MBA Research

Action Briefs

We learn a lot from the business community and want to share that with you in our Action Briefs that highlight business trends and their impact on the workplace and curriculum.

How will new immigration rules affect the health of businesses? Will proposed changes strengthen or weaken our economy? How will the workforce be affected? This month’s Action Brief explores what is on the minds of business leaders as they anticipate and prepare for potential changes related to immigration reform.

The current administration has proposed or enacted the following measures which have heightened the immigration debate:

  • Temporarily banning immigrants from certain countries and all refugees coming into the U.S.   while a new vetting process is discussed and developed
  • Building a wall along the U.S.— Mexico border
  • Withholding federal funds for sanctuary cities
  • Increasing deportation of undocumented immigrants and documented immigrants with criminal records

 

Many business executives are not framing their views on immigration along political lines as much as they are on the potential effects of immigration changes to their businesses and the overall economy. Nationally, immigrants make up 13 percent of the population and 17 percent of the workforce. Several industries stand to be heavily affected by immigration reform depending on which of the proposed actions take place including science, technology, engineering, and math (STEM); construction; restaurants; hotels; and agriculture (including dairy producers).

The business community is especially concerned about the effect of proposed rule changes and potential adjustments to the skilled-employment visas (e.g., H-1B, L-1, etc.). Fans of these programs say they help employers fill jobs that Americans lack the skills to do. Critics are concerned that the programs enable companies to undercut jobs and wages for American workers.  

The fate of many immigrant entrepreneurs also hangs in the balance. It is estimated that 10 percent of Americans are employed by private, immigrant-owned firms. Immigrants to the U.S. are almost twice as likely to start businesses than native-born Americans. In addition, over half of privately held American companies worth $1 billion or more have at least one immigrant co-founder, according to a study by the National Foundation for American Policy.

While the U.S. is struggling to define new immigration policies, other countries are rolling out welcome mats for entrepreneurs. Canada, Australia, Brazil, Chile, Ireland, Singapore, South Korea, Spain, and the United Kingdom have all created visas specifically targeting entrepreneurs. Many U.S. companies, new and established, are now rethinking their global perspective based on anticipated restrictions for entering the United States. Businesses are considering whether to locate their business in the U. S. or other countries based on talent availability. At the same time, business must also factor in global tariff agreements which are being renegotiated. These agreements will impact over all costs and affect  the businesses’ ability to import and export supplies they need and products they wish to sell. 

Alessandro Babini, a French citizen and entrepreneur, with a company based in Cambridge, Massachusetts, fears deportation due to an expired visa. The fate of his company, which makes fitness gadgets, is unclear. He has a small staff, and he volunteers in his community to help other start-ups. He is one of many foreign-born entrepreneurs who is asking if doing business in the U.S. is worth it.

Economic considerations are key in this debate. While immigrants can burden public resources such as welfare, food stamp programs and use of medical providers, many also pay taxes and contribute to the health of the economy as consumers. Many illegal immigrants pay into the social security system without ever recouping their investments. Wage depression is real and documented, while its effects are heavily debated.

Businesses are preparing for potential changes in some of the following ways:

  • Asking non-citizen workers to refrain from leaving the country based on concerns that they may be denied re-entry
  • Analyzing and vetting their internal applicant reviewing and hiring processes
  • Verifying that all employee documentation is up to date (e.g. I-9 forms)
  • Preparing for extensive visa related audits, inspections, and investigations from immigration labor agencies, which can be time consuming and costly
  • Anticipating workplace raids by U.S. Immigration and Customs Enforcement Agents and learning about their rights in the event of a raid

 

Implications for the Classroom

Learning opportunities for students abound as almost every community across the U.S. has immigrants. Students can start by identifying immigrants in their area and asking themselves what role those individuals play economically within their communities.

If there are immigrants, or foreign-born students in your classroom, invite them to share personal family experiences related to their status and business implications if they are comfortable doing so.

Have students read the story of Juan Carlos Hernandez Pacheco, a successful restaurant manager who was arrested and is being detained at an Immigration and Customs and Enforcement facility.

https://www.nytimes.com/2017/02/27/us/immigration-trump-illinois-juan-pacheco.html

Ask students whether or not they feel Mr. Hernandez should be deported based on his history. This example will help students realize the complexities that our current administration, lawmakers, and business leaders are facing as they take the next steps in immigration reform.

Update: Mr. Hernandez was released from immigration detention on March 1, 2017. The following link provides further information:

http://www.cnn.com/2017/03/01/us/juan-carlos-hernandez-pacheco-hearing-release/

Several recent studies revealed that trust in institutions, including businesses, governments, Non-Governmental Organizations, and the media, is declining. Specifically, those with a high level of authority and expertise are viewed as less trustworthy than ever. While businesses are still viewed as relatively reliable as compared to the government and the media, CEO credibility is at an all-time low. Many people do not even trust the high-level executives of their own companies. Instead, they trust information found on search engines. They believe companies’ social media posts more than traditional advertisements. Among other factors, unstable economic and political conditions have deteriorated trust in organizations.

