segunda-feira, 26 de dezembro de 2011

Domestic Labor: The Servant Problem

The Economist
Published: December 17, 2011


“THE cook was a good cook, as cooks go, and as cooks go, she went.” Saki’s epigram, from “Reginald on Besetting Sins”, has lasted well, but when it was published in 1904, readers would have felt not just its wit but its bite. This was the era of Britain’s “Servant Problem”: middle-class dinner parties buzzed not with school admissions and house prices but with the shortage of decent help, and its tendency to stalk off at the slightest provocation. (The cook in question drank, and “on a raw Wednesday morning, in a few ill-chosen words”, her mistress had said so to her face.)
Cooks always drank. “Too often tyrant, virago and frequently heavy drinker, all in one,” they get their own chapter in “The Servant Problem: An Attempt at its Solution”, published in 1899. The description of the problem—cases of “disease and deformity” caused by the “inefficiency and carelessness of nurses and nursemaids”, bold-faced girls in employment agencies with the cheek to question prospective employers about hours and perks—is more convincing than the solution: homes where ladies would be cared for by apprentice maids. Servants “have broken my spirit and ruined my health,” one friend tells the author, who went under the name of An Experienced Mistress. They are “necessary evils”, another moans.
Mistresses have always complained about servants: employment inevitably creates difficulties, but the relationship is trickier when the workplace is the employer’s home. The combination of physical proximity and class difference offers a wealth of dramatic possibilities, as the writers of novels and television programmes discovered long ago. “The Help”, a novel of black servants and white mistresses in the American south in the 1960s, has sold 5m copies and has spent more than 100 weeks on the New York Times bestseller list; this year “Downton Abbey”, a British soap based on relations between aristocrats and servants in a grand Yorkshire house, has gripped many millions around the world and garnered five Emmy awards. The drama is set around the time of World War I, when the servant problem was shifting the balance of power, and heightening tensions, between those above and below stairs.
In 1881 the British census had found 1.25m women, in round numbers, working in domestic service, by far the largest category of employed women. The demand for “skivvies”, or maids-of-all-work, went on rising for decades, as a newly created professional middle class looked for the servants their betters had always had. But the supply of uneducated village girls such households would have employed was drying up. From 1880 to 1918 the school-leaving age rose in stages from 10 to 14.
Meanwhile, new options were becoming available for working women, in shops, offices and factories. The first world war accelerated an already established trend. An estimated 2m women took jobs making munitions and replacing bus-drivers, postmen and all the other male workers sent to the front. Many left domestic service to do so—and some never returned to it. “The comfort of the rich depends upon an abundant supply of the poor,” Voltaire had written over a century earlier. By the early 20th century, the rich were getting the uncomfortable sense that the foundations of the social order were shifting.
Old-fashioned notions of the consecrating value of service were revived by an increasingly desperate upper class (Victorians had been fond of before-and-after illustrations of filthy ragamuffins rescued, body and soul, by being turned into neat little maids). Irish girls and orphans from institutions who half a century earlier would have had to settle for the “rough”—lugging coals and hot water around and the like—found themselves able to pick and choose. In 1912 in America, Christine Frederick argued in “The New Housekeeping” for servants to get overtime and bonuses for mastering new tasks—and to be granted the respect of an honorific. “How many good potential servants have become poor stenographers because of the odium of the name ‘Bridget’?” she asked rhetorically. But to no avail. On both sides of the Atlantic women continued to abandon other people’s sinks in droves.
The life of Virginia Woolf, from 1882 to 1941, bracketed the period of the Servant Problem. Her mother, Julia, had married in 1867 and set up home with cook, kitchenmaids, housemaid, parlourmaid, lady’s maid, nurse, nursemaid and gardener. Such a mistress was something akin, in the opening words of Mrs Beeton’s famous cookbook, to “the Commander of an army, or the leader of an enterprise”. But Woolf wanted to live the life of the mind, not to become manager of a medium-sized domestic business; and anyway, she would not have been able to find the staff.
Like others in the Bloomsbury group of intellectuals, Woolf was groping towards a new way to live: simpler and more self-reliant; befitting the writer of “A Room of One’s Own”. Alison Light’s book, “Mrs Woolf and the Servants”, uses Woolf’s novels, letters and diaries to document the transition, which was anything but smooth. Woolf abandoned the custom of dressing for dinner and learned to cook, and would sometimes end a letter to the effect of “must go and put the dinner on”, like some 1950s suburban housewife. In another mood she would strike a snobbish tone, using the word “housemaid” to describe people she disliked.
Woolf’s relationship with her few servants could be stormy. After one of many rows with a cook, Nellie Boxall, Woolf described her in her diary as a “mongrel” with a “timid spiteful servant mind”. Screaming matches with servants were “sordid” and “degrading”, she complained, and dealing with Nellie interrupted her writing. Such dramas were caused in part by swift, yet unrecognised, changes in social status: though Woolf wrote that she wanted to be cordial towards Nellie, she also expected Nellie to be obedient. Over and over again Nellie would beg to be kept on when Woolf threatened to sack her, only later to give notice and then withdraw it. But despite the emotional wear and tear, mistress could not imagine life without maid.
Well-off Britons like the Woolfs, steeped in the culture of service, took a long time to turn to technology to solve their problems. Refrigerators caught on a generation later than in America. It was the fall in the employment of servants that drove up demand for labour-saving devices, says Ms Light, not the other way around. The Woolfs only installed flushing toilets in their country house in 1926, when the increasing difficulty of finding a villager willing to slop out their chamber-pots and deal with the earth-closet in the garden forced change upon them.
Servant Problem Redux
Gaping income inequalities; limited education for the masses; a long tradition of domestic service: Brazil at the turn of the 21st century bore striking similarities to 1880s Britain. But in the past decade Brazil’s professional classes have burgeoned and a lower-middle class—25m new consumers—has sprung into being. Most Brazilian children now go to secondary school and the country’s north-east, long its poorest region, has become its fastest-growing.
As a result, many maids from the north-east who migrated in past decades to the richer southern cities are downing dusters and heading home. Quite a few are mixing cement and driving forklift trucks on the big infrastructure projects peppered around the region. Research by IPEA, a government-funded think-tank, found that across Brazil the proportion of domestic staff aged over 30 rose from 57% to 73% of the total over the past decade. In the past four years the workforce in São Paulo’s metropolitan area rose by 11% and average wages by 8%. But the number of domestics fell by 4%—and their wages rose by 21%.
“The hunt for domestics”, screamed one of the cover stories in Veja São Paulo this year. The mistresses interviewed by the weekly magazine, sold in Brazil’s biggest and richest city, expressed their frustration in words eerily similar to those used by Experienced Mistress’s friends more than a century earlier: it’s rare to find an honest maid; my motto is “bad with her; worse without her”; maids are paid enemies.
“The comfort of the rich depends upon an abundant supply of the poor,” wrote Voltaire
