The Dynamics of Product Pricing and Profit Strategies in Enterprises

Justin Lee

In the contemporary business environment, there exists a striking differentiation in profit margins between smaller enterprises, such as small businesses and individual ventures, and larger corporations. This disparity prompts a critical examination of the underlying factors that allow smaller firms to consistently enjoy higher profit margins than their larger counterparts.

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Reasons for Higher Profit Margins in Smaller Enterprises

One of the foremost reasons small or individual enterprises can achieve greater profitability is attributed to their lower fixed costs. These businesses often operate on a smaller scale, leading to reduced expenses associated with rent, equipment, and personnel. Consequently, with a similar income level, the profit share for small firms can be significantly greater than that of larger corporations, which must contend with a more extensive cost structure.

Operational efficiency also plays a pivotal role in enhancing profit margins for small businesses. Their inherent flexibility allows for rapid adjustments in production or business strategies, which can lead to better cost management. Smaller organizations often find it easier to implement refined management practices, thereby minimizing waste and optimizing workflow. This efficiency translates into increased profitability.

Moreover, many small enterprises strategically position themselves in high-end market segments, providing exceptional, value-added products or services. Such positioning enables them to charge premium prices, thus achieving elevated profit margins. These firms often leverage product differentiation more effectively than larger companies, employing unique designs, features, or services to captivate consumers and justify higher prices.

In the early phases of their establishment, small businesses may adopt high pricing strategies, aiming to build brand awareness and quickly accumulate capital. This tactic not only boosts immediate profit margins but may also allow smaller firms to secure advantageous positions within supply chains, fostering better procurement pricing through specialized supplier relationships.

Tax incentives and regulatory flexibility also contribute to the profitability of small enterprises. Governments often encourage entrepreneurial activity through various tax breaks, thereby alleviating the financial burden on smaller businesses. Furthermore, the ability to more easily adapt to regulatory changes can provide small businesses with additional cost-saving advantages, enhancing profitability.

Lastly, the competitive environment plays a crucial role in shaping the profit landscape for small enterprises. In certain niches or less saturated markets, smaller players may experience reduced competitive pressures, capitalizing on unique advantages that allow for high profit margins. Their ability to swiftly respond to market changes and consumer demands further empowers them in achieving superior profitability.

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The Path to Profitability through High-End Products

In exploring the viability of high-end products as a profit model for small businesses, it is essential to recognize that entering this market segment does present challenges. High-end consumers exhibit a preference for quality and service, readily paying premium prices, thus ensuring robust and stable demand. The potential for substantial profit margins exists in these segments, provided that businesses can effectively penetrate the market.

However, the pursuit of high-end market positioning often requires considerable investment in research and development, raw materials, and marketing, which may impose financial strain on businesses with limited capital. Furthermore, the competitive landscape in the high-end market is formidable, as established brands tend to dominate, leaving small enterprises at a disadvantage in resources and recognition. The challenge of attracting high-end customers, who are discerning and selective, complicates the strategy further.

Successful small businesses in the high-end market typically exhibit defining characteristics: a strong product positioning that distinguishes them from competitors, a commitment to exceptional quality and customer service, and precise marketing strategies that effectively identify and engage target consumer groups.

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Balancing Fast Money with Sustainable Growth

Amidst the pursuit of profits, small businesses often grapple with the dilemma of whether to prioritize quick returns or gradual, sustainable growth. Strategies aimed at achieving rapid profitability—such as high pricing—can yield immediate financial benefits but may pose risks in terms of long-term sustainability. Conversely, strategies emphasizing small profits and volume-based sales promote steady growth but may not capitalize on high-margin opportunities.

Successful entrepreneurs recognize the importance of balance in their approach. While high profit margins may initially provide the necessary capital to establish a firm, transitioning to a model of small profits with rapid sales can facilitate broader market penetration and increased customer loyalty over time. Achieving harmony between these approaches requires innovation and a continued focus on differentiating products and services.

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Adaptation Across Development Stages

Every enterprise must navigate various developmental phases, each necessitating distinct pricing and profit strategies. During the initial accumulation stage, high pricing can facilitate rapid capital accumulation. As firms mature, they may shift to low-margin, high-volume strategies to capture market share and build brand recognition. Eventually, organizations need to develop comprehensive systems surrounding product offerings and pricing to maximize profitability across diverse consumer segments.

In conclusion, successful enterprises adopt various pricing and profit strategies to adapt to their evolving market landscapes and internal growth trajectories. The astute selection of these strategies—guided by thorough market analysis and an understanding of consumer behavior—positions small and individual enterprises for enduring success amidst the complexities of the business world.

Seek a balance between short-term economic benefits and long-term brand maintenance during the economic downturn

Justin Lee

During the economic downturn, enterprises temporarily weaken the high-end product brand, and instead launch the low-end product brand to adapt to the sluggish market demand, this strategy seeks a balance between short-term economic interests and long-term brand maintenance, which has multiple important implications.

First, to achieve short-term economic benefits

Meeting market demand: During an economic downturn, consumers have less purchasing power and become more price sensitive. The launch of low-end product brands can quickly respond to changes in market demand and attract consumers with more affordable prices, thereby expanding market share and achieving short-term sales growth.

Ease operating pressure: low-end products usually have the characteristics of lower cost and faster turnover. By launching such products, enterprises can quickly withdraw funds, relieve operating pressure, and provide financial support for the stable operation of enterprises.

Second, maintain the reputation of high-end brands

Avoid excessive consumption of brand image: During the economic downturn, if you forcibly maintain the marketing and sales of high-end product brands, it may lead to inventory backlog, price war and other problems due to insufficient market demand, which will damage the brand image. Temporarily weakening the high-end brand can reduce such risks and protect the brand image from excessive consumption.

Focus on core customers: Although the market promotion of high-end brands is temporarily weakened, enterprises can continue to maintain a good relationship with high-end customers through precision marketing, personalized services and other ways. This helps maintain the reputation of mid-to-high-end brands and lays the foundation for brand revival after the market recovers.

Third, retain the loyalty of high-end customers

Enhance customer stickiness: Mid-to-high-end customers usually have high brand loyalty and purchasing power. By providing high-quality after-sales service and exclusive benefits to members, enterprises can enhance the stickiness with these customers, so that they can still maintain their brand attention and trust during the economic downturn.

Prepare for future market recoveries: Economic downturns are temporary and markets always recover. Retaining the loyalty of middle and high-end customers means that enterprises will have a stable customer base and strong market competitiveness when the market recovers. This will help companies recover quickly and expand market share to achieve long-term sustainable development.

Fourth, comprehensive strategy suggestions

Clear brand positioning: enterprises need to clearly define the positioning and target market of the high-end product brand and the low-end product brand. Ensure that the two in the brand image, product quality, price strategy and other aspects of the formation of an effective distinction to avoid internal competition.

Adjust marketing strategy flexibly: Adjust marketing strategy flexibly according to market changes. For middle and low-end product brands, more direct and effective promotion means can be used to attract consumers; For medium and high-end product brands, more attention is paid to the improvement of quality and service experience to maintain brand image and customer loyalty.

Strengthen customer relationship management: Establish a sound customer relationship management system to strengthen communication and interaction with customers. By collecting customer feedback and providing personalized services, we can enhance customer satisfaction and loyalty and lay a solid foundation for the long-term development of enterprises.

To sum up, enterprises temporarily weaken the high-end product brand, launch the low-end product brand to adapt to the sluggish market demand, this strategy to seek a balance between short-term economic interests and long-term brand maintenance, has multiple important significance. However, companies also need to define brand positioning, flexibly adjust marketing strategies and strengthen customer relationship management to ensure the smooth implementation of strategies and maximize long-term results.

THRIVING IN THE AGE OF ACCELERATION

10 To Do's for CEOs to Reinvent Insurance in 2023

By Michael Moloney, Gaurav D. Garg, Paul Ricard, and Stephen Kerr

We are continuing to face a very uncertain environment — war in Europe, higher inflation, the lingering effects of the pandemic, increased likelihood of recession, questions on the right direction and speed of movement on climate/ESG, evolving market pricing cycles, and moderating rates. We suggest 10 ways CEOs should be positioning their organizations in 2023 to make the most of the Age of Acceleration.

Download the Original Article

01

Build macro resilience

Proactively build organizational capacity to withstand the coming shocks

The interplay between inflation, geopolitical conflicts, supply chain shocks, uncertain pricing cycles, climate change, and turbulent markets means that we are facing uncertain and volatile conditions in 2023. Many organizations are initiating cost programs as a response. Traditional programs, however, are blunt instruments, cutting resourcing and management bandwidth dedicated to future capabilities and jeopardizing future growth prospects and competitive positioning.

Macro Resilience programs, on the other hand, map costs at a capability level, allowing CEOs to focus cost and capacity allocation decisions — where to double-down, where to exit or pause, and how much to then re-allocate to future-looking differentiating capabilities. CEOs that build Macro Resilience will ensure that their organizations have the strategic headroom to weather whatever 2023 brings, while preserving important long-term investments.

Create “Risk Fluidity”

Massively accelerate the rate at which risk and capital can be shifted based on emerging conditions

02

There are an amazingly rich and rapidly evolving set of protection needs evident today — climate, financial stability, decentralized finance, cyber, AI, supply chain fragilities, macroeconomic instability, and future pandemic risks, to name a few. Through one lens, this suggests that we should be looking at the ‘best of times’ for the industry — evidenced by rapid innovation in products, new distribution channels, flourishing customer engagement and significant, profitable growth in revenue volumes from new areas. It seems, however, that the industry is still struggling with how to ignite transformative growth against these opportunities with price-earnings multiples, for example, trading in single digit territory for many incumbents (brokers excepted) and a continuing mode of returning significant capital to shareholders rather than reinvesting at scale to pursue growth.

What the industry needs is “Risk Fluidity” — an ability to rapidly and frequently adjust how risk and capital flows within an organization across products, channels, business lines, and geographies. Achieving Risk Fluidity requires an operating model designed explicitly for rapid assimilation of market signals and speed of execution transforming organizational clock speed from months to days.

03

Modularize for Growth

Build a platform-based, modular ecosystem

An increasingly fluid market environment demands a more fluid ecosystem — inflation is forcing insurers to optimize costs, MGAs are gaining scale and traction, and plug-and-play infrastructure providers are commoditizing data and technology. These trends provide a transformative opportunity for insurers to modularize their organizations for growth.

CEOs need to focus capital and resources on their firm’s “crown jewel” capabilities and build an ecosystem of partners around these core activities. Successful modularization requires an unbiased appraisal of where one’s unique advantage lies and what it takes to maximize the value from “owning” certain value chain components, while assembling a powerful ecosystem around it. Select platform-based insurance models have emerged, including in the Web3 space, which may provide a preview of where the market may be headed… fast.

Be the Smart Climate Player

Capitalize on the retreat of capacity from Energy and other sectors to enable an orderly green Energy transition

04

Insurers have a crucial role to play in accelerating and de-risking the net-zero transition. In some cases, however, the industry is bluntly reducing its exposure to carbon intensive sectors, such as Energy, Transportation, Heavy Industry and Construction Materials. With many countries still dependent on energy from fossil fuels, along with operations from other high-emitting sectors, the swift retreat of insurance capacity is itself a risk to net-zero transition.

CEOs can ensure that their organizations set foundations for a sustainable energy strategy by dynamically providing capacity to ensure an orderly transition.

05

Triple Down on Escaping Legacy

Drive through legacy technology to enable cost and experience leadership

An inability to escape legacy technology has been a perennial issue for most insurers. This challenge is often quoted as the biggest reason behind the industry’s slow speed to market and difficulty in scaling disruptive technology. Modularization, Risk Fluidity, and Macro Resilience all require modern technology infrastructures. As such, CEOs must triple down on sunsetting legacy through use of rapid transition solutions, which are now available.

Predict and Prevent

Move beyond risk transfer to prevention to maximize customer lifetime value

06

Moving into profitable ancillary services across risk prediction, prevention, and response is a natural evolution for the P&C industry with several insurers embracing it as the new normal. Some incumbents, for example, are introducing digital assistants with an integrated front-end combining insurance and services offerings for home, health, and travel. Digital-native players offer sensors and home maintenance services to their customers to drive customer stickiness and lower claim costs. These services can be highly profitable, have lighter balance sheet requirements than traditional insurance products, and are highly complementary to existing offerings. Given the range of competing models, the winners will be those who effectively tie a ‘Predict and Prevent’ strategy to their customers’ key underserved needs

07

Integrate Backwards

Insulate against inflation by capturing more loss expense

The P&C ecosystem is a complex web of goods and service providers, with P&C carriers leveraging a network of external partners to replace or repair damage instead of servicing customers themselves. For every dollar of premium, approximately 44 cents of that dollar goes directly to external partners, most of which is focused on claims management including medical facilities, auto body shops or manufacturers, and data providers. Many of these businesses earn greater margins than most insurers, with ROEs in highly fragmented markets such as auto repair and physical therapy as high as 25% to 30%.

Insurers can capture more value from each dollar of claims spend by increasing control of downstream activities within the claims’ lifecycle.

When well-executed, this approach can both improve profitability and lead to better customer experience and satisfaction through delivery of a proactive, end-to-end claims experience.

Become an Asset-Management-Led Insurer

Shift paradigm to compete head-on with PE-backed players

08

Over the last decade, private equity has profoundly changed the landscape of the life insurance industry. Traditional insurers view liability origination as their primary business with general account asset management seen as a supporting capability. Private equity insurers, on the other hand, see asset origination and structuring as their primary business with insurance liability origination as an attractive source of long-term funding. This is a profound difference in business model.

Traditional insurers competing in effected areas need to consider if they too must adopt this PE mindset, or how they can preserve a more traditional model, perhaps through strategic partnerships. Irrespective of the route chosen, a different operating model, organization, and culture, may be a necessity.

09

Run towards the gaps

Be the specialist capacity provider for the growth gaps

The insurance industry has suffered from constrained capacity as demand for emerging risk types, such as cyber and climate, has exploded. For these emerging risks, a lack of historical data has led to insurers falling back on first-principles expertise and heuristics leading to excessive caution and, ultimately, limited capacity.

This limited capacity represents a prime opportunity for those willing and able to seize it. By managing exposure through emerging solutions (e.g., parametric reinsurance) and providing services beyond risk transfer, insurers can service these growth gaps without upending their own risk appetite. In turn, they’ll gain better data on these emerging risks and will underwrite them more effectively going forward.

Digitize Customer-First

Reduce digitization costs by focusing on what matters most to customers and distributors

10

Many insurers have often made a mistake when digitizing their operations – they have worked back from the technology and not the customer. Despite substantial investments to modernize and compete with insurtechs, too many organizations default to building an app or new system without a clear, proven link to the customer or organizational benefit. These investments are often a massive cost drain with minimal ROI when they support low-value products or operations.

When investing in digitization, insurers should focus on the customer’s desired experience in a specific circumstance (or the “job-to-be-done”), shifting from an Operator’s mindset to an Innovator’s mindset.

In starting with problems, not products, and thinking critically about servicing customers’ functional, social, and emotional needs, businesses can strategically invest in technology that enhances their value-proposition while avoiding unnecessary costs and maximizing long-term profitability.

Eyeing the Acquisition of a Direct-to-Consumer Business? Here’s What You Need to Know

LEK

Corporates are stepping up acquisitions of DTC businesses, whose sales are forecast to grow a healthy 16%-18% p.a. for the next several years. The trend reflects corporates’ ambitions to expand their product offerings and cross-market to a new customer base. It also marks a shift in how consumer businesses are adapting to changing consumer preferences by blurring the lines between online and in-person experiences in order to meet consumers where they like to shop.

Corporates have always invested in small brands to further their growth. But DTC businesses are especially attractive because the absence of a middleman often means higher margins. They also tend to have a strong customer orientation, including a deep set of consumer data and a well-developed, wholly owned digital commerce experience — attributes that corporates often struggle to acquire organically.

At the same time, the acquisition trend has yielded several high-profile deals that fell short of expectations. It turns out that many DTC businesses have hidden pitfalls that can trip up even the most experienced of corporates.

In this Executive Insights, we’ll look at where deal activity for DTC businesses has been going and what the attractions are for both buyer and seller. Then we’ll outline some concrete steps you can take to know what you’re buying and increase the odds of a successful transaction.

A robust environment for acquisitions

A growing number of DTC businesses have been hitting the M&A market in recent years. Most have been snapped up by corporates (see Figure 1).

Figure 1

DTC M&A transactions by acquirer type (2018-2021)*

In 2021, about 85% of these corporate DTC acquisitions were consumer businesses. Food and beverage was the most popular category, but meaningful deal activity took place across the consumer spectrum (see Figure 2).

Figure 2

Corporate Consumer DTC M&A transactions by category (2018-2021)*

DTC businesses are an attractive takeover target because they can help corporates achieve their strategic intentions. These include:

Expand consumer reach. The consumer populations of DTC businesses are often younger and quicker to adopt emerging trends. Access to that group was a key driver of Movado Group’s 2017 acquisition of upstart brand MVMT, which sells affordable watches and accessories with help from a significant presence on social media. Serta Simmons followed a similar pattern when it purchased DTC mattress company Tuft & Needle in 2018. The tie-up offered the chance for Serta Simmons to expand beyond its traditional brick-and-mortar channels to reach generally younger bed-in-a-box consumers.

Deepen customer relationships. DTC businesses have direct customer interactions that let them gather consumer data in ways that traditional wholesale brands can’t. With Lululemon’s 2020 acquisition of Mirror, a subscription-based home fitness startup, the company gained more data on consumer fitness preferences that it could use to expand its offerings and consumer touchpoints across fitness occasions. In 2021, women’s beauty and health startup FemTec Health acquired Birchbox, Mira Beauty and Liquid Grid — all data-rich businesses — in an apparent bid to further its artificial intelligence-driven personalized health offerings. This deeper understanding of the consumer allows for more targeted product development and marketing, ultimately improving the consumer experience and deepening customer relationships.

