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February 2006
Letters to the Editor
May I offer a few comments on Professor Jeffrey Pfeffer’s
thought-provoking piece "Presumed Truths Need Debunking" in
Stanford Business,
November 2005.
His central point is that “erroneous assumptions” about how employees think and
feel inform the design of many pervasive business practices. He cites
compensation and measurement systems intended to motivate behavior to achieve an
organization’s business goals but that gain little traction with employees
reluctant to embrace them.
While the logic of working from mental models based soundly on how people really
tick is undeniable, one must be careful to draw the right inferences. In a
success story such as Southwest Airlines, while a formula that puts “employees
first, customers second, and shareholders third” might be espoused, these items
are not participants in a zero-sum game. Corporate success means getting a win
in all three. In the particular dynamics of the airline industry, putting
employees first is presumably one of the keys to achieving this, yet the result
is that customers and shareholders are effectively first as well.
A more useful construct implied by the article is to start from the philosophy
of a company’s leadership. Thus people joining an organization effectively sign
on for what leaders stand for, including personal motivation. When the employer
and employee are in sync, people are more likely to give every available ounce
of effort to doing their jobs. Provided they also have the appropriate skills
and supports (e.g., information), their productivity is likely to be high.
Against this background, what additional positive impact would an appropriately
structured incentive system bring? If further benefit can be obtained, how
should the system be designed? [Motivational theorist Frederick] Herzberg seemed
to be writing about this matter in the 1950s.
JOHN BEE, MBA ’71
Kooyong, Victoria, Australia
Editor’s Note: The following letter arrived too late for the print
publication but we are including it in the online version.
I have been working at United Airlines’ headquarters for over two decades,
ever since I received my MBA from Stanford in 1984. I was surprised to read the
incorrect statements by Professor Jeffrey Pfeffer in “Presumed Truths Need
Debunking” from the November edition of Stanford Business magazine: “United has
experienced turnover, disaffected employees looking to sabotage the
organization, and problems with customers. People are abandoning the airline in
droves and the company is in a death spiral.”
Turnover has not been particularly high, and when United opened a website last
month to fill 2,000 flight attendant positions to support international
expansion, the site was shut down a few hours later after being flooded with
17,000 applications. Employees are not looking to sabotage anything. Professor
Pfeffer may be thinking of the union disturbances several years ago that led to
industry-leading contracts that bankrupted the airline. Those are a thing of the
past, with all employees understanding that it is in their best interest to
support the organization that provides such good careers. According to the U.S.
Department of Transportation’s Air Travel Consumer Report for October 2005,
United placed first among the seven major carriers in on-time arrival
performance and fewest mishandled bags. People are not abandoning the airline;
rather, the load factor, or percentage of seats filled, has set a record for
that month in each month of this year. The company is not in a death spiral;
instead, it is about to emerge from bankruptcy with an all-debt exit financing
package of $3 billion, secured by JPMorgan Chase, Citigroup, and GE Capital,
which have determined that United represents a good business opportunity.
United Airlines has done an amazing job of reducing its costs while running a
huge, safe airline with a top-notch route network and a leading position in a
powerful global aviation alliance. Professor Pfeffer’s business theory would be
well served to include United Airlines, but as a model of how to transform a
large company.
MICHAEL FINK, MBA ’84
Rolling Meadows, Ill.
The [November issue ] articles on
microfinancing,
“Ray of Enlightenment,” and
Cummins in Mexico were inspiring and gave us numerous ideas to bring to our work
in Belize. The articles illuminated the meanings of inner and outer aspects of
globalization, a really holistic approach that development is powered by the
individual.
SUSAN MORRICE CRANBERG
wife of Alex Cranberg, MBA ‘81
Greenwood Village, CO
Congratulations on Anne Field's insightful article on Microfinanciers. I am a
member of the Investment Committee of Global Partnerships in Seattle, which has
developed effective financial metrics to use in lending to microfinancing
institutions (MFIs). We launched Global Partnerships Micro Finance Fund 2005,
LLC, which closed in September. The creation of a secondary market in developed
countries through securitization of third world microloans is revolutionizing
the flow of the most critical ingredient to pulling people out of poverty:
capital.
