Stop Paying Employees Just to Show Up!

Beware small businesses – you get exactly what you pay for. According to a recent survey of 1,000 small businesses in the United States by management consulting firm George S. May International Company, 41 percent of owners pay their employees just to show up and that model is killing profitability.

“Too many small businesses still reward employees for just showing up, for being a warm body everyday, when they should be paying them based on performance related to specific, measurable goals,” said Paul Rauseo, managing director of George S. May International. “You’re setting the stage to destroy profits when employees expect compensation for participation in collaborative activities, regardless of results.”

In fact, 45 percent of small businesses say they aren’t profitable. And the relationship between the compensation and profitability data isn’t a coincidence, according to Rauseo. “The similarity of those numbers shows how closely your compensation style and profitability are linked. Small businesses can no longer turn a blind eye to that connection. They need to shake off their complacency and commit to making real change in operational efficiencies,” he said.

Initially limited to a small group of companies, the pay-for-performance concept has rapidly expanded over the past year as businesses look for ways to improve their operations. About 60 percent of small businesses claim to use the model, while not all (only 55 percent) institute the specific, measurable employee goals needed to make the system work.

“We tell clients to stop paying employees just to show up,” Rauseo said. “Pay-for-performance doesn’t guarantee profitability, but it has advantages in a down economy. Now is the time to climb out of the cellar of economic despair and plan for profit. You can turn your business around – start by taking a long, hard look at your compensation practices.”

Worker Non-Productivity Costing U.S. Businesses $4.4 Billion Every Day

U.S businesses waste over $4.4 billion every day in lost worker productivity, according to data analysis by Global 360.  In an eight and a half-hour workday, the average worker spends 1.7 hours doing nothing. When combined with recent Bureau of Labor Statistics data on the size of the U.S. workforce and average hourly wages, Global 360 determined that lost productivity is costing U.S. businesses over $4.4 billion every day – over $1 trillion annually.

If each worker increased his or her productivity by just 15 minutes per day, American businesses would save almost $650 million per day.

Noted Business Process Management (BPM) industry expert and Global 360 Director of Strategy Terry Schurter, “While it is impossible for a human to have 100% uptime in a job, it is possible to improve efficiencies through better system design. We are in a knowledge-based economy, and a huge percentage of our output is based on efficient business processes. So while business can squeeze more valuable time out of workers, it also needs improved software.”

“The bottom line is that my own industry, BPM, hasn’t yet delivered on its full promise,” added Schurter. “Vendors have spent too much time with system designers and not enough time with the people who actually do the work, the process participants – thinking that somehow software on its own will solve problems. The result has been software that doesn’t give users what they need to get their jobs done, forcing them to work around the system instead of within it – and ROI suffers as a result.”

The Lion Roars No More

It happened late so it didn’t make the papers, so if you don’t have radio, TV or Internet, Sen. Edward M. Kennedy of Massachusetts died early this morning. Known as the “Lion of the Senate,” Teddy, as he was known, was a true larger than life character who championed lots of legislation to help society’s most needy, including the Americans with Disabilities Act, the Voting Rights Act and the Family Leave Act. He also had some personal tragedies which marred him somewhat and are probably the main reason his Presidential ambitions were quashed in 1980.

He is an important figure in our economy and business world. His legislation clearly burdened business. Every new building now needs handicapped access. Businesses are required to give a certain amount of leave if they are above a certain size. And so on.

But here’s the thing. Ted was a pragmatist. He was the rare Democrat who indeed reached across the aisle to seek reasonable compromise on things, accepting Republican contribution to get things done. The Family Leave Act, for example, exempts small businesses, something the right was looking for. Many Republican Senators proudly called him a friend even if they didn’t agree with his politics.

He had some tough times when he was drinking too much, overweight, reports of carousing, etc. He divorced first wife Joan, who suffered from mental illness, in 1982. His second wife Victoria, whom he married in 1992 and who was about 22 years his junior (he met her when she was an intern in his office), seems to have really put him on the straight and narrow the last few decades.

But extraordinary Senator he was. And in Massachusetts he was overwhelmingly beloved. And to anyone being honest, regardless of political stripes, he deserved respect. As noted by former Education Secretary Bill Bennett on CNN this morning, there is probably no one else in the Senate today with his stature and ability to cajole.

With the Democrats now losing their filibuster-proof majority in the Senate, it will be interesting to see what happens. Will Kennedy’s death create a martyr for those seeking dramatic health care reform to redouble their efforts? Or is this the beginning of the erosion of the Obama magic in terms of legislative accomplishments? As always, I leave this for others to figure.

Shoppers Regaining Rationality – However, Price Still Rules

U.S. consumers have been battling adverse economic conditions for well over 18 months, and, to cope, they have been forced to make significant changes in how and where they shop. Gone are the days when shoppers selected retailers based on convenience, merchandising, promotions and affordability. Since shopper loyalty has become a much more complex subject, the latest IRI Times & Trends Report provides insights into recession-driven changes in consumer shopping patterns across departments, categories and consumer segments.

