!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: October 2008

Friday, October 31, 2008

Halloween 2008




Thursday, October 30, 2008

The Mindset of Too Many Russian Businesspeople

Whenever possible, it's just as well to learn from the mistakes of others, rather than waiting till you've made a mistake yourself to recognize that there's a better way.

In that spirit, I offer the provocative post Stanislav Mishin added to his blog on Tuesday. In the post, Mishin describes the mistakes he believes many Russian manufacturers make in their approach to deal-making.

You really need to read Mishin's own words to get the full flavor of his diatribe (which he calls a "treatise"). I would just note that the lessons to be drawn fall in the areas of cultural sensitivity, negotiation, and communication. (I'd also note that you might or might not want to dip into the political ruminations you can find at Mishin's blog.)


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Wednesday, October 29, 2008

Avoiding an Impasse in Decision-Making on Strategy

In the November 2008 issue of the Harvard Business Review, Bob Frisch, a business strategy consultant, offers practical advice for how a leadership team at a company can work toward a decision on strategy that all team members are aligned with.

Frisch contrasts this outcome of team alignment with the unhappy alternative in which the team members disagree to the point of impasse, and the CEO ends up making the call — leaving at least some members feeling as though a suboptimal outcome has been dictated to them.

Based on his experience in assisting companies with setting up and running strategy meetings, Frisch recommends adoption of a straightforward decision-making process:
  1. Articulate clearly the desired outcome (e.g., "raise gross margins to at least 18% by the end of the year").

  2. Generate a range of options for achieving the desired outcome.

  3. Determine which constraints are truly binding (constraints that are "walls"), and which can be eased (constraints that are movable "fences").

  4. Early in the discussion get everyone's preferences out in the open. The team needs "to identify areas of agreement and disagreement as well as the potential for deadlock." As discussion proceeds, options can be tailored.

  5. Identify each option's pros and cons. To make sure that the cons get sufficient scrutiny, it may be useful to designate one or more devil's advocates whose job it is to spell out the downside of each option.

  6. Create new options that preserve the best features of the options already assessed. As Frisch puts it, "Teams should continue to reframe their options in ways that preserve their original intent ..."
For this process to work well, Frisch warns that two ground rules need to be adopted:
  • Deliberations should be confidential. — "A secure climate for the conversation is essential to allow team members to float trial balloons and cut deals."

  • The team should be given adequate time to do its analysis of the options offered. — Frisch points out that "[b]reaking up the discussion into several meetings spaced widely apart and interspersed with additional analysis and research gives people a chance to reconsider their preferences. It also gives them time to prepare their constituencies for changes that are likely to emerge as a result of a new strategy."
In sum, Frisch argues that a team adopting the decision-making process he recommends will position itself to do an effective job of collaboratively evaluating and prioritizing multiple options.


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Tuesday, October 28, 2008

Training Supervisors in How to Support Work/Life Balance

The November 2008 issue of the Harvard Business Review offers another instance of how intelligent flexibility on the part of managers produces better results for a business than intensive enforcement of rigid rules.

In a brief article, Ellen Ernst Kossek, professor of human resource management at Michigan State University's School of Labor & Industrial Relations, and Leslie B. Hammer, professor of psychology at Portland State University, report the results of a multi-year study of supervisors and employees in American supermarkets.1 In sum:
Teaching managers to be more supportive of their direct reports' work/life issues can be a simple and effective route to improving employee health and satisfaction ...
The core of Kossek and Hammer's research program involved developing and evaluating training for supermarket supervisors designed to help the supervisors more effectively plan coverage in their stores and deal with employees' scheduling conflicts.

The training had three components:
  • A self-paced computer tutorial that took about 30-45 minutes for a supervisor to complete.

  • A 75-minute discussion session with a few fellow supervisors and a faciltator.

  • Having supervisors set individual goals for what they had learned and, for a few weeks following the discussion session, record their supportive behaviors on index cards.
In their training, the supervisors learned about good practice in four areas:
  • Providing emotional support — "acknowledging employees' sometimes extensive responsibilities outside work."

  • Providing structural support — "working with employees ahead of time to resolve scheduling conflicts."

  • Modeling healthful behavior — "for example, showing that it is acceptable to occasionally attend important family functions during work hours."

  • Partnering with other managers — i.e., working with fellow managers "to strategically address work/life issues through initiatives like interdepartmental cross-training, which increases coverage options."
Kossek and Hammer evaluated the impact of this training and found that after the supervisors were trained:
  • Employees' perceptions that their supervisors were supportive on work/like issues were significantly improved.

  • Employees "reported improvements in their overall health as measured by such factors as pain and psychological problems. This effect was most pronounced among employees who previously had the highest levels of work/life conflict — for example, a frequent need to change their hours to accommodate children's schedules."

  • Employees were more satisfied in their jobs.

  • Employees were less inclined to seek jobs elsewhere.

  • Employees reported greater willingness to comply with safety programs.

  • There was generally close agreement between employees' ratings of their managers' supportivesness and the managers' self-ratings. Prior to the training, the employees' ratings were markedly lower than the ratings managers gave themselves.
It is important to note that implementation of the practices Kossek and Hammer taught the supervisors required sanction from upper management. Short-sighted executives will balk at funding such training and at allowing the sort of flexibility Kossek and Hammer encourage. More far-sighted managers will recognize the business benefits of making reasonable accommodation of workers so that the latter feel valued and are not worn down by stress.

