We change, society changes, and business changes. From night to day and from spring to fall the world keeps changing around us. Those who fail to change soon have the please of seeing the back of the head of the new leader. After the recent sub prime mortgage crisis and volatile swings in global stock markets due to the defaulting investment firms the business environment has drastically changed. We don't know how the business environment will change or what the business world will be like but we do know that change management and risk analysis will become more important topics over the next five years.
?The World has changed? says Morgan Stanley spokesman as the Company contemplates converting back to a bank holding company 75 years after it was forced to split into the holding company JP Morgan and the investment firm Morgan Stanley by the enforcement of the Glass-Steagull Act (The end of, 2008). It appears that years of capitalism and the ?free hand? approach of government has been reversed in only a few short days. The new reality may require companies to change their approach to business by expecting more oversight and transparency. Investors want to know where their money is and are assured of its safe ty. Management innovation is defined as the ?invention and implementation of a management practice, process, structure and techniques that are intended to further organizational goals? (Birkinshaw, Hamel & Mole, 2008, pp. 825-824). This definition has at its root the fostering and improving of organizational goals and objectives. Thus the inner workings of a business and the way in which organizations approach the business environment must change to work within new realities. That reality may be based in further government oversight and scrutiny of accounting and investing practices. Thus a balance needs to be maintained between organizational objectives and investor capital.
To change the processes of an organization is one task but to prepare the working population for such change is a completely different concept. Some approaches to addressing worker change include education, participation of employees, employee involvement in the process, facilitation by decision makers of the change process, as well as brutal honesty which doesn't try and hide information from workers (O'Brien, 2008). In other words, workers should be involved the change process and supported while they change. A company can change a document overnight but it may take weeks or months to change someone's opinion.
Change appears to have two major components from the information presented above. Change management requires first the change in the process to turn the organization into the waves of the new realities and then to motivate workers in order to start rowing in the same direction. Organizations that fail to change and readjust to the realities may find themselves capsized in a market storm. They simply won't have the ability to handle the rolling cycles of business and drastic market adjustments as well as their competitors.
In order to engage in effective risk management companies should balance between the need for risk and return (Frick, 2008). Growth at any cost won't likely work in a world where investors desire some surety over their investments and government desires to monitor company activities. Therefore, a ?slow growth? model may allow companies to handle the risks associated with moving into new markets and developing new ventures. Investors will desire some surety over their investments and some level oversight and management.
Companies are also likely to take a look at long-term investments like pension plans and retirement financing (Hedges, Lee & Neilson, 2008). As the average age of Americans increase and the investment market becomes more volatile it is difficult for companies to project how well these retirement accounts will fair in the market. Therefore, these companies may be less willing to promise a pension and are more likely to move to defined contribution plans (Hedges, Lee & Neilson, 2008) with no promises of performance.
In addition to the financial performance of many organizations as well as retirement investments many organizations have found that intellectual capital is also one of their greatest risks. Mergers and acquisitions appear to be growing exponentially year after year. Therefore, intellectual capital and talent is often misplaced. This lost talent can be a serious loss to many organizations.
Loss of intellectual capital can be a substantial risk to organizations (Executive shuffle, 2008) when the efficiencies and innovation developed through that talent is minimized. When companies are acquired, sold, or moved talent might either leave the organization for more stable employment or might be placed in positions where they do not succeed.
Companies should consider the best approaches to maintaining talent and recruiting new talent. An organizations worth is more then simply the profits it generates but also the value of that organization over five or ten years. Thus talent is a major consideration in determining a company's future chances of success.
In conclusion, the report has discussed potential new changes that include change management and further risk management as it relates new realities forced by the recent collapse of the investment brokerages and the substantial loss of capital. Companies that desire to foster change should first design the change required in their policies and procedures and then encourage change among their workforce to ensure understanding and general compliance. Furthermore, the financial resources and any future ventures should balance the need for risk and return to ensure relative safe harbor for resources. Change and risk reduction are likely to cause an environment where slow growth and rapid adjustment are likely.
Birkinshaw, J., Hamel, G. & Mol, M. (2008). Management Innovation. Academy of Management Review, 33 (4). Executive shuffle (2008). Chain Leader, 13 (9).
Frick, R. (2008). This is rocket science. Kiplinger's Personal Finance, 62 (10).
Hedges, P., Lee, R., & Nielson, N. (2008). Alternatives to cash in ensuring the solvency of defined benefit funds. Benefits Quarterly, 24 (3).
Lenders of first resort (2008). Economist, 387 (8581) Retrieved September 21st, 2008 from Ebscohost database.
O'Brien, M. (2008). 5 approaches to leading successful organizational change. Healthcare Financial Management, 62 (9).
The end of Wall Street (September 23rd, 2008). Wall Street Journal, 2011 (71), pp. A28.
