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It’s a classic case of supply and demand, with Vanderbilt meeting the demand for sharp human resources professionals with a supply of MBAs trained in human resource. The crunch is driven equally by changes in the corporate world and the reputation of Owen’s Human and Organizational Performance program.
The HOP concentration is among the highest ranked programs at Vanderbilt’s Owen School. Financial Times, for instance, named it No. 4 in specialty MBA programs in the U.S., and No. 7 globally.
That reputation creates competition to land Owen grads for the working world.
“Employers want to get here before anyone else and skim off the cream of the crop, find those qualified students and lock them up for internships,” says Read McNamara, executive director of the school’s Career Management Center. “They feel if they can lock them up for an internship, they have a pretty good chance of having that particular student convert the internship to a full-time offer and a good chance of the student accepting that offer. Companies will push us as hard as they possibly can to get to campus as soon in the school year as they can.”
Case in point: By January 2013, every second-year HOP student had accepted a full-time position. About 60 percent of them came back from their summer internships in the fall with offers for jobs. Vanderbilt’s rate for all MBAs is 40 percent receiving offers after summer internships.
HOP has virtually caught up with other MBAs in salaries, too; McNamara says that the average starting salary for a Vanderbilt MBA grad with a HOP concentration is about $90,000, just shy of the $92,000 average for all MBAs. He expects HOP to be on par with other MBAs by 2015.
“It’s not just the salary. The number of offers per HOP person and the credentials of the people applying to Owen with the stated goal of HOP are certainly on the rise,” McNamara says. “We’re delighted with that and if we keep doing the things we’re doing, there’s no limit to what we can do.”
And no limit to the need, either. Changes in corporate America have shifted views of the workforce. Technological improvements that handle typical HR functions have created opportunities for HR professionals to claim a seat at the table of the upper echelon of company management.
Barry Salzberg, CEO of Deloitte Touche Tahmatsu Limited
“The HR function has been elevated,” says Barry Salzberg, chief executive officer of Deloitte Touche Tohmatsu Limited and a former member of the Owen Graduate School of Management Board of Visitors. “Ten to 15 years ago, human resource directors in large organizations reported to COOs or CFOs; today chief talent/HR officers report directly to CEOs, reflecting the increasing importance of talent. While leading a winning organization looks radically different today versus five years ago, business still relies on people to succeed.”
New demands on HR professionals include using predictive analytics to identify high performers early in their careers or to identify which employees may be likely to leave, Salzberg says. “This model allows for overall workforce planning, which is just as critical to a business’ bottom line as financial planning. Human resources has become a broad and strategic driver in business. This has not only helped us identify and cultivate careers of high-performers, but shifted our development approach from reactive to proactive.”
Reflecting Current Business Needs
Whether a company is growing rapidly, winding down a segment of its business or trying to do more with less to remain competitive, people issues are at the forefront and HR professionals are finding sometimes that seat at the table means at the head.
When Virginia “Ginger” Barnes, EMBA’91, began her career as a contracts administrator at Boeing, she recalls that “empowerment and encouragement thoughts existed only in small pockets and they certainly weren’t popular.” In her first program management job of overseeing early phases of Boeing’s involvement in the International Space Station, she began to understand the importance of people management as she worked closely with Russian counterparts. “That was a real people kind of epiphany,” she says. “We didn’t look alike, but we had the same values.”
Barnes
As CEO of United Space Alliance (USA), Barnes has had the unenviable task of retiring NASA’s space shuttle program. At the peak, USA—an alliance between Boeing and Lockheed Martin—employed 10,500. That number now stands at less than 2,000.
“What I’m most proud of is that we’ve done that with an intense focus on taking care of our people,” Barnes says. “Before I got here, USA benchmarked other companies that had shut down big programs. We didn’t find good examples of people who did it well. We went out to the workforce and said, ‘What do you need from us?’ I have an 11-by-17 spreadsheet of all the initiatives that we have implemented, and I have to say, we have been wildly successful. People come back and thank us for the ways that we helped.”
In 2011, when the shuttle flew its final mission, USA garnered five perfect performance scores from NASA; it marked the first time that USA had received even one perfect score. “I’ve been criticized by some for focusing more on people than I did on profits,” Barnes says. “But at the time that I did, we received the 100 percent award. As hard as this job is, and as unglamorous as it is, it’s the most rewarding experience of my career. Part of that has to do with the people I’m doing it with. We’ve made deliberate decisions about the people that we kept on board to finalize the closeout. In every case, each of those employees has come to me and said, ‘I will take on more, and do whatever you need me to do.’”
Crises, especially over the last five years, have certainly influenced the importance of staffing in companies, whether navigating external challenges or internal issues. “Those kinds of reactive developments have made companies, at the board level, look at the alignment of their own human capital, the importance of human capital and the importance of succession,” McNamara says. “And they’ve reached the conclusion that human resources is no longer a compliance function, but an absolutely essential element in the quiver of a company in terms of the elements it has available to ensure its own success. Visionary companies that recognize the importance of human capital and human capital deployment and planning are way ahead of the curve.”
“Attracting and retaining game-changing talent is at the top of the CEO agenda, as companies and clients expand exponentially in key markets—particularly in Asia and the Middle East.”
—Barry Salzberg
Those visionary companies are using their human relations personnel for entirely new functions. “Attracting and retaining game-changing talent is at the top of the CEO agenda, as companies and clients expand exponentially in key markets—particularly in Asia and the Middle East,” Deloitte’s Salzberg says. “In our global knowledge economy, the right employees make or break organizations, and we’re in the midst of a talent paradox: While layoffs continue and unemployment is high, many jobs still go unfilled because of skill shortages.
“For instance, in the United States alone, 3.6 million jobs were unfilled as of December 2012, according to the Bureau of Labor Statistics, even though the unemployment rate was at 7.8 percent,” Salzberg says. “Globalization and the proliferation of new technologies have forced companies to radically reconsider traditional talent and organizational models to distributed, crowd-sourced models.”
A Need to Understand
As HR gains visibility in upper management, it’s equally important that HR professionals know and understand all facets of business just like their peers with MBAs.
King
Erika Bogar King, MBA’99, began her career as a recruiter before moving into more of an HR generalist role, where she found herself recruiting those with graduate degrees to fill banking positions. “I hadn’t really thought of it before, but one turned to me and said, ‘So when are you going (to graduate school)?’ I looked at Owen because the professionals that I knew came from there were more accessible, more balanced in their approach,” says King, now talent director for Deloitte Consulting. “I liked the cultural sense that I was getting from the talent as well as the quality. I knew it fit would me.”
She also was attracted to the business background that embodied the HOP concentration. “I knew I wanted to stay in professional services and Owen’s HOP program was not from a psychology or people basis, but from a business basis first with the people element,” she says.
