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| Volume 6, Issue 3 |
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In This Issue:
Why your employees are loosing motivation
How to adjust your decision-making style
Do I dare say something?
Three myths of Management
Oprah: A case study comes alive
CFO Whistle-blower still in limbo
IRS eyeing Executive pay
Coming distractions
The people who count
Money for nothing
10 key steps in developing an effective Performance Management Strategy
Bye-Bye Boomers?
Turning customers into your sales and marketing department
Confessions of an Entrepreneur’s wife
The case for Business Continuity Management
Alliances: How to get desired outcomes
Leadership Q & A: Finance at the forefront
Succeeding in the corner office
Proxy preview
Handling the office jerk
Quickie workouts
Wow’Em like Steve Jobs
Beyond the annual physical
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Get ahead with a BlackBerry Solution
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Truth is, more and more businesses of all sizes are turning to a BlackBerry Solution to quickly gain a competitive advantage.
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Why Your Employees Are Losing Motivation
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| Business literature is packed
with advice about worker motivation—but sometimes
managers are the problem, not the inspiration. Here
are seven practices to fire up the troops. From
Harvard Management Update. | |
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To maintain an enthusiastic workforce,
management must meet all three goals.
A command-and-control
style is a sure-fire path to demotivation.
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Most companies have it all wrong. They don't have to motivate their employees.
They have to stop demotivating them.The great majority of employees are
quite enthusiastic when they start a new job. But in about 85 percent of companies,
our research finds, employees' morale sharply declines after their first six
months—and continues to deteriorate for years afterward. That finding is based
on surveys of about 1.2 million employees at 52 primarily Fortune 1000 companies
from 2001 through 2004, conducted by Sirota Survey Intelligence (Purchase,
New York).The fault lies squarely at the feet of management—both the policies
and procedures companies employ in managing their workforces and in the
relationships that individual managers establish with their direct reports.
Our research shows how individual managers' behaviors and styles are contributing
to the problem (see sidebar
"How
Management Demotivates")—and what they can do to turn this
around...
Read the article. Back to top
How to Adjust Your Decision-Making Style
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| To move up the ladder, it's important that your method
of making decisions develops as you do. This excerpt
from Harvard Business Review reports on
research drawn from a comprehensive Korn/Ferry International database. | |
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Somewhere between the manager and director levels, executives find that approaches that used to work are no longer so effective.
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When we began our research, we expected to find that managers' predominant
decision-making styles would change as they progressed through their careers.
But the patterns that jumped right out of the data were even more sharply defined
than we could have imagined. We found that decision-making profiles do a complete
flip over the course of a career: That is, the decision style of a successful CEO
is the opposite of a successful first-line supervisor's. In the leadership (or
public) mode, we see a steady progression as managers move up in the ranks
toward openness, diversity of opinion, and participative decision making, matched
by a step-by-step drop in the more directive, command-oriented styles. In the
thinking (or private) mode, we see a progression toward the maximizing styles—where
an executive prefers to gather a lot of information and think things through—and,
at the highest executive levels, an uptick in the styles favoring one course of
action. There's a logic as well as an interdependence to the way the two aspects
of decision making evolve. As you move up the ladder...
Read the article. Back to top
Do I Dare Say Something?
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| Are you afraid to speak up at work? The amount of fear
in the modern workplace is just one surprising finding
from recent research done by HBS professor Amy
Edmondson and her colleague, Professor James Detert
from Penn State. | |
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Most surprising to us has been the
degree to which fear
appears to be a feature of modern work life.
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As every company knows, employees are its greatest resource. It's more than
a shame, then, that many workers are either not encouraged or afraid to speak
up and communicate ideas at work.
Employers are losing valuable knowledge and experience, and their companies
are weaker for that loss. In a recent working paper, Harvard Business School
professor Amy Edmondson and Penn State professor James Detert explored the
challenges employees face speaking up to internal authorities. Their research
focused on behavior in large, multinational corporations, but the lessons
learned can apply to smaller enterprises as well...
Read the article. Back to top
Three Myths of Management
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| In a new book, Stanford professors Jeffrey Pfeffer and
Robert I. Sutton assail popular yet shaky—maybe
even harmful—management practices. Our excerpt starts
with a hot trend: benchmarking. | |
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Instead of copying what others do,
we ought to copy how they think.
