August, 2010 | Mays Impacts

Mays Business School at Texas A&M University will present its annual Dean’s Distinguished Scholar Lecture on Friday, September 24, at 10:30 a.m. The invited scholar for the 2010 event is Philip Kotler, S.C. Johnson & Son Distinguished Professor of International Marketing at Kellogg School of Management, Northwestern University.

The Dean’s Distinguished Scholar Lecture Series is a forum to present the best in scholarly thought from an array of business disciplines. The event, which is open to the public, will be held in the Ray Auditorium (113 Wehner).

About Philip Kotler

One of the foremost thinkers in the field of marketing, Kotler is the author of a number of books including Marketing Management (13th ed.), the most widely used marketing book in graduate business schools worldwide; as well as non-academic titles such as Ten Deadly Marketing Sins, Chaotics, and Up and Out of Poverty.

Philip Kotler
Kotler

He is responsible for new concepts in marketing including demarketing, megamarketing, turbomarketing and synchromarketing. He believes that marketing theory needs to go beyond price theory and incorporate the dynamics of innovation, distribution and promotion systems into analyzing, explaining and predicting economic outcomes.

He has published more than 150 articles in leading journals, several of which have received best-article awards. He is recognized as being one of the most prolific scholars in the field of marketing.

Kotler has consulted for such companies as IBM, General Electric, AT&T, Honeywell, Bank of America, Merck, Samsung and others in the areas of marketing strategy and planning, marketing organization and international marketing. He has traveled extensively throughout Europe, Asia and South America, advising companies how to apply sound economic and marketing science principles to increase competitiveness. He has also advised foreign governments on developing the service quality of government agencies and how governments can support their domestic companies to prosper in the global marketplace.

Over the span of his career, he has been recognized with many top awards and honors, including the Distinguished Marketing Educator Award from the American Marketing Association and the Marketer of the Year award from Sales and Marketing Executives International.

He has been chairman of the College of Marketing of the Institute of Management Sciences, a director of the American Marketing Association, a trustee of the Marketing Science Institute, a director of the MAC Group, a former member of the Yankelovich advisory board, and a member of the Copernicus advisory board. He has been a member of the board of governors of the School of the Art Institute of Chicago and a member of the advisory board of the Drucker Foundation.

He earned a master’s degree at the University of Chicago and a PhD at MIT, both in economics. He did post-doctoral work in mathematics at Harvard University and in behavioral science at the University of Chicago. He has received honorary doctoral degrees from the Stockholm University, University of Zurich, Athens University of Economics and Business, DePaul University, the Cracow School of Business and Economics, Groupe H.E.C. in Paris, the University of Economics and Business Administration in Vienna, Budapest University of Economic Science and Public Administration, and the Catholic University of Santo Domingo.

Categories: Executive Speakers, Programs

When it comes to disclosure of financial misstatements in a corporate press release, companies do better to keep things quiet. The less prominent the news of the error, the fewer class-action lawsuits will result. Furthermore, the greater the prominence of the news, the greater the decline in market value for the company.

Edward Swanson
Swanson

Edward Swanson, professor and Nelson D. Durst Chair in Accounting, and Senyo Tse, KPMG Professor of Accounting, along with Rebecca Files, formerly a PhD candidate at Mays, now an assistant professor at the University of Texas at Dallas, looked at how 919 firms announced misstatements between 1997 and 2002.

They separated announcements into three levels of prominence: high (headline of a press release), medium (body of a press release, but no mention in headline); and low (footnote of a press release, a.k.a. “stealth disclosure”).

They found that that firms providing less prominent press release disclosure of a restatement are rewarded with a less negative return at the announcement. Also, companies providing less disclosure are less likely to be sued for securities fraud.

Senyo Tse
Tse

The research indicates that lowering the prominence of disclosure by one level reduces the likelihood of a lawsuit by about half. The researchers controlled for other factors to isolate the effect of the placement of the announcement. They also controlled also for the severity of the misstatement. No differentiation was made about whether the restatement was due to aggressive reporting versus unintentional accounting errors.

Though it seems obvious that not trumpeting the company’s errors would be the safest policy, the researchers note that there are several reasons why managers continue to prominently announce financial errors. One possibility is that restatements occur infrequently, so managers have little experience that would allow them to anticipate how investors and litigators will react. Another possibility is that companies that value forthright communication may assume that placing the announcement anywhere other than the headline would be seen as deceptive.

