Federal agents arrested Madoff at his apartment on Thursday after prosecutors said he told senior employees that his money management operations were "all just one big lie" and "basically, a giant Ponzi scheme."
A Ponzi scheme is an illegal investment vehicle that pays off old investors with money from new ones, and is dependent on a constant stream of new investment. Because the invested capital is not earning a sufficient return on its own, such schemes eventually collapse under their own weight….. Source Yahoo News

A good example of where greed can lead us to, let´s learn from this by trying to reshape a new ethical culture linked to a Leadership style based on true values, ........which are they ?......What do You think ?

The Detroit Bailout,....

Newly elected president Barak Obama went on to describe, what he believes is a long-term bailout that will be conditioned on federal oversight. Could that mean that the government is mandated, or at least to heavily influence, what kind of cars the 3 Big ones from Detroit make, what mileage and environmental standards they must meet and what large investments they are permitted to make — to recreate an industry that Mr. Obama wishes “ that actually works, that actually functions.”
It all sounds me too close to nationalization.
My big question is, those 3 companies have been underperforming regularly in the last couple of Years even in the Booming ones, pursuing wrong business strategies, obsolete models, too many brands, so, why should the government ,as most will admit , historically, haven’t done that very well, be able to change that course and appear as the salvation management option ?
Plus it is a protection for the National American car manufacturers, what if the result is just the extension of the actual agony? Where is the American spirit of free trade and free market, what happens with the foreign manufacturers that invested in plants in the US and fostered the creation of thousands of new jobs, will they also be able to benefit form those massive financial injections ?
Would not be that money more wisely invested in long term actions that help boost economy by, lowering taxes and give the power back to those that more wisely can take the purchasing decisions. The taxpayers themselves, it is all a question of placing the right balance between back between offer and demand. What do you think?

Workout vs. Bailout: Should Government Take Advantage of the Buffett Effect?

James Heskett is a Baker Foundation Professor, Emeritus at Harvard Business School

Published:
October 2, 2008
Author:
Jim Heskett

Summing Up
The depth of the global financial crisis is becoming clearer day by day. In the United States, it is being used as a reason to set aside ideology regarding government ownership of important financial institutions, possibly including those that also manufacture automobiles. Our changing attitudes toward these matters may help explain the reasoned responses to this month's questions, responses surprisingly devoid of emotion. Granted, the emphasis of the column was on how the Government should act, not whether. But responses, by and large, resisted the temptation to venture into the realm of ideology.
Some respondents doubted the Government's ability to achieve the Buffett result, if not the "Buffett Effect" of the column's title. Several argued that the Government, by necessity, has different goals and constraints. Dave Guenthner wondered whether "a government would have the same financial-only interest that Buffett has. He is investing to make money, not save the economy." Sameer Kamat cited several reasons—lack of "credibility" as an investor, a "business model" that avoids hard-to-understand business, and "patience" (the pressure for Government to exit its investments as soon as possible)—as reasons why "a Government bailout may not be perceived in the same way as a Buffett style investment." Henrique Abreu cited a lesson of the late Milton Friedman that "it is a different thing spending your money on someone else (Warren Buffett) or spending someone else's money on someone else (government intervention)." But at the same time, most were resigned to the necessity of government action. In Tom Henkel's words, "Government intervention, while appalling, is really the only short-term fix."
One at least partial solution to these concerns was put forth by Amit Maheshwari, who asked, "Why not ask Warren Buffett to invest the bailout amount on behalf of Govt (he works for money, does he not?) …." Several responding as a group from Bethel University asked whether it would be possible to find an expert investor, including Buffett, who truly is a "disinterested party."
This sparked a side discussion about regulation. As Wilson Kimutai put it, "If we bring in Government to bail out, … more regulation should be brought to stabilize the market." David Moore echoed this thought and went further, suggesting that American people should not be allowed "to obligate themselves to loans they cannot afford." Elizabeth Doty commented, "The promise that individual actions lead to societal gain also means that individual failures of judgment lead to societal risk and pain, as we are seeing…. This is why I think we need to step up to the regulation challenge."
Those trying to fix the blame for the problem pointed in several directions. Bottoms-up (mortgage related) as well as top-down (concerning only financial institutions) solutions were favored. Now the definition of those institutions qualifying for either work out or bail out will be tested further, leading us to the question of whether the U.S. automobile industry should qualify for help. Where should we draw the line? Is it now time for ideology to take over? What do you think?

Original Transcription : HBS Working Knowledge November 2008

There are many books I could have written that are better than the ones I actually wrote. My best book would have been 'Managing Ignorance', and I’m very sorry I didn’t write it.”


Peter Drucker

Over the coming months, The New York Times will track six small businesses, and start a series in times of this financial turmoil on how their daily operations will be affected and the way they will handle this crisis, a very interesting idea by PATRICK McGEEHAN and KEN BELSON

Paul Krugman warned against the threats posed by the expanding non-regulated financial entities about a decade ago

To be a man is, ....precisely,..... to be responsible.

