ECONOMIC REVIEW & FORECAST

May 2005

The first quarter of 2005 was dominated by the rapid run-up in oil prices. Opinions vary as to the real cause or causes and all have a certain validity, whether they be seasonal patterns, the Middle East, Iraq, inventories, the U.S. dollar weakness or the China factor. With new or expanded energy related projects announced almost daily, there is also some speculation that hedge fund activity is the real cause of the price explosion. This may very well prove to be the case.

Over the past few years, a great deal of media has been devoted to "bubbles" whether they be technology or housing. Our view is that the oil sector is experiencing some such euphoria and we expect a decline in oil prices over the next few months. The prices of other commodities are also near recent highs, reflecting the two-year U.S. dollar malaise as well as increased worldwide demand, including and especially from China. Whatever the underlying forces affecting oil, the net result has yet to dampen economic growth to any measurable extent. Large share buy-back programs, such as the ones announced by IBM, Pfizer and Procter & Gamble, demonstrate that corporations have confidence to reinvest in themselves.

Much is dependant upon the strength of the U.S. dollar relative to other currencies. The U.S. dollar can be subject to renewed downward vulnerability depending upon whether or not any substantive measures are taken in regard to the massive U.S. budget deficit. At present, the Federal Reserve Board ("FED") seems to be content with the U.S. dollar's current rally. By allowing past declines the FED did nothing to help the U.S. current account deficit and may have been counter-productive. For Canadians, weak oil prices and the probability of an election before summer will make the loonie particularly vulnerable to a rising U.S. dollar.

The FED continues to move short term rates upward at a "measured pace" but is starting to voice some concerns about renewed inflation. Clearly, energy costs will percolate through the economy and with consumer and corporate confidence remaining positive, gradually increasing interest rates should be expected. We do not, however, expect an explosion in rates, as the damage to housing and personal finance could be substantial. We are using weakness in the bond market as an opportunity to extend the average term of our clients' bonds.

Oil was also the biggest factor affecting stock markets too, which moved counter to increased energy prices. Our view for the coming quarter is based on a moderate price pull-back in oil and other commodity prices.

The short-term effects of these shifts can be negative for resource producers. Longer-term, the commodity and resource sectors are experiencing a secular revaluation upward, so any serious correction may present an opportunity to increase weightings in these sectors. Specifically, we are building our clients' weighting in U.S. oil stocks. As the U.S. dollar strengthens, these should perform well for Canadian and international investors.

World economic growth is still being fuelled by the U.S. and North American corporations now have some pricing power after having absorbed commodity price increases for an extended period. Mr. Greenspan appears to be moderately concerned about any inflationary impact coming from the corporate sector. His interest rate increases appear to have helped the U.S. dollar, for the present time, despite massive trade deficit numbers. Concerns about the deficit are being addressed more with rhetoric than action, as the weak trade numbers are now, paradoxically, being described as indicative of a strong U.S. economy.

Higher interest rates can have an impact on the financial services sector, and so we reduced our clients' overweight positions in the Canadian banks and insurance companies by 25%. While much of the gains have been made in these stocks, the combination of high dividend yields in this sector coupled with the possibility of consolidation in both Canada and the U.S. will generally sustain current market valuations.

We feel that it is more likely that independent mutual fund company stocks, like CI Fund Management Inc., will benefit from industry consolidations sooner.

We are very pleased with the recent announcement that the New York Stock Exchange ("NYSE") will become a for profit, public company. The Caldwell Balanced Fund owns one NYSE seat. We are of the opinion that the proposed NYSE merger with Archipelago Holdings Inc., a major electronic securities exchange, will be approved on substantially the same terms that were recently announced. Consequently, we are reducing heavy weightings in U.S. banks and brokerage firms to buy shares in Archipelago and to raise cash for other opportunities, such as the possibilities for other securities exchanges. During May, we are also creating another Limited Partnership to purchase seats on the NYSE, which we continue to believe are undervalued.

Upcoming investment strategy will be based upon the following:
1. Declining commodity and oil prices,
2. Moderately increasing interest rates,
3. A stronger U.S. dollar, relative to other major currencies and
4. A reasonably strong North American economy.
These factors point to being opportunistic in a declining resource sector and bond market while using gains or significant rebounds in share prices of other stocks as a means of raising cash reserves.

