What's in the journals, August 2008

tauringhuang.

Aug 22nd 2008
From Economist.com

A look at noteworthy articles from the business journals


A thousand cuts

“Don't touch my perks: Companies that eliminate them risk employee backlash”

Knowledge@Wharton




“HR strategies that can take the sting out of downsizing-related layoffs”

By Franco Gandolfi (Richard Ivey School of Business)




“Managing costs and growth in uncertain times”

Towers Perrin




“Winning in a downturn: Six actions to take now”

By Udo Jung, Richard Messenböck and Harold Sirkin (Boston Consulting Group)




A sure sign of a souring economy is the burgeoning literature on cost-cutting in a downturn. These four reports stand out. First up, Wharton warns that although staff perks may seem an early and obvious contender for the chop, to do so could provoke a backlash from workers—especially those who have developed a psychological attachment and sense of entitlement to their benefits. Such perks include anything from free drinks to use of a corporate jet (Warren Buffet calls his The Indefensible). Managers, it is suggested, should consider the non-monetary value of different perks. While some are designed to motivate (or—such as free late-night pizzas—at least keep staff working), others are far less well regarded, and could easily be replaced by small sums of money.

Inevitably, the axe-man's attention will turn to the payroll. Ivey Business Journal provides a useful framework for determining when and whether to shed staff. If the economic pain is only expected to last up to one year, the report advocates milder measures, such as hiring freezes, voluntary sabbaticals, loaning out staff or simply soliciting cost-cutting ideas from workers. If redundancies are unavoidable, managers are advised to remain on good terms with the departed in case they need to be rehired.

A less defensive view comes from Towers Perrin. It cites findings from its own business survey that “there is little appetite for broad-scale workforce reductions” and “expansion is still top of mind.” The key to continuing success is “workforce optimisation”, getting “the right people in the right jobs in the right location at the right cost”, combined with fuller employee engagement and reward. This optimism may seem excessive in a year's time.

A more tactical approach in a contracting economy—and by far the best advice—comes from the Boston Consulting Group. Downturns, it argues, can be good for companies that are leaner than their competitors and that already have a recession strategy, especially if this includes taking over—or driving out of business—floundering rivals. One sobering thought for complacent companies: a mere 10% of market leaders that drop out of the top tier in a downturn ever recover their position when good times return. Although the report lists numerous ways in which companies can position themselves better, it would have benefited from some real-life examples of how this can be achieved.

Paved with gold

“The Entrepreneurial Advantage of World Cities: Evidence from Global Entrepreneurship Monitor Data”

By Zoltan Acs, Niels Bosma and Rolf Sternberg




This article, from the Global Entrepreneurship Monitor (GEM), an international initiative studying entrepreneurship, looks at the differences in entrepreneurial activity between 34 world cities and the countries in which they are located. Thus Tokyo turns out to be markedly less entrepreneurial than the Japanese average, while Germany, only a moderate performer, has pockets of vibrant entrepreneurial activity in Hamburg, Frankfurt and Munich. Paris and London have higher rates of entrepreneurship than France and Britain; New York and Los Angeles, on the other hand, are much closer to America's national average. In general, the study gives credence to the hypothesis that cities are more hospitable places for new businesses.

Growing up in public

“After the Fall: Reintegrating the Corrupt Organisation”

By Michael Pfarrer, Katherine Decelles, Ken Smith and Susan Taylor




From an issue of the Academy of Management Review focusing on corruption in organisations, this article addresses the aftermath of bad behaviour. The authors break the rehabilitation of a blemished firm down into four steps: discovering the unethical or illegal behaviour; explaining why the lapse occurred; accepting punishment and allowing for a period of penance; and, finally, making changes within the organisation to prevent similar lapses.

At each stage, the firm's performance will influence the responses of stakeholders: a firm that quickly and unreservedly discloses a problem may be able to move to the stage of explanation more quickly and easily than one that continues to stonewall. Wisely, the authors note that this four-stage process, with its emphasis on transparency, is tied to Western business culture; in cultures where public disclosure may be seen as shameful, the process of winning back the trust of stakeholders may look very different.

Clocking on and on

“The Future of Retirement: An Exploration and Comparison of Different Scenarios”

By Anna Rappaport




Writing in Benefits Quarterly, Anna Rappaport, a consultant on pensions and retirement, provides a useful primer for those wondering how retirement policies in America may change as baby-boomers age. Ms Rappaport addresses the implications of four different retirement scenarios: retirement around 65 (the current situation); retirement at 70 or later; “end of retirement”, where people work until they are no longer able to; and “phased” retirement, where an individual stops full-time work at 65 but does not leave the workforce fully for some years.

Ms Rappaport argues for the fourth option, as it allows the most flexibility for most workers, but warns that about 10% of the population will have to leave work before 65 due to poor health or disability, and that the maximum practical working age is 75. Even if phased retirement becomes the norm, individual workers will have to prepare for the possibility that they will not be able to work for as long as they wish.

Worldly thoughts

“Finding a higher gear: an interview with Anand Mahindra”

By Thomas Stewart and Anand Raman




Harvard Business Review's interview with Anand Mahindra, the chief executive of Mahindra & Mahindra, an Indian tractor-and-auto conglomerate, provides insights into the new breed of globalising Indian companies. The Harvard-educated Mr Mahindra sounds much like any Western corporate-turnaround expert when reflecting on such staple issues as market leadership, global positioning, innovation and “a ruthless focus on financial returns”. But the prism of India refracts a different and more interesting light on the future. His early failure, for instance, to convince Ford that India was “a sweatshop for brains” not hands, turned out to be a blessing in disguise, given M&M's subsequent development of its own low-cost SUV.

Mr Mahindra is measured about whether to focus on domestic or global expansion. The dilemma exercises many Indian executives who have enjoyed a decade-and-a-half of relative economic freedom. However, his parable about Goan villagers, whose famed watermelons were sold for profit rather than given to their children to enjoy and replant the seeds, is an evocative but unconvincing metaphor for globalisation.