Eurozone Causing Greek AIDS

A Greek economist notes that some Greeks are intentionally infecting themselves with HIV to qualify for benefits, the result of the Greek austerity forced on it by those nasty surplus countries currently funding their deficits. He mentions this, he says, to make dry statistics more real, to convey the true picture of what is going on in Greece. And another reason why anecdotes are usually tendentious crap. Here he is on Bloggingheads.tv:

Greece can either 1) leave the Euro and inflate their way out of their internal obligations, 2) stop running a deficit or 3) do what their lenders say to get their money. If they righteously declare the terms on the charity they demand, they shouldn't get all emo when it doesn't work and start cutting themselves in various ways.

Characteristics vs. Factors

the Low Volatility ETF LVOL, put out by Russell-Axioma, tries to capture the low volatility goodness via a circuitous route. First, it takes into account beta, and momentum in some unspecified way, which makes it a really hard thing to nail down. What most amused me, was that it calculates the return to the lowest volatility third of the Russel1000 index. It then selects a portfolio of about 100 stocks that track this index. The idea is that you find the target portfolio, and then, instead of using that portfolio, you use stocks correlated with it.

Downloading their current holdings, the equal weighted beta is 0.91--low, but not by much. The average 90-day volatility of their holdings is 39%. In contrast, the SPLV low volatility ETF simply takes the 100 stocks from the S&P500 with the lowest volatility over the past 12 months. It has an average beta of 0.6, and an average volatility of 28%. The Russel 1000 itself has a 90-day of vol of 50%, and a beta slightly above 1. In short the SPLV ETF delivers 'low vol' more simply, and more efficiently, by focusing on the characteristic, not the factor.

The idea that there exist risk premiums based on covariances with unidentified stochastic discount factors that are like the S&P500 return, but orthogonal to it, will be in the trash heap of bad ideas. As no one can articulate what such a factor might be, it seems absurd that millions of people are implicitly valuing companies, currencies, and futures this way. But a more tangible problem created by this theory is thinking that to get a certain return stream you should target the asset with the requisite factor mimicking beta, as LVOL has done.

Daniel and Titman documented that it was the characteristic, rather than the factor, that generated the value and size effects. They did an ingenious study in that they took all the small stocks, and then separated them into those stocks that were correlated with the statistical size factor Fama and French constructed, and those that weren’t. That is, of all the small stocks, some were merely small, and weren’t correlated with the size factor of Fama-French, and the same is true for some high book-to-market stocks.

Remember, in risk it is only the covariance of a stock to some factor that counts. Daniel and Titman found that the pure characteristic of being small, or having a high book-to-market ratio, was sufficient to generate the return anomaly, independent of their loading on the factor proxy. In the APT or SDF, the covariance in the return with something is what makes it risky. In practice, it is the mere characteristic that generates the return lift.

Davis, Fama and French shot back that their approach did work better on the early, smaller sample, and more survivorship biased 1933-to-1960 period, but that implies at best that size and value seem the essence of characteristics, not factors, over the more recent and better documented 1963-to-2000 period. Data in favor of Daniel and Titman's characteristics approach was found in France by Souad Ajili, and in Japan by Daniel, Titman and Wei.

In a similar vein, Todd Houge and Tim Loughran (2006) find mutual funds with the highest loadings on the value factor reported no return premium over the same 1975-to-2002 period, even though the value factor generated a 6.2 percent average annual return over the same period. Loading on the factor, per se, did not generate a return premium.

The standard equity groupings of size, value/growth, and now volatility, are best done directly, and not via an exposure to factor-mimicking portfolios.

Facebook Followers Correlated with Stock Price

A recent paper by Aurthur J. O'Connor and Famecount looked at 30 top brands from June 2010 through June 2011, and found that number of Facebook fans was correlated with the stock price. Looking at the charts below, I can see how it's pretty significant. You can't see these graphs very well, but the vertical axes are price, the horizontal are Facebook fans.



In my 1994 dissertation I found that if I counted up stories in Nexus, these stories counts explained the relative ownership percentage of mutual funds in regressions that included price, size, and volatility. That is, in the context of these other variables, stocks more frequently in the new tended to have larger mutual fund ownership. One could imagine fund being both more aware of these companies, and having an easier time explaining their ownership in these companies.

Contemporaneous correlations are one thing, predictions another. Stocks with higher volatility generate more news than less volatile firms. Such stocks are then ‘in play’, and so become relevant to the investor interested in deviating from the index. Further, they create a default value, in that once everyone seemed to have internet stock in their portfolio, or some exposure to residential real estate, it seemed prudent to also have some, especially if one were indifferent. Given short constraints and overconfidence, this increased focus on volatile stocks leads to lower future returns. I imagine this might be interesting to look at whether this is more useful as a short-term momentum indicator, or a longer-term mean-reverting signal. The trick for the longer term predictability, is that you need a survivorship bias free data set with historical data going back several years, so I doubt that Facebook or Twitter have enough data to test anything with a horizon greater than 1-week.

Are High Beta Stocks Like Call Options?

Dave Cowan and Sam Wildeman at GMO have a new paper, Re-thinking Risk (check here or here if that doesn't work), that makes the argument that the poor performance of high beta stocks makes perfect sense. Their idea is that high beta stocks actually are leverage with a put option, because unlike a levered fund where you can lose 2 times your investment (200%), a beta=2 portfolio can only lose 100%. In their words:

The point here is that the form of leverage offered by high beta is different in an important way from explicit borrowing. Investors should prefer this kind of leverage, and, in an efficiently priced market, they will accept a lower return for it. As we will show, the performance of high beta is not a product of excessive demand, but rather a reasonable and rational consequence of the fact that it provides a convex payoff to the market.

Their analysis highlight the fact that 'risk' has two meanings. One is the risk people intuit, the other the technical metric in financial theory that generates a return premium. The risk that generates a risk premium is solely a function of expected covariance with some risk factor. Convexity just means the average expected risk in the future is nonlinear, but there's still a simple linear function of this expected covariance that should relate to the expected return. Convex payouts in options may seem less risky, and indeed are often sold via the pitch that they have 'limited downside.' If losing 100% is risk reduction for you, your broker probably has you on speed dial.

The key insight in Black-Scholes-Merton wasn't the basic formulation, which was well-known at that time among practitioners like Edward Thorpe, it was rather that one should use the 'risk free rate' to discount future payoffs. This was surprising, and though it was proved later much more simply by Cox and Rubinstein in their binomial pricing model, they figured it out first and deserve their accolades.

Convexity generates option value only because of its effect on expected values, not because of a 'risk premium' in the technical sense. That is, the 'option premium' above the 'intrinsic value' is purely a risk neutral expected value. The convexity in payoffs should show up in the expected returns, which should show in average returns over a large enough sample. As the authors note, high beta stocks under perform historically in the US and internationally, so it is implausible to say this is simple a 'peso problem' of having a small sample.

If a high beta stock is really like a portfolio with leverage plus a put option, the expected return is still a function of its expected beta. This is shown rather nicely by Joshua Coval and Tyler Shumway in their paper 'Expected Option Returns.'

Nevertheless, while it is true that Beta=2 equities can lose only 100% unlike being levered 2 times where you can lose 200%, in practice this convexity is quite small. Above is their empirical estimation of the convexity in high beta equities. While there is a little convexity, it is quite small, not significantly different than zero (ie, it's pretty linear). It's implausible to think this minor amount of curvature is practically important.

The authors then point out that betas for high-beta equities have lower betas in down markets than in up moves. True enough, but this highlights having a good conditional beta forecast that recognizes this. By now everyone should know that in highly volatile times like 2008, stocks tend to decline and correlations increase, compressing the cross-section of beta (lowering high betas and increasing low betas). In practice, you want a bayesian adjustment or shrinkage parameter to your beta estimation that recognizes this (more shrinkage in bull or declining volatility estimation periods).

