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12 Jul 2022, 23:00
| FROM Insead Admissions Blog: Can We Get Better at Navigating Uncertainty? |
| What innovators have learned that allows them to face the uncertainty of new pursuits |
17 Jul 2022, 20:00
| FROM Insead Admissions Blog: How to Shoot for the Holy Grail of Social Media Marketing |
| Quality, consistent and simple messaging is what will bring in sales. The rest is just noise. |
18 Jul 2022, 23:00
| FROM Insead Admissions Blog: Making Sense of Attribution in Online Advertising |
| While online advertising has grown rapidly, methods to justify marketing spend on digital platforms have yet to catch up. |
20 Jul 2022, 00:00
| FROM Insead Admissions Blog: A “Human” Understanding of the World Through AI |
| Information search could be made less biased and more holistic through the lens of empathy. |
24 Jul 2022, 20:00
| FROM Insead Admissions Blog: Paradox Mindset: The Source of Remarkable Creativity in Teams |
| Teams are more successful if they embrace internal differences and explore conflicting ideas instead of glossing over them. |
26 Jul 2022, 01:00
| FROM Insead Admissions Blog: Bob Ayres at 90: Key Insights on Energy in the Economy |
| Groundbreaking observations from a formidable figure in the field of industrial ecology on the fundamental role energy and materials play in the economy. |
01 Aug 2022, 04:00
| FROM Insead Admissions Blog: Ten Steps Towards a More Fulfilling Life |
| The journey towards a more fulfilling existence starts within you. |
01 Aug 2022, 20:00
| FROM Insead Admissions Blog: Corporate VC is Booming, but Is It What Your Start-Up Needs? |
| A guide to choosing the right corporate investment for entrepreneurs. |
07 Aug 2022, 01:00
| FROM Insead Admissions Blog: Corporate VC Is Booming, but Is It What Your Start-Up Needs? |
| A guide to choosing the right corporate investment for entrepreneurs. |
07 Aug 2022, 20:00
| FROM Insead Admissions Blog: Better Human-AI Collaboration May Depend on Workflow Design |
| Improving how humans work with algorithms could simply be a matter of redesigning workflow. |
10 Aug 2022, 00:00
| FROM Insead Admissions Blog: In Age of Deglobalisation, MNCs Need Closer Ties to Thrive |
| Cultivating relationships with local communities and other stakeholders will help multinationals counterbalance increasingly powerful governments. |
15 Aug 2022, 18:00
| FROM Insead Admissions Blog: Better Human-AI Collaboration May Depend on Workflow Design |
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How should humans collaborate with artificial intelligence? This is a question of increasing urgency as AI becomes pervasive in the workplace. From screening job applications and chatting with customers to assessing investment portfolios, algorithms are working alongside us in myriad roles and organisation set-ups. But whether this collaboration is designed in ways that lead to trust and satisfaction – for us humans at least – is another story. Respecting, rather than ignoring, human concerns over working with AI is not only consistent with humanistic values, as we noted in an earlier article, but also good for business. That’s why we ran the “Bionic Readiness Survey” to investigate what configurations of collaboration with AI algorithms humans are more or less likely to trust. Based on responses from 257 participants so far (predominantly rank-and-file employees at large organisations in India), we found that people’s trust in AI and clarity about their own work role varied according to how their work is set up. Not all configurations are equal Respondents to our survey were randomly assigned to one of six different workflow configurations, which are illustrated in the graphic below. The scenarios (more information here) are permutations of whether employees work in parallel or in sequence, are specialised or not, and whether the final decision is taken by humans or algorithms. Some respondents were shown the same scenarios but with a human co-worker instead of an algorithm. All respondents were asked to rate their clarity about their own role and trust in the co-worker (human or AI). The survey turned up three main findings. First, respondents indicated that they would be clearest about their own role if they worked in parallel with the algorithm and specialised in a different task (i.e. Configuration 2 in the above graphic). That’s not very surprising: role clarity tends to be directly related to how much independence a human employee has at work. Second, respondents reported trusting the algorithm to almost the same degree across all configurations except in Configuration 3, in which human and AI work in sequence doing more or less the same thing, but with the human making the final decision. Unfortunately, this trust-sapping set-up is quite common in real life applications. Just putting the human in the role of second guessing the AI seems to lower human trust in the AI. Third, how work is set up in organisations appears to affect employee trust as much as -- in some cases more than -- who they work with. In Configuration 3, for instance, our respondents indicated that they would trust an AI or a human colleague equally. In other words, if we compared Configuration 3 with one of the other configurations, we might erroneously conclude that humans trust AI less than they trust human colleagues. Get the configuration right Put simply, our results to date show that human trust in AI as a colleague may be too broad a line of inquiry. A more fruitful one might be the optimal set-up for human-AI collaboration. Whereas past research on human-AI collaboration tends to focus on the reliability of the algorithm, ours is perhaps the first to examine the role of workflow. And it appears that human distrust of AI at work may be down to workflow design rather than human vs. machine rivalry. |
15 Aug 2022, 18:00
| FROM Insead Admissions Blog: In Age of Deglobalisation, MNCs Need Closer Ties to Thrive |
