American Journal of Management

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He has established a company, Mears Power-T, Inc., to begin to .... in operations, supply chain, finance, accounting or marketing classes by .... To be counted as marginally attached the labor force, people must indicate .... This in turn disrupts the traditional pattern of the retirement of aging workers ...... Sales / Receivables.
American Journal of Management

North American Business Press Atlanta - Seattle – South Florida - Toronto

American Journal of Management Editor-In-Chief Dr. David Smith

NABP EDITORIAL ADVISORY BOARD Dr. Nusrate Aziz - MULTIMEDIA UNIVERSITY, INDIA Dr. Andy Bertsch - MINOT STATE UNIVERSITY Dr. Jacob Bikker - UTRECHT UNIVERSITY, NETHERLANDS Dr. Bill Bommer - CALIFORNIA STATE UNIVERSITY, FRESNO Dr. Michael Bond - UNIVERSITY OF ARIZONA Dr. Charles Butler - COLORADO STATE UNIVERSITY Dr. Jon Carrick - STETSON UNIVERSITY Dr. Mondher Cherif - REIMS, FRANCE Dr. Daniel Condon - DOMINICAN UNIVERSITY, CHICAGO Dr. Bahram Dadgostar - LAKEHEAD UNIVERSITY, CANADA Dr. Anant Deshpande – SUNY, EMPIRE STATE Dr. Bruce Forster - UNIVERSITY OF NEBRASKA, KEARNEY Dr. Nancy Furlow - MARYMOUNT UNIVERSITY Dr. Mark Gershon - TEMPLE UNIVERSITY Dr. Philippe Gregoire - UNIVERSITY OF LAVAL, CANADA Dr. Donald Grunewald - IONA COLLEGE Dr. Samanthala Hettihewa - UNIVERSITY OF BALLARAT, AUSTRALIA Dr. Russell Kashian - UNIVERSITY OF WISCONSIN, WHITEWATER Dr. Jeffrey Kennedy - PALM BEACH ATLANTIC UNIVERSITY Dr. Dean Koutramanis - UNIVERSITY OF TAMPA Dr. Malek Lashgari - UNIVERSITY OF HARTFORD Dr. Priscilla Liang - CALIFORNIA STATE UNIVERSITY, CHANNEL ISLANDS Dr. Tony Matias - MATIAS AND ASSOCIATES Dr. Patti Meglich - UNIVERSITY OF NEBRASKA, OMAHA Dr. Robert Metts - UNIVERSITY OF NEVADA, RENO Dr. Adil Mouhammed - UNIVERSITY OF ILLINOIS, SPRINGFIELD Dr. Roy Pearson - COLLEGE OF WILLIAM AND MARY Dr. Veena Prabhu - CALIFORNIA STATE UNIVERSITY, LOS ANGELES Dr. Sergiy Rakhmayil - RYERSON UNIVERSITY, CANADA Dr. Fabrizio Rossi - UNIVERSITY OF CASSINO, ITALY Dr. Ira Sohn - MONTCLAIR STATE UNIVERSITY Dr. Reginal Sheppard - UNIVERSITY OF NEW BRUNSWICK, CANADA Dr. Carlos Spaht - LOUISIANA STATE UNIVERSITY, SHREVEPORT Dr. Ken Thorpe - EMORY UNIVERSITY Dr. Calin Valsan - BISHOP'S UNIVERSITY, CANADA Dr. Anne Walsh - LA SALLE UNIVERSITY Dr. Thomas Verney - SHIPPENSBURG STATE UNIVERSITY Dr. Christopher Wright - UNIVERSITY OF ADELAIDE, AUSTRALIA

Volume 18(2) ISSN 2165-7998 Authors have granted copyright consent to allow that copies of their article may be made for personal or internal use. This does not extend to other kinds of copying, such as copying for general distribution, for advertising or promotional purposes, for creating new collective works, or for resale. Any consent for republication, other than noted, must be granted through the publisher:

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This Issue AUS Entrepreneurship Education; Missing the Mark for Greater Societal Impact ......................... 10 Roy C. Carriker US workforce economic health continues to deteriorate as contributing stresses mount. Entrepreneurship educators must more broadly define “entrepreneurship”, creating new platforms better preparing society, not just students dreaming of starting something. Beyond entrepreneurship preparation of high school and university students, the task goes to non-traditional education of workers unable to retire and unprepared to finish life as self-employed “unintended entrepreneurs”. The greatest challenge in educating a healthier, more entrepreneurial workforce is first creating awareness of the need. Entrepreneurship educators are best positioned to deliver the needed training, but first must create awareness of the need. If they don’t, who will? Mears Power-T, Inc. ................................................................................................................................. 18 Robert Stevens, Lawrence Silver, Martin S. Bressler, Courtney Kernek, Robert Loudon Ray Mears has developed a portable sound system that he thinks will be able to offer him an additional income. As a music minister at a small local church he has been searching for something to supplement his salary so that he can continue to afford to do what he loves (church music). With his knowledge of church and overseas missions’ audio system needs, he developed a sound system that is very versatile and affordable for such customers. He has established a company, Mears Power-T, Inc., to begin to manufacture and market his design if it appears feasible. Optimization of Obsolescence Forecasting Using New Hybrid Approach Based on the RF Method and the Meta-heuristic Genetic Algorithm ............................................................................................. 27 Yosra Grichi, Yvan Beauregard, Thien-My Dao Obsolescence is highly complex problems due to the influence of many factors such as technological advancement. However, prediction of obsolescence appears to be one of the most efficient solutions. This paper proposes a novel approach known as GA-RF for obsolescence forecasting. Genetic algorithm (GA) searches for optimal parameters and feature selection to construct a random forest (RF) in order to improve the classification of RF. To examine the feasibility of this approach, this paper presents a comparison between GA-RF, RF, Stepwise logistic regression, and stochastic gradient boosting. Experimental results show that GA-RF outperformed the other methods with 93.3% of accuracy, 90.4% of sensitivity and 95.4% of specificity. Toward a Model for Evaluating Attorney Discipline Across Regions: The Ninth Circuit ...................................................................................................................................... 39 Michael M. McKinney, Douglas P. Dotterweich This paper builds upon initial findings as a first step in building a model to assess the efficacy of attorney disciplinary systems or processes in individual states or appellate regions. Analysis of reports compiled by state oversight organizations or boards responsible for investigation and disciplinary proceedings due to complaints filed against attorneys allowed for construction of the model. Future iterations of the model will include additional appellate regions. This paper examines the states located in the Ninth Circuit Court of Appeals.

The Effect of Positive Psychological Capital in Preventing Destructive Leadership Behaviours in a Portuguese Retail Chain ........................................................................................................................... 43 António Calheiros Although Leadership is mostly viewed under a positive light, there is growing research on leadership’s negative impacts, a new field that has been called destructive leadership. This paper reviews the literature on destructive leadership and verifies if Positive Psychological Capital (PsyCap) of the followers can help prevent the occurrence of destructive leadership behaviours. 98 teams of a retail chain, comprising 567 employees, reported on their PsyCap, prosocial behaviours, and leaders’ destructive behaviours. Results show that teams with high PsyCap neutralized the negative impact of one behaviour of destructive leadership in one of the measures of prosocial behaviours. Managing the Implementation of New Computer Systems in Small Businesses: Building Attitudes and Perceptions ......................................................................................................................................... 56 Paul E. Madlock This study developed a model to advance scholarship and assist practitioners implement, manage and build their employees’ perceptions of new computer systems. In doing so, Technology Management Model (TMM) was developed. TMM is comprised of three latent variables: technological; personal; organizational thought to influence the attitudes employees hold toward new computer systems. These attitudes were then hypothesized to be related to job satisfaction and organizational commitment. The results indicated that the data fit the TMM. Implications for these findings were discussed with an emphasis on the value derived from the development of TMM to scholars, practitioners, and employees. Worker’s Health and Productivity .......................................................................................................... 70 Mohammad Alam Tareque, Jack Edward Effron Turnover and absenteeism are common in the Ready-Made Garments (RMG) factories of Bangladesh, causing reduced productivity. Illness is the main cause. This is a study of projects in this industry which raise women workers’ health awareness. The objective of this study was to find out whether such projects: (1) increase the productivity of garment workers and (2) have a positive return on investment. In fact, productivity increased through reduced absenteeism, improved quality of work, reduced “throwbacks” to re-sew garments, reduced requests for early lunch out or leave, and ultimately, reduced turnover. With minimal initial investment, such projects have a significant Return on Investment (ROI). Stakeholders and Student Perceptions: Choosing the Primary Group................................................ 80 Charles M. Coco Student perceptions often provide valuable learning insights into various theories and concepts presented within the classroom. Stakeholder theory, for example, presented an opportunity to explore student views on which stakeholder group is most important to organizational success. Students within a business course considered the relative importance of customers, employees, investors, and suppliers. An interesting discussion followed their selections where the students debated the merits of each stakeholder group. Consequently, customers were perceived by the students as the most important stakeholder group to the organization.

Border-less Classroom, an Experiential Approach to Entrepreneurial Education: A Pilot Study in Enhancing Chinese Students Entrepreneurial Skills............................................................................. 83 Issam A. Ghazzawi, Junheng Liao, Jack Meek, Hanling Lu The global economy is embracing more international collaboration as technology and communication have linked countries and made the world smaller. Business and government collaborations are not alone, institutions of higher education around the world have also moving closer to each other through varied cooperative programs. Some institutions of higher education are experimenting with new approaches to learning and teaching through a technology enhanced delivery method. This paper offers an outcome assessment of a new method of an experimental/experiential pilot study where students from a university in Guangdong, China have created a small learning community and learned via WebEx technology varied topics in entrepreneurship including finance, management, and marketing. Facilitated by two faculty members from a private university in Southern California and a faculty member in Guangdong province, students were able to create a business plan, get a starting capital, started a small business, sold varied cosmetics’ products, and made some money. The paper concluded that border-less cooperation coordinated through a web technology based delivery method helped make education relevant to students' understanding of the subject of entrepreneurship as well as helped motivated them to succeed as the U.S. faculty shared their entrepreneurial knowledge. Based on quantitative analysis of the results coupled with students’ testimonials, the paper suggests that this border-less experiential learning collaboration has positive outcomes to students. Orchids Paper Company 2014-2015 ..................................................................................................... 104 John K. Masters, Pamela P. Rogers This case captures Orchids Paper Company at a time of significant change internally and in its environment. It presents opportunities to examine the concept of fit between Strategy, Environment, and Resources to maximize profit potential. The nature of Orchids’ products and industry facilitate the case’s accessibility, since Orchids operates in an industry which is fairly simple to understand (paper manufacturing). The case is intended for use in business policy and strategy classes at the undergraduate or MBA level, but might be used in operations, supply chain, finance, accounting or marketing classes by focusing on specific questions facing the firm. A Typology of Threats to Construct Validity in Item Generation ..................................................... 132 Lucy R. Ford, Terri A. Scandura We review the literature on item generation and develop a typology of common threats to construct validity related to poor item generation practices. The typology is based on the literature on item generation, which suggests that these are practices to avoid in the construction of survey items. The threats are categorized as scale-centered or context-centered, and might occur in either item construction or in the meaning drawn by the respondent. By wording items to avoid these pitfalls researchers may be able to improve the construct validity of their studies.

GUIDELINES FOR SUBMISSION American Journal of Management (AJM) Domain Statement The American Journal of Management (AJM) is a peer-reviewed multidisciplinary journal dedicated to publishing scholarly empirical and theoretical research articles focusing on improving organizational management theory, practice and behavior. AJM encourages research that impacts the management field as a whole and introduces new ideas or new perspectives on existing research. Accepted manuscripts will focus of bridging the gap between academic theory and practice as it applies to improving the broad spectrum of the management discipline. Manuscripts that are suitable for publication in AJM cover domains such as business strategy and policy, entrepreneurship, human resource management, operations management, organizational behavior, organizational theory, and research methods. Submission Format Articles should be submitted following the American Psychological Association format. Articles should not be more than 30 double-spaced, typed pages in length including all figures, graphs, references, and appendices. Submit two hard copies of manuscript along with a disk typed in MS-Word. Make main sections and subsections easily identifiable by inserting appropriate headings and sub-headings. Type all first-level headings flush with the left margin, bold and capitalized. Second-level headings are also typed flush with the left margin but should only be bold. Thirdlevel headings, if any, should also be flush with the left margin and italicized. Include a title page with manuscript which includes the full names, affiliations, address, phone, fax, and e-mail addresses of all authors and identifies one person as the Primary Contact. Put the submission date on the bottom of the title page. On a separate sheet, include the title and an abstract of 200 words or less. Do not include authors’ names on this sheet. A final page, “About the authors,” should include a brief biographical sketch of 100 words or less on each author. Include current place of employment and degrees held. References must be written in APA style. It is the responsibility of the author(s) to ensure that the paper is thoroughly and accurately reviewed for spelling, grammar and referencing.

Review Procedure Authors will receive an acknowledgement by e-mail including a reference number shortly after receipt of the manuscript. All manuscripts within the general domain of the journal will be sent for at least two reviews, using a double blind format, from members of our Editorial Board or their designated reviewers. In the majority of cases, authors will be notified within 60 days of the result of the review. If reviewers recommend changes, authors will receive a copy of the reviews and a timetable for submitting revisions. Papers and disks will not be returned to authors. Accepted Manuscripts When a manuscript is accepted for publication, author(s) must provide format-ready copy of the manuscripts including all graphs, charts, and tables. Specific formatting instructions will be provided to accepted authors along with copyright information. Each author will receive two copies of the issue in which his or her article is published without charge. All articles printed by AJM are copyrighted by the Journal. Permission requests for reprints should be addressed to the Editor. Questions and submissions should be addressed to: North American Business Press 5720 Old Ocean Blvd Ocean Ridge, FL 33435 [email protected] 866-624-2458

US Entrepreneurship Education Missing the Mark for Greater Societal Impact Roy C. Carriker Drexel University Charles D. Close School of Entrepreneurship

US workforce economic health continues to deteriorate as contributing stresses mount. Entrepreneurship educators must more broadly define “entrepreneurship”, creating new platforms better preparing society, not just students dreaming of starting something. Beyond entrepreneurship preparation of high school and university students, the task goes to non-traditional education of workers unable to retire and unprepared to finish life as self-employed “unintended entrepreneurs”. The greatest challenge in educating a healthier, more entrepreneurial workforce is first creating awareness of the need. Entrepreneurship educators are best positioned to deliver the needed training, but first must create awareness of the need. If they don’t, who will? FOREWARD The primary driver for education is preparation of an individual for earning a living. However, today earning a living does not have the once clearly defined historic pattern of:  Be trained/educated  Earn a living (get a job/work for yourself/have a career/etc.) over one or several employments  Retire Today there are a number of coexisting contributing factors creating a “perfect storm” of disruption in this workforce pattern and the ability to attain a secure economic future. While there has been a great deal of public discourse relative to US workers being taken out of the workforce via globalization, robotics, etc., and there exists a growing sense of discomfort and disruption, it appears the public at large and many of those guiding them don’t have a clear view of the multiple elements at play. Complicating factors include misalignment of education with emerging career paths, globalization, disruptive technologies and new means of earning money variously labeled as the gig, sharing or mesh economies. New patterns of earning a living are redefining what it means to be “employed” and/or “unemployed” and require a much greater understanding of “underemployment” to fully understand how to better prepare the workforce for a healthier economic existence. A growing movement in coping with emerging employment realities is becoming an independent, self-employed worker, i.e., being an entrepreneur, either by choice or out of necessity. The majority of this growing workforce segment never contemplated being an entrepreneur or sought appropriate training. They possibly represent the greatest potential opportunity for the entrepreneurship education community to create socioeconomic impact.

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Being employed or unemployed has become blurred and peoples’ economic circumstances with respect to earning a living are no longer captured in traditional government statistics. A principal part of this issue is traditional government statistics focus on rigid definitions of unemployment which do not capture the workforce economic distress of underemployment. If one has a choice of being unemployed or working far under the potential of their training/education, they must opt for the later to survive, i.e., opt to be underemployed and possibly eke out a living. The first wave in displacing/devaluing human endeavor in developed economies such as the US was globalization with well-paid manufacturing jobs being sourced from or moving offshore. Second came robotics and automation to further remove the cost of labor while simultaneously improving productivity and quality. The negative impact of this in the manufacturing sector was somewhat offset by the creation of the service economy, however, on average service economy jobs did not pay as well nor have the fringe benefits historically associated with manufacturing. The next wave came with the advent of the Internet which allowed knowledge work to be offshored to lower-cost countries just as globalization had done to manufacturing. Finally, we are entering an age where artificial intelligence is beginning to displace workers with advanced education and heretofore lucrative career paths such as structural engineering, medical diagnostics, stock market analysis, etc. While today's society faces displacement of human endeavor in the workplace, particularly in developed economies, it won't be long until economies relying on low-cost labor will be impacted as well, since low-cost labor alone cannot compete with the productivity and quality of automation and advancing, disruptive technologies. Evidence of Concurrent Stresses on Us Workforce Economic Health Certainly one of the key barometers of the US workforce economic health is the degree to which workforce underemployment is growing. Because of the complexity of today's economy there is not a great deal of specific data, yet there is sufficient evidence to paint a picture of significant stress. A second barometer of workforce stress is inflation adjusted wages over time, which show decline for significant portions of the US workforce. A third barometer of workforce economic health is the rapid redistribution of wealth in the United States to the detriment of the workforce at large. Finally, a fourth element of economic stress is extended lifespans with no commensurate retirement planning. Each of these elements will be briefly discussed in what follows. Underemployment Today, with the US Bureau of Labor Statistics putting unemployment at around four a half percent, how bad could the economic health of the US labor force be? To understand why government unemployment figures may no longer be a good barometer of workforce economic health more fully, one needs to delve into how the official unemployment rate is determined. Very briefly, according to the US Bureau of Labor Statistics unemployment rate is determined monthly as follows:  Approximately 60,000 eligible households, comprising on the order of 110,000 individuals are surveyed each month.  Every month, one fourth of the households in the sample are changed, so that no household is interviewed for more than four consecutive months.  After a household is interviewed for four consecutive months, it leaves the sample for eight months.  After eight months the household is again sampled for the same four calendar months a year later, before leaving the sample for good.  Survey respondents are never asked specifically if they are unemployed, nor are they given an opportunity to decide their own labor force status, their status being determined on the basis of how they respond to a specific question set on recent activities.

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This sampling regiment involving 60,000 households is quite small relative to the active workforce and returning to the same sample households after eight months, to examine changes within the sample base, in effect further lowers the breath of sampling. The basic concepts involved in identifying those who are employed and the unemployed are:  People with jobs are employed.  People who are jobless, looking for a job, and available for work are unemployed.  People who are neither defined as employed or unemployed are not counted as being in the labor force.  People who have no job and are not looking for one in the past four weeks are counted as not in the labor force.  People are considered employed if they did any work at all for pay or profit during the survey reference week, including all part-time and temporary work. The last three elements of identifying who are gainfully employed are particularly troubling with respect to ascertaining workforce economic health, because many who are underemployed and eking out a living via multiple odd jobs, the gig economy, etc. are either not counted as being in the labor force or are counted as employed even though they don’t have sufficient employment. As defined by the US Bureau of Labor, only those defined as employed or unemployed are counted in the US workforce. Persons not following in these two categories are considered to be marginally attached to the labor force. To be counted as marginally attached the labor force, people must indicate they currently want a job, have looked for work in the past 12 months or since they last worked and are available for work. Discouraged workers are a subset of the marginally attached. Discouraged workers report they are not currently looking for work for one of the following types of reasons:  They believe no job is available to them in their line of work or area.  They have previously been unable to find work.  They lack the necessary schooling, training, skills, or experience.  Employers think they are too young or too old.  They face some type of discrimination. Marginally attached and discouraged members of the workforce are not counted as being in the workforce and thus do not count as unemployed. With a large number in today's workforce working below their training or skill set just to make ends meet, it is clear underemployment is a major workforce economic issue, not necessarily unemployment as defined by rigid historic measures. One gauge of this issue, in recent surveys of graduating university students, 41% (Reynolds) to 46% (Federal Reserve Bank of New York Report) said they did not need their degree to obtain the job they were able to get, thus they are certainly underemployed relative to their career expectations. With the complexities of today's economy it is difficult to exactly assess the level of underemployment and its impact on a person's ability to earn a satisfactory living. Certainly a contributing factor to this complexity is today's gig economy with an ever increasing number of platforms such as Uber, Lyft, Airbnb, TaskRabbit, etc. providing supplementary income. It can be reasoned these platforms have attained such rapid popularity due to the growing need for means of earning a supplemental income. The US Bureau of Labor realizes their historic unemployment measures are too restricted and do not adequately capture the breath of labor market problems. Accordingly, economist at the Bureau of Labor Statistics developed a set of alternative measures, more broadly defined than historic unemployment, but still including it, which they term labor underutilization. However, in examining the variation in their labor underutilization figures in conjunction with times of recession, variations in labor underutilization

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appear to better represent a lack of job availability rather than a measure of being underemployed, i.e., working, but in a job well below one’s training or skill set. An excellent 2016 study by the McKinsey Global Institute (Manyika) delves into “independent work” as opposed to those who work in more traditional roles as employees. The McKinsey study defines four types of independent workers:  Free agents who derive their primary income from independent work and actively prefer it  Casual earners who use independent work for supplemental income and do so by choice  Reluctants who derive their primary income from independent work but would prefer a traditional job  Financially strapped who do independent work for supplemental income to make ends meet but prefer not to do this McKinsey groups the first two categories, free agents and casual earners, as independent workers who do so by choice. They group the last two categories, reluctants and financially strapped, as independent workers who do so out of necessity. Of the 54 million to 68 million independent earners McKinsey estimates are in the United States, roughly 20 million are in the out of necessity category. The US Department of Labor puts the US workforce at approximately 160 million, with 4-5% typically unemployed at any one point in time. If something on the order of 62 million are independent workers (per McKinsey), then nearly 39% of the US workforce are already independent workers and their numbers are growing. Further, if 20 million are independent earners out of necessity, they comprise about 13% of the US workforce and this number is growing as well. Contrasting US government figures on self-employment with the findings of the McKinsey study provides insight as to the difficulty in getting a clear picture. In April 2014 the Bureau of Labor Statistics put the number of unincorporated self-employed at nearly 9.3 million, about twice the number of Incorporated self-employed workers, or, taken together, roughly 14 million self-employed in total. At the same time the US Census Bureau reports data on what they term "non-employer firms", basically companies of one, as being around 22.7 million. The Census Bureau economic census data also reported on what they termed one employee firms. For the years 2002 and 2007 these numbers were 20.9 million and 26.5 million, respectively. In the 2012 census data they stopped reporting this figure, but one can probably use the 22.7 million from the non-employer firms data. In any case, these figures are far from the 54 - 68 million independent workers found in the McKinsey study and suggest a great deal of uncertainty as to just how many of the US workforce are self-employed, independent workers, but likely significantly higher than government estimates. The rising penetration and impact of the internet in every aspect of life is undeniable. Knowledge of the skill and value of every individual is being continuously refined and detailed knowledge of the workforce in general is becoming more and more “fine grained”. This enables employers to reach into the workforce at large to find an individual or individuals with the skill sets and knowledge needed for a specific project or task without having to hire these contributors/problem-solvers as traditional employees, but only as independent contractors. Given the uncertainties in permanent hires in terms of the individual working out and/or their needed skill/knowledge being obviated by technological or market disruptions, use of contract/independent workers will only grow, possibly accelerate, in the future. Inflation Adjusted Wages Over Time Despite an apparent historic growth in wages over the years, October 2014 analysis provided by the Pew Research Center (Desilver) showed, using 2014 dollars as a constant, seasonally adjusted average hourly wages in the United States actually have fallen since the early 1970s when inflation is taken into account and this has been true regardless of whether the economy has been adding or subtracting jobs. This grim picture is not true for top wage earners and wealthier Americans, but certainly points to an inability of middle income and lower income individuals to share in the nation’s growth in wealth.

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Historically, career oriented University educated individuals have fared much better with their inflation adjusted wages growing in real terms and they were able to accumulate some level of wealth. However, in approximately the last decade the fortunes of graduating University students have diminished. Today on an inflation-adjusted basis, the average starting salary for graduates entering the workforce has been depressed from that of their counterparts a decade ago. While around 60% of recent University graduates are avoiding this problem, average starting salaries are being depressed in general by the 41 the 46% of recent graduates who say they didn't need a University education to get the job they were able to get. Rapidly Rising Wealth Inequality Just how uneven the playing field has become in participating in the American dream of getting ahead financially and accumulating enough wealth to be able to retire later in life is evidenced in the following. According to an analysis conducted in 2007 (Hurst), the wealthiest 1% of the American population owned 34.6% of the country's total wealth while the next 19% wealthiest households owned 50.5%. Thus in that time, the wealthiest 20% of Americans owned 85% of the nation’s total wealth while the bottom 80% of the population only owned 15% in aggregate. A recent paper by economist Edward N Wolff (Ingraham) using data from the federal Survey of Consumer Finances reports the wealthiest 1% of American households now own 40% of the total wealth in the United States, up from 34.6% in 2007. In fact, they now own more wealth than the bottom 90% combined. As noted previously, in 2007 the wealthiest 20% of Americans owned 85% of the nation's total wealth. According to Wolff's study the top 20% of households in the US now own 90% of US wealth up from 80% only 10 years ago. This trend of consolidation of wealth at the top has continued for roughly a half century. Adding to this picture, in recent years households in the bottom 10% of the wealth distribution have gone from zero wealth to on average being approximately $1000 in debt. This accelerating wealth inequality in the United States goes hand-in-hand with inequality in the ability to earn. Today, more and more, people do not earn money, capital does. Thus, as noted above, people with capital continue to get richer while those who work to earn a living and acquire capital are falling behind. In a recent open letter to the Harvard Business School community (Scott), HBS Professor Emeritus Bruce Scott pointed to business education being a factor in this wealth consolidation/concentration whereby business graduates are sent forward to manage with the mandate to optimize shareholder value. Clearly one outcome of this mandate has been to remove US workforce content to lower costs and improve returns on shareholder equity by off-shoring work, importing rather than domestic manufacture, reinvesting offshore earnings offshore for lower labor costs and the use of automation/robotics. Aging Workforce Inability to Retire Beyond all the exacerbating factors noted above is the dramatic change in US life spans in just one lifetime, i.e., roughly 70 years. According to the US Census Bureau (Whalen), longevity in the US has gone from 68 years in 1950 to nearly 79 years today. The historic economic model has been to work and prepare to retire at age 65, thus on average, retirement preparation and financial planning only had to cover on the order of 3 years. While people still associate 65 years of age as a retirement milestone, the average time span to financially cover in retirement is now on the order of 14 years. Because of the economic uncertainties brought about by globalization and technological disruption of traditional employment, much of the workforce today is faced with uncertainty and an inability to schedule retirement. Many, if not most, are faced with having to continue to work to sustain themselves. With the crushing consolidation of wealth, retirement becomes problematic for most if not impossible. This in turn disrupts the traditional pattern of the retirement of aging workers creating opportunity for those entering the workforce and exacerbates problems already being experienced due to globalization and technological disruption.

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Entrepreneurship Education’s Role for Future Workforce Economic Health It seems clear earning a living in the future is going to be far different from the past. However, preparation of individuals to operate in this new environment has not kept pace with reality. The US government response has been to manipulate federal taxation, relying on trickle-down economics, to help right the US economic ship as it relates to workforce economic health. It remains unclear if this will be of any great benefit. One thing for certain, the US workforce must be much better informed and prepared to deal with the vastly different realities of earning a living in the future. Going forward there will likely need to be a number of initiatives which all combine to improve the economic prospects of the US workforce. The definition of “entrepreneurship” and who is an “entrepreneur” needs to be broadened to suit today's realities. If, as the evidence suggests, an ever-growing proportion of the workforce are going to be self-employed independent workers, i.e.,” the entrepreneurs of their own lives”, entrepreneurship educators then should think of entrepreneurship in terms of self-employment not just focusing on those pursuing a startup dream. A critical first step, which it seems must fall to entrepreneurship educators, is creating a much broader public awareness of how different earning a living in the future may be. The problem today is, while the workforce is sensing a certain level of economic stress, there is not a full appreciation of what they face in in earning a future living and that they may very well default to being the entrepreneur of their own life. Only with this awareness will people understand and appreciate the need for having a more entrepreneurial mindset and skills as potential keys to future success In 2015 Deloitte (Mind the gaps) completed a survey of more than 7800 millennials representing 29 countries around the globe, with all participants having been born after 1982, having a college or university degree and being employed full-time in organizations predominantly larger than 100 employees. These recently employed graduates across a wide range of companies, cultures and disciplines gained in appreciation of the importance of being entrepreneurial mindset when being entrepreneurial had not been their focus. They were asked to rate how they now (as an employee, not a student) view the skills and attributes on which businesses place the most value and are currently prepared to pay the highest salaries. The survey pointed to qualities highly valued by companies, but relatively underdeveloped upon graduation in the view of the millennials interviewed. Being entrepreneurial was viewed as valued by companies (mentioned by 24 percent of the participants), but only 14 percent thought this was a strong personal trait upon graduation. These survey results speak to the growing importance of having an entrepreneurial mindset, even in established companies. This suggests those entering the workforce from higher education haven’t been sufficiently educated in the importance of entrepreneurship and being entrepreneurial. They represent yet another subset of the population who would benefit from a broader definition and awareness of entrepreneurship, again supporting the notion entrepreneurship education needs to reach out to students not seeking to be entrepreneurs in the traditional sense, but who will have to be more entrepreneurial in the future What training or change in education should the workforce of the future have to be better prepared? One element of this preparation could certainly be bringing a much more pervasive entrepreneurial mindset to the current workforce as well as those being prepared to enter the workforce in the future. If there will be an ever increasing number of independent workers, would it be more business education for everyone? Thanks to clues from a recently reported research study (Campos), the psychological aspects of entrepreneurship may be of greater value in preparing the workforce of the future than business training per. se. This study, recently reported in Science, conducted by team headed by Francisco Campos with researchers from the World Bank, the National University of Singapore and Leuphana University reports on improving the performance of small businesses. The study monitored 1500 people running very small businesses in Togo West Africa. Five hundred in the sample were randomly chosen as a control, while a second set of 500 received business training in conventional areas such as accounting, financial management, marketing and human resources. The remaining group of 500 was given training in entrepreneurial skills such as personal initiative, setting goals, dealing with feedback and persistence in the face of setbacks. American Journal of Management Vol. 18(2) 2018

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After 2 1/2 years the study found small business performance improvement benefited from training in the psychological/entrepreneurial aspects of managing the enterprise rather than having training in traditional business tools. The 500 with business training performed no better in sales and profit than the control group, while those given entrepreneurial training improved monthly sales by 17% and profits by 30% over the control group. One can easily speculate providing McKinsey “independent workers” with the same kind of training would provide similarly positive benefits, making the case for entrepreneurial education at all levels of career preparation and career redirection. So, many elements of what is taught in entrepreneurship programs could potentially have a significant impact in addressing preparation of the workforce of the future. However, to date entrepreneurship education focuses primarily on those who always wanted to be an entrepreneur. From a recent Kauffman Foundation study (Kauffmann), and using data on students taking courses which had anything to do with entrepreneurship or having entrepreneur or entrepreneurship in the title, it could be roughly estimated approximately 0.3% of the US University student population is studying anything having to do with entrepreneurship. Thus, while successfully growing programs for students intending to be entrepreneurs or those with some interest, this narrow entrepreneurship educator focus severely limits potential societal impact. To have a much greater societal impact entrepreneurship education needs to be more pervasive across education in general. Further, to help the existing workforce cope with an inability to afford retirement, elements of entrepreneurship education need to extend to this population as well. It might not be too much to say for future workforce economic wellbeing an entrepreneurial mindset will be nearly as important as other basic skills. While the best resource qualified to provide entrepreneurial education across much broader elements of the population are entrepreneurship educators, a major issue is this task is far outside their traditional roles and structures within academia. CONCLUSIONS There is a much broader, high impact societal mission for entrepreneurship education in the face of dramatic historic disruption of how people will earn a living in the future. This mission goes to creating a more entrepreneurial society, not just more startups. The continuing growth of independent work has major implications for broader entrepreneurship education and better workforce preparation. Certainly one important implication is there needs to be more content on entrepreneurship in basic education. Not simply in terms of the traditional notion of being an entrepreneur, i.e., starting something, but rather having an entrepreneurial mindset, which includes examining alternatives, making reasoned judgements involving risk and dealing with failure. A second important implication for entrepreneurship educators is the need to create both awareness of the need for entrepreneurial training and then providing it for a large proportion of the current US 160 million workforce who will be unable to retire and who have no education/training to be an independent worker. The basic elements of creating a more entrepreneurial society are really quite simple. First individuals must be educated with respect to the future they face in terms of earning a living which is far different from what has been known historically, often resulting in poor career advice and preparation. Second, there needs to be familiarity with the personal toolset/skills important to entrepreneurs, such as presentation of oneself and one's ideas, negotiation, self- branding, forming and leading teams, creativity, dealing with failure etc. Finally individuals need to have a basic idea of what it takes to be self-employed “company-of-one”. This would include how to find a product or service which is valued and in demand (Is it real?), a few simple financial models like creating budgets and understanding how marginal income needs to cover fixed expenses (Cash is king!), and finally an understanding of broader issues which will require advice from others such as the form of business, liability insurance, intellectual property, etc. (It takes a team.). While the steps to creating a more entrepreneurial society are conceptually straight forward, the most challenging element is creating an awareness of the need to be more entrepreneurial. How do you create an awareness in people as to what is happening and who are without an appreciation of what the future 16

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portends in respect to earning a living? Without this awareness people will not be motivated to seek avenues of education which will improve their entrepreneurial mindset and ability to perform as an entrepreneur of their own life in the future. To date, the vast majority of those preparing to earn a living in the future are totally unaware they may default to being the entrepreneur of their own life, never having considered they may end up being a self-employed contractor/ independent worker and certainly never having considered being entrepreneurial or starting something. Because entrepreneurship educators are the best resource to provide education and training for this unrecognized need, it falls to this community to extend their mission to creating the necessary awareness. If they don’t, who will? REFERENCES Campos, F., Frese, M., Goldstein, M., Iacovone, L., Johnson, H., McKenzie, D., Mensmann, M. (2017). Teaching personal initiative beats traditional training in boosting small business in West Africa. Science, 357 (6357), 1287-1290. Desilver, D. (2014, October). For most workers, real wages have barely budged for decades. Retrieved from http://www.pewresearch.org/fact-tank/2017/11/01/how-wealth-inequality-has-changed-inthe-u-s-since-the-great-recession-by-race-ethnicity-and-income/ Hurst, C. E. (2007). Social Inequality: Forms, Causes, and Consequence. Pearson, UK: Pearson Education, Inc. Ingraham, C. (2017, December). The richest 1 percent now owns more of the country’s wealth than at any time in the past 50 years. Retrieved from https://www.washingtonpost.com/news/wonk/wp/2017/12/06/the-richest-1-percent-now-ownsmore-of-the-countrys-wealth-than-at-any-time-in-the-past-50-years/?utm_term=.bda3536c672d Kauffmann National Survey of Entrepreneurship Education, An Overview of 2012-2014 Survey Data. http://www.nationalsurvey.org/files/2014KauffmanReport_Clean.pdf Mind the gaps, the 2015 Deloitte Millennial survey. (2015). Retrieved from millennial-surveyexecutivesummary.pdf Manyika, J., Lund, S., Bughin, J., Robinson, K., Mischke, J., Mahajan, D. (2016, October). Independent Work: Choice, Necessity, and the GIG Economy. Retrieved from https://www.mckinsey.com/global-themes/employment-and-growth/independent-work-choicenecessity-and-the-gig-economy Reynolds, G. H. (2014.January). Degrees of value, making college pay off. The Wall Street Journal, pp. C1, C2. Scott, B. (2017, September). What’s wrong with the Harvard Business School and American business. Retrieved from https://www.pbs.org/newshour/economy/making-sense/column-whats-wrongharvard-business-school-american-business The Labor Market for Recent College Graduates, Federal Reserve Bank of New York. (2017, September). Retrieved from https://www.newyorkfed.org/research/college-labor-market/index.html Whalen, J. (2017, December 21). U.S. lifespans fall again. The Wall Street Journal, p. A3.

