Challenge of Cross-Channel Marketing: Few Marketers Understand It, Yet It’s Essential for Driving Sales Growth…

Cross-Channel Marketing Strategy: Large numbers of marketers (78%) believe that cross-channel marketing is either important or very important for driving sales growth in their business, according to a study; increases efficiency and improves marketing campaign return on investment and customer relationships. And yet, it’s surprising how unprepared most marketers are to actually implement a cross-channel marketing program…

Cross-channel and multi-channel are often used interchangeably but there is a difference: multi-channel marketing refers to sending out the same message to your audience using a variety of different channels (e.g., email marketing, direct mail, mobile…). The channels in multi-channel marketing work independently and are generally not coordinated; more of a silo approach. Whereas, cross-channel marketing still uses multiple marketing channels but it’s much more coordinated, orchestrated, personalized approach: One message reinforces the next message and leverages the benefits of the specific channel by driving audiences to action, as opposed to just repeating the same message. It’s much more tightly integrated and looks at the interactions holistically– not only how customer is receiving the communication but also how they’re responding to it; which it takes into consideration before sending out the next communication…

According to Forrester: In a nutshell, cross-channel marketing is about making all media channels work together to drive better results and provide a better experience for today’s customer. For customers, a better experience means– meaningful outreach by brands based on customer’s demographic; where they want to connect, where they are, and what they care about… For marketers, better results mean– increased sales…

cross cross_media_500In the article Study Reveals Marketers Continue to Struggle with Cross-Channel by Campbell Phillips writes: According to new research only 14% of marketers understand cross-channel marketing… but despite that 42% are intending to increase their technology investments in this area over the next 12 months… Cross-channel marketing is often heralded as the future for brand and product managers, enabling organizations to adapt and tailor campaigns in real-time to changing customers behaviors in any platform. As such, marketing becomes more tailored, personalized for each customer and therefore more effective…

According to Glasner; the customer’s path to purchase is becoming increasingly complex, making it more difficult for brands to cut through the noise… to be successful in this environment, marketers must have access to real-time data, interpret it and than respond quickly, confidently and appropriately. However, research indicates 91% of marketers are unable to maximize the insights from their data in order to accurately affect marketing strategy. Further insights from the research:

  • 57 % of marketers say they have no clear strategy when it comes to cross-channel marketing.
  • 42% say there’s a lack of knowledge among their team on what cross-channel marketing is or how to analyze relevant data.
  • 38% admit that a lack in their budget is restricting their ability to perform.

In the article Paradigm of Cross-Channel Marketing by Aniruddha  Bhattacharya, Laukik Desai write: Multi-channel marketing operates channels in silos. Cross-channel marketing, on the other hand, leverages the benefits of a channel then hedges drawbacks by use of alternate channels… The main purpose of cross-channel marketing is to coordinate efforts across channels and to drive a consistent message for marketing campaigns.

Cross-channel marketing uses different channels; as a function of time, targets, or message it carries… and it ensures an enhanced ROI by optimizing channel usage and higher interaction among the channels at regular intervals. The decision to pursue a cross-channel marketing strategy is an outcome of various factors, primarily; market forces, product maturity, customers profile… and these elements drive marketers to choose this approach…

However, it’s the optimum value creation opportunities that cross-channel execution offers– versus the multi-channel approach– that propels the decision for its use more than any other factor. Instead of looking at marketing as only providing message to customers, one must look at it as providing customer experience. Also, marketers should have a storyboard of customer experiences across all possible touch points.

Before finalizing strategy, all options must be considered by reorganizing the frames of the storyboard to ensure that all the interactions present a uniform marketing experience to the customer, and drives home a unified message. With lines between channels fading, marketers should not invest in overlapping channels without a clear-cut strategy.

Measuring and analyzing customers’ path through the marketing experience helps in leveraging different contact points, and structuring measurement metrics. It also puts the product in a context that is familiar to the customer. For a cross-channel marketing strategy, it’s imperative to have response attribution systems that can give insights into the effectiveness of a channel.

Hence, for a successful cross-channel marketing strategy rollout it’s imperative that the organization align three pillars of its organization with the cross-channel strategy:  process, technology, people…

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In the article Cross-Channel Campaign Management Trends by Suresh Vittal writes: We surveyed over 150 marketers and customer intelligence professionals on their use of cross- channel campaign management solutions. While some of the findings were not a surprise, the study revealed many interesting data points that are worth revisiting. Some of the key trends the study revealed were:

  • Marketers focus on longer term relationships– over 40% have stayed with the same provider for more than 3 years.
  • Marketers focus on just a few key channels like email (84%), direct mail (66%), and web site (55%).
  • Integration capabilities and costs are the key selected drivers when it comes to cross-channel campaign management solutions.
  • Despite the renewed focus on retention; few marketers can claim to be skilled at managing customer churn.
  • While the majority of the respondents were not net-promoters, few were actually inclined to switch providers.
  • Marketer satisfaction and dissatisfaction is hard to pin down. Marketers were all over the map on their thoughts about their solutions. Broadly, the highest levels of dissatisfaction were with contact optimization, online/offline integration as well as inbound/outbound integration.

Never have marketers been more challenged to find the right mix of messaging and media. Customers have only short bursts of time throughout the day and with limited attention spans they can easily ignore marketing messages. Also, they put more trust in their online communities than in marketing messages and many customers are willing to pay more for a product or service, if the purchasing process is more convenient…

These and other changes in customer behavior warrant the need for an integrated cross-channel marketing strategy. Marketers must touch the customer at multiple points throughout the day with different media-channels to extend reach and build frequency. These touch points must include a strategic mix of email, social, search, online display, direct mail, mobile, content marketing, and traditional media…

Most critical in cross-channel marketing are two fundamentals: Consistency and Metrics. Consistency in a cross-channel marketing strategy means not only carrying the brand image and vision throughout the messaging but using each channel to reinforce each promotion or seasonal marketing initiative. Use each channel as an opportunity to move the customer further into the buying funnel… Metrics is where the real magic happens. With an integrated cross-channel marketing strategy that includes all digital marketing elements–  you can better track customer behavior over time and improve your messaging, timing, and channel integration. It’s also a really good way to show return of investment (ROI)…

The first step is to set measurable goals for each cross-channel campaign; identifying the key performance indicators (KPIs) that are most important to the success of your business, e.g., awareness, leads, new customers, transaction counts, revenue… Then, set up your campaign strategy to measure these KPI’s at each stage in the consumer’s interaction with your messaging…

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Traditionally, connecting with customers was executed through single-channels like email, mobile, catalogue, web… Then you moved into multi-channel marketing because for improved communication by producing targeted strands of campaigns that suited the individual circumstance. But how do you execute effective and consistent campaigns across all channels?

