Evidence Based Management

Academy of Management Review 2006, Vol. 31, No. 2, 256–269. 2005 Presidential Address IS THERE SUCH A THING AS â€Å"EVIDENCEBASED MANAGEMENT†? DENISE M. ROUSSEAU Carnegie Mellon University I explore the promise organization research offers for improved management practice and how, at present, it falls short. Using evidence-based medicine as an exemplar, I identify ways of closing the prevailing â€Å"research-practice gap†Ã¢â‚¬â€the failure of organizations and managers to base practices on best available evidence. I close with guidance for researchers, educators, and managers for translating the principles governing human behavior and organizational processes into more effective management practice. Evidence-based management means translating principles based on best evidence into organizational practices. Through evidence-based management, practicing managers develop into experts who make organizational decisions informed by social science and organizational research—part of the zeitgeist moving professional decisions away from personal preference and unsystematic experience toward those based on the best available scientific evidence (e. . , Barlow, 2004; DeAngelis, 2005; LemieuxCharles & Champagne, 2004; Rousseau, 2005; Walshe & Rundall, 2001). This links how managers make decisions to the continually expanding research base on cause-effect principles underlying human behavior and organizational actions. Here is what evidence-based management looks like. Let’s call this exampl e, and true story, â€Å"Making Feedback People-Friendly. † The executive director of a health care system with twenty rural clinics notes that their performance differs tremendously across the array of metrics used. This variability has nothing to do with patient mix or employee characteristics. After interviewing clinic members who complain about the sheer number of metrics for which they are accountable (200 indicators sent This article is based on the address I gave at the annual meeting of the Academy of Management in Honolulu, Hawaii. Chuck Bantz, Andy Garman, Paul S. Goodman, Ricky Griffin, Bob Hinings, Paul Hirsch, Sharon McCarthy, Sara Rynes, Laurie Weingart, and John Zanardelli contributed ideas toward its development. 256 onthly, comparing each clinic to the 19 others), the director recalls a principle from a long-ago course in psychology: human decision makers can only process a limited amount of information at any one time. With input from clinic staff, a redesigned feedback system takes shape. The new system uses three performance categories— care quality, cost, and employee satisfaction—and provides a summary measure for each of the three. Over the next year, through provision of feedback in a more interpretable form, the health system’s performance improves across the board, with low-performing units showing the greatest improvement. In this example a principle (human beings can process only a limited amount of information) is translated into practice (provide feedback on a small set of critical performance indicators using terms people readily understand). Evidence-based management, as in the example above, derives principles from research evidence and translates them into practices that solve organizational problems. This isn’t always easy. Principles are credible only where the evidence is clear, and research findings can be tough for both researchers and practitioners to interpret. Moreover, practices that capitalize on a principle’s insights must suit the setting (e. g. , who is to say that the particular performance indicators the executive director uses are pertinent to all units? ). Evidence-based management, despite these challenges, promises more consistent attainment of organizational goals, including those affecting employees, stockhold- 2006 Rousseau 257 ers, and the public in general. This is the promise that attracted me to organizational research at the beginning of my career— but it remains unfulfilled. THE GREAT HOPE AND THE GREAT DISAPPOINTMENT It is ironic that I came to write this article in my role as the sixtieth Academy of Management president. â€Å"Management† was a nasty word in my blue collar childhood, where everyone in the family was affected by how the company my father worked for managed its employees. When the supervisor frequently called my father to ask him to put in more overtime in an already long work week, all of us kids got used to covering for him. If the phone rang when my father was home, he’d have us answer it. We all knew what to say if it was the company calling: â€Å"Dad’s not here. The idea of just telling the supervisor that he didn’t want to work never occurred to my father, or anyone else in the family. The threat of disciplinary action or job loss loomed large, reinforced by dinnertime stories about a boss’s abusive behavior or some inexplicable company action. From this vantage point, the term management connot es harsh and arbitrary behavior, with undertones of otherness. It is a far cry from the dictionary definition of management as â€Å"a judicious use of means to accomplish an end† (Merriam-Webster, 2005). I acquired a wholly new perspective on management and managers when I became a business school professor. First, many business students, even at the MBA level, have never experienced what it is like to work for a good manager. In the first business course I taught, in organizational behavior, I gave the students two assignments: (1) write about the worst boss you ever had, describing what made that person the worst and how it impacted you, and (2) write about the best boss you ever had, describing what made that person the best and how it impacted you. My MBA students with an average of five years of full-time work experience had no problem with assignment 1. For many of them, the assignment was cathartic, and they frequently exceeded its assigned page limit in writing vituperative portrayals of managers variously presented as self-centered, capricious, or otherwise lacking in capability or character. Assign- ment 2 was another matter. Many students had great difficulty thinking of anyone who qualified as â€Å"the best manager. † Over a third couldn’t think of any boss they could even describe as good. To the extent that people manage others the way they themselves have been managed, I came to worry about what the future held for these managers-in-the-making. Nonetheless, while these business students may never have had a great boss, they themselves still hoped to become one. (By the way, I have since abandoned this assignment in favor of more selfreflection on the manager students want to become and ways they can develop themselves to move closer to that ideal. ) Second, most business students have never worked for a great company either. There is the possibility that only dissatisfied people quit their jobs to study full time for an MBA, but in this regard I suspect availability bias. ) I never have had any difficulty getting students to share their experiences of dysfunctional organizational practices. However, when it comes to identifying a more functional way to motivate workers or restructure firms, they are often at a loss. Still, in-class discussions and students’ ow n future plans suggest that they do hope to join a company (or to start one) that is better managed than those they have worked for so far. In class and out, I have spent a lot of time helping students learn how to make a business case, with their future employers in mind, for creating financially successful firms that are good for people too. I have come to feel tremendous respect and affection for those students who have the personal aspiration to be a great manager in a great company. Out of these personal and professional experiences, I have nurtured my great hope—that, through research and education, we can promote effective organizations where managers make well-informed, less arbitrary, and more reflective decisions. My great disappointment, however, has been that research findings don’t appear to have transferred well to the workplace. Instead of a scientific understanding of human behavior and organizations, managers, including those with MBAs, continue to rely largely on personal experience, to the exclusion of more systematic knowledge. Alternatively, managers follow bad advice from business books or consultants based on weak evidence. Because Jack Welch or 258 Academy of Management Review April McKinsey says it, that doesn’t make it true. Several decades of research on attribution bias indicate that people have a difficult time drawing unbiased conclusions regarding why they are successful, often giving more credit to themselves than the facts warrant. Management gurus are in no way immune. ) Sadly, there is poor uptake of management practices of known effectiveness (e. g. , goal setting and performance feedback [Locke & Latham, 1984]). Even in businesses populated by MBAs from top-ranked universities, there is unexplained wide variation in managerial practice patterns (e. g. how [or if] goals are set, selection decisions made, rewards allocated, or training investments determined) and, worse, persistent use of practices known to be largely ineffective (e. g. , downsizing [Cascio, Young, & Morris, 1997; high ratios of executive to rankand-file employee compensation [Cowherd & Levine, 1992]). The result is a research-practice gap, indicating that the answer to this article’s title question is no—at least not yet. What it means to close this gap and how evidencebased management might become a reality are the matters I turn to next. THE â€Å"EVIDENCE-BASED† ZEITGEIST The phrase â€Å"evidence-based† is a buzzword in contemporary public policy, with all the risk of triteness and superficiality that buzzword status conveys. Let’s not be misled by its current popularity. Evidence-based practice has tremendous substance and discipline behind it. We can observe its impact in two fields highly influenced by legislative decisions: policing and secondary education. In evidence-based policing, community police officers are trained to treat criminal suspects politely, because doing so has been found to reduce repeat offenses (Sherman, 2002; Tyler, 1990). In evidence-based education, many secondary schools have restored the practice of social promotion, where students who have difficulty passing their courses, even after several tries, are advanced to the next grade level. Research indicates that social promotion’s benefits outweigh its costs, because a high school diploma increases the likelihood of subsequent employment and lowers the incidence of drug use, even among students who wouldn’t otherwise have qualified for that diploma (Jimerson, Anderson, & Whipple, 2002; National Association of School Psychologists, 2005). Evidence-based practice is a paradigm for making decisions that integrate the best available research evidence with decision maker expertise and client/customer preferences to guide practice toward more desirable results (e. g. , Sackett, Straus, Richardson, Rosenberg, & Haynes, 2000). Proponents are skeptical about experience, wisdom, or personal credentials as a basis for asserting what works. The question is â€Å"What is the evidence? â€Å"—not â€Å"Who says so? † (Sherman, 2002: 221). The answer, as the criminologist Lawrence W. Sherman indicates, can be graded from weak to strong, based on rules of scientific inference, where before-and-after comparisons are stronger than simultaneous correlations—randomized, controlled tests stronger than longitudinal cohort analyses. Strong evidence trumps weak, irrespective of how charismatic the evidence’s presenter is. Sherman sums it up: â€Å"We are all entitled to our own