1 Kossek and Hammer codirect the Center for Work-Family Stress, Safety and Health in Portland OR.


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Monday, October 27, 2008

"Nico and the Way to the Stars"

As reported today in the International Edition of Helsingin Sanomat, a feature-length animated film called "Niko - Lentäjän Poika" ("Niko — Flying Boy" aka "Nico and the Way to the Stars") "won both the main prize and the audience prize at the Cinekid International film, television and new media festival for children and young people held in The Netherlands during the weekend."

As summarized in the International Movie Database, "Nico and the Way to the Stars" tells the story of a "reindeer boy named Niko [who] dreams about flying like his father, whom he has never met. Despite suffering from severe vertigo, he sneaks out of his home valley to take flying lessons from Julius, a rare member of a Finnish family of flying squirrels."

You can see a sampler of scenes from the film in the video below. (The dialogue is in Finnish.)



Sunday, October 26, 2008

An Auditing Simulation

For an interesting example of how an unflashy simulation can be put together and used in the classroom, I'd suggest having a look at what Faye Borthick (Georgia State University)1 and Mary B. Curtis (University of North Texas) have created for helping students develop their skills for conducting audits that involve analyzing company financial information electronically.

In a 2005 paper (pdf), Borthick and Curtis present in detail a simulation of a due diligence engagement2 for the inventory account of Threadchic, a clothing retailer.3 The simulation's objectives are to help students learn to:
  1. Prepare a business process representation (diagram).

  2. Develop, by financial statement assertion (e.g., "Inventory is $X"), audit objectives for the inventory account.

  3. Design audit procedures to implement the audit objectives.

  4. Execute the audit procedures by querying the data.

  5. Communicate audit objectives, audit procedures, results from execution of queries, matters warranting follow-up, and lessons learned.
As Borthick and Curtis explain,
The learning objectives represent essential skills for audit expertise in situations where auditors are expected to analyze data electronically to verify the internal consistency of accounting records and to detect conditions warranting further investigation.

. . .

Completing the simulation requires learners to wrestle with ambiguities embedded in a realistic audit setting as they make the inferences necessary to develop an approach to performing the audit.4
Borthick and Curtis note that "students have been surprised at the depth of thought required to design the audit program, execute it with audit or query software, refine their audit programs, make sense of the results, and imagine procedures for resolving unusual conditions."

Borthick and Curtis investigated the ability of the Threadchic simulation to accelerate students' acquisition of auditing expertise. They looked specifically at the impact on learning of using business process modeling (one of the learning objectives for the simulation, as listed above), and report that "students with business process modeling experience outperformed students without that experience in every audit task" (i.e., developing audit objectives, designing an audit procedure, executing the audit procedure, and interpreting the results).5

1 Clicking on the Borthick link takes you to a page that provides links to summaries of other work Borthick has done in the areas of instructional design and evaluation of learning outcomes.

2 In a 2004 version of their paper (pdf), Borthick and Curtis provide an answer key for the simulation.

3 A due diligence audit is one carried out as part of the process through which a company decides whether or not to move ahead with a merger or acquisition it is considering. In the case of the Borthick-Curtis simulation, the inventory audit is part of the investigation a potential acquirer is undertaking to determine whether the financial statements Threadchic has provided are accurate.

4 You can look at the simulation as students experienced it here. To gain access, enter user name "ac863" and password "Qd0319."

5 Here (2004 - pdf) and here (2007 - pdf) Bortnick reports the results of research conducted with Carol. W. Springer, a colleague at Georgia State University, on developing accounting students' critical thinking skills. A working paper by Springer showing how critical thinking skills developed in an accounting course can carry over into other academic areas is here (2004 - MSWord).


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Saturday, October 25, 2008

"Playing for Change"

Yesterday's edition of Bill Moyers Journal included one of the most arresting features I have ever seen on TV. In the segment in question, Moyers presented lengthy excerpts from "Playing for Change: Peace Through Music," a film produced by Mark Johnson, a sound producer/engineer and film director.

As explained at the Bill Moyers Journal website:
"Playing for Change" "brings together musicians from around the world — blues singers in a waterlogged New Orleans, chamber groups in Moscow, a South African choir — to collaborate on songs familiar and new, in the effort to foster a new, greater understanding of our commonality.

Johnson traveled around the globe and recorded tracks for such classics as "Stand By Me" and Bob Marley's "One World" — creating a new mix in which essentially the performers are all performing together — worlds apart. Often recording with just battery-powered equipment, Johnson found musicians on street corners or in small clubs and they would in turn gather their friends and colleagues — in all, they recorded over 100 musicians from Tibet to Zimbabwe.
You can watch the "Stand By Me" portion of the film in the video below. A transcript of Moyers' interview with Johnson is here.

All of the "Stand By Me" performers are wonderful. I found myself especially taken with "Grandpa Elliot" Small, a New Orleans street musician.


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Friday, October 24, 2008

A Book on Business Writing

In 2007 Barbara Janoff, the writing coordinator for the Fashion Institute of Technology, and Ruth Cash-Smith, a writer based in Maine, published The Graphic Designer's Guide to Better Business Writing. This book is full of good advice that can be helpful to people in any business role, not just graphic designers.

