New research by Bob Whaley, the Valere Blair Potter Professor of Management, and Jacob Sagi, the Vanderbilt Financial Markets Research Center Associate Professor of Finance, has led to the creation of a recently launched group of NASDAQ indexes. The NASDAQ OMX Alpha Indexes are designed to help investors measure performance between individual stocks and exchange-traded funds. In practice, this means that the returns of popular holdings such as Apple and Citigroup could be isolated from sharp swings in the market. Traditionally it has been difficult—if not impossible for some—to trade directly on the relative performance of one asset compared to another.
In a new research paper describing how relative performance indexes work, Sagi and Whaley use the example of Apple (AAPL) compared to the S&P 500. In September 2008, AAPL’s share price plummeted by 32 percent, more than three times the amount lost in the broader markets. Seeing such an outsized decline in AAPL’s share price compared to the market overall may have signaled a buying opportunity to some investors. But as the financial crisis worsened, AAPL’s share price fell by another 1.4 percent. During the same time, however, the broader market fell by about 16.6 percent.
“AAPL outperformed the market as the investor expected,” Sagi and Whaley write. But anyone who had purchased shares of AAPL, while beating the market, would still have suffered a loss.
Jacob Sagi
If an investment tool based on a relative performance index had been available to capture AAPL’s performance against the market, however, it would have yielded a substantial gain.
To try and replicate that same trade using the tools available at the time, an investor would have had to buy a long position in AAPL, while shorting, or betting against, a product like an S&P 500 index fund. The central risk in that scenario is that an investor would be exposed to an unlimited loss in the short position. By contrast, a relative performance index would place at risk only the original amount of the investment. Further, the money and time spent rebalancing those trades to account for volatility in both the long and short position would be too much for most investors to bear.
While the derivative products on the indexes developed by Sagi and Whaley can be used to invest in the relative performance of any pair of securities or exchange-traded funds, NASDAQ OMX so far has unveiled 23 index options tracking “highly liquid” assets, including:
NASDAQ headquarters in New York City
AAPL vs. SPY Index (symbol: AVSPY)
Gold (GLD) vs. SPY Index (symbol: GVSPY)
Twenty-plus Year Treasury Bonds (TLT) vs. SPY Index (symbol: TVSPY)
Citigroup (C) vs. Financial Sector (XLF) Index (symbol: CVXLF)
Emerging Markets (EEM) Index vs. SPY Index (symbol: EVSPY)
For now, Sagi and Whaley see the relative performance indexes as providing an easy and low-cost way to execute what traditionally has been a cumbersome trade. But as these indexes become more widely used, the authors say, they could introduce entirely “new return/risk management strategies to the investment arsenal.”
Using VUMC’s dedicated trauma unit as a case study, Hyer and her colleagues found that focused delivery of health care can improve overall hospital performance.
With millions of new patients coming into the U.S. health care system over the next decade, the term “operations” is taking on a whole new meaning in America’s hospitals. Starting in the year 2014, as many as 32 million additional people will be covered by health insurance under the federal reform law passed last year. That additional demand comes at a time when medical facilities are struggling to reduce costs, improve safety and provide higher patient satisfaction.
To address these issues in the past, many health care facilities looked to manufacturing and its specialized product lines as a model for how to treat patients most efficiently and effectively. But little research has been done on how well these new “focused delivery” units have worked. To investigate this question, Nancy Lea Hyer, Associate Professor of Operations Management, turned to a dedicated trauma unit at Vanderbilt University Medical Center for answers. The case study was published in the Journal of Operations Management in 2009, and last year won that publication’s Best Paper Award.
“The following two questions were used to guide our research,” writes Hyer, who collaborated on the project with Dr. John A. Morris Jr., Professor of Surgery and Director of the Division of Trauma and Surgical Critical Care at Vanderbilt University Medical Center, and Professor Urban Wemmerlöv from the University of Wisconsin–Madison. “(1) How does the concept of focus, as it is used in connection with manufacturing plants, transfer to the context of a critical care hospital setting?, and (2) How does focus affect operational, clinical, and financial outcomes?”
Since 1987 the Medical Center has served as Middle Tennessee’s only Level I trauma center—meaning it is equipped to handle the most severely injured patients—within a 150-mile radius. By 1993 executives at the Medical Center authorized the creation of a separate $5 million, 31-bed facility called the Vanderbilt Trauma Center. The dedicated facility opened in August 1998.
Administrators staffed the Trauma Center with a designated team of doctors, nurses, social workers, even security and cleaning personnel, and outfitted it with X-ray and lab equipment. Physicians work 12-hour shifts instead of the traditional 24-hour rotation, so they are in-house and immediately available during their time on duty. And the facility itself was designed with an open-bay concept to accommodate the center’s 14 intensive care unit beds. This layout permits cross-trained staff to assist each other as needed and makes it easy to rapidly reconfigure the unit to respond to changing circumstances, such as a sudden influx of critically injured patients.
Nancy Lea Hyer
Prior to the creation of the Trauma Center, patients were transferred from unit to unit throughout the hospital as their recovery progressed. In directing patient care, trauma physicians traveled all over the hospital seeing patients and interacting with a wide array of staff, who cared for both trauma and nontrauma patients. In the new critical care facility, the dedicated staff delivers care in a single location and manages patient care through much, if not all, of the patient’s hospital stay. This has allowed the unit to develop and hone a specialized set of treatment protocols.
The Trauma Center also has its own financial director, who tracks physician and staff performance in much the same way a private company would. And to further differentiate themselves as an independent entity in the hospital, nurses and other staff wear distinctive black uniforms.
Did the measures work? To answer that question, Hyer and her co-authors examined the dedicated center’s length-of-stay, mortality rates and financial metrics. To compare before and after performance, researchers used data from 1996–1998, the two years before the separate Trauma Center opened, and from 2000–2002, which allowed for a period of adjustment.
The length of stay for patients treated in the dedicated trauma center declined by an average of 6.5 percent overall, and by 15 percent for those with more severe injuries. However, researchers detected no change in the mortality rate.