opinions, but not to our own facts† (2002: 223). Medicine is a success story as the first domain to institutionalize evidence-based practice. Evidence-based medicine is the integration of individual clinical expertise and the best external evidence. Its origins date back to 1847, when Ignaz Semmelweis discovered the role that infection played in childbirth fever. Semmelweis was vilified by physicians of the time for his assertion that it was doctors themselves who were infecting women by carrying germs between dead bodies and patients. Nonetheless, his work influenced the formulation of germ theory, which gained acceptance with the work of Lister and Pasteur forty years later (Wikipedia, 2005). Extensive infrastructures promote evidence-based health care (e. g. , the U. S. National Institutes of Health and Institute of Medicine, the Canadian Health Services Research Foundation, and the Cochrane Collaboration). Evidence-based-clinical care as a way of life in health care organizations is of relatively recent vintage, enjoying its greatest growth after 1990. (If you are wondering what physicians did before, the answer is what managers are doing now, but without medicine’s added advantages from common professional training and malpractice sanctions. ) The attributes of evidencedbased medicine provide a useful reference point 2006 Rousseau 259 for exploring what its counterpart in management might look like. By way of example, germ theory is widely understood by clinical care givers. It has led to broad application of infection control systems (gowns, sterile needles, and sterile instruments), medicines to avoid or cure infections, and supporting practices (handwashing). Its application has led to radical but important interpretations of seemingly distant events. Incidence of heart attack, for example, increases immediately after having one’s teeth cleaned. Reflecting on this correlation in light of germ theory led to recognition that teeth cleaning disperses mouth bacteria into the heart’s arteries. Certain bacteria in these arteries create conditions that give rise to heart attacks. Recognizing this causal link led to a risk-reducing solution: giving heart patients antibiotics to take before dental treatments as a preventive. This application of medical evidence involved cause-and-effect connections— how dental practice can disperse mouth bacteria into the heart’s arteries. It also required isolation of variations that affect desired outcomes, requiring knowledge of the mechanisms triggering heart attacks (and, in this case, knowledge that gum disease may itself trigger heart attacks [see, for instance, Desvarieux et al. 2005]). Yet more than scientific insight is needed to create evidence-based practice. In fact, only some physicians recommend this preventive action for their heart patients. Others may not see the risk as that great, are unaware of the finding, or merely have forgotten to make this preventive action part of their standard orders for cardiac patie nts. The involvement of other practitioners further complicates matters: dentists are not necessarily educated to inquire about heart conditions. Organizational factors affect whether evidence-based practice occurs. In health care settings certain features increase the likelihood that an at-risk patient will get the preventive medication. Social networks and organizational culture matter. It helps if the patient’s physician is part of a practice or a hospital where others recommend such preventive care. Similarly, impeding this evidence-based practice is the fact that dentists are unlikely to be in the same professional networks as physicians. In a hospital where medical leadership promotes evidencebased medicine, more physicians are likely to e aware of the finding. Such settings are also likely to have staff in-services to update physician knowledge where this practice might be discussed. Relatedly, participation in research increases the salience of the evidence base. It helps if physicians in the immediate environment have participated in clinical research and are engaged in one of the several online communities that review clinical evidence and then create and disseminate recommendat ions, which raises the next point: access to information on those practices the evidence supports. Physicians have online services that provide ready access to clinical practice best supported by research, based on the review and recommendation of health care experts (e. g. , Cochrane Collaboration). Such services capitalize on the information explosion and internet connections to build communities of practice enabling experts to communicate their knowledge, identify the best-quality evidence, and disseminate it broadly to care givers (Jadad, Haynes, Hunt, & Browman, 2000). Decision supports can be designed to make it easier to implement evidence-based practices. A patient care protocol might be written specifying that each heart patient and all post-op cardiac cases be advised of the need to premedicate before teeth cleaning, along with a prescription written for and given to the patient at discharge. This protocol might be formalized to the extent that a premedication instruction is written in each cardiac patient’s discharge orders. Last, a web of factors—individual (knowledge), organizational (access to knowledgeable others, support for evidence use), and institutional (dissemination of evidence-based practice)—promotes, sustains, and institutionalizes evidence-based medicine. Britain’s national health system, for example, promotes evidencebased practice using the Cochrane Collaboration’s recommendations as the standard. Medicare in the United States publishes information on whether hospitals use proven remedies in patient care (Kolata, 2004). In sum, features characterizing evidencebased practice include †¢ learning about cause-effect connections in professional practices; †¢ isolating the variations that measurably affect desired outcomes; 260 Academy of Management Review April creating a culture of evidence-based decision making and research participation; †¢ using information-sharing communities to reduce overuse, underuse, and misuse of specific practices; †¢ building decision supports to promote practices the evidence validates, along with techniques and artifacts that make the decision easier to execute or perform (e. g. , checklists, protocols, or standing orders); and †¢ having individual, organizational, and institutional factors promote access to knowledge and its use. Now let’s consider what such practice might mean for management and organizations. WHY EVIDENCE-BASED MANAGEMENT IS IMPORTANT AND TIMELY Evidence-based management is not a new idea. Chester Barnard (1938) promoted the development of a natural science of organization to better understand the unanticipated problems associated with authority and consent. Since Barnard’s time, however, we have struggled to connect science and practice without a vision or model to do so. Evidence-based management, in my opinion, provides the needed model to guide the closing of the research-practice gap. In this section I address why evidence-based management is timely and practical. Calling Attention to Facts: â€Å"Big E Evidence† and â€Å"little e evidence† An evidence orientation shows that decision quality is a direct function of available facts, creating a demand for reliable and valid information when making managerial and organizational decisions. Improving information continues a trend begun in the quality movement over thirty years ago, giving systematic attention to discrete facts, indicative of quality (e. g. , machine performance, customer interactions, employee attitudes and behavior [Evans & Dean, 2000]). This trend continues in recent developments regarding open-book management (Case, 1995; Ferrante & Rousseau, 2001) and the use of organizational fact finding and experimentation to improve decision quality (Pfeffer & Sutton, in press). In all the attention we now give to evidence, it helps to differentiate what might be called â€Å"Big E Evidence† from â€Å"little e evidence. † Big E Evidence refers to generalizable knowledge regarding cause-effect connections (e. g. , specific goals promote higher attainment than general or vague goals) derived from scientific methods—the focus of this article. Little e evidence is local or organization specific, as exemplified by root cause analysis and other fact-based approaches the total quality movement introduced for organizational decision making (Deming, 1993; Evans & Dean, 2000). It refers to data systematically gathered in a particular setting to inform local decisions. As the saying goes, â€Å"facts are our friends,† when local efforts to accumulate information relevant to a particular problem lead to more effective solutions. Although decision makers who rely on scientific principles are more likely to gather facts systematically in order to choose an appropriate course of action (e. . , Sackett et al. , 2000), fact gathering (â€Å"evidence†) doesn’t necessarily lead decision makers to use social science knowledge (â€Å"Evidence†) in interpretating these facts. In my introductory example of the health care system, the executive director might have concluded that the performance differences across t he twenty clinics were due to something about the clinics or their managers. It was his knowledge of a basic principle in psychology that gave him an alternative and, ultimately, more effective interpretation. However, systematic attention to local facts can prompt managers to look for principles that account for their observations. The opening example illustrates how scientific principles and local facts go together to solve problems and make decisions. Opportunity to Better Implement Managerial Decisions In highly competitive environments, good execution may be as important as the strategic choices managers make. Implementation is a strong suit of evidence-based management through the wealth of research available to guide effective execution (e. g. , goal setting and feedback [Locke & Latham, 1984]; feedback and redesign [Goodman, 2001]). Indeed, with greater orientation toward scientific evidence, health care management’s guidelines frequently reference social and organizational research on implementation (e. g. , Lemieux-Charles & Champayne, 2004; Lomas, Culyer, McCutcheon, 2006 Rousseau 261 McAuley, & Law, 2005). The continued wide variation we observe in how organizations execute decisions (e. g. , in goal clarity, stakeholder participation, feedback processes, and allowance for redesign) is remarkable, given the advanced knowledge we possess about effective implementation and what is at stake should implementation fail. Better Managers, Better Learning Given the powerful impact managers’ decisions have on the fate of their firms, managerial competence is a critical and often scarce resource. Improved managerial competence is a direct outgrowth of a greater focus on evidencebased management. Managers need real learning, not fads or false conclusions. When managers acquire a systematic understanding of the principles governing organizations and human behavior, what they learn is valid—that is to say, it is repeatable over time and generalizable across situations. It is less likely that what managers learn will be wrong. Today, the poor information commonly available to managers regarding the organizational consequences of their decisions means that experiences are likely to be misinterpreted— subject to perceptual gaps and misunderstandings. Consider the case of a supervisor who overuses threats and punishment as behavioral tools. A punisher who keys on the fact that punishing suppresses behavior can completely