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Mears Power-T, Inc. Robert Stevens Southeastern Oklahoma State University Lawrence Silver Southeastern Oklahoma State University Martin S. Bressler Southeastern Oklahoma State University Courtney Kernek Southeastern Oklahoma State University Robert Loudon Samford University

Ray Mears has developed a portable sound system that he thinks will be able to offer him an additional income. As a music minister at a small local church he has been searching for something to supplement his salary so that he can continue to afford to do what he loves (church music). With his knowledge of church and overseas missions’ audio system needs, he developed a sound system that is very versatile and affordable for such customers. He has established a company, Mears Power-T, Inc., to begin to manufacture and market his design if it appears feasible. BACKGROUND Having been in the ministry and overseas mission work for over 20 years, Mears recognized the need for a powerful yet portable sound system as a convenient way to communicate to small or large groups both indoors as well as outdoors under varying conditions. Many years ago, he had been given a small backpack system that had come from a Hollywood sound studio. It was very lightweight but not very powerful. He used it for several years until finally it was broken beyond repair. A member of one of Mears’ overseas mission teams told him that it resembled a piece of PVC and perhaps he should try to build one. This was the birth of the concept of the Power T. Mears’ “Power T” is a lightweight portable sound system that can operate on AC/DC power and has a self-contained microphone, amplifier, and a speaker (see Exhibits 1, 2 and 3). The battery-powered system is completely portable and can even be used with a keyboard or other electrical musical instruments. The name of the product was originally going to be "Port-a-Sound" to let the customer know 18

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that the unit provides sound in a portable unit. Unfortunately, Mr. Mears had to change this name due to a possible trademark violation. He is not sure if the current name adequately reflects the features or benefits of the product to potential customers. Mr. Mears is confident of the attributes built into the product but wonders if there are any other design features the product should have. The product’s exterior is a plastic (PVC pipe) outer shell that is a very durable protector of the inside of the unit. The two-way speaker system provides high-quality sound that is very effective for singing or for speaking in a normal size room. In addition, if the customer needs to project to a large number of people either outside or in a very large room, the unit can accommodate additional speakers. FIGURE 1 COMPONENTS OF POWER T

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FIGURE 2 ASSEMBLED POWER T

The Power T also incorporates a horn speaker. The portable system has one audio input, so that the user can easily plug an auxiliary item directly into the unit, such as a cassette deck or a compact disc player. A microphone is attached to the unit, which provides high quality and clear sound to the audience. The unit is totally self-contained and carries a one-year warranty against all factory defects. MARKET POTENTIAL Mears thinks the product has great potential -- especially for schools, churches, and other organizations, particularly those that have outdoor events or the need for portable sound equipment, such as lifeguards at pools or on beaches. If the product has potential, Mears will be able to spend only a couple of days each week assembling and selling the Power T because he is a choir director at a church. This is his calling and his family needs the financial support provided by the position.

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TABLE 1 SPECIFICATIONS FOR THE POWER T AMPLIFIER: 30 watts 112 db @ 1 meter, 1000 cps Output impedance: 4-16 ohms Microphone and Auxiliary inputs with individual volume controls AC/DC operation Siren circuit Durable steel faceplates and input jacks SPEAKERS: Main Speaker: High quality 6.5" Two-way Freq. Response: 55-22kHz Impedance: 4 Ohms Rated @ 60 watts Continuous Metal protective grill Horn: 5"X8" at face, heavy duty ABS plastic body with stainless steel hardware, rated @ 60 watts

BATTERY: 12-volt/5.0 amp hours rechargeable sealed lead acid AC ADAPTER/CHARGER: 12 VDC @ 1.5 amp WEIGHT: 20lbs (with standard accessories) DIMENSIONS: 12"HX21"WX11"D

MICROPHONE: Standard Microphone: Standard Heavy Duty Ball Type Unidirectional (High Feedback Rejection) 600 Ohms Freq. 90-10K -75 +/-3db On-Off Switch Cast Steel Housing

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Mears has gathered some data and believes that the primary market for his product consists of two main groups. The first includes schools, colleges, and universities. The second market segment consists of organizations such as churches. A breakdown of the different types of potential purchasers in selected counties/parishes of three states is shown in Exhibit 4. Even though there are other potential customers such as police departments, nursing homes, political groups, or even individuals or groups of singers, Mr. Mears' primary focus is on public and private schools, churches, and universities because of the perceived great potential of these groups to purchase the product. These organizations need compact and durable equipment that will withstand the wear and tear of everyday use. Pep rallies, choral events, and outdoor activities held by these groups usually presented the need for some type of sound equipment. The Power T is more flexible and powerful than amplified megaphones that are used by many of these groups. Mears’ initial thinking about a marketing strategy has focused on a selling strategy in which he would cover an area involving a one-way driving distance of 100 miles. He thought this would allow him to make sales calls and return home the same day with relative ease. With such an approach, Mears thought he would be able to easily maintain his church music director job with no sacrifice in performance. Within the 100-mile radius, Mears determined that there were 980 schools, 7,282 churches, and 8 universities in a tri-state area including Arkansas, Louisiana, and Mississippi. He did not yet know the identities or addresses of the specific organizations. TABLE 2 METROPOLITAN STATISTICAL AREAS WITHIN 100 MILES SOUTH ARKANSAS Counties Population Schools Churches Univ/Colleges Ashley Bradley Calhoun Chicot Clark Cleveland Columbia Dallas Desha Drew Hempstead Lafayette Lincoln Nevada Ouachita Union Total

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24,566 11,587 5,727 15,729 21,331 7,859 25,733 9,499 16,290 17,233 21,877 9,345 13,894 9,938 29,541 46,462 286,611

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17 7 3 11 12 4 16 2 10 7 9 6 7 5 15 26 157

82 39 20 53 72 27 86 32 55 58 73 32 47 34 99 155 964

0 0 0 0 2 0 1 0 0 1 0 0 0 0 0 0 4

WEST MISSISSIPPI Counties Population Carroll Claiborne Copiah Hinds Holmes Humpreys Issaquena Jefferson Leflore Madison Rankin Sharkey Sunflower Warren Washington Yazoo Total

9,773 11,284 28,288 271,917 21,036 11,717 1,732 8,500 37,463 63,683 96,280 6,952 36,013 49,034 66741 25354 745,767

NORTH LOUISIANA Parishes Population Avoyelles Bienville Bossier Caddo Caldwell Catahoula Claiborne Concordia DeSoto East Carroll Franklin Grant Jackson La Salle Lincoln Madison Morehouse Nachitoches

39,099 15,750 86,747 246,325 9,787 11,101 17,234 20,901 25,042 9,574 22,168 17,596 15,538 13,714 42,490 12,156 31,892 36,662

Schools 5 5 7 93 14 7 0 11 16 23 30 6 16 18 34 14 299

Schools 16 8 32 93 14 10 12 3 13 8 14 8 9 9 19 7 16 18

Churches 33 38 95 840 71 40 6 29 125 213 321 24 121 164 223 85 2,428

Churches 130 53 289 822 33 37 58 70 84 32 74 59 52 46 144 41 107 123

Univ/Colleges 0 0 0 5 0 0 0 0 1 0 0 0 0 0 0 0 6

Univ/Colleges 0 0 0 2 0 0 0 0 0 0 0 0 0 0 2 0 1

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Ouachita Rapides Red River Richland Sabine Tensas Union Vernon Webster West Carroll Winn Total

144,910 130,554 9,256 20,340 22,948 6,763 20,814 64,037 41,437 11,985 16,213 1,162,760

44 62 6 14 12 7 10 19 25 8 8 524

484 435 31 68 77 23 70 214 139 40 55 3,890

1 1 0 0 0 0 0 0 0 0 0 7

COMPETITIVE ANALYSIS After identifying what Mears thought were the most obvious target customers, he next tried to gain a better understanding of the competition. Mears thought that the Power T's main competitors would be amplified megaphones and portable sound systems since these are the most widely used systems in schools and churches. Even though these are the primary competitors, karaoke sound systems are also a threat due to the nature of the product (acceptable- to high-quality sound combined with one or more microphones for the purpose of singing). Currently, megaphones are the most commonly used communication tool in these target markets due to low cost and ease of use. However, Mears considered the Power T to have key advantages over its competitors due to certain attributes. Even though megaphones are portable, they do not provide a high quality of sound (especially for music) compared to the Mears Power T. Portable sound systems are also widely used by schools and churches. But Mears' product has a competitive advantage over this type of system because of its high mobility and AC/DC power flexibility. With its small size, just one person can carry, set up, and use it very easily. Component sound systems require AC power and generally require extra accessories, such as long cords and speakers to be able to communicate with the audience. The threat of future competition always exists due to the ease of entry into this type of market. The possibility of a competitor copying the product is a threat to be considered in this situation. Mears' Power T competition and approximate prices are shown in Exhibit 5.

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TABLE 3 COMPETITIVE PRODUCT PRICES $ 89.95

Amplified Megaphone Karaokes Pioneer CLD-V880

$799.98

Pioneer CLD-V870

$699.98

Pioneer PD-V10G

$387.98

Pioneer PD-V10G(B)

$299.99

Zenesis K2-77

$169.00

Portable Sound Systems Fender Passport P-150 $424.99 Fender Passport PD-250 $849.99 Production Ray Mears thinks it may be best for him to be solely responsible for all the marketing and production activities. He wants to manufacture the Power T by himself without outside labor. Mears has built several prototypes for trial and feedback from users. In the process, he has refined the operation down to an efficient activity. Production basically involves assembly of the component parts into a carrying case. The case contains all the components and also includes a handle with a clip for a microphone. The cost of the components is $210. By buying components in bulk he would be able to decrease variable costs by 10% and have the ability to build twenty units at a time. He can assemble one unit in an hour. With his current planned schedule of work, Mears anticipates that he will be able to assemble up to fifty units per month for sale and distribution. At this time, he can only devote 10-12 hours a week to production and sales of the product and still have time for his other responsibilities. Mears’ hope is to produce enough revenue to provide an additional income of $35,000 per year. Mears has lined up a finance company loan of $12,000 at 16 percent interest to move a small storage building onto his property to be used for manufacturing and storage. He will also use the loan to buy one month’s supply of components. He felt he could interest potential investors in the product or acquire an additional loan if he could build and sustain a reasonable sales volume for 6-12 months. Marketing Mears would make personal sales calls on schools and churches to demonstrate the system and finalize sales. However, he is not at all sure that this is the most effective or profitable approach he could take. But he is confident that his knowledge of the product and the market’s needs combined with his natural skills at communication would yield very good results through personal selling. There are other parts of a marketing strategy that Mears has not yet finalized. He needs a prototype of a brochure that could be used in promotion to show to customers and leave behind where necessary. He does not know what other, if any, approaches he might need to take with promotion, their cost, or how he would go about planning and implementing any other alternative approaches. Although being a one-man distribution approach for his product would allow him to control all aspects of the sale of the Power T, Mears does not know if that is how he should best spend his time and effort. In fact, he does not know what other options he might have for distribution of this product. Mears plans to pay for all shipping costs in the delivery process if the unit must be shipped. If the customer is within a reasonable distance, then Mears plans to deliver the unit himself. Mr. Mears will be American Journal of Management Vol. 18(2) 2018

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in charge of all phases of the distribution process. He will take, process, and fill all orders. If a unit is found to be defective within the warranty period of one year, then he must make the service call and repair the unit. Another issue for Mears is what to charge for the Power T. The enthusiastic response he has received from friends in the music ministry encourages him to charge a premium price. But he feels ethically bound not to “gouge” the prospects he will be selling to. He has a reasonable grasp on the cost structure that will form the minimum price floor from which to work. A friend in the local school system has told him that an interesting policy in Louisiana bid law requires only those items costing $500 or more to be put out to bid. Mears assumes this must be representative of his other target states, so he plans to sell the units for $499. MARKET OPPORTUNITY ANALYSIS PLAN A banker friend has told Mears that he could probably qualify for a traditional bank loan at 10 percent interest if he were to put together a thorough plan analyzing the business opportunity. He has decided this needs to be his next step in the process of getting the Power T to market and obtaining the supplemental income he desires. Even more optimistically, if the Power T exceeded his present production and sales capacity levels within the next couple of years, it would present a challenge. Mears needs to have some contingency plans for a five-year period indicating how he would be able to take advantage of sales opportunities lying beyond the 100-mile range and production demands that could outstrip his present capabilities.

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Optimization of Obsolescence Forecasting Using New Hybrid Approach Based on the RF Method and the Meta-heuristic Genetic Algorithm Yosra Grichi École de Technologie Supérieure Yvan Beauregard École de Technologie Supérieure Thien-My Dao École de Technologie Supérieure

Obsolescence is highly complex problems due to the influence of many factors such as technological advancement. However, prediction of obsolescence appears to be one of the most efficient solutions. This paper proposes a novel approach known as GA-RF for obsolescence forecasting. Genetic algorithm (GA) searches for optimal parameters and feature selection to construct a random forest (RF) in order to improve the classification of RF. To examine the feasibility of this approach, this paper presents a comparison between GA-RF, RF, Stepwise logistic regression, and stochastic gradient boosting. Experimental results show that GA-RF outperformed the other methods with 93.3% of accuracy, 90.4% of sensitivity and 95.4% of specificity. INTRODUCTION Obsolescence is a major problem caused by the increasing development of technologies. Various researchers define obsolescence in various ways (Rojo, Roy, & Shehab, 2010). A component becomes obsolete when the technology used to manufacture it is no longer available, supported or produced by the supplier (Rojo, Roy, & Kelly, 2012; Shen & Willems, 2014). In other words, obsolescence can be characterized by the loss of a supplier or raw materials (Sandborn, 2013; Singh et al., 2002). The negative effects of technological obsolescence on the production performances have been studied in the literature and represent a major challenge in the long term. Technological obsolescence causes problems in the supply chain and in the management of electronic systems (Sandborn, Prabhakar, & Ahmad, 2011). Rapid technological progress is one of the factors that increase the rate of obsolescence. When one hears about technological obsolescence, the first thing that comes to mind is electronics. The electronic industry has emerged as the fastest growing sector, and has spread widely around the world. As defined by Moore’s law, the rapid evolution of electronic components continues to grow, which stipulates that semiconductor density doubles approximately every 18 months (Homchalee & Sessomboon, 2013; Sandborn, 2008; Tomczykowski, 2003). This evolution creates new electronic components every year

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with short lifetimes. In the USA, the industry has grown at a rapid rate since the 1990s. New technologies are introduced in the market at increasing rates. Today, the short technological lifecycle and the lack of forecasting represent a challenge for several companies that need to take into account the risk of obsolescence. However, obsolescence forecasting appears to be one of the best solutions in the management obsolescence as it assists manufacturers to identify part obsolescence. Through obsolescence forecasting, companies can ensure support for parts in service. There are two types of obsolescence forecasting: long-term forecasting (1 year or longer), which allows a proactive management and life cycle planning to support a system, and short-term forecasting, which can be observed from the supply chain. Short-term forecasting may involve reducing the number of sources, reducing inventories, and increasing the price. To overcome the problems caused by obsolescence, many studies have been conducted to create models that can effectively forecast obsolescence. Statistical methods such as regression, Partial least square regression (PLS), logistical regression and Gaussian method have been previously employed in many works (Gao, Liu, & Wang, 2011; Sandborn et al., 2011; Solomon, Sandborn, & Pecht, 2000; Jungmok & Namhun, 2017). However, to conduct life cycle forecasting for thousands of components that affect day-to-day lives, there is a need to modify these methods. In this context, there are precise and stable forecasting approaches whose performance has been justified in the literature. In fact, results show that these approaches could be used for nonlinear predictions with high accuracy and without human manipulation (Zurada, 1992). In the past few decades, machine learning has attracted the attention of many researchers in various disciplines, and has been applied in many areas. According to Wu et al. (2007, p. 1), among the top ten algorithms identified by the Institute of Electrical and Electronics Engineers (IEEE) are AdaBoost, SVM, K-Means, decision tree, and Naïve Bayes. These algorithms have been proven to be good predictors. In addition, applying machine learning in obsolescence forecasting has received a lot of attention in the last two years (Jennings et al., 2016). In previous work, benchmarking studies have shown that the RF performs the best among current classification techniques and numerous experiments have shown that RF has a high degree of satisfactory classifications accuracies (Grichi et al. 2017; Jennings et al., 2016). On the other hand, features selection has an important effect on the classification accuracy, because not all of them are useful for classification. Therefore selecting the best features can achieve a better performance. To improve the accuracy of machine learning algorithms for obsolescence forecasting, this study presents a novel random forest approach based on genetic algorithm to perform features selection and parameters optimization of random forest algorithm based on supervised learning. This paper also examines the feasibility of applying this proposed method by comparing it to other algorithms which are random forest, stepwise logistic regression and stochastic gradient boosting. To the best of the researcher's knowledge, this is the first time the RF algorithm based on genetic algorithm is applied to predict obsolescence of technological components. The rest of this paper is organized as follows. Section 2 introduces the potential obsolescence forecasting strategies while Section 3 presents the proposed framework for obsolescence forecasting. Numerical case study is presented in section 4. Finally, Section 5 presents the conclusion and recommendations for future research. LITTERATURE REVIEW Obsolescence Forecasting Forecasting obsolescence is reactive in nature and is based on the resolution of the problem once noticed. The most classical reactive approaches are last time buy (LTB) and exiting stock (Rojo et al., 2010). However, there are two types of forecasting methods, namely forecasting of the obsolescence risk and forecasting of the obsolescence date (life cycle forecasting). Obsolescence risk is used to predict the probability that a component still in production (Josias, Terpenny, & McLean, 2004; Rojo et al., 2012; Van Jaarsveld & Dekker, 2011). A few researchers focus on the prediction of the risk of obsolescence. In this context, Rojo et al. (2012) conducted a Delphi study to analyze the risk of 28

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obsolescence. They developed a risk index using some indicators, which are; years to end of life, the number of sources available, and the consumption rate versus availability of the stock. Another approach developed by (Josias et al., 2004) aims to create a risk index by measuring the manufacturers’ market share, number of manufacturers, life cycle stage, and company’s risk level. Finally, (Van Jaarsveld et al., 2011) used product demand data history to estimate the risk of obsolescence. Alternatively, for the life cycle forecasting, Solomon et al. (2000) was the first to introduce the life cycle forecasting method. In his paper, Solomon conducted a study to predict the obsolescence date from the life cycle curve, which included six stages: introduction, growth, maturity, saturation, decline, and obsolescence. Another method based on data mining was developed by (Sandborn, et al., 2007). The obsolescence date was obtained by applying Gaussian method. Moreover, other researchers have introduced regression analysis to predict the date of obsolescence (Gao et al., 2011). Last, (Grichi et al., 2017; Jennings et al., 2016) have used datadriven method by create machine learning algorithms to forecast the obsolescence. Data-Driven Methods of Obsolescence Forecasting Today, the short life cycle of technology and the lack of forecasting represent a major challenge for the electronics industry. In fact, rapid technological progress leads to the production of technological components with very short lifetimes (Ward & Sohns, 2011). However, with this advancement of technology, obsolescence should be forecasted more accurately. Data-driven methods appear to be the most efficient solutions, we can find for example neural network (Guoqiang, Patuwo, & Hu, 1998). In fact, these networks are capable of assimilating complex relationships between several variables, neural networks show good stability, better accuracy, and the ability to predict and manage a large data (Memmedli & Ozdemir, 2011). Furthermore, we find the support vector machine (SVM) algorithm. This algorithm was applied in several areas such as forecasting and optimization, SVM is considered one of the most precise and robust approaches within all the recognized algorithms. Only a few examples are required to understand the model, and it does not depend on the number of dimensions (Wu et al., 2007). The following are some of machine learning techniques that will be used in experimental results. Random Forest Introduced by Breiman (2001), Random forests are an integration of tree predictors where every tree depends on the values of a random vector separately. A similar distribution applies for all the trees in the forest. The tree classifier of a forest has a generalization error which relies on the strong correlation between all trees in the forest. Classification accuracy increases significantly when the group of trees is enlarged. A primary example is bagging, where to raise every tree, an arbitrary selection (without replacement) is done from the set examples. Another example is random split selection where arbitrarily, the split is selected from among the K best splits at every single node. A random forest algorithm consists of rotating many decision trees that are randomly constructed and then generating them. Bootstrap sampling (OOB: Out-Of-Bag sampling) is used in RF to have a better estimate of the distribution of the original data set (Breiman, 2001). Indeed, bootstrapping means randomly selecting a subset of the data for each tree rather than using all the data to build the trees. In statistical terms, if the trees are uncorrelated, this reduces the forecast variance. The main advantage of random forests is their resistance to variances and biases. The random forest algorithm is used in the regression case to predict a continuous dependent variable, and in the classification case to predict a categorical dependent variable. For the regression type, a random forest consists of a set of simple prediction trees; each is capable of producing a numerical response when presented with a subset of explanatory variables or predictors. The error in this forecast is called Out Of Bag (OOB) error and is calculated as follows: 𝑂𝑂𝑏

 ∑

𝑦

𝑦

2

                                                                                                                                      (1)

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For the classification type, a categorical variable with N modalities is broken down into a disjunctive array (with N-1 variables) according to a 0-1 coding scheme. Thus, a categorical variable with N modalities can be considered as a set of N-1 variables, of which only one will assume the value 1 for a given observation. In fact, the ability to make predictions on a random subset of predictive variables is one of the strengths of the Random Forest module, which makes it particularly well suited to processing data sets with extremely high predictive variables. This random feature selection encourages systems diversity, and by the end, it enhances classification performance. The random forest is constructed by sampling arbitrarily the features subset as well as the training subset with regard to every system. The majority vote provides the final prediction. Finally, the random forest attains a favorable and vigorous performance with various applications (Cheng, Chan, & Qiu, 2012; Friedman, Hastie, & Tibshirani, 2017). Genetic Algorithm Holland (1975) was the first person to introduce the canonical genetic algorithm (CGA). Genetic algorithms are optimization algorithms based on techniques derived from genetics and natural evolution mechanisms. While GA can be used in features selection and classification, it can also solve nonlinear problems and find the best solution through some operations to obtain a set of desired design parameters. These operations are defined as follows: Selection involves choosing the individuals of the current population that will survive and reproduce. This operation is based on the value of the fitness function that evaluates the solutions. Crossover is defined as individuals that are randomly divided into pairs. The chromosomes are then copied and recombined to form two offspring with characteristics from both parents. Mutation presents a random modification of the value of an allele in a chromosome. This operator avoids premature convergence towards local optima. It is applied with a fixed probability, Pm. GAs can adapt to any search space. Because of their modular nature, these evolutionary algorithms are almost completely independent of the problem to be optimized. They require a measure of the quality of the solution and a definition of space by a code and operators that allow it to browse effectively. With these advantages and the power of this algorithm, it is necessary to take into account the specificities of the problem to design or choose the code and adequate operators. It is necessary to perform several experiments to adjust such parameters of the algorithm as the size of the population, the probability of crossing and mutation, the generation number, and the replacement technique among others. A simple GA works with a set of candidate solutions called a population, in which each chromosome (individual) represents a possible solution to the given problem. The individuals are obtained through a fitness function. The probability of having duplicates for each gene was defined by Holland (1975) as: 𝐹𝑖𝑡𝑛𝑒𝑠𝑠

 

(2)

The first phase of the algorithm involves building an initial population randomly. After that, the GA selects at each step the best individuals (parents) in the current generation to create the children of the next generation. The selection of individuals is done based on the results of every individual's fitness function. After that, the next generation's chromosome is selected by choosing the most adapted elements of the new generation. The next operation involves choosing a random point and exchanging the codes (bits) of chromosome pairs and implementing mutation by replacing the element of the current chromosomes with a new generated element. This step is known as crossover and mutation. The reproduction phase of a new population is constructed from the selected individuals though crossover and mutation operators. The algorithm stops once the required number of iterations or the execution time is achieved. The current solution is taken when this test is checked; otherwise, the steps are repeated all over again.

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PROPOSED FRAMEWORK  Throughout this research, the literature has showed how to evaluate the most promising approaches to obsolescence prediction based on selection criteria such as the capacity and stability of the algorithms. Based on these criteria, some of machine learning algorithms have been the subject of this research. This work presents a random forest algorithm based on genetic algorithm for obsolescence forecasting. The RF classifier is chosen because it represents a successful ensemble learning algorithms which has been proven as the best predictor for forecasting obsolescence risk based on a previous comparative study with a high degree of accuracy. The main objective is to apply genetic algorithm to enhance the classification performance of random forest. The framework of predicting obsolescence of technological components using RF based on GA is illustrated in Figure 1. FIGURE 1 A FLOW CHART OF THE PROPOSED FRAMEWORK Begin process: Data processing Collection/cleaning Start Feature extraction Training data: N p‐dimension with class labels 

Require parameters   Parameter t (ntree): Number of tree Parameter m (mtry): number of input variables Parameter nmin : Minimum node size

Random forest  modeling

individual

Evaluate P

For b=1…...B Next generation

Sample data (Z*) Using Bootstrap from training data Select parameters

Training data Data set to grow the single trees

Repeat until  specified number  of trees and nmin is  obtained 

No

Terminate?

Out‐Of‐Bug  Data to estimate the error of the  grown tree

Output best  solution: optimal  set of features 

Yes

Feature selection  Random selection of ntry predictors  Grow a random forest Tb  to the  bootstrapped data

Yes

Repeat until criteria for stopping  tree growth are fulfilled

P Generated?

Estimate OOB error  

No

Mutation

Satisfied criteria? NO

Yes

Cross over

Random Forest Output the ensemble  of trees 

Accuracy 

Fitness function

Selection 

Modeling of Random Forest The bootstrap adopted in this research is based on Breiman’s (2001) work. Each tree is constructed using a different bootstrap sample from the data sets, each having different subsets of attributes and parameters. Every final node gives a classification, and the forest chooses the classification by the majority vote (Friedman et al., 2017). The first step of RF algorithm is the extraction of the data from an available database. Then, the data is extrapolated by choosing the attributes and specifications required by the model. After that, the data is randomly subdivided into two subsets. The first subset consists of 70% of the data and is used to form the models; this is called the learning set. The second subset consists of 30% of the data, which is used to evaluate and validate the model. Once the data is collected and the features are extracted, a sample data American Journal of Management Vol. 18(2) 2018

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that uses a bootstrap that grows from the training data is presented. Then, the learning set is introduced into the RF to create the predictive model, whose parameters are also estimated. For each terminal node of the tree, these steps are repeated until the specified number of trees is reached and the minimum node size is obtained. Next, the OOB error for the model is estimated. Finally, the output is represented as an ensemble of trees 𝑇 . To make prediction at a new point x, let 𝑐 𝑥 be the class predicting of the bth random forest tree, then  𝐶 𝑚𝑎𝑗𝑜𝑟𝑖𝑡𝑦 𝑣𝑜𝑡𝑒 𝑐 𝑥 . The flow chart of random forest is shown in Figure 2. FIGURE 2 A FLOWCHART OF RANDOM FOREST

For the RF model, three parameters are required. At each node, the variables are drawn uniformly and without replacement among all the p explanatory variables (each variable has a probability 1/p to be chosen). The number m (m≤p) is fixed at the beginning of the forest construction and is identical for all trees. By default, the number of trees (ntree) is 500, and m is equal to p1/2 as suggested by (Breiman, 2001). Here, p presents the total number of variables/features while m is the number of variables in each split.   Modeling of Genetic Algorithm The main objective of applying GA is to enhance the classification performance of random forests for obsolescence forecasting. However, evolutionary algorithms such as genetic algorithm give a promising approach to multi-criteria optimization problems (Yang & Honavar, 1998). The individual in GA is coded with bit strings. First, the population is initialized. After that, the evaluation of the fitness function is conducted where the classification accuracy of the random forest is used to evaluate the fitness of individuals. Fitness (x) = accuracy (x)

(3)

The individual with the highest fitness is selected as the results of the RF algorithm when the evolution is over. Each individual (chromosome) in the population represents a solution to the feature subset problem. Although the proposed genetic algorithm proceeds with the next generation, the operation of genetic includes selection, crossover and mutation. In addition, the crossover operation is done by exchanging the bit strings of a pair of selected individuals at random positions to generate two new offspring, while each bit of the chromosome is treated as a gene. Mutation operation involves replacing one bit with a randomly generated one in a chromosome. This operation avoids premature convergence towards local optima (See Figure3).

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FIGURE 3 CROSSOVER AND MUTATION OPERATIONS

Let F be the total number of the ensemble features available to choose. Each feature in the GA represents a binary bit (0 or 1), where 1 represents a selected feature while 0 represents a feature that is not selected. Also, let K be the total number of classifiers. Each tree constructed contains two parameters to be optimized, which are m (the number of variables in each split) and nmin (the minimum node size). Figure 4 presents a sample individual composed of two classifiers and a dataset with 10 features (e.g. for the first tree, the features 2, 7, and 9 are assigned). FIGURE 4 AN EXAMPLE OF SELECTION FEATURES

Integration of GA-RF As previously discussed, the method of getting the decision function (ensemble of trees) uses GA to evolve. In this phase, the decision functions can be evolved using GA following the flowchart shown in Figure 1. The steps of GA-RF algorithm are as follows: First, the input is initialized. For the RF, the number of trees (defined by the users), the training data set, and the feature set are initialized. For the GA, the number of generations, population size, and the probability of crossover, mutation and selection, are initialized. The output presents the random forest model for obsolescence classification. The second step involves grouping the features and the data set by drawing bootstrap samples from the original data. In step 3, a tree is evolved for feature set and RF parameters combined using GA. Thereafter, a population is initialized. After population initialization, fitness evaluation for each individual is carried out. The fitness of the individual are defined as the accuracy of the classification result. For every individual, a classification label can be obtained when a data record comes. When all the training data records are collected, the accuracy of the individual can be obtained by taking into account all the classification results. After fitness evaluation, GA conducts other genetic operations and produces a new population by selecting the best individual in each generation using the elitism strategy. Elitism consists to Copy one or more of the best chromosomes in the new generation to not lose the best solution.

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NUMERICAL CASE STUDY Data Processing A total of 999 cell phones characteristics were used in this study, obtained from (Connor et al. 2016). The data provided information such as the brand, date of introduction, and the status (production/end-oflife) of different cellphones. Also, the data contained many technical specifications such as the screen size, GPS, and keyboard. While some data used in this paper are categorical variables (yes or no), others are continuous. These predictive variables (13 features) present the RF input. The target variable (dependent variable) is the obsolescence risk. About 70% of the data (700 cellphones) is used for training while 20% (299 cellphones) is used for testing. To obtain a better estimation of classification accuracy, a 5-fold cross-validation method was applied. Experimental Results The Rstudio software is used to develop the model (the code is available on request from the main author). The characteristic of GA and RF (based on R output) are as follows: Maximum generations: 20, Population per generation: 50, Crossover probability: 0.8, Mutation probability: 0.1, Elitism: 0, Number of trees: 500. The most frequently used metrics to describe these types of results are accuracy and error rate. The results in this manuscript are described in terms of accuracy (AC), Error rate, sensitivity (SE) and specificity (SP), and Cohen’s KAPPA given by the following equations. 𝐴𝐶

(4)

𝑒𝑟𝑟𝑜𝑟 𝑟𝑎𝑡𝑒

1

(5)

𝐴𝐶

𝑆𝐸

(6)

𝑆𝑃

(7)

𝐾

(8)

TP, TN, FP, and FN were defined as true positive, true negative, false positive and false negative respectively. Pr(a) presents the probability of success of classification (accuracy) and Pr(e) presents the probability of success due to chance. The accuracy of GA-RF was initially present by a confusion matrix (See Table 1) for training and testing set. TABLE 1 CONFUSION MATRIX OF GA-RF ALGORITHM (TRAINING AND TESTING SET) Predict

Training Testing

34

Actual Available Obsolete Available Obsolete

American Journal of Management Vol. 18(2) 2018

Available 404 4 166 8

Discontinued 6 286 12 113

To validate the results, the GA-RF algorithm is benchmarked with the RF algorithm, Stochastic Gradient Boosting (GBM), as well as the Stepwise GLM (stepwise logistic regression) model, which selected the best logistic regression using the stepwise method and AIC as the criterion for selecting the best model. Parameters of the GA-RF and the RF algorithms were optimized on the training sample using 5-fold cross validation. The same 5 folds were used in both procedures for consistency. The comparisons of the algorithms are shown in Table 2 and 3.  TABLE 2 THE ACCURACY MEASURES COMPARISON ACROSS ALGORITHMS (TESTING SAMPLE)   Accuracy measure

RF

GA-RF

Stepwise GLM

Stochastic Gradient Boosting

Accuracy No Information Rate Kappa Sensitivity Specificity Error rate Balanced Accuracy ((Sensitivity+ Specificity)/2)  

0.913 0.582 0.821 0.880 0.937 0.087 0.908

0.933 0.582 0.862 0.904 0.954 0.067 0.929

0.906 0.582 0.807 0.880 0.925 0.094 0.903

0.923 0.582 0.841 0.896 0.943 0.077 0.919

TABLE 3 THE ACCURACY MEASURES COMPARISON ACROSS ALGORITHMS (TRAINING SAMPLE)

Accuracy measure Accuracy No Information Rate Kappa Sensitivity Specificity Error rate Balanced Accuracy

RF

GA-RF

Stepwise GLM

Stochastic Gradient Boosting

0.947 0.583 0.891 0.914 0.971 0.053 0.943

0.986 0.583 0.971 0.980 0.990 0.014 0.985

0.914 0.583 0.824 0.901 0.924 0.086 0.912

0.936 0.583 0.867 0.904 0.958 0.064 0.931

The accuracy of all algorithms was significantly higher than no information rate, which equals to 0.582 (proportion of discontinued products in the validation sample). Random Forest with feature selection based on the genetic algorithm outperformed stepwise logistic regression, the random forest algorithm and gradient boosting, the performance of which was already outstanding. All commonly used accuracy measures are higher for the GA-RF approach. The error rate was 6.7% for GA-RF, 8.7% for RF, 9.4% for GLM, while the GBM error was 7.7%. Figure 5 presents a chart comparing the training and testing of each model. For the training set, GARF outperforms RF by 3.9%, GLM by 7.2% and GBM by 5%. For the testing set, GA-RF also outperforms GA, GLM and GBM by 2%, 2.7% and 1% respectively.

