Technology makes call centers tick. It is natural for a business owner on the North Coast to wonder whether his or her call center vendor has the right technological tools in its toolbox.
Michael White says that having the right tools for the job is an ever-evolving process. “We typically find, or create, four to five new tools every year to keep our call centers agile and able to respond to the challenges of today’s marketplace.”
White and his team are responsible for all of InfoCision’s internal IT infrastructure and call center technology.
Smart Business asked him what technology tools he employs to keep his call centers competitive.
What tools does a call center need to be successful?
These days the most successful call centers take advantage of every opportunity to keep their work force productive. Part of keeping a work force productive is being able to give them different types of work depending on the demand. A true inbound/outbound blending solution gives call centers the ability to present their workers with inbound calls when the volume of incoming callers is high and seam-lessly transition them to placing outbound calls or doing other work when the incoming call traffic is light.
One of the most significant aspects of blending is the ability to receive consolidated reporting to help manage the time spent in each activity and to be able to make informed staffing decisions. The most successful call centers can achieve 45 to 50 minutes of productive time out of every hour.
What other tools might call centers use?
The best way to ensure effective communication is one on one, but oftentimes, there is a need to provide information messaging or to allow customers the opportunity for self-service. E-mail, fax and Interactive Voice Response (IVR) technologies all offer effective means of communicating with your customers. IVR technology is a perfect cost-effective solution for giving customers an informational message when they contact your call centers by phone. You can optionally invite them to speak to a live person if their needs are not met in the IVR message. IVR applications can also be much more sophisticated — to the point where they take an entire order and even offer context sensitive promotional offers depending on what products have been selected.
Can you give an example of where an IVR application has been successfully blended with a live operator solution?
Several of our TV ministry clients offer free products during their broadcasts, which can generate thousands of calls in a matter of minutes. To accommodate the influx of calls, we will often employ an IVR application to handle the free product offer. We present the caller with an initial menu of choices. For example: Press 1 for the free product offer that you just heard about; Press 2 for customer service; Press 3 for prayer requests.
Those who are interested in the free product are directed through the IVR application and asked a series of questions, using their touch-tone phone for the response. The first prompt is typically, ‘Please enter your home telephone number.’ With the home telephone number, we are able to reach out to a national database and look for the address that is associated with that phone number. If there is a match, we use text-to-speech technology to speak the address we’ve found, and we ask the caller to confirm whether or not that is the correct address.
The next prompt asks callers to speak and spell their first and last name, which we will either record or use speech recognition to input into a database, along with the rest of the caller’s order. Any time during this process we give the caller the ability to opt out and speak to a live operator. Also, the initial menu options would allow the caller to be sent directly to a person.
We’ve found the use of IVR to be a cost-effective solution for our clients and can help our call centers manage the high call volume situations that may not require one-on-one interaction.
Which tools have helped you to better manage your call centers?
Work force management tools can help to develop staffing models based on the historical trends of incoming calls. These tools work in conjunction with an automated call distributor (ACD) to look at the number of employees who need to be on a given shift, based on the number of calls that are expected that day or a specific hour of the day.
Scripting tools can significantly reduce training time and provide a consistent presentation that the operator can follow, as well as offer answers to FAQs (frequently asked questions) and context-sensitive product information.
Operator performance and productivity reporting tools are essential to successfully manage any call center effectively. Call center managers must constantly manage the need to keep their work force busy, along with the return on investment and performance goals of their clients, to ensure there is a win-win situation for everyone involved.
MICHAEL WHITE is senior vice president of information technology infrastructure and call center technology at InfoCision Management Corp., Akron. Reach him at (330) 668-1400 or email@example.com. In business for 25 years, InfoCision Management Corporation is the second largest privately held teleservices company and a leading provider of customer care services, commercial sales and marketing for a variety of Fortune 500 companies and smaller businesses. InfoCision is also a leader of inbound and outbound marketing for nonprofit, religious and political organizations. InfoCision operates 31 call centers at 12 locations throughout Ohio, Pennsylvania and West Virginia. For more information, visit www.infocision.com.