The servant problem is raging in Brazil. Margarida, a thirty-something mother-of-two back in São Paulo after four years abroad, tried out seven nannies in less than a year. The failures included women who lied about their previous experience, or their travel costs (which in Brazil must be reimbursed by the employer), or “sat on the sofa all day”, or rarely turned up. Then Daniela, who had previously worked as her maid, called and asked if she was looking for someone. “I jumped at the chance to have Daniela back,” says Margarida. “I’d lost out on three jobs because of being let down on child-care, and I loved her, she had been a friend.”
But Daniela walked out after three weeks, complaining that Margarida was watching her every move. “She had been working in a hotel and she wasn’t happy working back in someone else’s home,” says Margarida. “But she didn’t know that about herself. And I hadn’t understood either.” Margarida is now trying out her ninth nanny. “I’ve learned to turn a blind eye to things I don’t like. I know now I was expecting too much. I hadn’t realised how much Brazil had changed while we were away.”
Alzira hears the maid’s side of such stories every day. The second child of 11 and a native of Piauí in the north-east, she started work aged ten, cleaning, looking after children, and rearing chickens. In 1988, aged 21, she made the 2,000km trek to São Paulo in the hope of something better. A sewing-machinist until carpal-tunnel syndrome ended that job, then a door-to-door seller of cosmetics until her lack of both education and a car impeded her progress, she turned to domestic work in 2006. Since then she has been helping other natives of Piauí into similar jobs.
Increasingly, she is in the line of fire in an undeclared, unacknowledged running battle. Some maids make ridiculous demands, such as large loans from their mistresses (one wanted the air fare to visit her parents); some mistresses are simply too rude for anyone to stay, no matter how much they pay (among the worst, apparently, are those who used to be poor themselves). Nowadays Alzira gets more calls from would-be mistresses than would-be maids. “I feel sorry for some of them, they phone and beg.”
More and more, she says, Brazilian women would rather not work in other people’s homes. And maids quit more easily now than just a few years ago. She thinks many people look down on domestics, regarding them as “the dregs”. She knows maids who, in social situations, lie about what they do for a living. “For me this is as dignified as any other job—I do it to support my family. But not everyone feels like that. It’s typically black women who do this job, and prejudice still exists.”
Since Priscila Leite and Isabella Velletri set up Homestaff, a domestic-employment agency, three years ago, they have been contacted by 5,000 would-be mistresses and have been able to find staff for 650. Doing so is getting harder, says Ms Leite: at the moment they have one maid on their books for every 30 clients. Scarcity is, unsurprisingly, driving up wages: specialists in caring for newborns can make as much as 5,000 reais ($2,750) a month. The agency sometimes gets hate mail from enraged mistresses accusing them of talking prices up—“but we don’t make the market, we just follow the market.”
Clients often start by expecting to find a maid who, like the north-easterners who came to the city 30 or 40 years ago and worked all the time because they had left everything behind, will live in and take only every other weekend off. But today’s young women are unwilling to follow in their mothers’ footsteps. Those that do have their own homes to sleep in, and friends and families with whom to spend evenings and weekends. “Much of our work is opening people’s minds to reality,” says Ms Leite.
Older clients, particularly, expect to be able to pay low wages for a maid-of-all-work. They are quickly disabused, either by the agency (“we delicately point out that we abolished slavery in 1888”) or by their daughters who explain that maids are no longer willing to remain standing whenever in their employers’ presence, and that if they are insulted they will leave. Ms Leite tells of a couple with a small apartment who made up a bed for their new maid in the laundry area—next to the dog’s. They were surprised when she walked out.
Britain has passed through the servant problem that Brazil is now experiencing. So what can Britain tell Brazil of life on the other side? That service does not die, but is reborn in a different form.
According to Britain’s Office for National Statistics (ONS), household expenditure on domestic service hit a low point in 1978, since when it has quadrupled in real terms. It estimates there are as many domestic workers in London now as in Victorian times. But everything except the raw number has changed. Few live in employers’ houses nowadays; many are self-employed, providing specialist services such as dog-walking or oven-cleaning to multiple customers. More work in institutions such as nurseries, rather than in private homes. Some are well-qualified and earning good salaries: professional couples look for educated nannies with qualifications in first aid and the like, and pay accordingly. Not included in the ONS figures are the factory jobs that have replaced service jobs. Instead of employing housemaids and cooks, for instance, busy householders buy the output of workers chopping and bagging salads and cooking ready meals.
Even the most apparently anachronistic of servants, butlers and valets, survive, though with the same shift from living-in to self-employment. Rick Fink started work as an assistant steward in the Royal Navy in 1953, then became live-in butler to a retired naval commander with a rich wife, earning £10 a week. In 1985 he went freelance, working regularly for a handful of families who wanted help on special occasions such as formal dinners and shooting weekends. In 2002 he opened his own butler-valet school to teach the traditional skills of service. His pupils are male and female, around two-thirds sent on the course by their employers, including yacht-owners, aristocrats both British and foreign and the global nouveaux riches. The other third pay their own way in the hope of making as much as £300 a day freelancing, or £70,000-80,000 a year full-time.
In Brazil babysitting services and child-friendly dining venues, unnecessary when the maid lives in, will start to boom. Clothes shops will start selling the drip-dry, non-iron stuff they flog in the rich world. Dry-cleaning and ironing services should benefit too. Schools will have to shape up: even the priciest private ones offer part-time education—with no guarantee that siblings get offered the same shift—meaning that families often have to shell out for both school fees and a nanny who works full-time. Men might even start to take up some of the slack: “my husband changed our children’s nappies,” says Ms Leite of Homestaff, “and friends thought that made him the world’s best father.”
Ready meals will become more popular: Brazilians still cook most meals from scratch, even though the country has some of the world’s biggest food-processing companies, which export their tins and sachets to America and Europe. Fine dining at home will largely disappear. “For the 4,000 reais a month a really good cook now costs, you could eat out ten times in São Paulo’s fanciest restaurants,” says Ms Leite. Many Brazilian mansions have no hot water in the kitchen, and there are paulistanos who time-share helicopters but do not own a dishwasher. That will change when getting congealed fat off pans stops being someone else’s job.
While the demand for service survives the Servant Problem, standards of housekeeping also tend to fall. Work famously expands to fill the time available, but that is even truer of domestic work than other sorts. Bridget Anderson of Oxford University’s Centre on Migration, Policy and Society recalls receiving the results of a questionnaire administered to domestic employers in a number of different countries, which asked what the staff spent their time doing. She was intrigued to discover that maids in Italy spent a great deal of time dusting ceilings. “I had never even thought of dusting a ceiling,” she says. “But then I looked up at mine—and they were very dusty.”

