Posts filed under ‘Business’
Disagree, but don’t be disagreeable!
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…
Reflections from a high-speed train (inbetween Madrid and Barcelona)
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.
The new cycle of capital recovery (who’s financing your debt now?)
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.
Financial weapons of mass destruction unleashed in the US (the party is over)
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.
Human capital versus organisational capital in practice (caring about people)
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.
HRM and the triple bottom line (do we really believe in people?)
I’ve blogged before about hard and soft human resources management, about the Michigan and the Harvard model, about to paying lip-service to it and the gap between theory and practice, and even about commitment (to commit or not to commit). But the more I think of HRM versus the old paradigm of “personnel management”, the more inconsistencies I detect.
Because if people was that important, it would be somewhere in the so called triple bottom line of the company, made of finance, social corporate responsibility a.k.a. CSR and sustainability a.k.a. our carbon footprint.
I feel that HRM is surprisingly absent of the triad.
But if we are to believe that people are our greatest asset they should be at our triple bottom line somewhere. Or even in several places.
The first place to look could be in financials. Maybe we could find our people in-between assets? I do not think so. After all assets are usually accounted at acquisition prices. And, fortunately, people are no longer acquired in the slave market. Consequently people are not assets for any company. Not anymore.
Where are those fundamental assets for the competitive advantage of the organisation? It’s funny to point that, not being assets, our relationship with our company is actually accounted as an expense. And some related concepts, such as our pension funds as liabilities… (wait, that’s not true, the pension funds are one of the main sources of creative accounting… where finance becomes an art. I’ll write about this another day though…)
In any case, it’s quite clear that our skills and abilities are not on the assets list. Neither the real value of our relationship with our company. Even when the opportunity cost of our leaving the company can be measured with the cost of recruiting our substitute, the cost of training her, the cost of the information the organisation is going to lack now, the cost of under-performance for our customers and many more.
But when we, employees, were encouraged to pursue our own learning and self development, it was clear that those assets would consequently become ours. So there’s nothing wrong with measuring assets that way. We are just another provider in an increasingly complex and atomised supply chain. Maybe we can still be in the second or third bottom line. Around corporate social responsibility, as stakeholders that we are. After all shareholders are only entitled the rights to the residual earnings, after the employees, the creditors and the state.
Let’s wake up. CSR and carbon footprints are only valid arguments when the company is earning money. But there’s only one bottom line: finance. And after that bottom line and before the second and the third there are still other business priorities as well as short-termism, insufficient resources allocated, resistance to change, and distrustful organisations. A huge gap that can’t be easily bridged. At least not with rhetoric.
Economy cycles, Schumpeter and tumbling again.
One of the great aportations of Schumpeter was his approach to the Economy from different points of view, not just from a mathematical, technical or mechanical one, but from the diverse social sciences: human history, sociology, anthropology and even psychology.
I love his concept of the business cycles. They are based on the creative destruction idea. That’s the process that the entrepreneur leads, supported by innovation, to destroy the old way processes were run and substitutes them for new ones. Destruction and creation both at the same time. That means a whole cycle: birth and death. That was in 1911.
But Schumpeter wasn’t the only one talking about cycles. Kitchin also did, in1923, from Harvard. His cycles were bigger than the already well known seasonal cycles, lasting for approximately four years. They were to be known as stocking/destocking cycles.
The legend says that Rothschild had already discovered the cycles before, on Wall Street, around the beginning of the XXth Century. But, instead of making his name famous, decided to use them to fill his pockets. A group of investors followed and, with the help of mathematicians, they found a 41-month investing stock cycle in 1912. If they became rich, they didn’t become rich enough: as of today we don’t know their names. And the cycles are still named after Kitchin (slimmed down to 40 months).
Later, new longer cycles were supposedly discovered: Juglar cycles, around 9-10 years and Kuznets cycles, around 15-20 years…
And there are also Kondratiev waves, around 48-60 years, and the most disputed of them all. There are supposedly a few Kondratiev cycles identified: The Industrial Revolution (1787-1842), The Bourgeois Kondratiev (1843-1897), The Neo-Mercantilist Kondratiev (1898-1950?) and the The Fourth Kondratiev (1950?- 2010?). The numbers with interrogation marks are of course just approximations written long ago. Could we be close to the end of the Fourth Kondratiev? In any case the projections didn’t know anything about subprimes, wars or energy prices. And Nikolai Kondratiev was a Soviet economist (not that the fact discredits him but he was kind of eager to prove that Western capitalist economies were susceptible to high performance volatility opposed to planned ones).
But, even not having any cycle under his name (an injustice from my point of view) it was Schumpeter who already identified and described the four phases of every cycle: boom- recession-depression-recovery. It’s the existence of the four phases that converts a fluctuation into a cycle. A stubborn aspect of reality that tends to repeat itself (not only in Economy though). This page of the National Bureau of Economic Research about Business Cycle Expansions and Contractions is interesting enough.
