Tuesday, July 29, 2008

Coping With A Bad Boss

Is your boss a yeller, a micromanager or clueless? Does he put insulting notes on memos that co-workers can see? Does he throw things?

Amy Cunningham's first boss at a Minneapolis public relations firm was a yeller and a micromanager, a tough challenge for a new employee just out of college. After a series of unpleasant incidents, the boss finally exploded when he found out Cunningham had put together a media kit without showing him the separate pieces before assembling it--a routine task she'd done many times before.

The boss stormed into her office, got in her face, yelled and cursed. "He tried to throw out any personal insult he could come up with," Cunningham says. "I've never been in another situation, business or social, that was that scary."

It all worked out. Cunningham approached another executive at the company and got reassigned. The boss left a few years later, and Cunningham stayed on--15 years, and counting.

Having a bad boss is more than an annoyance. It's the main reason people leave their jobs. Increasingly, that's a tough choice these days. A new survey from Working America, an AFL-CIO affiliate, says that more than 50 million workers feel some pressure to stay with a bad boss because of the current economic downturn.

"It's difficult to handle [uncomfortable] situations without taking some type of risk, and that's why a lot of people choose to ignore or live with it," says Manny Avramidis, senior vice president for global human resources at the American Management Association.

So if your boss is a jerk and you feel you have no choice but to stay, how do you cope? Here are some basic tips:

The best way to deal with a micromanager is to update him frequently. E-mail the boss a memo or checklist of what you're doing on a project so the boss is reassured, and check off your accomplishments as you go.

For instance, if the boss assigns you a report to write and then dictates what exactly you should have in it, tell him, "You've given me enough guidance. Let me take a shot at it and I'll come back after I have a rough draft. Can we talk about the rough draft when it's done?"

Dealing with an unpleasant boss can be uncomfortable, if you choose to address the situation by confronting him. Weigh the problem and how much bringing it up with him might affect your career. If your boss is a yeller and is creating a tough--or even hostile--working environment, say something like, "These aren't the conditions I work best under. Let's talk about a way to make them better." If that approach doesn't bring results, seek advice from Human Resources.

Sometimes a boss who's perceived as a dummy can actually be good for your career. Use cluelessness as an opportunity to gain more responsibility. Ask if you can take on more projects and even help manage the team.

"For people who like to take initiative, that can be a great thing," says Gini Graham Scott, author of A Survival Guide for Dealing with Bad Bosses. Meanwhile, others find that they're directionless without a boss's guidance. If that's the case, gently force the boss to critique your work and ask you questions.

Ideally, vet your boss before starting a new job. If you're in the final rounds of interviews with an employer, use networking to find someone on the inside. Ask about the person you're likely to work with. What's his skill set? Does he respect the views of his employees? Does he delegate or does he drive people crazy with questions?

Finally, ask the following to flush out any facts your source didn't spill earlier: What do you like--and not like--about working here?

If you don't like what you hear, don't take the job.

(http://in.news.yahoo.com/240/20080728/1302/tbs-5242272.html?printer=1)

Wednesday, July 02, 2008

How to Feel More Energetic

Fatigue is a common complaint regardless of age, but it becomes more prominent after the age of 40. Assuming you are in otherwise good health, here are some things that you can do to boost your energy level:

Get more sleep. Most middle-aged adults need at least 7 hours of sleep each night.

Exercise. Starting an exercise program can be overwhelming if you suffer from fatigue. Start modestly -- perhaps stretching exercise and walking. Remember the good, healthy feeling you experience after you complete your workout.

Drink more water. Most people don't drink enough water. Dehydration makes us sluggish. A quick rule of thumb to determine how many ounces of  water you require in a day is to take you body weight (in pounds) and divide by 2 and add 8 ounces for 30 minutes of aerobic activity you do.

Pare down your commitments. Doing less is not always easy, but overscheduling is a primary cause of fatigue. Look over the activities of your day or week and often you can find some that may not be necessary or enjoyable. We all have things we must do. Take a look at the non-essentials, perhaps some should move into the rest & pleasure part of your life. Take charge of your life.

Take a B-complex vitamin supplement. The B vitamins provide energy and help maintain healthy muscle and nerve cells. Aging and stress increase our need for these vitamins, while alcohol and caffeine deplete them in our bodies. Take a B supplement that contains at least 50 mg of B-1, B-3, B-5 and B-6, and 400 micrograms (mcg) each of B-12 and folic acid.

Have Fun. Laughter is essential to good health. But merriment is a foreign concept for some people. Finding delight in life is energizing. Find things that give you an emotional lift and enjoy them.

Try licorice. This herb improves immune health, so it's a great tonic for people with fatigue. Use the herb, not the candy. Take 1/2 teaspoon of tincture daily for up to 2 months. If you dislike the taste of licorice, try schisandra (same size dose). Note: Licorice is not safe for people with high blood pressure or liver or kidney disease. 

Lose weight. Even a small weight gain is enough to make some people tired. Image carrying a 10 pound weight with you all day long. You will have more energy if you drop unnecessary body weight.

Declutter. Living in a mess - and feeling guilty about it, is tiring. Clutter also distracts the mind, making it more difficult to concentrate. Get just one room, or one area, organized. You will get a boost.

Energy is a beautiful thing. A person with a lot of energy can accomplish twice what someone without much energy can and have more fun doing it. You get more life with more energy. And here’s a way to crank up your engine: Act more energetic. That sounds like shallow, positive-thinking hype, but it’s actually based on solid evidence: It works.

When you act more energetic, it stimulates your body. Lying down is relaxing. Moving around is more stimulating. Moving around quickly is even more stimulating. It gets the heart pumping. It puts the mind in gear.

Our biology has evolved to fit a different kind of world than the one in which we now find ourselves. There were plenty of times in our prehistory when food was scarce. People who wantonly used up energy would be the first to die, leaving no offspring. The bodies following the prime directive CONSERVE ENERGY passed their genes to us.

But times have changed. It’s no longer difficult to find food. If anything, food is difficult to avoid. Calories are everywhere, hugely and abundantly available. As a matter of fact, now a major concern for people in America is being overweight. Times have changed dramatically. There’s no longer any need to conserve energy, but your genes don’t know it. They’ve still got their orders, like a soldier in a jungle who was never told the war is over.

You can be more energetic, but you’ll have to override your feelings. And you can do this. You’ll have to essentially ignore the natural laziness we all share.

The way to override your body’s prime directive is to act energetic whether you feel like it or not.

The truth is, you are energetic when you act that way, regardless of how you feel. Listen to what I’m saying here. You want to be more energetic? By simply acting more energetic, you immediately become more energetic in reality, in the same way that when you act ethical, you are ethical, regardless of whether or not you were tempted to do the wrong thing.

You can become more energetic in ten seconds. Simply start acting more energetic.

You don’t have to feel energetic to be energetic. A nice bonus, however, is that often when you act energetic, it will rev you up and make you feel energetic too.

Experiments show that when people walk quickly, it speeds up their metabolism, making them feel more energetic, and this energetic feeling lasts for several hours after the activity. Acting energetic physically changes your body into a more energetic body.

So don’t wait until you feel energetic before you act. Act first. The feelings will follow.
 

Monday, June 30, 2008

Exchange-traded fund

An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks or bonds. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. In a survey of investment professionals conducted in March 2008, 67% called ETFs the most innovative investment vehicle of the last two decades and 60% reported that ETFs have fundamentally changed the way they construct investment portfolios.
 
An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be purchased or redeemed at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be substantially more or less than its net asset value. Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively-managed ETFs.
 
Most investors can buy and sell ETF shares only in market transactions, but institutional investors can redeem large blocks of shares of the ETF (known as "creation units") for a "basket" of the underlying assets or, alternatively, exchange the underlying assets for creation units. This creation and redemption of shares enables institutions to engage in arbitrage that causes the value of the ETF to approximate the net asset value of the underlying assets.
 
ETFs offer public investors an undivided interest in a pool of securities and other assets and thus are similar in many ways to traditional mutual funds, except that shares in an ETF can be bought and sold throughout the day like stocks on a securities exchange through a broker-dealer. Unlike traditional mutual funds, ETFs do not sell or redeem their individual shares at net asset value, or NAV. Instead, financial institutions purchase and redeem ETF shares directly from the ETF, but only in large blocks, varying in size by ETF from 25,000 to 200,000 shares, called "creation units." Purchases and redemptions of the creation units generally are in kind, with the institutional investor contributing or receiving a basket of securities of the same type and proportion held by the ETF, although some ETFs may require or permit a purchasing or redeeming shareholder to substitute cash for some or all of the securities in the basket of assets.
 
