remodeling school management - stanford graduate school of ... · remodeling school management mbas...

Remodeling School ManagementRemodeling School ManagementMBAs in Educational Reform

How Tempered Radicals Are Catalysts for Change

NOVEMBER 2001

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calen

dar JANUARY 26: Health Care

Technology Symposium, Stanford campus. Contact Igor Brodsky at [email protected]

FEBRUARY

FEBRUARY 3–8: Executive pro-gram “Managing Teams forInnovation and Success,” Stanford campus. See Webpage www.gsb.stanford.edu/exed/mtis/ or contact650.723.9356 or [email protected]

FEBRUARY 13: Asian AmericanBusiness Students AssociationFirst Annual Banquet, locationto be determined. ContactRoan Kang at [email protected]

FEBRUARY 17–MARCH 1:“Executive Program for Growing Companies,” Stan-ford campus. See Web pagewww.gsb.stanford.edu/exed/epgc/or contact 650.723.9356 orexecutive_education@gsb. stanford.edu

FEBRUARY 27: Arbuckle Award Dinner honoring JohnH. Scully, MBA ’68, Frances C.Arrillaga Alumni Center, Stan-ford campus. Contact ClaudiaDiven at 650.725.3767 [email protected]

FEBRUARY 28: Cool ProductsExpo, Stanford campus. Contact Kim Champion [email protected]

✱FUTURE EVENTS

MARCH 3–7: Executive pro-gram “Credit Risk Modelingfor Financial Institutions,”Zurich. See Web page www.gsb.stanford.edu/exed/crm/or contact 650.723.9356or [email protected]

MARCH 7: High-Tech Career Fair, Stanford campus.Contact Kelly Walsh at650.725.3235 or [email protected]

MARCH 14–21: EuropeanExecutive Briefing events featuring Professor HaimMendelson, March 14 inMadrid, March 18 in Lisbon,March 21 in Paris. ContactClaudia Diven at 650.725.3767 or [email protected]

APRIL 1–5: Executive program“Advanced Negotiation,”Stanford campus. See Webpage www.gsb.stanford.edu/exed/anp/ or contact650.723.9356 or [email protected]

MAY 3–4: MBA Class Reunionsfor ’01, ’97, ’92, ’87, Stanfordcampus. Contact Lisa Brownat 650.724.4101 or [email protected]

See the alumni online calendarat www.gsb.stanford.edu/alumni/events/calendar.html

For details on Executive Education programs, see theadvertisement on page 11 orvisit www.gsb.stanford.edu/exed

NOVEMBER

NOVEMBER 4–9: Executiveprogram “Leading Changeand Organizational Renewal,”Stanford campus. Contact650.723.9356 or [email protected]

NOVEMBER 11–16: Execu-tive program “Finance and Accounting for the Non-Financial Executive,” Stanford campus. Contact650.723.9356 or [email protected]

DECEMBER

DECEMBER 3–7: Executive program “Stanford LeadershipSeminar: The Effective Use of Power,” Stanford campus.See Web page www.gsb. stanford.edu/exed/sls/ or contact650.723.9356 or [email protected]

JANUARY

JANUARY 7: Winter quarterregistration

JANUARY 21–23: Executiveprogram “Advanced Negotia-tion and Deal-Making Strate-gies,” Dubai, United ArabEmirates. See Web pagewww.leading-concepts.com/advancednegotiations/stanford.htm or contact 650.723.9356or [email protected]

JANUARY 23: InternationalCareer Fair, Stanford campus.Contact Charlotte Carter at 650.725.3236 or [email protected]

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F E A T U R E S

16No Textbook AnswersOn the front lines of educational reform, gsb graduatesadvocate business-inspired solutions to the problems in America’s public schools. b y k a r l s c h o e n b e r g e r

20Understated Leadership Almost every organization has a few “tempered radicals” who lay the groundwork for slow, yet crucial organizationaladaptation and change.b y d e b r a e . m e y e r s o n , p h d ’ 8 9

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november 2001 • volume 70, number 1

People 10Hilary Beech, mba ’91 Tom Tusher, mba ’65

Management 12Stanford’s three Jesuit mbas are part of a centuries-old experiment in engaging theworld for God’s greater glory.by cherian george

Health Care 14A proposed remedy for the uninsured. Americans can havea choice of health care plansand universal coverage too. by meredith alexander

Faculty News 24

Faculty Publications 25

Faculty Research 26Virtual prototypes prove to be as good as the real thing. Questioning auditor inde-pendence. Selling violence tochildren. Online disclosures:noise or news?

Newsmakers 30Who’s in the news: A roundupof media mentions.

Alumni Resources 32

Class Notes 33

26

About This Issue 2

Dean’s Column 3

Spreadsheet 4What’s Up: News about the gsb and its graduates.

Today 7The Class of ’o3 bonds overstrikes, spares, and gutter balls.

Learning Curve 8Rebounding from a crisis. How a plastics recycling firmsurvived an industrial accident.by janet zich

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D E P A R T M E N T S

COVER: Michael Llewellyn/Getty Images

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about this issue

A Role for a Printed Magazine?in the days and weeks following the terrorist attacks in New York and Washington, d.c., many of you turned to the Internet andemail to make fast, two-way connections with others in the gsb community.(See the Dean’s letter at right for details.) In such crises, this magazine cannotcompete effectively with the latest communication technologies, or even, forthat matter, with the old telegraph and telephone. So what role does theprinted quarterly Stanford Business magazine play in this age of Web pages,e-books, and email newsletters?

You told us in a recent survey—mailed to 15,000 alums and emailed to 8,000 others, which in itself suggests there is no one-size-suits-all methodof getting information to you—that fast-paced communications don’t alwaysprovide the nourishment you seek and that you look forward to picking upthe latest issue and having something catch your eye, your mind, your heart.

The consultants who gathered the information from 4,500 surveys andfocus groups in 14 cities concluded that “the magazine is a ‘must-read’ formost alumni.” And while some alums, especially younger ones, said they are“very interested” in online access to the magazine, far more expressed interestin receiving a paper copy.

“Reading habits reflect lifestyles,” the consultants noted. The magazineis “leisure reading to some, an important professional education resource forothers. The printed version was lauded by most, but considered unnecessaryby some younger alumni, who prefer electronic ‘digest’ communications.”

Given these responses, it is possible the paper magazine will disappearsomeday, but it won’t happen tomorrow. “If it doesn’t come in the mail,there’s no way I’ll go look for it,” one alum commented about ClassNotes,the most popular part of the magazine. Another alum who reads on papersaid, “If I see something I like, I go to the Web site and email articles toclients. For me the Web is value-added, but not necessarily the way I read.”

Another pointed to the different strengths of these media. There aremany “things I want to know that I come looking for,” he said, which is astrength of the Web. But there are also “things I didn’t know I wanted thatthe gsb can make me aware of.” Flipping through the pages of a magazinestill offers this serendipity better than most Web sites.

Contributors to this printed and Web issue include freelance writer Karl Schoenberger, who wrote the feature story on educational reform (page 16)—a subject he found to be one of the most convoluted he has hadto unravel in his 20 years as a journalist. “I look to my sources for clarity, butpractically everyone I talked to for this story warned me how complicatedthe issues were,” he says. Given the “mind-numbing” amount of researchand ideological hyperbole surrounding the reform debate, Schoenberger

offers a “snapshot” of some of our alums in the thickof the entrepreneurial approach to reform.

Photographer Timothy Archibald (left) took the pictures for the education story, as well as for the article on a Richmond, Calif., firm working its wayout of crisis (page 8). A Richmond resident himself,Archibald “was amazed with the things that areuncelebrated—going on in my own back yard.”

E D I T O R

a quarterly publication for

alumni/ae of the stanford university

graduate school of business

PUBLISHERCathy Castillo

EDITORKathleen O’Toole

ASSOCIATE EDITOR (CLASS NOTES)Gale Sperry

ASSISTANT EDITOR (CLASS NOTES)Kristine Fortier

ASSOCIATE EDITOR (PRODUCTION)Nan Christensen

ART DIRECTION & DESIGNSteven Powell

CONTRIBUTING WRITERSMeredith Alexander, Barbara Buell, Helen K. Chang, Cherian George, Debra E. Meyerson, phd ’89, Karl Schoenberger,Robert L. Strauss, mba ’84, Janet Zich

COPYEDITINGHeidi Beck, Lila Havens, Michelle Hogan, Kate Kimelman

PREPRESSPrePress Assembly, San Francisco

PRINTINGGraphic Center, Sacramento

STANFORD BUSINESS Published quarterly (February,May, August, November) by the Stanford UniversityGraduate School of Business (issn 0883-265x). ©2001by the Board of Trustees of Leland Stanford Junior University. All rights reserved. Printed in the UnitedStates. Periodicals postage paid at Palo Alto, ca.

POSTMASTER Send address changes to Stanford Business,Graduate School of Business, Stanford University, Stanford, California 94305-5015.

SUBSCRIPTIONS For nonalumni — $10/year in the u.s.and u.s. possessions and Canada; elsewhere $12/year. For faster delivery outside the u.s., add $14 per year tosubscription payment.

CHANGE OF ADDRESS Alumni Office, Graduate Schoolof Business, Stanford University, Stanford, ca 94305-5015. Phone: 650.723.4046; fax: 650.723. 5151; email:[email protected].

CONTACTS For subscription information, permissions,and letters to the editor, contact our editorial office: Stanford Business, News and Publications, GraduateSchool of Business, Stanford University, Stanford, California 94305-5015. Phone: 650.723.3157; fax:650. 725.6750; email: [email protected].

STANFORD BUSINESS SCHOOL OFFICES Admissions:650.723.2766; Alumni: 650.723. 4046; Development:650.723.3356; Executive Education: 650.723.3341.

MAGAZINE WEB SITE www.gsb.stanford.edu/news/bmag

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by dean robert l. jossdean’s column

Building Community Is Not a GivenSeptember 11 events just two days before.

We are trying to make it easier for you to engage with the School. We have expanded alumni services toinclude a monthly news digest of events, research sum-maries, and information about the School that has ap-peared in the media. We’ve had good feedback so far.Take advantage of this service and others by visiting youralumni Web site (www.gsb.stanford.edu/alumni/). If you

would like to receive email communications from theSchool, log on to the Alumni Directory (http://alumni-gsb.stanford.edu) and update your email information.

We are also expanding a section on your Web pagecalled Lifelong Learning, which will increasingly offerbook suggestions, reading lists, and academic resourcesthat you may find relevant. We are currently featuring synopses of some of our new second-year seminars—preterm one-week classes with a maximum of 12 par-ticipants designed to give students and faculty an inti-mate, in-depth opportunity to explore a research topic.

Our alumni services Web page also features an im-proved career network service, and we are looking formore alums to join our mentor program for students.

September’s terrible tragedy forced us to cancel ourSeptember alumni program in Hong Kong, but restassured it is being rescheduled. And next March weplan to be in Europe with Professor Haim Mendelson,who is a thought leader in the field of information man-agement. In what will likely be a period of uncertaintyahead for all of us, I hope that you will rely in part onyour gsb community for support. ■

As we went to press with this magazine,the terrorist attacks on the World Trade Center and the Pentagon had taken placeonly a few weeks prior. Already, the Stanford

Business School community—like many other familiesand communities—has been profoundly affected bythese acts. With two of the four hijacked planes boundfor California and estimates of more than 6,000 casu-alties, it seemed inevitable that our community wouldbe touched directly. With great sadness, I must tell youthat word reached me that Bryan Jack, mba ’78, waslost in the plane that struck the Pentagon. Our deepestsympathies are with his family and friends.

It has given me comfort, however, to see students,alumni/ae, faculty, and staff coming together—talking,praying, and sharing. On September 11, the new stu-dents, here for their second day of orientation, gatheredwith staff and faculty for a vigil in the Birds courtyard.In addition, we were relieved to see, in the early after-math of this tragedy, that so many of you reported yoursafety to fellow alumni through a temporary databaseset up by Rian Schmidt, mba ’96. We now have an Alum-ni Thoughts page on our Web site (www.gsb.stanford.edu/alumni/) through which you may share comments aboutthe difficult new environment in which we must live.

Community is not something we take for granted.We work at making collaboration the hallmark of aStanford Business School education. Indeed, commu-nity building was the central theme of our new studentorientation program this year.

In addition to ensuring that students build strong tieswith faculty and staff while they are here, we feel it isessential to involve alumni in the life of the School, nowmore than ever before. We need you to help nourish theculture and resources of the School. And we have devel-oped new avenues to help you do so. For the secondyear in a row, alumni are helping us in the selectionprocess of the next class by conducting applicant inter-views. We urge more of you to do so and in the processhelp shape the quality of experience you have personal-ly known at the gsb for those who are coming after you.

Alumni also participated in an all-new student ori-entation panel this year. The panel’s purpose was to givestudents a sense that the School is bigger than any sin-gle one of us and that the gsb experience is both a priv-ilege and a gift, since alumni donations underwrite asignificant portion of our annual operating costs. At aninformal lunch and a subsequent dinner, alumni whoattended the event shared advice on how to make themost of their two years. We had also planned a separateAlumni Perspectives panel to help students see them-selves as part of a larger network, but we postponed ituntil later in the year due to the emotional impact of the

In addition to ensuring that students build strong ties withfaculty and staff, we feel it is essential to involve alumni in thelife of the School, now more than ever before.

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SpreadsheetWHAT’S UP News About the GSB and Its Graduates

School Backs Interns in Nonprofits

Thanks to the school’s new commitment to the Stan-ford Management Internship Fund (smif), second-year stu-dent Jay Hoffmann (above) could afford to take a summer jobwith the National Parks Conservation Association.

It was nearly two decades ago that gsb students developed thefirst business school program to encourage mba students to pursuesummer job opportunities in the nonprofit sector. Since then, stu-dents have collaborated with alumni/ae, administrators, staff, andfaculty to keep smif going. Their job became a bit easier this yearafter the administration agreed to have the School underwrite thestudent-run program. The level of funding for 26 smif interns wasalso increased to approximate the median summer salary earned by other gsb students.

“Student leaders retained leadership for promoting awareness,building community, and overseeing the screening and selectionprocess,” said Julie Juergens, director of the Public ManagementProgram. “Our thanks go to the smif student leaders who pro-posed this new structure and to Dean Joss, who enthusiasticallysupported it.” Hoffmann, who also worked for the Golden GateNational Recreation Area, currently serves as a smif cochair.

Institution Board of Overseers,and 10 years on the StanfordBoard of Trustees. He was na-tional chair for major gifts inStanford’s Centennial Campaignand president of the University’shonor society for alumni volun-teers. Dickason received theStanford Associates’ Gold SpikeAward in 1990 and the Centen-nial Medallion in 1992.

Guilt Is a Sunk Costguilt is so widespreadamong professionally trainedwomen with small children thatLaraine Zappert advises thesemothers to “accept some meas-ure of guilt as a sunk cost.” Inher new book, Getting It Right,about work/family conflicts, theclinical professor of psychiatryand behavioral sciences at theStanford Medical School sur-veyed approximately 300 gsbalumnae on this topic in 1996.She found that mothers whocontinued to work felt guiltyabout not spending more timewith their children, while thosewho stayed home felt guiltyabout not making more use oftheir education.

One way to handle the guiltis to talk about it with otherswho share similar concerns, she says. Many of the statisticalresults of Zappert’s survey—98

percent of mothers said havingchildren was the right decision,but 42 percent said it compro-mised their careers somewhat—were reported in the September1996 issue of this magazine.

