Play Ball

Por MIN ZENG

Pacific Investment Management Co., el fondo de bonos más grande del mundo, redujo sus tenencias de deuda soberana española e italiana, en medio de un fuerte repunte en ambos mercados este mes.

La firma de gestión de dinero ha estado vendiendo deuda europea en las últimas dos semanas como parte de reducción generalizada en la exposición a activos de riesgo en los mercados de renta fija, dijo Andrew Balls, titular de gestión de cartera europea de Pimco, en una entrevista concedida el miércoles a The Wall Street Journal.

Balls declinó especificar el monto en dólares que Pimco ha vendido en bonos españoles e italianos. Pimco gestiona más de US$2 billones en activos globales.

El ejecutivo dijo que el repunte en los precios de la deuda italiana y española —que hace poco arrastró el rendimiento de la deuda a 10 años a su nivel más bajo desde 2010—, fue impulsada por la inyección de liquidez de los principales bancos centrales, que por el momento ha eclipsado los problemas fiscales y económicos de la eurozona.

“Este repunte, inspirado por los bancos centrales, ha encarecido los mercados”, dijo Balls. “Los rendimientos podrían caer aún más en España e Italia, pero hemos vendido porque todavía nos preocupan los fundamentos en la eurozona”.

Balls agregó que, tras su reciente venta, las posiciones de Pimco en deuda española e italiana, en algunas carteras, van ahora “desde ‘neutra’ a algo por ‘debajo de ponderación del mercado’”, mientras que la exposición a otras carteras sigue siendo “desde ‘neutra’ a algo ‘sobre ponderación del mercado’”.

Pimco tomará importantes decisiones sobre su cartera general en su reunión anual, programada para el mes entrante, indicó Balls.

Agregó que los rendimientos en España e Italia deben subir en forma significativa antes que evaluar nuevas compras. Pimco tampoco tiene bonos soberanos de Grecia, Portugal e Irlanda, pese a que también han registrado alzas.

El miércoles, el bono italiano a 10 años rendía 4,01%, mientras que su contraparte español a igual plazo rendía 4,3%.

By RAYMUND FLANDEZ

See Correction & Amplification below.

Franchise restaurants, hit by higher commodities prices and a cutback in consumer spending, are aggressively searching for ways to slash costs.

Many of these businesses can’t pass on the higher costs to customers without losing even more business. So, they’re trying to find alternative ways to save — including changing vendors and packaging, altering delivery schedules, cutting serving portions and even prolonging the life of fryer oil.

Restaurants feel they have no choice, as some chains are posting some of their worst monthly sales declines. Ruth’s Hospitality Group Inc.’s

same-store sales at its company-owned Ruth’s Chris Steak House locations fell 15% in October. Ruby Tuesday Inc.

experienced a 10.8% drop in same-store sales; California Pizza Kitchen Inc. had a decline of 7.3%; and Red Robin Gourmet Burger Inc.

posted an 8% drop.

“These restaurant operators are really operating under a perfect storm, dealing with record [high] commodity prices, higher labor costs with the minimum wage increasing and falling consumer demand,” says Robert Marzo, senior analyst of food service for F&D Reports, a retail consulting firm in Great Neck, N.Y. “Many of [them] can no longer offer the same quality ingredients that they have in years past, so they’re downgrading in any way that they can.”

They’re getting “creative with their recipes, using cheaper ingredients and offering smaller portions in an effort to stay afloat,” he adds.

Here’s a look at a few efforts by chains and their franchisees to save money and draw in customers:

Ruth’s Chris Steak House

Big Steaks Management LLC, a franchisee in Pikesville, Md., operates several Ruth’s Chris Steak Houses in Maryland, North Carolina and New Jersey, and has seen 5% to 10% declines in revenue for the past six months.

So the company recently looked to reduce freight costs for the first time by buying meat from one vendor — and getting just one delivery per week from that vendor — instead of using multiple vendors with various deliveries throughout the week.

In North Carolina alone, Big Steaks’ three Ruth’s Chris Steak House locations will save $22,000 a year on its weekly purchase of 3,500 pounds of meat, says David Sadeghi, chief operating officer of Big Steaks Management.

