Russia Vetoes Crimea Resolution In U.N. Security Council | 03/16/2014
Russia vetoed a U.S. sponsored resolution Saturday to make illegal a referendum for Ukrainian peninsula, Crimea, to secede and join Russia. The mostly Russian speaking Crimea will vote on joining Russia on Sunday.
Thirteen of the Council’s 15 members voted in favor of the draft text, Russia voted against, and China abstained. A veto by any of the Council’s five permanent members –- China, France, Russia, the United Kingdom and the United States -– means a resolution cannot be adopted. The resolution would have reaffirmed Ukraine’s “sovereignty, independence, unity and territorial integrity” and declared that tomorrow’s referendum, which could lead to Crimea’s break with Ukraine, “can have no validity”.
Russia’s veto eliminates that as a possibility within the U.N.
Russia’s Permanent Representative to the United Nations, Vitaly Churkin, said it was “no secret” that Russia was planning to vote against the resolution, the U.N. noted on its website. He added that Moscow would respect the decision of the Crimeans but could not accept the basic assumption of the draft resolution which aimed “to declare illegal the planned March 16 referendum where residents of the Republic of Crimea should decide on their future”.
Crimea is an autonomous region of Ukraine much in the way Hong Kong has a separate government but remains part of China.
Liu Jieyi, Permanent Representative of China to the U.N., said Beijing sought a “balanced” solution to the conflict within a framework of law and order. He called on countries to refrain from action which could further escalate the conflict.
The resolution vote today marked the seventh time the Security Council was convening to discuss Ukraine.
Ukraine entered a deep political crisis in late 2013 when then-president Viktor Yanukovych rejected a trade deal with Brussels in favor of moving the country closer to Russia. Millions in Kiev, Ukraine’s capital, saw Yanukovych as acting on behalf of a foreign nation rather than the good of Ukraine. He was impeached through extra-legal means on Feb. 22 and allegedly fled to the Russian naval base in Sevastopol, located on the Black Sea coast in southern Crimea.
When pro-Western politician Arseniy Yatsenyuk took the helm of Ukraine, he quickly summonsed allies in Brussels and at the International Monetary Fund to help save the country’s ailing economy. But one of Yatsenyuk’s first orders of business was to eliminate Russian as the second official language of Ukraine. Many ethnic Russians took offense. And the mostly Russian peninsula of Crimea quickly became the new hot zone of Ukraine’s latest revolution. Washington moved to essentially replace Brussels, which was once the third party in this torrid affair.
Crimea’s leaders voted to secede last week, but the voters will decide on the matter tomorrow.
Eight U.S. Senators are currently in Ukraine’s capital waiting for fireworks.
U.S. Sen. Ron Johnson said that the United States should hold Russian President Vladimir Putin responsible for any bloodshed in Ukraine, the independent Kiev Post reported. Ukraine has reported around 100 civilian deaths since protest erupted in the fourth quarter of 2013.
Human Rights Watch documented the involvement of self-defense units in the abductions of at least six activists from the so-called Euromaidan movement, which organized the months of protests in Kiev
“I’ll tell you what, from my standpoint there is one person I hold accountable for this aggression and it’s Vladimir Putin. If there’s further bloodshed, there’s also one person I will hold responsible,” Johnson told a news conference in Kiev today. “There’s one person that can stop it, that can prevent it. That’s Vladimir Putin.”
See: ‘Blame Putin’, Wisconsin Republican Johnson Says – Kiev Post
Legal Or Not, Crimea Referendum Will Reshape Ukraine Crisis – CNN
Crimea As Consolation Prize As Russia’s Ukraine Costs Rise – The Washington Post
Online Sportsbook Founder Held Liable for $36 Million In Tax And Penalties | 03/15/2014
Last week, I detailed my fantasy of fleeing public accounting for life as an illegal bookmaker. I was, of course, indulging in nothing more than a bit of playful escapism, meant to dull the pain of another long busy season.
But after reviewing the Tax Court’s decision in Kaplan v. Commissioner, T.C. Memo 2014-43, I think I’m ready to give my two-weeks notice. Like, today. Because while Kaplan may not enlighten with regards to the tax law, it does reveal just how much bookmakers earn. And it’s a lot. As in a $24 million tax bill, which translates into approximately $75 to $160 million of taxable income, depending on the character.
In Kaplan, the taxpayer made the sound financial decision to drop out of high school so he could support his two children by taking bets. Following a 1993 arrest in New York City on sportsbooking charges, the taxpayer sought the more friendly gambling environs of Aruba before eventually landing in Costa Rica.
Around that time, Al Gore was gracious enough to invent the internet, and indirectly giving birth to
millions of hours of streaming pornography a highly lucrative offshore sports book industry.
Understand, sports betting is illegal in the U.S.because it is an evil, duplicitous act. (Unless of course, you’re in Vegas, in which case, feel free to parlay the Cowboys and 49ers to your heart’s content! No hypocrisy there.) As a result, prior to the internet era, bettors were forced to place their wagers with shady local bookies. Because bettors could wager money without actually fronting the cash, it was easy for a gambler to bet above his means and suddenly find himself in serious trouble with nefarious sorts.
With the advent of internet gambling, however, everything changed. While it was still illegal for a U.S. citizen to wager on sports via the Web, the government was focused on taking down the sportsbooks, and largely ignored the bettors. More importantly, the birth of online sportsbooks helped to protect bettors from an adversary more harmful than even the FBI: themselves. Bettors now had to place a wager out of an account, and any money risked had to be deposited in the account prior to the wager. Of course, if the bettor deposited money into his account via a credit card, he could continue to dig himself a financial hole, but at least in this case it was the credit card company coming after him, and not Vito from Chambersburg threatening to break his thumbs.
