Archive for September 2017

The Four Horsemen of Negotiator Power

The Four Horsemen of Negotiator Power

Michael Schaerer, Assistant Professor at Singapore Management University, Adam Galinsky, Professor of Business at Columbia Business School, and Joe Magee, Associate Professor at NYU Stern School of Business
 

To maximise their success at the bargaining table, negotiators should maximise their power.

At the bargaining table, a negotiator’s primary objective is to reach the best possible outcome, be it a higher salary, additional accessories when purchasing a car, or acquiring a company at a lower price. No matter what one negotiates about, the single most reliable predictor of the outcome is the amount of power one has. Although having power is important for many reasons, there are two fundamental ways in which power benefits negotiators.

Power transforms people into bold negotiators

The first benefit of power is that it emboldens individuals, making them more confident, optimistic and proactive. Power increases the probability that people consider negotiating in the first place due to higher feelings of entitlement and confidence that a positive result can be achieved. Those who have power also set higher aspiration prices, make more ambitious first offers and claim more value from their opponents. This is important because the size of the first offer and which party moves first or second in a negotiation both influence the quality of the outcome. Indeed, research has shown that those who have more power are more likely to make the first offer in a negotiation and end up with better deals.

Power shields negotiators from the tactics of the other side

The second way power benefits negotiators is by protecting or shielding them from attempts by others to influence them. Power can increase personal resilience towards what is going on in the environment. For example, those who have more power are less likely to conform to the opinions of others than those who have less power. Having power also makes negotiators less susceptible to the strategic influence tactics of the other side. Research suggests that, for instance, having power reduces the likelihood that facing an angry counterpart (as opposed to a happy one) would lead to larger concessions, or that a negotiator would fall prey to deliberate sympathy appeals of those with less power.

The four horsemen of negotiator power

Given the vast benefits of having power in a negotiation, knowing how to acquire it is crucial. In our article, “The four horsemen of power at the bargaining table” in the Journal of Business & Industrial Marketing, we identified four important sources of power, where they come from, and how they help (and sometimes hurt) negotiators at the bargaining table.

In our article, we define power in negotiations as the probability that an individual will influence the negotiation towards his or her ideal outcome. The four most important sources of power that can increase a negotiator’s chance of reaching his or her ideal outcome are alternatives, information, status and social capital.

The first horseman of power: alternatives

The strength of one’s alternative, or best alternative to a negotiated agreement (BATNA), is probably the most important source of power. When negotiators have an attractive outside offer going into a negotiation, they are less dependent on the other party to reach their objectives than when they have an unattractive alternative or no alternative at all. A valuable alternative offer allows a negotiator to put pressure on the opponent, for example, by threatening to leave the negotiation table if the other party cannot exceed one’s expectations. Negotiators also tend to use their alternatives as a reference point, or proxy, when they make offers to the other party. Thus, having a strong alternative will provide a more ambitious reference point and cause negotiators to ask for more.

The downside of using alternatives as reference points is that negotiators sometimes focus on their alternatives too much. Research suggests that negotiators who have an unattractive alternative end up asking for less than those who have no alternative at all. This is because negotiators’ offers are “weighed down” by the low reference point that their unattractive alternative provides. Thus, negotiators should be wary of relying on any alternative but rather focus on generating a single, strong alternative instead.

The second horseman of power: information

A second source of power comes from having information that is relevant to the negotiation. It is quite valuable, for example, to have information about the other side’s preferences or reservation price (e.g. their maximum willingness to pay). If a negotiator learns the counterpart’s reservation price, he or she can simply make an offer that is marginally better than that price. Information can also include knowledge of cultural practices – such as tactics which may be offensive to the counterpart – and insight into the opponents’ worries and constraints, as well as general expertise in negotiation.

Negotiators can gain information in several ways. First, negotiators can do their homework during the (often underestimated and neglected) planning stage of the negotiation. Second, negotiators can gain information during the negotiation by asking questions such as: “Why do you want to buy (or sell) this item? What are your preferences on this issue?” Third, negotiators can continuously try to take their counterpart’s perspective. Putting yourself in the shoes of the other party will help in making an educated guess about their goals and priorities.

