Have you ever watched a flock of geese soar through the air? Their synchronized patterns help them conserve energy, communicate and keep track of one another. Understanding and adhering to their patterns is a critical part of their survival.
If you are managing people, you have a lot in common with a flock of geese. On a daily basis you are faced with the challenge of synchronizing your team with the objectives of your business. Making sure that everyone puts forth the right amount of energy, understands corporate objectives and executes according to plan requires constant adherence to a preset pattern.
Determining the pattern is important and requires a lot of thought and discussion. Once the pattern is decided, you can achieve alignment throughout your organization by ensuring that department and individual goals, job descriptions and evaluation tools lineup with the corporate pattern.
Decide the time to start
If you are entering the final year-end quarter, then this is the perfect time to begin this process. Talk with your team about the objectives and goals of your department or business. If you don’t have objectives or goals, then you’ll need to create them. One thing to keep in mind is that objectives are a set of words and goals are a set of numbers.
For example, two objectives for my business include profitable growth and diversification of our revenue base. Our goals include our projected revenue and profit numbers for each line of our business. We also break down our customer base and set numeric goals for each line of business.
Once we’ve set our objectives and goals, we move on to developing strategies and metrics. Similar to the objectives and goals, strategies are comprised of words and metrics are comprised of numbers. Strategies should include important elements such as where the firm will target business and what products or services the firm will offer. Market segments and target audiences should be identified as well as geographic ranges.
The strategy section is also a good spot to determine where the firm will not do business. A few examples of strategic initiatives from my business include activities that drive toward profitable growth, our ability to manage resources, organizational effectiveness and customer satisfaction.
For instance, one of the strategies under our profitable growth initiatives includes developing and implementing a targeted commercial growth plan focused on attracting organizations conducting infectious disease research.
Develop a plan
This plan can be developed for one to three years or more. We focus our firm on a three-year period and fit the plan to one page. The process of developing and fine-tuning the plan takes a few months and should include the involvement of all senior management.
When the senior leadership has signed off on the plan, then each department should develop annual goals that align with the plan. Personnel within each department should work with their managers to develop individual goals that align with their department goals.
Personnel evaluations and bonus plans should incorporate these individual, department and corporate goals thus integrating the plan throughout the organization. Routine monthly or quarterly assessments and opportunity for communication should be scheduled to ensure that everyone remains focused on the corporate plan.
Adhering to this framework should result in a synchronized team that pulls together in the same direction.
Victoria Tifft is founder and CEO of Clinical Research Management, a full-service contract research organization that offers early to late-stage clinical research services to the biotechnology and pharmaceutical industries. She can be reached at firstname.lastname@example.org.
Why do more than 38,000 U.S. businesses go bankrupt each year? Obviously filing for bankruptcy wasn’t management’s aim.
Management in these companies simply allowed the “wrong things” to happen. These wrong things represent problems that have been allowed to fester, persist and multiply. As the problems went unrecognized and unresolved, they compromised carrying out essential activities, increased expenses and eroded profits. Eventually these unaddressed problems caused the business to go bankrupt.
Understand the problems
But why can’t management effectively solve problems? Ironically, in most cases, actually solving problems is not the issue. Instead, the challenge for management is to recognize the problems and understand what they are. Once problems are identified and understood, management is in a position to solve them. As George Washington often liked to say: “Errors once discovered are more than half amended.”
So what is it that makes identifying and understanding problems challenging? Management either lacks or fails to use the fundamental managing disciplines that would allow it to do so. These disciplines make effective managing possible. If practicing these management disciplines is so essential why aren’t they universally practiced?
To answer this question, consider a 19th century military theorist named Carl Von Clausewitz who observed, “Everything in war is simple, but the simplest thing is difficult.”
The same is true of management. Although simple disciplines make up the practice of management, actually carrying out these disciplines is difficult. This is because difficulties arise and accumulate, producing a kind of friction or inertia that cause the disciplines not to be practiced. When this happens, managers and their organization stumble along in frustration and failure as problems go unidentified and unresolved.
Consider the why factors
There are three main reasons for the disciplines not to be practiced. The first reason is that many managers do not know that there are seven learned disciplines of management that, through practice, are essential to their effectiveness and success. Therefore the disciplines are neglected.
The second reason is the seven learned disciplines of management are not practically understood — management does not know how to use them. Consequently the disciplines are misused.
The third reason is that management does not practice the management disciplines systematically. As a result, the disciplines are not practiced constantly and consistently.
