The Growing Inequality in America

Background

The article Poof Goes the Middle Class in the Los Angeles Times by Doyle McManus (10/23/2013) and the documentary Inequality for All featuring former Secretary of Labor Robert Reich, currently playing in theatres, have inspired me to write this paper. 

The subject of rising inequality has been a hot topic ever since the US economy began contracting in 2008.

McManus' dire predictions describe an America “in which real wages for most workers decline year after year, a future in which middle-class jobs disappeared in the Great Recession, and a future in which young Americans either squeeze into an increasingly wealthy elite or tumble to the bottom”, fewer and fewer, in what we once called the middle class.

At the current rate, economist Tyler Cowan in his book, Average is Over, predicts, based on current trends, over the next 20 years:

·       More wealthy people than ever.

·       More poor people than ever.

·       Automation and outsourcing will continue to eliminate many jobs.

·       Downward pressure on wages for all except the most skilled.

·      Growing inequality between the wealthy and everyone else.

·      Officials incapable of slowing these trends, let alone stop them.

·      Rather than balancing the budget with higher taxes or lowering benefits, real wages for many workers will continue to fall.

·      Resulting in a growing underclass.

Dismal predictions?  That’s not all!  Cowan goes on to point out that employers will constantly measure employee productivity, and will quickly weed out underperformers. He sees a scenario where retirees, their savings exhausted, move to newly built shantytowns in low cost regions or to developing countries, where cost of living is much lower.  Rather than rebelling, the underclass will console itself with online entertainment and improved narcotics in order to make life more livable. 

As the American economy, spurred by global competition, becomes ruthlessly more efficient and more productive, Cowan forecasts that the economic elite will grow to 15% of the population.  They will be the elites of today, plus technologically adept professionals from the fields of robotics to heath care whose jobs cannot be exported overseas, below there will be a servant class of service workers to the rich.

Social mobility will still be there.  On-line education, within reach of most Americans, will permit the most gifted and motivated in the underclass to rise.  But they will have to be very smart, very diligent, and highly motivated. 

Secretary Reich, in his documentary Inequality for All, traces the root causes to five main events:

1.    Changes in the taxation system during the Regan administration.

2.    The start of globalization in the mid-1970s.

3.  The excesses of the financier class throughout the last 30-50 years and the years preceding the 1929 crash.

4.   The introduction of stock options in executive compensation, starting in the mid 1990s.

5.  The decline of the American labor unions from 35% to less than 10% of the workforce.

He illustrates the phenomenon of increasing inequality in America with a brilliantly clear presentation of economic data from 1929 to 2008, the peak years preceding the two dramatic declines in GNP. 

Reich sounded the alarm in the early 1990s but few, if any, paid attention.  He was the lone man in the wilderness warning us of the impending crisis.  Many dismissed his message as that of an alarmist and of a union sympathizer.  Others accused him of being a socialist or a communist.  With self-deprecating humor, Reich dismantles the logic of his critics.  He tells us that he left government after Clinton’s first term, frustrated by the lack of attention to this emerging debacle. 

The documentary features a successful CEO and wealthy investor to debunk faulty economic assumptions.  For example, it is customers who create job, not wealthy people. (demand-side or mid-class up rather than supply-side or trickle down economics).  As an investor in Amazon.com, this CEO points out that Amazon is able to do with about 60,000 employees what previous methods would have required 600,000 employees.  He makes a good case for consolidation in order to achieve economies of scale. 

Reich also walks us through the increasing role of women in the workforce, initially to supplement family incomes as male wages began to stagnate or decline.  He goes on to suggest that declining wages encouraged people to over-extend themselves and out-of-control credit card borrowing, all encouraged by a growing housing bubble.  Many folks were encouraged to take home equity loans to finance a lifestyle beyond their means.  When the bubble burst, many lost their homes, as the value of their value submarined.

Reich shows a table ranking several nations with respect to the differential between top earners and the working class.  The US occupies a dismal 46^th place, closer to developing countries and much lower than most developed countries.  This comparison alone justifies the need for change.    