The logic behind the use of options as managerial incentive is flawed
once you consider what behaviors are actually rewarded.
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The catalogue of poor decision practices is immense, but we focus here on three of the most common and, in our experience, most harmful to companies.
Casual benchmarking. There is nothing wrong with learning from others'
experience—vicarious learning, as contrasted with direct experience, is an
important way for both people and organizations to learn how to navigate a path
through the world. After all, it is a lot cheaper and easier to learn from
the mistakes, setbacks, and successes of others than to treat every
management challenge as something no organization has ever faced before.
So benchmarking—using other companies' performance and experience to set
standards for your own company—makes a lot of sense. In the end, good or
bad performance is defined and measured largely in relation to what others
are doing. The problem lies with...
Read the article. Back to top
Oprah: A Case Study Comes Alive
| Writing a business case
on the icon of daytime television and chief executive
of a major media empire was challenge enough for
HBS professor Nancy Koehn and colleagues. Oprah
Winfrey's visit to campus to talk with graduating
students made it ample reward. | |
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I was interested in what it is about Oprah
that business leaders can learn from in the twenty-first century.
—Nancy Koehn
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The best and brightest executives in the world are common visitors to the
MBA classrooms at Harvard Business School, giving students a personal opportunity
to talk to the likes of Ann Fudge, Lou Gerstner, Meg Whitman, and Jack Welch.
Still, when Professor Nancy Koehn introduced her guest on the last day of class
this past spring, "everyone did a double take," Koehn recalls. Oprah Winfrey was
in the house.How the icon of daytime television and chief executive of a major
media empire came to HBS after three years of effort is a story in itself. And
what she told students brought them a unique perspective about leaders and
leadership in the twenty-first century. "I think she's a great bellwether for
the future of business," Koehn says. "Maybe she and her organization are on a
path that a lot of leaders and organizations are going to be on."...
Read the article. Back to top
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CFO Whistle-blower Still in Limbo
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The Department of Labor's Administrative Review Board has affirmed a judge's
order that a bank must rehire a former CFO who was the nation's first
Sarbanes-Oxley whistle-blower, but it doesn't seem to have settled the matter.
In late 2002, David Welch was fired as chief financial officer of Floyd,
Virginia-based Cardinal Bankshares Corp., a 65-employee holding company
whose subsidiary is the Bank of Floyd, after he refused to certify his
company's financial statements. "When I refused to certify, I was just trying
to get the ball rolling on some improvements," Welch told CFO magazine two years
ago. The former CFO says he raised concerns about several potential abuses to
Cardinal chairman and CEO Leon Moore as early as 2001, but to no avail. Included
in those concerns were improper journal entries amounting to $195,000, which led
to a 14 percent net income overstatement, alleged Welch. When he escalated the
concerns through a series of memos and by withholding his signature from
quarterly Securities and Exchange Commission filings for the small bank and its
holding company, which trades over the counter, the audit committee...
Read the article. Back to top
IRS Eyeing Executive Pay
The taxman is focusing closely on executive pay this tax season. Items
under scrutiny include family travel, corporate credit card use, and even
your company-issued cell phone.
The Securities and Exchange Commission isn't the only regulator taking a closer
look at executive compensation. The Internal Revenue Service will be
scrutinizing executive pay this tax season too, as part of its continuing
effort to force more companies to treat fringe benefits as wages for income
and employment tax purposes.In 2004, the IRS launched a pilot program to
investigate 24 companies already under audit to gauge their level of compliance
with executive compensation rules. The test group fared poorly, and, as a
result, executive pay became "an area for agents to focus on," says an
IRS spokesperson. Since then, the agency has released tax guidance in the
form of a 2005 memo called an "audit technique guide," and continues to keep
a watchful eye on how companies book executive bonuses and perks. This year
is no exception. The IRS won't only be looking at high-profile items, such as
stock option expensing and no-cost loans this year. Agents will be looking into
more mundane areas, such as...
Read the article. Back to top
Coming Distractions
If these eight risks are not on your radar screen, they will be soon.