Accessing the Global Workplacethe business school’sAlumni Association has joinedwith 25 of the world’s leadingbusiness schools in 14 countriesto bring international careeropportunities to its alumni/ae.The new GSB.Stanford GlobalWorkplace is a private careernetwork that can be accessed by logging on to the gsb’sAlumni Online Directory atwww.gsb.stanford.edu/alumni/directory. In the directory (whichallows alums to find each other),the Global Workplace hyperlinkis available under the heading“resources.”

Prom Night Reduxa half century after hemissed his high school gradua-tion, Edwin Bly, mba ’49, ofSacramento, donned his Navywhites to go to his second seniorprom. This time it was a“senior-senior” prom and graduationnight staged for about 40 wwiiveterans who missed their firstgraduation or prom night atRocklin High School in Califor-nia because of military service.

Bly, who was a skinny 17-year-old when he joined theNavy, told the Sacramento Beethat he managed to get a briefleave from Navy training for hisfirst senior prom and wore hisNavy blues, making it back tothe base just in time for morn-ing exercises at 5:30.

This spring’s celebration was

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GSB Loses Long-TimeAdviser, Volunteera ceo who serves on outsideboards learns not only from the substance of the discussionsbut also from seeing how thatsubstance is presented, JamesDickason, mba ’51, remarked in 1982 when he received theSchool’s highest alumni honor,

the Ernest C. Arbuckle Award.Stanford and the gsb alsolearned much from Dickason, a prominent Los Angeles busi-ness leader, philanthropist, andformer chairman of the NewhallLand and Farming Co., whodied Aug. 26 in Reno, Nev.

Dickason served six terms onthe Business School AdvisoryCouncil, one on the Hoover

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around the country and in London. Those who earnedtheir mba in the last 15 years“are really interested in havingthe Alumni Association provide networking opportunities acrossthe board, either through chap-ter events, conferences, or careerservices,” says Lynne Reynolds,sbsaa executive director. Olderalums are interested in classreunions but tend to think link-ing peers is a less important role for the association than“enhancing the reputation ofthe gsb.” The association willuse survey results to designevents, services, and communi-cations targeted to people withdifferent interests and awarenessof existing sbsaa programs,Reynolds said. For more surveyresults, see www.gsb.stanford.edu/alumni/surveyresults.html.

Hiring Talentmbas looking for a better job will find tips in a new bookthat was written primarily forrecruiters seeking talent in competitive markets, says SteveAnderson, mba ’99, a partner at Kleiner Perkins Caufield &Byers. The book, Hiring the Bestand the Brightest, is by SherrieGong Taguchi, mba ’89, whodirected the Business School’sCareer Management Centeruntil October when she movedto London with her husband,Mark Taguchi, mba ’86.

Taguchi’s tips are based bothon her experience assisting com-pany recruiters and gsb studentsto make good matches and herpast work in global recruitingand human resources. The bookis published by Amacom, thepublishing arm of the AmericanManagement Association.

Not Your TypicalSummer in Georgiajim twiss spent part of hissummer arguing with oilmenwhile waiting for Georgian President Eduard Shevardnadzeto arrive in Baku, Azerbaijan.Classmate Liana Downey wasembroiled in negotiations, conducted partly in Russian,arguing the validity of net pres-ent value. The two members of the Class of 2002 spent 10weeks in Tbilisi, Georgia, pon-dering problems of the formerSoviet republic.

Downey worked for theGeorgian International Oil Corporation, the state-ownedenergy company, on the right-of-way negotiations for the natural-gas pipeline that is to be builtacross Georgia from Azerbaijanto Turkey. Twiss split his timebetween the negotiations, organ-izing a restructuring of Georgia’sdebt to Austria, and selling twostate-owned telecommunicationscompanies. Downey’s task wasto negotiate with the consortiumof oil companies on payment to

planned by 30 Rocklin Highseniors in the National HonorSociety who wanted to expressthanks to the veterans.

Bottom Line2

students in the publicManagement Program (pmp)are interested in better under-standing how and why someinnovative businesses are pro-moting double bottom lines—profits and public service—atthe same time. Double bottomlines, the subject of this year’s

Public Management Initiative,will be explored by inviting in-dustry speakers to the gsb andlooking at the business modelsof companies like Wal-Mart and Cisco. Wal-Mart Stores Inc.opened its health insurance planto workers who punch in only

a few hours a week, and CiscoSystems recently offered laid-offemployees the option of receiv-ing a third of their salary if theywork for a nonprofit organiza-tion for a year.

The topic also includes inno-vative efforts to bring the ven-ture capital model of for-profitinvesting to the nonprofit sectorand initiatives by nonprofits to create for-profit functions.For more information, go to the pmp Web page at www.gsb.stanford.edu/pmp.

And the AlumniSurvey Says...although gsb alumni/aehave a very strong affinity fortheir classmates, younger alumsalso like to network with classesbesides their own, according to results of a new survey con-ducted for the Stanford BusinessSchool Alumni Association(sbsaa). Grads view the Inter-net as an important source ofinformation, although youngeralums are more inclined toaccess and use the alumni Website and online services.

About 4,500 of the School’s23,000 alumni/ae responded to the mail and email survey.Nearly 100 also attended focusgroup sessions in 14 locations

SRO Turnout for Hollywood Class

Sigourney Weaver, star ofAliens and Gorillas in the

Mist, was one of a cast ofentertainment industry notableswho spoke to students in RodKramer’s course Working in the

Film and Television Industry. Alsoappearing at the three-hour-plus weekly workshops, whichKramer cotaught with Emmy- and Oscar-winning documentary film-maker Bill Guttentag, were writers, directors, film and television pro-ducers, agents, a film critic, the head of a major entertainment lawfirm, and a former CEO of Universal Studios.

More than 100 students auditioned for 60 spots in the course bywriting proposals for a project related to the entertainment industry.

Weaver, who earned a bachelor’s degree from Stanford in 1972,turned out to be refreshingly down to earth. Her advice to budding pro-ducers was: “Be picky in your projects.… Don’t do it if it doesn’t feelright to you.… Embrace failure and learn from it.… Never do businesswith people you wouldn’t have dinner with.” But most important, shesaid with a sly grin, “When you’re very successful, hire me!”

Alum Returns to HeadMBA Admissions

Derrick Bolton, MBA ’98,became the GSB’s direc-tor of MBA admissions

in August. Alumni/ae, students,administrators, and faculty par-ticipated in an intensive nationalsearch for a director to succeed10-year veteran Marie Mookini,who announced her desire to change roles last winter. Mookiniremains at the School as an associate director of development.

Bolton, an associate at Goldman Sachs since graduating from the GSB, also earned a master’s degree in education administrationand policy analysis, with a higher education focus, while he was atStanford. Before coming to the School, he was a business analyst at McKinsey & Co. He completed his bachelor’s degree in psychology at Southern Methodist University.

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Georgia. She worked with JenikRadon, a gsb lecturer in inter-national business who led thenegotiations for the Georgiangovernment.

The importance of negoti-ating a 60-year contract was reinforced for Downey in asmoke-filled room with heateddiscussions being conducted inRussian, Azeri, and Georgian.“Arguing the validity of the netpresent value concept was anunexpected and fascinating col-lision of business school andreal world.”

Twiss recalls: “At one pointin Baku, it was 6:00 in themorning. We had been negoti-ating for 16 hours—fightingabout the definition of forcemajeure [act of God]—with thepresident of Georgia scheduledto arrive in five hours for a sign-ing and 10 exhausted oilmen onthe other side of the table. ”

Both students received sti-pends from the Stanford Man-agement Internship Fund andparticipated in gmix, a programthat gives students the opportu-nity to receive academic creditfor research projects related towork in foreign countries.

A Novel Look at a New Militarymarines prefer military tohumanitarian missions, accord-ing to Owen West, mba ’98,in his first novel, Sharkman Six,set in Somalia during OperationRestore Hope.

West, a former Marine cap-tain who came to the BusinessSchool rather than serve arequired turn at stateside duty,now takes his risks as an energyfutures trader for GoldmanSachs by day and as a writer bynight. It isn’t enough. He alsoclimbed the north face of Mt.Everest last spring, wisely turn-ing around at 28,000 feet, and

in 2000 completed his fifth EcoChallenge, arguably the world’stoughest expedition race, withthree Playboy Playmates asteammates. “I’m a restless per-son, and it’s hard to find outwho you are when you sit infront of a computer screen allday,” he says.

The risk-seeking Marines inWest’s book, just released bySimon & Schuster, are sent toSomalia with orders that forcethem to stand by and merelywatch mayhem unless their own lives are threatened. Theiradventures provide insight intothe problems of using the mod-ern military to carry out human-itarian policy.

Esperanto, Anyone?one way mba students preparefor the global economy is totake foreign language courseswhile studying business. Overthe last nine years, mbas haveaveraged 315 foreign languageenrollments a year. Spanish isthe favorite, constituting a thirdor more of the enrollments mostyears. French has been the sec-

ond favorite in most years, but Chinese took second placein 1992–93, 1993–94, and1996–97. The Russian/Slavic languages, popular after the fall of the Berlin Wall, havedeclined in more recent years,but Japanese enjoyed a healthyrebound with 15 enrollmentsthis past year after nose-divingto 1 the year before. Other languages taken include Hindi,Hebrew, Persian, German,Korean, Italian, and Portuguese,according to Betsy Scroggs ofthe mba Program office. ■

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GENERALTotal Applications 5,253Enrollment 362Women 37.6%Minority 27.1%International 23.5%Age Range 22–35Median Age 27.0Students with Advanced Degrees 11%Average Years of Work Experience 4.5Average GMAT Score 718

SCHOOL/GEOGRAPHIC REPRESENTATIONU.S. Institutions 78Non–U.S. Institutions 50Countries (including the U.S.) 31

UNDERGRADUATE MAJOREngineering/Computer Science 25.7%Economics 22.4%Behavioral/Social Sciences 16.0%Business/Accounting 13.5%Humanities 12.4%Applied/Natural Sciences 7.2%Mathematics 2.8%

TOP 5 INDUSTRIESHigh-Tech Products and Services 24.0%Financial Services 23.5%Consulting 22.4%Nonprofit/Government/Education 9.7%Diversified Manufacturing 6.6%

MBA Student Profile:Class of 2003

CLASS OF 2003

ARRIVES: Admis-sions director Derrick Bolton with Elaine Wongand Robin Daver-man, two of theBusiness School’s366 new MBA students in theClass of 2003.

Source: Registrar’s Office

FOR THE RECORD


Achance to try for a strike or a spare and get to know some class-

mates at the same time encour-aged more than 300 of the Classof ’03 and friends to turn out atMel’s Redwood Bowl for a nightof “extreme” bowling. Some stu-dents showed up for this classicorientation event in “extreme”style—to match the loud musicand high energy—before themore serious business of classesbegan on September 26. Daringto risk a gutter ball were (front)Kathy Lipscomb (2nd-year whocoordinated the event), AnaPedros, and Elaine Wong;(back) Carter Keller (friend of new student Hilary Hoover),Jeff Gerttula, Stefan Moores,Omar White, and Dan Krause.

PHOTOGRAPH BY ROBERT HOLMGRENSTANFORD BUSINESS NOVEMBER 2001

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by janet zichlearning curve

Rebounding from a Crisis A strong corporate–community relationship helped save Mike Biddle’s plastics

recycling firm after a major accident threatened to destroy the company.

In July, as workers hauled a bulky desk through a sec-ond-story window and laid new carpeting in the recep-tion area, Biddle sat in a nearly bare conference roomtalking about his company.

mba Polymers separates different colors and types ofmixed plastics so they can be remade into commercial-grade plastics. It sounds easy. “Basically, we grind themall up,” Biddle says, waving across the table at a half-dozen pint-sized, zippered plastic bags filled with trashin various degrees of pulverization. “These were com-puters, printers, and so forth. Most of the metal has beentaken out by someone else. What you see here is beingburied and burned around the world because nobodyknows how to get any value out of this garbage. Whatwe do basically is above-ground mining. We mine ourplastics without having to pump oil out of the ground.”

His hand moves down the row of baggies. “We takethis stuff and refine it one step further,” he says, “andthen separate it into different types and colors of plas-tic. Then we make it into little pellets, and someone cantake these pellets and make parts of 100 percent recy-cled plastics. We know a couple of companies that canseparate simple mixes, but we don’t know anyone elsein the world who can take this complicated a mixture.”Pointing to four bars of high-grade recycled plastic,each a different color, he says, “It took us eight years todevelop the technology to do this and over $16 millionin investments.”

In 1992, when Dow moved, Biddle started a con-sulting firm, Michael Biddle and Associates. (Its initialslater became the mba in mba Polymers.) Biddle wasmuch more successful than he had anticipated and calledon some of his old colleagues from Dow for help. Oneof them, Trip Allen, would later cofound mba Polymers.

For the next few years, Biddle and his associates concentrated on one major research subject: how torecycle plastics from computers. Most of the firm’sresearch was funded by the American Plastics Council(apc). “We were literally paid to go around the worldand figure out how to recycle plastics,” Biddle says. “Ihelped design a facility on the East Coast to demon-strate what we’d learned. We didn’t mind sharing thatpart of the technology.”

But mba had developed, both on its own and withfederal grants, more sophisticated techniques for theseparation of mixed plastics. Biddle and Allen proposedthat apc help the firm build a facility that would takeadvantage of its proprietary technology. “And that’s

There’s a story Mike Biddle loves to tell.As a young engineer at Dow Chemical, he sug-gested to his boss that since Dow was produc-ing so much plastic, it was time the company

looked into ways to recycle it. His boss answered thathe hadn’t hired a phd in polymer science to worry aboutgarbage, and that was the end of that. Or so theythought. Six months later Berkeley, Calif., outlawedpolystyrene foam containers, and other communitiessoon followed suit. Biddle’s boss decided maybe gar-bage was becoming a doctoral-level problem after all.

Biddle, Sloan ’91, went on to create and head Dow’splastics recycle research group before striking out onhis own in late 1992, when Dow decided to move itsWalnut Creek, Calif., office to Michigan. And whileBiddle hasn’t exactly turned garbage into gold, he waswell on his way until a major accident threatened todestroy his company.

Eight months after an explosion and fire shut downthe line at Biddle’s Richmond, Calif., plastics recyclingplant, mba Polymers, it started up again this summer.

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what formed mba Polymers,” Biddle says.The company received its first outside

equity funding in 1999. The $6 millionwould allow mba Polymers to switch frommainly research to commercial operations.Roughly half came from angel investors,most from the San Francisco–based Bandof Angels. The other $3 million came fromAmerican Industrial Partners, a privateinvestment partnership.

Flush with its new funds, the companywas clearly on a roll. It had grown to 100employees and brought in three senior-levelmanagers, including Richard McCombs,mba ’79, as coo and cfo. The president ofAmerican Industrial Partners, the founderof Band of Angels, and a prominent SiliconValley lawyer signed on as directors. And sodid a friend and personal investor in thecompany, John R. “Rick” Berthold, mba’65, who was director of the Executive Pro-gram for Smaller Companies at the BusinessSchool when Biddle was a Sloan Fellow.

