In addition to his long and impressive tenure with Columbia Business School, Professor Burton left a lasting impression in public life as well. In Washington DC, he joined the Securities and Exchange Commission as its chief accountant in 1972, then returned to New York City to become Abraham Beame’s deputy mayor for finance in 1976, a time when the city faced severe financial challenges.

The New York Times, in an obituary showcasing Professor Burton’s life, writes about his approach to accounting and financial regulation:

At the S.E.C., Mr. Burton stiffened the requirements for financial reporting by companies and lobbied accounting firms to take greater responsibility for the accuracy and clarity of the financial records under their review.

He argued that the accountant’s task should not be confined to auditing corporate books, but should include forecasts, judgments on the corporation’s financial controls and evaluations of management. And he argued that accounting firms were too secretive about their own finances.

“The mantra he was selling to Capitol Hill was, ‘An eighth grader has to understand this: Is the company healthy or isn’t it?’” said his daughter, now the general counsel for the Hearst Corporation, who was an eighth grader while her father was in Washington.

The key challenge that healthcare enterprise leaders face is determining how to drive innovation while addressing problems of affordability, inefficiency and gaps in quality. This task is now complicated by strong economic headwinds that limit the resources available to attack these problems. Industry executives are also dealing with new sets of competitive and regulatory pressures on their efforts to drive business growth.

At Columbia Business School’s 5th Annual Healthcare Conference held in New York City on November 21, over 500 students, alumni and other professionals heard more than 40 speakers and panelists discuss these issues.

The featured healthcare leaders said they are embracing change to develop creative solutions to the industry’s growing problems and to provide attractive investment opportunities on a global basis. A career strategies panel of executive and corporate recruiters also presented their views on the skills and talents necessary for healthcare professionals to succeed in this dynamic environment. This was followed by a concluding career fair and networking reception with the conference’s 17 corporate sponsors.

Ed Ludwig ’75, chairman and CEO of BD (Becton, Dickinson), gave the opening keynote address. Ludwig said that a successful global healthcare company must use technology, scale, global reach and operational excellence to offer value-added products. These products should reduce costs, enhance the quality of patient care and generate sustainable earnings growth.

Following his remarks, four concurrent panels took place in the morning session on the topics of pharma and biotech, medical devices, diagnostics and payor/provider issues.

The pharma and biotech panel discussed the trend among companies to narrow their therapeutic priorities, focus on biologics, pursue licensing and target acquisitions and seek enhanced productivity and cost savings. Numerous early-stage biotechnology companies are turning to larger pharma and biotechnology firms to survive as they are unable to secure capital from the public market. Global medical device companies are seeking to introduce innovative and cost-effective products in a challenging regulatory and pricing/reimbursement environment and pursuing acquisitions and new markets to meet growth objectives. The consensus of the payor/ provider panel was that any healthcare reform in 2009 would likely be incremental due largely to economic and political headwinds, and that a key focus would be on information technology and expanding access to those without insurance coverage.

Robert Essner, former Chairman and CEO of Wyeth Pharmaceuticals and now executive-in-residence at Columbia Business School, provided the lunchtime keynote speech. He suggested that although the pharma industry faces significant challenges, the combination of new drugs, biologics and vaccines in key areas of unmet need (e.g. Alzheimer’s, cancer, congestive heart failure) and the massive influx of informed baby boomers, who are demanding health solutions, provides favorable long-term growth prospects for innovative global pharmaceutical companies.

Three afternoon panels covered M&A, life science investments and emerging markets. It is anticipated that healthcare M&A will remain active across all sectors and that consolidation among Big Pharma companies appears inevitable. Early-stage life science companies and investors face a capital squeeze, which is threatening the viability of existing companies with lower levels of funds available for new investment. Emerging markets are an increasing focus for global pharmaceutical and medical device companies that are seeking new markets for their products.

The final panel of the day focused on the changing talent acquisition and development strategies of major healthcare enterprises. Panelists commented that successful leaders will need to have global and cross-functional experiences; that employees should be open to lateral moves that broaden their skills and experiences; and that healthcare companies considering new hires are seeking a broader “toolkit” of skills that reach beyond the traditional focus on healthcare backgrounds.

For more information about the conference and sponsors visit www.cbshealthcareconference.com.

In a similar spirit, Capon’s Customer-Centric CEO Index (C4I) is a simple measure of your firm’s degree of customer orientation.