Thanks to Google Books, you can sample the book's contents. For example, you might want to have a look at the substantial portion of Chapter 14, "Working through Client Conflict," that is included in the Google Books sections of the book.

In this chapter, Janoff and Cash-Smith discuss three keys to finessing the task of communicating a message to a client that likely to be viewed as disappointing or vexing, such as denying a claim, declining a request for additional services, or refusing to cut your agreed price for a project. These three keys are:
  1. Deciding whether to use direct or indirect organization for your message.

    With direct organization — the approach appropriate for most business communications — your main point comes first and is then followed by your rationale and supporting evidence.

    In situations where you believe you need to soften the blow of what you have to say, indirect organization helps. This means opening with your rationale and saving the refusal or bad news for the latter part of your message.

  2. Deciding whether to use active or passive voice.

    Again there is a default which applies for most messages, and that default is the active voice. E.g., "We'll draft the brochure by October 15, and then you'll communicate any needed revisions by the 22nd."

    For negative messages, the passive voice can be a better choice because it obscures who is responsible for an unwelcome state of affairs. E.g., instead of saying "We can't change the copy at this time and still stay within the budget," you may do better by adopting the passive voice: "It isn't possible to change the copy at this time and still stay within the budget."

  3. Keeping your reader's needs and expectations at the front of your mind.

    As Janoff and Cash-Smith explain, "You need to write with a sense of empathy, which means asking yourself how you would react if you were the reader of the message you are writing."

    Indicate benefit to your client even though the basic message is negative. For example, instead of announcing "The enclosed documents must be approved before we can proceed," say "So we can proceed with your design work, please approve the enclosed documents." The goal is a gracious tone that highlights the value of what you're saying has to happen (or what you're saying can't happen).
The issue of tone comes up in another excerpt of the Janoff/Cash-Smith book that you might like to take a look at. On pages 18-19, you'll find a revision checklist. The checklist is divided into six sections, the last of which covers tone. The questions Janoff and Cash-Smith suggest asking yourself are:
  • Have you written your message in the appropriate voice for your purpose and reader?

  • Is it written with the right degree of informality?

  • Have you avoided slang words and clichéd language?

  • Have you omitted language that indicates sarcasm and anger from complaints and disputes?

  • Do you maintain a friendly but business-like tone?
The other sections of the checklist cover:
  • Focusing on your purpose and your reader's needs and expectations

  • Organization of your message

  • Conciseness

  • Clarity

  • Layout
The bottom line is that you need to cast any message in persuasive terms that are geared to maximize odds that the recipient will respond in the way you're hoping and minimize odds of seriously frayed relations.


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Thursday, October 23, 2008

A Wiki of Enterprise 2.0 Case Studies

In an April 2006 post, I talked about the work Andrew McAfee, an associate professor of business administration at Harvard Business School, has done in analyzing the benefits to companies of business communication tools like blogs and wikis.

For many companies, these "Enterprise 2.0" collaboration tools are a revised approach to creating an intranet. Unlike many traditional intranets, the Enterprise 2.0 tools, properly set up, actually work, in the sense that they attract active participation and are generally easy to keep updated. The basic switch in platforms is from complex knowledge management software and one-to-many authoring, to easy-to-install software that enables many-to-many authoring.

To get a look at specifics of how some organizations are using tools like wikis, blogs, and social bookmarking, you can browse a slowly growing group of case studies posted at cases2.com, a site sponsored by McAfee and hosted by the social software vendor, Socialtext.

The cases themselves are presented using Socialtext's web-based wiki software. The submitters organize their stories by populating a template that includes these sections:
  • One sentence summary

  • Company information

  • Case description

  • Enterprise 2.0 solution

  • Results / Benefits

  • Hurdles / Challenges

  • Lessons learned

  • Screenshots

  • Information about the case — specifically, the name of the author, and any disclosures about relationships between the author and the company in the case, the technology vendor(s), etc.

  • Comments / questions from readers (virtually none, so far)
Among the cases you might want to check out:
  • The Angel.com case — illustrates how a company can implement wikis for communicating internally and with customers. This particular case was written by a Socialtext employee who did not get around to identifying hurdles and challenges and lessons learned, so the story is unfortunately incomplete.

  • The BUPA case — illustrates an application of social bookmarking to facilitate social networking, content management, and knowledge sharing. The iConcerina case, submitted by the same social bookmarking vendor, offers further useful tips.

  • The Citrix Community case — illustrates how an unofficial community can be created that fosters communication among employees, clients, and people at partner organizations. This case also enumerates hurdles that need to be anticipated and addressed.

  • The Intrawest case — illustrates how Enterprise 2.0 tools can help create solidarity among employees.

  • The Specialized Bicycle case — illustrates how use of online workspace can cut time to project completion, improve the accuracy of updates to information and status reports, and encourage transparency among team members in communicating their contributions to the joint effort.

  • The Uniglo case — illustrates an effective way of collecting timely feedback from hundreds of field locations (retail stores in this particular instance).

  • The YNNO case — illustrates how a consultancy can use an online knowledge sharing application as a document management system and collaboration platform.
I suspect that updates to the cases2.com site will be infrequent, but the cases already contributed provide a decent cross-section of applications of Enterprise 2.0 tools and, as such, are worth browsing.


