Archive for October 2012

Practical and simple ideas to combat unemployment

October 29, 2012

Elections are looming in Israel and yet major employers are cutting jobs;  Orbotech, Partner Mobile and others are all saying goodbye to hundreds of workers, effectively dismissing thousands of years of accumulated experience and knowledge.

Throughout the OECD block, unemployment is on the rise. It has been predicted for sometime. Sadly, for all of Keyensian economic theory, central governments appear powerless to stop the trend for now.

While in London, I learned of two practical local initiatives, designed to make a difference. They are so simple yet effective. It does not take the proverbial rocket science to understand why they deserve a wider audience.

In the first instance, a finance company in central London is sponsoring an intensive training course for students in their final year at school. Those selected for the course will then be asked to complete a project. The best performers will be offered a year’s placement.

Now you may be shouting that two or three temporary positions is not going to make too much of a dent in a stat of millions of jobless. There again, if more people would follow this lead, just think what the overall national benefits could be.

A second and wider initiative has been sponsored by the London newspaper “The Evening Standard”. Launched just over a month ago, “Ladder For London” has secured over 320 new positions for apprenticeships. One of the campaigns main highlights to date has been the role taken by Metro Bank, the first new High Street Bank for over 100 years. Its chief exec, Craig Donaldson, who grew up in the poverty of a mining village, has pledged to recruit around 150 unemployed youngsters.

Bottom line? The global economic downturn may be having a negative effect on recruitment and wage levels. However, decision makers are far from powerless if would but consider policies that are “out of the box’….assuming that is possible for civil servants and politicians.

Miracles, time managment and “the trial”

October 28, 2012

Last night, I received a very upsetting email from an associate; health problems, work complications, career issues – all at the same time. It was a Hollywood moviescript that had come to life.

We all go through those phases. It becomes difficult to plan our lives? As the troubles pile themselves on top of each other – with you at the bottom – we struggle to gain perspective and understand what is important. What should we tackle first?

Be the problems at work or in the home, modern terminology refers to the solution as ‘time management’. Crudely speaking, this is a group of skills, which allow us to handle a combination of difficult issues at any one time. Simple enough in theory, yet for many it becomes a nightmare to put into practice.

Earlier yesterday, I heard a different take on the issue from a leading rabbi in London, Shlomo Levin. He was discussing the biblical character of Abraham. Seemingly a simple nomad, he moved his home numerous times in his 185 years. The fact is that the first forefather faced ten tests of character or trials. Each one was complex. Each needed to be resolved….without email, mobile tech, modern medicine or the UN.

Levin commented how in Hebrew the words for ‘trial’ and for ‘miracle’ have a common root or background. And this goes towards confirming the strength of Abraham’s character.

I suggest that there is a more direct and practical lesson for us today, coping with the ever increasing speeds and pressures of global technology. Whether you have a religious faith or not, the next time you face a ‘difficult patch’, look at it as a trial. As Levin observed, more often than not, whenever we are tested as individuals, we come through better prepared for the future.

An expert lesson in what not do to with US$185 million

October 25, 2012

The average voter around the world is often caught up with the seemingly large government budgets of a million dollars or euros for a local community project. Will there be enough? And yet, globally, the real big sums are often found in international cooperation schemes.

One of the largest “gravy chains” is the budget of the European Union, which spends billions every year simply trying to encourage the pooling of knowledge in technology, industry and education to name just a few areas of interest. For example, Horizon 2020, which commences in 2013 and is geared to ramping up r&d, is valued at €80 billion ($105 billion).

Horizon will replace the EU’s Seventh Research Framework Programme. This has specifically sought to bring in and exploit the brain power of non EU members such as Israel.

According to Marcel Shaton, general manager of ISERD – the Israel-Europe R&D Directorate, since 2007 some 1,530 Israeli scientists and companies have been given the option to participate in projects valued at €2 billion ($2.6 billion), and the research grants given to Israeli recipients amounted to €570 million ($743 million).

Cool, no? Now to join Horizon 2020 and reap new wealth – fund research, create jobs, and develop exports – the Israeli government has to commit around the equivalent of US$185. To put it crudely: invest 185 million and create billions down stream.

However, according to reports, it seems that Israel, a country that loves to be called the ‘start up nation’, is having a problem taking on this decision, which many would see as a no-brainer. I suppose that Israeli politicians and civil servants are too caught up with the pressing issues of a general election campaign to make the leap.

Unfortunately, this is not the first time in recent months that financial planners in Jerusalem have frozen the hopes of small businesses. Just recently, the funding for mentoring SMEs was simply withdrawn overnight. Advisors were faced with no choice but to abandon their clients. It was stunning and demeaning, but none of that could be felt or understood in the long corridors of the unknown officials.

To show the importance of the abandoned scheme, one mentor wrote to me saying how he had received the following quote from a recent client. “I have to thank you a lot for your help. I have now my 2’nd container from China…..” Real revenues, less people depending on government support, custom duties and taxes for the Finance Ministry, employment. Not bad for sponsoring a mentor a few hundred dollars…………………which are no longer available.

Start Up Nation: The good, the bad and the stupid

October 23, 2012

In the mid 1980s, the Israeli government froze wages, prices and any other financial mechanism it could find in order to conquer hyperinflation. Then, over the following three decades, the protected economy of the Holy Land moved from being based on agriculture, textiles and tariffs to a “start up” success”. 

There are those critics that argue that not enough large companies have emerged. Too many exits is the cry. And the new wealth has not been spread equally.

On the other hand, statistics reveal that “65% of Israeli start-ups actually make it past the elusive fifth year in  business“. And I would argue that even without more large companies, the start-up phenomenon has been an amazing success. New jobs in new sectors have been created. Investments have flown in, especially into the Tel Aviv Stock Market. Employment is holding up despite a global recession. Israel has been able to join the OECD.

One simple way to analyse Israel’s success in the new industries – telecomm, cleantech, nanotech etc – is to look at the number of patents applied for. Since the year 2000, Israelis have registered around 7,000 patents per year, significantly more than countries like Switzerland, Germany and the UK. To take one case study, IBM has the largest single number of patent registrations in the USA. Around 8% alone emerge out of its Haifa-based research lab.

All very praiseworthy, until you look at what is happening in Israeli universities. Yes, they live up to their reputation and turn out all sorts of wierd and wonderful ideas, which are converted into Intellectual Property (IP). For example, “40 per cent of all Israeli start-ups are incubated by Technion (University in Haifa)”.

However, it turns out that hundreds of patents are unlikely to be commercialised. According to a table in last Friday’s financial paper “Calcalist”, citing seven leading academic institutions, over 2,100 patents have not found a commercial developer after twelve months. Most of these belong to the Weizman Institute, the Technion and the Universities of Tel Aviv and in Jerusalem.

It would be an interesting economics paper that would calculate the potential loss to the economy of this non-corporate activity. That said, I think it is fair to assume that the size of the forfeit can be described as significant! Daft, at the very least.

There again, a few weeks ago, the Israeli government pulled the plug on the heart of its mentoring programme for small businesses, which these patents are often part of. From the good to the sad to the stupid.

The strange and open secret about the Israeli economy

October 22, 2012

Yet another IMF conference about the global banking system is not something to set you alight, even if it features the largest bank from your own country – Bank Hapoalim from Israel. As to be expected, the prophets of gloom were out in full: “The global economy is facing its third major brake on expansion in five years as emerging markets slow from China to Brazil, provoking debate about how much policy makers should respond.”

However, this time there was an interesting spark to the story. It is not just that the IMF presented a reasonably optimistic forecast for Israel –  2.9% in 2012 and 3.2% in 2013. I was more interested in the reports back from the Bank of Hapoalim delegation.

It is evident from the comments that the Israelis were often met with the question: “How do you guys do it?” In other words, how does Israel succeed to beat the global recession, and near consistently so, when others fail?

Well, a comprehensive revelation of the secret lies beyond the scope of a blog. Point to the skills of Governor of the Bank of Israel, Professor Stanley Fischer. Discuss the benefits of a start up economy. Consider the Israeli character to push beyond challenges. etc etc.

There is one interesting case study that conveniently illustrates what I am saying. I have read that sales of new cars in the EU were down 11% in September 2012, compared to a year previously. And yet the President of Seat cars, James Muir, has identified Israel as a key market for further expansion. In an interview in the Hebrew press last Friday, he stated how the commercial set up in the Holy Land allows for companies to move very quickly from second-rate status to major brand.

There is an old zionist phrase which dates back to Theodore Herzl: “Where there is a will, where is a way”.

“Quality of management” – case study from Israel

October 17, 2012

What makes for a good manager in business?

As a teenager, I vividly remember a discussion between my father and a visitor from America. The guest was finishing an MBA at a top school, claiming that this would set him on a high career path. My father argued that the American first needed some experience in order to truly understand management and then he would be  successful.

It was and remains impossible to judge which position is correct. I suspect that as ever the two protagonists also confused the phrase “good management” with those of “leadership” and “strategist”. In a nutshell, while all three have common factors, they are stand alone items.

I mention all this, because I have come across two interesting articles from Israel about the subject of management – learning to be a manager and then how to use good managers.

In today’s Hebrew press, Yediot Ahronot, there is a commentary over a recent survey from the Bureau of Central Statistics, detailing customer satisfaction with local institutes of higher learning. As an owner of a food company and former student was quoted: “They taught me about stats and formulas. However, the important things – how to run a board, what commercial language to use or how to construct an effective presentation – that I had to learn by myself.”

I have a sneaky feeling that a criticism like that can be found in many places around the world. After all, almost by definition, lecturers tend to be academics, who have relatively little practical experience. You leave the safe comfort of your library lacking hands-on knowledge.

As an exception, I recently heard a senior administrator from the Hebrew University of Jerusalem, explain how the Biology Department is putting together a new course. The aim is to link the scientific modules with practical studies, such as how to create a company.

A second feature questioned why Israel has yet to generate more ‘large homegrown enterprises’. For its success as a start up nation and for all the wonderful exits, there are those that argue that the country would be better off with less buy-outs. However, something intrinsic is preventing that shift.

If you read the article carefully, you can see how good managers are ‘punished’ by the system. For example, there is so much pressure by investors and venture capitalists to deliver results in the short term that there is little scope to build a large company for the future. Others point to the natural characteristic of Israelis to rush into decisions, going round obstacles and move ahead, but without considering implications. Again, no room for the cold and boring thought process of a middle level manager.

It would be interesting to compile a study to analyse the link between successful companies (over what period of time?) and those firms that have invested in training managers with the ability to make decisions.

Judging Israel’s economy – mitigating circumstances?

October 16, 2012

The Israeli electorate will go to the polls on January 22nd 2013. This is about ten months earlier than required by law, but compared to predecessors over the past decade, the outgoing government has lasted a long time.

Historically, the main debates between the parties have centred on geopolitics; defense, Palestinians, relations with America, etc. However, there have been increased tendencies in recent campaigns to stress social and economic factors. Given the impact of new social movements over the past two summers, that impetus is likely to remain.

So how do you judge the performance of the outgoing government with an all-time record of 30 ministers? What have they achieved on the economy?

An interesting position was taken by Dr Yuval Steinitz, the Finance Minister, who has proclaimed that the politics of the next few months will not encroach on past gains. After all, a series of  stabilising measures were enacted just recently in July. And the Bank of Israel, led by the renowned and venerable Professor Stanley Fischer, encouragingly believes that:

Notwithstanding the recent slowdown, there are a number of indicators showing that there is a high level of activity in the economy, which may help the Israeli economy should a crisis erupt in Europe.  The output gap that is estimated through various methods has been hovering for a long time around low values.  The unemployment rate has been at 7 percent since the fourth quarter of 2011—a low level in historical terms. This low unemployment rate exists despite the fact that the participation rate in the labor market is at an all-time high of 63.6 percent.  In parallel, there is an upward trend of 2 percent in real salaries since the beginning of 2010 (they are still 2 percent away from the all-time high levels prior to the crisis), and there is a high rate of available positions.

Journalists are taking a somewhat more critical (naturally, sic) viewpoint, looking at past political promises and comparing them to deliverables. A typical example can be found from “Ha’aretz“, which essentially gave ministers a ‘thumbs down’. The newspaper’s conclusion is that aside from growth, Netanyahu’s government has failed on the economy.

I am not sure. Let us start at the beginning, as they say in the Holy Land. Israel faces a strain on its budget that few other countries have to deal with – a persistent and real threat to its survival. Defence expenditure is about 6-7% of the whole budget, absurdly large compared to most of its fellow OECD members and yet low compared to its hostile neighbours. And then if one adds on to that burden the global downturn that has dogged the government during its tenure, it becomes clear that Israel has faced a “double whammy” for much of the past four years.

To give credit to the mandarins in Jerusalem, the economy has moved forward.  Growth in 2008 and 2009 was 4% and 0.8%. The IMF assessed global progress at 3% and then down 0.6% for the same period. Going forward, Israel has achieved 4.8%, and 4.7%, with 3.2% growth expected in 2012. Global stats are 5.1%, 3.8% and 3.3%. Israel has performed well.

I could complain that the government has failed to deliver reform in two highly protected and sensitive areas; releasing public land for housing development and the distribution of fruit and vegetables. The former ensures that housing remains near unaffordable for young first-time buyers and is creating a dangerous market bubble. The latter allows farmers and wholesalers to maintain high prices to the public, while overseas competition is kept out of the market.

Not good. But that is not my major concern. Benjamin Netanyahu’s government has kept a balanced set of accounts for most of its period in power. Yet, it is going to the polls with a 14 billion nis (US$3.5 billion) gap in the budget. At the moment, there are only tenuous thoughts on how to cover the difference, and many of these are clouded by political party conflicts.

Simply put, this is irresponsible! This shows a lack of leadership. It endangers the potential benefits to be gained in 2015, as gas revenues should come into play. And it clouds the seriousness, even legitimacy, of any electoral message that may be thrown to the public over the next few weeks.

How will voters view this deficit? Will they be put off or will they be more concerned about negotiations with the Palestinians and how to handle Tehran? By January 23rd 2013 the world will know. Yet however many millions turn out to cast their ballot, the sign for 14 billion shekels cannot be hidden for ever. Time for somebody to take responsibility.