Coming into this course with some experience working in a small business, I found much of the material easy to relate to and apply to my own experience. However, I wouldn't say I knew a great deal of the material beforehand or looked at aspects of organizations from my experience in the way this course taught me to. I enjoyed looking at my family's small businesses from the lens of Katzenbach and Smith's distinguishing characteristics of teams, thinking about my own investment in my education from a risk management standpoint, and learning and understanding the Principal-Agent, Gift Exchange, and Shapiro and Stiglitz Models and how they apply to organizations and the economy as a whole.
In the first week or so of the semester, we were asked to describe the "best" class we had ever taken in our academic careers. I recall talking about an Econ class I took before transferring to Illinois, boasting that it's small class size and free-flowing lectures allowed me to maintain interest and feel like the professor was really helping us understand the material, and feel that if I didn't understand something, I could easily bring it up in class without the class falling behind. I felt very similarly about this course. There was a clear topic or list of topics to go over each class meeting, but a loose template otherwise allowed for more "jiving" in class, with which we could pick each other's brain and better wrap our own heads around the material, which I would take over reading an overhead projector any day of the week.
As far as the blog posts and homework go, I enjoyed them for the most part too. The blog posts certainly take a lot out of you. I found myself pacing around my room for quite some time each week trying to decide what to write about and once I decided that, what points to cover in my writing. When we discuss blogs in class and I realize all the points I missed in my post, I was often a bit disappointed, but then I realized that this helped me look at the situation form another perspective, which I believe helped my later posts. So the goal of the blog portion of the class (that they would further critical thinking skills throughout the semester) was fulfilled. Homework was another aspect that was both helpful and frustrating at times. For one, I was very impressed with the work put into developing excel spreadsheets with such detail and so many moving parts. And while I found some of the material difficult to comprehend, the explanations and graphs, along with assurance of correct answers (eventually), helped assure that I ended up figuring things out, most of the time anyway.
I guess one critique I would have for the course, which actually seemed to alleviate itself throughout the semester, was the disconnect between the three elements of the course, lecture, blog posts and excel homework. Early on, I found it odd that much of what was gone into in depth in the homework was not covered as heavily in class or if it was, wasn't covered in a mathematical sense, as the homework required. It seemed that the lectures were much more theoretical and abstract, whereas the homework was concrete and formulaic. Similarly, I found that some of the blog posts required in-depth reading of the course texts which was not always required for class or the homework. However, as I mentioned, this problem didn't last throughout the course. Over the last several sessions, we have delved deeper into the graphical and algebraic aspects of the materials which has made the homework easier to comprehend and relate back to the class.
Overall, I very much enjoyed the content and compilation of the course and would be willing to seek out more like it in the future. You can only handle so many powerpoints and non-discussion lectures before they really start to lose your interest.
Thursday, December 4, 2014
Friday, November 21, 2014
Example of Personal Reputation
I'm going to use a somewhat geeky reference for this post and discuss the fantasy football league I participate in with a few of my buddies from high school.
When I was a sophomore in high school, a friend of mine and I joined our school's fantasy football league which was ran by our Physics teacher and an all all-around cool cat Mr. Maruna along with a few older students. After winning the league in my first year (no bragging here, it was all complete luck), I couldn't get enough of the "sport." So the next year, after many of the other guys in the league had graduated, my buddy and I took it upon ourselves to help Mr. Maruna out with getting a league together. In fact, I think (know) we were far more excited about the league than even he was. After we graduated, we of course wanted to keep a league of Routt guys together so we started an "alumni" league, I guess you could call it and got several of the guys we had played with in high school together. Without Mr. Maruna who we didn't think would want to play in a league with a bunch of old students, I became the new Commissioner.
As Commissioner, I'm in charge of getting the league together each year, creating rules and regulations, making sure everyone has paid their dues and plays fair, allowing/vetoing trades, etc.. I feel I've built a large degree of trust with the guys in the league over time. Of course there is always the jokes of corruption and collusion, but they all seem to trust that I always make my decisions based on the good of the league as opposed to just myself since I have a team like everyone else. In fact,since we actually have a decent amount of turnover in this league due to busy college schedules etc., I've tried to build trust with newcomers by absolving some of my executive power in the league in a few ways. For one, we take league wide votes on major decisions, such as the establishment of a "keeper" rule (keeping a player on your team from the previous season), since it drastically changes the approach one takes to building a fantasy team. Also, I have put together a council for trade evaluation in which 3 other veterans of the league along with myself determine whether a trade should be allowed or vetoed. This way, I personally cannot make an unfair trade without being checked by the council.
I try never to make any trades that could be considered unfair myself, not only because I will be called out and my reputation will be damaged, but also because I don't like ruining another team's chances to win. I know from experience that once your team falls out of the race for the playoffs, fantasy becomes a real bummer and that could sully the chances that that player returns for the next season. This is also why I sometimes offer advice to the lesser experienced guys as to whether they should make that trade or pickup they were considering. I feel that may also help my reputation with guys in the league and be another example of how I put the league before my own team.
It can be difficult to not "cash-in" and take advantage of other guys' naivety, especially when my own team is lacking. When another team has a superstar and nobody else, it's easy enough to sell your lesser players for more than their worth considering the guy you're selling them to trusts you to be a man of your word. Therefore, I try to make sure the other guy knows what he's getting and giving up and instead of pulling the wool over their eyes, I trade them players that could help them but I can't necessarily use myself in exchange for guys they may not value as much as I do. This strategy has been quite successful over the past couple of years. I've sharpened my ability to find value in players and I've kept my rep with the league in tact.
Friday, November 7, 2014
Example of Principal-Agent Model
In the midterm elections this past week, there was a proposition on the ballot in Illinois for a potential minimum wage increase which would eventually make its way to $10/hour. Of course, this was just an advisory question to take the temperature of those in favor of such a delegation. Instead, the governor and state congress will be responsible for passing or rejecting this bill. In thinking about this issue further, I thought about how vastly different the sides voting for or against were in regard to this bill. There are many (specifically minimum wage workers) that could benefit from an increase in wages, at least in the short run before inflation takes effect. On the other side, there are many (specifically minimum wage employers) would would suffer from an wage increase. Of course there are too many effects of a large-scale wage increase to discuss in a single blog post, unemployment, inflation, tax revenue and production volume to name a few. However, I still would like to discuss how the government as a whole would go about determining whether or not this law should be passed. This isn't so much a case of an agent trying to please two principals, but rather one in which the agent must choose between them.
Of course, most politicians are tied to the views of their party and therefore will work solely toward the platform they've run on (or so we assume). This ultimately is how the politicians will be judged in the future. If they succeed in passing/blocking the laws they promised their voters they would, then they will likely be re-elected. Otherwise, they could get the boot. This fact essentially answers my question about which way the government will act. However, I would like to assume the government were a bi-partial entity with no allegiance to either party. How would such an entity approach this issue?
The proposition itself is a single yes-no question: Raise minimum wage or not? Because of this, once the government (agent) makes their decision, they will have seemingly chosen a side, pleasing some and angering others. Should the agent simply choose whichever side is larger? Ergo choose the answer that received more votes on the ballot on election day? Perhaps. Although, I believe that vote many be misleading as to which decision is truly better considering there are far more employees than employers in the private sector.