miss its other consequence—its inability to encourage positive behavior. Status differences and organizational politics make it unlikely that the punisher will learn the true consequences of that style, by limiting and distorting feedback. The reality is that managers tend to work in settings that make valid learning difficult. This difficulty is compounded by the widespread uptake of organizational fads and fashions, â€Å"adopted overenthusiastically, implemented inadequately, then discarded prematurely in favor of the latest trend† (Walshe & Rundall, 2001; 437; see also Staw & Epstein, 2000). In such settings managers cannot even learn why their decisions were wrong, let alone what alternatives would have been right. Evidence-based management leads to valid learning and continuous improvement, rather than a checkered career based on false assumptions. Organizational legitimacy is another product of evidence-based management. Where decisions are based on systematic causal knowledge, conditioned by expertise leading to successful implementation, firms find it easier to deliver on promises made to stockholders, employees, customers, and others (e. g. , Goodman & Rousseau, 2004; Rucci, Kirn, & Quinn, 1998). Legitimacy is a result of making decisions in a systematic and informed fashion, thus making a firm’s actions more readily justifiable in the eyes of stakeholders. Yet, given evidence-based management’s numerous advantages, why then is the research-practice gap so large? I next turn to the array of factors that align to perpetuate this evidence-deprived status quo. WHY MANAGERS DON’T PRACTICE EVIDENCE-BASED MANAGEMENT The research-practice gap among managers results from several factors. First and foremost, managers typically do not know the evidence. Less than 1 percent of HR managers read the academic literature regularly (Rynes, Brown, & Colbert, 2002), and the consultants who advise them are unlikely to do so either. Despite the explosion of research on decision making, individual and group performance, business strategy, and other domains directly tied to organizational practices, few practicing managers access this work. (I note, however, that of the four periodicals the Academy publishes, it is the empirical Academy of Management Journal to which company libraries most widely subscribe. So there is some recognition that this research exists! ) Evidence-based management can threaten managers’ personal freedom to run their organizations as they see fit. A similar resistance characterized supervisory responses to scientific management nearly 100 years ago, when Frederick Taylor’s structured methods for improving efficiency were discarded because they were believed to interfere with management’s prerogatives in supervising employees. Part of this pushback stems from the belief that good management is an art—the â€Å"romance of leadership† school of thought (e. g. , Meindl, Erlich, & Dukerich, 1985), where a shift to evidence and analysis connotes loss of creativity and autonomy. Such concerns are not unique: physicians have wrestled with similar dilemmas, expressed in 62 Academy of Management Review April the aptly titled article â€Å"False Dichotomies: EBM, Clinical Freedom and the Art of Medicine† (Parker, 2005). Managerial work itself differs from clinical work and other fields engaged in evidencebased practice in important ways. First, managerial decisions often involve long time lags and littl e feedback, as in the case of a recruiter hiring someone to eventually take over a senior position in the firm. Years may pass before the true quality of that decision can be discerned, and, by then, the recruiter and others involved are likely to have moved on (Jaques, 1976). Managerial decisions often are influenced by other stakeholders who impose constraints (Miller, 1992). Obtaining stakeholder support can involve politicking and compromise, altering the decision made, or even whether it is made at all. Incentives tied to managerial decisions are subject to contradictory pressures from senior executives, stockholders, customers, and employees. Last, it’s not always obvious that a decision is being made, given the array of interactions that compose managerial work (Walshe & Randall, 2001). A manager who declines to train a subordinate, for example, may not realize that particular act ultimately may lead the employee to quit. Evidence-based management can be a tough sell to many managers, because management, in contrast to medicine or nursing, is not a profession. Given the diverse backgrounds and education of managers, there is limited understanding of scientific method. With no formally mandated education or credentials (and even an MBA is no guarantee), practicing managers have no body of shared knowledge. Lacking shared scientific knowledge to add weight to an evidence-based decision, managers commonly rely on other bases (e. g. , experience, formal power, incentives, and threats) when making decisions acceptable to their superiors and constituents. Firms themselves—particularly those in the private sector— contribute to the limited value placed on science-based management practice. Although pharmaceutical firms advertise their investment in biotechnology and basic research, the typical business does not have the advancement of managerial knowledge in its mission. Historically leading corporations such as Cadbury, IBM, and General Motors were actively engaged in research on company selec- tion and training practices, employee motivation, and supervisory behavior. Their efforts contributed substantially to the early managerial practice evidence base. But few organizations today do their own managerial research or regularly collaborate with those who do, despite the considerable benefits from industry-university collaborations (Cyert & Goodman, 1997); the globally experienced time crunch in managerial work and the press for short-term results have reduced such collaborations to dispensable frills. Nonetheless, hospitals participate in clinical research and school systems evaluate policy interventions. In contrast to more evidence-oriented domains, such as policing and education, management is most often a private sector activity. It is less influenced by public policy pressures promoting similar practices while creating comparative advantage via distinctiveness. Businesses are characterized by the belief that the particulars of the organization, its practices, and its problems are special and unique—a widespread phenomenon termed the uniqueness paradox (Martin, Feldman, Hatch, & Sitkin, 1983). Observed among clinical care givers and law enforcement practitioners too, the uniqueness paradox can interfere with transfer of research findings across settings—unless dispelled by better education and experience with evidencebased practice (e. g. , Sackett et al. , 2000). Yet, despite all these factors, the most important reason evidence-based management is still a hope and not a reality is not due to managers themselves or their organizations. Rather, professors like me and the programs in which we teach must accept a large measure of blame. We typically do not educate managers to know or use scientific evidence. Research evidence is not the central focus of study for undergraduate business students, MBAs, or executives in continuing education programs (Trank & Rynes, 2003), where case examples and popular concepts from nonresearch-oriented magazines such as the Harvard Business Review take center stage. Consistent with the diminution of research in behavioral course work, business students and practicing managers have no ready access to research. No communities of experts vet research regarding effective management practice (in contrast to the collaboratives that vet health care, criminal justice, and educational research [e. . , Campbell Collaboration, 2006 Rousseau 263 2005; Cochrane Collaboration, 2005]). Few MBAs encounter a peer-reviewed journal during their student days, let alone later. Consequently, it’s time to look critically at the role we educators play in limiting managers’ knowledge and use of research evidence. EVIDENCE-BASED MANAGEMENT AND OUR ROLE AS EDUCATORS My biggest surprise as the Academy president turned out to be the most frequent topic of emails sent to me by Academy members: complaints about our journals from self-identified teaching-oriented members. A typical email goes like this: â€Å"I want to let you know what a waste the Academy journals are. There’s nothing in them at all pertinent to my teaching. The Academy should be for everybody, not just researchers. † My first response was to feel guilty (why hadn’t I seen this? ). But then I started to think more deeply about what this message implies. It says that educators aren’t finding ideas in journals that cause them to change what they teach. This might mean that current research is irrelevant to what’s being taught if educators focus on other topics. It could mean that the kind of information research articles provide about principles or practices is insufficient to determine what settings or circumstances their findings apply to. Or it could even mean that professors aren’t updating their course material when research findings differ from what they teach. These emails prompted me to wonder what exactly we are teaching. If we are teaching what research findings support, the content of a class has to change from time to time, with new evidence or better-specified theory. The concern that prompted this address stemmed from these emails: the role we educators play in the research-practice gap. How Professors Contribute to the ResearchPractice Gap Management education is itself often not evidence based, something Trank and Rynes implicitly recognize (2003) as the â€Å"dumbing down† of management education. They also persuasively demonstrated that, in place of evidence, behavioral courses in business schools focus on general skills (e. g. , team building, conflict man- agement) and current case examples. Through these stimulating, ostensibly relevant activities, we capture student interest, helping to deflect the criticism â€Å"How is this going to help me get my first job? † Business schools reinforce this by relying heavily on student ratings instead of assessing real learning (Rynes, Trank, Lawson, & Ilies, 2003). Stimulating courses and active learning must be core features of training in evidence-based management, because these educational features are good pedagogy. The manner and content of our approaches to behavioral courses perpetuate the research-practice gap. Weak Research-Education Connection Pick up any popular management textbook and you will find that Frederick Herzberg’s work lives, but not Max Weber’s. Herzberg’s longdiscredited two-factor theory is typically included in the motivation section of management textbooks, despite the fact that it was discredited as an artifact of method bias over thirty years ago (House & Wigdor, 1967). I asked a famous author of many best-selling textbooks why this was so. â€Å"Because professors like to teach Herzberg! † he answered. Students want updated business examples but can’t really tell if the research claims are valid. † This conversation suggests that professors are likely to teach what they learned in graduate school and not necessarily what current research supports. (Since many management professors are adjuncts valued for their practical experience but are from diverse backgrounds, even educators of comparable professional age may not share scien tific knowledge. ) I suspect that the persistence of Herzberg will continue until all the professors who learned the twofactor theory in graduate school (c. 960 –1970) retire. However, business