The ability to purchase and redeem creation units gives ETFs an arbitrage mechanism intended to minimize the potential deviation between the market price and the net asset value of ETF shares. Existing ETFs have transparent portfolios, so institutional investors will know exactly what portfolio assets they must assemble if they wish to purchase a creation unit, and the exchange disseminates the updated net asset value of the shares throughout the trading day, typically at 15-second intervals.
 
In the United States, most ETFs are structured as open-end management investment companies (the same structure used by mutual funds and money market funds), although a few ETFs, including some of the largest ones, are structured as unit investment trusts. ETFs structured as open-end funds have greater flexibility in constructing a portfolio and are not prohibited from participating in securities lending programs or from using futures and options in achieving their investment objectives. Under existing regulations, a new ETF must receive an order from the Securities and Exchange Commission, or SEC, giving it relief from provisions of the Investment Company Act of 1940 that would not otherwise allow the ETF structure. In 2008, however, the SEC proposed rules that would allow the creation of ETFs without the need for exemptive orders. Under the SEC proposal, an ETF would be defined as a registered open-end management investment company that:
 
    * Issues (or redeems) creation units in exchange for the deposit (or delivery) of basket assets the current value of which is disseminated on a per share basis by a national securities exchange at regular intervals during the trading day;
    * Identifies itself as an ETF in any sales literature;
    * Issues shares that are approved for listing and trading on a securities exchange;
    * Discloses each business day on its publicly available web site the prior business day's net asset value and closing market price of the fund's shares, and the premium or discount of the closing market price against the net asset value of the fund's shares as a percentage of net asset value; and
    * Either is an index fund, or discloses each business day on its publicly available web site the identities and weighting of the component securities and other assets held by the fund.
 
The SEC rule proposal would allow ETFs either to be index funds or to be fully transparent actively managed funds. Historically, all ETFs in the United States have been index funds. In 2008, however, the SEC began issuing exemptive orders to fully transparent actively managed ETFs. The first such order was to PowerShares Actively Managed Exchange-Traded Fund Trust, and the first actively managed ETF in the United States was the Bear Stearns Current Yield Fund, a short-term income fund that began trading on the American Stock Exchange under the symbol YYY on 25 March 2008. The SEC rule proposal indicates that the SEC is not suggesting that it will not consider future applications for exemptive orders for actively managed ETFs that do not satisfy the proposed rule's transparency requirements.
 
Some ETFs invest primarily in commodities or commodity-based instruments, such as crude oil and precious metals. Although these commodity ETFs are similar in practice to ETFs that invest in securities, they are not "investment companies" under the Investment Company Act of 1940.
 
Publicly traded grantor trusts, such as Merrill Lynch's HOLDRS securities, are sometimes considered to be ETFs, although they lack many of the characteristics of other ETFs. Investors in a grantor trust have a direct interest in the underlying basket of securities, which does not change except to reflect corporate actions such as stock splits and mergers. Funds of this type are not "investment companies" under the Investment Company Act of 1940.
 

Thursday, May 15, 2008

Teach Yourself to Avoid Favoritism

How do you teach executives to avoid encouraging sycophants and playing favorites?

Every company claims to discourage suck-ups. Every leader claims to despise suck-ups. If we all hate suck-ups so much, why does so much sucking-up go on?

Sucking-up happens because we all tend to create an environment where people learn to suck-up to us. We can easily see this in others. It is just hard to see in ourselves. You are probably thinking, “Marshall is making a good point. I see others do this all of the time. Of course, I find it to be disgusting!”

As a test of our unconscious tendency to encourage sycophants, I always ask participants in my executive education classes this question, “How many of you own a dog that you love?” Big smiles cross the faces of these leaders as they wave their hands in the air. They beam as they tell me the names of their always faithful hounds. Then we have a little contest. I ask them, “At home, who gets the most unqualified positive recognition? Is it (a) your husband, wife or partner (b) your kids or (c) your dog?" More than 80 percent of the time the winner is the dog.

I next ask these same executives, “Do you really love your dog more than the other members of your family?” They laugh and say no. My next question, “Why does the dog get the most unqualified positive recognition?”

Their replies are always the same: “The dog doesn’t talk back.” “When I come home the dog is always happy to see me!” “Even if I come home late (or drunk) the dog doesn’t care.” “The dog gives me unconditional love – no matter what I do!”

In other words, the dog is a suck-up.

If we aren’t careful, we can wind up treating people at work like dogs. We can unconsciously recognize people who recognize us.

The best way to stop this behavior is to recognize that we all have a tendency to fall into this trap – and the higher we move up in the organization, the bigger the trap gets.

I teach leaders to rank order their direct reports four ways:

1. How much do they like me? I know that you cannot be sure. What matters is what you think. Only bad suck-ups look like they are sucking-up. Great suck-ups appear to be your "true friends."

2. How much are they like me? Some leaders don’t favor people who like them; they favor people who remind them of themselves. A common variation from an engineer might be, “He may be a jerk, but he is an engineer.” As if people who are not engineers don’t have brains.

3. What is their contribution to our company and its customers?

4. How much positive personal recognition do I give them?
If we are honest with ourselves, in a surprisingly large number of cases, we may find that recognition is more influenced by 1 or‘2 than it is 3. And that (without meaning to) we may be falling into a trap that we despise in others – playing favorites.

Make this ranking yourself. After doing a thoughtful review, start monitoring your own behavior. Make sure that you are recognizing people at working for doing what is right for the company – not for making you feel good about yourself.

Monday, April 28, 2008

5 ways to unwind at the office

ll work and no play makes Jack a dull boy'. Now, nobody wants to be Jack, but invariably at some point during work you find that Jack's shoes fit just fine. It's almost as though the whole office is tuned into the same frequency.

The hum of the systems, clicking of the keys, shuffling of feet coupled with the idle banter can have you lost, waiting to stick your head out for a breath of fresh air.

Unwind, it's easy! You have the controls and the choice is yours to switch channels. The first step is to want to tune out. Once your mind is open to variables at work, possibilities start to pop out of the walls. And this does not include converting cubicles into a little feng shui showroom or involve chimes, bells and nodding dolls that every office already has.  

Headphone help
Music is the easiest way to tune out and headphones are as private as you can get. Tune into a personal space that is devoid of the office sounds. If your PC doesn't have a sound chip, speak to the IT department.

Speakers are like a concert in office with everyone on for the gig especially the lip syncers and sing-along-aloud-out-of-tune ones. So turn on the music and have your office tapping to a new groove.

Start with a seed
You can't take a pet to office unless you work at the zoo, leaving plants as the next best living thing to introduce to the office environment. Studies have shown that plants around the office help. But we won't go around watering every plant in the office and put the janitor out of a job.

Simple, plant a seed, watch it grow, this will give you time to take a break, water the plant and just maybe a conversation with the little tree may help.

Meeting meditation
The head honchos know it, Art of Living talks about it and yet we spend five minutes on wondering how to change the future rather than doing the now. Take five minutes out of office time, get to a quiet place -- the terrace, a balcony, the fire escape, the bylane -- wherever, but it should be quiet.

Now this won't give you nirvana but it sure as hell will help you recharge your batteries. Your mind can take you places, it's a magic carpet ride and if you haven't tried it, you should.

Busy with balls
If sitting in one place is your biggest problem, what you need is a ball. Stress balls, the ones with the smiley face are the best. Bounce them of walls, play an innings of cubicle cricket, toss a quick game of catch on the way to the board room or hit some dodge ball when you work late. If this doesn't get your mind racing, it surely will give you an adrenaline shot better than any office coffee.

The dream pillow
If all else fails, and you are really in need for your mind to shut down and reboot. Do just that. Take a nap.

Spend less time chatting at the water cooler and rest your mind and body. It helps. It increases your efficiency and you can be one of the privileged few who still dream while at work.

All you need to do is buy a comfortable little pillow. Keep it tucked away in a drawer and when you need to, instead of trying new and exaggerated methods to find some self-time while at the office, you can do what nature has us do no matter how much we avoid it. Try it, a 15-minute nap can and has changed how people work. Bear in mind, though, that this is not your chance to catch up on the hours of beauty sleep you missed out on thanks to the party last night. This is just to rest your eyes and freshen your mind for 10 to 15 minutes.