The taxpayer in Kaplan launched BetOnSports LLC during the Web’s formative years, and the rush of bettors seeking the perceived legitimacy and financial protection of an online sportsbook quickly turned the BetOnSports into one of the most heavily-used and profitable sites in the industry.
In 2004, the taxpayer, anticipating a public offering by the now-flourishing BetOnSports, transferred his shares in the company to several trusts in the Isle of Jersey. As part of the company’s PLO, the taxpayer’s trusts sold approximately 42 million shares of BetOnSports for $97 million at a time when he had no basis in the company’s shares. The taxpayer failed to report any of the gain – or file a tax return, for that matter — in either 2004 or 2005.
In 2007, the taxpayer was arrested in the Dominican Republic by U.S. authorities on charges of illegal bookmaking, racketeering, mail fraud, and using wire communication to transmit bets. Upon his arrest, the taxpayer faced 75 to 100 years imprisonment and criminal forfeiture of $180 million.
Two years later, the taxpayer entered into a plea deal with the government. As part of the agreement, he would serve 41 to 51 months in prison and forfeit nearly $44 million to the federal government. The plea specifically provided that no further criminal charges could be brought against the taxpayer. Unfortunately for the taxpayer, however, the deal also specifically stated that:
Nothing contained in this document is meant to limit the rights and authority of the United States of America to take any civil, civil tax, or administrative action against the taxpayer.
Before finalizing the plea, the judge asked the taxpayer if he understood the difference between criminal and civil tax proceedings, and that the plea deal continued to expose the taxpayer to civil tax charges. He responded that he did.
And therein lies the problem. Because soon after the taxpayer’s conviction, the IRS set about preparing tax returns for the taxpayer’s missing 2004 and 2005 tax years. After concluding that the Isle of Jersey trusts established by the taxpayer were grantor trusts for U.S. tax purposes – and thus the income allocable to the trusts were required to be reported by the taxpayer – the Service assessed over $24 million in tax related to the taxpayer’s unreported capital gain from the sale of BetOnSports stock. The IRS then tacked on $12 million in related penalties for late filing, late payment, and underpayment of estimated tax for good measure.
Faced with a $36 million tax bill, the taxpayer argued that the IRS was precluded form bring a civil tax action against him under the plea agreement. The Tax Court, armed with the sworn testimony from the plea hearing, had all the proof it needed that this was not the case.
As a result, on top of the $43 million the taxpayer was forced to cede to the government as part of his plea deal, he was also held responsible for an additional $36 million in tax and penalties, proving once again that crime does in fact pay. For the IRS.
follow along on twitter @nittigrittytax
Taxes From A To Z (2014): H Is For Holding Period | 03/15/2014
H is for Holding Period.
When you buy, sell or otherwise dispose of certain kinds of property, the result is a gain or loss for federal income tax purposes. Property subject to these rules is considered a capital asset (yes, giving rise to the terms capital gain and capital loss).
For the most part, capital assets include everything you own and use unless it’s otherwise excluded – so easy, right? It not only includes personal use property like your home and your car but also investment property like stocks and bonds. The rules are largely the same for the two kinds of assets with the primary difference being that you may not deduct a loss from selling personal use property (you can take a loss for the sale of investment property).
To figure the tax treatment of your gain or loss, you have to know a couple of key pieces of information: your basis (most commonly, your purchase price plus adjustments), your selling price and your holding period for the property.
Your holding period is generally defined as the amount of time you held the property. To figure this period, begin counting on the day you acquired the property. The day that you sold or transferred the property is your disposition date. You’ll count through – and including – the disposition date.
If you hold investment property for more than a year, any capital gain or loss is a long-term capital gain or loss. If you hold the property for one year or less, any capital gain or loss is a short-term capital gain or loss.
Here’s an example of how you count days to determine the holding period:
Today is March 15, 2014. If you originally bought investment property on March 15, 2013, and sold it today, your holding period would be one year or less, and gain or loss from the disposition would be short-term. If you sold the same property on tomorrow, March 16, 2014, your holding period would be more than a year, and gain or loss from the disposition would be long-term.
Some specific rules apply, depending on the kind of property:
- For securities, your holding period begins the day after the trade date you bought the securities and ends on the trade date you sold them.
- For US Treasury notes and bonds sold at auction, your holding period begins the day that the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders while the holding period for Treasury notes and bonds sold through an offering on a subscription basis begins on the day after the subscription is submitted.
- For real property, your holding period begins on the day after you received title or on the day after you take possession, whichever happens first, and ends at sale or disposition. However, if you sell property subject to a loan and later repossess it for nonpayment, your holding period begins on the date you originally obtained the property but does not include the period of time under which the subsequent owner took possession (you’ll want to back those days out of the count).
- Property you receive as a gift has a “carry over basis” and your holding period begins on the same day that the person making the gift originally acquired the property.
- If you inherit property, your holding period is always considered long-term – even if you sell the property the day after the original property owner dies (there’s an exception for certain estates who elect carryover basis treatment for decedents who died in 2010).
Other rules may apply to stock rights, property which is traded or bartered, stock dividends and other special circumstances. Consult with your tax or investment professional to help figure out the kind of gain – don’t just make an assumption. This is important because the rate of tax you pay is based on whether the gain is short-term or long-term. The differences between those rates, especially in 2013, can be significant.
Short-term capital gains are taxed at ordinary income rates which means that you pay tax on those gains at the same rate as you report your other taxable income. You can check out the 2013 tax rates here.