The third horseman of power: status

Yet another source of power in a negotiation is status, or the extent to which a negotiator is respected by others. Because low-status individuals tend to defer to those with higher status, demands made by high-status negotiators are more likely to be granted. High-status negotiators are also viewed as more competent (even though they might not be) and tend to be favoured as negotiation partners by others.

Status tends to be relatively fixed and can only be accumulated slowly over time. Negotiators should thus aim to build status long in advance of the negotiation by building a reputation as a competent, trustworthy player.

The fourth horseman of power: social capital

The fourth horseman of power is social capital. The more social or professional connections a negotiator has, the more likely it is that he or she is seen as being more influential. Social capital is not only its own source of power, but also acts as a facilitator for the other three horsemen of power. For example, by having a large social network, negotiators increase the chances of improving their alternatives (e.g. many people get jobs through their network), acquiring valuable information about the counterpart and gaining the visibility that is a precursor to high status.

Connections do not necessarily have to be close friends or allies to be valuable. Studies have shown that so-called “weak ties”, social relationships characterised by infrequent interaction and a low level of closeness, can be useful. Ties with past colleagues or distant friends require less maintenance but can be activated when needed.

The order in which we described the sources of power relates to their relative strength and importance. A strong alternative is probably the most valuable source of leverage you can have. Detailed information about your counterpart can also be quite powerful to have, whereas status and social capital operate in more indirect ways, such as facilitating other sources of power. Having all four horsemen of power is optimal but not always necessary. For example, a negotiator with a weak or no alternative may still be able to negotiate a profitable outcome by relying on information about the counterpart’s reservation price or by leveraging one’s status.

A negotiation checklist

The key in any negotiation is proper preparation. Before entering any negotiation, it is useful to go through a checklist of the different types of power. The more power you can accumulate, the greater the likelihood that you will get a better deal. Thus, you should always ask yourself the following questions:

  • How good are my alternatives? Should I use them as reference points? Can I generate better alternatives before I enter the negotiation?
  • What kind of information do I have? How much do I know about my opponent’s willingness to pay? What are appropriate negotiation practices?
  • Do I have positive standing in the eyes of my counterpart? Have I done anything to damage my reputation amongst his or her colleagues?
  • Can I use my social network to obtain information, to influence the situation in my favour, or remove constraints that my opponent may face?

Considering these questions can help you maximise your power at the bargaining table and increase the probability of reaching your ideal negotiation outcome.

Michael Schaerer is an Assistant Professor of Organisational Behaviour & Human Resources at Singapore Management University. He received his PhD from INSEAD.

Adam Galinsky is the Vikram S. Pandit Professor of Business and Chair of the Management Division at Columbia Business School.

Joe Magee is an Associate Professor of Management and Organizations at New York University’s Leonard N. Stern School of Business.

 

How to stay ahead of the IoT curve

How to stay ahead of the IoT curve

How to stay ahead of the IoT curve

Business leaders need to keep the big picture in mind when thinking about the internet of things.

Seemingly overnight, the internet of things (IoT) has become a technology buzzword, challenging businesses to embrace a technology in its infancy before they can firmly grasp the pitfalls and opportunities involved.

While business leaders are optimistic about the doors that IoT – the sum of smart devices that can measure and communicate data, and the technology and analysis to make the data useful – can open for cost reduction and new revenue streams, many find it difficult to get a foothold and develop a strategy. Research from Bain & Company found that only about 10% of companies have made it to extensive implementation and 20% of companies expect to do the same by 2020.

Executives in Europe are more ambitious and optimistic about their plans to deploy and integrate IoT solutions than their American peers, Bain found, particularly in industrial and commercial applications. Bain suggested this may be because European firms have clearer expectations about how IoT will change the way systems and businesses operate, and because Europeans and Americans appear to want different things out of IoT. American executives are more focused on cost reduction, Bain found, while European executives are enthusiastic about the potential to improve quality. According to Bain’s study, 27% of European executives said they are implementing or have already implemented IoT and analytics use cases, compared with 18% of US executives.

How does a business comprehend such a fast-evolving landscape? Here are some factors for CFOs to consider as they approach the IoT space.

Think up, down, and all around

Ann Bosche, partner at Bain and one of the authors of the study, said that IoT – which can come in visible forms such as wearable fitness trackers or behind-the-scenes technology such as a network of sensors tracking and communicating an array of performance indicators – presents a blind spot to most companies, whether they’re providing it or using it.

