Tag Archives: corporations

Seeing the world from behind the Genius Bar

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Here is a fascinating look at the world as viewed from behind the Apple Store’s Genius Bar:

When Apple employees are asked what they love most about their job (and they are asked often) most invariably answer “the people.” They mean their co-workers, not the customers.

Because the daily expectations for customer service go beyond anywhere else in retail, only those with managerial ambitions will invoke their commitment to helping people. Some thrive on that. Others get diagnosed with PTSD. Consider that the flagship store on Fifth Avenue in New York City is open 24 hours and has more annual foot traffic than Yankee Stadium, yet only one door. Every day, in every Apple Store, people flood to customer service, when what many truly need is therapy…

This is the dilemma of working for a technology company that is also perceived as a luxury brand: We attract clients who understand that we provide the latest and shiniest things that they must have, while at the same time they have no idea whatsoever how to use them. I wanted to ask Debris, “Did you ever learn about electricity and water?” but instead just recite the question over and over in my head…

I look up at the dozens of people cradling their aluminum babies. Tapping their feet, chewing their nails, licking their lips, they’re worried bad about something that matters to them. I wish Barbara the best of luck, really meaning it, and excuse myself. I unholster my iPod and call out the next customer’s name.

Is this what the modern world looks like or is this highly idiosyncratic and applicable only to Apple stores? The author oozes a sort of Marxist alienation with hints that the work is hard and dealing with people all day long is difficult (and then contrast this with stories about Apple workers in China). Would this job be considered a “good job” today or are the employees hoping for a better opportunity?

It also strikes me that we have a lack of sociological studies today from inside major corporations. Think about the major corporations of the world today – Apple, Google, Walmart, Shell, McDonalds, Disney, and on – and sociologists are stuck observing from the outside. We have to rely on books like Nickel and Dimed that give us an inside glimpse. I assume many corporations may not like such an insider study as some of the findings might reflect poorly on them, but don’t we need ethnographic and participant observation studies of corporations to understand today’s world?

When a country depends on one company, like Finland did with Nokia

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Here is a quick overview of how important Nokia once was for Finland:

Nokia, meanwhile, has been declining even faster, as Samsung Electronics Co. Ltd. and Apple Inc. have carved up the market between them. The company that used to account for 20 percent of Finland’s gross domestic product has seen its sales decline dramatically in the smartphone era and is operating at a loss.

That raises an interesting question: What does this mean for Finland?

I’m not exaggerating how dependent Finland’s economy has been on Nokia. Here’s the Economist last year, detailing the extent of the country’s reliance:

NOKIA contributed a quarter of Finnish growth from 1998 to 2007, according to figures from the Research Institute of the Finnish Economy (ETLA). Over the same period, the mobile-phone manufacturer’s spending on research and development made up 30% of the country’s total, and it generated nearly a fifth of Finland’s exports. In the decade to 2007, Nokia was sometimes paying as much as 23% of all Finnish corporation tax. No wonder that a decline in its fortunes — Nokia’s share price has fallen by 90% since 2007, thanks partly to Apple’s ascent — has clouded Finland’s outlook.

Since the trend in recent decades has been more toward diversification, this might strike many as surprising. But, I suspect Finland is not alone though I’m thinking more about countries reliant on companies dealing with natural resources like oil or minerals.

I’m also prompted to think whether the United States is in a similar position. There are clearly American brands known worldwide that also have large revenues: General Motors, Walmart, Budweiser, McDonald’s, Apple. But, even with (incorrect?) quotes like “What’s good for General Motors is good for the country,” our economy has a number of important corporations. At the same time, this doesn’t necessarily mean they aren’t interrelated. Remember the talk from several years ago about what might happen if General Motors went bankrupt? Or, what might be the ripples if Walmart declined significantly? Perhaps more importantly, the companies cited above all make material goods. As the recent economic crisis suggested, we are very susceptible to problems in the financial industry where the products are less tangible and yet financing, investments, and debts are incredibly important parts of the modern economy. These companies are so large and intertwined with so many areas of the economy that their fate to that of many others.