Meantime, the franchisee hopes to get more business by offering fixed-price holiday-party packages for the first time. “We need to have the holiday parties to keep our employees employed,” Mr. Sadeghi says. Customers “had an open check last year or the year before, [but now] they can’t afford to go up a couple thousand dollars. They need to keep in the budgeted numbers.” He says holiday bookings are up 10% so far from the same period last year.

Church’s Chicken

Church’s Chicken, owned by Cajun Operating Co., is looking to squeeze out savings from the ingredients and other products it uses. For instance, the Atlanta-based franchiser is testing the idea of filtering the shortening for frying in order to stretch a batch’s use to 14 days from the current 10 days. That would save the company $1 million next year. It also is shrinking the scoop size of its biscuits to 2 tablespoons from 3 tablespoons, for a saving of $1.8 million a year.

Another cost-cutting move: It has eliminated the chicken diaper, which is used to absorb some of the liquid in raw-chicken cases — for a savings of $800,000 a year. The company also plans to change its french-fry packaging from cardboard sleeve to paper, which will generate $700,000 in annual savings.

The franchiser says there have been minimal customer complaints about the changes.

IHOP and Applebee’s

DineEquity Inc.,

the Glendale, Calif., parent company of IHOP and Applebee’s restaurants, is consolidating the vendors the two restaurant chains use — and, in the process, is getting a discount by buying more from the vendors it does keep. DineEquity purchased Applebee’s a year ago and found that there was 75% overlap among IHOP’s and Applebee’s vendors.

The company says the new purchasing plan, which it hopes to have in place by January, would save the company millions of dollars each year. “That’s the biggest opportunity to assist [franchisees] in the cost of goods,” a DineEquity spokesman says.

Marco’s Pizza

At Marco’s Pizza, owned by Marco’s Franchising LLC of Toledo, Ohio, restaurants are looking to save money on their purchasing process.

They are ordering larger amounts less frequently, are working with vendors to lock in transportation costs and are choosing manufacturers that are closer to distribution centers to help reduce freight costs. Marco’s expects these and other changes to save the company a total of $2 million a year.

For example, scaling down to once-a-week deliveries will save a Marco’s franchisee with five stores more than $3,500 per year overall.

The company also is trimming packaging costs. It has eliminated its small pizza boxes at more than 170 stores in 14 states. Instead, it’s now using the box for CheezyBread for both products. That will result in a saving of $164,000 a year.

Tumbleweed Restaurants

Tumbleweed Restaurants Inc., a grill chain based in Louisville, Ky., is showcasing its lower-priced fare. The company has moved higher-priced food, such as red-meat grilled items, to the back of its four-panel menu, while putting lower-cost, more-profitable items, like tacos and burritos, front and center.

The result: Less-expensive items are being ordered more often. So food costs as a percentage of total operating costs have fallen to 33.2% from 34.2% since January at 44 full-service restaurants — a savings of $500,000.

Write to Raymund Flandez at raymund.flandez@wsj.com

Correction & Amplification

Same-store sales rose in the third quarter at the Church’s Chicken, IHOP and Marco’s Pizza chains. This article and headline about cost-cutting strategies at franchise restaurants suggested that the chains’ same-store sales were falling.

Printed in The Wall Street Journal, page B7

Welcome to the executive suite. But beware: Your smallest acts can cause big consequences.

Consider Linda Parker Hudson, promoted last fall to run the U.S. arm of BAE Systems

PLC, a global defense giant.

She told her top lieutenants that she expected “rapid responses” to email around the clock. To her surprise, several started sleeping beside their beeping BlackBerry so they could answer her 3 a.m. messages right away.

Ms. Hudson says she repeatedly reassured these colleagues that they could sleep at night and tried to lessen her nocturnal BlackBerry use. But “it was probably a few months before we all got used to each other,” she concedes.

BAE Systems

Linda Parker Hudson of BAE Systems

Ms. Hudson experienced “executive amplification,” a widespread phenomenon that can significantly affect your career. When you land a senior post, staffers constantly will scrutinize — and possibly misconstrue – your deeds, dress and words.

