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14 Feb 2023, 21:00
| FROM Insead Admissions Blog: Hard to Do, Easy to Criticise: How (Not) to Respond to a Humanitarian Crisis |
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The world continues to watch in horror as the aftermath of the Turkey-Syria earthquakes continues to unfold in the media. In the early days, reports of the “failed humanitarian response” to the disaster were already circulating, with journalists on the ground reporting that “aid has not yet arrived” to remote areas. Such reports elicited emotional reactions from viewers, some outraged by the lack of immediate humanitarian response in delivering aid to huge populations in distress. But this is no ordinary disaster, and the reality is that “immediate” does not come easy for humanitarian organisations. The sheer magnitude of the earthquakes (measuring 7.7 and 7.6 on the Richter scale), combined with the extremely shallow epicentres, led to the deadliest natural disaster in the region in modern times. The first quake’s impact is estimated to be equivalent to 130 atomic bombs. The affected area is over 135,000 km2 (about twice the size of Belgium and the Netherlands combined) and is a region experiencing political tensions (both within and between countries). The area was home to more than 18 million people. The affected population within Turkish territory alone is larger than the population of entire countries such as Austria, Belgium, Greece, Portugal, Serbia, Sweden and Switzerland. Probabilistically, the series of disasters may well be what is known as a “black swan event” – an extreme and unexpected event with catastrophic consequences. Even in the rosiest of scenarios, where rescue teams were on site and ready to be deployed and all the required aid prepared and ready to be distributed by a fleet on standby, it would take days or weeks to conduct the rescue mission and deliver aid across such an exceptionally large area. The reality of humanitarian operations In reality, none of these rosy, perfect conditions for humanitarian operations exist – and they seldom do. Instead, the reality that humanitarian workers meet on the ground are destroyed airports, roads and bridges, while congestion and material convergence – a common post-disaster phenomenon where donated items choke critical transport networks – often plague the disaster area. In the first week after a large-scale earthquake, the main tasks of humanitarian teams are to rescue survivors and treat the wounded, and then respond as quickly as possible to their needs for food, medicine, security and shelter in the ensuing months. At a high level, rescue and response efforts firstly involve needs assessment to determine what, where and how much is needed. These may include rescue teams, relief items such as medical kits, food and tents, ground and air fleet for transportation and rescue work, equipment and medical centres. In spite of their best efforts, needs assessment right after an earthquake may be far from accurate. Accuracy can only be improved as teams are deployed in the field to evaluate the situation in different areas. But this takes time. Next, required assets and resources need to be matched with what’s available to identify gaps. In the immediate period following the disaster, fleet and equipment are usually lacking as it takes time to deploy them to the areas in most need. There tends to be a shortage of manpower for search and rescue efforts to recover people from under the rubble, operate vehicles, distribute aid and help the injured. Moreover, detailed coordination is required to ensure both manpower and equipment are available at the same time. As an obvious example, having volunteer doctors without medical kits is not helpful. Even if resources or equipment were available prior to the disaster, they may not be located where they are most needed, given the unpredictability of the earthquake and the level of destruction. As expected, access is often limited in areas ravaged by natural disasters, and it can be difficult for help to reach people in need. It may simply be very hard or near-impossible to get to the hardest-hit areas. In fact, the airport in Hatay – one of the hardest-hit cities – was not operational, preventing direct airfreight into the area. Two other major airports were also closed to civil flights. Humanitarian workers on the ground need to conduct field assessments to determine which transport routes can still be used, whether debris removal is required to clear blocked roads and if deployment of air transport is needed. Compounding challenges As expected, almost all affected cities experienced water, power, gas and fuel shortages due to infrastructural damage or preventative measures. This doesn’t only mean a lack of access to basic necessities but can lead to a health and sanitation crisis if not properly managed. Other than physical access, communication channels were interrupted. Coordination within and between different areas requires managing various rescue teams, humanitarian organisations, resources and assets. This is already challenging in normal situations but becomes extremely difficult when communication is disrupted. Importantly, international humanitarian operations can only start with the permission and coordination from the government, but bureaucracy can create a bottleneck and delay operations. Governments may also force rescue and relief operations to be centralised for reasons ranging from public relations to better coordination, which may slow down or even prevent international humanitarian aid from reaching the affected areas. The fact that the affected areas have weakened and at times non-functioning institutions makes coordination even more challenging for humanitarian operations. Humanitarian principles can be difficult to maintain in large disasters that span vast regions and different countries. When military forces are one of the major actors, bureaucracy in deployment is beyond the control of humanitarian organisations. In fact, humanitarian workers tread a fine line to stay within the bounds and still deliver the much-needed aid. In this case when the affected area includes the politically sensitive border between Turkey and Syria, it is even more crucial – but also more difficult – to maintain neutrality and impartiality. Finally, over-zealous sympathisers can create a “second disaster” when they donate unsolicited items that significantly increase logistical challenges. The huge influx of in-kind donations – which rarely match actual needs, practical packaging or forms – can lead to congestion and material convergence, especially when access is already limited. Monetary aid is preferred, although an immediate translation of funds to aid is equally unrealistic. It takes time to raise monetary donations and to convert funds to aid. The sensitive role of the media The media plays an important role in raising global awareness of the scale of any disaster, which clearly can translate to much-needed aid and donations. Yet the media’s role is a delicate one given their power to influence and incredible reach. Reporters have privileged access to disaster sites, but the taxis and helicopters they used to get there are scarce resources that could be deployed to deliver aid or for assessing humanitarian needs. Therefore this “privilege” should ideally be used to do good – or at least to minimise harm. In the short-term, not doing harm could simply mean limiting the use of scarce transport and ideally, they should only access disaster sites if it does not burden the work of humanitarian groups. In the long-term, because donor sensitivity is at the peak right after a disaster, negative press that points fingers at rescue and recovery efforts can pare down donations needed for the massive reconstruction efforts required. Instead, it is important to paint an accurate picture of the harsh realities on the ground: that it takes time to mobilise the huge logistical machine necessary to bring in international support and start a full-blown response operation. In the meantime, a lot of help must come from local communities and organisations. Some local journalists have even gone above and beyond their responsibility to access people in need and direct rescue teams towards them. In this way, media acts as the voice of the people when they needed but could not get aid. Some people were able to locate their relatives through the local reporters thanks to the incredible reach of broadcasts. Hope and support can go together The magnitude of the relief operations, like the magnitude of the earthquakes, is colossal. The resulting death toll is expected to top 50,000 but may even exceed 180,000 (the latter would put this earthquake among the deadliest in a century). The people of Turkey and Syria – and the world that has been watching the catastrophe in disbelief – are hoping for miracles. But what’s also needed is recognition of the realities – the complexities of relief operations at such a scale. There is of course no fault in hoping but, at the same time, it is not fair to expect miracles from humanitarian workers who risk their lives, sometimes working 24 hours a day in extremely difficult and overwhelming circumstances. Considering the scale of the disaster and the challenging realities on the ground, they deserve our understanding and respect, if not our support. Driven by purpose instead of monetary rewards, they must believe in creating miracles too. |
19 Feb 2023, 21:00
| FROM Insead Admissions Blog: Demystifying China’s Internet Giants |
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Love them or loathe them, Chinese tech giants such as ByteDance, Alibaba and Tencent have become global household names in e-commerce, digital payments, social media and gaming in a few short years. Relatively little is known about these firms, but a new book may just change that. Written by INSEAD Professor of Strategy Guoli Chen and Jianggan Li, founder and chief executive of venture capital firm Momentum Works, Seeing the Unseen: Behind Chinese Tech Giants' Global Venturing shines a light on the success – and failure – of the likes of TikTok, Shein and WeChat beyond their home market of China. In this podcast, Chen dissects the phenomenon using what he terms the POP-Leadership framework. Short for people, organisation, product and leadership, POP-Leadership can help companies think systematically about their strategy for overseas expansion. Chen, who carried out extensive interviews with Chinese executives and investors for his book, gives us a behind-the-scenes look at how TikTok became the world’s leading social media app, how Xiaomi established an early foothold in India and how e-commerce upstart Shopee has held its own against Alibaba-backed Lazada in South-east Asia. |
20 Feb 2023, 19:00
| FROM Insead Admissions Blog: How Organisation Design Can Rescue the SDGs |
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Time is running out for the United Nations’ Sustainable Development Goals (SDGs). Adopted by all UN member states in 2015, the seventeen SDGs seek to eradicate poverty, inequality and counter climate change by 2030. Officially called the “2030 Agenda for Sustainable Development,” UN Secretary-General Ban-Ki moon heralded it be a "blueprint for a better future” that would “transform the world” through “renewed global partnership.” But we’re not on track. Halfway to 2030, we’re behind on almost every goal. The pandemic, the “existential threat of climate change” and a record-number of violent conflicts puts our world in “grave danger,” warns the UN’s Sustainable Development Goals Report 2022. Covid-19 wiped out more than four years of progress on poverty eradication, one quarter of the world’s population lives in countries affected by conflict (the highest number since World War II) and extreme weather impacts billions. Meanwhile, global greenhouse emissions are expected to increase this decade by almost 14 percent. These crises “threaten the very survival of humanity,” warns Liu Zhenmin, Under-Secretary-General for Economic and Social Affairs. The SDGs are a path towards coping with these existential threats – or "grand challenges" as academics now call them, but they cannot be pursued successfully by any one actor. The SDGs without exception require collaboration between a variety of private and public actors across the world, ranging from individuals to states (in fact, SDG 17, which focuses on global partnerships, is itself an acknowledgment of this idea). Getting many actors with diverging perspectives and incentives to collaborate effectively towards a common goal is a difficult problem. It is also the problem that defines the field of organisation design. The organisational challenges behind the SDGs Over the last few years, I’ve worked with several colleagues in academia as well as the UN to explore how organisational design thinking can help achieve the SDGs – through a campaign called "Organizing for Good,” organised by the United Nations Refugee Agency (UNHCR) and the Organizational Design Community (ODC) and also in a forthcoming paper on private-public collaborations. My approach to organisation design classifies any multi-actor system with a goal to be an organisation, including project teams, departments, divisions, entire companies, communities and strategic alliances. What’s common to all these systems is that to exist, they must solve the same problems: division of labour (what needs to be done, who does what) and integration of effort (how to motivate and coordinate actors). The solutions could vary, but the core problems are universal. From this perspective, the complex web of private-public partnerships needed to make real progress on any SDG is a "meta-organisation" – an organisation whose members are themselves distinct organisations. They come with their own special additional challenge – there is no formal structure of authority within them that empowers one actor to direct others’ behaviour. But by studying business ecosystems, e-commerce platforms, mega-projects and open-source software development communities (all meta-organisations), researchers have discovered that effective meta-organisations succeed when some actors take on the role of “architects” or “orchestrators” of the system. The role is akin to the organiser of a party; even if you can’t order the guests to dance this way or eat that (without acquiring a reputation for being a weird host), you can choose the food, the venue, the music and the guest list. It’s a delicate balance between orchestration and participation: get too heavy-handed and nobody will show up (or come back for the next party), do nothing and nothing (interesting) will happen. Successful architects of meta-organisations, like good party organisers, are knowledgeable about what people want and like, what they know how to do and who gets along well with whom. They also must take initiative. My co-author Vivianna Fang He and I refer to this as the "hidden hand" approach to design, contrasting it with the “invisible hand” of the market and the “visible hand” of authority. In my research with Gerry George, Thomas Fewer, Anita McGahan and Sergio Lazzarini, we conducted an extensive review of what we know about public-private partnerships that have attempted to tackle the various grand challenges that the SDGs aim to address. We concluded three things: Meta-organisations that tackle grand challenges need to be capable of iterative learning by doing as one does not typically start with a clear understanding of the complex problem at hand. This means that in some sense they resemble a giant agile development project. Given how varied in power and resources the members are, these meta-organisations need to find robust processes for participative self-design – since there are no single powerful central actors. Design decisions about division of labour and integration of effort such as who does what and who gets what, must be taken through a process of consensus, or at least consultation. The need for skillful orchestration – aligning all efforts towards a common goal without necessarily exercising power – is ideally met by non-private actors such as governments or UN agencies when it comes to pursuing SDG’s. They are naturally suited to take on this role as they often have the reputation, the local knowledge and legitimacy to influence others, even when they lack sufficient power. None of this is easy to implement and merely recognising these organisational design challenges will not magically help us meet the SDGs. But it shows us the next steps quite clearly, in my view. Build orchestration capabilities to meet the SDGs The main advantage to thinking about all organisations (including meta-organisations) as having the same universal problems, is that we can learn from solutions in one setting and apply them to another, with appropriate refinements. In organisational design, we know of a large bag of tricks that orchestrators in a variety of meta-organisations pursue; I believe that these are starting points for pursuing SDGs too. For instance, as any good party host knows, the guest list is the single most important decision. Who you bring into a system affects how well it functions – skills at member selection matter in meta-organisations. The problem with a number of private-public coalitions is that many partners are selected based on technical efficiency or lowest bid alone (to avoid corruption), but without regard to their value alignment or ability to engage in collective iterated adaptation. How one sets up the division of labour also matters enormously in meta-organisations. Whether and how we compartmentalise work will affect the possibility of future conflicts and the ability to adapt rapidly to new information. These are old problems in other domains (such as computer hardware design or even military operations) and there is a wealth of possible solutions to try out in the context of the grand challenges. How to motivate members of a meta-organisation when you can’t simply pay them is another old problem in other domains. In online platforms, reputation is the driving force behind active participation. No one wants to look bad online; a “bad” business review or a viral tweet can make or break an organisaton’s reputation. What if we leveraged reputation to incentivise better SDG collaboration? If the UN or a reputable third-party established a five-star rating system that evaluated how private actors contributed to the SDGs, then actors may be motivated to improve. I want to emphasise that these are starting points, not final solutions. Think of them as the candidate molecules in a drug discovery process which must nonetheless go through the rigours of clinical trials before being adopted. Organisational design thinking can offer a large pool of such candidate solutions to tackle SDGs. To rescue the SDGs, start with Goal 17 In last year’s annual UN report, UN Secretary-General António Guterres declared: “We need an urgent rescue effort for the SDGs”. It’s a tall order, but the sobering reality. Even if it’s unlikely that we can achieve any of the SDGs by 2030, we must act now to achieve them at all, even if takes longer. My suggestion is that we start with SDG 17 – the final goal should be our first: "Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development". Organisation designers know a thing or two about this. Let us make that count. |