A rising ideology of shareholder value in the United States

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How and why corporations make decisions has changed over the decades. Here is a quick argument of what has changed in the US:

Such is the power of the ideology known as shareholder value. This notion that shareholder interests should reign supreme did not always so deeply infuse American business. It became widely accepted only in the 1990s, and since 2000 it has come under increasing fire from business and legal scholars, and from a few others who ought to know (former General Electric CEO Jack Welch declared in 2009, “Shareholder value is the dumbest idea in the world”). But in practice—in the rhetoric of most executives, in how they are paid and evaluated, in the governance reforms that get proposed and occasionally enacted, and in almost every media depiction of corporate conflict—we seem utterly stuck on the idea that serving shareholders better will make companies work better. It’s so simple and intuitive. Simple, intuitive, and most probably wrong—not just for banks but for all corporations.

As Cornell University Law School’s Lynn Stout explains in her 2012 book, The Shareholder Value Myth, maximizing returns to shareholders is not something U.S. corporations are legally required to do. Yes, Congress and regulators have begun pushing the rules in that direction, and a few court rulings have favored shareholder primacy. But on the whole, Stout writes, the law spells out that boards of directors are beholden not to shareholders but to the corporation, meaning that they’re allowed to balance the interests of shareholders against those of stakeholders such as employees, customers, suppliers, debt holders, and society at large…

To be sure, the case against putting shareholders first is not quite the slam dunk for all corporations that it is for highly indebted, too-big-to-fail financial institutions. Outside of banking, the empirical evidence against the doctrine is more suggestive than dispositive. Supporters of shareholder rights can point to studies showing that certain shareholder-friendly changes, such as removing defenses against hostile takeovers, tend to bring higher share prices. Skeptics argue that this says little about long-term impact, and point instead to a more expansive, but impressionistic, set of indicators. The performance of U.S. stock markets since shareholder value became doctrine in the 1990s has been disappointing, and the number of publicly traded companies has declined sharply. The nation in which shareholders have the most power, the United Kingdom, has an anemic corporate sector; on Fortune magazine’s list of the world’s 100 largest companies, it claims only three, compared with nine from France and 11 from Germany, where shareholders hold less sway. Multiple studies of corporations that stay successful over time—most famously the meticulously researched books of the Stanford-professor-turned-freelance-business-guru Jim Collins, such as Good to Great—have found that they tend to be driven by goals and principles other than shareholder returns.

Collins’s books embody the most common criticism of shareholder value: that while delivering big returns to shareholders over time is great (it is, in fact, Collins’s chief measure of “greatness”), focusing on shareholder value won’t get you there. That’s what Jack Welch was getting at, too. In a complex world, you can’t know which actions will maximize returns to shareholders 15 or 20 years hence. What’s more, most shareholders don’t hold on to any stock for long, so focusing on their concerns fosters a counterproductive preoccupation with short-term stock-price swings. And it can be awfully hard to motivate employees or entice customers with the motto “We maximize shareholder value.”

Corporations and what their directors want, what their investors want, and how they operate changes over time based on surrounding economic and social forces. They can also innovate and develop new ways of pursuing profit or contributing to the public good. Thus, to understand them, invest in them, and develop regulations and policies involving them, we need to know their social context and their patterns of development.

One of the more interesting books I’ve read related to this topic is Frank Dobbin’s Forging Industrial Policy: The United States, Britain, and France in the Railway Age. Dobbin shows there was no “right” way to promote and develop railroads. France’s approach was to develop a centralized railroad system based on Paris and highly regulated by technocrats. Britain took the opposite tack: no regulation to start as railroad firms could build and do what they wanted. After a while, Britain had to introduce regulations because corporations were putting profits first over public concerns like railroad safety (an example: a need to regulate railroad brakes to avoid large crashes). The United States took a middle approach: some public-private partnerships with some regulation but also with the ability for corporations to make big money. Looking back from today, the “right” way might seem obvious but this whole process was strongly driven by social and cultural circumstances and norms.

Knowing all of this, perhaps the next question to ask is how might corporations change in 20 or 50 years?

