An Octopus on Roller Skates

"Talent without discipline is like an octopus on roller skates. There's plenty of movement, but you never know if it's going to be forward, backwards, or sideways." — H. Jackson Brown, Jr., Author

Self Discipline

"The first and best victory is to conquer self." — Plato, Greek Philosopher

Exercise Self-Leadership

"Control is not leadership; management is not leadership; leadership is leadership. If you seek to lead, invest at least 50% of your time in leading yourself—your own purpose, ethics, principles, motivation, conduct. Invest at least 20% leading those with authority over you and 15% leading your peers." — Dee Hock, Founder and CEO Emeritus, Visa

Generosity

"What we have done for ourselves alone dies with us; what we have done for others and the world remains and is immortal." — Albert Pike

Delegating: Leadership Basics

As an economic development executive, do you delegate work to others? Good leaders are adept at delegating work, even the work they love to do themselves.

The road to leadership is paved with action—with doing. Leaders are characterized by doing what other people don’t want to do. They do what needs to be done when it needs to be done. While this is an invaluable trait, it can be taken to an extreme and become your biggest liability. At some point you have to rely on other people to help you do what needs to be done. Delegating is that skill that will benefit you and those whom you lead.

Delegating is a way of increasing your time. It allows you the freedom to focus on what you should be accomplishing and to better see the big picture.

Only do those tasks that nobody else can do. Determine what it is you will delegate. Look at what you do and ask yourself if this is really where you should be spending your time. All routine activities and minor decisions should be delegated to others. Also, any tasks that should be performed when you are not there or unavailable are also candidates for delegation.

Never keep work simply because you do it better. Delegating certain tasks to others is a way of developing and endorsing those you lead. Delegating allows people to learn by doing, to take risks and to build confidence. It is one of the best ways to develop that person for further responsibilities and their own leadership responsibilities.

Don Iannone is writing Creating Leadership Advantage for Economic Development, a new book on the role of leadership in economic development. It will be available in about three months. Contact Don for more information: dtia@don-iannone.com. He will be a keynoter at the IEDC Leadership Summit on Janaury 23, 2006.

Book Review: New Check E-mail in the Morning

Never Check E-Mail in the Morning
And Other Unexpected Strategies for Making Your Work Life Work
By Julie Morgenstern, 2004

• Create a cone of electronic silence to start your day. Don't touch your e-mail for the first 60 minutes you are at work.

• Avoid seductive time busters: Internet surfing, voicemail and pointless meetings.

• Stop multi-tasking. This deceptive practice silently steals the quality and the quantity of your waking hours.

• Shrink your day. Delete 30 minutes from your work clock and add more efficiency.

• Set your time clock. Accurately measure how long a task takes. Measure three times.

• Make a conscious effort to be neat. Maintain a tidy workspace and desktop.

• Relate your "to-do" list to your revenue stream.

• Don't indulge in the twin demons of the workplace. Perfectionism and procrastination can haunt your career.

• Be honest: Are you making your life crazy or are others creating the disruptions? Would you have a better career if you corrected your quirks?

• Consciously create the right mix of people, physical activity, and rest and relaxation.

I don't know about you, but I do check email first thing in the morning. So I violated rule one in the book. But I do practice several of the author's other tips listed above.

What is the most beneficial thing that I do first thing in the morning? I meditate. Sitting in silence and creating some empty space for reality to paint itself on my mental canvas is the best thing in the world for me. Most importantly, meditation helps me remember "who I am," which comes in handy when my work day starts pulling at me to be things I'm not.

Would you like to know more about meditation, especially for executives? Go here and here and finally here for a more "researchy" article.

Buy the book at Amazon.com.

Tourism Growing in Viet Nam

Between 1990 and now, Viet Nam's industry has continually seen an average growth of more than 20 percent in the number of tourists, she said, adding that the number of foreign visitors is expected to increase to 3.43 million this year from 250,000 in 1990.

Revenues from tourist services, which were only 1.35 trillion VND in 1990, are estimated at 30 trillion VND this year.

The industry has created more than 234,000 direct jobs and over 500,000 indirect jobs, she said.Viet Nam has about 6,000 hotel and inn businesses with 130,000 rooms. Of them 2,575 have been rated one to five-star standards. Viet Nam has 399 travel businesses and thousands of households engaging in tourism services nationwide.

