. Don't think about what you are going to say next. Take notes p89 In addition to never being in a meeting, you are never sick. You are travelling. You have never "left for the day," You are out of the office or meeting with customers. You are never "not in the office yet." You are at a breakfast meeting with a client p97 "we would be happy to give you a demonstration. If the demo is successful, is there naything else prohibiting you from going ahead?" p103 before eght o'clock any morning and after three on Friday afternoons. Early-morning sales calls are good for two reasons: (1) there are less, or limited, interruptions, and (2) the customer's agreement to the unusual hour is a big buy signal p122 "why don't you give it a try?" is a killer sales question pp142-3 1. Send a handwritten note. 2. Clip and send an article of interest. 3. Talk to a satisfied client and ask who else you might help. 4. Send a tahnk-you gift to someone who referred you. 5. Give your business card to someone with influence. 6. Send a letter to the editor of a magazine your customers read. 7. Add fifteen people to your mailing list. 8. Leave a compelling voice mail. 9. Make an appointment. 10. Call a client you haven't talked to in years p145 The good salesperson: is organized, calls only on decision makers, does detailed precall planning, always has a written sales call objective, asks preplanned questions, listens, is emphatic with customers, encourages and appreciates objections, always dollarizes the value of the product, asks for customer commitments #@# Kotler Keller Mktg Mgt 12ed New Delhi:PrenticeHall 2007 p40 Fig 2.3 A Holistic.. [Kotler Jain Maesincee, Mktg Moves p29 HBS 2002] Customer Focus Core Competencies Collaborative Networks Value Exlporation Cognitive space Competencey space Resource space Value Creation Customer benefits Busiess domain Business Partners Value Delivery [CRM] Internal resource m.. business partner m.. p107 Questionnaire.. Ensure that questions are withour bias.. questions as simple as possible.. specific.. Avoid jargon or shorthand.. Steer clear of sophisticated or uncommon words.. Avoid ambiguous words.. Avoid questions with a negative in them.. Avoid hypothetical questions.. imaginary.. Do not use words that could be misheard.. Desensitize questions by using response bands.. Ensure that fixed responses do not overlap.. Allow for "other" p149 best customers outspend others by ratios of 16 to 1 in retailing, 13 to 1 in the restaurant business, 12 to one in the airline business, and 5 to 1 in the hotel and motel industry [AmEx Putten in Peppers & Rogers, One-to-One, NY:Currency Doubleday, 1993, p108] p156 Acquiring new customers can cost five times more than the costs involved in satisfying and retaining current customers. [Reicheld, Loyalty, HBS 1996] p186 People are more likely to notice stimuli that relate to a current need.. that they anticipate.. whose deviations are large in relation to the normal p202 Decision Traps [Russo & Shoemaker, Doubleday 1990] 1. Plunging In.. 2. Frame Blindness [Wrong problem].. 3. Lack of Frame Control.. 4. Overconfidence in Your Judgement.. 5. Shortsighted Shortcuts.. 6. Shooting From the Hip.. 7. Group Failure.. 8. Fooling Yourself About Feedback.. 9. Not Keeping Track.. 10. Failure to Audit Your Decision Process p202-3 Consumers tend to segregate gains.. integrate losses.. integrate smalle rlosses with larger gains.. segregate small gains from large losses p234 The buying center is the decision-making unit of a buying organization. It consists of initiators, users, influences, deciders, approvers, buyers, and gatekeepers.. environmnetal, organizational, interpersonal, and individual factors.. buyphases: (1) problem recognition, (2) general need description, (3) product specification, (4) supplier search, (5) proposal solicitation, (6) supplier selection, (7) order-routine specification, and (8) performance review p259 Table 8.2 Major Segmentation Variables for Business Markets.. Demographic: 1. Industry.. 2. Company Size.. Location.. Operating Variables: 4. Technology.. 5. User or nonuser status.. 6. Customer capabilities.. Purchasing Approaches: 7. Purchasing-function organization.. centralized or decentralized.. 8. Power structure.. 9. Nature of existing relationships.. 10. General purchase policies..leasing.. bidding.. 11. Purchasing criteria.. quality? Service? Price? Situational Factors: 12. Urgency.. 13. Specific application.. 14. Size of order.. Personal Characteristics: 15. Buyer-seller similarity.. 16. Attitudes toward risk.. 17. Loyalty p294 Twenty-First Century Branding [Bedbury, New Brand World, Viking, 2002].. 1. Relying on brand awareness has become marketing fools gold - Smart brands are more concrned with brand relevance and brand resonance. 2. You have to know it before you can grow it.. don't know who they are.. 3. Always remember the Spandex rule of brand expansion - just because you can doesn't mean you should. 4. Great brands establish enduring customer relationships.. emotions and trust.. 5. Everything matters - Even your restroom. 6. All brands need good parents - Unfortunately most brands come from troubled homes. 7. Big is no excuse for being bad.. principles before profits. 8. Relevnce, simplicity and humanity p301 [Keller, Strategic Brand Management, PH 2003] High-quality brands stretch farther.. prototypical of a product category can be difficult to extend outside the category. Concrete attribute associations tend to be more difficult to extend than abstract.. positive in the original product class but become negative in the extension.. successful extension can only contribute to the parent brand image but also enable a brand to be extended even farther.. unsuccessful extension hurts the parent brand only when there is a strong basis of fit.. does not prevent a firm from "backtracking" and introducing more similar extension.. Vertical.. often require sub-branding.. emphasized information about the extension p332 Table 10.3 Summary of Product Life-Cycle.. Introduction Growth Maturity Decline Characteristics Sales Low Sales Rapidly Rising Sales Peak Sales Declining Sales Costs High.. Average.. Low.. Low.. Profits Negative Rising.. High.. Declining.. Customer Innovators Early adopters Middle majority Laggards Competitors Few Growing.. Stable.. Declining.. Marketing Objectives Maximize Maximize Reduce expenditure Create product market profit while and milk awareness and share defending the brand trial market share Strategies Product Offer a basic ..extensions, Diversify.. Ohase out weak product service, warranty Price ..cost-plus ..to penetrate.. ..match or best.. Cut price Distribution Build selective.. ..intensive.. ..more intensive.. ..phase out.. Advertising ..awareness.. ..awareness.. Stress brand Reduce.. early adopters mass market.. diff.. retain.. loyals.. Sales promo.. ..heavy.. Reduce to take Increase.. Reduce ..entice trial advantage ..switching.. p369 Making Smaller Better [Adam Morgan, Eating the Big Fish, Wiley 1999] 1. Break with you immediate past.. 2. Build a "lighthouse identity".. 3. Assume thought leadership of the category.. 4. Create symbols of revaluation.. 5. Sacrifice.. 6. Overcommit.. 7. Use publicity and advertising to enter the popular culture.. 8. Be idea-centered, not consumer-centered #@# Mk Stevens Your Mktg Sucks Crown3River 2005 (msco.com) p19 1. Why your marketing sucks: Stop throwing thousand-dollar bills out the window and camouflaging spenfing as marketing p42 1. Marketing is an integrated process ** p43 2. You need to identify innovative initiatives that can command the attention of the marketplace.. 3. Integrate all of the elements of your marketing program.. 4. Do no engage in any marketing initiatives that fail to produce a positive return on the money invested p46 5. Pick the low-hanging fruit [cross-selling].. established client base.. 6. DOn't be linear.. assymetrical, swarming ** p45 7. Be persistent, relentless, inventive, counterintuitive, challenging, combative, strategic, and tactical** p49 2. Nothing happens until a sale is made: Any company making sales the last step in the marketing process has its marketing program ass-backwards. p87 3. Start with a blank page: To hell with what your competitors are doing... rethink everything and start from scratch p105 4. Make a spectacle of yourself - or your company: Stop playing it safe with singles and doubles and start hitting home runs. p112 Be imaginative / Accept risk / Assume challenges / Find a new way to win p121 5. There are no one-trick ponies: Who says synergy never works? The practical benefits of integrated marketing p136 staying power to remain committed throughout the course of the campaign p138 willingness to create a tight alignment between the president's office and the marketing campaign p143 6. Extreme Marketing in action: The last word on synergy and developing an integrated plan for making sure every marketing dollar you spend brings in more than $1 in return.. shoul dhelp leverage all of your other marketing spending p169 7. Ready, aim, fire! Why it beats ready, fire, aim every time.. how to test, execute and monitor your marketing.. Measure twice, cut once p187 8. Pick the low hanging fruit: Why you don't have to spend a fortune to boost sales and earning.. selling more to people who already have a relationship with you #@# Purple Cow SethGoldin.com Portfolio/Penguin 2002 p10 The world has changed. There are far more choices, but there is ** less and less time to sort them out ** p17 TV-INDUSTRIAL AGE - POST-TV AGES Average products - Remarkable products Advertise to anyone - Adevrtise to the early adopter Fear of failure - Fear of fear Long cycles - Short cycles Small changes - Big changes p41 Differentiate your customers. Find the group that's most profitable. Find the group that's most likely to sneeze [spread viral marketing]. Figur eout how to develop/advertise/reward either group. Ignore the rest. Your ads (and your products!) shouldn't cater to the masses. Your ads (and products) should cater to the customers you'd choose if you choose your customers p60 What could you measure? What would that cost? How fast could you get the results? If you can affort it, try it. "If you measure it, it will improve." p73 Do you have the email addresses of the 20 percent of your customer base that loves what you do? If not, start getting them. If you do, what could you make for these customers that would appear super-special? p74 Could you make a collectible version of your product? p88 Do you have a slogan or positioning statement or remarkable boast that's actually true? Is it consistent? Is it worth passing on? p93 If someone in your organization is charged with creating a new Purple Cow, leave them alone! Don't use internal reviews and usability testing to figure out if the new product is as good as what you've got now. Instead, pick the right maverick and get out of the way p94 1. Get permission from the people you impressed the first time. Not permission to spam.. to alert them the next time you might have another Cow / 2. Work with the sneezers in the audience to make it easier for them to help.. Give them the tools (and the story) they'll need to sell your idea to a wider audience. / 3. Once you've crossed the line from remarkable to profitable business, let a different team milk it.. thousand variations.. don't believe your own.. inevitable downward slide to commodity p95. 4. Reinvest.. fail and fail again.. remarkable last time won't be #@# Competitive Marketing O'Shaughnessy 1984 Allen Unwin 0-04-658243-6 p74 Figure 4.5 [Buyer decision model] Buyer's goals Buyer's belief Indecision<-Unstable Stable | Goals agreed-> V <------------------| standing<- Wants -> occurent Non-buying <--------|-----------------------------------> Buying Latent want Passive wants Exclusionary reasons Extrinsic Intrinsic Creation Want Change | Incapacity | Promises preference preference of remains in Forebearance Authority Evaluate/ | Habit| awareness latent beliefs, decide Choose | of priorities Generated-functions + Use-functions Picking product's or terms of Integrative | Adaptive Legalistic Technical potential purchase | Economic | performance | + |Imitative|||Reputation factors towards Conventions | Ego/Status/ | Advice|Sample Buying Bandwagon/ integrity| Seek Comparison action fashion |guarantees shopping ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Choice of [roduct/brand Intention to buy Buying action Buying action...belief and choice frustrated p113 Figure 6.1 Competitive Strategies Move Mix adjustments before competition Deterrent action Move Imitate Market share protection with (hold/defend) competition Compensate Move Merger/acquisition away from Competitive competition Collusion strategies New areas Move New segments before Additional channels competition Penetration pricing Market share advancement Move Capitalize (growth) with competition Leapfrog Move New offerings away from Reciprocal competition agreement p151 Table 8.2 Typical Suggested Strategies Relating to Mix Variables in the Product Life Cycle Stage Stage in Product Pricing Promotion Distribution life cycle Iron out High Create awareness Selective Introduction product of products' potential distribution deficiencies Stimulate primary demand Growth Focus on product Selective advertising Extend to quality of brand coverage sought Variations of product introduced Maturity Product adjustments Image build and maintain Seek close for further brand Sales promotions dealer relationships differentiation Facilitate changes in product, etc Decline Simplify product line Primary demand Selected Seek new product uses may again be dealers Changes to revitalize product Low cultivated cultivated p247 Figure 12.2 The Process of Industrial Purchasing Company objectives Efficiency Problems material/component shortages Saleability }Opportunities + Difficulties{ obsolete/old equipment Asset protection | new projects Flexibility | poor current suppliers | Buying | particiapnts image projected |Specific |Standing interpersonal relations |responsibilites|wants {integrity sought | | innovation risk avoidance | Perceived investment (personal) payoff Present supplier/ straight rebuy need product need Decision Disposition to make to buy and not buy | +++++++++++++++++++++++++++++++++++++++++++++++++++++++|+++++++++++++++++++ Pick Re-order Purchase Purchase Purchase {technical Purchase supplier from initiating advising deciding {economic liaison | authorizing from current Initiate Advise / adaptive |monitoring| approved suppliers inquiries Determine needs { integrative | | | list ............/ V \ legalistic | | | | Agreement Conflict | | | | | Analytical Bargaining Jural Liaise Settle | | mode mode | | | | V<------ Conflict resolved | | | | Core new offering | | | | offering modified offering | | | | specified same offering | | | Search directories --Specify | | | for catalogues suppliers | | | ......sources advertisements | | | | | Inadequate sales rep. | | | | | Develop Adequate | | | | | sources request | | | | | details/quotations | | | | | proposals /adaptive | | | | +- - - - - - - -+Evaluate{integrative| | | | | | \legalistic| | | | | | {technical| | | | | | {economic | | | | | Agreement Conflict | | | | | | Analytical Bargaining Jural Liaise Settle | | mode mode mode | | | | Conflict resolved | | | | +------------------------------+ | | +-------------Supplier selected | | | Authorization sought- - - - - - -Approved Authorized + - - - Contracts signed/rder issued - - - - - - - - - - - -+ +-Supplier performance evaluation [loop present need]..Unsatisfactory Satisfactory performance performance #@# Loyalty, Reicheld, HBS, 1996 [1989 hbr?] p1 disloyalty at current rates stunts corporate performance by 25 to 50 percent p33 raising customer retention rates by five percentage points could increase the value of an average customer by 25 to 100 percent p97 We discovered that employee loyalty affected new-customer volume as well as retention. We asked how people came to choose a particular garage. Predictabley, satisfied customers were the number-one source of referrals. But we were unprepared for the second most common source: referrals from garage employees themselves, who as insiders know how much value their shops provide. If an operation gives the kind of value that makes employees proud, they will naturally recommend it to friends and relatives. The real surprise is that their opinion has more impact on new-customer volume than advnertising and promotion put together p302 Customer, employee, and investor loyalty are so thoroughly intertwined that to understand and manage one, you must understand and manage all three #@# CRM Done Right. Rigby, darrell.rigby@bain.com Ledingham, dianne.ledingham@bain.com Harvard Business Review; Nov2004, Vol. 82 Issue 11, p118-129, The successful users have also exhibited a healthy skepticism, discounting overblown claims that the ultimate payback from a CRM system is the creation of a "real-time enterprise." Understanding that highly accurate and timely data are not required everywhere in their businesses, they've tailored their real-time CRM initiatives to those parts of their customer relationships that truly do depend on "perfect" information. Once they've succeeded with the smaller, more-targeted CRM project, they've used their initial investments as springboards for solving additional problems.. It's possible to use CRM systems to manage the entire customer relationship cycle all at once-initial purchase, after-sales service, subsequent purchases, recommendations to other customers..Such an approach ends up creating unused technology capacity, causes unnecessary business disruptions, and ultimately fails the payback test. When companies carefully examine their customer relationship cycles, they usually find some deep-seated, pernicious problems in a few areas that undermine overall performance. It is these pain points that should be the focus of the CRM effort.. Kimberly-Clark started by building onto an existing software program for account management, called Profit Calculator, which its sales department had developed to track investments in individual promotion efforts.. Focusing on pain points can not only be an effective way to build a successful CRM program but can also get an unsuccessful CRM initiative back on track.. But perfect information comes at a high cost. The systems required to collect and disseminate it are expensive; so are the finely tuned processes needed to react quickly to it.. data produced by a narrowly focused CRM system often reveal additional opportunities for important business refinements. And those refinements, taken together, can amount to a broad CRM application that extends across the company. The difference between this sort of wide-ranging CRM implementation and the prerecession CRM applications is that each step in building the system represents a carefully planned, well-defined advancement in strategic thinking.. #@# The Achilles' Heel of Supply Chain Management. Raman, Ananth 1 DeHoratius, Nicole Ton, Zeynep Harvard Business Review; May2001, Vol. 79 Issue 5, p25-28, Point-of-sale scanners and electronic inventory systems were supposed to revolutionize supply chains by connecting manufacturing directly to consumers. But there's a big problem: bad data.. Even when a store's inventory information is technically correct, it may still suffer from bad data because employees routinely put products in the wrong places. Another well-regarded retail chain found that 16% of its in-stock SKUs were reported as stockouts when customers asked for them at the help desk. In fact, however, the items were available; they had just been misplaced in a storage area or on the selling floor.. If a customer is buying peach, orange, and strawberry yogurts at the same price, the clerk often swipes one of the yogurts -- say, peach -- three times. As a result, the store's inventory system says the peach yogurts are down by three and the others are unchanged. Managers routinely exacerbate this problem by tracking checkout clerks' speed but not their accuracy. Indeed, most stores adopted scanners primarily to save on labor costs, not to gain better data.. When one retailer audited every item on hand at a new store, it found that the inventory system had the wrong quantities for 29% of the SKUs, with an average deviation from actual supplies of 25%. The pickers in the company's distribution center had simply been sloppy in assembling the store's mix of SKUs.. To minimize paperwork and auditing expenses on goods transferred within the company, the retailer had discouraged store managers from getting credit from distribution centers for items shipped in error that cost less than a certain amount. As a result, the managers weren't motivated to carefully check the accuracy of deliveries from the distribution centers. Since they could receive credit for manufacturers' errors, however, they checked those shipments meticulously. Unfortunately, the one activity that can help stores improve their data accuracy -- the periodic auditing of inventory -- is usually done for a very different purpose. Most stores perform audits solely for financial reasons, to measure the "shrink" of goods that have been lost or pilfered. That means they measure inventory by dollar value, not by item. If the audit shows that the total value of the inventory is approximately the same as what the system says, managers are happy -- even if the actual mix of SKUs differs greatly. Rewarding speedy checkouts, reducing paperwork, and checking inventory value are laudable goals, but they all inadvertently undermine the accuracy of supply chain data.. as long as inventory data aren't being collected for anything important, store managers won't be under pressure to improve their data quality, but until the quality improves, retailers and their suppliers will hesitate to rely on the data. #@# Alsop, 18 Immutble laws of Corporate Reputation WSJ/fp2004 p10 Like it or not, eveyr individual, every company, every organization develops a reputationthat is based on people's perceptions of it over time. THough reputation takes years to form, it can be ruined in an instant p49 The stakeholder pyramid isn't a static structure. It's vital to understand ehich audiences are most important to a company at any given time. At the pace pf change today, a company needs to frequently reevaluate which stakeholder group matters most at the moment p57 Values statements promote commitment, integrity, repsect, trust, teamwork, and other noble virtues. Ethics codes tend to be less visonary and more oriented toward compliance with laws and regulations.. Oc course, what cosntitutes ethical behavior can still be subjective p120 self-awareness is the first step toward self-improvement. Unfortunately, too many companies have managed to survive by living in denial p180 It had to learn to speak with a single voice. All communications and marketing messages must be working together to reinfoce a corporate brand. Stakeholders can't feel very good about a company they don't understand p195 THe possibilities for reputation rub-off from business relationships are endless. Whether a supplier, a merger or joint-venture partner, an accountant, a licensee, or acelbrity endorser, business connections will most definitely influence corporate repuatition.. A company can experience rub-off reputation damage just by being part of a maligned industry p220 The first few days are the most critical in trying to limit reputation damage in a crisis. Crises aren't like fine wines; they don't improve with age. A communications void is highly dangerous during a time of crisis. Silence gives critics time to gain the upper hand and reinforces the public's suspicions that the company must be guilty. Without information from the company, rumors and misinformation can proliferate fast. Corporate lawyers may advise against a public apology early onn in a crisis, when the facts aren't all in, but a company should at least own up to the problem and express regret. A long-standing, positive relationship witht he media can pay off handsomely in getting the corporate message out during a crisis. THe channels of communication are already open, and the media are mor elikely to trust what the company has to say` p236 Reputation improvement strategies misfire for many reasons, including weak leadership, lack of a coherent vision, stingy spending on marketing and new-product development, or simply blunders in execution. Whatever the cause, the longer a reputation remains in rehab, the harder is is to save. As time passes, the chances of ever regaining a robust reputation fade. The best hope becomaes simply eliminating the negative feelings and settling for neutral reputation - not an inspiring prospect p262 TO be effective, the apology should be made reasonably fast. Of course, the tone must be sincere.. Make an honest act of corporate contrition, and the public just may forgive you.. should have apologized right away instead of taking a defensive #@# Strategy in Action Yavitz&Newman 1982 FP 0-02-934670-3 p4 Strategy is not a response to short-term.. longer-term course that the ship is steering, not with the waves.. insist that the qualitative strategic plan be a separate document from the subsequently prepared financial projections.. not a rationalization of what we did.. integration of all these functional plans.. feasible in terms of resources that will be mobilized, and it must identify ways by which at least some form of superiority over competitors is to be achieved p22 1. Domain sought. What products or intangible services will the business-unit sell to what groups of customers? 