The global culture of the business office

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Photographer Louis Quail has a new book of photos of offices around the world – and they have a similar look:

Since 2006, Quail has photographed offices in Russia, South Africa, Germany, the U.S., the U.K., Cambodia, United Arab Emirates, Santo Domingo and China. Municipal departments, call centers, financial brokers and commodities traders all feature in Quail’s series, Desk Job…

“As we have moved into the technical and information age, there has been a shift towards more office-based work,” says Quail of globalization. “Whatever our job title or geographical location, our tools and environment are becoming similar. It is quite perverse; to travel around the world to photograph inside an office that looks like its in Croydon [U.K.].”…

“The employee is defined by the few cubic meters, which exist around them. They must not just work, but live, eat, pray and occasionally sleep as if ‘chained’ to the desk in perpetuity,” says Quail…

“Companies tend to strive for straight lines and uncluttered office spaces, where as individuals have an urge to colonize and personalize,” says Quail. “In these pictures we see the tension but ultimately workers are intrinsic to the organizations they serve and are best placed to change them if they choose.”

Quail argues this is a side effect of globalization. An office in Dubai looks like an office in Australia which looks like an office in the Chicago suburbs. And he hints at the root of this homogeneity across global offices: an interest in making money within a global business network.

It would be interesting to pair these photos with a history of how the corporate office look spread around the world. Where exactly did it start, who spread it (people or corporations or organizations), and how quickly did it catch on?

More companies hiring through internal referrals, online applications carry a stigma

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This might help explain why the ranks of long-term unemployed have risen: more companies are finding new employees through referrals from current employees.

The trend, experts say, has been amplified since the end of the recession by a tight job market and by employee networks on LinkedIn and Facebook, which can help employers find candidates more quickly and bypass reams of applications from job search sites like Monster.com.

Some, like Ernst & Young, the accounting firm, have set ambitious internal goals to increase the proportion of hirings that come from internal referrals. As a result, employee recommendations now account for 45 percent of nonentry-level placements at the firm, up from 28 percent in 2010…

The company’s goal is 50 percent. Others, such as Deloitte and Enterprise Rent-A-Car, have begun offering prizes like iPads and large-screen TVs in addition to traditional cash incentives for employees who refer new hires.

This sounds like a sort of Granovetter social network job hunt run amok: companies are looking for ways to minimize bad hires but in doing so, they are relying more and more on their current employees which freezes out people outside these social networks. But, it also suggests a job hunting strategy beyond Internet sites: people looking for work should look to impress their contacts who are currently working. This could be helpful to a lot of job searchers as it would cut down on online applications, cover letters, and the “black hole” (as it is called in the article) where applicants get very little feedback.

Here is a little bit about the advantages of companies hiring referred employees:

Referral programs carry important benefits for big companies. Besides avoiding hefty payouts to recruiters, referred employees are 15 percent less likely to quit, according to Giorgio Topa, one of the authors of the Federal Reserve Bank of New York study.

Social networks improve business efficiency…but might also leave certain people out in the cold.

Argument: cities could find more revenue by taxing people who commute in

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Michael Pagano details the tax revenue issues facing American big cities and proposes a solution: tax commuters for the city services they use.

Over the past several decades, municipal tax systems have changed in many ways to try and capture the revenues needed to support essential services. But most cities continue to base their tax systems on dated notions of how local economies work and what drives income growth and wealth. Cities must be given the ability to develop tax and revenue systems that match the unique characteristics of their local economies, and that allow them to diversify revenues in ways that protect them from fiscal crises.How might that request be accommodated? Tax structures should be created that link cities to their underlying engines of growth or to income and wealth, similar in design to what the property tax attempted to accomplish two centuries ago. In Ohio for example, cities tax earnings at the place of employment and the place of residence. By taxing at the place of employment, users of city services (that is, employees who physically work at a site) contribute to the resource base for service provision.

Imagine if users of city-government services actually were required to pay for the full cost of those services? Imagine household decisions on where to live that is based on their paying the full cost of services. Imagine the decision calculus by individuals who would be responsible for paying their fair share. It could be revolutionary.

I wonder if changing the tax structure in this way would only serve to push more organizations and firms to the suburbs. Take the example of Chicago cited by Pagano. In the last few years, several companies, like Motorola, have announced they are moving workers back into the city. Would changing the tax structure make them reconsider?