But just three short weeks after extend-ing its operations to three shifts a day, dis-aster struck. At around 2 a.m. on Oct. 26,2000, the plant was hit by a deadly explo-sion, probably caused by an electrostaticcharge in a grinder that ignited an accumu-lation of toner-cartridge dust. The blastrocked the company’s warehouse and thesurrounding neighborhood. One employee,a 26-year-old forklift operator, was killed.The fire and the black, acrid smoke that set-tled on the area required the services of 50firefighters, sent 200 people to local medicalcenters, and closed 12 schools. Hundreds ofneighboring refinery workers were forcedinside, and toll-takers at the nearby Rich-mond–San Rafael Bridge were sent homefor the morning.

As it turned out, the fire was well con-tained and the level of toxic compounds inthe smoke fell safely below California’s Envi-ronmental Protection Agency standards. Butthe accident caused an estimated $4 to $5million in damages to the plant, and Calosha initially fined the company $212,400,a figure that still was being negotiated whenit reopened in June.

Eliminating the cause of the accident wassimple: The company no longer processeswhole toner cartridges. That was the easypart. There were times Biddle wondered,“Are we going to get out of this?” SaysMcCombs: “We had to clean up, but we alsohad to keep people focused on rebuilding.”

Biddle persuaded his investors to keephalf the employees on the payroll. But let-ting the other 50 people go was tough.“That was one of the hardest things I’ve ever

had to do,” Biddle says. “At least, thanks toRichard, we were able to keep them in placefor months.” McCombs negotiated withmba Polymer’s insurance company to hirethe 50 for cleanup, and that kept them onsomebody’s payroll for a while.

Dealing with the neighborhood wasanother issue entirely. The residents of Rich-mond do not take kindly to industrial acci-dents. In 1999 alone there had been fourmajor accidents in the city or nearby; onekilled four people. Another company mighthave hidden behind a wall of lawyers orrevved up its public relations spin machine.Instead, mba Polymers quickly and publiclyoffered to pay medical bills for anyone wor-ried about the effects of smoke inhalation.Perhaps more important, the company wasable to fall back on the reservoir of good willit had built up over the past few years.

“From the git-go, mba Polymers did anoutstanding job of reaching out to the com-munity and becoming part of it,” says SalVaca, assistant director of Richmond’semployment and training department.

They’ve invited the community into theplant for open houses, and they’ve taken theplant to the community. mba Polymersserves on the local Chamber of Commerceand also sends representatives to monthlyneighborhood council meetings. “Basically,I think we do what good corporations do,”says McCombs. “Although I’m not suremost corporations do this.”

“They’ve also hired well over 35 peoplefrom the community,” Vaca says. Confirm-ing this, Biddle adds:“We hire locally, some-times from local rehabilitation programs.We try to give people a second chance.” Hegrins at the commercial to come. “Just like

we give plastics a second chance.”Biddle pauses. “You could never say the

fire was a blessing, but there were somesmall silver linings. We were forced to stepback and take that time to evaluate. We hadbrought Bechtel in before the fire to do testwork and observe the process lines. Afterthe fire they were able to spend more timeon the line than if we had been in produc-tion. And the timeout helped accelerate ourbusiness overseas. Since we raised moneythe first time, the opportunity has only got-ten bigger—bigger even than we projected.”

There has been a market for commercial-grade recycled plastics for years, but thesupply of garbage plastic to recycle has beenhard to come by. Manufacturers have foundit cheaper and more convenient to simplydump it. But times are changing. On April 1,new legislation took effect in Japan. Man-ufacturers of washing machines, refrigera-tors, televisions, and air conditioners be-came responsible for recycling the machinesthey manufactured. In response, the com-panies have banded together and built morethan 30 recycling plants.

“These facilities are a dream come truefor us,” Biddle says. “What they do is thefront end of our business. They collect it.They aggregate it. And then they shred it torecover the metals. What’s left is this,” hesays, pointing to the first baggie in the line.“They leave off where we start. Right now,they have to burn or bury the plastic. That’svery costly, and it’s a not very good thing todo to the environment. So these big-namecompanies are very interested in getting usover to Japan as soon as possible.”

The Richmond plant should be up to itsprevious speed before the end of the year,and Biddle sees it continuing to grow. TheUnited States is flirting with recycling legis-lation on a state-by-state basis, and a num-ber of states already have banned appli-ances from landfills. Several computer com-panies, including hp and ibm, have insti-tuted voluntary take-backs. The EuropeanUnion has mandated some recycling, andBiddle is laying the groundwork for expan-sion there as well as scouting a plant site inJapan. In September Biddle announced asecond round of funding, led by interna-tional contract manufacturer Flextronics.The future looks good.

Biddle knows the unexpected may hap-pen. But he also knows that sometimes pre-dictions come true. And he sure does like totell that story about the young engineer. ■

Former Stanford Business editor Janet Zich free-lances from Half Moon Bay, Calif.

During the hard times, COO and CFORichard McCombs, MBA ’79 (here holding an armload of plastics headed for recycling),buoyed the firm by focusing on rebuilding.

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“People are talking about globalization,but they don’t understand how it affectsthem. That worries them,” Beech says as sheheads for a 7 o’clock appointment. “Thereis little public discussion of the relationshipbetween globalization, trade, and work.”

Beech hopes eventually to raise the de-bate over globalization to a higher—andwider—level on tv or radio. For now, she’spreparing for the next step in her careerwith all the thoroughness of preparing forher weekly show. “Community Lives” isn’tthe product; it’s Step One in the process.

—janet zich

Tom Tusher, MBA ’65

Tom tusher felt a lump in hischest, but it didn’t seem to begrowing, it didn’t hurt, and he did-n’t feel tired. When his specialist

told him seven years ago that “men don’tget breast cancer,” Tusher opted not toworry. He was more concerned about whatto do after re-tiring as president and coo ofLevi Strauss. “The corporate world took200 percent of my time,” Tusher, mba ’65,says. “I didn’t have time to fish and readbooks. For me, retirement wasn’t going tobe something where I was going to go andvegetate. I was going to do things I hadn’tdone before.”

Twenty years before, Tusher had bought55 acres outside of Queenstown, New Zea-land, that were so difficult to reach no localwanted the parcel. As retirement neared, his

plan for a modest fishing cabin grew into ahouse. The house would require a caretaker.If there was to be a caretaker, then why nothave a bed-and-breakfast inn? But with ab&b, so many friends might come to visitthat a lodge seemed like an even better idea.“I’ve always enjoyed design and architec-ture,” Tusher says.

The end result is Blanket Bay, a 60,000-acre luxury destination with a nine-roomlodge plus two chalets (and the Tushers’two-building home) that has garnered ravereviews from the travel industry.

Last September, six years after Tusherdecided to dismiss the lump in his chest, his new doctor said, “I don’t like the looksof that.” A needle biopsy report came backmalignant. Within a week the lump and fivelymph nodes were out. The subsequentchemotherapy was “very ugly.”

Tusher says his bout with cancer hasn’tradically altered his view of life. It’s the perspective from Blanket Bay that has—the crystal-clear water, the snow-coveredmountains, the chance for his family andguests to go hiking, horseback riding, orheli-skiing from their front doors.

“We saw the chance to do something thatwould please other people as well as createa special place in a special part of the world.Our main purpose was not to create a prof-it but to create a place that we would enjoyand others would enjoy. A lot of peoplecome back after a day out with tears in theireyes,” Tusher says. “It’s a magical spot.” —robert l. strauss, ma/mba ’84 ■

Hilary Beech, MBA ’91

It’s 5:19 p.m. on kzsc-fm and HilaryBeech is multitasking. Raising the vol-ume on a cd of North African jazz,Beech asks the subject of her interview

how she’s holding up, sips some water, runsthrough her notes for the next segment ofkzsc’s “Community Lives,” reads a fewpublic announcements in a cool “Mid-Atlantic” accent, and returns seamlessly toher guest. Three minutes have passed.

Since last January, Beech has been the vol-unteer producer, director, researcher, writer,disk jockey, technician, and host of her ownweekly, hour-long interview and call-in show,which profiles people from all walks of lifein California’s coastal Santa Cruz County.

By the end of the hour, Beech, throughskillful questioning, will have enhanced her listeners’ appreciation for the problems facing gay, lesbian, and bisexual teenagers(today’s guest runs a nonprofit speaker panelthat visits local schools); answered a calleras her guest continued on air; and crawledaround the maze of wires under her desk ina futile attempt to locate the cause of astatic-laden news feed from Berkeley’s kpfa.

And this isn’t even her day job. Days, Beech runs her own high-tech con-

sulting firm in nearby Aptos. Born in Eng-land and raised there and in California, sheis an electrical engineer with bachelor’s andmaster’s degrees as well as a Stanford mba.Last year she finished a master’s in interna-tional economics. And this, oddly, is wherethe radio show comes in.

people


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For information or applications, please contact: MONICA SEGHERS

Phone: 650.723.3341 Fax: 650.723.3950 Email: [email protected]

OFFICE OF EXECUTIVE EDUCATION, STANFORD GRADUATE SCHOOL OF BUSINESSSTANFORD UNIVERSITY, STANFORD, CA 94305-5015

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Executive Educationg r a d u a t e s c h o o l o f b u s i n e s s

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Strategic Uses of Information TechnologyApril 28 – May 3, 2002

Finance and Accounting for the Non-Financial ExecutiveMay 5 – 10, 2002, and November 10 – 15, 2002

Marketing Management ProgramJune 23 – July 5, 2002

Financial Management ProgramJuly 7 – 19, 2002

Executive Program in Strategy and OrganizationAugust 4 – 16, 2002

Managing Your Supply Chain for Global CompetitivenessAugust 25 – 30, 2002

Human Resource Executive Program: Leveraging Human Resources for Competitive AdvantageSeptember 8 – 13, 2002

E-Business and Supply Chain Management (in Asia)September 10 – 12, 2002

Electronic Business and CommerceOctober 6 – 11, 2002

Leading Change and Organizational RenewalNovember 3 – 8, 2002

Stanford Leadership Seminar: The Effective Use of PowerDecember 1 – 6, 2002

I n t h e H e a r t o f S i l i c o n V a l l e y

At the Stanford Graduate School of Business, you

stand at the window of one of the world’s most

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General Management Programs

Stanford Executive ProgramJune 23 – August 6, 2002

Executive Program for Growing CompaniesFebruary 17 – March 1, 2002, andJuly 21 – August 2, 2002

Stanford – N.U.S. Executive Program inInternational Management (in Singapore)August 2002 (Three weeks: Dates TBA)

Advanced Management College(at Stanford Sierra Conference Center)September 15 – 20, 2002

Management Degree Program

Stanford Sloan ProgramAugust 29, 2002 – June 15, 2003

P O W E R F U L I D E A S ,I N N O V A T I V E P RA C T I C E ,L A S T I N G V A L U E

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11.ExeEd ad_Fall-Ad_v3.qxd 6/11/12 9:18 AM Page 11


by cherian georgemanagement

For the Greater GloryThree Jesuit priests, centered on spirituality but focused on solving worldly

problems, use their MBA degrees to push the Church’s envelope.

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individual talents,” Lahart says. “There areJesuits who are physicians, lawyers, artists,architects.” With about 22,000 men aroundthe globe, they form the largest missionaryorder of the Roman Catholic Church.

The 461-year-old organization, formallycalled the Society of Jesus, is noted as muchfor its energy as its longevity. In the UnitedStates, Jesuits have been active in the civilrights movement and are especially wellknown for their role in education. Begin-ning with Georgetown University, foundedin 1789, they have set up a network of 46high schools and 28 colleges and universi-ties around the country. Centered on spiri-tuality but geared toward direct service,Jesuits form a pool of skilled and flexiblehuman capital at the disposal of the Pope.

Getting the most out of that pool is oneof Smolich’s key responsibilities. He wasappointed California Provincial Superior in1999, putting him in charge of more than400 men from Nevada, Utah, Arizona, andHawaii, as well as the Golden State. “Insome ways it’s a human resources job, but24-7 rather than five days a week,” he says.

In contrast to the strongly hierarchical Catholic Churchit serves, the Jesuit order has a flat structure. The menreport to Provincials like Smolich, who in turn answerto the number one Jesuit, the General Superior in Rome,who is immediately accountable to the Pope. “I have apersonal conversation called the ‘account of conscience’with 460 guys every year. We talk about how the Spiritis moving in their lives, what their current mission is,and what their next mission should be,” Smolich says.His Business School training in risk management hasturned out to be especially useful when making per-sonnel decisions. “As an order, we have a tradition oftrying new things. But if we’re going to take risks, thereturns must be commensurate.”

For DiUlio, that tradition of innovation meant beingdispatched in 1999 to Ethiopia to set up the poverty-stricken country’s first Catholic university. He had bythen served as president of Xavier University in Cincin-nati and of Marquette University in Milwaukee. But histwo years in Addis Ababa were “something totally dif-ferent,” he says. DiUlio’s reminiscences include being

Jesuits Tom Smolich (left) and Dan Lahart atthe Sacred Heart Center in Los Gatos, Calif.

Afew eyebrows tugged heavenwardwhen Tom Smolich was asked to head one of the Jesuit religious order’s 85 provinces.“One of the concerns heard when I was

named Provincial was, was I going to turn this into abusiness?” he says. “No, I’m not turning it into a busi-ness.” There is a hint of exasperation in his answer, butit is not difficult to see why such questions pop up. Afterall, a Stanford mba is hardly the typical postgraduatequalification for someone who has taken a vow ofpoverty. But, as improbable as that career track mayseem, Smolich was not the first Jesuit priest to comestudy at the Business School. The Class of ’83 hadAlbert DiUlio, who has just taken up a leading positionin one of the country’s largest school systems. Smolich’sown Class of ’96 included Daniel Lahart, recentlyappointed president of a Houston preparatory school.

Stanford’s three Jesuit mbas are part of a centuries-old experiment in engaging the world for the greaterglory of God—ad majorem Dei gloriam, as their mottoputs it. “The Jesuits try to take advantage of people’s

12-13.priests-10.1-pp 6/11/12 9:20 AM Page 12


confronted by hundreds of sheep and cattleoutside his front door on market days;learning to direct taxis in a city where thestreets have no name; and inching throughthe government’s slow-moving bureaucracy.With preliminary funding for the universityput up by the Italian Bishops’ Conference,DiUlio entered into talks with the Ethio-pian government. It took more than threemonths to obtain a meeting with officials todiscuss the first draft of the university char-ter. “Most of my time was spent waiting,”he recalls. “It’s easy to underestimate theamount of time it takes to get things donein a different culture. And it is a very dif-ferent culture. But it really was an excitingproject, with a lot of potential. It still is.”

DiUlio completed a feasibility study andidentified a suitable plot of land, but he esti-mates that it will be another three to fiveyears before the institution opens. It will betough to find teachers, he says. Much of the indigenous professional class has emi-grated, and it is hard to draw expatriatesinto the country. Having done some of the groundwork for the university, DiUliomoved on this year to a new assignment halfa world away. When the Archbishop of LosAngeles created the position of president ofschools, DiUlio was picked for the job. TheL.A. Archdiocese runs one of the largestschool systems in the country, with 300 highschools and elementary schools servingabout 100,000 students. As their head,DiUlio’s responsibilities include strategicplanning, financial management, and find-ing solutions for reaching underserved andminority communities in the metropolis.“Los Angeles has a very large population ofnewly arrived peoples, and helping themand their children become fully integratedinto American culture remains a major chal-lenge,” he says.

