Recent Thoughts on Emerging Markets, Talent and Diversity

March 7, 2016

Globe

I thought I’d share with you three things I’ve learned in the last week.

Emerging is trending.

In 1980, emerging market economies accounted for 21 percent of global revenue. By 2013, this proportion had almost doubled to 41 percent. By 2025, we expect more than 45 percent of Fortune Global 500 companies to be from emerging markets.

The war for talent intensifies.

There is a global generation gap. Today, the median age is over 46 in Germany and over 36 in the U.S. On the other hand, it is 27 in India and 18 in Nigeria. This gap will lead to global migration with aging societies in the developed world competing for talent from the emerging markets. In short, it will become imperative for businesses in developed markets to adopt a global, not local, mindset. An inclusive culture and flexibility in the workplace will be the currency of choice. If you want to move ahead, be willing to compete for talent.

Diversity is a business imperative.

A recent survey by Ernst & Young reports that almost 9 out of 10 companies surveyed believe that the problems confronting them are so complex that teams are essential in creating solutions. Too, companies with diverse teams (both in terms of their backgrounds and geographies) experience higher EBITDA growth.


Happy Birthday, Ted Bauer

March 3, 2016

TedBauerIf he were alive, Charles T. “Ted” Bauer would have been 97 years old today.

At Bauer College, we think often of Ted Bauer as we see his legacy unfold.

We see his legacy unfold:

  • In the over 6,000 students who are enrolled in our various programs.
  • In the over 5,000 business connections that Bauer College has access to, thanks to his gift.
  • In the high retention and graduation rates of our students, especially the Ted Bauer Scholars.
  • In the niche programs like entrepreneurship, sales, energy, financial services and more.
  • In the faculty research that has been possible thanks to his gift.
  • In the emails we receive from students and alumni whose lives have been transformed thanks to the fine gift of education they received.
  • Most of all we hear it when, as Joshua Ferguson, a Bauer student who is currently serving as an intern in the White House in Washington D.C., shared with me recently, “I want to give back to this college that has given me so much.”

Happy Birthday, Ted Bauer.

Your legacy only grows over time.

 


When the Tide Goes Out

February 26, 2016

Only when the tide goes out do you discover who’s been swimming naked, or so Warren Buffet has been known to say.

The tide has been going down for the energy industry, and Houston sees and hears it loud and clear. Layoffs, reductions in capital expenditures by 50% relative to 2014, and by some estimate, over 50,000 job losses still to come. Over 40% of investment grade bonds of oil and gas firms are currently trading at junk levels. Big banks are expecting losses from the loans in their portfolio made to energy companies.

Those that are prepared to manage through times when the tide runs out — those that have built resilient business models and agile learning systems — will survive and thrive.  Better yet, those that have shown they can be trusted will come out ahead of the crowd.

In this environment, enter Silver Run Acquisition Corp., which raised $450 million to buy energy assets.  Interestingly, it was more than what the company expected to raise. They sold 45 million units at $10 per unit.  Each unit represents one share and a third of a warrant to buy shares at $11.50 in a year.  Additionally, it is what they call a “blank check” IPO.  The company does not have any sales or earnings yet, and plans to use the proceeds to invest in assets in the oil and gas sector. Interesting again, the IPO market this year has been depressed with only 5 IPOs since the beginning of the year compared to over 25 at the same time last year, and only a fifth of the proceeds raised during the same time frame last year.  This issue was the largest IPO so far this year.  Mark Papa, former CEO of EOG Resources and a Bauer MBA alumnus, is the prominent player in this deal.

Under Papa, and starting in 2006, EOG began to drill for oil.  This was unusual given that EOG’s core business had been in natural gas.  Furthermore, the drilling was to be in North Dakota and not in the usual areas like Canada or the Gulf of Mexico. The strategy paid off, leading EOG to become the largest oil producer in North Dakota.  A sound land acquisition strategy, along with technical expertise driven by scientists at EOG who identified the Bakken in North Dakota as the area that had the most potential for oil, helped the company.  Papa saw the decline in the price of natural gas coming before others did and moved to oil.  Most important of all, perhaps, was Papa’s strong belief in the Bakken and in EOG’s ability to extract oil, when other companies were backing off from there.  This allowed the company to buy acreage at bargain prices.  In addition, a conservative balance sheet helped the company emerge stronger and ahead of others in the recent downturn.

Smarts, and resilience, seem to be the Mark Papa brand.  Building trust is not easy, but those that can do it have a place at the front row during good times, but more so during bad times.

Sometimes we need the tide to run out to also discover who’s been building muscle.

At Bauer College, our goal is to build resilience and develop “smart” leaders — trustworthy leaders with good judgment who can keep their teams afloat even in a down cycle. And we’re doing this, one successful student at a time.