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  • Robert Pozen on Fair Value Accounting

    In the November Harvard Business Review , Robert Pozen --former adviser to President George W. Bush and Massachusetts Governor Mitt Romney, and current chair of MFS Investment Management--weighs in on the debate over whether accounting rules bear some blame for the financial crisis. And he says that both sides in the argument over whether "fair value accounting" exacerbated the credit crunch a year ago may be wrong: We do not want banks to become insolvent because of short-term declines in the prices of mortgage-related securities. Nor do we want to hide bank losses from investors and delay the cleanup of toxic assets—as happened in Japan in the decade after 1990. To meet the legitimate needs of both bankers and investors, regulatory officials should adopt new multidimensional approaches to financial reporting. Before we can begin to implement sensible reforms, though, we must first clear up some misperceptions about accounting methods. Critics have often lambasted the requirement to write down impaired assets to their fair value, but in reality impairment is a more important concept for historical cost accounting than for fair value accounting. Many journalists have incorrectly assumed that most assets of banks are reported at fair market value, rather than at historical cost. Similarly, many politicians have assumed that most illiquid assets must be valued at market prices, despite several FASB rulings to the contrary. You can read his article here (subscription only). You can also watch Pozen discuss the issue, along with a brief introduction to some of the ideas he puts forward in a new book, Too Big To Save , in this video from Harvard Publishing:

  • LinkedIn Founder on the Business Utility of Social Networks

    As the founder of LinkedIn , Reid Hoffman has a clear reason to tout the power of social networks. But while most users associate LinkedIn with recruiting and job-hunting, Hoffman wants us to consider some of the other ways a site like his helps businesses, like say, for example, figuring out a way to get a giant shipment of concrete from one continent to another. He raises at least one interesting point for managers to consider: how do you find the right level of social network activity for your staff? The opportunity to problem solve by expanding your knowledge base beyond your own office seems a great one. The danger of staff "time-wasting" seems to be a significant danger. It would seem that the right managers have to determine the proper balance as social network sites like LinkedIn continue to grow.

  • An Argument to Resist the Shining Star

    It is very tempting to want to pry a star performer from a competitor, but Michael J. Mauboussin argues, at Harvard Business Review , that can be a foolish approach: [T]here is a tendency to prize a few standout individuals while ignoring how much they draw on their surrounding systems for support. For instance, many companies, sports teams, and entertainment businesses hire a star when they want to quickly improve the organization’s results. More often than not, however, newly transplanted stars fail to deliver, because they’re separated from the people, structures, and norms that helped make them great in the first place. In one study, professors from Harvard Business School tracked more than 1,000 acclaimed equity analysts over a decade and monitored how their performance changed when they switched firms. The dour conclusion of the research: “When a company hires a star, the star’s performance plunges, there is a sharp decline in the functioning of the group or team the person works with, and the company’s market value falls.” Read When Individuals Don’t Matter here . (H/t Henry Abbott )

  • Navigating Transition, as an Organization and as a Worker

    This is a time of transition for the economy, companies across the country. And when recovery starts to hit in a meaningful way, then many workers will face a new sort of transition as they face new opportunities for advancement. Michael Watkins , Chairman of Genesis Advisers and author of a new book titled Your Next Move.The Leader's Guide to Successfully Navigating Major Career Transitions . And as Watkins wrote in an online article for Harvard Business , he believes that a lot of workplaces are set up to face a lot of change: According to a recent study just 10% of high-potential leaders lost their jobs during the recession (with many quickly securing new opportunities). But fewer than usual received promotions or moved to new companies. So at the first sign that the job market is heating up, many will be dusting off their resumes and seeking greener pastures. Companies that did a clumsy job of managing cost-cutting and restructuring during the downturn are particularly at risk of losing their best talent as conditions improve. Given plummeting revenues and the need to get costs under control, many firms rightly went into crisis mode. But the way they went about making the reductions varied greatly. For some, it was a process akin to taking a meat cleaver to the organization, with rapid, often indiscriminate cuts, and the attitude that virtually anything could be demanded of the survivors (longer hours, reduced salaries) because things were so dire. These same survivors, especially the most talented of them, understandably feel absolutely no loyalty to their current employers; they will jump ship the instant they feel it's safe to do so. In fact it's a wonderful time for strong companies to consolidate their positions and accelerate out of the downturn by cherry-picking the very best talent out of competitors who have (probably irreparably) damaged their corporate cultures. Some attention to effective on-boarding is also warranted as it will help you to retain the talent you hire. Watkins discussed his new book with Sarah Green of Harvard Publishing:

