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Michael Norton, a marketing professor at the Harvard Business School, specializes in consumer psychology and social enterprise. Last week, he shared his research on what he calls “The Ikea Effect,” which explains how getting customers more involved in a product or service — often with their own labor — can make them value it more. Today, he talks about how companies like Google use corporate giving to encourage customer and employee satisfaction and loyalty.

BNET: How did you get started looking into the effects of corporate philanthropy?

Norton: With collaborators from the University of British Columbia, I looked into the idea that money doesn’t make people that much happier. People believe that increasing their income over time will make them much happier, and that is not necessarily the case. Money makes you happier…but only a little bit. We had the idea that maybe when people got their money, they didn’t spend it in the right ways to make them happy. In our study, we made them spend money in different ways to judge which of those made them happy. As it turns out — and it’s a nice message — the way to use money to make you the most happy is to spend it on other people. We’ve shown in a bunch of contexts that it makes you demonstrably happier.

Then we said, “If that works at the level of the individual, how can corporations use this knowledge to change the way they interact with their employees or customers?” Usually firms give money in a lump sum to charity hoping for some PR effect. But those metrics are difficult to evaluate. If a company gives its employees vouchers to give to charity, we can look to see if the employees are happier and have higher satisfaction and loyalty to the company. Our studies show that, in fact, is the case. So, companies can look at both the impact their contributions had on the world and also how good it was from a business point of view.

BNET: What companies have a great strategic approach in their corporate giving?

Norton: Google has been an innovator here. A few years ago, they gave their [advertising] clients vouchers for the nonprofit donorschoose.org, where teachers in the public school system post projects that their school systems can’t afford. A teacher might post that she wants to provide her class certain books that aren’t in her school’s budget, and givers can choose to back that. Google’s customers got to choose where the money went. It’s a great example of a company engaging their customers in charitable giving in an effort to make their customers appreciate them even more.

BNET: So this covers writing checks, but how do companies encourage corporate volunteer efforts within their ranks? Do these programs also increase loyalty?

Norton: There are companies doing amazing things with volunteering. Volunteering is a strong predictor of how happy people are in general with their lives. I think the trick is that volunteering in general is hard. So, with many people, if their company gives them a day off to go build houses, it’s not necessarily a positive thing. The nice thing about giving away money is that it’s quick, people enjoy it a lot, and the company can get a lot of benefit from it.

Next week, we’ll hear more from Professor Norton about corporate philanthropy, including his assessment of the well-known and sometimes criticized Product Red Campaign.

I’ve come to the conclusion that the bloggers at the Huffington Post aren’t big fans of b-school. This summer, a post referred to b-school graduates as “menaces,” and more recently, in his post “Why B-schools Don’t Change,” Pablo Triana attests that despite talk of revamping, b-schools remain unchanged because:

1) In many cases, the negative aspects of inexperienced professors and theoretical dominance are conveniently ignored by both students and recruiters, thus effectively becoming harmless; 2) The positive aspects presented by (good) schools continue to be attractive enough to compensate for the disappointments.

Triana’s second point is valid. Despite the finger-pointing b-schools have endured for producing flawed leaders, a large number of business aspirants still see the b-school brand as a desirable one, and many are waiting out the financial crisis in b-school classrooms. According to a recent article in BusinessWeek, many of the top b-schools admitted their largest classes ever this fall.

It’s his first point, then, that deserves closer scrutiny. Triana is certainly not the first to criticize b-schools for focusing too heavily on theory instead of real-world practical business knowledge, and this is a discussion that needs to had both inside and outside of business schools. (more…)

Don Sull of the London Business School is a popular and familiar voice on the “Back to B-School” Blog.  He was recently cited by Fortune as one of the “ten new gurus you should know.” Right now, you’ll be get to know more about him and his new book,  The Upside of Turbulence: Seizing Opportunities in an Uncertain World.

BNET: How did you come up with the concept of your new book, a project you’ve devoted several years to?