2. Differential advantage in serving what domain. On what basis - such as access to raw materials, bette rpersonnel, new technology, or low cost and prices - will the business-unit seek an advantage over competitors in providing its products or services? 3. Strategic thrusts necessary and their appropriate timing. To move from where the business-unit now is to where it wants to be - as laid out in (1) and (2) - what moves will be made early and what can be deferred? 4. Target results expected. What financial and other criteria will the business-unit use to measure its success, and what levels of achievement are expected? p23 redefinition of one's industry or niche within that industry sometimes suggests an attractive domain p35 down-side risk, if present, that is substantially smaller than the potential up-side gain.. Contingency plans are a device for limiting losses.. fallback alternative p38 resources bases for prepared opportunism include unused borrowing capacity, mining rights or other access to raw materials, and a metal-can company's small venture in plastics to get a feel for that technology p39 Strategic management accepts uncertainty as inevitable, and then tries to turn this ambiguity into an advantage through strategic planning p46 Often a unit when viewed separately has only medium appeal, but when combined with other holdings it may add unusual stregth. Synergy p53 no inside champion for disposal, as typically is present for an acquisition; some people will lose thier jobs, and senior executives are reluctant to admit that they cannot make a success of anything they direct p57 develop along certain lines that the unit acting alone would shun.. while "taking out insurance" the enterprise can "learn" what is involved in developing specific stregths - a learning experience.. natural for unit executives to feel that they should be permitted to use cash they generate to strengthen their own position, instead of denying themselves for the benefitof a small, upstart activity p61 central issues of corporate input strategy are: 1. Selecting a few kinds of contributions the orporation will make to its business-units - contributions of such quality and value that the business-units gain a significant advantage over their competitors. 2. Finding ways to develop a differential advantage in the production or delivery of such services. 3. Integrating these strengths into portfolio selection and corporate mission, and into the design of charters for business-units p65 Many diversified corporations, in fact, provide few strategic inputs to their business-units. This is especially true of "conglomerates" - assemblies of already established firms that have little relation to each other and are merely clustered in a passive holding company. The pressure to generate short-term profits and cash flow is often so great that the parent corporation is not even a good source of capital p101 In any one technical area the need for major strategy shifts is intermittent.. easier to organize and administer staff seeking alternatives for recognized problems than to predict and diagnose those problems in the first place.. Judgement about when to speak up is required - a watchdog, growling all day will be ignored; going to sleep can be disastrous.. Staff, like the line, can get trapped in tradition p108 strategic planning system must be treated only as a framework within which the more irregular, less formal, and subtle aspects of strategy formulation can be brought into focus p118 PBB lesson is that detailed programming tends to reduce adaptation.. program calling for major internal change usually need reinforcement from organizational and personnel shifts - and time to digest p122 Program Other Critical Short-Term Moves.. Projects with such long lead times that they must be started now if they are to be completed when the end result is needed.. necessary first step in the sequence.. Development of a capapbility that will be used in a prepared opportunism strategy p126 Line managers not only help prepare progras, they also are assigned specific tasks in th enew program.. pressure to cut expenses arises it is the extra, special task that gets squeezed down.. special programs with difficult-to-measure outputs are often loosely controlled.. Meeting strategy targets typically is considered desirable but secondary to today's business. Thus rewards give managers a clear message of where priorities lie.. Strategic change is routine-disrupting, unique experience. It calls for initiative and imagination to overcome natural protection of the status quo p134 Conversion to a new behavioral system takes time.. learning, anxiety and confidence p150 think of the corporation serving as an outside director of each division.. strategy is consistent with corporate guides for that division as to domain, risk levels, target results.. Selecting capable executives.. tough actions be taken when necessary, even though such actions may be personally unpleasant for the division.. Rewarding key people for outstanding performance, and if necessary removing ley people for poor performance.. Making sure the internal control system will provide early warning.. final approval to very large transactions.. sounding board; asking discerning questions pp156-7 MATRIX ORGANIZATION AS A TEMPORARY COMPROMISE. Matrix organization is a seductive idea. It can be helpful, but should be used with caution. Of course, within some kinds of business-units a matrix setup is the normal - often more optimum - organization design. For a construction firm, advertising agency, or engineering consultatn - for example - there is repeated need for at least two strong viewpoints.. most functions can be assigned to the operating divisions. Usually, only one or two functions are on the borderline, and we do not have to complicate the entire structure to accomodate these exceptions.. can be treated like a shared service.. Matrix organization at the corporate level may be justified as a transistion device, but usually its use reflects fence-sitting - an attempt to have a new organization without dismantling the old one. It is a sure way to double the already staggering load of meetings senior executives must attend p173 outside is likely to be better prepared, sooner than an insider who has to retool.. exctement and vigor.. sends signals p179 Measure progress toward strategic targets separately from results of esablished operations.. encourage revisions of strategy and entrepreneurial risk-taking p189 many potential investments never reach the final screening. The personnel needed to develop the idea may not be assigned by a dubious supervisor, or a departmental manager may not care to sponsor the project. Without both careful analysis and strong sponsorship the proposal is unlikely to be presented to the top allocating body p200 regular expense budgets may be increased by a small amount to recognize the extra workload. The result is that costs of working on old and new strategies are scrambled in the current expense accounts. The annual budget allowances are similarly scrambled.. preference for dealing in immediate problems is normal.. incentives typically pay off sooner on short-term performance p204 Policies can be set that prevent use for sidetrack activities.. Project approval can be withheld unless support for strategy is clear.. Resource allocations can be derived directly from strategic programs.. Separate allocations can be made for old and new business pp217-8 What steps are systematically taken to design company strategy? .. Are provisions made to change behavior patterns?.. Does the company's organization aid the strategy?.. Are qualified, committed people in strategic posts, and does the reward system encourage them to give approved strategy top priority?.. Are resources allocated to nourish strategy? Is the linkage between strategy and local allotments clear?.. Do controls watch progress on strategic programs and monitor key external variables? p242 Figure 14-1 Intangible Factors Bearing on Modification of Strategy: A. Boldness of existing strategy. Its fit with existing company strengths and executive attitudes. Its difference from previous strategy. Replace vs add-on of activites. Perceived uncertainty and risk. B. Source of new alternatives (modifications). Externally imposed vs internally generated. Derived by analysis vs proposed by missionary for idea. Participation in formulation by those who carry out proposal. C. TImeliness of alternatives. Unique and fleeting opportunity. Importance of a head start. Defensive move vs offensive. Other committments of existing resources. D. Committment of respected, charismatic, powerful leaders within company to present strattegy and to alternatives. E. Conguence with aims of resource suppliers. Fit with values of key employees and political factors within company. Acceptability to outside reference groups (banks, neighbors, regulators, etc). Personal opportunitiees for self-actualization, achievement, etc at key places in th e organization. F. Fit with total company operations. Compatibility with internal operating system. Compatibility with other external relationships #@# Greenwald Competition Demystified Penguin Portfolio 2005 p18 YOU Manage Competitive Advantage OTHERS You are an ant; EXIT GRACEFULLY YES YES Single Dominant Firm NO Game STructure/Simulation Competitive Advantage Prisoner's DIlemma Entry/Preemption ALL Markets - NO Operational Effecitveness: Efficiency,Efficiency, Efficiency p340 segregate the early investments, which create assets, from the subsequent income flows. The former constitute the asset value of the project; the latter are the earnings power value [EARNS/WACC, franchise], including growth. Any excess of EPV over asset value must be justified by identifying sustainable competitive advantages. Optimisitic growth and margin assumptions incorporated into a highly uncertain terminal value are not dependable. #@# Porter, Competv Strategy 1980 FP 0-02-925360-8 p7 THREAT OF ENTRY.. Barriers to Entry.. Economies of Scale p9 Product Differentiation.. Captal Requirements p10 Switching Costs.. Access to Distribution p11 technology.. access to raw.. locations.. subsidies.. experience p17 Intensity of Rivalry.. Numerous.. Slow.. High Fixed p19 [lo] Switching Costs.. Capacity Augmented in Large increments.. p20 High Exit Barriers p24 BARGAINING POWER OF BUYERS.. concentrated p25 undifferentiated.. threat backward integration.. full information p27 POWER OF SUPPLIERS.. concentrated.. [no] substitute.. p28 differentiated.. forward integration pp40-41 Generic Strategy Commonly Requires Common Organizational Skills and Resources Requirements Overall Cost Substained capital Tight cost control Leadership investment and access Frequent, detailed to capital control reports Process engineering Structured organization skills and responsibilities Intense supervision Incentives based on or labor meeting strict Low-cost distribution quantitative targets system Differentiation Strong marketing Strong coordination abilities among functions in Product engineering R&D, product development, Creative flair and marketing Strong capability in Subjective measurement and basic research incentives instead of Corporate reputation quantitative measures for quality or technological leadership Focus Combination of the above polices directed at the particular strategic target p64 Areas of Competitor Strengths and Weaknesses Products Standing of products, from the user's point of view, in each market segment Breadth and depth of the product line Dealer/Distribution Channel coverage and quality Strength of channel relationships Ability to service the channels Marketing and Selling Skills in each aspect of the marketing mix Skills in market research and new product development Training and skills of the sales force Operations Manufacturing cost position - economies of scale, learning curve, newness of equipment, etc. Technological sophistication of facilities and equipment Flexibility of facilities and equipment Proprietary know-how and unique patent or cost advantages Skills in capacity addition, quality control, tooling, etc Location, including labor and transportation cost Labor force climate; unionization situation Access to and cost of raw materials Degree of vertical integration Research and Engineering Patents and copyrights In-house capability in the research and development process (product research, basic research, development, imitation, etc) R&D staff skills in terms of creativity,simplicity,quality,reliability,etc Access to outside sources of research and engineering (eg, suppliers, cutomers, contractors) Overall Costs Overall relative costs Shaed costs or activites with other business units Where the competitor is generating the scale or other factors that are key to its cost position Financial Strength Cash flow Short- and long-term borrowing capacity (relative debt/equity ratio) New equity capacity over the forseable future Financial management ability, including negotitation, raising capital, credit inventories, and accounts receivable Organization Unity of values and clarity of purpose in the organization Organization fatigue based on recent requirements placed on it Consistency of organizational arrangements with strategy General Management Ability Leadership qualities of CEOl abilit of CEO to motivate Ability to coordinate particualr functions or groups of functions (eg manufacturing with research coordination) Age, training, and functional orientation of management Depth of management FLexibility and adaptibility of manaegment Corporate Portfolio Ability of corporation to support planned changes in all business units in terms of financial and other resources Ability of corporation to supplement or reinforce business unit strengths Other Special treatment by or access to governent bodies Personnel turnover p96 THREATENING MOVES.. 1. How likely is retaliation? 2. How soon will retaliation come? How effective will retaliation potentially be? How tough will retaliation be, where toughness refers to the willingness of the competitor to retaliate stronlgy even at its own expense? 5. Can retaliation be influenced?.. Lags in retaliation p102 COMMUNICATING COMMITMENT..assets resources, other mechanisms to cary out the commitment quickly; a clear intention to carry out the commitments, including a history of adherence to past commitments; iability to back down or perceived moral resolve not to back down; ability to detect compliance to the terms to which the commitment refers p114 switching.. costs of modifying products.. costs of testing.. retraining.. new ancillary equipment.. logistical p118 COSTS OF SERVICING BUYERS.. order size; selling direct versus through distributors; required lead time; steadiness of order flow for purposes of planning and logistics; shipping cost; selling cost; need for customization or modification pp127-8 strategic dimensions.. specialization.. brand identification.. push versus pull.. channel selection.. quality.. technological leadership.. vertical integration.. cost position.. ancillary services.. price policy.. leverage.. parent company.. governement p142 gorwth of industry demand, overall potential for product differntiation, structure of supplier industries, aspects of technology.. height of mobility barriers protecting the firm's strategic group.. bargaining power.. vulnerability.. to substitute.. rivalry.. competition within the strategic group.. scale of the firm relative to to others in its group.. costs of entry.. ability of the firm to execute p272 Has strengths Relative Lacks Strengths to Competitors for Relative to Competitors Remaining Pockets for Remaining Pockets Favorable Industry Leadership Harvest or Structure for Decline or Niche Divest Quickly Unfavorable Industry Niche or Divest Structure for Decline Harvest Quickly Firm's Strategic Needs to Remain in the Business p326 Elements of the Capacity Expansion Decision: Detemine the firm's options for the size and type of capacity additions -> Assess probable future demand and costs of inputs -> Assess probable future demand costs of inputs -> Assess probable technological changes and probability of obsolescence -> Predict capacity additions by each competitor based on the competitor's expectations about the industry -> Add these to determine industry supply and demand balance, and resulting industry prices and costs -> Determine expected cash flows from capacity addition -> Test the aanalysis of consistency p328-35 Overbuilding.. Addinf capacity in large lumps.. Economies of Scale or a Significant Learning Curve.. Long Lead Times in Adding Capacity.. Increased Minimum Efficient Scale.. CHanges in Production Technology.. Significant Exit Barriers.. Forcing by Suppliers.. Building Credibility.. Integrated Competitors.. Capacity Share Affects Demand.. Age and Type of Capacity Affects Demands.. Large Number of Firms.. Lack of Credible Market Leader(s).. New entry.. FIrst Mover Advantage.. Inflation of Future Expectation.. Divergent Assumptions or Perceptions.. Breakdown of Market Signaling.. Structural Change.. Financial Community Pressure.. Product Orientation of Management.. Asymetric Aversion to Risk.. Perverse Tax Incentives.. Desire for Indigenous Industry.. Pressures to Increase or Mainatin Employment.. diversification, which raises the opportunity cost of capital and/or widens the horizons of management who may have been production-oriented or prone to overbuild to protect their position in their traditional industry.. finance background to replace management with marketing or production backgrounds.. Pollytion control costs.. uncertainty.. previous periods of overcapcity.. pp336-7 [PREEMPTIVE] Large Capacity Exansion Relative to Expected Market Size.. Large Economies of Scale Relative to Total MArket Demand, or Significant Experience Curve.. Credibility of the Preempting Firm.. ABility to Signal Preemptive Motive Before Competitors Act.. p338 Willingness of Competitors to back Down.. goals other than purely economic.. major strategic thrust.. staying power, a longer time horizon, or a greater wllingness to trade profits for market position.. very long view of success p340 confront directly the two sources of entry barriers into an industry - structural entry barriers and the expected reaction of incumbent firms.. face the risks that existing firms will retaliate p342-3 WILL RETALIATION OCCUR?.. Slow Growth.. Commodity.. High FIxed Costs.. High Industry Concentration.. Incumbents Who Attach High Strategic Importance to Their Position in the Business.. Attitudes of Incumbent Management p347 entrant can exploit conventional wisdom.. firm with no preconceived notions can often see p349 ENTRY.. Reduce Product Costs..Buy in with Low Price.. Offer a Superior.. New Niche.. Marketing Innovation.. Piggyback Distribution #@# Hardball Stalk 2004 HBS/BCG 1591391679 p8-10 Hardball players strive to continually widen the performance gap between themselves and competitors.. empirically proven advantage.. strive to convert competitive advantage into decisive advantage.. systematically reinforcing.. avoid direct confrontation with competitors.. exploit their employee's will to win.. believe.. "The number-one threat is us," Herb Kelleher, the former CEO of Southwest Airlines [1993 Annual Report], told his people at a big company meeting. "We must not let success breed complacency, cockiness, greediness, laziness, indifference, preoccupation with nonessentials; bureaucracy; hierarchy; quarrelsomeness; of obliviousness to threats posed by the outside world".. draw a bright line in the caution zone.. where the unacceptable area is pp13-16 Unleash massive and overwhelming force.. accurate, direct, and swift. It must not be used until the company is ready to pull all its energy behind it.. Exploit anomalies.. Threaten your competitor's profit sanctuaries.. Take it and make it your own.. much more than appropriating a good idea; you have to improve on it.. Entice your competitor into retreat.. believe will be beneficial to them but actually will weaken them.. Break compromises.. concession that an industry forces on its customers p40 Most anomalies go unnoticed, however, or are ignored. Organizations try to contain or suppress them, precisely because thay are departues from the norm and to ebrace them might disrupt standard operating procedures. When senior managers learn of anomalies, they generally dismiss them as narrowly based, or random, one-time events.. Exploiting an anomaly can be difficult - taking a limited phenomenon to a much larger scale may require that buiness processes and systems be adjusted in order to sustain and encourage the new behavior and to achieve competitive advantgae in cost, quality, time, and value p63-4 price strategically to sharply diminish a competitor's cash flow, thereby reducing his ability to respond.. The more like a commodity the product or service is, the easier it will be to use price to attract customers away from a competitor.. higher the costs of switchingm however, the harder it will be to lure customers away with price.. When the customer base is concentrated, such as is the case with big box retailers, discounts can be used to set low prices for high-volume customers.. But the complexity also gives management greater freedom to make focused pricing moves on specific products, accounts, or geographies. You must be sure that your "costs to serve" and specific market and competitive conditions are wll-documented in case you have to defen yourself against charge sof predatory pricing.. You need to have sanctuaries of your own as well as targets pp65 Behaviors to look for include: The company has only average financial performance.. competitor is sluggish, unaware, or does not display aggressive.. business units are managed as independent profit centers.. flow of information is slow.. A weal central management team will do nothing to help a business unit whose profit sanctuary is under attack, but they will still expect the unit to continue delivering profit against target pp82-3 if truly understood and successfully transplanted, has the potential to drmamatically improve the performance of your business.. Borrow when it will facilitate the indirect attack.. Copy completely, commit fully.. transplant the heart of its business model p97-8 main competitors have a broad range.. very large differences in the sales volumes of the various products offered by the main competitors.. harder for the company to allocate costs accurately to a specific product or order.. When indirect costs exceed 50 percent of value-added costs, the possibility of misallocation is very high.. The indirect costs that are most difficult to allocate accurately are the associated with creating and managing customer relationships.. sales to some customers will appear to be more profitable than they actually are.. compensation of certain employees, usually those in sales and marketing, is tied to the contributions their efforts makre to gross margin.. service costs may also be very high and often misallocated.. to exploit a competitor's flawed understanding of the true costs of serving different segments.. When an industry is booming, management practices get sloppy.. In an industry with only two or three mni competitors, each company is usually very aware of the other's actions, making it difficult to make an unnoticed indirect attack. In an industry with many competitors (five or more), it is very difficult for one competitor to taking princing actions that will influence the behavior of all the others in the desired ways. If a company attacks one rival, the other competitors may take actions to deflect it pp99-100 Strengthen your grip on customers that purchase in high volumes at prices that result in low margins. These are often the most important customers to win and keep because their high volumes can be key to achieving low costs.. Shed customers that purchase low volumes at low prices.. You want to set your prices high enough that your competitors will win most of this business, but not so high that they will make a substantial profit.. Retain low-volume customers that pay high prices, but be ready to ditch them if their willingness to pay erodes.. Retain high-volume customers that pay high net prices.. Offer incentives to your important customers who purchase both high- and low-volume products pp115-9 Shop the way your customer shops.. Know how your product or service is really bought and used.. Try to make a change to your product/service delivery mechanism.. would require a major change in the organization, in job skills, and in activities, and would probably require a significant shift in staffing.. Create new ways for your product/service and its delivery system to create value for customers.. placed the emphasis on the wants of the customer, rather than on the needs of the manufacturer.. Test the limits of your imagination.. reservoir of suppressed disatisfactions pp136-8 Acquire only if the opportunity fits with the strategy.. Don't be tempted to step outside your prove process. If you're going to change the acquisition criteria, you may need to change the acquisition