The Fed’s Failure

December 21, 2009 by  
Filed under Uncategorized

In what is now widely and infamously known for the near collapse of the financial sector in the United States, the Federal Reserve ignored warning signs associated with massive sub-prime lending for nearly two years. In the wake of this disaster, the Fed had to make decisions about what banks to save with an infusion of cash, what banks to save by negotiating sales to other banks, and what banks would fail. Despite these failures, Fed management contends the agency is the best choice for continued oversight of the nation’s banking system (with a little tweaking). Some lawmakers are not so sure.

QUESTIONS:

  1. There can be no question that the Federal Reserve’s actions (or lack thereof) are consistent with behavioral decision making. What cognitive limitations kept the Fed from making good decisions? Consider the Fed’s response to the crisis. Is there any evidence of satisficing?
  2. Which of the three heuristics most likely influenced Fed decision making? Why?
  3. Escalation of commitment is evident at several points in this story. Pick one and identify the factors that led to escalating commitment. What would you do to ensure no further escalation occurs?

SOURCE: B. Appelbaum & D. Cho, “Fed’s Approach to Regulation Left Banks Exposed to Crisis,” Washington Post (Retrievable online at http://www.washingtonpost.com/wp-dyn/content/article/2009/12/20/AR2009122002580.html?hpid=topnews)

Build A Better Hamburger

December 14, 2009 by  
Filed under Uncategorized

Payam Tabibian has been on the run all his life. After fleeing Iran with his family more than 25 years ago, the entrepreneur has been moving from one small business to the next throughout his business career. Tabibian worked in fast-food chains throughout school and is now developing his own hamburger chain using knowledge gained from a variety of restaurant experiences.

QUESTIONS:

  1. In what ways does Payam Tabibian fit the profile of an entrepreneur? What personality traits and characteristics does he possess that are consistent with those of successful entrepreneurs?
  2. Do Tabibian’s ventures represent necessity-based entrepreneurship? Why or why not?
  3. The article describes Tabibian’s frequent entry into and exit from successful small businesses. Looking at the life cycles of entrepreneurial firms, what explanation(s) could you offer for this pattern of behavior?

SOURCE: T. Heath, “Burgers to Go, With Ambition on the Side,” Washington Post (Retrievable online at http://www.washingtonpost.com/wp-dyn/content/article/2009/12/06/AR2009120602107.html)

Deep Six Executive Bonuses

December 14, 2009 by  
Filed under Management

Noted management guru Henry Mintzberg critiques the current system of bonuses for top-level managers. His contention is that bonuses do not accomplish what they exist to do – ensure sustained health of a company. Instead, Mintzberg argues that bonuses encourage CEOs to gamble away long-term performance for short-term gains that drive up compensation. His solution? Do away with bonuses completely. Never pay them. And use insistence on bonuses as a mechanism to screen out undesirable CEO candidates.

QUESTIONS:

  1. Are Mintzberg’s thoughts consistent with what the text says about organizational performance? Why do analysts rely so heavily on stock price and other financial measures to assess firm performance?
  2. What are the responsibilities of top managers? What is accountability? Are bonuses the best way to ensure CEO accountability?
  3. Now study the upside-down pyramid. What level of the organization is most directly responsible for company performance? What is the CEO’s role?

SOURCE: H. Mintzberg, “No More Executive Bonuses!” Wall Street Journal (Retrievable online at http://online.wsj.com/article/SB10001424052748703294004574511223494536570.html)

Related video clip:

Brooks & Dunn Are (Done)

December 7, 2009 by  
Filed under Uncategorized

Hailed as country music’s top recording duo for nearly two decades, Brooks & Dunn are ending their collaboration after a 2010 farewell tour. Coming together was the brainchild of Arista accountant Tim DuBois. The singers’ styles and personalities are quite different and, ultimately, these differences helped them know when it was time to end the partnership. The two leave on good terms and some industry experts predict that they will reunite in years to come.

QUESTIONS:

  1. Look at the definitions for team and teamwork. In what ways do Brooks & Dunn meet these definitions?
  2. Consider how the duo of Brooks & Dunn moved through the stages of team development. Why does the adjourning stage matter and how are Brooks & Dunn handling this?
  3. How has cohesiveness influenced the team’s success and impending dissolution?

SOURCE: B. Mansfield, “You Can Call Brooks & Dunn Done & Done After Final Tour,” USA Today (Retrievable online at http://www.usatoday.com/life/music/news/2009-12-04-brooksdunn04_CV_N.htm)

Keeping Nike Cool

December 7, 2009 by  
Filed under Uncategorized

Under the leadership of CEO Mark Parker, Nike is revamping its image and shifting its focus. Rather than ride its dominance in the athletic shoe market, Parker is following trends and repositioning Nike to capitalize on the digital age. Part of Parker’s strategy for Nike involves reducing staff and moving away from brand image. The use of celebrity endorsers continues, but Nike is being much more selective. These strategies are working. While the industry experienced a downturn in 2008, Nike’s market share increased slightly.

QUESTIONS:

  1. What model of change leadership is Nike utilizing? How does CEO Mark Parker fit into this strategy?
  2. Look at the organizational change pyramid. Where is Nike’s planned change? Is the change incremental or transformational? Why?
  3. Consider the shift from the Phil Knight way to the Mark Parker way. What are the targets for change?

SOURCE: B. Horovitz, “CEO Mark Parker Works on Keeping Nike Cool,” USA Today (Retrievable online at http://www.usatoday.com/money/industries/retail/2009-12-07-nike07_CV_N.htm)