While businesses are excited about one-dimensional IoT opportunities, such as connecting hardware to the internet, Bosche found that they are struggling with the larger picture. “The misconception for CFOs of those businesses delivering IoT solutions is that they can just go forward with the traditional horizontal model, implementing IoT across business units, when actually they’ll have to provide more integrated end-to-end solutions with vendors, customers, and partners.” Smart meters, for example, have a much wider implication than optimising energy costs at home; they also provide data that can benefit energy and tech suppliers.

Open the door to ideas

In trying to understand return on investment for IoT, finance professionals are looking to vendors to help, but vendors are making their own mistakes, Bosche said. “Vendors are spreading their investment too thin,” she said, explaining that many try to serve too many industries at once. “There’s a lot of focus on consumer devices and solutions, but our view is that most of the profits in the long term will accrue to vendors that are providing solutions to enterprises and industrial clients, in segments such as software, infrastructure, or analytics.”

Following the news and IoT influencers on social media is a good first step to stay current. Bertrand Lavayssière, managing partner of global financial consultancy zeb, said many effective executives also participate in hackathons, sprint-like events where programmers and other IT specialists collaborate on concepts or projects, which provide startups with a forum and allow companies to gather intelligence on ideas in development. Businesses also can designate a “research brain” that keeps a finger on the pulse of the latest IoT advancements, Lavayssière added, and can invite innovators over, or visit them on-site, and have an informal chat, presenting the challenges the business faces and finding out what the new technology can do to address them. In the banking industry, for instance, some firms hold “IoT speed-dating” sessions, where they present a particular challenge and give invited innovators three minutes each to present their solutions.

Make IoT part of overall data strategy

Bernard Marr, author of Data Strategy: How to Profit From a World of Big Data, Analytics and the Internet of Things, said there is no such thing as a specific strategy for IoT. Instead, Marr identified four distinct areas in which data can drive business performance:

  • Improve decision-making. More devices can collect more data to inform decisions.
  • Better understand customers. Automobile manufacturers, for example, are getting huge insight from connected devices as to how customers are using their vehicles.
  • Improve operations. Instead of a blanket rule that a machine has to be maintained every six months, it can get maintenance only when it really needs it.
  • Identify new revenue streams and income opportunities. Look not only at increasing the value of your business, but also at how you might partner with others to sell the data. For example, Google didn’t buy Nest just because it produces thermostats, but also because it can sell to utility companies the insight Nest collects on how people use energy.

You should make sure you’re considering IoT from the perspective of your customers, as well. Sam Ganga, a partner at KPMG specialising in digital, mobile, and IoT, sees a great deal of IoT initiatives driven by internal signals – typically, engineers or IT staff pushing an initiative. He encouraged CFOs to make sure that the voice of the customer is folded into the strategy. If IoT is purely a data monetisation play, Ganga warned, it may be a long play. Just because a business added a great innovative feature, he said, doesn’t mean that the customer is going to pay for it.

“Four years ago,” Ganga said, “a midsized manufacturer used IoT for a significant product improvement but was caught off-guard when the customer, although happy to use it, was not prepared to pay more. Two years later, they rethought the approach and offered a premium data service that would help predict machine maintenance at a higher price, and the investment ultimately paid off. Today IoT is moving so fast businesses can no longer afford to invest first and then hope to back into a value proposition.”

Take the lead

For James Pews, vice president of finance for professional networking platform Webtalk, IoT is an opportunity for financial managers to wear a leadership hat.

“We have to make a concentrated effort to stay up to speed with the evolving technology, not just at work, but also on the personal front, keeping our own ‘technology house’ in order.” The principles that apply to investment in smart home tech, using connected devices and data to make personal life more cost-effective, more sustainable, and more productive, involve decisions that can be scaled up to larger investments for a business.

Source : GCMA

Single Touch Payroll Program Lead at Australian Taxation Office

Single Touch Payroll Program Lead at Australian Taxation Office

Single Touch Payroll is a game changer for tax and super reporting and the broader economy. It is an exciting digital initiative as it ultimately unlocks real time salary and wage information for all employees in Australia.

