Supply Chain/Operations Case Study, Courtesy of Jim Henson

How could a business case study get better than this?  Building on the previous two posts, as well as my other passions, this 1963 Bell Data case study features:

  1. A business consulting case (operations/supply chain/communications)
  2. A Jim Henson Muppet
  3. A robot
  4. Rocket ships

A great example of each.

Enjoy, via @RobotCity_Chi

Frogs and Pigs Can Talk, Penguins and Chickens Can’t

From a NYTimes piece on Bret McKenzie’s work writing songs for the new Muppet Movie:

It’s a sacred endeavor because, to a certain generation, of which McKen­zie is part (he is 35), the Muppets are a found­ational part of childhood; writing a song for Kermit is a bit like writing a song for a blankie that millions of children shared. And it’s daunting because, well, these are the Muppets, and the Muppets have rules. And as of 2004, the Muppets, as a property, are owned by Disney. And Disney has rules.

For example: At one point, McKenzie wrote a lyrical joke for Kermit, in which he would sing, “I remember when I was just a little piece of felt.” That didn’t fly. “I was told: ‘You’re not allowed to do that. The Muppets have always existed. You can’t break down their world.’ ” Another rule: Frogs and bears and pigs can talk, but penguins and chickens can’t. They can cluck or squawk musically, but they can’t say words. “So I was like, ‘Can we get the penguins to sing?’ And they’d say: ‘No. Penguins don’t sing.’ ”

It reminded me of an old Wired Magazine article about the Star Wars canon.  When I was in grad school, we reviewed a case study that looked at the way content owners like Disney or Time Warner managed their characters like consumer packaged goods companies managed their brands – creating rules for where they can appear, what their behaviors are like, what the uniforms or clothes look like, and which cross-promotions are appropriate, and which verboten, similar to the way corporate marketing departments will regulate how their logos can appear, the fonts you can use, and the proper spellings of their products.

How Elite Firms Hire

Bryan Caplan is linking to a new study that covers an oft-discussed, but poorly researched, area of professional services firm management: the actual hiring process at elite firms in law, finance, and consulting.  (The actual paper by Lauren Rivera, “Ivies, Extracurriculars, and Exclusion“, Research in Social Stratification and Mobility 2011, is behind a paywall).

Bryan outlines the five key highlights:

  1. Most applications practically go straight in the trash
  2. Evaluators have a lot of slack
  3. Super-elite credentials matter much more than your academic record
  4. Super-elite schools matter because they’re strong schools, not because they’re better at building human capital
  5. Extra-curriculars matter

Ask anyone at a major firm in finance, law, and consulting, and you’ll here about the dedication that every professional has to the hiring process, that because talent is the cornerstone of any successful firm, everyone up to the partner level is heavily involved in recruiting and selection.  You’ll hear paeans to diversity in the firm, not just in terms of race or ethnicity, but also backgrounds and interests.

The truth, as Rivera reveals, is more mixed.  Professionals at all levels are indeed involved in hiring, but they’re also busy with client work, and resume reviews are quick skims. And despite practicing professions dedicated to rationality, they’re still humans who suffer from the same hiring biases as any other manager.  While they talk about diversity at recruitment events, they look for signals of people who are just like them, especially when it comes to attending an Ivy League university, which anyone who has tried to break into a top-tier firm from a school off the standard recruiting schedule can tell you.

As Megan McCardle points out, this isn’t just bad for society, it’s terrible for the firms:

Forget about the effects on society, though; this is terrible for organizations.  You see this in Washington all the time–a friend who went to a lesser-known state school said he could always tell the people he wasn’t going to like when he met them at cocktail parties, because the minute he told them where he’d gone to school, they became extremely interested in going to get another drink or find the cheese dip.  This is one of the smartest, most consistently interesting and original, most talented writers I know.  Having actually attended one of those elite schools that apparently make you fascinating, I can attest firsthand that statistically, the elitists were vanishingly unlikely to be as interesting as the person they abandoned because he’d gone to a state college.


The Ivy League is full of smart, interesting people.  But it is not full of all of the smart, interesting people in the country, or even a majority of them.  And given the resumes required to get there, it produces a group of people who are narrow in certain predictible ways.  (I include myself in this: just because I can see it operating doesn’t mean I can escape it.)
The problem is that actually seeking out a wide variety of graduates would be much more expensive and time consuming.  Why spend the effort searching for “best” when you can easily access “very, very good”?


It’s not actually a great personal tragedy to be turned down by McKinsey (she said, from personal experience); there are still a lot of interesting and remunerative jobs out there.
But it may well be a corporate tragedy for McKinsey and its clients.

The homogenization of top-tier professional firms might not be as bad as Megan makes it sound.  At their core, these firms are looking for people who are willing to work extremely long hours, with intense focus, on work that might be analytically demanding, but isn’t usually that interesting.  Not coincidentally, that’s what elite universities usually screen for too, so university admissions serve as a useful shorthand.  It’s also why many of these firms are finding new sources of talent in burnt out PhD students – what better way to prove that you’re willing to work really hard at something you don’t enjoy than spending five years on a degree you don’t even want?