Shared cultural interests leads to hiring at elite firms

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A new sociological study argues having the right cultural interests or pursuing certain cultural activities can lead to getting a job at elite firms:

Big-time investment banks, law firms and management consulting companies choose new workers much as they would choose friends or dates, zeroing in on shared leisure activities, life experiences and personality styles, a new study finds…

As a result, evaluators described their own and others’ firms as having distinct personalities related to employees’ extracurricular interests and social styles. Companies ranged from “sporty” and “scrappy” to “egghead” and “country club.” One outfit even specialized in hiring people with drab personalities.

Top-ranked firms uniformly favored applicants who cited upper–middle class leisure pursuits such as rock climbing, playing the cello or enjoying film noir.

Picking employees from the same cultural basket may have pluses and minuses, Rivera adds. Hiring people with common traits and interests may create a cohesive work force. But shunning prospective employees with different life histories could also make firms susceptible to reaching decisions quickly without evaluating alternative ideas.

This challenges the American ideal of meritocracy where hard work should lead to a job. While the study suggests these cultural interests don’t matter as much when organizations are hiring for more technical jobs, it does matter for white-collar and upper-class jobs. This could also challenge the role of college courses: how many college classes are about developing a “scrappy” or “country club” approach to life? In contrast, the experience outside the classroom at some colleges (plus the applicants’ earlier life history) might contribute quite a bit to learning about and then developing these cultural skills.

It would also be interesting to look more at the personalities involved in hiring and branding that companies develop. Marketing today often involves selling a brand and image more so than focusing on the particulars of a product. Is this branding simply about marketing or does it bleed through the culture of the entire organization?

Facebook owes a debt to sociological research on social networks

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At a recent conference, two Facebook employees discussed how their product was based on sociological research on social networks:

Two of Facebook’s data scientists were in Cambridge today presenting on big data at EmTech, the conference by MIT Technology Review, and discussing the science behind the network. Eytan Bakshy and Andrew Fiore each have a PhD and have held research or lecture positions at top universities. Their job is to find value in Facebook’s massive collection of data.

And their presentation underscored, unsurprisingly, the academic roots of their work. Fiore, for instance, cited the seminal 1973 sociology paper on networks, The Strength of Weak Ties, to explain Facebook’s research showing that we’re more likely to share links from our close acquaintances, but given the volume of those weaker connections, in aggregate weak ties matter more. As Facebook attempts to extract value from its users, it’s standing on the shoulders of social science to do it. It may seem banal to point out, but its insights are dependent on a rich history of academic research…

These data scientists were referencing an article written by sociologist Mark Granovetter that has to be one of the most cited sociology articles of all time. I just looked up the 1973 piece in the database Sociological Abstracts and the site says the article has been cited 4,251 times. Granovetter helped kick off a exploding body of research on social networks and how they affect different areas of life.

Some of the other conclusions in this article are interesting as well. The writer suggests the pipeline between academia and Facebook should be open both ways as both the company and scholars would benefit from Facebook data:

Select academics do frequently get granted access to data at companies like Facebook to conduct and publish research (though typically not the datasets), and some researchers manage to glean public data by scraping the social network. But not all researchers are satisfied. After tweeting about the issue, I heard from Ben Zhao, an associate professor of Computer Science at UC Santa Barbara, who has done research on Facebook. “I think many of us in academia are disappointed with the lack of effort to engage from FB,” he told me over email.

The research mentioned above and presented at EmTech was published earlier this year, by Facebook, on Facebook. Which is great. But it points to the power that Facebook, Google, and others now have in the research environment. They have all the data, and they can afford to hire top tier researchers to work in-house. And yet it’s important that the insights now being generated about how people live and communicate be shared with and verified by the academic community.

