metrics

Michele Colucci: Confessions of a Female Entrepreneur

by on November 4, 2010

Fund-raising is an awkward and often uncomfortable effort for those raising funds. But when the person asking is a women entrepreneur, the dance takes on many more nuances. First, a woman — asking for money from the usual funding decision maker — a man — can bring out the age old male/female dynamic and take the focus off track. Another hurdle can come from a woman’s own feeling of vulnerability when asking for assistance (something we prefer to give, instead of take). Still, a third challenge is trying to convince the funder that you (a woman) are every bit as capable of leading and scaling a business as your male counterpart. I don’t care what people say about this — the perception that a man as a leader will take the business more seriously is always there. (Perception can take a long time to catch up to reality!) So, the “ask” is now a “dance” with layers of complexity and nuance. Navigating this minefield can be tricky, but if you follow a few tips I’m paying forward from very credible sources, it will go a long way to making you far more effective in fund-raising. Skill #1: Practice The Ask This advice came from a doctor friend in New York who runs a very successful medical publishing company ( Castle Connolly Medical Publishing ) His advice: Look in the mirror. Practice your pitch. Then practice asking for money. “Would you like to invest?” (pregnant pause) Then don’t say another word until you get an answer. I would wager that 9 times out of 10, people talk their investors out of investing by what they say after they ask. No matter how uncomfortable it may be, don’t say another word until the person responds to your ask. It’s painful! And the interesting part of this is that people to whom you are pitching really want to tell you their thoughts. They want to tell you if they can or will invest. Cut to the chase! You’ve done your part — now let them do theirs.

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Michele Colucci: Confessions of a Female Entrepreneur

Anthony Tjan: The Fallacy of Financial Metrics

by on October 27, 2010

In both entrepreneurial and larger companies, we too often spend time focusing on the desired financial performance target, rather than the inputs that drive those numbers. Because boards, investors and management demand an objective way to measure performance, we often go right to the result without focusing on what caused those results. Financial performance is a result, a by-product, a consequence of something else. The financial “numbers” ultimately represent the scorecard we care about, but they do not help us understand how to score. When we ask management teams what are the most important drivers (or what we call operating metrics) of their financial results, I usually see one of two reactions: a) a dog in front of the television blank stare or b) a further breakdown of financial results: “sales on the West Coast drove the results.” When pressed further, we may get even further sales breakdowns which tell us little. As my partner, Dick Harrington, says, “We end up slicing baloney with a scalpel” and are talking too much about the “what” without getting the “why.” Operating metrics are the inputs that correlate or drive the desired results of a business. If you focus on the inputs, you need to worry less about the financial outputs. Examples of inputs include customer convenience, product quality, customer retention, or customer referral rate. Let me provide a couple of concrete examples. In many of our retail or restaurant investments, we espouse a value proposition of convenience. The more convenient we can make the experience, the happier the customer will be, and the more likely we will have customer repeat and referral, meaning not just higher revenues but higher quality of revenues. How does convenience translate into a measurable operating metric? As a proxy for convenience we measure metrics such as turn-away rates and wait times for service. That is, when a prospective patron walks in or makes a call for a reservation how often do we turn them away because we are full or short-staffed? We want that turn-away number as low as possible to reinforce convenience. If we detect a repeat issue we can see how to solve it, perhaps through improved reservations systems or increased staffing. Other metrics we might measure include weekly cleanliness scores, customer loyalty, and periodic customer satisfaction reviews. Of course we will look at these operating metrics alongside the financial and more quantitative results, but again–the point is to uncover the correlation between operating drivers and financial outcomes. Businesses need to focus on the 3-5 metrics that represent the most important drivers of value creation. It helps align an organization towards doing the right thing in a repeatable and scalable manner. When you just ask a team to chase results on a plan, you may never be sure what drove that result even if you are successful. There is a difference between having a good year of numbers and a sustainable business model that allows for more predictable year-over-year results. From a managerial tool perspective, a weekly or monthly dashboard that highlights not just the financial results, but also the operating metrics is smarter and more actionable. A dashboard with operating metrics serves effectively as an exception-based report where you look for deviations from the norm of operating metric levels and then consider whether the issue is systemic or one-off. It is true that people behave based on what they are measured by. Here are some guidelines on setting a culture driven by operating metrics and measuring your team on the right stuff: 1. Ensure management understands the difference between operating metrics and financial metrics – operating inputs versus financial ratios. The latter is for number-crunching analysts to focus on, the former is for managers and it is what will make the latter automatic. 2. Clearly communicate across the organization a small number of the most important operating metrics. It takes some thought to filter through the many possible inputs / operating metrics, but pick only the 3-5 that have the highest correlation to the desired financial goals. 3. Regularly review an operating metric dashboard, but focus on exceptions. You’ll be able to scan the health of your business very quickly. In an earlier blog, I interviewed superstar Oprah doctor and cardiac surgeon Mehmet Oz, and discussed the vitals for good personal health. Indeed, an excellent analogy is that operating metrics should represent the blood pressure and cholesterol levels of a company. Focus on the right ones, regularly measure them, and if they are out of whack, do something before your company has a heart attack. This article first appeared on Harvard Business Publishing on June 8, 2009.

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Anthony Tjan: The Fallacy of Financial Metrics