On the financial front, trauma care operations showed losses of $2.2 million and $1.75 million in 1996 and 1997, respectively. In 1998 the Trauma Center saw a small surplus of $50,000. By 2000 and 2002, however, the independent trauma facility showed surpluses ranging from $5.5 million to $7.89 million. Calculated on a per-patient basis, the unit turned an average loss of $578 per patient into a surplus of $2,493 per patient. Researchers also found similarly positive results when comparing the unit’s performance to benchmark peers.
“The discovery by the trauma unit’s managers that [Vanderbilt] discharged patients quicker, while charging comparatively less for its services, was both an affirmation that the focused hospital unit worked as intended and a sign that they needed to increase the charge levels and have [the Medical Center] translate these into better contracts with the payers,” the authors write.
Looking into some of the reasons for the improved performance on length-of-stay and financial measurements, researchers found ways the staff became more efficient treating patients. For example, before the creation of a separate trauma center, tracheotomies (a common procedure for patients who may be on a ventilator for an extended time) had typically been performed in an operating room, where it took an average of 80 minutes’ worth of physician time. In the new Trauma Center, doctors developed a bedside tracheotomy procedure, which takes only 15 minutes of a doctor’s time and is just as safe as one performed in a fully equipped operating room. Whether done in an operating room or at the bedside, however, the high reimbursement rates are the same, allowing the Trauma Center to capture the financial gains.
The finding prompted the unit to redouble its efforts to charge procedures more accurately for reimbursement, and most important, not to overlook them as had sometimes been done when patients were shuttled between departments.
But the authors acknowledge that one case study is not enough to suggest a need for broader changes within the health care system. Further, they write that nothing in their research suggests that the creation of a dedicated unit in itself is “a sufficient condition for success.” Rather, such initiatives should be aligned with other changes to factors such as hospital infrastructure, management and culture.
Nevertheless the case does indicate a need to further explore reasons why a dedicated unit can help bolster hospital performance. “Hopefully,” the authors write, “future studies will determine with greater precision what factors need to coexist with [focused hospital units] to create better performing health care delivery organizations.”
Kim Parlett with husband, Mark, and dogs in Montana
There was no single “aha” moment that convinced Kim Parlett, MBA’04, to leave her job at a marketing firm and embrace a more rustic way of life. Rather, she says, it was a series of realizations during a 2009 horse-packing trip through Yellowstone Park that helped her make up her mind.
“I was continually struck by the beauty around me,” Parlett says. “It reminded me just how small my problems really were. You go for a hike under the big sky, and everything gets put into perspective.”
Today that big sky country is playing a big role in her career. As Manager of Lone Mountain Ranch, a Montana ranch specializing in family vacations, Parlett is responsible for helping guests enjoy the best that nature has to offer, including Nordic and downhill skiing, fly-fishing, horseback riding and tours of nearby Yellowstone.
“Out here they say you eat the scenery. That’s your salary,” she says. “You may not make a lot of money, but the real payment comes from being able to live in such an amazing place.”
While the setting for her new job is undoubtedly different from that of her corporate experience, which included stints at both General Motors Corp. and Miller Brewing Co., Parlett says there are a surprising number of similarities when it comes to the business itself. “Budgeting, forecasting, marketing and operations are a lot of what I do at Lone Mountain Ranch,” she says. “The frameworks you apply are the same whether you’re at a Fortune 500 company or a small mom-and-pop shop.”
Parlett credits Vanderbilt with helping her understand those frameworks more fully. In fact, her experience at Owen opened her eyes in much the same way that her Yellowstone trip did. “Before business school I felt like I was just a small piece of the pie at my company,” she says. “Vanderbilt sparked my interest in being more involved in all aspects of business.
A new mobile application called SmartFuel allows drivers to search for live gas prices along any route in the United States, find the cheapest price and save an average of $5 with every fill-up. SmartFuel provides this information by gathering credit card purchase data that is continuously updated.
That is just one of the features that sets it apart from other mobile apps, says George Sibble, BE’06, MBA’08, President and CEO of Iridium Development, the company responsible for SmartFuel. Sibble estimates users will save $250 a year with the app, which is available for both the iPhone and Android. In case the user has any doubt about the savings, SmartFuel also conveniently keeps track of how many times it has paid for itself.
Sibble started Iridium, a holding company that creates subsidiary business around mobile apps, in 2009 under the auspices of the Nashville Entrepreneur Center, whose President and CEO is Michael Burcham, Clinical Professor of Entrepreneurship at Owen. (Learn more about Burcham and the center.)
Sibble says new apps are in high demand but creating them can be expensive. The process involves not just coming up with ideas but thinking through what is called “use case.” For example, the creators of SmartFuel realized it made more sense for a user standing by a gas pump to enter gallons purchased rather than mileage. “I want something used, and I want it to be efficient,” Sibble says.
“I see solutions all around. Whenever I see a problem, I also see that it can be solved through an application,” he adds. “I just want to get it up and out there.”
The 2010 U.S. Congressional elections saw an unprecedented boom in campaign spending—$4 billion in all, with about $1.12 billion coming in the form of individual contributions to candidates, according to the Center for Responsive Politics. While political pundits continue to debate what impact this money has on election outcomes, new research from the Owen School points to some clear winners: the individuals who donate and the corporations they support.
Using innovative techniques to match geographic areas that are most affected by government policy with “economically relevant” politicians, the husband-and-wife team of Alexei Ovtchinnikov, Assistant Professor of Finance, and Eva Pantaleoni, Researcher at the Vanderbilt Kennedy Center for Research on Human Development, analyzed nearly 5 million campaign donations between 1991 and 2008.
What they describe in a new research paper is strong evidence that individuals who make political donations—whether at the behest of firms or not—directly benefit companies in their communities.
“The reason we look at individual contributions is because it accounts for about two-thirds of all the money given directly to politicians,” Ovtchinnikov says, noting that only about 10 percent of firms are actively involved in campaign finance. “Individuals are the big players in this game.”
