Suddenly Unemployed? What to do if you’re a victim of the current financial crisis.

(This blog post has been excerpted from a previous article by Dr. Strom in the Graziadio Business Report)

Wayne Strom, PhD

The global financial crisis is having echo effects across many business sectors. Having coached executives who had been fired or laid off, I would like to share some of the lessons I learned that are particularly relevant today.

If you were a manager or executive, the probability is that the ideal future job for you will never be advertised anywhere. Rather, executives are quietly looking for someone with the right skill sets. You, as a job seeker, must create the right circumstances through enough executive informational interviews to bring yourself to their attention. The executive informational interview is not an interview for a job. It is an interview for the purpose of learning more about an industry or more about a specific company. The primary objective of the executive informational interview is to establish personal chemistry-not to sell yourself. If there is any secret here, it is in knowing enough to allow “personal chemistry” to work to your advantage.

With that in mind, the following suggestions will help you cope with this challenging period. 

What To Do

(click here for what NOT to do)

1. Be honest with yourself. If you made some mistakes, learn from them!
In interviewing executives who made firing decisions, they revealed the critical mistake leading to an employee’s termination is usually made two to four months before termination. Usually, that means the employee did not acknowledge his mistake nor take the steps to resolve it. Another example would be when the employee adopts an attitude of smugness or arrogance and is closed off to feedback or suggestions offered by others.

Could this apply to you? If so, do your best to learn from that experience.

2. Be honest with your family.

Don’t pretend that you are going to work if that is not true.

3. Do a complete cash flow analysis of your finances.
Determine the minimum amount of cash per month you will need to get by. What are all of the possible sources of cash? What are all of the unavoidable expenditures? Work with your family to set a frugal budget and to stay within it. Contact your state’s Department of Employment Development either on-line or by phone and sign-up for your benefits. You are entitled to them. Consider this experience to be part of your post-graduate education!

4. Determine how many months you can be unemployed.
This is an important number and it is based on your calculations from number three above. If you know that you have enough resources for six months you will feel less pressure to take the first job that comes along, which can be a mistake. On occasion, people who took the first job found themselves fired within a few months because it was not a good fit.

5. Contact your creditors.
Most lending agencies handling home and car loans would rather help you reduce your payments, maybe to interest only, than to go through the trouble and expense of a repossession. If you have credit cards, go to a not-for-profit consumer counseling service and have them help you to combine and reduce payments. Cut up your credit cards!

6. Dress up your resume.
People are rarely hired on the basis of the resume. The resume is a door-opener, that’s all. Use the interview to tell your story. Use the resume to get the interview. Use white space to make the paper visually attractive and easier to read. However tempting, do not overload a resume with information that may not be necessary and that can be stated in an interview. Creative use of “white space” can draw attention to key aspects of your experience.

7. Create a list of 100 names of people who might be helpful.
Criteria for being on the list must include having met the person and he or she being in a position to introduce you to someone high up in a corporation, or to get inside information for you. Don’t forget business school professors or classmates.

Cold call every single person on your list to set up a meeting, preferably in person. Hand deliver resumes if at all possible over mailing them. Your list is your primary source of contacts. If you are not working the list at least seven hours a day, you are not being proactive in your job search. In a major metropolitan area, you should attempt two interviews a day.

8. Ask your friends to critique your resume.
In general it is a mistake to inform your friends that you have lost your job and then ask if they know of any openings. Such an approach usually puts the other person into a defensive posture. A better approach is to ask if he or she would spend a few minutes critiquing your resume. Offer to buy them coffee and make it a short meeting. Then you can ask if they know people you might contact for an executive informational interview.

Remember that the direct approach of pressing for a job forces your listener into a yes/no position. When that happens, the conversation is quickly over. Your objective is to warm them up, gently build rapport, and gain their professional confidence so they feel comfortable introducing you to others.

9. Prepare, prepare, prepare!

People who prepare well and who request executive informational interviews generally have more doors open to them.