The element that makes this work is the impressive credit worthiness of the
individual borrower. The default rate of microloans has been amazingly low. It
is the local loan repayments to the MFI that it uses to make payments to the
investment fund that, in turn, makes interest payments to the investors. Most
investors have a dual motive: financial return and assistance to the world's
poor. Hence, the mission statement of Global Partnerships, "In business to
eliminate poverty."
BOB RICHARDS, MBA '64
North Bend, WA
As a former advisor to central European delegations to the UN Beijing
conference on Women and to the UN Development Programme on microlending in
central Asia, I realized from your story on microfinance that the conversations
women have had with the World Bank, the European Bank for Reconstruction, and
with microfinance institutions haven't registered. The only value that the
lenders seem to measure or find credible is the rate of return on the loans.
Your article mentions that other measures are being developed, but I have yet to
read that anyone is thinking about the needs of women receiving the loans. Most
of these wee loans go to women for activities that require the involvement of
their whole families because being able to pay the high interest on the loans
from the earnings of a small kiosk, a phone service, or basket making involves
nearly a 16-hour day.
The discussions that women had with lenders when I was involved from 1992 to
2000 included requests for some modicum of business training, such as how to
judge which market needed what product that a woman could grow. Women also
wanted to become valued as good credit risks so they could borrow money
individually from local institutions. I won't go into how belittled many women
felt by having to become a member of a group to get a loan rather than being
respected as an individual.
I have not been involved for a couple of years, but when I was, the only
research I saw on microlending revealed that women were not getting out of
poverty by utilizing these loans. Your article mentioned that some women were
returning for a second or third loan, which is indicative that the loans are
temporary measures rather than jump-starts. I am pleased that an MFI can make
some money, but shouldn't the women benefit as well? If lenders want to help
women out of poverty and into the mainstream, they would benefit from reading
Marilyn Waring’s book, If Women Counted, Harpers, 1990. Waring, who holds a
doctorate in economics, was a visiting fellow at Harvard's Kennedy School of
Government and a member of the New Zealand Parliament.
I like the approach that Deutsche Bank is taking by making loans to local
lending institutions who know the community and could be trained to give the
loans to individuals rather than groups, but I think I would put my money on the
alternative approaches to reducing global poverty listed in the article: Village
Enterprise Fund, Acumen Fund, and Kickstart. These programs offer dignity and
hope, which will make the training more effective and the workers more
productive.
SALLY WILLIAMS
wife of George Williams, MBA ‘51
Berkeley, CA
The “Alternative Approaches to Reducing Global Poverty” sidebar that
accompanied Anne Field’s article on microfinance highlights organizations that
build up businesses in developing countries. Your readers might also be
interested to know about the nonprofit organization I’m now fortunate enough to
lead. TechnoServe pioneered the use of a market-based approach to reducing
poverty in the 1960s. Founder Ed Bullard firmly believed that business could
become part of the solution to global poverty and that people are better served
with a hand up rather than a handout.
Nearly four decades later, TechnoServe continues to help entrepreneurial men and
women build small and medium businesses that generate jobs, income, and economic
growth in some of the world’s poorest communities. To date it has created or
improved more than 1,200 businesses, benefiting more than 3 million people in 22
countries. One case in point: In Mozambique, the business consulting that
TechnoServe provided to one entrepreneur helped revive a cashew industry whose
processing facilities now employ 3,000 people and provide an income for more
than 50,000 cashew farmers. Their children can now afford to go to school,
increasing their chances for even better lives.
Business leaders can play an important and necessary role in programs that
improve society. I look forward to reading more articles in your magazine that
inspire GSB alums to action.
BRUCE McNAMER, JD/MBA ‘96
Washington, DC |
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