But it’s companies that are reaping the most recognizable benefits. Ovtchinnikov says firms located in areas that most intensely target “economically relevant” politicians see positive changes in return on asset (ROA) and market-to-book ratios. The bottom-line boost that comes from campaign donations is similar to investing in a new research-and-development or capital-expenditure project.
Further, the economic benefit to firms strengthens when donations come from areas that have high unemployment rates—even if the politicians on the receiving end do not live in that district.
The new study also finds that political contributions flow disproportionately from companies’ home districts to key members of Congressional committees with jurisdiction over their industry. “What you’re seeing is an ability for people to reach politicians with dollars when they can’t reach them with votes,” Ovtchinnikov says.
The net result is that a significant amount of political donations come from narrow geographic clusters. Between 1991 and 2008, for example, three small areas around New York, Chicago and Washington, D.C., accounted for 11.7 percent of all campaign contributions—$425.9 million—even though they represented less than 2 percent of the population.
While the most recent study examined individual donations, a previous study by Ovtchinnikov and others published last year in The Journal of Finance shows a correlation between corporate political donations and higher stock returns.
David Parsley
“Our results … suggest an extremely high rate of return for firms participating in the political contribution process,” Ovtchinnikov and his co-authors write. “Alternatively, it is possible that politicians find it most beneficial to grant favors to large firms because those are the firms that generate the largest amount of tax revenues and jobs.”
In a similar study, David Parsley, the E. Bronson Ingram Professor in Economics and Finance, has found that corporate lobbying is “positively related” to a firm’s financial performance. In that study—where the top five firms in the U.S. accounted for 42 percent, or $160 million, of the total amount spent on lobbying in 2005—Parsley says that portfolios of companies engaged in the most intense lobbying efforts significantly outperformed their benchmark peers.
“Firms in this category earned an excess return of 5.5 percent over the three years following portfolio formation, while the rest of the firms earned essentially a zero excess return,” Parsley and his co-authors write. They do note, however, that the study’s results indicate that the gains were achieved through defensive lobbying, suggesting that simply spending the most on lobbying does not necessarily lead to better financial performance.
For his part, Ovtchinnikov says these studies, by demonstrating that campaign and lobbying expenditures have positive effects on corporate performance, open up intriguing new lines of inquiry for researchers.
“We have shown that firms are benefiting,” he says. “Now we need to begin asking why they benefit.”
Sarah Trahern, pictured here in the production control room at GAC TV, oversees the network’s strategic planning and day-to-day operations.
Sarah Trahern grew up in a home of divergent musical tastes. Her father used to sing old country standards to her in the crib, while her mother encouraged her to take classical violin lessons throughout childhood. Trahern admits an appreciation for a wide range of music these days, but it’s telling that after 12 years of violin she decided to switch to the banjo in high school. The twang of country music won out, and though she didn’t realize it at the time, Nashville was already beckoning.
After graduating from Georgetown University and covering politics for C-SPAN in Washington, D.C., she decided to pursue her interests in music and television in Nashville, where today she is the General Manager and Senior Vice President at Great American Country (GAC), a country music television network. Since her hiring in 2005, GAC has more than doubled its reach to nearly 60 million households.
“Country is unique in that it really is the soundtrack for a lot of America,” she says. “There’s pretty broad appeal. It’s not just niche music anymore.”
Trahern, who oversees GAC’s strategic planning and day-to-day operations, including programming and production, was named to Billboard magazine’s list of the top 30 women in music in 2010. She credits Vanderbilt’s Executive MBA program for much of her recent professional success.
“It really rounded out my management experience to be exposed to leaders in a variety of fields outside of my own,” she says. “Also my experiences in the strategy course—developing numerous analytical plans and having to defend them in front of the class—have been quite valuable in my current position.”
If Trahern had to pick one of her proudest moments as a manager, it would be the telethon she helped GAC organize just days after the floods struck Middle Tennessee last May. The commercial-free, three-hour concert featured some of the top acts in country and raised nearly $2 million for flood victims.
“We’re a ratings-driven business,” she says, “but sometimes doing the right thing is what’s most important.”
Ramanujam and colleagues studied 22,603 fourth-down decisions over five NFL seasons to better understand risk-taking behaviors in business.
Try asking any Monday morning quarterback about blown fourth-down play calls in the NFL and you are guaranteed passionate opinions. In most fourth-down plays, an NFL team will punt or try for a field goal. But occasionally teams decide to do something that is viewed as risky—attempt a fourth-down conversion, or “go for it.”
Associate Professor of Management Ranga Ramanujam, David Lehman from the National University of Singapore and other researchers studied 22,603 fourth-down decisions over five NFL seasons to understand when teams were more likely to attempt a seemingly risky fourth-down conversion. The goal is to apply this research to organizations. These findings are reported in a new study in Organization Science. The paper is titled “The Dynamics of the Performance-Risk Relationship within a Performance Period: The Moderating Role of Deadline Proximity.”
Ramanujam and his co-authors report that teams that were behind generally were more likely to go for it on fourth down. Also the more points behind they were, the more likely it was they would go for it. This effect became stronger as the game progressed. In other words, a trailing team was more likely to go for it later in the game rather than earlier in the game. Interestingly this was only the case for teams trailing by a margin of about three touchdowns or less. Teams trailing by wider margins actually became less and less likely to go for it as the game progressed.
“The idea here is that as the deadline approaches, the time available begins to factor into the decision to try something different in response to underperformance,” Ramanujam says.
The results suggest that as the game clock runs down, teams within striking distance of their opponent grow more and more eager to try risky plays that might help them win the game. However, teams outside that striking distance grow increasingly concerned with “saving face” or avoiding a risky move that might backfire and make them look stupid.
“We argue that this same tension between chasing organizational goals and avoiding reputational threats can help us understand risk-taking behaviors in other types of organizations,” Lehman says.
The goal of the study was to understand how risky organizational decisions might be shaped by performance feedback (i.e., the extent to which current performance is above or below the aspired level of performance) and deadline proximity (i.e., time remaining before an important deadline such as an earnings report date).