Sull: Well, ten years, but who’s counting?  The origin is: I grew up in Ohio, and as I mention in the forward of the book, when I was a kid, the major industries here like steel, autos and tires were the pistons driving the American economic engine.  By the time I graduated from college, these industries in Ohio were a joke and Detroit was in its perpetual freefall.  The auto industry was getting wiped out and the steel industry had cut something like two-thirds of its employees.  I just could not believe that these companies that everyone was so proud to work for could tank so completely and so quickly, basically over 15 years.

So that period informed this book and basically all of my research.  Why can’t companies adapt?  The twist in this book is the finding that companies that are really good in stable markets struggle in turbulent markets.  The other thing that really piqued my interested with this book is that there were companies that did not just survive turbulence but actually thrived because of turbulence.  For every General Motors there was a Toyota, for every US Steel, there was a Mittal Steel.

The steel industry was in particular interesting to me because I had grown up in Ohio.  Here was this guy Lakshmi Mittal who started up a steel mill in India in the 70s and basically built his company by seeking out the most turbulent markets…Kazakhstan, Mexico, Indonesia and places like that.  So, this book is not necessarily about how you survive in turbulent markets, it’s about the fact there are huge opportunities in turbulent times.

BNET: So, what exactly is turbulence?

Sull: Turbulence is a measure of the frequency of unpredictable changes that affect your company’s ability to create and sustain value.  A lot of people associate turbulence with the current “economic crisis.”  They say it’s bad now, but we’ll recover and things will get back to normal.  But that’s simply not true.  There have been a series of studies that have converged on one finding: volatility and turbulence in global markets have increased somewhere between two- and fourfold since the late 1970s.  Most of those studies measure it up until the late 90s, which obviously predates the current crisis [so the figures could be conservative].  The point is that turbulence is much broader than the current financial crisis.  It’s driven by macroeconomic shifts, currency market changes, technological changes, geopolitical events, 9/11, the entry of China and the former Soviet Bloc into the global economic system…

Turbulence is here to stay.  It was here long before the current crisis and is something we will have to deal with for a long time after the current economic situation is resolved.

BNET: What are some of the companies that have been done in by a failure to properly adapt during times of turbulence?

Sull: That’s a pretty long list.  I would say Anheuser-Busch; they weren’t able to keep pace with changes in the market the same way Inbev was.  Motorola, Norwegian Cruise Line, Detroit’s automakers as a group (though Ford is doing OK), Benetton…there’s just such a long list of companies.

There are so many ways companies can fail; you can have crooks at the top…you can have idiots at the top.  But one of the interesting things that emerged from this research is that while those things account for some of the cases where companies fail, much more frequently companies see changes coming. Their managers respond very aggressively…they are not idiots and they are not crooks.  But they get locked into the set of commitments [please see my interview with Don Sull about "managing by commitments"] and a certain strategy that have made them successful in the past.  They lock into a certain view of the world and a certain way of measuring success.  They lock into a set of relationships.  They lock into a certain set of processes that become routinized.  These commitments tend to harden over time, so when the environment shifts, it’s difficult to respond effectively.

I talk in the book about a concept called “active inertia” which is an acceleration of the activities that worked in the past, even in the face of disruptive changes.  It’s a common pattern.  In some ways I think it’s a much scarier story than the old “success breeds arrogance and complacency.  Arrogance and complacency breeds bone-headed moves.  And bone-headed moves lead to failure.”

Next week we’ll learn how some top companies have learned to prosper and seek out new opportunities in times of turbulence.

J.D. Schramm helps Stanford business students refine their communications, teaching them everything from how to write more effective e-mails to how to deliver speeches in times of crisis.In the first two installments of our conversation with him, we discussed the importance of learning communications in the context of the technology and social media of today and the skills necessary for effective cross-cultural communications in a business setting.Today, we’ll hear about the lessons he draws for business leaders from his work in political communications.