There are as many ways as there are workplaces. We can all find what helps us tune out. The best suggestion I can make -- have a talent, take that to work. If you draw, you can tune out on a white board. Musicians can leave a suitable musical instrument in the office for a quick tune and back to work. 

Maybe even a boxing bag, pool table, a pinball machine, the possibilities are infinite. It is up to you to take that time out and go play!

(www.rediff.com/getahead/2008/apr/21work.htm)

Tuesday, March 11, 2008

Want a work-from-home job?

With the continuing technological advancement of telecommunications, more people are exploring the option of telecommuting -- working from home or elsewhere without having to give attendance at the office.

The reasons for telecommuting or taking up a non-office based job could be numerous. Stay-at-home moms prefer it so they can look after their children, the unemployed make the most of such offers till they find a steady job, others with health concerns may be unable to work from the office and so on.

Here's a few ideas on how to make money while remaining within the confines of your own home. All you need is an Internet connection and a computer. Most of the jobs described here do not require you to be a computer whiz, either -- you just need to have working knowledge of the Internet and programmes like MS Office, Word etc.

~ Set up an online store

This is like owning a retail shop online. You can design your own online store and sell products -- anything from apparel to books, bouquets, accessories, electronics etc. Starting up such a business will not require much of an investment. You will, however, have to be careful about monetary transactions and dispatches, as payments are all made online. If you think, you can't handle the money and logistics part, a better way is to register with an Internet marketplace like eBay.

~ Translation

If you have a good command over two languages, translation could be a very interesting option. If you want to take up some assignments within India, knowing English, Hindi and one regional language is a winning bet. A lot of companies outsource their translation jobs. You can approach them and ask for a contract. Government offices also outsource such assignments; you can try for opportunities with them.

If you know a foreign language and English, it is again a very interesting combination. You can approach a lot of publishers wanting to republish their content in a foreign language. These can be the publishers of books, magazine, software etc. This career can offer you an earning potential of approximately Rs 600 per page!

~ Day-trading

Day-trading in the stock market is a good way of making money from home. All you need is an Internet connection and a demat account. You can make money by operating in the stock market. It is up to you to decide how aggressively you want to operate. While you start speculating, be careful how you are investing your money.

~ Authoring

If you have a good knowledge of any subject, you can get in touch with some publishers to find out if any of them wants to publish a book on the proposed subject. This will give you an opportunity to put your knowledge to good use and utilise your time in a better way while earning money. When you are approaching a publisher for the first time, make sure that you submit a well-drafted proposal, so that you can discuss it in detail. The earning potential in this field depends upon your subject.

~ Proof-reading

Again if you have a good command over a language, you can approach some publishers for a proof-reading job. Any written material, be it a book or online content, needs to be proof-read before actual publication. This presents a good opportunity to those who have a good command over language. You can earn anything from Rs 7000-10,000 to start with.

~ Blogging

If you know your subject well, you can start blogging it. Good content will attract a lot of traffic and hence advertising. You can gain monetary benefits through Google Adsense and other advertisements.

~ Moderating a forum

You can apply to work as a moderator for a forum. There are various forums on the Internet which need moderators. If the job interests you, it presents a good work-from-home opportunity. Usually a forum moderator is paid based on the revenue the forum generates. This should be able to earn you something around Rs 10,000-15,000 per month.

~ Graphic designing

This is a creative field which needs an interest in creativity and a knowledge of working on software. Anything starting from a visiting card to an advertisement needs graphic designing. So, if you have a flair for creativity and knowledge of creating graphics, this could be another interesting field. The earning potential in this field depends on the size of assignment. Designing an A4 size ad for a medium level company should be able to fetch you somewhere around Rs 3,000-Rs 5,000.

~ Typing

Every organisation needs documents to be typed. You can approach some organisations to see if some of them are ready to outsource it to you. Also, you can find some opportunities on Internet. The payments here are made on page basis. This job can get you anywhere from Rs 100-500 per page, depending upon the company and the language you need to type in.

~ Content writing

Many online and print magazines actually pay freelancers to write for them. If this interests you, this field offers some really worthwhile opportunities. You will see many websites advertising for content from freelancers. Approach them and see if there's an opportunity for you. The earning potential this job offers also varies with the company and subject. You can earn anything from Rs 500-4000 per article.

You may ask, how do I get a work-from-home opportunity? The best option is to explore if there's an opportunity with your current employer to work from home, or look up online vacancies. If that is not possible or you are not interested in doing it, you will have to graduate from the university of hard knocks and make your own way freelancing.

The personal qualities you will need to ensure that you are successful in your working from home assignment are:

~ Self-discipline
~ Commitment
~ Maturity
~ Productivity
~ Self-motivation

So, if you think you have the qualities that a home-based job needs, start working on your options now.

(http://in.rediff.com/getahead/2008/mar/11home.htm)

Wednesday, March 05, 2008

How the Sensex is calculated

For the premier Bombay Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called The Stock Exchange, Mumbai by paying a princely amount of Re 1.

Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market.

Sensex is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, Sensex is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies.

The base year of Sensex is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media.

The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. (See below: Explanation with an example)

Due to is wide acceptance amongst the Indian investors; Sensex is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the Sensex has over the years become one of the most prominent brands in the country.

The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The Sensex captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through Sensex.

Sensex Calculation Methodology

Sensex is calculated using the "Free-float Market Capitalization" methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.

The base period of Sensex is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the Free-float market capitalization of 30 companies in the Index by a number called the Index Divisor.

The Divisor is the only link to the original base period value of the Sensex. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate Sensex every 15 seconds and disseminated in real time.

Dollex-30

BSE also calculates a dollar-linked version of Sensex and historical values of this index are available since its inception.

Understanding Free-float Methodology

Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalisation of a company for the purpose of index calculation and assigning weight to stocks in Index. Free-float market capitalization is defined as that proportion of total shares issued by the company that are readily available for trading in the market.

It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a Free-float index is reduced to the extent of its readily available shares in the market.

In India, BSE pioneered the concept of Free-float by launching BSE TECk in July 2001 and Bankex in June 2003. While BSE TECk Index is a TMT benchmark, Bankex is positioned as a benchmark for the banking sector stocks. Sensex becomes the third index in India to be based on the globally accepted Free-float Methodology.


Example (provided by rediff.com reader Munish Oberoi):

Suppose the Index consists of only 2 stocks: Stock A and Stock B.

Suppose company A has 1,000 shares in total, of which 200 are held by the promoters, so that only 800 shares are available for trading to the general public. These 800 shares are the so-called 'free-floating' shares.

Similarly, company B has 2,000 shares in total, of which 1,000 are held by the promoters and the rest 1,000 are free-floating.

Now suppose the current market price of stock A is Rs 120. Thus, the 'total' market capitalisation of company A is Rs 120,000 (1,000 x 120), but its free-float market capitalisation is Rs 96,000 (800 x 120).

Similarly, suppose the current market price of stock B is Rs 200. The total market capitalisation of company B will thus be Rs 400,000 (2,000 x 200), but its free-float market cap is only Rs 200,000 (1,000 x 200).

So as of today the market capitalisation of the index (i.e. stocks A and B) is Rs 520,000 (Rs 120,000 + Rs 400,000); while the free-float market capitalisation of the index is Rs 296,000. (Rs 96,000 + Rs 200,000).

The year 1978-79 is considered the base year of the index with a value set to 100. What this means is that suppose at that time the market capitalisation of the stocks that comprised the index then was, say, 60,000 (remember at that time there may have been some other stocks in the index, not A and B, but that does not matter), then we assume that an index market cap of 60,000 is equal to an index-value of 100.

Thus the value of the index today is = 296,000 x 100/60,000 = 493.33

This is how the Sensex is calculated.

The factor 100/60000 is called index divisor.


The 30 Sensex stocks are:

ACC, Ambuja Cements, Bajaj Auto, BHEL, Bharti Airtel, Cipla, DLF, Grasim Industries, HDFC, HDFC Bank, Hindalco Industries, Hindustan Lever, ICICI Bank, Infosys, ITC, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog, NTPC, ONGC, Ranbaxy Laboratories, Reliance Communications, Reliance Energy, Reliance Industries, Satyam Computer Services, State Bank of India, Tata Consultancy Services, Tata Motors, Tata Steel, and Wipro.

