Point
Human beings are essentially blank slates that are shaped by their environment. B.F. Skinner, in fact, summarized his belief in the power of the environment to shape behavior when he said, “Give me a child at birth and I can make him into anything you want.”
Following are some of the societal mechanisms that exist because of this belief in the power of learned behavior.
Role of parenting. We place a great deal of importance on the role of mothers and fathers in the raising of children. We believe, for instance, that children raised without fathers will be hindered by their lack of a male role model. And parents who have continual run-ins with the law risk having government authorities take their children from them. The latter action is typically taken because society believes that irresponsible parents don’t provide the proper learning environment for their children.
Importance of education. Most advanced societies invest heavily in the education of their young. They typically provide 10 or more years of free education. And in countries such as the United States, going on to college after finishing high school has become the norm rather then the exception. This investment in education is undertaken because it is seen as a way for young people to learn knowledge and skills.
Job training. For those individuals who don’t go on to college, most will pursue job-training programs to develop specific work-related skills. They’ll take courses to become proficient as auto mechanics, medical assistants, and the like. Similarly, people who seek to become skilled trades workers will pursue apprenticeships as carpenters, electricians, or pipe fitters. In addition, business firms invest billions of dollars each year in training and education to keep current employees’ skills up-to-date.
Manipulating of rewards. Complex compensation programs are designed by organizations to reward employees fairly for their work performance. But these programs are also designed with the intention to motivate employees. They are designed to encourage employees to engage in behaviors that management desires and to extinguish behaviors that management wants to discourage. Salary levels, for instance, typically reward employee loyalty, encourage the learning of new skills, and motivate individuals to assume greater responsibilities in the organization.
These mechanisms all exist and flourish because organizations and society believe that people can learn and change their behavior.
Counterpoint
Although people can learn and can be influenced by their environment, far too little attention has been paid to the role that evolution has played in shaping human behavior. Evolutionary psychology tells us that human beings are basically hardwired at birth. We arrive on Earth with ingrained traits, honed and adapted over millions of years, that shape and limit our behavior.
All living creatures are “designed” by specific combinations of genes. As a result of natural selection, genes that produce faulty design features are eliminated. Characteristics that help a species survive tend to endure and get passed on to future generations. Many of the characteristics that helped early Homo sapiens survive live on today and influence the way we behave. Here are a few examples:
Emotions. Stone Age people, at the mercy of wild predators and natural disasters, learned to trust their instincts. Those with the best instincts survived. Today, emotions remain the first screen to all information we receive. We know we are supposed to act rationally but our emotions can never be fully suppressed.
Risk avoidance. Ancient hunter-gatherers who survived were not big risk takers. They were cautious. Today when we’re comfortable with the status quo, we typically see any change as risky and, thus, tend to resist it.
Stereotyping. To prosper in a clan society, Early Man had to quickly “size up” who he could trust and who he couldn’t. Those who could do this quickly were more likely to survive. Today, like our ancestors, we naturally stereotype people based on very small pieces of evidence, mainly their looks and a few readily apparent behaviors.
Male competitiveness. Males in early human societies frequently had to engage in games or battles in which there were clear winners and losers. Winners attained high status, were viewed as more attractive mates, and were more likely to reproduce. The ingrained male desire to do public battle and display virility and competence persists today.
Evolutionary psychology challenges the notion that people are free to change their behavior if trained or motivated. It doesn’t say that we can’t engage in learning or exercise free will. What it does say is that nature predisposes us to act and interact in particular ways in particular circumstances. As a result, we find that people in organizational settings often behave in ways that don’t appear to be beneficial to themselves or their employers.
