Hiring and promotion at Chipotle

Great LinkedIn post by Paul Patrone about incentives for employees and managers at Chipotle Grill.   Chipotle restricts its hiring to entry level positions and develops employees for managerial roles.  New hires are exposed to all aspects of the operation -- cash, cleaning, and cooking.  The one policy I really liked is that supervisors can be promoted only when they have developed an internal replacement for themselves.  Also, employees reporting to the supervisor are consulted as part of the promotion decision.

Even though the starting wage is just $9 per hour, the hiring process is very selective.  Before an interview, an applicant is directed to study the Chipotle careers website carefully.  Chipotle wants employees who are ambitious, happy, smart, polite, respectful, honest, conscientious, presentable, curious, motivated, hospitable, high energy and infectiously enthusiastic.  Part of the interview is designed to see if the applicant actually read the material they were assigned.  Employees are involved in the hiring decision.

Most employees working at Chipotle probably have no more than a six month time horizon, but the company seems sincerely committed to providing career opportunities.  Looks like a place where a high school graduate could get ahead and our economy needs more of those.

On climate science

Climate change is in the news again as over 100 countries convene at the United Nations.  (Let's not even think about the carbon footprint of that event; where is Telepresence when you really need it!)  I have no claims of scientific expertise here, but I strongly encourage everyone to read this WSJ piece by Dr. Steven Koonin, former undersecretary for science in the Department of Energy under President Obama.

Koonin has impeccable scientific chops as a physics professor and provost at Caltech and a stint at BP as chief scientist.  His article is titled "Climate Science is Not Settled" and here are a few key quotes:

• The climate has always changed and always will.
• Even though human influences could have serious consequences for the climate, they are physically small in relation to the climate system as a whole. 
• Precise, comprehensive observations of the oceans are available only for the past few decades; the reliable record is still far too short to adequately understand how the oceans will change and how that will affect climate.
• While the past two decades have seen progress in climate science, the field is not yet mature enough to usefully answer the difficult and important questions being asked of it. This decidedly unsettled state highlights what should be obvious: Understanding climate, at the level of detail relevant to human influences, is a very, very difficult problem.

One thing I learned as a math major a long time ago is that if you have a given number of data points, there is some function out there that will perfectly fit those data points.  Whether that function makes any sense or not in terms of explaining the data pattern, well that's another matter entirely.  Climate science is a relatively new field, not unlike macroeconomics.  Important issues, lots of emotion, and big gaps in knowledge.  

Enrollment and tuition concerns

Ran across two items over the weekend about the market for higher education.  Chronicle of Higher Education reports the results of a survey of senior executives.  The survey found that 85% are very or somewhat worried about enrollment.  The enrollment worries are driven by higher tuition and competition from other schools.  Yet almost half plan on raising tuition another notch!  Relatively few were looking for ways to cut costs or generate more revenue.

Why has tuition been rising so much?  Michigan economist Susan Dynarski shows that the main culprit for public universities has been declining state support (NYT Upshot).  She shows that public colleges collected $11300 in state funding and tuition per student in 1988; this amount rose to $11500 in 2013.  Over this period state funds dropped from $8600 to $6100, whereas tuition rose from $2700 to $5400.  One need not look any further for an explanation of why public schools have increased tuition.

But what about private schools?  Since public universities have become more expensive, this has led to increased interest in private schools and allowed them to raise their tuition as well.  

Longer term the prognosis for public schools is not great.  State governments are faced with rising expenses for Medicaid and employee retirement and health care.  I am not aware of any governor or legislator running on a platform of raising taxes to preserve funding for higher education.  It will be up to the public universities to either get a handle on costs or find their own sources of funds.  

Why is cash so popular in for transactions in Germany?

In a world where more and more transactions are handled by credit or debit cards, why do people hold cash?  Cash is needed in some establishments that do not accept cards.  It also is difficult to trace, making it the payment mechanism of preference for those who wish to leave no record of their purchases.  However, cash carries significant downsides.  You can lose it or have it stolen.  It pays no interest.  Governments can debase its value by printing too much of it.  

It came as no surprise to me that half of Americans carry $20 or less in cash.  I expected this would be the case in most other high income countries.  I was wrong.  

It turns out that Germans still rely heavily on cash and this has been the case for some time.  They carry around an average of $123 in their wallets and conduct 80% of their transactions in cash.  This cannot be explained in terms of simple economic factors.  For instance lower interest rates would lead to increased cash holding, but interest rates in Germany and the US are pretty close to each other.   

Some sources argue that the German preference for cash reflects the hyperinflation of the 1920s.  But most of the people who lived through that event are no longer around.  (Also, if there was ever a time to minimize cash holdings, that was it.)  Another possibility is that debt avoidance is integrated into German culture; always paying in cash is a good way to avoid ballooning credit card bills.  

We may see a clash of culture with technology soon, as mobile payment systems become more widely available.  Will paying by phone be viewed as equivalent to paying in cash?

NC State Jenkins ranked #15 Supply Chain MBA

The annual Gartner survey is the gold standard for ranking supply chain programs.  This year's ranking just came out and NC State's Jenkins MBA placed #15 in the US.  Penn State was #1, followed by Michigan State and Tennessee.  NC State was the only program in North Carolina in the top 25.  