“We know that deadlines play an important role in organizational life. Part of what we’re trying to understand is how deadlines affect the well-known relationship between underperformance and risk taking,” Ramanujam says. “In other words, when are organizations more likely to deviate from routines? This is an important question for understanding a variety of important organizational outcomes such as innovation, change and fraud.”
Ramanujam, though, is quick to acknowledge that “although many managers have a natural talent for finding a football analogy for every business situation, football games are very different from the operations of business organizations. However, they are sufficiently similar in some key respects to make these findings potentially relevant to business organizations.”
For instance, fourth-down decisions typically are organizational decisions in that they are based on the inputs of various people on and off the field and are based on performance relative to a target and in reference to a deadline.
Ramanujam also notes that unlike prior studies that analyzed whether fourth-down conversions are as risky as they are made out to be, this study was about understanding when teams were more likely to go for it.
“What is especially relevant to our study is that teams treat this as a nonroutine choice,” Ramanujam says. “In more than 80 percent of fourth-down plays, the teams punted the ball.
When I was younger and trying to decide on a career path, I briefly thought of going into business for myself. It was an admirable, if short-lived, dream, but in retrospect I’m a little dismayed that I even considered it. Time has taught me that I just don’t have the entrepreneurial itch—or the guts, frankly—to strike out on my own.
Oilman J. Paul Getty once said, “Going to work for a large company is like getting on a train. Are you going 60 miles an hour, or is the train going 60 miles an hour and you’re just sitting still?” Me, I’m the type of person who’s perfectly content riding the train.
Yet what’s more puzzling about my thought process back then isn’t that I considered starting my own business but rather the field it was to be in. The seed for the idea started with my grandfather, who ran his own civil engineering firm in Huntsville, Ala. I’d grown up admiring his accomplishments, and it seemed only natural to do something similar with my life. I think he would have liked nothing more than for me to follow in his footsteps, whether by taking over his business or opening an engineering firm of my own.
Of course that was assuming I had the technical skills to embark on such a career—which I didn’t. As much as I enjoyed looking over my grandfather’s shoulder at blueprints he was working on, I can’t fathom doing the math his job required.
Life, though, has a funny way of coming full circle. All these years later I’m getting to live out my childhood dream, albeit vicariously, through my wife, Victoria, a professional mechanical engineer. This past fall she started her own company, which specializes in sustainable building design. Having watched her get the business off the ground, I’ve come to believe that being a spouse of an entrepreneur is probably the closest thing to actually being an entrepreneur oneself. I’ve shared in the good times when work is plentiful and sweated the moments when funds are stretched pretty thin.
Nevertheless I wouldn’t change a thing about these past few months. I’m immensely proud of my wife for daring to do something that I’d only dreamed about, and if anything, her enterprising spirit has rubbed off on me. I’m now more mindful of how entrepreneurs think, and in some small part this has carried over to my own job.
As Dean Jim Bradford points out, large organizations can benefit from this kind of thinking just as much as smaller ones, and therein lies a valuable lesson for everyone, regardless of whether you choose to ride the train, so to speak, or not. The truth is we all have a say in where we’re headed and how we get there. We passengers just have to make sure we don’t get too comfortable in our seats.
Generations of MBA graduates have mastered pricing models designed to evaluate companies based on capital assets like equipment, land and raw materials. But as the world economy shifts to one that increasingly places a premium on brainpower instead of horsepower, there are few, if any, reliable methods for analyzing the financial value of human capital.
To help bridge that gap, Vanderbilt’s Financial Markets Research Center brought together researchers last October to look at the value and risk of human capital and how it affects a firm’s business and financial strategy. For the event’s organizer, Miguel Palacios, Assistant Professor of Finance, the pursuit of this new model is more than just an interesting theoretical exercise—it’s personal.
The Colombia native is co-founder of Lumni Inc., a Miami-based company that has developed investment products to help send promising students to school who otherwise would be shut out of higher education by soaring costs. Operating in four countries, including the U.S., Lumni was cited by Businessweek in 2009 as one of America’s most promising social ventures. More recently The Economist highlighted the company in a piece about innovative new microfinance ventures designed to help students pay for higher education.
With co-founder and fellow Colombian Felipe Vergara, a former McKinsey consultant, Lumni has financed education opportunities for 1,800 students using more than $10 million. The company raises money from investors such as the Inter-American Development Bank, foundations, universities and wealthy donors. Students commit to paying a fixed percentage of their income—never more than 15 percent—into a Lumni-created fund typically for five years after graduation. In turn, that fund pays out proceeds to investors.
As The Boston Globe has described it, “These contracts, proponents say, would allow more kids to finish college. They would free graduates from crushing debt. And they could liberate youngsters to pursue socially valuable but low-paying work such as teaching.”
But it is not just save-the-world types who would benefit. Palacios and others point out that this model would also help fund the next generation of doctors and lawyers as a way to spread investor risk through a broad pool of students.
“The best analogy is insurance,” Palacios says. “Not everybody crashes. If you pool everybody together, you are in a much better position.”
Lumni, a company that Palacios co-founded, has developed investment products to help more kids finish college and avoid crushing debt.
The analogy may end there, however, for unlike insurance there is no set of accepted standards for quantitatively measuring risk or reward when it comes to education. How, for example, does the value of human capital change when a person adds a medical degree versus a bachelor’s in philosophy?
“This is the largest asset that most people have,” says Palacios, who estimates that human capital accounts for about 90 percent of aggregate wealth.
Palacios says human capital poses a particular challenge for researchers because, while it represents the single largest asset class in the world’s economy, one cannot directly observe its value or dynamics. “We merely observe wages, human capital’s dividends,” Palacios wrote in a 2009 paper. “Thus, we need a framework to determine human capital’s value.”
Researchers continue to look for a breakthrough model in the field, and so far Palacios’ work indicates that human capital is less prone to economic shocks than equities, bringing a new level of empirical rigor to academic colleagues and potential investors alike.
Yet there are other, more practical concerns for the student-investment concept beyond technical valuation, namely how to guard against a student putting off a career because there is no pressure to repay loans. To address this, Lumni draws on psychologists to help screen its applicant pools and designs the student contracts in such a way as to deter abuse of the system.