This is the world of big data and who has access to the more proprietary data will be very important. More broadly, it should also lead to discussions about whether corporations should be able to sit on such potentially valuable data and primarily pursue profits or whether they should make it more available so we can learn more about humanity at large. I know which side many academics would be on…

Some thoughts on Progressive and Matt Fisher

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By now, you’ve no doubt run across Matt Fisher’s blog post titled “My Sister Paid Progressive Insurance to Defend Her Killer In Court”. (If you haven’t yet seen Matt’s post, take a moment to read the original and his follow up). There have been lots of reactions to Matt’s story (to put it mildly), including over at Above the Law, where blogger “Juggalo Law” makes the following two observations:

1. Matt Fisher’s “grief is impossible for most, if not all, of us to imagine.”

Katie Fisher died in a car crash and her brother lashed out at the insurance company that made life for her surviving family more difficult. Matt Fisher’s overwrought tumblr post can be excused by the fact that, you know, his sister died in a car crash. His grief is impossible for most, if not all, of us to imagine. And yet thousands of people put on their imagineering hats and did just that.

As an initial matter, this seems like a denial of even the possibility of empathy. Is ATL really arguing that it is “impossible” for people generally to even imagine another person’s grief in the wake of death? Except for the very young, virtually everyone has known someone who has died, and we each face the inevitable prospect of our own mortality. Of course no one besides Matt Fisher knows the precise contours his grief, but this is hardly a persuasive, blanket argument that humanity generally is incapable of even imagining what his grief is like.

Furthermore, the tragedy at issue here is a death caused by an automobile accident. While the number of motor vehicle deaths in the U.S. varies from year to year, during the years 1981-2010 it ranged from 49,301 (1981) to 32,885 (2010). In all, 1,268,122 people died over this 30 year span. Even in a nation of over 300 million, this is an enormous number. Matt Fisher’s loss of his sister is tragic, but, sadly, it is not unique.

2. Insurance companies are “inhuman” entities whose “existence…is predicated on their attempts to make money. ”

Sometimes, life deals you a sh**ty hand. Death, however, always does. And yet, those stuck behind will undoubtedly encounter a world that barely shrugs in acknowledgement. And that’s how it should be. You will still be asked if you want a coffin with gold plating and you may be asked if you want your loved one’s ashes compressed into a beautiful diamond that you can wear around your neck for a lifetime. And all the mundane features of our economy will seemingly laugh at your grief. But they’re not laughing and insurance companies and all of the other businesses that survivors must joust with aren’t “inhuman monsters.” They’re merely inhuman. And they will follow protocol and attempt to minimize their own exposure as much as is possible. The existence of insurance companies is predicated on their attempts to make money. And nothing in this case suggests that their actions were borne out of anything other than this absolute truth.

Here, the ATL blogger seems to argue that insurance companies automatically get a pass for distasteful behavior because they are “inhuman” (with a strongly implied “what else do you expect?”). I think this approach lazily obscures rather than thoughtfully resolves any of the issues Matt Fisher’s personal tragedy raises. Obviously, the facts in this case are disputed and not fully known (at least publicly), and I have no personal knowledge of this matter. However, taking Matt’s original post and follow up clarification at face value, it is clear that Matt is not blaming Progressive for his sister’s death. Matt’s argument (and the general outrage) against Progressive boils down to these alleged facts:

  • Katie was a Progressive insurance customer with underinsured motorist coverage.
  • Katie was killed in an automobile accident with an underinsured motorist.
  • Asserting that Katie herself might have been responsible for the accident (in which case Progressive would have no legal obligation to pay under Maryland law), Progressive refused to pay what it owed under Katie’s policy to her surviving family members.
  • When Katie’s family went to court and sued the other driver to establish that he was liable for the accident rather than Katie, Progressive sent in its own lawyer(s) to help the other driver prove he was NOT liable.

So far as I can tell, the general outrage being directed at Progressive arises from this last assertion. I think most people understand that “fault” in auto accidents can be murky, and I think that many people would have understood if Progressive had refused to pay Katie’s policy until this issue was conclusively resolved by a court.

But that’s not why Matt’s post went viral. It went viral because he alleges, as he puts it in the title, “My Sister Paid Progressive Insurance to Defend Her Killer In Court.” The extreme outrage is not that an insurance company wanted to be 100% sure it owed money before paying out. The outrage is that (allegedly) an insurance company unleashed its lawyer(s) against its own customer. I agree with ATL that one generally expects auto insurance companies to “attempt[] to make money.” However, I submit that many do not expect auto insurance companies to proactively work against their own policyholders who are involved in accidents by making common cause with the other driver. It is one thing to dispute liability and force a court to sort the issue out. It is another thing to send lawyer(s) into the resulting lawsuit on behalf of the opposing side.

