Strategic Clutter– For Some, Clutter Equals Creativity; For Others, Clutter Equals Chaos: To Clutter, Or Not To Clutter?

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Workplace ‘clutter'; is it a sign of creativity or chaos? Clutter is defined as– a collection of things lying about in an untidy mess or disorderly state… it’s sign of unorganized, irresponsible, incompetence… But for others, ‘clutter’ is a sign of creativity, high-achieving, inventiveness, genius… According to Katherine Trezise; workplace clutter is a tremendous waste of productivity… a little mess is OK, but the problem comes in when it affects other people… Some people feel like they must have tidy workspace or they can’t get anything done, whereas others say– clutter is important for creativity, new ideas… for example; Albert Einstein was a known messaholic (i.e., just look at his hair)… Abraham Lincoln worked among piles of papers; he even reportedly kept a note on one stack that read; When you can’t find it anywhere else, look in this pileAlexander Fleming’s desk was so unorganized that one day he discovered penicillin on a forgotten petri dish…

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According to International Facility Management Association; average space allotted per worker has dropped as much as 21%, and storage space is shrinking too… and not everyone is keeping up with the push for paperless office… so, where do you put the piles of stuff? Just the sight of all the piles can stress out neat co-workers, distract them from work and even hurt their performance… According to Judith Bowman; pressuring mess-makers to clean up can be very tricky… the appearance of your desk or work area is hugely important, it’s very personal… and criticizing someone’s messy desk is like telling them that they are dressed sloppily… According to Mark Hurst; everyone’s tolerance for clutter is different, e.g.; researchers found that certain people need a bit of a mess in their surroundings to feel inspired and get work done… whereas a clean desk is seen as a dormant area, and an indication that no thought or work is being done…

While clutter has been shown to negatively affect some people’s performance, it’s a person’s perception of clutter that really matters, not someone else’s. Clutter, whether physical or digital, is something you’ll always have to deal with, and it’s important to understand that clutter is not about things– it’s about people and their interactions with things… Hence, re-evaluating your belongings, throwing-out old and useless stuff, organizing things, giving everything on your workstation a suitable home… will all do wonders for your mental state, productivity… According to Albert Einstein; If a cluttered desk is a sign of a cluttered mind, then what are we to think of an empty desk?

In the article Dangers Of A Messy Desk by Jenna Goudreau writes: Is your laptop screen framed with layers of post-it reminders? Is the top of your desk hidden under stacks of papers, or your guest chair buried under a pile of stuff…? Then, just be aware that your colleagues are judging you… According to a survey of over 1000 workers by Adecco; a majority of U.S. workers (57%) admit they judge coworkers by how clean or messy they keep workspace. Meanwhile, nearly half say they are ‘appalled’ by how messy their colleagues’ offices are, and most chalk it up to pure laziness... According to Jennie Dede; with so many open-office plans today, more people can see into co-workers’ workspace and it can often get personal, e.g.; they may judge you as incompetent because your workspace is a mess, and therefore your work performance must be poor being consistent with your workspace… coworkers will associate a messy office with your organization skills and assume that your projects or proposal will get lost in the landfill of your desk… According to Peter Walsh; the issue isn’t space, it’s too much stuff… According to Laura Stack; digital clutter can be just as stressful and energy-sapping as physical clutter… most people spend at least 30 minutes to an hour a day looking for things

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In the article Why a Messy, Cluttered Store Is Good for Business by Brad Tuttle writes: Clutter is back in a big way in many retail stores all over the country; apparently when stuff is piled-up and thrown all over the store, shoppers tend to buy more stuff… Many discount and department stores are leading a pack of retailers that are restocking their shelves and cramming-in as much merchandise as possible– into, within, between aisles: Call it strategic clutter or mess by design… The reason these retailers are untidy is because the overloaded appearance gives off distinctly strong impressions to shoppers. Some may think ‘clutter’, yet for others (many, many others), a messy and random pile of goods connotes ‘bargain’. A source quoted in the NY Times offers some insight; historically, the more a store is packed, the more people think of it as value…

What’s interesting is that whether shoppers are aware or not, they are making pretty big assumptions based on a store’s appearance. And you all know assumptions can prove costly for consumers. In this instance, the assumption is that– if goods are thrown, here and there or piled-up semi-randomly in a store, the prices must be cheap. The customer gets the impression that the store isn’t spending money to tidy its appearance or design, so presumably the customer isn’t paying for those things either… On the other hand, when entering a store where the options are few, and everything is neat and meticulously organized, the shopper might get the impression that the stuff sold there must be high-end merchandise…

Retailers are constantly trying to catch shoppers’ eyes– to make them pause and consider a completely unplanned purchase. These ‘speed bumps’ get in your way physically, attempting to prevent the quick, impulse-free-shopping escape. The speed bumps add to the overall overloaded, messy appearance– an appearance retailers are striving for… Another interesting quote from the NY Times; messiness, or pallets in the middle of an aisle are also a cue for value… there are many cues that shopper’s picks-up on in stores… None of these ideas are new; thrift stores, flea markets, bazaars… the world over have been offering customers– a cluttered, messy, overwhelming, treasure-hunt-like shopping experience… But now, it’s local retailers copying the presentation and design of the shabby second-hand stores and the strategy is very simple; whatever it takes to keep the consumer shopping…

An MIT study seems to find a correlation between smart and messiness, but then it’s MIT and it’s probably filled with messy-desks people who might be skewing the results in their favor… Anyway they say that– messiness is often associated with people who are artistic, creative, scientific, mathematical, genius, and spontaneity… but also with carelessness, eccentricity, madness, unreliability… For example; the messy desks of– Einstein, Lincoln, Freud, Jobs, Twain, Bacon, Fleming, Turing… were all more than a bit unorganized… A study published in the Psychological Science magazine found that– a desk overflowing with piles of papers, empty coffee mugs, and various objects– stimulates creativity, promotes positive emotions, encourages a problem-solving attitude…

Whereas, a study by the Princeton University Neuroscience Institute found that– the negative impact of clutter can influence colleagues’ perception of one’s competence based on the looks of his/her desk… According to David Freedman; some people claim that having a messy desk is a sign of being a more creative person… On the other hand, people who have a very neat desk are not necessarily uncreative, e.g.; there are many accountants, bankers… with very messy desks; and there are many artists,  scientists.. with extremely neat desks…

For most people it’s hard to clear out all the clutter, and it’s also hard to keep life clutter-free, because ‘nature abhors a vacuum’… however, by understanding the deeper meaning and cost of clutter, then saying that you will declutter is one thing but understanding what you might lose if you don’t is another thing, entirely… According to Kristen Fischer; some people like the clutter… the mess aids them… it stimulates them… and for many, it’s damn inspiring… On the other hand, some creative people have enough stuff swirling in their artistic minds, and then looking at more crap around their workspace just makes them even more anxious, frustrated…

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Some researchers say; orderly environments promotes better decision-making, which can improve business performance… but they also say; disorderly environments stimulate creativity, which also has widespread importance for business performance… So bottom-line, if you love clutter, go for it– but it may be more than just clutter that makes you a creative genius… According to Dann Albright; everyone has an optimal working environment; for some people– it’s spotless desk with– laptop, smart phone… For others– it’s a kitchen table covered in books, handouts, printouts, files, newspapers, magazines, reports, tablet, phone, laptop, cup of coffee, water bottle… Hence, some people feel better when everything is very clean and orderly, while others find it a bit sterile… It’s important to find the best balance for yourself that limits stress, but also doesn’t make you feel like you are working in a hospital clean room, unless that’s what you prefer!

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Shield of Immunity for Corporation Board of Director Governance– The Business Judgment Rule: A Rule That Isn’t a Rule.

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The ‘business judgment rule’ is one of the fundamental concepts in corporate governance… It’s a legal principle which grants directors, officers, and agents of a company immunity from lawsuits relating to corporate transactions, if it’s found that they have acted in good faith and in the best interest of the company when making decisions– It’s a safe harbor for the directors of a corporation and their decisions… The business judgment rule is rooted in a 100-year history in which courts generally avoid substituting the judgment of a judge for that of the board. It’s the essence of the business judgment rule that a court will not apply 20/20 hindsight to second-guess a board’s decision, except in rare cases where a trans­action may be so egregious on its face that board approval cannot meet the test of business judgment…

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According to sekicho; the business judgment rule only provides that the directors won’t be held personally liable for a breach of their fiduciary duty so long as their decisions meet certain criteria. If all of the criteria are not met, the safe harbor disappears, but the breach of the directors’ duty still has to be proven separately… Irrationality is the outer limit of the business judgment rule. A court will not substitute its own notion of what is, or is not a sound business judgment on the approval of a transaction by a majority of indepen­dent and disinterested directors… this almost always bolsters the presumption that the ‘business judgment rule’ is attached to transactions approved by a board of directors that might later be attacked on grounds for the lack of ‘due-care’…

In the article What is the Business Judgment Rule? by Fred Abramson writes: There is no shortage of  examples of corporate wrongdoing; officers and directors have been using the business judgment rule as an excuse for corporate malfeasance since the stone age… This defense is used in a range of complex legal cases, for example; from the mortgage-backed securities indiscretions, to the relatively mundane cases where officers are accused of purchasing sports tickets out of the corporate till for personal use… The business judgment rule, which began as a minor exception, is now so strong a winning argument that the only fun left is trying to prove that it  does not cover absolutely all forms of corporate stealing… If you are an officer or director of a corporation then you are responsible for managing and directing the business and affairs of the corporation, and the larger the business, the more challenging the issues the officers face… The courts have given great leeway to decisions that directors and officers must make, and under the business judgment rule, the officers and directors of a corporation are immune from liability to the corporation for losses incurred in corporate transactions within their authority, so long as the transactions are made in good faith and with reasonable skill and prudence…

