Monthly Archives: September 2020

Effective Method of Negotiation

What is Negotiation?

Negotiation is the interactive social process in which people engage, when they aim to reach an agreement with another party or parties on behalf of themselves.

Negotiation is primarily a common mean of securing one’s expectations from others. It is a form of communication designed to reach an agreement when two or more parties have certain interests that are shared and certain others that are opposed.

– According to Shorter Oxford Dictionary, 1977-

Negotiation: To confer with another for the purpose of arranging some matters by mutual agreement; to discuss a matter with a view to settlement or compromise .

– Ginny Pearsom Bames sayes, Negotiation is a resolution of a disagreement using give and take within the context of a particular relationship. It involves sharing ideas and information and seeking a mutually acceptable outcome .

– The Pepperdine University of USA has developed an explanatory definition of negotiation:

Negotiation is a communication process used to put deals together or resolve conflicts. It is a voluntary, non-binding process in which the parties control the outcome as well as the procedures by which they will make an agreement. Because most parties place very few limitations on the negotiation process, it allows for a wide range of possible solutions maximizing the possibility of joint gains .

– According to Williams, Legal and Settlement 1983, Negotiation is a repetitive process that follows reasonably predictable patterns over time. Yet in legal disputes so much of the attorney’s attention and energy are absorbed by the pre-trial procedure and the approach of the trial, that they fail to recognize the important identifiable patterns and dynamics of the negotiation process

– M Anstey explains core elements of negotiation as follows:

1. A verbal interactive process;

2. Involving two or more parties;

3. Who are seeking to reach agreement;

4. Over a problem or conflict of interest between them; and

5. In which they seek, as per as possible, to preserve their interests, but to adjust their views and positions in the joint effort to achieve an agreement.

Broadly speaking, negotiation is an interaction of influences. Such interactions, for example, include the process of resolving disputes, agreeing upon courses of action, bargaining for individual or collective or crafting outcomes to satisfy various interests. Negotiation is thus a form of alternative dispute resolution (ADR).

Characteristics of Negotiation:

o Negotiation involves two or more parties who need (or think they need) each others involvement achieving a desired outcome. There is a common interest that connects the parties.

o The parties start with different opinions or objectives. It is these differences that prevent agreement.

o The parties are willing to co-operate and communicate to meet their goals.

o The parties can mutually benefit or avoid harm by influencing each other.

o The parties realize that any other procedure will not produce desired outcome.

o The parties think that negotiation is the best way to resolve their differences (or at leas, a possible way)

o They also think that they may be able to persuade the party to modify their original position.

o Even if they do not get their ideal outcome, both retain the hope of an acceptable outcome.

o Each has some influence real or assumed over the others actions. If one party is completely powerless, negotiation will have little point for the other.

o The negotiation process itself involves interaction between people. This interaction might be in person, by telephone, letter etc. or it might use a combination, because it is personal, emotions and attitudes will always be important.

Conditions for Negotiation :

A variety of conditions can affect the success or failure of negotiations. The following conditions make success in negotiations more likely:

Identifiable parties who are willing to participate: The people or groups who have a stake in the outcome must be identifiable and willing to sit down at the bargaining table if productive negotiations are to occur. If a critical party is either absent or is not willing to commit to good faith bargaining, the potential for agreement will decline.

Interdependence: For productive negotiations to occur, the participants must be dependent upon each other to have their needs met or interests satisfied. The participants need either each other’s assistance or restraint from negative action for their interests to be satisfied. If one party can get his/her needs met without the cooperation of the other, there will be little impetus to negotiate.

Readiness to negotiate: People must be ready to negotiate for dialogue to begin. When participants are not psychologically prepared to talk with the other parties, when adequate information is not available, or when a negotiation strategy has not been prepared, people may be reluctant to begin the process.

Means of influence or leverage: For people to reach an agreement over issues about which they disagree, they must have some means to influence the attitudes and/or behavior of other negotiators. Often influence is seen as the power to threaten or inflict pain or undesirable costs, but this is only one way to encourage another to change. Asking thought-provoking questions, providing needed information, seeking the advice of experts, appealing to influential associates of a party, exercising legitimate authority or providing rewards are all means of exerting influence in negotiations.

Agreement on some issues and interests: People must be able to agree upon some common issues and interests for progress to be made in negotiations. Generally, participants will have some issues and interests in common and others that are of concern to only one party. The number and importance of the common issues and interests influence whether negotiations occur and whether they terminate in agreement. Parties must have enough issues and interests in common to commit themselves to a joint decision-making process.

Will to settle: For negotiations to succeed, participants have to want to settle. If continuing a conflict is more important than settlement, then negotiations are doomed to failure. Often parties want to keep conflicts going to preserve a relationship (a negative one may be better than no relationship at all), to mobilize public opinion or support in their favor, or because the conflict relationship gives meaning to their life. These factors promote continued division and work against settlement. The negative consequences of not settling must be more significant and greater than those of settling for an agreement to be reached.

Unpredictability of outcome: People negotiate because they need something from another person. They also negotiate because the outcome of not negotiating is unpredictable. For example: If, by going to court, a person has a 50/50 chance of winning, s/he may decide to negotiate rather than take the risk of losing as a result of a judicial decision. Negotiation is more predictable than court because if negotiation is successful, the party will at least win something. Chances for a decisive and one-sided victory need to be unpredictable for parties to enter into negotiations.

A sense of urgency and deadline: Negotiations generally occur when there is pressure or it is urgent to reach a decision. Urgency may be imposed by either external or internal time constraints or by potential negative or positive consequences to a negotiation outcome. External constraints include: court dates, imminent executive or administrative decisions, or predictable changes in the environment. Internal constraints may be artificial deadlines selected by a negotiator to enhance the motivation of another to settle. For negotiations to be successful, the participants must jointly feel a sense of urgency and be aware that they are vulnerable to adverse action or loss of benefits if a timely decision is not reached.

No major psychological barriers to settlement: Strong expressed or unexpressed feelings about another party can sharply affect a person’s psychological readiness to bargain. Psychological barriers to settlement must be lowered if successful negotiations are to occur.

Issues must be negotiable: For successful negotiation to occur, negotiators must believe that there are acceptable settlement options that are possible as a result of participation in the process. If it appears that negotiations will have only win/lose settlement possibilities and that a party’s needs will not be met as a result of participation, parties will be reluctant to enter into dialogue.

Styles of Negotiation:

There are different styles of negotiation. Style of negotiation is also a strategy. In some occasions the style reflects the attitude of the party and an experienced negotiator can guess the result from such a conduct of the party as becomes evident by the style. Negotiation style is reflected in communication skills, interpersonal behavior of negotiators, language, voice tones, choices, listening power, non-verbal gestures and judgment. Generally there are three main styles of negotiation. A brief description is given below:

– Co-operative Style :

In this type of negotiation style, strategies which are typically used include the making of concessions, the sharing of information and the adoption of behaviors which are fair and reasonable. Thus a co-operative negotiator typically explains the reasons for her concessions and proposals and attempts to reconcile the parties’ conflicting interests; her proposals are measured against standards which both parties can agree, such as the legal merits of the case and fairness between the parties.

The advantage of the co-operative style of negotiation is that it tends to produce fewer breakdowns in bargaining with subsequent recourse to litigation, and to produce more favorable outcomes for both parties. This leaves both clients and negotiators in a position where they can ‘do business’ again. However, the co-operative style is subject to certain difficulties in operation where the parties to the negotiation are unequal in wealth or power or where one party will not bargain for joint or mutual gain;

– Competitive Style :

Thus the competitive negotiator makes concessions reluctantly because they may ‘weaken his position’ through position loss or image loss. He tends to make high initial demands, few concessions and have a generally high level of aspiration for his client.

It is often suggested that this style leads practitioners into specific negotiation strategies, for example, never making the first offer, always attempting to conceal the client’s true objectives always being the person who drafts the final offer; and the use of exaggeration, threat and bluff to create high levels of tension and pressure on the opponent. If used effectively these tactics cause the opposition side to lose confidence in there case and reduce their expectations of what can be obtained for there client It is therefore, an essentially manipulative approach, designed to intimidate the opposing side into accepting a negotiator’s demands.

– Problem-solving Style:

A problem solving style to a dispute over access might be based on the assumption that whilst both parents want access to their children for some of the time, neither would, in practice, want access for the whole of the time. On this basis a negotiated settlement advantageous to all parties (including the children) may be effected.

The problem-solving style thus commence with both negotiators trying to ascertain the underlying needs of their clients. This can best be achieved through client interviews in which the lawyer explores with the client how he wants the dispute to be concluded in social, economic, ethical and psychological terms. Focusing on the actual (rather than the assumed) needs of clients leads to solutions often more complex and yet more satisfactory in terms of social justice than those which a court could order, or which could result form competitive negotiation.

The four basic tactics which Fisher and Ury describes as being essential to the process of problem solving negotiation are :

1. Separate the people from the problem; In the other words, separate the interpersonal relationship between the negotiators and their clients from the merits of the problem or conflict

2. Focus on interests not positions; that is, consider the interests of the clients so that is party’s motives, goals and values are filly understood by each side

3. Generate a variety of options; for example, brainstorm to develop new ideas to meet the needs of the parties

4. Insist that the result of the negotiation be based on some objective standard that is, assess proposed outcomes against easily ascertainable standard base on objective criteria.

Basic structure of the negotiating process :

It is important to note that there are some basic structures of negotiation process. These structure increase the ability and skills of negotiator also helps to create successful environment for the effective negotiation. The most essential structure may be described as:

Agenda-setting:

Unless an agenda has been agreed in advance you will agree with the opposing lawyer the practical issues of how the negotiation will be conducted, what the agenda for the discussions will be, recorded and minute

Clarification of the facts:

A possible first is for you, or your opponent, to identify and agree the relevant available facts of the dispute and the law relating to those facts. This could then be followed by your identification of and agreement on, any missing or conflicting facts, or difference in documentation. At this point you cold seek to resolve such difference through further investigation, and through listening to and questioning the order side.

Evaluation and repositioning:

– You will next assess alternative solution in relation to the needs of both parties (co-operative problem solving style) or you will make strong counter proposals to your opponents position (competitive style)

– You will eliminate unworkable proposals (co-operative problem-solving style) or use a variety of negotiating tactics to enhance your position and discredit that of your opponent (confrontational style)

– You will generate new proposals (co-operative problem-solving style) or identify trade-offs and concessions (competitive style)

– You will consider ending the negotiation if the tradeoffs are too high for both parties (co-operative problem-solving style) or if the trade -offs are acceptable to your side although not to the other(competitive style)

Closing:

Finally you will need to find a way of closing the negotiation. The alternatives at this stage include:

– Adjourning to obtain further information, and instructions from your client

– Adjourning to report a final offer from the other side to your client and seek his instructions

– Reaching a final agreement as authorized by your client

If the outcome is successful and a settlement has been reached, you will need to check your understanding of the settlement with that of your opponent to make certain that you are in agreement. You must next decide how the settlement is going to be made legally enforceable (if it is), and who will draft the terms of any written settlement.

Review:

Throughout the whole of the process referred to above, it is helpful from time for the lawyers to review the stage that has been reached in the discussions. This is especially recommended if you appear to have reached a deadlock, or there is an uncomfortable silence. A review gives each side the opportunity to compare their original objective with that has been achieved so far and consider how the negotiation should proceed. This can lead to one or other of the negotiators stating a revised or more innovative position as a potential solution to the problem.

Stages of Negotiation:

Stage 1: Evaluate and Select a Strategy to Guide Problem Solving

o Assess various approaches or procedures–negotiation, facilitation, mediation, arbitration, court, etc.–available for problem solving.

o Select an approach.

Stage 2: Make Contact with Other Party or Parties

o Make initial contact(s) in person, by telephone, or by mail.

o Explain your desire to negotiate and coordinate approaches.

o Build rapport and expand relationship

o Build personal or organization’s credibility.

o Promote commitment to the procedure.

o Educate and obtain input from the parties about the process that is to be used.

Stage 3: Collect and Analyze Background Information

o Collect and analyze relevant data about the people, dynamics and substance involved in the problem.

o Verify accuracy of data.

o Minimize the impact of inaccurate or unavailable data.

o Identify all parties’ substantive, procedural and psychological interests.

Stage 4: Design a Detailed Plan for Negotiation

o Identify strategies and tactics that will enable the parties to move toward agreement.

o Identify tactics to respond to situations peculiar to the specific issues to be negotiated.

Stage 5: Build Trust and Cooperation

o Prepare psychologically to participate in negotiations on substantive issues. Develop a strategy to handle strong emotions.

o Check perceptions and minimize effects of stereotypes.

o Build recognition of the legitimacy of the parties and issues.

o Build trust.

o Clarify communications.

o Stage 6: Beginning the Negotiation Session

o Introduce all parties.

o Exchange statements which demonstrate willingness to listen, share ideas, show openness to reason and demonstrate desire to bargain in good faith.

o Establish guidelines for behavior.

o State mutual expectations for the negotiations.

o Describe history of problem and explain why there is a need for change or agreement.

o Identify interests and/or positions.

