An Analysis of Working Capital Management Results Across Industries PDF

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MID-AMERICAN Fall 2005 Volume 20, Number 2 JOURNAL OF BUSINESS EDITORIAL 3 Managing Our Way to Academic Decline Ashok Gupta DEAN’S FORUM 5 Business Colleges Should Practice What They Preach Daniel Vetter EXECUTIVE VIEWPOINT 7 Corporate Culture Defines a Company and Its Future Richard T. Farmer ARTICL...

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MID-AMERICAN JOURNAL OF BUSINESS Fall 2005

Volume 20, Number 2

EDITORIAL

3

Managing Our Way to Academic Decline Ashok Gupta

DEAN’S FORUM

5

Business Colleges Should Practice What They Preach Daniel Vetter

EXECUTIVE VIEWPOINT

7

Corporate Culture Defines a Company and Its Future Richard T. Farmer

ARTICLES

11 21 25 35

An Analysis of Working Capital Management Results Across Industries Greg Filbeck and Thomas M. Krueger

IBBEA Implementation and the Relative Profitability of Small Banks Srinivas Nippani and Kenneth M. Washer

Modeling Internet Operations Using Initial Public Offerings Sameer Prasad, David C. Porter, and Linda Yu

The Communication Effectiveness of System Models Using the UML versus Structured Techniques: A Field Experiment Bruce C. Hungerford and Michael A. Eierman

45

Building a Market-Oriented Organizational Environment: An Implementation Framework for Small Organizations

59

Implementing Planned Change: An Empirical Comparison of Theoretical Perspectives

Beth Ann Martin and James H. Martin

Matthew W. Ford and Bertie M. Greer

BOOK REVIEW

70

Final Accounting Bill Cummings

www.bsu.edu/majb

CONTENTS Fall 2005 Volume 20, Number 2

EDITORIAL

3

Managing Our Way to Academic Decline Rigor and relevancy need not be mutually exclusive. We can create a rigorous and relevant business curriculum, and at the same time conduct practical, relevant business research in a scrupulous and scientific manner.

25

Ashok Gupta

Sameer Prasad, David C. Porter, and Linda Yu

DEAN'S FORUM

5

Business Colleges Should Practice What They Preach There are some best business practices that we can follow or improve.

35

The Communication Effectiveness of System Models Using the Models of UML vs. Structured Techniques: A Field Experiment This article examines the comparative effectiveness of the UML and traditional modeling languages in communicating information about a system design. Performance of three groups are examined: (1) those without knowledge of either language; (2) those with some training in one language; and (3) those with extensive training in one language.

Daniel Vetter

EXECUTIVE VIEWPOINT

7

Corporate Culture Defines a Company and Its Future Corporate culture is what separates the business winners from the business losers. Quite simply, our culture is our No. 1 competitive advantage. Richard T. Farmer

Bruce C. Hungerford and Michael A. Eierman

45

ARTICLES

11

An Analysis of Working Capital Management Results Across Industries Using CFO magazine’s annual Working Capital Management Survey this article attempts to answer two questions: (1) Are firms in one industry as opposed to another quickly able to transfer sales into cash? and (2) Does working capital management performance for firms within a given industry change from year-to year? Greg Filbeck and Thomas M. Krueger

21

IBBEA Implementation and the Relative Profitability of Small Banks This article examines the impact of Interstate Banking and Branching Efficiency Act (IBBEA) of 1994 on the performance of small banks relative to large banks. The authors compare the performance of small and large banks in the periods preceding and following (1988-2002) IBBEA implementation. The study concludes that IBBEA has put small banks at a competitive disadvantage. Srinivas Nippani and Kenneth M. Washer

Modeling Internet Operations Using Initial Public Offerings The sudden Dot Com boom and bust left many investors and venture capitalists wondering about the investment worthiness of Internet companies. In this article, the authors examine 340 Initial Public Offerings (IPO) of Internet companies to identify which types of companies are likely to have superior performance.

Building a Market-Oriented Organizational Environment: An Implementation Framework for Small Organizations The authors, using an internal customer-internal supplier perspective, identify a framework for creating a market-oriented workforce in small organizations where impact of market-orientation on performance is stronger than in larger organizations. Beth Ann Martin and James H Martin

59

Implementing Planned Change: An Empirical Comparison of Theoretical Perspectives Using data from over one hundred managers involved in the implementation of planned change, the authors draw conclusions about the appropriateness of three configurations and about the relative importance of various change process factors in achieving implementation success. Matthew W. Ford and Bertie M. Geer