The 14th Banker: Auto Repairs and the Financial Crisis

October 10, 2010

The other day my vehicle was making a rubbing/grinding noise that was noticeable on low-speed turns. From prior experience, I knew it was probably wheel bearings, power steering, cv boots, axles or some such. As you can tell, I did not know much, just what I had paid for in previous experiences with similar symptoms. I received a recommendation for a local auto service place and decided to try them out. After leaving the car with them a few hours, the actual mechanic called me back. Note, it was not a “service advisor” or the intake person. The mechanic told me that the power steering fluid was a little low but he could not detect a leak. He said he topped off the fluid and suggested we just drive the car awhile and see if there is some very slow leak that is undetectable. He also told me that the last person to change the power steering fluid might have just left it a little low. When he paused, my response was “that’s it?”  Yes. I asked if he inspected the front end and he said that he had and there was a cracked CV boot but no wear as yet. He did not recommend changing it because I could drive it awhile and repair the whole thing later, including the axle, for about the same money. Then he put the business owner on and I asked him how much it would be. “Nothing”, he said. No service fee, no charge for time, no charge for fluid. I told him he had a customer for life. The business itself appeared to be quite successful. While not on a main street, there were two nice new buildings and plenty of apparent work, which could only come from word of mouth. This place had zero street visibility. As I was pondering this later, it occurred to me that the staff must not be under “metrics” and “goals”. Rather, they had an innate desire to provide a quality customer experience and to do the right thing for the client. They had a faith that if they did so, they would have a loyal customer that would come back to them when a real repair needed to be done. Do you know what? They are right. I will only go to a new car dealership in the future for a complex problem that only they have the diagnostics to fix, after these guys tell me then cannot handle it. And I trust that they will tell me that if it is the case. I did a quick internet search and quickly found a site that discussed metrics for Service Advisors. The terminology that began to jump out at me reminds me of that we find at large banks and corporations of every stripe. There are lots of metrics and the article discusses how if you compare individuals on the metrics the measures go up. Apparently in the auto repair business, metrics are such things as: Average up-sell per advisor Additional recommendations per Repair Order Additional average Customer Pay per Repair Order Warranty to Customer Pay conversion Customer declining of these additional up-sells are seen as a problem, so the industry has developed tools and techniques to overcome objections. They have found that if the advisor walks the customer through each recommended repair and “prioritizes” its importance, the customer pays for more repairs. They can use printed reports to help with this. The Recommended Action Plan can itemize all the suggested work and highlights in color (presumably red), those that are most urgent. Now I have had some experience with this process. I use a variety of places to service my auto based on convenience. If I am out at one office and there is a quick lube next door and I need an oil change, I will just get it done. I may even flush the radiator, rotate the tires, or do something else. Once at a new car dealership, a service advisor gave me this long list of work that he recommended and I asked where did he get this from? He told me that it was basically the list of everything that had to be done at certain intervals. If for example, my car had 80,000 miles on it, he might recommend a timing belt, even though I had someone else change the timing belt six months before. If I was not paying attention or did not remember what I had done, which is more likely the older one gets, I might just authorize the work. It had nothing to do with the condition of the vehicle. I am not against using metrics. They are important tools for accountability and to compare performance. But they go horribly awry when the metrics are wrong, there is little subjectivity, the compensation is tied to the metrics, the interests of the employee and the firm are elevated above the customer’s interest, the numbers are easily gamed by ethical lapse or cheating, etc. There are also many important work products that cannot be captured by metrics. I would love to see a metric in an auto shop that measures what my mechanic did. We could call it, “Sending The Customer Home Without Charging Them Anything. It might actually be the most important metric of all. What does this have to do with the financial crisis? There are two competing models here. One model is about extraction and consumption. Extract as much as you can so you can consume as much as you can. The other model is about preservation and investment. My new mechanic believes in preserving my money and investing in the relationship. In so doing, he also preserves his time, does not wear out his equipment, and perhaps provides faster service to other customers. With the time he is not spending doing unnecessary repairs on my vehicle, perhaps he is working on another vehicle, helping his spouse, or playing with his kids. There is a benefit to both of us that cannot be measured in currency. The current mortgage foreclosure crisis is a result of “extract and consume” thinking. How many tales are there of borrowers that bought more house than they could afford on false “stated income”. The mortgage originators must have been hitting some great metrics and getting big payouts. What about the lenders that made so many loans they did not have time to process the paperwork afterwards. Great metrics. Big payouts. What about the investment bankers that packaged these deals up and sold them to unwitting investors? Great metrics. Huge millions in payouts. What about the banks that loaded up on this stuff, many of them knowing the shortcomings but also knowing that they could get short-term results and that hopefully home prices would rise forever and everything would be fine? Great metrics and fantastic bonuses. What about the Federal Reserve that now owns much of this crap? Oh, never mind.

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Fred Whelan and Gladys Stone: Approaching a Recruiter – Don’t Do What He Did

August 24, 2010

The other day we received a wacky cover letter. It’s the type of bizarre letter we receive a few times every year. We cringe when we get it and have taken measures to stop them, with no success. We are certain that some company out there is charging a fee to job seekers for this “professional” cover letter, because they are all written in the same vein. Here’s what landed on our desk: “Dear Mr. Whelan, Just about everyone enjoys a Broadway play, at least occasionally. The best and most enduring musicals – those with engaging choreography, entertaining/clever plots, and foot-tapping/upbeat music – can pack in the audience for years. ” Phantom of the Opera” opened in January 1988….and, is still going strong. It’s the longest-running Broadway play of all time. Take a guess at #2. It’s Cat’s, which ran for 18 years, 1982-2000 – an incredible 7,485 performances. Cats might be revived on Broadway, but it closed. All plays close, even the best. My run at (company) was long like Cats – 12 great years. The Company shut down my division – not because of me, our metrics were excellent.” The rest of the letter had odd references, for example, “As the youngest of four boys, I learned how to fight for the last pork chop”. A few months ago we received a similar letter that started out, “The greatest invention mankind has known is fire. But it wasn’t until fire was controlled that it became useful.” This letter also continued to go down a similar path where the candidate linked the management of fire to his professional career. It didn’t ignite (pun intended) our interest. We understand how someone might want to differentiate themselves to a recruiter and stand out from the crowd. However, the best way to do that is to write a cover letter that is sincere, straightforward and highlights your accomplishments. Recruiters understand that in these difficult times, divisions close, companies get acquired, and people lose their jobs. No need to spend a paragraph explaining why you are on the market. Use that space to talk about the contribution you made and why your experience would be valuable to another company. Here’s a cover letter that was emailed to us this morning, which we think does the job: “Hi Gladys, I am looking for a sales leadership position with a late stage startup in data storage. I have both domestic and international experience and have a consistent track record of overachieving revenue objectives. ” This was followed by three excellent bullet points of her achievements. The email closed by saying: “I realize that recruiters are receiving a large volume of unsolicited email, thus I’ll make an offer to help you. If you are working on a search requiring sales professionals in the data storage market, I would be happy to provide leads to you. Attached is my resume. Thank you for your time and consideration.” This person is now on our radar screen as both a candidate and a potential source of referrals. A well written cover letter helps you receive the attention that you are seeking – positive attention. Trying to be gimmicky seldom works and can actually work against you. Instead of drawing an analogy between your career and something far fetched, make the connection between your experience and what you can do for a company. The more adept you are at communicating your strengths in a cover letter, the more likely you’ll do the same in an interview. Fred & Gladys Whelan Stone Executive Search and Coaching Authors of GOAL! Your 30 Day Career Plan for Business & Career Success