26 Feb 2023, 23:00
| FROM Insead Admissions Blog: The World Economy in 2023: A Recession Year? |
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We entered 2023 with increasing pessimism about a slowdown in growth. Almost without exception, all forecasts suggest that a global recession will take place. From a historical point of view, this feels like the most announced recession ever. This negative consensus is the outcome of a diverse set of trends that are coming together: The slowdown in Chinese growth through a combination of zero-Covid policies and set of structural weaknesses in its economy The effects of one of the largest energy-price shocks the world has ever seen The instability caused by geopolitical tensions (including the invasion of Ukraine by Russia and increasing tensions between China and the United States) The war on inflation that most central banks are fighting with higher interest rates The failure of technology to provide a sustainable basis for productivity growth In this session, INSEAD Professor of Economics Antonio Fatás sized up the state of the world economy and elaborated on how these trends will shape our future in 2023 and beyond. |
28 Feb 2023, 19:00
| FROM Insead Admissions Blog: Five Ways to Optimise Your Subscription Model |
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Amid challenging market conditions, retailers are trying various ways to maintain and increase their competitive advantage in a crowded post-pandemic market. Many are jumping on the subscription bandwagon to ward off competition and spur growth by aggressively attracting and retaining customers. This often takes the form of paid memberships that offer perks such as complimentary shipping and attractive discounts. According to UBS, the global subscription market was worth a total of US$650 billion in 2020 and is predicted to reach US$1.5 trillion by 2025. Zuora’s Subscription Economy Index indicates that over the past decade, subscription-based businesses have grown 4.6 times faster than the S&P 500, which represents more traditional, product-based firms. More importantly, the subscription economy has demonstrated resilience in times of crisis, with 80 percent of subscription businesses continuing to grow during the pandemic. The Subscribed Institute profiled 15 membership subscription services from 13 grocery retailers in a white paper, with the aim of uncovering similarities between their offerings. These retailers include: Walmart (United States), Tesco (United Kingdom), Coles (Australia), Monoprix (France) and Fairprice (Singapore). Common threads Overall, among the 15 subscription programmes, common benefits include discounts and complimentary delivery, which are easy to understand and provide tangible, fast value for money. Because these subscription models are designed to reduce consumers' barrier to purchase, retailers are able to achieve deep market penetration and secure their existing customer base. First, 13 out of 15 services offer either free or fully discounted delivery as part of the membership package, though often only applicable with a minimum purchase amount. As expected, discounts are key features, with 11 out of 15 programmes dishing out offers of up to 15 percent, making this a core aspect of their value proposition. The same number of subscription services provide free trials – a tried-and-tested method that eases acquisition and lowers the effort required by customers to sign up for the service. This tactic employed by Amazon Prime is also widespread in digital consumer subscriptions including Spotify and Netflix. In fact, it is increasingly expected by consumers. When it comes to subscription pricing, nine of the programmes’ monthly prices are within comparable ranges, varying between US$10.70 and US$12.99 per month. Nine service providers offer annual subscription rates that are more attractive than monthly rates in exchange for extended commitment and upfront payment. This practice is commonly employed in consumer and low-touch B2B subscription businesses from streaming offerings to productivity suites. Standing out from the crowd But building a membership base by merely focusing on complimentary delivery and discounts seems like a risky bet. As more companies turn to paid memberships, if they all embrace similar service features, they are at risk of being seen by shoppers as tomorrow’s commodities. One possible route is to increase discounts and reduce subscription fees further. However, such moves risk triggering aggressive price wars. Moreover, because price cuts can be easily and quickly replicated, this may lead to a race to the bottom. A more sustainable approach would be for retailers to offer more value-added services and focus squarely on creating and delivering outstanding customer experiences. Against this backdrop, there are five categories of differentiating services that retailers can incorporate into their subscription models. In-store shopping experiences Retailers can maximise the value of brick-and-mortar spaces with enhanced in-store shopping experiences for subscribers such as self-scanning checkouts, waiving bag fees and extended opening hours. More advanced features in the future could include personal shoppers, shopping companions for elderly customers, dedicated priority queues and access to subscribers-only “safety inventories” of items that often run out (such as bread, toilet paper and household cleaning products). Out-of-store shopping perks Many companies are also focused on improving online purchase journeys. For instance, Tesco in the UK gives subscribers priority access to prime-time delivery slots, such as during Christmas and Easter, while Walmart in the US delivers groceries straight into a subscriber’s fridge or garage. Looking ahead, retailers can explore even more personalised services such as members-only live-streaming channels and the option for customers to sync their travel schedules so retailers can proactively suggest deliveries right before return dates. Lifestyle benefits While core offerings are key, retailers can also create special experiences that cater to subscribers’ interests. This can go a long way towards enhancing brand knowledge, building positive associations with the brand and making subscribers feel connected and valued. For instance, Hy-vee, a grocer in the US, gives Plus members free treats including chocolate strawberries or pizzas to delight and “spoil” them, while Walmart throws in six months of free Spotify Premium with a Plus membership. The sky is truly the limit when it comes to perks: think subscribers-only experiences, invitations to brand-sponsored events, discovery boxes tailored to a customer’s preferences and the option for subscribers to donate a percentage of the membership fee to their charity of choice. Benefits beyond free loyalty programmes Retailers can also enhance loyalty programme perks to make customers feel unique within a retailer’s ecosystem given their specific status. Singaporean grocer FairPrice and Australian grocers Coles and Woolworths award double loyalty points to paid subscribers. Other retailers in our study have subscribers-exclusive helplines and allow members to share the subscription with another household member, who gets to enjoy the same benefits. Besides providing priority access to new, exclusive or limited-edition products and simpler or extended returns, forward-looking retailers can even give members digital items or product twins for metaverses, thereby tapping into the fast-growing virtual space. Financial services Finally, given their typical negative working-capital requirements profile, many retailers have made financial services a key pillar of their strategy, which can act as a value-creation lever. Under such services, members can access branded credit cards with zero interest on purchases – effectively a buy now, pay later mechanism – or get cash back on their shopping. Throwing in free fractions of shares or NFTs from subscribers’ favourite brands when they buy a product could also work. New growth avenues Beyond membership programmes, retailers can explore other service-related strategies that are aligned with their brand DNA to help customers get more bang for their buck. The white paper discusses three further growth avenues. First, retailers and consumer-packaged goods (CPG) companies can grow by offering recurring subscription boxes, which provide customers with convenience and a better deal or curated experiences to surprise and delight them. This service has historically been dominated by digital direct-to-consumer (D2C) brands such as HelloFresh for meal-kit delivery, Dollar Shave Club for shaving and personal grooming services and Ipsy for beauty products. A handful of retailers have embraced this, including Amazon’s Subscribe & Save and Schedule & Save by Albertsons. Second, complementary offerings on top of a purchased item – such as insurance and repair services for homewares, e-learning tutorials for musical instruments or cybersecurity software for laptops – are another option worth considering. The underlying rationale of such a strategy is that buying a product is just the beginning of an end-to-end consumer journey, and reaching out to consumers via such services can enhance their attractiveness and deepen relationships. Consider the example of guitar manufacturer Fender. The company launched Fender Play, a subscription-based online guitar-learning platform, and acquired as many as 1 million subscribers during the pandemic. A third approach involves repackaging a physical product into a recurring subscription, which is particularly applicable to retailers that sell more expensive durable goods such as appliances, high-tech products or vehicles. This tactic can open entirely new ways of lead generation and transform marketing and sales. For example, think of “extended try before you buy” models in industries such as automotive (Porsche Drive or Care by Volvo), watchmaking (Breitling Select) or electrical appliances (Philips Lumea). This approach resonates with changing consumption habits. According to a study featured in the white paper, 70 percent of consumers want to pay for products or services based on actual usage instead of forking out a flat fee. Besides giving customers greater flexibility, this also integrates sustainability and a circular economy dimension into a purchase. Unlocking potential The options we have outlined aren’t mutually exclusive and can be mixed and matched to offer a holistic suite of products and services. Combining parts or all of them will help retailers and CPG companies grow not only in terms of sales transactions, but also develop their offerings into a rich, value-laden, end-to-end product-as-a-service experience. Beyond merely focusing on free delivery and exclusive deals, retailers can strengthen their programmes, grow their market share and protect their bottom line through the strategies highlighted above. The market sends clear signals that consumers value subscription programmes and are willing to pay for meaningful proposals. Established retailers – some having invested billions in digital transformation – are well-positioned and equipped to go beyond paid memberships and build meaningful, customer-centric subscription models to generate new revenue streams. The white paper can be accessed here. The authors would like to thank Alicia Tostmann for additional research on the white paper. |
01 Mar 2023, 19:00
| FROM Insead Admissions Blog: What Machine Learning Reveals About Gender Stereotypes |
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Although we have a long way to go to achieving gender parity in the workplace, the past few years have shown some encouraging signs of progress. According to the World Economic Forum, women’s share of senior and leadership roles globally has steadily increased between 2017 and 2022. However, the reality is that women continue to be underrepresented in leadership positions, and less than 9 percent of Fortune 500 CEOs are women. This is driven at least partly by gender stereotypes that associate men, but not women, with leadership-focused, agentic traits – such as being determined, decisive and assertive – which creates the expectation that men will be more likely to succeed as leaders. Given that these stereotypes are expressed in language, can we learn something about organisations’ attitudes towards women from how they speak? In a recent Tech Talk X organised by digitalinsead, INSEAD Assistant Professor of Decision Sciences Asher Lawson unpacked how machine learning offers insights into the association between gender and leadership qualities and how it varies across firms. He showed that appointing women to the top tiers of management can help mitigate deep-rooted stereotypes in a way that is enduring and can precipitate the future hiring of women leaders. Harnessing machine learning “Gender stereotypes have severe consequences for women, such as the devaluation of their performance at work, denial of credit for their success and their broader exclusion in the workplace,” Lawson said. “Not being associated with [positive and agentic] leadership traits affects how much women are able to succeed and thrive in such roles.” How can we leverage machine learning to address this? Lawson highlighted that firms produce copious amounts of publicly available text data that can be examined to get a better understanding of how these companies approach and talk about gender stereotypes. Machine-learning models can be used to analyse this text – in particular, sophisticated word-vector models that measure the similarities in meaning between different concepts. A company-specific word-vector model is trained on the text data obtained from that organisation. Target words are then represented in a high-dimensional vector space that maps out the relationships between them. Through this, the model can reveal how different words are associated with each other (for instance, when and how “she” or “her” is used alongside agentic words) and how these concepts are related within the context of language used by that organisation. This gives us a better understanding of the gender stereotypes and attitudes espoused by a firm. Word-vector models in action Lawson then described a study about gender stereotypes he conducted with Ashley Martin from Stanford Graduate School of Business, Imrul Huda from University of Chicago and Sandra Matz from Colombia Business School. They obtained data from S&P 500 companies between 2009 and 2018, consisting of around 43,000 documents and over 1 billion words of text garnered from SEC filings, annual reports, proxy shareholder meeting statements and transcripts of investor calls. For each of these firms, the researchers used the aforementioned word-vector model process to obtain a measure of how closely women were associated with agentic leadership traits, and the shifts in gender stereotypes that arose when women were elevated to key leadership positions within the organisations. Among the organisations they examined were beauty companies Ulta Beauty and L Brands. The firms initially showed similar results in terms of how closely women were associated with agentic leadership traits. But that all changed in July 2013 when Ulta Beauty appointed Mary Dillon as their CEO. “What we observe in the period post-hire is that the association between women and leadership traits increased massively for Ulta Beauty, but not so much for L Brands,” Lawson said. This trend remained robust across the researchers’ wider data set. Over 70 percent of the firms they studied that hired women as CEOs saw an increase in the association between women and leadership traits, but this only applied to less than 30 percent of the organisations that did not hire women as CEOs. Unlike what one might think, a closer association between women and positive leadership traits did not come at the expense of women being viewed as likeable as far as how they were described by their own companies. “There doesn’t seem to be a penalty for women ascending to these leadership positions in terms of how they are perceived,” Lawson said, while noting that the study did not encompass how women leaders are represented in the media, which is a different story altogether. The research by Lawson and his colleagues also showed that increasing the proportion of women on a company’s board of directors can result in the use of more progressive language surrounding women and lead to changes in gender stereotypes that precipitate the appointment of more women to the board. Implications for organisations Lawson then ran through some important takeaways for firms, including how bringing more women on board can lead to a virtuous cycle by predicting the hiring of even more women in the future. “This is in many ways the most exciting result. If we can increase female representation in leadership roles, this can change the gender stereotypes expressed in language that lead to the devaluation of women’s performance and impede their careers,” Lawson said. “You see how such a thing can snowball into fighting back against this massive imbalance we see in female representation.” There are also implications for firms regarding the data they produce – which, as shown through the study, can be analysed using machine learning to reveal key information about the gender attitudes within these companies. This means that potential investors, partners or employees could be able to detect if an organisation has gender attitudes that are unconducive to women’s success, which could quickly become a competitive disadvantage. “[With this increased] transparency and accountability, companies [will be compelled to] look internally and try harder to change those attitudes and stamp out pernicious gender stereotypes,” Lawson said. “The other possibility is that firms might need to strive to control the latent attitudes they are communicating in this text data.” Responding to a question, Lawson suggested that word-vector models could also be used by firms for their internal DEI efforts. For instance, by gathering and analysing anonymous email corpus data, they could evaluate the language used to describe women and other minorities within their company. While the model cannot make the changes on its own, it can provide fine-grained information to target specific issues an organisation might have and that can be used to inform training sessions or interventions and monitor their effects. |