In the article Rule That Isn’t A Rule– Business Judgment Rule by Douglas M. Branson writes: The much misunderstood business judgment rule is not a ‘rule’ at all: It has no mandatory content: It involves no substantive ‘do’s or ‘don’ts… Instead, it’s a standard of judicial review, entailing only slight review of business decisions… Alternatively, it could be called a standard of non-review, entailing no review of the merits of a business decision corporate officials have made… The business judgment rule is multi-faceted: Most generally, it acts as a presumption in favor of corporate managers’ actions. Stronger still, the rule provides safe harbor that makes both directors and their actions unassailable if certain prerequisites have been met. In litigation, the rule is a means for conserving judicial resources, thereby permitting courts to avoid being mired down in rehashing decisions that are inherently subjective and ill-suited for judges, as opposed to business men and women. Last of all, the ‘rule’ is the law’s implementation of broad economic policy, built upon economic freedom and the encouragement of informed risk-taking…

Other uses to which it may be put include; the means by which boards of directors adopt corporate takeover defenses and by which, after the fact, courts review the adoption of those defenses when disgruntled shareholders pursue litigation. Another use is as a means by which corporations and their attorneys evaluate and, based upon that evaluation, recommend that courts dismiss derivative litigation… Hence, when properly applied, the rule permits courts to accord to boards of directors the proper amount of deference to board decisions. Last of all, the rule provides a schematic for any advisor counseling any collegial group, and not just a board of directors, to reach a judgment or decision that in all likelihood will be a sound one…

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In the article Business Judgment Rule by Michael L. Rich writes: The business judgment rule can afford significant protective armor to directors and officers. It does not, however, shield directors or officers from instances of fraud, self-dealing, or other unconscionable conduct. When director and officer liability claims arise, it’s important to understand which party will bear the burden of proof and how expansive the defense is under the applicable law. If the derivative suit involves the board’s decision to reject a shareholder’s demand for litigation or pre-suit demand is excused, the directors will bear the burden of proving they were disinterested and independent. If the shareholder has not made a demand to the board, the shareholder has the burden to disprove the applicability of the business judgment rule. If a minority shareholder claiming oppression shows self-dealing or other disabling factors, or if there is a conflict of interest, the burden shifts to the board of directors. However, the business judgment rule’s application and operation often depend on which state law applies and the circumstances presented, for example; New York’s business judgment rule is more deferential to the board of directors. A Delaware court, on the other hand, may apply its own independent business judgment in certain instances…

In the article Business Judgment Rule by Kyle Hulten writes: Corporation’s board of directors has a fiduciary duty to protect the interests of the corporation, and to act in the best interests of its shareholders. If directors take actions that are not in the best interest of the corporation, shareholders may bring a lawsuit against them. In order for a shareholder to succeed in a case against a director, the shareholder must overcome the ‘business judgment rule’ which creates a presumption that in making a business decision the directors of a corporation acted on; informed-basis, good-faith, honest-belief… that the action taken was in the best-interest of the company… To rebut the business judgment rule a shareholder plaintiff has the burden of demonstrating that a director breached; duty of good-faith, duty of loyalty, duty of care… According to the Delaware Supreme Court; directors’ decisions will be respected by courts unless the directors lack independence relative to the decision, do not act in good-faith, act in a manner that cannot be attributed to a rational business purpose or reach a decision by a grossly negligent process that includes the failure to consider all material facts reasonably available…

In the article Galactic Stupidity and the Business Judgment Rule by David Rosenberg writes: The only real difference in various formulations of the business judgment rule involves the question whether if, good-faith and due-care are established, there nevertheless remains room for a judicial judgment concerning the wisdom of the decision… It’s a truth almost universally acknowledged that most courts will not review the substance of the business decisions of corporate directors except under extraordinary circumstances. Embodied in the much-debated business judgment rule is the deference displayed towards the decisions of corporate directors arises not from a belief that directors are always right, or even always honorable, but from a belief that ‘investors’ wealth would be lower if managers’ decisions were routinely subjected to strict judicial review…

Corporate directors take the kind of risks that investors want them to take because the directors know that, whatever the outcome, stockholders will not have any legal recourse for losses arising from those actions unless the decision makers violated a duty, such as; loyalty, good faith… The belief in this general principle of the business judgment rule is so widespread that, despite scandals and negative publicity surrounding the conduct of corporate directors, few participants in the debate are calling for significant changes to the rule’s deference to actions taken by corporate decision-makers…

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Practically speaking, the business judgment rule is simply a policy of judicial non-review, however, the problem is– to identify the circumstances in which review is necessary… While many academics and judges repeatedly assert that the business judgment rule does not allow for review of the substance of director decision-making… There are three primary justifications for the business judgment rule. First, courts are hesitant to presume to know more about business than corporate directors. Judges are experts in law, not business, and are ill-equipped to retrospectively determine the relative merits of a business decision… Second, without a rule like the business judgment rule, it would be difficult for corporations to recruit qualified directors that would be willing to occupy a seat on the board when they would be subject to immense personal liability… Third, the business judgment rule enables corporate directors to be less risk-averse…

According to Jennifer Lynn Peters; courts acknowledge that, while shareholders might disagree with a management decision, and while it may be apparent in hindsight that the decision was wrong, the decision can withstand an attack because it was made in good-faith by disinterested persons. In the absence of fraud or bad-faith, the business judgment rule thus often provides a complete defense to rising claims of breach of fiduciary or other obligations being levied against directors, officers, and managers At the core of the business judgment rule is whether courts should judge the reasonableness of directors’ decisions. Judicial respect of directorial discretion and decisions is not the same as simply the abandonment of the judicial post. The judiciary retains the possibility of intervention in appropriate cases, such as when there is fraud or self-interestedness which imbues a decision. But in what instances should directorial accountability trump directorial authority? What is the appropriate level of judicial respect to directors’ decisions that should be adopted? And, therein lies the crux of the dilemma…

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Scarcity of Wisdom in Business: Access To More Information Produces More Knowledge, But Apparently Less Wisdom.

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World is awash with information, but there seem to be a growing scarcity of wisdom. And worse, the two are often confused; many believe that having access to more information produces more knowledge, which results in more wisdom… But, if anything, the opposite is true– more information without the proper context and interpretation only muddles your understanding of the world rather than enriching it… So; What is wisdom? How does anyone become wise? Is it something you are, something you have, or something you do? Does anyone ever set out to develop or acquire wisdom as a goal? How does a person become wise? Do people regarded as wise think of themselves as wise? What is it about someone who has others see them as wise? Philosophers, psychologists, spiritual leaders, poets, novelists, life coaches, and a variety of other important thinkers have tried to understand the concept of wisdom… For some; wisdom is the ability to think and act using knowledge, experience, understanding, common sense, insight…

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For Cheryl; wisdom is the ability to use the best means at the best time to accomplish the best ends. It is not merely a matter of information or knowledge but of skillful and practical application of the truth to the ordinary events of life… For Al; a person acquire wisdom from life-long, child-like curiosity and a playful spirit. Wise people are happy rather than hostile, no matter how badly life has treated them. You gain wisdom when you ask questions, explore, want to know how thing work, and learn valuable lessons from rough experiences… For Gail; knowledge is knowing how to apply the information. And wisdom is bringing all of your knowledge and skill to a situation to bring it to a successful conclusion… A couple more pearls of wisdom:

  • Quote–Jim Rohn: For things to change, you must change… for things to get better, you must get better… discipline is the bridge between goals and accomplishment… motivation is what gets you started , habit is what keeps you going… don’t wish it’s easier, wish you are better.. don’t wish for less problems, wish for more skills… don’t wish for less challenge, wish for more wisdom… if you really want to do something, you’ll find a way; and if you really don’t, you’ll find a good excuse…
  • Quote– Peter Drucker: Leadership means getting the right things done; no two leaders are alike– some are very gregarious, some very aloof, some are charmers, others are like a dead mackerel, but they all have two things in common; they get things done and you can trust them… Doing the right thing is more important than doing the thing right… If you want something new, you have to stop doing something old… What gets measured gets improved… So much of what you call management consists of making it difficult for people to work…

In the article Wisdom in the Age of Information by Maria Popova writes: A great storyteller– whether a business person, journalist, filmmaker, curator… helps people figure out not only what matters in the world, but also why it matters. A great storyteller dances up the ladder of understanding, from information to knowledge to wisdom… Through symbol, metaphor, association… the storyteller helps us interpret information, integrate it with our existing knowledge, and transmute that into wisdom… A great story is not about providing information, though it can certainly inform; but a great story invites an expansion of understanding, a self-transcendence… and more than that it plants the seed to grow new understanding– of the world, your business, yourselves… At a time when information is increasingly cheap and wisdom increasingly expensive, this is the gap where the value of storytellers lives…

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In the article Business Wisdom Of Steve Jobs by Jeff Soloman writes: Throughout the years, Steve Jobs has shared his remarkable story and business insight through speeches, interviews, keynote addresses… Here is a compilation of some inspiring bits of wisdom from Steve Jobs… hopefully, some of these will encourage you to follow your heart as you build your own business empire:

  • Embrace the opportunity in every situation: Getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, and less sure about everything. It freed me to enter one of the most creative periods of my life.
  • Commit to doing great work and never settle: Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking, and don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking, and don’t settle.
  • Make every day count: Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything all external expectations, all pride, all fear of embarrassment or failure- these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.
  • Don’t miss your moment: Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. Have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.
  • Keep your priorities in check: Manage the top line, which is your strategy, your people and your products, and the bottom line will follow. My model for business is the Beatles. They were four guys who kept each other’s negative tendencies in check. They balanced each other, and the total was greater than the sum of the parts. Great things in business are never done by one person. They’re done by a team of people.
  • Attract remarkable people: Building a company is really hard. It requires the greatest persuasive abilities to hire the best people and to keep them working at your company and doing the best work of their lives. We’ve been lucky to have great partners and to have attracted great people. Everything that has been done has been done by remarkable people.
  • Choose the right horse to ride: Apple is a company that doesn’t have the most resources. The way we’ve succeeded is by choosing the right horses to ride really carefully. We try to pick things that are in their Spring. If you choose wisely you can save yourself a tremendous amount of work, instead of trying to do everything. Sometimes you just have to pick the things that look like they’ll be the right horse to ride.
  • Don’t stress… it will all work itself out: If the market tells us we’re making the wrong choices, we’ll listen to the market. That’s what a lot of customers pay us to do, to try to make the best product. And if we succeed, they’ll buy them, but if we don’t, then they won’t. And it will all work itself out.”
  • Move on to the next great thing: If you do something and it turns out pretty good, you should go out and do something else wonderful. Don’t dwell on it for too long, just figure out what’s next.
  • Stay hungry. Stay foolish: Much of what I’d stumbled into by following my curiosity and intuition turned out to be priceless later on.