Reich’s documentary closes with a call for viewers to take action, and to get involved in pressuring our politicians to fix the problem. 

Historical Tidbits

Is inequality something new?  Primitive man started to domesticate animals so that he would have easier access to food, clothe himself, and help in his burden.  He mastered agriculture so that the soil would produce what he needed in quantity that he could trade. He established hierarchies so that those at the top would have more food, more privileges, and more security. 

It was during the Renaissance that the middle class got its spurt with the recognition and appreciation of the contribution of the guilds.  Prior to that, there were only two classes:  top and bottom.  The elite populated the top: nobility and military brass.   During this period, we see the elite recognize and reward the most talented amongst the painters, architects, writers, sculptors, etc.  Thanks to the largesse of patrons, a class of masters (middle class) and apprentices was created, permitting with time apprentices to rise to the master level, and a few to migrate to the elite group. 

During the Enlightenment period, we witness, for the first time, the preoccupation with equality under the law.  The concept was enshrined in the American (All men are created equal) and French (egalite’) constitutions.   Prior to that, the top enjoyed unquestioned mastery over the bottom – often of the despotical kind. 

Darwin discovered that species evolve and adapt to change in order to survive and grow, and that the stronger have a better chance at survival.  This principle was in evidence during the Industrial Revolution.   Scientific management made it possible for the unskilled, illiterate bottom to work in factories and earn substantially better wages.   From this workforce, the middle class emerged in grander numbers.  The economic boom following WWII accelerated the middle class’ growth.

Lenin’s musing that capitalists would sell you the bullets needed to kill them summarizes the antipathy of the proletariat toward capitalism and their sympathy toward laws that help the masses.

Judeo-Christian principles, all throughout history, have tried to temper man’s unbridled urge to profit from or exploit others.  Islam too has counseled its believers to be generous toward others.   

A strong realization emerged during the past century that, given natural man’s primal urge, regulations would have to be put in place to prevent certain business behaviors.  We see the enactment of strong laws to prevent monopolies, restrain of trade practices, unsafe, unfair or discriminatory labor practices, and to ensure consumers’ protection. 

My take-Away

Few predicted the side effects of a globalized economy. 

The developed world saw globalization as an opportunity to buy desired goods at a cheaper price.  The developing world saw it as an opportunity to increase its exports and thus increase the number of jobs and standard of living.  The higher the demand for cheaper goods, the higher would the wages in the developing countries would be.

The effect on wages has reached unexpected proportions.  When globalization started, most countries relied on a 4-tier compensation scheme.  Most jobs would pay according to prevailing local rates, some according to regional rates, a few according to national rates, and a tiny minority according to international rates.  The 4-tier scheme evolved in the 1990s to a 3-tier as regional and national rates began to converge.  In this century, increased skilled-level employee mobility has shrunk the 3-tier scheme to a 2-tier as local rates have become somewhat national.  As lower level wages reach global equilibrium, in 10-20 years a global rate scheme is likely.  At that time, the differential between workers’ pay throughout the world will pretty much disappear. 

Countries must then find a different way to gain competitive advantage.

Unions share responsibility in the decline of the middle class.  With their aggressive and unchallenged approach to collective bargaining, they saddled many industries, primarily in the manufacturing area, with exorbitant wages, rigid work rules, and unfunded liabilities.  The labor costs in the auto, rubber, and steel industries climbed so much that once global markets opened-up, companies were unable to effectively compete.  As a result, the destruction of our manufacturing base was sealed. 

Soon work performed in developed countries by marginally efficient operations began to migrate to lower cost countries leaving many workers in the developed world unemployed.  A structural class of unemployed folks emerged.  People whose skill set and education are obsolete.  Attempts to re-train them have yielded marginal results.   

The middle class shares also in the debacle.  Nurtured over the years by consumerist propaganda, it abandoned the true and tested teachings of the previous generation … "to save for the rainy days."  In fact, the very notion of saving was seen as passé and an unfortunate legacy from the Great Depression.   Americans have the lowest saving rate in the developed world.  Immediate gratification fueled spending beyond one’s means in the hope that the nest egg would continue to grow thanks to the housing market bubble and inflation.   Keeping up with the Joneses became the norm. 