Long-term capital gains rates have changed for 2013. Basically, the rate of tax is 0% if you are in the 10% or 15% tax brackets; 15% if are in the 25%, 28%, 33%, or 35% tax brackets; and 20% for taxpayers in the new 39.6% tax bracket. The brackets for capital gains break down like this:
And don’t forget that, beginning in 2013, capital gains items may be subject to an additional 3.8% Medicare tax – called the net investment income tax (or NIIT) – for some high income taxpayers:
For great coverage on the NIIT issue, check out Anthony Nitti’s Definitive Questions and Answers On The New Net Investment Income Tax.
For more in the series, see:
Want more taxgirl goodness? Pick your poison: receive posts by email, follow me on twitter (@taxgirl), hang out with me on Facebook or check out my YouTube channel. If you want to keep an eye on documents I’ve posted, check out my profile on Scribd. And finally, you can subscribe to my podcast on the site or via iTunes (it’s free).
Why Companies Fail To Engage Today's Workforce: The Overwhelmed Employee | 03/15/2014
We just completed a major study of human capital trends around the world (Deloitte Global Human Capital Trends, 2500 organizations in 90 countries) and the message is clear: companies are struggling to engage our modern, 21st century workforce.
This is a worldwide issue. Gallup research shows that only 13% of employees around the world are actively engaged at work, and more than twice that number are so disengaged they are likely to spread negativity to others.
Before I explain what’s going on, let me share some statistics from the research:
- 86% of business and HR leaders believe they do not have an adequate leadership pipeline (38% see it as an urgent problem)
- 79% believe they have a significant retention and engagement problem (26% see it as urgent)
- 77% do not feel they have the right HR skills to address the issue (25% urgent)
- 75% are struggling to attract and recruiting the top people they need (24% urgent)
- Only 17% feel they have a compelling and engaging employment brand.
And when we asked companies to evaluate their management practices they were particularly critical of the way they manage performance, leading us to the conclusion that performance management is broken. (Read The Myth of the Bell Curve for more on this topic):
- Only 6% believe their current process for managing performance is worth the time, 58% called their process “weak”, with North American companies 20% worse than the rest of the world.
A Changed Work Ethos
What is going on here? Why all these talent challenges at the beginning of an economic recovery? Shouldn’t people be pretty excited to see new jobs being created?
Our conclusion, after looking at the data and talking with many companies, is that workers today want more. They want something different. They are demanding, they want meaningful work, and they expect their employer to make work more rewarding in many ways.
As one HR manager put it, “today employees don’t want a career, they want an experience.
Look at some of the statistics. Nearly 40% of the US workforce now works part time. Baby boomers who lost their jobs are often out of work for 18-24 months. Millennials want more creative jobs and they want to work for startups (or for themselves). And everyone wants work to be easier, less punishing, and more meaningful. (Read Millenials Will Soon Rule for more details.)
And this issue is becoming urgent – studies show that nearly 26% of the US workforce is going to change jobs this year, and these are typically the most highly skilled and motivated people. This is why “retention” was the #2 issue in our study.
Incidentally, I think it’s time we throw away the word “retention.” No employer can “retain” anyone – we have to “continuously attract” our own people. We like to think about creating a “magnetic” workplace that “attracts” people.
The Overwhelmed Employee
One of the topics that came up in our research is the fact that 2/3 of today’s employees feel “overwhelmed.” The concepts of work-life balance have been lost, thanks to a proliferation of technology and the breakdown in barriers between work and life.
People are working too hard (40% of men work more than 50 hours per week and 80% would like to work fewer hours), they are too distracted (mobile device users check their phones 150 times per day), and they are flooded with too many emails, conference calls, meetings, and other distractions. Recent research shows that the average office worker can only focus for 7 minutes at a time before they either switch windows or check Facebook.
(65% of business and HR leaders rate this an important or urgent challenge, yet fewer than 10% have any idea what to do about it.)
Let’s Redefine What Engagement Means
The word “engagement” is an old-fashioned term used by Human Resources managers. It typically refers to an employee’s willingness to exert “discretionary effort” – and is measured through an annual survey.
As I talked with companies about the research, I found that while most companies do these annual surveys, the majority do not find this sufficient. While they give us an annual view, they do not help organizations understand the passion, soul, and real issues going on day to day.
We have to change our mindset and redefine what “engagement” means.
Our research (which I will be presenting at our upcoming IMPACT conference) shows that there are five elements which drive a highly engaged workforce:
- The work itself,
- The management environment,
- The flexibility and inclusion of the workplace,
- People’s ability to learn and grow, and
- Trust and meaning from leadership.
So it’s a whole set of issues to consider.
“Best places to work” companies don’t just have ping pong tables and free lunch, they have a “soul” which makes work exciting and energizing. They invest in great management and leadership. The train and develop people so they can grow. And they define their business in a way that brings meaning and purpose to the organization.
Look at how Satya Nadella, the new CEO of Microsoft, talks about work in his introductory email to employees:
Finally, I truly believe that each of us must find meaning in our work. The best work happens when you know that it’s not just work, but something that will improve other people’s lives. This is the opportunity that drives each of us at this company.
A New Industry Focused on Mindfulness and Balance
Supporting this growing problem, the “mindfulness industry” has become one of the fastest growing markets in the world. The Wisdom 2.0 (“Living Wisely in the Digital Age”) conference in San Francisco was sold out in weeks. Arianna Huffington’s new website The Third Metric, dedicated to work-life balance, is her fastest growing property (her new book Thrive will very likely be a best-seller). And books like “The Happiness Project,” authored by Gretchen Rubin, are rapidly becoming best-sellers.
Interestingly, the UN “World Happiness Report,” shows that the happiest countries (Denmark, Norway, Switzerland, Netherlands, and Sweden) are those with some of the best reputations for work-life balance. Businesses in these countries are quite successful – and they have learned to build work environments which are humanistic and let people think.