In the article What’s Your Conventional Wisdom? by Holly Green writes: What does conventional wisdom look like in a business? Try these for starters: Your biggest competitive threat will come from someone inside your industry. Your customers have always wanted it this way; they’ll never change. You don’t have to worry about your service getting commoditized because you are different and special. You can’t do it that way; nobody’s ever done it that way before. Don’t mess with your cash cow; the products and services that made you successful in the past will continue to do so in the future…The real danger with conventional wisdom is that it shuts down creativity and different ways of thinking…

It intimidates people from bringing up new ideas and expressing opinions that run counter to prevailing attitudes. It’s the little voice in your head that whispers; Don’t be ridiculous, that idea couldn’t possibly work. Or, don’t say that, people will laugh at you! Any time a business fails, loses market share, or makes a costly blunder, it’s usually because conventional wisdom had the upper hand… When conventional wisdom fails in sports, the team gets a chance to start over the next year with faster, better players. In today’s business environment, however, you often don’t get a second chance…

wisdom tumblr_m5oy48SPbj1rtanbqo1_500 Wisdom is an ancient concept and an esteemed human value, but– What is it? According to Stephen S. Hall; it’s easier to define what wisdom isn’t: First, it isn’t necessarily or intrinsically a product of old age, although reaching an advanced age increases the odds of acquiring the kinds of life experiences and emotional maturity that cultivate wisdom… Second, if you think you’re wise, you’re probably not…

According to Donald Cooper; every business is faced with increased competition, shrinking margins, more demanding customers and the challenge of finding and keeping great staff. Mediocrity is no longer an option. To thrive, or even survive, you need wisdom, passion, focus… and 2 out of 3 isn’t good enough! You need to truly understand your business, your customers, your market, your industry: That’s the ‘wisdom’ part… According to Harriet Tubman; every great dream begins with a dreamer. Always remember, you have within you– strength, patience, passion, and with a little persistence– the ‘wisdom’ to change the world…

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Managerialism– An Ideology Outdated: Modern Cultural Shifts Requires Rethink of Very Concept of Management.

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What is happening to the ‘concept and role of management’ in the modern-day organization? According to Gary Hamel; tomorrow’s organizational imperatives lie outside the performance envelope of today’s bureaucracy-infused management practices… Equipping organizations to tackle the future requires a management revolution– no less momentous than the one that spawned modern industry… In the 20th Century, companies were often successful by following the precepts of hierarchical bureaucracy or ‘managerialism’, which is characterized by– professional managers, focus on profit, tell employees what to do, work performance through rules, roles, plans and reports, achieving efficiency through economies of scale… According to Steve Denning; in the last quarter of the 20th Century additional corollaries were added, for example; focus tightly on maximizing shareholder value, strategy is all about competitiveness, lowering-costs is off-shoring… then, globalization and Internet changed everything… manage th6U39ARS9

Now in the 21st Century cultural shifts change everything where customers, e.g.; have real choices, access to instant reliable information, ability to communicate with each other– anywhere, anytime, anyplace… Power in the marketplace has shifted from seller to buyer. Customers are insisting on– better, cheaper, quicker, smaller; along with more convenient, reliable, personalized services… and, in highly competitive markets, organizations must continuously innovate to stay relevant…  As a result, a veritable revolution in the very meaning of ‘management’ is under way… In fact managerialism, the very foundation of 20th Century management practice, is under attack…

Managerialism is an ideology and process that establishes the ‘manager’ as the critical player in any organization hierarchy… it promotes the idea that a tightly managed organization is essential for success, as opposed to individuals or groups… it’s the notion that management skills are not specific to any particular organization or industry, and that managers are completely transferable between any organization or industry— the manager is the critical link, independent of any organization; whether it’s a– school, hospital, manufacturing, retail… it matters not: Any well-trained manager can manager any organization, industry… However, some experts say– not true; this ideology is outdated and no longer relevant in modern-day organizations…

According to Jeremy Heimans and Henry Timms; there is a distinction between organizations that are defined by ‘old power’ and ‘new power’… where ‘old power’ relies on the exclusive nature of ‘ownership’– what they ‘own, know, control– that nobody else does’… And, ‘new power’ relies on ‘sharing’– what they ‘own, know, control– that unleashes the activities of many others’… Organizations are also distinguished by their values; where ‘old values’ are driven by– managerialism, competition, professionalism… And, ‘new value’ are driven by– self-organization, collaboration, DIY spirit… This shift away from a world defined by hierarchy, to one shaped by mass participation is– unleashing the ‘power to create’, where ‘everyone is a change-maker’…. this revolution is not happening overnight; it’s part of a long march away from last century, when ‘old power/old value’ organizations were widely regarded as very essence of all that was modern:Think— Kodak, Polaroid, Lehman, Pan Am, Enron, Sharper Image, Washington Mutual Bank, Bethlehem Steel… manage imagesIMR0UTT0

In the article Managerialism by Chris Jury writes: Managerialism is usually a derogatory term used to describe a range of theories and techniques developed and implemented in large organizations by management gurus and major business schools across the Anglo-American world, over the last 20 years… The basic concept of managerialism is that structurally all organizations are essentially the same and therefore, there is one over-arching theory of management that can be applied to all organizations. The promotion of this theory by ‘top business schools’ has led to the development of a form of technical segregation that excludes people who are not part of this educated elite… This allowed for the emergence of a new type of career manager whose knowledge is not specific to any industry or activity; but who can, theoretically, move between unrelated organizations, industries…

The logic behind these ‘managerialists’ is that all organizations are essentially the same, and it’s their efficient manipulation of the common underlying structures that leads to success of the organization… this makes managers critical to the organization, rather than the people who actually deliver the services… This logic inevitably leads to diminution in status of specific skills of particular professions or industries, and often leads managers to perceive all non-management staff as interchangeable production staff; as human resources to be exploited by the organization (private or public), making no distinction between ‘professional practitioners’ and other forms of support or production staff…

Professional practitioners are the people who actually carry out the core activities of the organization, for example; in schools– these are teachers; in hospitals– doctors, nurses; in technology– engineers, scientists… Before dominance of managerialism, the knowledge and experience of professional practitioners was where the authority and power of an organization often resided, and indeed for many customers or users they inevitably still are, for example; if you are sick you do not want appointment with a hospital manager; but rather with a doctor who can prescribe best possible treatment based on their medical knowledge and experience; not a bureaucratic non-medical manager… manage managing-in-the-21st-century-31-638

In the article Managerialism by John Quiggin writes: As with most terms that end in; ‘ism’… managerialism is more often used pejoratively than favorably… The standard assumption is that management is a science on par with– physics, or biology, or at least with economics… The central doctrine of managerialism is that the differences between organizations, such as; say– university and automotive company… are less important than their similarities, and that the performance of all organizations can be optimized by the application of generic management skills and theory. It follows that the crucial element of organizational reform is the removal of obstacles to the ‘right to manage’… Managerialists rejects the idea that there is any fundamental difference, for example; between the operations of– a hospital and a manufacturing company… In both cases, it’s claimed the optimal policy is to design an organization that respond directly to consumer demand, and to operate the organization using generic management techniques and principles…

In the article Management Revolution by Steve Denning writes: A new management concept is emerging capable of achieving; continuous innovation, transformation, disciplined execution… while delighting those for whom the work is done, and inspiring those doing the work… These are fundamentally different principles, which involve not merely the application of– new thinking, technology, realities of new social priorities… but, according to Thomas Kuhn; these represent a paradigm shift and different mental model of how the world works leading to different ways of thinking, speaking, acting… None of the principles or practices are individually new; but the implementation is new when they all work together in collaboration…

Furthermore, since many of the sacred cows of the 20th Century are dying, for example; maximizing shareholder value is now ‘a dumb idea’, or search for holy grail of ‘sustainable competitive advantage’ is now recognized as futile, or essence of strategy seen as coping with competitors is obsolete, or uni-directional value chain… hence, the very core of 20th Century management thinking is now a problem, not a solution… In addition, the short-term gains of large-scale off-shoring of manufacturing is now recognized to have caused massive loss of competitive capacity; and the supposed distinctions between leaders and managers have collapsed… To top it off, a slew of management books suggest that the managerialist organizations represent a failure so deep and pervasive that there are hardly words to describe it, hence a veritable revolution in management is under way… manage thZBGKZJBU

Confronting managerialism offers a scathing critique of the crippling influence of many top business school and much of their management principles teachings… According to Robert R. Locke and J. C. Spender; managers who were once well-regarded as custodians of the economic engines vital to economic growth and social progress now seem closer to the rapacious ‘robber barons’ of the 1880s… In effect, responsible management has given way to ‘managerialism’, whereby an elite caste of business people are disconnected from any ethical considerations– they call the shots and often without social concerns… All this brings into questions, not only the social ethics of the management caste, but its management efficacy– compared to systems of management that are highly employee participative and dependent– and the often failed attempts, after the facts, to ‘bolt-on’ ethics and social responsibility as mere window-dressing…