The year 2001 was a milestone—bothprofessionally and spiritually—for Lahartas well. In August, he took up the presi-dency of Strake Jesuit College PreparatorySchool in Houston. He had spent the previ-ous five years as vice president for financeand administration at Gonzaga CollegeHigh School in Washington, d.c. There, hemasterminded a $21.5 million bond issue to

finance a major campus renovation by rely-ing heavily on his mba experience. “With-out it, I wouldn’t have known where to be-gin, and I probably would have been tooscared to do it,” Lahart says. “There weretimes I could pick up the phone and ask aclassmate for advice.”

Before moving to Houston, Lahart em-barked on his Tertianship—the final stageof his Jesuit training. This brought him backto the San Francisco Bay Area, but this timeit was to the Sacred Heart Jesuit Center,high on a hill in Los Gatos. Downtown SanJose is clearly visible in the distance, but itis the serene religious statues and free-roam-ing deer in the garden that set the tone here,not the Silicon Valley bustle below. Lahart’sTertianship included a 30-day silent retreat,in which solitary contemplation is inter-rupted only by brief daily meetings with anadviser. “It’s our belief that an immediateexperience of God is possible,” he explains.“The retreat is a kind of withdrawal fromall the distractions of the world to be ableto hear God’s call.”

The number of men willing to respond to that call—with its long years of trainingand its perpetual vows of poverty, chastity,and obedience—has been falling steadilysince the 1960s. The u.s. provinces havebenefited from some immigration of Jesuitsfrom Asia and Africa, where the order is stillgrowing. Nevertheless, numbers have fallenfrom over 8,000 in the mid-sixties to about4,000 today. “Manpower, manpower, man-power,” DiUlio replies, when asked to iden-tify the main challenges facing the order. Henotes that when he studied at MarquetteUniversity in the 1960s, it was “extremelyrare” for a student not to be taught by sev-eral Jesuits in the course of a year. Nowa-days, students may not have any contact atall with the Pope’s Men in Jesuit schools.“It’s harder and harder to maintain theiridentifiable religious character,” DiUlioacknowledges. Doing so requires greaterreliance on lay people, which the threepriests agree has been working well.

But some within the church allege thatthe Jesuits have bitten off more than theycan chew—building a large school systemon the assumption that the order would con-

tinue to grow. Smolichcounters: “Our found-er, Ignatius, was not acircle-the-wagons kindof guy. We’re going totry things. Yes, we setup this frankly phe-nomenal private Cath-olic school network. Is

it perfect? No, it’s not perfect. So what? Isthere a lot of good going on? Yes.” He notesthat Jesuits in the United States continue tobuild and innovate. For example, they haveset up a string of “Nativity” schools acrossthe country in which students from poorfamilies are given intensive academic andspiritual training in a year-round programthat includes extracurricular activities andsummer classes. “Historically, we’ve gonewhere needs are greatest. By nature, we’repeople who push the envelope, and thechurch needs people who push the enve-lope,” says Smolich.

Some critics are unimpressed, and theyargue that in its eagerness to address thepractical problems of the world, the Societyof Jesus has distracted the church from itsproper, spiritual purpose. In the conspiracy-theory version of this argument, Jesuits haveeven been portrayed as Trojan horses whohave smuggled Marxist liberation theol-ogy into the heart of the Roman CatholicChurch, with some far-reaching geopoliti-cal consequences.

The mba priests sweep aside such criti-cism. They perceive no such wall betweenspiritual and temporal worlds. Says Smo-lich: “Gerard Manley Hopkins, the Jesuitpoet, said, ‘The world is charged with thegrandeur of God.’ I really believe that. Thereare opportunities out there and things wecan do.” Their spiritual gift, or charism, is toget their hands dirty, adds Lahart: “There aresome religious orders whose charism is to siton a mountaintop and pray for the world.Our charism is to get involved, to try tomake a contribution to a situation, and inthe midst of that, recognize our God is pres-ent in what’s going on.” Jesuits are “con-templatives in action,” he says.

With everything that’s on their plate, thethree say their mbas have come in handy.Their jobs involve reading balance sheets,communicating with lay board memberswho use the language of business, and man-aging men and assets. But while they seeparallels between their order and any otherlarge corporation, they are also quick topoint out the limits to the analogy. After all,their bottom line is fundamentally differentfrom that of the typical Fortune 500 outfit.“The key difference is that governance isbased on an account of conscience,” saysSmolich. The California Provincial adds:“Am I the ceo? Yes, I’m the ceo. Would Iever use that title? Not on your life.” ■

Cherian George is a Stanford PhD candidate in communications and a former reporter forthe Singapore Straits Times.

“Los Angeles has a verylarge population of newly arrived

peoples, and helping them become fully integrated

remains a major challenge.”—Reverend Albert DiUlio, S.J.

12-13.priests-10.1-pp 6/11/12 9:20 AM Page 13

by meredith alexanderhealth care

A Proposed Remedy for the UninsuredA new federal agency would oversee a system in which all Americans could pick

among competing health care plans—as long as they pay the cost differential.

The group hopes that the government will give taxcredits to allow lower- and middle-income Americansto afford the premiums. Because individuals would payfor the coverage—either from tax credits, employer-given credits, or their own funds—consumers alsowould have an incentive to choose lower-priced plans.That pressure to lower prices could cut medical costsacross the board, the three researchers believe.

Key points of the Singer-Garber-Enthoven plan are:● The creation of public, private, and employer-based“insurance exchanges” that would offer a variety ofhealth plans in every geographic region, as well as agovernment-sponsored “U.S. Insurance Exchange” towork as a safety net. Individuals who enroll through anexchange would be guaranteed an insurance policy.People who did not enroll themselves would be enrolledin a default plan.● Tax credits for low- and middle-income Americans touse for health care purchased through such exchanges.● A new “Insurance Exchange Commission,” a federalagency resembling the Securities and Exchange Com-mission, that would distribute tax credits and pay-ments, accredit exchanges, and serve as an informationclearinghouse for the public.

The proposals resemble the plans Bill Bradley putforward during the Democratic presidential campaignof 2000—and, interestingly, are also similar to a mid-1990s Republican plan that never got off the ground,Enthoven says. Such “managed competition” has beenput into place before on a smaller scale—including atStanford, which gives its employees credits and a choiceof insurance plans, with employees having to contributemore of their own funds for more expensive plans. “It’sa wide range of choice, but it’s a responsible choice—ifyou pick something that costs more, you bear the costyourself,” he says.

Enthoven, often called the father of managed care,since 1978 has promoted similar solutions to the coun-try’s health care problems. Garber helped craft Bradley’shealth care plans, and Singer has held a variety of healthcare research and government advisory positions.

Congress, however, has been more concerned withother health-related matters lately, like the Patients’ Billof Rights. “America is not in the mood for looking hardat this right now,” Enthoven says. But when the politi-cal climate changes as costs rise, their plan might be justthe thing the doctor ordered. ■

Meredith Alexander is a staff writer for the Stanford Uni-versity News Service.

Health care today is “not affordable formost people, and it’s also not affordable fortaxpayers to help many of those people,” says Alain Enthoven, professor emeritus at

the Business School. That’s why he has joined withanother Stanford professor of health policy and a gsbalumna to propose a new health care system. Their ideais to create a system of health insurance “exchanges,”each offering a choice of plans, and to build a new fed-eral agency to monitor them.

Enthoven’s coauthors are Sara Singer, mba ’93, theexecutive director of Stanford’s Center for Health Pol-icy, and Dr. Alan Garber, the center’s director and a vis-iting professor this year at the Business School. Theirproposal has been presented before congressional com-mittees and is published in the new book CoveringAmerica: Real Remedies for the Uninsured.

At the crux of the group’s plan is the notion of aninsurance exchange. An exchange would be createdwhen an employer, or any other public or private organ-ization, offers people a choice among several competinghealth care plans. Since consumers would be able to pickbetween plans—each with its own price tag—the result-ing competition would give health plans an incentive tolower their premiums to attract more members.


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stanfordsloan

program2002-2003

“I hope you will consider sending a senior manager in your

organization to the Stanford Sloan Program. Sloan Fellows graduate

with the knowledge and confidence to lead global enterprises.”

The Stanford Sloan Program is a full-time master’s

degree program in general management for executives

with at least eight years’ experience and high potential for senior-

level positions. Its principal objectives are to develop a top

management perspective; increased appreciation of the global

nature of the social, economic, political, legal, and ethical

responsibilities of management; and greater understanding of key

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marketing, decision analysis, and strategic planning. The 48 Sloan

Fellows are expected to have the sponsorship of their employers

and to resume careers with those employers at the conclusion

of the program.

For brochure and application materials, contact:Bruce McKern, Director, Stanford Sloan Program

Graduate School of BusinessStanford University, Stanford, CA 94305-5015

Telephone: (650) 723-2149 Fax: (650) 725-4070Email: [email protected]

Web site: http://www.gsb.stanford.edu/sloanApplication deadline: February 15, 2002

The 46th session of

the Stanford Sloan Programwill run from September 2002

through June 2003

Robert L. JossPhilip H. Knight Professor and DeanStanford Graduate School of BusinessSloan Fellow 1965–1966

15-Stanford Loan Program-Ad 6/11/12 9:23 AM Page 15

16 STANFORD BUSINESS MONTH YEAR

NoTextbookAnswers

Hope community academy, an innovative elementaryschool in St. Paul, Minnesota, tells the story of how a fewgood ideas from the world of business can help trans-form public education. The k–3 charter school made itsdebut last fall after elders in the city’s ethnic Hmong community complained that their children were per-forming poorly in local public schools. The special needs

of these students were not being served by conventional bilingual educationand summer school programs.

So parents organized and started their own school. They located a sitein an abandoned brewery in the eastside Swede Hollow neighborhood,where many Hmong refugees had resettled after fleeing the highlands of Laosin the aftermath of the Vietnam War. To run Hope Community Academy,they turned to LearnNow, a for-profit “educational management organiza-tion” (emo) based in New York, in order to balance the unique cultural sen-sitivities of their community with a no-nonsense administration that stressessuch practices as rigorous student testing and budgetary discipline.

The progress made during Hope’s maiden year was measurable and dra-matic, says Jim Shelton, president of LearnNow, which became a division of Edison Schools in July. Shelton, who earned dual master’s degrees at Stanford’s Graduate School of Business and the School of Education in 1993,says as many as 88 percent of Hope’s kindergartners and 92 percent of itsfirst-grade students scored in the fall at “below basic” level on the SunshineAssessment, a standardized test for early development in literacy. By spring-time, their scores had flipped: 90 percent of kindergartners and 84 percentof first-graders scored at “proficient” or higher. Sec-ond- and third-graders demonstrated similarly sig-nificant improvement in the sat-9 test. “These kindsof gains are unheard of, especially in a first-yearschool,” says Shelton, a former McKinsey & Co.consultant who grew up in a disadvantaged AfricanAmerican neighborhood in southeast Washington,

from left: GLORIA LEE, mba & ma

in education’98,KIMBERLY SMITH,

mba’98, and LAUREN

DUTTON, mba’97

Photographs by TIMOTHY ARCHIBALD

16-19.feature-school-10.1-v2 6/11/12 9:25 AM Page 16

STANFORD BUSINESS MONTH YEAR 17

GSB alums are using their management training to attack problems in the nation’s public schools. IT’S NOT AN EASY ASSIGNMENT.

By KARL SCHOENBERGER


T


d.c. “It’s clear there are no excuses for not creating an environ-ment where all children can achieve.”

Shelton is one of the growing number of gsb alumni/ae on thefront lines of education reform—entrepreneurs who are using theirmanagement skills to attack the seemingly insurmountable prob-lems of the nation’s ailing public schools. Things don’t always goas smoothly as they have for LearnNow in St. Paul. Along withother pedagogues from the business community, Stanford’s mbasencounter an entrenched education bureaucracy and deep suspi-cion about the remedies they advocate. Fundamental business concepts—such as strict fiscal accountability, efficiencies of scale,merit-based compensation, and assessment of quantifiableresults—can seem radical and threatening in the tradition-boundeducation environment, where the culture of change is slow andcautious. The vehicle for this change in many cases is the charterschool—an independent school within a public school district thatis funded by the same taxpayer money as others but managed byan outside organization that hires its own staff and operates withan alternative philosophy. Stanford mbas are involved in a widerange of organizations that have education reform as their goal,from nonprofit and for-profit emos to foundations that providefunding to school experiments to groups that train teachers, prin-cipals, and school volunteers. The business-inspired solutions theypromote, however, can sometimes meet with resistance.

this conflict in values came into sharp focus recently in acontentious debate over the renewal of an elementary school char-ter in San Francisco held by Edison Schools, LearnNow’s parentand the nation’s largest for-profit emo. Despite praise from manyparents and claims by Edison staff that significant progress hadbeen made in learning achievement during the school’s three yearsof operation under charter, a majority on the San Francisco Boardof Education was deeply troubled by Edison’s for-profit and pub-licly traded corporate status. Critics claimed the school’s test resultswere skewed because poorly performing students had been elimi-nated from the test pool. The board revoked Edison’s charter, butin a last-minute compromise allowed the school to stay open thisfall under state supervision.

“Public schools and public institutions operate in very differentways than people trained and experienced in the private sector tendto realize,” says Linda Darling-Hammond, the Charles E. Ducom-mun Professor of Education at Stanford. Darling-Hammond sup-ports the efforts of entrepreneurs to solve problems in education,but notes that imposing business theories on the u.s. public schoolsystem is nothing new: Initiatives to fix schools with testing andmerit pay have come and gone since the early part of the last century. Pay-for-performance in today’s school environment, forexample, remains ineffective because “the people who are sup-posed to be handing out merit pay raises—the principals and theadministrators—don’t have the time or the qualifications to deter-mine which teachers deserve it.” The problems are very deep andvery complex, she says. “You need to change something within thesystem to get out from under it and allow innovations to work.”

Because the byzantine debate on school reform has tended togo in circles rather than progress in straight lines, it’s an increas-ingly important task to bridge the divide between education tradi-tionalists and the agents of entrepreneurial change. This is especiallytrue in light of President Bush’s controversial education reform ini-tiative, which contains many elements advocated by business inter-ests—including national testing standards and practices that some

educators fear will have the devastating effect of pushing studentsout of the system and reducing high school graduation rates.

One person taking on the leadership challenge of moderatingthe debate is Kimberly Smith, mba ’98. Smith, a former Teach forAmerica corps member and business training consultant who is thedaughter of an education professor and a school teacher, likes totalk about “hybrid” solutions. “People are speaking two differentlanguages” when they talk about education reform, says Smith,chief executive of San Francisco–based New Schools Venture Fund.“Efficiency is not necessarily equal to effectiveness. The trick is toget to a hybrid space where you have business leaders driving toefficiency and educators seeking quality and effectiveness.”

New Schools, where Lauren Dutton, mba ’97, is also a partner,is a donor-supported nonprofit organization that describes itself asa “venture philanthropy” fund investing in “education entrepre-neurs.” The organization helped Shelton and his cofounder, ceoEugene Wade, by seeding their fledgling LearnNow startup withloans and a $1 million equity investment. The fund will reinvestcapital gains generated by the Edison merger into other schoolreform initiatives, for-profit and nonprofit alike. “The public schoolsystem, the business sector, and the nonprofit sector all have partsof the solution. What’s needed is a commitment to bring all theseparts together,” says Smith.