quarta-feira, 21 de dezembro de 2011

Climbing The Great Wall Of Trust

Harvard Business School - Harvard University
Published: December 19, 2011

Executive Summary:

New research from Assistant Professor Roy Y.J. Chuainvestigates the difficulties for foreigners doing business in China, and what they can do to overcome the challenge. Key concepts include:
  • Foreign businesspeople must learn their way around Chinese cultural customs and the importance of personal relationships and trust in order to be successful in that country.
  • For companies doing business in China, one solution might be to consciously hire executives of Chinese ancestry in key roles or placing more emphasis and attention on cultural sensitivity.
  • The researchers believe that similar dynamics are likely to rule in any business situation that mixes partners from different cultures or countries.

About Faculty in this Article:

HBS Faculty Member Roy Y.J. Chua
Roy Chua is an assistant professor in the Organizational Behavior unit at Harvard Business School.
Inrecent conversations with US executives doing business in China, Harvard Business School Assistant Professor Roy Y.J. Chua heard about a new trend. In an East Asian version of cutting deals on the golf course, Chinese executives often take partners to teahouses to discuss business and negotiate deals. The problem, according to these executives, is that foreigners are rarely invited.
"It's really a perception that foreigners can't appreciate the culture," says Chua. In practice, it means that foreign businesspeople are at a disadvantage compared with peers of Chinese ethnicity. "It's a gap that might make you less competitive compared with someone who is of the same ethnic culture."
"To the extent that you could speak the language or demonstrate a certain level of understanding of culture, that might help."
As China becomes increasingly important to the world economy, it's getting more essential that global executives learn their way around Chinese cultural customs in order to be successful in that country. While every country has its version of the "old boys network" that defines in- and out-groups in business, Chinese culture puts particular emphasis on personal relationships.
"It's taken to a different level in China," says Chua. "Because of the lack of a strong legal infrastructure, people have to rely on those they know very well to get things done." There's even a name for the phenomenon, guanxi: a folk concept that means loyalty to people from the same village, but extends outward in principle to emphasize trusted personal relationships in every aspect of society.
In a paper published in the December 2011 Journal of International Business Studies, Chua looks at just how important this concept is to the Chinese—and how foreign businesspeople might overcome the challenge. The paper, "Effects of Cultural Ethnicity, Firm Size, and Firm Age on Senior Executives' Trust in Their Overseas Business Partners: Evidence from China, written with Crystal Jiang of Bryant University, Masaaki Kotabe of the Fox School of Business, and Janet Murray of the University of Missouri—St. Louis, explores the role that trust plays in forming bonds across cultures and national borders—an area that has received surprisingly scant attention in our globalized economy.

Types of trust

Building on past research, Chua and his colleagues investigate two types of trust: cognitive trust, which is based on confidence in a partner's technical competency, and affective trust, which is based on a shared concern for a partner's welfare and personal interests. "Cognitive trust is trust from the head; it's a very rational way of assessing ability and reliability," says Chua. "Affective trust is trust that comes from the 'heart.' This type of trust involves considerable emotional investments."
To test the relationship between those two types of trust, the researchers conducted extensive interviews with 108 Chinese senior executives from a random sample of firms in mainland China. In each interview, the researchers asked the executives to think of two overseas partners—one of Chinese ethnicity and the other of a different (non-Chinese) ethnicity. Participants were then asked a series of questions on a five-point scale about how much they could rely on those partners to complete tasks effectively (in order to measure cognitive trust), and how much the partners shared the same goals and feelings (in order to measure affective trust). These questions were asked among many other questions involving the firms' innovative capabilities and client relationships so that it was not obvious to the interviewees that the researchers were focusing on trust.
The results were striking. Affective trust, that from the heart, in overseas partners of Chinese ancestry was 33 percent higher than it was in the partners from other cultures. Even more important, however, was the influence of cognitive from-the-head trust. Far from being a cool, rational appraisal of a partner's ability, it was highly influenced by "trust from the heart" when dealing with someone from the same culture. In statistical terms, there was a 64 percent correlation between affective and cognitive trust for same-culture partners, but only an 8 percent correlation for those of a different culture.
Moreover, when that trust has been established, the research showed that it was much more fragile for those of a different ethnicity and more easily disrupted by external factors such as the size of a firm. For instance, in general, the larger the Chinese firm, the less its executives developed cognitive trust (but not affective trust) in their overseas partners, because they had more resources and thus less need to rely on those partners. However, when the overseas partners were of non-Chinese ethnicity, executives of large Chinese firms trusted them even less.