Acquire capabilities. DTC businesses come with digital capabilities that the acquirer can plug into its own business. In this respect, sometimes the brand or product is of less interest than the people and know-how. MVMT came with an experienced management team that could advance Movado’s Digital Center of Excellence initiative. At Serta Simmons, Tuft & Needle’s co-founders have been helping to shake up product lines, ramp up direct channels and change the company’s approach to marketing.

On the other side of the transaction, acquisitions often appeal to DTC brands as a way to tap into the well-developed logistics, marketing and human resources operations of an acquiring company. In addition, a corporate owner can likely help with wider brand marketing and provide access to new channels, which drives brand awareness and creates avenues for reaching a new set of consumers. Since its 2018 sale to Kroger, Home Chef has brought its meal kits into the supermarket company’s stores even as it maintains its ecommerce business. Meanwhile, Tuft & Needle mattresses are now available at Lowe’s and Crate & Barrel along with brick-and-mortar locations under its own brand. Serta Simmons’ capital and expertise fueled much of this expansion.

Best practices for DTC due diligence

But DTC businesses face growing headwinds. Digital marketing costs are rapidly on the rise. Privacy changes are impacting effective consumer targeting and acquisition attribution. Supply chain snarls are taking a toll. For many, profitable customer acquisition has stalled.

Challenges like these can create a cash black hole and become a painful distraction from the business of the acquiring company. After its 2016 acquisition of Dollar Shave Club, Unilever struggled to expand the brand and overcome its high customer acquisition costs. And even the customers that DTC brands already have aren’t guaranteed to stay. ModCloth was supposed to bring younger demographics to Walmart, but the deal turned off customers who liked ModCloth’s unique, independent positioning. Walmart sold the company in 2019, just two years after purchasing it.

So, if you’re in the market for a high-growth DTC business, how can you improve your chances of picking a winner? Here are six considerations for your due diligence:

Align your investment criteria to your goals. Before doing too much work, align on what the strategic goals are for the potential acquisition, whether it’s to reach a new consumer base, access data, jump-start your digital capabilities or something else. With this in mind, be clear on what you’re willing to accept from a profitability perspective (current and future) and how much you’re willing to pay to achieve your aims. Depending on your goals, consider how a DTC acquisition compares with an organic pathway and other alternatives, like acquiring a pure-play technology company that has the capabilities you’re looking for.

Evaluate the target company’s profitability and the quality of its customer base. By analyzing the expansive data set a DTC business has on its customers, you can find out where its margins are headed. Many DTC businesses aren’t in the black yet, and that may be OK. But customer acquisition costs, retention and order volumes are critical to profitability in the long term. Any negative trends in these metrics could signal an issue with the business proposition and long-term sustainability.

Understand brand value. Does the brand have authenticity? Is the product a good one that consumers want to buy? Does it stand out from similar DTC and established brands? Are there any reputational risks? You’ll want a brand that stands the test of time while avoiding any consumer backlash associated with a corporate acquisition.

Model synergies into your offer. Synergies between businesses will likely be your advantage over financial investors competing for the same deal. Many synergies will be revenue based, using the new customer audience (and the data you have on them) to cross-sell and expand share of wallet. This may be especially true when you’re looking to deepen customer relationships with your existing customers through an acquisition or acquiring a new customer base. There may be some cost synergies too, especially for DTC brands relying on contract manufacturers for small-run orders. And shared services could help any acquired DTC reduce its costs. Take these into account to develop a competitive offer but be sure to risk-weight synergies, as they aren’t guaranteed.

Assess how operating models align. DTCs are often more nimble, willing to take risks, innovative and focused on growth versus the bottom line. These cultural dynamics will influence the people they hire, the processes they have and how they structure their organization. Understanding which elements of this are key to success for the target company should play into your acquisition decision, including whether to fully integrate them or let them operate independently.

Consider team retention lock-ins. Certain people may be critical for the continued growth and culture of the DTC business. If that turns out to be the case — or if you’re buying the business for its talent — find out what their intentions are and what it would take to keep them on board once the deal has closed.

Set your dealmaking up for success

M&A transactions involving DTC companies and brands with material online sales hit a four-year high in 2021. Corporates are leading the way, having recognized the value of these businesses as a way to evolve alongside changing consumer behavior.

But success isn’t guaranteed, and DTC businesses have a particular set of challenges that can make it hard for them to become or remain profitable. By making sure you are clear-eyed on the goals of the acquisition and carefully considering the pitfalls, you can increase your chances of a value-creating acquisition.

How to be a great 21st-century CEO

By Gautam Kumra, Vikram Malhotra, and Joydeep Sengupta

What do CEOs do? Why do they do it that way? And what matters most?

To answer those questions, we identified 200 highly successful CEOs and conducted in-depth interviews with 67 of them. We found that there is no simple recipe for success, but there is virtue in simplicity. Indeed, the CEOs we interviewed could describe their business strategy in an elevator ride up Shanghai Tower.

We also found that, in a sense, all CEOs have the same responsibilities, such as working with the board, engaging stakeholders, setting direction, and creating a positive culture. What separates the best from the rest is how they approach these tasks. All excelled at some, were good at the rest—and knew the difference. All are world-class integrators. And all applied a distinctive set of mindsets against these responsibilities. In our own effort at simplicity, we identified the six mindsets that characterize great CEOs.

Be bold. In times of uncertainty, it can be tempting to minimize the downside. However, that all but guarantees either mediocrity or decline. Successful CEOs want to avoid making mistakes, of course, but they also act boldly, actively seeking significant opportunities. They raise the aspirations of the company, and they look for intersections where the business and the market meet. In effect, they are excellent futurists and thus can define the right vision. While they will cut their losses if a move is a dud, they stick to the strategy. The vision comes first; financial performance flows from that.

Treat the soft stuff as the hard stuff. Only one in three strategies is successfully implemented—in large part because change generates resistance. That is why the “soft stuff”—that is, matters related to people and culture—can be the hardest stuff of all to get right. Research has found that companies that solve the soft stuff are more than twice as likely (from 30 to 79 percent) to execute a strategy successfully.1 To carry their organization with them, leaders need to make the case for change, and then keep track of results.

Solve for the team’s psychology. To build high-performing leadership teams, the best CEOs start with roles, not people, asking what the most important jobs are and then finding people who can do those jobs. And they design for overall functionality, bringing in a wide range of expertise. CEOs must engage with each individual while keeping some distance. And, again, the soft stuff counts.

Help directors help the business. The board is the CEO’s boss, but an awkward one—a lot of people, infrequently seen. Like any relationship, the bedrock is trust. That means being open, honest, and prompt about plans and problems. Bad news is, well, bad, but delivering it is also a chance for the board to help, which is its function. CEOs should establish a strong relationship with the lead director and check in with other directors once or twice a year. Finally, introduce the board to the company by connecting the board to managers. As Piyush Gupta, the longtime CEO of Singapore’s DBS Group, put it: “The board, to me, is a partner, and they can talk to anyone in my management team. I believe the free flow of information is helpful for complete alignment.”2

Start with “Why?” Purpose can be difficult to define. At the very least, it should be powerful enough to inspire people, simple enough to be readily understood, and make business sense. And purpose matters: companies with a clear social purpose have significantly outperformed the S&P 500 over the past 20 years.3 The best CEOs ask themselves why their company exists, then make purpose an intrinsic part of the business model, knowing that testing strategy against purpose can open up new areas of growth. Leading with purpose can also enhance employee well-being and build loyalty.

Do what only you can do. Being a CEO is a 24/7 job, but no one can work that way. Great CEOs make it a priority to manage themselves to ensure that they are not being pulled apart. That is obviously personal, but we did find some commonalities. The most important is self-discipline, particularly regarding the use of time. Old-school techniques such as lists, stars, and color coding crop up often as time-management techniques. At the same time, the CEOs we spoke with also build flexibility into their schedule—to respond to the unexpected or simply to think. Many combine high-intensity work with recovery periods, whether that is a ten-minute break between meetings or playing the piano. Ultimately, managing personal effectiveness is about developing a sense of perspective, and then using that to see into the future.

No book can create a great CEO, any more than a boxing manual can produce a Manny Pacquiao. But in business, as in boxing, there is such a thing as good technique. CEOs matter: we calculated that the 200 CEOs we identified created additional economic value of about $5 trillion. By identifying the mindsets that characterize great leadership, we believe that excellence can be cultivated—now and in the future.

The Development of Chinese Digital Tourism Industry

PKU Management Consulting

With the advent of the digital economy, data and algorithms have become key production factors. Platform has become an important mode of economic organization. Digital technology has promoted cross-border integration as the new normal. The marginal cost of online products has been greatly reduced. Consumption and production in the digital economy have become highly interconnected. In this context, make full use of the characteristics of the digital economy, promote digital economy and cultural tourism combination, play to the advantages of the platform economy, strengthen regulation, promote the cultural tourism industry and other industries interconnection, has become a"Digital Tourism"A new track for industrial development.

"Digital Tourism"From the Internet economy, which used to be the backend of the market, we will move forward to the digital transformation of all factors, processes and forms of business in front-end factor markets, new infrastructure at the bottom and back-end industrial applications. Intelligent analysis and management, optimize existing business value chain and management value chain, realize from business operation enablement to product / service innovation, and then realize enterprise transformation and upgrading. Technological innovations such as AI, cloud computing, 5G, digitalization, networking, intelligent upgrading and big data will equip the tourism industry with the "wisdom core" of high-quality development. Promote the strong recovery of the cultural tourism industry, accelerate innovation and iteration, the cultural travel industry has begun to upgrade to the "number of intelligent cultural tourism."

"Digital Intelligence and Cultural Tourism" cannot be separated from a series of revolutionary breakthroughs in digital technology, but also from China's huge consumer market. "Digital Intelligence and Cultural Tourism" breaks the barrier of managers, operators and consumers, presents an explosive development trend, provides reference for tourism decision-making for leaders at all levels and departments, and realizes the scientific and efficient tourism decision-making.

Ⅰ. Policy support and business development

⒈Top-level policy design

In 2020, Ministry of Culture and Tourism, National Development and Reform Commission and other departments successively issued the "Opinions of the Ministry on Promoting the Quality Development of Digital Tourism and Cultural Industry" and the Opinions on Deepening "Internet + Tourism" to Promote the High-Quality Development ofTourism, " This year, the Ministry of Culture and Tourism issued the "14th Five-Year Plan for Cultural and Tourist Development" and the "14th Five-Year" Cultural Industry Development Plan, " As well as the "5G Application" Action Plan (2021-2023) jointly issued by the Ministry of Industry and Information Technology and other 10 departments in July, all of them are escorting 5G + cultural tourism from the top-level design level. With the support of a series of policies and technologies such as 5G, big data, AR, VR and cloud computing, digital tourism has gradually become the main direction for the transformation and upgrading of the tourism industry.

⒉Development of industry

Culture and tourism are important applications of digital tourism economy. The implementation of digital strategy of cultural industry is also an important deployment of the Fifth Plenary Session of the 19th CPC Central Committee. From the logic of industrial growth, since the outbreak of New Canopy Pneumonia, digital / digital intelligence has become the driving force for the development of the cultural and tourism industries. According to the data of the National Bureau of Statistics, in 2021, the operating income of 16 sectors with obvious characteristics of digital culture and tourism industry will reach 3,962.3 billion yuan, an increase of 18.9% over the previous year; The two-year average growth rate was 20.5 percent, 11.6 percentage points higher than the average for cultural enterprises. Accounting for 33.3 percent of the operating income of cultural enterprises.

⒊Type of industrial development

Culture is the precipitation of time and space, tourism is the transfer of space and time.The development and application of VR / AR, NFT, AI, cloud, PUGC game platform, and human-computer interaction devices have provided material support for the progressive technological breakthrough and business model innovation of "digital cultural tourism." The ultimate "Metacosmos" connects the physical world and the digital world, reshapes the human economic system, reconstructs the human way of life, and opens up a new format for the development of cultural tourism:
Smart Tourism Products and Services:It includes highly intelligent tourism products and services characterized by smart hotels, smart rooms, unmanned shops in scenic areas, unmanned sales vehicles and other features, as well as intelligent service characterized by self-check-in at contactless hotels and scanning QR code in scenic spots.

Online Blog:With the help of Internet, AR, VR, AI technology, museums, art galleries, etc., to achieve cultural relics, works of art information scanning, processing, processing. Tourists and viewers watch cultural relics and works of art online with the aid of devices, and improve the viewing experience of tourists through independent tour, zoom, rotation, 360-degree full scene experience.

Immersive scene:Using digital technology, VR, AR, AI and so on, theater, performance hall, theater to create immersive scene, such as immersive exhibition, immersive playground, R / VR theme park, holographic theme restaurant.

Intelligent Manufacturing of Tourism Equipment:Integrating and applying new technologies such as AI, AR, VR to produce smart skis, smart helmets, smart clothing and other travel smart equipment and supplies. Such as immersive roller coaster, driverless tour car, AI sightseeing car and other attractions and sightseeing car intelligent manufacturing. In addition, the integration of things, the Internet, artificial intelligence, big data, cloud computing, cruise yacht, RV, cable car and other tourism equipment manufacturing enterprises intelligent upgrade, The production process, sales process, after-sales process, such as the whole process of digital tourism.

Tourism Data Operation:Innovative and optimized data elements will further promote the supply-side reform of the tourism industry. In the process of the development of digital tourism, The development data of online core digital assets and related products and services of destination and tourism enterprises formed by big data and Internet technologies will shift to asset value. Data trading and data asset securitization will form new business forms and develop new economic models.

Ⅱ Characteristics and development logic of industry

⒈Industry characteristics

Compared with the traditional economy such as agriculture and industry, the digital tourism economy has its distinct new characteristics. As a result, compared with traditional cultural tourism, digital tourism has undergone significant changes in product mode, business mode, management mode, thinking mode and so on. Digital tourism has the characteristics of unlimited resources, unlimited time and space, data-driven, multi-identity and so on. It brings a vast prospect for the development of tourism industry.

From the spatial gathering form,The traditional cultural tourism resources are unique and monopolistic, which continuously promote the development of spatial agglomeration, which will lead to excessive accumulation of resources in the space and cause overcrowding of tourists in scenic spots and tourist destinations. Therefore, the cultural tourism industry planning, marketing and operation of the various aspects of the industrial ecology extended to multidimensional space and time. Breaking the imprisonment of space, thinking about the development of cultural tourism industry from a new dimension, which is the underlying logic of digital tourism and new profit growth space.

From a marketing perspective,Once the new dimension of time and space is established, the user does not need to reach the actual destination, only through the mobile terminal, In fragmented time, you can experience digital cultural tourism products and services, mobilize and stimulate user interest, and then flow to cultural tourism destinations or consumption of digital tourism products or services, providing an immersive experience that touches the emotions of users.

From a planning and operational perspective,A new museum built by the fusion of time and space, using digital technology to digitize many precious cultural relics, There is no longer any need for physical exhibition. Customers roaming in the museum can enjoy the real scene of cultural relics through virtual reality at any time, breaking the limit of time and space. Visitors can travel through the past and imagine the future, obtain unprecedented experience and establish a new view of space and time.

⒉Development logic

Starting from strengthening the basic system of cultural tourism industry,We will promote the digitization of public culture and expand investment space. Construction of digital tourism infrastructure system with digital transformation, intelligent upgrading, integration of innovation and other services. Such as information infrastructure - culture and tourism big data center, integration infrastructure - digital museum, innovation infrastructure - intelligent cultural and creative industrial park. Optimize the supply structure of tourism industry, improve the quality of supply. We will foster a number of leading digital tourism enterprises and develop digital tourism and cultural tourism intelligent industrial parks. We will build a number of regional cultural industrial belts, develop world-class scenic spots and resort areas with rich cultural heritage, and create a batch of national tourism and leisure cities and blocks with distinctive cultural features.

Focus on telling the Chinese story well,Externally, we should promote international communication through innovation, strengthen international cultural exchanges and multi-level dialogue among civilizations, encourage and support digital tourism enterprises to "go global" and promote international advanced digital tourism companies to "bring in." Internally, seize the "yuan universe" tuyere concept, depth excavation of the essence of traditional culture, vigorously develop the country tide, cartoon as the representative of the cultural and creative industries. Promote consumption upgrading and stimulate new consumption potential.

Comprehensively promote digital tourism consumption,Seize the opportunity to expand holiday consumption, vigorously develop red tourism, rural tourism. We will use digital technology to transform and upgrade food, housing, transportation, travel, shopping and entertainment, develop new modes and formats of digital tourism consumption, improve the quality of consumer services, and promote the integrated development of online and offline consumption.

Innovation in tourism management model,The use of digital tourism technology, improve tourism management system, enhance the ability of comprehensive management systems engineering. Such as scenic digital security system, scenic intelligent management platform.

Play the value and role of data,Under the premise of ensuring data security and protecting personal information, the transaction of cultural relics digital assets, cultural creation digital assets and cultural tourism data assets and other core element assets will be promoted in an orderly manner. Promote cultural tourism digital assets and data assets.

Enhance industrial efficiency,Before we do industry is to land, finance, culture and other resources, but the use of resources is not high efficiency. With digital technology, it can shift from efficient allocation to deep mining, and through continuous optimization, significantly improve the effective conversion rate of resources.

⒊Suggestions on the Development of Digital Tourism Industry

① At the industry level

During the prevention and control of the epidemic, the achievements of the digital development of culture and tourism were concentrated and recognized by the public. Digital tourism has the characteristics of low cost, large flow, easy iteration and strong realization. Digital tourism can transform traffic to higher consumption, and establish a higher level of dynamic balance between investment and consumption. Industrial development should achieve:

Digital technology deeply embedded in the tourism industry,Must be combined with the local characteristics of cultural tourism resources, the formation of scale, form complementary, form potential energy, to have the main products, the main project. New technologies and means should complement rather than replace them. We should integrate tradition with modernity and improve social and economic benefits.

