Should employers be forced to publish everyone’s pay?

That The Economist, the pillar of Capitalism (or it used to be) even posts such a question is alarming. Even more sickening is that half the readers who took the poll thought this was a jolly good idea. It reveals a appalling lack of understanding about how markets are structured. I found it even more surprising that from the comments, it seemed that the young generation liked the idea of revealing who is better and getting the rewards for their hard work.

Weren’t they the generation where marks in schools were hidden, where no one came first, everyone's a winner and gets a trophy and everyone’s artwork was put on the wall? I guess these young people do not understand how things work in the real world where if the art work is not that great, the customer will not select it:

No customer, no revenue, no business to pay salaries. 

Fini.

Here is a piece from The Economist article on the Government pushing into private business and forcing them to publish salaries:

 There may be an argument for requiring company owners to publish a list of who is paid what, so that if anyone is being discriminated against for any reason—not just sexism but other generic reasons such as race or religion, or maybe because of some individual vendetta—he or she can seek redress, or at least demand proper explanations as to why others are receiving more. Imposing such a rule on workplaces where pay varies widely is bound to cause ructions. It might cause more trouble than it is worth. Or maybe those ructions are necessary, to force those employers to be more rational in how they reward effort and talent.

Colin O’Neill from the heart of Socialist Capital of BC Canada writes:

The secrecy seems to be a form of short-term, rent-seeking behaviour; an inefficient game, where the employer incentives during wage negotiations is to exploit the asymmetrical information at the greater expense to the economy. A person's wage should reflect their productivity (their contribution; their value etc.): without transparency, the marginal cost of the worker won't equal the marginal benefit. Some workers are paid too much, some too little. A worker won't know where they are most productive (where an employer is willing to pay them more); therefore, factors of production (people) in the economy are not being used efficiently. 

Thank you, Trevor P. Harvey, who is older and wiser than Colin and probably remembers life before Socialism, and replied:

But Colin, what does this mean? "A person's wage should reflect their productivity (their contribution; their value etc.)" Who is to decide such relative values? Imagine comparison of Mozart, Pele, Shakespeare, Isaac Newton and Marie Curie. All had either employers or patrons. All were productive, but not one directly compares to another. Surely the only real arbiter of what value the world puts on us is the market. As R. L. Stevenson so rightly remarked, "Every man lives by selling something." Or at least, they did before the welfare state made fecund idleness a good little earner.

My favourite comment was from Japan, by Shintaro Tominaga

Socialists are all over the world.

But here is the real secret that young Colin does not get: employees in privately owned companies do not reveal their true salary to their co-workers, nor to peers working at a competitive business, not even at an industry cocktail party to strangers. 

Why not?

Privately owned business is very different from Public employees who get their salaries paid for by tax revenues. Salary scales are not simple and Government regulations mess up the free market and suck up time that should be spent on keeping a business strong. 
In Private Equity, I am observing how Canadian business owners are finding out it is not so hard to do business in other countries with more attractive environments for business owners.

 So, what do you think? Ought employers to be made to reveal everyone’s pay? 

How Business is under attack by Government

Have you a local bakery which puts out samples, enticing you to actually try Rosemary Olive Flatbread or that strangely coloured spinach pasta? Do you see the same, cheerful staff ringing up your purchases over the years? Can you stroll around, discovering new food while picking up your usual frozen shepherd’s pie and French bread? Is your experience one of welcome and comfort, so different from the larger supermarkets? What is the value of small store, neighbourly stores that offer a taste of Paris style shopping?

I have spent money for over a decade at this pleasant collection of cramped stores, voting with my money that they deserve their spot on Yonge Street I am sure that Longos and Lablaws (both family owned big stores) must covet.

It made it particularly distressing to see the plump, dimpled bakery lady’s face crumple as she told me about the bakery’s plastic bag debacle. 

Turns out the Toronto’s mayor, Rob Ford, wants the plastic bag 25c charge to discontinue, and this was reported in the media. The result is confusion as many shoppers and store owners believe that it has been dropped, but turns out that laws quickly put in place are not so easily repealed. This bakery does not have a compliance officer or lawyer on staff; checking out legislation is expensive. How many loaves of bread does a  bakery need to sell to ask a lawyer 's counsel on whether they must continue to charge 25c, particularly when the media reports the mayor saying no more charges?