The Deloitte research actually shows that some of the most stressful places to work are in fast-growing countries like China, where work practices are still immature. Your can visit the Deloitte Global Human Capital Dashboard to explore the data.
I recently found research by Zeynep Tom (“The Good Jobs Strategy“) that compares profitability among retailers that “overstaff” (hire extra people to give people slack time) vs. those who “understaff” (they keep the stores very lean).She found that those who overstaff are more profitable by far, driven largely by their employees’ ability to think, serve customers, re-arrange the stores, and be cross trained.
This illustrates a simple fact:
Making the work environment more forgiving is good business.
The Solutions Are Not Easy And They Take Leadership Commitment
Now that we’ve identified the problem, I suggest that the solutions are not easy. Many of the work practices in large companies have been built up over decades – and leaders are often afraid to make radical changes.
I recently met with the CEO of a major business in Australia and discussed their need to revamp and humanize their performance management process (their employees referred to their performance appraisal process as a “drive by shooting”). While the business was performing well, they had high turnover and were struggling to attract great people.
As we discussed a simpler, more coaching-based performance process, I saw the fear in his eyes. “What if people start goofing off around here?” I told him that part of building a great company is building trust – trust in leaders, trust in managers, and trust in employees. Not always an easy thing for a hard-driving CEO to accept.
We also know that complex issues like diversity and inclusion are important. Research by Deloitte shows that work teams which have high levels of inclusion outperform others by 8:1.
But creating a culture of inclusion takes time, effort, and demands top level commitment. An inclusion strategy impacts hiring, training, as well as leadership behavior. Our new research shows that while more than 80% of companies promote themselves as “highly inclusive” only 11% admit that they really are. Unconscious bias is an important topic and a difficult one to address.
One way to get your head wrapped around this issue is to think of employees as customers. Just like we use Net Promoter scores to tell us what customers want, we should do the same for our own people. Adobe, for example, now uses “pulse” surveys to analyze employee engagement four times a year – and this, coupled with a totally revamped performance management process, has reduced turnover among high performers by over 30%.
New Tools Are Coming
We also see new tools and Big Data solutions beginning to help. While Gallup, Kenexa (IBM), Towers Watson, and many others offer traditional solutions, a new breed of solutions is coming.
Real-time survey providers like CultureAmp, BlackbookHR, and RoundPegg, let you assess engagement and culture fit in real time. Companies like Evolv, Deloitte, and IBM now have retention analytics models you can implement. And a variety of exciting tools from companies like Good.co, Evolv, Entelo, Orgstars, Glassdoor, and others let you monitor employee “happiness” through their online behavior. These companies are marrying the old-fashioned world of I/O psychology with the new world of Big Data and social networking.
I wouldn’t be surprised to see LinkedIn offer you an “employee happiness” dashboard some day soon.
Bottom Line: Engagement Is a Big Deal
Let’s face it. If you’re a CEO or business leader, the only thing you really have is your employees’ commitment and engagement. This is not “one of the things” to worry about, this is “the thing” to worry about.
I encourage you to think more holistically about your own team (or organization) and what you can do to improve work, provide more coaching, improve flexibility, become more inclusive, and drive meaning into the workplace.
Of course we have to hold people accountable for results – but work is far more than producing output for a dollar – it is an integral part of our lives.
Now is the time to think holistically about your company’s work environment and consider what you can do to create passion, engagement, and commitment. It may be “the issue” we face in business over the next few years.
I am an industry analyst and researcher focused on corporate talent and learning, HR, leadership, HR technology, and the intersection between work and life.
You can follow me to stay up to date on trends, research, and news on twitter at @josh_bersin or on LinkedIn at http://www.linkedin.com/in/bersin.
For more information on Bersin by Deloitte, please visit http://www.bersin.com .
This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.
Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
Best- And Worst-Performing Cloud Computing Stocks March 10th To March 14th And Year-to-Date | 03/15/2014
The six highest performing cloud computing stocks year-to-date in the Cloud Computing Index are Fusion-IO (NYSE: FIO), Akamai (NASDAQ: AKAM), Workday (NYSE:WDAY), Qualys (NASDAQ: QYLS), F5 Networks (NASDAQ: FFIV) and VM Ware (NYSE:VMW). A $10K investment in Akamai shares made on January 2nd of this year is worth $12,794 as of market close yesterday.
Using Thomson Reuters data corroborated with Yahoo Finance, the percent of each company’s stock that is institutionally owned is now in the Cloud Computing Index . Salesforce (NYSE:CRM) leads the index with 99.6% of their shares institutionally owned, followed by Red Hat (NYSE:RHT) at 98%, F5 Networks (NASDAQ:FFIV) at 97.1%, Fusion-IO (NYSE: FIO) at 95%, and Akamai (NASDAQ: AKAM) at 93.8%. Veeva Systems (NYSE:VEEV) has the lowest level of institutional investment in the index (16%).
IBM, Microsoft, Oracle and SAP share prices are included for comparison.
The following graphic compares how $10,000 invested on January 2nd of this year in the highest performing cloud computing stocks, in addition to IBM, Microsoft, Oracle and SAP are valued today. Please click on the graphic to expand for easier reading.
Please see the full Cloud Computing Index for market caps, average volumes, 52-week high and low share prices, Earnings per Share, Price/Earnings Ratio, and Beta. I am using the Google Finance Portfolio option to track the performance of these stocks. For information on how this index was created, see the description at the end of this post. I do not hold equity positions or work for any of the companies mentioned in this blog post or included in the Cloud Computing Index and this post is not meant to provide investment advice. It is simply a glimpse into the performance of these company’s stock prices over time. Please click on the graphic to expand for easier reading.