Nancy Abbott, EMBA’91, wanted to change fields and move out of the IT function at her company, GE. Her undergraduate degree in behavioral science made human resources the logical choice. “I wanted to immerse myself in areas I hadn’t studied in undergrad. I needed to know how to read a balance sheet, get better grounded in economics and learn the language of business,” she says. “That was my goal in choosing Owen. In the job that I had, I realized I didn’t truly understand finance, business metrics and key drivers. I wanted to build my skills to be a credible business partner. We continue to have a strong relationship with Owen and recruit here every year because of the talented, business-focused HOP graduates.”
“I think I’ve been lucky to be in a company where it’s assumed that HR has a seat at the table,” says Abbott, who leads organization and talent development for GE Capital. “Although it’s expected that you have a seat, you have to understand how the business works and contribute broadly to the business’s success, or you’ll lose that seat.”
When Abbott worked on an acquisition, one of the biggest learning curves was helping the new employees to understand the role of HR. “They viewed HR as very tactical, more about benefits and payroll transactions,” she says. “They had no vision of the value we could add, such as attracting, growing and developing terrific talent.”
Abbott
Abbott sees traditional human resource functions such as payroll and benefits as activities many companies are outsourcing to specialists or centralized centers of excellence. “That’s an evolution that has allowed HR people at GE to focus on the most critical and strategic needs of the business,” she says.
In her role, Abbott must have a clear understanding of the company’s worldwide business goals. “Without really knowing the needs of a particular business unit, and its plans for the future, I can’t help to identify the best possible talent to help it reach its goals. In my role, I’m one of the few people in GE Capital who looks across the top performers in all our businesses to see where in the world they might be matched with a great new opportunity,” she says.
Success Secrets
In business, timing is everything and Vanderbilt has a strategic advantage: It’s growing its HOP concentration at a time when other business schools have eliminated programs. “A number of premier programs either de-emphasized or dropped human resources,” McNamara says. “I think they’d love to have that one back and do it again.”
McNamara
Vanderbilt has a strategic advantage: It’s growing its HOP concentration at a time when other business schools have eliminated programs.
While others may have stepped out of the HOP studies, Vanderbilt has stepped up. McNamara sees the possibility of doubling the number of students specializing in HOP to as much as 15 to 20 percent of its MBA class. The secret to the success? “No. 1 is faculty,” McNamara says. “If you look at the accomplishments of our management department faculty, and specifically people who teach HOP, these are folks who have gained a reputation inside the classroom and out, in terms of research and recognition. The kind of people who come to study HOP do their homework and understand the value of the faculty.”
McNamara also cites Owen’s forward-looking curriculum and association with Peabody College of education and human development, which is widely recognized for its organizational performance programs. “There’s a spillover effect of the wonderful reputation of Peabody on Owen,” he says. “We’re recognized as having two of the premier organizational programs. Finally, it’s the self-perpetuating excellence in that our HOP people go on to great careers in corporate or consulting, and they’re people who come back and get involved. The alumni involvement will not permit this great program to slip.”
Transforming the Future
Human capital has risen in importance along with other corporate functions, but it is not without unique challenges.
“Because people associate HR with the touchy-feely things, it does not get the respect that finance does,” King says. “I do think there are probably HR organizations that still are the people who organize the company picnic and other events. It’s hard to pull away and tell your clients that you’re not going to do this anymore.”
At Amgen, the transactional aspects of HR have been moved back to the staff level, and human resources has shifted to coaching and advising. Centers of excellence handle recruiting and scheduling job interviews, says Joe Parise, MBA’10, Amgen human resources manager. “Having a business background helps you speak the client’s language much faster. Transactional work is not what our clients need,” he says. “Clients come to me for decisions on what they want to do. My job is really to hold a mirror up to them, to explore unintended consequences, to be a sounding board.”
Parise
And to be a sounding board requires a strong understanding of the issues, the kind of understanding gained through an MBA.
“It’s doubly important here at Deloitte,” King says. “My clients have the degree. My clients are advisers to their clients. They expect that I have the ability to manage change, to be able to craft a vision, to understand project management and how we extract value from our practitioners.”
When all the elements come together, the role that HR professionals play in their corporations can—and will continue to—be a formula for success. “When an organization becomes known for cultivating and developing talent, the market brand is strengthened,” Salzberg says. “This ultimately increases their ability to attract and retain high performers. When a company attracts top talent, it can quickly fill new and open positions without missing a beat. Keeping unfilled positions to a minimum can lead to increased productivity and profitability, greater innovation and faster time to market.”
Just because you’re a business professor doesn’t mean you have to be all business, all the time, and Owen faculty are no exception. Among them are a champion trick water-skier, charcutier, screenwriter, barkeep (and builder) and owner of a multimillion-dollar company. They shine in the classroom—why not out of it? Meet five professors who are doing just that.
Going Green
Fifteen years ago, Bob Whaley and his wife, Sondra, MBA’82, visited Ireland and fell in love with the people, food, countryside and culture. Over the years, they have returned numerous times to visit, but going back just wasn’t enough. So they decided to bring a bit of Ireland to Tennessee.
“When you go into the Irish pubs, the people are so friendly and charming—they talk to you like they’ve known you forever,” says Whaley, the Valere Blair Potter Professor of Finance and professor of management. “We wanted to create that kind of atmosphere for ourselves and our friends, and so we did.”
Whaley, who is also co-director of the Financial Markets Research Center, used his carpentry experience and the help of his college-age son to transform his home’s entire lower level, including the garage, into a 1,500- square-foot Irish pub dubbed Whaley Tavern. Just like the ones in the Emerald Isle, this watering hole has Irish brews like Guinness and Smithwick’s on tap, game tables and dartboards to keep patrons occupied, and Irish flags adorning dark wood paneled walls.
The Whaleys entertain year around, but they go all out on St. Patrick’s Day. Around 100 or so fellow Hibernophiles crowd the place to feast on Guinness stew and shepherd pie, shoot pool and sing shanties over a pint (or two). While he won’t name-drop, Whaley says more than a few popular singer-songwriters have been known to stop by and perform (signed guitars on the walls are proof).
With all this talk of Ireland, one has to wonder if Whaley has some Irish blood in his veins.
“I did some searching and I think my parents’ lineage is English, not Irish,” he says. “I found a Jerusalem Whaley—I’m not sure I’m a descendent, but you never know. I may have to go over there and do some digging.”
Different Strokes
Jennifer Escalas isn’t an enthusiastic swimmer, but that hasn’t stopped the associate professor of marketing from launching and running what has become a $3 million-a-year swimwear company.
She is married to swimmer Rafael Escalas, who competed in the 1980 and 1984 Olympic games for his home country of Spain. The two met during their undergraduate years at University of California, Los Angeles, where she was studying Spanish and he was an engineering major competing on the university swim team.
“When we started dating, his swim schedule was just something I put up with,” Escalas says. “I didn’t realize how much dedication it took.”