Actively develop digital literature and art,We should actively promote the fashion of traditional art, in line with the aesthetic way of the times, tell Chinese stories in the world language, and show traditional culture in a lively and three-dimensional manner; Promote the image of stage art, make full use of image thinking and digital technology, to achieve the "virtual and real" Chinese flavor, Chinese style; Promote efficient communication under the thinking of "Internet +," and let the audience feel the charm of art without leaving home.

The core of digital tourism is to promote integration,Including the integration of technology and industry, integration of resources, cultural tourism integration. The integration of culture and tourism needs the support of science and technology, and the development of intelligent tourism is also inseparable from scientific and technological support. It is the need of industry, society and development to promote the integration of culture and tourism development. Science and technology + tourism, not a simple superposition, mechanical listing, to follow the law of development, to test the actual effect of industry, society, time. Enterprises need to constantly learn and innovate to enhance competitiveness. At the same time, seize the policy opportunity to promote the development of digital tourism industry, through improving online training capacity, upgrading the function of online platform and strengthening digital tourism marketing and other means, to comply with the new trend of the cultural tourism industry development.

② Government level

The CPC Central Committee has proposed a new development pattern with the domestic cycle as the main body and the international and domestic double cycles mutually reinforcing. Relevant leaders should grasp the general trend of the times, make scientific decisions, transform from traditional cultural tourism to digital cultural tourism, firmly grasp the connotation of "double cycle," and open up a new development pattern of digital tourism.

Using digital thinking,Through the flow of data elements, government construction should realize from "digital cultural tourism" to "digital governance." We will promote the formation of a governance system in which government and enterprises participate, share information, and interact with each other in an efficient manner, speed up the overall allocation of social resources, stimulate innovation, and enhance digital governance capabilities. We will support the development of digital infrastructure such as data centers and cloud platforms, encourage enterprises to participate in the opening and cooperation of digital infrastructures, strengthen the construction of mobile Internet infrastructure, such as apps and mini programs, and accumulate data assets. Excavate and cultivate original tourism IP with distinct Chinese cultural characteristics, and create a widely influential digital tourism brand.

Scientific evaluation, careful investment,According to local characteristics and practical application, local conditions should be selected. Avoid investing heavily in some tall, flashy hardware infrastructure, with an APP, make a product, built a platform, can not once and for all. The lack of refined operation will lead to a huge investment of funds, but not to meet the needs of the public experience, nor bring economic results.

The introduction of "sophisticated" talent,Especially with interdisciplinary, interdisciplinary talents; To establish the "production + learning" personnel training mode, based on the current demand of market economy, pay attention to industrial practice, training "practical talents"; Improve the talent evaluation standards, formulate the identification method of digital compound talent, formulate talent support policy. From the introduction of talent, training, evaluation, to play a role in the industry, all-round control tracking.

Study and formulate supporting policies,Based on the in-depth investigation of cultural tourism enterprises, digital tourism towns and tourism platforms, the relevant supporting policies on system design, planning guidance, organizational guarantee, tax incentives, talent support, intellectual property protection and other aspects are formulated. Speed up the establishment of laws and regulations, management norms, administrative regulations, assessment system and industry statistics system to adapt to the development of digital tourism industry to provide a good environment for the digital tourism development.

③ Enterprise level

Open up the data chain,Take scenic spots as an example, it is difficult to get through and share data between scenic spots and related enterprises. Build a smart tourism ecosystem, including senseless ticketing, automatic guidance, intelligent monitoring, security, smart restaurants, cultural relics protection, scenic spot operation and so on.

Strengthen the processing of big consumption data,Collection, storage, processing, analysis and use of cultural tourism data, to build cultural tourism product and service system, to promote enterprise supply and demand allocation and accurate docking.

Building a data aggregation platform,Support upstream and downstream enterprises to open data, promote the whole process of data collection, improve the level of data circulation and commercial sharing.

Build a data security responsibility system,Enhance data security services, improve the standardization and security of network data use in cultural and tourism enterprises.

In short, scientific and technological innovation, model innovation and application innovation are the only way to the integration of digital technology and tourism industry. There is no shortcut or curve to overtake. Digital technology and cultural tourism industry mutual enablement, become a strong support for the transformation of cultural tourism. The intelligence and intelligence index of cultural and tourism industry directly reflect the happiness index of people's better life.

An Overview of Rural Entrepreneurship and Future Directions

Dennis Barber

Abstract

Prior research shows that rural entrepreneurship has its own distinct elements and deserves additional attention within the research community. The frameworks and methodologies from studies focused on high-growth and technology-based entrepreneurship are often used to explore rural entrepreneurial activities. This incongruence limits our understanding of the true impact entrepreneurship can have on rural communities. The articles in this special issue help advance our knowledge of rural entrepreneurship as a distinct field of study, and add to our understanding of its impact in the rural context. Additional research avenues are suggested.

An Overview of Rural Entrepreneurship and Future Directions（EN）

An Overview of Rural Entrepreneurship and Future Directions(CN)

How to Lead Through the Pandemic and the Recovery Phase

By: Tomas Chamorro-Premuzic

Among the wide range of fascinating insights from the 100-year-old science of leadership, perhaps none are as uncomfortable as the notion of a significant gap between the qualities that propel people into leadership roles and those that are actually needed to be an effective leader.

As I highlighted in my last book, Why Do So Many Incompetent Men Become Leaders? (And How to Fix It) (Harvard Business Review, 2019), this gap also explains the pervasive gender imbalance in leadership: When we select leaders on the basis of their confidence, charisma, or power hunger, it should not surprise us that we end up with more male than female leaders. By the same token, these parameters explain why leaders are not typically known for their competence, humility, or integrity, and why narcissistic individuals over-index at the top of any organizational hierarchy or system.

If this was a problem before the pandemic, it is now a disturbing reality, one that accounts for the widespread leadership failures around the globe. Too many leaders are out of depth, exposed, and have nowhere to hide. As I observed in my March 15, 2020 article in Forbes, “Why Are Some Leaders Better at Managing a Crisis?”, while many of the key features of the pandemic are not as “unprecedented” as most people think—so yes, the word has been overused in unprecedented ways—there is surely one unique aspect to this crisis: It is a global leadership experiment like we have never seen before. Leaders around the world are being put through the same test, with unparalleled access to the same standardized KPIs, and the world is watching closely.

Furthermore, since we have never dealt with this virus before, let alone a digital-age pandemic, it has been largely impossible for leaders to rely on their past performance and expertise to mitigate this crisis. Instead, every leader has had to start from scratch, with a blank slate, and work out how best to mitigate the damaging consequences of this devastating virus.

THE POSITIVE CHARACTERISTICS OF CRISIS LEADERSHIP

As organizations (and indeed societies) prepare to face the next phases of this pandemic, there is no question that leadership will remain a key focus area. With that, it is important to reflect on what we have learned so far, not just from this crisis but also from the robust body of research derived from solid decades of organizational psychology and an increasingly interdisciplinary science of leadership.

Crisis leadership is just good leadership. There is a long tradition of research around crisis management, which has identified some of the decisive traits and behaviors to predict how some leaders are much better able to manage crises than others. In my talk at the Global Leadership Network’s event in August 2020, “Six Traits Leaders Typically Lack During Crisis,” I outlined that higher levels of intelligence, curiosity, humility, resilience, empathy, and integrity are all critical to improve leaders’ performance during a crisis. And as it turns out, these traits also elevate leaders’ performance during good times—that is, when there is not a crisis. But in a crisis, leadership matters even more: Leaders’ right and wrong decisions will exacerbate effects on their followers, raising the stakes to a matter of life and death. So while mediocre leaders may go unnoticed in good times, we pay a high price for leadership incompetence when the challenge is big.

The good news, however, is that we don’t need to completely revise our leadership models so they are crisis-proof. In fact, all we need to do is select good leaders. Of course, in a logical world, we wouldn’t have needed a pandemic to realize that people are generally better off when their leaders are smart, curious, humble, resilient, empathetic, and honest—or at least show some of these qualities—but in the real world we did. Our only hope is that the crisis reminds us of the importance of picking leaders based on their competence, rather than on their ability to entertain, seem confident, or successfully acquire power irrespective of their intentions or talent. By the same token, we would be suffering a lot less from this crisis if we had made it a habit to pick leaders with these foundational talent attributes, so here’s to learning this lesson and improving things in the future.

Context still matters. Although crisis leadership is in essence just good leadership, the context still matters. Indeed, according to “When and How Team Leaders Matter,” by J. Richard Hackman and Ruth Wageman (Organizational Behavior, 2005) over 60% of well-performing teams could attribute their performance to “someone’s personality or behavior—and that someone frequently was the team leader.”

And as Barbara Kellerman and I noted in our February 16, 2021 article in Fast Company, followers matter. This has been clear during the pandemic, as even in the case of high-performing leaders—such as Jacinda Ardern of New Zealand or Tsai Ing-wen of Taiwan—there were some favorable conditions, such as location, technological infrastructure, healthcare system, and indeed good followers, that enabled them to tackle the pandemic with success. By the same token, one cannot fully blame Donald Trump or Jair Bolsonaro for their country’s poor results, because inequality, size, governance, and the mindset and culture shaping follower behavior independently influenced results. Of course, in the case of the United States we are seeing in real time how much can change when we change the leader, but it is always hard to draw conclusions with an N of 1, and even though Biden’s administration deserves praise for its vaccine rollout, it is also true that the vaccines were produced during his predecessor’s mandate.

Organizations can change. A silver lining from this crisis is that incompetent leaders have been exposed (and in some instances also eliminated), which of course came at a high price. One hope is that organizations learn the lesson and start to take leadership selection more seriously. This will require the willingness and ability to become more datadriven in their assessment of leaders. As Jeffrey Pfeffer points out in his book Leadership BS: Fixing Workplaces and Careers One Truth at a Time (Harper Business, 2015), and as I noted in The Talent Delusion: Why Data, Not Intuition, Is the Key to Unlocking Human Potential (Piatkus, 2017), even before the pandemic there was clear evidence for the idea that leadership competence is the exception rather than the norm. Indeed, if leaders were chosen on talent, Gallup would not report that only about 22% of the global workforce is engaged (this, in mostly large or leading organizations).

In a world where leadership and management roles were assigned on the basis of competence, most people would trust their boss and be inspired by them. Instead, the average experience people have with their bosses is rather more discouraging, if not traumatic. And we continue to see reports of toxic leaders who derail and whose dark side keeps harming their teams and organizations.

Destructive leadership was rampant before the pandemic, and science-based tools could do much to mitigate it. It is noteworthy that the emergence of artificial intelligence and analytics could help, because the only way to evaluate leaders is to actually analyze how they behave and link these data to organizational outcomes. Yet there is clearly a human tendency to distrust AI and campaign against it as a biased tool. Meanwhile, human biases are alive and well, and they will continue to advance people’s careers on the basis of privilege, nepotism, political influence, and “culture fit.”

We’ve all heard it many times: Crises are opportunities to change, as well as traumatic periods of transition where the old is not ready to die, and the new is not ready to emerge. Our big hope is that our old and outdated leadership archetypes, and our tendency to select people based on style rather than substance or confidence rather than competence, will die or at least fade away with this crisis. That way, we can look forward to a future where our lives are not put in the hands of those who are in it for themselves, or have no capacity to make things better for us, but rather are smart, kind, and honest leaders. AQ

ABOUT THE AUTHOR

Tomas Chamorro-Premuzic is the chief talent scientist at ManpowerGroup, a professor of business psychology at University College London and at Columbia University, and an associate at Harvard’s Entrepreneurial Finance Lab.

The effect of talent management practices on employee retention at the Namibia University of Science and Technology: Middle-level administration staff

Jacobina Amushila, Mark H.R. Bussin

Introduction

Orientation

Talent management (TM) is one of the modern functions of human resource management (HRM) and the most inspiring topics in management (Hatum & Preve, 2015). Talent plays an important role as a part of the HRM function in managing all employees within the organisation that leads to high performance (Tetik, 2016, p. 44). The role of HRM has rapidly changed from only concentrating on hiring, employee benefits and payroll to strategic human resources whereby the focus is on sustaining and driving business strategies. This raises questions about the necessity of re-skilling of HRM functions (Sparrow & Makram, 2015, p. 249). This represents a major shift in how business executives view the value of HRM, as they understand the strategic value of TM and the impact that strong talent can have on financial outcomes (Silzer & Dowell, 2010, p. 3). Silzer and Dowell (2010, p. 3) further state that ‘talent is becoming recognised as a core competitive asset in any business organisation and serves as a currency of business’.

Namibia has been facing major challenges in retaining talent in most key sectors of the economy (Deloitte, 2015, p. 4). According to Letchmiah and Thomas (2017), it is still a major concern for many organisations to retain top-performing employees and thus, leadership strength is negatively affected. Talent management (TM) is the process that ensures an organisation has access to the human capital and helps in attracting, developing, engaging, retaining and utilising talent to the mutual benefit of the business and employees (Bussin, 2014, p. 17). However, employee retention can be defined as ‘an organisation’s ability to hold and keep in the possession and to engage the services of high potentials and value contributors in mission-critical and scarce skills positions’ (Bussin, 2014, p. 26):

Organisations used to view talent as an audience, like fish waiting to be caught and not as a community, an ecosystem or fish swimming all over the global talent pool that are harder to catch. (Frost & Turner, 2016)

Research purpose and objectives

Talent management, as such, is well researched in most parts of the world; however, it is limited in Namibian industries, as it is a fairly new approach in many organisations in Namibia. Therefore, although the shortage of talented workforce has attracted vast attention, the literature gives little recommendations on how to deal with it. The researcher is of the opinion that the problem is that organisations are still attached to the old perception of human resources and thus, there is a lack of understanding on the effects of TM on employee retention. Thus, the Namibia University of Science and Technology (NUST) may continue to face challenges in retaining key employees or absenteeism if TM is not implemented. The institution may extend its recruiting to foreign labour markets. Neither the NUST nor the Ministry of Education has commissioned to research and explore recruitment and retention trials facing NUST and the higher education sector in general to analyse the root causes (Van Hoof, 2020). The institutions of higher learning are vital to the success and growth of the Namibian economy. Retention of highly talented employees appears to be a concern at NUST given a high staff turnover (Deloitte, 2020). Research focused on retaining highly skilled employees might influence the institution’s success and growth, especially employees who are the key drivers in steering the institution in the right direction. If the challenges of retention are not addressed, this will probably negatively affect the university’s overall performance in terms of growth and professional support service to the education sector (Nambira & Enkali, 2019, p. 4). There might be a repeat of the threat in 2012 of employees striking, because of a lack of salary and increment benefits (NUST annual report: 2013). When employees strike, major drawback to the institution are caused because the absence of administration staff hinders service delivery to the students.

The researcher was motivated to undertake this study regarding employee recruitment, turnover and retention of high talent because it is deemed necessary by the fact that high performing and talented employees continue leaving the institution sighting similar reasons for leaving. It is envisaged to propose recommendations that will assist NUST in addressing challenges faced by the institution. The researcher attempted to obtain an understanding and insight into the institution’s recruitment and retention strategies.

To address the scarcity of literature that exists on the relationship between TM and employee retention within NUST and to understand whether implementation of TM can reduce employee retention, the following objectives will be explored:

1. To determine the impact of TM on employee retention at NUST.

2. To find the benefits that the institution can achieve by implementing TM.

3. To formulate the retention strategies adopted by the institution to reduce turnover.

4. To determine the effect that TM has on employee turnover.

5. To explore the relationship between TM and employee retention at NUST.

Literature review

The conceptual clarification of talent

According to Silzer and Dowell (2010):

[T]he term talent dates back to ancient Greeks and biblical times, starting as a measure of weight, then becoming a unit of money and later meaning a person’s value or innate abilities. (p. 13)

We might now refer to a person with innate abilities as a ‘gifted’ individual. There is no universal accepted definition of what talent constitutes, as different organisations and different sectors define talent in a wide range of ways. A few will regard employees who are the current top performers as talent, whilst others also classify those with ‘high potential’ (HIPO) as talent (Bussin, 2014, p. 46). Bussin (2014) further adopted a definition as stated in the Chartered Institute of Personnel and Development (CIPD) (2012) that:

[T]alent consists of those individuals who can make a difference to organisational performance either through their immediate contribution or in the longer term, by demonstrating the highest levels of potential.

Letchmiah and Thomas (2017, p. 3) define a ‘talented employee as the one who drives consistent excellent business performance through competency, commitment and involvement and has shown the potential to move up’. Silzer and Dowell (2010, p. 13) further stated that in an organisation, talent could refer to:

• an individual’s skills and abilities (talents) and what the person can do or contribute to the organisation

• a specific person usually implying she has specific skills and abilities in some area, or

• a group of employees in the organisation impacting superior performance and potential.

Egerova (2014), as cited by Van Zyl, Mathafena and Ras (2017, p. 2), believes that:

[T]he increasing attention to talent is affected by factors such as globalisation, knowledge-based reimbursement, changing the world of labour and also new forms of organisational and demographic changes. In some organisations, talent does not make a great difference about organisational performance. (p. 2)

‘Many bureaucratic organisations have been designed and structured so individuals do not need to perform at a superior level, they simply need to perform at an adequate level’ (Lawler, 2017, p. 10).

Talent management defined and the need for attention

According to Blass (2009, p. 17), cynics argued that ‘TM is just another human resources fad, but few fads seem to have turned themselves into a new trench in the labour market’. The roots of TM can be traced back to the downsizing and outsourcing trends in the 1990s, including the slimming down of graduate recruitment schemes. TM became more popular after McKinsey & Company coined the term ‘War for talent’ in 1997 for their research on TM and practices (Van Zyl et al., 2017, p. 1). Bussin (2014) stated that:

[M]any organisations responded to this ‘wake-up call’ by building methodologies, processes, and talent review mechanisms aiming to attract and retain critical talent and skills required to compete and ‘win the war’. (p. 85)

According to Van Zyl et al. (2017, p. 2), TM has progressed quickly up the corporate agenda in the recent years, which is apparent from the number of research papers published over the last few years. Typically, according to Poisat, Mey and Sharp (2018, p. 2), TM has three mainstream definitions: firstly, it is the description of a new HRM term; secondly, an insinuation of succession planning; and finally, the general management of talented individuals in the organisation. Bussin (2014) further stated that:

[E]ven after many years, organisations are still struggling with ensuring they have the right people, with the right skills, doing the right things, at the right time to achieve business results.