Rivera’s finding about extra-curriculars, while it surprises Bryan, lines up fairly well with how I’ve heard professionals describe “diversity” in their firm.  If you listen closely, diversity falls into one of two categories.  First, there’s diversity-of-academic-background, which means that there are people running around who went to the same elite institutions, but got a degree in something other than business or economics.  The second is diversity-of-outside-interest, and usually involves the anecdote about the partner who’s in an improv group, or the managing director who likes to build custom motorcycles.

These people are interesting in the sense that they’ve shown a fanatical devotion to at least one thing outside their core practice, but I’m not sure if it’s what I’d rely on to bring intellectual diversity to my firm.  And it’s intellectual diversity that leads to better outcomes for clients, as  Scott Page discusses in his book The Difference (I wish I could quote from it, but my copy is in storage in Detroit).

In contrast, I’ve seen a number of companies, both professional and corporate, that practiced what I call”talent arbitrage,” recruiting the best and brightest from top-tier state universities that fly under the radar of the usual hiring elite .  GE used to be well known for this practice, but I’ve also seen it more recently in rapidly growing software companies, profitable legacy manufacturers, and highly successful specialist consultancies.  It takes a much more sophisticated human resources function and dedication to talent management than most companies employ, but it’s also a way to hire great people without having to offer the astronomical salaries now needed to recruit from the Ivy League.


Edward Luttwak on Strategy and Organizational Behavior

From this Tablet Interview, Edward Luttwak on Strategy:

[Strategic thinking is] a gift like mathematics. The paradoxical logic of strategy contradicts the logic of everyday life, it goes against all normal definitions of intelligence we have. It only makes sense if you understand the dialectic

And on styles of leadership and bureaucracy:

But when such a person is the head of a department, the whole department is actually paralyzed and they are all reduced to serfs and valets. Therefore, what gets applied to a problem is only the wisdom of the aforementioned wily head of the department. All the other talent is wasted, all the other knowledge is wasted.

Now you have a choice: You can have a non-wily head of a department and the collective knowledge and wisdom of the whole department, or else you can have a wily head and zero functioning

Visualization: Surnames of Invitees to Nita’s Birthday

This weekend, I’ll be attending a birthday party for my friend Nita.  Happy Birthday Nita!  To help her celebrate, I created the following graph of surnames found in her Evite:


Firm Culture

In response to disturbing changes at my firm, I sent the following e-mail to our regional director of professional services:

I’m growing increasingly worried about the culture at [Firm].  When I joined, I was led to believe that certain things were important here, but I’m starting to think that we’re losing some of what makes us who we are.  For instance, I feel like every day I notice more and more new people in the cafeteria, yet the level of donuts has remained relatively constant.  Four years ago, it was communicated to me that when you joined [Firm], if you wanted a successful career you brought in donuts within your first week or two.

I’m concerned that one of two things has happened:

  1. Donuts are still important, and we are not setting up our new consultants for success by failing to inform them of that.
  2. Donuts are no longer important, in which case we are starting to lose grasp on our values and may need to rethink who we are and how we integrate new people onto the team

At first, I thought this may have been my perception – I was out of the office with clients for most of March and April.  However, as the graph below demonstrates, “New People” is rising significantly faster than “Donuts.”  This is even more disconcerting because neither of the two donut events were the result of new hires, which means we may be doing a poor job of communicating this tradition.


I know how important the firm culture is to you, so I thought I’d bring this concern to your attention.  Never one to just throw stones, I thought of some suggestions that may help us keep this vital piece of who we are:

  1. Integrate the importance of bringing donuts your first week into the new employee orientation
  2. Have each new employee pass on the tradition to the next new employee
  3. Create a “Donut Captain” responsible for holding new employees accountable
  4. Pass out Dunkin Donuts coupons to employees with their benefits forms
  5. Since we are bringing in a large class of new employees, fire the last new employee to bring in donuts

I’m in meetings with clients this week, but I know how important this is, so if you want to brainstorm I’ll be sure to make time.

Electronic Maintenance Records

From The Onion, “Quick Lube Shop Masters Electronic Record Keeping Six Years Before Medical Industry

“We figured that a basic database would help us with everything from scheduling regular appointments to predicting future lubrication requirements,” said the proprietor of the local oil-change shop, Karl Lemke, who has no special logistical or programming skills, and who described his organizational methods, which are far more advanced than those of any hospital emergency room, as “basic, common-sense stuff.”

Monitor Group Under Fire for Qaddafi Project

Monitor Group, the top-tier strategy consulting firm, is in hot water for their relations to Libyan President Muammar Qaddafi, who is currently engaged in a brutal war of repression against his own people.  Mother Jones has the scoop on the project:

But the firm also succeeded on other fronts. The two chief goals of the project, according to an internal document describing Monitor’s Libya operations, were to produce a makeover for Libya and to introduce Qaddafi “as a thinker and intellectual, independent of his more widely-known and very public persona as the Leader of the Revolution in Libya.”

