Factors of Political Opinion Formation

Ideological orientation is an important factor in forming political opinions, but how do ordinary citizens, who have not developed a consistent set of political attitudes and beliefs, form opinions? Beyond ideological orientation, other factors help shape public opinion: an individual’s own self-interest, a comprehended set of political information, a series of opinion schemas, and the influence of political leadership (Janda, Berry, & Goldman, 1995).

When individuals might benefit or suffer from a particular government policy, they generally respond in terms of their own best interest, unless they feel that acting in one’s self-interest is immoral. Many citizens have no clear opinions on issues that do not affect them personally.

When individuals lack understanding on a political issue, they tend to respond with an opinion based on the latest information received, which can cause polls to fluctuate. Political information obtained through the mass media and filtered through an individual’s political socialization can produce a wide variety of opinions. However, lack of political information does not inhibit most individuals from expressing an opinion.

Various facts, images and perceptions can be mapped into what is called an opinion schema, which can be used as a proxy for a formal political ideology and serve as a guide for forming an opinion on a specific issue, while the opinion is still influenced by an overarching political ideology. These schemas are a means of understanding the images, connections, and values that people attribute to a subject.

Finally, in the absence of specific information, citizens can be swayed for or against a government policy by highly influential political leaders. Public opinion is often more often shaped by the personalities in government via the mass media than a force that actually shapes the government.

Reference

Janda, K., Berry, J.M., & Goldman, J. (1995) The challenge of democracy: Government in America, (4th Ed.). Boston, MA: Houghton Mifflin.

Did Babies Build Roads in Europe? Presumed Causation Between Correlated Variables

A frequent problem with interpretation of data in the social sciences and business research is presumed causation between correlated variables. Two variables can exhibit perfect linear correlation yet not be in a cause and effect relationship. Generally, we need to satisfy at least three stipulations to argue for a cause and effect relationship:

1. Temporal precedence -- the cause happens before the effect.
2. Association between the independent variable (i.e., cause) and dependent variable (i.e., effect) – a linear, geometric, exponential, logarithmic, or some other covariation exists.
3. No reasonable alternatives -- upon careful inspection there are no other reasonable explanations for why the cause would result in the effect.
   

For example, between the years of 1945 and 1962, there were dramatic increases in the number of new roads built in Europe and the number of live births in the United States. (Note that I read this comparison somewhere but I do not recall; I use it frequently when teaching undergraduate statistics, because the face absurdity of the comparison makes the lesson easily remembered by students.) Were babies building roads in Europe? Not likely. Were roads in Europe making it possible for more babies to be born in the good 'ole U.S.A.? Not likely. See, variables can be perfectly correlated and probably unrelated. That is, there is no direct relationship between those variables; a confounding, third variable could be related to both of the correlated variables, which we might assign in this case to the drastic social upheaval that occurred during World War II.

In business research, causation and correlation are frequently confused as well. For example, are the dollars invested in showroom inventory the cause of sales revenue at the retail furniture store? Are the dollars of sales revenue generating investments in new showroom inventory? Still, is a third, confounding variable, such as consumer demand, somehow affecting both? In many cases, the discrete causal variable is not being measured, but at least the three stipulations above must be satisfied to argue for causation between any two known variables.

Enterprise Information Systems: The Problem of Integration

The time and attention of humans is required to integrate the information created, analyzed, and stored by departmental functions. Many impediments to accounting information system integration within the enterprise are easily identifiable, the chief of these being the existence of disconnected information systems that are native to individual functional areas of the organization. These native, function-based information systems are not integrated in any automated sense; instead, cross-functional information systems are integrated by the ultimate software system: people.

Of course, the entire organization must grow to survive, and business process growth inevitably requires storage and retrieval of additional information in departmental database servers, the nexus of business process growth. Such inter-departmental integration challenges are common, as managers require performance reporting that reflects a highly fluid business environment. Even the information systems within departmental functions can grow and morph to introduce intra-departmental integration challenges.