(http://www.rediff.com/money/2008/feb/21bspec.htm)

Thursday, February 14, 2008

What Interview Questions Do You Ask ?

Here are some of the things I might ask in an interview. I admit, I'm not the best interviewer, I'm a developer. But, I am part of the hiring process for new developers (and should be). I know many other developers are placed in the same situation. I hope to share my experience and learn from others.

They aren't listed in any particular order and this is neither comprehensive or complete. I'm not worried about publishing it because if a fraction of the people I interview actually took the step of reading the first few pages of Google results for whatever they are interviewing for they'd be ahead anyway.

Most of these are pretty Java specific. We use other languages too but, the majority of dev is with Java right now.

My goal is not to torture a candidate with trivia questions. My goal is find find out if they can write code and how well they can fit in with the team.

I'm curious to see what kinds of things others are asking too.

I actually ask a lot more code questions but, the nature of work makes those proprietary :-(

Start With Something Simple

(A good article from J.D. Meier's Blog)

What's the best way to build momentum and get results?  Start with something simple.  Seriously.  I get to see folks who get results and those who don't.  The difference nine times out of ten isn't smarts.  It's simply action.  The smart folks who don't get results, either get stuck in analysis paralysis or add too many dependencies up front.  The folks who get results start taking action and adjust along the way.

Why This Works
Starting with something simple works.  It's not that thinking up front doesn't help.  It certainly does.  The problem is, three things can happen along the way:

  • At some point, your thoughts are based on way too many assumptions and you don't know what you don't know.  You then find out too little too late.
  • Somebody faster came along.  While you're thinking, they're doing.
  • In the absence of results, your idea slowly dies inside.

The best way to fuel your fire is to incrementally get results.  Start with something simple.  Results feed on themselves.  If you start with something small, you'll learn faster and you'll start to adapt.  You'll inform your thinking.

How To Start
Start with the smallest thing you can personally do.  If you don't know where to start, here's key questions to help:

  • What's the simplest thing you could do?
  • What could you do today?

Personally, I find asking what I can do today to be the most effective.  Time is a great forcing function.  It's very easy to cut scope using time.  If you don't respect time, then it's very easy to add way too many things that will never happen.

Fail Fast
While starting with something simple helps build momentum, you'll also want to quickly spike on your risks.  You can do this separately, after you have some success under your belt. 

To fail fast, cut your idea into thin end-to-end slices and test your results.  For example, take one story or usage scenario and try to instantiate it.  Even before you build the solution, simply doing a dry run will reveal a lot of questions you can use to shape your approach.

The purpose of failing fast isn't to fail.  It's to uncover your risks and pick better paths.

(Read more at... http://blogs.msdn.com/jmeier/archive/2008/02/10/start-with-something-simple.aspx)

Friday, February 08, 2008

10 myths about innovation

Myth 1 Creativity is innovation:
Creativity is glamourous. "But getting a new idea is just 1% of the job. The rest is execution,"says Govindarajan."Companies don't pay much attention to execution because they think that innovation equals creativity,"says he.There is another problem related to execution: "What they know how to execute is business-as-usual or the core business. Organizations don't lack great ideas, but they struggle in innovation because of over-focus."
That's why Wal-Mart outmanoeuvred Sears in the discount retailing format. Or in the more recent Tata Nano case, as soon as the car was unveiled,Ford made a half-a-billion dollar investment in their Indian operations to come up with a small car priced at $7,000 by 2014."They are still not getting it!" says Govindarajan. "Someone has already fired the first shot with a $2,500 car. They ought to be thinking of something better."

Myth 2 You need a great leader:
it's a commonly held notion that we need a hero who champions the idea and works against all odds. "Innovation doesn't require a great leader, it obviously requires an above average leader," says Govindarajan. As for the notion that s/he fights bureaucracy, "It breeds a very wrong view because to succeed, you don't have to fight bureaucracy—you have to learn to coexist with it, to tap into the resource base."

Myth 3 It equals s k u n k wo r k s :
Skunkworks is a notion that the innovation team works in the "basement". It follows none of the rules of the corporate office. "But innovation in big corporations is centred around ways they can leverage their enormous capabilities to work on complex problems which a start-up would never do," says he. While innovation projects do need some space of their own, they also need to be connected to the main organization so as to leverage its resources. This also forces a degree of accountability on them.

Myth 4 You need major organizational changes:
Remember IBM under Lou Gerstner? "As soon as he came, he changed everything," says Govindarajan. IBM, under him, became a metaphor for how to catalyse innovation. "But that doesn't mean innovation requires major changes. Innovation requires targeted changes," says Govindarajan. "Changes have to be made in that part of the organization where that innovation is being cultivated. By wholesale change you can destroy the business-as-usual machinery." Because business-as-usual is what keeps an organization going but innovation is what keeps its future profits secure.

Myth 5 Innovation equals chaos:
"To say innovation equals chaos is dangerous because that's only about the 1%. The 99%— or the commercialization part—requires extreme discipline," says Govindarajan.
But isn't Google like that? From outside, the organization has nothing but chaos. "In Google what you see as chaos is empowering people at lower levels to conduct experiments. But they always ask them what they learnt from these experiments and how one can incorporate the lessons," says he.

Myth 6 It's the senior executives' job:
"The job of the people at the top is to come up with the strategy while people at the bottom execute it. People in the middle make sure things happen. But the problem with this approach is that innovation becomes nothing more than responding to changes." The people closest to the action are the so-called doers. So Ford, for instance, has missed a huge opportunity because it didn't empower the people in India to drive the innovation for the people's car. "Their approach is that people in Detroit know what works best," says Govindarajan. "The CEO's job is not to get actively involved in innovation, but to manage the organizational context."

Myth 7 It implies customer-orientation:
In the 1970s Xerox was making a lot of money with their $2,000 copiers when a bunch of engineers ("the doers") thought of $1,000 personal copiers.
Xerox asked its customers if it wanted these. The problem with that is: who is the customer of Xerox at that point? It is a big company's central copying department. So the answer is obviously no. "That's the problem of the big three automobile companies in India. The customer who is driving a BMW will never tell you he wants a one lakh car."

Myth 8 Planning is irrelevant:
"There is an element of truth to this because if you are in a rapidly changing industry, when do you plan?" says Govindarajan. But planning is important. "One thing we know is that the future is going to be full of surprises. The worst thing you can do in an organization is to be surprised by a surprise. You need to create a capacity to respond to surprises. Build mechanisms that even if the future doesn't happen like I plan, I have some capacity to respond to it. It is a learning tool."

Myth 9 It requires new products and technologies:
Many of the innovations have nothing to do with new products. The Mumbai dabbawallahs, for instance, distributed the Reliance Energy IPO marketing material with the dabbas to 200,000 households and delivered the filled-up forms to the Reliance office. Says Govindarajan, "Even Apple's iPod, one of the most popular innovations in recent times, is nothing but a handheld hard drive."

Myth 10 There are generalisable tools that companies can use to drive innovation:
Innovation comes in different forms and requires a nuanced approached. "If you apply general principles, you can actually destroy it," says Govindarajan. So the tools to measure various indicators such as performance of, say, GE's Six Sigma which is a continuous performance improvement process vis-à-vis a Tata Nano will wary.

- Vijay Govindarajan (in Times)
(Govindarajan is the Earl C Daum 1924 Professor of International Business at Dartmouth College's Tuck School of Business and director of Tuck's Center for Global Leadership. He is one of the four Indians to appear on the Thinkers 50, a ranking of the Top 50 business and management thought leaders in the world)

Wednesday, January 30, 2008

7 signs that employees hate the boss

There's a reason Dilbert, The Office, and their ilk are so popular. Satire gets old fast, but the appeal of realism endures. And the real world, sadly, is full of lousy bosses. Someone ought to do a study on where these louts come from.

Were they abused by their own bosses? Did they toss overboard the ballast of human kindness to hasten the ascent of their career balloons? Or is this an example of absolute power corrupting absolutely? Such research might also demonstrate how ubiquitous miserable managers are.

The proliferation of boss-bashing screeds with titles like When You Work for a Bully, Nasty Bosses, and How To Work for an Idiot suggests a plague.

A few months ago I enumerated five ways in which bosses could be great. A bookend column about bad bosses would never fit in this space, because while goodness tends to be monochromatic, badness comes in every color of the rainbow.