Enter cross-channel marketing: As you move towards integrating your marketing teams, you must ensure that your customers receive consistent messaging. Make sure that your entire team is on board with same information and not just offering customers information on products they’ve already refused: 84% of customers walk away from a company that don’t link up or understand or responsive to their engagement across channels; the best approach as a brand is to cover as many touch points as possible across all your channels…

Effective cross-channel marketing techniques allows you to have a complete understanding of your customers– their intentions, purchasing habits, social community engagements and web visits…

According to Ron Person; building a cross-channel marketing organization requires three processes: 1. Create a cross-channel marketing strategy: Build the brand. Be cost-effective. Strive for customer intimacy. Be a leading edge innovator. Focus on the niche. 2. Integrate cross-channel activity: Having a single point of integration brings all your marketing results together in one location. Make the results from email, marketing automation, social campaigns, webinars… culminate in a sale…

3. Measure a common cross-channel metric (i.e., engagement value): Metrics are critical; for example, measuring how engaged customers are no matter which channel they use… and by tracking the accumulation of engagement value– for each marketing channel, each campaign, or each asset, you can easily identify the marketing approach that adds the most value.

When you know the value attributed to each channel, you know which one produces the greatest return to the business. When you know the value attributed to each campaign, you know which campaigns, no matter the type, that produced the greatest results… When marketers are able to pull together these data points and access a more unified view of the customer experience, over time, then they can begin to see the true lifetime value of each marketing channel and optimize the experiences that work…

Cross-channel marketing is not simply new technology; it’s a new approach to marketing that requires newer and smarter technology. Customers are already expecting to communicate with a brand on their terms; they are– always-on and channel agnostic. If marketers wants to connect with customers, then customers demand relevance and meaning based on not just where they are, but who they are and what they like.

The transformation of customer behavior is result of widespread adoption of mobile, social, web technologies integrated into their everyday lives. As result, conventional marketing strategies are disrupted; simply adding channels to the strategy is not enough– marketers must think about how these channels can work together to drive more value and better information…

 

Infographics Big Data Visualization: Show Complex Information Quickly, Clearly… The Power of Visual Storytelling…

Infographics: It’s the age of Big Data; we must embrace and understand the meaning of large amounts of information and be able to easily share the story it tells: It enables management to make smarter decisions and improve business.

Infographics, or information graphics, are compact and creative graphical depictions of data and information, such that it engages and quickly conveys useful information and knowledge to viewers.

These visual representation of data typically involves analyzes of large data sets, and seeks to uncover important trends that show data meta patterns or makes single data points easily visible and extractable. The visual display of data is the most interesting and universal method to make complex information accessible to wide audiences.

According to Ross Crooks; infographics design is inherently about innovation and imagination to provide clarity, it present complex information quickly, clearly… Information graphics is an umbrella term for illustrations, charts… the images are designed to instruct people about complex information that otherwise would be difficult, if not impossible with only text. Infographics are often applied to business demographics, financial statistics, weather maps, route maps

Infographics are tools and typical designs includes three parts; visual, content, knowledge. Also, there are three basic design provisions for effective communication, including; appeal, comprehension, retention: Appeal means the viewer-audience must be engaged-attracted by the information; Comprehension means the viewer-audience must easily understand the information; Retention means the viewer-audience must retain-remember the information presented by the infographic.

The order of importance of these provisions depends on purpose of the infographic… While visualizations can be effective alone, many infographics combine multiple representation types into one infographic– along with other features, e.g., illustrations, text…

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In the article What is Infographics? by visual.ly writes: A lot of phrases get thrown around in the world of information graphics, such as; infographics, data visualization… When we use the term data visualization, we’re using it as a general term used to describe data presented in a visual way. To us, infographics are different because information graphics have flow to them: They’re data visualizations that present complex information quickly and clearly.

Think of statistics, charts, diagrams… used by marketeers, business planners… Wherever you have complex data presented in visual shorthand you’ve got infographics, and that’s important– it changes how people find and experience stories; especially now, when it’s being used to augment editorial content on the web. Infographics create a new way of seeing the world of data and helps communicate complex ideas in a clear and beautiful way…

Data visualization deals with an enormous amount of data with the goal of discovering key new patterns… Since, huge amounts of data (big data) are very difficult to sort through; infographics make information presentable-digestible to general audiences. An easy-to-read illustration helps tell a story and makes data points easier to understand; it doesn’t hurt when infographics are not only clear and straight forward but also beautiful and engaging. The aesthetic design draws viewer in; the information helps the viewer analyze and understand the data being presented. So taking into account all caveats that make up an infographic, here are the overlapping elements:

  • Visualizations: Present complex information quickly and clearly.
  • Visualizations: Integrate words and graphics to reveal information, patterns, trends…
  • Visualizations: Easier to understand than words alone.
  • Visualizations: Beautiful and engaging.

In the article Do And Don’t Of Infographic Design: Revisited by Nathan Yau writes: Remember that design isn’t just about making things pretty. It’s about making things work, and in the case of infographics, that means representing data accurately and clearly. It means letting the data speak and not putting extraneous icons all over the place to obscure what’s important– think about what you’re showing and what you really want to focus on. Once you’ve got that covered, you can bring in design elements that can evoke an emotion or portray an important image.

Bottom line: when it comes to information graphics, it should always be data and information first, and then you design around that. For that to happen, you have to learn more about data– how to work with it, where it comes from, and what it represents in the real world. 

Data can be beautiful when you realize the latter and when you do you won’t have to work so hard to catch the eyes of readers; because the story behind the numbers and spreadsheets will shine through.  Also, you must put in the time and think about the story you want to tell, and show some actual insight. When designing infographics, analyze and understand the data: Don’t sacrifice accuracy, clarity and ultimately an interesting story just to make something look unique…

In the article What Makes an Infographic Cool? by Kim Rees and Dino Citraro write: Infographics are popular, useful and seem to be an established part of our vernacular these days. Infographics are easy to read, quick to digest, and for the most part, can require less work to create than a more in-depth data visualization. If you want to create one then here are a few things to keep in mind:

  • Add Context: One of the most important things infographics can do is add context.
  • Expand Context Through Use of Metaphors: Infographics can (and should) be enhanced through the use of metaphor. By adding metaphor to data we add dimension. Through this abstraction we gain ability to provide complex information in a way that is accessible to a much wider audience than that which might be familiar with the specific subject matter. In addition, metaphors not only provide an easy vehicle for empathy and comprehension, they are also an excellent opportunity to add visual interest.
  • Respect the Data: Data collectors are the historians of our time. The process of collecting it, specifically when it is done by real people, is difficult and tedious, and largely goes unnoticed. When you visualize data, you must respect what you have, and the enormous potential it represents. Even the simplest statistic deserves more than a passing thought, or an effortless grasp at the most obvious visual display that comes to mind.
  • Do More-Tell the Story: When creating an infographic, the data you present must do more as a graphic than if it was presented as a number or single line of text. Adjusting the size of your text, illustrating a word found within the text, or even showing the concept embraced by a cute illustration is not enough. If you believe the data has a story to tell, then you should do your best to tell it.
  • Strive for Elegance and Clarity: A natural tendency is to want to include every data point, assuming that more data will equate to more credibility. This is logical in spirit, but counterproductive in practice. Data design follows the same rules as visual design. Remove anything you can’t justify and isn’t relevant to the message you’re trying to convey. The empty spaces, the things you leave out, can provide clarity– and can also provide an opportunity to evoke questions in the viewer’s mind (that’s a good thing).
  • Use Emotion: The best way to connect with people is to elicit an emotional response. No matter what the subject matter, visualizers need to have empathy for how people will feel when they reflect on the data we’re presenting: Joy, sorrow, curiosity, and other strong emotional reactions likely illustrate that you’ve chosen an important dataset and are presenting it well. In many ways, the ultimate compliment an infographic creator can receive is to know that a viewer of their work is being moved at a level that goes deeper than just an intellectual response.
  • Be Authentic and Sincere: Presenting data points without consideration for what they represent shows a lack of empathy. When visualizing data, it’s essential to understand the role it plays in the larger social conversation. If it has the potential to change a person’s worldview, you need to do whatever you can to make this happen. Imagine you are actually having a conversation with the viewer. Let your design choices begin a dialog.
  • Know the Difference: Data is easy to love. It represents truth and clarity, and can inspire people to grab whatever living thing is nearest to them and insist it listen. It can move a person to join a protest, to shout a slogan, or even inspire someone to make a poster. Even a digital one. When we begin to discern between graphical representations of data and actual visualizations of data, we become better data consumers and better knowledge creators.