process, too.. Build an internal M&A capability. Many a CEO has lived to regret succumbing to the unsolicited pitches of investment bankers.. building a team that can generate M&A ideas, explore and analyse them, do their own due dilligence, and negotiate the deals. Seek outside advice and assistance.. counsel of an adviser who does not stand to directly gain from the acquisition.. perspective on the acquisition that is free of traditional industry assumptions and unbiased by internal politics.. Take a rigorous approach to valuation.. how the pruchase will affect the value of your company, as well as how much it is worth on th eopen market. For example, will the acquisition rob resources from othe rof your initiatives? If you forfeit the acquisition ro a competitor, how micht it strengthen that rival? Or, can an acquisition be "lost" in a way that hurts your rival?.. Invest in post merger integration (PMI) capability so you have the capacity to successfully integrate acquisitions.. But integration can be the most difficult part, and it's where many deals fall apart p143 danger of being stuck in the miidle if.. Your product sells at a substantial premium based on its brand name withou t delivering on value, features, or emotional engagement.. Your product is mediocre in quality, design, or performance.. Your product has no story or context p154-4 Leaders who personally live in the heart of the matter have three traits in common.. physically and personally connected to the market.. courage to ask simple qeustions.. Saying "I don't know" can lead to breakthroughs. Leaders lose thier edge and value when they assume too much.. build a truth-telling network.. Employees, operating out of self-interest, often shade the truth when they pass information upward #@# HARDBALL INNOVATION George Stalk Jr. Research Technology Management. Washington:Jan/Feb 2006. Vol. 49, Iss. 1, p. 20-28 (9 pp.) Ten Patterns of Disciplined Management.. Know your process.. Make support functions time-invisible... Co-locate critical resources and organize around the tasks at hand.. Maintain continuity.. Align beliefs, goals, measurements, behavior for speed.. Bring discipline to planning.. Freeze specs and use improvement phases.. Invest in capability platforms.. Let senior management facilitate-not develop..Perhaps the most demanding change required of top management is adjusting the compensation and promotion system so that people can remain in their positions long enough to accumulate experience and to exercise that experience. Corporate-wide personnel policies often need revision to provide multiple pay tiers within a grade to enable people to stay in a position longer and still enjoy salary increases. #@# Alfred duPont Chandler Strategy&Structure 1962 MIT 0-262-530009-0 p21 THe operation of a railroad or canal called for more administration than its construction.. with the completion of the great east-west trunk lines in the 1850's administration became a full-time task in American business p30 Before the [1889] New Jersey amendment, no general incorporation law explicitly allowed a corporation to hold stock of other corporations. Some states, in fact, specifically forbade it p31 After the 1890's, administrative innovations were much mor eimportant to the development of American business than legal ones p55 Reorganization provided an opportunity to transform this loose federation of many related small firms into a consolidated, integrated, centrally managed industrial enterprise.. return for stock in th enew firm - the E I du Pont de Nomours Powder Co - formed to take over the combined properties p57 Each major department came to have its Vice-President and its Director. The latter was to be responsible for the smooth day-to-day operations of the department, the former was to concentrate more on the long-term planning and appraisal necessary to keep the company alive and growing. Collectively, the Vice-Presidents with the President, acting as the Executive Committee, were to make broad policy for the enterprise as a whole p61 From the very first, Pierre and Coleman insisted that the Executive Committee should concentrate on long-term planning and appraisal: it must not become involved in making decisions concerning th eoperating activities of the different departments.. coorsination of day-to-day activities of the different departments was left to the Admiistrative or "Operative" Committee made up of Departmental Directors p116 In 1885, Durant, a twenty-four-year-old insurance salesman in Flint, Michigan, purchased a patent for manufacturing two-wheel carts p117 By 1900, Ransom E Olds and one or two others had shown automobile manufacturing to be commercially profitable. In that year, a variety of small companies had produced 4,000 cars in the United States. In 1904, one of these tiny ventures, the Buick Motor Co with a small factory in FLint, failed. Durant needed little urging from its creditors to take over the defunct automobile company p122 before the voting trust agreement with the Boston and New York bankers had expired in November, 1915, Durant had acquired a major, integrated, volume-production automobile company in Chevrolet as well as substantial financial allies in the du Ponts of Wilmington. He used both to obtain full control of General Motors. In August, 1916, after the the resignation of Storrow and then Nash, Durant became President and Pierre S du Pont, Chairman of the Board p131 Hyatt grew so rapidly that Sloan was able to sell to Durant for $13.5 million the firm he had purchased [out of MIT] for $5,000 in 1899. At Durant's request, SLoan became President of United Motors - the parts and accessories company of which Hyatt had become a subsidiary.. he set up uniform accounting procedures.. evaluate the profitability of his operating divisions p134 In outlining his program, Sloan began by defining the role and duties of the Finance and Executive Committees. These he left much as they had been outlined by the du Pont Company early in 1918. The first committee would continue to set dividend rates and the salaries of top officials, to raise funds, and to determine other financial policies. It would have "general control" over the corporation's finances and accounting and would pass on major appropriations recommended by the Executive Committee. The second committee would retain its "entire supervision over the operations side of the Corporation's activities, constituting as a whole practically the entire operating staff." Each operating division would be represented in the Executive Committee, "major operations [car and truck] by a single representative, smaller operations being grouped together, one executive representing several such minor operations." The PResident's primary role would be to interpret the policies of the top committees and to see that they were carried out p226 begins in 1895. Before this, Rochard Sears had sold only watches and jewelry by mail order. In tha yea, Julius Rosenwald and his brother-in-law, Aaron E Nussbaum, joined the company, providing the capital and executive ability that Sears needed to make the most of the opportunity offered by mail-order selling to American farms and villages p227 Under Skinner's general direction came a large number of buyers, each handling a major line and each having a great deal of independence in selecting an procuring, at the lowest possible prices, the goods that were then advertised in the catalogue.. 190 Rosenwald went to a boyhood friend, Harry Goldman, of Goldman, Sachs & Company of New York City. At Goldman's suggestion, the Sears financial structre was re-formed and stock was offered p288 Before the 1920's, only du Pont COmpany developed this third role for their financial offices. By the time of World War I, the Treasurer's Department had its forecast and analysis section that maintained twelve month's forecasts of probable financial conditions and revised them each month. The Department also provided cost data on all the company's activities, such as manufacturing, sales, construction, and research. In the 1920's the financial departments at the other three companies helped develop comparable data.. One reason for the fairly general development of the line-and-staff type of departmental structure was that it helped make possible the delegation of authority and responsibility to the field units.. experiense of both Sears and [SO] Jersey empasizes how the lack of line-and-staff dstinction did result in centralization of decision making p293 Finally, the excutives at all four companies came to realize, some more slowly than others, that systematic policy formulation and allocation of resources called for carefully defined budgeting and capital appropriations procedures p299 Complexity in itself, it should be emphasized, did not assure innovation or change; some responsible administrator had to become aware of the new conditions p307 One of the most important tasks facing Sloan and Brown in 1921 was the creattion of an informational system to provide botthe division heads and thegeneral executives with an intelligible picture of present performance and anticipated conditions.. need to have the top executives be truly general officers.. relieved of operating responsibilities, ad each was to have only advisory contact with the division managers, as Sloan had recommended in his original plan. Finally, through the device of the Inter-Divisional Committees formed between 1922 and 1924, Sloan marked out another formal method or channel of communication and authority through which the general executives, staff specialists, and operating managers kept in constant conttact with each other. By 1925, the General Motors structure was as clearly outlined as that of du Pont p380 In general, the few firms among those studied here that remained family held have tended to be slower in changing both structure and strategy than the others. Deer, Distillers-Seagrams, Firestone, Swift, and Singer Sewing Machine as well as Dow and Alcoa long preferred to stick to the old ways [contrast how Ford, Motorola & oth fam held outgrew broadly held] p384 Antitrust activity [ditto tax & inflation changes?] has probably had the greatest impact on corporate structure and strategy in those reative;y rare cases where it transformed a monopoly into an oligopoly. Yet even in the case of the oil industry, the coming of a huge and entirely new automobile market was as significant as was the breakup of Standard Oil to the strategies and pace of growth of Gulf. Texaco, Shell, Sinclair, Phillips, and other large oil companies p385 Thus four phases or chapters can be discerned in the history of the large American industrial enterprise: the initial expnasion and accumulation of resources; the rationalization of the use of resources; the expansion into new markets and lines to help assure continuing full use of resources; and finally the development of a new structure to make possible continuing effective mobilization to meet both changing short-term market demands and long-term market trends #@# Strategy Implementn Galbraith&Nathanson 1978 West 0-8290-0214-7 p9 Chandler's thesis, then, represents what is currently known in the organization field as a contingency theory. COntingency theory states that there is no one best way to organize, but that all ways or organizing are equally effective (Galbraith 1973). The choice is dependent or contingent upon something. Chandler suggests that structure is congent upon the growth of strategy p22 If two units have reciprocal interdependence, then they also have sequntial and pooled interdependence.. Organizations are predicted to grow by incorporating within their boundaries those elements that, if left outside, would pose critical contingencies for viability and be constly to manage by contracting p45 multi-divisional structure was the best performer for growth and had average returns on equity and capital. Growth and returns were also positively related, showing that the multi-divisional structure could achieve growth without sacrificing profitability p54 Joan Woodward proposed that manufacturing technology was aprimiary determinant of organization form (1965).. rate of change of the environment that determined organization form (Burns and Stalker, 1961).. industries characterized by high rates of change of markets and technology.. decentralized with ambiguous roles and a great deal of lateral communication.. stable markets.. centralization and well-defined roles p55 Lawrence and Lorsch [Org&Env 1969].. high performing firms in an uncertain environment had greater decentralization than low performers, and that in the predictable industry, hte high performer was the more centralized p57 Khandwalla [1973].. greater the competition, the greater the use of controls and the greater the decentralization.. strongest when competition was based on new products rather than on mar-[keting or price; p58] p58 (Pfeffer and Leblebici 1973).. greater the competition, the greater the degree of specification of procedures (formalization) and th emore frequent the reporting of results.. Under competitive conditions, organizations stay flat and increase spans of control and number of departments. Also, the greater the numbe rof changes to products, the greater the formalization and written reproting of performance p64 [L&L AW73] FIrst, organizations had to differentiate their functions so that each functional department could deal with its different subenvironment. Second, it had to integrate the differentiated functions around the interdependencies brought on by the key competitive requirements of the industry p80 Oliver Williamson (1976).. additional hierarchical levels in functional organizations cause a loss of control and reduction of profit maximizing behavior.. resources are more likely to be used optimally (profit maximizing) in the multi-divisional firm when it is faced with large and diverse businesses p81 best recent work summarizing research on reward systems, and compensation in particular, is that of Lawler (1971, 1977). Lawler suggests that the research confirms the conventional wisdom that when pay is tied to performance, it motivates higher performance.. individual bonuses based on productivity or profit are best at linking pay and performance but have the strongest relation to side effects and are weakest at encouraging cooperation.. more one opts for global and cooperative plans, the more ambiguous the individual "pay for performance relation".. no single best reward system. The best depends on the organization's task and strategy p84 In summary, the Lawler and the Salter schemes require that the reward system designer start with the strategy of the organization, in order to determine the behavior that is necessary for implementation of that strategy. They identify some types for us, such as degree of cooperation between units and need for goal congruence between successive layers. The reward system chosen will be a trad-off between the various incentives for particular behaviors. A typical trade-off is between division profit incentives and total corporate profit. The total figure will encourage cooperation and congruence between division and corporate goals, but will reduce the degree to which an individual's performance is linked to his or her bonus. A balanced incentive scheme should be formulated according to the strategy, th einterdependence between units, and the individualism of the managers in question p87 [Lorsch&Morse 1974] low tolerance for ambiguity was found among the people in the manufacturing plants and high tolernce at the research and development labs.. managerial transfer in EUropean multi-national firms (Estrom and Galbraith 1977). The authors hypothesize that large numbers of transfers of many nationalities lead to a decentralized subsidiary structure. The work of Pitts is also relevant here (1977). He finds that firms that grow internally and presumably pursue "related diversification" strategies make use of interdivisional careers to a greater extent than do external growth firms pursuing unrelated diversification strategies p118 Table 8.1 Model Illustrating Five Organizational Types Type Simple Functional Holding Muli-Divisional Global-M Characteristic Strategy Single Single Growth by Related diversity Multiple products Product Product and Acquisition of product lines in multiple Vertical unrelated -internal growth countries ... Integration diversity some acquisition Organization Simple Central Decentralized Decentralized Decentralized Structure functional functional Profit Centers Product or profit centers around product area division around world divisions Small profit centers wide product Headquarters area divisions Research and Not insti- Incresingly Institutionalized search for new Development tutionalized Inst.. products and improvememnts around product Decentralized Centralized which is and process to divisions guidance centralized improvements and decentralized in centers of expertise Performance By personal Increasingly Impersonal Impersonal based Impersonal Measurement contact impersonal based on on return on with multiple subjective based on cost, return on investment goals like ROI, productivity investment and profitability profit but still subjective profitability with some tailored to subjective contribution product to whole and country Rewards Unsystematic Increasingly Formula based Bonus based Bonus based on paternalistic related to on ROI or on profit multiple based on performance profitability performance planned goals loyalty around Equity but more More discretion productivity rewards subjective than Cash and volume holding-Cash rewards rewards Careers Single function Functional Cross fnction Cross functional Inter- specialist specialists but intra- interdivisional divisional with some divisional and corporate- Intersub.. generalist divisional Subsidiary/ interfunctional moves moves Corporate moves Leader Personal Top control of Almost complete Delegation Deleg.. Style Control of Strategic deleg.. Indir.. ..indir.. results and strategic and decisions results and selection results according Control operating Some delegation of management Some decentr.. to decisions by top of operations [via] and capital of strategy.. plan management plans, procedures funding .. Strategic Need of owner Degree of Degree of diversity Allocation.. Choices vs needs integration Types of business Exit and Entry.. of firms Market share Acquisition targets Rate of Degree of Breadth of Product line Entry and Exit..Growth Ownersh.. #@# Legal COntext Hostile Takeovers HBS 9-904-005 2004 disclose its stockholdings in a target company when these holdings reach 5%.. tender offer statement on Schedule 14D-1.. open for at least 20 business days.. withdraw their shares at any time while the offer remains open.. bound to purchase as many shares as it announced.. Williams Act that are generally designed to level the playing field of all investors #@# Strategic Alliances HBS 9-298-047 Gompers 2001 Williamson argued that, as external market transactions become more costly, a firm is more apt to internalize its activities to economize on transaction costs.. Mergers and internal development may involved governance costs so large that the whole may not be greater than the sum of its parts.. according to mansfield (1991), the percentage of new products and processes based on academic research was highest in the drug industry and lowest in the oil industry.. Some of the motivational factors in forming strategic alliances include: Information exchange * Complexity resources * Economies of scale * International expansion #@# Leadership and the Psychology of Turnarounds. Kanter, Rosabeth Moss 1 Harvard Business Review; Jun2003, Vol. 81 Issue 6, p58-67, 10p, 5 color Each of these executives restored their people's confidence in themselves and in one another -- a necessary antecedent to restoring investor or public confidence. They inspired and empowered their organizations to take new actions that could renew profitability.. time and energy were spent on self-protection instead of joint problem solving.. Executives found reasons not to attend meetings because those few meetings that remained had degenerated into diatribes by the CEO, followed by uninformative reports. No one wanted to raise questions because that tended to produce angry exchanges, as department heads accused other department heads of putting obstacles in their paths. The game became one of blaming others before they could blame you.. the only way a CEO can reverse a corporate decline is to change the momentum and empower people anew, replacing secrecy and denial with dialogue, blame and scorn with respect, avoidance and turf protection with collaboration, and passivity and helplessness with initiative.. Executive committee meetings were increasingly devoted to themes that cut across divisions, and members discovered areas in which they could combine forces to tackle new business opportunities.. Rather than continually reorganize, which is highly disruptive, especially for a troubled company, turnaround leaders simply augment the organization chart with flexible, often temporary, groups that open relationships in multiple directions.. The push on the part of the executive committee to support new ideas and to collaborate on cross-division projects created some striking innovations.. A new team was established to take action and to continue the process of empowerment. #@# Mergers That Stick. Kanter, Rosabeth Moss 1 rkanter@hbs.edu Harvard Business Review; Oct2009, Vol. 87 Issue 10, p121-125, 5p Studies by Boston Consulting Group analysts have shown that in a weak economy acquiring companies add only marginal value by cutting costs. As the economy strengthens, successful mergers will be those that have invested in profitable growth -- which requires integrating and motivating employees who will work quickly and smoothly, minimize disruptions, increase market share, innovate, and adapt to emergent trends.. These acquirers overcame the usual barriers to successful mergers: employee shock, protests, and anxiety, all of which can fuel supplier unrest, government disapproval, and customer defections.. Building networks for new employees was a major emphasis.. they do not act like conquerors sending out occupying armies. Instead, they act like welcoming hosts and eager learners. Their leaders are attuned to emotions and culture, knowing the importance of symbols and signals in communicating with employees about change. They establish transparent processes to reduce anxieties about changes that have not yet been made. They invest in the future, adding more than they take away and letting people share in the fruits of success. They try to be fixers rather than destroyers, which converts skeptics into fans. They value and facilitate relationships #@# Integration Managers: Special Leaders for Special Times. Ashkenas, Ronald N.^1 Francis, Suzanne C.