Marcia Passos Duffy

When Dr. Hansen Chang’s medical practice began to grow, he needed to double his office space. Chang, who shares his practice with another physician, opened his medical office 15 years ago as a place where patients could receive expertise in both Eastern and Western medicine.

Within a decade, the two physicians, board certified in internal medicine and acupuncture, had grown the medical practice to six full-time employees, with a patient load of 10,000.

“Our practice was expanding and we were looking to move from a smaller office to a larger location 10 miles away in Berkeley Lake,” says Chang.

Along with the need for a larger office space, Chang’s telecommunications needs were also growing, and the office’s old T1 line was not able to handle the massive volume of data transfer that took place on a daily basis.

Smart Business spoke with Chang about the telecommunications needs his growing medical practice faced and the solution that worked for him.

What kind of telecommunications challenges did you face before your move into the larger space?

We were using a telecommunications provider that provided us with a T1 line. Not only was the smaller office incapable of handling our growing patient flow, but the T1 line, although reliable, was extremely slow and overloaded.

Additionally, medical records are required to be transferred electronically, which was part of the problem. Laboratory services that use email added to the issue. Lastly, the pharmacy needed a reliable connection. We needed a telecommunications provider that could accommodate all of this and make things more efficient with a faster Internet connection.

In a medical practice, security is paramount because we deal with sensitive material and personal patient information, so having a secure and reliable connection was important to us.

Why did you choose Comcast Business Class for the new office space?

We constructed the new office from the ground up and at the time there were no fiber optic lines or cables in the location, so we had to find someone who could build our cable infrastructure and complete it before we moved in. Because we deal with health emergencies regularly, we also needed to ensure that the transition was seamless and that we didn’t experience any downtime.

We evaluated various carriers, but Comcast offered fast Internet speeds as well as Norton Security Suite and Cloud Services from Microsoft, so that made it easy to choose.

The actual switch took place outside regular business hours, when the phone lines were forwarded to an answering service, but it was instantaneous.

We also wanted a private static IP address to access medical records from anywhere — from the office computer, home computers or laptops, so that if an emergency call came through, medical records could be accessed remotely. This private IP would also allow for viewing and transferring data safely and securely.

Additionally, Comcast Business Class provided a bundled phone line with our Internet service so we now work with one provider rather than multiple companies.

How long did the process take?

The planning stage took approximately a month, but it was worthwhile because the process went so smoothly. After that, the actual cutover was instantaneous and was done over the weekend before the new office opened on a Monday.

How has the new system helped your medical practice run more smoothly?

In order to provide a reliable service, we require a reliable backbone. With the high volume of patients coming in, efficiency is key. For example, patients should be able to go straight to the pharmacy after the doctor’s visit to pick up prescriptions, have a lab report emailed directly to them, and all their insurance information entered and sent instantaneously. Without a reliable network, this would not be a smooth process for our patients.

Communication is key in the medical business, and doctors are using more electronic devices and methods to do this. The system works very well now but as the practice expands, there may be a need for increased speed or bandwidth, which can be easily done.

What other factors are critical with the service?

Reliability comes first. Speed is next. Downtime can be disastrous in a medical practice, as missed phone calls from the ER or a pharmacy can be critical.

When dealing with human lives our telecommunications system is critical. To be able to handle any type of emergency, I have to put my trust in my provider’s network.

Dr. Hansen Chang runs an internal medicine and acupuncture practice in Berkeley Lake, Ga. Reach him at or (770) 454-9047.

Anthony Catinella is director of sales for Comcast Business Services. Reach him at or  (770) 559-2132.

Insights Telecommunications is brought to you by Comcast

You may not have given much thought to your company’s 401(k) plan since establishing it years ago. And it is likely that you have a third party service provider, such as a bank or financial institution, doing the administrative work.

But a new ruling by the Employee Benefits Security Administration (EBSA) — which goes into effect July 1 — is forcing in-house retirement plan administrators to stand up and take notice. The new regulation, called the Final Sponsor Fee Disclosure Regulation under the Employee Retirement Income Security Act, could put your company’s plan administrators in serious financial jeopardy, says Charles Bernier, president of ECBM Insurance Brokers and Consultants.

Company plan administrators, who are fiduciaries, have always been personally liable if they do not fulfill their responsibilities. But this new rule, which aims to rein in third-party service provider fees, has the potential to bring financial calamity to plan administrators who are unaware that they, not the service provider, carry all of the liability for missteps.

“Many company plan fiduciaries — who can be the owner, a financial or human resources officer or director — don’t realize that they could lose their homes over this,” says Bernier.

Smart Business spoke with Bernier about the new rule and how to protect your company’s 401(k) plan fiduciary.

