Based on research by Duane Windsor 

Key findings

• Companies need to cultivate “moral champions” — employees who defend key values within the organization.
• Companies also need to weed out “moral sinners and neutrals” — employees who know right from wrong but don’t act on it.
• Businesses should seek out employees who demonstrate company values and model these values for other employees.

It’s not unrealistic to look for moral paragons in business. In fact, moral champions can play a critical role in successful firms, argues Duane Windsor, a management professor at Rice Business. Ethics researchers, however, just need to grasp that the business world entails different constraints and opportunities than do some other spheres.

In a recent book chapter, Windsor took a close look at moral leadership models in business. Among his main questions: Are heroes and saints, as defined in other spheres, even desirable there?

To find answers, Windsor crafted a typology categorizing different sorts of moral exemplars. His methodology included original conceptual models combined with brief case summaries from available literature. (Windsor noted that his analysis did not provide a systematic survey of literature on the topic, but rather a citation of key selected publications, and that the development of a typology was based on both conceptual development and case study analysis.)

In the resulting pantheon of moral business exemplars, Windsor identified what he termed heroes, saints and moral champions. The moral hero, he writes, typically faces a dangerous, even life-threatening crisis and responds with moral courage. Rwandan hotel manager Paul Rusesabagina provides an example. During his country’s genocide in the 1990s, Rusesabagina reportedly managed to save 1,200 people from being murdered by Hutu militants.

Unsurprisingly, however, there are few candidates for this level of heroism in business. After all, it is not common to encounter the kind of danger that can summon courage like Rusesabagina’s.

“Saints,” meanwhile, show a different kind of initiative: going beyond legal requirements or common ethical standards to defend a particular, humanistic value.

Mohammed Yunus, who in 1976 began experimenting with making credit available to the landless poor, would fall into this category. In 1983, Yunus established the Grameen Bank to make loans available to those unable to get credit from other sources. He received the 2006 Nobel Peace Prize for his innovative concepts of microcredit and microfinance. Windsor categorized Yunus, a Vanderbilt Ph.D., as a “saint,” because Yunus built an enterprise promoting a single ethical value, in this case, helping the poor.

Windsor’s third type of moral leader, a champion, may sacrifice less personally, but defends important ethical standards. William O’Rourke falls into this category. As chief executive of Alcoa Russia in 2005, O’Rourke demanded zero company tolerance for corruption. Under pressure from threatening officials, and again when police robbed him at a local ATM, O’Rourke refused to pay bribes of any sort. 

In the same era when Siemens engaged in a global strategy of bribery, and Wal-Mart had to launch an inquiry into corruption payments by employees around the world, O’Rourke fended off threats of possible harm from government officials wanting the same type of payoffs. Even when local police stopped transport of a valuable furnace for his firm, O’Rourke refused to submit. With that type of backbone, Windsor wrote, if O’Rourke had faced much more physical danger, he might be classified as a hero.

Then there are the “moral neutrals” and sinners. Windsor created the first label for employees who know right from wrong but don’t act on it. Moral sinners, in this lexicon, are employees who know right from wrong but do not care. Both, Windsor argued, need actively to be weeded from business. Yet moral saints are not always an asset in for-profit firms, or for those who depend on them. A saint, he points out, prioritizes a single, non-financial value to the exclusion of all others — so, not ideal for shareholders or employees who need their paychecks.

Windsor also distinguished among the moral qualities of businesses themselves. This typology included a framework that distinguished between private and public businesses, and between harm avoidance and positive social benefit. To identify these types, Windsor used a classic series of definitions by Adam Smith. The difference between harm and contribution, for instance, echoes Smith’s distinction between citizenship as compliance and good citizenship as concern for social welfare. As Smith put it, a citizen obeys laws and rules. A good citizen strives for others’ well-being.

Businesses that merely refrain from harm, in other words, are mere citizens. But businesses that actively promote social good are good citizens. There is a paradox here, however. In a 15-year panel dataset of nearly 3,000 public companies in the U.S. by other scholars, businesses that did the most harm were also among those most actively doing some good.

Of the three types of moral leader, Windsor concluded, it is really the moral champions that companies need the most. Saints, uplifting as they sound, seldom are financially good for business. Heroes, meanwhile, are rarely called for. Moral champions, however, can be positive and powerful — and nearly as hard to find.

Duane Windsor is the Lynette S. Autrey Professor of Management and Strategic Management at Jones Graduate School of Business at Rice University.

To learn more, please see: Windsor, D. (2014). A typology of moral exemplars in business: Moral saints and moral exemplars (M. Schwartz & H. Harris, Eds.). Research in Ethical Issues in Organizations, 10, 63-95.

Based on research by Arnaud Chevallier (former professor at Rice University)

• Emotional intelligence (EQ) is crucial when managing work teams.
• Treat team members as if they’re artists: hire the best talent, give them support and don’t micromanage.
• Respect each individual’s gifts and opinions.

Change is perilous. There’s a reason why most management consultants let clients install the improvements they’ve recommended. Without insightful management, many of these plans will fail.

Emotional intelligence, also known as emotional quotient or EQ, makes a difference in such cases, according to Arnaud Chevallier, former associate vice provost at the Rice University School of Engineering. In his new book Strategic Thinking in Complex Problem Solving, Chevallier argues that while EQ won’t work by itself, it can dramatically enhance managers’ problem-solving success.