Friday, March 14, 2008
Learning How To Reward CEOs
Take a look at the compensation of top corporate CEOs from the mid-1990s through 2005. They typically follow a common pattern: Their base salary is less than $1 million but they earn tens-of-millions from cashing in stock options. This pattern is easily explained once you understand the U.S. tax code. Prior to 1992, most of an executive’s compensation was in base salary. But in that year, the U.S. Congress changed the tax code so companies could only deduct, as a business expense, salaries up to $1 million. This was done in response to the public outcry over the huge salaries that CEOs were making. CEOs and other top executives were not about to take huge cuts in pay. So board of directors merely changed the way that they paid their top people. Beginning in the mid-1990s, boards lowered base salaries and began handing out large grants of stock options to executives. Importantly, because of arcane accounting rules, these options actually cost the companies nothing and never directly effected profits. Corporate reformers failed to consider how stock options would change CEO behavior. Options allow recipients to buy company stock at a specific price. So option holders make more money as the price of a company’s stock goes up. When the bulk of your compensation becomes tied to options, which are increasingly valuable as a stock’s price appreciates, you suddenly have a powerful incentive to drive your stock higher by any means, if only for a short time. Relying on options as the primary form of executive compensation encourages all kinds of questionable practices that will inflate revenues and cover up costs. One shouldn’t be totally surprised, therefore, that Adelphia Communications’ executives inflated numbers and hid personal loans; that Xerox executives overstated their company’s revenues; that HealthSouth’s CEO instructed company officials to circumvent a large write-off that would seriously reduce earnings and batter the company’s stock; or that senior managers at Enron grossly manipulated sales and expenses to make their company look highly profitable when it was actually losing money. All these executives’ compensation packages were heavy with options. Their actions were consistent with a reward system that provided huge payoffs for executives who could make their companies look profitable for at least long enough for them to execute their stock options and make hundreds of millions of dollars for themselves. Meanwhile, Krispy Kreme’s CEO—Stephen Cooper—is paid by the hour. That’s right, he’s paid $760 an hour for running the company. You might think that’s quite a wage rate, but his $1.52 million salary (based on a 40-hour workweek) pales in comparison to the $475 million Bernie Ebbers (Worldcom Ex-CEO) or the $325 million (Enron Ex-CEO) Ken Lay earned.
Thursday, March 13, 2008
You Can’t Teach an Old Dog New Tricks
This statement is false. This statement reflects the widely held stereotype that older workers have difficulties in adapting to new methods and techniques. Studies consistently demonstrate that older employees are perceived as being relatively inflexible, resistant to change, and less willing and able to be trained than their younger counterparts. But these perceptions are mostly wrong.
Evidence does indicate that older workers (typically defined as people aged 50 and over) are less confident of their learning abilities (perhaps due to acceptance of societal stereotypes). Moreover, older workers do seem to be somewhat less efficient in acquiring complex or demanding skills, and, on average, they are not as fast in terms of reaction time or in solving problems. That is, they may take longer to train. Finally, older employees receive less support from supervisors and coworkers for engaging in learning and developmental activities.
However, once trained, research indicates that older workers actually learn more than their younger counterparts, and they are better at transferring what they have learned to the job.
The ability to acquire the skills, knowledge, or behavior necessary to perform a job at a given level—that is, trainability—has been the subject of much research. And the evidence indicates that there are differences between people in their trainability. A number of individual-difference factors (such as low ability, and reduced motivation) have been found to impede learning and training outcomes. However, age has not been found to influence these outcomes. In fact, older employees actually benefit more from training. Still, the stereotypes persist
Evidence does indicate that older workers (typically defined as people aged 50 and over) are less confident of their learning abilities (perhaps due to acceptance of societal stereotypes). Moreover, older workers do seem to be somewhat less efficient in acquiring complex or demanding skills, and, on average, they are not as fast in terms of reaction time or in solving problems. That is, they may take longer to train. Finally, older employees receive less support from supervisors and coworkers for engaging in learning and developmental activities.
However, once trained, research indicates that older workers actually learn more than their younger counterparts, and they are better at transferring what they have learned to the job.
The ability to acquire the skills, knowledge, or behavior necessary to perform a job at a given level—that is, trainability—has been the subject of much research. And the evidence indicates that there are differences between people in their trainability. A number of individual-difference factors (such as low ability, and reduced motivation) have been found to impede learning and training outcomes. However, age has not been found to influence these outcomes. In fact, older employees actually benefit more from training. Still, the stereotypes persist
The Benefits of Cultural Intelligence
The Benefits of Cultural Intelligence
Have you ever noticed that some individuals seem to have a knack for relating well to people from different cultures? Some researchers have labeled this skill cultural intelligence, which is an outsider’s natural ability to interpret an individual’s unfamiliar gestures and behaviors in the same way that others from the individual’s culture would. Cultural intelligence is important because when conducting business with people from different cultures, misunderstandings can often occur, and as a result, cooperation and productivity may suffer.
Consider the following example. An American manager was meeting with his fellow design team engineers, two of whom were German. As ideas floated around the table, his German colleagues quickly rejected them. The American thought the feedback was harsh and concluded that his German colleagues were rude. However, they were merely critiquing the ideas, not the individual—a distinction that the American was unable to make, perhaps due to a lack of cultural intelligence. As a result, the American became wary of contributing potentially good ideas. Had the American been more culturally intelligent, he likely would have recognized the true motives behind his colleagues’ remarks and thus may have been able to use those remarks to improve his ideas.
It is unclear whether the notion of cultural intelligence is separate from other forms of intelligence, such as emotional intelligence, and even whether cultural intelligence is different from cognitive ability. However, it is clear that the ability to interact well with individuals from different cultures is a key asset in today’s global business environment.