The seven fundamental management disciplines include planning, organizing, measuring performance, executing, following-up, real-time reporting and problem-solving. Each discipline is impactful, and all are indispensable. Their practice is the best way to understand what effective management does.
How can I be so certain these management disciplines are the secret to management’s success? Because I use them in my work as a turnaround specialist — I’ve helped turn around 28 underperforming and troubled companies (from large Fortune 500 companies to smaller public and private organizations).
When these disciplines were deployed an amazing change took place. The same managers who had wallowed in mediocrity and failure now formed the nucleus of a successful turnaround as they used the management disciplines to make the right things happen.
Fortunately, each of these seven management disciplines can be learned and can empower your management effectiveness.
Jim Burkett is president of Corporate Turnaround Consulting Inc. and author of “The Learned Disciplines of Management: How to Make the
Right Things Happen.” Contact him at
The laws of physics tell us that what goes up must come down. The reverse is true in today’s interest rate climate. Rates that have stayed low — among the lowest they’ve been in U.S. history — for such an extended period of time will soon begin to climb.
“This is a topic that gets commentary daily in the news,” says Jon Park, chair and bank leader of Westfield Bank. “It’s easy to think that it’s just noise and that things will stay this way forever. But it won’t, and companies should take precautions now against the inevitable increases in interest rates.”
The impact rate increases will have on borrowing money is obvious. But your company also could be impacted in other, more unexpected ways.
Smart Business spoke with Park about what you should expect from the coming rate increases, and how you should prepare.
When will rates start to rise and how large might the increases be?
Experts have predicted stable rates for now, with increases beginning in 2015. Once the Federal Reserve begins increasing short-term interest rates, they will likely climb at least 2 percent over a period of 18 to 24 months.
Interest rates work in cycles. The current 0.17 percent short-term rate (one month LIBOR) is considerably lower than its 20 year average of 3.27 percent. When rates have been artificially held low for too long, they will go up. It’s like tension in a spring that has to release.
Are there ways a rate hike can impact businesses that they might not expect?
Increases in interest rates will reduce the profitability of businesses in general. Though new borrowing will still occur, loans will be more expensive. Some companies are able to pass on these costs as price increases, like utilities and other businesses that are equipment-intensive. Many businesses will need to prepare for the increased cost, as the rising rates squeeze the profit margin for themselves, and their clients or vendors.
Another unexpected consequence is that the market value of commercial real estate could slowly begin to decline. The formulas used to determine a property’s worth are based on the positive cash flow the property generates, and interest rates are one of the biggest components of the formula.
What should businesses do to prepare?
Ask your bank to convert variable-rate term and real estate loans into fixed-rate loans. Many businesses have been borrowing at variable rates because it has been cheaper. Converting to a fixed rate will cost more in the short term, but will protect against future interest rate increases.
Approach your bank about re-pricing your fixed rate commercial real estate loan. Normally these loans are re-priced at five-year intervals. You may have several years before hitting the re-pricing threshold. Negotiating to re-price the loan now could secure that fixed interest rate for another five years.
You can also purchase an interest rate swap that will allow you to convert from a variable-rate loan to a fixed-rate loan. Ask your banker about the cost and terms involved to swap rates.
Finally, consider extending the term and/or renewal extension options of any real estate lease. Higher interest rates will eventually translate into higher rent payments, since interest expense is one of the largest cost components for real estate investors and landlords.
Are there other ways companies should prepare themselves from an operational perspective?
Finance your expansion now. If you need to buy a new drilling machine or update your computer system, take advantage of these low interest rates prior to the expected rise.
It is a prudent time to consider your process for accounts receivable. When interest rates are low, many companies aren’t as strict about payment terms. But as interest rates rise, it will be more important to collect your cash quicker and extend your payables longer. Plan ahead and implement the right strategy now.
This is a good time to make sure you have trusted financial advisers on your side to help you prepare for the coming interest rate hikes. ●
Insights Banking & Finance is brought to you by Westfield Bank
Before year’s end, taxpayers need to talk with advisers about their personal tax situation — wages, interest income, dividend income, capital gains, pass-through income from a business and other deductions. This preliminary road map can be used to make appropriate decisions.
“Years ago, I went through a projection with a client. We didn’t move the needle on their taxes much, but the client’s wife said, ‘I feel so much better knowing in December exactly what’s going to happen in April,’” says Patricia Rubin, CPA, director of assurance services at SS&G.