It is understandable that the general public might feel frustrated with those institutions they believe betrayed their wellbeing. But, societal shifts have altered the ways that people view themselves and others. The gap between the general population and “informed publics” continues to grow. According to studies, those who are college-educated and regularly keep up with world events have starkly different worldviews than those who are not. The general public is now much more likely to trust people who are “just like them” as opposed to those who are different from them. They seek sources of information that confirm their beliefs, be they biased or not. When they hear something that conflicts with their own opinions, they are much more likely to ignore it rather than researching to find the truth. Opposing viewpoints are usually disregarded, no matter how educated or informed the person behind the idea might be. In fact, “experts” are widely disparaged and thought of as outsiders who do not understand how to relate to “real” people.

While it is difficult to explain all the reasons for these changes, institutions (including businesses) have at times put themselves in a position to be mistrusted. Whenever executives break laws or engage in unethical behavior, they damage their relationship with society at large. Volkswagen and Wells Fargo are two recent examples of large corporations that tarnished their reputations with dishonesty, illegality, and disregard for the public interest. Publicized scandals, however, are not the only way that companies can lose trustworthiness. Businesses that are perceived as paying excessively high salaries to top executives while lower-level workers struggle may lead to distrust. Similar negative reactions might occur if a company moves profits to other countries to avoid taxes, even if the practices are legal and often required of executives who are charged with maximizing shareholder returns. Another recent example is alleged price gouging, specifically when a few medically necessary products are sold at unaffordable prices.  

Trust is an essential component of any relationship, whether between employer and employee, customer and business, or citizen and government. Therefore, government, media, business, nonprofit, and other organizational leaders need to determine why people do not trust them and how they can regain that trust.

Aside from avoiding illegal and unethical activity, leaders can work to build trust by trying to relate to citizens, customers, and audiences on a personal level. Using an everyday, casual, blunt style of conversation is more appealing to most than elevated, expert-level language. For example, those that have engaged with people in an informal style on social media have received positive attention. Building a relatable connection to leaders and their organizations as a whole can encourage people to trust the brand.

Another way that organizations can build trust is through empowering the community. Organizations that do good for society are seen as more trustworthy. Their aim should be to benefit the public, employees, and shareholders rather than causing harm. Many people seek out brands that are socially responsible or associated with positive causes. Environmental initiatives, sponsorships of charitable organizations, and ethical sourcing are examples of ways to build this goodwill. Organizations can also develop trust with the public by offering high-quality products, meeting customers’ needs, and listening to feedback. They should promote ethical practices such as offering competitive wages to all employees, paying taxes, paying returns to cover investment risks to shareholders, and working to put the customer first.

Organizations can also focus on treating their own employees well to demonstrate respect and trustworthiness. Transparency, loyalty, opportunities for growth, long-term thinking, and respect can help an organization encourage trust within its own ranks. If the leaders at the top of an organization demonstrate integrity, honesty, and respect, these ethical traits will be upheld across the board. Transparency is particularly important for an organization to show that it isn’t engaging in unethical practices behind closed doors. Opening up communications to make sure employees at all levels are informed is a great way to build trust throughout the organization. Leaders who demonstrate competence to their employees also earn trust because employees can count on the organization to be successful and secure.

Leaders should also be accountable when things go wrong or when they are at fault. If those at the top do not take responsibility when they make mistakes, no one in the organization will see the need to do so. Employees may become frustrated with leaders who refuse to fairly accept blame. Accountability makes leaders dependable. It leads to a culture in which everyone takes ownership for success.  

Classroom Implications

Trustworthy leaders are those that are ethical in everything that they do. Ethics, however, do not always come easily and naturally. Like any other skillset, ethics must be taught and practiced. Ethical education is critically important for students. If students are taught the importance of ethics from a young age, they will carry it with them. They will comprehend the relationship between ethical behavior and success. Students should become familiar with ethical principles and understand how to act when ethical dilemmas arise. If they can learn how to be trustworthy now, they will be prepared to be ethical leaders in the future.

Some discussion questions to help prompt an in-class conversation about the importance of ethical leadership:

  • Why do you think people prefer to trust “everyday” people rather than experts or people in power?
  • Why are some people tempted to act unethically or illegally, despite the many negative consequences?
  • Think of people or institutions that you trust. What makes them trustworthy?
  • Are there any specific companies or institutions that you do not trust? Why or why not? What could they do to gain your trust back?
  • What have you done that may have been unethical? Did anyone lose trust in you? If so, what can you do to regain their trust?
  • How can you encourage others to act ethically?

In November 2016, a 28-year-old man walked into a pizza parlor in Washington, D.C. and opened fire. This man, named Edgar M. Welch, drove from North Carolina to rescue children that he was sure were being held there against their will. He had read about Comet Ping Pong Pizza online. The restaurant was the target of a widespread Internet theory. Many articles and social network posts claimed it was the center of a child sex trafficking ring led by presidential candidate Hillary Clinton. Media sources such as The New York Times and The Washington Post debunked this theory, but it made little difference. The pizza shop and its neighboring businesses were hounded with threatening mail, phone calls, emails from people who were convinced of their guilt. It was only after Welch had already attacked the restaurant that he realized that his information was wrong. By then, the damage was done.

Problems with accuracy and integrity of information online are not new. On the Internet, anyone can be an author and publisher without much accountability. Today’s readers expect content to be updated to the minute. That “need for speed” reduces the time spent fact-checking and vetting sources. Internet articles are shared instantaneously and can spread across the world in minutes. They rely upon the number of people who open a page and click on advertisements to generate hefty profits.