Antoine de Saint-Exupery

The Paulson plan: A great idea if you have no idea how to read a balance sheet. --John Hussman

I believe that one thing the actual financial crisis showed us is that free markets do work, it is the old rule of demand pull inflation, (if someone comes and offers 20 % interest rates a year, should no one start to be suspicious? The old economic rule; low interest rate low risk, high interest rate high risk?) if there are people interested in buying any asset at any risk at any price regardless of his true value, we can have at the end bubbles that will blow when this balance starts shifting.
So should the government intervene and take care of the so called "toxic assets"? (By the way I still struggle with the content of that definition.) Normally politicians are not the most suitable persons to manage taxpayers' money, that reminds me one of the lessons of the late Milton Friedman, it is a different thing spending your money on someone else (Warren Buffett) or spending someone else's money on someone else (government intervention). Should we let the free market forces act and start a self-healing process? Or should bureaucracy intervene and start to regulate what is anyway difficult to regulate? It is a bit like the old analogy of the glass that is half full or half empty; on one hand we can see this as a collapse of the existing financial system with all its negative impact, but we can also take a look at it as a major and new business opportunity.
There are solid companies in the marketplace whose share values reached an all-time low in the stock markets. Those willing to buy now will be able to make some excellent deals. There is liquidity out there, so a major opportunity to see companies and individuals start to purchase shares massively. A huge opportunity to invest - probably that is what Warren Buffett is all about. In these times we see true entrepreneurs start a workout and help a deregulated economy to recover from this downturn and start to rise again, but at what cost, in what timeframe and at what speed?
Those are questions whose answers I do not have, but I truly believe that markets will stay frozen until confidence is restored, and to achieve that goal all involved agents have to behave responsibly and with transparence, acting like they would always and in every situation be spending their own money on themselves.

By Henrique Abreu

Extract of the open forum discussion on the Harvard Business Review Working Knowledge October 2008

Quotation from: Milton Friedman
It's hard to know what is meant by business ethics. Only people, not businesses, have ethics. Ethics is me, the individual, as a person. I'm ethical or unethical. If I'm employed in a business that I think is unethical, I have a clear choice. I can get out of that business and find something else to do. It doesn't seem to me it's ethical for me to do unethical things because the business can let me do it.
Original Source: Stanford Business

In times of uncertainty and financial turmoil how important is it to foster strong leadership at multiple levels in the organization to deal better with crises and other unexpected circumstances? Ideas? Opinions ?
We will try to dig deeper into this hot subject during the next couple of weeks. Stay tuned…….

Quotes

It is in times of turmoil and strife that true manliness is shown. A life without adversity makes a man weak, dull, and effeminate.

Seneca

The Art of War

Attack Your enemy where he is unprepared, appear where you are not expected.

Payback

Description:
If you're like most people, you bet your career and company on innovation--because you must. Payback: Reaping the Rewards of Innovation offers you a new way to think about and manage innovation that will dramatically improve the odds of success. Authors James P. Andrew and Harold L. Sirkin, senior partners at The Boston Consulting Group, describe an approach to managing innovation based on the concept of a cash curve--which tracks investment against time. They ask the questions you need to ask: How much should you invest in a new product or service? How fast should you push it to market? How quickly can you get to optimal value? How much additional investment should you pour into sustaining and building the product or service? Payback offers you practical and economically sound advice on when to pursue cash flow indirectly by first pursuing other benefits, such as brand and knowledge. It also shows you how to reshape the cash curve by using different business models--integrator, orchestrator, and licenser--each of which balances risk and reward differently. The authors then present a short list of decisions and activities that you must make--not delegate--to achieve a high return on innovation. You won't find facile answers in Payback. Instead, you will find valuable insights and practical guidance for mastering one of the most challenging and critical business activities: innovation

Source: Harvard Business Publishing

Quotes

People are willing to adjust their behavior to facilitate teamwork, but they expect others to make a similar effort.
— Irina Gaida, BCG

Quotation

If the primary aim of a captain were to preserve his ship, he would keep it in Port forever.
"Thomas Aquinas"

When is a Innovation profitable ?

An Idea becomes an Innovation as soon as it generates cash in a profitable way.

the elevator pitch

An elevator pitch (or elevator speech) is an overview of an idea for a product, service, or project. The name reflects the fact that an elevator pitch can be delivered in the time span of an elevator ride (say, thirty seconds or 100-150 words).
The term is typically used in the context of an entrepreneurr pitching an idea to a venture capitalist to receive funding. Venture capitalists often judge the quality of an idea and team on the basis of the quality of its elevator pitch, and will ask entrepreneurs for the elevator pitch to quickly weed out bad ideas.
It is said that many of the most important decisions made on the floor of the United States's Housee or Senatee are made "within the span of an elevator ride" as a staff aide whispers into a Congressman or Senator's ear while they head down to the floor to cast their vote.
A variety of other people, including entrepreneurs, project managers, salespeople, evangelists, job seekers, and speed daters commonly use elevator pitches to get their point across quickly.
An effective elevator pitch generally answers questions like...
What the product is
What it does for the buyer (e.g. the benefits)
Who we are

Source: Wikipedia

Some Key Characteristics of effective Leadership

Effective leaders have the ability to understand themselves and others, are great listeners strong communicators (both oral and written) get and keep people in action and develop a drive for achieving positive results consistently.

