Archive for January 31st, 2012
Dating and business: Not all that different
Just as healthy individual relationships require constant monitoring and care, the new paradigm for company and customer relationships values greater symmetry of power and dialogue.
By Thomas DeLong and Jevan Soon, guest contributors
Netflix CEO Reed Hastings had to deal with a major consumer blowback after the company announced a plan to increase its rates and spin off its DVD rental business.
FORTUNE — We’ve all fallen victim to or been perpetrator of the classic dating power play – waiting just a few days longer before calling. But this tactic can teach companies a thing or two on how they should be dealing with their customers, especially in light of Verizon (VZ) and Bank of America’s (BAC) relatively recent fee fiascos.
The “principle of least interest,” developed by sociologist Willard Willer from his studies of dating relationships among college undergraduates in the early 20th century, explains that how we feel about a relationship with another person depends on our perceptions of fairness or level of investment in that relationship. The party who holds the most power in that relationship is the one who is (or appears) least invested or interested. The power of “least interest” stems from an ability to exploit that difference in interest during various interactions, ranging from negotiations over the purchase of something desirable, to convincing your boss to give you a raise, to landing a date for Saturday night.
It may not sound surprising to suggest that most of us jockey for power in our business and personal relationships. The real insight comes from understanding the patterns of behavior that we fall into while pursuing the power of “least interest.”
In a study I did on high-need-for-achievement personalities, my team and I observed over and over how these driven individuals sabotage their own relationships at work in their reaction to perceived asymmetries with others. Feelings of inequity in relationships cause us to act out in ways that only exacerbate the problem, and can create destructive cycles that are hard to break.
The downward spiral looks something like this: A person perceives that his subordinate, partner, spouse, boss, or some other party has less interest in a relationship. He may begin to act out in reaction to the imbalance — pouting or getting unnecessarily angry over small incidents, becoming more critical of others at work and at home — as his emotional fuse grows increasingly short.
He may fight fire with fire, distancing himself in those relationships in an attempt to regain power and control through expressing less interest. These tactics trigger a similar reaction from the other person, resulting in a self-reinforcing loop of distrust and misunderstanding.
Rather than having a difficult but necessary conversation to identify and resolve the issues at hand, these individuals fear that nothing can be done to get them back in favor and simply continue the cycle in the vain hope that things will somehow balance out. Instead of first reflecting on his own anxieties and insecurities, the individual lashes out at others, placing the blame for the foundering relationship on them.
The power of least interest can cause people to cloak themselves in indifference rather than take the effort and the risks needed to build relationships based on trust. Escaping these zero-sum power games requires a willingness to be vulnerable and honest with yourself and others, to recognize and manage power imbalances while not allowing them to consume you. This is a tall but critical order in a world where our physical and virtual connections to others (and their associated power dynamics) are only growing more complicated.
These lessons hold true not just for individuals but for entire organizations as well. The latter half of 2011 was marked by several highly publicized power struggles between corporations and consumers, with the quick reversal of imposed fees by Bank of America and Verizon and Netflix’s (NFLX) intended spin-off of its DVD-by-mail service.
While you might assume that companies whose products impose high switching costs (e.g., the inconvenience of changing banks, or the early termination fees for breaking a cell phone contract) or whose services were wildly popular would hold the trump card in their relationships with customers. Yet these examples seem to demonstrate that the tide of power is turning in consumers’ favor, and that the trend may be accelerating.
Amid the increased prominence of social media, consumers’ ability to learn from each other and to mobilize as a larger group has increased exponentially. Through this increased connectivity, consumers complement their relationships with companies by adding relationships with each other.
So, the company’s power of least interest has grown weaker, as it no longer manages a set of isolated customer relationships where it holds a power position, but instead must confront a web of connected players that are increasingly capable of asserting themselves as a group.