As press releases are the primary timely disclosure medium for most companies, the findings of this study should be of interest to investor relations executives and other corporate managers with responsibility for disclosure communication. The researchers also suggest that regulators, especially the SEC, may want to issue guidelines to standardize press release disclosures so firms will not be rewarded for providing less prominent disclosure of accounting restatements. However, the researchers warn that such guidelines should not simply require headline disclosure for all restatements, since this could increase the number of frivolous lawsuits.

For more information

For further information, contact Swanson at eswanson@mays.tamu.edu or Tse at stse@mays.tamu.edu.

The article “Stealth disclosure of accounting restatements” appeared in The Accounting Review in 2009.

Categories: Research Notes

Good news for retailers: a new study indicates that you can increase sales without dropping prices too much or too often and cutting into your profit margins. How? By placing items frequently purchased in tandem closer together or inducing the purchase of one item by displaying related items closer.

Venkatesh Shankar
Shankar

Retailers have long been aware that the sales of one item can impact sales of another item, but until recently, not much was known about the degree of this relationship. A team of researchers, including Coleman Chair Professor in Marketing Venkatesh Shankar, looked at sales data for chips and cola (two items often consumed together) in a chain of grocery stores. To examine the effect of proximity on sales, they analyzed data on different placements of the items in 180 stores over 2.5 years.

When they moved chips one aisle closer to colas, sales of both items increased an average of 0.7 percent. When they moved the items one aisle further apart, sales decreased an average of 1.4 percent. When the items were arranged facing each other in the same aisle, sales of both increased 9.2 percent.

Simply changing the placement of these items led to a lift in sales that would be equivalent to running a price-cut promotion, without any loss in profit, says Shankar.

The significance of this study is that it can enable retailers to better manage their profits. Retailers frequently manage categories within a store separately, when their sales could be improved by a more holistic approach across categories. Sometimes selling less in one category means selling more in another category, thus increasing net profits. Retailers must consider these cross-category effects to maximize sales, says Shankar.

While the study examined food items, Shankar says the model he and colleagues created to predict how placement will affect sales could be employed in any retail setting, from electronics to clothing.

This research has value for manufacturers as well as retailers, as in the packaged consumer goods market, manufacturers often partner with retailers in promoting their items. By understanding cross-category sales effects, retailers and manufacturers can work together to plan more effective merchandising and promotions. This is especially relevant to manufacturers that own products in multiple categories, such as PepsiCo, which owns Pepsi (beverages) and Frito-Lay (snacks). Integrated marketing of these items leads to higher sales than independent promotion.

The lift in sales of these items from the aisle and display placements of these two items was not equal, though, notes Shankar. Moving the chips and colas closer together did impact sales of each—but it impacted sales of colas more. Why? Consumer behavior. Shankar theorizes that consumers don’t often eat chips without a drink; however they do drink cola without needing an accompanying snack.

Another finding of the study was that not all brands were impacted equally by the change in aisle placement: when the items were moved closer together, stronger brands (Coke and Pepsi) experienced a greater sales lift than weaker brands (RC Cola and the store brand cola). Shankar expects that the reason for this may be that the second purchase is more of an impulse item. As the decision to buy the second item is made rapidly, shoppers tend to buy the more well known brand.

This information can be useful to consumers as well as retailers, says Shankar. Smart shoppers need to know what tactics are being employed by retailers to entice them to buy more than they had planned so that they can avoid overspending.

For more information

For further information, contact Shankar at vshankar@mays.tamu.edu.

The article, “Cross-category effects of aisle and display placements: a spatial modeling approach and insights,” appeared in Journal of Marketing in May 2009.

Categories: Research Notes

An employee’s cultural background is sometimes a more accurate, consistent predictor of his or her job performance and organizational loyalty than personality tests routinely used by employers. So says a new study—the largest of its kind—that examines how cultural values affect job performance.

Bradley Kirkman
Kirkman

Brad Kirkman, John E. Pearson Associate Professor of Management, and co-authors pulled together data from nearly 600 previous studies that analyzed the effects of cultural values on job outcomes linked to 200,000 individuals. The research examined 80 areas of organizational life such as non-verbal communication, perceptions of justice, and employee rewards and how they’re affected by cultural values.

Cultural diversity poses particular challenges to a company, but the challenges can be minimized and the monetary rewards for corporations maximized when they balance these values correctly, say researchers.

The findings have huge implications for corporations with high multicultural diversity. Perceptions of justice and rewards are among the most important, the authors say. In cultures that value personal achievement (the U.S., for example), rewards for individuals can motivate a team to work harder and compete for rewards. However, that approach can clash with cultural values such as respect for seniority and egalitarianism.