^1 Harvard Business Review; Nov/Dec2000, Vol. 78 Issue 6, p108-116, CONSIDER THE IRONY: LESS THAN HALF OF all mergers and acquisitions ever reach their promised strategic and financial goals, yet companies spent more on M&A last year than ever before.. The due-diligence team develops a deep knowledge of the acquired company, but that team usually disbands after the deal closes. A management team will eventually run the merged organization, but often no one is responsible for the integration process itself-for charting how the two companies will combine their operations, for seeing to it that the integration meets its deadlines and performance targets, for educating the new people about the parent company, and vice versa.. We found that integration managers help the process in four principal ways: they speed it up, create a structure for it, forge social connections between the two organizations, and help engineer short-term successes that produce business results.. Deep Knowledge of the Acquiring Company.. No Need for Credit.. Not everyone can flip between being tough and being supportive. And not everyone can do that with people at different levels up and down an organization.. That's another reason why most integration managers are veterans of their organizations.. a major generator of this kind of flexibility is deep self-confidence combined with relatively few ego requirements. The integration manager cannot be concerned with getting credit- or even recognition- for an effective integration.. Comfort with Chaos.. takes exquisite project management and organizational skills. The teams need clear assignments; common formats for their outputs; disciplined timelines; and coordinated meeting schedules, meeting formats, communication mechanisms, and review processes.. A Responsible Independence.. Emotional and Cultural Intelligence #@# Your Best M&A Strategy. Rovit, Lemire Harvard Business Review; Mar2003, Vol. 81 Issue 3, p16-17, Smart deal makers methodically acquire through good times and bad.. Naturally, excess return varied a lot, and the outcome of acquisitions was only one factor in the mix. But the performance of the less frequent buyers and the nonbuyers varied more than the performance of the frequent buyers, and the frequent buyers were more likely to achieve returns above their cost of equity.. constant buyers were by far the most successful, outperforming the growth buyers by a factor of 2.3 and the doldrums buyers by a factor of 1.8. The 27 recession buyers came in second, outperforming the growth buyers by a factor of 1.4.. They started with small deals, institutionalized their processes, and created feedback systems to make sure that they learned from their mistakes. They continually reviewed targets and kept ready lists of companies they'd buy if the price was right.. All of the successful acquirers in our study share Cintas's comfort with killing deals, and many insist on high-level approvals. Some of the companies also adjust incentives to ward off ill considered acquisitions. They tie rewards to the long-term success of the acquired business rather than to the completion of the deal. #@# Desperately seeking synergy Goold, Campbell, Source: Harvard Business Review; Sep/Oct98, Vol. 76 Issue 5, p131-143, synergy bias, which leads executives to overestimate the benefits and underestimate the costs of synergy. Then comes the parenting bias, a belief that synergy will be captured only by cajoling or compelling business units to cooperate. The parenting bias is usually accompanied by the skills bias-the assumption that whatever know-how is required to achieve synergy will be available within the organization. Finally, executives fall victim to the upside bias, which causes them to concentrate so hard on the potential benefits of synergy that they overlook the possible downside risks.. distracts managers' attention from the nuts and bolts of their businesses, and it crowds out other initiatives that might generate real benefits.. Executives should strive to be as precise as possible about both the type of synergy being sought and its ultimate payoff for the company.. She saw that the broad goal-leveraging international brands-could be broken down into three separate components: making the brand recognizable across borders, reducing duplicated effort, and increasing the flow of marketing know-how.. Perception opportunities arise when businesses are unaware of the potential benefits of synergy. The oversight may be caused by a lack of interest, a lack of information, or a lack of personal contacts. The parent can help fill the perception gap by, for example, disseminating important information or by introducing aggressive performance targets that encourage units to look to other units for better ways to operate.. Evaluation opportunities arise when the businesses fail to assess correctly the costs and benefits of a potential synergy. The businesses' judgments may be biased by previous experiences with similar initiatives, distorted by shortcomings in the processes or methods they use to assess cost-benefit trade-offs, or skewed by their own strategic priorities.. Motivation opportunities, which derive from a simple lack of enthusiasm by one or more units, can stop collaboration dead in its tracks.. Implementation opportunities open up when unit managers understand and commit to a synergy program but, through a lack of skills, people, or other resources, can't make it happen.. A final discipline is in order: looking carefully for any collateral damage that may occur from the synergy program.. In other cases, cooperation can distort the way unit managers think about their business, leading to wrongheaded decisions.. All too often, executives set overly broad goals for their synergy programs - goals that make good slogans but provide little guidance to managers in the field. By disaggregating a broad goal into more precisely defined objectives, managers will be better able to evaluate costs and benefits and, when appropriate, create concrete implementation plans. Here we see how one broad and ill-defined goal - "leveraging international brands" - was systematically broken down into meaningful components that could be addressed individually. #@# Getting Offshoring Right. Aron raviaron@wharton.upenn.edu Singh singhj@wharton.upenn.edu Harvard Business Review; Dec2005, Vol. 83 Issue 12, p135-143 The higher a process's rank in the hierarchy, the more crucial it is to the company's strategy, and the less the organization should think about moving it offshore or outsourcing it.. Until service providers move up the learning curve, they will make more errors and execute tasks more slowly than companies' employees do. That often results in lower customer satisfaction.. nature of information flows doesn't affect the quality of execution. If companies codify work and develop metrics to evaluate quality, they can contain operational risk even if work constantly moves between companies' employees and vendors' agents.. Some structural risk arises because vendors can stop investing in training or employ people who aren't as qualified as the agents they presented during negotiations.. When companies supervise providers' work, structural risk falls. Thanks to advances in information technology, businesses can track providers' efforts in real time.. when firms outsource processes that require the transfer of a large amount of tacit knowledge, they have to invest time and effort in training providers' employees. Second, some processes take a long time to stabilize when companies offshore them.. In both cases, the cost of switching from existing providers is very high. That accentuates the risk that over time, vendors will dictate terms to buyers.. When a firm negotiates a contract with a provider, it should specify a period after the contract's expiry during which the provider must continue to offer the service at a certain price. As a rule of thumb, the buffer should specify 150% of the time that it took the provider to deliver output that matched the company's quality standards. If it took 12 months for the vendor to come up to speed, the vendor must continue to provide the service for 18 months after the contract has expired. Lehman Brothers, for instance, has insisted on adding this clause to all its contracts with providers. Although it may be difficult, companies should also split business between two providers.. Finally, companies face the risk that rivals may steal their intellectual property and proprietary processes if they transfer processes offshore, especially to emerging markets.. We call this structure the extended organization. In this hybrid organizational form, companies specify the quality of services they want and work closely alongside providers to get that quality. They manage providers carefully and monitor the agents' work to ensure that things are done properly. Technology enables buyers and sellers of services to exchange information in real time and to embed themselves deeply in each other's companies. Firms can thus move away from command-and-control structures to sense-and-respond forms of collaboration #@# The PASSIVE-AGGRESSIVE Organization. Neilson neilson_gary@bah.com Pasternack bpasternack@specialolympics.org Van Nuys van_nuys_karen@bah.com Harvard Business Review; Oct2005, Vol. 83 Issue 10, p82-92 In passive-aggressive organizations, people pay those directives lip service, putting in only enough effort to appear compliant. Employees feel free to do as they see fit because there are hardly ever unpleasant consequences, and the directives themselves are often misguided and thus seem worthy of defiance. Making matters worse, senior management has left unclear where accountability actually lies, in effect absolving managers of final responsibility for anything they do. Those with initiative must wait interminably for a go-ahead, and their actions when finally taken are accompanied by a chorus of second-guessing, a poor but understandable substitute for the satisfaction of accomplishing the task at hand.. In such organizations, people with authority lack the information to exercise it wisely or the incentives to serve the company's strategy and interests or the personnel that will carry out their directives. Conversely, people with the incentives and information necessary to make good decisions lack the authority to execute them or oversee their execution by others.. Before bursting into full flower, passive-aggressive organizations are dotted with frustrated world-beaters who cannot understand why their most promising projects can't gain traction. After a couple of years, such individuals either quit or become demoralized into ineffectuality by the thanklessness and futility of effort.. To some venerable observers, the employees of such companies bear a passing resemblance to the "organization man" of 1950s sociology and literary fiction.. More specifically, we've seen organizations descend into the passive-aggressive state through one or another of three classic failings, as the following examples demonstrate: Unclear Scope of Authority.. Misleading Goals.. Agreement Without Cooperation.. Ineffective Motivators.. Unclear Decision Rights.. The Wrong Information.. Misleading Structure.. The first order of business is the greatest challenge of all: getting a passive-aggressive organization's attention.. In addition to these catalysts, elements of successful programs to fix passive-aggressive organizations include the following: Bring in new blood.. Leave no building block unturned.. Make decisions, and make them stick.. Spread the word -- and the data.. Match motivators to contribution #@# BREAK FREE FROM THE PRODUCT LIFE CYCLE. Moon ymoon@hbs.edu Harvard Business Review; May2005, Vol. 83 Issue 5, p86-94 There's nothing inevitable about the product life cycle. Marketers are disrupting it by redefining the boundaries between product types. In the process, they're rejuvenating categories and creating whole new markets.. It's hard to win such a competition. As marketers instinctively embrace the old life cycle paradigm, they needlessly consign their products to following the curve into maturity and decline.. By positioning -- or, often, repositioning -- their products in unexpected ways, companies can change how customers mentally categorize them. As a result, companies can rescue products foundering in the maturity phase of their life cycles and return them to the growth phase. And they can catapult new products forward into the growth phase, leapfrogging obstacles that could slow consumers' acceptance. In this article, I describe three positioning strategies that marketers use to force consumers' mental shift. Reverse positioning strips away "sacred" product attributes while adding new ones; breakaway positioning associates the product with a radically different category; and stealth positioning acclimates leery consumers to a new offering by cloaking the product's true nature.. In his disruptive innovation model, Clayton Christensen describes how new, simple technologies can upend a market. The proliferation of features and attributes that occurs as companies ride the product life cycle can create the kind of "product overshoot" that leaves them vulnerable to a disruptive competitor with a simpler technology. In an analogous way, the strategies I describe can exploit the vulnerability of established categories not to new technologies but, rather, to new positioning.. make the heretical decision to step off the augmentation treadmill, shedding product attributes the rest of the industry considers sacred. Once a product is returned to its baseline state, reverse positioners supplement the stripped-down product with one or more carefully selected attributes that would typically be found only in a highly augmented product.. With breakaway positioning, a product escapes its category by deliberately associating with a different one. Marketers leverage the new category's conventions to change both how products are consumed and with whom they compete. Products communicate their category membership in many ways -- through their design, distribution channels, promotions, and pricing. Each of these elements of the marketing mix cue consumers to mentally categorize an offering in a certain way.. stealth positioning is a legitimate way to diffuse prejudice about a product or company, encourage acceptance, and deliver value to customers #@# Hw Biz Stg Use Guerilla Warfare Tactics Ian MacMillan JBizStg Fall 1980 p63 establish and consolidate guerilla bases in militarily secure areas where surplus resources.. engaged the enemy under conditions that suited him rather than them.. decide that the situation suited him rather than the enemy.. unless at least three of these conditions were present, he would rather retreat than engage the enemy p64 wars of attrition leave the "victors" exhausted, with resources depleted, and sometimes painfully vulnerable.. must be competitvely secure either because competitors cannot or will not enter.. patent.. cost of entry.. large long-term resource or managerial commitments, are often inclined not to enter particular segments aggrssively because they are otherwise engaged.. provide surplus resources which can be used to survive times of adversity or to engage in competition elsewhere.. Find allies who are willing and able to commit resources to the endeavor.. own resources can then be saved for the really critical efforts.. Focusing effort on a narrow, well defined segment or niche that is weakly defended by competitors enhances the probability of success.. Centralize ideology but decentralize decision making p65 Successful entry to a product/market segment or niche involves the development of a "cause," a position that requires support of the customer, supplier, and distributor, and which the competitor finds hard to refute. Similarly, successful exit from a product/market segment seeks to ensure that our temporary departure is viewed with regret by the customers, suppliers, and distributors.. Seek decisive results.. longer the engagement took place, the more likely that opponents would have time to deploy.. attrition.. BUild superior commitment.. Low morale feeds defeatism.. Rather build morale via small successes first.. Seek areas where opponents have overextended resources.. capturing opponent's resources.. personnel.. channels.. Retain the initiative.. Build superior intelligence systems #@# Corp Ideology & Stg Delgn Ian MacMillan JBizStg Wtr 83 3 p71 Management is able to delegate decison-making downwards, secure that subordinates will make decisions that are "right" and "appropriate" to the corporate ideology, and only in cases when there are conflicts concerning ideological commitments, or when intense pressures develop to reshape ideological commitments, do subordibnates need to have the decisions made by higher level of management p74 Every organization is rich with such stories, which have the potential of being used as powerful reinforcers for the corporate ideology.. Particular attention, and a great deqal of time, of very senior management is devoted to the screening and selection of initiates.. Once the selection has taken place it is equally important for these inductees to receive early exposure to the "ideology at work" preferably with a mentor, who can explain the trade-offs being made as ideology is articulated on the job p75 Reinforcement by Managerial behavior.. Reinforcement by Reward Systems #@# Hickson Hinings Lee Schneck & Pennings Strat Contingencies Theory of Intraorg Power Adm Sci Q 16#2 1971 p217 when organizations are conceived as interdepartmental systems, the division of labor becomes the ultimate source of intraorganizational power, and power is explained by variables thatare elements of each subunit's task, its functioning, and its links with the activities of other subunits p219 table 1 VARIABLES AND OPERATIONALIZABLE SUBVARIABLES Power (weight, domain, scope): Positional power (authority), Participation power, perceived power, preferred power; Uncertainty: Variability of organizational inputs, Feedback on subunit performance, speed, Specificity, Structuring of subbunit activites; Coping with uncertaint, classified as: By prevention (forestalling uncertainty), By information (forecasting), By absorption (action after the event); Sustainability: availability of alternatives, Replaceability of personnel; Centrality: Pervasiveness of worflows, Immediacy of workflows #@# Org Design Galbraith 1977 AW 0-201-02558-2 p36 Therefore the greater the task uncertainty, the greater the amount of information that must be processed among decision makers during task execution in order to achieve a greater level of performance p45 The shift to craft or professional workers represents a shift from control based on supervision and surveillance to control based on selection of responsible workers. Workers who have the appropriate skills and attitudes are selected p97 [Dimensions of the Vertical Information System] Decision frequency or timing.. scope of the data base.. degree of formalization.. capacity of the decision mechanism pp173-4 four organizing modes.. Creation of slack resources.. Creation of self-contained units.. Investment in vertical information systems.. expanding the capapcity of hierarchical channels of communication, creating new ones, and expanding the capapcity of decision mechanisms.. Creation of lateral relations.. 1. Direct contact between managers. 2. Creation of liaison role. 3. Creation of task forces. 4. Use of teams. 5. Creation of integrating role. 6. CHange to managerial linking role. 7. Establishment of the matrix form p176 Fig 12.2 The Range of alternatives ^ \ Product influence in decision making | \ Relative \ Influence \ Functional influence in decision making Functional organization Matrix organization Product organization Functional authority structure Dual authority Product authority structure Product task forces Functional task forces Product teams Functional teams Prduct managers Functional managers Product departments Functional departments Functional reporting Dual information and Product reporting system reporting system system p297 unintended effects which can result when rule compliance is applied in dynamic situations requiring spontaneous behaviors. The emphasis upon reliability produces a rigidity of behavior. Employees fail to develop programs of action which are tailored to the unique features of each situation p305 when outcomes are measured and rewarded, those outcomes occur with a high probability but they occur at the expense of unmeasured outcomes pp30-9-10 Implementation of Pay Systems.. Conflicting uses of pay.. Subjectivity of performance measures.. Insufficient variance in individual rewards.. supervisors are reluctant to give highly variable rewards. The consequences of this practice is that the individual recognizes that pay is not directly tied to performance. Attempts to force distributions on uncertain tasks can lead to serious morale problems, however.. Pay secrecy policy.. overestimation of the raises and salaries of others.. Infrequent distribution of rewards.. accounting convenience rather than motivational consequences p359 Fig 21.1 Summary of reward systems and [coop] behaviors Behavior Join and Reliable Effort Spontaneous Cooperative Reward\ remain role above behavior behavior System \ behavior minimum Rule compliance \+ +++ \- \- \- System reward ++ Group reward ++ + ++ ++\- ++\- Individual rewards +++ + +++ +\- +\- Leadership behavior + ++ ++ ++ ++ Group acceptance + +\- +\- +\- +\- Task involvement \- +++\-- +++ +++\-- +++\-- Goal identification +++ +++ +++ +++ +++ #@# Limits of the Learning Curve Abernathy & Wayne HBR 9/74 p110 The learning curve (also called the progress function and start-up function) shows that manufacturing costs fall as volume rises.. The experience curve traces declines in the total costs of a product line over extended periods of time as volume grows p114 rate of product improvement halted the steady reduction of costs. Nevertheless, to maintain market growth FOrd further cut the list price along the experience-curve formula p115 Process innovations rise to a peak after eriods of product innovation, as the manufacturer rationalizes the process and reduces costs.. not only that the nature of innovation changes, but also that the intensity of innovative activity diminishes.. changes introduced to trim costs altered the innovative activity.. Not surprisingly, technology transfers, increased in frequency through the period under consideration p118 In determining how the learning-curve strategy should be pursued, management must realize that the risk of misjudging the limit rises dirctly with the successful continuation of the strategy. There are two reasons for this seemingly paradoxical development: first, the market becomes increasingly vulnerable to performance competiton and second, attempts to continue reducing costs diminish the organization'a ability to respond to this kind of competition #@# Rothschild How Ensure Continued Growth Strat Planning J Biz Stg 1#1 1980 p12 critical success conditions are: TOp management commitment to and practice of strategic planning precepts. The establishment of well-defined SBUs within an organization, based on sound segmentation concepts. The training and development of all levels of middle and top management in the use of strategic planning techniques and concepts. The development of strategic control systems to determine whether SBU strategies are being implemented as proposed and approved p18 Growth will happen only if strategic planning is: APplied properly with explicit CEO commitment and involvement; Used at the appropriate organizational level by true SBUs; and Accompanied by the proper reviews and controls. #@# Competitive Marketing O'Shaughnessy 1984 Allen Unwin 0-04-658243-6 p74 Figure 4.5 [Buyer decision model] Buyer's goals Buyer's belief Indecision<-Unstable Stable | Goals agreed-> V <------------------| standing<- Wants -> occurent Non-buying <--------|-----------------------------------> Buying Latent want Passive wants Exclusionary reasons Extrinsic Intrinsic Creation Want Change | Incapacity | Promises preference preference of remains in Forebearance Authority Evaluate/ | Habit| awareness latent beliefs, decide Choose | of priorities Generated-functions + Use-functions Picking product's or terms of Integrative | Adaptive Legalistic Technical potential purchase | Economic | performance | + |Imitative|||Reputation factors towards Conventions | Ego/Status/ | Advice|Sample Buying Bandwagon/ integrity| Seek Comparison action fashion |guarantees shopping ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Choice of [roduct/brand Intention to buy Buying action Buying action...belief and choice frustrated p113 Figure 6.1 Competitive Strategies Move Mix adjustments before competition Deterrent action Move Imitate Market share protection with (hold/defend) competition Compensate Move Merger/acquisition away from Competitive competition Collusion strategies New areas Move New segments before Additional channels competition Penetration pricing Market share advancement Move Capitalize (growth) with competition Leapfrog Move New offerings away from Reciprocal competition agreement p151 Table 8.2 Typical Suggested Strategies Relating to Mix Variables in the Product Life Cycle Stage Stage in Product Pricing Promotion Distribution life cycle Iron out High Create awareness Selective Introduction product of products' potential distribution deficiencies Stimulate primary demand Growth Focus on product Selective advertising Extend to quality of brand coverage sought Variations of product introduced Maturity Product adjustments Image build and maintain Seek close for further brand Sales promotions dealer relationships differentiation Facilitate changes in product, etc Decline Simplify product line Primary demand Selected Seek new product uses may again be dealers Changes to revitalize product Low cultivated cultivated p247 Figure 12.2 The Process of Industrial Purchasing Company objectives Efficiency Problems material/component shortages Saleability }Opportunities + Difficulties{ obsolete/old equipment Asset protection | new projects Flexibility | poor current suppliers | Buying | particiapnts image projected |Specific |Standing interpersonal relations |responsibilites|wants {integrity sought | | innovation risk avoidance | Perceived investment (personal) payoff Present supplier/ straight rebuy need product need Decision Disposition to make to buy and not buy | +++++++++++++++++++++++++++++++++++++++++++++++++++++++|+++++++++++++++++++ Pick Re-order Purchase Purchase Purchase {technical Purchase supplier from initiating advising deciding {economic liaison | authorizing from current Initiate Advise / adaptive |monitoring| approved suppliers inquiries Determine needs { integrative | | | list ............