Netflix’s business analysts no doubt predicted that there would be some small, but acceptable, level of customer attrition after its Qwikster spinoff announcement (a plan it abandoned in October), but it failed to gauge how the negative customer reaction would continue to compound itself via news coverage and online community discussion until customer departures totaled 800,000 by the end of the third quarter, delivering untold damage to the Netflix brand (the company has since gained 610,000 subscribers as of the end of the four quarter). And what would have been an easily ignorable smattering of customer complaints in the past was brought together by Molly Klatchpole’s petition on change.org into a 300,000-signature-strong force that Bank of America could not disregard.
Navigating this new world certainly requires managers and companies to exhibit the same kind of honesty and willingness to listen as is expected in most personal relationships. But there is no single recipe for success in this new world. Facebook’s journey in introducing new attributes and services to its site embodies the perils and promise of this aggregated power of “least interest”, ranging from the successful roll out of Timeline despite some privacy concerns to Mark Zuckerberg’s public mea culpa over the initial version of News Feed.
Just as healthy individual relationships require constant monitoring and care, the new paradigm for company and customer relationships values greater symmetry of power and dialogue between groups over issues that matter, and the willingness to reconsider things when results or reactions are not as expected. Like any love affair you want to last, it requires patient, hard work and the willingness to put power games aside to have real conversations.
Jevan Soo is a management and human capital consultant, and a research associate at Harvard Business School. Thomas J. DeLong is a management and organizational behavior professor at Harvard Business School and author of Flying Without a Net: Turn Fear of Change into Fuel for Success.
Filed under: Contributors, Strategy 
From:Management and Career
Toronto’s SeaWell scores $5M in funding
As more people watch videos online, more investors are expressing interest in Canadian technology to help network operators handle the heavy data load.
SeaWell Networks Inc., a Toronto-based software startup, secured $ 5-million in new funding Tuesday, bringing the company’s total funding past $ 9-million since 2008 when SeaWell was founded. Northwater Capital Management, a Toronto-based firm focused on funding startups rich in intellectual property, led the latest funding round.
The venture capital arm of the Business Development Bank of Canada (BDC) also contributed funds. David Patterson of Northwater and Nazmin Alani of the BDC both serve on the company’s board of directors.
SeaWell offers a product called Spectrum to network operations, allowing them to stream video content over the Internet to multiple devices and platforms. The software, which can also insert paid advertisements into videos, captures detailed user information as well to help clients better understand who is watching their videos.
“This is an important step for SeaWell and demonstrates continued support from our founding partners,” Brian Collie, the company’s co-founder and chief executive, said in a statement.
“As the industry continues to take huge strides towards broadband video, our vision of putting intelligence into the network comes into focus.”
The company said it intends to use the new capital to support ongoing trial programs with major clients and to expand its sales and distribution teams.
Robert Teitelman: Whatever Happened to Occupy Wall Street?
Gone but not forgotten. Occupy Wall Street has disappeared from Zuccotti Park, save for occasional gatherings of shivering souls watched over by yellow-jacketed police, but it lingers on the edge of consciousness, in the now embedded cliché “we are the 99%” and, apparently in Davos, where all things go to warm their hands on the gas-fed embers of 1% capitalism. Morgan Stanley’s Stephen Roach lays out in today’s Financial Times a final session at Davos that allowed a branch of the local Occupy movement to do their thing. As Roach himself says, “Friday’s Open Forum, in an effort to take the debate from the glitterati to the real people” featured the topic “remodeling capitalism” and was a “chance to open this debate to the seething masses.” Note a few assumptions here. First, glitterati are not real people, which may well be true — I wouldn’t know. Second, the “so-called Occupy Community” represented “the seething masses.” This, of course, is the argument made by the Occupy community, embodied in the 99% slogan. But based on their numbers, on polls and on anecdotal evidence, they are a small segment of the overall population at large. Lastly, why do masses always seethe?
Roach’s description of this affair sounds like something out of the ’60s. The affair begins in chaos, with Occupy “agitators” stationed throughout the room leading chants. The panel itself is an mélange of various points of view. Roach, as a Wall Street representative, is hissed. An hour-long discussion ensues. Roach comes to accept “a reasonable suggestion” on the need to balance growth and stability. And just before he escapes in the night, “Maria,” an Occupy representative, offers her views: “The aim of Occupy is to think for yourself. We don’t focus on solutions. We want to change the process of finding solutions.”