Building trust

While such findings makes sense intuitively—we are all more partial to trusting those with whom we share values and background—the size of the correlation shows the height of the Great Wall that foreign executives must scale in proving themselves to their Chinese partners.
"That affective-trust deficit means when you try to build relationships across cultural lines, you have to deal with the fact that executives from other cultures are not going to engage with you on a social-emotional level as well," says Chua. "You have to start thinking about how you can build that level of trust."
For companies doing business in China, one solution might be to consciously hire executives of Chinese ancestry in key roles in which trust is important to establishing effective business relationships. But it might also mean placing more emphasis and attention on cultural sensitivity to bridge that affective-trust gap.
"To the extent that you could speak the language or demonstrate a certain level of understanding of culture, that might help," says Chua.
While those tactics might be especially vital in doing business in China, Chua continues, they are important to keep in mind in any business situation that mixes partners from different cultures or countries.
"Our data is only from China, so there is no concrete evidence yet for other cultures, but the theory is not culture specific," he says. "We can't be definitive that this exact pattern of findings would play out in India, for instance, but the hypothesis was developed without any specific culture in mind. China was our first test bed."
After all, every culture has its exclusive cultural rituals. Those who strive to succeed our globalized economy may just be those who can swing a golf club and appreciate a cup of tea with equal ability. 

Thinking Slow: An Argument For Bureaucracy?

Harvard Business School - Harvard University
Published: December 1, 2011

Executive Summary:

Summing Up Readers of Jim Heskett's column this month offer guidelines for when to think fast and when to think slow, from author Daniel Kahneman'sbook, Thinking, Fast and Slow.

About Faculty in this Article:

HBS Faculty Member James Heskett
James Heskett is a Baker Foundation Professor, Emeritus, at Harvard Business School.

Summing Up

Summarizing responses to questions about a topic as complex as thinking slow requires that one think slow. So I wrote this column, slept on it, rewrote it, and still have problems with it. But deadlines, as they so often do, help us avoid the "analysis paralysis" associated with the downside of thinking slow.
So here is what my gut tells me about what you said this month: Thinking slow, as Daniel Kahneman calls it in his recent book by that name, is important under circumstances of high risk, uncertain outcomes, and a limited experience base with the challenge requiring a decision. Good leaders know when to think slow. All of us need mechanisms for helping us to know. Some elements of bureaucracy can be included among the devices. But, as Ganesh Ramakrishnan said, "… we probably (need) to enrich the vocabulary … The word bureaucracy is associated with stagnation, rigidity, unthinking application of age-old rules … (vs.) careful reflective thought on matters that need intelligent application of criteria."
Just how to promote slow thinking where it is appropriate stimulated an interesting and stimulating debate. As Dave Schnedier put it, "I agree with Kahneman's diagnosis, but not his remedy… Whether the decision is to be made by an individual, a team, or 'the bureaucracy', I would say that all would be well served by the discipline … imposed by adherence to a rational process… (which) requires the intellectual rigor that professional management can impose…" Sudheer Thaakur concurred: "… in a world that is more complex and uncertain and ambiguous we should be promoting slow and deliberative thinking. Till we do that we will not be able to fully utilize the opportunity offered by (the) structured nature of organization." Rebecca Mott said "let's not forget the plethora of research that shows teams consistently outperform individuals. It is the modifying effect of the team, which also slows down the decision-making process, that produces a better result." Yadeed Lobo had other suggestions: "Good governance (the objective observer, non executive board members) serves as an effective moderator of (thinking fast) on the part of … executives. The relationship between the Independent Non-Executive Chairman of a Board and the CEO is particularly important."
Some saw a danger in flirting with the use of bureaucratic devices to promote deliberative thought. As Shadreck Salli put it, "What (is critical) … is the person that conducts the switching from thinking (either fast or slow) to (the) other … it may not be easy to have a series of processes in a bureaucratic chain that would best suit a particular type of thinking … Shalia commented: "I think the growth rate of large organizations slow(s) down precisely for this reason-not being able to separate decisions which need deliberations vs. quick decisions." Phillippe Gouambe was more blunt: "… bureaucracy slows everything down and I just do not have the time for that."
As you said, good judgment in thinking fast or slow is an important characteristic of outstanding leadership. Can it be taught or does it have to be acquired over time? How do leaders learn how to think slow at the right time? How do they ensure that others do so as well? What do you think? Or do you need more time?

Original Article

Behavioral economics has fascinated us at least since Daniel Kahneman became the first psychologist to win the Nobel Prize in Economic Sciences in 2002. It has allowed us to see more clearly traditional economics and the fallacy of the assumptions on which it is based: a world of rational humans who are unemotional, well-informed, and take the long-term view in economic decisions.
In contrast, behavioral economics emphasizes and examines the irrational side of managers, consumers, and investors—their tendency to take the short-term view while following their emotions. These "irrationals" are less well informed than they imagine (and certainly less well-informed than traditional economists assume).
As an antidote to these problems, behavioral economists have, for example, advised regulators to combat predictable irrationality in citizens and consumers by "nudging" them by means of economic incentives to act in ways that regulators believe are in citizens' best interests. Lest we underplay the significance of this or somehow associate it with conservative or liberal politics, consider that proponents of such ideas have been advisers to both David Cameron in the U.K. (Richard Thaler) and Barack Obama in the US (Cass Sunstein). Behavioral economists advise regulators that, when in doubt, make sure that business is transparent and even educational in its dealings with others in order to make them wiser.
An observer of policy based on behavioral economics might well conclude that an assumption of irrationality may be valid, but irrational behavior is hard to predict. Why, for example, do people (even experts and managers who should know better) act in their own worst interests or those of their firms? Can such behaviors be predicted and averted?
That is a subject of Daniel Kahneman's new book, Thinking, Fast and Slow. He concludes, based on his research, that as decision-makers, we rely too heavily on System 1 thinking (recall Malcolm Gladwell's book Blink) that helps us summon whatever knowledge we think we have. Among other advantages, it saves us time in situations with similar patterns. But errors of judgment occur when we apply it to complex issues that require more careful consideration, investigation, and reasoning--System 2 thinking. It helps explain behaviors ranging from overconfidence in planning to the defense of sunk costs and the failure to cut our losses in investments.
Kahneman implies, among other things, that in selecting decision-makers we should look for those who know when to switch from System 1 to System 2, that is, when to think fast and when to think slow (using his grammar). Another antidote to thinking fast at the wrong time, according to Kahneman, is to have an objective observer who can flag those situations requiring slow thinking when they arise.
But the best check on too-fast decision-making may be the organization itself. As Kahneman puts it, "Organizations are better than individuals when it comes to avoiding errors, because they naturally think more slowly and have the power to impose orderly procedures." Rather than castigate the bureaucratic nature of large organizations, Kahneman suggests we try to make them more efficient at slow thinking by improving processes for deliberation and making decisions
.
Do you agree with what Kahneman implies here? Does bureaucracy have its advantages? Is this one of them? What do you think?