06 Mar 2023, 20:00
| FROM Insead Admissions Blog: Will ESG Investing Solve Our Pressing Problems? |
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ESG investing is arguably one of the hottest trends in the financial markets in the past years, with funds purportedly aligned with environmental, social and governance goals hitting US$3 trillion by the end of 2021. The strong demand for ESG-related funds in the capital markets is driven by the twin virtues often promised for ESG investing: These funds are expected to deliver not only positive ESG impact as their labels suggest, but also superior financial returns. Doing well and doing good at the same time is a strong value proposition that makes investors feel great. The empirical question is whether ESG or sustainable investing delivers both the desired financial and environmental results in practice. An increasing body of research casts doubt on these claims. The principal-agent problem in ESG investing Fundamentally, there is a principal-agent problem in ESG investing. This is because investors – be it institutional or retail – delegate investment decisions to portfolio managers who are supposed to be superior not only in picking stocks that will outperform the market but also at assessing firms’ ESG credentials. Yet, anyone familiar with modern portfolio theory would know that picking stocks that consistently outperform the market is fiendishly difficult. On top of this, the requirement to (credibly) assess ESG credentials compounds the difficulty of achieving the twin goals. If investors are simply attracted to the ESG label but have no real ability or time to make sense of the myriad of ratings, reports and principles (which is often the case), investment professionals have the opportunity to package and sell an attractive product – ESG funds – which is more lucrative than conventional funds due to the higher fee structure. Moreover, the lack of clear regulatory guidelines in assessing which funds qualify as an “ESG fund” or a “sustainable fund” means that these funds are often simply self-labelled. This means that in the context of ESG investing, a host of intermediaries (agents) act as gatekeepers who wield significant influence on the flow of funds: Fund managers who declare to be ESG-focused curate companies in their ESG-oriented portfolios; and rating agencies and consultants label companies and funds deemed ESG-aligned (or not). Although there is no standard measure of ESG in today’s capital markets, Wall Street and the likes have the power to dictate ESG standards and norms. Fund-flow patterns clearly indicate that investors prefer “sustainable” funds despite their higher fee structures. A study shows that mutual funds categorised as “high sustainability” receive net inflows of more than US$24 billion, while those categorised as “low sustainability” experience net outflows of more than US$12 billion. Time- and attention-strapped investors depend on ESG labels and reports. However, self-labelled ESG funds sometimes hold portfolio firms with worse compliance track records for labour and environmental laws than those held by non-ESG funds, according to a study in the United States from 2010 to 2018. Portfolio firms held by ESG funds receive higher ESG scores on average not because of better compliance records but simply higher volume of ESG disclosure. Another study on institutional investors explored if signatories to the Principles for Responsible Investment (PRI) – a United Nations-supported initiative to develop a more sustainable global financial system – have better ESG scores at the portfolio level. The authors found that signatories in the US do not score better compared to non-signatories, which points to virtue-signalling instead of genuine interest to do the right thing. The conclusion from these recent studies is that while ESG investing has certainly been a commercial success for the fund management industry – or the agent – it has often not delivered on the twin promises of “doing well and doing good” made to the investing principals. Needless to say, it has done little to effect real desired change – that businesses would tread more lightly on the planet. What can businesses do? Ultimately, it is the businesses in the real economy, not investment vehicles in the financial market, that have a real impact on ESG and the sustainability of our planet. To create long-term value for business and society, businesses cannot afford to take an agent approach to ESG and sustainability issues. Instead, they must take a principal’s – or owner’s – approach. In other words, they need to exercise leadership based on sound economic and financial principles while integrating ESG considerations. Examples abound of good business decisions and good ESG practices going hand in hand. For example, in an article in The Wall Street Journal, the CEO of IKEA shared the company’s relentless focus on reducing packaging of its furniture. As a result of the redesign of just one piece of furniture, a three-seat sofa bed, IKEA was able to reduce its fleet by 7,600 trucks globally, streamline its supply chain and save costs. Clearly, such changes not only improved business performance, but also reduced IKEA’s carbon footprint. In his book, David Cote, the former CEO of Honeywell, explained how empowering the right ideas from bottom up can be a win-win for both profits and the environment. Solutions that emerged from the factory floor led to reductions in chemical waste, energy and water, and resulted in considerable savings for Honeywell. Under his leadership, Honeywell significantly outperformed General Electric, its close competitor. In a new INSEAD study, my colleagues and I explored if firms that do well on the ESG front exhibit good fundamental (operational) and market performance. We found that better ESG performance goes hand in hand with better operational performance. This increased return on invested capital not only directly translates into improved business performance, but also more productive efficiency – getting more goods and services out of less capital input. This is how businesses tread more lightly on our planet. Interestingly, the relationship is not causal – that is, we do not argue that a firm’s proclamation of its ESG goals leads to better returns on invested capital. Rather, firms’ performance along both the ESG and the financial dimensions results from the same underlying factor: superior leadership that drives value creation. Therefore, the integration of ESG into business operations should be seen as simply part of good business management. It could start with setting the right KPIs and the CEO’s readiness to empower every employee to contribute sensible ideas. It could be the COO working with the CFO to identity possible tangible improvements. With the relevant insights, leaders can refocus on the nuts and bolts of good business management and lead by encouraging collaboration and empowering ground-up solutions. The principal’s approach to ESG and sustainability Since ESG investing does not always deliver on its promise, the responsibility of achieving ESG goals cannot be put solely in the hands of investment professionals who serve as agents allocating funds. Instead, business owners and leaders who own and use capital – as principals in the productive economy – must take charge. Within organisations, sustainability should not be delegated and relegated to a designated “sustainability officer”. The moment this happens, the principal-agent problem resurfaces: when others in the organisation think that someone else is taking care of sustainability, it’s as if the box is checked and the job is done. Instead, the principal’s approach to ESG and sustainability requires that these considerations be embedded in the normal course of business decision-making. The goal of businesses should be to find profitable solutions to problems. This overarching goal will guide business leaders to focus on long-term value creation, with environmental, social and governance considerations integrated as part of the business decision-making process. This principal’s approach by businesses, involving every leader and not just the designated “sustainability officer”, will achieve far greater impact on sustainability than ESG investing. This article is based in part on a recent SAP INSEAD Masterclass attended by Sustainability executives in Asia. |
12 Mar 2023, 21:00
| FROM Insead Admissions Blog: Circularity in Practice: Case of a Zero-Waste Island |
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What does it take to transform an idyllic Greek island into the first zero-waste island? Can this circular model be extended to other islands and even other parts of the world? These are questions the INSEAD Sustainable Business Initiative (SBI) seeks to answer in its first research collaboration with Polygreen – a network of companies that offers integrated and innovative circular economy solutions worldwide. INSEAD Knowledge speaks to Atalay Atasu, Professor of Technology and Management at INSEAD academic director of the INSEAD SBI and Imran Gill, CEO for the Middle East at Polygreen, to learn about the Just Go Zero Tilos initiative. How can Tilos serve as a role model to help organisations take sustainable and circular systems from inspiration to execution? As a circular economy service provider, what Polygreen has achieved in Tilos is boundary-stretching on many fronts. From a typical model where companies are paid for the volume of waste handled, Polygreen has removed all public bins from the island and implemented programmes to educate both residents and tourists to sort and recycle their waste. Under the research collaboration between SBI and Polygreen, SBI researchers will embark on empirical research in Tilos, in collaboration with INSEAD faculty spanning the fields of operation, marketing and consumer behaviour. The initiative in Tilos is living proof that business can be a force for good. For circular economy solutions to deliver the positive environmental impacts they promise, academic-industry collaboration will set a solid foundation for impactful research, which could translate to tangible outcomes in practice. |
14 Mar 2023, 00:00
| FROM Insead Admissions Blog: How to Rapidly Test New Organisation Designs |
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It's no secret that there are no universally applicable organisation designs. What works in one context may not work in another because each organisation has a different history, culture and cast of characters. And yet there is a thriving segment of the management consulting business that specialises in implementing “best practices” – or sometimes “flavour of the month” organisation designs – in companies that vary widely in terms of age, industry and background. One might hope that research and theory would help perfectly predict which designs work best in a particular context. However, having studied the topic for two decades now, I believe this hope is unlikely to become reality anytime soon. Put simply, organisational contexts are dauntingly complex and vary in ways that we can't fully observe. This makes it hard to definitively recommend design interventions based on theory alone – context matters enormously. It is nothing short of foolhardy to adopt a new organisation design or practice without evidence that it will work in your organisational context. The gold standard: Randomised control trials Field experiments, also known as randomised control trials (RCTs), are the gold standard for determining whether a design will work in a specific context. Experiments involve randomly assigning some units (i.e., people, teams, projects or departments) to a treatment condition (the new policy you’re thinking of implementing) and others to the control group (where things stay as they were without the new policy). We then check if outcomes are statistically different between the two conditions. Randomisation is crucial. Imagine you implement, without randomising, a new training policy and find that employees who applied for the training and attended it saw their performance improve. You have no way of knowing whether this is because your training was effective or because the people who applied for it are motivated, high performers whose evaluations were going to rise anyway. You might object that if you make the training mandatory for all employees you could just see if everyone’s performance improves. But the problem is that you can’t rule out other factors (industry cycles, demand spikes) that may have affected all employees. Randomisation ensures you avoid these problems by creating counterfactuals, that is an understanding of what would have happened without the intervention. This is possible because randomised treatment and control groups are statistical twins: They are similar enough to be treated as identical, so the control group can serve as the counterfactual. We cannot establish causation without counterfactuals, and randomisation is the best way to establish counterfactuals (unless you have a time machine). But even when an experiment may be desperately needed, it can be logistically very challenging to conduct. Consider the following situation: Your company is considering whether it should adopt agile structures to manage its project teams. Despite the general enthusiasm, we know there are good reasons to be cautious: Agile structures are not a universally superior design. Ideally you would randomly assign half of the teams in your company to the new agile structure, keep the rest the same, and test for statistically and economically significant differences in their performance at the end of a few months. In practice, the cost, the risk to business continuity and the political challenges of pushing through randomisation can make this daunting. Does this mean companies are trapped forever in the limbo of adopting industry best practice without any proof it will work, and just hoping for the best? An alternative: Gamification meets randomisation Here is an alternative protocol that I believe can beat blind implementation of current “best practices”. Step one Find a team task that can be done in a few hours, but which is a reasonable approximation of what your project teams do. This is tricky but by no means impossible. For instance, business school case studies embody exactly this principle – with a combination of a few pages of text and a few hours of discussion, our students get thrown into a simulation of a situation where they must solve a problem which might have unfolded over a period of weeks or months in real life. Sometimes, you might have small sample sizes – e.g., not enough teams to draw any statistically meaningful conclusions. But the beauty of the gamified approach is that you can select a task in step one that involves a few people, not entire teams. This scales up your sample size. All organisation designs ultimately specify how people interact. With ingenuity and drawing on theory, we can find ways to put just the interactions that matter under the microscope. Two things are crucial about this gamified task: First, it should be a reasonably valid approximation of what project teams in fact do. Second, there should be a clear metric of successful performance on this task. Step two Organise a day-long hackathon. The purpose of the hackathon is to get all the teams in your company to participate at the same time in working on the case study that you came up with in step one. Step three Assign half the teams participating in the hackathon to the new agile structure. Keep the remaining teams in their standard structures with the same team leaders and role allocations. It is crucial this is done in a randomised manner – roll a die or flip a coin if you have to. Step four Compare how the teams in the agile structure versus those in the traditional structure performed. That’s it! In one day, you can combine a team building event with a pilot test of the new design you are thinking of implementing. Why this is a good idea This approach creates a “toy” version of the work (e.g. projects) you are trying to improve, and organisational design variants (agile vs traditional teams) that can be piloted cheaply and fast, with randomisation. Think of it as the equivalent to what aircraft companies do when building a new model airplane: They first test prototypes in a wind tunnel. The wind tunnel is not the same as real world conditions, but it gives useful signals that can save a lot of money and grief. Debriefing the results at the end of the hackathon (results can be computed in hours) can lead to a very rich discussion of the intended organisation design change – creating broad understanding, rooted in evidence, of the tradeoffs and buy-in. It's also worth highlighting that the entire protocol for gamified randomised control trials can be run online too (or even within a metaverse application), both within and across teams. In fact, it could be used to answer questions about whether distributed working within teams will be effective for your company. In sum: The low success rates of organisational re-design projects suggests that companies have nothing to lose and perhaps a lot to gain by trying out gamified randomised control trials. Start playing! |
