1 HCA448 Case 2 INTRODUCTION Beginning in 2015,.docx

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HCA448 Case 2
INTRODUCTION
Beginning in 2015, Aging Gracefully, a nonprofit agency that
provides care to patients in need,
faced a series of cutbacks in state funding that led to a deficit in
its budget. The CEO of the
agency, Don Arnold, was concerned that Aging Gracefully
would be unable to continue its
mission of caring for older adults I need if the agency did not
find a way to raise revenue.
In March 2016, Arnold set up the New Business Group to
explore ways for the agency to
convert some of the services that it currently offered for free to
a profit-based system for those
who could afford to pay. Included in the group, which met every
Tuesday at 9:30 A.M., were
Arnold, Beverly Slater (chief operating officer), Roslyn Warner
(director of marketing mid-
development), Gilda Newburgh (director of housing), Colleen

Confit (marketing manager),
Pamela Tilden (housing manager), and Emily Furley (social
services manager).
Number of new business areas were explored. It was critical for
Aging Gracefully to
assess the potential of these areas of business, set goals and
objectives, and implement a plan of
action. The expenses for the agency were divided among three
basic areas; home care, housing,
and social services (see Table 1).
Table 1. Aging Gracefully agency budgeted revenue and
expenses ($ in thousands).
Amount %
Social services
Home Care
Housing
Philanthropic
Total
Revenue
$31,037

13,882
5,807
2,342
$53,068
58
26
11
4
Home care
Housing
Social services
Total
Expenses
$41,630
8,084
3,350
$53,064
78

15
6
Staff within the organization did not fully support top
management’s efforts to require
clients to pay for services. This was particularly true of social
workers. Social workers were
trained as advocates of people in need and did not recognize the
difference between a client in
need and one who could pay for services. They often did not
recommend Aging Gracefully to
their clients for home-care services; they would recommend
lower-priced alternatives instead.
2
THE ORGANIZATION
Aging Gracefully’s mission was to care for the needy in
instances when they could not care for

themselves. The agency operated exclusively in the Boston
metropolitan area and offered a
variety of services related to the mission. One main focus of the
agency’s effort was caring for
the elderly, and this area was expected to grow because of the
ageing population in the United
States (see Table 2). By 2040, more than 20% of the U.S.
population will be 65 years of age or
older.
DIVISIONS
The agency consisted of three divisions: Home Care, Housing,
and Social Services. Each of the
divisions operated independently with its own budget. The
director of home care was responsible
for both licensed and certified home-care programs as well as
private-pay home care. The
housing director ran senior centers and residences for older
adults, and the director of social
services managed the programs for the older adults in need.
Table.2 Population by age (in thousands)
Age 65-74 Age 75-84
Age 85+
Year Number % Number % Number %

2000 18,551 6.7 12,438 4.5 4,333 1.6
2010 20,978 7.0 13,157 4.4 5,969 2.0
2020 30,910 9.5 15,480 4.7 6,959 2.1
2030 37,984 10.9 23,348 6.7 8,843 2.5
2040 33,968 9.1 29,206 7.9 13,840 3.7
2050
34,628 8.8
26,588 6.8
18,893 4.8
Source: U.S Bureau of census, 2000-2050 projected data,
middle-series assumptions
Home care
The homecare division was a licensed home health care agency.
It trained home health aides,
homemakers, and housekeepers and placed them in positions
home health aides were specially
trained to assist older clients with personal care such as
bathing, dressing and toileting. They also

served as companions for their older clients. Homemakers were
trained to acts as care givers for
children in the homes of incapacitated parents. Housekeepers
cleaned and performed other
household tasks for people incapable of doing so.
3
Within the homecare division, services were provided through
government contracts and visiting
nurse services, which billed Medicare or Medicaid.
Alternatively, Aging Gracefully billed the
client directly, a payment system known as “private pay”, which
served about 10% of the
homecare business. Nationally, the private-pay home care
market was smaller than the Medicare
and Medicaid home care markets (see table 3). Because Aging
Gracefully was a licensed agency,
not a certified agency it could not bill Medicare or Medicaid
directly for services. Therefore,
Aging Gracefully had to align itself with a certified home health
care agency that could bill in
this manner (as did VNS).

In 2015, Aging Gracefully had entered in to a strategic alliance
with VNS to provide home
health aides in eastern Massachusetts exclusively, and by 2016
the VNS business represented
90% of the home health aides patched. Because approximately
26% of the agency’s revenues
were generated by VNS contracts, the agency was highly
committed to this business and was
very careful not to jeopardize it. One issue was whether, and to
what extent, Aging Gracefully
could compete with VNS, particularly in Brookline,
Massachusetts, where Aging Gracefully did
contract work for VNS. Some staff members of the agency were
very concerned about
attempting to increase private-pay services while trying to
maintain VNS contracts.
Table.3 national home-care market
Home-care market agency receipts
2015
Medicare
65.2%
Medicaid
9.6%

Private pay*
7.0%
Private insurance
6.6%
HMOs, PPOs, state and local government, and
Bad debt
11.6%
*The National home care association places the private pay
market at 30%.
Housing
Aging Gracefully operated 5 buildings in Framingham,
Massachusetts, which altogether housed
1,000 older adults. Most of the buildings offered subsidized
housing, and only in of the
buildings, known as F3, rented at market value. Residents were
charged $800 for one bedroom
apartments that had a very basic décor. In addition, Aging
Gracefully operated a senior center 2
blocks from F3 that served 7,000 older adults and provided
many services, including a social
program and meals. As of July 2016, 14 units were vacant in F3,
and Gilda Newburgh had

devised a plan to provide assisted living in those 14 units.
Assisted living is a care plan for
elderly residents that includes 3 meals daily, day and evening
social programs, personal care, and
4
medication management. The cost to the resident for assisted
living was $3,000 a month.
Attempts to use promotional efforts to fill vacancies in F3 at
market value had been limited prior
to the decision to provide assisted living.
Social Services
The social services division was primarily responsible for the
care of individuals in need. The
division managed a number of programs. The community
guardian program assisted people who
did not have families to care for them. A caregiver’s social
worker acted as the person’s guardian
in legal and care matters, there was also a case management
program, which helped individuals
who needed assistance with their care but did not require total
guardianship. Finally, the financial

management program assisted clients with paying their bills.
Social services also managed Elderlink, an information and
referral database that contained
information a variety of eldercare services in the Boston area,
including home health care, senior
centers, meal programs, assisted-living facilities, and nursing
homes. Elderlink was part of
national network of information providers that was used by
Staler Referral, a firm that provided
the employees of fortune 500 companies with a national system
of information and referral on
aging. Employees of these firms could call a national number
and be connected directly to Aging
Gracefully’s Elderlink services. A caregiver’s social worker
would provide information to help
the employs care for an elderly relative in the Boston area.
Referrals from Staler, however, had
been dwindling lately.
POSSIBLE SOLUTIONS
The New Business Group consisted of managers from each of
the 3 divisions: Housing, Social
Services and Home Care. Through a series of brainstorming

sessions, the New Business Group
identified a number of potential businesses that would build on
Aging Gracefully’s skills in the
three divisional areas. However, the managers were unsure how
to allocate resources among
their ideas and which businesses were the most viable. They
chose three areas to explore more
fully: real estate development, real estate property management,
and private-pay home care.
Real Estate Development
The new business group proposed the development of a 200-
unit assisted- living facility
somewhere in the Boston area and determined the costs for
providing services to such a facility
(see table 4). Though care-givers did not have any expertise in
real estate development, top
management felt that its expertise in real estate development,
top management felt that its
expertise in providing services and its nonprofit status would
attract a developer who needed
Caregiver’s assistance with the particulars of providing
assisted-living services to the elderly. As
of July 2016, top management had met with a few development
had met with a few developers,

but Aging Gracefully was not happy with the quality of the
sites and did not feel comfortable
lending the Aging Gracefully name to a poorly located facility.
5
Table.4 Service costs for assisted-living facilities of 100-200
units
Cost category 100 units
200 units
Food $547,500
$1,095,000
Linens 100,000
200,000
Household supplies 54,750
109,500
Recreational supplies 15,000
30,000
Office supplies 6,000
9,000
Printing, duplication 6,000
9,000

Postage 24,000
48,000
Telephone 15,000
30,000
Marketing materials 50,000
75,000
Contracts machine 10,000
10,000
Transportation 68,000
68,000
Emergency response system 100,000
200,000
Consultants 36,500
54,750
Insurance, professional 35,000
40,000
Legal 20,000
20,000
Audits 20,000
20,000
Information services 47,758
72,419
Human resources 95,517
144,839