Armstrong (2012, p. 719) defines TM as ‘ensuring that the organisation has talented people it needs to attain its aims and objectives’. The term TM may simply refer to management succession planning or management development activities. Mahlahla (2018) mentioned that TM has three main goals, namely:

• to identify, handpick and develop employees who provide superior performance and stimulate others to perform with the same confidence,

• to find, develop and position highly qualified backup personnel for key positions in the organisation,

• to allocate resources, namely, rewards, training, coaching, job assignments and other inducements to employees based on their genuine or potential contribution to excellence.

Chee’s (2017) study on TM mentioned effective TM planning, leadership, continuous support, organisational unity, work-life balance and other environmental factors where important strengths to retain talented employees in the organisation.

According to Riccio (2010, p. 17), there is a shortage of TM in educational institutions as they spend too little time identifying their future leaders whilst claiming to be institutions for higher learning and training. Several researchers share the same view that there is a need for TM in every organisation and it must be incorporated to create and maintain a strong association of human resources development. Letchmiah and Thomas (2017) mentioned that TM relates to the implementation of integrated strategies that are designed to increase efficiency by developing improved processes for attracting, developing, retaining and utilising individuals with required talents and aptitude to meet existing and future organisational needs. Overall, according to Van Zyl et al. (2017, p. 2), there seems to be a lack of linkage between TM practices and the broader human resources system.

Employee retention

Talent retention is all the activities and practices used by organisations to avoid the departure of talent. ‘Because of the high costs associated with losing talent, it is difficult for organisations to gain and maintain a competitive advantage without retaining their talent’ (Ott, Tolentino, & Michailova, 2018, p. 16). Kibui, Gachunga and Namusonge (2014, p. 421) mentioned that employee engagement and employer–employee relationship should be durable, constant and link the employee to the organisation’s common values and by how the organisation responds to the needs of the employee. However, the South African Board for People Practices found in its annual HRM survey as cited by Erasmus, Grobler and Van Niekerk (2015, p. 34) that a significant 32% of South African organisations do not concern themselves with retention phenomenon, but at least 46% indicated the problem as a concern.

According to Lawler (2017), a major issue in talent development is talent retention. Talent retention as identified by Sparrow and Makram (2015, p. 250) is talent protection and is the process whereby organisations develop isolating implements to protect its talent resources from being lost to other organisations. Turnover is expensive from an administrative and development viewpoint, but its greatest expense often is the opportunity of the talent lost. Arguably, the economic downturn at the start of this decade has caused many employees to stay in jobs that they might have left earlier. As the economy recovers, up to half of the managers could be looking for new jobs as long hours, lower salaries and benefits coupled with their perception of ungrateful and greedy senior leadership, which propels disgruntled employees to leave as more opportunities become available (Blass, 2009, p. 13). The study of Onyango, Nzulwa and Kwena (2017, p. 637) revealed that employee retention involves taking measures to encourage employees to remain in the organisation for the maximum period of time. Onyango et al. (2017, p. 638) further define employee retention as a systematic effort by employers to create and foster an environment that encourages employees to remain with the organisation.

A significant number of employees leave their jobs before they have spent a year with the organisation (Lawler, 2017). Retention strategies should be adopted to strengthen the ability of organisations to attract and retain their workforce. Employee retention is important for building a productive, committed and healthy workforce (Onyango et al., 2017, p. 637). Kibui et al. (2014, p. 422) emphasised that retention is mainly to prevent the loss of competent employees in the organisation, which could cause harm to productivity and service delivery. Remarkably, in understanding challenges faced by organisations to retain staff, it is vital to understand employee turnover (Dhanpat, Modau, Lugisani, Mabojane, & Phiri, 2018).

The talent management strategies to enhance retention in an organisation

A TM strategy according to Armstrong (2012) consists of a view on how the TM processes blend with the organisation’s overall objective to acquire and nurture talent wherever it is. According to Poisat et al. (2018), TM strategies must be adjusted to accommodate the diverse values, features and attitudes towards work and corporate world view of the different generational associates working together. According to Bussin (2014, p. 81), succession management is one tactic to overcome leadership succession risks. Koranteng (2014, p. 23) further suggested that a succession system would be more successful if it is highly formalised, has a system of checks and balances, has adequate resources, has broad information, uses capability rather than governmental criteria for individual selection and has reliable staff. According to Robertson (2015), coaching new employees is important to incorporate coaching into a TM strategy to enable an increase in employee engagement and achieve talent development goals such as problem-solving capabilities and strategic thinking. TM suggests that organisations must be purposeful with their retention techniques to help engaging with newly recruited employees considered top performers. ‘The techniques may include selection techniques, developmental opportunities, and mobility within the organisations and promotion prospects’ (Letchmiah & Thomas, 2017). According to Davis (2016, p. 25), creative assignments is stating that “one cherished resource many organisations overlook is the value of existing employees. Attention on recruiting top talent is a priority for an organisation but so is the talent. Creative assignments is one of the many ways that organisations employ to increase the efforts and abilities of employees whilst performing tasks.

According to Bussin (2014, p. 74), talent development is learning and development of talent and is one of the most important components of a TM strategy and the development needs to be customised and experiential. Developing the right talent and doing so in the correct way is critical to the effectiveness of each organisation (Lawler, 2017). The aim is to use the business strategy to explore the talent attraction and development that may occur. Leadership development according to Armstrong (2012) is rather an unfavourable statement for those who are leaders by birth although there is a saying that leaders are born not made. However, further defines leadership development as a sense to acquire, develop and utilise leadership capabilities or the potential for it. Armstrong (2012) suggested possible conditions for effective leadership development as clear learning objectives, the opportunity for active practice, relevant timely feedback, suitable follow-up activities and a suitable mix of training methods. Employee engagement is one fascinating concept that comes along every few years in the HRM field that is fuelled by an intense business need and introduced into practice so quickly that it creates consternation and confusion in research and academic communities (Silzer & Dowell, 2010, p. 439).

Constructive retention strategies

All organisations are challenged with attracting and retaining a quality workforce to attain operational excellence and competitive advantage (Sparrow & Cooper, 2017, p. 78). Dhanpat et al. (2018) mentioned that it is vital to note that when organisations recruit HIPO individuals, they must develop and implement retention strategies immediately to prevent employees from leaving. According to Turner and Kalman (2014), retention is not only about money but also a universal process that will span most aspects of an individual’s management.

Mentorship programmes: Mentoring plays a key role in helping employees gain awareness into how senior leaders operate (Davies & Kourdi, 2010, p. 66). Organisations having employees mentored is one of the valued and effective professional development prospects they can offer employees. New employees can learn the ropes from an expert through a wealth of guidance, encouragement and support that will provide personal and professional benefits that lead to better performance.

Recognition and rewards system: According to Letchmiah and Thomas (2017), employees who perceive contributions equal to the benefits they receive are less likely to leave their jobs. The appreciation can be as simple as leaving a small note on the employee table, sincere email, a gift card, an extra day off or, as a surprise to a deserving individual, an internal promotion. To succeed in the war for talent, organisations need to clearly understand how numerous reward factors influence whether talented performers stay or leave their jobs (Pregnolato, Bussin, & Schechter, 2017).

Employee compensation: Mahlahla (2018) stated that other researches are on the opinion that the significance of financial compensation strategy on retaining employees varies as per individual and is not necessarily a motivator for everyone. Compensation plays a key role in attracting employees, improves an individual’s organisational commitment and ensures employee retention (Dhanpat et al., 2018).

An ideal package may include a salary, 13th checks, medical aid, pension, and retirement plans, generous paid leave and paid studies.

Communication and feedback: Dhanpat et al. (2018) emphasise that proper and frequent feedback is vital in retaining employees because employees perceive organisational support and increase commitment in the long-term. It is crucial to regularly connect with each employee and not allow issues to build up.

Perform exit interviews: According to Amsbary and Powell (2018):

[S]ome people switch jobs, moving because of a better salary and benefits and working environments while others burn out by working too long and too hard at a single position.

It is very difficult for an organisation to figure out why an employee is leaving unless the employee is asked. That is why Amsbary and Powell (2018) revealed that:

[I]t is vital for an organisation to schedule an exit interview with all employees who decide to resign. Since an exit interview is the last meeting between an employer and an employee, it will give a last chance for the employee to contribute to the organisation’s success. Organisations will be able to form trends and implement an effective change program to reduce or even avoid high turnover and improve retention.

Benefits of talent management

According to Sparrow and Cooper (2017, p. 51), TM has become a burning topic in management over the past few decades. The understanding of the TM topic has progressed in recent times, and the quality of experiential evidence has advanced and has countless benefits that organisations can utilise.

Retaining top talents: According to Letchmiah and Thomas (2017):

[T]op-performing employees are at times unnoticed and seen as organisational assets. As a result, employees become unhappy with and detached from their current employers and begin to look for new job opportunities where they feel more valued and appreciated. (p. 2)

Erasmus et al. (2015, p. 34) highlight that retaining high-quality talent is important to organisations as it eliminates the hiring, selection and onboarding costs otherwise suffered in replacing best professional talent.

Getting the right person for right position: Organisations that attract and retain the right talent and treat it well, reward it, develop it and deploy it correctly perform better than those that simply fill jobs (Lawler, 2017). The right person in the right job will give a better alignment between employee’s interests and job profile that leads to increased job satisfaction and their needs.

Enhanced professional development decisions: Poisat et al. (2018) state that the work environment is important for employee satisfaction and a positive relationship between management and employees. They further indicate that such a relationship needs to be of mutual respect, trust and confidence in employee’s capabilities.

Improved hiring: The success of an organisation’s hiring strategy is determined by an effective TM system that leads to a quality workforce (Van Zyl et al., 2017). As the saying goes, there is no successful talent at the top without bottom talent.

Competitive advantage: Engaged, motivated and skilled employees work in the strategic direction of the organisation’s goals and objectives, which creates a competitive advantage (Ott et al., 2018, p. 17).

Employee motivation and commitment: Poisat et al. (2018) state that that an organisation’s effective TM strategy helps them to keep their employees motivated and committed. A motivated workforce discourages employees to leave the organisation and do their job effectively. Not all employees are driven by money, so they will need to feel engaged and feel safe to be fulfilled.

Employee turnover

Employee turnover is a concern in many worldwide organisations, which decreases the operating costs of organisations, leaving significant effects on talent loss and disruptions in business activities (Dhanpat et al., 2018). Theron, Barkhuizen and Du Plessis (2014) distinguish between avoidable turnover (identified as those employees who express turnover intentions but do not resign) and unavoidable turnover (described as voluntary resignations because of various reasons that organisations have no control over). Narayanan (2016, p. 35) states that over the past few decades, management practitioners have shown more interest in the labour turnover model as it is always a significant concern to many organisations.

Mamun and Hasan (2017, p. 63) blame it on the organisation’s top management as they pay less attention and do not concentrate on this major issue, as they are possibly not capable of recognising the situation on how labour turnover harms the organisation’s overall performance. Ahmed, Sabir and Khoza (2016, p. 89) narrate that employee turnover results in the access and opportunity to enter into new employment. Armstrong (2012) believes that it is necessary to measure labour turnover and calculate its cost to estimate future losses for planning and also to recognise the motives on why people leave their employment. Numerous researchers, including the studies of Ahmed et al. (2016, p. 90), highlight similar factors on why people leave their jobs, such as lack of proper induction and orientation, a mismatch between experience, qualification and salary offered, poor training and development, low-grade working environment, career promotion and bad influence of co-workers. Besides these causes, Silzer and Dowell (2010, p. 240) added that employees also leave because they do not feel appreciated and because management fails to set clear job expectations for prospective employees.

Challenges associated with talent management

According to Sparrow, Scullion and Tarique (2014) ‘there are many debates and criticisms about the way TM is applied in practice and the topic is still lacking a definition and needs theological growth’. TM offers a fresh approach to addressing the hot topic through human resources affluence as many challenges need to be considered, especially the organisational level and employee level challenges (Silzer & Dowell, 2010, p. 753).

The study of Mogwere (2014, p. 23) stipulates that it ‘is important to remember that challenges differ from organisation to organisation even from one continent to another regarding experiencing and a shortage of talent’. Mogwere (2014, p. 23) uses Africa as an example, where organisations lack the ability to hire and retain a qualified workforce and face challenges such as poor salaries, working conditions, proper employee engagement and reduced rewards. Another challenge according to Mogwere (2014, p. 23) emphasises talent shortage resulting from the deteriorating quality of the education system, because of low funding caused by inadequate education and lack of facilities, equipment and tools; the most critical challenge is the lack of qualified academic staff. The studies of Koranteng (2014, p. 30) added that factors such as the current economic crises, hiring and selection, cultural diversities and proper human resources planning are affecting the management of talents.

Research design

This study was performed based on a qualitative research design to understand the effect of TM on employee retention at NUST. According to Bertram and Christiansen (2014, p. 40), ‘research design is a plan of how the researcher intends to methodically collect and analyse the data that is needed to answer the research questions’. The research information was solicited from both primary and secondary data. The researcher made use of a one-on-one interview with semi-structured questions with the study participants.

Research approach

The researcher adopted a qualitative research method by making use of a case study approach because of the complexity and nature of the study. According to Beaudry and Miller (2016):

[A] qualitative research remains constant among other approaches with distinctive features such as, the research focuses on people in their natural settings, samples are small and they are sensitive to setting and purpose, data analysis is inductive, and the researcher was the key instrument for data collection and is engaged with visible players. (p. 39)

Research strategy

The primary source of data for this study was obtained through the semi-structured interviews administered to the participants for both the middle-level administrative employees and the director of HRM.

Research method

Research setting

Interviews were conducted at NUST, which is a Namibian public tertiary educational institution that has recently transformed to a full-fledged university. The institution has grown since its academy years and employed close to 1000 employees, which comprise academic and administrative staff, and enrolled about 13 000 students in 2019. The research was conducted according to ethical rules, procedures and guidelines of NUST obtained from the department of the deputy vice-chancellor of innovation and research.

Entrée and establishing researcher roles

The primary researcher performed the role of interviewer.

Research participants and sampling methods

The 39 potential participants of the study were identified by finding all the names of the individuals that fitted the criteria for the target population. Detailed informed consent forms were e-mailed to participants seeking permission and approval to conduct interviews for gathering responses determining the influence of TM on employee retention of the sample population to address the research questions. An introductory e-mail on the setting up of convenient interview meeting times and venues that ensured confidentiality was sent out to individuals who had by that time consented to participate in the study. Interviews were conducted by first explaining the interview protocol and setting out the aims and objectives of the study. At the end of data collection through the structured interviews, 22 participants were interviewed, which represented a response rate of almost 58%. It was considered sufficient because data saturated well before then.

According to Bertram and Christiansen (2014, p. 59), ‘sampling encompasses making decisions about which people, settings, behaviours, and events will be included in the study by deciding how many individual groups or objects will be observed’. The unit of analysis of this research paper was the administrative middle-level management staff of NUST, because this group of administrative staff is where key activities of NUST revolve.

The researcher approached 39 participants who met the criteria from all 13 administration departments of NUST, meaning it was 3 participants from each department. Of the possible 39 participants approached, 22 were available and able to make the interviews. Data saturated long before all 22 interviews were completed. The sample selected was of the participants in employment for not less than 1 year because they have the knowledge based on the research problem. The participants selected were interviewed and the semi-structured were from the office of the vice-chancellor; office of the deputy vice-chancellor, administration and finance; office of the bursar; office of the registrar; human resources; library; centre for open and lifelong learning; department of auxiliary services; centre for teaching and learning; centre for corporative education unit; dean of students; centre for enterprise development and the department of information and communication technology.

Data collection methods

The data collection method was through semi-structured interviews with the participants selected as the middle-level administration staff members. The respondents answered the interview questions freely according to their ethics and principles without being exposed. The researcher adopted the use of open-ended and closed-ended questions to make it easier for data analysis. Semi-structured interviews lasted from 30 to 45 minutes and the researcher made audio recordings of all the interviews that were later transcribed and analysed.

Data recording

The researcher maintained a file to keep all the handwritten notes of what was said by the respondents because it was easy to lose crucial information if the papers were loose and no respondent would want to be interviewed twice and time was of essence. With the fast-paced technology world, the researcher made use of audio recording that was transcribed before analysis began.

Strategies employed to ensure data quality and integrity

The most cited concept of trustworthiness of quality criteria of this research method is that of Guba and Lincoln of 1985 and thus, this research’s trustworthiness was established by using credibility, transferability, dependability and conformability strategies. To that extent, the researcher ensured that data and data analysis will be credible and trustworthy. The participants were encouraged to support their statements with examples where necessary and the researcher studied the raw data to develop a theory to provide intended insight. Characteristics of data were examined by developing codes and core categories, recording and labelling them. The researcher ensured sending all interview transcripts back to respondents for feedback and correct any misinterpretations through member checking. The researcher made use of good descriptions of the respondent’s answers and the full research process. This enabled the reader to see if findings were in harmony with their experiences and to make transferability judgement decision. To increase dependability, the researcher ensured that the research process is logical, traceable and clearly documented.

The proposed research was conducted according to ethical rules, procedures and guidelines of NUST obtained from the department of the deputy vice-chancellor of innovation and research. Permission to conduct the research was obtained from the registrar, the consent form was developed to safeguard the participants and consent was sought from all participants before starting the interviews. According to Wiley (2013, p. 42), in the research setting, discretion means that identifiable information about individuals, collected during the process of research, will not be disclosed and that the identity of research participants will be protected through a process designed to ensure anonymity, unless they specified to be identified.

