While many of us have been scanning financial headlines by the minute to see if the fabric of our financial system has yet to come completely unglued (and who can blame us), apparently there are other newsworthy stories outside of Lehman, Merrill, AIG, WaMu, and the like.

I found an article about executive compensation in China that appeared in last week’s issue of the Economist especially fascinating (see False Options). As the article explains…

How executives are rewarded is one of the many mysteries of China’s increasingly powerful companies. Unravelling it is important, not least because it should help to explain corporate China’s transformation from a state-controlled to a consumer-driven creature.

Research on this question has been surprisingly sparse. A new study by Zhihong Chen and Yuyan Guan, of the City University of Hong Kong, and Bin Ke, of Pennsylvania State University, casts a rare beam of light.

…Senior executives’ cash pay [at 83 large companies operating in China but trading in Hong Kong] was low by global standards: $180,000 a year on average. Almost every firm awarded stock options, worth an average of $140,000, giving bosses healthy top-ups as well as equity stakes—if those options were exercised. Remarkably, a lot never were. At more than half of the firms, no options were exercised within four years of vesting.

The authors of the study pose the following question:

“What forces make them [executives] throw away money [in the form of unexercised options] on the table?”

The article goes on to conjecture that the reason that executives in China do not cash out their options is likely cultural. I agree that there is a large cultural component to the differences in behavior between Chinese and American executives with respect to cashing out in-the-money options.

The authors of the study then add:

“If executives in general do not exercise stock options, how can the option scheme align executives with the interest in shareholders?”

Actually, I think that having management in place that does not exercise in-the-money options is, in some ways, a good thing for shareholders. After all, once executives have exercised their options and cashed out, their interests are no more aligned with those of the shareholders than if they never had shares at all. If executives are forced to hold in-the-money options, they have every incentive to continue working in the shareholders’ best interests to maximize share price. This not only makes their options more valuable, but more importantly for individuals from collectivist cultures such as China, it avoids the the public humiliation that would result from a drop in the share price.

I believe the point that the authors of the study were trying to make, however, is that if executives do not consider options a potential income-generating mechanism ex ante, then options provide no incentives ex post. If executives treat those options as if they don’t exist and never intend to act on them, then in theory, they could care less whether they have options in the first place.

But if the explanation for why Chinese executives are less likely to exercise in-the-money options is truly cultural, then the incentives likely still work as intended. It’s simply that executives are reticent to exercise the options on the way up for fear of how they will be perceived if they do so, and incentivized to continue to keep the share price above the strike price for fear of public humiliation if they do not. In my opinion then, they still serve a purpose.

So in this respect, shareholders of American corporations might be better served if their executives followed the example set by their Chinese counterparts.

For more on executive compensation and options, see my earlier posts A New Approach to Executive Compensation? and Is Restricted Stock the Answer to Executive Compensation?

Several weeks ago, in my post Troubling Signs for the U.S. Economy and its Corporations, I made two points:

1. In addition to the U.S. consumer struggling at home, consumers across the globe (especially in Japan and Europe) have begun to feel strain, resulting in decreased foreign demand for U.S. goods and services.
2. The U.S. dollar has rallied significantly in recent weeks impacting the foreign sales of U.S. firms.

Janet Yellen (President of the San Francisco Fed) echoed this sentiment in a speech she gave yesterday in Salt Lake City (see The U.S. Economic Situation and the Challenges for Monetary Policy, hat tip CR):

…export growth alone contributed one-half of the total real GDP growth [3.3%] registered in the second quarter. This element has been an important source of strength in our economy for over a year, being buoyed by strong growth abroad and by the weakening of the dollar. However, as I discussed, in recent months the dollar has risen somewhat and economic growth in many of our industrialized trading partners has slowed or even turned negative, suggesting that we can no longer count on exports as an important source of strength.

