IESE Business School INSIGHT No. 155

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Where ideas and people meet

New paradigms in purpose, ownership and engagement

Where ideas and people meet


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Contents #155


New paradigms in purpose What do executives and directors need to know as firms increasingly look for purpose beyond profits and deal with a changing ownership environment?


Board basics 4 responsibilities for the board and tips to make sure it functions properly


Ask the tough questions and come prepared Herman Daems, chairman of multiple boards, discusses what it takes to be a good director 26

Next on the agenda: digital disruption

Value is extending to values BlackRock’s Amra Balic sees positive

signs that mark a shift in investment priorities

“The direction we’re traveling in is clear: higher expectations, greater transparency and more rigorous standards” Amra Balic


Ways in which technological disruption may transform corporate governance


“Dissatisfaction about remuneration can lead to conflict. Don’t underestimate this” “Technology opens new ways to fight opportunism and enhance the role of stakeholders” Gaizka Ormazabal

Herman Daems



What’s the future of banking? Which players will emerge as the winners?

Generational opportunities 34

With Gen X soon to outnumber boomers, understand what makes these age groups tick



HACK Keys when going digital overnight


Tips for managing virtual teams


Cash is king: advice for CFOs


“Hurry! Only 3 left in stock!” When scarcity signals are most powerful


By Eduard Calvo, Ruomeng Cui and Laura Wagner

+IESE Leaders need passion & empathy WTA President Micky Lawler on staying on top of your game


United in action Good news stories of alumni stepping up to help during the coronavirus crisis

How kindness culture can elevate your business By William F. Baker

Leveraging inclusiveness 42



In conversation with Kathleen L. McGinn

Simple by design For Belinda Klaes, business is in the bag


Giving back to society keeps me motivated How Siemens uses training for social good


“We have to have the right education for a changing environment” Thomas Leubner

A realist’s guide to happiness Embrace the negative: this and other tips for happiness and well-being



A characterbuilding issue

Antonio Argandoña Editorial Director of IESE Business School Insight


hey say crisis reveals character, and the coronavirus crisis has certainly revealed what we’re made of. As country after country adopted emergency measures, businesses began to show their true colors. Some rose to the occasion: we feature some inspiring stories from our alumni in this magazine, and there have been many en-

couraging comments from the thousands of you who have connected to the live sessions we began offering on LinkedIn. Yet, we can also find media stories of businesses that have not reacted so well. While every company has been forced to do some form of damage control, some of the damage has been of their own making. As one headline reminds us: “How companies behave amid coronavirus will determine their fate later.” A participant of one of our online sessions asked: “Is redundancy compatible with having shareholders and investment funds that only expect short-term profits and returns?” To which my colleague Miguel A. Ariño responded with an emphatic “No.” While sensitivities are changing in this regard, he admitted that this mindset still hadn’t filtered through to many directors. The crisis has forced the world to stop and think. “The last global crisis didn’t change the world. But this one could,” wrote one business commentator. With a global recession quite certain, the stakes are literally life or death as we decide the path forward. If not “a crisis of capitalism,” the commentator continued, “it might better be understood as the sort of world-making event that allows for new economic and intellectual beginnings.” That’s what this issue of IESE Business School Insight provides: food for thought on where the governance models that have guided our companies may need to go next. Our report, completed just as the coronavirus was declared a global pandemic, continues an important conversation that for IESE began long ago; that was given fresh impetus by the U.S. Business Roundtable and Davos manifestos; and that now seems of utmost urgency as we adjust our businesses and societies to the new normal. Many of us have more time than usual to read and reflect. So, as you read this magazine, reflect on the timeless lessons for leadership contained in each interview and personal story that can serve you as you write your own story going forward. Practice the habits for happiness. Show empathy and kindness. Promote inclusion, empower others and make a positive social impact. Above all, use this crisis to show your true character.

Banco Mediolanum customers are the most satisfied customers in the Spanish banking sector. We wish to thank our customers for their trust. And also those who have made it possible: our Family Bankers®.

Ranking first in something can be a one-time event. But when you are first in 10 categories, according to the Customer Satisfaction Benchmarking study conducted by Stiga, it means that there is a strong will behind it all.

— Brand image (strength, solvency, modernity and social commitment). — And the percentage of committed customers with the entity.

To be the best bank for our customers. Because our customers are the most satisfied. But we also rank first in key areas such as:

It makes us happy to see that time has proven us right and that the way of banking that we believed in many years ago is a model to follow today: our Family Bankers®.

— Customer satisfaction with their manager (the professional that advises them). — Relationship values (transparency, trust and personalisation).

We will not say it was easy, but we can say that we had clear ideas: to accompany our customers throughout the Financial Cycle of Life to achieve their goals.

Banco Mediolanum is the first bank in Spain in the ranking of overall customer satisfaction with its entity, according to the Customer Satisfaction Benchmarking study carried out by the independent consulting firm Stiga, which analyses the main financial institutions of the Spanish banking sector. Family Banker® is a registered trademark of Banca Mediolanum S.p.A.


New paradigms in purpose, ownership and engagement

A conversation around the purpose of business was already underway when the coronavirus hit. For many, this global crisis marks a before and an after. What are the issues that executives and directors need to reflect on now, as they look for purpose beyond profits in a radically altered business environment?


New paradigms in purpose, ownership and engagement


hat kind of capital-

Corporate governance encompasses all the rules,

ism do we want?”

practices, processes, systems and values used to

That was the ques-

direct and manage a company, with the board of




directors being one of the key mechanisms in en-


suring the company fulfills its fiduciary responsi-

and executive chairman of the World Econom-

bilities. Lately those responsibilities have grown

ic Forum, posed on the occasion of WEF’s 50th

significantly more complex – and more import-

anniversary, adding that it “may be the defining

ant than ever for a company’s long-term success.

question of our era.” The theme of the WEF Annu-

Public trust in companies is down, even as their

al Meeting held earlier this year in Davos – “Stake-

profitability is up. But profitability for whom? And

holders for a Cohesive and Sustainable World” –

at what price to society?


hinted at the answer, which was spelled out in a new Davos Manifesto that called for stakeholder

“Shifting customer demands and social expecta-

capitalism to become the new dominant model

tions, particularly in relation to climate and gen-

for doing business in the 21st century.

der equality issues, are driving boards to make sure the goals of a company’s executive team are

“The debate regarding the role of stakeholders

aligned with those of owners and other stakehold-

within a firm is, primarily, a governance debate,”

ers,” says Giné.

notes IESE’s Mireia Giné, who participated in the Davos summit. “And as with most challenges that

Whether it’s “the end of an era for corporations”

require robust leadership to change the way we live,

or “a watershed year in the evolution of corporate

work and interact, transformation starts from the

governance” as pundits predicted at Davos, one

top. Corporate governance sits at the heart of this.”

thing is certain: “As leaders, we must take the opportunity to evaluate whether our businesses are

As leaders, we must evaluate whether our businesses are truly serving society in the best way

truly serving society in the best possible way,” says Giné. “We have a unique chance to give meaning to stakeholder capitalism by engaging in a governance debate and devising new structures to implement it across our organizations.” Here, we highlight the high-level issues that need to be considered by the highest level decision-making body of your company, for the sake of fostering sustainable, long-term economic growth in the interest of your various stakeholders.

Repurposing capitalism

The move toward stakeholder capitalism has been a long time coming. The Milton Friedman-style shareholder primacy dogma that dominated Western corporate governance throughout the latter part of 20th century is showing its age. We have talked about “private ownership” and “the owners of the company” as if we were talking about owning a washing machine, remarks Colin Mayer of Oxford Saïd Business School. In so doing, we’ve reduced

10 | IESE Business School Insight | no. 155

the concept of a firm to little more than a nexus

but nexuses of trust among stakeholders, over-

of contracts, held together by the board, whose job

seen by boards of directors.”

has been to do the bidding of those who provide Though making money is still important, “profit

the capital.

is not the defining purpose but rather a derivative But a company, Mayer stresses, is much more than

of the primary purpose,” which Mayer describes as

a machine. It’s a complex organism: it depends

“to provide profitable solutions to the problems

on and impacts human, social and natural assets,

of people or the planet – and not create prob-

from employees to the environment. To govern it

lems for people or the planet.” By proving them-

otherwise will lead to failure. The corporate scan-

selves “trustworthy of being trustees of their many

dals – and the resultant political instability we’re

stakeholders,” companies will find themselves

experiencing around the world – are evidence

with more loyal customers, more engaged em-

that a more enlightened view is needed, one that

ployees, more supportive suppliers – and happier

“promotes welfare, not just wealth.” And if we don’t

shareholders. Recent studies bear this out.

seize the moment, then it’s going to be seized by someone else, he warned, namely government reg-

While there is gathering momentum for this vi-

ulators who may impose unwelcome restrictions.

sion, the question before boards is: Is it their job to do this? With the exception of family firms,

Mayer proposes an enlarged concept of “owners”

where it’s easier for a single founder-owner to set

as “beneficiaries.” The directors manage the com-

the purpose and require the management to ex-

pany in the interests of its many beneficiaries, act-

ecute it, the practical reality of corporate boards

ing more as trustees or stewards than as agents

taking into account the competing interests of

for shareholders. “Ownership is no longer just a

their many different stakeholders may lead to a

set of rights; it is also a bundle of responsibilities.

situation of “accountability to everybody means

Corporations are no longer nexuses of contracts

accountability to nobody.”

We have a chance to give meaning to stakeholder capitalism Mireia Giné

believes the debate regarding the role of stakeholders within a firm is a governance debate.

no. 155 | IESE Business School Insight | 11


New paradigms in purpose, ownership and engagement

6 keys for excellent directors 1. Act with responsibility and transparency Act in the interest of your stakeholders, not just your shareholders. Think beyond compliance to living up to your responsibilities. 2. Strike the right balance Support senior management while also supervising and controlling what they do. Be prepared to sacrifice some short-term results to benefit the company in the long term. 3. Avoid excesses Don’t let special interests distract attention from accounts and financial statements. 4. Embrace talent and diversity Diversity of gender, background and experience is essential for creativity,

To this argument, Mayer counters that accountability to a single person – i.e., the shareholder – means

innovation and disruptive strategies, so don’t end up with a board of clones. Make attracting and retaining top talent a strategic priority. 5. Deal with digital transformation Recruit talent with knowledge of data science and machine learning, and continuously train people in new technologies. Keep the company structure flexible and dynamic to react faster to change. 6. Avoid rookie errors Designing a strategic plan in which the board doesn’t play a key role, and not following up on its implementation: don’t make these costly mistakes. source:

Directors Forum, held annually at IESE Madrid.

Different paths to purpose

Are there examples of this purpose-driven, stake-

nobody else counts. In corporations where the own-

holder-centric model of corporate governance

ership is highly dispersed among many different

in action? Yes, and Europe is home to many of

investors, Mayer believes it ultimately should fall to

them, including many family businesses.

the board to set the purpose and execute it, ensuring a system of measurement to ascertain whether

Germany is well-known for its two-tiered model

corporations are delivering on their purpose.

of a management board and an independent supervisory board split between elected employee

Furthermore, the law should impose duties on

representatives and shareholder representatives.

shareholders, he adds. Corporate law in the U.S. and

This forces consensus-building and co-determi-

U.K. currently constrains the potential of corpora-

nation by design. U.S. presidential hopeful Eliza-

tions to pursue a plurality of corporate purposes.

beth Warren drew inspiration from it in formulat-

That needs to change, he insists. And the tide ap-

ing her Accountable Capitalism Act, which would,

pears to be flowing in his preferred direction.

among other proposals, require 40% of board

12 | IESE Business School Insight | no. 155

Are there examples of this purpose-driven, stakeholder-centric model of governance in action? seats of U.S. corporations to be occupied by work-

companies are now incorporating as a PBC, offi-

ers’ representatives to help rebalance the board-

cially embedding governing for the public good as

room. The idea of more worker representation on

part of their charter.

boards seems to enjoy broad public support. Spain’s La Caixa represents another model – a

New ownership landscape

At the same time as executives and directors are

hybrid between a public and private corpora-

grappling with changing expectations of cor-

tion, part foundation and part bank, which is 40%

porations, they must also deal with a changing

owned by a holding company. Jordi Gual, chair-

ownership environment. Ownership of public

man of CaixaBank and an economics professor at

companies by a physical individual shareholder

IESE, says the reference shareholder provides the

is dwindling, being overwhelmingly replaced by

stability and long-term orientation that the bank-

large institutional investors. Moreover, among

ing business needs, allowing them to take a more

those institutional investors, traditional ones

stakeholder-oriented approach overall. The divi-

such as pension funds, which typically have lon-

dends generated by the holding company finance

ger-term investment horizons, are also decreas-

the foundation, which has an explicit social mis-

ing, being replaced by new types – hedge funds,

sion to promote education, research, culture and

private equity funds, sovereign wealth funds and

welfare for a wide variety of beneficiaries.

exchange traded funds – with very different purposes, investment strategies and time horizons.

In the United States, such models are more the exception than the rule – though that is changing.