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Since the 2008 global financial crisis, when banks and corporations had to be bailed out by governments with taxpayers’ money, world trade growth has faltered. China and the United States have decoupled. The pandemic disrupted the global movement of goods and people while Russia’s war in Ukraine triggered sanctions and countersanctions. As a result, multinational companies (MNCs), for so long at the forefront of globalisation, are on the back foot. With overseas markets no longer as accessible as before, and governments more likely to crack the whip than bend over backwards, MNCs often lack the sophisticated political nous to navigate government and public expectations. For instance, when Alibaba founder Jack Ma openly criticised financial regulations in China in October 2020, Chinese authorities swiftly halted his fintech conglomerate’s initial public offering and launched a crackdown on Big Tech companies. Similarly, India’s commerce minister publicly took Tata Group to task last year after the country’s largest conglomerate griped about tough new e-commerce rules. MNCs face even greater challenges running outposts in foreign countries. Their relationships with host governments may deteriorate over time, along with the bargaining power that the MNCs initially enjoyed on entry. To find out what makes some companies better able to deal with host hostility than others, we studied eight MNCs involved in disputes with governments in South America between 2001 and 2012: Cemex in Venezuela; Telefonica, Repsol, Vivendi, and Endesa in Argentina; Telecom Italia in Bolivia; Shell in Nicaragua; and Iberdrola in Guatemala. Our findings, published in the Journal of Management Studies, show that reliance on local partners could result in what we call a liability of insiderness. Local partners tend to isolate foreign investors from local stakeholders, preventing the multinationals from developing direct, local ties and building local reputation. This in turn compromises the MNCs’ capacity to react and adapt to the sudden hostility of local governments. The insider’s liability We focused on sectors such as construction, energy, and mining where high sunk costs reduce bargaining power and can make exits difficult and costly. We also zeroed in on disputes that occurred in countries with similar institutional systems. All of the companies analysed had filed expropriation claims with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). We conducted dozens of interviews with MNC executives, managers of peer companies, government officers, representatives of political associations, diplomacy and political economics experts, and labour union experts. We also examined analyst reports, newspaper articles, and corporate, legal and government documents. Three phases of hostility We charted three phases of increasing hostility from political authorities: anticipation, escalation, and expropriation. Four of the cases we studied underestimated the trouble they were in at first, took remedial action only after the government hostility became evident, and ultimately failed to secure local and international support. Most of these companies exited their host countries and received little or no compensation for their losses. A second group of companies caught early warning signals and mobilised quickly to propagate their own narratives and canvass for local and international support. Three of them maintained operations in the host country and/or received compensation from the host government. Phase 1: Anticipation Disputes typically begin with symbolic, ambiguous actions that hint at the government’s intention to intervene in an industry or the economy, usually in the name of protecting national interests. The actions might include setting price ceilings, increasing corporate taxes, or using trade unions to pressure MNCs through public protests or strikes. In response to this first phase of government hostility, some of the companies such as Telecom Italia and Iberdrola relied on local partners to gather additional information and monitor the situation. They received filtered information that painted a partial and inaccurate picture that led them to delegate action to third parties. “We were myopic,” a director of Telecom Italia told us. “We delegated and we should have intervened in first person.” These companies had adopted a networking strategy that we refer to as mediated embedding in tandem with their narrow focus on profits. According to our interviewees, Telecom Italia saw the local investment as merely “a cash cow” while Iberdrola, a Spanish electric utility company, did not think it necessary to invest in the local communities. Endesa, another of the MNCs that relied on a local partner to manage its relationship with the host government, built goodwill with local people by giving aid to the underprivileged and providing training and other benefits. This helps explain why the Spanish electricity company managed to mobilise local support and renegotiate tariffs with the host government in Argentina. It stayed in the country for five more years. In contrast, other companies in our sample such as Repsol sought information from local lobbyists, trade unions or other MNCs. This helped them accurately assess government hostility and spurred them to take early action. These MNCs pursued a networking strategy that we named proximal embedding. They directly owned and managed their local investments, had built relationships with a broad range of local stakeholders, and liaised with the central government through lobbyists, “high-level contacts”, or informal interactions with political authorities. Local stakeholders helped these companies detect subtle signals of targeted hostility. Managers at the Mexican building materials company Cemex and Spanish energy company Repsol, for example, noticed that some contractors were delaying payments and some large clients had changed providers. The companies took immediate action. A Cemex executive recalled how they collected evidence of what political authorities were saying or doing at any given time. “We would take note of it and write it down. We had it documented. We never feared that we lacked arguments.” Phase 2: Escalation In this phase, the MNCs began to be accused by host governments of failing to fulfil investment commitments or causing pollution. They also faced demonstrations, fines, increased taxes, class action lawsuits and criticism in the media. Yet managers of multinational corporations operating through local partners continued to dismiss the severity of the situation. At French water services multinational Vivendi, managers maintained that the hostility they faced in Argentina was due to “unfortunate events” rather than a deliberate plan to seize their assets. Such MNCs also preferred to avoid direct confrontation, seeking instead to appease the authorities. As a Telecom Italia director lamented, “In Bolivia, my impression is now that the local partner knew [of the threat] but did not say. …When there is no partnership, you have a better understanding of what happens.” In contrast, managers of proximally embedded companies had already sensed danger and proactively sounded out local stakeholders to gauge whether they shared the government’s hostility. Cemex’s managers, for example, contacted suppliers to renegotiate the terms of their contracts. They met with clients that had stopped or delayed payments, and set up meetings with local employees to discuss rumours that senior executives were negligent. Cemex also reached out to friendly government contacts and mobilised lobbyists to gather information