“When we studied channel migration last year, we uncovered sizeable share gains by supercenters across departments and income levels, since consumers were trying to stretch their dollars,” says IRI Consulting & Innovation President Thom Blischok. “While supercenters are continuing to do well, we are also finding that competing retail channels have really been turning up the heat. From new everyday low price programs to expanding prescription drug programs, retailers are racing to deliver against consumers’ rapidly changing needs and behaviors. This is certainly the time for both retailers and manufacturers to conduct frequent and granular consumer and market assessments and develop consumer-centric marketing strategies.”

When mortgage and financial markets weakened, and energy and food prices spiked, shoppers flocked to supercenters and focused on securing the lowest prices on everyday CPG solutions. During the last few months, as energy and food prices have declined and the economy has begun to show glimmers of hope, shoppers have calmed down and are, once again, reassessing their shopping attitudes, behaviors and strategies.

Grocery, drug, dollar and other channel managers are intently focused on winning back shoppers. For many retailers, newly evolving strategies have been successful. Freed up by lower gas prices, three-quarters of today’s consumers shop at five or more channels.

The importance of winning with shoppers in an environment marked by rapid changes in purchase attitudes and behaviors is underscored by another trend—consumers are making more frequent visits, but the rate of basket growth has moderated. Still, some channels have seen particularly strong growth in per trip expenditures. The average dollar sale per purchase at dollar stores, for example, has grown five percent in the last year. Channels that don’t react quickly to changing consumer attitudes and needs stand to lose significant business.

“Even though shoppers are assessing their needs more rationally and are visiting a wide range of channels, they still view their purchases largely through price,” adds Blischok. “This mindset is not lost on CPG marketers. In fact, several grocery retailers are focusing on an everyday low price format. Because increases in hiring typically trail recovery after a recession, IRI forecasts that price will continue to be a principle driver in shoppers’ decision-making process after the recession ends.”

U.S. Ad Market to Decline by more than $1.6 Billion in 2009

Consumers now choose from an average of 119 TV channels, more than ever before in history, but those channels are competing for attention with a trillion internet links and more than a million mobile Web sites.  According to a recent Yankee Group research study, this oversupply of media is driving a more than $2 billion decline in TV advertising, which, combined with the economic recession, will pull down the U.S. ad market by more than $1.6 billion in 2009.

The market power of television is being eroded by dramatic growth in IP networks and their corresponding capacity to carry advertising. Yankee Group forecasts there will be more than 477 million wired broadband users worldwide by the end of 2009, a boost of more than 50 million since 2008. In addition, Yankee Group survey data show that 12 million more consumers are browsing the mobile Web now than in 2008.

As consumers become increasingly connected, behaviors are changing. New demands abound for Anywhere Media that is screen-independent, on-demand and easy to consume.

“As the Anywhere Network grows to connect nearly everyone on the planet, media companies must adopt new business models that acknowledge that consumers now have more power over their business,” said Carl Howe, Yankee Group director and author of the forecast. “Just as the music industry was forced to reinvent itself when digital downloads undermined its traditional strategies, the Anywhere Network’s abundance of content and advertising inventory will similarly reshape the TV, print and mobile media industries.”

Take Me Out…

Want To Own an Industrial Average?

We hear that Rupert Murdoch is thinking of selling the stock market averages business owned by his Dow Jones & Company. Would it become the Steve Schwartzman Industrial Average? The Goldman Sachs Industrial Average? Who would buy it? Interesting.

In the meantime another great week for the current Dow. It hit its highest point since election day, closing at 9505 yesterday. That’s 1.7% just Friday. Nice for my 401(k). It was good news from the Fed and in home sales that pushed things, according to CBS News. Is it time to get in the market if you haven’t? No clue. There’s no question at some point it will go beyond its old high. But when?? I dunno.

California Launches IT Reform Push

State officials and representatives of the information technology industry gathered this past week in West Sacramento to begin the task of reforming the state’s IT purchasing process. Late last month, the Governor enacted a series of process and legislative changes included within the 2009-10 budget, that when implemented will greatly shorten the time it takes to get an IT project done, generate project benefits earlier, avoid costs and aid in the modernization of the state’s technology environment.

“The Governor has made it clear to us all that we must look to cut the time and cost involved with our large IT projects in California while working to ensure we benefit from the latest technological advancements,” said Jim Butler, the state’s chief procurement officer. “We must work to stop the multi-year procurement process. The Governor’s plan will cut our purchasing time from five years to one, while also cutting costs and enhancing our ability to collect more revenues.”

The new program makes changes in a number of areas. The most significant improvement being reducing the total time it takes to implement a large IT project. Under the new plan, the process would be reduced from 3-5 years to 24-26 months, avoiding a large amount of workforce costs. Additionally, the plan also incorporates changes to allow multi-stage phased procurements-these allow a small number of winning first round bidders to create pilot or prototype versions of the systems they have bid on. This, a normal part of the IT procurement process outside of state government that was formerly prohibited. The opportunity to evaluate working version of systems should greatly improve the final products.

