Vacation Time is Great for Self Reflection

The headlines are impossible to miss: so and so company is laying off 25,000 or this and that company is downsizing by 10,000 employees. It makes everyone anxious about the status of their job. Most of the time it isn’t the work part that people are anxious about, but rather the steady check. Many companies, either by choice or for survival, do this to streamline their delivery of products or services. To get in line with the demand for their offering.

But timing is funny right now. The holiday season, particularly the days between Christmas Eve and New Years are a bust when in comes to productivity. Everyone is either on vacation or the people they need to do a deal is on vacation. Several companies, tech companies for example, shut down for the last week of the year. They do this to save on costs (don’t turn on the lights). Often times the employees are given the choice of having the time off non paid or taking vacation.

In other years, this time of year is a celebration of family and religion. This year it still is, but with a serving of concern. Concern for your job, concern for your debts, and concern for a future that is not close to the one you planned for.

But thankfully, the US system of democracy and capitalism offers so many options and alternatives that even the worst situations usually reveal opportunities. It is just a matter of getting out of your comfort zone to take advantage of them. Write your own headline.

Three Leader’s Strategies in a Down Economy

The beauty of a down economy is nothing is sacred. It allows government and corporations to make truly visionary decisions. I’ve said it before, but I think the downfall of the US is the Cost/Benefit Analysis. The example I like to use is the case of the cellular phone. The technology was there way before it gained major adoption? Why? Because it had to play ball with the install land line base. Getting it aligned to a similar but technologically different communication device slowed it tremendously. Now look at India. It has a cell phone penetration that is both faster and deeper than the US. Why? Because it didn’t have to deal with a legacy system. But no Cost/Benefit Analysis is going to come back with a suggestion that is visionary. It is a safe tool.

OK, that is the long way to get to my three summaries.

Jim Collins of Good to Great: Why Some Companies Make the Leap… and Others Don’t is taking the current situation to remind people of the importance of talent. A Postcard piece by Patricia Sellers called How to thrive in turbulenttimes describes Collins as emphasizing that before you can get the bus moving in the right direction, you have to have the right people on the bus. This isn’t really about downsizing or becoming lean. This is more about getting like minded individuals all moving in the same direction. Often in corporate life, there are motivations that are not aligned. This causes leadership issues and slows effective change. If the leadership team is unified in the goal, which is often the case in distressed companies, then driving results gets easier since there is nothing but support from peers and executives.

IBM, often a forerunner for identifying markets, is investing heavily in data and information capabilities. Sam Palmisano, the CEO, realizes that problems for humanity – wasted energy, insufficient health care, poor distribution of food and water, and snarled traffic for example – aren’t going away just because the economy is poor. If anything, he believes people will pay more attention to them. IBM has expanded mightily into the worlds of metadata and business intelligence, knowing the margins, if done right, are huge.

Remember the summer when you were 10 years old? For many people it meant being part of three different sports leagues. One was probably baseball or softball, another was soccer, and the third was perhaps basketball. You knew each person on each team and some overlapped. When the school year started you had all these different networks of people you knew through the leagues. Some people counted on you because you were one of the better players at baseball, while some knew you just because you were on the 15th man on the soccer team. This same paradigm is happening at Cisco Systems. During the last recession (2001), Cisco realized it took entirely too long for it to change and accomodate new economic environments. Cisco responded to the self evaluation by installing team oriented programs. If you are familiar with how internet traffic is routed then you know it is a big web. That way if one node goes down, the whole system can handle its absence. It is the same concept for their organization – a web of boards, councils, and subgroups. Each populated with different personnel to ensure diversity of thought. To reinforce the idea, compensation is now tied to these teams productivity. And it is paying off. Silos are broken down and decision making is improved and faster.

Team Dynamics with Innovating – Two Methods

I often get sucked into Janet Rae-Dupree’s writings and this week is no exception. She published a story called For Innovators, There Is Brainpower in Numbers that is mainly an advice piece about team dynamics with innovating. But before I get to that, I must copy a proverb she included:

“None of us is as smart as all of us.”

Japanese proverb

Back to my entry. An effective means to improve the efficiency of generating ideas is something called TIPS or Theory of Inventive Problem Solving. It is based on ideas of Genrich Altshuller, a Russian engineer/ scientist who led a related association in the second half of of the 1900s. How it works is to take successful products or processes and componentize them for what is innovative or reusable. Then take those parts and assemble what is applicable into the next problem. This benefits from a broad range of diversity in thought. Avenues that don’t seem similar are exposed for potential. And ultimately time is saved and relationships are formed.

