The Kauffman Foundation yesterday released its annual report ranking U.S. states on how well and how much they’ve adapted to what it dubs the “new economy.” The report grades each state on 29 different indicators in five general categories including knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and technological innovation capacity.

The top five states are all based in the Northeast or Northwest, while 16 of the 20 lowest-ranking states are in the Midwest, the Great Plains and southern U.S. states.

It’s still the information-technology boom that started in the 1990s that’s fueling the top states’ economies. But lower-ranked states have certain competitive advantages, Kauffman points out: Many of these states are less congested and less expensive to live in, so they can lure start-ups looking for a better quality of life than they might find in innovation hotbeds like Massachusetts or New Jersey.

The report shows how there is an interconnectedness between a state’s higher educational system and the types of companies and jobs created there. Massachusetts boasts universities such as MIT and Harvard that have helped spur business formation in innovative fields like biotech, software and hardware. It also points out other attributes or strategies that have helped the states succeed: Delaware (No. 4 on the list), for instance, has focused on being friendly to financial-services firms and currently has the most direct foreign investment of any U.S. state.

Here’s a look at the top 5 and bottom 5 states, according to the ranking:

Top 5:
1) Massachusetts
2) Washington state
3) Maryland
4) Delaware
5) New Jersey

Bottom 5:
46) Wyoming
47) Alabama
48) Arkansas
49) West Virginia
50) Mississippi

How well does your state foster innovative companies? Do you think this is a valuable ranking?

As we’ve noted, many small-business owners are feeling pretty blue about policy makers’ lack of attention to small-business matters right now. They complain that politicians are either ignoring the great financial burdens entrepreneurs face (no bailout for you!), or they’re championing the wrong cause (think Joe the Plumber).

Some entrepreneurs and their advocates think President-elect Obama could use a little first-hand help understanding the issues entrepreneurs face – perspective that can’t come from the perennial CEO or longtime politician.

“Since Mr. Obama is a very sharp man, it would be a wise move to bring the perspective of entrepreneurs into consideration as he develops his new Administration’s priorities,” writes Karen Kerrigan, president of the Small Business and Entrepreneurship Council in a recent blog post.

Serial entrepreneur and Dallas Mavericks owner Mark Cuban (who has other personal matters to contend with these days) was even more pointed in his criticism recently that no entrepreneurs seem to be making the cut. He wrote on his blog: “We need to know what the impact of his policies will be on the individually owned Chrysler Dealership in Iowa. The bodego in Manhattan. The mobile phone software startup out of Carnegie Mellon. The event planner in Dallas. The barbershop in LA. The restaurant in Boston.”

Mr. Cuban offered to advise Mr. Obama himself, if Obama was so inclined.

Others, such as HuffingtonPost blogger Steve Strauss, point out that Obama already has an entrepreneur in the most important position in his administration: himself.

Do you think Obama needs a real-life start-up enterpreneur in his cabinet? Whom would you recommend?

Photo: Getty Images

A poll released yesterday by Junior Achievement USA, a Colorado Springs, Colo., organization that hosts after-school programs for youth, found that fewer teens surveyed were interested in eventually starting their own businesses than just a year earlier. It found 60% of the 712 13- to 18-year-olds surveyed indicated they’d be interested in becoming entrepreneurs, compared with 67% in 2007.

The online poll was conducted in February and March, but timed for release this week in conjunction with Global Entrepreneurship Week. Though the survey was taken before the financial crisis of recent months, Junior Achievement suggests that economic uncertainty might have dissuaded some young teens from wanting to work for themselves.

The survey results seem to counter the trend of recent years, which has seen more teens and young adults showing an interest in entrepreneurship. Many youth entrepreneur programs and summer camps have emerged, with the aim of sparking an entrepreneurial drive in youth, and an increasing number of colleges are adding entrepreneurship courses and programs. The whole purpose of Global Entrepreneurship Week is to encourage more young adults to think about entrepreneurship as a serious career path.

