Tag: Faculty



Ashley Hardin, assistant professor of organizational behavior, wrote this for the Olin Blog. Her research interests include relationships at work and work-life boundaries.

Ashley Hardin

As areas of the country begin to relax and do away with stay-at-home orders, things will not snap back to normal for all employees and organizations. This may seem obvious, but it has huge ramifications for what employers can and should expect from employees during this time.

Some employees may continue to have childcare responsibilities. Some may have high-risk family members in their homes, or they themselves may have underlying health issues that put them in a high-risk category. It may be implausible for certain employees to return to work with the same routines as before the pandemic. Their working style and needs before the pandemic may no longer stand.

The best results are likely to come from treating each employee with care and compassion, rather than trying to enforce one uniform policy for all. For large organizations, one answer could be for leaders to empower lower-level managers to customize their own teams’ working habits.

Care and compassion pay dividends

We wrestle with productivity at this time. An overarching message could be that care and compassion must supersede productivity. Taking care of one’s self and loved ones may inhibit work progress. And that’s OK. Research shows that extending compassion to one’s employees has incredible benefits for individuals, relationships and organizations. Productivity may decrease in the short term, but making the time and space to take care of employees will have real long-term rewards for all. 

My main advice is to be flexible and offer different support to different team members, while trying not to make assumptions. It’s difficult to know what demands individuals are facing. They could have health issues, a partner who is a frontline responder, children in need of care, extended family members who are isolated.

Many workers are balancing many roles simultaneously for the first time. Given this blurring of personal and professional roles, managers should seek to grant more flexibility and open the door to sharing of circumstances. But they also should not demand to know all the details; that can seem invasive. When managers express care and concern and a desire to understand, their direct reports may choose to open up. With that information, managers can seek to be more accommodating. In these times, flexibility and adaptability will be critical in enabling team success.

These times are challenging. People are enacting their professional selves while working in their own personal spaces. The situation opens a window into individuals’ lives that they may or may not find comfortable. Research shows that learning about one another’s personal lives can help to humanize colleagues and foster more responsiveness to their needs. So these breaches of boundaries actually may strengthen teams in the new work reality. Reacting positively to learning new information or sharing information about oneself can help put someone at ease when the boundaries do blur.

An opportunity to adopt new routines

Routines that typically enable productivity no longer exist to rely upon. Newly remote workers or those continuing to be can take lessons from prior research investigating gig workers who are accustomed to working alone and setting their own agenda. Scholars Petriglieri, Ashford and Wrzesniewski found that cultivating connections to routines, places, people and a broader purpose are the most critical. Managers can assist their employees in doing this. 

In addition to the complexities of meeting the differing needs of employees, employers and individuals can use this shift as a time to mindfully adopt new routines. Fantastic innovations in work practices may have taken root during the period of staying at home. Through a practice known as appreciative inquiry — asking about what is going well — organizations can uncover new practices that they can rollout more broadly.

Perhaps some teams found new ways to build connections or new uses for work platforms that ease collaboration. Take advantage of this shift to shed old routines that were not working.

Similarly, organizations can inquire about what employees miss most about work patterns pre-pandemic. What practices should be retained and returned to? The invitation to open up and revamp the ways of working may lead to better organizational functioning in this new phase. 




John Horn, professor of practice in economics, wrote this article with contributions from Taylor Begley, assistant professor of finance.

In a well-functioning economy, the bankruptcy process should be able to sort out why a particular company failed. Was the company structurally unable to compete? Did executives make poor choices (like taking on too much debt)? Or were circumstances simply unlucky?

John Horn

But when large swaths of the economy default concurrently, banks shouldn’t hold individual businesses responsible for the disruption. Though the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent bills provide some small business relief, they largely leave the existing bankruptcy process in place.

Unfortunately, that process will take years to sort through the chaos. Unless we take additional action, when the crisis ends small businesses that were perfectly viable will face challenges in accessing the cash they need to start up again.

