Weekly Business Insights from Top Ten Business Magazines – Week 246

Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision making | Week 246|May 27-June 02, 2022

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Shaping Section : Ideas and forces shaping economies and industries

Why investors are increasingly worried about recession in America

The Economist | May 26, 2022

So choppy has America’s stock market been this year that only a fool would predict mid-week (or even mid-Friday) whether prices will end the week up or down. This time the answer was up: at the market’s close on May 27th, the s&p 500 index of leading American shares had broken a seven-week losing streak. Thus far, at least, it has avoided (just) the 20% peak-to-trough decline that is the informal definition of a bear market. But there are signs that America’s markets are entering a new, more worrying phase.

From January until early May, falling share prices could be put down to the effect of rising bond yields, as fixed-income markets responded to guidance from the Federal Reserve that interest rates would be going up a lot and fast. Higher interest rates reduce the present value of a stream of future company profits. Shares were marked down accordingly, especially those of technology firms whose profits could be projected furthest into the future. But in recent weeks share prices have kept falling, even as bond yields have dropped back. This combination points to fears of recession. Indeed, the mix of Fed tightening, slowing GDP, and rising production costs has the ominous feel of the later stages of a business cycle. The expansion is barely two years old. Yet investors are already worried that corporate profits are under threat.

Slower growth is one element of a textbook profit squeeze. A consequence of the mostly stable cost base of big businesses is that, when sales rise or fall, profits rise and fall by a lot more. This effect boosted profits considerably last year, but as GDP slows it goes into reverse. The other element of a profit squeeze is higher costs. A variety of bottlenecks have pushed up the prices of key inputs, notably energy. Debt-service costs are rising with interest rates. But the main worry is wages. The jobs market in America is tight. Pay rises have become more generous as a consequence. Corporate America finds itself in a double bind in this regard. If it passes on rising wage costs in higher prices, it will keep inflation high and force the Fed to raise interest rates more aggressively. If it absorbs rising costs, that will crush profits.

3 key takeaways from the article

1. So choppy has America’s stock market been this year that only a fool would predict mid-week (or even mid-Friday) whether prices will end the week up or down. 
2. From January until early May, falling share prices could be put down to the effect of rising bond yields, as fixed-income markets responded to guidance from the Federal Reserve that interest rates would be going up a lot and fast.
3. The world economy has been sideswiped by several big shocks.  Under these shadows on the global economy the mix of Fed tightening, slowing GDP, and rising production costs has the ominous feel of the later stages of a business cycle.

Full Article

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Topics:  Global Economy, USA’s Economy, Interest Rate, Inflation

How US consumers are feeling, shopping, and spending—and what it means for companies

By Kari Alldredge | McKinsey & Company | May 4, 2022 

Stick to new COVID-19-era habits, or go back to the old ways of doing things? For most US consumers, the answer seems to be “both.” Two years into the pandemic, people across the country have discovered that they like shopping online, but they’re also going back to brick-and-mortar stores. They’re venturing out of their homes again, but they’re continuing to spend money on home improvement. And—in what could be boon or bane for manufacturers and retailers—today’s consumers are quite willing to abandon their once-preferred brands in favor of new ones that offer value or novelty.  Recent survey results, combined with third-party data on consumer spending, provide insights into how US consumer sentiment and behavior have been evolving since the COVID-19 pandemic began.   Six major findings of the survey are:

1. Consumers continue to spend more on certain product categories, but inflation is slowing volume growth.
2. The “loyalty shake-up” continues. More US consumers reported switching to different brands and retailers in 2022 than at any time since the beginning of the pandemic—and most of them say they intend to incorporate that behavior into their routines.
3. Shoppers are spending more both online and in stores. 
4. Omnichannel shopping is becoming the norm. And this omnichannel behavior isn’t confined to a few types of products
5. Even as people go out again, their “nesting” continues. More than half of US consumers have already resumed their normal out-of-home activities; another 20 percent are in the process of returning to their pre-pandemic routines outside the home. 
6. Consumers say they care about environmental, social, and governance, but it means different things to different people.

2 key takeaways from the article

1. Stick to new COVID-19-era habits, or go back to the old ways of doing things? For most US consumers, the answer seems to be “both.”
2. Recent survey results, combined with third-party data on consumer spending, provide the following 6 insights into how US consumer sentiment and behavior have been evolving since the COVID-19 pandemic began.  Consumers continue to spend more on certain product categories, but inflation is slowing volume growth.  Inflation hasn’t stopped consumers from spending—yet.  The “loyalty shake-up” continues.  Shoppers are spending more both online and in stores. Omnichannel shopping is becoming the norm.  Even as people go out again, their “nesting” continues.  Consumers say they care about environmental, social, and governance.

