Monday, June 22, 2009

A little more transparency, please

Last night I watched a great classic film that I had DVR'd from Turner Classic Movies -- "Four's a Crowd" (1938), starring Errol Flynn, Olivia de Havilland, Rosalind Russell, and Patric Knowles, directed by Michael Curtiz. I mean, really, how can you go wrong with a cast like that?

TCM's weekend daytime host, Ben Mankiewicz, introduced the picture and noted that DVDs can be ordered through Warner Archive, a new service that allows customers to purchase one-off copies of movies that are considered to be too "small" to warrant full DVD release. Warner Archive is a terrific idea for people like me who love old movies. After all, TCM is the only reason that I still subscribe to cable; otherwise, it's 400 channels and nothing to watch. (For more background on Warner Archive from the other PoleStar Partners blog, click here.)

So why am I complaining? It's not a big deal, but I would have been much happier if Mr. Mankiewicz had just added a throw-away phrase like "from our sister company." Many people know that Turner Classic Movies and Warner Brothers are both owned by Time Warner, but there are also a lot who don't know that, and -- you know me -- I believe in full disclosure.

Would I not buy the "Four's a Crowd" DVD from Warner Archive if I knew that it was a sister company to TCM? No, it would still be on my wish list. But if I came across that information after the fact, I would have a "what else aren't they telling me?" moment.

And I hate those. Don't you?

Wednesday, June 17, 2009

When is good news not good news? When you can't trust the data.

If you've been flying a lot lately, you may (a) be thankful, because this means you still have a job, and (b) be surprised to learn that the latest government statistics show that airlines' on-time arrivals rate has improved.

According to Susan Stellin's piece in yesterday's New York Times, airlines ran on-time 79% of the time in April, up from a relatively steady 75% rate. This sounds like good news, but let's delve a little deeper, shall we?

It turns out that not every airline is required to report its flight-delays data, but only those airlines with more than 1% of domestic passenger revenue. That, according to Stellin, "leaves out roughly 25 percent of all domestic flights."

Among carriers not included are many regional partners of the larger airlines, and of course those smaller partners are sometimes the only airlines serving small cities. Nor are international carriers included.

While the number of airlines submitting information to the Transportation Department is up (19 carriers this year, up from 10 in 2002), this is still not a complete census from which travelers could get a really accurate picture. Nor is it a statistically balanced sample. It's just lousy data.

My mantra here is, "Transparency, transparency, transparency." We don't just need more data, we need better data. Airlines should report voluntarily (as, according to Stellin, Pinnacle Airlines does), but if they won't -- call me cynical, but I suspect they won't -- they should be required to.

Friday, June 12, 2009

Honesty from Coke? Well, at least, Hones-Tea

Earlier this week, the Financial Times ran a piece by Jonathan Birchall about the 40% investment made last year by Coca-Cola in Honest Beverages, makers of Honest Tea bottled iced tea and fruit drinks. It's an interesting analysis of the problems and pitfalls of trying to run an ethical business.

Honest Beverages, founded and run by Seth Goldman, pledges to "strive to grow with the same honesty we use to craft our products, with sustainability and great taste for all." The company's website includes the mission statement quoted above and is committed to transparency and social responsibility.

A good product and its ethical focus has made Honest Tea a success of sorts in the beverage market -- but it is still, as the Financial Times put it, a minnow compared to the whale that is Coca-Cola.

Honest Tea needed access to wider distribution, which is where Coke comes in. But Coca-Cola has in the past invested in small companies only to kill the brands when they failed to perform to expectations.

So Goldman had two problems: (a) he wanted distribution help, but with continued control, and (b) he needed to get the message out to his own customers who might look askance at the alliance. As Birchall put it: "In spite of efforts to improve its reputation on social and environmental issues, [Coca-Cola] remains the target of campus boycotts at US universities and colleges -- among the kind of ethically concerned young people who are Honest Beverage's customers."

Coca-Cola agreed that Goldman could maintain control, and then suggested that its investment could be made through a private non-Coke-branded entity. Goldman, however, said that "if we believe the transaction was worth doing [which we did], we wouldn't try to cover it up...In fact, we would have to be proactive in how we communicated about it."

