Tag Archives: school of business

Arizona Commercial Real Estate Development

Survey: Phoenix Commercial Real Estate in Recovery

It’s shaky, but improving. Experts say the Phoenix-area commercial real estate market is now officially in a slow recovery mode. A full 100 percent of the real estate brokers participating in a quarterly survey by the W. P. Carey School of Business at Arizona State University indicate they feel “optimistic,” and 84 percent believe the market is on an upswing.

The participants recently came together for a forum and the survey about progress on apartments, retail, industrial, offices and more. They say land prices are still going up and that some areas of the Valley are already doing better than others. However, don’t expect any drastic changes over the next year.

“We expect 2015 to be much like 2014, so we’re likely looking at one more year of slow recovery,” explains one of the forum’s organizers, Mark Stapp, director of the Master of Real Estate Development program at the W. P. Carey School of Business. “Over the long run, we’ll grow, but in ways we haven’t in the past — like more mature, established markets that focus on infill and developing in context with what’s already there. Some reasons for our current slowdown include tight lending standards, sluggish job and wage growth, and the need to absorb around 150,000 new homes built between 2000 and 2007. I also think it will be at least 2016 before any significant new retail space comes onto the market.”

Those participating in The Commercial Real Estate Broker Forum come from a variety of sectors, specializations and brokerage houses across the Valley. The event is moderated and co-organized by Pete Bolton, executive vice president and managing director of Newmark Grubb Knight Frank’s Phoenix office. Quarterly reports from the forums are available for download at the W. P. Carey School’s website, http://research.wpcarey.asu.edu/real-estate/commercial-reports under “Commercial Brokers Survey.”

Here are some of the Quarter 3, 2014 results:

• Where are we in the cycle?
92 percent – Recovery, 8 percent – Expansion, 0 percent – Correction, 0 percent – Maturity, 0 percent – Recession
NOTE: 100 percent said the area was in recovery in Quarter 1, 2014.

• In what direction is the metro Phoenix market moving?
84 percent – Up, 8 percent – Stationary, 8 percent – Down

• What is the overall feeling about the metro Phoenix commercial real estate market?
100 percent – Optimistic, 0 percent – Pessimistic

• Is uncertainty in the federal government affecting the commercial real estate market and hindering our local growth potential?
100 percent – Yes, 0 percent – No

• Have land prices reached their peak?
82 percent – No, 18 percent – Yes

• Have homebuilders stopped buying land?
91 percent – No, 9 percent – Yes

• Is the tight inventory of homes on the market affecting the commercial side at all?
50 percent – Yes, 50 percent – No effect, 0 percent – Not yet, but it will

• Where are apartment rents headed in the next six months?
55 percent – Stationary, 45 percent – Up, 0 percent – Down

• Where are office vacancy rates headed in the next six months?
73 percent – Down, 9 percent – Stationary, 18 percent – Up

• Where are retail vacancy rates headed in the next six months?
64 percent – Down, 36 percent – Stationary, 0 percent – Up

• Is this a landlord or tenant industrial market?
83 percent – Tenant, 17 percent – Landlord

• Where are interest rates for commercial loans headed in the next six months?
75 percent – Stationary, 25 percent – Up, 0 percent – Down

• Where are investor returns headed in the next six months?
92 percent – Stationary, 8 percent – Down, 0 percent – Up

Deliver on Your ROI, Business Meetings

Survey: Half want to own their own business

Half (50 percent) of working adults in the U.S. either currently own or want to own their own businesses, according to a new national University of Phoenix School of Business survey. Of working Americans who do not currently own a business, nearly two in five (39 percent) hope to do so in the future.

Age makes a significant difference as nearly half (52 percent) of workers in their 20s who do not currently own a business hope to do so in the future, followed by 50 percent of workers in their 30s and 35 percent in their 40s. Second careering may also lead some workers to consider entrepreneurship later in their careers. In fact, more than a quarter (26 percent) of workers in their 50s and 17 percent of workers age 60 or older who do not own a business, want to do so in the future.

The recent online survey of more than 1,000 working adults in the U.S. was conducted on behalf of University of Phoenix School of Business by Harris Poll in July 2014.

University of Phoenix School of Business is hosting more than 40 events nationwide in August to help prospective and current entrepreneurs learn how to launch and sustain successful businesses. More information about the events and locations can be found at www.phoenix.edu/thinkbig.

Barriers to business ownership

Why haven’t more American workers started their own businesses? According to the survey, the top barrier for working adults who want to own their own businesses is a lack of adequate finances (67 percent). Prospective business owners also say they are held back because they need more education or training (33 percent), do not know enough about running a business (32 percent), have not found the right idea or concept (30 percent), do not have the time (22 percent) and need to develop leadership skills (17 percent).