The IT procurement process improvements will also engage the IT community ahead of the state releasing Request for Proposals on new projects. This will allow the IT industry to provide much better input to the bid documents the government produces. Other improvements streamline the appeals process, drop some burdensome reporting requirements, and reduce mandatory financial withholding requirements for IT vendors.

“These reforms will strengthen our existing laws and help the IT vendor community partner with us to build projects that will operate more efficiently and effectively,” said Teri Takai, California’s Chief Information Officer. “As we overhaul our aging technology infrastructure, California has a golden opportunity to achieve Governor Schwarzenegger’s vision to reform, rebuild and better serve all Californians.”

We Lose Two News Biggies

In the last week we have lost 60 Minutes creator Don Hewitt and reporter/commentator Robert Novack. You know it’s a bad week when you need to hear the slow, sad-sounding piano version of the Today show theme as they go into commercial instead of the regular upbeat version.

Don Hewitt was 86 when he died yesterday. He created and produced CBS’ wildly popular 60 Minutes for 36 years. There’s simply no TV show that has withstood the test of time like this (except maybe NBC’s Meet the Press). Yes they were at times accused of ambush journalism and not getting things exactly right, but I always loved when they got a bad guy in his parking lot and asked why he’s stealing money from grandmas and widows and getting that blank stare. Hewitt, who joined CBS TV back in 1948 just when TV was starting, also produced the first televised Presidential debate in 1960. According to Fox News, he also directed the first network television newscast back in 1948, created the idea of using cue cards and is widely credited with coining the term “anchorman.” To me, growing up Sunday nights meant 60 Minutes. In this hectic time of life for me now I have not had as much time to sit down and watch. He will be missed.

Bob Novack was dubbed by the Huffington Post as a “pugilistic debater and proud owner of ‘the Prince of Darkness’ moniker. The New York Times called him “pugnacious.”  He died Tuesday at the age of 78 from a brain tumor. His newspaper columns and TV appearances were both dreaded and welcomed by his liberal opponents. He came to prominence during the Reagan era (the Times noted that his column was considered the “bulletin board of the Reagan administration”) and retained his conservative views right to the end. But he was articulate and made a point in a way that the average person could understand. He became the news in 2003 by outing CIA officer Valerie Plame when her husband was criticizing the Bush administration and suggesting they distorted information about Iraqi weapons to justify the war there. This led to some convictions (including VP Cheney’s chief of staff I. Lewis “Scooter” Libby- convicted of perjury). He ultimately revealed his sources as Carl Rove, Bush’s chief of staff, and Richard Armitage, a former Deputy Secretary of State. A strong voice of the conservative movement, who somehow avoided the sensationalism of others like Rush Limbaugh, I respected him very much. Let’s hope that both left and right have more folks with the passion and yet the reserve of Novak.

Managed Services Industry Finds a Friend in the Recession

Almost 20 percent of IT professionals are purchasing more managed services as a result of current economic conditions, according to the latest Enterprise And SMB Networks And Telecommunications Survey by Forrester.  “While the down environment is making most technology areas suffer, managed services is getting a boost as firms look for more flexible payment models that limit capital expenditure but also can keep them current with technology changes that help their firm,” said Ellen Daley, vice president and research director at Forrester. “This further accelerates an industry move to a more flexible services model for fulfillment of telecom, network, and IT technology changes.”

Forty-seven percent of enterprise respondents and 37 percent of SMB respondents say that they have already purchased managed or outsourced telecommunication services. Unlike in past years, the top reason isn’t cost savings — both enterprises and SMB respondents say they are motivated to use managed services in order to focus on their core business competencies and not just keeping the network running.

Other key highlights of the survey include:

• Unified communication (UC) adoption continues to see traction. Twenty-two percent of enterprise respondents and 24 percent of SMB respondents report that they are already, or are currently implementing, a UC solution. Just 12 percent of enterprises and 20 percent of SMBs report no interest in doing so. The main motivations for adopting UC are cost savings and increasing communication flow between employees.
• Enterprises use a plethora of wireless networks. Almost 65 percent of enterprise respondents report that their firm has already implemented, is implementing, or is upgrading their wireless local area network (WLAN). Close to half of SMBs have already implemented or are implementing an in-house WLAN solution. While there’s high enterprise interest in both fixed and mobile WiMAX, SMBs are more resistant to public cellular data with 45 percent of them indicating no interest in using it.
• Gradual growth in desktop voice over IP (VoIP) continues. Thirty-four percent of enterprise respondents say they have already implemented or are implementing desktop VoIP, and an additional 14 percent of enterprise respondents are expanding or upgrading their VoIP environment. Thirty-four percent of SMB respondents say that they’ve already implemented a desktop VoIP solution, and another 9 percent of SMB respondents are upgrading or expanding their current one.

Next Page »