When recruiters hit the college circuit in search of America’s most talented graduates, applicants with previous and targeted business experience certainly stand out on their radar.
Enter the development of student managed investment funds, or SMIFs, to help future job seekers better connect business theory with real world practice.
Through SMIFs, “students have the opportunity to apply the theoretical paradigms acquired through their business curricula to the merciless reality of financial markets,” says Dr. Stefano Mazzotta, assistant professor of finance, Kennesaw State University, and faculty mentor for the SMIF. “The skills they develop working for the SMIF will contribute to defining the future leaders of society and are particularly attractive to potential employers.”
Smart Business recently spoke with Mazzotta about how participation in the SMIF is allowing students to more quickly integrate their skills and education with the needs of today’s companies.
How are schools adapting to more closely match real-world demands?
I think from the companies’ perspectives, training is a huge issue. Firms want people that can function in a relatively short amount of time in whatever role they have to take. So, schools need to provide not only a solid education based on life-long, lasting core skills, but also a preparation so that students entering the job market will need relatively shorter training. This is challenging for schools. Real world activities like student managed investment funds are helping to bridge this gap.
What are SMIFs?
Student managed investment funds are a broad type of initiative that provides individuals with experience that they can promptly use and the ability to deal with difficult and technical material. At the same time, these programs promote learning from the humanistic level, including interacting with and leading other people.
The students here at Kennesaw are building the fund as a start-up venture an actual LLC with real money to be invested, and the need for management. The Henssler Financial Group donated the seed capital, and we look forward to expanding the network of donors and investors. That’s the beauty of this kind of project: The largest part of the work for the students is to manage themselves and see how their efforts directly determine the growth of the fund.
How will the fund operate?
It will operate like any other investment fund, but students will research companies and industries, write reports and then manage and invest the money. To purchase or sell a stock, students will make a sales pitch to their student body, which will vote for the purchase or sale of a security, at a certain price, in a certain timeline. As the adviser, I will review their motivation and, if it’s sensible and they have done diligent research, I will endorse the transaction. At that point, the investment advisory board, comprised of faculty and members of the business community, will have the opportunity to review the proposed transaction. If no objection is raised, then the trade is executed. However, the investment advisory board and I have an oversight function. We’re more like a safety net. The students should be free to make their own mistakes and take credit for the good things they do. However, we think it would be unfair to let them do this without the opportunity to hear the opinions of more experienced people.
What kind of training do the students receive?
The experience is designed to provide the maximum benefit to students who stay in the fund for the last two years of college. Some groups of students are trained in a more quantitative fashion and look at different companies’ market data using state-of-the-art econometrics software and financial economics models to design allocation strategies with an ex-ante superior probability of beating the S&P 500 benchmark. Some other groups look at investment prospects more from a fundamental angle, examining accounting data, strategy, industry and management, and develop a more traditional stock selection craftsman-ship. This dual approach and the interaction among groups help to broaden their perspective.
How are students selected to participate?
It’s more natural for business students to apply for these types of programs, but we are expanding our horizons with respect to any other student in the university with a strong interest. What makes somebody a successful investor sometimes is not only the knowledge of investing, but also some field-specific knowledge. The student managers also recruit their fellow students to provide new resources for when others graduate. They have to share their learning and coach the next core group of students.
How is the business community responding to the SMIF?
The SMIF experience makes these students a little bit special, and they get more interest from employers. Even though we are a nascent group, we have already had very good responses from employers: Firms such as Morgan Stanley and ING have hired our undergraduates, and one of our graduate students is working in New York as a hedge fund auditor at Rothstein Kass, a well-known accounting firm. We are always seeking new collaboration with businesses that might want to become involved with the SMIF at different levels.
STEFANO MAZZOTTA, Ph.D., is an assistant professor of finance in the Department of Economics, Finance and Quantitative Analysis at Kennesaw State University. Reach him at (770) 423-6341 or firstname.lastname@example.org.
Education: University of South Carolina, bachelor of arts degree in advertising with a minor in marketing
What has been your greatest business challenge?