To read more:

Malcolm Gladwell, blink: The Power of Thinking Without Thinking (New York: Little, Brown and Company, 2005)
Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011)
Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (London: Penguin Books, 2008)
Jim Heskett's latest book,The Culture Cycle, was published in September. 

quarta-feira, 14 de dezembro de 2011

China Inc. Goes Global

Columbia Business School - Columbia University
Published: December 12, 2011


China’s economy is taking its next great leap forward: parts of its manufacturing sector are now moving up the value-added chain and out of the country. The China challenge is now a global one.
The reasons are not difficult to fathom. Production costs (wages, office rents, land, capital, etc.) in China’s coastal provinces — where most of the country’s manufacturing and service production, as well as foreign direct investment, are located — have been rising fast. Since last year alone, minimum wages in 9 of 12 coastal provinces (including Beijing) rose by an average of more than 21 percent.
At the same time, the renminbi is appreciating, making domestic production of export-oriented goods and services even more expensive. This matters, especially for labor-intensive activities (ranging from toy manufacturing to data-entry services), whether by affiliates of foreign multinational enterprises (which account for more than half of China’s exports) or by local firms, which are losing competitiveness in international markets.
To maintain its export-oriented production base, output must move up the value-added chain, toward more sophisticated products. Multinational enterprises can do that within their integrated global production networks, which allow them to organize an international intra-firm division of labor. Any part of these production chains can be located wherever it suits the firms’ international competitiveness best. And such firms have the experience to scout the globe for the right investment locations.
Domestic Chinese firms, too, need to respond to these pressures. They are helped in this effort by the rapid deepening of China’s skills and technology base. This partly reflects training in foreign affiliates, but the main reason has been the Chinese government’s sustained effort to foster education and training, encourage technology transfers from foreign to domestic firms, and, in particular, to build up research and development capabilities.
In short, producers of more sophisticated goods and services in developed and emerging-market countries need to be prepared for growing competition from China.

The Shifting Labor Landscape

At the same time, China’s labor-intensive production will increasingly move to countries with lower labor costs — including Bangladesh, India, Indonesia, and neighboring Vietnam (where Chinese firms have already established about 1,000 affiliates), as well as various African countries. This process has already begun and has been supported since the beginning of the last decade by the government’s “going global” policy, through which it encourages outward foreign direct investment (FDI) from China.
The data bear this out: FDI outflows more than doubled in 2008, to $52 billion, from $23 billion in 2007, and rose even further in 2009 (when world FDI flows collapsed by about 50 percent, owing to the Western financial and economic crisis), before reaching $68 billion in 2010. Not counting Hong Kong, this made China the world’s fifth largest outward investor that year.
This development creates new opportunities for other emerging economies to reap the trade benefits of inserting themselves into the international division of labor. These countries’ investment-promotion agencies — indeed, those of all countries, including developed ones — should increasingly target firms in China to lure them to their shores. In so doing, they should aim not only for big state-owned companies but also for the rising number of vibrant, private small and medium-size enterprises in China that can be found in all sectors of the economy.
But an important caveat is in order: China has a vast interior that is far less developed than the coastal provinces. The government is making special efforts to develop these areas in the framework of its western development strategy, including building modern infrastructure, promoting high-quality education, supporting science and technology (all key determinants of the location of production), and encouraging investment there. As a result, firms based in the coastal provinces that have to move their production (and see no need to diversify away from China) can choose to relocate to China’s interior rather than going abroad.

What Governments Need to Do Now

The pattern is clear: this sort of transition away from labor-intensive manufacturing happened before in today’s developed countries, when firms headquartered in Europe, Japan, and the United States moved production to developing countries. Asia, Hong Kong, South Korea, Singapore, and Taiwan were (and have been) among the beneficiaries.
When costs for labor-intensive goods and services became too high in these countries, production was shifted elsewhere. This relocation of manufacturing has since been accompanied by the offshoring of services whose information-intensive components have become tradeable.
China itself has benefited from today’s open international trade and investment regime, which allows firms to locate production where it is most beneficial for their international competitiveness — and is now beginning to shed labor-intensive industries itself.
Governments need policies to adapt to this global shift in production. They should help their countries’ firms to adapt to the departure of some producers by establishing training programs, stimulating innovation, and maintaining or creating a competitive environment that encourages “creative destruction” while providing for a social safety net.
Likewise, governments that attract the production that was shed elsewhere need to have policies in place that enable them to benefit as much as possible from this global shift, thereby furthering their own economic development.
Karl P. Sauvant is executive director of the Vale Columbia Center on Sustainable International Investment at Columbia University.
Copyright: Project Syndicate, 2011

quarta-feira, 7 de dezembro de 2011

Are Creative People More Dishonest?