This is where the true horror story begins – a customer of the bakery snitched on them to City Hall for not charging 25c. 

Worse than Agent Smith, a government bureaucrat posed as a customer in order to entrap this store. Then a fine was charged, a significant amount of money compared to the bakery's profits.

Is this Russia where neighbours snitched on each other? 

Is this Zimbabwe where the government imposed bread prices and government thugs terrorized store owners?

No. This is Toronto the Bland, Toronto the Good.

Was this snitching and government interference over 25c bags a matter of concern for a global warming, Al Gore lover wanting store owners to snap into line over being green? Was it the City of Toronto Rob Ford haters just in for a dig to make him look bad? Or is it just a do-gooder making sure everyone follows the rules?

Whatever the reason, this snitching is terrible. Our our risk taking, hard working merchants do not need to be frightened. 

This bakery lady was more upset that a customer had snitched. Imagine the feeling of knowing a customer has snitched on your business, that government bureaucrats pretended to be a customer in order to levy a fine, that not charging 25c cost you thousands of dollars. 

When you have a bad business day, will you be able to carry on in business, or will you be just that bit more to close down? Snitching casts a terrible pall over a store and reduces the "animal spirits" required to run a business - that optimism. 

Finally, will the bakery owner continue to be generous to the customers and put out a new cheese for them to sample – meh - not this week.

And there goes the neighbourhood.

Steve Jobs - First Day at Home

Hilarious screen shot of Steve's activities - wonder how they hacked that? I particularly like the person being used as a dartboard. Very subtle!
Read the diary...

Bernanke vs Jobs - Who created more jobs?

With Steve Jobs announcing his withdrawal from Apple, a rush of Apple nostalgia took over Twitter and the blogsphere. Looking back over the past 40 years, it is dazzling to review how much Jobs contributed to the big dream of business with products, marketing and sheer design, never mind the unique style of his turtle neck and jeans. For those who never knew the IBM suit, they do not get the extreme irony and ballsy marketing genius of how Jobs signalled that Apple was not a faceless, uncaring corporation. 

Jobs is the epitome of Capitalism, the Ford of our day.

Steve Jobs managed to achieve irony with his retirement coming a few days before Ben Bernanke’s speech on US jobs, which many supporters of big government continue to believe creates the wealth of a nation. 

Here is a superb column by Peter Foster talking about this very contrast – Jobs, the Capitalist and Bernanke, the Government.

U.S. Federal Reserve chairman Ben Bernanke invited a fundamental question: where do jobs come from: Macworld or Macro management? Are both necessary, or does the latter in fact hinder the former?

Mr. Jobs retires having created a company that vies with ExxonMobil for the position of most valuable corporation in American history, with a market value of more than US$300-billion and 50,000 employees. It is indirectly responsible for hundreds of thousands of jobs elsewhere, from Korean computer chip manufacturers through high-street retailers to app developers. It also supports many unproductive — if arguably necessary — jobs in the public sector, from regulators through revenue collectors to, well, the chairman of the Federal Reserve.

The great French economist Jean-Baptiste Say coined “Say’s Law,” which points out that what brings forth production can only be the production of other items. It was the wages Mr. Jobs paid directly and indirectly as part of his productive activity that created — and continues to create — demand. However, if you believe the claims of Keynesian policymakers, although Mr. Jobs and his ilk might be useful “animal spirits,” when times are rough, jobs have to be created from above. Apple will then thrive, or at least continue to exist, not because of Mr. Jobs and his sensational products, but because the government will send people down to the Apple store “with money in their pockets.” The implications of the fact that this money must be either taxed, borrowed or printed tends to be ignored or glossed over. After all, in the long run, we are all dead.

In fact, Mr. Jobs’ amazing concrete achievements contrast markedly with Mr. Bernanke’s vague hopespeak at Jackson Hole on Friday. The one genuinely bright note in the Fed chairman’s speech was that price stability remained a top priority. That is likely why North American markets responded positively. Then again, the fact that gold also rose suggested that gold bugs were concentrating on his suggestion that he still had inflationary “tools” at his disposal, although these had to be boxed for the moment.

