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Benchmark to escape from Lake Wobegon Alan Betts Warwick Manufacturing Group, University of Warwick, Coventry, UK Simon Croom Supply Chain Management Institute, University of San Diego, San Diego, California, USA, and Dawei Lu Warwick Manufacturing Group, University of Warwick, Coventry, UK Abstract Purpose – This paper aims to investigate whether an employee reports an accurate view of the relative performance level of the organisation for which they work. Design/methodology/approach – Utilizes a survey of 2,517 senior managers, managers and team leaders from 120 different organisations in nine different countries. Findings – There is significant and consistent overestimation of performance with 75 percent of the management team reporting that their organisation is above average, and only 5 percent rating their organisation as below average compared to its competitors. A very significant finding is that where there is likely to be a greater degree of knowledge of competitor’s performance estimation improves. Practical implications – The implication of this misrepresentation of the true position is to make it less likely that an improvement initiative will succeed as managers will not be sufficiently motivated to improve an apparently satisfactory status quo. The paper calls for greater focus both on the activity of benchmarking and in the process of spreading knowledge of the benchmarking activity. Originality/value – This paper extends issues such as the Lake Wobegon effect and socially desirable reporting which have been investigated in depth in the area of personal self-assessment and applies them into a different arena, that of the employee’s view of the performance of the organisation. Keywords Benchmarking, Perception, Lake Wobegon, SDR Paper type Research paper Introduction Completing any perception survey holds two distinct but intertwined problems. First is the possibility that people will perceive that their performance is better than it is in reality (the Lake Wobegon effect). Second, that the respondents will answer in a way to present themselves in the best light (socially desirable reporting (SDR)). This paper seeks to see if these well-known phenomena are also present when employees are asked for their views about the performance of the organisation that employs them. If present, the paper will strive to resolve which is the more prevalent. These issues are explored through the analysis of a large-scale management survey (the world-class survey) which has been completed by 2,517 senior managers, managers and team leaders in nine countries. The importance of the issue is that an unwarranted level of perceived performance may make change programs less likely to succeed. The current issue and full text archive of this journal is available at www.emeraldinsight.com/1463-5771.htm Benchmark to escape from Lake Wobegon 733 Benchmarking: An International Journal Vol. 18 No. 5, 2011 pp. 733-744 q Emerald Group Publishing Limited 1463-5771 DOI 10.1108/14635771111166848

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Benchmark to escapefrom Lake Wobegon

Alan BettsWarwick Manufacturing Group, University of Warwick, Coventry, UK

Simon CroomSupply Chain Management Institute,

University of San Diego, San Diego, California, USA, and

Dawei LuWarwick Manufacturing Group, University of Warwick, Coventry, UK

Abstract

Purpose – This paper aims to investigate whether an employee reports an accurate view of therelative performance level of the organisation for which they work.

Design/methodology/approach – Utilizes a survey of 2,517 senior managers, managers and teamleaders from 120 different organisations in nine different countries.

Findings – There is significant and consistent overestimation of performance with 75 percent of themanagement team reporting that their organisation is above average, and only 5 percent rating theirorganisation as below average compared to its competitors. A very significant finding is thatwhere there is likely to be a greater degree of knowledge of competitor’s performance estimationimproves.

Practical implications – The implication of this misrepresentation of the true position is to make itless likely that an improvement initiative will succeed as managers will not be sufficiently motivatedto improve an apparently satisfactory status quo. The paper calls for greater focus both on the activityof benchmarking and in the process of spreading knowledge of the benchmarking activity.

Originality/value – This paper extends issues such as the Lake Wobegon effect and sociallydesirable reporting which have been investigated in depth in the area of personal self-assessmentand applies them into a different arena, that of the employee’s view of the performance of theorganisation.

Keywords Benchmarking, Perception, Lake Wobegon, SDR

Paper type Research paper

IntroductionCompleting any perception survey holds two distinct but intertwined problems. First isthe possibility that people will perceive that their performance is better than it is inreality (the Lake Wobegon effect). Second, that the respondents will answer in a way topresent themselves in the best light (socially desirable reporting (SDR)).

This paper seeks to see if these well-known phenomena are also present whenemployees are asked for their views about the performance of the organisation thatemploys them. If present, the paper will strive to resolve which is the more prevalent.