Data analysis

According to Beaudry and Miller (2016, p. 45), ‘in qualitative research, data analysis depends on the procedures for organising and reducing data and summarising results’. After collecting the information, the researcher carefully read the handwritten notes and listened to the audios to identify patterns amongst the data collected. Responses differed from the respondent’s different ways of answering the question on how they felt and thought. Thereafter, responses were transcribed into an excel worksheet for data analysis. It is a crucial step for analysing and organising qualitative data to be able to understand, see and allocate codes to sensitive and indirect data collected throughout the study. Responses for each question were assessed and analysed for key words and phrases for which codes were allocated. The codes that were identified were then organised into one dataset applicable to each question. The dataset was then analysed for resemblances, differences and replicate themes and organised order theme bands, categorised patterns and emerging themes for which each theme was named. This report underscored the themes for TM and employee retention, which emerged from the responses utilising thematic analysis technique. Thematic analysis is a search for patterns and themes within a dataset that discovers commonalities of capabilities, thoughts, beliefs, opinions and views, thus addressing the research questions being examined.

Reporting style

The study was reported as per the guidelines of the American Psychological Association (APA).

Ethical considerations

Ethical clearance was obtained from the Southern Business School, SBS-20201-0014-MM.

Results

The results are presented against the objectives of the study.

Research objective 1: To determine the impact of TM on employee retention at the NUST

The encounters of the study showed that NUST is not yet at the phase where it is supposed to be in terms of TM development and employee retention. At this stage, TM has not yet made significant progress and development to where it can influence employee retention. The findings exposed shortcomings in the implementation, such as the lack of overall leadership commitment that was found to be deficient and may impede delivery. The findings showed that the institution has invested in allocating fair salaries although it has not reached a point where non-monetary incentives have satisfied the policy of talent attraction and fulfil employee job satisfaction. Poor employee retention in NUST was also attributed to slow planning of developing a TM programme that could have been implemented ages ago, while others may be from the financial challenges that the institution was facing as a result of slow funding from the government.

Research objective 2: To find the benefits that the institution can achieve by implementing TM

The concept of TM has different meanings for different people, which means that the benefits of implementing a TM programme will differ from organisation to organisation. This is similar to the previous studies as most kinds of literature cited that TM implementation is crucial to recruit and develop talent not just for meeting today’s needs but also keeping in mind the organisation’s future. Thus, developing TM and managing it properly by keeping employees engaged and motivated is beneficial to NUST’s sustainability. To achieve that, the findings expressed that developing a TM strategy in line with the institution’s vision needs to be implemented.

There was a perception that TM improves employee commitment and support to employees throughout their employment and therefore retains top talents. The NUST has made it a priority to complete the implementation of TM to achieve competitive advantage in terms of retaining high performers in administrative operations.

Research objective 3: To formulate the retention strategies adopted by the institution to reduce turnover

This objective was to frame retention strategies that NUST is utilising to minimise employee turnover. This was made by establishing whether there was an understanding of the concept of employee retention and what it seeks to achieve in terms of what level the concept contributes effectively to the TM system. The findings revealed an insignificant percentage of lack of understanding of retention; many understood that retention strategies are necessary and critical for the institution to improve its capacity to retain its high performing employees. The respondents were not keen to identify institutional retention strategies, with individuals emphasising job dissatisfaction because of the institution holding on to traditional HRM practices. However, few respondents commended the strategy of allowing individuals to study with fees waiver options although it was limited compared to the opportunity given to the academics. The majority were rather suggesting strategies that would aid in reducing employee turnover and recommend for exit interviews to be performed to know the reasons behind employees leaving.

Research objective 4: To determine how effective TM is on employee turnover in the NUST

This research objective was to determine the effectiveness of TM process in NUST. The findings concur with the conclusions of various authors and kinds of literature mutually acknowledging that TM as a process ensures that the right skills are acquired, nurtured and retained by the organisations. The findings identified one primary reason that employees leave NUST is the lack of matching non-monetary incentives with that of their competitors. However, career development, job satisfaction and performance management in TM are important factors influencing an individual’s decision to stay. The results show that TM would anticipate HRM activities such as recruitment and selection, coaching, training and development and performance management to minimise employee turnover.

Research objective 5: To explore the relationship between TM and employee retention at the NUST

Many scholars, just like the findings of this study, revealed a positive relationship between the institution’s TM systems and its employees. The findings further showed that employee retention is a major factor in reducing talented employees’ turnover. Therefore, management should give much attention to talented staff to retain their services in the long-term.

It was perceived that talented employees always have high expectations regarding compensation packages but must be include attractive non-monetary benefits in the packages. Career development, job satisfaction and performance management appear to have a close association with low turnover rates maximising the institution’s overall performance. The study concluded that TM cannot be separated from employee retention because they go hand in hand.

Discussion

Outline of the results

The main objective of the research study was to discover the influence of TM on employee retention at NUST. From the qualitative analysis of the results of the interview protocol, the study discovered that TM practices have a significant effect on employee retention at NUST. NUST has gradually benefitted from introducing TM and developing a performance management tool from the analysis yielding several positive outcomes, with the aim to largely benefit after the complete implementation.

The findings also observed the importance of top management playing their key role in the TM programme to ensure the practice of talent retention whilst minimising employee turnover. The results on talent retention strategies showed absent retention strategies except for the old traditional processes in place that helped little in retaining employees. The literature review revealed several retention strategies to challenge the attraction and retention of a talented workforce.

The study findings expect employees to gain more attractive TM benefits that can motivate them to be more loyal to the institution. The study findings state that employees must adjust to change for TM to help them achieve their personal goals and objectives to develop their personal growth. To validate the above findings and finding the way forward, the next step is to address the analysis from the results of the four themes that emerged. The findings from the first theme of talent attraction were to identify and understand the processes of attracting new hires. It was discovered that employees were more attracted to non-monetary incentives compared to monetary incentives. The findings showed the lack of career development is one of the major reasons that employees leave their jobs. In the findings, respondents stated the lack of growth opportunities within administration although the details were not given professionally of exit interviews. Findings noted was increased turnover in the past few years because of burnout and non-monetary incentives offered by other institutions that NUST could not match and now calls for solutions to remain competitive and retain key talent.

The major theme of employee turnover attracted job satisfaction as the sub-theme and findings revealed that employees suffered from job dissatisfaction. The findings suggest that managers do not pay sufficient attention to the performance of employees and ignore the importance of job satisfaction. The study discovered that performance will be emphasised by developing a performance management tool at NUST. The findings concluded that the institution should manage its performance management to strengthen its capabilities and competitiveness in the operating environment. The results of performance management provide a basis for self-development and in TM to ensure the support and guidance that people need to develop and improve.

Practical implications

The findings of this study have important implications for the employers, especially those in the education industry, and the advancement of knowledge in managing and retaining HIPO employees at the institution. The findings of this study help the line and HRM managers in developing and implementing successful TM practices that would help align the core objectives of the institution. The institution should develop retention strategies based on the needs of its top talents and control the strengths that the institutional culture encourages and provides. This allows the institution to have a competitive advantage against other competitors by developing a TM strategy that would be consistent and efficient simultaneously. This study will also provide a vision to the institution as to how TM influences employee retention, so the institution can improve in developing, promoting and retaining talent to meet the existing and future needs.

As compensation of non-monetary incentives, career development, job satisfaction and performance management had the most significance, the institution should pay much attention to these four factors to keep the employee with the institution for a longer time. Line management must assume responsibility and accountability for the outcomes of managing talent in their respective units and departments. Constant communication and feedback are to be carried out continuously by direct management with the employees in a professional, open and honest manner. Finally, the study would also enable us to promote transparency amongst the management and employees in increasing their performance and indirectly help the institution to increase their productivity and ultimately lead to institution profit. The recommended practices for this study will offer the direction to higher educational institutions in determining which of the TM strategies are more effective to retain employees and what urges them to stay and work with the institution on a long-term basis.

Limitations and recommendations

Many interviews were performed via Phone, Zoom or Teams. This limitation was because of the international outbreak of COVID-19 that led to the country’s partial lockdown. The interventions were very strict because of the nature of spreading of the virus and thus led to social distancing and restricted travelling. Many respondents were not willing to risk attracting the virus. The challenge was also that respondents were not willing to provide the completely frank information as regard to the sensitivity of the study subject as they feared victimisation from top management. Another limitation was the lack of reliable responses as some of the data were recorded with cell phones, especially the ones gathered via the Phone app, and thus limited the research and analysis on some questions pertaining to this study.

Regarding empirical knowledge expansion, the study recommends to organisations and/or institutions wishing to restrict the drain of talent, increase job satisfaction to have well-motivated and effective employees and create better business results need to take practical steps to address these challenges. The strategies should increase the value of the organisation and preserve its sustainable competitive advantage.

Regarding organisational recommendations, the following should be practiced by NUST:

• Policymakers should revise and improve the HRM policies, including their TM and retention policy, as HRM policies directly influence employees’ working conditions.

• Implementation and correct application of talent retention strategies by applying the hierarchy of needs theory to understand employees’ needs in the institution by predicting the actions and behaviours of employees under different situations.

• Creating proper rewarding structure to enhance job satisfaction and therefore retention that may include fair benefits from the employee rebate systems for all employees and at all levels.

• Introducing a 360-degree performance appraisal method built in the new developed performance management tool and trying to tap from internal talent pool before a vacancy is advertised to the public.

• Creating an insignificant incentive approach.

Conclusion

The Namibia University of Science and Technology has embraced the development of TM combined with the performance management tool as part of its HRM management operations and practices. From the findings and discussion, majority TM practices that were found to have been adopted by the institution have a relationship with employee retention. Talent management practices to a greater extent determine employee retention; NUST needs to develop other practices such as knowledge management, health and safety and also employee engagement. This research study also established that successful TM is driven by a talent mind-set in which managers in the institution regard TM as their responsibility and not the sole responsibility of the HRM department. Failing to retain high-performing employees in NUST is costly just as for any other organisation because of costs associated with high turnover. Talent management practices can facilitate the development of employees, enhance service delivery and also give NUST an enhanced group image.

Creating Efficiency Through Roles and Responsibilities Alignment

Moe Hammad

"When the leadership team is presented as a unified front, a change can come together, and it can bring disparate teams together."

Can You Describe the Importance of Having Properly Aligned Roles and Responsibilities within an Organization and/or Project Team? 

Aligning on roles and responsibilities is important especially in a complex matrix organization where there are lots of people working on a lot of different things, in different departments. As organizations grow, teams start to migrate into their own silos and what used to work in a small team sometimes doesn’t scale to a larger team. This creates unnecessary handoffs, dissatisfaction, inefficiencies, and lost economies of scale.

Occasionally at different parts of an organization’s growth cycle, it’s important to re-evaluate the goals, strategies and focuses of the company and re-align the roles, responsibilities and interactions of the teams. Start by asking the following questions:

• What’s the vision or goal for each functional group?

• How do they interact with each other?

• How are those strategic goals and day-to-day goals filtered down from the heads of the functional groups to the working groups?

• How do those working groups work with each other?

Oftentimes, the leadership at the top thinks things are going fine, but from the perspective of the analysts and mid-level managers, there are role misalignments shown through duplicated work, or two departments thinking that they own something. That leads to a lot of inefficiencies and wasted time spent doing lower-value tasks in favour of higher value ones that better contribute to the organization’s strategic goals.

How Do You Support Change Management and Communication Functions When Rolling out New Roles and Responsibilities Assignments to a Large Organization? How do you Mitigate Risks?

Change management is crucial with any roles and responsibilities change. Some academic models address this pretty extensively, but what impacts the success of any large change is rallying the group around a shared vision.

The entire team needs to be clear on what the vision or the goal is behind this change, and why something is changing. Getting the team clear and aligned on these two factors will help in eliminating a lot of the hesitation or doubt that that might come up in the process.

In terms of communication, integrating that new communication into the pre-existing day-to-day communication that happens naturally within teams is one of the best ways to get a new message out. For that to work, it’s essential to have change leaders and supporters within the team who are going to be champions for that change across the team.

While there are tools and academic models that exist to help companies through this, it’s important not to solely rely on them because many people will not connect or resonate with an academic or technical model. Instead, integrate the goals of the change into the language that the organization uses day-to-day. That way, it feels as natural as possible to the employees and is something that they’re comfortable using.

How Does an Aligned (or Misaligned) Team Affect the Speed and Effectiveness of Decision Making and Communication? What Are Some Best Practices?

Decision Making

In organizations that are misaligned, every decision or a lot of decisions that are critical for the day-to-day are stuck in approval loops, which are much higher than they need to be. While there are finance and accounting concerns that need to be taken into account, operationally day-to-day these decisions need to be made much quicker.

One of the key ways in which roles and responsibilities alignment increase the speed and effectiveness of decision making is to keep those approval loops at the appropriate level or eliminate them completely. They would be replaced with regular reviews of those decisions and their results to continue to have a pulse on the outcomes of those decisions, but be less hindering to the productivity and speed of those decisions.

Communication

The speed of communication is one aspect of efficiency in roles and responsibilities alignment. Typically, we see processes that happen daily, weekly or quarterly that weave their way through several employees and even departments.  At each of those handoff points, you have to wait for the other employee to move the process along. Each additional handoff in the process creates friction in communication and reduces the speed of that process. Even more so when there are vague expectations set on due dates for deliverables or who is responsible for what.

Realigning those roles and responsibilities can reduce handoffs between departments, and improve the clarity of expectations, which improves speed and effectiveness of communication.

Best Practices to Create Team Alignment

First, the leadership team needs to align on a vision and the values for this change (i.e. what’s the vision for the final result and what was the reason for this change?). When the leadership team is presented as a unified front, a change can come together, and it can bring disparate teams together. 

Second, any vision for an organizational change affecting multiple people and departments needs to be communicated internally from the leadership team rather than imposed externally.

How the GCC can become a force in global green hydrogen

PWC

Executive summary

The rapid shift to green hydrogen presents Gulf Cooperation Council (GCC)1 countries with an opportunity to play a leading role in this new industry. Green hydrogen could become a major and versatile power source of the decarbonized future. The GCC holds significant advantages in the production of green hydrogen, due to abundant, low-cost solar energy. However, green hydrogen entails significant transportation costs to supply large export markets in Europe and East Asia. For that reason, the green hydrogen market will be won in the supply chain. The best way for GCC producers to supply large export markets is to use renewable energy to convert green hydrogen to green ammonia (NH3 , an effective hydrogen-carrying compound). GCC producers would then “crack” the ammonia at the export destination to extract the hydrogen for end use.

The green hydrogen economy is challenging, and will entail a new ecosystem with unique requirements and many unsettled elements. Although technically proven, green ammonia production is not yet operating at industrial levels; however, with several large-scale demonstrator projects currently under way, commercialization is imminent. At the other end of the supply chain, ammonia “cracking” technology still requires further development to extract high-purity hydrogen cost effectively at the volumes required.

To succeed, GCC countries must focus on policy imperatives over the next three to five years, in areas such as developing a national strategy; establishing the business case; launching pilot projects; and creating a supportive policy, regulatory, and investment framework. Longer term, GCC producers will have four strategic priorities to achieve scale advantages at all stages of the green ammonia value chain, encompassing production, conversion, transportation, reconversion through cracking, and delivery.

A critical component of the decarbonization agenda

The market for green hydrogen is moving swiftly from what seemed like a future hypothetical to an extremely promising reality in which the GCC could play a leading role. Hydrogen is abundant, environmentally sustainable, energy-dense, and when produced through renewable energy is “green” — making it a critical part of the decarbonization agenda. Rapid scale and technology improvements mean that green hydrogen production costs are expected to fall sharply in the next decade, with cheaper renewable energy making an important contribution. Based on these trends, green hydrogen will likely reach a turning point in terms of adoption around 2030. By 2050, global green hydrogen demand is expected to reach over 530 million tons, equivalent to around 7 percent of global primary energy consumption.2 This would displace 10 billion barrels of oil equivalent per year, around 37 percent of current global oil production.
At the same time, the applications for green hydrogen are growing far beyond existing uses such as feedstock for industrial processes. Over the long term, green hydrogen will become a major and versatile power source of the decarbonized future, whether powering passenger vehicles, industrial processes, or commercial transport. The transition will likely be led initially by transport applications in high-utilization and larger vehicle categories in which the total cost of ownership compared to vehicles running on hydrocarbons looks most compelling (see “The economics of hydrogen fuel cell electric vehicles”). Hydrogen-blending solutions in building heat and power also hold potential. Moreover, a full switchover from natural gas would unlock significant demand in areas such as industrial energy, industrial feedstock, and power system applications.

The economics of hydrogen fuel cell electric vehicles

Green hydrogen is triggering a fundamental shake-up in the transportation industry through the emergence of hydrogen fuel cell electric vehicles (FCEVs) — rivalling traditional internal combustion engine vehicles (ICEVs) and battery-powered electric vehicles (BEVs).

Generally speaking, FCEV technology has cost advantages over BEV technology for vehicle categories that have high utilization, require longer daily driving distances, or that are typically larger and heavier in size — such as trucks and buses, taxi fleets, and even forklifts. The combination of limited driving range, lengthy battery recharging time, and the extra weight, size, and complexity of the BEV battery pack for larger, heavier vehicles results in superior FCEV economics in these categories. In Germany, for example, FCEVs in the truck category are already more competitive than BEVs in terms of their total cost of ownership, and will be 30 percent more cost effective by 2030.

The market for passenger cars is equally promising, with FCEVs forecasted to surpass ICEVs by 2029 in terms of their total cost of ownership. Toyota is planning production of around 200,000 FCEV vehicles per year by 2025 and is targeting in excess of 500,000 units per year by 2030, with Hyundai aiming for 110,000 per year by 2025.3 These commitments will dramatically reduce FCEV costs, due to mass-market adoption. There are questions as to whether FCEVs or BEVs ultimately will dominate the passenger vehicle market. However, it is already clear that the era of ICEVs is ending.

Conclusion

Although many countries have ambitious plans for green hydrogen, the GCC states have unique advantages that could allow them to lead the hydrogen economy. They also have an incentive to move away from fossil fuels. By seizing the green hydrogen opportunity, GCC countries can lay the foundation for economic growth in a decarbonized world and ensure their continued influence in the energy market.