about the government’s motives. These proactive MNCs thus concluded that a confrontation with the government was inevitable and began to plan accordingly. All of them sought to highlight how their investments had contributed to local economic development and to convey that the actions proposed by the government would harm, not help, local communities. For example, Telefonica insisted that the government did not have the capacity to finance the necessary investments in telecommunications. Repsol warned that the Argentinian government’s actions would deter foreign investment in the country. Phase 3: Expropriation The dispute’s final phase usually sees hostile governments formally cancel or modify concessions (Iberdrola and Endesa), expropriate assets (Cemex, Repsol, Telefonica, and Telecom Italia), or seize rent sources (Shell and Vivendi) without compensation. In our study, companies operating through local partners (Vivendi, Iberdrola, and Telecom Italia) now faced widespread hostility from local stakeholders. These MNCs’ only recourse was to file complaints with ICSID even while they prepared to exit their host countries. In contrast, proximally embedded MNCs intensified their efforts to mobilise local stakeholders and put pressure on host governments to settle disputes amicably, or at least not to cause further harm to their remaining assets. Endesa, the only MNC in our study to pursue a hybrid strategy, lost control of its board and was forced to sell its majority stake in its Argentinean subsidiary. But, with the help of local supporters, it was able to persuade the government to renegotiate tariffs and continue its operations in the country. In the age of deglobalisation, nurturing direct local ties and investing in social initiatives that benefit local communities has proven to be a sound business strategy for multinationals. In contrast, as our study reveals, companies that rely on joint ventures with local businesses to run their foreign operations expose themselves to a liability of insiderness. They tend to become complacent and miss early warning signs of hostile government actions – a mistake that could potentially force them to retreat from the world. This is an adaptation of an article published in MIT Sloan Management Review. |
17 Aug 2022, 02:00
| FROM Insead Admissions Blog: Online Feedback Requests are Effective, Even if Ignored |
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Most of us consult reviews and ratings religiously before buying anything online. However, despite our reliance on others’ reviews, we are highly unlikely to leave our own review of a product or service. Indeed, prior research shows that the vast majority of people are likely to ignore requests for feedback by clicking "no thanks" when asked to "rate their experience" online. If most users do not reply, what is the point in asking them for feedback? In our study on how feedback requests affect consumer behaviour, we found that users who refused to rate a website when prompted were more likely to upgrade from free to paid services than those who were not asked to provide feedback. Moreover, those who declined to give feedback were as likely to upgrade as those who took the time to leave a rating. This implies that sheer exposure to a feedback request influences consumer behaviour. The real influence of rating requests To understand how requests for feedback influence consumers, we conducted two field experiments. These were done in collaboration with a leading international website that employs a “freemium” business model offering a basic, free service and additional, premium features for a fee. Our first study focused on users in the US who had just started using the freemium website. We prompted 2,038 users in the treatment group to rate their experience (1–5 stars) and provide an optional comment, and compared their behaviour with the 2,064 users who were not asked to rate the website (control group). The rating request appeared as a pop-up window after a user in the treatment group showed initial interest in the website’s services. Users had the option to dismiss the request by clicking a “no thanks” button or the “x” button at the upper right corner of the pop-up window to close it. Eight days after exposure, we calculated the number of users who had converted from free to premium membership. The user conversion rate was 29.3 percent higher in the treatment group that was exposed to the request than in the control group. The result indicates that the overall effect of a rating request on conversion was positive. What about users who ignore rating requests? In the first study we did not distinguish between users who responded to the rating request and those who did not. It could be argued that the users who upgraded to the premium service intended to convert anyway, and the rating request simply expedited the process. To explore the behaviour of those who ignored the rating request, and to ensure that the effect of exposure did not just expedite the user’s decision, we extended the experiment over a longer period with a wider pool of participants. We translated the prompt into 46 languages and observed approximately 90,000 users from 190 countries for a period of 90 days. We took note of each user’s subscription (free or premium) at three intervals: 30, 60, and 90 days after the treatment group was first exposed to the rating request. At all three points in time, we observed that the conversion rate was significantly higher for those exposed to the request than those who were not exposed. Furthermore, the conversion rate of those who were exposed and chose not to respond (non-compliers in the treatment group) was significantly higher than the conversion rate of those who did not receive the rating request. The “No Thanks Effect” Next, we compared the conversion rate of those who rated the website and those who chose not to leave feedback. At all three points in time, users who did not respond were as likely to upgrade as those who rated the site. This alludes to the existence of what we call a “No Thanks Effect” – simply asking for input influences a person’s behaviour, even when they do not respond. Put differently, mere exposure to an online feedback request may be just as powerful as the act of reviewing. This is noteworthy considering most consumers ignore feedback requests. Our research aligns with theories of attitude accessibility, which suggest that merely exposing people to a question can activate their attitudes associated with it and affect behaviour, regardless of whether they respond. When an attitude is more accessible, less thinking is required to act in accordance with that attitude. Although we did not investigate why we see this willingness to upgrade among “No Thanks” users, we surmise that asking users for their