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UnitedHealth, Humana Need 5-Star Ratings for $2.5 Billion Medicare Bonus

May 18, 2010

By Drew Armstrong May 18 (Bloomberg) — Insurers led by UnitedHealth Group Inc. and Humana Inc. may share in an estimated $2.5 billion in yearly bonuses if their U.S-backed Medicare plans rate four or five stars under a system created to improve quality of care. The U.S. has ranked Medicare Advantage insurance plans that serve the elderly on a one- to five-star basis since 2007, weighing clinical outcomes, access to tests, preventive care and consumer satisfaction, among 33 criteria . Under the health law signed in March, those scores will be used to award bonuses that can boost U.S. subsidies for the plans by five percent. The money may help offset an estimated $136 billion , 10- year scheduled cut in U.S. payments for the plans. UnitedHealth has begun an improvement push because most of their customers are in plans now ranked from three to three-and-a-half stars, said spokesman Matthew Burns. At the same time, America’s Health Insurance Plans , the industry’s lobbyist, is urging changes in the system that may allow more plans to get higher ratings. It’s “health-care Darwinism,” said Nathan Goldstein, senior vice president of strategic development with Gorman Health Group , a Washington consulting firm that works with Medicare Advantage plans, in an interview. The program begins with a 1.5 percent bonus in 2012, then 3 percent in 2013 and 5 percent in 2014. Payments will be worth at least $700 million a year by 2014, said Brian Biles , a professor at George Washington University’s Department of Health Policy who wrote a study on the program. If all the three-star plans improved to four, the total bonus payments would be worth about $2.5 billion, according to a separate analysis by Biles. ‘Taking the Edge Off’ The bonuses “could be significant in taking the edge off cuts to Medicare Advantage,” said Ana Gupte , a Sanford C. Bernstein & Co. analyst in New York, in an e-mail. UnitedHealth, based in Minnetonka, Minnesota, gained 5 cents to $30.44 in New York Stock Exchange trading yesterday. Humana , of Louisville, Kentucky, increased 14 cents to $45.89. The Standard & Poor’s 500 Managed-Care Index has fallen 12 percent since President Barack Obama signed the health-care law on March 30, compared with a 3.1 percent decline in the S&P 500. Advantage plans compete with traditional Medicare by offering expanded benefits and different premiums. About 10.2 million of the 45 million Medicare recipients were Advantage members in 2009, according to the Kaiser Family Foundation , a Menlo Park, California, health-care research group. UnitedHealth Coverage UnitedHealth covered 2 million people in Advantage plans as of March 31 and Humana had 1.74 million, according to statements released last month. The Advantage program accounted for one- fifth of UnitedHealth’s $3.82 billion in earnings last year, said Matthew Borsch , a Goldman Sachs Group Inc. analyst in New York, in a May 3 note. In 2009, he U.S. paid insurers an estimated $110 billion to run the plans, according to Kaiser. The payments were about 14 percent higher per-patient than the cost of traditional Medicare, the U.S. government’s basic health program for those 65 and older, the Medicare Payment Advisory Commission said. In an effort to raise its ratings by 2014, UnitedHealth will encourage patients to use chronic and preventive care services more often, and the company plans to put resources into added call centers and customer support, said Rhonda Medows, the insurer’s chief medical officer for public and senior markets. “We believe we’ll achieve four or better in time,” Medows said in a telephone interview. Industry Lobbying The insurance industry has been lobbying to influence many parts of the health-care overhaul that will affect how companies do business, including rules about the proportion of premium dollars to be used for administrative costs and profits. The rating system is also at issue said Robert Zirkelbach , the group’s spokesman. The star system grades insurers against one another on some of the 33 measures. America’s Health Insurance Plans is challenging the objectivity of having the criteria rated on a curve, Zirkelbach said in a telephone interview. “We have raised concerns that some of the measures in the current star systems are not based on objective criteria, which could prevent some plans from moving up,” he said. That means companies will find it harder to improve their ratings unless the metrics grading them against one another are changed to allow measurements against universal standards, said Biles, who wrote the study about the bonus program. “For somebody as big as UnitedHealth, that all their plans could be four stars under the current system is impossible,” Biles said in a phone interview. No Decision on Changes Medicare hasn’t decided whether to change the criteria, said Peter Ashkenaz , a spokesman for the Centers for Medicare and Medicaid Services, in an e-mail. Biles said ending the grading curve might make the star rating system less meaningful. “They’ll set absolute values, but they’ll set them so low that everybody lives in the world of Lake Wobegon, where all the children and all the plans are above average,” he said, referring to radio show host Garrison Keillor’s fictional town in Minnesota. Nonprofit Medicare Advantage plans tend to have higher ratings than for-profit companies. The average nonprofit plan has 3.87 stars, compared with 3.02 stars for the for-profit insurers, according to the Kaiser foundation. Martin’s Point Health Care in Portland, Maine, a nonprofit insurer, is one of four plans in the U.S. with a five-star rating. The insurer had 2,652 Advantage patients that brought in $16.4 million in 2009. Martin’s Point competes locally against Humana among about 10 rivals, Chief Executive Officer David Howes said in a phone interview. 9 Percent Cut All the local Maine plans are facing about a 9 percent cut to their government payment rates next year. “But they’re not all going to be getting the quality bonuses. I think the quality bonuses may be critical for success going forward,” Howes said. Howes said Martin’s Point expects to double the number of Advantage customers in the next year. The plan relies on its existing relationships with doctors and hospitals to make sure they’re providing preventive care, one of Medicare’s metrics. “We’ve spent a lot of time thinking about, ‘Who do we want to have in that network?’” Howes said. “Who gives nice access? Who gives us the ability to touch our members and patients in a way that is positive?” Martin’s Point’s five-star ratings will help it win more customers from its competitors and perhaps eventually drive them from the market, said Goldstein, of Gorman Health Group, who has consulted with the Maine nonprofit. “To the victor goes the members,” Goldstein said. “Mr. CEO, what I’m here to tell you is that your payment rate is getting cut down, and you have two levers you can pull to increase it — your risk adjustment, and your star system.” To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net .