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Wednesday, October 22, 2008

Equipping People with Basic Team Skills

You can get an overview of some fifty years of research on the factors driving team performance by reading the survey article (purchase required) Steve W. J. Kozlowski and Daniel R. Ilgen, psychology professors at Michigan State University, published in the June/July 2007 issue of Scientific American Mind.1

Instead of summarizing a summary, I'll focus here on what Kozlowski and Ilgen say about helping team members develop the skills they need in order to work together effectively. Kozlowski and Ilgen make three key points:
  • Best results come from training team members together. "Members of groups that had trained together remembered more details, built better-quality radios [the task in the research experiment] and showed greater trust in fellow members' expertise."

  • General teamwork skills, i.e., skills not specific to any particular task, are best taught in classroom mode because they can be covered in a tightly organized way (as opposed to depending on catch-as-catch-can acquisition on-the-job). The amount of time required is surprisingly small. In fact, Ilgen's research team "has demonstrated that knowledge of these team competencies can improve significantly with only 30 minutes of individual training."

  • With the help of the team leader, high-performing teams learn from their experience and are able to adapt to changing circumstances and new ideas increasingly effectively as time goes on.
Kozlowski and Ilgen conclude with the proposition, "If teamwork were taught along with reading, writing and mathematics, and if these skills were ubiquitous, there would be enormous benefits to students and society alike."

1 The Scientific American Mind article is a condensed version of a much longer monograph available here (pdf).


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Tuesday, October 21, 2008

Those Who are Willing Can "Break the Prejudice Habit"

For almost twenty-five years, Patricia Devine, a psychology professor at the University of Wisconsin-Madison, has been investigating how people with implicit and/or explicit prejudices can overcome those prejudices by applying values of fair-mindedness to their evaluations of and responses to others.

The key, as in just about any situation in which learning is involved, is that the individual must want to change. A person motivated to learn to act without prejudice will feel guilty when s/he behaves otherwise. This guilt is the person's cue to make a conscious effort to improve. The good news from Devine's research is that such conscious efforts pay off.

Devine explains:
[Prejudice] is the legacy of our socialization experiences. We all learn these stereotypes and have these biases at the ready whether we condone them or not, whether we think they are good or not, and as a result the immediate reaction is a biased one. If you are going to respond in nonbiased ways, you have to gain control or override the automatically activated stereotypic response and instead respond in these thoughtful deliberate ways that might represent your personal values.
In Devine's view, overcoming prejudice is akin to breaking a bad habit:
"[Eliminating prejudice] is a process. Making that decision is the first step, but then what you have to do is put some effort into it. Just making the decision doesn't mean you wake up one day, stretch and say "I'm not prejudiced," because you have got this whole socialization experience that you grew up with.
Devine found that people whose personal values and standards include being unbiased would try "to learn from mistakes, [try] to absorb material and at the next opportunity when prejudice was possible, they responded in a fair and unbiased way."

Devine also found that if people are responding to both internal motivation (personal values and standards) to act in an unprejudiced way, and to external motivation (social pressure), they will benefit from help in developing skills for acting in an unbiased way.

On the other hand, for people who are only responding to external motivation, the best way to help is not to up the ante by applying more pressure. Rather, a coach should try to facilitate development of internal motivation to break the prejudice habit.


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Monday, October 20, 2008

Manufacturer-Dealer Business Relationships

Right on cue, the Wall Street Journal published an article in today's edition that offers reinforcement for points covered in a recent post on the potential for nurturing joint dependence to improve performance of both a manufacturer and a partner company, such as a supplier.

The WSJ article, by Eric Johnson, a professor at Dartmouth's Tuck School of Business, and Robert Batt, a PhD candidate at Wharton, looks at the relationship between manufacturers and dealers. The recommendations Johnson and Batt offer track closely with those that grow out of the research by Maxim Sytch and Ranjay Gulati discussed in the earlier post.

Based on three years of interviews and field research, Johnson and Batt recommend a strategy of building long-term sales and profits by strengthening manufacturer-dealer relationships. This approach has three elements:
  • Strengthening the best dealers — This can mean culling weaker dealerships in order to provide scope for the stronger dealerships to grow. Providing dealer training can be a big help in positioning the remaining dealers for solid success.

  • Supporting dealer profitability — This means developing products that can be sold at good margins and that crowd out competitors.

  • Incorporating dealers in company culture — Manufacturers should take positive steps to enlist their dealers in achieving the company's mission in a way that aligns with the company's culture. This generally involves such contributions as training, merchandising support, and promotions. Other relationship-building activities, such as sales conferences and joint sales planning, are also productive.
Johnson and Batt illustrate their ideas with examples drawn from practices at piano manufacturer Steinway & Sons and power tool manufacturer Stihl Inc.


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Sunday, October 19, 2008

Jay Cross on Informal Learning

As a follow-up to yesterday's post on facilitating informal learning, I'd like to call attention to thoughts on the subject that consultant Jay Cross, offered in the same October 2008 issue of Chief Learning Officer as contains the article I highlighted yesterday.

Cross provides a Before-and-After case study of knowledge management and informal learning at CGI, a Canadian IT outsourcing firm.

The Before situation was one of overly elaborate knowledge management infrastructure that didn't work.