Investment Management Committee

Tom Caldwell, Chairman, Caldwell Securities Ltd. (416-862-7755)

• Get a clear mandate and make sure it is well documented, especially if your project is large. The mandate should
  • be clear and unambiguous;
  • define the parameters of the project;
  • indicate whether you are to research, recommend, or implement change.
• Be sure that the parameters of the project make clear:
  • The geographical scope. Will the project cover a part or all of your organization, one city, a province, or the whole country?
  • Which department will be involved, and how. Who will participate and who will be affected? What responsibilities will each have to the project?
  • Your authority. What powers do the team and its members have? What are their spending limits?
  • Which levels of the organization will be affected.
  • Which products or services are included in the project.
  • Which systems or processes are included.
• Ensure that your committee or team represents every part of the organization that will be affected by the project. Team members should have
  • time available to devote to the project;
  • skill and experience in working in groups;
  • knowledge of the subject;
  • an assortment of viewpoints.
• Plan carefully. Document the steps to be taken, when they will occur, who will carry them out, and how they will be done. Get your sponsor to endorse the plan.

• Welcome the attendees.
• Explain the mandate and goals of the project, review the parameters, and ask for comments and further explanations.
• Together with your teammates, establish ground rules for behaviour. Some examples:
  • We agree to finish our work on time.
  • We agree to be on time for meetings.
  • We agree to be honest with each other.
  • We will respect the ideas and opinions of our teammates.
  • We will give the team leader advance notice if we cannot complete a task on time.
• Present your plan, specifying tasks, target dates, and responsibilities. If everyone cannot agree to the plan, work with the team to modify it until they do. For large or complex projects, it is best to develop the plan from the beginning as a team. This will result in more commitment to goals from team members and a better plan.
• Anticipate obstacles that could prevent the plan from being completed on time and within budget. List them in order of importance and get team input on how to remove or avoid road blocks. If necessary, get volunteers to deal with these items by a defined date (not ASAP).
• Remind team members of the benefits they will receive, however intangible, from successful completion of the project.

• Monitor process, especially of tasks that are critical to the success of the project.
• As project manager, avoid doing any of the work yourself. Leave the technical aspects to team members - if they are falling behind, replace them or get extra help. Don't get caught up in details, you will lose sight of the big picture.
• Give frequent progress reports; they are essential for team morale. Let all team members know about successes so they will feel pride in their achievements.
• Give recognition to team members who outperform expectations, and let their bosses know about their contributions to the project.
• Stay within your parameters as defined at the outset of the project. If you feel the need to go beyond parameters, negotiate a change in them first.
• Stay focused on your goal. If your project has more than one goal, make sure everyone on the team knows which are the most important.
• Set a standard of professional behaviour for the project. Be a role model by staying out of politics, especially in other departments; focusing on problems, not people; refusing to criticize people who are not team members; running top quality meetings that begin and end on time, include all team members, and cover an agenda that you have distributed beforehand.

The Top Ten Ways To Get Any Project To Reach Its Critical Mass

1. Put in ten times as much effort as you think it should take (ten inputs for every one output).

2. Bring in three partners, advisers, friends or colleagues, and let them advise and support you.

3. Package the project so that it adds extraordinary value to the consumer, not just the customer.

4. Take consistent but learned action every day or week. Press forward, regardless.

5. Motivate yourself and others by creating a visual display showing measurable progress.

6. Bring in customers/users and alpha testers at the very beginning and learn from them.

7. Link the project to your vision. When both are connected, the project gets a big lift.

8. Maintain a healthy reserve: twice as much capital/expenses/time as estimated.

9. Force the project to prove itself, in some way, during each stage of its development.

10. Once you've done all of the above, then trust your gut.

Director of Finance, CMA

This individual gets results! Having a strong background in packaged goods and retail, she has demonstrated the ability to walk into a mess and transform things into a well-organized, streamlined picture of efficiency. For another employer, she was volunteered by her boss to help a marketing person who was floundering and within the first month she found a way to save a million dollars. Combine this ability with her strong interpersonal qualities and you know you have someone who will make a major contribution to your operation.

If you are interested in this "star candidate" please contact:
Ken Stouffer, CPC, Senior Consultant - Ken.Stouffer@fulcrumsearchscience.com

Corporate Credit Manager

A truly exceptional CA, CFA currently working at the VP level in a small company is open to opportunities in Financial Services at the Director level. As well as his education background he will bring superior analytical skills, great ability to present information to a wide audience, and his capacity for workload is extremely high.

Originally from a top 4 public accounting firm he worked for a major pharmaceutical company and during that period gained invaluable international experience.

He has very strong interpersonal skills and will be a great asset wherever he goes.