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David Isenberg: The Curious Case of the Unnoticed Congressional Hearing

March 14, 2010

Rather like the curious case of the dog in the stables that did not bark in Sherlock Holmes’ Silver Blaze case, there was a congressional hearing this past Thursday to which nobody paid any attention. They should have as it nicely illustrates the difficulties of both doing effective government oversight on private military contractors and implementing actions being taken to try and improve the situation. The March 11 hearing was held by the Defense Acquisition Reform Panel of the House Armed Services Committee. The lead witness was Ashton B. Carter, the Pentagon’s Under Secretary of Defense for Acquisition, Technology & Logistics. In his written statement he testified: A third area of responsibility connected to the two wars is contingency contracting. It is a fact of life that for every soldier we field, approximately one contractor also joins the effort. That is an unavoidable consequence of the way our country is waging today’s wars. Contingency contracting is an enormous effort to manage, and it is fair to say we have not managed it as well as we might have in the first eight years of the current campaigns. I think part of the reason is because of the novelty of the task; part of it is just the exigency of war, and part of it is that we refused to admit to ourselves that we were going to be doing this for a long time, and that we had to get good at it. But we have made that admission now, and Secretary Gates is insistent that we learn the lessons of Iraq in Afghanistan, and that we learn the lessons of Afghanistan quickly because Iraq is not Afghanistan. The public and all of us as taxpayers are justifiably insistent that contractor support be provided economically and there are a number of congressional oversight bodies who are sifting through what we are doing in Afghanistan. We are working down the same list they are to improve our performance and accountability. At the same time, however, we must retain a sense of balance between perfect and auditable on the one hand, and being effective and agile on the other. To his credit Carter acknowledges the obvious, which is that past governmental oversight of private contractor performance leaves much to be desired. So what does he propose to do about it? I believe this Panel has highlighted an area that we have not adequately addressed–acquisition of services. This area is where the money is and where we can do better. I agree with the Panel’s finding that in order to assess whether we are indeed obtaining the best value, we must use meaningful metrics in the categories of cost, quality, and delivery. “Metrics”? Isn’t that what Donald Rumseld wrote about in his famed 2003 memo on the war on terrorism, i.e. “Today, we lack metrics to know if we are winning or losing the global war on terror.”? One could very well say we still don’t have the metrics in place to comprehensively measure the utility and effectiveness of private military contractors, although the recent GAO report on the cost-effectiveness of private security contractors was a good, albeit long overdue, step forward. The Director of Defense Procurement and Acquisition Policy has developed and implemented a comprehensive architecture for the acquisition of services. My acquisition team is validating adherence to that architecture through the review and approval of acquisition strategies submitted for services acquisitions valued at $1 billion or more. For example, we are using this opportunity to shape these programs to severely curtail the use of new time and materials contracts, to limit service contract periods of performance to three to five years, ensure requiring organizations dedicate sufficient resources to performance oversight, and to demand competition for task orders on indefinite delivery, indefinite quantity (IDIQ) contracts. Military departments and defense agencies are to employ the same set of service acquisition tenets and associated review criteria for contracts valued less than the $1 billion OSD threshold. Management and oversight of contractors performing service functions demands a different approach than that used to oversee contractors developing our weapon systems. The decentralized nature of service functions requires a cadre of military members and government civilians to perform contracting officer representative (COR) duties. CORs are the eyes and ears of the government to monitor contractor performance. We have recognized that inadequate surveillance of services contracts has left us vulnerable to the potential that we are paying full price for less than full value. Therefore, over the past year, we have developed COR certification and training standards to legitimize this vital function and instill rigor in the management and oversight process. Once formalized, this initiative will build upon the mandate issued by the Deputy Secretary to require appointment of trained CORs prior to contract award and to require COR duties to be considered during personnel annual performance assessments. This month, we are deploying as a pilot a web-based tool that will enable military departments and defense agencies to manage nomination, training and tracking of their respective cadres of CORs. These actions, coupled with the COR courses developed over the past year by Defense Acquisition University (DAU), will improve the capability of the Department to provide effective surveillance of service contracts. Robert Hale, the Undersecretary of Defense (COMPTROLLER) said, “DOD’s enormous size and geographical distribution greatly complicates this task. We just can’t afford to hire an army of accountants. We have too many people, we’re spread around too much. Think of trying to do audits in Afghanistan or Iraq. It just wouldn’t work.” This is a reasonable statement as far as it goes. The alternative is to rely on automated financial management systems. But as anyone who has ever looked at the issue in any detail the Pentagon’s financial information systems are numerous, are frequently non-interoperable, and in many cases are legacy systems, which should have been retired decades ago. As Hale himself noted in his written statement, “Our systems are old and handle or exchange information in ways that do not pass current audit standards. Our legacy systems tend to be non-standard and sometimes do not have good financial controls.”

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Consumer Credit in U.S. Unexpectedly Increases for First Time in a Year

