Why doesn't this HR department get any respect?

Since becoming managing partner of human resources at Loft Securities more than a year ago, Luke Robinson has tried everything he can think of to change his department's reputation as an administrative backwater. But he's swimming against the tide. Ever since the retirement of a charismatic CEO in 1995, the firm has suffered a slow bleed of good people. The new CEO doesn't have a flair for attracting and retaining talented people, and the HR department hasn't been able to pick up the slack. Robinson has done his best to turn things around. He's met with just about everyone, from senior executives to administrative assistants to external contacts. And, when he found out that recruiting wasn't Loft's only problem, he took a variety of concrete steps. Among other things, he established internal service standards and performance guarantees for his department. He created "listening posts" and implemented and "HR ambassador" program. And he drafted plans for a program to help educate all the company's employees about the role of HR--specifically, how it can contribute to creating and upholding the firm's strategy for success. But Robinson has run over some major speed bumps. Just before he joined the company, HR sullied its reputation by mishandling the investigation of a discrimination charge. And while on Robinson's watch, HR botched the issuance of year-end bonus checks for the managing directors and vice presidents. The frustrations are piling up, leading Robinson to entertain thoughts of bailing out. Five commentators on this fictional case study explain why he should avoid quitting and how he can help his department earn new respect.     

Interpretive management: what general managers can learn from design

The past two decades have seen a dramatic acceleration in the pace of marketplace change. Companies have abandoned the old hierarchical model, with its clean functional divisions and clear lines of authority, and adopted flatter, less bureaucratic structures. But if most organizations have begun to adapt to the uncertainty of rapid change, most managers have not. They remain locked into the mechanical mind-set of the industrial age--that is, they assume that any management challenge can be translated into a clearly defined problem for which an optimal solution can be found. That approach works in stable markets and even in markets that change in predictable ways. Today's markets, however, are increasingly unstable and unpredictable. Managers can never know precisely what they're trying to achieve or how best to achieve it. They can't even define the problem, much less engineer a solution. The challenges facing the general manager in these circumstances, the authors argue, resemble those typically confronted by design managers. In the unpredictable world of research and design, neither the flow of the development process nor its end point can be defined at the outset. Rather than the traditional analytical approach to management, the design world requires an interpretive one. And that approach is equally well suited to rapidly changing, unpredictable markets. The authors describe how companies such as Levi Strauss & Company and Chiron Corporation have stayed at the top of their industries by adopting just such an interpretive approach to management.     

The dawn of the e-lance economy

Will the large industrial corporation dominate the twenty-first century as it did the twentieth? Maybe not. Drawing on their research at MIT's Initiative on Inventing the Organizations of the 21st Century, Thomas Malone and Robert Laubacher postulate a world in which business is not controlled through a stable chain of management in a large, permanent company. Rather, it is carried out autonomously by independent contractors connected through personal computers and electronic networks. These electronically connected free-lancers-e-lancers-would join together into fluid and temporary networks to produce and sell goods and services. When the job is done--after a day, a month, a year--the network would dissolve and its members would again become independent agents. Far from being a wild hypothesis, the e-lance economy is, in many ways, already upon us. We see it in the rise of outsourcing and telecommuting, in the increasing importance within corporations of ad-hoc project teams, and in the evolution of the Internet. Most of the necessary building blocks of this type of business organization--efficient networks, data interchange standards, groupware, electronic currency, venture capital micromarkets--are either in place or under development. What is lagging behind is our imagination. But, the authors contend, it is important to consider sooner rather than later the profound implications of how such an e-lance economy might work. They examine the opportunities, and the problems, that may arise and anticipate how the role of managers may change fundamentally--or possibly even disappear altogether.     

SERIAL ISSUE EVIDENCE FOR THE RELATION BETWEEN THE RISK STRUCTURE AND MATURITY: A DECOMPOSITION METHODOLOGY

The risk structure of the interest rates literature shows that coupon effects can cause changes in yield spreads as maturity lengthens. These effects make it difficult to empirically isolate the default risk component of the spread for coupon-paying bonds. Attempts to calculate zero-coupon risk structures suffer from the relative scarcity of zero-coupon corporate bonds. We show that yield spreads for coupon-paying bonds that are identical except for default risk decompose into a relative duration component, a premium discount coupon component, and a default component. We present closed-form solutions for measuring the first two components so that the default risk portions can be isolated as residuals. We further present an empirical application of the decomposition metrics for sixteen exchange-traded serial issues and nonparametrically examine the relation between the default premia and maturity. We find various maturity relations.     

Accruals,Cash Flows,and Equity Values

We find, as predicted, that the differential ability of accrual and cash flow components of earnings to help forecast future abnormal earnings and the persistence of the components result in the components having different valuation implications. We base our tests on Ohlson (1999) applied to fourteen industries. We find: (1) Accruals and cash flows aid in forecasting future abnormal earnings incremental to abnormal earnings and equity book value. (2) Accruals and cash flows provide explanatory power for equity market value incremental to equity book value and abnormal earnings. (3) There is evidence that accruals and cash flows valuation coefficients are consistent with the Ohlson model.     

Medicare+Choice--cost and funding issues for Medicare risk plans.

The Balanced Budget Act of 1997 contained the most important changes in Medicare since its inception in 1965. The most notable changes include Medicare+Choice, which includes existing Medicare risk programs. The author offers a brief summary of the history of Medicare and the changes that will impact employer/union service providers. Areas of discussion include typical Medicare risk benefit packages, a financial analysis of Medicare risk contractors and changes to risk contracting under the new law.     

The use of organic models of control in JIT firms: generalising Woodward’s findings to modern manufacturing practices

Prior research indicates that technology plays an important role in the determination of management control systems. A fully developed JIT system represents a radical departure from the traditional approach to organising and managing mass production. In probing the management control implications of JIT, this study extends some well-established concepts from organisation theory to the modern manufacturing practices literature to develop a framework which suggests that mass production firms adopting JIT (a new technology) must abandon a mechanistic management control system and adopt an organic model of control. Findings from three case studies describing the control structures used in JIT firms are also presented as part of the theoretical and hypothesis development. In addition, survey results are reported which are highly consistent with the framework, indicating that Woodward’s findings (Industrial organization: theory and practice (2nd ed.). Oxford: Oxford University Press.) generalise (are robust) to a new technology. Finally, a preliminary examination into whether improvements in certain key areas are higher for those JIT firms utilising an organic model of management was performed and found to be consistent with expectations.     

Sticky Valuations,Aggregation Effects,and Property Indices

Previous studies on real estate smoothing have generally focused on the second moment of returns for individual properties. Although this body of research has developed plausible reasons for explaining the observed lower risk associated with real estate, no explanation has, however, been offered to account for the large difference in serial correlation at the individual property level compared with the index level. This article addresses this issue and also offers an explanation for the difference in serial correlation observed with different frequency real estate indices. Employing the framework developed by Holbrook Working (1960), we argue that the high levels of serial correlation typically observed in real estate indices results from a combination of random and sticky appraisals that induce cross-correlations between the component returns. Using the concept of sticky values we question the results of Lai and Wang (1998) in which they argue that the variance of appraisal-based returns should always be greater than true returns. We argue that a pragmatic conclusion regarding volatility should be conditioned on the underlying stochastic processes. We draw a distinction between serial cross-sectional and temporal sticky appraisal processes that influence smoothing at the index and individual property levels. Our results indicate that smoothing does not appear to be a serious issue at the individual property level. However, when different appraisal processes are aggregated into an index the underlying cross-correlation between those processes can induce high levels of smoothing.