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FIGURE 5 ACCURACY OF ALGORITHMS IN THE TRAINING AND TESTING SET

GBM GLM training% testing%

RF GA-RF 86

88

90

92

94

96

98

100

Figure 6 presents a ROC (Receiver Operator Characteristic) curve. The curve compares the false positive rate to the true positive rate. We can see from the above curve that the proposed method presented the highest accuracy of classification with a small difference compared to the others models. However, the accuracy, specificity and sensitivity in the table 1 and 2 are more impressive. FIGURE 6 RECEIVER OPERATOR CHARACTERISTIC CURVE

CONCLUSION Research on obsolescence is growing due to the serious challenges that complex systems face. Basically, obsolescence problems are often sudden and not planned, causing delays and extra cost. This research presents a method that can be used to estimate the risk of obsolescence using machine learning 36

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with a high degree of accuracy. In fact, random forest method is one of a kind machine learning method, and appears as the best predictor for forecasting obsolescence risk. This paper presents a novel approach called GA-RF algorithms, which combines a random forest and genetic algorithm for predicting obsolescence. GA is used to improve the classification of random forest by select an optimal set of features and parameters optimization for classification. The optimal set of features was adopted for the training and testing of the model to obtain the optimal outcomes in classification. In order to validate this approach, GA-RF was compared to random forest algorithm, Stepwise logistic regression and stochastic gradient boosting. GA-RF was found to be more efficient with a high degree of accuracy by 93.3% of accuracy, 90.4% of sensitivity and 95.4% of specificity after the five-fold cross-validation. Therefore, the GA-RF with feature selection subset has better performance than the others methods. Furthermore, this model can be helpful for manufacturers and researchers that interest to apply evolutionary algorithm in predictive machine learning models. However, the exploitation of this model can be carried out on new data. For future work, a larger data can give more accurate results. Other optimization algorithms can also be used, such as Particle Swarm Optimization (PSO), which is widely used for optimization, characterized by its robustness and efficiency. In fact, no works have been done before using this approach. Therefore, the researcher intends to include it in the future work by comparing the performance of PSO-RF and GA-RF. REFERENCES Breiman, L. (2001). Random forests. Machine Learning, 45(1), 5–32. doi:10.1023/A:1010933404324 Cheng, Y. Y., Chan, P. P., & Qiu, Z. W. (2012). Random forest based ensemble system for short term load forecasting. 2012 International Conference on Machine Learning and Cybernetics, 52-56. doi:10.1109/icmlc.2012.6358885 Friedman, J. H., Hastie, T., & Tibshirani, R. (2017). The elements of statistical learning: Data mining, inference, and prediction (2nd ed.). New York: Springer-Verlag. Gao, C., Liu, X., & Wang, X. (2011). A model for predicting the obsolescence trend of FPGA. The Proceedings of 2011 9th International Conference on Reliability, Maintainability and Safety, 1354-1358. doi:10.1109/icrms.2011.5979481 Grichi, Y., Beauregard, Y., & Dao, T. M. (2017, 10-13 Dec. 2017). A random forest method for obsolescence forecasting. 2017 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM), 1602-1606. Guoqiang, Z., Patuwo, B. E., & Hu, M. Y. (1998). Forecasting with artificial neural networks: the state of the art. International Journal of Forecasting, 14(1), 35-62. doi:10.1016/S01692070(97)00044-7 Holland, J. H. (1975). Adaptation in natural and artificial systems: an introductory analysis with applications to biology, control, and artificial intelligence. Ann Arbor, MI: The University of Michigan Press. Homchalee, R., & Sessomboon, W. (2013). A comparison of forecasting models using multiple regression and artificial neural networks for the supply and demand of Thai ethanol. 2013 IEEE International Conference on Industrial Engineering and Engineering Management. doi:10.1109/ieem.2013.6962554 Jennings, C., Wu, D., & Terpenny, J. (2016). Forecasting obsolescence risk and product life cycle with machine learning. IEEE Transactions on Components, Packaging and Manufacturing Technology, 6(9), 1428-1439. doi:10.1109/tcpmt.2016.2589206 Josias, C., Terpenny, J. P., & McLean, K. J. (2004). Component obsolescence risk assessment. In IIE Annual Conference and Exhibition 2004, (p. 1). Houston, TX: Component obsolescence risk assessment.

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Jungmok, M., & Namhun, K. (2017). Electronic part obsolescence forecasting based on time series modeling. International Journal of Precision Engineering and Manufacturing, 18(5), 771-777. doi: 10.1007/s12541-017-0092-6 Memmedli, M., & Ozdemir, O. (2011). Forecasting neural network-based fuzzy time series with different neural network models. In 11th WSEAS International Conference on Signal Processing, Computational Geometry and Artificial Vision, ISCGAV'11, 11th WSEAS International Conference on Systems Theory and Scientific Computation, ISTASC'11, August 23, 2011 August 25, 2011, Florence, Italy. Rojo, F. J., Roy, R., & Kelly, S. (2012). Obsolescence risk assessment process best practice. Journal of Physics: Conference Series, 364, 012095. doi:10.1088/1742-6596/364/1/012095 Rojo, F. J., Roy, R., & Shehab, E. (2009). Obsolescence management for long-life contracts: state of the art and future trends. The International Journal of Advanced Manufacturing Technology, 49(912), 1235-1250. doi:10.1007/s00170-009-2471-3 Sandborn, P. (2008). Strategic management of DMSMS in systems. DSP Journal, 24-30. Sandborn, P. (2013). Design for obsolescence risk management. Procedia CIRP, 11, 15-22. doi:10.1016/j.procir.2013.07.073 Sandborn, P. A., Mauro, F., & Knox, R. (2007). A data mining based approach to electronic part obsolescence forecasting. IEEE Transactions on Components and Packaging Technologies, 30(3), 397-401. doi:10.1109/tcapt.2007.900058 Sandborn, P., Prabhakar, V., & Ahmad, O. (2011). Forecasting electronic part procurement lifetimes to enable the management of DMSMS obsolescence. Microelectronics Reliability, 51(2), 392-399. doi:10.1016/j.microrel.2010.08.005 Shen, Y., & Willems, S. P. (2014). Modeling sourcing strategies to mitigate part obsolescence. European Journal of Operational Research, 236(2), 522-533. doi:10.1016/j.ejor.2014.01.025 Singh, P., Sandborn, P., Lorenson, D., & Geiser, T. (2002). Determining optimum redesign plans for avionics based on electronic part obsolescence forecasts. SAE Technical Paper Series. doi:10.4271/2002-01-3012 Solomon, R, Sandborn, P., & Pecht, M. (2000). Electronic part life cycle concepts and obsolescence forecasting. IEEE Transactions on Components and Packaging Technologies, 23(4), 707-717. doi:10.1109/6144.888857 Tomczykowski, W. (2003). A study on component obsolescence mitigation strategies and their impact on R&M. Annual Reliability and Maintainability Symposium, 332-338. doi:10.1109/rams.2003.1182011 Tu, K. J., Huang, Y. W., Lu, C. L., & Chu, K. H. (2008). Predicting the operation and maintenance costs of apartment buildings at preliminary design stage: Comparing statistical regression and artificial neural network methods. In CME 25 Conference construction management and economics: Past, present and future: 16th-18th July 2007, University of Reading, UK. Van Jaarsveld, W., & Dekker, R. (2011). Estimating obsolescence risk from demand data to enhance inventory control: A case study. International Journal of Production Economics, 133(1), 423431. doi:10.1016/j.ijpe.2010.06.014 Ward, C. D., & Sohns, C. W. (2011). Electronic component obsolescence. IEEE Instrumentation and Measurement Magazine, 14(6), 8-12. doi:10.1109/MIM.2011.6086892 Wu, X., Kumar, V., Ross Quinlan J., Ghosh, J., Yang, Q., Motoda, H. … Steinberg, D. (2007). Top 10 algorithms in data mining. Knowledge and Information Systems, 14(1), 1-37. doi:10.1007/s10115-007-0114-2 Yang, J., & Honavar, V. (1998). Feature subset selection using a genetic algorithm. IEEE Intelligent Systems, 13(2), 44-49. doi:10.1109/5254.671091 Zurada, J. M. (1992). Introduction to artificial neural systems. St. Paul, NY: West Publishing Company.

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Toward a Model for Evaluating Attorney Discipline Across Regions: The Ninth Circuit Michael M. McKinney East Tennessee State University Douglas P. Dotterweich East Tennessee State University

This paper builds upon initial findings as a first step in building a model to assess the efficacy of attorney disciplinary systems or processes in individual states or appellate regions. Analysis of reports compiled by state oversight organizations or boards responsible for investigation and disciplinary proceedings due to complaints filed against attorneys allowed for construction of the model. Future iterations of the model will include additional appellate regions. This paper examines the states located in the Ninth Circuit Court of Appeals. INTRODUCTION A recent news story about a dentist who had received payment but abandoned his practice and left his patients without completing the expected work inspired this research in the area of attorney discipline. In that case, the dentist relocated to another state and continued to practice. Attempts by the media and a district attorney general to obtain specific information about the situation or the status of any disciplinary action from the state dental licensing agency were unsuccessful. Since the dentist voluntarily retired his license in the former state and relocated, the prior case was not an issue when the dentist applied for a license to practice. One author was personally familiar with another situation where a client had paid two different attorneys for services never received. These situations prompted the authors to begin research into complaints lodged against attorneys in their home state and subsequent application of the disciplinary process. The work has since expanded geographically and this paper addresses states in the Ninth Circuit. BACKGROUND AND PURPOSE OF STUDY Attorneys licensed by a state are required to exercise ethical practices in their legal activities. Each state’s rules of professional conduct guide attorneys by providing requirements in this area. When a complaint is lodged, the state’s disciplinary board is charged with conducting an investigation and administrating disciplinary proceedings when warranted. These boards typically publish annual reports, which provide aggregate information about complaints and proceedings. In Tennessee, for example, the Board of Professional Responsibility (BOPR) handles these duties. An annual report typically provides information such as the number of complaints filed, the number of investigations conducted and the type American Journal of Management Vol. 18(2) 2018

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of discipline rendered throughout the reporting period. Reports vary from state to state, with some states providing generous amounts of useful information and some states furnishing very little. The purpose of this study is to determine whether significant relationships exist between the nature and disposition of complaints and the general population and percentage of lawyers in the originating state. Regional patterns in the nature and disposition of cases will also be a key focus. The ultimate objective is to extend the study to states in all regions of the country to provide a national picture of legal disciplinary practices. EXPERIMENTAL DESIGN AND METHODOLOGY Modification of the author’s original state-related model was required when the BOPR changed its annual reporting format by eliminating useful categories. After failing to obtain the missing data, the authors began searching for annual reports from other states. The authors attempted to standardize categories since data formats varied by state. Data from state websites, supplemented by personal contact with state bar associations or boards of professional responsibility, will be combined to provide standardized state information. Such information should provide comparative analyses at state, regional and national levels. The intent of the analysis is to draw policy conclusions of importance to state bar associations and their ethics boards, practicing attorneys and judges, clients, and additional users of legal information. The statistical analysis will be accomplished using Excel and may gravitate to SPSS as the study proceeds. PROPOSED ANALYSIS AND INITIAL FINDINGS State bar associations provide information about complaints filed against attorneys. This paper examines results from the nine states grouped in the United States Court of Appeals for the Ninth Circuit, located in the western region of the nation. The Ninth Circuit includes the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington. The analysis initially uses a fiveyear time line for years 2010-2014 but will later be enlarged to identify trends in attorney discipline. Comparisons to additional states and regions will be possible as the model continues to develop. The authors will attempt to determine whether geographic regions play a role in how a complaint proceeds through the system and/or the resultant discipline. Frequency of Complaints The initial analysis provides information related to the frequency of complaints against attorneys relative to the state population and the number of licensed attorneys in the state. Table I presents the frequency of complaints for states in the Ninth Circuit per 1,000 lawyers and per 100,000 population for 2013. Table I provides the rankings for these categories by standardized Z scores. In part A, the Z scores indicate that Oregon is closest to the average among Ninth Circuit states with Arizona and Nevada reporting a greater than average number of complaints filed. Alaska has the lowest incidence of complaints. Part B of the table presents frequency of complaints per 100,000 population using the same methodology. Washington is closest to the average in this category with Nevada and Arizona again having the highest incidence of complaints. Hawaii leads the circuit with the lowest number of complaints filed as measured against the general population. This analysis provides a first snapshot in looking at patterns of the incidence of complaints in the region and allows comparison between specific states. The examination will grow to construct five-year trends and measure the performance of individual states over time as compared to others in the region. States in the Ninth Circuit will be compared to other regions of the country as the model continues to develop.

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TABLE 1 2013 COMPLAINTS PART A: PER 1,000 ATTORNEYS ranked by Z score per 1K atty Z value Alaska Hawaii California Idaho Washington Montana Oregon Arizona Nevada

59.33 62.92 79.98 99.06 99.91 105.06 135.14 215.45 263.84

-0.93 -0.88 -0.63 -0.36 -0.35 -0.28 0.15 1.29 1.98

PART B: PER 100,000 POPULATION ranked by Z score per 100K Z value pop Hawaii 18.56 -1.17 Idaho 22.89 -0.88 Alaska 25.17 -0.74 Montana 31.52 -0.32 California 34.04 -0.16 Washington 34.44 -0.13 Oregon 42.21 0.37 Arizona 52.70 1.05 Nevada 66.95 1.98

Other Measures of Performance The model will evolve to incorporate other measures of performance. The authors are currently compiling data related to the actual percentage of claims processed in each state by the various disciplinary boards. Not all complaints are meritorious or worthy of further investigation. Many reasons exist for dismissal of claims. They may be frivolous, unfounded, or not have an appropriate factual basis or merit to satisfy the burden of proof required to proceed. Z scores will allow comparisons of the percentage of claims processed by each state. The probability of sanctions against offending attorneys provides a third measure of performance. A claim might have adequate substance to survive summary dismissal but lack sufficient merit to warrant sanctions. If levied, sanctions can range from generally light repercussions, in terms of perceived implications regarding an attorney’s ability to practice, to extremely heavy consequences. Minor or less serious infractions could result in admonitions, reprimands or censures while more onerous behavior or severe misconduct can result in suspension of the attorney’s license to practice law for a defined period of time or even termination of the license for the most egregious offenses. In this category, the authors will examine the various levels of penalties administered in terms of the numbers imposed in each state in comparison with data from other states to determine whether significant differences exist in the administration of complaints and the severity of sanctions. Z scores will allow cross-state comparisons of the percentage of claims that receive sanctions by level of severity. POLICY IMPLICATIONS AND DIRECTIONS FOR FUTURE RESEARCH Comparison of all regions of the United States Court of Appeals will be possible in the final model. In the preliminary collection process, the authors encountered a diverse mix of information available from state to state. The authors believe that a more consistent reporting system would be very helpful in analyzing performance in the area of lawyer discipline. The research should provide information to encourage discussion toward a more uniform system of data collection and reporting among states. The authors intend to provide recommendations addressing the types of data that all state bar associations should consider collecting in order to enhance future research efforts. With uniform data and benchmarks, states can measure their performance in this area as compared to other states to better assess their own performance. The findings and recommendations of this study should be especially useful to the legal and business community, including bar associations, boards of professional responsibility, and disciplinary counsel for all states, as well as individual and business clients seeking legal representation, practicing attorneys and judges.

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REFERENCES Advisory Committee to the Arizona Supreme Court (2014, April 30). Annual Report. Retrieved from http://www.azbar.org/media/871296/2013_arc_annual_report.pdf Alaska Bar Association (2013). 2013 Annual Report. Retrieved from https://alaskabar.org/wp-content/uploads/2013annualreport.pdf Idaho State Bar (2016). 2015-16 Annual Report. Retrieved from https://isb.idaho.gov/wp-content/uploads/isb_annual_report.pdf Office of Disciplinary Counsel for the State of Hawaii (2014). ODC’S 2013 annual report, Appendix 7. Retrieved from www. odchawaii.com/uploads/2013_Annual_Report.pdf Office of Disciplinary Counsel for the State of Montana (2014). ODC’S 2014 annual report. Retrieved from http://www. montanaodc.org/Portals/ODC/Annual%20Report%20-%20WEBSITE.pdf Oregon State Bar (2014, April). Disciplinary counsel’s office 2013 annual report. Retrieved from https://www. osbar.org/_docs/resources/DCO2013ar.pdf State Bar of California (2014, April). Attorney discipline report. Retrieved from http://www.calbar.ca.gov/Portals/0/documents/publicComment/2014/2013_AnnualDisciplineRep ort-Final.pdf State Bar of Nevada (2014) Annual Report 2013. Retrieved from https://www.nvbar.org/wpcontent/uploads/Annual%20Reports%202013.pdf United States Department of Commerce, United States Census Bureau (2015, June). Annual estimates of the resident population: April 1, 2010 to July 1, 2014. Retrieved from http://factfinder.census.gov/faces/tableservices/jsf/ pages/productview.xhtml?src=bkmk Washington State Bar Association (2014). 2014 Lawyer Discipline System Annual Report. Retrieved from http://www.wsba.org/docs/default-source/licensing/discipline/2014-lawyer-discipline-systemannual-report.pdf?sfvrsn=e1af3cf1-2

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The Effect of Positive Psychological Capital in Preventing Destructive Leadership Behaviours in a Portuguese Retail Chain António Calheiros Polytechnic Institute of Coimbra, Coimbra Business School | ISCAC

Although Leadership is mostly viewed under a positive light, there is growing research on leadership’s negative impacts, a new field that has been called destructive leadership. This paper reviews the literature on destructive leadership and verifies if Positive Psychological Capital (PsyCap) of the followers can help prevent the occurrence of destructive leadership behaviours. 98 teams of a retail chain, comprising 567 employees, reported on their PsyCap, prosocial behaviours, and leaders’ destructive behaviours. Results show that teams with high PsyCap neutralized the negative impact of one behaviour of destructive leadership in one of the measures of prosocial behaviours. INTRODUCTION Leadership has long been one of the hottest topics in management literature, both in academic and practitioner domains. Most of that literature has put leadership under a positive light, focusing or even romanticizing on its many and impressive positive impacts, and inspiring aspiring leaders to be more than “mere” managers (Zaleznik, 1977, Kotter, 1990) and become charismatic (Conger and Kanungo, 1987), transformational (Bass, 1985) and/or authentic (Luthans and Avolio, 2003, George et al., 2007). There is, however, a darker side of leadership. In a survey of 2539 professionals in 2010, a group of Norwegian researchers (Aasland et al., 2010) found that, depending on the estimation method, between 33,5% and 61% of respondents had been subject to some kind of consistent and frequent destructive leadership during the previous 6 months. Only 40% of respondents reported no exposure to such leadership behaviour. To categorize these destructive leadership behaviours, they used a framework they had previously developed (Einarsen et al., 2007) that encompasses two dimensions of leadership behaviour: directed at subordinates and directed at the goals, tasks and effectiveness of the organization. A development of that model (Padilla et al., 2007) tries to understand what factors, besides the leader, are at the root of destructive leadership. This model presents us a toxic triangle, proposing that we must add susceptible followers and conducive environments are also necessary for destructive leadership to occur. The aim of this study is to verify if the followers’ Positive Psychological Capital (PsyCap - an individual’s positive psychological state of development and is characterized by: (1) having confidence [self-efficacy] to take on and put in the necessary effort to succeed at challenging tasks; (2) making a positive attribution [optimism] about succeeding now and in the future; (3) persevering toward goals and, when necessary, redirecting paths to goals [hope] in order to succeed; and (4) when beset by problems and adversity, sustaining and bouncing back and even beyond [resilience] to attain success”; Luthans et American Journal of Management Vol. 18(2) 2018

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al., 2007b, p. 3) can make them less susceptible to destructive leaders and act as a kind of vaccine or antidote to destructive leadership in organizations. The study was conducted through a survey of 567 employees of a Portuguese retail chain, who reported on their leaders’ behaviours, on their PsyCap, and on their prosocial behaviours. This paper begins by reviewing the literature on the main concepts of the study (Destructive Leadership, PsyCap, and Prosocial Behaviours), proceeds to describe the methodology of the empirical research that was conducted, and concludes by presenting and discussing the main findings and its implications. THEORETICAL FOUNDATIONS Destructive Leadership Destructive leadership is “the systematic and repeated behaviour by a leader, supervisor or manager that violates the legitimate interest of the organization by undermining and/or sabotaging the organization’s goals, tasks, resources, and effectiveness and/or the motivation, well-being or job satisfaction of subordinates” (Einarsen et al., 2007, p. 208). These destructive leadership behaviours can be aggressive or passive behaviours. The leader may not have a clear intent to harm the subordinates or the organization. The authors’ argument that destructive leadership is more about the outcomes of the leader behaviour than it is about the leader’s intentions. Also, they assert that these behaviours must occur repeatedly and regularly. This is a very broad and inclusive definition, that encompasses previously researched negative leadership concepts, such as “abusive supervision” (Hornstein, 1996, Tepper, 2000), “petty tyranny” (Ashforth, 1994), “managerial tyranny” (Ma et al., 2004), “workplace bullying” (Namie and Lutgen-Sandvik, 2010), “derailed leadership”, “harassing leadership”, and “intolerable bosses” (Lombardo and McCall, 1984), comprising anti-subordinate behaviours; and “toxic leadership” (LipmanBlumen, 2005), and “leader derailment” (McCall and Lombardo, 1983), concerning anti-organization behaviours. Einarsen, Aasland & Skogstad (2007) propose a conceptual model of destructive leadership considering the two dimensions of destructive leadership behaviour: behaviour directed towards subordinates and behaviours directed towards the goals, tasks and effectiveness of the organization. Constructive leadership happens when leaders “act in accordance with the legitimate interest of the organization, supporting and enhancing the goals, tasks, and strategy of the organization as well as making optimal use of organization resources” (Einarsen, Aasland & Skogstad, 2007, p. 214). These leaders also “enhance the motivation, well-being and job satisfaction of their followers by engaging in behaviours such as inviting subordinates to an extended engagement, and granting involvement and participation in decision processes”. Tyrannical leadership behaviours are those that “undermine the motivation, well-being or job satisfaction of subordinates” (Einarsen, Aasland & Skogstad, 2007, p. 212) even though they are not directly destructive of the organization best interest. These leaders typically get results at the cost of subordinates, not through them. Because these leaders can sometimes extract great performance from subordinates, they are sometimes view favourably by senior management. Supportivedisloyal leadership characterizes leaders who “show consideration for the welfare of subordinates while violating the legitimate interest of the organization by undermining task and goal attainment” (Einarsen, Aasland & Skogstad, 2007, p. 213). These leaders may benefit employees at the cost of the organization’s resources and steal material, time or financial resources from the organization, and may also encourage loafing or misconduct by subordinates. Supportive-disloyal leaders may not be acting with the intent to harm the organization. They may simply have a different vision of the organization’s purpose or fail to understand the legitimate interest of the organization. Finally, derailed leadership means engaging in both anti-subordinate behaviours (like bullying, humiliation, manipulation, deception or harassment) and antiorganizational behaviours (like absenteeism, shirking, fraud, or theft). According to McCall & Lombardo (1983), leader derailment can occur due to specific performance problems with business activities, inability to adapt to new situations or to develop new skills, being insensitive to others, or excessive

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ambition (thinking more about the next job than about the present, pleasing upper management instead of focusing on performance, etc.). FIGURE 1 CONCEPTUAL MODEL OF CONSTRUCTIVE/DESTRUCTIVE LEADERSHIP BEHAVIOURS

Source: Aasland et al. (2010) In addition to these three types of destructive leadership behaviours, one should also consider laissezfaire leadership as destructive. In fact, the same research team (Skogstad et al., 2007) propose (and validate) the hypothesis that laissez-faire leadership is not a type of zero-leadership, but a type of destructive leadership behaviour, passive and indirect, with significant negative impacts. They associate this leadership behaviour to what Kelloway et al. (2005) called poor leadership and to what Bass (1990) calls avoidant or passive leadership, which consists of a leadership style in which has been appointed to and physically still occupies the leadership position, but in practice has abdicated the responsibilities and duties assigned to him or her. These leaders avoid decision-making, show little concern for goal attainment and seldom involve themselves with their subordinates, even when it’s necessary. Whether this passive behaviour is a result of incompetence, lack of knowledge or strategic intent to harm, it clearly violates the legitimate interest of both the organization and the subordinates (Aasland et al., 2010). Padilla, Hogan & Kaiser (2007) help understanding destructive leadership by analysing also the context of those behaviours. In addition to a destructive leader, they propose that destructive leadership flourishes when we find susceptible followers and conducive environments (the toxic triangle). According to these authors, destructive leadership presents five features: (1) Destructive leadership is seldom absolutely or entirely destructive; there are both good and bad results in most leadership situations; (2) the process of destructive leadership involves domination, coercion, and manipulation rather than influence, persuasion, and commitment; (3) the process of destructive leadership has a selfish orientation; it is focused more on the leader’s needs than the needs of the larger social group; (4) The effects of destructive leadership are outcomes that compromise the quality of life for constituents and detract from the organization’s main purposes; and (5) destructive organizational outcomes are not exclusively the result of destructive leaders, but are also products of susceptible followers and conducive environments. In the following paragraphs, these three elements of the toxic triangle of destructive leadership are analysed more thoroughly. American Journal of Management Vol. 18(2) 2018

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FIGURE 2 THE TOXIC TRIANGLE

Source: Padilla, Hogan & Kaiser (2007) Destructive leaders are charismatic and narcissistic, have a personalized need for power, present negative life themes and an ideology of hate. Charisma is necessary but apparently not sufficient for a leader to be destructive. Narcissism is linked to charisma and to the personalized need for power, involving domination, grandiosity, arrogance and the selfish pursuit of pleasure. Narcissistic leaders live in their own world, ignoring the group’s needs and opinions, abusing power and exercising it autocratically, making decisions disconnected from reality. The personalized need for power is related with the use of the leadership position for self-promotion and personal gain. Negative life themes usually result from traumatic life experiences that form a destructive image of the world. An ideology of hate results in a worldview, vision and rhetoric containing images of hate, directed at victory over rivals and destruction of enemies, which fosters a culture of intimidation. It is not enough to possess one of these characteristics to be a destructive leader. It is not even enough possessing them all. In many situations, potentially destructive leaders don’t reach positions of power. For them to do so, susceptive followers and conducive environments are necessary (Padilla et al., 2007). Padilla, Hogan & Kaiser (2007) accept Kellerman (2004) and Lipman-Blumen (2005) suggestion that subordinates accept domineering and abusive leaders because they have a need for safety, security, group membership, and predictability in an uncertain world. Some subordinates benefit from the leader’s destructive activities and thus contribute to the toxic vision of the leader. There is also a natural tendency to obey authority figures and to conform to group norms, in order to obtain social order, cohesion, identity and coordination. However, Padilla, Hogan & Kaiser (2007) adopt Kellerman (2004) distinction between bystanders (allow bad leadership to happen, comply out of fear, try to minimize the consequences of not going along) and acolytes (“true believers”, who join in the destruction, and actively participate in the leader’s agenda seeking personal gain). The former are called conformers and the latter 46

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colluders. Conformers are vulnerable due to their unmet needs (economic difficulties or loneliness), to negative self-evaluations (low self-esteem and self-efficacy), and to psychological immaturity (integrated and socially valued identity not entirely formed). Colluders are ambitious (consider the destructive leader as a vehicle for achieving a higher status), selfish (ignore the socially destructive consequences of their actions) and share the leader’s world-view (the sharing of values generates greater satisfaction, commitment and motivation). The third component of destructive leadership is a conducive environment. There are four environmental factors that are important for destructive leadership: instability, perceived threat, cultural values, and the absence of checks and balances and institutionalization. (Padilla et al., 2007). Positive Psychological Capital Positive Psychological Capital (PsyCap) is the main concept of the Positive Organizational Behaviour field of research. It encompasses and signifies the positive side of organizational behaviour, instead of the negative. PsyCap is an individual’s positive psychological state of development and is characterized by: (1) having confidence [self-efficacy] to take on and put in the necessary effort to succeed at challenging tasks; (2) making a positive attribution [optimism] about succeeding now and in the future; (3) persevering toward goals and, when necessary, redirecting paths to goals [hope] in order to succeed; and (4) when beset by problems and adversity, sustaining and bouncing back and even beyond [resilience] to attain success” (Luthans et al., 2007b, p. 3).

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FIGURE 3 DIMENSIONS OF POSITIVE PSYCHOLOGICAL CAPITAL

Source: Luthans and Youssef (2004) According to Luthans and Youssef (2004), Efficacy draws from the extensive theory and research of Albert Bandura, and is defined as one’s confidence in his or her ability to mobilize the motivation, cognitive resources, and courses of action necessary to execute a specific course of action within a given context. People who are self-efficacious (self-confident) choose challenging tasks and endeavours, extend motivation and effort to successfully accomplish their goals, and persevere when faced with obstacles. Self-efficacy has substantial research backup as to its positive impact in organizational settings. Hope draws from the work of positive psychologist C. Rick Snyder as being a motivational state that is based on the interaction between three factors: goals, agency and pathways (Luthans and Youssef, 2004). People are driven to accomplish their goals by their sense of agency, which provides them with an internalized determination and willpower to invest the energy necessary to achieve their goals. Those with high hope are also motivated by their sense of having the capability to develop ways to get the things they want, which provides them with the ability to generate alternative pathways towards the accomplishment of their goals if the original ones have been blocked. Optimism involves a positive explanatory style that attributes positive events to internal, permanent, and pervasive causes, and negative events to external, temporary, and situation-specific ones. This allows individuals to take credit for favourable events in their lives, boosting their self-esteem and morale. It also 48

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allows them to distance themselves from unfavourable life happenstances, shielding them from depression, guilt, self-blame, and despair (Luthans and Youssef, 2004). Unlike hope, optimism has been applied not only to clinical applications, but also in organizational settings. Seligman has been one of the most relevant researchers on Optimism. Finally, Resiliency is the capacity to bounce back from adversity, uncertainty, failure, or even positive but seemingly overwhelming changes such as increased responsibility (Luthans and Youssef, 2004). Resiliency allows individual and environmental protective mechanisms to operate through enhancing the assets and/or reducing the risk factors within individuals and/or their environment. Even though resiliency only now beginning to be studied in the workplace context, it meets the POB criteria. Moreover, recent analyses by organizational scholars suggest that resilient people can thrive and grow through setbacks and difficulties. They bounce back not only to their original but to even higher levels of performance, and find meaning and value in their lives in the process. There are three recognized components of such resiliency: a staunch acceptance of reality; a deep belief, often reinforced by strongly held values, that life is meaningful; and an uncanny ability to improvise and adapt to significant change. Prosocial Behaviours Prosocial Behaviours are a component of Organizational Citizenship Behaviours (OCBs). We can trace the origins of Organizational Citizenship Behaviours to Katz’s breakthrough paper “The motivational basis of organizational behaviour” (Katz, 1964). In this work, Katz identifies three types of behaviour he considers necessary for an organization to function properly: people must be induced to enter and remain in the organization, they must carry out specific role requirements in a dependable fashion, and there must be innovative and spontaneous activity that goes beyond role prescriptions. It’s this last kind of behaviour that allows organizations to thrive, that lubricate the social machinery (Smith et al., 1983), and fill in the gaps in prescribed behaviours. These kind of behaviours comprise acts of cooperation, helpfulness, suggestions, gestures of goodwill, altruism, etc. Other authors call these behaviours organizational spontaneity (George and Brief, 1992; George and Jones, 1997), prosocial organizational behaviour (Brief and Motowidlo, 1986; George and Bettenhausen, 1990; George, 1991), contextual performance (Borman and Motowidlo, 1997; Motowidlo, 2000) or extrarole behaviour (Van Dyne, Cummings and Parks, 1995). Podsakoff et al (2009) found more than 650 articles on Organizational Citizenship Behaviour and related constructs. Brief and Motowidlo (1986), calling these behaviours prosocial organizational behaviour, make some important distinctions between different kinds of behaviours. First, they distinguish between organizationally functional (contribute to the accomplishment of organizational goals) and dysfunctional (for example, behaviours that help other employees achieve personal goals that may be irrelevant or contrary to organizational objectives) behaviours. They also distinguish between prosocial behaviours that are role-prescribed or extra-role. Thirdly, they make a distinction regarding the targets of the behaviours: co-worker, customer, and the organization as a unit. EMPIRICAL STUDY Hypotheses Considering the previous review, the two first hypotheses are very obvious: Hypothesis 1: Destructive Leadership is negatively correlated with prosocial behaviours. Hypothesis 2: PsyCap is positively correlated with prosocial behaviours. But the purpose of this study is more ambitious. Several forms of destructive leadership have been associated with impacts in some of the components of PsyCap. Duffy et al. (2002) found that social undermining (behaviour intended to hinder, over time, the ability to establish and maintain positive interpersonal relationships, work-related success, and favourable reputation.), that fits in the definition of destructive leadership, had a negative impact on subordinates’ self-efficacy. Ashforth (1997) found petty tyranny to have an impact on helplessness and self-esteem (sense of competence and self-worth), which we can associate with positive psychological capital’s components of optimism and self-efficacy. This

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means that destructive leadership can have a negative impact on PsyCap, which in turn will result in a similar impact on prosocial behaviours. And that is hypothesis 3: Hypothesis 3: PsyCap mediates the relation between destructive leadership and prosocial behaviours. Whereas destructive leadership can negatively affect the subordinates’ PsyCap, we can also propose that subordinates’ PsyCap may filter destructive leadership’s negative impact on prosocial behaviours. Subordinates with a more developed positive psychological capital will have more competencies to resist the leader’s destructive behaviour and to reduce their impact. In a literature review on workplace victimization, Aquino (2009) identified low self-esteem and low control over the work as predictors of victimization. In a previous study (Aquino, Grover, Bradfield, & Allen, 1999), victims had already been associated with insecurity, and negative views of themselves and of their situation. Self-efficacy (believing in one’s ability to mobilize cognitive resources to obtain specific outcomes) and hope (having the willpower and pathways to attain one’s goals) are psychological capacities that reduce insecurity and negative views of themselves and their situations. Self-efficacy has also been associated with perceptions of control and as a significant contributor to functioning under stress and fear (Bandura & Locke, 2003). Grandey et al. (2007) found abusive supervision to cause exhaustion and negative emotions. Psychological capital has been found to impact positive emotions (Peterson, et al., 2012). Avey et al. (2009) found that developing and leveraging employees’ positive psychological capital helped them better coping with work-related stress. Also, considering the characteristics associated with susceptible followers, we can verify that they correspond to low scores on the positive psychological capital components. This would mean that subordinates with a highly developed positive psychological capital (confident, optimistic, hopeful, and resilient) will be less susceptible to destructive leadership behaviours. Which brings us to hypothesis 4: Hypothesis 4: Positive psychological capital moderates the relation between destructive leadership and prosocial behaviours. Sample The sample selection was carried out aiming to obtain high validity (through the size of the sample) to the study, by trying to isolate (as much as possible) the variables. This would bring the study closer to a ceteris paribus situation thus minimizing the leader attribution error (Hackman and Wageman, 2005). This way, a retail chain was selected, being enquired all of the 681 employees, distributed by 122 stores; with a total of 35 leaders (all leaders manage more than one store). Retail stores are organized as work teams, sharing the same work procedures and offering customers the same range of products and services. This way, the link between leadership and team performance should be clearer than in other sectors. The participants were mostly female (95% of employees and 83% of leaders). Leaders, on average, are 34 years and 6 months old, have been in the company for 5 years and 2 months, being 3 years and 5 months of those in the current store. All leaders have college education. Employees, on average are 29 years and 7 months old, have been in the company for 4 years and 5 months (56% of employees are in the company for less than 5 years), and are in their current store for 3 years and 2 months. 40% of employees have college education. In agreement with management, in order to limit the time demand on teams, the research instruments were divided in two questionnaires. In each store, half of the employees would answer a questionnaire on the leaders’ destructive behaviours and the other half would rate the team’s psychological capital as well as their perceived performance. The leader would answer a questionnaire similar to the latter, also rating the team’s psychological capital and perceived performance. After the collection of all the questionnaires, the stores with less than two answers to each questionnaire were eliminated, remaining a total of 98 stores, comprising 280 questionnaires of leadership behaviours and 287 questionnaires of teams’ psychological capital and perceived performance. Instruments The Psychological Capital Questionnaire, developed by Luthans et al (2007b), empirically validated by Luthans et al (2007a), and now of widespread use in research (Clapp-Smith et al., 2009, Avey et al., 2010, Walumbwa et al., 2011, Peterson et al., 2012, Newman et al., 2014), was used. This questionnaire 50

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has 24 items, six for each of the Psychological Capital components (Self-efficacy, Hope, Resilience, and Optimism). The used scale range is from 1: “strongly disagree” to 6: “strongly agree”). Sample items are: (a) I feel confident in representing my work area in meetings with management [self-efficacy]; (b) When things are uncertain for me at work, I usually expect the best [optimism]; (c) I can think of many ways to reach my current work goals [hope]; (d) I usually take stressful things at work in stride [resilience]. This scale has been previously translated and validated by Arménio Rego (Rego et al., 2010, Rego et al., 2012). For the destructive Leadership construct, the selected measure was the Destructive Leadership Scale (Aasland et al., 2010); using 22 items with four points (from 0: “not at all” to 3: “very often, almost always”). Sample items are: Your immediate superior: (a) Gives recognition for good performance? [constructive leadership]; (b) Has encouraged you to enjoy extra privileges at the company’s expense? [supportive-disloyal leadership]; (c) Has humiliated you, or other employees, if you/they fail to live up to his/her standards? [tyrannical leadership]; (d) Has used his/her position in the firm to profit financially/materially at the company’s expense? [derailed leadership]; (e) Is likely to be absent when needed? [laissez-faire leadership]. Since there was no previous study using the scale in the Portuguese language, a first translator translated the items from English to Portuguese, and a second translator independently back-translated them to English. Both translators discussed discrepancies between the two versions and the final version was obtained. To assess prosocial behaviours was used a 15 item scale developed by Bettencourt and Brown (1997) and widely used presently (Chow et al., 2015, Tsaur et al., 2014, Ho and Gupta, 2012, Hsu et al., 2011, Huang, 2011). It was chosen for its suitability to contact employees. The instrument assesses the perceived role-prescribed and extra-role customer service as well as cooperation. Sample items are: (a) Meets formal performance requirements when serving customers [role-prescribed customer-behaviour]; (b) Helps customers with problems beyond what is expected or required [extra-role customer-behaviour]; (c) Helps other employees who have heavy work loads [cooperation]. The assessment was made by the team supervisor. Since there was no previous study using the scale in the Portuguese language, a first translator translated the items from English to Portuguese, and a second translator independently backtranslated them to English. Both translators discussed discrepancies between the two versions and the final version was obtained. FINDINGS Results TABLE 1 CORRELATIONS 1 1. cons tructi ve l ea ders hi p 2. s upporti ve‐di s l oya l  l ea ders hi p

2

3

4

5

6

8

9

1 0,080

1

3. tyra nni ca l  l eaders hi p

‐,317**

,389**

1

4. dera i l ed l ea ders hi p

‐,280**

,439**

,638**

1

5. l a i s s ez‐fa i re lea ders hi p

‐,316**

,380**

,349**

,510**

1

0,062

‐0,107

‐0,198

‐0,033

0,047

1

6. Ps yCa p

7

7. rol e pres cri bed cus tomer s ervi ce

0,060

‐0,129

‐0,114

‐0,003

‐0,012

,423**

1

8. extra‐rol e cus tomer s ervi ce

0,120

‐0,146

‐,240*

‐0,062

‐0,075

,421**

,813**

1

9. coopera ti on

0,177

‐0,068

‐0,133

‐0,060

‐0,068

,369**

,634**

,649**

1

**. Correl a ti on i s  s i gni fi ca nt a t the 0.01 l evel  (2‐ta i l ed). *. Correl a ti on i s  s i gni fi ca nt a t the 0.05 l evel  (2‐ta i l ed).