Infographics are traditionally viewed as visual elements such as signs, charts, maps, or diagrams that aid comprehension of a given text-based content. According to Anders Ross; often more powerful than words or imagery alone, infographics utilize visual elements of design and words to convey a message in such a way that context, meaning and understanding are transcended to viewers in manners not previously experienced.

However, visual representation of information can be more than just the manner in which we are able to record; they have the potential to become the process by which we can discern new meaning and discover new knowledge… According to Colleen Corkery; never before have pictures, images… been so very important for igniting participation in social media, email, and content marketing campaigns strategies. With that, popularity of infographics has also taken the marketing world by storm… Infographics are chock full of interesting stats, actionable items and a plethora of knowledge all wrapped up in a pretty package that’s ridiculously easy to share– a marketers dream! Here are a few examples:

Example #1

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Example #2

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Example #3

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Example #4

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Example #5

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Example #6

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Mentors, Mentees, Mentoring, Mentorship in Business: Measure Impact, Value, Outcome– The Promise of Mentorship Matters…

Mentors and mentoring relationships can be powerful and life-changing: If you examine successful people they typically have one thing in common: A Mentor. Nearly every successful person in history had someone who they could confide in and learn from when times were tough… They leverage knowledge and experience– guide and focus attention on things that matter, shorten learning curve and speed success…

According to Catherine A. Hansman; perhaps the most acknowledged root of ideas and definitions surrounding the concept of mentors is the well-known story from Greek mythology: The original Mentor is a character in Homer’s epic poem The Odyssey. When Odysseus, King of Ithaca went to fight in the Trojan War, he entrusted the care of his kingdom to Mentor who served as teacher and overseer of Odysseuss’ son, Telemachus.

The concept of Mentor  has continued through the centuries and reflected in the many definitions of mentors and in the expectations of mentoring relationships. Just uttering the word mentor brings to mind images of supportive people in the past or present who have assisted us and continue to sustain us in our professional and personal lives… But, according to Patricia Cross; mentoring is a slippery concept indeed, a search through the mountains of literature and research concerning mentoring reveals differing definitions for the term. For example, Levinson et al. defined a mentor as teacher, advisor, or sponsor, leaving the term open to personal or professional connotation…

Others choose to define mentors as helping more with professional life describing mentors– as people with advanced experiences and knowledge that are willing to provide upward mobility and support to the protégé (i.e., mentees) career development. Others add the idea of nurturing to their definition of a mentor, e.g., professional guide who nurtures and promotes the learning and success of his or her mentee…

The differing definitions of mentors reflect various characteristics that seem to define informal and formal mentoring relationships. Informal mentoring are psychosocial mentoring relationships for enhancing mentees’ self-esteem and building confidence through interpersonal dynamics, emotional bonds, mutual common interests, and relationship building. Formal mentoring, in contrast, are generally organized and sponsored by workplaces or professional organizations; a formal process that matches mentors and mentees for the purpose of building careers…

Different techniques may be used by mentors according to the situation and the mindset of the mentee… According to Jim Kouzes and Barry Posner; mentors should look for ‘teachable moments’ in order to expand or realize the potentialities of the people in the organizations they lead, and they underline that personal credibility is an essential for quality mentoring…

However, despite some of the positive benefits that have been linked to mentoring, some research has found that mentoring can have negative consequences, for example; jealousy, over-dependence, and feelings of failure… However, mentoring does matter– especially in the workplace– with the recognizing that such relationships require vigilance to prevent potential abuses…

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In the article Business Mentoring: What It Is Why It Matters by Chris Wallace writes: While it can be challenging to always quantify whether a mentoring relationship is successful (e.g. how do you measure things like increased confidence?) some studies and statistics do exist and are encouraging. Many in the mentoring field often point to a study conducted in 2006: The study compared the career progress of 1000 employees over a 5-year period and the results showed that those who participated in a mentoring program experienced many more benefits than those who did not.

An article in Forbes that talks about the study noted; both mentors and mentees were approximately 20% more likely to get a raise than people who did not participate in the mentoring program and 25% of mentees and 28% of mentors received a raise versus only 5% of managers who were not mentors.

Mentoring can also help reduce employee turnover, as an article in the Harvard Business Review noted: One of the most critical elements in retaining great people is effective mentoring. By investing in mentoring, you empower senior-level employees (who serve as mentors) and bolster junior-level employees who typically welcome (and thrive from) the increased guidance, support, and insight that mentoring provides.

The keys to a successful mentoring program include; oversight, training and guidance, and embracing of a mentoring spirit throughout the organization. A company that invests in its people often ends up having happier, more loyal and more productive employees as a result, which can only help a company’s bottom line…

Various mentoring models exist. Formal one-to-one programs match a mentor and mentee, while group mentoring involves having one mentor for a small group of mentees. Self-directed mentoring is an informal mentoring model where a gung-ho mentee who understands the benefits of mentoring goes out and finds a mentor on his or her own (either within or outside of the company). As business landscape changes, other mentoring models form to adapt to these changes.

Reverse mentoring is one such model that’s growing in popularity, especially with millennial… An article in The Wall Street Journal noted; in an effort to school senior executives in technology, social media and the latest workplace trends, many businesses are pairing upper management with younger employees in a practice known as reverse mentoring…

In the article Business Mentoring by Mike Morrison writes: According to a Chartered Institute of Personnel and Development (CIPD) Survey; 87% of businesses in the UK utilize mentoring; mentoring in a business sense is a vehicle for self-development. Having a formal relationship with a respected senior within an industry or organization is valuable to both the mentee and mentor; it’s an effective people development strategy and one that can support succession plans…

Mentoring is in essence the sharing of experience and learning from one person to another… It’s interesting to observe that often in education, mentoring is used for those that are under performing whilst in business, mentoring is used for those with potential– the high fliers in organizations and support of people starting their own business.

There are in essence two basic approaches to mentoring and they can be portrayed as– American and European methods or sponsoring (informal) and developmental (formal), respectively. In the informal process, it tends to occur naturally and involves individual choice like sponsoring… Whereas, the formal is structured with a formal facilitated process that can be managed and monitored…

The informal approach is more associated with the roots of mentoring, and emphasizes the need of a more senior experienced and wiser person, the mentor, to pass down their skills, knowledge and experience to a younger individual appropriately named as a protégé rather than a mentee.