That sentiment jives with what we know about the thrust of OWS at Zuccotti Park. It also sums up the challenges of the movement. Yes, it has achieved a certain amount of celebrity; and its sloganeering has been effective. But what has it become? OWS’s notion of creating a political transformation — “We want to change the process of finding solutions” — is rooted in place, in physical proximity, like Athenian democracy. This is paradoxical, given its expert use of social media for drawing crowds, and self-limiting. Without a physical space, an encampment, where general assemblies can be held and the interminable process of achieving democratic consensus reached, this is just another protest movement, albeit one with a sense of humor and a talent for slick slogans. This explains, I think, OWS’s continuing attempts to find a new home, first in the empty lot owned by Trinity Church, then this weekend, in the cozy confines of Washington Square Park, with New York University around it like a very expensive muffler. There’s something bittersweet about this, with its efforts to replicate Zuccotti without turning the public against them. As The Wall Street Journal writes: “Organizers said they hoped demonstrations like Sunday would improve the movement’s public image, a sentiment that comes just a day after protesters in Oakland clashed with police and more than 300 people were arrested.”
Gordon Crovitz in the WSJ also took up the plight of OWS but from a more critical perspective. He argues that OWS violated property rights and as long as municipalities and the police enforce those rights, the movement will fade. He may be right; he may be wrong. (Crovitz blames “liberal city politicians” in New York for letting the movement take root. It’s a sign of how conservative the Republican Party has become that the moderate Bloomberg administration could be called “liberal.”) Crovitz argues that OWS was essentially an “AstroTurf” movement, started by AdBusters, and thus, in a sense, lacking authenticity, legitimacy, roots in anything real. Like Roach’s “real people” we now get to tangle with what’s real or not. Is the Tea Party, which also has AstroTurf roots, real? Well, its votes in the 2010 elections were certainly real; and Sarah Palin sold a ton of books to someone real. And one could say that OWS, whether its genesis was AstroTurf or not, has had “real” consequence. President Obama is taking a decidedly more aggressive populist stand than before OWS. And even the Republican primary battle between Romney and Gingrich features issues like inequality, private equity and Wall Street articulated by OWS — or by interpreters of OWS in the punditocracy. In fact, it doesn’t matter. Nearly every political movement that makes an impact began with an organizer. The notion of a true grassroots movement is mostly a myth (historically, many of them sprang from the political parties). That said AstroTurf movements couldn’t sustain themselves unless troops from the grass roots sign up for duty. The Tea Party achieved that; for a few months, the Occupy movements did as well. The real question, which returns us to the importance of “place,” is whether it will be self-sustaining come the spring.
That’s an open question. The emphasis on fundamental political transformation is stirring but, again, decidedly self-limiting. The decision to press specific issues smacks of politics as usual. Who wants to wrestle with the kind of hard economic issues Roach laid out in his Davos remarks: inequality, global income disparities and growth? Besides, the greatest threat to OWS is that it becomes familiar and boring: toward the end of the Zuccotti phase, that, plus a certain loss of patience in a group that was increasingly viewed as parasitic, began to limit the tolerance of the surrounding community toward the affair. The real challenge for the OWS core group is to devise a fresh and inspiring new shtick — a new Zuccotti or effective slogans that paper over the underlying incoherence of the movement — knowing full well that to resort to public spaces is now probably off the table. To get anything done, to get any attention (to “occupy” the media), OWS needs to mobilize large numbers, and that will depend in part upon the economic situation with its large numbers of unemployed and indebted young folks. How they’ll pull that off will be fascinating to watch. One thing to keep in mind: The one solution to the fear of becoming boring and irrelevant is to become more aggressive, to confront the authorities more brazenly. That, however, has nothing to do with democratic transformation and consensus and will lose the still-accepting nature of the larger community. Meanwhile, media and public attention will be increasingly focused on a presidential election.
OWS is, in a sense, running for office just as hard as Gingrich, Romney and Obama. But the task is far more difficult.
Robert Teitelman is editor in chief of The Deal magazine.