On top of this, more and more institutional inves-

Until 2010, directors of for-profit companies were

tors outsource the management

not legally permitted to act outside the narrow

of their assets to

stricture of shareholder-first. Since the creation

professional asset

of a new legal entity known as the Public Benefit

managers. Some

Corporation, a growing number of U.S. for-profit

no. 155 | IESE Business School Insight | 13


New paradigms in purpose, ownership and engagement

of these assets are actively managed, meaning a portfolio manager or team of managers is making buy/sell investment decisions on behalf of their client in an attempt to outperform the market. The big shift of recent years has been to passively managed index funds, where the portfolio tracks a market index or benchmark to generate consistent returns. The management fees associated with these kinds of funds are lower and they can perform better than actively managed funds, making them a relatively safe investment vehicle – thus, their popularity. The proliferation of passive investing has attract-

dustries, such as

ed criticism for its outsized influence on the cor-

bacco, or promote

arms or to-

porate governance of public companies. Jill Fisch

Social and Governance (ESG) concerns, they have

of Wharton summarizes the main charges leveled

the ability to wield their power on an industry-wide

against passive asset managers: they don’t engage

scale for good. (See the interview with BlackRock’s

with or challenge companies enough, nor do they

Amra Balic for more on this.)


have the incentive or resources to do so because they compete on costs; worse for the proponents

Indeed, according to research by IESE’s José Azar,

of stakeholder capitalism is that they don’t act in

Miguel Duro, Igor Kadach and Gaizka Ormazabal,

the interests of society.

pressure from the Big Three about the risks that climate change creates for investors is having a

Fisch, however, takes issue with these criticisms. If

positive effect on corporate governance activities,

we take the enlightened sole owner as the bench-

contributing to their portfolio companies reduc-

mark for engagement decisions, then of course

ing their greenhouse gas (GHG) emissions. “Our

there will be costs. But that’s what she calls “the

analysis indicates that an increase in ownership

Nirvana fallacy,” comparing passive investors to an

by the Big Three is associated with a statistically

ideal world of fully informed, perfectly engaged in-

and economically significant reduction in emis-

vestors that doesn’t exist. In her view, the so-called

sions,” they assert.

Big Three of BlackRock, Vanguard and State Street do use the significant clout of the passive assets

“This may seem puzzling,” they admit, “given that

under their management to engage with com-

the Big Three have been criticized for tending to

panies on purpose and values as factors in their

vote against climate-related shareholder propos-

performance. Size creates more leverage in their

als.” To explain this apparent contradiction, the au-

engagements. And as asset managers offer more

thors state that the Big Three’s preferred method

socially responsible funds that exclude entire in-

of constructive conversations with management,

14 | IESE Business School Insight | no. 155

Increase in ownership by the Big Three is associated with a statistically and economically significant reduction in emissions

Miguel Antón

found a link between common ownership and excessive CEO pay.

Executives are given weaker incentives to compete when their industry is commonly owned José Azar

has been pursuing new lines of research into the phenomenon of common ownership.

entirely great news for corporate governance, especially when they constitute the largest shareholder of roughly 1 in 5 publicly listed corporations and close to 90% of S&P500 firms, often including the largest competitors within the

rather than protest voting, seems to be generally

same industry. Bloomberg Businessweek called

more effective at getting companies to take stake-

indexing “one of the biggest shifts in corporate

holder concerns seriously. And given that emis-

power in a generation.”

sions and climate change are global issues that transcend any one company’s or nation’s ability

Several IESE professors are pursuing new lines of

to solve singlehandedly, the Big Three, with their

research into this phenomenon known as com-

boundary-spanning portfolios, are uniquely placed

mon ownership. IESE’s Miguel Antón and Mireia

to exert positive pressure for socially responsible

Giné, for instance, have found a link between an

corporate governance on a global scale.

increasing amount of common ownership in U.S.

Common ownership

public companies and excessive CEO pay. In 2016, the median annual compensation for CEOs of S&P

That said, the fact that the Big Three hold about

500 companies was around $11 million. At the same

80% of all indexed money in the world is not

time, a majority of individual investors wanted to no. 155 | IESE Business School Insight | 15


New paradigms in purpose, ownership and engagement

see more pressure put on public companies to rein

carrier. Analyzing industry data between 2001 and

in executive pay. In the United States, CEO pay has

2013, Azar et al. found that the more common own-

grown almost 1,000% since 1978. This has opened

ership of certain airline stocks there was, the less

up massive inequality between very high earners

market competition there was between them and

and the bottom 90% of ordinary workers – a sit-

the higher the ticket prices, by as much as 12% on

uation that many consider intolerable, feeding the

certain routes. This is not to say there’s collusion on

rise of the populist backlashes we’re witnessing

the part of common owners. Rather, it’s that port-

around the world. In spite of this, according to 2016

folio managers seem to lack the impetus to push

data, asset managers voted to approve executive

company management to engage in more compet-

compensation packages about 96% of the time.

itive practices such as price wars, investing in R&D,

Analyzing data over the past two decades, Antón

improving operations, and so on. Everyone takes

and Giné found strong empirical evidence that

the path of least resistance: managers are incentiv-

“executives are given weaker incentives to compete

ized to maximize the value for all firms and relax

aggressively when their industry is more common-

the competition between them. Common owners

ly owned” and that “high levels of common own-

are rewarded with higher stock prices – though

ership rationalize performance-insensitive pay.”

consumers ultimately pay a price in the form of

In other words, among industry rivals held in the

more expensive airline tickets, even as passenger

same portfolio, CEOs can still get paid top dollar

numbers dwindle.

for not engaging in strategies such as price wars – something that in banking, for example, tends to

Azar is extending his research with IESE’s Xavi-

benefit customers looking for lower fees – because

er Vives. They recently modeled sectors of the U.S.

doing so could negatively impact their competitors’

economy and found that higher effective market

share price and dampen total portfolio returns.

concentration, including in the form of common ownership, can also lead to lower equilibrium wag-

Antón and Giné build on work by José Azar, who

es, lower output, lower labor share and lower capital

previously studied this effect among U.S. airlines.

share. Yet Vives remains cautious about calling for

The Big Three own up to 20% of each major U.S.

regulatory intervention and antitrust enforcement

There’s some evidence of common ownership contributing to more efficient governance Xavier Vives

prefers more research to regulatory intervention regarding common ownership.

16 | IESE Business School Insight | no. 155

Activists on the board Aside from index funds is another investment vehicle that’s impacting the way companies are governed: hedge funds. Unlike index funds, hedge funds attract a more activist breed of investor: highnet-worth individuals with more aggressive investment goals, usually looking to maximize profits in the shortest amount of time. As major shareholders, they can shake up corporate governance,

agitating for a radical restructuring or for selling off part or all of the business, which may deliver them quick returns but may also lead to layoffs and may not be in the best long-term interests of other stakeholders. By the time the value destruction comes to light, these slash-andburn investors have long since cashed out. regarding common ownership. He agrees that more

Columbia Law School’s John C. Coffee, Jr., notes

focus and scrutiny are needed, but urges more re-

the difference between having an activist hedge-

search. While there’s evidence of common ownership

fund employee on a board versus other types of di-

reducing competitive pressure, there’s also evidence of it

rectors, even if they may be activists themselves. In

contributing to more efficient governance – such as im-

general, he finds that “firms appointing an activist

proving information-sharing between firms and helping

experience an increase in information leakage of

them internalize spillovers where R&D investments are

25-27 percentage points.” Significantly, that leakage

complementary. The context matters, too: intra-industry

is “driven by the appointment of activist hedge-

common ownership could have an anti-competitive ef-

fund employees to the corporate board, and not by

fect, while inter-industry effects could be pro-competitive.

the appointment of other persons, such as industry professionals.” Moreover, “bid-ask spreads increase

For their part, asset managers disagree as to whether

by statistically meaningful amounts,” particularly

there is a real problem, but they’re closely watching how

“in those cases in which a hedge-fund employee

all these debates play out, given the potential ramifica-

is appointed to the board.” Tellingly, the market

tions for their business models. What’s in no doubt is

response is much more positive when the slate

that patterns of ownership have changed, says Vives, ren-

of fund-nominated directors aren’t employees of

dering the old maxim of “own-profit maximization”

hedge funds, he adds.

a moot point. At the very least, we can expect to see greater emphases on transparency and disclosure of

“Hedge-fund activism seems closely aligned with

engagement priorities and voting records, and add-

informed trading,” says Coffee. “That’s not neces-

ed pressure to introduce new voices and inputs into

sarily the same as illegal insider trading. We don’t

boardroom discussions.

know who the beneficiaries are. But it is certainly no. 155 | IESE Business School Insight | 17


New paradigms in purpose, ownership and engagement

Competence, character and, above all, integrity Martin Lipton

calls for more board members knowledgeable in digital strategies and business models.

Creating better boards The complexity of today’s consumers. Digital disruption. Geopolitical risks. To this list of corporate governance challenges add one more: the problem of short-termism, which the 2008 global economic crisis laid bare. Over the past decade, a new corporate governance framework, predicated on sustainable long-term value creation, has emerged as the new way forward. To deal with these challenges, bigger, more sophisticated boards are needed, says Martin Lipton. Boards need to be diverse, in terms of ethnicity and gender. And the typical eight directors could be expanded to 12 or 15, serving for five or six years max. We need board members knowledgeable in the strategies, methods and business models of the Googles, Apples and Microsofts of the world. Take Facebook: “No one asked the right questions

18 | IESE Business School Insight | no. 155

as to the societal impact of its activities. It was enormously profitable, but there was nobody on the board asking, ‘What’s the impact of doing this?’” Regarding activists, Lipton says, “You don’t always have to fight tooth and nail to defeat them.” Sometimes the best approach is to work something out. That’s why it’s so important to have collegial directors: “A director’s personality, leadership and communication style will affect overall board dynamics. Remember, a board functions best when it works in unison with the CEO and management team. Maintaining that collegiality is key.” Other important criteria for directors are competence, character, professionalism, sound judgment and, above all, integrity. “Even if you have smart people, if they don’t have the right moral compass, it’ll lead to failure.”

Jordi Canals

interviewed Martin Lipton, founding partner of the law firm Wachtell Lipton Rosen & Katz, about his WEF-sponsored publication, “The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth.”

asymmetric. And it is most likely harmful to shareholders.” He suggests these activist directors “tip information to their allies to assemble a ‘wolf pack’ to be able to put more pressure on management.” Although critics of hedge funds regard them as “the epitome of all that’s wrong with capitalism,” London Business School’s Alex Edmans doesn’t see their disruptive presence as categorically a bad thing. He cites instances where hedge-fund activists can make improvements, similar to a consultant or turnaround specialist hired for a few months. “Their shorter holding periods give them a sense of urgency, and the option to exit gives them teeth that can overcome managerial entrenchment. They can force the firm to refocus on its core expertise,

We’ve reached a tipping point. We must reconceive corporate governance as a collaboration among stakeholders

redeploy human capital and change board-level expertise, leading to a more efficient allocation of resources that results in increased innovation

The clarion call that Jordi Canals, head of IESE’s Cen-

output in the long term, measured by both patent

ter for Corporate Governance (CCG), issued a de-

counts and citations.” The key is for management

cade ago in his book, Building Respected Companies,

to turn activist initiatives into business improve-

has never been more relevant: “As one of the central

ments that have a positive impact going forward.

institutions in modern society, the firm is not just an

Resisting short-termism

engine of wealth creation and jobs, but an agent of change, a driver of innovation and people develop-

Whichever side of the debate you come down on,

ment. Boards should realize how critical their role is

one message is consistent: short-termism poses

for the companies they lead and the well-being of

a threat to long-term economic prosperity. We’ve

societies at large. Beyond overseeing financial and

reached “a tipping point,” says corporate gover-

nonfinancial performance indicators, the board has

nance expert Martin Lipton, “and decisive action is

a moral obligation to support the long-term success

imperative” to “recalibrate” and “reconceive of cor-

of the whole firm – and not only for certain share-

porate governance as a collaboration among corpo-

holders. Those who aren’t committed to this vision

rations, shareholders and other stakeholders work-

of the firm should ideally not be given a place on the

ing together to achieve long-term value and resist

board of directors. Its long-term success requires

short-termism.” (See Creating better boards.)

good governance.” How’s yours?

This echoes central tenets of the 2020 Davos Manifesto: A company treats its people with dignity and respect; it serves society at large through its activities; and it responsibly manages not just near-term but also medium- and long-term value creation “in pursuit of sustainable shareholder returns that do not sacrifice the future for the present.”

more info: This

article was informed by an executive summary by Tom Vos (KU Leuven), with additional reporting by Steve Tallantyre, of the conference “Corporate Governance and Ownership with Diverse Shareholders,” held at IESE Barcelona. The conference was organized by IESE’s Center for Corporate Governance (CCG) and the European Corporate Governance Institute (ECGI), with support from the Social Trends Institute. To find out more, go to

no. 155 | IESE Business School Insight | 19

New paradigms in purpose, ownership and engagement

credit :

Roger Rovira


Amra Balic

Head of BlackRock’s EMEA Investment Stewardship team based in London, responsible for company engagement, public corporate governance, stewardship and responsible investment across Europe, Middle East and Africa on behalf of BlackRock’s clients globally.

Value is extending to values E very year, BlackRock Chairman and CEO Lar-

ry Fink’s letter to CEOs makes headlines, and

2020’s was no exception. This time he put the climate front and center, announcing that sustainability would be “integral to portfolio con-

struction and risk management.” BlackRock would be exiting

certain investments such as thermal coal and, as the world’s

largest asset manager, it would bring its weight to bear on the companies whose shareholders it represented: “We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.” Fink’s previous letters have been no less newsworthy. He made “the inextricable link” between purpose and profit, and urged companies to prioritize value for stakeholders and positive social impact, long before the U.S. Business Roundtable issued its own similar statement in August 2019. For Amra Balic, these are all positive signals that mark a shift in investment priorities. In her role, she meets the boards and

management teams of the companies her clients are invested in, representing their concerns and encouraging those companies to adopt business practices consistent with their longterm interests. Here she explains why this role is so important and why, despite the challenges, she remains optimistic. no. 155 | IESE Business School Insight | 21


New paradigms in purpose, ownership and engagement

How have you seen the conversation changing?

