Thursday, April 25, 2013

Joe Thornton: Creating a Positive Mood

Many managers believe that emotions have no place in business. As a practicing manager, and a scientist, I was always taught that emotions are bad and that they play havoc with our decisions. That is, we should be making logical decisions based on facts and facts alone. The reality of the workplace makes this something that is impossible to achieve. Since ignoring our emotions does not work, the problem needs to be considered as how do we make our emotions and the emotions of others work for us in business. We have all heard that people do better when they are happy, so then we should be striving to create happy work places. But how do we do that.
A recent commercial from Values.com shows a young boy with a bat and a bucket of baseballs, he states that he is the best hitter in the world, he tosses a ball into the air, swings and misses, he repeats his mantra a second and third time, yet he misses each time. He then looks down at the ground for a second, looks back up and says that he is the greatest pitcher in the world.  This illustrates what we typically call optimism or one of the positive emotions. In this commercial, we see a person who has taken what many would consider to be a failure and made it a victory. It is about striving to reach a goal and persevering in the face of adversity. In my research, I looked at how self-efficacy affects social responsibility and the effect of positive and negative emotions on that effect. When I measured self-efficacy, the questions that strongly contributed to my measurement were about being confident in our ability to succeed even when faced with something we had not done before. While this had an effect on social responsibility in companies, the effect was relatively small and was limited to economic and legal responsibilities. When I added positive emotions to the equation, the effect size climbed indicated that positive emotions created a much larger impact on social responsibility than did self-efficacy alone.
My measurements for positive (and negative) emotions looked at three shared items, compassion, overall mood, and vision. Vision statements are very commonplace in most companies and are often communicated or shared throughout the company, but what about the other two items, what is shared overall mood and shared compassion. Let’s take a look at shared overall positive mood (OPM).
When we measure positive mood, our questions are related to whether someone enjoys working at the company or not in terms of the company and the people, we also ask if they would prefer to work elsewhere. When we walk into a company for an interview or to meet people, we often perceive a very different culture than if it is a place where we work. Most of us, in the US at least are at work 8 hours or more per day, five days per week, 50 weeks per year, nearly a third of time is spent at work and we create relationships with the people we work with.  These relationships may be positive or negative depending on the people involved and how we deal with them. When we have positive work relationships, we look forward to going to work, we know the people, we feel with them when they are hurt or happy. This sense of positivity is what we call the overall mood of the organization. It can change quickly from positive to negative because emotions are contagious and we pick up the cues at a subconscious level.
Creating a positive emotional atmosphere means that we need to allow people to have relationships and we need to build these relationships into our organization. We should foster a sense that people share not just the burden of work, but the joys of work. Recognizing when people have a positive experience, passing out compliments and learning to listen are good starting points and they are easy to do. We just need to remember that we are human, and just as we have hopes, dreams, and fears, so do the people we work with. Foster an open and communicative atmosphere being willing to stop and listen, be willing to take time to build relationships on a foundation of respect for others. These are a few steps but gradually, the positive days will begin to outnumber the negative and soon your employees will care and want to be there.
Joe Thornton is an instructor of Management at Bellarmine University, where he focuses on small business ethics and social responsibility. He has over 29 years of industry experience at various management levels in the environmental industry as a consultant, regulator, and internal resource manager. He is a registered professional geologist in Kentucky, Indiana, and Tennessee and is a certified professional geologist through the American Institute of Professional Geologists. He is currently finishing his doctor of management degree at Case Western Reserve University and can be reached at jthornton@bellarmine.edu.

Dave Jones: Is the DM Worth the Price?

Twenty two thousand five hundred dollars times 6 semesters is a lot of money for a terminal degree in management.  $135,000, plus expenses; plus lost time; lost experiences with family and colleagues; lost opportunities to pursue other ventures; emotional stress and strain and much more.  The value is almost immeasurable.  But I tried, anyway. 