What’s more, it’s possible that today’s bad economy will spur more teens and young adults to consider joining the ranks of entrepreneurs. As they watch people around them losing their jobs in big companies, they might see working for themselves as a more secure alternative.

What do you think? Will the current economic climate increase or decrease the number of people, young and old, looking seriously at entrepreneurship?

Photo: Getty Images

Performance-review season is here, and many people aren’t happy about it. In fact, many feel traditional annual reviews dash workplace morale and sever trust between managers and their reports.

Integrated Project Management, a Burr Ridge, Ill., project-management firm with 80 employees takes a unique approach to employee reviews. Instead of just banging out written reviews once a year, managers sit down with each direct report individually every week to discuss performance and how the employee can improve.

We spoke with Chief Executive Richard Panico about what makes the company’s review process special. Edited excerpts follow.

WSJ: How is your review process different than most companies’?
My goal has been to create an extraordinary culture and in order to do that our philosophies need to be very clear. A strong performance-review process helps. Managers give their reports a written performance document after an employee has been with us six months and then once a year. They spend 12 to 14 hours assembling each employee’s review. But we don’t just rate them on performance, we also review them on character elements, such as dependability, fairness, loyalty, commonsense, passion and the ability to elicit trust. We have two absolutes: honesty and integrity. If someone lies, they will be discharged. On a weekly basis, managers also meet with the direct reports one-on-one for an hour to an hour-and-a-half and give direct feedback on recent performance, such as how they handled a specific event like leading a meeting or speaking to a group. We have a rule that no criticism can show up on a review document that wasn’t mentioned to the employee beforehand. We have learned that the best development occurs when you’re providing real-time feedback.

WSJ: Why do you think your process is better than the typical annual review?
First of all, I think it’s the time and all the touch points that make our process unique, along with our focus on character – not just performance. In our environment, you could be a top performer, but if you’re failing on the character elements side you’ll ultimately be discharged. Bad character degrades the culture to the point where it is no longer a nurturing culture and all of a sudden you start developing these cliques with the company that bring down others. I think if you were to audit companies with a traditional annual-review process, people will tell you it’s so rote that there’s no true personalization. When our people get their feedback, they feel good about it because you can clearly see the amount of time, energy, attention and care that goes into it.

WSJ: That’s quite a lot of time devoted to employee feedback. Doesn’t that hurt productivity?
The greatest asset that any company can have is a motivating culture. You can’t have that unless people feel appreciated. We have some very, very high standards complemented with very, very caring people. I think that’s probably the misconception many companies have – that so many hours per year we spend on helping our employees perform better could be better spent billing clients. How could we treat our clients well if we don’t even treat our own employees well?

What do you think of this review process? Is holding employee reviews more than once or twice a year a good idea?

Publishers of the local directories often dropped on doorsteps are bleeding money, my colleague Emily Steel writes today. These directories rely on small businesses in particular for advertising, but many businesses are reining in their marketing budgets in the bad economy and buying fewer yellow pages ads — not to mention just the steady migration over time to online advertising. The publishers are trying to recoup some of their lost revenues by selling online ads along with their print ads (think SuperPages.com), but it’s not nearly enough to offset the steep decline on the print side. Internet ads command only a third of the price of a print ad.

Some businesses also feel their money is better spent online by focusing on search-engine optimization or getting a local search ad listing through a company like Google rather than sticking with online ads offered by the traditional print directory publishers.

One analyst projects spending on print yellow page advertising will drop 39% within the next four years.

If yellow pages directories were indeed to go extinct it would be a big jolt for the many small businesses that use them as the primary way to generate leads to their business. A survey we featured last winter found that 60% of small businesses still advertise in the print yellow pages – and some rely almost exclusively on the print directories for sales leads. Several commenters said the yellow pages offered a good return on investment compared with other forms of advertising.

Do you advertise in the yellow pages? Do you think the growth of online advertising will or should make them obsolete?