There is another way to attack this situation which I think may be best, although it may not yield the popularity of being the best option by the widespread public. The government should look at the situation not on the basis of "who many people will be helped by each ruling?" nor "what ruling makes the most positive impact immediately?" Instead, the governing body needs to analyze the situation from a purely objective and economic standpoint. If minimum wage increases, what will be the short and long-term effects on workers? Businesses? State GDP? State Income Tax revenue? Unemployment? Inflation? There are countless effects of this potential law that need to be analyzed. Eventually, the result should be that the state economy as a whole (key word) will be better off under one ruling or the other. Using Macroeconomics and a bit of Micro as well along with existing policies and economic climate, the government should be able to at least decide which choice would be a better bet for a better tomorrow. Of course, even when determining the (potentially) better choice, the governing body still must make an arbitrary ruling on the proposition, which will anger one side or the other, perhaps because they don't understand the expected outcomes or because they know they personally will likely be hurt (at least in the short-run) even if the state as a whole is better off.
Of course, this isn't quite how the system works. Politicians are not bi-partial but rather completely one-sided. Therefore, whichever party is in power will make the ruling they wish, as decided by their voters hopefully. This throws a bit of a wrench in my quandary, as it seems that each politicians serves a single principal, their voters. Still, I thought it was interesting to explore the idea as a whole considering the clear differences in interest of employees vs. employers, specifically.
Monday, November 3, 2014
Example of Conflict in the Workplace
For this prompt, I thought I would use as an example my favorite movie and book, Moneyball. In this story, the main character, Oakland Athletics General Manager Billy Beane (played by Brad Pitt in the film), faces the challenge of putting together a competitive baseball team despite having a payroll far less flexible than many of the other competing teams in the American League. After the 2001 season in which his A's were defeated in the playoffs by the New York Yankees who boasted nearly triple the payroll of the A's, several key A's players leave the team via free agency to sign with teams that could afford to pay them far more the Oakland could. In order to fill holes on the rosters without spending very much money both in the short and long-term future, Beane knew he had to approach free agency and the draft differently. Therefore, he turned to sabermetrics, the science and empirical analysis of baseball statistics. Using sabermetrics, Beane hoped to find value in players that other teams didn't see. However, this strategy also required that Beane overlook aspects of baseball and baseball players that others in the industry did value, including many within his own organization. This is where the conflict comes in. Beane's outlook conflicts with scouting director Grady Fuson (Ken Medlock) and manager Art Howe (Philip Seymour Hoffman), both of whom believe in the more traditional approach to baseball operations.
This conflict (Since Fuson and Howe have similar takes on baseball operations, I'll lump everything in as one conflict despite Beane having separate run-ins with Fuson and Howe) stems from a fundamental disagreement on how a baseball team should be put together and utilized on the field, but it goes much deeper than simply wanting what is best for the team for both sides.
Beane realizes if he continues to approach building his team the same way as other organizations do, he'll lose because other clubs can simply outspend him. Therefore, he decides to find the most efficient way possible to put a team together. Through studying the sabermetric teachings of Bill James, Beane and his Assistant GM Paul DePodesta (named Peter Brand and played by Jonah Hill in the film) determine that the two statistics most closely correlated to scoring runs are On-Base Percentage (OBP) and Slugging Percentage. All other stats have lesser influence on scoring runs and therefore winning games. Therefore, Beane decides to go after free agents and amateur players based solely on their career OBP and Slugging. In doing this, Beane is able to find several players who other teams wouldn't look twice at. This raises eyebrows in Beane's scouting department. Fuson argues that these players cannot play as they are un-athletic, play poor defense, and lack raw power, an understandable argument coming from a scout whose job it is to find the most talented players in the world. Beane dismisses Fuson, noting that those other aspects, those that Fuson values, don't matter to him.
When it comes to putting these players into the lineup, Howe refuses, applying the same logic as Fuson, that the players Beane has added are less talented and therefore shouldn't play. When Howe repeatedly disobeys Beane's orders to play the the players as Beane designed them to be played, Beane trades away the players in front of those he preferred on the depth chart, forcing Howe to play the players as Beane wants.
Fuson and Howe could simply say, "oh well, Billy's the boss. If this fails, it's on him.", but that would not only violate their fundamental beliefs about baseball, which had been molded over decades in the industry, but would also endanger their future in the industry. In baseball, individuals are evaluated by the decisions they've made throughout their career. They are judged by these decisions even when they belong to someone else. If Howe would have played the players Beane demanded him to and those players were to have played poorly, it would be Howe that received the criticism from fans and the media. Also, he wouldn't be able to explain it in job interviews for managerial jobs in the future. He would either have to take the blame for the poor decision or admit that he was steamrolled by his own GM. Why was this a major problem for Howe? I mentioned earlier how thin the budget was in Oakland. With players being run in and out, Howe could bet he wouldn't last long there no matter how well he did. If the organization wouldn't put their faith in him with a contract extension, why should he put faith in their system, which could seriously damage his reputation? The same goes for Fuson, who felt his position would be all but obsolete with Beane ignoring scouting reports and basing decision solely on statistics. Both Howe and Fuson would have to take on a great amount of risk in order to follow Beane's orders, and considering Oakland would unlikely retain either even if the plan succeeds, the positive outcome was minuscule comparatively.
Despite Fuson and Howe feeling similarly about the situation, the two experience far different outcomes. Fuson resigns after getting into a verbal altercation with Beane (or so the movie depicts). In reality, Fuson left the organization for a Assistant GM postion with the Texas Rangers. Howe, on the other hand, lets the team be after Beane ties his hands and when the team eventually succeeds, Howe receives a fair amount of the credit.
This shows that this particular conflict had very different potential outcomes. The interesting part of these outcomes is that they were reached through almost the set of circumstances. Neither Beane nor Howe made any compromises in order to reach a different outcome than Beane reached with Fuson. Perhaps Howe did give Beane a longer leash than Fuson did before he walked away from the organization. The important thing to note about the outcome and the conflict in general is that Beane, acting as the superior with control over the situation, would not have compromised on his strategy regardless of the consequences. He was ready to see his plan through even if meant losing his job in the case that his plan failed.
This outlook of Beane's verges on opportunism when it comes to others in the organization, namely Fuson. As I mentioned earlier, the statistical element to Beane's decision making process to an extent replaced the scouting element. If Beane doesn't care about how athletic a player is or how his swing looks, why even bother with scouting? Beane's opportunity to find players at a better value to the organization meant potentially making the entire scouting department, including Fuson, obsolete and non-essential. The only step further Beane could have went with this process was to eliminate the scouting department altogether, which would cost several people their jobs.
That action would have been one of several transaction costs of the new baseball operations system. "Adapt or die" Beane says in the film. Howe and Fuson were just two of many within the organization who had to either completely change their own approach to the game they had played and/or studied for years or find another job.