The After situation was what CGI dubbed "Internet Inside," an enhanced intranet constructed internally using mostly open-source software. The purpose of Intranet Inside, which has a distinct Web 2.0 flavor, is to consolidate and make easily accessible the collective intelligence of CGI employees located in the 16 countries in which the company has offices.

As Cross explains,
CGI has dozens of communities of a hundred or so like-minded professionals. Groups have formed around topics such as Java, enterprise architecture, banking, insurance, dot-net and business intelligence. ...

Admission is by invitation only, limiting participation to like-minded individuals and keeping the groups to workable size. Participation in a community is based on need and qualifications.

... Every item that is shared as news is screened by a knowledgeable person before distribution to the group. ...

CGI has begun tagging all dialogues, not just by topic, but also by roles of the participants. A few years hence, CGI will have sufficient information to identify in-house experts based on past discussion.
Presumably, a further phase of informal learning at CGI will involve helping employees effectively tap into the expertise so identified.


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Saturday, October 18, 2008

Facilitating Informal Learning

The October 2008 issue of Chief Learning Officer has an informative summary by Agatha Gilmore of the importance of informal learning and of how organizations can best facilitate such learning.

The main theme of Gilmore's article is that informal learning, like anything else of significance to an organization, must be managed, but that the management must not be self-defeating. I.e., it makes no sense to use a management approach that bleeds most of the informality out of informal learning. As one interviewee puts it:
Facilitation is about putting in place the minimum level of systems and processes and providing, in some cases, evangelism to build energy around the subject without going too far in terms of trying to get in the middle of every discussion
Gilmore lists three requirements for effectively facilitating informal learning:
  • Creating a collaborative culture

  • Executive-level buy-in

  • Providing tools (which you keep as simple as possible) for:

    • organizing learning (e.g., communities of practice and online discussion forums)

    • easing the process of keeping published information up-to-date (e.g., blogs, wikis, and Web conferencing)

    • building communities, finding experts, and creating experts (notably, social networking)
As for managing the content that employees access, the goals should be making the time needed to find a particular bit of information as brief as possible, and ensuring that the information is accurate.

Training is also part of the story, but the objective is nothing more elaborate than making sure people know "what the tools are and how and when to use them." This equips them to make effective use of information that is relevant and accurate because it is being captured in ways that enable timely updating, something that is increasingly problematic for formal learning programs.


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Friday, October 17, 2008

Levi Stubbs, 1936 - 2008

Here are Levi Stubbs, Abdul "Duke" Fakir, Renaldo "Obie" Benson, and Lawrence Payton performing "Baby, I Need Your Loving" in 1965 ...

You can read the Rolling Stone overview of the Four Tops' career here.



Thursday, October 16, 2008

The Fed's Beige Book

"Reports indicated that economic activity weakened in September across all twelve Federal Reserve Districts. Several Districts also noted that their contacts had become more pessimistic about the economic outlook.

"Consumer spending decreased in most Districts, with declines reported in retailing, auto sales and tourism. Nearly all Districts commenting on nonfinancial service industries noted reduced activity. Manufacturing slowed in most Districts. Residential real estate markets remained weak, and commercial real estate activity slowed in many Districts. Credit conditions were characterized as being tight across the twelve Districts, with several reporting reduced credit availability for both financial and nonfinancial institutions. District reports on agriculture and natural resources were mostly positive, although adverse weather associated with hurricanes Ike and Gustav negatively affected the South and the Midwest.

"Inflationary pressures moderated a bit in September. While several Districts noted continuing pass-through of earlier price increases for metals, food and energy, most indicated that cost pressures had eased. Labor market conditions weakened in most Districts, and wage pressures remained limited. Several Districts reported lower capital spending or reductions in capital spending plans due to the high level of uncertainty about the economic outlook or concerns over the availability of credit."

Thus opens the most recent edition of the Federal Reserve Board's Beige Book, which is published eight times a year. As explained (pdf) by Rubén Hernández-Murillo, an economist in the Research division of the Fed's St. Louis branch,
The Beige Book, officially called the Summary of commentary on current economic conditions, is an anecdotal description of economic activity in each of the 12 Federal Reserve districts. To produce the Beige Book, each Federal Reserve Bank gathers information about its district through a network of business contacts across many industries, such as manufacturing, services, real estate, banking and agriculture. The contacts are promised anonymity in return for accurate, honest and current information. Staff members at one of the 12 Federal Reserve banks compile the district reports into the national summary of economic conditions. The Beige Book is released two weeks prior to every scheduled meeting of the Federal Open Market committee. ...

Although the Federal Reserve relies, for the most part, on formal data and sophisticated statistical methods for conducting monetary policy, anecdotal information — such as that collected for the Beige Book — is also used to confirm or to help understand trends that arise from the formal data. Formal statistics, such as the series on Gross Domestic Product (GDP) and the Consumer Price Index, do not provide a perfect picture of the economy, and informal or anecdotal information yields insight into the formal statistics to help fill the gaps. For example, except for financial indicators, most formal data are released with a lag and, therefore, do not necessarily present an up-to-date picture of the economy. The anecdotal information collected from the people who are actually making day-to-day business decisions provides timely information about some of the trends in the data that may be occurring.
If you would like to learn more about the information value of the Beige Book you can read a recent research report by Hernández-Murillo and three co-authors here (pdf).