The destructive leadership behaviours are negatively correlated with constructive leadership and positively correlated with each other, except for supportive-disloyal leadership. This makes some sense, since supportive-disloyal leadership comprises behaviours beneficial to subordinates, whereas the others American Journal of Management Vol. 18(2) 2018

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mostly have a negative impact on subordinates. Leadership behaviours mostly don’t exert a statistically significate effect on prosocial behaviours. The exception is the negative impact of tyrannical leadership on extra-role customer service. This can be explained by the professionalism of teams. They don’t let tyrannical leadership to impact their role performance, but that makes them less available to go beyond their prescribed roles. The absence of impact on cooperation can be explained because cooperation is a behaviour directed at their co-workers, not the organization or the leader. This means that hypothesis 1 was only partially verified, since only one of the destructive leadership behaviours (tyrannical leadership) showed a statistically significant impact on one of the prosocial behaviours (extra-role customer service). The team’s PsyCap was found to be correlated with all the measures of prosocial behaviours (roleprescribed, extra-role and cooperation). Hypothesis 2 is a winner, validating previously identified relations between PsyCap and performance (Youssef and Luthans, 2007, Luthans et al., 2007a, ClappSmith et al., 2009, Walumbwa et al., 2010) and Organizational Citizenship Behaviours (Avey et al., 2010, Beal III et al., 2013, Kim, 2013, Hsiao et al., 2015) The lack of significant correlation between PsyCap and destructive leadership behaviours leads to reject hypothesis 3 for this sample. This is an unexpected result, especially considering recent study by Wu and Lee (2016), that found PsyCap to mediate the relation between abusive supervision (a concept very similar to Tyrannical Leadership) and knowledge sharing. Concerning the moderating effect of PsyCap on the influence of destructive leadership on prosocial behaviours, using the Johnson-Neyman technique (Potthoff, 1964, Preacher et al., 2007, Hayes and Matthes, 2009), it was identified a significance region for the conditional interaction between tyrannical leadership and extra-role customer service. For very low scores of team PsyCap (below average minus one standard deviation), there is the negative effect of tyrannical leadership on extra-role customer service. However, when the scores of team psychological capital get above that point, the effect no longer is statistically significant. So, Hypothesis 4 is verified. Discussion Although these results may be considered somewhat discouraging, there are some contextual circumstances to consider and a very bright spot to hang on to. The research team proposing the Destructive Leadership model (Skogstad et al., 2014) presented two recent studies (with 6 month and 2 year time frames), in this case focusing on the impacts of leadership in the subordinates’ job satisfaction. They found some similar results. Constructive Leadership was not a predictor of job satisfaction, as in this case was not correlated with prosocial behaviours. And only one of the destructive forms of leadership was a predictor of job satisfaction in each of the studies – Tyrannical Leadership in the 6 month study and Laissez Faire Leadership in the 2 year study. Fortunately for the organization, but unfortunately for the purpose of this study, the frequency of destructive leadership behaviours in the sample wasn’t very high. Most of the leaders had very low scores on the destructive leadership behaviours, which means there was little variability in the sample, making it more difficult to find statistically significant effects. If we consider the Aasland et al. (2010) survey mentioned in the beginning, this sample seems kind of peculiar. It may be useful to try to understand the causes for this reduced presence of destructive leaders. One possible explanation may reside in organizational culture. Some authors (Schein, 2010, Bass and Avolio, 1993, Schneider et al., 2013) propose that there is a dialectic relationship between leadership and organizational culture. Initially, founders of new organizations create and shape the organizational culture by way of their traits and behaviour and, as the organization matures, the culture begins to define the leadership. Bass and Avolio (1993) suggest that the ability to understand and work within a certain culture is a prerequisite to leadership effectiveness. However, most research on the relationship between organizational culture and leadership focuses on analysing how leadership impacts organizational culture (Giberson et al., 2009, Hennessey, 1998, Hai Nam and Mohamed, 2011, Ogbonna and Harris, 2000, Schneider et al., 2013, Zehir et al., 2011). Research on trying to understand how organizational culture impacts leadership (Giritli et al., 2013, Shamir and Howell, 1999) is a bit more scarce. This may be an opportunity for future work

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trying to understand how recruitment practices and other influence mechanisms may lead organizations to hire leaders with a certain profile and guide them to certain behaviours. Other point could be related to the professionalism and quality of the management procedures and approach of the studied company. When the variation in the results is small, and those results are good, maybe these organizational fixtures leave very little space for the impact of leadership. The substitutes for leadership theory (Kerr and Jermier, 1978) may help understanding these results. The substitutes for leadership that are present in this study, training and knowledge (99% of employees had at least completed high school, and 40% of employees have a university degree), unambiguous, routine and methodologically invariant tasks (the study focused the sales assistants of a retail chain), organizational formalization (the organization features very thorough work procedures and performance guidelines), and closely-knit, cohesive, interdependent work groups, are very likely to diminish the teams’ need for leadership, thus limiting the leaders’ capacity to exert a more impactful influence on performance. Also, one of the proposed leadership neutralizers (spatial distance between superior and subordinates), may have contributed to this results, since most leaders were responsible for more than one team, which may limit their impact. These above-mentioned limitations (limited number of destructive leaders, specificity of the organization’s procedures and industry) suggest the need to further study destructive leadership in other contexts. It is important to verify if these results are context-specific or applicable to other organizations and also to increase our knowledge on antecedents and moderators of destructive leadership. The bright spot is that this study reinforces the relevance of PsyCap for organizations. Not only PsyCap has a positive effect on all prosocial behaviours, but it also has a moderator effect on the negative impact of tyrannical leadership. This supports the idea that developing a team’s psychological capital can also be a means to protect organizations from the negative impacts of tyrannical leadership. Luthans and Youssef (2004) have proposed a set of strategies to develop the four components of PsyCap, and Luthans et al. (2010) have obtained empirical evidence that short training interventions may be used to develop participants’ PsyCap. These results are very important in supporting PsyCap interventions as a sound investment for organizations, joining other studies corroborating PsyCap’s positive impact on performance (Youssef and Luthans, 2007, Luthans et al., 2007a, Clapp-Smith et al., 2009, Walumbwa et al., 2010) and on Organizational Citizenship Behaviours (Avey et al., 2010, Beal III et al., 2013, Kim, 2013, Hsiao et al., 2015). CONCLUSION The aim of this study is to verify if the followers’ Positive Psychological Capital (PsyCap), can make them less susceptible to Destructive Leadership and act as a kind of vaccine or antidote to destructive leadership in organizations. The empirical study found an impact of one of the destructive leadership behaviours (tyrannical leadership) on one of the measures of prosocial behaviour (extra-role customer service), and found also that this effect only happened when the teams’ PsyCap was low (below average minus one standard deviation). These results bring implications both for research and for practice. In research, it is important to study destructive leadership in broader samples, with more variability of leadership behaviours and to test other possible vaccines or antidotes to destructive leadership. In practice, this study shows that PsyCap interventions can be a very profitable investment, for they can make organizations less susceptible to destructive leadership, which was verified to have an impact on performance. REFERENCES Aasland, M. S., Skogstad, A., Notelaers, G., Nielsen, M. B., & Einarsen, S. (2010). The Prevalence of Destructive Leadership Behaviour. British Journal of Management, 21(2), 438-452. Ashforth, B. (1994). Petty Tyranny in Organizations. Human Relations, 47(7), 755-778. American Journal of Management Vol. 18(2) 2018

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Avey, J. B., Luthans, F., & Youssef, C. M. (2010). The Additive Value of Positive Psychological Capital in Predicting Work Attitudes and Behaviors. Journal of Management, 36(2), 430-452. Bass, B. M. (1985). Leadership: Good, Better, Best. Organizational Dynamics, 13(3), 26-40. Bass, B. M., & Avolio, B. J. (1993). Transformational Leadership And Organizational Culture. Public Administration Quarterly, 17(1), 112-121. Bettencourt, L. A., & Brown, S. W. (1997). Contact employees: Relationships among workplace fairness, job satisfaction and prosocial service behaviors. Journal of Retailing, 73(1), 39-61. Clapp-Smith, R., Vogelgesang, G. R., & Avey, J. B. (2009). Authentic Leadership and Positive Psychological Capital: The Mediating Role of Trust at the Group Level of Analysis. Journal of Leadership & Organizational Studies, 15(3), 227-240. Conger, J. A., & Kanungo, R. N. (1987). Toward a Behavioral Theory of Charismatic Leadership in Organizational Settings. Academy of Management Review, 12(4), 637-647. Einarsen, S., Aasland, M. S., & Skogstad, A. (2007). Destructive leadership behaviour: A definition and conceptual model. Leadership Quarterly, 18(3), 207-216. George, B., Sims, P., McLean, A. N., & Mayer, D. (2007). Discovering Your Authentic Leadership. Harvard Business Review, 85(2), 129-138. Giberson, T. R., Resick, C. J., Dickson, M. W., Mitchelson, J. K., Randall, K. R., & Clark, M. A. (2009). Leadership and Organizational Culture: Linking CEO Characteristics to Cultural Values. Journal of Business and Psychology, 24(2), 123-137. Giritli, H., Öney-Yazıcı, E., Topçu-Oraz, G., & Acar, E. (2013). The interplay between leadership and organizational culture in the Turkish construction sector. International Journal of Project Management, 31(2), 228-238. Hackman, R. J., & Wageman, R. (2005). When And How Team Leaders Matter. Research in Organizational Behavior, 26, 37-74. Hai Nam, N., & Mohamed, S. (2011). Leadership behaviors, organizational culture and knowledge management practices. Journal of Management Development, 30(2), 206-221. Hayes, A. F., & Matthes, J. (2009). Computational procedures for probing interactions in OLS and logistic regression: SPSS and SAS implementations. Behavior Research Methods, 41(3), 924936. Hennessey, J. T. (1998). "Reinventing" government: Does leadership make the difference? Public Administration Review, 58(6), 522-532. Hornstein, H. A. (1996). Brutal bosses and their pray. New York: Riverhead Books. Kellerman, B. (2004). Bad Leadership: What it is, how it happens, why it matters. Boston, MA: Harvard Business School Press. Kelloway, E. K., Sivanathan, N., Francis, L., & Barling, J. (2005). Poor Leadership. In J. Barling, E. K. Kelloway, & M. R. Frone (Eds.), Handbook of Work Stress. Thousand Oaks, CA: Sage. Kerr, S., & Jermier, J. M. (1978). Substitutes for Leadership: Their Meaning and Measurement. Organizational Behavior & Human Performance, 22(3), 375-403. Kotter, J. P. (1990). What Leaders Really Do. Harvard Business Review, 68(3), 103-111. Lipman-Blumen, J. (2005). Toxic Leadership: When Grand Illusions Masquerade as Noble Visions. Leader to Leader, 2005(36), 29-36. Lombardo, M. M., & McCall, J. M. W. (1984). The Intolerable Boss. Psychology Today, 18(1), 44-48. Luthans, F., Avey, J. B., Avolio, B. J., & Peterson, S. J. (2010). The development and resulting performance impact of positive psychological capital. Human Resource Development Quarterly, 21(1), 41-67. Luthans, F., & Avolio, B. J. (2003). Authentic Leadership: A Positive Development Approach. In K. S. Cameron, J. E. Dutton, & R. E. Quinn (Eds.), Positive Organizational Scholarship (pp. 241-258). San Francisco: Berrett-Koehler. Luthans, F., Avolio, B. J., Avey, J. B., & Norman, S. M. (2007). Positive Psychological Capital: Measurement and Relationship with Performance and Satisfaction. Personnel Psychology, 60(3), 541-572. 54

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Luthans, F., & Youssef, C. M. (2004). Human, Social and Now Positive Psychological Capital Management: Investing in People for Competitive Advantage. Organizational Dynamics, 33(2), 143-160. Luthans, F., Youssef, C. M., & Avolio, B. J. (2007). Psychological capital. New York: Oxford University Press. Ma, H., Karri, R., & Chittipeddi, K. (2004). The paradox of managerial tyranny. Business Horizons, 47(4), 33-40. McCall, M. W., & Lombardo, M. M. (1983). Off the track: Why and how successful executives get derailed. Greensboro: Center for Creative Leadership. Namie, G., & Lutgen-Sandvik, P. E. (2010). Active and Passive Accomplices: The Communal Character of Workplace Bullying. International Journal of Communication, 4, 343-373. Newman, A., Ucbasaran, D., Zhu, F., & Hirst, G. (2014). Psychological capital: A review and synthesis. Journal of Organizational Behavior, 35(S1), S120-S138. Ogbonna, E., & Harris, L. C. (2000). Leadership style, organizational culture and performance: empirical evidence from UK companies. International Journal of Human Resource Management, 11(4), 766-788. Padilla, A., Hogan, R., & Kaiser, R. B. (2007). The toxic triangle: Destructive leaders, susceptible followers, and conducive environments. Leadership Quarterly, 18(3), 176-194. Peterson, S. J., Walumbwa, F. O., Avolio, B. J., & Hannah, S. T. (2012). The relationship between authentic leadership and follower job performance: The mediating role of follower positivity in extreme contexts. The Leadership Quarterly, 23(3), 502-516. Potthoff, R. F. (1964). On the Johnson-Neyman technique and some extensions thereof. Psychometrika, 29(3), 241-256. Preacher, K. J., Rucker, D. D., & Hayes, A. F. (2007). Addressing moderated mediation hypotheses: Theory, methods, and prescriptions. Multivariate Behavioral Research, 42(1), 185-227. Schein, E. H. (2010). Organizational Culture and Leadership. San Francisco: Jossey-Bass. Schneider, B., Ehrhart, M. G., & Macey, W. H. (2013). Organizational Climate and Culture. In S. T. Fiske (Ed.), Annual Review of Psychology, Vol 64 (Vol. 64, pp. 361-388). Palo Alto: Annual Reviews. Shamir, B., & Howell, J. M. (1999). Organizational and contextual influences on the emergence and effectiveness of charismatic leadership. The Leadership Quarterly, 10(2), 257-283. Skogstad, A., Einarsen, S., Torsheim, T., Aasland, M. S., & Hetland, H. (2007). The destructiveness of laissez-faire leadership behavior. Journal of Occupational Health Psychology, 12(1), 80-92. Tepper, B. J. (2000). Consequences of Abusive Suppervision. Academy of Management Journal, 43(2), 178-190. Walumbwa, F. O., Luthans, F., Avey, J. B., & Oke, A. (2011). Authentically leading groups: The mediating role of collective psychological capital and trust. Journal of Organizational Behavior, 32(1), 4-24. Walumbwa, F. O., Peterson, S. J., Avolio, B. J., & Hartnell, C. A. (2010). An Investigation of the Relationships Among Leader and Follower Psychological Capital, Service Climate, and Job Parformance. Personnel Psychology, 63(4), 937-963. Youssef, C. M., & Luthans, F. (2007). Positive Organizational Behavior in the Workplace: The Impact of Hope, Optimism, and Resilience. Journal of Management, 33(5), 774-800. Zaleznik, A. (1977). Managers and leaders: Are they different? Harvard Business Review, 55(3), 67-78. Zehir, C., Ertosun, Ö. G., Zehir, S., & Müceldili, B. (2011). The Effects of Leadership Styles and Organizational Culture over Firm Performance: Multi-National Companies in İstanbul. Procedia - Social and Behavioral Sciences, 24, 1460-1474.

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Managing the Implementation of New Computer Systems in Small Businesses: Building Attitudes and Perceptions Paul E. Madlock Southeast Missouri State University

This study developed a model to advance scholarship and assist practitioners implement, manage and build their employees’ perceptions of new computer systems. In doing so, Technology Management Model (TMM) was developed. TMM is comprised of three latent variables: technological; personal; organizational thought to influence the attitudes employees hold toward new computer systems. These attitudes were then hypothesized to be related to job satisfaction and organizational commitment. The results indicated that the data fit the TMM. Implications for these findings were discussed with an emphasis on the value derived from the development of TMM to scholars, practitioners, and employees. INTRODUCTION Since computer technology has become the newest “member” to join the workplace coupled with the influence the introduction of new computer systems have on the organization and its members, technology has become an area of interest to scholars, practitioners, and employees. Despite the enormous amount of time and money involved with implementing new computer systems (i.e., enterprise resource planning: ERP), thousands of companies have put these systems into practice because it allows them a competitive advantage over their competition by streamlining operations, improving communication, and allowing seamless information sharing (Trunk, 1999). However, the applications of these new systems may not achieve the desired results without a supportive organizational culture, a work climate that encourages the use of the new computer systems, and a workforce that is willing and able to adapt their work-lives to embrace these new computer systems (Achterberg, 2001). Similarly, Cheney and Dickson (1982) pointed out that the end user (the employee) is crucial to the success or failure of computerized communication systems. The introduction of computer technology into the workplace has also brought about a number of changes to both the organization and its members by altering core elements of the organization, such as its structure, culture, and performance (Jackson, Poole, & Kuhn, 2002). Such changes are highlighted by the way in which organizational members react to, interact with, and perceive new computer systems. Research that addresses the attitudes and perceptions employees hold toward new computer systems tend to be varied. For instance, prior experience with new computer systems is associated with more favorable attitudes toward the introduction of such systems (Morrow, Prell, & McElroy, 1986), while others found that gender, age, and race influence users’ attitudes (Campbell, 1990). Additional research findings point to either structural or external factors such as the type of new computer system or strategies employed by top-level management (e.g., workforce reduction) as important factors that influence users’ 56

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attitudes about new computer systems (Martin, 1985). For example, research found that employees’ negative attitudes about new computer systems were associated with their fear of change, fear of failure, fear of isolation, and fear of job displacement (Appelbaum, 1990). Despite the value of the previous examples, researchers have yet to determine whether the attitudes employees hold toward new computer systems impact their work-related attitudes of job satisfaction and organizational commitment. Researchers have also been slow to envision the way in which multiple external and internal factors contribute to the attitudes and perceptions users hold toward new computer systems. The focus here was on small businesses with no more than 100 employees. This sector was chosen because of the sheer number of small businesses across the U.S. and because of the fiscal impact associated with implementing such a system. As a result, the current study was developed with the goal of filling the gaps in the research and to assist practitioners realize the value of these new computer systems by developing a multifactor model designed to explain the impact new computer systems such as ERP have on the organization and its members. In order to develop this multifactor model, Actor Network Theory (Latour, 1987) was incorporated as the theoretical underpinning for the current study. The following section will provide the rational for the inclusion of ANT and how it served to inform the development of the current model. REVIEW OF LITERATURE Theoretical Background Actor-network theory (Latour, 1987) emerged from the field of science and technology research, ANT conceptualizes social interactions in terms of networks. Accordingly, networks integrate the material environment (e.g., new computer systems) and the semiotic environment (e.g., concepts and symbolic meanings) (Latour, 1987). This implies that social interactions have both material and human causes. For example, culture, society, and nature are constructed together simultaneously and are in a perpetual state of realization (Latour, 1987). Therefore, it would be incorrect to think that only one factor could explain the perceptions people hold toward society (Latour, 1987). In a similar vein, it also would be incorrect to think that only one factor (such as a new computer system) itself could explain the attitudes and perceptions employees hold toward the introduction of new computer systems in the workplace. Actor-network theory is also conceptually related to symbolic interactionism, insofar as social interactions construct and reify what is perceived as reality (Callon, 1986). Thus, in reality, there are a multitude of factors that contribute to a person’s view of reality and the way he or she acts in given situations. Because the act of carrying out any task is under the influence of a number of factors, it is reasoned here that multiple factors also contribute the attitudes employees hold toward the introduction of new computer systems in the workplace. Therefore, the current study utilized multiple factors to develop a model that include technological, personal, and organizational factors to explain and describe how these factors influence employees’ attitudes about the introduction of new computer system and in turn how these attitudes influence the work-related attitudes of job satisfaction and organizational commitment. The subsequent sections will elucidate the reason for including the factors found in TMM. Technological Factors To date, Technology Acceptance Model (Davis, 1989) is one of the most widely used and influential models developed to explain a person’s acceptance and use of new technology. Among the most salient findings associated with TAM was that users’ perceived ease of use and perceived usefulness of the new technology were found to be the primary predictors of users’ intentions to use and their actual use of technology (Venkatesh & Davis, 1996). Ease of use is defined as “the degree to which a person believes that using a particular system would be free of effort” (Davis, 1989, p. 320). Whereas, perceived usefulness is the degree to which a person believes that using technology will enhance his or her job performance (Davis, 1989). A shift from technology itself (as is the focus or TAM) was warranted here because, first technology is a broad term and second, today technology of some degree has been infused into the majority of workplaces. However, the current study focused on the introduction of new computer American Journal of Management Vol. 18(2) 2018

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systems, such as enterprise resource planning (ERP), accounting information system (AIS), material requirements planning (MRP), human resources management system (HRMS, e.g., PeopleSoft®), etc. into small businesses. As mentioned earlier, the focus on small businesses is related to the number of small businesses in the U.S. and because of the cost associated with purchasing such systems and the additional cost of training personnel. TAM is applicable here because of its focus on perceived ease of use and usefulness, which apply to the introduction of new computer systems in the workplace. Thus, if a new computer system is easy to use and is perceived as useful it is likely its users will embrace the new system, whereas the converse could also be true. Despite the number of studies utilizing TAM, the majority have offered little insight into additional factors affecting the acceptance and use of new computer systems other than those pertaining to the technology itself. Additionally, several researchers acknowledge that TAM is incomplete in that it does not account for social influences that contribute to the users’ attitudes of technology and its usage (Goodhue & Thompson, 1995). In an effort to extend TAM, Lin and Lu (2000) applied TAM to predict the acceptance of websites, which included external variables such as computer quality, information quality, response time, and system accessibility. The results indicated that the previously mentioned external variables significantly affected the perceived usefulness and perceived ease of use of websites (Lin & Lu, 2000). In addition to external determinants, a limited amount of prior research indicated that a number of personal factors contributed to the attitudes people develop toward technology such as: computer anxiety and frustration (Maurer, 1994), computer self-efficacy (Compeau & Higgins, 1995), and individual innovativeness (Rogers, 2003). Given that each of these personal factors alone or combined could affect the users’ attitudes and perceptions of the introduction of new computer systems in the workplace, the following section will consider the influence of personal factors beginning with computer self-efficacy. Personal Factors Computer Self-Efficacy, defined as one’s capability to use computer technology (Compeau, & Higgins, 1995), originated from self-efficacy in social cognitive theory and is conceptualized as person’s belief in his or her ability to meet certain situational demands (Bandura, 1997). A high level of selfefficacy is indicative of a person’s strong beliefs that he or she has the skills and ability to achieve desired goals. People with high self-efficacy are more likely to put forth additional effort in the process of pursuing their goals than those with low self-efficacy (Bandura, 1997). In following, Bandura, (1997) described the role of self-efficacy in human functioning as “a person’s level of motivation, affective state, and actions that are based more on what they believe than on what is objectively true” (p. 2). Thistly, the anxiety that results from low self-efficacy may influence the employee’s perceptions of technology in such a way that he or she would likely develop an aversion to computer technology and the implementation of new computer systems (Brosnan, 1998). Conversely, if the employee had a great deal of prior experience with the implementation of a new computer system coupled with a moderate to high level of computer self-efficacy, the employee would be motivated to learn the new computer system and develop an affinity towards the new system (Chua, Chen, & Wong, 1999). Additionally, computer selfefficacy and computer anxiety are both part of the self-efficacy framework (Bandura, 1997). In the current context, computer anxiety is also of interest because prior research has indicated that low computer anxiety was positively related to high computer self-efficacy beliefs and performance (Chen, Gully, Whiteman, & Kilcullen, 2000). Therefore, the relevance of computer anxiety to the current study will be considered in greater detail below. Computer Anxiety is the fear of computers when using one, or the fear associated with the impending use of a computer or new computer system (Chua, Chen, & Wong, 1999), and is accompanied by a negative emotional state and a negative cogitative experience (Bozionelos, 2001). However, computer anxiety is not considered to be a personality trait, but rather a “state anxiety” which occurs at the time of computer use or at the time of imagined future computer use (Cambre & Cook, 1985). Computer anxiety is likely to contribute to the development of negative attitudes, perceptions, and beliefs users hold towards using computers and using new computer systems (Heinssen, Glass, & Knight, 1987). 58

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Additionally, the performance of employees with high computer anxiety tends to be poorer than those with little or no computer anxiety (Cambre & Cook, 1985). Computer anxious individuals exhibit phobialike symptoms which lead them to use computers less, and when using computers to complete tasks, they do so more slowly (Mahar, Henderson, & Deane, 1997). In some cases, computer anxiety can even lead to physiological responses such as increased blood pressure and muscle tension (Scheirer, Fernandez, Klein, & Picard, 2002). Computer generated anxiety has also been recognized as a major reason why people develop low levels of computer self-efficacy, do not use computers or new computer systems to reach their goals, hesitate to use computers, and avoid computers altogether (Storms & Spector, 1987). Similarly, it has been indicated that in order for employees to cope with the changes technology brought to the workplace they must be adaptive and innovative (Rogers, 2003). Given that innovativeness speaks directly to a person’s ability to adapt their current course of thought or action for more productive alternatives (introduction to new computer systems), it is reasonable to consider individual innovativeness as a personal factor of interest here. Individual Innovativeness is defined as a predisposed tendency toward adopting an innovation (Rogers, 2003). According to the diffusion of innovation theory people react differently to a new idea, practice, or object due to their differences in individual innovativeness (Rogers, 2003). The innovativeness of an individual is a persistent predisposition that is reflective of an individual’s underlying nature when exposed to an innovation or in the case of this study, a new computer system (Rogers, 2003). Because it is new or perceived as such, adopting an innovation inherently involves a risk, with some people being more likely to take risks of adopting an innovation as opposed to others as a result of their differences in individual innovativeness (Rogers, 2003). Given the rapid introduction of new technologies and the associated costs, identifying characteristic such as innovativeness is of substantial value for the successful implementation of new computer systems in the workplace (Rogers, 2003). Research findings indicate a positive relationship between individual innovativeness and the attitudes users hold toward implementing new computer systems (Karahanna, Ahuja, Srite, & Galvin, 2002). Therefore, it could be extrapolated that employees who are high in individual innovativeness would be more likely to develop positive attitudes towards the introduction of new computer systems in the workplace compared to employees low in individual innovativeness. In addition to the personal factors discussed here, the physical environment (both natural and man-made), the organizational structure and climate, the rules and procedures of the organization, and individuals both in and out of the organization may shape an employee’s assessment of new computer systems. As a result, it is reasoned that organizational factors should be included here and will be consider in greater detail below. Organizational Factors Socialization has been defined as the process by which newcomers acquire the requisite attitudes, behaviors, and knowledge in order to participate as an organizational member (Van Maanen & Schein, 1979). When individuals join organizations, they must learn to understand and make sense of their new surroundings (Louis, 1980). Organizational Socialization also involves a shared understanding between the organization and its members regarding acceptable job behaviors (e.g., the use of new computer systems). Specifically, organizational socialization is considered to be a component of the assimilation process defined as the way of teaching those ongoing behaviors and cognitive processes by which individuals join, become integrated into, and exit an organization (Jablin, 2001). The success of an organization in terms of its productivity, employee job satisfaction, and minimal turnover rate (organizational commitment) depends primarily on the effective socialization practices of the organization (Downs & Hazen, 1977). With regard to organizational socialization and the implementation of new computer systems, organizational newcomers learn the appropriate use and misuse of new computer systems through formal and informal communication interactions. Specifically, group and organizational norms regarding the use of new computer systems influences employees’ frequency of use and their attitudes toward the new computer systems. Additionally, task socialization regarding the appropriate use of new computer systems is also considered here as an important factor that contributes to the attitudes and perceptions employees hold toward new computer systems. Based on social pressures to American Journal of Management Vol. 18(2) 2018

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conform to the expectations of others that result from the social influence of a referent group or authority figure, it is reasoned here that social influence may also influence the attitudes and perceptions employees hold toward the use of new computer systems. Therefore, social influence was included in the current study. Social influence has its roots in the classic experiments involving influence and compliance (see Asch, 1966). Social influence is comprised of normative influence which involves the conformity of one person’s behavior to conform with the positive expectations of others, and subjective influence, which is defined as the influence to establish a favorable image within a referent group (Deutsch & Gerard, 1955). Therefore, according to normative and subjective influence it is reasoned here that employees will likely develop attitudes about new computer systems that are congruent with both the attitudes expressed by organizational members and the desire to establish and or maintain a favorable image within a reference group. For instance, the use and acceptance of new computer systems by one’s work group has been found to be positively related to an individuals’ use and acceptance of new computer systems, especially when group attraction is high (Markus, 1994). Also, the use and acceptance of new computer systems by management has been found to be a significant predictor of employees use and acceptance of new computer systems (Markus, 1994). To ensure that employees behave in ways espoused by the organization, such as rules and structures (both formal and informal) are developed to make certain that such behaviors occur. Thus, task structure relevant to the introduction of new computer systems in the workplace was considered in greater detail below. Task structure has its roots in Structuration Theory (Giddens, 1979) to the extent that Structuration Theory highlights how the process of reality construction becomes a part of the social fabric of an organization through the development of structures. Further, it is argued that structures consist of rules and resources upon which individuals rely on to guide actions (Giddens, 1979). As research points out, new computer systems have not only revolutionized the ways in which organizations operate, its value is based on the influences of those in power through the development of structures designed to embrace this new form of reality (Foster & Flynn, 1984). Thus, the integration of structures with socialization and social influence could effectively explain how the application of rules and resources produce and reproduce a shared reality through the application of recursive communication structures. As a result, each time an employee engages in or uses new computer systems to complete work related tasks their actions reinforce organizational structures that support the reality that the new computer system is a valued asset. Since attitudes and perceptions ultimately shape a person’s view of reality and their subsequent behaviors; the following section will examine the way in which technological, personal, and organizational factors influence the attitudes and perceptions employees hold toward new computer systems in the workplace. Employee Attitudes/Perceptions of Computer Technology Some of the seminal research carried out in the field of attitudes was conducted by (Ajzen & Fishbein, 1980) who described a person’s attitude as a predisposition to respond either favorably or unfavorably to objects in the world. Implicit in this viewpoint is the notion of evaluation, where individuals rate their feelings toward an object or procedure. In effect, this evaluation process is the foundations for the current study, which is based on individuals rating their feelings toward various aspects of using new computer systems in the workplace. In the study of human-computer interaction, computer anxiety and negative attitudes toward computers were found to be positively correlated (Sewell & Barker, 2006). Current scholarship has also described computer surveillance as either good or bad or coercive or caring (Sewell & Barker, 2006). Surveillance can also protect employees against unfair work distribution or accusations of incompetence by creating a record of how an employee’s performance meets or exceeds management’s expectations (Sewell & Barker, 2006). Accordingly, it is reasoned here that a number of factors contribute to the attitudes employees develop towards new computer systems. Since a scant amount of prior research has examined the relationship between the attitudes employees hold toward new computer systems and their work-related attitudes, job satisfaction and organizational commitment were included here. 60

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Work-Related Attitudes Job satisfaction is identified as “a pleasurable or positive emotional state from the appraisal of one’s job or experiences” (Locke, 1976, p. 1297). Prior studies of computer technology and its association with user satisfaction have been divided into two distinct research streams (Mowday, Steers, & Porter, 1979). The first utilizes behavioral measures, such as technology acceptance and use, while the second is based on the attitudes and beliefs of the user (Wixom & Todd, 2005). Specifically, the first stream is found in the technology acceptance literature, most notably TAM (Davis, 1989). The research objective of TAM is to explain and predict user behavior, such as system adoption and use (Davis, 1989). More important to the current study is the second stream of research because it is concerned with users’ attitudes and perceptions of new computer systems as they relate to users’ job satisfaction. Some argue that new computer systems may have a positive or negative affect on employee job satisfaction depending on the perceptions employees hold toward the new computer system (Wixom & Todd, 2005). Following this reasoning it can be hypothesized that the relationship between the implementation of new computer systems and satisfaction is not direct but indirect; meaning that it is mediated by the users’ attitudes and perceptions of the new computer system. In that job satisfaction is different from, yet related to organizational commitment; it could be extrapolated that employees’ attitudes and perceptions of technology are likely to influence both job satisfaction and organizational commitment. Therefore, organizational commitment was considered here. Organizational commitment is the strength of emotional attachment to the organization and the acceptance of the organization’s goals and values (Mowday et al., 1979) Affective commitment as described above has received the majority of the attention in the literature and is described as an emotional attachment to the organization in which employees remain with their organization because they want to (Allen & Meyer, 1990). Affective commitment is of particular interest here because it is reasoned that employees’ attitudes and perceptions of new computer systems will influence their affective commitment to the organization. Hence, the reduction of employee-organization friction as a result of shared attitudes and perceptions of new computer systems affect how employees view the organization (Davis, 1989). For example, employees who sense their organization cares about them and is willing and able to provide them with the tools (e.g., computer training and service support) necessary to perform their jobs are expected, in turn, to offer increased levels of commitment to the organization. Because new computer systems have become such a vital part of organizational life today, it is important to examine the role of these new systems; the attitudes and perceptions employees hold toward the new computer systems, the factors associated with the development of these attitudes and perceptions, and the work-related attitudes that result. The examination of attitudes and perceptions are relevant here because they contribute to the construction of a person’s view of reality. Additionally, despite the contributions TAM (Davis, 1989) has made to our understanding of why individuals use and accept new technology, it may not be the best model for explaining the influence new computer systems have in the workplace. Subsequently, TMM was developed here with the intention of providing a means to explain the previously mentioned associations. In doing so, the following hypotheses were advanced. H1: There will be a positive relationship between employee job satisfaction and the attitudes and perceptions they hold toward their new computer system. H2: There will be a positive relationship between employee organizational commitment and the attitudes and perceptions they hold toward their new computer system. H3: The data will provide a good fit for TMM in which the attitudes and perceptions employees hold toward their new computer system (observed variable) will mediate the relationship between technological, personal, and organizational factors (latent variables) and the employees job satisfaction and organizational commitment (observed variables) (see Fig. 1).

