Category: Business

Younger siblings often take more chances as CEOs, study shows

Selig Center’s Multicultural Economy Report shows minority groups have a combined buying power of $3.9 trillion

The UGA Alumni Association recognized the fastest-growing companies owned or operated by alumni

Research shows complaining can make workers less hopeful

Getting rid of large bills would have unintended consequences for people who follow the law

Researchers were surprised to learn that people from high-income households also engage in payday loan borrowing

Do you like your cleaning products to be eco-friendly? Your shoes supportive of workers’ rights? Companies are increasingly using their good deeds to identify and differentiate themselves in the marketplace, and new research from UGA explains how and why it works.

In an article published in Harvard Business Review, Sundar Bharadwaj emphasizes the importance of aligning a social purpose with activities that are meaningful and appropriate for a brand.

“It makes more sense for a bank to invest in financial literacy or help the un-banked than it would to support a symphony orchestra,” says Bharadwaj, who holds the Coca-Cola Company Chair of Marketing at UGA’s Terry College of Business. “Financial literacy resonates with a bank’s brand and has a clearer association for customers and stakeholders.”

After studying many failed and successful campaigns, Bharadwaj and co-author Omar Rodriguez-Vila of Georgia Tech concluded that an effective social purpose strategy must create real value or customers may feel manipulated. A good way to ensure that a company’s efforts are paying real dividends is to partner with organizations or individuals who are already doing good work on an issue, according to Bharadwaj.

“If you don’t have credibility or authenticity, a social purpose campaign can absolutely hurt you,” he says.

This brief appeared in the spring 2018 issue of Research Magazine. The original press release is available at https://news.uga.edu/brands-social-purpose/.

Workplace sexual harassment policies can reinforce traditional gender stereotypes

UGA’s Selig Center calculates the consumer buying power for several racial and ethnic groups

Women encounter attitudes of “benevolent sexism”—stereotypically favorable, but potentially patronizing

When required to meet high standards, some employees will fudge results

Social media influences decisions on destination

Workers fare worse when popular medications leave the market

Highly educated employees are associated with improvements in key areas of business practices

When shareholders have a say, CEOs make less

Negotiations work best when both sides have matching personality traits—even if they’re both disagreeable—according to research from the Terry College of Business.

Conventional wisdom suggests that people who are outgoing and accommodating are better suited to negotiate, but a study co-authored by Fadel Matta and collaborators at several institutions found that two sides can reach accord through their common discord.

“Normally, you would consider agreeableness—that you’re cooperative and kind—to be a good thing. And being disagreeable—being cold—to be a bad thing,” said Matta, assistant professor of management. “But with negotiations we find that’s not necessarily true.”

Similarly, he said, being extroverted does not always translate into deal-making success.

At their core, negotiations are about a relationship, according to Matta. And like a relationship, they work best when both parties approach it the same way.

“If you’re a jerk and I’m a jerk, then it might seem like we’ll never get anywhere in negotiations, but it’s actually more useful to put two similarly minded people together,” he said.

The study was published in the Journal of Applied Psychology.

This brief appeared in the fall 2017 issue of Research Magazine. The original press release is available at http://news.uga.edu/releases/article/negotiations-researchs-jerks/.

Half of all workers say they found their current job through a friend or social acquaintance. But although these “job-referral networks” help make the labor market more efficient, they also tend to have an “old boys’ club” character and perpetuate inequality, according to new research from the University of Georgia.

“On one hand, referral networks help to solve information problems in the labor market,” said Ian Schmutte, author of the study and assistant professor of economics at UGA’s Terry College of Business. “On the other hand, these networks are typically based on historical patterns of racial or class stratification.”

Schmutte’s synthesis of recent research, published in the IZA World of Labor, confirms that while good workers tend to know other good workers, most people are confined to fairly homogenous social spheres. And “despite the fact that there are lots of other ways to get information about people, firms are increasing, rather than decreasing, their use of job-referral networks,” he said.

In 2016, U.S. Hispanic buying power was larger than the gross domestic product of Mexico and bigger than the economies of all but 14 countries in the world.