For now, it means employers will report payments such as salaries and wages, pay as you go (PAYG) withholding and super information to the ATO directly from their payroll solution at the same time they pay their employees.

For employers with 20 or more employees, Single Touch Payroll reporting starts from 1 July 2018. The first year will be a transition, we are keen to help people make this change and accept that there needs to be a bedding in period while everyone gets used to this new process.

The Australian Government has also announced it intends to expand Single Touch Payroll to include smaller employers with 19 or less employees from 1 July 2019, subject to legislation being passed in parliament.

What will I need to do differently under STP?

Single Touch Payroll is a new way of reporting payroll information to the ATO. As you pay your employees through your own payroll process, you will be sending us their tax and super information at the same time.

This will align your reporting obligations to your usual pay cycle. In other words, you’ll be interacting with the ATO at the point where you pay your employees. This will typically be through your accounting or payroll software and the majority of software developers are already building updates into their payroll products to deliver Single Touch Payroll reporting.

When the ATO receives the payroll information, they’ll match that to your records, as well as your employees’ records. You won’t need to provide your employees with a payment summary if you have reported their information through Single Touch Payroll. The ATO will provide that to your employees through myGov or through their pre-filled income tax returns.

What’s next?

We’re working closely with our industry partners – including software providers and tax practitioners – to make sure the move to Single Touch Payroll reporting is a smooth one for everyone.

In the next month we’re also writing to employers with 20 or more employees to let them know about their reporting obligations from 1 July 2018 so they can start planning for Single Touch Payroll.

If you’d like more information you can visit www.ato.gov.au/singletouchpayroll.

Source: John Shepherd via LinkedIn:

Personal Liability for Unpaid GST raised with introduction of Director Identification Number

As part of the reforms, the Government is consulting on widening the scope of directors personal liability to include GST liabilities as part of the Director Penalty provisions.

It is likely that personal liability for unpaid GST will operate in a similar way to current Director Penalty Notices that currently affect only unpaid PAYG and Superannuation. That is;

  • If a Director does not report by lodging a BAS return within 3 months of the due date for lodgement, there will be an automatic personal liability for a Company’s unpaid GST debt as well as its unpaid PAYG and Super debts.
  • Where a Director does report within the 3 month window, they will be able to avoid personal liability for the various company tax debts provided the Company is placed into liquidation within 21 days of the date on the Director Penalty Notice.

The Government’s consulting on Personal liability for directors with unreported and unpaid Company GST debts is a significant development that all directors must be made aware of.

As we discover more, we will keep you informed.


Media release from The Hon Kelly O’Dwyer MP

(Go here to view complete, unedited release)

A comprehensive package of reforms to address illegal phoenixing

The Turnbull Government is taking action to crack down on illegal phoenixing activity that costs the economy up to $3.2 billion per year to ensure those involved face tougher penalties, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, announced today.

Phoenixing – the stripping and transfer of assets from one company to another by individuals or entities to avoid paying liabilities – has been a problem for successive governments over many decades. It hurts all Australians, including employees, creditors, competing businesses and taxpayers.

The Government’s comprehensive package of reforms will include the introduction of a Director Identification Number (DIN) and a range of other measures to both deter and penalise phoenix activity.

The DIN will identify directors with a unique number but will also interface with other government agencies and databases to allow regulators to map the relationships between individuals and entities and individuals and other people.

In addition to the DIN, the Government will consult on implementing a range of other measures to deter and disrupt the core behaviours of phoenix operators, including non-directors such as facilitators and advisers. These include:

  • Specific phoenixing offences to better enable regulators to take decisive action against those who engage in this illegal activity;
  • The establishment of a dedicated phoenix hotline to provide the public with a single point of contact for reporting illegal phoenix activity;
  • The extension of the penalties that apply to those who promote tax avoidance schemes to capture advisers who assist phoenix operators;
  • Stronger powers for the ATO to recover a security deposit from suspected phoenix operators, which can be used to cover outstanding tax liabilities, should they arise;
  • Making directors personally liable for GST liabilities as part of extended director penalty provisions;
  • Preventing directors from backdating their resignations to avoid personal liability or from resigning and leaving a company with no directors; and
  • Prohibiting related entities to the phoenix operator from appointing a liquidator.

