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Mark Kolakowski

Mark's Financial Careers Blog


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Age Diversity

Monday May 19, 2014

A comprehensive study by fast-food giant McDonald's of its operations yields several very interesting findings:

  • Customer visits and revenues at a given location correlate highly with employee job satisfaction at that location.
  • The higher the average age of the employees at a given location, the higher that location is likely to score on a variety of performance measures.

As stated by Financial Times "On management" columnist Stefan Stern ("The kids are alright but they need help," 2/23/10), "the presence of grown-ups seems to encourage better behavior." Moreover, Stern quotes several researchers and management theorists who believe that companies with fixed retirement ages are shortsighted. Sure, older employers can be costlier in terms of benefits, for example, but this needs to be balanced with the positives that they can bring to the job. Consider this in your next discussion with human resources over retirement policy, controlling compensation and benefits costs, and maximizing productivity.

Didn't Make the Final Cut

Friday May 16, 2014

Based on my post yesterday regarding lessons from Hurricane Sandy, some of you may have set your DVRs to catch me on History Channel 2 tomorrow night. Sorry. False alarm.

Today I finally heard from the executive producer of "America's Book of Secrets" and he said that they dropped the DTCC segment because the DTCC wouldn't provide access or images. For what it's worth, they seemed eager to build up various conspiracy theories regarding the DTCC that I debunked in my interview.

Internship Time

Friday May 16, 2014

You students on the lookout for internships should take note of a sidebar that the Financial Times ran a few years ago. Among the critical points made by various financial sector recruiters quoted there were:

  • Prepare thoroughly. Each firm has unique aspects. Don't assume that one bank, for example, is very much like another.
  • Show a genuine interest in finance and the markets.
  • Exude confidence and an independent can-do spirit, but not arrogance.
  • Have opinions. Show that you're a thinking person.
  • Demonstrate strong communications skills.
  • If you have language skills, emphasize this if the firm is global, especially if it is trying to expand into a country whose tongue you speak.
  • A strong academic record is more important than the particular field of study.

The article notes that, after severe force reductions last year, many banks and other financial services firms are now reversing course, returning in a big way to campus recruiting. Moreover, working hard to land an internship with a desirable employer often is a sure ticket to permanent employment down the road. The article notes that high percentages of interns, up to 90% at some firms, get full-time job offers at graduation.

Lessons From Hurricane Sandy

Thursday May 15, 2014

With Hurricane Sandy striking the heart of the financial industry in New York City and its environs, the inadequacy of many business continuity plans in its constituent parts was laid bare. Who was prepared? Who failed the test miserably? What aspects of contingency planning have been neglected by firms in many other industries? Follow the link for details.

Business continuity planning not only is the responsibility of operations departments, but also of risk management teams.

Meanwhile, I was invited by the producers of the History Channel 2 (H2) series "America's Book of Secrets" to comment on related matters. This Saturday night, May 17, 2014, at 10:00 PM EDT, see the episode "Secret Underground." The segment for which I was interviewed covers the DTCC and its underground vaults that were flooded by Sandy, destroying millions of securities certificates.

Social Jet Lag

Tuesday May 13, 2014

If your work day is aligned with a faraway time zone, this can spell trouble for your productivity and health. This is a particular issue for financial professionals on the West Coast whose work days start very early, to coincide with the opening of the securities exchanges in the East. You may become the victim of what some researchers call "social jet lag."

This is a timely issue, if you will, since daylight saving time began last month. Beware: a variety of studies over the years indicate that the entire week after the clocks shift forward, and not just Monday, sees a spike in all sorts of accidents. A similar, but less intense, pattern manifests itself in the fall, when clocks are set backwards.

Culture of Secrecy

Saturday May 10, 2014

Pay close attention to the openness of their organizational cultures when choosing among potential employers. Particularly careful advance research may be in order with regards to a foreign-based company, whose cultural norms and internal protocols may be quite unexpected.