Stage 7: Define Issues and Set an Agenda

o Together identify broad topic areas of concern to people.

o Identify specific issues to be discussed.

o Frame issues in a non-judgmental neutral manner.

o Obtain an agreement on issues to be discussed.

o Determine the sequence to discuss issues.

o Take turns describing how you see the situation. Participants should be encouraged to tell their story in enough detail that all people understand the viewpoint presented.

o Use active listening, open-ended questions and focusing questions to gain additional information.

Stage 8: Uncover Hidden Interests

o Probe each issue either one at a time or together to identify interests, needs and concerns of the principal participants in the dispute.

o Define and elaborate interests so that all participants understand the needs of others as well as their own.

Stage 9: Generate Options for Settlement

o Develop awareness about the need for options from which to select or create the final settlement.

o Review needs of parties which relate to the issue.

o Generate criteria or objective standards that can guide settlement discussions.

o Look for agreements in principle.

o Consider breaking issue into smaller, more manageable issues and generating solutions for sub-issues.

o Generate options either individually or through joint discussions.

o Use one or more of the following procedures:

o Expand the pie so that benefits are increased for all parties.

o Alternate satisfaction so that each party has his/her interests satisfied but at different times.

o Trade items that are valued differently by parties.

o Look for integrative or win/win options.

o Brainstorm.

o Use trial and error generation of multiple solutions.

o Try silent generation in which each individual develops privately a list of options and then presents his/her ideas to other negotiators.

o Use a caucus to develop options.

o Conduct position/counter position option generation.

o Separate generation of possible solutions from evaluation.

Stage 10: Assess Options for Settlement

o Review the interests of the parties.

o Assess how interests can be met by available options.

o Assess the costs and benefits of selecting options.

Stage 11: Final Bargaining

o Final problem solving occurs when:

o One of the alternatives is selected.

o Incremental concessions are made and parties move closer together.

o Alternatives are combined or tailored into a superior solution.

o Package settlements are developed.

o Parties establish a procedural means to reach a substantive agreement.

Stage 12: Achieving Formal Settlement

o Agreement may be a written memorandum of understanding or a legal contract.

o Identify “what ifs” and conduct problem solving to overcome blocks.

o Establish an evaluation and monitoring procedure.

o Formalize the settlement and create enforcement and commitment mechanisms.

o Judicial review

Influencing factors of Negotiation :

There are some influencing factors or elements of negotiation which are essential and plays vital role in making effective negotiation. A short description is given below:

– Negotiator: Negotiation process is influenced by various factors. The first such factor is the skill and ability of negotiator, his character and credibility. Another ability, which is a major factor in negotiation, is that the negotiator should keep control over the process. A negotiator should review the progress of the negotiation process; time and again endeavor to build bridges between the parties. He or She should try to create a positive attitude towards agreement. A great deal of skill and experience are necessary to control the entire process of negotiation, which can be gained by keen observation of strategies adopted by other parties, past experience and studying the best negotiation processes in the contemporary world.

– Parties: Parties are a major influence on the negotiation process. The parties, their interests and the way they react and respond decide the process. Parties to a dispute have their own mindset when they come to a negotiation table.

– Selection of the team: The team of negotiation should be selected basing on case and circumstances, so that each member contributes towards achieving the goal with productive working.

– Place of negotiation: Sometimes the place of negotiation matters. Unfamiliar surroundings may cause stress to the opposite party in comparison to a familiar place.

– Layout of the room: The layout of the room has an influence on the conduct of the negotiation to some extent. Ideally the layout should be chosen taking into consideration the circumstance in which the parties operate. For example, if the negotiation in with regard to any industrial dispute, negotiators should ensure that the distance between the parties is not too much. The seating arrangements should be such so as to encourage a relaxed mood. The design of layout should reflect attitudes and perceptions and issues being discussed in negotiation.

– Psychology in negotiating: Psychology of the negotiators, as well as the parties plays an important role in the activity of negotiation. The people involved in the process work with different attitudes, approaches and activities. According to Maslows’ ‘Need Hierarchy Theory’, behavior of people is influenced by their needs. People’s needs are classified by him into:

1. Physical and survival needs;

2. Security and safety needs;

3. Social needs;

4. Ego needs;

5. Self realization needs.

Effective Negotiation Skills :

The key to effective negotiation is clear communication. Communication involves three important skills: Speaking, Listening and understanding. You can’t have one skill work without the others–for example, you can’t have good understanding without good listening and speaking. Negotiation is most effective when people are able to clearly identify and discuss their sources of disagreement and misunderstanding.

Speaking:

Negotiation begins with a clear, concise explanation of the problem as each person sees it. Facts and feelings are presented in a rational manner from the individual’s perspective, using “I” statements. Communication between people will go more smoothly when statements such as “I become very upset when you “are used rather than more aggressive statements such as “You make me mad when you,” which blames the other person and puts him or her in a defensive position. Shared concerns rather than individual issues remain the focus of discussion throughout negotiation. The negotiation process will be most effective when people take time to think through what they will say. When possible, plan ahead to meet at a time and place convenient to everyone. A quiet, neutral spot where there are few distractions or interruptions is perfect for open discussion.

Listening:

Listening is an active process of concentrating all of one’s attention on the other person. Encouraging the other person to share thoughts and feelings, giving feedback on what has been heard, and maintaining eye contact are skills that show you are interested in understanding what he or she has to say. It is always helpful to simply ask, “I understood you to say Am I correct in this?” or “I hear you saying that you are that how you feel?” Active listening assures the other person that he or she is heard, accepted and respected. The ability to listen actively supports open, ongoing negotiation. Thinking ahead or anticipating the course of the discussion is distractions that interfere with listening. Poor attention and listening can lead to misunderstandings, inappropriate solutions and continuing conflict.

Understanding:

Before two sides can look for solutions; a common understanding must be reached. If two people do not understand each other’s problems and concerns, then the process of negotiation will either be broken off or will end with solutions that do not work. Active listening encourages understanding. It is important to pay close attention to what someone says as well as to how he or she behaves. Body language, including facial expressions, hand gestures and degree of eye contact, can provide clues about the other person’s thoughts and feelings. Observations, however, are shaped as much by the observer as by the person being observed. It is good practice never to assume to understand the other person without first asking, “Did I hear you correctly?” or “I have noticed that you appear” or “I sense you are under strain. Do you want to talk about this?” and “I’d like to hear from you about how you are feeling” are all good examples of statements that encourage communication and better understanding between people.

Best Negotiation Tips :

Generally negotiation depends on the ability, skill, technique and knowledge of negotiator. The tips of the negotiation are varies from negotiator to negotiator. Some best negotiation tips with example are given below:

– Be willing to negotiate in the first place:

Some people are too shy to talk about money. Others think it’s rude or demeaning. And in many cases they’re right. However, when it comes to doing a deal – and we all have to sometimes – being unwilling to engage in “money-talk” can be a very expensive business. There are a lot of experienced negotiators out there. If you’re buying a house or a car, or taking a new job, you can be sure you’ll have to deal with such a person. If they can see you’re timid about the whole business, many will take advantage of that fact. You also shouldn’t be shy about turning something that may not immediately appear to be a negotiation into one. If I’m buying a few expensive things from the same store, I’ll often ask them to throw something in for free or reduce the price. Just because there’s no sign saying you can do that, doesn’t mean you can’t. Often, simply by asking for something extra I’ll get a better deal

– Don’t get emotionally involved:

One big mistake many amateur negotiators make is to become too emotionally attached to winning. They shout, threaten and demand to get their way. This is all counter-productive. Most deals are only possible if both people feel they’re getting something out of it. If the person across the table feels attacked, or doesn’t like you, they probably won’t back down. Many people hate bullies, and will be more willing to walk away from a transaction if it involves one. Keep calm, patient and friendly, even if the other person starts losing their cool. Make sure you leave any pride or ego at the door. You are more likely to do well that way.

– Don’t get suckered by the “rules” trick:

When someone sends me a contract to sign, if there’s something on there I don’t like, I’ll cross it out. I’m also happy to write things I want added in if I think they should be there. Sometimes, the other party will come back to me and say “You’re not allowed to make changes to our contracts like that”. Oh really? Since I’m the one signing the thing, I’ll make any changes I want, thank you very much. There’s no law that says they’re the only one allowed to add things to a contract. If they’re not happy with my changes, let me know and we can work it out, but don’t simply tell me I don’t have permission. This highlights a common tactic used by experienced negotiators such as real estate agents, employment agents, car salespeople and the like. They know many people are sticklers about following rules. So they’ll make up official sounding pronouncements and insist that “this is the way it’s done” or “you’re not allowed to do that”. If someone starts trying to box you in by adding rules to the deal, ask them to provide proof that such rules really exist.

– Never be the first person to name a figure:

This is an expensive lesson to have to learn, but a good one. I do a lot of contract work, and one of the first questions I’m usually asked is “What’s your hourly rate?” This is a high pressure question, and I often found myself blurting out a figure that was lower than what I really wanted. These days, I’ve learned the importance of getting the other person to say a number first. Now, I respond to that question by asking “What’s the budget for this contract?” Often, I’m surprised to discover they’re offering me a better deal than I thought they were.

– Ask for more than you expect to get:

Once the other person’s given their figure, even if it’s much better than you expected, say something like “I think you’ll have to do better than that”. Don’t be arrogant or aggressive. Just say it calmly. When they enquire about your expectations, ask for more than you expect to get. Few people will walk away from a deal once it’s commenced, and you can let the other person feel as if they’re winning by lowering your “unrealistic expectations” a bit at a time.

– Just giving the impression that you’re willing to walk away can do wonders for getting a better deal. Always play the reluctant buyer or seller.

Intellectual Property Issues Within the Supply Chain

Intellectual Property Rights (IPR) are of the utmost importance in today’s capital markets. Not only do they provide protection for innovations which have been developed, but they now offer revenue generating opportunities for proactive companies looking to license or sell their products into new markets.

Unfortunately, there is an oft overlooked aspect of IPR. This is the impact to a company’s supply chain. Specifically what happens if a third party hits you with an infringement claim for technology which is in a vendor supplied component? Or what happens if a vendor goes out of business or decides to get out of a line of business which manufactures a key part for your product? Will your business be hamstrung by someone else’s decision?

Let’s examine how to mitigate the risks associated with those scenarios so that you can keep selling your products.

Build to Spec vs. Build to Print

First some definitions which you should already be aware of, but are worth refreshing. “Build to spec” is when a company literally instructs a vendor to build something that is a certain size and has specific operational parameters. The degree to which the component is specified may vary, but ultimately the vendor is free to use their own design expertise and manufacturing know-how to produce the parts they will supply to you. The benefit is that the vendor retains the responsibility and liability for design and part quality, which may reduce your overhead since you do not need to maintain in-house expertise in an area of subject matter that is not a core competency for your company. The definitive drawback is that the vendor owns the IPR on that part, which may be a key component to your product. More on the impact of this later.

“Build to print” is when a company not only specifies the functional requirements of the part, but they produce assembly drawings, work instructions and call out specific manufacturing practices to be used in producing the parts. This method requires more work and development cost on the part of the company, but the advantage lies in maintaining control of the IPR and having the ability to select any appropriate vendor to produce parts for you. This approach is more costly since you would likely be responsible for design and quality liability issues. Nevertheless, if you possess the subject matter expertise it is always better from the perspective of IPR to design “in-house.” This approach also makes subsequent vertical integration of your business easier.

Clearance Search / Non-Infringement Assessment

When introducing a new product, a patent clearance search is an essential part of business risk mitigation. A clear path to non-infringement of existing patents and applications provides confidence to launch your new ideas.

While most companies work with their legal counsel to ensure their own intellectual property position is secured and they have freedom to operate, most neglect to consider the risk mitigation needs within their vendor base.

All companies need to work with their vendors to ensure a clear path to non-infringement exists. If not, the company may be subject to a claim of direct or contributory infringement resulting from an issue with a vendor supplied component.

These claims can damage the company’s brand and reputation and could even lead to monetary damages to the third party, even though the infringement was on the part of the vendor.

There is a way to mitigate this risk, but there is more than just simply requesting indemnification. Protocols such as a patent clearance search and non-infringement analysis by your vendors should be mandated as part of the qualification process.

Be wary of someone who tells you they’ve looked into third party IPR and it “doesn’t matter” or “won’t be a problem” without sufficient supporting material.

Indemnification Clauses in Supply Agreements

Beyond mandating that a patent clearance search be completed for vendor supplied parts, as the buyer/licensee, you should require explicit language in the supply agreement(s) to cover indemnification from third-party infringement lawsuits.

“The use of [product] by [the buyer/licensee] shall not infringe or otherwise violate the industrial or intellectual property rights of any third party of which [the seller/licensor] has knowledge. If any third party shall assert that [the buyer’s/licensee’s] practice of the Licensed Rights under [the Supply Agreement], whether resultant from explicit knowledge [the buyer/licensee] had or should have had through reasonable due diligence, shall constitute an infringement or misappropriation of that party’s industrial or intellectual property rights, [the seller/licensor] shall in accordance with this Article defend, indemnify and hold [the buyer/licensee] harmless against any and all such claims.”