The researchers cite an example of an American corporation working in China, which gave leather jackets to two management team members as reward for an innovative idea. The resulting discontent among the rest of the team caused weeks of lost productivity and resulted in the company buying leather jackets for the rest of the team members. The individual reward model didn’t translate well among the Chinese.

Similarly, General Motors found self-directed assembly line teams that worked well in the United States failed in Mexico, where workers don’t typically seek personal empowerment or self-management.

As the corporate world flattens, organizations must find ways to identify cultural values and tailor management practices accordingly in everything from human resources to strategic planning to minimize conflict, the authors say.

Cultural predictors are most accurate for managers who are male, older and are more educated. Countries that are culturally “tight,” such as Japan, where conformity to social norms is expected, see more consistent value-outcome relationships, the authors found. Outcomes for culturally “loose” countries, like the U.S., are less predictable, because there are many accepted norms.

The comprehensive nature of the new research—which the Journal of Applied Psychology has designated a “monograph paper,” indicating a game-changing shift in management theory—allows organizations to plug in different variables and determine which approach will work best in a given culture or multicultural organization.

Progressive organizations have been attempting this for years, says Kirkman. ExxonMobil, for example, uses software that plots the cultural value scores of management surveys and tries to calculate potential gaps in individual performance or conflicts among team members.

Cultural values are so strong, that even after decades of apparent acculturation, employees still behave predictably according to their inherent cultural values. “Even when they talk the talk, wear the clothes and have been in the culture for 25 years, their fundamental values still haven’t changed,” says co-author Vas Taras.

For more information

For further information, contact Kirkman at brad.kirkman@tamu.edu.

The article “Examining the Impact of Culture’s Consequences: A Three-Decade, Multilevel, Meta-Analytic Review of Hofstede’s Cultural Value Dimensions” appeared in Journal of Applied Psychology in May 2010.

Categories: Research Notes

I have been wrestling lately with the issue of sudden ethical collapses in people’s lives, dramatic one-time or short-window events that change the course of their lives and careers. Why do they happen, and what can be done to reduce the probability that they will?

I am not talking about the final revelation of people who have spent a lifetime manipulating people and finally experience what virtually always occurs. I am concerned with those who seem to be cruising along, often on smooth waters with fair winds. And then, suddenly, it happens.

Mark Hurd, HP’s CEO is just the latest example. He recently resigned under pressure from the board of directors after settling a sexual harassment lawsuit brought by a contractor for the company. This is not the type of topic I enjoy writing about a lot, because it is hard to be dispassionate about passion, and the genuine benefit of debating the downfall of folks where “close personal relationships” are involved gets swamped by the smirking over the details. But I think there is something for a lot of us to learn from Mark Hurd’s experience.

We are most vulnerable to doing something foolish when we are desperate and when we are very successful. The headlines that go with a desperate fool are short-lived—think convenience store hold-ups. Those that involve a successful person falling tend to have a life of their own, far beyond the importance of the event.

Most people can understand why a person who is desperate might end up in the headlines. They have a harder time explaining why someone who has virtually everything at his disposal would do the same, particularly when the incremental gains in happiness are so small.

I think, in the end, there is a sense of invulnerability that goes with a long string of successes that makes a star subject to imploding. The examples run from King David to Tiger Woods, and infidelity is not the only manifestation. Gradual increases in abuse of those under their authority, increasing isolation, and a smug self-sufficiency have been the recurring themes for the leaders of failed and fraudulent companies that I have studied for the past two decades. At the root of all of this is that the leader stops listening.

And the failure to listen is a critical mistake. I am often tempted to stop listening to my wife, because I am vulnerable to her ability to see underlying weaknesses in my life that others miss. If others are not criticizing me, why should she? Those who love us most and know us best must continually be reassured that we are listening to them and that we trust their perspective.

Perhaps just as important, we must listen to the criticism of those who oppose us, even those who mock us. The clearest presentation of our real weaknesses and long-term vulnerabilities often comes from those who are looking for an advantage or would like to bring us down. Their criticisms are often unhearable. Who wants to know what somebody in Austin thinks about us?

Earlier this week a Halliburton employee, Jesse Gagliano, testified that he had warned BP that if they did not use more risers to control the pressure in the Deepwater Horizon well, it risked a serious gas flow incident. Gagliano apparently recommended 21 risers to control the flow; BP went with six, according to The Wall Street Journal.

