Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985. Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand. She attended the University of Michigan and Wayne State University.
Most of us have behaviors that we would like to modify, but we often find it difficult to change habits we might call "bad." Many of these habits affect our work life directly and indirectly. Gretchen Rubin classifies the common habit arenas as the "Essential Seven":
Rubin believes that people have one of four tendencies when it comes to habits, and she is a strong supporter of the idea that people are very different in both large and little ways, and that honoring one's own idiosyncrasies is a major factor in successful habit change. Her main reason to focus on habits is to increase happiness and satisfaction (both components of productivity in the workplace, by the way). She simply articulates the stress-reducing benefits of good habits in this way:
"Habits are decisions you only need to make once."
Gretchen Rubin
Once the basic principles are understood and put into practice, habit change, as described by Ms. Rubin, is simple. But it still isn't easy.
Sources: "The Well Book Club: 'Better Than Before'," by Tara Parker Pope, the New York Times, (Wellness blog), March 23, 2015."Better Than Before: Mastering the Habits of Our Everyday Lives," by Gretchen Rubin, Crown Publishing, March 17, 2015. Follow up:
Great minds have been working on this problem for years--how do you get viscous liquids in tubes or bottles to come out of those containers through a narrow opening? The classic example is the ketchup bottle. If you've never dealt with a ketchup bottle, watch the video above.
There are actually two physics problems: one is that air has to enter the bottle as the ketchup leaves, so it can't take up the whole hole, unless it is a squeeze bottle.
The second problem is that sticky, viscous liquids do not want to move. They cling to the insides of the container. This creates some frustration with respect to product delivery. Worse, there is a lot of waste--Consumer Reports' tests indicated these levels of waste:
MIT announced a prize to solve this problem, and there has been a winner: A new product has been invented and a new business, LiquiGlide, has been formed to produce the product and expand the applications. Kripa K. Varanasi, a professor at MIT and his grad student, J. David Smith, have a developed a "porous solid' that stays permanently wet. The complicated properties of their invention are described in the linked article.
LiquiGlide has just announced a contract with Elmer's Glue company to produce containers for glue, and the company has another contract with a paint manufacturer in Australia.
Possible other applications include:
Former grad student J. David Smith--now the CEO of LiquiGlide--thinks their product will be "ubiquitous."
Source: "With New Nonstick Coating, the Wait, and Waste, Is Over," by Kenneth Chang, the New York Times Science section, March 23, 2015.
Follow up:
How is it possible to handle the logistics for a cruise for 3000-6000 passengers and over 1000 crew members--managing food, drink, luggage, room cleanliness, events, port connections, waste, entertainment, and crowd control--not to mention health crises and complaints? The article linked below described getting ready as "part Nascar pit stop, part loading of Noah's Ark."
Here are some of the provisions and systems required for an average-sized week-long cruise:
When things go wrong, they really can be bad. Dr. Peter Cass, a passenger on a Carnival line that had a fire that shut down power and knocked out major utilities remarked, "It’s like being locked in a Porta-Potty for days.”
There are also health concerns, particularly the possibility of a norovirus outbreak. Hand-sanitizing stations are everywhere on the ship, and there are "containment protocols" including quarantine if there is an outbreak.
Managing a cruise ship is like taking responsibility for every aspect of life for everyone in a small town. It is a big responsibility, with big financial rewards. But the skill set required includes all aspects of logistics, including meticulous planning, critical-path time management and decision-making, and a clear plan for production, operations and organizational management.
Source: "A Luxury Liner Docks, and the Countdown's On," by Jad Mouawad, the New York Times, March 21, 2015.
a Doonesbury cartoon by Garry Trudeau illustrating the perverse incentives in Higher Education.
Sometimes what is good for corporate managers is NOT good for other stakeholders in the financial community, such as stockholders or taxpayers.
For example, when taxpayers bailed out AIG, the executives in AIG still got their big salaries and got to keep their jobs--at the expense of taxpayers, who saw a loss of services or higher tax rates as a result. The alternative--liquidation of assets, layoffs and cost-cutting would not have helped the managers. So managers had a "perverse incentive" to take the bailout and ignore their costs to other stakeholders.
An even more direct example of this is when there is corporate fraud or mismanagement that is prosecuted by a regulatory agency and there is a settlement. This settlement is paid from corporate assets, lowering the underlying value to all of the stockholders. But the perpetrators of the mismanagement go unpunished. The settlement does not come out of their pay, even if they were directly responsible for the wrongdoing.
Corporate managers have a "perverse incentive" to take unreasonable risks with other people's money..especially when there is little or not chance that they will personally have to pay fines and penalties if and when the matter becomes a regulatory focus.