input could have triggered them to reflect on their enjoyment or positive attitude towards the website. Indeed, 91.1 percent of users who did provide feedback rated the website positively (4–5 out of 5 stars), which affirmed the website’s reputation as a high-quality platform. Why companies mustn’t stop asking for feedback It is important that companies understand the significance of asking for feedback. Users can offer insights on how they are interacting with the services provided and help companies increase engagement and improve services. More importantly, feedback requests are a subtle way of signalling that a company cares. Even if the request is automated, consumers are more likely to believe that someone is listening and that the company wants to provide a positive experience. One of the main challenges for freemium models is getting users to commit and pay for the premium service, since most users are content using the free version. Companies that show they care about user experience and effectively prompt users to recall their positive perceptions have a greater chance of attracting loyal customers. |
23 Aug 2022, 00:00
| FROM Insead Admissions Blog: The Special Bond Behind Every Brilliant Idea |
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We have all experienced that sudden stroke of genius: A remarkable idea pops into our head and our whole body begins to tingle. J.K. Rowling describes the visceral reaction she had when she first came up with the idea for the story of Harry Potter: “I’d never had an idea that gave me such a physical response … it was that incredibly elated feeling you get when you’ve just met someone with whom you might eventually fall in love.” But just as we fall in love with an idea, so the doubt creeps in. We begin to question how it will pan out, what others will think and if it is even feasible. Eventually, we dismiss the idea and pursue a safer solution. Novel ideas depart from current practice and have the highest potential for creativity. Prior research suggests that we have an implicit bias against our novel ideas, and favour concrete ideas that offer more certainty. In the brainstorming process we are likely to rule out novel ideas that seem risky or hard to envision. But if nobody kept their initial, unique ideas alive, we would likely miss the next technological innovation or creative masterpiece. This led us to the question how people, like Rowling, can overcome this bias against novelty, and under what conditions they select their more novel ideas early in the creative process. In our recent research, forthcoming in Organization Behavior and Human Decision Processes, we explored whether and when people feel attached to their novel ideas. We found that the way we define ourselves can explain the extent to which we feel attached to, and select, our most novel ideas. Can people feel attached to abstract ideas? People form strong emotional connections with products and brands that affirm key elements in themselves. This connection to the self is an important aspect of our attachment to objects, along with affection (warm feelings akin to love) and passion (feeling captivated and excited). Just as people can get attached to tangible objects that represent them, they can feel attached to ideas that communicate who they are. We posit that people develop attachments to novel ideas that affirm how they view themselves. However, not all people construe themselves in the same way. Early research indicates that people define themselves either as an independent entity, or in terms of their connections with others (interdependent). Those with an independent self-construal see themselves as distinct and autonomous, compared to those who consider themselves to be more collectivistic. We found that the way people view themselves shapes the way they fall in love with different types of ideas. Those who define themselves more individually may become attached to more novel ideas that affirm their independent thinking and divergence. Conversely, those who define themselves by their social groups are less likely to feel strongly about ideas that deviate from existing norms or the status quo. Attachment to ideas that affirm the self We collected data on participants of three technology hackathons to test whether participants with high independent self-construal became more attached to their novel ideas than those who presented themselves as interdependent of others. In these competitions, entrepreneurs were invited to suggest ideas for a new venture and then develop them for a few days. We asked participants to describe their initial idea, evaluate its novelty and practicality, and report their self-construal and attachment to the idea. In line with our theory, we found that the more people construe themselves independently of others, the more attached they feel to their novel ideas. However, individuals can present themselves as either independent or interdependent depending on the situation they are in. To explore this further, we manipulated the way participants thought of themselves by getting them to reflect on how they were either unique or similar to others. We conducted three experiments with the fitness, travel and food industries and asked participants to come up with initial ideas for a new piece of equipment. We then primed participants to think of themselves as either an individual or part of a collective by asking a series of leading questions. Results suggest that when a person’s independent self is more salient, they feel attached to and select their more novel ideas for further development. These findings were robust across all three studies. If you love your idea, don’t let it go Managers and mentors can adopt this same technique to shape the way employees think about themselves in a certain situation. By creating an environment where people feel valued for their unique values and differences, managers can motivate employees to select and develop novel ideas. While prior studies indicate that collectivistic cultures are less capable of generating novel ideas, our findings suggest that the issue is not in coming up with ideas, but rather in the selection of those ideas. This is because people in such environments will choose to pursue socially acceptable ideas and not the riskier, novel ones. If a manager encourages employees to harness their individuality and reflect on what makes them distinct, this may lead to the pursuit of more novel ideas, even in a highly collectivistic context. Individuals can also overcome the tendency to devalue their own novel ideas by focusing on ideas they connect with, rather than ones that may have a better chance of success. When choosing from a pool of initial ideas, people should reflect on their values and experiences and what novelty they can bring to the world. Rowling persisted with her extraordinary idea despite being rejected by 12 different publishing houses. If she hadn’t felt an intense attachment to this idea, the universe of Harry Potter would never have existed. Similarly, if you’ve fallen in love with an idea and feel a strong connection to it, don’t give up on it too soon. Who knows what brilliance you might breed if you keep your idea alive. |