However, according to Chris Dillow; there is a grain of justification for the imposition of managerialist values, for without them you might get futile perfectionism in which nothing ever gets finished, for example; Leonardo da Vinci might have benefited from a bit of management, and pursuit of excellence can be a mask for self-indulgence or even idleness… Nevertheless, there is a tendency for proponents to push the managerialist value system too far… According to Martin Parker; management is increasingly being seen as a problem and not a solution, it’s the beginnings of a cultural shift in the very  concept of management and the role of management in modern-day organizations–it’s a significant change… More important, it’s opening-up the possibility of exploring non-managerial alternatives to contemporary assumptions about organization… and even the radical notion that organizations can operate without– management, managers, management schools…

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Corporatized Nonprofits–PhilanthroCapitalism: Paradox; Use For-Profits Business Models for Nonprofits Sustainability

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How often have you heard: Nonprofits (nonprofit organizations) are not sustainable? According to Rebecca Reynolds; the idea that nonprofits are not sustainable, that they are too dependent on gifts and grants, that they can only truly succeed with some sort of ‘for-profit’ like earned income stream– reveals a fundamental lack of understanding about the nonprofit business model… Nonprofit organizations include; everything from neighborhood associations that meet a couple of times a year with no assets, to Harvard University, to Gates Foundation… each with tens of billions in assets… also, they include; soup kitchens and traditional charities that serve the poor, as well as; local churches, labor unions, chamber of commerce, community foundations, Sierra Club, Metropolitan Opera… There is no ‘one-size-fits-all’ way to think about nonprofits…

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Nonprofit organizations are divided into subsection of U. S. Internal Revenue Code 501(c). There are about 1,507,231 tax-exempt organizations and public charities reporting over $1.65 trillion in total revenues, $1.57 trillion in total expenses, and over $3 trillion in total assets… However, the nonprofit landscape is changing, and many nonprofits are increasingly becoming more like multinational corporations– in fact, many nonprofits are mimicking language of Wall Street, and donors are demanding to be treated as investors… and, nonprofits are obliging by using corporate like terms, such as; ‘returns on investment’ and negotiating gift arrangements as ‘contracts’… Also, many nonprofit foundations and individual donors are insisting on the use of ‘for-profit’ like metrics, such as; value of outcome, best practices, benchmarking, social impact, performance standards… it’s becoming the ‘corporatization’ of nonprofits… All of this was unheard of 10 years ago in nonprofit communities… Corporatization is rapidly becoming the preferred way of doing the ‘business’ of– grant-making and it’s influencing both new and older foundations, large and small, in ways that may undermine the diversity of the philanthropic world…

In the article Metrics Mania: Growing Corporatization of Philanthropy by Alison R. Bernstein writes: The role of philanthropy is changing and ‘managerialism’ appears to be the catch-all phrase to cover a shift that transforms knowledgeable business leaders into decisive philanthropic managers… These new managers in philanthropy claim that they are much more sensitive to the economics of the institution which will increase efficiency, effectiveness… While no one can dispute the importance of knowing the ‘metrics’ of an organization and trying to make an organization as efficient as possible, however, efficiency, in and of itself in grant-making, isn’t always the most important factor in determining who/what gets funded…

A far more troubling aspect of ‘managerialism’ is the idea that an organization can only be effective when it can be measured by a metric, and thus make decisions based on metrics. But metrics by its very nature only measures what can be measured, and thus it’s a proxy or an incomplete indicator of what is actually happening. An obsessive, technological approach to measuring impact, effectiveness is highly problematic in philanthropy, especially philanthropy that is concerned with progressive social change as opposed to improving a specific outcome… In the past, boards of trustees reviewed investment returns and asset allocations according to a set of internally generated principles, policies… and the key question was: Are you doing well relative to your own benchmarks? Now investments are judged by an external set of metrics based simply on formulaic returns… The challenge posed by metrics mania and false bottom lines is the assumption of a ‘one-size-fits-all’ model. Foundations are too diverse and the problems they hope to address effectively are too complex to be reduced to a metrics model…

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In the article Nonprofit Paradox: For-Profit Business Models by Bill E. Landsberg writes: It has become a generally accepted truth in the nonprofit world that organizations must embrace the ‘best practices’ form of governance of the for-profit business world in order to survive… The loftiest mission will fail if its delivering organization lacks the financial stability to stay afloat… An increasingly competitive business environment, with shrinking support from government and private donors, which means that nonprofits must acquire– the efficiency, flexibility, innovation, discipline… traditionally represented in competitive for-profit business; but, does this solution carry seeds of destruction for nonprofits?

Others argue that for-profit commercialization and resulting revenue streams threaten the very survival of nonprofits, and hence the modern-day nonprofit paradox: Nonprofits embraces for-profits business practices to assure its survival, but these very practices threaten to undermine the nonprofits– culture, mission, public image… Hence, in an effort to save its bottom line, the modern-day  nonprofits risks losing its soul… There is a basic conflicts between the values expressed in ‘for-profits’ and those of ‘nonprofits’, and it matters a great deal that ‘nonprofits’ not evolve into another version of ‘for-profit’ with an emphasis on profitability. At stake is the cultural relevance of nonprofits and the vital services that they provide…

In the article Nonprofit Business Model: Why it Still Works by Rebecca Reynolds writes: People have always been interested in contributing to good works, especially when there is the added incentive of a tax write-off for doing so. This doesn’t mean these gifts can be taken for granted, especially within changing– demographics, social trends, other market drivers… Nonprofits must innovate just as continually and effectively as do for-profits… but far too many nonprofits are being misdirected by board members coming from for-profits, who do not understanding the asset of the 501(c) or the profession of fundraising…

These well-intended people push fundraising methods, such as; golf tournaments, galas, auctions, online programs… all to avoid ‘dependence’ on gifts. This misses the entire point of nonprofits… there’s nothing wrong with golf tournaments or galas… and many nonprofits make good money and new friends with these types of revenue generators… But also, there is nothing wrong with writing grant proposals to foundations that are in the business of granting money or cultivating relationships with major donors who are looking for ways to put their money to good use… Hence, the combination of traditional fundraising, such as; contributions, grants… as well as, various sources of earned income sources… provide a viable and sustainable nonprofits business model…

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Money is a constant topic of conversation among nonprofit leaders: How much do we need? Where can we find it? Why isn’t there more of it? In tough economic times these types of questions become more frequent and pressing. Unfortunately, the answers are not readily available… According to William Landes Foster, Peter Kim, & Barbara Christiansen; nonprofit leaders are much more sophisticated about creating programs than they are about funding their organizations, and philanthropists often struggle to understand the impact (and limitations) of their donations… Too often, the result is that many well-intended programs are– cut, curtailed, never launched… And when money become tight, a chaotic fundraising scramble is all more likely to ensue… According to Peter Goldberg; new ways to finance the delivery of human services are needed– grants and contracts are not enough… Too many organizations are holding on to 19th century culture in a 21st century environment– the demand of change with changing times is enormous

In the current economic climate it’s tempting for nonprofit leaders to seek money wherever they can find it, causing some nonprofits to veer-off course… During tough times it’s more important than ever for nonprofit leaders to examine their funding strategy closely, and to be disciplined about the way that they raise money… nonprofits must provide greater clarity about their funding programs, also philanthropists are becoming much more disciplined about how they invest their nonprofit money… Hence, nonprofit governance is moving more toward a corporate model of accountability, transparency… While applauding some of these developments, there is concern over the creeping ‘corporatization’ of nonprofits, and it’s important to recognize that nonprofits have a different mission and purpose from for-profits, also the market incentives that control behavior are different…

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In the nonprofit world, programmatic ‘impact’ strategies are a significant part of the business model. But each activity must be associated not only with impact strategy, but also revenue strategy; thus, the sustainable nonprofits have a ‘dual’ bottom-line, i.e.; program ‘impact’ and financial ‘accountability’… According to Jeanne Bell, Jan Masaoka, Steve Zimmerman; nonprofits face unprecedented– challenges, accountability… and every nonprofit must develop a viable business strategy that– clearly defines its specific mission and purpose… identifies its primary sources of revenues… justifies its methodology of  program accountability… According to Jim Gibbons; nonprofits must be ‘work-horse’ not ‘show-horse’ organizations, such that everyone can see the ‘impact’ of their ‘programs’ on people’s lives…

 

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Irrational Consumers Behavior– New Normal: Business Strategies are Mostly Out of Sync with Consumers Buying Habits

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Consumers behavior is complicated: According to Dan Ariely; consumers are not rational actors, but irrational reactorsreacting to environmental stimuli with a set of cognitive heuristics (mental rules of thumb) that are fast and frugal, prompting them to do things that are often smart, but sometimes stupid… A consumer’s mind is not a clean slate; it’s refracted through the lens of– belief, culture, experience… and many are far less rational in their decision-making than most consumer buying models predict… According to Daniel McFadden; classical economists used to posit that consumers are rational and make decisions to maximize pleasure; end of story… but that might not be the complete story; consumers might be rational, but they are prone to all sorts of biases and habits that divert them from any strictly rational behavior…

The classical ‘economics of choice’ is far too simple to explain consumers behavior, since it does not capture what goes on in people’s brain when they make choices; it’s much too static to capture the sensitivity and dynamics of the process, in the modern world… In fact, some say that consumers are on a hedonic treadmill, which can be characterized as– not in ‘pursuit of happiness’, but in ‘happiness of pursuit’…