Two efforts are trying to change this:
It remains to be seen whether either of these efforts will be implemented. But--since they involve executive compensation--they have a chance of being effective.
Source: "Ways to Put Boss's Skin In the Game," by Gretchen Mortensen, New York Times, March 21, 2015.
Are you resilient--teachable but "unbreakable"? The Netflix series, "The Unbreakable Kimmy Schmidt," produced by Tina Fey, is a funny, very irreverent guide to the skill set needed to:
These are all "soft skills" that people need in order to face the various challenges that are a part of business life. Each episode is only about 23 minutes long. 13 episodes.
Many people find these inspiring and instructive, but they are not for everybody.
Source: "The Unbreakable Kimmy Schmidt," produced by Tina Fey and Robert Carlton, Netflix, March 2015
Why may skilled Chief Human Resource Officers (CHROs) make great leaders and CEOs? This assertion was made in a recent Harvard Business Review article, and was addressed in depth in the March issue of the online magazine, Human Resource Executive. The HRB article was based on research done by Ellie Filler of Korn Ferry and Dave Ulrich of the University of Michigan, using the proprietary databases owned by Korn Ferry. They analyzed skills and attributes that managers in all top areas had in common with CEOs (Chief Executive Officers), and found that Chief Human Resource Officers had more in common with CEOs than Chief Financial Officers, Chief Information Officers, or Chief Marketing Officers. Only Chief Operations Officers were more like CEOs.
Human Resource professionals are valuable as trusted confidantes for CEOs, as they have expertise about talent and expertise and are skilled at reading people and assessing potential. They can also operate in a "truth-telling" role, counseling CEOs about effective business communication strategies to use to motivate sales people, for example. Maybe more importantly, they can advise against ineffective or damaging strategies.
Source: "Being a truth teller," by Susan Meisinger, Human Resource Executive, page 6, March 2015.
It looks as though many more delivery systems for various series and movies are becoming available. This could mean a major change for the cable industry--as packaging and delivery of this content has been their business. Cable has been the logistics channel for media. Here are some of the options in 2015:
NickelodeonNoggin
Hulu Plus
Series for preschoolers
Current and past TV shows from major broadcasters and cable networks are available, in addition to original series
iPhone, iPad and iPod Touch devices
.
No Current Nickelodeon
On March 9, 2015, the Simon Property Group Inc. (SPG) made a takeover offer worth $22.4 billion ($91/share in cash and stock) for the Macerich Company (MAC). Simon currently owns 3.6% stake in Macerich. On March 17th, Macerich rejected the offer and announced that it would try to defend itself against a "hostile takeover" by Simon. Both companies own and operate high-end shopping malls--among other holdings, Simon operates the King of Prussia Mall in Pennsylvania (the largest mall in the world); Macerich operates Santa Monica Place in California.
Companies often buy stock in other companies. When a company buys, or attempts to buy, significant amounts of another company's stock, it is often to gain a larger share of the total business in an industry (as well as eliminate competition). Simon sees Macerich as one of the few mall operators that are running vibrant, profitable operations--many malls are failing as consumers shift to online buying. High end malls thrive because of specialty tenants and are also tourist destinations. Macerich is attempting to prevent the takeover. They are doing this by classifying its Board of Directors into groups, each segment of which would serve three-year terms (in order to prevent a proxy fight to replace the board). They also adopted a "poison pill" that will expire after the annual meeting, that will grant shareholders stock options if Simon's ownership goes above a certain threshold.
These moves by the Board of Directors for Macerich are controversial. This is because they benefit the current top managers and significant shareholders--at the expense of the smaller shareholders. The offer made by Simon is 30% above the trading price of Macerich as of last November--and many smaller shareholders have jumped at the chance to sell their stock to Simon at this price. The Macerich Board is trying to convince the shareholders to hold out for their rights under the poison pill, so that Simon will not be able to purchase a controlling interest.
Another strategy that can be useful in avoiding a hostile takeover is for Macerich to buy back shares from those shareholders who want to jump at this profit opportunity--and then re-sell them, maybe at a bargain price, to another investor who agrees NOT to sell to Simon. We'll see if it comes to that.
Santa Monica Place, owned by Macerich
Source: "Macerich Rejects Takeover Offer From Simon, a Rival Mall Owner," by David Gelles, New York Times, March 17, 2015.
Apple Pay seemed like such a good idea. One app would allow you to pay for small and large items using your phone as an access point to your accounts and credit cards. A security feature was that your name would not show up on the merchant's screens--nor would your numbers--so retail clerks couldn't steal your credit card information.
