ACTing on the sounds of silence

The first problem addressed in this weeks readings was that of “Operational Silence”.  Operational silence occurs when employees do not speak up about decisions being made by management even when they disagree with them.  There are a number of reasons that this can have a negative impact on a corporation.  Firstly, there really might be a problem.  If a firm is making a poor decision, and someone within that firm knows its a poor decision, then they really should be able to avoid it.  Also, the manager may not even realize that there is a problem.  This is very dangerous.  If a manager is surrounded by yes men, then he will have no idea if he is consistently doing something wrong.  This can lead to a sort of barrier being built up around the manager where they become isolated from not only inputs, but consequences as well.  Bad habits that would normally be stopped can continue and eventually cause decisions with dire consequences.  Lastly, it is difficult for the employees to function optimally in an environment where they feel they cannot express opinions or concerns.  Employees can develop work and performance anxieties.  These anxieties can make them nervous and affect their job performance.

ACT stands for Advanced Change Theory.  ACT is a system involving ten steps that firms are using to implement real, meaningful change where it is necessary in their business.  There are ten steps in the ACT program, each aimed at helping a firm identify, diagnose, and then finally treat a problem.  There are a few points made that echo back to articles and main ideas from earlier in the course.  The first is that in order for the behavior of employees to change, there must also be a change in the structure of the corporation itself.  This advice could be applied to the problem above.  If a firm that was suffering from operational silence wanted to fix the problem, they wouldn’t change the employees who were scared; rather, they would change the system in which those employees function.  If that company were to set up a program were employees could safely provide feedback to their superiors without the threat of disciplinary action, employees would no longer be frightened of managers and their behavior would change.  The second point stressed by the ACT system that has been mentioned many times over in this course is that in order for a manager to change his employee’s behavior, he must change his own as well.  This makes a lot of intuitive sense.  If an employee is told to do something because it “helps the company”, but then sees a superior doing the opposite, they will have good reason to assume that the preferred behavior must not actually be that important.  This also ties into another step of the ACT system which is establishing credibility as a leader.  If employees feel that a manager has their best interests at heart, is willing to sacrifice, and is competent in her position, they will be much more apt to follow her and to trust her.  A credible manager makes any change easier because employes will have more confidence in the person that is implementing the change; and their reasons for doing it.

These articles were given together because the latter (the ACT reading) presents a possible solution for to the former (the Operational Silence reading).  It is easier to think about how a solution to a problem might work when one has a problem to picture it solving.  Although that is just my opinion.  What do you think?  Would ACT be a viable system when solving a case like operational silence?  Should something else be used?  Please feel free to express your take on the matter in the poll below.

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You’re gonna like the way this company’s run, I guarantee it.

In 1973, George Zimmerman started a little clothing company with a $7,000 investment.  Today that little company is a large national clothing chain.  You may have heard of it, it’s called The Men’s Warehouse.  George Zimmerman is the bearded gentleman who appears at so many of their commercials; where he can be heard uttering his famous line “I guarantee it.”  Listening to George talk about the way he tried to build The Men’s Warehouse, one gets the sense that he did it the “right” way.

One of the methods he talks about is servant leadership.  Servant leadership is the idea that a manager’s employees are his most valued customers.  This means that a manager’s real job is to provide those who work for him with the best service he can.  This includes training them to do the job well and acting as a mentor for them in things related, and not related, to work.  George took pride in getting to know many of his employees personally.  Referring to this close mentoring relationship as “touch”.  He hopes that by mentoring his employees with such an emphasis on personal connection, that same personal connection will manifest itself in their interactions with customers.

