Gabriel’s scarcity rent - it’s management stupid!

It’s been too long without blogging. Some weeks at an hectic pace. Good things, bum things and a grain of salt. In this learning journey I don’t especially like posting about me. But here I am again, the worst draught we have ever suffered in Barcelona and I am at the beach and it’s raining! A few days ago I was in rainy England reflecting, trying to finish my assignment -dismissed as too reflective by the way-. Can it be that I’ve started to believe my own lies? Do people really expect you to reflect or talking about reflection in personal development is paying lip service to a new god while still worshipping the old one? Who knows.

I don’t want to further bore you with my own ramblings. The thing is that, if you ever face finance, think about the bottom line! There’s absolutely nothing else. No corporate social responsibility, no carbon footprint, just budgets, margins and ratios. The stake-holders are simply unavoidable, and the customers necessary. And if they care about those things, we’ll have to convince them that we care too. Nothing more.

My macbook just took this picture of me. I know I should have moved to avoid the direct light from behind, but I thought I could put something natural and improvised here. And that’s what I did. It’s raining outside. The fireplace is the only heat around, and the air is a bit smoky. Huge waves from the storm are splashing on the beach a few metres from here. Some dogs are howling while mine lay wet on the floor next to me. The recently established neighbouring bees are completely quiet inside their hive: they do not dare to go out. Next picture I’ll try to show you more of this. But not today.

The blog has just surpassed its 30.000 visits. Not bad, huh? Fairly surprising in fact. I’m still amazed that people find these pages floating in this coarse soup that the internet is. Maybe that’s why I decided to show my face and my nonsense, all at once.

What else happened these days? Another workshop, and, seeing the big picture, I’m straightly headed for the final exam. The first year will soon be gone. But first I need to study, I need to pass the exam.  And another year will be gone, one year and a half of blogging, and I will still be here.

Sorry for the babbling. That’s what I felt like doing today. That’s what my 3.5G modem is for. And thanks for reading.

Last Sunday my doggie decided to jump on my MacBook. Doggies have the ability to change from a quiet and relaxed mood to an excessive joy in a matter of seconds. I can’t describe the sensation I had seeing my middle-to-large sized beloved dog on my highly-priced adored computer. But she did.

Guess what happened? The computer withstood valiantly the assault. The momentum wasn’t able to join forces with gravity. It never fell down. But one of the keys jumped in revenge and tried to catch the doggie. Utterly broken, there was no way to reattach it.

A broken key. I felt like possessed by a sudden illness. Now it was my time to change into a gloomy mood.

The worst thing a patient can do is try to impersonate a doctor and use the world-wide-vademecum, that’s the internet and its information about hundreds of patients that have gone through the same illness. Why is that that the bad experiences get blogged far more often?

I encountered dozens of stories about broken keyboards, computers kidnapped at the technical service for weeks or even months, and then returned scratched to their unfortunate proprietors, about huge repair bills, bad and worse experiences, voided guarantees or even frauds.

So my mood went from gloomy to desperately depressive, collecting the dismal, dreary and dispiriting tonalities all in one.

I even tried to investigate how to solve the problem. I found a couple of websites that sold individual keys. That was the first good news. The bad news was that the gone-missing key is not standard but from the Spanish keyboard. My computer is in English but of course with a Spanish keyboard: I need a few more symbols to be able to write Spanish or Catalan.

The missing key was the one with both the symbols < and >. The English (both American and European) keyboards, have those symbols in two separate keys. That meant that they probably didn’t have my key in stock. The cost wasn’t that important, but the expected delay was significant. What should I do?

Well. Monday came and I went to the nearest Apple service centre in Barcelona. Only 300m from home there is that nice place… Microgestio. Let me tell you about my experience with them.

There were no queues. Just a nice couple at the counter. They called a technician that was with me in a matter of seconds. Then he left with my hapless computer. And I was there left waiting… I felt naked… it felt like a long wait… but it was only for a couple of minutes. Then he came back. The key was there. Everything was covered, no questions asked. Just a nice, emphatic smile. Just what I needed: no delays, no retreats, only an efficient solution.

That was like a moment of truth, a defining moment. I enjoyed and experimented good service… a rare and elusive taste. For Apple it was a small expense: the cost of a key. But what they got in return was loyalty. Immediate pay-back, and a greater, by far, net present value.

One key for another apostle. Is there a better deal?