The relationship between mentor and mentee is naturally developed often by choice of how and whom the mentor wishes to take under their wing. The pace of the relationship is controlled by the mentor and consists of a more authoritarian and influential approach…

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In the article Mentors Make a Business Better by Emily Keller writes: It’s never too late to have a mentor. If there’s an area in your career or personal life you want to improve, don’t think it’s too late. For workers who are seeking to change direction in their industry, climb to the next level or adjust to a merger or structural change at their company, management experts say finding a mentor could be their best transitional tool.

Successful mentorship can be in any number of forms: online or in-person, formal or informal, temporary or long-term, or between individuals or in groups: What experts say are the essentials– direction, dedication, and openness… To be sure that your time as a mentee is fruitful, experts recommend setting specific goals at the outset and revisiting them along the way, as well as looking for a mentor who has traveled the career path you seek and has the skills you need, instead of seeking out a mentor whom you like for personal reasons.

According to Lois Zachary; people put too much weight on personal chemistry-likeability, but they are not a prerequisite for learning. So what makes a good mentor? Ask the right questions are the key but receiving all the answers is not always expected. Your mentors shouldn’t tell you what your goals are; they should just ask you what your goals are… The benefits are far-reaching: In addition to improving managerial skills, company mentorship programs may also aid in recruitment: More and more people are attracted to organizations that help them grow and learn…

For the whole purpose of talent attraction and talent retention today, mentoring is a vital part… Yet mentors and mentees must be dedicated to skill-building for the relationships to work. Mentees should avoid seeking relationships for political or nebulous reasons, like trying to get a promotion and mentors should avoid making promises they can’t keep...

Research confirms what we already know– anecdotally or intuitively– mentoring works… To be successful in life it’s very important to have a mentor, a coach, someone with more experience than you, someone who is in a position in life that you desire to be in future. Most people underestimate the value of a mentor: A mentor offers valuable insight to things that only experience can teach… A good mentor will motivate you with a simple statement that affirms that you are on the right track, even when things do not seem to be going well… A mentor will help you prevent mistakes that you otherwise would have no way of avoiding… There are only two ways to gain wisdom in life; making your own mistakes or learning from others mistakes

According to Elizabeth Alleman and Diana Clarke; the first step in developing a business mentoring program is to answer three questions: 1) What business issues are you trying to address (e.g., turnover, recruitment cost, productivity or some other problem)? 2) Why is addressing this issue important? Companies address issues that have a financial impact or affect the quality of the products and/or services.

3) How will the organization be different as a result of the program? When business issues involving the effectiveness of employees have been identified, the next two questions arise: 4) Who do you want to change or develop? (i.e., who will be the mentee? and 5) How will those people be different? Answering these questions establishes program objectives. These objectives must be specific, measurable, and realistic and they must have an appropriate time frame…

While the intangibles benefits of such programs are often the most important outcomes; it’s also very desirable, if possible, to simply convert one of the intangibles into a significant tangible benefit; e.g., personal productivity into a monetary value which shows an ROI for the program.

This type of quantifiable result allows the proponents of the program to speak in the language of business and possibly influence upper management on the value of the program… We live in constantly changing world and mentoring programs are increasingly important in the workplace; but perhaps its greatest benefit is as a way to offer some kind of security in insecure times…

Pension Gap– Silent Crisis in Public-Private Pension Funding– Dodging the Disaster: Reform Critically Needed or Overstated…

Pension funds of the largest companies in the S&P 500 collectively reported that their pension plans had obligations of $1.68 trillion and assets of just $1.32 trillion; the difference of $355 billion was the largest ever…

Pension plans are a type of retirement plan, usually tax exempt, wherein an employer makes contributions toward a pool of funds set aside for an employee’s future benefit. The pool of funds is then invested on their employee’s behalf, allowing the employee to receive benefits upon retirement or no longer active in the workforce.

Very few topics generate as much interest among both policy makers and general public as discussions on financial viability of pension plan funding and retirement infrastructure. It’s a silent economic crisis lurking and growing on the balance sheets of the 89,000 state and local governments in the U.S. For decades, states, municipalities and towns have been under-funding their pension liabilities, resulting in a gap between the promises made to future retirees and the funds put aside to meet those promises, which some analysts estimate could total about $4 trillion: That’s 27% of GDP.

Closing that large gap could have a severe impact on the U.S. economy… In June 2012, the Government Accounting Standards Board (GASB) approved new standards for public employee pension accounting: Rules that seek to increase transparency and bring public-sector accounting standards more in line with those used in private sector. The regulations don’t impact the amount that should be set aside for pension funds, but they alter the way pension obligations are recognized-disclosed.

According to Matthew Tuininga; pension reform is necessary but it’s more than just cutting benefits and ensuring that politicians and union leaders stop collusive scams; it’s about enabling pension funds to invest in safer investments and stop paying huge fees to hedge fund managers and investment banks… Pension funds should not be aggressively invested and retirement funds should be conservatively managed, which means that enough has to be paid into those funds so that with moderate investment results– retirees can be sure that their promised benefits will in fact be paid...

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In the article Private Pension Plans May Be Under-Funded by Floyd Norris writes: The pension funds of the largest companies in the S&P 500 collectively reported that their pension plans had obligations of $1.68 trillion and assets of just $1.32 trillion. According to S&P; the difference of $355 billion was the largest ever. Of the 500 companies, 338 have defined-benefit pension plans, and only 18 are fully funded. Seven companies reported that their plans were under-funded by more than $10 billion…

The main cause of the under-funding at many companies seems to reflect the fact that investment markets have not performed well for a sustained period, rather than a failure to make contributions to the plans. Over the last 15 years, the S&P 500 rose at an annual rate of less than 5% even with dividends reinvested… Virtually all pension funds had assumed returns would be better, leaving them under-funded when their investments failed to perform as expected.

Seven years ago, S&P said, stocks made up 65% of pension-fund assets and bonds made up 29%, with the remaining assets in real estate and other investments, like private equity funds; by last year, stocks were down to 48% and bonds up to 41%. The stock market’s erratic performance has convinced some companies that they no longer want to take the risk of guaranteeing pension payments. Also, many have closed their pension plans to newer employees and stopped accruing benefits for workers already in them. Instead, they have pushed employees into defined-contribution plans in which the worker, not the employer, bears the risk of poor investment performance.

Determining whether pension funds have adequate funding is to some extent, a work of art; for example, companies will estimate their future obligation and then discount that number based on how long it will be until the funds must be paid– plus estimate the interest rate at which the pension investments might grow. The discount rate used can have a significant effect. For example, if a company estimated it would owe $1 million in 10 years and used an 8% discount rate, the current obligation would be $434,000. If it chose a 3% rate instead, the current obligation would be $737,000…

Congress voted this year to allow funds to discount their obligations using a 15-year average of bond yields, meaning they can use a higher rate and so report lower obligations. Thus, next year, pension funds will appear to be better funded, even if they are not. Some companies announced that they would slash their pension contributions as a result of the new law…

In the article Pension Funding Status Improves First Half of 2013 by ValueWalkStaff writes: According to a report from Martin Bernstein of Citigroup; in the first half of 2013 the value of pension liabilities has declined while pension assets have mostly increased in value– meaning that pension funding has mostly improved; although pensions still have a lot of problems…

In order to estimate changes in pension funded status, in aggregate and individually for specific plans, we looked at published asset allocations and liabilities of the largest corporate defined-benefit pension plans. Our database includes almost 500 plans accounting for over $1,750 billion in asset value, as of beginning of the year.