On the same day that Matt posted about Progressive, Bob Sutton blogged about how “United Airlines Lost My Friend’s 10 Year Old Daughter And Didn’t Care” (it’s as bad as you think, assuming the facts Bob recounts are all true). Bob narrates one part of the story in which the father is on the phone with a United employee located at the same airport as the lost 10-year-old, who was flying as an unaccompanied minor. When he “asked if the employee could go see if [his daughter] was OK,” she replied that she “was going off her shift and could not help. [He] then asked her if she was a mother herself and she said ‘yes’—he then asked her if she was missing her child for 45 minutes what would she do? She kindly told him she understood and would do her best to help.”

Bob writes:

This is the key moment in the story, note that in her role as a United employee, this woman would not help [the parents]. It was only when [the father] asked her if she was a mother and how she would feel that she was able to shed her deeply ingrained United indifference — the lack of felt accountability that pervades the system. Yes, there are design problems, there are operations problems, but the to me the core lesson is this is a system packed with people who don’t feel responsible for doing the right thing.

“Juggalo Law” titled its ATL post “Progressive Insurance Is Inhuman,” as if this fact excuses inhuman behavior. But just because corporations themselves aren’t people doesn’t mean their shareholders, managers, and employees aren’t. As Bob Sutton notes in his article on United Airlines, “a key difference between good and bad organizations is that, in the good ones, most everyone feels obligated and presses everyone else to do what is in their customer’s and organization’s best interests. I feel it as a customer at my local Trader Joe’s, on JetBlue and Virgin America, and In-N-Out Burger, to give a few diverse examples.”

Assuming the facts Matt alleges are true, Progressive clearly didn’t act in their customer Katie Fisher’s best interest. That’s not simply a sign that it wants to make money–or is legally organized as a corporation. If true, it’s a sign that it will act against its own customers whenever it can. Ironically, in a competitive marketplace, that approach is not in Progressive’s best interest. Indeed, the near-universal condemnation levelled at Progressive over the past few days suggests that such a narrowly self-interested approach is suicidal once it comes to light.

Daily Herald: Emanuel, Chicago raiding the suburbs without committing to “regional partnership”

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I posted Sunday about Chicago gaining Motorola Mobility and the suburbs (Libertyville) losing the firm. It is not too surprising that the Daily Herald, a newspaper serving Chicago’s suburbs, is not too fond of the move but they make a larger claim in an editorial: there isn’t much evidence yet that Chicago Mayor Rahm Emanuel is committed to “regional partnership.”

But today, Gov. Pat Quinn and Chicago Mayor Rahm Emanuel play by a different set of rules. This isn’t the first time Emanuel has raided suburban business with no significant attempt to forge any sort of regional partnership.

And while we appreciate Quinn’s efforts and relative success at keeping Illinois businesses in Illinois, his favoritism toward Chicago at the expense of the suburbs, at least in this case, is clear.

Though he was under no obligation to do so, Quinn signed off on the agreement to transfer Motorola Mobility’s incentive package to its move to Chicago.

And the thing is, that didn’t happen five minutes before the deal was announced. Yet, suburban officials were kept largely in the dark until the deal was done.

This is an ongoing point of contention in the Chicago region. When I heard Mayor Daley speak at Wheaton College, I noted that he talked about regional cooperation but evidence of this happening for some of the biggest issues has been lacking. Mayor Emanuel has made some overtures about the need for regional efforts but it appears that theDaily Herald(and perhaps others?) don’t think this has truly happened yet.

I wonder what it would take for the two sides, Chicago and suburbs, to truly feel like the other side is cooperating. If everything was equal, say both sides got the same number of large firms, would they each be happy? The Chicago area has a long history of many taxing bodies (see the example of 45 mosquito abatement districts in DuPage County here) and it is difficult to get all of these groups working together. Here is my short-term prediction: I suspect both sides will appeal for regional cooperation when they need outside help or funds from other groups but it will be very difficult for them to acknowledge regional partnerships when they might lose something.