These factors, combined with growing distrust of traditional news outlets, have changed the landscape of journalism. People no longer rely on the media to fact-check and provide them with the truth; instead, it is largely up to the readers, and most do not care to do so. It is easy to pass off fake information as the truth, as long as the readers want to believe it. In the past few years, hundreds of fake news websites have sprung up, making tens of thousands of dollars daily on advertising revenue. These stories are shared frequently because they tell people what they want to hear and use sensationalized headlines to generate interest. In the 2016 presidential election, false stories outperformed articles from reputable sources on social media. Many people believe that they influenced the outcome.   

Fake news stories are not just detrimental to journalism and politics. They also have real consequences for businesses – and not just the occasional restaurant targeted by conspiracy theorists. Reputation is key, and unfortunately, false information can damage a business’s character without cause. It is difficult to monitor online reviews or testimonials and ensure that nothing inaccurate is posted. Furthermore, if a company is accused of something unsavory in the press, it can be difficult to overcome that negative publicity, even if it is not accurate. For example, clothing retailer L.L. Bean became the target of proposed boycotts after it was revealed that the founder’s granddaughter and heir had contributed to the presidential campaign of Donald Trump. Though the company itself gave no money or support to any political campaigns, L.L. Bean was immediately at risk of losing business due to the online portrayal. A business can even damage its own reputation with one mistaken or incorrect post. Once something is put on the Internet, its mark has been made.

Inaccurate information can also hurt businesses internally as they seek and use information to inform their decision-making processes. Economic trends and world events are important to nearly any industry, but if a business is not getting accurate information, the decisions made based on that data might not lead to successful outcomes. False information can also affect the economy as a whole, not just individual businesses. One social media post can set off a chain reaction in the markets before it is revealed to be false.

While the spread of inaccurate information seems daunting, businesses can take several steps to combat it and protect their reputations. Checking the validity of sources is crucial. When looking at a news story or piece of online information, one of the first steps is to check the web address. Many fake sources try to imitate reputable news outlets by using parts of their names or copying their web design. However, closely inspecting the web address can reveal that the source is not actually reliable. Businesses can also check the owner of the domain name using Internet directories to see whether or not it is legitimate. It is a good idea to compare an article to a wide variety of sources to separate the facts from the bias.

Technology has made it much more difficult to identify accurate information. However, it has also led to the development of tools to help solve the problem. Reverse image searching, plagiarism detectors, and browser plug-ins can check sources and determine whether or not a page is reliable.

As a final note, businesses should always be skeptical of using social media as a source of news and information. Social media platforms spread stories at a rapid rate and have been criticized for not vetting sources. Posts on social media should not be taken at face value; rather, it is important to check the source and look for the same information in other, more reputable places.

Businesses also need to take the appropriate precautions to make sure that they do not spread false information or become the victim of it. Before posting anything on social media or making any decisions based on research, companies should think twice and do the required work to vet sources. If possible, organizations should have a system in place to help ensure that all posts are appropriate and accurate. Business should also avoid any association with inaccurate sources to preserve their integrity. They should be continuously aware of what people are saying about them by checking reviews online. If necessary, businesses can seek legal action against those who defame them. However, this process is often costly, time-consuming, and ineffective. By the time a lawsuit happens, the damage to the organization’s reputation is already done. It is better to deal with situations as they occur, responding quickly to any negative press in a respectful and effective way.

Classroom Implications

The Internet is an integral part of the lives of today’s students. They are used to perusing Twitter and Facebook rather than a newspaper or television news. Therefore, they are generally less skeptical of social media and random websites. While they have been exposed to a wide variety of sources, this exposure has not made them more discerning readers. In fact, students’ media literacy is shockingly low. In a study conducted by Stanford University, students were evaluated based on their ability to distinguish between ads and articles. The study also examined their ability to determine the trustworthiness of a source. At every level from middle school through college, students were not adequately able to reason about information found on the Internet. They were often fooled and failed to recognize bias. As the prevalence of false information grows, it is concerning that the next generation is not prepared to properly vet online information.

Teachers need to implement strong media literacy skills in the classroom as early as possible. They can point out ways to check sources and strategies for determining what is truth and what is biased. Caution students to be skeptical of writers’ hidden agendas—e.g., political agendas, medical agendas. Programs such as The News Literacy Project provide resources for teachers to educate students about the importance of being smart, discerning readers. Strong media literacy skills will help them to maintain skepticism when evaluating news in the future. Furthermore, students should know about the effects of spreading false information. They will then be more careful to avoid posting without checking sources first.  

This month's Action Brief focuses on society’s increased desire for instant gratification tailored to individual preferences.

Business Implications

The Golden Arches of McDonald’s, one of the most recognizable symbols in the world, represents American culture across the world. The global penetration of the chain and that of its competitors has had a large impact on society. Their effects are not only related to eating habits. They also impact customer behavior, business models, and product development.

Customers expect McDonald’s speed and efficiency at other businesses. Burger King, for example, offers to customize menu options with its “Have It Your Way!” campaign. The desire to “have it my way” has also caught on across businesses. Products must not only be quick and easy; they must be catered to individual needs and preferences. Customers want exactly what they want – and they want it now.

High-speed Internet access and mobile devices have made it easy to do whatever one wants at the click of a button. We can use social media to see what friends are doing in real time. We can communicate and receive split-second responses. With search engines, we can find the answer to any question in seconds. Naturally, consumers have begun to expect that their economic needs and wants will be met just as quickly.