By reflecting in December, taxpayers have time to plan ahead, she says.
Smart Business spoke with Rubin about maximizing year-end planning.
Alternative minimum tax (AMT) is always a big topic. How can you plan around it?
This year, Congress formalized and stabilized many AMT issues. You should do an annual calculation to determine whether AMT will apply to you. A taxpayer must calculate taxes using the regular method and then recalculate following AMT rules and pay the higher amount. AMT rules are similar to regular tax rules. However, under AMT certain items are not deductible in computing taxable income, such as state and local income taxes.
Certain taxpayers will find themselves in AMT every year, but 2014 could have different results as regular tax rates have increased.
How can you reduce taxes with year-end planning?
Donating appreciated stock to a charity is one option, and taxpayers can deduct this under either tax system. If you bought a share of stock for $1,000 that is now worth $10,000, the charity gets $10,000 and you don’t have to pay capital gains on the difference while also claiming a deduction for $10,000. There’s also charitable giving of cash and non-cash items. If you’re cleaning out your closet, make a list. You cannot deduct without specifics on the thrift shop value of donated items. You also can time payments of your state and local taxes — bunching them up and paying them in 2013, or deferring into 2014.
What are some new taxes this year?
These are a little harder to plan for, so consult with your adviser to understand if, and how, these taxes affect you. In addition to the higher tax rates, there is a new 3.8 percent Medicare tax on certain net investment income, as well as a 0.9 percent Medicare tax on earned income. Both of these new taxes apply only if the thresholds have been exceeded. The first year, you need to understand which items are subject to the tax.
In addition, there is a phase out of itemized deductions if your income exceeds the threshold amounts.
What year-end planning is available for a business owner working in the business?
The income of a business owner with an S Corporation, LLC or a partnership passes through to his or her individual return, making tax planning critical.
Make sure your retirement plan maximizes the value to you and your employees, to take advantage of planning opportunities. You can accrue what you’re going to fund into the plan in the current year and pay it next year.
Two depreciation items may be significant. Under Section 179 of the tax code, you can deduct purchases of property, plant and equipment up to $500,000. As the law stands, it drops down to $25,000 in 2014. Also, you still can get 50 percent bonus depreciation for new equipment, which is scheduled to sunset in 2014.
Other items to capture are a health insurance credit for those with less than 50 employees and a self-employed health insurance deduction, which might apply to a shareholder in a closely held company.
Overall, the promise of tax planning is to let you know what’s coming, properly plan for the appropriate deferral of income taxes and reduce your overall taxes. You may not have all three, but year-end tax planning always helps avoid surprises. ●
Insights Accounting & Consulting is brought to you by SS&G
It used to be that buyers would send out purchase orders with standard terms and conditions, and sellers would ship the product with invoices containing their own conditions. Now that more business is conducted online, conditions are agreed to by click-wrap — clicking a box to accept the terms of the website.
That causes problems when employees wind up agreeing to terms that greatly benefit the seller or supplier to the detriment of the purchaser, says Todd C. Baumgartner, a partner at Brouse McDowell.
“For whatever reason — it might be psychological — there is a lot less negotiation with terms and conditions on websites. It’s important to know what you’re agreeing to, and negotiate if you need to protect your interests,” Baumgartner says.
Smart Business spoke with Baumgartner about how to handle click-wrap agreements and potential problems when they’re agreed to without proper review.
How are differences resolved when buyers and sellers have different terms?
The Uniform Commercial Code has standard rules to follow when that happens. But what’s occurring now is that, General Electric, for example, uses a website instead of putting terms and conditions on the back of invoices. There is no paper going back and forth. GE has the clout to pull that off — companies will just accept the terms in order to be GE’s supplier. But you can negotiate terms and conditions on websites.
A 2002 case, I.Lan Systems Inc. v. Netscout Service Level Corp., demonstrates what can happen with these click-wrap contracts. The buyer, I.Lan Systems, negotiated an extensive software license agreement with all sorts of protections. However, whenever there was an update to the software, it was downloaded from a website by the IT department. Every time that happened, they downloaded a new license agreement that voided the prior one. The new agreements were skewed in favor of the software company, stating that it was not responsible if the software crashed the computer system. When that happened, there was fairly extensive damage, but the court ruled the software company was only liable for the original purchase price.
It’s critical that companies understand every time an IT employee clicks these buttons, they’re getting a new software licensing agreement whether they realize it or not.