In sum, I think the authors are confusing the intuitive risk with priced risk. The low return to high beta stocks is still a puzzle to standard theory because these stock returns include the convex payout, and this should show up in the average returns of stocks that implicitly include them. Not only is the convexity slight, high beta equities have lower than average returns historically.

Desktop Management: Saving Your Small Business Resources

Table of Contents

Introduction.......................................................1

Importance of PC Management.........................1

Effective PC Management.................................2

Alternatives for Acquiring Good Tools: Build, Software as a Service,
Outsource..................................................................2

Building an Internal PC Management Infrastructure.....3

Software as a Service...................................................3

Outsourced PC Management........................................4

Morton & Morton's Perspective...................................4

Introduction

Personal computers have delivered on the promise of productivity for knowledge workers. As a consequence, desktop and laptop computers have proliferated to almost every knowledge worker in a company. Advances in network bandwidth and the availability of wireless connectivity options have radically increased the number of home and remote workers. However, the increased use of personal computers and remote access has added significant workload and coordination to the already busy IT schedule.

For many companies, desktop management is not a core competency and there are other IT tasks that are considered mission critical or more strategic. Yet for many knowledge workers, the desktop is mission critical. Schedules, correspondence, contact lists, presentations and work in progress all live in the desktop for most office workers. Take away the desktop and work stops until the desktop is back up and running.

Most small and medium businesses do not have the IT staff and tools to treat desktop management issues with the attention they deserve. IT shops in small and medium sized companies are generally over-taxed and doing the best they can to keep the IT infrastructure running smoothly. Budgets are much smaller than those of their large enterprise counterparts, staffing is limited, and toolsets are few and far between. Too often manual processes and "just enough to get by" scripting is the answer to desktop management in the small and medium sized company. Individual users can be left to handle minor issues for themselves, and pseudo power users often get themselves into trouble and require IT staff assistance to resolve problems they have created through their self-help efforts. It is no longer a viable answer for small and medium sized business to treat desktop management casually.

Importance of PC Management

The task of PC management has become too large and too important to be handled on an ad-hoc basis with limited tools. The number of personal computers is significant. There are many versions of operating systems and many different software applications. This is also complicated by the number of employees working from remote offices. The scale has become rather large, even in a small to medium sized business. Now add in the constant stream of Microsoft patch updates (security, operating system and application software updates), periodic operating system upgrades, user initiated software installations and configuration changes, antivirus updates, and IT configuration changes. The rate and volume of change is significant, if not overwhelming. Not to mention the problem of Microsoft phasing out their support of old office applications and operating systems. Windows 95 is no longer supported and 98 is now no longer going to be supported.

The risks of doing a poor job of desktop management are now quite high given the security risks to every PC every day. Left unprotected, PCs are subject to Trojans, Keyloggers, Root Kits, Spyware and Viruses. One of the best ways to be protected is to apply all patches to operating systems and applications in a timely fashion. However, coordinating, staging and testing these patches is time consuming and something that should not be left to end users or ad hoc processes by the IT team. Every desktop needs Anti-virus software that is constantly updated, and users cannot be trusted to keep their virus data files current. Mobile users should also be protected with personal Firewall software, but again, users cannot be depended upon to install and keep such software current. Leaving this to chance can put the entire network and subsequently the entire company at risk.
The employee desktop today contains significant corporate data, both data taken from corporate repositories for use on the desktop as well as work-in-process data not yet stored on a secured and backed-up repository. Employees handle important and sensitive data that needs to be protected. This can include price lists, customer lists, customer data, human resources data, strategic plans, product plans and corporate financial information. Security breaches, viruses, and spy-ware can lead to stolen, lost or corrupted data. Regular backups can mitigate the risk of lost or corrupted data, however most users are not disciplined enough to perform regular backups. Mobile and remote users complicate the backup problem and render home-grown backup scripting ineffective.

Dealing with the disruption and potential data loss of security breaches can represent significant productivity loss. Work-in-process data on the desktop can represent weeks of effort and may be difficult or impossible to recreate. The loss of such data can affect project time-lines, which in turn can cause customer satisfaction issues and/or contractual penalties. Desktop data loss can also affect revenue if a desktop problem interrupts critical timeframes for customer proposals.

Another factor driving the need for good desktop management is the increasing regulatory compliance issues that are affecting businesses of all sizes. Consumer and patient privacy laws such as HIPAA (Health Insurance Portability and Accountability Act) and the wave of trend setting privacy laws out of California affect businesses of all sizes. Sarbanes-Oxley compliance includes rigorous asset management, change management and other controls for IT. This should be of concern for more than just the public companies covered by the law. Many small and medium sized businesses are working toward an eventual acquisition as an exit strategy, and most such acquisitions are by companies that are subject to Sarbanes-Oxley. It is much easier and faster to work through the due diligence phase of the acquisition if the company being acquired has implemented the types of controls required by Sarbanes-Oxley. Good desktop management can assist a company in certain aspects of regulatory compliance.

Effective PC Management

Effective PC Management begins with knowing what you have to manage. Complete and accurate asset and license management is key. Knowing how many machines of what type, their location, memory, hard drive, processor speed, etc., is a big step forward for many small and medium sized businesses. Tools available today have automatic discovery capabilities and excellent management reporting which can assist IT staff in establishing and maintaining good processes for asset management. With an accurate picture of the installed hardware base, it becomes much easier to assess operating system and business suite software upgrades.

Keeping track of software licenses and where they are installed is another important function. Accurate information of which machines have which software installed is a major starting point to effectively manage PCs across the company. This information can minimize the number and duration of on-site visits by IT support personnel. It can also ensure that software licenses are appropriately managed; paying for only those copies of a particular software that are needed and reducing the risk of fines in a software license audit.

Another good practice is to keep software installs to the minimum required for each employee to do their job. This will shorten install time, reduce updates and patches required, and use fewer resources leaving more capacity for each user's needs. Some systems administrators will attempt to make things easier by standardizing the desktop to one image for everyone. PC management is one place where "one size does not fit all." Overcomplicating the software image for every user by installing all applications everywhere will increase work in the long run and make everyone unhappy. A better practice is to define unique user types by department or job function, and to define a standard image for each user type. This can limit the time to upgrade applications and allow for better service for each user.

With an accurate inventory of all hardware and only the software needed on each desktop, the next step toward effective PC management is to automate software distribution. Automated software distribution minimizes the number of onsite visits IT staff must make. This lowers the cost of support and allows for more frequent updates. This can be applied to virus data files, operating system patches as well as updates and new versions of application software. Changes should be staged in a separate environment for testing and then rolled out based on individual or group user profiles.

Automated software distribution is the first step in remote management. Full remote management includes the ability to remotely control the desktop and make all required configuration changes through a networked connection. This is a critical function as the number of remote and mobile workers has increased. IT staff must be able to perform administrative functions from their office as if they were sitting in front of the PC of remote and mobile workers.

When considering how to implement desktop management best practices, companies need to acquire management tools to automate the management tasks. Companies can license tools and build an in-house management infrastructure, access management tools through a hosted Software as a Service (SaaS) model, or outsource the entire desktop management process. Each of these alternatives is explored in more detail below.

Alternatives for Acquiring Good Tools:

Build, Software as a Service, Outsource

A company with as few as 2-20 employees can struggle

with manual desktop management processes. The more

desktops to be managed and the more mobile and remote workers to support, the more difficult it becomes to deliver good service with manual processes. The severity of issues that can arise from poor PC management requires that the problem be taken seriously and therefore automation should be given significant consideration.