March 5, 2010

By Vincent Del Giudice March 5 (Bloomberg) — Borrowing by U.S. consumers unexpectedly rose in January for the first time in a year, led by auto and student loans, a sign Americans are gaining confidence in the economy. Consumer credit increased $5 billion, or 2.4 percent at an annual rate, the Federal Reserve said today in Washington. Borrowing dropped $4.6 billion in December, more than first estimated. The figures track credit card debt and non-revolving loans, including those for automobile purchases. Stocks rose after the report indicated that some banks may be more willing to lend as the economy recovers from the worst recession since World War II. Growth may get a bigger lift from consumer purchases that account for about 70 percent of the economy when companies start to hire. “Spending is holding up,” said David Wyss , chief economist at Standard & Poor’s in New York. “People are feeling a little bit more comfortable. They’re sticking their heads out of the shell a little more.” The economy lost 36,000 jobs in February, less than anticipated, after a decline of 26,000 a month earlier even as snowstorms in parts of the nation forced some employers to temporarily close, Labor Department figures showed earlier today. The unemployment rate held at 9.7 percent. Stocks gained for a sixth day and Treasury securities fell after a smaller-than-estimated loss of jobs in February. The Standard & Poor’s 500 Index rose 1.4 percent to 1,138.70 at 4:46 p.m. in New York. The 10-year Treasury note declined, pushing up the yield eight basis points to 3.68 percent. Decline Was Forecast Economists had forecast consumer credit would drop by $4.5 billion in January after a previously reported $1.7 billion decrease in December, according to the median of 33 estimates in a Bloomberg News survey. Projections ranged from a decrease of $12.3 billion to an increase of $2.4 billion. The January gain in credit was the biggest since July 2008, according to the Fed’s data. Non-revolving debt , including automobile and mobile-home loans, rose by $6.6 billion after a $4.9 billion gain. The Fed’s report doesn’t cover borrowing secured by real estate. Auto sales in the U.S. cooled in January to a seasonally adjusted annual rate of 10.8 million, according to industry statistics. The pace slowed in February to 10.36 million. Non-Revolving Loans Non-revolving credit, on an unadjusted basis, rose $10.3 billion at commercial banks. Federal government non-revolving loans, such as those for student loans, also increased an unadjusted $10.3 billion. The increase in student loans suggests people “are going back to school to ride it out because of the difficult labor market,” said Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York. Revolving debt , such as credit cards, fell by $1.7 billion in January, according to the Fed’s statistics. Revolving credit has fallen 16 straight months, the longest series of declines since the Fed began keeping those records in 1968. The January drop was the smallest since July. Consumer spending during the final three months of last year rose at a 1.7 percent annual rate following an increase of 2.8 percent in the third quarter, Commerce Department figures showed on Feb. 26. Spending contributed to economic growth of 5.9 percent at annual rate, the best performance in more than six years. A gain in February sales at retailers open at least a year indicates sustained spending by consumers. Comparable-store sales climbed 4.1 percent, according to Retail Metrics Inc. It was the sixth straight gain and the biggest in 27 months. Abercrombie & Fitch Co. said yesterday that sales rose 5 percent, while Macy’s Inc., the second-biggest U.S. department- store company, reported a 3.7 percent gain. “The consumer is starting to come out of hibernation and feel better about their situation,” Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said yesterday in an interview. More than three-fourths of retailers in the Retail Metrics survey beat estimates, he said. To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

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U.S. Consumer Credit Increases for First Time in a Year in Confidence Sign

March 5, 2010

By Vincent Del Giudice March 5 (Bloomberg) — Borrowing by U.S. consumers unexpectedly rose in January for the first time in a year, led by auto and student loans, a sign Americans are gaining confidence in the economy. Consumer credit increased $5 billion, or 2.4 percent at an annual rate, the Federal Reserve said today in Washington. Borrowing dropped $4.6 billion in December, more than first estimated. The figures track credit card debt and non-revolving loans, including those for automobile purchases. Stocks rose after the report indicated that some banks may be more willing to lend as the economy recovers from the worst recession since World War II. Growth may get a bigger lift from consumer purchases that account for about 70 percent of the economy when companies start to hire. “Spending is holding up,” said David Wyss , chief economist at Standard & Poor’s in New York. “People are feeling a little bit more comfortable. They’re sticking their heads out of the shell a little more.” The economy lost 36,000 jobs in February, less than anticipated, after a decline of 26,000 a month earlier even as snowstorms in parts of the nation forced some employers to temporarily close, Labor Department figures showed earlier today. The unemployment rate held at 9.7 percent. Stocks gained for a sixth day and Treasury securities fell after a smaller-than-estimated loss of jobs in February. The Standard & Poor’s 500 Index rose 1.4 percent to 1,138.70 at 4:46 p.m. in New York. The 10-year Treasury note declined, pushing up the yield eight basis points to 3.68 percent. Decline Was Forecast Economists had forecast consumer credit would drop by $4.5 billion in January after a previously reported $1.7 billion decrease in December, according to the median of 33 estimates in a Bloomberg News survey. Projections ranged from a decrease of $12.3 billion to an increase of $2.4 billion. The January gain in credit was the biggest since July 2008, according to the Fed’s data. Non-revolving debt , including automobile and mobile-home loans, rose by $6.6 billion after a $4.9 billion gain. The Fed’s report doesn’t cover borrowing secured by real estate. Auto sales in the U.S. cooled in January to a seasonally adjusted annual rate of 10.8 million, according to industry statistics. The pace slowed in February to 10.36 million. Non-Revolving Loans Non-revolving credit, on an unadjusted basis, rose $10.3 billion at commercial banks. Federal government non-revolving loans, such as those for student loans, also increased an unadjusted $10.3 billion. The increase in student loans suggests people “are going back to school to ride it out because of the difficult labor market,” said Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York. Revolving debt , such as credit cards, fell by $1.7 billion in January, according to the Fed’s statistics. Revolving credit has fallen 16 straight months, the longest series of declines since the Fed began keeping those records in 1968. The January drop was the smallest since July. Consumer spending during the final three months of last year rose at a 1.7 percent annual rate following an increase of 2.8 percent in the third quarter, Commerce Department figures showed on Feb. 26. Spending contributed to economic growth of 5.9 percent at annual rate, the best performance in more than six years. A gain in February sales at retailers open at least a year indicates sustained spending by consumers. Comparable-store sales climbed 4.1 percent, according to Retail Metrics Inc. It was the sixth straight gain and the biggest in 27 months. Abercrombie & Fitch Co. said yesterday that sales rose 5 percent, while Macy’s Inc., the second-biggest U.S. department- store company, reported a 3.7 percent gain. “The consumer is starting to come out of hibernation and feel better about their situation,” Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said yesterday in an interview. More than three-fourths of retailers in the Retail Metrics survey beat estimates, he said. To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

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U.S., Europe Stocks Gain as Treasuries Retreat Following Economic Reports