This is one of the effects that I spoke of in my previous post. However, it goes further. I would submit that not only will exports from the U.S. suffer, but the foreign sales of U.S. multinational affiliates will likewise suffer. Again, they will be impacted by the slowdown in the demand in the countries in which they operate, thereby decreasing profit. They will likewise be adversely impacted by the strengthening U.S. dollar as they repatriate income and report consolidated earnings in U.S. dollar equivalets.

For these reasons, and more, I am not seeing a rebound in corporate profitably for U.S. domestic or multinational firms in the 2nd half of 2008.

Back in March I expressed concern about Tata’s deal for Jagaur/Rover (see Buyers Remorse).

I think that this deal is destined to fail.

…For Tata, while bold, the deal just doesn’t make much sense. Aside from several luxury brands, an increased global presence, and some notoriety, I’m not sure what Tata gains. For example:

1. Where’s the synergy? Can Tata and Jaguar/LR share components, design, production, dealerships, or management? On its face, the synergies are just not there. But perhaps the investment was made for learning purposes, with Tata hoping to use Jaguar/LR capabilities to improve the quality and/or image of their existing automobiles. Possibly.
2. Can Tata rationalize Jaguar/LR’s production to make them more profitable? Actually, they cannot. They made pledges not to cut staff or close plants. And it’s unlikely that they would be able to reduce costs substantially by sourcing parts and supplies from India.
3. Can Tata right a ship that larger, more experienced, more formidable competitors had been unable to? In Jaguar and Land Rover, Tata is inheriting pieces of the old British Leyland Motors (Jaguar, Rover, Austin, Morris, etc.) that all tolled experienced (and continues to experience) more than 40 years of uncompetitiveness and underperformance. Quite simply, they are inheriting a lot of baggage (see Riding the Elephant for more background on British Leyland). It will be difficult for Tata to overcome this tremendous inertia.

Some analysts have argued that Jaguar and Land Rover were purchased on the cheap (at $2.3B minus $600M that Ford is throwing in to offset pension liabilities), and at the right time - when both Jaguar and Land Rover have a stable of new models about to hit the market (e.g., the Jaguar XF and the Land Rover LRX). These analysts point out that if these new models hit it big, it will make Tata’s acquisition look like a steal. However, this assumes that Tata can revive flagging sales at Jaguar and Land Rover in the middle of a downturn. Likewise, it assumes that Tata, by simply owning the brands, will not dilute their image. Finally, it assumes that the Jaguar and/or Land Rover brands can be revived after years of neglect and consumer dissatisfaction, and that consumers will once again be interested in buying relatively expensive, gas-guzzling cars and SUV’s (especially in the case of LR).

For all these reasons, I remain skeptical.

A recent article in The Economist echoes some of these concerns, but expresses some hope (see Now it’s Personal).

In the first quarter of this year JLR [Jaguar Land Rover] rang up profits of $421m.

But life has since become much harder for makers of large, powerful cars. In America, where petrol at $4 per gallon means big sport-utility vehicles have suddenly fallen from favour, Land Rover’s sales fell by 31% in the year to July.

So far, booming demand in Russia (up by 106%) and China (up by 151%) have more or less plugged the gap. Land Rover’s overall sales are only 2.7% lower year-on-year than in 2007. But JLR’s new boss, David Smith, acknowledges that the second half of the year will be much tougher. Land Rover’s production is being scaled back by 25-40%, depending on the vehicle model.

MY COMMENT: And it looks like things will be even tougher with global demand (even in places like China and Russia) slowing quite a bit.

A further worry for JLR is tightening environmental rules in most of its big markets. In Europe carmakers with fleets averaging more than 130 grams of CO2 per kilometre (g/km) are likely to face financial penalties by 2012. JLR is particularly exposed. Its best CO2 performer is the diesel Jaguar X-Type, which emits 154 g/km. Its worst is the Range Rover Sport which, in supercharged V8 form, chucks out 374 g/km.