There are now many options available to automate some or all of the PC management functions, and some of these options are cost effective even for small and medium sized companies. However, tool selection should be made carefully to ensure that the necessary functions are addressed by the tool, to keep training time to a minimum and to avoid selecting a tool that requires more effort to administer than it saves. As with any decision, all of the alternatives should be considered before making the decision. PC management is no different, and it can be accomplished through several approaches: management tools deployed in-house to internally manage PCs (the "build" approach), using a Software as a Service hosted management tool with internal staff, and outsourcing the management of PCs to a third party.

Building an Internal PC Management Infrastructure

This traditional approach to management involves identifying tools to purchase, purchasing those tools, deploying the tools, training IT staff on how to effectively use the newly deployed management tools, and staffing sufficiently to manage the PC infrastructure on an ongoing basis. One of the advantages of this approach is that the IT organization retains full control of the management infrastructure and functions because the solution is an internally deployed solution. However, the control also brings with it the responsibility to manage the management system/software itself.

The build approach typically requires a larger initial budget outlay for purchase/licensing costs, with on-going maintenance fees, and any investment in additional hardware that is required to run the
management infrastructure. In addition to these initial licensing costs, it is also important for IT organizations to realize that there is an associated cost of management. The IT staff is naturally responsible for managing the IT infrastructure, but in addition, they are also responsible for managing the IT management infrastructure itself. For example, in the case of internally deployed management software tools, these costs reveal themselves in deployment costs of the management tools, maintenance of the management tools (upgrades, patching), support personnel for ongoing operational support, management tool consulting services, training, software licensing costs (both initial purchase and recurring maintenance costs), hardware costs for additional hardware that is required to run the management software, and the cost of integrating tools in-house.

The cost of management depends on several factors; the ease-of-use and ease-of-deployment of the management solution, the stability of the management code, the frequency of new releases, and the maturity of the IT organization. Most of these factors translate to IT staff time that is required to manage the management infrastructure. In addition to these direct costs, maintaining a help desk to assist users with PC issues is another additive cost of management. For geographically dispersed companies, the help desk may be required to operate 24x7, which adds significantly to the cost of ownership.

Software as a Service

Another way for IT organizations to employ PC management functionality is through management software delivered as a service. This option shifts the responsibility for the management software deployment and maintenance to the service provider. Software as a Service (SaaS) results in eliminating the following costs for enterprises: deploying the tool, maintaining the tools, consulting services to deploy the tool, software licensing, internal tool integration, hardware to run the management software, and troubleshooting when the tool is not working properly. Instead of these costs of ownership, the cost of the hosted software is in the form of fixed monthly subscription fees.

PC management SaaS can bring additional advantages beyond the features of the tool. Virus protection and automated update of virus data files is a feature often available. Some services include significant coordination of new patches; simplifying the staging, testing and deployment of patches. The service may include automated backup and offsite storage features providing excellent data protection with little additional effort or hardware costs. Hosted software solutions also provide news and information on new practices and trends which can assist the small to medium enterprise IT staff.

Some IT departments may be concerned over the loss of control by using a management infrastructure provided as a hosted service. The quality of the service provided must be excellent and the reputation of the service provider is critical. However, only the infrastructure itself is under third party control in this alternative. Company IT staff remain in control of the actual end user interface and the actual processes and actions taken on individual desktops.

The SaaS model provides access to a full suite product without the upfront license and setup costs. It allows the IT staff to maintain control of the desktop management process without the effort required to setup and maintain the management environment. It does require training and good internal processes. It also requires a way to track service requests and problems. To provide effective support, a help desk is useful, and for some companies a 24x7 help desk is necessary.

Outsourced PC Management

The point of acquiring good PC management tools is to provide effective PC management. There are a number of full service outsource options available to small and medium sized businesses for desktop management. This alternative solves the effective PC management problem by turning the work over to a service provider. The service provider is responsible for tool selection, deployment and operation. The service provider also brings trained staff and proven procedures.

Like the SaaS model, the outsourced model eliminates the costs of licensing the management tool, deploying the tool, consulting services to deploy the tool, integration costs, maintenance costs and hardware costs. Additionally, the outsourced model eliminates the costs of internal staff for PC management and the costs of an internal help desk function for PC management. Outsourced PC management is typically charged on a per desktop per month fee. It is more expensive than a SaaS model as the service includes the staff and the help desk functions.

Outsourced PC management brings good tools and good processes to the problem of PC management, protecting the assets of the company while providing professional performance enhancements to maintain top performance expectations from the PC. Some businesses have experienced higher individual user costs for desktop management as individual users can spend more time attempting to solve their own problems rather than look to the third party provider for help.

The quality of the service delivered by the service provider must be excellent, and the services must be flexible enough to fit in with the way the company works. A collaborative working relationship must be established. This can require a different kind of management oversight than exists in some small and medium sized businesses. An outsourced service may bring improved service by providing a 24x7 help desk, a tremendous resource saving feature for a small business productivity need.

Morton & Morton's Perspective

Desktop Management is a critical business practice that, when done well, can keep employees productive and keep external threats to the company network in check. The traditional approach to managing PCs has been to deploy the management software in-house or use manual methods. Most companies now realize that manual efforts are no longer viable given the number of desktops, the frequency of changes and the risks to employee productivity and data. However, outsourcing the process to a competent third party company is by far the best method to reduce the cost of the company's resources and protect the intellectual assets of the company at all times.

We will provide you the best protection of your assets and reduce your small business resource requirements to manage the desktops and keep the performance level up the expected user level for the best productivity and do it at a cost that you can afford.

Retail Operations - Effective Branch Manager Support and Guidance

Performance and behaviour management is by far the most difficult aspect of any manager's job and the reluctance to 'grasp the nettle' when performance or behaviour issues emerge is certainly a concern in many organisations. But at the end of the day that is what managers are paid to do and not doing so will certainly affect service, team morale, sales and ultimately the bottom line.

Why does this reluctance exist, why do so many mangers back away from confrontation? The problems and challenges that need to be overcome are many and the common reasons and 'excuses' for not doing so are as follows:

It is Risky - There is a worry in the back of the manager's mind that discussions could turn into heated arguments and that they may open themselves up for harassment or bullying accusations. There is also a concern that team moral and motivation may be damaged by tackling an under-performer and that the team may even turn against the manager.

It is Complicated and Difficult- Performance and behaviour management is not straight forward, it is very seldom clear cut or black and white. It is 'grey area' stuff and often involves opinions, perceptions and subjectivity. As managers feel they cannot quantify and then justify their concerns clearly enough they do not attempt to do so.

It is Hard Work and Time Consuming - Many managers feel they do not have the time to sort out under-performers and that it is low on the priority list. "It is not worth the hassle" is a common comment to be heard.

Denial - Many managers are either blind to the fact that a person is under-performing or behaving unacceptably or they do not see it is a serious enough issue to address. There are even managers who believe that it is not their job to tackle performance and behaviour issues and that some day, someone will come along and do it for them.

Many of the aforementioned points tend to be excuses rather than reasons but there are a number of more important points that need to be taken into consideration:

Lack of Training - No new manager has any previous experience of performance and behaviour issues when they move into a manager role for the first time. New managers often inherit performance or behaviour issues from the previous manager and yet are not given relevant training for tackling these issues from the onset. Giving managers basic employment law training and the company procedures to read is not the 'practical' training they need and is certainly insufficient on its own. All managers need a thorough grounding in the use of the performance management tools and practice in their use. Job specs, probationary periods, reviews, counselling sessions, appraisals and the disciplinary procedures are all useful performance and behaviour tools when used correctly and at the right time. Yet this vital training is not made on someone's appointment, often it is made later in their careers when much damage has been done.

Courage and Confidence - Doing something risky, difficult and complicated requires both courage and confidence. Unfortunately many branch managers lack both. Even if managers are given the knowledge and skill to tackle performance or behaviour issues, they will not do so without these essential qualities.

The problems and challenges are undoubtedly great and many may see the issue as un-resolvable however there is someone available to branch managers who can help them overcome many of the problems and challenges and that someone is their boss the Area Manager.