But bad bosses of all stripes evoke similar responses in employees; consequently, you can often tell that people hate you, even if you're not sure why.Inc. readers, of course, are all purebreds among top dogs. But on the off chance that a misfit manager stumbles across this page, here are seven signs that you are a bad boss:

The staff has developed guidelines for dealing with you and quietly passes them to new employees. "Never suggest that there might be another way of doing something," they might say. Or "Act self-deprecating so he doesn't feel threatened."

You have one or two fanatical acolytes. Yes, such devotion may be a testament to your fabulousness. But often when a boss is perceived as universally loathed, the staff opportunist offers herself up as sole confidante and friend, seeking power and favor at the expense of more honest, critical employees.

You never see people walk by. Employees would rather circumnavigate the entire office to get to the coffee machine or bathroom than take the shortcut past your door and risk being invited in.

Your 360-degree evaluations come back short and full of generically positive comments, with one very mild criticism ("Sometimes she works too damn hard for her own good") thrown in for credibility's sake.

People don't volunteer for your pet projects. The idea sucks, and they're afraid to tell you, or it's brilliant, but the consequences for letting you down are too terrible to imagine. And, of course, if it's your pet project, you'll probably work on it as well. Which means more time spent...gulp...with you.

You have legions of former employees, but they rarely give your name as a reference for new jobs. Either they don't trust you to give them their due, or they worry that because they were so miserable working for you, your recollections will also be dismal.

You have legions of former employees, period. If your staff falls away like linty Post-it notes, ask yourself: Is high turnover the problem? Or am I?

(http://www.rediff.com/money/2008/jan/29boss.htm)

Wednesday, January 23, 2008

Invest in a gold fund, not jewellery

As we head into 2008, it is with even greater worries about global instability - both political and financial. Iran's potential nuclear arsenal, a near certain US recession, continued fallout from the sub-prime crisis, all point to one direction as far as your investment portfolio is concerned - load up on gold.
 
Touching new highs. Other than a small blip in the first quarter of next year, gold prices are expected to continue on their bullish path. Currently, gold is trading in the range of $785-795 per ounce.
 
T Gnanasekar, director, Commtrendz says: "Typically, when the dollar weakens, gold prices go up, and vice-versa. At the moment, the dollar is strengthening and is expected to strengthen further in the first quarter. This will result in falling prices of gold. So, gold prices could come down to $745, even $700 per ounce, in the first quarter of the year. Subsequently, however, our target price for gold in 2008 is $900 per ounce."
 
Gold prices hit a 28-year high of $845 on November 7, 2007, when the dollar fell to record lows against major currencies and oil prices rose to all-time record levels. But the metal has lost nearly 6 per cent of its value since then as the dollar rebounds, oil prices trend off record highs and players square positions at beginning of 2008.
 
Invest in a gold fund, not jewellery. Week to week trends notwithstanding, gold continues to remain a solid bet for the future. In fact, with more and more asset management companies offering gold exchange traded funds, a good way to invest in the yellow metal is in the form of paper, that is, through gold funds.
 
These funds can easily be bought and sold and there would be no problems in liquidating your gold investments. Also, as the underlying gold of your fund is in the form of bullion, there are no losses in terms of design and making charges.
 
Traditionally, especially in India, investments in gold are in the form of jewellery and you face a significant loss of value when you sell your gold as a lot of your purchase price goes towards design and making charges.
 
"People are buying gold anyway in India, and buying this in the form of a fund is a far wiser investment than buying jewellery," says Sanjiv Shah, executive director, Benchmark Mutual Fund. Asset allocation is critical, and given the correlation of returns from other assets, it is appropriate that an investor hedges by investing in gold, feels Shah. "Returns on the metal have been fantastic in the last five years.
 
Ideally, 5-10 per cent of your portfolio must be diversified and gold is a good option," he says. If you are buying gold purely as an investment, then the storage argument is a strong one to prefer a gold ETF over buying the metal in its physical form.
 
Bars and coins are also good options. The other popular way of investing in gold is by buying gold bars. Earlier, gold bars were only available in jewellery shops, but now they are available at banks.
 
Though private players such as ICICI Bank and HDFC Bank were the first to begin retailing gold, now even public sector giants have got on the gold bandwagon. State Bank of India recently started selling gold, and currently offers this facility in 100 of its branches. It will see a significant expansion in the next two years.
 
However, do remember that if you buy gold bars from banks, they can only be sold at jewellery shops. The Reserve Bank of India does not allow banks to buy gold back from its customers.
 
A little gold in your portfolio can go a long way in keeping your investments buoyant. And now, with multiple ways of buying our favourite metal, there's no stopping the shimmer and the shine this New Year.
 
(http://us.rediff.com/money/2008/jan/09gold.htm)

Monday, January 21, 2008

10-point checklist for planning your taxes

Following is a ten-point checklist  for  planning your taxes
1. The most important thing to do is start compiling a list of the TDS you have paid. TDS operates like tax already paid i.e. from your final tax liability you have to pay only such amount that is over and above the tax already deducted. It is important for all taxpayers to collect the TDS certificates after the end of the fiscal year. Though these don� have to be attached with the tax return anymore, they have to be filed and kept on record and produced before the ITO if called for.

2. If you have availed of housing finance, be sure to collect the certificate of your EMIs and the total interest paid from the housing finance company.

3. If you haven't bought Mediclaim, do so now. There is a deduction of Rs. 15,000 (Rs. 20,000 if you are a senior citizen) available under Sec. 80D.

4. It is time to make your Sec. 80C  investments to claim tax rebate. PPF offers 8% tax-free. Equity linked savings schemes are the flavour of the season. Have you considered these?

5. Sec. 88 used to be unavailable to those earning above Rs. 5 lakh. However, its not so with Sec. 80C. Everyone, regardless of income level, can take advantage of the Rs. 1 lakh tax break offered by 80C.

Sec. 80C doesn� impose sub-limits like Sec. 88 used to. For example, under 88, you could invest only up to Rs. 10,000 in ELSS. Or only Rs. 20,000 was available for housing finance. Now, 80C is extremely flexible, as the erstwhile sub-limits have been dispensed with.

The EET tax regime has yet not been notified. Therefore, all your  tax savings investments for FY 07-08 will be under the old EEE system. For next year, defer your tax saving investments till such time there is clarity on the issue. The Government is expected to come out with the new tax laws anytime next year.

6. If you have made a donation, you need to submit the receipt issued by the institute (receiving the donation) to get the benefit of the deduction under Sec. 80G. If you have not collected such a receipt, do so soon.

7. If you are a female assessee under the age of 65, do not forget to take into account the special tax exemption slab of Rs 1,45,000 while arriving at your tax. And if you are above the age of 65, remember to claim the special slab exemption of Rs. 1,95,000.

8. If you are a trader, remember, Sec. 88E allows you a set-off of the Securities Transaction Tax against your trading profits. Arrive at your taxes only after claiming this set-off.

9. Last but not the least; get in order all your supporting documents of the tax planning/saving instruments that you have invested in. For employees, this directly affects the amount of TDS on your salary. If you are late, you would end up bearing a higher amount of TDS than what ought to have been deducted.

10. The last date for payment of advance tax is March 15th. However, if your advance tax payable is less than Rs. 5,000, then you can pay such tax while filing the return. Also, if you earn any income after 15th of March, pay tax on it on or before 31st and such tax would also be treated as advance tax.

Monday, January 07, 2008

Interview Tips: How Would You Move Mount Fuji?

(by William Poundstone, Book Excerpt)

The Impossible Question

In August 1957 William Shockley was recruiting staff for his Palo Alto, California, start-up, Shockley Semiconductor Laboratory. Shockley had been part of the Bell Labs team that invented the transistor. He had quit his job and come west to start his own company, telling people his goal was to make a million dollars. Everyone thought he was crazy. Shockley knew he wasn't. Unlike a lot of the people at Bell Labs, he knew the transistor was going to be big.

Shockley had an idea about how to make transistors cheaply. He was going to fabricate them out of silicon. He had come to this valley, south of San Francisco, to start production. He felt like he was on the cusp of history, in the right place at the right time. All that he needed was the right people. Shockley was leaving nothing to chance.

Today's interview was Jim Gibbons. He was a young guy, early twenties. He already had a Stanford Ph.D. He had studied at Cambridge too - on a Fulbright scholarship he'd won. Gibbons was sitting in front of him right now, in Shockley's Quonset hut office. Shockley picked up his stopwatch.