The Men’s Warehouse also has a very interesting way of dealing with the competition inherently created by commission-based pay.  In many retail stores where salespeople get paid based on commission, there is a lot of incentive to have the most sales.  Oftentimes, this leads to clerks stealing each other’s sales.  The Men’s Warehouse keeps an eye on the sales of each of its clerks and fashion consultants.  If any of them seem to be an outlier with a high quantity of low price sales, management assumes that person is stealing sales and trying to rapidly move from customer to customer.  If these people fail to change this behavior they are released.  An example was made of an employee named Jim.  Jim had the highest sales figures at the store he worked at, moving over a half million dollars of product a year.  However, his managers told corporate that he stole sales and was not a “team player”.  Jim was released and the store’s total sales went up, validating the “team sales” idea and showing employees that no one was more valuable than the system.  This was probably my favorite part of the article; one of the major problems we’ve talked about in this class is the problem of commission.  The Men’s Warehouse is the first company we’ve studied that managed to keep commission competition under control without eliminating it altogether.

Another difference between The Men’s Warehouse and traditional management thought is that the Men’s Warehouse encourages close personal relationships throughout different levels of the corporate hierarchy.  They put such a high value on it that the company will pay for dinners at the homes of regional and district managers for them and their employees.  Similarly they will pay for golf outings between different level managers.  It is cool to see a company that is not afraid of employees growing to close to managers.  Instead of worrying that they will grow too comfortable, they seem to hope that these friendships will inspire people to do their best work.  Personally, I think this is a neat idea and would like to read more articles about companies that treat inter-organizational relationships this way.

The Men’s Warehouse ended up being the epitome of every case study we have read in this class.  They are a company that beat out the competition by doing things the right way.  They put their customers before their stockholders and their employees before everyone.  They realize by concentrating on the people in their organization, the money will take care of itself.  Of all the companies we’ve observed, this is the one who’s practices seem the most admirable.  They care about employees, have solved the problem of commission, consider the needs of customers over shareholders, and have lapped the industry in the process.  This is the epitome of successful leadership.

Foreman of Lima

The plant in Lima, Ohio having problems with rising foreman turnover is a difficult problem to solve.  However, it is not difficult to see why it is a problem that they have.  The article paints the position of foreman as a position that no one would want to hold.  Foreman occupies a sort of odd middle ground.  The unionized workers below the foreman have better health benefits and less responsibility.  The supervisors above the foreman don’t have to deal with the day-to-day pressure of meeting production quotas and dealing with hourly laborer issues.

The real rub of the situation is that it is very difficult for foreman to try and get promoted to supervisor because the company likes to bring them in from the outside.  Also, many of the foreman hired before were not college educated.  The company has been moving away from promoting employees without college degrees to supervisors.  Because of this foreman cannot go up.  And, who would want to take a demotion and a pay cut to go down to the less pressurized job of the hourly laborer?  This puts foreman in a sort of no-win situation.  Many of the foreman at the Lima plant have probably realized this and that is why they are leaving.

The way I see it Treadway only has two options.  The first is to allow foreman without college degrees to somehow get the option to receive proper training and possible promotions.  They could do this by offering scholarship programs to foreman who wish to go back to college and earn a degree.  It would be expensive, but it would not cost as much as retraining half of your lower management every year due to low morale and high turnover.  The other action they could take would be to allow the turnover to continue and only hire college educated foreman as replacements.  This way they could insure that they always had a pool of qualified applicants to choose their supervisors out of.

If Treadway does not adopt one of these courses of action than I do not see how they can avoid these high levels of turnover.  They have created a system where there is very little incentive to be a foreman at their company.  The job is very demanding and there is little chance of advancement.  By remedying the latter of these problems I believe they can not only improve their talent pool, but also give their foremen the incentives to stay on longer.

Robin’s Choice

This case details the choices faced by Robin Astrigo of Astrigo Holding Company, as he tries to cut costs.  It is an interesting article and gives insightful looks into all of the way that a manager could go about trying to cut payroll costs in a time of economic recession.  There are many different options laid out to him by his executive board.  I had never considered all of the different ways that managers might choose to lay off employees.  I had only ever considered that there would be the decision whether or not to have layoffs.  Once it was decided that layoffs would happen, I assumed that most companies already had a plan in place on how to do it.