23 Aug 2022, 02:22
23 Aug 2022, 22:00
| FROM Insead Admissions Blog: What Religion Teaches Us About Great Leadership |
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Even if you are not religious, or believe that religion and business should not mix, understanding how religious and spiritual beliefs might influence and inform leadership and organisational values can only provide invaluable insight for work and business. Graduates of INSEAD’s Executive Master in Change (EMC), a degree programme that examines the basic drivers of human behaviour and the hidden dynamics of organisations, sought to do just that. They delved into Islam, Hinduism, Buddhism, Catholicism, and Judaism to uncover religious teachings and role models that have had the greatest impact or the greatest potential for impact on executives and organisations. The seven forces of good leaders The world of business today is marked by a constant war for talent as well as evolving role identities and responsibilities. Michaël Issac Moyal, founder of Nevooa at Station F in Paris, endeavoured to identify exemplary leadership values in the Jewish tradition of Kabbalah applicable to the contemporary context. He named seven psychological forces and seven leading figures in the Tora who embody these forces: Chesed – Kindness as embodied by Abraham Gevurah – Strength/Justice as embodied by Isaac Tiferet – Beauty/Truth/Harmony/Good Balance as embodied by Jacob Netsakh – Hope/Ambition/Endurance as embodied by Moses Hod – Humility/Glory/Acknowledgement/Gratitude as embodied by Aaron Yessod – Foundation/Stability/Connection as embodied by Joseph Malkhout – Greatness/Sovereignty as embodied by David Abraham, for example, devoted his life to taking care of others. Despite his moral contempt for Sodom and Gomorrah, he prayed to God for the first time in his life in a desperate attempt to save the two cities. He also demonstrated singular leadership by rejecting the worship of idols that was popular in his time, maintaining that there was only one God. Moyal created an interview protocol that recruiters could use to assess potential hires on each of the seven dimensions laid out in the Tora. The questions suss out the candidate in relationship to herself, to others as well as her psychological drivers and motivations. For example, Abrahamic leadership qualities were measured by the following questions: When did you feel that you were different (able to lead)? Is it possible to count on you in both good and bad times? Do you think that through kindness you receive more than you give? First, do no harm While leadership qualities are vested in several exceptional men in Judaism, for Muslims one man embodies the ideal leader: Prophet Mohammad. From the life of the founder of Islam one could distill the leadership traits of humanity, compassion, gentleness and kindness, as well as power and assertiveness, says Saud Ghassan Al-Sulaiman, CEO of IKEA Saudi Arabia. These qualities of ideal Islamic leadership are not so different from contemporary Western models of successful leadership, says Al-Sulaiman. He identified the traits through a comprehensive review of literature on Islamic leadership and interviews with Islamic scholars. One of the latter quoted a hadith, or saying, by the Prophet: “Verily, the worst shepherds are those who are harsh, so beware not to be one of them.” But of course a good “shepherd” goes far beyond doing no harm. To be a good leader in business means having a positive and smooth relationship with one’s employees or subordinates based on trust, says Al-Sulaiman. And, according to one scholar he interviewed, Islamic teaching encourages leaders and employees to develop their skills with charity, inspiration, wisdom and experience. Another scholar highlighted patience, social intelligence, inspiration, honesty, sincerity, and confidence as important Islamic leadership skills. Sustaining a company Regardless of their capabilities, a leader can’t sustain an organisation for long if it doesn’t have the right culture. Ian Leong, a doctor at Singapore’s Tan Tock Seng Hospital who is involved in building community healthcare networks in the city-state, analysed the governing values and practices of the Benedictine and Jesuit Orders of Catholicism to come up with a framework for organisational longevity. Founded in 529 AD, the Benedictine Order is the oldest monastic order in the Christian West. Benedictine monks live in monasteries, are governed by abbots, and take the vows of stability (commitment to the monastery one belongs to), obedience, conversion of manners (commitment to the monastic way of life), poverty and chastity. The Jesuit Order, established in 1540, is the largest male religious order in the Roman Catholic Church. Jesuits are required to make a special vow of obedience to the Pope and may be deployed to any ministry that the Pope sees fit. But they are also trained to be “self-leaders” and focus on self-development, a practice evident in the many schools they have founded around the world. In short, says Leong, the Benedictines focus on community development and stability while the Jesuits focus on self-development and flexibility. Both have been immensely successful. Leong argues that a modern company could combine the paradigms of the Benedictines and Jesuits to create a culture that ensures it stays thriving for years and even decades. Here’s how: Create a transformational organisation that practises what it believes are good values and try to propagate such values. For example, leaders may focus on promoting higher education and improving quality of life Develop a clear and detailed value system that is practised throughout the organisation, constantly emphasised and periodically reinterpreted as required Maintain cohesion through respect, positive communication, and forgiveness Conduct daily exercises of reflection to promote change Provide coaching to help employees process and interpret experiences and decisions Develop leaders who are humble, empathetic, resilient, ethical and aligned with the organisation’s values Lesson from a warrior-prince Even the most successful executives are sometimes plagued with crippling self-doubt due to circumstances beyond their control. Take it from Arjun (also known as Arjuna), the warrior-prince in Bhagavad Gita (or Song of the Lord), one of the most prominent texts in Hinduism. A demigod, Arjun is depicted