Karim Vaes

Source : Sticky Wages

Check out the above story… It refers to the term “sticky wage” where companies didn’t cut wages in recessions. They just made them “grow slower”… Yet lately there have been actions where wages were cut and it’s an odd move when thinking of the following statements (which are quoted from the article).

• 1. Employee Morale: Truman Bewley found out that pay-cuts affected everyone’s morale, while firings only affected the minority. I am sure all of you, who have seen layoffs agree that the people left behind, are much more productive than they were ever before. When you see your colleague getting fired, you work extra hard to make sure that you are not next in line. Pay-cuts don’t have the same effect, as everyone is on the same boat, and there is no shock effect to spur employees.
• 2. Fear of the best people leaving: The job market has slowed down in the recession, but there are still plenty of firms that are hiring. If an employer cuts salaries across the board, it is quite likely that the better workers will find work elsewhere. So, firms which implement across the board wage cuts, risk disgruntling their better employees and have them leave for greener pastures elsewhere. This factor is a major contributor to sticky wages.
• 3. Get rid of Wally: Not all employees are created equal; some are more efficient than others. In all companies there is some deadweight. Some of your employees will be like Dilbert, some like Alice and then you will have a Wally. If you kept Dilbert and Alice, and fired Wally – your team will still do well, if anything the overall productivity of your team will increase. Even the Pointy – Haired boss knows that it is far better for him to fire Wally, than to take a chance by cutting the salaries of Alice and Dilbert, and risk losing them to Elbonians.
• 4. Preparing for the turnaround: Another factor that contributes to sticky wages is the hope of a turnaround. I know several people who are hanging around in companies without any work or pay – cuts. While there isn’t much demand for their skills now; their employer doesn’t want to take a chance. The employer is worried that if they let this person go, the competitors will build a strong team in this particular area, and drive them out of business when the market eventually turns.

Check the “the five stages of recession” by Tom Fishburne. It’s core idea lies in the three steps from being calm to panic and to getting excited.

Macworld features an article called “Ten business lessons from ‘Battlestar Galactica’”

A summary

• 1. Tech isn’t always the answer. : Totally agree… IT-ers tend to always go for a tech solution where a human solution might suffice!
• 2. Don’t neglect training. : I guess nobody will disagree here, but companies often don’t see the hidden cost of neglecting to do so.
• 3. Some things can’t be outsourced. : I’ll repeat it again; Outsourcing is good, but don’t do it on stategical areas!
• 4. Update your antivirus. : Personally I’d like to see this one renamed to “keep your organization up-to-date”
• 5. Democracy doesn’t always work. : A simple Project Management lesson; It’s a democracy until the scope is set, then it’s dictatorship!
• 6. Some problems can’t be killed. : Indeed, not all problems can be killed, just learn to cope with them.
• 7. Seek strategic alliances with competitors. : So true! Being a stategic game fan, I found that alliances either make or break any outcome of a game. The numerous time I’ve “won”, is always due to making (and breaking!) stategic alliances.
• 8. Don’t store all your backups in one place. : Better renamed to “don’t put all your eggs in one basket”.
• 9. The mission can change at any time. : A bit like 4., the world keeps evolving, incorporate that in your strategy.
• 10. Beware of visionaries. Zealots make bad leaders. – Awh, crap, that’d be against me…

Freelancefolder.com features “8 Ways Freelancers Can Survive In A Troubled Economy” ;

• Be a Bargain Hunter. Whether you’re buying routine office supplies or making a capital purchase, make sure that you get the most value for your dollar. Check sales flyers and compare costs to maximize your purchasing power. You can also look into barter arrangements to reduce your costs.
• Don’t Spend Everything That You Make. I give this advice during good economic times as well. The advice to save some of your earnings is doubly important in an uncertain economy. Whenever you are paid make sure that you set some income aside for times when your business is slow.
• Moonlight on Your Freelancing. You may have started your freelancing business by working a corporate job and moonlighting as a freelancer. There’s no reason why you can’t turn the tables and moonlight on your freelance business now. Consider taking a part-time job to bolster your monthly income.
• Ask Past Corporate Employers for Gigs. Many employers have hiring freezes, but their workload remains the same. While they may not be able to hire a new employee, often they are allowed to hire temporary help to meet a deadline. (I’m told that the money for contractors comes out of a different “bucket.”)
• Consider the Do-It-Yourself Question. Are you paying others to do tasks for you that you could actually do yourself? If your cash flow is slow, then you may want to consider whether it’s more cost efficient to continue outsourcing as you have been doing, or to start doing the tasks yourself.
• Make Sure To Consider Your Tax Liability. Even if the economy is slow, it is likely that you will still owe taxes at the end of your tax year. To avoid being saddled with a tax burden that you can’t pay, start setting money aside for taxes now. If you paid estimated taxes during the course of the year, then ask yourself if you paid enough.
• Broaden the Scope of Your Business. If your workload has slowed, then ask yourself if there are other products or services that you could add to your current offerings. Do you have a skill that you are not using? Broadening your scope could bring additional business from current customers as well as attract new ones.
• Be Patient. Difficult economic times come and they go. It may be a matter of weeks, months, or even years, but this tough economic period will also pass.

Let’s say you could win 1 million Euro when participating with a lottery. The odds are about 1 to a billion… How much would you pay for this lottery ticket?

Now let’s say that you’re in a lottery where you have a one-out-of-a-billion chance to lose 5% of all your assets. How much would you pay for a lottery ticket which insures you against this?

What you already have is worth more to you than what you might gain. Yet the same math & currency value applies to both gaining and losing. People tend to panic when there is a risk of losing something, despite how small it may be. Every change is seen as a potential loss and not a potential win.

A trader takes several risks on a daily basis, yet (s)he knows/judges the odds of every investement. Let’s say that they have a win ratio of 8 out of 10. When they invest their money into 10 opportunities, they should anticipate that 8 winners exceed the losses made at the two failed investments.

So how do you respond to risks? Do you fear or anticipate them?