10. Establish personal chemistry:

• Do advance research and know enough about the company and its products to ask intelligent questions.
• Establish rapport. The best guide in my opinion to establishing rapport is Genie Laborde’s book, Influencing with Integrity.
• Be fully present during the interview. Don’t permit your mind, or your eyes to wander.
• Practice your best listening. Don’t be thinking of your next comment or question while the person you are interviewing is speaking. Stay relaxed and physically open.
• Allow the “personal chemistry” to work between you and every person with whom you talk. You do not need to push or demand or grab at opportunities. You do need to be calmly confident on the inside and to allow grace to flow through you.
• If you hint that you need a job today, the hiring executive will sense your desperation and the door of opportunity will quickly close. If you make no such hints, but are consistent in gathering information about the industry, where it is going, etc., then the executive informational interview will open doors to a wide range of face-to-face interviews. This is a powerful networking tool. It will lead to opportunities of which you may not be aware.

11. Be enthusiastic!
Think through and rehearse your story about past work experience so that you can be succinct, correct, and positive. Talk about the things that interest and excite you. In doing so, your energy will rise and you will raise the energy of your listener. Enthusiasm is contagious! Enter every conversation with a positive “can-do” attitude. Be on your best behavior in terms of simple courtesy. (I have seen highly qualified people dropped from a candidate list because they were too pushy or forgot to say “please” or “thank you.”)

12. Tell the truth.
If you get asked why you are looking for work, tell the truth. If you were fired, as opposed to laid-off or downsized, emphasize what you learned from that experience so that you will not make those mistakes again. Executives are impressed by those who have the integrity to take responsibility for their mistakes and have learned from them. If you lie during the interview process and the truth comes out later, you could find yourself fired again. Depending on the cause, being fired once is not necessarily the end of a career-a pattern of being fired may be.

13. Demonstrate your ability.
Look for opportunities to grow, to take responsibility, and deliver results. Executives are looking for associates who are intelligent, calmly energetic, physically, mentally, and emotionally healthy. They are curious about experiences you have already had that show your competencies.

What NOT To Do

1. Don’t make yourself into a victim by leaning on alcohol or other drugs to avoid the reality of the situation.

2. Don’t decide to take a vacation using some of your savings.
Save the vacation as a reward for when you do find another job. If you take a vacation immediately after losing a job, you will not really rest, and you will miss the energy spike that usually follows job loss by a couple of weeks.

3. Don’t waste your energy complaining.
Your friends don’t want to be weighed down by your negativity and it may turn them off of finding you potential job leads.

4. Don’t rely solely on responding to advertisements with letters and resumes.
You are free to write letters and send resumes, but the truth is that unless you have some personal contact with the individual receiving the letter; it is unlikely that it will be read by the decision maker. Historically, a typical ad in The Wall Street Journal or Los Angeles Times seeking managers or professionals will have 300 or more responses. If an advertisement for an open position appeals to you, think about whom you know that might know someone in that company. Can you get a personal introduction? Even a telephone introduction will help. If you work with your list, you will eventually meet someone looking for a person with your competencies and experience. The most likely way to meet that potential employer is to be introduced. MAKE THE CALLS!

5. Don’t bad-mouth or be negative about prior employers.
If you are feeling bitter or betrayed, ventilate and resolve that with a skilled counselor before going on a job interview. Most trained interviewers will “smell” the hostility in your non-verbal responses and eliminate you from the prospect list.

Wayne L. Strom, PhD, is a professor of behavioral science at the Graziadio School of Business and Management.

Suddenly Unemployed? by Wayne L Strom, PhD

The Human Realities of Corporate Downsizing by Wayne L. Strom, PhD

Downsizing with Dignity by Ann Feyerherm, PhD

The Strategic Downside of Downsizing by Seymour Siegel, PhD

Defamation Vs. Negligent Referral by Linnea B. McCord, JD, MBA

Life is (still) Good

Kurt Motamedi, PhD

Once more in my lifetime we are going through an upheaval. This time it is the financial markets and economic condition. There is a great deal of pain and many of our students and communities are fearful and suffering. I would like to share with you an experience of the past and request your reply. 