Overview and growth of India’s connectivity market

PWC

With more than half a billion internet subscribers, India is one of the largest and fastest growing markets for digital consumers. This rapid growth has been propelled by both the public and private sector. For many people in India today, it is easier to have access to a mobile phone than to basic services such as public transport. As a result, the country has seen exponential growth in data generation.
India’s digital surge1 is well noted on the consumer side, even as its businesses have started to adopt ICT technologies such as cloud computing. As a result, the needs of various industry sectors have evolved. The highest demand for connecting data centres through long-haul, trans-oceanic, underground and pipeline cables to enable high-performance connectivity and computing is from the technologically most advanced banking, financial services and insurance (BFSI) sector and the IT and telecom sectors. Government projects such as BharatNet and the National Smart Cities Mission, where schools, hospitals and public security systems will have interconnected services, need passive optical network solutions. Multiple over-the-top (OTT) applications and cable TV operators need fibre-to-the-home connectivity for high-speed content streaming. Additionally, the recent pandemic and ensuing lockdowns have led to greater awareness of the need to be equipped for remote working, which may become a long-term requirement across many organisations.
As a result, data consumption in India is estimated to grow to 100 million terabytes by 2022.2 This data will be stored in a distributed ecosystem of multiple devices and data centres. Consumer preferences in terms of data consumption and the industry push for cloudification hence require significant growth in high-bandwidth and (in some instances) low-latency connectivity.
This growth in data consumption will impose capacity constraints on service providers (e.g. OTT and telecom players), even as the growing number of new-age digitally enabled enterprises demand higher capacity. As a result, the focus will shift to connectivity solutions on Layer 2 and Layer 3 of the Open Systems Interconnection (OSI) model. Layer 2 primarily consists of Ethernet, domestic leased circuit (DLC), international private leased circuit (PLC), etc. Layer 3 primarily comprises multi-protocol label switching (MPLS), software-defined networking in a wide area network (SD-WAN; sometimes also called Layer 2.5), and alternatives such as internet leased line.

The value of value creation

McKinsey Quarterly By Marc Goedhart and Tim Koller

Long-term value creation can—and should—take into account the interests of all stakeholders

Challenges such as globalization, climate change, income inequality, and the growing power of technology titans have shaken public confidence in large corporations. In an annual Gallup poll, more than one in three of those surveyed express little or no confidence in big business—seven percentage points worse than two decades ago.1 Politicians and commentators push for more regulation and fundamental changes in corporate governance. Some have gone so far as to argue that “capitalism is destroying the earth.”2

This is hardly the first time that the system in which value creation takes place has come under fire. At the turn of the 20th century in the United States, fears about the growing power of business combinations raised questions that led to more rigorous enforcement of antitrust laws. The Great Depression of the 1930s was another such moment, when prolonged unemployment undermined confidence in the ability of the capitalist system to mobilize resources, leading to a range of new policies in democracies around the world.

Today’s critique includes a call on companies to include a broader set of stakeholders in their decision making, beyond just their shareholders. It’s a view that has long been influential in continental Europe, where it is frequently embedded in corporate-governance structures. The approach is gaining traction in the United States, as well, with the emergence of public-benefit corporations, which explicitly empower directors to take into account the interests of constituencies other than shareholders.

Particularly at this time of reflection on the virtues and vices of capitalism, we believe it’s critical that managers and board directors have a clear understanding of what value creation means. For today’s value-minded executives, creating value cannot be limited to simply maximizing today’s share price. Rather, the evidence points to a better objective: maximizing a company’s value to its shareholders, now and in the future.

Section 1: Answering society’s call

Recently, the US Business Roundtable released its 2019 “Statement on the purpose of a corporation.” Dozens of business leaders (the managing director of McKinsey among them) declared “a fundamental commitment to all of our stakeholders [emphasis in the original].” Signatories affirmed that their companies have a responsibility to customers, employees, suppliers, communities (including the physical environment), and shareholders. “We commit to deliver value to all of them,” the statement concludes, “for the future success of our companies, our communities and our country.”

A focus on the future

The Business Roundtable’s focus on the future is no accident: issues such as climate change and income inequality have raised concerns that today’s global economic system is shortchanging the future. We agree. The chief culprit, however, is not long-term value creation but its antithesis: short-termism. Managers and investors alike too often fixate on short-term performance metrics, particularly earnings per share, rather than on the creation of value over the long term. By prioritizing (or, perhaps more correctly, mischaracterizing) shareholders’ best interests in terms of beating analyst estimates on near-term quarterly earnings, the financial system can seem to institutionalize a model that cares only for today and all but ignores tomorrow. There also is evidence, including the median scores of companies tracked by McKinsey’s Corporate Horizon Index from 1999 to 2017, that the tendency toward short-termism has been on the rise. Certainly, the roots of short-termism are deep and intertwined. A collective commitment of business leaders to clear the weeds and cultivate future value is therefore highly encouraging.

Companies that conflate short-termism with value creation often put both shareholder value and stakeholder interests at risk. Banks that confused the two in the first decade of this century precipitated a financial crisis that ultimately destroyed billions of dollars of shareholder value. Companies whose short-term focus leads to environmental disasters also destroy shareholder value, not just directly through cleanup costs and fines but via lingering reputational damage. The best managers don’t skimp on safety, don’t make value-destroying decisions just because their peers are doing so, and don’t use accounting or financial gimmicks to boost short-term profits. Such actions undermine the interests of shareholders and all stakeholders and are the antithesis of value creation.

Value creation is inclusive

For companies anywhere in the world, creating long-term shareholder value requires satisfying other stakeholders as well. You can’t create long-term value by ignoring the needs of your customers, suppliers, and employees. Investing for sustainable growth should and often does result in stronger economies, higher living standards, and more opportunities for individuals. It should not be surprising, then, that value-creating capitalism has served to catalyze progress, whether by lifting millions of people out of poverty, contributing to higher literacy rates, or fostering innovations that improve quality of life and lengthen life expectancy.

A strong environmental, social, and governance (ESG) proposition also creates shareholder value.3 For example, Alphabet’s free suite of tools for education, including Google Classroom, not only seeks to help equip teachers with resources to make their work easier and more productive, but it can also familiarize students around the world with Google applications—especially those in underserved communities who might otherwise not have access to meaningful computer engagement at all. Nor is Alphabet reticent about choosing not to do business in instances that it deems harmful to vulnerable populations; the Google Play app store now prohibits apps for personal loans with exorbitant annual percentage rates, an all-too-common feature of predatory payday loans.

Similarly, Lego’s mission to “play well”—to use the power of play to inspire “the builders of tomorrow, their environment and communities”—has led to a program that unites dozens of children in rural China with their working parents. Programs such as these no doubt play a role in burnishing Lego’s brand throughout communities and within company walls, where, it reports, employee motivation and satisfaction levels beat 2018 targets by 50 percent. Or take Sodexo’s efforts to encourage gender balance among managers. Sodexo says the program has increased the retention of not only employees, by 8 percent, but also clients, by 9 percent, and boosted operating margins by 8 percent as well.5

Section 2: Shareholders and stakeholders: A balanced approach

Inevitably, there will also be times when the interests of all of a company’s stakeholders are not complementary. Strategic decisions of all kinds involve myriad trade-offs, and the reality is that the interests of different groups can be at odds with one another. Implicit in the Business Roundtable’s 2019 statement of purpose is concern that business leaders have skewed some of their decisions too much toward the interests of shareholders.

Stakeholders for the long term

Time will tell how they act on this conviction. As a starting point, we’d encourage leaders, when there are trade-offs to be made, to prioritize long-term value creation, given the advantages it holds for resource allocation and economic health. Consider employee stakeholders. A company that tries to boost profits by providing a shabby work environment, underpaying employees, or skimping on benefits will have trouble attracting and retaining high-quality employees. Lower-quality employees can mean lower-quality products, reduced demand, and damage to the brand reputation.

More injury and illness can invite regulatory scrutiny and more union pressure. Higher turnover will inevitably increase training costs. With today’s mobile and educated workforce, such a company will struggle in the long term against competitors offering more attractive environments. If the company earns more than its cost of capital, it might afford to pay above-market wages and still prosper, and treating employees well can be good business.

How well is well enough? A long-term value-creation focus suggests paying wages that are sufficient to attract quality employees and keep them happy and productive and pairing those wages with a range of nonmonetary benefits and rewards. Even companies that have shifted manufacturing of products such as clothing and textiles to low-cost countries with weak labor protection have found that they need to monitor the working conditions of their suppliers or face a consumer backlash.

Or consider how high a price a company should charge for its products. A long-term approach would weigh price, volume, and customer satisfaction to determine a price that creates sustainable value. That price would have to entice consumers to buy the products—not just once, but multiple times, for different generations of products. The company might still thrive at a lower price point, but there’s no way to determine whether the value of a lower price is greater for consumers than the value of a higher price to shareholders, and indeed to all corporate stakeholders, without taking a long-term view.

Social consequences

Far more often, the lines are gray, not black or white. Companies in mature, competitive industries, for example, grapple with whether they should keep open high-cost plants that lose money, just to keep employees working and prevent suppliers from going bankrupt. To do so in a globalizing industry would distort the allocation of resources in the economy, notwithstanding the significant short-term local costs associated with plant closures. At the same time, politicians on both sides of the aisle pressure companies to keep failing plants open. Sometimes, the government is also a major customer of the company’s products or services.

In our experience, managers not only carefully weigh bottom-line impact but also agonize over decisions that have pronounced consequences on workers’ lives and community well-being. But consumers benefit when goods are produced at the lowest possible cost, and the economy benefits when operations that have become a drain on public resources are closed and employees move to new jobs with more competitive companies. And while it’s true that employees often can’t just pick up and relocate, it’s also true that value-creating companies create more jobs. When examining employment, we found that the US and European companies that created the most shareholder value in the past 15 years have shown stronger employment growth (exhibit).

Section 3: Value creation is not a magic wand

Long-term value creation historically has been a massive force for public good, just as short-termism has proved to be a scourge. But short-termism isn’t the only source for today’s sense of crisis. Imagine, in fact, that short-termism were magically cured. Would other foundational problems suddenly disappear as well? Of course not. There are many trade-offs that company managers struggle to make, in which neither a shareholder nor a stakeholder approach offers a clear path forward. This is especially true when it comes to issues affecting people who aren’t immediately involved with the company. These so-called externalities—perhaps most prominently, a company’s carbon emissions affecting parties that otherwise have no direct contact with the company—can be extremely challenging for corporate decision making because there is no objective basis for making trade-offs among parties.

That’s not to say that business leaders should just dismiss the problem of externalities as unsolvable, or something to be solved on a distant day. Punting is the essence of short-termism. With respect to the climate, some of the largest energy companies in the world, including BP and Shell, are taking bold measures right now toward carbon reduction, including tying executive compensation to emissions targets.

Still, the complexity is obvious for any individual company striving to comprehensively solve global threats such as climate change that will affect so many people, now and in the future. That places bigger demands on governments and investors. Governments can create incentives, regulations, and taxes that encourage a migration away from polluting sources of energy. Ideally, such approaches would work in harmony with market-oriented approaches, allowing creative destruction to replace aging technologies and systems with cleaner and more efficient sources of power. This trading off of different economic interests and time horizons is precisely what people charge their governments to do.

Institutional investors such as pension funds, as stewards of the millions of men and women whose financial futures are often at stake, can also play a critical supporting role. In the case of climate change, longer-term investors concerned with environmental issues such as carbon emissions, water scarcity, and land degradation are connecting value and long-term sustainability. Indeed, investor scrutiny has been increasing. Long-term-oriented companies must be attuned to long-term changes that will be demanded by both investors and governments, so that they can adjust their strategies over a five-, ten-, or 20-year time horizon and reduce the risk of stranded assets, or those that are still productive but not in use because of environmental or other issues.

Unfortunately, governments and long-term investors don’t always play their roles effectively. Breakdowns can lead to divergences between shareholder value creation and the impact of externalities. Failure to price or control for externalities will also lead to a misallocation of resources. Those effects can create new stresses, and sometimes outright divisions, between shareholders and other stakeholders.

Yet as the Business Roundtable statement affirms, the interests of shareholders and stakeholders can go hand in hand. Businesses make a vital contribution by creating value for the long term. Doing so in a sustainable manner calls for meeting the concerns of communities (including the environment), consumers, employees, suppliers, and shareholders alike. A short-term focus necessarily shortchanges some or all of these constituencies. A long-term commitment toward value creation, by contrast, almost axiomatically takes a broad range of constituent interests into account. Of course, it’s not the cure for all social ills (beware of anything that purports to be!), but a commitment to long-term value creation is something worth valuing indeed.

ABOUT THE AUTHOR(S)

Marc Goedhart is a senior knowledge expert in McKinsey’s Amsterdam office, and Tim Koller is a partner in the Stamford office. They are coauthors, along with David Wessels, of Valuation: Measuring and Managing the Value of Companies, seventh edition (John Wiley & Sons, 2020), from which this article is adapted.

The Philippines Growth Dialogues

Mckinsey&Comapny

The Philippines is poised for more of the economic growth it has experienced in recent years. In this collection, cross-sector leaders discuss how it can solidify its place as a global economic force.

Over the past decade, the Philippines has experienced exponential economic growth and is currently poised for increased momentum. The Philippines Growth Dialogues is a collection of conversations we have had with CEOs, entrepreneurs and technology leaders to identify opportunities for the country to solidify its place as a global economic force. Many of the conversations predate the pandemic, but they remain relevant and vital—perhaps more vital than ever.

The COVID-19 pandemic will be remembered not just for the massive impact on lives and livelihoods around the world, but also as a major inflection point in how people live, work, and consume. The outlines of the next normal are crystalizing into view, yet much remains to be written. What is certain is that the economic future in the Philippines will belong to the Filipino business leaders who can best anticipate changing demands from consumers, the wider public, and their own employees to drive innovation and growth.

The sweet spot is likely to lie where the transformative power of global trends—especially those that have been accelerated by the COVID-19 crisis—overlap with the unique economic, geographic, and social characteristics that shaped the country’s growth. Those forces have remained resilient throughout the pandemic and will continue to be important.

For instance, it’s well known that Filipinos are early adopters of technology. The conversations in the Philippines Growth Dialogues explore how technology and innovation will continue to shape the future, such as digital disruption in retail helping the next generation of entrepreneurs create and deliver new products and services in response to rapidly-evolving consumer tastes.

Yet the conversations also describe how Philippine companies have not yet fully embraced the ways in which technology can help them realize their full potential. With the COVID-19 pandemic driving an increasing number of consumers online, digital trends are supercharged. That’s creating enormous opportunities for Philippine companies that can leverage advances in technology to respond to changes in behavior to solve problems that are unique to the country.

Inclusiveness and opportunity remain key challenges. The middle class in the Philippines is growing fast, in part on the back of business-process outsourcing (BPO). A massive demographic dividend awaits as the country’s youth matures, but prosperity has not been evenly shared. Philippine businesses that can bring more people into the banking system or open access to education, healthcare, and jobs across the archipelago’s 7,600 islands will surge ahead.

With massive investment planned across the Philippines in everything from services to transport and urban infrastructure, the time is ripe for innovators to build their businesses as they continue building the country. The COVID-19 crisis has created an environment for businesses and governments that has never been more challenging—but that also means that the future starts now.

This anthology is a living document and we will update it as our conversations with local leaders forge new growth paths and shape a new normal for the Philippines.

COVID-19 has created a challenging environment for businesses and governments, but it also means the future starts now for leaders bold enough to overcome it.

Meet your future Asian consumer

Mckinsey&Company

Asia’s consumer markets are not only a story of scale, but also one of diversity and shifting preferences and behavior caused by powerful demographic, social, and economic forces.

Half of the world’s spending growth will come from Asia over the next decade, but do we really know Asia’s consumers? This kaleidoscope of consumers in this highly diverse regional economy—the fastest growing in the world—offers a $10 trillion consumption growth opportunity between now and 2030. Meet the Asian consumer in this series of charts.

Don’t miss more than half the world’s consumption story over the next decade: Asia

Asian consumers are expected to account for half of global consumption growth in the next decade, offering a $10 trillion consumption growth opportunity. Globally, one of every two upper-middle-income and above households is expected to be in Asia, and one of every two transactions to be made by consumers in the region. Strong prospects for consumption in the region reflect falling rates of poverty and rising incomes and spending power. Capturing this growth will require understanding the region’s diversity and rapidly changing consumer behaviors. Companies will need to acquaint themselves with Japanese Insta-grannies, Indonesian Generation Z gamers, Indian small shop owners, Chinese lifestyle-indulging millennials, and others.

Consumers in Asia opt for Asian platforms and influencers

Asian consumers are increasingly online and mobile first across age groups, from members of Generation Z voraciously consuming video content to the more than 90 percent of seniors in Japan and South Korea expected to be online by 2030. But what platforms, influencers, and payment methods do Asian consumers prefer? Asian platforms are gaining prominence and crossing borders. However, there is still no single playbook in the region, and companies will need to adjust their digital footprint to local markets. Asia’s digital generation tends to use non-Asian social-media platforms, but largely follow local social-media influencers. They use Asian e-commerce platforms and local digital payments providers. Within this broad picture, however, there are significant variations. Chinese consumers largely adopt local platforms, while Australian consumers tend to use non-Asian ones.

Israeli Electronic Weapons: Invisible Cloak

Strategic Frontier Technology

July 11, 2021: In mid-2021, an Israeli company (Polaris) launched Kit 300, which is a new MCS (Multispectral Camouflage System) cloth that counters the detection of thermal, infrared or radar equipment More practical and effective. The Polaris team said that the Israel Defense Forces (Israel Defense Forces) have conducted tests in operations and found it to be effective enough. Polaris is one of those defense companies that hired former Israeli Defense Forces special forces to join the team that developed Kit 300 and ensure that new products meet actual needs. In this case, since Lebanon started the war with Hezbollah in 2006, Israeli companies have been trying to develop an MCS material for vehicles and ground forces to neutralize heat detectors like Hezbollah’s 2006 use. For more than a decade, Islamic terrorists have been using night vision equipment obtained from the black market, which shows that the West needs something similar to MCS.