Like most CFOs, Paul Reilly is not prone to exaggeration. The finance chief
at Melville, New York–based Arrow Electronics Inc., Reilly is by nature a
pragmatist — a level-headed, by-the-numbers pragmatist. So when he tells you
flat out that, "It's a growing problem; people are not focused on it," you take
note. What people are not focused on, according to Reilly, is the massive heap
of old computers and motherboards piling up in landfills across the planet —
the toxic detritus of the Digital Age. It's a mounting problem — literally —
and one that's only now being addressed by government regulators and
corporate officers. But as big a concern as E-waste is, it is still only a
small byte in the larger risk grid confronting business managers these days.
Indeed, Reilly's statement about the looming green peril could just as easily
be applied to a host of regulatory red flags and business black holes
roiling corporations. And while companies have always faced risks, many
finance managers say they can't remember dealing with so many.Research seems
to back this up. In a recent survey of executives (mostly CFOs) conducted
by consultancy Protiviti, half of the respondents reported that the overall
risk level for their employers has gone up substantially in the past two years.
What's more, 57 percent of those executives said their employers are not
particularly good at identifying risks.That's a high percentage, and one that
suggests that risk managers are routinely engaged in a corporate version of
Wac-A-Mole. Just as one danger is smacked down, another one pops up. And while
no single magazine article could ever chart all the hazards facing corporate
managers, the eight risks detailed in the following pages cover a wide range
of concerns. As such, they involve a number of key company functions,
including accounting, finance, and insurance. Finance chiefs may be aware of
a couple of the risks, but it's doubtful any CFO is prepared for all of them.
That's why we did this story — as a heads-up. Our matrix was simple. The impact
of these risks must be felt within the next 12 months, and the risks themselves
must be relatively unknown. Of course, relative is a relative term. We've
omitted obvious big-picture concerns like the aging workforce and
global competition.Instead, we sought out more-tangible, more-discrete risks:
from looming regulatory actions to litigation threats to insurance woes.
Generally speaking, it's those sorts of defined dangers that end up
bedeviling companies — and agitating even the most even-tempered of CFOs...
Read the article. Back to top
The People Who Count
It was a classic career path, but with a twist: after spending six years at
a midsize CPA firm, John Doherty left to become the controller of a regional bank.
From there, he moved on to a division of John Hancock, where he was director
of financial reporting. That positioned him to advance in corporate finance to,
well, almost anywhere. Yet after a mere six months at Hancock, he leapt at
an opportunity to go back to his old CPA firm.
A significant jump in salary was one factor. So was the chance to enjoy
more-flexible work hours, a greater diversity of work, and the satisfaction
of contributing to revenue rather than overhead. "Working at a company,
you're constantly watching the bottom line. The stresses of working at a CPA
firm relate to client satisfaction, which is easier to manage for me," says
Doherty. All over the country similar scenes are playing out as accounting
firms large and small sweeten the pot in order to lure or retain employees. The
Big Four have doubled their assurance staffs in the past five years and are
expected to nearly double them again in the next five, thanks largely to Section
404 of Sarbanes-Oxley. Smaller accounting firms, their client rosters expanding
thanks to new rules on auditor independence, are also upping the ante. Add to
that a precipitous plunge in the number of accounting degrees granted in the late
1990s and disaffection with corporate finance jobs, and suddenly the labor pool
is roiled by a perfect storm, one that CFOs readily admit is difficult to navigate.
Nearly half of the CFOs surveyed in late 2005 (see "How CFOs Confront the War
for Accounting Talent" at the end of this article) say that it is somewhat or
very difficult to hire qualified finance staff. "It's an extremely competitive
hiring environment today," says Craig Nickerson, CFO of Dynetech Corp., a
privately held business-process outsourcer based in Orlando. After a five-month
search, he recently hired a senior staff accountant away from Deloitte & Touche
but is still looking for an accounting manager for his 33-person finance team,
a position the company expected to fill this spring...
Read the article. Back to top
Money for Nothing
Barnes Group Inc. isn't used to being fawned over by banks. The $1 billion
manufacturer of jet-engine components and engineered springs doesn't even have a
credit rating, though CFO William Denninger guesses it would rank at just about
the bottom of the investment-grade barrel, BBB or BBB-, if the company went to
the expense of buying one.
