Wednesday Feb 14, 2007

Web 3.0

How web 3.0 might actually be useful[Read More]

Thursday Jun 24, 2004

Stock Options - Why not expense them?

Just came from the rally in Palo Alto to oppose FASB ruling that stock options should be expensed. For those who do NOT have access to stock options, the answer seems pretty simple:
  • "These people are making lots of money off stock options, taking advantage of opportunities we don't have and inaccurately reflecting their expense on their companies' bottom lines. Of course they should be counted as an expense when they are granted"
I'm sure alot of this is also reflective of the abuses which have been widely reported, of CxOs making million$ while their companies went down the tubes.

Now here's another view of reality - for those of us who have
  • made some money (thank you, Netscape) and
  • not made any yet (I am still optimistic, Sun),
it also seems pretty obvious.

All those options we have been granted which we do NOT exercise, because they are "underwater", e.g.:
  •  Netscape /AOL options at $75 when the stock price was $20,
  • current Sun options at $12 (and I know many people with options well above that price) with the stock a little over $4,
are irrelevant to anyone. They are no more expense to the companies which granted them than they are profit to the employees who are not exercising them.

If and when they are exercised, then let's talk about how the companies should expense the benefit received by the employees. I admit to being ignorant as to how this is handled today. This seems to be a much more relevant issue than trying to assess some current value on some theoretical future benefit, which in many cases will either not happen, or will occur at a totally unpredictable level.

Thursday Jun 10, 2004

Re-orgs - a case in point

I was at IBM in the late 80's, early 90's when they decided that they needed to change from primarily a HW Product sales company into a company with more emphasis on SW and Services.

This was clearly a large change, since implementing SW for customers generally means longer projects than installing HW, with a shift in the pattern of revenue recognition (lower at first, more annuity-based). IBM Executive Management felt that they needed to educate their employees as to the significant changes this would mean for their business. They put all managers through training which included explaining how the business results would likely suffer in the short term before the changes had time to mature and bring increased revenue and profit.

What they did not do was explain to their employees and stockholders that this "investment" in change would have a cost which would show up in near-term quarterly earnings. When their quarterly results showed "disappointing" numbers, they tried to explain it with standard talk about the economy and other factors, with no reference to this investment effect which they had PREDICTED as part of their management training.

Once the shift had time to mature, the company thrived.

Conclusion I drew from that experience - any company that does a shift from product sales to annuity sales, should be very careful how they report the likely effects, or else people can be surprised for results which were entirely predictable. This is not based on any more information than just the basic difference between the types of businesses.

Re-orgs and their value

I have seen many (20+?, 30+? not counting) re-orgs over the years in several companies, and there is a question these have all raised. Did the management holding the re-org identify what was NOT working and how the re-org would solve it, rather than just determine that something was not working and a re-org "seemed" to be the right way to fix it?

The reason for asking this is that clearly there is a high cost of any re-organization - everyone has to learn the new org, their new roles and responsiblities, and usually there is an accompanying new business model or plan which has to be developed, learned, and executed. Frequently new systems need to be developed - compensation, job classification, etc. - to support the new organization as well.

Before spending all this time/effort, doesn't it seem like more work should go into what is the problem with the previous organization? There are always good reasons why a different organization, with a different model, can POTENTIALLY be successful in some new approach to the business. In fact, when the previous organization was put in place there were obviously lots of people who thought IT would be successful!

This is avoiding the tough questions as to why the previous business model did not work. The answer(s) could be several - poor management is one, but there is also:
  • the old organization was not given enough time to be successful (there are always start-up costs)
  • the old organization/business model was not appropriately staffed/supported to succeed - this failure can easily be repeated with a new model
  • the old organization/business model was implemented hastily by people who did not have prior experience with what they were trying to do, so there were some major flaws in it - this is also a problem which can easily be repeated by trying yet another re-org
What would be interesting would be to see one of these businesses hold their management accountable for making the current model succeed, and to have the stamina to NOT reorg without very clear identification of what the flaws were in the last plan



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