Managing for Value 2.0

In Finance 101, future corporate managers are taught that the social mission of public companies is to maximize their own longrun (or “intrinsic”) value by investing in all positive net present value (NPV) projects—that is, projects that are expected to earn at least their opportunity cost of capital. In markets that are reasonably efficient, provided management does an effective job of communicating its business plan and its progress in meeting its strategic goals, companies that follow this “NPV rule” can expect to be rewarded with increases in their share prices, at least in the longer run. But in the real world, of course, the pursuit of earnings and other “key performance indicators” (KPIs) often leads to managerial shortsightedness and destruction of value. To explain why—and to help companies avoid this outcome—this article presents an approach that envisions the intrinsic value of the company as an invisible “blue line” that moves through time on a graph, while showing observable key performance indicators, including revenue and earnings (and even the current stock price), as “red lines” on the same graph. The root of the problem is the failure of many companies to distinguish between their KPIs and the underlying drivers of value. KPIs, to be sure, are reflections of important aspects of the business; but however important and useful for strategic planning, they should not be used in performance evaluation or compensation plans for top management as surrogates for the underlying value of the business. Genuine value creation requires systems and a corporate culture that compel managers to pursue all projects that promise to earn the opportunity cost of capital—while treating earnings and other KPIs as means to creating value rather than ends in themselves.     

Combining creativity and control: Understanding individual motivation in large-scale collaborative creativity

Recent research has shown that management control systems (MCS) can improve performance in contexts characterized by high levels of task uncertainty. This seems to conflict with a second stream of research, which argues that MCSs risk undermining the intrinsic motivation needed for effective performance in such settings. To solve this puzzle, we build on theories of perceived locus of causality and self-construal and develop an integrative model summarized in 15 propositions. To explicate our proposed solution and to show its robustness, we focus on the class of activities we call large-scale collaborative creativity (LSCC) - contexts where individuals face a dual challenge of demonstrating creativity and embracing the formal controls that coordinate their creative activities with others’. We argue that LSCC requires the simultaneous activation of intrinsic and identified forms of motivation, and simultaneously independent and interdependent self-construals. Against some scholarship that argues or assumes that such simultaneous combinations are infeasible, we argue that they can be fostered through appropriate attraction-selection-attrition policies and management control systems design. We also show how our propositions can enrich our understanding of motivation in other settings, where creativity and/or coordination demands are less pressing.     

How to kill creativity

In today's knowledge economy, creativity is more important than ever. But many companies unwittingly employ managerial practices that kill it. How? By crushing their employees' intrinsic motivation--the strong internal desire to do something based on interests and passions. Managers don't kill creativity on purpose. Yet in the pursuit of productivity, efficiency, and control--all worthy business imperatives--they undermine creativity. It doesn't have to be that way, says Teresa Amabile. Business imperatives can comfortably coexist with creativity. But managers will have to change their thinking first. Specifically, managers will need to understand that creativity has three parts: expertise, the ability to think flexibly and imaginatively, and motivation. Managers can influence the first two, but doing so is costly and slow. It would be far more effective to increase employees' intrinsic motivation. To that end, managers have five levers to pull: the amount of challenge they give employees, the degree of freedom they grant around process, the way they design work groups, the level of encouragement they give, and the nature of organizational support. Take challenge as an example. Intrinsic motivation is high when employees feel challenged but not overwhelmed by their work. The task for managers, therefore, becomes matching people to the right assignments. Consider also freedom. Intrinsic motivation--and thus creativity--soars when managers let people decide how to achieve goals, not what goals to achieve. Managers can make a difference when it comes to employee creativity. The result can be truly innovative companies in which creativity doesn't just survive but actually thrives.     

America's looming creativity crisis

The strength of the American economy does not rest on its manufacturing prowess, its natural resources, or the size of its market. It turns on one factor--the country's openness to new ideas, which has allowed it to attract the brightest minds from around the world and harness their creative energies. But the United States is on the verge of losing that competitive edge. As the nation tightens its borders to students and scientists and subjects federal research funding to ideological and religious litmus tests, many other countries are stepping in to lure that creative capital away. Ireland, Canada, Australia, New Zealand, Denmark, and others are spending more on research and development and shoring up their universities in an effort to attract the world's best--including Americans. If even a few of these nations draw away just a small percentage of the creative workers from the U.S., the effect on its economy will be enormous. In this article, the author introduces a quantitative measure of the migration of creative capital called the Global Creative-Class Index. It shows that, far from leading the world, the United States doesn't even rank in the top ten in the percentage of its workforce engaged in creative occupations. What's more, the baby boomers will soon retire. And data showing large drops in foreign student applications to U.S. universities and in the number of visas issued to knowledge workers, along with concomitant increases in immigration in other countries, suggest that the erosion of talent from the United States will only intensify. To defend the U.S. economy, the business community must take the lead in ensuring that global talent can move efficiently across borders, that education and research are funded at radically higher levels, and that we tap into the creative potential of more and more workers. Because wherever creativity goes, economic growth is sure to follow.     