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Wednesday, October 15, 2008

Pay Attention to Profitability

On October 3, Forbes published an excellent article by Partha Mohanram, an associate professor at Columbia Business School, that is a timely reminder of why you should look at least as closely at a company's balance sheet as at its income statement when assessing the company's financial health.

Mohanram's central point is the necessity of recognizing the distinction between profit — the difference between revenue and expenses — and profitability — the amount of profit relative to the amount of assets the company is using to earn its profit.

Once one begins reflecting on the distinction between profits and profitability, several other points come to the fore:
  • Profitability can be falling even if profits are rising. This happens whenever the growth rate of assets exceeds the growth rate of profits.

  • The quality of assets matters. In particular, the risk of loss of value for each category of asset is of essential importance.

  • You have to look at the footnotes to the balance sheet to check for "offsheet" items that need to be added back in in order to get a true picture of the company's financial condition.
Having made the above points, Mohanram goes on to offer several recommendations:
Managers should care as much about what any new transaction brings to their balance sheet as what it brings to their income statements. Analysts should stop focusing exclusively on EPS [earnings per share] targets and also forecast profitability targets. ...

The business press should stop facilitating the negative cycle caused by an emphasis on profits and growth without regard to the assets used to derive them. Boards of directors should reward managers for growth in profitability, not profit, by incorporating measures such as residual income (earnings less a charge for capital employed) in deciding executive compensation. Regulators should clamp down on off-balance sheet items, a lesson that apparently wasn't learned from the Enron debacle. Finally, business academics must train the next generation of managers, financial analysts and investment bankers to understand the critical difference between profit and profitability.
In other words, ensuring that managers — and, ideally, that employees in general — have solid business acumen is fundamental for enabling value-creating business decisions.


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Tuesday, October 14, 2008

Creating Maximum Value Requires System Thinking

In the Fall 2008 issue of the MIT Sloan Management Review, Maxim Sytch, a lecturer at Northwestern University's Kellogg School of Management, and Ranjay Gulati, a professor at the Harvard Business School, provide an overview of their research on the relationship between the mutual dependence of a supplier and a manufacturer, and the firms' business performance.1

The key finding is that it is a mistake to think, as many do, that value appropriation is the only relevant process. I.e., it is not the case that the way in which the supplier and manufacturer divvy up the value they create is determined entirely by their degree of dependence asymmetry — "how much more (or less) one company is dependent on its business partner than vice versa."

Sytch and Gulati hypothesized that joint dependence — "the extent to which two companies mutually depend on each other" — was also important. In other words, in reaching their decision on dividing up the value they create, the manufacturer and supplier would factor in the potential for increasing the total value. Using data from the automotive industry (Ford and Chrysler, to be specific), Sytch and Gulati found clear support for this hypothesis.

By deliberately building a relationship that involves both joint action in such areas as design, cost control, and quality improvement, and also the sharing of detailed, accurate, and timely information, manufacturer and supplier are able to enhance the performance of the procurement relationship. Performance is measured by such factors as price competitiveness, product quality, product innovation, and defect rate.

The bottom line: Managers should think systematically about dependence in interorganizational relationships. Because there are benefits to mutual dependence, "striving to maximize power in a buyer-supplier relaitonship can have a negative impact on a company's performance."

1 The text of the published version of Sytch and Gulati's research is here. This version provides a full explanation of the research methodology.


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Monday, October 13, 2008

Paul Krugman, Nobel Laureate

One of my favorite living economists, Paul Krugman of Princeton University, has just been awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

(The New York Observer)

I regularly read Krugman's Monday and Friday columns in the New York Times, learning considerably from them — most recently about the moves taken by the British to cope with the freeze-up in the world's credit markets.

For a summary of the work for which the Royal Swedish Academy of Sciences recognized Krugman, you can go here (pdf).


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Sunday, October 12, 2008

Columbus Day 2008

The World's Columbian Exposition of 1893, held to mark the 400th anniversary of Columbus' arrival in the Western Hemisphere, is one of my favorite moments in American history — both for what it tells us about the city of Chicago at the end of the 19th century, and for its telling expression of American culture at that time.

"Horticultural Building, World's Fair, Chicago"
by Childe Hassam (1893)

(Source:Prof. Kathleen Nichols, Pittsburg State University (Pittsburg, Kansas))


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Saturday, October 11, 2008

Rachid Koraïchi

I am very interested in textiles in general, so yesterday's review in the New York Times of two current exhibits of African textiles caught my eye.

Among the works illustrated in the accompanying slide show, I particularly liked the one reproduced at left because I'm so attracted to the deep blue of indigo. "Bannière" was created by Rachid Koraïchi , a contemporary artist born in Algeria who now lives in Paris.

As Karen Rosenberg explains in her review, Koraïchi "makes reference to the complex history and geography of indigo in large vertical banners filled with text from an eighth-century Sufi mystic."

"Bannière" from "7 Variations Autour de l'Indigo,” 2002, by Rachid Koraïchi



Friday, October 10, 2008

Inflation FAQ

The Federal Reserve Bank of Dallas has published a helpful interview with Jim Dolmas, a senior economist at the bank, in which he answers basic questions about how inflation is measured:
  • How do recent inflation readings compare with historical trends?