Cataclysmic events

In contract law, “force majeure” clauses are intended to protect both parties from cataclysmic events beyond their control. But force majeure—in short, an extraordinary, unforeseen event—won’t absolve most current borrowers from default. Few small business loans have such clauses, and, even if they do, courts will have to decide whether the pandemic counts as such an event. This, in turn, will require a lot of one-off decisions from lenders, further clogging the system.

Here’s the bottom line: We are not ready for the economy to come out from under a large number of defaults once the coronavirus is contained sufficiently. We can’t rely on existing contractual clauses to remedy the situation. In an ideal setting, a bank will take into account the business’ situation before the COVID-19 crisis and evaluate it on the pre-crisis fundamentals.

This will work best when the lenders have a more intimate knowledge of the borrower and their history. That’s more likely to occur when the bank is a local entity. However, the banking industry has been closing branches over the past 10 years, and closures appear likely to continue amid this downturn.

The correct action requires coordination: All lenders need to act in a similar fashion at the same time so no one bank feels like it’s the only one taking a risk by doing something different.

Banks’ unwillingness to take risks on their own shouldn’t be surprising; we’ve seen this in the recent past. Since the Great Recession, banks have been holding excess reserves (cash in their vaults that they are allowed to lend out, but don’t) between $685 billion and $2.7 trillion since mid-2009. As comparison, the number averaged $1 billion between 1985 and 2008. Also during the Great Recession, banks tightened standards for small-businesses loans and have not relaxed them significantly since that crisis officially ended.

What can be done?

If we can’t rely on banks to self-start the lending cycle, what can be done? There are a couple of ways the federal government can improve liquidity for small businesses by putting all banks on the same footing with regard to the underlying insolvency risk.

  1. The simplest correction would to be for the government to underwrite the continued financing of small businesses until the crisis has passed. Ensure these businesses have access to funding they need to pay off all of their bills and remain viable. The CARES Act (and second round of Paycheck Protection Program funding) was a good first step, but Congress will need to continue funding small businesses until the crisis ends.
  2. If it doesn’t, then Congress should enact legislation that would count any bankruptcy/default from March 2020 until the end of the crisis as a nondefault event. Sure, some risky borrowers would have defaulted anyway without the coronavirus shutdown, but many of the other conditions (like cash flow, tenure of business) will still be used to underwrite future loans, as will bankruptcies/defaults before March 2020.
  3. Create new investment protection vehicles for banks/lenders to incentivize certain types of loans (modeled on the FDIC insurance—i.e., only for loans up to a certain amount, only for certain types of loans—and the mortgage loan backup created after the Great Recession). This would be similar to the current CARES SBA loans and allow for smaller minimums than the Fed’s Main Street Lending Program (currently $500,000).

Small businesses are hurting. If the current economic crisis doesn’t end in the next few weeks, they face an existential crisis that will be hard to endure—and find it hard to rebuild once the economy starts to rebound.




Seth Carnahan

Poets & Quants has recognized Olin’s Seth Carnahan as a Best 40 Under 40 professor.

Carnahan, associate professor of strategy, is highlighted an April 29 article that notes Carnahan, 34, is an award-winning researcher and teacher. He “has spent his early career building a strong and robust research pipeline with more than 600 Goggle Scholar citations and multiple grants and awards to boot.”

Carnahan provided “a great experience for one of my first MBA courses at WashU” with lectures that were relevant, current and generated engaging class discussion, one nominator said. “I feel as though my point of view changed greatly with regard to business strategy after having taken his class.”

A professor inspired him

Carnahan told Poets & Quants that he has no other academics in his family and was inspired by his strategy professor during his undergraduate. She mentioned her research during class, and “I dug up some of her papers an read them,” he said. When he learned her job was to write papers and teach, Carnahan said he thought, “I want to do that, too.”

Carnahan’s current research is examining the “human side of firm strategy.” He explores how organizations can out-compete their competition for talent and how firms can increase the performance of employees they already have by “managing their people more effectively.”