Describe a typical engagement…

Just a few years ago, the most important element in our abil-

When we approach companies for a con-

ity to manage money was around value, but today it is about

versation, we know exactly what we want to

both value and values. This comes up in many of our conver-

discuss and what we would like to achieve.

sations with asset owners. Some have very strong views on

When we talk to the board, in the vast major-

the (often ethical) values they want to capture in their invest-

ity of cases it’s the Chairman. Depending on

ments. Others focus on maximizing shareholder value. We

the topic, we would also talk to remuneration

don’t impose our views. Our job is to help them achieve their

committee members or sustainability com-

objective, whether driven purely by value or by both value

mittee members and, if necessary, the CEO

and their specific values.

or CFO. I must point out that no nonpublic information is shared in these meetings.

How does Investment Stewardship work?

There are stringent laws and regulations that

To inform our voting and to promote sound corporate gover-

investors are required to abide by in this re-

nance consistent with sustainable, long-term value creation,

spect. We’re clear that the information must

we engage with company leaders on key topics that could

be publicly available to all investors.

have material economic, operational or reputational ramifications for the business. We do this to give companies feed-

How do you measure what you’re achiev-

back, as a long-term investor, and for us to understand their

ing through these conversations?

approach. Where and when appropriate, we hold directors

It depends on the issue. Some topics are

accountable in our voting for their action or inaction on ma-

more short-term in nature than others. For

terial governance matters.

example, if we feel there’s a disconnection between executive pay and performance,

How do you take asset owners’ views into account?

we would expect boards to address that by

We spend a considerable amount of time talking to our cli-

the next shareholder meeting, so within a 12-month period.

ents, engaging with them directly to hear their views. We’re

Sustainability or climate issues, on the other hand, are not go-

very conscious of the fact that we’re managing somebody

ing to be addressed in 12 months, yet investors will expect to

else’s money, and it’s our job to make sure those asset own-

see progress year-on-year, and that progress will be monitored

ers have choices and that we’re meeting their expectations in

over time. Monitoring progress over time and reporting on it

terms of them achieving their desired outcomes.

is something that the investment industry needs to get better at, looking for ways we can communicate more clearly what

“We spend a considerable amount of time talking to our clients directly to hear their views”

all of this stewardship/engagement activity is achieving. This is something that the U.K. Stewardship Code is looking to capture through its reporting on outcomes from 2020. How can progress on environmental sustainability be better monitored? One of our engagement priorities is to factor “Environmental Risks and Opportunities.” So, we look for companies to disclose their approach to climate-related risks and their transition to a lower carbon economy, using the recommendations of the Taskforce on Climate-related Financial Disclosure (TCFD) and the Sustainability Accounting Standards Board (SASB) as benchmarks. Good quality, material disclosures enable us to make more informed voting decisions and are key for us being able to monitor progress. We consider progress in the context of the company’s current situation, its business risks and opportunities, and its ability to act.

22 | IESE Business School Insight | no. 155

credit :

Roger Rovira

insightful explanations of their long-term strategy, purpose and culture, and we’d like that to be the norm. In their absence and/ or when we have concerns, we believe that engagement is preferable to voting to communicate expectations to the company. I sometimes hear comments from companies that investors never ask about culture. Frankly, we don’t have to ask, “What’s your culture?” Culture influences both the “what” and “how” of the business, and some business decisions can be a litmus test for corporate culture. For example, a conversation with the board about how they determine executive pay. Or a conversation about the workforce and how boards are considering employee voice at the board level. Many companies say, “Employees are our greatest asset.” Then I ask, “What does that mean in practice?” And if they tell me I should talk to HR, then that’s a disappointing indication, because I would expect the board to engage Some point out that two-thirds of the $7 trillion that

in that conversation in a very meaningful way. The same goes

BlackRock manages are in passively managed index

for questions around strategy and how much the perspectives

funds, and some of the activities you’ve just described

of different stakeholders are taken into account.

apply more to actively managed funds. I deliberately don’t use the word “passive” because, even

How do you see this field evolving?

though we are index tracking, there’s nothing passive about

We expect that asset owners will continue to hold compa-

the considerable amount of time BlackRock’s stewardship

nies to account on ESG issues, in addition to financial perfor-

team spends engaging with companies to address concerns

mance. I note that conversations between companies and in-

and prepare for informed voting. Besides, index-fund clients

vestors are getting better. Increasingly, boards recognize it’s

who are pension savers, charities, endowments, foundations

part of their job, and useful for them, to talk to their investors

and sovereign wealth funds have long-term orientations,

and hear their views, especially around topics of a long-term

and, as shareholders, they expect us to encourage the com-

nature, such as the environment, human capital, corporate

panies they’re invested in to consider a range of Environ-

governance and pay, to name a few. This wasn’t the case,

mental, Social and Governance (ESG) issues, including cul-

even in some large European markets, until very recently.

ture and purpose, in line with their long-term goals. In engaging with companies, it’s not about us telling them How do you monitor culture?

what to do, but rather sharing experiences and different per-

When engaging on strategy, purpose and culture, we nor-

spectives, and forming a view on what works. The whole in-

mally discuss a company’s plans and policies and their im-

vestment and stewardship ecosystem is changing fast. But,

plementation with management. We typically meet with one

with the European Union Shareholder Rights Directive II, the

or more directors, possibly with management, to discuss the

U.K. Stewardship Code and other directives designed to push

board’s role in counseling and holding management to ac-

corporate governance to the next level, the direction we’re

count. Strategy, purpose and culture are more nuanced than

traveling in is clear: higher expectations, greater transparen-

many aspects of governance. Some companies publish clear,

cy and more rigorous standards. no. 155 | IESE Business School Insight | 23


New paradigms in purpose, ownership and engagement

Board basics The board of directors is meant to be a collegial body, yet that’s not always the case. To function properly, everyone needs to understand what they’re there for. Do you?


Why might you be asked to join a board? You represent a key shareholder or stakeholder. You have a reputation for reliability or independence. You bring specific know-how or capabilities... BUT remember you’re there to engage in general discussions, not to hold forth on your one area of interest.

In some countries, these responsibilities are split between different bodies, e.g., steering is separate from supervision & control, as in Germany’s twotier board system.

1 3

Steering the organization Discuss the vision and purpose of the organization. The CEO is typically selected on the basis of the collectively stated ambition. Note: The board doesn’t decide the strategy. Rather, the CEO that the board has selected will work out a strategy, together with the executive team, and the board endorses it and approves the resources to put it into action.

Following norms & standards The CEO may set these, but the board must endorse them and make sure they’re being adhered to.

24 | IESE Business School Insight | no. 155


Supervision & control Boards used to control only for results; now they’re controlling for risk (e.g., violation of environmental regulations). RESOURCES: What’s management spending money on? BEHAVIORS: Are we obeying the law, and do we know what’s permissible regarding the acceptance of gifts, for example?


INVESTMENTS: How much money is needed and where will it come from? COMPLIANCE: Is there a dedicated compliance officer who reports to the board?

Assuming responsibility If there’s a violation, the board is ultimately responsible. In some cases, individual directors can be held personally liable.

Lead Independent Director EU




Chair = CEO There’s a mathematical relationship between the number of board members, the number of times you meet, and the number of topics that can reasonably be discussed. Think about that when planning the meeting agenda. There’s nothing worse than advocating that a decision be made during the meeting but then having to postpone it because you ran out of time. That wastes everyone’s time.

Am I a good director? Do I add value? Do I contribute to the future of the company? Do I speak my mind? Do I make sure that the company has the right people on the board and in the management team to ensure its future sustainability?

What to do with board members who don’t talk? TAKE A STEP BACK TO ANALYZE:

Why is this happening? Why is that person here? Typically, board members represent an interest: you need to figure out how to leverage that.

2 PRACTICAL ACTIONS: 1. Make the order of intervening a random process.

2. Appoint discussants who have to read up on a topic beforehand and come prepared to lead a discussion on it.

Sources of conflict CEO is too dominant. Differing opinions about strategies and results: the best thing a board can do is call time on something that’s not working. Unhappy shareholders. CEO dissatisfied about remuneration. Directors who undermine the CEO by talking to the press and analysts.


Based on the Executive Education lecture “How to be a good director,” delivered by Herman Daems, visiting professor of Strategic Management at IESE and veteran director of multiple boards around the world.


New paradigms in purpose, ownership and engagement

Ask the tough questions and come prepared


ompany boards meet just a few times a year, but the challenges they face are non-stop. Here, Herman Daems discusses the board’s shifting roles and responsibilities, and what it

There are more and more rules that a company has to com-

takes to be a good board member.

ply with. And while the board doesn’t actually do that compliance, it does have to make sure that all of the firm’s com-

How has the role of the board changed in recent times?

pliance functions are being properly executed, that there’s a

The traditional job of the board – to supervise and control

person and an office responsible for it, and the board must

management resources – has grown significantly. It used to

hear, at least once a year, a report on compliance. Part of this

be that boards controlled almost exclusively for results. Now

is being driven by a wider shift that’s happening across the

they’re increasingly controlling for risks and management

business world, from being solely profit-driven to also being

behaviors – for compliance. Is there cheating? Are we fol-

purpose-driven. The board has the added challenge of more

lowing the laws? We tend to think of banks in this regard, be-

involvement with society while at the same time protecting

cause theirs is the most visible sector where compliance has

the horizontal line. This is something really new.

gotten more onerous, but it’s happening across all sectors. The chemical industry also has stricter rules: salespeople

How does the experience of sitting on a board differ

have to be trained to know what is and isn’t permissible to

from one company to another?

say to other salespeople. The same goes for pharmaceutical

It depends on the context, particularly the ownership structure.

companies, as well as the Nestlés and Unilevers of this world.

There’s a world of difference between, say, sitting on the board

26 | IESE Business School Insight | no. 155

Roger Rovira credit :

Herman Daems

Chairman of BNP Paribas Fortis and Domo Investment Group, among others. Having sat on the boards of numerous companies on both sides of the Atlantic, Daems has experienced firsthand the changes that have swept the boardroom, which he documents in his book, Insights from the Boardroom.


New paradigms in purpose, ownership and engagement

of a large, listed company with thousands of disparate shareholders, many of whom have no interest in interfering with the board’s decision-making, and sitting on the board of a company owned by a single family in which you may have very little say. Serving as an independent director of a startup is yet another story: here, you may need to act more like a referee between the founding entrepreneur and the VC firms involved, who may not see eye to eye on which direction to take the business. Then, there are other factors that can lead to differences, such as: the composition of the board and the personalities of its members; the laws and regulations in place where the company operates; and how authority is allocated. In Europe, the Chairman and CEO tend to be two separate people, whereas in the United States, the Chairman and CEO are often the same person. Personally, I don’t think that’s a

“Dissatisfaction about remuneration can lead to conflict in the company and unhappy shareholders. Don’t underestimate this”

good practice. And increasingly the U.S. must think so too, because they’ve created a new function, the Lead Indepen-

going to cost. It’s your responsibility, as a board member,

dent Director, to essentially monitor that the CEO as Chair

to protect the resources of the company and think about

is performing the role to the board’s satisfaction.

these things.

Where do you see boards frequently having difficulties?

Another difficult topic is remuneration and variable com-

One is around strategy. People often think the board decides

pensation. Honestly, I can’t tell you how many times I’ve

on strategy. That’s not true. The board approves the strategy.

spent talking with frustrated CEOs trying to pressure me

The CEO that the board has selected will work out a strategy,

into giving them more money. Dissatisfaction about remu-

and it’s the board’s job to look at it and decide whether they

neration can lead to conflict in the company. And it can lead

believe in it or not. They ask the tough questions: “How are you

to unhappy shareholders. Don’t underestimate this.

going to do this? How much money will you need? What are the investment requirements? Where is that money going to

What about with the board members themselves?

come from?” That’s a big difference.

One thing you have to understand is that boards need people with broad orientations. So, if your focus is narrow, you

So, while it’s not your job to set the strategy, it is your job to ap-

shouldn’t be on the board. I’ve had people come up to me

ply the brakes if that strategy isn’t working. Managers are prone

and say, “I’m really outstanding in logistics and I’d like to

to carry on: “Just give us a few more months and it’s going to

join the board.” You’re not the right person. We don’t need

work.” At some point, someone has to step in and say, “Stop.

the best logistics manager in the Western world. Apart from

You’re going to try something new.” That’s the board’s job.

the fact that the logistics person in the company is probably going to be thinking, “Great, now I’m going to get an addi-

Deciding on acquisitions is another big mistake I see boards

tional boss on top of my CEO,” no one is really interested in

make. I’m convinced that so many acquisitions fail because

having a board member who can only talk about one thing.

the board overpays and is led in the wrong direction by the

If you can’t talk about the results and the performance of

management who get so excited by “this great strategic op-

the company in general terms, and about the market condi-

portunity” that they forget to think about how much it’s

tions, you’re worthless.

28 | IESE Business School Insight | no. 155

credit :

Roger Rovira

Besides being able to talk about more than one thing is simply being able to talk. Consider the banks: why did they go under? If you look at their governance before the crisis, most of them would get five stars: they had separation of powers, they had the right committees. They had everything except people who spoke their minds. People kept quiet and accepted whatever the management told them. One of the really important things for you, if you join a board, is to speak up and express your opinion – not to start a fight, but to really state what you think. What do you do about those people who just sit there and don’t talk? As the Chairman, I’ve done two things. First, I make the order of intervening a random process. I don’t let the person with the biggest name speak first. I make sure someone else gets the floor first. This changes the debate. Second, I appoint first discussants. Days before the meeting, the secretary sends round a list of topics to certain board members who will be responsible for leading the discussion on that topic. This has a number of advantages. First, they read that document very carefully. Second, they express an opinion. Then the others can respond to that opinion. Any other advice? When speaking your mind, be courageous, but remain friendly. If you’re coming in with an attitude of, “I’ll tell them,” it’s not so good. You challenge, but in a friendly way: “Why are you doing this?” Sometimes asking even the stupid question forces everyone, especially the executives, to really think through how they’re presenting certain things. If you feel that you need to know something, it’s your duty to ask for it. Don’t be afraid to ask for information that you think you need to have. Finally, there’s nothing worse than having to postpone an important decision until the next meeting because “I forgot to read this.” That’s not stimulating for the executives who were counting on this board meeting to get approval for what they’re doing. As a board member, you’re supposed to do your work, so please, please, please, come prepared. no. 155 | IESE Business School Insight | 29


New paradigms in purpose, ownership and engagement

Gaizka Ormazabal

Associate Professor of Accounting & Control and Academic Director of the Center for Corporate Governance (CCG) at IESE.