What does this new regulation say?

The Final Sponsor Fee Disclosure Regulation, or 408(b)(2), mandates full disclosure of all fees and compensation, direct and indirect, that are charged by 401(k) service providers. Prior to the regulation, the onus was on the company’s plan fiduciary, or trustee, to find out the service provider’s fees and compensation. Before, if a fiduciary didn’t ask, the service provider didn’t have to tell.

In this mandated disclosure, a service provider also has to state if it is a fiduciary for the plan, or whether it’s not. This can come as a surprise to plan administrators who may have assumed, incorrectly, that their service provider is also the fiduciary.

Do many businesses incorrectly make this assumption?

According to the Department of Labor, there are 483,000 retirement plan administrators in the U.S. Of those, 17 percent are aware that they are the fiduciary and 83 percent are not.

The problem with not knowing that you are the fiduciary of your company’s retirement plan is that you have unknowingly put your personal assets at risk. A fiduciary assumes personal liability for the responsibilities for administering the plan correctly.

A February 2008 Supreme Court ruling states: ‘Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations or duties imposed upon fiduciaries by this title shall be personally liable to make good to such plan any losses to the plan resulting from each such breach.’

The word ‘personal’ means just that, and there is no corporate veil in place to protect you. So, in essence, you have pledged your home. That is the dirty little secret to this deal. And ignorance is no defense in a court of law.

The responsibilities and duties of a fiduciary, among other things, include making sure that the plan is paying out only reasonable plan expenses to a service provider.

How are reasonable plan expenses defined?

The benchmark number for a plan of        100 participants with $2 million in assets is 1.32 percent. If the service provider fee is, say, 2.5 percent, the fiduciary must document and report this.

This may not seem like a lot of money, but when you consider that there are 72 million Americans in 401(k) plans, and if everyone is overpaying fees by 1 percent for 25 years, compounded, you can see that it can be very lucrative for service providers.

If a company’s plan administrator has not documented this information, he or she may be liable for those extra fees; one estimate is that this can be as high as $75,000 per employee over the life of a 401(k). Estimates are that $2.3 trillion will be put back into employees’ 401(k) as a result of this new regulation. That money must be paid back to the employee’s retirement fund. If the company’s plan administrator is also the fiduciary, that money will come out of the administrator’s own personal assets.

What can plan administrators do before July 1 to protect themselves?

First, consult with your company’s attorney to find out if you are the fiduciary of your company’s 401(k) plan. Second, get a fiduciary liability policy before the rule goes into effect July 1. These plans are typically not expensive and can cover all individuals, trustees and board members who act as fiduciaries of the company’s retirement plan.

Finally, get a new administrator for your plan that has low fees and accepts fiduciary responsibilities.

What are some key dates for the new regulation?

July 1 is the date that the service provider must disclose its fees and compensation to clients and to explain whether it is the plan’s fiduciary. These meetings between service providers and a company’s plan administrator are already taking place all over the country.

On Aug. 30, the company’s fiduciary must issue a report on a monthly basis to each of its employees about how much the service provider is taking out of each 401(k) each month in fees and other compensation. If an employee complains about this fee to the Department of Labor and asks for an audit, the fiduciary must comply and present reports about these fees for the entire life of the 401(k). And these monies will have to be put back in. And if you are the fiduciary and do not have fiduciary insurance, those funds will be taken out of your personal assets.

Charles Bernier is president of ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100 or

Insights Risk Management is brought to you by ECBM Insurance Brokers and Consultants

Saturday, 25 April 2009 20:00

Who owns your brand?

The days of having one-way conversations with your customers are over.Today, businesses not only talk to their customers, customers also talk back — and to each other — on social networking sites.

You may think that the more buzz there is about your business the better, but are you prepared for the impact that interactive marketing has on your carefully crafted corporate message?

“Marketers have entered an era when they are no longer in charge of the message — and that is scary,” says Debra Zahay, Acxiom Corporation Professor of Interactive Marketing at Northern Illinois University.

Smart Business spoke with Zahay about the impact of interactive marketing on the Web and what businesses can do to regain control of their marketing message.

How is marketing different today than in the past?

It is no longer the 1950s, when everyone came home from work and watched the same TV shows and received the same message. We now have the ability to engage customers through RSS feeds, e-mail, blogging, podcasts, webinars and social networking sites.

When customers want to find out about your product or service, they turn to the Web to read reviews, interact with other customers and give feedback to the business. Ultimately, the result of all this interaction is that the customer ends up owning the brand — they are now in charge.