Guidance, Coaching and Support
The area manger is the only person who can guide, coach and support branch managers in the addressing of performance or behaviour issues. They can un-complicate the issues and help managers build a strong case for presenting to an employee. The area manager can also help the manager minimise the risk of harassment or bullying claims by ensuring the correct procedures are being used and that the managers say the right things in the correct way.

More importantly a good area manager will 'encourage' and give the manager much needed confidence. The area manager is the only one who can do this but unfortunately in many instances this is not happening and by not doing so area managers are unconsciously (or consciously) influencing a reluctance to tackle performance or behaviour issues within their branches.

Why is this happening?

Asking for support and guidance - Many branch managers are certainly reluctant to approach their area manager when they experience performance or behaviour issues within the team. If the matter falls into the gross misconduct category then managers will contact the area manager (and HR function) in the first instance. But for 'grey area' performance or behaviour matters they tend to keep the issues to themselves.
The reasons for this are as follows:

Many branch managers feel:

* The area manager may see it as a trivial matter and not important enough to bring to their attention.

* That seeking advice and guidance will be seen in a negative way by the area manager.

* The area manager will go into fault finding mode rather than helping find solutions.

* The area manager may start questioning the branch manager's ability to do the job.

Many managers have in the past gone to their area mangers for advice and support on team performance issues but received such a negative, unhelpful reply that many were put off from ever doing so again, even when they changed to a different area manager.

There is also a feeling that area managers themselves do not know what to do either. "Bring me solutions not problems" is a common comment heard by branch managers when they have taken a 'people' issue to their area manager.

Offering support and guidance

It is a fact that very few area managers actively encourage branch managers to talk about their 'people' issues or are prepared to probe below the surface to identify possible performance or behaviour problems that may be affecting the business. There are many examples where area managers have placed managers in 'problem' branches without preparing them for the issues they will face or helped or supported them once they have taken up the position. Basically they throw them to the wolves and then leave them to get on with it.

Another common issue is when the assistant manager of the branch is turned down for the manager position. Very few area managers are competent in explaining why an individual was not appointed and give excuses rather than valid reasons. This results in the new manager having to experience considerable hostility and resentment from not only their deputy but from many of the team also.

Why do many area managers not offer support or guidance or dig below the surface looking for performance issues? There are a number of reasons for this.

Unconscious Competence

There is a saying that "Good Management will result in good people staying and not-so-good people either improving or leaving. Where as Bad Management will result in good people leaving and not-so-good people staying and possibly getting even worse".

During their time as branch managers, many area managers did not experience risky, difficult or complicated people issues. If they did, they often resolved them unconsciously. They just acted as good managers should, which resulted in the issues being resolved quickly. Ask any manager who is competent in performance or behaviour management "how do you do it or what do you do?" and you will probably receive a shrug of the shoulders and a comment like "I don't know specifically, I just do it" (Unconscious Competence)

Unconscious competence is not acceptable at area management level as a key requirement of the job is to coach and train branch managers in performance management. Area managers can only fulfil this critical function if they know exactly what is to be done and how to do it. (Conscious competence)

Conscious Incompetence

Unfortunately there are area managers in existence who 'know' they are not personally competent in dealing with performance and behaviour issues and will go to great lengths not to expose this weakness to others. (Conscious incompetence) These area managers tend to encourage branch managers to not make waves, maintaining the status quo and to tolerate rather than develop. They certainly do not dig below the surface in a branch seeking 'people' issues that may be affecting the business.

One of the most disappointing comments I heard from a seasoned area manager when asked why he was not supporting his managers was "I am not allowed to get involved as I am the next step of the appeal process".

A good measure of an area manager's competence is to look at the performance and behaviour of the area manager's branch manager team. It is pretty certain that if they cannot coach and encourage branch mangers in the tackling of performance and behaviour issues then you can be sure they themselves are not tackling branch manager performance or behaviour issues.

Possible Solutions

If a retail organisation needs to tackle performance or behaviour issues at branch levels, I believe they need to develop the skills and competence of performance management at area management level first as area managers alone have the authority and are the biggest influence on branch manager effectiveness.

Unconscious competent area managers need to become consciously competent so they can not only develop others but also develop themselves further. Conscious incompetent area managers need to admit that they are not effective in performance or behaviour management and be prepared to learn and develop the necessary skills. If they are not prepared to do so then they themselves need to be performance managed by the company. After all, Executives cannot demand that branch managers tackle performance and behaviour issues one moment and then not do so themselves when they need to. That isn't leading by example

The Impact of Performance Management on Key Organizational Functions

Performance management is the foundation of any organization that has a vision and knows where they want to be in the near and long term future. As today's rapidly evolving business environment challenges organizations to adapt to constant change, the need for organizations to be sure that their projects and activities are aligned with overall strategic goals and business objectives is critical. Performance management is the gauge that lets you know whether or not you are reaching strategic goals and which areas within your service delivery could use improvement. It used to be that performance was isolated to one department. Today, every division within an organization can benefit from it. Performance management spans across various management functions and helps ensure that your people, processes and technology are working together to achieve your organization's missions and goals. This article illustrates how performance management relates to various major management support functions within your organization.

Strategic Planning

Strategic planning is the process of determining a company's long-term goals and then identifying the best approach for achieving them. Strategic planning plays a vital role in the performance of your organization. In order for strategic goals to be achieved, strategic planning must be aligned to performance measurements. These performance measurements allow executive management to gauge the effectiveness of the organizational strategic plan and determine how the budget and projects will be setup in the future. The strategic planning process is discussed in more detail in the planning phase.

Organizational Development

Often used interchangeably with organizational effectiveness, organizational development is the process through which an organization develops the internal capacity to be the most efficient towards its mission work and to sustain itself over the long term. This definition highlights the explicit connection between organizational development work and the achievement of organizational mission. Performance management directly relates to organizational development, since OD is primarily focused on improving the performance of organizations and the people within them. Whatever your organizational challenges, the starting point is to get a clear, objective view of your organization's performance abilities, such as strengths and limitations. Identifying proper performance attributes is essential, because sound management decisions can only be made when performance attributes are identified and measured accurately. In order to reach anticipated organizational targets, you must be able to tie the performance and motivation of individuals to the overall strategic objectives. The Lifecycle Performance Framework processes illustrate how performance management, organizational development and strategic planning share interrelated processes to accomplish organizational goals. Organizational development processes are discussed in more detail in the planning and execution phases.

Change Management

Change management is a systematic approach to dealing with change within every perspective of an organization, from systems to personnel to projects to functions. Change management is a comprehensive, often difficult management function to properly implement. There's the saying "Organizations don't adapt to change; their people do." With that outlook, it is easy to understand how performance management plays a critical part in managing change. Implementing change within an organization often requires a change in how employees execute things. You can implement the most advanced change management tools money can buy, but if your people don't buy into or fully support the initiatives, their performance will suffer and ultimately the organization will be ineffective, or less efficient than before.

Every system, personnel, and procedural change within an organization should be implemented with the goal of achieving an improvement in performance some form. The actual improvement should be compared to the predicted improvement to assess the effectiveness of the change. This guide discusses managing your organization during its many changes throughout the performance lifecycle.

Project Management

Project management is the discipline of organizing and managing resources (e.g. people) in such a way that the project is completed within defined scope, quality, time and cost constraints. A project is a temporary and one-time endeavor undertaken to create a unique product or service, which brings about beneficial change or added value. Performance measurement is an area within the Project Management Institute's Project Management Body of Knowledge (PMBOK). It is the link between performance management and project management, where cost, schedule and scope performance are measured and monitored throughout each phase of the Project Lifecycle. Project performance reporting is the process of collecting project baseline data and distributing performance information to stakeholders throughout the project. Implementing project performance measurement ensures that your reporting clarifies how resources are being used to obtain the objectives of the project. Measuring project performance is discussed in detail in the monitoring phase.