There is scarcely a senior executive today who doesn’t recognize the importance of customers to the firm’s financial health. Relationships with customers drive the firm’s top-line performance; hence the role of NPS in trying to understand the customer-firm relationship.

My concern is broader; I want to understand the degree to which the organization as a whole puts customers at the center of its activities and is committed to using its entire set of resources to deliver customer value. What could be a better basis for determining your firm’s degree of customer orientation than the behavior of your CEO?

So, the C4I is very simple: C4I = the percentage of time your CEO spends with customers. Consider some polar opposites: for example, C4I = 0 and C4I = 30.

We could label the C4I = 0 CEO as the bureaucratic manager, internally focused and presiding over the entire organizational apparatus. Far from being central to the CEO’s concerns, relationships with customers are something to be delegated to the marketing or sales departments. Organizational layers shield this CEO from the realities of the marketplace — from competitors, customers and customers’ customers. Lack of firsthand customer interaction means that the firm likely makes all critical customer-oriented decisions at lower organizational levels. Alternatively, if the CEO does make these decisions, they are based on information filtered through the organization.

By contrast, a C4I = 30 CEO is highly engaged with customers. In B2C, some CEOs spend time on customer-complaint phone lines; former Southwest Airlines CEO Herb Kelleher was famous for interacting with passengers; and Terry Leahy, CEO of British retailing giant Tesco, and Mickey Drexler, CEO of J. Crew (formerly CEO of Gap), frequently walk around their stores talking with customers.

C4I = 30 CEOs recognize that the firm’s revenues are probably based on an 80:20 distribution — 80 percent of revenues generated by 20 percent of customers. In B2B, or in B2C where channel entities are increasingly important, powerful customers play an ever more critical role in deciding the firm’s future. C4I = 30 CEOs use direct customer input to help plot the firm’s strategy — recall Lou Gerstner’s early days at IBM as he met with customers in the process of developing the strategy that would turn IBM from a lumbering and declining giant into a preeminent industry player. And a few years ago, EMC’s CEO Joe Tucci changed his firm’s direction only after meeting with the CEOs and CFOs of customers’ customers.

Furthermore, as strategic/key/global account management practices become more widely entrenched, the potential roles for customer-driven CEOs become increasingly obvious. Hank Paulson was an obsessively customer-focused on-the-road CEO at Goldman Sachs, and Larry Ellison is Oracle’s point person at major customer General Electric. Other CEOs, like Sam Palmisano at IBM, are ready to directly engage with customers to close a deal or redirect a contract that was headed for a competitor.

The message should be clear. As IBM’s Thomas Watson Sr. famously said, “Nothing happens until a sale is made.” Even if you only half believe this statement, you must ask the question, “What is my CEO doing directly to help make this happen?”

As a starting point, I suggest you figure out your CEO’s C4I score. If it’s in the doldrums, you owe it to your firm and the shareholders to do what you can to inch it upward. CEOs, take note!

Professor Capon is author of Key Account Management and Planning, Managing Global Accounts, and The Marketing Mavens. His new textbook, Managing Marketing in the 21st Century, is a quarter the price of most competitive offerings; see www.mm21c.com.]]> Wed, 12 Mar 2008 16:06:42 EDT ]]> Leadership Marketing Organizations

	View and post photos from commencement on the Columbia Business School Facebook page.

This is an excerpt from the speech Vikas Raj ’10 gave at the School’s Recognition Ceremony on May 16, 2010. The class of 2010 took part in the Columbia University Commencement on May 18, 2010.

When most of us got into business school early in 2008, our friends told us, “What great timing.” But it wasn’t long after we started school that we began to question that. In fact, it was only weeks into our first semester — on September 15, 2008 — that Lehman Brothers filed for bankruptcy protection. The day before, Merrill Lynch was sold to Bank of America.

In the weeks that followed, we first-year students at Columbia Business School stood in the lobby of Uris Hall, watching two awkwardly placed TV screens for the latest news on what appeared to be the unfolding of the global economy.

We started business school when it was about as bad as it could get “out there.” But as Columbia’s most famous alumnus Warren Buffett, MS ’51, once said, “When life gives you limes, make margaritas.” Sorry, looks like that was Jimmy Buffett, but the point remains. Over the last two years, while the crisis continued “out there,” we were given the opportunity to learn from it in real time from our brilliant professors and from each other.

We learned to rely on each other and to make the best of this difficult environment. We leave Columbia today with the skills and the confidence to rebuild the business world.