One of the opportunities this interaction creates is a new ability for businesses to take this data from customers and create personalized messages and even products. — the poster child of interactive marketing — remembers your preferences, profile and what you ordered, and then makes recommendations for future purchases. Interactivity is also driving new products, such as Nike shoes; a longstanding feature on its Web site allows customers to personalize running sneakers with not only color and style but also the customer’s name.

But there are major challenges to interactive marketing. The first challenge is figuring out which channel is the most effective for your particular product or service. The second is how to control and manage all the talk and opinions about your company. The third is figuring out how to measure all the relational data that will come streaming in once you jump into social media.

How can a business find the right social media for its message?

Look at your marketing objectives. If you are trying to reach a target audience that is greater than 75 years old, they may be on the Internet, but they are probably not in social media. Fish where the fish are. If your target audience is using just e-mail or is on Facebook or Twitter, go there.

Second, learn social media. After you learn where your target audience is hanging out, learn how to use the media. Sign up for an account on YouTube, Twitter, LinkedIn or Facebook. Learn the landscape and learn how to use social media.

Once it finds the right social media, how can a company use it to best get its message across?

Tie social media to your strategy. What do you want to achieve with social media? For example, Microsoft wanted to create a better image of itself to counter the monolithic image it had with its customers. So it created The Human Face of Microsoft, where one employee blogged about the company, positively and negatively.

The goal is not to always paint a happy and positive picture of the company but to aim for sincerity. Comcast has a huge presence on Twitter and is engaging customers and solving customer complaints using this social networking tool.

Second, remember consumers are very smart and will tune out social media that exist solely to put a positive spin on everything. Consumers are looking for genuine interaction, so involving technical rather than public relations personnel in a blog, for example, is a good idea.

Lastly, monitor the posts. While you don’t want to filter out negative posts, you do want to monitor and delete those that are inappropriate or are not genuine concerns about your product or service.

How can a company measure the data it gets through social media?

What goes on inside social media, unfortunately, is difficult to measure. It’s messy. While you get to know your customers, you can also become overwhelmed by the data. But if you can get a handle on it, studies show you’ll be more successful in customer retention.

One way to manage the data is to create a new position of director of social media. You can also hire a social media consultant if your firm does not have the resources to create this position.

But realize that even a social media expert will have limits on what he or she can report. It is nearly impossible to figure out how these social media channels are interacting. It is possible to build models to track some of them, but you might never pinpoint the marketing ROI of, say, all your time spent Twittering or on Facebook.

Debra Zahay is Acxiom Corporation Professor of Interactive Marketing at Northern Illinois University. Reach her at (815) 753-6215 or

Thursday, 26 March 2009 20:00

Customer communities

Communities not only exist in neighborhoods. They also exist in the marketplace: from service establishments tocafes and diners, from weightlifting gymsand health clubs to bars. These are called“third places,” and the social interactionthey bring becomes the driver of consumption, says Mark Rosenbaum, a FulbrightScholar and an NIU College of Businessassistant professor of marketing who hasconducted various studies on third placesand the marketplace, which have been published in the Journal of Service Research.The benefit of having a business that caters— or encourages — these communities iscustomer loyalty.

“These are the customers who don’t payattention to coupons given out by competitors,” he says. “These are the customers whoprovide free promotion via word-of-mouth.”

Smart Business spoke with Rosenbaumabout the benefits of creating customer communities and why they are important.

What is an example of a successful customercommunity?

Customer communities often form spontaneously around neighborhood taverns,bookstores, cafes and coffee shops. Theseare simply adorned establishments whererelationships are the drivers of consumption.The ticket price of the product or service isaffordable; for example, a cup of coffee, sothe customer can come every day. The richness comes from the social interaction.

Why should these groups matter to othertypes of businesses?

Businesses have started to realize the loyalty benefits of these customer communitiesfor their own companies and are creatingcorporate-sponsored communities of theirown. Companies such as Jeep, HarleyDavidson, Neiman Marcus and Winnebagohave created exclusive customer communities that encourage social relationships withother customers around product ownership.If you own a Harley, you can belong to theH.O.G. club; Neiman Marcus created a community called ‘In Circle,’ which allows customers to join after they spent a certainamount at the store.

How do customer communities impact customer loyalty?

Satisfaction alone does not generate loyalty. Social relationships add value to anexchange and social bonds are the ‘stickinessfactor’ that attaches a customer to a specificfirm. By making customer-to-customer interactions easier, it provides a great value atalmost no cost to the organization.

Do online communities provide the samebenefits?

Online communities do offer organizationsbenefits. It not only provides a customer-to-customer place to exchange ideas, but thecompany gets the added benefit of listeningto the conversations and getting free marketresearch ideas. But it is too new to firmly conclude if online exchanges provide the samedegree of loyalty that face-to-face interactions do.