Customer Satisfaction

Customer satisfaction is the measurement or determination that a product or service meets a customer's expectations, based on predetermined quality and service requirements. It is said that customer satisfaction equals perception of performance divided by expectation of performance. There is a direct relationship between performance and customer satisfaction, where the better you perform to customer expectations, the more satisfied customers will be. Customer satisfaction is your organization's level of performance through your customers, employees, and/or stakeholders perspective. In fact, many times customer satisfaction feedback, if requested properly, can provide information and insight for achieving breakthrough increases in organizational performance and effectiveness. When measuring customer satisfaction, organizations should review their objectives and ensure that the customer service strategy is linked to those objectives. How to ensure that your organizational objectives are linked to your customer service strategy are discussed in the reporting phase.

Workforce Performance Management

Workforce performance management is the strategic alignment of an organization's human capital with its business activities. It is a methodical process of analyzing the current workforce, determining future workforce needs, identifying the gap between the present and future, and implementing solutions so the organization can accomplish its mission, goals, and objectives.

People are the most important aspect to any organization. Therefore, the performance of the people within an organization will greatly impact the overall performance of the organization. While most employees understand what they need to do, workforce performance management tells them how well they must do it. The greatest benefit to workforce performance management is the process of aligning employee performance to organizational objectives and goals. This guide explains how to evaluate individuals on their alignment with corporate goals and their contributions to business results in the planning section. Functions within workforce performance management are Recruit and Hire Management, Compensation Management, Incentive Management, Goals Management, Learning Management, Competency Management, and Performance Measurement. These functions are described in the executing phase.

IT Performance Management

IT performance management assists organizations with the increasing demands of maximizing value creation from technology investments, reducing risk from IT, decreasing architectural complexity, and optimizing overall technology expenditures. Behind people, technology is the next critical factor in maximizing efficiency and organizational performance. Many organizations from small to large are using IT strategically to support profitable growth. IT performance management includes maximizing technology to improve service delivery in every area of the organization. IT performance management utilizes such technology as unified management reporting and dashboard tools to enhance performance and drives business processes. How to find the right technologies to enhance your business intelligence, and choosing the right business intelligence tools are discussed in detail in the reporting phase.

Knowledge Management

Knowledge management refers to the guidelines, policies, and practices that an organization uses to create and transfer information to support the performance of the people in the organization. These can include various documents and copyrights, and intangible processes, models and methods that their people use to get work done. The impact of knowledge management on key business results is seen through its potential for improving the performance of business processes. Take call centers for example. They may handle hundreds, even thousands of calls a day. It would be too much too ask for call center representatives to be able to resolve the majority of these calls without a knowledge management system in place. With a knowledge management system, the call center representatives have more information and resources to access and can thus resolve more customer requests. Performance benefits can be seen in such areas as first call resolution, time to resolve, and customer satisfaction. Knowledge management drives performance by linking knowledge to critical functions which impact business and putting the supports in place to ensure knowledge is leveraged across people and circumstances.

Quality Management

Quality management is a method for ensuring that all the activities necessary to design, develop and implement a product or service are effective and efficient with respect to the system and its performance. Quality management includes several processes that enable organizations to ensure quality. Among them are quality planning, quality assurance, quality control, quality audits and quality surveillance. Quality planning is defined as a set of activities whose purpose is to define quality system policies, objectives, and requirements, and to explain how these policies will be applied, how these objectives will be achieved, and how these requirements will be met. It is always future oriented. Quality assurance (QA) is defined as a set of activities whose purpose is to demonstrate that an entity meets all quality requirements. QA activities are carried out in order to inspire the confidence of both customers and managers, confidence that all quality requirements are being met.

Quality control is defined as a set of activities or techniques whose purpose is to ensure that all quality requirements are being met. In order to achieve this purpose, processes are monitored and performance problems are solved. Quality audits examine the elements of a quality management system in order to evaluate how well these elements comply with quality system requirements. Quality surveillance is a set of activities whose purpose is to monitor an entity and review its records to prove that quality requirements are being met. Performance measurement is a necessary instrument for quality management because in order to measure quality, you must first apply performance expectations and standards. In the PMBOK, the performance measurement process group falls under the quality management knowledge area. Quality management is discussed in greater detail in the monitoring phase.

Process Improvement

Process improvement is a series of actions taken to identify, analyze and improve existing processes within an organization to meet new goals and objectives. There are many process improvement methodologies that differ in approach, but the one thing they all have in common is the outcome of better performance. In fact, by definition performance improvement is the concept of measuring the output of processes or procedures, then modifying the processes or procedures in order to increase the output, increase efficiency, or increase the effectiveness of the processes or procedures. Often times, the most critical processes that impact business success are those that require support from multiple functional groups. Identifying and managing cross-functional processes and removing the functional silos that inhibit business culture are discussed in great detail in the planning and executing phases.

About Victor Holman

Victor Holman is a performance management expert who helps organizations reach performance goals through best practice analysis and implementation and custom enterprise performance management products and services.

Check out his FREE performance management kit [http://www.lifecycle-performance-pros.com/index.php/free-kit.html], which includes several templates, plans, and guides to help you get started with your next initiative.

Victor's complete Lifecycle Performance Management Kit is a turnkey organizational performance management solution consisting of a web based organizational performance analysis, 7 guides, 39 templates, 600+ metrics, 35 best practices, 48 key processes, a performance roadmap and more.

His Organizational Performance and Best Practice Analysis measures how well organization's utilize the key performance activities that drive organizational success, and identifies cost savings opportunities and the critical path to reaching organizational goals.

Why Movie Reviewers Turn Into Op-Ed Writers

I was reading Joe Morganstern's review of George Clooney's latest movie, and was struck by this line:

Mr. Clooney is a star at the peak of his powers, playing the sort of person we're seldom privileged to meet—a whole man, which is to say a flawed and foolish man who is basically good, and who gets a precious shot at being better.

There's a lot of profundity in that little snippet. I've notice several big think commentators today started or do movie reviews (Steve Sailer, Frank Rich, John Podhoretz, Michael Medved). The ability to articulately critique pop-fiction is deceptively deep, I guess.

Distinguishing Features of Project Management in the 21st Century

The purpose of this article is to investigate the current hot topics of project management. In the 21st century, there is a clear swift from hard systems approach of project management to soft factors, a demand for strategic thinking in project management (Buttrick, 2000), new success factors (Atkinson, 1999) and project uncertainty management (Ward & Chapman, 2003). Broader project management theory and more intense research efforts are also a trend in the field (Winter & Smith, 2005).

Human beings have been executing projects from ancient times (Kwak, 2003). From relocating a tribe to constructing enormous buildings such as the pyramids, projects were a dominant element of history. Not long ago, those involved in projects understood that they needed methods and processes to help them manage these projects more efficiently. To meet this need, scientists and practitioners worked together to form a new concept which was called «project management». According to the PMBOK's definition "project management is the application of knowledge, skills, tools and techniques to project activities to meet project requirements". (A Guide to Project Management Body of Knowledge, 2004). There are many different views in the literature concerning the birth of project management. Maylor (2005) mentions that "project management in the way that we would understand it today did not exist until the 1950s" and Wideman (2001) tracks the first use of project management in the UK's Institution of Civil Engineers report on UK post war national development first published in 1944.

Since then, there have been a lot of changes. "The hard systems approach, which treated the project as a mechanical activity, has been shown to be flawed" (Maylor, 2005). The soft skills of project management are getting more attention because it is now clear that "the ability to apply these skills effectively throughout the life cycle of a project will enhance the success of a project exponentially" (Belzer). In spite of the perfect understanding of planning, scheduling and controlling, projects have still a high rate of failure. Belzer points out that "more often they fail because of a project manager's inability to communicate effectively, work within the organization's culture, motivate the project team, manage stakeholder expectations, understand the business objectives, solve problems effectively, and make clear and knowledgeable decisions". To address these problems in the 21st century, a project team needs to develop a series of soft skills such as "communication, team building, flexibility and creativity, leadership and the ability to manage stress and conflict". (Sukhoo et. al, 2005).

