Games People Play - for big money in this case!

Well, I guess Wall Street showed those foolish folks in Congress who has the power, didn't they? And before that Congress showed those greedy bankers they don't have to rush to their rescue, didn't they? And before that? You can take this pretty far back before you find someone who wasn't being greedy or arrogant or blind. Make no mistake about it - this is a contest to see who really controls the economy in this country. And one thing is certain, neither of the contestants thinks it's you and me. We're just the PR pawns in their power struggle, the folks they both say they want to help while they pick our pockets to line their own, or to grow their power base, or to simply get re-elected.

There. I got that off my chest. Can't do anything about it except tell you how I feel. And if you feel the same way you could tell someone. And they could tell someone. Hey, maybe I can do something about it. But only if you and I team up to do it together. How? Well, here's my suggestion:

Tell your congressional representative to get off his/her duff and get this thing passed! It's a horrible bill except that it's far better than the alternative. Not in the long term, when everything will right itself as it always does; but in the short term the bankers will make our lives miserable if we don't save them so they can lend back to us the money they got from us through Uncle Sam.

But there's more we've got to do. After this thing gets signed, we've got to get our reps to do something really meaningful for a change. We've got to get them to enact real reform in the banking system. Not from the ideas that the banking industry lobbyists or congressional staffers will propose, but from the minds of our best economists and experts on financial systems. So at least one of these two groups has less opportunity to get rich at our expense by finding still another loophole in the banking and securities laws.

Then go to the polls and take care of the other contestant.

As always, I welcome your comments.

Stupid headlines!

This item caught my eye as I was catching up on the news this morning:

WASHINGTON (MarketWatch) -- U.S. retail sales unexpectedly fell in August, pushed lower by plunging gasoline prices, according to Commerce Department data released Friday.

Huh??? Gas prices down, so retail shopping is down? What are you smoking, dude? If that sentence had read 'sales pushed higher by plunging gas prices' I wouldn't have stopped, because we've been hearing that for a couple years. But this headline made me stop. Of course, down in the bowels of the article the writer quoted his source which said the opposite, and properly so. But the point is, when the financial world is in a near panic mode and looking over its' shoulder for the next train wreck, we're going to read irrational stuff in the media. If you're an investor or in a business where the state of the global economy is critical to your business, you've got to ignore the panic scripts. Read the statistics and ignore the interpretations of those statistics. Then draw your own conclusions. You'll be ready when your market is ready.

As always, I welcome your comments.

According to PersonalMBA.com as reported in BusinessWeek.com

Josh Kaufman, editor of the website http://www.personalmba.com/ compiled and posted his list of the 77 best business books which would, if they were all read, amount to the equivalent of a personal MBA. His list, which includes my book, can be found at http://personalmba.com/best-business-books/. The list was then mentioned again in an article in BusinessWeek.com -http://www.businessweek.com/bschools/content/apr2006/bs2006042_3490_bs001.htm.

Here is what Mr. Kaufman had to say about Finance for Non-Financial Managers:

If you're responsible for profit and loss in your business or organization, you need a business finance reference close at hand.

Finance for Non-Financial Managers is everything that a business finance reference text should be: clear, comprehensive, and easy to use. Using plain and simple English, Siciliano makes even the most obtuse financial concepts easy to understand and apply.

Most accounting and finance reference texts have a bad habit of being terminally boring. Fortunately, this book's snappy presentation of financial concepts will give you all the information you need quickly, without putting you to sleep in the process. Call-outs and sidebars add additional context to core subjects, giving you a broad understanding of how financial matters impact your company and teaching you "tricks of the trade" that can help you keep your company's financial situation under control.

With the help of Finance for Non-Financial Managers, you'll be prepared to understand any financial situation.

What more can I say? Available in paperback or e-book. Buy one.

A plug for Microsoft's new stuff (NOT Vista)

I was working with a small spreadsheet that I use to track some personal information today, and I wanted to have access to it from both my home and office PCs. My home machine has Microsoft Office 2007 and the office machine has Microsoft Office 2003.

In looking at the two files side by side, I noticed that the 2003 version file took up 621 kilobytes of space, but the 2007 version file took up only 365 kilobytes, a 41% savings of space! That's a bunch! I checked out a larger Excel file and found a 55% savings in space. I know space is cheap these days, but using twice as much as you need has got to cost you sooner or later.

So if you use Microsoft products, and you can't think of a good reason to upgrade your office software version, and the new look and features aren't enough of an attraction, how about effectively doubling the size of your hard drive?