MY COMMENT: JLR has a long way to go on emissions. It is not clear to me that Rover (given its portfolio of offerings) is anywhere near competitive.

One of the nice things about this article, however, is that it begins to detail JLR’s strategic plan for the next several years.

Mr Smith claims that JLR has a new nimbleness which allows it to exploit its smaller size. Strategy is set by a board consisting only of Mr Smith, Mr Tata and Ravi Kant, the head of Tata’s automotive business. Tata is committed to supporting the business plan until 2011, but the intention is that JLR should operate as a more or less independent, self-funding entity.

MY COMMENT: I’m not sure operating as an independent, self-funding entity should be Tata’s purpose with this acquisition. The best use of JLR is not to treat it as if it were a portfolio holding of Tata’s, but for Tata to exploit synergies with JLR - either reducing overall cost structure by sharing operations, parts, components, etc. AND/OR by using JLR as a means to learn - to help Tata develop up-market vehicles and learn about selling/manufacturing cars in developed markets.

Mr Smith’s strategy consists of three main elements. The first is improving customer service. Jaguar is already rated highly in America by J.D. Power, a consumer-research firm, but Land Rover “is not there yet” says Mr Smith.

The second is to recognise that, although JLR cannot compete across the board with the likes of BMW, Mercedes and Audi, it can be the best in its chosen segments. Land Rover, he says, has “benchmark products” in all its segments, and the XF, rated by several car magazines as superior to equivalent German cars, has shown what Jaguar can do. A new small Land Rover, based on the LRX concept-car displayed at car shows this year, seems certain to get the go-ahead, and Jaguar’s big saloon, the XJ, will be replaced next year with something sportier and more modern-looking. Mr Smith sees both Jaguar and Land Rover going even further upmarket, pushing into territory occupied by the cheaper Bentleys and Aston Martins.

MY COMMENT: This will be difficult for JLR to accomplish. One of the reasons JLR has a tough time competing effectively with the likes of BMW, Audi, and Mercedes is precisely because they don’t offer “across the board” models. They specialize in up-market saloons and SUV’s. BMW, Audi, and to a lesser extent Mercedes have a distinct advantage over JLR in their ability to spread development costs across models by using a single platform across multiple offerings (cars and SUV’s). This makes it difficult for LR to compete on cost with the likes of BMW, Audi, and Mercedes. Moreover, does JLR really believe it is in a league with Bentley and Aston Martin??

The third element is to reduce emissions. Jaguar is already a leader in lightweight aluminium construction and Mr Smith expects a 25% improvement in fuel efficiency over the next few years just by refining existing engines. But JLR is also investing $1.5 billion in new hybrids which will come on stream from 2012. Land Rover’s “e-terrain” technology, a diesel-electric hybrid powertrain with an electric rear-axle drive system, should give future Land Rovers even greater off-road ability while cutting emissions by 30%.

MY COMMENT: That is not enough. JLR does not currently manufacture one car that meets the European environmental standards that take effect in 2012.

And if all that were not enough, on top of all the strategic issues that JLR faces, for Tata there is the added difficulty of managing/coordinating operations across borders and cultures - i.e., an Indian firm managing a largely British operation. In cross-border deals, corporate culture needs to be integrated in a context complicated by differences in national culture. That is no easy task.

For JLR and Tata’s sake, I hope JLR survives to see 2012. But even if it does, there is no guarantee that it will turn into a profitable investment.

So I remain unswayed. I still think this is a bad deal for Tata.

One year ago in “How Good Were 2Q Earnings Really?” I wrote:

…we should think carefully (and critically) about why some firms performed well…especially those that used improved foreign sales as an explanation for such performance.

If consumers continue to struggle in the US and it turns out that the improvement in…performance was a result of a temporary improvement [exchange rate induced] in the repatriation of foreign profits, we can and should expect…a long road to economic recovery.