“Starting your own business can be an exciting and fulfilling pursuit, but requires significant planning, resources and business knowledge,” said Michael Bevis, director of Academic Affairs for University of Phoenix and faculty member for the School of Business. “Many potential entrepreneurs have great ideas and a strong understanding of specific industries, but often do not have the business background to turn concepts into profitable ventures. Business education can help entrepreneurs fill knowledge gaps and strengthen business acumen.”

If you were the boss

More than three quarters (76 percent) of all working adults identify things that they would do differently if they were in charge of their workplaces. For example, 37 percent would provide more training and education opportunities for employees, 35 percent would hire better-qualified employees and 32 percent would create more flexible work environments, such as offering flex hours or the option to work from home. Twenty-seven percent say they would rely more on teamwork and collaboration. The majority of working adults say they would be or are great bosses, with 85 percent of self-employed adults and 76 percent of workers who are not self-employed indicating this.

Career stagnancy and being entrepreneurial in your own career

Nearly two-thirds (64 percent) of all working adults say they currently have limited opportunities within their companies. That said, many workers also admit that they may need to be more proactive in managing their own careers. More than half (53 percent) of working adults say they should be more entrepreneurial in their careers. Notably, even those well into their careers express an interest in being more entrepreneurial, specifically 47 percent of those in their 40s, 46 percent of those in their 50s and 43 percent who are 60 or older. Two in five (40 percent) working adults have not set career goals for themselves.

“Being entrepreneurial does not just mean starting your own company; it is also about approaching your existing career with purpose,” added Bevis. “Do not rely on your employer to manage your career. Setting career goals, developing a strong personal brand and constantly looking for ways to grow and tie your responsibilities to the company’s bottom line can help you succeed and feel more engaged in your career.”

Bevis offers the following recommendations for individuals who want to start businesses or be more entrepreneurial in their careers:

Tips for owning your own business

* Start with a business idea that not only fulfills specific customer needs, but has enough market demand. Support your idea through market research, competitive intelligence and target audience assessment.
* Identify your target audiences, understand what motivates them to act and learn how to grow long-term relationships with your customers.
* Create a business plan and use it to set priorities, address gaps and lay out your growth strategy.
* Financial planning can be one of the most challenging aspects for business owners who are not trained in this area. Consider additional education or plan for resources to address financial planning and management.
* Develop an organization and management structure so your company is poised for growth.
* Do not operate in a vacuum – network and learn from other successful entrepreneurs.

The Small Business Administration website offers a variety of business plan templates at www.sba.gov.

Tips for being more entrepreneurial in your career

* Be knowledgeable about your organization, industry and career growth opportunities.
* Think like a marketer. Develop a strategic business plan to grow and improve your personal brand within your organization. Start with a mission statement. Other areas to consider include: audience assessment; Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis; points of differentiation; promotion strategy; and ongoing personal development.
* Keep your personal brand current and sustainable by knowing how your skills and experience fit into the big picture of your organization.
* Network and engage with individuals who have diverse experiences.
* Identify and engage with a mentor. This individual does not necessarily have to be in your own company. Find someone who you admire professionally and whose success mirrors your goals.
* Identify and engage with a sponsor in your own company. This person can champion your success and advocate for your growth within the company.

University of Phoenix School of Business offers associate, bachelor’s, master’s and doctoral degree programs with specializations across a wide range of business disciplines, including entrepreneurship, marketing, human resources and finance. For more information about University of Phoenix School of Business degree programs, visit www.phoenix.edu.


Luxury Real Estate Market Retrospective: 2001-2012

News archives must be bursting with stories examining real estate’s regional and national trends after one of the most dramatic events in U.S. real estate history. However, with the old adage in mind that all real estate is local, we wanted a clear retrospective of the market we serve without the sensationalism and consistently inconsistent “expert” predictions.

Real estate veterans and industry followers are no doubt aware of the outstanding work Mike Orr has done as founder of real estate research firm The Cromford Report, and his recent appointment to Director of the Center for Real Estate Theory and Practice at ASU’s School of Business. We’ve asked him to analyze specifically our luxury market since 2001.

Though it’s no secret that residential real estate is often a purchase driven by passion, our clients are increasingly concerned about home-as-investment strategy. With this in mind, we analyzed the most helpful statistics for luxury home investors in Phoenix’s Northeast Valley from 2001 through 2012. The analysis covers single family homes $1,000,000 or more in Scottsdale, Paradise Valley, Fountain Hills, Rio Verde, Arcadia, Biltmore, Cave Creek, and Carefree. It is our hope that a better understanding of where we’ve been will help us know where we are going.

Annual Sales

In 2001, there were 396 sales of single-family homes listed at $1,000,000 or more. At the time, Scottsdale (182) narrowly beat Paradise Valley (170) for units sold, but Paradise Valley had a slight edge in terms of dollars spent. Sales in these two areas made up 89 percent of the entire luxury market, with Phoenix trailing at 15 sales in the Biltmore area and 13 in Arcadia. Carefree (7), Cave Creek (4), Fountain Hills (4) and Rio Verde (1) were relatively small markets then, and while they have grown tremendously since 2001, 86 percent of sales are still in either Scottsdale or Paradise Valley.