Nonetheless, Denninger has seen what life must be like with a gilt-edged balance
sheet. Early this year, he watched Barnes's treasurer, Lawrence O'Brien, emerge
from a meeting with the company's 11-lender bank group with a host of improvements
to the company's $175 million credit revolver. O'Brien was able to negotiate
a 25-basis-point decrease in the borrowing rate, while carrying over a
previously negotiated accordion feature that allows the Bristol,
Connecticut-based company to raise up to $75 million of new bank commitments
under the existing facility. He was able to extend the revolver's maturity by
almost 20 months — putting it back to a full five-year term — and increase
the company's overall borrowing limit to 4 times EBITDA from 3.25 times. For
good measure, O'Brien also won approval for...
Read the article. Back to top
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The 10 Key Steps In Developing An Effective Performance Management Strategy
In a recent issue of The Economist, the magazine points out that "Over the
next few years companies may well come to reassess the value of their HR
operations and decide that workforce planning and performance management have
become sources of competitive advantage... ."
Some would say that's already the case. For instance, the United
Kingdom's Northumberland Fire and Rescue Authority was praised on January 19,
2006, by government authorities for "making progress in achieving its
objectives through its proactive approach to community safety, supported
by improvements in its performance management framework to monitor core
outcomes." Officials went on to say that the Authority has driven down
deaths and injuries from fire to the lowest level in history. To offer more
evidence that an investment in performance management pays dividends, consider this...
Read the article. Back to top
Bye-Bye Boomers?
It’s now a matter of time. The baby boomer generation—comprised of nearly 83
million people, according to the U.S. Census Bureau, and getting ever-longer in
the tooth—will soon begin filtering out of the workforce.
The threat that has long been on the horizon is now knocking at the door:
Boomers will be leaving behind the jobs—including many C-level posts—they’ve
held for years, taking with them the wealth of experience and knowledge
they have accrued.Charged with filling those positions, companies will draw
on a pool of workers that, at least in terms of numbers, doesn’t seem capable
of replenishing the ranks. The U.S. Bureau of Labor Statistics projects a
labor force of 162 million in 2012, and anticipates the economy will require
165 million jobs. Those figures—accounting for factors such as outsourcing
and the hiring of newly arriving immigrants—don’t necessarily equal a shortage
of 3 million workers, but do pose questions for many U.S. companies. On the
whole, “employers simply can’t afford to see this generation retire en masse,”
says Roselyn Feinsod, principal at Towers Perrin HR Services in Stamford,
Conn., without witnessing significant effects on productivity, the ability to
serve customers and, ultimately, the bottom line. The good news for business is
that...
Read the article. Back to top
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Turning Customers Into Your Sales and Marketing Department
Average Customer Value
+ Additional Retention Value
+ Additional Price Premium
= Value of Promoter Customer
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One of the most exciting and promising developments in marketing is the emergence
of something called Net Promoters as an increasingly critical metric that
drives corporate performance.
First described by Fred Reichheld two years ago in Harvard Business Review,
followed by his recently published book The Ultimate Question, Net Promoters
is now being adopted by a growing number of highly respected firms, including
General Electric, Intuit, and SAP. What does it do? In a nutshell, it provides
simple but very powerful analytical rigor to what is arguably the most important
source for spreading positive buzz about a company: its own customers...
Read the article. Back to top
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Confessions of an Entrepreneur's Wife
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"A CEO sells everyone. When he asks suppliers for better terms
he's also selling them on why they should do it. When he convinces
a new hire to join a super-risky venture, he's selling her on the
potential the job offers. When he convinces me to stay married to
him, he's selling me on the better future we will have together." |
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She was proud to support her husband's dream of building a great business.
But five years is a long time to watch someone focus on his company at the expense
of everything--everything--else.
We were on vacation at the lake when my husband decided to start a company.
Our five-year-old, Lily, was napping, so we had some rare adult time to talk
about the opportunity Bill was considering. He wanted to leave his job as
general manager for an industrial laundry plant to partner with a guy who had
invented a drink that was carbonated but also 100 percent juice. It seemed to
Bill like the chance of a lifetime, given that he had worked for a number
of entrepreneurial companies before, most notably a few beer businesses. And I
agreed. As we aged it would only become harder for him to take a big risk like
that. We had some money saved and had recently relocated from Boston to
Richmond, Virginia--a pretty affordable town. Why not go for it? I knew what we
were in for. I had been a business journalist for a dozen years (five of them
on staff at Inc.) and had written countless articles and a couple of books
about managing start-ups. My husband was a smart M.B.A. with entrepreneurial
drive, I told myself, and I would be the supportive wife with exceptional
business sense. In five years, he would sell the company to Coke or Pepsi and
cash out. Of course you've already guessed it: I was dead wrong on nearly every
count. Neither of us could have predicted the company's surprising trajectory.
