Based on research by Scott  Sonenshein, Katherine A. Decelles and Jane E. Dutton

• More and more U.S. firms back social equality movements as a way to attract top workers.
• But it’s still hard to be an activist from the workplace ⁠— especially on the issue of climate change.
• Assessing personal strengths and weaknesses helps employees (and potential employees) be better advocates for their causes.

A few decades ago, it would have been unheard of to think of corporate America as a leader in social justice. Wasn’t the bottom line the only line that mattered?

Recently, however, several U.S. corporations have entered the fray on the side of the less powerful. For example, Dow Chemical and other firms were among those lobbying against the North Carolina bill limiting public restroom access for transgender people. In Georgia, the Disney Corporation helped persuade the governor to veto a similar bill. Even corporations that are controversial on one cause, such as Monsanto, have taken stands on other issues, such as what they see as discriminatory legislation.

There’s a reason some companies are looking out for the underdog: Firms that operate in states with discriminatory laws are struggling to recruit the best and the brightest. Talented employees, these companies know, are often motivated by social and environmental causes from LGBT rights to fighting climate change. In other words, it’s workers themselves who are pushing corporate America toward social activism.

How can they best harness this power?

In a recent paper, Scott Sonenshein, a professor at Rice Business, Katherine DeCelles of the University of Toronto and Jane Dutton of the University of Michigan explored how employee activists could maximize their often taxing efforts.

Some causes, the scholars found, are more daunting than others. Advocacy for LBGT rights, for instance, can be difficult, but at least the issues are clear-cut. The Supreme Court can make a ruling, and voila: same-sex marriage is legal in Texas.

Battling climate change, however, is trickier. First, as one research subject put it, the issue itself “is probably the most difficult and complicated challenge humanity has ever faced.” Second, at the same time that green advocates are wrapping their own minds around the problem, they must deal with others, including coworkers, who don’t share their passion. Some simply don’t care. “I’m going to make my couple hundred thousand dollars creating money for rich people,” a study participant imagined a coworker declaring. Others, of course, deny climate change is real.

Environmental advocates also face internal doubts. Do they have the wherewithal, some quietly wonder, to tackle climate change’s complexities? Even for individuals, living green can be pricey and inconvenient. Depending on the industry, convincing a company to go green can seem impossible.

Sonenshein and his coauthors propose ways for green activists to take heart. They can start by assessing their “self assets” – all the personal attributes an individual can call on for strength. A person’s values, knowledge and experience can all be assets. So can the ability to adapt. Over time, for example, one study subject learned to adjust the way she talked about climate change to match a given audience, even within the same workplace. The more you can put environmental issues into coworkers’ own language, she told the researchers, “the more you can get them to see the benefits to them” of effecting change.

Curiously, the authors found that practical constraints actually strengthened activists’ ability to promote their causes at work. Self-doubt, for example, often brought out activists’ resolve to improve their technique and turn weakness into strength – with an important caveat. They also needed to recognize their self-assets. That was especially true for those who could look at their overall lives and see that a perceived failure at work could be balanced by success in the same issue at home. If you can’t get recycling going in the office, in other words, don’t give up. Recycle more in your neighborhood.

“Know thyself” is one of our oldest injunctions. By looking at themselves in a multifaceted way, and acknowledging strengths alongside weaknesses, employee activists can appreciate their triumphs where they find them. Just as important, they can muster the courage to fight another day.

Scott Sonenshein is the Henry Gardiner Symonds Professor of Management at Jones Graduate School of Business at Rice University.

To learn more, please see: Sonenshein, Scott, DeCelles, Katherine A., & Dutton, Jane E. (2014). It’s not easy being green. The role of self-evaluations in explaining support of environmental issues. Academy of Management Journal, 57(1), 7-37.

Note: This article was originally published Oct 27, 2016.

By Claudia Feldman

Think of some of the apologies we’ve heard in this year:

• Actress Roseanne Barr blaming Ambien for a racist tweet.
• Film producer and accused rapist Harvey Weinstein attempting to dismiss decades of sexual misconduct by quoting actress Meryl Streep, who once described their working relationship as “respectful.” 
• Celebrity chef Mario Batali offering a seemingly sincere written apology after multiple allegations of sexual harassment and assault, then touting a recipe for pizza dough cinnamon rolls.

Men — or women — who will not take responsibility for their awful behavior are really nothing new. What is different today is the #MeToo movement, an outpouring of women sharing their own stories of abuse, and the omni-presence of social media. Stories about misconduct of all sorts — and the insincere apologies that tend to follow — go around the world in the length of time it takes to hit the “send” button.

That may explain why primers on apologies, for individuals and business leaders, also are trending now. Apologies can’t heal all wounds; sometimes they make things worse, says Anastasiya Zavyalova, an assistant professor of strategic management at Rice Business.

But sometimes a serious apology can break a fall.

Roy Lewicki, professor emeritus of management and human resources at The Ohio State University’s Fisher College of Business, started focusing on apologies in the wake of JetBlue’s detailed explanation of a major equipment shutdown in New York, Tiger Woods’ mea culpa for extra-marital affairs, and British Petroleum’s attempt to atone after the deadly Deepwater Horizon oil spill.

