A1 Business MOD7 How Does Mindtree Sustain Communities of Practice Case Study Goal: Modules 3-7 you were required to read a case from your course packet a

A1 Business MOD7 How Does Mindtree Sustain Communities of Practice Case Study Goal:

Modules 3-7 you were required to read a case from your course packet and answer a series of questions. The goal is to allow you to apply the strategic concepts and practices studied in each week and to sharpen your analytical, evaluative, and overall case analysis skills in preparation for your final project. This week, you are to carefully read the following Case Study:

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A1 Business MOD7 How Does Mindtree Sustain Communities of Practice Case Study Goal: Modules 3-7 you were required to read a case from your course packet a
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MindTree: A Community of Communities (Links to an external site.)
David A. Garvin; Rachna Tahilyani
Deliverable:

After you have read through the case study, give thoughtful, well-developed responses to these case analysis questions, in a 1 – 2 page Word Document. Upload your document by clicking the Submit Assignment button at the top of this page.

How would you describe the culture at MindTree? What are its strengths and weaknesses?
What is Bhagchi hoping to accomplish as the Gardener? What is your assessment of the Gardening process?
What are the key elements of MindTree’s approach to knowledge management? How effective are they?
How does MindTree create, develop and sustain communities of practice? What role do they play at the company?
How (if at all) does the 5*50 initiative alter the roles and responsibilities of the knowledge management function? What changes (if any) would you propose?

Grading criteria and rubric for this assignment are located in your syllabus and a link to the rubric is provided below. For the exclusive use of M. Esposito, 2019.
9-406-081
REV: MARCH 26, 2007
BORIS GROYSBERG
INGRID VARGAS
Innovation and Collaboration at Merrill Lynch
Early in 2005 Candace Browning, head of Global Securities Research at Merrill Lynch, was
assessing the gains of the previous two years and contemplating the role of collaboration in the
department’s future strategy. The changed environment of Wall Street research since the collapse of
the Internet bubble in 2000 had forced brokerage firms to produce better and more independent
research with fewer resources. At Merrill, research management had concluded that collaboration,
once a luxury, was a must. And the commoditization of research called for analysts to innovate in the
creation of new value-added products.
Browning was in charge of approximately 500 Merrill Lynch analysts worldwide (see Exhibit 1),
most of whom were accustomed to working independently in their own spheres of expertise. Five
years earlier, research analysts had expressed little interest in group efforts, but by 2005 analysts who
had been assigned to collaborative projects expressed willingness to work in teams again. A few
analysts had initiated collaborative projects on their own. But others remained skeptical, arguing that
collaborative work might be valuable for “average” performers, but that it was a burden to star
analysts whose time was better spent elsewhere. Even managers questioned whether every type of
collaboration was worth the effort it demanded.
Browning mentally reviewed the department’s recent collaborative efforts, particularly the three
unprecedented capital-structure reports it had produced over the course of eleven months in 2002
and 2003. The three reports, on the U.S. cable-television industry, U.S. utilities, and the global auto
industry, had been well received. Though published in quick succession, they had been produced by
very different processes and mixes of participants. In all three cases, analysts covering different
regions, industries, and asset classes had worked together to produce high-quality innovative
research. Pleased with the department’s achievements, Browning asked herself which model had the
broadest applicability. In which situations did collaboration work best? Should analysts be assigned,
or merely encouraged, to collaborate? What kinds of incentives should be created? What was the
right number of analysts on a team? What factors were important to consider in selecting team
members? And finally, once a team was in place, how should the collaborative process be structured?
As Browning contemplated these questions, she reviewed the feedback on the capital-structure
reports from participating analysts, clients, and managers. The messages had been mixed. But it was
________________________________________________________________________________________________________________
Professor Boris Groysberg and Senior Researcher Ingrid Vargas prepared this case. Post-Doctoral Fellow Amanda Paige Cowen helped revise the
original version of this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2005 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the permission of Harvard Business School.
This document is authorized for use only by Michael Esposito in Managing Diverse Organizations – MPTM 622-1 taught by Sarah McCue, Georgetown University from Aug 2019 to Feb 2020.
For the exclusive use of M. Esposito, 2019.