From:The Blog
RRSPs: It pays to do your homework
A recent Investors Group RRSP Intentions Poll advises that 76% of Canadians either already have an RRSP or plan to start one this year. Of those planning to invest, 83% intend to match or exceed their 2010 contributions, even though markets continue to be erratic. It seems these investors understand that there are ways to improve their long-term financial picture by maximizing their RRSPs.
It begins with the way in which RRSPs are invested, and basic principles apply. Generally speaking, bonds and other interest-bearing investments are best kept within an RRSP to remain tax sheltered while the most favorably taxed investments should be outside the RRSP, including those that produce capital gains and dividends.
Investors who choose to hold dividend-paying investments inside their RRSP should consider dividend reinvestment plans (DRIPs) where they reinvest dividends in additional shares instead of receiving cash payouts. This allows them to acquire shares cost-effectively and benefit from dollar-cost averaging with cash dividends reinvested on a regular schedule at prevailing prices. During market corrections this is especially beneficial because investors can acquire shares when prices dip, lowering the total average cost base.
RRSP structure plays an important role. Those in higher tax brackets than their spouses or common-law partners can take advantage of spousal RRSPs. A higher-earning partner can contribute to a spousal RRSP registered in the name of the lower-income spouse and achieve income-splitting. The contributor earns an immediate tax deduction, while the annuitant spouse reports the income for tax purposes when funds are withdrawn, ultimately reducing taxes. Care should be taken not to over-contribute, as contributions made to the spouse or common-law partner reduce the contributor’s RRSP deduction limit.
When it’s time to draw from spousal RRSPs, income splitting can be achieved once more. The contributor and spouse can make equal withdrawals to ensure taxation at the same rate and, if income levels are kept below Old Age Security thresholds, it may reduce or eliminate OAS clawbacks.
RRSPs have benefits beyond financial investments. The Home Buyers’ Plan allows eligible individuals to withdraw up to $ 25,000 tax-free from their RRSP to acquire a primary residence. It applies to persons, including former homeowners, who have not owned a home they occupied as a principal place of residence at any time during the four-year period before the date of withdrawal of funds. And there are criteria to help disabled persons acquire a more accessible home.
The home must be in Canada and must be purchased before October 1st of the year following the year of the RRSP withdrawal. The withdrawal must be repaid in equal annual installments over 15 years, beginning in the second year. Any payment shortfall must be reported as taxable income in the year it occurred.
RRSPs have advantages for students. Individuals or their spouses can make use of the Lifelong Learning Plan. A fulltime student, acquiring qualifying full-time post secondary education at a designated institute, can withdraw up to $ 10,000 in a given year from their RRSP over a 4-year period as long as the total does not exceed $ 20,000. They must repay it in equal installments over 10 years; otherwise it becomes a taxable withdrawal.
There is more to RRSP planning than just putting the money in and waiting for a tax refund. It is wise to do your homework.
Kim Inglis is an Investment Advisor & Portfolio Manager with Canaccord Wealth Management, a division of Canaccord Genuity Corp. www.reynoldsinglis.ca. The views in this column are her own.
What right-to-work laws really mean
Indiana could become the first state to embrace a right-to-work law in more than a decade, alarming organized labor proponents who fear a shift in public support for workers’ rights.
By Elizabeth G. Olson, contributor
FORTUNE — As the economy continues to wobble, the American divide on labor rights is playing out in some unexpected locales. Indiana is in the spotlight now, as it prepares to adopt a law that unions say will weaken their ranks.
If passed, the “right-to-work” law would allow workers to skip paying union dues but still receive the benefits of union-negotiated contracts. Advocates say such employees have been forced into unions, but organized labor calls them “free riders.”
Like the minimum wage, right-to-work battles have flared repeatedly for more than a half-century after workers toiling in onerous circumstances — not unlike what some in Asian factories face today — won the right to unite and bargain for wages and workplace conditions. But the nation never completely embraced a uniform view of worker rights.
In a peculiarly American way of adopting names that can be contrary to what they can mean, proponents called their effort “right to work.” At first glance, this “seems to be a declaration that there is a right to have a job,” notes Dan Graff, a professor with the Higgins Labor Studies Program at the University of Notre Dame, who has studied the impact of such a law in Indiana.
