By Sarah Viren

This article first appeared in Fall 2016 Rice Business magazine. Sarah Viren is a professor at Arizona State University and author of the book MINE.

When Chris Bolding took her family to Panama on a recent vacation, she made sure they stopped by the famous canal. But after that, she, her husband and their three teenage kids did their best to stay off the beaten path. They traveled through the mangroves with local guides, wandered into a bat cave where the water went up to their chests, visited a little-known coffee plantation, and spent a long weekend on a remote island without any cars that they could see or—as they soon learned—ATM machines. At one point, Bolding’s husband embarked on a four-hour boat ride to another island to get cash, but even that inconvenience was worth it, says Bolding, a Rice Business graduate (’98) with more than 18 years of experience working in the travel industry.

Though Bolding probably wouldn’t have classified her vacation as such at that time, her Panama trip is a good example of a relatively new tourist trend known as “slow travel.” Rather than flying in and out of a tourist hot spot for a rushed week of must-see sites, slow travelers try to live by that age-old adage about the journey trumping the destination or experience being more important than acquisition. They advocate taking the scenic train through the Alps, spending a month walking the Appalachian Trail, or renting a house in the French countryside for a week and getting to know the locals and local cuisine.

Or as Bolding, now director of business development at Sabre Travel Network, likes to tell her children, “The fact that you saw the Sistine Chapel or the Panama Canal might get one mention in a conversation, but those stories about the people you met or the food you ate or the experiences you had are the ones you’ll tell again and again.”

As a movement, slow travel has its origins in the slow food revolution, which began in the late-1980s in Italy in response to the first McDonald's opening up in Piazza di Spagna, Rome. Slow foodies believe in local farming, in preserving traditional food preparation customs and cuisines, and in eating communal meals. Their fervor has since ignited a whole host of similarly “slow” movements: slow cities, slow parenting, slow art and even slow sex.

The driving force behind much of this is a sense that, as we’ve become more time-efficient and technology-drive, we’ve also lost track of what makes us happy, healthy and—well—human. In Carl Honoré’s book, In Praise of Slowness: Challenging the Cult of Speed, the self-declared “globetrotting ambassador for the Slow Movement” describes his own awakening as the moment when he found himself almost buying a collection of one-minute bedtime stories to read to his children at night.

“These days, the whole world is time-sick,” Honoré writes in the book’s introduction. “We all belong to the same cult of speed.” His solution, of course, is to slow down. And it’s a message that’s found an audience. Honoré’s book has been translated in to dozens of languages since it was first published in 2004 and was later called the Das Kapital of the Slow Movement by the Financial Times. Though the book didn’t address slow travel when it came out, Honoré later claimed that this branch of the movement was “the most exciting and, certainly for us today I think, the most relevant front in the slow revolution.”

In many ways, though, slow was always the way we traveled—at least until recently. Some of our most famous travel writers and adventurers moved slowly out of necessity. Marco Polo’s trips to China by boat and camel-back later inspired other adventurers including Christopher Columbus. Meriwether Lewis and William Clark spent more than two years, by horse and by foot, exploring the territory west of the Mississippi. In one journal entry from that exploratory trip, Lewis almost sounds like a modern-day slow traveler espousing the joys of taking one’s time while moving through the landscape.

“The buffaloe (sic) Elk and Antelope are so gentle that we pass near them while feeding, without appearing to excite any alarm among them,” he wrote. “And when we attract their attention, they frequently approach us more nearly to discover what we are.”

Things only began to change for travelers as technology advanced: The train came along and then the automobile and finally the plane, and along with these new modes of transportation came the rapid construction of highways and hotel chains and fast food restaurants, all of which has made travel more accessible to more people, and also much quicker.

Ironically, technology is also what is now allowing tourists to return to their slow traveling roots, so to speak. Bolding remembers a family vacation to France when she was in high school and her mom lugging around a big book of bed and breakfasts listings—the only way then to find accommodations with a more local touch.

