mcdonaldland

The consumer price index (CPI) data for May was released yesterday, showing a two point spike in both the national and southeast averages. If we calculate the inflation rate for this year. All is not well.

In 2007, the entire inflation was 4.44% for the southeast and 4.08% for the nation as a whole:

Southeast = [ ( 203.457 - 194.8 ) / 194.8 ] * 100 = 4.44%
National = [ ( 210.036 - 201.8 ) / 201.8 ] * 100 = 4.08%

In just the first five months of 2008 we are rapidly approaching the same figures. The southeast inflation for January 2008 through May 2008 is 3.22%. The national inflation for the same period is 3.14%.

Southeast = [ ( 210.006 - 203.457 ) / 203.457 ] * 100 = 3.22%
National = [ ( 216.632 - 210.036 ) / 210.036 ] * 100 = 3.14%

If we look at these numbers we can estimate the total inflation for the year, ceteris paribus. By calculating the change from month to month for each region we are interested in we can arrive at an average change per month. If we then apply this to the rest of the months in the year we can figure inflation for the total period, giving us our estimate.

Here are the numbers:

	National CPI	Southeast CPI	National Δ	Southeast Δ
12/2007	210.036	203.457
01/2008	211.080	204.510	1.044	1.053
02/2008	211.693	205.060	0.613	0.550
03/2008	213.528	206.676	1.835	1.616
04/2008	214.823	208.085	1.295	1.409
05/2008	216.632	210.006	1.809	1.921
Average			1.319	1.310

So with a average change of 1.310 for the southeast and 1.319 for the nation, we can calculate the estimated inflation for the year by adding the current CPI for each region to the region’s average, times the number of months remaining in the year (7):

Est. Southeast CPI = 210.006 + ( 7 * 1.310 ) = 219.176
Est. National CPI = 216.632 + ( 7 * 1.319 ) = 225.865

We can now recalculate the inflation, using these latest numbers, to arrive at our estimated inflation for the year:

Southeast = [ ( 219.176 - 203.457 ) / 203.457 ] * 100 = 7.73%
National = [ ( 225.865 - 210.036 ) / 210.036 ] * 100 = 7.54%

So using our estimation, based on the current progress of the year, we are looking at total inflation for the year capping out around 7.73% in the southeast and 7.54% nationally.

Pretty scary, huh?

Maintaining momentum really is an art form. This came to me where most of my thoughts do, during my morning commute. There is a certain portion of the highway that routinely slows down because it junctions with one of the largest thoroughfares in our city. Traffic inevitably stops or slows here, but for the select few, there is a way to keep moving. Over the past two years I, and many others, have discovered that there is a specific pattern to the traffic flow.

Approaching the junction lane 1 slows because everyone is getting over to avoid incoming traffic and because people are trying to move into lane 2. Lane 2 slows slightly to accommodate movement from lane 1 and from people trying to get into lane 3. Lane 3 speeds up because people are exiting the highway and there are fewer cars. Leaving the junction the opposite occurs. Traffic in lane 3 slows down to accommodate incoming vehicles and because people are trying to move to lane 2. Lane 2 slows slightly to accommodate people from lane 3 and because they are trying to move to lane 1. Lane 1 speeds up because there is the least amount of resistance there.

The most interesting part of the traffic though is that as you pass through the junction there is a gray (bluish) area that affords drivers the opportunity of maintaining their momentum. But there is an art to it. If you move over too early you end up sitting still because you are stuck in the red part of lane 1, however if you move over too late you find in the red area in lane 3. Either way, you are killing momentum. The ability to move in and out of the gray area on a green lane truly is an art form that takes the ability to read the situation correctly and be lucky enough to be in a position to capitalize upon it.

Finding the way to maintain momentum will vary by interchange, highway, city, number of people on the road, the time of day, the day of year, whether there are a lot of schools around, and many other variables. What stays constant is that in all cases there is either a way to maintain momentum or there isn’t. When there is a way to maintain momentum the practice is often going to be more of an art form, sprinkled with a little luck, than it is to be a skill.

Sounds like business, huh?

What happens when you temporarily forsake one or more of your corporate values, intentionally or unintentionally?

In short, I have never been a party to such a situation so I don’t know. But I do see some clear paths that are likely:

The company learns to appreciate the benefit of the value.
This is the corporate equivalent of taking a sabbatical from sex just before the wedding. The basic concept is that the deprivation of something for a period of time makes it that much more desirable and enjoyable when it finally happens. While the analogy may (or may not) ring true for sex and marriage, there is a pivotal difference between the sex-marriage analogy and the corporation-values one. This difference comes from the fact that most people are able to let go of corporate values, especially ones they never truly aligned with, easier than they can part with the idea of something as strongly reinforcing as sexual contact. In order for this to work the reward at the end of the deprivation period must be strong enough to sustain the company throughout the entire deprivation period.

The company loses its desire to uphold the value.
This can happen for a couple reasons. First, the company may decide that the benefit, after the deprivation period, is not strong enough to warrant the wait period and they give it up. Second, people may gradually become accustomed to the value not being present. Either way, the populous gradually shifts their paradigm such that it excludes the value. Once this happens it is no longer a matter of reintroducing a previously held value but attempting to introduce a value that is now foreign. In order for the value to become a core part of the business again it will take extreme effort.

The company identity shifts.
There are two main reasons this can happen, the first of which is mentioned in the previous point. The second is that the growth of the company will dilute the population that still holds the value. This will typically be more prominent in high growth companies but can happen anywhere. For example, assume a company has 100 people, 70% of which are highly attuned to the value when it is forsaken. By the time the company reintroduces the value, they have grown to 300 employees. Assuming that the original 70% still are attuned to the value, which is highly unlikely, we now have diluted the workforce down to 23% of the people that are in accord with the value. This results in the same problem as the last point in that it will inevitably take a herculean effort to resurrect the original value.

People Leave, People Arrive
If people are so attuned to a value that the lack of that value separates them from the company they will likely become disenchanted. Once people become disenchanted they either create change or they move on. If the dropping of the initiative is involuntary these people will likely try to revive it. However, if the drop is intentional then people will typically just move on. With this transition, the company will begin to appear more attractive to individuals who struck a discord with the value. This will continue to shift the corporate personality away from the dropped value, making it harder to reintegrate in the future.

This is the typical path. This is what I would expect to happen. However, there are times when the unexpected choice ends up making the difference between levels of success or between success and failure. Every now and then you hear about a leader so aligned with his or her company that they are able to make bold moves, that the critics denounce, and bring about broad and positive change. On the face of it, dropping a corporate value seems like a bad move. Whether there are hidden benefits is something that I can’t see but await a case study that shows the true outcome of such a situation.