There's a tennis tournament with one hundred twenty-seven players, Shockley began, in measured tones. You've got one hundred twenty-six people paired off in sixty-three matches, plus one unpaired player as a bye. In the next round, there are sixty-four players and thirty-two matches. How many matches, total, does it take to determine a winner?

Shockley started the stopwatch. The hand had not gone far when Gibbons replied: One hundred twenty-six.

How did you do that? Shockley wanted to know. Have you heard this before?

Gibbons explained simply that it takes one match to eliminate one player. One hundred twenty-six players have to be eliminated to leave one winner. Therefore, there have to be 126 matches.

Shockley almost threw a tantrum. That was how he would have solved the problem, he told Gibbons. Gibbons had the distinct impression that Shockley did not care for other people using "his" method.

Shockley posed the next puzzle and clicked the stop-watch again. This one was harder for Gibbons. He thought a long time without answering. He noticed that, with each passing second, the room's atmosphere grew less tense. Shockley, seething at the previous answer, now relaxed like a man sinking into a hot bath. Finally, Shockley clicked off the stopwatch and said that Gibbons had already taken twice the lab average time to answer the question. He reported this with charitable satisfaction. Gibbons was hired.

Find the Heavy Billiard Ball...

Fast-forward forty years in time - only a few miles in space from long-since-defunct Shockley Semiconductor - to a much-changed Silicon Valley. Transistors etched onto silicon chips were as big as Shockley imagined. Software was even bigger. Stanford was having a career fair, and one of the most popular companies in attendance was the Microsoft Corporation. With the 1990s dot-com boom and bull market in full swing, Microsoft was famous as a place where employees of no particular distinction could make $1 million before their thirtieth birthday. Grad student Gene McKenna signed up for an interview with Microsoft's recruiter.

Suppose you had eight billiard balls, the recruiter began. One of them is slightly heavier, but the only way to tell is by putting it on a scale against the others. What's the fewest number of times you'd have to use the scale to find the heavier ball?

McKenna began reasoning aloud. Everything he said was sensible, but somehow nothing seemed to impress the recruiter. With hinting and prodding, McKenna came up with a billiard-ball-weighing scheme that was marginally acceptable to the Microsoft guy. The answer was two.

"Now, imagine Microsoft wanted to get into the appliance business," the recruiter then said. "Suppose we wanted to run a microwave oven from the computer. What software would you write to do this?"

"Why would you want to do that?" asked McKenna. "I don't want to go to my refrigerator, get out some food, put it in the microwave, and then run to my computer to start it!" "Well, the microwave could still have buttons on it too."

"So why do I want to run it from my computer?" "Well maybe you could make it programmable? For example, you could call your computer from work and have it start cooking your turkey." "But wouldn't my turkey," asked McKenna, "or any other food, go bad sitting in the microwave while I'm at work? I could put a frozen turkey in, but then it would drip water everywhere."

"What other options could the microwave have?" the recruiter asked. Pause. "For example, you could use the computer to download and exchange recipes." "You can do that now. Why does Microsoft want to bother with connecting the computer to the microwave?" "Well let's not worry about that. Just assume that Microsoft has decided this. It's your job to think up uses for it." McKenna thought in silence.

"Now maybe the recipes could be very complex," the recruiter said. "Like, 'Cook food at seven hundred watts for two minutes, then at three hundred watts for two more minutes, but don't let the temperature get above three hundred degrees.'"

"Well there is probably a small niche of people who would really love that, but most people can't program their VCR."

The Microsoft recruiter extended his hand. "Well, it was nice to meet you, Gene. Good luck with your job search." "Yeah," said McKenna. "Thanks."

The Impossible Question

Logic puzzles, riddles, hypothetical questions, and trick questions have a long tradition in computer-industry interviews. This is an expression of the start-up mentality in which every employee is expected to be a highly logical and motivated innovator, working seventy-hour weeks if need be to ship a product. It reflects the belief that the high-technology industries are different from the old economy: less stable, less certain, faster changing. The high-technology employee must be able to question assumptions and see things from novel perspectives. Puzzles and riddles (so the argument goes) test that ability.

In recent years, the chasm between high technology and old economy has narrowed. The uncertainties of a wired, ever-shifting global marketplace are imposing a start-up mentality throughout the corporate and professional world. That world is now adopting the peculiar style of interviewing that was formerly associated with lean, hungry technology companies. Puzzle-laden job interviews have infiltrated the Fortune 500 and the rust belt; law firms, banks, consulting firms, and the insurance industry; airlines, media, advertising, and even the armed forces. Brainteaser interview questions are reported from Italy, Russia, and India. Like it or not, puzzles and riddles are a hot new trend in hiring.

Fast-forward to the present - anywhere, almost any line of business. It's your next job interview. Be prepared to answer questions like these:

How many piano tuners are there in the world? If the Star Trek transporter was for real, how would that affect the transportation industry? Why does a mirror reverse right and left instead of up and down? If you could remove any of the fifty U.S. states, which would it be? Why are beer cans tapered on the ends? How long would it take to move Mount Fuji?

In the human resources trade, some of these riddles are privately known as impossible questions. Interviewers ask these questions in the earnest belief that they help gauge the intelligence, resourcefulness, or "outside-the-box thinking" needed to survive in today's hypercompetitive business world. Job applicants answer these questions in the also-earnest belief that this is what it takes to get hired at the top companies these days. A lot of earnest believing is going on.

To an anthropologist studying the hiring rituals of the early twenty-first century, the strangest thing about these impossible questions would probably be this: No one knows the answer. I have spoken with interviewers who use these questions, and they have enthusiastically assured me not only that they don't know the "correct answer" but that it makes no difference that they don't know the answer. I even spent an amusing couple of hours on the Internet trying to pull up "official" figures on the number of piano tuners in the world. Conclusion: There are no official figures. Piano-tuner organizations with impressive websites do not know how many piano tuners there are in the world.

Every business day, people are hired, or not hired, based on how well they answer these questions.

The impossible question is one phase of a broader phenomenon. Hiring interviews are becoming more invasive, more exhaustive, more deceptive, and meaner. The formerly straightforward courtship ritual between employer and employee has become more one-sided, a meat rack in which job candidates' mental processes are poked, prodded, and mercilessly evaluated. More and more, candidates are expected to "prove themselves" in job interviews. They must solve puzzles, avoid getting faked out by trick questions, and perform under manufactured stress.

"Let's play a game of Russian roulette," begins one interview stunt that is going the rounds at Wall Street investment banks. "You are tied to your chair and can't get up. Here's a gun. Here's the barrel of the gun, six chambers, all empty. Now watch me as I put two bullets in the gun. See how I put them in two adjacent chambers? I close the barrel and spin it. I put the gun to your head and pull the trigger. Click. You're still alive. Lucky you! Now, before we discuss your résumé, I'm going to pull the trigger one more time. Which would you prefer, that I spin the barrel first, or that I just pull the trigger?"

The good news is that the gun is imaginary. It's an "air gun," and the interviewer makes the appropriate gestures of spinning the barrel and pulling the trigger. The bad news is that your career future is being decided by someone who plays with imaginary guns.

This question is a logic puzzle. It has a correct answer and the interviewer knows what it is. You had better supply the right answer if you want the job. In the context of a job interview, solving a puzzle like this is probably as much about stress management as deductive logic. The Russian roulette question exemplifies the mind-set of these interviews - that people who can solve puzzles under stress make better employees than those who can't.

The popularity of today's stress - and puzzle-intensive interviews is generally attributed to one of America's most successful and ambivalently regarded corporations, Microsoft. The software giant receives about twelve thousand r?sum?s each month. That is amazing when you consider that the company has about fifty thousand employees, and Microsoft's turnover rate has been pegged at about a third of the industry average. Microsoft has more cause to be selective than most companies. This is reflected in its interview procedure.

Without need of human intervention, each résumé received at Microsoft is scanned for keywords and logged into a database. Promising résumés lead to a screening interview, usually by phone. Those who pass muster get a "fly back," a trip to Microsoft's Redmond, Washington, headquarters for a full-day marathon of famously difficult interviews. "We look for original, creative thinkers," says a section of the Microsoft website that is directed to college-age applicants, "and our interview process is designed to find those people." Six recent hires are pictured (three are women, three are black). "Your interview could include a technical discussion of the projects you've worked on, an abstract design question, or general problem-solving puzzles or brainteasers. The types of questions you'll be asked vary depending on the position you're looking for, but all are meant to investigate your capabilities and potential to grow. It's important for us to find out what you can do, not just what you've done." Another company publication advises bluntly: "Get over your fear of trick questions. You will probably be asked one or two. They are not exactly fair, but they are usually asked to see how you handle a difficult situation."