The first method presented was “first in, first out”.  Under this program older employees would be let go.  This would be good because it would “trim dead wood” but it would be bad because of the pension plans Astrigo would have to pay.  Also, like many other possible layoff methods, it uses broad targeting and lays off people at random.  The next method was “rank and yank”.  Under this system employees were to be judged on the basis of the previous years performance reviews, after which the lowest scoring ten percent would be let go.  This system does have merit in that it is not just random firing, however after talking at such great lengths in this course about how unreliable performance evaluations are, this does not seem like a solid method either.  The third strategy was to fire all of the newest people.  This would eliminate the problem of paying pensions and severance packages, but would also eliminate the best young talent from the company.  Furthermore, is Astrigo got the reputation for firing younger employees, they could be severely hampered when competing for the top business school graduates.  It was also suggested that Astrigo should start selling off assets.  This plan would be very short sighted.  Firstly, it would do nothing to increase investor confidence (which is really why the stock price dropped so much in the first place).  Secondly, those assets might be hurting the bottom line during the current recession, but it is very possible they could turn into steady sources of revenue when the economy picks back up.  Selling them now may hurt Astrigo’s ability to hire back employees later when the market turns.  The final course of action presented to Robin was to have employees take a 50% pay cut and then finance all they were short on from a cash fund that Astrigo has sitting in the bank for liquidity purposes.

I think that the two solutions that make the most sense are the “first in, first out” policy, and the final policy where every employee takes a pay cut.  The only real reason that the former appeals to me is because it may cut bloated salaries.  This would be good, and it would also clear room for the new talent coming up through the ranks.  However, severance packages and pensions would be expensive for these people.  Also, the company would be eliminating all of their most experienced employees, and the wealth of knowledge that goes with them.  The other strategy, where everyone takes a pay cut, is probably the best solution.  First of all, it would show the employees that Astrigo is a firm that really values their workers.  Also, it is actually not bad to use cash during a recession.  During economic downturns, the interest rate is often lowered.  Because of this, the cash sitting in the bank is not growing at the rate it would in a normal economic climate.  Also, Robin is saving the money for acquiring an important asset, what asset is more important than the workers?  As long as Astrigo can keep from having a lot of short term liabilities, it would probably be smart for them to use some cash.  Other options that were not brought up were financing their deficit through either debt or the issuing of stock.  Although it is possible that taking on more debt in a recession is a bad idea (although interest rates are low).  All in all it is smart for Astrigo to go with the pay cut idea.  It may not be the perfect solution, but none of these are.  It is important for the employees and the shareholders to see everyone making sacrifices together, this is the only solution where that can happen.

Do The Right Thing

The articles about the military were very interesting.  In both of these cases, a commanding officer is put in a position where they must make a decision between their mission and their conscience.  In the case of Lt. Withers, it seems as though everyone seems to agree that he did the right thing by helping out Peewee and Salomon.  Even though they weren’t supposed to take and holocaust refugees with them, he followed he did what he knew was right and ended up having a big impact on both of those kids.  Sanders knew that if he was caught he wouldn’t get the GI Bill and wouldn’t be able to go back to school, but he disobeyed orders anyway because he thought it was the right thing to do.  This same basic situation was seen in the second article, where Colonel Dowdy had the choice of taking his men through dangerous territory or going around it and getting to the objective later than he otherwise might.  Dowdy does not technically disobey orders but he does go against what his commanding officers seemed to want him to do.  In both of these cases, the men on the ground made decisions based on what the saw.  Also, both times they did so against the wishes of their more far-off superiors.

