Malaysia’s Minimum wage’s benefits and effects

Tweet

Minimum wage’s benefits are plenty

I HAVE been waiting for a reason to talk about a pizza delivery man I met in a lobby of an condominium while waiting for a lift to arrive. It was in the evening and he was delivering pizza to one of the residents. I struck a conversation about his job, his salary and his aspirations, and got enough from the chat to get his views that the decent salary he was making was insufficient.

The young man claimed he was making RM2,200 a month whizzing through traffic, despite the weather, to send piping-hot pizzas to customers from between 10am and midnight.

He said that after sending back money to his parents in Pahang and paying for his lodging and expenses to live in Kuala Lumpur, the salary was just not enough. Furthermore, the job was wearing him down and he wants to do something else, but is finding it hard to get a new skill with the demands of his current job and the obligations he has.

His story will resonate with many others who are struggling to make ends meet, and whatever little assistance they get will surely be welcome. That small bit of help though came for millions of Malaysians by way of a new minimum wage the Government announced on April 30.

Workers in Peninsular Malaysia were promised a floor wage of RM900 a month and those in Sabah, Sarawak and Labuan RM800 a month. The minimum wage will take effect six months from the time the law is gazetted to allow industries to make adjustments to comply with the new law. Non-professional services companies with fewer than five employees will be given a further six months to make their adjustments.

The higher minimum wage will benefit a reported over three million private-sector employees and the net effect economists have calculated is a negligible increase in unemployment and a small drop in investments.

Economic growth and the investments that will take place and the promise of new jobs will be more than enough to offset those small impediments.

One drawback many can expect is higher prices. You can bet employers will pass on the higher staff costs to customers, but the quantum should be kept in check given the competition that exists in business.

The benefits, though are plenty.

The higher wage that almost a third of the workforce will benefit from will be a boost to the economy, which in recent years has been driven by consumption.

The higher wages will also manifest in other benefits for workers. A higher base salary will mean higher contributions to the Employees Provident Fund (EPF) and the extra will go some way to shore up the retirement savings of many Malaysians.

Companies will see an increase in their payments to the EPF, but with productivity having risen 6.7% per year over the past 10 years and companies making a lot more money than before judging by profits announced by listed companies and tax collection by the Government, they can afford to pay a little more for their workers without diving into bankruptcy.

With a third of the workforce soon enjoying a higher base salary, the increased income will go some way to satisfy the requirement of banks under the new responsible lending guidelines.

Under the new loan criteria, banks will look at the basic salary and decide whether a person can afford a loan. With higher salaries, maybe that will be enough for low salaried people to qualify for a loan to get the small car or home they need.

The minimum wage will help those in need. It might help those like the pizza delivery man if the minimum salary together with allowances are fixed. It is a start that many Malaysians will be thankful.

● Deputy news editor Jagdev Singh Sidhu needs to get a lucky charm ahead of this weekend’s FA Cup final.

Minimum wage effects manageable

Effects of the minimum wage policy are expected to be manageable and unlikely to have a significant impact on companies, with rubber glove manufacturers seen to be the hardest hit, analysts said.

UOB KayHian Research head Vincent Khoo said there will be no significant wage rise for most listed companies, especially given the flexibility for the floor wage to include allowances and benefits, hence no wage restructuring is required.

“However, small and medium enterprises in particular, may still be impacted by higher overtime and there may be an upward cascade effect for some listed companies.”

In terms of sector, he said glove manufacturing remains the most impacted but the effect should be significantly softened with the incorporation of some allowances into wage calculations.

“Minimum wages would lower industry profits by as much as over 10% as a significant portion of the industry’s staff force earn only RM600 to RM700 a month before allowances and benefits.”

Consumer companies emerge as the winner as overall demand for fast-moving consumer goods should improve with higher disposable income among low-wage earners.

“We expect manufacturers to raise product prices during the implementation grace period to maintain profitability,” Khoo said.

Affin Investment Bank economist Alan Tan said: “The direct effect of a minimum wage increase will result in increases in the relative prices of goods produced. However, even if minimum wages were to lift prices (especially in low-wage industries), we expect the inflationary impact to be manageable, as the minimum wage is set at a relatively low level, which will not raise production costs and overall price level significantly.

“Overall, we expect the broader economic effects of minimum wage in the country on company profits, prices, and inflation, to be manageable and unlikely to have a significant impact on the economy.”

However, CIMB Research said higher wages will release pent-up consumption, albeit with some inflationary impact.

“Our view is that an appropriate minimum wage could over time achieve a big push, which is moving the low-wage, low-consumption and informal labour market to a high-wage, high-consumption and formal labour market.”

For rubber glove makers, HwangDBS Vickers Research said staff costs would increase by 17-22% while earnings could fall by 5-19% .

“We expect the additional staff costs to be passed to customers over time, but in the immediate term, we expect earnings and margins to be dampened.”

It said Hartalega Holdings Bhd is the least affected while Top Glove Corp Bhd would be most affected.

“Based on our estimates, Hartalega’s salary costs could rise by RM10 million a year, an increase of 17% and this would lower the 2013 estimated net profit by 5%. For Top Glove, staff costs could rise as much as RM39 million (an increase of 22%), denting 2013 earnings by 19%. Meanwhile, we estimate Kossan Rubber Industries Bhd’s annual salary costs to increase by RM18 million (a rise of 17%) and net profit to fall by 13%.”

However, it said that if fixed allowances or cash payments are allowed in the calculation for minimum wages, the impact will be softened.

It maintained a hold on Top Glove at a target price of RM4.80 and Hartalega (RM7.70) and Kossan (RM3.30).

Affin Investment Bank said rubber glove makers have indicated that they will most likely reduce or re-categorise certain allowances to help offset the increase in their workers’ basic salary.

Ee Ann Nee
sunbiz@thesundaily.com

Glove makers to gain from wage rule in long run

PETALING JAYA: While the new minimum wage will dent glove makers’ earnings in the near term, it is expected to be beneficial for the industry in the long run, CIMB Research said.

“It will encourage glove makers to reduce their use of low-skilled labour and improve their manufacturing processes by using more advanced technology and methods.

“Also, we believe that wage inflation will make the smaller glovemakers less competitive and catalyse consolidation in the sector. This will strengthen the positions of the large glove makers, favouring those with more efficient processes such as Hartalega (Holdings Bhd),” the brokerage said in a note to clients.

On Monday, Prime Minister Datuk Seri Najib Tun Razak announced the details of the country’s wage floor for the private sector, with the monthly benchmark set at RM900 for Peninsular Malaysia and RM800 for Sabah, Sarawak and Labuan.

This translates to an hourly rate of RM4.33 and RM3.85 respectively.