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FIGURE 1 HYPOTHESIZED TECHNOLOGY MANAGEMENT MODEL (TMM)

METHOD Participants Of the original 2000 questionnaires distributed to full-time working adults, 647 were returned (32.4% return rate), 62 of which could not be used as a result of missing data or unverifiable participants (see procedures section for requirements). This resulted in 586 useable questionnaires for the current study. Participants were working adults in the Mid-Atlantic and Mid-Western regions of the United States (48.6% male, n = 285) and (51.4% female, n = 301), whose overall tenure at their current job ranged from 1 to 39 years (M = 9.95, SD = 7.67). Participants ranged in age from 23 to 61 (M = 40.43, SD = 10.44) and the percentage of their day spent using computers as a part of their job functions ranged from 20% to 100% (M = 71.60, SD = 20.29). Participants also reported their computer experience ranging from 2 to 26 years (M = 14.48, SD = 6.14). Procedures A network sample was utilized for the current study consisting of employees recruited by the primary author and graduate and under graduate students enrolled in communication and business courses at a large Mid-Atlantic university and at a large Mid-Western university. The participants were full-time working adults who worked for small businesses (100 employees or less) who within the last year implemented new computer systems such as an enterprise resource planning (ERP), accounting information system (AIS), material requirements planning (MRP), human resources management system (HRMS, e.g., PeopleSoft®), etc. To ensure that the participants are working adults the following procedure was utilized. The participants (working adults) were given an email address located on the cover letter in which they were asked to report the name of their organization in the subject line of the email followed by their name and telephone number in the body of the email. Participants were then instructed to return the completed questionnaire in the self addressed stamped envelope provided by the researcher in which the return name and address were to match the company name indicated in the subject line of their email. Also in the lower right-hand corner of the envelope they were asked to write their name as it appeared in the body of the email. Only envelopes containing a completed questionnaire with verifiable information were used in the study. Periodically (i.e., approximately every 30 surveys), the primary author called and verified that the participants who completed a questionnaire were the persons they claimed to be.

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Measures Technological factors were measured by a variation of the 6-item ease of use and the 6-item usefulness scales developed by Davis (1989). The revised measure referenced new computer systems instead of the technology itself. A 5-point Likert-type response format (1 = Strongly Disagree to 5 = Strongly Agree) was used here. The scales for perceived usefulness and perceived ease of use have amassed evidence of reliability; Taylor and Todd (1995) reported reliabilities of .92 for perceived usefulness and .91 for perceived ease of use. Cronbach’s alpha for the current study was .86 for perceived usefulness (M = 4.24, SD = 0.76) and .90 for perceived ease of use (M = 3.91, SD = 0.83). Personal Factors Computer Self Efficacy and Computer Anxiety were measured by 8 of the 16-items from the New Computer Anxiety and Self-Efficacy Scale developed by Barbeite and Weiss (2004). Four items measuring computer self-efficacy for advanced activities (introduction of new computer systems) and four items measuring anxiety as a result of the introduction of new computer systems were used here. Based on the advanced focus of new computer systems the current study excluded items measuring computer self-efficacy for the general use of technology and anxiety associated with the general use of technology. A 5-point Likert-type response format (1 = Strongly Disagree to 5 = Strongly Agree) was used here. Prior research indicated evidence of reliability (see Barbeite & Weiss, 2004). Cronbach’s coefficient alpha for the current study was .87 for computer self-efficacy (advanced activities) (M = 4.03, SD = 0.85) and .93 for computer anxiety (for advanced activities) (M = 4.57, SD = 0.68). Individual Innovativeness was measured by the Individual Innovativeness Scale developed by Hurt, Joseph, and Cook (1977) to measure a person’s predisposition to be innovative. A 5point Likert-type response format (1 = Strongly Disagree to 5 = Strongly Agree) was used here. Prior research indicated evidence of reliability (see Clark & Goldsmith, 2006). Cronbach’s alpha for the current study was .96 (M = 4.20, SD = 0.67). Organizational Factors Socialization was measured using a modified version of the 35-item Newcomer Socialization Questionnaire (Haueter, Hoff-Macan, & Winter, 2003). The scale measured organizational, workgroup, and task socialization. A 5-point Likert-type response format (1 = Strongly Disagree to 5 = Strongly Agree) was used here. Prior research indicated evidence of reliability (see Madlock & Horan, 2009). For the current study, the items were modified to reflect a focus on the introduction of new computer systems. Cronbach’s alpha for the current study was .88 for organizational socialization (M = 4.30, SD = 0.72), .86 for workgroup socialization (M = 4.57, SD = 0.59), and .89 (M = 4.60, SD = 4.61) for task socialization. Social influence was assessed using the 10-item Social Influence Scale developed by Kelman (1961). A 5-point Likert-type response format (1 = Strongly Disagree to 5 = Strongly Agree) was used here. Prior research indicated evidence of reliability (see Malhotra & Galletta, 1999). Items were modified to reflect a focus on the introduction of new computer systems. Cronbach’s alpha for the current study was .80 (M = 3.57, SD = 0.91) for internalization. Task Structure was measured using a modified version of the original version of the 4-item Task Characteristics Scale developed by Withey, Daft, and Cooper (1983). The scale wasdesigned to assess the degree of structure in a person’s job. A 5-point Likert-type response format (1 = Very Little Extent to 5 = Very Large Extent) was used here. Prior research indicated evidence of reliability (see Anandarajan, Simmers, & Igbaria, 2000). The modified version of the scale used here reflected the degree of structure associated with the introduction of new computer systems at work. Cronbach’s alpha for the present study was .90 (M = 4.23, SD = 0.82). The Attitudes and Perceptions of Computer technology were measured here by a modified version of the Computer Attitudes Scale (CAS; Nickell & Pinto, 1986) with a focus on the introduction of new computer systems. A 5-point Likert-type response format (1 = Strongly Disagree to 5 = Strongly Agree) was used here. Prior research indicated evidence of reliability (see Anandarajan et al., 2000). Cronbach’s alpha for the current study was .96 (M = 3.89, SD = 0.85). Job satisfaction was measured by the eight-item Abridged Job In General Scale (Russell, Spitzműller, Lin, Stanton, Smith, & Ironson, 2004). A 7-point semantic differential response format was used in the American Journal of Management Vol. 18(2) 2018

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current study instead of the original scale formatting (0 for “no,” 1 for “?” and 3 for “yes) for clarity. Prior research indicated evidence of reliability (see Madlock, 2008a, 2008b). Cronbach’s coefficient alpha for the current study was .81 (M = 5.55, SD = 1.16). Organizational commitment was measured by the 15-item Organizational Commitment Questionnaire (Mowday et al., 1979). A 5-point Likert scale response format ranging from (1 = Strongly Disagree to 5 = Strongly Agree) was used here. Prior research indicated evidence of reliability (see Madlock & Horan, 2009). Cronbach’s coefficient alpha for the current study was .81 (M = 4.10, SD = 0.67). RESULTS Hypothesis 1 predicted that employee job satisfaction would be positively related to the attitudes and perceptions employees hold toward their new computer system. Results of Pearson’s correlational analysis showed that the data were consistent with the hypothesis by indicating a strong significant positive relationship (r = .72, p < .001) between the variables. Hypothesis 2 predicted that employee organizational commitment would be positively related to the attitudes and perceptions employees hold toward their new computer system. Results of Pearson’s correlational analysis showed that the data were consistent with the hypothesis by indicating a significant moderate positive relationship (r = .45, p < .001) between the variables. Hypothesis 3 predicted a meaningful path model for TMM in which the attitudes and perceptions employees hold toward their new computer system (observed variable) would serve to mediate the relationship between technological, personal, and organizational factors (latent variables) and employees’ job satisfaction and organizational commitment (observed variable). The path model of TMM showed that the data were consistent with the hypothesis. Results of the Structural Equation Model indicated that the data fit the model: x2 (60) = 185, p = .042; CFI = .929, NFI = .926, GFI = .920, AGFI = .897, RMSEA = .059 (see Figure 2).

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FIGURE 2 ACTUAL TECHNOLOGY MANAGEMENT MODEL (TMM) e7 .51

e2

Organizational socialization .55

.07

Task socialization

e9

e8

Social influence (internal) .72

.56

.74

e10

.26

.47

Task structure .75

Workgroup socialization

.68

e4

.74

e12

.51

Organizational Factors .82

Job satisfaction

.35 .91

Ease of use .51

e3

.72

.71 .29

-.05

Technological Factors .97

Attitudes and perceptions .45

.23

Usefulness

.20

Organizational commitment Personal Factors

e1

.75

e5

.60

.56

.36

.31

Innovativeness

.74

self-efficacy (general) .55

e11

Computer anxiety (activities)

e13

e6

DISCUSSION Since computer technology has become the newest “member” to join the workplace coupled with the influence new computer systems (of interest here ERP) have on the organization and its members, the implementation of new computer systems have become an area of interest to scholars, practitioners, and employees. Despite this high level of interest, there has yet to be a widely accepted model that explains the influence new computer systems have on the work environment. As a result, the goal of this study was to develop a model TMM, comprised of multiple factors (technological, personal, and organizational) hypothesized to explain how the attitudes employees hold toward new computer systems are developed and how these attitudes influence employees’ work-related attitudes of job satisfaction and organizational commitment. Hypotheses 1 and 2 examined the relationships between job satisfaction and organizational commitment and the attitudes employees hold toward their new computer system. These findings indicated that the attitudes employees hold toward new systems were positively related to job satisfaction and organizational commitment. In other words, as employees’ attitudes toward the new computer system increased so did their job satisfaction and organizational commitment. These findings are of value because they provide support for the position that the value-added component of a new computer system can be realized at the employee level. In this instance, the value of a new computer system, can be explained through the association between the attitudes employees hold toward that new computer system and their subsequent work-related attitudes of job satisfaction and organizational commitment. Additionally, since a value-added component of new computer systems resides in the employee’s job satisfaction and organizational commitment, TMM provides a means to explain how to maximize the value-added component by way of technological, personal, and organizational factors found to contribute to the attitudes employees hold toward the new system. As a result of the costs associated with the purchase and implementation (e.g., training) of new computer systems, coupled with the value associated American Journal of Management Vol. 18(2) 2018

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with the new system and the impact of the work-related attitudes of employees, scholars and practitioners alike should take note of the findings contained in this study. Hypothesis 3 predicted that a Structural Equation Model would provide a meaningful fit for TMM. Following the criteria previously set forth in this research study, the data indicated a meaningful fit for TMM. Another important point highlighted by the development of the TMM is found in its simplicity and practicality. For example, TMM is simple and practical in its ability to explain the influence of new computer systems on employees and the organization. Another example of the simplicity and practicality of TMM is found in its ability to serve as a guide for employees, managers, and the organization to manage the influence of new computer systems in the workplace. Since TMM indicates that employees’ attitudes toward new computer systems are primarily influenced by organizational factors, managers may want to focus their attention on these factors in order to maximize the buy-in of employees to the new computer system. Specifically, TMM explains two ways in which technology in the workplace contributes to an organization’s bottom line. The first is associated with the money saved in recruiting, training, and socializing employees as a result of increased levels of organizational commitment. The second contribution resides in the positive association between job satisfaction and increased production of employees (Gruneberg, 1979). Additionally, TMM offers an explanation of how the personal factors of computer self-efficacy, computer anxiety, and individual innovativeness influence the attitudes employees hold toward new computer systems. With this realization, employees may begin to work on improving their personal factors beginning with being proactive in building their computer self-efficacy (e.g., taking classes to build computer skills), which will reduce their computer anxiety. As far as the personal factor of innovativeness, it is realized here that any increase in innovativeness may take the employee some time to achieve as traits are difficult to change but can be managed. At the same time, employees also need to enhance their organizational factors by engaging in information seeking tactics during the socialization process to fully understand the policies regarding the use of their new computer system. As a result of utilizing TMM as a guide to manage the introduction and implementation of new computer systems organizations can maximize the value-added component of their investment. Another unique finding associated with TMM was the order in which the latent variables were found to influence the attitudes employees held toward their new computer system. Although technological factors were thought to influence the attitudes employees hold toward the new computer system, when combined with the influence of personal and organizational factors there was no association. It appears that the ability of technological factors to predict the attitudes employees’ hold toward their new computer system was attenuated by personal and organizational factors. To explain, employees high in computer self-efficacy, high in individual innovativeness, and low in computer anxiety (personal factors) may as a result; find computer their new computer system easy to use and useful. Thus, attenuating the affect technological factors alone have on employees’ attitudes toward their new computer system. Similarly, employees who experience high levels of organizational socialization (task, organizational, and workgroup), high levels of task structure, and high levels of social influence (organizational factors) may also find their new computer system easy to use and useful. One additional point of interest associated with TMM is that the latent variable of organizational factors was the greatest predictor of the attitudes employees hold toward technology. The value of this finding is based on the associations between organizational, personal, and technological factors to the extent that organizational factors appear to attenuate the influence of both personal and technological factors. For example, organizational factors such as socialization, structure, and social influence provides employees with training about the appropriate use of the new technology and the associated benefits, that would likely contribute to employees’ self-efficacy, decrease their anxiety, and increase their innovativeness. In sum, it appears that the communication interactions that take place within the organization are important factors to consider when implementing new computer systems in the workplace.

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Limitations Although the current study is of value it is not without limitations. The first limitation involves the lack of a qualitative component which could have allowed for a greater understanding of TMM. For example, a qualitative approach could identify the formal and informal messages exchanged during socialization that adequately address the appropriate use of new computer systems. Another limitation involves the list of procedures requested of the participants by the primary author in order to verify that they met the requirements for participation in the study. As a result, some potential participants may have felt uncomfortable with identifying themselves or may have just been irritated with the list of requests and chose not to participate in the study. This may have inadvertently resulted in the exclusion of individuals who were limited on time or irritated by the list of requests. REFERENCES Achterberg, M. (2001). How culture affects information sharing in an organization. Retrieved July 30, 2008 from http://www.kwork.org/White Papers/cultural.html. Ajzen, I., & Fishbein, M. (1980). Understanding attitudes and predicting social behavior. Englewood Cliffs, NJ: Prentice-Hall. Allen, N. J., & Meyer, J. P. (1990). The measurement and antecedents of affective, continuance and normative commitment to the organization. Journal of Occupational Psychology, 63, 1-18. Anandarajan, M., Simmers, C., & Igbaria, M. (2000). An exploratory investigation of the antecedents and impact of internet usage: An individual perspective. Behavior and Information Technology, 19, 69-85 Appelbaum, S. H. (1990). Computerphobia: Training managers to reduce the fears and love the machines. Industrial and Commercial Training, 22, 9-16. Asch, S. E. (1966). Opinions and social pressure. In A. P. Hare, E. F. Borgatta, & R. F. Bales (Eds.), Small groups: Studies in social interaction, (pp. 318-324). New York: Alfred A. Knopf. Bandura, A. (1997). Self-efficacy: The exercise of control. New York: Freeman. Barbeite, F. G., & Weiss, E. M. (2004). Computer self-efficacy and anxiety scales for an Internet sample: Testing measurement equivalence of existing measures and development of new scales. Computers in Human Behavior, 20, 1-15. Bozionelos, N. (2001). Computer anxiety: Relationship with computer experience and prevalence. Computers in Human Behavior, 17, 213-224. Brosnan, M. J. (1998). The impact of psychological gender, gender-related perceptions, significant others, and the introducer of technology upon computer anxiety in students. Journal of Educational Computing Research, 18, 63-78. Callon, M. (1986). The sociology of an actor-network: The case of the electric vehicle. In M. Callon, J. Law, & A. Rip (Eds). Mapping the dynamics of science and technology: Sociology of science in the real world. London: Macmillan. Cambre, M. A., & Cook, D. L. (1985). Computer anxiety: Definition, measurement, and correlates. Journal of Educational Computing Research, 1, 37-54. Campbell, N. J. (1990). High school students' computer attitudes and attributions: Gender and ethnic group differences. Journal of Adolescent Research, 5, 485-499. Chen, G., Gully, S. M., Whiteman, J., & Kilcullen, R. N. (2000). Examination of relationships among  trait-like individual differences, state-like individual differences, and learning performance. Journal of Applied Psychology, 85, 835-847. Cheney, P. H., & Dickson, G. W. (1982). Organizational characteristics and information systems: An exploratory investigation. Academy of Management Journal, 25, 170-184. Chua, S. L., Chen, D., & Wong, A. (1999). Computer anxiety and its correlates: A meta-analysis. Computers in Human Behavior, 15, 609-623. Compeau, D. R., & Higgins, C. A. (1995). Computer self-efficacy: Development of a measure and initial test. Management Information Systems Quarterly, 19, 189-211. American Journal of Management Vol. 18(2) 2018

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Maurer, M. M. (1994). Computer anxiety correlates and what they tell us. Computers in Human Behavior, 10, 369-376. Morrow, P. C., Prell, E. R., & McElroy, J. C. (1986). Attitudinal and behavioral correlates of computer anxiety. Psychological Reports, 59, 1199-1204. Mowday, R. T., Steers, R. M., & Porter, L. W. (1979). The measurement of organizational commitment. Journal of Vocational Behavior, 14, 234-247. Nickell, G. S., & Pinto, J. N. (1986). The computer attitude scale. Computers in Human Behavior, 2, 301306. Rogers, E. M. (2003). Diffusion of innovations (5th ed.). New York: Free Press. Russell, S. S., Spitzműller, C., Lin, L. F., Stanton, J. M., Smith, P. C., & Ironson, G. H. (2004). Shorter can also be better: The abridged job in general scale. Educational and Psychological Measurement, 64, 878-893. Scheirer, C., Fernandez, R., Klein, J., & Picard, R. (2002). Frustrating the user on purpose: A step toward building an affective computer. Interacting with Computers, 14, 93-118. Sewell, G., & Barker, J. R. (2006). Coercion versus care: Using irony to make sense of organizational surveillance. Academy of Management Review, 31, 1-24. Spector, P. E. (1978). Organizational frustration: A model and review of the literature. Personnel Psychology, 31, 815-828. Trunk, C. (1999). Building bridges between WMS & ERP. Journal of Transportation and Distribution, 40, 6-8. Van Maanen, J., & Schein, E. H. (1979). Toward a theory of organizational socialization. In B. M. Staw (Ed.), Research in Organizational Behavior (vol. 1, pp. 209–264). Greenwich, CT: JAI Press. Venkatesh, V., & Davis, F. D. (1996). A model of the antecedents of perceived ease-of-use: Development and test. Decision Sciences, 27, 451-481. Withey, M., Daft, R. L., & Cooper, W. H. (1983). Measures of Perrow’s work unit technology: An empirical assessment and a new scale, Academy of Management Journal, 26, 45-63. Wixom, B. H., & Todd, P. A. (2005). A theoretical integration of user satisfaction and technology acceptance. Information Systems Research, 16, 85-102.

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Worker’s Health and Productivity Mohammad Alam Tareque Bangladesh University of Professionals Jack Edward Effron Rajshahi International Education Centre

Turnover and absenteeism are common in the Ready-Made Garments (RMG) factories of Bangladesh, causing reduced productivity. Illness is the main cause. This is a study of projects in this industry which raise women workers’ health awareness. The objective of this study was to find out whether such projects: (1) increase the productivity of garment workers and (2) have a positive return on investment. In fact, productivity increased through reduced absenteeism, improved quality of work, reduced “throwbacks” to re-sew garments, reduced requests for early lunch out or leave, and ultimately, reduced turnover. With minimal initial investment, such projects have a significant Return on Investment (ROI). INTRODUCTION “Health is wealth” is an old saying, and “a healthy worker is a productive worker”. As a laborintensive industry, Ready-made Garments (“RMG”) runs on low labor costs and needs high labor productivity. The RMG in Bangladesh mainly produces basic garments of low price and the strategy is to produce high volume. For high-end fashion items, the strategy is different and this is out of the scope of this paper. The only way to stay competitive in RMG is high production, high quality, and on-time delivery. This paper only addresses the relation of worker health with labor productivity. The objective of this study was to find out whether increasing workers’ health awareness through programs like HealthEnabled Returns (“HER”), studied for this article, also increases the productivity of garment workers. If so, we then asked what the Return on Investment (“ROI”) on HER is. 80% of the workers being female, the target group was women workers of the factory. To answer the question, an impact assessment of one of the HER projects was done, using questionnaires and key informant interviews. Quantitative data were analyzed through tabulation and multivariate analyses were done by SPSS 20. The impact assessment showed that, after implementing the HER intervention, absenteeism was reduced, the quality of work improved, throwbacks for re-sewing were reduced, requests for early lunch out or leave were reduced, and ultimately the workers’ turnover was reduced. The authors tried to quantify these benefits and measure ROI. However, it seemed, from the management interviews, that the non-quantifiable benefits were equally important. Also, a causation

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percentage could not be attributed to the HER intervention, since some other health variables were not included in the model. However, it is clear that the impact of the HER intervention crossed the boundary of the factory. The benefits reached the neighborhood, and society in general, as well. METHODOLOGY This study was a case study of a factory which implemented an HER project. The study followed a quantitative-qualitative sequential action study approach. The factory studied has 2,812 workers, 70% of which are females. That means 1,968 were women workers. 7% of the female workers were selected to be trained as Sastho Shakhi (SS)(“Peer Educators”).140 SSs received two weeks training, each day for 3 hours, covering 12 topics and then these SSs gradually trained another 1,500 workers. The target sample size was 460 out of the 1,968 population, using a 95% confidence level with 4 confidence intervals. However, 540 persons were surveyed and 40 less-reliable responses were discarded. As a result, 500 responses were used as the sample. Both the 140 SS and the 500 workers were surveyed before and after the project and the differences in awareness of health issues were analyzed. The significant factors that led to improvements were statistically analyzed to determine correlation with absenteeism and migration. Then further analysis was done to determine the ultimate effect of these factors on productivity. Figure 1 illustrates the strategy of this research. FIGURE 1 RESEARCH STRATEGY

Quantitative

QUALITATITVE  /Interpret

Result

Baseline Data Impact Assessment

Compare /Analyse

Main Research Questions: If a health education awareness project like HER is implemented in a factory can the program increase productivity? If so, then what is the likely ROI? Additional Questions: What are the health factors which contribute to increased productivity? Why on health issues, do workers migrate from one factory to another factory? LITERATURE REVIEW Baumol, Blackman, and Wolff (1989:227) explain: “It is obvious that total productivity (better known as multifactor productivity) is the best input efficiency index. It would thus seem that labor productivity is a

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measurement that sheds light on the results of the productive process for its participants.” So we focus on labor productivity in this labor-intensive industry. Renowned psychologist A.H. Maslow (1943) theorized that a human tries to fulfill his needs in a fixed order of preference. First, he tries to fulfill his physiological needs for food, clothing, shelter, etc. Then, those filled, he tries to fulfill his need for security. Those filled, he tries to fulfill his social needs: for love from someone and for acceptance by social groups. Those filled, he focuses on his need for esteem, for respect in his social groups and elsewhere in a society. That filled, he focuses on his need for self-actualisation, to be all that he can be, to use all his talents. So, we can see why the workers in the garment factories might choose just to be absent if they are not well. Health and money (with the food, clothing, etc that a poor person can buy with money) are both “first-order” needs but health is more basic. A sick person is not motivated to make money: he is motivated to feel better. When he feels better, then he will try to make money and eat better, dress better, etc. Yet classical economics considered that labor productivity came automatically from the level of production, technology, training, etc., without really considering the condition of the individual workers. For example, Verdoorn’s Law, in McCombie, Pugno and Soro (2002) expressed labor productivity as a linear function of the level of total production. In recent times, in empirical studies of the garment industry in developing countries, there is ample evidence: 1. That chronic illness is a factor in employee absenteeism 2. That widespread and chronic absenteeism is a factor in low labor productivity in the garment industry. 3. That absenteeism can be reduced, and productivity thus increased, by employee Wellness programmes at work. Tammita and others(June 1999) did a study of absence in the Sri Lanka garment industry in 1999, and found that illness was one of the 11 causes of such absence. They also found that absenteeism was a factor in low productivity in the industry. Nanjundeswaraswami (2016) did a similar study on the Indian garment industry. He found that curbing absenteeism improves productivity. Edries, Jelsma and Maart (2013), studying “employee wellness programmes” in Capetown (South Africa) clothing manufacturing companies, featuring a cognitive behaviour therapy programme to improved health-related behaviors, plus daily aerobic exercise, caused improvement in the employees’ health quality of life. A THEORY OF RMG PRODUCTIVITY Total working minutes in a day x No. of operators x line efficiency = % (Sarker, 2016) Daily Line Target = Garment SAM In this study: Standard Allocated Minutes (“SAM “) = 25 minutes = (Standard Minute Value (“SMV”) + allowances) Number of Workers = 40 to 60 Minutes Worked = 400 - 800 Therefore efficiency = .40 - .60

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The above model shows that any changes in the number of workers, working hours and efficiency affects productivity. Also, if we simplify process and reduce SAM, that will affect productivity, too. Some say that, if workers’ numbers are less due to absenteeism, increasing hours worked should eliminate any loss of productivity. However, the answer is not that simple. To understand this, the manufacturing process of a garment has to be understood. Figure 2 clearly describes that making a garment is a chain: any missing link in the chain breaks the whole process. For example: if fabric cutting input is 200, and back part output is 160 but front part output is 78, at last we will get only 78 or less fully-assembled garments. Although back part produced is 160, the rest will remain as Work in Progress (WIP) as they have no sewing on the front. This is how the productivity of every section, and every individual, affects the overall productivity in garment making. Therefore, the presence of all required workers is vital to achieve production targets at the end of the day. FIGURE 2 THE PROCESS OF MAKING A READY-MADE GARMENT

Cutting Input

Sewing Back part

Sewing Front Part

Garment

Absenteeism cannot be covered by casual or temporary workers to replace the absent ones. Most factories have a pool of only 3% extra workers to meet legally-required grants of casual leave, maternity leave, earned leave, etc. of the permanent staff. Having more than a 3% pool is not cost-effective. The “fill-in” operator’s efficiency will not be the same as that of an experienced worker, who is there all the time: workers are more than infinitely interchangeable “pairs of hands”. An operator needs time, training and experience to become familiar with the style and product of a given factory. With many inexperienced replacement workers, the line will not be balanced, so output will not be consistent and continuous. Finally, although every factory has some excess helpers and trainee operators, it is illegal to make them work in the lines, without extra wages. Permanent workers will become demoralized and tend to migrate if they know that they will be replaced by temporary workers at the same, let alone better, wages, when they are absent. STRATEGY OF THE HER PROJECT The HER project identified the following priority health issues, after carrying out a health needs assessment in garment factories: • anemia; • lack of awareness and understanding of Family Planning; • lack of awareness of general health and disease prevention; • shy to talk on HIV/STIs, and have no clear idea on STDs; • menstrual hygiene; and • reproductive health. Figure 3 shows a diagram of the process of HER intervention. The project then created a project team involving workers, middle and top management, collected baseline data/before project, selected SS, trained them on the above topics for 2 weeks, 3 hour each day; who (SS) in turn trained in production lines. After implementation of the project, data were collected and an impact analysis was done.

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FIGURE 3 PROTOCOL FOR A HER INTERVENTION

Create HER Project Team Baseline Data

Select SS Train Data

Train Others by SS Data

Impact Assess ment

Analysis of Data To Determine ROI Project duration 24 months RESULTS Profile of Workers  female workers average age is 24.9 years;  54 % in the age group (18-25 years);  28 % of workers have not completed primary level education;  69 % are currently married;  66 % migrated to current residence 5 years ago or less. Most of the participating workers have 5 years of schooling, followed by up to 9 years and a few have 10 years or 10 + of years of schooling. Improvements in Workers’ Health Before the HER project, the complaint pattern collected from the doctor’s room shows that weakness, headache, vertigo, and musculoskeletal complains were the most common complaints. After the project, there was a little improvement on vertigo and musculoskeletal issues but a marked improvement on weakness and UTI. Figures 4 and 5 show a “before” and “after” HER intervention picture of such data.

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FIGURE 4 PERSONAL AND HEALTH DATA OF WORKERS (BEFORE INTERVENTION) 160 140 120 100 80 60 40 20 Sastho Sakhi Educ 5 Educ59 Educ10 Married Un Married Divorce Miscarriage Abortion HIV aware HIV Shy Sanitary Pad UTI MusculoSkeletal EYE Anemia

0

The data in Figure 5 show significant improvement on STI, STD, family planning and menstrual hygiene, and HIV awareness. The HIV shyness dropped to -0-. In this data, the education variable is discarded, as the training materials were in Bengali, with easy-to-understand pictures that can be easily grasped by even illiterate people. The miscarriage and abortion rate also dropped by 25%, and 100% workers started using sanitary napkins during menstrual cycles, in place of unhygienic “clothes patches”. The employer also supplied sanitary napkins to the workers at a subsidized rate. One napkin cost 35 BDT and it was supplied to the workers at 17 BDT, i.e. at 50% reduced cost. This also played a role in inspiring the workers to use hygienic sanitary napkins. Multivariate analysis shows that, before intervention, abortion or miscarriage was least in the group having 10 or 10+ years of schooling: it is likely that, being educated, they have a more-effective voice in the family on family planning matters. However, after the awareness program, regardless of education level, all participants were equally equipped with general knowledge on daily health issues: the abortion and miscarriage rates dropped by 10%. Moreover, none of them were shy anymore to talk on family planning, STDs or HIV issues. They became vocal on their health problems and the visits to the doctor’s rooms increased by 20%. Before the awareness program, when they felt sick, they just remained absent or took off after lunch. The complaints of weakness were reduced drastically, by more than 50%, because they were aware of hydrating themselves, took more water, and used the toilet instead of holding their urine for long periods: as a result the UTI also decreased by 40%, Awareness on safe sex, and using condoms, also prevented the UTI, and STIs. If someone was having any STD problem, she did not hesitate to ask for medical help anymore

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FIGURE 5 PERSONAL AND HEALTH DATA OF WORKERS (AFTER INTERVENTION) 500 400 300 200 100 Anemia

EYE

Musculoskeletal

UTI

Sanitary Pad

HIV Shy

HIV aware

Abortion

Miscarriage

Divorce

Un Married

Married

Respondents

0

Overall Results of HER Table 1 shows that almost forty percent (39.9%) of the sample group had been absent from work for at least one day in the month before the survey. The bivariate analyses provide evidence that, in postintervention factories where the HER project had been implemented, there was significantly less absenteeism than in the other 2 types of factories. The linear regression is not applicable due to low explanatory power of the fitted model. However, after recoding the absenteeism as a dummy variable (which takes values 1 for at least one day absent and 0 for no absent days) and fitting it into a logistic regression, the crude odds ratio tells that respondents from intervention factories are four times more likely and control factories are twice as likely to have at least one day of absence compared to the postintervention factories’ workers. While controlling for workers’ age, position, educational exposure, wealth, and marital status, these odds lessen but still remain significant. In conclusion, it can be said that, in the factories where the HER project was completed and sustained for two years, absenteeism was reduced significantly. TABLE 1 ABSENCES BEFORE AND AFTER HER INTERVENTION Postintervention

NonIntervention

Count % within Treatment

100.0%

% absent

19.9%

Count % within Treatment status of the respondents % absent

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779 100.0% 39.9%

Increased Productivity Figure 6 shows that absenteeism had, before intervention, restricted production to 600,000. Reducing absences to 5% increased production to 650,000 and 3% absenteeism increased production to 1,000,000. FIGURE 2 PRODUCTIVITY MODEL

Productivity Model 10000

1152 1000 691.2

No of Workers

307.2 100

Work hours in minutes

10

SAM

Efficiency

1

60%

60%

Productivity

0.1

The intangibles are what made the difference in absenteeism and productivity:  reduced worker exhaustion, and increased happiness;  workers were more knowledgeable and communicative regarding common health problems;  utilization of personal hygiene products – sanitary napkins – and in-house health facilities;  workers were conscious about common diseases and medical facilities available for them;  improved quality of life inside the factory;  workers shared their learning in their communities, empowering them and their communities;  reduction in use of traditional jhar-fook (“quack”) doctors from 60% to almost zero;  reduced rate of migration/turnover of workers;  confidence building between management and workers through improved communication

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ROI Cost-saving/revenue earning due to the HER project activities is shown in Table 2. From that Table, we can see that the company saved 70,000BDT from maintenance funds alone. In production, taking into account the increase of 300,000 garments for sale means US$300,000 in improved revenue (minimum). The cost of re-work fell to 1%, which is a very good score as per ISO 9001. Ikram and Su (2015). All of this progress is achieved with only 40,000BDT in investment, mostly for subsidizing sanitary napkins. TABLE 2 REDUCTION IN COSTS AFTER HER INTERVENTION Baseline Before Intervention Cleaning Material Cost60,000 Taka Medicine 45,000 Taka

Cost-

Sewerage Line Cleaning Cost2000 Taka (Note: This is related to the workers’ tendency to throw their used “clothes patches” into the toilet, blocking the drain.) Re-work =5 %

During Intervention Cleaning Material Cost24,000 Taka Medicine Cost33,500 Taka Sewerage Line Cleaning Cost-500 Taka

After Intervention Cleaning Material Cost- 18,000 Taka

Medicine Cost- 12,000 Taka Sewerage Line Cleaning Cost- Nil (Note: Use of sanitary napkins eliminates the blockage of drains. The subsidy for such use at 40,000 Taka is greater than the cost of cleaning the drains, which is why most companies do not subsidize: but the subsidy is more than paid for by savings in other areas shown in this Table.)

Re-work =3 %

Re-work =1 %

These were the visible ROI reflected from the awareness program. If we attribute a value to the intangibles, the ROI becomes even more significant. LIMITATIONS OF THE STUDY AND NEED FOR FURTHER RESEARCH The study did not consider other issues of health like stress, working under pressure, and some other psychological aspects that need to be incorporated in future research. Also, the study did not further investigate continuing the programs in future to build upon the strengths achieved. A longitudinal study of something like HER, as a permanent part of an employer policy for human resource development in a garment factory, is needed. CONCLUSIONS Health awareness programs benefit a manufacturing organization. They directly increase productivity by reducing absenteeism and migration. The ROI is significant and investment is minimal. In some cases, the plants do not need to invest money directly, except investment in training and health-related preventative costs (e.g. sanitary napkins). Health awareness, by benefitting the workers’ families and community, when workers are happier and healthier, and teach the lessons that they have learned, also has social impact.

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ACKNOWLEDGMENT The writer acknowledges the contribution of HER project team of BSR, Primark and Population Council for a successful implementation of the awareness program. Ms Nazneen Huq and her team for periodical visit to assess the progress and training the Peer Educators. I also thank Mr Sohag and Mr Irfan for their whole-hearted support in finalizing the findings. REFERENCES Baumol, W.J., Blackman, S.A.B., and Wolff, E.N. (1989).Productivity And American Leadership: The Long View(1sted.). Boston. Edries, N., Jelsma, J. and Maart, S. (2013). The Impact Of An Employee Wellness Programme In Clothing/Textile Manufacturing Companies.BMC Public Health, 13, 25-30. Ikram A. and Su Q. (2015). Determinants of Productivity in the Ready-made Garments SMEs of Lahore, Pakistan. Qi E., Su Q., Shen J., Wu F., Dou R. (eds) Proceedings of the International Asia Conference on Industrial Engineering and Management Innovation, (1sted). Paris. Maslow, A.(1943). A Theory of Human Motivation.Psychological Review, 50(4), 370-396. Nanjundeswaraswami, T. (2016). An Empirical Study On Absenteeism In Garment Industry..Management Science Letters 6, 275-284. Sarkar, P. (2016). Garment Maker’s Key Performance Indicators (p.8-11). Retrieved from http://www.onlineclothingstudy.com. Tammita, U., Seedevi, B.M.D., Jayarathne, D.G.T.S., Welianga, A., Madushanka, K.L.H. (June 1999). A Study Of Employee Absenteeism In The Apparel Industry.Garment Gazette. Verdoorn, P. in McCombie, P., Pugno, M., Soro, B. (eds). (2002). Factors That Determine The Growth Of Labour Productivity, Productivity, Growth And Economic Performance (1st ed.), London. Chapter 2.