This disconnect between leadership and subordinate is explored in Covey’s article on leadership.  Covey believes that relationships shoudl be more horizontal than vertical.  That is to say that relationships within companies should not be so much about bosses and authority.  Leaders should not look down on subordinates because of their lower position, but instead they should treat them as equals who just happen to work a lower position in the company.  Leaders that take this approach are better for two reasons.  Firstly, they are more likely to listen to the advice of their subordinates.  Secondly, their employees will likely be more comfortable bringing suggestions to management’s attention and will put forth their suggestions with more frequency.

In the cases of  both Sanders and Dowdy, it seems that these types of beliefs would have been beneficial.  If the higher military brass would have allowed the men on the ground to make decisions based on the intelligence that they had and that central command did not), neither of these things would have been an issue.

That being said, I will say that Sanders’ choice, although it was more directly disobedient, was not as bad as Dowdy’s.  With Sanders, the only person that stood to be hurt from his choice was him.  With Dowdy, the entire invasion could have been compromised.  It wasn’t compromised because he got there on time and the resistance was not as severe as we thought; but we did not know that at the time.  Dowdy tried to save the lives of his men and civilians, which is admirable.  But he could have cost the lives of even more if his batallion had really been needed in the taking of Baghdad.  Both of these men took risks, risks that perhaps they should not have had to take.  But Dowdy did take a bigger risk than Sanders.

But that is not the main point of this post.  The point is that people are more important that money or objectives, and also that the people who are in the action should have a say, or at least some input, into the decisions that are finally made by they superiors.  I certainly wish I had this kind of input at my job.  I’m sure you do too.  Well, don’t you?

Harrah’s: It’s all Love. Man.

Gary Loveman’s tenure at Harrah’s was an interesting one to follow.  The changes he made to the company when he was there changed the corporate structure of the company to its very core.  He did this in multiple ways.  But the most interesting ones to me were the ideas of meritocratic management, accountability, and using data in his rewards system.

Meritocratic management was the idea that the company should be managed and employees should be punished or rewarded based on merit.  When employees know that they cannot be promoted based on anything but their merit, they will be certain to try as hard as they can to increase the perception of said merit.  While this was good in the sense that it got all of the employees working harder, there is a chance it could have also increased competition among employees.  This had the potential to create competitive silos.  A silo occurs when employees become pitted against each other and end up hurting the whole as they focus more on the improvement of the individual parts.

Accountability was a big part of Loveman’s strategy.  This goes hand-in-hand with the meritocracy.  Making employees accountable for their every action insured that they paid attention to  every action.  Loveman drove this point home by being accountable himself.  He admitted his own mistakes and did not try to hide his faults.  This created a level of trust between Loveman and his employees.  When the Harrah’s employees saw the Loveman had credibility and practiced what he preached, it made it easier for them to trust him.

Loveman improved Harrah’s customer service by introducing a tiered reward system based on data.  This is gone over in more detail in my earlier posting entitled “Getting Lucky With Data”.  But basically what he did was look for trends in players and use it to project their lifetime value.  Those with higher lifetime values were catered to more so than those with lower projected values.  The tiered system he introduced gave customers different levels of rewards.  They were inspired to spend more at Harrah’s casinos because they saw others that had the higher levels of rewards (like Diamond level).

Loveman brought a lot of change to Harrah’s, and it seemed that he did well.  It would be interesting to see not only how these strategies have aged, but also an article that addressed more of the negatives of this strategy. No strategy is perfect, and I don’t believe this one was either.  Do you?

Dean’s Disease

Bedeian’s article about the Dean’s Disease is quite a read.  In it, the author describes what the Dean’s Disease is, why it is the large problem that it is, and how it can possibly be stopped.  Two things are clear: the Dean’s Disease can be debilitating to a college; and Bedeian has had some pretty serious problems with university administration. Bedeian states that the Dean’s Disease occurs when all of the members of a college start to only go along with a Dean’s wishes.  He says this happens because deans possesses a large amount of power over faculty.  Deans influence their job advancement and security; as well as having direct influence over the privileges that individual faculty members may receive.