Now, as Constantine Hallax, another Rice Business graduate (’01) working in the tourist industry, explains, internet upstarts like Airbnb make staying with—or getting a ride or buying a meal from—a local much easier than it was in the past.

“Everyone is seeking uniqueness in travel,” he says. “And the technology that exists today can provide you with that.”

Hallax, who previously worked for Travelocity and is now vice president of business development for TripCase, a travel application developed by Sabre Travel Network, says traveler review sites are a good example of technology aiding slow travel trends. By allowing tourists to read and share opinions about trip itinerary, sites like TripAdvisor and Gogobot can give potential travelers the confidence to go off the beaten path or stay at a nontraditional lodging that they might have avoided—out of fear or lack of knowledge—in the past.

Apps, Hallax says, are also making it easier for travelers to plan more complicated trips without the assistance of a travel agency or local contact. There are apps now to help travelers quickly figure out the exchange rate, learn key phrases in a new language, trace one’s wanderings through an unknown town or city, or coordinate lodging, food and transportation plans.

Hallax’s company recently developed an app feature called SafePoint for TripCase that allows employers to monitor world events, and if anything happens—from a terrorist attack to a flood—to locate and contact employees traveling and working abroad or domestically.

“The world is becoming more dangerous,” Hallax notes. “But technology and these other tools will help mitigate some of these concerns.”

The ecotourism movement, and environmentalism in general, has also had a hand in popularizing slow travel. As Janet Dickinson, professor of tourism at Bournemouth University, explains in her book Slow Travel and Tourism, traditional modes of “mass travel”—via airplane, staying in chain hotels, etc.—tend to leave a larger carbon footprint than embarking on a pilgrimage, say, or staying two weeks in a remote village somewhere off the beaten path. This means that slow travel can often also equal more sustainable travel.

And on this front, the slow traveler has a whole host of resources at her fingertips. Organizations like the International Ecotourism Society help evaluate and publicize legitimately ecological trips and locales while private sector companies such as Expedia are beginning to offer “green” search options for those looking to find sustainable travel or lodgings options.

Money, however, can also be a driving factor for those opting to travel slowly. Though slow travel is not always cheaper, it can be, and those on a budget might find slower forms of tourism more appealing monetarily and philosophically. The great American road trip is said to be making a comeback in recent years for that very reason.

In a recent survey by AAA, road trips were the number one vacation choice for Americans, followed next by trips to national parks. Sarah Schimmer, a spokeswoman for the organization, said the slow pace of a road trip is appealing for nostalgic reasons but added that there is also a practical side to travelers’ decisions to drive instead of fly.

“What we are seeing is that more people are taking road trips and are being inspired to take road trips because gas prices are so low,” Schimmer notes.

Slow travel is still more popular in Europe than the United States in part because the movement began there, but also, as Dickinson explains, because the infrastructure and long holiday traditions in Europe are more accommodating to the slow traveler.

“It’s not uncommon for Europeans to take a one-month holiday which enables people to take time traveling,” Dickinson notes. “It is more difficult to invest in slow travel when your holiday is shorter—it limits how far you can go.”

Still, that doesn’t mean Americans are saddled to fast travel forever. Bolding sees the recent popularity of riverboat tours—especially as an alternative to the cruise ship vacation—as one example of a slow travel trend in the United States. And, she says, the fact that many Americans are now adapting to more overlap between their work and home lives means that lots of potential travelers, herself included, are finding ways to take longer vacations—with the idea that they’ll do a little bit of work here and there while traveling.

“I just took a 16-day trip, and I said, two mornings on the trip, I’ll answer some emails; I’ll do some work.”