I was interviewed for the Independent by Andy Sharman and he wrote this interesting article, here you have an excerpt

Facebook or LinkedIn?

Most business schools have their own network, in the form of a virtual learning environment. These have “blackboard” functions, which allow course materials to be posted online. But Facebook and MBAs should be a match made in heaven. One of the main reasons MBA students do MBAs is to network, and what could be easier than collecting your contacts on a site such as Facebook and LinkedIn? Still, staff seem divided as to whether Facebook – a site developed for college friends to keep in touch, and post party pictures – has any real relevance in business. Most educators agree that, though LinkedIn is a relatively safe forum, the Facebook phenomenon throws up as many obstacles as it does opportunities.

“This is a big challenge for universities and business schools in general,” says Dr Gareth Griffiths, MBA Director at Aston Business School. “We’re all looking to exploit it to the best of our advantages.” One of theways in which social networking sites can be used by business schools is to keep track of alumni. Aston has an alumni network on LinkedIn – “just because LinkedIn seems to offer more of a professional forum,” says Griffiths. This enables former MBA students to keep in touch, discuss work matters and maintain the base of contacts they built up whilst studying. Griffiths says the network can also be useful for current, and even prospective, MBAs. Former students can be called upon for assistance on student projects, case studies and future employment opportunities. They can even assist with recruitment. “If we have a prospective student in, say, Saudi Arabia, and we know an alumnus is in Saudi, we would put them together on LinkedIn,” he says. The prospective student can then ask about the alum’s experiences at Aston: “questions they perhaps wouldn’t ask us,” adds Griffiths. Social networking sites can be particularly useful for distance learners, who have previously struggled to recreate the networking possibilities on campus.

“You really need these tools for a distance learning MBA to work effectively,” says Gabriel Mesquida, 35, from Barcelona, who is studying for an MBA by distance learning at Henley Management College. Some tutors, like Dr Caroline Wiertz at Cass Business School use Facebook as an easy way of getting in touch with students. She uses the site to give instant feedback to dissertation with students, and also uses Skype for video-conferencing with MBAs. She says she has experimented with the Courses on Facebook application that allows the tutor and students to set up private study groups, upload and share files and create class discussions. But she is not convinced that the benefits outweigh the drawbacks. “The question is really, where do you draw the line between privacy and your social life and our school?” she says.

“Do students want their teachers to be on Facebook or do they want it to be their own personal space. It’s a very difficult trade off to make.” LinkedIn seems to be the option that most tutors prefer. “You almost can’t afford not to be on LinkedIn,” says Wiertz. Chris Dalton, director of studies for the distance learning MBA at Henley, praises LinkedIn for the fact that it’s retained its insularity. “It remains dedicated to one thing,” he says, “an opt-in, career-building network service.” He says that LinkedIn is particularly good because you’re entering professional data about yourself, rather than personal data.

Blogging

But for others, like Professor Peter Kawalek of Manchester Business School, Facebook has the advantage of personality. “As human beings, we want to know who we’re talking to,” says Kawalek. “The way Facebook is structured is more akin to a watercooler culture at work. It’s more than just a formal presentation of a CV.” Kawalek’s students on the Executive MBA in management information systems put together multimedia reports, increasingly using photos and video. These kinds of resources can be easily shared on Facebook, and Kawalek encourages students to contribute also to the course group blog. And it seems that it is blogging which represents the best Web 2.0 forum for business schools. Mesquida blogs feverishly, which has led many others on the course to contact him, whilst encouraging him to consolidate his learning. “When you’re quite busy you tend to focus a lot on information and data and you don’t have time to reflect,” he says. “With the blog, the idea is to take some perspective of what has happened to you in the day and apply something you have read and make some new ideas and conclusions. That’s an integral part of learning.”

What happens if in a meeting something is said and you think it’s not right? Easy. You say no. You can say it softer or louder, directly or through complicated verses, but you say no. That’s all.

Now let’s add another ingredient to the soup: power. Some people have more power than others, and I’m referring to an organisation. And you are the one not to have it. Unlucky you. And relationships are in a touchy state… you no longer can afford to say no… but you still have to disagree. What can you do?

Just remember that you can acknowledge something, being either the cat or the mouse, and that doesn’t mean you agree. It means you’re still able to listen. Don’t let your defensiveness show through your lack of attention. Don’t let your position, whatever it is, impair your education or politeness, you’re still a professional.

