Business Research in Action - Fall 2010

business research in action

FALL 2010 » The future of health care » When it pays to keep quiet » Store shelf strategy » Culture's consequences » Honeymoon to hangover in the workplace »

The future of health care

Mays profs shape nationwide overhaul of health care IT practices

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ow many lives—AND how much money—could be saved if all of a patient’s health care information, including test results, orders, medications, health histories, and insurance information, was stored in one record, easily accessible by health care professionals anywhere?

This is the future President Obama envisions for health care in the United States, but it is dependent on the sharpest minds in management of information systems and IT. Through a $5.2 million grant from the federal government, Arun Sen, professor of information and operations management at Mays, and two A&M colleagues will develop one of four regional extension centers for health care IT for the state of Texas, creating a resource for doctors as patient records become digitized in compliance with goals set by the Obama administration for a paperless patient records system.

Sen says that soon health care information will be available via an electronic pipeline that will move patient records from local to state to national levels. The National Health Information Network is already under development. Sen and colleagues are creating the system through which Texas providers will upload patient information to this national system. This A&M team of researchers will be on the leading edge of designing an electronic health record (EHR) system to be used for the state.

The researchers will also establish the CentrEast Regional Extension Center for Health Care IT and a health information exchange (HIE)—a hub for providers to coordinate with the national system.

Streamlining patient records by digitizing and sharing them is still optional for health care providers. By 2015, however,

providers must display meaningful use of the network, or risk nonpayment or partial payment from Medicare and Medicaid.

What is meaningful use? That’s still under debate. ‘Jon Jasperson, assistant head of the Department of Information and Operations Management and director of the Center for the Management of Information Systems at Mays, has examined the term “meaningful use” as it applies to HIE. While the details of the nationwide system are still being created, Jasperson and a coauthor are adding to the dialogue by suggesting that HIE usage is not a simple thing to measure, as it must take into consideration the context and objectives of the system under scrutiny. As legislation about this system is developed, Jasperson recommends that understanding of HIEs will be advanced by focusing on how systems are utilized in practice and their application to patient health and well-being.

Providers seeking to use EHRs face a variety of challenges, such as assessing needs, selecting and negotiating with a system vendor or reseller, implementing project management, and instituting workflow changes to improve clinical performance and, ultimately, outcomes. Past experience has shown that local technical assistance can result in effective implementation of EHRs. That’s where Sen and colleagues come in.

There will be 60 centers similar to Sen’s in the U.S. Sen’s work will involve researching how patient information is currently handled and developing a more efficient process as providers modernize their record systems. The center will also connect providers with vendors who specialize in digitizing records, and will serve as a data repository for all area providers.

Contact Sen at Arun-Sen@tamu.edu or Jasperson at jon.jasperson@tamu.edu.

Jasperson’s article “What should we measure? conceptualizing usage in health information Exchange” appeared in Journal of the American Medical Informatics Association in May 2010.

Prominently displaying financial misstatements leads to greater stock price decline

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hen it comes to disclosure of financial misstatements in a corporate media release, companies do better to keep quiet. The less prominent the news of the error, the fewer class-action lawsuits result. Furthermore, the greater the prominence of the news, the greater the decline in market value for the company.

Edward Swanson, professor and Nelson D. Durst Chair in Accounting, and Senyo Tse, KPMG Professor of Accounting, along with Rebecca Files,

When it pays, to keep quiet “The research indicates that lowering the prominence of disclosure by one level reduces the likelihood of a lawsuit by about half. ”

a PhD graduate of Mays, now an assistant professor at the University of Texas at Dallas, looked at how 919 firms announced misstatements between 1997 and 2002.

They separated announcements into three levels of prominence: high (headline of a media release), medium (body of a media release, but no mention in headline); and low (footnote of a media release, a.k.a. “stealth disclosure”).

They found firms providing less prominent media release disclosure of a restatement are rewarded with a less negative return at the announcement.

Also, companies providing less disclosure are less likely to be sued for securities fraud.

The research indicates that lowering the prominence of disclosure by one level reduces the likelihood of a lawsuit by about half. The researchers controlled for other factors to isolate the effect of the placement of the announcement. They also controlled for the severity of the misstatement. No differentiation was made as to whether the restatement

was due to aggressive reporting versus unintentional accounting errors.

Though it seems obvious that not trumpeting the company’s errors would be the safest policy, the researchers note there are several reasons managers continue to prominently announce financial errors. One is that restatements occur infrequently, so managers have little experience that would allow them to anticipate how investors and litigators will react. Another is that companies that value forthright communication may assume that placing the announcement anywhere other than the headline would be seen as deceptive.