We sourced pension data from published corporate 10-Ks in which plan sponsors disclose the value and gross allocation of pension assets, as well as the value of plan liabilities (PBO). Our analysis shows that pension funding first half-year 2013 is as follows:

  • Estimated that the funded status for U.S. corporate defined-benefit pension plans improved from 77% to 88% over the first six months of the year.
  • Funding gap fell by more than half, from -$540 billion to -$258 billion.
  • Most of the improvement in funded status resulted from declining liability values, as liability returns were approximately -8.4%, outstripping returns on most assets.
  • Percentage of pension funding of assets in fully funded plans has likely increased from 5% to 16%, and approximately 40% of pension assets are now held in plans that are at least 90% funded.

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In the article Solving the Public Pension Plan Funding Crisis by Hazel Bradford writes: Severely under-funded public defined-benefit plans will have to try a bit of many things to shrink liabilities– from benefit cuts to contribution hikes to accelerated payments– as well as, paying more attention to costs overall. According to Pensions & Investments‘ analysis of funds’ annual report data; the average funding ratio of the 100 largest public pension plans dipped slightly in fiscal year 2011 to 73.64% with unfunded liabilities increasing 4.1% from the previous year. 

One positive note, however, comes from Wilshire Associates’ annual measurement of 102 systems’ 2011 actuarial data that showed pension assets growing faster at 16.4% than liabilities which grew at 3.3%. Wilshire attributed the latest asset growth to strong global equity performance, along with more moves into other non-traditional assets.

According to Steven J. Foresti; there has definitely been, over time, a move into a larger number of asset classes and more diversification into global… it would take some really attractive returns short-term to invest your way out and one of those routes requires taking more risks. But he and other public plan experts caution that investing is not the solution to plan under-funding especially for the many plans that are still writing down investment losses that occurred in the recession. According Meredith Williams; there are pretty exotic models using various scenarios as public plans are starting to think about risk management…

In the article Pension Plans’ Funded Status Declines Worldwide by Stephen Miller writes: The funded status of defined-benefit pension plans in U.S., Canada, and major European economies broadly declined in the first nine months of 2012 (January through the end of September), while improvements were seen in UK, according to data released by Mercer, HR consultancy. Funded status is defined as the percentage of assets vs. liabilities in the plan; and the factors driving down funded status are primarily declining discount rates combined with lackluster asset performance. Discount rates are based on the yields on high-quality corporate bonds denominated in the currency of the liabilities. Multinational companies are exposed to movement in discount rates (due to changes in corporate bond yields) across multiple markets…

According to David Newman; multinationals will likely be faced with significant increases in expense due to changes in discount rates not only in the U.S., but overseas… the projected impact of the decline in funded status in these plans will have a significant impact on 2013 earnings… multinational organizations need to be mindful of the regulatory nuances in each market, and the fact that markets are not perfectly correlated, so monitoring needs to take place at a local level. For multinationals operating defined-benefit pensions across multiple geographies, it’s common for funding levels to move in different directions in some markets over the same month.

According to Frank Oldham; it’s crucial, therefore, that multinationals monitor their cross-country exposure and react quickly to capitalize on local opportunities… While the situation for each multinational depends on how their pension risk is distributed across markets and across asset classes, strategies to control the impact of market fluctuations on pension earnings are essentially same across all markets. These include liability-driven investing and risk transfer strategies, including lump-sum cash-outs and annuitization, which transfers pension risk to private insurers…

The pensions’ crisis is the predicted difficulty in paying for corporate, state, and federal pensions due to a difference between pension obligations and the resources set aside to fund them. Shifting demographics are causing a lower ratio of workers per retiree; contributing factors include retirees living longer (increasing the relative number of retirees) and lower birth rates (decreasing the relative number of workers…).

There is significant debate regarding the magnitude and importance of the problem, as well as the solutions. Proposed pensions reform ideas are in three primary categories: a) Addressing the worker-retiree ratio via raising the retirement age, employment policy and immigration policy; b) Reducing obligations via shifting from defined-benefit to defined-contribution pension types and reducing future payment amounts (by, for example, adjusting the formula that determines the level of benefits); and c) Increasing resources to fund pensions via increasing contribution rates and raising taxes…

Others argue that the pension crisis is overstated, and for many regions there is no crisis because the total dependency ratio– composed of aged and youth– is simply returning to long-term norms but with more aged and fewer youth. However, looking only at aged dependency ratio is only one half of the coin– the dependency ratio is not increasing significantly but rather its composition is changing… Another area of contention relates to the expected investment return rate: If this rate (i.e., percentage) is increased than relatively lower contributions are demanded of those paying into the system…

Critics have argued that investment return percentage rate assumptions are artificially inflated to reduce the required contribution amounts by individuals and governments paying into the pension system… So the debate goes on– there are some fundamental-debatable differences between economists, policy-makers and pension practitioners– but effective pension reform is essential…

Frontier Markets– Moving Beyond Emerging, BRICs, Developed Countries: Unpredictable, Volatile, Risky, Irresistible

Frontier markets are underdeveloped emerging markets in nations with economies lagging behind the industrialized world, but showing potential for future development… Countries around the world are broadly classified into various categories based on their economic development. These categorizations are based on a number of criteria ranging from per capita income to life expectancy and literacy rates…

According to Justin Kuepper; there are many different measures of development used by a wide variety of institutions. For instance, the United Nations has few conventions for distinguishing between developed and developing countries, while the World Bank makes specific distinctions using gross national income (GNI) per capita, though other analytical tools may also be used.

In general, the International Monetary Fund’s (IMF) definition may be the most complete, taking into account per capita income, export diversification, and the degree of integration into the global financial system. In 2011, the IMF published a research report on the topic of classification called Classification of Countries Based on Their Level of Development... As a hard example, the World Bank considers countries with per capita income of less than US$12,275 as developing countries…

Different organizations use different measures to determine how countries are classified, but there are a few common denominators in the mix. For example, the so-called BRICs are generally considered developing countries and include; Brazil, Russia, India, China, and South Africa, but other commonly considered developing countries go far beyond the BRICs: Some of these countries are: Argentina, Chile, Malaysia, Mexico, Pakistan, Philippines, South Africa, Thailand, Turkey, Ukraine. Frontier markets are considered a type of emerging market but are considered less prominent or important than BRICs markets…

The concept of frontier markets was developed by the International Finance Corporation (IFC) in the 1990s to describe a specific subset within the larger group of emerging markets. Emerging markets in general are economies in the process of developing rapidly and showing explosive potential for growth…

Within the emerging markets around the world, small markets with poor liquidity and low market capitalization are considered frontier markets… The implication of a country being labeled as frontier is that, over time, the market will become more liquid and exhibit similar risk-return characteristics as the larger, more liquid developed emerging markets…

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Emerging and Growth-Leading Economies (EAGLE) is a grouping of key emerging markets that include: Brazil, China, Egypt, India, Indonesia, South Korea, Mexico, Russia, Taiwan, Turkey. The EAGLE economies are expected to lead global growth in the next 10 years, and to provide important opportunities for business. EAGLE is a grouping acronym created in 2010 by BBVA Research to identify all emerging economies, whose expected contribution to world economic growth in the next ten years is expected to be larger than the average of the G6 economies (i.e., France, West Germany, Italy, Japan, UK, Canada).