That’s just one of the telling statistics that illustrates the unprecedented economic clout of U.S. minority groups in the latest Multicultural Economy Report from the Selig Center for Economic Growth at UGA’s Terry College of Business.

The report estimates the nation’s total buying power reached $13.9 trillion in 2016 and predicts it will hit $16.6 trillion by 2021, with minority groups making the fastest gains.

Hispanic buying power increased its economic clout from $495 billion in 2000 to $1.4 trillion in 2016—a 181 percent increase. Black buying power increased 98 percent from 2000 to 2016. And since 2000, Asian buying power has grown 222 percent to $891 billion, the biggest percentage increase of any U.S. minority group. During the same time period, the buying power of whites increased by 79 percent.

“Minority buying power is growing at a faster pace than the white consumer market for a number of reasons, such as demographics, increases in educational attainment and entrepreneurial activity,” said Jeff Humphreys, author of the report and director of the Selig Center.

In business, as in basketball, teamwork counts

While black households see value in using financial planning services, most don’t pursue it due to barriers to entry including large gaps in income and net worth relative to other ethnic groups.

While black households see value in using financial planning services, most don’t pursue it due to barriers to entry including large gaps in income and net worth relative to other ethnic groups.

By Matt Weeks
Illustration by Missy Kulik

Can volunteering harm your workplace reputation? New research from UGA’s Terry College of Business finds co-workers’ attitudes can vary depending on their perception of someone’s charitable efforts—especially when they perceive a person is primarily volunteering to get ahead.

As personal and professional lives continue to intermingle thanks to the constant connection of cellphones and social media, today’s workers are often at the mercy of their colleagues’ appraisal, said the study’s lead author Jessica Rodell, an associate professor of management at the Terry College.

“Volunteering is a behavior that traditionally has little to do with work,” Rodell said. “It’s something that can be done with your kids’ school or through your church, but it turns out that this behavior can have a real impact on how people view you at work.”

Her research, co-authored with John Lynch, a former UGA graduate student and assistant professor of managerial science at University of Illinois-Chicago, finds that co-workers often have mixed feelings about their colleagues’ charitable efforts.

When volunteering is seen as intrinsically motivated, meaning the worker is seen as personally compelled to volunteer, both supervisors and co-workers tend to hold the volunteering employee in high esteem. However, if the worker is seen as a showboat who volunteers to enhance his or her image or score brownie points, colleagues and supervisors form a more negative opinion.

“We use people’s behaviors as signals of who someone is, and the more data we have, the more we know how to interact with them. Here, we are showing that volunteering is a piece of data that we use to determine someone’s character, which affects how we treat them,” Rodell said.

And, as it turns out, the treatment that results can be rather important in the workplace.

“In fact, if you have two people who have the exact same performance ratings at their job, but one of them volunteered for what appeared to be good reasons, that person would be more likely to get a raise or promotion because that volunteering positively affects their reputation at work,” she said.

Although volunteering is an inherently pro-social behavior, there are several reasons it can have negative repercussions. Colleagues may find a volunteer to be smug or superior. They may feel volunteers forsake their office work in order to volunteer, or that they volunteer just to get credit.

“We’re very attuned to certain social cues that help us determine why people do certain things, like volunteering,” Lynch said, “and there are very real consequences for that.”

Most often, though, volunteering is a mixed bag that brings both positive and negative connotations. In addition to the potential negatives, volunteers may be seen as thoughtful, caring and good at time management, which can reflect well in the business environment.

Fortunately, when it comes to volunteering, it appears the positive opinions tend to outweigh the negative ones.

“As co-workers, we are OK with the fact that someone might personally benefit from their volunteer work,” Rodell said, “with the caveat that they are also doing it for good reasons.

“Interestingly, we typically aren’t aware that we judge people based on these things; it’s something that happens without us really thinking about it. Reputations tend to be viewed generally as in ‘he is a good person’ or ‘she’s a good time manager.’ What we’ve shown with this research is that one reason you may think those things about your colleagues is because of their volunteer work.”

She explained that some people may not like that a co-worker could get promoted at work for doing something not related to work.

“But that’s why this finding is important,” she said. “Employees should know that if they’re going to volunteer, it’s going to have consequences depending on how they manage it. And, if done for the right reasons, it’s ultimately going to benefit them.”