In addition, project management requires a stronger strategy orientation. "More than 80 per cent of all problems at the project level are caused by failures at a board level in firms to provide clear policy and priorities" (Maylor, 2001). The approach that Maylor suggests is very different from the traditional link between strategy and projects, as he proposes a "coherent, co-ordinated, focused, strategic competence in project management which eventually provides source of competitive advantage". This two-way methodology that relates organisational and project strategy is illustrated in figure 1. To better understand the project's strategy, there is also a need to analyse "the experiences from past activities, politics during the pre-project phases, parallel courses of events happening during project execution and ideas about the post-project future" (Mats Engwall, 2002).

Moreover, Maylor highlights a change in project's success criteria, from conformance to performance. In 1960s project managers seek to comply only with the documented specifications of the project, while current projects require real performance. In other words, the success criteria of the 21st century as indicated by Maylor have changed to as short time as possible, as cheaply as possible and towards a maximum customer delight. Other academics imply nowadays a much simpler view of success criteria which is focused only in keeping the client happy (Ferguson, 2005) in contrast with the 90s view of just finishing the project on time and on budget.

Changes in risk management are also one of the hot topics of project management in the new century. Ward (2003) propose the term «uncertainty management» and recommends that a "focus on «uncertainty» rather than risk could enhance project risk management". Adams has an interesting view of risk as he describes it as "a reflexive phenomenon - we respond to perceived probabilities and magnitudes, thereby altering them", a definition that differs from the traditional quantitive analysis of risk. Green broads even more the scope of risk management and includes the clients. He thinks that "the process of risk management only becomes meaningful through the active participation of the client's project stakeholders". In his point of view there is a new way of assessing risk management that "depends less upon probabilistic forecasting and more upon the need to maintain a viable political consistency within the client organisation".

The conventional theory of project management consists of a narrow focus on projects as unique and totally separated units of work. But current projects tend to be integrated smoothly in the general context of organizations in order to "develop the «management of project portfolios» and «programme management» which are more strategically orientated towards «doing the right projects»" (Winter & Smith, 2005).
It is common ground in the literature that the theory of project management needs more research. Koskela and Howell (2002) suggest that the theoretical base "has been implicit and it rests on a faulty understanding of the nature of work in projects, and deficient definitions of planning, execution and control". From their point of view, enrichment of project management with new methods and techniques cannot be done with any stable theoretical background. As a result, there is a trend of putting more effort in research and rethinking the way which «bodies of knowledge» is written so that complex projects' actions will be better documented.

As a conclusion, we could use the words of D.T. Jones (2005) who writes that "project management is no longer about managing the sequence of steps required to complete the project on time". He adds that "it is about systematically incorporating the voice of the customer, creating a disciplined way of prioritising effort and resolving trade-offs, working concurrently on all aspects of the projects in multi-functional teams".

The Mini-Project Manager Concept

"Manage from the bottom up; not just from the top down; this creates personal commitment and accountability."

- Bryce's Law

INTRODUCTION

A couple of months ago we started a free service to analyze a person's style of management. Through our "Bryce Management Analysis," a manager answers a series of questions (30 in all) and, based on his responses, we produce a report which assesses his style of management as well as other attributes.

The data collected from these surveys has confirmed a lot of my suspicions; that companies are regressing back to a Theory X form of management. Over the last twenty years we have witnessed a dramatic swing from a Theory Y or Z form of management, back to Theory X. Whereas workers used to be empowered to make decisions and tackle assignments (a la Theory Y or Z), managers today tend to micromanage every action or decision in their department. Workers are told what to do, how to do it, and when it has to be done, with little regard for their input. We see this not only in the corporate world, but in nonprofit organizations as well. The result is that organizations today are run by control freaks who would be more content working with robots as opposed to human beings. This mentality has resulted in an apathetic workforce that doesn't trust management. It also breeds contempt and disloyalty for management, as well as making for some excellent fodder for such things as Dilbert and NBC's hit comedy, "The Office."

Although there are instances where a Theory X form of management can work effectively, it nonetheless represents a top-down unidirectional "master-slave" relationship. Theory X can work well in certain crisis situations, such as "crunch-time" projects, but it is hardly conducive for a normal mode of operation in today's society. Let me be clear on this, under a Theory X form of management, project planning, estimating, scheduling, reporting and control is performed top-down. Instead, a bi-directional approach is recommended which is a critical aspect of the Mini-Project Manager concept.

THE CONCEPT

The Mini-Project Manager (MPM) concept is based on our experiences in several I.T. shops over a number of years and was first described in the Project Management activities of our "PRIDE" methodologies dating back to 1971. Unlike Theory X, the MPM concept seeks to empower workers and make them more responsible for their actions. It promotes more management and less supervision. Actually, under the MPM concept, the individual is expected to act professionally and supervise themselves.

There are still some top-down activities to be performed by management, such as project planning where projects are defined and prioritized. Further, managers select and allocate human resources to participate in project assignments. It also includes establishing project Work Breakdown Structures (WBS; e.g., phases, activities, tasks) and precedent relationships between such structures. Here, the manager relies on such things as Skills Inventories, Resource Allocations, Calendars, and Priority Modeling tools.

After projects are assigned, workers estimate the amount of effort needed to perform the work. This is a critical aspect of the MPM concept and is typically not found in today's Theory X environments. Here, the worker is asked, "What do you think?" But understand this, the worker's estimate is an expression of his personal commitment to the work involved. If the manager does not agree with the estimate, he may ask the worker to rationalize his estimate. If the manager is unhappy with the answer, he may elect to give the assignment to someone else (perhaps another employee or a contractor). Nonetheless, the estimate is an expression of commitment by the person.

Based on the estimate, the manager then calculates the project schedule. Whereas the worker developed the estimate, the manager computes the schedule. Here, the manager considers the project's WBS and precedent relationships. More mportantly, the manager considers the Indirect and Unavailable time affecting the worker. This means the MPM concept does not subscribe to the "Man Hour" approach to project estimating and scheduling. I have discussed the differences in the use of time in many other articles, but in a nutshell we view time as:

AVAILABLE TIME - this is the time workers are available to perform work; e.g., Monday through Friday, 9:00am - 5:00pm.

UNAVAILABLE TIME - this is the time when workers are not available for work; e.g., weekends, holidays, vacations, and planned absences.

Available Time is subdivided into two categories:

DIRECT TIME - representing the time when workers are performing their project assignments and, as such, estimates are expressed in Direct Time.

INDIRECT TIME - interferences which keep workers from performing their project assignments. For example, meetings, training classes, reviewing publications, telephone calls and e-mail, surfing the Internet, and breaks.

The relationship between Direct and Indirect Time is referred to as "Effectiveness Rate" which is an analysis of a worker's availability to perform project work. For example, the average office worker is typically 70% effective, meaning in an eight hour day a worker spends approximately five hours on direct assignments and three on indirects. Effectiveness Rate is by no means a measurement of efficiency. For example, a highly skilled veteran worker may have a lower effectiveness rate than a novice worker with less skills who has a higher effectiveness rate; yet, the veteran worker can probably complete an assignment faster than the novice. It just means the novice can manage his time better than the veteran worker. Again, what we are seeing is the individual worker being personally responsible for supervising his own time. Interestingly, a manager typically has a low effectiveness rate as he typically has a lot of indirect activities occupying his time. For example, it is not unusual to find managers with a 20-30% effectiveness rate.