Another factor that has made the problem worse is what has been happening to the nuclear family.  The number of one-parent families has increased substantially during the past 50 years.  The result has been that many families now cannot make it on a single wage earner’s income, especially during an inflationary period such as the one we have experienced since the mid 1970s.   Coupled with a culture based on consumerism, many families have been forced to make up the difference by borrowing. 

People managed for years without 3-4 cell phones per family, without cable or satellite TV, with a 19” or 36” TV, etc.  Now these expenditures are a must.  Living within one’s means is no longer an honored principle.  A culture of excess is tough to reign even during a time of austerity.

Soon politicians started to step in.  Moved by compassion or opportunism, they began to carter to a growing constituency of unhappy campers.  How?   

·     War on poverty programs.  Billions have been spent since the mid-1960s.  Yet the percentage of poor folks has not budged.

      Union contracts in the public administration sector, that gave employees exorbitant pensions, often unfunded, and other costly perks to secure the votes of union members.

·        Pressure on banks to approve mortgages for people who were unqualified.  100% loans were approved.  Many loans were made based on false financial statements.

·         Bail-outs to cover unfunded private sector's liabilities or to provide cashflow relief.

·       Economic assistance available to a single parent with two children continued to grow. 

  

    In the state of Hawaii, the amount in tax-free economic assistance is over   60,000dollars, in California, New York, Massachusetts, and several other states over 50,000.

·       Segmentation of the population to show greater impact on chosen constituencies, e.g., Blacks, Hispanics, undocumented, etc.

·         Poorly administered financial assistance, often used to supplement income rather than complete valuable education.

·        Polarizing policies and solutions.

·       Tea party fanatics.

We see, in some cases, an underclass stuck in comfortable misery, lacking the motivation or rational basis for escaping current conditions.  The response from the electorate to perceived abuses has been swift and brutal.

Needless to say, the answer is never at the extremes, but in the center.  We are still debating the role of government in polar terms, when we actually need to have a balanced approach.

In my view, the real culprits of the social problems are the financiers.  Someone from Wall Street always manages to show up as our Secretary of Treasury, regardless of who is elected, democrat or republican.  They manage to push through loopholes that favor them.  For example, taxing the income of traders at the 15-20% level.   It is an abomination for a billionaire to pay a tax rate lower than an office worker.  Fixing this problem should be priority one.  Private enterprise often gets unfairly blamed for the actions taken by a a handful of financiers.

The discourse has been high-jacked by activists and politicians that pit one class against another, the poor against the rich, the nativist against the immigrant, one region of the country versus another, and so on. 

In my view, the root cause of inequality comes from lack of economic and political leadership. 

We can only solve inequality by raising those at the bottom, not by bashing those at the top as greedy, heartless, and unscrupulous sobs. 

Americans are the most generous people in the world.  Avarice is not in the American DNA.   The issue of growing inequality is a national issue, not one that affects others, it affects all of us, whether we are rich or poor.  It is to our country’s benefit that we fix it.

Solving the Root Problem

If we examine those countries where the gap between the top and the bottom is the smallest, we will find many Northern European countries.   Sure, their population is more homogeneous than America’s, but immigration is increasing there too.  What is unique about them?  Some generalizations ...

·    The tax rate for the top is significant higher than in America, e.g., fewer loop holes, fewer lawyers and accountants driving the tax code.

·        They are OK with solidarity toward the less successful.  It is probably a legacy from their Protestant roots.

·         They are industrious and law abiding.

·         They are more communal than their US cousins.

·         They tend to work to live, not live to work.

·         They have more progressive national economic policies.

The Germans, in particular, offer a great example that America could emulate. 

First, identify niches where our expertise is strong and capitalize on it.  Second, identify areas that we want to be an expert in, and invest in becoming one. 

By doing so, the Germans continue to enjoy an expanding economy, low unemployment, and a generous welfare system.  Solidarity to Germans is not a dirty word.  It is part of their culture and history. 