When P&Q asked what Carnahan thinks makes him a standout professor, he replied: “Based on the feedback they give me, I think students appreciate the open, inclusive culture that I try to create in my class. I think they see my class as a safe place where they can experiment with ideas, take risks, make mistakes, and learn from each other.”

Read the full article here.




Hong Kong protest 2019

Critics claim the 2019 protests in Hong Kong undermine it as a leading global financial center.

Olin’s David R. Meyer, however, finds that Hong Kong’s status is secure for three reasons:

  • China’s government will continue to support it;
  • Hong Kong’s financial networks possess extraordinary scale and sophistication;
  • and no viable alternative center has emerged to challenge Hong Kong as the Asia-Pacific leader.
David R. Meyer

Meyer, a senior lecturer in management and expert on East Asian and international business, puts forth his arguments in “The Hong Kong protests will not undermine it as a leading global financial centre,” published online in April in Area Development and Policy.

“The Hong Kong protests will not undermine it as a leading global financial center,” he said, citing his research that draws on the “geography of finance” research on global financial centers.

Protests begin

The protests started in mid-March 2019 after the government sought to allow extradition of suspects between Hong Kong, Mainland China, Taiwan and Macau in criminal cases. Then, on June 9, came the march of “more than a million Hongkongers,” according to organizers.

As Meyer notes in the paper, protesters issued five demands: withdraw the extradition bill; make an independent inquiry into police enforcement; retract the “riot” classification of violent protests; drop charges against demonstrators; and reform elections.

Protests and riots continued into the fall. By November, demonstrations reached the airport and temporarily closed it, protesters took over university campuses and disrupted the rapid transit system. Later that month, voters swept anti-government candidates into office in district elections. Then, as violent protests declined, peaceful protests continued this year.

Network hub of global capital’

Now critics claim the protests threaten Hong Kong as a leading global financial center. They suggest Hong Kong’s importance to China will fade because activities such as initial public offerings, bond sales and currency trading will be done elsewhere, Meyer says in his paper.

Hong Kong
Hong Kong

They speculate that other cities—among them Singapore, Beijing, Shanghai and Shenzhen—will compete with Hong Kong and that financiers will move their business to other cities.

“These are serious claims,” Meyer said.

Yet the claim that the protests threaten Hong Kong as a leading center “fails to recognize that the city’s significance rests on its status as a network hub of global capital,” Meyer said.

“Based on this perspective,” Meyer writes in the paper, “I argue that the protests do not threaten Hong Kong as a global financial center because its networks of capital are resilient.”

No other financial center in the Asia-Pacific region has the ability to replace it, he says.

Almost two centuries of stability

Research on global financial centers shows a high degree of stability at the upper-ranked centers dating back for almost two centuries, Meyer notes in the paper.

London had replaced Amsterdam as the leading center by the 19th century, and New York joined the top centers in the early 20th century. Hong Kong became the leading financial center in Asia by the late 19th century, according to the paper.

This relative stability of the upper-level financial centers persists, Meyer says. Even the 2008 global financial crisis couldn’t significantly disrupt the ranks of the top financial centers.

(Meyer says the COVID-19 crisis “will have no consequence other than near-term disruption of activity as is occurring in all major financial centers.”)

And even though China’s leaders are unhappy with the Hong Kong government and outraged over the violent protests, no evidence suggests that they will undermine the city’s financial community, according to the paper.

“Hong Kong’s financial community occupies the highest level of specializations in finance and contains multi-faceted, complex and internally connected networks,” Meyer writes.

“Components of these networks reach across Asia and globally, which means Hong Kong is the pivot of financial expertise and knowledge in the region.”




In business, simple loyalty programs can strongly increase customer retention, Olin researchers have found. And when the US economy edges closer to normal following the global pandemic, such programs may be a method to help businesses get back on their feet.

The researchers studied a loyalty program at a chain of men’s hair salons, collecting data on more than 5,500 customers. Under the program, for every $100 a customer spends, he gets a $5-off coupon.