Finance 98,928
150,012
Administration 98,929
150,912
Management 252,000
504,000
Total $1,700,881
$3,039,532
6
Source: Aging Gracefully internal documents, 2016.
Real Estate Property Management
The New Business Group determined that older inner-city
residents would not be likely to leave
their apartments as they aged because many of the day to day
maintenance issues in a rental unit,
co-op, or condominium were handled by the building
management. Aging Gracefully’s
management, however, saw an opportunity to market eldercare

services to building managers
who had large percentages of elderly residents in their
buildings. The marketing department
began to identify buildings built prior to 1965 in the Boston
area with 300 or more apartments.
Letters and brochures were sent to building managers
emphasizing the dangers of leaving older
residents without care. For instance, an older person might
leave the gas stove on and start a firm
hoard garbage in the car stages of dementia, or forget to pay
maintenance fees. On the phone,
many managers expressed interest in the problem. They felt that
they could use some assistance
with their older residents but did not see spending up front to
avoid potential accidents. They felt
that caring for older adults was the responsibility of the family.
A few meetings were set up with
larger complexes, but in such instances, co-op and condo bards
were reluctant to spend money
on this matter.
The new business group developed the property management
program, which consisted of 2
services an on-site model and consultation model. The on-site
model was designed for large

buildings with at least 30% of elderly residents. Aging
Gracefully would conduct a survey to
determine where the elderly residents lived and would the place
on the premises a part-time
social worker who would provide social programs and
assistance to the elderly residents. The
social worker would also intervene in difficult cases and assist
building employs in identifying
problem situations. The price would be $2,800 per month for the
building. The consultation
model provided many of the same services, but operated out of
Aging Gracefully’s offices and
did not include a part-time social worker on the raises. The
price would be $1,000 a month.
Private-Pay Home Care
Private-pay home care clients pay for their own home care
rather than relying on Medicare or
Medicaid for payment. Aging Gracefully’s license allowed the
agency to provide home health
aides to those who could afford to pay out of pocket for the
service.
In July 2016, the exact size of the private-pay market in the
Boston area was unknown, but

national information on older adults with disabilities was
available (see table 5), as was
information on the older population in the Boston area (see
table 6).
Competition was intense in the private-pay home care market.
One important competitor was the
“gray market” for home care services. Since home care services
for older adults were often an
ongoing expense, many adult children chose to hire home care
workers who were untrained and
7
did not demand that their employers pay social security tax
aside from the gray market, a number
of other agencies competed for the private-pay business (see
table 7).
The New Business Group discussed their concerns regarding
how to furnish home health aides
under a private-pay system, when Aging Gracefully also
provided aides through VNS, as of July
2016, most of Aging Gracefully ’ aides were working under
VNS contracts and could not be

switched to a private-pay case. Aging Gracefully’s management
considered not pursuing the
private-pay market because of the fear of losing the VNS
contract. They also considered
pursuing private-pay in areas that VNS did not serve.
The target market for home care services is the elderly
population 75 years and older with one or
more difficulties in the activities of daily living and incomes
higher than $35,000 per year.
Table.5 Percent of elderly with functional limitations
Functional Limitation Age 75-84
Age 85+
Walking 18.8
34.9
Getting outside 22.3
44.8
Bathing or showering 11.3
30.6
Transferring 11.6
21.9
Dressing 7.0
16.1
Toileting 5.7
14.2

Average 23.5
40.4
Source: U.S bureau of the census, survey of income and
program participation, functional limitations and
disability file, non-institutional persons.
The New Business Group discovered some difficulties in
marketing the private-pay home care
business. First, home health aides were paid $6.50 an hour,
which did not provide much
incentive for them to deliver exceptional service. Second, there
were no home health aides
available exclusively for private-pay cases, and sometimes an
aide could not be found to service
a particular case. Finally, most of the clients wanted service in
the morning from 9. AM to 12
noon, but aides were often already working on morning hobs
and only had afternoon hours
available. Not only were clients not able to receive care when
they wanted it, but aides did not
receive a full days’ worth of hours and often got only morning
work.

8
Table.6 Older adults by income, selected Massachusetts
counties
Income Age 75-84
Age 85+
Under $5,000 11,013
13,938
$5,000-$9,999 32,477
49,706
$10,000-$14,999 24,539
24,354
$15,000-$24,999 39,353
25,708
$25,000-$34,999 28,410
14,670
$35,000-$49,999 26,546

11,009
$50,000-$74,999 22,294
8,549
$75,000-$99,999 8,746
3,055
$ 100,000+ 8,286
2,823
Source: U.S Bureau of the census: Norfolk, Suffolk, Middlesex,
Bristol, Essex, and Plymouth countries.
There were, however, some positive aspects of Aging
Gracefully’s services that would appeal to
the target market. Aging Gracefully always sent a nurse to a
clients’ home to assess the case
prior to dispatching an aide. Aging Gracefully also prided
health and drug screening of aides,
background checks and training. If an aide was sick or unable to
provide service on a particular
days, replacement was sent. A 24 hour telephone assistance line
was available for home health
aides to call in emergencies. Aging Gracefully charged an
individual client $2.75 an hour for
home care services during the week and $14 an hour for
weekend service. The gray market rate
was between 9 and $11 an hour for care. The new business

group determined that Aging
Gracefully earned 75 cents of profit on every hour of care they
delivered. In other words, it cost
$12 an hour to provide service to clients during the week and
Aging Gracefully charged $12.75.
The median number of hours per case was 20.
9
Table.7 competitor data
Home care agencies Number of
Weekday rate/hr
Private-Pay cases
U.S Home care 400
$15.00
All metro 150
$13.75

Caring hand 150
$9.50
Allen 100
$14.00
COHME 100
$14.00
Select 100
N/A
Partners in care 100+
$14.00
Source: 2016 caregiver’s competitor survey, completed in-
house.
Aging Gracefully had also identified a number of possible niche
markets within the larger
homecare market:
• Specialty disease: The nice of specialty diseases was
considered because people with
certain diseases require a significant amount of care. Though
aides were already trained
to provide Alzheimer’s care, other diseases would require
additional training.
• Skilled nursing: Skilled nursing was another potential niche
market pursuing this market

would require that Aging Gracefully hire more nurses and
obtain a special license to offer
such services in order to be able to bill Medicare and Medicaid
directly. The size of that
market was substantial, as shown in table 3.
• Difficult cases: over time, Aging Gracefully had developed a
reputation for being able to
handle difficult cases. These cases, which had been rejected by
other agencies because
the client was disruptive and disrespectful to the aide, often
ended up at Aging
Gracefully. Aging Gracefully was better able to handle such
cases because of the special
training that was provided by the agency and the support that
the aides received from the
home office. However, it was more expensive to services a
difficult case because it
required more managerial time to arrange for proper care.
10
• Long distance: another possible niche market was the long-
distance market, which

consisted of adult children who lived more than an hour’s drive
from Boston but who had
an elderly relative to care for in the Boston area. It was
believed that adult children who
were not available to care for a parent would be a better target
market because they would
need to purchase more home care hours to make sure that the
parent was well care for.
They might also be willing to pay a premium for such services.
Though the actual size of
the long-distance market was unknown, the number of adults
over the age of 75 living in
the Boston area was more than 300,000.
CONCLUSION
With the fall approaching and a board meeting scheduled for
early October, Don Arnold
needed to nail down the most viable solution for Aging
Gracefully. He looked at the data on
the home care market, considered developing an assisted-living
facility, and thought about
bringing services to existing buildings. Which would be the
most profitable enterprise to
pursue, and how could that be done without alienating VNS or

staff members?
Journal of Business Research 63 (2010) 67–70
Contents lists available at ScienceDirect
Journal of Business Research
Cognitive complexity implications for research on sustainable
competitive advantage
Shu-Ling Cheng a,⁎, Hae-Ching Chang b
a Far East University, Department of Management Information
Systems, 49, Jhonghua Road, Sinshih Township, Tainan County
744, Taiwan
b National Cheng Kung University, Department of Business
Administration, No. 1, Ta-Hsueh Road, Tainan 701, Taiwan
⁎ Corresponding author. Tel.: +44 886 6 5977873; fa
E-mail addresses: [email protected] (S.-L. Cheng)
(H.-C. Chang).
0148-2963/$ – see front matter © 2009 Elsevier Inc. Al
doi:10.1016/j.jbusres.2009.02.016
a b s t r a c t
a r t i c l e i n f o
Article history:
Received 1 February 2009
Received in revised form 1 February 2009
Accepted 1 February 2009
Keywords:

Cognitive complexity
Testability
Measurement
Cognitive complexity of top managers gains increasing attention
in the management field. Performance
implication of cognitive complexity is an important one. This
article clarifies several of the original points to
reply to Huang's commentary. In particular, we comment on
some issues of testability and measurement of
cognitive complexity and internal/external related dimensions.
© 2009 Elsevier Inc. All rights reserved.
1. Introduction
We welcome Huang's response (Huang, 2009) to Cheng and
Chang
(2009). The intent in the article is to spur discussion about
which
specific forms of cognitive structures in cognitive strategic
groups can
help firms to sustain competitive advantage. We are pleased to
have
the opportunity to clarify several of the original points.
We first build on some important areas in the original article.
These areas may provide the basis for improved understanding
of the
arguments between Huang's and the original articles. Next, we
readdress the issues of the performance implications of
cognitive
complexity and perceived internal/external dimensions in light
of
Huang's comments. We clarify and extend the original remarks
responding to his queries. Finally, we suggest some future
research
directions. Space limitations preclude the responding to each of

