The annual Retailing Summit, hosted by Texas A&M University’s Center for Retailing Studies (CRS) at the Westin Galleria Dallas, united retailers from across the United States and Taiwan. The CRS is based at Mays Business School.

On Oct. 13-14, executives from PetSmart, Walmart, Fishpeople Seafood, Carter’s, the Dallas Cowboys, Learfield, Tuesday Morning, Bridgestone, CVS Health, Groove Jones and newly formed Mizzen+Main discussed “driving customer-centric retail.”

Becoming the trusted partner to pet parents and pets 

Kicking off the first day, Eran Cohen, a 30+ year fashion veteran and current Executive Vice President of Customer Experience at PetSmart outlined the “big dog” retailer’s approach to creating a customer-centric world.

As the #1 specialty retailer in a $64 billion dollar pet industry, PetSmart has a wide portfolio that includes more than 1,500 stores in the United States, Canada and Puerto Rico.

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Categories: Centers, Departments, Featured Stories, Marketing, Mays Business, News, Programs, Spotlights, Texas A&M

Aggieland Credit Union donated $10,000 to the Master of Science (MS) Business program at Texas A&M University to fund five new companies created by graduate students enrolled in the integrated business experience course. The course is a key component of the “learning business by doing business” approach of the program at Mays Business School.

In the first eight weeks of the fall 2016 semester, students in the course identified a product or service they would like to sell, conducted market research to determine how their product would be received, developed a business plan for a new company and requested up to $2,000 in start-up funds from loan officers of Aggieland Credit Union. The learning objective for the students is creation, refinement and delivery of a fundamentally sound business case. The measure of their success was the outcome of the loan decision.

Each of the five teams was successful with their respective pitches, and Aggieland Credit Union agreed to provide the necessary capital for each company to move forward in executing their business. “The integrated business experience is a remarkable opportunity for students to gain insights and perspectives about running a business that are difficult to obtain in a classroom setting. Our team is delighted to be part of making this experience possible for the students,” said Jason Goodman, senior vice president/COO at Aggieland Credit Union, who delivered the check on Oct. 7.

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Categories: Donors Corner, Featured Stories, Mays Business, MS Business, News, Spotlights, Students, Texas A&M, Uncategorized

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QUESTION: Which PMBA courses, events, self-assessments or experiential activities (ChallengeWorks, Disaster City, International Experience, and Capstone) made the most significant impact on the development of your leadership understanding and ability?

The personal statement of leadership exercise had the most significant impact on the development of my leadership understanding and ability. The process began at the end of the first semester with reflection about effective characteristics of leaders and ended with a draft of my personal statement of leadership philosophy. After completing the leadership journey created through the effective design of the program’s courses, events and activities, I revisited my first draft during the last semester of the program. Equipped with my deeper awareness and understanding of leadership, I was able to significantly improve my personal statement. My leadership philosophy was now clear and concise, but most importantly, it was my own.

QUESTION: What is the most important insight you gained regarding leadership?

One must find his own leadership voice in order to be effective. Although leadership is a skill that can be learned, an authentic message delivered in a natural voice will produce the best results.

QUESTION: What is the most important leadership tool or technique you learned?

Given the collaborative nature of today’s work environment, the framework described in The Five Dysfunctions of a Team by Patrick Lencioni has been very useful. This model points out the common pitfalls that restrict teams from producing optimal results. Understanding these common limitations of teams has allowed me to quickly diagnose problem areas and make adjustments.

Increasing my awareness of the importance of emotional intelligence (EI) has contributed to my effectiveness as a leader. In my pursuit to increase my EI competencies, I have increased my patience and improved my listening skills. This has allowed me to focus on asking the right questions to uncover root issues, understand initial decisions and suggest appropriate alternatives.

QUESTION: Did any professors have a particularly strong influence on your leadership maturation? 