Read more here.

New Jersey Looks at Corrective Course of Action

Too much, too little, too late. That's how New Jersey is seen when compared with other states by companies considering expansion or relocation, according to a recently study released by the New Jersey Chamber of Commerce.

The state costs too much, little demographic data is readily available, officials are slow in responding and economic development functions are split, making one-stop shopping virtually impossible, the study said.

Download the study here.

Things Looking Up in St. Louis County, MO

St Louis County, Mo. had a good year in 2005. Its major achievements include projects like Chrysler's $1 billion commitment to its Fenton plants and Pfizer Inc.'s planned $200 million Chesterfield research facility as examples of investments in the county that should pay economic dividends for years to come.

The county experienced continued expansion from major anchoring companies located in the area as well as continued growth in small-business startups.

"There are great business startups. They don't make headlines now, but they will in the future," said Denny Coleman, St. Louis County Economic Council president and chief executive.

St. Louis County was the leader in new-business starts among Missouri counties last year, with 2,300 new businesses, according to a report from the Missouri Economic Research and Information Center.

North Carolina Teaches Us About Small Towns

North Carolina is hardly alone in valuing its small towns, though the enduring image of Mayberry may create an extra tug on Tar Heel heartstrings. But the state's small towns are more than sources of nostalgia. They are home to 919,783 people and play vital cultural and economic roles, for their surrounding communities as well as for the townspeople themselves.

This is especially true in the state's 85 rural counties, where 92 percent of municipalities are small towns and two-thirds of all county residents live outside of incorporated areas.

Many of the most important attributes of small towns cannot be measured. Others only offer hints: $83 billion in assessed value of private property and 1,332 square miles of land area, for instance.

Clearly, though, many of the same forces that gave rise to towns make them vital today, as hubs of commerce and springboards of entrepreneurship, as distribution centers, as seats of government, law and finance. They provide outlets for recreation and give focus to civic and cultural life. Small towns pull people together and help define what it is to be a community.

For its examination of small-town North Carolina, the North Carolina Rural Development Center defines small towns as incorporated communities of fewer than 10,000 residents. As of 2004, this encompassed 478 towns, 87 percent of the state's municipalities. Among these small towns are 409 towns in the state's 85 rural counties, or 92 percent of all rural municipalities.

Download the NC Small Town Factbook here.

Corporate Citzenship Report

Economic developers have become increasingly concerned about corporate citizenship; that is whether companies conduct business in a way that is responsible to society. In fact, some have re-set their targeting criteria to develop these types of businesses.

What are the top corporate citizenship issues out there? A good starting point is to read a short report by Golin Harris on this topic. Click here. (You may have to register with Business Wire first).

Kraft Canada Sells Business Units

Kraft Canada Inc. said it agreed to sell some product lines and five factories to a group led by two private-equity firms for an undisclosed sum.

The product lines have estimated 2005 revenue of $260 million. They are: Aylmer tomatoes, vegetable, fruits, soup and beans; Primo pasta, sauce, soup, tomatoes, beans and other products; Il Migliore and Roma foodservice pasta; and the Canadian licensing rights for certain Del Monte products. The affected products are "not strategically aligned" with Kraft's overall portfolio.

The five factories are in St. David's, Dresden, Exeter and Toronto, Ontario; and in Chambly, Quebec.

The buyers - private investment firm Sun Capital Partners of Boca Raton, Fla., and EG Capital Group LLC - are handling the purchase through a newly formed company, expected to be named CanGro Foods.

Read more here.

Small Town Call Center Location

There is a well-established trend in call center location strategy that involves placing call centers in low cost labor markets throughout the world. Strategy drivers include a mix of achieving/maintaining cost minimization, hiring the best talent to deliver excellent customer service, serving customers in different languages, maximizing business continuity, and allowing flexibility to up or downscale the physical portfolio as market conditions warrant.

Read here to read more at ContactCenterWorld.

$58 Billion Price Tag for U.S. Hurricane Damage

Advisen Ltd. Tuesday estimated worldwide insurance and reinsurance losses related to the three major hurricanes that hit the United States this year would amount to $57.6 billion, making the cumulative catastrophe losses the largest on record.