The largest challenge I had was selling Dun and Bradstreet software. I closed on a brand-new, big house I had built in Atlanta in November, and I was told in December they were going to publicly auction the software business. It started Jan. 2, and we didn’t sell the company until November of that year.
I had a role of selling the company, and I had a role of keeping the employees as well-informed as we could, most of which I couldn’t tell them. At the same time, we were trying to drive the business forward, and nobody knew who was going to buy us, so customers were hesitant to invest in our products.
We tried to inject a lot of humor. We had a studio in our offices, so every Thursday night I would write a script, and every Friday morning, I would do a taped voice mail message because I could blast it across the world to every employee. We always had people from out of town, so I had them as our roving reporters, and we had sound bites and talked about who got married, who had babies, what customers went live, what new customers we added and poke fun at the executive team, and then use that as a vehicle to communicate as much as I could about what was going on. That was a long, draining process.
What’s the best business lesson you’ve learned?
Everybody will tell you, you are what you hire, and I believe that. There is no substitute, period, for hiring people that are brighter than you are, that have more capabilities than you do, and then turning them loose and letting them have the freedom to perform.
Understand what you don’t know, and then hiring people who do what you don’t do well has had a tendency to keep me out of trouble in my career, so I think it’s the willingness to admit what you don’t know.
What was your first job ever?
I worked in a bank in a training program. It was awful. It was my job right after college. I tell you what, it was awful. I made $8,000 a year, but I was miserable.
What’s your favorite board game and why?
Oh, Monopoly are you kidding me? Monopoly because it’s play money. And I get to compete with my kids and my wife, and I probably lose more than I win, but you get to roll the dice with somebody else’s money that isn’t real, and they can’t fire you if you lose it, so it’s just fun, you know?
Open communication with employees shouldn’t end after the training process. When running a company that relies on good client relations, a healthy dialog among workers, management and the executive level sets a precedent that fosters success and retention.
Smart Business asked Mike Langenfeld, executive vice president for call center operations at InfoCision Management Corporation in Akron, about the role of communication in the workplace.
Is there a particular educational or job background that tends to produce better communicators?
Retailing, customer service, food service industry — jobs that require contact with people are ideal for this. We are looking for anyone with a good attitude and a willingness to learn. We can teach them to be successful.
You can teach product knowledge. Can you teach phone personality?
You absolutely can. We teach sales skills and customer service skills, whatever is needed for the client. We teach the communicators how to listen and then how to respond as well as how to use their voice to connect with the other person. Objection handling, internalizing and assertiveness are all skills that can be taught.
How does the InfoCision training program work?
The initial new-hire training is four to five weeks long. We have one week of in-class training, where the trainee stays in the classroom environment the majority of the week. During week one, we use instructor-lead presentations and take into account adult learning principals in how the information is taught and coached. The in-class trainer then works on the floor with the new hire during the second week of training. Additional classroom time is provided in week two.
During their third and fourth weeks of training, a call center trainer works on the floor with the new hires, continuing to develop their presentation skills, and getting them comfortable with the work. The trainers will work one on one coaching the trainees. We do still provide additional in-class training modules in weeks three and four. After four weeks of training, we are able to have 90 percent of the trainees working within 80 percent of the average performance of the established center. That trainee is then considered a graduate and is moved on to a supervisor team.
If a trainee is not able to perform within 80 percent of the average, they are given an additional week on the training team, and additional help is provided.
Do some communicators work better with one product or service than another?
Yes. We evaluate our communicators on the various programs separately. We will then try and place our people on the programs with which they excel. While the various skills can be taught, the individuals will have natural skill sets that may make them stronger on a particular program.
Employee, worker, team member: does it matter what communicators are called?
Absolutely. In an industry that is known to have representatives and agents, InfoCision has ‘communicators.’ They communicate the message of our clients.
We work for our clients and everything we say on the phones is approved by the client. We are an extension of the client and it is our job to ‘communicate’ the same message regardless of which communicator is making or taking the call.
Do communicators respond more to cash incentives or other perks?
