LOST turned out to be a helluva long job interview

For LOST fans, here is a interesting perspective on job interviews. It's by Robyn Greenspan, Editor-in-Chief, ExecuNet and you can reach him to comment at Robyn.Greenspan@execunet.com:
So, in the end, LOST turned out to be a helluva long job interview. For those who didn't spend the last six years alternately fascinated and frustrated by the series, I'll translate it into corporate language:
Like many good leaders, Jacob, knowing his tenure was coming to a close, had a succession plan. Well in advance of retirement, he started filling his talent pipeline and selected his top potential replacements. Due to the "unavailability" of some of his recruits at the last stages of the interview, very few candidates made it to the final slate.
The position came with tremendous responsibility and Jacob elected the candidates undergo an arduous series of situational interviews to assess their skills and qualifications. Plane crashes, death, destruction, explosions, polar bears, time travel, electromagnetism, good Locke/bad Locke, and a smoke monster — all to determine who was most qualified for the role of island caretaker.
An interview is an opportunity for candidates to evaluate if the role is a good fit for them too, and of those remaining — Jack, Hurley and Sawyer — two seem less certain they want the position. So Jack selects himself as Jacob's replacement, and when he inquires about the length of his employment contract, Jacob tells Jack he must do the job as long as he can.
Instead of a handshake, Jack drinks from Jacob's cup, and immediately begins onboarding into his new role by accompanying the evil John Locke on a business trip into a cave. But Jack is among the 12 percent that ExecuNet-surveyed recruiters report don't complete their first year in a new job and during a hostile takeover, he learns this role was only for a turnaround specialist on an interim assignment.
Before his exit interview, Jack expediently manages the institutional knowledge transfer to Hurley, who, with his servant leadership qualities, turns out is better suited for the longer term role.


Written by Robyn Greenspan
Editor-in-Chief
ExecuNet
Robyn.Greenspan@execunet.com
twitter.com/RobynGreenspan
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Where is the economy - fiscal issues, union salaries, union pensions

Here is a recommended reading list from Mish's Global Economic Blog. Read more. Mish is a self taught economic commentator and his blog has made more sense to me than most over the past three year ride. 
Any business owner needs to understand the true state of the American economy, not the one that politicians are trying to sell to the media and public. It will affect all of us over the next ten years.
The US economy is going to be weak for a decade thanks in part to refusal of politicians to address fiscal issues, union salaries, and union pensions now. Mish's book choice explains why in practical and readable terms.

• Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics by Henry Hazlit
• Economics for Real People by Gene Callahan
• What Has Government Done to Our Money? and The Case for a 100 Percent Gold Dollar by Murray N. Rothbard

Private Equity in Sell Mode

Well, business owners cannot moan that they were not warned that their opportunity to sell their business at a good price is rapidly declining. If you own a business in Canada, and particularly if your revenues are below $20M, you are going to have a far harder time selling your company. There is still time to get in Private Equity Partners who will buy 30% and let you stay on to grow the business with them and sell your remainder share five years down the road.

"For the first time in 16 years, private equity funds are selling more companies than they are buying," reports Andrew Willis, Globe and Mail. Here's what else Willis had to say: 

News on Monday that Cerberus Capital is selling a health care company in its portfolio, Talecris Biotherapeutics, to Spain’s Grifols marked something of a turning point for the private equity sector. According to data from Thomson Reuters, the $4-billion (U.S.) sale meant that for the first time since 1994, global mergers & acquisitions involving a private equity seller outweigh takeovers involving private equity buyers.Funds have sold $67.1-billion of companies, year-to-date, and done $64.2-billion worth of takeovers. Overall, the volume of deals involving private equity funds is soaring, largely due to a recovering in credit markets over the past year - loans fuel leveraged buyouts. Year-to-date 2010, Thomson Reuters found activity involving financial sponsors as sellers was up 132 per cent, while sell-side activity is up 174 per cent. M&A activity involving a private equity fund accounted for 13 per cent of the total value of worldwide M&A so far this year, up from 6 per cent of deals during the same period in 2009, according to Thomson Reuters. 

What does this mean for business owners? It is similar to the housing market, investors are selling off properties and this pulls down the price of housing in the neighborhood. Same for businesses. The last eight glory years of getting great multiples are over.

However, I was in Boston this past week and American Private Equity firms are very keen to buy into Canadian firms and willing to invest in equity partnerships of 35% upwards. They would be exciting partners for Canadian owners and are very similar in culture - polite. 

If you are a Canadian business owner with a company with revenues over $20,000 revenues, now is your chance.

Jacoline Loewen, expert in private equity, author of Money Magnet: Attract Investors to Your Business.

The Role of Institutional Development in the Prevalence and Value of Family Firms

It was a surprise to me the number of family firms in Canada, but this not unusual.

Family firms dominate economic activity in most countries, and are significantly different from other companies in their behavior, structural characteristics, and performance. But what explains the significant variation in the prevalence and value of family firms around the world? 

The two leading explanations are 

1. legal investor protection and 
2. institutional development.

Cross-country studies are unable to rule out the alternative explanation that cultural norms are what account for these differences. In contrast, China provides an excellent laboratory for addressing this question because it offers great variation in institutional efficiency across regions, yet the country as a whole shares cultural and social norms together with a common legal and regulatory framework. In this paper, HBS professor Belén Villalonga and coauthors study ownership data from a sample of nearly 1,500 publicly listed firms on the Chinese stock market. They conclude that institutional development plays a critical role in the prevalence and value of family firms, and that the differences observed across regions are not attributable to cultural factors. Key concepts include:

• Family firms do not inhibit growth and development, as is sometimes argued. This seems clear due to the relatively higher prevalence of family firms even in regions with high institutional efficiency.
• The effects of family, ownership, control, and management in China are remarkable similar to those found by professor Villalonga in her earlier research based on U.S. data. Namely, family ownership is positively related to value, family control in excess of ownership is negatively related to value, and family management, when exercised by the firm's founders as is primarily the case in China, is positively related to value. However, in China these effects are largely driven by the low institutional efficiency regions. In the high efficiency regions, none of these effects are significant.
• These findings are particularly relevant for China as it continues its transition from a central planning system to a market economy.
• On average, family firms are significantly smaller, younger, and less capital-intensive than non-family firms. Yet they exhibit significantly lower systematic risk, and they are not significantly different from non-family firms in their growth and leverage.

Read in Full at Harvard Business Review;

Published:June 23, 2010
Paper Released:May 2010
Authors:Raphael Amit, Yuan Ding, Belén Villalonga, and Hua Zhang

Every Family's Business: 12 Common Sense Questions to Protect Your Wealth

Surprise - Government stimulus can reduce private sector spending

If you are wondering if your tax dollars can re-build the economy, I recommend reading more about this fascinating study by HBS which confirms that government spending skews opportunities for private businesses.  I like it when we can separate out the social rhetoric and see the economic factors clearly, particularly with well-meaning government interventions. Central planning has been shown to be far less effective in the many political forms it has tried over the past century.  If you are running your own business and having to meet payroll, you will already be aware of these findings even thought the researcher, Joshua Coval, was surprised.

Executive Summary:

New research from Harvard Business School suggests that federal spending in states appears to cause local businesses to cut back rather than grow. Read the full article here - A conversation with Joshua Coval.
Key concepts include:

• The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three congressional committees. In the House, the average is around 20 percent.
• For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.
• In the year that follows a congressman's ascendancy, the average firm in his state cuts back capital expenditures by roughly 15 percent.
• There is some evidence that firms scale back their employment and experience a decline in sales growth.