At that first Sunday night dinner of Orientation, we tried to listen to then-GBA president Don Baxter ’09 tell us, “These are going to be the best two years of your lives.” What we were really doing was staring at each other. We knew already that these were the strange faces of the people who would define our Columbia experience. In the following week of Orientation, those strange faces became friends on whom we would learn to depend.

All of us now know that Orientation isn’t just block-standing games and case studies that bring together a cluster. It is the realization, gradually crystallizing over the course of two weeks, that somehow Admissions did it right, that they put together a group of people who were so different but still tied together by a fundamental desire to do something better and more impactful with our lives.

So, as things continued to get worse “out there,” inside the gates of Columbia Business School we began to depend on each other and learn from each other. We depended on each other to get through core classes and electives as our professors taught us the art and science of marketing, strategy and finance; they taught us to negotiate above our BATNAs and really value companies.

We depended on each other to get through the most difficult recruiting environment in decades, guiding each other through countless mock interviews, recruiting events and résumé reviews, and we checked in on each other during summer internships. We learned from each other by learning about the amazing things we had done before school. We came here to study in the same halls as business pioneers like Warren Buffett MS ’51, Henry R. Kravis ’69 and Jerry Speyer ’64, and to study with world-class professors in this amazing city, in the heart of the global business world. Columbia truly is a global business school.

Raj will begin a career in M&A investment banking at Evercore Partners in New York this summer.

Photo credit: Columbia Business School

Choosing wisely for positive long-term outcomes — often at the expense of tempting short-term gains — is a hallmark of mature leadership. At the individual level, these types of decisions signal patience, vision and self control.

New research published in the journal Nature Neuroscience (March 28, 2010) provides significant evidence as to where in the brain these cognitive processes are taking place: the lateral prefrontal cortex. That region of the brain — tap your forehead, it’s right under there — is considered to be the executive lobe and is associated with planning, complex decision making and moderating socially acceptable behavioral responses.

Bernd Figner, a research scientist at the Business School and the University’s Department of Psychology, working with Professor Eric Johnson and Professor Elke Weber, used a brain stimulation technique called rTMS to temporarily disrupt the function of the lateral prefrontal cortex in a group of volunteers. After the brain stimulation, the volunteers were asked to make choices between smaller, more immediate rewards or larger, future rewards.

“When we disrupted the function of the volunteers’ left lateral prefrontal cortex, we found they strongly preferred the smaller, more immediate rewards,” says Figner. The effect of increased impatience was specific in three ways: it only occurred after stimulation of the left, but not the right prefrtontal cortex; when the smaller reward was a tempting immediate reward; and when a choice, not just an evaluative judgment, had to be made.

The results add to the growing body of scientific literature on decision making, which has examined the behavioral, cognitive and neural mechanisms. A recent Ideas at Work article profiled related research by Weber, Johnson and other researchers, on the role of cognitive mechanisms in decision making. Specifically, they examined how people use memory and attention in delaying gratification or taking an immediate reward; they found “people muster the most evidence to support the first choice they consider, drowning out other options.”

The implication of the research findings is important for “choice architecture” or the way in which environments are structured to lead people through a decision-making process.

In Ideas, Weber says out that we live in an era that makes choice architecture easy to implement: “More and more decision making and communication occurs on the Web, where it is easier to structure a choice environment in a way that focuses people on one type of option or query over another,” she says. “So you can provide people first with information about the future when they make health or financial decisions, building decision environments that promote less impulsive choices and encourage more long-term choice.”

To combat falling membership and scattered leadership, the Girl Scouts launched a new strategy in 2005. Five years later, the plan to increase participation appears to be working — at least in New York City where the New York Times recently reported a boom in troops.

The case of the Girl Scouts provides key lessons for strategy, says management professor Willie Pietersen. His new book, Strategic Learning (Wiley, March 2010), examines how organizations can turn market insights into strategic actions. In it, he uses the example of the Girl Scouts, with whom he has worked as a strategic adviser since 2004.

“The Girl Scouts are a movement rather than a legally aligned organization. It’s similar to a franchise operation,” Pietersen says.

The movement’s new strategy entailed redefining its customers and its winning proposition clearly, restating its mission and setting new priorities. Additionally, each of the organization’s 312 independent councils was required to set its own priorities, based on local markets, in alignment with the movement’s.

“After a total strategy was defined as a central idea, a local strategy was created for each independent council,” he continues. “They aligned their own propositions and priorities as a direct translation of what the total organization was trying to do. That gave coherence.”