Some analysts say the new minimum wage rule may encourage glove makers to reduce their use of low-skilled labour and improve their manufacturing processes by using more advanced technology and methods.

The policy applies to all workers in the private sector, save for those in domestic services, but it will only take effect six months after the Minimum Wages Order is gazetted.

The law, which will be reviewed every two years, affords some flexibility to employers as they can absorb a certain amount of allowances and fixed cash payments in calculating the new wages.

According to CIMB Research’s forecasts, the minimum wage could shave some 1% to 7% off glove makers’ financial year 2013 core net profit, but the brokerage has kept its “neutral” rating for the sector and estimates for the companies under its coverage as they may yet find ways to mitigate the impact of higher staff costs.

Other research houses have also maintained their ratings pending further clarification from the companies and the actual gazetting of the law.

Among the glove makers, Hartalega is the least affected by the setting of a wage floor due to its highly automated production facilities and high margins relative to its peers.

“We believe Hartalega will emerge the strongest from the higher wages as its operations are already lean and management is working hard to further automate its manufacturing process.

“With the highest margins (lowest post-tax cost base), technologically advanced manufacturing process and an aggressive eight-year expansion plan, Hartalega has the most wiggle room in the sector to price gloves competitively and gain market share,” CIMB Research said.

Management was aggressively working on further automating the stripping and packaging portions of its manufacturing process to reduce the use of low-skilled labour and optimise operating expenditure, it added.

CIMB Research said Top Glove Corp Bhd would be the hardest hit as a result of low margins and an oversupply for its gloves that could take two to three years to work off.

“We believe it would be challenging for management to pass on the cost of the minimum wage to customers. This would put further pressure on margins and Top Glove’s high-volume low-price model.”

Top Glove shares have reflected this, with the counter losing 13 sen, or 2.72%, to RM4.65, making it one of the day’s top losers.

In contrast, Kossan Rubber Industries Bhd and Supermax Corp Bhd dipped one and two sen respectively to RM3.24 and RM1.87 yesterday, while Hartalega was unchanged at RM7.80.

For Supermax, CIMB Research said the manufacturer was ramping up nitrile production to 53% of capacity by financial year 2013. This could help curb rising staff costs, the brokerage added, as the cash cost of producing nitrile gloves was 20% lower than natural rubber.

Kossan, meanwhile, is poised to tap on the growth in China, where glove usage is a mere two gloves per person per annum versus 50 in Europe and 96 in the United States. Kossan entered the market in financial year 2012 via its 53%-owned Cleanera HK Ltd.

Moving forward, HwangDBS Vickers Research expects the additional staff costs to be passed on to customers over time.

Affin Investment Bank, in a report, also noted that Top Glove had previously said it would likely pass on 80% to 90% of the higher costs by increasing prices, which could prompt other glove makers to do the same. – The Star Business

Related post:

Malaysia’s minimum wage, and its implications

The 3rd Alternative, 21st century win-win

Tweet

21st century win-win paradigm

Title: The 3rd Alternative
Author: Stephen R. Covey
Publisher: Simon & Schuster

ALL hail the king of motivational theory and practice, and reigning monarch of corporate leadership coaching. Stephen Covey recently hit the big eight-O, but the acuity of his mind is as impressive as ever, on the evidence of The 3rd Alternative.

The multimillion-selling author of The 7 Habits of Highly Effective People, which in 1989 kick-started the whole genre, is acknowledged by many as the most influential business text of the 20th Century.

Audiobook clip

His publisher has presented The 3rd Alternative as a wholly fresh work. But this is slightly misleading. What this is, in actuality, is a well-penned and timely rehash of the book that made his name, thanks to its ground-breaking focus on the importance of synergy and on the win-win paradigm.

Is this a bad thing? No. If you have read now admittedly dated The 7 Habits, you might find The 3rd Alternative underwhelming. If you haven’t, it would behove you to skip it and go straight to this, which has similar content and almost identical messages, but is written from a 21st century perspective instead of that of the good old days of the bullish late 1980s.

The last person to widely use the term the “third alternative” as an approach to living was the late Muammar Gaddafi, whose Green Book expounded an alternative to communism and capitalism through a mixture of theological claptrap and goofy economics.

Hailing from the American rocky state of Utah, Covey is a hard-boiled capitalist, and a Mormon. And so there is an element of religiosity in Covey’s work. But his grasp of the fundamentals of economics is vastly superior to the late Libyan dictator’s. That said, it takes a certain amount of chutzpah to call one’s latest book “the 3rd alternative”. However, the book achieves its lofty goals, and is written with the clear-eyed lucidity that Covey’s legions of fans have come to expect.

The 3rd Alternative presents productive approaches to conflict resolution and creative problem solving. In these pages, Covey unveils a powerful methodology that he claims can resolve thorny professional and personal conflicts and yield solutions to apparently intractable challenges.

In any conflict, the first alternative is “my way” and the second alternative is “your way”. The fight usually rages over the question of whose way is “better”. There are numerous methods of “conflict resolution”, but most involve grudging compromise.

The 3rd Alternative goes further it’s about creating, what Covey terms, “a new and improved reality”. A departure from the usual strategies, this book illuminates a more productive mind-set one helpful to anyone seeking urgent solutions in their professional or personal lives.

Covey amplifies his message by means of wide-ranging examples of “third alternative thinkers”. There’s the local police force that transformed a crime-plagued community by casting off its entrenched “them against us” mentality. Another example tells the tale of a father who, during the course of one extraordinary evening, rescued his daughter from years of clinical depression. Then there’s the judge who brought a swift and peaceful end to a massive environmental lawsuit without setting foot in a courtroom.

Like many of the titles examined in the highly influential Read To Succeed column, this is an America-centric text, but there’s a whole generation of budding Stephen Coveys in this part of the world. And I’ll be bringing more of them to your attention in the Year of the Dragon.

But let’s get back to the man who started it all. Speaking to the press recently about his new release, Covey explained: “Most negotiators are trying to get their way. Through rounds of haggling, they usually arrive at a compromise, in which both sides concede something to get an agreement. By contrast, a third alternative’ requires no concessions at all because it’s truly a better deal for everyone. You get to it not by haggling but by asking, Would you be willing to go for a Third Alternative that is better than what either of us has in mind?’”

And that’s the message in a nutshell. Of course a win-win compromise is often a very tough nut to crack for those in the corporate community, and compromising with grace, even more so. The 3rd Alternative provides a whole toolbox of nutcrackers.

It’s a return to form. Totally fresh and original it isn’t, but seeing as it sources Covey in his prime, one cannot go far wrong. Hardcore Covey fans will love this. The newly interested should go here first, and maybe approach The 7 Habits and his other nine titles if they find Covey a sufficiently engaging guru. Many do. He’s got an enormous fan base, because he’s doing something right. And he’s been doing it for over 20 years.