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In the article Keeping Up with Your Customers Behavior by Adrian J. Slywotzky writes: Have you ever been blindsided by changes in your customers? Have you ever felt that half or more of your marketing dollars are wasted? Were the surprises and the waste really unavoidable? Perhaps the most insidious strategic risk companies face is decimation of their customer base by shifts in– behavior, preferences, demographics… These shifts may happen gradually or literally overnight. Either way, they can destroy a business model… Customers are people–unpredictable, irrational, emotional, curious, and highly prone to change. Customers can’t keep still. They resegment themselves from ‘product buyers’ to ‘value buyers’ to ‘price buyers’ and then back again. Their priorities change from ‘quality’ to ‘price’ to ‘solutions to ‘style’ to ‘brand’…

They get richer; they get poorer; they get excited by and attracted to different styles, different offerings, different ways to buy… They get better informed; they get even more demanding; they decide to shop at different places; they start buying through catalogs, from TV networks, online… They pledge allegiance to product brands; then store brands; then no brands… They want carbohydrates, then they don’t… They want big cars; then small; thrifty ones; then decide they value fuel-efficiency… Hence, every time customers priorities shift, your business model is at risk, and your value proposition gets a little fuzzier, a little more out of focus. You lose a little business from a few customers; they decide to buy a couple of items from another supplier… Then you start losing customers altogether (and, that’s a little more worrisome but at least you have your old reliable customers). Then you start losing your most profitable customers, the 20% that generate more than 80% of your revenues… Panic; what you thought was a trickle turns into a nightmare; all because you lost track of the changing customers behavior, perceptions, expectations…

In the article Irrational Consumers Behavior by Ravi Dhar writes: Economists have long assumed that consumers rationally weigh the costs-benefits of every possible choice, before deciding what to buy…  Typically, under this assumption, businesses uses a tidy frameworks to help identify ways to influence consumer decisions… As it turns out, this assumption is wrong. While shopping, consumers don’t think as much as you think they think… Recent research in behavioral economics and psychology demonstrate that consumers seldom behave rationally, meaning the tidy frameworks are not, in fact, useful for predicting consumers behavior…

A revised understanding of consumer mental processes indicates that business need to rethink how consumers make purchase decisions… In order for business to create an  effective– in-store and/or online strategy, it must make a clear connection between mindset and behavior… You tend to think of consumers as rational beings with stable preferences. But recent research shows that it just isn’t so; small changes in things like; environment or messaging can change consumers’ goals and mindsets (and, ultimately their purchasing behavior) in ways that are both predictable and profound… Hence, business must learn to embrace these new, multi-dimensional models of consumer behavior and devise new, more effective ways of influencing the consumer’s decision-making process…

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In the article Duality Of Consumers Behavior by Bob Hoffman writes: There seems to be two competing models of consumer behavior: First model suggests that consumer behavior is basically logical: This theory asserts that people behave rationally– and there is much persuasive evidence to valid this model; for example, retailers know that they can stimulate sales by lowering prices, offering discounts, utilizing other types of promotional activities… and, consumers will react with rational behavior… Second model asserts that consumer behavior is essentially irrational: This theory holds that people are not really influenced by marketing motivations, but are ruled more by emotions– evidence that validates this model is equally persuasive… Then, you are faced with two contradictory models of consumers behavior that both seem to be valid…

Hence, you can conclude that consumer behavior may have a dual character, and when paired with a business strategy (which have no inherent inevitability; just probability and likelihood) the result can be a business nightmare… According to Einstein; when there are two contradictory pictures of reality, and when separately neither of them fully explains the phenomena– but then when these realities are combined, they do… This type of duality and uncertainty is true in business, and is typical of consumer behavior… In other words, there is an inherent contradictory duality that challenges your most cherished beliefs about consumers behavior… This duality of consumers behavior is one of the most difficult and confusing element of business– it’s one of the factor that business people continuously misunderstand and misalign in their struggle to describe and predict consumers behavior…

In the article Rationalizing the Irrational Customer by John Lucker writes: Classic economic theory tells us that consumers behavior is born of certain traits that can be described as– unbounded rationalism, will power, self-interest… Historically, these traits have been identified as the reasons humans make certain choices under specific circumstances… In business, these cognitive perceptions have long been relied on to– develop business strategies, guide product development, give marketing executives their directives… The problem is that consumers don’t always follow these rules or conform to  classic experience and wisdom. Business often find that traditional evaluative methods of supply/demand models, consumer surveys, observational focus groups… can go only so far to help understand individual behaviors… When faced with value choices, consumers make decisions that appear counter-intuitive, e.g.; perhaps consumers are more fickle, acting more often on whim than fact… Some say that market and behavioral forces, today, are changing consumers behavior faster and more radically than ever before…

Further confusing the issue is that most consumers think they are rational, in the classical sense… They research a purchase in detail before making it, but in reality they get tangled in a web of correlations, along with a network of influencers, followers, transient leaders– who often sways their behavior without their being aware of it… With the pervasiveness of product review information, a seemingly rational purchase choice can be driven by others’ nonfactual, subjective or irrational influence… Too often, misinformation can be viewed as accurate information…

Consequently, businesses that subscribe to the notion of always engaging rational consumers risk misunderstanding the factors that motivate many customers’ buying decisions. This lack of understanding may lead to– missed business opportunities, customer churn, loss of market share, declining revenue… Ultimately, deep analysis of customer– biographic, demographic, and psychographic data can give companies a more accurate view of what makes customers tick and lead to better business outcomes. Although the factors that motivate consumers behavior may not always make obvious sense, business through more imitate consumer engagement and analytics can begin to make more sense of the seemingly nonsensical…

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Business needs to work smart to keep-up with constant shifts in consumers– behavior, perceptions, expectations… Being in-sync with consumers’ changing needs and wants is critical– it can make or break a business… hence, constantly re-aligning the business such that it’s in complete sync and harmony with unpredictable and often irrational consumer must be priority #1 for business sustainability… According to Jirafe; failing to understand consumers behavior is recipe for disaster– as many companies have found out the hard way…

According to Charles Swann; calling consumers irrational misses the whole point. It’s the business’ responsibility to understand consumers behavior and decision process, even if it doesn’t make a lot of sense… Calling consumers irrational also suggests that something is wrong with them when they don’t make the decisions you expect or want… In fact, these seemingly ‘irrational’ decisions may be quite– rational, predictable…  According to Martin Lindstrom; much of what you do each day is irrational, and in most cases emotions drive decisions, and you only look for logic to help confirm the decisions... Business is very much about tapping into the emotional nature of consumers, and for business to be sustainable; it must have a realistic perception of consumers emotions, behaviors…

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Power of Competitive Intelligence– Think Garbology With A Twist: A Critical Edge That Turns Trash Into Advantage…

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What you don’t know can destroy your company– it’s a highly competitive world where knowledge is power… However, with some savvy planning and perfectly legal snooping– otherwise known as competitive intelligence– you can drive strategy, soothe your fears, and give your company a competitive edge... Competitive intelligence (CI) is the action of ethically and legally gathering, analyzing, and communicating information about your total competitive environment– it’s a practice that is essential in modern business… it’s warning system that enables business to make important decisions with a higher-level of certainty… According to Linda Klebe Trevino; sometimes competitive intelligence gets a bad rap when some people associate it with terms, such as; snoop, corporate spooks, spying, James Bond tactics… which implies illegality or at least questions legitimacy of the activity…

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Competitive intelligence in its truest form is an ethical and essential function that involves collecting and analyzing often public, but little-noticed information, with an objective of ‘connecting the dots’ and leading to a competitive advantage… and, when it’s effectively aligned with the strategy-setting, it can help companies decipher the early signs of opportunity or trouble before they become obvious to everyone else. It essentially means understanding and learning what is happening in the world around your business so you can be as competitive as possible. It means learning as much as possible– as soon as possible– about your industry, markets, competitors, or even your county’s particular zoning rules. In short, it empowers business to anticipate and face challenges head-on… In essence it turns many sources of raw data, and in some parlance, garbage and trash into a significant competitive advantage– think Garbology…

In the article Competitive Intelligence Focused on What Matters by Jim DeLoach writes: In a dynamic, complex and uncertain business landscape, effective competitive intelligence is needed to provide early warning… competitive intelligence should be comprehensive in scope, integrating the intelligence gained from the analysis of multiple sources of data and information with the objective of identifying insights and trends that can make a difference in exploiting opportunities, identifying emerging risks… In effect, a competitive intelligence function is the business’– ‘eyes and ears’ in a rapidly changing world… it’s a ‘early warning’ system that is critical in identifying ‘vital signs’ in an ever-changing environment… However, failure to make the fundamental connectivity with the enterprise’s underlying strategic assumptions leaves competitive intelligence as a tactical, ad hoc, strategically irrelevant process… If the intelligence function is not driven by factors relevant to the critical assumptions underlying the strategy, then the organization is at risk because the intelligence gathered does not convey the full picture…

In the article Importance of Competitive Intelligence by Tony Corrigan writes: Know your ‘enemy': According to Sun Tzu; to know your enemy you must become your enemy… Sometimes competing for business can seem like a battle, where the odds are stacked against you and the odds of success are insurmountable… All is not lost however; competitive intelligence is a key weapon in leveling the battle field and allowing you to compete with the advantage of knowledge on your side… Competitive intelligence is the ethical gathering and analysis of– competitor, customer, market… information from multiple sources… and, used by organizations to make better strategic decisions. It’s the difference between competing and winning… Your organization survival depends on the knowledge that you acquire from and about your– customers, markets, competitors… It’s not an overstatement to say– embedding competitive intelligence as core management process is increasingly essential for survival and growth in the 21st century… As Sun Tzu noted: opportunities multiply as they are seized…

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In the article Right Kind of Competitive Intelligence by Leonard Fuld writes: Competitive intelligence isn’t magic, it’s legal, it’s about gathering honest and hard-won information and analyzing it so that business can make sound decisions. Many companies mistakenly believe they can find all the information they need by just uses Internet search engines, but using the Internet is only scratching the surface… Unique business insight comes from blending, analyzing information from many sources, such as; street knowledge, market savvy, customer data… Here are a few rules for harnessing intelligence:

  • Rule 1: Marshall your company’s competitive knowledge: Created a war room and assemble a team drawn from across the organization, including; sales, marketing, engineering, manufacturing… collect all available information and use the war room’s walls as a strategic planning board pinning all available information, e.g.; product offerings, advertising, packaging, pricing, customers, distribution, market trends, innovations, government regulations… Hence, the team becomes fully aware and immersed in the competitive intelligence process, and the objective is to devise business initiatives that engages this competitive environment…
  • Rule 2: Build information filters to reduce competitive distraction: Monitor the critical signals in your competitive environment… This means devise a simple early-warning system based on series of weighted information filters, and monitor signals that tracks key competitive activities… When any of these signals is triggered, then the potential threat or opportunity needs to be examined for potential action…
  • Rule 3: Stress test your strategy to identify future threats: It’s one thing to develop a strategy and another to demonstrate its resiliency when faced with unimagined business  threats or opportunities. Stress testing is another way to scope out the potential competitive landscape– place your strategy in a type of pressure cooker, such as; a war game… to demonstrate or stress test your strategy’s resiliency…

In the article Protect Your Business From Competitive Intelligence by Michael C. Zahrt writes: Many large companies hire strategic intelligence experts, and these experts specialize in– discovering, uncovering… wide range of relevant information that can impact a company’s competitive position… The good news is that small and medium-sized business are not usually the targets of professional competitive intelligence experts. However, business would be wise to protect itself from intelligence gathering by its competitors… Competitive intelligence gathering begins by identifying the strategy of a business and key issues affecting its competitiveness… One competitive intelligence expert suggests four steps business can take to protect themselves:

First, improve workplace culture to lower the possibility that workers feel mistreated… Those who feel mistreated are more likely to divulge sensitive information to competitors. Non-disclosure clauses in the employment agreements of all employees with sensitive information are also helpful, but can be hard to enforce. Second, business should be wary about being contacted by anonymous communications, i.e., phone calls, emails… it’s common for competitors to make up a fake identity in hopes of gathering information… Third, business should ensure that their website is secure and not a source of sensitive information… Finally, remind your employees to be careful about what they post on social media. Employees may be disclosing more than they should on their profiles, and it’s easy for a competitor to find this information quickly…

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Every operation needs an effective network of informants, e.g.; every employee is a sensor, every employee is an intelligence resource… Encourage staff members to gather competitive information as they interact with people outside the company, e.g.; sales people talk to customers, who talk to competitors… human resources staff members interview job candidates, who work or may have worked for rival firms… purchasers talk to suppliers, who know who is demanding what and when it’s needed… Get the whole company involved: Find out where employees used to work, what kind of data they use to do their job, whom they work with outside the company… It’s possible they have easy access to the kind of information you are looking for or have a relationship with people who do… profile the competitor’s top executives– examine the decisions they made to determine how decisive or methodical they are… Each independent information source can help complete a larger picture…

According to Burt Helm; sharp focus is essential to any successful intelligence-gathering effort, e.g.; don’t just say; ‘find out everything you can about all the competitors in the marketplace’… It’s far more productive to think of a specific question or problem that is crucial to your company’s success. The goal of your intelligence operation is to gather information to help address issues that really matter; remember– stable, predictable markets are relics of the past… According Gino Imperato; business moves fast– product cycles are measured in months, not years… partners become rivals quicker than you can say ‘breach of contract’… That’s why competitive intelligence is so important…

Forget the occasional racy headlines about industrial espionage and take new approach– think global, snoop local… become heads-up on a new innovations, know rival’s cost structure, understand changing business modes, track people’s talent… This kind of information gets exchanged all the time, e.g.; engineers swap gossip at trade shows; rival salespeople compare notes at a restaurant, Internet offers a remarkably wide variety of sources– news services, online job postings, brutally honest discussion groups… The information is out-there– all you need is an effective competitive intelligence process to activate it…

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According to Maryam Donnelly; competitive intelligence is one of the most powerful yet under-utilized sources of knowledge at most organizations– the key issue is with how companies store, access, analyze competitive information. They typically keep it in individual silos throughout the company, with no consolidation, no chance at analyzing the scattered data for broader organizational use… This lack of consolidation and analysis leaves many companies at a disadvantage…

The truth of the matter is competitive intelligence, in many businesses, takes a back seat to things like– impulsive, ill-informed decision-making… Where as through use of competitive intelligence, company could get a more accurate view of where the business is, within the context of the overall competitive landscape– its position now, its trend, its future potential… and more important, it provides much relevancy for better, informed decision-making… A Garner Research paper suggested– that many of the world’s top global companies have serious issues making good decisions due to a combination of changing markets, lack of information…

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Corporate Death Spiral– Going to Hell in Hand-Basket: Avoid Downward Spiral– Stop The Bleeding, Do Things Differently…

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Corporate death spiral, going to hell in a handbasket… describes a situation when a business is headed for disaster inescapably or precipitately… Many business’s today are struggling: The business model that worked 20 years ago, or 10 years ago, or even a few years ago no longer apply to today’s competitive global market… According to Gregg Stocker; nowhere is it written that a company, regardless of how large or how successful it might seem to be, will survive… The media continue to report about large, well-known companies that at one time are extremely successful, then fall apart seemingly overnight. In reality, the decline of an organization is a process that usually takes several years and results from a number of– actions, decisions, behaviors… that contribute to the demise. The highly complex nature of organizations and markets makes it difficult to determine what actions or events led to the problems being faced today… The decline can actually begin when times are good and continue for many years, before it becomes obvious that the organization is in deep trouble…

spiral gallup-business-deaths-graph Unfortunately when the decline becomes apparent, the leaders often shift into crisis mode and implement drastic actions to improve the situation, which although are well-intentioned, they actually result in speeding-up rate of decline… Entering the corporate death spiral is a process that begins with weakening of an organization’s immune system. When one or more of the signs are evident, it’s vital to fix the problems by understanding and attacking ‘causes’ of the warning signs instead of treating only ‘symptoms’ with short-term actions… According to David Gardner; leaders either have to figure out how lead their companies in a constantly evolving market, or run the risk of becoming a victim of the inevitable– change in market or transition of market… Companies in a death spiral watch market change or transition before their very eyes, and then later wonder how they could have missed it…

Economic Death Spiral: More U.S. Businesses Dying Than Starting by Wynton Hall writes: In a report, Gallup CEO and Chairman Jim Clifton revealed that– for the first time in 35 years, U.S. business deaths now outnumber business births… Clifton says for the past six years since 2008, business startups have fallen below the business failure rate, spurring what he calls– an underground earthquake– that only stands to worsen… According to Clifton; let’s get one thing clear; the economy is never truly coming back unless the    birth and death trends of businesses is reversed… Indeed, the numbers are striking: Contrary to the oft-cited 26 million businesses in U.S. figure, Clifton says 20 million of these so-called ‘businesses’ are merely companies on paper with– zero workers, profits, customers, sales…

In reality, U.S. has just 6 million businesses with one or more employers– 3.8 million of which have four or fewer employees. In total, these 6 million U.S. companies provide jobs for more than 100 million people in U.S… Of the 2.2 million job-creating companies with five or more workers, the numbers break down accordingly: There are about one million companies with five to nine employees, 600,000 businesses with 10 to 19 employees, and 500,000 companies with 20 to 99 employees. There are 90,000 businesses with 100 to 499 employees. And there are just 18,000 with 500 employees or more, which includes about a thousand companies with 10,000 employees or more… According to Jim Clifton; these numbers paint an ominous portrait of business in dire state of decline, and I don’t want to sound like doomsayers, but when small and medium-sized businesses are dying faster than being born, so is free enterprise, and when free enterprise dies nations die with it…

spiral thKKFY93PV In the article Avoid the Downward Spiral by Dennis Gerschick writes: Success often leads to complacency and complacency leads to poor results and the downward spiral… Many companies who were very successful at one point ended up going out of business, e.g.;  Who were the top two retailers in the U. S. in 1975? Sears and K-Mart: What happened to them? Both are on a downward spiral… There are a lot of adages that may seem like pithy statements but they usually contain much wisdom, e.g.; one adage that has done more damage to more businesses than any other is: If it ain’t broke, don’t fix it. At successful companies they modified it to read: If it ain’t broke break it, because if you don’t, your competitors willThe adage; If it ain’t broke, don’t fix it– really suggests the company is good enough just the way it is, and there is no need to improve it. This attitude sets the stage for complacency and the downward spiral… The world is constantly changing and businesses have to change to be able to compete in the new world.