  • Annual Reviews and Puppy Training with Yahoo's Carol Bartz

    Adam Bryant of The New York Times has a quick interview with Yahoo CEO Carol Bartz . Bartz has been CEO since January, and to her credit seems to have been largely candid in her public interviews about Yahoo. This interview is less about Yahoo and more about Bartz and her thoughts on management. The gem comes when she discusses the value (not so high) of annual reviews: I have the puppy theory. When the puppy pees on the carpet, you say something right then because you don’t say six months later, “Remember that day, January 12th, when you peed on the carpet?” That doesn’t make any sense. “This is what’s on my mind. This is quick feedback.” And then I’m on to the next thing. If I had my way I wouldn’t do annual reviews, if I felt that everybody would be more honest about positive and negative feedback along the way. I think the annual review process is so antiquated. I almost would rather ask each employee to tell us if they’ve had a meaningful conversation with their manager this quarter. Yes or no. And if they say no, they ought to have one. I don’t even need to know what it is. But if you viewed it as meaningful, then that’s all that counts. Read the interview here .

  • Creating Better Boards

    In February we highlighted a McKinsey article on the need for corporate boards to adapt their thinking to new economic conditions . There was a survey that went along with that article, and now the McKinsey Quarterly is publishing some of the results. And the findings are not very promising: Today, boards are probably underreacting to the stresses—and opportunities—of economic turmoil. Directors themselves seem to agree: a McKinsey survey conducted in conjunction with an article published earlier this year 1 showed that only half of the 186 directors responding thought their boards had met the demands of the crisis. Just 30 percent reported that a wider range of information was now presented at board meetings or that conversations were more frank than usual (exhibit). Even among directors who believed that their boards had responded effectively, overall, to the crisis, only 19 percent felt that those boards had really addressed the problems of talent management—meaning not only the composition of the board but also its role in hiring and remunerating senior executives. Read Using the crisis to create better boards here .

  • Keeping Top Talent Still a Priority, Even in a Downturn

    With unemployment the highest it has been in a quarter century, do businesses really have to worry about losing top talent? Sylvia Ann Hewlett says yes. Hewlett, founder of the Center for Work-Life Policy , says the cost of losing top talent is great in a bad business climate, so don't act like the tough jobs climate means you can hold onto the best performers. Here she is discussing the topic for Harvard Publishing :

  • Top-Down Approach to Cutting Costs and Generating Cash

    As signs point toward recovery, companies need cash on hand to facilitate a rebound from the recession. And for some that means continuing to cut costs. Here's an instructive video from Knowledge@Wharton in which experts from Wharton and The Boston Consulting Group advocate a top-down approach to streamlining. This advice seems to run counter to advice we have posted from other experts, who advise getting employee participation in cost cutting strategies . Take a look:

  • Strategic Thinking Podcast from Total Picture Radio

    Successful companies are looking for a few good strategic thinkers. Rich Horvath makes his living giving advice on how to develop strategic thinking skills. Horvath is president and founder of the Strategic Thinking Institute , and author of Deep Dive: The Proven Method for Building Strategy, Focusing Your Resources, and Taking Smart Action . He spoke about the paucity of strategic thinking training for executives with Peter Clayton of Total Picture Radio. You can listen to the podcast here .