Managing markets for toxic assets

A model in which banks trade toxic assets to raise funds for investment is analyzed. Toxic assets generate an adverse selection problem and, consequently, the interbank asset market provides insufficient liquidity. Investment is inefficiently low because acquiring funding requires banks to sell high-quality assets for less than their “fair” value. Equity injections reduce liquidity and may be counterproductive as a policy for increasing investment. Paradoxically, if it is directed to firms with the greatest liquidity needs, an equity injection will reduce investment further. Asset purchase programs, like the Public–Private Investment Program, often have favorable impacts on liquidity, investment and welfare.     

Managing for efficiency, managing for equity

It is a truism that not all managers do the same things in the same ways. Less often recognized, however, is the fact that the essential tasks and goals of management are not everywhere the same. Indeed, so unlike each other are the two primary systems of management--the "technocratic" and the "political"--that they consistently vary in the implicit contract offered to participants, the career path of members, the use of organizational structure, the choice of purpose, and the allocation of resources, but also provides a conceptual framework for understanding why they happen and what can be done to prevent their happening in the future.     

Beyond postnormal times: The future of creativity and the creativity of the future

Creativity and imagination are the most important ingredients for coping with post-normal times, according to Sardar. This paper looks at the way creativity itself is being transformed in the West, from the individualistic/atomistic view of Modernity towards a more contextual, collaborative, complex approach. It explores the potential and possibilities for this more participatory creativity to help go beyond the “crisis of the future,” and argues that the centrality of creativity must go beyond the mythology of genius and inspiration to inform philosophy, ethics, and action. Philosophical reflection and the imagination of desirable futures can emerge from a creative ethic that stresses the value of generative interactions and contexts that support creativity.     

Cuts,collaboration and creativity

Massive cuts in public spending are demanding a new era of collaborative working among partners in English local governance. Partnerships have the capacity to pool assets, share scarce resources and leverage new forms of social and human capital. City-wide partnerships are also ideal vehicles for public service creativity. Action research in Sheffield reveals the potential, but also the pitfalls, of attempts to mainstream partnership principles, now they are no longer mandated by central government.     

The weird rules of creativity

For at least the past decade, the holy grail for companies has been innovation. Managers have gone after it with all the zeal their training has instilled in them, using a full complement of tried and true management techniques. The problem is that none of these practices, well suited for cashing in on old, proven products and business models, works very well when it comes to innovation. Instead, managers should take most of what they know about management and stand it on its head. In this article, Robert Sutton outlines several ideas for managing creativity that are clearly odd but clearly effective: Place bets on ideas without much heed to their projected returns. Ignore what has worked before. Goad perfectly happy people into fights among themselves. Good creativity management means hiring the candidate you have a gut feeling against. And as for the people who stick their fingers in their ears and chant, "I'm not listening, I'm not listening," when customers make suggestions? Praise and promote them. Using vivid examples from more than a decade of academic research to illustrate his points, the author discusses new approaches to hiring, managing creative people, and dealing with risk and randomness in innovation. His conclusions? The practices in this article succeed because they increase the range of a company's knowledge, allow people to see old problems in new ways, and help companies break from the past.     

Property Derivatives for Managing European Real-Estate Risk

Although property markets represent a large proportion of total wealth in developed countries, the real-estate derivatives markets are still lagging behind in volume of trading and liquidity. Over the last few years there has been increased activity in developing derivative instruments that can be utilised by asset managers. In this paper, we discuss the problems encountered when using property derivatives for managing European real-estate risk. We also consider a special class of structured interest rate swaps that have embedded real-estate risk and propose a more efficient way to tailor these swaps .     

Managing buzz

We model the incentives of individuals to engage in word of mouth (or buzz) about a product, and how a firm may strategically influence this process through its information release and advertising strategies. Individuals receive utility by improving how others perceive them. A firm restricts access to information, advertising may crowd out word of mouth, and a credible commitment not to engage in advertising is valuable for a firm.     

Managing Expectations

The idea that monetary policy is principally about “managing expectations” has taken hold in central banks around the world. Discussions of expectations management by central bankers, academics and by financial market participants frequently also include the idea that central bank credibility is imperfect. We adapt a familiar macroeconomic model so as to discuss key concepts in the area of expectations management. Our work also exemplifies a model construction approach to analyzing the dynamics of announcements, actions, and credibility that we think makes feasible a wide range of future investigations concerning the management of expectations.     