If you are interested in this "star candidate" please contact:
John Maybury, Senior Consultant - John.Maybury@fulcrumsearchscience.com

Process Operations Manager - Chemical Eng P eng, Six Sigma Black Belt

• Is the team leader to amalgamate/ Streamline 14 Manufacturing sites Worldwide into 5 Sites Worldwide
• Implemented SAP throughout the Production operations and Maintenance areas
• Lean team leader within a 500 Unionized Complex Consumer Products Giant , resulting in over 80 Million Dollars of savings , through his ability to Motivate his People through self directed Work teams and quickly grasping complex concepts, analyzing and interpertating ideas onto a logical Strategy
• Strong interpersonal Skills and extensive six training allows him to get the best out his team
• Has Achieved the "Gold" Employee award twice within his tenure with the company for outstanding service and Achievements with his Company
  

If you are interested in this "star candidate" please contact:
Silvio Rossi, CPC, Senior Consultant - Silvio.Rossi@fulcrumsearchscience.com

Master Black Belt

With great pleasure I introduce to you an Excellent Master Black Belt currently employed with a division of Magna. The candidate has a Mechanical Engineering Degree along with his Professional Engineering designation. Out of a group of Black Belts within his company he was chosen to oversee an international turnaround of another plant and was successful in that venture.

If you are interested in this "star candidate" please contact:
Joe Braccia, Senior Consultant - Joe.Braccia@fulcrumsearchscience.com

FEATURE ARTICLE

by John Sutherland

• Allow anyone with a breakthrough idea to invoke the fifteen minute no judgement rule. The rule states that people discussing an idea cannot say anything negative or judgmental about the idea. They can only discuss ways in which an idea might work. Try it. It is much harder than it sounds. Some companies go so far as to fine offended persons a $1 for every judgment made with the proceeds going to charity.
• Create a budget to explore breakthroughs ideas. Publicize it and make it available to all employees, especially new employees who have had less chance to learn the "right" ways of doing things.
• Establish regular "Breakthrough Idea Days" where for a day people can talk about whatever silly idea they have. Everyone is rewarded for participating, even if her idea goes nowhere. Now here's the hard part. At the end of the day, dig down deep, stretch yourself, push past your long experience that got you where you are today, and go ahead and fund someone for 60 days to work on an idea that makes you feel just a little bit uncomfortable.
  

• Asking silly questions. Re-looking standard and well-accepted assumptions about how things are done and why.
• Deferring judgment on those ideas by displaying the patience to work with them to see how it can be made to work.
  

LEGAL CORNER
by Yosie Saint-Cyr, Editor HRinfodesk,
Canadian Payroll and Employment Law

Although employers practice preventative measures and guide employees in attempts to correct undesirable situations, there are times when these methods just do not work. Disciplinary probation can be a very effective form of discipline when employees are experiencing problems with job related performance or have job related behaviour problems. Through counseling, supervisors monitor performance during a specified period of time and encourage employees to improve performance related problems or job related behaviour problems. Disciplinary probation may be imposed for a period of up to six months, but may be extended to a total of one year by the employer. This is a designated time period during which the employee must improve identified deficiencies in their performance or behaviour. Improvement standards and time frames are put into a written Performance Improvement Plan by the supervisor and a copy is given to the employee at the time they are placed on disciplinary probation.

The imposition of disciplinary probation requires that supervisors make a concerted effort to meet regularly with the employee during the probationary period to assist him or her in improving performance or behaviour. A supervisor's failure to meet with the employee on a regular basis and discuss improvements would make this type of discipline ineffective.

Employees on disciplinary probation cannot be promoted or granted merit increases. It is also critical that, should the supervisor not see an acceptable improvement in performance or behaviour during the probationary period, they must extend the probationary period prior to its expiration. Once an employee reaches the six month date when the probation expires, the supervisor cannot retroactively extend the probation. Also, employees granted leave while serving disciplinary probation may have their probation extended by the number of days absent on leave provided the employee receives notice of the extension prior to the expiration of disciplinary probation.

It is important to note that disciplinary probation should not be an employment practice unless it is a term and condition of employment. An employer cannot place an employee on probation for poor performance or misconduct unless their employment contract or written workplace policies provides for that, generally, at the time of hire. If the employer tries to impose probation anyway, the employee may be able to assert constructive dismissal and trigger their right to a termination/severance package. In addition, employers should identify and list offenses which may warrant discipline, suspension or termination. The list does not need to be inclusive of all offences, but is intended to assist employees in knowing what the expected standards of performance and/or conduct are that must be maintained in the workplace subject to the organization's environment and culture. It will also assist employers to identify examples of offenses within each level of discipline measures.