After they married and moved to North Carolina and she entered the Ph.D. program at Duke University, they decided it was time to start their own company. He quit his engineering job and together they launched Agon Sport, a competitive swimwear company. He set up the factory in Spain and she took on the marketing and the books.
“We didn’t have a stash of money,” she says. “We maxed out credit cards and took out a second mortgage to get the business off the ground.”
The gamble paid off. In 2012, they created custom swimsuits for more than 1,800 swim teams—including their 16-year-old daughter Elena’s high school team. “Nike doesn’t create custom suits, so we fill a really important niche,” she says.
In the classroom, Escalas often uses examples of challenges encountered in her business and that has given her credibility with her students, she says.
“I don’t just write articles about how to run a successful, profitable business, I am actually doing that,” she says. “I think my students are far more impressed with that than my Ph.D.”
Writing the past
By day, her world is black and white—debits and credits, columns in a spreadsheet, numbers in a row. But by night Debra Jeter’s world is sepia-toned and dreamlike, as she weaves words into short stories, screenplays and novels that draw on her life as a child in rural Kentucky.
“I’m happier when I’m writing,” says the associate professor of accounting. “I’m more productive if I’m preparing for class or interacting with my students if I’ve got a project going. It makes my whole day go better.”
A recent project brought her talents to the national stage. The prestigious Sundance Film Festival chose Jess + Moss, an art-house film she helped pen and executive produce with her son Clay, as an official selection. It’s a bittersweet coming-of-age story about two cousins spending the summer at their grandmother’s house for the last time.
“We shot Jess + Moss in a very short time period at my grandmother’s abandoned farmhouse in Lynn Grove, Ky.,” Jeter says. “It was shot on aged film stock to give it that grainy quality—grainy the way my memories are of spending all my summers there.”
The film was well received by critics, which she attributes to Clay, a former child actor, who directed.
“It was unbelievable for us at Sundance, seeing people lined up to see our film—for the first time it was real,” Jeter says.
Jeter juggles numerous writing projects, including a script for a TV pilot about a real estate office in a small Southern town that is based on the lives of her father and sister.
“Their stories could fill several books,” she says. “I just don’t think I’ll ever run out of stories to tell.”
The Art of the Meal
Craig Lewis has a secret identity. Students and fellow Owen faculty know him as the Madison S. Wigginton Chair of Management and a finance professor. His colleagues at the Security Exchange Commission in Washington, D.C., know him as the SEC’s chief economist. And his family knows him as husband and father. But many don’t know he is also a charcutier—a curer of meats—a process he has mastered to create his own private-label sausages, pancetta, lardo, salami and coppa.
It all started after a particularly delicious meal at Nashville’s F. Scott’s restaurant in 2005.
“They served a nice duck prosciutto and I thought it was interesting,” he says. “I am an amateur chef, and I thought, ‘I can do this.’ Then I found this book called Charcuterie, by Michael Ruhlman and Brian Polcyn, and it just went from there.”
To dry cure meat, he starts with a piece of farm-fresh pork, which he rubs with a special combination of curing salts over a period of weeks. Then the meat is wrapped in cheesecloth and hung to dry in a cool, humidity-controlled curing chamber for several months.
“Our house in Nashville doesn’t have a basement, so at one point I bought a large dorm fridge, and rigged it up with a thermostat like microbrewers use,” he says. “I also wanted to be able to monitor it during the day so I put it in my office at Owen.”
There is no curing chamber in his office at the SEC, but Lewis admits to the occasional pork shoulder hanging in his coat closet in his D.C. home. When he returns to Nashville after his two-year appointment and leave, he looks forward to sharing his gastronomic skills with his colleagues and students once again.
“I enjoy getting my smaller classes together at the end of the semester for a nice meal,” he says. “Culinary experiences are such a wonderful way to bring people together.”
A Need for Speed
Growing up in Bogotá, Colombia, Miguel Palacios never set out to be a competitive water-skier. But Columbia’s warm, year-round climate makes water activities popular. One summer, 7-year-old Miguel went with his father to a nearby sports club and signed up for a water-skiing lesson. Before long, he was skimming across the water at electrifying speeds and performing gravity-defying jumps, spins and flips.
“It is the most awesome feeling in the world—and it’s only a little bit dangerous,” says the assistant professor of finance with a grin, later explaining that it raises adrenaline without danger.
Palacios quickly rose in the sport and earned a spot on Colombia’s national water-skiing team. He continued to ski when he could while earning three degrees—a bachelor’s in mechanical engineering from the Universidad de los Andes, Colombia; an MBA from the Darden Business School at University of Virginia; and a master’s in economics and Ph.D. in finance from the University of California, Berkeley.
Competitive water-skiing requires very specific man-made lakes on which to perform and practice, so it’s not convenient to train just anywhere. But even with a full course load at UC Berkeley, he managed to pull off a third-place ranking in the West Coast men’s division for trick skiing.
“I like speed,” admits Palacios, who is also an instrument-rated pilot. “It’s so different from what I try to achieve in my academic life, which takes a lot of focus and patience. When I ski, I can let go of everything that’s on my mind.”
Palacios, who came to Owen in 2009, says he doesn’t get out on the water as often as he would like. But when he does, it’s at a competition-ready lake in nearby Manchester, Tenn.
“For me it’s just pure fun,” he says, “but water-skiing is also a good lesson for life. When you try, you may fall, but if you want to learn, you have to get back up and try again.”
After nine years as dean of the Vanderbilt Owen Graduate School of Management, Jim Bradford is stepping down from his position at the end of the academic year in June. Jim recently discussed some of the highlights of his time as dean with
Vanderbilt Business magazine. He also laid out some of the broad areas he thinks will shape Owen in its next era of leadership. Here’s Jim in his own words.
On Passages
When we were writing the announcement that I’d be stepping down, it felt at times like crafting my own obituary. What do you say about a 40-year career in both the private sector and academia in just a couple of paragraphs? It reminded me of the book Tuesdays with Morrie.
What’s been great fun and interesting is visiting with alumni. My message to them is simply that this is an incredible school worthy of their time, energy and support. And in that process, I’ve greatly enjoyed hearing how Owen has influenced people’s dreams and how appreciative they are of the education they received here.
Of course, anytime there’s change you’ll find pockets of worry. But I tell people this is a team sport, that whatever course a new dean charts, the intimate, collaborative culture of Owen will carry the school forward. That’s one of the most valuable lessons the alumni taught me when I started my tenure: Make whatever changes are necessary to help the school thrive, but don’t lose the culture.
On Strategy
I believe the school—or any organization—has to be guided by two things. First, it needs a mission or a vision that works for it. What are we about? What are we doing? Second, there needs to be a sustainable business model that allows for smooth functioning. If those two priorities get out of whack, it doesn’t matter how great the mission is if you can’t make it work financially. Likewise, if you are rudderless and just go where the wind blows, you might get through in good times, but if you forget who you are and what you’re doing, you won’t be able to make it through in hard times.