/ V \ legalistic | | | | Agreement Conflict | | | | | Analytical Bargaining Jural Liaise Settle | | mode mode | | | | V<------ Conflict resolved | | | | Core new offering | | | | offering modified offering | | | | specified same offering | | | Search directories --Specify | | | for catalogues suppliers | | | ......sources advertisements | | | | | Inadequate sales rep. | | | | | Develop Adequate | | | | | sources request | | | | | details/quotations | | | | | proposals /adaptive | | | | +- - - - - - - -+Evaluate{integrative| | | | | | \legalistic| | | | | | {technical| | | | | | {economic | | | | | Agreement Conflict | | | | | | Analytical Bargaining Jural Liaise Settle | | mode mode mode | | | | Conflict resolved | | | | +------------------------------+ | | +-------------Supplier selected | | | Authorization sought- - - - - - -Approved Authorized + - - - Contracts signed/rder issued - - - - - - - - - - - -+ +-Supplier performance evaluation [loop present need]..Unsatisfactory Satisfactory performance performance #@# Ray Ad & Commnxn Management 1982 PH 0-13-015230-7 p54 Figure 2-5 The full decision sequence.. [J Mktg 1/73 p31] SITUATION ANALYSIS Company Strengths, Weakness, Objectives/Product Characteristics & Price/Buyer Segments, Characterisitcs, and Behavior Competition/Trade/Past Experience with Communiation Elements V MARKETING OJECTIVES Overall Objectives of the Total Program, Sales, Votes, Various Social Acts - by Segment, Time and Area V ^ SIZE OF TOTAL COMMUNCATION BUDGET V ^ +--------------> TENTATIVE BUDGET MIX | Proportion of Budget Tentatively Assigned to Communication Elements, | (eg Selling, Advertising, Publicity, Public Relations, Reseller Support- | Merchandising, Product Sampling, Packaging Changes) V | V Advertising: <----+ Tentative Budgets | Selling: Tentative Budget | for Other | Tentative Buget V ^ | Mix Elements | V ^ +---> Communication Goals | V ^ | Decisions | V ^ | Decisions | Similar to +---> Message Strategy: | Similar to | Advertising | Positioning & Format | Advertising | | V ^ Ad Budget | | | +---> Message Distribution Size | | | | Plan Revision | V ^ | V ^ ^ V ^ | | Budget Allocation ---------+ | | | | V ^ | | | | Specific | | Implementation | | V ^ +------------- CONTROL EVALUATION: INFORMATION SYSTEM Continuous Measurement of Communications and Sales Effects for All Mix Elements, Separately and in TOtal, by Time, Area and Segment p131 Define groups that differ in past or future propensity to consume th eproduct.. Determine the different preference-consumption groups.. relevant to the product class, the attributes sought, and the relativ eimportance of the attributes.. oerceptions of the individual brands or company offerings.. Adjust the prefernce groups.. Analyze the resulting segments in terms of theitypical purchase and use behavior and resultant comunication needs p161 Situational Factor Relationship with Product quality/uniqueness/ID M/S A/M A/S [M=Mktg A=Ads S=Sales] with company 0 + + Frequency of pruchase 0 + + [Lilien, Mgt Sci, Stage in life cycle - 0 - 2/79, 191-204] Market share - 0 - Concentration of sales - + 0 Grwth in customer base + + + p198 BEFORE COMMUNICATION & TENTATIVE BUDGET MIX KEY DECISIONS: KEY DECISIONS: KEY DECISIONS: SELLING ADVERTISING GENERAL ALL MIX ELELMNTS Communication Goals: Communication Goals: Communication Goals: Selling Advertising Other Mix Elements Message Appeals Used Ad Appeals Message Appeals Positioning by Salespeople and Position Other Mix Elements Sales Messgae Format: Advertising Format Message Format Type of Salespeople Message DIstribution Advertising Message Distribution Number of Salespeople, Media Planning Plan Territories, Call Patterns BUDGET - IMPLEMENTATION - CONTROL #@# Customer Oriented Apr Id Product Mkts Day Shocker J Mktg 43#4 1979 p11 Analytical methods for customer-oriented product-market.. Purchase or Usage Behavior: A1 Cross-elasticity of demand, A2 Similarieties of Behavior, A3 Brand switching. Customer Judgements: B1 Decision sequence analysis, B2 Perceptual mapping, B3 Technology substituition analysis, B4 Customer judgements of substitutability.. Cross-elasticity of demand.. is a static measure, and breaks down in the face of a market characterized by changing product composition" (Cocks and Virts 1975 [Eli Lilly internal]) p18 boundaries are seldom clear-cut - ultimately, all boundaries are arbitrary #@# Abell Strategic Windows J Mktg 42#3 1978 p25 To what extent do the changes call for skills and resources completely outside the traditional competence of the firm?.. To what extent can changes be anticipated?.. How rapid are te changes which are taking place? Is there enough time to adjust without forfeiting a major share of the market which later may be difficult to regain?.. How long will realignmnet of the functional activities of the firm take?.. What existing commitments - eg technical skills, distribution channels, manufacturing approaches, etc - constrain adaption?.. Can the new resources and new approaches be developed internally or must they be acquired?.. Will changes completely obsolete existing ways of doing business or will there be a chance for coexistence? #@# Hambrick&MacMillan Prod Pflo & Man's Best Friend Cal Mgt Rvu 25#1 Fall 1982 p84 Cash cows "generate large amounts of cash, in excess of the reinvestment required to maintain share. This excess need not, and should not, be reinvested in those products." Dogs "may show an accounting profit, but the profit must be reinvested to maintain share, leaving no cash throwoff. The product is essentially worthless, except in liquidation." Wildcats (or Problem Children) "almost always require far more cash than they can generate. If cash is not supplied, they fall behind and die." Stars "nearly always show reported profit, but may or may not generate all of their own cash" [Henderson pp164-6 Abt 1979] p94 Dogs perform better that BCG has led us to believe. In fact, some dogs perform very well. Cartain strategic factors are associated with high profitability among Dogs. The notable factors are low apital intensity, attention to efficiency, a narrow focus, high product quality, and low to moderate prices. Top management of a company can effect whether Dogs achieve their potential as long-term, reliable cash generators. Among the ways: assign first-rate managers to head DOgs, avoid incessant milking, and use substantive rewards and symbolic actions to maintain morale in Dogs #@# HBR 3/93 71#2 93204 Hamel & Prahalad Strategy as Stretch and Leverage (Competitiveness is born in the gap between a compay's resources and its managers' goals) p79 If convergence prevents the diversion of resources over time, focus prevents the dilution if resources at any given time p80 Being a "learning organization" is not enough; a company must also be capable of learning more efficiently than its competitors.. "Borrowing" the resources of other companies is another way yo accumulate and leverage resources p83 dissguise their true intentions. They reconnoiter enemy territory before advancing. They don't attack heavily fortified positions #@# Product Portfolio Planning HBS 9-581-107 Yip 8/82 p8 [BCG Growth:Share] (1) Both margins and cash generation tend to increase with increasing relative market share. Experience curve and scale effects link high margins with high relative market share. (2) Product sales growth requires cash input to finance added capacity, working capital, etc. Thus cash input is needed to maintain share of a growht market. (3) An increase in market share requires cash input to finance increased edvertising expenditutre, additional plant and cost-reducing equipment. Growth in each market will untimately slow as th eproduct approaches maturity. Cash generated as growth slows must be reinvested in other, still growing products #@# Market share - key to profitability [PIMS], HBS 1/75 75103 Buzzell Gale & Sultan, As market share rises, turnover on investment rises only somewhat, but profit margin on sales increases sharply.. The biggest single difference in costs, as related to market share, is in purchases-to-sales ratio.. As market share increases, there is some tendency for marketing costs, as a percentage of sales, to decline.. Market leaders develop unique strategies and have higher prices for their higher-quality products than do smaller-share businesses.. Market share is more important for infrequently purchased products than for infrequently purchased ones.. Market share is more important to businesses when buyers are "fragmented" than concentrated #@# Successful share-building strategies, HBR 1/81 81101 Buzzell & Wiersema [PIMS] difference of 10 points in market share is accompanied, on avergae, by an increment of about 5 percentage points in ROI.. the strategict factors generally involved in market share gains include all of the following: Increase in new product activity. Increse in relative product quality. Increase in expenditures for sales force, advertising, and sales promotion, relative tot he growth rate of the served market #@# Limits of the learning curve HBR74501 9/74 Aberarnathy & Wayne Product: Standardization increases, models change less frequently, and the product line offers less diversity. As the implementation of the strategy continues, the total contribution improves with acceptance of lower margins accompanying larger volume. Capital equipment and process technology: Vertical integration expands and specialization in process equipmetn, machine tools, and facilities increases. The rate of capital investments rises while the flexibility of these investments declines. Task characteristics and process structure: The throughput time improves and the division of labor is extended as the production process is rationalized and oriented more toward a line-flow operation. The amount of direct supervision decreases as the labor input falls. Scale: THe process is segmented to take advantage of economies of scale. Facilities offering economies of scale, such as engine plants, are centralized as volume rises, while others, like assembly plants, are dispersed to trim transportation costs. Spreading the higher overhead over larger volume gains savings. Material inputs: Through either vertical integration or capture of sources of supply, material inputs come under control. Costs are reduced by forcing suppliers to develop materials that meet process needs and by directly reducing processing costs. Labor: The heightening rationalization of the process leads to greater specialization in labor skills and may ultimately lessen workers' pride in their jobs and concern for product quality. Process changes alter the skills requirments from the flaxibility of the craftsman to the dexterity of the operative #@# Impact of strategic planning on profit performance HBR74210 3/75 Schoeffler, Buzzell & Heany [PIMS] p141 The best of all possible worlds is to have both high market share and superior quality: business in this category averaged 28.3% return on investment. But even when quality was relatively inferior, average ROI for high-share businesses was a respectable 19.5%. On the other hand, superior-quality producers with weak market positions earned an average 17.4% on investment, which suggests that quality can partly offset low share #@# Industrial buyer behavior HBS 9-582-117 4/89 stage in the procurement cycle, either early stages of formulating requirments of the later stages of meeting ongoing needs.. interest and involvement of other functional areas.. supplier/customer relationships, say, technical versus management.. performance measures imposed on purchasing #@# Arthur Rock [Fairchild, Apple] HBR 11/87 Strategy vs Tactics from a venture capitalist p63 Frankly, how anyone can figure out what sales and earnings and returns are going to be five years from now is beyond me. The first place I look is the resumes.. especially interest in what kind of financial people they intend to recruit. So many entrepreneurial companies make mistakes in the accounting end of the business. Many start shipping products before they confirm orders are good, or that customers will take the product, or that accounts are collectible p65 After being honest with yourself, the nest most important characteristic for the entrepreneur is to know whom to listen to and when to listen, and then which questions to ask.. thin line between refusing to accept criticism and sticking to your guns p66 aware of their own limitations.. "entrepreneurial personality." I suppose there are certain common qualities - a high energy level, strong commitment.. just overpowering.. Good entrepreneurs are tough-minded with themselves and with their teams. They can make hard decisions #@# Top Ten Lies of Entrepreneurs HBR 1/01 Guy Kawasaki Garage.com p22 Nobody believes the financial forecasts - investors simply want to see that the entrepreneur understands the industry, the logic involved in putting together a reasonable financial model, and how companies grow.. Instead of trying to prove that the market will be big, enable investors to fantasize about its size. Give them the facts and the context p23 Few new economy companies ever definitievley say no to any alliance, partnership, or offer. They're all afraid of missing the Next Big Thing. Instead, everyone says, "You have an interesting idea. We'll get back to you about it," and then they don't.. one of the litmus tests of fundability and entrepreneurial skill is the ability to attract talent without money.. If an idea is great, ten companies are working on it.. Investors won't sign your nondisclosure agreement because they usually see several similar plans: what if they sign one company's nondisclosure agreement and fund another? In reality, the ability to implement an idea, not the ability to keep it a secret, is the key to a sucessful start-up.. Show a healthy respect for the incumbents while demonstrating a compelling and believable way to compete with them.. investors believe that what makes a company defensible is the ability to out-implement, not out-litigate.. Shooting for the top-dog position is much more attractive to an investor than claiming it will take only a miniscule market share to succeed #@# George Jenkins [Patricof] HBR 11/89 p117 we are trying to invest in increments of no less than $5 million and have become much more selective regading the startups we will fund: startups are huge time-sinks and generally require modest amounts of money in early phases. THey are however, still the source of greatest investment return for us. Moreover, the venture capital industry is now almost entirely dependant on institutionalized sources of funds.. removal of capital gains incentive has seriously eroded the availability of early stage, high-risk capital #@# How venture capital works Zider 11/98 hbr p132 PROFILE OF THE IDEAL ENTREPRENEUR. From the venture capitalis's perspective, the ideal entrepreneur: is qualified in a "hot" area of interest; delivers sales or technical advances such as FDA approval with reasonable probability; tells a compelling story and is presentable to outside investors; recognizes the need for an IPO for liquidity [really? in good times there are 15x M&A:IPO and in bad times 30x]; has a good reputation and can provide references that show competence and skill; understands the needs for a team with a variety of skills and therefore sees why equity has to be allocated to other people; works diligently toward a goal but maintains flexibility; gets along witht he investor group; understands the cost of capital and typical deal structures and is not offended by them; is sought after bymany VCs; has realistic expectations about process and outcome p137 HOW VENTURE CAPITALISTS SPEND THEIR TIME Soliciting business 10% Selecting opportunities 5% Analyzing busines splans 5% Negotiating investments 5% Serving as directors and monitors 25% Acting as consultants 15% Recruiting management 20% Assisting outside relationships 10% Exiting 5% #@# Bootstrap Finance Amar Bhide HBR 11/92 p109 The big-money model has little in common with the traditional low-budget start-up p110 attest to the value of bootstraping: launching ventures with modest personal funds.. founders' personal savings, credit cards, second mortgages, and in one case "a $50 check that bounced." THe median start-up capital was about $10,000. Furthermore, fewer than one-fifth of the bootstratppers had raised equity for follow-on financing in the five or more years that they had been in business. THey relied on debt or retained earnings to grow.. For the majority of would-be founders, the biggest challenge is not raising money but having the wits and hussle to do without it.. Venture capitalists (and other investors in start-ups) are neither greedy nor shortsighted, as some disappointed entrepreneurs believe; they are simply inappropriate fro most start-ups. p111 7% of the investments account for more than 60% of the [VC] profits p112 Winning over investors too early, they said, can compromise your discipline and flexibility. Bootstrapping in a start-up is like zero inventory in a just-in-time system: it reveals hidden problems and forces the company to solve them.. Diminished flexibility is often another consquence of premature funding. STart-ups entering new industries seldom get it right the first time. Suuccess, especially in new and growing industries, follows many detours and unanticipates setbacks, strategies may have to be altered radically as events unfold.. pressure to stick with untenable strategies that outside investors can create p113 1. Get operational quickly.. Imitation saves the costs of market research, and the start-up entering a small market is unlikely to face competiton from large, establisehd companies.. 2. Look for quick break-even cash-generating projects.. Profit opportunities that might be regarded as distractions in a large company are immensely valuable tot he entrepreeur p114 3. Offer high-value products or services that can sustain direct personal selling.. overcoming customer inertia p115 4. Forget about the crack team.. diamonds in the rough.. 5. Keep growth in check. Start-ups that failed because they could not fund their growth are legion. Successful bootstrappers take special care to expand only at the rate they can afford and control p116 6. Focus on cash, not on profits, market share, or anything else p117 7. Cultivate banks before the business becomes creditworthy.. preparation and careful timing.. records were immaculate.. may also have to effect a U-turn and abandon the very policies that allowed them to get up.. Emerge from it niche and compete with a large competitor.. Offer more standard, less customized products.. Bring critical services in-house.. Change management's focus from cash flow up to startegic goals.. Recruit higher priced talent, perhaps encouraging early employees to move on #@# Kaplan & Stromberg J_Finance LIX 5 10/04 p2194 VENTURE CAPITALIST ACTIONS [% of companies].. VC Active in recruiting or changing management team before investing.. 16%.. VC expects to be active in recruiting or changing management team after investing.. 43%.. Any of the above.. 51%.. VC explicitly active in shaping strategy/busines smodel before investing.. 9%.. VC explicitly expects to be active in shaping strategy/business model after investing.. 30%.. Any of the above.. 34% #@# What do Venture Capitalists do? Gorman & Sahlman, HBS 9-288-015 1987 p5 Table 2 Mean Std Dev High Low # of Active Partners per Firm 5.1 3.8 25.0 1.0 # of Investments Managed per Partner 8.8 3.5 20.0 4.0 # of Seats on Boards per Partner 5.1 3.0 21.0 0.0 p8 Table 4 Form of Assistance Rank Frequency 1. Help obtaining additional financing 1.9 75.0 2. Strategic planning 2.4 67.5 3. Management recruitment 2.6 62.5 4. Operational planning 4.1 55.0 5. Introduction to potential customers and suppliers 4.6 52.5 6. Resolve compensation issues 5.6 55.0 p11 Table 5 [worst problems] Frequency Rank Std Dev.. (1) Inneffective Senior Management (SMAN) 95% 1.6 1.0 (2) Innefective Functional Management (FMAN) 50 2.5 1.1 .. (3) En user market failed to develop as (MKT) 43 2.7 1.9 .. (4) Poor channel selection/ (DIST) 35 3.3 1.5 .. (5) Competition (COMP) 34 3.0 1.3 (6) Poor product/market fit (FIT) 28 3.5 1.7 .. (7) Devlopment delayed or unsuccessful (DEVT) 51 2.4 1.4 (8) Manufacturing failure (MFG) 11 2.9 1.4 (9) Poor product performance (PROD) 18 4.2 1.4 (10) Inadequate quality control (QUAL) 13 4.7 2.4 #@# Financial Contracting: "DEALS" HBS 9-288-014 6/89 p43 deals that have proved successful over a long period of time: they are simple; they are robust (they do not fall apart when there are minor deviations from projections); they are organic (they are not immutable); they take into account the incentives of each party to the deal under a variety of circumstances; they provide mechanisms for communications and interpretation; they are based primarily on trust rather than on legalese; they are not patently unfair; they do not make it too difficult to raise additional capital; they match the needs of the user of capital with the needs of the supplier; they reveal information about each party (eg, their faith in their ability to deliver on the promises); they allow for arrival of new information before financing is required; they do not have perverse discontinuities (eg, boundary conditions that will evoke dysfunctional behavior on the part of the agents of principals); they take into account the fact that it takes time to raise money; and, they improve the chances of success for the venture. #@# Amis & Stevenson, Winning Angels, FT/PH/Pearson 2001 ISBN 0-273-64916-7 p86 [Landrum Profiles of Genius 1993 Prometheus p232] 1. Promethean (Carl Jung and MBTI) - INTJ, ENTJ, ENTP Intuitive - Perception of world (forest vs trees / macro vs micro) 2 Competttive to a fault Aggressive behavior where winning is more important than playing 3. Innovator operating style (Kirton's style inventory) Preference for "doing things differently" vs "doing things excellently" 4. Self-employed father - Early vision fo achievement outside establishment Fathers made their own way in the world as dentist,truck driver,or lawyer 5. Big "T" personalities (high in testosterone, thrill seeking - enormous risk takers): Big Ts - High in risk taking. Preference for uncertainty, unpredictability, variety, intensity, novelty; Little Ts - Low in risk taking. Preference for certainty, predicatbility, simplicity, low intensity, familiarity. 6. Self-confidence/high self-esteem - Built in early childhood - permissive parent allowing error and building sense of self. Arrogant attitude preferable to submissive one for innovative pursuits. 7. "Type A" behavior (Meyer Friedman and Ray Rossenman) - Impatient and impulsive. Impatient to a fault, obsession with winning, short attention span, multitasking personality types 8. Charismatic - The consumate salesman. Enthusiastic, passionate and inspirational leadership qualities. 9. Right-brain,qualitative "gut" decision makers - qualitative vs quantitative They utilize macro vs micro, long term vs short term, qualitative vs quantitative, analogue vs digital, indutive vs deductive, and subjective vs objective operating styles. 10.Psychosexually driven - Sublimated libidinal drives of insecurity and inferiority. Intensely driven individuals with high sex drive and /or need to overcome innate fears of failure. Consumate overachievers. 11.First-born males (Adler and Kevin Leman) - Morber the major influence. Perfectionism, stiving for superiority, and need to achieve, Natural leaders (12 of 13 innovative geniuses studied were first-born males, as were all seven of the Mercury austronauts) 12.Personality focused and goal oriented - Edison's aphorism "persistence vs inspiration". Persevering prevails in entrepreneurship. Individuals who never give up never lose! 13.Transient childhoods - Leading to consummate self-sufficiency. Ability to cope in foreign environments learned early in life. p123 looks for in a start-up opportunity: 1. Quality dedicated management that is passionate for what they are doing with industry experience and a willingness to test new ideas. If I walk away everything continues to move forward!!! 2. A business that is simple and has a clearly defined product and revenue model with clear customer benefits. 3. A reasonable time to market advantage, channel control, or technology advantage that creates some barrier to entry 4. A scalable business that creates long-term customers and or a product that when generated can be sold in perpetuity to become marginally more profitable over time. p125 REDFLAGS 1 Salary is utmost on their mind (they should be thinking about creating share value) 2 The business plan claims 10 revenue sources or products (ealry stage companies need to focus on one or two and make them work) 3 They say or do anything that is dishonest. (If they do not have a strong moral code, your money is history) 4 They are not realistic about their own abilities (eg, lacking any financial knowledge, the entrepreneur does not have "financial guy" on his list of to-dos) 5 They only "need 1% of the market" 6 They have not identified the first customer p127 Top 10 things Manny Villafana [MN] looks for in a medical start-up.. 1 Is threr a technical need for the device? 2 Is the technology readily available for the manufacturing of the device? 3 The management; composition of the team; previous experience.. 4 Capital requirements. Is the capital going to be raised in stages? 5 The make-up of the scientific advisory board 6 The capitalization of the company. Is there fairness to the incoming investor? Is the valuation correct? Does the CEO have a meaningful investment in the company? 7 Does the CEO and do the members of the management team have a proper proportion of the ownership to make it worthwhile to invest their time and effort into this project? 8 The quality of the regulatory officer as a medical device company needs to have a top person in that field 9 Are there any possible litigation factors? 