March 4, 2010

By Michael P. Regan March 4 (Bloomberg) — U.S. and European stocks rose and Treasury two-year notes fell after American jobless claims dropped from a three-month high and worker productivity topped economists’ estimates. Equities trimmed gains in New York as a stronger dollar dragged down oil prices. The Standard & Poor’s 500 Index increased 0.1 percent to 1,120.31 at 2:19 p.m. in New York and the Stoxx Europe 600 Index advanced 0.2 percent. Both measures climbed for a fifth straight day. The MSCI Emerging Markets Index dropped 0.6 percent to halt a four-day rally, its longest in two months. Greek bonds slipped as the government started selling 10-year securities. Oil lost 1.1 percent to pace a drop in commodities as the dollar gained. U.S. initial jobless applications fell by 29,000 to 469,000 in the week ended Feb. 27, easing concern that tomorrow’s jobs report will signal a deteriorating labor market. Productivity of U.S. workers rose at a 6.9 percent annual rate in the fourth quarter, capping the biggest one-year gain since 2002. The data overshadowed concern the global economic recovery will falter as Greece’s financial crisis poses the biggest threat to the euro currency in its 11-year history. “The U.S. productivity number is quite real,” said Hayes Miller , a Boston-based money manager at Baring Asset Management Inc., which manages $47.5 billion. “I saw those figures this morning and my eyes popped. Productivity enhances your bottom- line, which is good for the stock market. And even though it’s tough to determine a trend for jobless claims, it’s obviously being perceived as a positive today.” Financials, Retailers Diversified financial companies in the S&P 500 climbed 1.2 percent as a group and retailers gained 1.1 percent to lead the benchmark index’s advance. Abercrombie & Fitch Co. jumped 12 percent for the top gain in the S&P 500 after posting higher-than-estimated February sales. Retail Metrics Inc. said total U.S. comparable-store sales climbed 4.1 percent in February, the biggest gain in 27 months. Today’s data eased concern that tomorrow’s U.S. government jobs report will trigger concern the economic rebound is slowing. Payrolls probably fell by 63,000 last month after declining 20,000 in January, according to the median forecast of 62 economists surveyed by Bloomberg News. The Labor Department figures may show the unemployment rate increased to 9.8 percent from 9.7 percent. “Provided demand continues to grow in the U.S. corporate and consumer sectors it is simply a matter of time until a robust re-employment cycle develops, and this time lag is probably far shorter than most people estimate,” said Michael Shaoul , chief executive officer of New York brokerage Oscar Gruss & Son Inc., in a note to clients. China Shares Slump The Shanghai Composite Index tumbled 2.4 percent on concern bank lending may slow and interest rates will rise as inflation accelerates. Industrial Bank, part-owned by a unit of HSBC Holdings Plc, dropped 2.4 percent after forecasting loan growth will almost halve this year. The MSCI Asia Pacific Index lost 0.9 percent. Mitsubishi Motors Corp. slumped 11 percent in Tokyo after the carmaker and Paris-based PSA Peugeot Citroen said they won’t form an alliance. Greek bonds fell, pushing the yield on the 10-year security up 10 basis points to 6.09 percent. The difference in yield, or spread, between the securities and benchmark German bunds widened 11 basis points to 297 basis points. Greek Debt Auction Greece began selling 5 billion euros ($6.8 billion) of 10- year bonds after Prime Minister George Papandreou ’s promises to reduce Europe’s largest budget deficit by cutting wages and spending prompted protesters to occupy the Finance Ministry. Investor demand when the order book closed exceeded 16 billion euros, Petros Christodoulou , head of Greece’s debt agency, said by phone today from Athens. The government priced the notes at 300 basis points more than the mid-swap rate, or a yield of 6.35 percent. “They obviously feel confident that they now can raise the funds,” said David Schnautz , a fixed-income strategist at Commerzbank AG in Frankfurt. “Time was running out for Greece so it was warranted for them to do the deal rather sooner than later. And demand looks solid.” The euro fell for the first day in three against the dollar, weakening 1 percent to $1.3564. The Dollar Index, which gauges the currency against six major U.S. trading partners, climbed 0.8 percent to 80.631 for its biggest advance on a closing basis in two weeks. Copper for delivery in three months fell 1.9 percent to $3.37 a pound in New York. Lead, nickel and zinc lost at least 2 percent in London. Crude oil slipped 1.1 percent to $79.99 a barrel in New York trading. To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net .

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ISCS Adds World-Class Expertise to Professional Services With New Director of Support

December 1, 2009

More Support for Latest Silicon Valley Customer Satisfaction Techniques & Metrics

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Retail Sales Rebound Into Xmas as Rising Shares Show Consumer Not Dead Yet