Yet again cycles catch so many off-guard. It’s interesting to see…
2008 IT trends, what they mean for Apple and where Microsoft is wrong
I’ve been reading Gartner’s key IT predictions for 2008 and beyond. (If you don’t have access to the full text you can access a summary here.)There’s one prediction regarding Apple:
“By 2011, Apple will double its U.S. and Western Europe unit market share in Computers. Apple’s gains in computer market share reflect as much on the failures of the rest of the industry as on Apple’s success. Apple is challenging its competitors with software integration that provides ease of use and flexibility; continuous and more frequent innovation in hardware and software; and an ecosystem that focuses on interoperability across multiple devices (such as iPod and iMac cross selling)”
The reflection about the failures of others it’s directly aimed to Microsoft. In a political analogy, the incumbent presidents are the ones to lose elections.And apart from the recent “downgrade” riots where many users want to go back from Vista to XP, there’s something wrong with Microsoft’s strategy. A misalignment that is growing worrisome for the huge company, accustomed to not being able to detect trends at their beginnings. Let’s think about it.
Why is people downgrading from Vista? It’s not because it’s ugly, it is not ugly enough for that, and XP wasn’t the most handsome kid on the block either. People are trying to avoid vista because it requires too much hardware, because takes too much resources to run, because it’s not as snappy as it should be.Think of it from the personal computer cluster’s viewpoint: additional requirements from OSes mean more opportunities to sell more advanced hardware, and thus a growing market. The more sophisticated OSes become, the more complex hardware is needed. And the different companies are, of course, happy to indulge and sell.But that’s not what users want. There are no new necessities covered. Applications are fancier, yes, but there are no new killer applications. In fact I still have to see an application that makes full use of Vista’s new graphics engine. Everything could still be done from XP, no transparent frames, true, but who cares?After seeing Vista, people still prefer to focus their hardware on a better working machine, not on a better looking but buggier one. And they look the other way round… to XP and sometimes Apple.That’s where Apple’s new market share comes from. In evolving their Mac OS X system they have not used the extra power inherited by Moore’s law to rejoice in extra-sophisticated graphics and a huge coverage of legacy systems. Instead they have used it to get snappier applications, providing a secure and limited environment, even excluding their oldest hardware from compatibility. Once their compatible hardware (yes, all of it PC compatible hardware) has been short-listed, they have focused on making it work better.And then they have favoured usability over trendiness (without forgetting the latter). Simplicity over a spree of hidden options, users’ needs over hardware providers’ needs.
But that’s not the only thing going around.And there’s still another trend going on here: from more powerful portable computers to simple ones (that are still very sophisticated by the way) but focus on doing simpler things and rely on other machines and network capabilities. We will no longer need that huge hard drive in our laptop when we will be able to store and synchronise our files on-line. Or, as the MacBook Air does, we don’t need to have a DVD unit in our laptop if we are able to access other’s people DVD drives.And sometimes, as gadgets like Blackberrys, iPhones et al have demonstrated, we can do most of the things we are requesting from our laptops if we can have better screens, better connectivity and better input methods.Or with network shared utilities and storage, as well as web-based applications (look out for some Google office hardware soon). Those web applications will increasingly have the ability of working off-line and syncing when needed. That will mean less reliance on your “own” computer and easier usability of both shared and simpler devices.
That’s three dilemmas identified in this post:
- Using the additional power to provide snappier applications versus fancier looks.
- Focus on support a limited list of hardware and make the most efficient usage of it or try to keep all users (and providers) happy paying a price on performance.
- Relying on shared and simpler net-powered devices or having your own computer the more powerful the better.
As I see, Microsoft has focused on the second options of the three dilemmas, while other companies, namely Google and Apple, have focused on the first. And it’s the first trend that, IMHO, will dominate. Users do not want or need complete overhauls of operating systems that are operating within normal parameters. Only a big leap ahead in productivity could justify a radical change. That’s not the present case.What users do need are incremental and continuous improvements to operating systems that enhance productivity, stability and security without adding unknowns and uncertainties. And Microsoft is not walking the proper path.
Apple, without being that brilliant (Steve Jobs *is* brilliant indeed), is doing much better by comparison… better enough to reclaim part of the market share that the incumbent is going to lose. Try a Mac OS X and tell me 
Skiing in the Pirinees (albeit the decreasing snow)
As you probably have guessed, this weekend I’ve been skiing in the Pirinees, in Andorra. The ski station, called Grandvalira, has an skiable domain of 193 km in 110 tracks and is the biggest in the Iberian peninsula.
That’s how it looks like in Google Maps:
And this is how it looks like from within:
Needles to say, I had a lot of fun. It’s my favourite station and I think I’ve skied (almost) all of it. The weekend was non-stop skiing, eating, going to a spa, reading and laughing.
But there’s also an scarcity reflection about all of this. It doesn’t snow as it used to be. The global warming has arrived.
Higher and higher investments are necessary to keep stations running. Artificially created snow is the only way to grant a smooth season where it used to be snowy not so long ago. That means increased tension on natural resources as water to make snow becomes more scarce, and higher energy expenditures. The balance is unsustainable on the long run.