Next on the agenda:

digital disruption


owadays, few business topics draw as much public attention as digital disruption. Webbased application programming interfaces (APIs), smartphones, blockchain technology, machine learning and data analytics, among many other innovations, are giving rise to the emergence of new business models and transforming the ways firms operate and interact with clients, suppliers and other stakeholders. In this context, a natural question is whether this wave of technological disruption is also transforming corporate governance. Recent survey and anecdotal evidence suggests that digital disruption is a major concern for boards. But is technology also transforming the functioning of corporate boards? Is it having any effect on shareholder monitoring? Not much, one could conclude at first glance. However, even if that were true, such a conclusion runs the risk of ignoring important changes that are yet to come. Some of these changes relate to the functioning of corporate boards. For example, Netflix recently opened access for its directors to all the data on the firm’s internal shared systems. Of course, one could argue that there is only so much information a director’s brain can process. But advocates of technological change would counter that this is not necessarily a problem. Artificial intelligence and machine learning can help directors by identifying correlations and by producing better forecasts. Not only that: computer-based textual analysis can help identify mismatches in wording and inconsistencies in numbers. In addition to enhancing access and quality of information, technology could facilitate the preparation of board meetings by automating mundane tasks.

What about shareholder monitoring? Can technology enhance shareholders’ empowerment? Consider the application of blockchain technology to the register of corporate shares. This innovation would enhance transparency. The register would be publicly observable and changes recorded instantly. This is possible through

settling securities trades.

credit :

Edu Ferrer

a process of computerized verification of transactions. Moreover, such a register would increase stock liquidity by shortening the time required for executing and

no. 155 | IESE Business School Insight | 31


New paradigms in purpose, ownership and engagement

Technology opens new ways to fight opportunism and enhance the role of stakeholders in corporate governance

Similar technological developments could limit other types of managerial opportunism. For example, a blockchain register of insiders’ trades could reduce the profits from misusing private information, as outsiders would be able to observe managers’ trades in real time. Can technology improve shareholder voting? Consider a firm holding a virtual shareholder meeting with a remote voting system. Remote connection would likely result in higher shareholder participation. Remote voting would address issues such as incomplete distribution of ballots, incorrect voter lists and problems in vote tabulation. Technology could also enhance the role of stakeholders in

This is important, because ownership transparency and stock

corporate governance. Customers could influence firms by

liquidity go hand in hand with shareholder monitoring. Let us

sharing their views on social media platforms. Suppliers

remember why.

could protect themselves from client opportunism by using “smart contracts” – for example, a supplier selling a device

First, liquidity is at the heart of an important mechanism

that automatically stops working if the payment is not done

through which investors put pressure on firm managers – the

before a certain date.

possibility of “voting with their feet” (i.e., selling their shares). So, can we conclude that technological disruption enhancSecond, a transparent share register could attract some in-

es corporate governance? Not so fast: technological disrup-

vestors (e.g., institutions) and repel others (e.g., raiders). This

tion also raises concerns. Some – such as hacks and privacy

matters because investors often differ in economic interests

breaches – are obvious. Others are less evident, such as the

– for example, in terms of risk preferences or investment

greater transparency inducing short-termism and, by dis-

horizon – as well as in their ability to influence top corpo-

couraging potential raiders, managerial entrenchment.

rate managers. All this calls for a careful consideration of the potential uninTechnology also opens new ways to fight managerial op-

tended consequences of technological disruption. But, as with

portunism. Consider a firm disclosing its ordinary business

any innovation, assuming certain risks is par for the course.

transactions on a public blockchain. This disclosure would result in real-time accounting (i.e., instantaneous financial information), which would facilitate the monitoring of firm performance and make manipulation more difficult.

32 | IESE Business School Insight | no. 155

To find out more about the activities of the IESE Center for Corporate Governance (CCG) and to subscribe to its newsletter, contact

dayone scaling up


A new perspective

What’s the future of banking? Evolving consumer expectations, tech innovations, regulatory changes and new business models are fast reshaping the global banking industry. Fintech and platform-based competitors are eating into the market that used to be dominated by a few major international banks. As the rules of the game change, who will emerge as the winners?


Enjoy better reputation


Governmentbacked guarantees (for capital, consumer protections, etc.)

Experience and expertise in regulation and risk management


Economies of scale


TODAY New players, new tech and low benchmark rates are already seeing: erosion of incumbents’ margins • increased competitive pressures •

34 | IESE Business School Insight | no. 155

1-3 YEARS Incumbents will have to restructure and consolidate, owing to: overcapacity low profitability • need for heavy investment in IT • •

Brand recognition

3-5 YEARS Whether Big Tech dominates will depend on: • the regulatory environment and compliance costs • the capacity of incumbents to monopolize the interface with customers

A FRAMEWORK THAT WORKS FOR ALL? The EU Payment Services Directive was updated (PSD2) precisely to account for the new, nonbank providers of payment-and-account services that have entered the market since the financial crisis. New parts of the directive have recently come into effect. Here’s what’s involved:

Ability to attract the best talent and innovate


What it means in practice

Who’s most affected?

Enhanced data privacy and security

At least two of these three authentication methods are required for online payments: (1) customer password or PIN; (2) customer phone or token; (3) customer fingerprint, voice or face recognition.

Primarily banks, as they have to behave more like the platforms that represent their biggest competitive threats.

Data portability to give customers more control over their own data

Customers have the right to request that their personal data be shared with other nonbank entities and third-party payment service providers.

Banks lose exclusivity to their databases – although the requirements of the directive cut both ways, and nonbank, third-party providers have their own compliance challenges in ensuring the security of the said data before banks share it.

Superior technology, free of legacy systems

Operate outside some regulations that exist for traditional banks


GAINING GROUND Big Tech firms both cooperate and increasingly compete with traditional banks in offering financial services. A broader range of networked, interwoven, datadriven services

Savings Payments instruments Credit

Big Tech firms (and regions of operation) Alibaba/Alipay, Tencent (China) Baidu (China)

Vodafone M-Pesa (East Africa, Egypt, India) Established customer base

Mercado Libre (Argentina, Brazil, Mexico) Line, Rakuten (Japan) Google (Worldwide) Amazon, eBay/PayPal (Worldwide) Apple, Facebook, Microsoft (Worldwide)

5+ YEARS The winners will be those that achieve: • superior innovation • a strong reputation • customer loyalty and trust • large quantities of customer data that they leverage effectively

indicates new operations introduced outside the traditional banking networks

indicates services offered on top of or in collaboration with existing financial institutions

source: “Big tech in finance: opportunities and risks,” Bank for International Settlements (2019).

source: Based on presentations by Jorge Soley, including during the 15th Banking Industry Meeting held at IESE Madrid. Also, “How large is the disruption in banking?” by Xavier Vives, published in IESEconomics, and his paper “Digital Disruption in Banking,” published in the Annual Review of Financial Economics (2019).


Flipping the digital switch Many companies have found themselves going completely digital overnight. What are the keys when undergoing radical digital transformation?

1. EMPOWER A PILOT GROUP Empower a small group who are directly connected to the senior management team or board to give them organizational cover but they don’t interfere in the day-today details. Keep the rules loose, allowing people to play within the sandbox. Participants should spread out, then come back together, in quick succession. Take the lean startup approach of fail fast, learn, move on. Know when it’s time to stop, disband and hand over: the people good for the pilot may not be the right people for the next iteration. Let everyone find their new role as the new normal takes shape.



When deciding which technology or platform to choose, acknowledge that not everything can be done by your own internal teams. There are times when you may have to go outside your own IT department. Start with trusted providers with whom you already enjoy good relationships. Longer term, you will have to weigh whether it’s worth relying on an external provider for a key piece of tech. But in the short term, the transformative impact of outside expertise may be required.

Establish good protocols from the very beginning. This will help when rolling out, scaling and involving other relevant communities in the change.

watch: “Digital

Reinvention in Disruptive Times” with Sandra Sieber.

36 | IESE Business School Insight | no. 155

A world of knowledge to overcome the crisis For more tips like these, go to where you will find a host of open-access resources, including links to online sessions, to help the business community and others work together to overcome this unprecedented crisis. #NowMoreThanEver

Managing virtual teams

Can deep, high-quality, effective work be replicated in a virtual, remote, home-based setting? Yes, if you keep these points in mind:

1 4

Remember the 3 D’s There are three types of distance to overcome – geographic, time zone and operational – which demand greater sensitivity and respect for how and when each team member may be working.

Keep calm Anxiety is contagious, so stay positive. Lighten the mood with uplifting chats that keep your team hopeful. watch:

“Managing Virtual Teams” with Sebastian Reiche.

2 5

Virtual doesn’t negate personal When working from home, team members are likely to find themselves juggling complicated domestic circumstances. We all need extra patience and empathy.

Connect purposefully Establish structure, rules and virtual meeting times. A regular call is helpful and appropriate, but always with a concrete reason. Think of creative ways to build relationships via screens.

3 6

Trust your team from afar Don’t assume that people are slacking off at home. Let go of any mistrust and resist making biased judgments of others’ performance.

Use today as the basis for tomorrow Having learned to work online, don’t revert to old ways once you’re allowed back to the office. Note the practices worth keeping.

Cash is king: advice for CFOs We have a responsibility to make sure our employees have

and balance sheets to determine their capacity to pay. Always

workplaces to come back to. To ensure that happens, calcu-

try to negotiate a deal: receiving a partial payment is better

late exactly how much cash your business needs in order to

than nothing. Check the terms of your contracts. Regardless

be up and running from the moment the crisis is over, and

of fixed or variable terms, there are conditions by which a

keep that amount in reserve. Start by working backwards:

contract can be halted or a payment delayed.

if you need, say, $500k on May 1st, and you have $1m, set the $500k aside and see what you can do with rest between

Talk to your banker: it’s their job to help. As a last resort,

now and then. Do that for different scenarios and especially

check out your country’s bankruptcy laws: they may afford

for worst case scenarios. Set your own time 0 (with 0 being

you some protections. Whatever you do, do it now!

the end of the quarantine) and prepare cash budgets for -2 months, -3 months, etc. Start negotiating with your suppliers to get better margins, paying special attention to the contribution margin. With customers who owe you money, study their income statements


“Financial Impact of the Outbreak and Advice for CFOs” with Javier Santoma.


Leaders need


icky Lawler got into tennis by chance, but given her international background it seems only logical that she ended up working among a set of top professionals who can spend 11 months out of the year

a tenth of the prize money of men; over the past decade, the

crisscrossing the globe to compete at the highest levels. Orig-

total prize money in women’s professional tennis has more

inally from the Netherlands, her father’s job as a Philips ex-

than doubled, reaching record levels today. “The growth has

ecutive took her family to live in many different countries.

been incredible,” says Lawler. Here, she highlights what other

“Moving from country to country gave us a very wide per-

professions can learn from tennis, where men and women

spective,” she says. After earning a master’s degree in applied

both perform at the top of their game on the world stage.

linguistics from the University of Delaware, she moved to Paris, where she responded to a job advert for a multilingual

What are the characteristics of top performers?

press attaché for the Men’s International Professional Tennis

They’re very focused, disciplined and driven. One of the best

Council – her entrance into the world of tennis.

athletes I ever met was also very well-rounded. She loved people and relationships, which is kind of the opposite of the

Lawler went on to work for the sports marketing agency, Oc-

robotic focus on “I need to win, win, win.” I remember talking

tagon, and during her 27 years there she joined the board of

to her at length about walking that fine line between humility

the Women’s Tennis Association (WTA), eventually becoming

and confidence, of having the utmost respect for your op-

its President in 2015. Tennis is one of the few sports where

ponent while also having absolute confidence in yourself, of

women command as much fame and fortune as the men and

keeping a 30,000-foot view of a situation that’s bigger than

where, in the grand slams and combined events, the prize

yourself. Maintaining that balance, I believe, made her the

money is equal. When the WTA started in 1973, women earned

champion she was.

38 | IESE Business School Insight | no. 155

Paul Mac Manus credit :

passion & empathy

Micky Lawler

President, Women’s Tennis Association (WTA). “A startup mentality is absolutely key to continued success for any business.”


Face to face

The other thing I’d say is: you always need to have a Plan B.

Your background helped you develop these qualities.

