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Leading & Managing People

April 1, 2010

Talented people will give you a competitive edge.

Managers should spend 40% of their time on people.   People first culture really makes a different.  People need to be recruited, retained, and promoted, and a lot of attention needs to be paid to that process.

Diversity is important because of its moral importance, it appeals to the customer base, and it creates a diverse set of perspectives.

Need a top person and a top team for HR.  Top person should have a seat at the executive table.

Everybody in an organization is a recruiter, and getting everyone in the organization to believe that is important.

Succession planning is a key part of the organization.  Developing the bench of employees that will take over a position when you move to the next position.  Vital importance to the organization because it maintains the vitality of the organization.

Identifying up and comers is important to the organization.  How do you accelerate their growth?  Two schools of thought.  Tell them they are an up and comer or Don’t tell them they are an up and comer to preserve their ego.  Don’t need to tell them, but nurture them and let them figure it out.

Large importance in high achieving teams and separating out underachievers.  There are two ways to underachieve either through their job performance or being a bad team player.  People need to not destroy morale and not be a bad people person.

Since people are so important, how you manage them is also important.  Need to teach managers how to manage, and know how to teach yourself how to manage.

It is important to know how to measure productivity and engagement.  How to measure productivity of a knowledge worker?  Gallup survey is a standard survey for employee engagement.  They have established standards and norms for employee engagement across similar organizations.   GELFAM is another survey.

It is often beneficial to set individual performance goals, team performance goals, and organization performance goals.

Review process is more than just conducting the prescribed review sessions, but it should be having an ongoing conversation.

People don’t leave organizations they leave individuals.

People strategies are very important and needs to be figured out and appropriately implemented.

Salary is not the main reason people come and stay at an organization.  Drucker’s Thesis – was that people make a sacrifice to work in the nonprofit sector and they reward is the mission.  Therefore individual’s should expect to make 60% of what they would make in the for profit.

At AARP people were compensated at 95% level in the nonprofit sector and approximately 60% of what they would make in the for profit sector.

How do you motivate people?  Salary, Monetary Compensation, Recognition, (Could use fear, but not a good strategy), inspiration, …

Can inspire people by having a great story, a great mission, and have believability of the change.  Also, importance of delivering on the promise.

It is important not to report to someone that you don’t respect and that you can’t learn from.  There is no reason to stay in that position, and should move organizations soon.

Resources: Execution – Book

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Volunteer Management

April 1, 2010

Number one reason why people volunteer is because they are asked.

Motivating Volunteers is different from motivating a workforce.  It is important to demonstrate results of volunteer’s efforts.  Opportunity for promotion as a volunteer or promoted to a staff position.  Non-monetary recognition is a key incentive.  Motivated by flexibility.  Trust is important to establish.  People are treated like volunteers.

Volunteers need to be able to be fired.  Thank them for their service and let them go.

Is Happiness Catching Is it a valuable theory for social change.

-Yes, because it allows for a mechanism to enact social change.

Resources: “Carrots, Sticks & Premiums” NYTimes

Importance is to get accountability at the individual level.  By impacting the individual you are able to initiate the contagion factor.

Ethics: Integrity, Openness, Accountability, Service, Charity

International Finance 3

March 31, 2010

Balance of Payments

-National accounts in the open economy

Closed economy, production must equal absorption-that is, all goods and services produced must be consumed or invested .  National Income equal GDP.  Therefore Savings = Investment  (See slides for proof)

Open Economy, International trade allows for absorption to be greater or less than GDP.  The difference is the trade balance.Income can differ from production due to transfers or net factor receipts.  i.e. foreign aid or gains/losses on foreign investments, external debt, …

National Income equals consumption + investment + government spending + current account.

Current account = exports – imports + Net Factor Receipts + Transfers   or = Private Saving + Government Saving – Interest

Therefore, savings no longer has to equal investment, and the excess of saving over investment equals the current account, which also equals the trade balance plus net factor receipts.