What if the firms don’t understand or developcustomer communities?

The market will create these communities if companies don’t. was createdin response to dissatisfaction with UnitedAirlines. One has to wonder whether Unitedwould have been better served to have a blogwith positive and negative experiences on itssite. If communities are going to emerge anyway, you might as well be a part of it and havesome control. That said, business ownersneed to be aware that customer communitiescan sometimes take over and change theaura of a company or establishment. This isparticularly true online when negative comments can take over a forum or blog. In someservice firms, it is possible that a group of regulars can ostracize new customers.

How can customer communities be createdto produce a positive outcome for the firm?

Be proactive when creating your marketingplan; have discussions and plan for customersocial relationships. The ultimate customerloyalty lies in an organization creating, facilitating and encouraging customer-to-customer relationships.

The payoffs outweigh the negatives. Theorganization will have an opportunity tolearn from its customers; the customers gainknowledge and experience about the product/organization from existing customers,which lowers the risk of a potential customer’s purchase decision.

What are ways to successfully incorporatesocial relationships into the marketing plan?

  • Have ongoing conversations with customers. Listen to what other groups are saying in the blogosphere and at your place of business and respond.



  • Be obsessive with customer care, from service failure through service recovery. Remember, customer care is now the democratization of the customer and is no longer for the privileged few.



  • Create and sponsor organizational communities. If you are a service organization think of ways you can get your customers to stop, linger and talk to other customers. People like to socialize and enjoy being in the company of other people.

MARK ROSENBAUM is a Fulbright Scholar and assistant professor of marketing for the NIU College of Business. Contact Rosenbaumat (815) 753-7931 or

Monday, 26 January 2009 19:00

Recruitment brands

Your business is branded to communicate benefits to customers about your products or services.

But do your prospective employees know what it is like to work for your company? Do they know why it is better to work for your business rather than your competitor?

If your job applicants are in the dark about the culture of your company, you need an effective recruiting brand, says Ruth McCurdy, vice president of corporate connections with Talent Tree, a Houston-based staffing company.

“The result of having a good recruitment brand is that prospective employees will seek you out rather than you doing all the seeking,” says McCurdy.

Smart Business spoke with McCurdy about why a recruitment brand is important and steps to take to develop a successful one.

Could you give an example of a successful recruitment brand?

The most successful recruitment campaigns have actual employees doing the promoting for the company. For example, we all know that Google is a great place to work. Why? Because there have been a number of stories in the press about what it is like to work for Google. Google Jobs, a section of its Web site, is dedicated to showing pictures of employees who give testimonials about what it is like to work for the company. Google’s recruitment brand emphasizes that it encourages creativity and fun in the workplace.

Not every company has the same recruitment brand and will attract different kinds of employees. Other companies that do a good job with recruitment include The Container Store and Macy’s. These businesses have an entirely different culture than Google, but they do have a recruitment brand that is designed to attract precisely the type of employee that will fit in with the culture.

What is important is that a company clearly communicates to employees and prospects what it stands for; the company needs to create a compelling picture of what it is like to work for the organization that attracts and retains employees.

Is attracting and retaining employees the main goal of creating a strong recruitment brand?

Yes. It has the added benefit of saving the company time and money. Businesses that have strong recruitment brands don’t have to recruit very much since prospective employers seek the company out.

The byproduct of creating a recruitment brand is tenure, loyalty, increased productivity and happy employees.

What are the steps to creating a good recruitment brand?

  • Build an appealing brand. Make sure you know exactly the people you are targeting and what they want in an employer. You don’t want to create a brand that does not appeal to your target audience.

  • Talk to employers to help draw a picture of your company’s culture. Engage employees from all segments of your company, not only executives, in the process of recruitment.

  • Select a few people to tell their story. Make sure you hand pick a wide range of employees who are successful and happy working for your company. Do not use actors or models for your Web content or print ads. Have them tell their story about why they like working for your firm; make sure you use this information in all your recruiting materials. It is your employees’ stories that will make it real. People believe other people, particularly if the stories are sincere.

What are the disadvantages of not having a recruitment brand?

When a business does not have a recruitment brand, it will not attract the type of employees that will be happy working at the company. Recruiting can also be more expensive and time-consuming since, without branding the work environment, a business might get applicants are not a right fit for the company.

Many companies don’t understand why this is so important. Company owners and executives may believe that they can effectively compete for employees by offering a job position with a bulleted list of responsibilities and a competitive salary. This will not get you the best selection and the right fit of applicants.

Remember, in addition to the details of the job, employees want to know what it is like to work for a company, if they will be happy there, and if others are happy working there.