I’m confident that Monitor isn’t the only major consulting firm that engaged with an autocracy to help them gather legitimacy on the international scene, they’re just the guys who got caught when their client decided to respond to peaceful protests with a military crackdown.  

Given the criticism Monitor is now receiving for their work, will it make other consulting firms more hesitant to take on dictators and their governments as clients?  Or will the financial appeal, combined with a genuine belief that they’re helping these countries move towards more democratic government and efficient services for citizens, keep consulting firms engaged?  At the time, I don’t think anyone at Monitor thought there was a problem with what they were doing, but I have to think there’s some serious soul searching going on at the firm right now.

The Breast Ice Cream In Town

Apologies for the pun, but it was hard not to.

An ice cream parlour (you spell it that way on the other side of the pond) in the UK has had their new ice cream flavor confiscated by health authorities:

The ice cream, dubbed Baby Gaga by maker Icecreamists, is made by combining a liter of donated breast milk from a single woman with vanilla pods and lemon zest.

I’ve had ice cream made from goat’s milk, sheep’s milk, and of course good old fashioned cow milk, but human milk is pretty new to me.  The opportunities for innuendo here are crippling.

In an attempt to keep this blog high-brow, I’ll note a blog post at The Guardian that asks why we consider consuming human breast milk a repugnant transaction:

Eww! Ice-cream made out of breast milk! Gross! There’s a good chance that was your first reaction to reading about the Baby Gaga ice-cream being served by the magnificently trend-baiting Icecreamists parlour in Covent Garden, and to be perfectly honest, even after thinking it through for long enough to write this piece, it’s still my reaction.

However, I’m less convinced by her conclusion:

Ultimately, I suspect there’s a power relationship in eating that’s unsettled when we begin to think of our dietary resources as having agency: if this food is willingly given, how am I supposed to feel like the top of the food chain? It’s a power dynamic that probably feeds into the sexual connotations of adults consuming breast milk – yes there is a fetish market, and yes, I’m sure that some of the patrons at the Icecreamists are attracted by something other than the lure of the ultimate natural and free-range food.

I’m not convinced that people get so much pleasure out of dominating animals through factory farms that it unsettles them when a human gives her milk willingly.  For the most part, the closer humans are to animals, either in physical similarity (monkeys), or proximity (dogs and cats), the less likely we are to use them for food.  Academics think this is one of the origins of food taboos, because it’s much easier for disease to spread from animals that we’re closer to, ostensibly the reason health authorities are scanning Baby Gaga.

Changes in Top Law Firm Compensation

The Wall Street Journal reports that the spread between the highest paid partners and their peers at top law firms is growing:

Now some top rainmaker partners at firms in New York, Los Angeles, Washington and Chicago earn $10 million or more a year, compared with $640,000 for the average partner at a U.S. firm, said Jeffrey Lowe, a managing partner at the legal recruiting firm Major, Lindsey & Africa.

Traditional notions of pay equity are falling by the wayside at firms eager to hire and retain proven business generators, whatever their cost, particularly at a time when many companies are reducing spending on outside lawyers. Faced with declining revenues, firms want big-name lawyers who perform mission-critical work and whose billing rates are more resistant to economic downturns.

Rather than a new phenomenon, it’s more likely that this is the continuation of a broader trend.  David Maister identified it in 2006, when he updated his original essay about the One Firm Culture, noting that even the most egalitarian, insular firms are increasing their use of both lateral hires and differentiated compensation:

The one-firm firms have largely avoided the stampede toward individual-based (or profit-center-based) reward schemes. However, since 1985 most one-firm firms have gradually expanded the individual component of their reward scheme (in fact if not in rhetoric) and have increased the total compensation ratio between the highest-paid members and the lowest-paid members.

At Latham, until 1993 the long-term compensation element (known as units) was essentially lockstep, with seniority as the main driver. Under cover of the early 1990s recession, this system was changed. Management’s considered view was that the firm could not operate successfully in the emerging marketplace without providing more incentive for short- and long-term individual performance, particularly on the business development front.

The highest paid partners, based on the WSJ analysis, tend to work at smaller firms – only Skadden cracked the list of both the ten largest firms and the ten with the highest average-partner compensation, where it was #10 and the only firm with more than 200 partners.

Many of the highest paid lawyers in these firms specialize in complex business transactions: high stakes, once-in-a-lifetime deals where incremental experience can add massive value to clients.  As Megan Mcardle put it in an explanation last year of Goldman Sachs’ high fees, “when you have only one chance to get it right, you tend to open up your wallet and pray. So one-shot deals are very, very expensive—a logic that prevails with weddings, funerals, and college diplomas.”  Wachtell, the firm with the highest paid partners in the Journal’s analysis, specializes in mergers and acquisitions, and as the article points out towards the end, banks and hedge funds are now competing for the same talent, driving up compensation relative to other practice areas. 

It will be interesting to see how law firms manage increasing inequality between partners in different practice areas.