If I use a conservative average salary of $XXX,XXX and determine the hourly amount of $70 then with a few simple assumptions about the time spent doing homework, paper projects, re-doing emails that were unanswered, revising and resubmitting homework, reading and studying one can arguably arrive at a cost of approximately of $165,000 for a running total of $300,000 ($135,000 + $165,000).   Add the difficult to measure time away from family, friends and colleagues at let’s say conservatively double the rate to $140 an hour and one raises the total costs to $560,000.  Opportunity costs cannot be added because they are incalculable.  Add expenses for travel, hotels, conferences, editors, ink, transcriptions, books, etc. and we approach $575,000.  Many might agree to a range of between $500,000 to $600,000 for the DM degree if one gets comfortable to my simple assumptions.   If one breaks this down further by class and by paper projects we have approximately 22 events in a 3-year program.  Thus, if each event is prorated evenly, each activity costs approximately $22,700 to $27,300.   Of course, it is probably inappropriate to evenly prorate all the events; so to be fairer, let’s assume that the statistics courses and the papers are worth more since one of the DM reputations at Case is one of substantial rigor and writing contributions to literature.  Therefore, let’s assume statistics and paper projects are worth double the amount of any other course.  Eight events for statistics and paper production, each worth double all other coursework and we get a new range for 8 “rigorous” training events and 14 “less rigorous” training events.  Consequently, the less rigorous price per event is in a range of $16,667 to $20,000.  The rigorous events will fall in a range of $33,334 to $40,000.  One can evaluate on an activity-by-activity basis whether or not each course was worth the price.  But, my question was really about the DM program holistically.
I recognize it would not be fair to look at costs alone without considering the benefits as well.  We received meals, snacks and drinks during our DM residencies and free parking for those of us who drove.  I think I ate enough “trail mix” during the residencies to gain about 5 pounds each time we met.  I am certain I wasn’t cheated of my share of food.  A generous estimate is $75 a day for these goodies or $6,000 for the three year total.  We get a cap and gown rental free and a tam at graduation that is ours to keep.  This amounts to $275.  Let’s add the value of access to experts in so many areas of management and statistics our faculty.  If we assume that the average salary was $XXX,XXX for our faculty and we got one third of their time divided by 18 in our cohort, then each of us will be allocated approximately $70,000 for all three years of time spent by each professor on our individual activities.  Add to this an overhead factor for the use of this fabulous facility.  After all how many DM students anywhere in the world get to use a Frank Gehry building to go to school?  None, except, those lucky enough to attend CWRU!!!  I estimate this to be a factor of 6/10s of the salary cost of the faculty so an additional benefit of $42,000 per person.  And of course, the able body assistance of Marilyn and Sue helping us with countless tasks and conveniences.  I calculate each person is attributed $12,500 for these great ladies.  It is impossible to calculate the value of the increase in knowledge we each received at our advanced age in life.  I assume these offset the opportunity costs previously discussed and equally incalculable.  We currently stand at a net cost of about $369,225 to $469,225; a very substantial sum for the DM degree.  There are three remaining significant ingredients missing in my computations: the increase in earnings one can expect from this degree, the Case name value and last but not least the relationships that will last and last.
Earnings increases are difficult to estimate because everyone attending the DM is already an accomplished executive and more than likely to reach peak earnings no matter the additional DM degree.  However, with added credentials and experience, most employers or clients will pay more for added knowledge and skills.  I can’t estimate the current salaries or work life estimates because I don’t have the data.  But, assuming our cohort gets a 15% increase pay for the rest of their work life and given our average age and expected remaining work life, I assume we each will realize on a present value basis after taxes an additional $233,000 in benefits from the DM.  We are now down to an approximate net cost of between $133,000 and $233,000.
The CWRU name is synonymous with the leader in DM degrees.  We hold so many firsts in the area we are the tip of the spear.  A value on the Case name is certain to bring with it the respect and prestige befitting its reputation.  I estimate the Case name and reputation over any other university offering this degree to be $250,000.  Just look at the Cleveland Browns naming rights to their stadium worth $100MM and the Browns stink! The math is simple: excess benefits over costs are between $17,000 and $117,000 and now we must consider if the DM is underpriced? 