RUTH MCCURDY is vice president, corporate connections for Talent Tree, a staffing company based in Houston. Contact McCurdy at (713) 361-7555 or

Monday, 26 January 2009 19:00

Web 2.0: Serious business

Web 2.0 includes a dizzying array of social technologies such as YouTube, Second Life, Twitter, LinkedIn and Facebook, plus blogs, instant messaging, texting and more. Compared to 1.0, with its one-way static communication, the second generation of the Web encourages user interaction, self-expression, collaboration and community building.

While this is fine for socializing and fun, what does it have to do with business? Everything, says Joe Cullinane, executive in residence at the NIU College of Business and co-author of the upcoming book, “Surfing the Rift.”

“Web 2.0 is fundamentally changing the way we talk to customers and investors,” Cullinane says. “Executives need to be there because customers and competitors are there.”

Smart Business spoke with Cullinane about how and why CEOs should join in on the Web 2.0 phenomenon.

What are some examples of Web 2.0 applications that are useful in business?

Social networking sites can be used to gain valuable customer feedback; it is also an excellent place to promote products and train employees. IBM, for example, uses the virtual world Second Life for training and mentoring. Ernst & Young has a Facebook page it uses for recruiting. Barack Obama’s political campaign strategically used Web 2.0 tools, like Facebook and Twitter, with unprecedented success.

What is the first step in getting involved in Web 2.0?

You can’t just haphazardly jump in. First, you need to know what are the tools of choice among your target audience. For example, anyone with a teenager knows that teens rarely answer their cell phones. If you want a response, you need to text them — that is their communication tool of choice, for the moment anyhow.

The same is true for your customers or potential customers. Your marketing department should know the age group and other demographic information of your customers. Familiarize yourself with what is going on in their virtual world. Perhaps you can engage a Gen Y employee to give you a tour of what is out there. Then find out where your customers are going. Are they reading blogs or listening to podcasts? Are they on LinkedIn or Facebook?

You don’t need to know about all these technologies inside and out — just the ones that reach your target audience and are appropriate for your products and your business.

Are there any pitfalls to using social networking in business?

Yes, and the biggest one is the loss of control of your company’s message. Once you open up the message to user and customer involvement you can lose control of what is said about your company. There are also issues of violating copyrights and trade secrets and revealing sensitive financial information.

A business needs to set rules and guidelines for employees so that they do not post inappropriate things that can be online forever. Some companies are beginning to look at employees’ Facebook pages and institute rules against disclosing company information on social networking sites.

Another hazard is that competitors might publish false information about your company. There needs to be someone in the marketing department that stays on top of everything that is out there and corrects any false information.

Naturally, there is still a bit of wariness among executives about social networking because of its potential to dilute a brand. The option is to cling to older tools that have diminishing returns. A better option is to experiment, test the waters, listen in on the conversations and slowly get involved in networking that is relevant to your business.

Given the pitfalls, why should executives get involved with Web 2.0?

For one thing the Web 2.0 phenomenon is already happening and you can bet conversations are already going on in cyberspace about your company.

The other reason is that those in Generation Y are tech-savvy and are entering the work force in large numbers. But they are not necessarily using the same technology as executives. Gen Y is on Facebook, the CEO may be on LinkedIn. Businesses need to be able to reach their future employees — and their customers — on the right social networking sites, because that is where they can be found.

Granted, it is almost impossible to keep up with all the changes and all the conversations that are happening on cyberspace. Technology is driving these conversations because of the new ways of communicating that are cropping up all the time. I don’t think anyone has caught up with the full potential of these technologies, such as Twitter.

But, it is important that businesses at least try and keep up, because if you don’t, you can be sure your competitors will and are already using it to their advantage.

JOE CULLINANE is an executive in residence at NIU College of Business. Reach him at (815) 753-6393 or

Monday, 26 January 2009 19:00

Do you need D&O?

While the majority of Fortune 500 companies carry director and officer (D&O) liability insurance for the obvious risks, including securities class-action lawsuits, should your business carry this coverage?

In an environment where litigation is commonplace, you should consider it, particularly if you face increased exposure due to certain business activities, says Jennifer M. Bell, managing director, president and chief operating officer at Aon.

Bell notes that in 2008 there were more than 210 major securities class-action claims filed — a 19 percent increase from the number of claims filed in 2007 and a 76 percent increase over 2006. The average class-action claim settlement for 2008 was $37.5 million, which did not include defense cost.

“Companies face increased exposure when they are completing an initial public offering or private placements and engaging in merger and acquisition or divestiture activity,” says Bell. “But even companies not engaging in these activities do not escape all potential liability.”

Smart Business spoke with Bell about the risks that D&O liability insurance can cover and the hallmarks of a good policy.