Executives must stay informed of changes in technology, demographics, political and social trends, economic conditions, what competitors are doing… but  many executives, don’t so for a variety of reasons which may include, e.g.; executives being  myopic – they focus on what they are doing but fail to see forest for the trees… They do not see the changes or trends, and many might think that  the changes or trends are only temporary, and conditions will revert back to what they always knew… Change scares many executives because they cannot predict the future. Many executives find comfort in maintaining the status quo… Many executives simply want to stay on the same path until they retire; the business is secondary and they think only in their own best interest…

In the article Is Your Business Bleeding Out? by Ben Lichtenwalner writes: Bleeding-out (i.e., exsanguinations in medical terms) is death caused by loss of blood from a wound. In business, the term could be used to describe a similar death. Wounded by an event(s), the organization can fail to recover, slowly bleeds to death… Whatever the injury source, the bleeding must be stopped for the business to survive… It’s important that leadership– recognize the impact, identify the source of the bleeding, and put a stop to it… There are several types of blood the business may lose, e.g.: People; your best people, seeing the trouble, they seek employment elsewhere… Efficiency; resources are wasted on politics, personal agendas and ulterior motives… Commitment; disengaged workers who remain, show a lack of enthusiasm and performance decreases… Whatever the type of blood loss you experience, it’s highly likely you will eventually see decreased levels of all three. The downward spiral often begins with one attribute and takes-on other vital components as negative momentum builds. Faced with a wounded organization about to bleed-out consider how hospitals usually treat patient that are in this condition:

Emergency Procedures for an Organization Bleeding-Out: When a patient is admitted to hospital, the medical staff processes the patient through four phases: Triage, Diagnosis, Treatment, Recovery:

  • Triage: Stop the hemorrhage: At this point, fast, strong and highly visible action is required. Communications to the organization about your commitment to resolving the issue is necessary– you may not be 100% certain of the root cause…
  • Diagnose: Triage executed, now you must begin to diagnose root cause. This means a cross-functional, multi-level team dedicated to naming the source…
  • Treatment: Treatment process is often uncomfortable for many– like re-breaking a misaligned limb… but, commitment to completing the healing process is vital. Or, if not careful, you can slip back to old routines and bleeding resumes– often at faster pace…
  • Recovery: Organization must experience a time of healing, and hypersensitive to the problems of the past… leadership must be constantly engaged with employees and reinforcing ongoing support and commitment for the long-term…

Don’t just sit there; Yes, whatever you do, don’t just sit there. Allowing the organization to bleed-out is like a medic standing beside a dying patient, watching them slowly fade away. In long-term, you would be equally responsible for the slow death of the company. Stand up; Say something; Take action… According to  Aswath Damodaran; the Chinese saying;  = you are born, get old, get sick and die… Looking back at history, there are companies that have beaten the odds of the business life cycle, fought off decline, and reborn as successful ventures, for example; Apple’s climb back from the dark days of 1997 to the top of the market capitalization… As you think of other examples it’s worth noting that the very fact that you can name companies that are reborn suggests that businesses can survive the death spiral and thrive…

spiral ciavniuad06fxohwao4d3a Notwithstanding the sobering reality, it’s still useful to put success stories under the microscope, not only to get an understanding of what allowed these companies to succeed, but also to develop forward-looking criteria that you may be able to use to sustain a business, for example; ‘Acceptance': The old ways don’t work any more… To have a corporate rebirth, a company has to get through the acceptance that the old ways, don’t work any more… ‘Change Agent’: This may be cliché but change has to start at the top… ‘Plan for Change’: Knowing that the existing ways don’t work any more is important but it’s futile unless accompanied by new mission and focus… ‘Luck’: Much as you would like to attribute success to great skill and failure to poor management, it remains true that the X-factor in business success is luck (although people create their own luck). According to Joann Auger; the downward spiral is that tendency to get caught up in ‘what’s wrong’ and ‘why it’s wrong’ conversations thus spiraling into negativity… Often leaders wait too long to address problems, or are only made aware of problems when it has reached near crisis… and this can be the beginning of a downward spiral…

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Ill-Conceived–Americans Disabilities Act (ADA)– Failing in Workplaces: Yet It’s Poised for Adoption in Internet Websites…

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Americans With Disabilities Act( ADA) is one of the most significant federal laws of the last 25 years… The law’s purpose is to provide full economic opportunity to disabled people without discrimination. It forbids employers from discriminating against them on the basis of their disabilities. The law has a major impact on employers’ practices in job application procedures, hiring, job placement, compensation, promotions, terminations, and other areas. It has also been the source of much litigation against employers. The Equal Employment Opportunity Commission (EEOC) reported that it received nearly 140,000 ADA-related complaints in one seven-year period… According to government labor data, of the 29 million working-age Americans with a disability– over 24 million are unemployed, which is leading some experts to question the effectiveness of the law…

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The ADA is one of those laws that, on an emotional level at least, it’s hard to oppose… After all, who can really be against the idea of making it easier for disabled people to function in the modern world? However, in the 25-odd years since the ADA has become law, courts have struggled with the question of how the law should be applied and what, exactly, constitutes a ‘reasonable accommodation’ under the law; especially when it relates to cyberspace… However, a federal judge has ruled that Internet online providers that serve the public are subject to the regulation of ADA… According to Peter Blanck; under this judge’s reading of the law, all Internet businesses must add features that make their websites usable by people with disabilities…

The implications of such a ruling are potentially quite far-reaching: Any website created for a commercial purpose would be required to invest the resources necessary to make the website accessible to all people with disabilities, e.g.; visual, auditory… However, there are many business people who see the disabilities issue differently: Yes, commercial website developers should do their best to accommodate people with disabilities who wish to access their websites, however, trying to apply a law that was written even before the Internet was invented is a mistake… the real solution is for Congress to revisit the law that was drafted in a different era and update it, such that its reasonable and relevant in world that we live in now…

The Americans with Disabilities Act (ADA) was signed into law on July 26, 1990. Its overall purpose is to make society more accessible to people with disabilities. In 2008, the ADA Amendments Act (ADAAA) was passed: Its purpose is to broaden the definition of disability, which was narrowed by U.S. Supreme Court decisions. The ADA’s protection applies primarily, but not exclusively, to people who meet the ADA’s definition of disability: A person has a disability if; he/she has a physical or mental impairment that substantially limits one or more of his/her major life activities…

Also, other people who are protected under the law, include; 1) those, such as parents, who have an association with a person known to have a disability, and 2) those who are coerced or subjected to retaliation for assisting people with disabilities in asserting their rights under the ADA… While the ADA employment provisions apply to employers of 15 employees or more, its public accommodations provisions apply to all businesses, regardless of number of employees… and it also applies to  state and local governments regardless of size. The ADA is divided into five titles:

  1. Employment (Title I): Title I requires covered employers to provide reasonable accommodations for applicants and employees with disabilities and prohibits discrimination on the basis of disability in all aspects of employment. Reasonable accommodation includes, for example; restructuring jobs, making work-sites and workstations accessible, modifying schedules, providing services, such as; interpreters, modifying equipment, policies…
  2. Public Services (Title II): Under Title II, public services (which include state and local government agencies, the National Railroad Passenger Corporation, and other commuter authorities) cannot deny services to people with disabilities or deny participation in programs or activities that are available to people without disabilities. In addition, public transportation systems, such as; public transit buses, must be accessible to individuals with disabilities…
  3. Public Accommodations (Title III): Public accommodations include facilities, such as; restaurants, hotels, grocery stores, retail stores… as well as privately owned transportation systems. Title III requires that all new construction and modifications must be accessible to individuals with disabilities. For existing facilities, barriers to services must be removed if readily achievable…
  4. Telecommunications (Title IV): Telecommunications companies offering telephone service to the general public must have telephone relay service to individuals who use telecommunication devices for the deaf (TTYs) or similar devices…
  5. Miscellaneous (Title V): This title includes provision prohibiting either; (a) coercing or threatening, (b) retaliating against individuals with disabilities or individuals who are attempting to aid people with disabilities in asserting rights under the ADA…

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In the article Unintended Consequences of ADA by Thomas De Leire writes: The employment provisions of the ADA exemplify the ‘law of unintended consequences’ because, in the opinion of some experts, those provisions have harmed the intended beneficiaries of the Act, not helped them. ADA was enacted to remove barriers to employment of people with disabilities by banning discrimination and requiring employers to accommodate disabilities… However, studies of the consequences of the employment provisions of ADA show that the Act has led to less employment of disabled workers…

Although ADA has caused some employers to accommodate people with disabilities, the cost of complying may have reduced the demand for disabled workers and thereby have undone ADA’s intended effects… However, according to Paul Miller; ADA has helped to raise awareness of challenges faced by people with disabilities and establish guidelines that help business better understand what is expected from them… While you should not let disability be a barrier to employment, you also need to be mindful that you don’t hire an applicant just ‘because’ of the disability, you hire because of talent– think outside of the disability…

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In the article ADA Standards for Website Accessibility by Jim Butler writes: The Department of Justice (DOJ) issuance of website standards is not a matter of ‘if’, but ‘when': These regulations will require websites that provide– goods, services, facilities, privileges, accommodations… or advantages offered by state and local governments… features that allow accessibility to persons with disabilities… On November 25, 2014, the DOJ Civil Rights Division issued its Advance Notice of Proposed Rule Making entitled ‘Nondiscrimination on the Basis of Disability: Accessibility of Web Information and Services of State and Local Government Entities and Public Accommodations: These revised regulations, when adopted, will implement website standards which the DOJ has been working on for nearly a decade… The DOJ’s proposed guidelines for website access for public accommodations are scheduled for late 2015…

The DOJ website accessibility standards will reach entities that provide ongoing goods, services that fall within the 12 categories of ‘public accommodations’ as defined in the ADA regulations, including; hotels, financial institutions, shopping centers, retail stores, restaurants, arenas… The regulations are intended to cover public accommodations that ‘operate exclusively or through some type of presence on the Web– whether hosting their own website or participating in a host’s website… but standards will not affect– personal or non-commercial websites or postings… As guidance, the DOJ recently provided an 18-month phase-in period from publication of the final standard, e.g.; the DOJ noted that it’s considering a 6 month effective date for newly designed websites (i.e., those placed online for the first time six months after the publication of the final standard) and for new pages on existing websites, including navigation components. For existing websites or pages, the DOJ is considering a 2-year phase-in period from the publication of the final standard…

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Disregarding the ADA can be very costly,e.g.; a major corporation paid a record $6.2 million settlement after being accused of illegally firing disabled employees who were on workers’ compensation after being injured on the job, and not making ‘reasonable accommodation’ to allow them to return… Employee provisions are enforced by the Equal Employment Opportunity Commission (EEOC) or designated state human rights agency. They could seek a variety of remedies, including; reinstatement, promotion, back pay, attorney’s fees… Discrimination against disabled people is often much more subtle than something like a sexual harassment claim; you don’t get the same kind of smoking gun with disability…

Also, it’s important to remember that many states and municipalities have their own disability access laws and regulations with which businesses must comply. Although many state and local requirements are similar to the ADA, this is not always the case… A well designed website must be accessible to everyone online and meet; the World Wide Web Consortium (W3C) guidelines, the Americans with Disabilities Act (ADA) and the Rehabilitation Act of 1973 (Sections 504 and Section 508). This means all content– text, photos, videos, links… must be accessible to anyone who can navigate a website page, regardless of physical ability…

It’s clear that websites will be required to be compliant with ADA regulations, hence business should move towards ensuring that their website(s) is accessible and user-friendly to all people…

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Controversial Pay Debate– CEO Vs. Worker Pay Gap: What’s CEO Worth? What’s Worker Worth? Who Decides?