Because of increased technological capabilities, personalization and efficiency are now standard expectations. The food industry is perhaps the most obvious example. Build-your-own-meal restaurants such as Chipotle appeal to customers with their speed and customization. Online orders from grocery stores or restaurants can be delivered right to the customer’s door.

This desire for efficiency and customization is found in many product categories. Instead of spending time hailing a cab or waiting for public transportation, customers can order a car by phone.  Music streaming services such as Pandora and Spotify predict the music users want to hear with individualized playlists, rather than listeners taking the time to discover music on their own. Even dating and relationships have become customized, convenient experiences with the use of mobile apps, enabling people to connect with others who fit their exact interests and specifications.

No industry seems to be off limits or incapable of adapting to this new model. Businesses can look to innovative companies such as Uber, GrubHub, InstaCart, and Amazon as examples. Among many others, these organizations stand out due to their responsiveness to customer convenience. They show that it is possible to make nearly anything available instantly and easily. Companies wanting to emulate these brands should look for creative, innovative ways to simplify people’s lives.

But, it doesn’t take a new business model to satisfy customer insistence on customized, efficient services. Businesses are implementing agile practices companywide to increase reactions to changes that are shortening product life cycles. Many companies are also using customer-experience mapping to provide better, more responsive service. Rather than focusing on individual customer touchpoints, this approach helps businesses to follow a customer from initial contact throughout the customer journey with the company. This improves efficiencies by cutting across departmental siloes and processes to improve the overall customer experience.

Supply chains have emerged as a critically important focus for improving efficiencies. Suppliers and wholesalers need to follow through with guarantees and be transparent to their business customers. Supply-chain processes are being examined to eliminate any inefficiencies.

Businesses must also be aware of the way that instant gratification affects potential new employees. Today’s entry-level job seekers want to reach their career goals much more quickly and easily than ever before. They want a career that is perfectly tailored to their skills and interests. Rather than attempting to “sell themselves” in an interview, job seekers instead try to find out what the company can do for them. Companies must find ways to become employers of choice through day-to-day respectful treatment, customized work options, instant feedback on performance, social involvement benefit options, schedule flexibility, promotions, and compensation programs and more. Otherwise, they risk not being able to hire and losing talented employees to other positions.

The need for speed is not going away. In fact, demand for efficient and customized products is likely to increase. Businesses must strive to find the balance between speed and cost efficiency when customizing and personalizing. The companies and employees who find creative solutions to people’s problems will be the ones that succeed.

Classroom Implications

Students need to understand what business models are and that they will continue to change. Have students identify the business models of local businesses and recommend ways that one of those businesses could change its business model to be more responsive to customer needs.

Students should learn about the types of jobs and industries that will grow due to the instant gratification trend. Ask students to identify businesses that have surfaced due to customers’ need to have it my way—now.

Have students map their customer experience with a business, asking them to identify their initial contact with the business all the way through the product purchase. Ask them to identify any glitches encountered along the way and to recommend how to improve business processes.

Prepare students to have appropriate expectations when they begin seeking a job. Those who know what to realistically expect will be better equipped for success. Finally, students should grasp the importance of trends that create new business opportunities.  

While professional and personal lives have often been kept separate, the prevalence of internet has increased awareness of employees’ extracurricular activities and begun to blur these boundaries. Employers can easily become aware of who their employees are and what they do. The damage from a scandal, unfavorable publicity, or legal trouble is more permanent and detrimental than ever, with news spreading at the speed of light and negative events permanently recorded and accessible to the entire world. For these reasons, it has become commonplace to heavily scrutinize the behavior of employees, both in the office and outside of it.

How do companies examine their employees? What is beneficial for them to know? What are they legally allowed to know? Generally, businesses should be aware of employees engaging in any sort of risky activities that could bring negative effects to the organization. Those negative effects can be in terms of productivity, public image, or legal liability. Many of these issues can be uncovered before someone is even hired. Employers generally run background checks to find out about potential employees’ criminal history, past employment, education, test scores/licensure, credit reports, etc. – but most of those require explicit permission from the potential employee. With some of these checks, such as criminal record and credit reports, employers are required by law to advise the applicant in advance of taking action that they may be taking adverse action based on the “credit report” and are required to provide a copy of the report so that they have a chance to contact the courts or credit agency to correct errors in records or identification. The employer must also communicate that they have taken adverse action after providing time to the applicant to contact the employer that they are trying to correct inaccuracies in the records. 

Increasingly, companies are turning to social media as a de facto background check. Many people do not even realize how public and readily available their social media presences are. Performing a search before hiring someone can reveal whether or not the interviewee’s online profile includes anything illegal, reprehensible, or incongruous with the company values. 

Once hired, employees are not yet free from the watchful eye of their employers. During working hours, managers want to know how workers are spending their time online. The use of social media and other non-work related sites during paid hours is a problem for employers who expect productivity and are worried about abuse of paid work time time. Organizations generally have the right to monitor the way their employees use company resources, including email, Internet use, and working hours. Most companies have a policy in place regarding when and how they can surveil employees’ email and computer use. They reserve the right to monitor and impose consequences on those that violate policies regarding computer use. Policies often ban employees from viewing inappropriate materials, engaging in personal conversations, or visiting non-work related websites. Employees are generally required to sign off on the company’s policy so that the company legally has the right to access and use information regarding their Internet use. A well-worded, specific policy is important to protecting businesses since surveillance of private information can be a gray area if not clearly defined. 

