Hedge funds have historically lodged in a dark corner of the investment universe, where investors and regulators were happy to leave them. There they have rested, mostly in the investment portfolios of the wealthy clients of private banks as tools to preserve wealth.
But institutional investors – the big pension funds, local authorities, charities and university endowment funds –- have become more interested in alternative investments. Falling markets have highlighted the benefits of funds that can pay positive returns regardless of what stock markets are doing, apparently with less volatility.
Fund managers, too, are seeking more flexibility in the way they invest, and have migrated in their hundreds to set up and run their own hedge funds. The number of hedge funds now exceeds 6,500, according to some estimates. And the amount of money invested has more than doubled since 1998 to more than $750bn. Read more →
When a change-management consultant interviewed a group of workers, he realized they didn’t understand the impact of returned shipments. After that meeting, the consultant placed a pickle jar in the middle of the shipping department floor. For every successful shipment, management placed a quarter in the jar. For every shipping error, management removed $10. The money that remained in the jar at the end of the month was distributed to department staff.
While some business strategies analyze the affects of change on the bottom line, change management focuses on people and how they resist, cope with, and ultimately accept change in the workplace. Executive leaders use change-management strategies to create a culture that embraces change, and often find that these strategies make the difference between the success and failure of new management processes and system implementations. Read more →
Innovation is one of those words that can mean different things to different people — indeed, if you ask a group of your colleagues to write a sentence or two about what they mean by the term, you should expect a lot of variety, for example:
- A new idea.
- A really great new product.
- Something different from the competition.
- Something that makes real money.
- Something that is so radically different.
Some people tend to emphasize the creativity aspect of innovation; others stress the need for commercial success; yet others highlight the importance of being radical. Read more →
The son of a stockbroker, David Ogilvy was born in 1911. Despite the family’s reduced financial circumstances Ogilvy was dispatched to Fettes School, a prestigious private school near Edinburgh, Scotland. What Ogilvy lacked in natural academic ability he made up for in scholarly application, securing a scholarship to study history at Christ Church College, Oxford University.
When he left university, the young Ogilvy sought adventure, trading the Cotswold stone of the Oxford colleges for the boulevards of Paris. In France, he worked in the kitchens of the Hotel Majestic. His first assignment was to prepare meals for customers’ dogs. When Ogilvy had tired of la vie Parisienne he returned to England to sell a new type of cooking stove, the AGA.
As a salesman Ogilvy proved a great success. So much so that he was asked to write a manual on how to sell the cooker for the AGA sales force (thirty years later the editors of Fortune magazine announced that it was probably the best sales manual of all time). Read more →
It’s hard to manage any organization so that its long-term interests aren’t sacrificed to short-term expedience. But there is an added wrinkle for organizations whose operations are globally dispersed: Cultural orientation toward the future varies widely the world over.
Mansour Javidan and his colleagues discovered that looks at how cultures vary in relation to a set of factors important to organizational management and leadership.
They found that societies vary greatly in how oriented they actually are to the long term, but in most cultures people’s personal values and aspirations are similar and quite future oriented. What’s more, most people feel their cultures aren’t as forward thinking as they should be.
In their study, Singapore emerged as the most future oriented of cultures, followed by Switzerland, the Netherlands, and Malaysia. The least future oriented were Russia, Argentina, Poland, and Hungary. Squarely in the middle were Germany, Taiwan, Korea, and Ireland. Read more →
Harold Geneen was born in Bournemouth, England, in 1910. Geneen’s childhood was spent at boarding schools and summer camps. When Geneen started work, as a runner for the New York Stock Exchange, he continued to study at night at New York University. In 1934 his hard work was rewarded with a degree in accounting.
For the next 25 years his career took in a string of companies starting with the forerunners of Coopers & Lybrand followed by Montgomery an accounting firm, then the American Can Co., Bell and Howell Co., Jones and Laughlin Steel Co. and Raytheon. After Raytheon, where Geneen was vicepresident, came the biggest challenge of Geneen’s career and the job that made him famous — International Telegraph and Telephone Company (ITT).
