About.com Financial Careers

Unforeseen Consequences

Thu, 26 Nov 2009 04:00:55 +0000

As a financial professional, you always have to be concerned about possible unforeseen consequences of your actions and initiatives. We've already delved into how improperly-designed incentive systems unexpectedly can promote dysfunctional behaviors. Likewise, risk managers need to worry about whether risk mitigation initiatives, like the construction of safety nets to shield individuals or organizations from catastrophic events, actually promote excessive risk taking.

Curiously enough, the Thanksgiving holiday brings this to mind. How's that? Well, Thanksgiving is notable (or notorious) for its association with football. Recently, there's been a buzz in the media about the prevalence and long-term effects of head injuries in the sport, which appear to be growing despite advances in the protective qualities of football helmets. What to do?

A radical idea appeared earlier this month in a Wall Street Journal article. Since better helmets may be encouraging more dangerous play, some outside-the-box thinkers wonder if American football actually would be less dangerous if there were no helmets. They point to rugby and Australian rules football, both similarly hard-hitting games, but games in which the unhelmeted, unpadded players suffer far fewer serious head injuries. A similar dynamic has afflicted hockey. Over the past three decades, after helmets became mandatory in the pro game, and face protection in the collegiate game, blows to the head have become much more common.

According to a brief blurb in the 11/25 WSJ, the idea that football helmets may be as much a problem as a solution is gaining momentum among mainstream observers, most notably a panel headed by former coach and broadcaster John Madden. This group may recommend that helmets be banned from practices, in hopes that players thus will learn to refrain from inflicting or absorbing even the slightest blow to the head. Also, the panel is considering whether the face guards attached to the helmets used in games should be scaled back in size or eliminated completely.

Something to ponder while viewing the pigskin madness today (or not). Happy Thanksgiving.

Unforeseen Consequences originally appeared on About.com Financial Careers on Thursday, November 26th, 2009 at 04:00:55.

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Bankers and Hackers

Wed, 25 Nov 2009 04:00:12 +0000

If you have a small business, plan to start one, or plan to work in the financial function for one, you may want to read an article in the November 16 issue of Forbes magazine entitled "Is Your Bank Account Safe?" Its sobering subtitle: "If hackers get into a commercial account, you're out the money."

According to the article, federal law places the onus on the banks to protect individual accounts from losses due to hackers. This is of a piece with the well-known $50 dollar limitation on fraudulent charges to a credit card number. However, there is no such legally-mandated protection for business or commercial accounts. Most small business people are unaware of this, and many thus commingle personal and business funds in the same accounts. This can be a very costly mistake, as the article illustrates through an actual case.

Lesson one: never commingle personal and business funds in this fashion. Lesson two: before opening a business or commercial account, conduct detailed due diligence into various banks' policies on protecting such accounts from fraud, and on your possible financial exposure with each. When your business opens an account, be sure to get these policies in writing. Better yet, get legal advice on your ability to hold the bank to its end of the bargain.

Bankers and Hackers originally appeared on About.com Financial Careers on Wednesday, November 25th, 2009 at 04:00:12.

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Corporate Shrinks

Tue, 24 Nov 2009 04:00:44 +0000

Yes, many businesses are shrinking and downsizing. Meanwhile, some are employing shrinks, in the sense of psychoanalysts and psychiatrists, to observe the dynamics of individual and group behavior, with an eye towards improving their organizations. This is yet another example of how psychology and related fields are applicable in business and finance.

Years ago, as an undergraduate, I took a course in organizational decision making that was offered by the sociology department. Many of the insights offered in that course appear to be of a piece with what organizational psychoanalysts are doing.

Corporate Shrinks originally appeared on About.com Financial Careers on Tuesday, November 24th, 2009 at 04:00:44.