  • Haven't we seen particularly big increases in food and energy this time?

  • What about the perception that inflation statistics don't match consumers' experiences when they shop?

  • Shouldn't the cost of shelter be going down with housing prices?

  • Why exclude food and energy from the inflation rate for core services?

  • Are there other measures that help reveal inflation trends?

  • What's the difference between the price index for personal consumption expenditures (PCE) and the consumer price index (CPI)?
You can access data on inflation in the US from this page of the Dallas Fed site.


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Thursday, October 09, 2008

The Ming Tombs

In addition to the Great Wall, my brother and his group of exchange students visited the tombs of the thirteen Ming emperors today.

(Source: ChinaCukture.org)

(Source: Chinese Culture and Education Foundation)



Wednesday, October 08, 2008

The Summer Palace, Beijing

My brother and his group of high-schoolers are back in Beijing after a month in Xi'an. A highlight of today's touring was a stop at the Summer Palace in the northwest section of the city.

(Source: www.chinapictures.org)

(Source: jjacobs.net)



Tuesday, October 07, 2008

Just Read the Sidebar

In its October issue, Chief Learning Officer has an article on the subject of evaluating learning that tells you nothing new. However, embedded in the article is a helpful sidebar by training specialist Tom Kelly that offers a half dozen practical tips for making sure your measurement of learning impacts is aligned with business goals:
  1. Track macro trends, not individual results "In sales and other functions, too many variables exist to measure positive or negative impacts of training on an individual success/failure level. However, comparisons of regional teams, city teams or other groups can help identify a correlation between training and success."

  2. Measure and report the right metrics — You need to identify impacts on revenue, employee productivity, and/or customer satisfaction and loyalty.

  3. Look at the training strategies used by successful people or teams — Replicate what works, making appropriate adjustments to fit each group of employees being trained.

  4. Create a teaching culture — Take steps to ensure experts share their expertise.

  5. Decentralize content creation — "Peer-to-peer teaching tools mean giving up some control of the content creation process but increase the accessibility and speed that content can be updated or corrected."

  6. Centralize content deployment — Establish a portal that aggregates content (and allows control of redundancy), and that makes accessing the content easy for users.
As Kelly points out, there is a dual benefit of adopting the above practices. You both acquire information needed to make the business case for investing in your training programs, and you bolster the degree to which your company is a learning organization with "an evolving, organic culture that’s open to growth and change."



Monday, October 06, 2008

The Barefoot College

Alerted by a report tonight on the PBS Newshour with Jim Lehrer, I've spent some time informing myself about the mission and activities of the Barefoot College.

The Barefoot College was founded in 1972 by Sanjit "Bunker" Roy in Tilonia, the village in Rajasthan, India, where he was living.

In its own words, the Barefoot College takes as its mission addressing
... problems of drinking water, girl education, health & sanitation, rural unemployment, income generation, electricity and power, as well as social awareness and the conservation of ecological systems in rural communities.

The College benefits the poorest of the poor who have no alternatives.

The College encourages practical knowledge and skills rather than paper qualifications through a learning by doing process of education.
You can get an idea of the work the Barefoot College is doing — not only in India, but also in other developing countries around the world — by watching the video below. Note that the women learning to install and maintain solar panels and lanterns at the Barefoot College are generally illiterate or semiliterate, but this does not prevent them from acquiring the necessary skills during six months of practical training.

The Barefoot College has a channel at YouTube where you can browse through addiitonal videos detailing its work.


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Sunday, October 05, 2008

Healthcare Training in Eritrea

The country of Eritrea in east Africa has had a difficult history. The United Nations federated Eritrea with Ethiopia in 1952, and then Ethiopia annexed Eritrea ten years later. This precipitated armed resistance that ended with independence from Ethiopia in 1991, confirmed through a referendum in 1993. A subsequent border dispute precipitated further conflict in 1998-2000, which was brought to an end through United Nations intervention to arbitrate drawing of the border. Unfortunately, there is lingering disagreement over a portion of this border. (A detailed chronology is here.)

Internally, Eritreans have faced an indefinite delay in putting into effect the democratic constitution that was ratified in 1997. Isaias Afworki, elected president in 1993 by a transitional legislature, remains in office, never having exposed himself to the electoral process laid out in the constitution.

Even as advances toward democracy have remained stalled, Eritrea has made progress on other fronts, notably in the area of healthcare. The two videos below, produced by the Geneva University Hospitals provide some background on the opening of Eritrea's first medical school in 2003. (The videos are parts 1 and 2 of a single narrative.)

Only four years after the medical school was established, Eritrea opened the Orotta Post-Graduate Medical School to train specialists — initially in surgery and pediatrics.

For additional detail concerning Eritrea's efforts to modernize and expand its health system, you can read the Eritrean Ministry of Health's 2006-2010 strategic plan here (MSWord).


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Saturday, October 04, 2008

Tang Paradise

The Tang Paradise theme park southeast of Xi'an, which opened in April 2005, occupies 165 acres, 49 of them water. My brother visited there on Wednesday with his fellow teacher, the women hosting them, and the son of one of the women. You can see some of what they saw in the video below.

For more on Tang Paradise, you can read the article on the park that the Boston Globe published in 2006. The photo below of the park's Self-Cooled Pavillion is taken from the Globe article.