As such clippings piled up on his desk, Lewicki saw links between his extensive research on trust and the importance of trust repair. Did apologies help mend torn business relationships, he wondered? What did an effective apology look like? 

After several years of study, Lewicki found six key components to a good “sorry," and the more of those components included in the apology, the better. They were: an expression of regret (I’m sorry), a specific explanation of what went wrong (this is why I’m apologizing), an acknowledgement of responsibility (it’s my fault), a declaration of repentance (it will never happen again), an offer of repair (here’s how I plan to fix this) and a request for forgiveness. 

Lewicki’s research also showed that the six elements are not equal in importance. What matters most are the acknowledgement of responsibility, declaration of repentance and offer of repair.

A different kind of apology, between individuals, lies at the core of psychologist Harriet Lerner's recent book, “Why Won’t You Apologize?” She recommends a message that is short, sincere and designed to open lines of communication. Here’s an example: “The comment I made was offensive (and name it). It was insensitive, uncalled for and it won’t happen again.”

But, as Lerner says, it’s one thing to forget to return a friend’s Tupperware and another to sleep with her husband. In cases of more egregious behavior, Lerner says, “I’m sorry” is a good first step in a long distance run that requires the offender to drop his or her defenses and simply listen. 

“There is no greater gift, or one more difficult to offer, than heartfelt listening to that kind of pain, especially when the other person is accusing us of causing it,” Lerner says. 

***

Oberlin College psychology professor Cindy McPherson Frantz researched a subset of “I’m sorry” etiquette after a student vented about a boyfriend’s apology. It was too early, the young woman said; she wasn’t ready to hear it. 

At first that sounded ridiculous. Then it wasn’t. 

“Yes, there is such a thing as a too-early apology," Franz says. "It’s usually in the interest of the other person to say ‘I’m sorry’ as quickly as possible, but the victim really needs to feel heard and understood. The perpetrator needs to get what he did wrong and be committed to not doing it again.”

Other common missteps include repeated apologies that don’t ring true and statements like, “I’m sorry if I offended you” or “I’m sorry if you feel that way.”

“Sorry I offended” means the perpetrator is not expressing regret or taking responsibility for what he did wrong, Frantz says. “‘Sorry you feel that way’ implies your reaction is not legitimate.” Says Lerner, “Humans are wired for defensiveness so there are endless ways that we slip into vague, obfuscating language that obscures what we are sorry for.”

Frantz’ vote for worst apology of the year goes to Andy Savage, a pastor in Tennessee. By video he apologized to his congregation for a “sexual incident” with a high school girl that took place on the way home from a Houston area church 20 years ago.

“He was in the power position — he was bigger and older,” Frantz says, “and he described what happened as a regrettable encounter as opposed to sexual assault, which it was. He got a standing ovation from the congregation — he was patted on the back for confessing his sin and seeking forgiveness. But she wasn’t patted on the back. She didn’t get anything.”

According to media accounts written after the video went viral, Savage said he apologized to the girl those many years ago. Jules Woodson, now a middle-aged woman, wrote on an online site for abuse survivors that the only comment even close to an apology came immediately after the encounter. She wrote that he said, “‘Oh my God, oh my God. What have I done? Oh my God, I’m so sorry. You can’t tell anyone, Jules, please. You have to take this to the grave with you.’” Frantz says Savage talks about the assault today as if they both behaved sinfully. “That is completely blaming the victim and side-stepping responsibility.” 

Lerner describes most public apologies as performances. “At the time of the public apology,” she says, “the wrongdoer wants to save his own skin.”

Zavyalova, the Rice professor who studies reputation management after negative events, has no trouble remembering bad apologies in the corporate world. Just two examples: The apology offered by United Airlines in 2018 after a passenger was dragged off a plane, and by BP in 2010 after its Deepwater Horizon drilling rig exploded in the Gulf of Mexico, killing 11 workers and spilling millions of gallons of oil.

In the United case, four passengers who had already boarded a plane and found their seats were asked to leave because the flight was overbooked (a situation that arose when four off-duty United employees arrived and wanted seats on the full airliner). Three passengers acquiesced and left but one man, an elderly doctor, refused and raised his voice in protest. The United crew summoned airport police, who wrestled the man off the plane. His next stop was a nearby hospital because he sustained injuries to his face.

After cell phone videos of the ruckus circulated, United CEO Oscar Munoz might not have been able to say anything to avoid public outrage. But his first, terse statement was defensive and tone deaf, including the line, “I apologize for having to re-accommodate these customers.” It took several more statements from Munoz before he sounded truly sorry.

****

In navigating the aftermath of public relations disasters, Zavyalova says, part of the challenge is knowing when to keep quiet. “Business leaders may have legal advice to not make public statements until the details of a particular situation are clear,” she notes. “On the other hand, executives have to consider that the decision to remain silent allows for others to take control of the story.” 

Adds Lewicki from Ohio State, “That question — to apologize or not — arises with very serious violations which reflect on one’s integrity. Some research argues that when an apology reveals a defect in character, that person might be better off denying — or saying nothing — than acknowledging the real problem.” 

Lerner agrees: There are times to remain mum.

“It is not useful to apologize to someone who truly does not want to hear another word from you,” Lerner says. “In those cases, it’s intrusive to offer an apology, whether by voice, email, text, flowers or carrier pigeon.” In that same vein, Lerner says, “It is unimaginable to me that the victims of abuse want the offender to show up at their door and make a personal apology. They (the victims) just want that person to go away — and in some cases — to jail."