A significant step was taken this February, when Crystal Leach joined UGA as the founding director of Discovery and Innovation Partnerships, a new initiative jointly supported by the Office of the Vice President for Research and the College of Engineering.

By Matt Weeks

An important part of a CEO’s job is to communicate a business’s value to shareholders. Good news is usually shared with investors right away, but bad news tends to lag. A new study from the University of Georgia Terry College of Business examines why CEOs delay the release of bad news and how that can change.

Top managers face a double-edged sword when they communicate news to shareholders. Being open about a firm’s recent trajectory is good for investors, but can be harmful for a CEO’s career.

“The CEO doesn’t want to get fired, and is concerned with how the market will view his or her performance as a manager if they release poor company performance,” said John Campbell, an associate professor of accounting at the Terry College. “The idea, then, is that the CEO will delay the release of bad news as long as possible in hopes that good news will come along to offset it, so that the bad news never has to be released.”

These career concerns can create a barrier to open and timely dialogue between the firm and its investors. In an effort to understand this phenomenon, prior academics found something of note. Since the passage of Regulation Fair Disclosure in 2000, which requires CEOs to disclose company news to all investors simultaneously, CEOs seemed to no longer delay the release of bad news.

“One set of researchers noticed that CEOs stopped delaying bad news after the passage of Reg. FD, a regulation that has absolutely nothing to do with career concerns. So we were puzzled by that,” Campbell said. “If I’m a CEO under Reg. FD, I can still delay bad news. I just don’t tell anyone. So we decided to look into it.”

Their findings are included in a paper called “Do Career Concerns Affect the Delay of Bad News Disclosure?” that Campbell co-authored with fellow Terry College professor Stephen Baginski, Terry doctoral candidate Lisa Hinson and David S. Koo at the University of Illinois Urbana-Champaign (and a Terry College Ph.D. graduate from 2013). The paper was presented at the 2015 Canadian Academic Accounting Annual Conference

The authors found that Regulation Fair Disclosure doesn’t eliminate the delay of bad news release, but it did change the way firms forecast their earnings. More importantly, the authors find that previous researchers’ failure to account for these changes in forecasting behavior led to overstated conclusions on the effectiveness of Regulation Fair Disclosure on eliminating bad news delay.

“We look at management forecasts, and around this time, managers started issuing more range forecasts versus point forecasts,” said research co-author Lisa Hinson. “Basically, the manager would say ‘We expect earnings per share to be between 2 and 6 cents’ instead of saying, ‘We expect it to be 4 cents.'”

Around the same time, CEOs became more likely to simultaneously issue earnings forecasts for the next quarter and announce the earnings of the previous quarter. Taking these new findings into account, the researchers concluded that Reg. FD did not have much of an effect on the release of bad news relative to good news.

So what explains the delay of bad news disclosures? Money. Specifically, the kind of severance compensation paid to CEOs. The researchers found that top-level severance pay helped alleviate the fear of being fired, freeing CEOs to open up about failures.

“There’s a lot of people who think that CEO severance pay is a rip-off,” Campbell said. “They look at it and say, ‘Why are you paying this guy so much money when he was fired at his job?’ But if it reduces the manager’s career concerns enough, they will take actions that they otherwise might not have. They take more risk and, in this case, accelerate the disclosure of bad news. They don’t feel as concerned about being fired in the short run.”

The key word being “enough.” Severance packages (or ex-ante agreements) are standard for many C-suite jobs. But not all are created equal. To keep CEOs open and honest about their forecasts, their compensation needs to be in the top 50 percent, Campbell said.

That’s equal to about $8 million, or nine times a typical CEO’s yearly salary.

“If you give a manager enough severance, they reach the point where they don’t differentiate between good and bad news, they disclose to investors on an equally timely basis,” Campbell said.

That level of transparency translates into better conditions for investors overall, the authors said.

“It’s typically good to encourage CEOs to take risks and invest in positive net-present-value projects,” Hinson said. “And the markets generally like to know information as soon as the managers know, rather than getting it at a delay. It keeps capital market participants informed and leads to more efficient capital allocation.”

The study is available online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2537580.