A spate of Wall Street Journal articles about the recall crisis at Toyota several years ago linked it to certain Japanese business norms, notably an extreme aversion to admitting error and an overall culture of secrecy.

Around the same time, The Economist magazine castigated Japanese firms for "a rigid system of seniority and hierarchy" in which management does not take kindly to hearing bad news or to being questioned. Moreover, "groupthink" is endemic in Japan because movement of staff between companies is low and difficult. The "Schumpeter" column in the same issue finds a huge bar to correcting major problems such as those faced by Toyota when "defensiveness towards the outside world" is combined with "exaggerated deference towards senior management."

Lest we write this off as just a Japanese problem, note that more than a few Western organizations and leaders display these unfortunate traits. Organizations with this sort of culture expose themselves to potentially huge legal liabilities and potentially permanent reputational hits from shortsighted decisions to cover up mistakes or misconduct rather than to confront them openly and early. Be careful about joining an organization with these tendencies. Disaster may loom in the distance.

SEC Probes

Wednesday May 7, 2014

With a growing number of states and municipalities flirting with insolvency, the threats to municipal bond holders are real and growing. In response, the SEC established an investigative unit several years ago dedicated to probing the muni market, with particular focus on the adequacy and accuracy of disclosures to investors. Keep an eye on this if you have experience in the muni field and have an interest in entering the regulatory sphere.

The latest shoe to drop concerns SEC probes of the CLO and CDO markets. Under investigation are several matters ranging from tactics designed to thwart regulatory and reporting requirements, to opaque pricing and trading practices that shortchange investors.

Financing Online Merchants

Sunday May 4, 2014

Part of the growth of online commerce is provided by small sellers, many of them individuals, who utilize the trading venues created by the likes of eBay and Amazon.com, among other large players. The value of such online market venues derives, in large part, from the number and variety of merchants using them. Accordingly, the big players who manage these marketplaces have an interest in the success of these smaller merchants, and now are extending credit to them in the form of merchant cash advances.

This is yet another example of how, with the withdrawal of traditional banks from many categories of lending as the result of increased risk aversion (much of it due to regulatory pressure), cash-rich corporations are stepping into the breach. In fact, the phenomenon is becoming fairly widespread, as lending to suppliers is now an important activity for many large companies, Follow the link for details.

In fact, all this falls under the larger category of trade credit and is closely related to the concept of the working capital loan. Check out our articles on these topics, as well as on the underlying concepts of working capital, accounts receivable and accounts payable.

Next Generation Finance

Thursday May 1, 2014

Financial planners and financial advisors must manage their practices for the long run. While maximizing their current income usually involves building a book of business that primarily consists of older, wealthier clients, a key concern is cultivating the next generation of clients.

Developing the next generation also is an important strategic issue for major financial services firms. In particular, they are facing particular challenges in marketing financial services to millennials, the generation that's now entering the workforce. Follow the link for details.

A CFO With Integrity

Thursday April 24, 2014

In recent years, leading business schools have made a lot of noise about emphasizing business ethics in their curricula. But talking about them is one thing. Adhering to principle at genuine personal cost in the real world is quite another.

Last year, I made the acquaintance of a priest who was on sabbatical in New York. He was effusive in his praise for a highly principled member of his congregation who put his faith in action. This man was the chief financial officer of a company in which the CEO had hatched an underhanded scheme to pay the already ill-compensated mass of employees even less. This CFO refused to be complicit and was fired for his integrity.

This man easily could have rationalized complicity with the CEO. He was married, had children and expenses, and was the sole source of income for his family. The company was treating him very well. The workers on whose behalf he took a stand had nothing to offer him in return. And so on. Indeed, many a person in a similar situation might even rationalize that, since the company was doing right by them, that therefore what it proposed to do to the other less fortunate employees was appropriate and defensible.

But not this CFO. He took a stand for what was right, never mind that he stood to gain nothing, and regardless of the potential negative personal consequences. When such rare persons of principle are found, they justly deserve to be lauded. And welcomed with open arms by equally principled employers.

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