  • Booz & Company's Mainardi on Cutting Costs Strategically and Quickly

    Cost cutting has been a dominant theme in board rooms for at least the last year. But Cesare Mainardi --managing director of Booz & Company and co-author of Cut Costs + Grow Stronger --says a lot of companies do not know how to cut costs strategically. If done right, Mainardi says, companies can implement aggressive cost cutting rapidly. He describes appropriate cost cutting strategy, and details his notion of the right process, in this interview with Harvard Publishing (the publisher of his book):

  • The Value of Initiative, Creativity, and Passion in Employees

    Obedience, diligence, and intellect. Three key attributes for good employees, right? Gary Hamel says yes, but they aren't enough. In fact, he labels obedience, diligence, and intellect as global commodities that any business can get from various places around the globe. Managers who want their companies to thrive need to find and foster employees with other attributes. Hamel, author of the influential book The Future of Management , points to initiative. Employees who "don't wait to be directed," and push to solve problems before they are even asked. In this BigThink video, Hamel explains the value of initiative, along with passion and creatvitiy--all attributes that he suggests are too rare in the American workplace these days:

  • De-mystifying Finance

    Joe Knight , co-owner of the Business Literacy Institute , and co-author of the book, Financial Intelligence (both along with Karen Berman ) is out to de-mystify finance. He travels the country to teach business owners and comapny managers the basics of finance. In his mind, the notion that finance is a specialized field is a mistake. He believes that all employees should have a sense of a company's finances, and that the more they understand, the more care they take to build a stronger business and make a stronger balance sheet. He explains his approach in this Harvard Business video:

  • Dan Ariely on the Limits of Monetary Incentives

    Noted behavioral economist Dan Ariely asks, "If I gave you $10,000 to be funny in the next minute, could you do it?" It turns out that giving someone more money to do something can actually make it harder for them to accomplish the task at hand. In the first part of this BigThin k video, Ariely discusses research into whether offering workers more money produces better work:

  • Gen Y and Boomer Employees After More than Money

    It's not that Gen Y and Boomer employees don't care about how much they are paid, it's just that they want "a whole bunch of other stuff," and sometimes that "stuff" is even more important than the money. That is what Sylvia Ann Hewlett , Laura Sherbin , and Karen Sumberg found in researching the particular needs and desires of the two dominant generations (at least in terms of numbers) in the workforce. And as Hewlett, Sherbin, and Sumberg point out in the most recent Harvard Business Review , managers need to understand those needs and desires because they are driving workplace culture today: The combination of Generation Y eagerly advancing up the professional ranks and Baby Boomers often refusing to retire has, over the course of a few short years, dramatically shifted the composition of the workforce; each of these generations is roughly twice the size of Generation X, which lies between them. More important, Boomers and Gen Ys are together redefining what constitutes a great place to work. As we will show, they tend to share many attitudes and behaviors that set them apart from other generations. These shared preferences constitute a new center of gravity for human resources management. Here is Hewlett, founding president of the Center for Work-Life Policy, discussing the findings in a Harvard Business Review interview: Read an abstract of How Gen Y and Boomers Will Reshape Your Agenda from the Harvard Business Review here .

  • Cherry-Picking Best Employees in a Recession

    Jobless claims may have dropped last week , but another the US economy still managed to shed another 565,000 jobs last week. There are few, if any, silver linings in the climbing unemployment statistics, but it does mean that small businesses that do have the resources to hire have a lot of choices and leverage. Mirela Iverac writes in Forbes that the trick is "figuring out which of those left behind were victims of the economy, and which deserved to go." Iverac cites advice from Barry Deutsch , CEO of Impact Hiring Solution s, who says that small businesses frequently hire what he calls "mismatches." How to avoid all those mismatches? As with most things, some smart work up front does the trick. First, specifically define the job you are looking to fill--generic titles are useless, says Deutsch--and quantify your expectations. Say you need a marketing director. You might require that she, within the first 30 days, assess the division, identify gaps and come up with a personal development plan for each team member; within 60 days, come up with a detailed list of potential product extensions; and within 120 days, execute a new product launch. The power of defining goals up front is that it serves as a road map for the interview, making it easier to predict whether a candidate has relevant experience and the chances she'll thrive in the new environment. Once you know what you're looking for, you have to let the world know you're looking for it. There's an art to Want Ads. One that lists a dry set of qualifications--five years of this skill, 10 years of that skill--won't cut it, says Deutsch. Read Hiring The Best Of The Left-Behind here .
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