Janet Rae-Dupree also talks about Brainstorming. She describes it as not the pancea it is often thought to be. I agree to a point. I think some brainstorming is good, especially when the participants feed off each other. But too often it is not a good use of time. Some of the reasons for this are (as excerpted):

throwing in an idea for public consideration generates fear of failure,
and workers looking to advance their own interests often keep their
best ideas to themselves until a more opportune time.

But researchers have shown repeatedly that individuals working alone generate more ideas than groups acting in concert.

As an aside, it seems group or team dynamics have the potential to accomplish more and quicker, but the US doesn’t reinforce this in its education system. Collaborative learning is often ignored for Anaylsis and Procedure learning (tests).

“Innovation today isn’t a sudden break with the past, a brilliant
insight that one lone outsider pushes through to save the company,” he
says. “Just the opposite: innovation today is a continuous process of
small and constant change, and it’s built into the culture of
successful companies.”

US Employment and Prediction

Here is a quick chart of how things have progressed over the last two years in regards to unemployment – the blue line that is. I included the red line to emphasize my viewpoint on the next few quarters. First, I’ll say I’m actually not as optimistic as the chart indicates. But I have a good feeling about the unemployment shape.

Here is my rational for a deep unemployment situation, but not a drawn out one:

1) Transformation Efficiency. The method for transformation is much more efficient than it once was. Business within the US is in constant fear. Because of that most companies have both hiring and layoff systems in wait. So when a company needs to activate one or the other the time to get the machine moving is very small. Plus people can acquire skills faster than ever before.

2) Impatience! No one seems to be talking about the most valued resource in the US = TIME! The greed that caused many investors to abandon long term investing strategies (why wait 10 years for 9% return when I can leverage everything for 20% now) will very soon pull the US out of the situation. Its as simple as there are just to many deals to be had out there right now.

3) The Cash Bubble. Today the three month Treasury bill traded at a negative yield. That means people who bought them are acknowledging a loss on it. How strange is that? People want to put their money somewhere to the point of taking a loss because the  return will still be more than many other investing options. If that doesn’t scream for alternatives, I don’t know what would.

4) Globalization. Businesses are realizing it isn’t a cure all. Good ideas still have to come from somewhere. And lessons learned from the last 15 years or so will show the US is still the leader in driving new business. Which in the long run, flips globalization back to the US. For instance, suppose you are a successful company in Asia in the call center business. Your growth rate levels off and expansion is necessary to improve income. The US has the talent to assistant in this type of work.

5) Content is still King. Many news agencies are in dire situations (Tribune, Time Warner, and the NY Times) but it isn’t because people read less, listen to music less, or visit museums less. It is because advertising needs a refocus. In the meantime, this situation will spawn a new dynamic of content creation and perhaps distribution. There are simply too many talented people flooding the vacuum of free time.

So because of these five forces, the US will hit a deep unemployment chasm (in it right now 12-8-08) and then rebound out fairly quickly. I feel like the tipping point is when the jobs report levels off. That will be the signal that it is safe to go back into the water.

Graphics of the Job Market – December 6th, 2008

 

November 2008 Jobs Report and Wages

Here are the job market and compensation numbers for November 2008 (based on the job report):


Net
loss of 533,000 jobs in the month
(revised to a loss of 588,000 in the Dec ’08 report, revised to a final loss of 728,000)

  • Most jobs lost in a month since December 1974
    • As a percentage the December 1974 job loss was 0.65% of the workforce
    • As a percentage the November 2008 job loss was 0.34% of the workforce (although still a huge loss, it isn’t quite as dramatic)
    • From a percentage standpoint, it is the steepest loss since 1980
  • Analysts expected a loss between 325,000 and 335,000
  • Eleventh straight months of job losses
  • 1,900,000 jobs lost in 2008
    • 1,550,000 jobs lost in the last six months
    • 1,600,000 total jobs lost in the recession of 2001
  • September revised to loss of 403,000 jobs (revised to a final loss of 458,000)
  • October revised to a loss of 320,000 jobs (revised to a final loss of 554,000)
  • There is an additional 637,000 people not counted in the 533,000 because they stopped looking for work
  • Part time workers – those that can not find a full time job – rose by 621,000
    • 7.3 million people are in this category, 2.8 million added in the past 12 months. 7.3 million is the highest ever for this record, which dates back to 1955