Perhaps BP did not listen to its friends. And I am sure it is tempting for BP now to just get past this incident and ignore the catcalls of its enemies. But it does so at its peril.

And if I am wise, I will cultivate honesty not just in my wife or my closest friends, but in those who think I am a simpleton. It takes combing through their criticisms for what is legitimate, and listening to things that are hard to hear. But it may just be the key to preventing an ethical blowout in my life.

Categories: Bottom Line Ethics

Again this year, Texas A&M University and Mays Business School have received great reviews in U.S. News and World Report‘s “Best Colleges” guidebook.

In the “Best Business Schools” category of the 2011 guidebook, Mays moved up three rankings to tied for 16th place among public schools. Among all schools public and private, Mays was ranked tied for 28th.

Business school rankings are based on a survey of deans and senior faculty at undergraduate business programs accredited by the AACSB International—The Association to Advance Collegiate Schools of Business.

“We are obviously pleased with the improvement in our ranking,” said Mays Dean Jerry Strawser. “Rankings such as this affirm the quality and dedication of our students and faculty and reflect the increased opportunities for our students following their graduation.”

All of these rankings were released in advance of the U.S. News and World Report‘s September issue, scheduled to be on newsstands August 31. The guidebook will be available August 24.

To see more about A&M in the new rankings, visit Texas A&M News and Information Services.

Categories: Programs, Texas A&M

They walked down the road from the lake about 100 yards ahead of us, bouncing off one another shoulder-to-shoulder about every three steps, in animated conversation. Nothing new—Katie and Nathan are almost always in conversation. I feel sure they were talking about nothing particularly deep or important at the moment, but they were continuing the step-by-step farewell that occupies our family right now as our daughter prepares to leave for college.

We are parents of five, with births spread across 16 years and four presidents. But for the last eight years, we have been parents of two, the classic one-girl/one-boy family of four. Easily seated in cars and at the dinner table, evenly matched in our ability to tease one another, we have had a delicately balanced ecosystem that has served us well. We have grown together as our last two kids have grown up, and we have a drawer full of common experiences that are not shared by our older kids. We are the Shaubs, Updated Edition.

But all that is about to change, and I find myself wrestling inside with what it means for my life. I have three more years to invest in Nathan, and I am excited about the things still ahead of us. But the sun is setting on our parenting days the way it does at the beach, when you watch that orb disappear like liquid into the water in a matter of seconds. I wonder what comes next.

The little lake house is one thing that comes next, a place to write, to play golf with Nathan, to read, to spend time alone with my wife. It is a place to walk and to bring grandkids, or at least we hope it is. It is a place of the later years. If God grants good success and economic stability, it is a second home; if not, a first.

My investment in students, and my search for wisdom, continues. I have a group of friends with whom I can be honest, and I have the woman I love close by me. I hope for 15 productive years as a professor, perhaps 20.

But Katie is leaving. Leaving. Parents understand what that word means, and it does not mean what it means for the kids: freedom. For parents, a child leaving brings a mixture of pride and loneliness. It leaves a sense of accomplishment and despair simultaneously. There is absolutely nothing else I can do to get her ready for this. And there is absolutely nothing else I need to do.

I have done this three times before, so I thought I would be practiced and poised. In my job I watch parents go through it year after year with bemused detachment. But it is my turn again. And it is my Katie who is walking out the door.

We will regain our equilibrium. The gyroscope is spinning a bit out of control, but we will calibrate again. There will be a new norm, with one side of the dinner table empty. And with my son as a new driver I will sometimes be in the back seat.

In fact, that’s how it feels. It feels like, after all these years of being the Dad in the driver’s seat for all those family trips, I am being relegated to the back seat. You can’t see as clearly back here, and other people seem to be making the decisions about where we are going.

For many years, particularly with Katie and Nathan, we sang at the beginning of each trip out of town, “We’re going on an adventure, and we don’t know where.” Today, for me, we are. But with one seat empty.

It was a seat that held giggles and baby dolls. I will look in the back seat and see Amish romance novels and adventure stories, a cheerleading outfit and a megaphone. I will see an iPod with one ear bud in Katie’s ear and the other in Nathan’s.

And then, I’ll turn around, face forward, look out the windshield and drive on. We raised her to leave that seat empty some day. And when some day comes, driving on is all there is to do.

Categories: Bottom Line Ethics

Statistical analysis by researchers for the Real Estate Center at Texas A&M University confirms that the average price for a thoroughbred yearling racehorse sold at the world’s top auction is a consistent predictor of trends in Texas land prices two years down the road.