What’s the best way to deal with click-wrap agreements?
Don’t just click boxes. Have the head of the IT department review everything, and set up a policy in-house with appropriate procedures so these matters are presented to the right decision-makers.
If there’s something in the agreement that’s not acceptable, depending on your leverage, you can tell the software company you’re not doing click-wrap updates or negotiate an agreement covering the updates.
Click-wrap agreements are not necessarily a bad thing for the buyer or seller, but it’s important that it’s mentioned in bold at the bottom of your invoice or purchase order that the terms are on the website. The seller also needs to keep track of the terms and conditions it had. Then, if a company comes back later and claims it didn’t understand the terms, or didn’t know what was agreed to, sellers can produce what was on the website two years ago.
What sort of problems can arise years later?
Many times disputes are about specifications that the product was supposed to meet, and if it didn’t meet those specifications, what damages might be involved. As a supplier, you want to limit your consequential damages to replacing the product. A buyer will argue that it lost revenue as a result of the defective product. If the agreement doesn’t have the proper damage limitation, it’s going to be a problem for the supplier.
Are purchase agreements done differently online?
Essentially they’re set up the same way; it’s just that people are less likely to negotiate something that’s on their computer screen. Companies will still ask for changes to terms and conditions on a website, but the number of requests for changes drops substantially. Everyone’s classically conditioned to review a contract in Microsoft Word line-by-line; as businesspeople we’re still catching up with the fact that websites can be changed. ●
Insights Legal Affairs is brought to you by Brouse McDowell
First, the Small Business Health Options Program (SHOP) health insurance exchange was delayed. That was followed by a delay in the release of community ratings for small group programs. On top of that, there’s confusion about whether businesses with less than 50 employees, which are not governed by the Affordable Care Act (ACA) mandate to provide health insurance, can utilize health reimbursement accounts (HRAs) to buy individual coverage.
“The ACA places significant limitations on HRAs, and they are the only vehicle these companies have to distribute dollars employees can use to pay for premiums. The question is whether businesses that are exempt from the mandate are impacted by other aspects of the ACA. There will need to be some guidance as to whether it applies,” says William F. Hutter, CEO of Sequent.
The delays and uncertainty have left small businesses with few options for health insurance at a time when they need to finalize plans for 2014.
“That inherently creates a violation of rules because there’s a 60-day notice requirement to inform employees of any plan changes,” Hutter says. “We think the notice will be interpreted so that companies might be able to make a plan change, but not a cost change — the employer would have to pick up any difference. But that factor also has to be determined.”
Smart Business spoke with Hutter about problems with the rollout of the ACA exchanges and how reform continues to affect businesses of all sizes.
Should the 19 million people who were told their coverage was terminated have been surprised?
That was known back in 2010; it was written about. Plans were cancelled because the ACA changed requirements for insurers and the plans they provide. Plans are not only registered on a federal level but also on a state-by-state basis. Each state has a department of insurance to oversee plans and rate structures. A carrier needs to meet new requirements under ACA and state mandates, but when a plan design is changed, it is no longer grandfathered. It has to be terminated or withdrawn, and a new plan is submitted and approved. Whether this will be true going forward is uncertain.
If you are self-insured, the opportunity to keep the same plan is greater. Companies that self-insure can continue their plans as long as they don’t make significant changes.
Are self-insurance plans exempt from many ACA requirements?
Yes, that’s why companies have been exploring the option of self-funding arrangements. It’s a strange set of rules, but you can choose to cover or not cover certain things as long as they aren’t considered minimum essential coverage requirements. However, you can’t do it in a limited way; you can’t decide to cover autism, but only up to $10,000 a year. You have to choose to not cover it or cover it completely.
What self-funding does is create more predictability for companies because they purchase a stop-loss policy to limit their liability. Health insurance costs will continue to rise because of an aging demographic. The plan design can help keep increases to 4 to 6 percent annually instead of 30 or 40 percent.
Is that option also available to small businesses with fewer than 50 employees?
It can be, although you can’t do it like a big company would because a small employer doesn’t have the numbers to mitigate the risk of large claims.
Self-insurance is a design plan issue. Being self-insured with a specific stop-loss point might work. If you have 30 employees, you can have a stop-loss of $10,000 each. Then you need to figure out your actuarial funding for it and reserve that amount to pay for claims and expected losses. If you have a healthy group, it makes sense.