In the early 90s when the market was down and the world was facing another real estate crisis, many of my students had lost their jobs and people all around were economically struggling. It was a time of Charles Keating’s excesses and REOs. In one late night class, the spirits were down and many of my students uncertain about their futures felt hopelessly down.

I asked the students to respond to a hypothetical situation. I asked them to assume that they were rich and well-to-do, but had lost their respective right arms in a recent car accident. Luckily, new technology and medical science would enable the replacement of the arm through cloning. The new arm would be perfect and as good as the old and with absolutely no shortcomings. It would be identical to the lost arm.

Like many new technologies, the new arm was pricey. I asked each student what percentage of their individual wealth and savings they would spend to get the new arm. The class was at first silent. When the discussion began, all were willing to give up all or a very significant of portion of their wealth to have the new arm.

I asked how much they would give if it were their leg, heart, eyes, mind, etc.

We followed with a discussion of what if we did not have our child, spouse, friend, this great country… or our faith and hope? What would we give of our material wealth to have them back? 

As heartless as this exercise was, it shed light on how rich and wealthy we really are. If we expand our vision and strategic thinking, we realize how lucky and blessed we are to have all our loved ones, our health, and this day to live, to enjoy and to serve.

Yesterday, the Dow fell more than 7 percent; it broke the 9,000 level and closed at around 8,700. As I write you this email it is down another 400-plus points.

The sun rose today and will rise again tomorrow. And, this will be behind us through hard work and sober acts. 

Let’s focus on our life gifts and blessings and true wealth. Let’s reflect in this season of awe and be thankful for all that we have. We will overcome this setback as we have overcome greater challenges… challenges that proved to be opportunities in retrospect. 

Freely you received, freely you give…

Kurt Motamedi, PhD, is a professor of Strategy and Leadership at the Graziadio School of Business and Management of Pepperdine University.

Related in the GBR

Gratitude at Work by Charles Kerns, PhD

Graziadio Faculty Discuss Ethics by Linnea McCord, JD, MBA, Mark Mallinger, PhD, Kurt Motamedi, PhD, Steven M. Sommer, PhD, and Ray Valadez, EdD

Seven Neurotic Styles of Management by Kurt Motamedi, PhD

Questions on the Financial Meltdown Answered (1)

Joetta Forsyth, PhD

Listeners from across the country submitted questions to Graziadio School faculty during the conference call on America’s Financial Crisis this Tuesday.

With over 200 participants on the call, there were too many questions for the panel to answer in the short time.

Below are responses from panelist, Dr. Joetta Forsyth, Assistant Professor of Finance, to just some of these questions. (Read why she believed a bailout was necessary)

Now that Congress has passed the bailout plan, we are working on answering more of these questions and posting the responses shortly.

1. The Bush Tax Cuts mixed with a boom economy and lack of fiscal leadership led to the largest deficit of our time and the current economic condition.  What would you do as the incoming President to improve our situation?

I have a different interpretation of what happened. There are a number of factors that lead to this crisis, and the list is staggering:

1. Congress refusing to strictly regulate Fannie and Freddie:
   • Because of lobbying and dollars to congressmen.
   • Because of the desire to encourage home ownership by the poor, with doubtful results.
2. A flood of money into the U.S. from the Fed after 9/11 and from foreign investors including China, who kept the yuan low to sell us goods.
3. Lax oversight of banks by the Fed, the Bush Administration, and other regulators.
4. A confusing tangle of regulators at the federal and state level who oversaw banks and mortgage brokers.
5. Lax oversight of investment banks and brokerages by the SEC.
6. Fraud and predatory lending to consumers.
7. A lack of responsibility at the individual level.
8. New Mark-to-Market accounting rules. Note: This may have been a good thing, because it caused the crisis sooner rather than later, after even more bad mortgages were underwritten.
9. Supposedly savvy financial market participants who didn’t understand collateralized securities. What they didn’t understand was that once banks sold securities off, they no longer had the incentive to be diligent about a borrower’s credit quality.
10. Executives who knew what was going on, but let it continue while reaping enormous compensation.
11. The failure to regulate the credit default swaps market.
12. High debt levels at financial institutions, and an aggressive attitude towards risk taking.