schools may discourage inclusion of some well-substantiated topics because they don’t â€Å"sound† managerial. Paul Hirsch, the well-known sociologist, tells the story that when he flies business class, his seatmates ask what he does for a living. When he identifies himself as a business school professor, the next customary question is â€Å"What do you teach? † As a sociologist steeped in Weber and the century of research he spawned, Paul used to say, â€Å"Bureaucracy. † His seatmates frequently 264 Academy of Management Review April moved to the opposite wing at that point, until Paul wised up and found a more appealing response: â€Å"Management† (personal communication). Paul notes that managers still need to understand bureaucratic processes, so he hasn’t changed what he teaches— only what he calls it. I do this too: I no longer call socialization, training, and rules â€Å"substitutes for leadership† (Kerr & Jermier, 1978), having found that the last thing a would-be manager wants to hear is how he or she can be replaced. The implications are clear. We frame, and perhaps even slant, what we teach to make it more palatable. Can it be we are on that slippery slope of avoiding teaching the most current social science findings relevant to managers and organizations, from downsizing to ethical decision making, because we fear our audience won’t like the implications? Failure to Manage Student Expectations Student expectations do drive course content, and current evidence indicates that there is a strong preference for turnkey, ready-to-use solutions to problems these students will face in their first jobs (Trank & Rynes, 2003). What efforts do we make to manage these expectations? Unless students are persuaded to value sciencebased principles and their own role in turning these principles into sound organizational practice, it will be nigh impossible for faculty to resist the pressure to teach only today’s solutions. We might start by asking students who they think updates more effectively—practitioners trained in solutions or in principles. Effective practices in 2006 need not be the same as those in 2016, let alone 2036, when the majority of today’s business students will still be working. If we teach solutions to problems, such as how to obtain accurate information on a worker’s performance, students will acquire a tool—perhaps, for example, 360-degree feedback. Yet they won’t understand the underlying cognitive processes (whether feedback is task related or self-focused), social factors (the relationships between ratees and raters), and organizational mechanisms (used for developmental purposes or compensation decisions), which explain how, when, and why 360-degree feedback might work (or not). Imagine a doctor who knows to prescribe antibiotics to patients with bronchitis (a common recommendation in the 1980s before recognition of antibiotic overuse [Franklin, 2005]) but doesn’t understand the basic physiology that can lead other therapies to be comparable, more effective, or have fewer downsides. In the case of feedback, basic social science research is quite robust regarding how feedback impacts behavior (Kinicki & Kreitner, 2003). Such knowledge is likely to generate broader utility and more durable solutions over time than training in any particular feedback tool. Lack of Models for Evidence-Based Management Case methods are de rigueur in business schools, helping to develop students’ analytic skills and familiarity with conditions they will face as practicing managers. The cases that I find most effective are those that have an individual manager as a protagonist (as opposed to those that describe an organization without developing one or two central personalities). A central character creates tension and evokes student identification with the events taking place. That character is typically a manager, who can be the change agent responsible for solving the problem or a catalyst for the dysfunctional behavior on which the cases focuses. Either way, students have a model—a positive or negative referent—from which they can learn how to behave (or not) in the future. As with most complex behaviors, from parenting to managing, people learn better when they have competent models (Bandura, 1971). Nonetheless, in twenty-five years of using cases in class, I cannot recall a single time in which a protagonist reflected on research evidence in the course of his or her decision making. No Expectation for Updating Evidence-Based Knowledge Throughout the Manager’s Career Upon graduation, few business students recognize that the knowledge they may have acquired can be surpassed over time by new findings. Although social science knowledge continues to expand, business school training does not prepare graduates to tap into it. Neither students nor managers have clear ideas of how to update their knowledge as new evidence emerges. 2006 Rousseau 265 There are few models of what an â€Å"expert† manager knows that a novice does not (see Hill, 1992, for an exception). In contrast, expert nurses are known to behave in very different ways from novices or less-than-expert midcareer nurses (Benner, 2001). They more rapidly size up a situation accurately and deal simultaneously with more co-occurring factors. In the professions, extensive postgraduate development exists to deepen expertise to produce a higher quality of practice. In contrast, business schools often imply that MBAs know all they need to know when they graduate. WHAT WE CAN DO TO CLOSE THE RESEARCH-PRACTICE GAP There is a lot we can do to close the researchpractice gap, both as individual educators and through working collectively. Manage Student Expectations We can manage student expectations with regard to the role of behavioral course work in the student’s broader career. I often introduce myself to full-time students by telling them that the easiest teaching I do has always been to executives, because these experienced managers come to the program convinced that human behavior and group processes are the most critical things they need to learn. At this point in their careers, our full-time students can only be novices whose expertise will grow with time and active effort on their part to understand the dynamics of behavior in organizations. Try asking students what the difference is between ten years of experience and one year of experience repeated ten times. Then let them imagine what ten years of experience in becoming more expert on behavior and group processes in organizations would look like (the types of job, people, settings, etc. ). Let them also imagine this for one year repeated ten times. Reflecting on these contrasting visions of their careers gives students an opportunity to raise their expectations of themselves as professional managers. There are various related means for managing expectations, including the creation of learning contracts based on the learner’s anticipated future roles, the behavioral knowledge and skills these roles will necessitate, and how that knowledge and skill will be acquired in the course (Goodman, 2005). It is easier to do this as part of a larger curriculum framed by anticipated future roles—the would-be-manager’s story (Schank, 2003). Important also is the next feature: providing models of evidence-based practice and evidence-based managers. Provide Models of Evidence-Based Practice We need to model evidence-based practice in our teaching and in the curriculum. Psychological research on learning offers a useful guide for course/curriculum practices (e. g. , Kersting, 2005). These include exposing the learner to models of competent evidence-based managers. I have been fortunate to encounter such a person. John Zanardelli is the CEO of Asbury Heights, the Methodist Home for the Aged, Mt. Lebanon, Pennsylvania. I first met John in an executive course on change management at Carnegie Mellon. He peppered me with questions about skills, information, and management tactics and wanted to know the research support behind my answers. Trained as an epidemiologist, John understands the scientific method and regularly looks for scientific corroboration of ideas he comes across in popular management books and from self-proclaimed experts. (Not surprisingly, the calls for evidence-based management largely have come from health care professionals and scholars [e. g. , DeAngelis, 2005; Kovner, Elton, & Billings, 2005]. I knew that I was seeing an unusual manager, to say the least, when John, faced with the need to redesign his organization’s compensation practices, went off to the Carnegie Mellon library to read J. Stacy Adams’ equity theory! His organization’s vision statement is built around the concept â€Å"Where Loving Care and Science Come Together. † Managers such as John Zanardelli provide exemplars of the complex set of proficiencies required to b ecome a master management practitioner. Using them as examples reinforces the notion that the typical twenty-something student is a novice taking first steps along the path to becoming an expert (e. . , Benner, 2001; Hill, 1992). Active practice, self-reflection, and feedback are core learning principles (Schon, 1983). ? Developing student competence through active practice entails project work supported by ongoing reflection and debriefing regarding what constitutes valid learning and effective behavior. Similarly, our educational practices, 266 Academy of Management Review April courses, and curricula need that same reflection and evolution to effectively model evidencebased teaching. Promote Active Use of Evidence Students need to know that evidence is available, and they need to learn how to apply it. This necessitates a balance between teaching principles—that is, cause-effect knowledge—and practices—that is, solutions to organizational problems—though the mix is subject to dispute (Bennis & O’Toole, 2005). In the spirit of making the course tell a story students can understand and participate in, a course conveying how a novice becomes an expert manager, like any good story, involves a succession of experiences, trials, failures, and successes (Schank, 2003). That story line is marked by the acquisition of distinctly different kinds of knowledge. There is declarative knowledge regarding principles or cause-effect relationships. Students can acquire principles in a variety of ways. They might address the appropriateness of group incentives versus individual incentives by locating evidence in a textbook, in journals, or online. Informing students of the â€Å"evidence† through lectures and books has its place, but there is value in identifying and deriving the principles themselves from the sources that will remain available to them throughout their careers. Students can learn a good deal from actively accessing evidence, using it to solve problems, reflecting—and trying again. Indeed, one of the most powerful forms of learning may be deriving principles from experience and reflection, as when students review cases and then derive the principles governing the underlying outcomes (Thompson, Gentner, & Loewenstein, 2003). Thompson and her colleagues found that students learned better when they developed principles from cases than when they derived solutions, a finding consistent with basic psychological research on learning (Anderson, Fincham, & Douglass, 1997). Actually using evidence takes a metaskill— the ability to turn evidence-based principles into solutions. A form of procedural knowledge, a solution-oriented approach to evidence use is comparable to product design, where end users and knowledgeable others familiar with the situation in which the product will be used jointly participate in specifying its features and functionality. Perhaps