Huang's queries. We therefore focus on those queries we deem
most
salient.
2. Review of important areas
Huang agrees with several important findings in the original
article. The areas include (1) that the performance implications
of
cognitive complexity is helpful for practical application, (2)
that
identifying top managers' attention patterns toward
internal/external
dimensions in high-performing and low-performing groups can
provide insight into performance-enhancing process, (3) that a
clear
x: +44 886 6 5977600.
, [email protected]
l rights reserved.
methodological picture for this type of research is particular
beneficial. I briefly summarize the first two areas of the
research as
the basis upon which further comments can continue.
2.1. Performance implications of cognitive complexity of
cognitive strategic
groups
The question of how firms sustain competitive advantage is a
central interest in the management field. The concept of
cognitive
strategic groups, utilizing managerial cognition of competition,
gains
prominence to explain performance differences among
competing
firms at the group level analysis since managerial cognition of

competition influences the organizational strategic actions and
subsequent performance (Andrews,1971; Hodgkinson,1997;
Osborne
et al., 2001). Top managers develop mental models to interpret
their
competitive environment (Porac et al., 1989), and these
executives
construct mental models of themes that allow qualitative
comparison
and clustering of companies within an industry (Osborne et al.,
2001).
A few studies extend this line of research by examining the
cognitive
complexity of top managers in the strategic groups and
assessing the
relationship between the cognitive complexity and performance.
Given
the cognitive limitation of individual's information processing
cap-
ability, top managersmay need to focus theirattention on some
selective
dimensions since they are unable to comprehensively evaluate
all
variables relevant to a decision (Hambrick and Abrahamson,
1995;
Calori, Johnson, and Sarnin,1994; Garg et al., 2003). Managers
construct
simplified mental models to make decisions (March and Simon,
1958).
Such simplified mental models help them to deal with the
challenges
effectively (Miller, 1993). In contrast, several studies contend
that firms
with a complex orientation achieve superior performance
(Ashby,1956;

McNamara et al., 2002; Neill and Rose, 2006). Similarly, Carley
(1997)
finds that high-performing groups have more concepts in their
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mailto:[email protected]
http://dx.doi.org/10.1016/j.jbusres.2009.02.016
http://www.sciencedirect.com/science/journal/01482963
68 S.-L. Cheng, H.-C. Chang / Journal of Business Research 63
(2010) 67–70
mental models than low-performing groups. To understand the
implication of cognitive complexity, the study (Cheng and
Chang,
2009) examines managerial cognition of firms with themes in
the
Taiwan semiconductor industry. Besides, the complexity is
measured
by the number of themes extracting from letters to shareholders.
In
line with Ashby's (1956) law of requisite variety and prior
works, the
study argues that in a highly competitive industry, top managers
with
a higher level of complexity are capable of holding an elaborate
picture to guide an adaptive action, leading to a superior perfor-
mance. The finding results support this view.
2.2. Relationship of attention patterns toward internal/external
dimensions
to performance
In addition to difference in the level of complexity in
managerial
cognition, the study also examines differences in top managers'

atten-
tion patterns toward internal/external dimensions. Previous
research
concludes that top managers reveal relative emphasis on
internal/
external related dimensions. Various emphasis on
internal/external
related dimensions result in different performances (D'Aveni
and
MacMillan, 1990; Staw et al., 1981). The original study argues
that top
managers in high-performing groups of firms emphasize
relatively
more external related dimensions (e.g., customer need and
product
demand) than those in low-performing firms. The reasoning is
that
emphasizing internal related dimensions is usually insufficient
to
solve the severe environmental problems that firms confront.
With a
feasible empirical analysis, the study supports the argument.
3. Reply to queries
3.1. Cognitive complexityand performance: linear or curvilinear
relationship?
Huang's first query is that: is an inverse U-shape relationship
possible between the degrees of cognitive complexity of
strategic
groups and performance? With the cognitive limitation of
informa-
tion processing capability, there may be a curvilinear
relationship
between cognitive complexity and performance. Indeed, this

argu-
ment is interesting but requires more empirical testing.
Theoreti-
cally, top mangers experience bounded rationality and can only
include a finite number of dimensions in their cognition.
However,
few studies empirically test the argument. McNamara et al.
(2002)
empirically investigate the curvilinear relationship between
cogni-
tive complexity and performance using the data from banks in
three U.S. cities. They use three variables to measure the
complexity:
the number of strategies identified by the managers, the number
of competitors categorized by the managers, and the size of
groups
identified by top managers. The mean number of strategies,
com-
petitors, and size of groups are 5.1, 23.9, and 5.2, respectively.
In their
study, they find the positive relationship between the last two
complexity variable and the negative relationship between the
first
one. Furthermore, they do not find an inverse U-shape
relationship
between complexity and performance with the first two
measures of
complexity.
Unlike their study, the original study examines the complexity
in terms of the number of themes extracting from letters to
share-
holders. The study specifies the level of complexity is only 2, 1
and
0, for cognitively complex, simple and non-focus strategic
groups,

respectively. Thus, the testability of a curvilinear relationship
bet-
ween complexity and performance is limited with the scarce
level of
the complexity in the context of our study. However, other
studies
under different contexts may find more themes which can
increase
the complex level of managerial cognition. In such a condition,
integrating the moderate complexity perspective into the
examina-
tion of the effect of cognitive complexity on performance will
enhance understanding of performance implication of cognitive
complexity.
3.2. Perceived internal/external related dimensions and
performance:
measures and testability argument
In Huang's second query, he asserts the questions about why
product
is categorized as a perceived external related dimension rather
than an
internal related dimension, and how to define and measure the
perceived internal/external ones. Besides, he also addresses the
issue
of testing whether there is a linear relationship between the
multitude
of perceived external related dimensions and performance,
describe
below.
3.2.1. Product: internal or external dimension?
Duncan (1972) defines the relevant dimensions that are outside
the boundary of an organization as the external related ones.
The

original study categorizes product as the external related
dimension
because it refers to product demand which is inferred from the
related
keywords of product listed in Table 2 (Cheng and Chang, 2009).
Similarly, D'Aveni and MacMillan (1990) define product
demand
growth as an external related dimension. Based on the concept
of
product in the study and Duncan's (1972) definition, product in
our
study is conceived as an external related dimension.
3.2.2. Perceived internal/external related dimensions: how to
measure?
Unlike our concept of product, Neill and Rose (2006) define
product
orientation as an internal related dimension because their
concept
of product emphasizes the product quality and efficiency of
value
offerings. Thus, there may be a need to develop the measures of
internal/
external related dimensions. A number of studies provide the
examples
of how to measure perceived internal/external dimensions. For
instance,
Bourgeois (1980) conceptualizes external environment as task
and
general environment. The task environment includes those
dimensions
of the environment that have direct transactions with the firm
such as
customer, competitor, and suppliers while the general
environment

includes those dimensions of the environment that affect the
firm
indirectly such as social, demographic, and economic
dimensions. Daft,
Sormunen, and Parks (1988) conduct an empirical study to
examine the
environmental dimensions by using managerial impression.
Also,
D'Aveni and MacMillan (1990) define internal environment as
relevant
dimensions related to owners, employees, and top managers,
and
external environment as relevant dimensions related to
customers,
general economic factors affecting demand, creditors, and
suppliers.
Furthermore, Garg et al. (2003) identify two dimensions (e.g.,
efficiency
and innovation) as relevant domains of the internal environment
from
five dimensions (e.g., cost, operation, product R&D, marketing,
and
finance). Moreover, Nadkarni and Barr (2008) describe that
managerial
attention can be directed toward the external environment (e.g.,
competition, regulations, macroeconomic factors, technology)
or inter-
nal environment (e.g., organizational structures, resources,
policies and
procedures, communication channels). Nevertheless, to better
capture
the concept of internal/external related dimensions in different
contexts
of firms or industry, researchers can employ the methods of the
in-dept
open-ended interviews (Daft et al., 1988; Calori et al., 1994) or

ques-
tionnaire derived through a though analysis of relevant
literature com-
bined with experts' opinion (Dess and Davis, 1984; Garg et al.,
2003)
to elaborate their results. Some researchers note the limitations
in
using manager's reports through either interviews or
questionnaire
(Hodgkinson, 2002; Thompson,1967; McNamara, Deephouse,
and Luce,
2003). However, the use of multiple measures can minimize
these
limitations, especially where results from different methods
converge.
3.3. A linear relationship of perceived internal/external related
dimensions
to performance: how to test?
Huang raises the query whether there is a linear relationship
between perceived internal/external related dimensions and
perfor-
mance. A few studies provide the examples to test the query.
For
69S.-L. Cheng, H.-C. Chang / Journal of Business Research 63
(2010) 67–70
example, Garg et al. (2003) conduct a hierarchical regression
model to
test the linear relationship between perceived internal/external
related dimensions and performance by regressing the four
perceived
variables (e.g., task environment, general environment,

efficiency and
innovation) together on firm performance. Their findings show
that
firms that pay more attention to the task environment are higher
performers. However, there is no significant effect between
perceived
internal related dimensions and performance.
3.4. Environment, cognitive complexity, internal/external
related dimensions
and performance: an integrated perspective
In his third query, Huang suggests conducting an integrated
linkage
among environmental conditions, the degree of cognitive
complexity,
the degree of internal/external related dimensions, and
performance.
Prior studies enhance understanding about the impact of the
environ-
mental conditions on cognitive complexity and perceived
dimensions.
For example, Regerand Palmer (1996) find that environment
turbulence
does not increase the degree of managers' cognitive complexity
but
increase the degree of diversity in their cognitive dimensions.
Bogner
and Barr (2000) argue that top managers in competitive
industries
develop different mental models than those in more stable
environ-
ments. Top manages in competitive industries tend to focus
more on
the task environment than on the general environment (Nadkarni
and