Anastasiya Zavyalova is an assistant professor of strategic management at Jones Graduate School of Business at Rice University. 

Claudia Feldman is a freelance writer living in Houston and editor of the Last Word, a service that helps people tell their own stories.

A version of this article also appeared in the Houston Chronicle. 

Based on research by Jing Zhou, Dong Liu, Yaping Gong and Jai-Chi Huang

• A careful mix of human resources practices can spur employee creativity to greater heights than a single approach.
• Firms that rely on external creativity — imitating other companies’ inventions or receiving government support — have less employee-driven innovation.
• In China, privately-owned firms tend to be more driven by employee creativity than state-owned companies, even though the private firms have access to fewer resources.

Inventive employees drive innovation and fuel competitiveness, which is why managers and scholars search so relentlessly for ways to spur their workers’ imaginations. But what if innovation could be sparked by one of the most familiar corporate departments — one often taken for granted?

Human resources departments can be powerful engines for innovation according to Rice Business Professor Jing Zhou. She and colleagues Dong Liu of the Georgia Institute of Technology, Yaping Gong of the Hong Kong University of Science and Technology and Jia-Chi Huang of National ChengChi University recently conducted the first empirical study looking at the impact of human resources practices on workplace innovation in China. That country’s unique mix of human resource practices and allure for multinational companies, Zhou and her team say, made it an ideal lab for their research.

Their findings should interest companies outside of China. According to the 2014 World Investment Report, that year more firms directly invested in China than in any other country. China also ranked at the top of economies attractive to multinational firms. Scholars expect the country to become a hub of innovation similar to the United States; in the near future, researchers note, the familiar “Made in China” label will likely be eclipsed by “Created in China.” 

Today, however, encouraging Chinese innovation is a puzzle for many multinational managers. This is largely because of the relationship between the country’s state-owned and privately-owned enterprises. 

One of the first decisions any foreign investor in China has to make is whether to collaborate with a state-owned or a privately-owned firm. Investors generally pick the former, because state-owned firms have better access to ideas hatched by Chinese research institutes and universities. Private firms have evolved into major economic players, but they still face forms of institutional discrimination, and have far less access to the ideas bubbling out of China’s think tanks and universities.

That’s why, for private firms, maximizing employee creativity is crucial. But how best to do it? To find out, Zhou and her team divided human resources departments into two types, maintenance oriented and performance oriented. Maintenance-oriented HR departments focus on employee equality and job security; it’s the type of department that often dominates state-owned firms. Performance-oriented HR departments, on the other hand, help employees master new skills and improve their future prospects.

China’s socialist ideology has promoted the maintenance-oriented approach, sometimes known as the “iron rice bowl.” Only in 2008 did the government begin enforcing a labor law that compelled firms to formalize human resources procedures, shifting state-owned companies from informal and sometimes arbitrary management towards consistent management based on rules.

Chinese employees, Zhou’s team found, appreciate performance-based systems. But if employers don’t offer strong maintenance-oriented systems, those same workers worry about job security. Mastering new skills, the workers sometimes decide, isn’t worth it if it’s accompanied by job insecurity. As a result, employees in performance-based systems may not take advantage of the opportunities to learn.

State-owned owned companies often provide more secure work environments and enjoy better perks than private firms. In 2015, for example, China’s State Council announced that R&D personnel in state-owned companies could take non-paid leave for up to three years to start new ventures. When firms depend on inventions from other companies or on government support, the researchers found, they are not shaped by internal creativity as are privately-owned firms.

To reach their conclusions, Zhou and her team analyzed data from metallurgical firms in a northeastern province of China, surveying employees about a variety of human resources practices. They then compared the survey results with data from the companies’ research and development departments indicating the number of new products launched. What they discovered is that when companies use multiple human resources practices rather than just one, these practices act in synergy to heighten employee innovation.

These findings offer some practical implications for managers. The first lesson: Creativity flourishes when firms offer performance- and maintenance-oriented human resources at the same time. The second lesson: Worker creativity flourishes in private companies more than it does in state-owned ones. That means leaders and investors of state-owned companies should craft more opportunities for workers to turn their ideas into innovation. The findings can be applied in other places, such as the former Eastern Bloc, where state-owned firms flourish.

Corporate creativity can also be promoted intentionally. In 2007, China held its first major science fiction convention. During the Cultural Revolution, science fiction was considered escapist and middlebrow. As a result, it was banned. Then the Chinese government began sending delegations to visit U.S. firms such as Google and Apple to understand the source of their creativity. What they found was that the leaders of these companies almost without exception were science fiction fans. Reading the genre as children, they said, sparked many of their ideas for technological development. China promptly began encouraging the reading and writing of science fiction — and as a result sparked what is considered a Golden Age in Chinese sci-fi. 

As Chinese companies grow more aware of the need for innovation, they may find other ways to cultivate this quality among their workers. Whether it’s curling up with The Martian Chronicles or rethinking HR, Zhou’s research shows, imagination often can be nurtured close to home.  

Jing Zhou is the Mary Gibbs Jones Professor of Management and Psychology in Organizational Behavior at the Jones Graduate School of Business of Rice University. 

