Archive for November 2011

Israel and the OECD: Good, bad, and the ugly

November 29, 2011

It is just over a year since Israel became the 33rd member of the OECD.

Some of the comparative stats look very impressive. The country may spend less on health than others, but Israel is fifth on the ladder of life expectancy.  As for the price of food, Israelis pay less than citizens in other countries, even if this will come as a surprise to many householders in the Holy Land.

This week, the OECD published its latest report on the Israeli economy. Unemployment should hold steady along with price inflation. There should still be some real growth per capita. That said, GDP increase for 2012 is forecast at 2.9%, barely 60% of the prediction for this year.

The problem is the ugly unknown threat of the European downturn. Nobody can say for sure just how deep it will be.

The Bank of Israel has already chirped in and cut the rate of interest by 0.25% to 2.75%. While stressing the Euro factor, the bank commented that:

Economic indicators that became available this month support the assessment that in the third quarter and in October the slowdown in the rate of growth of economic activity continued. Most of the slowdown in the domestic economy resulted from the easing in global demand and its effect on exports, and also to some extent from the slackening of domestic demand.

As I commented yesterday, the Israeli economy is still reacting from a position of strength. That said, changes will need to be made and soon in order to maintain the country’s competitiveness in key sectors. One simple example is the central control of the agricultural sector, which keeps the price of local produce artificially high. Another problem is the bureaucracy surrounding small companies wishing to receive support. The tax system is crying out for simpification. 

The OECD report stated that Israel is “expected to avoid recession” in 2012. That is a warming remark as we head into winter, but policy makers cannot afford to be complacent. It is time for new structural changes in order to protect the impressive economic achievements of the past.

Time to learn (again) how to run economies sensibly

November 28, 2011

Here’s simple question for Western economists to consider. Aside from Israel, how many other countries have continuously reported 4% economic growth since 2003, including this current year? Apart from China, not too many.

Israel’s economy is similar in size to Greece, Portugal and Ireland, although it shares few of the problems of these territories. These countries ran up large debts. Bankers were prepared to allow the red numbers to grow for too long. And the politicians have dithered in coming up with a solution.

So when former finance minister and now Prime Minister, Binyamin Netanyahu, says: “”We must continue this responsible management. This means that we will need to reject with an iron fist populist draft legislation – both from the coalition and from the opposition,” it should be time for others overseas to listen in on Israel’s plan.

For all of Israel’s economic and high tech successes, the country will not be immune from any slowdown in Europe. So, it is hardly surprising that this week, the Bank of Israel is expected to announce a drop in the central rate of interest. And reports in the Hebrew press suggest of work in progress for an emergency budget, which will contain some severe cuts – if the looming recession was to demand it.

Just how serious is the Prime Minister? Can his Finance Minister deliver? What will be the position of the Bank of Israel?

It is easiest to start with the latter. The Governor of the central bank, Stanley Fischer, is an internationally renowned central banker. Over the past few years, he has taken on vested interest groups, local banks, government ministers and his own workers’ union, and usually won convincingly. Local and oversees observers are sure that he will look after his end of things.

The finance minister, Dr Steinitz, has deservedly built up an excellent reputation over the past three years. However, you begin to wonder just how much he has the full support of his boss. Oops – room for some worry here.

As for Netanyahu himself, he knows how to talk the talk, but…..If he were to give in on the wage demands of hospital doctors, it would make him very popular. However, that decision would kick in a chain of other public sector pay claims. The defence budget is almost certain to require a heavy upheaval, as threats surface on the borders of Syria and Egypt. And, as usual, the government is a coalition, compromised of many small squabbling factions; bad news for strong government.  

 hw will all these factors effect Netanyahu’s looming election planning? Personally, I have never seen him as a man who stands up to pressure.

There is much to praise about the Israeli economy. Shaul Rosenfeld’s recent blog makes for an excellent summary. What is not clear to me is what is the biggest threat to the recent economic achievements in the Holy Land – poor European financial leadership or a local team that will lack fight and direction at a critical moment?

What to ask your business mentor?

November 25, 2011

When a business mentor starts off with a new client or meets up with them after a bit of break, there is often a feeling of “positive tension” in the air. What the devil am I going to be asked now? Can I help? Can I direct or coach them?

One common starter thrown to me is: “How do I find new clients?”. Funnily enough, I often find that the client already knows the answer. They just have a mental block looking at what may be the very obvious.

For example, earlier this week, I was asked this question in a very challenging manner by a customer. 10 minutes later, after cooly forcing them to consult their contact list on their mobile phone, they had compiled a healthy list of people to call.

Time management is another of those recurring themes, which is often discussed at my sessions. And I have written about it extensively under various guises.

Possibly a different approach is to consider what one blogger has determined as “the third rule of business“. Put it simply; if you don’t keep focused, you don’t get nowhere slowly.

Let me expand. If you have a clear sight of your vision, then you will know how to form a strategy. If you have a definitive methodology, you should be able to identify what tools you are missing. And whatever is lacking, you will dedicate yourself to go out and get it, somehow, legally.

No focus means lots of opportunity for commercially valueless tasks, which is a politically correct term for poor time management. 

Another topic, usually raised by tech-savvy entrepreneurs, is why they have to invest so much time managing. Why can’t people just get on with their tasks by themselves?

An article in this month’s Harvard Business Review cheekily posed the challenge: “Let’s fire all the managers”. After all, “management is the least efficient activity in your organization“, no?

The study is worth reading in full. My point is somewhat more basic. An entrepreneur tends to come into commercial life, wishing to concentrate on his “baby”. They soon face the startling realisation that they have to take responsibility for a whole concern; admin, finance, sales, strategy, legal and even the post. Time and detail. Yuk. Remaining focused ain’t always that easy.

As for the mentor, well they have their own enterprise to operate. Fortunately, they should have the skills to empower the client to engage successfully such subjects.

So, I suggest that the first question the customer should ask is what experience the coach has handling all of these an similar subjects.

The link between time management and your profit levels

November 20, 2011

A recent blog reviewed 10 simple ways for small businesses (SMEs) to save money. All are very relevant but none referred to saving time.

Why should they? Well, we all know that time is money. But there is more to it than that.

My point is that most owners and employees in SMEs do not have enough time to complete all their tasks. A typical case is a new client that I am about to visit this week – a service supplier, he knows that he is busy, but the effort does not result in more sales. Help, he cries to his mentor!

Siu Ling’s latest edition of “Ruminations” deals with this very issue. She looks at the imperative need of good managers to create ” habits that support high productivity”. Specifically, Siu suggests : – 

  • decluttering the mind
  • a firm morning ritual
  • “block times”

I will add one other “must” factor. Before – and I repeat, before – I commence my week, I have my schedule already listed out. To be specific, for each day, I know when I will be in meetings, when I have time for phone calls, time for blog writing, time for thinking, time for whatever.

  1. The first advantage of this is that I do not waste valuable hours planning away at the beginning of the week, often a very productive time for most people.
  2. I can never double book times for projects. Everything has been allocated a slot.
  3. In parallel, everything (known) will be dealt with.

Sure, emergencies come up. Commerce is dynamic, not static. You have to be flexible.

However, since operating this system, I achieve much more. And when I see similar positive results in the bottom line of my customers’ revenue streams, it makes you want to think how we all survived up to now.

Has Fischer got it right on the Israeli economy?

November 18, 2011

Prof Stanley Fischer is well into his second term as governor of the Bank of Israel. A highly experienced and respected international banker, who has the ear of Ben Bernanke in America, he has rightly taken a lot of credit for guiding Israel through the 2008 credit crunch.

Most predictions leave economic growth for 2011 around 4.7% in the Holy Land. G7 eat your heart out.

Is there a looming “but”?

Most of this surge took place in the first quarter (7.2%). Private consumption for the second half of 2011 is almost certainly in the negative sector. Exports in the third quarter collapsed by 16.9% compared to the same period last year. And nobody doubts that the Euro blues have yet to fully impact on future orders or foreign direct investment.

In the words of leading financial commentator, Avi Temkin:

The word “concern” can describe most thoroughly Bank of Israel Governor Stanley Fischer’s mood, at least according to what he said at a press conference on Tuesday. In the meantime, Fischer is not expressing more than concern. His essential message can be reduced to a warning not to increase expenditures and not to let the deficit expand beyond what stems from slowed growth.

What Temkin is saying is that Fischer believes that Israel can get through any global downturn or recession. Growth could stick at a very respectable 3% in 2012. There is one big proviso – politicians do not force the mandarins at the Finance Ministry to cave on to populist measures. Social protest movements, army generals and even strikers may have a point, but not all changes can be made in one shot.

Where to now? The economic world is in a period of instability. In such an era, those with clear heads and a vision are a rare breed but definitely the order for the day. Our man Stan fits the bill. I just hope he continues to meet the political needs of the Prime Minister.

Why the “occupiers” have a point – an Israeli case study

November 15, 2011

For all the protests outside St Paul’s Cathedral in London or around Wall Street in New York, many have traced the origins of the 2011 street protests to events in Tel Aviv.

For all the many successes of the Israel economy over the past decade – even this year, growth will hit the 4% mark – the housing market remains unfordable for many newly weds and the prices of standard food items are viewed as higher than necessary.

The first reforms are on the way. Manufacturers have acted positively. The government has moved. The cry of “social justice” has made its mark. Good.

And yet….

Currently, Israel has three mobile phone service providers, all making humongous profits. One of these giants is Orange /Partner, which is in the process of laying off employers, primarily from its customer support teams.

Orange blames its problems on increased competition and government interference with pricing policies. As somebody who jumped ship and moved to another company this year, I suggest that the corporate decision-makers look at their treatment of customers. “Bad” would be a complimentary description from my perspective. After all, please note where the cuts are being made.

However, the problem does not stop there. Bank Leumi has a heavy position in Partner. This financial leader has just posted a profit warning, along with its two main rivals (Hapoalim and Discount).

What is my issue?

1) I have yet to see a mention of bonuses being reduced for the top guys at the banks or the mobile companies.

2) If the banks do not have enough extra money, then liquidity becomes a problem and thus lending starts to dry up. In parallel, bank charges will probably rise to cover partially the gap.

Can you now understand the average customer / consumer / person on the street for being concerned about greed going unpunished?

3 lessons in management from the Port industry

November 13, 2011

Let me start by clarifying at the outset – all genuine port (wine) in the world originates from the Douro region, which stretches from about 60 miles west of Porto and up towards the border with Spain.

Like it or not, this has been a fact of international trade for years. And if you ask why, you will begin to comprehend how the Portuguese (with a bit of canny help from the Brits) started implementing management and strategy long before Harvard, Sloan et al business schools got in on the act.

Here’s what I mean.

1) Branding: As far back as 1756, the King of Portugal ensured that the Douro became the oldest defined and protected wine region in the world. Drink port from anywhere else and under international law, you are not drinking “the real thing”.

It does not stop there. Sandeman is one of the oldest brand names in the port business. The founder was a wee Scotsman, who made his way to London in 1790. Within 15 years, all of his casks were denoted by his own iron signature. His successors, in 1927, were amongst the first in the world to trademark their own symbol, the Don.

 2) Production:  We all know the rules of this decade:  Tech up your production to become lean and efficient above your competitors. But not if you are in the port biz.

How so? Well, most of the grapes are still harvested by hand, even in the searing heat of the Douro Valley. They are then transported back to the various estates and crushed. Yes, some places still use the well trodden method of human feet.

And finally, the spirit is moved to cellars in central Porto, where it is kept for years. These “caves” must maintain strict level of humidity and temperatures. In several places, this task is secured by spraying the floors with cool water, and very little more sophisticated an operation than that.

3) Pricing: Buy good port in Portugal, and much of it is very affordable, despite the intense labour costs. Check out the prices around the world and it is rarely under-priced. In theory, the only difference between the two places is a little bit of extra transportation costs and an extra mark up.

What I am saying is that the industry has long ago devised a pricing system where everyone benefits. This includes the final consumer, who often seems pleased to pay a premium for a great product.

Bottom line of all this. If you want a great holiday, where one of the great global tastes can become suddenly affordable, do what I have just done – spend a week in the beautiful country of Portugal.