Sales volume grew slowly in 2002 and 2003, before expanding dramatically in 2004 and 2005 when it peaked at 1,563, almost four times the sales volume a mere four years earlier. Scottsdale accounted for much of the luxury sales growth, thanks to its relatively undeveloped landscape with room for new projects in DC Ranch, Troon, Grayhawk, McDowell Mountain, Pinnacle Peak, the Shea Corridor and Desert Mountain.

Although sales began to decline after the frenzied peak of 2005, luxury home sales remained reasonably buoyant when compared to the market at large, until demand fizzled out in the second half of 2007. The broader real estate market collapse, as well as the stock market collapse in 2008, would destroy confidence in real estate for years to come. Foreclosures and short sales became part of the new vernacular, peaking in 2010 and representing 33 percent of transactions that year. Total annual sales have remained at a similar level for the past five years, but distressed sales have declined to 17 percent of transactions in 2012. Total sales in 2012 were at their highest level since 2007.

Sales Pricing

The Northeast Valley luxury market appears extremely volatile when measured on a shortterm basis, due to relatively low volume and a wide range of price points. Greater accuracy is obtained by measuring pricing over longer periods, and the best way to judge pricing is typically on a per square foot basis. The next chart shows the 12-month moving average sales price per square foot, meaning each month is the average of that specific month and the 11 months preceding it.

In 2001, the luxury market was already troubled by over-supply, and took another hit after the terrorist attacks of 9/11 and resulting stock market weakness. However, by 2004 pricing improved and prices escalated quickly during 2005 and 2006.

Yet, while prices fell from mid 2006 onwards in less expensive markets, luxury market price per square foot continued climbing – despite a slowdown in sales – into the early part of 2008. However, the extreme economic recession and the failures of Bear Stearns and Lehman Brothers took their toll from May 2008 onwards; prices collapsed from the peak of $404 per square foot in December 2007 to reach $290 by May 2010, before drifting to their lowest point ($277) in February 2012. Although the decline from peak to trough was a significant 31%, this is far less than the 59% drop in average price per square foot experienced by the overall market in the Metro Phoenix area.

Pricing finally began to recover as distressed homes worked their way through the system and by the end of 2012, price per square foot had crawled back to $291 and continue to trend upward. “86 percent of sales are still in either Scottsdale or Paradise Valley” “prices collapsed from the peak of $404 per square foot in December 2007 to reach $290 by May 2010.


During 2004 and 2005, new listings grew at a slower rate than sales volume, but they continued growing in 2006 and 2007 as sales declined; projects began during what we now recognize as the peak took time to finish. This ominous imbalance led to the huge excess of inventory in 2008 when only 766 homes were sold across the entire Northeast Valley luxury market. The number of distressed listings peaked in 2009 at 21 percent of new listings before declining to 9 percent in 2012. The number of new listings in total was at its lowest in 2011; 2012 was the first year since 2007 to show an increase in inventory. By the end of 2012, supply was roughly in balance with demand.


The luxury market is most active during the spring, and most transactions close from March to June each year. Over the last 12 years, this period typically generates sales at a remarkable 39 percent higher rate than the rest of the year.

Summary and Outlook

Between 2001 and 2012 the luxury home market has experienced a period of great turbulence and volatility, though not quite the extremes suffered by the rest of the market. As 2012 came to a close, supply and demand are near balanced. Barring external economic shocks, the luxury market looks likely to be relatively calm and positive.

For a personal analysis of what these numbers mean for your home, please contact our office at 480-991-2050.


Learn The Principles Of Effective Leadership

Knowledge: Great companies and great leaders are often synonymous, but what does it take to be a great leader? Dr. Angelo Kinicki is professor of management at the W.P. Carey School of Business. As a consultant, Kinicki often works with top management teams. Here, Kinicki discusses the principles of transformational and managerial leadership in increasing the efficiency of executives and the companies they lead. (18:09)


Digital Management Solutions Are Basic Competitive Necessity

Digital universe. Exabytes. Data fluidity value. Master data management solutions. This is the language of the future of business. As the amount of data companies attain and store grows, so too must the ability to deal effectively with this digital avalanche. Michael Goul is a professor of information systems at the W. P. Carey School of Business. Here, he discusses how businesses will have to learn to manage unprecedented amounts of data as a means of gaining a competitive edge. (16:09)

alan mulally ford

Executive Of The Year: Alan Mullaly, Ford Motor Company

Alan Mulally, president and chief executive officer of Ford Motor Company, was honored recently as Executive of the Year by the Dean’s Council of 100, a group of prominent business executives who advise the W. P. Carey School of Business. In presenting the award, W. P. Carey School Dean Robert Mittelstaedt noted Mulally’s exceptional leadership in turning Ford around without requesting government bailout money. Here is Mulally’s speech and the question period that followed. (47:30)