Best Performing Cloud Computing Stocks, March 10th to 14th, 2014
Worst Performing Cloud Computing Stocks, March 10th to 14th, 2014
Best Performing Cloud Computing Stocks In 2014
Worst Performing Cloud Computing Stocks In 2014
Where The Bands Stay At SXSW | 03/15/2014
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For many of the estimated 200,000 people who attend South By Southwest each year, finding a place to stay in Austin tends to be a pricey and frustrating experience.
Those who search for lodging online quickly discover that most of the hotels within a mile or two of downtown are already booked; the available rooms often exceed $500.
For most, that means scrounging up a $200-a-night room on Airbnb or staying on the couch (or floor) of a friend, relative or colleague. But for the big musical acts who can afford just about any hotel in the world, there are many more palatable options.
We asked a few of them where they decided to stay, and got a surprisingly broad range of answers. Snoop Dogg, for example, likes to stay outside of town at a spot with a personal chef. Neil Young prefers the Four Seasons. And Matisyahu likes his tour bus best.
We captured the entire process in the video above, stopping to check out some of the top hotels in Austin—and their nightly rates. The results should be of interest to any aspiring rock star.
For more on the business of music, check out my Jay Z biography Empire State of Mind. My next, Michael Jackson, Inc, will be published in June. You can also follow me on Twitter and Facebook.
Take These Two Steps To Rival Nordstrom's Customer Service Experience | 03/15/2014
Sometimes you hear people speaking about Nordstrom (our Seattle-based fashion retailer that’s so expert in customer service), and they’ll tell you Nordstrom’s employee handbook is only a single line long: “Use your best judgment in all situations. There will be no additional rules.”
Is this actually the entire Nordstrom employee handbook? Nah. (In spite of what you’ve heard, and in spite of the ill-sourced Wikipedia entry on the subject.)
But the statement does tidily sum up the first element of the Nordstrom customer service ethos: the power of hiring nice, capable people and inspiring them to use their judgment.
The two elements you need for great customer service
There is, at Nordstrom, and at every other great organization, a second element of nearly equal importance: standards. Additional guidelines and internal, codified knowledge that support these employees and multiply the power of their “best judgment.”
You can recognize both elements immediately if you venture into any Nordstrom store. Employees are clearly empowered, but it’s equally clear that Nordstrom is running a really tight — maybe the tightest there is — retail ship.
And although I’ve written here emphatically about the need to empower customer service employees, the truth is, you don’t create a Nordstrom-level customer experience solely by empowering employees. You also need customer service standards to support those employees, and, ultimately, your customers.
This is the two-part combination — autonomy and standards — that creates customer experience magic.
You need to empower employees, need to give them autonomy, in order to get the best results in customer service and the customer experience. But that’s never the entire story. The next time you see reports about a company that’s “all autonomy, all of the time,” look closer. In our Nordstrom example, we’re talking about acompany supported by rigorously maintained standards and training, not just a one sentence “employee handbook.”
Or look at Zappos’ reported social media policy of “be real and use your best judgment.” This is indeed its policy–to an extent. But only to an extent: After all, Zappos (well, Amazon) is a publicly traded company and would be at significant risk without the standards it has implemented to protect against the untoward release of information.
Empowerment: It’s what happens when someone leaves your Nordstrom shoes out in the rain
Employee autonomy — “using your best judgment” — is extremely important to delivering Nordstrom-quality customer service. And it crucially comes into play on the more complex and unpredictable tasks, of which there are many: selecting items for a customer’s wardrobe makeover, walking the line between honesty and not insulting a customer when she’s trying on clothes, finding ways to go the extra mile for a customer. Complex and unpredictable tasks in customer service require an enormous amount of autonomy and a properly hired and trained staff to make use of that autonomy.
For example, do you know who’s legally responsible if a common carrier (UPS, DHL, FedEx) leaves your Nordstrom delivery in the rain and your $200 shoes are ruined? Well, the responsibly party might be you or it might be the trucking company, but it’s absolutely not Nordstrom. Yet, when this happened to me, not for an instant did my salesperson (the great Joanne Hassis at the King Of Prussia Nordstrom, by the way) consider saying “You need to file a claim with the trucking company.” She instead told me, without hesitation, the following:
“I’m so incredibly sorry that happened, and I’m bringing over a brand new pair of shoes–will you be home in forty-five minutes?”
Standards: Don’t leave your employees without them.
At the same time, many things at Nordstrom and other great companies depend on standards. For example, the way an employee is paged over the Nordstrom loudspeaker is superior to the way it’s done elsewhere. Not because employees autonomously, spontaneously decide to do it better each time they page, but because someone at Nordstrom thought through what a paging system should sound like from a customer’s perspective and then standardized it.
Reworking the idea of a paging system to put what a customer would want to experience (less auditory clutter in the store’s soundscape) at the center, Nordstrom eliminated all that stuff you usually hear about which department to call and so forth. All you hear is the name of the employee being paged: “Jamie Johnson.” [How can this work? The employee who's been paged then calls in to a central number, states her name, and is directed to the appropriate extension by a professional operator.]
These Brooklyn Social Entrepreneurs Want You To Party Hard, Party Without Red Plastic Cups | 03/15/2014
The plastic red cup is a true icon of American culture. It’s there for the high school keg party, the college pizza study party, the awkward office holiday party and every milestone in between. And that’s reflected in the figures. The red solo cup – ubiquitous beer pong receptacle of choice – is part of a gargantuan industry of disposable plastics. Solo Cup, the almost-80 year old company that makes the cherished red cup was gobbled up by Dart Container in a $1 billion sale in 2012. The tableware industry alone is worth $5.5 billion.