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Stakeholders and Student Perceptions: Choosing the Primary Group Charles M. Coco Troy University

Student perceptions often provide valuable learning insights into various theories and concepts presented within the classroom. Stakeholder theory, for example, presented an opportunity to explore student views on which stakeholder group is most important to organizational success. Students within a business course considered the relative importance of customers, employees, investors, and suppliers. An interesting discussion followed their selections where the students debated the merits of each stakeholder group. Consequently, customers were perceived by the students as the most important stakeholder group to the organization. INTRODUCTION The motivation for this study came from a threefold interest in organizational stakeholders. First, understanding how companies and organizations relate to external groups with vested interests. Organizational leaders need to regularly monitor and examine the external environment. Second, identifying which stakeholders may be seen as primary to organizational success. Certain stakeholders provide better opportunities for increasing competitive advantage for the firm. Third, ranking the primary stakeholders based on student perceptions. Encouraging student engagement and perceptional feedback provided ways to raise awareness of various stakeholder groups and their importance to organizational success. According to Ferrell (2004), “A common view of the firm holds that employees, customers, shareholders, and suppliers are key organizational stakeholders” (p. 126). Using those criteria - students enrolled in a college business course were asked to rank the most important among the following stakeholder groups: investors, customers, employees, and suppliers. The students provided feedback after a class discussion on stakeholder theory and the role of various stakeholders within organizational relationships. Collecting thoughts from the students and engaging in topic discussions led to new insights into the perceived importance of certain stakeholders and connections to organizational success. BACKGROUND Understanding the importance of various stakeholders, beyond corporate stockholders, has gained increasing awareness in recent years. Managers and business leaders rightfully place major emphasis on organizational success. Executives often consider valued outcomes achieved in areas of management, operations, finance, accounting, customer service, and others. These outcomes are better achieved when multiple organizational stakeholders play integral roles. However, determining which stakeholders to 80

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prioritize can become a difficult task to manage and maintain. Organizational leaders need to recognize the distinct contributions of each stakeholder group and how these groups interconnect with one another (Nwanji & Howell, 2005). For instance, competent and well-trained employees create better service interactions for customers. When customers are satisfied, they are more likely to become long-term and loyal clients of the organization. Likewise, employees that feel important and valued remain more committed to management and organizational objectives. Employees contributing toward valued outcomes, such as superior customer service, provide organizations competitive advantage. Therefore, it becomes imperative that businesses find ways to enhance positive stakeholder contributions and relationships (Ferrell, 2004). Stakeholder theory has developed as an important way to determine organizational value and success (Harrison & Wicks, 2013; Freeman, 1984). Stakeholders may include both internal and external individuals or groups that have relationships with and vested interests in certain corporations and organizations (Daft & Marcic, 2017). Stakeholders may include both primary and secondary groups with both groups providing opportunities to the organization for improvement and ongoing success. Completing a three-step process within a stakeholder analysis helps to properly identify the primary and secondary groups (Wheelen, Hunger, Hoffman, & Bamford, 2015). The primary stakeholders represent groups with strong strategic interests and connections to the organization. According to Steiner & Steiner, “Primary stakeholders are a small number of constituents for which the relationship is mutually immediate, continuous, and powerful. They are usually stockholders (owners), customers, employees, communities, and governments and may, depending on the firm, include others such as suppliers or creditors” (2012, p.17). Secondary stakeholders, however, have less influence upon and strategic connection to the organization. Consequently, secondary stakeholders have weaker relationships with the corporation or organization of interest (Steiner & Steiner, 2012). DISCUSSION Students within an upper-level business course were provided important conceptual information regarding organizational stakeholder theory. The students were then given class time to consider the following reflection exercise—choose one of the following stakeholders that you think ranks as most important to organizational success: investors, customers, employees, or suppliers. Explain your choice. The exercise garnered 31 responses from the participating students. Most of the students chose customers as number one with a total of 65% stating the case for customers. Several students argued for suppliers to be given first place status. Likewise, a similar number advocated for employees as the most important stakeholder. Surprisingly, only a couple of students debated that investors were paramount to organizational success. One interesting point came from observing many students relating their own personal experiences as customers. They argued in favor of customers being the most important stakeholder, chiefly because they saw a direct connection with being an actual customer. These students were very vocal on the need for businesses to provide quality products and exceptional customer service. In other words, these students articulated that “no customers – no business!” offered the best defense for their choice of customers as the primary stakeholders. SUMMARY In conclusion, student perceptions provided valuable learning insights regarding various organizational stakeholders. For instance, students were overwhelmingly in favor of customers being recognized as most critical to organizational success, whereas, only a few argued that employees deserve that distinction. The students, however, in spite of the disparity between customer and employee rankings seemed to agree that employees have a direct impact on improving customer satisfaction and long-term loyalty. Students in favor of employees as most important placed themselves in the role of an employee.

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They shared thoughts on how businesses will not succeed unless the employees are seen as vital to organizational success. However, student engagement was not limited by the number of students in a particular choice category. For example, one insight involved the very low number of students that chose investors as most critical to organizational success. Yet, the students choosing investors were adamant about their choices being given prominent status. Other students also believed that investors were important stakeholders and needed to be considered as one of the primary groups. Finally, an interesting finding revolved around the number of students perceiving that suppliers deserve the top status among organizational stakeholders. Perhaps this unexpected finding came from a significant portion of students majoring within the supply chain program. These students placed prominence on securing the best sourcing of goods and services available. Future research is needed to examine additional student perceptions of organizational stakeholders in order to determine contrasting rankings and discussion points. REFERENCES Daft, R. L., & Marcic, D. (2017). Understanding management (10th ed.). Boston: Cengage Learning. Ferrell, O. C. (2004). Business ethics and customer stakeholders. Academy of Management Executive, 18 (2), 126-129. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman. Harrison, J. S., & Wicks, A. C. (2013). Stakeholder theory, value, and firm performance. Business Ethics Quarterly, 23(1), 97-124. Nwanji, T. I., & Howell, K. E. (2005). The stakeholder theory in the modern global business environment. International Journal of Applied Institutional Governance, 1(1), 1-12. Steiner, J. F., & Steiner, G. A. (2012). Business, government, and society: A managerial perspective, text and cases (13th ed.). New York: McGraw-Hill/Irwin. Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2015). Strategic management and business policy: Globalization, innovation, and sustainability (14th ed.). Upper Saddle River, NJ: Pearson.

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Border-less Classroom, an Experiential Approach to Entrepreneurial Education: A Pilot Study in Enhancing Chinese Students Entrepreneurial Skills Issam A. Ghazzawi University of La Verne Junheng Liao Guangdong Pharmaceutical University Jack Meek University of La Verne Hanling Lu Guangdong Pharmaceutical University

The global economy is embracing more international collaboration as technology and communication have linked countries and made the world smaller. Business and government collaborations are not alone, institutions of higher education around the world have also moving closer to each other through varied cooperative programs. Some institutions of higher education are experimenting with new approaches to learning and teaching through a technology enhanced delivery method. This paper offers an outcome assessment of a new method of an experimental/experiential pilot study where students from a university in Guangdong, China have created a small learning community and learned via WebEx technology varied topics in entrepreneurship including finance, management, and marketing. Facilitated by two faculty members from a private university in Southern California and a faculty member in Guangdong province, students were able to create a business plan, get a starting capital, started a small business, sold varied cosmetics’ products, and made some money. The paper concluded that border-less cooperation coordinated through a web technology based delivery method helped make education relevant to students' understanding of the subject of entrepreneurship as well as helped motivated them to succeed as the U.S. faculty shared their entrepreneurial knowledge. Based on quantitative analysis of the results coupled with students’ testimonials, the paper suggests that this border-less experiential learning collaboration has positive outcomes to students.

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INTRODUCTION The development and the emerging of the new economy of the People’s Republic of China (PRC) over the past 40 years has been an unprecedented phenomenon that has impacted many nations as China became a production machine capable of exporting almost everything to the world. China has initiated new forms of entrepreneurship as a result of the gradual loosening of the central government control in the late seventies and the implementation of China’s “Open Door Policy” of 1978 that facilitated the moving of its economy from a planned to a socialist market one (Anderson et al., 2003; Lin & Si, 2014; Lu & Tao, 2010). This transition facilitated and accelerated the starting and the acceptance of entrepreneurial roles and activities in the country and thus resulted in an unmatched job creation, production of goods and services, and unparalleled consumption-all resulted from entrepreneurs’ initiatives (McMillan & Woodruff, 2002). One important consequence of this shift toward more “socialist market economy” (SME) has been the relative decline of its large “State Owned Enterprises” (SOEs) and the mushrooming of the number of “small enterprises” {(SMEs) (Anderson et al., 2003)} as a result of privatization. According to state-run news agency Xinhua, the number of individually owned businesses and private enterprises in China exceeded 40.6 million at the end of January of 2013 (in Market Watch, 2013). The appeal of entrepreneurship has impressive momentum in the Chinese society, and in September 2014, China’s premier Li Keqiang called for “mass entrepreneurship and innovation” as he issued the call for a new wave of “mass entrepreneurship and grassroots entrepreneurship” (English.gov.cn, 2015; Xuefeng, 2015). Li (2002) suggested that the contemporary form of Chinese entrepreneurship originated from a variety of sources. During the eighties, the dominating forms of entrepreneurship were the township and village-based enterprises that were supported by local governments. Li observes that a second form of entrepreneurship came as a consequence of the first form when entrepreneurs started a small family-based business that employed a fewer than six employees, others have formed private enterprises that employed more than six people. Additionally, a few small state-owned enterprises existed and were subcontracted or managed by entrepreneurs. It is also important to clarify that other form of business were also existed, these were in the form of joint ventures and shareholding cooperatives. A case in point here, is that economic privatization is not any easy process, it requires a new set of government policies and tremendous learning and modifications of existing of both old and new business based policies to accommodate the unforeseen requirements and emerging needs. According to Dusan Triska, the principal architect of Czechoslovakia's privatization program: Privatization….is not just one of the many items on the economic program.It is the transformation itself. Without a well-defined and feasible privatization strategy the program would become just another hopeless attempt to reform the unreformable. Privatization is the element that distinguishes transformation from reform. That is why privatization must be conceived of and viewed as an end in itself (in Nellis, 2001, p. 32). According to Triska (in Nellis, 2001), for privatization to be successful, the policy prerequisites include “price liberalization, bankruptcy law, and convertibility of the currency” (33). The road to privatization has two routes- privatizing the existing firms and creating new ones, and thus create a need to reform policies that would foster entry (McMillan & Woodruff, 2002). At the time of this report, the Mass Entrepreneurship and Innovation “MEI” is a national strategy in China, and entrepreneurship and innovation are nurtured as twin engines for substantial economic growth by the Chinese government (Song, 2015). As a consequence of this strategy, entrepreneurship education in universities became an important part underpinning the largest ever entrepreneurial boom in China. However, the approach to entrepreneurship education has long been criticized for its lack of practice and little relevance with real world (Bernhofer et al., 2014; Millman et al., 2008; Tang et al., 2014; Wang et al., 2012). 84

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Research studies examining entrepreneurship in China have been mostly focused on entrepreneurial development and challenges (e.g. Ahlstrom & Ding, 2014; Child et al., 2007; He, 2009; Li & Matlay, 2006; Liao & Sohmen, 2001; Pistrui, 2001; Poutziouris et al., 2002; Puffer et al., 2010; Tsang, 1994; Yang & Li, 2008; Yu & Stough, 2005) or on peasants’ entrepreneurs (e.g. Chen, 2002; Fan et al., 1996; Nee & Young, 1991; Peng, 1992; Tsang, 1994). Research on entrepreneurship education in China - especially in institutions of higher education - is still limited and needs improvement (Li et al., 2003; Millman et al., 2008; Xiong & QIU, 2005; Zhi-rong, 2006); or needs to develop entrepreneurship education to make it more accessible and provide flexible approaches that meet different students’ needs with varied academic backgrounds to make it more relevant (Wang, 1999; Wu & Wu, 2008; Xiaozhou & Zhiyong, 2010; Zhou & Xu, 2012). This paper - based on an exploratory pilot study - is an attempt to fill some of the gap in the literature regarding entrepreneurship education in China. The paper offers a summary of the authors’ experiential approach to teaching entrepreneurship to a small number of Chinese university students where the weekly instruction and interaction were provided through the use of WebEX technology connecting a private institution of higher education in Southern California and a university in Guangdong province. This study is significant in that it provides assessment of an alternative delivery approach to entrepreneurship education and by focusing on making skills’ buildings more relevant, hands on, and challenging to the learners. The paper is divided into six sections. After this introduction, section two develops the conceptual framework of the study and its research questions/propositions. In this section, the paper discusses the concepts of entrepreneurship and entrepreneurial education in general, followed by a chapter (i.e. three) on entrepreneurship and entrepreneurial education in China. Section four describes the “borderless program” as an experiential learning process used by the authors and discusses the research methodology. While section five presents the findings and discussions, section six provides conclusions, implications, students’ testimonials and suggestions for future research. ENTRERENEURSHIP AND ENTREPRENEURSHIP EDUCATION As a critical component of economic strategies for fostering job creation, entrepreneurship education was introduced in the US in the 1940s at the college level and witnessed a tremendous growth (Støren, 2014; McMullan, 1987). Since then, this concept has been adopted and integrated into many countries’ educational system (Støren, 2014; McMullan, 1987). The success of this concept has eventually led UNESCO World Conference to recognize the importance of entrepreneurship education and call for other nations to cultivate it at higher educational level (UNESCO, 1998). According to Carayannis and Von Zedtwitz (2005:95), “entrepreneurship is at the heart of sustainable, organic growth for most developed, as well as transitioning and developing economies and incubators have often served as catalysts and even accelerators of entrepreneurial clusters formation and growth”. Støren (2014) asserted that entrepreneurship education has been high on many countries agenda over the past ten years or so- as a few countries have launched action plans to promote entrepreneurship education at all levels especially at the college one. Accordingly, policy makers around the world started looking at entrepreneurship as the path to reach higher levels of economic growth and innovation. Evidence from empirical research provides support for the positive link between entrepreneurial activities with economic growth (that includes employment generation) and innovation (e.g. Charney & Libecap, 2000; Harkema & Schout, 2008; Rasmussen & Sørheim, 2006; Van Praag & Versloot, 2007). According to Kuratko (2005), the US has witnessed the powerful entrepreneurial activities in the last 20 plus years as new business ventures (start-ups, expansions, and development) averaged 600,000 per year. As for employment generation; while Fortune 500 companies have lost more than 5 million jobs since 1980, more than 34 million new jobs have been created. In 1996, a small business has created 1.6 million new jobs (Kuratko, 2005). Additionally, in its fourth year of assessing entrepreneurial activity worldwide, the Global Entrepreneurship Monitor (GEM) estimated that more than 460 million adults around the globe were engaged in entrepreneurial activity in 2002 (Reynolds et al., 2002). American Journal of Management Vol. 18(2) 2018

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There is no widely accepted definition of entrepreneurship (e.g. Gartner, 1990; Reynolds et al., 2005; Thurik & Wennekers, 2004; Van Praag, 1999). While Thurik and Wennekers (2004) called it a behavior that is focused on opportunities, Gartner, 1985 used a broader definition by defining it as the creation of a new venture. This paper relies on a definition that is built on the combination of the aforementioned definition: we define entrepreneurship as the creation of a new business venture that is founded on a readily available opportunity. In China, entrepreneurship is synonymous with “business start-up” (Zhou and Xu, 2012). Education is the means to develop the total person and help develops/enhances skills to create entrepreneurial opportunities and Zhou and Xu (2012) have determined that entrepreneurship education in China emphasized four goals: (1) To expose students to the challenging prospect for employment and raise their entrepreneurship awareness; (2) lay a solid foundation of knowledge on entrepreneurship; (3) improve college students’ entrepreneurial skills and abilities; and (4) to reduce entrepreneurial risks among college students. Entrepreneurship education has also been a strong positive influence on individuals in terms of influencing them in becoming self-employed and successful (Robinson & Sexton, 1994). In an effort to close the gap between what colleges offer and what the ‘real world’ needs, many institutions of higher education resort to programs to enhance students’ applied learning. Abbondante et al., (2014:14), noted that “the objectives of curricula are to not only enable students to apply knowledge directly to jobs, but to nurture an entrepreneurial spirit in students”. On the other hand, Vesper and Gartner (1997), asserted that the better approaches to accomplished these objectives is to offer a non-traditional program at both graduate and undergraduate levels that it encompasses concepts such as starting a new business, doing business consulting, managing a company, or engaging in a venture plan writing and financing. Pittaway and Cope (2007) suggested that enterprise and entrepreneurship education had made a profound impact on institutions of higher education as these initiatives (i.e. enterprise education) started a ‘vibrant’ cultural shift in the United Kingdom. “There are many educational aspects covered within the domain including: employability skills; social enterprise; self-employment; venture creation; employment in small businesses; small business management; and, the management of high-growth ventures … institutional approaches to implementation have varied considerably.” (Pittaway & Cope, 2007:3). On the other hand, in their study of the impact of leading entrepreneurship educational program on college students’ entrepreneurship skills and motivation, Oosterbeek et al., (2010) concluded that results showed that the program does not have the intended effects on students’ self-assessed entrepreneurial skills and negative effects on the intention of the students in becoming entrepreneurs. A possible explanation of said result is that “students have obtained more realistic perspectives both on themselves as well as on what it takes to be an entrepreneur” (Oosterbeek et al., 2010:452). Recognizing the fact that entrepreneurial education and entrepreneurial experiences impact peoples’ attitudes towards starting own business, several scholars have researched the impact of entrepreneurship education-as distinct from general education, on students inclination to initiate their own entrepreneurship venture (e.g. Abbondante et al., 2014; Støren, 2014; Donckels, 1991; Fayolle et al., 2006; Hannon, 2005; Kirby, 2004; Krueger & Brazeal, 1994; Peterman & Kennedy, 2003; Pittaway and Cope, 2007; Zhao et al., 2005). However; the literature regarding entrepreneurship education and its impact on students in China has remained relatively limited (Byabashaija & Katono, 2011; Krueger & Brazeal, 1994; Peterman & Kennedy, 2003; Zhang et al., 2014).

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ENTRERENEURSHIP AND ENTREPRENEURSHIP EDUCATION IN CHINA Encouraged by the global shift towards entrepreneurship education of the nineties and the challenges of its growing students’ enrollments and its associated problems of finding jobs after graduation; the government of China took a leading role in promoting entrepreneurship education in 2002 (Zhou and Xu, 2012). Since then, China’s entrepreneurship education emerged on some college campuses in the form of entrepreneurship competitions as “the growth of entrepreneurship education in other countries has served as a source of inspiration for Chinese universities” (Zhou and Xu, 2012:83). According to Li et al., (2003), small business development started in rural China after the implementation of the “Open Door Policy.” Its rural enterprises accounted for an unprecedented proportion of small firms in the country. To improve its performance and managerial competency, the ministry of agriculture coordinated short training and development programs for managers and key members of rural enterprises in 1990s. By the year 2000, 1.7 million individuals participated in these programs that were offered in 106 rural enterprise centers and colleges nationwide. These programs covered a few topics including business management, quality control, product development and other technical topics (Li et al., 2003). The recent history of entrepreneurship education dates back only to 1997 when Tsinghua University started the Student Entrepreneurship Competition that was modeled after a similar competition at the Massachusetts Institute of Technology (Li, 2012). A few years later, a few other universities have taken further steps towards entrepreneurship education and expanded entrepreneurship education-for instance, “Fudan University encouraged its faculty to integrate entrepreneurship basics into their daily instruction; East China Normal University was the first to offer a course on entrepreneurship education; Wuhan University offered a course on creativeness, innovation, and entrepreneurship; and Beijing University of Aeronautics and Astronautics provided capital support to student entrepreneurs” (Li, 2012:85). In April 2002, the Ministry of Education took a proactive role through the selection of nine institutions (i.e. Tsinghua University, Beijing University of Aeronautics and Astronautics, Renmin University of China, Heilongjiang University, Shanghai Jiaotong University, Nanjing University of Finance and Economics, Wuhan University, Xi’an Jiaotong University, and Northwestern Polytechnic University) to participate in the National Entrepreneurship Education Pilot Program (NEEPP) with a purpose to explore a number of entrepreneurship education models including classroom-based model (to foster students’ awareness and constructing their knowledge structure), a practice-oriented model (to enhance students’ knowledge and skills through the support of institutional infrastructures such as entrepreneurship parks, capital support, consulting services, and incubators), and a hybrid model (that employs a combination of both classroom instruction and training in practical settings (Li, 2012). In 2005, the Know about Business (KAB) program- a systematic entrepreneurship education program developed by the UNESCO labor organization, was introduced to students and in six universities (i.e. Tsinghua University, Beijing University of Aeronautics and Astronautics, China Youth University for Political Sciences, Heilongjiang University, Tianjin Polytechnic University, and Beijing Youth Political College). This model provided an exceptional example of the collaboration among organizations and higher education institutions in promoting entrepreneurship education. Through teaching basic knowledge and skills about enterprises and entrepreneurship, the program uses psychological assessment and teambased games to help students understand entrepreneurs’ general characteristics and quality and acquaint them with the whole process. The program also invites accomplished entrepreneurs to contribute to classroom instruction and discuss real-world case studies, a practice which is especially well received by students. “By 2009, KAB had provided training opportunities to 795 faculty members representing 318 higher education institutions in 25 provinces, and it had offered a course titled “KAB Entrepreneurship Basics for College Students” to over twenty thousand students in 100 universities” (Li, 2012: 86-87). In 2008, the government has called for some government agencies, universities, and corporations to set up a pilot program to develop talents of innovation and entrepreneurship (Li, 2012; China Ministry of Education, 2009). Additionally, the Ministry of Education and the Ministry of Science and Technology jointly initiated pilot programs for innovation and entrepreneurship such as Entrepreneurship Park and American Journal of Management Vol. 18(2) 2018

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Science Park in some selected universities. Similar initiatives were also initiated at the provincial level, and the corporate sector became an active player in education (Li, 2012; China Ministry of Education, 2009; China Ministry of Education, 2010a). According to Li (2012), these milestones marked the beginning of a China’s entrepreneurship education that was characterized by the support of the government, active participation by institutions of higher education, and the unprecedented support by the society and the corporate sector. Finally, in early 2010, the Ministry of Education formed a national advisory committee that consisted of 41 college presidents, governmental officials, and successful entrepreneurs to provide consultation and guidance for colleges and universities regarding entrepreneurship education (Li, 2012; China Ministry of Education, 2010b). BORDER-LESS CLASSROOM APPROACH: PROGRAM DESCRIPTION Program Initiation In December of 2015, an initial faculty exchange initiative between a Southern California University in the United States and a university from Guangdong in China. This exchange included an initial effort to connect students and faculty from both universities along common interests. The success of this initial exchange led to a proposal to design and implement a course of study focusing on entrepreneurship for students in China supported by faculty from both universities and where synchronic student-faculty interaction was supported with WebEx technology. The mission of this entrepreneurship educational pilot class was to accomplish its goal of providing experiential learning to a group “cohort” composed of 9 students located in Guangdong, China; our global collaboration draws on the work and the foundations of Experiential Learning Theory (ELT), its process was to provide a hybrid model of meaningful education that uses both classroom instruction (including remote instruction through WebEx) and simultaneously starting a business venture in China by students. Program Mission The mission of the “Border-less Classroom” was to enhance the entrepreneurship skill of the students at the Chinese university, and to further explore the benefits of cross-cultural education through distance learning. To accomplish this mission, a pilot program “Border-less Classroom” commenced in March 2016 and lasted for six months. Program Faculty The program was designed and supervised by three faculties: two faculty members from a Southern California university in the U.S. and another one from university in Guangdong, China. Because the faculty were trained and have expertise in different subject areas, each faculty contributed insight from their disciplines to the project. In addition, the local faculty member contributed contextual knowledge to the project so that entrepreneurial materials could be framed with meaningful local application. This knowledge was especially important in a number of steps in the curriculum. Overall program support was obtained through the Deans of the respective universities. Students Nine students were selected to join the pilot study based on their academic achievement and their expressed interest in this program and to become entrepreneurs. The selection process was established by the local faculty member an included an assessment of student achievement over a minimum of two years in coursework in business-related studies, student capacity in the English language (both written and oral communication), and interest in entrepreneurial study. Global Collaboration and WebEx Technology Global collaboration offers both challenges and opportunities to the problem encountered in the higher education in China (Zhiwen, 2008). While on one hand, it increases complexity; it permits Chinese universities to embrace more international collaboration to work out solutions (Chan et al., 2013; Li-Hua, 88

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2007; Zhiwen, 2008). To overcome the challenges of location, distance, and time differences, modern communication methods were utilized including WebEx enabled video conference and in instances WeChat, a popular social networking application in China that permits instant text, voice, image and video sharing. Despite its tedious feature, email exchange between faculty members and the students provided an excellent opportunity for the Chinese students to practice their English writing skills. The program employed a range of methods to enhance students’ entrepreneurship skill. Apart from class teaching, experiential learning – discussed below - based on a practical e-Commerce project, group discussion, and presentation are also employed. To enhance students’ learning and entrepreneurial skills, in-class meetings combined with WebEx enabled video conferencing presentation on subjects including: Business mission, vision, goals, organizational structure, small business finance, and products’ promotion, pricing, and marketing were provided through the US faculty. To compliment skills building, an experiential learning component were added where the students form a company, selected cosmetics product to promote and sell for profit, and decided on their targeted market through e-commerce to other students throughout the semester. Experiential Learning as an Educational Approach The educational approach of the “Border-less Classroom” was intentionally designed around Experiential Learning Theory (ELT). The course architects established learning objectives based on the ELT approach as central to entrepreneurial education. Kolb and Kolb (2012) have defined Experiential Learning Theory as the one that “placed experience at the center of the learning process, envisioning an educational system that was learner centered. ELT is a dynamic view of learning based on a learning cycle driven by the resolution of the dual dialectics of action/reflection and experience/abstraction. It is a holistic theory that defines learning as the major process of human adaptation involving the whole person” (Kolb & Kolb, 2012:43). According to Kolb and Kolb (2012), as a holistic process of adaptation and not as outcomes, learning should focus on engaging students in a process that best enhances their learning, including the feedback on the effectiveness of their learning efforts. While experiential learning creates knowledge and results from synergetic transactions between the person and the environment, it also requires the resolution of conflicts. While institutions of higher education are racing to creativity in entrepreneurial education offerings, business plans today and business plan competitions dominate worldwide on many college campuses as means to provide experiential learning (Abbondante et al., 2014). These business plans allow students to apply learned skills when introducing new products or services while encouraging innovative behavior in students and bring about their passion (Chen et al., 2009; Russell et al., 2008; Wen & Chen, 2007). Additionally, simulation as often seen in senior seminar or capstone courses, is another effective method of having students integrate knowledge from various courses and use it in a computerized game environment (Vogel, et al., 2006). All of these approaches are focused on providing an experiential approach to learning through providing a theory-to-practice environment that is on specific objectives and available resources-known as “a learning community” (Abbondante et al., 2014). This concept of a learning community that portrays the ELT could be arguably linked to the ideas of educator John Dewey at the beginning of the 20th century (1916). Dewey suggested that a learning community is composed of a close relationship between the teacher and the learner, it must be focused on learning by doing, and must develop skills to enhance reasoning capabilities to promote lifelong learning (Dewey, 1916). RESEARCH METHODOLOGY: EXPECTED PROCESS OUTCOMES AND RESEARCH PROPOSITIONS One objective of the pilot project included the development of cross-national connections between students and faculty through educational exchange efforts. A second program objective was to develop a project that provided a benefit to the university community in China while it serves as a learning

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opportunity for its students and faculty. From these objectives, the program established a central proposition to examine along with three learning outcomes. Study Proposition The central proposition the faculty were seeking to explore was that three learning outcomes’ in entrepreneurial study can be identified with a curriculum that is based on experiential learning design AND the joint (international) faculty collaboration of entrepreneurial curricular – that embraces theory and participant context (practice environment). Learning Outcomes The program identified three specific learning outcomes for students. When based on experiential learning approach and guided by local contextual knowledge: Learning Outcome 1 Students will demonstrate an understanding of the entrepreneurship process through the generation of an idea for a new business and/or recognition of an opportunity. The development of a business plan to serve as a blue print of the proposed venture is a key element. Learning Outcome 2 Students will assemble the needed resources (including financial, human, logistics) to develop this new venture or opportunity. Learning Outcome 3 Students will launch the new venture or develop this opportunity, manage its logistics and growth, and be able to make it profitable. Procedure This study documents the learning outcomes of an experiential entrepreneurial program where students in China were exposed to an entrepreneurship through a hybrid method (a class learning environment that was complimented with video conferencing learning and venture creation exercise). It also investigates the impact of this borderless classroom on students’ learning. Participation in this program and its study outcomes were voluntary. Its survey and reflection responses were confidential. Participants understood the purpose of this study and indicated their awareness that their participation in this study was voluntary and that they had the right to withdraw at any time without consequences of any kind. Measures A pre and post-tests survey to measure students’ comprehension of the taught subjects were utilized in addition to the outcomes of students’ venture creation, venture sales and profit, and business plan report and presentation were also complimentary learning outcomes. Participants and Setting The sample in this pilot study included only 8 women and one man (n=9). All respondents to the survey have the knowledge to answer the survey. All respondents were juniors or seniors participating in an entrepreneurship course at one of Guangdong institutions of higher education in China. Participants returned their completed survey to their faculty member in Guangdong who is also a co-author of this study. The research method for this study was based on an empirical study and descriptive statistics.

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RESULTS AND DISCUSSIONS The expected outcomes from this experiential learning project is to ensure students ability to demonstrate an understanding of the entrepreneurship process through recognizing an entrepreneurial opportunity, getting the needed resources to develop it, and be able to launch it and ensure its financial health. The Starting of a Venture: Campus Go Team! Identifying a need to fulfill or a product to promote and sell to a target market was the first key challenge for the participating students. Nine students started an e-commerce venture named “Campus Go Team” with a mission to provide the on-campus community with healthy food items and nature care products outsourced and delivered directly from Australia. Students identified the need for these items through a marketing survey, decided on the price after sourcing these products and factoring all related expenses and their profit margin. The vast majority of the Campus Go Team customers were college students from the same university. Please see Figure 1 for selected items from the company’s online store. As the students had no prior experience in starting a venture, the second challenge for the new venture was to organize their functional activities and ensure accountability with respect to the key functional managers, quickly they have identified their CEO, the Vice President of Finance, the Vice President of Operations, and the Vice President of Sales and Marketing. Accordingly, they have designed an organizational chart. FIGURE 1 SELECTED ITEMS FROM THE Campus Go TEAM ONLINE STORE

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Students were reminded that writing a business plan is an integral part of starting a successful business. Very quickly, the Campus Go Team were able to write a business plan comprised of an executive summary that serves as an introduction to their new venture in addition to detailed and supported sections regarding proposed products’ description and its sources, targeted market, operations, management/organization, capital budget, and revenues and expenses projection. Simultaneously, students were instructed to state their goals that include sales and profits’ goals. They were also taught how to stay focused on their organization competitive advantage. Important to note that situational analysis (Strength, weaknesses, opportunities, and threats) were emphasized and stressed during the learning process as students were instructed to ensure their organizational sustainability (profitable growth). A case-in point here is the fact that faculty has also stressed the importance of ethics and ethical practices with all stakeholders. While the Campus Go Team investigated target market based on potential opportunities at the start, they have followed up with a secondary research concerning size, demographics, lifestyles, and purchase behavior of their identified target market (i.e. the campus community) to get a closer look at items that will eventually fill needs while adding value to their potential clients. They were also instructed to explain and justify the positioning of their products in the marketplace and ensure that the image is significant to their target market. Business Plan Presentation via WebEx After the completion of their business plan, students e-mailed it to their faculty and provided a live presentation through WebEx to the two faculty members from California in the presence of their faculty in Guangdong. While the business plan contained all the aforementioned components, students presented detailed information regarding their target market and positioning statement, their survey results, their sales forecasts, products’ images, pricing, promotional plans, and financial projections. As their target market was their own college students', social media was at the center of the “Campus Go Team” promotional activities including QQ and WeChat. Once the Borderless Program faculty members approved the business plan, “Campus Go Team” began the implementation phase and raises the initial startup capital to place the very first order and develop its business. An important note, students were constantly meeting among themselves to evaluate their business strategies and making adjustments as deemed necessary to meet their objectives. Notable Achievements For the first two months’ period, “Campus Go Team” has achieved an over RMB 7,000 in sales revenue with a net profit of about RMB 1,500. The sales revenue and net profit rose to RMB 80,000 and RMB 17,000 respectively over the next 8 months after the Korean supply channel has been incorporated. Please refer to Table 1 for Campus Go’s Income Statement ending on December 31, 2016. TABLE 1 STATEMENT OF PROFIT AND LOSS FOR THE PERIOD ENDING DECEMBER 2016 RMB Sales revenue Cost of goods sold Gross profit Sales and marketing expenses Travel expenses Total Expenses

3,000 2,000

Net profit 92

RMB 80,000 (58,000) 22,000

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(5,000) 17,000

A survey was conducted by the students to evaluate customer satisfaction. Customers were asked to rate their satisfaction with the overall experience with the “Campus Go Team” products and services based on five categories comprising an overall performance, product quality, packaging, logistics, and service. Said categories based on Likert scale and range from 1 (very unsatisfied) to 5 (very satisfied). As illustrated in table 2 and Figure 2, more than 80% of their respondents rated them 4 or 5 for the four categories composed of: Overall performance, product quality, packaging and service. However, and due to the cross border delivery their logistics performance has not achieved reasonable result. TABLE 2 Campus Go TEAM’S CUSTOMER SATISFACTION SURVEY RESULTS Category Overall Performance Product Quality Packaging Logistics Service Satisfaction

1 3% 0% 0% 14% 0%

2 0% 3% 3% 0% 0%

3 17% 14% 14% 38% 3%

4 31% 24% 38% 0% 31%

5 49% 59% 45% 48% 66%

FIGURE 2 Campus Go TEAM’S CUSTOMER SATISFACTION SURVEY RESULTS

Campus Go Team’s Customer Satisfaction Survey Results Service Satisfaction Logistics Packaging Product Quality Overall Performance 0%

20%

40%

60%

80% 100% 120%

Another method to assess students’ comprehension and understanding of the entrepreneurship process was evident through an increase of knowledge in all entrepreneurship education functions-namely: Management/organizing, marketing, finance, global business, and e-commerce. Said knowledge increase was measured through a pre and post relevant entrepreneurship survey. Please refer to Table 3 and Figure 3 for results illustration. In addition to the quantitative results, please refer also to Appendix I for students’ testimonials. Lena, a member of Campus Go Team stated “before I attended the enterprise classes, I always think set up a business is really far from me. In my previous opinion, set up a business need a lot of money, wide networking and strong will. After the lessons, I found that my thoughts are just partly right... Because of this lessons, we have a try to set up our own

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business--Campus Go. And that's the first time we put the theory into practice... (Lena, June 22, 2016). Another student added, “I really benefit a lot from these courses. That course about divisional structure was the most impressive for me, which was divided into three parts: product structures, geographic structure and market structure. In product structures, it’s also divided into three parts: product division structure, multidivisional structure and product team structure…After the professor’s guidance, we found that the right choice of organizational structure for their own business situation is also very important (Crystal, June 28, 2016). TABLE 3 STUDENTS’ ENTREPRENEURIAL EDUCATION KNOWLEDGE INCREASE Category Management/Organizational Literacy Marketing Literacy Financial Literacy International Business Literacy E-Commerce Literacy

% Knowledge Increase 90 50 26 90 15

On the other hand, Patty- another participating student added that “… I learned the details about how to run a new company, just like organizational design and structure, marketing research and so on. I learned something new as well as deepen something that I have known. The pre-class preparation and after-class homework improved my English written skills as well as ability of collecting information and critical thinking. Last but not least, our entrepreneurial practice made me grasp the ability to discover and solve problems” (Patty, July 2, 2016). FIGURE 3 STUDENTS’ ENTREPRENEURIAL EDUCATION KNOWLEDGE INCREASE

% Knowledge Increase

Management/Organizational Literacy Marketing Literacy Financial Literacy

International Business Literacy

E-Commerce Literacy Entrepreneurship Competitions The Campus Go Team with its e-Commerce project is very competitive in Entrepreneurship Competitions. The team is under the process of transition that new members have been recruited to replace the senior members. It is also appropriate at this point to mention that during December 2016, the Campus Go Team also participated in the First Entrepreneurship Competition held by the School of Business at their university in Guangdong. The Border-less Classroom e-Commerce project won the 94

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competition’s first prize award competing with about 60 other groups. The organizing committee was made of 3 entrepreneurs and 6 faculty members. The students were awarded RMB 3,000 to support their business operation. This is second cash award won by the Campus Go Team after the first winning award of RMB 5,000 provided by the university. Teamwork and Collaboration Most of the participating students had some comment regarding the interaction with each other and how they worked together as a team. Their testimonials reflected the importance of teamwork and collaboration to reach success as opposed to be a cohort in a traditional course. To them, it was a real-life venture where failure has no place. This sentiment was emphasized by faculty members during the learning period. As faculty members have observed their progress during their venture cycles of birth and growth, students became a tight net where they needed to closely work together for the success of their business. For them, slackers had no place! They collaborate and overcame some conflicts especially at the start as they were initially researching the viability of the products that they would have market. Below are some selected students’ testimonials: “First of all, this course improved our ability of solving problems. Because when we run our own company, we are sure to run into all kinds of difficulties, no matter how intractable it is, we have to overcome it instead of giving it up as we would in school if the exam is too difficult. Secondly, as the team leader, I have learned how to lead a team…What’s more, when my teammates finished their work, I would firstly, appreciate their hard work and appraise them for what they have done well, then point out how it can be improved. I found later that many things I have done during the project were related to the knowledge I have learned in the course though I wasn’t aware of it when I was doing that. (Kelly: June 24, 2016) “Through "no borderless" class, I meet the teammates and learn a lot of things from them. In two months of cooperation, I also know what kind of role should be played in a team. When falling into a trap we should maintain a calm attitude to deal with…” (Ivy, June 11, 2016). “…and the greatest achievement is I have learned how to find the key problem and solve it in my way. In addition, through the video conference, the eager curiosity urges me to focus on something that not around us but make a difference to us. It is also what I should strengthen. That is all.” (Lilly, July 8, 2016). “…The other hand I think important is team work, everyone has other personal work to do, and so how to finish the work efficiently is very important. We have Assign tasks to everyone, and let them finish them in time. Finally, we will let other team member’s double check or Propose different ideas. That is what I learn from the project” (Lizzy, June 28, 2016). “What I have learned from this course is that teamwork is very important. In addition, during the time we run our company, we have overcome many difficulties, which have improved our ability to find and solve problems. Furthermore, there is always a gap between theory and practice, so you can’t just think it in your mind and don’t take any action. What’s more, when you put your heart into something and try your best, you will benefit from it” (Vanky, June 26, 2016). American Journal of Management Vol. 18(2) 2018

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CONCLUSION, LIMITATION, AND IMPLICATIONS FOR FUTURE RESEARCH Conclusion This paper offers an outcome assessment of a new method of an international experimental /experiential pilot study in entrepreneurship education where a cohort of Chinese college students has created a small learning community and learned via WebEx technology varied topics in entrepreneurship that was facilitated by two faculty members from a private university in Southern California and a faculty member in Guangdong province. Based on the results and its discussions, this paper concludes that border-less cooperation and technology based delivery method was instrumental in enriching students’ entrepreneurship knowledge of understanding the subject of entrepreneurship and motivated them to start and successfully implementing a business venture for profit. Based on these findings, it is evident that the international learning process has created a positive learning environment and led to positive outcomes to students. In addition, the students’ narratives support the project’s central proposition was demonstrated: that three learning outcomes’ in entrepreneurial study can be identified with a curriculum that is based on experiential learning design AND the joint (international) faculty collaboration of entrepreneurial curricular – that embraces theory and participant context (practice environment). Evidence listed in the results section demonstrate that: (1) Students demonstrated an understanding of the entrepreneurship process through the generation of an idea for a new business and/or recognition of an opportunity; (2) students assembled the needed resources (including financial, human, logistics) to develop this new venture or opportunity; and (3) students launched the new venture or develop this opportunity, manage its logistics and growth, and be able to make it profitable. In short, the program has achieved the experiential learning goals of ensuring what Kolb and Kolb (2012) labeled as “dual dialectics of action/reflection and experience/abstraction” (2012:43). Limitations As this study attempts to contribute to the knowledge of the experiential entrepreneurship education and students’ learning through an international collaboration, it has some limitations. One limitation of this study was that it used a convenience sample of well-motivated faculty members and a group of motivated Chinese students with a fair command of the English language. Future research might produce different results based on a different sample of both faculty members and students. Therefore, further research with a larger sample is required to assess the applicability of these findings to the general population of students who are interested in the subject of entrepreneurship. Another second limitation of this study was the fact it has used modern communication technology. Therefore, we can make no claims to the generalizability or representations of these results where technological collaboration is limited or finding an institutional partner in the US with the will to collaborate is not feasible. Finally, a limitation of this study was that it was limited to one group (i.e. n=9) and in one university. Accordingly, the study does not provide valuable implications for other students within the same university or in different universities. Based on that, the generalizability of these findings to other students and other settings are not reasonable. Implications for Future Research This study offers some suggestions for future research. First and foremost, more research should be conducted, these authors posit that Chinese universities should seriously consider an international collaboration with U.S. based institutions of higher learning that emphasize alternative entrepreneurship learning through the use of the available technology. While current research of experiential learning is very limited and focuses on traditional learning, the above stated outcomes are very encouraging and require more research to enhance the literature.

