Archive for Colin Campbell
In demand economists
Major technology firms are on the hunt for economists
The job most in demand in Silicon Valley lately is not in social networking or marketing, but something slightly less trendy. Major technology firms are on the hunt for economists. Yahoo, Facebook, Amazon.com and eBay are all currently recruiting economists, reports the San Jose Mercury News. Those companies are following the likes of Google and Microsoft, which in recent years have added big-name academics to their staffs, including Hal Varian from University of California, Berkeley and Susan Athey from Harvard University, respectively.
Economists have proven adept at helping tech firms tweak everything from search methods to online advertising platforms—intricate systems that can be manipulated to produce better results, or studied to predict outcomes from different strategies. Tech firms also tend to be creating entirely new businesses, and sometimes the best person to help explain how traditional markets will react to them is a good old-fashioned economist.
Small but smart
Why some schools don’t want a Big Five monopoly on research
The University of Waterloo has emerged as one of the leading research centres in quantum computing and digital media. Its computer science and mathematics faculty is the largest in the world. In terms of the number of grants and funding it attracts per faculty member, it is among the most research-intensive universities in the country. But Waterloo is not one of the so-called Big Five universities, who recently proposed in an interview with Maclean’s a radical rethinking of the higher education system: boosting government research funding and resources to the biggest universities—i.e., them—while having other schools shift focus toward undergraduate education.
The proposal of the Big Five—British Columbia, Alberta, Toronto, McGill and Montreal—understandably doesn’t sit well with Waterloo’s president, David Johnston. “How sad it would be to say, ‘We don’t see Waterloo being of high priority for funding because you don’t happen to be in the Top Five universities,’ ” he says. “Simply because you’re big doesn’t mean you’re great.”
Waterloo isn’t alone in its unease with the ideas of the Big Five. The notion of creating a two-tier system, which would favour a select group of big schools, has caused concern among many smaller but highly regarded research universities, like McMaster, Queen’s, Carleton and Victoria. “To say universities of this size can’t compete on an international stage is at best misleading,” says Fiona McNeill, associate vice-president of research at McMaster University in Hamilton, which has done leading research in stem cells and robotic surgery. More than just controversial, the Big Five’s proposal now threatens to pit universities against one another—and potentially launch Canada’s system of higher education into a drawn-out, divisive fight.
Critics acknowledge that, at least in theory, there is some merit to the Big Five’s idea. Large schools might be best equipped to become major centres of research. In the U.S., a few prestigious schools—many of them private—dominate research, while hundreds of smaller liberal arts colleges feed them with well-trained undergrads. By contrast, Canada produces fewer Ph.D.- or master’s-level graduates, and fewer qualified undergraduates.
In reality, however, Canada’s higher education landscape appears to many to be ill-suited to the Big Five’s proposal. Of 95 universities, 40 to 45 do competitive research through their Ph.D. programs. Daniel Woolf, the incoming principal of Queen’s University in Kingston, Ont., points out that schools like Queen’s already excel in both research and undergraduate education. Like the heads of several other universities, Woolf says that rather than focusing on a few schools, “the dollars should follow excellence in research.”
Yet deciding how to divvy up funding is otherwise problematic. Canada’s system of publicly funded universities is not as flexible as the more heavily private U.S. system, where research centres enjoy large private endowments. In Canada, boosting funding to a few big universities means taking it away from others.
When Harvard grads go to Wall Street, get out
A simple way to time the market: follow the money — and do the opposite
If you’d been listening to Ray Soifer for the past several years, your investment portfolio would probably make you the envy of most so-called market experts. Since the early ’80s, Soifer has been using a system for timing long-term stock markets that’s rarely wrong. For several years now, his system has been suggesting to take your money out of the market. Last year it was screaming that a bust was coming.
Soifer’s method is simple, and more than a bit curious: he tracks the number of Harvard MBA graduates who take jobs on Wall Street or with investment banks, hedge funds and venture capital firms. If more than 30 per cent of Harvard’s graduating class takes one of those jobs, it’s a long-term ’sell’ signal (40 per cent of the class of 2007 went to Wall Street). If less than 10 per cent take the plunge into finance, it’s a ‘buy.’ In other words, the more Harvard alums on Wall Street, the worse things are likely to get.