This is a dynamic concept where country members can change, over time, according to their forecasted performance relative to developed economies. Over the years there have been several attempts to try to implement the economic concept that will best reflect the potential of emerging markets in the coming years. After BRIC concept was coined by Goldman Sachs in 2001, there were other endeavors to find the best grouping acronym such as: CIVETS, Next Eleven, 7% Club, EAGLE…

In addition, as part of the EAGLE proposal, they identified the EAGLE’s Nest as a second set of countries with expected incremental GDP in the next decade to be lower than the average of the G6 economies but higher than the G6 minimum… The membership of the EAGLE’s Nest is subject to a yearly revision and can change according to forecasted economic performances, currently the EAGLE’s Nest countries includes: Argentina, Bangladesh, Chile, Colombia, Egypt, Malaysia, Nigeria, Pakistan, Peru, Philippines, Poland, South Africa, Thailand, Ukraine, Vietnam…frontier spring09_frontiermarkets_figure1

In the article Frontier Emerging Markets by Ed Marsh writes: Basing future business expectations on past success is indeed a very risky proposition, particularly as market conditions change quickly and the economic center of mass shifts from developed markets to emerging markets… Perhaps a dose of emerging markets, carefully selected and strategically engaged with risks mitigated really should be part of your business plan… And, before you say– sure, but we must stay focused– here’s a point to ponder: On what are you focused? Strategic growth or simply myopic execution of the domestic strategy that you have convinced yourself that it’s been masterfully crafted…The point is; do it right–don’t just do it…

In 2011 a growing number of business people tried to distinguish between the old emerging markets and new emerging markets, and asked themselves; which are the real emerging markets? Where they the old ones, the group that Goldman Sachs dubbed the BRICs, but they are  now suffering from the law of diminishing returns… So then why not look elsewhere, such as; new emerging markets? These come in two varieties: overlooked countries that can rival the BRICs in terms of prosperity, as well as, the frontier countries that are only just beginning to emerge from their chrysalis.

Frontier markets are by their very nature unpredictable… but they present numerous things that are irresistible to the West’s growth-starved companies, for example; they offer huge opportunities for investment in infrastructure… Africa contains a disproportionate share of the world’s mineral wealth at a time when mineral prices are soaring…

True, the growth is volatile, but an increasing number of companies, looking at the West’s flat markets, will decide if that volatility is at least a sign of life. Above all, the overlooked and frontier markets offer businesses a chance to get in on the ground floor.

Companies that move first will enjoy lots of advantages: They will be able to forge deals with aggressive young companies, strike infrastructure deals with local governments, and  shape the tastes of future consumers… Companies that succeed in these neglected emerging markets are not only putting down roots in the world’s most fertile soil. They are giving themselves a chance to establish business habits for years to come…

In the article The Frontier Beyond BRIC by Richard Rittorno writes: The Report Global Growth Generators: Moving Beyond Emerging Markets and BRIC by Willem Buiter and Ebrahim Rahbari begins with the statement: We expect strong growth in the world economy until 2050. Now when I read this statement– I couldn’t stop scratching my head. It’s so difficult for economists to guess what is going to happen next year in U.S., let alone in 2050 in undeveloped markets…

The report predicts frontier markets growth to average 4.6% annually for the next 17 years, then drop to 3.8% for following 20 years afterwards in an explosion of the developing economy. The report goes on to say eleven economies are currently set to see the strongest of the growth rates. Five of the countries named are classified as emerging markets by the research firm MSCI: China, Egypt, India, Indonesia, and Philippines.

The other six countries are found on the MSCI list for frontier markets: Bangladesh, Iraq, Mongolia, Nigeria, Sri Lanka, and Vietnam. All six of these countries are politically unstable with mismanaged economic policies causing widespread poverty; not to mention that most are considered hotspots with little to no education systems established. However, the authors of the report see something in these countries in the long-term.

My initial reaction is if one or two of these countries truly take their places on the world stage, it would put more pressure on natural resources already running in high global demand with limited quantities, such as; crude oil, fresh water… Granted, frontier countries may only have room to move upwards, but caution is strongly advised. History has taught us that emerging markets may have a lot of room to improve, but they do not always match expectations or the same in return on investment (ROI)…

The term frontier markets may be ubiquitous, but its criteria are not very well-defined. As a result, there are many different lists of frontier markets that are put together by various organizations. The most common lists used by investors are those assembled by the FTSE, MSCI, and S&P, which vary in number from 25 countries to more than 30 countries.

The common countries between these lists in 2010 included: Argentina, Bahrain, Bangladesh, Bulgaria, Croatia, Estonia, Jordan, Kenya, Lithuania, Mauritius, Nigeria, Oman, Qatar, Romania, Slovenia, Sri Lanka, Tunisia, and Vietnam. However, it’s important to note that the list of these countries is subject to regular change as economic and political climates change.

Frontier markets are rarely stable, and the very notions of frontier– appeals to  much of the inherent human desires to– push ahead, explore and discover new things. In human history, important discoveries  are mostly about physical boundaries– conquered by explorers, or knowledge boundaries– overcome by scientists; so it’s the same with expansion in business markets…

Frontier markets are constantly in a state of flux; such that, as little-known opportunities in countries, technologies, industries are uncovered they evolve into established business markets and assets with measurable properties. In these cases; the risk, return and correlated properties are central to the management of business investment…

Frontier markets are dynamic: As countries grow and mature they evolve along different paths, and they either, move-up (or -down) the risk-return market development categories; while other newer countries emerge to take their place at the frontier market level…

The phenomenon of globalization has resulted in a broad-deep pool of business opportunities, and the increased importance of these countries as measured by a number of macro-economic indicators necessitates their consideration as important additions for serious business considerations and market investments…

Grow the Business thru Charitable Giving–Rethink Business of Charities: Companies and Charities Forging New Partnerships…

Charities and giving– charitable giving– is a big business. Every year charitable and non-profit organizations solicit companies in the hope of obtaining much-needed funding to accomplish their missions that help the less fortunate. Many businesses are willing to give, but are often confused as to which charities might be best for them.

According to Michele Cuthbert; a successful match can lead to a fulfilling partnership and helping others, while a mismatch may lead to disaster. Businesses can build stronger relationships with their communities through their charitable endeavors that help less fortunate while helping themselves to more growth and bigger profits. Giving to charities is a way to both brand your business and assist those in need. It helps to create respect for your business as a company that is doing good in society and so encourage more people to purchase your products and services by making them feel that they are doing something for charity by supporting your business…

The legal definition of charitable organization (and charities) varies according to the country, and in some instances the region of the country in which the charitable organization operates; the regulation, tax treatment, and the way in which local laws affects charitable organizations also varies. For example, in U.S. a charitable organization is an organization that is organized and operated for purposes that are beneficial to the public interest, however, distinctions are made between different types of charity organizations:

Every U.S. and foreign charity that qualifies as tax-exempt under Section 501(c)(3) of the Internal Revenue Code (IRC) is considered a private foundation, unless it demonstrates to the Internal Revenue Service (IRS) that it falls into another category. In general, any organization that’s not a private foundation (i.e., it qualifies as something else) is usually a public charity, as described in Section 509(a) of the IRC.