In America, its individualistic history and its multicultural milieu see solidarity as a ticket for deadbeats and profiteers.  No doubt, some will do just that, but not the great majority.

Americans may not admit it, but we are not a melting pot, never really were.  Each group looks at the other with suspicion and, in some cases, with contempt.  Some groups think of themselves as being in the right or better than their cousins, based on flimsy rationale:  I was born here, this is our country, we were here first, we are a Judeo-Christian nation, etc.  Wedges, designed to keep folks separated and at each other’s throat.

We need to marshall the will and the resources to attack this issue before it gets out of hand.  I welcome your thoughts and ideas.

Optimism & Leadership

Last October I attended a one-day conference in Madrid, Spain, sponsored by Grupo-PyA, on whose board I serve.  The conference was held at the Club Financiero, a prestigious venue in the center of the Spanish capital.  Over 100 senior executives attended the conference.

Featured amongt the speakers was my good friend and colleague Bob Sherwin, Chief Operating Officer, Zenger-Folkman, a well-known leadership development firm, with offices and partners in numerous countries.  

The Research

Sherwin shared with the audience some intriguing findings from his firm's research on "Leading with Optimism."  He started his talk by advising the audience to "always borrow money from pessimists ... they don't expect to ever be paid back".  He got a big chuckle from the attentive audience.  He then proceeded to share the three benefits that optimistic leaders bring to the situation:

1. They are more resilient and inspiring in the face of challenges and setbacks.
2. They are problem solvers who try to improve the situations they are in.
3. Behaviors are infectious, and optimistic leaders will spread their optimism.

Tempering these findings, Sherwin went on to raise a flag of caution.  Optimism can be based on unwarranted or warranted confidence.  Optimists are prone to cognitive biases, thereby underestimating dangers and taking unique risks.  

The impact of optimism on leader effectiveness is dramatic, the research shows.  The top 10% in level of optimism translates, according to 360 data, to an overall effectiveness of 89%.  Correspondently, the lower 10% in level of optimism translates into an overall effectiveness of 19%.  That is a significant difference!  

Effectiveness was measured in terms of employee engagement, commitment, productivity, and profitability.  

The presentation went on to show six behaviors employed by optimistic leaders:

1. Seek to find solutions rather than place blame
2. Be open to negative feedback and criticism
3. Make mistakes momentary
4. Accentuate the positive
5. Enhance long term goals
6. Push and pull

Sherwin then shared a Cherokee proverb:  "There is a battle of two wolves inside all of us."

One is Negativity ... it is anger, sadness, stress, contempt, disgust, fear, embarrassment, guilt, shame, and hate. Positivism, the other, ... it is joy, gratitude, serenity, hope, pride, awe, interest, amusement, inspiration, and above all, love.

Which is the wolf that wins?  The one you feed!

My Take Away

Highly effective leaders are more optimist than good or mediocre leaders.  Optimism needs to be balanced with a modicum of realism.  Pessimistic leaders create a climate that is oppressive and unsatisfying.

The Cherokee proverb teaches us that we need to feed the positive "wolf" inside of us, and starve the "negative" wolf inside of us.  This is a lesson that applies to our private lives as well.

I hope you enjoy this post as much I did preparing.  

Labels That Divide Us

Sometime ago while visiting friends in Minneapolis I was invited to attend church services in a downtown church. I had no idea as to what I would find and how I might react to it. It was a lesson that has staid with me since.

The "church" was a shabby hall in an abandoned building in what we used to call skid row. The pastor was a devout man in his mid 30's flanked by his wife and their toddler son. About 35-40 people total were present, mostly folks down on their luck, homeless, some with drug or alcohol problems, and a few "do-gooders" like my hosts. Several must have come, I think, because free coffee and donuts were served after the service.  Some were there because of their abiding faith.

The Sermon

After a short invocation, the young pastor embarked on his sermon.  It was evident from his demeanor that he had much passion for his mission and ministry. He spoke in a pleasant voice and he seemed to elicit interest from his audience.