Yet power makes you “less aware that your behavior matters,” cautions Adam Galinsky, a professor of organizational behavior at Northwestern University’s business school. “That can be a career killer by demoralizing your troops.” Even lack of eye contact with them as you walk down the hall conveys your disapproval, risking alienation.

Amplification also can work to your advantage because effective, small moves often improve employee motivation. You must recognize that “leadership is a role, and you are always on,” says Gary Bradt, an executive coach in Summerfield, N.C. “Make sure you send the messages that you want to send.”

Ms. Hudson first saw the downside of the amplifier effect when she became the first female division president for General Dynamics Corp.

in 1999. During her first week, she wore a new scarf tied in a fancy bow. The next day, she ran into more than a dozen women there wearing scarves tied the same way.

Being watched so closely frightened Ms. Hudson. “I wasn’t accustomed to being the center of attention,” the 60-year-old executive recalls. “I felt like I was up on a billboard.”

She soon found herself closely scrutinized again. Touring a division factory months later, Ms. Hudson noticed flyers posted everywhere. They displayed her photo and list of leadership expectations from a recent management team speech.

Thanks to the unanticipated flyers, Ms. Hudson says she realized that amplification represents a potentially positive tool. “You can change employee behavior by subtle changes in your behavior,” she explains.

Anton Rabie, president and co-chief executive of Spin Master Ltd., a toy maker, uses a minor symbolic gesture to amplify his deep commitment to taking risks. He mounts failed Spin Master products and misguided mock-ups on a wall of his Toronto office.

“Each one has a lesson that we should remember,” observes Mr. Rabie, who launched the manufacturer with two classmates in 1994. Staffers viewing his flop-filled wall know “it’s okay to make mistakes,” he continues. “It’s like walking the talk.”

You may also reap benefits from executive amplification by seeking frequent feedback – and making needed corrections. Easier said than done, however.

“As you rise in the ranks, people stop telling you what they should tell you,” notes Richard A. Davis, a partner at RHR International, an executive-coaching firm, and author of the new book. “The Intangibles of Leadership.”

He advocates creating a personal board of directors to help identify your blind spots. “They have to know you and the people around you,” but work elsewhere than your employer, Dr. Davis recommends.

A performance review known as 360-degree feedback persuaded a newly promoted executive at a multinational apparel concern to alter her misinterpreted appearance, according to Rosemarie Fiorilli, a New York executive coach who advised her this year. The 360-degree process involves anonymous input from peers, subordinates and superiors.

The executive wore designer duds, including luxury-brand jewelry, at a workplace that favors business casual dress, Ms. Fiorilli says.

During 360-degree interviews, co-workers said, “She’s trying to be better than us,” the coach recollects. “She was the only one who didn’t know this was bothering people.”

Ms. Fiorilli says she warned the executive that the amplified impact of her luxurious look was hurting her group’s cohesiveness. The woman “toned it down immediately,” the coach adds. “Her boss said other people had noticed and remarked favorably.”

An associate’s frank feedback taught Tim Rice a different amplification lesson. While chief operating officer of Moses Cone Health System in Greensboro, N.C., he visited a friend seated in a chair two days after she underwent open-heart surgery at one of its five hospitals.

Mr. Rice teased her nurse for leaving the woman “in this chair all day long” because the patient looked tired. His joke devastated the nurse, “and she cried afterward,” the nursing director told Mr. Rice.

He later apologized to the nurse and in front of nearly 150 colleagues, praised the nursing director’s candor. Actually, “I was really afraid to come tell you,” she replied.

Mr. Rice says he concluded that his high-level title intimidated subordinates, and he should avoid sarcasm “because everything we do is amplified.” He took charge of Moses Cone in 2004. But “I am probably not as open and free and goofy as I have been in the past.”

At the same time, Mr. Rice regularly encourages his team members to suggest ways that he might lead the health-care system better. “I always say, ‘Who is going to tell the CEO that his fly is unzipped?”’

Write to Joann S. Lublin at joann.lublin@wsj.com

Por RYAN DUBE

LIMA, Perú—El producto interno bruto de Perú se expandió 3,01% en marzo frente a un año antes, informó el miércoles el gobierno.