Mr. Bernanke’s claim that “long-run prospects for the U.S. are undiminished” made little sense, because those prospects depend entirely on the outcome of the political battles now taking place in Washington, which will culminate in next year’s presidential election.

Mr. Bernanke invoked the vague notion of “putting people back to work,” as if work was some undifferentiated lump of stuff that arose out of employment statistics rather than the result of specific jobs created by entrepreneurs in pursuit of profit. He suggested that policymakers shouldn’t leave productive resources “fallow,” as if those resources were, again, macroeconomic blobs that merely needed the application of government electrodes to jump to useful life. Housing? What was needed was “good, proactive” policies. He also projected adjectival success for European policymakers, who would take the “necessary and appropriate steps.” 

This is all wishful thinking and macromancy. 

If you want to know where jobs come from, look at the record of Mr. Jobs. Apple’s success is based on his relentless drive to produce new and/or superior products, from the first Apple computer, which he developed in the proverbial garage with his partner Steve Wozniak, through the Mac, the iPhone, the iPad and offshoots such as iTunes and Apple stores. During a period away from Apple, Mr. Jobs built animation wunderkind Pixar and sold it to Disney, of which he is now the largest shareholder.

I particularly appreciated Peter Foster's ability to try and show people why there are business leaders - they just keep trying. Jobs got fired from his first company, Apple, in a public manner. He was like the Phoenix rising from the ashes and he succeeded in returning to his first company and taking it far beyond anything its finest engineers' dreams. 

I do believe being a business founder and operator draws a great deal from health and long term survival of leading business people. So many of the best people seem to go early.

10 Ways to get Hired by Private Equity and Family Business

Surprising to some, Private Equity is in all areas of business, big and small, public and private. The public market is doing what Sony and the big kingpins of music did – dying. More companies are partnered with Private Equity and the hiring practices are different.

Peter Ploughs from Phoenix Executive Network asked me to present to a group of top C-Suite people about how to get hired to work with Private Equity. Here is a list of the top ten ways to get hired by Private Equity, specifically when they are partnered with a family business:

1. Know how Private Equity works.

I recommend calling companies, not Private Equity, as the owner-operator tends to originate the jobs. Private Equity people are busy and are less likely to see you. The chart shows the wide range of companies working with Private Equity and they have degrees of bureaucracy and risk depending on the type of business. 

Match yourself to your preferred style. If you are a corporate “intrapreneur”, you will hate working for a family business with fewer systems, even if it is $500M in revenues. Know yourself and be honest.

2. Be Likeable

Unlike a corporate position, Private Equity jobs in family businesses will require 5 to 10 years of commitment. If the owner is meeting you, it is critical you make a connection and the owner can see themselves spending time with you and even your family. How you “feel” to the family business team will be the most important criteria for hiring. If the family business owner likes fishing and you do too, good news. Family business hiring is quirky.  If the owner does not like golf players as he believes they waste time, and you have golf listed as an interest, it could prevent a second interview.

3. Be Trustworthy

It comes back in spades. When hiring, family business owners and their private equity partners will call wide and far to find out details on character as well as competencies One story of questionable behaviour and they will turn down the candidate. On the resume, they will want to see you have not bounced around companies and have been promoted. Talk about why you switched jobs.

4. Engage

From the start of a conversation, the owner and CEO is imagining working with you. How will it feel and how are you with problems? Behave as if you are working with them already, rather than pitching for the job. Give ideas and email 100 day plans or strategy. One COO was offered a salary and he chose to send the “no” reply by email on a Friday afternoon. What a difference if he had just got on the phone. The owner and Private Equity asked “Is this how you will deal misunderstandings with our clients?”

5. List business details

The size of past company revenues and growth rates are of great interest to Private Equity and business owners as growth is their goal. They are looking to match the size of business where you have worked with their company. If you were in a $30M revenue company and helped grow it to $100M, this is what they want to hear. What did you do personally to add to the growth?