For me personally, it has been gratifying to see the Leadership Development Program reach the levels it has. It’s sustainable and it’s something that we’re now being noted for by incoming students, employers and peer schools. We’ve also been fortunate that—starting with the Accelerator program in 2004, the Health Care MBA and MS Finance degree in 2005, then adding a Master of Accountancy, Master of Management in Health Care and the Americas MBA—all these new programs continue to thrive. They may need to morph over time to accommodate what the global economy demands. But I feel like we have met an obligation to build programs that business wants.
On Priorities for the Last 100 Days
The last 100 days are a wonderful time to look back at what has been accomplished and what’s still left to do. When I began thinking about this notion of the last 100 days, I remembered when I sent my own kids off to college. As a parent, you want to impart every article of wisdom that you can. Of course, you can’t do that in the last hour—the morals and values you instill have to begin at a very young age.
So while I certainly can’t plot a strategy for Dean Johnson, I want to do whatever I can to leave Owen in the best condition I possibly can. Right now that means communicating just how strong this school is. You can see that in the quality of our faculty, our students, and our staff. The rankings have all validated our strengths as well.
Bradford (center) joined students for the last Thursday Social at Owen in April. He also presented the 100% Owen Clash of the Class Trophy to the Class of 2014.
Second, I feel confident that as some optimism comes back into the economy—and we at least know that we’ll see some interest rate stability—our base of giving will continue to grow. It’s important to keep raising money for scholarships as a way to help recruit the best students possible.
I also have an eye on the faculty recruiting process. We have three major faculty members taking emeritus status this year—Germain Böer, Dick Daft and Hans Stoll—and I want to ensure that we are supporting and identifying the next generation of stars.
On Areas for Growth
The levers are there to ensure the continuing quality and vigor of the faculty. Along with that, you want to have the resources and facilities to attract the best students and stay plugged in to the employment market. Those types of levers can be pulled to guarantee our continued status as a highly ranked, intellectually robust school.
And when I talk about facilities, I don’t just mean a new building or additional classrooms. I also mean technology. What is Owen’s role in the world of MOOCs (massive open online courses)? Vanderbilt University and Owen have already taken a lead in this. So while technology may ultimately help lower the cost of providing an education, we want to make sure we protect the quality of what we offer. How, for example, do you stay in control of a classroom with 40,000 students? The school will need to understand those hurdles and be able to jump over them.
I think you’ll also see the nature of global education change. We’ve already come down that path somewhat with the Americas MBA, where students are having more immersive experiences and working with teams across borders, for example.
In addition to being dean of the Vanderbilt Owen School of Management, Jim Bradford is the Ralph Owen Professor of Management. He plans to take a yearlong sabbatical before returning to Owen, where he will once again teach strategy.
— Ryan Underwood
Vanderbilt students gained wisdom straight from the Oracle himself. Here the group gathers with Warren Buffett after lunch.
A few times a year, the second richest man in the U.S. invites students from business schools to meet and ask him anything. On February 22, Owen students traveled to Omaha, Neb., for a day with Warren Buffett. We enlisted second year MBA student Stephanie Dozier to give us a first-person account of the rare opportunity to meet the chair and CEO of Berkshire Hathaway. She and her fellow students also filled social media and blogs with information about their visit.
We almost didn’t make it. The week of our planned trip to meet with Warren Buffett, a major snowstorm went through the country. Omaha was expected to receive 12 inches of snow the evening we were to arrive, so everyone who could got excused from class on Thursday (the final day of Mod 3) and flew out early in the morning instead of late afternoon.
The group chosen for the trip consisted of 10 MBA students (five first years and five second years), three MAcc students, three MSF students, four EMBA students and our adviser, Phil Woodlief, adjunct professor of management. We each applied to be chosen, but the selection was random. I had applied because I knew it would be a once-in-a-lifetime opportunity to meet a brilliant man whom I tremendously respected. We had prepared for months in advance, reading The Essays of Warren Buffett (a compilation of letters to shareholders), discussing what we’d learned about him as an investor and a person, and carefully crafting and choosing questions for the Q&A session. Still, throughout all that, it seemed more like an exercise than preparation for something we would actually do.
But there we were, on a Friday morning in snowy Omaha, rising early to visit the Nebraska Furniture Mart, a Berkshire Hathaway company. We toured the largest furniture store in the U.S. and listened to stories of how it was founded by Mrs. B, a Russian immigrant who could neither read nor write. And our tour guide? Mrs. B’s great-grandson, the head of real estate development for the company. This was an example of what we’d already learned—Buffett chooses great companies with great management, and continues to give that management free rein to succeed.
After our tour, we headed to Berkshire Hathaway Headquarters for the meeting with Buffett. We were there with six other business schools, including University of Pennsylvania–Wharton and University of Wisconsin–Madison. NYU’s Stern School of Business was supposed to join us, but the weather had led to their cancellation.
Buffett opened the room for questions, going alphabetically by school. The questions posed varied, with topics ranging from financial- and investment-related queries to advice for facing challenges, choosing good companies and prioritization, as well as his thoughts on social responsibility and emerging markets. One of our Owen group, MSF candidate Matthew Trautman, was excited to ask Buffett about his private jet—which Buffett has openly called both “indefensible and indispensable.” On that topic, Buffett said that “it’s about the only thing that costs money that makes my life better.”
It was great to hear his financial perspective from him, but the real value from the experience came in listening to his philosophy on life and career. Some of the key takeaways from the two-hour session with Buffett include:
When dealing with a crisis or problem, “get it right, get it fast, get it out, get it over.”
Stay within your circle of competence. The most important thing is not how big that circle is, but that you know where the perimeter is. “How do you beat Bobby Fisher? Play something other than chess.”
Work for a company of people you admire. Write down the qualities of the people you admire most—these are habits, developed over time—and you can build them in yourself.
Since we sit in the shade of trees others have planted, we should plant some ourselves if we have the means.
Improving your ability to communicate makes you at least 50 percent more valuable.
Time is the precious asset. Buffett doesn’t believe in determining how to live his life based on how other people expect him to live.
Think through what you want in life. The main things are interesting activities and great friends. You can’t make a mistake doing something you enjoy with your life. You’ll be a better person.
Get out there and do it. Always move forward. Take some risks. “A lot of good things happen by accident.” If you do something you love, good things happen.
On the most important job any of us will have: parenting. As parents, we have to be teachers and we don’t get a chance to hit the reset button. We should know that it isn’t what we say, it’s what we do. And never forget about the power of unconditional love.
After the Q&A, Buffett treated everyone to lunch at his favorite restaurant in Omaha, Piccolo Pete’s, where we finished off our meal with root beer floats. After lunch, Buffett took group photos with each of the schools, and we presented him with gifts we brought from Nashville—Goo Goo Clusters, an inscribed bottle of Jack Daniel’s, and an Owen Hatch Show print.