The Government will also consult on how best to identify high risk individuals who will be subject to new preventative and early intervention tools, including:

  • a next-cab-off-the-rank system for appointing liquidators;
  • allowing the ATO to retain tax refunds; and
  • allowing the ATO to commence immediate recovery action following the issuance of a Director Penalty Notice.

Consultation on the non-DIN measures will commence in the coming weeks.

These reforms complement and build on other Government action to combat crime and fraud in the economy, including:

  • instituting the Phoenix, Black Economy and Serious Financial Crime Taskforces;
  • strengthening disciplinary rules for insolvency practitioners;
  • legislating to improve information sharing between key regulatory agencies;
  • reviewing and enhancing ASIC’s powers and enforcement tools;
  • consulting on law reform initiatives to curb the excessive drain on the taxpayer funded Fair Entitlement Guarantee scheme, which covers employees’ entitlements left outstanding as a result of failed business enterprises;
  • improving the collection of GST on property transactions from 1 July 2018; and
  • consulting on a register of beneficial ownership of companies to be made available to key regulators for enforcement purposes.

“The Government is committed to ensuring individuals who engage in illegal phoenixing activity are held to account and that the regulators are equipped to take stronger action to both deter and penalise phoenixing activity for the benefit of all Australians,” Minister O’Dwyer said.

Source  : insolvencyexperts.com.au

Want to Improve Your Sales Forecast? Check Your Company’s Facebook Feed.

You’re scrolling through Facebook and see a post from your favorite clothing store showcasing a great pair of jeans. You “like” it, perhaps even leave a comment that you are eager to buy a pair, and then scroll on.

How is that store putting your likes and comments to use? It’s probably using them to shape its social media marketing strategy. But it is much less likely that the retailer is using that data to make operations decisions, such as how many pairs of those jeans to manufacture or whether to mark down prices.

That could change. In a recent study, Antonio Moreno, an associate professor of operations at Kellogg, found that social media data can improve sales forecasts. When researchers incorporated information about a clothing company’s Facebook interactions into prediction models, they could more accurately estimate purchases the following week.

Using advanced algorithms was key to the improvements, meaning simply collecting social media data is not enough: companies should also upgrade their forecasting techniques.

“It’s important to get new data but also use more sophisticated prediction methodology,” Moreno says.

The study did not reveal why the Facebook information improves forecasts. Moreno speculates that the data might reflect how much attention customers are paying to the brand, as well as good or bad word of mouth.

“By introducing social media data, we can do better.”

But companies may care more about the technique’s effectiveness than the mechanism behind it.

“If something works,” he says, “sometimes they might be able to live without knowing why it works.”

Using Social Media Data

The idea of mining social media data to guide operations is in its infancy.

For instance, companies might show a forthcoming shirt in two colors and see which one generates more clicks. The company could then use that information to decide which color to produce. “But it’s still not mainstream,” Moreno says.

And while academic studies have explored whether social media posts boost sales, little research has been done on using the data for internal operations decisions.

Moreno decided to investigate that idea with Ruomeng Cui, at Emory University, and Dennis Zhang, at Washington University, both of whom are former Kellogg doctoral students, along with Santiago Gallino at Dartmouth College.

The team worked with an online clothing company. Most of the firm’s social media–driven traffic came from its Facebook page, which had more than 300,000 followers at the time of the study. But to forecast sales, the company was largely relying on basic information such as its overall sales growth and weekly or seasonal patterns—such as the tendency to sell more on weekends.

Moreno’s team wrote software to extract information about the company’s Facebook posts from January to July 2013. The final data set included more than 171,000 users, 1,900 company posts, about 25,000 comments, and a quarter-million likes.

Next the researchers used language-processing software to categorize each comment as positive, negative, or neutral. In addition, the team obtained internal data on the company’s sales and advertising campaigns during that time.

Training the Forecasting Models

Using what they gathered, the researchers produced two sets of sales-forecasting models: the baseline forecast, which included only internal company information, and a second forecast that combined internal and social media data.

For both the baseline and social media forecasts, the team experimented with a variety of prediction methods. Most of the models relied on machine learning, in which the model trains itself to identify which factors are most important.

To assess accuracy, the researchers used a measure called mean absolute percentage error (MAPE), which captures how much the estimate deviates from actual sales. For instance, a MAPE of 10% would mean that, on average, the model’s estimates were 10% off.