6. Be “Game On”

This has always been a tenet of good business, but when getting hired by a business partnered with private equity it will be critical. Pay attention to every “Moment of Truth” - how you present yourself to anyone involved with the position. One CFO was approved by the owner and needed the final nod from Private Equity. Thinking that it was fine to be casually dressed as if visiting the plant, this CFO attended a Bay Street lunch in a golf shirt. His insensitivity to social context meant he lost the job offer.

7. Develop Your Mantra

Give a quick verbal one liner to snapshot what you love to do. Think about an accountant. Would it be easier to get an idea if she says, “Empowering clients to reduce their business and family tax over the life of the business”. Position yourself as early in the conversation as possible to not waste anyone’s time.

8. Share stories

People love stories—about how you contributed to your last company, or about an interesting product or a business development program you did that brought in a surprising client. Keep the stories short and simple. A picture is really worth a thousand words too.

9. Remove the road bumps

Have your LinkedIn profile with a good photo (not with your baby) and recommendations. You will show your organization skills if you email your resume labelled with your last name, first name, date and if you mention you have references. Offer to buy a coffee. Make it attractive.

10. Family Business really means Family

For family owned businesses, the rules are very different. They may invite you for dinner. Your wife will be seated next to the owner. The CEO and Private Equity will be paying excruciating attention. Your wife could sink the deal – better to leave her at home if she is ticked off with you. Advise her not to share that “Joe is messy or lazy” or to flirt with the owner. Pay attention to the spouse because often, they own half of the business and are crtical to the hiring decision.

If you’d like to learn more about private equity and how it works, be sure to read Jacoline’s book, Money Magnet: How to Attract Private Equity to your Business. (Publisher: Wiley)

 Social Media: http://twitter.com/#!/jacolineloewen

Should PowerPoint Be Banned from Private Equity Pitches?

How worthwhile is to fire up a PowerPoint presentation when meeting with Private Equity for the first time? Is it better to focus on the human connection, after all, all Private Equity investors will say that the people are the most important part of making the decision to do the deal.

What business owners who succeed in raising capital say is that the people test means that you are competent and at an advanced level of competing in your market place. Then, PowerPoint is a very useful tool. You take control of the meeting and get to demonstrate your sophistication and level of business knowledge.
If you do use a PowerPoint, make sure it is short and well rehearsed. Have a range of people view it and make sure it is equal to the level of marketing you do for your business, no less.

Infuse start up teams with females to strengthen the business

Mark Zuckerburg told Sheryl Sandburg, his COO, that he does not check off boxes to get the right people. Mark will not hire to fill a gender quota but he did make Sheryl the most important person on his team and within a short period, the bleeding Facebook was making revenues thanks to Sheryl's new policy on advertising streams.
I also do not like gender and diversity for companies because it is good business sense to have a wide range of people in your business. Ruth Bastedo supports women in business strongly but without the preachiness, just the good business sense. Here is Ruth:

So, what is stopping women from taking major leadership roles in the technology startups of today? Through my work in the field of women entrepreneurs, I have identified five recommendations to increase the number of women in startup teams:

1. Encourage startup teams to consciously analyze the diversity in their leadership teams. What diversity of thought could be missing as part of the growth strategy? Ask founders what might be missing in the mix, from product development to sales strategy to growth strategy? For example, with consumer-oriented products, how is the team addressing the needs of a female user base? Groupon’s subscription base is over 75% female. This is not the type of number to dismiss lightly. At times, the female viewpoint needs to be represented at senior levels in the organization, even if that female viewpoint is that of the end consumer.
2. Tap into a base of experienced, older women leaders. Women business leaders in their 40s, 50s, and 60s are excellent sources of experienced management talent for startups. Tapping into this group and engaging them in technology startups as investors or members of a management team or advisory board can be an excellent way to tap into the experience and expertise of these women. This is the view of private equity expert Jacoline Loewen, Director at Loewen and Partners in Toronto and panelist on the Business News Network television show The Pitch. She says, “Startups are like an intense marriage and choosing a woman 50+ to be a founding member, particularly if you are all males under 30, could be a savvy choice… these guys have to get over the stereotype of mum with the cookie tray nagging about a messy room. At age 53, Arianna Huffington did a startup bloggers’ forum website called The Huffington Post which went on to get sold 6 years later to AOL for US$315 million.”
3. Acknowledge that women may have different needs than their male counterparts. In their early 20s, women can compete more or less head to head with men. Unfortunately, many women soon find that their careers are impacted by the decision to have a family. What they need during this period is as much flexibility as possible. They also need to earn enough money to have good quality childcare so that they can present to that potential investor in New York on the spur of the moment. This need for cash flow during this critical period is important to understand.
4. Support and nurture organizations that in turn support women entrepreneurs. There are several organizations and initiatives in Canada, and increasingly internationally, that support women who want to engage and be successful in high-growth startups. The support for these organizations needs to come from multiple sectors: government, professional services, technology, financial services, and academia. In order to increase the likelihood of success, women need the contacts, networks, mentorship, and access to information that these initiatives can provide. Compelling examples of these types of initiative in Canada include:
   • Canadian Women in Technology
   • Rotman’s Next Steps
   • WEConnect
   • Women’s President’s Organization
   Further examples from the United States include:
   • National Association of Women Business Owners
   • Astia
   • National Centre for Women & Information Technology’sEntrepreneurial Alliance program, designed to integrate women into startup teams of under 100 employees
5. Expose technology and computer science to girls in a more compelling way. Girls and young women love using technology, as any parent with any exposure to girls and their Webkinz can attest to, but how can this early enthusiasm and interest be translated into an interest in product and software design? How can we teach girls to engage in programming in a more appealing way? There are those that are trying, but the representation of women in computer science departments continues to decline. From 2002 through 2009, the proportion of female graduates from computer science bachelor degree programs declined from 19.4% to 11.3% in Canada and the United States (Zweben, 2009).
   Initiatives such as Alice, educational software that teaches students computer programming in a 3D environment at Carnegie Mellon, show a model of how to engage girls in middle school. Alice allows students to learn fundamental concepts of programming and programming logic without a background in mathematics and programming. The software introduces a storytelling model, which allows girls to create software that is personally relevant to them. (For further details on the promise of the Alice approach for influencing later success in computer science education, see the paper by the National Center for Women & Information Technology) Going through the process of learning how to program is very important in the technology industry, not only as a potential pathway to becoming a programmer, but also as important background to enable more effective interactions with technical teams. This early engagement in technology is a critical step in getting women to the point where, in their 20s, they might find themselves in an environment conducive to creating the next “killer app”.

From my vantage point, following these recommendations would help infuse our existing startup teams with female talent and nurture the younger generation of women that is interested in using technology to create products and services that are consumer friendly. Encouraging more women to be a part of high-growth technology startup teams, as entrepreneurs or otherwise, will result in well-balanced technology companies that can compete effectively in today’s diverse world.

Read this article... 

Is Ruth Bastedo Right about Women and Start Ups?

With the recent flurry from Facebook's female COO, Sheryl Sandburg, discussing how women need to lean into their careers, how about encouraging women to apply for positions in start ups?
I'm with Sheryl, women need to do more of the stepping forward. I spent the weekend with a family where the 16 year old daughter won the science fair project, yet the mother is encouraging to follow music. When I probed, she told me she plays the piccolo and, no, she has not won any music award. Her mother just thinks the piccolo is "lovely", but a recent trip to see Billy Elliott shocked them as the entire wind section f the orchestra was done by a key board.
I mentoned to the girl that if she loves science, she might think of the big salary that comes from getting a degree in engineering or science. I also told her there would be scholarships for a female. She can still play the piccolo as a hobby.
In the same line of thinking, Ruth Bastedo's article got me thinking that older women would be great foils for young start ups entrepreneurs. Ruth says:

A recent Catalyst study showed that companies with three or more women on their board of directors outperform those with fewer women by 53% on return on equity, 42% on return on sales, and 66% of return on invested capital (Joy et al., 2007). Moreover, the study found that the link between women board directors and corporate performance holds across industries. I am convinced that part of the reason for our startup’s success, was that, at all times, there was that strong female representation in the founding leadership team (with a female COO and VP Creative) that impacted all parts of the company, ranging from product and service development, client service, human resources, operations, and business development. Our “secret sauce” was the diversity in our leadership team.