Leadership and communication are closely linked and are both woven into the program from start to finish. Accordingly, Executive Professor John Krajicek was instrumental in my leadership development. His assignments put us in scenarios requiring leadership expertise and challenged our current communication skills to maneuver through the situation. He then asked that we create an individual communication development plan to address any gaps revealed during the previous exercise. This process accelerated the development of both my leadership and communication abilities.

QUESTION: How have you applied your leadership knowledge or tools to your career/job?

At the end of the first semester in the PMBA program, my company decided to close our Houston office and consolidate operations into its headquarters out of state. I was at a personal and professional crossroads, but I decided to continue my career with the company and relocated my young family to Oklahoma. Not wanting to abandon my commitment to the PMBA program, I also decided to continue pursuing my MBA. This choice proved very beneficial as I was able to apply the leadership training from the program to my role as a Revenue Accounting Supervisor leading a group of 11 direct reports. My new staff included external hires, internal transfers, and a couple of “relos,” like myself. The team was changing, but the deadlines to record and distribute approximately $70MM in oil and gas revenues each month were not. I knew we were responsible for producing accurate results on a timely basis, but I needed to influence the team if we were going to meet this goal.

For this, I turned to The Five Dysfunctions of a Team by Patrick Lencioni. After exploring this model during a class session, I decided to implement the concepts into my team meetings. We began with the foundational element of the framework, building and sustaining trust. I introduced the topic of trust during an early team meeting and built on the discussion during subsequent meetings by reviewing the constructs of trust, sharing personal experiences and finally having the team present examples of trusting each other. With this foundation, the next elements of the framework naturally fell into place. Through productive, open dialogue, a commitment was formed, and the group began holding each other accountable to produce the high-quality results I had envisioned.

QUESTION: Have you assumed greater leadership responsibility at your job as a result of your PMBA leadership training?

In March 2014, my company acquired the Eagle Ford Shale assets of a privately held exploration and production company for $6 billion. A month later, I presented my capstone project to the senior management and project sponsor at my company. The capstone allowed me to demonstrate an ability to apply an analytical framework to solve a real business problem facing our company. The leadership skills I developed were also displayed as I was tasked with forming a cross-functional team to solve a business problem outside of my expertise. At the end of April, I was assigned as the Business Lead for converting the systems from the recent acquisition to our ERP system, SAP. I was now tasked with creating the integration plan and leading a cross-functional team of approximately 50 people. I believe the skills demonstrated during the capstone presentation influenced management’s decision to assign this project to me.

These leadership skills developed during the program and displayed during the capstone presentation will also provide the foundation for the success of the SAP conversion project.  Three weeks later, I graduated from the PMBA program, and at the end of May, I was promoted to a management position. In addition to my project role, I am now responsible for leading a group of supervisors and staff of approximately 50 people. I would not have realized this success or have been prepared for the responsibilities that accompany these roles if it were not for the leadership development I experienced during the PMBA program.

QUESTION: What advice would you give to prospective PMBAs who are considering pursuing the degree?

I would advise prospective students to be aware of the impact of leadership, and the shift in perspective that is required as one moves from pursuing individual achievement to influencing others. Given the professional experience level for most prospective PMBA candidates, individual contributions have highlighted the success they have realized to date. These accomplishments may put these talented individuals in a position to lead, but a different set of skills is required for success in a leadership role. These skills are being taught in the Mays PMBA program, and it is essential that candidates do not let these opportunities pass them by.

Categories: Spotlights

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Why an MBA?

Before deciding to pursue an MBA, I had graduated from the U.S. Military Academy at West Point and served as a Commissioned Officer in the Army. I had a lot of peers that were also separating and realized they were getting a great deal of variety in job offers. I wanted to make the transition less of a shot in the dark and dedicate some time to learning as much as I could about what was out there and make the most informed decision possible when shaping the next stage of my life. Additionally, I believe it’s a great way to stand out.

The Texas A&M MBA.

The state of Texas offers top-notch veterans benefits and Texas A&M in particular truly understands and appreciates the culture of service members. From first speaking with an admissions officer to contacting old professors over my summer internship, the Texas A&M MBA program has been a small, close family.