BOOK REVIEW

70

Final Accounting

by Barbara Ley Toffler

Bill Cummings

Mid-American Journal of Business, Vol. 20, No. 2

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Gupta

EDITORIAL

Managing Our Way to Academic Decline

Ashok Gupta Editor-in-Chief

One of the critical elements with a significant impact on the quality of education is the recruitment and retention of excellent faculty. In a recent article, Bennis and O’Toole lamented that business schools lost their way by focusing on the wrong reward system for faculty, which emphasizes rigorous-scientific rather than practical-relevant research. Top rated business schools derive pleasure and prestige by extolling the number of articles their faculties have published in A-rated journals. There is nothing wrong in publishing in A-rated journals; but there is something seriously wrong when the consequences of such behavior on business education are ignored; it is even more deplorable when not-so-top-rated business schools try to emulate their A-rated brethrens. We have long known the perils of rewarding behavior “A” while hoping for behavior “B”; we must now deal with the outcome of such thinking. Ineffective management of business schools is a major source of discontent among faculty. It is paradoxical and ironic when business schools that are supposed to teach how to manage a business are themselves poorly managed. Deans come and go as in a revolving door. Jeffrey Garten, departing Dean of the Yale School of Management, said in a recent New York Times interview, “I was an investment banker for fifteen years. I was in four presidential administrations. But this job has been the most difficult of all.” Looking at the number of ads for Dean’s jobs, one wonders where all the good people have gone! Many business schools have hired (tired or retired) corporate executives as “Accidental Deans” – dean’s positions occupied by those with no training or experience in teaching, research or academic leadership. They do not know and perhaps don’t care what it means to be a faculty in a university setting. Many have no appreciation or respect for faculty governance in higher education. They are used to a corporate style of management

and that is how they run the business school and treat business faculty. Ethics for them is something to organize lectures on and write about. In the name of discretionary powers, they play favorites with faculty without regard to the demoralizing effect such actions may have on others. In the name of raising money, they enjoy traveling and meeting their own corporate types with whom they are most comfortable. Extensive traveling as a by-product, keeps them away from campus which helps them avoid interacting with faculty and getting to know them except, of course, their own core group of confidants called the members of the Executive Council, which keeps getting bigger and bigger with additional Assistant and Associate Deans. In the name of innovation, they dilute the curriculum without assessing the effectiveness of such an “innovation.” As if grade inflation was not enough, some business schools have created lucrative programs for students to receive multiple credits for little work. These “innovations” essentially give luster to the student’s resume – a truly studentcentered approach to education! Why are we just concerned about rigor in research and not rigor in education? Faculty members, on the other hand, have become timid. Like Pavlov’s dog, they have learned how to behave: give easy grades – faculty gets good evaluations, students feel good (they are already paying steep tuition why give them a hard time) and faculty do not have to defend their actions; just say “yes” and grease the right administrators to get lucrative assignments; volunteer to get on the important recruitment committees; become a showman – invite the Dean or other big-wigs during student presentations where you exhibit well dressed executive-looking students and their slick PowerPoint slides rather than focus on the content of their presentations or grill them with tough questions; and if you are a senior professor, you Mid-American Journal of Business, Vol. 20, No. 2

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“collaborate” with some untenured faculty members or, if you are lucky, with young relatives on research projects and publications – preferably for A-journals! Students are happy with less. Education is perhaps the only industry where the customer is least demanding and happy with little. They prefer a lighter work-load, easy grading, entertaining classes, curving of grades, and accommodating professors. Many students work to pay for their education; they have to fit classes into their real lives. A large number come from difficult family backgrounds with poor study habits and work ethics. They consider getting a diploma as their entitlement for paying the tuition. Students’ attitudes toward learning need serious adjustments. In a truly global world that we now live in, American students are not just competing with other fellow students in America; they are competing with students from rest of the world. To stay competitive, US students need to keep getting better. Thomas Friedman of the New York Times beautifully summarized how things have turned around: When I was growing up, my parents used to say to me, “Tom, finish your dinner — people in China are starving.’’ But after sailing to the edges of the flat world for a year, I am now telling my own daughters, “Girls, finish your homework — people in China and India are starving for your jobs.’’ [3] There was a time when the world used to knock at America’s doors for excellence in higher education in science, mathematics, engineering, technology, and business. America still attracts the best talent from around the world. However, that lure may be slowly diminishing. Students around the world now have more choices; those who come to America for higher education may prefer to return to their native lands, taking their talent with them. India presents a shining example of academic excellence in several of these areas of education. India is setting up campuses around the world to provide rigorous and relevant education at a lower price-tag. Will we be ready to compete? Let’s rededicate ourselves to the real purpose of business education: producing students who can generate creative solutions to business problems in the absence of clear facts by integrating knowledge, experience and critical thinking. Let’s remember that rigor and relevancy need not be mutually exclusive. We can create a rigorous and relevant business curriculum, and at the same time conduct practical-relevant business research in a scrupulous and scientific manner. These goals can only be achieved with the help of academic leaders who truly understand the role of faculty in business education and who treat them with respect, fairness and dignity.

In this issue......