Our final stop in Omaha was Borsheim’s, a jewelry store and another of Berkshire Hathaway’s companies. Susan Jacques, president and CEO of Borsheim’s, met with us and discussed her history with the company and Buffett. Buffett has been open about his support of women in leadership, and even requires that all groups that visit him be at least 30 percent women. Knowing this, it was great to hear from one of the women managers that Buffett has supported. She had started with the company in the early 1980s, and told us about the shock she felt when Buffett told her he was promoting her to president in 1994. We had to leave directly from Borsheim’s to go to the airport and back to Nashville, but I was glad we’d had the time to fit in that tour as well.
Phil Woodlief and students. A group of students from various programs at Owen (MBAs, first year and second year; EMBAs;
In the end, the experience was exactly what I had expected from the Omaha trip: a rare, never-to-be-forgotten opportunity that I experienced by being at Owen.
Editor’s Note: Adjunct Professor of Management Phil Woodlief spent months applying for and orchestrating the visit, an offshoot of his Financial Statement Analysis Class. Woodclief says that 175 students applied for the 20 spots available on trip so attendees were chosen by lottery.
Current Owen students honored outgoing Dean Jim Bradford on April 18 during their last Thursday Social at Owen of the academic year.
The students surprised him with a specially designed and created Hatch Show Print recognizing Bradford’s tenure as dean. The poster was one of only 100 made using hand-carved images and letterpress printing in Hatch Show Print’s iconic vintage-style, a particular favorite of Bradford’s.
Owen EMBA graduate Nelson Andrews is general manager of Andrews Cadillac and Land Rover of Nashville. For mini profile in spring Vanderbilt Business. (John Russell/Vanderbilt University)
Nelson Andrews III, BA’89, EMBA’95, grew up around the automobile business, but he didn’t see himself making it his career. His father owned a dealership in Michigan before the family moved to Brentwood, Tenn., to establish the area’s first Cadillac dealership. As a teen, Andrews found himself doing whatever needed to be done for the business: mopping floors, manning the parts department, tending the landscape.
When it came time for college, Andrews majored in political science at Vanderbilt and took computer classes at the School of Engineering. The two fields combined research-oriented, big-picture projects with organization and structure, which suited Andrews’ skills and interests. After graduating from Vanderbilt, he moved to Detroit and a job in the computer industry at Electronic Data Systems. A few years later, however, Andrews recognized that he wanted to do more than computer coding. He wanted to know the principles behind industry and be someone who could lead and shape strategy. Looking at MBA programs, he liked what he saw at the Owen Graduate School of Management.
“I had a great experience at Vanderbilt as an undergrad and Owen had what I wanted,” Andrews says. He could also help the family business, Andrews Cadillac, by working there and upgrading and integrating its computer systems.
A funny thing happened during those two years: He discovered he liked the family business. Today, Andrews is general manager of Andrews Cadillac and Land Rover of Nashville, two of Middle-Tennessee’s most successful automobile dealerships.
As general manager, he oversees everything from planning and construction to special events and sales. The role of planner and strategist suit him, he says.
“The biggest thing I learned at Owen was strategy. Everything was strategy. It might be Germain Böer’s Financial and Managerial Accounting course, but he really taught strategy,” Andrews says.
That emphasis on strategy has helped Andrews in the changing world of marketing his business. Where automobile companies used to rely on newspaper, radio and TV advertising to reach customers, Andrews now relies on the wired world. “If a Land Rover customer expresses an interest in off-roading, I can send them an email inviting them to an off-roading event. We can text them when a part is in because that’s how the customer said to reach them,” Andrews says. “It’s much more personal. Customers let us know how they want to be contacted.”
Andrews and his wife, Trisha, are the parents of four children ranging from 15 to 5. He says that although all but the 5-year-old have helped around the dealership, it’s too soon to tell if any will want to take over the family business. And that’s ok with him.
“I’m more concerned that they seem to want to go to Michigan for college,” he says.
Tricia Siegfried, EMBA’93 (Vanderbilt Photo / Daniel Dubois)
Tricia Siegfried, EMBA’83, retired at the end of 2012 after 17 years as Owen’s chief financial officer. “With an overriding passion for this school’s success over the years, she has time and again proven her dedication to Owen,” said Dean Jim Bradford in announcing her retirement. “Her husband, John, has finally convinced her that they need leisurely time to travel.” In the coming year, that travel will include domestic trips, a Baltic Sea cruise, a visit to Egypt and a stay in Australia. Siegfried expects to stay connected to Owen and recently volunteered for her 30th reunion.
Feb. 18:Doug Parker, MBA’86, CEO of US Airways, is profiled. Parker will lead the newly merged US Airways and American Airlines.
April 18: The Pilot Flying J headquarters in Knoxville, Tenn., was raided by FBI and IRS agents due to allegations of rebate fraud. The raid signaled fresh scrutiny of competition issues involving the nation’s top retail seller of diesel fuel. Paul Chaney, the E. Bronson Ingram Professor of Accounting, is quoted.
Bloomberg Businessweek
Jan. 3: Vanderbilt’s Owen Graduate School of Management ranks ninth among the top business schools in the world in leadership development.
Jan. 4:Tami Fassinger, chief recruiting officer, is quoted in an article in which business school administrators admit there is a natural inclination for students, especially those who have already found a full-time job, to feel less pressure to ace their classes. However, the administrators urge seniors to keep up the good work through graduation as classmates and school officials may be watching.
Jan. 10: Business schools that toil in obscurity may soon be able to gain some prominence—for a price. In a new rating system devised by Quacquarelli Symonds, the company behind the QS World University Rankings and a global business school ranking, schools will have to pay for their evaluation. Dean Jim Bradford is quoted.
Jan. 29: Full-time MBA students head back to business school, aware that—barring access to a healthy trust fund—they’ll have to live as if they’re broke. This can provide great motivation for outside-the-box thinking. Owen second year Walker Matthews Jr. is featured in a story about creative moneymaking ventures that have been tried, with some success, by cash-strapped MBA students.
Feb. 21: Eight months after the GMAT exam underwent its biggest overhaul in 15 years, the test’s new Integrated Reasoning section is beginning to be used by admissions committees at top business schools to determine which applicants to accept. The Owen School is mentioned.
March 1: The Owen School is mentioned in a story about how to navigate getting wait-listed at business school.
March 7: A university in the United Kingdom will officially unveil its “MBA for the Music Industry” program in the United States at a global music event in Hollywood. A similar program offered by the Owen School is referenced.
March 13: What are the best business school keepsakes? A custom Hatch Show print for the Owen School is one of the more unusual—and affordable—items mentioned.
Bloomberg Markets
December 2012: Investors can use derivatives such as VIX futures and options to help shield a portfolio from market disaster. Robert Whaley, the Valere Blair Potter Professor of Finance, is profiled for Bloomberg Markets’ annual 2013 terminal guide, an annual review of investment strategies and trends for institutional investors.