one of the first products of behavioral research in organizations was the revolving spindle restaurants use to convey customer orders to the kitchen. William Foote Whyte (1948) discovered that status differences between restaurent wait staff (typically female) and the (male) chef led to conflicts, because chefs disliked taking orders from women. The revolving order spindle to which waitresses could attach an order and spin it in the direction of the kitchen allowed customer orders to be conveyed impersonally, reducing workplace conflict and improving communication. Other researchbased products include decision supports such as checklists to guide a performance review or action plans to conduct meetings in ways that build consensus (e. . , Mohrman & Mohrman, 1997), effectively translating the evidence into guides for action. Build Collaborations Among Managers, Researchers, and Educators As the saying goes, it takes a village to educate people. Changing how we educate managers in professional schools necessitates a collective attitude and behavior shift among educators, researchers, current managers, and recruiters. Pfeffer and Sut ton’s (in press) book calls attention to managerial heroes—people who use evidence to turn troubled companies around and/or to create sustained successes. As in the case of any change in collective attitudes (Gladwell, 2002), turning evidence-based management from a practice of a prophetic few into the mainstream requires champions— credible people like Pfeffer and Sutton’s managerial heroes—to advertise its value. Networks of individuals, excited by what evidence-based management makes possible, need to exist to disseminate it to others. One such collaborative network might parallel the Cochrane Collaboration in medicine and the Campbell Collaboration in criminal justice and education. Such a community has been advocated to promote evidenced-based management of health care organizations [Kovner et al. , 2005], suggesting that communities of experts might effectively be built around the management of specific kinds of organizations. ) Each represents a worldwide community of experts created to provide ready access to a particular 2006 Rousseau 267 body of evidence and the practices it supports. Community members, p ractitioners as well as researchers, collaborate in summarizing stateof-the-art knowledge on practices known to be important. Information is presented in sufficient detail regarding evidence and sources of outcome variation to reduce underuse, overuse, and misuse. While these communities are geographically distributed, they also sponsor face-to-face meetings to promote community building, commitment, and learning. Their major product is online access to information, designed for easy use. EVIDENCE-BASED PRACTICE CAN BE MISUNDERSTOOD On a cautionary note, the label evidencebased practice can be misapplied. It can be used to characterize superficial practices (another company’s so-called best practice or the latest tool consultants are selling). Alternatively, it can be used as a club (the kind with a nail in it) to force compliance with a standard that may not be universally applicable. One downside of poor implementation of evidence-based medicine is the challenge the British health care system has faced owing to the use of the Cochrane Collaboration’s recommendations to regulate clinical care decisions, with enforcement of the recommendations regardless of their suitability for particular patients (Eysenbach & Kummervold, 2005). Evidence-based practice is not onesize-fits-all; it’s the best current evidence coupled with informed expert judgment. OUR OWN ZEITGEIST PROMOTING EVIDENCE-BASED PRACTICE OF MANAGEMENT Forty years elapsed between Semmelweis’s discoveries and the formulation of germ theory. One hundred years later, even basic infectionreducing practices such as hand washing still are not consistently performed in hospitals (Johns Hopkins Medicine, 2004). Considering the personal growth and social and organizational changes evidence-based practice requires, our own evidence-based management zeitgeist still has plenty of time to run. The first challenge is consciousness raising regarding the rich array of evidence that can improve effectiveness of managerial decisions. Educating opinion leaders, including prominent executives and educators, in the nature and value of evidence-based approaches builds champions who can get the word out. Updating management education with the latest research must be ongoing, demanding that educators and textbook writers apprise themselves of new research findings. The onus is on researchers to make generalizability clearer by providing better information in their reports regarding the context in which their findings were observed. All parties need to put greater emphasis on learning how to translate research findings into solutions. In the case of researchers, too much information that might affect the translations of findings to practice remains tacit, in the apparent minutiae research reports omit, known only to the researcher. Educators need to help students acquire the metaskills for designing solutions around the research principles they teach. Managers must learn how to experiment with possible evidence-based solutions and to adapt them to particular settings. We need knowledgesharing networks composed of educators, researchers, and manager/practitioners to help create and disseminate management-oriented research summaries and practices that best evidence supports. Building a culture in which managers learn to learn from evidence is a critical aspect of effective evidence use (Pfeffer & Sutton, in press). Developing managerial competence historically has been viewed as a training issue, underestimating the investment in collective capabilities that is needed (Mohrman, Gibson, & Mohrman, 2001). The promises of evidence-based management are manifold. It affords higher-quality managerial decisions that are better implemented, and it yields outcomes more in line with organizational goals. Those who use evidence (E and e) and learn to use it well have comparative advantage over their less competent counterparts. Managers, educators, and researchers can learn more systematically throughout their careers regarding principles that govern human behavior and organizational actions and the solutions that enhance contemporary organizational performance and member experience. A focus on evidence use may also ultimately help to blur the boundaries between researchers, educators, and managers, creating a lively community with many feedback loops where information is sys- 268 Academy of Management Review April tematically gathered, evaluated, disseminated, implemented, reevaluated, and shared. The promise of evidence-based management contrasts with the staying power or stickiness of the status quo. Like the QWERTY keyboard created for manual typewriters, but inefficient in the age of word processing, management-asusual survives, despite being out of step with contemporary needs. Failure to evolve toward evidence-based management, however, is costlier than mere inefficiency. It deprives organizations, their members, our students, and the general public of greater success and better managers. Please join with me in working to make evidence-based management a reality. REFERENCES Anderson, J. R. , Fincham, J. M. , & Douglass, S. 1997. The role of examples and rules in the acquisition of a cognitive skill. Journal of Experimental Psychology: Learning, Memory, and Cognition, 23: 932–945. Bandura, A. 1971. Social learning theory. New York: General Learning Press. Barlow, D. H. 2004. Psychological treatments. American Psychologist, 59: 869 – 878. Barnard, C. I. 1938. Functions of the executive. Cambridge, MA: Harvard University Press. Benner, P. 2001. From novice to expert: Excellence and power in clinical nursing practice (commemorative ed. ). Menlo Park, CA: Addison-Wesley. Bennis, W. G. , & O’Toole, J. 2004. How business schools lost their way. 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Organizational behavior: Key concepts, skills and best practices. New York: McGrawHill. Kolata, G. 2004. Program coaxes hospitals to see treatments under their noses. New York Times, December 2: A1, C8. Kovner, A. R. , Elton, J. J. , & Billings, J. D. 2005. Evidence-based management. Frontiers of Health Services Management, 16(4): 3–24. Lemieux-Charles, L. , & Champagne, F. 2004. Using knowledge and evidence in healthcare: Multidisciplinary perspectives. Toronto: University of Toronto Press. Locke, E. A. , & Latham, G. P. 1984. Goal setting: A motivational technique that works. Englewood Cliffs, NJ: Prentice-Hall. Lomas, J. , Culyer, T. , McCutcheon, C. , McAuley, L. , & Law, S. 2005. Conceptualizing evidence for health system guidance. Final report to Canadian Health Services Research Foundation, Ottawa, Ontario. Martin, J. , Feldman, M. , Hatch, M. , & Sitkin, S. B. 1983. The uniqueness paradox in organizational stories. Administrative Science Quarterly, 28: 438 – 453. Meindl, J. 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Hard facts, dangerous half-truths, and total nonsense: Profiting from evidencebased management. Boston: Harvard Business School Press. Rousseau, D. M. 2005. Evidence-based management in health care. In C. Korunka & P. Hoffmann (Eds. ), Change Rucci, A. J. , Kirn, S. P. , & Quinn, R. T. 1998. The employeecustomer-profit chain at Sears. Harvard Business Review, 76(1): 82–97. Rynes, S. L. , Brown, K. G. , Colbert, A. E. 2002. Seven common misconceptions about human resource practices: Research findings versus practitioner beliefs. Academy of Management Executive, 18(3): 92–103. Rynes, S. L. , Trank, C. Q. , Lawson, A. M. , & Ilies, R. 2003. Behavioral coursework in business education: Growing evidence of a legitimacy crisis. Academy of Management Learning & Education, 2: 269 –283. Sackett, D. L. , Straus, S. E. , Richardson, W. S. , Rosenberg, W. , & Haynes, R. B. 2000. Evidence-based medicine: How to practice and teach EBM. New York: Churchill Livingstone. Schank, R. C. 2003. Every curriculum tells a story. Unpublished manuscript, Carnegie Mellon University, Pittsburgh. ? Schon, D. 1983. The reflective practioner: How professionals think in action. London: Temple Smith. Sherman, L. W. 2002. Evidence-based policing: Social organization of information for social control. In E. Waring & D. Weisburd (Eds. ), Crime and social organization: 217– 248. New Brunswick, NJ: Transaction. Staw, B. , & Epstein, L. 2000. What bandwagons bring: Effects of popular management techniques on corporate performance, reputation, and CEO pay. Administrative Science Quarterly, 43: 523–556. Thompson, L. , Gentner, D. , & Lowenstein, J. 2003. Avoiding missed opportunities in managerial life: Analogical training more powerful than individual case training. In L. L. Thompson (Ed. ), The social psychology of organizational life: 163–173. New York: Psychology Press. Trank, C. Q. , & Rynes, S. L. 2003. Who moved our cheese? Reclaiming professionalism in business education. Academy of Management Learning & Education, 2: 189 – 205. Tyler, T. 1990. Why people obey the law. New Haven, CT: Yale University Press. Walshe, K. , & Rundall, T. G. 2001. Evidence-based management: From theory to practice in health care. Milbank Quarterly, 79: 429 – 457. Whyte, W. F. 1948. Human relations in the restaurant industry. New York: McGraw-Hill. Denise M. Rousseau ([email  protected] edu) is past president of the Academy of Management and H. J. Heinz II Professor of Organizational Behavior and Public Policy at Carnegie Mellon University, jointly in the Heinz School of Public Policy and Management and the Tepper School of Business.