As always, I welcome your comments

Finance for Low Paid Professionals

Well, that's the working title of a new book that a publishing client has asked me to consider writing. The low paid professionals that will be the target market for the book are in the education business (teachers, to be exact) but the need could apply to any number of professionals who are in low paying jobs but stay there because they are passionate about the work. Think: teachers, social workers, administrators, actor/waiters, etc.

So this post is not so much information from me as it is a request for information from you. What do you think is the most important issue faced by such professional workers as they pursue their careers and at the same time must provide for family, savings, and ultimate retirement?

I'd really like to hear your thoughts. They will help me decide how to approach this book. You might even get credit in the book for a really good idea or suggestion.

Controlling passwords is easy now

If you're active on the web as I am, you probably have dozens of passwords to remember for all the controlled sites you visit. I have nearly a hundred so far. If you keep them all in your head, you're clearly smarter than I am, and if you've got them written down on a piece of paper somewhere, you're clearly not.

My solution is RoboForm, a password manager that is itself password controlled, but once activated will with one click fill in the user ID and password that you've selected for whatever site you're trying to access. Thus one humongous (if you want) password to open RoboForm, and ease thereafter no matter how many controlled sites you visit. I think they offer a free version that will enable 10 or so passwords to be saved before you have to register and pay a modest one-time license fee. Great utility program.

Huh? What's he taking about?

A Wall Street Journal reporter wrote a piece on hedge funds looking to find bargains in beaten down bank stocks. At one point he wrote this paragraph about the hedge fund investors:

"Since it is harder for investors to borrow money at reasonable rates, they won't be eager to be buyers unless prices are marked down further. That all suggests troubles in the financial market will get worse before they get better. And most of the money being raised seems aimed at investing in distressed companies, not securities, suggesting more write-downs of mortgage-related assets if housing doesn't perk up."

What the h--- does that mean and how does he get from Point A to Point B? If you can explain that, you're smarter than I am. Does this validate the snide comments we hear about financial reporters or am I missing something here?

As always, your comments are welcome.

Cynical humor comes with a grain of truth...

Compliments of a friend, some thoughts for you to consider in a quiet moment, or not:

1. Borrow money from pessimists. They don't expect it back.
2. 82.7% of statistics are made up on the spot. No, wait, that's 87.2%.
3. The early bird gets the worm, but the second mouse gets the cheese.
4. A conclusion is the place where you got tired of thinking.

OK, enough of that for now - until the next time i don't have anything to say...

Pay for Performance - One more time

The Wall Street Journal reported in Managing: Theory & Practice (July 7, 2008, p. B6) on the success of one company in providing flexible compensation choices to its employees. The byline called it a “throwback to (the) ‘80s.” In an era of scarcity for high quality workers – despite the unemployment numbers you read – why would such an idea be so out of favor? While the article focused on one particular arrangement where managers could opt for a lower salary in return for a higher bonus potential, there are lots of incentive options that employers could use to motivate employees to the benefit of all, yet most companies don’t even try. Pay-for-Performance is an idea with profound potential, yet it is not widely used outside the sales force.

We think a significant reason is the lack of trust that has developed between employees and employers over the past couple decades. Just ask any sales person what goes through his/her mind when their company announces any changes to their compensation plan and you’ll hear something like: “OK, I wonder what they’re taking away this time?” I wrote about this a few years ago, and urged company managements to consider some form of open book philosophy to re-establish some of that lost trust, especially when it comes to calculations that affect their paychecks, like bonus plans, profit sharing plans, and the like. The reality is that companies have not earned that trust in many cases – often adjusting bonus plans to limit success payments, crafting elaborate plans to favor top executives despite ostensibly offering equitable sharing of rewards, promising a lot but delivering a lot less, and so on.

It is true that a successful incentive compensation plan needs to be adapted to the level of employee management is seeking to motivate – factory workers will not be moved by the same options that move vice presidents. It is also true that responsive incentive plans are more work to develop and administer than straight salary plans, and the more responsive the plan the more administration it will require. But once you get past the design stage, most of the work is around performance evaluation: goal setting, getting buy-in, evaluating results and monetizing those results in a credible way. Performance evaluation that should be taking place anyway, don’t you think?

We have a long-time client whose plant work force has produced a consistent 15%+ increase in productivity per person, with roughly half the overtime compared to previously, with the implementation of a simple profit sharing bonus plan that was clearly tied to getting product shipped to customers.

