[email protected] Presents Direct Relevance for Decision Making
The 2018 season of the [email protected] series of lunchtime presentations proved a notable success. Four thought-provoking topics, with direct relevance for decision making in today’s business environment, gave managers and executives the chance to hear from respected academics about their latest research-based findings.
The format of the [email protected] series encourages the audience to question methods, challenge conclusions, and put forward examples drawn from their real-world experience. And this kind of interaction, which has become a hallmark of the series, can spark new ideas and alternative perspectives for all those taking part.
Financial behaviour and portfolio management
The first seminar in this season featured two professors from the Department of Finance, Professor Utpal Bhattacharya and Professor Philip Cheng. They looked at how different factors affect financial behaviour and portfolio management, outlining in turn some of the psychological pitfalls to avoid and certain strategies likely to give private investors more consistent returns.
As a specialist in behavioral finance, Professor Bhattacharya uses aspects of cognitive psychology to explain unexpected asset price fluctuations. He explained common practices like supermarkets selling items for US$6.99 rather than US$7 and how it stems from the human tendency to rely on initial information - the “anchor” - when making buying decisions. His research, based on 130 million transactions on the NYSE, has also shown that most stock market “buys” and “sells” took place at figures just over and just under a round number.
Another non-rational approach is seen on Taiwan’s stock market, where individual investors show a clear preference for the number eight and a dislike for the number four. Superstition plays a part, showing that, even in major investment decisions, facts and reason don’t always hold sway.
Professor Cheng explained how private investors can learn from professional portfolio managers, a concept detailed in his book Taming the Money Sharks. He recommended a clear-headed, rational approach to maximise gains and limit losses. Private investors should focus on sectors they know most about and, when picking stocks, study fundamentals and check financial statements covering at least a three-year period. For any company, two of the best indicators are gross profit margin and net cash flow.
In terms of portfolio management, Professor Cheng suggested a long-term approach, a sound process, and never to “fall in love” with a particular stock.
Creativity and effective collaboration
The second seminar focused on creativity and effective collaboration in the workplace, with a view to enhancing individual and collective performance – and productivity. Professor Gong Yaping from the Department of Management outlined key factors that promote or inhibit employee creativity within the work environment. He noted that, in general, companies may say that “innovation” as a top-three priority, but too many good ideas are still lost somewhere along the way because of failures in organizational structure, strategy or implementation.
The challenge is to design work and a working environment which helps employees be more creative and improves the flow of useful information. His recommendation was to look at three key drivers: intrinsic motivation, creativity skills, and building the necessary expertise and domain knowledge. Also, when divergent or out-of-the-box thinking is actively encouraged, employees are more likely to consider old problems in a new light and make leaps of intuition.
Approaching the topic from a different angle, Professor Sam Garg drew on his experience of young, entrepreneurial firms and the Silicon Valley mindset. He showed why a CEO and board members don’t always collaborate effectively and why managing the relationship and getting the best out of everyone can present major difficulties.
Creativity is great, he noted, but it doesn’t automatically lead to a profitable business. The dynamics between strong-willed, go-ahead individuals in the entrepreneur community could lead to a “disconnect” between directors and those responsible for day-to-day management, with senior advisers often adding “negative value” to a venture.
Based on his research, Professor Garg said certain steps could help collaboration and more effective decision making. For example, “strategic brainstorming” sessions should be restricted to one agenda item only to prevent endless meetings and distractions. Also, board members should be responsible for clearly different areas in order to make better use of their individual expertise and draw out practical advice, which will genuinely enhance company performance and outcomes.
Diversity and inclusion
The third event of the series approached another subject from two quite different angles. The first speaker was Professor Christy Zhou Koval also in the Department of Management, who noted how gender stereotypes contribute to differential evaluations of men and women in the workplace.
In Hong Kong, women now make up 51 per cent of the labour force according to the 2016 census, but are still under-represented in the top tiers of management. That points to lingering gender stereotypes and bias, which have clear implications for equality issues and earnings. Traditional thinking plays a part in this, but there is no reason for stereotypes to persist in everything from advertising to job postings.
If modern-day managers are to maximise the potential of a diverse workforce, they must acknowledge the situation, initiate things like “unconscious bias” training, and nudge others to make better decisions.
On the same broad theme, Professor David Daniels considered whether investors really value diversity, based on evidence from Silicon Valley. Google and the other big tech firms may say they value diversity and inclusion, but comments from employees and other sources can suggest the opposite.
To gauge the attitude of investors, he drew on stock-price and market-related data showing the reaction to key announcements made by big companies about levels of demographic diversity in recent years.
So far, there was no consistent association, or causal link, between diversity and performance, though companies with more gender diversity on the board do usually have a higher return on equity, sales and investment capital.
“But in some cases we can see that efforts towards greater gender and racial diversity are just causing tension,” Daniels said.
Online labor market
The concluding seminar took a different direction, focusing on how internet developments have affected the online labour market (OLM) and why social media is shaping the concept of personal branding.
Professor Wang Jing, from the Department of Information Systems, Business Statistics & Operations Management (ISOM), pointed out that OLM work now includes areas like software and web development, multimedia and administrative support, sales and marketing, writing and editing, and logo design.
Both initial hiring and subsequent assignments are done online, and the sector is expanding at an exponential rate as employers see the cost and efficiency benefits of such outsourcing.
There is a fast-growing pool of labour ready to take on part-time work, one-off contracts or longer-term commitments. The plus points for them include greater flexibility and freedom. And there are important social and economic implications, with the market projected to become a US$23 billion cross-border industry by 2020.
However, research shows gender-based stereotypes have an impact on hiring preferences, with an overall 13 per cent advantage for females over males. Perceptions about underlying gender-specific traits clearly contribute to this bias, even though OLM hiring usually involves no face-to-face interaction.
Employers rely on heuristic factors, such as an applicant’s qualifications, skills, salary requirements, and previous job ratings. But they can infer gender from names and photos, and tend to favour women, believing them to be more trustworthy and cooperative.
Professor Chen Yanzhen spoke about the use of social media to boost online personal branding. This has an impact on job seekers, executive employment and compensation negotiations, but it can sometimes backfire. The popular view is that it’s now essential to use social media for self-promotion, but rather than winning friends and influencing people, individuals can instead seem conceited, narcissistic and self-aggrandising.
In academic studies, the challenge is to quantify the value of this type of personal branding and then assess if it is under- or overpriced by employers and peers.
To review previous and the following [email protected] series at:
1 March 2018: How different factors affect financial behavior and portfolio management?
14 March 2018: Creativity and effective collaboration in the workplace
18 April 2018: Diversity and Inclusion
9 May 2018: How the development of the Internet and social media has affected the online labor market