Gartner's rankings are based mainly on two factors: Gartner's own evaluation of the curriculum and the success of graduates in the job market (measured by employer surveys and salaries).  This is great recognition for our supply chain program.  

Will MBA programs become unbundled?

Poets and Quants editor John Byrne has an interesting piece in USAToday regarding how technological disruption is likely to affect MBA programs.  Right now a good MBA program is a bundle of services that create value for students.  It starts with instruction from great professors, but also includes career coaching, networking with alumni and fellow students, and placement services.

MOOCs already threaten the instruction part of the bundle.  In the not-to-distant future, business students will be able to obtain certificates of completion for all MBA core subjects plus a mix of electives in mainstream subjects such as finance and marketing.  Byrne thinks that free MOOCs will quickly put MBA programs that lack strong career services and networking out of business.

Byrne does not address the possibility that other providers will step up and provide coaching, job contacts, and networking.  Students pay a hefty premium to get into the very top MBA programs.  The academic content of the core MBA courses is pretty much the same across all institutions, which implies that the perceived value of the nonacademics is driving the price premium.

This leaves open the question of how communication and leadership skills are developed.  These skills are #1 on the list of MBA recruiters.  Many of the top schools restrict admission to students with strong skills in this dimension; employers use a degree from those schools as a signal that the student possesses those skills.  Other schools invest heavily in training that changes student behavior.

My take: I am skeptical that MOOCs will be very helpful for developing the so-called "soft skills." Schools that take those skills seriously should be able to stay in business, and perhaps even prosper.

Employers taking longer than ever to fill positions

Just ran across this WP blogpost by Catherine Rampell that shows the average vacant job stays open 25 days.  There is tremendous variance by industry.  Construction positions are filled within 10 days, whereas finance positions take 40.  Want a good example of diseconomies of scale?  Firms with 5000 or more employees take 68 days!   

Vacancies are at the highest level in the history of this since data series that goes back to 2001.  One might interpret this as another sign that the labor market is tightening, although this is inconsistent with the extremely modest wage growth we are observing.  Another interpretation I am seeing is that corporate America has unrealistic expectations of job applicants and would rather invest in finding the ideal person than train someone else.  This might be a rational strategy at a time when employment still does not seem to be growing very much.  

How top execs view competitiveness

This week Harvard Business School issued its third annual survey of how its alums view American competitiveness.  In a nutshell they are still pessimistic but not as pessimistic as one or two years ago.  Alums working in large companies were more optimistic than those in small companies.

What do they think is going well?  They speak fondly of universities, entrepreneurship, firm management (a little self-serving?), innovation, capital markets, and property rights.  They speak less fondly of K-12 education, regulation, tax code, and the political system.

A strong theme that emerged from the survey was that although businesses are doing well (hello S&P 500 at 2000), most households have yet to share in the recovery.  In addition to shoring up K-12, the report points to the need for businesses to rethink their hiring processes and to invest more in training.  One point I particularly liked is the need to stop talking about labor markets in the aggregate and a need to focus at more micro levels, such as workers in a particular occupation, industry and location.  

If you are not up for the full report, you might find this Fortune interview with one of the lead authors Michael Porter worthwhile.  I was actually one of Porter's first graduate students at Harvard all too many years ago.

What do you do with Google Fiber?

NYT reports on Kansas City's experience with Google Fiber to date.  The service costs $70 for broadband and another $50 for television.  The take-up rate has been reasonably high: three fourths of households in areas with average income of $100k or more have signed up, as have a third of households in low income areas.  Speed is blazing at one gig per second.  

So what are customers using all of this high powered service for?  The same stuff they do on regular systems, of course!  (The article has lots of snarky comments about how many kitten photos can be downloaded.)  This is no real surprise as no one is likely to develop high-powered apps that only can be used in the few cities that have Google Fibre.  

For there to be network externalities, there needs to be a broader network.  In time I would imagine that high-def two way video, sharing of medical data, and connecting schools will be taken for granted.  The world of work is likely to change as well, making work at home more viable.  One added bonus: another competitor for Time Warner!

Viva Google Fiber; come to Cary ASAP!

Do skills matter more than degrees?

Two sociologists did a study four years ago of how much learning takes place in college, and the results were not encouraging.  Scores on the Collegiate Learning Assessment were only half a standard deviation higher for seniors than they were for freshmen.  To use statistical terms, you cannot reject the null hypothesis of "no learning takes place."  The results were not uniform; those in the arts and sciences learned more than those in business and communications.

Now they have done a follow up study of how these 2009 graduates did in the labor market.  The results, summarized in NYT, show that those with the highest scores have done the best professionally.

Even after statistically controlling for students’ sociodemographic characteristics, college majors and college selectivity, those who finished school with high C.L.A. scores were significantly less likely to be unemployed than those who had low C.L.A. scores. The difference was even larger when it came to success in the workplace. Low-C.L.A. graduates were twice as likely as high-C.L.A. graduates to lose their jobs between 2010 and 2011, suggesting that employers can tell who got a good college education and who didn’t. Low-C.L.A. graduates were also 50 percent more likely to end up in an unskilled occupation, and were less likely to be satisfied with their jobs.

Overall the college graduates in this study still did much better than their counterparts who did not finish college.  But once again, this study shows that employers hire and reward for skill not credentials -- an important message for faculty, administrators, and students.