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APPENDICES Appendix I Excerpts from Students’ Reflections “All testimonials have been reproduced exactly as written” (1) “I think I have gained a lot of experience and knowledge in this course. First of all, this course improved our ability of solving problems. Because when we run our own company, we are sure to run into all kinds of difficulties, no matter how intractable it is, we have to overcome it instead of giving it up as we would in school if the exam is too difficult. Secondly, as the team leader, I have learned how to lead a team. For example, I would coordinative designate each teammates’ work so that everyone can exert their strengths to the best. What’s more, when my teammates finished their work, I would firstly appreciate their hard work and appraise them for what they have done well, then point out how it can be improved. I found later that many things I have done during the project were related to the knowledge I have learned in the course though I wasn’t aware of it when I was doing that. Furthermore, I am studying in Korea now and selling Korean products to China via WeChat with my roommate, our total sales reached 5, 5000 RMB over the past 2 months. I think one of the most important reason that we can get such a big sale is that I have gained a lot of experience in CampusGo. Therefore, I think this course is useful and meaningful. What impressed me most is that everyone has his strengths and weakness, some traits may seem common while it is quite precious, such as earnest and perseverance. Once you make your choice, all you have to do is to do your best and stick it out. Finally, I would like to thank Jack, Issam, Steve and my teammates, the time we have spent together is memorable” (Kelly: June 24, 2016) (2) “Through "no borderless" class, I meet the teammates and learn a lot of things from them. In two months of cooperation, I also know what kind of role should be played in a team. When falling into a trap we should maintain a calm attitude to deal with. And at this time the leader wants you to give is the solution, not the problem. In addition, you have also gave me a more comprehensive understanding of financial knowledge and the level of my English has also been improved” (Ivy, June 11, 2016). (3) “Before I attended the enterprise classes, I always think set up a business is really far from me. In my previous opinion, set up a business need a lot of money, wide networking and strong will. After the lessons, I found that my thoughts are just partly right. Because I forgot an important thing--theory! Although theory is abstract, it can bring us ideas and thinking. We can learn the regularity from it and avoid making unnecessary mistakes so that we can advance more smoothly. Because of this lessons, we have a try to set up our own business--Campus Go. And that's the first time we put the theory into practice. That's so excited! The last but not least, l think that's an unforgettable and significant lessons and hopping more and more students like us can get benefit from this lessons and that would be really nice. Thanks for all teachers and teammates!” (Lena, June 22, 2016). (4) “It was our pleasure to join in the video conference. Thanks for Steve striving for the opportunity for us. We were all glad to spend times with Issam and Jack. The video conference means a good chance for me to know about myself. Before that, I was too passive to express myself in my words. Communicated with teammates and professors, which encourages me to try to speak English and promoted me asking something what I want to know, and the greatest achievement is I have learned how to find the key problem and solve it in my way. In addition, through the video conference, the eager curiosity urges me to focus on something that not around us but make a difference to us. It is also what I should strengthen. That is all.” (Lilly, July 8, 2016). American Journal of Management Vol. 18(2) 2018 101

(5) “After weeks of Chinese and American classroom learning, not only understand knowledge starting a business better, the more I think is the way to how to put them in practice and the attitude. For example, at the beginning, we don’t know which transport companies is better, we search the information in Internet and consult the Customer Service staff. Even we have tried many transport companies. So from the class, I knew how to find the problem and find the way to solve them. The other hand I think important is team work, everyone has other personal work to do, and so how to finish the work efficiently is very important. We have Assign tasks to everyone, and let them finish them in time. Finally, we will let other team member’s double check or Propose different ideas. That is what I learn from the project” (Lizzy, June 28, 2016). (6) “During the borderless course, I learned the details about how to run a new company, just like organizational design and structure, marketing research and so on. I learned something new as well as deepen something that I have known. The pre-class preparation and after-class homework improved my English written skills as well as ability of collecting information and critical thinking. Last but not least, our entrepreneurial practice made me grasp the ability to discover and solve problems” (Patty, July 2, 2016). (7) “From this course, it’s my honor that you can give us some business course every week. I deeply have got hand of organizational structure. I really benefit a lot from these courses. That course about divisional structure was the most impressive for me, which was divided into three parts: product structures, geographic structure and market structure. In product structures, it’s also divided into three parts: product division structure, multidivisional structure and product team structure. According to the advantages and disadvantages of the three parts and the actual situation of our venture project us choice product team structure for the structure. At first, the definition of organizational structure is relatively vague, so the selection of organizational structure is chosen at random. After the professor’s guidance, we found that the right choice of organizational structure for their own business situation is also very important. In addition, communicating with your American students via remote video, It’s obvious, the differences between Chinese and Western culture. Your students are so enthusiastic and humorous, with sharp point of view. That prompted me to work harder to learn English, and they can be more in-depth conversation in future. Have a good time!” (Crystal, June 28, 2016). (8) “What I have learned from this course is that teamwork is very important. In addition, during the time we run our company, we have overcome many difficulties, which have improved our ability to find and solve problems. Furthermore, there is always a gap between theory and practice, so you can’t just think it in your mind and don’t take any action. What’s more, when you put your heart into something and try your best, you will benefit from it” (Vanky, June 26, 2016).

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APPENDIX 2 MORE ITEMS FROM THE Campus Go TEAM ONLINE STORE

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Orchids Paper Company 2014-2015 John K. Masters Cameron University Pamela P. Rogers Stephen F. Austin State University

This case captures Orchids Paper Company at a time of significant change internally and in its environment. It presents opportunities to examine the concept of fit between Strategy, Environment, and Resources to maximize profit potential. The nature of Orchids’ products and industry facilitate the case’s accessibility, since Orchids operates in an industry which is fairly simple to understand (paper manufacturing). The case is intended for use in business policy and strategy classes at the undergraduate or MBA level, but might be used in operations, supply chain, finance, accounting or marketing classes by focusing on specific questions facing the firm. INTRODUCTION When Jeffrey Schoen took over as Chairman and C.E.O. of Orchids Paper in 2013, he brought with him a vision to make the small Oklahoma firm a national player in the sanitary paper products industry. Mr. Schoen had served on the firm’s board of directors since 2007. The firm’s Oklahoma paper mill produced bulk rolls of tissue paper, called parent rolls, which the firm then converted into tissue products at the adjacent converting facility or sold to other converters. Selected data about the firm’s performance over time is presented in Appendix A. Orchids’ paper mill housed three paper machines which produced paper made primarily from recycled pre-consumer solid bleached sulfate paper, or "SBS paper," combined with a lesser amount of virgin kraft grades of fiber. The firm’s paper mill began by pulping recycled fibers and kraft fibers and processing them for use in the firm’s three paper machines. The firm’s pulping operation had the ability to selectively process the firm’s basket of fibers by specific recipe to meet customer and quality specifications. Orchids then converted parent rolls into finished tissue products at the firm’s converting facility. The converting process involved embossing, laminating, and perforating or cutting the parent rolls as they were unrolled; pressing two or more plies together in the case of multiple-ply products; printing designs for certain products and cutting into rolls or stacks. Finished products were then wrapped in polyethylene film; and packed in corrugated boxes or on display-ready pallets for shipment. The firm sold most of its converted products in the “at home” market, focusing its efforts on dollar stores and other discount retailers. The “at-home” tissue market consisted of several quality levels, including a value tier, premium tier and ultra-premium tier. The firm’s core customer base in the “away 104 American Journal of Management Vol. 18(2) 2018

from home” market centered around companies in the janitorial and food service industries. Most of the products sold in the “away from home” market were value tier products. Orchids sold any parent rolls not required by the firm’s converting operation to other converters. The firm’s flexible manufacturing capabilities allowed Orchids to provide its customers with a variety of package sizes and format options, which allowed customers to fit products into particular price categories. The firm’s converting facility, together with low direct labor costs and overhead, combined to produce relatively low overall operating costs. Orchids’ small size and geographic limitations, though, meant that the firm could not cost--effectively fill the needs of customers with operations outside its geographic area. By the beginning of 2015, the firm had taken steps toward becoming a national supplier of tissue products in the value, premium, and ultra-premium grades. In 2013 and 2014, the firm had invested significantly in upgrading its equipment. The new equipment not only expanded the firm’s paper making and converting capacity, it also allowed the firm to produce the premium and ultra-premium tier products that were increasingly in demand from the firm’s customers. In 2014, the firm entered into a deal with Mexican firm Fabrica (“the Supply Agreement”) to supply products to customers in the Southwestern United States. With these investments, Orchids was poised to take the next step. What that next step should be was the question facing Orchids. THE SANITARY PAPER PRODUCTS INDUSTRY Orchids competed primarily in the sanitary paper products industry (NAICS Code 322291, SIC code 2676) but also operated in the Paper Mills Industry (NAICS code 322121, SIC code 2621). The sanitary paper products industry was in the mature stage of the industry life cycle. North American revenue in the industry exceeded $13 billion annually with annual growth forecasts of between 0.5% and 2.0% through 2019. Products within this industry included toilet tissues, facial tissues, napkins, paper towels, feminine hygiene products and disposable diapers. These products, as daily consumables, were not subject to much seasonal or cyclical demand variation. Excluding diapers and feminine hygiene products, the North American tissue market is comprised of toilet tissue (45% share of North American consumption), paper towels (36%), napkins (12%), facial tissue (6%) and other uses (1%). Firms in the industry competed in three tiers of products based on product quality: value tier, premium tier, and ultra-premium tier products. In addition to quality, firms in the industry competed on the basis of price and service. With no industry standard for product sizes, most firms offered a wide range of product specifications to meet specific customer preferences, as illustrated in Table 1. TABLE 1 EXAMPLES OF VARIATION IN PRODUCT CONFIGURATIONS (TOILET TISSUE)

Sheet Size Sheet per Roll Rolls per Case Ply Cases per Truckload

A 4.0X3.75” 1000 96 1 560

B 4.0X3.25” 400 96 2 750

Product Options C D 4.0X3.75” 4.5X3.25” 500 500 96 80 2 2 560 560

E 4.5X3.75” 500 96 2 550

For branded products, the sanitary paper products industry was highly concentrated. A wave of acquisitions in the 1990s left three large companies (Procter & Gamble, Kimberly-Clark, and Georgia Pacific) with nearly 80% of the industry’s market share. These companies boasted well-established brands. Georgia Pacific offered products under the names Brawny, Angel Soft and Quilted Northern, Procter & Gamble’s Charmin brand alone accounted for 30% of the North American market, and American Journal of Management Vol. 18(2) 2018 105

Kimberly-Clarke’s Cottonelle, Kleenex, Scott, Huggies and Kotex brands combined for another 30 to 40% of the North American market. Despite the well-established brands in the industry, private label brands still accounted for significant sales volume in the industry. The private label tissue market was highly fragmented. Entry to the industry was difficult due to the large capital expenditures required to start a paper mill and converting facility and difficulty in obtaining environmental and local permits for parent roll manufacturing facilities. The private label segment of the tissue industry was highly competitive, and discount retail customers were extremely price sensitive. Many of Orchids’ competitors were larger and better known, but competition in the tissue market was limited by geographic location. Shipping costs represented a significant portion of total product costs. The costs to ship a truckload of the product could range from $1.50 per mile to $5.00 per mile depending on fuel prices, wages, and timing. At these prices, the cost to ship a truckload 1,000 miles could add $4.46 per case to the customers’ costs (at $2.50 per mile.) This was a significant addition to a product that cost roughly $70.00 per case. While it was economically feasible for Orchids to ship within an approximate 900-mile radius of the production site, the firm had focused mainly on customers within a 500-mile radius of its facility to maximize the firm’s freight cost advantage over competitors. Competitors operating within a 500-mile radius of the Oklahoma facility included Georgia-Pacific in Muskogee, Oklahoma, Cascades and Pacific Paper in Memphis, Tennessee, Sofidel in Tulsa, Oklahoma and Clearwater Paper Corporation in Oklahoma City. The firm’s competitors also had plants in a 500-mile radius from Fabrica’s Mexicali plant, including Royal Paper and Cascades in Arizona, Clearwater and Sofidel in Nevada and Asia Pulp and Paper in California. Most of Orchids’ competitors had additional facilities in the Southeast and Midwest regions of the United States. Georgia-Pacific had plants in Georgia, Louisiana and Wisconsin; Cascades had plants in Pennsylvania, Wisconsin, and North Carolina; and Clearwater Paper Corporation had plants in Georgia, Idaho, Illinois, Mississippi, New York, North Carolina and Wisconsin These 32 firms had net sales of just over $3 billion annually, or average net sales of $94.7 per firm—similar to Orchids. . Comparative financial data for Orchids and selected similar-sized competitors is included in Appendix B, C and D. Other than the equipment needed to manufacture and convert paper, supplies were relatively simple. The main supplies needed in industry were water, energy, and some form of wood pulp, often mixed with recycled paper. Ink, packaging and other supplies were incidental to the manufacturing process. This industry was the world’s largest customer for recycled material. Customers fell into two broad categories. The “at home” customers included individual purchasers who bought the product through grocery stores, supermarkets, discount stores and other retail outlets. These retail outlets resold the products, but many also offered their own house brands, which they purchased from manufacturers like Orchids. Competition for shelf space with these retailers was fierce. The “away from home” market was comprised of restaurants, hotels, janitorial services and other parties who used the products in the course of their business rather than reselling the product. Converted product sales generally commanded a higher profit margin than parent roll sales. Within the converted product category, sales in the “away from home” market generally commanded a slightly (2%) lower price than sales in the “at home” market. Margins increased as product quality rose from value tier through ultrapremium tier products. THE FIRM In March 2004, Orchids Acquisition Group, Inc. acquired the firm’s present facilities in Pryor, Oklahoma outside Tulsa from a bankrupt predecessor for a price of $21.6 million. They began updating equipment to improve capacity, efficiency, and product breadth. In July 2005, Orchids completed its initial public offering. The $15.0 million net proceeds were used to partially finance the construction and start-up of a new paper machine. In 2009, a second public offering netted $14.8 million dollars, which the firm used partially to finance a major converting expansion project, which cost approximately $27 million. 106 American Journal of Management Vol. 18(2) 2018

In June 2014, Orchids completed a transaction with Fabrica de Papel San Francisco, S.A. de C.V., a privately owned Mexican company that produced parent rolls, paper towels, bathroom tissue and paper napkins. As part of the transaction, Orchids acquired papermaking and converting equipment from Fabrica as well as Fabrica’s U.S. business, which was primarily in the western United States. The transaction included a supply agreement with Fabrica that provided Orchids the option to purchase up to 19,800 tons of product each year, with an additional 7,700 tons annually in each of the first two years of the agreement. The supply agreement with Fabrica increased the firm’s capacity to serve customers in the premium and ultra-premium market tiers primarily in the western United States. Fabrica also agreed to a non-compete in the United States for 20 years or until two years after the termination of the supply agreement, if the supply agreement were terminated prior to 18 years after the transaction. The installation of a new paper machine and a new converting line in the firm’s Oklahoma facility in mid-2015 brought the firm’s manufacturing capacity in line with its paper production capacity, at approximately 74,000 tons. The new paper machine could produce a broad range of paper grades used in manufacturing value and premium tier products at lower costs than the machines it replaced. The new converting line increased manufacturing flexibility and capacity in the firm’s converting operation. Products Orchids manufactured products in the value, premium and ultra-premium market segments. In 2014, 53% of the firm’s converted product case shipments were paper towels, 44% were bathroom tissue and 3% were paper napkins. Of the firm’s converted products sold in 2014, 74% were packaged as private label products made to customers' specifications. The remaining 26% were packaged under the firm’s brands including Colortex®, My Size®, Velvet®, Big Mopper®, Linen Soft®, Soft & Fluffy® and Tackle®, as well as brands acquired under the exclusive U.S. rights to Fabrica’s products under the names Virtue®, Truly Green®, Golden Gate Paper® and Big Quality®. Orchids had never actively promoted the firm’s brand names and the firm’s brand names had no significant market recognition. The firm’s branded products were sold mostly to smaller customers who used them as their in-store labels. In 2014, approximately 67% of the firm’s converted product net sales came from sales to discount retailers. Orchids was among the first to focus on serving customers in the discount retail channel and had benefited from the growth of discount retailers and their increased emphasis on consumable products such as bathroom tissue and paper towels. Discount retailers had been expanding their private label product lines into higher tiers as part of their merchandising strategies. By seeking to provide improved product quality, consistently competitive prices, and superior customer service, Orchids managers hoped to capitalize on these trends. Orchids’ investments in new paper machines and converting equipment expanded its ability to provide higher quality products and broadened the firm’s product offering into the higher tier markets through improved quality of paper, increased packaging configurations, enhanced graphics and improved embossing. In 2011, Orchids began to place premium and ultra-premium tier products with several customers and was able to grow its sales in these tiers. From only 6.8% of the firm’s total production in 2011, premium and ultra-premium sales had risen to 37.9% of total cases shipped in 2013 and 2014. Human Resources At the end of 2014, Orchids employed 313 full time employees of whom 254 were union hourly employees and 59 were non-union salaried employees. Most (289) employees worked in the manufacturing and production functions at the Oklahoma facility, while 24 were engaged in sales, clerical and administrative functions and two in engineering. Hourly employees were represented under collective bargaining agreements with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union Local 5-930 and Local 5-1480 at the mill and converting facility, respectively. In 2015, the firm negotiated a new three-year contract with hourly employees at the mill which expires in February 2018. In 2012, the firm negotiated a new four-year contract with hourly employees in the converting plant that was due to expire on June 25, 2016.

American Journal of Management Vol. 18(2) 2018 107

Marketing Although the firm served customers located throughout the United States, most sales were within approximately 500 miles of its manufacturing facility in Oklahoma and Fabrica’s Mexicali, Mexico facility to maximize the firm’s freight cost advantage. In the areas near the firm’s Oklahoma and Mexicali facilities, Orchids typically had lower freight costs to customers' distribution centers in those regions. The firm’s target region for the Oklahoma facility included Texas, Oklahoma, Kansas, Missouri and Arkansas. The transaction with Fabrica allowed Orchids to add customers in California, Nevada, Arizona, New Mexico and Utah. Growth in the “at-home” tissue market historically had been closely correlated to population growth. The firm’s expanded target region had experienced strong population growth for the past fourteen years relative to the national average, and these trends were expected to continue. None of the firm’s products were sold under supply contracts. Instead, customers ordered products as needed with truckload purchase orders. This practice was common in the industry. The firm’s ability to increase net sales depended significantly on the growth of the firm’s largest customers or on increasing business with other discount retailers, increasing business in the grocery chain market, increasing the share of the premium and ultra-premium tier markets or taking market share from competitors. Orchids depended on four customers for 71% of its converted product sales in 2014. The remaining converted product net sales in 2014 came from other discount retailers, grocery stores, grocery wholesalers and cooperatives, convenience stores, janitorial supply companies and companies in the food service market. Dollar General accounted for approximately 40% of the firm’s net sales in 2014. With annual revenue of $17.5 billion and more than 11,000 stores in 40 states, Dollar General was the largest small-box discount retailer in the United States. Orchids supplied value tier products to over half of Dollar General's eleven distribution centers and supplied premium tier products to less than half of Dollar General's distribution centers. HEB became the firm’s second largest customer in 2014, primarily due to business gained in the Fabrica Transaction, accounting for approximately 12% of net sales. HEB was one of the largest independent food retailers in the United States with stores in more than 150 communities in Texas and Mexico. Orchids supplied value and premium tier products to HEB. Orchids supplied value tier products to all of the HEB distribution centers. Family Dollar accounted for approximately 11% of the firm’s net sales in 2014. Family Dollar had become one of the leading discount retailers in the industry with more than 8,100 stores in 46 states and sales in excess of $10 billion. Family Dollar had ten distribution centers throughout the United States. Orchids supplied value tier products to six of Family Dollar's 13 distribution centers and premium tier products to half of Family Dollar's distribution centers. In early 2015, Dollar Tree announced its acquisition of Family Dollar, but had not announced plans for integrating the two firms. Wal-Mart accounted for approximately 9% of the firm’s net sales in 2014. Wal-Mart was the largest discount retailer in the United States, with U.S. sales of more than $279 billion and more than 4,000 stores in the U.S. Orchids served 25 distribution centers with value tier products in 2015. Orchids’ internal sales team of six employees led by the Vice President of Sales and Marketing directly serviced six customers representing roughly 30% of the firm’s sales in 2014 and supervised the firm’s network of approximately 40 brokers. These brokers had relationships with many of the firm’s customers and Orchids sales staff worked with these brokers to increase business with their accounts. With each of the firm’s key customers, however, the senior management team participated with the independent brokers in all critical customer meetings to solidify direct customer relationships. Most of the firm’s brokers provided marketing support to their retail accounts which included shelf placement of products and in-store merchandising activities to support the firm’s product distribution. Orchids paid commissions to its brokers ranging from 1% to 3% of the sales they generated. These commissions amounted to $1.6 million and $1.9 million in the years ended December 31, 2014 and 2013.

108 American Journal of Management Vol. 18(2) 2018

Distribution The firm’s products were delivered to customers in truckload quantities. For shipments from the Oklahoma location, most of the firm’s customers arranged for transportation of the firm’s products to their distribution centers. In 2014, the customer or their agent picked up approximately 76% of the shipments from Pryor. For the firm’s remaining shipments, Orchids arranged for third-party freight companies to deliver the products. In 2014, Fabrica arranged for third-party freight companies to deliver shipments under the Supply Agreement. Manufacturing Orchids owned a 36-acre property in Pryor, Oklahoma that served as the company’s headquarters and main production facilities. Parent roll production was housed in the firm’s two paper mills. The older paper making facility was a 135,000 square foot building which, as of March 2015, housed two paper machines and related processing equipment. The newer paper making facility was approximately 27,000 square feet with one paper machine and a 23,000 square foot parent roll warehouse. Generally, the Oklahoma paper mill operated 24 hours a day, 362 days a year, with a three-day annual planned maintenance shutdown. The firm’s parent roll production capacity historically exceeded the requirements of the firm’s converting operation and any excess parent rolls were sold into the open market. However, in September of 2014, the firm demolished two older paper machines in order to begin construction of the new paper machine. As a result, Orchids purchased parent rolls from third parties during the fourth quarter of 2014. During 2013, the company purchased parent rolls from third parties due to an anticipated short-term increase in converted product shipments that exceeded the firm’s parent roll manufacturing capacity. In March of 2015, Orchids replaced two of the firm’s older paper machines with a new paper machine, which increased the firm’s tissue paper making capacity from 57,000 tons to 74,000 tons, depending upon the mix of paper grades produced. The new machine was also installed to reduce the firm’s manufacturing costs, improve product quality and increase manufacturing flexibility. Adjacent to the firm’s paper mill, Orchids operated a 300,000 square feet converting facility containing eleven lines of converting equipment. Orchids ran its higher-speed, more flexible converting lines on a 24 hours a day 7 days a week schedule and utilized the other converting lines as needed. The converting facility produced approximately 8.0 million cases, or 51,000 tons, in 2014. The addition of another high-speed, flexible converting line in 2015 further increased the firm’s converting capacity. The capacity of the firm’s eleven converting lines depended on the mix of products produced (e.g. toilet paper versus paper towels versus napkins) and the configuration of products produced (e.g., one roll pack versus multi-roll packs), the size of multi-roll packs (6-count versus 8-count versus 12-count), and sheet counts). Current and expected product configurations and efficiencies reflected an annual converting capacity of approximately 11.5 million cases, or 70,000 tons, of finished tissue products. The firm also owned a 245,000 square foot finished goods warehouse adjacent to the converting facility. The warehouse had the capacity to hold approximately 600,000 cases of finished product. The firm’s normal finished goods inventory level is three to four weeks of sales. In 2013, Orchids began leasing storage space from a third party to meet the warehousing requirement of increasing converted product shipments. Sales projections for 2015 indicated that Orchids would need to continue to rent third party warehousing to meet sales forecasts and maintain customer service levels. The Oklahoma site offered enough land to add additional paper making capacity, but any future expansion of converting capacity would require the firm to acquire additional land and manufacturing space. During 2013, Orchids entered into an option to purchase land adjacent to the converting facility. With the Fabrica transaction, Orchids acquired one paper machine and two converting lines with capacity of approximately 19,800 annual tons. The equipment had a net book value of $6.9 million in 2014. The equipment remained in Mexico operated by Fabrica under the terms of an equipment lease agreement signed as part of the transaction. Fabrica may use these assets to provide parent rolls or converted products under the supply agreement or may use these assets to manufacture products sold to American Journal of Management Vol. 18(2) 2018 109

its customers. Furthermore, in accordance with terms of the transaction, items produced under the supply agreement may be manufactured on Fabrica’s paper making assets, which can produce quality grades ranging from the value tier to the ultra-premium tier, using the latest paper machine technology. Under the supply agreement, Fabrica agreed to supply Orchids with up to 19,800 tons (27,500 tons in the first two years of the agreement) of the firm’s products or parent rolls manufactured at Fabrica’s location in Mexicali, Mexico. Orchids’ volume, in tons, of parent rolls manufactured, sold, purchased and converted for each of the past five years, including products produced in Mexico by Fabrica following the Fabrica Transaction in June 2014 appear in Table 2 and 3. TABLE 2 ORCHIDS’ OUTPUT VOLUME AND PURCHASED QUANTITIES 2014 68,023 (4,922) 492 63,593

Total Manufactured Sold to Third Parties Purchased from Third Parties Converted

2013 57,734 (6,726) 1,155 52,163

2012 56,775 (10,334) 46,441

2011 56,145 (16,410) 39,735

2010 55,765 (20,537) 35,228

TABLE 3 ORCHIDS’ SALES AND TONS SHIPPED

Converted product net sales Parent roll net sales Total net sales

$ $

Converted product tons shipped Parent roll tons shipped Total tons shipped

Years Ended December 31, 2014 2013 2012 (in thousands, except price per ton and tons) 138,382 $ 109,611 $ 90,505 4,342 6,763 10,314 142,724 $ 116,374 $ 100,819 67,870 4,922 72,792

52,592 6,726 59,318

43,661 10,334 53,995

Net sales figures include gross selling price, including freight, less discounts and sales promotions. Procurement Recycled fiber accounted for most of the fiber used to produce the firm’s parent rolls. The pulping process at the paper mill was configured to primarily process a particular class of recycled fiber known as Solid Bleached Sulfate (SBS) paper. Dixie Pulp and Paper, Inc. supplied all of the firm’s recycled fiber needs. Under the terms of the contract, unless either party gave notice at least ninety days prior to the end of the term, the agreement automatically renewed each year for one additional year to ensure the firm’s long-term supply of quality, recycled fiber on reasonable terms. If Orchids were unable to purchase a sufficient quantity of SBS paper or if prices increased, the firm could reconfigure the firm’s pulping plant to process other forms of fiber or could use an alternative type of fiber with the firm’s existing pulping process. Both of these options could result in significant cost increases. To ensure an adequate supply of SBS paper, Orchids maintained approximately a three-week inventory. Orchids combined these high grades of recycled SBS fiber with virgin bleached pulp kraft fiber (e.g., northern bleached softwood, eucalyptus and northern bleached hardwood) to produce the firm’s parent rolls. The mix of fiber used depended on the quality attributes required for the particular grades of product. Orchids purchased the majority of its virgin kraft fiber from a single supplier—Marubeni 110 American Journal of Management Vol. 18(2) 2018

America Corporation. Virgin kraft fibers were used in the production of premium and ultra-premium tier products. Producing for the higher quality premium and ultra-premium tier markets, would require the firm to increase its use of virgin bleached pulp kraft fiber. Table 4 shows Orchids’ cost of sales. Energy also was a key cost factor in the firm’s business operations. Orchids sourced the firm’s electricity from the Grand River Dam Authority. In 2006, in connection with the purchase of a new paper machine, Orchids installed a natural gas fired boiler to supply the firm’s own steam. Orchids used a thirdparty energy supplier to purchase all of the firm’s natural gas requirements through a combination of fixed price contracts, options and spot purchases. In 2009, Orchids entered into a fixed price contract to supply approximately 60% of its natural gas requirements, or 334,000 MMBTUs (British Thermal Units) per year. The agreement was extended to supply approximately 70% of the firm’s natural gas requirements through December 2017 with the price/MMBTUs dropping from $5.57/MMBTUs in 2013 to $4.06/MMBTUs in 2017. Under these contracts, Orchids was required to purchase these minimum amounts regardless of its production requirements. TABLE 4 ORCHIDS’ COST OF SALES

Cost of goods sold Depreciation Cost of sales Gross Profit Gross Profit Margin % Total paper cost per ton consumed

Years Ended December 31, 2014 2013 2012 (in thousands, except gross profit margin % and price per ton) $ 107,049 $ 80,881 $ 70,712 8,936 7,613 7,541 $ 115,985 $ 88,494 $ 78,253 $ $

26,739 $ 18.7% 781 $

27,880 $ 24.0% 746 $

22,566 22.4% 754

Water was another key input to the process and came with its own issues for the firm. Environmental, health and safety laws and regulations by federal, state and local governments imposed strict standards regarding air emissions, water discharges, handling of hazardous materials, disposal of waste, and remediation of environmental contamination. The U.S. Environmental Protection Agency required that certain pulp and paper mills meet stringent air emissions and waste water discharge standards for toxic and hazardous pollutants. These standards were commonly known as the "Cluster Rules." Since Orchids’ products were made primarily from SBS paper, the firm did not make extensive use of chemicals and Orchids’ operations were not subject to the current "Cluster Rules." The manufacturing facilities met all existing federal, state and local environmental regulations and Orchids had all of the environmental permits and approvals necessary for its continued operation, either directly or through the Oklahoma Ordinance Works Authority. The Oklahoma Ordinance Works Authority ("OOWA") which owned the industrial park in which Orchids operated, held the waste water permit that covered Orchids’ facilities and OOWA could determine the level of biological oxygen demand ("BOD") and total suspended solids ("TSS") that Orchids could send to the OOWA following pre-treatment at the Orchids facility. The OOWA reduced Orchids’ BOD and TSS limits in August of 2007 and Orchids invested to improve the capability and increase capacity in the firm’s waste water treatment facility. The improvements allowed the facility to meet the revised permit limits. Production in Mexicali was operated by Fabrica under the Equipment Lease Agreement entered into as part of the Fabrica Transaction. In accordance with the terms of this agreement, Fabrica indemnified Orchids against any claims, actions, suits, losses, damage, demands and liabilities arising directly or indirectly from operations located in Mexico, including environmental matters. American Journal of Management Vol. 18(2) 2018 111

CONCLUSION Orchids had been profitable, but its stock performance had underperformed its selected peer group (Clearwater Paper Products, Wausau Paper, and Cascades) as well as broader measures of paper products investments as shown below. A decade of upgrades and capacity expansion had gone into setting the stage for Orchids to become a national player in the paper products industry. Whether the firm’s goals were appropriate and how to implement any plan for increased profitability remained in question. CASE QUESTIONS 1. What factors in the external environment have the potential to influence profitability in Orchids’ industry (sanitary paper products or paper mills)? 2. Using Porter’s Five Forces Model, analyze the industry environment of Orchids and its competitors. Identify opportunities and threats as well as the key success factors for this industry. 3. Complete an internal analysis of Orchids’ resources. What Strengths and Weaknesses make Orchids different from its competitors? 4. What are the main issues facing Orchids? 5. Develop a Strategic Proposal for the firm by selecting a business level strategy for the firm. Explain how the chosen strategy addresses the firm’s strengths and weaknesses which will allow Orchids to exploit opportunities and neutralize threats. 6. Why has Orchids’ stock price lagged behind the stock performance of its peers? 7. Develop a functional implementation plan that addresses the problems identified. REFERENCES Illinois Community College Board, (2017). TDL Math: Warehouse Packing & Loading Calculation Retrieved from https://www.iccb.org/iccb/wpcontent/pdfs/adulted/tdl_bridge_curriculum/tdl_context_math/TDL2_Warehouse_Packing&Loadi ng.pdf Laseter, T. M. and Weiss, E. N. (2008). “Structural Supply Chain Collaboration Among Grocery Manufacturers” in Supply Chain Analysis: A Handbook on the Interaction of Information, System and Optimization. Tang, C.S., Teo, C.-P., and Wei, K.-K., eds. Springer, New York, NY pp. 35-36. Orchids Paper Company (2014). Orchids Paper Company 10-K filing for the year ended Dec. 31, 2013 Retrieved from https://ir.orchidspaper.com/annual-reports Orchids Paper Company (2015). Orchids Paper Company 10-K filing for the year ended Dec. 31, 2014 Retrieved from https://ir.orchidspaper.com/annual-reports Orchids Paper Company (2016). Orchids Paper Company https://orchidspaper.com/ Encyclopedia of American Industries (2016) SIC 2676 Sanitary Paper Products - Description, Market Prospects, Industry History. Retrieved from http://www.referenceforbusiness.com/industries/Paper-Allied/Sanitary-Paper-Products.html RMA Annual Statement Studies (2017). The Risk Management Association, Philadelphia PA. Retrieved from https://rmau.org/industry/detail?indCode=322291&leftnavmenuid=3 Sellars Company (2017). Retrieved from http://www.sellarscompany.com/2-ply-bath-tissue-500ct.html

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ADDITIONAL READINGS Costin, H. (1998). Readings in Strategy and Strategic Planning. Fort Worth, TX: The Dryden Press. Deephouse, D. (1999). "To Be Different, or to Be the Same? It's a Question (and Theory) of Strategic Balance." Strategic Management Journal 20: 147–166. Dyer, J.H., P. Kale, and H. Singh. (2004). "When to Ally and When to Acquire." Harvard Business Review 82: 108–116. Galbraith, J., and R. Kazanjian. (1986). Strategy Implementation: Structure, Systems and Process. 2nd ed. St. Paul, MN: West. Hitt, M.A., Ireland, R.D, and Hoskisson, R.E. (2005). Strategic Management: Competitiveness and Globalization. Thomson South-Western. Hofer, C.W. and Schende, D. (1978). Strategy Formulation: Analytical Concepts. St. Paul, MN: West. Hunger, J.D. and Wheelen, T.L. (1997). Essentials of Strategic Management. Reading, MA: Addison Wesley. Kaplan, R.S. and Norton, D.P. (1996). The Balanced Scorecard: Translating Strategy Into Action. Boston: The Harvard Business School Press. Kotter, J. and Schlesinger, L. (1979). "Choosing Strategies for Change." Harvard Business Review, March-April, 106–114. Kroll, M., Wright, P., and Heiens, R. (1999). "The Contribution of Product Quality to Competitive Advantage: Impacts on Systematic Variance and Unexplained Variance in Returns." Strategic Management Journal 20: 375–384. Morgan, B.S. and Schiemann, W.A. (1999). "Measuring People and Performance: Closing the Gaps." Quality Progress 1: 47–53. Porter, M.E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press. Porter, M.E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Companies. New York: Free Press. Schiemann, W.A. and Lingle, J.H. (1999). Bullseye: Hitting Your Strategic Targets Through Measurement. Boston: The Free Press. Stahl, J.M. and Grigsby, D.W. (1992). Strategic Management for Decision Making. Massachusetts: PWSKENT Publishing. Wheelen, T.L. and Hunger, D.J. (1998). Strategic Management and Business Policy: Entering 21st Century Global Society. Reading, MA: Addison Wesley.