In order to further streamline the Girl Scouts’ efforts, the number of councils was reduced from 312 to 109. “This was done to improve the implementation effectiveness of the strategy that had already been defined,” Pietersen says. The Girl Scouts made other tactical changes, including shifting the emphasis away from earning merit badges to learning about topics, like health and wellness or financial literacy, and using online tools to foster engagement. A key point in the strategic learning sequence is that structure should always follow strategy, Pietersen says.

Pietersen cautions that independent subsidiaries cannot automatically align with the central mission but should instead develop their own priorities. “They have to do their own situation analysis and learn about their own local markets,” he says. “They can translate that information into an aligned winning proposition.”

Willie Pietersen is teaching the Columbia Business School Executive Education program “Creating and Executing Breakthrough Strategy,” taking place May 16–21, 2010.

Peter Peterson, cofounder and chairman emeritus of the Blackstone Group and former CEO of Lehman Brothers, spoke with students on January 21 as part of the Silfen Leadership Series. He served as the U.S. Secretary of Commerce under President Richard Nixon from 1972 to 1973. The event was co-sponsored by the Sanford C. Bernstein & Co. Center for Leadership and Ethics.

Peterson is a vocal advocate of deficit reduction and founded the Peter G. Peterson Foundation to promote non-partisan education and research for economic issues. In his presentation at Columbia Business School, he elaborated on his views of the long-term fiscal challenges ahead for the United States, which he said included entitlement spending, current accounts and savings deficits, and healthcare costs.

“We need to get rid of the notion that we will grow out of these problems,” he warned. “If we don’t demonstrate to foreign lenders that we’re going to take significant action [on our debt], they will be forced to raise interest rates.” Peterson also strongly advocated for education and the mobilization of younger generations to play a bigger role in economic decision making.

Peterson answered questions from the audience, including one on the future of private equity. “They desperately need for credit to open up,” Peterson said. “Otherwise it’s not much of a leverage business.”

Photo courtesy of the Peter G. Peterson Foundation

A guest lecturer in my Venture Capital class — a female partner at a large venture fund — told my students that she wouldn’t chase a contested deal if the management team and board lacked women. In her experience, she (a) wouldn’t win the deal so why waste cycles on it, (b) might have difficulty with “fit” even if she did get the deal, and (c) would rather use her time more efficiently on deals where she had an edge. A New York Times article on April 18, 2010, detailed this problem from the entrepreneurial side: Women are not starting as many companies as men, are having trouble getting them funded and are running into sexism in Silicon Valley’s well-known venture funds.

Perhaps even more distressing is the recent post by The Funded, a popular VC blog that provides Zagat-like reviews of venture investors. It came out with its list of the best VCs, ranked by the extent to which CEOs like working with them. Of the 84 VCs and super-angels who topped the list (from their database of more than 17,000 individual investors) only one woman made the grade: Maria Cirino at .406 Ventures in Boston. Clearly women constitute more than 1/84th of the current pool of venture investors.

How do we break this cycle if we are in fact experiencing a redlining of women in the venture capital ranks?

The success of the Gilt Groupe has made it clear that there is tremendous value in understanding how consumers approach purchasing and demonstrates a competitive advantage for women executives going after consumer Internet ventures. But right now it is an outlier. According to recent research by Professor Ann Bartel and the Women’s Executive Circle of New York, less than 11 percent of executive officers in New York are female. In the Fortune 500, that number is around 16 percent. In a study of Stanford’s MBA graduates, only 10 percent of the executives at start-up ventures are women. Yet nearly 40 percent of MBA graduates are women.

So how do we go from almost 40 percent of MBA graduates to only 10 percent of the execs at start-ups? How are start-ups, which are supposed to be at the cutting edge (and which are generally run by a younger set than the Fortune 500), worse on this issue than the Fortune 500? What can repeat players in the VC market do to equalize the representation of women in senior management at VC-backed startups?

Another guest lecturer (a male CEO of a VC-backed company in which I am an investor) showed a slide with his 12-person management team, all of whom were male. When a student (appropriately) queried why there were no females in management, he descended from the podium, handed her his business card and said “apply.” Two years later, that company has grown tremendously and has some extraordinarily talented women, but none are in the boardroom or have made it to the top echelon of management (yet).