Life as a Texas A&M Student.

Most MBA programs will be very demanding, and Texas A&M is no exception if not more so due to our compressed schedule. It’s been uncomfortable at times but a year later during my summer internship; I’ve realized how much I’ve learned. Class occupies much less time than it did in my undergraduate degree but the commitment to studies outside of class more than make up for the difference. Expect class to be a culminating event in which you get out of it what you put in. Finally, there’s a healthy injection of professional development outside of your studies to ensure you are as well prepared outside of the academic world.

Your future?

Through my internship search and what’s soon to be a full-time employment search, I’ve found the opportunities for function, industry, and locations are limitless. I’m excited to continue shaping my decision.

Categories: Spotlights

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Why an MBA?

After getting my undergraduate degree in Agriculture Economics I worked for 4 years in Agribusiness, doing sales and account management for Elanco Animal Health (a division of Eli Lilly). In the account management role I was stewarding the business relationship with customers that were large, complex organizations and I found myself needing a better understanding of the different functional parts that make up a whole organization. My interest in entrepreneurship also drove me towards an MBA.
The Texas A&M MBA

The Aggie Network is exceptional and I wanted to be a part of it. The culture of the university was a draw for me as well as the shortened program length. One of the key assets of Mays is the small program size, something I couldn’t fully appreciate until the program started.
Life as a Texas A&M Student.

This is a high impact program for many reasons but most important is the people. Dr. Berry’s services marketing class changed the way I view how a company operates and interacts with its customers. Group projects transformed my view of teams and what it really takes to get great results – the real “aha” moments come from brainstorming and kicking around ideas with people as you push through to learn together. MBAA events and interactions across the Aggie Network continue to reinforce that the Aggie family is real and invaluable. Leadership discussions in John Krajicek’s class grounded us in the role of self-awareness and why it matters as a leader. The list goes on, but people are at the heart of what makes this program great.

Your future?

I plan to use what I’ve learned through the people and classes in the MBA program to pursue a career in entrepreneurship by creating organizations that impact lives. I have no doubt my lessons, experiences and people from my time at Mays will be the cornerstone of this pursuit.

Categories: Spotlights

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Employees who fear their jobs are at risk are more likely to stay engaged with their work colleagues than those who feel more secure, according to research from a team led by Mays Business School Management Professor Wendy Boswell.

The fallout from working virtually around the clock varies, from stress to burnout to work interfering with the home life.

In a recent study, Boswell and her colleagues on the project, Julie Olson-Buchanan of California State University, Fresno, and Brad Harris of University of Illinois (a former PhD student at Mays), focused on the role of the context in shaping how employees manage their work and family boundaries. Boswell described the cycle in a simple illustration: Job insecurity leads to lower use of family support program and more willingness to integrate work into an employee’s personal life (i.e., blur boundaries). These behaviors in turn lead to higher burnout as well as more work-family conflict.

The study has been accepted for publication by the journal Personnel Psychology.

“Drawing on an adaptation perspective, we expect employees feeling greater job insecurity to engage in adaptive work behaviors, including less use of work-nonwork support programs and greater willingness to let work permeate into one’s personal life, which in turn will associate with greater work-nonwork conflict and emotional exhaustion,” Boswell explains.

Data were collected from employees within a large energy company at two points in time. Results support the model, offering important insight on employee behavioral responses to job insecurity and key mechanisms through which insecurity may foster diminished employee well-being. It also offers firms with important practical insight on how, when faced with job insecurity, employees may engage in behaviors that are ultimately detrimental to their well-being and long-term effectiveness. Boswell emphasizes: “It is during such unstable and stressful times when employees need to utilize organizational support resources the most and strike a balance among their multiple work and personal demands; yet our results suggest that employees may be hesitant to do so, likely out of fear of further risk to their job and a desire to be seen as a valuable – perhaps even indispensable – contributor.”