When Geneen arrived at ITT in 1959 the corporation was a ragbag collection of businesses, loosely focused around telecommunications, with revenues of $800,000. During the 1960s the predominant organisational trend was one of diversification and conglomeration. CEOs went into a purchasing frenzy raiding the corporate aisles for any company, no matter what business it was in, so long as it turned a profit. Geneen was no exception. Read more →
Under pressure to hit immediate performance targets, many managers inflate earnings, often by cutting expenditures. In a recent survey of 401 top financial executives by Natalie Mizik and Robert Jacobson, 80% said they would decrease spending on “discretionary” activities like marketing and R&D to meet short term goals.
It’s true that this kind of shortsightedness may temporarily fool the stock market by giving the appearance of improved prospects. However, in their study, firms that appeared to make short-term expense adjustments to inflate earnings when they issued equity ended up losing profits in the long run, causing their market value to drop by more than 20% four years out.
Because the amount of capital collected by a firm depends on the stock price on the day the equity is issued, managers have an acute interest in that price and may be tempted to give it a quick boost by inflating earnings through cost cutting. After all, investors rely on current earnings measures when they form their expectations of future performance and, therefore, when they value equity. Read more →
We all know the main contributors to carbon dioxide emissions: Europe, the United States, China, India, and Russia. The sheer size of these economies — and the expected growth rates in the developing ones — makes avoiding an increase in global CO2 emissions unlikely in the short term. That’s why we need to manage that increase carefully.
Those of us in the energy industry can do a lot about it, and we’re already making progress. E.ON is working on a design for a gas-fi red power station that will convert 60% of the gas consumed into energy. A couple of coal projects hope to reach effi ciency rates of 46%, and other projects that aim for efficiency rates approaching 50% are already under way.
By achieving those kinds of numbers in countries like Russia or China, where power stations have efficiency rates of 35% or less, we could reduce CO2 growth rates significantly and immediately. E.ON is also investing €8 billion in sustainable and new energy technology between now and 2012.
We’re researching and developing clean coal technology that could create a new generation of power stations worldwide. And we’re planning to build more large-scale offshore wind farms in the UK and Germany. Read more →
Robert Edward Turner III was born in Cincinnati, Ohio, in 1938. He was notable for eccentric and unconventional behaviour rather than academic excellence. He betrayed a penchant for taxidermy and catching squirrels in pillowcases. Then he was punished to issue demerits which required the recipient to walk a quarter of a mile. Turner earned over 1000 demerits in his first year; further than any pupil could walk in the time available.
At Brown University, Turner continued to challenge authority. Eventually, caught with a woman in his room, he was asked to leave, but not before he had made a name for himself on the university sailing team. After university Turner returned home to work in his father’s advertising billboard business. His father made him manager of the firm’s operation in Georgia.
Turner’s often difficult relationship with his father came to a shocking end in March 1963. When Turner was just 24, his father took a silver .38 revolver and shot himself in the head. In these terrible circumstances Turner became president and COO of the Turner Advertising Company. Read more →
America’s highly touted productivity may be destroying its legendary enterprise and many of its powerful enterprises. Many of the claimed productivity gains in recent years have amounted to productivity losses. Imagine what would happen if you fired everyone in your company and shipped from stock: Working hours would disappear while output would continue. That would be extremely productive, and you’d make a lot of money in the bargain, until you ran out of stock.
Many American companies are running out of stock. They’re trading away their future health for short-term results. Thanks to corporate subservience to shareholder value, which means driving up the price of a company’s shares as quickly as possible, CEOs have been finding all kinds of other ways to cash in the goodwill that accountants and economists have trouble measuring.
Trashing the brand is one easy way. Cutting R&D is another. Then there is managing by the numbers: The CEO decrees the desired results, and everyone else has to run around meeting them — no matter what the consequences. Read more →