In addition, disciplinary probation should not apply to new employees on a probationary period following hiring.

A progressive disciplinary policy should have various levels leading to disciplinary probation up to termination. A disciplinary action may begin on any level based upon the severity of the offenses. To illustrate, they are as follows:

Level 1: Verbal Notice

A verbal notice is a verbal discussion between the employee and employer identifying the employee's on the job related behaviour or performance problem. A verbal notice form identifying the work problem, expected improvements in the employee's performance or behaviour, and any assistance the employer plans to provide the employee in correcting the problem must be completed. The employer must inform the employee that this is the first level of the formal discipline process. This form is not given to the employee but should be filed in the employee's personnel file.

Behaviour or performance issues that can result in a verbal notice are: tardiness, unauthorized and/or chronic absence, foul and abusive language, inefficiency, incompetence or negligence and/or failure to abide by the organization's policies and rules.

Level 2: Written Notice

A written notice is a more formal disciplinary measure for certain conditions or behaviour problems and may be necessary even without a record of prior offenses.

The written notice should indicate the reason for the discipline and the consequences of continued infraction. The notice should also include what specific behaviour or performance must be corrected, a time frame for correction and any commitment on the employee's part to correct the behaviour or improve performance as well as any assistance the employer intends to provide the employee in correcting such behaviour or performance and any follow-up actions to be taken.

The employer must inform the employee that this is the second level of the formal discipline process. The employee should acknowledge receipt by signing the written warning; their signature should only acknowledge receipt of the written notice. The original written notice should be given to the employee and a copy should be inserted in the employee's personnel file. The employee should have the opportunity to respond to the written notice and the response should be attached to the written notice.

Behaviour or performance issues that can result in a written notice are: careless use of company property, three days absence without notification and/or chronic absenteeism, insubordination, harassing behaviour and/or carelessness in carrying out assigned duties.

Level 3: Disciplinary Probation

If the employer determines that an employee's overall performance and/or behaviour is below standards, the employee may be placed on disciplinary probation. The employee will be notified of deficiencies in performance and/or behaviour and, with the employer, will develop a plan of action to improve those identified deficiencies. Disciplinary probation is generally for a period not to exceed one year.

Disciplinacy probation is used instead of a recommendation for termination when the employer feels that the employee is sincere and still capable of correcting his or her behaviour. A disciplinary probation can lead to a recommendation for termination, but need not precede a recommendation for termination.

Employers can base their determination for disciplinary probation on performance reviews, breach of code of conduct policy and other related data. Unless significant satisfactory improvement is made during the disciplinary probation period, termination may be recommended. If the employee has made improvement, but has not yet performed in a manner as to be removed from disciplinary probation, the employer may extend the disciplinary probation period for a time not to exceed one additional year; at the end of which time the employee should either be removed from disciplinary probation or terminated.

The written notice of disciplinary probation should state that the employee is being placed on disciplinary probation, the length of the probation period, the specific deficiencies in performance and/or behaviour, the necessary changes and improvements that need to occur within the probationary period, and the plan of action to improve those deficiencies. The notice must be dated and signed.

A series of counseling sessions or other activities designed to bring about the desired performance and/or behaviour should be held during the probation period. Periodic performance reviews or meetings should be held to monitor the employee's progress.

Behaviour or performance issues that can result in a written notice are: serious breach of code of conduct and other workplace policy, willful destruction of company property; gross insubordination; theft/fraud (depending on seriousness and specific circumstances such as falsifying time cards or records; violence, and sexual or other forms of harassment, during accommodation dealing with drug and alcohol dependence, among other things. This step may also be necessary for less serious offenses that continue to occur after the employee has gone through level one and two or after an investigation of a serious offence.

For minor infractions or behaviour problems, disciplinary probation is appropriate only after the employee has received verbal and written notices. For major infractions or behaviour problems, disciplinary probation or recommendation for termination may be warranted without a record of prior offenses.

Level 4: Suspension or Recommendation for Termination

Suspension or recommendation for termination may be necessary for serious offence(s) that are criminal in nature or threatening to other employees and/or clients. This step may also be necessary for less serious offenses that continue to occur after the employee has gone through level one and two or during an investigation of a serious offence.

Suspension is used instead of a recommendation for termination when the employer feels that the employee is sincere and capable of correcting his or her behaviour. A suspension can lead to a recommendation for termination, but need not precede a recommendation for termination.

For minor infractions or behaviour problems, suspension is appropriate only after the employee has received verbal and written notices. For major infractions or behaviour problems, suspensions or recommendation for termination may be warranted without a record of prior offenses.