Ultimately, Beane's plan was successful. The A's went onto earn the American League's best record in 2002 and Beane's system was implemented by several other organizations throughout baseball as a pinnacle of efficiency in a sport where efficiency was sorely needed. However, I don't believe one could argue very effectively that the specific conflict I've described went as well as it could have. Beane essentially worked around both Fuson and Howe, taking the bat out of their hands you might say. In an organization in which employees aren't as easily expendable, Beane almost surely wouldn't be able to treat Howe and Fuson as he did.
Friday, October 24, 2014
Experience with the Psychology and Economics of Team Production and Gift Exchange
The New York Times article, "How to Get the Rich to Share the Marbles," given in the prompt for this post makes an interesting and very legitimate comparison between man's psychological willingness/non-willingness to share and the current direction of the Democratic party. The behavior of the toddlers in Tomasello and Hamann's experiment seemed quite similar to the consensus behavior of many Americans when it comes to their roles in the American economic structure.When participants are aware of the source of the payout, the dividing up of payouts is usually based on whose input led to what payout as opposed to being based on who gave the biggest input. This system seems to make sense as far as distributive fairness. You've heard the saying, "work smarter, not harder." If one person's effort led to a much bigger payout than another's, why should the first person have to share the wealth they received? This is the problem that Democrats want to alleviate. What will increase the wealthy's willingness to share with their less wealthy counterparts? One idea might be if the wealthy's payout is dependent on their sharing with the less wealthy. I have a example.
I took a class on Financial Management a couple of semesters ago. Part of the curriculum involved a group project in which we analyzed the stock market on a weekly basis, decided on stocks to "buy" or "sell," and reported our findings. After a semester of buying and selling stocks, we had to write a paper as a group, describing various aspects of the projects and our findings. We originally broke this paper up into even parts, so that everyone would provide the same input. However, as the process went on, small chunks of other members' work fell onto the shoulders of myself and one other member. In addition to helping the other members with their chunks, the two of us had to review and edit their work and get the paper formatted for submission. Essentially, the assignment became largely the product of the two of us with small inputs from the other members. Why would we be willing to gift the other members by helping them out with their chunks? Of course, it was because the group as a whole received a single grade. Helping our group members led to us receiving a higher grade.
This could translate over to Haidt's idea in his article. Since the payout for the two of us who were doing most of the work hinged on the performance of the group as a whole, we were willing to gift our other group members with increased production. If we were each graded individually (assuming the professor could determine how hard we each worked), the two of us would have no incentive to help our group mates out.
This idea sounds feasible considering everyone benefits in the situation. The two of us still received a good grade and so did the rest of our group, but is that fair? That's hard to say. On one hand, those whose work leads to positive payouts should be rewarded accordingly. However, was is necessarily the fault of our group mates that their work may not have led to such positive payouts? If they truly worked hard on their section of the project, but struggled in some way, should they be punished by receiving a lower grade than other group members who produced more? In theory, one would almost certainly say no. However, if we were to distribute payouts based on effort alone, how would effort be quantified?, i.e. what would stop members from only demonstrating perceived effort in order to receive a payout? This seems to be the critique of choice for Republicans opposed to the liberal agenda of the Democrats. If everyone works hard, then equal payouts is feasible, but if some slack because their production doesn't affect their pay, that could lead to real problems.
The only part of Haidt's piece that doesn't seem to connect with my experience is the final paragraph, regarding the rich lobbying in Washington to help themselves become richer. In my experience, there wasn't a way for any of us to lobby with the professor to give us an edge in grading. This might be an aspect in favor of equal pay for all or effort-based payouts. If everyone received the same payouts, no single person would have any more utility than another, which would effectively cancel out the ability to lobby and the edge gained from lobbying.
I took a class on Financial Management a couple of semesters ago. Part of the curriculum involved a group project in which we analyzed the stock market on a weekly basis, decided on stocks to "buy" or "sell," and reported our findings. After a semester of buying and selling stocks, we had to write a paper as a group, describing various aspects of the projects and our findings. We originally broke this paper up into even parts, so that everyone would provide the same input. However, as the process went on, small chunks of other members' work fell onto the shoulders of myself and one other member. In addition to helping the other members with their chunks, the two of us had to review and edit their work and get the paper formatted for submission. Essentially, the assignment became largely the product of the two of us with small inputs from the other members. Why would we be willing to gift the other members by helping them out with their chunks? Of course, it was because the group as a whole received a single grade. Helping our group members led to us receiving a higher grade.
This could translate over to Haidt's idea in his article. Since the payout for the two of us who were doing most of the work hinged on the performance of the group as a whole, we were willing to gift our other group members with increased production. If we were each graded individually (assuming the professor could determine how hard we each worked), the two of us would have no incentive to help our group mates out.
This idea sounds feasible considering everyone benefits in the situation. The two of us still received a good grade and so did the rest of our group, but is that fair? That's hard to say. On one hand, those whose work leads to positive payouts should be rewarded accordingly. However, was is necessarily the fault of our group mates that their work may not have led to such positive payouts? If they truly worked hard on their section of the project, but struggled in some way, should they be punished by receiving a lower grade than other group members who produced more? In theory, one would almost certainly say no. However, if we were to distribute payouts based on effort alone, how would effort be quantified?, i.e. what would stop members from only demonstrating perceived effort in order to receive a payout? This seems to be the critique of choice for Republicans opposed to the liberal agenda of the Democrats. If everyone works hard, then equal payouts is feasible, but if some slack because their production doesn't affect their pay, that could lead to real problems.
The only part of Haidt's piece that doesn't seem to connect with my experience is the final paragraph, regarding the rich lobbying in Washington to help themselves become richer. In my experience, there wasn't a way for any of us to lobby with the professor to give us an edge in grading. This might be an aspect in favor of equal pay for all or effort-based payouts. If everyone received the same payouts, no single person would have any more utility than another, which would effectively cancel out the ability to lobby and the edge gained from lobbying.
Thursday, October 16, 2014
Thoughts on Managing Future Income Risk
The extent to which my current decisions affect my future is a subject I have struggled with over the past few years, often changing my views on the matter. Let me explain.
After graduating from high school, I enrolled at UIS, a school to which I could commute while also working a full-time job at my family's chain of dry cleaners. It seemed to be a fairly good situation. I received a partial scholarship from UIS and the tuition rates were pretty reasonable on top of that, so between my savings, my income, and partial financial help from my parents, I was on-track to be able to pay for college without taking out any student loans. Meanwhile, while working for the family cleaners, I learned a great deal about businesses and microeconomics outside of classes. If I had kept in this system, I believe I would have been set up pretty well for my immediate future after college as I would have a college degree, little-to-no debt, and experience in the field I was entering prior to graduating.