Banks and merchants wanted to leap on the Apple Pay bandwagon. But it looks as though they didn't look closely enough before they leaped. That particular feature turned out to be a bug--a checkpoint against fraud that had been eliminated when the name was hidden. And, according to Cherian Abraham, the blogger that identified the problem, the Apple Pay fraud rate is about 6% of all dollars spent. Meanwhile the fraud rate for credit cards is about one-tenth of 1%. The weak link seems to be the lack of controls of the upload of credit card information to a given phone.
If you are a user of Apple Pay, you might be wondering--who is going to pay the costs of this fraud? Am I at risk? Lucky for the consumer, finance laws are set up to put the burden of fraud protection on the retailer and bankers, rather than the purchaser. Nevertheless, a breach would be a hassle.
Source: "Pointing Fingers in Apple Pay Fraud," by Andrew Ross Sorkin, New York Times Dealbook, March 16, 2015.
How is China's economy doing? An accurate indicator is the demand and supply of steel.
China's housing market, the major customer for China's domestic steel, is slowing down. But there are still many steel production facilities creating an over-supply, so steel prices have therefore collapsed. Exports of this excess steel have increased 55% over last year. A slowdown in the following three areas foreshadow a weaker Chinese economy:
The government in Beijing, led by Premier Li Keqiang, has had a policy of of shifting the economy to favor these goals:
All of these goals are being threatened by persisting effects of the global financing crisis and the softer demand for domestic housing, which are having a ripple effect throughout China's economy. The lowered demand for steel, for example, means that there is a lower demand for "coking coal" in the smelting ovens. This in turn means a lower demand to use the trains for transporting the coking coal to the steel mills. Nevertheless, in support of the long term goals, China still intends to spend about $130 billion this year on new rail lines. This will be threatened if the economy continues to shrink.
The downturn has produced a few opportunities, however, for savvy middle managers in the steel industry who have been creative about shifting gears to self-employment and accommodating new markets.
Source: "An Upside-Down Economy" (print), by Neil Gough, the New York Times, March 11, 2015.
Having trouble deciding which Apple Watch to get? There's plenty of help out there in cyberspace, but business students take note: The marketing strategy zooms straight past the REAL question: What do you need an Apple Watch for?
The anticipation of "the next" Apple product generates excitement among techie news organizations, who want to generate traffic by being the first to report on the new technology. These media outlets are invested in the traffic their articles generate, so they may not be the most reliable sources of objective information. One strategy, however, is to appear objective, as demonstrated by the TechCrunch article linked to the graphic below.
Anyway, if you want some input on deciding which watch is best for you, try these sites:
Of course, there are other watches out there as well:
from TechCrunch
Sources: "Which Apple Watch are you?", via Tony Wagner, Marketplace, American Public Media, March 11, 2015."Which Apple Watch is Right for you?" by Darrell Etherington, TechCrunch, March 12, 2015.Follow up:
General Motors (G.M.) has capitulated to a major shareholder's pressure, and has announced a plan to buy back $5 billion of its own common stock. Harry J. Wilson, who was part of the government's oversight group during the 2009 bailout of G.M., spearheaded the effort to force the buy-back.
What happens when a company buys back its stock? The company's cash reserves are used, so they decrease. Also, the number of stock shares "outstanding" decreases. This means that the remaining stockholders will have higher "earnings per share" than they would have had if more shares were still held by the public. Not only Wilson would benefit from this--all stockholders would benefit.
The risk to G.M. is: Does the company have enough cash after the buy-back ($20 billion) to weather the payouts that may be required due to recall costs? Analysts seem to think it is not a problem. In addition, Mary Barra, G.M.'s CEO, believe that they have plenty of cash to deal with the safety problems, expand the Cadillac brand and other new products, and deal with problems in Europe.
The market responded positively to the buy-back announcement, and so did Mr. Wilson, in an interview this week:
"l was very impressed at how Mary (Barra) handled this and what it says about her general style and management approach.”
Source: "GM to buy back $5 billion of its stock," by Bill Vlasic, the New York Times, March 9, 2015.
drawing is part of Mountaintop Removal by Bob Engelhart, in the Hartford Courant
There is a conflict of interest between those who want to protect Appalachian mountains from disfiguring topping-off in search of coal, and the coal mining companies who seek new sources of coal for power generation. Blasting off the tops of mountains is a major part of this mining strategy.But a shift is taking place. PNC Financial, a major source of financing for the mountaintop mining of coal, decided to stop financing companies that use this technique in Appalachia. This came because of environmentalist's pressure on Wall Street banks. Most other major banks have already abandoned supporting companies that use this technique to mine coal.
Only GE Capital and UBS are still financing this practice--and if financing totally dries up, the business practice will stop. This is a very effective strategy for environmentalist groups.