The heat detector is an infantry night vision device that has existed since the 1960s. These portable devices were first equipped with American soldiers in the 1960s, allowing troops to see more clearly than the enemy in moonlight or starlight. In the following decades, these devices became smaller, lighter, and more powerful.

In the ten years after 2001, progress has been faster and more revolutionary. By 2012, lightweight (infantry) night vision equipment uses digital optical amplification technology. The previous optical amplification was analog. But as a digital device, you will get more magnification (up to 300 times). Through the software, you can see a blurred image or quickly adjust the magnification of the device, and you can enter a lighted room from the dark without temporarily blindness. Digital images can be easily transmitted wirelessly. By 2014, the digital goggles weighed 680 gr (24 ounces) and were successfully used by SOCOM troops. The new digital light enhancement technology works well with the existing thermal (thermal) imaging technology. It can quickly mix the data of the two and use helmet-mounted night vision equipment to generate more accurate images for soldiers.

In 2009 and 2011, the US Army began to accept helmet-mounted ENVG (enhanced night vision goggles). This is another major improvement: SENVG (spiral enhanced night vision goggles) appeared. The main improvement of SENVG is clearer, more true color images. The troops who tested them didn't want to abandon them. SENVG is more expensive, and the initial order is less than one thousand yuan. Since then, this has more than tripled, but SENVG has been allocated to the units that need them most.

Russia and China can use this technology, so the development of MCS materials that will hide vehicles and troops from detection by digital thermal sensors is now a priority. This is because thermal equipment looks for differences in heat. It has always been difficult to hide this, and Kit 300 MCS cloth does a better job than any earlier material. Improved MCS materials usually first appear on vehicles and are too heavy to be used by ground forces. It didn't take long for MCS manufacturers to develop a lighter version for the infantry.

For example, in 2017, the U.S. Army tested a new type of Swedish (Saab) MSC camouflage material that provided vehicles with unprecedented concealment. This is because SAAV MCS camouflage nets can be installed on specific types of vehicles, such as second skins, and provide protection when moving, even in combat. The United States and many other countries are looking for an MCS that provides this protection. Saab has sold $8 million worth of MCS to Canada, which has encouraged Americans to take a look.

In the 2017 test, Saab provided four sets of these nets for the Stryker wheeled armored vehicle at their expense, and the United States also followed them to conduct field tests in Europe. If the US military places a large enough order, Saab is willing to build an MCS manufacturing plant in the United States. The test found that Saab MCS is effective, but it is sufficient to justify the large order. Saab has already made some sales to Western countries, and more people are interested in trying it out.

This new generation of camouflage materials has evolved over decades to protect vehicles and mobile bases from the increasing use of infrared (thermal/thermal) sensors for aerial reconnaissance. The latest generation of MCS materials began to appear 15 years ago. After 2006, the United States purchased a large number of such materials. The new MCS net can shield infrared, thermal and radar sensors to a certain extent. Some new materials are used in vehicle soft tops, which have been found to provide a certain degree of protection. The combat uniform contains treated cloth to make it more difficult for thermal sensors to quickly spot soldiers in the dark.

Saab and Polaris went a step further and developed MCS cloth, which makes the effect of air or ground thermal sensors much lower. This may be a major advantage in combat, because getting the first accurate shot may be decisive. Saab MCS has a variety of camouflage patterns and colors, so vehicles can quickly "change their skin" to cope with the new climate or season. Israel Kit 300 is a step beyond this and provides invisible thermal, infrared and radar sensors. In addition, Israel and other MCS developers are working on new materials that will make troops and vehicles invisible to the naked eye, as well as multispectral sensors.

After 2006, people worry that because the basic invisible network is relatively cheap, it may be welcomed by Islamic terrorists and drug-trafficking groups in places such as Iraq and Afghanistan. The result will be that the enemy’s position will be more difficult to detect by airborne or satellite sensors. As we all know, the enemy's irregulars will obtain high-tech equipment, such as night vision or encrypted radio, and use them for their own benefit. Of course, if terrorists with commercial infrared sensors scan the hills one night, they will find that their equipment is less effective. They will not be able to spot the special forces team and hide under their new MSC camouflage net. This has not become a major issue in counter-terrorism operations. But the effectiveness of the new network is real.

How does the US government support technological innovation?

Strategic Frontier Technology

Technological innovation is a systematic project. Good industrial policies, accumulation of basic research, close cooperation between industry, university and research are indispensable. 

Ford Professor of Economics at MIT, Jonathan Gruber, Director of the Health Care Program of the National Bureau of Economic Research, and his partner Simon Johnson in the book "A Brief History of American Innovation", Industrial Policy on American Technological Innovation The changes have been interpreted, from which we can also see the course of the development of scientific and technological innovation in the United States.

To a certain extent, the "A Brief History of American Innovation" co-authored by MIT professors Jonathan Gruber and Simon Johnson is a prosperous alarm in times of peace.

The United States' technological innovation capability, technological strength, and educational strength have been leading the world for many years. In many fields of science and technology, such advantages have also become the killer of the United States in sanctions or restraining some companies in other countries. For the Chinese, the most memorable example is that the US government banned the sale of chips to Huawei. Huawei was hit hard as a result.
Even under such circumstances, "A Brief History of American Innovation" still sounded the alarm about the lack of funding for scientific innovation by the US government. Through this book, we can not only understand classic cases in the history of American innovation, but also learn more about the current problems of American innovation.

A brief history of American innovation

In this book, Jonathan Gruber, a Ford Professor of Economics at the Massachusetts Institute of Technology and Director of the Health Care Program at the National Bureau of Economic Research, combed through the important history of American innovation, expressed concern about the current situation, and raised concerns about the future. Provide concrete and feasible strategic support.

1. The government supports technological innovation, with pearls and jade first

From the perspective of R&D investment, the United States ranks first in the world. The comparative dimension of "A Brief History of American Innovation" is not to compare the United States with other countries in terms of the amount of investment, but to compare the amount of government funding for scientific innovation in the history of the United States and the proportion of GDP.

The Chinese have a familiar saying that science and technology are the primary productive forces, but many people may not really understand the path that science and technology promote economic development and improve national competitiveness. In this regard, this book starts from actual cases in the United States and makes a convincing explanation-in terms of factors that promote economic development, scientific innovation has a spillover effect, promotes further innovation, and creates numerous job opportunities. When a country takes the lead in the most critical industry, it can take the lead in the competition between countries.

In the view of Jonathan Gruber and Simon Johnson, the successful case of the U.S. government funding for scientific innovation is the funding of scientific innovation by the National Defense Research Council led by Vannevar Bush, the former vice president and head of the engineering department of the Massachusetts Institute of Technology. He made outstanding contributions to the victory of World War II and laid the foundation for the economic growth of the United States after World War II.

On June 12, 1940, Vannevar Bush visited the White House. He suggested to President Roosevelt the establishment of a National Defense Research Committee led by scientists and engineers to control the leadership and funding of new weapons research and development. Some industrial companies don't want private top research laboratories. Roosevelt approved this request.

The founding members of Bush’s Defense Research Council included Karl Compton, then Dean of the Massachusetts Institute of Technology, Harvard University President James Conant, and President of the National Academy of Sciences and Director of Bell Labs Frank B. Juvet, California Institute of Technology Richard C. Toroman, Dean of the Graduate School. The research fields of these scientific and technological elites involve atomic theory and some emerging concepts.

At its peak, Bush led 30,000 people, including 6,000 scientists, including about two-thirds of physicists in the United States. What followed was a sharp increase in scientific research funding. In 1938, the US federal government and state governments invested 0.076% of US national income in research funding; by 1944, this figure had risen to 0.5%. Most are spent from the National Defense Research Council.

In 1945, Bush prepared a report "Science: Endless Frontiers" for President Roosevelt. He pointed out that inventions and creations can save lives, improve the quality of life and create jobs; the government should not directly engage in scientific research, and the military's scientific bureaucratic command hinders science. Explore; companies, wealthy individuals, and first-class universities cannot solely undertake and carry out the scientific innovation and research needed by the country.

Bush proposed that the U.S. government continuously provide a large amount of funds to facilitate cooperation between universities and private enterprises to create "post-war innovation machines." In 1944, the "Veterans Rights Act" expanded university enrollment and trained many engineering and technical personnel. After the nascent industry has developed, many unprecedented jobs have been created. In the following 20 years, the salaries of American middle school graduates and college graduates have increased significantly. From 1940 to 1964, the federal government's investment in research and development increased by 20 times. In the heyday of the 1960s, this expenditure accounted for about 2% of GDP, which is roughly equivalent to today's 400 billion U.S. dollars.

On the other hand, during World War II, although the US government allocated a large amount of funds to the National Defense Research Council, the National Defense Research Council was composed and led by scientists and engineers. The bureaucracy of the US government (including the military) has no right to interfere in the work of these scientists and engineers. Decide. This approach has produced good results. The various scientific innovations promoted by the National Defense Research Council have made a significant contribution to the United States in winning the Second World War.

Looking back at the history of scientific innovation in the United States during this period, the special backgrounds such as World War II and the Cold War arms race are clearly "indispensable." They have become the best reason for the generous support of investors and the government's massive funding of scientific innovation. But from a methodological point of view, the special precedents during the Second World War may not be comparable.

Facts have also proved that with the reduction of government support, US technological innovation has gradually entered a low ebb.

2. Scientific innovation of U.S. private companies

The innovations of US private companies such as Microsoft, Apple, Amazon, and Google have hardly received any support from the government. They are entirely self-motivating within the companies for the purpose of competition and survival. A large number of privately supported laboratories at Stanford University, Massachusetts Institute of Technology, University of Washington, University of California, and Johns Hopkins University play a very important role in basic research in the United States.

These stories are already familiar to us, but scientific innovation in private companies has not been smooth sailing—at least from the perspective of the United States.

One of the wonderful stories is how the United States missed the liquid crystal display products and handed over to Japan in the 1960s.
In 1968, researchers from RCA held a press conference to showcase the world’s first commercial LCD display—this was the beginning of the liquid crystal display (LCD), and this project was quickly planned. Belongs to the semiconductor team that holds the patent of transistor cathode ray tube (RCT).

Perhaps because of concerns that the development of LCD technology will endanger the very successful and lucrative RCT TV business and the benefits of patent licenses, all research activities on LCD screens were forced to terminate. This decision happened to give the rising Japan an excellent opportunity.

It was in this year that the Japan Broadcasting Association (NHK) went to the American Radio Broadcasting Corporation to shoot the documentary "The Company of the World: Modern Alchemy", one of which showed the LCD screen. After the show was broadcast, this emerging technology attracted the attention of many people, including Tomio Wada, who is in charge of Sharp's computer display business.

He immediately suggested: Use LCD screens to make calculators.

Subsequently, Sharp's management, who had great ambitions to transform into a high-tech industry, went to the American Radio Broadcasting Corporation in person. At that time, the American Radio Broadcasting Corporation was not enthusiastic about this technology, so it sold the patent license to Sharp at a price of 3 million US dollars.

In 1973, Sharp announced that the world's first-generation commercial pocket calculators used LCD screens.

The United States originally had a second chance to overtake.
Sharp's LCD screen uses passive matrix technology. The image is composed of rows and columns of pixels. Complex images require many rows and columns, which results in slower data signals. In addition to the active matrix processing system developed by Westinghouse scientists in the United States, the use of transistors to turn on all pixels at once makes the screen faster, brighter, and clearer.

At that time, Westinghouse did not pay enough attention to this technology. The Brody team responsible for the development of the technology left Westinghouse’s independent portal in anger. In 1984, he began to sell experimental products and laboratory prototype screens. The industry has 80 customers.

If the first time Americans missed a good opportunity, it was because of the short-sightedness of ABC, then this time, American venture capitalists did not show enough courage. They believed that Japanese companies were already in a leading position. it is too late. Finally, Brody's company failed because it was unable to achieve scale.

We all know the following story. Japan has occupied and monopolized the world market. From the mid-1990s to 2010, the scale of the industry has increased tenfold. The current global sales are 114 billion U.S. dollars, but there is no American company. Profit from this industry, and no American workers are employed in this industry.

Ironically, the US state of Wisconsin took the initiative to introduce Foxconn’s LCD factory project several years ago.

3. In the new situation, how does the US government support scientific innovation?

Although the U.S. government's funding for scientific innovation has fallen sharply after the 1970s, there are not a few companies benefiting from the U.S. government's funding, and they have also achieved remarkable results. Genome sequencing is a typical case.

In 1988, the U.S. Congress agreed to fund the National Research Institute of the United States to conduct human genome research. In 1990, the Human Genome Project was launched, which is expected to last for 15 years, with a total budget of US$3 billion. In 1999, the funded Cereira Genomics Company carried out the human genome sequencing work, and its sequencing method was a great success.

There are many government-funded companies like Cereira Genomics, which directly stimulates the development of the entire industry and drives a considerable number of jobs——

In 2004, the total value of the stock market in the genomics category was 28 billion, and 75% were publicly listed companies. Among those private companies that are not listed, 62% are based in the United States;

From 1988 to 2012, direct and indirect economic activity expenditures related to this project amounted to US$965 billion, creating 280,000 jobs and US$19 billion in personal income;

In 2012 alone, the industrial sector supported by genomic research generated US$3.9 billion in federal taxes and US$2.1 billion in state and local taxes, far exceeding the US$3 billion investment in 13 years.

On the other hand, government-funded scientific innovations have higher social returns than private returns because of the spread of technological innovation to other fields. For example, scientific innovation has driven the development of some superstar cities in the United States-the center of biotechnology is located in Cambridge, and Microsoft moved its headquarters to Seattle in 1979. This has had a profound impact on the local area.

Having said so much about the benefits of government funding for innovation, the author also makes suggestions: It is proposed that the US federal government spends 100 billion US dollars to fund scientific innovation every year, which can create 4 million jobs and share the growth opportunities of the entire country.

Based on past innovation cases, the author suggests: First, focus on the integration of research and products. The public sector and private enterprises should establish partnerships to form a good complementarity, generate better returns to compensate for possible losses caused by risky investment, and attract more More investment; the second is to extend public research funds to various places to obtain intensive benefits; the third is to create new innovation centers through competition, and formulate local regulations that are conducive to economic growth, successful infrastructure plans and education base plans, etc.; The fourth is to use an independent committee to ensure that funds are used for the most valuable research projects; the fifth is to benefit more people by sharing innovation dividends.

"A Brief History of American Innovation" does not recapitulate the glory of the past in the field of scientific innovation, but under the new scientific competition landscape, it is vocal about the lack of funding for scientific innovation by the US government, and hopes to form realistic decisions to maintain the leading edge of the United States. . As professional scholars, Jonathan Gruber and Simon Johnson also explained the internal mechanism of scientific innovation to promote economic development, and analyzed the reasons why scientific innovation improves national competitiveness. This allows readers to deeply understand the importance of scientific innovation.

However, do the heads of government and politicians of the United States have such great determination? Can they give up political disputes for the benefit of the whole country? Do U.S. taxpayers agree to pay more taxes for this?

These are obviously more important and difficult issues.

Headquarters location decisions under conflicts at home: Evidence from a configurational analysis

Mariano Méndez-Suárez

Abstract

This study identifies the necessary and sufficient conditions to relocate firms’ headquarters (HQ) under circumstances of high political and economic risk (the illegal referendum of Catalonia in 2017). One of the most promising advances in the discussion of relocation decisions lies in combining non-economic conditions with traditional production factors. We use fsQCA methodology to test the model. QCA is a method based on set theory in which the outcome depends on combinations of elements, that have the nonlinear property and permits that certain conditions act in opposite ways under different circumstances. Using a database of 42 companies of different sectors, 28 of them that maintained HQ and 14 that relocated, the study provides evidence that family firms under similar circumstances may make decisions to stay or relocate as a function of the origin of the founders and the production factors of the relocation region. Second, we found that relocation decisions of subsidiaries under political and economic uncertainty are not affected by economic fac-tors and there is inertia in their behavior

Introduction

Except when the firm faces severe conflicts at home, the decision of relocating headquarters (HQ) is rare, and has substantial impact on both the old and new HQ sites as it would require replacing many individuals working in specialized roles who may not be willing to relocate (K. E. Meyer & Benito, 2016). But apart from the relocation of individual employees, HQ relocation affects the whole business operation (Gregory et al., 2005) and for the re-gions, losing HQ induces employment losses, decreases in the quality of labor markets (Strauss-Kahn & Vives, 2009) and worsens the image trademark of a city or place (Clouse et al., 2020). However, this complicated decision was taken by more than 3,000 companies (Garijo, 2017) that relocat-ed their HQ during 2017 to other Spanish regions due to the unprecedented rise in political uncertainty due to the Cat-alonian illegal secessionism referendum (Reid, 2017). The impact of uncertainty was especially severe on big banks, which suffered a huge increase in liquidity risk due to the mass withdrawal of bank deposits until they relocated.

Other well-known companies of different sectors, in-cluding auto, distribution, food, fashion, pharmaceuticals, and others, decided to maintain the sites of their HQ despite the high level of political uncertainty. Even though it was a risk, many companies decided to change the location of their HQ and a large number of other companies decided to stay. This provides a database of great value to be able to an-alyze the phenomenon of the location of the headquarters of companies in troubled times. Based on this data, the present research tries to answer the following research questions:

• Which reasons/conditions were necessary or sufficient for the firms to maintain HQ in Cata-lonia in a period of high economic and political uncertainty?

• Were the reasons the same for all the companies that maintained their HQ?