If diverse startup teams can be so successful, why are they so rare? Among other factors, the following reasons contribute to the rarity of women on startup teams:

1. There are few women who have a background in technology.Women looking to work with a technology startup are more likely to have a background in sales, project management, marketing, legal issues, or human resources. Even in my case, when I did my new media training at the Vancouver Film School in 1995, there were four women in my class of about 25. To make matters worse, the numbers of women enrolling in computer science at universities is actually dwindling, as will be discussed later.
2. There are very few venture capitalists and investors who are women. Women who are investors are at least likely to connect with women on startup teams. In the United States, investment firms with at least one woman partner are 70% more likely to invest in a women entrepreneur than firms that have only make partners, according to a whitepaper published by the venture capitalist firm Illuminate Ventures.
3. There is no incentive for change. Having young women in key leadership roles is challenging. My partners were not thrilled that I took two maternity leaves, albeit short ones, within two years. People in general are very comfortable with the status quo, and the technology community has a comfortable homogeneity when it comes to the model for success. But as one recent columnist, Natasha Mooney, said, “Hiring your first woman employee when you’re a 30-person company is far more difficult than when you’re a 5-person company.”

Ruth Bastedo,
Read the full article.

Private equity and Jon Huntsman

There is the mistaken belief that the USA president candidate Jon Huntsman is the same Jon Huntsman who co-founded a $1.1 billion private equity firm called Huntsman Gay Global Capital. But he isn't.

The Jon Huntsman running for president is the former governor of Utah and U.S. Ambassador to China. The private equity Jon Huntsman is his father, who previously founded specialty chemicals company Huntsman Corp. and who isn't nearly as involved with the firm as is co-founder Bob Gay (a former colleague of Romney's, as it so happens). The firm also happens to employ Jon Jr.'s brother Paul as a vice president.

Huntsman Jr. does not have any financial interest in his father's firm, according to a source familiar with the matter. He would have a good understanding of the use of many private equity firms who have taken their financial power to re-energize businesses that might otherwise go bankrupt.

Who Will Win the Private Equity Cage Battle between The Bay and J.Crew

Since The Bay's renewal, the males in my family have bought all of their casual clothing there over the past year, and  I had no intention of even window shopping, yet ended up buying business suits too. I would personally say The Bay is back to being a go-to-shopping spot again. 
The Bay has achieved their relaunch thanks to private equity backing with financial depth, and the gutsy CEO, Bonnie Brooks, is probably still in the midst of the final transformation. It is with alarm that I hear the rumours that the preppy and likeable J. Crew is looking to open in Canada. 
Is there room? 
Lands End had to leave with its tail between is legs. How will J. Crew be different?
Well, first, J. Crew will also have the deep pocket, private equity backing that The Bay enjoys. Here is an article detailing the private equity story:

Now we find out that the American retail chain BJ's Wholesale Club, Inc. announced Wednesday that it has agreed to be bought by private equity firms Leonard Green Partners (LGP) and CVC Capital Partners in a $2.8 billion cash deal.

Taking lead advisory roles on the deal are lawyers from Latham Watkins, Simpson Thacher, Bartlett, Wilmer Cutler Pickering Hale Dorr and Potter Anderson Corroon.

Under the terms of the transaction, BJ's shareholders are to receive $51.25 per share, a premium of nearly 7 percent premium over the stock's closing price on June 28, according to the BJ's statement. A proxy statement with additional information on the agreement has yet to be released to shareholders and the SEC, the companies said.

BJ's board of directors has unanimously approved the deal and has recommended it for shareholder approval. The company expects to close the acquisition in the fourth quarter.

BJ's, which operates 190 warehouse outlets in 15 states, is one of the top warehouse chains in the country and the latest in a string of retail pick-ups for LGP this year. The investment house acquired preppy clothier J.Crew, last November and added the craft-and-hobby chain Jo-Ann Stores in December.