The Wealth of Nations

The Wealth of Nations was published 9 March 1776, during the Scottish Enlightenment and the Scottish Agricultural Revolution. It influenced a number of authors and economists, as well as governments and organizations. Synopsis I: Of the Causes of Improvement in the productive Powers of Labour Of the Division of Labour: Division of labour has caused a greater increase in production than any other factor. This diversification is greatest for nations with more industry and improvement, and is responsible for â€Å"universal opulence† in those countries. Agriculture is less amenable than industry to division of labour; hence, rich nations are not so far ahead of poor nations in agriculture as in industry. Of the Principle which gives Occasion to the Division of Labour: Division of labour arises not from innate wisdom, but from humans' propensity to barter. The apparent difference in natural talents between people is a result of specialization, rather than any innate cause. That the Division of Labour is Limited by the Extent of the Market: Limited opportunity for exchange discourages division of labour. Because â€Å"water-carriage† extends the market, division of labour, with its improvements, comes earliest to cities near waterways. Civilization began around the highly navigable Mediterranean Sea†¦ Of the Origin and Use of Money: With division of labour, the producer of one's own labour can fill only a small part of one's needs. Different commodities have served as a common medium of exchange, but all nations have finally settled on metals, which are durable and divisible, for this purpose. Before coinage, people had to weigh and assay with each exchange, or risk â€Å"the grossest frauds and impositions. Thus nations began stamping metal, on one side only, to ascertain purity, or on all sides, to stipulate purity and amount. The quantity of real metal in coins has diminished, due to the â€Å"avarice and injustice of princes and sovereign states,† enabling them to pay their debts in appearance only, and to the defraudment of creditors. Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money: Smith gives two conflicting definitions of the relative value of a commodity. Adam Smith, â€Å"What everything really costs to the man, who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy. â€Å"The value of any commodity †¦ is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities. † Of the Component Parts of the Price of Commodities: Smith argues that the price of any product reflects wages, rent of land and â€Å"†¦ profit of stock,† which compensates the capitalist for risking his resources. Of the Natural and Market Price of Commodities: â€Å"When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay†¦ annot be supplied with the quantity which they want†¦ Some of them will be willing to give more. A competition will begin among them, and the market price will rise†¦ When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages and profit, which must be paid in order to bring it thither†¦ The market price will sink†¦ † When demand exceeds supply, the price goes up. When the supply exceeds demand, the price goes down. Of the Wages of Labour: Smith describes how the wages of labour are dictated primarily by the competition among laborers and masters. When laborers bid against one another for limited opportunities for employment, the wages of labour collectively fall, whereas when employers compete against one another for limited supplies of labour, the wages of labour collectively rise. However, this process of competition is often circumvented by combinations among laborers and among masters. When laborers combine and no longer bid against one another, their wages rise, whereas when masters combine, wages fall. Of the Profits of Stock: Smith uses interest rates as an indicator of the profits of stock. This is because interest can only be paid with the profits of stock, and so creditors will be able to raise rates in proportion to the increase or decrease of the profits of their debtors. Smith argues that the profits of stock are inversely proportional to the wages of labour, because as more money is spent compensating labour, there is less remaining for personal profit. It follows that, in societies where competition among laborers is greatest relative to competition among employers, profits will be much higher. Smith illustrates this by comparing interest rates in England and Scotland. In England, government laws against usury had kept maximum interest rates very low, but even the maximum rate was believed to be higher than the rate at which money was usually loaned. In Scotland, however, interest rates are much higher. This is the result of a greater proportion of capitalists in England, which offsets some competition among laborers and raises wages. Of Wages and Profit in the Different Employments of Labour and Stock: Smith repeatedly attacks groups of politically aligned individuals who attempt to use their collective influence to manipulate the government into doing their bidding. At the time, these were referred to as â€Å"factions,† but are now more commonly called â€Å"special interests,† a term that can comprise international bankers, corporate conglomerations, outright oligopolies, trade unions and other groups. Indeed, Smith had a particular distrust of the tradesman class. He felt that the members of this class, especially acting together within the guilds they want to form, could constitute a power block and manipulate the state into regulating for special interests against the general interest: â€Å"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. † Smith also argues against government subsidies of certain trades, because this will draw many more people to the trade than what would otherwise be normal, collectively lowering their wages. Motivates an understanding of the idea of feudalism. Of the Rent of the Land: Rent, considered as the price paid for the use of land, is naturally the highest the tenant can afford in the actual circumstances of the land. In adjusting lease terms, the landlord endeavors to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed, pays the labour, and purchases and maintains the cattle and other instruments of husbandry, together with the ordinary profits of farming stock in the neighborhood. This is evidently the smallest share with which the tenant can content himself without being a loser, and the landlord seldom means to leave him anymore. Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, he naturally endeavors to reserve to himself as the rent of his land, which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. II: Of the Nature, Accumulation, and Employment of Stock Of the Division of Stock: â€Å"When the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavors by his labour to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. This is the state of the greater part of the laboring poor in all countries. † â€Å"But when he possesses stock sufficient to maintain him for months or years, he naturally endeavors to derive revenue from the greater part of it; reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which, he expects, is to afford him this revenue, is called his capital. Of Money Considered as a particular Branch of the General Stock of the Society: â€Å"That the price of the greater part of commodities resolves itself into three parts, of which one pays the wages of the labour, another the profits of the stock, and a third the rent of the land which had been employed in producing and bringing them to market: that there are, indeed, some commodities of which the price is made up of two of those parts only, the wages of labour, and the profits of stock: and a very few in which it consists altogether in one, the wages of labour: but that the price of every commodity necessarily resolves itself into some one, or other, or all of these three parts; every part of it which goes neither to rent nor to wages, being necessarily profit to somebody. † Of the Accumulation of Capital, or of Productive and Unproductive Labour: â€Å"One sort of labour ads to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproduct ive labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance and of his master's profit. The labour of a menial servant, on the contrary, adds to the value of nothing. † Of Stock Lent at Interest: â€Å"The stock which is lent at interest is always considered as a capital by the lender. He expects that in due time it is to be restored to him, and that in the meantime the borrower is to pay him a certain annual rent for the use of it. The borrower may use it either as a capital, or as a stock reserved for immediate consumption. If he uses it as a capital, he employs it in the maintenance of productive labourers, who reproduce the value with a profit. He can, in this case, both restore the capital and pay the interest without alienating or encroaching upon any other source of revenue. If he uses it as a stock reserved for immediate consumption, he acts the part of a prodigal, and dissipates in the maintenance of the idle what was destined for the support of the industrious. He can, in this case, neither restore the capital nor pay the interest without either alienating or encroaching upon some other source of revenue, such as the property or the rent of land. † The stock which is lent at interest is, no doubt, occasionally employed in both these ways, but in the former much more frequently than in the latter. III: Of the different Progress of Opulence in different Nations Of the Natural Progress of Opulence: â€Å"The great commerce of every civilized society is that carried on between the inhabitants of the town and those of the country. It consists in the exchange of crude for manufactured produce, either immediately, or by the intervention of money, or of some sort of paper which represents money. The country supplies the town with the means of subsistence and the materials of manufacture. The town repays this supply by sending back a part of the manufactured produce to the inhabitants of the country. The town, in which there neither is nor can be any reproduction of substances, may very roperly be said to gain