You don’t have to think that listening, and acknowledging what you’ve heard means yielding. Nor you should thing that expressing your point of view means winning. It’s good to put your cards on the table even so to understand everyone’s position. And it’s something that speaks highly of you to acknowledge the position of the other, the only compromise is on behalf of your professionality.

Still if you are the mice you have to find ways to make the ideas move around the table, to show contradictions in the other’s position. Just visualise their ideas from your point of view “so you mean that if things are done like this then… but if they are done that way like you say, those issues are no longer problematic… is this, thus, what’s at stake?”. Don’t refrain to be challenging “… isn’t that a contradiction” or even reassuring yourself “isn’t this more less the same I was saying” and minimise the differences “could that be that our only difference is where we locate that square… is that really so important?” or don’t fall into distractions “aren’t we moving out of track here?”.

And last, but not least, wherever you are, don’t make it personal. People are not at stake here, issues are. The rather provocative “could you express this less personally?” requires to have shown interest in the other person, to have been careful about showing attention, to avoid gestures that show rejection, to avoid aggressive voice tones. Only then you’ll be able to mediate yourself, be able to reconcile whilst being an active part, keeping the link open whatever happens…

I’m too busy these days. That’s why my blogging activity has been errr… nullified. And having to cope with my MBA is far too harsh. A lot of side activities have suffered a lot. Right now I feel I’m even paying too much for my gym!

This morning I’ve had a surprising meeting. I can’t talk too much of it because of confidentiality reason, and because I know that at least one of the people in the meeting checks this blog (hi!). But the thing is something like what follows:

We had a project. We changed it a couple of years ago to accommodate a different corporate sensibility. We excluded some parts that had to be provided by the “official” corporate provider. Now it’s getting late and we really need those parts, and the central sensibility ends up saying that it’s not sensible to provide those parts, that should have never spun off the project.

Which are the alternatives? either find a compromise or change the project again. But the project would suffer from delays if it had to change again. Too late for changes.

What surprises me is that the reasons that I exposed today were also exposed two years ago. Then they weren’t a problem. Now they are. Why? The devil is in the details. And when people have to start assuming responsibilities for their decisions… they baulk out.

Why should we be discussing philosophy in a late execution phase? I expected a quarrel over completion dates, that’s true, but never a review of the bottom line. Didn’t we talk about all this before? Didn’t we understand each other?

Is the proximity of completion a necessity for people to effectively listen and think practically? Is it true that from the distance everything is possible and people just don’t care? Is it the way we do things around here?

If people could really share in advance, listen to each other, try to understand… things could be different. But I guess is easier to let the time sleep by. And to assume that an old idea of yours just matures and becomes universal with the march of time. Then you slam it on someone else’s face and say “I already said that, two years ago!”

But even when that happens, the game of retreats is utterly useless. I firmly believe that people should be accountable to themselves, and my duty is to still be constructive and try to push things ahead amid the unexpected difficulties.

I often travel the route Barcelona Madrid (and backwards) for the day. By plane it’s rather tiresome and expensive: with an open fare you end up paying around 400€ for a 630 km flight (+ 630 km back).

Barcelona - Madrid is the world’s busiest route with 971 operations per week. The second one is Sao Paulo - Rio (894 per week) then Jeju/Seoul Gimpo (858 per week) and fourth is Melbourne/Sydney (851 per week).

In fact you have to go very low in the ranking to find another crowded European route. That would be Rome - Milan with less than 600 operations per week, which, by the way, is more than the most crowded North American continental route: Las Vegas - Los Angeles (553 per week)

Source: www.oag.com, data from September 2007

But things change. And this milk cow for the airlines faces its first serious menace ever: the high speed Spanish train service, also called AVE.

These brand new trains travel the distance of 630km (410 miles) in two hours and 35 minutes. Not too bad when it’s compared with the plane that takes roughly two and a half hours (not just flying but also spent in the check in and departure processes), and possibly more.

But, from an economic point of view, there are many hidden costs that must be taken into account. After all, what is it that you do in a plane? Well, you sit in a narrow seat, trying not to disjoint your legs, and pray that the person that will be sitting beside you is not extra overweight. In the train you have plenty of space. Being uncomfortable has a cost.

How much? Well, it depends on what you’re willing to pay to be more comfortable, of course, and how much your time costs.

