Leadership

Companies are on the lookout for new forms of competitive advantage. One emerging possibility: the idea that a company's management model can become a source of advantage.

Despite research showing that mergers and acquisitions rarely provide significant shareholder value, there is no sign of any slowing in the trend toward M&;A. One of the major reasons why M&;A tend, to fail, argue the authors, is that the process often puts extreme stress on senior management teams. By nature, the process is an adversarial one, with management on both sides advocating for their stakeholders. When the dust clears at the end of the process, management is left, as the authors say, "to navigate the challenging segue from 'tough negotiator' to 'trusted colleague.' " The authors draw on the experience of Hewlett-Packard, Cisco, General Electric and Adobe to propose six guidelines for improving relations between the senior management teams of both sides of the M&;A equation. The first three guidelines should be undertaken as soon as possible in the integration process. The authors advise that you can reduce the defection of talented personnel by reducing role ambiguity as quickly as possible. They also urge due diligence about the talent you are acquiring as early in the process as possible, and preferably before the deal is finished. Third, they recommend allowing some "habits to die hard." Employees often rely on habits and long-standing procedures to remain comfortable, and many of them are what made the company successful in the first place. As the integration process continues, there are three more important guidelines to follow. First, acquirers should not tolerate "bad behavior" that can sabotage the integration process. Second, it is important to have patience with the new management team, as many of them will be in unfamiliar roles. Finally, the authors suggest that it is important to remember to celebrate the value of the deal for all involved. By trumpeting the value of the new team, you can increase communication and trust. Ultimately, this trust may lead to increased shareholder value for all involved.

At top companies, where the inspired use of metrics helps to identify potential leaders and develop their skills, the answer is yes.

In business and in personal life, people look for easy solutions to solve complex problems. Unfortunately, most quick fixes don't work because the problem is rarely fed by a single cause. If you want to confront persistent problems, the authors argue, you need to apply several different kinds of influence strategies simultaneously. Their approach is based on three separate studies -- two examining organizational issues within companies and a third exploring destructive individual behaviors such as smoking, overeating and excessive alcohol use. The authors document the success of this multipronged approach across different problem domains (from entrenched cultural issues in companies to leader-led change initiatives to stubborn personal challenges). They found that those who employed only one influence strategy (for example, managers offered training, redesigned the organization or held a high-visibility retreat) were far less likely to achieve significant results than those who used four or more sources of influence in combination. The same went for those tackling personal challenges. Many had attempted to alter their behavior by using a single approach (joining a gym, following prescriptions in a book or attending Alcoholics Anonymous meetings) -- but nearly all had failed. Using examples from such companies as AT&;T, Lockheed Martin, OGE Energy and Spectrum Health Systems, the authors describe six influence strategies. The first two, personal motivation and ability, relate to sources of influence within individuals that determine their behavioral choices. The next two, social motivation and ability, relate to how other people affect an individual's choices. And the final two, structural motivation and ability, encompass the role of nonhuman factors, such as compensation systems, the role of physical proximity on behavior, and technology. "Too often," the authors argue, "[leaders] bet on a single source of influence rather than tapping a diverse arsenal of strategies. We have learned that the main variable in success or failure is not which sources of influence leaders choose. By far the more important factor is how many."

Past research is clear on the benefits of high-performing, or “star,” workers. Star computer programmers, for example, are more productive than average ones by a ratio of eight to one. But reaping the benefits of such talent is not so simple. Say you hire a number of stars. How can you guarantee that they will be able to replicate their success in a new environment & #8212; in short, how portable are they? In the past, portability has been viewed as an attribute of a person, team or organization, but it can also be looked at as an attribute of a position. Specifically, certain jobs do require different levels of company-specific human capital, thus making some workers less portable than others. Consequently, organizations should not think of talent management as a simple “build versus buy” dichotomy. Rather, there are some positions for which they can buy, and others for which they must build. Within investment banks, for example, the retail brokers (who handle individual clients) work primarily on their own. In contrast, institutional salespeople (who sell to major institutional investors such as Putnam, Vanguard and Fidelity) are more likely to perform their jobs in teams. Thus, retail brokers are more portable and can easily be hired from the outside. Institutional salespeople, however, should be developed from within, and efforts should be made to retain them. Understanding such differences is crucial for companies attempting to attain sustainable competitive advantages that derive from human capital. The authors’ research, which has probed the application of human capital theory to talent portability, should help companies recognize that an entire class of factors & #8212; specific roles within an organization & #8212; greatly determines the portability of performance. With that knowledge, executives can gain a deeper understanding of the pros and cons of hiring certain star employees.

Much lip service is given today to “values-based decision making,” with the implication that the underlying values are “good” values, occupying high moral ground. But the fact is that all decisions & #8212; whether highly ethical, grossly unethical or anywhere in between & #8212; are values-based. That is, a decision necessarily involves an implicit or explicit trade-off of values. The values represented in a particular decision are not always easy to identify and evaluate, however, and the shortcuts that people often take in decision making can make deeper analysis of values all the more difficult. This article presents a framework designed to explore the values implicit in decisions. Moving systematically from concrete consequences to higher-ordered values, the framework, embodied in a decision-mapping technique, helps the decision maker think through what is gained and what is given up as a result of a decision. It also encourages an expansion of choice options, motivates a more balanced view of positive and negative consequences, and provides insight into the dynamics of decision making. When good people at times say yes to bad & #8212; unethical or illegal & #8212; actions, there are four possible reasons: (a) the organization’s values are fuzzy to them, leading them to resort to undeveloped intuition and expedient criteria, (b) they may not be clear on their own values, (c) their interpretation of probability conveniently favors their a priori preferred option, or (d) they see no other options (they believe their hands are tied). Each of these possibilities reflects issues that senior managers need to account for directly in addressing ethical decision making in their organizations. Illustrating the framework through a case study based on actual events, the article aims to help managers build a culture that better integrates the organization’s values into staff members’ decisions.