October 19, 2009

By Cotten Timberlake and Rich Miller Oct. 19 (Bloomberg) — From Intel Corp. to TJX Cos. , it’s beginning to look a lot like the retail holiday season will be happier than forecast. Intel, the world’s biggest chipmaker, cited stronger consumer demand in projecting Oct. 13 that its sales in the fourth quarter would be $9.7 billion to $10.5 billion, compared with a $9.5 billion average prediction in a Bloomberg News survey. TJX, the Framingham, Massachusetts-based operator of clothing-store chains T.J. Maxx and Marshalls, raised its fourth-quarter comparable-sales estimate Oct. 8 to a gain of 3 percent to 5 percent from an increase of 2 percent to 4 percent. “Consumers’ bunker mentality is gradually giving way to more-familiar spending patterns,” says Michael Feroli , a former Federal Reserve official who is now an economist at JPMorgan Chase & Co. in New York. Rising sales would be good news for the economy as well as retailers. Consumption accounts for about 70 percent of gross domestic product, and more spending would help the recovery. UBS Securities in New York improved its outlook for third- quarter growth to 3.5 percent from 2.5 percent after last week’s report of September retail sales was higher than it had expected. GDP fell 0.7 percent in the second quarter; it was the fourth consecutive decline, which would be the longest since such records began in 1947. “Retail sales offer the most encouraging sign of a more- lasting turn in activity,” Robert DiClemente , chief U.S. economist at Citigroup Global Markets in New York, said in an Oct. 16 note to clients. ‘New Normal’ He sees the U.S. growing about 2.75 percent in the second half of this year and about 3.25 percent in 2010, beating the 2 percent rate Mohamed El-Erian , chief executive officer of Newport Beach, California-based Pacific Investment Management Co., considers the “new normal” for the economy. Helping to drive the improvement in consumer spending is a rebound in household wealth, which increased $2 trillion in the second quarter and about that much again in the third, according to Steven Wieting , managing director of economics and market analysis at Citigroup Global Markets Inc. in New York. Retail sales excluding automobiles and restaurants might advance as much as 1.5 percent in the holiday season as “frugal fatigue” sets in and shoppers open up their wallets, says Marshal Cohen , chief industry analyst for NPD Group , a Port Washington, New York-based market-research firm. Worst Holiday Season Sales dropped 4.2 percent a year earlier during what the International Council of Shopping Centers said was the worst holiday season in four decades. The fastest growth since 2000 was 5.9 percent in 2005. “Slowly but surely, the underlying sales performance is inching higher,” says Mike Niemira , chief economist for the trade group in New York. “The retail-sector recovery is starting to unfold.” Sales at U.S. retailers, excluding automobiles, climbed 0.5 percent in September. The increase, more than twice the 0.2 percent anticipated by 78 economists in a Bloomberg survey, followed a 1 percent gain in August, the biggest in six months. Intel’s sales during the back-to-school season in the U.S. exceeded expectations, Paul Otellini , president and chief executive officer of the Santa Clara, California-based company, said in an Oct. 13 conference call with analysts and reporters. “The strength in our business remains primarily consumer driven,” he added. The company’s shares climbed 34 cents, or 1.7 percent, to $20.83 the day after it announced the forecast for fourth- quarter sales, which topped the mean estimate of 29 analysts surveyed by Bloomberg. Rising Shares Shares of Pier 1 Imports Inc. also rose after the Fort Worth, Texas-based retailer of imported furniture said Oct. 12 that sales at stores open at least a year increased 9.9 percent last month. Pier 1 ended at $4.85 on Oct. 13, the highest in 16 months. The Standard & Poor’s 500 Retailing Index rose 72 percent between March 9 and a close of 393.03 on Oct. 16, as companies have beaten profit estimates by reducing costs and inventories more than analysts expected and as sales trends began to improve. Industry sales at stores open at least a year have outpaced analysts’ estimates in the past two months and are likely to do so again in October, said Ken Perkins , president of Swampscott Massachusetts-based Retail Metrics Inc. Analysts are predicting a 1.4 percent gain this month, after a 1.1 percent increase in September and a decline of 2.3 percent in August. ‘Upside Surprise’ “There is definitely pent-up demand out there,” Perkins says. “The chance of an upside surprise in holiday sales are very good.” The steepest rally in the stock market since the Great Depression may have convinced households they don’t need to save as much as they thought, says John Ryding , chief economist at RDQ Economics LLC in New York, leaving more money for spending. The S&P 500 index , which closed at 1087.68 on Oct. 16, is up 61 percent from 676.53 on March 9, the lowest since September 1996. “The rebound in equities may have lowered the target savings rate from around 7 percent to around 5 percent,” he says. “The risks to the economy are beginning to build more to the upside than the downside.” The monthly rate has averaged 4.1 percent this year, up from 2.6 percent in 2008. The stock rally may reflect investors heeding the advice of equity analysts over economists sympathetic to El-Erian’s view. Earnings estimates compiled by Bloomberg show companies in the S&P 500 will report combined profit in 2011 that is 54 percent higher than this year, the steepest growth in two decades. 2010 Forecast The forecast by analysts for 2010 is 11 times the expansion in GDP projected by economists surveyed last month, the highest ratio on record, based on data compiled by Bloomberg going back 60 years. The rise in stock prices is particularly welcome for affluent consumers. The top 20 percent of U.S. income earners account for more than half of total wealth and about 37 percent of consumer spending, according to Andrew Tilton , an economist at Goldman Sachs Group Inc. in New York. Household net worth rose to $5.3 trillion in the second quarter from $5.1 trillion in the first as share prices rallied and home values steadied, according to data from the Fed. House prices in 20 U.S. cities climbed in July by the most in more than four years, increasing 1.6 percent from the previous month, although they were 13.3 percent lower than a year ago, according to the S&P/Case-Shiller Index . Lower Heating Costs Lower home-heating costs may also mean more money to spend. Average household expenditures for space-heating fuels will be $960 from Oct. 1 to March 31, 2010, down $84, or 8 percent, from a year earlier, the government’s Energy Information Administration said Oct. 6. Some forces may restrain consumer purchases. Household wealth, while higher now than in the last six months, is down from the record $6.4 trillion in the third quarter of 2007. Unemployment , already at a 26-year high of 9.8 percent, is projected to rise to 10.1 percent in the first quarter of next year, according to the median estimate of 73 economists surveyed by Bloomberg. “Sustained expansion of consumer spending will require a sustained rebound in employment,” David Resler , chief economist at Nomura Securities International in New York, said in an Oct. 14 e-mail to clients. “That remains a hope that has yet to become a reality.” Enticing Customers Companies are trying to entice customers. Wal-Mart Stores Inc. of Bentonville, Arkansas, the world’s largest retailer, said it will offer a larger selection of toys priced at $10. Hhgregg Inc. , an Indianapolis-based chain of 118 stores, will sell 32-inch flat-panel TVs for $299 and is adding more GPS navigational devices and digital cameras. Wayne, New Jersey-based Toys “R” Us Inc. , the largest U.S. toy-store chain, is opening more than 80 temporary “Holiday Express” locations in malls and shopping centers across the country starting this month. Saks Inc. , the New York- based luxury retailer, is offering free shipping on purchases from its Web site. Many consumers are open to being convinced. About a fifth of the people surveyed last month by Worthington, Ohio-based BIGresearch LLC said they haven’t decided how much they are going to spend this holiday season. Roseanne Morrison, fashion director at the Doneger Group trend-forecasting firm in New York, says she is optimistic. “By the time Christmas comes around, people are going to be ready to celebrate and throw off their worries and buy something special,” she said in an Oct. 13 e-mail. “You can only be low for so long.” To contact the reporters on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net Rich Miller in Washington rmiller28@bloomberg.net

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Wal-Mart Supplier Li & Fung May Target U.S. Companies in Acquisition Plan