'Strategic Defaults in the Recovering Real Estate Market

‘Strategic’ Defaults In The Recovering Real Estate Market

The Phoenix resale home market rebounded slightly in February, according to the Realty Studies Report from the W. P. Carey School of Business. Compared to January, the number of transactions increased and prices were up a bit. Still, foreclosures accounted for 42 percent of the total market, and the sale of previously foreclosed properties made up 40 percent of the traditional sale segment. Meantime, market watchers are wondering what will happen when the many Adjustable Rate Mortgages (ARMs) reset this year and next. We asked  Jay Butler, associate professor of real estate and author of the report, what he thinks about that, and what else he noticed in the February data. (9:20)

Companies Continue To Turn To ASU - Az Business Magazine Jul/Aug 2010

Despite Hard Times, Companies Continue To Turn To ASU For Executive Education Offerings

You might think companies designate the development of managers and executives as a low priority as they try to weather the storm of a recession. Though it’s true many companies scale back tuition benefits and send fewer people to executive education programs, most business leaders still are keenly aware they need to develop current and future talent, especially as the economy begins to recover.

Because of the recent recession, firms had to reduce staff precisely at the time when the first wave of baby boomers — a vast reserve of knowledge and experience — is set to retire. This leaves a much smaller and less-seasoned population of Generation Xers with the responsibility to manage the incoming “boomlet” of millennials. As a result, professional development opportunities no longer are considered a “perk,” and organizations are much more purposeful in identifying future leaders among current managers, and providing them with learning and development opportunities that are cost effective and build capabilities that translate into business results.

This situation raises a number of challenges and opportunities for business schools, which over the last 20 years have expanded from their traditional role of providing companies with freshly-minted graduates to also partnering with them in the development of their existing talent pools. Like many business schools across the country, Arizona State University’s W. P. Carey School of Business assumed this new role, in part, by creating a wide range of degree and non-degree programs for working professionals.

The school’s Center for Executive and Professional Development (CEPD) provides short, non-degree courses and certificates, including customized programs. The school’s MBA program is offered in executive, evening and online formats. The school’s full-time MBA program currently is ranked in the Top 30 in the nation by U.S. News & World Report. The evening MBA program is ranked in the Top 20.

Two part-time master’s degrees also are offered to working professionals: the Master of Science in Information Management (MSIM) is a one-year evening program that prepares IT managers; and the Master in Taxation (MTAX) is a one- or two-year evening program focused on the skills needed to provide tax advice and administer tax laws.

New demands from companies continue to raise the bar on all of W. P. Carey’s programs for working professionals. In response to customer surveys, CEPD recently shifted away from offering multi-day, on-campus short courses to instead scheduling courses over multiple evenings, weekends and online. This minimizes disruption to work schedules. This August, CEPD will launch a series of online, one-week “mini-courses” in marketing, finance, accounting, information systems management, leadership and supply chain management. The courses will be taught by W. P. Carey faculty.

The center also has ramped up its ability to design and deliver custom programs, with objectives and learning materials that can be tailored to specific industry and company needs, and that can be delivered on campus, at company locations, provided entirely online or in a “blended” live/online format.

The school’s professional MBA programs also have several initiatives underway. One involves a deepened focus on leadership across all of the working professional MBA programs. That includes community leadership in concert with an increased focus in the business world on corporate social responsibility.

In addition to integrating significant, new leadership components into the coursework, students, alumni and staff from all of the W. P. Carey MBA working professional programs also recently engaged in volunteering and fundraising for various local nonprofit organizations. The school also initiated annual Student Leadership Awards, with community leadership a major criteria for nomination and selection.

The school’s two other masters programs for working professionals, MSIM and MTAX, also are aligning their programs more closely to the needs of businesses. In the MSIM program, student teams work on a year-long project with a company of their choice (which, in most cases, is their employer). They analyze the competitive forces within the company’s industry, then come up with a transformation plan involving a major IT component and leveraging all the courses they’ve had in the MSIM curriculum.

“Companies see real value in the projects,” said the program’s director, Uday Kulkarni. “Some of our past projects have been actually used by companies, since the plans make specific recommendations about technology platforms, capital and revenue budgets, human resources and project rollout.”

He also points out that the program holds an executive seminar series four times a year so “Valley leaders can speak directly to students about how they are transforming their businesses.”

Similarly, the MTAX program incorporates local practitioners as instructors and seeks to maintain a cutting-edge curriculum through a rigorous annual review process that includes input from an advisory board composed of alumni and distinguished practitioners.