Outside of working hours, people are not exempt from employer scrutiny. Businesses may need to be aware of what employees are publishing on the Internet to protect themselves. Content that employees post can be problematic for employers who may feel that social media posts are disparaging, inappropriate, or could reflect badly on the organization as a whole. If an employee posts something that could be deemed inappropriate or detrimental to the company, organizations may have the right to terminate him/her – the First Amendment protects the legal right to free speech but not the right to speak freely while maintaining one’s employment. Social media accounts, personal blogs, and websites can all be monitored if made available and public. Businesses have the ability to protect themselves from those who cause them damage, whether intentionally or not. 

Employers’ rights to monitor off-duty conduct are not unlimited, though. Some states prevent companies from firing employees for engaging in conduct outside of work if it is lawful. For example, if employees post photos on their social media pages of them using a legal substance such as alcohol, employers cannot necessarily fire them, unless the consumption of alcohol is related to that employee’s work or the business’s interest. Employees who discuss wages or working conditions online are also often protected due to labor laws. Companies need to be familiar with their state’s particular laws regarding off-duty conduct to avoid any costly litigation. Further, businesses should be consistent in their handling of discipline when such issues arise. 

Another aspect of employee conduct that is heavily scrutinized is research. Research is increasingly done online, which brings with it a new set of ethical requirements. Informed consent is an important aspect of any research study, but it is more difficult to ensure it has been obtained online than it is to do so in person. The Internet makes it less clear what information is public and private. Research studies should be designed to protect the company from any potential problems by obtaining as much permission as possible when dealing with private information. Furthermore, when privacy permission is obtained, companies must make it clear what that permission entails. For example, if a researcher is granted permission to use an individual’s data, does this permission apply to all members of the research department, or just the specific researcher in question? What about other members of the company or industry as a whole? How can that data be used? 

Well-written privacy statements and terms of agreement are necessary to protect companies in situations such as these. With the cost of doing research in today’s landscape, businesses cannot afford to make ethical mistakes and should provide significant oversight to ensure ethical research principles are upheld. 

In the Classroom

Students may not truly understand the future impact that their online presence can have on their careers and personal lives and on their places of employment. Have students conduct online research to identify situations in which businesses have acted/re-acted to postings of job applicants or employees. Have students work in small groups to share their findings.

Students need to be aware that the Internet blurs the lines between their private and public lives and that nothing online is truly private. Students can perform an online search of themselves using their names. When they see what information about them is already publicly available, they may be motivated to use discretion in the future. Learning to be professional online, including on-the-clock and off-duty conduct, is a crucial skill. 

Students should also be aware of their rights and what is legal and illegal in situations regarding privacy and off-duty conduct. Ethical research practices also affect students, as they will most likely engage in some sort of study as either participants or researchers during the course of their lives.

 

In the wake of the recession, most economists agree that while the U.S. economy has slowly made its recovery, the effects will be felt for years to come. In 2015, median household income rose 5.2% from the previous year, which was the largest single-year increase since 1967. While median household income is still lower than before the recession, the increases demonstrate that prosperity is consistently growing. However, most gains occurred at the top of the ladder, while those in lower income brackets are still struggling. The United States has one of the greatest income and wealth disparities of any developed nation. Over 70% of the wealth in the United States is held by the top 10% of people, with 35% of that wealth in the hands of the top 1%. Meanwhile, the bottom 80% of the country has only 11% of the wealth. 

Other countries, such as China, have their own challenges and opportunities related to changing wealth patterns. China has shifted from cheap labor and manufacturing to a more service-based economy with a growing middle class: 30 million Chinese are becoming part of the middle class every year. This change affects businesses domestically and internationally from a demand standpoint as well as resource-availability/cost standpoint. Businesses must pay attention to shifts on a worldwide scale, especially in large markets such as China. 

Wealth inequality affects businesses in many ways. Banks and financial institutions, whose reputations were damaged after the recession, are now competing with new models of lending that are more feasible for those who may not have had the opportunity to build strong credit and accumulate savings. Peer-to-peer lending services such as The Lending Club, Prosper Marketplace, and Kabbage strive to cut out the middle man and offer more affordable loans to small businesses that wouldn’t ordinarily qualify. Interest rates are generally lower, and the application process is less cumbersome. Corporate giants such as Amazon and PayPal are also getting into the loan business by offering capital to business owners who sell through their platforms. Crowd-funding, too, has become a large source of capital for small businesses through online platforms such as GoFundMe and Kickstarter, eliminating the need to apply for traditional loans. Entrepreneurs and business owners can look to these alternative sources to obtain the capital they need to start or continue operations. 

Businesses should also be aware of the needs of their employees that are not being met by wages alone. Incomes have risen, but most of the gains have occurred in upper income brackets. Furthermore, when adjusted for inflation, wages for the majority of Americans remain much lower than needed to keep up with rising costs. They thus look to their employers to provide benefits such as health insurance, childcare, professional development, and wellness programs. Many of these services are unaffordable without employer support. While job seeking, many people place more importance on these benefits than on the salaries themselves. Companies that strive to attract top talent should ensure their employees’ requirements are being met.