Why is D&O insurance important, particularly if a company is not publicly traded?

This insurance is important because it provides coverage directly to the directors and officers in situations where the company is unable to offer personal asset protection for these individuals. Directors and officers have an obligation to a company’s shareholders, the company itself and other third parties. This obligation is present regardless of whether or not the company is publicly traded, privately held or even nonprofit. People who serve as directors and officers are exposed to personal liability as a result of their acts or failure to act with respect to these duties. While a company will typically offer indemnification for this liability, there are potential gaps. The D&O policy is designed to step in a fill these gaps and respond in the event that a claim is made against a director or officer for a wrongful act. The policy provides coverage for defense costs as well as judgments and settlements.

What is the biggest potential exposure that D&O insurance covers?

For public companies, the biggest exposure that a director or officer of a public company faces is a shareholder securities class-action lawsuit. These claims typically allege that the directors and officers made false or misleading statements or failed to disclose facts to the public that resulted in harm to shareholders. For privately held organizations, directors and officers face liability from minority shareholders, family shareholders, customers and suppliers. The largest exposure for a director or officer of a nonprofit organization tends to be employment practices related.

What coverage does D&O insurance offer?

The public company D&O contract typically has three main insuring agreements: coverage for the directors and officers to the extent the company is unable or unwilling to cover them; coverage for the reimbursement of the company’s losses as a result of lawsuits against its directors and officers; and coverage for the company for securities claims made against the company. Privately held company policies and nonprofit D&O policies provide the same basic coverage offered for public companies with the addition of coverage for employment practices liability exposures.

What are some of the hallmarks of good D&O insurance?

All D&O policies are different. However, here is some of the language to look for in a good D&O liability insurance policy:

  • Severability of the application and exclusions: A provision to restrict the insurance company's ability to unjustly blame one insured’s knowledge or actions to another insured.


  • Non rescindable coverage: This provision eliminates the insurance company’s ability to take the contract away as if it never existed. A tactic insurers sometimes utilize in a major claim scenario.


  • Final adjudication in the underlying action language for the personal conduct exclusions: Every primary D&O contract has exclusions for personal conduct such as fraud and illegal profit. However, a D&O policy should be amended such that these exclusions can only be applied if a final judgment in the underlying action has found that there was illegal fraud or profit. If a final judgment has not been made, then the exclusion cannot apply.


  • Dedicated Side A DIC (Difference in Conditions) policy: This policy provides coverage that is solely for the benefit of the directors and officers when there is no indemnification available from the company. This policy provides a ‘last line of defense’ against exposing a director’s or officer’s personal assets to a claim.


  • True worldwide coverage with local policies where appropriate: Foreign countries may not permit nonadmitted insurance to respond in the event that a claim is brought in a foreign jurisdiction against foreign directors and officers. For multinational corporations, careful consideration should be given to purchasing local policies in countries that prohibit nonadmitted insurance. 

JENNIFER M. BELL is the managing director, president and COO of Aon. Reach her at (216) 623-4110 or

Tuesday, 26 August 2008 20:00

Insurance education

If a customer, say, in Australia, purchases your product and suffers an injury caused by your product, will your U.S. insurance policy cover this claim? Or, if you need to meet a client in Mexico and drive over the border with the company car, are you covered if you should have an accident there? If you don’t know the answers to these questions, chances are that you may not know the ins and outs of your insurance policy.

“U.S. auto policies do not cover liability in Mexico, and U.S. product liability policies don’t cover claims that are filed overseas unless they are set up properly, but this is not something business owners typically know unless they learn about how insurance works, either through educating themselves or the hard way — experience,” says Paul Havener, vice president of Aon Global Client Network, a division of Aon Risk Services Inc.

Smart Business spoke with Havener about how business owners can learn about what exactly their insurance policies cover before the worst-case scenario happens.

Why is it difficult to understand exactly what insurance policies cover?

Insurance and risk management are complex fields. Insurance policies are legal contracts that require considerable interpretation. A layperson can’t just jump into the field of insurance without some working knowledge of what all the jargon means. There are exclusions and limitations in all insurance policies, and it is important to understand what these are and what the terminology means. There are also words in an insurance contract that look like everyday words, but mean different things in the insurance field.

What words need to be watched out for?

For example, the term ‘personal injury’ in everyday conversation means someone getting hurt, that is, injury to the body. However, in the insurance business, this term means damage to the character of a person, such as false arrest, libel or slander. The insurance term ‘bodily injury’ is what actually refers to physical injury to a person. If a business owner misunderstands these terms, he or she may think that the insurance covers something that, in fact, it does not.

What are the repercussions of not understanding your insurance policies?