People get injured. The odds are stacked against you from the

For someone who hasn’t had such formative experienc-

get-go. You can have incredible physical skills, but your men-

es, how can they develop these competencies?

tal skills have to be equally fine-tuned and strong. It takes

I’d say that if your existence goes around a radius of X, then

hard work but also a lot of luck. You have to be passionate

that radius needs to expand by Y. Whenever you’re thrust

but also empathetic. There are many pieces and every piece

into a new situation, you’re going to have to look at areas that

needs to come together perfectly for it all to work.

you’ve never looked at before, and you will learn them. It’s also worth remembering that you don’t have to be Superman

Why is empathy so important for success?

or Superwoman in all areas. A leader should be okay with

Because only if you’re able to be non-judgmental and put

not being perfect in everything. You work to your strengths

yourself in someone else’s shoes can you fully understand

and surround yourself with a very solid team who comple-

the value proposition – where the wants and needs are,

ment each other, and you maximize the strength of the team.

what the challenges are, where the opportunities lie. As the

That’s how you learn and grow and lift your performance.

psychologist Tal Ben-Shahar said, in life you have the givers and the takers. The takers have no empathy. To be a good

In what ways are you using technology to innovate?

leader, you have to be a giver, not only to others, but also

For us, the biggest innovations have been on the content side

to yourself in terms of regulating your emotions, applying

and growing the digital footprint. The emergence of broadband

discipline and not losing control.

has delivered a big opportunity for all of us in sports because we have no limit to the number of stories that we can tell, and it offers us the opportunity to have a direct relationship with our consumers. With SAP, the WTA built a digital platform known as SAP Tennis Analytics, which analyzes data collected from the chair umpire’s scoring and combines it with Hawk-Eye technology. This has completely revolutionized the sport, from how the media report to fans, to how coaches train their players. This technology continues to evolve, as the WTA recently unveiled a new tool called Patterns of Play, allowing coaches to investigate how a rally unfolds point by point. Data is increasingly changing how we approach all aspects of our sport. With SAP, we’re able to stay on the cutting edge of where technology will take women’s tennis in the future, from fan engagement and gaming, to new revenue streams and the next level of competition on the court. credit :

40 | IESE Business School Insight | no. 155

Marta Jordi

“Sport, as in business, has to live in lockstep with shifting global influences”

There have been big debates about male and female athletes being treated differently, particularly in terms of pay. What’s your take on this? This is a complex topic, but what’s very simple is: while there are differences between the men’s and women’s business models, the argument should not be based around gender or talent; the argument should be based within the field of player profiles and those fueling the business. In examining the combined events, we’ve seen a long history of tennis stars on both sides take turns driving the sport.

Another area is over-the-top (OTT) streaming services, which

Unquestionably, there’s no place for ever considering any-

afford other huge opportunities beyond the traditional net-

thing but equal pay, whether in sport or in business. A fe-

works paying for your television rights. In China, for example,

male engineer needs to earn the same as her male coun-

we launched with an OTT platform called iQiyi, which is sort

terpart. Period.

of like Netflix, YouTube and Amazon rolled into one, where they distribute but also develop native content.

Two female astronauts recently made an interesting point about the first all-female spacewalk. On the one hand, they

Regarding China, why choose Shenzhen for the WTA

said, it shouldn’t matter if a man or a woman is on their team;

Finals for the next 10 years?

in the end, you just want to work with people who have the

Sport, as in business, has to live in lockstep with shifting

right skill set. On the other hand, the astronauts recognized

global influences. That requires optimizing existing rev-

the need for milestones and for young girls to have role

enue streams while also discovering new ones and serving

models. It’s like that with the WTA. Again, it’s about skill lev-

the growing demand coming from markets that used to be

el, performance level, quality and, yes, the business models

considered secondary but are now becoming prime. What’s

between the men’s Association of Tennis Professionals (ATP)

astounding about sport is that one star athlete, like Li Na in

and the WTA are a bit different. But gender equality, in this

tennis or Yao Ming in basketball, can drive an entire nation to

day and age, is absolutely key to human evolution. And we re-

shape the direction of those global shifts. The 2008 Olympic

alize these debates are about something much bigger: we’re

Games in Beijing also really made the opportunities appar-

contributing, even in the tiniest of ways, to social change.

ent. We now have 11 events in China. The market evolution

So, we carry the torch, even though I find it sad that we’re

over the past 20 years in China has been remarkable.

still talking about it, like when businesses say, “We have 40% women represented, isn’t that fantastic?” I live for the day

At the same time as mirroring these global shifts of influ-

when we don’t have to say that anymore, because we’ll all be

ence, we have to remain quite flexible, constantly open to

together. But we’re not there yet.

new opportunities, new markets – and new challenges. We are especially sensitive to the difficult times that our athletes,

Do you think the WTA and ATP will ever come together?

colleagues and partners are experiencing with the coronavi-

For the WTA and the ATP to be one association, one tour,

rus outbreak. Our thoughts are with everyone as we monitor

one organization – that would be my dream come true. The

the situation closely. This part of the world is near and dear to

game of mixed doubles, when men and women play togeth-

the WTA family and we continue to support and protect the

er, is great, and the athletes enjoy it a lot themselves. I believe

health and livelihood of our players, staff and fans while this

that’s where the future value proposition lies. Togetherness.

situation is managed closely on all fronts. The WTA has a long history of positive growth in China, and we consider it a valuable investment in the WTA Tour to increase diversity across the sport’s international field of talent.

Micky Lawler spoke on “Driving Innovation” at IESE’s Global Alumni Reunion 2019.

no. 155 | IESE Business School Insight | 41



UNITED IN ACTION The coronavirus outbreak has also seen an outbreak of solidarity and positive action. Here, we feature some inspiring stories that are representative of the many extraordinary efforts during these extraordinary times. Read more stories of IESE alumni doing their part at And please continue to send your stories to the IESE Alumni Association so we can spread the good news and increase the impact.

42 | IESE Business School Insight | no. 155

“Our motivation couldn’t be greater” When Hewlett-Packard (HP) pushed

As soon as each design is validated by

to make 3D printing a key part of its

the relevant authority, HP works fast to

business portfolio, Ramon Pastor (PDD

scale production, so that thousands of

’01) couldn’t have imagined that their

the approved products reach hospitals

pioneering efforts would end up be-

on the frontlines. So far, HP has pro-

ing used in the global fight against the

duced face masks, face shields, mask

coronavirus pandemic. But this is 3D

adjusters and hands-free door openers.

printing’s great advantage: the tech-

It’s also working against the clock to

nology is versatile enough to be used

test and validate a mechanical bag valve

for any number of applications in very

mask that can be used for emergency

little time.

ventilation of COVID-19 patients. And

Work teams from HP’s R&D center

ventilators are in development.

nasopharyngeal swabs, FFP3 masks and near Barcelona – where Pastor, head of HP’s 3D printing division, is based –

The challenge now is to set up more lo-

are working in close collaboration with

cal supply chains for final assembly and

their counterparts in Corvallis (Ore-

distribution of products, which entails

gon), San Diego and Vancouver (Wash-

collaborating with each country’s au-

ington) to respond to growing requests

thorities. “It’s a tremendous logistical

from hospitals, medical professionals

challenge,” says Pastor, “but the moti-

and industrial companies in all the re-

vation to achieve it couldn’t be greater.”

gions of the world where HP operates. “We study the requests and allocate them to different teams according to their nature, so the relevant team can gear up the machinery,” says Pastor. “Besides our own employees, who have really stepped up, a network of other companies, tech centers and volunteers has come together, willing to use their own 3D devices to print the materials that hospitals demand. We’re providing designs and technical advice, as well as lending our own 3D production capacity, to the collective effort.” more info: Go to to find out how to produce critical parts to help meet urgent needs. Also, IESE’s Joan Jané has written a case study on “HP 3D Printing” which is available at

Ramon Pastor

(pictured below) is using HP’s 3D printing capabilities to produce essential medical supplies around the world.



“It’s important to be part of the solution” Brian Ellison (MBA ’03) describes him-

where his wife works urgently needed

thousands of the face shields. Oth-

self as someone “addicted to communi-

more face shields to protect medical

er manufacturers across the United

ty building, who loves solving complex

staff treating COVID-19 patients. He

States are downloading the design as

problems with elegant solutions.” With

enlisted the help of Jesse Darley, of

the number of coronavirus cases rises

the coronavirus pandemic, the problem

the local design firm Delve, and Elli-

in every state, and demand for medical

couldn’t be more complex. And the solu-

son, business development manager

gear outstrips supply. Toyota, Nike and

tion that he and two engineer friends

at Midwest Prototyping, which, as im-

Apple, combined with Ford, now pro-

came up with couldn’t be more elegant,

plied by the name, specializes in rapid

duce over 1.5 million face shields a day.

as the trio worked together to design

prototype solutions. While Midwest will manufacture the

and produce 1,000 medically approved

shields for customers, the beauty of

face shields for their local hospital in

Although the impetus was to solve a

Madison, Wisconsin, in less than a week,

problem for their local community

their solution is that anyone with a la-

and are now producing over 20,000 of

hospital, the trio made their design

ser cutter, stapler, scissors and three

their “Badger Shields” a week for hospi-

“open source,” posting everything on-

readily sourced supplies (elastic head-

tals and clinics around the region. On March 16, Lennon Rodgers, who

line with instructions, material lists

bands, foam and clear plastic) can

and sourcing contacts, so that anyone

make the shields for themselves.

could download the design and create

works in the innovation lab of the

their own face shields to meet their

University of Wisconsin-Madison, got

own local demand.

“While this pandemic is global, it’s important to be part of the solution at the local level,” says Ellison. “We hope

a call for help. The university hospital Ford Motor Company is one of the big-

more manufacturers, maker spaces

gest companies to take up the charge.

and handy families will use this design

With auto production on hold, Ford

to help make shields for their hospitals

is now mass-producing hundreds of

and healthcare workers.” more info: To purchase or make your own Badger Shields, go to badgershield or

Brian Ellison

(pictured right) unloads Badger Shields at his local university hospital.

44 | IESE Business School Insight | no. 155

“We’re all in this together” For two Chinese businesswomen study-

Besides the practical aid, Wang also

ing in Europe, watching the coronavirus

wanted to do something to lift people’s

spread across the continent has been

spirits. “I’ve been in Germany for more

distressing but also a call to action to

than 10 years. Europe is like my second

unite people around the world in a

home,” she says. “Love knows no bor-

common cause.

ders. And as IESE teaches us, it’s my social responsibility to help others.”

Julia Zhou, managing director of Grupo Mandarin, is an Executive MBA

As Italy went into lockdown, schools

participant in IESE Madrid. She took

closed and children were thrust into

to WeChat, the Chinese social messag-

a frightening new world in which they

ing app, to raise funds for supplies in

were no longer allowed outside. Wang

Spain. From just three WeChat groups,

was getting calls from Chinese fam-

she raised enough to ship 40,000 sur-

ilies wanting to help the kids in Italy

gical masks from China to Spain. And a

because for many children in China,

separate initiative among the Chinese

this had been their reality for several

community in Spain raised funds for

weeks already. She got various kinder-

another 40,000.

gartens and primary schools in China

Ge Wang and Julia Zhou

(pictured left to right) organized medical supplies to be sent from China to Europe. And Wang got Chinese children to send drawings (below) to inspire Italian children during their lockdown.

to get their kids to draw pictures for Meanwhile, Ge Wang, CEO of Himmuc

the kids in Italy. Many of the pictures

Information Technology Co., is doing the

depict China and Italy united against

Executive MBA in IESE Munich. She lev-

the virus, with positive images of

eraged Chinese company contacts to ar-

rainbows and cherry blossoms. They

range donations of surgical masks to Italy.

sent videos to cheer the others on.

“It was painful to watch Italy experiencing

One Italian city intends to exhibit the

what China had just gone through,” she

artwork in its town hall when restric-

says. So far, she has managed to arrange

tions ease.

donations of over 100,000 masks and other medical supplies to several Italian

“Italy is one with us,” says one girl in a

cities as well as to Madrid, the epicenter

message of support. For Wang and

of the crisis in Spain.

Zhou, too, we are all in this together. more info: and

no. 155 | IESE Business School Insight | 45

My experience

credit :

George Kalozois


Belinda Klaes

CEO & Founding Partner of LOQI. She completed an Advanced Management Program (AMP) for senior executives in IESE’s Munich and Barcelona campuses.

SIMPLE BY DESIGN 46 | IESE Business School Insight | no. 155

LOQI products showcase world-class artwork around the globe, thanks to the inspiring business idea of Belinda Klaes.


elinda Klaes has a passion for art and wants to inspire people and bring culture to their lives with LOQI. “I wanted to start a brand that creates products with a soul,” she explains with a smile. Klaes heads LOQI, a Berlin-based com-

pany that provides galleries and museums around the wide with fashionable tote bags emblazoned with art prints. Growing up on a cotton farm in Australia, Klaes says there was “a dearth of art and culture.” Ever since moving to Germany 25 years ago, she has been intrigued by the diverse art landscape across Europe, and now calls the continent’s museums her second home. Still, she credits her home country and upbringing for being a major root of her success. “I might not have had a background in art, business or entrepreneurship, but I did have good business intuition and common sense – and I think those are Australian attributes.” As proof of her success, since founding LOQI in 2013, her brand has made it into some of the most prestigious, hard-toget sales channels, including the most renowned museums in the world, the most fashionable concept stores and the busiest international airports, where winning retail space is gold. The concept behind LOQI was to create simple, affordable products that could serve as canvases or media for artistic expression, allowing world-class painters and rising stars in the art scene to reach audiences on a globe scale. At first, the bags featured artwork by contemporary graphic designers. Now, LOQI also collaborates with 85 of the world’s top museums, from the Louvre to the Guggenheim to the Van Gogh. Lately, LOQI has entered into a photography collaboration with National Geographic. Throughout this process of growth and expansion, Klaes has held fast to the idea of simplicity – a simple product, a simple idea, with endless applications.

Bypassing the rules

Entrepreneurship comes with its own lexicon, from seed capital to angel investor, but LOQI’s entrepreneurial journey has largely avoided all of this. The business is self-funded and has grown organically, says Klaes, adding that her initial investment needs were low.