Small businesses also can join a pool for health insurance. That’s a service HR consultants or chambers of commerce provide, through an aggregation model, for clients or members to get health care. They don’t provide health care but establish a contractual arrangement with a company that does.
But the problem with the ACA is that new information is coming so quickly, and it takes months to rethink your health insurance strategy. This will continue to be difficult for companies to work through. ●
Insights HR Outsourcing is brought to you by Sequent
The Summit of Sustainability Awards
Winner Small Business Category
Ms. Julie’s Kitchen
When it comes to the grassroots level for the wisest practices for not only being a steward of the environment but of the health of the community, Julie Costell is on the cutting edge.
The owner of Ms. Julie’s Kitchen, a vegetarian restaurant that grows its own food, Costell goes back to basics even to the degree of recently tilling her garden with two plow horses.
“We turned almost two acres of vacant city lands into organic tillable, arable land,” she says “We removed debris, amended the soil, built a fence and planted beautiful flowers along with our tons of vegetables.”
As a result of growing her own food for Ms. Julie’s Kitchen and to sell in the neighborhood, she saved more than $5,000 on groceries. Building a fence with materials considered “seconds” and employing neighborhood youth along with summer youth workers saved $3,000.
No chemicals are used at the gardens, and produce is grown organically. Ms. Julie’s Kitchen uses organic biodegradable cleaning products and compostable containers which are put into compost at the gardens.
“Area residents have reported losing hundreds of pounds, decreasing diabetes medications and reducing heart medications after eating our foods on a regular basis and learning from us how to change their eating habits to benefit their health,” Costell says.
She also volunteers to teach cooking classes in the community.
Among the awards Ms. Julie’s Kitchen has earned include the Art of Living Foundation, International Association for Human Values & The Akron Peace Project Human Values Award 2011, Akron Life Magazine — Third Place Best of City for Healthy Lunch 2012 and 2013, and Fox 8 Hot List Third Place Best Vegetarian Menu 2012.
The Summit of Sustainability Awards
Winner Public Sector Category
City of Twinsburg
What started as an environmental protection program for portions of the Tinkers Creek flood plain and nearby corridor that the city purchased several years ago has bloomed into substantial efforts to conserve financial resources and reduce energy consumption as well as the city’s carbon footprint.
Energy management projects that have been completed include installing energy-efficient lighting at city facilities; replacing windows and doors with energy-efficient products; installing solar heating arrays at the outdoor city pool to save 50 percent in natural gas consumption and heated water expenses; and converting all traffic signals in the city to LEDs.
Water management at the city’s Gleneagles Golf Course now makes use of storm water retained on the property; in addition, organic fertilizer is applied to the fairways and greens. A total of 4,800 trees have been planted in the city since 1995 to help improve water quality, reduce storm water runoff and moderate temperature.
In the winter, city streets receive treatment with beet juice and brine for more environmentally friendly ice control.
Waste paper has been reduced significantly after the city encouraged digital communication and record keeping. Recycling efforts have increased for residents as well, and the resident recycling programs have achieved the second highest rate of community participation in Summit County.
Many other efforts are underway to help the city’s green initiative. The success of the city’s program is directly related to the corporate culture of sustainability adopted by the staff members who remain vigilant in their search for efficiency, sustainability and cost reduction.
The Summit of Sustainability Awards
Winner, NonProfit Category
The Akron Marathon
The efforts of the Akron Marathon to become an environmentally responsible sporting event since it started a recycling plan in 2008 have shown impressive gains each year. The first year, a quarter ton of material was diverted from the landfill and sent to be recycled, and last year, 5.46 tons of material was diverted from the landfill.
Last year, the Akron Marathon instituted other environmental initiatives in its efforts to be certified by the Council for Responsible Sport as an environmentally responsible sporting event. These included calculating the carbon footprint to travel to and from the race by participants, improved management of water supplies, better control of waste management, expanded information about recycling stations, and creative initiatives to reuse or recycle other race day products that may have otherwise been thrown out.
According to the group’s calculations for 2012, carbon dioxide emissions for vehicular and air passenger travel combined to equal 212.8 metric tons. The group can now use this benchmark calculation to help create a plan to reduce the carbon footprint in years to come.
These efforts to reduce the carbon footprint include providing access to public transportation, promoting carpooling, using alternative fuel vehicles and providing mass transit to and from partner hotels and relay exchange zones.
Last year, the organizers also saved 3,344 gallons of water by filling cups for the runners to the half-full level. This was the first year water usage was measured which will offer a baseline for future years.