The basic vision at New Schools—which was founded by BrookByers, mba ’70, of Kleiner, Perkins, Caufield & Byers and otherprominent Silicon Valley venture capitalists—is that by leading by example, entrepreneurs can have a catalytic effect of instilling business-style accountability in public schools. One basic problemin the education establishment is “misalignment,” says Smith,where resources go into the system without being linked to meas-urable outcomes in educational achievement. Compared to the$360 billion that the nation spends on public education every year,New Schools’ $20 million investment portfolio is minuscule, butSmith says it is “strategic,” aimed at influencing public policy delib-erations and decision making on a larger scale.

Gloria Lee, mba and ma in education ’98, takes a somewhatdifferent approach. She also cut her teeth as a business consultantat McKinsey and, after Stanford, helped establish the Bay Areaoffice for a ucla School of Management program that trained public school teachers and principals in leadership and changemanagement. Lee is now chief operating officer for Aspire PublicSchools, a nonprofit charter school organization founded in a part-nership between prominent Bay Area educator Don Shavley, for-mer superintendent of schools in San Carlos, Calif., and high-techentrepreneur Reed Hastings.

Lee is among the ranks of reformers who envision the ideal of an “education marketplace” that would offer parents greaterchoice and revolutionize public education once there is a criticalmass of alternatives, primarily in the form of charter schools. “Theidea of creating more opportunity for parents to choose is a goodone, and I think we’re moving in that direction,” Lee says. But sheadds, in a note of realism: “We may never really get there.”

Aspire is doubling the number of charter schools it operatesfrom three to six this fall, including a new elementary school inEast Palo Alto, Calif., the underprivileged oasis surrounded byhigh-tech wealth, where public education has failed famously andwhere education reformers love to set up laboratories for theirideas. There are stubborn obstacles in the way of increasing thecharter school supply rapidly enough to meet seemingly insatiabledemand for choice, Lee says. Scarcity in school facilities is a bane

n o t e x t b o o k a n s w e r s



for many new charter schools, which might have to spend up to15 percent of their budget on rent, a burden not placed on con-ventional public schools. “It’s not a level playing field,” Lee says.

Another major problem, school reformers say, is the need forcustomization. A school that succeeds in one community cannotbe cloned and transplanted. Currently, there are approximately2,000 charter schools in the 36 states that allow them—a fractionof America’s 90,000 public schools. Each charter school operateswith varying degrees of autonomy within local public school sys-tems, but all are dependent on the same per-pupil funding for theiroperating costs as other district schools. The fact that communityneeds differ from district to district and per-pupil funding varieswidely across state lines makes for a maddeningly complex patch-work of market conditions. Efficiency that might be derived by cre-ating a successful charter school model and applying it uniformlyon a large scale is illusory in the so-called education marketplace.

The same seems true for the for-profits. Edison Schools—found-ed in 1992 by media entrepreneur Christopher Whittle (creator ofthe Channel One commercial television news program for studentaudiences) and chaired by former Yale University president BennoC. Schmidt—now manages 113 public schools nationwide undercharters or on a contract basis. Edison may be a for-profit entitywhose stock is weathering the storm reasonably well on the Nas-daq, but it is far from profitable. The company recorded net lossesof $29.3 million on growing revenues of $266.7 million during thenine months ending March 31. Much as is the case with charterschools in general, about half of Edison’s schools have not beenmeasurably successful—including an Edison school in East PaloAlto that has been placed on the state’s list of underperformingschools, according to Darling-Hammond.

If classic market mechanisms aren’t necessarily theanswer to school reform, what else can business offer?

The kipp Foundation believes it has answers and amodel for success that draws heavily on business man-agement concepts that can be learned and theoreti-cally transplanted across diverse localities. kipp—theacronym stands for Knowledge is Power for Progress—is not an emo seeking the elusive economies of scale.It’s a training organization that guides a branded net-work of autonomous charter schools in what it believesare proven principles for turning around failing schools.The major distinction in its approach is the marathonclassroom hours that are required of every kipp acad-emy. The school bell rings at 7:30 a.m. and studentsdon’t go home until 5 p.m.—not to mention the addi-tional hours they’re required to attend on Saturdaysunder kipp’s principle that “there are no shortcuts.”Lisa Daggs, mba ’96, yet another joint master’s degreeholder in business and education, is chief of staff for thekipp Foundation in San Francisco. Daggs became aTeach for America corps member after earning herbachelor’s degree in economics from Stanford in 1991.She had her trial by fire teaching fifth grade in a crum-bling Oakland public school, where she became frus-trated by the institutional inertia of the traditional and,in her school’s case, substandard learning environment.

“I felt there had to be some things the private sectorwas doing that I could apply to education, but I didn’tknow exactly what these were. It seemed the bureau-cracy within the Oakland school system wasn’t the

answer and there had to be a better way,” says Daggs, who aftergraduate school spent several years as a consultant at DeloitteTouche Tohmatsu before returning to the education fold. Part ofkipp’s solution for schools in crisis is the Fisher School Leadershipprogram, which indoctrinates its network of educators in an 8-weekcourse in education management at the University of California’sHaas School of Business. Funded by Gap Inc. founders Doris andDonald Fisher, the program uses case-study and role-playing tech-niques to offer its students rigorous training in general managementas well as in specific tasks of administrating charter schools anddeveloping innovative classroom teaching plans.

Julien Phillips, mba ’70, executive director of San Francisco–based Partners in School Innovation, takes another approach toreforming public schools with best practices from business. Phillipstrains AmeriCorps members for classroom duty—but not as teach-ers. His organization dispatches smart manpower to troubledschools in low-income districts in the Bay Area to help lift the bur-den from harried teachers and principals. In this support role, theyfocus on such tasks as analyzing student test results and help-ing design teaching plans to meet the needs of individual studentsin the classroom. Once a Peace Corps volunteer in Peru who laterbecame a partner at McKinsey & Co. specializing in organiza-tional change, Phillips says his tactics are gentle but highly effec-tive. “If we act as if we know how to run schools better than thepeople in the system,” he says, “we’ll be rejected.” ■

Karl Schoenberger is a former correspondent in Asia for the Los AngelesTimes, Fortune, and other news organizations. He is the author oflevi’s children: coming to terms with human rights inthe global marketplace (Atlantic Monthly Press, 2000).

“IF WE ACT AS IF WE KNOW HOW TO RUN SCHOOLSBETTER THAN THE PEOPLE IN THE SYSTEM,

WE’LL BE REJECTED.” —JULIEN PHILLIPS, mba’70


20-23.feature-rads-10.1-pp 6/11/12 9:27 AM Page 20

21

Ffrom 7 a.m., when Martha Wiley walked into her10th-floor office, she has sprinted from one meeting tothe next, stopping only for a one-hour workout. Beforeshe rushes home to relieve her nanny, she has one finalmeeting at 5:30 with one of her most valued employ-ees, who requested time to talk about “the future.” Theemployee, fidgeting nervously, explains that since re-turning from maternity leave with her second child, shehas found it increasingly difficult to be in the office fivelong days each week. She needs to find an alternativeway to continue performing her job.

In just 30 minutes, the two women agree to a plan:The employee will work two days from home and threedays in the office, and every other week she will takeone day off. Martha’s only request is that the employeeremain flexible and be willing to come into the officewhen it is absolutely necessary for her work.

At 44, Martha has spent the past 10 years workingher way up to her position as senior vice president andhighest-ranking woman in the real estate division of aSeattle financial institution that I will call by a pseudo-nym, Western Financial. (Except for scholars named inthis article, all the names of people and organizationshave been changed to protect their privacy.) Martha hasactively looked for opportunities to initiate changes thataccommodate working parents and that make her de-partment more hospitable to women and people ofcolor. A full 30 percent of her staff work an alternative

schedule despite a lack of formal policy to guide thesearrangements. Martha has little doubt that her experi-ments in flexible work, even though she has kept themquiet, have been slowly paving the way for broaderchanges at Western.

This quiet and persistent approach to organiza-tional change is typical of how Martha and countlessothers lead change in their workplaces. Martha’s agen-da is bold—she wants nothing less than to make theworkplace just and humane—yet her method of changeis modest and incremental. She balances the need to fitinto the established culture against her commitment to act on personal values that often set her apart. As aresult, she continues to rock the boat, but not so hardthat she falls out of it.

All types of organizations—from global corpora-tions to neighborhood schools—have Marthas. Theyoccupy all sorts of jobs and stand up for a variety ofideals. They engage in small, local battles rather thanwage dramatic wars. But these men and women of allcolors and creeds are slowly and steadily pushing backon conventions, creating new understandings, andinspiring change within their organizations.

Sometimes people like Martha pave alternativeroads by quietly standing up for their personal valuesor by refusing to silence aspects of themselves that makethem different from the majority. Other times they actmore deliberately to change the way the organization

UNDERSTATED

LEADERSHIP

In every organization, there are a few people who act outsidethe mainstream and modestly, yet persistently, change the culture.By DEBRA E. MEYERSON, PhD ‘89

Illustration by SARAH WILKINS



does things. They are not heroic leaders of revolutionary change;rather, they are cautious and committed catalysts who keep tryingand who slowly make a difference. They are “tempered radicals.”

BEGINNINGS AT THE GSB

in the early 1980s, when I was a doctoral student at the Stan-ford Graduate School of Business, Maureen Scully, another stu-dent, and I found ourselves feeling like “poor fits” in our chosenprofession. We did not have to look far to find others who sharedour sense of misalignment. We were advisees of Professor JoanneMartin, the first tenured woman at Stanford’s Business School.Behind the closed doors of her office, she shared with us some ofthe dilemmas she faced in balancing the demands of the male-dominated culture of the Business School with her own progres-sive ideals and the needs of her family. We watched her navigatebetween her commitment to maintain her credibility within themainstream of the profession and at the same time advance a socialagenda that involved opening opportunities for women andminorities and breaking down boundaries within the profession.Her career entailed an ongoing “swim against the tide,” as she hascalled a chapter about her experience in a forthcoming book.

When Maureen and I proposed researching challenges facedby women executives, we were strongly advised by faculty againsttaking up such a heated topic at the formative stage of our careers.We were told we needed to build our credibility first. Eventuallywe returned to our interest in women executives and expanded ourfocus to include others who feel at odds with their institutions andwant to effect change. We coined the term “tempered radical” tocapture the competing pulls faced by these individuals and the del-icate balance between conformity and rebellion they must sustain.

Since our published article on tempered radicals in 1995, I haveheard from hundreds of people—many of whom would never con-sider themselves “radical”—who recognized their own experiencesin our descriptions of tempered radicals. Based on these responses,I expanded our original portrait and conducted additional inter-views, first with 182 people in three quite different companies andthen with 56 additional individuals who self-identified as changeagents. This research allowed me to write a book for many differ-ent types of people who might be tempered radicals, even if theydon’t realize it.

Though the profile of a tempered radical should apply to any-one who feels at odds with his or her organization in some funda-mental way and wants to use his or her difference as the impetusfor change, I restricted my research to tempered radicals whose val-ues are more progressive than the majority—environmentalists infor-profit companies, parents who want to create family-friendlyworkplaces, women and people of color who want to removeobstacles, gay employees who want to be treated equitably, andinnovators who advance progressive ideals, to name just a fewcases. I did not study people who advance values that are moreconservative than the majority, though I think many of the sameprinciples that emerged from my research would apply.

TEMPERED RADICALS AS “EVERYDAY LEADERS”

when i asked people at Martha Wiley’s company who theythought had made a real difference in the organization, many people, and particularly people of color, pointed to Peter Grant, anAfrican American executive who spent 30 years working his wayup the corporate ladder and bringing hundreds of others up withhim. His colleagues described Peter as an inspiration, coach, men-

tor, and catalyst of a quiet and slow cultural transformation. Onemiddle manager described how Peter had kept him going by show-ing him how his struggle to succeed was not just about his personalsuccess. “He didn’t let up on me, but it was the most caring ex-change I can ever remember having at work,” the manager said.Another executive told how Peter had helped her land a plum jobin another area of the bank, which turned out to be a platform fora brilliant career. Since then, she has followed his lead, activelyrecruiting and mentoring other minorities.

Despite this legacy, I doubt that Peter will be written into thecompany’s history books as one of its more influential leaders. Henever visibly took the helm of a dramatic transformation or organ-ization-threatening crisis. He never formally led from the very topof the organization. Yet people throughout the organization viewedhim as one of the most important people in their professional lives.They were mentored, taught, and inspired by him. Many othersrecognized the cumulative cultural impact of Peter’s persistent yetquiet efforts to effect positive change within the organization.

Like Peter, other tempered radicals act as “everyday leaders”who make a difference in the course of their daily actions and interactions. By opening the boundaries of inclusion, pushing backagainst prevailing norms, and creating new conversations andlearning, they lay the groundwork for slow yet crucial organiza-tional adaptation. This surely represents an important and under-appreciated sort of leadership in organizations and society.

We can find traces of this humble form of leadership operatingbehind the scenes of most significant social or organizational trans-formations. If we look, for example, at the u.s. civil rights move-ment, we find countless individuals leading tirelessly outside thespotlight. While history records the names of a few of the more visible heroes—Martin Luther King and Rosa Parks, to name two—it leaves out all the others who played crucial backstage roles ingenerating the momentum of social change.

The same is true of many of the people I studied. They don’tflash brightly on the cultural radar as rebels or change agents. Yetthe footprints of their efforts are everywhere, and their leadershiptakes many different forms.

Some tempered radicals leave their mark as leaders of people.Martha Wiley’s employees looked to her as one of the best man-agers because she allowed them to be themselves, created condi-tions that enabled them to shine, and championed their successes.Other tempered radicals make a difference by leading change,drawing on a spectrum of strategies from the most quiet personalapproaches to more public collective ones.

On the most quiet end, some tempered radicals inspire changesimply by behaving in a way that is consistent with their personalvalues, but in so doing they disrupt established norms. For exam-ple, John Ziwak, an ambitious manager in a business developmentdepartment of a fast-growing, high-technology company, wants tocontinue to advance in his career but is unwilling to shirk his dutiesas parent and partner to do so. But it isn’t that easy. John, like hiswife, faces pressure from his organization to work all the time andto choose between his commitments to his work and to his family.He resists pressure to make such choices and, in so doing, he chal-lenges prevailing expectations.

For example, John consistently leaves work by 6 p.m., rarelyschedules meetings that run later than this, and generally refusesto take calls at home between 6:30 and 9 p.m. so he can spend timewith his family. Though he often works late at night from home tomeet performance expectations, his schedule initially caused his

u n d e r s t a t e d l e a d e r s h i p



boss to doubt his commitment. But people respected his perform-ance, and his boss did not want to lose him. Eventually, people inJohn’s group adjusted to his schedule, and conference calls andmeetings that involved him stopped being scheduled after 5 p.m.This evolved into an unstated rule within his group that all meet-ings should be scheduled to end by 5:30, and soon a strong normemerged against calling people at home during dinner hour.

Productivity did not suffer, and virtually everyone appreciatedthese changes. What started as John’s simple adherence to his personal values and priorities createdsome significant shifts in cultural ex-pectations about time and ultimatelyworked to the benefit of many peoplebesides himself.

Sometimes tempered radicals leadchange in a more public and deliberatemanner by forming or joining a groupor task force to advance more sweepingorganizational changes. Other timesthey start small and provoke change byinitiating what Karl Weick, a professorat the University of Michigan, terms“small wins,” which are “controllableopportunities that produce visible re-sults.”For example, a person who wantsto make a corporation more environ-mentally sustainable places a green binunder everyone’s desk so people don’thave to get up and walk to the nearestrecycling receptacle and makes sure thatthe cleaning staff are paid to collect therecyclable waste.