Review by Nick Walker

Related articles

• 7 Habits of Highly Effective Expats (tulipanmalaga.com)
• SMART TRUST: Creating Prosperity, Energy, and Joy in a Low-Trust World, By Stephen M. R. Covey and Greg Link Foreword by Indra Nooyi, Chairman & CEO of PepsiCo (prweb.com)
• A Management in a Minute Book Overview of The Seven Habits of Highly Efficient People by Stephen Covey (healthmad.com)
• Are You Proactive or Reactive? (lifehack.org)
• Swain, Maass, Covey and the M/M writer… (authoremwoods.com)
• The Soft Stuff Is the Hard Stuff (empwaynek.wordpress.com)
• The Listening Ear (lifecoachbydesign.wordpress.com)
• Swain, Maass, Covey and the M/M writer… (authoremwoods.com)
• The Soft Stuff Is the Hard Stuff (empwaynek.wordpress.com)
• The Listening Ear (lifecoachbydesign.wordpress.com)

Malaysia could go bankrupt by 2019?

Why Malaysia won’t go bankrupt

 TRANSFORMATION BLUES By IDRIS JALA idrisjala@pemandu.gov.my

The Government is not in dire financial straits right now. By all measures its finances are good, but as in any situation involving finances, this is not to say it cannot be better.

I AM frequently asked why I said Malaysia could go bankrupt by 2019. I have had many queries asking for clarification and this has become one of my transformation blues.

In charting out our transformation journey in 2009, one of the first things the Prime Minister and the cabinet did was to list our current status, say where we want to be and set up a programme for transformation to get us there.

Amongst the many things on the list was a need to rationalise subsidy and so we ran a lab to do this.

During our open day, we engaged the public on the lab recommendation on the subsidy rationalisation. I wanted to be as frank as possible and to make it clear what the consequences of inaction would be.

Perhaps I was too frank but what I said has been misrepresented on a number of occasions, and I have since been saddled and hobbled with an unnecessary problem.

Habitual critics latched on to a small part of one of my first presentations where I said we have to change our spending patterns for sustained fiscal health.

Against a backdrop of several caveats and conditions, I said that we would be bankrupt by 2019 IF we continued to increase our subsidies and borrowings the same way we did before and IF our economy grows at less than 3% annually.

I’ve worked in Shell for more than 20 years, a company that is famous for its scenario planning techniques.

In layman terms, scenario planning means describing a future that could either be “good, bad or ugly” and doing our best to achieve the “good scenario” and avoid the “bad and ugly”.

My statement was heavily qualified but little or no mention was made of the clear caveats that I had put forward.

I still stand by what I said and it is important that my statement is taken together with the conditions.

This statement has been taken out of context so many times that it really gave me the blues – I have been talking till I turned blue in my face explaining what I meant!

Let me say in the clearest terms that my intention then was to illustrate the consequences of inaction when faced with tough decisions. We cannot continue to subsidise the way we have.

Let me also state that the Government is not in dire financial straits right now. By all measures its finances are good, but as in any situation involving finances, this is not to say it cannot be better. Here’s why.

Our debt as at end 2011 is 53.8% of gross domestic product (GDP the sum of goods and services produced in the country) and the budget deficit is better than the 5.4% target of GDP.

Compare this with Greece’s debt which stands at 110% of GDP and a budget deficit of 13% and it is obvious that we are not anywhere close to a crisis.

Subsidy rationalisation

Globally, many economists are cautioning the Governments against rising national debts. In 2009 the year for which the figures I used when I talked about subsidy rationalisation we had to increase government spending via our “economic stimulus package” in the face of the world financial crisis caused by the sub-prime mortgage problem in the United States.

This had spill-over effects into 2010 as well. But the debt as a percentage of GDP has begun to level off while the budget deficit, again as a percentage of GDP, has begun to significantly decline and as our economy continues to grow. We are reversing the situation.

In a simplified system to assess whether countries are in a sovereign debt crisis, the Boston Consulting Group (BCG) uses a graphical representation to identify countries with a potential problem.

Public debt as a percentage of GDP is plotted on the vertical axis while surplus or deficit in the national budget as a % of GDP is plotted on the horizontal axis.

BCG identifies a potential problem looming if public debt is 100% or over of GDP while simultaneously the budget deficit is 10% or more of GDP (see chart).

The more a country is to the left of the chart and the higher on the vertical axis, the greater the risk of a potential debt crisis but note that a country has to be simultaneously in problem in both areas to be regarded as a big risk.

If you look at Singapore, public debt as a percentage of GDP is 100% in the problem area but only for one of the two criteria but there is hardly any budget deficit to speak of in the republic.

Nobody considers Singapore a financially troubled country.

For Malaysia, it is important to notice that it has moved to the right in 2011 compared with its position in 2009 and 2010 while there is hardly any upward movement. That indicates a move in the right direction.

Based on this analysis, we are better than the United Kingdom, the United States, Spain, Italy, Portugal and Japan, to name a few. We will get into the safe zone soon enough.

The problem I highlighted using 2009 figures, making the caveat that IF debt continued to increase at previous levels we can have a serious problem in 2019 and IF we grow less than 3% annually, does not exist anymore.

Making improvements

Why? Because we are making improvements on both counts.

Firstly, as a responsible Government, in 2010, we began the process of gradually reducing subsidies for fuel, sugar, electricity and so on, knowing fully well that this was unpopular.

Secondly, our GDP grew by 7.2% in 2010 and 5.1% in 2011 and that’s an average of 6.2%; we are meeting our Economic Transformation Programme (ETP) target. Of course, we can and should do much more.

As I have pointed out in previous presentations very little of our subsidies amounting to billions of ringgit every year go to the poor, the rich get most of it. We must rationalise the subsidy system not do away with it and cut other extraneous expenditures.

However, we continue to help the poor via our GTP initiatives e.g. Azam programmes and BR1M for the low income households and rural infrastructure programmes.

On the other side of the equation, we must increase government revenue sources by introducing such measures as a goods and services tax (GST) and get more economic activity going. We can exclude necessities from the tax.

We are already succeeding. We have the ETP and we are growing our revenue we had additional tax revenue of RM26bil in 2011. This has allowed us to finance rakyat-centric programmes such as BR1M.

Why, if we continue to make progress by these measures, we may even be able to balance the budget come 2020 even though that will welcomingly surpass our own target.

I know there will be critics who will say that I have changed my mind on the bankruptcy issue. I haven’t changed my position vis-a-vis scenario planning.

I always believe in describing the “good, the bad and ugly” scenarios (that hasn’t changed) i.e. the “good” scenario is if we successfully implement our ETP, we will achieve high income status by 2020.