It’s an industry two twenty-something social entrepreneurs in Greenpoint, Brooklyn are trying to shake up as demand for sustainable alternatives grows. The market for sustainable tableware is now worth around $700 million and growing, says Susty Party CEO Emily Doubilet.
The daughter of two National Geographic underwater photographers, Doubilet grew up swimming around stunning coral reefs and concerned about environmental destruction. She also loved performing and produced global warming themed burlesque shows and performed in a band in Brooklyn while working as a sustainability advisor. At a party one night she met Jessica Holsey, a Credit Suisse private equity Wall Streeter who’d studied economics at Harvard where she’d captained the basketball team. “It was awesome, I had the great dream job,” says Holsey. But she’d started thinking more about investing her time in a project that involved social as well as financial gains. “It’s funny – it took me two years working on Wall Street to even come across the term ‘social entrepreneur’,” she says.
“I wanted to be involved in the environmental movement as a person who loves parties and entertaining in Brooklyn,” says Doubilet. Noticing the amount of plastic waste that often accompanies a good shindig, Doubilet wanted to find a fun way to make her events match up with her ideals. “I started thinking, how can we have a really positive event or show without creating all this waste?” says Doubilet. “We’re environmentalists who love a good party.”
She’d “scoured the earth for compostable tableware,” but found there was no seamless way to order online. Holsey and Doubilet decided to join forces to launch a webstore and later their own branded products. The duo also partnered with U.S. factories who employ blind and visually impaired people.
“We wanted to create value locally,” says Doubilet. The National Industry For The Blind powered initiative employs 12 people to make Susty’s line of colorful compostable tableware in the USA, unlike lots of other compostable tableware, which is imported from overseas. Last year, Doubilet and Hosley, who were named in FORBES’ 2014 30 under 30 list, won a $40,ooo award for social impact from the Hitachi Foundation, allowing them to expand and continue to create jobs for the blind.
Susty was self-funded and bootstrapped for four years. Expenses were low at first as they were just running an online store, but after a nerve wracking meeting with Whole Foods in 2012 Susty got placed in stores at first regionally but then nationally last year. They began expanding their own designs and hunting down new materials. They’ve recently launched the world’s first biodegradable plastic tablecloth, says Doubilet. To keep up momentum and increase research and development into innovative materials like tapioca starch, Susty closed at $500,000 seed round led by Radicle Capital, an investor focused on early stage sustainable companies.
“We’ve launched a ton of new products,” says Holsey. Sales have jumped from $500,000 in 2012 to $1.2 million in 2013, she added. The deal with Whole Foods came about because the supermarket is running an initiative that supports millenial social entrepreneurs, says Doubilet. “The meeting with Whole Foods was the start of launching our own brand,” she says. “They’ve been a dream partner,” providing mentorship and guidance. So too have United Natural Foods, Inc. a national distributor of all things to do with organic food and packaging.
Another key advisor is Julie Bell, a Partner at San Francisco Equity Partners. Bell’s portfolio company, Method Products, which makes naturally-derived, biodegradable household cleaners, laundry detergents and soaps merged with Belgian firm Ecover to create a $200 million company in 2012. “She sees a lot of similarity,” says Doubilet. “It’s approaching a product that might seem boring or stale and thinking, let’s make this a really fun experience and good for environment and community as well.”
So far, so sunny but dangers lurk. Susty’s products are still much more expensive than their plastic equivalents. A box of their wooden cutlery is $8.99 for 50 vs Dixie’s $4.99 for 100 price point. Also, some of the products can only be broken down through industrial composting, an option only really accessible in a few cities like Portland, Seattle and San Francisco (although Doubilet thinks a change in legislation will make curbside composting pickup a reality in NYC soon too).It’s hard to know what would happen if one of the plastic giants started offering a viable compostable alternative themselves at a much lower premium. But Doubilet and Holsey remain upbeat, determined to party on. They’re gearing up to appear on Shark Tank on April 4th determined to bring Susty Party to the attention of millions of Americans in time for picnic season.
In Kiev, Ukraine Parliament Axes Crimea | 03/15/2014
The Ukraine Parliament voted Saturday to dissolve the regional assembly representing the autonomous region of Crimea in Kiev, RIA Novosti newswire reported.
A total of 278 lawmakers out of 296 voted to dismantle the political authority that represents Crimea in the Ukrainian capital. The parliament’s ruling went into effect immediately. With Crimea now even more on the outs with Kiev, a positive vote to leave Ukraine and join Russia is now almost a certainty.
On Friday, Ukraine’s highest court said Crimea’s decision to hold the secession vote on Sunday was unconstitutional. That will put legal question marks over Crimea’s widely expected decision to leave Ukraine’s sphere of influence. Russia’s government continues to declare that the autonomous and largely Russian ethnic majority Crimean peninsula is within its legal rights to secede.
On Friday, Russian president Vladimir Putin told U.N. Secretary General Ban Ki-moon in a phone conversation that the upcoming referendum in Crimea was in line with the U.N. Charter. “Putin emphasized that the decision to hold the referendum is in line with the provisions of international law and with the UN Charter,” a statement from the Kremlin said.
Putin has Kosovo’s secession from Serbia in 2008 on his side.
In a non-binding ruling in 2010, the International Court of Justice ruled that Kosovo’s formal secession from Serbia was not in violation of any international laws and was therefore legal. Pro-Western Kosovo continues to be occupied by NATO troops. For Putin, Kosovo is like a petri dish to what may grow into a Crimea-Russian stronghold on the Black Sea.
The U.N. Charter states that each country’s territorial integrity is inviolable and all people have a right to self-determination. These two principles conflict when an oppressed minority seeks to achieve self-determination by seceding from an existing state.
Russians make up around 58% of the Crimean population. Two weeks ago, the Ukrainian parliament voted to do away with Russian language in official settings, irking millions of ethic Russians who live in far eastern Ukraine.