The employee should receive a written notice of disciplinary suspension. The notice should indicate the duration of the suspension, the reason for the suspension, conditions under which the employee can return to work and any assistance the employer plans to provide the employee to correct the problem. A disciplinary interview should follow the notice to re-enforce the notice of disciplinary suspension. The employee should acknowledge receipt of the notice with a signature.

Suspension may be with or without pay at the discretion of the employer, however, which option is available and if and when it can be used must be stated in the policy or employment contract and communicated to employees, prior to suspending an employee without compensation. Suspension can range from one day to a few weeks but rarely exceeds 30 calendar days.

A recommendation for termination should be handled through the normal chain of command and according to workplace policy and practices and legislative requirements.

Behaviour or performance issues that can result in a suspension or recommendation for termination are: intoxication or drug use that cannot be accommodated or depending on the circumstances surrounding the issue; fighting, theft and/or fraud, refusal to work (excluding an organized labour action or under workers' compensation); willful destruction of company property; gross insubordination; falsifying time cards or records; violence, and sexual or other forms of harassment.

Please note:

Level 3 could be Suspension or Recommendation for Termination followed by level 4 which is a disciplinary probation. The employer can alternate between these two levels depending on the circumstances and/or the seriousness of the offense(s). This should be indicated in the progressive discipline policy.

It is always wise to consult a lawyer prior to any decision to dismiss, even for a small business. In the case of a serious incident, the employer may wish to suspend the individual immediately while they determine the action that needs to be taken.

In addition, before implementing any performance management system or disciplinary policy, employers should ensure that managers or supervisors are properly trained and competent to handle both performance management and disciplinary issues. They must also ensure that they have set clear and attainable standards. The employer should encourage improvement by identifying reasonable performance standards, conducting performance reviews over a reasonable period of time, and warning the employee of the consequences for failing to meet the required standards.

The facts and circumstances surrounding the problem performance and/or behaviour must be examined carefully when applying any level of discipline. Each case is different. The employee's position and length of service must also be considered. Personality conflicts, general dissatisfaction with performance, petty issues, or one incident of inappropriate behavior or misconduct, are usually not serious enough to warrant dismissal. In these instances, corrective action may be more appropriate.

It is important for organizations to ensure that performance/behaviour problems and serious incidents are well documented. For disciplinary issues, employers need to keep file copies of the disciplinary letters given to the employee. In the case of serious incidents which require prompt action, employers will need to have a record of statements by key participants and witnesses in the incident, as well as reports of any investigation held.

Simply said, it is important to give your employees the chance to improve their performance and/or behaviour. A series of well applied disciplinary steps gives them the chance to fix their performance/behaviour problems and continue to be valuable assets to your organization.

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By Yosie Saint-Cyr, Editor at HRinfodesk

Published on HRinfodesk---Canadian Payroll and Employment Law

HRinfodesk is a service that is published by First Reference which includes employment law news for every jurisdiction in Canada, a Library of Articles, FAQs, a Calendar of Events, Important Dates and an HR Internet Directory for expanded research. Our search tools will help you to quickly find results by jurisdiction, topic, date and keyword. For the latest employment law news and a ten day trial, click here.

First Reference is a publisher of Canadian employment law reference manuals that are comprehensive, updated and practical. Publications include The Human Resources Advisor, Human Resources PolicyPro andmore! For more information or to purchase one of our publications, go to http://www.firstreference.com/.

This article offers general comments on legal developments of concern to businesses. Every effort has been made to ensure the accuracy and timeliness of this information. These publications are written for informational purposes only and should NOT be relied upon as legal advice or opinions. The reader should always obtain legal advice from a qualified lawyer or other qualified professional, which will be responsive to the case or circumstance of the individual. Please note that the content provided in this article or any content contained in or made available through any third party website linked to from this article and/or HRinfodesk, is provided 'as is' without representations or warranties of any kind. All representations and warranties in respect of Content or Third Party Content, express or implied, including, without limitation any representations to warranties or conditions regarding accuracy, timeliness, completeness, non-infringement, merchantability or fitness for any particular purpose are hereby disclaimed.

Yosie Saint-Cyr was called to the Quebec bar in 1988 where she practiced employment and labour among other fields till 1999. She is a researcher, policy analyst, and content provider with an extensive background in employment and labour law across Canada. She also obtained a Certificate in Technical & Professional Writing from York University---Glendon in 2003. She is currently the Editor at HRinfodesk.com a Canadian online information service that provides subscribers with a single access point to find answers and solutions to employment and labour law questions across Canada.

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