Unemployment rate rose to 6.7

  • Forecasters thought it would rise to 6.8%
  • The unemployment rate hasn’t been this high since 1993
  • 420,000 people left the labor market group in November as well
  • Underemployment is now at 12.5%
    • From 11.8% last month (an increase of 0.7% in one month!)
    • This includes part timers who want full time jobs
  • The long term unemployed (those without a job for 27 weeks or more) remained steady at about 2.2 million people


Specific Segment Job numbers:

  • Manufacturing lost 85,000 jobs
    • 604,000, or about one third of all jobs lost in 2008 are manufacturing jobs
  • Construction lost 82,000 jobs
    • Since peaking in 2006 (housing bubble), construction has lost 780,000 jobs
    • Infrastructure projects would help with this situation as proposed by President-Elect Obama
  • Retailers lost 91,000
    • Retail usually adds jobs for the Christmas season – not this year
  • Professional and Business Services loss 101,000 jobs
    • Since December of 2007, 495,000 jobs are lost in this segment
  • Government sector added 7,000
  • Education and Health Services grew by 52,000 jobs
  • Health Care added 34,000
    • Over the last 12 months, 369,000 jobs were gained
  • Leisure and Hospitality loss 76,000 jobs
    • Since April, 2008, 150,000 jobs are lost in this segment

Wage:

  • The average weekly paycheck is $613.05
    • A gain of 0.52 cents
  • The average hourly work week stayed the same – 33.5
    • Economists thought it would remain at 33.5
    • Seasonally adjusted, it is the lowest since the record began in 1964
  • The average weekly wages for many Americans has increased by 2.8% over the past 12 months
    • Inflation over the same period is 3%
    • So despite the loss in jobs, wages are holding up, somewhat


Notes:

  • The economy is expected to get worse and an unemployment rate of at least 8% is expected in mid 2009
  • 8% unemployment was last seen in the early 80s
  • GDP is expected to be a contraction between 4% and 5% for the fourth quarter of 2008
  • GDP for all of 2009 is expected to be a shrinkage of 2%
    • 1982 was the last time things were that bad
  • Revisions of September and October pointed to even worse conditions than the survey estimated. Will November follow suit in subsequent revisions?

Bureau of Labor Statistics

Job Report Stats Summary
Graphics of the Job Market – December 6th, 2008

An Update of Ken Chenault Posts

Fortune.com is running some video segments of Geoff Colvin interviewing Ken Chenault. Chenault is the CEO of American Express. I’ve written in the past that I was impressed with what the board came up with for a compensation package for their CEO. It pays handsomely, but only after their shareholders were rewarded for owning AmEx stock (did the company perform well and did it perform well compared to the market?). Here are several links to the videos and posts of mine.

Videos (12/3/08
How AmEx calculates CEO Pay
AmEx CEO: Plan for the Worst
AmEx CEO: Wealthy Spending Less

My previous Posts
Ken Chenault 2007 versus 2006 Compensation (2/25/08)
AmEx Pays Ken Chenault After They Pay Their Shareholders (1/16/08)

College Costs are Rising – Is Demand?

Yesterday in the NY Times was a story called College May Become Unaffordable for Most in the US. It was written by Tamar Lewin. What I liked most about the piece is the acknowledgment of parents to pay whatever it costs for the college education. And over time this has done two things 1) pushed college costs up (to go with demand) and 2) put more people in substantial debt.

What drives me nuts about this is the lack of some innovative entrepreneur to come up with an alternative to a college education that is still on par with the knowledge development (University of Phoenix included). I firmly believe there are many opportunities outside of a college degree. I think if you are really good at something the market wants, then you will get paid for it. Alex Rodriquez hits a baseball. JK Rowlings writes entertaining books. Mechanics fix cars.

Back to the NY Times story. I pulled some stats from it that I thought were interesting.