Two things (not unrelated) have happened since then that make that prognostication look more and more like a reality:

1. In addition to the U.S. consumer struggling at home, consumers across the globe (especially in Japan and Europe) have begun to feel strain, resulting in decreased foreign demand for U.S. goods and services. For an excellent summary of economies currently in (or slipping into) recession, see Nouriel Roubini’s recent post The Perfect Storm of a Global Recession.

The argument for some time had been that although domestic demand was stagnating, global growth would keep the U.S. economy (and the performance of its firms) chugging along, with increased exports substituting for domestic consumption. With a global consumer now struggling, and global growth quickly slowing, that reasoning looks tenuous. Re-coupling seems to be the order of the day.

2. The U.S. dollar has rallied significantly in recent weeks (by about 10% in DXY terms). This is a trend that I see continuing for awhile.

In my opinion, the explanation for the dollar’s strength has to do with the fact that now that many economies outside the U.S. are struggling, it is becoming increasingly clear that foreign countries will not only NOT be able not to raise interest rates to curb inflation, but will eventually HAVE to lower interest rates to address their own domestic weakness. This change in expectations for foreign central bank interest rates is U.S. dollar supportive. Add to that the flight to quality that generally occurs when foreign economies weaken, and we have a recipe for a sustained U.S. dollar rally. Mish has provided some excellent insight on the dollar in recent weeks (see U.S. Dollar Rally Continues, Currency Intervention and Other Conspiracies)

Should the U.S. dollar continue to strengthen vis-a-vis foreign currencies (and I expect that it will), it will put additional pressure on the earnings potential of U.S. multinationals that benefited from favorable exchange rates. A strengthening dollar not only makes U.S. goods and services more expensive for foreign consumers to purchase in their own currency, but it lowers earnings via the repatriation channel - the consolidation and reporting of foreign profits in U.S. dollar equivalents.

Taken together then, in addition to a struggling U.S. consumer, U.S. corporations face several additional headwinds moving forward: Foreign consumers that are now struggling - not willing, or able, to purchase U.S. goods and services - and less of a repatriation windfall as well.

Ouch!

One month ago, in reference to Inbev’s offer for Anheuser Busch, I wrote (see Ambush by Inbev?):

…no way, ain’t gonna happen.

It was my opinion that the proposed takeover of Anheuser by Inbev would not be a successful one. I had several reasons for such a view. First, I thought that the deal involved far too much debt (Inbev had proposed to put only around 13% down), and in the current credit environment I thought they’d have difficulty arranging the financing. Second, it was clear that top management, and certain members of the Busch family (including August Busch, the CEO) did not want AB to be acquired. It looked as if they would attempt just about anything to thwart the deal. And third, I felt that there were so many interested parties running interference (e.g., politicians, unions, consumers) that they would eventually scuttle any deal.

OK, so back to the present. On Monday, Anheuser Busch agreed to a $52 Billion takeover by Inbev (see Anheuser-Busch Accepts $52 Billion Inbev Offer). Boy was I wrong…

That’s ok though - I’ve been wrong before and I’m certain I’ll be wrong again. However, as I mentioned in a follow-on post last week (see Inbev and Anheuser: Cooler Heads Prevail), I thought it was great news that executives at AB agreed to discuss the deal with Inbev. They finally put the interests of the shareholders before their own. As I also mentioned in that post, I have an inkling that Adolphus Busch IV (uncle to August Busch) had a little something to do with AB’s change of heart.

Now that the two parties have reached an agreement in principle, the deal is still not quite out of the woods. It must go through the regulatory channels to receive approval. But at this point, with the support of AB, I think that the Anheuser Inbev deal is likely to get the go-ahead.

Assuming that they do get the go-ahead, the issue then becomes: Will this acquisition work?

According to Bloomberg, Inbev will finance the purchase with $45 Billion in debt (see Inbev May Raise $4.6 Billion). That’s a whole heck of a lot of debt, leaving them little margin for error, and likely forcing them to dispose of assets to raise capital (most likely the theme parks).