Watching Bill navigate the entrepreneurial life, I see now just how little I
really knew about starting and building a business. In the five years since
Bill embarked on his great adventure, I've come to realize the only thing I was
right about originally is that my husband is, indeed, a smart M.B.A.--and he
has more entrepreneurial drive, much more, than either of us knew...
Read the article. Back to top
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The Case for Business Continuity Management
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Globalization, regulatory mandates, and recent natural and man-made disasters have pushed BCM into the C-suite and the boardroom.
The debate over whether business continuity management (BCM) is an IT issue
or a finance issue is moot: It's both, and then some. True, the discipline grew
out of IT's disaster recovery practices, but today BCM is clearly an
overarching business concern -- and an increasingly critical one.
Prompted by a rising tide of terrorist attacks, natural disasters, and less
news-worthy but equally expensive power outages, regulatory bodies and
corporate boards are pressing executive teams to expand and strengthen
their organiza-tion's resiliency. As a result, more and more finance functions
are assuming ownership of enterprise BCM strategies. Regardless of whether
finance owns those capabilities, though, CFOs should carefully measure the
cost of continuity and determine the level of risk their company is willing
to assume. To do so, they must understand the discipline's drivers,
investigate emerging BCM frameworks and review their organization's options
for fortifying its BCM activities. Bill Teuber brings a unique perspective to BCM.
He's CFO and executive vice president of EMC Corp., a Hopkinton, Mass.-based
provider of products and services for information storage and management. Teuber
and his staff play a key role in managing the company's continuity practices.
And Teuber also keeps tabs on customers' BCM capabilities, which EMC's
products support. "With business continuity, there is a gap between expectations
and reality," says Teuber. "I've seen that here, in other companies and in surveys."
A widely circulated 2003 survey conducted by EMC with RoperASW crystallized
that disparity. Fifty-two percent of surveyed IT executives in U.S. companies
reported that their organization's critical data would be "very vulnerable" in
the event of a business interruption. However, only 14 percent of surveyed
business executives -- who worked in the same companies as the IT people -- shared
that view. The survey also examined respondents' estimates of the time
their organization would need to resume normal business operations after
an interruption...
Read the article. Back to top
Alliances: How To Get Desired Outcomes
Alliances represent low-risk growth opportunities -- if the partnering
companies know how to manage the relationship effectively.
Companies forge alliances with other organizations for a number of reasons,
including to develop and market products and services and to take advantage
of technology, knowledge or capabilities they do not possess. * However, the
real challenge begins once these alliances are in place. By their very
nature, alliances are prone to disagreement, misunderstandings and unmet
expectations that can lead to conflict. "Alliances are particularly rich in
potential problems in matters like the definition of costs, setting up the initial
and periodic funding, estimating realistic cash-flow budgets, making
major acquisitions, assuming debt, customer relationships, and so on," says
Frank MacInnis, chairman and CEO of Emcor Group Inc., a Norwalk,
Conn.-based construction and facilities services company. These problems can
be particularly challenging because "corporate practices differ from company
to company, so these issues must be identified before the alliance is created,
and there should be clarity around what decisions can be made and how and by
whom," says MacInnis. For example...
Read the article. Back to top
Leadership Q&A: Finance at the Forefront
Douglas R. Oberhelman, a group president at Peoria, Ill.-based construction
and mining equipment manufacturer Caterpillar Inc., was formerly the company's
CFO. Oberhelman explains to Business Finance editor Laurie Brannen how a
finance background can pave the way to the executive suite.
Laurie Brannen: How did your stint as CFO prepare you to move up in the organization?
Douglas Oberhelman: I served as Caterpillar's CFO for four years. My
experience during that time was tremendously valuable to me in several areas.
Most notable was the...
Read the article. Back to top
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Succeeding In The Corner Office
At the time, higher pay, increased responsibility, a corner office and an easier commute added up to a dream job and a great career move.