Harvard Business School - Harvard University
Published: December 7, 2011


In his 1641 treatise, Meditations on First Philosophy, philosopher René Descartes introduced the concept of an "evil genius," a powerful force of nature who is equally clever and deceitful. Since then, the world has given us plenty of examples—Hannibal Lecter in The Silence of the Lambs, fictional Wall Street villain Gordon Gekko, and real-life Wall Street villain Bernie Madoff, to name a few. Not only were these classic bad guys unquestionably unethical, but all were inarguably creative in carrying out their bad behavior as well. Indeed, it's rare to hear anyone described as both evil and unoriginal.
This raises a question: Is there a link between creativity and unethical behavior?
"Dan and I started wondering whether there is something about the creative process that triggers dishonest behavior."
There certainly is, according to an article in a forthcoming issue of the Journal of Personality and Social Psychology. In "The Dark Side of Creativity: Original Thinkers Can Be More Dishonest," the authors report that inherently creative people tend to cheat more than noncreative types. Furthermore, they show that inducing creative behavior tends to induce unethical behavior.
It's a sobering thought in a corporate culture that champions out-of-the-box thinking.
"In any organization, especially in contexts that are global and very competitive, there is so much focus on trying to be innovative and creative," says Francesca Gino, an associate professor at Harvard Business School, who wrote the article with Dan Ariely of Duke University. "But is creativity always good? We often hear of cases in which people use innovative behavior to create a sense that what they're doing is not morally wrong. So, Dan and I started wondering whether there is something about the creative process that triggers dishonest behavior. Specifically, we decided to explore the idea that enhancing the motivation to think outside the box can drive individuals toward more dishonest decisions when facing ethical dilemmas."

Creativity and ambiguity

To begin their research, Gino and Ariely surveyed 99 employees across 17 departments at an American advertising agency, where some jobs—copywriting, for example—required much more creativity than others. In the anonymous survey, on a seven-point scale, the respondents indicated how likely they were to engage in various ethically questionable work behaviors such as "take home office supplies from work" and "inflate your business expense report." Respondents also evaluated scenarios describing a hypothetical person who has the opportunity to behave dishonestly, and then indicated, again on a seven-point scale, how likely they would be to behave unethically in each instance. Finally, the respondents reported how much creativity was required in their respective jobs, with three managers in the executive office rating the creativity level required in each department, as well.
Overall, the researchers learned, the higher the creativity required for the job, the higher the level of self-reported dishonesty.
Then, through a series of experimental studies, the researchers tested--and largely proved--the theory that creative people are more likely to exhibit unethical behavior when faced with ethical dilemmas.
The first study tested the hypothesis that a naturally creative person is predisposed to dishonest behavior. (The week before the experiment, the participants, 71 university students, completed an online survey that included dispositional measures of creativity.) The experiment included a computerized task in which participants viewed 20 dots inside a diagonally bisected square. They were told to indicate whether there were more dots on the right side of the square or on the left, and that their answers would affect how well they would be compensated for taking part in the experiment: each "more-on-the-right" decision would earn them 10 times as much as a "left" decision.
In half the trials, it was obvious that one side of the square had more dots than the other—2 dots versus 18, for example. But in the other half, the task was a little more ambiguous, with several dots appearing near or on the line in the middle of the square. The researchers focused on the results of the "ambiguous" tasks, with the idea that these were the ones that allowed more room for interpretation—participants could easily misrepresent what they actually perceived and report "more on the right" in order to incur a higher payoff.
The results showed that participants who had scored high on the creativity scale were the most likely to fudge their answers for monetary gain.
"Ambiguity, having some room to justify our behavior, seems to be a really important component of explaining when and why we cross ethical boundaries, and these results show us that creativity helps with that process," Gino says. "It suggests that moral flexibility is the mechanism explaining why being in a creative mindset or being a creative person puts you more at risk to do the wrong thing."

The perils of inducing creativity

In another study, which included 111 university students, the researchers tested whether they could actively induce creativity, and whether doing so would temporarily induce dishonest behavior. Participants were randomly assigned to one of two groups: the "creative mindset" group and the control group. All were asked to construct sentences from sets of randomly positioned words. But in the creative mindset group, more than half of the sentences included words related to creativity: "novel," "imagination," "invention," "originality," and so on.
"We're not saying that creativity's bad, but we are saying that it can lead to problems."
To test whether the creativity prime worked, the researchers asked participants to solve a cognitive puzzle created by the Gestalt psychologist Karl Duncker. Known as Duncker's candle problem, it presents participants with the task of affixing a candle to a wall in such a way that when lit, the candle won't drip wax on the floor. To complete the task, participants can use a box of tacks, a book of matches, and the candle. The ideal solution, which requires ingenuity, involves emptying the box, tacking the box to the wall as a candleholder, placing the candle inside, and lighting the candle with the match. The researchers found that 47.3 percent of participants in the creative mindset group solved the candle problem ideally, versus 26.8 percent in the control group.
Next, participants completed a series of computerized tasks, including the ambiguous dots-in-the-square task from the first study. The results showed that those in the creative mindset group were much more likely to give dishonest answers for monetary gain than those in the control group.
"These were simple studies, but they were powerful in showing that our ability to justify things is significantly greater if we are in a creative mindset or when we are creative people," Gino says.
That said, Gino is quick to add that she and Ariely are not suggesting that companies put the kibosh on innovation in order to keep dishonesty at bay.
"We're not saying that creativity is bad," Gino says. "But we are saying that it can lead to problems. And so the question from a manager's perspective is: How do you get the good outcomes of creativity without triggering the bad outcomes?"
While "The Dark Side of Creativity" doesn't answer that question directly, Gino hopes that the research will remind innovative organizations not to give short shrift to ethics.
"As a manager, if you're highlighting the importance of being creative and innovative, it's important to make sure that you're stressing the presence of ethics, too," Gino says. "Dan and I are of the hope that managers will start thinking about how to structure the creative process in such a way that they can keep ethics in check, triggering the good behavior without triggering the bad behavior."