Photos of bags courtesy of LOQI

no. 155 | IESE Business School Insight | 47


My experience

“Culture sparks the imagination. It’s an endless source of possibilities and evolution” For Klaes, the maxim of “keep it simple” is extremely import-

Although she may embrace a simple business ethic, she ap-

ant. “I love simplicity: it’s the core of the business. It’s not

preciates complexity in at least one area: international teams.

always about having the biggest ship. You can be rewarded by

LOQI employs 15 nationalities and Klaes finds the mix – from

having a small ship, and steering it well.”

German to Portuguese to South Korean – inspirational. “Fostering cultural diversity is a truly exciting aspect of the job.”

Take her approach for winning important collaborations with major museums: “I just called them and asked if they were in-

This enjoyment of diversity applies to the products, too.

terested.” When the first museum turned her down, “I decided

“Culture sparks the imagination. It’s an endless source of

to do it anyway.” She produced 30,000 bags in designs relevant

possibilities and evolution.”

to that museum, and in the end they came back to her. She set herself to learning about licensing and commissions.

Klaes looks forward to working on many more artistic collaborations with diverse groups of artists from every corner of

“It’s all about the chase,” she says. “Until you’ve made it, it’s

the globe in 2020 and beyond.

hard to get the big players to pay attention. My response to people saying I can’t do something is always, ‘Yes, I can!’”

article by :

Emily McBride

In terms of starting from scratch in a foreign country, in much the same vein she says, “I love a challenge and I see the opportunity arising from adversity.”

credit :

48 | IESE Business School Insight | no. 155

George Kalozois

Giving back to society keeps me motivated





learning: keeping your workforce up to date with the latest demands of global business is imperative, especially given the way technology is

changing industry at an ever accelerating pace. Few understand this better than Siemens. Making sure that Siemens’ 385,000 employees worldwide get the most out of their careers is a big challenge – one that Thomas Leubner, Siemens’ Head of Global Learning and Education, is constantly striving to meet. Siemens provides strategic education and training opportunities for all kinds of people, from blue-col-

Thomas Leubner

Head of Global Learning and Education at Siemens, based in Munich.

lar workers to board directors, where and when they want to learn, from dual work-study programs to advanced degrees. “Good training is a win-win,” says Leubner. “There’s no doubt Siemens benefits from having better trained employees. And as digitalization touches everything, we have to have the right education for a changing environment.” no. 155 | IESE Business School Insight | 49


credit :

Giving back /

Leubner has seen “profound shifts” in industry

lations. Dual education, which combines vocational

throughout his 31 years with Siemens, serving in a

training in a classroom with apprenticeships that

wide variety of corporate roles, from R&D to HR.

lead to work, “is a way to target youth unemploy-

Since 2014, he has been working to further Siemens’

ment and genuinely do something about it,” he says.

education and training programs. His favorite part of the job, besides contributing to Siemens’ talent

In Germany, dual education is more common

base, is that it also contributes to society, particu-

than in, say, the United States, where graduates

larly in serving young people and vulnerable popu-

often leave university saddled with huge debts even before they start working. As such, there’s a

“We have to have the right education for a changing environment”

strong business case to be made for an alternative model: “You come out of the training with no debt and a decent job that’s paid well enough for a young person and their family. This has a real social benefit.” Leubner cites a large-scale project that Siemens undertook with the Egyptian government to refurbish the national power grid there. More than just building new power plants, Siemens also helped train local people with the skills needed

50 | IESE Business School Insight | no. 155

On-the-job training helps new arrivals learn industry skills as well as cultural competencies.

to run them. Local schools were up-

Siemens stats € 234m/year

invested in training

graded and new institutions built, including a training center near the Suez Canal, which benefited thou-

165,000 people trained in Germany

sands of young Egyptians.

Education as integration

More recently, in response to the large numbers of refugees coming to Germany, Siemens stepped up to offer internships with not only on-the-job training in industry, but also training in language and cultural issues to aid their integration into society. Siemens provided intensive, six-month-long classes to help new arrivals get up to speed on basic technical competencies. Around half went on to Sie-


receive classroom training to add new skills


is Siemens’ new digital platform for individualized career development and personalized e-learning, adjusted to expertise levels, to help employees move up without the need for physical classrooms.

mens’ dual education program, while the other job opportunities elsewhere.

In 2018 Siemens provided vocational training to nearly

Leubner extols the benefits of doing this: a com-


half were connected with educational, training or

pany can identify new candidates and the trainees can avail themselves of other opportunities via the company’s wider network of industry contacts. Over the past five years, Siemens has seen hundreds of participants from Syria, Afghanistan, Iraq, Libya, Eritrea and elsewhere, “too many to name,” says Leubner, go on to find jobs or apprenticeships. As other countries look for ways to mitigate social frictions with the arrival of refugees, Siemens’ constructive approach is worth considering. “I’m passionate about giving back to society,” says Leubner, “and it’s initiatives like these that

apprentices and dual students of which


were for Siemens


were for third parties in Germany


were for Siemens in


other countries

keep me motivated.” article by :

Cintra Scott

no. 155 | IESE Business School Insight | 51

Food for thought

SMART PICKS Boom time Although the older baby boomers have already retired, they’re still consumers, and they want to see themselves represented in the media they consume.

The Intern

“Experience never gets old” is the tagline to this 2015 movie starring Robert De Niro as a 70-year-old intern who proves he still has plenty to contribute. It makes a great case for reverse mentoring in any organization.

Generational opportunities The world is inhabited by people who came of age in vastly different times, each with distinct educational, cultural and socioeconomic realities. Older generations largely grew up in an analog world, while the youngest were born into a digital society. Unsurprisingly, these formative experiences affect everything from what people buy to how, and hold implications for capturing and keeping attention, brand loyalty and service requirements. Businesses need to understand what makes the different age groups tick. The resources highlighted here can help you get into the heads of four key generations, thus delivering the best possible customer experience. 52 | IESE Business School Insight | no. 155

Grace and Frankie

This popular Netflix series has been credited with challenging stereotypes about older women, as Jane Fonda and Lily Tomlin reinvent themselves as 80-something entrepreneurs, proving, “At my age I only have one speed: breakneck. Of course I don’t call it that. Because it is a very real fear.”

The in-betweeners Angst is the name of the game for this group defined by the nondescript X. Generation X Douglas Coupland’s 1991 novel popularized the term (see also: McJob). In many ways, it’s the anti-marketing novel of the ages. In the protagonist’s own words: “What one moment for you defines what it’s like to be alive on this planet. Fake yuppie experiences that you had to spend money on, like white water rafting or elephant rides in Thailand, don’t count. I want to hear some small moment from your life that proves you’re really alive.” A tough crowd.

Zero Hour for Gen X Subtitled “How the Last Adult Generation Can Save America From Millennials,” Matthew Hennessey’s 2018 book is a celebration of the generation that grew up before the internet and a battle cry against the digital revolution.

The new consumers Marketers are obsessed with capturing the attention of millennials and Generation Z, the digital natives who are driving a massive shift in the way products are promoted and experienced. These generations obsess and exasperate older analysts in equal measures. Millennials Rising: The Next Great Generation Neil Howe and William Strauss present the case for the defense, painting a picture of millennials who are hard-working, positive and high-achieving.

The Coddling of the American Mind Not everyone is convinced by the younger generations. This book dissects millennial and Gen Z’s fragility and moralizing, and criticizes the culture of helicopter parenting that has led to this.


By José Luis Nueno

Professor of Marketing and holder of the Intent HQ Chair on Changing Consumer Behavior at IESE

X marks the spot Generation X, those born between 1965 and 1980, may have launched the trend for labelling generations with letters, but otherwise this group tends to pass unnoticed. Today all the talk is about millennials (aka Generation Y) and Generation Z – young shoppers with distinctive consumption patterns – and comparing Gen Xers with baby boomers, for whom traditional marketing strategies were conceived. Gen X is the “baby bust,” and as boomers pass away, Gen X is set to outnumber them by 2028. Gen Xers were the first generation to come from two-income families and, amid rising divorce rates, they were the latchkey kids. They grew up to be independent, individualistic, pragmatic and flexible. The majority went to college and were technologically adept, entering the workforce with a mindset less wed to a single employer. They would found Silicon Valley, changing the game for subsequent generations. But it hasn’t all been plain sailing. The dot-com and housing bubbles hit this group hard. Already less well off than their parents, Gen Xers are stretched thin by mortgage and interest rates, and also shoulder many of the economic burdens that have hit their children. Many Gen Xers rely on their parents to stay afloat and support millennial or Gen Z offspring. Now, as they prepare for retirement, Gen Xers are notorious for their frugality. Yet they are in their highest-earning years of employment and shouldn’t be written off as consumers, especially as they are the parents of the younger generations who are the focus of more marketing efforts. Fortunately, we now have access to more data than ever to help us break down preferences, capacity and willingness to spend by demographics and geolocation. For this reason, IESE is collaborating with Intent HQ to study the use of advanced analytics in generating consumer insights. And a wealth of public data is freely available: here are two useful references to bookmark.

Eurostat, the statistical office of the EU A mine of statistical information covering all areas of European society, “created for all those who require high-quality statistical information as an aid to decision-making.”

U.S. Census Bureau Includes data visualizations, interactive web and mobile apps, and “Stories Behind the Numbers” on various topics such as families, housing, employment, business, education, the economy and population.

Value Creation Through Effective Boards Focused Program

Looking for a way to improve your boardroom effectiveness?

Barcelona September 21-24, 2020

This joint IESE and Harvard Business School program is designed for board members in both public and private sector companies from a broad range of industries.  We invite you to join us if you are looking for strategies to boost your contribution as a board member and to promote overall boardroom effectiveness.

More information: Mireia Ajates International Open Programs Client Services


By Eduard Calvo, Ruomeng Cui and Laura Wagner

By William F. Baker

In conversation with Kathleen L. McGinn

“Hurry! Only 3 left in stock!� When scarcity signals are most powerful

How kindness culture can elevate your business

Leveraging inclusiveness

Page 56

Page 62

Page 68


Only 3 left in stock!” Many retailers disclose product availability to get customers to buy, but does it really boost sales and profits? By studying this effect in online retail, we identify the contexts where scarcity signals are most powerful. By Eduard Calvo, Ruomeng Cui and Laura Wagner

illustrations :

Javier Tascón


ow many times have you gone

scarcity signals served to drive sales and profit-

online to book a flight and a mes-

ability in online retail, and in what context pro-

sage pops up to say, “Hurry! Only

viding such information was more effective.

3 seats left!” Or you’re browsing hotels and you’re alerted that

“only 2 rooms remain for your dates” and that “10

To reveal or not to reveal?

Why would a retailer consider revealing inventory

other people are looking at this hotel” which was

information in the first place? Telling consumers

“booked 2 times in the last hour.” The sales chan-

when availability is low has two effects: 1) the scar-

nel may have changed, but the tactic is the same:

city effect induces some customers to buy while

pressure selling, designed to make consumers

they can for fear of missing out; and 2) seeing cus-

rush into a purchase.

tomers rushing to buy prompts others to follow suit, in what’s known as the herding effect. Product

The use of scarcity signals, like those just de-

popularity is taken as a proxy for product value.

scribed, varies among online retailers. Amazon,

Harnessing these effects can boost sales.

for instance, discloses the availability of “lightning deals,” or limited-time offers, in real time

However, it can also backfire. Customers driven

and for the entire deal duration. Others, such as

by scarcity pressure may spend less time shop-

Veepee, never disclose product availability other

ping around and make an impulse purchase less

than when it sells out. With no apparent industry

aligned with their needs. And customers follow-

consensus, we set out to discover to what extent

ing the herd may buy a product that doesn’t live up to their expectations. In both cases, customers may be left feeling disappointed and ask for a refund or return, which can be costly for a business, especially if any moderate sales gained through pressure selling were cancelled out by a massive number of subsequent returns.


When scarcity signals are most powerful

How profitable is it, then, for a firm to display this

hitting five units, had sold a similar number of

information? To answer this question, we partnered

units. As such, we are confident that the patterns

with a global online retailer and analyzed its trans-

we observed were indeed caused by the revelation

action data. The retailer’s business model is “flash

of inventory information.

sales” – branded products that are heavily discounted and sold until stocks run out. Margins are slim, and increasing sell-out is key for profitability. Our

A clear boost

We found that the disclosure of low product avail-

data spanned over 190,000 products, nearly 1,300

ability increased hourly sales – they grew by 13.6%.

brands and around half a million customers.

This stands to reason: Who likes missing out on an exclusive deal?

The disclosure of low product availability was what interested us. This particular retailer didn’t

However, those purchases made under the influ-

disclose product availability until its inventory

ence of scarcity signals were far more likely to be

level had dropped to five or fewer units, at which

returned – product return rates increased by 17%.

time it displayed “five units left” and continued

As mentioned earlier, the disclosure of product

to update availability, in real time, until the end

availability may pressure customers into impulse

of the sales campaign. With this “five or fewer

buying, only to find that their purchases don’t suit

units” policy, we were also able to observe sales

their real needs.

patterns of products whose availability was never disclosed. But we had to be careful: the fact that a

Because returns involve additional operational

product sold down to five units implied that it was

costs, revealing product availability could nega-

already a bestseller, and we didn’t want to confuse

tively affect a retailer’s profitability. For this, we

that fact with the disclosure of “five units left” as

studied net sales (a product’s hourly sales minus

being the reason for its popularity. So, we twinned

hourly returns) and found they still increased – by

like-for-like products, linking products of the

12.5% – after the retailer revealed low availability.

same brand, category and price that, just before

This means that, even in the context of a return

58 | IESE Business School Insight | no. 155

Closer deadlines put extra pressure on customers so as not to miss out on the scarce product

canceling out the entire economic contribution of a sale, the effect of these scarcity signals remains profitable overall. These results would imply that revealing low

the product is on sale for a short time.

product availability to customers is an effective

paigns of longer duration mitigate the effect of

tool for boosting sales and profits in online retail,

disclosing product availability because custom-

even accounting for the possibility of returns.

ers have more time to explore alternative choices

The importance of context


and consider other sources of information. Closer deadlines put an extra pressure on customers

Having said that, the disclosure of scarcity signals

affected by a scarcity signal, so as not to miss out

is not equally important for all products: some el-

on the scarce product.

ements accentuate or temper the strength of this technique. In particular, we find that scarcity sig-

the product belongs to a wide assortment.

nals are most powerful when:

Facing (too) many options, customers who browse wide assortments may suffer a cognitive overload

the product is deeply discounted.