In addition, a private foundation usually derives its principal fund from an individual, family, corporation or some other single source and, more often than not, is a grant-maker and does not solicit funds from the public. In contrast, a foundation or public charity generally receives grants from individuals, government and private foundations and although some public charities engage in grant-making activities, most conduct direct service or other tax-exempt activities…

Overall, charities are good for business and the obvious main reason– to incorporate charitable giving into your business is that– it’s good to give back to the less fortunate in the community. Also, a second reason to think charitably is that it’s very important to your bottom-line: Customers patronize companies that are doing something for the greater good of the community… and having a charitable component is a business differentiator… and a reason that some customers choose one company over another…

According to Jeneen Todd; I wanted my business to be in the public eye as a business that’s reaching out to the community… marketing my business with charitable events is a fairly inexpensive way to reach out to a large number of potential customers, while still helping others…

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Quick Facts About Charitable Giving and Nonprofits in U.S.:

  • Nonprofit Organizations: There are 1,537,465 tax-exempt  organizations, including: 955,817 public charities, 97,792 private foundations, 483,856 other types of nonprofit organizations, including chambers of commerce, fraternal organizations and civic leagues. In 2010, nonprofits accounted for 9.2% of all wages and salaries paid in U. S. Nonprofit share of U.S. GDP was 5.5% in 2012. There are an estimated 323,754 congregations (churches) in June 2013.
  • Public Charity Finances: In 2011, public charities reported over $1.59 trillion in total revenues and $1.49 trillion in total expenses. Of the revenue: 22% came from contributions, gifts and government grants. 72% came from program service revenues, which include government fees and contracts. 6% came from other sources… Public charities reported $2.87 trillion in total assets in 2011.
  • Volunteering and Charitable Giving: Approximately 26.5% of Americans over the age of 16 volunteered through or for an organization between September 2009 and September 2012. This proportion has remained relatively constant since 2003 after a slight increase from 27.4% to 28.8% in 2003. Charitable contributions by individuals, foundations, bequests, and corporations reached $298.42 billion in 2011, an increase of 0.9% from the revised 2010 estimates and after adjusting for inflation. Of these charitable contributions: Religious organizations received the largest share, with 32% of total estimated contributions. Educational institutions received the second largest percentage, with 13% of total estimated contributions. Human service organizations accounted for 12% of total estimated contributions in 2010, the third largest share. Individuals gave $217.79 billion in 2011, about the same as in 2010.
  • Foundation Giving: Foundations gave $46.9 billion in 2011, up 2.2% from 2010. Of total foundation giving in 2010: 71% came from independent foundations. 9% came from community foundations. 11% came from corporate foundations. 9% came from operating foundations.

In the article Charitable Giving Is Good for Your Business by Lee Polevoi on writes: Donating to worthy causes can benefit the givers as much as the receivers. When it’s done strategically, charitable giving is good for business– and we’re not just talking about potential tax deductions… While the organization appreciates your donation (financial or otherwise) you can also promote your charitable activities to build good will in the community, enhance customer loyalty, heighten brand awareness, and yes, even increase sales.

Giving to a worthy cause makes good business sense. Make the practice part of your overall business strategy, and you’ll quickly see it’s a win-win situation… However, finding the right charity for your business can be difficult; here are three simple rules of thumb that can help:

  • Pick a cause that you believe in: This helps elevate your involvement from something you feel you should do– to something you truly enjoy doing.
  • Look for a local charity: Knowing that you’re helping your own community can make your involvement more meaningful, especially if it also enhances the well-being of family and friends.
  • Find a cause that relates to your business: If you run a sporting goods store, why not sponsor a kids’ soccer league or Little League team? Support a charity that affects and influences your target market.

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In the article Why Aligning Your Business With Charity is Important by Jane Greece writes: Aligning your business with charity can be a little difficult to understand, but companies who have aligned with charities are seeing the big picture. There are business benefits for doing the charitable projects even in developed and underdeveloped countries: This is called strategic philanthropy

Most importantly, aligning business with charities, lays some of the foundation for future markets. People will come to associate the business as the good guy, and this matters a lot to some people… If good works matter to them, then good sales for the business follows…

Thus, aligning your business with charity or cause can do a lot of great things, and that’s what makes it important. Doing this type of strategic marketing has many benefits; for example; First, it adds another element to your business’ character. Second, aligning business with charity can attract positive publicity to your business. Third, strategic philanthropy can elicit new ideas to improve or enhance your products and services. And fourth, doing charity would give more meaning to the business… Nothing beats the feeling of feeling good, and  aligning your business with charities is being wise with the business and also being responsible, socially…

Many savvy companies are affiliating themselves with charities to market their businesses. Not only is it a primary means for developing a powerful network, but also it helps others in the process. According to David Frey; people like to associate themselves with businesses that support causes, which help disadvantaged people in a meaningful way. And, don’t think that charities are oblivious to your motivations. Most charities today understand your secondary purpose for participating in charities and are experienced at helping business receive a return on their charitable investments…

From a business standpoint, look for charities that will give you meaningful exposure to a large number of influential people… Linking your name with the charitable cause is an important part of charitable marketing. Even if you are participating in a charity for altruistic reasons, there’s no reason why you should not benefit from the resulting positive exposure… Charities like businesses are interested in building their membership base… Partnering with your charity to market to a niche will bring new customers to the business and new members to the charity…

Taking the idea of charity partnerships a bit further, you may consider establishing a full-time commercial venture with your charity. Both parties would provide specific resources to run the venture. For example, you could provide the financial funding and the charity could provide the staff, expertise and equipment… Although there are a lot of legal and tax issues to address with this strategy, many such ventures are being established with success…

Most corporations enter the philanthropic arena to achieve specific business objectives through a program of good deeds… however, an increasing body of scholarship shows that corporate giving programs actually can generate increased sales and revenues, especially for firms that market directly to consumers…

According to Carlson; corporations represent a vital portion of total charitable giving… it’s important that the strategic priorities of both charities and companies are aligned in order to have an effective partnership… For example, a grocery-store chain partnering with food pantries, instead of other types of nonprofits… or a financial services company that supports school math education…

According to Gregg Carlson, Chairman of the Giving USA Foundation; we have started to see a sustained recovery in corporate giving, and the outlook for business in philanthropy is very positive…

Manage Business Strategy Like an Investment, Not Like ATM: Build Value, Create Wealth, Grow Assets, Make Investments…

Manage your business like a prudent investment and it will pay large dividends, or treat your business like an open ATM (automatic teller machine) and it can cost you– big time, like a faulty cash dispenser. Believe in your business enough to invest in it: Invest money, invest time, and invest resources… a real business must be based on a prudent investment plan with an expected return for the investment.

Business success does not just magically happen; you must have skin in the game, and you must be fully committed to making the business work– make it a real business by applying the mind-set of an investor.