Though small wins are relativelysimple to initiate, they need not staysmall. Tempered radicals broaden theimpact of their small initiatives by add-ing people to their efforts and creating learning from them. PeterGrant, the African American executive described earlier, was bril-liant at scaling out the impact of his small wins. For instance, mostof the jobs he held entailed hiring new talent, so when he could, hehired women and minorities. But he didn’t stop there. He askedthe people he hired to commit to doing the same. Over his careerthis effort resulted in the hiring of more than 3,500 minority andfemale candidates, many of whom became successful executives.

Martha Wiley recognized and acted on doable opportunitieswhen she experimented with flexible work arrangements, but shedid more than initiate these experiments—she created learningfrom them. After several experiments had proven successful, shecreated conversations about them, strategically framing them as asignificant change from normal practice. She called attention to thefact that “normal” arrangements did not work for all employees,many of whom could be productive contributors if minor adjust-ments were made to their schedules. By developing conversationsaround her own actions, she helped her colleagues develop newunderstandings about what needed to change and why.

QUALITIES OF TEMPERED RADICALS

in the course of my research, I have found that the mosteffective tempered radicals move back and forth between ap-proaches to change that are more and less tempered, adjusting their

approach to circumstance. Whatever their approach, however, tem-pered radicals must continually navigate between the competingpulls of their personal values and the surrounding culture. For thisreason, many tempered radicals are characterized by a set of dual-istic, even paradoxical, qualities.

Perhaps the most important quality of effective tempered rad-icals is that they know who they are and what is most importantto them, and they stay firmly committed to these ideals and values.Yet even as they stay anchored to these core commitments, they

are flexible about how and when theyact on them. This flexibility allows themto improvise, ultimately making themmore effective in achieving desired ends.

Tempered radicals also are inclinedto favor action, yet at the same timethey are marked by their patience. Themost effective tempered radicals are theones who have the patience to wait forthe right opportunity to act but who acton that opportunity—regardless of howsmall it may be—without hesitation.Tempered radicals who seek long-termcultural change also have the patienceto endure setbacks and the persistenceto keep acting in the face of them.

Tempered radicals act as individu-als to make a difference, but they alsoknow that they cannot do it alone. Theybuild connections to people who sharetheir identities and change agendas andthose who don’t. These relationshipsare essential to keep tempered radicalsgoing, to help them affirm their sense of self, to aid them in their efforts tobroaden their impact, and to forge col-lectives when necessary to drive larger

institutional change. Most important, relationships prevent isola-tion and loneliness—a fate that can easily sap the energy and effec-tiveness of tempered radicals.

I am not suggesting it is easy to be a tempered radical—but neither is it impossible. The people portrayed in my book are ordi-nary people. Most have advanced steadily in their careers whilebalancing competing pulls. They face ongoing setbacks that con-tinually test their commitment and patience. Some tempered rad-icals ultimately give up. But many others persist, working in a widevariety of ways to advance their ideals and make a difference.

In the process, tempered radicals inspire people, and they in-spire change. They inspire by having the courage to tell their truthswhen it is difficult to do so. They inspire by demonstrating the com-mitment to stay focused on their larger ideals even when they suf-fer personal setbacks and receive little recognition for their efforts.Their leadership does not rely on inspiring through heroism andheadlines. Their leadership inspires—and matters—in big andsmall ways every day. ■

Adapted with the permission of Harvard Business School Press from the book tempered radicals: how people use difference toinspire change at work by Debra E. Meyerson, a 1989 PhD graduate of the Stanford Business School and visiting professor of orga-nizational behavior. ©2001, Debra E. Meyerson. All rights reserved.

The people I studied don’t flashbrightly on the cultural radar asrebels or change agents. Yet the

footprints of their efforts areeverywhere, and their leadership

takes many different forms.


faculty news

School Welcomes 12 New Faculty

T he business school’s 12 newfaculty members this academic yearinclude two professors of account-ing, an associate professor of mar-

keting, and nine assistant professors.The accounting specialists are Madhav

Rajan, who comes from the Wharton Schoolat the University of Pennsylvania, and Stefan

Reichelstein from the Haas School of Busi-ness at the University of California, Ber-keley. Rajan’s research interests includeoptimal choice of performance measures,performance measurement and learning,organizational design and management con-trol, and incentives in interfirm relation-ships. He will teach the mba core courseManagerial Accounting and an accountingelective. Reichelstein works primarily in theinterface of management accounting andeconomics. He is interested in the way firmsshould do accounting and why they do ac-counting in particular ways. He will alsoteach Managerial Accounting as well as a doc-toral course in accounting research.

Stanford alumnus Dale Griffin, who joinsthe faculty as an associate professor of mar-keting, earned his doctorate in psychologyat Stanford in 1988. He comes from the

School of Commerce and Business Admin-istration, University of British Columbia.His research centers on marketing and con-sumer behavior; specifically, judgmentalprediction, constructive processes in socialjudgment, and individual differences in con-strual biases. He will teach an mba electivecourse in consumer behavior and a doctoralcourse in marketing.

The new assistant professors cover a widerange of specialties.

Daniel Byrd completed his doctorate incorporate strategy and international busi-ness at the University of Michigan BusinessSchool. His research in interorganizationalrelations within the field of organizationalpsychology focuses on the manner in whichorganizations learn from each other and towhat extent learning affects performanceand organizational change. He will teachthe mba core course Strategy and Organiza-tion in the Global Economy.

Michaela Draganska completed her doc-torate in marketing at Northwestern Uni-

versity. She uses econometric techniques tostudy firms’ choice of product scope. Shewill teach an mba elective course in mar-keting research.

Leslie Hodder completed her doctorate in accounting at the Graduate School ofBusiness, University of Texas at Austin. Thecurrent focus of her research in financialreporting is on financial services firms. Shewill teach the mba core course ManagerialAccounting and an accounting course for theeconomics department.

Mikolaj Piskorski completed his doctoratein organizational behavior at Harvard Bus-iness School. In the field of organization theory and strategy, his work covers suchareas as networks, economic sociology, cor-porate governance, and venture capital. Hewill teach the mba elective course ManagingOrganizational Networks and the doctoralcourse Perspectives on Organization and theEnvironment.

Katja Seim, who completed her doctoratein economics at Yale University, researchesthe empirical and theoretical analysis ofways in which firms differentiate their prod-ucts. She will teach the mba core courseData and Decisions.

Tunay Tunca, who completed his doctor-ate in operations, information, and tech-nology at the gsb, studies the structure andperformance of financial markets to exam-ine how the mix of rational liquidity-moti-vated traders and insiders affects marketperformance. He will teach the mba courseManagement in an Information Age.

S. Christian Wheeler completed his doc-torate in marketing at Ohio State Universi-ty. His research centers on repeated auctionsand price adjustment processes, with aninterest also in the area of stereotyping anddecision making. He will teach the mba corecourse Marketing Management.

Justin Wolfers completed his doctorate ineconomics in the Harvard economicsdepartment. He conducts research spanningthe area from labor economics to politicaleconomy. He will teach the mba core courseStrategy in the Business Environment.

Eric Zitzewitz, who completed his doctor-ate in industrial organization and interna-tional business at mit, studies industrial or-ganization, particularly in the application of


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The GSB attracted a large group of new fac-ulty in 2001, including accounting professors Madhav Rajan (left) and Stefan Reichelstein.

24-25.facultynews-10.1-pp 6/11/12 9:29 AM Page 24

BIOGRAPHY Merton H. Miller: Memories of a Great Mentor and LeaderMyron S. ScholesThe Journal of Finance (Vol. 56, No. 4)august 2001

HEALTH CARE MANAGEMENTNear-Universal Coverage ThroughHealth Plan Competition: An InsuranceExchange ApproachSara J. Singer, Alan M. Garber,and Alain C. EnthovenIn Jack A. Meyer and Elliot K. Wicks(eds.), Covering America: Real Reme-dies for the Uninsured, Washington,D.C.: Economic and Social ResearchInstitute, 2001

Outcomes-Adjusted Reimbursementin a Health Care Delivery SystemPrashant Fuloria and Stefanos ZeniosManagement Science, june 2001

HUMAN RESOURCES MANAGEMENTFighting the War for Talent Is Hazardous to Your Organiza-tion’s HealthJeffrey PfefferOrganizational Dynamics (Vol. 29, No. 4), 2001

Weird Ideas That Work: 111⁄2 Prac-tices for Promoting, Managing, andSustaining InnovationRobert I. SuttonNew York: The Free Press, 2001

What’s Wrong with ManagementPractices in Silicon Valley? A LotJeffrey PfefferMIT Sloan Management Review (Vol. 42, No. 3), spring 2001

MARKETINGConsumption Symbols as Carriers ofCulture: A Study of Japanese andSpanish Brand Personality ConstructsJennifer Aaker, Veronica Benet-Martinez, and Jordi GaroleraJournal of Personality and Social Psychology (Vol. 81, No. 3), 2001

Culture-Dependent Assimilation andDifferentiation of the SelfJennifer Aaker and Bernd SchmittJournal of Cross-Cultural Psychology(Vol. 32, No. 5), september 2001

The Federal Trade Commission’sReport on the Marketing of ViolentEntertainment to Youths: DevelopingPolicy-Tuned ResearchSonya A. GrierJournal of Public Policy and Marketing(Vol. 20, No. 1), spring 2001

Social Dimensions of ConsumerDistinctiveness: The Influence ofSocial Status on Group Identity and Advertising PersuasionSonya A. Grier and Rohit DeshpandeJournal of Marketing Research (Vol.38), may 2001

What Is Your Goal? The Impact ofGoals on Counterfactual Thinking,Attitude Formation, and Predictionsof the FutureJennifer Aaker and Angela LeeAdvances in Consumer Research, 2001

When Does Culture Matter? The Transitory Nature of CulturalDifferences in Judgments andChoicesDonnel Briley and Jennifer AakerAdvances in Consumer Research, 2001

OPERATIONS MANAGEMENTDynamic Control of a Queue withAdjustable Service RateJ. Michael Harrison and J. M. GeorgeOperations Research november 2001

Heavy Traffic Resource Pooling in Parallel-Server SystemsJ. Michael Harrison and Marcel J. LopezQueueing Systems (Vol. 33), 1999

ORGANIZATIONAL CULTUREOrganizational Culture:Mapping the TerrainJoanne MartinFoundation for Organizational SciencesSeries, Newbury Park, Calif.: Sage,2001

Tempered Radicals: How People UseDifference to Inspire Change at WorkDeborah E. MeyersonCambridge, Mass.: Harvard BusinessSchool Press, 2001

POLITICSElections, Governments,and Parliaments in Proportional Representation SystemsDavid P. Baron and Daniel DiermeierQuarterly Journal of Economics august 2001

SECURITIES MARKETSThe Impact of Securities LitigationReform on the Disclosure of Forward-Looking Information by High-Technology FirmsMarilyn Johnson, Ron Kasznik,and Karen Nelson Journal of Accounting Researchautumn 2001

Mental Accounting, Loss Aversion,and Individual Stock ReturnsNicholas Barberis and Ming HuangThe Journal of Finance (Vol. 56, No. 4)august 2001

STRATEGIC MANAGEMENTThe Power of Strategic IntegrationRobert A. Burgelman and Yves L. DozMIT Sloan Management Review (Vol. 42, No. 3), spring 2001

SUPPLY CHAIN MANAGEMENTE-Fulfillment: Winning the Last Mile of E-CommerceHau Lee and Seungjin WhangMIT Sloan Management Reviewsummer 2001

New Supply Chain Business Models:The Opportunities and ChallengesD. Anderson and Hau LeeIn D. Anderson (ed.), Achieving SupplyChain Excellence Through Technology(Vol. 3), San Francisco: MontgomeryResearch, Inc., 2001

faculty publications


theory and empirical methodologies to eco-nomics, strategic management, and finance.He will teach the mba elective course Com-petitive Strategy.

Joanne Martin, the Fred H. Merrill Profes-sor of Organizational Behavior, recently

received three honors. She was named In-ternational Woman of the Year by the Inter-national Biographical Centre, received anhonorary doctorate from Copenhagen Busi-ness School, and was named to the advisoryboard of the International Centre for Re-search in Organizational Discourse, Strat-egy, and Change of the Universities ofMelbourne, Sydney, and London and atMcGill University.

Darrell Duffie, the James Irvin Miller Pro-fessor of Finance, has agreed to join a

new academic research and advisory com-mittee assembled by Moody’s Investors Service and Moody’s Risk Management Ser-

vices. The committee is an outgrowth ofMoody’s past support for academic researchin credit and credit-ratings–related areas offinance and economics, said Moody’s Pres-ident John Rutherfurd. Two Moody’s re-searchers will also be part of the group,which will include seven European andNorth American academic experts. Mem-bers will review each other’s research find-ings, generate new research projects, andexplore collaborative projects. Duffie alsohas been appointed a research associate ofthe National Bureau of Economic Research.

The Leadership Education and Develop-ment Program (lead), which helps

prepare minority students for careers inbusiness, has named Assistant ProfessorSonya Grier one of three outstanding personsamong its 6,000 alumni/ae. A national part-nership of leading u.s. corporations andgraduate business schools, lead recognizedGrier not only for her professional contri-

butions but for her continued service to theorganization. Grier was in the first leadprogram in 1982. Her work is in the area ofconsumer and target marketing.

The International Foundation for AssetManagement and Financial Engineer-

ing honored Ming Huang, assistant professorof finance, for coauthorship of the bestpaper in 2000 in the foundation’s area ofexpertise. The paper related asset pricing toprospect theory.

Based on the number of articles he haspublished in the Academy of Manage-

ment journals, that academic organizationrecently awarded Charles O’Reilly its 2000bronze medal for research publications. TheBusiness School’s Frank E. Buck Professorof Human Resources Management and Or-ganizational Behavior, O’Reilly also receivedthe academy’s award for the best paper onorganizational behavior in 1999. ■

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Virtual Prototypes Good as the Real Thing

One of the toughest challenges facedby a product design team is concept selec-tion—comparing any number of potentialproduct ideas in order to choose a winner.

Traditionally, companies have relied on costly physicalprototypes or complicated statistical analyses to test the preferences of consumers. Now the Internet offersa tantalizing option: virtual prototypes. “It’s a marketresearch tool that has a promising future,” says mar-keting professor V. “Seenu” Srinivasan.

In a research study, selected in October as the bestpaper published in 2000 by the Journal of Product Inno-vation Management, Srinivasan tested the ability of Internet-based virtual prototypes to accurately predictconsumer choice. He concluded that virtual prototypesprovide nearly the same results as physical prototypes.Furthermore, virtual prototypes cost considerably lessto build and test than their physical counterparts, sodesign teams using Internet-based product research canafford to explore a much larger number of concepts. “Inshort, the Web can help to reduce the uncertainty in anew product introduction by allowing more ideas to beconcept-tested in parallel,” says Srinivasan, who is theErnest C. Arbuckle Professor of Marketing and Man-agement Science at the Business School.