“This loyalty program did increase loyalty,” said Raphael Thomadsen, Olin professor of marketing. “In fact, the size of the effect is incredibly large given the simplicity of the program.”

Thomadsen

The program increased the lifetime value of the hair salons’ customers by 29%, with more than 80% of that lift coming from increased customer retention, the researchers found.

The increased lift happened despite the fact that coupon redemption was low, suggesting that psychological factors rather than rational economic factors are driving the results.

Emotionally connected

“For example, the presence of the rewards program can make the customer feel emotionally connected to a particular firm, which leads to the customer visiting the firm more often,” the authors write in “Can Non-tiered Customer Loyalty Programs Be Profitable? The paper is under minor revision at Marketing Science.

Nevskaya

Coauthors of the paper include Olin’s Yulia Nevskaya, assistant professor of marketing, Arun Gopalakrishnan, of Rice University, and Zhenling Jiang, of Georgia State University. Both Gopalakrishnan and Jiang have Olin ties. Gopalakrishnan was an Olin assistant professor of marketing from 2015 to 2019. And, last year, Jiang received her PhD in marketing from Olin.

The researchers did not study the response to loyalty programs during the current economic crisis. But Thomadsen and Nevskaya agreed such programs could help businesses recover.

“It is often easier for companies to get in touch with their loyalty program members than with other clients,” Nevskya said. “That is another benefit of having a loyalty program. The right tone and message and being sensitive to likely shifting needs of consumers during and after the COVID-19 epidemic should definitely help.”

‘Even a simple program is likely to work well’

Loyalty programs are popular at many businesses. Some programs, such as those for airlines and hotel chains, are complex and include multiple tiers, and they’ve proven to be quite successful. But a vast number of loyalty programs are set up in much simpler ways, with no tiers.

Over time, managers and academics have questioned the efficacy of simple loyalty programs, finding they have little or no benefit, according to the paper. But previous studies contained a significant flaw, the authors say. Those measured the programs’ effectiveness by increased sales per customer visit or by increased visits. The flaw? They didn’t measure the programs’ impact on keeping customers.

The managerial implications of the findings are clear, Thomadsen said. Many businesses are not going to implement complex loyalty programs, either because of the scale of their businesses—think yogurt shops, pizza parlors, coffee houses—or because they philosophically oppose setting up a tiered system.

“Our research suggests that even a simple program is likely to work well,” he said. “Even if another business only gets half of the lift we get, a simple loyalty program will still add considerable value.”




Because of the worldwide havoc of the coronavirus, supply chains have become a crucial new focus of the global economy. Sergio Chayet, director of the Operations and Supply Chain Management MBA platform at Olin, foresees changes ahead in several areas including making workers safer and strategies to guard against future massive stresses on supply chains.

“There is a new appreciation for retail store employees, factory workers and workers in logistics and transportation, energy, health care, education, and other industries responsible for sustaining life during shutdowns,” he told Bloomberg recently. (See “How supply chains jumped from business school and into our lives.”)

“Just like September 11 brought permanent changes to airport and port security, it is likely this latest crisis will bring permanent changes to operations and supply chain risk management as it pertains to mitigating worker health risks and establishing contingency plans to protect them.”

Would it be better for companies to produce from geographically diverse places or from one particular region?

“Having a geographically diverse footprint and carrying excess capacity is always valuable as a real option, since it allows firms to react to a wide variety of risks (social, political, macroeconomic, etc.) by shifting production to the most convenient location on short notice  with changes to the global economy.

“But such excess capacity is costly and must be justified by being exceeded with the real option’s value. A complementary strategy, when feasible, is having flexible contracts with supply chain partners. However, when several correlated risks happen in quick succession, partners will be unable to honor those flexible terms.”

What lessons are we now learning about supply chains?

“Over the last couple decades, driven by price and time competition, supply chains have evolved toward becoming leaner and more responsive, resulting in lower production and transportation costs. Reduced trade friction and international arbitrage opportunities in the form of wages, total cost, exchange rate, access to talent and raw materials, and other differences, has led to ever more global supply chains. Containerization, larger vessels and ports, and warehousing innovations have all contributed to lowering logistics and transportation costs.