  • Over a 25 year period, from 1982-2007, college costs and fees adjusted for inflation have increased by 439%
    • Over the same period, median family income increased by 147%
  • Borrowing to pay for college costs has doubled over the last 10 years alone
  • Grant size for lower-income families is less than grants for more affluent families
  • The US is one of a few countries where the 25 to 34 age group is less educated than the older generation
  • Last year, the net cost at a four-year public university
    amounted to 28 percent of the median family income, while a four-year private
    university cost 76 percent of the median family income
  • As a percentage of income, the cost of an education has increased by 16% (from 39% to 55%) of over the last seven years for those with incomes in the bottom 20%
  • Community college cost has increased as a percentage of income as well. From 40% in 2000 to 49% in 2007

Here are some excerpts:

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“If we go on this way for another 25 years, we won’t have an
affordable system of higher education,” said Patrick M. Callan, president of
the center, a nonpartisan organization that promotes access to higher
education.

“When we come out of the recession,” Mr. Callan added,
“we’re really going to be in jeopardy, because the educational gap between our
work force and the rest of the world will make it very hard to be competitive. Already,
we’re one of the few countries where 25- to 34-year-olds are less educated than
older workers.”

Although college enrollment has continued to rise in recent
years, Mr. Callan said, it is not clear how long that can continue.

“Most governors’ budgets don’t come out until January, but
what we’re seeing so far is Florida talking about a 15 percent increase,
Washington State talking about a 20 percent increase, and California with a
mixture of budget cuts and enrollment cuts,”

“There’s an awful lot of experimentation going on right now, and that needs
to go on,” he said. “If you teach a course by distance with 1,000 students,
does that affect learning? Till we know the answer, it’s difficult to control
costs in ways that don’t affect quality.”

Mr. Callan, for his part, urged a reversal in states’ approach to higher-education
financing.

“When the economy is good, and state universities are somewhat better
funded, we raise tuition as little as possible,” he said. “When the economy is
bad, we raise tuition and sock it to families, when people can least afford it.
That’s exactly the opposite of what we need.”

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For more of my thoughts on education, so my Education Posts – A Summary entry.

Education Posts – A Summary

Poor economic times push people to look at their knowledge and skill base. Inevitably, college applications raise. But there are many alternatives to the classic university four year degree. Below is an index of Education based entries of mine. This is more of a reference post:

Why No Changes (7/2/07) – Reading this entry now is like looking in a fun house mirror. Here is what I write “There are also several recent articles describing the amount of the
compensation package to hedge fund managers. If you hold one of these
lucrative positions then there is a good chance that you are now one of
the richest people in the world. You accepted a large amount of risk
and the market has rewarded you for it. When the market is up, that
tends to be the result. When it is down, I doubt we will see any
articles, but that is not where I’m driving this. The growth of the
number of hedge funds is accredited to the ease of amassing credit.
This allows the manager to take volume gains on investments that are
traditionally risky or long term. Since the taxes don’t disincent this
investment activity then it is worth the risk. But what bothers me is
that there isn’t anything innovative about this. We are in a positive
market, so the results bear out.

This mentality of avoiding risk and going with what works is what is
bothersome. The public education system is largely the same as it was
for the past 60 years. Over that time, especially in the recent past,
the margin between the rich and the middle class has widened. Normally,
that is a ho hum story, but if the reports are true, that this is the
first generation that won’t have an improved standard of living, then
we have hit a new threshold. So in a positive market the ultrawealthy
will get richer and the educational system won’t advance. What happens
in a negative market?”

Finding Perception (9/11/07) – This is a simple instructional post asking the reader to look at three objects – a needle, a nickle, and post it notes – and change their viewpoint so the reader looks from different angles. I like the post because it emphasizes challenges to ones own views.

MBA Alternatives (9/18/07) – I mention two avenues for people to look at besides MBAs – Masters in Financial Engineering and Masters in Fine Arts. At the time of the writing, I thought both had immense upsides. 20/20 would say the Masters in Financial Engineering was timely.

The Next Management Stars: Divergence Generation (9/20/07) – Companies that create an environment of learning are setting themselves up for flexibility when times are tough. I go into the idea of “academy companies.”

Does College Have a Future (10/23/07) – Here is what I write: Everyone knows that the cost of attending college is going up every
year. Recently, Keisha Lamothe supplied the statistics as to how much
the cost is increasing in an article titled College Costs Keep Rising.
I’m a college graduate from 7 years ago. I had college loans
(refinanced them) that seriously ate into my income. I have a good job
because of college, but I didn’t get paid very well at first – I didn’t
have experience and really lacked the true skills required. Yesterday I
posted an entry about the amount Alex Rodriguez adds value to the team
that employs him. He didn’t go to college. I believe the worth of
college is overrated in the US. Being a society of supply and demand, I
feel the supply of college educated workers is starting to exceed
demand. I think those that have a unique skill are going to really
flourish before 10 years is out; maybe even 5.