It depends on the location. Cash in hand is good, but workers don’t like taxes being taken out. They like to be personally rewarded for success and prefer instant rewards versus drawings for a chance to win.
It’s also effective to offer incentives, such as flexible hours, vacation time, fitness centers, an on-site doctor, tobacco cessation programs, weight-management programs, wellness competitions between buildings and discounted daycare.
How do you build a sense of team with your workers?
We make daily announcements, hold biweekly meetings, put out team newsletters and maintain team boards in the call centers. There are special recognitions and awards at monthly Employee of the Month ceremonies to top performing teams.
How often do you poll employees about job satisfaction?
Once a month we have a Quality Environment Assessment and will hold open forums with random selections of our communicators to make sure we get feedback. Our president and CEO will end every Employee of the Month ceremony with a Q&A session to encourage constant feedback from our communicators.
MIKE LANGENFELD is executive vice president for Call Center Operations at InfoCision Management Corporation, Akron. Reach him at (330) 668-1400 or email@example.com. In business for 25 years, InfoCision Management Corporation is the second largest privately held teleservices company and a leading provider of customer care services, commercial sales and marketing for a variety of Fortune 500 companies and smaller businesses. InfoCision is also a leader of inbound and outbound marketing for nonprofit, religious and political organizations. InfoCision operates 28 call centers at 12 locations throughout Ohio, Pennsylvania and West Virginia. For more information, visit www.infocision.com.
One of Tony Quin’s favorite pieces of business advice is something he learned from his father, a British officer who spent four years of World War II in a Japanese prisoner-of-war camp.
“He always said business is just like being a warrior,” Quin says. “You put your armor on, and you gird your loins to go out every day to fight. It’s quite an honorable thing to do because you’re fighting for what you believe is right. Hopefully, nobody gets killed.”
Quin has taken that philosophy to heart with IQ Interactive, a 75-employee digital advertising agency that is pushing the limits of broadband Internet with its groundbreaking Web site design.
Smart Business spoke with Quin, CEO and executive creative director of IQ Interactive, about why CEOs need to act with certainty.
Q: What are the most important skills a CEO needs to have?
A leader has to have a strong vision and has to be able to articulate it really well.
Because if everyone doesn’t think the leader knows where he’s going, then how are they meant to know where they are going?
Another important characteristic is having at least a semblance of certainty. Knowing where you’re going is important, but it’s also OK to change direction as long as you’re doing it in the context of a plan.
Your employees are everything, and it makes people uncomfortable if you are reacting to your environment. When you’re predicting the future, obviously there’s no absolute certainty in that, but people do tend to gain confidence as your predictions come true.
Anybody who’s running a business is trying to guess the future. Your employees are relying on the CEO to be the best future-guesser around.
Q: How do you articulate that vision?
In regular meetings with the entire company, I reinforce our driving ideas. We try to get into an open and frank dialogue; nothing is off limits. Anybody can ask any question and get the truth.
When we get new employees, we want everybody singing from the same hymnal. You should be able to ask any of our employees, ‘What does IQ do? Where is IQ going?’ and get the same answer. So we work hard to ensure that’s the case.
It’s not about understanding by rote; it’s about getting them to understand it. I’ve done a number of videos, which we share with all of our new hires. They talk about everything from vision to values. That saves me the time of having to do that for every single person.
Q: What are some pitfalls CEOs should avoid?
The biggest one is you get out of touch with your people. You get so involved with the big picture stuff that you get out of touch with your people. The moment they feel like cogs in the machine, maybe your company needs cogs in the machine, but it doesn’t work in my world.
You have to feel accessible; you have to feel human. We have high expectations of ourselves, and we have high expectations of employees, but they’re not machines. We’re asking them to find the capabilities in themselves they don’t even know they have yet. We want our employees to be rising to their next level of their capabilities just as the company is. So they have to believe in themselves just as we believe in the company.
If you want loyalty and if you want enthusiasm and people’s creativity and drive and determination, you’re not going to get that by sitting in your ivory tower and saying hello to them at the company picnic once a year.
Q: How do you create a culture that reflects that?
