Post on 22-Dec-2015
People in Strategic Management
Sydney FinkelsteinSteven Roth Professor of Management Associate Dean for Executive Education
Tuck School of Business at Dartmouth College
sydney.finkelstein@dartmouth.edutwitter: @sydfinkelstein
The Sales Manager, the Doctor, and the CEO
A Simple Model of Strategy
StrategyStrategy ImplementationImplementation PerformancePerformanceContextContext
A Simple Model of Strategy: Now with the Strategists
StrategyStrategy ImplementationImplementation PerformancePerformance
CEOsTMTs
Boards of DirectorsGeneral Managers
CEOsTMTs
Boards of DirectorsGeneral Managers
ContextContext
Thinking you’re right, when you are very wrongThinking you’re right, when you are very wrong
Adaptation precludes adaptabilityAdaptation precludes adaptability
Intellectual honesty is an underappreciated capability for CEOs and TMTs
Intellectual honesty is an underappreciated capability for CEOs and TMTs
Three Points on How and Why People are Central to Research and Practice
in Strategic Management
1. Lessons from history.
1. Illustrations of some interesting ideas about people in strategic management.
1. Stories of people in action, or inaction.
First, Some History
General Petraeus Has Company
• Mark Hurd, former CEO, H-P• Brian Dunn, former CEO, Best Buy• Gary Friedman, former CEO, Restoration
Hardware• Kenneth Melani, former CEO, Highmark• Chris Kubasik, former President and incoming
CEO, Lockheed Martin
Survey of "Friends and Family"• Identify one or two articles on the general topic
of "people in strategic management" that you have found particularly interesting.
• Interesting = valuable, insightful, helpful for your own research.
• Response rate = 60%• # Respondents = 15• Most Common Responses– # people citing books: 12– # people citing articles: 10– # people citing both: 7
Chester Barnard
Chester Barnard: The Functions of the Executive (1938)
• Cited > 11,000x
• Organizations die young• Effectiveness: accomplish goals• Efficiency: satisfy motives of individuals
• Zone of Indifference: Subordinates enable, rather than submit to, executive authority
• Therefore, subordinates must be induced to cooperate• incentives and persuasion
• Organizations are cooperative systems• Managers must create a common purpose
Garbage Trucks, Oracle, and Agency Theory
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$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
Com
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Total sales in quarter
Highly non-linear compensation
Larkin, Ian. “The Cost of High-Powered Incentive Systems: Gaming Behavior in Enterprise Software Sales,” Working Paper, 2006.
020406080
100120140160180
1 2 3 4 5 6 7 8 9 10 11 12 13 14
# deals closed by quarter week#
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WeekNotes: Week 14 is the last business day of the quarter. There were 1,924 deals closed on the last business day; these were deliberately cut off to emphasize deal flow in the other periods. Week 13 is the 4 business days preceding the last business day of the quarter.
Larkin, Ian. “The Cost of High-Powered Incentive Systems: Gaming Behavior in Enterprise Software Sales,” Working Paper, 2006.
Herbert Simon
Herbert Simon: Administrative Behavior (1947)
• Cited > 15,000x
• “Administrative Man” vs.” Economic Man”• People (managers) satisfice, not optimize• Bounded rationality
• “Decision-making is the heart of administration; the vocabulary of administrative theory must be derived from the logic and psychology of human choice.”
• “Of course I built squarely on Barnard, and have always felt deeply indebted to him.”
Philip Selznick
Selznick: Leadership in Administration (1957)
• Cited > 5,000x
• What do top managers do?• Mission: Why does an organization exist?• "Distinctive Competence": What is unique, and
valuable, about an organization?• Institutional Leadership
• Organizations as Institutions: Survival requires more than efficiency; it requires creation of administrative ideology that enables adaptation. Survival requires legitimacy.
Managers are central, but limited• Organizations cannot survive without managers– Create common purpose– Create legitimacy– Create balance of inducements and contributions
• But managerial discretion is constrained– Environment, organization and individual
• Managers can create value, and destroy value• Decision-making is core to managerial behavior– Bounded rationality– Cognitive limits and deficits– Emotions– Personal interests
CEOs and Executives
• Narcissism and other fine personality attributes• Kets de Vries and Miller (1984); Hayward and Hambrick (1997);
Chatterjee and Hambrick (2007) – Prominence of CEO’s photo in firm’s annual report– Prevalence of CEO’s name in firm’s press releases– Relative use of “I” vs. “We” in interviews– Relative compensation
• The power of experience• Hambrick and Mason (1984)
• The risk of experience• The case of Captain Sullenberger
Captain Chesley Sullenberger
US Airways Flight 1549
US Airways Flight 1549
Top Management Teams
• Power in top management teams• The dead end of research on heterogeneity
and homogeneity• Team of rivals (on Lincoln) – Doris Kearns
Goodwin• Fragmentation• Executive succession
Boards of Directors• What is board vigilance?– The problem of “potential” vigilance vs. “actual”
vigilance– Boards are groups of individuals
• What about advice and counsel? (Westphal et al.) – Social ties with board promote collaboration– External social networks used for confirmatory
counsel when firm performance is low– Board monitoring increases CEO advice-seeking from
non-confirmatory networks– Moves toward greater board vigilance increase CEO
ingratiation and persuasion behaviors• Boards and executive compensation
Can an Organization Survive Forever?
• Tiny Fey, 30 Rock • Larry David, Seinfeld• Albert Brooks, Looking for Comedy • Billy Crystal, 76th Academy of Awards• Adam Sandler, The Waterboy• Mike Judge, King of the Hill• Greg Daniels, The Simpsons• Rich Blomquist, Daily Show with Jon Stewart • John Bowman, Murphy Brown• Vanessa Middleton, Cosby• Dan Aykroyd, Blues Brothers• Greg Daniels, The Office
All worked for Lorne Michaels, SNL
Leading Writers/Producers in Comedy
Leading Executives in the Casual Restaurant Industry
• Richard Rivera, CEO, Longhorn Steaks• Tim Gannon, SVP, Outback• Rick Federico, CEO, P. F. Chang’s • Wally Doolin, CEO, Buca di Beppo • Mike Jenkins, Vicorp• Jeff Shearer, Boston Market• Bob Bashan, Outback• Hal Smith, Chi-Chi’s• George Biel, Houston’s Restaurants• Richard Frank, Chuck E. Cheese• Lou Neeb, Mexican Restaurants, Inc.
All worked for Norman Brinker
Some of the Super-Spawners
Norman Brinker
People in Strategic Management
Sydney FinkelsteinSteven Roth Professor of Management Associate Dean for Executive Education
Tuck School of Business at Dartmouth College
sydney.finkelstein@dartmouth.edutwitter: @sydfinkelstein