Using EQ to problem solve, Chevallier says, can be as powerful in the academic and corporate worlds as it is in managing high-maintenance artists. Whether it’s the conductor of an orchestra or the director of a movie, a successful leader needs to motivate individual talents to work in concert. It’s not easy. But if you want a brilliant ensemble, you need a leader who captures the best of everyone on set. That means director, actor, set designer — no matter how large their respective egos. And that takes EQ.

There are four crucial elements in such leadership, Chevallier says.

• Self-awareness: Know your limitations and hire the best possible coworkers to compensate.
• Self-management: Communicate clearly and let workers know what is expected of them. Reframe arguments in a persuasive, can-do form.
• Social awareness: Show empathy. Let others express themselves.
• Relationship management: Be a good coworker and motivate others to create a harmonious workplace.

An emotionally intelligent team leader needs to be expert at managing, not at the skill she is managing. In a post elaborating on his book research, Chevallier put it like this: “A good generalist shouldn’t be the smartest guy in the room but, rather, the best integrator. You don’t want the symphony orchestra director to be the best violin player… What you want is a director who is good at directing.”

These techniques, often used to manage arts productions, apply to other kinds of teams too — especially teams in transition. Consider the Tigres of Monterrey, a professional soccer team that in 2010 was undergoing a mortifying losing streak. Their record was so bad that they were threatened with demotion to a lesser league. Then the owners hired a new president, Alejandro Rodríguez. Within a year Los Tigres roared back as the Mexican league champions, and the team succeeded continually ever since.

Behind the success was EQ.

First, the new team president stifled any personal vanity and hired top-notch associates. Then he let them do their work without meddling and provided support when asked. He didn’t care if he was the smartest person in the room. He just wanted a room full of smart people.

Second, the president understood the vocabularies of each member on his team, much as a symphony conductor knows the instruments in his orchestra.

Finally, the Tigres’ president trusted in his futbolistas’ gifts. The players soon followed suit toward each other. By treating team members as artists and managing both their strengths and weaknesses, Rodríguez built a team of individual experts who worked harmoniously together.

This approach isn’t always the norm in academia or business, with their focus on technical skill. But in both fields, Chevallier argues, problem solving requires managing emotions in oneself and one’s team. Handle it right and, like a film, the product can be more than lights and a soundtrack. It can be a star-studded epic.

Arnaud Chevallier is a former associate vice provost at Rice University.

To learn more, please see: Chevallier, A., (2016). Strategic Thinking in Complex Problem Solving, Oxford University Press.

https://powerful-problem-solving.com/book.

Based on research by Robert E. Hoskisson and Brian Connelly

• It’s commonly thought that external corporate governance measures, such as a threatened takeover, naturally curb financial fraud.
• It seems logical that managers would toe the line under intense scrutiny – but external corporate governance can have a surprising psychological effect.
• In fact, when top level managers find governance mechanisms too coercive, they’re more likely to commit fraud.

Ever since the 2008 financial crisis, investors have been highly touchy about company managers committing fraud. And rightly so: Misdeeds ranging from improperly stating revenue to inaccurately valuing assets undermine stakeholders’ ability to judge a firm. The Securities and Exchange Commission takes such transgressions just as seriously, penalizing numerous publicly traded firms for misconduct every year.

Scholars, policy makers and regulators also brood about corporate ethics and governance, in the process creating a vast literature on how to fight financial fraud. External governance, they largely agree, is best. Yet most of this research is based on one framework known as agency theory. What if a different theory explained human behavior just as well, or better?

Agency theory argues that we are driven by self-interest. According to this line of thought, the presence of external governance mechanisms should make managers less likely to enrich themselves via financial fraud. After all, the added scrutiny boosts the chance of getting caught: obviously, not in any manager’s self-interest.

However, Robert Hoskisson, a Rice Business emeritus professor, tackled the question of financial fraud a different way. In a recent paper, Hoskisson and two colleagues built on a theory called cognitive evaluation theory, which looks at the psychological effect of external governance mechanisms. How, the researchers asked, might this theory predict financial fraud?

According to cognitive evaluation theory, humans need to feel a certain level of self-determination. Impose too many outside restrictions, the theory goes, and you “crowd out” the wish to act in the very ways the controls were meant to encourage.

To test if this theory applies to top managers, the scholars studied institutional and regulatory data from 1999 to 2012. They focused on three kinds of external governance mechanisms: 1) dedicated institutional investors; 2) the threat of corporate takeover; and 3) ratings agencies.

The results were surprising.

The first group the scholars looked at were dedicated institutional investors. These investors have access to key data because they hold stock over longer than average periods of time, and closely watch the senior management’s actions. Under that kind of spotlight, traditional agency theory suggests, financial fraud by managers should shrink. But the data suggested the opposite. Higher levels of dedicated institutional ownership were linked to higher levels of fraud.

A looming corporate takeover also pressures firms. Lackluster management quickly gets ousted; poorly performing firms get acquired. To study the effects of this external pressure, the researchers analyzed how financial fraud differed if managers were shielded from this pressure by takeover defense provisions (e.g., poison pills, golden parachutes and staggered board appointments). Traditional agency theory predicts that fraud should increase when more of these shields are in place. But according to the data, when takeover defenses increased, financial fraud dwindled.

