Tuesday, August 31, 2010

Increasing Cracks in the “US Product Safety” Egg: Why it is Difficult to Monitor Ourselves

By Dr. Hari Bapuji.

The latest recall of over 500 million eggs in the US tops a list of large recalls this year. A few other recalls that come to mind quickly are: McDonald’ recall of 12 million Shrek themed glasses, recall of 3 million bottles of Tylenol by Johnson and Johnson, Maytag’s recall of 1.7 million dishwashers, and numerous recalls of cars by Toyota, Ford and others. Besides these, there are a number of other smaller recalls in recent weeks. What is common to all these recalls is that these products cut across the spectrum of product safety and include food, drug, auto and consumer products. More importantly, these product were all made in the US. This obviously raises the question of why? It is difficult to tell without studying this issue in-depth, but let me hazard a few guesses.

As manufacturing of a number of products shifted out of the country, it is possible that companies on this side of the world (e.g. North America) are losing significant types of expertise related to product design, development and manufacturing. This might be resulting in more faulty products coming out of the companies.

Since 2007, a number of recalls involved products made in China. As a result, the attention of all stakeholders (industry, government, regulators, consumers, and media) was focused on “import product safety.” While this was no doubt required given the rise in imports to the US, a predominant focus on what is happening in China might have given rise to some kind of complacency in the US. It was probably felt that problems will not arise (at least not to the same degree as those made in China or elsewhere) with products made in the US. When we expect problems, we are more careful. But, if we do not expect problems, we are less careful and slippages might occur.

Maytag's recalls don’t surprise me anymore but are a case in point. When a defect involved external suppliers, Maytag was quicker to issue a recall (likely because they had more systems to monitor external suppliers). But, when products were made by Maytag itself, the recalls came slow and after a number of incidents and injuries occured. We all know that companies need to set up systems to monitor their contractors' opportunistic behaviour. But, it is equally important to set up internal control systems.

If there are no control and inspection systems, we get to see the kind of violations reported in some of the recent recalls. The violations in the egg farms were far too many and were termed as stomach churning. Johnson and Johnson was once known as the gold standard for recall management because it managed its Tylenol recall well in the 80s. The recent violations in its factories were numerous. On top of it, Johnson and Johnson was accused of engaging a third-party to buy back its products from store shelves instead of announcing a recall. Early last year, Peanut Corporation of America shook the US and Canada with its vast recalls. Several violations were found in their factories too.

If the above logic is true (one hopes that it is not and that these recalls are only isolated cases), then recalls of products made in the US will only rise in the coming months and years. To stop that, it is important that all stakeholders of product safety look as much within the US as they do outside. Also, companies need to look within their boundaries as much as they do outside.

In sum, it appears that we need a clean-up, both literally and figuratively.

Friday, August 27, 2010

Successful Entrepreneurs exercise Strategic Leadership

Entrepreneurs and employees make decisions every day as they interact with their firm’s stakeholders, customers, suppliers, the communities in which they operate, and each other. When these decisions are in accordance with the strategic direction of the organization, the company will thrive. The key is strategic leadership so this takes place consistently and automatically.

Strategic leadership means influencing your employees to voluntarily make decisions on a day-to-day basis that enhance the long-term viability of the organization while at the same time maintaining its short-term financial stability. Are the decisions that employees are making in accordance with the strategic direction of the organization? Will these decisions enhance the future of the organization and make sense in the short-term?

It makes sense that if you can count on employees to voluntarily make decisions that benefit the organization you won’t have to expend as much effort on monitoring and controlling your employees. Counting on your employees to do the right thing will also give you more time to examine what the organization needs to do, both in the short and long-term.

But how best to ensure that you can count on your employees to make those decisions? Communication is one key way. When employees understand and embrace the strategic direction of the company they will more likely make appropriate decisions. Conversely, if employees do not know the strategic direction of the organization they may inadvertently make decisions that damage it.

Influencing subordinates to voluntarily make decisions that enhance the organization is the most important part of strategic leadership. Noel Tichy professor of organizational behavior and human resource management at the Ross School of Business at the University of Michigan says 

When you can’t control, dictate or monitor, the only thing you can do is trust. And that means leaders have to be sure that the people they are trusting have values that are going to elicit the decisions and actions they want.