There is also a risk that potentially high earners—medical school students, for example—would avoid signing up because they could end up paying out more to Lumni’s investors than they would to a private student loan company. In such a case, the company offers better terms such as a lower percentage of income to be repaid.
Lumni is not the first company to attempt this invest-in-students model; its conceptual roots stretch back to the 1940s and 1950s when economist Milton Friedman first proposed the idea. More recently the companies MyRichUncle, a U.S. student financing company that is now out of business, and German-based CareerConcept, launched versions of the idea. MyRichUncle began experimenting with these types of student contracts in 2001. CareerConcept, however, has seen success since it began offering student investment funds in 2002. It has sent thousands of students to school across more than 20 countries, mostly in Europe, through eight funds totaling 40 million euros.
For now, Lumni is trying to establish itself in the Americas, with a goal of financing 1 million students over the next 12 years. Vergara told Businessweek, “My vision is to create a revolution in investing in human capital to show it’s possible to receive an education despite low income.”
But companies like Lumni can only execute on that vision if they have the analytical tools being developed by Palacios and others to correctly value the contracts they sign.
Paul Dent, pictured with Mekong Blue scarves at St. David’s Episcopal Church, spent last summer in Cambodia assisting the Stung Treng Women’s Development Center with its business plan.
After many hours of travel down a long dirt road, Paul Dent, MBA’10, arrived at a secluded ranch scattered with rustic, wooden outbuildings. It may sound like the beginnings of a Western novel, but the setting, in fact, was one of the poorest regions of Cambodia. Instead of cattle roping or sheepherding, the occupants were busily working at looms, manufacturing beautiful silk scarves.
Last summer Dent rolled up his sleeves and applied his freshly minted marketing skills by helping the founders of the Stung Treng Women’s Development Center (SWDC) expand their vision of providing employment, training and education to women in the region. Proceeds from the silk scarves, which are woven by the women and sold in regional gift shops and at www.bluesilk.org under the Mekong Blue brand, benefit the center.
“My goal was to help them create a plan for sustainability with the hope of decreasing their reliance on outside funding in the near future,” says Dent, whose work was directed and funded by the Allen Foundation, which for years has been actively supporting the SWDC in its goal to achieve sustainability. Dent’s result was a 20-page marketing report detailing some of his findings.
“This was a great exercise in thinking back to the basics of marketing,” he says. “We were working from a very basic marketing level, asking how we get people interested in hands-on, real-time opportunities with a small business that is making a difference in so many lives.”
Dent was struck by the poverty and isolation of the embattled Stung Treng region in the country’s northeast corner, where a majority of the residents are sustenance farmers. Such enterprise as that taking place at the women’s center might have resulted in persecution from the oppressive Khmer Rouge regime that occupied Cambodia just a few decades earlier.
Weavers at the SWDC in Cambodia
“This center was developed to provide a source of income, training and livelihood for the women. Unfortunately they might otherwise turn to the sex trade, which is pretty prevalent there,” he says. “This gives them a fair trade, a way to learn a valuable skill and also provides housing, health and other services they need, as well as education for their children.”
Dent was engaged in the work in Cambodia by the Rev. Ann Walling of Franklin, Tenn., whose family founded the Allen Foundation. In 2009 Walling established a highly successful Internet presence for the sale of Mekong Blue scarves with the support of St. David’s Episcopal Church in Nashville. The Owen School entered the picture shortly after when Walling contracted with Amy Seigenthaler Pierce, President of Seigenthaler Public Relations, to boost public relations efforts for Mekong Blue. Pierce is the wife of Tim Pierce, a Director within the Vanderbilt Executive Development Institute, who put out the word that Walling was seeking to hire an Owen graduate to assist the SWDC.
Once in Cambodia, Dent focused on the potential of expanding the company’s presence locally, particularly in Phnom Penh, the home of Mekong Blue’s flagship store. He suggested making the scarves available in more stores and actively interacting with managers and owners of shops to generate interest in selling the scarves. A shop clerk he identified also offered to help with distribution efforts.
With increasing numbers of tourists visiting the capital and nearby shrines, such as the Angkor Wat temples in Siem Reap, Dent felt the touching story of Mekong Blue would resonate with travelers. He encouraged founders Nguon Chantha and Kim Dara Chan, who built much of the SWDC complex with their own hands, to reach out to travel agents and guides who might bring tourists to the stores or to the production facility.
Dent detailed numerous other suggestions in his report and left Cambodia with a sense that he was able to make an immediate contribution. “It was a great opportunity,” he says, “to put some of the things I learned at Owen into practice right away.”
Leadership amid the Ruins
Jim Bryson, pictured here at 20/20 Research in Nashville, started the Joseph School to provide leadership training to orphans in Haiti.
The moment in 1994 when Jim Bryson, MBA’85, and his wife, Carol, pulled away from a state-run orphanage in Russia with three adopted children in their laps was both joyful and sad. They had become parents at last, but 20 more orphans stood watching from the steps as they pulled away.
“We wished we could take them all,” he says.
During the next 15 years, as the family grew to four children, Bryson continued to build 20/20 Research, the qualitative research firm he had founded in 1986, with offices in Nashville, Miami and Charlotte, N.C. He even served four years as a state senator and was his party’s nominee for Tennessee governor in 2006. But he never forgot the orphans left behind.
On Jan. 12, 2010, as a 7.0 magnitude earthquake pummeled the island of Haiti, Bryson found himself profoundly moved by the plight of its people. A visit to Haiti four months later provided images he could not shake, especially the number of young teenage orphans who ended up on the street with no education and nowhere to go. Bryson saw a nation in desperate need of rebuilding and leadership.
“I began to put these two problems together: There’s a real orphan crisis and there are not enough leaders in the country, and that’s when I had a vision for a concept where we’d build a school for older orphans,” he says. A return visit last summer cemented an ambitious plan—to transform a national crisis into a leadership opportunity by founding a boarding school for secondary education.
