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| Volume 8, Issue 3
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In This Issue:
 Rescue me: A fed bailout crosses a line
Buyout industry staggers under weight of debt
 York: A long, ugly, deep recession
A visible hand reluctantly grows heavier
 Senior executives say we're in a recession now – or will be within six months
 To survive or thrive?
 Toward more strategic sourcing
 Are you the pointy-haired boss?
Communication for managers 101
 The fine art of sucking up to your boss
Eight healthy reasons to drink beer
Memo to the Fed: Stop those rate cuts
 Meet the bosses who could win the ‘Awful’
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Rescue me: A fed bailout crosses a line
WHAT are the consequences of a world in which regulators rescue even the financial institutions whose recklessness and greed helped create the titanic credit mess we are in?
Will the consequences be an even weaker currency, rampant inflation, a continuation of the slow bleed that we have witnessed at banks and brokerage firms for the past year? Or all of the above? Stick around, because we’ll soon find out. And it’s not going to be pretty.
Agreeing to guarantee a 28-day credit line to Bear Stearns, by way of JPMorgan Chase, the Federal Reserve Bank of New York conceded last Friday that no sizable firm with a book of mortgage securities or loans out to mortgage issuers could be allowed to fail right now. It
was the most explicit sign yet of the Fed’s “Rescues ‘R’ Us” doctrine that already helped to force the marriage of Bank of America and Countrywide. But why save Bear Stearns?...
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Buyout industry staggers under weight of debt
With their big paydays and bigger egos, private equity moguls came to symbolize an era of hyper-wealth on Wall Street. Now their fortunes are plummeting.
Celebrated buyout firms like the Blackstone Group and Kohlberg Kravis Roberts & Company, hailed only a year ago for their deal-making prowess, are seeing their profits collapse as the credit crisis spreads through the financial markets. Investors fear that some of the
companies that these firms bought on credit could, like millions of American homeowners, begin to buckle under their heavy debts now that a recession seems almost certain. The buyout lords themselves suddenly confront gaping multibillion-dollar losses on their
investments...
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York: A long, ugly, deep recession
"Watch your receivables like a hawk." -Jerry York on the coming recession, during CFO Rising, March 2008
Speaking at the CFO Rising conference in Orlando, former IBM and Chrysler Corp. finance chief Jerry York predicted a lengthy and deep recession for the American economy. Addressing the topic of what boards are demanding from CFOs, York said if he had only five minutes to
give his speech, he would tell finance chiefs that: "CEOs and boards are just going to expect you to get these companies through the mess," emphasizing that, "I think this is going to be a very ugly recession, I think it is going to be lengthy, I think it is going to
be deep." [York told CFO.com: "It's going to be a very bad recession, perhaps the worst I've seen in the 46 years I've been working."He described a "perfect storm" of economic calamity...and what measures you should be taking...]
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A visible hand reluctantly grows heavier
Citing a "significant erosion of market discipline," financial regulators find the credit crisis demanding an ever-stronger regulatory response.
In the 1987 cult horror film Evil Dead II, the hero's right hand becomes possessed and does battle with its owner, who is finally forced to saw it off. Treasury Secretary Henry Paulson, now dealing with his very own horror show in the melting credit markets, can
probably relate. Paulson, the former chairman and CEO of Goldman Sachs, has strived to regulate the financial markets with a light touch. Yet the most recent report of the President's Working Group on Financial Markets, which Paulson chairs, shows financial
regulators are being pulled inexorably by the worsening credit crisis to use a heavier regulatory hand or even intervene directly in the market. Indeed, Friday, just one day after the report was released, the Federal Reserve was forced to back a bailout of Bear Stearns.
And earlier in the week, the Fed poured some $200 billion of liquidity into the market. The report of the President's Working Group itself contains recommendations that translate into increased regulatory oversight of everything from credit-rating agencies to banks to
institutional investors to mortgage brokers. The report also recommends that regulators intervene with...