Organizational culture is something that happens when you get the right balance between individual responsibility and rigorous process, which tends to tie people, give them less freedom. There’s a balance. You have to be careful not to put handcuffs on people.
Our culture comes from the nature of the people that we hire, the way we want them to interact with one another, and the freedom we give them to move out of their space.
We don’t want people who just put that one lug nut on the car and do that 3,000 times a day. We want people who understand how the whole car goes together and who feel free to go give a suggestion to the guy working on the wind-shield or the engine.
So, we encourage cross-disciplinary capabilities. We encourage technical people to be creative and creative people to be technical. It’s helpful and it empowers people.
The other thing about the culture is people need to see they can grow within it. They need to see that somebody comes in as a junior designer; if they do good work, they go to a senior designer, then they go to art director, then they go to senior art director, then they go to associate creative director, and so on.
HOW TO REACH: IQ Interactive, (404) 255-3550 or www.iqinteractive.com
Get the right people. You can have all the capital in the world, but if you don’t have the right people, you’re not going to succeed. If you have the right people, you can get dog food and sell it as caviar. If you have the wrong people, you could have Louis Vuitton bags, and you couldn’t sell them.
In Spanish, it’s called chispa spark. They have to have it in their eye. They have to have it when they speak, but it has to be a true chispa.
You interview people, and they’re like, ‘I want to come work for you, and I’ll work eight days a week, 30 hours a day, and I’ll live, breathe your company, and I can raise your sales 50 percent.’ That is false chispa. He’s creating a spark because he’s doing an interview.
The spark is more in the want. You can see it when they speak because they’re not trying to prove themselves to you in a 10-minute interview. You can see it in the way they dress, the way they look, the way they handle themselves. You can come in a hand-me-down suit, but you tied your tie properly, you sat up straight in the chair. You at least cleaned your shoes.
If someone gets here late and got stuck in traffic, folks say, ‘Oh, he doesn’t care.’ You have kids at home, you get delayed, your car breaks down. Those things can happen.
It’s more personality. How they look at you, how they speak, their mannerisms. Are they polite? Do they say thank you? That all matters.
Don’t be fooled by resumes. Resumes do not impress me. I’ve seen people master’s here and 10 different colleges, and you interview them, and they have no social skills. They don’t look you straight in the eye when they talk to you. They don’t sit up upright.
They’re not proud of who they are. They’re not self-confident, and you can see that when you talk to people. Then I hire some kid who had to leave high school to support his family, and he impresses the hell out of me, and he gives me a wow.
That’s what I look at. Do you demand more of yourself? Do you demand more of what you are able to contribute from your abilities? A kid who didn’t finish high school has limitations to a certain amount, but those limitations to them don’t exist, and they exceed those limitations, and that’s the spirit I’m looking for that nothing holds them back.
Do things yourself. If something’s small, like faxes or return this person’s call, it is who can do it the fastest. If it’s going to take me longer to tell my assistant to call Kristy and tell her I can’t make the conference call, and she’s like ‘Who’s Kristy?’ ‘Kristy works for Smart Business. She’s an associate editor here’s her number.’ It’s faster for me to pick up the phone and call you.
Whoever’s going to do that for me, they have work to do as well. If it’s going to take me five minutes to explain, and I’m going to take that five minutes of their time, and they still have to make the call, it would have been more efficient for the company if I had just done it myself.
Delegate. If I get calls from folks who want to buy my company, I say nicely, ‘You need to speak with my CFO,’ and they say, ‘Well, we only talk to owners.’ I go, ‘No. My CFO has access to everything. If you want to talk financial stuff, you talk to my CFO,’ and that’s how I delegate.
If it’s not my responsibility, it’s delegated to a manager. Period. I keep a list of the tasks by managers in a public folder. They have access to that folder they can read it, they can copy it, but they cannot amend or delete it.
I’ll add the task, I’ll e-mail her the task so she knows that that’s an expectation of mine, and I put a start date and a due date. Then they get back to me and tell me whether that’s reasonable or not. I know everyone’s busy, but I don’t know what you’re working on. I’m flexible on that stuff.