A 2/3 majority must now approve all investment banking transactions; your district representative's staff reviews individual mortgage applications; and all 401(k), IRA, and remaining employer pension assets have been rolled into the Social Security Slush Fund.
Only federal and state elected officials are exempt from the 45% all purpose Income Tax. The estimated time to bring new companies public is 4.5 years; all individual account dividends and interest are paid directly into your IRS "grabber" account; CEO's salaries are limited to 50% of the amount paid to a first year congressman, and any government budget shortfalls are withdrawn from corporate earnings before any corporate obligations can be dealt with.
All employees receive the federal mandated minimum wage, except senior executives who are limited as mentioned above. Scary? This is a scenario that could play out if Congress (or the SEC) does not come to the rescue of the credit markets. You missed your opportunity to help stop it, but chances are a fix is on its way.
How many more businesses, jobs, and hopes will be killed by this irresponsible Congress? When will the average blogger realize that when a corporation fails, we all suffer? One would think that the informed and enlightened could take time out from their texting for a little research and education. Instead, they show their power by influencing public opinion numbers and the marshmallow politicians who worship them.
As economist Irwin Kellner and I have pointed out, this is no bailout and we are not nearly approaching a recession. Kellner's September 28th Market Watch article points out ten major differences between now and then: (1) In 1929, the DJIA plunged 40% in two months vs. around 30% in about a year.
(2) In 1933, the jobless rate was 33% vs. 6% today. (3) The GDP shrank 25% then, but has increased 6% now. (4) Consumer prices actually fell 30% then but haven't ever since. (5) Home prices dropped 30% then, but only 16% from the recent bubbly highs.
(6) 40% of all mortgages were in default then vs. only 4% now. (7) 9,000 banks failed in the 1930s compared with just 25 or so (bigger and broader based ones) recently. (8) The Federal Reserve reduced the money supply, (9) raised interest rates, and (10) raised taxes on foreign imports.
Further, Kellner points out, we now have automatic stabilizers, deposit insurances, and market trading restrictions as protective elements. Today's Congress however, has never been good at connecting dots, has accomplished nothing under an unpopular president, and is ignoring its role as the primary creative force in today's problems.
This transfusion is needed because: bad laws have obscured the values on financial institution balance sheets, and have created a clot in the credit arteries that keep the economy alive.
Educate yourselves on the Accounting Rule's that require institutions to book paying assets at pennies on the dollar. Find out why institutions are afraid to loan money to one another--- over night, at any rate of interest--- strangling the credit markets.
Doing nothing is killing jobs, killing companies, and deferring retirements for those who were counting on 401(k) and IRA dollars to provide them with income. Congress, of course has an old-fashioned pension plan, so it is unaffected by such financial realities.
Investigate the relaxation of lending standards that Congress orchestrated over the past few administrations, before blaming the companies that then extended credit to many speculators and other buyers who falsified application papers. Learn how the SEC was prohibited from regulating the CDOs and other multiple-leveraged credit market speculations. There are as many culprits outside the corporate executive suite as in it.
Congress is bursting with pride over bringing some of the Rich and Famous to their knees, and capping some of their obscene compensation arrangements at still shareholder pillaging levels. I've spoken often about how these salaries need to be controlled. But the multi-level-mortgage-marketing schemes that Congress encouraged must be unbundled somehow, and a buy out is the proper vehicle.
Congress has punished the entire world with its attack on Wall Street, and both parties are to blame. Representatives of the states listed below voted "no" to the credit transfusion, causing death and destruction that, in many instances, cannot be recouped. We have to replace them with better decision makers, representatives who can think in economic terms when they have to.
The number and letter code after the state designation indicates the number of representatives and their party: AL-1R, AK-1R, AZ-4D4R, CA-15D9R, CO-2D2R, CT-1D, FL-1D13R, GA-4D7R, HI-2D, ID-1R, IL-4D5R, IN-3D3R, IA-1D2R, KS-1D2R, KY-2D2R, LA-2D3R, ME-1D, MD-2D1R, MA-3D, MI-3D6R, MN-2D2R, MS-3D, MO-2D3R, MT-1R, NE-3R, NV-1D1R, NH-2D, NJ-3D4R, NM-1D1R, NY-3D1R, NC-3D5R, OH-3D7R, OK-3R, OR-3D, PA-3D7R, SC-1R, SD-1D, TN-1D4R, TX-8D14R, UT-1D1R, VT-1D, VA-1D5R, WA-1D3R, WV-1R, WI-1D2R (Names withheld, but available from the author.)
On Friday evening, candidates Obama and McCain gave their support to the Capital infusion, but neither bothered to explain why--- a huge audience was ready to soak up the information. Over the weekend, both attended meetings to support the plan and to generate support from their respective parties.
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