The St. Louis Post-Dispatch had a nice article on some of the other cost-saving measures that Inbev will likely implement (see Inbev Faces Challenges). They acknowledge (and I agree) that it will not be an easy task for Inbev to generate value out of this acquisition. They write:

The deal is based largely on the premise that Budweiser will succeed when sent to the far reaches of the globe, and that two companies with dramatically different cultures can merge into a smoothly running global powerhouse.

My comment: As I’ve written before on this blog, culture can be the key to making/breaking a union. In this case, the cultural component is especially complex. The two firms obviously have different corporate cultures. However, because this is an international deal, those corporate culture differences are compounded by differences in national culture - how the Belgian, Brazilian, and American managers get on.

The article continues:

…the beer industry carries high-profile examples of beer not crossing borders easily, said Roman Shuster, an analyst with Euromonitor in Chicago. Brahma, for example, is a cautionary tale as InBev plans to send Budweiser into untapped markets. Brahma is a top beer in Latin America but much less prevalent elsewhere. InBev planned earlier in the decade to take Brahma worldwide, but the effort fizzled…

My comment: I do not expect Budweiser to suffer the same fate as Brahma. American-made products still carry caché abroad. They are a status symbol (for good or bad) for consumers from many countries, and a signal that a country (especially a developing country) has “arrived”.

In addition to the cross-distributional synergies that Inbev will try to generate, they will also attempt to rationalize AB’s operations:

Anheuser-Busch is expected to become considerably leaner when InBev applies its trademark cost-cutting. In a conference call Monday morning, victorious InBev executives laid out their plans to expand cost-cutting already under way at Anheuser-Busch. InBev envisions a deeper cost-cutting plan than the one A-B unveiled last month, when it was trying to fend off InBev. Anheuser-Busch’s plan to cut $1 billion in expenses through 2010 will be expanded to a $1.5 billion effort over the next three years.

The ramped-up cost cuts will include about $360 million from greater leverage with suppliers, more aggressive production efficiencies and “elimination of corporate overlapping functions” — which likely will lead to job losses at A-B’s corporate headquarters in St. Louis.

One thorny issue is whether — and to what extent — InBev executives will shake up A-B’s network of more than 600 beer distributors in the U.S. …InBev may see those distributors as ripe for cost-cutting, some analysts said. InBev has a record of tough dealings with distributors in Brazil, one of its main markets.

All told, I’m pretty happy I’ve been forced to eat my words on this one. I’m glad the two firms are coming together; otherwise, how would we get to see the fun part - how the Anheuser Inbev integration plays out. Buckle up.

The New York Times and Wall Street Journal are reporting that Inbev agreed to raise its bid for Anheuser Busch to $70 per share (see Inbev Raises its Offer, Inbev Boosts Offer). This raises the premium offered for AB from about 30% to nearly 40%. As a consequence, AB has agreed to consider the offer, and has opened lines of communication with Inbev.

I applaud the two firms for ratcheting down the hostilities. I also applaud them for recognizing that this is a deal worth discussing (and considering) rather than bickering over. AB’s rebuke of Inbev’s initial offer was a blunder. Inbev followed that blunder with one of their own, by taking the issue directly to the AB shareholders, drawing the ire of U.S. politicians and consumers in the process.

Personally, I think much of the credit for bringing the two parties together belongs to Adolphus Busch IV (uncle to August Busch IV, the current CEO). When this deal turned hostile, Inbev decided to offer its own slate of directors to oust AB’s current board. It so happens that one of those proposed directors was Adolphus Busch IV (I’d actually be interested to know the back-story for why he agreed to serve as a director on the competing slate). As reported by The Economist last week (business brief, sorry no link):

InBev, a Belgian brewer, intensified its efforts to win Anheuser-Busch by nominating an alternative board. The slate included Adolphus Busch IV, who wants the Busch family to negotiate with InBev. He is an uncle of Anheuser’s chief executive.