What he said during his 45 minute talk surprise me. He talked about -isms and how such words ending in -sm had impacted his life often in a negative way. His general point was that any word that ends in -sm often charms us with the positive while hiding its negative elements. He cited as examples socialism, communism, capitalism, and libertarianism. They are terms, he said, that conjure up some utopian benefits while hiding or discounting their downside effects.  

During the service, I was surprised to see come around a basket soliciting donations. Surprised because most people there seemed to be indigent. My admiration for the pastor compelled me to make a meaningful offering. To do otherwise would have been phony.  

The sermon over, most folks quickly gathered around the coffee table, got their cup of coffee and donuts and disappeared into the streets. A few hung around to chat and comment on the inspirational sermon they had heard.

The sermon's warning has stayed with me.

Lesson Learned

Indeed as the good pastor taught us, -sms bombard us daily. Some promise utopian benefits, as the pastor warned us, and others would caution us about their downside. I have come to the conclusion that all -sms are one-sided, that what they reveal is interesting but what they hide vital. I have developed the notion that they represent extreme positions to which there is a wide-pendulum response.

They tend to fall into two buckets that I have labeled, for lack of better words, left and right, words that we use daily to describe one another political leanings. Let me illustrate a bit more what I mean here:

Left                                                                                     Right

Communism                                                                       Capitalism

Socialism                                                                            Individualism

Liberalism                                                                          Conservatism

Existentialism                                                                     Feudalism

Modernism                                                                         Traditionalism

The list is partial. I am sure that you can add to either column other commonly discussed -sms. Passionate advocates from either side espouse the many benefits that come from such -sm while its adversaries point out the many disadvantages associated with that -sm. The dialog alternates from left to right back to left in a continuing wide pendulum swing akin to a grandfather's clock's. Each side of the argument attacks the other as being naive, intolerant, evil or stupid for disagreeing.

Experience teaches us that the right place is often in the middle, capturing the benefits while minimizing the downside, finding that elusive middle ground, and blending the two into a livable and motivating whole. But, as we have been warned, those who ignore experience are bound to repeat the mistakes we have made in the past. 

The dialectic includes much rhetoric and little substance to the human discourse. The outcome is often polarization and enmity.  Two words that conjure up more -sms. Those who choose the middle ground are accused of lacking convictions, of using convenient situational averaging, and not being in touch with the real problems of the common person.  Someone, who we might not admire, referred to those in the middle as the silent majority. I think he was right.  

Questions

Like John Lennon sung in one of his famous songs, I know that I am not alone, that there are others who think a lot like me.  But, can we quit pigeoning or demonizing one another with labels? Can we stop the self-righteous nonsense? I welcome your comments and reflections.   

Organizational Rasputins & Svengalis

It has been four years since I left the workforce and faded into retirement.  As you can imagine, I have had plenty time to reflect on a number of issues and events during a long work journey spanning 50 years.  All this in an attempt to distill my learning and formulate my conclusions.  Why? So that I can share them with the younger generation in the hope that others have an easier path to success than the previous generation.  Younger people often learn by making mistakes -- my hope is that they be new mistakes rather than a repetition of old ones.

During my long career, I had the privilege of working for several organizations.  A handful left an indelible mark on me.  They were great companies with exceptional leaders and with unique internal cultures.  I was one of their employees at their peak, when they could do no wrong, where success shined brightly over them. They had one thing in common -- they were people companies ... not mere product or service providers.   But as the law of gravity teaches us -- what goes up must come down at some point in time.  But why?  The reasons are many:  loss of market focus, errors in strategy, fumbling execution, arrogance, self-absorption, neglect, and so on.  A more insidious reason is the emergence and flourishing of internal Rasputins and/or Svengalis.  

For those not familiar with either term, let me illustrate one of them: Rasputin.  He is indelibly immortalized in 20th century Russian history.  He was an Eastern Orthodox monk who used his spiritual role to gain access to the Empress and win over her confidence and trust.  He used the relationship to manipulate the impressionable Empress for his own benefit and often to the detriment of others, especially those that he saw as potential or real competitors.  He eventually was exposed and died ignominiously as a result.

