February 13 2009 - Newswise — We are experiencing a severe economic turndown, and we urgently need a stimulus plan. But, the plan needs to be very well thought out. We don’t have another trillion dollars to spend if this trillion-dollar stimulus plan is not effective.

The current proposed stimulus plan will result in limited economic stimulus and a lot of spending for questionable pork, exceed the entire cost of the Iraq war, result in tremendous increases in the national debt and set the stage for rampant inflation when the economy starts to grow.

In addition, many of the proposed stimulus plan programs will commit us to long-term social welfare programs. We may need changes in social welfare programs, but such programs require very serious and lengthy deliberation.

Before addressing new social welfare programs, we need to remember that there are two gigantic and very costly existing social welfare problems that we must address: Social Security and Medicare. Before we consider massive spending on new social welfare programs we should focus on fixing Social Security and Medicare.

Our single largest problem is the ongoing financial system quagmire. I believe our primary focus at this time should be on fixing the financial system. If this is not “fixed,” it is likely that other stimulus programs will have little long-term positive effects. I support the idea of establishing a “bad bank” to deal with questionable bond and mortgage portfolios. This is likely to stimulate the economy by making funds available for lending and investment. And, over a period of years, the government might actually realize a profit on its investment in a “bad bank.”

In addition, the value of housing must be stabilized and incentives provided to increase the value of stock prices. More than 100 million people who participate in and/or depend on defined benefit and defined contribution plans are dependent on the stock market. As much as we may detest the greed of overpaid Wall Street titans, we must realize that all of America is now tied to the stock markets.

One simple way to stimulate the stock market is to freeze or reduce the maximum tax rate on long-term capital gains. This will, at very low cost, eliminate significant market uncertainty and buoy up stock values, resulting in increased consumer expenditures and job creation.

Another way to increase stock values is to change the tax laws to favor investment in plants, machinery, vehicles, etc. We should resurrect the investment tax credit — a tax credit used effectively during the 1970s to stimulate business investment. Such stimulation will result in increased business efficiency (making us more competitive in the world markets), increased business capital spending, job creation, increased business profits, increased stock market prices and increased consumer spending.

With respect to housing, I suggest we establish a program whereby existing home owners and new home buyers can refinance/finance their primary residences at four percent (five percent for a secondary residence), using fixed-rate mortgages for up to 30 years. This would greatly stimulate the housing market and free up consumer cash. To facilitate this program, the government would lend (not give) banks and other lending institutions funds at two-percent interest. The lending institutions would be required to follow pre-established lending guidelines to prevent a recurrence of the existing mortgage crisis. In addition, for 2009 and 2010, allow homeowners to double their itemized deductions for property taxes and mortgage/home equity home interest.

There are many homes currently in the process of foreclosure. The investor risk of purchasing vacated homes and making repairs/renovations so they can be resold is very high. As a fiscal incentive, tax any profits made in the process of the purchase-repair-resale process of such homes as long-term capital gains regardless of the period of time the investor may hold the property.

Finally, let’s cut through all of the pork and limit the stimulus plan to $300 billion. If, six months after passage of the stimulus package, the economy still is languishing, pass another stimulus bill. Don’t just throw $1 trillion at pork and new programs that are likely to waste money, result in unintended consequences, and set the stage for high rates of inflation two or three years down the road.

NOTE: Pritchard is the senior member of the Rohrer College of Business faculty. He completed both his undergraduate degree in physics and an M.B.A. at Drexel University, his M.A. in applied economics at the Wharton School of Business at the University of Pennsylvania and his doctorate in education administration at the University of Pennsylvania. Pritchard has authored/co-authored nine books in the fields of finance, small business management and marketing and has written more than 250 trade journal articles. He has consulted and provided financial training for many businesses and trade associations throughout the United States. Pritchard's research interests include real estate, personal financial management, retirement planning and Social Security. He specializes in applied financial research and pedagogical research principally pertaining to the teaching/learning processes in business and finance.

February 4 2009 - Newswise — Those fortunate enough to have held onto their jobs during the economic downturn may experience Post Downsizing Stress Syndrome, a psychological response to a combination of widespread layoffs and high levels of job stress, according to a business professor at the University of New Hampshire.

Barry Shore, professor of decision sciences at the UNH Whittemore School of Business and Economics, says many workers are discovering that they must adjust to a new organizational culture and management style, one that the Economist describes as “command-and-control.”