The losses amount to more than twice the annual total for other U.S. natural disasters and one-and-a-half times the losses from the 2001 terrorist attacks in New York and Washington.

Read more here.

Update on Guidant

Guidant just can't get any relief from regulators, but analysts and a potential corporate buyer refuse to give up on the beleaguered pacemaker company.

Over the last year, Indianapolis-based Guidant Corp. has seen its stock price drop more than 10 percent amid a litany of bad news, including the July recall of tens of thousands of faulty pacemakers that have been connected to seven deaths.

Read more here.

How Manufacturing CFOs See 2006 Shaping Up

Economy

• Manufacturing company CFOs continue to view the current state of the U.S. economy in a positive light, giving it an average score of “66” on a scale ranging from 0 (extremely weak) to 100 (extremely strong) for the second year in a row. This is an increase from 2003 (“58”) and 2002 (“65”).

• CFOs also have a positive view of the world economy, giving it an average score of “63,” up slightly from a score of “62” last year. CFOs gave the current state of the manufacturing sector a “59,” up from “58” in 2004 and “51” in 2003.

• Although more than half of all manufacturing company CFOs (58%) believe the national economy will expand in 2006, this is the lowest percentage in four years.

• Only 46% of CFOs surveyed believe that the U.S. economy will outperform the world economy in 2006, a significant decline from 58% in last year’s survey.

• Oil prices were cited by 57% of manufacturing company CFOs as having the greatest potential impact on the U.S. economy in 2006.

• Sixty percent of CFOs surveyed believe that the actions taken by the Federal Reserve Board have helped the economy. This is down significantly from 72% last year and 83% the year before.

• For the fourth consecutive year, CFOs’ optimism about the manufacturing sector has declined. Only one-third of CFOs forecast “expansion” in the manufacturing sector, a substantial decrease from the 44% citing expansion in last year’s survey.

• Only 15% of CFOs report that the current state of the U.S. economy has caused them to accelerate their company’s plans for growth or expansion, down dramatically from a high of 25% last year.

• In line with CFOs’ more tempered outlook for the 2006 U.S. economy, their expectations for revenue growth remains healthy (73%) but are down from 81% last year.

• Thirty-seven percent of CFOs expect their capital expenditures to increase in 2006.

Finance

• The most significant financial concern of manufacturing company CFOs (84%) is the impact that rising energy costs will have on the U.S. economy in 2006. This is up from 72% last year. Other notable financial concerns are cost of materials — excluding energy (82%) and healthcare costs (81%).

• Only 25% of CFOs expect their borrowing needs to increase in 2006, the lowest percentage in the eight-year history of the CFO Outlook.

• With interest rates on the rise for the second consecutive year, 59% of CFOs forecast an increase in the cost of capital.

• Six-in-ten manufacturing companies are considering financing in 2006. The top reasons for financing are capital expenditures (38%), working capital (23%), acquisition (21%)
• and U.S. expansion (19%).

• Sixty-eight percent of manufacturing company CFOs plan to use internal sources as a means of financing in 2006. Other types of financing cited include cash flow financing (46%), asset-based financing (39%) and leasing (34%).

• Of the various products and services offered by lenders, Letters of Credit (63%) and Cash Management (60%) continue to be used most often by manufacturing companies.

Labor Costs and Product Pricing

• Fifty-nine percent of CFOs believe their labor costs per unit will increase in 2006, up
• significantly from 53% reported last year.

• Sixty-one percent of CFOs expect to increase the price of their products in 2006, compared to 63% reporting product price increases last year.

Mergers and Acquisitions (M&A)

• Thirty percent of manufacturing company CFOs expect to participate in a merger or acquisition in 2006. This is up sharply from 23% last year and the highest percent in the history of the survey.

• Twenty-three percent of CFOs think the purchase price of companies as a multiple of earnings will increase in 2006. Twenty-one percent believe it will decrease.

• Only twenty percent of CFOs surveyed believe that there will be more businesses available at lower purchase price multiples in 2006 — a significant decrease from 27% last year.