However, I was never quite sure whether I truly wanted to go into the family business, and if I were to, I would likely go into my parent's other business, Flynn Sales & Service in which we sell and repair commercial laundry equipment (I discussed this business in a previous post), as opposed to the dry cleaners. While I had been around the business throughout my life, I didn't have nearly the amount of experience with repairing equipment as I did at the dry cleaners, not to mention the lack of experience with the differing customer base, business operations, etc.. You may wonder why I didn't work at Flynn Sales instead of the cleaners. The reason is pretty plain: Flynn Sales would've demanded me to work hours completely incompatible with my school schedule while the cleaners hours were flexible, and also the need for employees at the cleaners was much higher than at Flynn Sales. In addition to this oversight, I had become somewhat disenchanted with my situation as a whole. Long hours at school and work left little time for other things, such as a social life. Also, I knew that if I stayed in my situation, I may not get the chance to experience new things and would surely end up working for the family business, which as I said I was undecided on.
For these reasons, I decided to transfer to UIUC. If you travel to Springfield, you'd quickly see that Champaign and Springfield are very much alike once you're outside the campus, but they were different enough for me and Illinois, being a state school was still within a reasonable price-range tuition-wise. That's not to say the transfer has not been expensive. This is where the new risk comes in. Transferring to a slightly more expensive school, coupled with living expenses and the loss of my full-time job, has thrown me completely off my plan to graduate without debt, which certainly increases the risk I am taking on my future. Also, the move to UIUC is surely not helping me in preparing to work for Flynn Sales. However, I hope that UIUC will help me in finding employment in a different field if I choose to enter one, as it is held in high regard and would insure that I receive a good education. I would consider this a very big risk considering I gave up a decent amount in both accounting costs and opportunity costs to attend here. However, taking the risk wasn't necessarily the goal in coming here. I wouldn't consider myself a huge gambler. I mainly transferred here in order to experience something different than I had been and determine whether or not I want to continue on with my family's businesses or take a chance on doing something different.
I still have Flynn Sales and the cleaners as a fall-back of course. In fact, I spent the summer back home in Jacksonville working for Flynn Sales in somewhat of an apprentice's role. Without classes to get in the way, I was able to dedicate much more time to studying how the business works and what my role may be there if I choose to work there full-time after I graduate. That experience should help me in deciding what I want to do after I graduate and also eliminate a little of the risk seeing as how I have a fall-back option if I choose not to pursue another occupation.
My choices have been slightly different than my siblings before me. My oldest sister, Becca, for example approached college a little differently than I did. Becca was incredibly efficient in her approach to college, which somewhat resembles my approach before I decided to transfer. She enrolled at Illinois College, a small private college in Jacksonville. This allowed her to live at home, cutting living expenses as well as work full-time. She was able to graduate with honors with an Accounting degree in a square four years with little in the way of student loans and quickly find a great job in Jacksonville which helped her pay off her loans in a somewhat painless manner. She seemed to have an understanding early on about what she wanted and was incredibly driven to achieve her goals. While I don't know exactly how intentional it was, she minimized her risk almost throughout the whole process. She controlled the amount she was spending in order to graduate without an obscene amount of debt, she chose a field of study that not only paid well but also was in high demand in our area, and finally, and also she made sure the things she did on the side; working, extracurriculars, etc. would all help her in the future in some way, shape, or form.
I have not managed to be quite as efficient in my approach as Becca was, and shame on me as an economics major for not being efficient. However, I also didn't quite know exactly what I wanted to do from the start of my college career like she did and therefore felt taking a risk may carry more utility for me. In taking the risk that I did, I may have helped myself find what I'd like to do as far as a career goes. She never had that problem and therefore never felt the need to take a risk when choosing a college and an approach to graduating and moving on after college.
After graduating from high school, I enrolled at UIS, a school to which I could commute while also working a full-time job at my family's chain of dry cleaners. It seemed to be a fairly good situation. I received a partial scholarship from UIS and the tuition rates were pretty reasonable on top of that, so between my savings, my income, and partial financial help from my parents, I was on-track to be able to pay for college without taking out any student loans. Meanwhile, while working for the family cleaners, I learned a great deal about businesses and microeconomics outside of classes. If I had kept in this system, I believe I would have been set up pretty well for my immediate future after college as I would have a college degree, little-to-no debt, and experience in the field I was entering prior to graduating.
However, I was never quite sure whether I truly wanted to go into the family business, and if I were to, I would likely go into my parent's other business, Flynn Sales & Service in which we sell and repair commercial laundry equipment (I discussed this business in a previous post), as opposed to the dry cleaners. While I had been around the business throughout my life, I didn't have nearly the amount of experience with repairing equipment as I did at the dry cleaners, not to mention the lack of experience with the differing customer base, business operations, etc.. You may wonder why I didn't work at Flynn Sales instead of the cleaners. The reason is pretty plain: Flynn Sales would've demanded me to work hours completely incompatible with my school schedule while the cleaners hours were flexible, and also the need for employees at the cleaners was much higher than at Flynn Sales. In addition to this oversight, I had become somewhat disenchanted with my situation as a whole. Long hours at school and work left little time for other things, such as a social life. Also, I knew that if I stayed in my situation, I may not get the chance to experience new things and would surely end up working for the family business, which as I said I was undecided on.
For these reasons, I decided to transfer to UIUC. If you travel to Springfield, you'd quickly see that Champaign and Springfield are very much alike once you're outside the campus, but they were different enough for me and Illinois, being a state school was still within a reasonable price-range tuition-wise. That's not to say the transfer has not been expensive. This is where the new risk comes in. Transferring to a slightly more expensive school, coupled with living expenses and the loss of my full-time job, has thrown me completely off my plan to graduate without debt, which certainly increases the risk I am taking on my future. Also, the move to UIUC is surely not helping me in preparing to work for Flynn Sales. However, I hope that UIUC will help me in finding employment in a different field if I choose to enter one, as it is held in high regard and would insure that I receive a good education. I would consider this a very big risk considering I gave up a decent amount in both accounting costs and opportunity costs to attend here. However, taking the risk wasn't necessarily the goal in coming here. I wouldn't consider myself a huge gambler. I mainly transferred here in order to experience something different than I had been and determine whether or not I want to continue on with my family's businesses or take a chance on doing something different.
I still have Flynn Sales and the cleaners as a fall-back of course. In fact, I spent the summer back home in Jacksonville working for Flynn Sales in somewhat of an apprentice's role. Without classes to get in the way, I was able to dedicate much more time to studying how the business works and what my role may be there if I choose to work there full-time after I graduate. That experience should help me in deciding what I want to do after I graduate and also eliminate a little of the risk seeing as how I have a fall-back option if I choose not to pursue another occupation.
My choices have been slightly different than my siblings before me. My oldest sister, Becca, for example approached college a little differently than I did. Becca was incredibly efficient in her approach to college, which somewhat resembles my approach before I decided to transfer. She enrolled at Illinois College, a small private college in Jacksonville. This allowed her to live at home, cutting living expenses as well as work full-time. She was able to graduate with honors with an Accounting degree in a square four years with little in the way of student loans and quickly find a great job in Jacksonville which helped her pay off her loans in a somewhat painless manner. She seemed to have an understanding early on about what she wanted and was incredibly driven to achieve her goals. While I don't know exactly how intentional it was, she minimized her risk almost throughout the whole process. She controlled the amount she was spending in order to graduate without an obscene amount of debt, she chose a field of study that not only paid well but also was in high demand in our area, and finally, and also she made sure the things she did on the side; working, extracurriculars, etc. would all help her in the future in some way, shape, or form.