In addition to the risks of misunderstanding the language and, consequently, what is included or excluded, business owners can underbuy insurance and not know they are underinsured until something happens. I’ve seen businesses go bankrupt from a fire or a suit from a liability claim where the insurance purchased does not cover the cost of the claim and the business can’t pay the balance. For example, if a business has $100,000 to spend on insurance, it can do it one of two ways: Buy a $1 million policy with a $5,000 deductible or buy a $2 million policy with a $50,000 deductible. Most small businesses will opt for the lower deductible, but they neglect to think about what a big loss would do to the company. In many cases, a large loss could put them out of business whereas they could probably afford the higher deductible with the higher level of protection.

Is this kind of foresight just for high revenue companies with higher risks?

Generally, the larger the company, the greater its potential for problems. However, small businesses can have big business problems if they are in high-risk businesses or manufacture a high-risk product. The more intricate a business is, the more important it is that someone within the company understands its insurance policies and what they do and don’t cover and not just rely on their insurance agent’s recommendations. In order to properly cover a business, someone within that business needs to possess a working knowledge of insurance and also understand the intricate workings of the company. In a smaller company, the logical person for this task would be an owner or chief financial officer. Many larger companies have risk managers.

What are the basics that a business owner or executive should know about corporate insurance policies?

The first thing is insurance ‘language’ — what all the terminology means in an insurance policy. Next is an understanding of contractual relationships with suppliers, vendors and customers and the risks in these relationships that can be covered by insurance. Business owners also need to learn how to handle claims and control losses as well as to know what is covered and what is not covered by their various policies.

What is the best way to learn how corporate insurance works, other than by experience?

There are trade publications and online services that can provide needed information. Insurance consultants are also a good way to help manage insurance policies. Many insurance companies and brokers/agents also have free educational forums or workshops, some online and some in person. As an example, our company offers a two-day course to executives and business owners who want to learn about business insurance and risk management issues that can affect the companies that they own or for which they work.

PAUL HAVENER is a vice president of the Aon Global Client Network, a division of Aon Risk Services Inc. (, a risk management, human capital and reinsurance-consulting firm. Reach him at (216) 623-4138 or

Sunday, 24 February 2008 19:00

Buy vs. lease

No matter what kind of business you’re in, you’ll likely have to decide whether to lease office space or buy a building.

“The pros for buying an office building are similar to the rationale when deciding to rent or purchase a home,” says Patrick Burns, business banking vice president at Plano-based ViewPoint Bank. “Similar to home ownership, owning the building in which your business resides requires serious considerations. These include future price appreciation, cash flows and down payment costs.”

Smart Business spoke with Burns regarding the benefits of owning your own building versus staying in your lease.

Are there certain types of industries — or business circumstances — that make it more advantageous to lease space rather than buy?

Yes, there are. It’s typically a disadvantage to buy when a business has sales under $250,000 a year. Banks require the debt service coverage ratio to be 1.25 cents on the dollar. Therefore, if you have a $5,000 mortgage payment per month, the bank will want to see cash flow of $6,250 or more in order to cover the mortgage payment. In other words, your cash flow needs to exceed payments by 25 percent.

Other businesses better off leasing are start-up service businesses, such as attorneys or other professionals. These young professionals are usually saddled with higher education debt and don’t have the cash flow or savings to make a down payment on a building. Also, there are many other attractive options — such as leasing an executive suite with an assistant. It is best for these businesses to get a few years under their belts before purchasing a building.

Another reason to continue leasing is to allow your business to be scalable. Companies that own buildings and are letting employees go can have a more difficult time and may have to either sell the building or sublease the extra space. Those renting will simply need to pare down their office space.

When should a business owner make the decision to buy a building?

The best time to purchase a building is when a business owner has a good cash flow and money in the bank to make the down payment necessary for the purchase. For example, if a building is selling for $500,000, the owner will need to put 20 percent down — or $100,000. Do you have that kind of cash, plus some left over for cash reserves? The answer should be ‘yes’ in order to approach a bank for a commercial mortgage loan.

Also, a business has to have a strong positive cash flow to make the mortgage payment and cover taxes, insurance and maintenance costs. That said, tax deductions and appreciation can make this overall monthly cost less of a burden than renting. For example, if a business owner is paying $5,000 a month leasing office space, it is comparable to a $523,000, 15-year 8 percent mortgage payment. If a business owner finds a building that costs $500,000 and puts $100,000 down, it will be a $400,000 loan. The monthly payment would be approximately $3,800, equivalent to $1,200 a month in savings. When the business owner deducts interest and other costs, the monthly out-of-pocket expense to own the building is even less.

Are there other advantages to purchasing?