The “bad or ugly” scenario is if we don’t do anything to avoid it, then we can go bankrupt.

The fact is we are doing a lot of things to transform our country. So, we will not go bankrupt.

With the implementation of the ETP, we must acknowledge that Malaysia is on the right track in transforming its economy. The average annual GDP growth in two years (2010 and 2011) is more than 6%. In 2011, we met our GNI and investment targets, trade reached a record high of RM1.27 trillion in 2011.

We cut our deficit in 2011. In April, our PM will be releasing our ETP and GTP annual reports which provide all the details of our country’s achievement.

Let me conclude by quoting Dale Carnegie: “It is tragic when we put off living. We dream of a magical rose garden over the horizon and miss the roses blooming outside our windows”.

Datuk Seri Idris Jala is CEO of Pemandu and Minister in the Prime Minister’s Department. Fair and reasonable comments are most welcome at idrisjala@pemandu.gov.my

Related post:

Malaysians, work hard to succeed !

Moody’s declares Greece in default of debt

Think business, think margins

ON YOUR OWN By TAN THIAM HOCK

An Innovation Competence Process Coming From Knowledge Management (Photo credit: Alex Osterwalder)

ABOUT 20 years ago, when Forbes started compiling a list of the richest Asian billionaires, many rumours spread. My favourite story involves a president M of a neighbouring country. He was known as the 10% president. Just make sure you budget a 10% margin for him if you want to participate in any infrastructure projects in his country.

After diligently amassing a tidy fortune over his long rule, president M was surprised when the new list from Forbes placed him a few places below another head of state from a neighbouring country. This head of state had only been in power for a few years so president M decided to make a state visit to learn the ultimate trade secret.

After a sumptuous dinner at the palace on a hill, the head of state led the president to the balcony with a great view. When asked for his secrets to such quick success, he asked the president, “Can you see that beautiful highway? And that long bridge across the river? And the power station next to it?”

Faced with a vast landscape of lush virgin forest and hills, the puzzled president said, “Sorry. There is nothing there but a forest in my view.” The beaming head of state explained patiently, “That’s my trade secret. I only take 100% margin!”

No, I am not asking you to make a 100% margin. Because you can’t. Unless you are a very powerful and corrupt politician or head of state. But it just shows that you will make money faster when your business enjoy high margins. Net profit is basically gross profit less expenses. The higher your gross profit (sales minus cost of goods), the faster you cover your expenses, the more you make as your sales increase. All because you have high gross margins.

No, I am not asking you to invest only in high margin business. If sales turnover is small, your net profit remains small. Sometimes high volume, low margin business provides a very high return on investment, like the Walmart hypermarket business. A 2% net profit on a turnover of US$400bil will net the shareholders a cool US$8bil (RM24bil) a year! Only Petronas makes more money than Walmart. And that’s because the abundant oil and gas from the sea bed is free!

But for entrepreneur wannabes who need to start on a small scale, I always recommend high margin business opportunities. You are under less pressure to achieve high sales volume and you need less working capital. You just have to watch your expenses and cover your opportunity cost of being employed.

High margins can be created through innovation, brand perception, necessity and scarcity.

In my pre-university days, I worked for 3M as a sales promoter. 3M is well known for its innovative research and development programme of developing next generation products. These are products that are sold at premium prices and fetch at least 70% margins across their 5,000 product lines! Once copycats flood the market and reduce their product margins, they just discard the product line and launch newer and more innovative products at higher prices.

Then you have Apple products which is at a premium to its competitors and they fetch higher margins through a combination of technological innovation and higher brand perception. Microsoft has been selling their so-called software diskette at an average of US$200 when their cost of production is US$2 per diskette. Out of necessity, your business computers must be installed with their operating system and Office application software. No prizes for guessing the reasons why these two companies are the most profitable in the world.

Why must you pay two times more for Gillette blades versus other blades when a shave is just a shave? Why must your wife pay RM5,000 for a plastic monogram bag when a full calf leather bag cost a mere RM500? And will a RM1,000 jar of cream make you look 10 years younger? If you have innovative products, make sure you hire the best marketing minds to create a superior brand perception, raise the prices and reap the rewards.

With a growing world population and depleting natural resources, we have seen continuous price increases in oil, minerals and agricultural products. What used to be cyclical in demand and supply, where prices fluctuate in 10-year cycles, have now become a continuous increase in demand versus depleting supply.

Compared with massive overcapacity in manufacturing of almost any conceivable product from consumer goods to ships to cars; it is a no brainer where the high margin business will be in the foreseeable future.

For entrepreneur wannabes, you should develop a competitive business model where you can charge a higher price for your goods or services. Be creative. Build yourself a superior brand image. Make sure your services or your products are a necessity.

A “must have” by all concerned. Embrace high margin mentality when you evaluate business opportunities. Then go forth and multiply.

This advice is free. But if you make your millions, just remember to send me a cheque for 10% of your earnings. Lest you forget that I do not have to be a crooked politician to earn my clean 100% margin.

● The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should. Email him at thtan@alliancecosmetics.com

Leadership management and strategy – failure of Obama Presidency

HOPE IS NOT A STRATEGY: Leadership Lessons from the Obama Presidency

John Mariotti,  Forbes Contributor

Image via Wikipedia

BREAKING NEWS—A Series of Excerpts from A Powerful New Book

Much has been written about Barack Obama’s presidency during his first three years. His supporters still adore him. His critics dislike him intensely. The real question is, why has Obama failed—in his own terms: “to turn this country around?” His campaign mantra of “HOPE & CHANGE” created tremendous expectations. The problem is, as our title states, “hope is not a strategy” and the “change” has been change for the worse, and not better.

Now there is a new book which chronicles thirty of Obama’s most notable failures and mistakes from a new perspective: as problems of leadership, ideology and inexperience–combined. Co-author Dave M. Lukas and I have combined the perspectives of two different generations of executive and entrepreneurial success into a series of short, easy-to-read chapters, each of which describes one or more of Obama’s failed outcomes, and goes on to offer valuable lessons for life, career and most of all, for current and future leaders in business and government.

Dave and I are both deeply concerned about America’s future as it struggles under Obama’s staggering budget deficits and imperial power plays, leading to sluggish growth, record unemployment and a general lack of respect for the USA that is growing greater every month he is in office.

When Barack Obama exploded onto the national political stage—literally—during the 2004 Democratic convention, he used his oratorical skills to elevate his thin resume and undistinguished career into national prominence. He stated his conviction that, “There is not a liberal America and a conservative America – there is the United States of America.” Unfortunately, after a masterful campaign, in which he echoed this line in various forms, he did not behave or govern this way. Under his presidency, the divide between the conservative and liberal elements of the US government has grown wider, not narrower. Obama has been a divider, not a uniter.