What are entrepreneurs doing, and what role can VCs play, to bring more women into the world of start-ups and venture capital? Is there a tipping point or critical mass? In companies where there are two senior female executives or board members, is there a higher percentage of females company-wide? Some research indicates that having a higher percentage of women in senior management positions equates to better firm performance. If mixed-gender teams are likely more effective, should start-ups go out of their way to achieve critical mass?

Ed Zimmerman is an adjunct professor in the Finance and Economics Division and teaches the Venture Capital class. He is chair of the tech group at the law firm Lowenstein Sandler and angel invests through Grape Arbor VC.

Photo credit: Flickr/rogue3w

	Professor Olivier Toubia, left, and Aliza Freud ’01 collaborated on research.

Key takeaways from the BRITE conference, hosted by the School’s Center for Global Brand Leadership on March 31-April 1, focused on brand strategies for integrating on- and offline communication channels, leveraging communities for problem solving and finding new ways to think about excess capacity. A theme threaded throughout was the growing use of data sets and measurement in the marketing mix. (Read and watch complete audience-generated coverage at the conference’s media hub.)

That theme was explored in a breakout session on April 1, where professors Bernd Schmitt, Oded Netzer, Jonathan Levav and Olivier Toubia along with Aliza Freud ’01 (EMBA) discussed university research collaborations with businesses. The last decade’s boom in data sets — a result of technological innovations — Schmitt said, is one key driver of these collaborations. Toubia and Freud have worked together using data from Freud’s market research firm and online community, SheSpeaks. (Read more about their research in Ideas at Work.)

“Firms have all this data that they don’t necessarily know how to use, and small companies don’t have time to use it,” Levav said. “Our advantage is that we can leverage it into useful information.” He has worked with data from a large German auto manufacturer, for example, to look at decision making in build-to-order transactions.

Yoon Lee, vice president of product innovation at Samsung, presented at the conference and recently collaborated with Schmitt on a forthcoming case study for CaseWorks about the Samsung’s DualView camera and brand leadership. Lee suggested that corporations can have a difficult time getting beyond numbers-led innovation and “don’t know how to express qualitative data.” On the other side, he said, designers are “bad at putting linear arguments on emotional qualities.” Lee suggested that the balance between the technical and emotional qualities is where business school research offers an advantage.

Netzer, who has conducted research on topics as varied as pharmaceutical side effects and alumni giving, added that “cross silo” thinking occurs in the Marketing Division, where computer science, economics, psychology and other disciplines are all in the research mix.  “We are bringing different types of perspectives,” he said, "which helps tremendously with the thinking."

Photo credit: Columbia Business School

What can Japanese businesses learn from the unprecedented crisis engulfing Toyota, Japan’s flagship automaker?

It’s a question that was raised over spring break as the Japan Business Association and the Jerome A. Chazen Institute of International Business launched the 21st annual Japan Study Tour. Forty students, one faculty member and a Chazen representative spent nine days in Kyoto, Hakone and Tokyo. The tour, which was impeccably organized, included site visits to Nomura Holdings, Sony, the Mori Building, Gekkeikan’s sake-brewing facility and, of course, Toyota.

The revered automaker is probably the most powerful symbol of Japan’s rise to manufacturing excellence over the half-century since World War II, and a symbol of Japan’s self-confidence on the world stage in the 1980s. With the perceived safety and reliability of its vehicles providing a key competitive advantage, Toyota has grown in stature over the last two decades, recently eclipsing General Motors to claim the title of the world’s number one automaker.

Then came the recall. Over the past six months, Toyota’s reputation has been severely tarnished by a worldwide vehicle safety recall in which more than eight million vehicles, including the cutting-edge Prius sedan, have now been called back. The carmaker’s recent troubles are also damaging the excellent standing of other Japanese businesses according to some analysts, which comes at a time when the nation is set to be overtaken by China as the world’s second-largest economy. The crisis at Toyota is raising questions about the viability of Japan’s economy, beset by deflation, and its major corporations. With this in mind, our trip to Toyota City — a municipality that revolves around the automaker and houses its corporate headquarters, main research facilities and manufacturing plants — was perhaps the most anticipated company visit of the 2010 tour.

	Japan’s auto industry can still make a comeback, panelists said.

We toured the corporate museum, a welding facility and an assembly plant, but, not surprisingly, had no meetings with top Toyota executives. However, Toyota’s troubles and their broader implications for Japanese companies was the topic of a lively debate when Columbia Business School’s Alumni Club of Japan hosted us at the Josui Kaikan building in the center of Tokyo.