The indicator isn’t really a knock on the quality or character of the Harvard biz school grad. Soifer is one of them (he graduated in the class of ‘65). “It’s not so much that the Harvard MBAs are any greedier than anybody else—certainly no greedier than law school or medical school graduates,” he says. “But it’s really more the behaviour of the Wall Street firms themselves.” When things are good on Wall Street, money starts flowing and competition and recruitment heats up, luring graduates from the prestigious school. Those hiring sprees are a pretty good sign that a boom is peaking and a bust is coming.
Next year’s number should be interesting, notes Soifer. Almost certainly, they will be down. Although, there is a lag between the hiring decisions and the state of the things on Wall Street. Next year’s numbers will include many who made career decisions in the fall of 2008, when the market was declining, but still before the meltdown. The indicator may not be in ‘buy’ territory just yet. “It takes two to three years for a market move to fully reflect itself,” he says.
Soifer acknowledges that while fairly accurate over the long term, his system is a better ‘sell’ warning than a ‘buy’ one. The last time his indicator hit the ‘buy’ level was in the early ’80s (the all-time low was in 1937).
And what does Harvard make of his indicator? “They’ve gotten used to it,” he says. But there was a period when they were not entirely pleased, he adds. “What miffed them was not that I was doing it. What miffed them was the idea that, ‘our graduates are going to that den of iniquity called Wall Street? We think better of them.’ ”
M.B.A.s who want to save the world
Social entrepreneurs aim to use business skills to do more than just make money
When Brendan Baker applied to the M.B.A. program at the prestigious Saïd Business School at the University of Oxford, getting accepted turned out to be the simple part. The real challenge for the 28-year-old from Vancouver: coming up with $90,000 to cover tuition and living costs, and just two months before the start of classes this fall. For a lot of M.B.A.s setting their sights on high-paying jobs at consulting firms and investment banks, that’s a problem easily solved with a bank loan. Not so for Baker, who plans to do a very different kind of M.B.A. He wants to study in a growing field known as social entrepreneurship.
Often dubbed the “do-gooders’ M.B.A.,” social entrepreneurship is about turning the hard skills of business school toward more altruistic ends, such as fighting poverty or improving the lot of the less fortunate. It’s business, but with a social agenda. Or it’s charity, but run like a business. It’s also a career path more likely to land Baker a job launching small social ventures in the developing world than raking in a six-figure salary on Bay Street. “People like me tend to fall into a little bit of a gap where it’s tough to justify the cost [of an M.B.A.] and there are very few scholarships available,” says Baker, speaking from a library at the University of Cambridge, where’s he finishing another master’s degree.
Baker, an engineer by training who has worked for Engineers Without Borders, is taking a big risk. Unable to raise so much money in such a short time, his Oxford plans are still up in the air. But he’s just one of thousands of new M.B.A.s and M.B.A. hopefuls—from Canada, the U.S. and around the world—who are eager to make a similar leap, whether that involves bringing entrepreneurial best practices to a non-profit in the developed world or lending newly acquired marketing or finance skills to communities and small businesses in the Third World.
There’s no hard data on just how big social entrepreneurship is, but the demand is there and growing fast, says Tal Dehtiar, president of the Canadian-based MBAs Without Borders (MWB). Modelled on groups such as Doctors Without Borders, which has long sent physicians to global crisis zones, MWB is an international organization that places grads with M.B.A.-level business skills in places that need them, from India to Ecuador. “Last year alone we had over 2,000 M.B.A.s applying for 23 projects,” adds Dehtiar.
Dehtiar, along with colleague Michael Brown, founded the organization four years ago, after earning his M.B.A. from DeGroote School of Business at McMaster University. “While I was doing my M.B.A. I thought, all this knowledge is great but there’s got to be a different way to use it.” Dehtiar had already spent a year building a small non-profit in Costa Rica and an agribusiness in Belize, and saw a market for an organization that could bring young business graduates together with communities in need. The organization, for instance, recently sent one M.B.A. to Ethiopia, where he spent three months helping 31 coffee co-operatives organize themselves to have their beans certified as fair trade. The end result was over $100,000 in new revenue for the coffee farmers this year alone.
This fall, MWB is embarking on a tour of Canadian business schools to talk to students about the social impact business can have. Dehtiar says soaring demand from students is driving his organization and others like it, with business schools responding to a changing market: “We’re not forcing this on people. They’re saying ‘give us more.’ ” Dehtiar used to work in sales for a pharmaceutical company, and he says the loss in earnings that comes with the job is ultimately a small price to pay for the personal rewards of his line of work. “I was making about a hundred grand; now, I’m not making close to as much—but I love every day of the job.”
Three years ago, Bangladeshi economist Mohammad Yunus won the Nobel Peace Prize for his pioneering work with microcredit—a way of fighting poverty and spurring investment by offering tiny loans to poor people without access to traditional banks. In doing so, Yunus became perhaps the most well-known social entrepreneur, and helped turn the field into the latest business buzzword. But despite its rising popularity, defining precisely what social entrepreneurship involves can be tricky. Most economists agree that the point of a business, particularly a publicly traded company, is simple: to maximize profits and make money for investors. But social entrepreneurship turns that approach on its head. Profits become merely a means for the enterprise to accomplish its social mission. Unlike the corporate social responsibility movement that swept business schools beginning in the 1990s, and which pushed to make social concerns an important business consideration, a social enterprise makes social concerns the whole point of its business.
Workers with benefits
Perks culture now permeates every level of Canada’s labour market
Sometime next spring, 15 lucky employees of Ceridian Canada will win a one-week holiday in Peru. “Totally company paid, first class all the way,” says John Cardella, Ceridian’s head of HR, or as his official title states, “chief people officer.” Leave it to a company whose business is all about human resources to know how to motivate its workers. The winners are picked from a hat filled with names of deserving employees nominated by their peers throughout the year. The trip is just one of the flashier perks the HR services company offers its 1,500 employees. Beyond the basic benefits, like a health plan and generous maternity and paternity leaves, there’s also the $300 fitness subsidy, which workers can use on anything they want, from a gym membership to new golf clubs. Then there’s the year-end bonus, in which five per cent of the company’s annual profit is divvied up and given to employees. Last year, everybody received $1,900. And for the pet-loving employees, there’s even a heavily discounted pet insurance program — something that dozens of Ceridian’s employees take advantage of, says Cardella.
It used to be that there were two things that really mattered about a job: the pay and the pension. Throw in a few weeks of vacation, and that was about all anybody expected. Not so anymore. The perks culture now permeates every level of Canada’s labour market — from the ranks of white-collar professionals, to the legions of hourly workers; from the boardroom to the company cafeteria. Not only have benefits become more common, but in the past decade they’ve come to represent a larger and larger share of overall compensation. Wages may have just barely kept pace with the cost of living in recent years, but it’s in the perks where most employees have really made gains, says Richard Kelly, a senior economist with TD Bank. In a report last month, Kelly noted that in the United States since 2000, the growth in benefits has been three to four times greater than wages. That has ensured that overall compensation has indeed kept up with economic growth. “It’s definitely an increasing trend,” he says.
The perks boom has its roots in the hyper-competitive information technology sector of the late 1990s — and most noticeably in booming Silicon Valley, where high-tech firms engaged in wild games of one-upmanship to woo workers. This was where extravagant perks, once confined to the boardroom, began to spread to the plebes. “It was asinine what you needed to do” to avoid staff shortages, says James Popel, who used to work in the industry and is now the vice-president of human resources at Wardrop Engineering in Winnipeg. “I remember at one point a group of employees coming in and saying, ‘we want a pool table or we’ll resign.’” That culture survived the tech bust of 2001, and human resources experts say that across the economy there’s still heated competition for qualified employees — something they expect will worsen as baby boomers continue to retire, even if there is an economic downturn. “There’s a war for talent going on,” says Cardella.
The result is a workplace that aims to do more than just make space for life alongside the drudgery of work. It’s about breaking down the barrier between the two and eliminating the notion that a job is something you do 40 hours a week so you can afford to do things you enjoy the rest of the time. That has meant the spread of luxury cafeterias, fully equipped health clubs, and on-site daycare, to name just a few examples. Arcis Corporation, a geotechnical services company in Calgary, for example, employs an in-house chef who cooks up lunch and breakfast for employees each day. Even the traditional benefits have been upped substantially among top employers. Three weeks paid vacation for first-year employees is increasingly common. Many also provide top-up pay for maternity and adoption leave. And many offer looser summer hours, and give employees more Fridays off for a jump on long weekends.
The rise in this kind of non-wage compensation can be explained in part by rising incomes and the prevalence of two-income families. “Other things become more valuable than that extra dollar of pay that you get,” says Kelly. “Businesses that are competing for employees are competing with wages, and they’re also trying to market themselves by having better benefits than each other.”
But the spoils of the boom in perk culture haven’t been distributed very evenly across the workforce. As always, the greatest, and most expensive bonuses and rewards, are reserved for those on the executive floors. This year, the new CEO of Qwest Communications, Ed Mueller, took perks to a whole new level when he secured approval for his family to use the corporate jet to fly between California, where the company is based, and Denver, where his stepdaughter goes to school. A U.S. study by the Institute for Policy Studies and the think tank United for a Fair Economy found the top 386 executives in the United States took home on average $438,342 worth of perks. The study notes that a minimum-wage worker would have to toil for 36 years to earn that much.
Along with free rides on the corporate jet, many executives also take home perks like car leases and golf club memberships. Although they are rarely fully disclosed — typically, they’re buried in the microscopic print of management proxies — they can add up to some impressive dollar figures. Donald Guloien, the chief investment officer at Manulife Financial, received $82,310 for “personal expenditures, including car payments and club memberships” last year. Along with a $5-million bonus last year, Royal Bank head Gordon Nixon received $77,963 for car leases.
All this has raised some important questions about just what the culture of perks is accomplishing, and for whom. Most North Americans are well aware of the exploding gap in executive salaries compared to wages for the rank and file. And as focus shifts onto fringe benefits, a similar gap is developing. At large public Canadian companies, more than 50 per cent of an executive’s compensation now comes in the form of benefits like bonuses, retirement plans and stock options, says Shamsud Chowdhury, a business professor at Dalhousie University who studies executive compensation. “It’s increasing more and more,” he says.
A glance at the pay of executives at some of Canada’s largest public companies shows just how significant it can be. Gregory Wilkins, the president and CEO of Barrick Gold Corp., earned $1.2 million last year. His bonus was $3 million. Gerald Schwartz, the CEO of Onex Corporation, took home $755,950 in salary last year. His bonus was $12.9 million. Many public companies now also carry liabilities worth tens of millions of dollars to cover growing company-funded executive pension plans, not to mention severance guarantees that can add up to several years’ worth of salary and bonus.
In the U.S., this executive largesse has begun to harden into a political issue. Earlier this year, Barack Obama introduced a measure in the U.S. House of Representatives that would let shareholders vote on executive pay packages. The Securities and Exchange Commission has also recently pushed for more disclosure over executive pay and perks. Critics say the big rise in bonus pay versus salary is merely an ugly tax loophole. But increasingly, companies are under pressure to award executive compensation that is more clearly tied to performance, says Chowdhury. Stock options, for instance, although widely abused, are a benefit with real value only when a company’s stock price goes up. So long as a company’s profits and share price are on the rise, investors have generally been willing to swallow the enormous compensation packages paid to executives.
There’s no sign that the gap between wildly inflated executive perks and the average employee’s perks will narrow anytime soon. But there is evidence that aspects of executive pay are slowly trickling down the corporate ladder. “The increased focus on the link between pay and performance is something boards are demanding, and a lot of companies are reinforcing that message down through the organization,” says Iain Morris, a principal with Mercer Human Resource Consulting. Wardrop, the engineering firm in Winnipeg, is moving this year to make all of its employees eligible for bonuses that would be directly tied to performance, says Popel. Currently, about 500 out of 920 employees are paid bonuses worth as much as 45 per cent of their salary. The company paid out over $1 million in bonuses last year. “We want to overcompensate top performers,” says Popel. “It’s taking executive compensation systems and pushing them downwards, trying to even the playing field.” This is what it takes to win employees in this day and age, adds Popel. “There are staff shortages and it’s going to get worse. If companies don’t respond in creative ways they will lose the war.”
And that’s what many employees might not quite understand when they take advantage of that latest share accumulation plan or apply for a company-funded tuition subsidy to upgrade their skills. If business is a war, then talented workers are the troops and desertion, with all the loss of institutional memory and wasted investments in training, is costly. Many forward-thinking HR types have come to realize that in the effort to keep restless employees happy, and striving for that next perk, creativity is key. Get it right and you’ll create boundless loyalty. Screw up and you’ll create jealousy and resentment. And as time goes by, the expectations, right from the boardroom to the call centre, only seem to be going up.
