Human behavior and decision-making

Human behavior and decision-making is a featured research topic at Harvard Business School.
 
Ever since their origins about three decades ago, the Behavioral Science areas of economics, ethics and managerial psychology have been rapidly evolving. In the 1980's and 1990's, early work by Max Bazerman in judgment and negotiation, Matthew Rabin in behavioral economics, and James Sebenius in negotiations was instrumental in shaping research on Human Behavior & Decision-Making. Today, our research focuses on individual and interactive judgment and decision making and explores the role of personal bias, cognition and learning, time, perception, ethics and morality, and emotion.  
  1. Risk Management—The Revealing Hand

    Robert S. Kaplan and Anette Mikes

    Many believe that the recent emphasis on enterprise risk management function is misguided, especially after the failure of sophisticated quantitative risk models during the global financial crisis. The concern is that top-down risk management will inhibit innovation and entrepreneurial activities. We disagree and argue that risk management should function as a Revealing Hand to identify, assess, and mitigate risks in a cost-efficient manner. Done well, the Revealing Hand of risk management adds value to firms by allowing them to take on riskier projects and strategies. But risk management must overcome severe individual and organizational biases that prevent managers and employees from thinking deeply and analytically about their risk exposure. In this paper, we draw lessons from seven case studies about the multiple and contingent ways that a corporate risk function can foster highly interactive and intrusive dialogues to surface and prioritize risks, help to allocate resources to mitigate them, and bring clarity to the value trade-offs and moral dilemmas that lurk in those decisions.

    Keywords: Risk Management;

    Citation:

    Kaplan, Robert S., and Anette Mikes. "Risk Management—The Revealing Hand." Journal of Applied Corporate Finance 28, no. 1 (Winter 2016): 8–18. View Details
  2. The Dyadic Ties of Managers and Financial Analysts and Their Externality on a Firm's Information Environment

    Zengquan Li, T.J. Wong and Gwen Yu

    When emerging market firms raise external capital, they face a tradeoff where greater transparency may lead to a lower cost of capital but at the cost of revealing proprietary information in their relational business practices. We find that firms overcome this challenge by relying on financial analysts within their private networks, who then transmit the information to arm’s length analysts outside the network. Specifically, we show that firms with more connected analysts have more accurate and informative firm-level consensus forecasts. Likewise, when a connected analyst drops coverage of a firm, there is a decrease in the accuracy and informativeness of the unconnected (arm’s length) analysts’ forecasts, suggesting that the connected analyst’s knowledge spills over to those outside the private network. The spillover effect is stronger when firms have plans to access external capital or rely heavily on non-arm’s length transactions. The findings suggest that managers’ private networks with financial analysts can have positive externalities for firms’ information environments.

    Keywords: emerging market; financial analysts; Information; Emerging Markets; Forecasting and Prediction; Corporate Governance;

    Citation:

    Li, Zengquan, T.J. Wong, and Gwen Yu. "The Dyadic Ties of Managers and Financial Analysts and Their Externality on a Firm's Information Environment." Harvard Business School Working Paper, No. 16-135, June 2016. View Details
  3. Searching for a New CEO: TiVo 2016

    David B. Yoffie

    In 2015, TiVo initiated a search for a new CEO. This case provides a profile of the CEO search and background on the company.

    Keywords: strategy; technological change; succession planning; Technology; Strategy; Strategic Planning; Management Succession; Forecasting and Prediction; Change; Entertainment and Recreation Industry; Media and Broadcasting Industry;

    Citation:

    Yoffie, David B. "Searching for a New CEO: TiVo 2016." Harvard Business School Case 716-470, June 2016. View Details
  4. What Else Do Shareholders Want? Shareholder Proposals Contested by Firm Management

    Eugene F. Soltes, Suraj Srinivasan and Rajesh Vijayaraghavan

    Shareholder proposals provide investors an opportunity to exercise their decision rights within a firm. However, not all proposals created by shareholders receive consideration. Managers can seek permission from the Securities and Exchange Commission (SEC) to exclude specific proposals from the proxy statement. From 2003 to 2013, we find that managers seek to exclude 40% of all proposals they receive, but the SEC does not permit exclusion in over a quarter of the cases. Of the proposals that managers seek to exclude but the SEC does not allow, 28% win shareholder support or the firm voluntarily implements prior to a vote. Our analysis of contested shareholder proposals suggests that managers often seek to avoid the implementation of legitimate shareholder interests.

    Keywords: Voting; Business and Shareholder Relations;

    Citation:

    Soltes, Eugene F., Suraj Srinivasan, and Rajesh Vijayaraghavan. "What Else Do Shareholders Want? Shareholder Proposals Contested by Firm Management." Harvard Business School Working Paper, No. 16-132, May 2016. View Details
  5. Pal's Sudden Service — Scaling an Organizational Model to Drive Growth

    Gary P. Pisano, Francesca Gino and Bradley R. Staats

    Pal's Sudden Service has developed a unique operating model and organizational culture in the quick service restaurant business. With a deep emphasis on process control and improvement, zero defects, extensive training, and a high level of employee engagement, Pal's has been able to achieve excellent operating and financial performance. The case examines the challenges it potentially faces as it contemplates growing the chain significantly from the 28 units it currently operates.