According to Chia-Li Chien; managing a business must be viewed as more than a means for just improving your lifestyle; it must be viewed as an assemblage of investment assets that are used for generating wealth and serving the community… When the business is viewed from an  investor’s perspective, then you will actually expect and demand an annual investment return, as well as, growth and appreciation in the value of the business, over time. Let me elaborate, for example; managing a business can be viewed as a job (e.g., pay the mortgage…) or for improving lifestyle (e.g., vacation in Fuji…) or for the creation of wealth (e.g., establish an endowment fund…).

According to Jason Fisher and Eric Goldstein; if you’re looking to build a multi-million dollar business, then you must start treating the business like an investment– and start, right Now! And, if you don’t do it, right Now! Then it won’t ever happen… Treat your business like an investment, and it will pay you a generous return for your investment, as well as, growth in equity value and wealth… Prudent investments– financial instruments– are structured and managed for financial growth and income, and similarly, for a business to be successful– productive and effective– it must be structure and managed for growth and income, and a generous return for your investment…

But, most important,  business investments must be transparent– you must know what’s working and what’s not working, and the only way you can do that is by tracking results. And, tracking results is like looking in the mirror; where results are reflection of the investments and if afraid or unwilling to make prudent investments, then you must rethink the objectives and goals for the business…

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In the article How to Run Your Business Like an Investment by Michael Batton Kaput writes: The investors with the most staying power treat their stock portfolios with reverence. They know their investing philosophy that prizes long-term growth over short-term profits, and partners with others to get the most out of their money.

Business management could learn a lot from successful stock market players. Treating a business like an investment, rather than like a money-making tool that’s discarded after it has outlived its usefulness… managing a business like an investment can generate long-term returns and financial security for all the stakeholders. Consider these steps:

  • Step 1: Put yourself on the line. Any investment you make has material consequences for you and your net worth. With your own money on the line, you tend to take investing seriously. The same goes for a business. A substantial portion of your own assets and net worth should be tied to your business.  That gives you a stake in succeeding, as opposed to cashing in quickly and hanging your employees out to dry.
  • Step 2: Create a strategy for tough times. Too many businesses are blindsided when bad economic times or tough markets rear their heads. Financial investors, however, try to plan for the worst by hedging their risk and having plans in place to deal with difficult economic conditions. Businesses should do the same. While material success is the goal, it doesn’t always come easy. Draft strategies that the business will use to survive, and even capitalize, on tough times.
  • Step 3: Establish and maintain trust with your employees. Treating a business as an investment means treating your employees like one, too. Retaining workers and keeping them happy leads to better productivity and results. Avoid micromanagement where possible. Give employees the training and the tools to make decisions for themselves. Autonomy in the workplace generates trust between management and employees, while fostering a culture of hard work and innovation.
  • Step 4: Formulate and emphasize your business culture. When management takes the time to examine the company’s core values and priorities, then corporate culture stops being a set of buzzwords. A strong corporate culture, and adherence to it at every level of the company, is an investment in your company and the people who work for it. Just like investors know what their investing philosophy is, so should management know what their business philosophy is.
  • Step 5: Treat your business as a partnership, not a set of top-down directives. While investors may tell their stock brokers which shares to buy and sell, the smart ones solicit feedback from their brokers and take their advice under consideration. It should be the same with management and their employees. When everyone feels like they have a stake in the company and its success, this enhances the idea of a business as an investment, rather than a way to simply make money and move on to another venture.

In the article Treating your Company like an Investment by Craig Castelli writes: What is the difference between an investment and a career? The two words are rarely compared, but perhaps we should pay closer attention to their meaning. The best way to compare the two is this: you retire from a career, but you exit an investment. This distinction sums up the difference in approaches– retirement is a highly personal and emotional decision, whereas exiting an investment is a highly rational and non-emotional, business decision.

Unfortunately for many businesses, when it comes to exit strategy it’s tough to separate the emotional from the rational. Therefore, an exit is typically linked to retirement rather than the real factors that drive exit timing. I draw the distinction between investments and careers because I know far too many business owners treat their companies like careers…

The focus is short-term with primary concern being to make as much money this year as they did last year, in order to fund their lifestyle. Rarely, if ever, do business owners contemplate the bigger picture, including an exit strategy. Creating a strong exit strategy requires a shift in mindset; it requires thinking of the business as investment, rather than as a career. To this end, your business is no different from a stock or a piece of real estate, but unlike stocks or real estate, however, you have a lot of control over many aspects of the business…

Business owners that treat their business like an investment rather than careers embrace this mindset. Begin thinking about your exit… View your business as an investment, so that you can understand its actual fair market value… Take an investor’s perspective and view your business through their eyes…

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In the article How Do You Treat Business: Investment or Gamble? by Frederick Lam writes: There are two mind-sets for how you treat your business: Investor or Gambler. Think about it: Gamblers are taking chances– taking a lucky shot. They think that if you throw enough money at it, then it will grow-prosper. These are people who invest in technology stocks and pray that it will become an overnight success or they buy lottery tickets religiously…

The gambler mind-set is of hope, not of investment. In a sense, a gambler is living on prayer-hope, and banking on the idea that they will hit it big and get a 100x return… The problem is that it’s not business: Gambling is game of chance-high risk. For every one person that hits the jackpot, there are countless people who do not: In contrast, having a mind-set that treats the business like a true investment is the real key to business success…

When you invest instead of gamble you take ownership, which means that you have a different mind-set. You no longer live on chance but you have a plan, manage risk, make things happen… You don’t chase fantasies, but rather you invest in success. A gambler looks for an easy way out; whereas, an investor does their homework, researches… and finds a way to create a unique or untapped niche to leverage…

When you treat your business like an investment; you are not searching for get rich quick schemes– business success is a process, and not a one-time event. So, manage your business like an investment; change your mind-set, change your attitude, change your actions, and change the business results…

You can significantly increase your net wealth by simply changing the way you look at your business… According to Tim McDaniel; typical business owners have more than 60% of their net worth tied up in their business. That’s a huge piece of their nest egg. Yet, most business owners don’t treat their business as an investment, i.e., as something they need to watch, nurture and care for just as they do their 401(k), and other investments. Your business is every bit of an investment as stocks, bonds, mutual funds…

Treating your business like an investment is the key to increasing value and building wealth. There are five steps you can follow that will help you develop an investment mind-set, they are: Know the value of your business. Develop an investment mindset toward your business. Set a growth goal for your business investment. Protect your business from value detractors. Determine your exit strategy...

According to Gregg Hamilton-Piercy; while you are working hard to make the business profitable and to develop new strategies that will help it thrive; how often do you step back and view the business the way an outside investor might? Consider the fact that most of us have investments in stocks, bonds, mutual funds... Why then wouldn’t you consider taking a similar approach when it comes to managing what is potentially the most important piece of your illiquid personal wealth– your business?

The core idea is that, on top of running your business, it’s always a good idea to keep an eye toward ultimately moving it to market-ready status. Whether or not you are actively looking for a buyer, it’s certainly prudent to take steps that will prepare your business for situations where investors come to your door, so to speak…

According to Alex Tabatabai; it’s wise to treat the business like an investment fund; i.e., think of the business as an investment fund that’s 100% invested in the business… also, view the role of management as a capital allocators, on behalf of shareholders, and in effect a fund manager of the business…

According to Rosie Bank; the first rule of being in business is to take the business very seriously and view it as an investment… The second rule is to get in the game, stay in the game… create and execute a game plan that positions the business as a successful investment opportunity…