Businesses are also dealing with the repercussions of older workers who, under different financial circumstances, might be preparing for or already in retirement. For years, business owners and economists have anticipated the aging of the 74.9 million Baby Boomers, who are currently between the ages of 51-70. This large-scale retirement was predicted to open up many jobs for new employees, but also cause a slowdown in productivity and economic growth as the most experienced, highest-level employees transition out of the workforce. However, millions of Baby Boomers do not have the accumulated wealth necessary to retire by age 65. The losses of the recession, combined with stagnant wages and a reluctance to make risky investments, have kept many Americans from reaching long-term financial goals. Furthermore, worries over the capacity of Social Security to support the large number of Baby Boomers, who will live longer than any previous generation, have prompted many to stay in the workforce past traditional retirement ages. 

To cope with these changes, businesses must implement policies to accommodate older workers. They should strive to combat ageism in the workplace and provide support to keep older employees up-to-date. Offering financial planning and healthcare services to older employees can help ensure a successful transition to eventual retirement.

Those who have left the workforce may not be financially prepared to finance their retirements, which will impact the economy as a whole. Financial issues associated with retirement will remain prevalent, as those in younger generations have less discretionary income to put into retirement savings. At the same time, costs associated with retirement continue to rise.  Companies in industries such as health care, insurance, retirement facilities and destinations, and financial advisors should be aware of the lack of wealth that may affect their customers.

Classroom Implications

Students may not have an accurate understanding of the way income and wealth are distributed among U.S. households. They should begin to pay attention to wealth patterns and how they impact both individuals and businesses. Students who want to attend college should carefully consider job opportunities after college and what wages they would expect for those jobs. They might want to consider career fields heavily impacted by the large-scale retirement of Baby Boomers. 

Students who want to start their own businesses should be aware of the lending environment, including alternative ways to obtain capital if traditional loans are not an option. Furthermore, students should understand the benefits and services they should seek from future employers in addition to wages. 

Although retirement probably isn’t at the top of students’ thoughts, they need to plan for their long-term future. Ask students how they will support themselves for the 30-40 years after retirement. Point out that Social Security income will not be sufficient by itself. They will need to save and invest to be comfortable in retirement. Currently, the stock market’s annual rate of return has dropped to 5% rather than the historical average of 10% prior to the Great Recession. This means that Millennials need to start saving for retirement as early as possible and saving more from each paycheck to be able to pay their retirement expenses including medical care and long-term care after retirement. Have students research how much they need to be saving to afford retirement. (The current estimate for Millennials is 22%).

In general, students should be aware of the ways wealth impacts retirement and the effects on the economy if workers are unprepared.  Students should also be aware of the ways in which other countries’ economies can impact market demands across the globe and can impact production.

If you were an Ohio business owner many years ago, you only needed to know the laws affecting business in Ohio. Now, the legal environment is much more complex. The pervasiveness of the Internet and other technologies has not only added new dimensions to business law, but has also changed the way business law is carried out. While businesses have always needed to attend to the legal ramifications of their actions, it has become even more important to understand the ever-shifting legal system in today’s technological world.

One of the most prominent changes is the nature of intellectual property. Everyone has the ability to create and distribute content through social media, blogs, and personal websites. It is important to avoid using another entity’s trademarked phrases or images on the web, such as in domain names. It is also essential to identify and agree upon ownership of content on a website, especially when working with a web developer or host service. Social media users must be aware of the terms of uploading content such as images or videos. An article posted on LinkedIn, for example, can be used and distributed in any way LinkedIn sees fit.

Online communications bring a host of new legal issues that businesses should know. Defamation of companies and their employees has greatly increased and become more difficult to track. Businesses must vigilantly monitor the web for any disparaging or dishonest comments that may be detrimental to their success. Using social media as a means of providing customer service can help to resolve these issues. Marketing communications and digital advertisements, too, are subject to a world of new legal implications. Laws such as the CAN-SPAM Act place strict regulations on what can and cannot be included in promotional emails. Businesses should be aware of the FTC’s many guidelines and regulations for Internet marketing that will undoubtedly continue to change along with technological progress.

Another potential legal issue brought about by the Internet involves interstate and international commerce. In the past, most businesses were locally based, but now, businesses of any size can sell online to customers in other states and countries. Those who sell online must know the taxes and regulations in new markets. Sales taxes, which are traditionally enacted at the state level, present a problem. States have attempted to tax online retailers who sell to customers but do not have an established physical presence in that state. Legislation currently in Congress would simplify the policies, but until it is enacted, businesses need to ensure they are aware of the intricacies surrounding sales taxes and other international commerce regulations.

The nature of contracts has also evolved with technological advancements. The process of contract negotiation, traditionally lengthy and painstaking, has become instantaneous and interactive thanks to the use of electronic documents and communication. Ambiguous “back and forth” paper exchanges have been eliminated, along with timing disputes that can be easily resolved through the use of electronic records.

Despite these convenient simplifications, however, the digitalization of contracts involves some complications as well. Laws that determine what constitutes an e-signature vary across countries. Some consider simple electronic signatures to be equivalent to a handwritten signature, whereas others require encrypted digital certificates to authenticate the signer’s identity. Additionally, contract negotiators must ensure that all parties assent to the terms and conditions through electronic means. Many contracts require the reader to click a button or to scroll through the terms entirely before they can sign and indicate their agreement. It is recommended that in all cases, business contracts include consent to sign electronically, an opt-out option, an audit trail, and transparent circulation of the complete electronic document to all parties.

