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. Hewlett Packard Enterprise: The Dandelion Program

    Gary P. Pisano and Robert D. Austin

    This case describes Hewlett Packard Enteprise's “Dandelion Program," which has developed a new service offering for the company’s clients by drawing on the special talents of people with autism. The company has deployed “pods” organized around 8 or 9 employees with autism, to function as high performance mini-ecosystems, which have turned out to be 30% more effective than average service teams (in some areas). The case centers around questions of how to adapt this successful model to new demands in a different service domain, specifically, cybersecurity and defense related areas. The case also explores how the company is innovating and refining its assessment and training processes in support of the program.

    Keywords: leadership; training; organizational behavior; Technology; Organizational Change and Adaptation; Leadership; Talent and Talent Management; Service Operations; Training; Diversity; Innovation and Invention; Technology Industry;

    Citation:

    Pisano, Gary P., and Robert D. Austin. "Hewlett Packard Enterprise: The Dandelion Program." Harvard Business School Case 617-016, September 2016. View Details
  3. FJ Management Inc.

    Lynda M. Applegate and Matthew Preble

    In late 2015, Crystal Call Maggelet, president and CEO of FJ Management, is working with her investment committee to help set the company’s strategic direction. Maggelet, daughter of the company’s founder, has led FJ Management since 2009 when she stepped in as CEO following an unexpected bankruptcy. At that time, FJ Management was known as Flying J. Flying J owned and operated hundreds of truck stops—which it called Travel Plazas—nationwide and was a growing multi-billion dollar business, but broader problems in the oil and credit markets in late 2008 forced it to declare Chapter 11 bankruptcy.
    Maggelet, who had been serving on Flying J’s board, became its new CEO and was able to successfully manage competing stakeholder demands, keep the business running, and ultimately paid back every dollar it owed to its creditors by selling the company’s core assets—its travel plazas—to its main competitor in 2010. Since that time, the company had returned to a healthy financial position, diversified its holdings, and made investments in diverse industries to determine how to grow the company, since renamed FJ Management. In 2015, Maggelet now wants to set a clear path forward for the company.

    Keywords: turnaround; family business; transformation; Volatility; change management; entrepreneurship; ethics; moral sensibility; Values and Beliefs; Cash flow; insolvency and bankruptcy; financial liquidity; financial management; governance; corporate governance; governance controls; company history; leadership; leading change; crisis management; negotiation; Organizational Change and Adaptation; family ownership; business and stakeholder relations; Business Strategy; Family Business; Transformation; Volatility; Change Management; Entrepreneurship; Ethics; Moral Sensibility; Values and Beliefs; Cash Flow; Insolvency and Bankruptcy; Financial Liquidity; Financial Management; Governance; Corporate Governance; Governance Controls; Leadership; Leading Change; Crisis Management; Negotiation; Organizational Change and Adaptation; Family Ownership; Business and Stakeholder Relations; Business Strategy; Energy Industry; Travel Industry; Retail Industry; Service Industry; Utah;

    Citation:

    Applegate, Lynda M., and Matthew Preble. "FJ Management Inc." Harvard Business School Case 817-043, September 2016. View Details
  4. Angie's List: Ratings Pioneer Turns 20

    Robert J. Dolan and Ayelet Israeli

    In 1995, before people “googled” or “yelped," Angela Hicks (HBS, 2000) was establishing her Angie’s List as a pioneer in the accumulation and dissemination of consumer rating information. Hicks focused on the home repair and maintenance market, and, as she put it, “particularly on high cost of failure situations where good information on potential service providers is correspondingly of high value." Angie's List had a paid subscription model as it charged “members” for access to the information they collectively provided on service providers.

    Citation:

    Dolan, Robert J., and Ayelet Israeli. "Angie's List: Ratings Pioneer Turns 20." Harvard Business School Case 517-016, September 2016. View Details
  5. Designing Performance Metrics at GoDaddy

    C. Fritz Foley and Michael Lemm

    Scott Wagner has recently joined GoDaddy, a leading provider of cloud-based software and services that helped individuals and small businesses establish a web presence, in the dual role of chief operating officer and chief financial officer. One of his first tasks is to design a set of performance metrics that can be used to run the business. This case gives students the opportunity to develop a framework for thinking about GoDaddy’s business and to design performance metrics that measure the health of the business and guide employee behavior.