Bedeian believes that the large influence the dean of some colleges hold pushes faculty to get in line with their way of thinking.  An advantage to going along with the Dean is that these faculty find themselves in their Dean’s “inner circle”.  However, in order to get into, and remain in the inner circle, one must almost always agree with the things that the Dean thinks.  This can often lead to a pretty serious case of group think within a department.  Group think would be very damaging to an academic department becasue it would limit what the professors were able to teach; thereby limiting the quality of education offered at that school.  For example: if the Dean of a school of economics is a little more right wing in his leanings and believes in a strict free market based on the teachings of Adam Smith, than what are the chances that anything else will be taught?  Certainly under this type of academic dictatorship no one would think of issuing Keynes as required reading.  And quite frankly, an economics degree that comes without a thorough discussion of the philosophies of Keynes, is not really an economics degree at all.

Thankfully, Bedeian does offer some light at the end of the tunnel.  He believes that by making sure the college has long standing guidelines and restrictions of deans, than this disease may be curtailed.  The most important of these are that every school should establish values and encourage independent thought.  The former could possibly be seen as something that would lead to more severe Dean’s Disease if viewed in the wrong context.  If these values were ideological in nature, than the Keynes-less economics curriculum described above could come true. Instead these values should be taken to mean that a college should develop values in the way they conduct their research.  This will insure that the research done at the school is only of the highest quality.  This would eliminate group think as different researchers would be able to explore the topics they are truly passionate about, and come to unique conclusions.  Of course, the principle that will do the best to exterminate group think from overtaking a department is the notion that deans should encourage different opinions.  The great thoughts that are taught in the university were likely gleaned from intellectual conflict from long ago. It seems that knowing this would drive all institutions to declare diversity of thought as the status quo.  A status quo, that does not include the Dean’s Disease.

Harrahs: It’s All Love. Man

Gary Loveman’s tenure at Harrah’s was an interesting one to follow.  The changes he made to the company when he was there changed the corporate structure of the company to its very core.  He did this in multiple ways.  But the most interesting ones to me were the ideas of meritocratic management, accountability, and using data in his rewards system.

Meritocratic management was the idea that the company should be managed and employees should be punished or rewarded based on merit.  When employees know that they cannot be promoted based on anything but their merit, they will be certain to try as hard as they can to increase the perception of said merit.  While this was good in the sense that it got all of the employees working harder, there is a chance it could have also increased competition among employees.  This had the potential to create competitive silos.  A silo occurs when employees become pitted against each other and end up hurting the whole as they focus more on the improvement of the individual parts.

Accountability was a big part of Loveman’s strategy.  This goes hand-in-hand with the meritocracy.  Making employees accountable for their every action insured that they paid attention to  every action.  Loveman drove this point home by being accountable himself.  He admitted his own mistakes and did not try to hide his faults.  This created a level of trust between Loveman and his employees.  When the Harrah’s employees saw the Loveman had credibility and practiced what he preached, it made it easier for them to trust him.

Loveman improved Harrah’s customer service by introducing a tiered reward system based on data.  This is gone over in more detail in my earlier posting entitled “Getting Lucky With Data”.  But basically what he did was look for trends in players and use it to project their lifetime value.  Those with higher lifetime values were catered to more so than those with lower projected values.  The tiered system he introduced gave customers different levels of rewards.  They were inspired to spend more at Harrah’s casinos because they saw others that had the higher levels of rewards (like Diamond level).

Loveman brought a lot of change to Harrah’s, and it seemed that he did well.  It would be interesting to see not only how these strategies have aged, but also an article that addressed more of the negatives of this strategy. No strategy is perfect, and I don’t believe this one was either.  Do you?