Riddles and Sphinxes

"Not exactly fair"? It's little wonder that some compare this style of interviewing to fraternity hazing, brainwashing, or the third degree. As one job applicant put it, "You never know when they are going to bring out the guy in the chicken suit."

Another apt analogy is that familiar type of video game where you confront a series of odd and hostile characters in a series of confined spaces, solving riddles to get from one space to the next. Not many make it to the highest levels; for most, after three or four encounters, the game is over. As classicists point out, those video games update the ancient Greek legend of Oedipus and the sphinx. The sphinx devoured anyone who couldn't answer her riddle: "What is it that walks on four legs in the morning, two legs at noon, and three legs in the evening?"

Oedipus solved the riddle by answering "Man." A baby crawls on all fours, an adult walks on two legs, and the elderly use a cane as a third leg. It was, in other words, a trick question.

The sphinx tale puzzles people even today. Why didn't they just shoot it? is the reaction of most college students. The principal source for the story, Sophocles's Oedipus Rex, is a realistic and psychologically nuanced tragedy. There the man-eating she-monster is as out of place, one scholar noted, as Godzilla would be if he were to lumber into the New York of Coppola's Godfather trilogy. Still, something about this crazy story strikes a chord. We all undergo tests in life. Maybe we succeed where all others have failed - or maybe not; at least, it's a common fantasy. There is something familiar in the banality of the riddle too, and in the weirdness of its poser. They remind us that the tests of life are not always reasonable and not always fair.

Tales of people proving their mettle by solving riddles exist in cultures around the globe. The "ordeal by trick question" was possibly raised to the highest art by the monks of Japanese Zen. Zen riddles are the antithesis of the Western logic puzzle, though one might describe them as demanding an extreme sort of outside-the-box thinking. A student of Zen demonstrates worthiness by giving a sublimely illogical answer to an impossible question. Zen master Shuzan once held out his short staff and announced to a follower: "If you call this a short staff, you oppose its reality. If you do not call it a short staff, you ignore the fact. Now what do you wish to call this?" In traditional Zen teaching, the penalty for a poor answer was a hard whack on the head with a short staff.

So Microsoft's "not exactly fair" questions are not exactly new. The company has repackaged the old "ordeal by riddle" for our own time. With its use of puzzles in its hiring decisions, Microsoft plays to the more appealing side of the digital generation mythos - of maverick independence and suspicion of established hierarchies. Puzzles are egalitarian, Microsoft's people contend, in that it doesn't matter what school you attended, where you worked before, or how you dress. All that matters is your logic, imagination, and problem-solving ability.

For of course Microsoft is an egalitarian meritocracy. It is ruthless about hiring what it calls the "top ten percent of the top ten percent." Microsoft's interviews are carefully engineered to weed out the "merely" competent who don't have the Microsoft level of competitive drive and creative problem-solving ability. It is estimated that less than one in four of those flown up to Redmond for a day of interviews receive a job offer. Like most riddle-bearing sphinxes, Microsoft's human resources department leaves a high body count.

Blank Slate

Microsoft is a fraught place. It represents the best and worst of how corporate America lives today. The software company that Bill Gates and Paul Allen founded was one of the great success stories of the last quarter of the twentieth century. The Justice Department's 1998 antitrust suit against Microsoft has not entirely dimmed that reputation. Maybe the opposite: Microsoft is now bad, and as we all know, bad is sometimes good. People have misgivings about Microsoft, just like they do about pit bulls and the Israeli Army. People also figure that if Microsoft hires this way, well, it may push the ethical envelope, but it must work.

Microsoft's role in changing interview practice is that of a catalyst. This influence owes to a shift in hiring priorities across industries. With bad hires more costly than ever, employers have given the job interview an importance it was never meant to have.

There was a time when a corporate job interview was a conversation. The applicant discussed past achievements and future goals. The interviewer discussed how those goals might or might not fit in with the company's. If the applicant was "put on the spot," it was with one of the old reliable human resources chestnuts such as "describe your worst fault." At many companies, that type of low-pressure interview is on its way out. The reasons are many. References, once the bedrock of sound hiring practice, are nearing extinction in our litigious society.The prospect of a million-dollar lawsuit filed by an employee given a "bad reference" weighs heavily on employers. This is often dated to 1984, when a Texas court ruled that an insurance salesman had been defamed when his employer, insurance firm Frank B. Hall and Company, was asked for a reference and candidly rated the salesman "a zero." The court added a few zeros of its own to the damage award ($1.9 million).

Employment attorneys observe that awards of that size are rarer than the near hysteria prevailing in human resources departments might suggest. They also allow that - theoretically - the law protects truthful references. It is tough to argue against caution, though. "We tell our clients not to get involved in references of any kind," said Vincent J. Appraises, former chair of the American Bar Association's Labor and Employment Law Section. "Just confirm or deny whether the person has been employed for a particular period of time and that's it. End of discussion."

Equally problematic for today's hirers is the generically positive reference letter. Some companies are so terrified of lawsuits that they hand them out indiscriminately to any employee who asks. It's no skin off their nose if someone else hires away an inept employee.

With references less common and less useful, hirers must seek information elsewhere. The job interview is the most direct means of assessing a candidate. But the ground rules for interviews have changed in the past decades. It is illegal in the United States for an interviewer to ask an applicant's age, weight, religion, political view, ethnicity, marital status, sexual preference, or financial status. Nor can an interviewer legally inquire whether a job seeker has children, drinks, votes, does charity work, or (save in bona fide security-sensitive jobs) has committed a major crime. This rules out many of the questions that used to be asked routinely ("How would your family feel about moving up here to Seattle?") and also a good deal of break-the-ice small talk. Hiring has always been about establishing a comfort level. The employer wants to feel reasonably certain that the applicant will succeed as an employee. That usually means sizing up a person from a variety of perspectives. In many ways, today's job candidate is a blank slate. He or she is a new person, stripped of the past, free of social context, existing only in the present moment. That leaves many employers scared.

One popular website for M.B.A. recruiting offers a "Social Security Number Decoder for Recruiters." Based on the first three digits, it tells where a job candidate was living when the social security number was issued. "The point being..." you ask? Well, it's one way of telling whether someone is lying about his past - a way of spotting contradictions when employers can't pose direct questions.

The Two-Second Interview

There are other, more serious reasons to worry about the American way of hiring. In the past decade, the traditional job interview has taken hits from putatively scientific studies. An increasing literature asserts the fallibility of interviewers.

Two Harvard psychologists, Nalini Ambady and Robert Rosenthal, did a particularly devastating experiment. Ambady had originally wanted to study what makes teachers effective. She suspected that nonverbal cues - body language and such - were important. To test this, she used some videotapes that had been made of a group of Harvard teaching fellows. She planned to show silent video clips to a group of people and have them rate the teachers for effectiveness.

Ambady wanted to use one-minute clips of each teacher. Unfortunately, the tapes hadn't been shot with this end in mind. They showed the teachers interacting with students. That was a problem, because having students visible in the clips might unconsciously affect the raters' opinions of the teachers. Ambady went to her adviser and said it wasn't going to work.

Then Ambady looked at the tapes again and decided she could get ten-second clips of teachers in which no students were visible. She did the study with those ten-second clips. Based on just ten seconds, the raters judged the teachers on a fifteen-item list of qualities.

Okay, if you have to judge someone from a ten-second video clip, you can. You probably wouldn't expect such a judgment to be worth anything.

Ambady repeated the experiment with five-second clips of the same teachers. Another group of raters judged them. Their assessments were, allowing for statistical error, identical to the ratings of the people who saw the ten-second clips.

Ambady then had another group view two-second clips of the same teachers. Again, the ratings were essentially the same.

The shocker was this: Ambady compared the video- clip ratings to ratings made by the students of the same teachers after a semester of classes. The students knew the professors much better than anyone possibly could from a silent video clip. No matter - the students' ratings were in close agreement with those of the people who saw only the videos. Complete strangers' opinions of a teacher, based on a silent two-second video, were nearly the same as those of students who had sat through a semester of classes.