In many ways, the school’s challenges in increasing the accessibility and impact of its programs for working professionals are similar to those faced by companies as they strive to better serve and expand their customer base.

Arizona Business Magazine Jul/Aug 2010


A New ASU Lab Asks Whether The Public Has To Give Up Its Privacy To Take Advantage Of New Technologies

Everyone recognizes that privacy is important. But if you look at several issues that have been in the press recently, it seems like we’re always being asked to trade privacy for other benefits — security, convenience or even financial benefits.

Arizona State University’s new Privacy by Design Research Lab in the W. P. Carey School of Business is working with industry leaders to change the conversation to one in which we capitalize on best practices in engineering, business and communications to identify practical solutions to improve products and processes without sacrificing privacy, and perhaps even enhancing it. Consider the following situations:

Red light and speed cameras: These traffic enforcement technologies have been widely adopted in Arizona, but they are quite controversial. Those in favor of the cameras focus on improving driver safety and generating revenue for our cash-strapped state. In 2009, Arizona did have the lowest number of fatal collisions on state highways, and the speed cameras generated $19 million in revenue between October 2008 and October 2009, so maybe there is some merit in these arguments. However, these practices also raise serious privacy issues. Many citizens are concerned that Big Brother is watching them on the highway and in major intersections, and they worry that the state is capturing photographs of citizens who have done nothing wrong. For example, the photos taken often show the passengers — clearly enough to be identified — and they haven’t been speeding. Do we have to trade passenger privacy for improved highway safety and state revenue?

Imaging technologies at airports: After the attempted terrorist bombing on an airplane this past Christmas, there was a lively discussion in the media about scanning technologies that could be used at airports to improve the Transportation Security Administration’s ability to spot a wide range of weapons carried close to travelers’ bodies. In almost every newscast, the reporters focused on a backscatter X-ray scanner’s ability to help identify security threats. But they also described the images produced as putting passengers through a “virtual strip search.” In effect, the question that was repeatedly asked was, should American citizens be willing to be viewed “naked” in order to improve national security?

Facebook’s privacy settings: There also has been a lot of discussion around the most recent changes Facebook made to its privacy settings. Over time, the social networking Web site has created more robust privacy settings, allowing members to control their content at a more granular level. But Facebook also has made the default settings for some content public. That means the content of members who do not take the time to adjust their settings is made available to the world. Additionally, the new privacy defaults were changed to public unless users took the time to check that they wanted their former privacy settings honored.

Location-based services: As mobile phones get smarter, creative innovators are developing applications that can greatly enhance our productivity — or at least help us get data that is appropriate, given our location. For example, when traveling you can use OpenTable’s iPhone application to help you find a highly rated, independent restaurant within two miles of your hotel, and it can give you walking directions and lead you step-by-step from your current location to your table. This convenience is amazing. But at the same time, several organizations are tracking your geographic location — accurate to within a few yards. Are the privacy issues that arise worth the great meal? Should you really have to give news services like National Public Radio access to your location data (which you must, by the way) in order to get their news feeds?

Each of these scenarios brings up interesting privacy issues, and when you read about them, it almost always sounds as if we are facing a zero-sum game situation: Business can either deliver on privacy or earn revenue. However, this is absolutely not true, as we are advocating at ASU. The challenge is to identify or develop, if necessary, technologies and processes that can deliver the same level of security and convenience without sacrificing privacy or profits. For example, traffic cameras can “blank out” driver and passenger faces unless authorized individuals enter security codes that allow users to “see” the driver’s face, while still protecting the passenger’s privacy. Similarly, if the TSA adopted millimeter-scanning devices, they would be as accurate as the backscatter devices and simultaneously better at protecting individual privacy. And we could all go through security without taking off our shoes, improving our overall convenience.

What these examples highlight is that there needs to be a radical shift in expectations. Organizations must consider privacy issues when creating new products and services. If they do, they can enjoy a positive-sum game, improving their relationships with customers, which can lead to higher profits. The statement made over a decade ago by former Sun Microsystems CEO Scott McNealy, “You have zero privacy anyway, get over it,” is actively being challenged at ASU’s Privacy by Design Research Lab.

We are working with internationally known privacy guru Ann Cavoukian, the information and privacy commissioner of Ontario, Canada, and primary developer and proponent of the Privacy by Design concept. The ASU research lab is the first such ambassador program in the United States with Cavoukian providing executive guidance. With initial seed funding from the Privacy Projects, we have begun initiatives to develop actionable guidance for emerging business situations. Our first project is focusing on best practices for mobile applications, helping those who are developing applications such as OpenTable to determine what personal data is needed to be successful, and what practices should be put in place to ensure customers get great service without giving up their privacy. If you’d like to learn more and join in the discussions, please join us for one of our monthly meetings.