The popularity of travel memoirs like Wild by Cheryl Strayed, which chronicles her 1,100-mile trek along the Pacific Crest Trail, and A Walk in the Woods by Bill Bryson, about traveling the Appalachian Trail, also indicate that the old-fashioned pilgrimage—a staple of slow travel—might be finding new life in the United States along America’s trails. According to the Appalachian Trail Conservancy, more than 4,000 people hiked the entire 2,180 miles of that trail in the 2010s, up from about 1,500 hikers in the 1980s. The USDA Forest Service reports that both day hiking and camping are much more popular now than they were in the 1980s, with about a third of all Americans saying they enjoy hiking and a quarter saying they’ve recently camped.

Advocates of slow travel, including the travel writer Nicky Gardener, author of the “Slow Travel Manifesto,” also point out that trips don’t have to be long or even require that much distance to count as “slow.” In her manifesto, published at the travel web site Hidden Europe, Gardener writes that one of the best ways to travel slowly is to start at home. She encourages would-be-slow travelers to walk or take a bus one day rather than driving or to check out a church or cafe they’ve noticed in their neighborhood but never had the time—or perhaps never made the time—to visit in the past.

“The key to slow travel is a state of mind,” she writes.

Based on research by Wagner Kamakura 

• “Middle class” is a vague phrase that needs precise definition.
• The middle class has advanced in income and wealth over three decades, but not nearly as much as the rich.
• While the consumption gap between the upper class and all others has widened, the poor are virtually left behind.

Is the middle class coming to an end? The eulogies come from virtually every political quarter. According to Senator Elizabeth Warren, a middle class American lifestyle is “increasingly out of reach for middle class families.” In the words of Senator Marco Rubio, American workers might “have what was a great job 10 years ago, but now...literally live one unexpected expense away from disaster.”

The reality, research shows, is a bit more nuanced. In a recent working paper, Wagner A. Kamakura, a professor of marketing at Rice Business, shows that there are indeed yawning and growing gaps between America’s socio-economic classes. But while these gaps are real, overall quality of life among the middle class has actually increased, when measured in terms of consumption. Only one group, in fact, has definitively gotten worse off: the poor.

Just who is in the middle class? There’s a remarkable lack of consensus about this, not just among scholars, but also among other Americans. In one survey, for instance, nearly a third of respondents earning more than $150,000 per year identified as middle class. So did 40 percent of respondents earning $20,000 or less. Standard U.S. government definitions, which define middle class in terms of current yearly income, are hardly more illuminating.

The confusion, in part, comes because American class hierarchy can’t really be understood only by income. In the course of one lifetime, an individual’s experiences and expectations can often include chapters of both wealth and adversity. This aggregate lifetime profile – what scholars call “permanent income” – is one way to define economic class.

But it’s not as if lifetime earnings show up on a tax return. So in order to study permanent income, Kamakura looked at a sample of 101,671 U.S. households from a spectrum of incomes between 1982 and 2010.

To estimate their permanent incomes, he included factors such as profession, education and tax payments along with financial and physical assets.

More objective than self-reporting, this method let Kamakura divide America into four economic strata: upper, two middle quartiles, and lower. He defined wealth as financial assets plus the value of an owned home.

The formula revealed stark divides in American fortunes. Over three decades, upper class wealth leaped an average of 3.5 percent per year in real terms. Middle class wealth rose 1.7 percent per year over the same period. But lower class wealth grew a mere 0.3 percent per year.

The annual growth in wealth among the upper quartile, in other words, was more than double that of the middle class. The lower quartile of Americans saw virtually no growth whatsoever.

Kamakura also uncovered generational, gender, and racial chasms. Households headed by men in their 30s to 50s did better than both younger households and households headed by men 61 and older. Households headed by men were more likely to be upper class than households led by women. White households were more likely to be middle class than those headed by African-Americans, which were more likely to be poor.

But to truly understand the middle class, Kamakura argues, you also have to know how people consume.

Even when their incomes go up, for example, many Americans struggle to make the mortgage or pay for health care – not to mention affording a nice vacation, a new car, or jewelry that seems commensurate with their standard of housing. Despite apparently healthy incomes, in other words, many theoretically middle class Americans are dogged with anxiety about their expenses.