In a discussion moderated by Japan expert and Michigan’s Ross School of Business Professor Schon Beechler (also a former Columbia Business School professor), alumni and current students talked about the competitive outlook for Japanese businesses and what the future may hold for Asia’s most developed economy. Beechler critiqued the recent Newsweek article “Toyota and the End of Japan” (March 5, 2010) as being too pessimistic. Rather than facing a precipitous decline, she said, Japan is instead at “an exciting inflection point.”

For other panelists — Japanese nationals educated at American business schools — Toyota’s problems are key to understanding Japan’s zeitgeist and are symptomatic of a nation withdrawing from the world. A case in point: While Sony and Nissan both have non-Japanese CEOs, signifying their global outlook, Toyota remains a “homespun” company with its Japanese president, Akio Toyoda, grandson of company founder Kiichiro Toyoda. A company like Toyota needs a leader with a more global mindset, the panelists said.

When it comes to the competiveness of another of Japan’s core industries — electronics — Japanese manufacturers are slipping behind major new rivals like Korea’s Samsung. Panelists agreed that Japanese companies now need to imbue their corporate cultures with a “sense of urgency.” Korea, India and China are nearby nations that are growing quickly and represent a significant threat, they said. The discussion ended on a hopeful note, however. Despite its current troubles, Japan has a lot to offer. The automotive and electronics sectors can come back, the panelists said, and Japan has expertise in healthcare, robotics and tourism that can make it very competitive in the modern global economy. The future of Japan lies in closer integration and cooperation with its neighbors, such as Korea and China.

“There’s a pressure on this country to open up, but there’s also a deep pride in the Japanese culture,” Beechler said. “This is the issue that will determine the future of business in Japan; it will determine whether the nation succeeds or fails.”

Photo credits: Junichiro Mimaki; Guzel Chechenova

How do we make decisions? If you believe classical economic models, decision making is a process of choosing the most rational and self-serving option. But, as Professor Stephan Meier’s research shows, many people’s decisions substantially deviate from this ideal. In fact, some individuals make consistently suboptimal choices, which can have an enormous effect on public policy and corporate strategy.

Meier’s research is focused on behavioral strategy, a subgroup of the growing field of behavioral economics. Behavioral economics marries standard economic theory with research in the field of psychology, often with surprising results.

Fruit or Chocolate?

In a famous experiment from 1998, Daniel Read and Barbara van Leeuwen of Leeds University Business School looked at how well individuals predict hunger and the effect of appetite on making choices. In the study, the researchers asked participants, “Deciding today, would you choose to eat fruit or chocolate next week?” Seventy-four percent of respondents chose fruit for next week. However, when the same respondents were asked about their choice a week later, 70 percent of them now picked chocolate, without regard to what was previously chosen. While this may not seem surprising to any chocolate lover, this effect is called present bias and it reveals an inconsistency in decision making not previously accounted for in economic theory and strategy.

Meier’s current research looks at the effect that present bias has on the financial services industry and the strategies firms can employ to provide benefits to both the nonrational consumer and the firm. In recent papers, he examined the links between present bias and credit card borrowing, showing that the association between higher credit card balances and present-biased individuals is robust — in other words, if you are the type of person who switched from fruit to chocolate, you will be more likely to have more credit card debt.

Capturing Value from Irrational Choices

Traditional for-profit financial services firms have used the irrational tendencies of consumers to their benefit — and even to the consumers’ detriment — which can result in long-term consumer attrition but high short-term profit margins. Meier suggests these firms might instead capitalize on the non-rationality of their consumers by offering products that benefit both parties, both to maintain long-term relationships and attempt to do well by doing good. For example, a firm could create a Christmas club account, which would allow consumers to save money in a non-interest bearing account for a specific purpose, such as the holiday.

Both the banks and the present-biased consumer benefit from this arrangement. Although it may seem like “doing well by doing good” is the social sector’s strength, there is also a lesson here for corporate firms: Think long term when building value for donors and design giving strategies that recognize and allow for nonrational decision making.

Meier encourages firms, both in the public and private sector, to “recognize people may make suboptimal decisions, but they are often systematic about these decisions. Since they are not random, firms can build on these behavioral patterns and predict how consumers may make decisions, designing products that maximize long-term value to the firm, not just squeezing short-term profits.”

This article also appeared in the Social Enterprise Club alumni newsletter. Learn more about the Social Enterprise Club and the Social Enterprise Program.

