Harvard Business Review May - June 2017

It’s pretty much a given in modern capitalism that managers’ top priority is maximizing value for shareholders. So when we publish articles about how to create a sustainable, long-term business, we sometimes get pushback from executives of publicly listed companies. They say the goal is admirable, but real-world pressures require them to put shareholder returns first. Anything else is secondary. But what if the assumption underlying that thinking is wrong? What if it’s built on a debatable, perhaps even incorrect, interpretation of the law? These are some of the provocative questions put forth in this month’s lead Spotlight article by Harvard Business School professors Joseph Bower and Lynn Paine: “The Error at the Heart of Corporate Leadership” (page 50). The idea of shareholder primacy is relatively recent and is rooted in the…

When Lynn Paine first heard the theory that management’s sole purpose was to maximize shareholder wealth, she “more or less wrote it off” because it didn’t jibe with what she’d learned in law school. “That was a big mistake. The theory spread like wildfire,” she says. As a board member she became keenly aware of the deep tension between the theory and “what’s actually involved in running a company that can sustain itself.” She explores that tension with coauthor Joseph Bower in our lead Spotlight article. Jennifer and Gianpiero Petriglieri fell for each other 13 years ago, while planning a research project on the experiences of highpotential managers. In their work, they would meet many “hi-pos” who floundered just as their dreams seemed to be coming true. In this issue the…

HBR ARTICLE BY MATTHEW DIXON, LARA PONOMAREFF, SCOTT TURNER, AND RICK DELISI, JANUARY–FEBRUARY Consumers are often unhappy with the help they get from customer service. The authors say this is because companies don’t hire the right people as frontline reps or equip them to handle complex challenges. Every rep can be classified as one of seven types. Supportive Empathizers constitute the largest group, and managers prefer them. But take-charge Controllers, who make up only 15% of all reps, actually do best at solving customers’ problems. As the authors explain, companies that transition to self-service options leave frontline service reps with problems that are increasingly tough to solve because they’re the ones customers can’t solve on their own. They cite one manager who woefully admitted that his contact center has for this very…

Before Lakshmi Balachandra entered academia, she spent a few years working for two venture capital firms, where she routinely witnessed a phenomenon that mystified her. The VCs would receive a business plan from an entrepreneur, read it, and get excited. They’d do some research on the industry, and their enthusiasm would grow. So they’d invite the company founder in for a formal pitch meeting—and by the end of it they’d have absolutely no interest in making an investment. Why did a proposal that looked so promising on paper become a nonstarter when the person behind the plan actually pitched it? “That’s what led me to pursue a PhD,” says Balachandra, now an assistant professor at Babson College. “I wanted to break down and study the interaction between the VC and…

STAFF TURNOVER CREATES particular headaches for professional services firms, because clients often follow departing employees to their new companies. In a novel study, a researcher used public records to determine when clients accompanied lobbyists who switched firms and when they stayed put. One important factor is the length of the relationship with both the lobbyist and the firm. The chance that a client will follow a departing staffer rises by nearly 2%, on average, for each six months that the two have worked together. That effect is somewhat counterbalanced by the length of time the client has worked with the firm, with the risk that a client will follow a defecting staffer being about 1% lower for each six months that the client has employed the firm. The relative magnitude of…

New data from the annual Most Memorable New Product Launch survey shows an interesting pattern: American consumer recall of new products was at least 10 points lower, on average, for items launched in 2008, 2012, and 2016 than for items launched in other recent years. Why? Presidential elections consume media and consumer attention. “Legislation and policy can change the way people live their lives in a way few products can,” the researchers say. Election ads and coverage are emotional and highly charged, so “new products have more difficulty piercing the collective consumer consciousness.” Among the products that did break through the clutter in 2016 and score high: Apple’s iPhone 7, the Tesla Model X, Amazon’s Echo Dot, and several fast-food and snack items. PROPORTION OF CONSUMERS ABLE TO RECALL ANY NEW…