Finally, ratings agencies also exert pressure. Securities analysts are privy to troves of information, and thus serve as a second pair of eyes on a firm and its performance. Their reviews can send a stock price plummeting or soaring. So according to traditional agency theory, more analyst scrutiny should equal less financial fraud. Au contraire. According to the scholars’ findings, higher analyst pressure correlated to higher levels of fraud.

The findings create a real conundrum. Too little external control leaves managers with no accountability. But too much actually threatens their feelings of agency – emotions that cascade into lower motivation to protect shareholders, and higher chances of committing fraud. The answer seems to lie in proportions. You catch more flies with honey than with vinegar, as the adage goes. In corporate governance, the recipe has been heavy on the vinegar. Regulators might find better results with just a little more honey.

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

To learn more, please see: Shi, W., Connelly, B., & Hoskisson, R. E. (2017). External corporate governance and financial fraud: Cognitive evaluation theory insights on agency theory prescriptions. Strategic Management Journal, 38(6), 1268-1286. 

Based on research by Dinah Cohen-Vernik (a former Rice Business professor) and Devarat Purohit

• Manufacturers can’t assume that using the turn-and-earn rule based on retailers’ historical sales is the most profitable choice for the manufacturer.
• Retailers don’t always prefer a fixed allocation rule.
• Examining how multi-product firms get the best return sheds light on the right answer.

If you lived in California and were looking for a new Toyota Prius back in spring of 2008, it was tough going. About 65 retail dealers were jockeying for position with Toyota to get a share of the 400 available Priuses. You think you had problems! Manufacturers can’t always increase the wholesale price or expand production capacity in order to solve the problem. Those are risky propositions in a market where product demand is fickle but manufacturer-retailer relationships are critical to long-term success. So what’s a manufacturer to do when capacity might tighten for a product with unpredictable demand?

Many manufacturers try to optimize profits by using a time-honored tradition: turn-and-earn (T&E). It goes like this: Retailers who turn inventory the fastest, based on past sales, earn the right to a higher allocation of scarce, high-demand products in the future. T&E tends to optimize capacity utilization, sales and profitability as compared to fixed allocation methods that dole out the product based on some pre-determined amount across a retail network.

But should a manufacturer consider their retailers’ sales histories across their entire product line, the product that could be in short supply in the future or other products in their line that have stable demand? This choice matters only when capacity is tight and demand is high. It is then that retailers are incentivized to behave differently — to order more products today — in an attempt to secure a sales leadership role that could earn them a higher allocation of a scarce product in the future, if needed.

It turns out that a T&E rule that is based on retailers’ sales of products with fairly steady demand is always inferior to other types of T&E rules. So Dinah Cohen-Vernik, former assistant professor of marketing at Rice Business, and her co-author focused a study on developing a general allocation rule amongst the other alternatives. To do so, they developed an analytical model set in a two-period world in which a single manufacturer sells a product line consisting of two products that are sold via two retailers that are geographically separated, such that they have monopolies within their respective markets. The products are partial substitutes, but demand for one product is stable while demand for the other is unpredictable and subject to supply constraints when demand for it is high. Consistent with some real world situations, wholesale prices and allocation methods are assumed to be fixed across the consecutive selling periods.

Findings from the study reveal that managers at multi-product manufacturing firms shouldn’t assume that using a T&E rule based on retailers’ sales across the entire product line is always the best choice. If products are highly substitutable, then the ability of manufacturers to set an optimal price makes a T&E rule based on retailers’ sales of just the product with erratic demand the best choice, especially if it’s likely that it will be in high demand and suffer future supply constraints. The logic is straightforward. Because the products are substitutable, retailers will increase orders of the product with an anticipated supply shortage today while simultaneously decreasing orders of the product with stable demand. Knowing this, managers will set prices for the product that will get higher orders today at a level that offsets any loss associated with the decline in orders for the product with stable demand.

The strategy should change, however, when products are less substitutable. Sure, retailers still will place more orders today of the product with an anticipated shortage. However, the quantity ordered of the product with stable demand doesn’t decline. Remember, every retailer wants to become a sales leader via any T&E rule. Some, with deep pockets, will attempt to do so by ordering more of both the stable-demand and unpredictable-demand products. Other, less flexible retailers will make a play for sales leadership by sacrificing orders of the product with stable demand in order to buy more of the product with unpredictable demand. Because it’s hard to predict who will respond in these different ways, the manufacturer’s best bet is to go with a T&E rule based on retailers’ sales across the entire product line.

Cohen-Vernik and her co-author also show that T&E is not always a bad deal for retailers, as suggested by prior researchers. Taking into account a full product line, it is possible for the retailer and manufacturer to prefer a T&E rule to a fixed allocation rule. In fact, it is possible for the retailer and manufacturer to prefer the same T&E allocation rule, which enhances profit for both.

You might be wondering: “Wouldn’t it be best for manufacturers to just forget about these T&E rules and let the free market sort things out by raising wholesale prices when capacity gets tight?”