International

• For the second year in a row, 84% of manufacturing companies surveyed conduct business internationally. Seventy-two percent buy from foreign suppliers, 67% sell to foreign markets and 45% have operations outside the United States.

• Sixty-eight percent of companies that sell to foreign markets expect sales to increase in 2006, compared to 62% last year.

• Asia and Europe continue to be the top two foreign expansion markets. Among those companies expecting foreign sales to increase in 2006, 56% are expecting that growth to occur in Asia and 43% in Europe.

• Most companies (80%) with foreign operations do not plan to repatriate foreign earnings as a result of the American Jobs Creation Act tax incentive. Ten percent plan to take advantage of this opportunity. The remaining 10% of the survey participants are uncertain as to their plans.

Source: Bank of America Business Capital Services

Download the Bank of America report here.

Expect More Healthcare Benefit Cuts

Ohio CPAs are predicting that more Ohio employees will lose health care benefits in 2006 as employers explore ways to control rising health-care costs. That's one finding from The Ohio Society of CPAs 2005 Statewide Ohio Business Poll.

Two-thirds (67 percent) of survey respondents estimated that health-care insurance costs would rise from 10 percent to 20 percent in 2006.

One in five of CPAs surveyed said that it was likely a significant number of employers would eliminate health-care coverage for their employees, and 41 percent said that it was somewhat likely. Only 6 percent forecast that it was not at all likely, and 34 percent termed it somewhat unlikely.

Read more about the Ohio CPA 2006 Outlook here.

ED Futures Newsletter

Dear ED Futures Subscriber:

Shortly we will welcome a new year into our lives. Hopefully as you reflect upon 2005 you will discover there was more joy than suffering in your work and your community.

We here at ED Futures give thanks to all our readers and clients. This was a very good year for us on most fronts. We were honored to serve you in 2005 and look forward to continuing the dialogue during 2006.

For many communities, 2005 was a year of mixed results--some good and some not so good. Overall, growth in economic output was very favorable. While there were a few bright spots in terms of job creation and personal income growth, it is my impression that both lagged expectations in both fast and slow-growth local economies.

What lies ahead in 2006?

According to the World Bank, world GDP is estimated to have increased by 3.2 percent in 2005, down from 3.8 in 2004. Growth is projected to be stable in 2006, before strengthening somewhat in 2007.

The slowdown that began in the second half of 2004, was experienced throughout the industrialized world, with growth in Europe still under performing potential. In contrast, despite having slowed, the economies of Japan and the United States are expanding at close to their maximum sustainable rate.

Among large developing economies, GDP in 2005 continued to expand rapidly in China and India (in excess of 9 and about 7 percent, respectively), but slowed in Russia as growth in oil production slowed.

High oil prices, in combination with domestic capacity constraints, and slower import demand from high-income countries are estimated to have reduced growth among oil-importing developing countries from 6.9 to 6.1 percent.

During 2006 the expansion among high-income countries is projected to be stable at about 2.5 percent before picking up a bit in 2007. This reflects a combination of improved performance in Europe, and stable growth in the United States and Japan. In the United States, higher oil prices and tighter monetary policy are expected to offset the positive stimulus to growth from past depreciations.

Global current account imbalances and the U.S. current account deficit, which is expected to exceed $750 billion in 2005, remain important medium-term problems. During late 2004 and early 2005 tensions eased somewhat.

Here is some news for economic developers. Business investment in the biggest economies is heading higher in 2006 after reaching a record 15 percent of global output this year, according to Stephen Roach, chief global economist with Morgan Stanley in New York. U.S. companies plan to increase spending about 9 percent next year, according to surveys by the Institute for Supply Management and Financial Executives International.

A very large majority of CEOs expect capital spending to increase, which is really important once consumer spending has had its major impact," said Hank McKinnell, the chairman and chief executive of Pfizer and the Business Roundtable chairman..

The rebound in corporate expenditure is not limited to the United States. Large manufacturers in Japan plan to increase investment at the fastest pace since 1990, according to the Bank of Japan, whose Tankan index of business confidence rose this month to its highest level in a year. Investment in the dozen countries sharing the euro surged 3.2 percent in the third quarter from a year earlier, the fastest pace in almost five years.