14 Mar 2023, 21:00
| FROM Insead Admissions Blog: For MNCs, Big Decisions About China Are on Ice |
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When China abruptly ended most Covid-19 restrictions in December 2022, hopes were high that the world’s second-largest economy would quickly return to its pre-pandemic dynamism. Those hopes were dimmed last week, when then-Premier Li Keqiang announced a 2023 growth target of 5 percent, the lowest since 1991. It was the latest sign of how much has changed over the last three years. Political winds shifted, Covid-19 struck and Chinese economic growth nosedived. Many in the global business community who had enthusiastically advocated engagement in and with China have lost their voice and are in retreat. In the West today, arguing in favour of China carries reputational risks. Unsurprisingly, China’s latest growth target was greeted with a wave of downbeat Western media coverage that somehow ignores the fact that very few countries – and certainly no large economy – could expect growth on a similar scale this year. According to a recent report by McKinsey Global Institute, if China’s economy were to grow by 5 percent between 2021 and 2030, it would expand by the equivalent of the combined GDP of Japan, India and Indonesia in 2021. A lower growth scenario of 2 percent would still add more than the equivalent of India’s GDP in 2021. Perhaps such forecasts of exceptional growth explain the optimism of expatriate and Chinese top executives working for multinationals in China in recent surveys, despite the deluge of negative, if not hostile, reporting on China in the West and hesitation at their own headquarters. Positive business sentiment about China, after all, has been the norm rather the exception for decades. Western multinationals have poured capital and technology into the country since its economic liberalisation in the 1980s and in the initial years of its ascension to the World Trade Organization in 2001. Many have achieved billions of dollars in sales, and surveys of the European and American chambers of commerce in China suggest that profits at their members’ China operations have, in many cases, exceeded results at home or in other markets. Foreign companies had first-mover advantage in bringing products and services into a country in which little demand had existed and where local competitors had limited technologies and management know-how. There were plenty of operational problems to be solved, but older multinationals such as Unilever and Shell drew on their experiences in similar markets around the world. Growth across the board remained high for years even after Chinese companies eventually gained market share or opened new businesses in the digital realm across many industries. Not quite business as usual Despite souring ties between China and the United States in recent years, which have triggered fervent discourse about decoupling and deglobalisation, China’s exports and imports of goods have continued to grow significantly and reached an all-time high last year. Neither the bickering nor the high import duties Washington has imposed on Chinese goods have slowed bilateral trade. Meanwhile, investment flows into China remained robust. Funds from European companies spiked by 92.2 percent last year, according to data just published by the Chinese Ministry of Commerce. Four German multinationals – Volkswagen, Mercedez-Benz, BMW and BASF – all first movers with substantial assets in China, continue to dominate European investment flows into in the country. In short, deglobalisation and decoupling do not appear to be an inevitability in the next few years – at least if the business imperative prevails. Yet, the hardening of Western attitudes towards China, a relatively new and unexpected phenomenon, has had a major impact on the leadership at multinationals. Few headquarters are prepared to consider further expansion in China at their next investment committee meeting. Confidence must be restored first. Business loves predictability. China-plus-one strategy Multinational corporations are now trying to apply a "China-plus-one" strategy, which calls for developing activities in at least one other country to reduce their dependency on China. Apple and its Taiwanese partner Foxconn, for example, are building up operations in India and Vietnam, though the shift concerns only a very small part of the tech giant’s extensive activities in China. Siemens, which derives 13 percent of its sales from China, is likewise looking towards South-east Asia. Relocating substantial operations is extremely difficult due to smaller local markets, a shortage of skilled workers and weaker ecosystems of suppliers and service providers. In low-skilled and low value-added industries such as shoe and garment manufacturing, relocation from China to lower-cost countries such as Bangladesh has been taking place over many years. This may accelerate as multinationals seek to reduce their reliance on China. The perennial pursuit of supply chain optimisation now entails diversifying away from China. Whereas costs and logistics used to determine decisions, reliability and trade rules now dominate. Procurement centres have had to acquire legal and political expertise to navigate the changing geopolitical landscape. Exiting China is not yet publicly discussed. Due to the economic and technological importance of the country and the growing presence of Chinese companies outside their home territory, any such move will have significant implications for a multinational corporation’s global market position. The fraught recent departure of Western multinationals from Russia, a much smaller economy than China, points to major strategic and operational challenges should multinationals also leave China. In sum, for most Western multinationals, the big decisions on China are on ice. It will take more than a sudden end to zero-Covid lockdowns for that ice to melt. This article is adapted from a commentary published in the South China Morning Post. |
15 Mar 2023, 00:00
| FROM Insead Admissions Blog: For MNCs, Big Decisions About China are on Ice |
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When China abruptly ended most Covid-19 restrictions in December 2022, hopes were high that the world’s second-largest economy would quickly return to its pre-pandemic dynamism. Those hopes were dimmed last week, when then-Premier Li Keqiang announced a 2023 growth target of 5 percent, the lowest since 1991. It was the latest sign of how much has changed over the last three years. Political winds shifted, Covid-19 struck and Chinese economic growth nosedived. Many in the global business community who had enthusiastically advocated engagement in and with China have lost their voice and are in retreat. In the West today, arguing in favour of China carries reputational risks. Unsurprisingly, China’s latest growth target was greeted with a wave of downbeat Western media coverage that somehow ignores the fact that very few countries – and certainly no large economy – could expect growth on a similar scale this year. According to a recent report by McKinsey Global Institute, if China’s economy were to grow by 5 percent between 2021 and 2030, it would expand by the equivalent of the combined GDP of Japan, India and Indonesia in 2021. A lower growth scenario of 2 percent would still add more than the equivalent of India’s GDP in 2021. Perhaps such forecasts of exceptional growth explain the optimism of expatriate and Chinese top executives working for multinationals in China in recent surveys, despite the deluge of negative, if not hostile, reporting on China in the West and hesitation at their own headquarters. Positive business sentiment about China, after all, has been the norm rather the exception for decades. Western multinationals have poured capital and technology into the country since its economic liberalisation in the 1980s and in the initial years of its ascension to the World Trade Organization in 2001. Many have achieved billions of dollars in sales, and surveys of the European and American chambers of commerce in China suggest that profits at their members’ China operations have, in many cases, exceeded results at home or in other markets. Foreign companies had first-mover advantage in bringing products and services into a country in which little demand had existed and where local competitors had limited technologies and management know-how. There were plenty of operational problems to be solved, but older multinationals such as Unilever and Shell drew on their experiences in similar markets around the world. Growth across the board remained high for years even after Chinese companies eventually gained market share or opened new businesses in the digital realm across many industries. Not quite business as usual Despite souring ties between China and the United States in recent years, which have triggered fervent discourse about decoupling and deglobalisation, China’s exports and imports of goods have continued to grow significantly and reached an all-time high last year. Neither the bickering nor the high import duties Washington has imposed on Chinese goods have slowed bilateral trade. Meanwhile, investment flows into China remained robust. Funds from European companies spiked by 92.2 percent last year, according to data just published by the Chinese Ministry of Commerce. Four German multinationals – Volkswagen, Mercedez-Benz, BMW and BASF – all first movers with substantial assets in China, continue to dominate European investment flows into in the country. In short, deglobalisation and decoupling do not appear to be an inevitability in the next few years – at least if the business imperative prevails. Yet, the hardening of Western attitudes towards China, a relatively new and unexpected phenomenon, has had a major impact on the leadership at multinationals. Few headquarters are prepared to consider further expansion in China at their next investment committee meeting. Confidence must be restored first. Business loves predictability. China-plus-one strategy Multinational corporations are now trying to apply a "China-plus-one" strategy, which calls for developing activities in at least one other country to reduce their dependency on China. Apple and its Taiwanese partner Foxconn, for example, are building up operations in India and Vietnam, though the shift concerns only a very small part of the tech giant’s extensive activities in China. Siemens, which derives 13 percent of its sales from China, is likewise looking towards South-east Asia. Relocating substantial operations is extremely difficult due to smaller local markets, a shortage of skilled workers and weaker ecosystems of suppliers and service providers. In low-skilled and low value-added industries such as shoe and garment manufacturing, relocation from China to lower-cost countries such as Bangladesh has been taking place over many years. This may accelerate as multinationals seek to reduce their reliance on China. The perennial pursuit of supply chain optimisation now entails diversifying away from China. Whereas costs and logistics used to determine decisions, reliability and trade rules now dominate. Procurement centres have had to acquire legal and political expertise to navigate the changing geopolitical landscape. Exiting China is not yet publicly discussed. Due to the economic and technological importance of the country and the growing presence of Chinese companies outside their home territory, any such move will have significant implications for a multinational corporation’s global market position. The fraught recent departure of Western multinationals from Russia, a much smaller economy than China, points to major strategic and operational challenges should multinationals also leave China. In sum, for most Western multinationals, the big decisions on China are on ice. It will take more than a sudden end to zero-Covid lockdowns for that ice to melt. This article is adapted from a commentary published in the South China Morning Post. |
15 Mar 2023, 19:00
| FROM Insead Admissions Blog: Bringing DEI into the Core of Our Institutions |
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Diversity, equity, and inclusion (DEI) is making inroads in business schools, including the core curriculum. This encouraging trend enriches our institutions by giving future business leaders the tools they’ll need to build thriving and inclusive organisations in the global economy. Yet because these concepts are relatively new additions to business-school classrooms, deploying them effectively may require help from both institutions and a wider community of experienced peers. In 2019, the late Katherine W. Philips brought 15 leading scholars representing top global business schools together for a three-day workshop on integrating DEI principles into business education. Since her passing in 2020, the expanded group – organised by Modupe Akinola (Columbia Business School), Zoe Kinias (INSEAD), Michael Norton (Harvard Business School) and Erin Kelly (MIT-Sloan) – continues to meet several times per year to honour Philip’s vision and discuss the challenges and successes of teaching and institutionalising DEI in the classroom and beyond. 2022 saw the resumption of the in-person working group at Columbia Business School (CBS) after a shift to Zoom during Covid-19. Ongoing initiatives for the DEI working group include academic papers, case studies, teaching notes, and more in-person conferences. A few months after the get-together at CBS, the group aggregated its collective learnings and worked with Stephanie Creary (Wharton), Tianna Barnes (University of Pennsylvania), Christopher Petsko (Duke University), Ashleigh Shelby Rossette (Duke University) and Ayana Younge (University of North Carolina, Chapel Hill) to create a professional development workshop in conjunction with the 2022 Academy of Management conference in Seattle. This workshop was the first step in spreading the working group’s shared knowledge to a broader audience. “Teaching DEI can cause self-doubt. But we have to persevere. What we’re doing is far too important not to. It’s not that it stays in the classroom; it can end up in the boardroom, influencing thousands of lives.” – Modupe Akinola Here we discuss important takeaways gleaned from both gatherings. Classroom techniques for increasing awareness Akinola showed how CBS students used Poll Everywhere, an online interactive tool, to assemble a catalogue of statements from their classmates that made them uncomfortable in the past. Viewed onscreen within the software’s spreadsheet-like interface, the statements could be unpacked and examined in a format geared toward mutual understanding. Similarly, one workshop attendee described her response when a student referred to a guest speaker – a prominent and highly successful Black woman – as “articulate.” She could have let the comment pass, but instead created a teachable moment. In a private session, she explained to the student that the word he chose could be seen as reinforcing social stereotypes since it would probably not be used for an equally accomplished speaker of non-marginalised identity. Later, the student, having reflected on this, stood up in class and delivered an apology. The ensuing discussion pointed up several other possible responses to problematic comments. For example, educators could ask: “What did you mean by that?” or “Why did that come to your mind first?” or “I’m going to let you try that again.” Several colleagues cited humour as a key ingredient for calling out instances of often-unconscious bias without suppressing open conversations. Of course, misconduct that threatens other students and faculty or compromises their safety demands swift, zero-tolerance response. A supportive institution that treats these offenses with the seriousness they deserve is essential to DEI work. Maintaining the “learning zone” Stephanie Creary’s classroom mantra is “don’t dominate – facilitate.” Instructors should allow for various perspectives but know when to move on. When in doubt, they can transform tension into a teachable moment by inviting more voices into the discussion. Kinias shared how awareness of self and the group can help mitigate challenges that go along with working in this space. She recommended that participants pay attention to their “learning zone” where they are fully present and activated for exploration, rather than stay in a “safety zone” where they are too comfortable, or a “panic zone” causing “fight, flight or freeze” responses. In panic-ridden environments, it is often necessary to take a step back and regroup to re-establish psychological safety. When professors must learn But what happens when educators are perceived to have said or done something that contradicts DEI principles? For faculty who need to overcome self-consciousness or negative self-image, Erika Hall, assistant professor of organisation and management at Emory University, demonstrated a classroom exercise illustrating how false meta stereotypes – beliefs about how others regard us – influence how we show up in the world. Inspired by the long-running US game show Family Feud, in which contestants try to guess the most popular responses to survey questions, Hall divided attendees into small groups and asked each group to produce a list of widely held opinions of DEI educators. The results comprised a litany of self-satirising putdowns (e.g. “preachy”). As Hall revealed, however, people outside academia described DEI practitioners far more positively. When Hall runs this exercise in the classroom, she uses “Gen Z” or some other context-appropriate label, achieving the same result. The exercise could be extended to groups ranging from MBAs to corporate executives. |
19 Mar 2023, 21:00
| FROM Insead Admissions Blog: We Need to Talk About the Carbon Budget |
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It’s grotesque, isn’t it? A map of the world with countries scaled to match their annual CO2 emissions betrays a bloated Global North and a squeezed South. Unlike a mirror at a funfair that makes us laugh at some impossibly distorted version of reality, this reflection speaks a sobering truth – of global inequity, of haves and have nots.