Actually, according to the findings published by Cohen-Vernik and her co-author, when capacity is extremely tight for products with unpredictable demand, it’s more profitable for managers to use a T&E rule based on retailers’ sales across the product line than to use price as an allocation mechanism. The T&E rule gives retailers incentive to secure sales leadership by at least ordering more of the stable-demand product (since more of the variable-demand product isn’t possible). All said, understanding how to get the most out of T&E policies is critical for manufacturers hoping to optimize performance.

Dinah Cohen-Vernik is a former marketing professor at Jones Graduate School of Business at Rice University.

To learn more, please see: Cohen-Vernik, D., & Purohit, D. (2014). Turn-and-earn incentives with a product line. Management Science, 60(2), 400-414.

Based on research by Utpal Dholakia, Rui (Juliet) Zhu, Xinlei (Jack) Chen and Rene Algesheimer

• Participation in an online community fosters risky financial behavior. In fact, the greater an individual’s participation, the greater their preference for risk.
• Participation increases risk-taking when people perceive strong social ties with fellow members who will cushion the blow if something goes wrong.
• Managers of firms that sponsor online communities should develop strategies that safeguard potentially vulnerable consumers and, in doing so, sustain their communities and brands.

The number of consumers who engage in transactions with one another in online communities continues to grow. Widespread participation in auctions, as well as a rise in crowdsourced lending, offers unprecedented opportunities for consumers to improve their financial position by participating in online communities. Yet, attempts to take advantage of such opportunities might come at a higher cost than consumers bargain for. Is it possible, for instance, that increased participation in online communities creates conditions that encourage individuals to take on more financial risk than is prudent?

Yes, according to findings from a recent article co-authored by Rice Business faculty member Utpal Dholakia, professor of management. In fact, the more someone participates in an online community, the more risky is her financial decision-making. Why? Because participants of online communities think that fellow community members will offer a helping hand if they find themselves in a bind.

It might seem foolish for anyone to have such strong faith in online community members. After all, an online community is not the same thing as a social networking site – think Facebook – where people tend to replicate an existing network of friendships online. In many online communities, relationships are initiated among individuals who are relative strangers, until the time that they meet up in the community. So, what would make someone think that an online community member, with whom she has no other connection, would have her back if she got into a financial jam?

The so-called “cushion hypothesis” suggests that online community members develop emotional connections and a sense of moral obligation toward one another. In fact, research shows that people who don’t know each other in real-space often meet up in virtual-space and then form a sort of kindred spirit. So, it’s not hard to see why some people might feel such strong social ties with community members that they expect those members to provide the same type of support that any other close friend might provide in a time of need.

Dholakia and his co-authors demonstrate the effect of online community participation on risky financial decisions through a series of field studies and lab experiments involving Prosper.com, the largest U.S. peer-to-peer online lending community, and an online community located on eBay’s German site (eBay.de). In the first study, they randomly chose 600 of Prosper.com’s lenders and tracked their behavior for 18 months. They found that the riskiest loan portfolios were held by those who participated in the community and that the greater a lender’s participation — measured by the number of their postings — the greater the risk of the lender’s portfolio.

In a second study, the research team conducted a controlled experiment during which they observed the behavior of almost 14,000 eBay customers for an initial 16 month period. During this time, each customer had completed at least one eBay transaction successfully but had never joined and participated in an eBay community. After the 16 months, roughly half of the customers were randomly invited to participate in one of the eBay communities and the remaining customers were not invited. Both sets of customers were observed for another six months, and the findings were consistent with those from the Prosper.com study: The riskiest bidding behaviors (e.g. participating in bidding frenzies, winning bidding wars by spending the most) were enacted by those who participated in the community after accepting the invitation. Further, those who participated more, by posting a greater number of threads in the community, exhibited a greater level of risky behavior. In both the first and second study, the researchers were able to rule out the possibility that the results occurred simply because those who join online communities are more risk-seeking in general.

Finally, Dholakia and his co-authors conducted a laboratory experiment with 120 individuals to go the extra mile to explain why there is a link between online community participation and risky behavior. By manipulating individuals’ perceptions of the strength of social ties with community members, as well as by combing through individuals’ codified thoughts about their rationale for engaging in risky behaviors in the community, they found evidence to support the cushion hypothesis: When individuals felt that social ties were strong, they thought that fellow community members would have their back if something went wrong.

Consumers should be wary of their belief about the safe haven provided by relationships with online community members. Their belief might not reflect reality, and they could suffer real harm as a result. Findings from the Prosper.com study, for example, showed that increased risk-taking was not very rewarding. The return on investment for lenders was negatively correlated with the riskiness of their loan portfolios.

It seems clear that consumer participation in online communities is here to stay, so managers who sponsor such communities should develop strategies that minimize the potential harm for consumers. Why not alert consumers about their susceptibility to riskier decisions within the online community? In the long run, doing so would not only help consumers, but also help firms safeguard and sustain both their communities and their brands.

Utpal Dholakia is a marketing professor at Jones Graduate School of Business at Rice University.

To learn more, please see: Zhu, R. J., Dholakia, U. M., Chen, X. J., & Algesheimer, R. (2012). Does online community participation foster risky financial behavior? Journal of Marketing Research, 49(3), 394-407.

By Weezie Mackey

This article originally appeared in the Jones Journal, Spring 2016.

A senior executive at a high-end grocery store eased her way back into work after maternity leave. In one fell swoop, she had delivered twins and become one of her most targeted demographics: a working mother. When it came to groceries, however, there were certain necessities she couldn’t fit into her real live shopping cart. So she opted for a virtual one.