Full Article

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Topics: Global Economy, US Consumers,  Marketing

Gamification Took Over the Gig Economy. Who’s Really Winning?

By Jackie Davalos and Drake Bennett | Bloomberg Businessweek | May 27, 2022

In 2008, University of Chicago economist Richard Thaler and Harvard Law School professor Cass Sunstein published Nudge: Improving Decisions About Health, Wealth, and Happiness. It’s a breezy tour through behavioral science, especially the ways in which decision-making can be shaped by what the authors call “choice architecture.”  The book’s argument is that we should enlist so-called nudges to socially beneficial ends. In the years since the book’s release, policymakers have occasionally adopted the ideas, with mixed results.

Where nudges have really caught on is in the part of the tech world that uses algorithms to mobilize and manage freelance workforces. Armed with troves of data and the quickly improving capabilities of machine learning, online platforms such as Uber Technologies Inc. and Lyft Inc. use nudges to coordinate millions of independent workers and extract maximum productivity. This model let Uber scale quickly, with the force of a command-and-control structure, even while corporate framed its drivers as independent, self-directed, and entrepreneurial.  The concept of directly connecting customers to contractors paved the way for marketplaces including home-cleaning (Handy), pet-sitting (Rover), and, of course, food-delivering (Grubhub, DoorDash, and Uber again with Uber Eats).

For more than a decade now, gig economy companies have told workers that signing up for ride-share or delivery side hustles will allow them to be their own boss, to choose how and when to work in a way that fits their lifestyles. Instead, workers have found themselves managed by incentives and code. Sophisticated software holds real-time auctions every second, matching prospective customers with drivers or couriers in a vast marketplace. This system, the businesses tell investors, lets them grow—and if necessary shrink—faster and with less friction than a company reliant on old-economy ideas such as salaries, employees, and managers. If the practical applications of nudge theory sound like a win-win, then the companies accomplished their mission.

Even before Covid-19, the drivers, being managed by a ride-hailing app felt like competing with a wily, well-funded operation that knew how to keep them driving, tip the odds away from them, and take a bit more of their money. And today the number of variables has only grown.  The business model e.g., drivers participate depends on an asymmetry of power and information.  And this has become a  game whose rules are constantly changing.

3 key takeaways from the article

1. In 2008, University of Chicago economist Richard Thaler and Harvard Law School professor Cass Sunstein published Nudge: Improving Decisions About Health, Wealth, and Happiness.  The book’s argument is that we should enlist so-called nudges to socially beneficial ends.
2. Where nudges have really caught on is in the part of the tech world that uses algorithms to mobilize and manage freelance workforces. Armed with troves of data and the quickly improving capabilities of machine learning, online platforms such as Uber Technologies Inc. and Lyft Inc. use nudges to coordinate millions of independent workers and extract maximum productivity.
3. The business model e.g., drivers participate, depends on an asymmetry of power and information.  And this has become a  game whose rules are constantly changing.

Full Article

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Topics: Technology, Gig Economy

Strategy & Business Model

3 Ways Companies Can ‘Adapt to Endure’ Tough Times

By Rebecca Deczynski | Inc Magazine | May 27, 2022

The world economy is in a “crucible moment”–and businesses need to adapt for more change to come.  That’s according to a leaked, 52-page memo that the venture capital firm Sequoia Capital presented to its portfolio companies on May 16, The Information first reported. In the presentation–titled “Adapting to Endure”–the VC firm explains that it’s not yet time to panic, but businesses should think critically about how they can prepare for a economic downturn. Planning for the worst will help companies “avoid the death spiral.”   This isn’t the first time that a Sequoia Capital memo predicted economic hardship. In 2008, its R.I.P. Good Times memo foretold the Great Recession, and in early March 2020, its Black Swan letter told businesses what to anticipate at the outset of the Covid-19 pandemic. Now, it’s worth paying attention to Sequoia’s predictions for months ahead.

The three biggest pieces of advice to take away from the latest presentation.

1. Simplify your strategy.  Now is not the time for rapid growth–it’s time for deliberate scaling and cost-cutting. The only strategies businesses should focus on in the current moment are those that drive revenue growth, save money (for a strong return on investment), and reduce risk, the memo says. Companies should look at cuts as a way of conserving cash and making business more efficient.
2. Find opportunity.  “We believe the best, most ambitious, most determined of you will use this moment to rise to the occasion and build something truly remarkable,” reads Sequoia’s memo. Businesses will need to make hard choices to stay solvent, but those choices can position them for success even after economic recovery.
3. Lead with optimism and realism.  Strong leadership is essential for companies even on the best days–but it’s even more vital when times are tough. Sequoia advises leading with the “four C’s”: communication, conviction, confidence, and calmness. Leaders should also make sure that their teams are aligned on goals and overall vision; employees will be looking to their managers for direction and reassurance, so it’s necessary for those in charge to rise to the challenge.