All Eyes On Crimea
The Security Council has met on the situation in Ukraine since March 1, even as multiple multilateral and bilateral diplomatic efforts remain under way. Meanwhile, Washington and Moscow are at odds, with both sides threatening tit-for-tat economic sanctions. Trade sanctions are expected to come swiftly after Sunday’s vote in Crimea.
Seizure and blockade of Ukrainian military bases, as well as of the majority of State Border Service facilities continued last week ahead of the secession vote. Russia says such actions are the work of local militia’s and not the Russian military. Kiev and Washington disagree and lay the blame with Moscow.
According to the U.N.’s Under-Secretary General for Political Affairs, Jeffrey Feltman, there have been reports that a military hospital has been taken over by unidentified military personnel and Crimean authorities closed the airspace over the peninsula to all commercial flights except those travelling to and from Moscow, citing the need to keep ‘provocateurs’ out of the area.
“The scheduled referendum has further complicated an already difficult and volatile situation,” Feltman said on March 13, adding that Crimean authorities denied U.N. Assistant Secretary-General for Human Rights, Ivan Šimonovic, access to the peninsula for Sunday, citing the lack of readiness to receive him and inability to provide security.
As for the situation on the ground “we will have to rely on, among others, reports from residents, foreign diplomats based in Crimea, and international non-governmental organizations. Given the vast divergence in reports about what is actually happening on the ground in Crimea, we would have much preferred Šimonovic had been able to collect first-hand accounts himself.”
The potential for intentional or unintentional escalation or miscalculations is very real.
The 8 Powerful Communications Secrets Every Person Can Use | 03/15/2014
I have recently re-connected with a personal hero of mine: Pamela Maier, a personal counselor or “life coach” as she describes the role she fulfills, “because I now have a life.” Pamela is a delightful individual who’s lived a variety of experiences in her 79 years. Beginning at an orphanage in England, she was raised by a foster mom and married an officer in the Royal Navy, a PhD who was both a psychologist and a professional illusionist. She had a career in singing and dancing, and was a proprietor with her husband of an immersive live-in program for children designated as “mentally retarded” to determine what the children were genuinely capable of before returning them to their parents and homes. She experienced parenthood and grandparenthood. She was widowed after 42 years of marriage and married in 2000 to lifelong friend Richard Maier, now her partner in business and life.
Her teachings have indelibly affected not only my life, but also my business. My partners have heard me repeat “Pamela wisdom” on many occasions. Pamela resides with husband Richard in Southern California, but thanks to the magic of Skype is able to counsel her clients from anywhere, which allows me the chance to check back in with her now and again.
I met Pamela during the hardest time of my life. In 2001, as the mother of five and one of three owners of a marketing and public relations business that was struggling to endure the dot.com crash, I also found myself in the midst of divorce. It was a difficult time made still harder by the fact that I lived and worked in a close-knit and highly conservative town.
When I finally mentioned the divorce to friend and professional mentor Craig Burton in an email, he immediately picked up the phone. (Surely he’d heard the scandalous news far sooner, but he’d graciously avoided the topic until I’d brought it up.) “Stop everything,” he said. “Call Pamela Maier. Book a flight and go to Orange County this weekend.” And so I did, spending money I could not afford at the time. I’ve been forever grateful since then that I did.
Pam taught me, the PR expert, a thing or two (or 20) about core life skills and communications. Her advice didn’t change my hard situation, but it changed me. In negotiations, in conflicts, and even in day-to-day communication, the principles she talked about have come to life many times. Recently we re-connected as she spent some time with my son. “Have you ever written these principles down?” I asked her. It turns out she had, and she emailed the manuscript of her unpublished book, The Art of Communication. I was overjoyed. Better still, she’s given me permission to share some of the elements from her manuscript here. So here they are – eight of my favorite communications truths from Pamela Maier:
- You must be fully comfortable within yourself before you can be effective in communicating with others. True discussion requires the ability to be fully present and fully interested in the perspective of others. It is a discussion between equals, in which you are solid and aligned within yourself to the point that you are able to hear and desire to understand the opinion of another without interruption, without anger, and without “the need to be ‘right’.” There’s not necessarily a need to agree, but the ability to genuinely strive to understand another person’s perspective is a vital skill you should call upon often.
- Take the time to increase your awareness. As we tend to “close ourselves off” to the would outside of our phones, the television, iPad, computer or our favorite book, what other information might await as we open ourselves up to confronting the world around us every day in 3D? The outdoors, your own space, the objects around you—pick them up, feel them, hold them, genuinely discover them and you may be amazed by the things you will learn. From the moment your feet hit the floor in the morning, become aware of the solidness of the floor, and take a moment to throw open the drapes and really take in the characteristics of the space that surrounds you. From this vantage point, you can spend the rest of your day with an attitude of looking “out” instead of contracting “inward.” It will make a great difference in the perspectives you see.
- True integrity requires learning to be yourself – the same self – at all times and with all people. We’ve all seen the people who shift like a chameleon to be the person they consider fitting for every occasion. The suave and entertaining person who is life of the party and then goes home to yell at a spouse. The boss who shines like a star from the podium and after the program is over shouts abuse at his staff. The person who feigns religious piety or political conservatism in front of the parent or boss and then becomes a different person entirely for the rest of the week. Great communication requires that you “lose the attitudes” you put on like a coat from your closet and learn to exist as the same authentic and integrated person in the presence of everyone else in your life. Who is that person? If you aren’t sure or the question is suddenly giving you pause, you have work to do.