“Diapers,” she finally confessed to her CEO. “I’m buying diapers from Amazon because I need them to be at my front door.”

Rice MBAs Melissa Mohr ’10 and Abhishek Jha ’14 come to the Amazon grocery business from different divisions but with the same goals — to make the customer’s life easier and to make Amazon the choice for online groceries, both in the pantry and the fridge.

Door to door

This insistence on convenience and selection keeps consumers coming back to the world’s largest retailer again and again. But the profitable food and beverage category, with $620 billion a year in sales in the U.S., has been the least disrupted by e-commerce. According to Booz & Company, only about four percent of those sales currently happen online.

Clearly the opportunity for growth with online grocery is vast. So how do retailers convince the public to buy groceries online? Would shelf-stable items like coffee and granola bars be an entry point? In other words, hook them on filling their cupboards and pantries first and then target the fridge and the fruit bowl.

Enter Melissa Mohr, a manager on the Amazon.com Grocery Team. “Our goal is to help change how people grocery shop.” It’s part of her job to understand the lives and habits of her customers. “People are super busy, with more dual income homes and more active lifestyles,” she said. “We’re trying to make it easier that they are looking for and to make it easy for them to order from our site.”

It sounds simple. Almost as simple as changing how people shopped for books some 20 years ago. Does it mean the end of the brick-and-mortar grocery store? Not likely. Does it mean turning the grocery store model — which Mohr pointed out hasn’t changed much in over 50 years — on its head? Probably.

“Our focus is on how we can help make our customers’ lives easier. We think the ability to shop for groceries online is a big part of that.”

According to Mohr, Amazon differentiates itself with customer value programs. Subscribe and Save is a program that invites customers to pick “their favorite, for them to buy their groceries and provide it in a convenient and stress-free way. We know we have all types of customers and our goal is to have the selection most-used items and have them shipped on a regular schedule, and they receive five percent off the price. If they have five or more subscriptions, they get 15 percent off,” Mohr said. With no contract, buyers customize or change the items in their box whenever they want with no penalty.

“We also offer Prime Pantry. A great way for our customers to fill their typical ‘stock up’ trip and purchase items like bottled water, toilet paper, diapers. They ship directly to your door, and you don’t have to worry about carrying heavy and bulky items.” Which solves that problem a mother of twins might face.

And then there’s Amazon Dash— an actual button customers attach to an appliance or pantry in their home (for specific products only, such as Gatorade) tied wirelessly to Amazon online.

“Any time you’re running low, you push the Dash Button and two days later your product shows up at your house. These programs really drive our business and help change the way customers shop.”

Much like buying books and electronics, these incentives all make  sense, but how will they influence loyal shoppers to start buying their groceries from Amazon?

From coffee to cucumbers

Before taking the leap of grocery faith — from ordering something shelf-stable to going all in and ordering perishables — people need to have a level of comfort with the buying process. Having the name, infrastructure and track record of Amazon helps. It helps a lot. Especially since most who try the new service will already have an experience buying something from Amazon.

Still, the consumer’s resistance to buying perishables online has to be addressed. Prices, logistics, delivery windows, and annual membership fees all play into the decision to do their weekly grocery shopping online. Finally, does Amazon even deliver to your neck of the woods? Enter Abhishek Jha, senior program manager for the Launch and Expansion Team for AmazonFresh and Prime Pantry.

“We look at a variety of factors when evaluating where to offer AmazonFresh including our network of fulfillment centers, which allows us to get closer to our customers and offer them new services,” Jha said.

The AmazonFresh site delivery drop down menu, for now, couples New York and New England and includes Southern California, Northern California, Pacific Northwest and Mid-Atlantic as other choices. Whether these are areas where people were more likely to be early adopters or not, the effort of expansion proves Amazon’s intentions. From its launch in Seattle in 2007, LA and San Francisco in 2013, and San Diego, New York City and Philadelphia in 2014, the company is full steam ahead with online groceries.

Details of roll out and expansion are confidential, according to Jha. What’s not is the open season on convincing the consumer mindset that buying groceries online will make life better. Jha and Mohr agree that it’s Amazon’s philosophy. Andthis philosophy, despite reports to the contrary, extends to its employees as well.

Working it

“Literally everyone at Amazon owns his career,” Jha said. “The company offers a gamut of roles especially to MBAs who can excel and chart out a career in any business team, role or function. This is one of the main reasons I joined Amazon after graduation.”

Mohr was recruited by Amazon from Dr Pepper, where she was a brand manager. “When I got the offer I knew that it was a great opportunity for me to expand my experience, and I wanted to learn ecommerce. Also in my interview, I found out that you can bring your dog to work. This is a pretty awesome benefit, and my border collie Bode thinks Amazon is the greatest place ever.”

Her first role at Amazon was as the senior vendor manager for toys on Amazon.ca. “When I started we actually didn’t have a toy business so I was able to launch it for Amazon Canada. It was fun and challenging to launch a new business, engage with manufacturers to launch with Amazon and think about the selection and site experience for our customers. I loved that I was able to utilize my marketing background to help companies launch their toy brands, but I also got the experience of driving an ecommerce business.”