Barr, 2008). Garg et al. (2003) indicate that the fit between
perceived
internal/external dimensions and environmental conditions is
related to
higher performance.
Similar to several previous works (Daft et al., 1988; Reger and
Palmer,1996), the original study use four different periods to
interpret
the environmental conditions – upturns, downturns, and
uncertainty –
based on the history of the Taiwan semiconductor industry.
Instead,
other studies may consider operationizing the objective
environment
conditions when investigating the relationship between the
cognitive
complexity and performance. For instance, Dess and Beard
(1984)
operationize environment as munificence, dynamism, and
complexity
and develop the indicators for those environmental dimensions
such
that they measure the munificence with five-year average
growth in
net sales. The operationalization of the objective environment is
difficult because of the shorter time frame in the original study.
When
the time frame is longer, it would be feasible to examine the
linkage
among all sets of variable. Furthermore, future studies
considering the
use of perceived environment may test the query. The work of
Garg
et al. (2003) provides a good example to this kind of test.

4. Conclusion
We appreciate Huang's commentary, and hope that the remarks
may in some way contribute to clarifying the issues of
testability and
measurement of cognitive complexity and perceived
internal/external
related dimensions. Further empirical investigation is necessary
to
enrich understanding of cognitive complexity and its
performance
implication.
Fig. 1. Future research direction.
Managerial cognition, representing a driving force of the
organiza-
tional strategic actions, and the competitive environment,
represent-
ing what must be done to compete effectively, are both essential
in the
strategy-making process. The original article could be a first
step to
explore the managerial cognition with the computer-aided
content
analysis and attempt to explain the performance differences
among
competing firms based on the concept of cognitive strategic
groups.
We agree with Professor Huang's suggestion that our work may
be
elaborated if we integrate with competitive dynamics studies
(Miller
and Chen, 1996). By examining the response patterns, we can
capture
a more complete picture of how managers of firms think, how
they
react to competition, and how they perform.

We also agree with Professor Huang's suggestion to investigate
environmental conditions, cognitive complexity, perceived
internal/
external dimensions, and performance together to test their
relation-
ship. Calori et al. (1994) note that the relationship between
cognitive
complexity and performance should be moderated by the degree
of
environmental complexity. They argue that the complexity level
of top
managers should match the complexity level of the
environment. This
line of research considers the moderating role of environment
on the
relationship between cognitive complexity and performance, as
describe in Fig. 1 of Huang's article. However, several studies
include
environment as an independent variables based on the
proposition
that it has an independent effect on managerial cognition (Cho
and
Hambrick, 2006; Nadkarni and Barr, 2008). An interesting
future
study is, firstly, to examine the effect of environmental
conditions on
managerial cognitive complexity and perceived multitude of
external/
internal dimensions, and then to integrate investigate the
linkages
among environment, cognitive complexity and perceived
multitude of
external/internal dimensions, and performance, as Fig. 1 shows.
The original study shows the positive relationship between the

cognitive complexity and performance while McNamara et al.
(2002)
show the negative relationship between them based on one out
of the
three measures. The reason may be that top managers may
utilize
fewer dimensions, but they may be the most critical ones to
make
effective decision, leading to performance enhancement.
Decision
making in the strategy processes demands sound judgment.
Attention
to factors that are directly related to performance enhancement
could
prove fruitful for researchers. Nevertheless, we also look
forward to
seeing the work applied to more new conditions and learning
more
about how firms to sustain competitive advantage.
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Cognitive complexity implications for research on sustainable
competitive advantageIntroductionReview of important
areasPerformance implications of cognitive complexity of
cognitive strategic groupsRelationship of attention patterns
toward internal/external dimensions to performanceReply to
queriesCognitive complexity and performance: linear or
curvilinear relationship?Perceived internal/external related
dimensions and performance: measures and testability
argume.....Product: internal or external dimension?Perceived
internal/external related dimensions: how to measure?A linear
relationship of perceived internal/external related dimensions to
performance: how to .....Environment, cognitive complexity,
internal/external related dimensions and performance: an
int.....ConclusionReferences
3 8 l e a d e r t o l e a d e r
For those blessed with the charisma that the rest of us
envy, personality and interpersonal skills can carry the
day for a while—but not for the long run. Charisma
without substance and competence is meaningless, even
dangerous. Both interpersonal and task skills matter, of
course, but when it comes to leadership the former

tend to get more press than the latter. the leadership
field focuses so heavily on personality and interper-
sonal skills that the need for genuine competence is
easily overlooked. even the charisma-challenged can
achieve greatness in leadership positions via sheer com-
petence.
effective problem solving is a—perhaps the—foun-
dation of competence for both leaders and followers.
Competent leaders exhibit a clear results focus and
apply the processes needed to fix problems, identify
and seize opportunities, and otherwise meet and con-
quer important performance challenges. When leaders
inspire followers to do the same (competently), they are
developing a vital type of culture: a culture of distrib-
uted leadership.
doing these things well may be the true heart of leader-
ship, and none of it is easy. those who underestimate
the challenge do so at their own peril. But here’s the
good news: competent problem solving by leaders and
followers requires applying knowledge and skills that
many people already have at their disposal but simply
forget to use.
Lead with Competence
We might judge a leader’s competence initially on the
basis of brief performances such as speech-giving, and
then more broadly on interpersonal and other skills.
e x e C u t I v e f o r u m
LeadING WItH
CoMPeteNCe:

ProBLeM-SoLVING
BY LeaderS aNd
FoLLoWerS
Thomas S. Bateman
s u m m e r 2 0 1 0 3 9
Ultimately, though, we appraise results in the form of
performance improvements or declines. We can see
these only after the fact; in real time, it’s not so easy to
tell because hard data and results clearly attributable to
the leader are unavailable. However, there is another
useful way to appraise competence: the processes used
(or not used) in solving problems and pursuing op-
portunities (or failing to do so). Leader competence is
evidenced by actually solving problems, exploiting op-
portunities, and (just as important) enabling followers
to do the same.
Leaders and followers exhibit competence when they
execute the phases of classic problem-solving mod-
els. For the best chance of successful outcomes, the
essential activities of problem solving involve these
steps: (1) clearly defining problem scope and goals; (2)
generating multiple alternative courses of action; (3)
thoroughly evaluating those alternatives; (4) making
the choice; (5) implementing the decision; and (6)
following up by changing the approach as needed. ad-
ditional problem-solving techniques and activities exist,
of course, but these six cover a lot of territory and are
extraordinarily high-leverage. Ideally, these activities

are done in sequence, although that is rare.
For small problems, it is not worth expending a lot
of time and effort on every stage. But for nonroutine,
consequential problems, these activities provide a path
to competence. With expertise and experience, a leader
can learn to execute these steps more quickly and in-
tuitively. Still, for particularly difficult challenges, it
helps to go through the stages conscientiously and
thoroughly.
Outwit the Problem-Solving Traps
although the problem-solving activities seem com-
monsensical, each activity is littered with traps. these
pitfalls are so numerous, and they ensnare people so
regularly, that they seem to be standard default op-
tions. they are forms of self-sabotage, because people
usually know better; they just don’t execute as fully and
competently as they could and should. the common
mistakes can be remedied by consciously and explicitly
enacting their opposites or applying additional tech-
niques.
In defining the problem, leaders often ignore impor-
tant problems, tackle easier but less crucial ones, fail to
specify goals, and allow their goals to be displaced by
other, less substantial goals. effective leaders have the
courage to tackle the things that matter most, articulate
the goals that would indicate success, and do not allow
slippage in their aspirations (for example, settling for
a weak, ineffectual compromise) or get distracted by
more trivial objectives.
In generating alternatives, you no doubt have seen lead-
ers and decision-making teams satisfice by settling for

the first option generated, or for a false choice between
two obvious options. If you find yourself thinking “I
have no choice” or “I have only two options,” consider
it an indication that you have not thought hard enough
about possible alternatives. For important problems,
many options should be generated, perhaps using the
proper brainstorming techniques that most people
know but don’t actually execute. For example, a de-
liberating body may decide to brainstorm but instead
Even the charisma-
challenged can achieve
greatness.
Effective leaders have the
courage to tackle the things
that matter most.
often based on instinct rather than a thorough evalu-
ative process. this is fine when the decider has lots of
relevant experience on which the instinct is based, but
not for major challenges in changing circumstances
that have not been faced before.
regarding implementing and following up, suffice it
to say here that these stages are too often neglected
or treated as perfunctory. the result, of course, is in-
adequate execution. table 1 provides additional de-

tails, summarizing some common mistakes—some of
commission, others of omission—and also potential
remedies.
Adapt as Necessary
the final stage of problem solving deserves special at-
tention: changing and adapting as new information and
wind up taking potshots at every option as it is verbal-
ized, instead of holding fire until all options are on the
table.
In evaluating alternatives, think of how many times
you and others have spent the lion’s share of time argu-
ing for an instinctively preferred option, based on the
upsides as you see them while ignoring the downsides.
think as well of how often people criticize others’ ideas
based solely on their costs, and ignore the benefits.
Furthermore, it is human nature to focus more on
short-term than long-term consequences (which so
often means that short-term costs override long-term
benefits). devil’s advocacy and dialectical inquiry are
useful techniques here.
at the deciding stage, simply think of how many leaders
are either indecisive or too quick to decide, the latter
Activities traps (self-sabotage) effective leadership
Define problem and goals Tackle the wrong problem Tackle the
right problem
Ignore important problems Tackle important problems
Choose wrong objectives Choose right objectives