Here’s what we’ve experienced:
· An employer who acts as if their employees should be adequately motivated by having a job and a salary will consistently get these results: high turnover and mediocre performance.
· An employer who is willing to share the fruits of above average performance with the workers who delivered that above average performance will continue to get above average performance, often dramatically above.
· An employer who wants their employees to accept a loosely defined methodology for determining incentive pay without significant transparency may be rewarded with skepticism and loosely delivered performance.
· Profits are produced by employees who want to do a good job, who feel their efforts are contributing to the company’s profits, and who have the clear sense that the company appreciates their contribution to those profits.

As always, your feedback is welcome.

Did a whole industry forget to plan ahead?

First, this post is not about the banking industry, or the securities industry (regardless of the terrible market performance lately), or the mortgage banking industry, or even the much maligned morgage brokers.
It's about the airline industry.
An industry strategist was quoted recently as saying "many airline business models cease to work at $135-a-barrel oil prices." I guess they're not in much better shape at $145.
So what happened? We've known that oil prices were at risk since at least 2001 if not as far back as the 80's. And any industry that relies on fuel oil to fly a piece of metal machinery weighing upwards of a million pounds would want to have risk management issues resolved long before survival was at issue, wouldn't they? So why are they now trying to nit pick their customers with extra charges for checking baggage, food in flight, cutting schedules, etc.? Why is the Wall Street Journal writing about the possibility of their postponing the purchase of new planes - the fuel efficient ones, no less? Either they didn't plan ahead or they didn't like what their planning told them so they chose to ignore it. Oh, you say they saw it but were too poor to do anything about it? Rubbish! If you think your survival is at issue, you put up everything you have to prevent a bad outcome. Survival is the basic instinct, remember? If you don't do that, you either don't think it will happen or you think someone will bail you out if it gets too bad. And if you're big enough, you may get a bail out from the biggest free-of-charge insurance company in the country, the US government.
Airlines regularly go into bankruptcy, but none of the big ones ever stop flying, in spite of what seems from here like very poor strategic planning. What would happen if one of them actually put their planes on the ground and laid off all their pilots? Would Uncle come to the rescue?
I think we can survive with one or two fewer airlines, don't you?
I welcome your comments.

How to salvage a half-baked turkey!

Launching a new product is for some like birthing a baby. For others it’s more like cooking a bird you’ve never prepared before. Something can and probably will go wrong. The question is how easy will it be to fix it. But let’s suppose your new product turns out to be a real turkey, and you have a warehouse full of half-cooked birds that aren’t going to sell at anywhere near list price. What do you do? How do you maximize your profit or at least minimize your loss?

We discussed this topic today in a management seminar I was leading, and I’ll share with you the same ideas that I gave them: Today is a new beginning. Incremental profit from today on is the only meaningful measure of success going forward. Later on you can berate the poor soul who made the decision to take the product on, but today it’s about making a good decision to optimize profits from a bad situation.

So consider this: Everything you have spent through today is sunk cost. It’s gone. You can’t change your mind and unwind it, or return your new product and start over. But what you spend from today on, and what you sell from today on, and what you earn from today on, is all that matters. This is a useful application of the concept of Contribution Profit, which is Net Sales less all variable costs of getting and fulfilling the sale. From today on, every dollar you can produce in Contribution Profit from your turkey will add directly to your bottom line. It may not produce the profit you once envisioned, but it will reduce your loss or produce a bottom line that is improved over where you are today.

And that sounds like a good management decision to me.

As always, I welcome your comments.

The best book in print on simplified finance!

OK, maybe those weren’t words from an independent source exactly. But my book is still a best seller for good reason. Finance for Non-Financial Managers, published by McGraw-Hill, is truly finance in plain English for those who are averse to learning about finance and accounting reports and all that stuff. It’s used in classrooms and corporate offices, by big company executives and startup entrepreneurs. Why this book? Because you can understand it!

And if you buy it from us you also get the right to email me any questions that come up in your reading. And I’ll sign it for you besides. Is that a blatant pitch for your money? Yup! Go to http://www.amazon.com/Finance-Non-Financial-Managers-Briefcase-Books/dp/0071413774/ref=sr_1_1?ie=UTF8&s=books&qid=1213433046&sr=8-1 on Amazon.com and read the many reviews from delighted readers. Then you can either buy the book from Amazon for a few dollars off the cover price, or come to us and get the autographed book and the email rights for $14.95 plus shipping. It’s a steal! Go to http://www.executivefinancecoach.com/finance_book.html and get yours while they last. OK, that last part is puffery. We’ve got lots of them. But they’re not helping you while they’re sitting on our shelf. Use your PayPal account or your credit card and get your copy now.

Procurement software? Bah, Humbug!