Want to predict future land prices? According to research conducted at the Real Estate Center, you might want to keep an eye on racehorses.
Want to predict future land prices? According to research conducted at the Real Estate Center, you might want to keep an eye on racehorses.

For three decades, Dr. Charles E. Gilliland, research economist for the Real Estate Center at Texas A&M University, has tracked Texas land prices. He recently found a link between his research and another pastime, monitoring sales of thoroughbred yearlings.

“When the financial meltdown struck in the 1980s, prices of many luxury items declined, said Gilliland. “Land investors watched helplessly as land prices dropped. Horse owners, too, saw average horse prices slide to startling new lows.”

These coincidental events suggested to Gilliland that weakened prices for horses, which are now primarily a luxury, might presage drops in land prices or vice versa.

“Analysis of historical prices for horses at the fabled Keeneland September Yearling Sale suggest that price trends for these select thoroughbreds may indeed provide a guide to future Texas land prices,” he said.

The Keeneland auction is the premier sale of prospective race horses in the world. In two weeks, buyers spend hundreds of millions of dollars. In 2009, they spent nearly $191.9 million on some 3,159 yearlings.

Similarly, land buyers scour the Texas countryside in search of trophy properties. Their reservoir of discretionary cash expands or contracts according to economic conditions.

The Keeneland sale is unique because it provides an “instant” reading of demand for luxury items.

Gilliland and Research Assistant Abhijeet Gunadekar did side-by-side comparisons of horse sales and Texas land prices from 1966 to 2009. Gilliland called the overall patterns “remarkably similar.”

Prices for both rose steadily in the 1960s and 1970s and fell in the 1980s. Both increased rapidly in the past decade. The lone deviation came in a precipitous drop in thoroughbred prices when the 9-11 attacks occurred just prior to the 2001 Keeneland auction.

“Horse and land prices show a strong statistical relationship,” said Gilliland. “They exhibit a positive correlation of 0.820, which means the two tend to move in the same direction.”

When horse prices are lagged two years behind land, the correlation rises to 0.916. In other words, the latest auction numbers indicate what lies 24 months ahead in the Texas land market.

For Texas landowners thinking of selling a tract, the news is not good. Prices for thoroughbred yearlings peaked in 2007 and continue downward. Texas land prices fell in 2009.

The price of an acre of Texas land dropped 7 percent last year to an average $2,086. The number of land transactions — 4,138 — was the lowest since 1995. Typical tract size hit 73 acres, the smallest ever recorded by the Center.

For details of Gilliland’s and Gunadekar’s research, read their article in the July issue of Tierra Grande magazine, the Center’s flagship periodical.

Categories: Centers, Research Notes

Mays Business School is again joining a select group of business schools to offer the Entrepreneurship Bootcamp for Veterans with Disabilities (EBV). This year, supporters will be able to taste the action of the life-altering program, as three of the 20 Mays participants will be video-blogging the event. (See the videos here after August 17.)

Entrepreneurship Bootcamp for Veterans with Disabilities

The program, which runs from August 14 to 21 on the A&M campus, provides education and training in entrepreneurship and small business management free of cost to military personnel injured in the line of duty since 9/11. The program is designed to help participants learn essential skills that will help them start, grow and successfully manage entrepreneurial ventures.

“We have the opportunity to change lives for men and women who have given so much to us through their service to our country. It is a great honor and privilege that all of us share who become associated with the EBV program,” says Richard Lester, clinical associate professor, and executive director of the Center for New Ventures and Entrepreneurship (CNVE). The CNVE hosts EBV at Mays, where Lester oversees the program. (Click here to see coverage from previous years’ EBV programs at Mays.)

The EBV program was introduced by the Whitman School of Management at Syracuse University in 2007. Now the program is offered in consortium with Mays, UCLA, Florida State University, Purdue, and the University of Connecticut.

The program consists of a three-week online self-study, a nine-day on-campus residency period, and a year of mentorship with a faculty member volunteer as participants launch their new ventures. The program provides participants not only with the practical skills necessary to make their new venture a success, but also a network of support that will be vital as they launch their ideas.

Thanks to the generous support of corporate sponsors and private individuals, the entire program — including tuition, travel and accommodations — is offered at no cost to the veterans. (To give to this program at A&M, visit the Texas A&M Foundation website.)

Contact the Mays EBV Program Director, Richard Lester, for more information at rlester@mays.tamu.edu or (979) 862-7091.

Categories: Centers, Programs, Texas A&M