Of course, we can’t calculate an accurate and comprehensive estimate of the cost of the DM or its benefits.  As a fun exercise, I did this to determine for my own satisfaction the ultimate cost of the one remaining benefit that arises from the DM degree.  That is simply the satisfaction of doing something only a few hundred people in the world have ever done.  The satisfaction gained from doing something that a lot of family, friends and colleagues would have never attempted.  That same group openly voicing their support for our courage and efforts but quietly and secretly saying, “you have to be nuts to do that!”  But most of all and most importantly, the privilege of sharing this experience with a cohort of colleagues randomly selected by fate or dumb luck and thrust together to enjoy the trials and joys of the DM is not surprisingly immeasurable.  That benefit is priceless.  The answer to the question is the DM worth it?  That is easy!  When priceless enters any equation, it becomes among the most treasured items known and without a doubt worth it and more!
Dave Jones is an associate professor of accountancy at Case Western Reserve University, email dej34@case.edu.  He will receive his DM degree on May 19, 2013.

Solange Charas: Threats to Board Stability – Understanding Director Behavior

For the past 25 years, I have been advising Boards and Top Management Teams, and having served on both public and private for-profit Boards, it did not escape me that each Board has its own characteristic, rhythm, social construct and level of effectiveness.  Boards are a mystery to most people (directors and researchers alike) especially as it concerns the questions of what makes a board good versus bad, active versus passive, engaged versus indifferent. 
To try to answer the question of what makes a Board good or bad, I went back to school to study the “board phenomena.”  I had hope that with an intensive study of boards (and a PhD), I would be able to enhance the effectiveness of my advisory work and help boards harness the incredible talent resident in their individual Directors to produce, as a team, economic value-creating leadership.
After a year of reading over 300 research articles, books and practitioner accounts, and speaking to my circle of board Directors, I was able to design an effective context for the first phase of my research.  The fundamental problem was that evidence existed (GMI ratings) that the majority of low corporate governance ratings for U.S. publicly-traded companies are attributable to poorly-performing boards.  This scared me, and should scare anyone who owns a share of stock!
Passage of the Sarbanes-Oxley (SOX) and Dodd Frank Acts of 2002 and 2010 respectively have had a material effect on corporate governance of US firms ? heightening public scrutiny of board behavior and causing companies to reevaluate both board composition and internal controls.  On a governance stage more brightly lit by such legislation and resulting evaluation, my research draws on “theatric” theory to examine boards as “actors” whose individual and collective performances can enhance or diminish the quality of organizational governance.
One of the most respected executives and board members in the US is Warren Buffet, but even Warren has faltered, admitting in his 2002 annual report, to succumbing to the power of social pressure by: “…too often (remaining) silent when management made proposals…judged to be counter to the interests of shareholders.”  If the “Oracle of Omaha” found Boardroom dynamics challenging, what does that say for the rest of us mere mortals that serve on Boards?  The research question became obvious -- What are the enablers and impediments to Director participation in Board deliberations?  What makes good boards good and bad boards bad?
With this premise, I selected directors from organizations with high and low governance quality GMI ratings.  The research process involved semi-structured interviews with seldom-sampled US small- and mid-sized enterprise (SME) board members of companies with high and low governance quality ratings (GMI).   My research reveal factors affecting their behavior in and out of the post-SOX boardroom ? and the consequences of that behavior on board culture, tenure and overall performance.  The research results illustrate how board member behaviors ? both individually and collectively ? impact board quality. There were three major paired findings of the research: 1. two distinct realms of the boardroom, 2. two types of conflict that exist in the boardroom and 3. two different recruiting strategies and how that influences governance quality.
Two Distinct Behavioral Realms of the Boardroom
There are two “realms” of the boardroom – front stage (the formal boardroom which is a stage for the information dissemination and decision ratification) and back stage (committee meetings, informal dialogue between board members, working meetings) where the work actually gets done.  Each realm has its corresponding social norm.  The front stage is characterized by more “collegial and congenial” climate and the backstage where directors have a more open and direct communication. Directors who have difficulty distinguishing these two realms and their corresponding social norm are typically regarded as “disruptive”, “uncooperative,” “overbearing,” “overpowering, or “egoistical” because they confuse appropriate behaviors in each realm.