It looks like people make a snap judgment of a person within two seconds of meeting him or her - a judgment not based on anything the person says. Only rarely does anything that happens after the first two seconds cause the judger to revise that first impression significantly.

All right, but the raters in this study were volunteer college students. Who knows what criteria they used to rate the teachers? Who knows whether they took the exercise seriously?

A more recent experiment attempts to treat the hiring situation more directly. Another of Rosenthal's students, Frank Bernieri (now at the University of Toledo), collabrated with graduate-student Neha Gada-Jain on a study in which they trained two interviewers for six weeks in accepted employment interviewing techniques. Then the two people interviewed ninety-eight volunteers of various backgrounds. Each interview was fifteen to twenty minutes, and all the interviews were captured on tape. After the interview, the trained interviewers rated the subjects.

Another student, Tricia Prickett, then edited the interview tapes down to fifteen seconds. Each fifteen-second clip showed the applicant entering the room, shaking hands with the interviewer, and sitting down. There was nothing more substantial than that. You guessed it - when another group rated the applicants just on the handshake clip, their opinions correlated strongly with those of the two trained interviewers who had the full interview to work from.

This would be funny if it weren't tragic. These studies suggest that the standard job interview is a pretense in which both interviewer and interviewee are equally and mutually duped. The interviewer has made up her mind by the time the interviewee has settled into a chair. Maybe the decision is based on looks, body language, or the "cut of your jib." What's certain is that it's not based on anything happening inside the job candidate's head. The questions and answers that follow are a sham, a way of convincing both that some rational basis exists for a hiring decision. In reality, the decision has already been made, on grounds that could not possibly be more superficial.

Human resources experts categorize interview questions with terms such as "traditional" and "behavioral." Traditional questions include the old standards that almost any American job seeker knows by heart. Where do you see yourself in five years? What do you do on your day off? What's the last book you've read? What are you most proud of?

Traditional-question interviews walk a tightrope between concealment and disclosure. They often invite the candidate to say something "bad" about himself, just to see how far he'll go. These questions seem to be about honesty. Really, they're about diplomacy. What you're most proud of might be your comic-book collection. That's not necessarily what the interviewer wants to hear, and you probably know that. There are safer answers, such as "the feeling of accomplishment I get from doing something - it could be anything - really well." The trouble with the traditional interview is that both sides are wise to the game. Practically everyone gives the safe answers. The interviewers nod, not believing a word of it.

This has led to the rise of behavioral questions. These ask the candidate to describe a past experience bearing on character and job skills. An example (used at Microsoft) is "Describe an instance in your life when you were faced with a problem and tackled it successfully." Another is "Describe a time when you had to work under deadline and there wasn't enough time to complete the job." The rationale for asking behavioral questions is that it's harder to fabricate a story than a one-liner.

Unfortunately, traditional and behavioral interview questions do almost nothing to counter the two-second snap judgment. These are soft, fuzzy, and ambivalent questions. Rarely addressed is what you're supposed to make of the answers. It's mostly gut instincts.

Ask yourself this: "Is there any conceivable answer to a traditional interview question that would cause me to want to hire someone on that answer alone? Is there any possible answer that would cause me to not want to hire someone?" I guess you can imagine alarming answers that might betray the candid psychopath. But most of the time, job candidates give the cautious and second-guessed answers everyone expects. With half-empty or half-full logic, an interviewer can use any answer retroactively to justify the first impression. Rarely does an answer challenge that first impression. This probably makes some interviewers comfortable. It may not be the best way to hire. It is far from clear that traditional and behavioral questions are a good way of spending the always-too-limited time in a job interview.

Future Tense

Microsoft's interviewing practices are a product of the pressures of the high-technology marketplace. Software is about ideas, not assembly lines, and those ideas are always changing. A software company's greatest asset is a talented workforce. "The most important thing we do is hire great people," Microsoft CEO Steve Ballmer has stated more than once.

But how do you recognize great people? It is harder than ever to equate talent with a specific set of skills. Skills can become obsolete practically overnight. So can business plans. Microsoft is conscious that it has to be looking for people capable of inventing the Microsoft of five or ten years hence. Microsoft's hiring focuses on the future tense. More than most big companies, Microsoft accepts rather than resists the "job candidate as blank slate." Its stated goal is to hire for what people can do rather than what they've done.

Because programming remains a youthful profession, Microsoft hires many people out of college. There is no job experience to guide hiring decisions. Nor is Microsoft overly impressed by schools and degrees. "We fully know how bogus [graduate school] is," one senior manager is reported to have said. This attitude has changed somewhat - Harvard dropout Bill Gates now encourages potential employees to get their degrees -but Microsoft has never been a place to hire people because they went to the right schools.

Microsoft is also a chauvinistic place. The private suspicion in Redmond seems to be that Sun, Oracle, IBM, and all the other companies are full of big, lazy slobs who couldn't cut it at Microsoft. The only kind of "experience" that counts for much is experience at Microsoft. So even with job candidates who have experience, the emphasis is on the future tense. Microsoft does not have a time machine that lets its human resources people zip ten years into a subjunctive future to see how well a candidate will perform on the job. Predictions about future performance are perforce based largely on how well candidates answer interview questions.

"Microsoft really does believe that it can judge a person through four or five one-hour interviews," claims former Microsoft developer Adam David Barr. Barr likens the interview process to the National Football League's annual draft. Some teams base decisions on a college football record, and others go by individual workouts where the college players are tested more rigorously. At Microsoft, the "workout" - the interview - is the main factor in hiring all but the most senior people.

Why use logic puzzles, riddles, and impossible questions? The goal of Microsoft's interviews is to assess a general problem-solving ability rather than a specific competency. At Microsoft, and now at many other companies, it is believed that there are parallels between the reasoning used to solve puzzles and the thought processes involved in solving the real problems of innovation and a changing marketplace.

Both the solver of a puzzle and a technical innovator must be able to identify essential elements in a situation that is initially ill-defined. It is rarely clear what type of reasoning is required or what the precise limits of the problem are. The solver must nonetheless persist until it is possible to bring the analysis to a timely and successful conclusion.

What This Book Will Do

The book will do five things. It will first trace the long and surprising history of the puzzle interview. In so doing, it will touch on such topics as intelligence tests for employment, the origins of Silicon Valley, the personal obsessions of Bill Gates, and the culture of Wall Street.

The book will then pose the following question: Do puzzle interviews work as claimed? Hirers tout these interviews, and job candidates complain about them. I will try to supply a balanced discussion of pros and cons - something that is often missing from the office watercooler debates. The book will present a large sample of the actual questions being used at Microsoft and elsewhere. Provided your career is not on the line, you may find these puzzles and riddles to be a lot of fun. Many readers will enjoy matching their wits against those of the bright folks in Redmond. For readers who'd like to play along, there's a list of Microsoft puzzles, riddles, and trick questions in chapter four (most of which are in widespread use at other companies as well). A separate list of some of the hardest interview puzzles being asked at other companies is in chapter seven. I will elaborate in the main narrative on some of these questions and the techniques used to answer them but will refrain from giving answers until the very end of the book.

The final two chapters are addressed in turn to the job candidate and the hirer. There is a genre of logic puzzle in which logical and ruthless adversaries attempt to outsmart each other. This is a good model of the puzzle interview. Chapter eight is written from the perspective of a job candidate confronted with puzzles in an interview. It presents a short and easily remembered list of tips for improving performance. Chapter nine is written from the opposite perspective -that of an interviewer confronted with a candidate who may be wise to the "tricks." It presents a list of tips for getting a fair assessment nonetheless.

If this appears a paradox, it is only because these interviews have been touted as being difficult or impossible to "prepare" for. Most logic puzzles exploit a relatively small set of mental "tricks." Knowing these tricks, and knowing the unspoken expectations governing these interviews, can help a candidate do his or her best.

The hirer, in turn, needs to recognize the possibility of preparation and structure the interview accordingly. The merits of puzzle interviews are too often defeated by the hazing-stunt atmosphere in which they are conducted and by use of trick questions whose solutions are easily remembered.

HOW WOULD YOU MOVE MOUNT FUJI? gives a proposal for how innovative companies ought to interview and explains how this type of interview can be improved by refocusing on its original goal of providing information that the hirer can use.

Copyright © 2003 by William Poundstone