Tag Archives: Kathleen Eisenhardt

Women Board Members + Strong Shareholder Protections = Higher Financial Performance

Kris Byron

Kris Byron

The relationship between women on corporate Boards of Directors and company positive financial results is mixed, according to Syracuse University’s Kris Byron and Corinne Post of Lehigh University.

Corinne Post

Corinne Post

To clarify conflicting data, they conducted a meta-analysis of 140 existing studies and found that women on corporate boards was related to positive financial outcomes in countries with stronger shareholder protections.

Companies with women on Boards and subject to rigorous shareholder protections reported higher accounting returns or firm profitability.

Richard Gentry

Richard Gentry

Accounting returns evaluate a firm’s efficiency in using assets to generate earnings and represent short-term financial performance, noted University of Mississippi’s Richard Gentry and Wei Shen of Arizona State University.

Wei Shen

Wei Shen

Another financial performance measure in Byron and Post’s meta-analysis was market performance, defined by University of Chicago’s Richard H. Thaler as marketplace behavior that reflects expectations of a firm’s long-term value.

Richard Thaler

Richard Thaler

Women on Boards of Directors provide “diversity of thought and experience” and tolerate less financial risk.
As a result, female board members made stronger efforts to monitor the firms and to ensure strategy execution, according to Byron and Post.

Kathleen Eisenhardt

Kathleen Eisenhardt

The team considered Agency Theory, proposed by Stanford’s Kathleen Eisenhardt, in her theory that Boards of Directors are “information systems” used by key stakeholders to verify organizational behavior.

Amy Hillman

Amy Hillman

These systems are influenced by Directors’ individual cognitive frames, derived from their diverse values and experiences, argued Arizona State’s Amy Hillman and Thomas Dalziel of University of Cincinnati.

Donald Hambrick

Donald Hambrick

These diverse cognitive frames yield more favorable organizational outcomes only when teams “engage in mutual and collective interaction [and] share information, resources, and decisions,” according to Upper Echelons Theory (UET) developed by Penn State’s Donald Hambrick.
This means that women Board members affect group decision-making and financial performance when other Board members are willing to consider their diverse perspectives and experiences.

Thomas Dalziel

Thomas Dalziel

Strong shareholder protections provide “an information-processing stimulus that motivates (Boards) to leverage the decision-making resources (i.e., knowledge, experience and values) that women bring,” asserted Byron and Post.
From this, they concluded that strong financial outcomes occur in companies with women on their Boards of Directors in countries with strong shareholder protections.

Byron and Post’s analysis illustrates that diverse perspectives provide little benefit if they are not solicited and fully considered in a context of regulatory oversight.

-*When have you observed diverse perspectives associated with increased profitability and performance?

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Career “Planning” = Career “Improvisation”

Kathleen Eisenhardt

Planning is most suited to relatively certain circumstances in which processes and decisions are typically linear, argued Stanford’s Kathleen Eisenhardt and Behnam Tabrizi in their analysis of global computer product innovation.

In contrast, frequently-changing or uncertain conditions with many iterative modifications require improvisation coupled with frequent testing.

Behnam Tabrizi

In “VUCA world,” described by the U.S. Army War College as volatile, uncertain, complex, ambiguous environments, current career “planning” occurs under rapidly-shifting conditions more appropriate for an agile strategy.
As a result, it is increasingly difficult to meaningfully respond to the frequently-asked interview question: “What are your career plans for the next five years?

Iterative exploration, rapid prototyping/experimentation, and testing characteristic of agile development and design thinking are more suited for rapid changes in economic, political, and technology changes that affect known career paths.

Alison Maitland

Alison Maitland

Possible Futures of Work are investigated in three thought-provoking books:

-*When have you found it more useful to “improvise” instead of “plan” your career?
-*What are the benefits and drawbacks of career “improvisation”?

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Integrating Natural Sciences and Business to Consider Strategy as “Structured Chaos”

Shona Brown

Shona Brown

Former Google Senior Vice President of Business Operations Shona Brown and Stanford Engineering Professor Kathleen Eisenhardt assert in their best-selling book, Competing on the Edge: Strategy as Structured Chaos, that “the key driver of superior performance is the ability to change. Success is measured by the ability to survive, to change, and ultimately to reinvent the firm constantly over time.”

The book investigates matched pairs of anonymized companies in the computer industry as an example of strategy in fast-moving, unpredictable, competitive markets.

It draws upon concepts from the natural sciences, such as evolutionary theory and natural selection, as an analogy to change in businesses.

The authors state that decisions on what to structure or not, draw on:

-Improvisation
-Co-adaptation
-Regeneration
-Experimentation
-Time-pacing

These considerations set the pace of change by “balancing on the edge of time” from the past to the future.
They assert that these five phenomena enable a “semi-coherent” strategy, that is “unpredictable, uncontrolled, inefficient, proactive, continuous, diverse.”

Kathleen Eisenhardt

Kathleen Eisenhardt

Brown and Eisenhardt define natural science concepts in business terms:

• Complexity Theory
• Evolutionary Theory
• Dissipative Equilibrium
• Coadaptation
• Natural Selection
• Mutations
• Complexity Catastrophe
• Error Catastrophe
• Repeated Layering
• Genetic Algorithm
• Recombination
• Rearchitecture
• Modularity
• Entrainment

The authors advise to move to “the edge of time” and “the edge of chaos”, and offer guidelines including:

• Prune to reveal the core of the business
• Build the business through growth, not assembly, of modular parts
• Recognize that the business’s starting point and the order of implementing change strategies, are among outcome determinants
• Devote 15% of the product portfolio to experimental probes
• Apply successes from experimental probes in new ways
• Institute regular planning meetings focused on the future
• Exploit current capabilities in new ways
• Develop time-pacing through regular benchmark reviews
• Watch for missing linkage between key processes and innovation elements
• Use “patching” to match the best people resources with required tasks

This book offers an original examples and metaphors for change strategies in business, including jazz improvisation, The Tour de France, American Baseball.

-*What models do you use to understand and execute business strategy?

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