BNET: We’re over half a year into an Obama Administration.How effective has the President been with his communications, in your opinion?

Schramm: Well, we’re always safer as educators if we look at former statesmen rather than current statesmen and politicians involved in campaigns.As soon as we do that, we end up charging people emphatically against us or emphatically for us.I think it’s dangerous to go too far down the road.I do think President Obama has given us some really good examples of oratory and use of language n a way that is compelling and powerful.Pundits on both sides of the aisle would acknowledge that President Obama has brought a return to the kind of oratory that we experienced with Reagan and Kennedy, and that has been welcome.

Conversely, I think we’ve seen - as with anyone in a new job - some growing pains and mistakes.I think very early he did an interview with Tom Brokaw in the Oval Office with no jacket, no tie and rolled up sleeves, sitting in front of the fireplace…pretty much looking “every day,” not at all “presidential.”I would argue in that particular room, we need to see the president look very presidential.If his idea was to do something folksy and approachable, probably Camp David or the Rose Garden would have been a better setting for that interview, not the Oval Office, where he greets heads of state.This communication wasn’t as thought out or strategic as it could have been.

BNET: Are there any specific techniques you think business leaders should draw from watching presidents and other top political leaders?

Schramm: I think there are quite a few lessons you can gain from watching the president, whoever is in the White House.We can see formality in communications in an acceptance address or a State of the Union address.There are very few times in our career where we have to do that sort of high-profile address to our employees or our stockholders, and we can learn what works and what doesn’t as we analyze their speeches.The other place to look is how leaders communicate inside of a crisis.I think of the way President Bush responded the day of the 9/11 attacks and the day after…the calm he tried to instill. Some of the best speeches of his presidency were during that time of crisis.We can use these tools of crisis communications when we manage layoffs or deliver other sorts of difficult news.There’s good role-modeling from the public sector that those in the private sector can use as well.

BNET: Any final thoughts on what people can do throughout their careers to continue to sharpen their communication skills?

Schramm: One final thing I would offer is the value of a coach.We use a lot of communication coaches here at Stanford to help students work on their writing or their speaking or something specific like a pitch to a venture capitalist.Learning to be coachable is a very important skill.The higher up in organization someone climbs, the more comfortable they are going to need to be receiving coaching from someone who is an expert in this field.

BNET: Is this something people can find with colleagues in their workplaces? Could they agree to be each others’ communications coaches?
Schramm: I think if you establish the parameters around it, that can absolutely happen.I have a few colleagues I’ve stayed in close touch with over the years and we can rely on each other for that level of coaching.I’ll call one and say, “I’m about to give an offer to someone.Can I role-play that with you?”I think some of the best executives in organizations today have an internal or an external coach that they use for that purpose.

Professor J.D. Schramm of the Stanford GSB specializes in helping future executives upgrade their speaking, writing and other communications ability. One important facet of Stanford’s program is fostering an awareness of the challenges of communicating in the international business environment. To read the first installment about the importance of business communications, please click here.

BNET: What are the main tenets of effective cross-cultural communication?

Schramm: At the heart of it, it’s necessary that an individual first have an understanding of his or her own cultural biases. It requires a very intensive self-analysis. In what ways do I see the world or operate in the world that could be off-putting to the other side? Then, you need to have an understanding of what’s expected in the other culture you are operating in that is different than your own. But I have to be careful that I just not operate under stereotypes. I have to get to know the culture and be sensitive to it, but yet get to know the individuals, so I just don’t think, “Oh, everyone from Asia is going to be a certain way.” It takes a lot more time to navigate cultural differences between myself and a counterpart.

BNET: So on this issue of “know thyself” and one’s own cultural milieu, what do we Americans need to realize we often come to the table with in terms of biases and predispositions?