Heavily dis-

and thus rely on the most salient information –

counted products not only sell better, but cus-

such as the low availability signals that the firm

tomers are also more sensitive to the disclosure

displays noticeably – to make up their minds.

of their limited availability. A deep discount decreases the cost of making a wrong choice; it also

scarcity signals are sufficiently abundant.

increases the value for money of a product. When

Customers with limited attention tend to over-

combined with a low availability signal, this makes

look scarcity signals when they are sporadic. Con-

it easier for customers to commit to a purchase

sequently, online retailers should not fear sending

instead of shopping around for longer.

many conspicuous alerts to customers. no. 155 | IESE Business School Insight | 59


When scarcity signals are most powerful

customers use larger screens.

Mobile customers are less sensitive to scarcity signals than those who purchase through a non-mobile device

Mobile custom-

ers are less sensitive to availability information compared with those who purchase through a non-mobile device. We speculate this may be a consequence of smaller screens obstructing the visualization of scarcity signals. Although these insights were derived in the context of “flash sales� retailing, we studied not just one but thousands of brands, dozens of verticals and hundreds of thousands of active customers over the span of a year. As such, we believe these results can be generalized across many situations and leveraged by other companies competing in the online retail space. Granted, companies will have to take their own context into account: a context where product replenishment is possible isn’t the same as one where products are gone


60 | IESE Business School Insight | no. 155

The authors once they sell out, so customers’ reactions to scarcity signals will be different and the previously described effects may be less. Still, these characteristics give companies some guidance to help tailor their information disclosure policies accordingly.

Eduard Calvo is an associate professor in the Department of Production, Technology & Operations Management at IESE Business School.

Take our finding that disclosing product availability boosted sales but also returns. If we recognize that tendency, then setting a fixed disclosure threshold becomes suboptimal: any value will be too high for the bestsellers that would probably sell out anyway, and too low for the slow movers that most need a push to avoid a sales standstill.

Ruomeng Cui is an assistant professor in the Department of Information Systems & Operations Management at Goizueta Business School, Emory University.

By tuning the disclosure of product availability according to the unique context of each product, we can exploit our understanding of these effects to lift sales without spiking returns. We propose a data-driven policy to prescribe the timing of the disclosure of scarcity signals for

Laura Wagner is an assistant professor in Operations Management at Catolica Lisbon School of Business & Economics, Catholic University of Portugal.

each individual product according to an optimal stopping time logic. Once a product is put on sale, we can use machine learning to periodically compare the estimated profit-to-go: 1) if we disclose its availability right away; with 2) if we postpone this decision one more period. Then, we can make

Online retailers can convert these causal findings

a decision accordingly. The model estimation

into enhanced practice via the use of data-driven

would need to be tailored to the specific context,

policies. Contingent upon the availability of data

but the design principles of our policy apply to

with enough variation, retailers can use machine

any retailer able to disclose product availability

learning to prescribe the timing of the disclosure

independently. The value of data-driven disclo-

of scarcity signals in light of the ever-changing

sure policies will be higher for online retailers who

context of each individual product.

get frequent and costly returns, and who are able to disclose availability at variable inventory levels.

Use these results honestly

It should go without saying that the managerial prescriptions of our results should be honestly executed. There are limits to how far retailers

In sum: Revealing low product availability to cus-

can go when engineering their disclosure policies

tomers is an effective tool for boosting sales and

with the aim of encouraging a purchase. How-

profits in online retail. Moreover, scarcity signals

ever tempting it might be, manipulating scarcity

are most powerful when they are abundantly re-

signals to a point at which they become untrust-

leased and involve deeply discounted products

worthy is not only unethical but also illegal.

sold within wide assortments, and whose campaigns are close to the end. Conversely, these signals are least useful when they are seldom released and involve moderately discounted products sold within narrow assortments, and whose campaigns have plenty of time left.

source: Calvo, E., R. Cui and L. Wagner. “Disclosing product availability in online retail.” Manufacturing & Service Operations Management (MSOM). Forthcoming. This paper received Honorable Mention in MSOM’s 2019 Practice-Based Research Competition.

no. 155 | IESE Business School Insight | 61

How kindness culture can elevate your business Successful companies all share a commitment to three principles: abundance, longterm relationships and regard for others. How well does your company encourage the growth and development of its employees, and then celebrate their accomplishments?

illustrations :

RaĂşl Arias

By William F. Baker


How kindness culture can elevate your business


n Germany they have a word for everything.

Creating such a culture at work is no easy feat,

A longing for someplace faraway is Fern-

though. It’s not simply about making employees

weh. The feeling Geborgenheit is the per-

happy. It’s about cultivating a sense of security,

fect blend of warmth, comfort and safety.

shared responsibility and mutual respect.

Have you ever thought of a retort too late,

or something that seemed like a good idea at the

I’ve studied hundreds of companies over the

time turns out to be a bad joke in retrospect? The

course of my career, some of which are fea-

Germans call that Treppenwitz. But one of my fa-

tured in my new book – Organizations for People,

vorites is vergönnen. It literally means “not to be-

co-authored with industrial psychologist Michael

grudge” someone of something. In other words,

O’Malley – in which we argue that cultivating an

it’s taking satisfaction in the achievements of

organizational culture of kindness is beneficial in

others. There are few pleasures as rich and re-

creating a contented workplace and even a posi-

warding as the delight we feel when someone

tive bottom line.

close to us succeeds. I’ve found that companies characterized by The pace and demands of the modern workplace

vergönnen all share a commitment to three princi-

can prevent employees from celebrating their

ples: abundance, long-term relationships and re-

colleagues’ growth and accomplishments. This is

gard for others. If a company can focus on these,

a shame. While there is a place for healthy compe-

they can build a workforce that finds inspiration

tition, collaboration is where the real opportunity

in the success of every employee. With a culture

for innovation lies, and nothing encourages col-

like that, there’s no upper bound to what a busi-

laboration like vergönnen.

ness can achieve.


The abundance principle is best understood in terms of its opposite: scarcity. In a workplace dominated by a scarcity mindset – whether we’re talking about jobs, projects or face time with a manager – employees can feel like they’re trapped in a zero-sum game, which breeds an unhealthy sense of competition. With an abundance mindset, however, employees don’t feel threatened by their colleagues’ success. This, in turn, makes the workplace more collaborative and productive. It’s true that resources are finite. But this doesn’t mean people need fear uncertainty, or that they won’t have access to what they need. The key is to actively prepare employees for the next opportunity, whether it be the next big account or a promotion.

One way to do this is to invest heavily in employee

There’s another accessible way to promote abun-

development. Companies that empower employ-

dance: hire internally. While this may seem obvi-

ees to upskill, not only on their traditional career

ous, you’d be surprised how uncommon a practice

track but in departments other than their own,

it is. Consider that only a third of employers post

expand a sense of what’s possible. When people

job listings internally before looking for external

feel empowered by new skills, they’re not only

candidates. Giving employees a first look is an

more useful to any company with changing needs,

easy way to let them know that you want to pro-

they’re also less prone to fear-driven relationships

vide them with an abundance of opportunities.

with their colleagues. And the more knowledge

And helping them see their colleagues grow and

that flows through an organization, the greater the

advance sends the message that there is abundant

sense of abundance.

opportunity within their organization.


How kindness culture can elevate your business

Long-term relationships

When employees sense abundance in the workplace, they can imagine a future there. This is critical for employee retention. But there’s more to cultivating long-term relationships than that. Companies must also be committed to what could be called redemption. People who are scared to make mistakes will rarely take risks, making it difficult for them to grow and develop. But when employees feel there is a pathway back from a mistake or a risk taken unsuccessfully, they feel permission to innovate and grow within their company, to its benefit. There are many ways to foster redemption in the

When there is a pathway back from a mistake, employees feel permission to innovate and grow within their company

workplace: mentorship, frequent performance reviews, a Slack channel. BambooHR has a prac-

identify with them and feel like a part of a team.

tice I particularly like: an Oops Email Box where

Companies that do this tend to inspire extreme

employees from every level share mistakes they’ve

loyalty among their employees – and customers,

made and what they learned from them.

too, for that matter.

In addition, companies that build long-term re-

Patagonia does this well: workers there feel deep-

lationships with their employees nearly always

ly attached to the company’s longstanding com-

create a sense of communion – a shared mission

mitment to environmental justice. But you can

or ethos that everyone can rally behind. When

also find many great examples in startups. The

a brand emphasizes its values, employees can

heart of many small, nascent businesses is their

The author employees’ steadfast commitment to the com-

William F. Baker is the Distinguished Professor of Media & Entertainment at IESE Business School, and he directs the Bernard L. Schwartz Center for Media, Public Policy & Education at Fordham University. He is also President Emeritus of WNET-Thirteen, New York’s public television station. He taught a business class at the Juilliard School in New York for 10 years.

pany cause. When everyone shares the same mission, it’s easier to share success.

Regard for others

Regard for others doesn’t just refer to our workplace colleagues; it includes people outside of the company as well. When we think about corporate social responsibility (CSR), we often conceive of it from a high level in terms of the company’s public image with regard to global issues. But we must not overlook the overwhelmingly positive influence each one of us can have in the day to day, and dedicate ourselves to making an impact on the ground through

use all seven, Salesforce donates $1,000 to a char-

local community service and charitable activity.

ity of their choice. It’s no coincidence that Salesforce has made Fortune’s list of “100 Best Compa-

These are the facts: volunteering improves em-

nies to Work For” 11 years in a row.

ployees’ mental health and job satisfaction, period. Company-sponsored volunteer opportunities

It’s astounding, then, that a 2017 Deloitte survey

reduce employee turnover by 57%, according to

of workplace volunteering found that only “38% of

one recent survey that’s consistent with others.

respondents said their employers provided access to company-sponsored or coordinated volunteer

Salesforce has been an important leader here.

programs.” Since community service is such an

They offer employees “seven paid days of volun-

easy way to build company cohesion, business

teer time off (VTO) each year … to make the world

leaders would do well to incorporate it into the

a better place in whatever way they choose.” If they

employee experience. As we move into the next decade, these principles of abundance, long-term relationships and regard for others are likely to become even more important. That’s because the next working generation prioritizes culture and values more than any before. They don’t just want a stable job; they want to see a serious commitment to the things they find important, whether that’s a personal goal or a social cause. By fostering an organizational culture of vergönnen, businesses can provide all this and more for their employees. That’s the secret to recruiting and retaining tomorrow’s leaders.

read more:

Organizations for People: Caring Cultures, Basic Needs and Better Lives by William F. Baker and Michael O’Malley (Stanford University Press, 2019).

no. 155 | IESE Business School Insight | 67

Leveraging inclusiveness

In conversation with Kathleen L. McGinn Cahners-Rabb Professor of Business Administration at Harvard Business School

What can companies do to really promote inclusion? Here are some keys for fostering egalitarian gender attitudes and more inclusive organizational cultures, leading to better outcomes for all.

illustrations :

Jojo Cruz


Leveraging inclusiveness


n recent years, many companies have made

brings results. When implemented well, it forms

strides in increasing the diversity of their

part of a sound business strategy: it allows com-

teams. In order to gain the benefits of di-

panies to tap a much larger talent pool and boost

versity, however, a feeling of inclusiveness

their market competitiveness. And in this time of

has to be present. While diversity refers to

social and technological upheaval, we need the

the makeup of your organization, inclusiveness is

best people in our organizations.

the extent to which members of diverse groups feel they belong and can contribute in meaningful

Diverse groups of people are better at creativi-

ways. Kathleen L. McGinn explains why compa-

ty because they have different backgrounds and

nies are increasingly investing in inclusiveness as

competencies. They think in different ways, so

a way to gain competitive advantage.

they come up with better and more creative solutions. But the payoff only comes when this

Why has inclusiveness become a priority in

diversity is accompanied by a sense of inclusion.