    Keywords: Motivation and Incentives; Management Practices and Processes; Performance Evaluation; Compensation and Benefits; Web Services Industry;

    Citation:

    Foley, C. Fritz, and Michael Lemm. "Designing Performance Metrics at GoDaddy." Harvard Business School Case 217-004, September 2016. View Details
  6. Monitoring Global Supply Chains

    Jodi L. Short, Michael W. Toffel and Andrea R. Hugill

    Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers' conduct. But little is known about what influences auditors' ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains. Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers’ conduct. But little is known about what influences auditors’ ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains.

    Keywords: Monitoring; transaction cost economics; industry self-regulation; auditing; Codes of conduct; supply chains; corporate social responsibility; globalization; Corporate Social Responsibility and Impact; Supply Chain; Globalization;

    Citation:

    Short, Jodi L., Michael W. Toffel, and Andrea R. Hugill. "Monitoring Global Supply Chains." Strategic Management Journal 37, no. 9 (September 2016): 1878–1897. (Revised July 2015. Previously titled "Monitoring the Monitors: How Social Factors Influence Supply Chain Auditors.") View Details
  7. Bounded Awareness: Implications for Ethical Decision Making

    Max Bazerman and Ovul Sezer

    In many of the business scandals of the new millennium, the perpetrators were surrounded by people who could have recognized the misbehavior, yet failed to notice it. To explain such inaction, management scholars have been developing the area of behavioral ethics and the more specific topic of bounded ethicality—the systematic and predictable ways in which even good people engage in unethical conduct without their own awareness. In this paper, we review research on both bounded ethicality and bounded awareness and connect the two areas to highlight the challenges of encouraging managers and leaders to notice and act to stop unethical conduct. We close with directions for future research and suggest that noticing unethical behavior should be considered a critical leadership skill.

    Keywords: Ethics;

    Citation:

    Bazerman, Max, and Ovul Sezer. "Bounded Awareness: Implications for Ethical Decision Making." Organizational Behavior and Human Decision Processes 136 (September 2016): 95–106. View Details
  8. How to Tackle Your Toughest Decisions

    Joseph L. Badaracco

    The toughest calls managers have to make come in situations when they have worked hard to gather the facts and have done the best analysis they can, but they still don’t know what to do. Then judgment—a fusion of thinking, feelings, experience, imagination, and character—becomes critical. The author offers five practical questions to improve your odds of making sound judgments: What are the net, net consequences of all my options? What are my core obligations? What will work in the world as it is? Who are we? What can I live with? All five questions must be answered. According to the author, “Each question is an important voice in the centuries-long conversation about what counts as a sound decision regarding a hard problem with high stakes for other people.” If you work through these questions, you’ll know that you’ve approached the problem in the right way—not just as a good manager but as a thoughtful human being.

    Keywords: Management; Judgments;

    Citation:

    Badaracco, Joseph L. "How to Tackle Your Toughest Decisions." Harvard Business Review 94, no. 9 (September 2016): 104–107. View Details
  9. Know Your Customers' 'Jobs to Be Done'

    Clayton M. Christensen, Taddy Hall, Karen Dillon and David S. Duncan

    Firms have never known more about their customers, but their innovation processes remain hit-or-miss. Why? According to Christensen and his coauthors, product developers focus too much on building customer profiles and looking for correlations in data. To create offerings that people truly want to buy, firms instead need to home in on the job the customer is trying to get done. Some jobs are little (pass the time); some are big (find a more fulfilling career). When we buy a product, we essentially “hire” it to help us do a job. If it does the job well, we’ll hire it again. If it does a crummy job, we “fire” it and look for something else to solve the problem. Jobs are multifaceted. They’re never simply about function; they have powerful social and emotional dimensions. And the circumstances in which customers try to do them are more critical than any buyer characteristics. Consider the experiences of condo developers targeting retirees who wanted to downsize their homes. Sales were weak until the developers realized their business was not construction but transitioning lives. Instead of adding more features to the condos, they created services assisting buyers with the move and with their decisions about what to keep and to discard. Sales took off. The key to successful innovation is identifying jobs that are poorly performed in customers’ lives and then designing products, experiences, and processes around those jobs.

    Keywords: Customer Relationship Management;

    Citation:

    Christensen, Clayton M., Taddy Hall, Karen Dillon, and David S. Duncan. "Know Your Customers' 'Jobs to Be Done'." Harvard Business Review 94, no. 9 (September 2016): 54–62. View Details
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