A request for the licensor to carry insurance in regards to this matter may also be inserted into the supply agreement depending on how much negotiating leverage the buyer maintains. Additionally, most supply agreements provide a use license to the buyer, which is typically transferrable to the end consumer in the case of OEMs and system integrators. Therefore, your customers should be at ease that they will not be subject to a “stop-use” injunction as a result of their purchase of your product.

However, this indemnification requires the additional work of the patent clearance. The language used above necessitates that you are explicitly aware or you should have known about third party patents. At the very least, the language above helps to mitigate any claims of gross negligence, but if a patent clearance initiative is not conducted your company may still be subject to misconduct and damage awards. This misconduct would not be covered by the indemnity, so mitigating this risk requires appropriate steps in the vendor qualification process.

It should be the responsibility of the vendor to convince you that the product they are offering for sale does not infringe on a third party’s IPR. Additionally, you may be aware of certain patents as a result of your own product clearance search or landscaping efforts. You should make it a point to maintain a catalogue or “watch-list” of patents which refer to sub-component items that are sourced from vendors. This watch list should be communicated to the vendor during the qualification process to provide them the opportunity to address these issues if they have not already.

In conducting the patent clearance search the vendor should have legal opinions from their counsel if necessary to demonstrate non-infringement position or a reasonably comprehensive approach to invalidation. Much like your own efforts those opinions should address 1) literal infringement, 2) infringement via the doctrine of equivalents, 3) prosecution history and/or file wrapper estoppel, 4) inequitable conduct, and 5) means for invalidation (if necessary).

Second Source – Another Potential IPR Impediment

For manufacturers who have parts “built to spec” instead of “built to print” another issue arises when it comes to second sourcing and spare parts.

Imagine a scenario in which one of your vendors is providing you a key component of your product, but they subsequently discover a quality issue which leads to a massive recall of that part. The financial and PR cost of an extensive warranty claim may put them out of business, but it can also damage your business if you have numerous units of your own product sold and no way to repair/replace the vendor supplied parts.

If you have something built to spec, then you must have a clause in your supply agreements that refers to your ability to take the vendor’s drawings, manuals, and manufacturing know-how to a second source in the event that they are unable or choose to not provide you with sufficient supply of parts for use or replacement in your product(s).

Also, the more highly you specify the parts to be supplied the more you are in control of the supply scenarios. If you have more than one vendor of a part and these parts are not “interchangeable” then the question should be asked about the risk exposure in case one of those vendors is unable or unwilling to supply you for whatever reason.

Taking precautions to protect your company when it comes to counter-party IPR is not just a good idea… it is a must!

The Importance of Encoders Product in Your Company

In general, an encoder is a process that converts data from one format to another. An encoder can also be defined as a device that can be used to detect and convert mechanical movements into analogue or digital coded output signals. Encoders are very useful in the industrial world to drive a system in industrial equipment, such as a crane, an encoder mounted on the motor shaft to provide position feedback so that the crane knows when to pick up or release the load. Encoders are also used on observatories, railroad tracks, escalators, etc. Therefore, industrial companies need to work with the best Encoder Manufacturers to ensure their control devices are capable of sending commands for a particular function.

Encoders play a very important role in industrial equipment; these powerful tools are capable of converting digital signals into mechanical commands. It’s no wonder that encoders can be found on almost any industrial machine. As an electro-mechanical device, the encoder can provide information to the motion control system user regarding position, speed, and direction. Based on several references, the encoder is divided into several types such as linear encoder which response to motion along the path, and rotary encoder which response to rotational motion. In addition to linear and rotary encoders, based on their signal, encoders consist of incremental encoders and absolute encoders.

Encoders use a variety of technologies to generate electrical signals; one of the most commonly used by Encoder Manufacturers are optical technology. These signals can be read by several types of control devices in motion control systems. An encoder is a device that can send feedback signals that can be used to determine position, number, speed, and direction. The motion control system translates the signals into commands on industrial machines. For example, in an automatic cutting equipment application, an encoder with a measuring wheel can tell the control device how much material has been fed, so that the control device knows when to cut. In a printing application, feedback from the encoder activates the print head to make a mark at a certain location so that we can print documents perfectly.

All industries need encoder products to perform various functions in their industry. Encoder Manufacturers professionally manufacture encoders and their accessories. All products produced are of high quality and are capable of producing high-precision feedback. Professional industrial companies need encoders that produce high-precision feedback, such as in the industry of aerospace, printing, mobile equipment, textiles, packaging, metal forming, and many more industries.

Make sure your industrial company buys encoder products only at the best Encoder Manufacturers who provide complete services ranging from providing quality products and accessories, the best purchasing service, professional technical support, easily accessible sites, and most importantly an affordable price.

Ignorance in Marketing – Is Poor Grammar Making You Look Stupid?

The scary thing about ignorance is that you don’t know you are ignorant about something until you are made aware of it. And at that point, not only do you realize you were ignorant, but now you are also ashamed and embarrassed, to make matters worse. While everyone is capable of making mistakes whether through ignorance or forgetfulness, I have found that there is no better way to learn something than through the humiliation of being caught in an error, no matter how inadvertent. While ignorance may be bliss, its ramifications are truly mortifying!

As marketing professionals, it is our job to mastermind brilliant ways to bring success to the clients we represent. A marketer’s tools include effective use of language, visuals and sounds, all of which should work together to create a memorable and powerful symbol of appeal.

Unfortunately, this is easier said than done, (should be “more easily said than done” but the original is an idiomatic expression and is acceptable in its cruder form). If a marketer suffers from a lack of knowledge about any of the components within his repertoire, the work he produces may suffer as well.

Grammatical errors seem to take predominance. Examples can be found both in written and spoken form, published and broadcast in news, commentary and advertising formats, as well as weather and traffic reports. No one seems immune these days and the more such errors proliferate through the media, the more the population seems to adopt them as proper form. Often these errors are difficult to trace, whether originating as gang-speak on the street or trickling down from the most reputable icons of our sources of cultural information.

One of the most prevalent of these errors involves the addition of the preposition “of” where it does not belong, as in “not too big ‘of’ a deal,” or “not too bad ‘of’ a ride,” which more correctly should be “not too big a deal” and “not too bad a ride.” I understand where the confusion comes from since it is correct to say “not too much of a problem.” Why is one correct and not the other? It is all based on whether the word before the word “of” is a noun or an adjective. If it is a noun, following it with the word “of” is correct. If it is an adjective, following it with the word “of” is incorrect. Here is a very helpful explanation from wiki.answers:

“The word ‘of’ only belongs with words like ‘much,’ so ‘too much of a problem’ would be correct, but ‘too big of a task’ should instead be ‘too big a task.’ This goes for most adjectives, for instance: ‘too blue a shirt’, ‘too tall a building’, ‘too deep an ocean’, etc.”

The word “much,” which can be an adjective, an adverb or a noun depending on the context, is used as a noun in this instance, according to Merriam Webster dictionary, unlike the words “big,” “blue,” “tall” and “deep” which are used as adjectives. A simple formula to apply for clarification could be:

Too (adjective) a (noun) or…

That (adjective) a (noun) or…

Quite (adjective) a (noun) or…

How (adjective) a (noun)…

…as in “too sassy an attitude” or “that high an elevation” or “quite boring a speech” or “how wonderful an occasion.” The consensus seems to be that interjection of the word “of” in this context seems to be indigenous to North America and is largely informal in use. If this is true, I predict that its current prevalence in language (particularly within the media), no matter how incorrect it may be, will eventually creep into our cultural lexicon to become the permanent rule as opposed to the exception – something I find disheartening after all the effort it takes to remember, understand and apply correct usage.

This reminds me of something my mother taught me many years ago which continues to make me feel like someone from a different planet when I still obey her today, though she’s been dead for more than twenty years. When the phone rings and I am asked, “Is Marilyn there?”, the proper response according to my mother and proper English usage is “This is she” or “I am she.” I am probably the only person on earth who feels compelled to reply in this way leaving the inquirer to think I am putting on airs to elevate my social status, when in fact I am only trying to avoid the guilt of motherly disobedience. The reason it is correct is that there must be agreement between “This” or “I” and “she,” all of which must be in the nominative case. If I were to say, “This is me” or “This is her,” the words “me” and “her” would be in the objective case and would not agree with the subject “This” in the nominative case. But I digress.

What really gets me is that when errors like this are so flagrantly repeated day after day, week after week, within radio traffic reports, for instance, no one of any authority makes an effort to correct them, comment about them, apologize for them or otherwise address them as incorrect. Am I the only one to notice these things?

And why is it important, anyway? Some people feel nitpicking about usage of the English language is pointless since the meaning is clear regardless of such minuscule aberrations. Anyone complaining about these seemingly archaic grammatical rules should “man up” and “get a life!” In today’s world, slang seems to be the universally acceptable format du jour.

Someone like me who is paid to write a wide variety of business marketing items such as letters of introduction, ad copy, website content, press releases, etc., must do so as professionally as possible which includes adhering to proper grammatical usage of the English language. To do anything less than that would be a disservice to my clients who hire me because they cannot do it themselves. Therefore, it is my responsibility to know the rules of syntax thoroughly to be able to defend whatever I write.

But more importantly, having command of the English language in its proper form differentiates a writer or a speaker from those who do not, elevating one’s skills to a more sophisticated level and defining one’s style as eloquent, articulate and expert. Absence of grammatical errors is not something which normally attracts any attention. But subliminally, it evokes respect for what is being presented as authoritative, trustworthy and believable. Interject even a typographical error and suddenly the source of the document is suspect as a charlatan!

I find that if using proper grammar makes you feel pretentious as per my phone retort example above, there is always another way to express oneself and such an exercise actually improves your skills as a writer or speaker since you are constantly challenging yourself to be the best you can be. For instance, instead of struggling with the horrendous “This is she” reply, why not just say, “This is Marilyn” or “I am Marilyn”? Better yet, identify yourself upon answering the phone so there is no need to beg the question.

Need more proof of ignorance run rampant? Among the huge numbers of errors which include misuse of such words as it’s/its, utilization of double negatives, and many others, here are a few examples of common usage issues I encounter frequently in the media:

Of all the accidents reviewed, none were considered serious. (WRONG!)

Of all the accidents reviewed, none was considered serious. (RIGHT!)

Why? Because none implies “not one” which is singular and must be followed by a verb which agrees.

What about use of the Latin abbreviations: i.e. and e.g.? What do they mean, and when and how do you use them? The Latin abbreviation i.e. literally translates as id est which means “that is,” or, “in other words.” The Latin abbreviation e.g. literally translates as exempli gratia, which means “for example.” Therefore, i.e. is used to specify exactly what you mean while e.g. is used to merely provide some examples of what you mean. A comma always follows either abbreviation.

The lecture focused on war, i.e., World War I and World War II.

Soldiers injured during war was part of the discussion, e.g., spinal cord injuries, traumatic brain injuries, etc.

Often in songwriting, grammatical errors occur for the sake of rhyme or rhythm and is apologetically referred to as poetic license. (One example from Jim Morrison and the Doors: “Till the stars fall from the sky, for you and I” This comes to mind because of a common error with objects of the preposition.

With confidentiality as a concern, the investment advisor revealed financial losses only to my wife and I. (WRONG!)

With confidentiality as a concern, the investment advisor revealed financial losses only to my wife and me. (RIGHT!)

In discussions between Bob and I, we agree there is only one correct investment strategy. (WRONG!)

In discussions between Bob and me, we agree there is only one correct investment strategy. (RIGHT!)

Why? Prepositions are followed by the objective case.

And errors pertaining to disagreement of singulars and plurals are extremely common:

Those kind of things. (WRONG!)

That kind of thing or those kinds of things! (RIGHT!)

Errors using the words Fewer and Less: The following are correct examples.

We need fewer problems and less strife in the world.

With fewer hours to work, we accomplish less.

Less milk, fewer bowls of cereal.

But “I want to pay less taxes” is incorrect. While the intention is to convey the idea that you want to pay less money toward your taxes, and the correct “I want to pay fewer taxes” does not truly communicate that meaning, the way to say it correctly could be:

“I want to pay less in tax.” Or, just rephrase completely to say, “I pay thousands in taxes and I want to pay less!”

Errors with the words “Amount of” and “Number of” These examples are correct:

She drank a large amount of milk with her cake.

She passed a great number of lakes on her trip.

A large amount of oil has spilled in the gulf.

Often an additional error occurs in these instances with lack of agreement of verbs with preceding subject (singular or plural)

A large number of fishermen have been impacted. (WRONG!)

A large number…HAS been impacted. (RIGHT!)