“This country has a different definition of this phrase than everyone else in the world,” he says. “The phrase is deliberately meant to confuse. A Texas newspaper columnist started calling it that decades ago, and it was picked up to mean working without having to be a member of a union.”
Almost half of all states already have such laws, with a concentration in in the Sun Belt, a region that has a less than friendly history with unions. It’s been more than a decade since the last state adopted such a law (Oklahama, in 2001), but the unexpected success of curbing collective bargaining rights in Wisconsin has fueled voices to give corporations a free, or, at least freer, hand in the workplace.
Indiana’s move has alarmed organized labor proponents who fear a shift in public support for workers’ rights and a rolling back of gains workers have made since before World War II.
“If more states pass right to work, unions would lose more members,” says Douglas McCabe, professor of management at Georgetown’s McDonough School of Business. “It would discourage people from signing authorization cards to be able to hold a vote on unionizing.”
A war of words and statistics
The Indiana Chamber of Commerce argues that more employers would move to Indiana if they had more flexibility to set worker pay, and, at the same time, incomes for residents would rise. The organization asserts that compensation for private sector employees was more than$ 1,000 a year higher in right-to-work states in 2011 than the salaries of workers in states without such a law, citing figures from the National Institute of Labor Relations Research, a nonprofit group that describes itself as “analyzing and exposing the inequities of compulsory unionism.”
But Graff and Notre Dame economist Marty Wolfson conclude in a separate report that right-to-work laws would deliver low-wage and low-skill jobs to Indiana.
The Indiana Chamber maintains that employment grew 100% in right-to-work states over the 30-year period between 1977 and 2008, and increased only 57% in other states. But the Hoosier state suffered a significant loss of manufacturing jobs during that time while right-to-work states had different economic experiences, such as large population increases, that affected job growth.
Each side of the right-to work argument cites studies to back their views, but a uniform economic prescription is hard to find because individual states have their own, unique economic circumstances, such as availability of skilled workers and access to markets and infrastructure.
Indiana’s action comes as the nation’s overall union membership rate continues to slide. Last year, only 11.8 %, or 7.2 million, of the private and public workforce belonged to unions, according to the latest figures from the Bureau of Labor Statistics. This compares to union membership of 20.1%, or 17.7 million workers, in 1983, the first year for which comparable union data are available, the BLS said in announcing the figures last week.
Non-government employees’ participation has fallen precipitously. Last year, it was only 6.9%, compared to 37% of public sector union membership.
The public sector figures fell, in part, because tight budgets forced states and municipalities to lop off jobs, many of which were unionized.
Those arguing against unions say private company employees do not want to oppose management and, if they do, they do not make meaningful wage or other gains.
“Deregulation and free trade have made the economy more competitive,” argues James Sherk, an economics policy analyst at the conservative Heritage Foundation, in a recent blog post. “Consequently, unionized companies cannot pass higher labor costs on to consumers. If they raise their prices, consumers will take their business elsewhere.”
In contrast, the Economic Policy Institute, a Washington, D.C.-based think tank, claims that wages are lower in right-to-work states, noting that employees in those states earn $ 1,500 less yearly than those in states without the law. Wages are 3.2% lower for everyone, not just union members, in right-to-work states than in other states, they argue, contradicting the Indiana Chamber’s conclusions.
To be sure, the erosion of unions was already well underway throughout the U.S. Unionization of private company workers is only 20% of what it was in the 1950s, when more than 35% of workers were union members, according to the latest federal labor statistics. North Carolina has the lowest rate of unionization, at 2.9 %, and South Carolina the second lowest, at 3.4 % while Indiana has a rate of 8.9%, down from 12.1%, as factory jobs have disappeared over the last decade.
Even if Indiana enacts a right-to-work law, McCabe, of Georgetown’s business school, says, “I don’t think it will set off a tidal wave. But if more states pass this, unions will loose even more members.”
Filed under: Contributors, Management, Strategy 
From:Management and Career