Ellison Chair in International Floriculture
Ellison Chair in International FloricultureTeaching, Research, Extension and Service

Fire Yourself Today

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From today’s Harvard Management Tip of the Day:

Management shake ups, while disruptive, can be good for a company. They bring in fresh perspectives and require that leaders take a hard look at their own performance. Don’t wait for your company to get in trouble. Instead, fire yourself. Not literally, but think about what you would do in your position if you were to start anew. What would you do differently if this was your first day on the job? Taking this step back can help you evaluate the strategies and approaches you are currently using, see things that are too difficult to see when you are entrenched, and re-energize you for the challenges ahead.

January 2010 Retail Business Weather Round-up

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“The most important and statistically significant factors for stronger retail sales performance in January are the consumer confidence index followed closely by less severe weather,” said Bill Kirk, CEO Weather Trends International. Last year the January index was at an all time low (38) which in part explains the disastrous retail SSS results of -4.8% according to ICSC’s tally of 60 major retailers vs. this year’s confidence index of 53. While 53 is nothing to get too excited about (90 is a strong index indicating a strong economy) it’s still better than last year and combined with the more favorable weather trends retailers should post gains in-line to higher than expected when results are announced Thursday, February 4th. Over the past 25 years a stronger than expected December (December 2009 brought very strong industry gains of +3.6% according to ICSC) is followed by a stronger than expected January 82% of cases so the math suggests more retailers will again be in positive territory!

For a complete business-weather roundup click on the link below for a detailed PDF summary report:

U.S. January 2010 Retail Business Weather Summary Report

How reducing payroll taxes increases employment

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Today CBO released a letter to Senator Robert Casey, Jr., in response to questions he asked about policies that could be adopted to increase employment. Specifically, Senator Casey was interested in a policy option to reduce employers’ payroll taxes for firms that increase their payroll, and how different design elements of this type of policy might affect its impact on employment.

In CBO’s January 2010 publication, Policies for Increasing Economic Growth and Employment in 2010 and 2011, the agency analyzed the effects on employment of several policy options, including giving employers a one-year, nonrefundable credit against their payroll tax liability for increasing their payrolls in 2010 from their 2009 levels. (To finance Social Security, employers and employees each pay 6.2 percent of an employee’s annual earnings up to a maximum.) Such a tax cut would lead to increased employment through a number of channels. For example, some firms would hire more people because hiring would be less expensive; others would lower prices to increase sales, thus spurring production and increasing the demand for labor; still others would increase compensation for employees, which would encourage more spending.

CBO measured the effect of that policy (and others) on employment as the cumulative effect on years of full-time-equivalent employment for each dollar of a policy’s total budgetary cost. (A year of full-time-equivalent employment is 40 hours of employment per week for one year.) CBO estimated that, through its effects on wages, prices, and profits, the policy would add 8 to 18 cumulative years of full-time-equivalent employment in 2010 and 2011 per million dollars of total budgetary cost, measured in terms of lost revenues. Thus, the budgetary cost of increasing employment by one full-time person for one year would probably be between $56,000 and $125,000. Although such a policy would have economic benefits in the short run, it would also add to already large projected budget deficits. Unless offsetting actions were taken to reverse the accumulation of additional government debt, future incomes would tend to be lower than they otherwise would have been.

Policymakers could structure legislation that reduced payroll taxes for firms that increase employment using various combinations of caps on the total amount of the tax benefit a firm could receive, limits on the size of firms that would receive the tax cut, methods of measuring payroll growth, and other elements. In today’s letter, CBO separately analyzed several key policy design elements and concluded that, per dollar of budgetary cost:

  • Capping the size of the tax cut for individual firms would decrease the employment effect;
  • Restricting eligibility to small firms would decrease the employment effect;
  • Limiting the eligible wage base would not change the employment effect, but would alter the types of employment fostered by the policy;
  • Basing the tax cuts on the total payroll in 2010 for new hires rather than on the net change in a firm’s payroll from 2009 to 2010 would have a similar effect on employment;
  • Offering larger tax cuts in economically depressed areas would probably not significantly alter the effect on employment;
  • Raising awareness of the tax change would increase the employment effect; and
  • Increasing the complexity of the tax change would reduce the employment effect.

The Bullwhip Supply Chain is Beginning

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Wednesday’s Wall Street Journal has a noteworthy front-page article about the “bullwhip” effect, as it is starting to play out in businesses as the economy recuperates. What’s the bullwhip effect? The WSJ article explains:

“This phenomenon occurs when companies significantly cut or add inventories. Economists call it a bullwhip because even small increases in demand can cause a big snap in the need for parts and materials further down the supply chain.”

For more details about “the bullwhip effect” — and what causes it — see the classic 1997 MIT Sloan Management Review article on the topic, “The Bullwhip Effect in Supply Chains.”

In that article, Hau L. Lee, V. Padmanabhan and Seungjin Whang argue that the bullwhip effect results from rational behavior by companies within the existing structure of supply chains. As a result, companies that want to mitigate the impact of the bullwhip effect need to think about modifying structures and processes within the supply chain – in order to change incentives. The authors explain four major causes of the bullwhip effect — as well as ways to counteract it.

2nd straight GDP increase

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From the BEA report this week:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis.
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The increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, exports, and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the fourth quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an upturn in nonresidential fixed investment that were partly offset by decelerations in federal government spending and in PCE.
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Real personal consumption expenditures increased 2.0 percent in the fourth quarter, compared with an increase of 2.8 percent in the third.
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Real nonresidential fixed investment increased 2.9 percent in the fourth quarter, in contrast to a decrease of 5.9 percent in the third. Nonresidential structures decreased 15.4 percent, compared with a decrease of 18.4 percent. Equipment and software increased 13.3 percent, compared with an increase of 1.5 percent. Real residential fixed investment increased 5.7 percent, compared with an increase of 18.9 percent.