These issues are explored through the analysis of a large-scale management survey(the world-class survey) which has been completed by 2,517 senior managers,managers and team leaders in nine countries.

The importance of the issue is that an unwarranted level of perceived performancemay make change programs less likely to succeed.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1463-5771.htm

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Benchmarking: An InternationalJournal

Vol. 18 No. 5, 2011pp. 733-744

q Emerald Group Publishing Limited1463-5771

DOI 10.1108/14635771111166848

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The Lake Wobegon effectThe instance of individuals rating themselves as better than they are is well documented.About 87 percent of Stanford MBA students rated their academic performance to be inthe top two quartiles compared with their peers, 90 percent of these students alsobelieved that they were either average or above average in terms of quantitative abilities;only 10 percent judged themselves to be below average (Zuckerman and Jost, 2001).

Dunning et al. (2004) reported a study by Zenger (1992) of several 100 engineers attwo high-tech companies and found that 32 percent of the engineers in one company and42 percent in the other rated their own performance in the top 5 percent of all engineers.

As discussed in the article written by Ehrlinger et al. (2008), the reported studies byMarottoli and Richardson (1998) and Cross (1997) showed, respectively, that elderly peopletend to believe they are “above average” drivers and that 94 percent of college professorsthought they do “above average” work. In the same wave length, Svenson (1981) reportedthat 93 percent of drivers in the USA believed their driving ability is above average.

The issue of self-delusion by individuals is well documented (Kruger and Dunning,1999; Dunning et al., 2004, 2003; Ehrlinger and Dunning, 2003; Burson et al., 2006;Ehrlinger et al., 2008; Moore and Small, 2007; Svenson, 1981; Zuckerman and Jost, 2001;Airely, 2009). It is described as the Lake Wobegon effect.

The name Lake Wobegon derives from a fictional US town in a long-running radioshow where “all the women are strong, all the men are good looking, and all the children areabove average,” The more technical name for the condition is “illusory superiority”whichexplains why people overestimate their positive qualities and abilities and tounderestimate their negative qualities, relative to others (Kruger and Dunning, 1999).

Well documented in personality studies, there is little evidence that the effect hasbeen studied in depth in employee perceptions of their own organisation.

Why the Lake Wobegon effect is importantEhrlinger et al. (2008) explains the consequence of over estimating one’s abilities:

[. . .] that poor performers show little insight into the depth of their deficiencies relative totheir peers. They tend to think they are doing just fine relative to their peers when, in fact,they are at the bottom of the performance distribution.

Dunning et al. (2004) go on to explain that in a medical context this lack ofself-awareness leads to health issues:

[. . .] perceived vulnerability is an important motivator for people to do something about theirhealth. Indeed, a meta-analysis has shown that the degree to which people perceivethemselves to be vulnerable to health problems predicts the likelihood that they will engagein health promoting behaviors.

They then extend the analysis to business by referencing other investigations:

[. . .] overconfident business owners persist in outmoded strategies when economic conditionschange (Audia et al., 2000). Poor-performing business managers who overrate themselves arethe ones most likely to be derailed in their careers (Shipper and Dillard, 2000).

Dunning et al. (2003) describe the “double whammy” facing poorer performers:

This lack of awareness arises because poor performers are doubly cursed: Their lack of skilldeprives them not only of the ability to produce correct responses, but also of the expertise

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necessary to surmise that they are not producing them. People base their perceptions ofperformance, in part, on their preconceived notions about their skills. Because these notionsoften do not correlate with objective performance, they can lead people to make judgmentsabout their performance that have little to do with actual accomplishment.

They go on to quote Alfred North Whitehead “it is not ignorance, but ignorance ofignorance, that is the death of knowledge.”

In short, the poorer performer who is ignorant that they are a poor performer willnot have the motivation or the ability to improve. If this is the case for individuals, canit be extended to organisations?

According to Kotter (2007), it can. His view is that if there is insufficientdissatisfaction with the status quo, then any change initiative will fail:

When is the urgency rate high enough? From what I have seen, the answer is when about75% of a company’s management is honestly convinced that business as usual is totallyunacceptable. Anything less can produce very serious problems later on in the process.