Organizations, even the best, are not immune to this phenomenon that I have come to call Rasputins and Svengalis.  Clever people use their superior talents to gain access to and eventually manipulate outstanding CEOs and senior managers.  Being at the top, it is said, is lonely -- no peers, no real colleagues.  To fill the gap, CEOs and senior managers must still rely on others for information, counsel, and social interaction.  They select their inner circle from those they have come to admire for their technical expertise, people perceptiveness, unquestioned loyalty, sense of humor and/or intellect.  When someone possesses one or more of these traits, he or she is able to more quickly penetrate the circle and seduce the top person. As part of the inner circle, they wield power that goes beyond their formal role, level of experience, or business acumen.  

Most members of the inner circle use this power positively and to the benefit of the organization.  A few, however, use it to fulfill other needs ... of the devious kind.  They are interested in solidifying their unique position and to eliminate real or perceived threats.  They cleverly work on shaving down others' credibility, impugning their motives, trivializing their capabilities and accomplishments.  They work to erode others' stature in the eyes of the CEOs or senior managers so that their own profile can stand taller and stronger.  One of the consequences of this treachery is executive isolation.  The other is manipulation.

Rasputins and Svengalis come in all kinds of forms and gender ... they might be ex-college buddies, top-notch technical folks, accomplished consultants, sport partners, etc.  They are as good as any chameleon and are able to disguise their real motives and hidden agendas.  The effect on the organization is devastating.  The very fabric that has brought success begins to fade and come apart at the edges.  Trust level begins to decline.  Communication becomes randomized and perfunctory.  Fear of reprisal looms heavy in people's mind.  Organizational energy starts to dissipate away from the customer to internal politics and posturing.  Opportunities are missed, threats minimized, weaknesses hidden, and strengths weathered away.

You might say that this is just a theory.  And you might be right at that.  But I have accumulated too many critical incidents over the past 50 years to ignore this phenomenon.  Let me share one glaring example.

A Risputin in one of the top companies in which I had the privilege to work managed to capture the attention and gain the emotional intimacy of the CEO.  There was nothing that this man did not know or was not good at in the eyes of the CEO.  He was the only one who could solve looming profitability challenges that required drastic management action and strategic reassessment.  Only his viewpoint counted.  It was foolhardy for others to question his recommendations.  He saw to it that those who were not in line with his thinking would be branded as not loyal team players and too invested in the status quo.  Deadly labels during tough times in any organization.  They could be the first faced with elimination.  

To conclude this example, this Rasputin convinced the CEO that there was only one way to come out a winner out of this managerial conundrum of increasing market share while drastically reducing operating margins.  The board was dissatisfied with the profitability level.  He convinced the CEO that salvation would be possible only if the organization outsourced as much as possible.  No one raised his or her hand to question this strategy!  Soon he singlehandedly, with the help of chosen claques and mini-Rasputins, began to outsource internal activities and processes to providers that (1) did not know how to do it better, and (2) who charged more for the service than what the organization was spending.  His view was that there were no competent external partners and that the organization needed to develop their own.  Result?  Things got much worse.  Board pressured the CEO out.  Company lost its momentum and went into a defensive retreat in which many years later is still mired.  By the way, the now ex-CEO still believes that this Rasputin can do no wrong.  

The signs were there for all to see.  Rasputin had a checkered business background.  He had some success managing a green field operation in a friendly market place with unlimited resources at his disposal.  He had no prior successful experience helping a grey field operation regain profitability and market dominance,  His foray into launching a start-up was a total failure that ended up in bankruptcy, of course, he would maintain to no fault of his own.  

It has been said that it takes a lot of work to screw up perfectly good companies.  I agree.  To speed up the process ... just bring in a few Rasputins.   The management literature is full of examples.  To name a few: Hewlett Packard, Digital Equipment, Sun Microsystems, Xerox, Memorex, Fairchild Semiconductor, etc.

I am sure that you can add to the list above ....

Sicily and its many secrets ...