To learn more, please see: Liu, D., Gong, Y., Zhou, J., & Huang, J. (2017). Human resource systems, employee creativity and firm innovation: The moderating role of firm ownership. Academy of Management Journal, 60(3), 1164-1188.

By Vikas Mittal and Hari Sridhar

This article originally appeared in the Houston Chronicle. 

Florida's deadly school shooting has, once again, shone a spotlight on the importance and relevance of safety in schools. Sadly, all too soon, the spotlight will dim.

During the 2015-2016 school year, nearly 40 percent of American schools reported at least one student threat of physical attack without a weapon, and 9 percent reported such a threat with a weapon, according to the National Center for Education Statistics. There have been more than 40 "active shooter" episodes in U.S. schools since 2000, the New York Times reports. Meanwhile, bullying and cyberbullying (reported at 12 percent of U.S. schools), along with verbal abuse of teachers (reported at 5 percent), are daily or weekly occurrences. Schools respond by creating plans and programs, yet these plans and programs may not be enough. Parents all across the country are clamoring for safety, and it is high time that school leadersand administrators address their justifiable concerns.

A 2017 survey of 7,259 parents conducted by the Collaborative for Customer-Based Execution and Strategy found that safety was the second biggest driver of parent satisfaction ⁠— just one point behind family and community engagement and four percentage points ahead of academics and learning. The study showed that parents take a much broader view of safety than school administrators tend to. For parents, safety meant that their children were not only physically safe and protected from violence, but also mentally safe. Why should schools care about these findings? The study found that parents' satisfaction with school safety drove their overall satisfaction, which in turn was associated with higher SAT scores and lower dropout rates.

Safety therefore represents a strategic priority for schools - beyond the moral obligation schools have to students and their families. Making it a priority means measuring the level of parents' satisfaction with safety and systematically assessing its impact on a school's most important objective: educating students. Business organizations do this sort of thing routinely: Focus on their clients' most pressing needs to improve satisfaction and achieve consistent outcomes. School administrators and leaders should do it, too.

But making safety a strategic priority is unlikely to happen if we think about it only in the wake of tragedy, then lull ourselves into inaction when things are going well. School leaders must be vigilant in tracking parent and student satisfaction with safety, both physical and mental. They must track safety metrics and move beyond programs and processes to make safety one of the highest priorities for a well-functioning school. School safety is on our minds today, but it needs to be on our minds every day. Let's make it a consistent priority for the wellbeing of our students, their parents, and our schools.

Vikas Mittal is the J. Hugh Liedtke Professor of Management in Marketing at the Jones Graduate School of Business at Rice University. 

Based on research by Robert E. Hoskisson (George R. Brown Emeritus Professor of Management), Margaret Cording, Jeffery S. Harrison and Karsten Jonsen

• For a successful transition, companies need to promise employees only what they can deliver.
• Building and maintaining the trust of employees in their employers is especially important at the time of a corporate merger.
• Productivity rises when a firm actually acts on its stated values — and that, in turn, improves shareholder value. 

Corporate mergers usually promise results based on brass-tacks changes like lower costs. But projected cost savings are only part of the alchemy when companies are combined. To get the most out of a merger, according to Rice Business Emeritus Professor Robert E. Hoskisson, leaders need to pay serious attention to goals that may seem secondary. In particular, the values of the dominant company, especially the way it treats its workers and clients, are a potent force in a profitable merger. 

To reach his conclusions, Hoskisson joined Margaret Cording and Karsten Jonsen, both of the International Institute for Management Development, and Jeffrey S. Harrison of the Robins School of Business at the University of Richmond to analyze 129 post-merger outcomes. Mergers, the researchers note, wash waves of uncertainty over everyone linked to the companies involved: employees, executives, shareholders and customers. Employees worry about losing their jobs; executives puzzle about how to create a unified new company; shareholders fret about their stock losing value; and customers wonder if the new firm will continue to serve their needs. 

Building and holding trust is essential for managing the anxieties of these stakeholders. And perhaps the single fastest way to show that trust is deserved is to state corporate values clearly — then practice them. 
The performance of a firm following a merger is ultimately shaped by consistency between words and deeds, Hoskisson and his team argue. “Organizational authenticity,” as this match is called, is a litmus test employees use to judge the company’s fairness. This consistency is crucial for a newly merged firm. Saying, and then doing, signals to employees and shareholders alike that the firm will deliver on its other promises.

It’s not as easy as it sounds. As the merger advances, “there is much temptation for the newly combined firm to disregard espoused values,” the researchers write. Maybe a manager wants to withhold gloomy information that could affect the stock price. Or maybe layoffs are looming despite the firm’s promise to treat long-term employees like family. 

Such lapses in candor can be costly. To learn more about how company values and actions affect output, the researchers surveyed top executives and managers of 129 mergers between U.S.-based corporations. Each company in a given merger shared at least one product line, meaning the firms had to integrate part of their operations. To gauge the new firm’s performance, Hoskisson’s team measured employee productivity and, in turn, the subsequent effect on stock price for the acquiring firm for the three years following the merger. 