And additional tensions arise because of the opportunity costs of those owners of land beside the station. On the French side (upper right) there’s an enlargement going on. It’s called Porte de Neige and will increase the skiable domain with 50 additional km, along with a new complex for tourists with several hotels, shops and all the necessary infrastructures.
It would simply be growth if it wasn’t in a previously unspoiled and wild place. Of course ecologists complained, but with no results. And the necessary question arises: should we be enlarging stations when the snow is becoming even more scarce? Shouldn’t we be focusing capital and investments somewhere else?
Let’s take a look around. This station is one of the lucky stations to still have a lot of snow. Others are not so lucky. In Cantabria, north of Spain, a new ski station was opened last year after a great deal of investment by the regional government. The snowing season was so terrible there that they still have to open after one year. Meanwhile somebody is paying all the expenses. You guessed it: the taxpayers.
Every community would like to have their own ski station. They attract tourism and generate business where none existed. That’s how they make their case for state subventions and those huge investments in infrastructure.
But in the end they always want the same: to build a huge amount of apartments and houses that will have to be paid in 30-year-mortgages. That’s of course if the banks decide to finance the final buyers. The real estate companies will try to sell everything as quickly as possible. After all, a season without snow is a rare occurrence, isn’t it?
Is it an efficient use of resources to build this kind of complexes with state subventions, using natural resources and to serve an excuse for building new houses in an already depressed state market?
Tell it to buyers in 30 years time when the global warming has further progressed and they have beautiful houses with no prairie.
Soft and hard human resource management (utilitarian instrumentalism versus developmental humanism)
In 1960 Douglas McGregor developed two sets of theories that would shape two antagonistic currents in human resource management: Theory X and Theory Y. They are based on radically different assumptions.
Charles Chaplin working Theory X style
Theory X is the classical managerial distrust approach. People are lazy by nature and only pursuing self-interests. That means that there are two different and opposite sets of interests: those of the company and those of its workers. It’s management’s task to induce the appropriate behaviour in workers so as that they actions pursue the accomplishment of the company’s goals, not their own. If there ever was a carrot and a stick, that’s the stick. Thus there’s a case for the existence of “correctives” and “coercion”.
It may be argued that this view doesn’t exactly reflect human nature but the organisations’ nature: they were born long ago, and one of the first theories that were developed (they have become the classic perspective) regarding on how to manage the workforce was scientific management. Those theories regarded people as resources in the same way that machinery was also a resource. People had to be assigned fixed, repetitive (I could add unfulfilling and alienating) tasks. That was only one hundred of years ago and there’s still a lot of Taylorism in us.
By the way that matches with many of our current economic theories when we say that people as economic agents are always looking to maximise their perceived utility. That’s what we mostly assume that consumers will do. But then there are still economic realities that cannot be explained from that point of view.
Regarding HRM many authors classify this approach as a classic approach, hard HRM or the Michigan model. Ever seen a manager that style? I bet you have, many of them.
Vicent le Moign, a freelance designer, working Theory Y style
Theory Y is the opposite approach. Instead of thinking of people as lazy machines deals with their emotions, feelings and motivations. People may actually want personal realisation and work can be one the ways to attain it. People like things well done, making a difference. Managers, thus, must enable them to do so and keep their motivation high. People don’t hate working, are not lazy and can be self-responsible. That way coercions are no longer needed.
Following this theory, compensation is still important, but not exclusively attained through money but also many implicit compensations are of utmost importance. Under the right circumstances, people will seek higher responsibilities, not reject them. The individuals can be creative and proactive, values that the organisation must nurture to ensure their commitment.
This approach is called the Harvard model, or soft HRM.
Fortunately it works. Unfortunately it does not always work. Theory Y integrates the personal objectives with those of the corporation, but that cannot always be done. Here comes the dilemma between the two models. In fact neither of them completely represents reality, because people can behave in very different ways. And I’m not referring to different people but everyone of us.
That means that we must use both models to describe reality. And that’s what many managers use. Sometimes a hard approach, sometimes a soft approach.
But that mixed approach holds a contradiction in itself, although if we don’t go deep into the theory we may not notice. Both models are holding two basic and irreconcilable fundamental ideas: self-interest versus self-direction, distrust and trust, negative and positive. How can both be mixed at a higher deductive level?
In the meanwhile, it has never been proved that committed workers are more productive than closely controlled ones. And, after all workers know that HRM considerations are always in a lower precedence than business strategy considerations, so the company, whatever it might say, has a clear precedence for hard shareholder goals over people goals. Some recent models have been developed to try to link employee satisfaction to results through the value chain. The same way as Balanced Scorecards try to enforce soft issues that have been marginal to date in front of long established hard issues. But still, if you think of your company… which are the most relevant business goals? Do you really think that people is among them?
(To think more about this, you may review the past posts: To commit or not to commit (treating and spoiling yourself at your post and The wide gap between theory and practice in human resource management)
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