El Instituto Nacional de Estadística e Informática, INEI, informó el miércoles que el PIB se expandió 4,79% en el primer trimestre del año respecto del mismo período de 2012.

El crecimiento de la economía fue inferior a lo esperado, ya que el índice de indicadores adelantados del Ministerio de Economía y Finanzas apuntaba a una expansión de 5,5% para marzo.

El ministerio señaló que el primer trimestre de este año tuvo cuatro días hábiles menos que el mismo lapso del año pasado, debido a que 2012 fue año bisiesto y Semana Santa cayó el año pasado en abril.

El INEI indicó que la actividad del sector minorista creció 4,02% en marzo, mientras que el sector de transportes y comunicaciones se expandió 4,92%. La agricultura registró un crecimiento de 5,84% en marzo y el sector de servicios financieros se incrementó 6,33%. La entidad informó que la actividad del sector fabril se contrajo 3,64% en marzo.

El volátil sector pesquero se redujo 20,36%, mientras que el sector de minería e hidrocarburos creció 3,36% en marzo.

El INEI indicó que la economía peruana se ha expandido durante 43 meses consecutivos.

It’s been about three months since we began confronting the electronic elephant in our living room: the huge amount of time our girls spend online, captivated by games, shows and web surfing. After much brainstorming, we settled on a grade-based solution, which I wrote about last month, ultimately letting the girls’ performance in school decide how much freedom they’d have in using computers.

I can’t say that we’ve completely solved the problem. In fact, our confrontations over this have turned a peaceful home into a bit of a battleground. One child initially lost unsupervised use of her laptop in her room and has since lost use of her laptop altogether and now must queue up with the other girls for use of the main family computer.

But on the positive side, not only are we talking about a problem everyone seemed happier ignoring, we’re also pushing each other to solve it and planning some even more ambitious experiments.

Here are a few things we’ve learned—from our own experience so far and from readers—which may help others trying to get their arms around this problem.

Don’t be oblivious: Parents need to be in a position to understand how much time is being sucked away from their children. That may simply mean being home more often and in a position to monitor when the child is in front of the device. Or it may mean doing an occasional audit through the browser history or Netflix viewing log (which may alarm you as much as ours did me—we ended up canceling our subscription).

Frank Seldin, a reader in Dutchess County in New York, says he warns friends not to get their children tablets because they’ll lose control. “When the girls play videogames, it is on my wife’s and my iPad/Fire, and we know exactly what is on it and what they are playing,” he says. “All computer use is in the kitchen (where homework is done as well), and it will stay that way.”

Find individualized solutions: Every child is so different. My kids are at different levels academically, different ages, and have varying amounts of maturity around the concept of self-monitoring. You don’t have to solve this for all time. Instead, you want to stay tuned in to where your child is and what motivates him or her.

Insist on clearer communication: I’ve learned it’s first a process of educating the child about which activities constitute work and which are better defined as play. That distinction may not always be obvious to them as online chats about homework turn into silliness and become a big time waster.

As I suggested in my original column, the best way to minimize nagging is when a child learns to send very clear signals about where he or she is in the continuum of work and play. My kids now say to me, “Mom, I’m going to take a half-hour break because I’ve been working for the past two hours on homework.” That kind of communication on the child’s part makes all the difference.

Another reader, Bob Larson of Folsom, Calif., insists on honesty from his kids. “If we catch them abusing any of these privileges, they automatically are banned from all electronics for 2 to 4 weeks depending on the severity,” he says. “We have had some of our kids banned for 6 months when they told blatant lies to our faces when they were old enough to know better.”

Give kids a chance to earn autonomy: This may be the grade-oriented solution we found, or, as suggested by Brian Verhaaren, a reader in Salt Lake City, Utah, it could mean letting your children actually pay the cost for their computer devices, their game memberships, their Netflix subscription. Ultimately, you want kids to be able to police themselves.

Consider a router “kill switch”: This solution comes from an online commenter, who literally is remodeling her home to put a router kill switch in the master bedroom. You don’t have to take that drastic a measure, but there are easy ways to get devices powered down at bedtime, including parental-control settings on PCs and Macs, and simply taking the router power cable to bed with you.