Provided that talks between Inbev and AB do not breakdown, we can now all turn our attention to where it rightfully belongs - to the issue of how Inbev will create value by bringing these two firms together. As I have mentioned in previous posts (see Ambush by Inbev and Anheuser’s First Ploy), there are lots of reasons to bring these firms together - there are some real distributional and operational synergies. However, as with any deal, achieving synergies can be difficult (see Why M&A Deals Go Bad), …especially for cross-border mega-deals of this sort (see DaimlerChrysler Post Mortem for a case in point).

Then there’s also the issue of whether or not the deal has become too rich - whether the achieved synergies will more than compensate for the premium.

Although the deal is getting friendlier, it has also gotten pricier…

For those of you who have been following this blog, you know where I stand on Inbev’s bid for Anheuser Busch (see Ambush by Inbev?). Basically, my view is that although there are many reasons the two firms belong together, I would be surprised if the deal were to go through. It just seems to me that there are too many interested parties running interference.

My view hasn’t since changed, and it looks like Anheuser Busch will now make its first in a predictable (and myopic) set of moves by officially rejecting Inbev’s offer (see Anheuser Busch Plan Unlikely to Please Investors). Reuters is reporting that Anheuser Busch will instead offer it’s own plan to raise shareholder value that includes divesting non-core assets such as the theme-park business.

So assuming AB rebuffs Inbev (which looks likely), where do we go from here? The most likely scenario is that Inbev takes its case straight to the shareholders (another blunder) and turns this into a hostile affair.

Why would that be a blunder you ask? Because if you thought Anheuser Busch didn’t want this deal to go down, just wait until the politicians (and the mal-informed, misguided American public) get into the game and cry foul. All that will do for Inbev is raise its costs with little change in the end result - a failed bid for Bud.

At this point, if Inbev (and it’s bankers) were thinking about the best interests of its own shareholders, they would abandon the bid and move on. This is a no-win battle.

And even if by some miracle Inbev does win the fight, it still loses the war. If Inbev is able to wrestle Anheuser Busch away from AB’s shareholders, in the end the additional expense incurred during the bidding process, coupled with the many concessions Inbev would be forced to make as the owner of AB, will condemn their union to years and years of sub-par returns.

For Inbev then, the best response is probably just to walk away now.

When I first heard the rumors several weeks ago that Inbev was considering making a play for Anheuser Busch, I thought to myself, “no way, ain’t gonna happen.” So you can imagine my surprise at Inbev’s unsolicited bid on Wednesday for the largest brewer in the U.S. (see Inbev Makes Bid for Maker of Bud).

It’s not that I thought that such a marriage couldn’t work - there are some real distributional, and even some operational, synergies here. It’s not that I thought AB was too big to be bought, as many firms have the wherewithal. I just thought that in the current economic environment a deal of this size would be unlikely in the absence of the buyer putting up a significant amount of cash. After all, $46B is a non-trivial sum of money, and from all accounts Inbev plans to finance all but about $6B with debt. If the accounts I read in the press are correct, that makes for a 13% downpayment. Hey Inbev, it’s not 2005 anymore!

There are other forces working against Inbev in this deal. For one, it seems the Busch family does not want it to happen. It’s likely that they will take whatever measures they deem necessary to try to block it (witness their courtship of Modelo - see AB Approaches Modelo to Block Inbev). Add on top of that the newfound protectionist sentiment in the U.S. toward AB (see Hands Off Our Bud or Politicians Oppose Bid). I gotta tell ya, I never realized that AB was a source of national pride, and before yesterday I had no idea that brewing was considered a strategic national industry.

For all these reasons, and despite the fact that I think it’s not a half-bad combination (especially for BUD shareholders who would receive a 20-30% premium for their shares since rumors first circulated), I think this deal faces significant headwinds.

So my priors still haven’t changed - no way, ain’t gonna happen.