Why are Communications skills so important…..

The ability to communicate effectively is the most important skill you need to develop, whether you're giving speeches, pitching ideas to your boss, sending off an email, leaving a voice message or having a face to face discussion.
In a recent survey, conducted by the University of Pittsburgh’s Katz Business School among HR managers from companies with more than 50,000 employees, communication skills were cited as the single most important decisive factor in choosing managers. The survey points out that Communication skills, including written and oral presentations, as well as the ability to work with others, are the main factor contributing to success.
Employees in organizations spend more than 75% of their time in an interpersonal situation; therefore it is no surprise to find out that at the source of a large number of organizational problems we find poor communication.

As a consequence of that, employers are looking for more than a specific set of skills, they are looking at a candidate's flexibility, at their ability to change and to be trained for different roles. But, fundamentaly they are also looking for those who have strong communication and interpersonal ability .

Power Point .............

I have mixed feelings towards PowerPoint®. Used porperly, it can be a great presentation tool. Used wrongly (unfortunately its too often the case ) they are a unbroken stream of boring slide shows narrated by mediocre communicators.

Sex, Leadership And Rock N' Roll

"At last, a book that cuts through the jargon of leadership and personal development. It offers a real world source of inspiration and provocation in areas such as: creativity, innovation, relationships, motivation, leadership, high performance, learning and reinvention. The unique approach springs from the mix of leading edge concepts with the wisdom of the street in the form of rock music. This is served up in a quirky, challenging but intelligent way. Peter Cook has skillfully synthesized these diverse viewpoints using his background, both as a business academic, MBA graduate and tutor, strategy consultant and thought leader as well as a musician, writing and performing music, in rock bands. The book examines the issues using the analogy of "Sex, Drugs and Rock n Roll" rather than the language of prophets, consultants and gurus. In this context, the letters MBA stand for "Management By Attitude." Let there be Rock n Roll Leadership!"

Source: Amazon

A shift in paradigm

In order to be successful in the future we need to change our attitude towards work in general and management practices in particular; instead of working harder we should focus on working smarter, and do this by:

• Increasing the speed of decision-making. Decisions need to be made faster, even if not always 100% right, we need to take our decisions embedded in a lot of uncertainty under a volatile environment.
• Much slimmer structure around organizations, much more entrepreneurship and initiative taken by individuals.
• Shift from “power and status” to “ownership and achievement.”
• Seek for new ways of compensation and reward, with more participation in the risk of Profit & Loss with ALL levels of employees involved in the business structure, enhancing the opportunity of bigger pay-offs.
• Start to shift the term employee to business partner.
• Foster higher level of creativity and innovation among all key stakeholders and extended it to all parts of the company.

The Future of Management

:For me, management innovation is about innovation in management principles and processes that ultimately change the actual practice of what managers do, and how they get it done. That’s different to operational innovation, which is really talking about how the actual work of transforming inputs into outputs, gets done. "

Gary Hamel

InnoExecution

Is a leadership philosophy developed from the result of a study focused on Corporate Leadership and goal achievement of enterprises. The study aimed to find out the reasons and solutions of the following problems common to most organizations under a competitive environment:
Most of the enterprises cannot meet its goals effectively? Why?
What is the most important factors affecting its performance?
What is the most important capability of an enterprise?
To answer these questions, extensive research has been conducted by Mr. Ka-Keung Chan on a large number of corporations and organizations in the following status:
Successful organizations
Growing corporations
Falling organizations
The study extended to historical events, fall and raise of nations, important battles and the leadership of their generals.
The result: Successful corporate leadership relies on the art of identifying the driving forces of an enterprise, and the balance of them
The most important factors that affect the value and existence of an enterprise is:
1. Innovation power - create new product or services for the client
2. Execution power – realize what is innovated
Innovation power is the ability to create new product to meet the changing needs of the market. Executive power is the ability to deliver the new product to the market effectively.

Source: Wikipedia

Power Map

“Sometimes at IMD we use a questionnaire called the Power Map to help participants identify their own culture (i.e. values they cherish, leading to certain behaviors), to identify other executives' profiles and discuss consequences on communication and leadership in a team.
To simplify, the four main types of profiles that our survey identified are:
People who like to 'control things' and introduce processes, develop more the 'now';
People who are more concerned with people, develop more the impact on people;
People who are more concerned with getting things done, start with key actions;
People who are more concerned with ideas, frame proposals in concepts. “

Jacques Horovitz is Professor of Service Strategy, Service Marketing & Service Management at IMD, one of the world's leading business schools.