Managers should act like owners open for business

What would your customers say if they could see your expenses claim? The abstemious can rest easy. But extravagant restaurant receipts, first-class travel and accommodation, huge taxi fares - such things might not endear you to the people you are supposed to be serving.

You should expect a tough conversation about the prices you charge if customers get the impression you are enjoying the high life with their money.

That is why smart business leaders advise their colleagues to imagine they are spending their own money when they are out on company business. Act like an owner, the adage goes. Be responsible. Think before you splash the company's cash about.

This is a micro-level example of what has been called the "principal-agent problem". Even the most senior managers are not, usually, the owners of the business they are working for.

It may not be easy for them to think and act like an owner. At the same time, can owners be confident that managers are working in the company's best interests and not simply pursuing their own selfish agenda?

This question was explored by two academics, Michael Jensen and William Meckling, in a famous 1976 paper (Theory of the firm: managerial behaviour, agency costs and ownership structure), which popularised so-called agency theory.

Their answer to the problem? Among other things, try to align the interests of managers and shareholders. Use share options to give managers "skin in the game", a personal interest in the success - or failure - of the company.

There have been, to put it at its gentlest, regrettable unintended consequences to the spread of this theory. It turns out that the simple solution of share options does not solve the complicated problem of how to encourage and reward effective, responsible management.

For one thing, senior managers may not have the same time horizons as owners. A chief executive might reasonably calculate that he or she will be given no more than three or four years to run the business before their time is up.

You would understand it if that CEO worked pretty hard to get the share price up fast in order to make those share options more valuable.

Prof Jensen conceded in 2002, in the wake of the dotcom crash, that the incentives he regarded as crucial could do terrible harm.

"In the bubble, the carrots (options) became managerial heroin, encouraging a focus on short-term prices with destructive long-term consequences," he said. "It also encouraged behaviour that actually reduced the value of some firms to their shareholders."

In an important critique published in 2004 (Bad management theories are destroying good management practices), Sumantra Ghoshal condemned agency theory as an example of all that was wrong with management.

Amoral theories taught in business schools, he said, had "actively freed their students from any sense of moral responsibility".

According to this critique, the theory seems to launch a cycle of distrust. Managers are knaves, out for themselves, who have to be tied in with share options.
But managers who feel regarded in this way can become unmotivated and in the end untrustworthy. Why has executive pay exploded over the past 20 years? Partly, Prof Ghoshal suggested, because managers have sunk to reach the low expectations people have for them.

So is the idea of managers acting like owners a futile dream? Not necessarily but it's a tricky path to navigate - Financial Times
Published: July 08, 2009, 22:52

7 Indian firms among world's largest companies

Bangalore: Indian Oil Corporation (IOC) and Reliance Industries are among seven Indian companies which are listed in world's 500 largest companies compiled by Fortune for consecutive two years.

Oil giant Royal Dutch Shell leads the list of 500 elite companies for 2009, followed by another oil major Exxon Mobil and U.S. retailer Wal-Mart Stores.

The other Indian companies include Tata Steel, State Bank Of India [SBI], oil entities like Bharat Petroleum, Hindustan Petroleum and Oil & Natural Gas. IOC is placed at 105, followed by Tata Steel at the 258th spot, RIL at 264th, BPCL at 289th, HPCL at 311th, SBI at 363rd and ONGC at 402nd spot. IOC had revenues of $62.9 billion, Tata Steel $32 billion, RIL $31.7 billion, BPCL $29.9 billion, HPCL $28.2 billion, SBI $24.5 billion and ONGC $22.7 billion. Citigroup, Pepsico and Motorola, are also among the listed companies led by India-origins. Vikram Pandit led Citigroup is at the 39th place with revenues of $112.3 billion while Pepsico stood at the 175th spot with revenues worth $43.2 billion.Motorola is placed at the 282nd position. Royal Dutch Shell had revenues of $458.3 billion while Exxon Mobil and Wal-Mart made revenues worth $442.8 billion and $405.6 billion respectively.

Wal-Mart was at the premier spot in 2008 list while Royal Dutch Shell was at the third place.

Other firms in the top ten comprises of BP (fourth spot), Chevron (fifth), Total (sixth), Conoco Phillips (seventh), ING Group (eighth), Sinopec (nineth) and Toyota Motor (tenth).

37 companies in the Fortune 500 list represent China.

Property for sale at Omalloor

I'm planning to sell this property at Omalloor, Pathanamthitta, Kerala, India. Excellent site for a shopping complex, hospital, similar buildings, or even for several villas / houses. The total area is 1 acre.

The price is Rs.10 lakhs per cent. Ofcourse, I can reduce the price a bit for the most serious bidder / buyer.

 

Please be aware that once the global downturn and other economical headache bla blas are over, I'll increase the price to, may be, Rs.15 lakhs a cent, if the property is not sold out by that time.

Omalloor is just 3 km away from Pathanamthitta twon, and ideally located, with a panoramic view. See below the main Chengannur road right in front of the property.