So now that I’ve had the time to decompress and think carefully about my experience at the 2nd Sumantra Ghoshal Conference on Managerially Relevant Research (see Off to London for background), I’m more convinced that my time was well spent.

It was nice to be part of a conference with the explicit intention of bringing academics and practitioners together to discuss research papers, and the role of academic research in the everyday lives of managers. The conference was attended by academics from various of the top business schools in both Europe and the U.S. Moreover, there was ample managerial representation from firms such as Accenture, Hoffman-LaRoche, McKinsey, Saatchi & Saatchi, RBC, and the Financial Times (to name a few).

Some highlights from the conference included:

• The organizers of the conference administered a survey before the conference began and presented some interesting data on the most important issues managers and scholars believe are facing businesses moving forward (credit concerns aside). What I found most interesting is that managers generally agreed about the most critical issues facing their businesses. They identified the following strategic issues as crucial: How to attract and retain talent; How to build and leverage knowledge; How to Identify the next area of growth for the corporation; How to align the organization toward common goals; and, How to draw up an appropriate mission statement. The academics, by contrast, were all over the map. We didn’t agree on much of anything. About the most you could take away from the data for the academics is that all of us in attendance have very different research interests. Some of us thought that “Building and leveraging knowledge” was important, some thought that “Identifying the next area of growth for the corporation” was important, some thought that “governance” was important. But for the most part, there was little agreement among us.
• There was general agreement among most of us that academics influence practice in a multitude of ways, and that influencing practice is not always about getting our research directly in front of the eyeballs of managers. In fact, if anything, this is probably a small part of how we influence managers. We obviously have the greatest impact through our teaching, at the undergraduate, MBA, and executive levels. We also influence managers through consultants (who borrow and implement our ideas), and on occasion, by consulting directly with firms. Scholars also influence practice through our impact on policy - by proffering informed opinions to politicians or testifying on business practice. In this sense then, we help shape the game and inform the agenda - helping decide which issues are important and which are not.
• One of the McKinsey representatives suggested that she (and other management consultants) routinely scan and read academic research to extract the latest ideas, concepts, and tools to apply on client engagements. Interestingly, one research paper presented at the conference suggested that those ideas, concepts, and tools are often applied inappropriately, and sometimes without effect. However, the research also suggested that although sometimes applied incorrectly, they get people within the organization to openly communicate about strategic issues, thereby generating some value, if not exactly that originally intended.
• With respect to our research, there was considerable debate on the type of research we ought to be doing - whether research that directly addresses specific management problems, or research that we ourselves consider important, irrespective of whether it’s managerial relevance is immediately obvious. One view expressed (with which I must say I agree) was that we must not lose site of the fact that as business school faculty, we are a part of an applied, vocational program with a mandate to train business leaders. We therefore cannot lose sight of, or become completely detached from, our audience when conducting our own research, for taken to an extreme, research that is disconnected with the interests of our constituents will ultimately repay us with lower enrollments.

All in all, I got a lot out of the conference. It was fun to spend a few days interacting with a bunch of really smart folks (both academics and managers) discussing some really interesting issues.

The 2nd Sumantra Ghoshal Conference on Managerially Relevant Research officially wrapped-up last night. A very worthwhile endeavor again this year! I’ll provide more detail in a follow-up post later in the week, but I just wanted to pass along what I thought was the best quote of the conference. Mark Spelman, the head of Global Strategy at Accenture, had the following nugget of insight to pass along:

The most problematic relationship for the Chief Strategist is the one with the CFO

What a great line. It makes complete sense to me. According to Spelman, the strategist often does not have control, or decision-making authority, over the deployment of any actual resources. Rather, it’s the CFO that holds the purse strings. In this sense then, the Chief Strategist can only influence decisions. So the best strategists are not only keen, intelligent types, but those who can make an influential case that leads others in the organization to take actions consistent with his or her recommendations.

…some food for thought.

More to come as soon as I’ve finished collecting my thoughts.