According to his vision, The Joseph School, as it has become known, will offer academics, leadership training and service training. The school is named for the biblical figure in Genesis who was separated from his family because of his brothers’ deception, rose to a leadership role in the pharaoh’s government, and later saved his family and his country from famine through his vision and adept leadership.
A Port-au-Prince neighborhood in ruins after the 2010 earthquake
The school will partner with an educational institution to choose curriculum and devise admissions testing procedures for talented students. Included in that curriculum will be Haitian cultural arts and history. “We will also have classes in English and French because immersion is crucial to these students being able to function in government and the wider world,” Bryson adds. “However, we will not abandon their native Creole as it is the language of the Haitian people.”
The Joseph School received an initial $20,000 startup grant from the Retail Orphan Initiative, a charitable foundation that aims to raise awareness and provide solutions for orphans worldwide. The school’s interim director, who has experience building a school in another third-world country, has begun researching and identifying best educational practices for Haiti.
Bryson says attorneys have volunteered legal help to get the necessary paperwork in order for the next steps, including identifying a site and beginning construction. “The concept of helping orphans get an education and take on leadership roles resonates with people,” he says. “I’m finding there’s a lot of interest in the business community. Business leaders know the value of leadership.”
Bryson hopes the school will ultimately help empower the people of Haiti to rebuild their nation while addressing other pressing social problems. “We want to help give them the resources to equip them to solve their own problems,” he says.
A Lesson in Sustainability
Samuel Frank, an MBA candidate for 2012, is working through Project Pyramid to explore microlending opportunities for housing in Guatemala.
In 2006, 11 Vanderbilt MBA students used C.K. Prahalad’s book The Fortune at the Bottom of the Pyramid as the basis to form an organization dedicated to addressing global poverty through education, collaboration and action. Since then, the group known as Project Pyramid has grown steadily thanks in large part to the support of Cal Turner Jr., BA’62, retired Chair and CEO of Dollar General Corp.
Today there is a Project Pyramid course at Owen taught by Bart Victor, the Cal Turner Professor of Moral Leadership, that is open to students across the university. One component of this course is a spring break trip where learned principles and practices are put into action to tackle problems of poverty.
Previous spring break projects focused on developing nations in Asia, such as Bangladesh, but in 2010 the group decided to build upon Vanderbilt’s already strong connections in Guatemala, where the university has a significant number of health, development and archaeological projects.
More than 25 students returned to Guatemala in March 2011, dividing into several faculty-led teams focused on issues from microfinance lending to creating marketing plans for nonprofits. Among these teams was a group of Owen students working with Clinical Professor of Management Jim Schorr to investigate microlending opportunities for housing in Guatemala City. The Nashville-based Shalom Foundation had been building houses in the Las Conchas community on the outskirts of the city for several years but was seeking help to find ways to finance an expansion of the program.
In Las Conchas, 800 families live on dirt floors in makeshift homes strung together with sheets of corrugated metal. Schorr’s group learned that with a $4,000 loan a family could build a more substantial home on the same land. A community assessment conducted by some of the students in 2010 revealed that many families could afford such a home with financing help. The students then set out to find a community-minded microlender. After several meetings the Las Conchas team received strong interest from Genesis Empresarial, Guatemala’s leading microfinance institution. This year another group of Project Pyramid students returned to further this initial progress.
Makeshift houses in Las Conchas
The students have learned that the key is to empower local communities. MBA candidate for 2012 Samuel Frank, a project leader who also has traveled and worked with nonprofits in Bolivia, says many such organizations face similar challenges.
“These nonprofit groups are led by passionate people doing incredible work,” Frank says. “The challenge is finding a way to expand these education, health and social programs in a way that is sustainably funded and doesn’t breed dependence. It is relatively easy to do something for someone. It is much more challenging to develop those skills and expertise locally so progress continues long after you leave.”
Ted Fischer, Professor of Anthropology and Director of the Center for Latin American Studies (CLAS), helped the team identify projects and work out the complicated logistics for the trip. CLAS coordinates a number of projects in Guatemala in conjunction with the Monroe Carell Jr. Children’s Hospital at Vanderbilt, the School of Medicine, the School of Engineering and the Vanderbilt Institute for Global Health.
“The Project Pyramid program is unique in providing business and other professional students the opportunity to gain valuable hands-on international experience while giving back to the communities in which they work,” Fischer says. “All of the Project Pyramid programs are oriented toward sustainability. This is truly doing well in scholarly pursuits while doing good.”
Nov.1: NASDAQ OMX Group Inc. is introducing new indexes from Bob Whaley, the Valere Blair Potter Professor of Management and creator of the VIX volatility index, and Jacob Sagi, the Vanderbilt Financial Markets Research Center Associate Professor of Finance. The new indexes will track popular stocks’ performance against the broader market. A Feb. 9 follow-up article mentions the approval of the Alpha Indexes by the Securities and Exchange Commission.
Nov. 4: U.S. business schools, faced with a decline in applications from overseas, are stepping up international recruiting efforts to preserve what they say is an essential component of an institution’s credibility. John Roeder, Director of Admissions, is quoted.
Nov. 8: By assigning a price tag that sums up medical, economic and other burdens, researchers are hoping to influence policymakers who weigh spending on these concerns against other priorities. Mark Cohen, the Justin Potter Professor of American Competitive Enterprise and Business and Professor of Law, one of the experts studying the issue, is quoted.
Nov. 29: The popularity of the VIX index, which has become a widely watched barometer of investor fear since the financial crisis, is generating a host of spinoffs, copycats and derivatives. It is adding up to big business for VIX’s owner, the Chicago Board Options Exchange, as well as partners and competitors. Bob Whaley is quoted.
Jan. 14: Hedge funds are crowding into more of the same trades these days, amplifying market swings during crises and unnerving investors. The pack behavior undermines the image of hedge fund chiefs as savvy money managers who sniff out investment opportunities that others don’t see—thereby justifying the hefty fees they charge clients. It also suggests that hedge funds are having a harder time coming up with money-making ideas in rocky markets. Nick Bollen, the E. Bronson Ingram Professor in Finance, is quoted.