In this issue, we present a set of six articles and an executive viewpoint. Businesses are paying increased attention to applying Six Sigma methodologies to measure and ensure quality in all areas of the enterprise including working capital management. In the first article of this issue, the authors, using 4

Mid-American Journal of Business, Vol. 20 No. 2

CFO magazine’s annual Working Capital Management Survey, attempt to answer two questions: (1) are firms in one industry as opposed to another quickly able to transfer sales into cash; and (2) does working capital management performance for firms within a given industry change from year-to year? The authors report an affirmative answer to both questions. The second article examines the impact of the Interstate Banking and Branching Efficiency Act (IBBEA) of 1994 on the performance of small banks relative to large banks. The authors compare the performance of small and large banks in the periods preceding and following (1988-2002) IBBEA implementation. The study concludes that IBBEA has put small banks at a competitive disadvantage. The sudden Dot Com boom and bust left many investors and venture capitalists wondering about the investment worthiness of Internet companies. In the third article of this issue, the authors examine 340 Initial Public Offerings (IPO) of Internet companies to identify which types of companies are likely to have superior performance. The authors find that Internet firms with high information intensity and low customer contact yield superior performance but firms with low physical presence underperformed. The study reported in the fourth article examines the comparative effectiveness of the Unified Modeling Language (UML) and traditional modeling languages in communicating information about a system design. Effectiveness is assessed by examining the performance of three groups: (1) individuals with no knowledge of either language; (2) individuals with no knowledge of either modeling language that were provided training in one of the languages; and (3) individuals that have had more extensive training in one of the languages. Although the impact of market-orientation on organization performance has now been widely accepted, there is little guidance for actually developing market-orientation. In the fifth article of this issue, the authors, using an internal customer-internal supplier perspective, identify a framework for creating a market-oriented workforce in small organizations where impact of market-orientation on performance is stronger than in the larger organizations. Few models for implementing planned change have been studied using empirical research designs. In the last article, using data from over one hundred managers involved in the implementation of planned change, the authors draw conclusions about the appropriateness of three configurations and about the relative importance of various change process factors in achieving implementation success.

References

Bennis, Warren G. and James O’Toole, “How Business Schools Lost Their Way,” Harvard Business Review, May, 2005. Holstein, William J., “Are Business Schools Failing the World?” The New York Times, June 19, 2005. Friedman, Thomas, “It’s a Flat World, After All,” New Yourk Times, April 3, 2005

Vetter

DEAN’S FORUM

Business Colleges Should Practice What They Preach As I was facilitating discussion regarding the college’s three year strategic plan at our recent Deans Business Advisory Board meeting in May, a board member inquired whether the college “practices what it preaches.” We teach our students how successful firms and organizations operate, but do we expect that of ourselves? He also suggested, “If we don’t, we ought to.” He introduces a compelling point. Is a business college a good example of how a business is run? The answer is yes and no. Daniel Vetter A business college is much like a busiInterim Dean ness with products and services, clients College of Business or customers, and business processes. Administration Central Michigan University Granted, to the extent that business colleges can act like a business in all aspects is somewhat limited. However, there are some best business practices that we can follow and possibly improve on.

Live your strategic plan

Create and communicate your vision for the college. Take the college with you. AACSB International’s emphasis on strategic planning has been very good for business colleges. For some business colleges, the strategic planning process is standard fare. For others it is new territory. Gradually bringing faculty and staff together to build a consensus about where the college is going, providing benchmarks from which progress can be measured, and focusing financial resources on key initiatives are key components. Our college has formally employed a strategic planning process for a number of years. We always struggle with several issues. Consistency with ever changing university goals is one challenge. Bringing a college organization together to embrace the importance of the strategic plan is the greatest challenge. My experience suggests that the college staff are the easiest to embrace the process. Department

chairpersons and program directors are key, but faculty are the biggest challenge. Not only does a dean have to find a way to include the faculty into the strategic planning process, but faculty activities such as teaching, research, professional development, and service must align with college priorities. Faculty must have incentives to focus their activities on college priorities. They must understand the importance of what they do and how it contributes to the college mission and vision.

Become more entrepreneurial

Some business colleges throughout the country have done this well. For the most part, we can all improve. Larger and more prominent business colleges have a strong track record of courting alumni, pursuing private money, aggressively raising fees to cover program costs, and growing executive education programs. We all can learn from this type of model. Our college still has considerable progress to make in this area. However, we have been more aggressively leveraging business partnerships to help sponsor programs and focus initiatives. Our faculty do not have expertise in every area, but we are getting better at marketing and matching our focused expertise to offer management education programs that firms and organizations value.

Measure how well your college is performing

Benchmarking is a time honored practice. Comparing our performance to our peers has been healthy. We all have a few schools that we aspire to be like. Nevertheless, business schools should also look to campuses that are different and who may have useful and smart innovative programs. Although university presidents are enamored with rankings, in my opinion, we spend too much time and resources to Mid-American Journal of Business, Vol. 20, No. 2

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pursue rankings. Some of the ranking criteria is sensible, but perceptions are not a good way to rank schools. We need to be more objective and relevant. More across the board benchmarking is needed in the area of student learning. What is the real value that a business education provides? The proof is in the pudding. It is in the performance of our graduates. Do they have the skills, knowledge, and abilities to compete? We also have to improve on communicating these results to our stakeholders.

The Mid-American Journal of Business is sponsored by: Ball State University

Improve the skills of your workforce

Are we doing enough to incentive and motivate faculty to continuously maintain and upgrade professional development skills? Are scarce resources spent effectively? We usually rely on faculty to personally make these decisions. Do they make the correct decision? In the area of scholarship, some faculty research skills are steadily eroded after graduate school. Should this happen? I believe it is somewhat universal that senior...