Robin’s Choice

This case details the choices faced by Robin Astrigo of Astrigo Holding Company, as he tries to cut costs.  It is an interesting article and gives insightful looks into all of the way that a manager could go about trying to cut payroll costs in a time of economic recession.  There are many different options laid out to him by his executive board.  I had never considered all of the different ways that managers might choose to lay off employees.  I had only ever considered that there would be the decision whether or not to have layoffs.  Once it was decided that layoffs would happen, I assumed that most companies already had a plan in place on how to do it.

The first method presented was “first in, first out”.  Under this program older employees would be let go.  This would be good because it would “trim dead wood” but it would be bad because of the pension plans Astrigo would have to pay.  Also, like many other possible layoff methods, it uses broad targeting and lays off people at random.  The next method was “rank and yank”.  Under this system employees were to be judged on the basis of the previous years performance reviews, after which the lowest scoring ten percent would be let go.  This system does have merit in that it is not just random firing, however after talking at such great lengths in this course about how unreliable performance evaluations are, this does not seem like a solid method either.  The third strategy was to fire all of the newest people.  This would eliminate the problem of paying pensions and severance packages, but would also eliminate the best young talent from the company.  Furthermore, is Astrigo got the reputation for firing younger employees, they could be severely hampered when competing for the top business school graduates.  It was also suggested that Astrigo should start selling off assets.  This plan would be very short sighted.  Firstly, it would do nothing to increase investor confidence (which is really why the stock price dropped so much in the first place).  Secondly, those assets might be hurting the bottom line during the current recession, but it is very possible they could turn into steady sources of revenue when the economy picks back up.  Selling them now may hurt Astrigo’s ability to hire back employees later when the market turns.  The final course of action presented to Robin was to have employees take a 50% pay cut and then finance all they were short on from a cash fund that Astrigo has sitting in the bank for liquidity purposes.

I think that the two solutions that make the most sense are the “first in, first out” policy, and the final policy where every employee takes a pay cut.  The only real reason that the former appeals to me is because it may cut bloated salaries.  This would be good, and it would also clear room for the new talent coming up through the ranks.  However, severance packages and pensions would be expensive for these people.  Also, the company would be eliminating all of their most experienced employees, and the wealth of knowledge that goes with them.  The other strategy, where everyone takes a pay cut, is probably the best solution.  First of all, it would show the employees that Astrigo is a firm that really values their workers.  Also, it is actually not bad to use cash during a recession.  During economic downturns, the interest rate is often lowered.  Because of this, the cash sitting in the bank is not growing at the rate it would in a normal economic climate.  Also, Robin is saving the money for acquiring an important asset, what asset is more important than the workers?  As long as Astrigo can keep from having a lot of short term liabilities, it would probably be smart for them to use some cash.  Other options that were not brought up were financing their deficit through either debt or the issuing of stock.  Although it is possible that taking on more debt in a recession is a bad idea (although interest rates are low).  All in all it is smart for Astrigo to go with the pay cut idea.  It may not be the perfect solution, but none of these are.  It is important for the employees and the shareholders to see everyone making sacrifices together, this is the only solution where that can happen.

Getting Lucky With Data

The case study on Harrah’s was very good, and explored some interesting ways that data can be used to improve a business (and eventually, an industry).  After reading the article it seemed that there were two major innovations that Harrah’s made in terms of customer service improvement.  We have already gone over the benefits of customer service many times in this class and how beneficial it can be in a business.  However from the article it would appear that the casino industry hadn’t bought into this in the same way that others had (like airlines).  Harrah’s main rivals were more concerned with one-upping each other in terms of spectacle and sparkling new amenities.  While this may be a fine strategy for the flagship casino on Las Vegas Boulevard, Harrah’s realized that it was not as efficient in terms of expansion.  Put it this way: When people go to the fantasy land that is the strip in Las Vegas, they go maybe once every few years (or for some once a lifetime), and they will be impressed by the bigger, shinier casinos.  However, for those who gamble regularly for recreation, they could care less about how many fountains a casino has.  One can only watch the pirate battle at Treasure Island so many times before it becomes old hat.