-Balance of payments accounting

Current Account + Capital Account = Change in Reserves

-Modeling the trade balance

Marshall-Lerner condition/J-curve

If the sum of the elasticities are greater than 1 then there is benefit to the depreciation.  If less than 1 then there is not a benefit to the currency depreciation.

Government spending and the trade balance

Government spending can create a deficit in the current account, which leads to an increase in the number of jobs.  In order to reduce the deficit can devalue the currency which will reduce the wages for all, but increase employment.

-Saving, investment and the current account

Debt Dynamics

Global Imbalances

International Finance Part 2

March 30, 2010

Uncovered & Covered Interest Parity

-Uncovered Interest Rate Parity – Return on the home currency equals the return of the foreign currency after accounting for exchange rates.

Interest rate of the home currency must exceed the interest rate of the foreign currency by the depreciation of the home currency.

There is also a risk premium, which leads to two unobservables, expected depreciation & risk premium.

It is considered uncovered because the exchange rate in the future is unknown.

Covered Interest Rate Parity can be done by going to the forward exchange rate market.  Forward exchange market allows you to sell the foreign currency at a known exchange rate at a specific point in time.  Due to this it should eliminate any arbitrage opportunities and create parity in the foreign currencies.

Uncertainties in the marketplace can lead to deviations from the covered interest parity.

Opportunities from trade

Types of international trade

Inter-industry trade (trade across sectors), Intra-industry trade (trade within sector), Trade in services, and “Task trade”

-Task Trade is the process where different tasks in the production of a product are performed in different countries-locations.

What is the basis for trade? And why does it give rise to business opportunities?

Comparative Advantage

-Technology Differences – when comparing two goods between two countries the comparative advantage is the relative production capabilities i.e. a ratio.  The higher ratio equals a comparative advantage.

-In order to trade the price of the export must be lower than the domestic good when expressed in a common currency.

Overvalued exchange rate means that you can no longer trade goods because the price of the export goods are no longer cheaper than the price of the foreign good.

-Endowment Theory

Theorems: Country will trade good that relative intensely

Factor Price Equalization Theorem – Factors cannot move across countries, through trade in goods, relative factor rewards and given identical technologies, and absolute factor rewards, will tend to equalize.

Capital Intensive  means a good will consume more capital to produce the same amount of goods.  Capital can be replaced with any factor.

Comparative advantage

-Technology

-Endowments

-Who gains (suports) and loses (opposes) trade?

Non-comparative advantage explanations

-Imperfect Competition

-Representative Demand

-Product Cycle

Trade Policy

-the free trade paradigm

-tariffs and specificity principle

-Strategic Trade Policies

Managing Non Profit – Part 2

March 18, 2010

Main Goal of the Non Profit is to Serve the Public Good

-This is done primarily through being driven by the mission.  Most people in the nonprofit sector are mission driven and mission focused.

-Nonprofit typically think about their life in terms of accomplishment in life.

Nonprofits need to be managed just as vigorously as for profit corporations.  Results need to be demonstrated and the mission needs to be accomplished.  This is the goal of the leaders to hold the high expectations.

Need people to go from the for profit world and into the non – profit world  and succeed and vice versa.

Nonprofits are Not Beneficial Because they Lack

1. Self Interest of Owners – Argument Against (Individuals are motivated to accomplish the mission)

2. No Competition – Argument Against (Large volumes of competition for donors and for influence)

3. Bottom Line Motivation – Argument Against (Mission motivation)

Non-Profits are a Public Good

Four Sectors: NGO, Government, Informal & …

Andrew Carnegie believed that individuals should die with wealth, but should seek to give away a fortune.  Also believed that businesses had talents that could be used in nonprofit settings.

Henry Thoreau believed that you should invest yourself not just money when you give.

Bill Gates is focusing on applying advances to reduce inequity.  He believes that reducing inequity is the highest human achievement.  This can be accomplished by changing market forces to help the poor by creating creative capitalism by making governments use funds that align with citizen motivations, …

Side Note: Base of the pyramid are the poorest of the poor.