Returning to scheduling, the manager uses the worker's effectiveness rate when calculating project schedules. If the worker's estimate is such that it greatly impacts the schedule, the manager may consider alternatives, such as influencing the worker's indirect time (eliminating interferences) and unavailable time (work overtime or on weekends, possibly cancel vacations, etc.).

This brings up another important aspect of the MPM concept, the manager is responsible for controlling the work environment. In addition to the physical aspects of the job such as the venue and tools to be made available to the worker, it also includes managing Indirect Time. For example, if a worker is working on a project assignment on the critical path, the manager may elect to excuse the worker from meetings and training so that he can concentrate on the project assignment. Whereas the individual worker is concerned with managing his Direct Time, the manager controls the Indirect Time. It is important to understand that nobody can be 100% effective; for nothing else, we as human beings need breaks so that we can refocus our attention on our work.

The "Effectiveness Rate" technique serves two purposes: it builds reality into a project schedule, and; it provides a convenient mechanism for a manager to control the work environment. For example, a manager may decide to send someone to a training class to develop their skills (representing Indirect Time). By doing so, he is weighing the impact of this decision against the worker's current assignments.

As workers perform their project tasks, they report their use of time (representing another "bottom-up" characteristic of the MPM concept). In addition to reporting time against assignment, workers are asked to appraise the amount of time remaining on a Direct assignment (not Indirects). This is referred to as "Estimate to Do" which is substantially different than the "Percent Complete" technique whereby workers are asked where they stand on an assignment. The problem here is that workers become "90% complete" yet never seem to be able to complete the last 10%. Under the "Estimate to Do" approach, the worker estimates the amount of time to complete a task. To illustrate how this works, let's assume a worker estimates 30 hours to perform a task. During the week, he works 15 hours on the task. He is then asked how much time remains on it. Maybe its simply 15 hours (whereby the worker was correct on his estimate) or perhaps he determines the task is more difficult than he anticipated and 25 hours remain (15 hours performed + 25 hours "to do" = 50); conversely, perhaps he found that the task was easier than imagined and only 5 hours remain (15 hours performed + 5 hours "to do" = 20). Either way, this will affect project schedules and the manager must then consider the repercussions and take the necessary actions. "Estimate to Do" is another example of where the individual worker is asked, "What do you think?"

Although the reporting of time can be performed in any time cycle, we recommend a weekly posting. This can be performed either with Project Management software or using a manual system involving Time Distribution Worksheets. Either way, it is important for the manager to review each worker's distribution of time (including Direct, Indirect, and Unavailable time) and their effectiveness rate for the week. This review should not be considered frivolous as the manager should carefully scrutinize the worker's Direct and Indirect time as they might impact project schedules.

A good Project Management system should have the ability to "roll-up" time reports into departmental summaries for analysis by the manager. For example, a departmental effectiveness rate can be calculated thereby providing the manager with a means to study which workers are working above or below the departmental average. Again, you are cautioned that this is not an efficiency rating and workers should not necessarily be competing over who has the highest effectiveness rate. Accurate time reporting is required to make this work properly.

Both the individual and departmental effectiveness rates should be plotted on line graphs to allow the manager to study trends, as well as determining averages over a period of time; e.g., three months (quarterly) or annually.

IMPLEMENTATION

Implementing the MPM concept requires a good Project Management system (either automated or manual) and a good attitude by all of the participants involved, both managers and workers alike. Some people resist the concept as it forces accountability. Now, instead of the manager making an estimate, the worker is charged with this task, something that doesn't sit well with some people who shirk responsibility. Further, some Theory X managers falsely see it as a threat to their control and authority. However, most people welcome the MPM concept as it represents more freedom and empowerment. This helps promote project ownership by the workers as they now feel their input is heard by management, which leads to improved corporate loyalty, trust, harmony, and teamwork.

By encouraging worker participation in Project Management, they tend to act more professionally and responsibly in project activities. Interestingly, as workers are given more freedom, they are forced to become more disciplined and accountable at the same time.

CONCLUSION

It was back in 1982 when Dr. William Ouchi wrote his popular book, "Theory Z," describing Japanese management practices empowering workers. And it was in 1986 when President Ronald Reagan advised, "Surround yourself with the best people you can find, delegate authority, and don't interfere." Keep in mind, this was twenty years ago. A lot has happened in the last twenty years; the Baby Boomers have been succeeded by Generation X, who is also being succeeded by Generations Y and Z. In the process, socioeconomic conditions have changed as well as the management landscape. Frankly, I think a lot of the management practices of today are dehumanizing. There is little concern for the people side of management, only numbers and technology. Its no small wonder that workers are becoming more socially dysfunctional.

To change this, I recommend that managers manage more and supervise less. And this is the heart of the Mini-Project Manager concept.

The Advisor Weblog

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Dollar time Posted: 16 Nov 2011 06:41 AM PST   Hi everyone! While dollar keeps extending gains, European stocks struggle to remain in green today, after a positive start, now off daily highs. Data coming from the Euro zone, and the UK continues disappointing, while improving in the US; despite Wall Street opened slightly red, I do still believe that is dollar time: the worst seems to be over in the US, while just starting at the other shore of the Atlantic. Intraday short term corrections against it, will be just be seen as opportunities to buy the greenback. Here is the short term updated perspective for majors: http://www.fxstreet.com/technical/analysis-reports/currency-majors-technical-perspective/2011/11/16/02/   Have a great trading day!

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Have US Federal Revenues Hit Their Laffer Curve Limit?

I was listening to Jeffrey Hummel's recent talk (see here, scroll down to his picture). He argues the US federal default is inevitable, using the following reasoning.

Federal Tax revenues as a percent of GDP have consisntently been bumping up about 20% since 1951. Even in WW2, when federal taxes were highest as a percent of GDP, tax revenues never broke 25% of GDP.


Meanwhile, top marginal tax rates, corporate rates, and capital gains tax rates have basically declined, though bouncing about quite a bit.


This suggests the 20% barrier is some kind of structural barrier in the system: people adjust their effort and tax avoidance to generate basically the same percentage of GDP over a variety of tax rates.

Here are the projected Federal expenditures from the Congressional Budget Office

Thus, the projected 30% of GDP spending in the pipeline seems impossible to finance. While conceivably we could cut our spending, its likely this will only be cut when deficits are curtailed via an explicit or implicit default.

On the brighter side, it took Rome a good 200 years to totally implode after their peak, and there's the example of Argentina, which while not as relatively prosperous as it was 100 years ago, isn't a horrible place to live.

The Importance of Project Closeout and Review in Project Management.

The well known English phrase "last but not least" could not better describe how important the project closeout phase is. Being the very last part of the project life-cycle it is often ignored even by large organizations, especially when they operate in multi-project environments. They tend to jump from one project to another and rush into finishing each project because time is pressing and resources are costly. Then projects keep failing and organizations take no corrective actions, simply because they do not have the time to think about what went wrong and what should be fixed next time. Lessons learned can be discussed at project reviews as part of the closeout phase. Closure also deals with the final details of the project and provides a normal ending for all procedures, including the delivery of the final product. This paper identifies the reasons that closeout is neglected, analyzes the best practices that could enhance its position within the business environment and suggest additional steps for a complete project closeout through continuous improvement.

Project managers often know when to finish a projects but they forget how to do it. They are so eager to complete a project that they hardly miss the completion indicators. "Ideally, the project ends when the project goal has been achieved and is ready to hand over to customer" (Wellace et. al, 2004, p156). In times of big booms and bubbles, senior management could order the immediate termination of costly projects. A characteristic example of that is Bangkok's over investment in construction of sky-scrapers, where most of them left abandoned without finishing the last floors due to enormous costs (Tvede, 2001, p267). Projects heavily attached to time can be terminated before normal finishing point if they miss a critical deadline, such as an invitation to tender. Kerzner (2001, p594) adds some behavioural reasons for early termination such as "poor morale, human relations or labour productivity". The violent nature of early termination is also known as 'killing a project' because it "involves serious career and economic consequences" (Futrel, Shafer D & Shafer L, 2002, 1078). Killing a project can be a difficult decision since emotional issues create pride within an organization and a fear of being viewed as quitters blurs managerial decisions (Heerkens, 2002, p229).