The Most Powerful Workplace Motivator

Harvard Business School - Harvard University
Published: October 31, 2011


Any parent can tell you that a surefire way to turn joy into rage is to offer your child a big candy bar—and then turn around and offer an even bigger one to his sister. Suddenly, a special treat turns into a great injustice. "Hey! How come she got more? That's not fair!"
And any hiring manager can tell you that the world of business is not so different.
"It really was all about the recognition of and comparison with their peers, and many of them were willing to pay for it."
"This is why MBA programs send out lists of average salaries, and why students spend hours poring over those lists," says Ian Larkin, an assistant professor in the Negotiation, Organizations & Markets Unit at Harvard Business School. "You should see the angry e-mails I get from students when they find out that a job offer turns out to be $10,000 per year below the average. It's not that they really feel like an annual salary offer of $115,000 is unfair on its own. They might be perfectly happy with that salary if it weren't for the information that it's below average."
And it's not just a matter of money. In several studies of social comparison in the workplace, Larkin has found that the most powerful workplace motivator is our natural tendency to measure our own performance against the performance of others.
"Traditionally, [the field of] economics has held a very rational view of people, and there's a gigantic amount of literature focusing on financial incentives and the idea that simply having financial incentives causes people to work harder," he says. "But my research suggests that in deciding how hard we work and how well we think we're performing, social comparisons matter just as much."

The $30,000 gold star

The power of social comparison can lead to irrational financial decisions, according to Larkin's 2009 paper "Paying $30,000 for a Gold Star: An Empirical Investigation into the Value of Peer Recognition to Software Salespeople."
The paper describes a field study at a large enterprise software firm, where salespeople's salaries are largely based on commissions. The firm also features another common sales incentive--a "president's club" membership for those employees who sell more software than 90 percent of their peers in a given year.
The software firm uses a "commission accelerator" program over the course of each financial quarter, meaning that a salesperson expecting a high-volume sale at the beginning of a quarter would receive a higher commission on any additional sales in the same quarter. A salesperson expecting a large sale early in the first quarter of the year would rationally want to delay any other potential sales until later in that quarter, so as to take advantage of the accelerating commission schedule.
However, making the sale right away, before the end of the year, could help the salesperson achieve special recognition as a member of the club. Thus, the salesperson faces a choice: delay the sale and garner eventual commission boosts, or make the sale right away and improve the chance of attaining club membership. In the paper, Larkin uses actual choices of hundreds of salespeople facing this decision to statistically estimate the average salesperson's "willingness to pay" for club induction—the point at which a salesperson is indifferent to waiting for greater commissions and closing the deal now and getting inducted into the club. The willingness-to-pay statistic at the software firm is calculated to be nearly $30,000, or approximately 5 percent of take-home pay.
"My research shows that salespeople who are right on the margin of club induction are actually willing to pay to get over the margin and into the club," Larkin says.
Importantly, Larkin observed that there were no apparent financial benefits to attaining club membership. Recipients received a gold star on their name card, companywide recognition, an e-mail from the CEO, and a weekend trip to a tropical destination with the other club members. (Granted, the trip was worth several hundred dollars, but was far less financially valuable than a large commission.)
Club members "were not more likely to be promoted, leave for a better job, or make higher commissions in the future," Larkin says. "It really was all about the recognition of and comparison with their peers, and many of them were willing to pay for it."

Insecurity leads to dishonesty

Social comparison also can lead to insecurity-driven cheating, as Larkin details in a 2009 paper co-written with HBS colleague Benjamin Edelman, Demographics, Career Concerns or Social Comparison: Who Games SSRN Download Counts? The paper addresses an issue near and dear to academics worldwide: the relative popularity of working papers in the Social Science Research Network (SSRN) repository.
The SSRN is a huge academic paper repository, with more than 100,000 authors and 500,000 registered users who have the opportunity to view or download every paper on the site. For each paper, SSRN creates a web page that includes statistics on how many times the paper has been downloaded and viewed. The SSRN site also publishes various "top 10" lists in numerous fields, ranked according to how many times the paper has been viewed, downloaded, or cited elsewhere on SSRN.
Some scholars paid a lot of attention to the reported download counts of their papers; Larkin reports that one prominent legal academic described the monitoring of his own paper's download counts as "like crack for me."
Historically, SSRN allowed unlimited downloads of papers, and most of those downloads were reflected in the reported download count on each paper's web page. It became apparent that many authors were gaming the download count system by repeatedly downloading their own papers, so that others would see the high download count and assume that these particular papers were very popular. SSRN maintains detailed historical records of every paper download and is able to determine when papers appear to be downloaded over and over by the same person.
"It's like having a convenience store that's not manned, and everyone who comes in can either steal or pay, but there's a video camera that nobody knows about, and it's tracking everyone's every move," Larkin says. "For years, some academics got away with inflating their own download count numbers, but we were able to see exactly who was doing this, and in what circumstances."
In their research, Larkin and Edelman teamed up with the SSRN and set out to determine the factors that would make academics inflate the download counts of their own papers.
"As economists, we thought, hmmm, it's probably people who are up for tenure soon, or maybe it's the people who just graduated, and they want to get their name out there," Larkin says. "We were thinking very much along the traditional economic model--people doing things for rational, career-promoting reasons."
Larkin shared these hypotheses with HBS colleague and mentor Max Bazerman, a leading ethics scholar, who had a different theory. "Max told me, 'I'll bet people are doing this because they feel bad that their papers aren't being downloaded as much as their colleagues' papers,' " Larkin says. "So we looked at that."
It turned out Bazerman was right. The researchers found that authors were more likely to download their own papers repeatedly when a colleague's paper was performing especially well on the site, or when a very similar paper to an author's was newly released and received significant downloads. Deceptive downloads also increased during times when a paper was close to gaining (or losing) placement on a top 10 list. (Ironically, one of the most downloaded SSRN papers of all time is 'I've Got Nothing to Hide' and Other Misunderstandings of Privacy.)
"Again, what was surprising to us was how little we found in terms of the economic reasons for doing this," Larkin says. "By far, the biggest predictor of this behavior was fear of being socially inferior to one's peers."
(Those tempted to boost a paper's usage stats should note that SSRN's terms of service now state that the attempted manipulation of download counts is against site rules, and that the organization retains the right to ban anyone caught abusing the system.)