I have not managed to be quite as efficient in my approach as Becca was, and shame on me as an economics major for not being efficient. However, I also didn't quite know exactly what I wanted to do from the start of my college career like she did and therefore felt taking a risk may carry more utility for me. In taking the risk that I did, I may have helped myself find what I'd like to do as far as a career goes. She never had that problem and therefore never felt the need to take a risk when choosing a college and an approach to graduating and moving on after college.
Friday, October 3, 2014
Thoughts on 'Illinibucks' Concept
At a major university such as Illinois, there are lines everywhere for everything. Even when there are multiple venues to find what it is you're looking for, the sheer volume of students makes certain that several other people are looking for the exact same thing. This is what makes Illinibucks so interesting. If the university were able to allocate and redistribute these lines based on what students find most important, not only will many students be able to get what they really need quickly, but they may tend to be more complacent when they are waiting in line for something less vital. Theoretically, the university could increase student satisfaction at little or no financial cost.
The simplest way to implement this system is by administering a given amount of Illinibucks to each student either as a lump sum upon enrollment, or periodically each semester, month, week, etc. If they choose to provide Illinibucks periodically, I believe it is only proper that rollover is allowed, otherwise students would be forced to spend all their Illinibucks in a given amount of time even if they don't wish to so as to not waste them. Rollover would also ease the process of accepting Illinibucks, as vendors would not need to check expiration dates etc. in order to accept the bucks as well as allow students to save for situations that occur infrequently, such as class enrollment.
These Illinibucks could be used at any type of line on campus: bookstores, coffee shops, dining halls, perhaps even local private businesses if they wish to implement the system. It would not be difficult for the university to set such a thing up with local businesses and the result would likely be beneficial for both parties: Illinibucks get more validation and become more valuable and versatile and the businesses may see more customers who wish to take advantage of the bucks.
The difficult part of the system would be in setting prices and the amount allocated to each student. A hierarchy would need to be established to determine which lines are more valuable to cut than others. For example, the price of priority course registration must be far higher than the price to cut in line at the coffee shop. Some differences may be solely based on preference, for those situations, the prices would be similar. The university will need to make sure that there is similar demand quantities for each venue, so that students don't all choose to spend their bucks in the same line, otherwise the system would be useless.
In addition to establishing this hierarchy of prices, the university must decide how many bucks to give each student. There must be enough for students to actually be able to make use of them, but not too much that every student can cut in every line, otherwise the system would be useless.
I personally would likely spend my Illinibucks on registration for course. I'm one of those students who are usually behind the ball when signing up for classes and it would be nice to be able to still get into classes despite my laziness! However, this leads to the problem that I suggested earlier, that certain perks of Illinibucks are much more valuable than others. I assume most students would choose to purchase priority registration, which essentially nullifies the perks. Those who spend their bucks on registration would skip ahead of those who don't but would still have to wait behind the countless students who have already used their bucks on registration. So the benefit for students may not be quite as great as they hope.
With that last bit being said, I still think the system could be overall beneficial to all parties for the second reason I mentioned in my first paragraph. Since students are given the opportunity to cut ahead in line, those who choose not to should tend to be more content than they would be if they had no say in the situation.
The simplest way to implement this system is by administering a given amount of Illinibucks to each student either as a lump sum upon enrollment, or periodically each semester, month, week, etc. If they choose to provide Illinibucks periodically, I believe it is only proper that rollover is allowed, otherwise students would be forced to spend all their Illinibucks in a given amount of time even if they don't wish to so as to not waste them. Rollover would also ease the process of accepting Illinibucks, as vendors would not need to check expiration dates etc. in order to accept the bucks as well as allow students to save for situations that occur infrequently, such as class enrollment.
These Illinibucks could be used at any type of line on campus: bookstores, coffee shops, dining halls, perhaps even local private businesses if they wish to implement the system. It would not be difficult for the university to set such a thing up with local businesses and the result would likely be beneficial for both parties: Illinibucks get more validation and become more valuable and versatile and the businesses may see more customers who wish to take advantage of the bucks.
The difficult part of the system would be in setting prices and the amount allocated to each student. A hierarchy would need to be established to determine which lines are more valuable to cut than others. For example, the price of priority course registration must be far higher than the price to cut in line at the coffee shop. Some differences may be solely based on preference, for those situations, the prices would be similar. The university will need to make sure that there is similar demand quantities for each venue, so that students don't all choose to spend their bucks in the same line, otherwise the system would be useless.
In addition to establishing this hierarchy of prices, the university must decide how many bucks to give each student. There must be enough for students to actually be able to make use of them, but not too much that every student can cut in every line, otherwise the system would be useless.
I personally would likely spend my Illinibucks on registration for course. I'm one of those students who are usually behind the ball when signing up for classes and it would be nice to be able to still get into classes despite my laziness! However, this leads to the problem that I suggested earlier, that certain perks of Illinibucks are much more valuable than others. I assume most students would choose to purchase priority registration, which essentially nullifies the perks. Those who spend their bucks on registration would skip ahead of those who don't but would still have to wait behind the countless students who have already used their bucks on registration. So the benefit for students may not be quite as great as they hope.
With that last bit being said, I still think the system could be overall beneficial to all parties for the second reason I mentioned in my first paragraph. Since students are given the opportunity to cut ahead in line, those who choose not to should tend to be more content than they would be if they had no say in the situation.
Friday, September 26, 2014
Experience with Team Organization
I'd like to go back to the well on this one and discuss our dry cleaning process at Crystal Cleaners in regards to team organization. Since I have not been a part of the dry cleaning process for some time since transferring to UIUC, I will discuss the system in its current form, without me in it.
At this time, the system could be considered a simple "One Boss" arrangement. My sister, Emily, oversees all business operations, including all facets of the dry cleaning process. Underneath her, the system is broken up into smaller sectors: Dry Cleaning, Laundering, Dry Cleaning Pressing, Shirt Pressing, Sorting/Processing, Customer Service, and Transportation. These sectors perform tasks largely individually, with few overlaps in production, so high levels of communication between sectors is not always required. They also all answer to Emily directly and refer to her with any questions or concerns. Of course, this does not mean one sector can function completely freely of all others. They are all facilitated by one another and require one another to perform their tasks properly in order to perform their own tasks.
Here I will give a quick synopsis as to how the system works and what each sector's tasks are:
-The Dry Cleaning and Laundering Teams arrive before the store opens, ready the machines and clothing items, and begin washing/cleaning all items.
-The Shift Clerk (Customer Service) arrives to open the store to customers at 7 am.
-The Shirt Pressing Team arrives at 7:30 am, when the first loads of shirts are finished in the washers, and begins pressing. Shirt pressing is a three-part process: Shirts first go on a buck press on which the body of the shirt is pressed. Then, shirts are inspected for any unwanted creases or imperfections the buck may have left and imperfect areas are pressed by a hot head press. Finally, shirts are brought to a basic iron where sleeves are ironed and the shirts are readied for processing.
