Long-run implications of industrial bond ratings as risk surrogates

The financial quality of industrial bonds is observed at two different times (1968 and 1976). Discriminant models, using pertinent financial ratios as input variables, are able to replicate approximately 70 percent of Moody's ratings for both years, thus indicating that ratings remain appropriate risk proxies for long periods, However, average levels of key ratios changed. Ratios measuring leverage, coverage, and profitability deterioriated over time, indicating increased absolute risk. But, since these deterioriations were fairly uniform across groups, there appears to be little change in the relative degree of riskiness across rating groups.     

The office of strategy management

There is a disconnect in most companies between strategy formulation and strategy execution. On average, 95% of a company's employees are unaware of, or do not understand, its strategy. If employees are unaware of the strategy, they surely cannot help the organization implement it effectively. It doesn't have to be like this. For the past 15 years, the authors have studied companies that achieved performance breakthroughs by adopting the Balanced Scorecard and its associated tools to help them better communicate strategy to their employees and to guide and monitor the execution of that strategy. Some companies, of course, have achieved better, longer-lasting improvements than others. The organizations that have managed to sustain their strategic focus have typically established a new corporate-level unit to oversee all activities related to strategy: an office of strategy management (OS M). The OSM, in effect, acts as the CEO's chief of staff. It coordinates an array of tasks: communicating corporate strategy; ensuring that enterprise-level plans are translated into the plans of the various units and departments; executing strategic initiatives to deliver on the grand design; aligning employees' plans for competency development with strategic objectives; and testing and adapting the strategy to stay abreast of the competition. The OSM does not do all the work, but it facilitates the processes so that strategy is executed in an integrated fashion across the enterprise. Although the companies that Kaplan and Norton studied use the Balanced Scorecard as the framework for their strategy management systems, the authors say the lessons of the OSM are applicable even to companies that do not use it.     

Adding Value to the Teaching and Learning of Design and Technology

It has been argued that design and technology can be used as a vehicle for teaching science and vice versa. In this paper, we report an investigation into Grade 6 students understandings of concepts embodied in the Systems strand of a technology syllabus as they grappled with a unit of work in technology for the first time. The unit of work involved students in the design and construction of simple systems, followed by experiences with more complex systems. Qualitative research methods were used to investigate the activities of the students as they engaged in the design and technology learning experiences for eight weeks. Data sources included student and teacher interviews, video and audio recordings of whole class and small group interactions, students notes, drawings and diagrams, and researchers field notes and reflections. Changes in students ability to identify the individual components and analyse how the components worked together in systems, and evidence of students use of scientific understandings for explanations, were noted as the unit of work progressed. An improvement was observed in students abilities to describe relationships between inputs, processes and outputs, and outline sequences of cause and effect. The technology and science appeared to be complementary as they developed technology specific and action-oriented technology and science language, which may be evidence of the presence of a community of learners. Recommendations are proposed for enhancing the value of both design and technology and science if both subjects are taught together as part of an integrated program in primary schools.     

Investment in education in developing nations: Policy responses when private and social signals conflict

In most developing countries the net private benefit of higher education exceeds its net social benefit because education-related wage differentials are excessive and the beneficiaries of higher education are subsidized. The resulting political pressures seem to favor investment in education over the creation of employment opportunities. A more balanced allocation of investment may require the revision of basic policies dealing with wage determination, the incidence of educational costs and the role of private sector education. The aim should be narrow the gap between private and social signals and thus reduce excess private demand for higher education.     

Liquidity Risk and Banks' Asset Composition: Implications for Monetary Policy

Monetary growth models in which the government is a net debtor demonstrate that inflation adversely affects capital formation through the crowding out effect. Interestingly, the results are at odds with empirical evidence. In particular, recent studies point to an asymmetric relationship between inflation and the real economy across countries. Specifically, inflation and output are negatively correlated in poor countries. In contrast, inflation is associated with higher levels of economic activity in advanced economies. I present a monetary growth model with public debt, where the exposure to risk is inversely related to the level of income. In this setting, I demonstrate that the effects of monetary policy depend on the level of capital of the economy. In poor countries, banks' portfolios consist primarily of government liabilities. Therefore, a higher rate of money creation inhibits capital formation in these economies. In contrast, banks devote more resources toward productive uses in advanced countries. Consequently, monetary policy generates a Tobin effect.     

How to implement a new strategy without disrupting your organization

Throughout most of modern busi ness history, corporations have attempted to unlock value by matching their structures to their strategies: Centralization by function. Decentralization by product category or geographic region. Matrix organizations that attempt both at once. Virtual organizations. Networked organizations. Velcro organizations. But none of these approaches has worked very well. Restructuring churn is expensive, and new structures often create new organizational problems that are as troublesome as the ones they try to solve. It takes time for employees to adapt to them, they create legacy systems that refuse to die, and a great deal of tacit knowledge gets lost in the process. Given the costs and difficulties involved in finding structural ways to unlock value, it's fair to raise the question: Is structural change the right tool for the job? The answer is usually no, Kaplan and Norton contend. It's far less disruptive to choose an organizational design that works without major conflicts and then design a customized strategic system to align that structure to the strategy. A management system based on the balanced scorecard framework is the best way to align strategy and structure, the authors suggest. Managers can use the tools of the framework to drive their unit's performance: strategy maps to define and communicate the company's value proposition and the scorecard to implement and monitor the strategy. In this article, the originators of the balanced scorecard describe how two hugely different organizations--DuPont and the Royal Canadian Mounted Police-used corporate scorecards and strategy maps organized around strategic themes to realize the enormous value that their portfolios of assets, people, and skills represented. As a result, they did not have to endure a painful series of changes that simply replaced one rigid structure with another.