Lose sight of your goals Maintain focus on the important goals
generate alternatives Settle for the first alternative Make a full
search for best alternatives
Use either/or thinking (only two choices) Identify multiple
creative solutions
Settle for small-scale solutions Find solutions that match
problem scope
evaluate alternatives Focus on short term Pay attention to both
long and short term
Consider mostly impact on in-group Consider impact on
multiple constituencies
Focus on benefits of preferred alternatives and costs of
other alternatives
Thoroughly consider costs and benefits of all
alternatives
Decision Satisfice Optimize
Choose based on instinct Use devil’s advocacy
Choose a single solution Create combined, integrative solution
implementation Treat as perfunctory Plan thoroughly; give
mindful attention
Treat as routine Treat as a problem to be solved

Delegate poorly Delegate effectively
Discontinue leadership Continue leading
monitoring and follow-up Fail to assess Monitor and collect
data
Assume success or failure prematurely Make an unbiased
appraisal
Reduce commitment prematurely Maintain unflagging
commitment to success
Fail to adjust Adapt as necessary
throughout the process: Think you can do all this well, working
alone or with oth-
ers who think just like you do
Collect needed additional information; value and
seek diverse viewpoints
table 1.. P R O B L E M - S O L v I N G A C T I v I T I E S ,
T R A P S , A N D S O L U T I O N S
s u m m e r 2 0 1 0 4 1
tulane’s president, Scott Cowen, continues to see New
orleans as one of the great development opportunities
in america, potentially with a successful outcome as
people see more clearly the progress being made.

Three Critical Imperatives
Let’s step back from the problem-solving weeds and
trees and consider the forest—specifically, three over-
arching points that some would say are obvious but
that leaders and followers ignore all the time.
Take action. • Inaction is a common default mode,
when in fact action is necessary on consequential
problems that won’t solve themselves.
Choose your challenges thoughtfully and strategically. •
We often tackle things that are small and easy or
personally interesting rather than focusing on a
valid set of organizational priorities.
Distribute the leadership. • Leaders can’t do every-
thing themselves.
Decide to Act
think of how many problems exist in your organiza-
tion on which no one has taken action, or of the many
opportunities on which no one has capitalized. or con-
sider how many ideas you’ve had in the shower that
remain maybe-some-rainy-day projects, still residing
in the “good idea” rather than “resounding success”
category. the point is, even when people know what
should be done, they often do not take action. People
are unlikely to act, even though they may care about an
issue, until they make a real decision to do so. “I will
do X” is a powerful call to action; “Maybe I’ll get to
it when I’m not so busy” and “I wish someone would
take care of that” are not.
Continuing with the Katrina example, everyone knew
about the inadequate levees, but when Katrina struck,

New orleans’s main hurricane project was decades
behind schedule. Moreover, the city appeared to have
nothing in the way of a real evacuation plan. FeMa
director Michael Brown was more talk than action,
and Mayor Nagin implored federal and state officials
to get busy helping and taking action rather than doing
changing circumstances dictate. actually, this should
be considered not a final stage but a never-ending one.
Unfortunately, as important as this activity is known
to be, we too rarely act accordingly.
to illustrate, consider some of the biggest performance
challenges of the past decade: responding to the 9/11
terrorist attacks, the Iraq war, and Hurricane Katrina.
Politics and partisanship aside, these examples high-
light the importance of adaptation specifically and
more broadly the central role of problem solving in
leadership. they also illustrate the importance of com-
petent problem solving by followers as a crucial type of
distributed leadership.
For example, the campaign in afghanistan in the im-
mediate aftermath of 9/11 was well thought out and
executed at first, but in the end the enterprise fell short.
resources were diverted to Iraq too soon; the gains in
afghanistan were not solidified, the situation worsened,
and afghanistan became a huge problem once again.
the “adjustment” in afghanistan was to withdraw
resources too quickly. In Iraq, the occupation went
poorly for too long in large part because of a refusal to
adapt. But when the administration reconsidered and
changed the approach, things started turning around.
In the case of Hurricane Katrina, scientists and en-
gineers in the aftermath collected data to learn more

about the storm’s impact and about the human and
institutional errors that compounded the catastrophe.
Sometimes, learning after shortcomings in execution is
about assigning responsibility and accountability and
can turn into a mere blame game. But as Jed Horne
states in Breach of Faith: Hurricane Katrina and the
Near Death of a Great American City, with hurricanes it
is vitally useful to know about the processes, scientific
and institutional, that underlie failures. Whatever the
causes, the knowledge gained can aid leaders and deci-
sion makers in the future.
a well-known but underpursued form of adapting is to
turn a problem into an opportunity. Some individuals
and businesses saw new chances for new profits. Some
New orleans neighborhoods engaged in aggressive
post-Katrina revivals. tulane University drastically re-
shaped the university’s curriculum and faculty, and
as important as avoiding a nuclear exchange between
great powers. Whatever your opinion, this example
highlights the central relevance to leadership of choos-
ing the right priorities for action.
Distribute the (Competent) Leadership
one important lesson from Hurricane Katrina is that
not all successful leadership is top-down. effective dis-
tributed leadership can contribute exponentially to
results. Whereas elected officials and top-level FeMa
appointments were the leaders most apparent to Ka-
trina observers, many lesser-known organizations and

individuals demonstrated great leadership and per-
formed brilliantly. Private-sector companies, churches,
communities, agencies, faith-based groups, and grass-
roots collaboratives showed leadership by engaging
in post-Katrina activism and action. Families offered
their homes to the homeless; small towns and big cit-
ies provided shelters and supplies; individuals and
teams brought boats from everywhere to rescue the
stranded.
returning to Iraq: military leadership and execution in
the field in some ways compensated for errors by the
civilian leadership. americans as well as Iraqis in Bagh-
dad, civilians as well as the military, all were essential
in solving problems and contributing to the progress
made there.
distributing the leadership is not about hoping that
others take the initiative and step up and fill vacuums.
It also is not a typical act of delegation. It is a broader
strategy of motivating followers to solve problems and
seize opportunities. effective leaders communicate
about the essential nature of those behaviors and create
a culture that encourages people to exhibit them.
Demand Competent
Followership
Just as people want competence from their leaders (not
to mention respect, trustworthiness, integrity, and so
forth), leaders want certain things from their followers.
Some are standard expectations: loyalty, a good atti-
tude, good effort, conscientious work, goal accomplish-
media appearances. Mayor Nagin himself was not often
seen in public, in contrast to President Bush’s famed
“bullhorn moment” with the first responders in New

York City.
Successful leadership usually means not sitting on the
sidelines. taking action is more likely to be effective
than a laissez faire approach to leadership. But even a
strong action orientation doesn’t guarantee results. ef-
fective problem solving is requisite.
Choose the Right Issues
Leaders ignore some issues and choose others for atten-
tion and action. regarding Iraq, readers will have their
own opinions, and knowledgeable people had different
perspectives. Critics argued that the Bush administra-
tion saw a problem where one didn’t exist (because
Saddam Hussein was weaker than in the past, and was
not the perpetrator of 9/11), and then working on the
easy problem (capturing Baghdad) but ignoring the
more difficult challenges surrounding the occupation.
In contrast, key players saw Iraq as an opportunity
to achieve several goals including withdrawing U.S.
forces from Saudi arabia, creating a democracy in Iraq,
creating a friendly source of oil, and improving Israel’s
strategic position.
Some experts maintain that deciding to act in Iraq
came at the neglect of other critical fronts including
homeland defense, securing weapons and materials of
mass destruction from theft and purchase, and win-
ning the war of ideas. others worry that while the fight
against terrorists is both urgent and important, it is not
Successful leadership
usually means not sitting