Source: Based on C. Earley and E. Mosakowski, “Cultural Intelligence,” Harvard Business Review, October 2004, pp. 139–146.
Have you ever noticed that some individuals seem to have a knack for relating well to people from different cultures? Some researchers have labeled this skill cultural intelligence, which is an outsider’s natural ability to interpret an individual’s unfamiliar gestures and behaviors in the same way that others from the individual’s culture would. Cultural intelligence is important because when conducting business with people from different cultures, misunderstandings can often occur, and as a result, cooperation and productivity may suffer.
Consider the following example. An American manager was meeting with his fellow design team engineers, two of whom were German. As ideas floated around the table, his German colleagues quickly rejected them. The American thought the feedback was harsh and concluded that his German colleagues were rude. However, they were merely critiquing the ideas, not the individual—a distinction that the American was unable to make, perhaps due to a lack of cultural intelligence. As a result, the American became wary of contributing potentially good ideas. Had the American been more culturally intelligent, he likely would have recognized the true motives behind his colleagues’ remarks and thus may have been able to use those remarks to improve his ideas.
It is unclear whether the notion of cultural intelligence is separate from other forms of intelligence, such as emotional intelligence, and even whether cultural intelligence is different from cognitive ability. However, it is clear that the ability to interact well with individuals from different cultures is a key asset in today’s global business environment.
Source: Based on C. Earley and E. Mosakowski, “Cultural Intelligence,” Harvard Business Review, October 2004, pp. 139–146.
Transfer Pricing and International Corporate Deviance
Transfer Pricing and International Corporate Deviance
Workplace deviance isn’t limited to the harmful behaviors of employees within one location. There are cases of corporate deviance that extend across country borders. Consider transfer pricing, which is the price that one part of a company charges another part of the same company for a product or service. What happens with transfer pricing if various parts of a company are located in different countries, which happens as more and more companies extend their operations across the globe to become multinational businesses?
Tax rates on company profits differ—sometimes greatly—from country to country. Transfer pricing, when used to shift income from high-tax countries to low-tax countries, can be a deviant corporate policy if abused. One way to increase overall profit—that is, the combined profit of the multinational’s headquarters and its subsidiaries—is to take profits in the country with the lower taxes.
Take the case of a multinational firm whose headquarters sold toothbrushes to a subsidiary for $5,000—each. The subsidiary, with the higher tax of the two, claimed a loss (after all, it paid $5,000 per toothbrush). The multinational firm, with the lower tax of the two, took the profit and paid the tax on it. Because the two firms were part of the same organization, they combined the results of the transaction, and the company made a staggering profit.
Transfer pricing, according to a survey by the international auditing firm Ernst & Young, has become a heated issue among multinational companies. Why? The U.S. Multistate Tax Commission estimated that states were losing almost a third of their corporate tax income because of tax-sheltering practices by multinational companies—transfer pricing among them. The U.S. Internal Revenue Service is keeping a watchful eye on international transactions.
Source: Based on “Case of the U.S. $5000 Toothbrush,” Finance Week, April 27, 2005, pp. 45–46.
Workplace deviance isn’t limited to the harmful behaviors of employees within one location. There are cases of corporate deviance that extend across country borders. Consider transfer pricing, which is the price that one part of a company charges another part of the same company for a product or service. What happens with transfer pricing if various parts of a company are located in different countries, which happens as more and more companies extend their operations across the globe to become multinational businesses?
Tax rates on company profits differ—sometimes greatly—from country to country. Transfer pricing, when used to shift income from high-tax countries to low-tax countries, can be a deviant corporate policy if abused. One way to increase overall profit—that is, the combined profit of the multinational’s headquarters and its subsidiaries—is to take profits in the country with the lower taxes.
Take the case of a multinational firm whose headquarters sold toothbrushes to a subsidiary for $5,000—each. The subsidiary, with the higher tax of the two, claimed a loss (after all, it paid $5,000 per toothbrush). The multinational firm, with the lower tax of the two, took the profit and paid the tax on it. Because the two firms were part of the same organization, they combined the results of the transaction, and the company made a staggering profit.
Transfer pricing, according to a survey by the international auditing firm Ernst & Young, has become a heated issue among multinational companies. Why? The U.S. Multistate Tax Commission estimated that states were losing almost a third of their corporate tax income because of tax-sheltering practices by multinational companies—transfer pricing among them. The U.S. Internal Revenue Service is keeping a watchful eye on international transactions.
Source: Based on “Case of the U.S. $5000 Toothbrush,” Finance Week, April 27, 2005, pp. 45–46.