An implicit assumption of the "war for talent" perspective is that departing workers are lost to competitors. Yet employees also leave to join "cooperators," such as customer companies, suppliers and partners, and such movement can facilitate the creation and strengthening of business relationships with those organizations. Another important factor is whether the departing employees possess generic or valuable company-specific knowledge. Managers should consider these two criteria -- the destination and knowledge of departing employees -- when determining how best to handle worker turnover. There are four different scenarios. In the first, employees with knowledge that is generic or of low strategic importance leave to join competitors. This type of turnover can hamper the productive capacity of an organization while increasing that of its competitors. Here the authors recommend the use of defensive maneuvers (such as improving employee benefits), which are designed to retain existing workers. In the second scenario, employees possessing knowledge that has low strategic importance depart to join cooperators. This type of turnover leads to administrative and human-capital costs that must be weighed against the possible social-capital benefits -- the new business opportunities that can be generated by ex-employees in their new jobs. The recommendation is for companies to adopt relational actions, in which they take active steps to maintain positive relationships with former employees, such as through the formation of alumni programs. The third scenario -- employees with strategically important, company-specific knowledge resign to take jobs with competitors -- is potentially the most damaging form of turnover. Consequently, companies might best be served by emphasizing retaliatory actions (such as the threat of lawsuits to enforce noncompete clauses in employment contracts) in addition to defensive maneuvers targeted toward the retention of specific employees who are crucial contributors. In the fourth and final scenario, employees with strategically important, company-specific knowledge leave to work for cooperators. This type of turnover presents interesting challenges. Because the loss of key employees incurs high administrative and human-capital costs, companies have a strong incentive to adopt defensive strategies to reduce such turnover. But the movement of key employees to cooperators can also lead to substantial opportunities for businesses to expand their social capital with important clients and suppliers. Therefore, when defensive maneuvers fail, a company should consider adopting a relational approach, maintaining positive relationships with departing key employees as they make the transition into their new jobs at cooperators.

Companies with connections to a nation’s government may be less productive.

What's behind every industry-shaking innovation? Countless, but crucial, "mini-innovations," as Joe Fox calls them. Along with his brother, Avi, Fox has founded two companies -- in entirely different industries -- that aimed to challenge the traditional business models. But in an interview with MIT Sloan Management Review, Fox explains that these large-scale innovations don't dawn on him all at once. Instead they arrive in fragments, some of which are conceived by his management team of original thinkers. The Fox brothers set the group to work after they've spotted a broader opportunity, which happens when they aren't looking for one. Their first business, an online brokerage called Web Street, grew out of their own experience trading equities. And they constructed the framework for BuySide Realty, an online real estate brokerage -- which they currently operate, along with a subsidiary called Iggys House -- when prowling around for a vacation home. After the initial inkling, Fox's market research consists not only of asking potential customers, but also of actually paying attention to their answers. What he's looking for is not their opinion of whether an idea can possibly be executed; he just wants to know if they would pay for such a service, assuming he could bring it into existence. Not that he's had an easy time bringing a notion to fruition. He's never been able to strike a deal with any institutional investors, although Web Street did successfully go public during the dot-com boom in 1999. He had hoped to repeat that feat with his current venture last year, but opted to wait for Wall Street's appetite to improve. In the meantime, Fox is counting on a steady supply of "mini-innovations" to keep the business ahead -- by a half-step, at least -- of its megacompetitors. Can he do it? Clearly, he thinks he knows how.

Initiatives to build and maintain trust with various stakeholders, including customers, employees, suppliers and investors, have risen to the top of the executive agenda at many organizations. But the problem is that most companies don't really understand how to manage stakeholder trust effectively. In fact, the authors' research suggests that many of the trust-building initiatives and approaches that organizations invest in may be of questionable value. Others might actually be counterproductive. One of the reasons managing stakeholder trust is difficult is because there are many different stakeholder groups, each with its own particular needs and perspective. That is, trust is multidimensional, and it's not obvious which dimension executives need to focus on when dealing with any particular constituency. What, for example, is more important for building trust with employees and customers: a reputation for kind-hearted benevolence or for fair-minded integrity? To answer such questions, the authors conducted a study of stakeholder trust in four different organizations. The research analyzed the relevance (if any) of various factors: benevolence, integrity, managerial competence, technical competence, transparency and value congruence. In essence, the study asked what matters -- and to whom. Some of the results were unexpected, and a few were even counterintuitive, leading to the following key insights: Transparency is overrated; integrity is not enough; the right kind of competence matters; building trust with one group can destroy it with another; and value congruence matters across the board. The new framework challenges some existing beliefs and sheds light on a number of areas that companies would be wise not to ignore. Indeed, as the authors illustrate, fundamental misunderstandings about stakeholder trust have tripped up a number of corporations, including Coca-Cola, Google, Apple, Delta Air Lines, Mattel and Sprint. In the future, a deeper knowledge of stakeholder trust will help businesses become more adept at managing stakeholder trust so that they can reap the numerous benefits, including improved cooperation with suppliers, increased motivation and productivity among employees, enhanced loyalty from customers and higher levels of support from investors.