its whole wealth and subsistence from the country. We must not, however, upon this account, imagine that the gain of the town is the loss of the country. The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided. † Of the Discouragement of Agriculture: â€Å"Of the Discouragement of Agriculture in the Ancient State of Europe after the fall of the Roman Empire†. â€Å"When the German and Scythian nations overran the western provinces of the Roman Empire, the confusions which followed so great a revolution lasted for several centuries. The rapine and violence which the barbarians exercised against the ancient inhabitants interrupted the commerce between the towns and the country. The towns were deserted, and the country was left uncultivated, and the western provinces of Europe, which had enjoyed a considerable degree of opulence under the Roman Empire, sunk into the lowest state of poverty and barbarism. During the continuance of those confusions, the chiefs and principal leaders of those nations acquired or usurped to themselves the greater part of the lands of those countries. A great part of them was uncultivated; but no part of them, whether cultivated or uncultivated, was left without a proprietor. All of them were engrossed, and the greater part by a few great proprietors. This original engrossing of uncultivated lands, though a great, might have been but a transitory evil. They might soon have been divided again, and broke into small parcels either by succession or by alienation. The law of primogeniture hindered them from being divided by succession: the introduction of entails prevented their being broke into small parcels by alienation. † Of the Rise and Progress of Cities and Towns, after the fall of the Roman Empire: â€Å"The inhabitants of cities and towns were, after the fall of the Roman empire, not more favored than those of the country. They consisted, indeed, of a very different order of people from the first inhabitants of the ancient republics of Greece and Italy. These last were composed chiefly of the proprietors of lands, among whom the public territory was originally divided, and who found it convenient to build their houses in the neighborhood of one another, and to surround them with a wall, for the sake of common defense. After the fall of the Roman Empire, on the contrary, the proprietors of land seem generally to have lived in fortified castles on their own estates, and in the midst of their own tenants and dependants. The towns were chiefly inhabited by tradesmen and mechanics, which seem in those days to have been of servile, or very nearly of servile condition. The privileges which we find granted by ancient charters to the inhabitants of some of the principal towns in Europe sufficiently show what they were before those grants. The people to whom it is granted as a privilege that they might give away their own daughters in marriage without the consent of their lord, that upon their death their own children, and not their lord, should succeed to their goods, and that they might dispose of their own effects by will, must, before those grants, have been either altogether or very nearly in the same state of villanage with the occupiers of land in the country. † How the Commerce of the Towns Contributed to the Improvement of the Country: Smith often harshly criticized those who act purely out of self-interest and greed, and warns that, â€Å"†¦ for us, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. † IV: Of Systems of political Economy Of the Principle of the Commercial or Mercantile System: Specifically, The Wealth of Nations attacks, inter alia, two major tenets of mercantilism: 1. The idea that protectionist tariffs serve the economic interests of a nation (or indeed any purpose whatsoever) and 2. The idea that large reserve of gold bullion or other precious metals are necessary for a country's economic success. Of the extraordinary Restraints: â€Å"Of the extraordinary Restraints upon the Importation of Goods of almost all Kinds, from those Countries with which the Balance is supposed to be Disadvantageous†. Of Drawbacks: Merchants and manufacturers are not contented with the monopoly of the home market, but desire likewise the most extensive foreign sale for their goods. Of Treaties of Commerce: When a nation binds itself by treaty either to permit the entry of certain goods from one foreign country which it prohibits from all others, or to exempt the goods of one country from duties to which it subjects those of all others, the country, or at least the merchants and manufacturers of the country, whose commerce is so favored, must necessarily derive great advantage from the treaty. Those merchants and manufacturers enjoy a sort of monopoly in the country which is so indulgent to them. That country becomes a market both more extensive and more advantageous for their goods: more extensive, because the goods of other nations being either excluded or subjected to heavier duties, it takes off a greater quantity of theirs: more advantageous, because the merchants of the favored country, enjoying a sort of monopoly there, will often sell their goods for a better price than if exposed to the free competition of all other nations. † Of Colonies: Of the Motives for establishing new Colonies: The interest which occasioned the first settlement of the different European colonies in America and the West Indies was not altogether as plain and distinct as that which directed the establishment of those of ancient Greece and Rome. Causes of Prosperity of new Colonies: The colonists carry out with them knowledge of agriculture and of other useful arts superior to what can grow up of its own accord in the course of many centuries among savage and barbarous nations. They carry out with them, too, the habit of subordination, some notion of the regular government which takes place in their own country, of the system of laws which supports it, and of a regular administration of justice; and they naturally establish something of the same kind in the new settlement. Of the Agricultural Systems: â€Å"Of the Agricultural Systems, or of those Systems of Political Economy, which Represent the Produce of Land, as either the Sole or the Principal, Source of the Revenue and Wealth of Every Country†. V: Of the Revenue of the Sovereign or Commonwealth Smith postulated four â€Å"maxims† of taxation: proportionality, transparency, convenience, and efficiency. Of the Expenses of the Sovereign or Commonwealth: On taxation Smith wrote, â€Å"The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respe ctively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation. † Of the Sources of the General or Public Revenue of the Society: In his discussion of taxes â€Å"The necessaries of life occasion the great expense of the poor. † They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. † Of War and Public Debts: â€Å"†¦ when war comes politicians are both unwilling and unable to increase their tax revenue in proportion to the increase of their expense. They are unwilling for fear of offending the people, who, by so great and so sudden an increase of taxes, would soon be disgusted with the war †¦ The facility of borrowing delivers them from the embarrassment †¦ By means of borrowing they are enabled, with a very moderate increase of taxes, to raise, from year to year, money sufficient for carrying on the war, and by the practice of perpetually funding they are enabled, with the smallest possible increase of taxes [to pay the interest on the debt], to raise annually the largest possible sum of money [to fund the war †¦ The return of peace, indeed, seldom relieves them from the greater part of the taxes imposed during the war. These are mortgaged for the interest of the debt contracted in order to carry it on. † Smith then goes on to say that even if money was set aside from future revenues to pay for the debts of war, it seldom actually gets used to pay down the debt. Politicians are inclined to spend the money on some other scheme that will win the favor of their constituents. Hence, interest payments rise and war debts continue to grow larger, well beyond the end of the war. Impact– United States James Madison, in a speech given in Congress on 2 February 1791, cited The Wealth of Nations in opposing a national bank: â€Å"The principal disadvantages consisted in, 1st. banishing the precious metals, by substituting another medium to perform their office: This effect was inevitable. It was admitted by the most enlightened patrons of banks, particularly by Smith on the Wealth of Nations†. Thomas Jefferson, writing to John Novell on 14 June 1807, claimed that on â€Å"the subjects of money & commerce, Smith's Wealth of Nations is the best book to be read, unless Say's Political Economy can be had, which treats the same subject on the same principles, but in a shorter compass & more lucid manner†. Two views of the â€Å"Wealth of Nations† The â€Å"Wealth of Nations† is therefore inhomogeneous and consists of the earlier elements of an individualistic strain in the tradition of Aristotle, Puffendorf and Hutcheson, Smith’s teacher, – elements compatible with a neoclassical theory – and the classical theory Smith learned in France. Smith’s classical message is what he states at the very beginning: the two ways to create the â€Å"Wealth of Nations†. First, make productive labour even more productive by enhancing markets to deepen the division of labour (moving the neoclassical production curve to the right); and second, use more labour productively instead of unproductively, i. e. produce more goods and services that are inputs to the next economic reproduction circle, as opposed to goods used up in final consumption. In the words of Adam Smith: â€Å"The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes †¦ This produce †¦ bears a greater or smaller proportion to the number of those who are to consume it †¦ But this proportion must in every nation be regulated by two different circumstances; First, by the skill, dexterity, and judgment with which its labour is generally applied; and, Secondly, by the proportion between the numbers of those who are employed in useful labour, and that of those who are not so employed.