Integration can be partially achieved by integrating similar types of systems and finally the reporting output from those systems (Dunn, Cherrington, & Hollander, 2005). Information system planning can reduce the number and scope of information pockets stored in the various functional silos within the business enterprise by building systems from scratch or obtaining enterprise wide accounting systems. The key concept to understand in information system integration is to re-engineer business processes along with concomitant accounting information systems from the ground-up and avoid partial patching of information systems to achieve necessary integration. However, the low hanging fruit in accounting system re-engineering may be simply capturing and recording the same information with shorter elapsed time and fewer inaccuracies, not necessarily re-engineering the entire business process. The trade-offs seem a matter of project scope.

Reference

Dunn, C., Cherrington, J.O., & Hollander. A.S. (2005). Enterprise information systems: A patterned-based approach, 3rd edition. New York: McGraw-Hill/Irwin.

What is Rebranding?

Rebranding is one of those terms that has cropped up in the last decade or so. Branding means to link a name, trademark or service mark with a product or service. However, rebranding can mean both to assign new name, etc. to a product or service and it can mean to reposition an existing brand. That is, rebranding can mean to make the brand mean something else. Consider that brands have multidimensional properties, such as brand attitude (i.e., consumer's perspective) and brand personality (i.e., manufacturer's perspective); in which case, to rebrand we would start by defining the manufacturer's perspective and try to shape the consumer's perspective toward that end. I realize that this is slightly different than what you'll read in Wikipedia, but I apologize for not updating that page yet...

Accounting Assumptions, Principles, and Constraints: A Short Review

Now, let’s backtrack a little to a short review of accounting theory to consider a few concepts useful to the process of extracting meaning from financial statements. All the accounting rules behind Generally Accepted Accounting Principles (GAAP) may seem overly complicated but they can be understood mostly as a complex give and take between the following accounting assumptions, principles, and constraints (Keiso, Weygandt, & Warfield, 2002). By the way, these concepts underpinning how financial statements are constructed really help unite the themes of most MBA-level financial accounting courses.

Accounting Assumptions

Economic Entity – the financial statements assume that we are dealing with a single organization, but this gets tricky when we want to slice and dice the financial statements to understand what is happening with a particular product or division within the organization.

Going Concern or Continuing Operations – we assume that the economic entity has a meaningful past and future for purposes of recording costs of assets and inventory, and decision making based on those costs in the present.

Monetary Unit – we keep score with money and we typically ignore inflation and deflation of currencies; the value and unit of currency is assumed to be stable, unless we are transacting with international divisions that use other currencies besides the U.S. Dollar.

Accounting Periods –we assume that it makes sense to have monthly, quarterly, and annual accounting periods where we stop to assemble financial statements. Fiscal years sometimes don’t align with calendar years.

Accounting Principles

Historical Costs – assets (and liabilities) are typically reported at the historical cost and then adjusted with fair market value when the needs of reporting require it. However, the cost of an asset 10 years ago does not reflect what it is worth to another buyer or the cost of replacement.

Revenue Recognition – we record revenues when they are realized (i.e., we become aware) and earned (i.e., we do or ship something). This is one of challenges that accrual-based accounting is trying to solve. Just because we received cash from a sales order doesn’t mean that we did everything we had to do to earn the revenue or ship the product. Also, we may have sold something but not received cash.

Matching Expenses to Revenues – we match expenses to the revenues, so recorded profit in the income statement is based on the best fit of revenues and expenses. This is another feature of accrual-based accounting; expenses are aligned with associated revenues in the same or future accounting period. For example, most fixed expenses for buildings and equipment must be depreciated to align the expense with the revenue that was earned.

Full Disclosure – in general, accountants record and report every bit of information in the numbers and footnotes of financial statements that fairly represent the activities of the business entity in that accounting period. That is fine and dandy but for decision-making we want to leave out or add things that are relevant to the decision we are making.