Recognition

The most direct reason that Project Closeout phase is neglected is lack of resources, time and budget. Even though most of project-based organizations have a review process formally planned, most of the times "given the pressure of work, project team member found themselves being assigned to new projects as soon as a current project is completed" (Newell, 2004). Moreover, the senior management often considers the cost of project closeout unnecessary. Sowards (2005) implies this added cost as an effort "in planning, holding and documenting effective post project reviews". He draws a parallel between reviews and investments because both require a start-up expenditure but they can also pay dividends in the future.

Human nature avoids accountability for serious defects. Therefore, members of project teams and especially the project manager who has the overall responsibility, will unsurprisingly avoid such a critique of their work if they can. As Kerzner (2001, p110) observe, "documenting successes is easy. Documenting mistakes is more troublesome because people do not want their names attached to mistakes for fear of retribution". Thomset (2002, p260) compares project reviews with the 'witch hunts' saying that they can be "one of the most political and cynical of all organizational practices where the victims (the project manager and the team) are blamed by senior management". While he identifies top management as the main responsible party for a failure, Murray (2001) suggest that the project manager "must accept ultimate responsibility, regardless of the factors involved". A fair-minded stance on these different viewpoints would evoke that the purpose of the project review is not to find a scapegoat but to learn from the mistakes. After all, "the only true project failures are those from which nothing is learned" (Kerzner, 2004, p303).

Analysis

When the project is finished, the closeout phase must be implemented as planned. "A general rule is that project closing should take no more than 2% of the total effort required for the project" (Crawford, 2002, p163). The project management literature has many different sets of actions for the last phase of the project life cycle. Maylor (2005, p345) groups the necessary activities into a six step procedure, which can differ depending on the size and the scope of the project:

1. Completion

First of all, the project manager must ensure the project is 100% complete. Young (2003, p256) noticed that in the closeout phase "it is quite common to find a number of outstanding minor tasks from early key stages still unfinished. They are not critical and have not impeded progress, yet they must be completed". Furthermore, some projects need continuing service and support even after they are finished, such as IT projects. While it is helpful when this demand is part of the original statement of requirements, it is often part of the contract closeout. Rosenau and Githens (2005, p300) suggest that "the contractor should view continuing service and support as an opportunity and not merely as an obligation" since they can both learn from each other by exchanging ideas.

2. Documentation
Mooz et. al (2003, p160) defines documentation as "any text or pictorial information that describe project deliverables". The importance of documentation is emphasized by Pinkerton (2003, p329) who notes that "it is imperative that everything learned during the project, from conception through initial operations, should be captured and become an asset". A detailed documentation will allow future changes to be made without extraordinary effort since all the aspects of the project are written down. Documentation is the key for well-organized change of the project owner, i.e. for a new investor that takes over the project after it is finished. Lecky-Thompson (2005, p26) makes a distinction between the documentation requirements of the internal and the external clients since the external party usually needs the documents for audit purposes only. Despite the uninteresting nature of documenting historical data, the person responsible for this task must engage actively with his assignment.

3. Project Systems Closure
All project systems must close down at the closeout phase. This includes the financial systems, i.e. all payments must be completed to external suppliers or providers and all work orders must terminate (Department of Veterans Affairs, 2004, p13). "In closing project files, the project manager should bring records up to date and make sure all original documents are in the project files and at one location" (Arora, 1995). Maylor (2005, 347) suggest that "a formal notice of closure should be issued to inform other staff and support systems that there are no further activities to be carried out or charges to be made". As a result, unnecessary charges can be avoided by unauthorized expenditure and clients will understand that they can not receive additional services at no cost.

4. Project Reviews
The project review comes usually comes after all the project systems are closed. It is a bridge that connects two projects that come one after another. Project reviews transfer not only tangible knowledge such as numerical data of cost and time but also the tacit knowledge which is hard to document. 'Know-how' and more important 'know-why' are passed on to future projects in order to eliminate the need for project managers to 'invent the wheel' from scratch every time they start a new project. The reuse of existing tools and experience can be expanded to different project teams of the same organization in order to enhance project results (Bucero, 2005). Reviews have a holistic nature which investigate the impact of the project on the environment as a whole. Audits can also be helpful but they are focused on the internal of the organization. Planning the reviews should include the appropriate time and place for the workshops and most important the people that will be invited. Choosing the right people for the review will enhance the value of the meeting and help the learning process while having an objective critique not only by the team members but also from a neutral external auditor. The outcome of this review should be a final report which will be presented to the senior management and the project sponsor. Whitten (2003) also notices that "often just preparing a review presentation forces a project team to think through and solve many of the problems publicly exposing the state of their work".

5. Disband the project team

Before reallocating the staff amongst other resources, closeout phase provides an excellent opportunity to assess the effort, the commitment and the results of each team member individually. Extra-ordinary performance should be complemented in public and symbolic rewards could be granted for innovation and creativity (Gannon, 1994). This process can be vital for team satisfaction and can improve commitment for future projects (Reed, 2001). Reviewing a project can be in the form of a reflective process, as illustrated in the next figure, where project managers "record and critically reflect upon their own work with the aim of improving their management skills and performance" (Loo, 2002). It can also be applied in problematic project teams in order to identify the roots of possible conflicts and bring them into an open discussion.

Ignoring the established point of view of disbanding the project team as soon as possible to avoid unnecessary overheads, Meredith and Mandel (2003, p660) imply that it's best to wait as much as you can for two main reasons. First it helps to minimize the frustration that might generate a team member's reassignment with unfavourable prospects. Second it keeps the interest and the professionalism of the team members high as it is common ground that during the closing stages, some slacking is likely to appear.

6. Stakeholder satisfaction

PMI's PMBoK (2004, p102) defines that "actions and activities are necessary to confirm that the project has met all the sponsor, customer and other stakeholders' requirements". Such actions can be a final presentation of the project review which includes all the important information that should be published to the stakeholders. This information can include a timeline showing the progress of the project from the beginning until the end, the milestones that were met or missed, the problems encountered and a brief financial presentation. A well prepared presentation which is focused on the strong aspects of the projects can cover some flaws from the stakeholders and make a failure look like an unexpected success.

Next Steps

Even when the client accepts the delivery of the final product or service with a formal sign-off (Dvir, 2005), the closeout phase should not be seen as an effort to get rid of a project. Instead, the key issue in this phase is "finding follow-up business development potential from the project deliverable" (Barkley & Saylor, 2001, p214). Thus, the project can produce valuable customer partnerships that will expand the business opportunities of the organization. Being the last phase, the project closeout plays a crucial role in sponsor satisfaction since it is a common ground that the last impression is the one that eventually stays in people's mind.

Continuous improvement is a notion that we often hear the last decade and review workshops should be involved in it. The idea behind this theory is that companies have to find new ways to sustain their competitive advantage in order to be amongst the market leaders. To do so, they must have a well-structured approach to organizational learning which in project-based corporations is materialized in the project review. Garratt (1987 in Kempster, 2005) highlighted the significance of organizational learning saying that "it is not a luxury, it is how organizations discover their future". Linking organizational learning with Kerzner's (2001, p111) five factors for continuous improvement we can a define a structured approach for understanding projects.

This approach can be implemented in the closeout phase, with systematic reviews for each of the above factors. Doing so, project closure could receive the attention it deserves and be a truly powerful method for continuous improvement within an organization. Finally, project closeout phase should be linked with PMI's Organizational Project Management Maturity (OPM3) model where the lessons learned from one project are extremely valuable to other projects of the same program in order to achieve the highest project management maturity height.