- Online customer review site Yelp.com is introducing a new feature that lets business owners write descriptions of themselves. [Entrepreneur]

- Don’t forget to ask these questions before buying a business. [Seattle Post-Intelligencer]

- Seth Godin reveals his secrets to a successful blog. Hint: Find a tribe. [Seth Godin]

- Want more people to follow your tweets on Twitter? Rule #1: Follow the “Smores” (Social Media Whores) [Guy Kawasaki]

- Immigration reform unlikely to be top priority in Obama administration. [WSJ]

- The glum economy is spurring a new wave of barter exchanges that let entrepreneurs swap goods and services instead of cash. [NYT]

- Google just unveiled a new online voice and video tool. Does this spell doom for Skype? [DuctTapeMarketing]

- Next week is Global Entrepreneurship Week. Here are some ideas for how to celebrate. [Kauffman Foundation]

“I had never swam in my life before, in the ocean,” says Yacov Wrocherinsky, founder and chief executive of Infinity Info Systems Corp., a New York-based company that specializes in customized integration of customer service, marketing and sales management for other companies. (He’s also afraid of sharks.)

These are just the kinds of stresses that Mr. Wrocherinsky and 47 other business executives from around the world underwent as part of an unusual physically and mentally taxing leadership program from one of the elite commando forces in the world. Held in early October, the YPO/U.S. Navy SEALS Challenge: Leadership Under Fire Seminar is not for the faint of heart or the out-of-shape.

“You’re beyond tired,” says Mr. Wrocherinsky, who recently turned 49. “You’re accessing areas of your brain that you’ve never done before. But the amazing thing is, I had more energy than I ever had.”

About six months ago, he found out about the Navy SEALs program as a member of the Young Presidents’ Organization, an Irving, Texas-based peer-based executive leadership organization. It was the first time the organization had ever put on a program, and it required participants to pay about $5,500 and to train for the fitness challenge. Mr. Wrocherinsky prepared by visiting San Diego, Calif., hired a personal trainer and worked out for months to get ready.

“They emphasized leadership principles we could use,” he says about the dozen or so Navy SEALs who put them under stressful conditions. “They thrive on chaos. When everybody’s confused, they know what to do. They plan for it. They prepare for it.”

From the brief training, Mr. Wrocherinsky says he learned to use intelligence about his clients to develop plans to adapt to rapid changes in the business market. That’s why afterward, he put the lessons he learned to good use by meeting with his employees and customers to tell them that even with the economic downturn, the company is in a growth spurt, having seen a 15% to 20% jump in revenue to $18.5 million. Being proactive, he also says that his company will be holding a seminar series that would help his clients – other small-business owners – share information about business practices that have helped them weather difficult business conditions right now.

“One of my philosophies is to learn and grow as a person, and to learn as a leader,” says Mr. Wrocherinsky, who was honored this year as the Small Business Person of the Year in New York City and the state by the Small Business Administration.

He not only won over his employees and clients, but he lost, too: about 13 pounds, he says. “I think every person should challenge themselves to another level,” he says. “Standing still is not an option.”

Would you go through a Navy SEALs program to learn survival skills? Or do you have a better solution?

Today, the SBA announced some changes it says will help make SBA loans available to a greater number of small businesses. The changes are technical — they involve allowing lenders to peg SBA loans to the London Interbank Offered Rate (LIBOR), along with the current prime rate, and letting them pool the loans when they resell them on the secondary market — but the effects could ease the accessibility of SBA loans to many prospective borrowers. “We’re confident these solutions will help free up capital so lenders can continue to make SBA-backed loans, said Eric Zarnikow, associate administrator of SBA’s Office of Capital Access, in a news release.

We recently wrote that SBA lending had fallen gradually in recent months due to a host of factors: less demand from small businesses, tightened lending standards and declining creditworthiness. But since mid-September, the drop has been dramatic, as the secondary market for SBA loans — where lenders sell the guaranteed portion of SBA loans to other institutions to free up capital to make new loans — has dried up. Lenders and government lending experts blame the secondary-market woes on the fact that SBA loans have become less lucrative, partly because the loans were traditionally only pegged to the prime rate. (One major SBA lender, CIT Corp., today announced it was applying to become a bank to get some federal bailout money in hopes of relieving its financial woes.)