 

Interested parties should contact at e-mail: librahitech@gmail.com

Thanks - Prathap G.

A Guide For Creative Thinking

A Guide For Creative Thinking - By Brian Tracy.

Einstein once said, Every child is born a genius. But the reason why most people do not function at genius levels is because they are not aware of how creative and smart they really are.

I call it the Schwarzenegger effect. No one would look at a person such as Arnold Schwarzenegger and think how lucky he is to have been born with such tremendous muscles. Everyone knows that he, and people like him, have worked many thousands of hours to build up their bodies so they can compete and win in bodybuilding competitions. Your creative capabilities are just the same. They actually grow as they are used.

But you don't need to spend thousands of hours to increase your creative-thinking abilities. By practicing a few simple exercises and applications, you can start your creative juices flowing, and you may even amaze yourself at the quality and quantity of good ideas that you come up with. Read the complete article

10 ways to become more Intelligent

10 ways to become more Intelligent.

Your brain needs exercise just like a muscle. If you use it often and in the right ways, you will become a more skilled thinker and increase your ability to focus. But if you never use your brain, or abuse it with harmful chemicals, your ability to think and learn will deteriorate.

Here are 10 simple ways anyone can squeeze a bit more productivity out of the old gray matter.

1. Minimize Television Watching - This is a hard sell. People love vegetating in front of the television, myself included more often than I'd like. The problem is watching television doesn't use your mental capacity OR allow it to recharge. It's like having the energy sapped out of a muscle without the health benefits of exercise. Read the complete article

What are your favorite ways to make the most of your intelligence? Share them in the comments.

Definition of Wealth

The Definition of Wealth - By Brian Tracy

If you want to be wealthy, you must understand what wealth is. Here is the best definition of wealth you will ever find. Wealth is "Cash flow from other sources."

Make Your Money Work For You

What this means is that, you are not wealthy just because you earn a lot of money. You are only wealthy when your money works for you. To become wealthy, your main job is to acquire money and then put it to work making more money for you.

Add Value Continually

The key to creating wealth is simple. It is called "adding value." Successful people are those who are always looking for ways to add value in some way to a person, a company, a product or a service.

Do It Faster

Here is an example of adding value: Domino's Pizza. The founders of Domino's Pizza took a common food, offered by thousands of little restaurants and added a value to the pizza by delivering it more rapidly than anyone else. The added value of speed enabled Domino's to create a billion dollar empire and made the founder of Domino's, Tom Monahan, one of the richest men in the world.

Buy It Cheaper Somewhere Else

Another way to add value is to buy something in one place at one price and then make it available in another place for another price. For example, buying a product or service manufactured in Europe or Asia, importing it to the United States and making it available to people to whom it was not available before, is a way of adding value for which you can charge a higher price.

Improve The Life or Work of Others

All manufacturing and marketing is based on this principle of added value. All importation and distribution aims to add value. Performing a service that enhances the life or work of another person adds value. A dentist who takes away pain is adding value. An accountant who saves a client money on taxes is adding or actually creating value. A salesperson who introduces a new product or service to a customer that helps that customer in some way is adding value. All financial success, especially business success, is based on adding value. It is based on the old saying, "Find a need and fill it."

Combine and Recombine The Elements of Value

All successful business is based on someone bringing together the factors of production, such as labor, capital, raw materials and management, and creating a product or service that a customer will pay a price for that is in excess of the cost of producing it.

How All Fortunes Are Made

Adding value is the way that all fortunes are made. Whenever you see an opportunity to give people what they want at a price greater than it costs you to produce that product or service, you see an opportunity to make a profit, build a business and begin moving toward financial success. Almost any business or occupation can make you financially independent if you can find a way to add enough value.

Action Exercises

Now, here are two actions you can take immediately to add more value to your time and activities:

First, take the time to be absolutely clear about what it is that people want and need to improve their lives and work. The more clear you are about their real needs, the easier it is for you to satisfy them at a higher level.

Second, look for ways to add value to what you are doing every day in every way. Never be satisfied with the status quo. One small idea to add value can be the starting point of a great fortune.

A successful business manager

A successful business manager

The latest study of leading companies throughout the world has identified the following defining characteristics of a successful senior manager:-

Exhibits a real knowledge of the company, empathy for its mission, and a genuine commitment to its goals and values.

Has significant direct experience of the business and a proven, demonstrable record of achievement in the relevant management areas.

Possesses outstanding planning, organizational and project management skills. Is a strategic and visionary thinker with a successful track record in developing, implementing, monitoring and evaluating strategies and initiatives.

Has a disciplined and methodical approach to handling multiple projects simultaneously.

Has the confidence and ability to prioritize and address a wide range of goals and issues.

Thrives in a demanding working environment and is committed to setting and meeting tight - but realistic - deadlines.

Is committed to building a strong team and creating a culture that recognizes and rewards teamwork success. Respects and shares ideas and knowledge. Has a natural talent for establishing enduring relationships.