-The Dry Cleaning Team arrives at 8;00 am, when the first load of dry cleaning is finished being cleaned, and begins pressing. Dry cleaning presses is essentially broken up into three categories: Trousers are pressed on a "legger" press and touched-up by a pant-topper press. Jackets are pressed on a cushioned utility press and steamed-out by a "Suzie" machine. Finally, all other miscellaneous dry cleaning/laundering items are pressed by hand on a utility press and Suzie if need be.
-The Processing Team arrives at 9;00 am and begins inspecting finished items for any mistakes and then places items on the line with their order ticket. As orders are completed, items are bagged and place with in a designated area with other orders from that particular location. Crystal dry cleaning is placed on our rotating rack for customer pick-up.
-All dry cleaning from our drop stores are loaded and transported to those locations. While at each location, incoming dry cleaning from the day is picked up and returned to Crystal.
-Team members leave after their tasks for the day are finished and the day's work is completed.
This system seems to be successful as of now and it may be because it includes several of Katzenbach and Smith's distinguishing characteristics of high-quality teams.
-The system allows each team to handle its own matters throughout the day. Granted, she has taught each team how shes wants things to be done and what ways she feels will produce the greatest efficiency, but she does let each team go about its business without breathing down their necks constantly.
-Each sector's tasks have been broken down into measurable goals. As you may have been able to tell, much of the dry cleaning process involves labor, machine utilities, and other variable costs. Therefore, our system is centered around been as efficient as possible. Therefore, we have employed the use of time and quality-measured performance goals to ensure that work is being done in a timely manner.
-The size of the system may seem big from my explanations, but actually, there are only about 10 people in the system. most of the teams I mentioned earlier are actually made up of just 1 or 2 people.
-Expertise may be a field in which we are lacking a bit. Mainly, since employees are only performing tasks relating to their sectors, they don't carry much expertise in the other dimensions of the system. However, there are a handful of team members that do have experience in multiple fields which comes in handy when someone misses a day of work or one particular sector has more work to do than normal.
-Working relationships is another field in which we aren't as strong as we could be. Team members within the same sector have often become quite close as they are working toward the same immediate goals and are also in close proximity to each other. However, since sectors don't often overlap, there is little need to develop close relationships with those outside one's sector. Don't get me wrong here though. It is a small business and everyone knows everyone, but as far as interpersonal communication, it is not necessarily vital to the success of the system.
-The final piece is the one that intrigues me most of all. In a remedial labor-driven business like ours, it is incredibly difficult to get our employees to become committed to the business. This problem can present itself in many ways. An employee can work slowly because they don't care about being efficient. They could skimp out on quality as far as pressing because making sure items are perfect can be a pain and they don't care about perfection. Or they could be careless when processing items, which leads to customers' items being placed with the wrong orders or being lost altogether. This has been our biggest problem since we started at Crystal and our main strategy to prevent it is to simply try to make Crystal a pleasant place to work so that employees enjoy being there (as much as they can at leas) and to involve them in the decision-making process so that they feel they are truly a part of our business because in truth, they are. This strategy has had some success lately. Our current team includes some of the hardest working and more efficient employees I've seen since we've started. And believe me, I've seen a lot. In this type of industry, turnover is something you see quite a bit.
At this time, the system could be considered a simple "One Boss" arrangement. My sister, Emily, oversees all business operations, including all facets of the dry cleaning process. Underneath her, the system is broken up into smaller sectors: Dry Cleaning, Laundering, Dry Cleaning Pressing, Shirt Pressing, Sorting/Processing, Customer Service, and Transportation. These sectors perform tasks largely individually, with few overlaps in production, so high levels of communication between sectors is not always required. They also all answer to Emily directly and refer to her with any questions or concerns. Of course, this does not mean one sector can function completely freely of all others. They are all facilitated by one another and require one another to perform their tasks properly in order to perform their own tasks.
Here I will give a quick synopsis as to how the system works and what each sector's tasks are:
-The Dry Cleaning and Laundering Teams arrive before the store opens, ready the machines and clothing items, and begin washing/cleaning all items.
-The Shift Clerk (Customer Service) arrives to open the store to customers at 7 am.
-The Shirt Pressing Team arrives at 7:30 am, when the first loads of shirts are finished in the washers, and begins pressing. Shirt pressing is a three-part process: Shirts first go on a buck press on which the body of the shirt is pressed. Then, shirts are inspected for any unwanted creases or imperfections the buck may have left and imperfect areas are pressed by a hot head press. Finally, shirts are brought to a basic iron where sleeves are ironed and the shirts are readied for processing.
-The Dry Cleaning Team arrives at 8;00 am, when the first load of dry cleaning is finished being cleaned, and begins pressing. Dry cleaning presses is essentially broken up into three categories: Trousers are pressed on a "legger" press and touched-up by a pant-topper press. Jackets are pressed on a cushioned utility press and steamed-out by a "Suzie" machine. Finally, all other miscellaneous dry cleaning/laundering items are pressed by hand on a utility press and Suzie if need be.
-The Processing Team arrives at 9;00 am and begins inspecting finished items for any mistakes and then places items on the line with their order ticket. As orders are completed, items are bagged and place with in a designated area with other orders from that particular location. Crystal dry cleaning is placed on our rotating rack for customer pick-up.
-All dry cleaning from our drop stores are loaded and transported to those locations. While at each location, incoming dry cleaning from the day is picked up and returned to Crystal.
-Team members leave after their tasks for the day are finished and the day's work is completed.
This system seems to be successful as of now and it may be because it includes several of Katzenbach and Smith's distinguishing characteristics of high-quality teams.
-The system allows each team to handle its own matters throughout the day. Granted, she has taught each team how shes wants things to be done and what ways she feels will produce the greatest efficiency, but she does let each team go about its business without breathing down their necks constantly.
-Each sector's tasks have been broken down into measurable goals. As you may have been able to tell, much of the dry cleaning process involves labor, machine utilities, and other variable costs. Therefore, our system is centered around been as efficient as possible. Therefore, we have employed the use of time and quality-measured performance goals to ensure that work is being done in a timely manner.
-The size of the system may seem big from my explanations, but actually, there are only about 10 people in the system. most of the teams I mentioned earlier are actually made up of just 1 or 2 people.
-Expertise may be a field in which we are lacking a bit. Mainly, since employees are only performing tasks relating to their sectors, they don't carry much expertise in the other dimensions of the system. However, there are a handful of team members that do have experience in multiple fields which comes in handy when someone misses a day of work or one particular sector has more work to do than normal.
-Working relationships is another field in which we aren't as strong as we could be. Team members within the same sector have often become quite close as they are working toward the same immediate goals and are also in close proximity to each other. However, since sectors don't often overlap, there is little need to develop close relationships with those outside one's sector. Don't get me wrong here though. It is a small business and everyone knows everyone, but as far as interpersonal communication, it is not necessarily vital to the success of the system.