Let’s look at the word “lay” which is so commonly misused everywhere. Conversationally, professionally, musically. Ah, yes. Back to the musical violations. Bob Dylan leads the way with “Lay, Lady, Lay” followed closely by Eric Clapton’s “Lay Down, Sally”

In Bob’s case, unless he is referring to laying eggs and Lady is a chicken, he’s way off base. Eric doesn’t have a prayer. He’s just dead wrong, as they say.

How do I remember what is correct? I don’t always but I am not too proud to do some research… in fact, a lot of research. Even though I’ve always had a very good memory for these things, what I remember most is what sounds correct because of my upbringing. My mother was obsessed with teaching me proper English perhaps because her mother only spoke Hungarian. So she hammered exercises like the following into my young brain, day in and day out. Maybe it was her pet peeve but I thank her for her tedium today. Of all the things my parents gave me as a child, I would have to say that their efforts to expose me to proper use of the English language was their greatest gift of all!

Lie, Lay, Lain; Lay, Laid, Laid

I lie down today.

I lay down after supper last night.

I have lain down after eating quite a bit lately.

The dog has been lying there for hours! Lie down, Fido!

Think: recline.

———————————-

I lay the book on the table.

I laid it on the table about an hour ago.

I have laid it on the table many times.

Just lay the book on the table, Melissa.

She is now laying the book on the table.

Think: put or place.

As a marketing professional, I have a natural interest in mainstream marketing. Lately, I have noticed a couple of grammatical infractions in radio advertising for extremely popular brands. Not that this is so uncommon, I just find it unfortunate because our culture, particularly the younger members of our population, mainline the media’s message through sound, often more than through print, ingesting such errors as acceptable forms of speech. While I can understand the use of less-than-perfect English to represent a fictitious character rather than a true person, (the way snarky Popeye had to eat “me spinach,” true to the sailor-man that he was), deliberately saying “This is one of them cases” when the word “those” could easily have sufficed makes no sense to me. Likewise, saying “It worked pretty good” instead of “…pretty well” may have been for the purpose of appealing to a more blue-collar market but hardly can be justified as responsible advertising if it is teaching our children to speak like street urchins.

Often clients complain if I add a hyphen where it belongs when they send me a slogan to use verbatim. I regard it as my duty to explain why I added the hyphen but give them the option of omitting it if that is their preference. After all, how many years did we listen to the defiantly improper, Madison-Avenue-produced branding: “Winston tastes good like a cigarette should”?

So, while it may be acceptable in some contexts to regard proper grammar flippantly, doing so on a professional level may result in a blow to your reputation, doubt about your expertise, and ultimately loss of business. If you compromise the language knowingly, that’s one thing. But if you do so out of ignorance, you do so at your own risk.

Overview of Zimbabwean Banking Sector (Part One)

Entrepreneurs build their business within the context of an environment which they sometimes may not be able to control. The robustness of an entrepreneurial venture is tried and tested by the vicissitudes of the environment. Within the environment are forces that may serve as great opportunities or menacing threats to the survival of the entrepreneurial venture. Entrepreneurs need to understand the environment within which they operate so as to exploit emerging opportunities and mitigate against potential threats.

This article serves to create an understanding of the forces at play and their effect on banking entrepreneurs in Zimbabwe. A brief historical overview of banking in Zimbabwe is carried out. The impact of the regulatory and economic environment on the sector is assessed. An analysis of the structure of the banking sector facilitates an appreciation of the underlying forces in the industry.

Historical Background

At independence (1980) Zimbabwe had a sophisticated banking and financial market, with commercial banks mostly foreign owned. The country had a central bank inherited from the Central Bank of Rhodesia and Nyasaland at the winding up of the Federation.

For the first few years of independence, the government of Zimbabwe did not interfere with the banking industry. There was neither nationalisation of foreign banks nor restrictive legislative interference on which sectors to fund or the interest rates to charge, despite the socialistic national ideology. However, the government purchased some shareholding in two banks. It acquired Nedbank’s 62% of Rhobank at a fair price when the bank withdrew from the country. The decision may have been motivated by the desire to stabilise the banking system. The bank was re-branded as Zimbank. The state did not interfere much in the operations of the bank. The State in 1981 also partnered with Bank of Credit and Commerce International (BCCI) as a 49% shareholder in a new commercial bank, Bank of Credit and Commerce Zimbabwe (BCCZ). This was taken over and converted to Commercial Bank of Zimbabwe (CBZ) when BCCI collapsed in 1991 over allegations of unethical business practices.

This should not be viewed as nationalisation but in line with state policy to prevent company closures. The shareholdings in both Zimbank and CBZ were later diluted to below 25% each.

In the first decade, no indigenous bank was licensed and there is no evidence that the government had any financial reform plan. Harvey (n.d., page 6) cites the following as evidence of lack of a coherent financial reform plan in those years:

– In 1981 the government stated that it would encourage rural banking services, but the plan was not implemented.

– In 1982 and 1983 a Money and Finance Commission was proposed but never constituted.

– By 1986 there was no mention of any financial reform agenda in the Five Year National Development Plan.

Harvey argues that the reticence of government to intervene in the financial sector could be explained by the fact that it did not want to jeopardise the interests of the white population, of which banking was an integral part. The country was vulnerable to this sector of the population as it controlled agriculture and manufacturing, which were the mainstay of the economy. The State adopted a conservative approach to indigenisation as it had learnt a lesson from other African countries, whose economies nearly collapsed due to forceful eviction of the white community without first developing a mechanism of skills transfer and capacity building into the black community. The economic cost of inappropriate intervention was deemed to be too high. Another plausible reason for the non- intervention policy was that the State, at independence, inherited a highly controlled economic policy, with tight exchange control mechanisms, from its predecessor. Since control of foreign currency affected control of credit, the government by default, had a strong control of the sector for both economic and political purposes; hence it did not need to interfere.

Financial Reforms

However, after 1987 the government, at the behest of multilateral lenders, embarked on an Economic and Structural Adjustment Programme (ESAP). As part of this programme the Reserve Bank of Zimbabwe (RBZ) started advocating financial reforms through liberalisation and deregulation. It contended that the oligopoly in banking and lack of competition, deprived the sector of choice and quality in service, innovation and efficiency. Consequently, as early as 1994 the RBZ Annual Report indicates the desire for greater competition and efficiency in the banking sector, leading to banking reforms and new legislation that would:

– allow for the conduct of prudential supervision of banks along international best practice

– allow for both off-and on-site bank inspections to increase RBZ’s Banking Supervision function and

– enhance competition, innovation and improve service to the public from banks.

Subsequently the Registrar of Banks in the Ministry of Finance, in liaison with the RBZ, started issuing licences to new players as the financial sector opened up. From the mid-1990s up to December 2003, there was a flurry of entrepreneurial activity in the financial sector as indigenous owned banks were set up. The graph below depicts the trend in the numbers of financial institutions by category, operating since 1994. The trend shows an initial increase in merchant banks and discount houses, followed by decline. The increase in commercial banks was initially slow, gathering momentum around 1999. The decline in merchant banks and discount houses was due to their conversion, mostly into commercial banks.

Source: RBZ Reports

Different entrepreneurs used varied methods to penetrate the financial services sector. Some started advisory services and then upgraded into merchant banks, while others started stockbroking firms, which were elevated into discount houses.

From the beginning of the liberalisation of the financial services up to about 1997 there was a notable absence of locally owned commercial banks. Some of the reasons for this were:

– Conservative licensing policy by the Registrar of Financial Institutions since it was risky to licence indigenous owned commercial banks without an enabling legislature and banking supervision experience.

– Banking entrepreneurs opted for non-banking financial institutions as these were less costly in terms of both initial capital requirements and working capital. For example a merchant bank would require less staff, would not need banking halls, and would have no need to deal in costly small retail deposits, which would reduce overheads and reduce the time to register profits. There was thus a rapid increase in non-banking financial institutions at this time, e.g. by 1995 five of the ten merchant banks had commenced within the previous two years. This became an entry route of choice into commercial banking for some, e.g. Kingdom Bank, NMB Bank and Trust Bank.

It was expected that some foreign banks would also enter the market after the financial reforms but this did not occur, probably due to the restriction of having a minimum 30% local shareholding. The stringent foreign currency controls could also have played a part, as well as the cautious approach adopted by the licensing authorities. Existing foreign banks were not required to shed part of their shareholding although Barclay’s Bank did, through listing on the local stock exchange.

Harvey argues that financial liberalisation assumes that removing direction on lending presupposes that banks would automatically be able to lend on commercial grounds. But he contends that banks may not have this capacity as they are affected by the borrowers’ inability to service loans due to foreign exchange or price control restrictions. Similarly, having positive real interest rates would normally increase bank deposits and increase financial intermediation but this logic falsely assumes that banks will always lend more efficiently. He further argues that licensing new banks does not imply increased competition as it assumes that the new banks will be able to attract competent management and that legislation and bank supervision will be adequate to prevent fraud and thus prevent bank collapse and the resultant financial crisis. Sadly his concerns do not seem to have been addressed within the Zimbabwean financial sector reform, to the detriment of the national economy.

The Operating Environment

Any entrepreneurial activity is constrained or aided by its operating environment. This section analyses the prevailing environment in Zimbabwe that could have an effect on the banking sector.

Politico-legislative

The political environment in the 1990s was stable but turned volatile after 1998, mainly due to the following factors:

– an unbudgeted pay out to war veterans after they mounted an assault on the State in November 1997. This exerted a heavy strain on the economy, resulting in a run on the dollar. Resultantly the Zimbabwean dollar depreciated by 75% as the market foresaw the consequences of the government’s decision. That day has been recognised as the beginning of severe decline of the country’s economy and has been dubbed “Black Friday”. This depreciation became a catalyst for further inflation. It was followed a month later by violent food riots.

– a poorly planned Agrarian Land Reform launched in 1998, where white commercial farmers were ostensibly evicted and replaced by blacks without due regard to land rights or compensation systems. This resulted in a significant reduction in the productivity of the country, which is mostly dependent on agriculture. The way the land redistribution was handled angered the international community, that alleges it is racially and politically motivated. International donors withdrew support for the programme.

– an ill- advised military incursion, named Operation Sovereign Legitimacy, to defend the Democratic Republic of Congo in 1998, saw the country incur massive costs with no apparent benefit to itself and

– elections which the international community alleged were rigged in 2000,2003 and 2008.

These factors led to international isolation, significantly reducing foreign currency and foreign direct investment flow into the country. Investor confidence was severely eroded. Agriculture and tourism, which traditionally, are huge foreign currency earners crumbled.

For the first post independence decade the Banking Act (1965) was the main legislative framework. Since this was enacted when most commercial banks where foreign owned, there were no directions on prudential lending, insider loans, proportion of shareholder funds that could be lent to one borrower, definition of risk assets, and no provision for bank inspection.

The Banking Act (24:01), which came into effect in September 1999, was the culmination of the RBZ’s desire to liberalise and deregulate the financial services. This Act regulates commercial banks, merchant banks, and discount houses. Entry barriers were removed leading to increased competition. The deregulation also allowed banks some latitude to operate in non-core services. It appears that this latitude was not well delimited and hence presented opportunities for risk taking entrepreneurs. The RBZ advocated this deregulation as a way to de-segment the financial sector as well as improve efficiencies. (RBZ, 2000:4.) These two factors presented opportunities to enterprising indigenous bankers to establish their own businesses in the industry. The Act was further revised and reissued as Chapter 24:20 in August 2000. The increased competition resulted in the introduction of new products and services e.g. e-banking and in-store banking. This entrepreneurial activity resulted in the “deepening and sophistication of the financial sector” (RBZ, 2000:5).

As part of the financial reforms drive, the Reserve Bank Act (22:15) was enacted in September 1999.

Its main purpose was to strengthen the supervisory role of the Bank through:

– setting prudential standards within which banks operate

– conducting both on and off-site surveillance of banks

– enforcing sanctions and where necessary placement under curatorship and

– investigating banking institutions wherever necessary.

This Act still had deficiencies as Dr Tsumba, the then RBZ governor, argued that there was need for the RBZ to be responsible for both licensing and supervision as “the ultimate sanction available to a banking supervisor is the knowledge by the banking sector that the license issued will be cancelled for flagrant violation of operating rules”. However the government seemed to have resisted this until January 2004. It can be argued that this deficiency could have given some bankers the impression that nothing would happen to their licences. Dr Tsumba, in observing the role of the RBZ in holding bank management, directors and shareholders responsible for banks viability, stated that it was neither the role nor intention of the RBZ to “micromanage banks and direct their day to day operations. “

It appears though as if the view of his successor differed significantly from this orthodox view, hence the evidence of micromanaging that has been observed in the sector since December 2003.

In November 2001 the Troubled and Insolvent Banks Policy, which had been drafted over the previous few years, became operational. One of its intended goals was that, “the policy enhances regulatory transparency, accountability and ensures that regulatory responses will be applied in a fair and consistent manner” The prevailing view on the market is that this policy when it was implemented post 2003 is definitely deficient as measured against these ideals. It is contestable how transparent the inclusion and exclusion of vulnerable banks into ZABG was.