Source: "A New Tack In the War on Mining Mountains," by Andrew Ross Sorkin, the New York Times, March 9, 2015.
This weekend, the New York Times interviewed Vivek Gupta, the CEO of Zensar Technologies, who imparted his wisdom about leadership, management and hiring.
Here are his some of his thoughts on these topics:
Source: "Beware of Hiring People Just Like You," by Vivek Gupta, the New York Times Corner Office, March 7, 2015, in print 3/8/15.
The uses of these apps include helping make decisions about car purchases, baby names, phone carriers, or where to go on vacation. As well as almost everything else. With many of the apps, you can evaluate several relevant factors associated with each decision, including costs and preferences.
If you are REALLY indecisive, you might try the app called Decide Now--it makes your decision for you with the spin of a wheel--no intermediate decisions for you to make at all.
But, as the article points out...the app doesn't have to live with the consequences of whatever decision you make. Maybe a business-owner or manager would not want to delegate their decision-making prerogatives to an entity that isn't a stakeholder in the outcome.I wonder if updates will include a feedback loop for inputting results to improve decision-making.
Source: "Aids for the Indecisive, when options abound," by Kit Eaton, New York Times Tech, March 4, 2015.
Etsy is a company that originally (2005) only sold hand-made crafts. But in 2013, it started allowing the sales of "manufactured" goods as well. Artisans who were struggling to keep up with demand could hire people to help them produce product, or otherwise outsource their production. This was an important factor in allowing Etsy to grow from $125 million in sales in 2013 to $195 million in sales in 2014.
Nevertheless, Etsy was still running a net loss of $15 million in 2014.
The IPO hopes to raise from $100 million (NPR's estimate) to $300 million (Bloomberg's estimate). As part of the IPO, Etsy had to disclose in its filing documents the risk factors associated with the business. Etsy identified this:
"If we are unable to maintain the authenticity of our marketplace, our reputation and business could be adversely affected."
The Marketplace commentators translated this as "losing their soul."
Some of the craftspeople-sellers (as well as the original founder, who has left the company) agree that veering from the "core values of hand-made goods" and becoming more corporate are harming the brand. But the artisans are not going to be weighing in where it counts. We will have to wait to see how the market responds to Etsy's IPO.
Sources: "Etsy Goes Public, Hoping to Remain 'Authentic'," by Dan Weissman, Marketplace, American Public Media, March 5, 2015. "Etsy Crafts IPO Putting New York Tech Back on the Map," by Leslie Picker and Alex Sherman, Bloomberg Business, January 13, 2015.
GOALS:
Specific goal-setting is an identified strategy for employee motivation. To complement the classic goal-evaluation mnemonic pictured above, Entrepreneur magazine suggested the following five strategies for making goal setting work as a motivational tool for employees:
Developing and evaluating goals should be done on an annual basis, creating a cycle of forward-looking achievement.
Source: "5 Ways to Set Up Your Employees for Success in 2015," by Zeynep Ilgaz, Entrepreneur online magazine, December 30, 2014.
The graphic above, put in easier-to-understand terms, says that if you are making $60,000 a year at age 35, you should have that much saved in various retirement funds (401K and IRAs, for example). This also says you should have $480,000 saved by the time you retire at 67...if you are still "only" making $60,000 per year. If you are making $100,000 per year at that point, you should have $800,000 saved. This is Fidelity Investment's recommendation.
If that sounds like a lot--it is: but it still might not be enough for you. A person would have to save 10% of their income per year--assuming they are making $30,000 when they start their career and get a 3% raise each year, and make 7% annually, compounded, to have "enough." "Enough" is a little under $1,000,000--and that is only enough if one is taking out just 4% of the balance per retirement year (under $40,000). This isn't lavish, but it is sustainable.
The trouble is, financial advisors often steer investors into "actively managed portfolios" or other costly investment vehicles that have up-front or high fees. This reduces the return to below 7%, which in turn reduces the nest egg at retirement. One does not want to be caught without a financial safety net when Social Security and other government programs are being cut.
Source: "Americans Aren't Saving Enough for Retirement, but One Change Could Help," by Eduardo Porter, New York Times, March 3, 2015.
Millennial Disruption IndexLast week I wrote a post about a large consulting firm's take on what banks need to do to address current market needs. The graphic above and the article below offer advice to the banking industry as well--but from the Millennials' perspective. The banking industry really needs this advice, based on the Millennial Disruption Index, as banking is the industry with the "highest risk of disruption."
Suggestions for bank service and image improvement include:
Source: Millennials and Money: How Banks are Missing the Mark by Shama Hyder, Forbes Magazine, February 25, 2015.Follow up: