Small signs of recovery cannot shift the general gloom

When American house prices finally started rising in June last year, ending a three-year decline, homeowners and economists rejoiced. The steep plunge in values, about 33% nationally from peak to trough, caused widespread damage in the American economy and abroad. The stabilisation of prices turned out to be a precursor to broader economic recovery. Since bottoming out between May and June, prices have ticked upwards every month, while sales have risen from their recession lows. And yet gloom persists. The pace of foreclosures has not abated.

Worse still, the momentum now seems to be ebbing. Mortgage applications for purchases fell sharply in November, to their lowest level since 1997. Confidence among home-builders declined in November for a second consecutive month. And figures released on January 20th showed that new housing construction, which recovered from the record lows of early 2009 to plateau late last year, fell by 4% between November and December. The fear is that prices will soon start to fall again, touching off another round of pain for homeowners, workers and banks.

Government support boosted house prices by about 5% last year and the bulk of the support, are due to end in March. As their end approaches concern has grown, not least because the underlying fundamentals remain shaky. With many mortgage loans underwater, continuing job losses are pushing ever more households into default. Nearly 3m properties entered foreclosure last year, and filings increased by 14% from November to December. Foreclosures place downward pressure on house prices, contributing to a vicious cycle of economic pain.

The end of government support will put housing markets under great strain. It is a difficulty the American economy had better get used to.
(Source: The Economist)
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Financial giants gather in Davos to fight fingerpointing

From January 27 to 31, 2010 the Winter Davos World Economic Forum (WEF) Annual Conference will be held in the Swiss town of Davos. From the list of participants people can see those financial giants who were absent in the previous conference will come to this forum.

Analysts believe that at the critical moment when the government of various economies are preparing for drastic financial reform of regulation, these financial giants find it hard to express their own ideas, and the Davos Forum is to give them precisely the stage to fight for their own initiative, and try to push back torrents of financial reforms that will surely hurt their bottomline.

Two weeks before the official opening of the Forum, Citigroup, Swiss Reinsurance, Bank of Zurich and other financial giants released a joint report "Global Risks Report." To have a say is the first step these financial giants make to escape the blame of "causing the crisis but still enjoy high salaries".

The report warns that investors need to guard against a second wave of financial crises, and pointed out that the financial crisis and the collapse of asset prices in the United States and the United Kingdom and other developed countries will be one of the biggest risks global stability faces this year and the next few years.

The report also said that leaders must make the right choice to withdraw from the economic stimulus measures at an appropriate time in a progressive, reliable way to prevent a reversal in the momentum of economic recovery.

Those financial giants who missed the last forum will be at the scene and this has become a major highlight of this year's forum. Heads of Wall Street giants including Gary D. Cohn, president of Goldman Sachs, Morgan Stanley chairman John Mack, Citigroup CEO Vikram Pandit, and Bank of America CEO Brian Moynihan will attend this Forum. In addition, the major European financial institutions are also interested in attending the forum. Barclays Bank president Bob Diamond, chairman of HSBC Bank Stephen Green, Credit Suisse CEO Brady Dougan and Deutsche Bank CEO Josef Ackermann have all registered at organizing committee of the Forum.
(Source: People's Daily Online)

Organizational Effectiveness

Organizational effectiveness is the concept of how effective an organization is in achieving the outcomes the organization intends to produce. Organizational effectiveness is an abstract concept and is basically impossible to measure. Instead of measuring organizational effectiveness, the organization determines proxy measures which will be used to represent effectiveness. Proxy measures used may include such things as number of people served, types and sizes of population segments served, and the demand within those segments for the services the organization supplies.

To increase organizational effectiveness, winning companies create sustainable competitive advantage by aligning their talent and business strategies.

(Image source: Umkc.edu)

How to approach a colleague who is making Mistakes

In today's highly interconnected organizations, a colleague's mistakes can have a real effect on your ability to get work done. Address mistakes by approaching your co-worker, but do so cautiously and follow these rules of thumb:

Don't assume - You may think you know why your colleague is making mistakes, but don't jump to conclusions. Ask him open-ended questions to try to understand what is going on.

Offer help - Your colleague may be struggling with a short-term issue that is causing the mistakes. Offer help and support while he deals with the situation. This kind of support is often paid back at a later time.

Focus on the relationship - Good working relationships are essential to success in any organization. Be direct and honest about how the mistakes are affecting you, but do what you can to preserve the relationship.
(Source: Harvard Business Review)
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Rupee rise to dictate RBI policy

The buoyant foreign capital flows in debt instruments since the beginning of 2010 could weigh on the Reserve Bank of India's decision on whether to raise policy rates. According to data available, foreign institutional investors had pumped in US$ 1.72 billion (Rs 7,900 crore) into debt instruments. In fact, these have overtaken equity flows, which stood at US$ 1.38 billion (over Rs 6,300 crore).

So far in 2010, the cumulative inflows -- equity and debt -- have been US$ 3.1 billion. As a result, the rupee has already appreciated around 1.28 per cent against the US dollar during the first three weeks of the year. The sharpest increase has been seen against the Euro.

FII investment in debt instruments has gone up, as they are trying to take advantage of the higher interest rate regime in the Indian market compared with those prevailing in the developed countries facing severe economic slowdown.

While Indian government bond yields have moved up from 6.05 per cent in April 2009 to 7.70 per cent now, the interest rates in developed economies are quite low -- in some cases, close to zero. Any increase in the rates could trigger a further inflow of foreign funds into the debt market.

The RBI's third-quarter review of monetary policy is due to be announced in this month end. So RBI has a work to do...
(Image source: Mutiny.in)

What worked in cost cutting—and what’s next

Companies were able to cut costs effectively through the crisis, executives say, but they’re less confident of their ability to contain or continue to cut them. Some companies are positioning themselves for longer-term success by planning the next round more strategically.

Executives say their companies have made effective and significant cutbacks in overall costs since the onset of the economic downturn in September 2008, according to a recent McKinsey survey. Even though cost containment remains a high priority, many respondents worry about the sustainability of the cost reductions and are only somewhat confident that their companies are adequately prepared for even bigger cost challenges, which they expect in the coming year. These are among the findings of a survey of 300 operations and other senior executives from around the world. They (McKinsey) asked respondents about the size and scope of recent actions their organizations have taken to reduce costs, the strategic motivations underpinning the moves, and executives’ views on the success and sustainability of cost cuts. They also asked respondents to identify the most significant risks facing their companies’ cost structures in the coming year and assess their confidence in the level of preparedness of their organizations to manage those risks.

While the results reflect a lingering environment of uncertainty and risk in the short term, they also show that some companies are making important strategic moves in cost reduction—among them, a focus on organizational effectiveness and capability building—to position themselves advantageously for the long haul.
(Image source: Safetynewsalert.com)

Three Tips for Hiring Former Employees

Former employees can often make successful rehires — they are known quantities and are familiar with your organization's unique culture. But bringing a former colleague back needs to be done thoughtfully:

1. Do your due diligence - You may assume you know what you're getting when hiring back former employees. But, you should go through a rigorous interview and screening process — just as you would for a new candidate — to be sure the returning employee is truly qualified for the job at hand.

2. Communicate - Be sure the rest of the organization, especially those employees who were candidates for the position, knows the reasons for bringing back the employee.

3. Brief the returning employee - The employee will need to know what the current situation is at the company, with special attention paid to what has changed since her departure.

(Source: Harvard Business Review)
(Image source: Nevermindthemanager.com)