on the sidelines.
s u m m e r 2 0 1 0 4 3
Communicate About the
Important Things
From the Strother Martin prison gang boss in Cool
Hand Luke (“What we have here is failure to communi-
cate”) to Harvard leadership guru John Kotter talking
about leading change (admonishing leaders to commu-
nicate at least 10 and up to 100 times as much as they
do), the importance of communication is constantly
emphasized. and it is undeniable. Particularly because
information is communicated constantly, everywhere,
and in every direction, the important strategic question
becomes, Communicate about what? Leading through
competence requires communicating about perfor-
mance results, problems, opportunities, and progress,
and also about the processes required to solve problems
and achieve results most effectively. Successful leaders
do this as individuals, they do it in teams, and they
distribute the leadership by asking followers to identify
problems and take action in concert with others as
needed. distributing the leadership also requires creat-
ing the right culture by modeling the desired behaviors,
developing appropriate skills in followers, rewarding
performance in these regards, putting in needed con-
trols, and managing mistakes appropriately.
Strengthening the problem-solving culture also requires
top leaders to be receptive to honest communications
from below (as opposed, for instance, to shooting
messengers). Furthermore, leaders would do well to
communicate the right combination of realism plus

optimism. think of Franklin delano roosevelt com-
ment. there’s also a lot to be said for followers who
go above and beyond the call of their required duties,
doing things that benefit the organization or constitu-
ents as long as they’re not running amok, out of con-
trol. Leaders often need their people to spot problems
and opportunities and solve or pursue them. When
followers do this in concert with others, they are engag-
ing in acts of leadership, and leadership is truly shared
and distributed. Competence flowers throughout the
entire organization.
top leaders cannot identify and solve all problems by
themselves—and shouldn’t even try to do so. the best
leaders lead their teams in problem- and opportunity-
identification and discussions about how to tackle these
performance challenges. they solicit ideas and contri-
butions from others they know will offer useful—and
sometimes contrary—perspectives. they are decisive
as needed, but they also encourage input, involvement,
and initiative from others. to be clear, this is not just
about encouraging “initiative,” a vague concept that
people define different ways. It means spreading the
responsibility and competence so that others will solve
problems effectively and capitalize on opportunities on
their own and in collaboration with others.
Some of these suggestions require leaders to ac-
knowledge (at least to themselves) that they don’t
know everything, don’t have all the answers, and
can’t do it all. this is anathema to some leaders, who
would rather be certain than actually be right. on
the surface, it also flies in the face of the need for
leaders to be confident and to not appear uncertain.
But such acknowledgment is pure realism in our

complex, rapidly changing world. What therefore
becomes important is to show confidence not so
much in your own ability to handle everything as in
the problem-solving process itself, in your own abil-
ity to enact it, and in your followers’ ability to not
only offer suggestions but take needed and proper
actions themselves. By the way, leaders’ charisma
grows stronger from showing appropriate confidence
in themselves and in others. and guess what else:
charisma doesn’t make a leader competent as much
as problem-solving competence makes a leader more
charismatic.
Some leaders would rather
be certain than right.
leadership includes making any positive change, and
ranges from fixing problems to creating and capital-
izing on opportunities.
Like everything important, successful leadership is
more easily claimed than done. But by attending to the
basic activities of the problem-solving process and dis-
tributing the problem-solving leadership it is certainly
attainable. If leaders are willing to take the challenge,
this process offers a clear, actionable, competence-based
path to higher performance.
municating with both optimism and honesty about
the realities of the present and about possible futures,
including the obstacles that lay ahead, the viable strate-

gic directions and opportunities, and the resources that
could be brought to bear and prevail. For some lead-
ers, the temptation is strong to conceal some things,
but succumbing to the temptation will forfeit people’s
trust, in part because when the truth isn’t told, people
ultimately learn it anyway. Naive sugarcoating, cyni-
cal spinning, denying problems, and other misleading
communications about harsh realities undermine cred-
ibility, support, and performance—and make people
think their leader is incompetent.
Several books about Hurricane Katrina by authors
including douglas Brinkley, Jed Horne, Ivor van
Heerden, and Mike Bryan describe such leadership—
not only problem-oriented, but realistic and optimistic.
Governor Haley Barbour reassured his Mississippi con-
stituents with his resilience, stoic optimism, and can-do
spirit. When New orleans desperately needed straight
talk from someone at the federal level, Lt. General rus-
sell Honoré delivered it. When General Honoré saw
that the atmosphere in the city was one of open warfare
(weapons up), he told his troops to put weapons down,
thus changing the communicated and perceived profile
of the military presence to one of a humanitarian re-
lief operation, to good effect. Beyond anyone’s doubt,
General Honoré was brutally honest, results-oriented,
and action-oriented.
Take the Challenge
Leadership means taking action in concert with others,
to move from a current state to a more desirable dif-
ferent state. Not every leadership act needs to be inter-
personal, but leadership ultimately creates constructive
change with, through, and in other people. “Good”
Tom Bateman is Bank of America Professor at

the McIntire School of Commerce, University of
Virginia. He has taught and led management
workshops in Europe, Asia, and the United States.
His articles on leadership, work goals, motivation,
decision making, and proactive behavior have ap-
peared in academic and practitioner journals, and
his textbook (coauthored with Scott Snell), “Man-
agement: Leading & Collaborating in a Competi-
tive World,” is in its 9th edition.
Developing your global minDset © copyright 2013
by mansour Javidan and Jennie l. Walker. all rights reserved.
no part of this book may be reproduced in any form whatsoever,
by photography or xerography or by any other means, by
broadcast or
transmission, by translation into any kind of language, nor by
recording
electronically or otherwise, without permission in writing from
the author,
except by a reviewer, who may quote brief passages in critical
articles
or reviews.

isbn 13: 978-1-59298-997-3
library of Congress Catalog number: 2012XXXXXX
printed in the united states of america
First printing: 2013
17 16 15 14 13 5 4 3 2 1
Cover and interior design by James monroe Design, llC.
beaver’s pond press, inc.
7108 ohms lane
edina, mn 55439–2129
(952) 829-8818
www.beaverspondpress.com
to order, visit www.beaverspondbooks.com
or call (800) 901-3480. reseller discounts available.
w w w.globalmindse t.com
Case Study 2: Preparing for a Crisis
in Sudan
abstract
A Malaysian human resources manager who is
new to his role and new to operations in Khartoum,
Sedan, is left in charge while his manager is away.
During that time, an employee requires a minor
medical procedure that turns tragic. The human

resources manager is left to navigate a complex
human disaster in a cross-cultural environment,
both of which he is unprepared for.
the case
Ravi, one of our native Malaysian staff
members with a technical background, was posted to Sudan in
1999 for three years.
Ravi’s tenure there began as a training supervisor with the
Greater Nile Petroleum
Operating Company. This is a joint venture between four
companies—China’s
CNPC (40 percent), Malaysia’s PETRONAS (30 percent),
Canada’s Talisman (25
percent), and the National Oil Company of Sudan Sudapet (5
percent). The venture
later emerged to be a major contributor to PETRONAS’s
overseas production and
revenue.
Ravi was sent to Sudan to help set up the joint venture for the
human resources
department. He was promoted to deputy human resource
manager in October
1999 where his role primarily involved assisting the human
resources manager
to plan and implement company policies and processes to drive
performance and
Harison Yusoff, MS
Learning Manager
PETRONAS Leadership
Centre
D

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shutterstock.com
productivity. He also oversaw the well-being of staff and their
administrative
needs during the setup of the joint venture.
On a Tuesday afternoon in December 1999, Ravi was informed
that a
Malaysian staff member had been admitted to the local hospital
in Khartoum. The
human resources manager, Jamila, was away for the week,
leaving Ravi in charge.
He rushed to the hospital to visit the young engineer, Ahmad.
He found him quite
cheerful despite his complaint of a nagging pain in the lower
abdomen.
“The doctor said it is appendicitis and will involve only a minor
operation,”
Ahmad told Ravi.

“I would strongly advise that we get the opinion of our panel
doctor in Dubai,”
Ravi responded. “If you could just give me a few hours to make
the arrangements,
I can get you on a flight to Dubai by tonight and you can have
the operation as soon
as we can arrange for it.”
Ravi’s effort to persuade Ahmad to attend to his medical needs
in Dubai were
unsuccessful.
“It’s okay,” said Ahmad. “I heard the doctors here are just as
reputable, and
I want to get it done with. I have so much work to finish that I
cannot afford any
more time away. There have been too many delays on this
project.”
Looking at Ravi’s worried frown, Ahmad continued with a
smile. “Anyway,
I am planning to go back for a long leave to Kuala Lumpur right
after we complete
the first phase of this project. I will have plenty of time to rest
and recuperate
then,” Ahmad said.
Even though Ravi tried to convince Ahmad to delay the surgery,
it was to no
avail. Ahmad went through with the procedure at the hospital in
Khartoum the
following day.
That Wednesday, Ravi received a call from the hospital in
Khartoum inform-
ing him that Ahmad had died due to excessive bleeding after the

surgery. Ravi was
shocked. For a few hours after that, he could hardly remember
what he had done.
He was in a mad scramble to prepare the report for his superiors
and to make the
necessary arrangements.
Ravi was completely unprepared for the emotional and
administrative
nightmare that ensued. According to Ravi, the hospital
administrators seemed
very uncooperative and did not see the urgency of the situation.
To get the body
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released and flown back to Kuala Lumpur involved intricate
communication and
negotiation techniques that Ravi had not been prepared to
perform.
When Ravi’s boss, Jamila, returned from her trip, she realized
how traumatic
the situation must have been for Ravi. He was new in the
position and there was
no policy or procedure in place to guide him. His offshore
experience called for
him to be prepared for technical crises, but this kind of situation
was totally new
for him. It was a disaster of the human kind. It was through
sheer providence that
Ravi managed to coordinate the administrative matters and
overcome the multi-
tude of challenges, which among the most critical was making
arrangements for
deporting the body from Sudan to Malaysia.