-The final piece is the one that intrigues me most of all. In a remedial labor-driven business like ours, it is incredibly difficult to get our employees to become committed to the business. This problem can present itself in many ways. An employee can work slowly because they don't care about being efficient. They could skimp out on quality as far as pressing because making sure items are perfect can be a pain and they don't care about perfection. Or they could be careless when processing items, which leads to customers' items being placed with the wrong orders or being lost altogether. This has been our biggest problem since we started at Crystal and our main strategy to prevent it is to simply try to make Crystal a pleasant place to work so that employees enjoy being there (as much as they can at leas) and to involve them in the decision-making process so that they feel they are truly a part of our business because in truth, they are. This strategy has had some success lately. Our current team includes some of the hardest working and more efficient employees I've seen since we've started. And believe me, I've seen a lot. In this type of industry, turnover is something you see quite a bit.
Friday, September 19, 2014
Experience with Opportunism and Inopportunism
In addition to running a few dry cleaners/laundromats in the Springfield area, my parents also own Flynn Sales & Service, a business in which we sell and repair commercial and industrial laundry equipment. We are also official distributors for Dexter Laundry Equipment for central and southern Illinois. Essentially, we work with almost exclusively other small businesses: laundromats, nursing homes, hotels, etc. This can make things a little difficult when it comes to the payment side of the transaction.
Small businesses are more difficult to run now than ever and our customers can, obviously, be a little stingy when it comes to what they're willing to pay. This stinginess can present itself at any time: when we send them a quote for the estimated price, when we get to the location and find out they've changed their mind, or in some cases, even after we're finished installing the machines and they feel they can haggle since it would be too much work for us to uninstall the machine at that point. This behavior can drive some of us crazy, to the point where we would prefer to not do business with stingy customers at all. But my dad, who essentially makes all sales and service decisions for the company, has an unbelievable ability to remain steadfast, to his own detriment in many cases.
My dad truly believes that small businesses are a most vital part of our economy. He is also a very humble and hard working individual, never trying to steal an extra buck from anyone. He believes that if you work hard and do the right thing, things will take care of themselves. I greatly admire his philosophy as an individual, but this way of thinking can sometimes muddy the water when it comes to business.
At times, when customers try to haggle or talk him down, it is truly because they just don't have the money and would pay if they just had a little more. Other times, they may be just wise to the fact that my dad is quite easy-going when it comes to money. Regardless, my dad is usually willing to give a lot more than the rest of us would like him to. I've asked him on several occasions, "you only charged enough to cover our cost of the machine and barely enough to cover our cost of labor and gas. Why not charge more?" He hates that question since he gets it almost constantly from the rest of the employees and of course, my mom, who is not only part-owner but is also in charge of all finances. But he always just answers, "It's tough out there for us small businesses. We have laundries. We know it's hard. The economy and customers are hard enough to handle. The least we small businesses can do is help each other out." He goes on to say that we're getting enough to cover our paychecks and put a little money back into the business, and that's good enough.
You could easily argue that my dad is not great at this business thing. But he's been running Flynn Sales for over 25 years and he has one of the best reputations in the state. He also has a great reputation with Dexter, despite having a small sales region and many times talking his own customers into buying used equipment because of Dexter equipment's durability. He's been offered to take over larger regions including St. Louis but has turned them down as he doesn't want to sacrifice the quality of his work just to expand. He seems to turn down opportunities fairly often in his work, but he's made it very clear why. He cares about his customers and would rather see to it that they are taken care of than make a few extra bucks, and he knows that when it comes to laundry equipment, nobody can take better care of his customers than him.
Small businesses are more difficult to run now than ever and our customers can, obviously, be a little stingy when it comes to what they're willing to pay. This stinginess can present itself at any time: when we send them a quote for the estimated price, when we get to the location and find out they've changed their mind, or in some cases, even after we're finished installing the machines and they feel they can haggle since it would be too much work for us to uninstall the machine at that point. This behavior can drive some of us crazy, to the point where we would prefer to not do business with stingy customers at all. But my dad, who essentially makes all sales and service decisions for the company, has an unbelievable ability to remain steadfast, to his own detriment in many cases.
My dad truly believes that small businesses are a most vital part of our economy. He is also a very humble and hard working individual, never trying to steal an extra buck from anyone. He believes that if you work hard and do the right thing, things will take care of themselves. I greatly admire his philosophy as an individual, but this way of thinking can sometimes muddy the water when it comes to business.
At times, when customers try to haggle or talk him down, it is truly because they just don't have the money and would pay if they just had a little more. Other times, they may be just wise to the fact that my dad is quite easy-going when it comes to money. Regardless, my dad is usually willing to give a lot more than the rest of us would like him to. I've asked him on several occasions, "you only charged enough to cover our cost of the machine and barely enough to cover our cost of labor and gas. Why not charge more?" He hates that question since he gets it almost constantly from the rest of the employees and of course, my mom, who is not only part-owner but is also in charge of all finances. But he always just answers, "It's tough out there for us small businesses. We have laundries. We know it's hard. The economy and customers are hard enough to handle. The least we small businesses can do is help each other out." He goes on to say that we're getting enough to cover our paychecks and put a little money back into the business, and that's good enough.
You could easily argue that my dad is not great at this business thing. But he's been running Flynn Sales for over 25 years and he has one of the best reputations in the state. He also has a great reputation with Dexter, despite having a small sales region and many times talking his own customers into buying used equipment because of Dexter equipment's durability. He's been offered to take over larger regions including St. Louis but has turned them down as he doesn't want to sacrifice the quality of his work just to expand. He seems to turn down opportunities fairly often in his work, but he's made it very clear why. He cares about his customers and would rather see to it that they are taken care of than make a few extra bucks, and he knows that when it comes to laundry equipment, nobody can take better care of his customers than him.
Friday, September 12, 2014
Experience with Organizational Changes and Transaction Costs
Before transferring to Illinois last year, I attended UIS in Springfield while working for my family's dry cleaning/laundromat business, Crystal Cleaners. My family has owned and operated Crystal for about 6 years now. When we took over the business, it was a little down on its luck, but my family has had years of experience in the industry and we felt we could turn it into a very successful and profitable business. We performed renovations on the laundromat and conducted a complete overhaul of the dry cleaning process. Still, our expectations were humble. We expected steady increases in profits, which we assumed would be due in part to increased laundromat revenue and improved efficiency in the cleaners. However, the actual increases were much more dramatic than our highest hopes! Soon, we were able to take over Crystal's sister-store, Family Pride Cleaners and Laundry, which, up to that point had been serving as a drop store and sending us their dry cleaning. While we weren't nearly as large as some of the other dry cleaner chains in Springfield, we were by far the fastest growing, and our two laundromats had (and still have) the best reputations in town.
Last year, we were given another opportunity to grow as one of the other dry cleaner chains came to us with a proposal to merge. Their dry cleaning plant was in need of tedious renovations and their income at that time made making upgrades impractical. Therefore, we took on their dry cleaning as part of a partnership. However, this nearly doubled the size of our business in terms of clothing items per week. We had dealt with gradual increases in output and shocks to our systems before, but nothing of this magnitude. We had to change our entire system of production. We nearly doubled the size of our dry cleaning/pressing staff, installed additional presses, completely reworked our production line, and even altered our hours of production. While undergoing these changes were difficult at the time, we learned that we can adjust and adapt to new shocks to our system, not only planned shocks, but unplanned ones too if they were to arise in the future. As we continue to grow, we will continue to make these adjustments as they are needed. Hopefully, they will be due to pleasant changes such as an increase in business as opposed to negative changes!