In line with other authors who study location prob-lems, instead of isolating regional factors, the present re-search addresses the problem in a holistic manner (Cui et al., 2020) using fuzzy-set qualitative comparative analysis (fsQCA) methodology (Ragin, 2008). The methodology permits to empirically identify and interpret the identity, socio-psychological, and economic configurations associat-ed with the outcome of the permanence of the firms HQ in Catalonia. The methodology infers causality from set-the-oretic relations rather than correlations (Fiss, 2011; Ragin, 2008). The fsQCA provides enhanced methodological rigor to multi-case analysis by allowing the researcher to system-atically analyze a far greater number of cases than can be subjectively assessed (Fainshmidt et al., 2017).The present research makes several important con-tributions in the design of the propositions, because it ac-knowledges the nonlinearity property of configurational approaches (Fiss, 2007; Meyer et al., 1993), so variables found to be causally related in one configuration may act in the opposite way in another configuration causing the oppo-site outcome. That is, under the same circumstances, similar environments, and political-economic situations. The same condition may cause firms to make opposite decisions, to either maintain or relocate HQ. Additionally, following the call from Jain et al. (2016), we include the impact of the governance structure, family firms and subsidiary, to deter-mine location choice. Additionally, this study contributes to extant literature by identifying the different sets of condi-tions that explains the different motives and typologies of firms that maintain HQ sites in periods of high political and economic turbulence.The article is organized into several sections. The next section provides the theoretical background to support the research propositions. The data and methods are presented in the third section, followed by a discussion of results in the fourth section. Finally, concluding remarks are presented.

Theoretical Background

To select the conditions that caused the outcome of staying or relocating HQ, this study acknowledges the lim-itations of considering only economic factors (Musteen, 2016) and integrates non-economic conditions such as those related to the origin and if the firm is a family busi-ness or not. Conditions related to the firm’s position towards separatism, including support for independence and the ref-erendum and purely economic conditions, as if the firm is a subsidiary of a multi-site firm and purely economic factors as those represented by the European Regional Competi-tiveness Index of the region in which the HQ are located after the outcome decision

In the design of the propositions, the present research acknowledges the nonlinearity property of configurational approaches (Fiss, 2007; Meyer et al., 1993), so variables found to be causally related in one configuration may be unrelated or even inversely related in another. That is, the same condition may cause firms in similar environments to respond differently to the situation created by the referen-dum and either to stay or relocate its HQ.

Origin and Family Business

Empirical evidence suggests that for the largest firms the corporate head office mostly remains located in the orig-inal home base irrespective of the firm’s subsequent growth in geographic footprint (Coeurderoy & Verbeke, 2016). Most founders are people embedded in their home environ-ments, with personal ties, close to family and friends (Mey-er & Benito, 2016) and preserving their corporate identity (Desai, 2009). In fact, firms are deeply rooted in their home countries, to their customers, employees, investors and sup-pliers (Ghemawat, 2011).

There is evidence that founders have a substantial im-pact in the inertia of companies to maintain their original HQ location (Lussier & Sonfield, 2009). Business people develop an emotional attachment to their place of origin and feel responsible toward the community that enabled them to grow (Meyer & Benito, 2016). Furthermore, family firms are usually part of the social network at the local level, sponsoring associations and activities related to the com-munity and pursuing the welfare of the locality (Berrone et al., 2010) and relating the firm’s success to the origin of the founders (Castillo & Wakefield, 2006)

Regarding risks, family firms are likely to place a high priority on maintaining family control even if this means accepting an increased risk of poor firm performance. They may also act more conservatively by avoiding business de-cisions that may increase variability even at the price of a business failure in the future (Gómez-Mejía et al., 2007). Research based on behavioral economics has empirically shown that family firms’ risk willingness or risk aversion depends on the scenario and the way in which each scenario might threaten these firms’ priorities (Llanos-Contreras et al., 2020; Stieg et al., 2018). These arguments lead to the following proposition:

Proposition 1. The origin of the founders is relevant and has a positive influence in the decision to maintain its HQ. Being a family business may influence the decision to stay when considering the roots of the family but also may influ-ence the decision to relocate considering the perceived risks for the business

Support for Independence and the Referendum

Catalonia is a territory where part of the population de-clares a Catalan national identity, defined as the attachment that subjectively links individuals to the nation (Rodon & Guinjoan, 2018). Although the support for independentism and the referendum was not majoritarian, the stronger asso-ciation with Catalan identity made some business associa-ions give explicit support to the referendum and indepen-dence (El Nacional, 2017). On the opposite side and because of the polarization of society regarding those issues, other associations or companies declared against the referendum and independentism

For some companies, the institutional support for the referendum may be considered a decrease in quality of the legal and regulatory regime and make them consider re-locating their HQ. However, other companies, which ex-plicitly support the referendum, may consider this fact as a positive change in the regulatory and legal regime. The configurational approach supports the apparently contradic-tory conditions that may lead to opposite outcomes, leading to the following proposition:

Proposition 2. Support for independence and the referen-dum may be relevant to the decision of maintaining their HQ, but for companies not supporting the referendum nor in favor of independence, it may be relevant to make the decision to relocate their HQ.

Subsidiary and Regional Competitiveness Index

There are important reasons to maintain the location of subsidiaries for multi-site firms, such as the relations with local suppliers and customers (McCann & Mudambi, 2005). Other key aspects in the location decisions are the closeness to the different sites, to minimize transport costs, or those related to management optimization around the world (De-sai, 2009)

For the owners of subsidiaries, the decrease in institu-tional quality in the host region increases the likelihood of relocation to another place, moving away from local gov-ernments with unfavorable policies that increase the institu-tional uncertainty (Valentino et al., 2019).

Regarding factors of production, previous research finds relevant to the location decision their abundance and quality including the physical, human and financial resourc-es available to firms in a given region. The quality of infra-structure provided by the economy’s transportation, com-munication, education and healthcare systems, as well as access to advanced factors of production, such as a scien-tific base and highly skilled labor (Cui et al., 2020). Addi-tionally, relevant factors include the quality of air services, proximity to large markets and specialized providers and the availability of skilled labor (Bel & Fageda, 2008). The Regional Competitiveness Index (RCI) in Europe analyzes the quality of those factors for regions across the European Union measuring, with more than 70 comparable indicators, the ability of a region to offer an attractive and sustainable environment for firms and residents to live and work (An-noni & Dijkstra, 2019). These arguments lead to the follow-ing proposition:

Proposition 3. Being a subsidiary of a multi-site company is relevant to maintain its HQ.Considering RCI is relevant to location decisions.

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Marketing strategies in family firms

Manuel Alonso Dos Santos, Orlando Llanos Contreras, Raj V. Mahto

ABSTRACT

Branding and reputation plays an important role in determining firm behaviour and outcomes. These well-known marketing concepts have attracted attention of family firm scholars as well. However, despite the significant growth in family firm literature over the last two decades, the application of marketing theories and concepts in family firm context is limited. Thus, there is an urgent need for a better understanding of reputation, branding, communication, and marketing perspectives in family firms. The goal of this special issue is to enhance our understanding of marketing strategies in family firms.

Introduction

Family-owned firms are the most dominant form of business entities in market economies around the world (Poza & Dauguerty, 2013). For example, these firms represent 70% to 90% of all firms in Europe, 70% of all firms in the USA and Australia, and up to 98% of all firms, ac-cording to some estimates, in Latin America. In African and Middle Eastern countries, family firms play an equally important role (Basly, 2017; Llanos-Contreras & Jabri, 2019; Zellweger, 2017). Family firms are central for many countries not only from an economic perspective, but also in terms of their social role in regional development (Bas-co, 2015; Llanos-Contreras & Alonso-Dos-Santos, 2018). Prevalent in family firm literature is the attribution of their uniqueness to family ownership and family influence. Family identity is a resource that influences con-sumer behavior and their response to communicational stimulus (Alonso Dos Santos et al., 2021; Sageder et al., 2015). Thus, the family identity of a firm is a source of differentiation that can be commercially exploited (Bote-ro et al., 2019). While research based on socioemotional wealth acknowledges that these organizations are especial-ly focused on protecting their reputation and family name (Alonso-Dos-Santos & Llanos-Contreras, 2019; Berrone et al., 2010), articles utilizing the resource-based view suggest these organizations retain valuable idiosyncratic resources that impact the lives of their customers and stakeholders (Craig et al., 2008; Gallucci et al., 2015; Zellweger et al., 2010). Furthermore, empirical findings confirm the positive benefits of communicating the family control of the firm to firm stakeholders, such customers, employees, and the local community (Deephouse & Jaskiewicz, 2013).The aforementioned economic and social impor-tance of family firms, when combined with the significant communication and marketing potential of a firm being acknowledged as family owned, creates a rich area for scholarly exploration. Some progress achieved in the area more recently includes: (1) understanding the strategies em-ployed by family firms to communicate their family compo-nent/identity through websites (Botero et al., 2013; Mice-lotta & Raynard, 2011), (2) identifying factors impacting firm image and types of strategic actions enhancing their family brand (Binz et al., 2013; Marques et al., 2014), and (3) assessing consumer response to firm communications emphasizing family nature, such as signals through a firm’s product packaging (Alonso-Dos-Santos et al., 2019; Beck & Prügl, 2018; Lude & Prügl, 2018).

Family firms’ branding and reputation has attracted family firm scholars’ attention in recent years. However, the application of marketing theories to family firms has witnessed a slow progress in academic journals. There is an acute scholarly need for understanding the reputation man-agement of family firms and how to make the most of it from a branding, communication, and marketing perspec-tive. Accordingly, articles in this special issue have been selected because of their contribution in making progress on this theme. This special issue is publishing five articles, which present the work from twelve scholars from five different countries and nine different universities. The articles address issues related to customer-family business relationships, perceptions of family businesses and customer behavior (purchase intention), risk aversion and marketing collab-oration with other businesses, digital marketing strategies for family businesses and reputation and family identity. In terms of methods, most of them are based on quantitative data analysis with one using regression analysis and two others utilizing structural equation analysis. One article is based on a mixed research design and one is a systematic literature review.

Discussion and Contributions

The article by Cuevas-Lizama, Llanos-Contreras and Alonso-Dos Santos entitled, “Reputation and identity in family firms: Current state and gaps for future research” ex-plores the strategic value of reputation and the transmission of a family firm’s family identity. This research uses a sys-tematic literature review approach, studying 56 articles in-dexed in the Web of Science database, to analyze the current state and evolution of the topic, the impact it has had in re-cent years, and to identify relevant research areas with their respective contributions and research gaps to guide future work. The analysis of this work reflected seven research topics related to reputation and family image, finding great-er relevance in works that analyze the sources of advantages of the reputation of family businesses and how the priority to preserve it influences their strategic behaviors such as investments in R&D and their socially responsible activi-ties. Other papers found in this article advance study themes that the transfer of family identity effects both in financial markets, where family firms seek to be transparent in order to take care of their image, and in the consumer market, where they have a better response compared to non-family firms. Finally, this work highlights opportunities for future research by considering other less studied areas that detail how family firms transmit family identity to internal groups, the diffusion strategies they have with external groups, and the effects of reputation on performance.

Botero and Litchfield-Moore make contributions by as-sessing the perception about family firms. Based on signal-ling theory and the theory of reasoned action, the authors predicted that the family identity would be a signal which determines consumers’ perceptions, attitude, and intention to buy in relation to family firms. This research included four studies to respond to the question “What are the as-sociations that customers have with products and services from “family-owned businesses”? Study 1 was based on the analysis of qualitative data from a four-question survey to 87 students from introductory courses. Study 2 considers data collected from a 73 item survey which was responded to by 145 college students. Items in this survey allow the quantitative assessment of perceptions about family firms, attitude toward these organizations and intention to buy and work for these firms. Study 3 included additional respons-es from another 90 college students. Unlike Study 2, here questions on intention to buy and intention to work were asked to different groups to make the survey shorter and easier to answer. Finally, Study 4 was focussed on exploring the generalizability of their previous results and included 65 working professionals (in addition to 54 new students) in the sample. Results are in line with research suggesting that communicating the family identity of a firm would re-sult in a positive response from consumers (Alonso Dos Santos et al., 2021). Botero and Litchfield-Moore confirm that “family-owned businesses” would have an advantage in using their identity as part of their communication and marketing strategies. Results suggest that consumers would have positive perceptions about organizational values and neutral perceptions about products and services offered by family firms. The authors concluded that “As suggested by the Theory of Reasoned Action, these perceptions affected attitudes and intentions towards Family Owned Business.”The work from Gonzalez-Lopez, Buenadicha-Mateos, Barroso and Sanguino deals with the theme of digital mar-keting strategies in family firms. More specifically, the au-thors analyse the online presence and differences between Ibero-American and American family firms in the world. Based on information provided by the Family Business Global Index (FBGI), this article aimed to respond to the following two research questions: (1) Does the quality of a corporate website and the presence in social networks in-fluence the family firm’s turnover? and (2) Are there sig-nificant differences between Ibero-American and American family firms regarding online presence, in terms of quality of corporate websites and presence in social networks? The article analyses content, form, function and presence in so-cial networks. This work is important because the profound influences of social networks and internet in communica-tion and marketing strategies in all the different econom-ic sectors around the world (Alonso Dos Santos, Calabuig Moreno, Crespo et al., 2016; Alonso Dos Santos, Calabuig Moreno, Rejón Guardia, et al., 2016). Internet is not only the one of main and more accessible communication chan-nels for large and small businesses, but also it offers a wide range of options to develop flexible and focused marketing strategies. Among other findings, this article results show that there is a negative relationship between website quality and company turnover and a positive relationship between social networks and company turnover. This is important for family firms because it provides insight into the effec-tiveness of different communication channels and strategies they have access to. Also, the study did not find significant differences among the family firms of the two regions with respect to online presence, which suggests similar availabil-ity of this resource in both regions. Thus, this work con-tributes to the specific topic of our special issue by mak-ing progress in the understanding of marketing strategies in family firms. The article also makes progress in family firm literature, by integrating concept and construct from the marketing research. From a managerial view point their findings are important as they shed light on the importance of enhancing family firms’ online presence, and the power of building strong family firm brands based on this online presence.

The article entitled, “Personalized Service and Brand Equity in Family Business: A Dyadic Investigation of How Family Business Owners’ Time Servicing Customers Im-pacts Work Overload: Spillover Effects in Delivering a Per-sonalized Service and in Building Brand Equity” by Velas-co, Lanchimba, Llanos-Contreras and Alonso-Dos Santos focused on the understanding of demand and resources on the firms’ brand equity. More specifically, this research fo-cused on answering the question of (1) how family busi-ness owners’ time in serving customers, work overload, and Collaborative Organizational Citizenship Behaviours inter-act and influence the delivery of personalized services in Small and Medium size Family Enterprises, and, (2) how these relationships ultimately influence these firms’ brand equity. In this way, the article made progress on the under-standing of how family business owners’ time in servicing customers triggered a chain of effects (positive and nega-tive) which finally impacted on small and medium family enterprises’ brand equity. The authors’ study is highly im-portant and relevant because brand equity is closely related to corporate reputation and accordingly, it would not only be a good way to assess reputation in family firms, but also to understand factors that enhance or harm it. This is par-ticularly important in family firms as the firm reputation is closely tied to the family reputation and it is one of the most salient socioemotional wealth priorities (Deephouse & Jaskiewicz, 2013; Llanos-Contreras & Alonso-Dos-Santos, 2018). The findings in this article are relevant and make an important contribution to theory and practice. From a theo-retical viewpoint, the study sheds a light on the connection between brand equity and firm reputation. It is important as it suggested that brand equity would be a good proxy to assess reputation in family firms. Theoretical contributions are made also to marketing and reputation theory in family firms by integrating the analysis of resources and process to reputation theory. In this way this article goes beyond the analysis of the sole effect of communicating the fam-ily identity and integrates the study of the process which is central in the marketing strategy. From a practical view-point, family-business managers can learn by identifying strategic resources and processes that influence their firms’ brand equity and ultimately the family and firm reputations. Controlling these resources and process would be central for managers in order to preserve their firm and family rep-utation.

Ibáñez’s paper, “Inter-firm marketing collaboration in family businesses: The role of risk aversion”, explores how risk aversion in family firms influences their non-fi-nancial strategic decisions to collaborate in marketing. This research addresses two issues barely explored in the fami-ly firm literature: (1) the influence of risk aversion on the decision to collaborate to develop marketing capabilities and (2) the choice of a partner known or unrelated to the family firm for this cooperation. The author proposes that both decisions are made simultaneously. She uses a bivar-iate probit method to evaluate the decision to enter into a collaborative relationship and the choice of a partner in a single econometric model. Results suggest that family firms that are more conservative in terms of risk-taking are less willing to engage in collaborative relationships for market-ing activities. However, these firms are willing to take a risk by collaborating with a partner they do not know (rather than a known partner). This apparent dichotomy is consis-tent with previous research showing that family firms are both risk-taking and risk-averse in order to preserve socio-emotional wealth (Gómez-Mejía et al., 2007). In this case, socioemotional preservation would not only be related to risk-taking decisions, but also to their priority of preserv-ing good standing with people they have close relationships with by avoiding engaging in partnership with them. This article contributes to family business research by extending the study of risk aversion beyond the financial and econom-ic decisions of family firms. Concluding ThoughtsIn summary, this issue of Journal of Small Business Strategy is a special issue on “Marketing strategies in fam-ily firms”. The five works in this special issue significantly enhance our understanding of family firm reputation from a strategic marketing viewpoint. The studies in the special issue contribute to reputation theory in family firms, as well as to knowledge in marketing and communicational strate-gies for these specific types of organizations. The articles in this issue allow the readers to know the state of the art from a theoretical viewpoint, but also to analyse empirical find-ings in relation to the effect of communicating the family firm identity, the influence of family identity in the world wide web, the importance of small and medium family firms’ resources and demand in building brand equity, and the importance of risk-taking aversion toward collaboration on developing marketing capabilities. From a managerial perspective, this special issue provides important insight for family firm owners and managers in relation to the im-pact of leveraging their family identity in their marketing strategies. Also, practitioners can learn about mechanisms, processes and resources which would drive the successful implementation of such strategies in these firms.