Kotter is not alone in this thought. There is a body of support for the importance ofmanagers needing to be convinced that it is truly appropriate for change to occur(Cole et al., 2006).

Tichy and Devanna (1986) discuss “creating a need for change”; in effect, openingup the organisational culture to be receptive to the change. They note that this isespecially difficult when there is no apparent crisis.

Siegal et al. (1996) states Schein (1987) builds on the work of Lewin’s three-stage process.For him, unfreezing is the process of creating motivation and readiness for change. A keyway to accomplish this is by creating “disconfirmation, when members of the organisationexperience a need for change which, in turn, motivates them to embrace change.”

In summary, the Lake Wobegon effect is important as the lack of awareness of trueperformance compared to competitors will blunt any drive for improvement.

Socially desirable reportingThe concept of SDR is also a well-known issue (Rees and Metcalfe, 2002; Darby, 2006;Paulhus, 1991; Zerbe and Paulhus, 1987). SDR occurs when people are faced witha survey questionnaire (often a personality type questionnaire) and are asked toself-disclose. The tendency is to interpret questions and provide answers that areperceived to be more acceptable and to place the respondent in a better light.

Although SDR has been reported outside of behavioural or personalityquestionnaires in, for example, business-to-business surveys (Yaveroglu and garcia,2003), there is limited evidence that the phenomena of SDR has been examined in depthwhen reporting employee perceptions of their own organisation.

The world-class surveyA total of 2,517 senior managers, managers and team leaders have completed a survey(the world-class survey). The survey comprises 20 broad question areas to provide aninsight into the capability of the unit under analysis. The units are drawn from thepublic and the private sector and represent a range of different industrial sectors(with a bias towards financial service and manufacturing businesses in the privatesector and defence and health organisations in the public sector). The respondents havebeen drawn from 120 different organisations or units within organisations in nine

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different countries. The survey, typically, is taken by units who are looking to set outon an improvement journey in order to benchmark their present level of capability andto diagnose the key areas for improvement. There is the possibility of a sample bias, inthat largely only organisations interested in improvement are likely to complete thesurvey which may well eliminate the really poor organisations. Conversely, anorganisation that was already at the top of its field would be less likely to complete thesurvey.

In one of the questions, each respondent was asked to rate their organisation’s levelof performance in the following areas:

. right first time;

. innovative products and services;

. low prices;

. fast response;

. dependable delivery;

. wide range of products and services; and

. customised products and services.

Against a scale of:

(1) consistently considerably better than our nearest competitor;

(2) consistently clearly better than our nearest competitor;

(3) consistently marginally better than our nearest competitor;

(4) often marginally better than most competitors;

(5) about the same as most competitors;

(6) often close to main competitors;

(7) usually marginally worse than main competitors;

(8) usually worse than most competitors; and

(9) consistently worse than most competitors.

Survey resultsFigure 1 shows the overall performance score for each of the 2,517 respondents. This isan average score of the seven performance objectives.

Average scores for the seven areas between 1 and 1.50 have been allocated tothe descriptor “consistently considerably better than competitors”, average scoresbetween 1.501 and 2.50 allocated to the descriptor “consistently clearly better thancompetitors”, etc.

The results tend to indicate that the Lake Wobegon effect holds good fororganisations. Taking 5 (4.501-5.5) “about the same as most competitors” as theaverage score 1,894 respondents described the performance of their organisation asabove average, against 491 who assesses their organisation as average and only132 who assessed their organisation as average or below.

The results, however, do bear close resemblance to other surveys (Table I).Drilling down further, the data were analysed to see if this effect was prevalent in

different circumstances. The first test was to see if differences of perception influenced by

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the level of the individual in the organisation (Table II). This table shows the number andpercentage that assessed overall performance against the previously descriptors.

Team leaders showed a greater tendency towards the most outstanding level ofperformance (13.87 percent reporting that the average performance is consistentlyconsiderably better than our nearest competitor). In addition, the percentage at eachlevel who considered the average performance above average (i.e. level 4 or better) wasgreater the more junior the respondent:

. senior managers (69 percent);

. managers (73 percent); and

. team leaders (78 percent).

The next analysis was by looking at industry sector according to Standard IndustrialClassifications. Only sectors with greater than five separate organisations within thesector were included in this analysis (Table III).