- Help is only “help” in the eye of the receiver. People can become upset if the “help” you provide isn’t helpful for them. As you provide something others didn’t really want or weren’t expecting, they become annoyed and you consider them ungrateful. As a boss, the help you are needing should take the form of a job description (the clearer the better). As a manager or team member, learn to ask the deeper questions such as, “Of everything on your plate, if you were to receive help, what would be most beneficial?” or “What kinds of feedback or additional information would be most useful to you?” These small steps can save untold anxiety while also respecting and empowering the people you serve. It is also interesting to note that research shows millennial employees are especially poised to thrive on help—not on getting help, but on giving it. The opportunity to serve others in a way they consider meaningful can be extremely motivational and rewarding for them. (Pamela notes that this principle is highly true when working with children as well.)
- Be aware of your emotional level before you respond. Beyond words, we live in a continuum of attitudes and emotions. At any instant our emotional state can range from zero (complete apathy) to ten (flaming rage). We are at our cognitive best when we are operating at or near the center of the emotional spectrum. Before making a major choice, and especially before responding in a difficult situation, it is vital to step back and take your emotional pulse. Especially when you are angry, ask yourself “What is it I want to happen? Is what I’m about to say or do the best way to achieve that result?” As Pamela will say, “Words have power. You can’t take them back. Use them with care.” Of all the “Pam Lessons” that have stayed with me, this single principle has changed outcomes within my business again and again. Always sleep on a hard decision or discussion before acting. Avoid the temptation to react to a volatile situation with ill chosen words. This advice applies to “bragging” as well—when a former business competitor bragged about a contract before the deal was actually won, it reminded me to reach back out to the former account. The result: it was my team who won the sizeable deal. In another company a highly accomplished sales VP, after drinking too much on the eve of a major company conference, bragged that his company and CEO were inferior but were leading the market anyway due entirely to his brilliant performance in sales. The next morning, he was relieved of his job. It is also interesting in business (and personal) situations to observe that the greatest power in the room is often held by the individuals who aren’t speaking–the strongest people in the room are often the ones who have sufficient confidence and emotional restraint to keep their mouths closed.
- Trust, loyalty, faithfulness and honesty are the cornerstones to resolving untruths, misunderstandings and lies. Unless people are deliberately vicious and evil, they don’t purposely tell lies, they simply interpret what they see or are told. If there’s a “drama queen” in the person’s nature, they’ll also embellish it a bit for a better story. But at all times, as a communicator, be careful and aware of the assumptions you make. Allow other parties to explain themselves, or take the time to investigate the facts sufficiently before you jump to accuse. You should put critical communications in writing. However, when misunderstandings occur, if the four key elements are present—trust, loyalty, faithfulness and honesty–the majority of misunderstandings are quickly resolved. No matter how dire a misunderstanding, great communicators will seek out the information they need before reacting and will maintain an atmosphere of respect in the conversation that ensues. If it turns out that the worst has actually happened, you will at least be armed with correct information (and the advantage of forethought) before acting. Remember that with an attitude of respect you can be successful within most any conversation, no matter how tough. However, if respect and honesty aren’t possible on either side of the table, there is little basis for the partnership to exist and very little hope the relationship can be saved.
- Fear is the enemy of communication. Anxiety, nervousness, panic, loss of control (or the need to take full control) are the signposts of fear. At a primal level, fear is your brain’s way of warning you to react quickly (even instantly) to present dangers or to triggers that appear similar to bad experiences you’ve had in the past. Healthy fear reacts to real and present dangers. Unhealthy fear makes people feel insecure. They don’t trust others, nor do they trust themselves to be strong enough to handle the negative situations they may face. What are your own fears? Name them – remember them – and determine once and for all (if needed, with a counselor’s help) if these are real dangers or simply the unhealthy act of giving away strength to the irrelevant thing that you fear. As you determine what you’re afraid of (and why) it may help to ask yourself just how big the danger is. Bigger than an avalanche? And now describe a fear you don’t have that’s even bigger than that. A train wreck? Or a bomb explosion? From that perspective, perhaps your fear of giving a speech is not such a big deal after all, and you can free yourself to proceed.
- Blame is an irresponsible attitude. When you assign blame, you demonstrate to the world that you are too weak to own the responsibility of your actions. When a person jumps to blame others, they lose the ability to make a truthful assessment of the relevant facts. Blame becomes wrapped up with its companions of Shame and Regret. The opposite of blame is responsibility (response+ability), the power to respond to a situation and the ability to make it right, if possible. Sincere apologies are the result of responsibility. But a person who is shamed into apologizing is not genuinely apologizing at all. And regret is a useless emotion that leaves a person mired and “stuck” in the past. So the next time you are tempted to blame the tool you’ve used, or the manufacturer, or another person, take the time to investigate all of the facts and enact a responsible solution instead.
There is much more, of course. But the crux of these eight Pamela lessons can make a profound difference for any business, any leader, and any personal or working relationship.
Should every entrepreneur participate in life coaching? Whether it’s a little or a lot, I would say emphatically “yes,” or at least that it just doesn’t hurt. Pamela doesn’t recommend that her clients continue forever, but notes that in even the most challenging situations (short of longterm addiction/recovery), within the space of 30 hours of work she can help an individual develop an inner foundation of strength that should allow them to continue forward with success on their own.
Whether or not you pursue life coaching, I suggest that every entrepreneur or executive develop a habit of reading and absorbing all information on beneficial communications you can find. (For example, you could use the books and audio materials on Crucial Conversations and Crucial Confrontations to make a positive start.) You can also bookmark or print this article as a periodic reminder. But in a nutshell, remember the Golden Rule of Communication, according to Pam: “Do as you would be done by” and her philosophy to live by, “You Live as you Think.” These are wise words from a wise lady. Those who would like to connect with Pamela directly can find her at firstname.lastname@example.org.