3 key takeaways from the article

1. The world economy is in a “crucible moment”–and businesses need to adapt for more change to come.  That’s according to a leaked, 52-page memo that the venture capital firm Sequoia Capital presented to its portfolio companies on May 16, 2022.
2. This isn’t the first time that a Sequoia Capital memo predicted economic hardship. In 2008, its R.I.P. Good Times memo foretold the Great Recession, and in early March 2020, its Black Swan letter told businesses what to anticipate at the outset of the Covid-19 pandemic. Now, it’s worth paying attention to Sequoia’s predictions for months ahead.
3. The three biggest pieces of advice to take away from the latest presentation are: simplify your strategy, find opportunity, and lead with lead with optimism & realism.

Full Article

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Topics:  World Economy, Recession, Business Strategy

Leading & Managing Section

A Better Approach to Avoiding Misconduct

By Wieke Scholten et. al., | Harvard Business Review Magazine | May–June 2022 Issue

Despite substantial regulatory reform in the aftermath of the 2008 financial crisis, financial firms have continued to suffer from fraud and other types of ethical misconduct. As a result, by 2020 they had collectively paid out more than $400 billion in fines. One 2019 Harvard Business School study of Fortune 500 companies—based on a sample of firms on that list—found that on average, they experience more than two instances of internally substantiated misconduct each week.

It’s becoming increasingly clear to many experts in risk management that the traditional approach to preventing wrongdoing in companies—imposing formal rules and investing in a strong compliance function to ensure that institutions, managers, and employees adhere to them—cannot by itself protect firms. That is why over recent years—spurred by regulators,financial institutions have begun adopting a complementary approach that embraces a behavioral dimension. This approach, sometimes known as behavioral risk management, acknowledges that behavior in the workplace is driven by and factors in people’s professional context—such as the teams employees work on, the goals they have to achieve, the direct leadership they receive, and the processes they work with.

Behavioral risk management involves identifying behavioral drivers and addressing them by making changes in processes or organizational contexts. These can take the shape of “nudges” (a term coined by the behavioral economists Richard Thaler and Cass Sunstein), which may seem small or even trivial but can have profound effects on behavior.  Two important group of suggestions:

1. Identify and Understand the Hot Spots.  The first step is to identify the processes and units in the organization where negative outcomes of employee behavior are most likely to occur.  These scans help managers identify what is getting in the way of good decision-making. They involve multiple in-depth interviews with key players across a selected process, along with observations of work situations.
2. Finding Solutions.  The authors helped the companies address the problems revealed through behavioral insights scans or risk reviews in two ways. The first is a workshop in which they lead employees who are working in specific areas or processes to identify simple nudges that would change their handling of specific behaviors – referred as nudge lab. Second, what the authors call system-in-the-room sessions. These are interactive workshops designed for senior leaders, with the aim of creating a shared and complete understanding of the challenges involved in managing identified behavioral risks from the perspectives of all stakeholders. With that understanding, the team can design effective solutions accordingly. 

3 key takeaways from the article

1. Despite substantial regulatory reform in the aftermath of the 2008 financial crisis, financial firms have continued to suffer from fraud and other types of ethical misconduct.
2. It’s becoming increasingly clear to many experts in risk management that the traditional approach to preventing wrongdoing in companies—imposing formal rules and investing in a strong compliance function to ensure that institutions, managers, and employees adhere to them—cannot by itself protect firms. That is why over recent years—spurred by regulators,financial institutions have begun adopting a complementary approach that embraces a behavioral dimension.
3. Behavioral risk management involves identifying behavioral drivers and addressing them by making changes in processes or organizational contexts. These can take the shape of “nudges”, which may seem small or even trivial but can have profound effects on behavior.

Full Article

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Topics: Banking, Financial Risk Management, Organizational Behavior

Common Hiring Mistakes To Avoid And Strategies To Build A Great Team

Written By Kara Dennison | Forbes Magazine | May 28, 2022

Recruitment is a challenge for organizations looking to mitigate costs while attracting top talent. A recent Northwestern University survey found that 74% of employers have hired the wrong person due to ineffective recruitment practices. There are many ways the traditional hiring process can be inefficient. Some of the most common hiring mistakes to avoid and strategies to build a great team are:

1. Rushed Recruitment Process.  Hiring the first qualified candidate can lead to an unsuccessful hire. The decision-makers on your team might overlook red flags, missing opportunities to find the best cultural fit or the best fit for the day-to-day needs of the department.  Start the process early and dedicate time for discussion with the department manager, team leaders, and peers about the qualities the ideal candidate will possess.
2. Unclear or Inaccurate Job Descriptions.  A poorly defined job description leads to confusion, unrealistic expectations, and disappointed team members when onboarding the new hire.  Be specific about the role’s responsibilities, including the technical, soft skills, and experience that are imperative to successfully filling the open position.  Clearly define the team’s needs.  Keep your list specific, but don’t include so many qualifications that it is overwhelming or difficult to determine which are the most important.
3. Get Team Input with Peer Interviews.  Involving team members in interviews is a great way to get valuable feedback about the department’s needs and how the candidate would fit in with the culture and dynamics of the existing team.
4. Know the Difference Between Gut Feelings and Personal Bias/Effects.  When interviewing, it’s crucial to have a uniform interview process, so all decision-makers can fairly compare data and candidate performance. Even if randomly selected questions are assigned, the same standards should apply to all.

Creative Strategies to Build the Best Team include: 

1. Improving Employer Brand.  72% of recruiting leaders believe that employer brand is crucial to success when hiring. Branding is your company’s image, and the first thing candidates see when they consider applying.
2. Increase Business Visibility with Passive Recruiting.  Passive recruiting involves headhunting and networking on social media, as you won’t always find the best talent on job boards due to the limitations of the platforms.
3. Revamping the Recruitment Process.  One of the most common complaints of candidates in the market today are lengthy and ineffective hiring processes, so doing your part to ensure the process is as efficient as possible will go far in hiring top talent.

2 key takeaways from the article

1. Recruitment is a challenge for organizations looking to mitigate costs while attracting top talent. A recent Northwestern University survey found that 74% of employers have hired the wrong person due to ineffective recruitment practices. There are many ways the traditional hiring process can be inefficient. 
2. Some of the most common hiring mistakes to avoid and strategies to build a great team are: a rushed recruitment process, unclear or inaccurate job descriptions, not getting team input with peer interviews, and not knowing the difference between gut feelings and personal bias/effects.  Creative Strategies to build the best team include:  improving the employer brand, increasing business visibility with passive recruiting, and revamping the recruitment process.

Full Article

(Copyright)Topics: Recruitment, Team, Talent 

Entrepreneurship Section

4 Reasons Intuition Is an Essential Leadership Skill

By Laura Stupple | Entrepreneur Magazine | May 30, 2022

Entrepreneurs and business leaders are renowned for being tough as nails, highly rational and skeptical of airy fairy concepts. On the surface, intuition might sound like the latter.    But what intuitive business requires less effort, and delivers better results.  Alongside creativity, risk-taking and resilience, intuition is the key trait that all business leaders should lean into. Intuition is generally accepted to be the information we receive instinctively, without the need for conscious reasoning or fact.  Also known as “sixth-sense”, “gut feeling” and “inner knowing”, intuition refers to our ability to subconsciously receive information.  If you’re not already convinced that you need a little more intuition in your life, here are four reasons that it’s one of the most underrated business (and life) skills.

1. Intuition keeps you aligned.  Deep down, we all know when something is “off.”  But it’s easy to ignore that gut feeling when our mind tells us that something is the “better” choice. Rationality can tell us that a business deal, opportunity or relationship is good for us. When deep down, we know it’s not.
2. You can speed up response time.  In a world where everyone is time-poor, speeding up decisions can be a superpower. Studies have shown that leading with intuition speeds up your response time.  As an entrepreneur or business leader, this can be an invaluable skill. But it’s important to highlight that data, processes and facts also have their place. The best results tend to come when intuition complements the hard evidence.
3. Intuition takes you closer to your ideal customer.  Data, history and analysis can tell us a lot about our ideal customer.  But no matter how much research we do, we can never know our ideal customer’s mind. Unless, of course, we connect on a deeper level.  Intuition brings us closer to natural intelligence and the flow of the universe. In doing so, we can gain access to information that seems to appear from nowhere.
4. You’ll become a better leader.  When you go with your gut, the decision-making process becomes a lot clearer. You’ll be able to stop second guessing your choices, and give better direction to your team.  With more clarity in your own mind, you’ll be able to stay true to your vision. Less confusion, more clarity makes for a better business leader.

3 key takeaways from the article

1. Alongside creativity, risk-taking and resilience, intuition is the key trait that all business leaders should lean into.
2. Entrepreneurs and business leaders are renowned for being tough as nails, highly rational and skeptical of airy fairy concepts. On the surface, intuition might sound like the latter.    But what intuitive business requires less effort, and delivers better results.
3. If you’re not already convinced that you need a little more intuition in your life, here are four reasons that it’s one of the most underrated business (and life) skills: intuition keeps you aligned, you can speed up response time, Intuition takes you closer to your ideal customer, and you’ll become a better leader.

Full Article

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Topics:  Entrepreneurship, Leadership, Decision-making, Intituition