Data privacy law is one of the most prevalent and controversial issues brought about by the prevalence of the Internet. Governments and legal entities are struggling to determine how to handle the vast amount of personal information exchanged over the internet between individuals and customers. Businesses have a responsibility to handle customer information in the appropriate manner, which becomes further complicated when data is exchanged globally. Data protection laws differ substantially in various countries in terms of the level and nature of regulation.

One example of the complications that occur due to these discrepancies is the Safe Harbor Privacy Principles between the European Union and United States companies. The Safe Harbor Privacy Principles were designed between 1998- 2000 to manage the secure transfer of information between the EU and the United States. Because European officials felt that the privacy laws in place in the U.S. were not adequate in comparison to the EU’s stringent standards, they offered U.S. businesses a way to opt in by adhering to certain guidelines. If the businesses complied, they could receive data transferred from the EU.

In 2015, the European Court of Justice invalidated the Safe Harbor Principles, claiming that the data protection measures in place in the U.S. were still inadequate. The decision was largely influenced by the 2013 leak that revealed the NSA’s surveillance practices. US companies were faced with the task of complying with the EU’s strict regulations instead of the relatively simple guidelines of the Safe Harbor decision. Nearly a year later, a new mechanism for personal data exchanges has been implemented, called the Privacy Shield. The Privacy Shield Principles have some similarities with the Safe Harbor Principles, but they impose stricter and more specific requirements on U.S. companies.

The site “DLA Piper’s Data Protection Laws of the World Handbook” offers a comprehensive guide to world data protection laws and allows you to easily compare different types of law across the world: https://www.dlapiperdataprotection.com/#handbook/about-section

Classroom Implications

Most students can barely remember a world without the Internet’s ubiquity, so the changes in the legal system may not appear quite so drastic to them. However, they should be aware of the ways in which technology affects the legal system so they will understand the need to stay up-to-date on changes and developments. Students have probably already encountered online contracts when downloading software or signing up for social media accounts. However, they might not realize that by clicking “I Accept,” they are entering into a legally binding contract. They should be cognizant of what exactly they are accepting and should develop the practice of carefully considering terms and conditions.

Ownership of content on social media and data privacy are both legal issues to which students can relate. Students may not think twice about posting a photo on social media until they learn that the site owns that content and can use it in various ways. Increased knowledge of the laws affecting data collection can help students to stay safe online and avoid unfair marketing practices.  

Sustainable development--meeting the needs of the present without compromising resources for the future--is a topic being grappled with daily by business and industry. Last month’s Action Brief explored shifting factors in energy supply and demand, while this month’s brief dives into how businesses are working to reduce their carbon footprint and what factors impact their progress/willingness to get onboard. As our good friend Kermit says, it’s not easy being green.

Business Implications

Businesses are taking innovative measures to implement renewable energy sources and/or reduce their carbon footprint. Many companies are purchasing carbon offsets and renewable energy credits for this purpose. Other efforts include:

  • Recycling—metals, petroleum products, paper products, plastic
  • Repurposing—furniture, décor, food waste, rain water
  • Reusing—packaging, containers, operating-room instruments
  • Installing—occupancy monitors in HVAC and electrical systems; efficient light sources, fixtures, appliances, and controls; vehicle recharging stations; rooftop solar panels; watering stations to refill reusable water bottles; LEED certified buildings, green roofs
  • Monitoring—suppliers’ sourcing, production, shipping, and transporting activities
  • Reducing—amount of packaging materials used, weight/volume of products, total reliance on nonrenewable energy sources, use of hazardous materials, energy used in production processes, waste going into landfills and water supplies
  • Producing/Selling—environmentally friendly products
  • Partnering—with other entities focused on green energy
  • Utilizing—SMART manufacturing techniques, LEED criteria for building upgrades, Greenhouse Accounting methods to track greenhouse emissions and offsets, renewable energy sources, locally grown foods, natural lighting, local supply chains
  • Encouraging—consumers to re-use hotel sheets and towels; employees to take steps to curb energy consumption; and use of bicycles, shuttles, and public transportation for commuting

 

Green construction is having a positive effect on the economy and will continue to do so as demand grows. Green building programs are largely responsible for the $134 billion annually being taken home by 2.3 million U.S. workers. LEED certified and other green buildings can be costlier to build than traditional construction (some experts estimate a $3-$5 per foot increase or much more, depending on added green features), but the higher initial cost is associated with greater energy and cost savings throughout the life of the building.

The Morgan Processing and Distribution Center (part of the United States Postal Service) in New York City sports a 2.5-acre green roof which cost about $30 per square foot to install-- twice as much as a traditional roof. The roof’s lifespan, however, will be about 50 years (twice as long as the roof it replaced). The green roof, along with other energy saving measures implemented at the center, help save the postal service over $1 million per year.  Cost recovery, in this situation, could likely occur in three to five years.

While the initial costs can still be prohibitive for building or going green, other factors impacting the “greening” of businesses include:

  • Concern about reliability of renewable energy sources
  • Concern that energy efficiency processes might compromise overall business operations and therefore the bottom line
  • A perception that the changes made in one business might not make a difference to the overall environment
  • Inability to pinpoint carbon outputs and track waste streams accurately in order to assess potential effectiveness of efforts to be energy efficient
  • Confusion about environmental claims
  • Costs associated with changing and adjusting production processes
  • Concern about willingness of customers to pay more for green products

 

Greenwashing—the act of marketing a product as more environmentally friendly than it actually is—has become a major concern. In response, the Federal Trade Commission (FTC) developed the Green Guides, designed to help businesses market their products more accurately, but they are not enforceable by law. The FTC can, and does, pursue false or misleading environmental claims made by companies under Section 5 of the FTC Act: 15 (Unfair methods of competition unlawful; prevention). Still, confusion over terms like eco-friendly, recyclable, green, biodegradable, and earth-friendly are rampant. Some consumers are giving up their green efforts completely due to the complexities. In short, businesses need to substantiate the environmental claims that they make about their products or risk consumer--and sometimes legal-- backlash.