2. Stabilization is great, but is there a long term fix? Dynamic capitalistic markets are never without upheavals, but the goal is to create as stable an environment as possible for them to operate in.

The hard part is to get the amount of regulation right, and to write smart regulations. With too little regulation markets get out of control, with too much, we squelch innovation and lose to overseas competitors.

3. Has the problem accelerated this week due to the end of quarter?

Possibly, since banks want their quarterly books to look as good as possible.

4. Please discuss the pros and cons of buying the bad debt versus insuring the bad debt.

The pro to insuring the debt is that we leave the banks, who presumably would be superior to the government, to deal with problem mortgages.

There are several cons. First of all, there would still be fear about the bank’s books since these mortgages are hard to value, which would leave uncertainty in the market. Second, when banks sold mortgages to be collateralized, they sometimes had to agree not to alter the terms of the mortgage. Therefore, bank’s hands are tied when a borrower asks for relief. If the government takes control of the CDOs they could issue a blanket repeal of these provisions, for the CDOs that they own.

A final consideration is that because the mortgages were securitized and sold off, if can be hard to tell who has a claim on what. It is not clear who would be best at trying to untangle the mess, although having all the bad debt centralized in one place (with the government) might help.

5. Isn’t a bailout  tantamount to privatizing profits and socializing losses?  Aren’t these risks that Wall Street and main street chose to take hoping for a return on their investment?  Aren’t losses a part of capitalism?

I agree with you about “moral hazard”. And I think the idea of government getting involved in running businesses is a terrible one. I would hope that the government sells off it’s ownership as quickly as possible.

6. Is there a number at which the Treasury can buy this debt and profit to the tune of paying off the national debt?

This can’t happen. It’s not possible to profit that much.

7. From our understanding, the sub-prime default is approximately 12% of all residential mortgages. How does this equate to the need of a 700 billion bailout?

If an investment bank has 20/1 debt to equity, it doesn’t take much of a loss on assets to make them insolvent. Even commercial banks have relatively high debt levels.

Why I’m Against the Bailout

John Paglia, PhD

The recently approved bailout is yet another attempt to prop up the markets with an election around that corner that will only delay and worsen the inevitable pain ahead…

There is definitely a lack of trust and confidence in the markets, but it is due to the blatant lies and unethical representations. How many times have we heard an NAR (National Association of Realtors) economist call the bottom in housing? How many times have we heard the reporters on CNBC call a bottom in the equity markets? How many times have we heard phrases like “subprime is contained,” “we’re comfortable with our capital position,” “we have adequate liquidity,” and “the economy is fundamentally sound?”

The benefits of this package are being oversold to Main Street. And many don’t realize that a large part of this funding will be channeled to foreign banks through our domestic institutions. Furthermore, distribution of funds will not be exclusively through reverse auction; therefore preferential distribution—both in funds provided and responsibilities assigned to select agents—is a negative consequence. It is a disaster in the making and we will be left with a really bad hangover in a few months once we realize what happened.

During the early phases of this crisis, capital providers were buying these representations and investing billions of dollars of fresh capital in troubled financial institutions only to find out that portfolio values were not as represented. After sustaining large losses and with the inability to adequately assess risk due to lack of transparency and misrepresentation, capital providers, for the most part, have decided to sit on the sidelines with trillions in capital.

What we really needed was a market solution. I would rather have seen these institutions be forced to mark their portfolios (and their level 3 assets and off-balance sheet assets) to fair value and then raise private capital to fund any solvency gaps. Only when this happens can we truly assess the risks and raise the appropriate capital. Adding capital to these financial institutions may shore up solvency, but we’re still in a recession and lending always tightens when that is the case.