CNBC Nightly Business Report
Jan. 25: Research by Nicolas Bollen finds that hedge funds, widely prized for their safety, may contain previously overlooked risks and may be prone to failure of performance for investors.
Feb. 5: Steve Posavac was interviewed about the impact of shareholder value as it compares to the success of a company’s celebrity endorsements.
NBC
Jan. 28: For years, Super Bowl commercials were closely guarded secrets until they aired on the biggest ratings day of the year. These days, companies have discovered that teasing them online in advance of the big day is a more efficient way of getting their brand message in front of the masses. Steve Posavac weighs in.
Jan. 31: Salacious commercials are as much a part of the Super Bowl experience as instant replays, controversial calls and boring halftime shows. And consumers only have themselves to blame. Or, more accurately, their own conditioned reflex to stimuli. Steve Posavac is quoted.
March 16: A new ad by Amtrak shows scenes of travelers doing things that are forbidden or frowned upon while traveling on a plane: using electronic devices, moving about and socializing on the train during transit. Steve Posavac is quoted.
Deseret News
Jan. 30: With health insurance access being widened under the health care reform law, attention is focused on groups that, presumably, place disproportionate burden on the health care system—mainly smokers and the obese. W. Kip Viscusi, University Distinguished Professor of Law, Economics, and Management, is quoted.
Environmental Leader
April 2: Strategic Sustainability Consulting CEO and founder Jennifer Woofter applies to her industry the lessons she has learned from the Coursera course, Leading Strategic Innovation in Organizations, taught by David Owens, professor of the practice of management and innovation at the Owen School.
Financial Times
Jan. 30: The Owen School rose three places to No. 53 in the Financial Times’ 2013 roundup of the world’s top business schools.
Forbes
March 14: The Owen School invited four financial luminaries to a discussion where they tangled with the country’s current economic issues. One of them was Robert Whaley.
FOXSports
Jan. 17: Sports agent Bo McKinnis, MBA’91, worked with Vanderbilt baseball star and now Cy Young Award winner David Price to construct a new $10 million contract with Tampa Bay Devil Rays that smartly saves Price $250,000 in “fiscal cliff” taxes.
NPR, On Point
March 31:Larry Van Horn, associate professor of management, was a guest on National Public Radio’s On Point, discussing how states are preparing for the Affordable Care Act, set to roll out in six months.
Poets and Quants
Jan. 8: The MBA bashers are everywhere, especially in the media where uninformed reporters are eager to write stories that often make little sense. The latest example surprisingly comes from The Wall Street Journal, which reported on Jan. 7 that MBA pay is declining. The Owen School is mentioned.
USA Today
Jan. 24: The mania for Super Bowl teasers—call them ads for ads—began last year, with Volkswagen posting a teaser online aimed at driving folks to social media to get hints about VW’s Super Bowl game ad. Steven Posavac is quoted.
April 21:Bruce Barry, the Brownlee O. Currey Jr. Professor of Management, is quoted in an article regarding professors who use pop culture in their teaching. Academics are reaching beyond dense economic texts and into the world of pop culture to help students and others recognize that business and economic concepts are all around.
April 28: As the dust settles on the FBI raid of the Knoxville, Tenn., headquarters of Pilot Flying J, the nation’s largest truck stop chain, the long wait for the legal fallout has begun. Mark Cohen is quoted.
USA Today College
April 1: The term “bridge program” is often used to refer to crash courses in business or corporate skills that can give liberal arts majors a boost before entering the working world. The Owen School’s Accelerator program is featured, and Greg Harvey, administrative director of Accelerator, is quoted.
Christie St-John, MA’94, PhD’99, recently rejoined Owen as director of admissions after eight years as senior associate director of admissions and recruiting for the Tuck School of Business at Dartmouth College. She directs admissions for Owen’s fulltime MBA programs and the MS Finance program. Before beginning her Vanderbilt career in 1997, St-John worked in marketing and in oil and gas trading. St-John, a Nashville native, has lived abroad and traveled extensively for both work and pleasure.
Christie St-John, MA’94, PhD’99
Q. Welcome back! Tell us a little about your connection to Owen, and what you’re doing now.
A. I was recruited to Owen from the Vanderbilt Ph.D. program in 1997. I had lived in France and Italy for about eight years and had come back to Nashville in 1992. One day, a friend from the Spanish department who was working with the International Executive MBA Program called and asked if I would be interested in working at Owen.
I met with Peter Veruki, Susan Motz and Tami Fassinger, and I guess I passed the test since I knew the difference between Saks Fifth Avenue and Goldman Sachs. They liked the fact that I had worked in several industries in the U.S. and in Europe and that I brought a strong international outlook to the program.
Admissions was quite different from any other job I had been in, and I loved working with the students. I started out managing the exchange programs. Luckily, the dean then, Marty Geisel, was willing to let me expand my role considerably. Because of my eclectic background, in addition to handling the exchange programs, I started doing some international recruiting and helping international students with their resumes and career paths. It soon developed that I was doing just about anything related to international affairs. It was a unique position and allowed me to get to know the students from the time of their first contact with Owen throughout their careers as alumni. I have remained in touch with a number of our alums over the years. It has been so gratifying to receive welcome-back notes from many of them.
When Tami Fassinger and I started talking about the director of admissions position last summer, I was intrigued. After visiting the school and seeing all the changes that had happened during my nine-year absence, I thought it would be a great opportunity for me to make an impact and contribute a different perspective on MBA recruiting from my work with the Tuck School of Business at Dartmouth.
Q. What goals do you have for your office?
A. Recruiting more military candidates, expanding outreach to women and minority candidates, and diversifying our international pool of applicants. To that end, we’ve added several new recruiting events, such as four military-focused recruiting events, a second trip to Latin America, a few stand-alone events and fairs in Europe, and our first foray into Africa. We also joined the Foundation for African Leadership in Business. I’m very excited about this because Africa is in great need of trained managers for their expanding economy. I am very pleased that Owen will be a leader in this endeavor.
Q. How can alumni help?
A. I have always believed that alumni are the key to recruiting and yielding great candidates. It is especially helpful when they talk (in person or via email) to prospective candidates because they can share their views on the value of the Vanderbilt MBA. Moreover, our alumni are proof that a Vanderbilt MBA will lead to career success. We urge all alumni to send good prospective candidates to us directly, to help us with our yield of admitted candidates, and to remain involved with the school through any activity that they feel suits them best, whether helping at MBA fairs, recruiting students at their companies, coming back to help with interviewing, or hosting coffee chats or dinners for admitted students.
I encourage all alumni to contact me directly if they want to be involved. We promise not to abuse their generosity.
“Alumni are the key to recruiting and yielding great candidates.”
—Christie St-John
Q. What differences do you see in Owen of 15 years ago and today?
A. All the students look younger now! The library has been updated and refurbished and is really impressive. That used to be one of my favorite places to go for research and also to get away from my desk. And, of course, there are more programs today than then, and the overall class size of the MBA program is much smaller.