Who To Watch: Gary Naumann

Gary Naumann
ASU Spirit of Enterprise Center

Small businesses are guardedly optimistic about 2010, says Gary Naumann, who heads the ASU Spirit of Enterprise Center at the W. P. Carey School of Business. He senses the mood from what he sees and hears, especially from entrepreneurs who attended the 13th annual Spirit of Enterprise Awards last September.

“You can only look down at your shoes for so long,” he says. “It’s a lot more fun to look up. That’s what I sensed from the crowd of 800-plus at the awards event.”

Under Naumann’s leadership, programs at the Spirit of Enterprise Center are providing assistance to small businesses and real-life experience for students.

“People come up to me on a regular basis and say they’re thinking about starting a business or expanding,” he says.
As examples of the optimism he is starting to see, Naumann mentions two of the small businesses that were honored by the center this year. Caliente Construction is targeting 20 percent growth next year, and Terralever, an Internet-based marketing company, recently expanded to Los Angeles.

“That’s why we picked them — they’re doing good things in a tough market,” he says. “If we were able to find these kinds of small businesses in the last few years, we sure as heck are going to find them for our awards next September.”

Without duplicating other services offered at the School of Business, Naumann says the center’s focus is on opening doors to opportunity. The center assists hundreds of businesses each year, mostly small firms, by providing guidance and connections to key resources.

“The type of businesses we help is across the board,” Naumann says. “We believe entrepreneurship is alive and well, even though this is such a tough time to start a business. Dislocation creates opportunity. We’re definitely in that period where there has been a lot of dislocation the last 12 to 18 months. People look around and wonder what they can do to take charge of their future. That’s a very healthy thing for our economy.”

Naumann, who has been in the entrepreneurial field for 30 years, says the center will continue to honor entrepreneurs who are showing promise, and educate young entrepreneurs of the future. He has lined up three new guest speakers from different walks of life to share their experiences with students.

“We landed a venture capitalist, and they’re hard to find,” Naumann says. “Students hear from guest speakers about what they did right in business and missteps they took and corrected. They learn more from hearing about the mistakes.”

To do well next year, small businesses must be prepared to do a fair amount of what Naumann calls “heavy lifting.”

“They’ll have to do two things at the same time, even though they almost don’t seem to go hand in hand,” he says. “They’ve got to watch their cash flow like a hawk, and at the same time they have to have one eye toward growth of the business. People who are going to succeed are going to be on these two paths.”


Arizona Business Magazine

January 2010

man with red tie standing in front of Dean's office

CEO Series: Robert E. Mittlestaedt Jr.

Robert E. Mittelstaedt Jr.
Dean, W.P. Carey School of Business at Arizona State University

How is W.P. Carey’s curriculum changing due to the economic crisis?
The curriculum in any business school has to involve some fundamental, timeless subjects that never change. So accounting and some aspects of finance and people management and other things will go on forever, but in every case we have to find a way to adapt to the changes in the external environment, whether it’s societal or specific kinds of business issues. I think that most business schools now are re-thinking seriously their curriculums in light of what has happened in the last couple of years, in particular issues in the areas of risk management, ethics in decision making and globalization … It doesn’t mean that the entire curriculum will change, but we have to find a way to weave those things more into almost everything we teach.

Could business schools have done more to create an ethical climate among corporate executives that could have averted this crisis? Does that argument have any merit?
My experience over many years now tells me that parents have to do more to teach ethical values to their children, and society has to take responsibility for holding people accountable for ethical behavior. Sadly, I have found that in most people, when they cross ethical lines, you find out it’s not the first time and they started doing it early in their life. By the time we get them as undergraduate business students, that’s about the end of the time when you can influence it.

We push hard on ethics from day one, and the students who come into our program hear about ethics on day one from me, and throughout the time that they’re here and they are required to take ethics courses. … This is something that’s a broad societal problem that we have to deal with, and we’re are doing as much as we can in business schools and will continue to put even more emphasis on it, but it’s not something that can be solved just in a business school or just in a university alone.

What are some of the future trends you see for business schools?
I expect to see all business schools more concerned with some of the things that we have been thinking about here at ASU. For instance, whether you believe in global warming or not, it is indisputable that we have to worry about sustainability, simply because of the number of people on the planet. … There are all sorts of things that become different issues where we have society and business interacting, whether we like it or not, in a much more integrated fashion than we have had in the past. … Issues of instant communications, doing business differently than our predecessors did, are very real and have to be part of a curriculum. … All those things find their way into a curriculum, both in terms of changing the way we teach, the kinds of things we teach, the impact they have on individuals.

How would you assess the relationship between W.P. Carey and the Valley business community?
I believe that our relationship with the business community at the W.P. Carey School is quite strong. We have many business leaders that are on our advisory councils, advisory boards to departments, to the whole school; we have many businesses that support us by sending students here to work on their MBAs or even their undergraduate degrees. And we have many business leaders who are not graduates of our school but who believe we have to have a strong business school to help Phoenix grow, and so they support us.