How Globalization Is Changing Labor Markets
How Globalization Is Changing Labor Markets
The movement of manufacturing jobs from the United States, Britain, Germany, and other countries with high labor costs to places like China, Mexico, India, Malaysia, and the Philippines has been going on for two decades. What is often overlooked is that service jobs are increasingly being exported to low-labor-cost countries.
It was recently estimates that between 2003 and 2008, 500,000 jobs in the U.S. financial services industry alone will be moved outside the country. Banks, brokerage firms, insurance companies, and mutual funds will transfer functions such as data entry, transaction processing, and call centers to China, India, the Philippines, Canada, the Czech Republic, Brazil, Ireland, and Russia. Why? A call center employee would make $20,000 in the United States can be hired in India for about $2,500. Moreover, this movement is not limited to low-skill jobs. U.S. financial services firms are also transferring professional functions like financial analysis, regulatory reporting, accounting, and graphic design to lower-cost locations. Why pay a U.S.-based stock researcher $250,000 a year when you can get an equally proficient researcher to do the job for $20,000 in India? Executives at BearingPoint (formerly KPMG Consulting) say that the engineers they hire in Shanghai for $500 a month would cost them $4,000 a month in the United States.
Here are some current examples to give you a preview of what the future may hold: Massachusetts General Hospital is using radiologists in India to interpret CT scans. Boeing uses aeronautical specialists in Russia to design aircraft parts. Delta Airlines has 6,000 contract workers in India and the Philippines handling airline reservations and customer service. The architectural firm Flour has 700 employees in the Philippines drawing blueprints. Oracle has a staff of 4,000 in India doing software design, customer support, and accounting. And IBM is currently shifting 3,000 programming jobs from the United States to China, India, and Brazil.
Digitalization, the Internet, and global high-speed data networks are allowing organizations to shift knowledge work to low-wage countries. And this trend is likely to continue. Experts predict that at least 3.3 million white-collar jobs will move from the United States to low-cost countries by 2015.
Source: Based on P. Engardio, A. Bernstein, and M. Kripalani, “Is Your Job Next?” BusinessWeek, February 3, 2003, pp. 50–60: M. Schroeder, “More Financial Jobs Go Offshore,” Wall Street Journal, May 1, 2003, p. A2; and B. Davis, “Migration of Skilled Jobs Abroad Unsettles Global-Economy Fans,” Wall Street Journal, January 26, 2004, p. A1.
The movement of manufacturing jobs from the United States, Britain, Germany, and other countries with high labor costs to places like China, Mexico, India, Malaysia, and the Philippines has been going on for two decades. What is often overlooked is that service jobs are increasingly being exported to low-labor-cost countries.
It was recently estimates that between 2003 and 2008, 500,000 jobs in the U.S. financial services industry alone will be moved outside the country. Banks, brokerage firms, insurance companies, and mutual funds will transfer functions such as data entry, transaction processing, and call centers to China, India, the Philippines, Canada, the Czech Republic, Brazil, Ireland, and Russia. Why? A call center employee would make $20,000 in the United States can be hired in India for about $2,500. Moreover, this movement is not limited to low-skill jobs. U.S. financial services firms are also transferring professional functions like financial analysis, regulatory reporting, accounting, and graphic design to lower-cost locations. Why pay a U.S.-based stock researcher $250,000 a year when you can get an equally proficient researcher to do the job for $20,000 in India? Executives at BearingPoint (formerly KPMG Consulting) say that the engineers they hire in Shanghai for $500 a month would cost them $4,000 a month in the United States.
Here are some current examples to give you a preview of what the future may hold: Massachusetts General Hospital is using radiologists in India to interpret CT scans. Boeing uses aeronautical specialists in Russia to design aircraft parts. Delta Airlines has 6,000 contract workers in India and the Philippines handling airline reservations and customer service. The architectural firm Flour has 700 employees in the Philippines drawing blueprints. Oracle has a staff of 4,000 in India doing software design, customer support, and accounting. And IBM is currently shifting 3,000 programming jobs from the United States to China, India, and Brazil.
Digitalization, the Internet, and global high-speed data networks are allowing organizations to shift knowledge work to low-wage countries. And this trend is likely to continue. Experts predict that at least 3.3 million white-collar jobs will move from the United States to low-cost countries by 2015.
Source: Based on P. Engardio, A. Bernstein, and M. Kripalani, “Is Your Job Next?” BusinessWeek, February 3, 2003, pp. 50–60: M. Schroeder, “More Financial Jobs Go Offshore,” Wall Street Journal, May 1, 2003, p. A2; and B. Davis, “Migration of Skilled Jobs Abroad Unsettles Global-Economy Fans,” Wall Street Journal, January 26, 2004, p. A1.
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