I do feel that the international mix needs to be tweaked a bit to include areas where we already have a solid alumni base and new areas that are opening up for MBA talent. I am also very pleased to see the caliber of alums on the Alumni Board and the business people on our Board of Visitors.
Q. You have a lot of international experience. How will that apply to your new role?
A. Working in admissions with a focus on international recruiting has led me to more than 70 countries so far. I also served on the evaluation committee at American Councils, an organization launched by former Sen. Edmund Muskie. It provides scholarships for candidates from the former CIS (Commonwealth of Independent States) countries. This gave me the opportunity to travel to some really exotic places, such as Azerbaijan, Kazakhstan, Kyrgyzstan and Ukraine, to name a few.
I believe in establishing relationships wherever I go, so I am bringing personal contacts with overseas educational advisers and agencies—and Owen alumni—that will help us get the kind of international diversity that we are seeking. Plus, adding Kim Killingsworth to our admission office brings an even larger wealth of international knowledge since Kim had a similar job at Cornell University.
Q. Your Vanderbilt degrees are in French and Italian. How did you parlay those interests into your recruiting career?
A. Having language skills permitted me to get meaningful jobs in Europe. It has also meant success in recruiting in Europe. I can talk to potential candidates in their languages and can also speak with corporate recruiters about things other than just business because I know the history and culture of those countries—and other Francophone countries as well. It has allowed me to develop strong relationships with educational advisers, and to empathize with our international students when they come to the U.S.—I’ve been there and I know how confusing it can be. It also helped me have credibility with U.S. students who wanted to work abroad. It isn’t easy and it requires a lot of preparation and a lot of humility.
Q. If there’s one message you could convey to Owen alumni, what would it be?
A. We need your help to keep the Owen brand in front of recruiters and prospective students. And we want to stay in touch with you. Above all, please keep us updated as to where you are and what you are doing. I foresee lots of travel in the future where we will need alumni help. The MBA market is becoming more and more competitive, and to show how strong our program is, we need to show off our alums—they are the proof that this program is one of the best for success in one’s career.
Most people know Parkland Memorial Hospital in Dallas for its heroic efforts to help President John F. Kennedy after he was shot in November 1963.
Fifty years later, Parkland is once again drawing national attention, only this time, not for its service to the nation, but rather for its woeful record of violating basic patient safety procedures.
In August 2011, the hospital received a damning 600-page report issued by federal and state regulators detailing scene after painful scene of chaos and confusion. Emergency room patients were repeatedly placed in soiled bedding, children were discharged without proper medical screening, and unqualified medical residents were treating patients. In one instance, on-site regulators were forced to intervene to help lost patients seeking medical attention who were left wandering the halls.
Ranga Ramanujam
In short, there have been few—if any—instances of such a large, high-profile public hospital facing similar funding cuts for regularly placing patients in “immediate jeopardy” as a result of the facility’s systemic violation of basic safety practices.
But the truth is that even without the scathing reports issued by the Centers for Medicare & Medicaid Services, Parkland would have been in crisis. Like most public hospitals, Parkland is an anachronism that has been propped up by a too-important-to-fail mentality.
In an environment that includes a shrinking margin for medical errors, relentless pressure to cut costs, uncertainty over how to implement the Affordable Care Act, and acute physician and nursing shortages, the status quo is no longer good enough. Safety is more than a matter of operating for a long period without major adverse events—that’s just getting lucky. Instead, safety must be purposefully managed throughout every layer of an institution.
And doing that requires a fundamental shift in today’s health care organizations. Issues of quality and safety are intensely local and as such, they are not items that can be managed from a suite of executive offices.
Rather, the hospital of the 21st century demands that management build and maintain organizations designed to encourage what former Treasury Secretary and Alcoa chairman Paul O’Neill calls habitual excellence. Hospital leadership teams should seek to build an organizational infrastructure where employee engagement and continuous improvement are paramount. Improving care for patients can be brought about only by identifying and solving problems in the delivery of that care.
Hospital CEOs must start these transformations by expanding their traditional definitions of success. While financial outcomes and regulatory compliance remain crucial, management must also set audacious goals around employee engagement, communication and learning.
As many as 44,000 patients die each year in U.S. hospitals as a result of medical error.
Patient safety is more likely when clinical employees are treated with respect and dignity, when they’re given the necessary resources to carry out their work, when they are recognized for their contributions, and when they are afforded physical and psychological safety. When these critical preconditions are absent or go unmet and hospital employees are not meaningfully engaged in their work, patients face dangers that are all too real—as Parkland and the people it serves discovered.
While the idea of employee engagement may strike some as too squishy or touchy-feely, in the case of medical institutions nothing could be further from the truth. By some estimates, as many as 44,000 patients die each year in U.S. hospitals as a result of medical error—the equivalent of a 9/11-type attack happening each month. That means employee engagement literally becomes a matter of life and death in a clinical setting, a fact that every hospital CEO needs to fully comprehend.
CEOs must also recognize that change is not easy, especially in an entrenched culture like medicine where doctors typically go unchallenged by nurses and other staff members. Resistance and setbacks are almost guaranteed.
But with time and effort this will change. It starts at the top. Executives must be as attuned to quality and safety metrics as they are to profits and losses. This means undertaking things like frequent employee surveys and ensuring that senior leadership engages in regular walk-arounds. It may also require new team clinical structures that include physicians, nurses, pharmacists and dietitians who are jointly reviewing cases on a daily basis. There must also be mechanisms that enable and encourage employees to report medical errors and other safety issues.
Hospital leaders should have a mindset not of fixing problems but rather of redesigning structures and processes in a way that delivers care that is safer, more cost-effective and, most important, patient-focused.
The need to implement effective health care organizations has become as pressing as the need for medical breakthroughs. Safety is too important to be left to chance.
A version of this article originally appeared in the Dallas Morning News as part of a continuing series on safety problems at that city’s Parkland Memorial Hospital. Associate Professor of Management Rangaraj “Ranga” Ramanujam’s current research examines leadership, communication and learning processes in enhancing the quality and safety of health care.
The Vanderbilt University Board of Trust has bestowed emeritus status on three of Owen’s most acclaimed faculty. Germain Böer, Richard Daft and Hans Stoll were honored during Commencement as the school’s newest faculty emeriti.
Böer, who was professor of accounting, as well as director of the Owen Entrepreneurship Center, is now professor of accounting, emeritus. Daft, formerly Brownlee O. Currey, Jr. Professor of Management, is now professor of management, emeritus. Stoll, the Anne Marie and Thomas B. Walker Jr. Professor of Finance, is now professor of finance, emeritus.
“Together, these three professors have dedicated more than 90 years of scholarship and teaching to Owen. They have been favorite professors to hundreds of students and outstanding colleagues with whom it has been a pleasure to work,” says Dean Jim Bradford. “I regret that their retirement will rob future students and faculty of the opportunity to learn from them.”