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CEO to Politico

Mon, 23 Nov 2009 04:00:32 +0000

Financial Times columnist Michael Skapinker offers his own take on why former CEOs such as Jon Corzine generally fail as politicians. Among his observations in the 11/10 issue:

CEOs are not used to being questioned or shouted down. Thus, they often look dazed and confused when they are.
Many CEOs are poor speakers who use PowerPoint slides as a crutch. Skapinker notes that even The New York Times has cited Corzine for confused syntax and mumbling.
Civil servants typically are difficult, if not impossible, to fire. This gives the ex-CEO decidedly less leverage than he or she had over employees back in the private sector.
Additionally, since government does not go out of business, many civil servants see no urgency in changing their work habits, especially if it involves working harder.

Still, ex-CEOs Carly Fiorina (late of Hewlett-Packard) and Meg Whitman (late of eBay) seem poised to run for U.S. Senator from California and governor of the same state, respectively.

CEO to Politico originally appeared on About.com Financial Careers on Monday, November 23rd, 2009 at 04:00:32.

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Unheavenly Returns

Sat, 21 Nov 2009 04:00:55 +0000

If the Church of England doesn't have enough problems these days, its clergy retirement plan reports that assets equal only 57% of its actuarially-determined liabilities. The annual payout of benefits is running at 1.6% of assets. Projections are that young clergy in their 30s stand to receive pensions that will be less than half what current retirees get. Ouch.

What happened? According to the 11/3 Financial Times, the pension fund's advisors decided to go 100% into equities right around the time that the FTSE 100 index hit its all-time high in 1999. Bad prophets, no profits, if you will. By contrast, according to the article, the typical pension fund in the U.K. has just a bit over 50% of its assets in equities, and many are reducing their exposure.

The Church of England took another big financial hit in the early 1990s when a major British investment company that managed a large portion of the Church's holdings went bust. The resulting cutbacks were severe, and last to this day. For example, the Archbishop of Canterbury's diplomatic mission to the Vatican, called the Anglican Centre in Rome, became responsible for its own fundraising. It is now the only embassy funded through direct private donations, and its director is the only ambassador with fundraising in his job description.

When supposedly sleepy or conservative organizations become overly risk-loving, take that as an another indicator of a financial bubble on the verge of bursting.

Unheavenly Returns originally appeared on About.com Financial Careers on Saturday, November 21st, 2009 at 04:00:55.

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Unwelcome Advice

Fri, 20 Nov 2009 04:00:55 +0000

A bit over a decade ago, I was asked by the president of a nonprofit to serve on a special financial advisory committee that he was forming. We already knew each other, through my support of that organization.

The members of that committee were drawn principally from the financial services industry, and it soon became apparent that the president had convened us mainly, if not exclusively, to develop creative fundraising ideas and to spearhead the organization's next capital campaign. By capital campaign, I mean a special multi-year fundraising effort aimed at augmenting the organization's endowment, rather than funding its current operating budget.

From the word go, I proved to be out of step with both the president and the other members of the committee. For one, I was the only person asking questions about the operating budget and seeking ways to improve operational efficiency. For another, I questioned the ethics of launching a new capital campaign immediately after closing another. Donations had been solicited for the previous campaign with the promise that it was to be the last push of its kind for decades to come. Moreover, that campaign had netted significantly more than its stated goal.

I was not surprised when the president did not ask me to continue when my term expired. Despite my continued strong financial support of the organization, his ire at my independence was still palpable, and he eventually succeeded in alienating me from this organization.

Lesson: if you are recruited as an unpaid advisor to a nonprofit, be sure you understand what level of independent thought will be welcome from you. If you are being brought on board to advance an insider's predetermined agenda, be sure you know what it is and be sure that you agree with it.

Unwelcome Advice originally appeared on About.com Financial Careers on Friday, November 20th, 2009 at 04:00:55.