Friday, October 03, 2008

Roger Fisher on Getting and Using Influence in Negotiations

To be able to approach a negotiation with maximum, realistic confidence of being able to hold your own, you need to scope out in advance all the sources of persuasive power you can bring to the interchange.

In a 1983 article (pdf, pp. 51-71), Roger Fisher, an emeritus professor of law at Harvard, describes six sources of negotiating power, which, in this context, he defines as the ability to influence others. Fisher advises tapping all these sources of power, and, generally speaking, doing so in the order shown below.1
  1. Skill and knowledge — You need interpersonal skills (e.g., the ability to listen), analytical skills, general knowledge (e.g., of cultural differences), and knowledge specific to the particular negotiation (most importantly, knowledge of the parties, of their respective interests, and of relevant facts).

  2. A good relationship — "The two most critical elements of a working relationship are, first, trust, and second, the ability to communicate easily and effectively."

  3. A good alternative to negotiation — As part of your preparation, identify the alternatives to reaching agreement with this particular negotiating partner, select whichever is most promising, and refine that alternative as fully as possible.

  4. An elegant solution — "The more complex the problem, the more influential an elegant answer."

  5. Legitimacy — You "can substantially enhance [your] negotiating power by searching for and developing various objective criteria and potential standards of legitimacy, and by shaping proposed solutions so that they are legitimate in the eyes of the other side."

  6. Commitment — An affirmative commitment is an offer of something you are willing to agree to, or an offer of what, failing agreement, you are willing to do under certain conditions.

    A negative commitment is an assertion that you are "unwilling to make certain agreements (even though they would be better for [you] than no agreement)," or a "threat that, failing agreement, [you] will engage in certain negative conduct (even though to do so would be worse for [you] than a simple absence of agreement).
Note that, contrary to some people's inclinations, the idea is to hold off on resorting to threats until you have attempted to reach a satisfactory outcome by tapping your other sources of negotiating power.

As Fisher puts it, "The earlier I make a negative commitment — the earlier I announce a take-it-or-leave-it position — the less likely I am to have maximized the cumulative total of the various elements of my negotiating power." Furthermore, there is the danger of getting caught up in a battle of back and forth threats, which is unlikely to be productive.

1 This post covers recommendations from Fisher that are more comprehensive than those discussed in a previous post that drew on suggestions offered by Fisher and co-author William Ury have in their classic book, Getting to Yes: Negotiating Agreement Without Giving In. Other posts focused on the how-to's of effective negotiation are here and here.



Thursday, October 02, 2008

James Rickards on Modeling of Financial Risks

Today's edition of the Washington Post contains an excellent article by James Rickards, one-time general counsel of Long-Term Capital Management and currently a consultant on national security and capital markets. Rickards explains why the models Wall Street has been using to assess the risk of their portfolios are fundamentally flawed.

Central to Rickards' discussion of risk modeling is the concept of complexity:
Both natural and man-made systems are full of the kind of complexity in which minute changes at the start result in divergent and unpredictable outcomes. These systems are sometimes referred to as "chaotic," but that's a misnomer; chaos theory permits an understanding of dynamic processes. Chaotic systems can be steered toward more regular behavior by affecting a small number of variables. But beyond chaos lies complexity that truly is unpredictable and connot be modeled with even the most powerful computers. Capital markets are an example of such complex dynamic systems.
The article is short and is well worth reading in its entirety.



Wednesday, October 01, 2008

Training ... What a Concept

Knowledge@Wharton published an article today that, among other things, serves as a reminder of the importance of including training in efforts directed at raising employee productivity.

The article looks at the recent adoption of RedPrairie's workforce management software by Ann Taylor Stores Corp. This software enables Ann Taylor to make sales assistants' assignments in a way that has the most productive people — in terms of average sales per hour (most important), units sold, and dollars per transaction — on the floor during the times of heaviest traffic.

As described by RedPrairie, their software can take not only sales productivity and store traffic patterns into account, but also employee preferences and skill levels. Appariently, Ann Taylor has not given the latter variables much weight.

Stephen Hoch, a marketing professor at Wharton, argues that the software — as implemented at Ann Taylor — "potentially creates a hostile working environment." Hoch
acknowledges that technology-based information can be valuable to managers, but only if the value is clearly understood throughout the company. Without consistent buy-in, technology-driven management tools will result in adversarial relationships across all staff levels.

Information technology is not a way to overcome weak management, he suggests, noting that human capital management systems must be sold to workers as a valuable tool for all employees and should be accompanied by training sessions. "It should motivate everybody, not just the best sellers. It would be nice to couple it with training to bootstrap people who are not as effective as the top performers."
It is important to note that RedPrairie assumes that at least some of its clients will want to integrate workforce management software with training because the company offers learning management applications.

The Wharton article cites an article in the September 10 edition of the Wall Street Journal that reports employees at Ann Taylor "say the system has resulted in sharp cutbacks in hours for some employees and has diminished morale." I will have an eye out for follow-up reports indicating whether Ann Taylor persists with its current rather employee- and customer-unfriendly implementation of its workforce management system, or, alternatively, moves in the direction of beefing up training and having managers apply the software with a degree of flexibility that promotes high employee performance over the long run.


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