Jha began at the company as a senior financial analyst, benchmarking and analyzing Amazon Fashion, such as shoes, watches, apparel, luggage and jewelry. “I was also involved in other Fashion business initiatives which involved operational costs impact. Besides delivering financial analysis on these projects, I also networked internally with other operation and business teams.”

It’s the networking that Jha calls crucial. “Fit is very important with a specific team since Amazon essentially is a global firm housing several startups and teams with their own cultures. I finally decided to join Amazon-Fresh, which presents strong growth opportunities. With this role change, I am still part of North America supply chain and operations and am also responsible for leading launches for the AmazonFresh business.”

Though Jha and Mohr make up only two of the 230,000 employees worldwide that Amazon claimed in its most recent earnings report, their roles in the grocery divisions may play a major part in the disruption of an industry.

Weezie Mackey is the Associate Director of Marketing and Communications at the Jones Graduate School of Business at Rice University. 

By Allyn West

The following story originally appeared in Cite: The Architecture and Design Review of Houston, 98: The Finance Issue, Spring 2016, under the title “An Industry in Crisis" by Allyn West. 

Hermen Valdez realized that he wasn’t going to be able to afford to get back to Texas. His oldest son, a Houston native, was set to graduate from Baylor, and Valdez needed a plane ticket.

But he also needed to make payroll that month.

Valdez, who had moved away in the late 1980s from the recession in Houston to New England in search of more steady construction work, was an independent contractor, responsible for the salaries and insurance payments and taxes on a crew of about 20 general and skilled laborers.

He started working in the construction industry in high school. Before that, since he was 10, he had been helping his parents as a manual laborer. He grew up a few hundred miles southeast of Seattle, where his parents settled after emigrating from Mexico. When he graduated from high school in the late 1970s, he heard there were opportunities in Houston, then in one of its booms. Developers like Hines were financing big commercial projects Downtown, and the Medical Center was expanding. You could move to Houston, build buildings, start a family — and that’s what Valdez did.

The recession forced him north to hustle for work in a new part of the country. There, the competition of the free market wasn’t always friendly. Running his business out of the passenger seat of his truck, Valdez often bid lower on jobs than most union shops, and he allows that some stooped to intimidation to drive him out. “The unions made me miserable,” he says. The tires of his truck were regularly slashed. Once, says Valdez, a story was fed to a small Massachusetts newspaper that alleged he was forcing his workers to share a cramped apartment, implying that he was engaged in human trafficking. It wasn’t true, but there wasn’t much Valdez could do. Hiring a lawyer to file a libel suit and collect damages wasn’t in his budget.

Telling these stories now, Valdez shrugs. What choice did he have? He put up with the forced itinerancy. The intimidation.

The 70-hour weeks. After 16 years of having to live and work away from his family, his marriage ended. He began to realize that he wasn’t saving nearly enough for retirement. Eventually, he arrived at the dilemma that would drive him back to Houston: He could pay his workers, or he could see his son get his college degree.

He had to let his son down.

“That was the last straw,” he says.

Such difficulties and indignities are not uncommon among career construction workers. Even as building booms again in Texas, where one in 13 workers is employed in the industry, where Austin, Houston, San Antonio, and Dallas are considered among the fastest-growing cities in the country, the industry still promises but a low quality of life for many of its workers and struggles, at the same time, to recruit young people who no longer see the building trades as a means to the middle class.

A survey of almost 1,200 construction workers in Texas, compiled in 2013 by professors at the University of Texas, University of Illinois at Chicago and researchers with the Workers Defense Project (WDP) in Austin, show an industry today that is compromised by low wages, lack of benefits, job insecurity, unsafe working conditions and little to no continuing education or vocational training. Only 18 percent of the workers surveyed reported that they had received training on a job; 22 percent reported some form of wage theft; 52 percent reported earnings below the federal poverty line; and 78 percent reported that they are not covered by employer-based medical insurance.

One of the industry’s most insidious problems is payroll fraud, with employees being misclassified as independent contractors. Doing so allows employers to avoid paying Social Security and payroll taxes and providing overtime pay, benefits, insurance and unemployment for their workers — which, in turn, allows these employers to make lower and lower bids on jobs “in a race to the bottom.” (Meanwhile, law-abiding employers complain they can’t compete in such a race.)

The pretense is that an “independent contractor,” as the self-employed owner of a small business — his own body, that is — should be responsible for setting aside, out of hourly wages that rarely surpass $15, his own taxes, insurance premiums and payments into a retirement plan. (Not to mention provide access to his own safety equipment, tools, etc.)

The WDP estimates that, in Texas, as much as 40 percent of the construction workforce — or upward of 400,000 people — is thus misclassified. Worse, many others are paid in cash “under the table.” This leads to an estimated $1.6 billion every year in unpaid federal income taxes.

Texas is also the most dangerous state to work in, with the highest fatality rate in the country. The WDP found that as many as 20 percent of workers surveyed reported at least one workplace injury that required medical attention; 60 percent reported never having received basic safety training. Meanwhile, employers in Texas are not required to provide workers’ compensation. For that matter, they are not required, in this hot and humid state, even to provide water breaks.

These problems have led to an industry in something of a crisis. Leaders describe a shortage of skilled workers, which drives costs higher, as jobs take longer to complete. When they are completed, they are not always jobs done well.