A new governor of the RBZ was appointed in December 2003 when the economy was on a free-fall. He made significant changes to the monetary policy, which caused tremors in the banking sector. The RBZ was finally authorised to act as both the licensing and regulatory authority for financial institutions in January 2004. The regulatory environment was reviewed and significant amendments were made to the laws governing the financial sector.

The Troubled Financial Institutions Resolution Act, (2004) was enacted. As a result of the new regulatory environment, a number of financial institutions were distressed. The RBZ placed seven institutions under curatorship while one was closed and another was placed under liquidation.

In January 2005 three of the distressed banks were amalgamated on the authority of the Troubled Financial Institutions Act to form a new institution, Zimbabwe Allied Banking Group (ZABG). These banks allegedly failed to repay funds advanced to them by the RBZ. The affected institutions were Trust Bank, Royal Bank and Barbican Bank. The shareholders appealed and won the appeal against the seizure of their assets with the Supreme Court ruling that ZABG was trading in illegally acquired assets. These bankers appealed to the Minister of Finance and lost their appeal. Subsequently in late 2006 they appealed to the Courts as provided by the law. Finally as at April 2010 the RBZ finally agreed to return the “stolen assets”.

Another measure taken by the new governor was to force management changes in the financial sector, which resulted in most entrepreneurial bank founders being forced out of their own companies under varying pretexts. Some eventually fled the country under threat of arrest. Boards of Directors of banks were restructured.

Economic Environment

Economically, the country was stable up to the mid 1990s, but a downturn started around 1997-1998, mostly due to political decisions taken at that time, as already discussed. Economic policy was driven by political considerations. Consequently, there was a withdrawal of multi- national donors and the country was isolated. At the same time, a drought hit the country in the season 2001-2002, exacerbating the injurious effect of farm evictions on crop production. This reduced production had an adverse impact on banks that funded agriculture. The interruptions in commercial farming and the concomitant reduction in food production resulted in a precarious food security position. In the last twelve years the country has been forced to import maize, further straining the tenuous foreign currency resources of the country.

Another impact of the agrarian reform programme was that most farmers who had borrowed money from banks could not service the loans yet the government, which took over their businesses, refused to assume responsibility for the loans. By concurrently failing to recompense the farmers promptly and fairly, it became impractical for the farmers to service the loans. Banks were thus exposed to these bad loans.

The net result was spiralling inflation, company closures resulting in high unemployment, foreign currency shortages as international sources of funds dried up, and food shortages. The foreign currency shortages led to fuel shortages, which in turn reduced industrial production. Consequently, the Gross Domestic Product (GDP) has been on the decline since 1997. This negative economic environment meant reduced banking activity as industrial activity declined and banking services were driven onto the parallel rather than the formal market.

As depicted in the graph below, inflation spiralled and reached a peak of 630% in January 2003. After a brief reprieve the upward trend continued rising to 1729% by February 2007. Thereafter the country entered a period of hyperinflation unheard of in a peace time period. Inflation stresses banks. Some argue that the rate of inflation rose because the devaluation of the currency had not been accompanied by a reduction in the budget deficit. Hyperinflation causes interest rates to soar while the value of collateral security falls, resulting in asset-liability mismatches. It also increases non-performing loans as more people fail to service their loans.

Effectively, by 2001 most banks had adopted a conservative lending strategy e.g. with total advances for the banking sector being only 21.7% of total industry assets compared to 31.1% in the previous year. Banks resorted to volatile non- interest income. Some began to trade in the parallel foreign currency market, at times colluding with the RBZ.

In the last half of 2003 there was a severe cash shortage. People stopped using banks as intermediaries as they were not sure they would be able to access their cash whenever they needed it. This reduced the deposit base for banks. Due to the short term maturity profile of the deposit base, banks are normally not able to invest significant portions of their funds in longer term assets and thus were highly liquid up to mid-2003. However in 2003, because of the demand by clients to have returns matching inflation, most indigenous banks resorted to speculative investments, which yielded higher returns.

These speculative activities, mostly on non-core banking activities, drove an exponential growth within the financial sector. For example one bank had its asset base grow from Z$200 billion (USD50 million) to Z$800 billion (USD200 million) within one year.

However bankers have argued that what the governor calls speculative non-core business is considered best practice in most advanced banking systems worldwide. They argue that it is not unusual for banks to take equity positions in non-banking institutions they have loaned money to safeguard their investments. Examples were given of banks like Nedbank (RSA) and J P Morgan (USA) which control vast real estate investments in their portfolios. Bankers argue convincingly that these investments are sometimes used to hedge against inflation.

The instruction by the new governor of the RBZ for banks to unwind their positions overnight, and the immediate withdrawal of an overnight accommodation support for banks by the RBZ, stimulated a crisis which led to significant asset-liability mismatches and a liquidity crunch for most banks. The prices of properties and the Zimbabwe Stock Exchange collapsed simultaneously, due to the massive selling by banks that were trying to cover their positions. The loss of value on the equities market meant loss of value of the collateral, which most banks held in lieu of the loans they had advanced.

During this period Zimbabwe remained in a debt crunch as most of its foreign debts were either un-serviced or under-serviced. The consequent worsening of the balance of payments (BOP) put pressure on the foreign exchange reserves and the overvalued currency. Total government domestic debt rose from Z$7.2 billion (1990) to Z$2.8 trillion (2004). This growth in domestic debt emanates from high budgetary deficits and decline in international funding.

Socio-cultural

Due to the volatile economy after the 1990s, the population became fairly mobile with a significant number of professionals emigrating for economic reasons. The Internet and Satellite television made the world truly a global village. Customers demanded the same level of service excellence they were exposed to globally. This made service quality a differential advantage. There was also a demand for banks to invest heavily in technological systems.

The increasing cost of doing business in a hyperinflationary environment led to high unemployment and a concomitant collapse of real income. As the Zimbabwe Independent (2005:B14) so keenly observed, a direct outcome of hyperinflationary environment is, “that currency substitution is rife, implying that the Zimbabwe dollar is relinquishing its function as a store of value, unit of account and medium of exchange” to more stable foreign currencies.

During this period an affluent indigenous segment of society emerged, which was cash rich but avoided patronising banks. The emerging parallel market for foreign currency and for cash during the cash crisis reinforced this. Effectively, this reduced the customer base for banks while more banks were coming onto the market. There was thus aggressive competition within a dwindling market.

Socio-economic costs associated with hyperinflation include: erosion of purchasing power parity, increased uncertainty in business planning and budgeting, reduced disposable income, speculative activities that divert resources from productive activities, pressure on the domestic exchange rate due to increased import demand and poor returns on savings. During this period, to augment income there was increased cross border trading as well as commodity broking by people who imported from China, Malaysia and Dubai. This effectively meant that imported substitutes for local products intensified competition, adversely affecting local industries.

As more banks entered the market, which had suffered a major brain drain for economic reasons, it stood to reason that many inexperienced bankers were thrown into the deep end. For example the founding directors of ENG Asset Management had less than five years experience in financial services and yet ENG was the fastest growing financial institution by 2003. It has been suggested that its failure in December 2003 was due to youthful zeal, greed and lack of experience. The collapse of ENG affected some financial institutions that were financially exposed to it, as well as eliciting depositor flight leading to the collapse of some indigenous banks.

Trade, Jobs and Growth: Facts Before Folly

Trade.

Our new President rails against it, unions denigrate it, and unemployed blame it. And not without reason. On trade, jobs and economic growth, the US has performed less than stellar.

Let’s look at the data, but then drill down a bit to the nuances. Undirected bluster to reduce trade deficits and grow jobs will likely stumble on those nuances. Rather, an appreciation of economic intricacies must go hand-in-hand with bold action.

So let’s dive in.

The US Performance – Trade, Jobs and Growth

For authenticity, we turn to (by all appearances) unbiased and authoritative sources. For trade balances, we use the ITC, International Trade Commission, in Switzerland; for US employment, we use the US BLS, Bureau of Labor Statistics; and for overall economic data across countries we drawn on the World Bank.

Per the ITC, the United State amassed a merchandise trade deficit of $802 billion in 2015, the largest such deficit of any country. This deficit exceeds the sum of the deficits for the next 18 countries. The deficit does not represent an aberration; the US merchandise trade deficit averaged $780 billion over the last 5 years, and we have run a deficit for all the last 15 years.

The merchandise trade deficit hits key sectors. In 2015, consumer electronics ran a deficit of $167 billion; apparel $115 billion; appliances and furniture $74 billion; and autos $153 billion. Some of these deficits have increased noticeably since 2001: Consumer electronics up 427%, furniture and appliances up 311%. In terms of imports to exports, apparel imports run 10 times exports, consumer electronics 3 times; furniture and appliances 4 times.

Autos has a small silver lining, the deficit up a relatively moderate 56% in 15 years, about equal to inflation plus growth. Imports exceed exports by a disturbing but, in relative terms, modest 2.3 times.

On jobs, the BLS reports a loss of 5.4 million US manufacturing jobs from 1990 to 2015, a 30% drop. No other major employment category lost jobs. Four states, in the “Belt” region, dropped 1.3 million jobs collectively.

The US economy has only stumbled forward. Real growth for the past 25 years has averaged only just above two percent. Income and wealth gains in that period have landed mostly in the upper income groups, leaving the larger swath of America feeling stagnant and anguished.

The data paint a distressing picture: the US economy, beset by persistent trade deficits, hemorrhages manufacturing jobs and flounders in low growth. This picture points – at least at first look – to one element of the solution. Fight back against the flood of imports.

The Added Perspectives – Unfortunate Complexity

Unfortunately, economics rarely succumbs to simple explanations; complex interactions often underlie the dynamics.

So let’s take some added perspectives.

While the US amasses the largest merchandise trade deficit, that deficit does not rank the largest as a percent of Gross Domestic Product (GDP.) Our country hits about 4.5% on that basis. The United Kingdom hits a 5.7% merchandise trade deficit as a percent of GDP; India a 6.1%, Hong Kong a 15% and United Arab Emirates an 18%. India has grown over 6% per year on average over the last quarter century, and Hong Kong and UAE a bit better than 4%. Turkey, Egypt, Morocco, Ethiopia, Pakistan, in all about 50 countries run merchandise trade deficits as a group averaging 9% of GDP, but grow 3.5% a year or better.

Note the term “merchandise” trade deficit. Merchandise involves tangible goods – autos, Smartphones, apparel, steel. Services – legal, financial, copyright, patent, computing – represent a different group of goods, intangible, i.e. hard to hold or touch. The US achieves here a trade surplus, $220 billion, the largest of any country, a notable partial offset to the merchandise trade deficit.

The trade deficit also masks the gross dollar value of trade. The trade balance equals exports minus imports. Certainly imports represent goods not produced in a country, and to some extent lost employment. On the other hand, exports represent the dollar value of what must be produced or offered, and thus employment which occurs. In exports, the US ranks first in services and second in merchandise, with a combined export value of $2.25 trillion per year.

Now, we seek here not to prove our trade deficit benevolent, or without adverse impact. But the data do temper our perspective.

First, with India as one example, we see that trade deficits do not inherently restrict growth. Countries with deficits on a GDP basis larger than the US have grown faster than the US. And further below, we will see examples of countries with trade surpluses, but which did not grow rapidly, again tempering a conclusion that growth depends directly on trade balances.

Second, given the importance of exports to US employment, we do not want action to reduce our trade deficit to secondarily restrict or hamper exports. This applies most critically where imports exceed exports by smaller margins; efforts here to reduce a trade deficit, and garner jobs, could trigger greater job losses in exports.

Job Loss Nuances

As note earlier, manufacturing has endured significant job losses over the last quarter century, a 30% reduction, 5.4 million jobs lost. Key industries took even greater losses, on a proportional basis. Apparel lost 1.3 million jobs or 77% of its US job base; electronics employment dropped 540 thousand or 47%, and paper lost 270 thousand jobs, or 42%.

A state-by-state look, though, reveals some twists. While the manufacturing belt receives attention, no individual state in that belt – Pennsylvania, Ohio, Illinois, Indiana and Michigan – suffered the greatest manufacturing loss for a state. Rather, California lost more manufacturing jobs than any state, 673 thousand. And on a proportional basis, North Carolina, at a manufacturing loss equal to 8.6% of its total job base, lost a greater percent than any of the five belt states.

Why then do California and North Carolina not generally arise in discussions of manufacturing decline? Possibly due to their generating large numbers of new jobs.

The five belts states under discussion lost 1.41 million manufacturing jobs in the last quarter century. During that period, those five states offset those loses and grew the job base 2.7 million new jobs, a strong response.

Similarly, four non-belt states – California and North Carolina, mentioned above, plus Virginia and Tennessee – lost 1.35 million manufacturing jobs. Those states, however, offset those loses and generated a net of 6.2 million new jobs.

The belt states thus grew 1.9 jobs per manufacturing job lost, while the four states grew 4.6 jobs per manufacturing job lost.