Reorganize periodically. Let’s assume we’re starting from scratch. Forget people. Forget budgets. Create an organizational chart for me that would meet your needs today. Then forecast your needs for the next 12 months, then a soft scenario for 24 months.
In the reorg, we’ve created a list of requirements before we look at who’s going to fill that box. Then we say, ‘(She) had that job before that was her title. Look at the job now. Does she fit that job? If she does, is she willing to do it?’
One of my buyers, when I analyzed what she was doing, she was creating reports for sales. She was analyzing data, so I moved her into my team, and she’s our business analyst. It’s not different. It’s just sometimes the title, over the years, has remained the same, but your duties have changed, so you’re really doing something different than what your title calls for.
It makes us refocus on our business at a micro level rather than a macro level. It’s not a lot of changes, but one or two little boxes you move around makes a huge impact. When you’re growing 30 percent a year, you have to redefine yourself every 12 months. If not, you’re fooling yourself.
HOW TO REACH: Diaz Foods, (800) 394-4639 or www.diazfoods.com
Tiger Woods knows how to play golf. He’s proven himself so well, in fact, that it begs the question of why he would require a coach to improve his game.
Consider upper-level corporate executives: Why would these obviously accomplished professionals need additional training or coaching to sharpen their business skills?
“What a coach does for Tiger is to help him become aware of elements of his swing, something he’s doing differently or some new ways of thinking,” says Dr. Stephen Brock, LPCC, professor at Coles College of Business, Kennesaw State University. “In an analogous way in the business community, coaches use assessments and tools to help managers and executives leverage strengths, identify and compensate for vulnerabilities, and develop additional skills in a particular area to be even more effective.”
Smart Business spoke with Brock about the evolution of executive coaching, and how managers and executives can improve and enrich their professional and personal lives through coaching.
How are mentoring and coaching different?
Mentoring and coaching often are used as interchangeable terms, but in reality, they are two distinctively different activities. Mentoring is much more akin to the guild system in the Middle Ages where a master craftsman took on apprentices to teach skills, give direction to move his charges along to journeymen and, finally, to become master craftsmen themselves. Alternatively, coaching is a collaborative relationship that does not require the coach to be a subject-matter expert in a particular field, other than the field of human development. A coach understands the process of enabling people to explore their goals, to do critical thinking about their challenges, their talents, their abilities, how to access and leverage those to accomplish their goals, and how to create measurable steps as they move forward.
How has coaching changed over the last decade?
For several decades, professional consultants have been coaching personal development. Often, the coaching involved a problem employee who was going to cost a company a great deal of money to replace. So coaching started as a kind of remedial intervention process. That has changed dramatically. Today, the focus of coaching emphasizes working with people who are already functional and performing well but who want to achieve an even higher performance in their life.
Meanwhile, coaching is right at the cusp of becoming a singular profession unto itself perhaps in the next five years. England and Australia already have graduate degrees in coaching, and several U.S. schools are developing graduate degrees and certificates.
Who are prime candidates for an executive coaching program?
Senior executives are driving decision-making down in the ranks to become more efficient and effective, and they are using coaching at all levels of their organization. I’ve seen law firms, cardiovascular practices, hospitals, manufacturing facilities and sales groups, all of which are using coaching in slightly different ways. In some instances, it’s used as part of succession planning where higher performers are groomed to move into greater levels of responsibility. Coaching is also effective for people who have been promoted and must learn a new set of responsibilities. Senior executives use coaches as an objective frame of reference because presidents and CEOs often don’t have people they can talk to and get straight answers from. A coach becomes their sounding board someone who can say the unpopular thing or point out counterproductive behavior.
Today’s managers routinely have to play multiple roles to their subordinates, so companies have started training their middle and lower management to become more effective coaches as part of their management skill set.
What are key components of an external coaching program?