How much are you willing to pay for that extra nap? Well, in a 45-minute-long flight, you’re going to have maximum thirty minutes of uninterrupted sleep. You won’t be able to sleep while you queue, while you’re being inspected at the burdensome security checks, while you wait your turn. But on a continuous 2 hours 35 minutes journey you’ll be able to.

As for opportunity costs, you won’t be able to do anything in the plane, apart from opening your laptop for half an hour. It’s completely wasted time. In the train you can use your computer as much as you want, use your phone, combine them and access the internet. Work, eat, talk, whatever you wish.

But externalities must also be taken into account. Environmental footprints can be four times higher for planes than for trains. That means that the train will always be more sustainable and, if we ever are to reflect the true external costs, energy efficiency will give the train an important lead over the plane.

Add those costs up: discomfort costs, opportunity costs, externalities and you will have a very competitive mean of transport. Which only means that competition has been increased, with a comparable service at a better price. In the end, consumers will be benefited from the additional choices, lower prices and the increased service levels that competition will bring.

That was what I was thinking when I decided to open the textbook I was carrying with me. The Managing Financial Resources module awaited me. Fortunately it was half way to Barcelona, 300 km per hour (186.41 mph), still an hour to go.

Following with the article Financial weapons of mass destruction unleashed in the US (the party is over) that I recently wrote, it seems like the liquidity storm is enjoying some calm. Not a bad thing when liquidity is the tip of the solvency iceberg, and when investors need a break in the increasingly bearish market.

Yes, it all began with an excess of funds that permitted spending in excess. And from that excess, excessive and ultra sophisticated imaginative investing products were made. The trouble is that they were so complicated that the risk wasn’t understood enough, or simply ignored. Now the risk has resurfaced again and debt ratings are on its way down.

In that scenario we had several options: to cut the excessive spending or to find new lenders. Looks like we’ve encountered some new ones.

The first are the public lenders, also known as monetary authorities. By increasing the monetary mass, and providing low-term credit to low rates, we have financed ourselves. Not a bad thing to do if we were a socialist economy, which we are not. But time will say if we have many other options. I fear we don’t.

Wait, there’s still another option. The ones that actually created the liquidity bubble are coming to our rescue. After all they are the ones benefiting from selling 100$ barrels of dark oil. And now they can come to rescue our banks, our real state using sovereign funds. Suspiciously these new lenders remind me a lot of the old ones…

Both refuel the shrinking bubble in the hope of inflating it again, but in the meantime the true inflation is rising and growth going down the slope. Either we finance ourselves or we trust in opaque investment artefacts coming from non-democratic countries.

But this time, if we are being refinanced, it will be either at higher rates or lower prices, there’s no way to ignore the risk.  Are we really aware of the costs of refinancing? Are we facing the real issue here? Reality tends to be stubborn.

Have you wondered what actually makes a good manager? Is it something that is taught at business schools or is it something more?

Why some people have that ability to make others follow them and others do not? Is it credibility that makes people follow you? How can you grow trust and dependability.

Well, there’s no easy recipe based on power point files or blog passages, but there’s a couple of things that always work:

• Because you care, and people know that you care.
• Because you also do it, and not in some kind of gimmick, but wholeheartedly.

When you care and you lead, people will follow.

Given that, it makes me wonder how is it possible that organisations spend so much money in education and training, and so little effort in following how people really behave, how they lead, how they care.

There’s a because to that: we always prefer what is measurable.

Tell it to Kaplan and Norton when they were conceiving the balanced scorecard! Hard financial measures versus soft data such as feelings and perceptions. The hard data is in the books, in the balance sheets. It’s already there, and relatively undisputed and objective. It’s the easiest building block for the diagnose of the company. But it’s only a single point of view, and focused on what has already happened, focused on the past.

In education is exactly the same: it’s always easier to stop at the happy questionnaires at the end of the seminar. Albeit they only take soft measurements, they are easy to gather.But what do they actually gather? They are also focused on the past, on the educational experience, on what has already happened. The rear view mirror.

Following the application of what has been learned at the latest educational experience should be a must for every company. Why throwing away all that investment if you don’t measure the results? Accountability should be the norm for everyone that learns something.

That’s the deal: your company has channeled a lot of resources to give you a chance to learn, now it’s your turn to change, improve, to change the way things are done around you. You change yourself, make yourself accountable for the change, and then it shows.