Categorizing Funding Requirements Essay

Each requirement should be funded in different ways. In other words, the nature of the funding requirement dictates the preferred type of funding. For example, core funding needs as a general rule will be satisfied by equity funding and, if available, long-term debt. Short-term cyclical funding and contingency requirements usually are satisfied by shorter-term bank lines. Analyzing the total funding needs of the business into these three categories calls for judgment as to which requirements are core and which are cyclical and of short-term or medium-term duration. There is no one correct answer, and much depends on the nature of the company’s business. For example, a property investment company might categorize funding to pay for completed property developments as core funding for a long-term asset, while a property development company would categorize the costs of a development as cyclical short- to medium-term funding for an asset it confidently will expect to sell on completion of the development. †¢The long-term funding requirements of a business are the funds needed to finance its core business assets such as land, buildings and equipment. Every business has core assets, although it is not always readily apparent what they are. For example, the core assets of airline companies at one time were their fleets of aircraft. Now, however, many airlines avoid owning aircraft, preferring to lease them, and their main core assets have become information technology systems and landing slots at airports. Some hotel groups have ceased owning the hotels they manage, and their core assets are the management contracts for hotels that are owned by third parties. †¢Most companies are subject to cyclical or seasonal fluctuations in their cash flow, often reflecting a seasonal trading pattern. Even companies with no apparent cyclical influences on cash flow, receiving a relatively constant stream of income, might in reality have a short-term cash flow cycle. They might, for example, accumulate cash receipts at a steady rate throughout each month but make bulk payments (for materials and wages and salaries) only one or two days each month, or just once every quarter (for rent payments). Business cycles, and their associated cash flows, can span several years, for example in the development of agricultural and forestry businesses. †¢Contingency funds are to meet unexpected requirements. A company should have access to contingency funding for a number of reasons. There could be an unexpected downturn in one of its markets or the opportunity to make an acquisition. The level of contingency funding depends on such factors as: †¢the volatility of the markets in which the company operates †¢the vulnerability of the earnings stream to market recession †¢the dependence on one or just a few major customers for achieving sales targets †¢Management’s desire for growth by making acquisitions.

Phil Company II Research Paper Example | Topics and Well Written Essays - 1000 words

Phil Company II - Research Paper Example This means that a company should create a brand after acknowledging the influence of economic forces on any given marketing environment. In the contemporary business environment characterized by economic forces created by free enterprise, a company’s brand has proven to play a substantial role in ensuring accomplishment of marketing objectives. Therefore, modern managers should develop reliable skills of initiating and developing a company’s brand. In the context of Phil Company, we will strive to create a brand that deems appropriate for the company’s marketing strategy. From a theoretical perspective, creation of a brand starts at the definition stage whereby a manager defines what a company’s brand should mean to all the interested stakeholders. Upon defining a company’s brand, the responsible manager determines clear objectives meant for that company (Julian, 2011). Based on the business profile of Phil Company and the prevailing marketing force s in the electronics manufacturing industry, Phil can develop a concrete brand by articulating marketing research information into their decision making processes. Research information helps in brand creation because it highlights the key stakeholders and their respective expectations with respect to the company’s marketing practices. In the context of Phil Company, research findings show the expectations of selected market segments. After an accurate definition of the brand, the next step should involve specifying the intended objectives of that brand to the interested stakeholders. A typical brand should communicate the intended message to the target audience(Peter, 2004). A brand should create a vivid perception of a company’s products’ qualities and uniqueness. Phil Company emphasizes the need to differentiate their product with respect to the element of competition in the industry. As a result, the brand developed will influence the target audience at an em otional level. The content of the created brand should achieve a feeling of connection to the consumers. In addition, Phil can achieve loyalty among the consumer population by engaging in the house of brands. In order to reach all its target audience, Phil Company will engage in active brand positioning, both at the domestic and the international market environments. Brand positioning can be achieved through the use of advertisement channels like the media, both television and print, or through the internet. Employment of these modes of advertisement will facilitate substantial positioning of Phil’s brand in both markets (Peter, 2004). Product pricing is another essential element in marketing. In a competitive environment characterized by the typical forces of free enterprise, product pricing is influential in a company’s marketing process. A business environment enjoying the economic aspect of free enterprise allows easy entry and exit from any product industry. In th is regard, the electronic products industry in the US and at the international level has numerous competing manufacturers. Therefore, Phil has to consider the influence of pricing during the development of their marketing strategy. Phil chooses to adopt three pricing strategies that can facilitate the development of comprehensive pricing principles. The first pricing strategy adopted by Phil is

Module Title- Journalism and Society Essay Example | Topics and Well Written Essays - 2000 words

Module Title- Journalism and Society - Essay Example The increasing contentious role of journalism is a major concern and therefore, we would be studying the role and impact of news media in the wider interest of the public. It is true that media, in all formats, exerts powerful influence. It is therefore, not surprising that in the last thirty years, number of ownership has been reduced to just 9 major media conglomerates (Bagdikian) who now own all the major media outlets which include TV, newspaper, radio, publishing houses and movie production houses. Since Media has the power to change public perception, news channels mostly have different channels for domestic and international audience and as per the coverage, content and the authenticity of the news, the media often gains an enviable status and popularity among the masses. The pressure on the journalists to conform to the diktats of the management has intensified. Richard Keeble has asserted that ‘In the face of the enormous cultural, ideological and financial power of the dominant media and their hierarchically organised management structures, it is not surprising that isolated journalists (driven by their consciences) feel impotent to effect change’. (2005, p58). Looking through the last two decade of media evolution, one finds that the democratic and conscientious approach towards various issues that so characterized the media in earlier years, has gradually turned towards capitalistic values. Initially, media served as a link between the community and the government. The newspapers and radio made conscious effort to raise the problems and issues which directly affected the community and their welfare. It acted as the watchdog of the public and made sure that the government adhered to policies and plans best suited for national and regional development. Gradually all that changed and the various media like newspaper and publishers, radio, TV network, motion picture etc. gravitated

Religious figures Term Paper Example | Topics and Well Written Essays - 1500 words

Religious figures - Term Paper Example According to the History, Lord Mahavir was the last Tirthankara of the Jain religion. As per the Jain methodology all Tirthankaras were human beings. They acquired the status of perfection / enlightenment after passing through meditation and self realization. Hence, Jains consider themselves as the perfect human beings. They do not either accept God as their creator, protector and the destroyer of the Universe nor they believe in the destruction of demons (Nagaraja 43). Mahavira was born in 599 B.C. in the Bihar State of India in the King’s house. His followers celebrate his birthday each year as Mahavir Jayanti. The name given to him by his parents was Vardhaman. Being a loving son of his parents, he used to enjoy pleasures and comforts of life in a princely manner. When he attained the age of 30, he gave up all the pleasures of material world and left his family and the Royal abode for good in search of finding solution to the problems of common people and became Monk (Jain & Upadhye 36). After leaving the family and the Royal home, he spent his next 12 years in deep silence and meditation to get rid of the pleasures of life. He did not indulge in any activities that could be harmful for the animals and the birds. In some part of the mentioned period, he lived without food. He found himself quite calm and composed in the face of unbearable sufferings. Due to cited qualities, he earned the fame of Mahavir, which means brave and courageous. During said period, his spiritual power completely developed and comes to the stage of self realization. Such realization in the religion of Jain is known as keval jnana (perfect/enlighten) (Jain & Upadhye 39).   Soon after completion of self realization exercise, Mahavir spent another 30 years of his life to travel in the length and width of India barefooted. During this period, he used to teach people about the truth that he realized. He appraised the people how an individual can enjoy freedom from the cycle of bi rth, pain, misery, life and death and to achieve the state of bliss for good. This state of bliss is known as nirvana or moksha (Nagaraja 54). According to the beliefs of Mahavir, under the influence of karma, the soul becomes greedy of worldly pleasures (personal belongings and possessions). In his view, worldly pleasures make an individual self centered resulting in more and more amassing of karmas.  He used to preach the right faith, right path and good conduct, which played decisive role in freeing the soul from the clutches of karma (Winternitz 107). We cite here three major events of the life of Mahavir a) Conception (Chyavana), an event when his mother conceived him in her womb b) after conceiving him in womb, the mother had fourteen dreams, but as per the belief of Digambar, they were sixteen dreams and c) his birth was the memorable event for his mother and the family alike. According to the belief of Mahavir’s followers, soon after his birth, the King of Heaven to ok him to the Mount of Meru and celebrated his birthday. The most important event in his life was when he gave up all worldly materials in his possession and took refuge in the ascetic order (Jain & Upadhye 47). The ages of darkness in the life of mankind, gave birth to three great religions namely Islam, Christianity and Judaism. The mentioned religions are deep rooted religions. The said religions made its inroads in the Old Testament patriarch. Abraham used to teach their followers about one God and no more (known as Ibrahim in Islam), was said