Photo credit: Flickr/The Consumerist

Last Thursday, February 25, Howard Schweitzer and Jim Lambright entered Uris Hall serenely, shook off the snow and immediately began their discussion with a crowd of students and faculty members. While most people would have been dismayed by the travails of taking a train through a blizzard from Washington DC to New York — and just to visit Columbia Business School students! — Schweitzer and Lambright viewed the task as trifling.

Not surprising, given that until recently Schweitzer ran TARP (the Troubled Asset Relief Program) and Lambright, who had been the president of the Ex-Im Bank, served as TARP’s chief investment officer. When Schweitzer took the job in the fall of 2008, Lehman and WaMu had disintegrated, Wachovia had been acquired to stave off a panic and Goldman Sachs and Morgan Stanley, the last two major investment banks, had converted themselves into commercial banks. Running TARP, Lambright said, was like working in the emergency ward of a wartime hospital: lots of blunt instruments and patients enduring a great deal of pain. After that experience, a three-hour journey through a snowstorm was barely worth noticing.

Schweitzer and Lambright spoke to a lively and elite audience as part of the School’s Community Forum on Business and the Economy organized by Dean Glenn Hubbard. They gave an inside account of the beginning of TARP from the day Neel Kashkari first called Schweitzer to start up the program. With no clear mandate and makeshift offices hidden in crevices of the Treasury’s buildings, Schweitzer was given the task of managing the list of firms that the Treasury handed over.

Schweitzer recalled the first days of the program: Another $40 billion for AIG, ok, we’ll work that one out, we’ll do non-voting equity. CITI needs an injection of finance, ok, we’ll work out the warrants and take board seats. The public is in an uproar over compensation packages already in contract. Nothing much can be done; the rule of law prevails but let’s put in place a pay czar to make sure that the public money is spent wisely. Over here, the auto industry is bleeding cash, no credit is forthcoming and the repercussions on the financial system are massive. We’ll work something out, but there is an election happening too and a new guy is taking over January 20. Do I show up for work? Does TARP carry over and do we keep on working? What do I do January 21? Oh, it is business as usual. By the way, will TARP ever fully repay the taxpayer? The estimate is that it will be $120 billion short, but that’s the official estimate. It’s likely to pay back except for autos … and AIG?

Schweitzer and Lambright answered every question. While they were both very modest, there was still a sense that these two men knew how to get a job done. At one point during the heated events in 2009, the Wall Street Journal quoted former Treasury Secretary Henry Paulson, who hired Lambright. Paulson said about Lambright, “He’s unbelievably tough, and … the job is to save the financial system.”

Leaving aside whether one thinks TARP was a good idea (I do) or a bad one, the impression left by these two very amiable and frank government servants was that they took the entrepreneurial challenge and ran with it, steering carefully within the confines of the law that sets out hiring practices (they needed to hire fast) and transparency. Now after stepping down from TARP, Schweitzer has joined the big law firm Cozens O’Connor; Lambright is pursuing green energy at Sapphire Energy.

No revolving door into Wall Street for them. One had to leave the room very impressed.

Photo credit: Flickr/onecle

On November 18, three student teams gathered at Calder Lounge in Uris Hall to compete in the final round of the First Annual Columbia Business School Corporate Social Responsibility Case Competition sponsored by IBM. The winning team of Elizabeth McCarthy ’11, Blaire Fernandez ’11, Justin Kidwell ’11 and Kristin Stepaniak ’11 were awarded a prize of $1,500.

The case competition was organized in a joint effort by the CSR P2P Group, part of the Social Enterprise Club, and the General Management Association with the support of Columbia CaseWorks. It challenged teams of first- and second-year students to apply concepts and theories to a current challenging CSR issue.

This year’s case was “The Norwegian Government Pension Fund: The Divestiture of Wal-Mart Stores Inc.” written by Andrew Ang, the Ann F. Kaplan Professor of Business. The case considered the exclusion of Wal-Mart from the Norwegian Government Pension Fund’s investment universe and the subsequent divestiture of Wal-Mart by the fund; it looks at the issues socially responsible investing raises for portfolio managers.

The student teams presented their evaluations of the fund’s disinvestment and the judges critiqued them on their innovative approaches. Several proposed solutions emerged in each 10-minute presentation followed by a Q&A session. The panel of judges for the competition included Jennifer Crozier, Director, Corporate Citizenship and Corporate Affairs, IBM; Christopher Bishop, IBM; and Professor Ang.