To tackle this aspect of class, Kamakura turned to the Bureau of Labor Statistics.

Studying raw data from the bureau’s quarterly Consumer Expenditure Survey, Kamakura found that the United States lurched into a disturbing new state of inequality over three decades. Most strikingly, consumption of medical goods and services grew among the wealthy but declined everywhere else, after adjusting for price changes. The middle and lower class quartiles consumed fewer medical goods and services between 2005 and 2010 than they did between 1982 and 1985.

The gap persisted in recreation, education, family vacations, and charitable donations. Rich people consumed 37 percent more in 2005-10 than they did in 1982-85. Middle class people consumed 28 percent more. And poor people consumed only 20 percent more.

What accounts for the difference? Prices, for one thing. During the time Kamakura studied, inflation lowered the purchasing ability of both the middle class and the poor. Education costs mushroomed 500 percent. Hospital costs increased nearly 600 percent. Even protecting existing assets cost more: both motor vehicle insurance and health insurance ballooned 400 percent during the survey period.

Perhaps the most dramatic shift, though, took place between lower class Americans and everyone else. In contrast to the other groups, lower class Americans’ wealth stagnated. Disposable income for the wealthy quartile was 5.5 times that of the poorest quartile between 2006 and 2010.

That stagnation was reflected in spending. Between 2005 and 2010, the poorest Americans spent 32 percent less annually on medical goods and services than they had between 1982 and 1985. Overall, in fact, they consumed less in real terms than they had three decades earlier.

The figures are stunning, considering that per capita gross domestic product increased by 48 percent during these decades.

Most Americans say they expect to live middle class lives. Kamakura’s findings, however, show that since 1982 it has become harder and harder to stay in the middle lane. It’s cold comfort indeed that the economic class right behind hasn’t moved down the highway at all.

Wagner Kamakura was the Jesse H. Jones Professor of Marketing at the Jones Graduate School of Business at Rice University.

To learn more, please see: Kamakura, Wagner A. (2014). What Happened to the American “Middle” Class? Class and Consumption in America. Class and Consumption in America, Social Science Research Network.

By Lynn Gosnell

This article by Lynn Gosnell originally appeared in Rice Business, Fall 2016.

Scott Sonenshein’s academic curiosity has led him to study banks, booksellers, entrepreneurs, environmentalists, fashion, and most recently, the complex social identities coalescing around food truck ownership. The Henry Gardiner Symonds Professor of Management at Rice Business, Sonenshein applies qualitative and generative methods to his research questions, heading into the field to collect data via interviews, careful observation and participation (think: hanging out). It’s a hands-on approach that marries the tools of social science and ethnographic methods to understand how businesses work. The data often points to counter-intuitive, but important, research questions.

In the case of his recent foray into Houston’s food truck scene, Sonenshein was curious, at first, about the special relationship between owner-chefs and their customers. But the data soon revealed extraordinarily collaborative relationships. His findings from the multiyear project teach us some surprising ways that competitors help each other out.

During a recent conversation in his McNair Hall office, Sonenshein talked about the evolving nature of qualitative field research, the precariousness of food truck life, and how he recently lost the 15 pounds he gained in the name of research.

Curiosity and coincidence

Several years ago, I was reading [a Houston magazine], and there was a review of a couple of local food trucks. I was curious. You don’t think of the restaurant review column as a place where you would see food trucks reviewed. I searched around a little and learned that they’re big business. Wow, I thought, here’s a nascent field that’s trying to establish legitimacy, and you’re seeing some of the early signs of that through getting reviews.

A couple weeks later, I was reading the Wall Street Journal, and there was this story about the University of Washington kicking food trucks off its campus. Their food services company decided that they wanted to get in on the business. They came back with their own food trucks that looked independent, but they were really owned by a large food services company. Why would this multi-billion dollar conglomerate be worried about mom-and-pop businesses?