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CEO Vs. Worker Pay Gap: It’s good to be a Fortune 500 CEO these days at least pay-wise, e.g.: *One CEO Hour = 1,372 Minimum Wage Hours* or *One CEO Person = 354 Workers*. According to the 2014 AFL-CIO Executive PayWatch; it’s 331 times better to be a CEO than an average worker; the average CEO of an S&P 500 company made $11.7 million in 2013, while the average worker earned $35,293… According to Gillian B. White; business has become more efficient and profitable but workers aren’t sharing in the benefits… When you look at the relationship between worker wages and productivity there is a wide and many believe, problematic, gap that has arisen in the past several decades… According to Economic Policy Institute; productivity (defined as output of goods, services per hour of work) grew by about 74% between 1973-2013, while wages for most workers grew at a much slower rate of only 9% during same time period… According to Richard Trumka; these huge gaps are wrong, it’s unfair, it’s bad economics…

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However, while most headlines on CEO pay focus on the total compensation packages of the CEOs of the largest public companies, the reality is that the vast majority of CEOs do not enjoy multi-million dollar pay packages… According to ‘Chief Executive'; of the roughly 30 million businesses in the U.S. fewer than 6,000 are publicly traded and only the largest 8% of these public companies make it into the S&P 500… Despite this reality, most media outlets focus on the $12 million average pay package among S&P 500 CEOs, or even more misleading, the $38.7 million average annual pay package for the CEOs of the largest 200 companies…

According to ‘2014-2015 CEO and Senior Executive Compensation in Private Companies Report'; the median private company CEO earned $343,000 in cash compensation in 2013 (base salary and bonus) and total compensation of $378,000, including; benefits, perks and equity gains… Median total compensation for private company CEOs was up approximately 5% from the prior year– outpacing the inflation rate of 1.5% in 2013– but not growing as fast as pubic-company CEO compensation packages. The S&P 500 median package increased by 9.5% over the same period…

In the article Pay Gap Between CEOs and Employees by Elliot Blair Smith and Phil Kuntz write: Under the Dodd-Frank law passed by Congress, several years ago; public companies must reveal their CEO-to-worker pay ratios, but many companies still are not making this numbers public…To get a sense of what such ratios could reveal, we conducted an experiment: We compared the disclosed CEO compensation information mandated by the SEC, including; salary, bonus, perks, changes in pension accrual, and the value of stock-based awards… with U.S. government data on average worker pay and benefits by industry. (Most companies don’t disclose actual payroll information for employees.) In addition we used the industry-specific averages for workers compensation, which compares CEO pay with the ‘average’ for all rank-and-file employees in the U.S., while the law calls for using the ‘median’ of all employees, including; executives other than the CEO…

Others organizations who have calculated similar pay ratios, such as; the AFL-CIO, didn’t differentiate worker pay by industry or include employee benefits in their math, but others like Bloomberg News did, which tended to make the ratios smaller. (The AFL- CIO’s average ‘CEO-to-worker’ multiple at large U.S. companies is 357. Bloomberg’s average ratio for Standard & Poor’s 500 companies is 204; the average of the top 100 companies is 495. That is, CEOs of the companies averaged 495 times the income of non-supervisory workers in their industries.) There’s no question that using industry-wide averages as the denominators is not a perfect substitute for the real pay ratios that Dodd-Frank calls for, but this a reasonable approximation to demonstrate the point…

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In the article Pay Gap Between CEOs and Workers is Much Worse by Roberto A. Ferdman writes: A study conducted at Harvard Business School found that Americans believe CEOs make roughly 30 times what the average worker makes in the U.S., when in actuality they are making more than 350 times the average worker… According to the study; Americans drastically underestimated the gap for actual incomes between CEOs and unskilled workers… But that underestimation isn’t merely drastic; it’s also unmatched in the world. The gap between Americans’ perception and reality is the most among any of the 16 countries for which the researchers measured, both for the perceived and the actual pay inequality…

The U.S. CEOs are significantly better paid than those from just about anywhere else, for example; average Fortune 500 CEO makes more than $12 million per year, which is nearly five million dollars more than the amount for top CEOs in Switzerland, where the second highest paid CEOs live, more than twice that for those in Germany, where the third highest paid CEOs live… While a handful of countries might perceive larger ‘pay gaps’ than the U. S., none of the ones surveyed have an actual pay gap anywhere nearly as large. In Switzerland, the country with the second largest CEO-to-worker pay gap, chief executives make 148 times the average worker; in Germany, the country with the third largest gap, CEOs make 147 times the average worker; and in Spain, the country with the fourth largest gap, the ratio is 127 to one…

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In the article Are CEOs Paid Too Much? by Jack L. Lederer writes: The problem isn’t that CEOs are paid too much, it’s that outstanding employees are paid too little. Most top performers earn hardly more than the average, although they work much harder and create greater value: The solution? Implement a broad-based compensation system that defines and rewards outstanding performance… But, the criticisms are familiar: ‘CEO pay is unrelated to company performance’ or ‘No one is worth that much money’… And the most emotional of all: ‘The pay gap between CEOs and average employees is destroying the social fabric’…

But, the facts are just the opposite; most companies are strengthening the ties between CEO pay and company performance. Good chief executives are well worth the money that they earn, given their unique talents, and the enormous value they create… And, the pay differential between the ‘typical’ CEOs and ‘average’ workers is usually much less than what some critics (and politicians) claim… But while most companies do not overpay their CEOs, they do underpay outstanding non-executive workers. These high-achieving workers are lucky to earn even 10% more than the average… The solution is to design reward systems that deliver outstanding pay and other benefits for outstanding worker performance…

In the article Executive Pay Controversy by Anthony Smith writes: The outrage over executive compensation is largely a perception vs. reality issue. The perception is that a $5-10 million compensation package is out of balance because it’s either too large of a multiplier of an average worker’s salary or its greater than shareholders’ perceived rate of return on investment: Or both. This perception was a key factor in passage of a House of Representatives bill requiring public companies to put executive pay packages up for an advisory vote by shareholders. Unfortunately, many of those ‘outraged’ have failed to consider several important points.

  • Consideration #1: The reality is that the free market is alive and well, and is the true dictator of CEO pay. While what one’s peers are making is still a legitimate barometer, critics should look at the macro economics of ‘stars’ in all fields (after all, CEOs are the ‘stars’ of the business world), and not just the micro economics of CEO pay, if they are serious about understanding the calculus in determining compensation…
  • Consideration #2: Few people can– perform music like Bono, write books like Harry Potter‘s J.K. Rowling, play golf like Tiger Woods… They all have unique talents that the free market has decided are worth millions of dollars each year, even though Woods doesn’t win every ‘major’ and every album of U2’s is not double platinum… Likewise, only a handful of people are capable of leading major multinational corporations with 100,000+ employees and $50+ billion in annual revenue…
  • Consideration #3: These unique people create more than just entertainment value; they create thousands of jobs, deliver a lifetime of wealth for legions of investors, drive life-changing innovation… IBM’s Lou Gerstner saved a U.S. institution; Herb Kelleher at Southwest Airlines defied industry logic by consistently delivering profits, in the toughest of times; Many people became wealthy investing in GE; and yes, Jack Welch did have something to do with it…
  • Consideration #4: Unlike an artist with a distinctive talent, a CEO’s craft and contribution is highly subjective, you need to find an objective means, in this highly subjective universe, of separating a CEO’s overall performance from the number attached to his or her compensation… Historically, compensation was negotiated based on potential and probability of success, but company’s must now move closer to a ‘merit-based pay for performance’ model that will indeed drive greater differentiation…

Forward-thinking companies must negotiate a new contract with their workers, one that fits the demands of the next century… According to Jack L. Lederer; the workers’ agreements for the 21st century must accomplish three critical objectives: First, it must lure highly talented, self-confident, team-oriented employees who are comfortable with risk… Second, it must reinforce a culture of performance by delivering significant rewards to those workers who make outstanding contributions… Third, it must inspire team-oriented behavior, and treating workers more like business partners…

According to Peter Drucker; excessively high multiples undermine teamwork and promote a winner-takes-all attitude, and that is poison to a company’s long-term health… I’m not talking about the bitter feelings of the workers on the plant floor– they are already convinced that their bosses are crooks anyway– it’s the people in middle management who become ‘incredibly disillusioned’ by runaway CEO compensation: It’s morally unforgivable…

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According to Weinberg and Davide Dukcevich; this is a free market capitalist system which tends to produce the best possible outcome for the greatest number of people, and nowhere is that more true than in the labor markets… and, nowhere is that principle more generally ignored… Many well-intentioned people love to muck with the seamless operation of supply and demand, and especially the labor markets; they interfere with– hiring, firing, mandate everything from vacation time to minimum wages… But are workers any better off for all this well-intentioned meddling? When, in fact, most companies are concerned about the well-being of workers, about fairness, about social responsibility… it’s just good business… However, without begrudging the compensation being offered to executives; wage systems, in general, both for CEO and worker, must be better connected to current market and social realities…

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