Other states mimic this disparity. New York and New Jersey ran a job growth to manufacturing job lost ratio of under two (1.3 and 2.0 respectively), Rhode Island less than one (at .57), and Massachusetts just over two (at 2.2). Overall, the 8 states of the Northeast (New England plus New York and New Jersey) lost 1.3 million manufacturing jobs, equal to 6.5% of the job base, but grew the job base by only 1.7 jobs per manufacturing job loss.

In contrast, seven states that possess heavy manufacturing employment, and losses, but lie outside the belt, the Northeast, and the CA/VA/TN/NC group, grew 4.6 jobs per manufacturing job lost. These seven are Maryland, Georgia, South Carolina. Mississippi, Alabama, Missouri, and Arizona.

For the four groups, here are the job growth percentages, over the last quarter century.

Northeast                        12.6%                      8 States

Belt 12.3% 5 States

VA/TN/CA/NC 30.2% 4 States

Group of Seven 27.3% 7 States

Imports definitely triggered manufacturing job loss. But states in the last two groups rebounded more strongly. In a particularly good recovery, North Carolina, once heavy in furniture and apparel, lost 44% of its manufacturing jobs, but did not see stagnation of its economic base.

Why? Manufacturing loss due to imports stands as only one determinant of overall job growth. Other factors – climate, taxes, cost of living, unionization (or lack of), congestion (or lack of), government policies, educational base, population trends – impact job creation equally or more. North Carolina for example, features universities and research centers; moderately sized and relatively uncongested cities (Charlotte and Raleigh); low unionization; temperate winters; and so on.

This does not downplay the hardships that individuals, families and communities experience from manufacturing job loss. And job growth in other sectors does not offer a direct cure for manufacturing declines. The higher paying jobs in other sectors often require college or advanced degrees, something those losing a manufacturing job may not possess.

A note of caution though. Even absent trade, technology and automation drive growing requirements for college education. Manufacturing workers directly build less; rather workers control machines, complex computer-controlled machines, which build. Operating those machines, designing those machines, programming those machines, that type work increasingly involves advanced degrees.

Think historically. Automation reduced farm employment, and all but made extinct elevator operators, ice deliverers and telephone switchboard cord workers. Similarly, automation today has and will continue to impact manufacturing employment.

Trade Deficits and National Growth

Let’s return now to country-to-country comparisons, to search for added insights. Earlier we saw that countries with trade deficits had achieved strong economic growth. So a deficit does not inherently create economic stagnation.

Let’s now look at the flip side – do trade surpluses trigger growth. China certainly has achieved both. They have grown, on average, an amazing 9-10% per year for the last quarter century, and have amazed a trade surplus with the world of $325 billion per year over the last five years.

Other countries have achieved the same dual success, of trade surpluses and strong growth. Korea, Ireland, Singapore, Nigeria, are among a list of ten major countries with consistent trade surpluses and strong growth.

A wider scan though, across approximately 140 countries for which the World Bank/ITC report data on both GDP growth and trade, shows more complexity. In particular, another group of 18 countries achieved trade surpluses, but did not growth appreciably more than the US.

Germany, Denmark, Sweden, Switzerland, and Brazil, among others, populate this group. Overall, this group attains trade surpluses at five percent of GDP, but has grown on average only about 1.5% in real terms over the last quarter century. This growth underperforms the US.

In a further look, three countries with apparel imports to the US – Vietnam, Pakistan and Bangladesh – have extraordinary growth, but have trade deficits. Overall, across the 140 countries, no detectable relation exists between trade surpluses/deficits and growth.

Productivity

What does show a relation to growth, in the World Bank data? Per capita GDP, in a counter intuitive way. Countries with lower per capital GDP have grown faster, while those with the highest per capita have averaged a meager 2% growth over the last 15-25 years.

This reverse relation, higher per capita aligned with lower growth, highlights a major, if not the major, determinant of growth, productivity. GDP represents that total of what a country produces. And for a given worker base, GDP can grow only if the workers produce more per worker, i.e. improve productivity.

Now compare the opportunity to apply efficiency gains in low per capita verses high per capita countries. Though not universally true, in many parts of low per capita countries good opportunities exist due to the limited adoption of the best available means. Efficiency gains in farming, and in manufacturing, and in distribution, basically in almost all facets of the economy, can be achieved by adopting efficiency measures already available from and proven by other countries.

Not so in high per capita countries. Such countries, in achieving high per capita GDP, their high output per worker, have likely already deployed available efficiency techniques. Efficiency gains cannot simply be pulled “off-the-shelf” or brought in from other countries or firms. Rather such gains must arise from, often complex and pain-taking, research, trial and analysis.

Productivity alone certainly does not determine economic growth. Population trends, labor force participation, education infrastructure, capacity utilization, these and other items also enable or retard economic growth. But productivity provides the base upon which those other factors build.

North America

We should study a region receiving strong attention, the North American market. Much discussion has been directed at the trade in that market and the impact of trade agreements.

In the last 15 years, rather than increase, the US combined trade deficit with Mexico and Canada has decreased $5 billion per year, from $87 billion to $82 billion. This decline consists of a $35 billion decrease in the deficit with Canada and a $30 billion increase with Mexico. At a product level, the US trade deficit with Mexico/Canada combined increased for autos ($23 billion a year increase), oil ($11 billion), and electronics ($5 billion); and decreased for chemicals ($14 Billion), aircraft/ships/trains ($7 billion) and apparel ($6 billion). The deficit also decreased for paper products, lumber, and metals, and increased for furniture, agriculture and pharmaceuticals.

The $5 billion shift in the deficit masks the rather enormous growth on a gross basis of trade. Imports to the US from Canada and Mexico increased $245 billion between 2001 and 2015, and exports increased $251 billion in the same period. Note the balance between the increases, with export growth matching, actually exceeding, import growth. This speaks of a relative balance in employment impacts.

For example, North American trade can involve US sending medical equipment to Mexico, equipment not available from a Mexican producer, and Mexico sending agricultural goods to the US, goods out of season for US farms. Both countries benefit with added products, and both benefit from added employment. Even if imports from Mexico substitute for goods that could have been produced in the US (i.e. the imports hurt American workers), the relative balance of import/export growth in North America means this substitution offsets.

That relative balance is important. We will see later a lack of such balance with China.

North American trade also builds efficient supply chains. We can picture that US efficiently produced chemicals feed into low cost production of auto parts in Mexico, while American engineers in Michigan design cars which will use engines from Canada and plastic parts from Mexico for assembly in Ohio. Certainly we would like the parts made in Mexico to rather be made in America, and same with the engines, but the US competes with the world in the auto market. Absent efficient supply chains, US autos will become increasingly non-competitive in the world market. China has yet to significantly penetrate the American auto market, and efficient North American supply chains will provide a defense against the Chinese juggernaut.

Trade also lowers prices. While lower prices lack the visceral impact of a closing plant, we can picture that American sub-compact cars, made lower in cost through production across North America, remaining competitive with imports. Thus a US college graduate buys a Ford, Dodge, or Chevy, rather than a Korean import.

Further, North American trade gives American export producers greater economies of scale. So a Canadian or Mexican outdoor enthusiast buys an American made high-tech hiking boot, rather than one made in Asia because the American producer gained efficiencies by selling into the larger North American market.

What do we make of this? On balance, neutral. Some pluses, some minuses. Mexico has taken manufacturing jobs, but exports to Mexico offer job opportunities. We compete with Mexican and Canadian products, but American producers sell to a larger market. We run a deficit, but the deficit has stabilized. Imports have risen, but exports more so. And all involved obtain lower prices and integrated supply chains.

Can trade agreements in North America be improved? Certainly. Can American companies bring a finer pencil to cost reduction to keep manufacturing in America? Certainly. Should harsh publicity and government review of plant closings bring counter pressure on corporations driven by Wall Street interests? Certainly.

But on balance North American trade impacts America in a neutral way.

But this pertains to North America. Next, Asian Pacific. The impact reigns not so neutral, at least with respect to one country.

Asian Pacific

One country, China.

China dominates.

China dominates the trade dollars with the US, with the whole word for that matter.

China ranks as the number one merchandise export country, with $2.2 billion in 2015. Since 2001, China has grown its exports by 750%. China has the highest trade surplus of any country, with an average surplus of $325 billion over the last five years, and $600 billion in 2015 as dropping oil prices trimmed the value of Chinese oil imports.

As for the US, China accumulated a 2015 trade surplus of $386 billion. That Chinese trade surplus with the US (aka US trade deficit with China) represents 48% of the total US merchandise trade deficit for that year. Japan, which in 2001 garnered 16% of the US trade deficit, dropped to 9% by 2015. Mexico hit 7.0% of our deficit in 2001, and despite rhetoric took only 7.6% in 2015. Canada dropped from 12.6% to 2.6%. The Chinese portion of our trade deficit dwarfs that of any other country.

Between 2001 and 2015 the US deficit with China increased by $296 billion. That represents a mind-numbing 84% of the total increase in the US deficit in that period. That means the remaining 16% was spread across our almost 225 other trading partners.

A key feature of trade involves the ratio of imports to exports. We discussed that in the North American trade section. If that ratio, of imports to exports, stands near one, i.e. our imports do not radically exceed exports, then the trade export flow to that country nominally generates employment in the US offsetting lost employment opportunity of the imports. With Canada we run 1.1, and Mexico 1.25 (and 0.7 and 1.22 on the increase since 2001), so that as explained above, our trade flows with those countries balance, and the employment impacts stays approximately neutral.

China does not fit that mold. We run an import to exports ratio with China of 4.3, or $4.30 of imports to every $1.00 of exports. Thus Chinese imports reduce employment potential with no offsetting employment generated by exports to China.

Removal of China from our trade statistics further highlights the singular impact of China. Removing China, and adding in services, the US exported $2.1 trillion in products and services in 2015, against imports of $2.3 trillion. The ratio of imports to exports, on this basis, drops to a favorable 1.1, and the $200 billion deficit runs at only a bit bigger than 1% of GDP. With China removed, the countries with which the US runs the largest trade deficits are Germany and Japan. We should be able to compete with those two developed countries, without concern about low wage labor.

We can compare the Chinese trade dominance in the US with the lack of dominance of other Asian and Asian Pacific countries. India provides a critical example, as it parallels China as a large developing rapidly growing Asian country. China, as noted before, achieved a world trade surplus of $325 billion per year over five years; India a trade deficit of $78 billion a year (5 year average). With respect to the US, India garnered a 2015 surplus of $25 billion, a positive, but quite small compared to $386 billion mentioned above of China.

A wider look across Asia shows the same. Combined, the 13 major Asian countries outside China and India (for example Japan, Australia, Indonesia, Philippines, Pakistan) run a world trade deficit, as a last five year average, of $45 billion. The combined GDP of these countries equals China’s, but the US trade deficit with the 13 amounts to about a third of China’s, and importantly the increase in the deficit since 2001 hits a modest $29 billion, one-tenth China’s increase. The key US import/export ratio with the 15 stands at 1.6, not outstanding, but less than the 4.3 with China.

China then has unmistakably outpaced it Asian neighbors in trade success, both with the world and with the US.

While many factors contributed to Chinese success, unique trade deals do not appear among them. True China entered the World Trade Organization in 2001, but essentially every major country belongs. China just managed trade and economic growth better. Other countries, India, Korea and Indonesia mentioned above, performed much less spectacularly, facing nominally the same opportunities and constraints as China.

China’s dominance centers on four key areas: electronics, furniture/appliance, apparel and consumer products. (Call these the “four key groups”). In these four key groups they ran a trade surplus with the world of over $750 billion (2015 year). Astounding.

Can the US, or any non-Asian country take over Chinese dominance in the four key groups? The train has likely left the station for now. China has created an intricate supply chain, an extensive distribution infrastructure, and a large manufacturing base, in the four key areas. These strengths are buttressed by their possession of a large, low cost labor pool. To the degree China falters (for example with rising labor costs), other Asian countries appear ready to take up slack.

The US can certainly grow its capabilities in these four key groups, and forestall and even roll back parts of the Chinese incursion. But overtaking China would likely involve years of steep tariffs to protect the American turnaround in the four key areas. We can imagine trade wars, likely ugly. And we can certainly imagine significantly higher prices, both from what would initially and maybe ultimately be high costs in US production, and from the price impact of tariffs on imports.

But China does not dominate everywhere. They rate as minor players in a number of key sectors – autos, aircraft, chemicals, agriculture, pharmaceuticals and importantly fuel. China runs deficits in these areas.

Conclusions – at the Point

What can we conclude so far?

A singular focus on trade deficit reduction will not assuredly stimulate economic growth or job creation. Rather, economic growth depends heavily on productivity; and high per capita countries on average grow slower since productivity increases must arise via innovation and not adoption. And state-by-state data show that job growth depends not just on manufacturing and exports but many factors.

The data also show complex, intertwined trade flows in North America, and a lack of devastatingly large deficits. Rather, the net deficit has remained essentially level since 2001, and the integration of the North American markets likely helps North America remain competitive, for example in autos, in the world market. Further, given the close balance of imports to exports in that market for the US, an all-out focus on reducing the trade deficits in North America will likely decrease export employment to the same extent that reduced deficits improve that employment.