Why this happened can lead to complex, and contentious arguments. That it has happened is indisputable. In HOPE IS NOT A STRATEGY: Leadership Lessons from the Obama Presidency we break down some of the many the problems, mistakes, failures and “misstatements” that Americans encountered during President Obama’s first term.

In this series, I will post excerpts from several chapters of the book, to provide readers a “taste” of what the book contains. It has been called “The most important book of 2102,” and described as, “An insightful guide to leadership and management based on examples of stunning failures and what not to do.” Another assessment of it said it this way: “Every American voter needs to read this book. It will help them see Obama’s many mistakes—prove that style and oratory do not trump substance…”

The book will be available in late March on www.amazon.com in both paperback and Kindle versions, and other on-line booksellers. To sign up for more details of availability, go to www.hopeisnotastrategybook.com and click on the Contact tab.

—————-
John Mariotti is an internationally known executive and an award-winning author. His newest book, co-authored with D. M. Lukas, Hope is NOT a Strategy: Leadership Lessons from the Obama Presidency will be available in March 2012 at www.amazon.com. Mariotti’s 2008 book, The Complexity Crisis was named one of 2008’s Best Business Books. His critically acclaimed 2010 novel, The Chinese Conspiracy, merges an exciting fictional thriller with the reality of America’s risk from Cyber-Attacks. Mariotti does keynote speeches, serves on corporate boards and is a consultant/advisor to companies. He can be reached at www.mariotti.net.

Newscribe : get free news in real time

Dumb Leadership Mistakes Smart Managers Avoid

7 Dumb Leadership Mistakes Smart Managers Avoid

Martin Zwilling, Forbes Contributor

Many professionals in business, from startups to multi-nationals, assume that team leader or executive is an appointed position, and the skills come with the title. In reality, leadership is best demonstrated while not in a position of authority, and is a skill that must be sharpened every day of your life.

Most experts agree that leadership, as perceived by people around you, is more about behavior than it is about specific skills or knowledge. Darryl Rosen, in his new book “Table for Three?” illustrates this with humor for each of fifty dumb mistakes that smart managers don’t make. The leadership one is setting a poor example by your own actions (“Do as I say, not as I do.”)

His rendition, including the following seven examples of poor leadership behavior, that I have seen all too often in startups, illustrate how your actions affect others around you:

1. Blame others for everything. An entrepreneur’s passion for an idea often prompts them to blame others or external events for setbacks, rather than themselves, so that they can maintain some semblance of self-esteem and control. This “attributional bias” may be understandable, but is perceived by associates as poor leadership.
2. Worry and fret about everything. Precious little of what we worry and fret about ever happens, so don’t share every concern with associates. At best, it comes across as lack of confidence, or more likely sounds likely trying to make excuses for possible later failures. Team members want leaders who calm their worries, not amplify them.
3. Criticize others and the company. Managers who speak critically of team members, customers, friends or family members, have something going on within them that needs to be examined. There is some aspect of self that they find unacceptable. Real leaders are recognized as willing to look in the mirror, and learn from what they see.
4. Complain about being overwhelmed. Overwhelm is a feeling that always precedes growth, and is a state in which your brain is developing new pathways and connections. Starting a business or a new organization will always cause self-doubt and insecurity. Real leaders embrace and manage these feelings, rather than complain to associates.
5. Do 10 things at a time in a mediocre fashion. Entrepreneurs or managers who claim to be able to do multiple things at a time must never use this as an excuse for poor quality. Associates will quickly conclude that mediocrity is good enough. Even one task done with mediocrity can be the kiss of death for any business, or any career.
6. Appear disorganized and manage things haphazardly. Doing things haphazardly is prone to mistakes. In business, when you are making mistakes, it’s costing you time and money. With associates, making mistakes will cost you in productivity and morale, and will kill their image of you as a leader. Worse yet, associates will follow your example.
7. Fail to see the positives in others. The key here is to maintain a positive mindset. Leadership is all about finding positives, for business growth, for competitive advantage, and people development in your organization. Managers and entrepreneurs need everyone in their organization accentuating the positive, not amplifying the negatives.

Leadership and improvement is about taking small steps forward, and evolving just a bit each day. Think evolution, not revolution. Anyone can change one behavior a month, or eliminate one mistake, and suddenly you too can be an “overnight success.”

Of course, correcting leadership mistakes is only the beginning. There are at least 49 other ways to go wrong in navigating workplace relationships, problem-solving approaches, time management, credibility, and business effectiveness. How many have you avoided recently in your job?

Newscribe : get free news in real time

Measuring Happiness

BY Bain Insights, Forbes Contributor

Fred Reichheld

Happiness has been a hot topic in business lately and I’ve been delighted to see such a serious subject get the attention it deserves in the corner office. In the Jeffersonian tradition, the “pursuit of happiness” is considered an inalienable right on par with life and liberty. Yet, until recently, managers here and elsewhere in the world made little effort to rigorously measure or manage happiness.

That was part of the reason I created the Net Promoter score (NPS) nine years ago. When I was considering various names for the new metric, I thought seriously about calling it the Net Happiness Score. We describe NPS as a measure of loyalty, but the overarching objective of the framework is to make people happy—so happy that they recommend a product or company to friends and loved ones so they can benefit from a similar experience.

Of course, I ended up calling it NPS. I decided against NHS as a name because I feared it might sound too corny or whimsical to hard-minded business execs, causing them to overlook the very real connection between how customers feel about their experience with a company and that company’s profitable, sustainable growth.

But even today we still maintain a not-so-subtle link between NPS and happiness through the emoticons we use to report the scores.  For example, we communicate a Net Promoter Score of 75 with a wall of faces like this:

It’s pretty hard to miss the link between NPS and the emotional energy of happy or unhappy people when looking at a picture like this. Using emoticons to represent promoters, passives and detractors requires little additional explanation. What’s more, the happy, passive and angry faces illustrate that making people happy and earning their loyalty creates emotional outcomes, not just economic ones.

“If you figure out how to make employees happy and make customers happy, then the business just kind of takes care of itself,” says Zappos CEO Tony Hsieh. “It’s just about delivering happiness.”

Well, it’s not quite that simple since the happiness must deliver profits—but companies already have well-advanced measures to focus efforts on profits. What they have lacked is a rigorous metric for happiness—until the adoption of NPS. Leading practitioners use different language to describe the underlying emotional engine of NPS: Apple talks about enriching lives. Intuit talks about delighting customers. Rackspace talks about “Fanatical Service.”  But they are all talking about the same thing: making customers happier.