There are broad levels of similarity in the different sectors who believe performancelevels are above average (average scores 4 or better):

. manufacturing (76 percent);

. financial services (77 percent);

. public administration, defence, social security (70 percent); and

. health and social work (77 percent).

SurveyPercentage reporting above

average performance Source

World-class performance 75 This paperDriving skill (USA) 93 Svenson (1981)Academic performance 87 Zuckerman and Jost (2001)College professors 94 Ehrlinger et al. (2008)

Table I.Comparison of

perception results

Figure 1.Overall assessment of

own organisationversus competitors

0

100

200

300

400

500

600

700

Consistentlyconsiderablybetter thanour nearestcompetitor

Consistentlyclearly better

than ournearest

competitor

Consistentlymarginallybetter thanour nearestcompetitor

Oftenmarginallybetter than

mostcompetitors

About thesame as mostcompetitors

Often closeto main

competitors

Usuallymarginallyworse than

maincompetitors

Usually worsethan most

competitors

Consistentlyworse than

mostcompetitors

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The data were then broken down in terms of the country the organisational survey wasfocused upon. The comparisons were the UK, the USA and other which comprisedorganisations from Singapore, Portugal, Ireland, India, Kenya, South Africa andCanada (Table IV).

The categorisation of “other” is a false category but nevertheless it does reveal aninterestingvariationwith amuch lower incidenceof aboveaverageperformance in theothercountries. Above average scores (level 4 and better) split by country was as follows:

. UK (77 percent).

. USA (74 percent).

. Other countries (41 percent).

Manufacturing %Financialservices %

Public administration,defence, social security %

Health andsocial work %

1 15 7.35 171 11.29 47 21.27 39 15.792 30 14.71 266 17.57 23 10.41 41 16.603 49 24.02 329 21.73 45 20.36 58 23.484 61 29.90 402 26.55 40 18.10 54 21.865 38 18.63 275 18.16 55 24.89 46 18.626 11 5.39 57 3.76 10 4.52 9 3.647 0 0.00 9 0.59 0 0.00 0 0.008 0 0.00 5 0.33 1 0.45 0 0.009 0 0.00 0 0.00 0 0.00 0 0.00

Table III.Comparison of resultsby sector

Other % UK % USA %

1 15 7.1 261 12.1 19 13.482 20 9.4 357 16.5 20 14.183 34 16 478 22.1 37 26.244 51 24 572 26.4 29 20.575 56 26 409 18.9 26 18.446 27 13 80 3.7 10 7.097 4 1.9 5 0.23 0 0.008 5 2.4 1 0.05 0 0.009 0 0 0 0 0 0.00

Table IV.Comparison of resultsby country

Senior manager % Manager % Team leader %

1.00 20 7.43 84 9.68 191 13.872.00 40 14.87 120 13.82 236 17.143.00 54 20.07 192 22.12 303 22.004.00 72 26.77 237 27.30 343 24.915.00 61 22.68 176 20.28 254 18.456.00 19 7.06 52 5.99 46 3.347.00 2 0.74 6 0.69 1 0.078.00 1 0.37 2 0.23 3 0.229.00 0 0.00 0 0.00 0 0.00

Table II.Comparison of resultsby level of respondent

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This variation may be as a result of there being a genuinely lower level of performance(although remember they were asked to assess performance against competitors whichit would be expected would be local ones). Or it could be, intriguingly, that the LakeWobegon effect is a USA/UK phenomena. Previous studies have provided tentativesupport for ethnic differences in the field of management most notably Hofstede (1993).One study indicated that Asians are likely to exhibit less extreme responses thanAustralians (Dolnicar and Gru, 2007). Whilst another survey demonstrated thatindividuals from an individualistic national culture (i.e. “USA”) were more likely tohold and report inflated or overconfident views of their own skills (Lalwani et al., 2006).

Taken overall with the exception of the “other countries” score, there is a remarkablelevel of consistency in rating company performance as above average (Table V).

Finally, an analysis of the scores for the individual objectives was undertaken. Here,the average score for each objective was calculated (Table VI). The scale is 1-9 with 1representing superior performance and 5 as an average score. Whilst all the scoresrepresent an above average score one, low price, is significantly closer to the averagethen any of the other objectives.