Unfortunately, we are headed for a nasty recession and the bailout will not stem the tides. In my opinion, it’s about time. Economic recessions are the natural cleansing process of an economic cycle and come as a result of excesses that have been built in periods prior. The longer we delay, the worse it will be.

John K. Paglia, PhD, MBA, is an Associate Professor of Finance of the Graziadio School of Business and Management of Pepperdine University.

Related in the GBR

Doing Business in a Volatile World: Graziadio School faculty reflect on ways in which business perspectives have changed since September 11

Using Asset Allocation Strategies to Recover from a Bear Hug by John K. Paglia, PhD, FRM, CFM and Ivan C. Roten, PhD

Has the Dow Really Escaped the Bear? by John K. Paglia, PhD,

Listen: Pepperdine Faculty Answer Questions on America’s Financial Crisis

America’s Financial Crisis (Audio)

On Tuesday, September 30, 2008, members of the Graziadio School community came together from New York to Los Angeles on a conference call to hear about America’s financial crisis from a distinguished panel of professors.

During the 45 minute conversation, moderated by the Graziadio School’s Associate Dean of Executive Education Dr. Ron Ford, listeners from across the country submitted questions to the panel that ranged from explaining the sophisticated complexities behind credit-default swaps (CDS) to understanding the practical reasons that led to the crunch in financial markets. The panel discussed the factors that led to the crisis and offered an outlook for the financial sector and the overall economy.

Listen to the discussion

Panelists:

David M. Smith, PhD
Associate Dean of Academic Affairs and Associate Professor of Economics

Joetta Forsyth, PhD
Assistant Professor of Finance (Read why Dr. Forsyth thinks a flawed bailout is better than none at all)

Ed Fredericks
Practitioner Faculty of Finance and Portfolio Manager at East Wind Asset Management

Moderator:

Ronald D. Ford, PhD
Associate Dean of Executive Education and Practitioner Faculty of Finance

Excerpts:

“The most constructive thing to do is to understand this situation and try to determine how we can move ourselves forward.” ~ Ed Fredericks

“The extent to which we can’t address important issues sooner, rather than later, will be correlated with the performance of the world-wide economy over the coming months.”  ~ Dave Smith, PhD

“If we fail to pass a comprehensive bill of some kind, we could potentially be headed for a financial collapse.” ~ Joetta Forsyth, PhD

America’s Financial Crisis

Joetta Forsyth, PhD

The United States is facing the greatest financial crisis since the Great Depression. Financial institutions are failing, as is confidence in the financial system.

U.S. Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson have testified that Congress must act immediately to bail out troubled financial institutions, or we could face a financial collapse. There is much furor over the proposed $700 billion bailout, which didn’t get the required number of votes today to pass the House. Why, taxpayers ask, should people who were responsible and didn’t buy a house that they couldn’t afford, pay to bail out people who did, along with Wall Street fat cats? Exacerbating the problem is the fact the some of the people who are viewed as contributing to the crisis are now asking Americans to trust them to solve the crisis, using what could be an enormous amount of taxpayer dollars.

I share the same fury. And there is plenty of blame to go around. However, I would like to focus on the immediate problem. We are being told that something has to be done immediately, or we might have a financial collapse.

The key questions are:

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11 comments See also in America's Financial Crisis, Economics, Finance, In the News, Public Policy

The R-Word and the Future of the Economy

This is a guest post by Sean D. Jasso, PhD, practitioner faculty of economics.

The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.

~ Peter F. Drucker

The big question on the minds of most people is: What is the future of the economy?

The answer is not always found in the news—today’s journalism is often polarized, biased, or not focused on reporting the story, but rather on enhancing a perspective of the story for the benefit of a targeted audience. For example, for several months economists, journalists, and politicians alike have hesitated on how to characterize the state of the economy.