as courageous, intelligent, humble and just. Yet when he finds himself on the brink of a battle against his evil cousins to reclaim land usurped from him and his brothers, Arjun suffers from cold feet. The thought of vanquishing his kinsmen, even for righteous reasons, is too much for him to bear. Krishna, the god who serves as Arjun’s charioteer, then engages the warrior in dialogue, helping him overcome his misgivings and triumph over injustice. The dialogue is a lesson in rising above anxiety and personal attachments for the sake of the collective good, according to Pankaj Bhatt, the former Chief Transformation Officer at Nucleus Software. Bhatt likens Krishna to a dispassionate coach who helps his client through mentalising, reality-testing and impulse control. Through his dialogue with Krishna, Arjun has better clarity of a leader’s role and duty, which is to take justified action even when it’s unpleasant and the results can’t be guaranteed. In order to do so, the leader should realise that nothing is permanent and strive to be less attached to emotions, ego and success. When it comes to leadership, religious traditions have more in common with modern-day practices – and with one another – than one might think. By revisiting long-standing religious and spiritual beliefs, as the EMC graduates did, one can glean insights into individual and collective forces that combine to bring about positive change at work. |
29 Aug 2022, 00:00
| FROM Insead Admissions Blog: Four Key Elements of Successful Stakeholder Communication |
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George Bernard Shaw famously quipped that “the single biggest problem in communications is the illusion that it has taken place.” This is often the case when it comes to interactions between firms and stakeholders. Organisations need to improve communication with key actors to foster trust, enhance cooperation and mitigate potential risks and conflicts. But what form does that communication take? And should it differ depending on the stakeholder profile? In a recent study published in the Journal of Business Ethics, Witold Henisz, Sinziana Dorobantu* and I shed light on the four factors that matter when dealing with stakeholders: timeliness, valence, richness and topicality. We observe how the speed of a firm's response (timeliness), the tone of that response (valence), the depth of engagement (richness), and the degree of responsiveness to the specific issues raised by the stakeholder (topicality) influence stakeholder reactions. Our results demonstrate support for greater promptness, openness of tone, depth of response and relevance in firm responses. However, the relative importance of these elements depends on the type of stakeholder as well as their status. Identifying and understanding stakeholders The cooperation of stakeholders is particularly critical in extractive industries such as gold mining. Conflict with stakeholders over environmental issues and social factors including labour practices, human rights and broader community impacts can lead to costly delays, regulatory proceedings and legal judgements. By focusing our research on the gold mining industry, we were able to narrow our sample to 19 companies listed on the Toronto Stock Exchange which own and operate three or fewer gold mines in emerging markets that have reached the stage of a feasibility study. Through examining media reports, we collected data from interactions between gold mining companies that operate 26 mines in 20 countries and 199 stakeholders with a political, social or economic stake in the mines. First, we analysed news articles, extracted from the Factiva database, that referenced the firm and the mine between 1993 and 2010. From this we extracted a comprehensive set of stakeholders including actors that are often overlooked in the business world, such as rebels in the Democratic Republic of Congo (DRC), the Romanian Orthodox Church, and even actress Vanessa Redgrave. Second, we coded sentences to extract source–verb–target triplets that specify who (source) did or said what (verb) to whom (target). We matched all the verbs onto a 20-point conflict-cooperation scale that ranges from −9 (extremely conflictual action or statement) to 0 (neutral statement of fact) to +10 (extremely cooperative action or statement). A cooperative action like “provide financial support” or “create partnership” was coded +7, while a conflictual action like “protest” or “bulldoze property” was coded as -7. We identified 6,068 instances of media-reported interactions that include three elements in sequence: a stakeholder's initial engagement with the firm (voicing an opinion or undertaking an action), the firm's response and the stakeholder's subsequent reaction. We examined the impact of the timing, valence, richness and topicality of a firm's response to a stakeholder's initial statement or action, and noted changes in the stakeholder’s subsequent reaction. Measuring conflict and cooperation To assess the importance of timeliness, we determined whether the firm responded a day, week or month after the stakeholder’s initial engagement. We measured the valence of the firm’s response as the difference between the stakeholder’s initial statement or action and the firm’s response. In other words, whether the firm responded with more cooperation or conflict. Next, we calculated the difference in the degree of richness (i.e. verbal communication vs. action) between the stakeholder’s initial engagement and the firm’s response. We devised a five-point scale to determine the level of a firm’s commitment of resources and time to the event. Finally, we used the Python tool EMPATH to analyse the disparity in the distribution of topics within the firm’s response as compared to the stakeholder engagement. This allowed us to gauge the topicality, or lack thereof, of the response. Our results demonstrate that timely, positive, rich and topical responses are associated with positive stakeholder reactions overall. For example, when the DRC government announced its intention to nationalise all gold mining assets in 1998, Banro American Resources responded within a day. The company sought an explanation, threatened to sue and condemned the government’s action in a rich and topical response that, while conflictual, did not escalate tensions or take concrete actions. The government responded the following day by clarifying the terms of the firm’s long-term mining concession and highlighting its strong relationship with the company’s leaders. It also admitted to a mistake in its previous announcement. Years later, the government announced that a state-owned firm would be given permits unexploited by Banro. In this case, the firm failed to respond for over a month and announced that it was protesting the redistribution of