10 What does my gut tell me? p129 Must have: Match of interest and experience; Management team A+++; Big market opportunity, rapid growth to $1bn+; Compelling business model; Concise and convincing differentiation. Ought to have: 2 customers already identified; Draft business plan; Demo version of product; 2-4 people already involved; Entrepreneurs that know how to use advisors. Nice to have: Revenue; Track record in this kind of deal; Good advisors. Must avoid: Dishonest entrepreneur; Self-destructive ego; Lifestyle entrepreneur. Ought to avoid: Empire builders. Nice to avoid: Inexperienced CEO. p150 David Berkus created his own methodology for investing in early-stage deals. Typically he invests $200k and values the deal based on the simple formula: For a sound idea $1m [million]; For a prototype +$1m; For a quality management team +1-2m; For a quality board +$1m; For any roll-out, sales +$1m p152 [Multiplier Method, eg D&B Std Biz Ratios] Mutiply a key number in the business plan times an industry standard, eg, a nursing home start-up might project 2,000 beds and if $60k per bed is an industry standard for valuing a nursing home, the company couls be worth $120 when it attains its target p153 Venture capital method.. 1. Determine the future value of a company using the multiplier [industry ratios] in a given year, say $25m in year 5. 2. Decide what ROI you need on your investment and calculate the future value to the same year. So if you are investing $100k and need a 50% return, in year 5, your investment should be worth $759,375 at that time. 3. Now sipmly divde the value you need ($759k) by the future value of the company ($25m) and that will tell you the percentage of the compnay you need to own $759k/$25m=3% p196 [STRUCT] Impact on Exit Downside Protection Upside Potential Common stock/ None, expect it gives None Limited to initial units no rights the entrepreneur shares/units maximum freedom ownsership, no rights to invest additional capital Common with None None 1 Investor is given pre-emptive and the chance to invest tag-along rights additional capital - to avoid dilution 2 Entrepreneur cannot sell his shares without also offering the investor a similar exit Preferred Depends on additional 1 In the event Depends on the terms convertible with terms. Complicated of liuidation, but is generally the various terms or irregular terms the investor best structure for reduce the likelihood is ahead of capturing upside of second-round the common financings and shareholders some exit events 2 Additonal terms may provide further protection, eg buy-out clauses or board seats Convertible note Facilitates a VC Loan note provides Yes, if the with various terms round, and VCs are best leverage in conversion terms the exit pros the event of are favorable or liquidation or if investors get work-out the same terms as the VC p214 Capitalyst [author Amis] Preferred Deal Terms Common share structure Preferred share structure Convertible note Must have Must have Must have Pre-emtive right Pre-emtive right Set conversion price Tag-along right Tag-along right or discount Registration right Registration right Cumulative interest Reasonable price Reasonable price (deferrable) Anti-dilution Ought to have Ought to have Ought to have Entrepreurial compensation Visitation rights Convertible into preferred limit (not necessarily Redemption rights contractual) Warranties and representations Anti-dilution Cumulative dividend (although deferrable) Board representation (far all preferreds) Nice to have Nice to have Nice to have Warranties and repr.. Put Potential payback with Put warrants to provide upside Board representation (for all current-round investors) Must avoid Must avoid Must avoid A call Anything too complicated Forced conversion by Anything that will turn entrepreneur without a off next investors trigger event related to significant progress p264 [Benefits from angel] INDUSTRY: Strategic advice; product development advice; Introducion to industry players. FUNCTIONAL: Management advice; Assitance in interviewing job candidates; Hands-on assistance. NETWORK: Opens doors: New partners, New team members, New capital providers, Other professionals. ANGEL EXPERIENCE: Raise more angel capital; Raise venture capital; Allround advice on dealing with financial or growth issues. ENTREPRENUER EXPERIENCE: High-impact general advice and support on a variety of growth and management issues; Hands-on assistance #@# Ehernfeld on Doriot HBR 5/90 p218 Spending money is the art of giving every cent a meaning p219 I don't know of anyobody who looked who didn't find money.. art of using your new ideas sparingly and in the right dosage.. Lack of information is true of 99 decisions I make out of 100.. ownership of money seems to bring out the worst #@# Done Deals [VC] Gupta HBS 2000 p19 [Kagle/Benchmark] We observed that in many cases they had so much money they could raise more than $100 million so we wouldn't feel presure to put money out. In terms of capital per partner, we were going to be among the lowest in the industry. That would give us the opportunity to write the half-million dollar check without feeling guilty about it p44 [Knox/Cornerstone] Most corporate venture capital investment programs are widely viewed to have been failures, in part because their rate of return objective was subordinate to their corporate objectives - the industries they wanted to be in, the intelligence they wanted, the strategic corporate relationships they wanted p105 [Eugene Kleiner] We ran the companies as if they were smaller departments of large comapnies because that's where our experience was. We worked closely with the entrepreneurs to develop their business and we didn't make too many technical mistakes. It was more the question of execution. Indeed, we had very few technical failures. THings failed because of the inability to execute.. Venture capital was very different then. People focused on building companies rather than on exits. Securities regulations such as RUle 144 have helped investors exit a firm but it may also have hurt the chances of building companies. We had very few companies going public early. And we always worried about that kind of early exposure. p142 [Arthur ROck] Fred Terman. He was head of the engineering school at Stanford, and he encouraged his students, especially the doctoral and postdoctoral students, to form companies and continue to teach at Stanford p161 [Wythes/Sutter] The big money poured in by pension funds is a bad influence.. We think universities and endowments are the best source of venture capital money, because they have a long view of commitment to our asset class.. The money will probably be there a long time because the trustees want to keep things stabilized and not move quickly in or out of these assets. THey don't have a quarter-to-quarter, mark-to-market mentality. So, I think the source of institutional money in our industry can and should dictate how venture capital firms run their shop.. Those are the institutional sources that don't know what they're doing p189 [Dennis IVP] We hav eincubation space downstairs and across the hallway.. But the business has gotten so competitve, one of the best ways to control your investment pace is to incubate companies in your offices, so you're completely up to speed when the company does its first round of financing p218 [Sonsini Lawyer] id you can't make an investment liquid through the IPO market, what are you going to do? YOu'r egoing to start running companies to merge.. What we might do is build projects, rather than enterprises. Develop a particular market, a particular product, and then sell or merge it p231 [Waite Greylock] Doriot's philosophy. Many of the people in venture capital have some connection to him. For example, Tom Perkins and Peter Crisp were his students, and I'm sure there are many others. And he stayed in touch with these people. Not only were they students of his, but he had substantial influence on them. Doriot's thesis was that if you took a team of people with business experience and a willingness to expend time and effort as well as money, and mixed them with an entrepreneur they could invest in.. This pool of knowledge, money, and time would ad dmaterially to the mix.. there was a missionary zeal about it - that's how Doriot got away with underpaying us all, because we believed we were doing something for the greater good p361 [Lazarus ARCH] In the early '80s, COngress passed the Stevenson Wydler Act and the amendments to the Bayh Dole Patent Act and essentially the two pieces of legislation together gave the University of CHicago the opportunity ti take title at no cost to discoveries at Argonne p371 because you want to stay in control of the deal. Everything you've learned about that business at the beginning becomes more and more valid and valuable as the company matures. You don't want to put its destiny in the hand sof someone whos ebackground may be an investmentbank, because it's a different style of thought than the development of enterprise #@# Venture Capitalists usually take convertible preferred stock for their investments as precisely a way of mitigating downside risk and being paid before other owners as well as providing a tax subsidy. [Gilson Schizer, Harvard Law Rvu, 116#3, p874] #@# Alternative Financing HBS 9-384-187 1984 convertible debt or preferred gives the venture firm a liquidation preference #@# Venture Capital Method HBS 9-288-006 6/89 Sahlman Forecasting future results.. Determining a value that is likely to apply at that point.. how much capital will be reuired to attain.. new shares that will have to be awarded.. Determining the shares of the final "pie" that each group will demand, fiven a set of required rates of return, where the discount rates depend on: (a) The level of risk-free interest rates in the economy; (b) A premium for risk [50%, high CAPM beta]; (c) A return premium for illiquidity [50%]; (d) A premium for value-added by the investor; and (e) A premium related to past experience.. Converting the future value back to the present in order to determine share prices and ownership #@# Valuation of Venture Capital Hellmann Stanford E95 3/01 A valuation method is a sophisticated tool [failure rate as nergative Gordon growth] for determining how entrepreneurs and venture capitalists should split the rturns of the new venture. But the actual split, ie, the actual deal, is not really driven by the valuation method, but rather by the outcome of the bargaining between the entrepreneurs and the venture capitalists. #@# Venture Industry HBS 9-285-096 11/85 American Research and Development Corporation (ARD) was the first independent firm that did not trace its origins to a family fortune and, as such, was considered a pioneer. Created in 1946 and led by General Georges Doriot, a Harvard business School professor, ARD was a publicly traded firm.. General partners of the venture firm prepared a private placement memorandum that explained the structure of the fund. SEC regulations required that the memorandum be offered to a limited number of prospective investors. Each plan was labelled confidential and numbered. THese memoranda were offered to institutions, to corporations and to wealthy individuals.. Two years after the date of purchase, those privately issued shares could be sold gradually under Rule 144a or, if held privately within the venture firm, the could be registeres subsequent to the IPO and sold as a block.. WHile realizing cash returns through public sales of securities of successful ventures was a common form of harvesting for venture firms, acquisition of venture-backed companies was a more frequent form of liquidation over the long term #@# Attracting Shareholders Bhide HBS 9-389-139 Since irreversible investments required by an enterprise cannot be entirely eliminated, another entrepreneurial task is to select stakeholders who are the most willing to and capable of bearing the risk. All other things being equal, the most desirable stakeholders fit one or more of the following characteristics: they are diversified, experienced in th etype of risks they are expected to bear, have excess capacity and are risk seekers #@# Private Equity Fundraising HBS 9-201-042 2007 Lerner Hardymon & Leamon These included old-line endowments such as Yale and Harvard, family offices with longstanding management groups, and other organizations that knew what to expect from the asset class and/or could help differentiate the firm in terms of contacts or technological knowledge. Younger and less experienced institutions are generally viewed as less desirable, because they frequently need more help in understanding the nature of the asset class. Public pension funds often face the greatest hurdles in accessing desirable private equity funds. Not only do they face political pressures, but they areoften plagued by "revolving door" staff that loses talented members to more lucrative opportunities.. Strong evidence supports the claims regarding capital gains tax rates: lower capital gains taxes seem to have a particularly strong effect on the ammount of venture capital supplied by tax-exempt investors [Gompers & Lerner Brookings 1998] #@# IPO Process HBS 9-200-018 2001 The legal, accounting and investment banking fees from an ofering are substantial, frequently totaling 10% of the total amount raised in the offering or more #@# Angel Financing HBS 9-298-083 2001 Gompers Myers and Majluf (1984) and Greenwald, Stiglitz and Weiss (1984 [AERPP]) demonstrate that the offerings of firms may be associated with a "lomons" problem (first indetified by Akerlof [1970 QJE]).. Stiglitz and Weiss (1981[AER 71 393-409]) show that if banks find it difficult to discriminate among companies, raising rates can have perverse selections effects.. First, business plans are intensively scrutinized: of those firms that submit business plans to venture capital orgnainzations, historically only 1% have been funded (Fenn, Liang, and Prowse [1995]). The decision to invest is frequently made conditional on the identification of a syndication partner who agrees that this is an attractive investment (Lerner [1994]). Once the decision to invest is made, the venture capitalists frequently disburse funds in stages. The entrepreneur must periodically prove prove the company is making progress and not squandering money in order to receive additional capital. In addition, venture capitalists intensively monitor managers. THe investors demand preferred stock with numerous restrictive covenants and representation on the board of directors #@# Private Equity Securities HBS 9-200-027 Lerner & Hardymon 2001 The driver behind the recent acceptance of participating convertible preferred is the willingness of later stage investors to pay very high prices if the terms include a participation feature.. preferred stock structures do a better job of implementing the "reward for preformance" principle since they rely on the investment's terminal value.. Vesting creates the "golden handcuffs".. sales of assets are often restricted.. founders cannot sell any of their common stock without approval.. restricting the issuance of new securities.. coupled with supermajority voting provisions #@# Private Equity Partnership Agreements HBS 9-294-084 Lerner & Gompers 2001 In most cases, however, one percent is still the general partners' contribution.. Since the private equity partnership will only invest the funds gradually, if the funds are simply sitting in the fund''s bank account, they will depress the partnership's rate of return.. A few of the very oldest organizations, however have managed to maintain simple contracts with few restrictions. THese covenants can be divided into three broad classes: those relating to the overall management of the fund, the activities of the general partners, and the permissible types of investments.. If the institutional investors see that a new prvate equity manager is willing to take a cut in his base fee in the hopes of making a substantial amount of carried interest #@# Elevator Pitch HBS 9-802-222 Applegate 2001 Our business [list name] will deliver [list key deliverables] to [list key benefiiaries] to enable them to [list key bbenefits]. THe business is headed by [list founder ans key executives, investos, and advisors] that have [list key background and qualifications]. The business [will launch/was launched] on [date] and we [will begin/began] delivering [first product or service] on [date]. We expect to prove our business model and achieve profitable growth on [date] and anticipate that the temrinal value of the business will be [list aticipated value], which represents a [list return] to investors. The total cost to achieve this goal will be [total cost], which included the following key categories [list]. We have currently received [list dollars of funding secured to date] from the following sources [list]. We anticipaet receiving the remained of the funding by [date] from [lis sources]. The key risks for th eproject are [list risks]. THese risks will be managed by [list key approaches to managing each risk] #@# Valuation in Private Equity HBS 9-297-050 Lerner 2002 one should attempt to match the maturity of the investment with that of the risk free rate.. necessary to "unlever and relever the beta [mult by fraction of capital that is equity] #@# Pre-Start Analysis HBS 9-386-075 Van Style 1985 Considerations.. nature of the opportunity.. critical skills, resources, relationships and approvals that will be required.. indicated plan of action.. plan for putting together a business entity to incorporate or control the required skills and resources.. plan for actually controlling.. strategy for harvesting #@# Distributions of Venture HBS 9-295-095 Lerber 1995 Venture capitalists harvest their stakes in companies that have gone public in two ways. First, the venture capitalist sell heir shares in the market and distribute the cash to the limited partners. More often, however, the venture capitalist distributes the actual shares to each of the limited partners and keeps a certain fraction of shares or cash based on the value of the stocks on the day the distribution is decalred.. The negative attitude of most limited partners towards stock distributions suggest that they do not benefit from these transactions. Indeedm several theories predict that the market should react negatively to the distribution of shares by venture capitalists to limited partners, making it difficult for the limited partners to realize the stated value of shares at the time of the distribution. There are thee main theories: inside information, corporate control, and price pressure #@# Valuing Equity Cash Flows HBS 9-295-085 Luerman 1994 impossible to apply option-pricing techniques to highly levered equity..With high leverage, valuing equity directly is probably simpler than assets-minus-debt and, under certain assumptions, he sign of the bias in the equity-cash-flow approach is known.. Valuing the equity directly - ie discounting equity cash flows at the cost of equity - requires one complex analysis rather than four. But more importantly, by making certain assumptions, we can be fairly confident that this approach will underestaimte the value of the equity #@# Start-up Strategies HBS 9-394-067 Bhide 1993 entrepreneur does only enough research to justify the next action or investment.. purpose of analysis is not ot find fault with new ventures or find reason for abandoning them. Analysis should be considered as an exercise in what to do nextmore than what not to do.. Entrepreneurs often blur te line between research and selling.. don't just seek opinions and information, thay also seek to gain others' commitment.. Entrepreneurs who act on sketchy information and back of the envelope plans must stand ready to change their strategies as event unfold #@# Deal Structure HBS 9-384-186 8/88 Understanding the business.. amount of funds required.. riskiness of the venture.. potential magnitude of returns.. Understanding FInanciers.. magnitude of rtunr required.. risk which is acceptable - preception of risk and reward - magnitude of investment - timing of return - form of return - degree of control - mechanisms for control.. Undertandin the Entrepreneur.. degree of control desired - mechanisms of control desired - amount of financing required - magnitude of financial return desired - degree of risk which is acceptable #@# Entrepreneurship HBS 9-384-131 8/88 strategic orientation, the commitment to opportunity, the resource commitment process, the concept of control over resources, the concept of management, and compensation policy.. "promoter" who feels confident of his or her ability to seize opportunity regardless of the resources under current control.. maximize value creation by minimizing the resource set #@# New Venture Planning Karl Vesper J Biz Stg p75 Three general types of practical objceives mightbe served by study of new ventures: One is to accomplish those that would be done anyway, btu do them sooner, more economically, and with less pain. This might be regarded as improvnihe efficiency of venture prodcu on. A second objceive is to avoid those venture that don't deserve being done; these generally being the ones that lose money. THis would be reduction of wasted effort. The third objective is to minimize opportunity losses by reducing failures of ommission, failure to exploit those venture opportunities that should be utilized #@# Diana I. Angelis Capturing the Option Value of R&D Research Technology Management 43 no4 31-4 Jl/Ag 2000 Instead, it is suggested that the cost and revenue cash flows associated with implementing a project be used to measure the option value of R&D.. must use the expected value of V* [NPV] as an estimate. Let X be the net cash flows, X = R - K.. By relaxing the log-normal assumption in the Black-Scholes model.. Because it is based on cost and revenue projections routinely used to determine the net present value of investment alternatives, it should have an intuitive appeal to practitioners. #@# Prahalad & Hamel Core Competence 5/90 HBR p80 strategic alliances.. aimed at building competencies rapidly and at low cost p81 competencies that spawn unanticipated products.. consolidate corporatewide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities p82 Core competenecies are the collective learning in the organization.. Core competence does not diminish with use p84 core competence ishould be difficult for competitors to imitate. And it will be difficult if it is a complex harmonization of individual technologies and production skills #@# Strategies for Declining Industries J Biz Stg 1980 1#1 p27 Harrigan Increasing the firm's investment (to dominate or get a good competitve position); Holding the firm's investment level until the uncertainties about the industry were resolved; Decreasing the firm's investment posture selectively, by sloughing off unpromising models of customer groups, while simultaneously strengthening the firm's investment posture within the lucrative niches of enduring customer demand; Harvesting (or milking) the firm's investment to recover cash quickly, regardless of the resulting investment posture; and Divesting the business quickly by disposing of its assets as advantageously as possible. #@# Funding Growth in an Age of Austerity, Hamel & Getz HBR 7/04 Strategos.com p78 Raise the ratio of innovators tot he total number of employees.. Raise the ratio of radical innovation to incremental innovation.. Raise the ratio of externally sourced innovation to internally sourced innovation.. Raise the ratio of learning over invwestment in innovation projects.. Raise the ratio of commitment over the number of key innovation priorities p80 An idea is radical if.. changes customer expectations and behaviors.. changes the basis of competitive advantage.. changes industry economics p83 Product Testing Experimentation Scope Product or Service Business Model Product testing focuses on Strategic experiments seek to enhancements or extensions to explore the merits of a number of well-establisehd products or interrelated changes to a services within the context of company's business model a mostly static business model Philosophy Prune Learn Products testing is typically Strategic experiments are designed designed to winnow out to create opportunities for iterative potential duds. The basic learning. The basic principle is, principle is, "Don't invest "Don't killa great idea prematurely." in losers." Methodology In Vitro In Vivo Product testing takes place Wherever possible, experiments are in laboratory-like conditions, conducted in live commercial settings where new products are where customers can buy the product or subjected to ever more service or some reasonable facsimile. rigorous tests with customer The goal is to learn how customers panels. Customers use the interact with all the elements of products but have no chance the redesigned business model to buy them until a formal launch decision has been made #@# Economic decline Hayes & Abernathy HBR 7/80 p73 Imitative design Innovative design Market demand is relatively well Potentially large but unpredictable known and predictable demand; the risk of a flop is also large Market recognition and Market acceptance may be slow initially acceptance are rapid but the imitative response of competitors may also be slowed Readily adaptable to existing May require unique, tailored marketing market sales and distribution and sales policies to distribution policies educate customers or because of special repair and warranty problems Fits with existing market Demand may cut accross traditional segmentation and marketing segments, disrupting product policies divisional responsibilites and cannibalizing other products #@# MacMillan & George Corp Vent J Biz Stg p36 