As I have noted before, in our work at Bain & Company we find it nearly impossible to separate the notions of employee happiness and customer happiness—they are two sides of the same coin.  There is no way to consistently turn customers into promoters unless they are being served by employees who are equally enthusiastic about their work, and there’s no way employees can be enthusiastic about their work if the customers they deal with all day long are detractors.

Some leaders assume that simply making employees happy will result in happy customers. That is dangerous thinking. When employees come to believe that the job of their leader is to make them happy, the result is almost always entitled but uninspired employees—who help create fewer and fewer happy customers.

Leaders can and should treat their employees well, but they can’t make them happy. True happiness must be earned through meaningful service to others. When a customer scores an employee’s work a 9—or especially a 10—they are giving a standing ovation that provides a real source of sustainable happiness.

What bosses can do is make sure their people are in a position to earn lots of 10s from their customers—by structuring teams correctly, assigning good leaders, providing the right tools and training, supporting them with good policies and putting individuals in roles that play to their strengths. And, as important as any of these, they can install a system that measures the impact employees have on customers and lets employees hear that feedback in a timely manner.

Many loyalty leading companies install employee NPS feedback systems to work in parallel with their customer NPS systems, because they recognize the close and interconnected relationship between customer and employee happiness. Integrating those two systems isn’t always easy—employee feedback has long been the province of the HR department, and employee NPS drifts naturally in that direction.

But loyalty leaders such as Apple Retail and JetBlue work hard to ensure that employee engagement isn’t pursued independently of the goal of delighting customers. Instead, they ensure that they set up a virtuous circle that positions employees to earn “10s” from customers and to hear about it and are rewarded for it. Employee and customer Net Promoter feedback systems remain fully integrated at those companies, because they are part of the same pursuit—the pursuit of happiness.

Fred Reichheld is a fellow at Bain & Company and co-author, with Rob Markey, of The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World, published in September by HBR Press.

Newscribe : get free news in real time

How CEOs Can Build A Better Work Team In 2012

Tweet

By Deborah Sweeney, Forbes Contributor, West Coast CEO who knows small business and entrepreneurs.

Truly a Lightbulb Moment

Got a resolution for 2012 at the workplace yet?

Or better yet, what are the resolutions that your employees have for the company next year?

These resolutions could be lofty. Nab every sales call, land the biggest accounts, open offices in every major city overseas. They could be set on a smaller scale too. Leave earlier in the morning to avoid getting caught in traffic, ask for more beverage options in the kitchen, delegate tasks to other department members more often. All good goals for any team to work towards, but difficult for a CEO to process when they don’t know what their staff resolves to work towards, if they plan on working toward anything at all.

If you’re stuck in a place where the progress forward looks cloudy, this is the time to work on building a better work team for 2012. A team that is roaring and ready to go and certain of how their place in the company can lead to its eventual success. Building this team takes time, talent, and creativity. Sometimes it requires hiring new people and firing those who aren’t doing their part. More than just shooting off a couple of emails and hoping for the best, your team for 2012 will rely on you to think outside of the box as well as inside at some of the common sense bits that get overlooked. From new hires to clones, here are my tips on the building for the better within your company team.

1. Look Beyond Business BAs and MBAs

Not every person who gets hired for your business needs to be strictly all about business. Who will handle the legal division of your firm, the public relations aspect of your brand, the IT work for when the computers suddenly crash? A grad degree in business is attractive on paper, but not useful in every setting. Look into hiring candidates with backgrounds in other studies like communications that you would typically pass over.

2. Don’t Hire A Clone Of Yourself

Great minds think alike, but a greater mind will want to work with a team that expresses a slew of opinions and ideas across the board. Working with a team that is just like you won’t challenge your company to grow in a new direction if you all agree on the same things all the time. It’s easy to want to hire someone just like you, but more rewarding in the long run if you get someone to offer what you cannot to the table.

3. Allow Employees To Be Involved In The Hiring Process

Get an idea of whether or not a potential employee will be a good fit within their department by inviting the managers and senior staff members to the job interviews. They may have questions and concerns related to their field that you won’t touch on that decide whether or not a future hire is the best decision to make

4. Explain Company Culture To Your New Team Members Early

Welcome to the team! Beyond just your employee handbook, there are rules to the game of working within the company. Some work teams are much more by-the-book in terms of how to conduct yourself and may be much more quiet and soft-spoken. Others are willy-nilly and a lot more extroverted and open to embracing new ideas with members encouraged to leave their shyness at the door. A new hire needs to know the company culture early on so this isn’t so much of a shock to their system.

5. Answer Questions, Communicate Often

Future goals and upcoming projects will have a series of questions that come with them, especially if a team member is new. Hold plenty of open discussions and meetings to provide insight into what you’re working on. Keeping communication lines between all team members and yourself is key to the success of the project and the overall organization as a whole.

6. Hire People With Different And Complimentary Personalities

Much like not having dozens of clones of yourself, don’t do a similar thing with your favorite employee (and don’t play favorites either). It’s cliche to say it, but your team needs to have the snowflake effect where no two think or behave exactly the same despite having similar strengths in their field. Personality goes a long way and can work to give your company the face and voice it needs if it doesn’t already have a defined one.

7. Hire Milliennials

They are young, eager to please, tech savvy, and well educated. And if you treat them well, they will stay with your company (though not forever which is to be expected). Interview the bright young things and bring them on to see what they’re made of. You might find yourself to be pleasantly surprised.

8. Pay Your Interns

It isn’t a practice that every company commits to or can commit to, but at the very least offer a stipend if you decide to bring in seasonal interns.

9. Don’t Outsource Your Social Media Team

Gets kind of hard to create a voice for your online persona if the person creating it has never visited your office or interacted with your employees before doesn’t it?

10. Offer Flexible Schedules

This is a rule of thumb for both new hires and longtime employees. Circumstances do arise where not every member of the team can be there to make a meeting. If multiple members can’t do it or aren’t ready just yet, offer to reschedule the event. Employees with additional commitments outside of work like family or school will also appreciate a flexible schedule in being able to accommodate their lives and still work.

11. Encourage Employees To Pursue Outside Interests

Beyond just being a CEO, you may serve as a mentor to some of your staff. And your staff isn’t here solely for the company itself. They may be actively pursuing acting on the side or writing or engaging in other hobbies that could turn into their next career move later on. Have lunch with your staff both new and old to see what they’re all about on the side of their full-time job. Encourage them to share their published work with you or invite you to the opening of a gallery they have a painting featured in. Your acknowledgment of what they are truly passionate about is worth more than you think it might be.

12. Create Jobs Based On Valuable Skills

Want to a hire a new employee, but have nowhere to put them where you know they will really fit in at? Create  a position based off of their skill set. You may even wind up creating an entirely new and much needed department!