Employee productivity clearly reflected the match — or mismatch — between words and deeds, the researchers found. Promises set up implicit contracts with employees, so when those promises are not kept, employees renege on their own implicit promises to perform. So profound is the importance of trust that employees underperform even when the new practices are actually better than those the company had promised. 

Employee productivity hit bottom, Hoskisson’s team discovered, when the company’s stated values were especially lofty and their practices fell far short. In other words, the bigger the broken promise, the fiercer the employee backlash.

Not surprisingly, productivity also plunged when a company’s stated values were shoddy in the first place — and the firm then surpassed that low bar. Under-promising, the researchers note, is not a useful strategy for boosting productivity. “Employee productivity is higher for firms that under-promise relative to firms that over-promise,” they added. 

The relationship of a company’s values to its treatment of clients had an even greater influence on productivity than did its treatment of employees. In both cases, it was the workers’ impressions of the how well a company’s words matched its deeds that mattered: Employee response to a merger, the researchers found, had a “significant effect” on the new company’s performance. 

What that means is that a newly merged firm can’t just talk the talk. It has to walk the walk as well. Workers have their eyes not just on how they’re treated, but also on how well a firm upholds its implicit contract with customers. If firms in a merger falter in these relationships, employee productivity can slip and ultimately reduce the financial outcome for shareholders. 

Conventional wisdom holds that mergers give managers a free pass to run roughshod over employees. Managers need to know better. After a merger, Hoskisson’s research shows, employee performance, and thus company outcome, actually hinge on the corporation meeting its previously espoused value positions. There may be no more critical time in the life of a business for its executives to be real.  

Robert E. Hoskisson is the George R. Brown Emeritus Professor of Management at Jones Graduate School of Business at Rice University.

To learn more, please see: Cording, M., Harrison, J. S., Hoskisson, R. E., & Jonsen, K. (2014). Walking the talk: A multistakeholder exploration of organizational authenticity, employee productivity and post-merger performance. The Academy of Management Perspectives, 28(1), 38–56.

Based on research by Constance Elise Porter, Naveen Donthu, William H. MacElroy and Donna Wydra

• Successful customer communities don’t coalesce by themselves. They’re well-managed corporate initiatives.
• Online customer communities generate more than endorphins for the customers. They build financial value for the company.
• Engaging customers is probably the single biggest hurdle for firm-sponsored virtual communities.

Love of cooking may bring them together, but it’s the corporation that keeps the relationship alive. Reader’s Digest, best known for pocket-sized magazines, also publishes allrecipes.com, the world’s largest online community of cooking enthusiasts. There’s a reason for the company’s effort: Sustaining online customer communities generates much more than endorphins for the customers. It builds financial value for the company.

In a 2011 paper, Rice Business Professor Constance Elise Porter, Georgia State University marketing professor Naveen Donthu, Information Resources Inc. principal Donna Wydra and Socratic Technologies chairman William H. MacElroy outlined how companies can best nurture such communities. To reach their findings, the team interviewed more than 650 members of 60 different online communities sponsored by companies. Successful customer communities don’t coalesce by themselves, the researchers found. Instead, the seemingly spontaneous chat-fests are well-managed corporate initiatives.

But keeping the communities going isn’t easy. Engaging customers is probably the single greatest hurdle for firm-sponsored virtual communities. In fact, of the many Fortune 1000 companies that sponsor virtual communities, more than half might actually be destroying value rather than building it.

Companies with strong online communities talk a lot about “flow.” What they mean is that they want members first to enjoy themselves and identify with the product. From there, the consumers may take online leadership positions, offering constructive product critiques, writing content for the company’s site, even helping to design new products. 

But there’s a process to all of this. The first step is understanding the consumer’s motivations. To stay with an online community, customers need to sense an overlap between their identities and those of the other members. They have to want to share information and stories.

Next, interest needs to be gently promoted and kept alive — though never in a way that feels coerced. Initial enjoyment, it turns out, isn’t enough to fuel participation over the long haul. Computer maker Dell’s strategy is to make participation easy, giving quick access to recent blog posts and threads from discussion forums. In one area of its community called “Be Heard,” members are invited to rate new products.

Personal connection, the researchers also found, eclipses incentives such as payouts for participation. From a company’s perspective, it’s welcome news: Brand love and community links can save vast sums in trying to gather customer feedback. Oddly, cash incentives are one of the least effective ways to lure participation in virtual research communities.

Once a firm has reached a reasonable level of customer participation, it needs to ensure that members are provided value, Porter’s team says. At this stage, members participate for the fun of it; the thought of having to leave gives them negative feelings. Once customers reach this point, the researchers say, they’re in a position to also satisfy specific needs of the firm. Giving happy clients a sense of status at this point can make them into a virtual workforce. 

The Jones Soda Company, for example, gives its online community a role in the marketing process. A group of about eight teenagers forms part of an advisory board to the board of directors.

Starbucks takes a slightly more personal approach, encouraging employees to introduce themselves through extensive personal profiles, and inviting customers to share thoughts about products. During the first year of this project, customers submitted more than 70,000 ideas. The company put 94 into action and launched 25 as discrete products. 

Both companies shrewdly tapped into the goodwill of a customer community that feels valued. But woe to the executive who takes the opposite approach, deeming the customers’ role as simply buying and chatting among themselves. In short order, the researchers say, such members can start feeling ignored. At this point, they may morph from advocates into “madvocates” who see themselves as attack dogs against both the product and its management.