“As a result, consumers have had access to unprecedented levels of product variety at low prices.

“But lean supply chains are more susceptible to disruption risk, and have to rely on excess capacity or being nimble in integrating new partners into them.

“When the crisis started, all eyes were on China, and organizations were evaluating contingency plans to mitigate risks affecting that portion of their supply chains. In the midst of companies evaluating those contingency and reactive measures, the crisis started to become more severe in Europe and subsequently in America, rendering many of those options obsolete.”

What’s an example of a situation that may not have been considered in the past?

“The demand shocks many retailers have experienced for commodity products. Some understandable, such as face masks, hand sanitizers and general purpose cleaners, and some less understandable, such as toilet paper.

“The familiar bullwhip effect in supply chains—driven by information and product lags, independent decisions by channel partners, and low levels of demand variability—has been overshadowed by unpredictable shocks to end-consumer demand.

“Take toilet paper: Because it’s a commodity, manufacturers have little influence on market prices. To be competitive they must control costs and usually rely on high levels of automation, low levels of labor and high-capacity utilization, with plants running 365/24/7. They can maintain high utilization only because of predicable demand, with low uncertainty and no seasonality.

“Such an unpredictable spike in demand—likely driven by a vicious cycle of panic purchases and perhaps some speculators planning to make quick profits in secondary markets—quickly depleted most of the channel’s inventory. With no excess capacity, we can expect a lag until those products are back on the shelves, which will probably be followed by more panic purchases and secondary spikes. Eventually, with so much forward buying, those supply chains will experience excess inventory.

“Interestingly, once consumers started their lockdowns, their demand for these commodities increased to supplement what they had previously used from supply chains serving the commercial market. For example, in addition to their use at home, consumers used toilet paper at offices, schools, restaurants, malls, etc. This has further strained consumer supply chains and will further delay the time it takes for manufacturers, distributors, wholesalers and retailers to replenish inventory to the new necessary levels.

“Because in several industries supply chains that serve the consumer and commercial markets are different (For instance, commercial toilet paper roles don’t fit residential toilet roll holders.), lockdowns have also created both shortages in consumer supply chains and surpluses in commercial ones. But simply shifting one to the other isn’t feasible, at least in the short term.”

Will the coronavirus change the study of supply chains?

“In supply chain risk management, planners start by identifying and assessing possible risks, which are classified according to their probability and anticipated impact. These are called foreseeable risks, and are managed proactively. Relatively likely risks should be mitigated by measures designed to lower their probability or impact before they happen. Because of limited resources, less likely risks are best managed by contingency measures, which are planned ahead but only triggered after the risk happens. Remaining risks are called residual or ‘unknown unknowns’ and can only be managed reactively. The only proactive measures for those are setting aside time, resources and flexibility to be used once the risks are known. 

“When major unknown unknown risks were modeled in the past, they were usually assumed to happen one at a time and independent of each other. COVID-19 turned out to be an unprecedented set of unknown unknowns all happening in rapid succession, including: A highly contagious pandemic, which quickly traveled across continents, sharp economic downturn globally, a large portion of the population under lockdown, etc.

“In the future a global pandemic of this magnitude will not only be a foreseeable event, but also will likely change how we model unknown unknowns. And depending on how likely similar pandemics are expected to be in the future, a whole slew of mitigation and contingency measures are likely to be considered.”

How long can supply chains withstand shock?

“When either demand or supply are affected, predicting how long supply chains can withstand a shock depends on the severity of the shock, the length of the disruption, and specific factors to each industry.

“What’s interesting about the current situation is that both supply and demand are being affected simultaneously. An important new factor determining the resiliency of each supply chain will be the relative changes in their supply and demand.

“A slowdown in economic activity may end up making it easier to restart some producers, in particularly those who will be able to operate with low overhead and be able to scale as demand picks up.”