As media releases are the primary timely disclosure medium for most companies, the findings of this study should be of interest to investor relations executives and other corporate managers with responsibility for disclosure communication. The researchers also suggest that regulators, especially the SEC, may want to issue guidelines to standardize media release disclosures so firms will not be rewarded for providing less prominent disclosure of accounting restatements. However, the researchers warn that such guidelines should not simply require headline disclosure for all restatements, since this could increase the number of frivolous lawsuits.

Contact Swanson at eswanson@mays. tamu.edu or Tse at stse@mays.tamu.edu.

The article “Stealth disclosure of accounting restatements” appeared in The Accounting Review in 2009.

Store shelf strategy

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Strategic product placement leads to higher sales across categories

“By understanding cross-category sales effects, retailers and manufacturers can partner in more effective merchandising and promotions. ”

ood news for retailers: a new study indicates that you can increase sales without dropping prices too much or too often and cutting into your profit margins. How? By placing items frequently purchased in tandem closer together, or inducing the purchase of one item by displaying related items closer.

Retailers have long been aware that the sales of one item can impact sales of another item but, until recently, not much was known about the degree of this relationship. A team of researchers, including Coleman Chair Professor in Marketing Venkatesh Shankar, looked at sales data for chips and soda (two items often consumed together) in a chain of grocery stores. To examine the effect of proximity on sales, they analyzed data on different placements of the items in 180 stores over 2.5 years.

When they moved chips one aisle closer to sodas, sales of both items increased an average of 0.7 percent. When they moved the items one aisle further apart, sales decreased an average of 1.4 percent. When the items were arranged facing each other in the same aisle, sales of both increased 9.2 percent.

Simply changing the placement of these items led to a lift in sales that would be equivalent to running a price-cut promotion without any loss in profit, says Shankar.

The significance of this study is that it can enable retailers to better manage their profits. Retailers frequently manage categories within a store separately, when sales could be improved by a more

holistic approach across categories. Selling less in one category can mean selling more in another category, thus increasing net profits. Retailers must consider these crosscategory effects to maximize sales, says Shankar.

While the study examined food items, Shankar says the model he and colleagues created predicting how placement will affect sales could be employed in any retail setting.

This research has value for manufacturers, too, as in the packaged consumer goods market, manufacturers often partner with retailers in promoting their items. By understanding crosscategory sales effects, retailers and manufacturers can partner in more effective merchandising and promotions. This is especially relevant to manufacturers that own products in multiple categories, such as PepsiCo, which owns Pepsi (beverages) and Frito-Lay (snacks). Integrated marketing of these items leads to higher sales than independent promotion.

The lift in sales of these items from the aisle and display placements of these two items was not equal though, notes Shankar. Moving the chips and sodas closer together did impact sales of each—but it impacted sales of sodas more. Why? Consumer behavior. Shankar theorizes that consumers don’t often eat chips without a drink; however they do drink soda without needing an accompanying snack.

Another finding of the study showed not all brands were equally impacted by the change in aisle placement: when the items were moved closer together, stronger brands (Coke and Pepsi) experienced a greater sales lift than weaker brands (RC Cola and the store brand). Shankar expects that the reason is the second purchase is more of an impulse item. As the decision to buy the second item is made rapidly, shoppers tend to buy the more wellknown brand.

This information can be useful to consumers as well as retailers. Smart shoppers need to know what tactics are being employed by retailers to entice them to buy more than they had planned, so that they can avoid overspending.

Contact Shankar at vshankar@mays.tamu.edu.

The article, “Cross-category effects of aisle and display placements: a spatial modeling approach and insights,” appeared in Journal of Marketing in May 2009.

Culture accurately predicts loyalty, longevity, and performance in the workplace

Culture's

consequences

n employee's cultural background is sometimes a more accurate, consistent predictor of their job performance and organizational loyalty than personality tests routinely used by employers. So says a new study—the largest of its kind—that examines how cultural values affect their job performance.

Brad Kirkman, John E. Pearson Associate Professor of Management, and co-authors pulled together data from nearly 600 previous studies that analyzed the effects of cultural values on job outcomes linked to 200,000 individuals. The research examined 80 areas of organizational life such as non-verbal communication, perceptions of justice, and employee rewards and how they’re affected by cultural values.

Cultural diversity poses particular challenges to a company, but the challenges can be minimized and the monetary rewards for corporations maximized when they balance these values correctly, say researchers.