Working with research coauthor Ely Dahan, a Busi-ness School phd alum who is now an assistant profes-sor of management science at mit’s Sloan School of

Management, Srinivasan pitted the virtual prototypeagainst conventional market research methods, includ-ing both physical prototypes and nonvisual, attribute-only conjoint analysis—a complex statistical compar-ison of consumer trade-offs between price and othercharacteristics. Nine concepts for a new portable bicy-cle pump competed against two existing bike pumps inthe tests, which surveyed respondents who were uni-versity students screened for bicycle use. Characteristicssuch as price, time for inflation, size, ease of inflation,and durability were included as product attributes. Bothstill-picture and animated virtual prototype tests pro-duced market shares that closely mirrored those ob-tained with the physical products. And the visual proto-types outperformed the set of predictions produced inthe attribute-only conjoint analysis, which failed to cap-ture the aesthetic and usability aspects of the product.

Interestingly, says Srinivasan, the attribute-only con-joint analysis identified the top three products in cor-rect order. However, it predicted market shares for thetop three products to be well below those achieved usingphysical prototypes. This sort of forecasting gap maybe filled at least in part by the realistic animations of vir-tual prototyping. Indeed, a key breakthrough in virtualprototyping that allowed the researchers to conducttheir study has been the development of Virtual Real-ity Markup Language (vrml), which produces high-quality color animation within very compact data filesthat can be easily downloaded by consumer researchparticipants in far-flung locations.

Yet virtual prototypes are not perfect. Sometimesthere is a disconnect between the results of a physicalprototype and a virtual one. In the Dahan–Srinivasanstudy, the Web-based survey predicted that a bike pumpnicknamed Gecko could compete against the two com-mercially available products and ranked fourth in themarket. But when customers handled the real thing,Gecko couldn’t score. It ranked last. One reason maybe that the computer renderings of Gecko made it lookand feel better in virtual reality. The fit and finish of therubber material that gave Gecko its green, lizard-liketexture and appearance was not of high quality, but thatbecame obvious only when consumers actually touchedthe prototype.

The crucial question is which product characteris-tics are most accurately communicated only through a physical prototype? Sensory experiences such as smell,touch, and taste have yet to be mastered in a virtual envi-ronment. “It remains to be seen which goods are best suited to virtual, visual testing, but we expect that manydurable goods categories can be represented accuratelyusing animation and compared using the simulatedshopping experience,” says Srinivasan. For unfamiliar

Design teamsusing Internet-based productresearch canafford to explorea much largernumber of concepts.

Marketing

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products, an educational step could precede the concepttests, say the coauthors. One thing is already clear: TheInternet provides a cheap way to test more ideas thanever before. —barbara buell

“The Predictive Power of Internet-Based Product Concept

Testing Using Visual Depiction and Animation,” Ely Dahan

and V. “Seenu” Srinivasan, Journal of Product Innovation

Management, March 2000 (http://faculty-gsb.stanford.edu/

ssrinivasan/rp1502.pdf)

Questioning AuditorIndependence

In recent years, a dramatic increase in the rev-enues big accounting firms derive from managementconsulting services has raised a red flag about audi-

tor objectivity. The Wall Street Journal reported in April,for example, that just last year Sprint paid Ernst &Young $2.5 million for auditing but $63.8 million forother work, including $12 million for the deploymentof a financial-information system. General Electric paidkpmg $24 million for auditing but more than threetimes that for other services. This growing trend trig-gered the Securities and Exchange Commission to seri-ously question whether auditors have a conflict ofinterest that compromises the quality of an audit. Leftunchecked, such conflicts could undermine the credi-bility of earnings statements upon which stock marketactivity hinges. Until now, the audit industry has dis-puted these claims, in part because there has been noevidence to suggest auditors have lost their objectivity.

But in a study analyzing the effects of accountingfirms’ consulting business on the independence of theirauditors, faculty member Karen Nelson and her col-leagues provide the first hard evidence showing that the provision of nonaudit services impairs an auditor’sindependence and dangerously stretches the bounds ofaccepted accounting practice. “Our motivation fordoing the paper comes out of the sec’s policy agenda oftrying to crack down on so-called earnings manage-ment,” says Nelson, who is assistant professor of ac-counting at the Business School. “We were interested inwhether public accountants really are performing theirrole as independent gatekeepers, or has it become agame of winks and nods between corporate manage-ment and the auditors because the auditors don’t wantto lose these very lucrative consulting contracts.”

The study is relevant to sec concerns about the in-crease in earnings management practices such as “bigbath” charges (one-time write-offs), “cookie jar” reserves(setting aside funds to manipulate future earnings), andpremature recognition of revenue. These are legal butsometimes dubious practices within the range of Gen-erally Accepted Accounting Principles. The researcherslooked to see if there was more creative accounting

among companies that paid their accounting firms bigconsulting bills relative to auditing fees. There was.

Working with Richard Frankel at mit’s Sloan Schoolof Management and Marilyn Johnson at MichiganState’s Eli Broad College of Business, Nelson capitalizedon data that has become available since February, whenthe sec began requiring corporations to disclose all auditand nonaudit fees paid by a corporation to its auditor.The study was based on data from the proxies of morethan 4,000 firms filed between February 5 and June 15.

The study looked at the ratio of nonaudit versus auditrevenues paid by a corporation to its auditing firm. Itfound that more than half of the firms paid more forconsulting services than audit services, and that morethan 95 percent of firms purchase at least some non-audit services from their auditor. The study also tried togauge whether companies with less independent audi-tors stretch earnings to meet or beat analysts’ earningspredictions and project a smooth earnings path. Cor-porations are under enormous pressure, because failureto meet such predictions—even by a penny—can senda company stock into a tailspin.

The study found that corporations with the leastindependent auditors—those who paid the most in con-sulting fees versus audit fees—are more likely to justmeet or beat earnings benchmarks, such as analysts’expectations and prior year earnings expectations, andto report large discretionary earnings. This suggestsmore earnings management went on among companiesin the sample that paid the highest proportion of man-agement consulting fees to their auditors. “Taken to-gether, our results suggest that the provision of nonauditservices impairs independence and reduces the quality ofearnings,” the researchers write. “This evidence is impor-tant given the ongoing debate about the effect of non-audit services on auditor independence,” says Nelson.“The sec does not want earnings to be a fiction.”

The researchers also wanted to know if the new secaudit fee disclosures are useful to investors. To find out,they measured the stock market reaction to earningsstatements after the new sec disclosure rules went intoeffect in February. The results showed a statistically sig-nificant stock price drop of four-tenths of a percent onthe single day proxies were filed with the sec among the25 percent of corporations that paid the most in non-audit fees to their auditors. That suggests institutionalinvestors and other stock market investors were scruti-nizing and discounting the earnings of firms with poten-tial conflicts of interest.

The remedy for conflicts and earnings management?Some accounting firms have spun off their consultingfirms as separate ventures, but the best solution, saysNelson, is full disclosure so that investors can judge thequality of financial statements for themselves and sothat the sec can monitor earnings management.

—barbara buell

“Auditor Independence and Earnings Quality,” Richard M.

Frankel, Marilyn F. Johnson, and Karen K. Nelson, GSB

Research Paper #1696, July 2001 (http://gobi.stanford.

edu/ResearchPapers/detail1.asp?Document_ID=1467)

More earningsmanagementwent on amongcompanies thatpaid the highestproportion ofmanagementconsulting feesto their auditors.

Accounting



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Selling Violence to Children

T he tragic shootings at Columbine HighSchool and other campuses across the countrybrought renewed scrutiny to the link betweenyouth violence and entertainment media. Then-

President Bill Clinton commissioned a joint study by the Federal Trade Commission and the Department ofJustice to investigate the marketing of violent enter-tainment products to youth. gsb assistant professor ofmarketing Sonya Grier served on the research team.

The investigators asked two key questions: Do film,music recording, and electronic game companies pro-mote age-restricted products in places frequented bychildren? And do their ads target children and youth?

The answer was yes. “I don’t think that surprisedpeople,” says Grier, who as visiting scholar at the ftcconducted the study with a panel of legal, economics,and marketing experts. What was unexpected was thatthe evidence came from the entertainment marketersthemselves. “It wasn’t as if we designed ways to try toinfer what they were doing or subpoenaed information,”says Grier. “The companies, at our request, submittedmarketing plans that documented these practices.”

The report, released by the ftc in September 2000,caught the entertainment industry red-handed. Whileeach of the three industry segments used differing sys-tems of self-regulation, individual companies wereguilty of promoting to children the very products theirindustry segments deemed inappropriate for thoseunder the stipulated age restriction.

“Eighty percent of the studied r-rated motion pic-

tures, 100 percent of the studied explicit-content–labeled music, and 70 percent of thestudied m-rated games were targeted to con-sumers under 17 years of age,” says Grierin a spring 2001 academic paper about thereport. In one instance, a video game mar-keting plan refers to the target market as“males 17–34 due to m rating” yet, paren-thetically, “the true target is males 12–34.”

The report not only casts serious doubtson the ability of the entertainment industryto regulate itself, but for Grier, whose re-search interests include target marketing, italso documents the use of some shadowypractices. “Intentionally or not, they used alot of marketing strategies and tactics thatcould be described as undercover—for ex-ample, street marketing that can’t be meas-ured,” says Grier. She adds that most parentsprobably are not aware that their childrencould, say, receive a flier for an age-restrictedmovie at a Brownie or Cub Scout meeting.

Add to that the blurring of the lines be-tween entertainment and advertising and the increasingcrossover of content between industry segments, andthere is little wonder that parents are frustrated at theireroding control over the inappropriate material towhich their children are exposed.

Compounding the issue is the entertainment indus-try’s First Amendment shield against government regu-lation of content. Unlike tobacco and alcohol sales tominors, which have legal implications, regulations gov-erning the sale of age-restricted electronic games, movietickets, and music recordings to kids have no teeth.

While the ftc report did not enter into the debateabout causes and effects of media violence, it did reviewexisting scientific research on the subject, finding that acorrelation exists between exposure to media violenceand aggressive and sometimes violent behavior. Thereport also raised many questions about target market-ing that warrant future in-depth investigation.

In April, the ftc issued what amounts to a six-monthreport card on the entertainment industry’s progress inbringing its marketing practices more closely in line withits self-made regulations. The results are encouraging.Both the motion picture and electronic games industrieshave taken steps to address the issue; however, the musicindustry has done nothing.

“With the least comprehensive rating system of thethree industries, the Recording Industry Association ofAmerica has been very adamant that it’s impossible torate music and words in the same way that you can ratevideo games. It’s complex,” says Grier. “Part of the dif-

Unlike alcoholand tobaccosales to minors,regulations governing thesale of movietickets, music,and electronicgames have no teeth.

Marketing

faculty research



ficulty is the development of music as an inside lan-guage, where there could be a million words used tomean guns or sex, and outsiders like parents will neverknow what that song is really saying to their kids.”

The ftc is expected to release a more detailed reporton the industry’s progress toward effective self-regula-tion. In the meantime, ftc officials suggest that the keyto consumer protection against inappropriate mediaexposure is consumer education. —helen k. chang

“The Federal Trade Commission’s Report on the Marketing

of Violent Entertainment to Youths: Developing Policy-Tuned

Research,” Sonya A. Grier, Journal of Public Policy & Market-

ing, Vol. 20 (1), Spring 2001

“Marketing Violent Entertainment to Children: A Review

of Self-Regulation and Industry Practices in the Motion Picture,

Music Recording & Electronic Game Industries: A Report of

the Federal Trade Commission,” Robert Pitofsky, Chairman,

September 11, 2000 (http://www.ftc.gov/reports/ violence/

vioreport.pdf)

Ibid. (A Six-Month Follow-Up Review, FTC Report to Con-

gress) April 24, 2001 (http://www.ftc.gov/reports/violence/

violence010423.pdf)

Online Disclosures:Noise or News?

It’s obvious that the internet has revolution-ized the way people communicate with one another.Indeed, the Internet has enabled individuals to broad-

cast messages to a potentially vast audience at very little cost. On the flip side, the plethora of messages hasled to a noisy environment, making the medium a less-than-ideal vehicle for meaningful communication.

Yet despite the volume of disclosures and the poten-tial noise in the system, the often anonymous disclosureof information on the Web is finding a receptive audi-ence, and useful information is getting through. AnatAdmati, the Joseph McDonald Professor of Finance andEconomics, and Paul Pfleiderer, the William F. SharpeProfessor of Financial Economics, set out to investigatehow this process works.

Their research started with the notion that the key toculling information from the Web is sorting the nuggetsof news from the noise. Further reading about the effectsof Internet disclosure on various companies’ stock pricesfueled their interest. In particular, they followed the caseof the 14-year-old New Jersey boy busted by the Securi-ties and Exchange Commission for profiting by dab-bling in stocks he had researched and touting thosecompanies on the Internet. Pursued on the basis ofmanipulation laws, the boy’s so-called crime is hard to distinguish from an analyst’s role. Using data from Amazon.com book review ratings as a model for Inter-net disclosure, Admati and Pfleiderer’s research hasimplications for any field affected by public disclosure.

The Web opens a whole new world where disclosureby individuals is extremely easy, says Admati. “In thepast, you would have to buy an ad in the newspaper ifyou wanted to let people know your views on a book orsome company’s stock” she says. For example, at Ama-zon.com, one needs only to check off a rating numberand possibly add a few sentences to register an opinionon a book or product and become an instant reviewer.

In their study, Admati and Pfleiderer develop an economic model to address what happens when con-sumers, for whatever reason, want to share informationwith fellow consumers and they have a simple avenueto transmit their opinions. Will information be trans-mitted in the most efficient way when forces are allowedto work unhindered? And will results be distorted if itcosts something to send the message or if some senders’opinions are not relevant to others’ experience?

While Admati calls the model a simple one, it never-theless lays the foundation for further research leadingto increased understanding of the effects of financial andpolitical disclosure in the new “Webbed” world.

They found surprisingly rich results. They assume thatthere is a finite number of “messages” the sender can useto communicate his or her information and that thesender is attempting to bring the receivers’ opinions asclose to his own as possible. If both the senders and thereceivers of information understand the true likelihoodthat the sender’s information is relevant, then the resultis often that information is communicated in the mostefficient way. Surprisingly, the most efficient communi-cation might involve some messages being used less frequently than others. “There is a preponderance of ex-treme messages—a lot of five-star ratings, for example—with some available messages, like two-star ratings,essentially unused,” says Admati. “Our results are gen-erally consistent with our observations that the customerrating levels on the Internet are not evenly distributed.”

A well-documented psychological phenomenon isthat people are often overconfident concerning the use-fulness and accuracy of their own knowledge and infor-mation. “If the sender in our model is overconfident,”says Admati, “in other words, he believes that his infor-mation is definitely useful while, in effect, there is achance it is not, then the sender will exaggerate in hisdisclosure, choosing more extreme messages.” Never-theless, overconfident senders may actually contributeto more informative communication. For example, ifthere is a small cost associated with broadcasting opin-ions, an overconfident sender is often more likely to bewilling to incur the cost than a rational sender who real-izes his information might not be useful to receivers.

“The Internet has dramatically changed the wayinvestors and other economic actors can communicate.Understanding that process is critical to understandinghow the financial market might behave in the Internetage,” Admati concludes. —helen k. chang ■

“Noisytalk.com: Broadcasting Opinions in a Noisy Environ-

ment,” Anat R. Admati and Paul C. Pfleiderer, GSB Research

Paper #1670, December 2000 (http://gobi.stanford.edu/

ResearchPapers/Library/RP1670.pdf)

In the past,you would haveto buy an ad in the newspaper if you wanted tolet people knowyour views on a book or somecompany’s stock.