Any analysis of the Q4 GDP report has to start with the change in private inventories. This change contributed a majority of the increase in GDP, and annualized Q4 GDP growth would have been 2.3% without the transitory increase from inventory changes. Unfortunately – although expected – the two leading sectors, residential investment (RI) and personal consumption expenditures (PCE), both slowed in Q4. PCE slowed from 2.8% annualized growth in Q3 to 2.0% in Q4. RI slowed from 18.9% in Q3 to just 5.7% in Q4. It is not a surprise that both key leading sectors are struggling. The personal saving rate increased slightly to 4.6% in Q4, and I expect the saving rate to increase over the next year or two to around 8% – as households repair their balance sheets – and that will be a constant drag on PCE. And there is no reason to expect a sustained increase in RI until the excess housing inventory is absorbed. In fact, based on recent reports of housing starts and new home sales, there is a good chance that residential investment will be a slight drag on GDP in Q1 2010. (Source: Calculated Risk)

Most economists reaction: It’s too soon to declare recovery accomplished. Click here.
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Bus trip to "Pack Trials" planned

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The January 29 deadline to register for a Greenhouse Grower’s trip to this year’s California Spring Trials (this used to be called the Pack Trials) is fast approaching.

An intense, educational and entertaining trip is planned to several of the key Spring Trial locations from April 10 -12, 2010. The trip is designed specifically for greenhouse growers and other floriculture professionals.

The trip itinerary is jam-packed; the days begin early and continue at a fast pace late into the evening. Attendees should plan to arrive on Friday, April 9 and will stay at a designated hotel near the San Jose Airport. The journey begins at 7 a.m. on Saturday, April 10, when the bus departs from the hotel. That first day, the group will visit Pacific Plug & Liner and Agrexco in Watsonville, followed by Syngenta Flowers and Goldsmith Seeds in Gilroy, Speedling in San Juan Batista (along with exhibitors HEM Genetics, GreeNex USA, Schoneveld Twello, Thomson and Morgan, MasterTag, and Plant Source International and finally ending the day at American Takii in Salinas, with an optional stop at Matsui Nursery. Participants will stay in Salinas on Saturday night.

On Sunday, April 11, the day will begin with a bus drive to San Luis Obispo, where the first stop will be Dummen USA. After a short drive to Arroyo Grande, the group will visit Greenheart Farms to celebrate their 30th anniversary. The last stop of the day will be in Santa Barbara where the participants will visit Jiffy Products along with their exhibitors Northern Innovators Inc., Skagit Gardens, Florist de Kwakel, and GGG-international.

Monday, April 12, will be a busy day beginning with the bus departing at 7 a.m. and driving to Carpinteria to visit PlantHaven, HIP Labels, and Westflowers. Following this stop, the group will arrive at Santa Paula to visit Ball Horticultural Co. along with Ball FloraPlant, Selecta First Class, PanAmerican Seed Co., and Kieft Seeds. Lunch will be hosted by Ball. In the afternoon, Green Fuse Botanicals will be visited along with GroLink in Oxnard. The last stop of the day will be in Somis, CA to visit Suntory. Participants will spend Monday night at a hotel in West Hollywood, CA. This hotel is conveniently located midway between the Los Angeles (LAX) airport and the Burbank Airport. There is a shuttle service and taxi service to both of these airports from the hotel.

This package trip includes the cost of first class hotel accommodations for four nights from April 9-12, bus transportation from the first day to on the last day, lunches for 3 days, and experienced guides. Participants need to arrange their own transportation into San Jose on April 9 and out of West Hollywood on April 12, and cover their own dinner costs. A travel agency is available to assist with plane reservations (go to the website listed below). The cost of the trip will be $450 per person in a double room or $720 per person for a single room. These rates are based on 47 participants and will be adjusted slightly if minimum capacity is not met. The trip is subject to change.

**Space is limited** Register by January 29, 2010 to reserve a seat on this trip. For on-line reservation, go to www.concepts.us.com and click on Event Registration at the bottom left of the site. Be sure to go to the site labeled: Greenhouse Growers Spring Trials 2010. If you have questions, contact Dr. Mark Bridgen at mpb27@cornell.edu or at 631-727-3595.

This group trip to the 2010 California Spring Pack Trials is a new, one-of-a-kind venture for growers! All greenhouse growers and floriculture professionals are invited to attend. It is an opportunity to meet fellow growers, breeders, and other plant company representatives to share ideas, update your understanding of what’s happening in our industry, and travel with trained professionals.

Boost Your Bottom Line Webinar Series

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Get a better handle on your bottom line profitability. Register today for a webinar series that I am co-presenting along with Dr. Paul Thomas (University of Georgia) in the latest installment in the Greenhouse Grower webinar series.

This 4-part series, Using Benchmarking To Track Your Recovery Performance, is designed to help you make more informed managerial decisions in the aftermath of an economic downturn that literally turned markets upside down. In this hypercompetitive market environment, the competitive advantages you enjoy today may vanish with breathtaking speed and frequency.

By learning how to use a benchmark analysis, growers are empowered to investigate and implement changes to their business with better understanding and documentation of the actual profits and benefits to be gained.

In this webinar, we will set the stage for the webinar series by demonstrating how to measure the profitability associated with various cultural and management practices you may be planning to put in place for the economic recovery.

Click here to go to the registration page.

After registering you will receive a confirmation email containing information about joining the webinar.