Boswell’s latest study is related to earlier research that focused directly on the role of communication technology in blurring the boundaries between work and family. Published in January 2012 in Journal of Vocational Behavior, “Communication technology: Pros and cons of constant connection to work” was one of the first studies to specifically examine the predictors and consequences of using communication technologies (e.g., email, cell phones) for work purposes “after hours.” The findings revealed how employees who strongly identified with the job and/or were ambitious were particularly likely to stay connected after hours and that doing so associated with greater work-nonwork conflict.

Boswell’s research targets managers and organizations by examining how to best manage and develop policies around the work-nonwork interface, although the topics of work-family boundaries, burnout and work-family balance are definitely interesting to individuals.

She says her interest in work-family issues began when she started a family a decade ago. “I know first-hand the challenges of balancing demands, but I also know there are tradeoffs and choices we all must make. Understanding how people make these choices, how they can be more effective in balancing demands, and the various outcomes (personally and for a firm) has real practical importance,” she explains.

“I’m fascinated with how people manage multiple demands (and we have many in our lives!), and how individuals vary in managing these demands (e.g., different needs, preferences, goals). Certainly, technology has changed how and when we work, and I always like to ground my research in fairly practical and timely issues. “The stress of job insecurity and balancing one’s life and work demands is a very practical, timely and important one for our society.”

She says she is interested in observing “somewhat counterintuitive things” and wanted to explore an area that the literature so far has not offered a clear answer for: Why would people who are stressed by their employment situation (e.g., feel insecure) work harder/more?

“Much of the literature suggests insecurity should make you ticked off at your company, yet anecdotally, we were seeing employees put their heads down and dive in to work in the face of a poor economy,” she explains. “And, then, what would be the longer-term outcomes of this – that is, isn’t it likely that this behavioral adaptation to insecurity could actually have long-term deleterious effects for the individual?”

Boswell teaches courses on human resource management at the undergraduate, graduate (master’s and doctoral) and executive levels. She is the holder of the Jerry and Kay Cox Endowed Chair in Business and she received the 2004 Center for Teaching Excellence Montague Scholar Award.

Her research focuses on employee attraction and retention, job search behavior, workplace conflict and the work-nonwork interface. Her work has appeared in such journals as Academy of Management Journal, Academy of Management Review, Journal of Applied Psychology, Personnel Psychology, Human Resource Management, Journal of Vocational Behavior, and Journal of Management. She serves on the editorial boards of the Academy of Management Review, Journal of Applied Psychology, International Journal of HRM, and Journal of Management, and is an incoming Associate Editor for Personnel Psychology. She served as the 2012-13 Chair of the HR Division, Academy of Management.

Categories: Mays Business, Spotlights

Sorescu, Alina

Many research studies have analyzed customer-based brand equity and how it relates to consumers’ willingness to pay for a branded product, but researchers have not yet questioned whether the same brand equity can impact executive pay. Alina Sorescu, associate professor of marketing at Mays Business School, saw a correlation between brand equity and top management of well-known brands’ willingness to work for less compensation.

Sorescu first saw patterns forming within academia when PhD candidates chose to study at more prestigious schools who offered them less scholarship money over lower-tier schools offering a much larger amount of scholarship money. She theorized the PhD candidates’ decisions were based on the opportunities created by attending a more prestigious school. In the long run, the benefits of taking the option that provided less funding would pay off because of the brand equity that accompanies a prestigious degree. As she repeatedly observed this pattern in academia, she began applying this theory to other scenarios.

Sorescu and her colleagues, Nader Tavassoli and Rajesh Chandy – both from the London Business School – began looking for connections between brand equity and the salary of top five executives across a large sample of firms. Sorescu wanted to know if top executives of companies with well-known brands received lower compensation.

She began her data collection with U.S. Young & Rubicam BAV metrics survey to obtain brand strength, executive level compensation data from ExecuComp, a Standard & Poor’s database and firm level data which yielded a sample of 10,107 observations for all top executives and 1,869 observations for CEOs, across 393 firms.