I just returned from a five-week visit to Sicily, where I was born.  On my flight from Palermo to Rome, an article in the airline magazine Ulisse caught my attention.  It chronicled the history and special gifts of Djerba, the bewitching tiny island-oasis, off the Tunisian Coast.  The island was immortalized in Homer's Odyssey.  In mythology, the Greeks believed that it was occupied by the Lotus people who offered Ulysses a local fruit that had the power to make men forget ... their country, their home, their loved ones.  In reality, the fruit was the Barbary jujube, which yields an inebriating juice, and not the classical lotus fruit.  Many still believe that persimmons have similar qualities to the jujube.  

As I was reading the article, my mind began to wonder off.  I started to savor the five weeks I had spent in the island.  My stay was enriched by several guests who visited me there.  Together we explored parts of the island that are not known to the typical tourist visiting the island.  

In one special case, I guided two Italo-Americans friends and their spouses to the home town of one of their ancestors.  Nestled in the rugged Nebrodi mountains, we visited Tortorici, where we met four of their cousins along with their families (about 22 in total).  I was touched by the warmth, love-filled reunion, and the superb banquet that followed to celebrate the reunion.  They say that blood is thicker than water.  I witnessed the power of this proverb first hand.  What a marvelous spectacle!

In another special case, I led a two car caravan with 6 American friends through the back roads of Sicily to Vallelunga to visit the Regaleali winery.  I had wanted to visit it for several years but timing was always off.  This time, thanks to the fact that all my guests loved wine tasting, I led the journey there.  

The winery is owned by the Conte Tasca d'Almerita, a noble family from Palermo (no direct relatives of mine).  I had corresponded with the Contessa Anna Tasca Lanza about 15 years ago.  She had established a well-known cooking school on the property.  I had read with interest two of her cook books.  The Countess had invited me to visit the winery, but to my chagrin I did not have enough time to do so.  She died a few years ago.  Her daughter Fabrizia now runs the school.  

Conte Tasca bought the ranch in 1830 along with the nobility title from a Spanish aristocrat.  After WWII, Conte Giuseppe Tasca (curiously, my father shared his first name in addition to his last name) embarked on the transformation of the property to wine production.  The winery now produces 3 million bottles of wine each year.  Sixty percent is consumed in Italy and the balance is exported all over the world. Sadly Count Giuseppe died in 1998 (curiously, my father also died that year). The winery is now run by Count Lucio Tasca and his two sons.  The winery employs 90 people year around, more for seasonal work.  

The local staff took us on a guided tour of the winery, culminating with an elaborate tasting session.  Unfortunately, I am not a wine drinker, so while my friends indulged, I spent my time taking photographs of the winery's interesting setting.  We ended our visit with a shopping spree at the winery's well equipped store.  For all of us, it was a fun filled and memorable day indeed!

Sicily is an ancient land.  It has been inhabited for 12,000 years, first by primitive people, later colonized by people from the Iberian peninsula (Sicani), The Italian peninsula (Sikels), the Levant (Phoenicians), the Aegean (Greeks), and North Africa (Carthagenians), and much later occupied by Roman, Arab, Norman, French, German, Austrian, Spanish and Italian conquerors.   So the island abounds of many myths.  

Ancient Greeks believed that the god of wind Aeolos lived in a nearby archipelago where the god of fire Vulcan had his forge.  Neptune, the ill-tempered god of the seas, often visited the island. Greeks also believed that one-eyed Cyclops inhabited the area close to the giant Etna.  Mother Earth (Demeter) lived in the island.  Persephone was born from the union between Demeter and Zeus -- half human and half divine.  Today, people believe that the cherry tomatoes of Pachino have special curative properties. 

The island is blessed with great weather most of the year, and it is beautifully landscaped with olive orchards, citrus groves, grapes fields, and an abundance of fruit trees.  The rugged North is balanced by Southern plains, and the green costal areas are offset by the arid interior.  Mount Etna rises to almost 14,000 feet and it is snow-capped year around.  To the surprise of most tourists, Sicily boasts of some great ski areas during the winter months.