Harrah’s saw that a better way of competing would be to put assets into things like better customer service and rewards.  The first way they took advantage of this was by developing a tiered customer reward system.  This inspired customers to spend more at their casinos to earn more reward and get better service and perks.  Harrah’s made sure this was so appealing to customers by practicing exemplary customer service, such as no waiting and complementary rooms, in front of all guests of the casino.  Also, by putting the consumer in the silo (essentially in competition for the best rewards), but the employees in an environment where team success is the most important (due to the property-specific bonuses) is a great way to use competition to motivate.

The other thing they do, and probably the more innovative measure, is looking at the activities of casino patrons and determining what types of services and comps they would most like to have.  Also, analyzing the data has allowed them to figure out which patrons spend the most at the casinos and who will add the most value to the casinos in the future.  It is clear that looking at data trends when making decisions about customer service is a good idea.  It is interesting that other casinos were not able to copy this model.  It is also good that they did not engage in any data mining in their observations of the data.

This was a very interesting article and it is cool to see how an emphasis on customer service can change the way an industry is run and approached.

Good to Great to Maybe Not

The article by Niendorf and Beck criticizing Collins’ land mark 2001 book Good To Great, raised a few interesting points.  In their response to Collins’s book they question his research methods.  They claim that he is guilty of data mining and that he searched for trends to justify things he wanted to say about the companies he believed had made the transition from good to great.  Some of these points are well made, especially those about data mining.  However, I am not sure that all of their criticisms are valid.

One of the criticisms the authors spend a lot of time looking at is the statistic Collins used about the “great” returns being made to stockholders by the GTG companies.  Niendorf and Beck point out that the returns of the 11 GTG companies are only one third as large as those of the companies with the biggest share holder returns on the Fortune 500.  However, in making this comparison the authors fail to take into account a number of factors that could contribute to this disparity.  Firstly, there are other ways that companies can add value to the portfolios of their stockholders.  One of these is by paying out dividends.  Dividends are quarterly (or annual) payments made to shareholders.  Usually these are paid out as a percentage of every share that the stockholder has in the company; ie. 59% = $0.59 for every share owned.  Couldn’t it be possible that Collins’ 11 pay dividends?  This is certainly the case with Kimberly-Clark.  In 2009, they raised their dividends 3.4 percent to pay out 60 cents per share (NYSE).  This is the 37th year in a row that they have raised their percent payment on dividends.  While it may be true that Kimberly-Clark only had a stock price growth of 6.2% during the study period, they were paying dividends.  It is likely that these high payouts kept stockholders happy.  Also, it is an understood negative of dividends that company paying them will not be able to invest as much in the company, and therefore will not grow as quickly.  Obviously, the stockholders who hold shares of Kimberly Clark are okay with this as they continue to invest.

Another aspect of shareholder returns that the authors failed to mentioned, were the ages of the companies.  Younger companies will almost always have more shareholder growth than older ones.  There are two reasons for this.  Firstly, younger companies have not been around as long and they may be in an emerging marketplace. Because of this, they have more room to grow than older, more established companies.  Secondly, younger companies are riskier to invest in than older ones.  Because of that, they have to offer greater incentives to get people to invest in them; incentives like high shareholder returns and robust growth.  When one remembers these factors, the disparity between the GTG 11 and the companies listed by Niendorf and Beck is obvious.  Some of the companies selected by Collins are ancient. Fore example, Wells Fargo was started in 1852!  NVR on the other hand, was only started in 1980.  One would expect a company started during the Reagan years to post higher returns than one started during the Franklin Pierce administration.

Niendorf and Beck make some good points.  Collins and his team were clearly guilty of data mining and used statistical patterns to verify foregone conclusions.  However, Niendorf and Beck also used statistics that may have been less than comprehensive to make their points.  This article does serve to show that statistics can be manipulated to make any point that the authors want. Unfortunately for them, they don’t prove this in quite they way they were hoping.

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