Describe the education industry in Arizona in terms of employment.
Education is a big sector of our society and I don’t believe there are very many people today that would deny that education needs to be there. …  (T)here’s more to learn today and a child today needs to learn more and get to a higher level of knowledge just to be competitive in the work force than they did a generation or two generations or three generations ago. You have to have an education sector that is strong and employs a fair number of people if you’re going to be competitive.The fact that we have gone through a financial crisis and budget cutbacks and furloughs and layoffs means that it’s not different than any other business, and it is in fact a business. It may be state supported, partially in the case of our university, but it is nonetheless a business that is subject to the same kinds of economic whipsaws as other sectors. The difference here is that our students don’t just go away because the economy got worse. In a retail establishment the customers may not show up and you may not have to have as many (establishments) open. We still have 52,000 students showing up on this campus in the fall …

    Vital Stats

  • Dean at W.P. Carey since 2004.
  • Between 1973 and 2004, he served in numerous leadership positions at The Wharton School at the University of Pennsylvania.
  • Author of “Will Your Next Mistake Be Fatal? Avoiding the Mistake Chain That Can Destroy Your Organization.”
  • Earned his bachelor’s degree in mechanical engineering from Tulane University.
  • Served five years as a U.S. Naval officer.
  • Received an MBA from the Wharton School.
  • wpcarey.asu.edu
Investing man

Changing Investment Management Firms Can Be Costly

Patience, it turns out, can be indeed a virtue — especially for retirement plan sponsors. Sunil Wahal, professor of finance at the W. P. Carey School of Business at Arizona State University, and his co-authors compiled a database of hiring and firing decisions made by more than 3,700 plan sponsors between 1994 and 2003. The reasons plan sponsors change investment management firms vary, but often the sponsors hire firms that have recently earned significant excess returns.

However, Wahal and his team found that those high fliers do not perform as well after they are hired, and the fired firms sometimes go on to turn in impressive numbers. If plan managers had stayed with their original managers, Wahal says, their excess returns would have been larger than those delivered by the newly hired managers.

“When firing decisions are made, one needs to be very careful and cognizant of the costs involved,” Wahal says.

Factor costs into decisions
Wahal’s study of the selection and termination of investment management firms by plan sponsors looked at 9,684 hiring decisions by 3,737 plan sponsors between 1994 and 2003. The plan managers hired by the sponsors were responsible for delegating $737 billion in investments. The study also examined 933 firing decisions by 515 plan sponsors between 1996 and 2003. Nearly $117 billion of investments were impacted by those decisions.

“There is an enormous amount of money that is invested in the market by plan sponsors. These organizations make a lot of decisions about who gets to manage the assets for the beneficiaries,” Wahal observes. “Sometimes the hiring and firing decisions they make work well. Sometimes they don’t. The frictions involved in these decisions are costly to beneficiaries.”

The rationale for a change varies. Plan sponsors usually fire investment management firms for poor performance, but sometimes they act because of an organizational change. For example, the investment management firm may have gone through a merger, or a star stock picker or portfolio manager may have left. The plan sponsor also may decide to change direction with its investments, such as switching from running a large-cap stock portfolio to a bond portfolio.

Factors that point to success
Wahal found that consultants are hired to assist plan sponsors in nearly two-thirds of all hiring decisions. Excess returns from consultant-supported decisions are higher, consistent with the notion that a consultant’s expertise adds value when selecting managers. But there’s a downside to consultants. They often take the blame, in place of the firm’s treasurer, when a company with a defined benefits plan selects a plan manager that performs poorly. Even so, using a consultant led to a 3.7 percent increase in three-year, post-hiring returns.

The researchers also found that returns were higher as the size of the plan increased, presumably because the sponsors of bigger plans have more experience selecting investment managers. In addition, they discovered that plan sponsors like to hire investment management firms within their own states. The study found that those in-state, post-hiring returns were positive.

Despite evidence that a number of factors can predict success, plan sponsors typically selected investment management firms by screening their performance based on excess returns. Firms are usually hired after investment managers have done very well, with an average excess return of 13.8 percent three years before the hiring decision.
Yet, after an investment management firm was hired, the study found the excess returns were close to — or below — zero.

“It’s not that they do poorly,” Wahal explains, “they don’t do as well as they had been doing prior to being hired. In other words, when you chase returns, you chase hot hands. But those hot hands don’t seem to persist.”
Wahal also learned that three years after the firing decisions, excess returns were sometimes up, with performance-based firings resulting in bigger return reversals. In fact, it was discovered that had plan sponsors stayed with the fired investment managers, excess returns would be more than what the newly hired managers delivered at some horizons.