Hurrah for transparency!

Sunday, June 7, 2009

Are There Any Guarantees for Ethical Behavior?

Not hardly.

But you knew that already, didn't you?

Saturday's New York Times carried a sort-of mea culpa column by Ron Lieber, noting that he has in the past recommended that investors rely on money managers who "make money only through fees that clients pay directly to them" (rather than those who accept commissions from, e.g., mutual funds). Many of these personal advisers belong to NAPFA, the National Association of Personal Financial Advisers, which, like Lieber, criticize those who accept commissions. NAPFA also promotes "its adherence to a 'fiduciary' standard, where members act only in a client's best interests."

Or perhaps we should say: "where members claim to act only in a client's best interests."

Because, as Lieber points out in his column, the Securities and Exchange Commission has filed action against James Putnam (and another employee of Wealth Management in Appleton, WI), for allegedly receiving more than $1 million in kickbacks for certain client investments.

Who is James Putnam? A past president of NAPFA.


After the Madoff scandal, this may seem like small potatoes. But the point is, there are no guarantees. Even the most honest-seeming people may be rascals. After all, church priests and bookkeepers take off with parish funds all the time (you think I exaggerate? A quick Google search turned up, just this year, a case from Gaylord MI in which a former First Congregational Church employee allegedly embezzled $50,000, a case from Philadelphia in which a former First Corinthian Baptist Church allegedly embezzled more than $100,000, and a story from West Palm Beach FL about the conviction of a Roman Catholic priest for stealing nearly $500,000 from his parish).

All of this explains why I'm such a firm believer in strict regulation and severe penalties. Neither will guarantee good behavior, but they make it easier for people to be honest. Think of regulation as being like the lock on your front door: it won't prevent a determined thief from getting in, but it'll remove the temptation that an open door might offer to the more-or-less honest...

Monday, June 1, 2009

First Dates, First Interviews -- They're Exactly Alike

Really? An interview is like a date? Sure.

In both cases, the parties are on the best behavior (or should be....). And you can get a lot of valuable information from what your date, or interviewer, does or doesn't do.

In both cases, if the first meeting is successful, you'll agree to meet again. Ultimately, you're looking for a long-term relationship, whether social or business. You may not have marriage in mind (or a lifetime job), but you're looking for more than just a single meeting. And even if the date isn't successful for you, you may know someone who's just right for that person. Even if the interview teaches you than this candidate doesn't have quite the right qualifications for the position you're hiring for, you may have a colleague or a friend who would really appreciate what this candidate has to offer.

But whether we're talking about dates or interviews, so many people get this first step wrong.

Jon Picoult had a nice column in yesterday's New York Times about the way companies mistreat candidates -- not acknowledging the receipt of resumes, not keeping them informed about where they are in the interview process, not responding promptly to phone or email questions, etc. I've had all these happen to me, and no doubt you have too.

Here's where I think of dates: if I were on a date, and my partner started making phone calls in the middle of the meal, or got up to greet someone at another table and stayed there for half an hour, or spent the whole time talking about himself, well, it wouldn't take long for me to get the message that this wasn't going to work out. And even if he called me the next day to apologize and asked me out again, I'd say, "No." Because the behavior's not going to get better as the relationship goes on.

Picoult had two great examples of the right way to approach interviews and recruiting, the first from Southwest Airlines and the second from Nabisco.

As he put it, Southwest's culture of respect means that "there is a focus on making sure that no applicant feels inferior or rejected. Many Southwest job applicants have a better experience being rejected by Southwest than they have being hired by other companies. As a result, Southwest gets the best people, and it shows in its superior financial results."

And when a Nabisco hiring manager was asked why on earth his company responded to every single resume received, whether solicited or not, his answer was illuminating: "Because — everyone eats cookies."

In other words, don't think of this date or this interview as a single isolated event. This person may not be your soulmate, but she could become a friend, a resource, a sister-in-law. This candidate may not be the one you need right now, but might be a good hire down the road, or perfect for a colleague, or ... a customer.