Handled well, strong online communities give firms enormous financial benefits at an often negligible cost. Members who create content can save the company a fortune in advertising. Customers who dream up new products are providing expert consulting for free. 

If the site is carefully nurtured, even those clients who don’t write, critique or invent new products still gather to chat passionately about the product. Businesses can’t buy that kind of word-of-mouth. But, Porter and her team conclude, they can certainly help it along. 

Constance Elise Porter is an assistant clinical professor of marketing at Jones Graduate School of Business at Rice University.

To learn more, please see: Porter, C. E., Donthu, N., MacElroy, W. H., & Wydra, D. (2011). How to Foster and Sustain Engagement in Virtual Communities. California Management Review, 53(4), 80-110.

By Utpal Dholakia

This article originally appeared in Psychology Today. 

As consumers, we think of high prices as painful and low prices as attractive. However, prices have a powerful informational value that can make this relation invalid. The level of an object’s price embeds and conveys useful information about its quality (or lack thereof) or the quality of the store from which it is purchased.

For instance, if all I tell you about one particular car is that it has an $85,000 price tag, visions of a posh luxury car are sure to dance before your eyes even when no other information about the vehicle is forthcoming. You are unlikely to visualize a hatchback or a cookie-cutter minivan given this $85,000 price point.

On the other hand, if I tell you my lunch today cost just one dollar, you will guess I had a taco or a hot dog from a food truck, not a gourmet multi-course meal.

An item’s price level, by itself, delivers useful, and sometimes diagnostic information about the product. The informational value of price is particularly potent when the item’s price is extreme, either on the high end or the low end. It can work in counter-intuitive ways that make little economic sense.

The case of the bargain basement author

To understand the power of informational value, Consultant Dorie Clark recounts the case of a highly-regarded New York Times bestselling author who was invited to be a keynote speaker at an association’s annual convention. When asked his speaking fees to participate, the superstar author quoted a modest price of $3,000, a fraction of what the association was expecting to hear. Instead of being thrilled at having locked up a top-notch speaker at a price far below the budgeted amount, the event’s organizers started having second thoughts. They wondered whether they had chosen the right speaker and grew concerned about the quality of the speech he would deliver. This adverse reaction occurred because the price was too low! As Clark insightfully advice, “Price is often a proxy for quality, and when you put yourself at the low end, it signals that you’re unsure of your value — or the value just isn’t there. Either can be alarming for prospective clients.”

The highest price point can be the most comforting one

In the late 1990s, when the consumer packaged goods behemoth P&G wanted to introduce the new Olay Total Effects product, the company tested different price levels of $12.99, $15.99, and $18.99 to determine which price would be the most appealing to target customers. They would presumably have made a profit at all these prices. At the low price level, a fair number of mainstream consumers who shopped in grocery or drug stores expressed interest in Olay, but the prestige shoppers who purchased it in department stores were not as responsive. They thought it was too cheap to be in department stores. At the $15.99 price level, the amount of purchase interest from both groups declined. But surprisingly, when Olay’s price was increased to $18.99, both groups, and particularly, the department store shoppers’ intentions to purchase shot up to levels higher than the $12.99 price. More people wanted to buy the same product at a higher price. As Joe Listro, Olay’s R&D manager explained:

So, $12.99 was really good, $15.99 not so good, $18.99 great. We found that at $18.99, we were starting to get consumers who would shop in both channels. At $18.99, it was a great value to a prestige shopper who was used to spending $30 or more [for a similar product]. But $15.99 was no-man’s-land—way too expensive for a mass shopper and really not credible enough for a prestige shopper.

What is striking about this story is that the exact same product was being tested by P&G, yet it was the price level that created such a varying degree of response. The informational value of the $18.99 Olay price lay in comforting the prestige shoppers by signaling the product’s effectiveness, and in making the product aspirational for the mass shoppers, portraying it as an affordable luxury item that they could splurge on. Anything lower was detrimental to the new product’s success.

High prices attract consumers when assessing quality is difficult

As both these cases show, the informational value of price is particularly powerful when the buyer has difficulty in discerning the item’s quality. The keynote speaker’s services were what marketers call an “experience good,” the quality of which can only be evaluated after the experience is complete. Similarly, the Olay Total Effects product was being newly introduced to the marketplace, so consumers did not have a good idea of what to expect.

The main lesson for consumers is this. When a product’s quality is hard to assess, that’s when savvy marketers tend to set prices at a high level to signal that they are selling high-quality items. This is when you should take the time to do research and try to understand what contributes to quality so that you can buy the item with the best value instead of the most expensive one.

Utpal Dholakia is the George R. Brown Professor of Marketing at Jones Graduate School of Business at Rice University.

Based on research by Gustavo Grullon, James P. Weston, Bradley Payne and Shane Underwood

• The number of companies paying dividends has dropped dramatically in the past 30 years.
• But companies are making net payments — through other types of cash disbursements, including share repurchases — that are as high or higher than they were in the 1970s.
• By shifting cash distributions to repurchases instead of dividends, firms moved towards a policy of minimizing the tax burden on their investors.