Adapts readily to changing roles, methods, and situations. Is flexible, open-minded, and responsive to new ideas. Embraces challenge as welcome opportunity and displays a positive "can do" attitude.

Is a logical thinker with strategic and pragmatic analytical skills. Has an innovative, imaginative and creative approach to problem solving. Is equally comfortable applying logic, reason and lateral thinking to tasks and challenges.
Has the ability to engage with individuals and groups at a variety of levels and from wide-ranging backgrounds.

Possesses outstanding verbal and written communication skills. Can assimilate and translate complex information into concise and lucid formats. Displays excellent presentational skills.

Is an articulate and persuasive negotiator with dynamic influencing skills.

Has the self-confidence and ability to take the initiative when required.

Is passionately committed to high-quality customer care and service excellence.

Manages resources effectively. Is computer literate and conscientious in updating Web knowledge and research skills.

Possesses excellent time-management skills.

Demonstrates a real commitment to continuous improvement; and sets programs in place to ensure the structured development and progression of all other members within the company or organization.


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L.K. Advani

I am at a loss to understand why a gentleman of your calibre indulge in tarnishing a statesman like Shri L.K. Advani, who for all practical purposes is an Indian to the core than those hypocrites masquerading as Indians who might sell India to the highest bidder right in front of your eye.

Leave Shri Advani alone for a peaceful retirement from politics, and may God bless you Bikram Singh Jee.

Poor Advaniji

Bikram, on July 4th, 2009 at 9:41 pm Said:

Dear Prathap,

I appreciate the time you invested in first reading the post then commenting on it. Before writing anything further, I must tell you that I went to your blog and had a look so that I can get some idea about the person to whom I am going to write.

What do you exactly mean by tarnishing? If calling a spade a spade means tarnishing then I am sorry to say, I cannot help it.

And about selling the country to the highest bidder. Do you still believe your country has not been sold, and mind you it’s not the politicians alone who did this. Go to the nearest shopping mall and see everyone celebrating 4th of July!, or at least trying to do so.

Anyway, I am not a big fan of Mr. Advani or his party, and the reason being the lack of ideology in the party. I do not believe in the merits of religions and doubly don’t believe in the political or social system being centered on any religious ideology.

Prathap, please make me understand what your idea of being an Indian is? And how can you be sure about Mr. Advani’s indianism? And in the article you read above, I have not only condemned Mr. Advani as a person, but I have condemned his policy more in it. Mr. Advani might be warm as a person, but as a person who can think, he does not deserve any consideration.

And please do not talk about his retirement, talk about his failure. He isn’t retiring. He has failed!

Prathap G., on July 6th, 2009 at 12:00 am Said:

What is my idea of being an Indian? And how can I be sure about Mr. Advani’s indianism?

Well, these are multi-Million Dollar questions only an erudite person of your standing and repute can elicit a response to.

I would reckon, being an Indian is akin to being a Slumdog.

This is your world, and hence, please excuse me for my tomfoolery in agitating your excellent disposition as a human being.

May God bestow unto you all the blessings that he possibly can.

The Fully-Automated Way To Invest Just Like Warren Buffett

Michael Jackson

Dear Jack,

We herewith express our deepest sorrow and condolence on your sad demise. May your soul rest in peace.

 

Michael Jackson (1958 - 2009)

Sorry to know that you've gone from this wild-wicked-world of today, but your memories will remain with us. May God bless your soul, and let it remain in eternal peace.

Dubai Autism Center

Welcome to Dubai Autism Center.

Founded in 2001, Dubai Autism Center is the largest, most innovative and comprehensive nonprofit organization in the United Arab Emirates serving children with Autism Spectrum Disorders.

DAC relies on grants, donations and fundraising to operate its program. We greatly appreciate all donations and offers of support.

Volunteers are an essential part of the successful delivery of services at DAC. We encourage everyone who is interested in Autism.

Visit Dubai Autism Center, thank you

Africa

Can Africa Be Saved?

Africa is fabulously rich in natural resources, more than any other continent. According to Capitalism Magazine, it has 50 percent of the world’s gold and diamonds. It possesses a seemingly endless supply of minerals, including most of the world’s bauxite, chromium, cobalt, manganese and platinum, along with large untapped oil reserves. It has an abundance of timber, millions of acres of fertile land, and lakes and rivers capable of producing 40 percent of the world’s supply of hydroelectric power. The list could go on. Read Full Article

Jerusalem

Jerusalem: Past, Present—and Awesome Future.

Jerusalem: The name, among many ancient definitions, means “city of peace”—yet, ironically, it has been the focal point of war, uncertainty, turbulence and religious confusion for thousands of years. Even today, Jerusalem is the center of controversy, with Jews, Christians and Muslims esteeming the ancient city as their particular religion’s holy site, both Israelis and Palestinians wanting it as the capital for their individual states, and the United Nations recommending that Jerusalem be designated an international city. Read Full Article