licenses and filing suit against the government. This constituted an escalation of tensions as well as a concrete action. The government’s reaction the following day was markedly more conflictual towards Banro. Different stakeholders appreciate different responses In a post hoc analysis, we replicated our results for different sub-samples of stakeholders. This included government actors (e.g., related ministries and agencies such as the Ministry of Mines), economic actors (e.g., other business and economic stakeholders such as other mining firms), and civil society stakeholders (e.g., protestors, communities and non-governmental organisations such as Greenpeace), as well as stakeholders of high vs. low status. By doing so, we were able to examine how stakeholders differ in sensitivity to different elements of firm responses. Our results indicate that government actors prioritise richer engagement and topicality over timeliness and valence. Economic actors, by contrast, are less concerned about richness and topicality, and are more sensitive to timeliness. For civil society stakeholders, timeliness and valence are most important, while richness is penalised. Low-status actors across sectors deprioritise timeliness and richness, while high-status actors demand performance in all four elements. Ultimately managers have to choose which elements to prioritise when dealing with stakeholders. For instance, responding quickly could come at the expense of a rich or topical response. We argue that the tradeoffs managers make across these elements should vary by stakeholder characteristics in order to unlock deeper communication and trust. Effective engagement influences stakeholders’ impressions and how a firm responds to one stakeholder affects another's opinion. This can result in repercussions throughout the stakeholder network that could potentially have adverse consequences, or benefits, for the firm. *Witold Henisz is the Deloitte & Touche Professor of Management at the Wharton School, University of Pennsylvania. Sinziana Dorobantu is an Associate Professor of Management and Organizations at New York University Stern School of Business. |
29 Aug 2022, 23:00
| FROM Insead Admissions Blog: Could Living Near the Office Make You a Better CEO? |
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Be it offering more career development opportunities, better work-life balance or bigger bonuses, companies are constantly experimenting with ways to boost employee morale and improve the work environment. Prior research shows that 84 percent of US executives believe their firms must strive to improve corporate culture, with 92 percent reckoning that achieving this would help increase company value. Regardless of the firm, CEOs often have an outsized influence in shaping corporate culture. This can’t be written down in a contract, nor can it be adopted by simply emulating successful organisations. Instead, intangible and cultural factors related to a CEO’s personal traits are likely to play a significant role. We set out to study how “neighbourhood CEOs” – which we define as CEOs with an affinity towards their local community – shape workplace conditions. What is the impact of having a CEO who lives closer to their office on the work environment, employee productivity and firm profitability? Location, location, location Focusing on Denmark, we investigated whether CEOs who display an affinity towards their neighbourhood – be it geographically in relation to where they live, or culturally in terms of an attachment to the area – foster a positive work environment. We based our study on information from multiple Danish administrative sources covering more than 70,000 firms between 2008 and 2015. In particular, “administrative remarks” from the Danish Working Environment Authority (WEA) were used as a proxy to assess work environment, since they typically pertain to workplace hazards such as safety issues and violations that can have adverse effects on employees. Complementing this were two comprehensive surveys covering employees’ perceptions of their work environment, as well as company leaders’ and employees’ thoughts about how their organisations handle workplace issues. We used the addresses of the firms’ headquarters and the employees’ residences, as well as the birthplaces and residences of the CEOs, to build a neighbourhood measure that captured the physical dimension of CEOs’ neighbourhoods. For a subset of these firms, we designed another neighbourhood measure to portray the extent to which CEOs feel culturally embedded in their local community. This was based on a survey of tens of thousands of CEOs, which revealed their personal values, including how the firm’s neighbourhood influenced the way they managed their companies. Physical proximity matters According to our findings, companies with CEOs who lived within 5km of the office received fewer administrative remarks for subpar workplace conditions from WEA. On the other hand, firms led by CEOs who lived farther away experienced a higher incidence of administrative remarks, indicating a poorer work environment. These observations were aligned with the survey results that speak to organisational culture. When CEOs lived within 5km of their company’s headquarters, employees felt significantly more involved in workplace decisions, and the work environment was perceived to be fairer, more inclusive and more accommodating of special needs. This could point to neighbourhood CEOs adopting management styles tilted towards employees’ welfare. The survey of CEOs also showed a link between a CEO’s level of engagement with their local community and the firm’s workplace conditions. Companies with CEOs who reported being more engaged with their neighbourhood received significantly fewer administrative remarks. Their firms suffered less from conflict, were more supportive of elderly workers and, in general, had employees that were more satisfied with the work conditions. Hence, the geographic proximity between firms and the current residences of their CEOs was shown to facilitate a better work environment, independent of whether or not the company was family firm. Although we theorised that CEOs who were born within 5km of their firm’s headquarters may exhibit a place attachment that positively influenced workplace conditions, the results from our research were insignificant. The power of social connections The ability of neighbourhood CEOs to foster better workplace culture can be attributed to the positive social interactions with their employees. There is a higher possibility of this occurring when CEOs and their employees live within the same area, as this creates the physical conditions necessary for these social interactions to occur. Probing this relationship further, our findings show that when a