Her findings were in line with the proposed theory. Moving from a brand with average brand equity to one whose equity is in the 80th percentile yields a 12.13 percent decrease in CEO pay, or $1,268,130 in savings for the average CEO compensation, and a 2.42 percent decrease in pay, or $89,978 in savings for the average non-CEO executive

In an effort to explain why strong brands should attract executives at lower levels of pay, Sorescu explains the definition of employee-based brand equity as “the value that a brand provides to a firm through its effects on the attitudes and behaviors of its employees.” This concept offers a new look at the returns on branding, by highlighting a brand’s ability to cut costs instead of increasing revenue. “The payoff to brand investments largely exists in the revenue gains that they can yield. Our approach flips this notion by looking at the cost side of profits, an area rarely examined in marketing,” she explains. “We suggest that a significant part of the returns to marketing investments in brands may be in reducing payroll costs.”

Taking a look at the psychological effects strong brands have on executive pay Alina offers an identity-based framework. “The overarching theme underlying this effect is self-enhancement,” says Sorescu. “Strong brands offer greater possibilities for self-enhancement to the executives associated with them than do weak brands.” People choose to work for companies with strong brands because brands build reputation and those connections create future opportunities, “Self enhancement is seen as a substitute for pay.” Brands are seen as a signaling tool, being associated with a strong brand says something about you; the long-term benefits outweigh the immediate salary cut one may be willing to take.

“Our results imply that researchers should take a broader view of the contributions that brands make to firms and the effect they have on the balance sheet,” Sorescu says of employee-based brand equity. “Moreover, they should make use of strong brands in executive pay negotiations that are typically viewed as being outside the realm of marketing.”

– “Employee-Based Brand Equity: The Impact of Customer Perceptions on Executive Pay” by Sorescu, Nader Tavassoli and Rajesh Chandy (both of the London Business School) is forthcoming in the Journal of Marketing Research. Sorescu is holder of the Rebecca U. ’74 and William S. Nichols III ’74 Professorship at Mays.

Categories: Mays Business, Spotlights

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The bottom line is that engaged employees improve a company’s bottom line, and an organization possessing an entire workforce that is collectively engaged will exhibit higher levels of motivation. That’s according to research by a team of professors and graduate students from Mays Business School’s Department of Management, who determined that higher levels of collective engagement in an organization lead to higher level of motivation.

In a study of 83 small to mid-sized U.S. credit unions, the researchers concluded that engagement—defined as investing one’s cognitive, emotional and physical self into work performances, i.e., putting one’s head, heart and hands into work—leads to improved return on assets, a common financial indicator of organizational success.

“The word ‘engagement’ is sometimes used as a pop term,” said Stephen Courtright, an assistant professor of management who participated as a researcher in the project. “There is a lot of discussion anecdotally that engagement impacts organizational effectiveness, but we set out to test in an objective, scientific way whether an organization full of employees who see themselves and other organizational members as engaged improves the bottom line,” he said. “We concluded that yes, employee engagement impacts an organization and helps drive its competitive advantage. That means collective engagement matters for organizational effectiveness in a real and measurable way.”

However, beyond just showing the bottom-line impact of collective employee engagement, the researchers also sought to answer a question naturally brought up by organizational leaders and stakeholders: “What can organizations do to get their workforce engaged?” While some research has analyzed what immediate bosses can do to help a small group of employees become more engaged, what organizations can do from a strategic standpoint to influence their workforce to be collectively engaged as a whole is a deeper question.

Management Professor Murray Barrick, Courtright and graduate students Gary Thurgood and Troy Smith tested this question on the same sample of credit unions. Using this sample of similarly-sized organizations from the same industry helped to produce purer results.

To get a collective workforce engaged, “it starts at the top,” Courtright said. Specifically, the researchers found that the strongest predictor of collective employee engagement was the CEO’s “transformational leadership,” a leadership style in which the CEO (1) articulates a compelling vision that challenges the status quo, (2) serves as an inspirational and charismatic role model and (3) shows care and concern for members of the organization.