Two Distinct Types of Conflict
It turns out that there is something quite powerful in the way directors speak to one another. My research revealed that there are two kinds of boardroom conflict – cognitive conflict and affective conflict.  Cognitive conflict is essential in generating value, whereas affective conflict destroys any chance of generating value:
  • Cognitive conflict is task-oriented, with a focus on how to get things done and achieves optimal results – the dialogue around cognitive conflict can sound like:  “I don’t think your idea will work, maybe we need to look at it a different way….have you thought of this?” 
  • Affective conflict, conversely, is emotionally-oriented and focused on personal differences or shortcomings between people – the dialogue around affective conflict can sound like: “I don’t think you have good ideas and you don’t understand the issue”. 
This is a subtle but powerful distinction, as cognitive conflict addresses ideas or points of view with an opening for something creative, innovative and positive, whereas the affective conflict is a seeming attack on the capabilities and perspective of the individual – making this personal and limiting.
Two Recruiting Sources
My interviews showed a consistent theme – there is a relationship between board governance quality and prior personal relationships of board directors. High governance boards cast a wide net when recruiting directors, and often recruit people with whom the other directors did not have a prior relationship.  My study showed that close to 70% of high governance-rated board directors were “strangers” when they joined their board, while only 25% of directors recruited to low governance-rated boards were unknown quantities.
Putting It All Together
This brings us back to the question – what makes directors participate or stay silent in board deliberations and what makes good boards good and bad boards bad? 
We found that:
  • Directors that readily recognize the two realms of the boardroom tend to be perceived as productive and contribute value to boardroom deliberations effectively – they follow the rules in each realm. This leads to more productive board/committee sessions.
  • Good boards recognized affective conflict and addressed it, whereas bad boards recognized affective conflict, but are less willing to address and resolve it. We’re all human and no matter how experienced and professional we are, it’s easy to allow affective conflict to seep into our conversations, especially when tensions are high, time is limited and there’s a lot at stake (like most boardroom environments).
  • There is a relationship between board governance quality and prior personal relationships of board directors. High governance-rated boards cast a wide net when recruiting directors, and often recruit people with whom the other directors did not have a prior relationship.  Close to 70% of high governance-rated organizations board directors were “strangers” when they joined their board, while only 25% of directors recruited to low governance-rated boards were unknown quantities.  This leads us to consider “independence” of directors in a new light – not just independent from the company, but independent from other directors.
  • Boardroom dynamics are influenced by prior personal relationships:  We found that when a director had a prior relationship with a newly-recruited director – one that exists beyond the boardroom – directors are driven by their desire to maintain a congenial relationship with one another  – to not “rock the boat” of their extra-board relationship by addressing affective conflict in the boardroom.  Conversely, in high governance-rated boards, where directors only have the boardroom as the context of their relationship, it becomes even more important to address affective conflict to make sure that the work environment be productive.  Directors are not willing to “sweep issues under the carpet” for the sake of keeping “peace” when the health of the company is at stake. 
The Story’s Moral
What can we learn about creating good boards?  Recruit the best people you can by casting a wide net to get the most experienced, most connected people.  It’s imperative to look beyond your personal network because recruiting your pal to the boardroom could turn out to be the enemy of the stakeholder and the downfall of governance quality!
Solange Charas is the President of Charas Consulting, Inc. (www.charasconsulting.com), providing comprehensive strategic HR consulting to organizations.  Solange is a seasoned professional with over 25 years of experience in both senior-level consulting and c-suite corporate roles in firms including The Hay Group, Ernst & Young, Arthur Andersen, Havas Advertising, Benfield and Praetorian Financial Group.  She started Charas Consulting in 2000, and serves clients in the area of governance advisory, Human Capital program design, metrics and optimization, team coaching, and M&A due diligence.   She has an MBA in Accounting and Finance from Cornell University and is currently finishing her PhD in Management from Case Western Reserve University.  She is an Adjunct Professor at Touro College and frequently speaks and writes on the topic of Boards, HR metrics and team performance.