CEO’s and employees’ children attend the same school, the additional venue for social interactions can result in a better work environment. This is shown in a reduction in the probability of the firm receiving administrative remarks from WEA. Rather than dropping into the area only during office hours, neighbourhood CEOs who are intimately involved in the fabric of their community can develop stronger bonds with their employees. These CEOs are more likely to adopt a managerial style that favours workers and elevates the firm’s corporate culture. Happier employees, better profits Beyond improving workplace culture, neighbourhood CEOs can yield tangible results for a company’s bottom line. In fact, our research suggests that when a firm’s workplace culture is poorer, the workforce is 3.7 percent less productive. If we take employee productivity as a potential profit driver, it follows that firms with lower labour productivity may also be less profitable. While we acknowledge the challenges of giving a causal interpretation to these findings, our research suggests that a high-quality workplace may improve firm performance by making employees more productive. Thus, firms don’t necessarily have to make trade-offs between employees’ welfare and shareholder returns. Indeed, there is a tendency to view these as mutually exclusive, with investments in employees’ welfare often seen as entailing significant organisational or financial costs. However, investing in factors that lead to better corporate culture – such as initiatives to build stronger ties between CEOs and their employees – can in fact improve workplace productivity and lead to greater returns for the company. What does this mean for remote working? Since our study was done, the pandemic has redefined the “workplace” as we know it. Given the substantial rise of remote working, more CEOs are likely to live in separate neighbourhoods, or even in entirely different countries from their companies altogether. In such cases, firms should consider if the benefits of remote working outweigh the positive effects of CEOs and employees living in close proximity to the office, and to each other. Organisations that embrace remote or hybrid working would also stand to gain from finding ways to substitute for the in-person social interactions that can play a vital role in promoting corporate culture and boosting company value. |
31 Aug 2022, 20:00
| FROM Insead Admissions Blog: Biden’s Misguided Tax on Share Buybacks |
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A 1 percent tax on companies purchasing their own shares from the market was signed into law by US President Joe Biden last month, as part of a bill addressing climate change and healthcare. Initial market reaction to the tax, expected to raise US$74 billion over nine years, was muted, as was analysts’ predictions on the impact on corporate behaviour. Indeed, a 1 percent tax is too trivial to make firms change their payout policy. The new tax will not change corporate behaviour and will ultimately make matters worse. The levy on share buybacks was apparently introduced to secure Arizona Senator Kyrsten Sinema’s support. Sinema had insisted on dropping planned tax increases on manufacturers and the private equity industry -- the buyback tax is supposed to make up for the lost tax revenue. It may, however, just be the start of more to come, leading Democratic lawmaker Chuck Schumer indicated earlier this month. “I hate stock buybacks,” Schumer reportedly said. “Instead of investing in workers and in training and research and in equipment they don’t do a thing to make the company better and they artificially raise the stock price by just reducing the number of shares. They are despicable. I’d like to abolish them”. Schumer’s accusation that buybacks come at the expense of capital investment assumes that firms have no excess cash or debt capacity, or that they cannot issue equity later. Firms have excess cash when they have more money than they need to invest in good projects, namely projects with a positive net present value (NPV). What Schumer advocates is tantamount to making firms invest in bad projects that benefit other stakeholders at the expense of shareholders. Optimal capital allocation should mean that firms with excess cash pay it out to shareholders. These shareholders can then give the money to firms that need capital for positive NPV projects. Discouraging firms from paying out excess cash may therefore lead to overall lower investment, the opposite of the intention of the tax. Buybacks are not a manipulation scheme Moreover, why pick on buybacks and not criticise dividends? Companies are reluctant to cut dividends, so a dividend increase is a much longer and stronger commitment to pay out cash than a buyback. Repurchase authorisations are options to repurchase stock, not a firm commitment. If a company runs into a great project, it will simply not complete the buyback. Schumer’s argument that buybacks artificially increase stock prices because they reduce the number of shares ignores the fact that companies have to spend cash to buy back the shares. As long as the company buys the stock at fair value, nothing should happen to the stock price. Although earnings per share may increase if the return on assets is higher than the return on cash used to buy back stock, the earnings are now riskier and should therefore be discounted at a higher rate. The present value of earnings per share does not increase. Again, there is no reason why a buyback should automatically increase stock prices. Nevertheless, there is a lot of empirical evidence that buyback authorisation announcements indeed increase stock prices. The most obvious explanation is that investors see the buyback as a signal that the stock is undervalued and that the management is confident about the future. They may also see the fact that excess cash is paid out rather than wasted in negative NPV projects as an indication of commitment to shareholder value and hence, good corporate governance. But if buybacks were a manipulation scheme, stock prices should rise at the time of the announcement and fall back to the pre-announcement level, as the actual repurchase takes place at a higher price after the announcement. The empirical evidence shows just the opposite: Stock prices actually increase abnormally afterwards, to the extent that executives who sell stock after a buyback announcement are actually worse off than long-term investors. In short, the hatred of buybacks expressed by the leader of the Democratic Party can only be explained by unfamiliarity with finance theory and evidence, and/or by ideological aversion to maximising shareholder value. An earlier version of this article was published on 9 May 2022. |
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