October 11, 2009

By Lauren Coleman-Lochner Oct. 12 (Bloomberg) — Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., said it’s considering acquisitions of several U.S. companies with hundreds of millions of dollars in annual sales. “We’ve never seen so many great opportunities,” President Bruce Rockowitz said in an Oct. 9 interview in New York. “It’s almost unprecedented.” The company has a $1 billion acquisition fund, and is eyeing “multi-hundred-million-dollar-sales companies” in the U.S., he said. Li & Fung may make “a series of acquisitions” within the coming months, and is also looking at companies in Europe and in Hong Kong, he said. Li & Fung, founded in China in 1906 near the end of the Qing Dynasty, is accelerating efforts to buy makers of clothing, cosmetics, home products, accessories and shoes at a time when retailers are stepping up reordering to meet growing demand. The company is looking for wholesalers, not merchants, Rockowitz said. Since September, there’s been a “marked difference” at retailers, said Rockowitz. “People are restocking their closets now because they haven’t bought in a long time,” the executive said. Kohl’s Corp. has had “a tremendous amount of reorders” over the last two months, he said. Sales at U.S. chains open at least a year rose 1.1 percent in September, the first increase in 13 months, as results at American Eagle Outfitters Inc. and Kohl’s topped analysts’ estimates and discounts drew shoppers back to stores, according to Swampscott, Massachusetts-based Retail Metrics Inc. Closely Held Targets Li & Fung would probably buy closely held companies as it has in the past, because it likes to keep management in place, said Marc Cooper , head of the retail practice at New York-based investment bank Peter J. Solomon Co. The supplier has been “conservative” about the prices it pays for companies, he said. Because of a dearth of deals, valuations are difficult to determine, Cooper said. “Other than distressed transactions, there’s been no mergers and acquisitions in the retail and consumer space,” he said. Li & Fung’s acquisitions include New York-based handbag importer Van Zeeland Inc., announced last year. Van Zeeland brings in goods to sell in U.S. department stores including Macy’s Inc. Sales Rebound Pittsburgh-based American Eagle targets 15- to 25- year- olds at its more-than 900 stores. Kohl’s, which has more than 1,000 stores in the U.S., is based in Menomonee Falls, Wisconsin. Li & Fung, the Hang Seng Index’s third-best performer this year, rose 3.8 percent to HK$32.65 in Hong Kong Oct 9. The stock has more than doubled this year, beating the Hang Seng’s 49 percent climb. The company may announce some acquisitions by year-end, Rockowitz said Sept. 21. The Hong Kong-listed company has also signed new outsourcing contracts this year. Li & Fung in August said it would provide almost all apparel to Talbots Inc., a U.S. women’s clothing chain with more than 580 stores in the U.S. and Canada. Li & Fung expects to generate as much as $400 million in volume with the Hingham, Massachusetts-based retailer this year. In April, Li & Fung completed an $83 million agreement to buy the sourcing business of Liz Claiborne Inc., whose brands in include Kate Spade and Juicy Couture. The deal may boost sales by $1 billion, according to the company. To contact the reporters on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net

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Retail Sales in U.S. Climb for the First Time in 13 Months on Discounting

October 8, 2009

By Allison Abell Schwartz Oct. 8 (Bloomberg) — U.S. retail sales rose for the first time in 13 months as September results at American Eagle Outfitters Inc. and Kohl’s Corp. topped analysts’ estimates and discounts drew shoppers back to stores. Sales at U.S. chains open at least a year climbed 1.1 percent last month, according to Swampscott, Massachusetts-based Retail Metrics Inc. Seventy percent of retailers reported sales results that exceeded the average of estimates compiled by Retail Metrics, said Ken Perkins , president of the researcher. While shoppers have shifted spending away from big-ticket items, retailers have had a year to change their product assortments and offer lower prices, according to Richard Hastings , a Charlotte, North Carolina-based consumer strategist for Global Hunter Securities LLC. “The consumer has less spending capacity but the industry’s learning ability is very strong,” Hastings said in a telephone interview today. “The consumer is less frightened than it was one year ago.” Same-store sales at American Eagle were unchanged in September, compared with the 4.4 percent drop predicted by the analysts surveyed by Retail Metrics. Comparable sales at Kohl’s , the fourth-largest U.S. department-store chain, rose 5.5 percent, beating a 0.6 percent projected decline. American Eagle, based in Pittsburgh, rose $1.20, or 7.2 percent, to $17.86 at 11:03 a.m. in New York Stock Exchange composite trading . Menomonee Falls, Wisconsin-based Kohl’s added $1.13 to $59.67. Easier Comparisons Retailers faced easier year-over-year comparisons starting last month, according to Perkins. Sales in September 2008 dropped 0.1 percent, probably attributable in part to the collapse of Lehman Brothers Holdings Inc. on Sept. 15, after five months of gains, according to Perkins. A later Labor Day pushed more back-to-school sales to September from August, probably luring more shoppers into stores early in the month to take advantage of holiday deals, according to Christine Chen , an analyst at Needham & Co. in San Francisco. Many U.S. schools open the week after Labor Day, which fell on Sept. 7 this year, compared with Sept. 1 in 2008. “We expect teens will succumb to peer pressure now that school has started, which could lead to incremental sales in October as they shop for the hottest trends after seeing what others are wearing,” Chen said in an Oct. 6 note. The International Council of Shopping Centers said September comparable chain-store sales excluding Wal-Mart Stores Inc. rose 0.1 percent, the first gain the New York-based trade group has noted since July 2008. Walmart, the world’s biggest retailer, doesn’t report monthly sales. October Sales October sales will be little changed, Mike Niemira , chief economist of the ICSC, said in a telephone interview. American Eagle said third-quarter profit will probably be 24 cents to 26 cents a share, after previously forecasting 22 cents to 25 cents. Kohl’s said earnings will be 52 cents to 54 cents a share, compared with an earlier prediction of 40 cents to 44 cents. Cooler weather at the beginning of the month also probably increased demand for fall season merchandise, said Richard Jaffe , an analyst at Stifel, Nicolaus & Co. in New York. Macy’s Inc. , Limited Brands Inc. and Aeropostale Inc. also reported September sales results that exceeded estimates. TJX Cos. and Ross Stores Inc. beat analysts’ estimates for September sales as shoppers sought bargains. Both also raised their profit forecasts. U.S. holiday sales for the last two months of the year will probably fall 1 percent to $437.6 billion from the same period in 2008, the National Retail Federation forecast on Oct. 6. That’s not as steep as last year’s decline of 3.4 percent, the first drop since the Washington-based NRF started tracking holiday sales in 1995. Holiday shoppers will continue to flock to discount retailers and warehouse clubs as they shop on tighter budgets, according to Rosalind Wells , the federation’s chief economist. To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net .

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