Yes, buying a building automatically gives you a second business in real estate investing. This is particularly advantageous to small business owners who may need the perks accompanying ownership that large companies have, such as 401(k) programs. The building loan, as it decreases in debt, can be viewed as a retirement savings vehicle for the owner. Also, there are a variety of options available to the business owner at retirement. These might include selling the office building, providing a lump sum benefit upon the sale and leasing the space, which provides a stream of income. Another advantage has to do with the business owner’s American dream: to see a building with his or her name or business name above the doorway. Of course, owning the building as a financial property is the largest perk; however, there is a lot of pride in owning a building on which you can’t put a price tag.

PATRICK BURNS is vice president, business banking at Plano-based ViewPoint Bank. ( Reach him at (972) 801-5859 or

Tuesday, 29 January 2008 19:00

Microsoft Office 2007

Each new release of Microsoft Office Suite has traditionally offered many new features. While MS Office 2007 is similarly packed with new bells and whistles, it’s different in a way that completely changes the way users navigate the software. MS Office 2003 and earlier versions’ way of getting at features were through fixed menus and hierarchical toolbars. In MS Office 2007, these are gone and are replaced with what is called “The Ribbon” — which users either intuitively get right away or struggle with.

“Businesses making the transition need to factor in a period of adjustment when switching over to MS Office 2007,” says Bill McClung, IT program director for Corporate College.

Smart Business spoke with McClung about the benefits to switching over to Office 2007 and the challenges that come with it.

If a business is happy with MS Office 2003 or 1997, why should businesses care about transitioning to MS Office 2007?

The majority of businesses today have MS Office 2003. They can try and keep their old version as long as they can, but, eventually, they will have to upgrade since MS Office 2007 will become the business standard. Businesses are naturally reluctant to upgrade because they don’t see the benefit — either in productivity gains or because of the extra cost. But, while this recent upgrade comes with a learning curve, it is well worth it.

If employees can take advantage of the extensive improvements in MS Office 2007, businesses will see direct impacts on their bottom lines. Microsoft has taken steps to reduce the numerous headaches that continually plague users of previous versions. Plus, MS Office 2007 is sharper and faster, and the reduced file sizes can create efficiencies for your office network.

What is different about MS Office 2007?

The most significant change that users will notice immediately is the new ribbon interface utilized throughout the suite. This modifies the existing version of the file menu that previous MS Office users have become accustomed to. Microsoft intended to make the appearance more intuitive to the end user, and it has a distinctly different feel than previous versions of the product. Users who have a comfort level in the more traditional Microsoft interface might be challenged to navigate it initially because it is so different.

What are the benefits to changing over?

Even though the ‘ribbon’ represents change, the idea behind it is to make all of MS Office more visual and more intuitive. Once you learn how it works, you can get more done faster because other processes are done ‘behind the scenes.’ There is also a feature that prevents files from being corrupted and unusable — a headache that has plagued previous versions. Excel sheets are bigger with more features. Files saved in MS Office 2007 are smaller, which means more room on the computer. While these behind-the-scenes changes may not be as sexy as the ribbon, they provide tangible benefits to a business.

What challenges have you seen from businesses that have upgraded?

Because of the change in appearance, there has been a challenge for employees to learn the new system. Training is very important to maximize the ROI of a company’s investment. Without it, the transition will be counterproductive in the short term because users will become frustrated when they can’t navigate as they do traditionally. In the long term, the frustration may fade, but, without training, companies will not realize the full benefit of the transition. Another challenge that has cropped up is the incompatibility of documents produced with the new version with computers that still have older versions of MS Office. Microsoft has addressed this problem with a converter, which can be downloaded from the Microsoft site.

How would you suggest someone learn to navigate the differences in this product?

There are a variety of MS Office 2007 training options available, including day training sessions designed specifically to address only the new features associated with MS Office 2007. This is a cost-effective way for businesses to provide training for their employees without a large investment of their time or retraining them about areas they already know.

How would someone decide on whether or not he or she should upgrade?

Frankly, if businesses don’t use MS Office all that much — they write a letter once in awhile or use a spreadsheet occasionally — it’s probably OK to continue using the older version. But, companies that use MS Office as an integral part of everyday business need to look into upgrading. There are ways to test out the software before you put the expense into it. That said, I think it’s important to realize why Microsoft has decided to change its user interface. A lot of users only access a small percentage of the MS Office software’s features. The idea behind this new version is to make the interface more visual to encourage people to leave their comfort zone and experiment more with the esoteric features that could help a business.

BILL MCCLUNG is the IT program director at Corporate College,, which offers employers custom-designed training programs to enhance future workforce development, job growth and job retention in Northeast Ohio. Reach him at (216) 987-5806 or

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