Faced with the wicked problem of tackling climate breakdown – detailed in the latest report by the IPCC (Intergovernmental Panel on Climate Change) – and reducing carbon emissions, one way to read the map is to see the challenge as one primarily confronting the Global North. Indeed, Nationally Determined Contributions (NDCs), the Paris Agreement’s central mechanism for facilitating national commitments to reducing emissions, frames decarbonisation of the global economy as a task mostly for countries with high emissions. But even if NDCs were ambitious enough to deliver net zero (emissions) by 2050, they would still only address the half of the problem that is already manifest but not the half that lies ahead. While the Global South may be a small emitter today, it is also where most projected increases in the global population will occur, with millions aspiring to better lives. No one can rightly deny this aspiration – ‘leave no one behind’ is the transformative promise of the UN Sustainable Development Goals – but historically, income growth has been strongly connected with higher per capita carbon emissions. Substantial fossil fuel reserves and vast carbon storage in virgin forests in the Global South mean the potential for increased emissions is huge, and the Amazon has already become a source of carbon emissions rather than a sink for CO2. Yet for the world to limit global heating to 1.5°C or even 2°C, most of the forests must be conserved and fossil fuel reserves must remain untouched. And this makes the challenge for the South – of not ‘carbonising’ while developing – one at least as significant as decarbonising the North. Countries in the South are also more vulnerable to climate risks. They will experience increased drought and flooding even if global warming is limited to 1.5°C, and need significant climate adaptation finance – estimated to be between US$160 billion and US$340 billion by 2030, going up to US$565 billion by 2050 – that enables them to face already inevitable climate impacts. In addition, realising the transition to net zero will rely on large capital flows from North to South, including through a range of incentives such as debt-for-nature swaps that help protect natural carbon sinks. Optimistic technologists believe that emerging and developing economies in the Global South will be able to avoid the ‘brown road’ to prosperity and leapfrog directly to a clean energy, net-zero future. This would magically eliminate any trade-off between growth and emissions but it relies on richer countries quickly scaling clean technology, making it cheaper, and eliminating sizeable green premia. If technology does not eliminate these, the alternative is an approach long-favoured by economists: carbon pricing. But unfortunately, carbon taxes are deeply unpopular and have been taken off the table in key countries like the United States. How then can we reconcile and deliver on both decarbonising the North and forging a clean development path in the South? The starting point lies in shifting from price-based solutions (carbon taxes) to quantity-based solutions (the remaining carbon budget). In terms of economic thinking, this means shifting from Pigou (pricing externalities) to Coase (cap, allocate rights and trade). In practice, it means establishing a functioning and feasible global carbon credit market, as explored in Climate and Debt, the latest Geneva Report on the World Economy. This will not be easy given current markets are fragmented and embryonic, and participation is voluntary. Firstly, to improve market functioning, mandatory carbon emissions reduction requirements must be put in place for all large emitters, and carbon credits must be shown to be credible so that markets scale and prices rise to levels that reward countries and companies for preserving carbon sinks, developing nature-based solutions, and engaging in nature-positive business. There are various competing initiatives trying to bring transparency and accountability to the voluntary carbon markets. Secondly, and more importantly, the world must squarely face the rapidly shrinking but increasingly alarming elephant in the room. According to the IPCC, if the average global temperature rise is to remain below 1.5°C with more than 80 percent certainty, the world has a carbon emissions budget of just 300 gigatonnes of CO2. And with 50 percent certainty, only 500 gigatonnes. At current emissions levels, the budget will be exhausted in less than a decade. To be feasible, any system for allocating remaining emissions rights must be perceived as equitable. And so the question is, who should be allowed to ‘use up’ the remaining budget? NDCs implicitly suggest allocating the bulk of the remaining carbon budget to the biggest emitters in the North. At the other extreme, countries that have emitted the most in the past might receive only a small part of the remaining budget, which would immediately create a large carbon market. But neither of these approaches balances ethics with political realism in a way that is fair and effective. A more balanced approach would be to distribute remaining emissions rights equally per capita across the globe, and then adjust them to account for past and future emissions opportunities. For poor countries with large carbon sinks, for example, the opportunity costs of low future emissions are high, while those endowed with a wealth of natural renewable resources can more easily avoid future emissions. A robust global carbon market would then deliver the efficient use of the world’s remaining emissions budget through global ‘cap and trade’. Achieving global consensus for and establishing such an approach will take time, of which we have very little. A less ambitious but similar and more achievable approach is to greatly expand ‘just energy transition partnerships’ in which rich countries cut a deal with poorer countries to pay for green technology in return for phasing out coal and leaving remaining reserves untouched. Indonesia, for example, recently received US$20 billion from a coalition of rich countries through such a deal. Securing further timely deals like this would usefully complement a global deal through targeting priority emissions mitigation ‘hot spots’ such as the Amazon rainforest. President Luiz Inácio Lula da Silva of Brazil has called for the COP30 climate summit in 2025 to be held in the Amazon rainforest, an ecosystem vital for global climate stability. What better place for the world to turn things around, and what better milestone towards which our leaders might work to secure a step change on the road to net zero? |
23 Mar 2023, 02:00
| FROM Insead Admissions Blog: How Large Mergers Can Benefit Smaller Players |
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Mergers between large firms have profound impacts on smaller firms. When two big companies join forces they typically drive prices up for customers and control a large portion of the market, making it more difficult for smaller firms to enter the market and compete. However, not all mergers have a negative effect on the entry and proliferation of smaller firms. Instead of pushing firms out, some mergers have the potential to create opportunities for new players to enter the market. For instance, the 2007 MillerCoors joint venture (between SABMiller and Molson Coors) inadvertently increased the number of smaller craft brewers in the market. José Azar at the University of Navarra and I examined the effect of the MillerCoors merger in a research paper published in the International Journal of Industrial Organization. We found that the merger between two large commercial brewers created an opening for independent brewers to enter the market and gain market share. Craft brewers seized the opportunity to differentiate themselves by offering specialised products and a new experience. Making the most of a merger While craft brewers have been gaining traction in the brewing industry over the past 20 years, the industry has historically been dominated by a few large firms that have carried out mergers and acquisitions to solidify their presence across the globe. Consolidation in the brewing industry has raised concerns about the possibility of increased market power and price coordination. To understand how craft brewers in the United States responded to the MillerCoors joint venture, we analysed retail scanner data from 1,088 grocery stores in 36 states. We measured the impact that a sudden increase in concentration had on the presence and the market share of craft brewers in the four years that followed. We found that the merger led to an 11.59 percent increase in the number of craft brewers in the average market, and a small but significant increase in their market share. A potential explanation could be that consumers got bored of seeing the same brands and jumped at the opportunity to try something different. Craft brewers had the opportunity to enter the market because grocery stores wanted to maximise the number of products they offered to increase their sales. However, this does not mean that craft brewers were introducing an endless stream of products to the markets. Smaller players often do not have enough financial flexibility to test out several products and only release products they know are successful in their portfolio. Furthermore, we found that commercial brewers were not entering the market at the same rate as craft brewers and were increasing the prices of their existing products by approximately 4 percent. Essentially, consumers were getting the raw end of the deal and craft brewers played the situation to their advantage. How can small players benefit? Our findings show that mergers by large incumbent firms can have a positive effect on the number and market share of smaller firms. If a small firm can enter the market following a merger, the first thing they need to do is to study the price changes that the merger is creating. If they see that the price is increasing, this creates an opportunity to go in and show consumers that they have a new, different product at a competitive price. Then, from a marketing perspective, how a small firm positions its product is really important – it needs to differentiate itself from the big brands. This could involve playing up the localness or exclusivity of the brand, or the fact that it only produces small batches. The idea is to create a differentiating point from the big firms. In a really concentrated market post-merger, it is usually extremely difficult for small firms to enter and capture market share. But this is not always the case. After the MillerCoors joint venture, craft brewers spotted an opportunity to carve out space and offer consumers something different. Instead of killing off independent brewers, the merger acted as a catalyst for a craft beer revolution. |
26 Mar 2023, 21:00
| FROM Insead Admissions Blog: ChatGPT Launch and Managing Contradictions: Why We Need Ambidextrous Leaders |
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Measured in numbers, ChatGPT has no rival (yet): The chatbot became the fastest growing consumer app in history only two months after its launch, chalking up 100 million monthly active users in January 2023. But in terms of quality, the generative AI tool lay no claim to be the best. Based on technology already in existence, ChatGPT was pushed out to market in a hurry to outpace other chatbots in development. (I asked ChatGPT specifically what problems users have encountered so far. The reply: the quality and accuracy of responses, ethical implications of AI in general and technical glitches.) ChatGPT’s phenomenal popularity has revealed an arms race among rivals. Most recently, a Google-backed competitor is responding with a version that is easier to interact with and less likely to produce harmful output, and Google itself just launched its own chatbot called Bard. The jostling illustrates one of the many contradictions – speed versus quality – that organisations face. Should they aim for first-mover advantage with the attendant reputational risks, or bide their time until their product is good enough to capture the confidence of the market more fully? Although only time can tell the wisdom of either move, the general point is that business life is full of contradictions, and the best organisations do not avoid them. Instead, they need to manage through them over time. To manage contradictions effectively requires ambidexterity, and particularly leaders who are sufficiently discerning and dexterous to achieve an optimal, dynamic equilibrium between two opposing imperatives. This is something my colleague (Senior Affiliate Professor of Organisational Behaviour Jose Luis Álvarez) and I have tried to impart in an INSEAD online programme, Leading Organisations in Disruptive Times. We cover concepts, tools and skills that enable managers to lead organisations better in turbulent times, and we deal specifically with the challenge of ambidexterity in the final module. The ambidextrous leader Contradictions take specific forms: the long-term versus short-term view; autonomy (decentralised systems) versus collaboration (synergistic, centralised systems); and two essential modes, “exploration” (exploring new opportunities for business development) versus “exploitation” (exploiting the resources in hand for more immediate returns). The best place to start cultivating ambidexterity is the mindset of executives (as outlined in my book, Backstage Leadership: The Invisible Work of Highly Effective Leaders). Managing contradictions often involves being torn between different stakeholders and staying on top of difficult and uncomfortable situations. Imagine being caught between one group of stakeholders who demand that the company clamp down on costs in order to keep up with a giant competitor, and another group of stakeholders who are convinced the company’s future lies in long-term innovation and big, over-the-horizon projects. Four ways to cultivate ambidexterity Without the ability to “stay in the problem/contradiction” within one’s own mind, leaders cannot effectively steer their organisations through complexity. There are at least four ways to lay the groundwork of cultivating an ambidextrous or paradox mindset. Embrace and tolerate paradox and contradiction My colleague Ella Miron-Spektor (Associate Professor of Organisational Behaviour) has done great work on the phenomenon of paradox mindset. Consciously acknowledge and re-articulate that contradictions such as short versus long term, local/competitive versus collective/cooperative and exploration versus exploitation are all valuable and necessary to well-performing organisations. It means acknowledging the big picture around paradoxes and their value, and reminding yourself of that basic value and logic. Embark on self-reflection and self-knowledge How well do you know yourself? How have your experiences in management and business shaped your thinking? No one can be truly objective or unbiased, but you should ask yourself whether you have such strong preferences that they amount to dogma and ideology. It may be worthwhile to take stock of your own experiences and preferences, so you can at least be aware of your natural filters when dealing with situations that require paradoxical thinking and patient reflection. Frame a situation in different ways When thinking about a situation or problem, especially about organisational development, practice using contrasting mental templates or approaches, such as an exploration frame and an exploitation frame. Cognitive variety can be a source of recombinant innovation, creating a wider array of potential solutions derived from diverse templates to apply to a given problem. Toyota’s famed just-in-time production system is an example where paradoxical frames are allowed to co-exist – high efficiencies, yet fast and adaptive reactions – and thrive in the construction of routines and processes. Use divergent and convergent thinking to juggle competing dimensions Divergent thinking means delving into the exploration logic and the exploitation logic separately. At least for a while, do not allow either logic to shackle the other. A good example was the debate in traditional print media on adapting to digital and online technologies. The more successful ones, such as The New York Times, not only framed it as an opportunity but also explored ways of attaining greater differentiation from their print businesses; the less successful ones framed it as a threat and tended to focus on incremental innovations. Then, take some time to consider convergence – overlaps, integration and synergies – across these different logics. Attempt “combinatorial play”. Look for paths and resource strategies that enable you to straddle both exploitation and exploration with as little cost, conflict or confusion as possible. The ambidextrous mindset is just one of five components of the framework featured in our online programme to help leaders manage contradictions for better organisational performance. The other pieces are leadership versatility, team cohesion, structural moves and contextual work. Creating ambidextrous organisations takes work, not least of which is a mindset change. It begins with leaders who can cope with and absorb contradictions. |