The Wall Street Journal carried an article this week discussing web spending tools, that is to say software that helps businesses control costs by telling them where they’re spending their money. It’s called procurement software and it sells for big bucks to big companies. Most companies are not big companies, and most of them can get the same results by learning how to read their own financial reports, IF they also learn how to ask for the information they don’t see in the standard forms their software spits out every month.

Too many managers are frustrated because they don’t see what they need or they don’t understand what they see and they don’t know what to do about it. They don’t understand what is possible and reasonable to expect from their financial departments, so they accept that it’s a different language and they lower their expectations. With all due respect to their skills, I call this Financial Illiteracy.

Some of the most creative CEOs I’ve known keep numbers on the back of an envelope – or the equivalent – because it’s the only think they understand. How sad is that? If you know anyone in that state of affairs, do them a huge favor. Tell them to call me.

As always, I welcome your comments.

Incentives work – for everyone!

Good workers are hard to find, many CEOs report. Despite an economy that some feel is in recession – don’t you believe that part – unemployment statistics across the country are just shy of levels traditionally thought of by economists as full employment. That means you work harder to hire good people and then you have to keep working to keep them, because someone across town is willing to pay them more than you are to induce them to come to work for them. How do you cope? You can count on the familiarity of your company being an advantage vs. an unknown new situation. Unless your business is a sweat shop that should be a positive. But what about the pay issue?

I strongly believe customized incentive programs are a powerful glue to keep good people fastened to your payroll. Let me give you an example: a long-time client of mine is in a manufacturing business that requires highly skilled workers, and everyone wants them. Because their industry is booming, they were working all the overtime they could get from their people just to keep up with the orders. And they weren’t keeping up well enough, in the eyes of several of their key customers. Enter the simple bonus/profit sharing plan.

We installed a quarterly bonus plan that applied to everyone on the payroll, down to the shipping clerk. It’s funded from a percentage of profits and allocated to each worker based on their evaluated performance. To keep it simple the evaluation is a short check list of critical activities that are deemed directly supportive of timely and accurate delivery of goods to their customers. Every quarter each employee gets an additional amount in their paycheck or, at their option, added to their 401(k) account. A typical bonus can add $2-3 an hour or more to everyone’s paycheck for the entire quarter, all in one chunk of cash. The program has been in place for about 18 months now. The results:

With no major additions to equipment or plant layout changes, the company is now shipping roughly 15% more in sales than they were 2 years ago, with higher quality and better on-time delivery. And overtime has been reduced by 75%! As a result, profit margins have soared and morale has rarely been higher.

Your comments are welcome.

Accounting recruiters nightmare

With the current shortage of good accounting staff now approaching epidemic proportions, companies are looking to recent graduates for talent that is both current on technology tools and still affordable. But there’s a big caveat to that strategy, ably demonstrated by a recent Robert Half International survey published in CFO Magazine. They surveyed these “millennials” to find out what they most valued on the job. The top ranked results on a scale of 1 to 10 are shown in the graph below.
They don't need explanation, although the writer had a one-liner to add, hinting at a backlash against companies' declining sense of loyalty to their employees over the past generation.

"If you want loyalty, get a dog."

I welcome your comments.

Internal Audit and the CFO - inherent conflict of interest?

I was reading an interview with the WorldCom whistle blower, once the vice president in charge of internal audit at WorldCom. She made a comment that every CEO whose company has an internal audit function should read. She said having that function report to the CFO, a common situation because of the kind of work internal auditors do, is an inherent conflict of interest for the CFO. The conflict is that much of the work done by internal auditors involves reviewing the work performed by people who work for the CFO. The likelihood of internal auditors reporting problems in their boss's organization seems somewhat problematic, if you think about it.

Her point was that the internal audit team should report to the audit committee of the board of directors, and I agree. Lacking that, such as in a privately owned company that doesn't have an audit committee, that reporting relationship should be to the CEO. The problem: the CEO probably doesn't want the direct responsibility of managing a function whose activities are so foreign to what he/she feels comfortable with. My message to the CEO: get over it! These people can keep you out of trouble and make your company run better.

.

If you don't like the sound of "internal controls" then how about "integrity and efficiency controls?" Learn what it takes to oversee these mechanisms in your company, and that includes internal audit. And if your company is over $50 million or so in sales and you don't have a separate internal audit function, you should be worried. If you don't know why you should be worried, call me to talk about a coaching relationship.

I welcome your comments.

Don't take them for granted!

I'm teaching finance for non-financial managers to the management team of a company whose CEO believed they didn't have enough appreciation for the financial side of their business. It's a command performance, in effect, as all managers are required to attend.