Owners spend as much as 90 percent more than the initial cost on repairs and maintenance over the life of the building.

“This is the most complex business problem I’ve ever seen in my life,” says Chuck Gremillion. “It’s not just a workforce problem. It’s a human problem.” A native Houstonian, Gremillion has experienced the city’s busts and booms. He witnessed the collapse of the economy in the 1980s that drove Valdez and others like him away in search of work. He witnessed how the industry was soon forced to cut costs and became, as he says, “bottom-line driven.”

First, says Gremillion, members of unions — one of the last places where workers can receive “formalized training” — were deemed too expensive. Then, even hourly workers were deemed too expensive; they started to be misclassified as “independent contractors” — given 1099s instead of W2s — and paid by the piece. Often, they were fired if they complained, fired if they were hurt. For decades, now, the industry has confused its people with its tools, treating them with indifference and neglecting their upkeep, then casting them aside when they break down. “Some owners look the other way, shooting themselves in the foot in the long run.”

In 2009, this crisis led five industry leaders — the top executives from Vaughn Construction, Marek Companies, W.S. Bellows Construction, Associated General Contractors–Houston and Chamberlin Roofing & Waterproofing — to establish a nonprofit initiative that they called the Construction Career Collaborative (C3). Gremillion now serves as C3’s Executive Director. C3, explains Gremillion, intends to revive the industry’s reputation and restore the building trades as middle-class occupations. That’s done primarily, he says, through the participation of owners — including M.D. Anderson Cancer Center, Memorial Hermann Health System, Texas Children’s Hospital and The Museum of Fine Arts, Houston.

“It’s the right thing to do for a lot of reasons,” says Peter Dawson, AIA, Senior Vice President of Facilities Services at Texas Children’s. Building with C3 accreditation was, for Texas Children’s, a way to support a “social value.” But it was also a business decision with at least a few important considerations. Primarily, Dawson explains, it was a way of leading the industry forward: the growth of Texas Children’s depends directly on the growth of a skilled workforce. “It costs a lot to build a hospital,” he says. “It has a lot of systems — mechanical, electrical — that are sophisticated. In order to get a building like that built, you have to be able to call on different trades and different levels of skilled labor [that] can do highly specialized work effectively and correctly. [Working with C3] is encouraging a marketplace of these skills.”

If LEED measures the energy and resource efficiency of a building, C3 accreditation might measure the quality of workplace for the people who built it. “Ultimately,” predicts Dawson, “C3 will become the standard for construction.” A building built with C3 accreditation means that the contractors of record have submitted signed agreements with 14 “assurances” about payroll compliance, workers’ compensation, safety training and more. Contractors must provide assurances that their employees are paid by the hour, given overtime according to federal law and are designated as W2-receiving employees, not 1099-receiving “independent contractors.” They are also required to provide OSHA 10-hour safety training for workers and 30-hour training for supervisors. Additionally, C3 conducts spot audits to reinforce these assurances — which are further reinforced by annual accreditation fees. Contractors can pay $1,500 for an entire job or pay a range, from $100 to $2,000, for specialty work.

Though these provisions ensure better conditions for the workers employed by C3-accredited companies, many of which are the largest and longest-running general and specialty contractors in Houston, the overall sustainability of the industry remains uncertain — suffering, as Gremillion describes it, from a “perception problem.”

“Young people don’t see it as a path to the middle class. More people are recognizing that the problem exists,” says Gremillion. “But we are just scratching the surface.” As Gremillion explains, those workers trained by unions — the last generation of skilled laborers — have now reached retirement age. Where will the next generation come from? Policies resulting from the No Child Left Behind Act in 2001 have added more urgency to that question. Funding, scarce in education to begin with, went to support preparation for standardized testing — that is, preparation for college. Cuts to arts and music programs are the ones that receive the most outrage, but cuts to vocational and technical programs limit career opportunities as well.

Additionally, 40 to 50 percent of the construction industry is made up of undocumented workers. C3, as Gremillion explains, doesn’t take a stance on immigration policies. “We train the workers we have,” he says. But it’s clear that a worker’s lack of documentation would be incompatible with the payroll practices — which demand transparency, aside from local, state and federal compliance — that C3 advocates.

Still, it’s clear that C3 is working for a skilled laborer like Valdez. Since moving back to Houston in the late 2000s, Valdez landed with Marek Companies, a C3-accredited employer. “I started all the way back at the bottom,” he explains. But he has since moved up to become a general foreman, and he spends his days planning meetings and coordinating among the laborers, engineers, architects and owners on a job site. Marek pays him an hourly wage and guarantees a 40-hour week. Marek pays into a retirement account and provides vacation time, healthcare and insurance in case he’s injured.

Marek also provides classes after hours, in English and in Spanish, for skilled workers and site supervisors like him — and such continuing education provides these employees a way to advance and increase their earning potential.

Valdez is working, now, on a new patient tower for Methodist Hospital in Sugar Land, where Vaughn Construction is the general contractor. Every morning, Valdez drives in and forms a huddle at the job site. The employees — who will spend their day framing walls, hanging drywall, sealing the seams, painting, wiring and installing the floors — hear from him about safety procedures. About production issues. About quality. Those who will bend and hoist 100-pound panels of drywall into place review proper lifting techniques and are even led through a stretching routine. In other industries, that wouldn’t be news. It wouldn’t be worth noting. But on the construction sites where Valdez has spent his entire career, and his entire adult life, it is.