Low pricesInvestigating the low price result in more depth reveals a more balanced view ofcompetitive performance (Table VII):

. low price;

. of the senior managers, 38 percent saw performance in this category as aboveaverage, 27 percent average and 34 percent below average;

. of the managers, 47 percent saw performance as above average, 30 percentaverage and 24 percent below average; and

. of the team leaders, 50 percent saw performance as above average, 29 percentaverage and 21 percent below average.

Percentage assessing performance as above average

Senior managers 69Managers 73Team leaders 78Manufacturing 76Financial services 77Public administration, defence, social security 70Health and social work 77UK 77USA 74Other countries 41

Table V.Overall comparison ofresults by level, sector

and country of respondent

Rightfirsttime

Innovativeproducts and

servicesLow

pricesFast

responsesDependable

delivery

Wide range ofproducts and

services

Customisedproducts and

services

Averageperformance

score

3.21 3.29 4.17 3.28 3.23 3.3 3.50 3.43

Table VI.Comparison of results by

individual objective

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Prima facie there seems to be a good case for suggesting that senior managershave a realistic view of competitive performance for this particular objective. Whilstmanagers and team leaders are still a little skewed in their beliefs they are less skewedin an analysis of this particular objective than any other.

To gain an insight into why this should be we can turn, again, to the literaturearound self-assessment. Moore and Small (2007) stated that when people had little datathey tended to see themselves as better but when they had better knowledge of others’performance their view of their own ability was more balanced:

The result is that people believe they are above average on easy tasks and below average ondifficult tasks. These effects are exacerbated when people have accurate information abouttheir performances, increasing the natural discrepancy between knowledge of the self andknowledge of others. The effects are attenuated (lessened) when people obtain accurateinformation about the performances of others.

Looking across the different performance objectives provides weight to Moore andSmall’s (2007) view.

Applying the observations of Moore and Small (2007), it would seem reasonable toassume that price is the most visible objective, the one where most knowledge ofcompetitors is held. Applying that principle it would seem that providing goodknowledge would lead to more accurate self-assessments.

DiscussionThe conclusion seems to be that people are just as bad at understanding averageperformance when it comes to the companies they work for as they are at estimatingtheir own abilities.

The case for overestimating performance levels is reasonably proved with75 percent reporting above average performance, 20 percent average performance andonly 5 percent reporting below average performance. Whether this is caused by peoplegiving the answers that they think are wanted (SDR) or because they believe theircompanies to be better than average (Wobegon effect) is less clear cut.

Two elements provide circumstantial support for the cause to be primarily the LakeWobegon effect. First, the variation in country results. Here earlier research indicatesthat individuals from an individualistic national culture (i.e. “USA”) were more likely tohold and report inflated or overconfident views of their own skills (Lalwani et al., 2006)which fits with the Wobegon hypothesis. Second, and more convincingly, the “price”

Senior managers % Managers % Team Leaders %

1.00 33 0.12 116 0.13 244 0.182.00 14 0.05 85 0.10 116 0.083.00 31 0.12 68 0.08 143 0.104.00 25 0.09 138 0.16 198 0.145.00 72 0.27 261 0.30 398 0.296.00 35 0.13 101 0.12 139 0.107.00 33 0.12 67 0.08 91 0.078.00 22 0.08 26 0.03 40 0.039.00 4 0.01 7 0.01 8 0.01

Table VII.Comparison of lowprice results by levelof respondent

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score fits well the Moore and Small (2007) observations that inflation of performance isless prevalent where data are more easily identifiable.

On balance, it seems likely that both SDR and Wobegon have affected the resultsbut that Wobegon has the greater impact.

Overcoming the Lake Wobegon effectDunning et al. (2004) identify two key reasons behind the Lake Wobegon effect; a lackof knowledge and not knowing what they do not know. To overcome theseshortcomings, they advocate benchmarking approaches “self-assessments may also beimproved when people take pains to compare their choices and performance againstthose of others, a practice known as benchmarking.”

They go on to extend the concept of benchmarking from education to business:

[. . .] in educational settings, benchmarking has been shown to improve self-evaluationaccuracy, as has peer assessment. In the business world, having an independent and activeboard of directors has been shown to prevent CEOs from making the kind of mistakes thatgrow out of hubris.