406-081
Innovation and Collaboration at Merrill Lynch
up to her to devise a strategy, drawing on the department’s experiences and her grasp of the
changing market for research.
Wall Street Equity Research
Modern Wall Street research began in 1959 with the founding of Donaldson, Lufkin & Jenrette
(DLJ) by three Harvard Business School graduates who found that they could increase trade volume
and commissions by providing in-depth reports on companies to institutional clients. DLJ’s reports
offered qualitative and quantitative analyses of data gathered from a company and its competitors,
suppliers and former employees.1 At that time institutions had accounted for just 30 percent of New
York Stock Exchange volume, but institutional investors came to constitute 70 percent of volume by
the end of the 1960s as pension funds increased their stock holdings.2 Wall Street brokerage firms
eager for larger shares of the 1960s’ go-go trading created research divisions of their own, spawning a
new industry.
Then on May 1, 1975, the SEC deregulated brokerage commissions. The ensuing competition for
the business of institutional investors drove down commission prices to levels that could no longer
support research divisions. Many top research firms closed or merged with larger firms. Others,
including DLJ, ventured into alternative revenue drivers like investment banking and money
management.3 Many firms began paying for research indirectly through investment-banking fees.
Analysts from boutique research departments flocked to full-service investment banks that could
still afford to supply clients with quality research. Merrill Lynch aggressively sought out the best
analysts and paid them unprecedented salaries. Analysts’ rising prominence was boosted in 1972
when the trade journal Institutional Investor (II) began polling institutional clients and publishing an
annual ranking of the best analysts in each sector. (Exhibit 2 explains the survey’s methodology and
criteria.) The II rankings soon became the most influential measure of analysts’ value, and played a
key role in determining star analysts’ compensation. An II-ranked analyst made as much as $1
million in annual compensation, and some earned up to $5 million. In contrast, unranked analysts
generally made $500,000 or less.
In the early 1990s, some feared that the advent of powerful computers and money managers’
mania for quantitative models threatened the future of sell-side research. For a time fund managers
shunned research reports in favor of simple earnings estimates and spreadsheets. “The proliferation
of computers and databases has made it harder for everybody—analysts, portfolio managers and
amateurs alike—to make money the old-fashioned way, by finding stocks whose value is not yet
recognized by the market,” wrote Institutional Investor in 1993.4 But instead, in 1995, the Netscape IPO
ignited the technology and Internet boom, taking the securities business to dizzying heights.
Research was in greater demand than ever, and analysts’ salaries soared. On Wall Street spending on
research reached an estimated $8 billion in 2000.5
Hard Times
In 2000, the value of many Internet and technology stocks declined sharply, and research analysts
that had promoted these stocks came under attack. Critics contended that analysts had issued
favorable research reports as a way to win investment banking business for their firms, rather than
because of beliefs about potential investment returns. Investment banking business translated into
lucrative fees for the firm and healthy bonuses for analysts that helped to land clients. New York
Attorney General Elliot Spitzer launched an investigation into these conflicts of interest, and
2
This document is authorized for use only by Michael Esposito in Managing Diverse Organizations – MPTM 622-1 taught by Sarah McCue, Georgetown University from Aug 2019 to Feb 2020.
For the exclusive use of M. Esposito, 2019.
Innovation and Collaboration at Merrill Lynch
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eventually reached a settlement with ten of the largest investment banks in 2003. The terms of the
Global Settlement required Wall Street firms, including Merrill Lynch, to pay $875 million in
penalties, enact structural reforms, and enhance disclosures. The reforms and disclosures were
intended to reduce bias in research reports and to make research analysts more independent by
limiting their ability to solicit investment banking clients.
To make matters worse, trade volume on the NYSE and NASDAQ had dropped significantly since
2000, and commission rates were in decline. (See Exhibit 3.) After climbing 93 percent between 1997
and 2000, research spending on the Street fell with the collapse of the 1990s stock bubble and
dropped further after the regulatory changes.6 Budgets were cut mainly by laying off staff and
reducing compensation, which accounted for about 75 percent of costs.7 By early 2005, the seven
largest Wall Street brokerages had cut spending on research by more than 40 percent since 2000.8
Yet research continued to provide brokerage firms’ key competitive advantage, according to
Institutional Investor. Buy-side firms—that is, institutional clients—rated “quality of research and
ideas” and “quality of and accessibility to company contacts” as the top two factors they considered
when choosing a brokerage firm.9 These circumstances forced Wall Street research departments to
look for new and creative ways to add value for their clients.