Ramifications for salary managers

The field evidence from the worlds of software sales and academia indicates that companies need to bear social comparison in mind when designing compensation plans. Larkin discusses the issue in The Psychological Costs of Pay-for-Performance: Implications for the Strategic Compensation of Employees, a paper he cowrote with HBS colleague Francesca Gino and Washington University's Lamar Pierce.
The authors argue that paying each employee solely according to his or her performance is actually an inefficient strategy; it can lead to resentment or even sabotage on the part of employees who believe they are underpaid compared with their colleagues. Thus, a standardized salary scale, combined with ancillary incentive programs, may be the best way to motivate employees. "When deciding how much effort to exude, workers not only respond to their own compensation, but also respond to pay relative to their peers as they socially compare," the paper states.
That's important food for thought, considering that Facebook, LinkedIn, and other such sites have made it de rigueur to share information that we used to keep to ourselves.
"It used to be that our salaries were very secret, but they're getting less and less secret because of social networking," Larkin says. "And people get upset quickly when they realize that there are large variances in how much other people are paid. Companies need to realize that with the overflow of information these days, paying peers differently is going to affect not only how those people feel but how their colleagues feel as well." 

What Makes A Good Leader?

Harvard Business School - Harvard University
Published: April 2, 2001


When discussing business leadership, the distinction between good management and good leadership is often made. Managers are thought to be the budgeters, the organizers, the controllers — the ants, as one observer puts it — while leaders are the charismatic, big-picture visionaries, the ones who change the whole ant farm. But such a construction, those interviewed for this article agree, erroneously leads to a bimodal way of looking at something that should really be evaluated on two separate scales. "Everybody has got a little bit of each in them," says John Kotter, who admits he is sometimes guilty of using the dichotomy in an effort at simplification. "It's much better to think in terms of measuring people on a zero-to-ten scale for each quality."
HBS professor Joe Badaracco agrees that the traditional manager versus leader argument ("Clark Kent versus Superman," he jokes) tends to undermine the value of management. "There are lots of people who look and act like managers, who have excellent managerial skills, and who don't make a lot of noise. Nobody is writing cover stories about them. But after they have been in an organization for a period of time, things are significantly better," observes Badaracco. "Now, are these mere managers because we can't compare them with Martin Luther King? Or are they leaders because they accomplished something that needed to be done?"
If leaders disclosed all their concerns and doubts, stock prices would plummet, their competitors would be all over them, and employees would be jumping ship.
—HBS professor Joe Badaracco
Some great managers struggle with change and fail to be great leaders, while a great leader might fail to create a sense of stability in an organization and not measure up as a manager. HBS professor David Thomaspoints out that "increasingly, the people who are the most effective are those who essentially are both managers and leaders."

Communication Is Key

"Communication is the real work of leadership," says HBS professor Nitin Nohria, who documented the importance of persuasion in his 1992 book Beyond the Hype: Rediscovering the Essence of Management. Nohria believes effective leaders are masters of the classical elements of rhetoric, as outlined by Aristotle centuries ago. "You can reach people through logos or logic, by appealing to their sense of what is rational," he explains. "You can use pathos, appealing to their emotions, or you can make an argument based on their sense of values or ethos." Great leaders, he notes, "spend the bulk of their time communicating, and they know how to employ all three of Aristotle's rhetorical elements."
Nohria also feels that leaders are able to distill their message, however complex it may be, to something that is accessible to those who may not share their knowledge or background. Joe Badaracco agrees. "You need a talent for simplicity — for saying things in a few words. General Electric's Jack Welch is a good example. He is astonishingly articulate and able to convey complicated concepts in just a few phrases."
Of course, knowing your audience is also essential. "Great communicators have an appreciation for positioning," states John Kotter. "They understand the people they're trying to reach and what they can and can't hear. They send their message in through an open door rather than trying to push it through a wall." Badaracco believes part of knowing your audience is the ability to listen. "Communication can't always follow the top-down model," he says. "With the fluidity of information in business today, leaders need to be masterful listeners; they need to be able to receive as well as send."
David Thomas stresses the importance of "multimodality" in communication. "What you say is only the beginning," he states. "Your behavior, your actions, and your decisions are also ways of communicating, and leaders have to learn how to create a consistent message through all of these. It's been said many times, but leaders lead by example."
For Rosabeth Moss Kanter, a key question is whether a leader's personal passion matches his or her aspirations. "There are so many false starts, unexpected obstacles, and surprising turns along the path to change. Daily work often drains energy needed for change," she says. "Leaders must pick causes they won't abandon easily, remain committed despite setbacks, and communicate their big ideas over and over again in every encounter."

Telling the Hard Truths

What happens when leaders must communicate facts that are hard to take? Nitin Nohria reflects on Winston Churchill's devastating defeat at Gallipoli, which resulted in over 100,000 Allied casualties during World War I. "The campaign was a total fiasco for British military leadership," he notes. "When it was over, Churchill took complete responsibility. A setback like that could have been paralyzing, but he was able to move forward to lead his country to victory in World War II."
The lesson, says Nohria, is that Churchill and other great leaders are pragmatists who can deal with difficult realities but still have the optimism and courage to act. "Enduring setbacks while maintaining the ability to show others the way to go forward is a true test of leadership," he asserts.
Jeff Bezos, founder and CEO of Amazon.com, has said that one of the key elements of being a good business leader is the capacity to tell the hard truths. "Leaders struggle with this problem all the time," says David Thomas. "From a leadership point of view, you always want to move toward telling the hard truths and helping people cope with the realities of change. But as a manager, you might be more inclined to minimize the complexity of a situation so things can run smoothly for as long as possible. It's often a judgment call."
The ability to render that judgment can sometimes make or break a company. "The phrase 'public confidence, private doubt' comes to mind," observes Joe Badaracco. "If leaders disclosed all their concerns and doubts, stock prices would plummet, their competitors would be all over them, and employees would be jumping ship. But even if you can't be absolutely open with everyone, leaders have to confront their companies' problems and, of course, share them with top management."
John Kotter underscores the positive potential of facing problems head-on. "Great leadership does not mean running away from reality," he argues. "Sometimes the hard truths might just demoralize the company, but at other times sharing difficulties can inspire people to take action that will make the situation better."