Feb. 21: The recession has made many companies leery about hiring specialized employees who may not be able to adapt to volatile market changes. That’s why experts say it’s important to routinely re-evaluate your skill set. Tim Gardner, Associate Professor of Management, is quoted.
March 17: Marketing researchers and psychologists say that using “regular” people to model products, as the online shoe seller Zappos does, can be especially effective in certain cases. Steve Posavac, the E. Bronson Ingram Professor of Marketing, is quoted.
Jan. 31:Vanderbilt Owen Graduate School of Management ranked 25th in the U.S. and 51st worldwide, according to the 2011 Global MBA survey published today by Financial Times. Compared to 2010, Owen moved up five spots in its U.S. ranking and six spots in its global ranking. In addition, Owen ranked high among schools worldwide in two key measures: job placement and faculty research (both No. 31 globally).
Nov. 5: The job market for 2010 MBA graduates made a slow but steady recovery this year, beginning to rebound from one of the worst MBA hiring seasons in recent history. Read McNamara, MA’76, Executive Director of the Career Management Center, is quoted.
Nov. 8: Should businesses crack down on workers who visit recreational websites, such as Facebook and Twitter, on company time? Bruce Barry, the Brownlee O. Currey Jr. Professor of Management, authored the “Con” opinion.
Jan. 21: The Graduate Management Admission Council announced a contest in July that would award $50,000 to the best idea for how to improve management education. Dawn Iacobucci, the E. Bronson Ingram Professor in Marketing, won second place.
Nov. 30:Larry Van Horn, Associate Professor of Management and Faculty Director of the Health Care Program, introduces his new blog for Forbes, titled “Second Opinion.” In subsequent entries Van Horn writes about Americans’ unwillingness to cut Medicare, the impact a certain provision in the health care reform bill will have on the insurance industry, why thoughtful people will never agree on health care reform, and prescription drug ads.
March 15:Vanderbilt Owen Graduate School of Management climbed eight spots to No. 28 in the latest U.S. News & World Report business school rankings. Owen ranks No. 19 among private U.S. graduate business schools, and is one of seven programs in the top 30 to focus only on full-time graduate management education.
Dec. 13:The Executive and the Elephant: A Leader’s Guide to Building Inner Excellence by Dick Daft, the Brownlee O. Currey Jr. Professor of Management, has been selected by The Globe and Mail as one of its top 10 business books of 2010.
Jan. 4: Companies with dissatisfied customers will eventually fail. Research by Bruce Cooil, the Dean Samuel B. Richmond and Evelyn R. Richmond Professor of Management, into the relationship between customer satisfaction and stock prices is mentioned.
Feb. 7: Assuming the score is remotely close, expect the losing team to go for it on fourth down as time runs out in the Super Bowl on Sunday. New research conducted by Ranga Ramanujam, Associate Professor of Management, and David Lehman of the University of Singapore is mentioned.
Jeff Fisher (left) and Frank Moser, pictured here at the Aegis Sciences Corp. lab, have helped implement the recommendations made by the Executive MBA team.
No pain, no gain.
That was the core message of a strategic plan developed by a team of Vanderbilt Executive MBA students in 2009 for Aegis Sciences Corp. The students’ plan, part of a yearlong class project, made several recommendations for the Nashville-based company, which specializes in toxicology analysis and consulting services for sports teams, medical examiners, crime labs and others.
When senior management at Aegis put those recommendations into action, the outcomes more than exceeded expectations, says Frank Moser, Vice President of Business Development. In spite of the recent economic downturn, Aegis expanded from 150 to 400 employees in less than two years, and total revenue grew from $20 million in 2008 to $51 million in 2010. Meanwhile the plan continues to guide decision making at Aegis to this day.
Dr. David Black, Associate Clinical Professor of Pathology, started Aegis after successfully setting up a drug-testing lab at Vanderbilt in the late 1980s—a response to an increased need for monitoring steroids and other drugs in athletics. Aegis soon moved into forensics toxicology, going private in 1990. The company was in the midst of revising its business plan when it was approached by the Owen students, who were searching for a client to work with in their Strategy Project course.
While firmly committed to putting science first and sticking to its core philosophies, Aegis was also ready to expand. “The impetus was that we’d grown pretty well and were looking to continue that growth in current markets but also look at adjacent markets,” Moser says. “We had so many opportunities, and we really wanted a framework.”
Jeff Fisher, BA’77, Vice President of Finance, had just joined the company when the Owen students got involved. He says the process brought Aegis’ executive team closer together. “It was good for all of us to share thoughts and ideas and begin to look outside the box,” he says.
As part of the plan, the student group developed an acronym around “LABS,” focusing on logistics, adjacencies, building and sustaining. The recommendation to put more resources into pain management turned out to be recession-proof. “People in pain are still going to get treatment,” Fisher says.
The team’s project took top honors in the strategy course that year. “By any measure, the report was outstanding,” says Adjunct Professor of Management David Furse, who taught the course. “They just really hit it out of the park.”
According to project leader Josh Anthony, EMBA’09, the success of the partnership was the product of three key factors:
(1) The Aegis management team remained completely open and engaged in the process.
(2) The nimble advice from faculty advisers, including Furse and Michael Burcham, Clinical Professor of
Entrepreneurship, was indispensable and constant.
(3) The students on the team effectively leveraged their unique strengths.
“Each of us was willing to step outside our comfort zone to learn something. When we didn’t agree, we talked about it,” says Anthony, Director of Research and Development for the Global Infant Category of Mead Johnson Nutrition.
Other students on the team were Andres Visbal, Materials Supervisor at Newell Rubbermaid; Justin Calhoun, Financial Adviser at Merrill Lynch; Sarvant Singh, Program Manager at Cummins Inc.; and Steve Wingard, BE’85, Manager of the Wireless Solutions Group at Intergraph Corp.—all members of the Class of 2009. Anthony says that Wingard offered strong writing and artistic skills, Singh brought a talent for financials, and Visbal and Calhoun helped analyze business development opportunities. Meanwhile Anthony himself focused on developing the key presentation points.