In looking at the stock market, Merrill Lynch believes the global economy will do well in 2006, that equities and commodities will outperform fixed-income assets, and that the U.S. dollar will underperform other major currencies. In the equity market, Merrill Lynch (ML) prefers Asia and Japan, as well as U.S. large-cap growth stocks. In the fixed-income market, ML think that U.S. portfolios should concentrate on 5-to-15-year municipal issues and that non-U.S. portfolios should move up in quality and shorten duration.

Looking at the midwestern economy, job growth could be brighter in 2006. According to the Federal Reserve Bank of Minneapolis, the outlook for labor markets in 2006 is positive, reflecting expectations for increased economic growth. The strongest growth is expected in Montana, while the slowest growth is expected in the Upper Peninsula of Michigan. District business leaders indicate that labor markets are tightening. While a majority of respondents to the poll expect to increase employment at their companies, many are beginning to indicate difficulty finding qualified workers. Hiring in the services, manufacturing and construction sectors will expand. In contrast, the agriculture and retail sectors anticipate decreases in employment levels.

A less optimistic picture of the coming year is offered by the UCLA Economic Forecast Center, which sees problematic conditions in the national economy through 2007, but not enough to be called a recession. Manifest problems in the housing sector will result in sluggish economic conditions, but with few jobs to lose in an already moribund manufacturing sector, no true recession is foreseen. The California Forecast mirrors that of the Nation. The housing market will cool off, consumer spending will slow and there may be some job loss in construction and other real estate related industries. California “probably will not see a full-blown recession.”

Finally, let's look at some of Global Insight's top predictions for 2006 and beyond.

Solid Growth Will Last for at Least Another Year. Strong growth momentum in the United States and Asia has been both the underlying cause of record-high energy prices and the reason why the global economy has managed to shrug them off. Global Insight expects both the U.S. and global economies to grow at a rate of about 3.5% next year (compared with 3.7% and 3.4%, respectively, in 2005). In the case of the United States, an expected slowdown in consumer spending and housing will be offset by strength in capital spending and exports, helped by a fiscal boost from hurricane-related reconstruction.

China and the Rest of Asia Will Remain the Star Performers of the Global Economy. The Asia-Pacific region, excluding Japan, will be able to sustain growth of around 6% next year. While the Chinese economy is expected to cool off a little, Global Insight predicts that next year's growth will be at least 8.4% (compared with 9.3% this year). Other key economies will also be expanding rapidly (e.g., India at 6.7% and South Korea at 6.0%). While exports continue to drive growth in these economies, domestic demand has also been robust (capital spending in the case of China and consumer spending in other economies, such as South Korea).

Oil Prices Will Slide Gradually—But the Risks Are on the Upside. Oil and gasoline prices have fallen substantially since hitting record highs (before adjusting for inflation) in the wake of hurricanes Katrina and Rita. Global Insight expects that the price per barrel of West Texas Intermediate crude will continue to slide from around $60 per barrel in early December to $52 by the end of 2006. However, with real GDP growth and energy demand predicted to stay robust, oil market conditions will not ease up by much. This means that the risk of another spike in oil prices—triggered by a weather-related or geopolitical disruption—is still uncomfortably high.

Core U.S. Inflation Will Edge Upward. So far, inflation has remained a low-level threat worldwide, despite strong growth and high energy prices. However, since the United States has been growing above trend for the past two years, it has become more vulnerable to inflationary pressures. Global Insight expects core CPI inflation to edge up from 2.2% in 2005 to 2.3% in 2006. But inflation is unlikely to get out of control. Productivity growth has stayed strong (keeping a lid on unit labor costs) and compensation growth is still pretty tame, reflecting continued slack in labor markets. Outside the United States, inflation is even less of a threat—in Europe because growth has been below trend, and in China because of its investment-led boom.