Schramm: I think it’s easy for us to assume the way we do things is the right way. When we begin interacting with other people on a multicultural basis, we need to set those assumptions aside and listen and understand how things are done differently in another locations. I think a very tactical one is how we operate under time. Do meetings start on time, do they end on time, and are people good following up on what they promised to do? I think it’s easy to take a rigid view that “time is money” and we have to do things quickly, but in other cultures, time is much more fluid. Things operate during an appropriate season or other appropriate juncture for something to happen. People may not be as rigidly wed to the clock as we are here in the west. You have to be open to both ways of doing things. When that occasion arises, you need to think, “How am I going to operate with these people on this particular team on this project?”

At the heart of it all is authenticity. If I acknowledge to my counterpart in another culture that I’m not exactly sure what to do here or I may need their guidance on how to make a certain type of communication appropriate for people in their firm or their culture, that level of authenticity or vulnerability will inevitably carry me further than if I try to act like I know what to do. Without giving up “power”, you can still build bridges with the people you are trying to communicate with.

BNET: What kind of programs do you have to allow students to gain exposure to the challenges of communicating with people who are immersed in a totally different culture?

Schramm: We have an exchange program with a university in India and another in China. Every student had to do a project on a team with two students from America and two from the other universities on what it takes to best communicate with students from India and China. I think with those cultural differences that definitely do exist, it’s necessary to give people inside an MBA program the tools and skills to navigate across the different cultures. The second piece of that course is navigating through the technology. Even if one has done everything right in terms of planning a project or managing the team, if at the end of the day, one doesn’t know how to operate the telepresence unit or the Webex unit to participate fully in the meeting, then that’s a failure. So the technology is a critical component of someone contributing in a global business environment.

We’ll conclude our discussion with Professor Schramm’s views on political communications and the role of communications in career management next week.

The New York Times reported this week that President Obama and Congressional Democrats are gearing up for an “August offensive” in response to groups that are speaking out against proposed health care reform. At least one concerned party about the health care proposal currently under consideration in the House of Representatives comes from the b-school world: Columbia Business School professor Rita Gunther McGrath.

In a recent blog post, McGrath writes that she fears the current plan being considered by Congress “is going to fundamentally alter … the structure of incentives that shape how entrepreneurs allocate their energies.”

Because the plan calls for businesses with over 25 employees to provide mandatory health coverage or be fined 8 percent of its payroll, McGrath believes this will not only have an ill effect on small business, but our economy as a whole. She writes: (more…)

When I’m not surfing the web for the latest news from b-schools, sometimes I’m just surfing the web. A site I really enjoy is Big Think, which features interviews with thoughtful people across many disciplines: business leaders, authors, actors, activists and others share their ideas on the big and not-so-big issues of the day. Every so often the site even features a b-school luminary, as it did recently with the University of Michigan Ross School of Business Dean, Robert Dolan.

Dolan discusses the difference between a manager and a leader, saying that the main distinction is one of innovation: (more…)

When you send an email to your employees or colleagues, do you think that humor might help a tough message go down a little easier? Do you try to include a few punch lines, thinking you’re breaking up the monotony of their day?

If the answer is yes, then you need to stop, according to business writing teacher and author David Silverman.

In his Harvard Business blog post “That Funny Email? No One’s Laughing,” Silverman includes a cringe-inducing email exchange between a friend and him, in which they kept missing the other’s attempts at humor. As the exchange devolved into explanations like “as was I also trying to be funny in a wry sardonic way,” Silverman made clear his point that wit is best saved for face-to-face and telephone interactions.

A few other pieces of advice from Silverman about email tone: (more…)

Darden’s Michael Lenox is an authority on innovation strategies.  He heads the school’s Batten Institute, which examines the impact of innovation in improving key sectors of the economy. Today and next week, we’ll hear Lenox’s views on business and the environment.

BNET: You’ve examined how firms “self-regulate” in the environmental arena and also how outside interest groups try to affect corporate environmental performance. What has your research shown you?