Managing Middlescence

They make up more than half your workforce. They work longer hours than anyone else in your company. From their ranks come most of your top managers. They're your midcareer employees, the solid citizens between the ages of 35 and 55 whom you bank on for their loyalty and commitment. And they're not happy. In fact, they're burned out, bored, and bottlenecked, new research reveals. Only 33% of the 7700 workers the authors surveyed feel energized by their work; 36% say they're in dead-end jobs. One in three is not satisfied with his or her job. One in five is looking for another. Welcome to middlescence. Like adolescence, it can be a time of frustration, confusion, and alienation. But it can also be a time of self-discovery, new direction, and fresh beginnings. Today, millions of midcareer men and women are wrestling with middlescence-looking for ways to balance work, family, and leisure while hoping to find new meaning in theirjobs. The question is, Will they find it in your organization or elsewhere? Companies are ill prepared to manage middlescence because it is so pervasive, largely invisible, and culturally uncharted. That neglect is bad for business: Many companies risk losing some of their best people or-even worse-ending up with an army of disaffected people who stay. The best way to engage middlescents is to tap into their hunger for renewal and help them launch into more meaningful roles. Perhaps managers can't grant a promotion to everyone who merits one in today's flat organizations, but you may be able to offer new training, fresh assignments, mentoring opportunities, even sabbaticals or entirely new career paths within your own company. Millions of midcareer men and women would like nothing better than to convert their restlessness into fresh energy. They just need the occasion-and perhaps a little assistance-to unleash and channel all that potential.     

管理价值

准确地判定企业的价值所在,才可能真正有效地管理价值。如何以有限的资源提供更多的产品和服务?对于公司和个人来说,压力与日俱增。无论是公共部门还是私营部门,都面临着资金不     

Managing demographic risk

In developed nations, the workforce is aging rapidly. That trend has serious implications. Companies could face severe labor shortages in a few years as workers retire, taking critical knowledge with them. Businesses may also see productivity decline among older employees, especially in physically demanding jobs. The authors, partners at Boston Consulting Group, offer managers a systematic way to assess these dual threats--capacity risk and productivity risk--at their companies. It involves studying the age distribution of their employees to see if large percentages fall within high age brackets and then projecting--by location, unit, and job category--how the distribution will change over the next 15 years. Managers must also factor in both the impact of strategic moves on personnel needs and the future supply of workers in the market. When RWE Power analyzed its trends, the company learned that in 2018 almost 80% of its workers would be over 50. What's more, in certain critical areas its labor surplus was about to become a sizable shortfall. For instance, a shortage of specialized engineers would develop in the company just as their ranks in the job market thinned and competition to hire them intensified. Reversing its downsizing course, RWE Power took steps to increase its supply of workers in those key positions. The authors show how companies that face talent gaps, as RWE Power did, can close them through training, transfers, recruitment, retention, productivity improvements, and outsourcing. They also describe measures that companies can take to keep older workers productive, including workplace accommodations, revised compensation structures, performance incentives, and targeted health care management. The key is to identify and address potential problems early. Firms that do so will gain an edge on rivals that are still relentlessly focused on reducing head count.     

Managing by commitments

What makes a great manager great? Despite differences in their personal attributes, successful managers all excel in the making, honoring, and remaking of commitments. Managerial commitments take many forms, from capital investments to personnel decisions to public statements, but each exerts both immediate and enduring influence on a company. A leader's commitments shape a business's identity, define its strengths and weaknesses, establish its opportunities and limitations, and set its direction. Executives can all too easily forget that commitments are extraordinarily powerful. Caught up in the present, managers often take actions that, while beneficial in the near term, impose lasting constraints on their operations and organizations. When market or competitive conditions change, they can find themselves unable to respond effectively. Managers who understand the nature and power of their commitments can wield them more effectively throughout a company's life cycle. Entrepreneurs can avoid taking actions that imprint a new venture with a dysfunctional character. Managers in established enterprises can buttress past commitments that retain their currency and learn to recognize when commitments have become roadblocks to needed changes. The manager can then replace those roadblocks with new, rejuvenating commitments. That doesn't mean you should try to anticipate all the long-run consequences of every commitment--and it certainly doesn't mean you should shy away from making commitments. But it does mean that before making important decisions about, say, operating processes or partnerships, you should always ask yourself: Is this a process or relationship that we can live with in the future? Am I locking us into a course that we'll come to regret?