Moore and Small (2007) agree with this approach, reporting that greater knowledge ofothers will reduce the likelihood of over estimating performance.

An approach espoused by Ehrlinger et al. (2008) is to improve insight by learning:

If a lack of skill leads to an inability to evaluate the quality of one’s performances, one meansof improving metacognitive ability – and thus self-insight – is to improve one’s level of skill.Kruger and Dunning (1999) found that training students in logic did, indeed, improve theirability to distinguish correct from incorrect answers and, concurrently, improved the qualityof their performances. We might than encourage greater self-insight just by encouraginglearning. However, it is quite possible to encourage a mindset that leads to greater excitementabout learning and, by extension greater self-insight.

Ryan et al. (2000) writing about personal feedback:

Proponents of 360-degree feedback systems note that one benefit of receiving feedback frommultiple sources is that it forces an individual to be more self aware as it is harder to dismissthe same negative feedback from multiple individuals.

Ehrlinger and Dunning (2003) sum up the importance of seeking an outside perspective:

When gaining an accurate impression of one’s current performance is important, it may bewise to assume that one does not already know the answer but to seek out information fromthe outside world – and then to pay it heed.

In sum, it may pay to be a little more like Ed Koch, making sure to ask the question“how’m I doin’?”.

It seems like all organisations need to ask that question.

ConclusionThe findings from this research support the view that trends of how an individualcompletes their own self-assessment can be generalized into another field. It wouldappear that, in the absence of strong data to the contrary, the natural tendency of anemployee is to over estimate the performance level of their own organisation.The consequence of this over estimation is that it is likely to lead to greater reluctance

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to improve. So the key recommendation is that much greater effort is spent on bothbenchmarking performance and in spreading awareness of the benchmark results tothe whole management team.

Further researchThis paper has put forward a strong case that there is a high level of employeeover estimation of an organisation’s competitive position. It has made a tentativeconclusion that the Lake Wobegon effect has a greater impact than SDR but moreresearch is needed to confirm these thoughts. The other area that seems ripe for furtherinvestigation is the issue of ethnic/country differences in the degree of over reporting.This paper highlights a possibility but a wider study of different countries would beneeded before any conclusions can be made. In a world of multi-national organisations,however, this research would be an important contribution to knowledge.

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Zuckerman, E.W. and Jost, J. (2001), “What makes you think you’re so popular? Self-evaluationmaintenance and the subjective side of the ‘Friendship Paradox’”, Social PsychologyQuarterly, Vol. 64 No. 3, pp. 207-23.

Further reading

Eisenbach, R., Watson, K. and Pillai, R. (1997), “Transformational leadership in the context oforganizational change”, Journal of Organizational Change Management, Vol. 12 No. 2,pp. 80-8.

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About the authorsAlan Betts is the Managing Director of HT2 Limited, an e-learning company. He is currentlyresearching “World Class” organisations as part of his Doctoral studies at WarwickManufacturing Group. Following a career in financial services, he completed Institute ofPersonnel and Development qualifications and an MA in Human Resource Management andmoved to the Operations Management group at Warwick Business School as a Senior ResearchFellow. He is the joint author of Operations and Process Management (Pearson, 2nd edition 2009).Alan Betts is the corresponding author and can be contacted at: [email protected]

Simon Croom is Professor of Supply Chain Management at University of San Diego (USD),Executive Director of USD’s Supply Chain Management Institute and leads one of the country’smost regarded graduate programs in supply chain management. Prior to joining USD, he was atWarwick Business School for 12 years and has been actively involved in research and educationglobally. He has published over 70 technical papers, is frequently invited to speak at academicand professional conferences and has been an advisor to a range of government and corporateclients.

Dawei Lu is a Principal Teaching Fellow at Warwick Manufacturing Group, University ofWarwick, UK and has worked there as a full-time permanent academic staff member for over21 years. Dr Lu is a course leader for Supply Chain Management courses at the master andexecutive training levels. He delivers the courses across six different countries internationally.He has successfully managed many high-profile industry-funded projects and consultingassignments. He also gives invited talks to the academic community and publishes researchwork in professional journals and conferences regularly. He has supervised 11 PhD students andover 80 Master students.

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