The human resources manager reported that the incident was a
crucial
learning experience for the organization. According to Jamila,
“Not only did we
lack the standard processes, what was particularly glaring at
that time was that
there was nothing in place to help someone of Ravi’s level cope
with the conse-
quences of the distressful situation and get him back on track.
Not only did he feel
inadequate for not being able to persuade Ahmad to seek
medical care in Dubai in
the first place, but the maddening runaround and massive
paperwork in Khartoum
took a toll on his well-being as well. Due to the stress he
suffered, Ravi became
more taciturn and was overly particular with processes and
procedures in regard
to health and medical matters.”
Ravi admitted that he became quite paranoid, wondering if there
could
be another crisis just around the corner. It was energy-sapping
for him. Jamila
observed that Ravi took some time to revert to his normal self.
When he finally
appeared more stable, Jamila heaved a sigh of relief. She said,
“Ravi is a very valu-
able team member. The organization is fortunate to have him
back in shape.” But
the entire situation begs the question: are other organizations
prepared to address
these kinds of complex human disasters in cross-cultural
environments?

discussion Questions
1. How could someone in Ravi’s position be more equipped to
manage his responsibilities in a new environment and a new
culture during both normal circumstances and emergencies?
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549
2. What training would have been useful to help the overseas
staff
prepare for crisis situations and perform well during traumatic
experiences?
3. Do you believe there is a difference in intensity or stress in
an international working environment compared to a local
environment? How can the overseas staff cope with stress?
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IntroductionNajafi Global Mindset InstituteUsing This
HandbookFinal ThoughtsGlobal MindsetGlobal Mindset
ModelGlobal Mindset Inventory1Global Business
SavvyKnowledge of Global IndustryKnowledge of Global
Competitive Business and Marketing StrategiesKnowledge of
How to Transact Business and Assess Risks of Doing Business
InternationallyKnowledge of Supplier Options in Other Parts of
the World2Cosmopolitan OutlookKnowledge of Cultures in
Different Parts of the WorldKnowledge of Geography, History,

and Important Persons of Several CountriesKnowledge of
Economic and Political Issues, Concerns, and Hot Topics of
Major Regions of the WorldKnowledge of Important
World Events3Cognitive ComplexityAbility to Grasp Complex
Concepts QuicklyAbility to Analyze and Problem-SolveAbility
to Understand Abstract IdeasAbility to Take Complex Issues
and Explain the Main Points Simply and
UnderstandablyPSYCHOLOGICAL CAPITAL4Passion for
DiversityEnjoyment of Exploring Other Parts of the
WorldEnjoyment of Getting to Know People from Other Parts of
the WorldEnjoyment of Living in Another CountryEnjoyment of
Traveling5Quest for AdventureInterest in Dealing with
Challenging SituationsWillingness to Take RiskWillingness to
Test One’s AbilitiesEnjoyment of Dealing with Unpredictable
Situations6Self-AssuranceEnergeticSelf-ConfidentComfortable
in Uncomfortable SituationsWitty in Tough
SituationsSocialCAPITAL7Intercultural EmpathyAbility to
Work Well with People from Other Parts of the WorldAbility to
Understand Nonverbal Expressions of People from Other
CulturesAbility to Emotionally Connect to People from Other
CulturesAbility to Engage People from Other Parts of the World
to Work Together8Interpersonal ImpactExperience in
Negotiating Contracts/Agreements in Other CulturesStrong
Networks with People from Other Cultures and with Influential
PeopleReputation as a Leader9DiplomacyEase of Starting a
Conversation with a StrangerAbility to Integrate Diverse
PerspectivesAbility to Listen to What Others Have to
SayWillingness to CollaborateNajafi Global Mindset Institute
ServicesAcknowledgementsCase StudiesReferencesAbout the
AuthorsAbout the Contributors_GoBack_GoBack
Thunderbird Global Mindset

®
Inventory
Jiangyi Qiu
08-Feb-18
1/20© 2016 Thunderbird School of Global Management. All
Rights Reserved.
Jiangyi Qiu
What is Global Mindset?
Global Mindset is the ability to influence others who are
different than you. It is a critical combination of
intellectual, psychological and social capital:
• Intellectual Capital refers to your global business savvy,
cosmopolitan outlook, and cognitive
complexity.
• Psychological Capital refers to your passion for diversity,
quest for adventure, and your self-
assurance.
• Social Capital refers to your intercultural empathy,
interpersonal impact, and diplomacy.
Why is Global Mindset Important?
Today’s corporations are more globally connected than ever
before. They are in pursuit of global customers,

global talent, global credit, global manufacturing, global
partners, and global supply chains. They have a large
global workforce, use global business and virtual teams, and
need to work with large numbers of groups and
organizations in many parts of the world. As a consequence,
their managers and leaders need to be
effective in working and dealing with people who are different
from them. Their success will depend on their
ability to influence others from many parts of the world to help
achieve their organizational goals. Global
Mindset is a set of individual attributes that help global leaders
and managers do a better job of influencing
others who are different from them.
Can Global Mindset Be Developed?
YES! All elements of Global Mindset can be developed and
improved. But it is true that some aspects of
Global Mindset are easier to develop than others. During the
feedback workshop, you and your colleagues,
working individually and in groups, will identify ways of
improving your own, and your group's stock of Global
Mindset. At the end of the session, you will receive
Thunderbird's suggestions on how to improve your Global
Mindset.
Rights Reserved.
QiuJiangyi
QiuJiangyi
QiuJiangyi

QiuJiangyi
Jiangyi Qiu
About This Report
This report is designed to provide you with feedback on your
approach in dealing with people from other
cultural and geographic backgrounds. Increasingly, managers
are expected to work effectively with
individuals and groups from different parts of the world.
Therefore, the ability to master such relationships is
becoming more important. The purpose of this feedback report
is to help you find ways of improving your
ability to deal with people from diverse cultural settings. The
report provides feedback on your personal
profile of Global Mindset, as well as your group's profile of
Global Mindset.
The report is based on the Thunderbird Global Mindset
Inventory, a scientifically based instrument that has
been used to collect data from thousands of respondents
working for global organizations in many
countries. The instrument has strong scientific properties and
has been developed through a rigorous
scientific process. Here are the details of your report:
Page 4 Your overall profile of Global Mindset
Page 5 The complete structure of Global Mindset
Page 6 Detailed explanation of Intellectual Capital

Your profile of Intellectual Capital
Page 8 Detailed explanation of Psychological Capital
Page 9 Your profile of Psychological Capital
Page 10 Detailed explanation of Social Capital
Page 11 Your profile of Social Capital
Page 12 Your overall profile of Global Mindset (repeat of page
4)
Page 13 Your Global Mindset profile sorted from your highest
score to the lowest score.
Page 14-15 The Group Profile
Page 16 Global Mindset Scores Summary
Page 17-19 Your Personal Observations
Good Luck!
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Your Global Mindset Profile

Intellectual
Capital
Psychological
Capital
Social Capital
Your Score Group Mean (n=24) Grand Mean (n=34,416)
1 2 3 4 5
Not at all To a small extent To a moderate extent To a large
extent To a very large extent
Note: The light gray bars below the Group Avg. and the Grand
Mean indicate the range of min. and max. values for the Group
and Grand Mean respectively.
TEST
TEST
TEST
3.24
3.28
3.26
3.21
3.58
3.86

3.10
3.51
3.48
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
On the following pages you will receive your scores on all of
the above elements of
Global Mindset.
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Intellectual Capital
Your Intellectual Capital reflects your global business savvy,
your cosmopolitan outlook, and your cognitive
complexity. The following are major elements of Intellectual

Capital.
Global Business Savvy:
• Knowledge of global industry
• Knowledge of global competitive business and marketing
strategies
• Knowledge of how to transact business and assess risks of
doing business internationally
• Knowledge of supplier options in other parts of the world
Cosmopolitan Outlook:
• Knowledge of cultures in different parts of the world
• Knowledge of geography, history, and important persons of
several countries
• Knowledge of economic and political issues, concerns, hot
topics, etc. of major regions of the world
• Up-to-date knowledge of important world events
Cognitive Complexity:
• Ability to grasp complex concepts quickly
• Strong analytical and problem solving skills
• Ability to understand abstract ideas
• Ability to take complex issues and explain the main points
simply and understandably

Individuals with high scores on Intellectual Capital tend to be
very knowledgeable about their global industry.
They understand how the industry operates and how global
competitors position themselves to generate
competitive advantage. They also know how global customer
markets behave and how various competitors
attempt to target their markets. They have an understanding of
supply chain options and issues in their
industry and are cognizant of country risk analysis in global
decision making.
A high score on Intellectual Capital reflects strong
understanding of culture, history, geography, and political
and economic systems in different parts of the world. It also
reflects the ability to understand the complexity of
global business and the ability to find appropriate solutions to
complex problems.
TEST
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Your Intellectual Capital Profile
Global Business
Savvy