If you clearly delineate the values of your organization, people will be more inclined to live up to those values. This means that your employees will voluntarily make decisions and take actions on a day-to-day basis that will eventually determine the strategy your organization is pursuing. Entrepreneurs who are strategic leaders understand and use this to ensure the current and future viability of their organizations.
Two additional views on Strategic Leadership are as follows: 

“There are three categories of people – the person who goes into the office, puts his feet up on his desk, and dreams for 12 hours; the person who arrives at 5 am  and works for 16 hours, never once stopping to dream; and the person who puts his feet up, dreams for one hour, then does something about those dreams.”
—Steven J. Ross, Former Chairman and co-CEO of Time-Warner

“Without effective strategic leadership, the probability that a firm can achieve superior or even satisfactory performance when confronting the challenges of the global economy will be greatly reduced.”
—R. Duane Ireland and Michael A. Hitt, authors of Strategic Management: Concepts & Cases Competitiveness and Globalization

*Dr. Glenn Rowe is the Director of the Executive MBA Program at the Richard Ivey School of Business, Canada. He is an Associate Professor of Strategic Management and holds the Paul MacPherson Chair in Strategic Leadership.

Thursday, August 12, 2010

Why I "Dared to Care" about Philosophy and Research Methods at the Academy of Management, Montreal

By Dr. Suhaib Riaz.

My reflections during the largest annual conference of management scholars, held recently in Montreal, were focused on two words and their relationship to each other: philosophy and methods. Though very few others seemed to "dare to care" about it, I believe these words might well hold the key to why most mainstream management research has lost relevance in the real world. 

Philosophical assumptions behind our methods do not get as much coverage as they should. At a workshop on the "philosophical foundations of organizational research" that was ably chaired juggled by Raza Mir (given the eclectic nature of the talks), Teppo Felin remarked that mainstream journal reviewers in our field typically push authors to move any philosophical issues to “footnotes” (hence the title of his talk: What is Reality? Footnotes...). This problem has deep ramifications for what we study and how we study it. 

One aspect of this problem involves our notions of probability distributions underlying social phenomena. Pierpaolo Andriani, speaking at a workshop on "empirical exploration of complexity in human systems", shared how most of our statistics are based on Gaussian assumptions, while the real world is more Mandelbrotian / Fractal and closer to Paretian assumptions - a fact that Schumpeter was aware of. The talk was reminiscent of Nassim Nicholas Taleb's work, both in terms of its content and in how it was ignored by most mainstream researchers at the conference. 

This leads to broader questions of how statistical tools have been used by scholars in our fields. An investigation of such statistics using an ethnomethodology approach is much needed, and was the subject of a talk on Ethnostatistics by Robert Gephart. Gephart shared how his concern started years ago during his PhD years as a qualitative scholar attending quantitative methods courses. His exhortation was for us to encourage more critical studies of methodology practices and ultimately make statistics more meaningful. I left with a strong feeling that ethnostatistics has the potential to revolutionize our field by posing challenges to mainstream work, particularly if conduced with a focus on the loss of relevance in our work. 

In general, it is puzzling to see why, out of the 7000 or so academics gathered at the Academy of Management conference, more of us are not following the philosophy and methods of scholars that have led to impactful research. If we needed any confirmation on the link between methods and relevance, here is an extract from the recently published last interview of C. K. Prahalad on the importance of qualitative methods:

“Every one of my research projects started the same way: recognizing that the established theory did not explain a certain phenomenon. We had to stay constantly focused on weak signals. Each weak signal was a contradictory phenomenon that was not happening across the board. You could very easily say, “Dismiss it, this is an outlier, so we don’t have to worry about it.” But the outliers and weak signals were the places to find a different way to think about the problem.

If you look historically at the strategy literature…the most powerful ideas did not come out of multiple examples. They came out of single-industry studies and single case studies. Big impactful ideas are conceptual breakthroughs, not descriptions of common patterns. You can’t define the “next practice” with lots of examples. Because, by definition, it is not yet happening.”

A confirmation of this approach came from Yves Doz, Prahalad's long-time research collaborator at a session where he shared stories on how they conducted qualitative work: interviewing executives, avoiding simple explanations, and working through the qualitative data over extended discussion sessions. Not surprising that Doz often stayed over in CK’s basement, and they started breakfast by throwing out solutions from the previous night’s work. Little wonder that Mary Yoko Brannen introduced Doz as Prahalad's "brother"!

On another note, it was nice to get to thank Richard Scott for a paper that he encouraged two years ago at the same location, and also get some feedback thoughts on the appropriateness of a qualitative study underway on narratives during the current economic crisis. Scott and other participants provided some interesting insights during a session on how to interweave emotions and identity into institutional theory. For my work-in-progress on the global financial crisis, this also had interesting tie-ins with the amazing keynote address in the critical management studies division by Stephen Barley on the need to investigate how business organizations interact with and mold governments. But more on that another time...