The findings have huge implications for corporations with high multicultural diversity. Perceptions of justice and rewards are among the most important considerations. In cultures that value personal achievement (the U.S., for example), rewards for individuals can motivate a team to work harder and compete for rewards. However, that approach can clash with cultural values such as respect for seniority and egalitarianism.

The researchers cite an example of an American corporation working in China, which gave leather jackets to two management team members as reward for an innovative idea. The resulting discontent among the rest of the team caused weeks of lost productivity and resulted in the company buying leather jackets for the rest of the team members. The individual reward model didn’t translate well among the Chinese.

Similarly, General Motors found self-directed assembly line teams that worked well in the United States failed in Mexico, where workers don’t typically seek personal empowerment or selfmanagement.

As the corporate world flattens, organizations must identify cultural values and tailor management practices accordingly in everything from human resources to strategic planning to minimize conflict.

Cultural predictors are most accurate for managers who are male, older, and are more educated. Countries that are culturally “tight,” such as Japan, where conformity to social norms is expected, see more consistent value-outcome relationships, the

authors found. Outcomes for culturally “loose” countries, like the U.S., are less predictable, because there are many accepted norms.

The comprehensive nature of the new research—which the Journal of Applied Psychology has designated a monograph paper, indicating a game-changing shift in management theory—allows organizations to plug in different variables and determine which approach will work best in a given culture or multicultural organization.

Progressive organizations have been attempting this for years, says Kirkman. ExxonMobil, for example, uses software that plots the cultural value scores of management surveys and calculates potential gaps in individual performance or conflicts among team members.

Cultural values are so strong that even after decades of apparent acculturation, employees still behave predictably, according to their inherent cultural values. “Even when they talk the talk, wear the clothes and have been in the culture for 25 years, their fundamental values still haven’t changed,” says co-author Vas Taras, an assistant professor of management at the University of North Carolina at Greensboro.

Contact Kirkman at brad.kirkman@tamu.edu.

The article “Examining the impact of culture’s consequences: a three-decade, multilevel, meta-analytic review of Hofstede’s cultural value dimensions” appeared in Journal of Applied Psychology in May 2010.

Honeymoon to hangover in the workplace

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hy is it that the novelty of a new job wears off so quickly? Does the company need to keep employees as excited about their workplace on day 100 as on day one?

Wendy Boswell, associate professor of management, Mays Research Fellow, and director of Center for Human Resource Management and Abbie Shipp, assistant professor of management, collaborated to take a deeper look into the nature of this process and the measures employers might take to lessen the effects of the let-down after the initial employment high.

The researchers break the new job experience into two phases: honeymoon and hangover. Through quarterly surveys Boswell and Shipp explored the attitude shift in a set of new employees over the course of one year. The surveys assessed the new employees’ levels of satisfaction both with their previous places of employment, as well as with their current position.

The research indicates that it’s typical for an individual to go through the honeymoon to hangover process, though the severity of the shift from high to low varies between individuals. The employees that the Mays professors found to be the most at risk for a steep decline in satisfaction were those who came to the new job with baggage from their old job.

People who started the new job feeling deep dissatisfaction about their previous job will more likely feel a greater letdown after the newness wears off because they felt the new job would be such an improvement. They’ve set themselves up with unrealistic expectations, says Boswell.

The data they gleaned from this study indicated that the peak of a new employee’s job honeymoon tends to be between three and six months. It is during this period that a new employee is no longer apprehensive

about beginning work, and the realization of their permanence in the organization is setting in, says Shipp.

One hypothesis of the study was that greater socialization would have a role in preventing the hangover. The surveyed organization had a focus on socialization, including a first-day new employee orientation, planned activities and social events throughout the first year. The surveys revealed that even well socialized employees experience the honeymoon to hangover shift.

After examining the data, Boswell says it seems that job satisfaction has more to do with the individual’s attitudes and previous experiences than management’s efforts. Also, the honeymoon to hangover process is a natural occurrence, and does not necessarily represent a problem. “Even if you’re really enjoying what you’re doing and contributing to the organization, you may still experience this decline,” she says.

How does the new job become just like the old one?

In fact, the absence of a rise and eventual decline in enthusiasm could indicate a problem, says Shipp. If an employee doesn’t exhibit those signs, it may be an indication that they are less engaged and more likely to leave the position.

Instead of trying to prevent a hangover, Boswell suggests that managers could do more to re-recruit their employees—in essence, give them a second honeymoon.

Contact Boswell at wboswell@tamu.edu or Shipp at ashipp@ mays.tamu.edu.

The article “Changes in newcomer job satisfaction over time: examining the pattern of honeymoons and hangovers” appeared in Journal of Applied Psychology in 2009.

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