After the students’ presentations, Ang, who has advised the government of Norway on strategic asset allocation for the past four years, expressed his point of view on the case. He has said the country has a history of ethical investing.

“Ethical considerations played an important part in running the fund,” he said. “Norway’s stance on ethical investing comes from the society and they view it as an important issue.” Ang also pointed out that it is not a “static process” but it has evolved and will continue to change in the future.

One of the main issues in the case of Wal-Mart was child labor, said Ang. In the past, the fund has excluded investments in firms that are connected to nuclear weapons and cluster bombs; it also has a history of exclusions based on humanitarian and environmental issues.

This case competition gives Columbia Business School students the unique opportunity to explore CSR topics while learning firsthand what goes into the effective implementations of corporate responsibility policies, and the challenges that companies and advocacies can face in the process. This inaugural competition was truly successful and we hope it has been just the first of many in the years to come!

Photo courtesy of Mara De Monte

“I am the luckiest person I know,” Sallie Krawcheck ’92 said at an event in New York on February 4, 2010. Krawcheck, who is the president of Global Wealth & Investment Management at Bank of America, spoke at a presentation hosted by Columbia Business School and the Women’s Executive Circle of New York on findings from the 2009 New York Census. Professor Ann Bartel presented the data, which revealed that fewer than 11 percent of executive officers in New York are women (see related post).

“Don’t wait for a company to put an initiative in place,” Krawcheck told the women in the audience about moving forward in their organizations. “Take ownership of your career. Have conversations about money. Be self-aware and very honest with yourself about your strengths and weaknesses. When you ask for feedback, make sure you get it and then don’t push it away, even if it’s hard to take.”

Her advice for women early on in their careers is to take speech lessons, so that they exude confidence in their speaking. Another key to success, she said, is to know what to worry — and not to worry — about.

“My mantra is ‘Water off a duck’s back,’” she said. “Don’t focus on what you can’t control but on what you can, like your own behavior.”

Responding to a question from the audience about leadership in tough times, Krawcheck said it was important for leaders to skew toward optimism.

“People want to work with someone who is open; it’s about leading and interacting with the people who work for you,” she said. “Make them feel included and respected. It’s okay as a leader to show that you don’t always know all the answers.”

Photo courtesy of Columbia Business School

Understanding some basic lessons from neuroscience can make you a more effective leader — and help you avoid mental practices that carry serious risks for your health, according to executive coach and author of Your Brain at Work David Rock.

On February 5, 2010, Rock joined Columbia University professor of psychology Kevin Ochsner, a leading researcher on the neuroscience of emotional regulation, for a workshop organized by the School’s Program on Social Intelligence as part of its “Science Meets Practice” series. Columbia Business School professor Hitendra Wadhwa moderated the discussion.

The workshop focused on emotional regulation — feeling the right emotions at the right time — a skill that is especially important in the workplace. Negative emotions are powerful: they can significantly reduce functioning in the prefrontal cortex, the region in the brain that supports higher intellectual processes, said Rock.

Ochsner gave two scenarios to explain how emotional regulation works in a stressful situation.

The typical response: You try to suppress your feelings. This turns out to be more physiologically arousing than expressing what you feel. Studies show that suppression not only reduces short-term memory and causes your blood pressure to go up — it also raises the blood pressure of your colleagues. Over time, this can lead to long-term health problems like diabetes and cardiovascular disease for both you and your peers.

A new response: Try a “reappraisal” strategy and decide to see the situation in a different way so as to prevent an emotional response. For example, if your boss criticizes your presentation, you might adopt the perspective that she is having a bad day, or focus on what you will do in your next presentation.

Ochsner explained that suppression and reappraisal cause very different responses in the brain: while suppression increases activity in areas involved in generating emotional responses — diminishing the brain’s capacity for higher intellectual functions — reappraisal reduces activity in them. So choosing to reappraise rather than suppress can literally prevent a negative emotion.

How to become more adept at reappraisal?

Practice mindfulness and pay attention to the present in an open, accepting way, Rock advised. Mindfulness enables you to turn off the brain’s “narrative circuit” — conscious, active thought — and activate “direct experience,” giving you a more accurate perception of reality and allowing you to be more flexible in how you respond to the world.

Rock believes that people will be more effective leaders if they can consciously move back and forth between these two modes. It’s a premise based on science: studies indicate that people high on a mindfulness scale have a greater ability to shape how they react and what they do than people with a lower capacity for mindfulness.

Photo credit: MR McGill