To specify some of the transaction costs incurred as we took on more business, they mainly regarded our plant and our production system. Before the merger, we were able to begin our dry cleaning process at 7 a.m. when we opened each morning. My sister, Emily, the co-owner and manager, or I will open the store and begin readying the dry cleaning items for cleaning. Soon after, our shirt team will come in and begin readying the shirts for washing, a sometimes lengthy process. The dry cleaning pressing team would come in a couple hours later, once the first load of dry cleaning has been cleaned, to begin pressing the items while the shirt team began doing the same to the shirts. As items were finished being pressing, they were inspected by Emily or I and then placed with their order, bagged and processed into our line for pick-up.
This process seemed to work well with the amount of items that we had at that time. However, when the number of items nearly doubled, we couldn't simply plan to work twice as long. Instead, Emily planned to come in earlier, either before we opened in the morning or during the evening before, to begin readying the dry cleaning. This way, we could have the dry cleaning pressing team come in and start slightly earlier in the day. Also, she began having the evening workers ready the shirts for wash before close and even load them into machines. This way, Emily could simply start the machines when she arrived in the morning and they would be ready for the shirt team when they arrived soon after. These prep changes seem minor but they are often the cause when production falls behind.
Some bigger transactions costs of increasing business were the costs of increasing the staff and installing new pressing equipment. Simply adding staff when adding to business is one thing, but we couldn't run our old system with a different amount of staff members. We added a new utility press on which hand-iron shirts and dry cleaning items could be done, as well as an additional "suzie" press, a steaming press for dresses, jackets, etc. Also, we moved one of our hand-irons, on which the shirt team would iron shirt sleeves, next to the hot-head press so that it was more quickly available to the shirt team and they didn't have to wheel their rack of shirts over to it from across the plant.
One last transaction cost was our transportation system. Before expansion, we had only a few deliveries and pick-ups to make each day and each of them usually involved smalls amounts of dry cleanings. Therefore, we simply used our own vehicles and made rounds after leaving the plant for the day. However, after expansion, we had far too much dry cleaning to fit in our vehicles, so we invested in a van to haul dry cleaning. Also, our new production system, in which we prep dry cleaning and shirts before the morning, required that we return to Crystal after making our rounds each day to drop off the pick-ups from each drop store.
These examples may not be particularly accessible for those outside the industry, but they were each very vital to the success of this expansion. We spent a great deal of time determining what parts we needed to change and how we needed to change them. I think we learned a lot from it.
Last year, we were given another opportunity to grow as one of the other dry cleaner chains came to us with a proposal to merge. Their dry cleaning plant was in need of tedious renovations and their income at that time made making upgrades impractical. Therefore, we took on their dry cleaning as part of a partnership. However, this nearly doubled the size of our business in terms of clothing items per week. We had dealt with gradual increases in output and shocks to our systems before, but nothing of this magnitude. We had to change our entire system of production. We nearly doubled the size of our dry cleaning/pressing staff, installed additional presses, completely reworked our production line, and even altered our hours of production. While undergoing these changes were difficult at the time, we learned that we can adjust and adapt to new shocks to our system, not only planned shocks, but unplanned ones too if they were to arise in the future. As we continue to grow, we will continue to make these adjustments as they are needed. Hopefully, they will be due to pleasant changes such as an increase in business as opposed to negative changes!
To specify some of the transaction costs incurred as we took on more business, they mainly regarded our plant and our production system. Before the merger, we were able to begin our dry cleaning process at 7 a.m. when we opened each morning. My sister, Emily, the co-owner and manager, or I will open the store and begin readying the dry cleaning items for cleaning. Soon after, our shirt team will come in and begin readying the shirts for washing, a sometimes lengthy process. The dry cleaning pressing team would come in a couple hours later, once the first load of dry cleaning has been cleaned, to begin pressing the items while the shirt team began doing the same to the shirts. As items were finished being pressing, they were inspected by Emily or I and then placed with their order, bagged and processed into our line for pick-up.
This process seemed to work well with the amount of items that we had at that time. However, when the number of items nearly doubled, we couldn't simply plan to work twice as long. Instead, Emily planned to come in earlier, either before we opened in the morning or during the evening before, to begin readying the dry cleaning. This way, we could have the dry cleaning pressing team come in and start slightly earlier in the day. Also, she began having the evening workers ready the shirts for wash before close and even load them into machines. This way, Emily could simply start the machines when she arrived in the morning and they would be ready for the shirt team when they arrived soon after. These prep changes seem minor but they are often the cause when production falls behind.
Some bigger transactions costs of increasing business were the costs of increasing the staff and installing new pressing equipment. Simply adding staff when adding to business is one thing, but we couldn't run our old system with a different amount of staff members. We added a new utility press on which hand-iron shirts and dry cleaning items could be done, as well as an additional "suzie" press, a steaming press for dresses, jackets, etc. Also, we moved one of our hand-irons, on which the shirt team would iron shirt sleeves, next to the hot-head press so that it was more quickly available to the shirt team and they didn't have to wheel their rack of shirts over to it from across the plant.
One last transaction cost was our transportation system. Before expansion, we had only a few deliveries and pick-ups to make each day and each of them usually involved smalls amounts of dry cleanings. Therefore, we simply used our own vehicles and made rounds after leaving the plant for the day. However, after expansion, we had far too much dry cleaning to fit in our vehicles, so we invested in a van to haul dry cleaning. Also, our new production system, in which we prep dry cleaning and shirts before the morning, required that we return to Crystal after making our rounds each day to drop off the pick-ups from each drop store.
These examples may not be particularly accessible for those outside the industry, but they were each very vital to the success of this expansion. We spent a great deal of time determining what parts we needed to change and how we needed to change them. I think we learned a lot from it.
Friday, September 5, 2014
Susan Athey Biography
Susan Athey is an American economist and Economics graduate professor at Stanford University. She is also the Chief Economic Consultant at Microsoft. Her main areas of research include industrial organization and microeconmic theory as well as the economics of technology. This has led her to specialize in studying the advancement of auction-based marketplaces and economics of the internet, with an emphasis on the role of advertising online and the economics of news media.
Athey was born November 20, 1970 in Boston, MA. Enrolling at the age of just 16, she received her Bachelor's degree from Duke University with a triple major in economics, mathematics, and computer science. She then went on to receive her PhD from Stanford University, completing her doctorate at the age of 24. She began teaching as an associate professor at MIT and was there for six years before moving on to Stanford as a professor of economics. After five years, she moved on to Harvard where she taught until 2012, when she decided to return to the Stanford graduate school of business, where she currently teaches today. She has received a number of honors for her research, most notably the John Bates Clark Medal in 2007, an award given to an American economist under the age of forty who has made a significant contribution to the field of economic thought and knowledge.
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