Six months and many sleepless nights later, it appears that your values don't mesh
with your new company's way of doing business, and that you've made the worst
decision of your career. Now what?"Don't be dazzled by higher pay and a chance
to move up the corporate ladder when sizing up a job offer," says Barbara
Callan-Bogia, founder and principal of Callan Consulting in Framingham, Mass.
"I've tracked many executives in new jobs, and the key to success is
'fit'—not competence. You wouldn't have gotten an interview, let alone the job,
if the company didn't think you could do the job."...
Read the article. Back to top
Proxy Preview
Executive pay is always a hot topic. But this time of year, CEO salaries grab
even more headlines than usual. As companies begin releasing their proxy
statements, shareholders finally learn what top executives made the previous year.
Usually, the headlines are easy to write: Executives are making more. But
there's another trend this proxy season: Executives are disclosing more. Some
companies are divulging more information about executive pay, anticipating new
U.S. Securities and Exchange Commission rules that will probably pass later
this year. According to a survey by consulting firm Watson Wyatt, 23% of companies
plan to adjust their disclosure this year because of the proposed rules. "This is
kind of your last time to get a practice run," says Pat McGurn, an executive
vice president at Institutional Shareholder Services, an organization that
monitors corporate governance and executive pay...
Read the article. Back to top
Handling The Office Jerk
The pallbearers carried their co-worker's casket down the church steps to
the hearse.Mourners whispered their fond memories and expressed an overwhelming
sense of loss to friends. A cell phone tucked in one of the pallbearer's pockets
played a cheerful tune. He's an important guy, so he took the call.
"That's appalling," says Dr. Ken Lloyd, author of Jerks at Work: How to Deal
With People Problems and Problem People. "His action told everyone that on many
levels he's a jerk." Unfortunately, there's no shortage of jerks. These
maddening creatures, including some with real talent, are everywhere. There are
jerks in the corner office, jerks in middle management, jerks in computer support
and jerks in the next cubicle. Jerks can be male or female, young or old. An
education doesn't inoculate one against jerkdom. The essence of a jerk is immutable,
or so it seems, raising a basic question: How do you deal with the office
ninny, jackass or schmuck?...
Read the article. Back to top
Quickie Workouts
Is it possible to get a good workout in less than 30 minutes?
The Gravity Fitness Center in Le Parker Meridien hotel in New York boasts
that with "The Quickie," a person can get into the gym and work out their entire
body in just 28 minutes. Does it work? While many people are under the impression
that they have to spend hours at the gym (which leads to the excuse of not
having time), that's not necessarily the case. A typical strength exercise
program usually consists of three sets of eight to 12 repetitions per body part.
But the American College of Sports Medicine in Indianapolis, has done research
that shows that 80% of the gains made from the three-set system are accomplished
in...
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How to Wow’Em like Steve Jobs
Apple Computer (AAPL), now celebrating 30 years of innovation, has
revolutionized the way we use computers and listen to music. Now its
charismatic co-founder, Steve Jobs, has transformed the corporate pitch.
Anyone who has watched a Jobs keynote will tell you he is one of the most
extraordinary speakers in Corporate America. Jobs learned a long time ago
that a leader must be a company evangelist and brand spokesperson. As a
communications coach and former business journalist, I have spent plenty of
time with Apple executives and have watched my share of Jobs' presentations.
He is magnificent. But whether you are pitching a hot gizmo, such as the iPod,
or a hot sub sandwich, a story is a story and your goal is to win customers.
Here are Jobs' five keys to a dazzling presentation...
Read the article. Back to top
Beyond The Annual Physical
Well-heeled worriers are signing up for wide-ranging tests. We try a pricey new one.
How much do you really want to know about your health? For most of us, the
annual physical -- a little blood work, a little poking and probing -- will
more than suffice. But for the well-heeled worrier, there are far more detailed
and costly options: one- to two-day executive physicals that cost thousands of
dollars, $500-and-up full body scans, and now, a $3,400 blood test named
the Biophysical250 that screens for 250 possible diseases, at least 150 more
than most standard physicals. "Very American," my own admittedly skeptical
doctor sighed when I told him I'd tried the latter option for this story.
Then came the warning...
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