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orgtheory puzzle: why does sears still exist?

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Puzzle for you all your org behavior/theory of the firm types: Why does Sears still exist? Normally, when we think about why successful firms exist, we think that they have a unique product, fill a niche, or have some sort of incumbent advantage. Or just overly aggressive management. But in a world of Amazon, Target, and Home Depot, it’s difficult to understand what Sears does well. Why aren’t they gobbled up by Lowes or Home Depot? Or dismembered by selling off its prime real estate holdings?

You see the occasional article on the topic. Forbes in 2011 claimed that it was generating good cash flow, which owners used to fund purchases of other firms. But the question is – where is the cash flow coming from? Yahoo readers claim that Sears is less a retailer and more of a holding company for a few brands (like Diehard batteries or Land’s End clothes) that just happen to be sold in Sears big box stores. But you’d think that competition would make this set up hard to sustain. The Forbes article does note a massive drop in sales… yet wiki reports that 793 (!) stores were open in 2014. Please use the comments.

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Written by fabiorojas

March 25, 2015 at 12:01 am

“there’s no rankings problem that money can’t solve” – the tale of how northeastern gamed the college rankings

There’s a September 2014 Boston.com article on Northeastern University and how it broke the top-100 in the US News & World Report of colleges and universities. The summary goes something like this: Northeastern’s former president, Richard Freeland, inherited a school that was a poorly endowed commuter school. In the modern environment, that leads you to a death spiral. A low profile leads to low enrollments, which leads to low income, which leads to an even lower profile.

The solution? Crack the code to the US News college rankings. He hired statisticians to learn the correlations between inputs and rankings. He visited the US News office to see how they built their system and bug them about what he thought was unfair. Then, he “legally” (i.e., he didn’t cheat or lie) did things to boost the rank. For example, he moved Northeastern from commuter to residential school by building more dorms. He also admitted a different profile of student that wouldn’t the depress the mean SAT score and shifted student to programs that were not counted in the US News ranking (e.g., some students are admitted in Spring admissions and do not count in the US News score).

Comments: 1. In a way, this is admirable. If the audience for higher education buys into the rankings and you do what the rankings demand, aren’t you giving people what they want? 2. The quote in the title of the post is from Michael Bastedo, a higher ed guru at Michigan, who is pointing out that rankings essentially reflect money. If you buy fancier professors and better facilities, you get better students. The rank improves. 3. Still, this shows how hard it is to move. A nearly billion dollar drive moves you from a so-so rank of about 150 to a so-so rank of about 100-ish. Enough to be “above” the fold, but not enough to challenge the traditional leaders of higher ed.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($2!!!!)/From Black Power/Party in the Street!!

Written by fabiorojas

February 13, 2015 at 12:01 am

there’s probably a lot more cheating with the patriots

So far, the Patriots have been nailed on two cheating scandals – deflation gate 2015 and the 2006 spying scandal. Each of these is interesting in its own right but there is one implication that few are willing to utter. The Patriots are probably cheating in more ways than we imagine.

The intuition is simple. Cheating incidents are not independent. It is not likely that every person will cheat with equal probability. Rather, people who want to cheat are the most likely to cheat and do so over and over. Also, consider incentives. They have been caught cheating multiple times and that hasn’t seemed to harm them much at all. The conclusion is that it is highly likely the Patriots are cheating in other ways.

I think it would be interesting for the fans of vanquished teams to conduct Levitt style analyses of the Patriots. I would guess that looking at other data in addition to the now famous fumble analysis will yeild some interesting answers.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($1!!!!)/From Black Power/Party in the Street!! 

Written by fabiorojas

January 26, 2015 at 12:45 am

where human capital arguments make headway

Higher education has become dependent on human capital arguments to justify its existence. The new gainful employment rule for for-profit colleges, announced yesterday by the Obama administration, reminded me of this. It clarifies what standards for-profits have to meet in order to remain eligible for federal aid, which makes up 90% of many for-profits’ revenues.