Accounting Constraints

Cost and Benefit Paradox – there is a very real cost to recording and reporting accounting information. Hence, some potentially important events relevant to a business may not be disclosed because it was too expensive or cumbersome to gather the data. We must read between the lines of financial statements and add information to which we have access in order to make the best decisions.

Materiality – small financial events are not as important large financial events to the typical, reasonable reader of financial statements. That makes sense but our decision making process may be different from the typical user of financial statements as understood by the accounting folks; some small financial event may not be disclosed even though it is very relevant to our decision.

Industry Practice – one size does not fit all when reporting financial activities. Some industries have peculiar products/services or have special ways of distributing the products/services to customers, so we cannot understand an Internet retailer the same way we would analyze and automobile manufacturer.

Conservatism – to avoid investor misinterpretation of assets and income, accountants choose accounting methods that do not overstate what the business owns or the profits achieved. Again, this is an important consideration for financial reporting, but we need to modify the notion somewhat to make decisions about the business between accounting periods.

Important! As an MBA-level manager, it will be your responsibility to challenge the assumptions behind accounting principles and constraints, when interpreting financial statements to make decisions. It is incumbent upon MBAs to logically and judiciously tweak available financial information to make sound financial or investment decisions that put our organizations ahead of the competition.

Reference

Keiso, D, Weygandt, J, & Warfield, T. (2002). Intermediate Accounting, 11th Ed. New York, New York: John Wiley & Sons.

Six Disciplines Business Excellence Franchise

Looking for an interesting MBA-level professional services franchise or career opportunity? Have a look at Six Disciplines (http://www.sixdisciplines.com/). The Six Disciplines (TM) Methodology is based on practicing a series of repeatable cycles to promote executive, manager, and organizational learning. Step 1 requires the team to decide what is important. Step 2 involves setting goals that exercise leadership. Step 3 promotes alignment of internal groups and systems. Step 4 fosters working the plan. Step 5 encourages team members to innovate toward the purpose behind the goal. Step 6 uses what was learned as 360 degree feedback for improvement in the next cycle. I like this cookie cutter approach; the Six Discplines system could work for many medium-sized businesses that have lost the focus provided by an entrepreneurial presence. What I thought was nonsense was the notion of an annual performance appraisal in Step 6; personal feedback should be continuous, as team's change too fast and feedback more than a few weeks old is typically irrelevant to the person and the process.

Note: all copyrights and trademarks are owned by their respective holders.

Reference

Six Discplines (2007). http://www.sixdisciplines.com/

Necessity of Leadership Charisma

The human quality of charisma can be best characterized as human expressiveness (Kouzes & Posner, 1993). As Kouzes and Posner (1993) suggested, the term charisma has been used to describe so many different variations of qualities expressed by leaders that it has lost a great deal of its true meaning. The whole idea of the type of leadership quality that leaders need to be attractive to followers has become a bit of an overworked cliché.

What the Kouzes and Posner (1993) discovered in their research is that leaders need an attractive human expressiveness that involves sharing, touching appropriately, smiling and making body movements that gain the attention of those being led. As to whether leaders need charisma for leadership, it is difficult to imagine that a leader could communicate effectively with followers without some form of charisma. Another situational factor may be that groups that are formed in an unstructured fashion will simply look to another person in the group that communicates in a way that gains their confidence and inspires them to act in accordance to the direction set forth by the leader. This is to say, the leader with the most influential form of charisma as defined above will rise to be the leader. In a workplace setting, where groups are formed in a structured fashion, an appointed leader may be charged with leadership and not have the strongest expressiveness tendencies or charisma within the group.

With regard to whether managers who are judged less adept at human expressiveness can lead effectively, depends a large part on the situation, the task faced by the group and whether the group was formed in a structured or unstructured context. In sum, the level of charisma required to get the job done all depends on the situation, but in general, all leaders must possess the ability to express themselves in a way that resonates with and gains the confidence of those who would follow.


Reference

Kouzes, J.M., & Posner, B.Z. (1995). The leadership challenge (2nd ed.). San Francisco, CA: Jossey-Bass.