There Will Be No Recession in the Next Couple of Years, Without the Convergence of Two or More Big Shocks. The U.S. and global economies were able to withstand a number of major shocks in 2005—one of the worst tsunamis on record (which actually occurred at the very end of 2004), one of the worst hurricanes on record, and the highest energy prices ever—without missing a beat. This remarkable resilience indicates that growth will be sustained over the next couple of years despite most shocks. Only if two or more severe shocks were to happen simultaneously would a recession become inevitable. Using its proprietary Global Scenario Model, Global Insight recently addressed the question: what would it take to trigger a global recession? The answer: a combination of oil prices above $100 per barrel, inflation and interest rates running 3 percentage points above current levels, and a 10% drop in home prices across many industrial country markets. All possible, but unlikely in either 2006 or 2007.

Forecasts are not destiny, but they do give us a sense of what may lie ahead. We hope that your economic path is filled with light and the right catalytic projects take off in your communities in 2006.

Please stop by ED Futures website and see firsthand what we have been saying. To access the site, simply click here.

Best wishes for 2006!

Happy New Year.

Don Iannone
ED Future Publisher
Email: dtia@don-iannone.com
Tel: 440.449.0753

China Struggles with Continued Corruption Problems

Chinese auditors have uncovered 290 billion yuan (35 billion dollars) in funds illegally spent by government offices in the first 11 months of this year, state media said here today.

The improper spending was found during a nationwide annual audit of 22,000 officials by the National Audit Office, Xinhua news agency said.

Details were not given but previous findings about misspending involved officials using public funds to build apartments for employees or to give themselves bonuses.

About 196 of the officials were disciplined by their superiors or prosecuted in court, the report said, which cited sources with a National Audit Conference that opened in Beijing today.

The annual audits are an attempt by the government to stem a rising tide of corruption, which is tarnishing the Communist party's image and fuelling ordinary people's anger against the government.

Read more here.

Some UAW Workers Want Ford Health Vote Recount

Some United Auto Workers members want a recount of a vote that narrowly approved an agreement between Ford Motor Co. and the union that requires active workers and retirees to pay more for their health care.

The UAW announced just before Christmas that hourly workers for the automaker had approved the deal by a 51 percent majority. The agreement still needs approval in federal court.
"I am afraid that members are going to turn their backs on the union," Ron Lare, a member at UAW Local 600 in Dearborn, told the Detroit Free Press for a Saturday story. "Several people have called me, union reformers, to say they would like to protest this vote count."

Dearborn-based Ford, which has been struggling with skyrocketing health care costs, said the deal will save it $850 million annually and will shave about $5 billion off its long-term retiree health care liability.

Last month, hourly workers at Detroit-based General Motors Corp. approved a similar agreement by a 61 percent majority. The UAW also has begun negotiating a similar agreement with DaimlerChrysler AG.

Read more here.

Japanese Manufacturers Gain Some Ground

Japan's manufacturers gained in confidence for a second straight quarter, adding to signs that they may sustain investment and fuel economic expansion in the world's second-largest economy.

Confidence among manufacturers with at least 1 billion yen ($8.6 million) in capital was 10.5 points in the three months ending December, up from 6.4 points in the previous quarter, according to a survey jointly released by the Cabinet Office and Ministry of Finance in Tokyo today. A positive number means more companies indicated conditions have improved compared with the previous three months.

Expansion by companies such as Toyota Motor Corp. and Fuji Photo Film Co. is creating jobs and raising wages, fueling demand by consumers at home and helping to extend the country's longest economic expansion in eight years.

"Japanese companies have increased investment at a pace exceeding expectations, and this is a clear sign that they are confident about the sustainability of high economic growth,'' said Hiroshi Watanabe, an economist at Daiwa Institute of Research in Tokyo.

Read more here.

Christmas Eve Sales Report

U.S. retailers faced slower-than-expected traffic in stores on the last shopping day before Christmas as extended hours and steep discounts failed to draw a big crowd of shoppers.

"I don't think the day is the kind of day that retailers thought it would be," said Britt Beemer, head of America's Research Group, which surveys consumer spending habits. "Christmas Eve is seldom the big day because of the fact that so many consumers ... want to be home."

U.S. retailers were counting on strong demand on Saturday to make up for solid but unspectacular sales so far this holiday season. The Saturday before Christmas has become the busiest shopping day of the year as consumers hold out for last-minute discounts.

Read more here.

Merry Christmas

My wish for all communities of the world is that they may live in greater peace in the coming year. And may every economic developer serving these communities follow a path with a heart in 2006.