It supposedly began with a bubble. Just another bubble like the one I described on The South Sea Company (or how Sir Isaac Newton spurned the dismal science). The bubble was fuelled by an excess of liquidity. It had to end someday. We learned the word subprimes. We knew it had to mean trouble.

Liquidity injections were administered and succeeded. But they were just patches for a bigger problem. And then they asymmetrised the risk: there were institutions willing to provide liquidity when needed, to reward higher risks, to stimulate the economy further up and away from reality. Until the moral hazard was too huge.

And then it ended too abruptly. The wells of money simply drained and, those whose business was to ensure the efficient distribution of liquidity between the different players just became inefficient. From excess to world wide scarcity, even for sound projects. It became a financial crises.

Few crises have been so focused on the financial system like this one. Because that’s what’s really in trouble here, the whole financial system. I began in the UK with Northern Rock, now nationalised thanks to Alistair Darling. In the meantime Daniel Bouton from Societe Generale didn’t know what was happening in his bank until he lost more than his reputation. And the Swiss face value is also in an all-time-low: just take a look at UBS and Credit Suisse (also First Boston).

But where really is too darn hot is in the US. Bearn Sterns is in flames, expiring his final breath. Bought by $270 million, it was valued about $20.000 million one year ago. A 85-year-old Wall Street institution simply died.

And those that bought companies using leveraging, namely private equity, now see the liabilities piling on top of the roof. Take a look at Blackstone: their profit for the last quarter was less than a half of what was expected, and dropping. Of course its value is dropping too.

We gave it complete freedom. They took it. They invested again and again in the same risky assets, albeit chopped and transformed so they didn’t look like they were the same: collateralised debt, mortgage insurances, mortgage reinsurances, credit swaps and all kinds of derivatives that were the same dog, different collar.

And when the system was in trouble: more liquidity. Await for some more in the next days. New bolts and flashes from the Fed to try to contain it all. But no regulations… in any case it would be too late for that. And always paying a huge price in inflation… until that game is not longer possible.
The dollar’s dropping. The safe heaven for savings all over the world that financed the US debt has ended. If you add up the soaring energy prices, and the huge public deficits, the US credibility is under minimum. The country risk is dangerously rising… no more overspending, no more cheap financing, the party is over.

In light of a recent experience (yes, I’ve been rather busy these days) I’ve been thinking about the difference between human capital and organisational capital (organizational at the other side of the ocean, of course) and how that difference impacts into everyday work.

Let’s first use the books. When defining human capital, Bontis et al. propose the following:

Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that gives the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization.

While if we focus on organisational capital (also called structural capital), and quoting Yondt this time:

Organizational capital is the institutionalized knowledge possessed by an organization, which is stored in databases, manuals, etc

As you can see there’s a difference there, a huge difference. This difference can be named as the human factor. For there’s a difference between the knowledge that the organisation owns and contains, and the knowledge, skills and abilities that every worker possesses. It’s not only a matter of accounting these different sets of knowledge as assets or not, as I reflected in my last post HRM and the triple bottom line (do we really believe in people?), there’s much more than that: the effective use of that knowledge is far more important.

Because the employer-employee is not a simply-transactional one-way relationship (at least we can say it no longer is) but a sophisticated dialogue between different entities, an usually effective interchange inserted in the complex framework of the psychological contract.

The psychological contract is a useful construct that reflects the true relationship of the employment contract as assumed by the different parts: what we really expect, what we have understood we should expect, how we agree our post has been designed and our responsibilities are, and many other things that, albeit not written anywhere, are, sometimes unconsciously, stored in our minds.

If our psychological contract is breached, what will become of our knowledge? It won’t be as readily available to our company as it used to be. In fact that’s a moment where the organisational capital will be as available as always, but the human capital simply won’t.

The human factor means that we can make choices. And the drive of those choices can range from self-interest to commitment to your organisation. This commitment modulates the real availability of human capital for the organisation.

That’s why treating people right is so important. In a zillion of a second the most committed employee can turn into an alien counting the minutes until eating-time. And it is, and will be, the responsibility of her manager to make the right decisions, in the right timing, and using the right way to do things, whatever that is.

You can’t be a good manager without caring about people. You simply can’t. As good engineers must love the systems they are designing and good teachers must love what they teach (and children too), people that are managed must matter to the manager. There’s no other way.