I see two
primary forces making this a reality. The first is the gain in
education of the areas that weren’t part of the US/Western
European/USSR faction. Countries or areas like India, China, the Middle
East, and Eastern Europe are developing programs and churning out
workers of quality. The second is the entrepreneurial nature of the US.
As the baby boomers move out of the workforce and Generation Y becomes
more prominent I see a move to situational or something similar to
contract work for a great number of workers than use this method today.
Generation Y has a different mentality. I’m generalizing, but
Generation Y wants to enjoy what they do and doesn’t really accept not
being able to it. They see traditional work and their idea of a job as
an intertwined evolution of the workplace. That is great for
situational work, but not necessarily for corporate life.

Now
the hard part is figuring out what is a unique skill that will have
value in the future marketplace. I expect it to be related to the arts
or maybe a combination of art and technology.

Teaching Teachers and Kids (11/8/07) – This entry focuses on teachers, their personality type, and the US culture. I theorize that the US teaching system hasn’t changed enough to keep pace with the US culture. How kids learn is different now than it was 50 years ago, but many teaching practices don’t reflect that. Then we wonder why the US is falling behind in education scores.

Who Pays Skyrocketing College Costs? (1/2/08) – This entry is focused on Generation Y and their entry into the workforce. Gen Y believes they should be paid more than other groups entering the workforce because they are experienced (internships) and skilled in Web 2.0, which without Gen Y would be a corporate vacuum (tongue in cheek).

College Tuition Changes (3/10/08) – I posted a chart of numbers I collected. The numbers show the percentage increase 5 year period to period of private college costs and public school costs. Needless to say, both outpace inflation, by a lot. Perhaps the increases were supply and demand driven? But I doubt it. I think it’s the foolish idea of if something costs more then it must be better.

Philosophy Education Beneficial in Today’s Fast Pace World (4/5/08) – Philosophy engages students in a way that they aren’t used to in the test based path they’ve been on. The reason is because there are no right answers. It is reflective of the individual. I’m encouraged by this idea because it increases true understanding.

Types of Intelligence and Challenge Approaches (5/5/08) – I mainly just wanted to call out the four methods humans use to solve problems: analytically, procedurally, relationally (collaboratively), and innovatively. I was intrigued by the observation that most people choose two of these types after early childhood and culture often shapes which are chosen.

Thinking about Design (5/25/08) – I like the idea that good designers think along these five lines: Empathy, Integratively, Optimism, Expermentalism, and Collaboratively.

The Unlocking of New Education (6/25/08) – This entry is two great videos on Youtube.com that visually illustrate my viewpoint of a changing culture not being reflected in our educational system. Check them out.

Educating – A Down Economy Opportunity (11/24/08) – I think entrepreneurs that focus on education and training in innovative ways will see big business over the next 18 months. Everyone wants a cheap way to improve their knowledge and skill base. This entry focuses on a company called startup weekend that teaches people to start their own online business in a weekend.

Calmness of a Leader

I occasionally write about leaders. I hope I’m like others and fascinated about how people make certain decisions. But it isn’t just the inner workings of the decision maker that is interesting. It is the appearance of ease in doing so that establishes a leader. For instance, Barack Obama comes off as very calm, very measured, very thoughtful. A good example is during the second Presidential debate the national credit markets were frozen. No one was sure what was happening or how to fix it. So the debate is a time capsule moment for dealing with an unknown. Obama displayed no panic – he was practically reassuring. His competition for the office of President was scattered in his approach. McCain didn’t reinforce his message of strength or experience. As Kate Zernike writes in the NY Times in a piece called Never Let Them See You Sweat people want stability, a steady hand, and reassurance. 

Calmness is partially genetic though. I once read that most of our behavior is genetic, all the way to around 90%, but it is the last 10% that is the difference maker. Channeling it can lead to paramount shifts in how you act. So regarding calmness, even though you may or may not be predisposed to it doesn’t mean you can’t hone it. You can actually hone four other traits as well.

As Zernike points out, Obama is probably shaped by the culture of Hawaii to be more calm. I’ve been to Hawaii and it is laid back. So he may not have had to work very hard at being calm, but he does have to worry about being disconnected as well. And that is the balance of a leader. You must be human in your emotions, but able to rise above them.