Lenox: What I’ve long been interested in is under what conditions do firms basically go beyond the letter of the law? When do they go beyond mere compliance with environmental statutes? Basically, the research was of the flavor of “does it pay to be green?”. What are the financial incentives that firms have to achieve superior environmental performance? Also, recently, I’ve looked at the role of activists and why they target certain types of firms and how those firms respond. At the heart of this is a question of incentives; when are the actions of an activist enough of a motivator to spur firms to any kind of action?

The most interesting thing we found is that there are different groups of stakeholders. Some are really all about bringing attention to the issues they are focused on, especially the big, internationally focused interest groups. The disappointing thing for firms is that those interest groups tend to target firms really regardless to their performance relative to their industry; they target them just because they are big and visible. If you are Dupont in the chemical industry—which is a firm that I think has done quite a bit and been progressive on their environmental performance—you’re going to get targeted. Some groups are smaller and more localized…they really care about a narrower set of environmental interests and would only target a company if, say, it was actually polluting a river that they cared about. They tend to target companies with much poorer records of environmental performance and seek to change behavior on certain specific matters.

BNET: Should self-regulation be a big part of environmental standard-setting? Is it effective?

Lenox: We looked at private, industry-led codes of conduct, one of the most known being the Responsible Care Program out of the chemical industry. A set of big chemical firms in the US got together and said, “We are going to hold ourselves to a higher standard on environmental performance.” Usually, this kind of action is a pretense to forestall governmental regulation. “There’s no need to step in with additional regulations. We’ll put the policies and procedures into place.” We found that these kinds of self-regulatory schemes can work, if you have a few conditions in place. First, monitoring, preferably third-party monitoring. And you need some kind of sanctions to punish people who don’t live up to the standard. This seems kind of obvious, but we’ve seen a lot of these agreements where not only was there self-reporting, there was never really punishment for those who failed to live up to the code of conduct.

BNET: What are some examples of how self-regulation, collective or third-party regulation affects environmental performance?

Lenox: One really interesting example of third party standard-setting is ISO 14000, which is an environmental scheme laid out by this international standards setting organization. This is a standard that requires companies to have certain procedures and systems in place, but not to achieve certain results or reach certain levels, per se. What we found is that those kinds of standards did improve environmental performance and reduced emissions. But we also saw that most of the firms attracted to getting that type of certification tended to be the dirtier types of facilities. My co-author came up with this analogy: think of two people, one with a 1980 Buick, and the other with a brand new BMW. Who is more likely to need some sort of maintenance program more? The person with the 1980 Buick, because that’s the person whose car will be breaking down more. What we observed was that it was the older dirtier facilities that were attracted to the ISO 14000 and found a lot of value in putting some sort of management system in place for their wastes. Cleaner sectors and cleaner industries needed this less. But the interpretation is that ISO 14000 means a cleaner facility, which is not exactly right. They may be comparatively cleaner than the baseline if they didn’t have the processes required by ISO 14000, but probably not nearly as clean as other newer facilities in their industry that didn’t even seek out that certification.

Next week, we’ll wrap up our discussion with Prof. Lenox and hear his views on how companies are innovating technologies and practices to improve the environment.

Lately, whenever someone who holds an MBA does something ethically questionable, it has become fashionable not to blame the person, but her degree.

For instance, Charles Warner wrote on the Huffington Post recently about Washington Post publisher Katherine Weymouth, who took some heat for her proposed idea of hosting salons in which lobbyists and government officials could pay to have “off the record” dinners with Post reporters. He blamed two things for this integrity-compromising proposal: Weymouth’s privileged upbringing and her MBA degree. He said:

It almost seems that Weymouth … arrogantly believed she could do no wrong, which likely comes from a sense of entitlement after getting a job she didn’t earn and, of more concern, from what she learned in her MBA program — think of your own needs first, not about the core values of your organization, and not about customers.

Warner does admit at the end of the article that it probably isn’t fair to blame Harvard Business School for its graduates’ ethical lapses and asks a fair question that has been on many minds lately: “What values are MBA programs like Harvard’s teaching?”   (more…)