But a clear finding involves China. China has built a dominance in four key sectors, a dominance that rests now on several decades of integration and investment. A frontal assault on the Chinese juggernaut in those areas likely wastes resources. Also after China, Japan and Germany, having no wage advantage, still hold the next largest trade deficits with the US.

Oil, Auto, Areas of Strength, Divergence of Interest, and Export Deficiency

Within the US trade deficit hides an amazing story, oil. In 2008 our trade deficit in oil and related soared to over $400 billion. In 2015 that deficit shrank to under $100 billion.

This story shows petroleum clearly represents an area where the US possesses strong resources, advanced technology and deep infrastructure. Currently the US runs a net trade deficit in oil. However, the amazing performance since 2008 points to petroleum as an area for further reduction in imports, and for actual net export growth.

Add to petroleum, the sectors chemicals, agriculture, pharmaceuticals, and even advance industrial and medical equipment. Thus US runs surpluses. And of course services. The US has tripled it trade surplus in services in the last 10 years.

Autos represents another success. Recall earlier that, unlike apparel, or electronics, or furniture, or paper, where imports devastated manufacturing employment and trade deficits increase by large multiples, auto trade deficits grew modestly. Auto manufacturing lost only 14% of its employment in the last 25 years.

And critically the integrated North America market arguably assists in the US capabilities. As for China, they run a trade deficit in autos. And US brands received wide acceptance and high sales in China. Autos, unlike say socks, or even Smartphones, involve complex manufacturing and components, thus China can not immediately close its manufacturing gap in autos.

Realize, though, a divergence of interest. Global corporations seeks financial goals, regardless of geography. Workers, and governments, seek jobs, with specific regard to geography. A divergence ensues. American workers desire the US auto makers to produce Chinese bound cars in America, while the auto makers, seeking financial goals, produce those Chinese cars in China.

We also have another, surprising, divergence. While the US in dollar terms ranks high in imports and exports, as a percent of GDP the US stand apart in how low it ranks. US imports comprise but 12% of GDP, among the lowest percentage of all countries. On the export side, US exports comprise but 8% of GDP, not just among the lowest but just about the lowest of any country.

This perspective points to a different approach to manufacturing jobs in trade intensive industries.

Compete, not Confrontation with Trade Wars

What now emerges for our look at trade flows, jobs and economic growth?

First, if we desire overall American economic growth, do not focus first on trade. Trade can, but will not assuredly, stimulate overall growth. Rather, for general growth, take action on productivity (i.e. to jump start more output per worker), or stimulate demand (to pull more workers into the labor force and/or increase work hours per worker.)

But overall growth can leave groups of workers behind, including those employed in traditional manufacturing jobs in trade sensitive industries. True, workers can move to a state which has seen job growth, and can get the necessary training and education to transition to a non-manufacturing job. We should, however, do better than just expect the workers themselves to deal with globalization and automation.

We all, in the form of our government, should help, with appropriate action to stimulate manufacturing employment.

What action? Well, do not pick a trade fight with Mexico. We export about as much as we import, so a fight risks as much as it might gain. And we need a unified North America market to build the supply chains and achieve the economies of scale needed to complete globally.

This does not preclude blunt, frank discussions, and even measures, but with the realization we want Mexico as a partner.

Do not mount a frontal assault on Chinese imports. Certainly, the US can sustain and even expand our apparel production, or furniture making, and electronics assembly, even with Chinese strength here. We can not though, beat back or overtake the well-developed, low wage cost, integrated production base of China and Southeast Asia.

What can we do? Boost exports. America ranks terribly low in export percentage of GDP. And America generates products other countries desire. China values American car brands, the world needs geopolitically neutral oil, our industrial equipment and medical technology vie world-wide, American designer furniture and custom apparel can still compete, and our natural gas feedstocks allow low cost, high value chemical production.

How can public policy boost exports, i.e. align corporate and national interest? In a way that might be an unusual twist. Allow corporations to bring back – untaxed – the billions in un-repatriated profits parked in foreign countries. But only if they invest the profits in manufacturing and similar job creation.

We must proceed with caution here as WTO rules restrict direct subsidization of exports. This special tax-free incentive thus would focus on jobs, with exports a means by which corporations could generate sales to support jobs.

Software companies hold the most un-repatriated profits, you might say. And software development provides only a poor opportunity for displaced manufacturing workers.

However, software will drive (literally) future self-driving cars. Unlike Smartphones, where China beat the US, and the world, in production, America appears at or near the fore front in development of self-driving cars, and then hopefully production. Partnerships between software and auto corporations makes sense, and thus a repatriation incentive can advance such partnerships.

What else to spur exports? Publicize corporate performance. A rather obscure provision, Part 583, provides an example. That rule requires auto manufacturers to publicize the American and Canadian content of cars. For example, Mitsubishi, Audi, Volkswagen, Volvo, Mazda, Kia, among others, perform horribly in this metric, less than 10%. Honda, in contrast, reaches over 50%.

But I sense few follow these statistics. Thus, Part 583 requires supercharging.

Very simply, expand the rule, dramatically. Specify that all major companies, Walmart, GE, Exxon/Mobil, automakers, and on and on, report key metrics like local content percentages, percent of foreign sales produced in the US, and similar items.

These two proposals, one for repatriation incentives and one for Part 583 expansion, are offered as real candidates for action. But any equivalent action can be taken. The key lies in the strategy. Do not start confrontations with Mexico and China over imports. Certainly stem the tide, and aggressively negotiate.

But do not retaliate. Do not start trade wars. Rather, especially given the export deficient stature of the US, focus on expanding exports to Mexico, China, and other countries, from sectors of American strength.

Look forward more, and backward less. We can not go back and become the electronics assembler of the world. We can go forward to excel in design and production of self-driving cars, of advanced aircraft and rockets, of both high volume and specialty chemicals, and in services, like software, architecture, law, environmental control.

Final words? Mexico provides a partner, not a foe. China offers a market, not an enemy. For plant closings, certainly bring scrutiny. On corporations, publicize export/import data. Negotiate hard. Compete aggressively. Boost exports with wise incentives.

But don’t pick fights. And don’t start trade wars. Be tough. But also wise.

Formulation of Coaching Themes

Life and Personality Development can be the most complex coaching theme because each person is unique. Life is an evolving project. We must make it happen. Coaching assists people in making choices that make them happy. There are no right or wrong answers, though. There are only choices but the coach does not make choices for the client. He/she facilitates the process. Each person is unique, and requires coaching intervention that responds to such uniqueness. The coach assists clients in reflecting on their personal values, health, life styles, etc. He/she may use tools like Emotional Intelligence (EQ) to help the client develops self awareness, self management, social awareness, and relationship management, etc. The coach may also facilitate the insights into personal branding and image building.

Youth Development: Coaching the youth does not mean taking over and running their lives. It is about creating the opportunity for them to engage with themselves and their peers. They are helped to make sense of all the pressures of life. The coach is there to challenge and interest them in their development journey.

The youth are the leaders of the future. They deserve to be treated like we would treat any candidate of a succession planning in any organization, institution, and company. Their leadership programmes could take a specialist dimension, for example entrepreneurship development. The majority of the youth respond positively to the coaching programmes dedicated to the entrepreneurship development. Today entrepreneurship opportunities for the youth are mostly in the technology sector. The fourth industrial revolution is the cause of this. Entrepreneurship is the most direct option to employment for the youth. It is important for the youth to make a shift and consider it not as a means of survival but an opportunity to innovate solutions that mitigate the challenges in the society. The coaches must challenge the youth to explore many options about their future. We do not expect them to jump certain stages of their development and become adults too soon. They must enjoy their life journey. However the business case for early youth leadership and entrepreneurship development is very strong. We are laying foundation for their future responsibilities as entrepreneurs and leaders in the society.

Entrepreneurship coaching is a kind of a business coaching but it focuses on the unique businessperson called an entrepreneur. An entrepreneur identifies challenges, sources solutions, products, services and create value.

Whereas the coach does not have to have practiced entrepreneurship, he/she must understand the context in which an entrepreneurship coaching takes place. The clear objective is to produce or facilitate the development of an entrepreneur and enterprise through coaching. That is what Entrepreneurship Development Coaching is all about. The proof of a successful entrepreneurship development coaching is a functioning enterprise and a highly capable entrepreneur. The approach and tools that the coach uses are informed by the stage at which the entrepreneur and the enterprise are in their life cycles.

Coaching a start-up is not the same as coaching a seasoned entrepreneur who is looking at growing the market share, renewal and diversification of the product or service offerings. The coaching methods may be the same, but the approach must respond to the circumstances facing the client (coachee). The entrepreneur is challenged to master the logical steps in exploring and resolving the problems.

Celebrity Status Management: Someone is referred to as a celebrity because he/she is being celebrated by the society. There is something unique or particular that distinguishes this person from the society. People do not necessarily know why they are celebrities. They have not interrogated their distinguishing factor and whether they would like to be associated with it or not. So, being referred to as a celebrity is subjective. It depends on the standard the society applies. It is important to know that you can choose to be a normal person irrespective of how the society sees you. You choose to remain who you are. It is a choice you must make. Being a celebrity has its own pressures and risks. You give away your privacy; have personal safety and security risks to cope with; loses touch with reality; removing oneself from ordinary people; temptation to looking down at people; being aloof; misplaced self-worth; attracting wrong friends (and attention); developing fake identity, etc.

Diversity Management & Inclusion: We are different by birth and acquired characteristics. However, that does not justify rejecting each other on the basis of our differences. Human beings are able to unite around their differences. In fact we are attracted to each other because of our differences. This is what makes us pleasant species. We are adaptable to differences. The Diversity Management & Inclusion Coaching helps the clients in learning to value each other and their differences. The understanding and accommodating of each other’s differences is not the end of it. We must learn to appreciate our diversity. This is crucial, especially at the workplaces where we are given the opportunity to gain value from our differences. It is only when there is harmony at the workplace that we reach our highest potential, become productive, and increase our levels of performance. Diversity Management & Inclusion is not a nice to have intervention. It must be part of the company’s change management, transformation, and strategy. For the first time in human history we have all the generations at the workplace at the same time.

Management and Leadership: The management and leadership layers in an organization are the traditional recipients of coaching intervention. But it has never been more necessary like it is today to coach them in coping with the complexity they face. Whereas traditionally coaching was offered for their professional development, today they are offered coaching to support the business growth. Their styles have direct impact on the talent they manage and lead. Hence the saying that talent does not leave the company, it leaves the managers (and of course the leaders). The manner in which people are managed and led in organizations determines the success or failure of such organizations. The management and leadership is coached to successfully give the organization its future strategic direction, cope with the business complexity, lead, and guide the implementation of the corporate strategy. They are also responsible to equip the organization in the implementation of its business strategy. They are assisted, through coaching, in carrying out the mandate of the shareholders. This is done in partnership with all the internal and external stakeholders.

Change Management and Transformation is one of the most common themes in the coaching space. The only thing constant in our lives and in business is change. Change Management is the strategic intervention that ensures that the process of transformation delivers the desired outcomes. The society and organizations are assisted by coaching to maintain the highest level of readiness in embracing and driving change management. By so doing, they enable a shift from the Current State of Being (CSoB) to the Future State of Being (FSoB). People and organizations that reject change run a risk of becoming irrelevant in the future.

Executive Business Coaching: This is the fastest growing branch of professional coaching. Whereas we apply the same models, processes, tools, and frameworks, the main focus is on making business executives succeed in the delivery of their strategic, functional, and operational plans. It is often aimed at the Chief Executive Officers, Managing Directors, Executive Committees, and other executive functionaries to whom the executive responsibilities have been delegated. The executives are fully dedicated to the running of the business and deliver on their shareholders promises. Executive Business Coaching is a serious intervention. The executives are coached to master the markets and grow their market share. They are expected to counter competition, grow their companies’ brands, deliver return on investment, reinvest resources responsibly and grow the share price of the enterprise.

Sport Personality Development: There are many arguments for a dedicated coaching programme for sport personalities (amateur and professionals). The moment a young athlete is identified to have an outstanding talent and potential to make it to the professional level or chooses to make a career in sport, he/she will need a coaching programme. Such a programme is more than the technical sport coaching. Here we are talking about life and career management coaching. One of the challenges athletes face is achieving a balance between sport, education, normal and sport life (and later celebrity sport personality life). The demands of development phase are put on such athletes by development academies and trainers. This is often the beginning of hectic and high pressure life. However, this need not be a punishment in life. The development of emotional capacity to deal with this is an absolute necessity early in their lives.The athletes always have a desire to live normal lives but this does not always become a reality. They are exposed to demands of high expectations from the society, pushed by circumstances to display behaviours of a professional athlete too early in their lives. From the beginning, at junior clubs, they experience pressures from fans, parents, friends, club supporters, and club sponsors. Sport clubs expose them to extensive travel to participate in sport tournaments in the country, continent, and the world. Sport agents may pick the athletes very young, tracks their performance, sign them, and expose them to bigger sporting markets. This is how performance expectations are raised high. The interests of the athlete take secondary position. Athletes are separated from their parents and family members too soon. If they are not exposed to life coaching, the chances are that the impact will be negative. At club levels the athletes are exposed to league and cup games pressures, which have their own kind of demands. The athletes’ education programme, if not well integrated into their sport programme, tends to suffer.