Newscribe : get free news in real time

Learning From The Masters of Management

Tweet

Dan Schawbel, Contributor

Adrian Wooldridge

I recently spoke with Adrian Wooldridge, who is the author of Masters of Management: How the Business Gurus and Their Ideas Have Changed the World – for Better and for Worse. Wooldridge is the management editor and “Schumpeter” columnist of The Economist. He was educated at Balliol College, Oxford, and All Souls College, Oxford, where he held a Prize Fellowship. He was formerly The Economist’s Washington bureau chief and “Lexington” columnist. In this interview, he talks about how the field of management has changed over the past decade, the difference between management and leadership, and more.

How has the field of management changed in the past decade?

Management has been revolutionised by two great changes over the past decade. The first is the rise of the internet. A decade ago the internet was still a fancy reference tool and Google was still a start up. Today the internet is reorganising the world. The internet is not only spawning an entire ecosystem of new businesses. It is reshaping the way that even the most conservative companies organise their business.

The second is the rise of emerging markets. A decade ago we still referred (often pityingly) to the underdeveloped world. Today we regard the emerging world as a hotbed of growth and innovation. Investment houses are pouring money into the BRICs even as they despair about stagnating Europe. Multinationals are ‘offshoring’ research and development as well as manufacturing to India and Brazil.

Are all managers leaders? What’s the difference between management and leadership?

No: not all managers are leaders (and not all leaders are managers: some great leaders such as Winston Churchill have been hopeless everyday managers).

The great distinction between the two lies in the choice of direction: leadership is about choosing where to go while management is about choosing how to get there. Jack Welch was a great business leader because he changed General Electric’s strategic direction with his emphasis on being number one or number two in a business or getting out. A secondary distinction lies in inspiration: the best leaders not only set a direction but inspire their followers to strain every sinew in reaching their new destination. There is nothing second-rate about management: great leaders mean nothing without the nuts-and-bolts men and women who put their visions into practice and make sure that the trains run on time. Incremental changes can sometimes add up to big changes. But given the uncertainty of the current business world—the sudden gusts of change that blow from unexpected directions—leadership is more important now than it was say fifty years ago when ‘organisation man’ ruled the roost.

Can you name a few management gurus that you’ve been observing and explain how they have helped make change?

These astonishing changes of the past decade—the world remade by the internet and turned upside down by emerging markets—have changed the pecking order among business thinkers. You are probably more likely to find a mind-changing article in Wired than in the Harvard Business Review or from an Indian than from an American-first mid-westerner.

The business gurus that I pay most attention to come in two guises: geeks or third-world firstists. Christopher Anderson made waves with his book on The Long Tale (which argued that the world of niches is replacing the world of mass markets). The book has had a huge influence not only with high-tech companies but with other organisations (retailers for example) that are seeing their markets redefined by the internet.

I suspect that his work-in-progress on 3-D printing will also have a big influence (though there is a lot of work in this area). V.G. Govindirajan of Tuck Business Shool has produced exemplary work on ‘frugal innovation’ (the idea that the most interesting form of innovation in the emerging world is about radically reducing costs rather than adding more bells and whistles. This has had a huge impact on General Electric which is producing a new generation of ‘frugal’ medical products. John Hagel and John Seely Brown have produced equally fasinating work on how these ‘frugal products’ will send a wave of disruption through rich countries, as traditional producers are forced to cut costs dramatically or see their markets eaten up by emerging-market giants.

What will the new management gurus of the future look like?

The management gurus of the future will look more like the class of 2010 at CEIBS or the Indian Business School than the class of 2010 at Harvard Business School or Wharton. They will also look more like the class of 2010 at the Stanford School of Engineering than the class of 2010 at the Stanford Business School: white faces will give way to ‘faces of colour’ and classic business school types will give way to engineers and other sorts of geeks.

Masters of Management

For the past century business thinking has been dominated by the United States. The bulk of the business cases have been about American companies. The bulk of the tools and techniques have been dreampt up by American managers. The driving assumption has been that if you don’t measure up to American standards—about how you organise your company or measure your performance—you are doing something wrong. That model was shaken by the rise of Japan but reasserted itself in the 1990s. It is now being shaken up even more thoroughly by the rise of a huge variety of emerging world companies. The business gurus of the future will come from emerging world—not just from India (which has cornered the market for the moment) but also from China, Indonesia, Turkey and Nigeria.

For the past century technology gurus have played second fiddle to strategy gurus (or even marketing gurus). Peter Drucker was less interested in technology than in the sociology of organisations. Tom Peters made little use of his training as an engineer in his voluminous writing. Technology is now at the heart of business thinking rather than an optional add on. Technology gurus are rewiring our thinking about organisations. And gurus from other disciplines face a stark choice: think deeply about what is happening in the world of the internet or face irrelevance.

Dan Schawbel, recognized as a “personal branding guru” by The New York Times, is the Managing Partner of Millennial Branding, LLC, a full-service personal branding agency. Dan is the author of Me 2.0: 4 Steps to Building Your Future, the founder of the Personal Branding Blog, and publisher of Personal Branding Magazine. He has worked with companies such as Google, Time Warner, Symantec, IBM, EMC, and CitiGroup.

Newscribe : get free news in real time

Why ‘Occupy Wall Street’? Job growth fails to dent US unemployment rate!

Tweet

Why ‘Occupy Wall Street’?

 

Steve Denning, Contributor

RADICAL MANAGEMENT: Rethinking leadership and innovation

Image by AFP/Getty Images via @daylife

For people wondering why the ‘Occupy Wall Street’ movement is spreading across the country, an article earlier this year in  Bloomberg by Danielle Kucera and Christine Harper sheds some light. It discusses the continuing disconnect between the amount of pay in finance and the value generated to society:

Wall Street traders still earn much more than brain surgeons. An oil trader with 10 years in the business is likely to earn at least $1 million this year, while a neurosurgeon with similar time on the job makes less than $600,000, recruiters estimated.

After a decade of deal-making, merger bankers take home about $2 million, more than 10 times what a similarly seasoned cancer researcher gets.

“I don’t think it’s healthy for the economy to be this skewed,” said Stephen Rose, a professor at Georgetown University’s Center on Education and the Workforce. “I believe there’s some sort of connection between value added to the economy and pay. Everyone is losing sight of any fundamentals.”

Yet many bankers think they’re not paid enough

For those in middle class finding it difficult to make ends meet or for recent college graduates struggling to find a decent job, the pay numbers are truly eye-popping.

In the first three quarters of 2010, eight of Wall Street’s largest banks set aside about $130 billion for compensation and benefits, enough to pay each worker more than $121,000 for nine months of work. That’s up from the same period four years earlier — before the crisis — when the lenders set aside a total of $113 billion, or enough to pay an average $114,400 to each worker.