The company’s existing sales forecasts for the next week had a MAPE of 12%. The researchers’ best-performing baseline model—the one without the social media data—brought the error down to about 7–9%.

Adding social media data lowered it even further to 5–7%. Yet, the social media data alone was not enough. When the team plugged social media information into a poorly performing model, the accuracy could be even worse than the baseline model without the social media information.

The results suggest that both the data and methods are important. “By introducing social media data, we can do better,” Moreno says. “But it looks like the first step should be having better methods.”

“They can actually use this social media to learn and make better decisions.”

Fine-Grained Forecasts

Future research could explore in more detail why social media improves sales forecasts. Researchers could also perform similar studies to predict sales for individual products, rather than just total sales. And if data could be broken down by geographic area, the information could help companies decide how much of a particular product to carry in, say, Texas versus Idaho.

Moreno notes that the study’s results may not apply to all industries. Social media data is more likely to be relevant to products with highly uncertain sales or industries heavily influenced by trends, such as fashion and entertainment. But for consumer goods like breakfast cereal, sales are already fairly predictable, so adding Facebook data may not improve forecasts much.

Companies could also become more strategic about their social media posts, in order to specifically elicit information that will help guide their operations. For instance, more firms might adopt the practice of displaying potential products and deciding what to manufacture based on customers’ reactions.

“They can actually use this social media to learn and make better decisions,” Moreno says.

Source  : Kellogg

5 Tips for Powerful Financial Storytelling

Microphone

Public speaking is hard, there’s no doubt about it. You need to prepare your speech, carefully choosing your words and crafting your story. Then, you need to devote some serious time practicing– some say up to one hour for every minute of your speech! Finally, you need to fight the butterflies in your stomach to step in front of the crowd, steady your voice, and give your speech.

When it comes to public speaking, accountants face more challenges than the average person. Not only do they need to do all of the above, they also need to translate complex data into easy-to-understand concepts for non-finance professionals.

Financial storytelling takes a lot of work, but it’s a learnable skill. The following are tips from the CGMA research brief, “Six Rules to Delivering a Powerful Financial Presentation.”

Know your audience. Your first step when developing a presentation is to find out what’s most important to your audience.  Then, lead with that piece of information. It will instantly capture their attention and make it easier to keep them engaged throughout the rest of the speech. Manoj Vasudevan, the 2017 Toastmasters International world champion of public speaking, suggests identifying what you can teach your audience, and cutting anything that can appear self-serving or repetitive. “Your speech is not about your ego; it’s about your message,” he told Business Insider. “Make sure that message is worth listening to.”

Nobody’s perfect. Not even champion speakers—and especially not the members of your audience. Don’t fear making mistakes or suffering technical difficulties. Most audience members won’t notice mistakes, but they will notice if you get tripped up by them. When something goes wrong, don’t panic. Take a deep breath, pause, regain your composure, and carry on. And, resist the urge to apologize to your audience – hat only draws more attention to the blooper.

Tell a story. Storytelling is so effective because it provides context to the figures you’re presenting to help make them relatable. A speech is like a conversation–you want to wrap your facts in emotion so your listeners understand why what you’re saying is important. Your job isn’t to read the balance sheet, it’s to offer broader context to the figures and bring a financial story to life.

Use pictures to enhance the data. Use bold, bright, and high-contrast photos to help set the tone for your presentation. Or use props for an unexpected twist. Instead of displaying multiple figures on a large graph, consider data visualization charts and tools. They’ll help your audience quickly identify major trends or anomalies without getting distracted by trying to read a busy slide. (You can always send spreadsheets as a follow up to your presentation!) The CGMA report, “5 Rules of Effective Data Visualisation” can help you generate ideas.

Simplify. You worked  hard to master the vernacular of accounting. Unfortunately, it might as well be a foreign language to your audience. Warren Buffett has said that he writes financial reports like he’s talking to his sisters. “I have no trouble picturing them: though highly intelligent, they are not experts in accounting or finance. They will understand plain English, but jargon may puzzle them.”

It may take a while until you nail the perfect financial presentation. Until then, try to improve upon one aspect at a time, and practice, practice, practice!

Source : AICPA