The Advent of Hedge Funds
Meanwhile, as commissions from traditional institutional investors declined, another source of
revenue was on the rise. Hedge funds had proliferated in number and assets since the 1980s, and
were challenging mutual funds for preferred-client status at investment banks. With over $1 trillion
in assets in 2005, hedge funds were attractive brokerage clients; they traded frequently and were
usually willing to pay rack commission rates.10 Hedge funds typically turned over their portfolios
three times a year, generating commission dollars in the process.11
Prime brokerage—specialized brokerage services provided to hedge funds, including securities
lending, leveraged trade executions, and cash management—had become a money-maker for
investment banks. In 2003, the estimated $21 billion that hedge funds contributed to global
investment-banking revenues represented 13 percent of total investment-banking income and 35
percent of equities revenues.12 By the following year, revenues from hedge funds had climbed to $25
billion.13 Prime brokers estimated that hedge funds generated as much as 40–70 percent of all
institutional equity commissions.14
Originally aimed at wealthy individuals with over $1 million to invest, hedge funds were taking
in increasing amounts of capital from institutional investors. “The hedge-fund industry will find
growth similar to how the mutual-fund industry did,” said a global managing partner at Deloitte &
Touche. “It is moving from a market that institutional investors considered to be high-risk to one
that’s now being seen as another method to diversify.”15 Led by endowments and foundations, U.S.
institutional hedge-fund investments totaled $60–70 billion in 2004, and were expected to climb to
$300 billion over the next five years as more mutual funds and pension plans joined in.16 Investment
banks vied for hedge funds’ business.
Merrill Lynch’s New Research Regime
Candace Browning became Global Head of Research at Merrill Lynch in early 2003. Formerly
Director of Equity Research for the Americas region, Browning knew that she had to cut costs, but
wanted to regain investors’ trust and restore Merrill’s reputation for value-added research as well.
3
This document is authorized for use only by Michael Esposito in Managing Diverse Organizations – MPTM 622-1 taught by Sarah McCue, Georgetown University from Aug 2019 to Feb 2020.
For the exclusive use of M. Esposito, 2019.
406-081
Innovation and Collaboration at Merrill Lynch
She was also intent on changing the culture of Merrill’s research department. Browning had been
struck by Merrill Lynch’s chilly culture years earlier when she had first joined the firm as an airlines
analyst. “Nobody even said hello. We just worked in our various silos,” Browning recalled. “I have
consciously wanted to change that, because if we all start communicating and sharing our resources
better, not only would we be more efficient but we would give our clients a better product and
employees would feel more connected.” Sara Karlen, who had recently joined Merrill as head of
Human Resources for Research, recalled her initial impression that Merrill Lynch research was “very
hierarchical, with management focused on the senior analysts and on maintaining stature through
the II rankings.” But the situation had since changed, Karlen said:
Today the culture in research is embracing. It’s inclusive. The senior analysts are important,
but there is just as much value placed on the junior analyst and the talent pipeline. There is a
great deal of emphasis on organic growth. Gone are the days when every time we had an
opening, there was a rush to the outside to fill it. We have very talented people that we want to
provide opportunities to, and we want people in research to see this as a long-term career and
not just a five-year relationship.
Steve Haggerty, deputy director of equity research for the Americas, had also seen evidence of
change over his five years at Merrill. “If you look at the recent II rankings, there are Merrill Lynch
analysts on there who were promoted from within, given their resources, and are being successful,”
he pointed out. “That’s a testimony to the beginnings of a culture here. And it’s being created in a
way that makes people feel they’re actually part of something and that they have opportunities
beyond the next paycheck.”
Initiatives to Promote Collaboration
Research management also introduced a number of initiatives to inform analysts about each
other’s work and to promote a more collaborative environment. “Many of these initiatives were built
around that need to move from a star culture where everybody operates as their own individual silo
to a Merrill Lynch franchise culture where no one analyst is bigger than Merrill Lynch,” said
Browning. The new measures, including a departmental newsletter, a series of training seminars, and
a revamped performance-management system, facilitated communication and increased
transparency.