Cosmopolitan
Outlook
Cognitive
Complexity
1 2 3 4 5
Your personal observations:
TEST
TEST
TEST
3.63
2.94
2.61
3.29
3.16

3.22
2.80
3.75
3.93
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Psychological Capital
Psychological Capital reflects your passion for diversity, quest
for adventure, and your self- assurance. The
following are the major elements of Psychological Capital.
Passion for diversity:
• Enjoy exploring other parts of the world
• Enjoy getting to know people from other parts of the world
• Enjoy living in another country
• Enjoy traveling
Quest for Adventure:
• Interest in dealing with challenging situations

• Willingness to take risk
• Willingness to test one’s abilities
• Enjoy dealing with unpredictable situations
Self-Assurance:
• Energetic
• Self-confident
• Comfortable in uncomfortable situations
• Witty in tough situations
Individuals who score high on Psychological Capital, tend to
have a passion for diversity which leads them to
enjoy exploring other parts of the world, other cultures, and
other ways of doing things. They enjoy meeting
people from other countries and living in other corners of the
world. They tend to consider themselves as
citizens of the world and enjoy the opportunity to learn about
other cultures and peoples.
A high score on Psychological Capital reflects a high level of
self confidence, a sense of humor, and a
willingness to take risks. It reflects a desire to challenge oneself
and the ability to thrive in unpredictable and
complex environments.
TEST
Rights Reserved.

QiuJiangyi
Jiangyi Qiu
Your Psychological Capital Profile
Quest for
Adventure
Self-Assurance
Passion for
Diversity
1 2 3 4 5
TEST
TEST

TEST
3.40
3.62
3.77
3.20
3.45
3.66
3.03
3.67
4.15
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Social Capital
Social Capital reflects your intercultural empathy, interpersonal
impact, and diplomacy. The following are the
major elements of Social Capital.
Intercultural Empathy:

• Ability to work well with people from other parts of the world
• Ability to understand nonverbal expressions of people from
other cultures
• Ability to emotionally connect to people from other cultures
• Ability to engage people from other parts of the world to work
together
Interpersonal Impact:
• Experience in negotiating contracts/agreements in other
cultures
• Strong networks with people from other cultures and with
influential people
• Reputation as a leader
Diplomacy:
• Ease of starting a conversation with a stranger
• Ability to integrate diverse perspectives
• Ability to listen to what others have to say
• Willingness to collaborate
Individuals who receive high scores on Social Capital, are
better able to build trusting relationships with
people who are different from them. They are viewed as
effective leaders and diplomats in the sense that they
are good listeners, at ease in conversations with other, and are

able to bring divergent views together and
develop consensus among different parties.
A high score signifies the ability to show empathy, and
emotionally connect to people from other parts of the
world. It reflects the ability to engage others and to have an
extensive network of friends and colleagues in
different countries.
TEST
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Your Social Capital Profile
Interpersonal
Impact
Intercultural
Empathy
Diplomacy
1 2 3 4 5

TEST
TEST
TEST
3.33
3.13
3.03
3.17
3.52
3.44
2.80
3.88
3.97
Rights Reserved.

QiuJiangyi
Jiangyi Qiu
Your Global Mindset Profile
Intellectual
Capital
Psychological
Capital
Social Capital
1 2 3 4 5
TEST
TEST
TEST
3.24

3.28
3.26
3.21
3.58
3.86
3.10
3.51
3.48
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Your Detailed Global Mindset Profile
Global Business Savvy
Quest for Adventure
Interpersonal Impact
Cosmopolitan Outlook

Self-Assurance
Intercultural Empathy
Passion for Diversity
Cognitive Complexity
Diplomacy
1 2 3 4 5
Note: The light gray bars below the Participant's score indicate
the range of min. and max. values for the Group
This chart is designed to show your nine dimensions of Global
Mindset sorted from the highest to the lowest
score based on your self-assessment. The dimensions are color
coded. Dimensions of Intellectual Capital
are shown in yellow boxes and borders. The three dimensions of
Psychological Capital are displayed in blue
boxes and borders. And dimensions of Social Capital are
displayed in red boxes and borders.
A score of 4 or higher means that you believe you are good at
that dimension, although there are still things
you can do to improve. A score of 3 to 4 means that you are
pretty good at that dimension but need to get
better at it. A score of 3 and below means that it is urgent for
you to think seriously about a plan to improve
that particular dimension. Your success as a global leader
requires serious attention to that dimension.

TEST
TEST
TEST
TEST
TEST
TEST
TEST
TEST
TEST
3.63
3.40
3.33
3.29
3.20
3.17
3.03
2.80
2.80

Rights Reserved.
QiuJiangyi
Jiangyi Qiu
The Group Profile of Global Mindset
Psychological
Capital
Social Capital
Intellectual
Capital
Group Mean (n=24) Grand Mean (n=34,416)
1 2 3 4 5
This chart shows the profile of your group's Global Mindset and
how it compares to our Grand Mean sample
of global managers. It is sorted from the highest score to the
lowest on the three categories of Intellectual
Capital, Psychological Capital, and Social Capital.
TEST
TEST

TEST
3.58
3.86
3.51
3.48
3.28
3.26
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
The Detailed Group Profile of Global Mindset
Diplomacy
Cognitive Complexity
Passion for Diversity
Quest for Adventure
Intercultural Empathy

Self-Assurance
Cosmopolitan Outlook
Interpersonal Impact
Global Business Savvy
Group Mean (n=24) Grand Mean (n=34,416)
1 2 3 4 5
This chart shows the detailed profile of your group's Global
Mindset and how it compares to our Grand Mean
sample of global managers. It is sorted from the highest score to
the lowest on the nine dimensions of Global
Mindset. The dimensions are color coded. Dimensions of
Intellectual Capital are shown in yellow boxes and
borders. The three dimensions of Psychological Capital are
displayed in blue boxes and borders. And
dimensions of Social Capital are displayed in red boxes and
borders.
A score of 4 or higher means that the group believes it is good
at that dimension, although there are still
things you can do to improve. A score of 3 to 4 means that the
group is pretty good at that dimension but
needs to get better at it. A score of 3 and below means that it is
urgent for the group to think seriously about a
plan to improve that particular dimension. Your success as a
group of global leaders requires serious
attention to that dimension.

TEST
TEST
TEST
TEST
TEST
TEST
TEST
TEST
TEST
3.88
3.97
3.75
3.93
3.67
4.15
3.62
3.77
3.52
3.44
3.45
3.66

3.16
3.22
3.13
3.03
2.94
2.61
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Global Mindset Scores Summary
Jiangyi Qiu 3.21 3.10 3.24 3.03 3.40 3.20 3.17 3.33 2.80 3.63
2.80 3.29
Group Mean 3.58 3.51 3.28 3.67 3.62 3.45 3.52 3.13 3.88 2.94
3.75 3.16
Max 4.94 4.77 4.09 4.82 5.00 5.00 4.50 5.00 4.80 4.00 5.00 4.43
75th Percentile 3.88 4.11 3.70 4.14 3.90 3.80 4.04 3.75 4.60
3.63 4.20 3.60
50th Percentile 3.65 3.45 3.30 3.61 3.60 3.50 3.59 3.33 4.00
3.00 3.80 3.07

25th Percentile 3.22 3.02 2.96 3.39 3.15 2.80 3.09 2.33 3.35
2.22 3.40 2.68
Min 2.58 1.95 2.42 2.61 2.40 2.20 2.17 1.33 2.00 1.75 2.40 2.14
Grand Mean 3.86 3.48 3.26 4.15 3.77 3.66 3.44 3.03 3.97 2.61
3.93 3.22
Max 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
75th Percentile 4.30 3.95 3.72 4.83 4.20 4.20 4.00 3.67 4.40
3.25 4.40 3.86
50th Percentile 3.92 3.50 3.25 4.33 3.80 3.60 3.50 3.00 4.00
2.63 4.00 3.14
25th Percentile 3.50 3.02 2.79 3.67 3.40 3.20 2.83 2.33 3.60
1.88 3.60 2.57
Min 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Rights Reserved.
QiuJiangyi
QiuJiangyi
QiuJiangyi
Your Score
Jiangyi Qiu

Your Personal Observations
1. What is your assessment of the need for you to possess a
global mindset? Now? Five years from now?
2. What are the consequences of your doing nothing to further
develop your global mindset?
3. What are your areas of relative strength?
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
4. What are your areas of developmental opportunities?
5. What are your priorities over the next 6 to 12 months for
further strengthening and leveraging your areas of
strength?
Rights Reserved.
QiuJiangyi

Jiangyi Qiu
6. What are your priorities over the next 6 to 12 months for
improving your areas of developmental
opportunity?
7. What are your top 3 to 5 action plan steps for the next 6 to 12
months?
Rights Reserved.
QiuJiangyi
Jiangyi Qiu
Rights Reserved.

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