One of the distinctive features of the Vanderbilt Executive MBA is that students are carefully organized according to expertise into “C-teams,” which are designed to emulate an organizational executive team of C-level officers. Anthony says the experience provided him with the opportunity to learn sound business principles and apply them right away. “Managing challenges and growing with them is a much greater experience than just book learning,” he says.
The process also proved to be invaluable for Aegis. Since graduation, the students and Aegis executives have stayed in contact, and many of the students’ long-term recommendations are still on the table and will be implemented as resources allow.
“It would have cost tens of thousands of dollars to put together an analysis like this and to have the resources of five very bright individuals,” Fisher says.
From Peru to Germany to India, Owen alumni around the world have supported the Admissions team’s efforts at B-school fairs. These alumni have played an important role in rallying support from other Owen graduates, relaying market-specific information that might improve recruiting strategy, hosting applicant gatherings, and representing the program at fairs. The Admissions team would like to thank the following alumni for their participation and support.
From left, Larry Van Horn, Jim Bradford and Margaret and Jim Brunstad at the Birmingham event
The CityOwen program is led by alumni around the country and provides value through networking opportunities, updates on the school and featured faculty or staff presentations. The program also helps strengthen the relationship between the Owen School and local communities in areas such as recruitment.
Birmingham
Jan. 26
Margaret and Jim Brunstad, both MBM’75, hosted a CityOwen Birmingham event at their home. Associate Professor of Management Larry Van Horn spoke about health care. Dean Jim Bradford was in attendance.
California
Jan. 13
CityOwen California held a joint event with the San Francisco Chapter of the Vanderbilt Alumni Association at the Fort Mason Center. Mark Abkowitz, Professor of Civil and Environmental Engineering, gave a speech titled “Can’t We Do More to Prevent Disasters from Happening?”
Chicago
Oct. 20
CityOwen Chicago held an event at Tavern at the Park. Hans Stoll, the Anne Marie and Thomas B. Walker Jr. Professor of Finance, spoke about the finance industry.
Dallas/Fort Worth
Nov. 18
Linda, BA’78, and Tom Barton, MBA’77, hosted a CityOwen Dallas/Fort Worth event at their home. Bob Whaley, the Valere Blair Potter Professor of Management, spoke about the finance industry.
Las Vegas
March 15
CityOwen Las Vegas held a joint event with the Las Vegas Chapter of the Vanderbilt Alumni Association at the Stirling Club. Anna, BS’91, and Craig Savage, BS’92, MBA’98, and Ike Lawrence Epstein, BA’89, JD’92, hosted the gathering.
Nashville
Feb. 2
Sandy and Jay Sangervasi, MBA’81, hosted a joint CityOwen Nashville and Nashville After Owen event at their home. Dean Bradford was in attendance.
New York
Oct. 12
CityOwen New York hosted an event at the Union League Club. Professor Hans Stoll spoke about the finance industry.
Feb. 15
CityOwen New York hosted an event at the 21 Club. Nick English, CEO of Bremont, a British company that makes limited-edition handmade watches, spoke about his entrepreneurial experience. Dean Bradford was in attendance.
If you are interested in starting a CityOwen group where you live, please contact Alumni Relations at (615) 322-7409.
The floodwaters that devastated Middle Tennessee in early May left their mark in more ways than one. The physical destruction was sudden and overwhelming: Lives were lost, and many homes and businesses were in ruins once the muddy water subsided. The psychological impact, however, didn’t recede quite so easily. For weeks afterward the unseen effects of the disaster—the shock, worry and fatigue—continued seeping into the lives of everyone in this area.
Fortunately my family and I were spared during the flood, but I’m still haunted by pictures from those days. One in particular that has stayed with me is that of the Grand Ole Opry stage door half-submerged in murky water. The photo, which appeared in various media outlets, is what you’d expect from a snapshot taken in difficult conditions; the lighting is poor, the image a little shaky. Yet it resonates with me nonetheless because of a personal connection I feel toward it.
During the late ’70s and early ’80s, I had the privilege of spending many hours backstage at the Opry House just steps from that very door. At the time my father sold advertising for WSM, the AM radio station that broadcasts the show, and I’d often tag along when he entertained clients. Some of my earliest memories are of standing offstage watching Roy Acuff and other stars of that era perform.
These memories are what first came to mind when I saw the photo of the door. My heart sank as I thought of all the history washed away and of the monumental rebuilding task that lay ahead—a task incidentally that David Kloeppel, BS’91, MBA’96, President and Chief Operating Officer at Gaylord Entertainment, writes about here. Gaylord has worked doggedly to restore the Opry House to its former glory, and remarkably it is now open for business once again.
While I never really doubted that the Opry would someday return, I did wonder if it, and Nashville for that matter, would ever be the same. Now that time has afforded some perspective, I realize how shortsighted that was of me. The question wasn’t so much if but rather how our community would change, and I’m happy to say that in many ways it has been for the better. A page of history may have been lost in the flood, but in its place a new one is being written—one that reflects our compassion and resolve.
There’s no better symbol of this than the stage door itself. In salvaging the door, Gaylord decided to preserve the mark left by the flood and display it for all to see. Aside from being a historic curiosity, I’d like to think that the mark serves another purpose altogether—to signal a high point of sorts. It commemorates not the depths to which we Nashvillians sank as a community but rather the heights to which we rose, buoyed by neighborly love, perseverance and the promise of new beginnings.
When I was younger and trying to decide on a career path, I briefly thought of going into business for myself. It was an admirable, if short-lived, dream, but in retrospect I’m a little dismayed that I even considered it. Time has taught me that I just don’t have the entrepreneurial itch—or the guts, frankly—to strike out on my own.
The floodwaters that devastated Middle Tennessee in early May left their mark in more ways than one. The physical destruction was sudden and overwhelming: Lives were lost, and many homes and businesses were in ruins once the muddy water subsided. The psychological impact, however, didn’t recede quite so easily. For weeks afterward the unseen effects of the disaster—the shock, worry and fatigue—continued seeping into the lives of everyone in this area.