28 Mar 2023, 00:00
| FROM Insead Admissions Blog: Humanitarian versus For-Profit Operations: When Lines Blur |
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The primary goal of humanitarian operations is to deliver life-saving goods and services as quickly and efficiently as possible to people in crisis situations, such as natural disasters or armed conflicts. In humanitarian emergencies, response time is critical, and delays can result in the loss of lives. Humanitarian operations are characterised by high levels of uncertainty, unpredictability and urgency, where plans are expected to fail, default partners are unfamiliar actors and infrastructure is limited (or at times non-existent). These are highly volatile conditions that are vastly different from for-profit settings. Commercial operations, driven by the goal to maximise profits, are designed to support the production and delivery of goods and services to consistently meet customer demand in a more predictable, routine type of environment. Given the different goals and operating environments of commercial and humanitarian operations, the risks – and stakes – of having a mismatch in demand and supply is higher in humanitarian operations, which can result in insufficient supplies, more waste and increased cost. There are real dangers when the lines between the two are blurred. When the lines blur Humanitarian organisations typically depend on external funds, which can be highly unpredictable. Therefore, some have turned to generating revenue through commercial operations to reduce this dependence. This may be a valid strategy but could also cause tensions between the organisation’s for-profit and humanitarian arms, as seen in the case of the Turkish Red Crescent, Kızılay. Kızılay is part of the International Red Cross and Red Crescent Movement, whose mission is to alleviate human suffering, protect human dignity and prevent and respond to crises and disasters. Kızılay is involved in disaster response, health, social services, education and blood services, among others, and, like most humanitarian organisations, is expected to aid those in need, regardless of their ability to pay. Since November 2018, Kızılay has adopted a conglomerate structure (see below) by establishing 11 for-profit subsidiaries under Kızılay Investment. Kızılay’s long-running softdrink plant now falls under the for-profit Kızılay Beverage (which is currently preparing for an IPO) and its tent-production plant now falls under the for-profit Kızılay Tent & Textile. Kızılay’s conglomerate structure (source: Kızılay Investment website) In addition, the humanitarian arm of Kızılay had to transfer its assets (including operational infrastructure such as warehouses and manufacturing facilities) to the for-profit subsidiaries, with the goal to provide stable revenue for humanitarian operations. In terms of governance, Kızılay Investment reports to the same governing board as the Kızılay general directorate, which continues to house Kızılay’s humanitarian operations. The new commercial structure led to impressive financial success. Kızılay’s subsidiaries had a consolidated revenue of over 520 million Turkish liras in 2021 (equivalent to about US$27.31 million) based on the most recent data available – an almost 300 percent increase from the previous year. On the other hand, Kızılay’s response in the aftermath of the earthquakes in February 2023 that killed more than 45,000 people in Turkey alone and left millions homeless has raised the question: Does the commercial structure of a humanitarian organisation affect its relief operations? Public scrutiny of Kızılay’s for-profit operations brought to light the fact that three days after the earthquake, Kızılay Tent & Textile sold tents worth 46 million Turkish liras (equivalent to about US$2.44 million) to Turkish humanitarian organisation AHBAP, which wanted to distribute them in the affected region. Kızılay’s for-profit subsidiary Kızılay Logistics also sold 30,000 meal packages to AHBAP. Meanwhile, Kızılay Tent & Textile sold tents to the Turkish Association of Pharmacists, which needed them to operate not-for-profit temporary pharmacies in the affected areas. Kızılay argued that revenue from the sales was necessary to cover the costs of production and any profit would be used for humanitarian operations. Despite this argument, critics maintain that this for-profit model conflicts with Kızılay’s humanitarian mission. Most importantly, such scrutiny can negatively influence Kızılay’s credibility and, in turn, ability to raise external funds. Humanitarian versus for-profit operations In practice, commercial and humanitarian operations on different fronts. Planning and forecasting Humanitarian organisations are driven by the immediate needs of the affected population. Due to the need to respond quickly to sudden, unexpected crises, humanitarian operations often have short-term planning and forecasting horizons. On the other hand, for-profit organisations operate within planned, predictable and longer time frames and therefore are better able to optimise production schedules, inventory levels and transportation routes. While commercial supply chains are typically designed to operate within established protocols and routines to achieve efficiency and predictability, humanitarian supply chains require greater flexibility and agility to respond to changing circumstances and unexpected events. It is also worth noting that, with surging turbulence in commercial operations (e.g., due to supply chain consequences of the war in Ukraine and Covid-19), collaboration between commercial and humanitarian organisations is increasingly important to create common knowledge on operating under high uncertainty. Notably, INSEAD’s Humanitarian Research Group has been a pioneer on research in this domain. Procurement and inventory In humanitarian supply chains, inventory management is geared towards ensuring sufficient aid supplies when and where they are needed, which comes with its own set of challenges. On the demand side, the needs of affected populations are dynamic and can be difficult to assess. By the time the needs are known, access to supplies can be hindered by market forces such as competitive markets and unavailability of supplies. Moreover, on the supply side, the reliance on donations and in-kind contributions can make access unreliable. In contrast, in commercial supply chains, more predictable demand makes it possible to maintain optimal inventory levels to meet customer demand and minimise inventory costs by working with reliable suppliers. Logistics and transport infrastructure Infrastructure such as warehouses, distribution centres and transportation networks forms the backbone of commercial supply chains, especially in developed or established markets. Humanitarian supply chains, on the other hand, are often set in challenging environments with limited infrastructure – be it geographically remote locations or hard-to-reach areas due to destruction. Collaboration and coordination For-profit organisations are motivated to collaborate and coordinate with stakeholders such as suppliers or customers mostly for reasons including maximising efficiency and minimising costs. In the case of humanitarian organisations, amid the pressure of delivering aid in a timely manner, collaboration and coordination may be a prerequisite to provide aid to those in need. With more diverse and sometimes unfamiliar actors – such as international organisations, local governments, community groups and private sector entities – in the humanitarian setting, these stakeholders can act as enablers or gatekeepers. Performance metrics and funding Success in for-profit organisations is often measured in terms of profitability and efficiency. In contrast, success for humanitarian organisations is measured by the number of people reached, the amount of aid supplies delivered and the effectiveness of aid provided. These metrics are often difficult to measure, yet they can influence the amount of external funding that humanitarian organisations receive in the form of donations, grants and government aid. Due to the unpredictable nature of external funding, some humanitarian organisations have designed commercial activities such as revenue-generating subsidiaries or social enterprises to support their humanitarian operations (see examples in box), with excess profits reinvested into their programmes and services. A common feature across these examples is the clear distinction between their for-profit and humanitarian operations. Humanitarian organisations with revenue-generating subsidiaries or social enterprises Oxfam operates several social enterprises, including Oxfam Shops, which sell donated items to raise funds for their programmes. CARE operates an impact fund subsidiary called CARE Enterprises. Save the Children operates a social enterprise called Save the Children's Gift Shop, which allows individuals to purchase gifts including school supplies, food and medicine to support children in need. Need for transparency and governance The ongoing Kızılay controversy shows the importance of transparency and governance for humanitarian organisations. It also raises the question of efficiency and flexibility required in the humanitarian context, which may be hindered by bureaucracy in a conglomerate structure. Prior to its transformation in 2018, Kızılay operated 26 warehouses and 600 local disaster stations across Turkey, with each warehouse owning its own vehicle fleet to respond quickly in case of an immediate need nearby. The stations had the authority to act right away while communicating and collaborating with the central management for further response. After the creation of the for-profit Kızılay Logistics, only the central management based in Ankara has the authority to make procurement and logistics decisions, which can increase response time in emergencies. The new corporate structure also affects long-term operational planning and therefore future preparedness. The humanitarian arm now requires approval from Kızılay Tent & Textile, as well as several rounds of evaluation in planning the production of tents, for example. These extra layers of bureaucracy may hinder the necessary agility required in humanitarian operations. Kızılay is just one example among many where the blurring lines between for-profit and humanitarian activities raise challenges. Humanitarian organisations face both increasing demand for humanitarian aid and reduced funding. While creating income-generating activities to sustain humanitarian operations may be an option, it also brings significant potential risks. This is especially true given that the requirements for achieving operational excellence in commercial and humanitarian settings are vastly different. Developing the operational structure necessary to excel in humanitarian response demands a fundamentally different set of capabilities, culture and mission than in commercial settings. Although the need for a more reliable source of revenue is understandable, transforming the operational and organisational structure to accommodate commercial activities may jeopardise the primary mission of a humanitarian organisation. To strike this delicate balance, humanitarian organisations venturing into commercial activities need advanced systems and excellent management, as well as carefully designed communication channels between their commercial and humanitarian branches. Above all, transparency and good governance are essential. |
28 Mar 2023, 03:00
| FROM Insead Admissions Blog: Humanitarian Versus For-Profit Operations: When Lines Blur |
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The primary goal of humanitarian operations is to deliver life-saving goods and services as quickly and efficiently as possible to people in crisis situations, such as natural disasters or armed conflicts. In humanitarian emergencies, response time is critical, and delays can result in the loss of lives. Humanitarian operations are characterised by high levels of uncertainty, unpredictability and urgency, where plans are expected to fail, default partners are unfamiliar actors and infrastructure is limited (or at times non-existent). These are highly volatile conditions that are vastly different from for-profit settings. Commercial operations, driven by the goal to maximise profits, are designed to support the production and delivery of goods and services to consistently meet customer demand in a more predictable, routine type of environment. Given the different goals and operating environments of commercial and humanitarian operations, the risks – and stakes – of having a mismatch in demand and supply is higher in humanitarian operations, which can result in insufficient supplies, more waste and increased cost. There are real dangers when the lines between the two are blurred. When the lines blur Humanitarian organisations typically depend on external funds, which can be highly unpredictable. Therefore, some have turned to generating revenue through commercial operations to reduce this dependence. This may be a valid strategy but could also cause tensions between the organisation’s for-profit and humanitarian arms, as seen in the case of the Turkish Red Crescent, Kızılay. Kızılay is part of the International Red Cross and Red Crescent Movement, whose mission is to alleviate human suffering, protect human dignity and prevent and respond to crises and disasters. Kızılay is involved in disaster response, health, social services, education and blood services, among others, and, like most humanitarian organisations, is expected to aid those in need, regardless of their ability to pay. Since November 2018, Kızılay has adopted a conglomerate structure (see below) by establishing 11 for-profit subsidiaries under Kızılay Investment. Kızılay’s long-running softdrink plant now falls under the for-profit Kızılay Beverage (which is currently preparing for an IPO) and its tent-production plant now falls under the for-profit Kızılay Tent & Textile. Kızılay’s conglomerate structure (source: Kızılay Investment website) In addition, the humanitarian arm of Kızılay had to transfer its assets (including operational infrastructure such as warehouses and manufacturing facilities) to the for-profit subsidiaries, with the goal to provide stable revenue for humanitarian operations. In terms of governance, Kızılay Investment reports to the same governing board as the Kızılay general directorate, which continues to house Kızılay’s humanitarian operations. The new commercial structure led to impressive financial success. Kızılay’s subsidiaries had a consolidated revenue of over 520 million Turkish liras in 2021 (equivalent to about US$27.31 million) based on the most recent data available – an almost 300 percent increase from the previous year. On the other hand, Kızılay’s response in the aftermath of the earthquakes in February 2023 that killed