Calculated in dollars, average pay per employee has risen at Bank of America Corp. [BAC] Citigroup Inc. [C], Credit Suisse Group AG [CSGN] and UBS AG [UBS]and declined at Deutsche Bank AG [DBK], Goldman Sachs Group Inc. [GS], JPMorgan Chase [JPM] and Morgan Stanley [MS] since the same period in 2006.

“The bottom line is all the people in investment  banking understand that they work harder and are under more stress,” said Jeanne Branthover, a managing director at Wall Street recruitment firm Boyden Global Executive Search. “Many don’t think they’re paid enough.”

What is the basis for these financial rewards?

John Cassidy, writing in The New Yorker in an article entitled What Good Is Wall Street? asked a banker how he and his co-workers felt about making loads of money when much of the country was struggling.

“A lot of people don’t care about it or think about it,” he replied. “They say, it’s a market, it’s still open, and I’ll sell my labor for as much as I can until nobody wants to buy it.” But you, I asked, what do you think? “I tend to think we do create value,” he said. “It’s not a productive value in a very visible sense, like finding a cure for cancer. We’re middlemen. We bring together two sides of a deal. That’s not a very elevated thing, but I can’t think of any elevated economy that doesn’t need middlemen.”

The [banker] is right: Wall Street bankers create some economic value. But do they create enough of it to justify the rewards they reap? In the first nine months of 2010, the big six banks cleared more than thirty-five billion dollars in profits.

It wasn’t always this way

It hasn’t always been this way. Cassidy notes that from around 1940 to 1980 things were different.

Economic historians refer to [this as] a period of “financial repression,” during which regulators and policymakers, reflecting public suspicion of Wall Street, restrained the growth of the banking sector. They placed limits on interest rates, prohibited deposit-taking institutions from issuing securities, and, by preventing financial institutions from merging with one another, kept most of them relatively small. During this period, major financial crises were conspicuously absent, while capital investment, productivity, and wages grew at rates that lifted tens of millions of working Americans into the middle class.

Banking of course wasn’t the only factor. This was a period when oligopolies were in charge of the marketplace and could charge pretty much what they wanted, even for products that weren’t particularly good. So they could afford to offer life-time employment with good salaries.

Since the early nineteen-eighties, by contrast, financial blowups have proliferated and living standards have stagnated. Is this coincidence?

For a long time, economists and policymakers have accepted the financial industry’s appraisal of its own worth, ignoring the market failures and other pathologies that plague it. Even after all that has happened, there is a tendency in Congress and the White House to defer to Wall Street because what happens there, befuddling as it may be to outsiders, is essential to the country’s prosperity. Finally, dissidents are questioning this narrative. “There was a presumption that financial innovation is socially valuable,” [a critic] said to me. “The first thing I discovered was that it wasn’t backed by any empirical evidence. There’s almost none.”

True, but banking wasn’t the only factor. This was also a period in which the big companies that used to be in charge of the marketplace, found themselves struggling to cope with global competition and the new power of the customer and could no longer offer life-time employment at high salaries.

One might have hoped that the banks would have provided an element of stability in a turbulent period. As it turned out, the net effect of the financial sector has been to aggravate the instability.

Slum lords in pin-striped suits

The case for bankers, if any, rests on the argument that their activities grow the economic pie. However, most of the income comes from extracting rents in a zero-sum game. Cassidy quotes Gerald Epstein, an economist at the University of Massachusetts:

These types of things don’t add to the pie. They redistribute it—often from taxpayers to banks and other financial institutions.

Cassidy’s overall take? He cites with approval Lord Adair Turner, the chairman of Britain’s top financial watchdog, the Financial Services Authority, who has described much of what happens on Wall Street and in other financial centers as “socially useless activity”:

Many people in the City and on Wall Street are the financial equivalent of slumlords or toll collectors in pin-striped suits. If they retired to their beach houses en masse, the rest of the economy would be fine, or perhaps even healthier.

_____________

Steve Denning’s most recent book is: The Leader’s Guide to Radical Management (Jossey-Bass, 2010).

Follow Steve Denning on Twitter @stevedenning

And join the Jossey-Bass online conference webinar”: Sep 22-Oct 20, 2011. My session is on Thursday October 13 at noon ET. To register, go here and use discount code

Newscribe : get free news in real time

Job growth fails to dent US unemployment rate

Economy created 103,000 new jobs in September, but unemployment remained high at 9.1 per cent.

Al Jazeera and agencies

Frustrated with the ailing economy, protesters have staged #Occupy rallies in over 500 American cities [Getty]

The US economy created 103,000 jobs in September, the labour department has reported, a much stronger figure than expected but not enough to lower the unemployment rate.

Economists had expected Friday’s report to say that the economy only replaced 60,000 jobs in September.

The private sector accounted for all of the the gains, which were boosted in part by the return of 45,000 telecommunications workers who had been on strike in August.

“Job gains occurred in professional and business services, health care, and construction. Government employment continued to trend down,” the labour department said.

Meanwhile, the unemployment rate was still stagnant at 9.1 per cent for the third straight month in September.

For African-Americans, the unemployment rate is 16.7 per cent – the highest it has been in 27 years and double the rate of unemployed whites.

Al Jazeera’s Patty Culhane, reporting from Washington, explained that the number of unemployed and under-employed Americans is in the millions.

“There are still 14 million Americans who aren’t working today, even though they’d love to have a job,” she said.

“Beyond that, there are something like six million that have been unemployed for more than six months. That is a unique feature of this recession – how long people are staying out of work.”

She said there are another nine million Americans “who are working part-time jobs because, quite frankly, that’s the only job they can find”.

Growing frustration

With the underlying data still dire, Friday’s news is unlikely to dampen President Barack Obama’s calls for congress to pass a $447bn jobs bill- which he says could create 1.9mn new jobs. 

In depth coverage of US financial crisis protests

He said on Thursday said that America’s growing #Occupy protest movement reflected people’s frustration with the American financial system and the country’s declining economy.

“I think people are frustrated, and the protesters are giving voice to a more broad-based frustration about how our financial system works,” he said at the White House.

Republicans, who oppose Obama’s jobs bill, said the latest jobs figures were another indication of Obama’s mismanagement of the economy.

“There were far too few jobs created this month, which shows the need to spend less time making campaign style speeches and more time trying to work together to identify policies that we both can agree will create an environment for job creation,” Eric Cantor, the House of Representatives majority, leader said.

Al Jazeera’s Culhane said that Obama is playing “campaign politics” by “going all around the country saying blame the republicans”.

But, she points out, “no US president in recent history has ever won a second term with unemployment anything close to this high”.

Newscribe : get free news in real time