Transition costs can add up
When a plan sponsor decides to fire an investment manager, the sponsor then has to take those funds and provide them to the newly hired investment management firm. This process entails what are commonly referred to as transition costs, that is, the cost of selling the old portfolio and creating a new one. Wahal says that “such costs can frequently be as much as 2 percent, and add to any other losses that the plan sponsor might suffer.” So, the newly hired manager is expected not only to deliver superior returns, but also perhaps to recover the 2 percent transition costs. Wahal argues that “to the extent that we do not live in Lake Wobegon, this is quite a challenge.”

“What’s really important is that the firing and hiring process be set up very well,” he says. “You can’t be too quick to jump the gun on firing and hiring because those costs have to be factored into the decision. Someone’s going to bear that loss and typically it’s the beneficiaries of the plan sponsors.”

Companies Can Get Better Understanding Of Customer Experiences Through Service Blueprinting

Companies Can Get Better Understanding Of Customer Experiences Through Service Blueprinting

Not too long ago, Mike Tully discovered something important about the perception of time. The AAA Arizona president and others in his organization were not on the same clock as members requesting roadside assistance.

AAA Arizona measured effective responses from the point when its personnel dispatched tow trucks until those trucks actually arrived on the scene. Members started their countdowns from the moment they phoned in for help. Sometimes that meant a difference of eight or nine minutes — something that became abundantly clear when members called back before tow trucks even hit the road.

Fortunately, AAA Arizona and many other businesses are now gaining important customer-experience insights through a technique called “service blueprinting,” which asks organizations to evaluate and improve services by looking at them through the eyes of customers.
The concept of utilizing the customer’s perspective to develop a comprehensive service blueprint dates back several decades to a technique first discussed by G. Lynn Shostack, a one-time Citibank vice president, in the Harvard Business Review. The tool has evolved through the years and, now, has been outlined in great detail by three researchers with ties to Arizona State University’s W.P. Carey School of Business.

“Service Blueprinting: A Practical Technique for Service Innovation,” was published in the California Management Review this past May and co-authored by Mary Jo Bitner, Amy L. Ostrom and Felicia N. Morgan. Bitner is academic director for ASU’s Center for Leadership Services and the PetSmart Chair in Services Leadership at the W.P. Carey School of Business, while Ostrom is an associate marketing professor there. Morgan, a former ASU doctoral student, is an assistant marketing professor at the University of West Florida.

In working with companies, Ostrom says, it became apparent there was a need for an in-depth paper that included case studies of businesses that used blueprinting and realized its value.

“The technique, in a broad sense, is really focused on having people internally within an organization come together to help them really understand what it is they’re offering to the marketplace,” Ostrom says.

The objective is to get a handle on the actual customer experience and look for ways to improve and innovate. It involves mapping everything from face-to-face customer contact to behind-the-scenes support services.

“You end up getting a very, very clear diagram of what the customer’s walking through,” Tully says.

AAA Arizona was able to identify something of an annoyance for customers dealing with different departments. As a company that provides multiple products ranging from insurance to travel assistance, it’s not unusual for members to take care of different needs on a single call. AAA discovered customers were being asked to provide the same membership information each time their call was transferred from one department to another.

The organization now has a vice president who works on tightening up the service encounter for customers, eliminating any unnecessary hoops they’re being asked to jump through.

The benefits of a service blueprint can be wide-ranging. Organizations are able to chart how they provide services to customers, and then compare those findings with competitors’ practices.

“When you’re able to do things that customers value and do them better than your competitors, I think in general, that puts you in a much better situation,” Ostrom says.

Although some companies already make considerable efforts to understand their customers’ needs, oftentimes they don’t quite have a big-picture view of everything customers go through as part of the service experience. Blueprinting provides such insights and may indicate the need for additional research.

And, as Tully suggests, satisfied, happy customers usually deliver stronger profits.

“I clearly think it does contribute to bottom-line performance,” he says.

Blueprinting is not just something for service-oriented businesses.

“Any company can use it because every company, to be honest, tends to be (a) service business when you really think about what they do,” Ostrom says.

A company might not be focused on providing services for external customers, but every company provides internal services.

Developing a comprehensive service blueprint requires collaboration across an entire organization, with input from front-line employees, middle management and senior management.

“This process of bringing people together within the organization that don’t tend to talk to one another normally gives them a picture of what the customer experience is that’s just different than they get through other techniques,” Ostrom says.

Service blueprinting is also flexible and can be modified to address a company’s unique situation. Examples include a business that interfaces exclusively with customers online or one that has to target the needs of different types of customers.

Ostrom has been working with companies on service blueprinting for some time through the Center for Services Leadership. But her first daylong workshop was scheduled in January and future such workshops are in the planning stages.

The full-day format allows Ostrom ample time to offer an overview of the technique and then guide attendees through the modification process.

“We find once people learn the tool and get some exposure to working with it in their own context, that gives them the knowledge they need to go back and start using it more widely within their own organization,” she says.