Own the problem: What kind of example are you setting? How much time do you spend with your own nose to a screen at home? Mine has been excessive—I’m always finishing work or catching up on personal email or doing computer-intensive school volunteer work. Lately, as we’ve been pushing the girls to shift their own gears, they’re pushing me, asking me to read aloud or snuggle or play a game. I sometimes have to say no, but I say yes whenever possible, so grateful that they’re asking.

A few weekends ago Emily, 14, suggested to me that we have a computer-free day. I was so refreshed that the idea came from her, I hugged her. It wasn’t possible because of another daughter’s homework load, but it got us thinking about spring break, and even more time in digital detox this summer.

—Demetria Gallegos is community editor for WSJ.com. Write to her at SundayJuggle@wsj.com. You can also join the conversation at WSJ.com/Juggle.

By LESLIE KWOH

When Jim Donald took the helm at Extended Stay America a year ago, he sensed fear.

Justin Cook for The Wall Street Journal

Extended Stay’s Jim Donald says employees ‘were afraid to do things.

Growth and innovation come from daring ideas and calculated gambles, but boldness is getting harder to come by at some companies. Leslie Kwoh reports. Photo: Justin Cook for The Wall Street Journal.

Many employees at the national hotel chain, which had recently emerged from bankruptcy, were still stuck in survival mode. Worried about losing their jobs, they avoided decisions that might cost the company money, such as making property repairs or appeasing a disgruntled guest with a free night’s stay.

“They were waiting to be told what to do,” recalls the former Starbucks Corp.

chief executive. “They were afraid to do things.”

So Mr. Donald gave everyone a safety net: He created a batch of miniature “Get Out of Jail, Free” cards, and is gradually handing them out to his 9,000 employees. All they had to do, he told them, was call in the card when they took a big risk on behalf of the company—no questions asked.

Growth and innovation come from daring ideas and calculated gambles, but boldness is getting harder to come by at some companies. After years of high unemployment and scarred from rounds of company cost-cutting and layoffs, managers say their workers seem to have become allergic to risk.

Companies large and small are trying to coax staff into taking more chances in hopes that they’ll generate ideas and breakthroughs that lead to new business. Some, like Extended Stay, are giving workers permission to make mistakes while others are playing down talk of profits or proclaiming the virtues of failure.

At Extended Stay, Mr. Donald says the small lime-green cards have been trickling in since last summer, a sign that the staff’s risk-averse mentality may be dissipating.

One California hotel manager recently called to redeem her card, he says, confessing that she nabbed 20 business cards from a fishbowl in the lobby of nearby rival La Quinta in an attempt to find prospective customers.

Another manager in New Jersey cold-called a movie-production company when she heard it would be filming in the area. The film crew ended up booking $250,000 in accommodations at the hotel.

Workers may feel some whiplash as companies inadvertently bombard them with “conflicting messages” to be creative and cautious at the same time, says Ron Ashkenas, a senior partner at Schaffer Consulting, a Stamford, Conn.-based management consulting firm that advises Fortune 500 firms including Merck & Co. and General Electric Co.

A penchant for risk can get an employee flagged as a loose cannon or hard case for management. And, while companies may talk lovingly about experimentation, they’re often quick to deem someone a failure when results don’t come quickly, Mr. Ashkenas says.

Little wonder, then, that senior managers complain that “nothing happens” when they tell their employees to feel empowered and come up with new ideas, he says. The irony, he adds, is that a company where workers fail to take risks along the way often find themselves forced into a “position where it has to take a big bet, to put all chips on one shiny new object.”

Steve Krupp, CEO of consulting group Decision Strategies International, says one of his clients, a financial-services firm, dubbed its portfolio managers the “walking wounded” because they remain traumatized by losses their portfolios sustained during the economic downturn.

Many have become overly cautious about taking even ordinary risks with investments, adds Mr. Krupp, who is devising ways for the firm’s senior leaders and employees to overcome their fears and take balanced risks.

“You can’t just avoid all risk, because it will lead to entropy,” he says.

In many cases, risk-averse employees just assume that’s how the boss wants things. Mark O’Brien, North American president of ad agency DDB Worldwide, says he got a wake-up call when workers cited “profit” as the company’s top priority in a 2011 employee survey. In previous years, profit generally ranked second to creative work, and ahead of people.