Next, the team found that company leaders need to establish and implement performance management systems that serve to identify and track high performers, reward high performers and then make high performers feel secure in their job.

Finally, companies can better facilitate collective employee engagement by designing jobs within the organization to be more motivating for their employees. This includes giving employees greater autonomy and ownership over tasks, allowing them to use a variety of skills on the job and helping them to see how their jobs make a significant difference to the company’s overall success.

According to the researchers, these three organizational-level factors, in combination, maximize the three underlying psychological conditions for full engagement from employees—psychological availability, safety and meaningfulness. “CEO transformational leadership helps employees be more willing to be engaged at work; effective performance management helps employees feel that they are rewarded for being engaged; and motivating job design helps employees sense that impact of their engagement on the organization,” said Courtright.

—— “Collective Organizational Engagement: Linking Motivational Antecedents, Strategic Implementation, and Firm Level Performance” was accepted for publication in the Academy of Management Journal” February 2014. Researchers are Murray R. Barrick, Stephen H. Courtright, Gary R. Thurgood and Troy A. Smith.

Categories: Mays Business, Spotlights

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In an economy that values financial success and high revenues, organizations of all types continually struggle to balance efficiency with production-constraining regulations.

“Organizations have two motivations: production and compliance,” explained Rogelio Oliva, associate professor of information and operations management at Mays and Ford Faculty Fellow. “They are trying to grow their businesses while, at the same time, knowing they must follow the rules.”

Oliva and his colleagues – Ignacio Martinez-Moyano from the University of Chicago and David McCaffrey from the University at Albany – have been conducting ongoing studies that model rule development and compliance in organizations. Their most recent study examines United States financial markets as a case area and suggests that recurring regulatory problems over the past 60 years are structurally similar.

“There are some structural reasons why we have a financial crisis every so often,” said Oliva. “The crises change in specifics, but they all have the same origin. The system is rigged so that the actors in a system become lax in compliance due to an enormous pressure to produce.”

Oliva and his colleagues propose a model of drift and adjustment in rule compliance. This model centers on the tension between production goals that focus on short-term benefits and required adherence to production-constraining rules that attempt to mitigate long-term risks.

“The pressure for companies to produce leads to one of two outcomes: working hard or cutting corners,” said Oliva. As organizations face high volume and time pressures, they may adopt a “Will we get caught?” decision-making mindset. In an attempt to evade controls and avoid delays, they will often commit a number of small infractions that will, for a while, remain undetected or tolerated.

However, adopting this mentality can lead to a decrease in service quality and an accumulation of regulatory and criminal violations.

“Eventually the violations pile up so that people can see the evidence,” explained Oliva. “This leads to strong backlash from regulators and an increase in the number of regulations. After a while, there are too many regulations and they start to back off, leading to the same cycle all over again.” This “regulatory pendulum” can be applied to settings beyond financial markets as well, since this phenomenon occurs in virtually every industry.

One surprising discovery uncovered by the research is how fast-paced the evolution of new products and regulations is. “It reminded us of the evolutionary race between predators and prey,” said Oliva. “New products are designed to address customer needs and soon someone starts abusing the system with these new products.” Eventually, however, these new products lead to even more regulations, which causes the pendulum to swing again.

This study is one of the first attempts to bring all plausible explanations together to form an aggregated picture of what is occurring in the market. Oliva and his colleagues have received support and validation from industry partners for their research and are presently working to validate their theory by creating a detailed model capable of replicating these dynamics.

“Ultimately, we have analyzed the micro decisions that are made in the industry in order to identify a structure that is responsible for the behavior,” said Oliva.

For the box at the bottom of the page in BRIA:

“Drift and Adjustment in Organizational Rule Compliance: Explaining the ‘Regulatory Pendulum’ in Financial Markets” was published in Organization Science and is authored by Rogelio Oliva of Mays, Ignacio J. Martinez-Moyano of the University of Chicago and David P. McCaffrey of the University at Albany, State University of New York.