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Russell Ackoff, RIP

Thu, 19 Nov 2009 04:00:09 +0000

The centenary of late management theorist Peter Drucker's birth is being marked in the November issue of the Harvard Business Review. Meanwhile, the recent passing of the man to whom Drucker acknowledged a great debt is getting a modest amount of notice. Longtime Wharton management professor Russell Ackoff died October 29 at age 90, and was the subject of Stefan Stern's "On management" column in the 11/10 Financial Times and of the "Remembrances" feature in the 11/11 Wall Street Journal.

Both articles offers several incisive observations from Ackoff, a sampling being:

The most dysfunctional organizations are those that are the most efficient at doing counterproductive things.
"Business schools are high security prisons of the mind."
The most creative organizations are those most welcoming towards nonconformist employees.
The less you expect of employees, the less you get from them.
"Complex problems do not have simple solutions."

The WSJ obituary goes into Ackoff's extensive consulting work for major corporations. He advised GM in the development of the OnStar navigation system. Using computer modeling, a revolutionary approach in 1960, he helped Anheuser-Busch design and implement an aggressive expansion strategy that turned it from a purely regional brand with 7% national market share in 1960 to the dominant national brand with a 40% share by 1990.

According to the WSJ piece, Ackoff credited his undergraduate studies in architecture at the University of Pennsylvania with helping him develop a holistic approach to organizations and systems. I never studied under Ackoff during my Wharton days, but a colleague of mine at AT&T did during the 1970s, and frequently spoke of this experience glowingly.

Russell Ackoff, RIP originally appeared on About.com Financial Careers on Thursday, November 19th, 2009 at 04:00:09.

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Elder Care

Wed, 18 Nov 2009 04:00:08 +0000

Providing care for elderly and infirm parents places real constraints on career choices and opportunities open to their children. This is a topic covered in detail in an excellent article, "Caring for an Ill Parent Even as Your Career Calls," in the 11/3 Wall Street Journal.

The article focuses on how these responsibilities limit a caregiver's ability to accept an attractive new position. However, it also offers several case studies about people who were able to negotiate special relocation packages that included their parents. Lesson: if the company values your services highly enough, and if the opportunity is attractive enough for you, don't hesitate to ask for such special consideration.

Elder Care originally appeared on About.com Financial Careers on Wednesday, November 18th, 2009 at 04:00:08.

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Gmail Alert

Tue, 17 Nov 2009 04:00:35 +0000

Have a Gmail account? Thinking about using it for business purposes like job hunting or registering for conferences? Think again.

A friend reports that many business and professional conference organizers are summarily rejecting registrations from people using Gmail accounts. Reason? Gmail accounts are notorious as means for people to create false identities, and are utilized heavily by spammers. Accounts with Hotmail also have had the same stigma. Beware.

Gmail Alert originally appeared on About.com Financial Careers on Tuesday, November 17th, 2009 at 04:00:35.

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Expunging Records

Mon, 16 Nov 2009 04:00:19 +0000

A page one article in the 11/11 Wall Street Journal, "More Job Seekers Scramble To Erase Their Criminal Past," is a must-read if you ever have been arrested. Even if the charges subsequently were dropped, even if they were a youthful indiscretion, and even if you have lived an exemplary, unblemished life since, an arrest can present an insuperable bar to subsequent employment. This is especially true in the financial services industry, which already was hypersensitive about hiring people with problematic past associations, but now is under increased regulatory and political pressure to keep its collective nose clean.

With the rise of computerized records and the Internet, background searches are getting progressively faster, cheaper and more comprehensive. Accordingly, it is becoming increasingly more difficult, if not impossible, to hide embarrassing episodes from your past. The WSJ article delves into the mounting backlog of requests for official expungement of past criminal records, which, if granted, would allow the recipient to answer "no" with confidence to any questions on an employment application asking about past arrests.

One huge caveat: legal expungement does not mean that old newspaper articles about your arrest will cease to exist. Another caveat: private background-checking companies are under no obligation to erase references to a subsequently officially-expunged arrest in their own databases.

Expunging Records originally appeared on About.com Financial Careers on Monday, November 16th, 2009 at 04:00:19.

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