Non-profits are the fastest growing sector in many countries.  Laws allow these to begin very easily.

Non-profits get funding through donations from governement, individuals, foundations, …; earned income such as membership fees, fees for services, selling merchandise, …,

Contributions to 501c3 non-profits are tax deductible in the U.S. but are limited in the amount of advocacy they can do.

501c4’s are able to do more in advocacy than a 501c3.

Lawyers are an important part of the non-profit world due to the limitation and the structure that exists within the non-profit sector.

Non-profits can compete with for profit enterprises but need to be careful about how they use their funds due to the limitations and the tax complications.

Employees/ Volunteers of Non-Profits – Volunteers, Personnel i.e. marketing, accounting, … lawyers.

Beneficiaries of Non-Profits are the people who are receiving help from the Non-Profit.

Non Profit Intro – Overview

March 17, 2010

Art Taylor – President & CEO

Overview and the place of the Non Profit in the future of American society.

Majority of Funding for Nonprofits come from government.

It comes in various forms tuition, grants, payments, fees, …

Scope and Scale of Nonprofits in the U.S.

-Majority, approximately 50%, of private contributions go to Religious Institutions & to Education.  Total giving in 2008 was approximately 307.6 Billion.  Source Giving USA Foundation.

-Individuals are the largest contributor to non-profit organization among private contributions.  75% of all giving in 2008 was done by individuals.  Corporations only provided 5% of private contributions in 2008.

There are over 1.5 million nonprofit organizations and 228,707 who file taxes with the U.S. Government.  This number represents organizations that are not churches, hospitals, and schools.  Source: Guidestar Database of Charity 990’s.

BBB NonProfit Assessment Looks At

-Transparency of the Organization

-Whether or Not there is a Board and who are the representatives of the board.

-How Truthful the Organization is with its solicitations.

-Assessment of the Organization’s Effectiveness.

-Assessment of the claims made by the organization example: cause related purchases – What % will go to charity? How long the promotion will run? …

-Number of Complaints against a charity

-Use of Funds i.e. operational overhead expense.

Purchase Power Parity

March 17, 2010

Terminology for exchange rate:

-For Floating Exchange rate, use “appreciation/depreciation”.  An increase in Euro’s per Dollar represent a depreciation of the Euro.  Likewise a decrease in Euro’s per Dollar represents an appreciation of the Euro.

Law of One Price- a traded good has one price when expressed in the same currecy, arbitrage will lead to equalization of prices:

-Reasons it does note hold

1. Barries, tariffs, transportation costs, taxes

2. Imperfect competition leading to different demand curves differential pricing.

Relative Purchasing Power Parity

Inflation in local economy = percent change in exchange rate + inflation in external economy.

Therefore: percent change in exchange rate = Difference of Inflation of local economy from external economy

Positive percent change relates to depreciation in currency of local economy

Negative percent change of exchange rate relates to an appreciation of the local currency.

Implication of the theory is that by pegging exchange rates then inflation of one country will equal the inflation of the pegged currency.

Bulgaria & Estonia are two examples where the pegging of exchange rates worked to reduce inflation of the currency.   Requires a two fold approach where the currency supply is controlled and the exchange rate is pegged to a strong currency.

Real Exchange Rate is the relative price of two countries’ goods.  Common focus is on a basket of goods rather than on an individual good.

Ratio= price in local currency/(exchange rate*price in foreign currency)

If PPP hold then the real exchange rate would equal one.

Real appreciation means that a home country’s goods are more expensive than foreign country – homecountry is “less competitive”.

Although PPP does not hold, we expect real exchange rates at least to be stationary.

PPP & Real Incomes

To expand into foreign markets, need to know what is purchasing power.

Prices Lower in Poor Countries – due to lower wealth, demand for non-traded goods, lower productivity in traded goods,

Balassa-Samuelson

-If developing countries have productivity growth in the traded goods sector, their real exchange rate should appreciate.  This is an equilibrium phenomenon not a sign of losing competitiveness.