Categories: Mays Business, Spotlights

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The Sarbanes-Oxley Act, passed in 2002, was the most impactful regulation in terms of accounting and financial reporting since the 1930s. The act, often referred to as SOX, was passed in an effort to diminish the widespread fraud that had gripped the nation for the first part of the decade.

“It was a monumental piece of legislation,” says Nate Sharp, accounting professor and Mays Research Fellow.

SOX tightened the reins on accounting firms that had begun to provide multiple services to their clients beyond auditing, and left them with the ability to perform few services beyond external audits. Although the public was generally pleased with the move toward greater auditor independence, some in the profession argued the additional services offered by auditing firms had led to more thorough and effective audits.

“We tend to call that ‘knowledge spillover,’” says Sharp. “If the audit firm is there doing other services, the argument is that they learn things about the client that then ‘spill over’ and can benefit the audit team when they perform the audit.”

Others argue in favor of the strict regulations put into place by SOX, saying the many services offered by auditing firms had compromised the independence of the auditors; otherwise put, they believe there was enough money at stake to tempt auditors to overlook financial misreporting. In their paper “Internal Audit Outsourcing and the Risk of Misleading or Fraudulent Financial Reporting: Did Sarbanes-Oxley Get It Wrong?” Sharp and his colleagues – Douglas Prawitt and David Wood of Brigham Young University – looked into the effects, if there were any, of restricting audit firms from doing internal auditing for their clients, one of the services auditing firms had offered before SOX.

“We said, let’s go back a few years prior to SOX before all of this came into effect to see whether companies that were outsourcing part of their internal audit function to their external auditor had financial statements that were either riskier or less risky,” Sharp says of the idea behind the research. “In other words, if it’s true that allowing the external auditor to participate in the internal audit compromises independence, then companies doing that should have riskier financial statements that appear to be aggressive.”

Gathering information from the Institute of Internal Auditors, the researchers looked at financial statements from 159 firms in the three years leading up to SOX. The firms fit into one of four categories:

– The firm outsourced some of its internal audit function to the same Big Four accounting firm that conducted its external audit
– The firm outsourced some of its internal audit function to a Big Four firm that did not conduct its external audit
– The firm outsourced some of its internal audit function to a non-Big Four firm that did not conduct its external audit
– The firm kept the internal audit function completely in-house

Running the data through a sophisticated model, Sharp and his colleagues were able to determine which firms had riskier financial statements.

“What we found was financial statement risk was lowest when the company outsourced some of its internal audit function to its own external auditor, which is contrary to the assumptions behind the prohibition in SOX,” Sharp says of the results. “Overall financial reporting quality was higher when the external auditor was also providing internal audit services.”

The research was generally well received by both the academic and professional communities. Numerous conferences accepted the paper, and articles in CFO Magazine and Compliance Week cited its findings. Prior to its publication, this paper received the University of Oklahoma Price College of Business 2010 Glen McLaughlin Award for the best, unpublished research paper on accounting and ethics. The paper was later published in Contemporary Accounting Research, a highly respected journal in the field.

“By no means do we think lawmakers should change the law just because we found this,” says Sharp, addressing those who did not receive the research well. “We’re just trying to inform the debate.”

Sharp says he enjoyed working on research that contributed to a debate both within and outside of academics. For Sharp, it is his goal to do relevant research that informs many groups, including experts in the field, practitioners, and students.

“I look for research projects that even people outside of accounting academics can appreciate and understand the importance of the question and the value of what the findings are,” says Sharp of his research philosophy. “I think no matter what field we’re in, we have the opportunity if we look for it to do research with implications that reach far beyond the ivory towers of academics.”

“Internal Audit Outsourcing and the Risk of Misleading or Fraudulent Financial Reporting: Did Sarbanes-Oxley Get it Wrong?” was published in Contemporary Accounting Research and is authored by Nate Sharp of Mays, and Douglas F. Prawitt and David A. Wood of Brigham Young University.

Categories: Mays Business, Spotlights