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Most senior executives say we're in a recession now – or will be within six months
With Few Exceptions, Senior Executives Say Their Companies Will be Unable to Avoid the Effects of the Recession, According to Boston Consulting Group Survey.
Most U.S. business leaders believe the economy is in a recession now, or that one is inevitable within six months. That's according to a survey conducted by The Boston Consulting Group (BCG) of 101 senior decision makers at U.S. companies with at least $500
million in annual revenues. Almost every executive (94.9%) who said that a recession is likely believes his or her company will not be able to avoid the effects of the recession. Companies Already Feeling Recession Squeeze. A total of 53.4% of executives believe that
we're in a recession now (37.6%), or that we will be within six months (15.8%). While the majority (71.2%) of those who believe we're in or near recession say they base their view in part on macro-economic indicators, they're also feeling the effects in their businesses:
55.9% say their view is based in part on a slowdown in sales, and 30.5% say it's based in part on a slowdown in payments to their companies.
Going into the Recession With the Right Perspective. "We believe companies should approach signs of a recession as an opportunity - to prepare. Downturns magnify relative strengths and weaknesses, so companies that gird themselves intelligently can leverage a
change in the dynamics of an industry - something that always happens in a recession - so that it works in their favor," said Hal Sirkin, global leader of BCG's Operations practice, which spearheaded the research."In the last recession, 30% of the companies that had been
among the top 10 players in their sectors dropped off that list. So, viewed the right way, a downturn presents a strategic opportunity to leapfrog the competition, rather than simply posing a threat," he added.
[The Right Steps to Being Prepared. Mr. Sirkin suggests that companies should begin immediately to determine and measure their ...]
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To survive or thrive?
If a recession is really on the way, it could spell opportunity for companies that take the right steps right now. Everyone knows the proverb about finding opportunity in chaotic times. But what about lean times?
In the traditional view, an economic downturn is something your business hopes to survive: hunker down, dial back on spending and hiring, and wait for the uptick that signals a return to business as usual. But surviving isn’t good enough, in lean times or anytime. Every
business wants to grow and thrive. And by turning to a set of common-sense strategies now, you can position your company to thrive during a downturn by taking market share away from competitors, and be poised for breakthrough growth when the economy rebounds. Chances are,
the structure you’re currently running is built on a set of circumstances that are already starting to erode. If you wait too long, your ability to make changes may become limited...
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Toward more strategic sourcing
Getting the most from suppliers takes more than making them jump through competitive hoops and fight for every contract.
When the economic times get tough, companies almost automatically try to trims costs by pumping up the competitive pressure on their suppliers. But that might be a mistake, according to a new white paper from Huron Consulting Group. Taking a rigidly competitive
approach to supplier selection may save funds in the short term, but it can eat time and resources in the long run, create resistance within the organization, and send the wrong message to suppliers who have performed well. Companies need a more flexible, strategic
approach, even in hard times. The Huron paper recommends a five-phase methodology for evaluating incumbent relationships...
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Are you the pointy-haired boss?
Here he comes again. In Dilbert cartoons, you know him as the pointy-haired boss.
He will parade up to your cubicle to dispense self-serving advice. His logic is as arbitrary as his deadlines. He may sprinkle his language with the latest acronyms, but you know the truth. He is oblivious to day-to-day operations, like Mr. McGoo
wandering through a minefield. Behind your corporate Pollyanna, you resent him sometimes. Still, you follow the drill: stroke his ego and don't make waves. You may have started to tune him out, but he still holds sway over your career. It may be
dispiriting, but you have come to accept your situation: your boss is not equipped to help you and you are on your own. Demonizing then Becoming the Boss In the cubicle culture, it is easy to caricature or demonize the boss. The dizzying speed
of business sometimes makes corporate decision-making seem capricious. When you step into management—and become responsible for the livelihoods of others—your words and actions become instantly magnified. Your world accelerates and expectations are
high. Your credibility is constantly on the line. In this environment, you can quickly become overwhelmed. Some managers choose to insulate themselves; others overcompensate. Either way, you may morph into that person who once made you
snicker. You may not even realize it. Then, like a blinding light on the road to Damascus, it hits you...