By Utpal Dholakia

Rice Business marketing professor Utpal Dholakia warns that companies too in love with algorithm-based marketing may end up drowning in a sea of numbers. This story appeared in the June 17, 2015, online edition of Harvard Business Review under the title “The Perils of Algorithm-Based Marketing.”

For marketers, it’s easy to lean heavily on algorithms to reach out and engage with customers. Marketers can take customer-specific information, such as demographics or previous behavior, and deliver special offers, track customers, cross-sell and promote. The list goes on and on. Who wouldn’t love algorithms?

One answer: consumers.

Algorithms can perform astonishing tasks. But take care. In an article published in Harvard Business Review, Dholakia warns about the dangers of relying too much on numbers alone:

"Algorithms aren’t sensitive enough to context. Algorithms can use only a handful of variables, which means a lot of weight is inevitably placed on those variables, and often the contextual information that really matters...isn’t considered.

They arouse suspicion and can easily backfire. If customers feel the marketer knows too much about them, algorithm-based personalization can seem creepy or backfire badly.

They encourage complacency. Having tools that capture exhaustive data about customers, quantify minute aspects of their behavior, and measure their responses can create a false sense that one knows customers really well and understands their motivations and triggers.

They stifle customers’ emotional responses to marketing offers. By shifting the customer into a more calculated and methodical mind-set, algorithm-based marketing minimizes opportunities for forming emotional bonds and limits the range of customer actions — to the marketer’s detriment."

Dholakia also offers some ideas for businesses to add a little humanity when reaching out to customers. It may make all the difference.

Read the entire article.

Utpal M. Dholakia is a professor of marketing at the Jones Graduate School of Business at Rice University. 

Based on research by Scott Sonenshein

• Research on fostering creativity looks at the role of organizational processes, as well as the interplay between managers and employees and their actions on resources.
• During lean times, encouraging employees to transform objects into resources cultivates needed creativity. During times of plenty, managers continue to nurture creativity by regulating the flow of objects to employees and by empowering a sense of ownership.
• Firms institute organizational processes that facilitate creativity by understanding how and why employees transform objects into resources and how managers enable these actions.

Is necessity truly the mother of invention, or does an abundance of resources lead to creativity? Scholars and practitioners have wrestled with this question for decades. And the results of study have been mixed.

Consider the histories of Apple and Google, two organizations thought to be among America's most creative and innovative. In 1997, when Apple was shrinking rapidly, its loss of talent and funds was thought to spell doom for the company, as it was assumed that Apple could not innovate in such a resource-scarce environment. Yet a few years later, it developed the revolutionary music, phone and mini-computing devices it has become known for. So, did a lack of resources contribute to its astounding creative output? Conversely, a few years ago, researchers and practitioners expressed fears that Google’s growing size might stifle creativity among its ranks, yet so far, the company’s creative output seems to continue unabated.

While researchers have been exploring the connection between abundant and scarce resources and creativity with conflicting results, Scott Sonenshein, a professor of management at Rice Business, shifts the conversation toward how actions shape and generate the resources that constitute and aid creative activities. His findings are important for leaders who want to continue to foster creativity within their companies as they grow over time.

Sonenshein initially set out to understand how organizational cultures transform due to dramatic change, and his research subject was a small, family-owned women’s boutique that was on the cusp of experiencing rapid growth. Because the company culture emphasized creativity, he was interested in how the culture might change over time. He watched the company grow from a single, family-owned operation to one that opened multiple new locations under investor ownership. He witnessed how creativity persisted from a time of limited resources to a resource rich one, and observed the processes that aided continued creativity.

At first the boutiques operated on a proverbial “shoestring.” Managers gave their employees autonomy, empowering them to “take ownership” of their stores and to respond to their environments creatively by manipulating and recombining objects in novel and useful ways to aid sales. For example, when one store manager noticed that a group of summer dresses with defective straps weren’t moving, he removed the straps and repositioned the dresses as swimsuit covers to successfully sell them. This kind of employee ownership and creative resourcing allowed employees to devise their own solutions to problems.

But what happened when the investor influx of money created a resource-rich environment, one that didn’t require the pluckiness of devising creative solutions out of necessity?

Most retail stores use planograms, which are like “maps” that tell managers and employees where to display particular items within a store. These plans (fixed objects) serve the valuable purpose of creating a consistent environment and experience from one store to the next. But in this case, the central leadership decided to withhold the store planograms and replace them with narratives (malleable objects), which allowed each store manager and team to devise their own creative ideas about how to tell that narrative within their store. Withholding the fixed object and replacing it with a malleable one that employees could act on fostered creativity and innovation, allowing each store to adapt and customize its environment and experience for its particular clientele, while keeping the cohesiveness of the brand experience among stores.

The takeaway? Creativity can be fostered in a variety of resource environments. It’s the specific actions of managers and employees that foster creativity.

Scott Sonenshein is a management professor at the Jones Graduate School of Business at Rice University.

To learn more, please see: Sonenshein, S. (2014). How organizations foster the creative use of resources. Academy of Management Journal, 57(3), 814-848.