more than 45,000 people in Turkey alone and left millions homeless has raised the question: Does the commercial structure of a humanitarian organisation affect its relief operations? Public scrutiny of Kızılay’s for-profit operations brought to light the fact that three days after the earthquake, Kızılay Tent & Textile sold tents worth 46 million Turkish liras (equivalent to about US$2.44 million) to Turkish humanitarian organisation AHBAP, which wanted to distribute them in the affected region. Kızılay’s for-profit subsidiary Kızılay Logistics also sold 30,000 meal packages to AHBAP. Meanwhile, Kızılay Tent & Textile sold tents to the Turkish Association of Pharmacists, which needed them to operate not-for-profit temporary pharmacies in the affected areas. Kızılay argued that revenue from the sales was necessary to cover the costs of production and any profit would be used for humanitarian operations. Despite this argument, critics maintain that this for-profit model conflicts with Kızılay’s humanitarian mission. Most importantly, such scrutiny can negatively influence Kızılay’s credibility and, in turn, ability to raise external funds. Humanitarian versus for-profit operations In practice, commercial and humanitarian operations on different fronts. Planning and forecasting Humanitarian organisations are driven by the immediate needs of the affected population. Due to the need to respond quickly to sudden, unexpected crises, humanitarian operations often have short-term planning and forecasting horizons. On the other hand, for-profit organisations operate within planned, predictable and longer time frames and therefore are better able to optimise production schedules, inventory levels and transportation routes. While commercial supply chains are typically designed to operate within established protocols and routines to achieve efficiency and predictability, humanitarian supply chains require greater flexibility and agility to respond to changing circumstances and unexpected events. It is also worth noting that, with surging turbulence in commercial operations (e.g., due to supply chain consequences of the war in Ukraine and Covid-19), collaboration between commercial and humanitarian organisations is increasingly important to create common knowledge on operating under high uncertainty. Notably, INSEAD’s Humanitarian Research Group has been a pioneer on research in this domain. Procurement and inventory In humanitarian supply chains, inventory management is geared towards ensuring sufficient aid supplies when and where they are needed, which comes with its own set of challenges. On the demand side, the needs of affected populations are dynamic and can be difficult to assess. By the time the needs are known, access to supplies can be hindered by market forces such as competitive markets and unavailability of supplies. Moreover, on the supply side, the reliance on donations and in-kind contributions can make access unreliable. In contrast, in commercial supply chains, more predictable demand makes it possible to maintain optimal inventory levels to meet customer demand and minimise inventory costs by working with reliable suppliers. Logistics and transport infrastructure Infrastructure such as warehouses, distribution centres and transportation networks forms the backbone of commercial supply chains, especially in developed or established markets. Humanitarian supply chains, on the other hand, are often set in challenging environments with limited infrastructure – be it geographically remote locations or hard-to-reach areas due to destruction. Collaboration and coordination For-profit organisations are motivated to collaborate and coordinate with stakeholders such as suppliers or customers mostly for reasons including maximising efficiency and minimising costs. In the case of humanitarian organisations, amid the pressure of delivering aid in a timely manner, collaboration and coordination may be a prerequisite to provide aid to those in need. With more diverse and sometimes unfamiliar actors – such as international organisations, local governments, community groups and private sector entities – in the humanitarian setting, these stakeholders can act as enablers or gatekeepers. Performance metrics and funding Success in for-profit organisations is often measured in terms of profitability and efficiency. In contrast, success for humanitarian organisations is measured by the number of people reached, the amount of aid supplies delivered and the effectiveness of aid provided. These metrics are often difficult to measure, yet they can influence the amount of external funding that humanitarian organisations receive in the form of donations, grants and government aid. Due to the unpredictable nature of external funding, some humanitarian organisations have designed commercial activities such as revenue-generating subsidiaries or social enterprises to support their humanitarian operations (see examples in box), with excess profits reinvested into their programmes and services. A common feature across these examples is the clear distinction between their for-profit and humanitarian operations. Humanitarian organisations with revenue-generating subsidiaries or social enterprises Oxfam operates several social enterprises, including Oxfam Shops, which sell donated items to raise funds for their programmes. CARE operates an impact fund subsidiary called CARE Enterprises. Save the Children operates a social enterprise called Save the Children's Gift Shop, which allows individuals to purchase gifts including school supplies, food and medicine to support children in need. Need for transparency and governance The ongoing Kızılay controversy shows the importance of transparency and governance for humanitarian organisations. It also raises the question of efficiency and flexibility required in the humanitarian context, which may be hindered by bureaucracy in a conglomerate structure. Prior to its transformation in 2018, Kızılay operated 26 warehouses and 600 local disaster stations across Turkey, with each warehouse owning its own vehicle fleet to respond quickly in case of an immediate need nearby. The stations had the authority to act right away while communicating and collaborating with the central management for further response. After the creation of the for-profit Kızılay Logistics, only the central management based in Ankara has the authority to make procurement and logistics decisions, which can increase response time in emergencies. The new corporate structure also affects long-term operational planning and therefore future preparedness. The humanitarian arm now requires approval from Kızılay Tent & Textile, as well as several rounds of evaluation in planning the production of tents, for example. These extra layers of bureaucracy may hinder the necessary agility required in humanitarian operations. Kızılay is just one example among many where the blurring lines between for-profit and humanitarian activities raise challenges. Humanitarian organisations face both increasing demand for humanitarian aid and reduced funding. While creating income-generating activities to sustain humanitarian operations may be an option, it also brings significant potential risks. This is especially true given that the requirements for achieving operational excellence in commercial and humanitarian settings are vastly different. Developing the operational structure necessary to excel in humanitarian response demands a fundamentally different set of capabilities, culture and mission than in commercial settings. Although the need for a more reliable source of revenue is understandable, transforming the operational and organisational structure to accommodate commercial activities may jeopardise the primary mission of a humanitarian organisation. To strike this delicate balance, humanitarian organisations venturing into commercial activities need advanced systems and excellent management, as well as carefully designed communication channels between their commercial and humanitarian branches. Above all, transparency and good governance are essential. |
29 Mar 2023, 19:00
| FROM Insead Admissions Blog: The Costs of Fuelling Economic Growth |
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A new generation of smart machines could possibly replace a large proportion of existing human occupations, according to the World Economic Forum. But even before the emergence of “smart machines”, the relationship between exergy and production is clear to physicists, industrialists and political leaders. However, economists have been misled – one could say mesmerised – by Philip Wicksteed’s “exhaustion theorem” from the 19th century that says, in effect, that the importance of energy in the economy of a country must be proportional to the share of energy costs in the country’s total expenditure. Built on this theorem, economic modelers from Robert Solow to William Nordhaus assume that cutting energy consumption (to reduce greenhouse gas emissions that cause climate change) won’t have a serious impact on gross domestic product (GDP). But this is far from today’s reality because the theorem is flawed. Today, in spite of the importance of energy, the share of energy costs in the United States national accounts is only about 4 percent, while payment to workers in the form of wages and salaries account for at least 70 percent of GDP. On the impact of energy shortage on GDP, look no further than the effects of Russia’s invasion of Ukraine on Germany, the world’s industrial powerhouse. Cheap Russian gas has powered Germany’s industries since the 1990s. When access was cut, wholesale natural gas prices in Germany surged nearly 400 percent in early September 2022. Energy-intensive industries such as chemicals, glass and metal producers were forced to curb output, stop production or relocate production. As a result, Germany’s GDP growth in 2022 fell by over 25 percent, from 2.6 percent in 2021 to 1.9 percent in 2022. A significant consequence was that Germany had to fall back on coal temporarily, in spite of plans to phase out coal-fired power by 2030. Against the backdrop of the global energy and climate crises and a looming recession, it is ever more important to understand the role of energy in production, and the cost of greenhouse gas emissions on the environment, especially carbon dioxide and methane. Redefining ‘work’ My point is that the economy depends entirely on energy to do work – in the thermodynamic sense. “Doing work” here refers to generating electricity to produce light and perform all kinds of mechanical work. It provides heat to cook food, heat houses, smelt metal ores and produce cement for construction. Work performed by internal combustion engines also drives cars, buses, trucks, tractors, ships and airplanes. All these economic and human activities depend on energy (exergy) inputs. Without energy, they would all stop short, never to go again, like the song “My Grandfather’s Clock”. A worker or a working animal without food or feed is a corpse. An engine without fuel or electric power is a pile of useless junk. Exergy – or the part of energy that is capable of performing thermodynamic work – is the unique and only “factor of production” that counts. While capital goods play a role, they too were produced by thermodynamic work done in the past. Yet, despite the essential role of exergy in the economy, it is drastically under-represented in statistics and missing in economic models and textbooks. In economic growth theory, the Cobb-Douglas production function is commonly used to model the relationship between production output (GDP) and production inputs (or “factors”). Since Adam Smith’s era in the 18th century, the widely recognised inputs are: agricultural land, labour and capital (tools, animals, buildings). Where is exergy? Exergy as the new labour in production If “labour” is another word for “doing work” and if work can be measured in terms of energy (exergy) consumption reasonably accurately, exergy would be the dominant factor to explain and predict production (GDP) output in economic models. This perspective could offer important insights on the impact of energy constraints on businesses and the economy. In a recent study, my co-authors* and I set out to empirically prove this perspective. We analysed the GDP, capital, labour and exergy data of the ten largest economies that cover over 65 percent of global GDP: Australia, Canada, China, France, Germany, India, United States, United Kingdom, Japan and Italy. We used the Cobb-Douglas production function to produce individual economic estimations for each country and an estimation for all ten countries for the period of 1960 to 2014. Two alternative sets of inputs were used to produce the estimations: the conventional one based on labour (payments to employees) and financial capital stock vs. exergy and capital (in energy units). The results show that viewing labour as work done – by exergy consumption – explains economic growth almost perfectly. Specifically, the outputs for the two sets of inputs match only when an exogenous multiplier representing technological change (or “total factor productivity” change) is included in the first estimate using conventional inputs. But no such multiplier is needed for the second estimate. We empirically show that exergy consumption can replace labour as an input for production without an additional multiplier to account for technological change. More importantly, our findings underpin the essential role of energy behind GDP growth and the relevance of exergy as either a substitute or complement for labour in aggregate production functions. The wider picture: An environmental perspective From the economic point of view, the belief held by most – including governments and institutions – is that the economy must grow. Yet, exergy and economics cannot be viewed in isolation. With the increased demand for energy to fuel growth, the singular pursuit for growth will not benefit the environment nor make society more equitable. Industrial production, food production, economic and other systems are part of a larger environmental system that interacts and evolves. Among the global systems, food production is one of the most critical – albeit unsustainable – ones. In a typical scenario, large volumes of water, nitrate and phosphate fertilisers are applied to expansive farmlands in Brazil to grow soybeans that are sent to the US and fed to cattle together with artificial growth promoters. Alongside beef, methane and other carbon emissions are produced. The luxury of access to affordable steaks clearly comes at a cost to the environment. At the recent World Economic Forum in Davos, there was broad consensus that climate change is an important topic and that all carbon-based fuels should be eliminated by 2050. The question is: How can the inherent tensions between economic growth and sustainability best be managed? Invest in change In practice, significant investments are needed to make energy and other systems more sustainable. Electrification is underway in an ambitious fashion in the motor industry, backed by governments and industry. The EU is targeting 100 percent fully electric vehicles (EV) by 2035 and China is requiring manufacturers to produce new energy vehicles (NEVs) to meet credit requirements. However, even when every vehicle is an EV, only 30 percent of the current carbon emissions will be eliminated. To eliminate all emissions, it is necessary to electrify everything, powered by renewable energy. Technologies such as turbines and photovoltaics are capable of tapping solar, wind and hydro power, but their efficiency and scale need to be improved to bring significant environmental impact. The recent breakthrough in nuclear fusion – often described as the "holy grail" of energy production – is another important step towards powering the world with almost unlimited clean energy instead of relying mostly on fossil fuels. Although governments often take the lead, investing in change is not limited to governments. Business leaders have the power to make their operations more efficient and sustainable by modifying their interactions with the environment. Companies should allocate a portion of profits into creating real value for the company through research and development instead of distributing profits as dividends to shareholders or for share buybacks. Exergy is intertwined with business operations, productivity and the environment. Investment in more sustainable processes and products may not be immediately profitable but will profit both the environment and businesses in the long run. When business leaders recognise this interdependency, it could lead to improved risk assessment as well as greater accountability towards the environment. * Ivan Savin and Jeroen Van Den Bergh, Universitat Autònoma de Barcelona, and Lu Hao, Zhejiang Institute of Administration |