“It is a culture that shifts the focus from motivation and collaboration to delegation and compliance. It is also a culture that expects those who remain to take over responsibility for the work done by those who have left,” Shore says. “Certainly, those who still hold their jobs feel grateful for being spared, but many also feel threatened, abandoned, burdened with more work, and subject to overall greater job stress.”

According to Shore, the stress that develops in a downsized environment is different from traditional job stress. A downsized environment is usually the result of deteriorating business conditions that are beyond the immediate control of management. It affects a wider percentage of the workforce in the organization than it would under more normal circumstances. It can be long-lasting and may recur with increasing intensity as job cuts both within the survivor's company and other companies occur. Employees become obsessed with their plight -- it dominates informal discussions in the organization, and, as a result, employees turn their focus inward and worry about job security rather than focusing outward on job performance.

The symptoms of Post Downsizing Stress Syndrome include trouble concentrating on the job, irritability with fellow workers, anger toward management, higher absenteeism, substance abuse, family problems, feelings of mistrust, health problems, negative attitude toward work, and a sense of hopelessness.

“When several of these symptoms are observed, management needs to take action before the damage spreads through the workforce. Unless treated, the organization’s competitive position may be eroded as morale and then performance suffers. Later, some of the company’s best performers may leave once the job market recovers. This can be particularly unfortunate since those who have survived the reductions-in-force are presumably the better performers,” Shore says.

According to Shore, there are several ways to treat Post Downsizing Stress Syndrome:

• Resist the temptation to blindly follow a command-and control approach. Companies should lead with humility and professional will. Command-and-control can work in the short run, but it stifles individual initiative, commitment, and contribution in the long run.

• Acknowledge the insecurities and fears of the workforce. Bring current concerns into the open, talk about them with employees and acknowledge their concerns. This sends a strong message that a company cares about the plight of its workers.

• Communicate often. This is no time to keep employees guessing. Hold meetings to discuss the problems faced by the company. Ask employees what is on their mind. Start a blog. Create a new page in your newsletter devoted to the issues the company faces during the recession.

• Share the complexities of management decisions. Help employees understand the tradeoff between survival and job cuts. Ask for their suggestions. Would they prefer that the company retain its current workforce level and absorb the drop in business through fewer hours or shorter work weeks, or would they prefer job cuts? By sharing these complexities, employees can offer useful responses during the economic downturn.

• Develop a questionnaire to study employee morale. Before taking steps to improve morale, management should understand current attitudes toward the company, management and the job. Developing a questionnaire to collect data can be useful.

• Encourage collaboration. It is more important now than in the past few years to encourage teamwork and collaboration. Schedule team-building workshops and invite groups to plan their own workplace strategies that may include setting their own budgets and timetables. Ask employees how to do the job better. Try to resist the temptation to increase responsibility while stifling authority and control.

• Improve trust. Trust is one of the most important human resource assets, but there is no quicker way to undermine it than to cut jobs and impose a command-and-control culture. Management must do what it can to manage this asset. Trust starts with honesty, even when it means warning employees that bad news may be coming. Trust also requires fairness, even when it means explaining what criterion was used to furlough workers, and even when this explanation leads to significant criticism from employees. Finally, trust is doing one’s best to keep promises, even when these promises are tough to keep.

• Recognize contributions. Celebrate accomplishments. Everyone likes to be appreciated, but few take the time to show appreciation.

• Start new projects. Understandably, some projects were delayed as the economic crisis forced the organization to circle the wagons. But that doesn’t mean there should be a moratorium on new projects. Initiate studies of the competitive market environment. What opportunities now exist because competitors have left the market? How have customer needs changed in response to the expectation that this slowdown will be prolonged? The answers to these and other questions may suggest new products, services and projects. It’s important to keep in mind that people are energized by new ideas and fresh starts.

• Involve the workforce in developing new ways to improve old products and processes. The economic crisis provides an opportunity to change processes that have resisted change for many years. Involve employees to make the change effective and to help build morale.

“Developing a strategy to survive the recession should not end with a plan to contain costs and reduce the size of the workforce. Equally important is a focus on the human resources within the firm, one that recognizes the stress that the recession has imposed on those fortunate to have survived job cuts but who are still susceptible to Post Downsizing Stress Syndrome,” Shore says.

The University of New Hampshire, founded in 1866, is a world-class public research university with the feel of a New England liberal arts college. A land, sea and space-grant university, UNH is the state’s flagship public institution, enrolling 11,800 undergraduate and 2,400 graduate students.