You'd expect a "show me" attitude, wouldn't you? Glum faces, resistance to participation, and doing only what is required. Well, you'd be wrong!

These folks are anxious to learn more about finance, and they particularly want to learn more about the financial affairs of their own company. They want to understand things like working capital, ROI, contribution margin, and debt management. Their participation is eager, sincere, and apparently driven by a genuine desire to get better at this foreign language called finance.

If your managers are unaware of the power of financial concepts and practices to improve profits and careers, and you wonder if closing that education gap could help your company, we should talk. I can practically guarantee you'll like the results. Visit us at http://www.executivefinancecoach.com/ or http://www.genesiciliano.com/ to learn more about educational programs that can deliver an amazing return on investment, aka ROI.

And if any new readers know a good resource to get this kind of customized training, I'd like to know about it. Your comments are encouraged.

At last! Help for administrators and non-management professionals!

In my just released eBook, Finance for Administrative Assistants, I provide a basic overview of finance for administrators and non-management professionals who want to broaden their understanding of financial documents and how to interact with the finance department. NO technical jargon! Guaranteed!

This eBook is ideal for administrative assistants and other support personnel whose jobs require them to have a basic knowledge of finance. We all rely on the finance department for information. This eBook will show you how to read the reports you will most likely see and how to better understand the information in them so that you are helping to make informed decisions that support your company’s profitability and financial management goals. It will also help you get information that you may not even know is available.

My new eBook, available at http://www.genesiciliano.com/, gives a basic overview of how finance departments work and the information they provide. This provides administrative assistants – and other support personnel who are accountable to those responsible for business results – with the tools they need to provide better support and to enhance their value to the company.

The value of the finance department is in the information they provide. Employees of all levels, in all departments need financial information in almost every decision they make, though few of them really understand the resources they have available and how to use them.

People who don’t work in finance are often completely intimidated by the financial department and the work they do. The goal is really to demystify finance and make it clear that everyone can – and should – learn the basics. Get yours today at http://www.genesiciliano.com/

Real estate investors beware!

I am not an expert in real estate investing. So I pay attention to those who are when making my investment decisions. The best expert I know on California real estate is The Norris Group, a Riverside-based real estate training, consulting and publishing firm (http://www.thenorrisgroup.com/). Their predictions of real estate trends and expectations have generally been very accurate from what I have read, and they base much of their thinking these days on statistical relationships between things like personal income, house prices, foreclosure and default rates, and the like. Here is an alarming quote from their latest quarterly newsletter:


"According to some, the worst is almost over, and the (real estate) market is beginning to stabilize. That conclusion defies logic. The exact opposite is about to occur.


DataQuick (a real estate data provider) just came out with their foreclosure numbers for the first quarter of 2008. For California, it reported 47,171 trustee sales in the first quarter, an all-time record. The conversion percentage of the Notices of Default going to trustee sale is now 68%, also an all-time record. Therefore, according to Data Quick, there must have been 69,369 NODs that converted 68% of the time to 47,171 trustee sales. The number
of Notices of Default for the first quarter 2008 was 110,000! If the conversion ratio stays the same, 75,480 trustee sales should record in the third quarter 2008. That represents a 60% increase from an already record number of trustee sales.


Furthermore, DataQuick reports that 38% of all resales in California were lender-owned properties in March, 2008. By the third quarter, the percentage for the entire state will fly by 50% lender sales."


So if you're interested in California real estate investing today, get friendly with your local banker. They're going to be holding some mighty big sales in the months to come.

Make up your mind and mean it!

When you decide to improve how your business runs, that means you have to make changes. Change is traumatic, scary, unsettling, uncomfortable, etc. Whatever words you want to put on it, your employees will double it in their minds, and likely resist the discomfort as long as possible. In fact, they'll resist it indefinitely unless the CEO make a clear statement of active support for the change. Clear means unequivocal, and active means you do it too ("do as I say, not as I do" is not allowed here). They will wait until they're sure they've seen that.

Example: I have a client attempting to turn around a losing business. The business needs internal structure to guide the way they do business and they need more sales. My role is helping them create the infrastructure so that new business will be profitable. It will enable them to lower costs and stop reinventing the wheel when it comes to things like business promotion, measuring profitability of what they sell, lowering time spent in administrative trivia, lowering labor cost per dollar of revenue, etc. It means change for the better, but it means change. All say they want it, but discussions center around how to adapt process to incorporate the predominance of exceptions, rather than removing the exceptions. No one is convinced that the CEO intends with certainty to make the change. Here's a clue, folks:

If you do what you've always done before, you'll get what you always got before. If nothing changes, nothing changes.

I welcome your comments.