The original premise of a “hedged fund,” as a financial journalist originally described the concept in 1949, was simple: A portfolio balanced between long and short positions could profit in nearly any market.
That idea may have taken a while to seep into the mainstream, but as it has over the past decade, the hedge fund industry has exploded, rocketing from $310 billion in assets under management in 2002 to more than $2 trillion today. Institutional investors and high net-worth individuals flocked to these largely unregulated, nonpublic funds in no small part because they offered access to assets and trading strategies that are all but impossible to replicate.
But new research from Nicolas Bollen, the E. Bronson Ingram Professor of Finance, says those hedge funds that are hardest to imitate—something investors look for and for which they often pay a premium—are the ones most prone to failure.
In addition, Bollen finds that these types of funds contain a significant amount of volatility, indicating that they are vulnerable to the type of risks they are supposed to guard against. “This result suggests the presence of an omitted but potentially catastrophic risk factor in funds for which standard regression analysis fails,” Bollen writes in the study, forthcoming in the Journal of Financial and Quantitative Analysis.
Those previously undetected risks raise the annual probability of failure for hard-to-replicate funds from 10 percent to 12 percent. The findings have implications for investors who rely on statistical models to screen funds for heightened risk factors as part of their due diligence process.
Determining Hedge-fund Performance
The difficulty in assessing hedge fund performance lies in the industry’s opacity. Fund managers report returns publicly at their discretion, leaving wide gaps of data about holdings, accuracy, and even whether a fund is still operating. (In October 2011, hedge funds with more than $1.5 billion in assets under management were required to start disclosing fund details to U.S. regulators, but that information will not be made public.)
As hedge funds have grown, academic researchers have developed statistical models designed to correlate hedge fund returns with known investment strategies. Using these models, along with data from a broad cross section of funds from 1994-2008, Bollen found that more than one-third of all funds cannot be correlated to known style factors. The phenomenon becomes even more pronounced in funds with short histories.
Bollen suggests those results indicate that using hedge fund regression models to learn about a fund manager’s trading style and selection of assets may be even weaker than previously thought. Further, he says it may be a Sisyphean task to try to develop a complete set of risk factors, especially those representing catastrophic losses during rare events.
Where does that leave investors? For the time being, relying more heavily on qualitative judgments about things like a fund manager’s background and strategy mix than the quantitative analyses of econometricians.
A version of this article originally appeared in VB Intelligence.
Lowest prices of the year! Markdowns! Exclusive Dealer! Top Quality! We’ve all been exposed to them—the marketing strategies promising bargains or high value. Yet as alluring as those pitches can be, consumers draw very different—and sometimes contradictory— conclusions when it comes to sale prices or value. To make it even more challenging, consumers often fill in gaps in their knowledge by drawing inferences about products.
New research co-authored by Steve Posavac, the E. Bronson Ingram Professor in Marketing, finds that in some consumers’ minds, price denotes quality. Yet for others, low price leads a consumer to believe he or she is getting a good value.
Steve Posavac
“Consumers rarely have complete information and use various strategies to fill the gaps in their knowledge as they consider and choose products,” the researchers wrote in an article published in the April 2013 Journal of Consumer Research. “One of these strategies involves using naive theories: informal, common sense explanations that consumers use to make sense of their environment. For example, consumers may believe that popular products are high in quality while also believing that scarce products are high in quality.”
Posavac and collaborators Hélène Deval, Susan P. Mantel and Frank R. Kardes found that consumers use a series of theories when considering value and price. How they size up a possible purchase depends on what is on their mind when they’re thinking about a given product— something marketers need to take into account when crafting ads, marketing strategies and promotions.
Price vs. Quality Experiments
The researchers conducted eight experiments that tested marketing techniques that leaned toward price or quality. In one experiment, consumers were shown an ad for a bottle of wine with either a high or low price. When subtly reminded of quality, consumers evaluated the expensive wine more favorably than the cheap wine. However, when subtly reminded of value, they rated the cheap wine more favorably.
“In the case of price, most people simultaneously believe that low prices mean good value and that low prices mean low quality. But these two beliefs are not equally present in consumers’ minds all the time,” the authors wrote. In short, people can hold opposing beliefs about the same product.
When Product Marketing Backfires
Sales promotions succeed when consumers perceive that they are getting a good deal, but they can also backfire if consumers perceive that lower prices indicate poor quality. And if the company makes assumptions that one naive theory guides consumers, they run the risk that the strategy could actually cause a decrease in sales and perceived value. “For example, a marketer who feels that low prices signal value may go all in on a low-price strategy in an attempt to drive sales but may succeed only at reducing brand value and alienating consumers if a substantial percentage of the firm’s customers believe that low prices are commensurate with low quality,” they wrote.
Posavac and his fellow researchers cite retailer J.C. Penney as an example. The company moved to a new strategy of abandoning sales events in favor of everyday low pricing. However, J.C. Penney customers had been so conditioned to the naive theory that sales promotions signified good deals that the absence of such events was taken by many longterm customers to mean that there were no longer opportunities to get good deals—and sales dropped.
“[Companies] design a strategy by assuming that a certain naive theory is going to drive consumer evaluation and choice when, in fact, several naive theories are available to the consumer,” the authors conclude. So what’s the best strategy? The authors suggest that, in practice, marketing communications that set the stage by suggesting a given naive theory—quality, for example—and then make a product appeal in keeping with that theory will have the best results.
A recent independent economic analysis has found that Vanderbilt University had an $8.6 billion impact on the Tennessee state economy during fiscal year 2011-12.
Among the factors measured were Vanderbilt’s direct spending on operations and construction, spending by students and visitors, and spending by businesses as a result of Vanderbilt’s presence in the state.
The analysis, prepared by Austin, Texas-based TXP Inc., reported that Vanderbilt, the second largest private employer in Tennessee, generated an economic impact of $8.6 billion for the fiscal year ending June 30, 2012.
The economic activity supported 58,000 total jobs with wages and benefits in excess of $3.4 billion.
Vanderbilt spent $86.6 million on construction, building and leasehold improvements. These expenditures supported hundreds of jobs in the construction and building maintenance sector.
University-related activity attracted 700,000 visitors to campus, including patients, parents and athletic enthusiasts, creating jobs and wages for businesses and vendors in the community.
Tax revenue generated by Vanderbilt and related activities drove estimated Tennessee tax revenue of $221.6 million into state coffers.
The TXP report said that the impact potentially exceeds the calculations, since a university’s economic impact extends well beyond the traditional workplace due in part to factors not easily quantifiable such as “a highly capable workforce, innovation and entrepreneurship, clusters in knowledge industries, and superior quality of life.”
Current Owen students honored outgoing Dean Jim Bradford on April 18 during their last Thursday Social at Owen of the academic year.