There are a significant number of responsible organizations rooted in solid theory and practice that train and certify coaches. There also are a number of fly-by-night outfits that realized they could make money selling coaching certifications. Some of these programs require very little on the part of the individual to become certified. A good program is one that engages both business acumen and acumen in psychology. It should provide people with a basic understanding of how a business operates and a true understanding of interpersonal and intrapersonal dynamics. Another factor is trust. Coaches should meet a potential client at least once or twice to see if trust will develop and if it’s a good fit.
How does coaching impact today’s business climate?
Some companies are starting to develop their own internal coaching programs. These internal coaches become a resource to anyone in the organization who would like to have coaching. Front-line superintendents, supervisors or cell leaders could easily gain from trained, internal coaches. However, I think we’ll continue to see the use of external coaches who have no investment in internal politics and who can give the tough message that truly benefits the person receiving it. Of course, there are also companies that use a combination of these approaches.
DR. STEPHEN BROCK, LPCC, is a professor of leadership and executive coaching at Coles College of Business, Kennesaw State University. Reach him at (678) 231-3812 or firstname.lastname@example.org.
As we pass the mid-year point of 2007, it’s a good time to perform a status check on the various financial processes your small company has in place to meet the reporting requirements you’ll face. Staying up-to-date with the ever-changing landscape of financial reporting standards can be a challenge.
Smart Business asked Sheldon D. Zimmerman, CPA, audit principal of Tauber & Balser, P.C., about the top financial reporting challenges for CFOs of small SEC filers.
When will small public companies be required to comply with Sarbanes Oxley?
The Public Company Accounting Oversight Board (PCAOB) recently adopted Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements, to replace its previous internal control auditing standard, Auditing Standard No. 2. The new standard, known as AS5, is less burdensome for smaller public companies and will put small businesses on track for compliance with section 404 of Sarbanes Oxley, possibly as early as this summer.
AS5 is principles-based and written to be simpler than AS2, which has been criticized as being too difficult to adhere to, especially for smaller public companies.
The Securities and Exchange Commission is expected to approve AS5 this summer, which would require compliance for small businesses [market capitalization of less than $75 million]. Companies would have to begin complying with the management assessment portion of 404, although full compliance would not begin until March 2009.
What are some of the other financial reporting challenges for CFOs of small companies?
There are a number of areas on which small company CFOs should focus, including:
Uncertain tax positions FASB’s (The Financial Accounting Standards Board) FIN No. 48, Accounting for Uncertainty in Income Taxes, became effective for public companies beginning the first quarter of 2007. Many have already started the process, however, we have seen a number of cases where the process has been implemented in a rather cursory manner, so there will need to be fine-tuning before the end of this year.
XBRL Interactive data technologies based on eXtensible Business Reporting Language (XBRL) provide a way to improve the timeliness, accuracy and accessibility of business information. The SEC and other regulators around the world are launching initiatives to encourage companies to report in XBRL.
Complex debt and equity transactions Many smaller companies have complex debt and equity structures that typically contain complicated provisions such as beneficial conversions. Since these transactions are so complex, they need to be evaluated by the accountants to make sure the company’s management team understands the financial statement implications before they enter into the agreements.
Fair value FASB issued a new standard this year, Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which provides companies with an option to report selected financial assets and liabilities at fair value. The standard aims to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Statement No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.
The standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. The new statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157, Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments. Statement No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after Nov. 15, 2007.
Guarantor’s accounting and disclosure requirements for guarantees These disclosure requirements, along with variable interest entities, require a careful analysis of the underlying relationships that don’t necessarily involve ownership interests. But if companies issue a guarantee or make advances, which, in essence, funds the losses of another entity, they may be required to consolidate those as if they were a subsidiary.
SHELDON D. ZIMMERMAN, CPA, is an audit principal at Tauber & Balser, P.C., providing accounting and auditing services to private and public companies. He is experienced in bankruptcy matters, corporate restructurings, lender negotiations and cash-flow enhancements. Additionally, he has experience with strategic initiatives involving acquisitions along with hands-on experience in managing the finance and treasury operation of a large corporation. Reach him at (404) 814-4958 or email@example.com.
No business would knowingly implement a process to produce mediocre results. Instead, everyone focuses on best practices and continuous improvement of the processes in place. The challenge with continuous process improvement is to make the best better.