He understood why workers felt that way. His division, DDB North America, had just laid off 10% of its workforce, and clients were paying less than before. He saw the work suffer, too—the division, which brought in roughly half of the company profit, only won a tiny share of industry awards given for creative work, a key driver for attracting talent.

Talking too openly about the company’s financial pressures was dampening morale and inhibiting creativity, he reasoned, so he took managers aside and told them, “You and I can talk about money, but don’t let that spill into the rest of the agency.”

Mr. O’Brien has taken risks of his own, going beyond the usual employee pools to source new talent in the U.K. and Latin America, where he says the advertising industry is more competitive.

To prod employees into action, some management gurus are preaching the virtues of failure.

Naveen Jain, CEO of information-technology company Inome, says his own missteps as an entrepreneur led him to urge his 400 employees to “fail fast” if they can, moving on quickly from projects that don’t take off.

“My whole life has been a set of failures,” says Mr. Jain, whose Internet-search venture InfoSpace almost ran out of money in the 1990s. “It’s impossible to try something new and not fail.”

Write to Leslie Kwoh at leslie.kwoh@wsj.com

A version of this article appeared March 20, 2013, on page B8 in the U.S. edition of The Wall Street Journal, with the headline: Memo to Staff: Take More Risks.

By RACHEL ROSENTHAL

For parents sending high-school seniors to college in the fall, here’s a surprising financial tip: Contributing to a 529 plan even just months before the first tuition payment is due will qualify the account owner for a tax benefit in many states.

Adding to a 529 can lower the state taxes you owe—under certain conditions—in 34 states and the District of Columbia, according to a tally by college-planning website FinAid.org.

Make sure your plan doesn’t require a minimum holding period before withdrawals to get the tax break. While most states don’t require such a holding period, a handful do—like Michigan. There, the deduction of up to $5,000 per year for individuals (and $10,000 for a married couple filing jointly) is determined by subtracting distributions from the total contributions to the plan within the same calendar year. This implies you need to take the distribution in a subsequent tax year to get the deduction.

Overlooked Loophole?

Joe Hurley, founder of the website savingforcollege.com, says he wouldn’t be surprised if more states add holding-period requirements because of the revenue losses states have suffered in recent years. It’s possible, he says, that most states either haven’t seen this as a big issue or that they remain unaware of it.

Investors can open any state-sponsored 529, though most states offer tax incentives only for residents who enroll in a plan in their home state. “Always start with your own state plan” when shopping for 529s, says Stuart Ritter, a vice president and certified financial planner at T. Rowe Price Group.

“But don’t stop there,” particularly if you are investing for the long term, he says. Some state plans have high fees, limited investment options or poor records that should be weighed against tax benefits, Mr. Ritter says. Morningstar.com and savingforcollege.com offer ratings for 529s based on such criteria.

Note that some states—including Pennsylvania, Arizona, Maine, Missouri and Kansas—offer a tax benefit for contributions to out-of-state plans. No break is available in states without income tax.

Aid Consideration

If a student will apply for need-based aid, consider federal aid rules before setting up a 529 as well. The rules determine what each student can afford to pay based on his or her income and assets and on the income and assets of the parents if the student is a dependent.

When a 529 is owned by a grandparent, the assets aren’t counted, but payments from the account on behalf of the student count as income for the student. In light of this, Keith Bernhardt, vice president of Fidelity Investments’ college-planning group, says it may be better for grandparents to contribute to a 529 owned by the parents. In most states, grandparents residing in the state where the plan is sponsored will get the deduction, no matter who owns the account or where he lives, says Mr. Hurley.

Another tip: If the 529 contribution will be spent in a few months, the investment option should be conservative. College-savings professionals recommend money-market and short-term-bond funds.

Ms. Rosenthal is an editor for WSJ.com. Email her at rachel.rosenthal@wsj.com.

A version of this article appeared April 7, 2013, on page R1 in the U.S. edition of The Wall Street Journal, with the headline: Student Starting College This Year? A 529 Savings Plan Might Still Help..