Stock Market



Mum’s the Word“there’s no faster way toget turned down by a venturecapitalist than to ask her to signa nondisclosure agreement,”wrote second-year student Jamie

Earle in a column for C/NetNews.com. “Considering that avc can review a dozen businessplans in a day, taking the timeto review an nda for each oneisn’t productive,” says the for-mer equity research associatefor cs First Boston TechnologyGroup. She tells the story of anunnamed entrepreneurial firmthat was pressured to partnerwith one of its competitors as aresult of disclosing informationto a venture capitalist. Earle’sadvice to would-be entrepre-neurs is to first deal with “established vc firms with long-standing reputations.”

The Soprano‘sGodfatherthere was a twinge of irony in the decision of the DirectorsGuild of America to give anaward this year to the chairmanand ceo of hbo, Jeff Bewkes,

noted the Hollywood Reporter.

Bewkes’ only directing attemptwas a documentary on a vealslaughterhouse that led to hisfinishing last in film class at Yale.

But Bewkes, mba ’77, isknown for taking a chance oncreative directors and writers.When David Chase pitched awatered-down version of TheSopranos, Bewkes told him toforget about commercial appealand go back to his original,more authentic idea. The serialdrama about a mobster hasbeen a major ratings and criti-cal success.

Analysts Bombed in 2000adding fuel to the debateover the value of stock marketresearch emanating from WallStreet are research results fromBusiness School professors Maureen McNichols and Ezra

Zuckerman.

CBS MarketWatch reported on work by McNichols and her University of California colleagues that showed stocksthat Wall Street analysts recom-mended buying or holding in2000 plunged in value whiletheir “sell” and other negativerecommendations gained.

Business Week reported onwork by Zuckerman and a University of Chicago colleaguein which they concluded thatsocial conformity influencedmany analysts in the mid-1990s.Specifically, the researchersfound that fewer than 5 percentof the forecasts issued involvedexplicit “sell” recommenda-tions—usually issued by topanalysts, who feel secure in theirjobs, or by low-status analysts,who have little reputation tolose, but not by the vast major-ity in the middle.

Battle at Sea Over Black Gold“one of the planet’ssmallest seas has spawned oneof the world’s most spirited landgrabs,” the Wall Street Journalsaid this summer after an Iran-ian patrol boat armed withmachine guns forced a BritishPetroleum plc research vessel to turn around in the CaspianSea. Stan Polovets, mba ’89, is in the thick of the battle amongoil companies and five nationsthat border the sea, which sitsover promising oil fields.

Polovets told the Journal thatTurkmenistan, the nation heworks for as an adviser, would“soon take decisive actions ofits own” unless neighboringAzerbaijan halted work on dis-puted blocks of the seabed andadopted “a more conciliatoryposition in negotiations.” Azer-baijan alarmed its neighbors by signing a deal with a bp-ledconsortium to develop threeknown oil fields off its shores.

Polovets, who was born inRussia and recently moved toMoscow, is founder of rpi Inc.,a consulting firm that has assist-ed international energy compa-nies with investing in Russia,other Caspian states, and theBaltic nations since 1992.Clients include bp Amoco, Shell, Mobil, Japan NationalOil Corp., and ft Energy.

Yogi CEOwhen a doctor first suggest-ed he try yoga after injuring hisfoot in a Paris marathon, John

Abbott, sep ’78, thought “yogawas for the older ladies whowanted to lie on the mat andcontemplate life.” But the Citi-corp banker quickly became

hooked, and after moving toCalifornia found himself con-sulting for and eventually buy-ing the Yoga Journal from theCalifornia Yoga Teachers Asso-ciation. Now a slick bimonthly,the journal’s circulation hasmore than doubled to 220,000and ad pages are up 60 percentsince Abbott took over in 1998,notes the San Francisco Chronicle.It doesn’t hurt that 15 millionAmericans participate in yoga,according to Time estimates.

Not Bad for Bad Timinginvestor Richard Rainwater,

mba ’68, has made a fortune forhimself and others several times,but he has the same pangs ofdoubt that amateur investorsdo, according to Fortune. “I’mnever right on my timing. It’spitiful. Macro it’s wonderful;

micro it stinks,” says Rainwater,who read a 1992 book, Beyondthe Limits, and decided as aresult to invest in energy stockswhen most folks were investingin dot-coms. His net worth fell $400 million. At the time of the article, however, Rain-

NewsmakersWHO’S IN THE NEWS A Roundup of Media Mentions

Nondisclosures are a turnoff inthe VC world, says Jamie Earle.

Just like everyone else, RichardRainwater frets over his invest-ment timing.

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water was up $400 million onenergy and $200 million onenergy-related real estate,according to the magazine.

He Should HavePlayed Baseballceos in most industriesmade substantially more in 2000than their counterparts a decadeearlier, according to Fortune. Intelecommunications, for exam-ple, the nearly $21 million com-pensation of at&t’s MichaelArmstrong outstripped that of 1990 industry leader Robert

Allen, Sloan ’72, by 539 percent.Not so in the software industry,where the 2000 leader, Micro-soft’s Steve Ballmer, Class of ’81,made $633,514—64 percentless than the 1990 leader, JoshWeston of adp, and substanti-ally less than the average 2000major league baseball player.

Customer Comebackwill the ability to buildand analyze massive databasesof customer information lead to the return of the diversifiedcompany? the Financial Times ofLondon recently asked. “If cus-tomer information is a strategicasset, you can see that theremay be an argument for manag-ing a wider range of businesseswithin the same entity,” Busi-ness School professor James

Lattin told the paper. Customer relations manage-

ment, which involves makingmanagers responsible for a setof customers, rather than a setof products, has become popu-lar, said Lattin and professoremeritus David Montgomery.

Customer value has replacedcost control, Montgomery said,“as the guiding principle ofmanagement.”

Loyalty Begets Loyaltyattracting good manage-ment talent may be partlyaccomplished by treating wellthose who leave, according to anumber of companies who haveset up alumni associations andservices. Alumni workshops and

social events have paid off forBain & Co. with second-yearmba student Katie Friedman,

who told the New York JournalNews that she is an “ambassa-dor” at Stanford for her formeremployer. When gsb studentswere deciding between job offersfrom Bain and others, Friedmansaid, “I was absolutely pluggingBain because, most important, I had a great experience there,but also they have impressed mewith the support and loyaltyshown even to their alums.”

Mixing Cement andTechnology in a series on e-strategy leaders, the Economist extolled Mexico’s Cemex as “a rarity—a company in the industrializingworld that has used e-businessto steal a march on its rich-world rivals.” ceo Lorenzo

Zambrano, mba ’68, started thecompany on its current path byautomating its cement plantsand becoming an early adaptorof email and networked com-puting. Information technologyupset the companies’ hierarchi-cal traditions because it “freesup everyone’s imagination,” hesays. Cemex is more profitablenow than its international com-petitors, and 55 percent of itsholdings are outside of Mexico.The company has spun off its it arm into a consultancy toother companies. It also runs an online construction industrymarketplace and an e-procure-ment site and is installing com-puters with Internet access inemployees’ homes.

Oklahoma’s OKbusiness strategies needto incorporate space and placeconsiderations, says Stephen

Roulac, phd ’75, the founderand ceo of Roulac Group Inc.,a consulting firm in San Rafael,Calif., that specializes in realestate. “People used to go wherethe jobs were, but now prioritieshave capsized,” Roulac said in Fast Company. “People arechoosing more purposefullywhere they want to live, andthen they are looking for a job.”

They want a sense of commu-nity, good public transportation,and outdoor-recreation ameni-ties, he added. A counter-intu-itive location that meets thosestandards: Tulsa, Oklahoma.

Don’t Bury E-Commercefm radio was the latest,greatest technology in the late1940s, but it took 40 years for it to overtake am, gsb professorHaim Mendelson observed in aSan Jose Mercury News opinionpiece on the current state of e-commerce. “Just as the mete-oric rise of e-commerce wasgrossly exaggerated, so is thenews of its death,” he said. “As with the adoption of anynew technology, this is a slowand error-prone process.” Newtechnology usually augments,rather than replaces, existingtechnology, partly because con-sumers are slow to change theirhabits, he said.

www.class of ’03incoming mba studentsare the leaders in “extreme net-working,” according to a FastCompany article on Web-basedcommunities sprouting at busi-ness schools. Once admitted tothe gsb, they gain access to apassword-protected class Website, hosted on a Yahoo server.

The conversation is animated,the magazine reports, “with students planning happy hoursfrom Hong Kong to BuenosAires, debating laptops versusdesktops, and sharing truckrentals for the trek from theMidwest to Palo Alto.”

Hometown Heronow a business consultantwith McKinsey & Co. in Dallas,Michael Cruz, mba ’00, became ahero in his hometown, Amarillo,Texas, after cbs anchor DanRather included Cruz’s life storyin his book The American Dream.

Cruz’s business educationbegan in the fifth grade, whenhe moonlighted alongside hisparents in a cleaning business.Later, as a Yale student facing a financial emergency, he starteda laundry and dry-cleaning serv-ice that eventually was used bya quarter of the university’s stu-dents. The success led him to see that opportunity was notlimited to the well-to-do, so hepapered Wall Street with hisresume and landed an intern-ship at Merrill Lynch.

“Perspective is a balancingact,” Rather quoted Cruz. “My first week in New Yorkwas the same kind of thing aswhen I first got to Yale. Therewas this homesickness, thatkind of queasy feeling in yourstomach.” Cruz found relief by establishing an sat prep program for inner-city studentsthrough his church. ■

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According to Stephen Roulac,location matters to job seekers.

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CAREER SERVICES

The alumni office offers the followingcareer services:

◗ CAREER STRATEGY ADVISINGTo schedule an appointment call 650.723.9736.

◗ GLOBAL WORKPLACEA new service giving alumni/aeaccess to international senior careeropportunities.

◗ EMPLOYMENT BULLETINNow online as JobTrak.

◗ CAREER WORKSHOPSSingle-topic workshops, held primarilyat the Business School.

◗ CAREER RESEARCH RESOURCESBibliography, related career reading,and list of outside job search services.

For up-to-date career services infor-mation, visit www.gsb.stanford.edu/alumni/career or contact JenniferSmith at 650.723.9736 or (email)[email protected].

LIFELONG LEARNING

The Alumni Association offers manyprofessional development and contin-uing education programs. For moreinformation, visit our Web site atwww.gsb.stanford.edu/alumni/events.

◗ ALUMNI WEEKENDSFaculty and alumni speakers, panels,and roundtables.

◗ WOMEN’S CONFERENCESWorkshops focusing on issuesfacing women today.

◗ INTERNATIONAL CONFERENCESTwo- or three-day events in locationsoutside the United States featuringfaculty speakers.

◗ EXECUTIVE BRIEFINGS Faculty presentations in locationsaround the world for GSB alumni/aeand other corporate leaders.

◗ LIFELONG LEARNING WEB SITEA resource to stay up on managementissues, upcoming academic programs,faculty research, visiting speakers,suggested reading from alumni/ae andfaculty (www.gsb.stanford.edu/alumni/lifelonglearning).

EXECUTIVE EDUCATION & SLOAN PROGRAMS: The Business Schooloffers a variety of executive programsto help you help your firm build andmaintain its competitive edge. Contactthe Executive Education office at650.723.3341, ext. 96; (email) [email protected]; or (Web)www.gsb.stanford.edu/exed.

ALUMNI ORGANIZATIONS

SBSAA CHAPTERSThe Alumni Association sponsorsalumni chapters in major cities aroundthe world. For a chapter directory, visitour Web site at www.gsb.stanford.edu/alumni/chapters.

ALUMNI CONSULTING TEAM (ACT)Alumni teams volunteer as consultantsfor nonprofit and government agencyprojects in the Bay Area. Visit the ACTWeb site (www.gsb.stanford.edu/alumni/act) or contact Erica Richter at 650.725.3028 or richter_ [email protected].

STAYING IN TOUCH

ALUMNI ONLINE DIRECTORY ANDSERVICES: These password-protectedservices enable you to:

◗ Update your contact information and function and industry codes oradd your email address.

◗ Locate your Business School friendsand classmates.

◗ Search the Online Directory by program/class year, occupation, function, industry, company, or geographic location.

◗ Access the Global Workplace—aninternational career search service.

◗ Sign up for email forwarding.

◗ Sign up for email groups (“mailgroups”).

Access the Online Directory at http://alumni-gsb.stanford.edu. For questions,email [email protected].

REUNIONSClass reunions are offered at five-year intervals: The 1st, 5th, 10th, and15th reunions are held in the spring of each year; the 25th reunion is held during the summer; and otherreunions are held during fall AlumniWeekend.

ADDRESS/PHONE CHANGESIf you are unable to use the OnlineDirectory, mail or fax changes in yourbusiness or home phone/address to the alumni office or send email to [email protected].

CLASS NOTESIn each issue of Stanford Businessmagazine. Report news to your classsecretary or to ClassNotes editor Gale Sperry at the Graduate School of Business, Stanford University, Stanford, CA 94305-5015; (fax)650.725.6750; (email) [email protected].

CONTACT INFORMATION

STANFORD BUSINESS SCHOOL

ALUMNI OFFICE

Stanford University Stanford, CA 94305-5015 gTELEPHONE: 650.723.4046 1FAX: 650.723.5151 IEMAIL: [email protected] TWEB SITE: www.gsb.stanford.edu/alumni E

Alumni ResourcesAlumni Resources


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C l a s s e s o f

We’re planning a very special reunion weekend in the spring of 2002

for the classes of 1987, 1992, 1997, and 2001, who will be celebrating

their 15th, 10th, 5th, and 1st reunions. Join us for two dynamic days at

Stanford and a chance to reconnect with the Business School. There will

be wonderful opportunities to catch up with old friends, spark ideas for

the future, and have an all-around great time. Make your plans now

for May 3- 4, 2002, and watch for more details online and in the mail.

May 3-4, 2002S

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More information:

http://www.gsb.stanford.edu/[email protected]

Spring Alumni r e u n i o n s

65(Cov3).GSBalumni/ad.qxd 6/11/12 9:37 AM Page 65

Stanford Business SchoolAlumni AssociationAtYour Service...

▪ Alumni Online Directory – Recently Upgraded!“Solid Gold” resource for networking

▪ Individual Career Strategy Advising SessionsTailored to your personal situation

▪ Mail GroupsKeep in touch with classmates, share interests, post jobs

▪ MonsterTrak New!Search for and post jobs

▪ Access HBS and Kellogg Employment DatabasesFind more jobs around the country

▪ Global Workplace New!International job listings

▪ Workshops Coming Soon!Career development experts presenting on critical topics

▪ Networking LunchesShare experiences and learn from fellow GSB alumni

▪ Access CMC Handouts and More Than 800 Career Links on the Web

Career Services ResourcesThe SBSAA provides a range of career resources for GSB alumni. We invite youto take advantage of these services for your own needs and hope that you willlook to your fellow alumni and GSB students to fill your future hiring needs.

Bookmark the Alumni Career Services Web site:http://www-gsb.stanford.edu/alumni/career/ or call 650.723.9736 for more information.

GetInvolved▪ Post a permanent or

summer job opportunityat the GSB

▪ Update your records inthe Alumni OnlineDirectory

▪ Invest time networkingwith other GSB graduates

Updated

and

Improved

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