Classroom Implications

Understanding the technological, political, and economic systems that drive energy is a life-long learning process. A good place to start is by having students compare various types of renewable energy as explained by the National Renewable Energy Laboratory: http://www.nrel.gov/workingwithus/learning.html

Ask students to discuss carbon neutrality in business operations. They could consider the following:

  • What are the challenges businesses may face in becoming carbon neutral or offsetting carbon   emissions?  Are these challenges different for smaller vs. larger companies?
  • What are some of the ways businesses can move towards carbon neutrality?
  • Is there a moral obligation for businesses to become carbon neutral?

 

How are other countries addressing energy issues both from a business and community perspective?  These two resources will help broaden students’ global perspective on energy use:

 

Is it possible for politics and conflicting business interests to influence energy choices?  See this article about what a group of students ran into as they attempted to make their school more environmentally friendly: http://www.dw.com/en/students-preach-renewable-energy-get-politics-lesson/a-19426179

Ask students to identify local use of environmental marketing and pinpoint potential incidents of greenwashing. This resource will help students better understand greenwashing and some of the enforcement actions taken by the FTC: http://www.greenerpackage.com/green_marketing/ftc_cracks_down_biodegradable_marketing_claims

The potential impact of shale on natural resource availability in the U.S. and abroad is unknown but potentially a game-changer. Heightened focus on the preservation of global resources for future generations plays a role in the energy debate. As energy resources are explored, and utilized in different ways, companies have to deal with the resulting supply-chain issues. This month’s Action Brief looks at shifting factors in energy supply and demand, and some of the resulting economic effects. 

Business Implications

Greater availability of domestic energy resources has drastically changed the face of gas and oil production in the United States. The “shale revolution” is reshaping the country’s dialogue about energy strengths and weaknesses, especially now with record amounts of propane and other natural gas liquids being exported. Other countries with shale resources are also working to extract gas and tight oil, but access to fresh water reserves used in the process can present a challenge in many parts of the world. Coal plants and other traditional energy operations are closing or laying off massive numbers of workers as they go out of business or restructure to support alternative energy’s processing and delivery.

Companies in the renewable energy sector are also experiencing their own viability issues. Many companies are struggling to stay financially solvent while facing funding issues and other business challenges not unusual for start-ups. Government subsidies are potentially on the chopping block which adds to eroding confidence in many companies. While renewable energy is relatively low-cost, and growing in use, many companies are coming up short with funding to support new and growing infrastructures. 

The boom in natural gas and oil holds many potential benefits, such as less dependence on foreign resources, increased manufacturing, more choices and lower prices for consumers, and maybe even cleaner air. Disadvantages are:

  • Potential contamination of water and other natural resource supplies due to fracking and wastewater disposal
  • Fracking induced earthquakes
  • Loss of jobs and revenue in traditional and new alternative renewable energy source sectors

 

Much to the dismay of environmentalists, the shale boom may have somewhat slowed a shift toward the use of products that utilize renewable energy sources. As an example, many consumers are passing up hybrid vehicles for conventional gasoline-only models. Surprisingly, even some consumers who had switched to hybrids are going back to fuel-only powered vehicles. Lower gasoline prices mean a longer break-even time for consumers purchasing hybrids. Guessing that the price of gasoline will rise again, automakers are ramping up production of traditional vehicles, but not putting hybrids on the shelf just yet.   

While hybrid car sales may have taken a recent hit, studies show that more than 50 percent of consumers from across the globe are willing to pay more for products from companies committed to making an environmental impact. As consumers become more savvy about sustainability issues, many companies are strengthening their green appeal in the following ways:  

  • Incorporating more areas of relevance to customers’ lifestyles
  • Encouraging customers to live sustainably beyond that particular product
  • Understanding what social and environmental issues their customers are concerned about and continuing to address those concerns in product development
  • Demonstrating credible environmental impact (proof) based on product sustainability

 

How are these companies and others walking the walk? Look for next month’s Action Brief when we explore how companies are working to reduce their carbon footprint and the obstacles they are facing in doing so. 

Classroom Implications

Understanding the different types of energy and basic cost implications of use can be crucial for students as they enter into the energy debate and understand the impacts on business: 

  • Help students become energy literate by accessing information and lessons on this website: http://cleanet.org/clean/literacy/energy/index.html 
  • Explore energy related issues with students such as:
    • How are decisions made regarding energy use—what are the main drivers?
    • How do varying energy sources impact the economy and the environment?
    • How do energy policies vary in different states/countries?
    • How do energy prices and the process of importing/exporting affect our economy?
    • How are businesses impacted by fluctuations in energy costs, and what are some of the techniques used in mitigating those variations? 
  • Ask students to identify local business efforts to sustain energy. What resistance has been encountered? What support has been provided? Discuss community benefits that have resulted. 
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