Departmental Newsletter. In 2003 the Americas Equity Research Department inaugurated a
monthly newsletter, The Research Exchange, intended as a forum for sharing information and ideas
rather than a one-directional managerial outlet. One goal of the newsletter was to spur inventiveness
about ways to do things differently. The first edition urged analysts to propose “a few really good
ideas/innovations,” including ideas for new products, nontraditional sources of information or crosssector/cross-discipline projects. A regular feature on “new and noteworthy products” spotlighted
innovative and collaborative work produced in the department. The newsletter also published
departmental metrics, listing analysts by numbers of morning-meeting presentations, non-deal road
shows, outgoing calls logged, and appearances in the Portfolio Manager Review, the department’s
weekly flagship report. Such transparent measures reminded analysts of the importance of regularly
contacting clients and revealed how they were doing relative to others.
Training Seminars. A speaker series known as Research Excellence, launched in 2002, offered a
venue for analysts to meet regularly to share best practices. The sessions, usually several per month,
were open to the entire department and typically featured senior analysts sharing lessons from
experience. Topics included how to build your franchise, tips for becoming II-ranked, effective uses
of the morning call, successful writing styles and stock picking.
4
This document is authorized for use only by Michael Esposito in Managing Diverse Organizations – MPTM 622-1 taught by Sarah McCue, Georgetown University from Aug 2019 to Feb 2020.
For the exclusive use of M. Esposito, 2019.
Innovation and Collaboration at Merrill Lynch
406-081
Revamped Performance-Management System. Beginning in 2002, senior analysts were
required to complete a business plan articulating both their individual and team objectives for the
coming year. Browning saw the business plans as a healthy step for the department. “I’m certainly
not, as a manager, going to tell people specifically what they should do,” she explained, “but both
management and employees need a piece of paper and a road map that reflects what we’ve both
agreed the employee is expected to accomplish.” Each January management provided lead analysts
detailed metrics on their teams’ prior-year performance and asked them to specify goals for the new
year. Metrics included market-cap coverage, ratings and earnings estimate performance, monthly
calls logged, non-deal roadshows, broker votes (feedback from large institutional clients) and
feedback from retail clients, trading market shares and external surveys. Company-wide averages
and medians were supplied for comparative purposes. The business plans also included a section on
team management that asked senior analysts to think about their role as mentors. The metrics
contained in the business plans served as the foundation for analysts’ year-end evaluations, lending
clarity and transparency to the performance-management process.
A Push to Collaborate on Innovative Research Products
Shortly after taking over as head of research in May 2003, Browning articulated her vision for the
department at an internal town-hall meeting. Three forces were driving the imperative of change in
the department, she said: compliance with the terms of the Global Settlement, clients’ demands for
more relevant and action-oriented research, and competition for a shrinking commission base.
Browning mentioned several indicators that demand for high-quality research would rise and
declared that Merrill was in a strong position to deliver. Research needed to be run more like a
business, Browning said, taking a client-focused approach and paying particular heed to the most
profitable clients.
Meeting client needs meant providing value-added research that clients could not get elsewhere.
Examples of recent innovative research and presentation at Merrill included a report on competitive
issues written from the perspective of a fictitious technology-consulting firm, and conference calls
featuring industry experts, such as a consultant on the industrial-gas market and the president of a
health-care coalition, who provided in-depth commentary on their industries. A food analyst acted
on management’s suggestion to look at a specific segment of an industry by producing a guide to the
soybean industry, including how soybean pricing affects companies outside the sector. When
management encouraged analysts to conduct surveys to generate unique data, one analyst surveyed
motorcycle dealers and issued a cautionary bulletin on Harley-Davidson. To promote novel projects,
management introduced “Paid to Ponder” awards recognizing analysts for innovative products and
investment ideas.
Drawing on Merrill’s strengths across geographies and disciplines was a favored way to add new
value. Merrill Lynch was one of perhaps five firms in the world with the resources to do world-class
collaborative projects, said Jerry Labowitz, director of equity research for the Americas, and those
resources should be leveraged:
When you have a limited budget, and you have all this brainpower around you, and feet on
the street in every area of the world, and you’ve got folks down the hall who understand fixedincome products, you’ve…
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