1. Selection of context 2. Design of structure 3 Provision of adequate support 4 Appointment of a venture ombudsman p42 Difficulty in getting support from key stakeholders; Diffuliculty in securing internal support; Imptience in the firm with the venture's progress; and Difficulty in coping with the rapid growth when success is fully achieved #@# Corp Venturing Zenas BLock JBizStg 3#2 fall 1982 Review of the five pivotal decisions - format, management and compensation, venture plan approval, positioning, and financing triggers - will provide developing certainly about the new business, and the application of professional management where it belongs, which is not in the management of the venture intself but the conditions surrounding it. Venturing is primarily a learning process. The entrepreneur adjusts to new information by manipulating every relevant variable - products, marketing, distribution methods to develop the complex of activity, and products needed to succeed.. Perhaps th emost important thing to learn is how to identify, develop, reward, and support the quintessential element needed for any venture success - the people who have the skill, drive, energy, creativity, persistence, and leadership that create new businessses #@# Commercializing Technology HBS 9-694-102 9/94 Since innovative products and processes are derivative, users can directly help shap their design. Extensive tools and methods exist for elicting user needs - even uncommunicated ones - for such products.. next managerial frontier for technology commercialization is to explore methods for better understanding uncommunicated, non-obvious but current user needs and unarticulated, non-obvious future needs. If one primary method for creating this understanding is harnessing the creative imagination of individual "gurus".. Truly understanding needs - not just their demands - enables speed at no sacrifice of inventiveness #@# Nichols/Lewent/Sci Mgt Merck HBR 1/94 p91 Monte Carlo analysis is a sophisticated form of mathematical analysis that lets us come up with a range of possibilites or outcomes for a certain set of possible actions.. simultaneous changes in numerous variables p92 [Gary Sender] Merck's finance group used the Black-Scholes option-pricing model to determine the project's option value. Five factors that influence an option's price are used in the Black-Scholes model. The finance group defined those factors as follows: The excercise price is the capital investment to be made approximately two years hence. The stock price, or value of the underlying asset, is the present calue of the cash flows from the project (excluding the above-mentioned cpaital investment to be made and the present value of the up-front fees and development costs over the next two years). The time to expiration was varied over two, three, and four years. The option could be excercised in two years at the earliest. The option was structured to expire in four years because Merck thought that competing products, making market entry unfeasible, would exist by then. A sample of the annual standard deviation of returns for typical biotechnology stocks was obtained from an investment bank as aproxy measure for project volatility. A conservative range for the volatility of the project was set at 40% to 60%. A risk-free rate of interest of 4.5% was assumed. This figure roughly represents the US Treasury rate over the two to four year period referred to in the time to expiration of the model. #@# R N Anthony We dont have the accounting concepts we need HBR 1/87 p81 limited to the information in the primary financial statements. (Broadening it to include supplementary information leads to an undesirable dilution of effort, as was demonstrated by the inflation accounting program.) p82 Standards governing the information in financial staements should be based on the appropriate trade-off between relevance and reliability.. reporting an entity's performanc in maintaining its financial capital.. effect of highly unusual events - whose inclusion would result in a serious distortion of reported performance - should be excluded from net income and entered dirctly in entity equity.. Revenues are additions to entity equity resulting from events of the period, including realized gains.. Expences are costs incurred in a current or previous period that will not benefit future periods.. balance sheet should report the sources of an entity's financial capital and the forms in which that capital existed as of the balance sheet date.. Assets are the forms in which the entity's capital exist as of the balance sheet date.. Accounting should report the flow of financial resources into, through and out of the organization #@# Burton Malkiel Random Walk Dn Wall St 4ed ISBN 0-393-95460-9 p21 In The_Theory_of_Investment_Value, [John B.]Williams [Harvard 1937 Thesis, Fraser 1938] presented an actual formula for determining the intrinsic value of stock. Williams based his approach on dividend income. In a fiendishly clever attempt to keep things from being simple, he introduced the concept of "discounting" into the process. Discounting basically involves looking at income backward p22 The castle-in-the-air [technical analysis] theory of investing concentrates on psychic values. Lord Keynes, a famous economist and outstandingly successful investor, enunciated the theory most lucidly in 1936. It was his opinion that professional investors prefer to devote their energies not to estimating intrinsic values, but rather to analyzing how the crowd of investors is likely to behave in the future and how during periods of optimism they tend to build their hopes into castle sin the air. p25 Some readers may pooh-poh the mad public rush to buy tulip bulbs in seventeenth-century Holland and the eighteenth-century South-Sea Bubble in England. But no one can disregard the new-issue mania of 1959-61, the conglomerate wave of the middle 1960s, the boom and bust of the so-called concept stocks during the 1967-70 period, the "Nifty-Fifty" and gambling stock crazes of the 1970s, and the 1980s version of a new issue craze p45 The consistent losers in the market, from my personal experience, are those who are unable to resist being swept up in some kind of tulip-bulb craze. It is not hard, really, to make money in th emarket. As we shall see later, investors who select stocks by throwing darts at the stock listings in the Wall_Street_Journal can make fairly handsome long-run returns. What is hard to avloid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges p92 The point to remember from such examples is that the mathematical precision of the firm-foundation [fundamental analysis] value formulas is based on treacherous ground: forecasting the future p123 restating the first two rules: Look for growth situations with low-price earnings multiples. If the growth takes place there's often a double bonus - both the earnings and the multiple rise, producing large gains. Beware of very-high-multiple stocks where future growth is already discounted. If the growth doesn't materialize, losses are doubly heavy - both the earning and the multiple drop. Rule 3: Look for stocks whose stories of anticipated growth are o the kind which investors build castles in the air p127 Technical analysis is anathema to the aademic world. We love to pick on it. Our bullying tactics are prompted by two considerations: (1) the method is patently false and (2) it's easy to pick on. And while it may seem a bit unfair to pick on such a sorry target, just remember: it's your money we are trying to save p186 The stock market is such an efficient creature that nothing and no one can predict its future course in a superior manner. And, becaus eof the actions of the pros, the prices of individual stocks quickly reflect all the information that is availbale.. but the method of beating the market, they say, is not to excercise superior clairvoyance but rather to assume greater risk.. reduce risk through diversification p326-8 Rule:1 Confine stock purchases to companies that appear able to sustain above-average growth for at least five years.. Rule 2: Never pay more for a stock than can reasonably be justified by a firm foundation of value.. Rule 3: It helps to buy stocks with the kinds of stories of anticipated growth on which investors can build castles in the air..RUle 4: Trade as little as possible #@# The Moral Hazard Economy. Bernstein, Peter L. 1 Harvard Business Review; Jul/Aug2009, Vol. 87 Issue 7/8, p101-103, The economist Hyman Minsky has reminded us, "Each state nurtures forces that lead to its own destruction." All of history testifies to the truth of this observation. Greater liquidity leads firms to borrow more than before. But higher levels of debt mean increasing vulnerability to adversity and negative shocks in an ever-changing world. For these reasons, as Minsky put it, stability leads inevitably to instability. Now let me offer an alternative version with the emphasis and predictions in reverse: We are moving through an environment perceived as high risk, especially in the credit area, where banks are loath to lend money and where yield spreads between Treasury bonds and corporate bonds are huge. But the more we emphasize the high risks in the environment, the stronger our normal and rational inclination to risk aversion becomes and the more our actions alter the character of the environment to reduce risk. At the same time, less liquidity leads firms to borrow less than before, reducing their vulnerability to adversity and negative shocks in a volatile world. For these reasons, instability leads inevitably to stability. Will this inverse Minsky dynamic be enough to counteract the effects of the bailout on our finances, institutions, and managerial incentives? If pressed, I would argue that this dynamic will win out, in much the way the trauma of the Great Depression in the 1930s set corporate behavior and economic policy in a risk-averse mold that lasted nearly three decades. On the other hand, much about this current crisis is unprecedented, which means that history is less relevant than it has been, well, historically. #@# Knee Accidental Investment Banker Random 2006 xvi In the 1960s Morgan Stanley quite pointedly did not have a securities sales and trading operation, viewing it as a low-class business engaged in by mere, and largely Jewish, traders. In 1971, however, the bank had established its own sales and trading desk, and put [RIchard B] Fisher, a younf partner at the time, in charge. In recent years, the profits from these operations had come to dwarf those of traditional gentlemen banking in which they engaged in their heyday. The introduction of sales and trading at Morgan Stanley coincide with the firm's launch of one of the first mergers and acquisitions departments among the major investment banking houses. Prior to that, these firms had often treated advice on mergers and acquisitions as something to give away free to longstanding clients of the firm. Within a decade or two, "M&A" would establish itself as a profit engine of traditional finance, wit high-profile bankers whose names were often better known than that of either the clients or financial institutions they in theory served p19 Many of the other investment banking controversies of recent years have stemmed from the decision by most investment banks to cross the line from agent to principal to a greater or lesser degree. THe use of proprietary trading strategies, where the firm put its own capital at risk, usually developed in windowless rooms by rocket scientists of various stripe, had resulted in sales and trading accounting for the majority of the profits of some investment banks during certain periods p43 The single figure who best epitomizes this era is Sidney Weinberg, leader of Goldman Sachs from 1930 until his death in 1969.. assistant porter in 1907 at the age of 15.. But as John Kenneth Galbraith would write 25 years later in his seminal review of the crash and its aftermath, GOldman, Sachs and Company rescued its firm name from its deliquent offspring and returned to an earlier role of strict ractitude and stern conservatism." This was thanks largely to Weinberg's leadership. p45 Weinberg refused to set a fee "saying that he would just as soon work for a dollar a year and then, when everything was over, let the members of the Ford family decide what they felt his efforts were worth.".. ANd the idea that a senior partner of a major firm would spend half of his own time over two years on a single acocunt and leave the fee to the client's good judgement once it was all over is unthinkable p91 The relationship banker is left stuck in the middle potentially trying to sell assorted financial products that may or may not be in the client's best interest. And sometimes the banker might even be put in the position of threatening to withhold needed credit from a "trusted relationship" unless addition banking services are purchased. The follow-on megabank mergers that these misguided deals spawned caused a corporate credit crisis that made the tactic of using access to credit as a tool to obtain investment banking business all the more effective. After the crash of 2001, this credit crisis would be exacerbated by the unprecedented number of high-profile bankruptcies. The result would be that during th ebust even blue-chip corporate clients would have difficulty putting a basic credit line in place p117 At GOldman, any banker (no matter how junior) would not think twice about leaving a voice mail for any banker (no matter how senior) to seek information relevant to a project he was working on. And he would get a prompt, concise, responsive reply. In the more balkanized environment of Morgan [Stanley], I soon discovered, bankers only share information and resources across groups if an explicitly symbiotic relationship has been established between the bankers involved. p120 The reason why bankers were so generous with each other on revenue credit is that it cost them nothing (it didn't diminish their own contribution) and provided some significant upside: the thankful banker who got unearned secondary credit on your deal could be trusted to do the same for you p142 Although Meeker's celebrity was a source of frustration to banker's hungry to exploit every revenue-generating opportunity, it is clear in retrospect that in many instances she saved Morgan Stanley from itself. By enforcing her role as the ultimate bottleneck for doing Internet deals, Meeker ensured that there was some consistent quality control in an era when there was none. The evidence is that as a group, the companies she took public did better than those of other banks. And the reason ultimatelythat Meeker, unlike Henry Blodget, her counterpart at Merrill, never became a regulatory target is that she actually chose companies to take public based on quality. Her singular focus was determining which company would be the leader in each category p189 Shortly after the mergerFisher found himself tryingto buy his young wife something expensive at a Fifth Avenue boutique using a Discover Card. "I have some bad news," the store manager gravely intoned, when Fisher asked if they accepted the card. "Not only don't we accept it," the manager continued, "I am afraid we don't serve anyoe who has one." p217 there was never any correlation between which research analysts won the Instutional_Investor survey and stock-picking prowess.. reports widely available.. accident waiting to happen.. Many senior banking executives were quietly thankful for SPitzer's intervention, as the price of maintaining a superstar roster of research analysts had reached as hig as $1 billion annually at som efirms.. relieved to find a way of reducung their cost base that was government-mandated (thus avoiding any charge of interfirm collusion) #@# Geisst Deals of the Century WIley 2004 p85 McFadden Act also allowed the comptroller of the currency to decide whether banks could begin dealing in common stocks as well. p93 mostly Republican, neo-Progressive group wielded influence out of all proportion to its numbers. Its constant references to conspiracies among Wall STreet bankers combined all the ingredients of agrarian populaism with distrust of the federal government and the occassional twinge of nativism and anti-Semitism. p183 In response to severe problems within the banking industry, in 1980 COngress passed the Monetary COntrol Act, designed to phase in deregualtion of interest rates over a six-year period p189 Milken recognized that the new breed of investor emerging from the inflation-ridden 1970s wanted a combination of both [stock & bond].. junk financing became very common p202 It would have been unimaginable before World War II that deal makers would be dictating terms to investment bankers p206 William Baxter, formerly professor of law and economics at Stanford, who employed economic analysis of potential mergers p212 FInally in 1982 AT&T consented to the breakup, which had been pressed by William Baxter when he became the head of the Antitrust Division p224 Alan Greenspan, Paul Volcker's successor at the Fed, also made his fears about the takeover trend be known. He asked the Senate Banking Committee to reconsider the tax laws so that corporate borrowing was not encouraged even more p247 Cisco acquired 62 compaqnies between 1996 and 2002 alone and developed specific methodologies through which it could assess another company's potential fro becoming integrated into its own corporate culture or operations p272 FAS 141.. required the use of the purchase method only after June 30, 2001. The older, softer way of pooling interests finally was put to sleep in favor of a more stringent method of accounting for premiums paid by many firms when they acquired others. The results were drmataic. Now firms were required to record the premium paid for acquisitions as goodwill above market value and the difference was to be amortized, resulting in losses to income in many cases.. intangibles had become standard in many high tech and dot-com p284 The gradual approach was supported by the fact that many top regulators were not clear about the original intent of the Glass-Steagll Act. Banks first began attacking the law in the 1960s, when they wanted the authority to underwrite certain types of municipal bonds [sim WW1 bonds] #@# Lewis Panic Norton 2009 p4 When a market is crashing and no one is willing to buy, it's impossible to sell short. If too many investors are trying to unload stocks as a market falls, they create the very disaster they are seeking to avoid. p5 The very theory underlying all insurance against financial panic falls apart in the face of an anctual panic p60-61 [USNWR 6jun88] how they popose to ward off a repeat of Black Monday: BAKER: The Treasury Secretary's group would have a "circuit breaker" halt all trading for 1 hour if a market moved the equivalent of 250 points on the Dow. RUDER: The SEC chairman wants to raise margin requirements in stock-index futures and to let the SEC regulate the futures as well as stocks. BOWSSHER: Charles Bowsher of the General Accounting Office wants better communications and contingency plans among fderal authorities and exchanges. / BRADY: His task force calls for coorsinating markets under one regukatory agency, circuit breakers, upgraded information systems to monitor transactions in related markets, consistent margins accross markets and a unified clearing systems p147 [Stiglitz 7/2007] Reforms are still needed - including an overhaul of the global reserve system p241 [Lewis NYT 27oct02] Cohen was wrong, and Blodget was right, and Merrill Lynch was the laughingstock of the market. And so Merrill fired Cohen, hired Blodget and in effect, bought into AMazon.com at four hundred bucks a share. / It occured to no one at the time tha Merrill was conspiring to drive up Internet stocks. They were simply giving their brokeage clients what they wanted p269 [Dave Barry Money Secrets 2006 Crown, How to get RIch in Real Estate] The reason people usually give for buying an older house is that older houses have "character." What do we mean by "character"? We mean "dry rot." p272 Unlike old houses, which fall apart over time, new houses start falling apart immediately. Oftne the last subcintractors on the job have to spring from the house as it begins to collapse around them, like Indiana Jones in the Temple of Doom p277 [WSJ 13dec02] Federal regulators require some form of appraisal for virtually every residential real-estate loan to protect lenders and homoeowners against overextending themselves.. profession organized in the 1930s, when plunging Depression prices made valuing property more difficult, In 1989, when appraisers came under fire for valuations that supported shaky S&L loans, COngress passed a law establishing state licensing.. Many lenders also have lost a long-term interest in their loans, because they sell them off to investors p290 [New Yorker 11nov02] Many families have offset their losses in the stock market by refinancing their mortgages and taking out home-equity loans. During the past two and a half years, homeowners have raised more than three hundred and fifty billion dollars in this way, of which they have already spent more than a hundred biillion, on SUVs, furniture, and other goods. In the words of Fortune, "The American home has become a virtual ATM." p343 [Bloomberg 26mar08] It isn't because Wall Street CEOs are lazy, or stupid. It's because tey are trapped. The Wall Street CEO can't interfere with te new thing on Wall Street because the new thing is the profit center, and the people who create it are mobile. Anything he does to slow tem down increases the risk that his most lucrative employees will quit and join another big firm, or start their own hedge fund. He isn't a boss in the conventional sense. He's a hostage of his cleverest employees #@# Hedging Political Risk in China. Bremmer, Ian 1 Zakaria, Fareed 2 Harvard Business Review; Nov2006, Vol. 84 Issue 11, p22-25, especially vulnerable to external shocks, such as spikes in global commodity prices (particularly energy), epidemics, regional political unrest, and protectionist sentiment in the Western world. Domestic political unrest also poses risks: Rapid growth; the dislocation of tens of millions of people as state-owned companies have shed workers; public anger over land redistribution; widening wealth gaps; and major industrial accidents, including toxic spills, have all fueled social instability. This volatility has the potential to force sweeping governmental action, such as large-scale social spending or systemic crackdowns; disrupt supply chains; endanger fixed assets; and erode investor confidence.. foreign firms in China should employ several hedging strategies. First, they should work with their home governments to press the Chinese government to honor its commitment to open markets, institute basic economic rules of the road, enforce those rules it does have, and protect intellectual property rights.. Second, to minimize reputational risks at home, foreign companies should establish and firmly adhere to corporate responsibility standards.. Third, foreign companies should prepare in the following specific ways.. Create emergency response plans.. Preparing Chinese workers to assume the functions vacated by foreign workers is essential for the continuity of operations.. even when workers cannot all assemble in one place.. Develop strategies to recruit and train talented managers.. partnerships with Chinese colleges and universities, trading promises of future employment for influence in the business management curriculum.. Safeguard intellectual property rights.. Involving Chinese stakeholders in the benefits that flow from technical innovation may over time promote greater enforcement protection.. Understand the competition. Increasingly, Chinese companies are competing not just on their home turf but also in foreign competitors' home markets and around the world.. Diversify risk.. Develop strategies for exercising corporate social responsibility.. Seek outside perspectives. Firms should supplement the views of their in-country teams and consultants with those of truly independent experts. They should also institutionalize the application of their risk-mitigation framework.. Have an exit strategy. #@# Management Lessons from the Bust; Joseph Weber; Business Week Aug. 27, 2001, pp. 104-112. As the widely touted "new paradigm" fades into bitter memory and the management gurus look for the next new thing, the search for lessons begins. This report discovers that there were people at such "old economy" companies as Eaton who saw it coming and took appropriate steps, like accumulating cash. Others are now learning such lessons as "don't base forecasts on order backlogs," and "know your customers' customers." As MIT professor John D. Sterman told BW, "If you are in the pasta business, you want to know how much pasta people are cooking and eating, not how much they are buying, and certainly not how much supermarkets and distributors are ordering from the factory." #@# Symposium: The Going-private Phenomenon: Venture Capital Limited Partnership Agreements: Understanding Compensation Arrangements Winter, 2009 76 U. Chi. L. Rev. 161 Kate Litvak compensation of venture capitalists is comprised not only of management fee and carried interest, the two elements commonly identified, but