In our research at Harvard, we’ve tried to figure

Inclusiveness is not about being good-hearted, as

out what companies and executives can do to re-

some might think. Organizations are increasingly

ally foster inclusiveness.

investing in inclusiveness, not just because they believe it’s the right thing to do, but because it

What’s the most challenging part about developing inclusiveness? A key problem is that people often feel they are either insiders or outsiders. For instance, men more often consider themselves insiders in terms of decision-making and influencing the company. Women, on the other hand, often feel like outsiders. These kinds of stark differences show up in many interesting ways, such as the emotions felt at work. For example, we asked workers in a tech company to give us four words that described how they felt about working in their company. The four words that men most often gave were “exciting,” “learning,” “fun” and “chaotic.” When we asked women in the company the same question, they also said

70 | IESE Business School Insight | no. 155

Negotiating tips for women “fun,” but the top two words they reported were “challenging” and “frustrating.” These women thought of themselves as outsiders. Is it possible to have an organization where “exciting” and “learning” are common responses among everyone, regardless of gender? In other words, a company where inclusion worked? That is what my colleagues and I set out to find. And does such an organization exist? Yes. We identified one very successful organization that had, in many ways, done exactly what needed to be done. It was a professional services firm that had been implementing a strategy to drive inclusiveness for 20 years. At the early stage of imple-

Many factors affect negotiation success. Even for exceptionally talented executives, gender can play a role in negotiations when there is ambiguity around what is negotiable and what options are possible. In ambiguous negotiations, it may feel harder for women to negotiate effectively. To overcome ambiguity, do your research: know what’s negotiable, what outcomes are possible and what your options are. Then, equipped with the facts, make clear, specific claims that leave no room for ambiguity (which is when less confident employees may clam up so as not to rock the boat).

mentation, the company was a slight market leader. As they developed their strategy, they became a clear leader. To understand how they did this, my colleagues

that some people don’t have access to the same in-

and I gathered all the public data and internal doc-

formation or opportunities that others do. And this

umentation available about their inclusiveness ef-

has a significant impact on the overall agility and

forts. The information showed us that they had ex-

speed of an organization.

perienced repeated cycles of what we call “analysis and action.” By this, we mean they didn’t just rush

In the case of the professional services firm we

ahead and institute a new policy. Instead, they first

studied, they found evidence of a widespread be-

studied what was going on, trying to understand the

lief that women simply could not, would not and

problem in the organization (analysis). Then, they

should not be doing work as good as or equivalent

brought people together from across all levels of the

to men. To address this, they carried out inclu-

organization. This was critical for action – to make

siveness training and, importantly, diversified the

sure what they were doing was relevant and also to

ways that women and men worked together. A key

get buy-in. They also brought in external advisers

factor was the CEO, who was actively involved ev-

to give credible answers to the questions that peo-

ery step of the way. Working both top-down and

ple were asking. Together, they came to understand

bottom-up was essential.

what sort of solutions would work for the problems that arose at each stage of analysis. Each action peri-

After a few years, they found that bias was going

od would drive a subsequent period of change.

away, but women were still underrepresented. So,

How does bias show up in an organization?

a new set of recommendations in terms of struc-

they entered another phase of analysis. This led to There are many ways that bias or discrimination in

tural change and rearranging the way work was

the workplace can play out. Bias can be rooted in

done in the organization. This, in turn, led to new

beliefs about certain cultures, age groups or gen-

actions supported by leadership and bottom-up

der. It’s often unconscious. Ultimately, it means

activities. They continued on and on in this way.

no. 155 | IESE Business School Insight | 71


Leveraging inclusiveness

4 key principles The negotiation workshops for girls (available for free download at were structured around four key principles, which are applicable for establishing cooperative interactions, leading to better outcomes. 1. Me. Understand your own interests. Identify deeper needs and values rather than the proximate cause of a dispute. This is a necessary first step because you identify your triggers and your red lines. 2. You. Next, seek to ascertain the other party’s interests by asking open-ended questions. Look for shared values, rather than focusing on the differences. 3. Together. Use those shared values to find common ground. Recognize that a “no” may be due to an external factor, and by working together you might be able to find a way through. 4. Build. Brainstorm ways to overcome roadblocks in pursuit of a win-win agreement, which is like “building a house you can both live in.”

It’s no surprise that organizations that rank as the best places for women to work are also places where everybody wants to work, regardless of gender. They are places that allow individuals within the organization to thrive in very different ways than organizations that don’t foster inclusiveness. How does a sense of inclusiveness impact individuals? When individuals are empowered to contribute and feel included, they create more value for the entire group. One study that we carried out over three years with adolescent girls in Lusaka, Zambia, clearly showed this. In Lusaka, young girls are made to feel worthless, and families’ constrained resources typically go toward educating boys. We randomly assigned girls within a school to one of three different groups: • One group participated in a two-week, after-school negotiation program. • One group participated in a two-week, safe-space program. • A third group did not participate in either activity, serving as the control group. Our study showed that girls in the negotiation program, compared with those who participated in the safe-space program, were able to come to understand their own worth, convey that worth to others, and, as a result, build value for their families. This study provides important takeaways that can

At one point, the CEO was less involved, and they

be applied to organizations in which some em-

saw a dip in results, so he became more involved

ployees may feel undervalued or not even recog-

again. They were able to see this because all

nize their own potential.

changes aimed at driving inclusiveness were tied to metrics and consistently followed. They were

Over the three years, the girls who had gone to

integrated across the organization and into the

negotiation training, relative to the girls who

broader strategy of the company. Today, the com-

had gone to the safe space or the control group,

pany is a leader in gender inclusion.

were more likely to be attending high school and,

72 | IESE Business School Insight | no. 155

importantly, more likely to be attending a higher-tier high school. They were also viewed by their parents as more respectful. They scored higher across a wide index of critical life competencies, and they regularly applied, with perseverance, their negotiation training with their parents and teachers, who came to trust them and came to invest more in them. How are our ideas about inclusiveness shaped by society? Research shows that adult attitudes about inclu-

“Men and women raised by women employed outside the home have more egalitarian gender attitudes”

siveness are formed early in life. We carried out a study involving more than 50,000 women and men from 29 different countries who were asked

We found that both men and women raised by

about their parents’ education and employment.

women employed outside the home have more

We wanted to understand the importance of

egalitarian gender attitudes. Interestingly, men

role-modeling and how mothers’ employment

raised by women who were employed outside

affects daughters’ and sons’ views of women in

the home have more egalitarian attitudes than

the workplace. (By the way, I never use the phrase

women who were raised by moms who stayed at

“working mother” to describe women employed

home full-time.

outside the home. I’m one of five children, who was raised by a very hard-working mother who didn’t happen to be employed outside the home.)

no. 155 | IESE Business School Insight | 73


Leveraging inclusiveness

“Organizations that rank as the best places for women to work are also places where everybody wants to work” How can we use these research insights to build more inclusive organizational cultures? We can start by transforming our interactions, so that we build solutions together and create new possibilities. We can also foster inclusive organizations through individual action and collective action, in an ongoing, repeated cycle of “analysis and action” periods. It takes lots of time and it has to be done with patience, since results don’t always show up immediately. It also has to be done with love. Most of all, you need the true belief that an inclusive society is a necessary and better society. Kathleen L. McGinn spoke on “Leveraging Gender Inclusiveness” at IESE’s Global Alumni Reunion 2019.

read more:

McGinn, K.L., M. Ruiz Castro and E. Long Lingo. “Learning From Mum: Cross-National Evidence Linking Maternal Employment and Adult Children’s Outcomes.” Work, Employment and Society 33, no. 3 (2019): 374-400. Ashraf, N., N. Bau, C. Low and K.L. McGinn. “Negotiating a Better Future: How Interpersonal Skills Facilitate Intergenerational Investment.” The Quarterly Journal of Economics. Forthcoming.

74 | IESE Business School Insight | no. 155

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no. 155 | IESE Business School Insight | 75


Forget what you know about happiness. To become more positive, embrace the negative. This and other practical tips from positive psychologist Tal Ben-Shahar.


re you happy? What does “being

The reasons for this are complex and include

happy” even mean? For many,

external pressures such as the global economic

it’s “having made it,” to have

crisis of the past decade, growing inequality and

achieved that better job, promo-

workplace precariousness, along with environ-

tion, raise or some other marker

mental factors such as air pollution. But they also

of “success.” If happiness is measured in purely

reflect the increased stressors of modern life,

financial or material terms, it’s no surprise, then,

particularly the “always on” culture promoted

that OECD countries with high GDPs filled the

by constant digital connectedness, which leaves

upper ranks of the United Nations’ 2019 World

many professionals constantly working – or en-

Happiness Report. European, particularly Scan-

tertaining themselves online when they aren’t.

dinavian, countries dominated the top 10, along

The World Health Organization has declared a

with Canada and New Zealand. The United King-

“pandemic of stress,” causing loss of productivi-

dom came 15th and the United States 19th out of

ty, absenteeism and health crises. And that’s even

156 countries ranked by how happy their citizens

before the latest coronavirus pandemic.

perceived themselves to be. Amidst chronic levels of everything from stress Yet, when examining on a country level whether

and burnout to sick leave and turnover, it’s clear

happiness had increased or decreased between

that our understanding of “having made it” needs

2005 and 2018, Western Europe, North America

an overhaul. But what can we do to boost our lev-

and Australasia were net losers and, overall, nega-

els of happiness – or well-being, to put it in more

tive emotions were on the rise. And China, with

scientific terms?

its growing middle class and rising car ownership, came in at 93, lower than war-torn Libya or crisis-struck Greece.

It starts by recognizing that neither money nor success are, in themselves, predictors of greater


A realist’s guide to happiness

’s top r a h -Sha pier life n e B Tal or a hap f t ips

happiness. The more we make the bigger house or bigger bank account the end point of all our searching, the more this can lead to feelings of

Prioritize real, face-to-face relationships: schedule quality time with others. Keep it simple: single task rather than multitask. Develop healthy habits: exercise regularly; instead of reading the news on your phone first thing every morning, try doing something more calming instead, like meditation or prayer – with religious practices, the ritualizing aspect is key. Give yourself permission to be human: allow yourself to feel painful emotions too. Be generous: spending money on others raises happiness levels for longer than spending money on yourself. Practice MPS: engage in activities that are Meaningful to you, that give you Pleasure, and that play to your Strengths.

disillusionment or depression – what’s known as the “arrival fallacy.” To really be happy, we may need to throw out much of what we think we know about happiness and start from the ground up. Though it may seem counterintuitive, we may need to embrace unhappiness in order to finally be happy.

Let yourself be human

“Imagine refusing to accept the law of gravity,” says Tal Ben-Shahar, an Israeli-American author and lecturer who teaches worldwide on happiness, self-esteem, resilience and mindfulness, including courses on “Positive Psychology” and “The Psychology of Leadership” at Harvard University. “It would be unthinkable not to accept gravity.” Yet when it comes to painful emotions, our approach is rather different. “We ignore the fact that painful emotions are as much a part of human nature as

credit :

Paul Mac Manus

the law of gravity is part of physical nature.”

Tal Ben-Shahar spoke at IESE’s Global Alumni Reunion in Barcelona. He is co-founder of the Happiness Studies Academy, Potentialife and Happier.TV.

78 | IESE Business School Insight | no. 155

Emotions that are smothered are likely to build up, he warns. To make his point, he commands you not to think of a pink elephant. What’s the first thing that springs to mind? A pink elephant. Negative emotions are the same, he says. By denying our anger (an emotion commonly bottled up by women), fear (ditto for men), envy and frustration, we don’t eliminate them – we cause them to intensify. These negative emotions can manifest themselves

When we

physically – through backache, for example. They

can, we should

may cause us to explode or hide from our respon-

leave work behind

sibilities. Ultimately, they will make us unhappier

properly. The repar-

than if we had just let ourselves experience them.

ative value of a good

Allow time for recovery

night’s sleep or a day off cannot be overstated.

In addressing the ills of the modern workplace,

With more than half of Americans not tak-

we frequently target stress, “the silent killer.” But

ing all the vacation days they’re entitled to,

Ben-Shahar feels our blame may be misplaced.

and with people worldwide failing to discon-

“The problem is not stress per se,” he insists. “The

nect from email during weekends and holidays, it’s

problem is not allowing time for recovery.” After

no wonder that happiness levels have taken a hit.

all, when we go to the gym and work out, we’re subjecting our muscles to stress, but we do it to

Both companies and individuals need to recali-

make ourselves stronger. The hurt comes when

brate the way they think about time off. IESE pro-

we do set after set, without letting ourselves rest

fessor Mireia Las Heras has discovered that the

and recover from the last workout. The same can

culture of a company changes, and workers are

be applied to our emotional well-being: “We need

better off, when managers model best practices.

to energize our lives with recovery.”

When the boss is working weekends and sending emails at midnight, staff feel the pressure to

Ben-Shahar suggests some practical ways of

be likewise connected. However, when managers

building recovery periods into our lives. On the

take a day off to take a parent to the doctor or at-

simplest level, schedule regular breaks into your

tend a child’s school play, staff are empowered to

workday. From pausing to look out of the window

focus on their own work-life balance, resulting in

to making sure you eat a proper lunch away from

higher personal happiness and workplace gains in

your desk, these are attainable goals that most of

terms of more productivity, creativity, motivation,

us can fit into our workday.

teamwork and engagement.

no.1 55 | IESE Business School Insight | 79


A realist’s guide to happiness

Spend time with others

when he began studying the science of happiness,

Psychologists agree that strong interpersonal rela-

but that he hopes to be happier still in 10 more years.

tionships are the No. 1 predictor of happiness, as

Research is on his side here. A study from the U.S.

well as of health and longevity.

National Bureau of Economic Research looked at data from 132 countries and concluded that happi-

Ben-Shahar cites research in Latin America, a re-

ness dips in middle age and then recovers, with 47

gion with high inequality but also high happiness

being the “unhappiest age.”

ratings. It turns out that the older generations, with their strong family ties and social focus, are

So, the good news is, any misery you might be

tipping the balance there. They are also likely to

feeling today has its peak. And the sooner you

have spirituality in their lives – another predictor

stop chasing after false notions of what will make

of happiness. Meanwhile, the younger genera-

you happy, and start putting these small yet enor-

tions, whose relationships are often digital, are no

mously effective actions into practice, the closer

happier than their peers elsewhere.

you’ll be to truly “having it all.”

In Denmark (ranked 2nd for happiness in the 2019

article by:

World Happiness Report), its cultural concept of hygge prioritizes just spending time with family and friends, playing board games or having a meal, in the coziness of your home. This “intentional social intimacy” may hold further keys to well-being. Interacting and being in relationship with other people are what counts, more than the specific reason for those relationships. The main thing to remember is that “happiness is not a goal,” says Ben-Shahar, “it’s a continuum.” He says he’s happier now than he was 25 years ago

80 | IESE Business School Insight | no. 155

Emily McBride