“The only thing that gives me pleasure is to see my dividend coming in,” oil magnate John D. Rockefeller once said. Rockefeller wasn’t the only investor to cherish the portion of corporate earnings that companies have historically divided among their shareholders. The dividends a company paid were once the most reliable public demonstration of its financial health. During the dark economic days of the 1930s, federal legislation began requiring companies to conduct business with more transparency. Before that, dividends acted as one of the few visible ways investors could judge a company’s success.

But a dramatic drop in the number of firms paying dividends from 1978 to 1999 has posed a puzzle to analysts who study capital markets. Experts have long believed that the decline in dividend payments reflected the transitory nature of company profits. But Rice Business scholars recently discovered a conundrum: Large firms with higher earnings are the least likely to pay dividends. These companies aren’t crippled by costly external financing, and they don’t need to hoard cash for investment purposes.

So why aren’t they paying out?

Dividend levels differ enormously from company to company. Some of the fastest growing companies, such as internet startups, tend not to pay dividends at all. As these companies swiftly expand, they plow profits back into their businesses. But for older, more established companies, stockpiling profits or funneling them back into the firm may not be the wisest decision. Experts expect more mature, established companies to pay dividend yields above the market average.

Rice Business Professors Gustavo Grullon and James P. Weston, along with Bradley S. Paye, now a finance professor at Virginia Tech, and Shane Underwood of Baylor, decided to approach the puzzle by looking at other forms of paying out. They examined whether net cash distributions to equity holders, including repurchasing shares and issuing stock, have declined similarly — and when they looked at these figures, a very different picture emerged. They found no decline. In fact, they discovered that net payout yields have increased over time.

Their research showed that many firms were positive net payers even if they weren’t paying dividends. And many companies that paid dividends turned out not to be positive net payers. Scholars determined that although dividend payments have fallen, companies are as likely to make net payments today as they were in the 1970s. These results proved consistent across a number of methods of measurement. In fact, the findings suggest that corporations currently distribute more cash to their shareholders than in the past.

The researchers studied payouts by publicly-traded domestic firms with a median age of 16 years. Young firms are expected to have a greater need to save cash than established ones, and since publicly-listed companies tend to be younger and less profitable than they were 30 years ago, researchers expected that the number of companies returning cash to shareholders would drop during this time period. But the scholars found the opposite. They discovered that the number of firms with low retained earnings that distribute cash to equity holders actually has increased. What’s more, they found that firms were shifting cash distributions to repurchases instead of dividends — thereby easing the tax burden on investors who would have paid higher penalties on dividends.

By looking at net payouts — such as repurchased shares and stock issues — instead of just dividends, the researchers came to an entirely novel understanding of payout policy. For example, the fact that firms with relatively low earnings were actually more likely to return cash to shareholders than they were in the 1970s may reflect the loosening of restrictions on repurchases that have facilitated the use of stock buybacks among smaller, less mature firms.

Their conclusions also have major implications for tax policy. Proponents of the Jobs and Growth Tax Relief Reconciliation Act of 2003, for example, argued that in the wake of the corporate scandals of 2001 and 2002, firms needed encouragement to return cash to shareholders. The act, commonly known as the Bush Tax Cuts, lowered taxes on dividends and capital gains, among other measures. As the researchers note, proponents believed the legislation would “jumpstart a staggering economy, jolt stock prices upward, and release a cascade of corporate cash into the pockets of upscale consumers.”

But those who made such arguments presumed that firms were less likely to distribute cash to investors than they had been in the past, and that altering the tax code could help reverse this trend. The research suggests otherwise. Firms were just as likely to return cash in 2003 as they were in 1978. A diehard dividend fan like Rockefeller might find himself waiting a long time at the mailbox today for an envelope that never arrives, but investors are still getting payouts — more now than ever before.

James P. Weston is a Harmon Whittington Professor of Finance 

Gustavo Grullon is a Jesse H. Jones Professor of Finance at the Jones Graduate School of Business at Rice University. 

To learn more, please see: Grullon, G., Paye, B., Underwood, S., and Weston, J. P. (2011). Has the Propensity to Pay Out Declined? Journal of Financial and Quantitative Analysis, 46(1), 1-24.

By Jennifer Latson and Andrew Sessa

This article originally appeared in the Houston Chronicle

Last week, Facebook launched a new unit of time: the flick, which corresponds to 1/705,600,000th of a second. If you’ve always thought a nanosecond was too short but a second was far too long, this is the increment you’ve been waiting for. But why should Facebook stop there when it could launch an entire time line?