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Communication for managers 101
Employees Stressing Out
While it's no secret that stress contributes to overall worker well-being, what is surprising is that many employers are likely to do little about it.
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Harvard Business Publications recently confirmed what many have always known: effective communication is the number one skill for executives to develop.
But this skill is neglected when it comes to employee development. Companies send their managers and executives to all types of continuing education programs. And yet, communication development goes highly overlooked. Managers and executives need
to be acutely aware of their communication within the organization. A Gallup poll of more than 1 million U.S. workers concluded that the No. 1 reason people quit their jobs is because of problems with their immediate supervisor. Also, surveys show that
over 80% of work-related problems are due to a breakdown in communication (Felber 2002). So how can managers and executives improve their interpersonal communications with their employees? Here are five easy steps that can be taken:...
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The fine art of sucking up to your boss
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Forget about complimenting the boss' tie or her choice in shoes. And if you're thinking of picking the head honcho up a scone and coffee on your way into work, think again.
Forget about complimenting the boss' tie or her choice in shoes. And if you're thinking of picking the head honcho up a scone and coffee on your way into work, think again. There's an art to sucking up, and if the boss--or your co-workers--can
figure out what you're up to, you're not doing it right. More importantly, it will backfire. Your goal is to develop trust between you and your manager since the projects you work on and whether you get promoted is directly tied to your
relationship with him or her. So while everyone calls it something different, it's key to your success at work. "I call this self-survival," says Faith Ralston, an
organizational leadership coach. "It's not fun to play the game, but if you do it to succeed then you're not just doing it to make the boss feel good." The key is...
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Eight healthy reasons to drink beer
Looking for a good excuse to tip back a beer? You don't have to wait for St. Patrick's Day. That's because a decade's worth of health research shows that regular, moderate beer intake--one to two 12 ounce glasses per day for men and one for women--can be good for you,
especially if you're facing some of the most common diseases related to aging. Experts say wine tends to get most of the attention when it comes to the health benefits of alcohol primarily because of the French paradox, a reference to the relatively low rate of heart
disease in France in spite of a diet high in saturated fat. The idea is that daily sips of Merlot make the difference. But a number of studies are showing that moderate consumption of
alcohol, including beer, can have similar...
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Memo to the Fed: Stop those rate cuts
Lee Hoskins is a senior fellow at the Pacific Research Institute and a former Cleveland Federal Reserve president.
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Robert P. Murphy is a senior fellow in business and economic studies at the Pacific Research Institute.
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The markets rallied last Tuesday in response to the Fed's growing assistance to holders of mortgage-backed securities.
Yet many onlookers are convinced that an aggressive cut in the federal funds rate at the upcoming March 18 meeting is still necessary to avoid a painful recession. In our view, further loosening at this time would be a mistake, and would also send an alarming signal
regarding future monetary policy. he Fed needs to quit chasing declining GDP growth and instead focus on...
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Meet the bosses who could win the ‘Awful’
When bad boss behavior occurs, it generally happens in an atmosphere in which the law is ignored, company policy is ignored and the line separating good business
practices from boorish conduct—and often unlawful conduct—is crossed. A dose of stupidity, mixed with a larger dose of arrogance—that’s the formula for winning an Awful Award.
Dressed in their Sunday best, everyone leaned forward to hear the words: “The envelope, please.” Anticipation grew. Who would win and who would lose? The room was hushed. The envelope loomed large in the announcer's hand. "And the winner is
..."This could be a scene from the Academy Awards. Or it could be a scene from any courtroom in the country, any day of the week. Actors who receive an Oscar are honored for their behavior on-screen. Employer-defendants who receive a jury verdict
in favor of a plaintiff are also recognized—for their bad behavior in the workplace. Here, in no particular order, are this year's nominees for the Awfuls—my Bad Boss Behavior of the Year Award. First: American Apparel CEO Dov Charney, noted for his
role in the lawsuit Mary Nelson v. American Apparel, Inc., et al. Mr. Charney often referred to women as...
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