includes a third element. This additional element is the value of the interest-free loan that VCs receive from limited partners. The amount and term of this loan are specified through distribution rules determining when VCs receive their share of profits.. Because of this interest-free loan, VCs almost always capture a higher fraction of funds' profits.. VC compensation is substantially less performance-based than commonly believed.. pay-performance elasticity is similar to that of CEOs of public companies during the same years and is lower than that of CEOs of S&P 500 financial firms.. VC funds very rarely use hurdle rates.. Carry. This variable is the percent of the fund's profits payable to VCs as risky compensation. Distribution coefficient. This variable is the ratio of carry that a VC would receive according to the distribution rule specified in a partnership agreement over carry that a VC would receive under the most investor-friendly distribution rule.. if more successful VCs are able to raise larger funds, they may get a double benefit - they will earn the management fee and carry on a larger base, and may also earn higher compensation per dollar of committed capital.. the management fee is typically calculated as a portion of fund size. And carry, measured in dollars, is directly related to fund size. Thus, fund size is a strong predictor of VCs' overall take-home pay.. VCs who raised more money in the past raise more money in the future.. Past performance matters, too (Hypothesis 1b): VCs with an above-median sold/total ratio raise larger funds. However, the IPO/total ratio does not predict new fund size.. suggests that older VCs may, in part, be coasting on past reputation.. A 1 percent increase in fund returns translates into a 0.47 percent increase on average in total VC compensation across vintage years, with a low of 0.38 percent (in vintage year 1997) and a high of 0.5 percent (in vintage years 1989 and 1990). This is not surprising given that a significant portion of VC compensation does not depend on fund performance.. greater complexity predicts lower compensation.. older VCs and more reputable VCs (as measured by total dollars raised in prior funds) make less use of the managed-capital base.. VCs with a higher portion of failed companies are more likely to use a managed-capital base.. carry is based on the sales of portfolio companies.. VCs can smooth their income by front-loading their management fees.. A VC who raises a new fund every four to six years can expect a stream of carry every four to six years; he might prefer higher management fees in the middle of each fund's life.. more established VCs (who raised more capital in prior funds) are less likely to have a front-loaded fee.. The sold/total and failed/total ratios are not significant predictors of front-loading.. In particular, distribution rules vary widely across funds, yet their VC-friendliness is not strongly predicted by proxies for VC quality. Nor are distribution rules simply delegated to lawyers - the same law firm will often draft different distribution rules for different clients. Better VCs tend to raise larger funds, as do VCs who have raised larger funds before. Some elements of VC compensation appear to be used to smooth VC incomes... My findings have implications for executive compensation. They suggest that the legal and institutional barriers to investor participation in setting executive compensation do not fully explain some key features of compensation contracts. Investors in venture funds are able to negotiate compensation terms directly.. On the other hand, with the exception of distribution rules, there is no evidence that the contractual complexity is used to increase stealth compensation. #@# Symposium: The Going-private Phenomenon: Does Private Equity Create Wealth? The Effects of Private Equity and Derivatives on Corporate Governance Winter, 2009 76 U. Chi. L. Rev. 219 Ronald W. Masulis & Randall S. Thomas private-equity investors are better risk monitors with better incentives than public shareholders at firms with significant derivative trading activity and derivative contract positions.. Federal Reserve has relaxed its stringent regulations on private-equity investment in banks and bank holding companies to facilitate the flow of capital into banks. The Comptroller of the Currency has also permitted a private-equity fund manager to purchase a bank personally, rather than through the use of his fund, and thereby avoid having his fund classified as a bank holding company.. debtholders and institutional investors can further improve firm risk monitoring since they are large investors who frequently hold both debt and equity positions in private-equity-controlled firms. This gives them good access to and strong incentives to monitor proprietary firm information flows to accomplish this goal. Thus, the shift toward greater private-equity ownership in the economy can be viewed as a value-creating response to increased derivative activity and contract exposure levels..The buyout firms earn fees from a variety of different sources: management fees, which are typically 2 percent of committed and/or invested capital; carried interest, which is usually 20 percent of the profits earned by the fund on its investments, subject to various adjustments, thresholds, and hurdles; transaction fees, which are paid to the fund when it buys or sells a portfolio company; and monitoring fees for its work helping to manage the portfolio company while it is owned by the buyout firm.. Prior to 1980, the total amount of capital in the private-equity market equaled between $ 2.5 and $ 3.0 billion, with new capital inflows at less than $ 100 million per year. [ Daniel A. Wingerd, The Private Equity Market: History and Prospects, Investment Policy Mag 26, 30 (Sept/Oct 1997) ] Only in the 1980s, after deregulatory initiatives at the Department of Labor and the SEC removed important obstacles to institutional investors putting large amounts of capital into the asset class, did the first private-equity boom begin.. in 2005-2006, the private-equity/LBO market had reached 5 percent of the capitalization of the US stock market, or about 1.4 percent of global GDP.. Michael Jensen argues that going-private transactions reduce the agency costs of equity by cutting down on managers' discretion to misallocate cash into empire building, empire preservation, and excessive perquisites [67 Harv Bus Rev 61(Sept/Oct 1989)].. Why might this managerial domination persist? One possible answer is because the director nomination process at public companies has historically ensured that directors care more about what CEOs think than what shareholders think  Melvin Aron [Eisenberg, The Structure of the Corporation: A Legal Analysis 146-48 (Little, Brown 1976); 63 J Fin 1729, 1733 (2008)].. In sum, there seem to be significant regulatory cost savings that can be obtained by going private, and for at least some firms, particularly smaller firms, these cost savings may exceed the benefits of being a public company.. increase in interest payments is the enhanced corporate tax deductions available to the firm.. This asymmetric information distribution can provide managers with superior understanding about the future value of the firm, allowing them to time their purchase of the company in a going-private transaction to take advantage of a temporarily depressed price for the company's stock. More perniciously, unfaithful managers may engage in techniques designed to depress artificially the stock price in order to facilitate an MBO deal.. Robert Merton was the first to argue that the existence of derivative contracts raises the relative advantage of being private over being public by permitting private firms to spread risks more widely.[19 J Banking & Fin 461, 462 (1995)] Given the tremendous growth in derivative markets since 1995, the relative benefits of public ownership as a means of risk-sharing and lowering the cost of capital appear to have substantially declined.. expected costs of an LBO: higher expected bankruptcy costs, agency costs due to intensified conflicts of interest among firm stakeholders, the lack of stock liquidity, owners' reduced diversification of risk, the disappearance of timely stock price information, the lack of periodic financial disclosure, and a reduced ability to tap public capital markets.. managers of highly leveraged firms can have strong incentives to "bet the farm" to avoid potential bankruptcy.. if a leveraged firm experiences an adverse economic event that pushes it into financial distress, then regardless of whether it is closely or diffusely held, managers have incentives to substantially raise firm risk to increase the firm's equity's (call option) market value by raising volatility (a call option is a positive function of volatility since it raises the probability of a large gain in value), even though the debt's value suffers from a greater probability of default.. most firms appear to have inadequate internal accounting and control systems to track these derivative transactions on a timely basis or to police effectively any existing position limits. The many derivatives-related financial scandals are a testament to this weakness. The problem has been compounded by the failure of many derivative traders to require highly detailed information on the assets underlying their financial contracts..  Robert Merton and Myron Scholes both observe that current financial and regulatory accounting systems do a poor job of tracking the risks associated with derivatives [Merton, 19 J Banking & Fin at 470].. default risk of counterparties in derivative contracts is also very dynamic.. Two particularly serious areas of deficiency appear to be the assessment of counterparty default risk exposure and the adverse effects on insurers of potential macro events, which can overwhelm their reserves against losses. However, a more fundamental problem is that risks taken by counterparties can change quickly, but there is no real-time control or monitoring of these risk exposures.. tendency of many financial assets to suddenly become highly correlated in periods of capital market distress.. One result of this greater risk exposure is that FIs have a greater need for sophisticated directors who are knowledgeable about derivative contracts and markets. These directors need to monitor intensively these FIs on an almost continuous basis and implement rigorous internal risk controls and monitoring systems, which require updating as the financial engineering technology evolves. While regulatory authorities have tried to reduce these concerns through their own monitoring mechanisms, they have suffered from similar weaknesses.. board oversight has been significantly weakened by poor incentives and higher monitoring costs. In addition, there has been a shift toward nominating directors based on their independence from management.. while many outside corporate directors appear to exhibit financial independence, this is often offset by these directors not being well informed about company operations.. A general prediction of the literature on optimal contracting is that as it gets more difficult and costly to monitor managers, there should be a greater reliance on risk-sharing through larger equity-based compensation contracts[10 Bell J Econ 74, 75-80 (1979)].. use of private debt allows creditors to be more flexible in dealing with covenant violations, permitting more customized covenants to be used and potentially resulting in tighter contracts #@# Predicting Corporate Governance Risk: Evidence from the Directors' & Officers' Liability Insurance Market Spring, 2007 74 U. Chi. L. Rev. 487 Tom Baker and Sean J. Griffith Liability insurers bankroll shareholder litigation in the United States. Directors' and officers' (D&O) liability insurance policies cover the risk of shareholder litigation. Nearly all public corporations purchase D&O policies. And nearly all shareholder litigation settles within the limits of these policies.. The D&O insurer has several means of reintroducing the deterrence function of corporate and securities law and, because it is the one ultimately footing the bill, ample incentive to do so.. Because this cost is, in part, a function of the quality of the insured's corporate governance practices, it fulfills a necessary condition for advancing the deterrence objectives of corporate and securities law.. unique perspective on what (if anything) matters in corporate governance, underscoring the role of "deep governance" variables such as "culture" and "character" in contrast to the formal governance structures commonly emphasized in previous scholarship.. two insurers (AIG and Chubb) together account for more than half of the market.. public companies have about a 2 percent chance of being sued in a shareholder class action in any given year.. average settlement value for the years 2002-2005 was $ 22.3 million, significantly higher than the average settlement value of $ 13.3 million for the years 1996-2001.. basic concern underlying all such claims is a divergence between managerial conduct and shareholder welfare -- the problem, in other words, of agency costs.. capitalization, volatility, n120 and various accounting ratios. Industry and volatility are associated with frequency: some industries are sued more often than others and shareholder litigation tends to coincide with sudden declines in share price (volatility). Market capitalization, meanwhile, is used to predict both frequency and severity: larger firms are sued more often.. Several underwriters cited executive compensation as a key indicator of intrafirm incentives. An equally large number also emphasized the constraint of internal controls. In their discussion of these incentives and constraints, it was clear that underwriters looked past the formal rules, seeking a sense of how strong the norm of compliance is within the organization or whether, by contrast, there is a norm of defection.. liability risk comes from what the firm's executive compensation practices suggest about the incentives operating within the firm. For similar reasons, our participants cited the stringency of a firm's insider trading policies (and the care with which they are observed) as significant factors in risk assessment.. pressures to manipulate results may exist throughout the firm.. Insurers are interested in whether acquisition activity is value enhancing or rather mere empire building, further evidence of unconstrained management.. underwriters reported that they take the ownership structure of a prospective insured into account.. take into account such structural governance features as state of incorporation, board independence, committee composition, and separation of the chief executive and board chair roles.. Arrogance, our interviews suggested, may indicate individuals who hold themselves above rules and norms.. arrogance indicates a lack of restraint, as well as the ability and willingness to rationalize one's conduct in a way that makes the rules seem not to apply.. that the company is overcommitted to growth because in such situations there will be a strong temptation to misstate results when reality falls behind expectations. Excessive risk taking, in other words, can lead to fraud.. market capitalization (all insurers), industry sector (most insurers), stock price volatility (many insurers), accounting ratios (many insurers), and age/maturity of the applicant corporation (some insurers).. Most insurers allocate even more discretion to individual underwriters in setting premiums.. the primary insurer's quotation is disclosed to all excess carriers before they provide their final quote, putting them in an even better position to predict the prices charged by their competitors #@# Pernicious Art of Securities Regulation. Anglo-American Securities Regulation: Cultural and Political Roots, 1690-1860. Stuart Banner. Cambridge University Press, 1998. Pp xviii, 318. Fall, 1999 66 U. Chi. L. Rev. 1373 Reviewd by: Paul G. Mahoney To see where such an analysis might have led, consider two steps that have been taken elsewhere. Historians have situated English antispeculation commentary within a broader seventeenth-century dispute about the role of the state in "managing" the economy. n3 Many of the commentators who believed that government must enforce moral precepts against profiting from trade in necessary commodities also argued more generally for "the subordination of economic life to social and political considerations." n4 Such commentary provided intellectual support for mercantilism, a system of pervasive economic regulation that sought to maintain social order by bringing economic activity under the centralized control of the state. Economists have taken the further step of identifying rent-seeking interest groups who took cover under that desire for stability. n5 Once we discover in seventeenth-century arguments about speculation an undercurrent of ideological dispute about the desirability of industrial planning, fueled in part by producers trying to hobble their competitors, the whole debate begins to look remarkably modern.. Starting in the mid-1690s, Defoe wrote a series of pamphlets attacking "stockjobbers.".. Banner alludes to the least important of Defoe's personal interests--his bankruptcy, which gives his diatribes a strong flavor of sour grapes (p 29)--but the brief mention does not nearly do justice to Defoe's remarkable commercial career. Defoe inherited from his father the privileged status of a liveryman of the City of London, one of the powerful few able to engage in trade, vote in Parliamentary elections, and reap the privileges of control of a local government devoted largely to rent-seeking on behalf of merchants.. swindler, embezzling money from his mother-in-law, tying up his creditors in litigation, hiding assets, and selling the same assets to multiple purchasers.. Defoe's most consistent complaint about stockjobbers is that they were responsible for the existence of two competing East India Companies. The "Old Company" received its first royal charter in 1600 and enjoyed a monopoly of the trade to India until Parliament created the "New Company" in 1698. Defoe argues that competition between the two reduced the prices of imported goods to the detriment of domestic manufacturers.. Anyone who could convince the crown to grant a charter (which in practice meant paying for a charter through loans or gifts to the King) could establish a business. In that sense, the joint-stock company represented an incursion by national authorities on municipal privileges.. "stockjobber" was in part a code word meaning the proprietors of businesses organized as joint-stocks rather than regulated companies. Their real complaint was about competition.. [other] recurring complaints. Securities trading was described as "a breeding ground for deceit" (p 49); a nonproductive activity that "diverted time and effort from other, more worthwhile activities" (p 58); an activity that tended "to divide the public into factions" (p 62) and divert the government from pursuing the public interest; and an activity that "upset accustomed patterns of social life" (p 65) by creating a moneyed class that was neither propertied nor well-bred and in many cases not Christian. Banner notes that "some of these complaints are unlikely to sound persuasive to modern readers" but maintains that these views were widely and sincerely held (p 49). Moreover, he argues, these criticisms "would become long-running motifs in English and American culture" (p 48).. As Banner recognizes, these criticisms were essentially warmed-over versions of the traditional attacks on grain speculators and money-lenders.. when the English government temporarily stepped up its enforcement of grain speculation laws in the early seventeenth century, the effect was to reduce food supplies in London and the effort was abandoned. [Christopher Hill, The Century of Revolution, 1603-1714 31 (Thomas Nelson & Sons 1961)].. Securities regulation, on the other hand, was clearly a forum through which brokers gained rents at the expense of their customers. We get our first hint from the wonderfully named "Act to restrain the number and ill practice of brokers and stock jobbers" of 1697, the first statute to regulate the new securities market. Its principal feature was indeed to limit the number of stockbrokers to one hundred. The Lord Mayor of London was given the power to hand out the licenses. The brokers apparently understood the benefits of entry barriers without the help of modern economic theory. The collapse of the price of South Sea Company shares in 1720 occupies a prominent place in the history of securities regulation, and Banner describes the public reaction to the fiasco in detail (pp 45-48).. The Bubble Act was enacted before, not after, the steep drop in the South Sea Company's share price. Moreover, it is clear that the statute was enacted at the South Sea Company's behest. One recent commentator argues that the Company's purpose was to cut off competition for scarce capital. Whether or not that was the motivation, the Company induced Parliament to enact a statute that then backfired by causing a financial panic that brought the Company down with the rest [Garber, 4 J Econ Persp 35, 51 (1990); Harris, 54 J Econ Hist 610, 612 (1994)] #@# Implications of the Private Securities Litigation Reform Act of 1995 for Judicial Presumptions of Market Efficiency Summer, 1998 65 U. Chi. L. Rev. 879 Nathaniel Carden In 1995, however, Congress passed the Private Securities Litigation Reform Act of 1995 ("PSLRA"). The measure was designed to stem what Congress believed to be an epidemic of frivolous securities fraud suits... distinct uses of "efficiency": (1) as a goal for the market, (2) as a description of the market, and (3) as a heuristic device needed because of courts' limited competence in predicting market movements.. efficiency is often a normative goal. Certain judicial decisions attempt to make the capital markets more efficient.. an efficient market is desirable because it ensures that society's productive assets are transferred to those who can make the best use of them, thereby maximizing aggregate welfare... weak form predicts that it is futile for investors to undertake so-called technical analysis based on patterns in historical price data. The intermediate version of the theory, termed "semi-strong," asserts that all publicly available information is reflected in market price, and that newly available public information becomes incorporated in that market price almost instantaneously. This version suggests that further "fundamental value" analysis, such as using information about the firm, the industry, or the economy, will not yield superior returns. Finally, the "strong" form maintains that all information, public and private, is fully incorporated into the market price at any given time. Under this theory, even insider trading would not be profitable.. semi-strong version, however, has been accepted by courts and become relevant to liability under Rule 10b-5.. Armed with statistical evidence of the frequency and magnitude of suits, n65 as well as anecdotal evidence of frivolous or abusive litigation practices, n66 Congress began considering legislation to reform securities fraud liability in early 1995. This effort culminated in the PSLRA, which had three objectives: (1) to encourage voluntary disclosure of information; (2) to "empower investors" so that they, not their lawyers, control litigation; and (3) to encourage plaintiffs to pursue valid claims while simultaneously facilitating defendants' resistance to frivolous suits.. provides for a "look-back" period following the corrective disclosure so that plaintiffs will not be overcompensated if the markets overreact to a disclosure correcting the initial misleading statement or omission. In arriving at this conclusion, Congress relied heavily on a "crash" theory of market movement posited by Professors Baruch Lev and Meiring de Villiers.[47 Stan L Rev 7, 20-21 (1994)] This model predicts that share prices will systematically overreact and correct following a corrective disclosure.. Congress apparently believes that price movement subsequent to the corrective disclosure is attributable not to new information entering the market, but rather to market readjustment following the initial overreaction to the unveiling of the fraud. Over the course of the ninety day postdisclosure "look-back" period, other macroeconomic, industry, and firmspecific information is likely to enter the market. Congress appears to think that price changes will be a reflection of both this new information and the response to the overreaction.. reflect a congressional desire to limit plaintiffs' leverage and ensure that defrauded plaintiffs are not overcompensated by market overreactions.. common sense presumption that arises with a showing of a sufficiently active market along with credible and widely dispersed information. Simply put, fraud is likely to cause a change in the price at which investors buy or sell securities in an active market. As a consequence, there is no reason for courts to rely on theories that describe the market as efficient. Instead, using "common sense and probability," courts should attempt to ensure that no investor must "roll the dice in a crooked crap game."