1. The friend requant: The time it takes to decide whether to accept a friend request from your 8th-grade frenemy, Amber, who you’re pretty sure just wants to sell you essential oils. Length: Somewhere between a nanosecond and a flick, on average.
2. The memute: How much time you have to post your own witty take on the latest viral meme before it becomes stale. Length: The number of flicks it takes Sad Keanu to eat a sandwich alone on a park bench.
3. The Facebyte: The time spent crafting exactly the right comment when your freshman-year roommate posts that she has sold her first novel, which must include the word “congrats” (for the balloon effects) and should in no way reveal that you are dreading the debut of what she describes as “Fifty Shades of Grey set in the zombie apocalypse.” Length: About half a memute, plus a few billion flicks to decide between the thumbs-up or the heart emoji.
4. The privasec: The interval when you carefully adjust your privacy settings after Facebook revamps them before just giving up and posting your social security number, wedding anniversary and mother's maiden name in your bio. Because, let's face it, you're destined to lose that battle. Length: As long as it takes to say “year-long security breach that exposed the private data of 6 million users.”
5. The flack: The period in which it slowly dawns on you that the unexpected message from your college crush was not prompted by his realization that he made a horrible mistake in never calling you after that one party where you totally hit it off — but was in fact a prelude to him asking you to donate generously to your 15th reunion class gift. Length: Way longer than it should have taken. Come on.
6. The fluke: The time it takes you to figure out that the story in your news feed about Malia Obama’s addiction to Tide PODS was generated by Russian bots (and reposted by Amber). Length: Much less than a flack, to your credit.
7. The flunk: The total length of your Facebook tenure before you decide to disable your account. Alternate usage: The amount of time your account stays disabled before you realize you can’t live without it. Length: Varies, although the former is measured in memutes and the latter in flicks.

Jennifer Latson is an editor at Rice Business Wisdom and the author of The Boy Who Loved Too Much, a nonfiction book about a rare disorder called Williams syndrome.

By William M. Arnold 

This article originally appeared in The Hill. 

The early days of 2018 are a good time to consider America’s energy landscape and how it impacts our broader global competitiveness. The outlook is good.

The shale revolution in the U.S., OPEC’s varied responses, changes in federal regulations, as well as the cost of oil and gas here, relative to the rest of the world, all impact the country’s economy.

These dynamics have been in active play for close to a decade but seem to have reached a “new normal” in recent months.

The implications of the shale revolution are many. It provides an unprecedented level of energy security as U.S. production reaches levels unseen for 30 years and puts us among the top three producers in the world. Politically, this provides some immunity from crises in places like Venezuela and Nigeria.

It also encourages energy companies, large and small, to invest tens of billions of dollars back in the U.S. over countries with less stable business environments. That translates into high-paying jobs and economic growth in places like West Texas, North Dakota and Pennsylvania.

OPEC’s response has been erratic since the collapse of oil prices three years ago. In early 2015, many U.S. producers bet, to their misfortune, that OPEC would cut its own production to stabilize prices above $70 a barrel. Instead, OPEC let market dynamics rule and prices collapsed by more than 70 percent into the high $20s.

More recently, OPEC and other major producers like Russia agreed to cut production, and they showed discipline in the implementation. That helped drive prices to about $60 in the U.S. and $65 outside the U.S. (the “Brent” market). The $5 difference between oil in the U.S. and the rest of the world adds to our competitiveness as the price of refined products plays out in the cost structure of economies.

While oil prices have rallied, U.S. natural gas continues to be cheap (aside from Arctic weather spikes) because of abundant supplies, new technology, infrastructure, ease of market entry and available capital. This has led to the rapid-paced closure of uncompetitive coal-fired power plants across the country. A consequence of this has been the drop in America’s carbon dioxide emissions to a 20-year low.

Many of the nations with which we compete in Europe and Asia pay two to three times, or more, for the clean-burning fuel that provides residential, commercial and industrial power. America is now exporting natural gas that supports the independence of vulnerable countries like Lithuania, which had been dependent on Russian supplies until they built a facility to import liquefied natural gas.

Cheap natural gas is also having a dramatic effect on the nuclear power industry. Many U.S. facilities were built decades ago and are at the point where they would need major refurbishment. But in the current price environment, many of these plants are slated for closure instead of renovation, which would cost tens of billions of dollars. New facilities are few and have been subject to dramatic cost overruns.

Wind power has emerged as a growing source of energy, at times providing a majority of power supplied in Texas, home to the greatest concentration of producing turbines in the U.S. The prospect for offshore wind, which has been a factor in Europe for many years, adds to the potential.

Subsidies are still an important economic component and interstate transmission is a challenge. Solar has grown exponentially but from a very small base, with sharply declining costs, but has had less widespread impact.

The Trump administration has attacked regulation broadly, especially in energy. The recent proposal to open nearly all offshore areas to oil and gas drilling — in Alaska, the Eastern Gulf of Mexico and the Atlantic and Pacific coasts — is a dramatic example.

There will be political and environmental challenges. The lease sales would run between 2019 and 2024, when prices for oil and gas are difficult to foresee.

Previously, President Trump announced he would abandon the Obama administration’s Clean Coal Plan that had already been suspended by the U.S. Supreme Court. In contrast, the Department of Energy has proposed initiatives, now pending, to provide financial support to coal and nuclear because of their reliability of supply for power generation.

Also, disputes over regulation of fracking on federal lands tipped in favor of state regulators. And the Interior Department is rolling back offshore drilling safety rules in light of the industry’s adoption of new safety practices.

The recently signed tax overhaul drops the corporate rate for all industry. Ironically, though, companies like Royal Dutch Shell had to take billion-dollar financial charges in the fourth quarter of 2017 because this impacted the value of tax losses that they carry forward. But the dramatically lower federal taxes will favor U.S. production as companies decide on future portfolio allocations.

The convergence of these seemingly diverse factors combine to provide a fruitful basis for strength across the U.S. economy as 2018 gets underway.

Bill Arnold was a professor in the practice of energy management at the Jones Graduate School of Business at Rice University.