    Keywords: growth strategy; corporate culture; operations strategy; motivation; values; Motivation and Incentives; Strategy; Values and Beliefs; Service Operations; Organizational Culture; Growth and Development Strategy; Service Industry; Food and Beverage Industry;

    Citation:

    Pisano, Gary P., Francesca Gino, and Bradley R. Staats. "Pal's Sudden Service — Scaling an Organizational Model to Drive Growth." Harvard Business School Case 916-052, May 2016. View Details
  6. When and Why Randomized Response Techniques (Fail to) Elicit the Truth

    Leslie K. John, George Loewenstein, Alessandro Acquisti and Joachim Vosgerau

    By adding random noise to individual responses, randomized response techniques (RRTs) are intended to enhance privacy protection and encourage honest disclosure of sensitive information. Empirical findings on their success in doing so are, however, mixed. Supporting the idea that the noise introduced by RRTs can make respondents concerned that innocuous responses will be interpreted as admissions, seven experiments involving over 3,000 respondents document that RRTs can, paradoxically, yield prevalence estimates that are lower than direct questioning (Studies 1-5), less accurate than direct questioning (Studies 1, 3, & 4B-C), and even impossible (negative prevalence estimates, Studies 3, 4A-C, & 5). The paradox is reduced when the target behavior is framed as socially desirable (Study 2) and is mediated by respondents’ concerns over response misinterpretation (Study 3). A simple modification designed to reduce apprehension over response ambiguity reduces the problem (Studies 4A-C), particularly when concerns over response ambiguity are heightened (Study 5).

    Keywords: Corporate Disclosure; Cognition and Thinking;

    Citation:

    John, Leslie K., George Loewenstein, Alessandro Acquisti, and Joachim Vosgerau. "When and Why Randomized Response Techniques (Fail to) Elicit the Truth." Harvard Business School Working Paper, No. 16-125, May 2016. View Details
  7. Revitalizing State Bank of India

    Srikant M. Datar, N. M. Bhatta, Rishikesha T. Krishnan and Rachna Tahilyani

    State Bank of India is India’s oldest and largest bank with the government of India as its majority shareholder. Arundhati Bhattacharya, a 35-year old veteran of the bank, is appointed as its chairman in October 2013. Her appointment coincides with Moody’s downgrading the bank’s debt due to rising non-performing assets. She embarks on a mission to improve the bank’s risk taking and management abilities, ensure uniform customer experience, and encourage greater collaboration among various verticals. Her efforts help the bank reduce its non-performing assets and improve its profitability. However, Bhattacharya knows that these gains will be fleeting without the development of a trained workforce who can address 21st century industry problems with speed and creativity. This requires transforming SBI into a performance-oriented bank supported by a new career development and remuneration system. Bhattacharya wonders if attempting to change the culture of a 206-year old mammoth organization is feasible or a mere pipe dream.

    Keywords: change management; transformation; Communication strategy; Leadership Style; organizational culture; Organizational Change and Adaptation; Performance Evaluation; culture; corporate social responsibility and impact; human resources; employees; Compensation and benefits; recruiting; capital markets; Performance Expectations; Financial Services Industry; Asia; India;

    Citation:

    Datar, Srikant M., N. M. Bhatta, Rishikesha T. Krishnan, and Rachna Tahilyani. "Revitalizing State Bank of India." Harvard Business School Case 116-043, May 2016. View Details
  8. Seaside Organics

    Howard H. Stevenson and Alisa Zalosh

    This case follows Sara Norton, a soccer player-turned-serial entrepreneur, as she transforms Seaside Organics from a fledgling startup into an $89 million company. Informed by the successes and failures of her first organics venture, WellBar, Norton tries to balance her naturally energetic, hands-on approach with the changing needs of a large company. Students discuss the differences between running a growing startup versus a mature organization, and the tensions that can result between entrepreneurs and the managers tasked with running their organizations.

    Citation:

    Stevenson, Howard H., and Alisa Zalosh. "Seaside Organics." Harvard Business School Brief Case 916-526, May 2016. View Details
  9. When Performance Trumps Gender Bias: Joint Versus Separate Evaluation

    Iris Bohnet, Alexandra van Geen and Max Bazerman

    We examine a new intervention to overcome gender biases in hiring, promotion, and job assignments: an "evaluation nudge," in which people are evaluated jointly rather than separately regarding their future performance. Evaluators are more likely to focus on individual performance in joint than in separate evaluation and on group stereotypes in separate than in joint evaluation, making joint evaluation the money-maximizing evaluation procedure. Our findings are compatible with a behavioral model of information processing and with the System 1/System 2 distinction in behavioral decision research where people have two distinct modes of thinking that are activated under certain conditions.

    Keywords: Prejudice and Bias; Selection and Staffing; Decision Choices and Conditions; Performance; Gender;

    Citation:

    Bohnet, Iris, Alexandra van Geen, and Max Bazerman. "When Performance Trumps Gender Bias: Joint Versus Separate Evaluation." Management Science 62, no. 5 (May 2016): 1225–1234. View Details
  10. The Walt Disney Studios

    Anita Elberse

    In December 2015, Alan Horn, chairman of The Walt Disney Studios, celebrates the world premiere of Star Wars: The Force Awakens—only the latest in a string of big bets that he has overseen. Disney pursues a ‘tentpole strategy’ that revolves around at least eight big-budget movies each year—most from its acquired labels Pixar, Marvel Studios, and Lucasfilm. In fact, Disney produces nearly twice as many tentpole movies as any other major Hollywood film studio, but fewer movies overall than all but one of its rivals. Box-office failures can be extremely costly, since Disney (unlike its rivals) chooses not to enlist the help of financing partners. Is Disney Studios pursuing the right number of tentpoles as well as the right mix of new versus existing properties, under the right financing structure? And will the tentpole strategy pay off—in the short and long run?

    Keywords: entertainment; media; movie industry; film; Creative Industries; product portfolio management; innovation; branding; Talent; marketing; strategy; blockbuster; superstar; Strategy; Talent and Talent Management; Creativity; Product Launch; Film Entertainment; Brands and Branding; Product Development; Entertainment and Recreation Industry;

    Citation:

    Elberse, Anita. "The Walt Disney Studios." Harvard Business School Case 516-105, April 2016. View Details
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