How qualitative research works

What you do with this type of method is you start off with a question that motivates your research, but you let the data lead you to what’s most interesting. It’s called “grounded theory.” … Almost every time, I have what I think is a really interesting research question that turns out either not to be the most interesting question I should be asking or turns out not to be at all related to what I’m finding in the data. In general, these are multi-year projects that are very iterative.

Finding the right questions

A lot of my early interest was on the relationship between the food truck owner and the customer. Was there some type of special relationship or almost intimacy that forms when the same person who is cooking your food is also handing it to you in the window? But on my very first visit to a food truck, I realized what a terrible question to be asking.

If you’ve ever been to a food truck, you see that those windows are high up, and they have plexiglass on them. The mode of interaction is you reaching your hand up toward the window, so especially for a guy like me who’s not very tall — that question didn’t pan out! But what did turn out was [hearing about] the relationship with other food truckers. One said, “We’re really friendly. We get along, we hang out. This is very social.” That’s where the research started to morph into studying these dynamics between competition and collaboration.

Food truck life

My [informants] would elaborate on all the remarkable things they do to help each other out, like tweeting to raise awareness of each other, fixing each other’s trucks, running errands, volunteering, sharing parking spots at food truck venues, etc. (Parking spots are a big issue, because the market has exploded recently.) One person put it this way: "It’s a constant cycle of just helping each other out.”

The power of a shared identity

We found that these food truck operators share a strong social or collective identity that belies traditional notions of competition and the many competitive pressures of, to put it succinctly, food truck life. That sense of identity leads to lots of cooperation, banding trucks together to survive and make the market stronger and more welcoming. In the case of my research, it comes down to the collective identity: By forming a collective identity, you view the success of the group as your own success.

What about the exceptions?

Some people truly embody and embrace the collective and that’s what motivates all these helpful behaviors. There are others that don’t want to be part of the group — this is more the exception. The group imposes sanctions against these trucks, and they generally struggle.

Raising reputations one meal at a time

There are over 1,000 mobile food units in the Houston area. I was particularly interested in the gourmet segment of food trucks, which is experiencing rapid growth. You’ll find people using artisanal ingredients, more chef-driven-type menus, lots of creativity in terms of the product, premium ingredients and so on. Because food trucks already had an identity — namely, cheap, inexpensive, noncreative food — they struggled for customers at first. So, another question is, “How do [gourmet food trucks] band together to create a different identity?”

Focusing on Korean Mexican fusion and dessert trucks

People who know me tell me I focused on dessert trucks because I love dessert. That’s true – I do love dessert. But the reality is dessert trucks (along with Korean Mexican fusion) were one of the more concentrated segments of the market where there were people selling very similar products. So the idea to test the ideas in the paper is to locate those areas where you might not expect a theory to hold up. That’s why we oversampled on those.

The hard road of food truck life

Everyone has a profit motive; this is not simply just I want to do this because it’s cool. Some are doing quite well, some were not at the time of the study, and some went out of business.

Informants use the term “food truck life” to refer to the major challenges in operating a gourmet food truck. It’s a very hard industry of course — equipment breaks down, the weather turns bad, the city puts in place restrictive regulations. These are very resilient people who work incredibly long hours. As glamorous as it might seem on TV, my sense is that most of us would not last very long doing it.

What’s important from a research perspective?

It’s another way of characterizing a market. We don’t tend to talk about markets as being shaped by a collective identity, so it gives us a potent window into thinking about how relationships and markets might unfold a little differently when a large chunk of firms within that market share a collective identity and redirect competition away from price and towards group status. It’s also refreshing to see them help each other out, not necessarily for personal gain, but because they embrace and embody the collective. To me that’s a pretty powerful idea.

This interview has been edited for space and clarity. It is based on research conducted by Scott Sonenshein.

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.