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APPENDIX A ORCHIDS PERFORMANCE OVER TIME Year Ended December 31, 2014 Converted Product Net Sales Parent Roll Net Sales Net Sales Cost of Sales Gross Profit Selling, General and Administrative Expenses Intangibles Amortization Operating Income Interest Expense Other (Income) Expense, net Income Before Income Taxes Provision for Income Taxes Net Income

$

138,382 4,342 142,724 115,985 26,739

Year Ended Year Ended Year Ended Year Ended December December December December 31, 31, 31, 31, 2013 2012 2011 2010 (in thousands, except per share and Tons) $ 109,611 $ 90,505 $ 81,949 $ 74,078 6,763 10,314 15,894 18,426 116,374 100,819 97,843 92,504 88,494 78,253 81,886 76,752 27,880 22,566 15,957 15,752

$

11,675 753 14,311 271 181 13,859 4,394 9,465 $

9,471 18,409 371 (173) 18,211 4,892 13,319 $

8,456 14,110 407 302 13,401 4,144 9,257 $

6,810 9,147 647 (42) 8,542 2,344 6,198 $

6,618 9,134 934 (65) 8,265 2,351 5,914

Net income per common share Diluted $ Cash dividends declared per share $

1.11 $ 1.40 $

1.67 $ 1.35 $

1.18 $ 0.85 $

0.80 $ 0.50 $

0.76 -

Operating Data Converted product tons shipped Parent roll tons shipped Total Tons Shipped

67,870 4,922 72,792

Cash Flow Data Cash Flow Provided by (Used in): Operating Activities $ Investing Activities $ Financing Activities $

20,152 $ (37,434) $ 11,098 $

Working Capital Net Property, Plant and Equipment Total Assets Long-Term Debt, net of current portion Total Stockholders' Equity

$ $ $ $ $

6,488 119,720 170,739 33,662 100,513

52,592 6,726 59,318

43,661 10,334 53,995

20,796 $ (12,179) $ (7,146) $

$ $ $ $ $

22,440 95,745 127,092 13,927 84,849

39,104 16,410 55,514

17,451 $ (9,788) $ (6,226) $

$ $ $ $ $

20,454 91,188 119,358 15,079 77,178

36,126 20,537 56,663

15,655 $ 1,969 $ (13,469) $

$ $ $ $ $

15,342 92,285 114,968 16,231 72,649

12,648 (17,795) 4,057

$ $ $ $ $

10,429 93,805 122,571 16,615 69,596

Notes: Net sales figures include gross selling price, including freight, less discounts and sales promotions. 2. Cost of sales includes the cost of internally produced paper, raw materials, direct labor and benefits, freight on products shipped to customers, insurance, repairs and maintenance, energy, 1.

114 American Journal of Management Vol. 18(2) 2018

utilities, depreciation and the cost of converted products purchased under the Supply Agreement with Fabrica. 3. Selling, general and administrative (SG&A) expenses include salaries, commissions to brokers and other miscellaneous expenses. APPENDIX B COMPARATIVE FINANCIAL INFORMATION Annual Income Statement (in 000's) Orchids Paper Period Ending: 12/31/2014

12/31/2013

12/31/2012

Total Revenue

$142,724

$116,374

$100,819

Cost of Revenue

$115,985

$88,494

$78,253

Gross Profit

$26,739

$27,880

$22,566

Sales, General and Admin.

$11,675

$9,471

$8,456

$0

$0

$0

$753

$0

$0

Operating Income

$14,311

$18,409

$14,110

Add'l income/expense items

($181)

$173

($302)

Earnings Before Interest and Tax

$14,130

$18,582

$13,808

$271

$371

$407

Earnings Before Tax

$13,859

$18,211

$13,401

Income Tax

$4,394

$4,892

$4,144

Net Income-Cont. Operations

$9,465

$13,319

$9,257

Net Income

$9,465

$13,319

$9,257

Non-Recurring Items Other Operating Items

Interest Expense

Annual Income Statement (in 000's) Clearwater Paper Period Ending: 12/31/2014

12/31/2013

12/31/2012

Total Revenue

$1,967,139

$1,889,830

$1,874,304

Cost of Revenue

$1,708,840

$1,671,371

$1,607,872

Gross Profit

$258,299

$218,459

$266,432

Sales, General and Admin.

$130,102

$119,131

$121,045

$8,227

$0

$0

$0

$0

$0

$79,811

$99,328

$145,387

($64,579)

($17,058)

$0

Earnings Before Interest and Tax

$55,391

$82,270

$145,387

Interest Expense

$39,150

$44,036

$33,796

Earnings Before Tax

$16,241

$38,234

$111,591

Income Tax

$18,556

($68,721)

$47,460

Net Income-Cont. Operations

($2,315)

$106,955

$64,131

Net Income

($2,315)

$106,955

$64,131

Non-Recurring Items Other Operating Items Operating Income Add'l income/expense items

American Journal of Management Vol. 18(2) 2018 115

APPENDIX B (continued) COMPARATIVE FINANCIAL INFORMATION Annual Balance Sheet (in 000's) Orchids Paper Period Ending:

12/31/2014 12/31/2013 12/31/2012

Current Assets $1,021

$7,205

$5,734

$0

$5,035

$5,027

Net Receivables

$11,443

$7,137

$6,406

Inventory

$9,650

$10,921

$10,275

Other Current Assets

$2,184

$1,009

$681

Total Current Assets

$24,298

$31,307

$28,123

$1,734

$0

$0

$119,720

$95,745

$91,188

Goodwill

$7,560

$0

$0

Intangible Assets

$17,237

$0

$0

$190

$40

$47

$0

$0

$0

$170,739

$127,092

$119,358

Accounts Payable

$15,138

$7,715

$6,517

Short-Term Debt / Current Portion of Long-Term Debt

$2,700

$1,152

$1,152

Other Current Liabilities

$1,706

$0

$0

Total Current Liabilities

$19,544

$8,867

$7,669

Long-Term Debt

$33,662

$13,927

$15,079

Other Liabilities

$0

$0

$0

Deferred Liability Charges

$17,020

$19,449

$19,432

Total Liabilities

$70,226

$42,243

$42,180

Common Stocks

$9

$8

$8

Capital Surplus

$64,275

$46,298

$41,238

Retained Earnings

$36,229

$38,543

$35,932

Treasury Stock

$0

$0

$0

Other Equity

$0

$0

$0

Total Equity

$100,513

$84,849

$77,178

Total Liabilities & Equity

$170,739

$127,092

$119,358

Cash and Cash Equivalents Short-Term Investments

Long-Term Assets Long-Term Investments Fixed Assets

Other Assets Deferred Asset Charges Total Assets Current Liabilities

Stockholders’ Equity

116 American Journal of Management Vol. 18(2) 2018

APPENDIX B (continued) COMPARATIVE FINANCIAL INFORMATION Annual Balance Sheet (in 000's) Clearwater Paper Period Ending:

12/31/2014 12/31/2013 12/31/2012

Current Assets Cash and Cash Equivalents

$28,831

$25,175

$12,579

Short-Term Investments

$50,000

$70,000

$20,000

Net Receivables

$156,929

$206,915

$192,107

Inventory

$286,626

$267,788

$231,466

Other Current Assets

$3,424

$5,523

$12,314

Total Current Assets

$525,810

$575,401

$468,466

$0

$0

$0

Fixed Assets

$810,987

$884,698

$877,377

Goodwill

$209,087

$229,533

$229,533

Intangible Assets

$24,956

$40,778

$47,753

Other Assets

$8,309

$14,415

$10,327

$0

$0

$0

Long-Term Assets Long-Term Investments

Deferred Asset Charges

$1,579,149 $1,744,825 $1,633,456

Total Assets Current Liabilities

$223,741

$199,426

$174,733

Short-Term Debt / Current Portion of Long-Term Debt

$0

$0

$0

Other Current Liabilities

$0

$0

$0

Total Current Liabilities

$223,741

$199,426

$174,733

Long-Term Debt

$568,221

$650,000

$523,933

Other Liabilities

$178,016

$165,407

$333,772

Deferred Liability Charges

$111,634

$124,898

$60,124

Accounts Payable

$1,081,612 $1,139,731 $1,092,562

Total Liabilities Stockholders’ Equity Common Stocks

$2

$2

$2

Capital Surplus

$334,074

$326,546

$326,901

Retained Earnings

$464,324

$466,639

$359,684

Treasury Stock

($230,000) ($130,000) ($30,000)

Other Equity

($70,863)

($58,093)

($115,693)

Total Equity

$497,537

$605,094

$540,894

Total Liabilities & Equity

$1,579,149 $1,744,825 $1,633,456

American Journal of Management Vol. 18(2) 2018 117

APPENDIX C COMPARISON OF ORCHIDS’ FINANCIAL RATIOS AND PRODUCTION FIGURES WITH SELECTED INDUSTRY DATA Comparative Financial Ratios and Production Figures Available in the Case RATIOS

Orchids, 2014

Clearwater, 2014

Industry Averages

COGS / NS

.813

.868

.79

Gross Profit / NS

.187

.131

.21

Operating Expenses / NS

.092

.070

.156

Operating Profit / NS

.100

.041

.053

0

0

.014

Interest Expense / NS

.003

.018

Profit Before Taxes / NS

.097

.008

.039

1.24

2.35

1.6

.75

2.22

.9

Sales / Receivables

12.47

12.53

9.6

Sales / Inventory

12.47

6.85

Cost of Sales / Inventory

12.01

5.98

6.7

EBIT / Interest

52.14

1.41

5.6

Fixed / Worth

1.19

1.62

1.5

Debt / Worth

.336

1.14

2.7

Sales / Net Fixed Assets

1.20

2.42

4.9

Sales / Total Assets

0.83

1.25

1.8

Expense Ratios

All Other Expenses (net) / NS

Liquidity Ratios Current = CA / CL Quick = (CA-Inventory) / CL Activity Ratios

Production Figures 70,000 tons = 11.5 million Cases = 164 Cases/ton 51,000 tons = 8.0 million Cases = 156 Cases/ton Converted Price (produced) = $138 million/63,593 tons = $2170.05 per ton Converted Price (shipped) = $138 million/67,870 tons = $2038.93 per ton Parent Roll Price = $4.34 million/4,922 tons = $882.16 per ton Price per Converted Case = $2,100/160 cases per ton = $13.125 per case Price per Truckload = $13.125 per case X 560 cases per truckload = $7,350.00 per truckload Shipping cost per case (1,000 miles) at $2.50 per mile = $2,500/560 cases per truckload = $4.46 per case

118 American Journal of Management Vol. 18(2) 2018

APPENDIX D COMPARISON OF ORCHIDS’ STOCK PRICE WITH SELECTED PEERS

12/31/2009 12/31/2010 Orchids Paper Products Company Regional Peer Group (average) S & P Composite 600 Paper Products (average)

December December December December 31, 2011 31, 2012 31, 2013 31, 2014

$100.00

$61.13

$90.91

$101.00

$164.04

$145.40

$100.00

$106.40

$97.85

$115.12

$137.29

$150.01

$100.00

$116.73

$130.90

$143.43

$227.62

$236.18

American Journal of Management Vol. 18(2) 2018 119

TEACHING NOTES Case Synopsis Orchids Paper Company (Orchids) is a small U.S. manufacturer of tissue products, primarily toilet paper and paper towels. They have longstanding relationships with several discount retailers both for the firm’s own brands and as a maker of house brands for those firms. The firm owns a single production facility in Pryor, Oklahoma (near Tulsa) and has recently completed a supplier agreement with a Mexican competitor. At the time of the case, the firm has been considering expansion. Whether this would be a wise choice and what to do next are possible directions to pursue with the case. Teaching Objectives The case captures a firm at a time of significant change internally and in its environment. The case is intended for use in business policy and strategy classes at the undergraduate or MBA level, but might be used in operations, supply chain, finance, accounting or marketing classes by focusing on specific questions facing the firm. From a strategy perspective, it presents opportunities for students to examine the concept of fit between strategy, environment, and resources to maximize profit potential in an actual firm. The nature of Orchids’ products and its industry facilitate the case’s accessibility to students, since Orchids operates in an industry which is fairly simple to understand (paper manufacturing). Students should be able to analyze the firm and its environment, identify the issues facing the firm, and develop a strategy for addressing those issues. For operations and supply chain management, students should analyze operations with regard to process improvements, new product development opportunities, production expansion (facility location decisions), logistics/transportation and procurement. With regard to marketing, students can focus on issues related to merchandising, pricing, promotion, customer retention and new customer acquisition. They could also consider whether the firm should consider developing their brands to compete on a national level. For finance and accounting, the case includes financial data for a full financial ratio analysis of the firm, which can include analyzing financial data of primary competitors. It could be used in an investments course to consider whether the firm is a viable addition to an investment portfolio. The case was envisioned originally to serve as an end-of-semester integrative project, but can be segmented into smaller assignments through the use of questions to focus students’ analyses. Students might begin with an analysis of the industry (the five forces) or with a SWOT analysis, either alone or as a prelude to selecting and implementing a strategy for the firm. Identifying the issues facing Orchids and the alternatives available for dealing with those issues could provide for interesting discussion. Questions for Discussion 1. What factors in the external environment have the potential to influence profitability in Orchids’ industry (sanitary paper products or paper mills)? Political/Legal – Union contracts with manufacturing workers are a potential challenge for the industry. Poor negotiations with labor can shut down a facility for an undetermined time. Environmental regulations can have a significant impact on the industry. The EPA’s “Cluster Rules” refer to the air emissions and waste water discharge standards that pulp and paper mills must meet. Additional state and local environmental regulations can also affect organizations in this industry with regard to handling and disposal of waste, handling of hazardous materials, and remediation of environmental contamination. Water shortages during droughts could also affect the industry if restrictions for water volume are imposed. Firms could be required to implement significant water recycling programs if they aren’t proactive in this area. The industry does have a high rate of recycling with regard to fibers, however, use of renewable sources may become increasingly important with shifts in consumer expectations. Economic – The cost of some inputs, in particular energy and water, can vary significantly based on worldwide supply and demand. Changes in financial regulations has increased the cost of financing for many firms making interest rates potentially more volatile especially on revolving lines of credit. 120 American Journal of Management Vol. 18(2) 2018

Consumers grew more price-sensitive after the 2008-2009 financial crisis. This sensitivity caused a boom in sales for dollar stores and other discount retailers as middle class customers shifted their buying habits. Some consumers have returned to products purchased before the crisis, however, many have placed more emphasis on value and price than previously. The discounters, in turn, added products which appealed more to these new customers. Economic improvements leading to significant increases in wages could have the effect of some consumers choosing national brands over private label options. Since facilities generally operate 24/7, energy (electricity and/or natural gas) is another significant factor of production directly impacting cost of goods sold. Social/Demographic – Shifts in population can affect the industry due to high shipping costs and low margins. More consumers are becoming aware of environmental impacts of manufacturing and some are willing to pay more for a recycled product or support firms that are environmentally friendly in their operations (e.g. those not shipping products from one coast to the other). Consumer preferences for convenience of purchase, combined with the acceptability of discounters to middle class consumers meant that securing shelf space in established discount retailers was increasingly attractive to manufacturers. Technology – Production automation technology is important to improve output capacity and capability. The case highlights several instances in which Orchids lowered costs while increasing capacity and flexibility in its paper mill and converting facility when they acquired new equipment. For example, the new paper machine replaced two older machines and the new converting lines are lower cost. 2. Using Porter’s Five Forces Model, analyze the industry environment of Orchids and its competitors. Identify opportunities and threats as well as the key success factors for this industry. Orchids competes heavily with other private labels within specific geographic regions. Orchids’ geographic competitors in the private label tissue market are: Pacific Paper, Cascades, Sofidel and Clearwater Paper Corporation. Firms such as Procter & Gamble, Kimberly-Clark, and Georgia Pacific are competitors in the ultra-premium market tier. Students should be reminded that this analysis is of the Sanitary Paper Products industry not the firm (Orchids). It is a good idea to tell students to not mention the firm once the industry has been identified (e.g. “Sanitary Paper Products”). This may help students focus less on the firm and think about each of the Five Forces with regard to the industry as a whole. Barriers to Entry (Threat of New Entrants) – Students should consider what barriers exist in the industry. Questions to consider include: How much would it cost to open/acquire a new manufacturing facility? Are there cost advantages to being large or small? Does experience help you to continually lower costs or improve performance? High barriers to entry result in a low threat of new entrants. Barriers to entry primarily relate to the cost of production facilities and equipment. Economies of scale favor larger firms with a cost advantage and the industry is dominated by a few established national brands. It is easier for these national brands to secure distribution and retail shelf space versus unknown brands. Another barrier is the high cost to ship low margin products over significant distances. Lastly, government regulations regarding paper mills and paper product manufacturing are significant barriers to entry. Bargaining Power of Buyers – Bargaining power of buyers is somewhat tricky in this industry. Students often focus on the individual end consumer having low bargaining power to affect industry offerings or prices. In this case, however, the customers are the distributors/retailers who purchase the products for resale. High bargaining power of buyers is due to low switching costs for customers (retailers can switch to another private label) and low product differentiation among private label brands. Shelf space is difficult to secure for relatively bulky items that have low margins. Discount retailers are highly price sensitive and are not loyal to a particular brand and can switch to another manufacturer for a private label. The private label tissue market is highly fragmented with no single large competitor. Bargaining Power of Suppliers – Bargaining power of suppliers refers to those entities who provide the industry’s inputs (recycled fibers, virgin kraft fibers, energy and water).

American Journal of Management Vol. 18(2) 2018 121

High bargaining power of suppliers is due to a limited number of suppliers of the Solid Bleached Sulfate (SBS) recycled fibers and virgin kraft fibers. Recycled fibers are generally lower cost than first generation fibers, however, white/light colored fibers are needed for the tissue industry. Additionally, there is often only one supplier for particular categories of energy (electricity or natural gas) and water (local municipality). Threat of Substitutes – There is a low threat of substitute products from other industries. Although customers do not incur a significant cost to switch to a substitute, it is unlikely that other options such as fabric or wet wipes would become more popular due to lower convenience and/or higher cost of those products. Competitive Rivalry: As a result of the above forces, competitive rivalry is high in the sanitary paper products industry. The sanitary paper products industry is in the mature stage of growth (2% to 3%). Average profit in the industry is 6.4% of revenue. This is primarily due to the nature of the product itself and the lack of product differentiation among private label brands. Due to slow industry growth, the primary way to increase sales (market share) is to steal customers from competitors. Firms have high fixed costs due to the automated nature of the paper manufacturing process and it is not economically feasible to add capacity in small increments. The equipment is highly specialized and not suitable for other purposes. Products are simple for consumers to understand and compare among competitors. Key Success Factors – Key success factors are ‘problems’ that all competitors in the industry must solve for long-term competitiveness, profitability and sustainability. For the sanitary paper products industry these include: low switching costs for customers, high fixed cost of production facilities, low product differentiation, and slow industry growth rate. From the macroenvironment, a key success factor would be the changes in the discount retail industry. Which of these key success factors represents an opportunity and which represents a threat? 3. Complete an internal analysis of Orchids’ resources. What Strengths and Weaknesses make Orchids different from its competitors? The case should allow students to analyze the firm’s strengths and weaknesses. It may help to ask students “What resources does Orchids have to work with?” Students could complete a comparison of financial ratios for Orchids and key competitors (using the DuPont model or another tool). A comparison of financial ratios for Orchids and key competitors supports many of the strengths and weaknesses to which the case alludes, but also may provide additional insights into the firm. Appendix A presents numerical information that could be gleaned from the case. The case highlights Orchids’ capabilities with respect to both strengths and weaknesses. Strengths – Orchids has a number of strengths that are valuable within this competitive industry. Orchids: 1. Remained focused on providing tissue products to a limited 500-mile range of its facilities. This potentially allows for a higher margin (lower cost per unit) than competitors that ship more than 500 miles from their facilities. 2. Maintained a good relationship with labor and seems able to successfully negotiate labor contracts with little to no disruption of operations. 3. Updated the Pryor, Oklahoma facility to better match capacity between the paper mills and converting lines. 4. Negotiated an exclusive supplier deal with Dixie Paper Products to ensure a source of supply for recycled fibers. The majority of the kraft fibers are purchased from Marubeni America Corporation. Current processes can be used for other types of fiber if necessary and the facility could be reconfigured to process other fiber types. 5. Had low overhead costs (SGA Expenses) which allows the firm to be highly competitive within their geographic region.

122 American Journal of Management Vol. 18(2) 2018

6. Sustained a strong reputation in the private label sector of the industry as evidenced by its long relationship with Discount Retailers (Dollar General, HEB, Family Dollar and Walmart) 7. Minimized use of debt for financing 8. Was able to customize products to create “store brands” 9. The new supply agreement with Fabrica has given Orchids the ability to access West Coast markets that might be difficult or costly to enter on its own. Weaknesses – Orchids has some weaknesses that could make it vulnerable in this industry. Orchids: 1. The firm is operating near its maximum production capacity. Any increase in sales would require investment in additional capacity. 2. The firm has little experience in marketing to end-users (e.g., no history of advertising, a marketing staff of six people). While its six sales people have developed relationships with discount retailers and brokers, they would be hard pressed to sell to a larger audience. 3. Procured all recycled fibers from a single supplier and the majority of its virgin kraft fibers from a single supplier. While this can be an advantage in some ways, it may become a challenge if the agreement is not renewed or if either Dixie or Marubeni America were unable to supply enough of the raw materials. 4. Owned only two production facilities and the 500-mile distribution limit are constraints to the growth of the firm. 5. Had a limited ability to expand the firm nationally due to narrow focus on the discount retail market. 6. Relied on a small number of Discount Retailers (Dollar General, HEB, Family Dollar and Walmart) which accounted for 71% of sales. Although it occurred after the date of the case, Orchids did lose Walmart in 2015 who had accounted for 10% of sales the previous year. 7. Lacked brand awareness 8. Procured water from one source at Pryor facility 9. Purchased natural gas through third-party energy supplier who utilizes a combination of fixed price contracts, options and spot purchases; Orchids was required to purchase minimum amounts regardless of production output; resulted in the firm paying higher rates 4. What are the main issues facing Orchids? The case should allow students to identify a number of issues facing the firm. Probably the main issue facing Orchids is that the firm’s small geographic footprint has left them unable to serve large customers fully. As noted in the case, the firm supplied its products to less than half the distribution centers for three of its four major customers. The exception, HEB, was a regional firm itself. The high cost of shipping a low-price, high-volume product is a key to this issue. The core issue above also ties into the firm’s limited production capacity. Some of the issues listed below also would be incorporated into the issue above, which Orchids should address to remain competitive: 1. Small relative market share 2. Limited breadth and depth of customers 3. Limited paper making capacity (parent rolls) in Pryor Other issues students might identify include: 4. Limited number of suppliers 5. Inability to easily switch raw materials (equipment designed for SBS) and currently don’t have to comply with “Cluster Rules” 6. Contracted natural gas price was significantly higher than market price

American Journal of Management Vol. 18(2) 2018 123

5. Develop a Strategic Proposal for the firm by selecting a business level strategy for the firm. Explain how the chosen strategy addresses the firm’s strengths and weaknesses which will allow Orchids to exploit opportunities and neutralize threats. The strategic proposal should start with selecting one of Porter’s (1980) generic business strategies (low cost, differentiation, focused low cost, focused differentiation, or low cost/differentiation). Two strategies are likely the easiest to justify using Orchids’ existing strengths and weaknesses – low cost or focused low cost. Orchids’ strengths are its low overhead, labor and input costs and its flexible manufacturing equipment which allows the firm to create house brands to customers’ specifications. These specifications often allow the product to be designed to meet a desired price point (e.g., 3.25 X 4.25” as opposed to 3.75 X 4.5” or single- versus two-ply toilet paper). What the firm does NOT have are accepted branding or significant marketing capabilities—both of which would be useful were the firm to pursue a differentiation strategy. The firm’s low cost and flexible manufacturing capabilities also fit Orchids’ environment—the discount retail industry is growing and attracting more middle-class consumers and those firms are seeking higher-end (premium and ultra-premium) products at reasonable prices to fit the preferences of those new customers. The competitive premise identifies the value added by either product/service attributes for which customers will pay extra (differentiation or focused differentiation) or the source of the firm’s ability to create the product/service at a lower cost (low cost or focused low cost) or both to some extent (low cost/differentiation). This part of the proposal will depend upon what strategy is selected. The competitive premise should ‘fit’ the strategy. For example, if a focused differentiation strategy is selected, then the proposal should revolve around how to penetrate a niche market and charge a premium price. For that strategy, students could recommend that the firm focus more on providing customizable house brands potentially at the premium and ultra-premium tiers. This is probably not a good strategy as it will put them in direct competition for shelf space with the large national brands. For a low cost or focused low cost strategy, the firm would need to find a way to expand its market share while maintaining lowest cost. We use this discussion to make points about profitability using the basic profit equation: Total Revenue (Price X Volume) -Total Cost (Fixed Costs + Variable Costs X Volume) Profit A firm can therefore improve profitability by increasing price or volume (in differentiation-based strategies) or by reducing total costs (cost-based strategies like those recommended for Orchids). Those cost reductions can come from process innovation, achieving volume buying discounts or economies of scale, cutting fixed costs or by spreading those fixed costs over a larger volume of sales. The key sales pitch for Orchids centers around low costs particularly within a 500 mile radius of its manufacturing facilities. Orchids’ price per case is currently about $13.125. To this, the customer would have to add the cost of shipping the product to their own distribution facilities. This shipping adds roughly $2.23 per case to their costs within the 500 mile radius, but that cost would double if the product were shipped 1,000 miles. This shipping adds nearly 14.5% to the customers’ total cost of acquiring the product. The product/market focus identifies which products/services the firm should sell (product mix) as well as to whom the firm should sell the products/services (specific demographics of the target market). With the low cost or focused low cost strategies, students should recommend several courses of action: 1. that the firm continues to focus on selling to Discount Retailers that are within the geographic reach (500 mile radius) of the firm’s manufacturing facilities, 2. seek out new customers within the 500 mile reach of the existing facilities (requiring the firm to expand production capacity), 3. Add the ability to serve new distribution centers owned by existing customers (Walmart, Dollar General, Family Dollar) 4. Add new customers outside the 500 mile reach (which would add approximately 14.5% to customer costs due to shipping.)

124 American Journal of Management Vol. 18(2) 2018

Generally, it would be expected that the firm continue to offer the existing product lines in the three different tiers. The key change here would be adding one or more production facilities to better serve the firm’s existing and potential customers outside its current geographic region. Note that any increase in sales would require additional production capacity, so a key question would be where to put the additional capacity. A good discussion point might be which factors should influence the choice of new plant location: Supplier access, customer access, transportation access, cost of land and labor, environmental issues or all of the above. Which factors would be most important? (Note: Orchids did open a new facility in Barnwell, S.C. in 2016 and a Tennessee facility in 2017.) The instructor’s manual Appendix B contains information regarding current customer access (distribution centers), potential new customer access (distribution centers), potential new production facility location, supplier access for new production facilities, and rail transportation options if rail versus truck is considered to expand the profitable distribution radius beyond 500 miles. Students can complete a cost comparison that includes: the cost of adding rail access to each facility; the use of shipping containers (intermodal); or possibly partnerships with logistics firms to reduce costs. The business system focus identifies the parts of the value chain (inbound/outbound logistics, operations, marketing and sales, service, human resource management, technological development, procurement, and firm infrastructure) which are of primary importance in implementing the strategy successfully. Generally, low cost and focused low cost strategies rely heavily on the firm’s operations, logistics, and procurement functions to maintain or reduce costs through process improvements or reduction of input costs. Goals for the firm should be specific, measurable, and timely while also connected to the successful implementation of the strategy (S.M.A.R.T.--specific, measured, attainable, relevant to the strategy, timed). These should relate directly to the suggested plan to improve the problems identified and the recommended implementation plan. 1. Open a new Production Facility in the Southeastern U.S. (Kentucky? West Virginia? Tennessee? Georgia?) within two years. This facility would require a paper mill and one or more converting lines. 2. Increase Revenues to $ 3. Add the remaining distributions centers for Family Dollar, Dollar General, Dollar Tree, and Walmart within 4 years. 4. Pursue non-customers such as Costco who fit Orchids’ customer profile. The strategic proposal should ‘fit’ the firm and its situation. Students often want to create a strategy that is ‘cool’ but inappropriate to the firm, its industry, or both. This firm is a good example of this phenomenon. While students may be predisposed to pursue some form of differentiation strategy, such a choice would play away from Orchids’ strengths and toward its weaknesses. Students can be asked to create realistic financial projections (3-5 years) including the costs and benefits of the proposed plan. 6. Why has Orchids’ stock price lagged behind the stock performance of its peers? The problem is not profitability—Orchids had outperformed most of its peers by most measures of profitability (Gross profit, Operating Profit, Earnings before interest and taxes, Earnings before taxes, Return on Sales). Three factors may be contributing to the stock’s performance. First, the firm’s reliance on a limited number of product, buyers and suppliers makes this a riskier investment than other firms like Georgia-Pacific or Clearwater. Second, the firm’s products are not well branded, meaning many investors would not know about the firm. Finally, the firm’s limited scope of operations means its growth potential is limited. Would the strategies suggested above have any impact on these factors? 7. Develop a functional implementation plan that addresses the problems identified. As a major semester project, students should develop implementation plans in which they explain specifically the role of each function with regard to implementation of the strategic proposal. For American Journal of Management Vol. 18(2) 2018 125

example, if the plan calls for building a new facility, the students should address the role of operations, logistics, procurement, finance, and human resources with regard to opening a new facility. In this case Sales and Marketing may not play a role in the facility expansion, however, they would responsible for expanding sales into the new territory through existing relationships or by developing new customers. IM Appendix A: Comparative Financial Ratios and Production Figures Available in the Case RATIOS Orchids, 2014 Clearwater, 2014 Industry Averages Expense Ratios COGS / NS

.813

.868

.79

Gross Profit / NS

.187

.131

.21

Operating Expenses / NS

.092

.070

.156

Operating Profit / NS

.100

.041

.053

0

0

.014

Interest Expense / NS

.003

.018

Profit Before Taxes / NS

.097

.008

.039

1.24

2.35

1.6

.75

2.22

.9

Sales / Receivables

12.47

12.53

9.6

Sales / Inventory

12.47

6.85

Cost of Sales / Inventory

12.01

5.98

6.7

EBIT / Interest

52.14

1.41

5.6

Fixed / Worth

1.19

1.62

1.5

Debt / Worth

.336

1.14

2.7

Sales / Net Fixed Assets

1.20

2.42

4.9

Sales / Total Assets

0.83

1.25

1.8

All Other Expenses (net) / NS

Liquidity Ratios Current = CA / CL Quick = (CA-Inventory) / CL Activity Ratios

Production Figures 70,000 tons = 11.5 million Cases = 164 Cases/ton 51,000 tons = 8.0 million Cases = 156 Cases/ton Converted Price (produced) = $138 million/63,593 tons = $2170.05 per ton Converted Price (shipped) = $138 million/67,870 tons = $2038.93 per ton Parent Roll Price = $4.34 million/4,922 tons = $882.16 per ton Price per Converted Case = $2,100/160 cases per ton = $13.125 per case Price per Truckload = $13.125 per case X 560 cases per truckload = $7,350.00 per truckload Shipping cost per case (1,000 miles) at $2.50 per mile = $2,500/560 cases per truckload = $4.46 per case 126 American Journal of Management Vol. 18(2) 2018

IM Appendix B: Logistics and Transportation-related information CURRENT Customer Access H.E.B. Distribution Centers - Currently serve all

Family Dollar Distribution Centers – serve 6 DCs value tier; 5 DCs premium tier

Dollar General Distribution Centers – serve >50% value tier;