The aromas of the Mediterranean are everywhere to be enjoyed.  Being an island, Sicily is blessed with a variety of fish of unequal quality and taste, and a large variety of fresh vegetables and fruits .  Its cuisine has two parallel styles.  The cucina povera (the poor man's cuisine) is my favorite with many vegetable dishes and unique pasta dishes.  The baronial cuisine (the cuisine of the nobility) traces its origins to the importation of French chefs during feudal times.  The presence of butter and cream is noticeable in many baronial dishes.

If your time permits, I invite you to explore this website of my home town that I helped create:  www.castelditusa.com

10 ways to drive people away from your organization

It has been some time since my last posting.  Busy enjoying my semi retirement.  Nothing of real value to report.

This morning I read with interest a posting by Mel Kleiman in the on-line group The Business of HR.  It motivated me to write this posting.  

Let me start by agreeing with Mel's conclusions.  He does a great job of organizing the major causes that drive away the better talent in an organization.  These causes do not necessarily drive away the average talent.

The list is in reverse order of its importance:

10.  Treat everyone equally.
9.    Tolerate mediocrity.
8.    Have dumb rules.
7.    Do not recognize outstanding performance.
6.    Do not have any fun at work.
5.    Do not keep your people engaged.
4.    Micromanage.
3.    Do not have a retention strategy.
2.    Do not conduct retention interviews.
1.    Make on-boarding a tedium.

I am sure that you have your own list, but Mel's list rings many bells with me.  Here are some HR practices that give face validity to his findings:

1.  Companies implement employee programs designed to treat everyone equally, when we know for a fact that no two people are like, performance and capability-wise.

2.  Salary surveys are used often as a tool to pay the market rate, to go along with everyone else rather than finding more motivating ways to reward top performers.

3.  Promotions are based not necessarily on merit, but on longevity and political connections.

4.  Assignments made, willy-nilly, without adequate attention to individual interests and capabilities.

5.  Policies that are not only dumb but laughable.  Soon the become irritants and de-motivators.

This list is not complete.  I know that you will find many, and probably more appropriate examples, to illustrate the issue.

Compensation and Benefit Design

Published by FT Press in January 2013, this book is available on Amazon.  It is a must-read for the HR professional interested in learning how to apply finance and accounting principles to global human resources management systems.  The author is my good friend and colleague Bashker Biswas.

Because I have known Bashker for over 40 years, I was given the honor of writing the Foreword.  In the book, he shares with us his vast knowledge and experience in total rewards program design.  

As I have written before in my blog, there is art (soft) and science (hard) to effective human resources management.  The art part is "sexier" and, as a result, more seductive.  The science part is more difficult and riskier.

I have seen larger organizations outsource compensation and benefit design to outside experts in well known consulting firms, while retaining the responsibility for its implementation.  One way people justify this choice is that the external consultant is more objective and perhaps more skilled.  As a result, most organizations have limited internal capacity to do the design work.  

The book is an antidote to this problem. It guides you through a variety of design considerations, issues, and alternatives.  It makes you more knowledgeable of a complex and demanding function.  It is also a great resource to go-to to find answer to specific issues that might hinder implementation.

A quick review of the contents follows to spur along your appetite.  You will find specific chapters on:

• Business, Financial, and HR Planning
• Projecting Base Compensation Costs
• Incentive Compensation
• Shared-Based Compensation Plans
• International and Expatriate Compensation
• Sales Compensation Accounting
• Employee Benefit Accounting
• Healthcare Benefits Cost Management
• The Accounting and Financing of Retirement Plans
• Human Resources Analytics
• Human Resource Accounting

Compensation and benefit expenses are often the largest individual line item.  Research as taught us that often it represents anywhere from 20 to 60% of gross revenue.  In the service sector the range is on the upper side. Yet most HR professionals often lack the working knowledge of how their activities can add value to the cost management process. 

In search for relevancy, HR professionals, with the aid of academics, have been playing word-games. The title in vogue for the past 10 years is business partner.  This term gives the illusion of equal footing to the HR professional in his/her interaction with line management.  Reality is that line managers are quick to recognize his/her lack of sound preparation and application of the management discipline.  Becoming fluent in compensation and benefit design, in my view, can be key to career advancement.