05 Apr 2023, 23:00
| FROM Insead Admissions Blog: Making Strategic Decisions Together: Do We All Need to Agree? |
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Top management teams often find it difficult to agree on a course of action for their firm. Whenever we participate in firm strategy retreats, we see managers grappling with collective decisions. After weeding out inferior strategic alternatives, they are left with a set of promising but mutually exclusive options, and often struggle to make a call. Since it is unrealistic for every manager to agree on a single option, the more relevant question is how many do need to agree before a strategic decision is made? When organisations set a high threshold for approving a project – such that almost all managers need to be in agreement – it is clear that few projects will move ahead. As such, to encourage more investments, organisations may modify their decision-making rules, lowering the threshold required to approve new projects. While this appears logical, this structural change may fail to bear fruit. Our research reveals that lowering the bar in the hopes of making it easier for projects to get the go-ahead can have unintended consequences. When less consensus is needed, the more an individual's support counts. This makes individuals more conservative about how they vote and reluctant to voice their support. Changing the rules changes how people vote Suppose a company is considering a major investment to expand its production capacity and its decision-making process requires at least 75 percent of a committee of senior managers to approve any new investments. However, they come to believe that requiring a majority vote is too high a standard and may hinder their ability to grow, so they change the rule to only require a simple majority. After lowering the threshold, however, committee members begin to scrutinise proposals more carefully and become less inclined to approve new investments, even those with strong potential for success. Ultimately, the new voting structure does not yield the desired effect. Why are managers more reluctant to support new projects when voting rules change? We conducted a series of experiments to examine how decision-making rules shape how individuals vote. In our studies, participants assumed the roles of partners in a venture capital firm and were tasked to vote on whether to invest in certain start-ups. Data was collected via online workshops that are still open to the public. Each participant was aware of the voting threshold (which we varied systematically) and had access to limited information about each company. We found evidence that a high threshold makes individuals more relaxed about how they vote, while a lower threshold causes them to be significantly more cautious. This effect held across different threshold magnitudes, different group sizes and independent of whether individuals deliberated before voting. Essentially, knowing how much your vote counts influences how you vote, and substantially so. People anticipate what needs to happen for their vote to make a difference. For example, in a scenario where one vote would be sufficient to move ahead, individual decision-makers become acutely aware that they may be the pivotal voter and become more reserved about how they vote. Put differently, individuals are a lot more careful when they know their decision can be the make-or-break vote and will only voice their support if they’re absolutely certain they are right. This isn’t necessarily because they’re worried about being blamed for making a bad call, but rather, they fear they don’t have enough information to make the right call. By lowering the threshold, organisations give more power to individual decision-makers. However, people might not necessarily be comfortable using that power. How to really encourage organisational risk-taking Organisations need to be aware that changing decision-making rules won’t automatically translate into better organisational decisions. This is because it will also change how people vote; individuals will adjust how they vote based on the new rule. If lowering the bar for projects to pass doesn’t work, how can organisations promote more risk-taking? One approach could be to implement a straw poll to see where everyone stands before making a go/no-go decision. This method can help decision-makers learn from their peers, gain a better understanding of the project's potential impact and assess whether it aligns with the organisation's overall goals. This approach can be especially useful when the decision involves a high level of risk and managers are hesitant to take a chance on a new project. By gathering inputs from others, decision-makers can gain confidence and insights that may help them make a more informed decision. Another way could be to not disclose how much each vote counts. This could help decision-makers focus on the project's potential rather than engage in strategic voting by considering how much influence their vote has. By removing the weight of their vote, people may make more objective decisions. Alternatively, organisations could maintain a consistent voting rule but occasionally give managers a "golden ticket" to trigger the go-ahead for projects that appear risky, but they believe have the potential for significant impact. Instead of lowering the bar for project approval, organisations should prioritise creating a culture that values risk-taking and encourages managers to follow their instincts. In order to arrive at the best decision, top management needs to reflect on how to make the decision. Sign up for the next Venture Capital, Business Angels & Startups online workshop here. |
09 Apr 2023, 20:00
| FROM Insead Admissions Blog: Russian Business Leaders in a Time of War |
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Last year Russia President Vladimir Putin started two undeclared wars that dramatically changed the context for business in the country. The first war, begun on February 24, was a conventional war against Ukraine in which Russian forces began attacking Ukrainian cities, towns, villages and infrastructure. The second was a hybrid war against the West, in which Putin used natural, financial and informational resources to inflict damage on Western countries and strengthen his position at home. Putin’s aggression and the West’s swift decision to supply Ukraine with military equipment and impose unprecedented economic sanctions on Russian organisations and individuals created a new and heightened level of turbulence and uncertainty for Russian business leaders. While being Russian doesn’t imply that they support the values or actions of their country’s government, it does mean that they have to bear the brunt of the resulting uncertainty and disruption. A study conducted by the Skolkovo School of Management in March 2022 identified five key challenges facing heads of Russian companies: extreme contextual volatility, leaders’ inability to make any prognosis, employees’ stress and psychological trauma, the need to retain key talent while reducing headcount and the leaders’ own emotional state and motivation. The study found that Putin’s decision to attack Ukraine and to openly confront the West came as a surprise to most Russian business leaders. Whether traditionalist or global they did not want the war. Their initial reaction was, in the words of one CEO of a large state-owned company: “Shocked, sad and mad.” Getting on with business Shortly after the outbreak of the war, the Skolkovo study found a small but noticeable number of Russian business leaders decided to exit. Their withdrawals took different forms, the most radical being to relocate themselves and their businesses to a different country. As one founder and president of a reputable consulting company said to me: “Now it’s the last chance to do something meaningful outside of Russia.” Some sold or closed their businesses and emigrated, while others left the country but continued to own and manage their Russia-based businesses. Another group of senior executives quit their jobs because of the imposed or potential Western sanctions but continued to exercise significant influence behind the scenes. Meanwhile, most Russian business leaders have stayed in the country and continued in their roles. Based on business media reports as well as my personal interactions with some of these executives, I identified several patterns of behaviour during the first year of the war. Self-mobilisation Resilience is a key feature of Russian national culture. Many business leaders were done mourning the past in a matter of weeks. They then rolled up their sleeves to face the new challenges, scanning the environment for cues on how to navigate the new maze and delving into every detail in ensuring business continuity. As a CEO of a commercial bank told me: “After 24 February I drank for a week. Then I said to myself: ‘You cannot take five million clients out of this country. You have to find ways to serve them under the new situation’. I stopped drinking and immersed myself in creative work.” Taking responsibility for their organisations Russian business leaders did not waste time blaming Putin, Ukraine President Volodymyr Zelensky or US President Joe Biden for the turmoil their businesses experienced. Nor did they expect the Russian government to help them in any significant way. Rather, they assumed personal responsibility for the fate of their organisations and committed to keeping them alive. For some companies this translated into salary cuts, putting people on reduced time and closing some product and business lines. Remaining apolitical With a few exceptions, such as the CEOs of large government-owned companies who openly supported the war in Ukraine, Russian business leaders kept a low profile and did not make their views on current events known either publicly or privately. They steered clear of politics and asked employees to do the same. In an autocratic country, business leaders consider such an approach to be the best risk-mitigation policy. As one owner of multiple businesses explained: “Many people in the West are shocked that Russian businesspeople do not publicly condemn the war. But they just do not understand the situation in Russia. If I say what I think I will lose my assets, my employees will lose their jobs, my customers will not be served, but the war will go on.” Adapting with ingenuity and entrepreneurship Russian business leaders saw both risks and opportunities in the new situation. They worked hard to mitigate the former and capitalise on the latter. The Skolkovo study reported that 45 percent of respondents engaged their companies in proactive adaptation, which included rethinking strategy; altering financial management, operations and logistics; and changing organisational structures and headcounts. Business leaders also analysed the sanctions imposed on Russia for loopholes and to design schemes to circumvent them. The general trend was to replace European Union partners with those from China and to some extent India; source critical components through Turkey, Azerbaijan or Armenia; and work with Russian suppliers on developing substitutes for Western goods. Western sanctions triggered not just disruptions but also new opportunities. Notably, following McDonald’s exit from Russia, Siberian entrepreneur Alexander Govor quickly acquired and rebranded the vast chain’s entire 850 outlets to Vkusno - i Tochka (“Delicious. Full stop”), saving the jobs of 62,000 Russian employees. Some business leaders also aggressively hired talent, went after competitors’ customers and negotiated M&A deals. To retain high-performing staff, many Russian companies allowed, and in some cases helped, male employees who would have come under pressure to fight in the war, to emigrate and work remotely. Some companies even arranged exemptions with the military authorities. Supporting their teams and companies The Skolkovo study indicated that despite their personal values, political views or assessment of the situation, most Russian business leaders remained optimistic about the longer term while recognising that things might get worse in the short term. They remained confident in their abilities to navigate yet another crisis, and even strengthen their companies. Executives sought to instill that optimism into their organisations, often by increasing the frequency of their interactions with their teams. Some business owners and CEOs paid a one-time extraordinary bonus to all their employees while others provided free psychological help. Many leaders I spoke with emphasised the importance of framing the situation in a positive way. They talked about new opportunities and preserving investments, including those in people development, and sharing good news no matter how small. Staying on top of adversity It is obviously hard to give any advice to Russian business leaders who find themselves facing such an adverse context. However, based on my past research I can at least suggest three recommendations that any business leader forced to operate under conditions of extreme adversity may want to consider. Keep a long-term prospective and think about avoiding regret The deeper the crisis is, the stronger its impact on a leader’s legacy. However, emergencies often trigger knee-jerk reactions. Leaders may neglect the bigger picture and long-term consequences of their actions and non-actions. They ought to remember that a person’s life is longer and bigger than any job and consider what is important in their wider lives as well as the regrets they want to avoid. Such reflection will help to answer the essential questions many executives struggle with but do not dare face: Should I continue in my role? If yes, what contribution to the world do I want to make and how do I want to be remembered? And finally, what are the values that will guide my work in the next few years? Share leadership In times of uncertainty leaders tend to consolidate responsibility and authority. But not only does this put enormous psychological pressure on them, it is simply not effective. Smart leaders invite their people to share the burden by making plans and decisions together, delegating authority and enabling leadership at all levels of the company. Look after yourself Leading under adversity requires high levels of physical and mental fitness. This fitness has to be maintained through a consistent regimen of adequate rest, nutrition, physical exercise, meditation, sojourns in nature, meetings with close friends and moments of spontaneity. Some Russian business leader have tried to reframe their new reality. The CEO of an industrial holding confided that he realised that the old order would never come back, the new one was going to be messy and he had to be very careful not to compromise his values in that emerging reality. Many executives simply reduced or stopped consuming news about the war. Many tried to stay physically healthy and were selective about the company they kept. Other leaders adopted radical acceptance just to stay sane. As one CEO of a tech company said to me: “I cannot do anything about the war, so I stopped thinking about it and concentrate on what I have control over – my business.” |
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