Under the new standard, programs will fail if graduates’ debt-to-earnings ratio is over 30%, or if their debt-to-discretionary-earnings (income above 150% of the poverty line — about $17,000 for a single person) is over 12%.

Now, we could have a whole other conversation about this criterion, which is really, really, weak, since it no longer takes into account the percent of students who default on their loans within three years. By limiting the measure to graduates, it ignores, for example, the outcomes of the 86% of students who enroll in BA programs at the University of Phoenix but don’t finish in six years — most of whom are taking out as many federal loans as they can along the way.

But I want to make a different point here. More and more, we are focused on return on investment — income of graduates — as central to thinking about the value of college.

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Written by epopp

October 31, 2014 at 3:39 pm

what, exactly, are the police maximizing?

Last week, discussed how police interact with urban communities and the hypothesis that police are rewarded for focusing on the drug trade and they are less rewarded for just keeping the peace. Once commenter asked: what are the goals of the police? What are they trying to maximize?

Upon reflection, I realize that I had no idea, but I could generate some hypotheses:

  • Income/salaries
  • Department budgets
  • Violent crime
  • Non-violent crime
  • Property crime
  • Victimless crime
  • Social control (i.e., controlling specific populations)
  • “Broken windows” – making certain locations look desirable
  • Self-image
  • Votes (for D.A.’s especially)

I’d be interested in any data show the relative importance of these goals, say, in police budgets, arrests, prosecutions, police hours, etc. Criminology readers – how would you rank these goals given your knowledge of the field?

50+ chapters of grad skool advice goodness: Grad Skool Rulz/From Black Power  

Written by fabiorojas

September 9, 2014 at 12:01 am

financializing social services

Do people know about social impact bonds? I hadn’t heard of them till recently. Since then, though, I’ve developed a train-wreck fascination. They have the potential to combine all the worst features of the public and private sectors. And they can be securitized, to boot!

Let’s take a step back. What is a social impact bond, anyway?

Well. Imagine you have a social problem you’d like to solve. Say that you want to reduce recidivism among young people in prison. That sounds good, right? The problem, of course, is that taxpayers don’t want to pay for rehabilitative programs, and there’s lots of disagreement about what kind of program would actually help solve the problem, anyway.

The government says, Wouldn’t it be nice if somebody would take care of this for us, and we’d only have to pay them if they actually succeeded?

Enter Goldman Sachs.

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Written by epopp

August 11, 2014 at 1:01 pm

grade inflation experiment

A recent article in the Journal of Economic Perspectives reports a recent attempt to curb grade inflation. High GPA departments at Wellesley College were required to cap high grades. The abstract:

Average grades in colleges and universities have risen markedly since the 1960s. Critics express concern that grade inflation erodes incentives for students to learn; gives students, employers, and graduate schools poor information on absolute and relative abilities; and reflects the quid pro quo of grades for better student evaluations of professors. This paper evaluates an anti-grade-inflation policy that capped most course averages at a B+. The cap was biding for high-grading departments (in the humanities and social sciences) and was not binding for low-grading departments (in economics and sciences), facilitating a difference-in-differences analysis. Professors complied with the policy by reducing compression at the top of the grade distribution. It had little effect on receipt of top honors, but affected receipt of magna cum laude. In departments affected by the cap, the policy expanded racial gaps in grades, reduced enrollments and majors, and lowered student ratings of professors.

My sense is that this shows that grade inflation, whatever its historical origins, acts as a competitive advantage for programs that few other market advantages. If you don’t have a strong external job market or external funding, then you can boost enrollments via grade inflation. It also absolves programs by masking racial under performance. The lesson for academic management is this: If you have inequality in funding, departments will compensate by weak grading. If you have inequality by race, departments will compensate by weak grading. Thus, academic leaders who care about either of these issues should implement policies where departments don’t choose standards and are accountable for results.

50+ chapters of grad skool advice goodness: Grad Skool Rulz/F

Written by fabiorojas

August 5, 2014 at 12:01 am

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