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Faculty News

Kenyan Study Trip Sparks Case Study

James MwangiAmong the many CEOs who have been invited to speak at the Business School, one thing made James Mwangi (pictured) different: The students, or at least most first-year MBAs, were likely to have been familiar with his story because it was part of a case study developed for the new introductory course in the global context of management.

Mwangi’s relationship with the School began last March, when Professor Garth Saloner led a student trip to Nairobi to study small, nongovernmental organizations and microfinance institutions. With the help of W. Kimathi Marangu, MBA ’93, and Jessica Flannery and Tanya Melillo, both MBA ’07, Saloner’s team arranged a meeting with Mwangi, the head of Equity Bank of Kenya.

Equity Bank was founded in 1984 as a provider of mortgage financing to low-income Kenyans. When he became CEO in 2004, Mwangi shifted the bank’s focus to microloans. Equity Bank now serves more than 1 million customers, more than 31 percent of all Kenyan bank accounts.

“I immediately recognized that this was an interesting case in microfinance and also strategy,” Saloner said. Mwangi agreed to have his company’s experience incorporated into a case study, and the School sent casewriter Bethany Coates, MBA ’04, to Nairobi to do the research.

“If you are going to be a bank to the poor, you have to be a trusted partner of the very poor who have little experience with financial institutions,” Saloner said. “The key was their ability to put together a culture that embraced the mission of the company to serve the very poor and do so in a way that is cost effective but appealing to the clientele.”

Mwangi’s visit to classes in October gave MBA students a unique opportunity. “It’s pretty extraordinary to have the CEO of a Kenyan company fly in to talk about a case that all 362 first-year students have just discussed,” Saloner said. “If you talk about globalizing the curriculum, this is the kind of thing that fits into that.”

OB Pioneer Leavitt Dies

Harold J. Leavitt, a management professor who believed organizational success should be judged in human—not numerical—terms, died of pulmonary fibrosis at age 85, in December at Huntington Memorial Hospital in Pasadena, Calif.

LeavittHis 1958 textbook—Managerial Psychology—pioneered the field of organizational behavior in business school curricula. Now in its fifth edition, it has been translated into 18 languages.

As a graduate student at Massachusetts Institute of Technology in the 1940s, Leavitt began writing about the role of behavior in organizational success. It was an era when researchers studied rats to understand human behavior, and organizational success was determined by analyzing numbers. He turned to human subjects and began a lifelong career arguing that organizational success should be measured in human terms.

Throughout his lengthy academic career, he recognized the inevitability of hierarchies, arguing they helped create successful workplaces and accomplished employees. In his last book, Top Down, published in 2005, he argued that modern organizations had not become “flatter,” as pundits claimed, but rather were just new types of hierarchies. (See an excerpt from the book in the August 2005 issue of Stanford Business.) He offered middle managers suggestions about how best to negotiate their way through authoritarian mazes, while maintaining their personal integrity and even finding satisfaction in their work.

An earlier book, Hot Groups, coauthored in 1999 with his wife of 20 years, Jean Lipman-Blumen, argued that effective groups helped individuals achieve personal success and contributed to effective organizations. “A hot group is just what the name implies: a lively, overachieving, dedicated group—usually small—whose members are turned on to an exciting and challenging task,” they wrote.

Leavitt joined the Stanford faculty in 1966, a time when the Business School was expanding to acquire its current international status. He possessed “the rare quality of being interested in your research and your problems—not just his,” said Robert Jaedicke, Business School dean emeritus. “His open door policy welcomed a constant stream of friends—faculty, students, and almost anyone who knew him.”

James Van Horne, the A.P. Giannini Professor of Banking and Finance, Emeritus, who arrived at the Business School just before Leavitt, recalled Leavitt propelling fellow organizational behavior faculty members forward at the Business School during the 1970s, attracting stronger doctoral students, and creating more innovative courses for MBA students.

Business School Dean Robert L. Joss said Leavitt was a “great teacher and a prolific writer whose ideas shaped our thinking about managers and organizations.”

Born in Lynn, Mass., on Jan. 14, 1922, Leavitt was the Walter Kenneth Kilpatrick Professor of Organizational Behavior and Psychology, Emeritus, at his death.

Conference Honors Singleton

SingletonKenneth Singleton, the Adams Distinguished Professor of Manage-ment, was honored last September along with a coauthor on the 25th anniversary of the publication of a research paper that proved to be the centerpiece of modern dynamic analysis in business and economics. The paper, “Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models,” published in the September 1982 edition of the prestigious journal Econometrica, has been cited 1,331 times, according to Google Scholar. It established the first general methodology to estimate and test nonlinear dynamic models.

The Tepper School of Business at Carnegie Mellon University honored Singleton and Lars Hansen, a professor at the University of Chicago, by hosting an academic conference in their field. Both economists were at Tepper when their seminal paper was published.

“The path-breaking contributions of Hansen and Singleton provided the foundation for significant advances by themselves and many others in empirical economic and financial research, and in the science of asset pricing,” said Kenneth B. Dunn, dean of the Tepper School of Business.

Kreps Recognized for Innovation

KrepsDavid Kreps, senior associate dean for academic affairs and the Theodore J. Kreps (no relation) Professor of Economics, was the 2007 recipient of the second annual Prize in Innovative Quantitative Applications given by CME Group and the Mathematical Sciences Research Institute.

The organizations recognize individuals or groups who contribute original concepts and innovation in the use of mathematical, statistical, or computational methods for the study of the behavior of markets, and more broadly of economics. At a September ceremony at the Chicago Mercantile Exchange, Kreps was honored for his innovative work in dynamic choice and equilibrium. In conjunction with the award ceremony, a seminar titled “What’s the Deal with Private Equity?” was held.

Kreps’ research in microeconomics has probed deeply into dynamic choice, in both single-person and multi-person settings. In 1979, he was part of a team that placed the concept of risk-neutral asset pricing in the framework of “martingale measures,” an approach that is now standard for the pricing and risk management of financial products. He has had influential insights across a host of different topics, including dynamic choice where parties exhibit a preference for flexibility or concern over the timing of resolution of uncertainty; processes of learning both in markets and in games; and models of reputation in repeated games, with applications to corporate culture and human resource management.