Many small-business lending experts are optimistic that SBA’s changes will ease the current lending issues, but think the federal agency should go even further in helping borrowers right now.

What do you think? Is the SBA doing enough to help small businesses in the current harsh lending environment?

Photo: Getty Images

The approval of Proposition 8, in which California voters voted to overturn same-sex marriage rights, was a major victory for religious conservatives but a setback for the gay rights movement.

Some California business owners, mainly in the wedding industry, who expected to rake in business from Proposition 8’s defeat can only watch helplessly as ordered wedding cakes go unsold and tuxedos remain unrented.

Those businesses weren’t the only ones affected, though. Some small businesses, those who donated money in support of banning gay marriage in California, are being threatened with boycotts.

For example, El Coyote, a Mexican restaurant in Los Angeles, received calls threatening a boycott after it was reported that someone there allegedly contributed $100 to “Yes on 8.” HuffingtonPost.com reported it was actually the restaurant owner, who claimed she’d given the money through her Mormon church. Says Sonja Eddings Brown of ProtectMarriage.com, “We have received calls today from our members in Greater Los Angeles and other parts of the state indicating that today their businesses are being hurt because they contributed money. People who contributed have been receiving calls from people dropping their business with them.”

Backers of gay marriage have also put up a Web site calling for the blacklisting of individuals and organizations that donated money to Proposition 8, saying “Please do not patronize them. 8=HATE.” The list includes the name, title, the company’s name, the location and how much money was donated.

At Yelp.com, a popular consumer review Web site, same-sex marriage supporters have been busy posting comments and identifying businesses that were pro-Prop 8. The San Francisco-based company says it’s removing those postings since they aren’t reviews of first-hand customer experiences in those establishments. Wedding dress designer Amy Kuschel says that her business has been a target on the Web site, even though she’s an opponent of Prop 8. She says one of her employees — not her — had donated $2,500 to the Prop 8 campaign. “If I feel strongly about something and I want to speak out, I should be able to speak out,” Ms. Kuschel says. “But you know without all the information, without all the accurate information, it can be very dangerous and very unfair.”

A list of contributors on both sides of the issue can be found here.

Do you think it’s fair to organize a boycott of a company based on the gay-marriage issue? What can you do when your business gets blacklisted or boycotted?

William Kane, a quality analyst for a prescription benefits administrator in Kingsland, Ga., sent an email to his local Congressional representatives, the White House, the Treasury Department and Barack Obama’s transition team telling them of the financial hardship his mother’s St. Mary’s, Ga. small antiques business faced. Sales, he wrote, fell from averaging $12,000 a month in 2007 to less than $2,000 a month in October 2008. (His mother’s business, Kane’s Kollectables, is pictured to the above right.)

After listing off the huge sums of money some of the huge banks are receiving under Treasury Secretary Henry Paulson’s financial-rescue plan, he said it’s only fair that a small business get its share of federal aid.

He wrote:

“We do not have any pockets to line, pork to add, or monetary promises to make. I can promise a vote, and our word that will we not use our money to add to our overhead by purchasing another failing business. We will not hold $400,000 executive getaways on your tab. We may use your money to expand our business, but we certainly will not do so in a way that will set us up for failure. We aren’t asking for billions. We as taxpayers are paying for it, I think it’s only fitting some of the smaller fish in the pond have access to the funds.”

Mr. Kane said he just kept hearing about the federal bailout on the news, and all the big companies getting massive sums of money, so he decided to request some for his suffering family-owned business. So far, he hasn’t received any direct responses to his request — just a few automated email responses. “President Bush will have some time on his hands here soon,” he said in a telephone interivew. “Maybe he’ll be able to answer it.”

What do you think? Should small businesses get a piece of the $700 billion?