In today’s world education and sport are seen as one. The athlete must do well in both. The United States is known for recruiting athletes and giving them sport scholarships to study at their best universities and play in the college sport leagues. This is actually the dream of most talented athletes. Such universities and colleges have many years experience in balancing sport and education. Once the athletes reach the professional level they become big personal brands. Personal brand management becomes the necessary theme of their life coaching programme. These personal brands may either add to the growth of their club brands or be in conflict with their club brands. They become celebrity sport personalities with own dedicated sponsors. The complexity grows. At this stage we are also concerned with their post stardom life. So, sport personality coaching is not a luxury, but a necessity.

Community Development: Most community workers started their careers as volunteers in community projects and programmes. Volunteerism requires specific qualities in people, because it has its own challenges. Those who choose to become community workers and volunteers should seek professional coaching interventions as well. This will assist them in coping with the demands of community work and volunteerism. Community work is about developing others by offering oneself. By doing community work and volunteerism, one benefits from such roles. Volunteerism, especially in the community, is a form of social responsibility at the individual level. It is seen as service beyond self. It puts commercial interests at the sideline. The closest to commercial interest are the social entrepreneurship initiatives. They are often aimed at the empowerment of vulnerable individuals and communities. There are academic programmes offered by institutions of learning wherein knowledge on social entrepreneurship is offered. Such programmes integrate coaching into their portfolio of modules. Anyone intending to make a career in community work and volunteerism, or just to lay the career foundation, they will do well to find a community development coach. Communities are unique and different. They are dynamic, have challenging issues, and demand one to have passion for who they are.

Relationship Management (Private and Professional): It is actually difficult to regulate any relationship (private or professional). However, two or more people can work out the best approach, and manage their relationship accordingly. Relationship Management Coaching facilitates such process of coming up with working relationship between individuals and groups (private or professional). There is no such a thing as a perfect relationship. People gravitate towards each other and this result in some form of relationship. In professional relationships like in business the common objectives and interests are the bases of such relationship. However, the differences and preferences between people continue to exist and must be managed in the interest of such relationship. The coach’s aim is to facilitate the client’s understanding of the value of their differences in their relationship, and build the capacity to deal with any challenges in their relationship. The individuals retain their unique identities and uniqueness. They however accept others for who they are. Over time they will develop common interests and preferences. This becomes the reason for a strong bond between individuals and groups. There will always be conflicts. We must allow conflict resolution and coaching interventions to take place.

It’s Time To Rethink Leadership Development: Building Momentum For A Leadership Culture

Leadership excellence is fundamental to the health and performance of an organisation. Leadership development, however, in most cases is a costly affair. It therefore warrants careful consideration of what organisations hope to achieve when they invest in leadership development. If the point of departure is to help people excel as highly competent individuals, then the criteria for a development programme would be different from one where the goal is to grow people in order to achieve more with and through others – in other words true leadership and teamwork.

Changing perceptions and expectations of leadership

Times change and so do the perceptions and expectations of leadership. If we lived in ancient times when progress meant territorial dominance and hard, hand-fought victories on the battlefield, we would be looking for strong, brave and imposing men with some ability to out-think the enemy. If we lived in the industrial age we would be looking for superior scientific minds. As the world became more ordered, specialised and hierarchically structured in governments, institutions, business and many others types of organisations; technical or functional ability and political astuteness (skilful in tactics and power play) allowed many to rise to the top and thus be recognised as leaders. In this scenario, leadership is typically exercised through command and control complimented by concomitant tactics of intimidation and manipulation. Unfortunately, there are far too many examples with this type of leadership and organisations may be stuck in this old mindset.

Instruments of power

Where command and control still delivers results, the people have resigned themselves to the idea that they are fundamentally either stronger or weaker instruments of power – in some cases they paint themselves powerless for life, in others they believe they are untouchable and as a result often ruin their personal relationships. They fear or respect power for the sake of power. Where those at the top embrace the culture — and why would they not if they were successful in and beneficiaries of it — they will more likely than not, consciously or unconsciously, further entrench this culture through the choices they make on training and development. It does not bode well for the future in a world where optimum learning, flexibility and responsiveness are such important factors for success.

The cost

The cost for organisations, and more specifically, when the leadership are poorly aligned with societal changes is immeasurably high. Today’s knowledge worker commits themselves when they experience the freedom to be creative and enterprising. In a command and control environment they feel inhibited and frustrated; the result being untapped potential. Moreover, people in such an environment often withhold critical information which ultimately comes at a cost to the organisation.

Another cost factor is that employees who are not intrinsically motivated but prepared to submissively and passively ‘sit out’ their careers for the sake of a salary cheque, are nowadays difficult and expensive to get rid of. The longer we have command and control environments (as it is experienced by the common worker, since it is seldom acknowledged by the leadership), the more disengaged people will become. Progressive organisations, understand what is required of a modern-day leader, and are quickly pulling away from their counterparts who continue to practice the archaic command and control tactics.

The key shift

Who do we regard as good leaders? Who is climbing the ladder to higher positions of authority and power? Who gets the benefit of the doubt when it comes to filling leadership positions? Is it not those with a strong knowledge base as reflected in their academic qualifications and other certificates? Is it not those with technical know-how and management experience? And is it not those who have demonstrated the ability to use their positional power to get quick results? We believe these are the three criteria most people have in mind when they consider candidates for leadership positions. Whoever fits the bill, can be forgiven if he or she feels superior to the rest. The combination of high intellect, know-how, tactical skill and a robust ego is a powerful one. It is almost inevitable that the leadership challenge ends up to be no more than a battle of wits and ego’s in budget, planning and strategy sessions. Teamwork, the key to success, suffers as a result.

How would leadership development programmes be of any use for the above? If it means another qualification to go on the manager’s CV, more ideas, theories, models and arguments for the meeting room, and perhaps some insights that could improve personal effectiveness, then it will fit the requirement well. But the question that needs to be asked above all is: what is the value for the organisation as a whole? What is the positive influence on those who work with the leader, their morale, energy, focus, productivity, willingness to take responsibility, innovativeness, and own leadership development? Furthermore, what are the ethical and governance values being driven by the organisation and its leaders, and do management support these? And then, what are the positive changes that others see in terms of the manager’s willingness to sacrifice for the cause, openness to feedback, team-orientation, his/her courage to name the real issues that prevent growth in the organisation, and work towards much needed transformation?

i. Culture eats strategy for lunch

The observation is widespread that in spite of various leadership development initiatives, the change that matters most, invariably does not take place. In others words, a change of leadership culture is required and is not being done. More sophisticated strategies, better designs, and the latest performance management tools or tactics to out-maneuver the opposition, can never achieve what a strong leadership culture can. What most people in ‘unhealthy organisations’ secretly or openly hope to see, is a change of heart in their leadership.

The reason for poor or inadequate performance in organisations very seldom is lack of knowledge, skills or experience. Rather, it is to be found in the leader’s lack of attention to behavioural aspects, the general climate, and the alignment in the organisation. When leaders really concern themselves with the character of their organisation, they forget about their ego concerns and personal agendas. To use an analogy from the sports world, we know that when we are in agreement that the team showed character it also means they gave their hearts for the team and the greater cause. Poor character is when a team member puts his own interests before those of the team.

Leadership development for our times need to be in the areas of awareness, ‘inner work’ (self-mastery) and context-sensitive leadership responses.

ii. Awareness

It is to state the obvious that heightened levels of awareness is needed for real change in mindset, attitude and behaviour. As the emotional intelligence expert Daniel Goleman points out, self-awareness forms the cornerstone for awareness of others, self-regulation and regulation of inter-personal relationships. As obvious and simple as it seems, it is not a given. As a starting point it requires openness, vulnerability and humility to grow in self-awareness. With the ‘chips’ of knowledge, experience and positional power on one’s shoulder, the tendency is very high to filter out signals that might be damaging to the ego.

The three main areas for awareness are personal disposition and discipline, adaption to and need for change, and relationships. The defining, breakthrough moment that leads to heightened awareness and sets ‘inner work’ in motion, often is the understanding that the use of outside help — typically from family members to friends, colleagues, books, coaches and mentors — is not a sign of weakness, but of becoming more authentic and mature.

iii. Inner work (self-mastery)

Awareness is one thing, but challenging conversations with oneself is another. As all exemplary leaders will testify, the ‘make or break’ in their growth as leaders were the challenges they put to themselves in response to the challenges they experienced from the outside; be they tragedies, major disappointments, lack of results, personal attacks on them, honest but hurtful feedback or overwhelming responsibility. Sometimes ‘inner work’ demands nothing short of a deep and painful ‘inner journey’ – going back to unresolved issues and unhealed pain of the past. But most of the time it is nothing as dramatic as that, but being intentional and committed to grow as a person and a leader in all the many wonderful facets of being human.

iv. Context-sensitive leadership responses (use of inner wisdom)

Key to leadership and leadership development is the ability to respond appropriately and more wisely to all kinds of situations. That is why awareness and inner work is so important. To think that reading textbooks will help the leader to do the right thing or minimise damage is shortsighted. Leadership in its proper sense is authentic, spontaneous and from within. Whatever knowledge the leader comes across, it needs to be internalised to make any real and meaningful difference. A leader that has grown out of the command and control style learns the critical importance of adjustment. For instance, to be forceful, courageous and bold is important in leadership. But the context determines when it is appropriate and most effective. Bright ideas at the wrong time or with an insensitive presentation in a particular context can be totally counter-productive. The key to becoming wiser is to consciously and intentionally keep all channels of feedback and learning op en. When we are open and receptive to our environment and to others, our eyes ‘open’ to the wisdom that we have within but never allowed to guide us. It is at the point where we allow ourselves to be vulnerable, not all- knowing and self-important, that we rise to new levels of understanding and insight.

From a leadership development perspective, it is much more effective to explore leadership responses in conversation with others who share the same context (facing their ‘real world’) than listening to leadership theory in a lecture room. It is a common complaint that the good and lofty ideas in the lecture room come to nothing the moment a person is back at the office facing ‘the real world’. It is different when leaders in a development programme support each other by sharing their leadership thoughts and questions as they face the challenges before them.

For healthy workplace and social structures to thrive, leadership development should facilitate growth in the areas of awareness, ‘inner work’ and context-sensitive leadership responses. As illustrated below, in many cases a shift in thinking about leadership development from an outdated paradigm needs to take place.

Old Criteria And Development Focus

Knowledge

Experience

Strategic and tactical skills

Strategy before culture

Change of processes and tools

Advocacy

Good for transactional environment

Development Focus For Organisational Health

Awareness

Inner work (reflection and self-challenge)

Context-sensitive leadership responses (use of inner wisdom)

Culture before strategy

Change of heart and attitude

Questioning and shared learning

Needed for transformational environment

Less is more

The best way to grow a leadership culture is to further develop those who already have a positive influence in the organisation. The questions to ask in order to identify them are the following:

– Is the person clearly passionate about the cause and values of the organisation?

– Is it evident that he does not need and does not have to rely on the power of his position to be able to have

significant influence?

– Does he genuinely want to become a better leader?

– Would he be keen to play a part in building a strong leadership culture in the organisation?

– Is he loyal to the organisation, and will he be part of the organisation for at least for the next two to three years?

Such a group of leaders will have an enormous impact if they purposefully support each other and grow their leadership according to the above-stated development principles for organisational health. A wholesale approach where everyone at a certain level is included in a development programme can at times disappoint in terms of its impact for the organisation. Half-motivated people who participate under some form of internal or external pressure dilute the value. As a strategy to grow a leadership culture, a focused approach with a core of motivated people delivers far better and more sustainable results for the organisation..

The example of Nelson Mandela

Late last year, the world appeared to stand still and reflect on the remarkable life and example of Nelson Mandela. One of the most striking and powerful illustrations of his leadership influence is that so many people recalled that nobody could turn down his requests – a manager’s dream! It is the best possible illustration of the truth of John Maxwell’s axiom: a leader first gives his heart then asks for a hand. The belief that, particularly business leaders, need to hide their hearts from others (and themselves) in order to take hard, calculated decisions and remain resolute in negotiation, is wrong and in truth undermining of their leadership. Passion for and dedication to the cause, is a matter of the heart. And so respect for others, the will to serve — humility — the willingness to ask forgiveness, care, trust, compassion, moral conviction, resilience and perseverance are indeed matters of the heart.

Surely, if we recognise leadership excellence in the person of Nelson Mandela, we should endeavour to look for and grow the qualities he lived and demonstrated. For organisations it is not a call to become more ‘touchy or feely’, but to responsibly address the context within which business decisions are taken and to ensure that these decisions accurately reflect the organisation’s heart, mind and soul, be this in its strategy, finance, marketing, technology and corporate social values.