These so-called experts are afraid of saying the r-word, most often associated with recession, or, correctly defined, a contracting economy. Any astute observer can see that the economy is contracting in certain industries while also growing in many others. This ebb and flow is nothing new and since World War II, to use as a benchmark for the modern economy, every decade has experienced the natural phenomenon of growth and decline.

This article’s central objective is to elaborate on the issue of the apparent economic slowdown while providing insight on how history and theory help minimize the confusion. The answer to the big question is not simply recession, but rather, another r-word—resilience. More

Why Did Subprime Loans Become Such a Big Deal?

This is a guest post by Abraham Park, PhD, practitioner faculty of finance.

Intelligent people, including my wife, have been asking me questions about the subprime mortgage crisis. The point that seems to stump them is why a relatively small percentage of subprime mortgage defaults has led to a spiraling national credit crisis, how it happened, and where do we go from here. They were good questions, and if you are wondering the same thing, read on…

So what’s the deal with the subprime mortgage meltdown?

Well, imagine that the markets involved are analogous to a house with three stories. Each of the floors represent an industry related to the housing market and each of the upper stories are dependent on the one right below it.

The first floor represents the primary mortgage market (homeowners and their banks or mortgage lenders)

The second level represents the secondary mortgage market (where government-enabled agencies and private lenders by bundled bank mortgages)

The third represents the credit derivatives market (where securities created in the secondary mortgage market are pooled again with other debts and with various risk preferences)

The primary mortgage market is huge, but the second and third levels are just as huge. It makes for a pretty big meltdown when it all starts to unravel.

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Dream to Nightmare: Who Should Pay for the Housing Disaster?

This is a guest post by Peggy Crawford, PhD, Professor of Finance, and Terry Young, PhD, Professor of Economics

The housing saga continues. The hope of “owning a piece of the American dream” is becoming a nightmare for some home buyers. While optimists argue that the “worst” is over as they cling to any sign of positive news, such as the slight upturn in sales of existing homes in February, others call for the government to come to our rescue and save homeowners by declaring a moratorium on foreclosures or “encouraging” financial institutions to renegotiate loan terms. Meanwhile, the Federal Reserve continues to cut interest rates (sometimes dramatically) hoping to ease the pain for some as interest rates reset on their mortgages and to spur activity in the sagging economy.

Have housing prices stopped plummeting? The experts disagree, but Business Week states that home prices could decline by another 25 percent over the next 2 or 3 years, returning the values to their 2000 levels in inflation-adjusted terms.

What can we expect? Like any market, the housing market is based on economic fundamentals of demand and supply. In general, housing prices are inversely related to interest rates. Now, both interest rates and housing prices are falling at the same time.

So, why aren’t sales increasing? Things have changed.

First, lenders are scrutinizing borrowers more carefully. No/low down payments are disappearing and no documented income is a thing of the past—at least for the time being. And second, potential buyers hear the news and are waiting for prices to fall further. On the other hand, some potential sellers are still in denial that the value of their property is decreasing not increasing.

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Our Ethics Mess

This is a guest post by Linnea B. McCord, JD, MBA, Associate Professor of Business Law

We are only just beginning to comprehend how bad an ethics mess we’re in—but it’s likely to be a real doozy.

Failing CEOs walk away with more than $100 million and Wall Street investment bankers pay themselves many billions of dollars in bonuses even as investors’ returns plummet. State and federal politicians with little or no money when they enter public life are worth tens of millions of dollars just a few short years after leaving office. All of this is against the backdrop of the worst housing downturn since the Great Depression, a massive credit crunch that threatens to wreak havoc on our financial system, mounting layoffs, the possibility of millions losing their homes, rapidly declining state budgets, crushing personal, corporate and federal debt and jihadist Islamic groups that wish to destroy us.

While our first inclination may be to blame “them” for all of our current ethics fiascoes—and there are plenty of “thems” to choose from these days—as a free nation and a free people, we bear the ultimate responsibility for allowing ourselves to get into this ethics mess.

How did we do this you might ask?

The answer is simple—by allowing ourselves to become so ethically confused over the past forty years.

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