Smart Business asked Chris Wagner, vice president of marketing at InfoCision Management Corporation, about the process of continually improving a company’s marketing efforts and building a quality assurance (QA) program. “Good is not good enough today,” Wagner says. He advocates a regular review of all processes and raising the bar each time an existing metric is met.
Isn’t it a challenge to recognize that yesterday’s ‘best’ is today’s so-so process?
It sounds a bit harsh, but the demands of today’s business world call for out-performing the competition and yourself. The only way to run a quality, nimble operation is to keep raising the bar. Our company does this quarterly by providing an employee incentive for each component. Remember that quality matters in terms of results.
How does process improvement work?
Any process can be described as a triangle with these three sides: QA, training and execution.
The bottom line on the triangle is execution, or operations. This represents your output. That’s the place to start. As a company, we spent many years and millions of dollars building this side of our triangle. The goal is to directly correlate performance and execution. In a lot of companies, quality is measured after the fact. In a call center, you may have agents with very high QA scores and slightly lower performance, or vice versa. You have to balance their skills out with performance evaluation and coaching.
Second, you have to build a statistically legitimate QA program. This is for trend analysis. The closer your P-score is to zero, the more your costs increase. We try for plus/minus 5 percent reliability. Our QA program has three tiers: the production floor, where employees and managers work together; a QA manager who works with employees; and a corporate, internal QA group that monitors and calibrates quality daily.
Lastly, be sure you have a clear path out of the QA department to the training side of the triangle. You should continuously improve programs. Use tools like video, web-enabled training and local universities that offer employees degrees either for general or job-related improvement.
Where do you look first to increase productivity?
In order to improve, you need better employees, so look at performance and education in two areas: new-hires and production. We have a 30-day training period, after which people are expected to meet certain goals.
It is important to monitor the ability of your workforce to accomplish goals. Examine the potential of the top 30 percent. In our company, we average the top and second third of performance levels every quarter, and that measurement becomes our new standard of excellence.
Reset goals as soon as you are able to consistently hit the previous benchmark. For us, that is about quarterly. As soon as you can hit a benchmark consistently, it is time to raise it.
Should the call center take the lead in maximizing ROI for its customers or the business using the call center?
If a call center understands its customer’s key metrics, it can take the lead based on those benchmarks. The customer has to give its outsourcing partner incentives. However, be certain that the incentives boost productivity and sales and tie into true ROI, or they will become goals in and of themselves.
When does process improvement fall into the danger of tweaking for the sake of tweaking?
I don’t think it ever does. Any business constantly hires new people, adds new products, sets new goals and finds new customers. Even if you maximize the potential in one sector, you need to keep your eyes open for improvement in others
Any sports coach will tell you that the hardest time to improve is when the team is winning. But it is also the most important time. It is easy to get attention when you are the underdog, but there is a real danger of getting complacent when you are on top.
Is a big announcement required for changes? Does a process change lose some impact if it is simply inserted into the routine?
It is really larger than that. No real change can be seen as ‘just another idea from management.’ A change has to tie into the company culture to be effective. The best way is to link the change to compensation. Reward the top performers of the company for achievement. The key is buy-in from upper management. Change needs to be passed through the organization and not be seen as ‘the flavor of the month.’
CHRIS WAGNER is vice president of marketing at InfoCision Management Corp. Reach Wagner at (330) 668-1400. In business for 25 years, InfoCision Management Corporation is the second largest privately held teleservices company and a leading provider of customer care services, commercial sales and marketing for a variety of Fortune 500 companies and smaller businesses. InfoCision is also a leader of inbound and outbound marketing for nonprofit, religious and political organizations. InfoCision operates 28 call centers at 12 locations throughout Ohio, Pennsylvania and West Virginia. For more information, visit www.infocision.com.
Five years ago, Michael Gerster realized the old business model at WIKA Instrument Corp. had clearly expired. It was losing market share to Chinese manufacturers, was failing to efficiently meet customer demands and was wasting money with large amounts of obsolete inventory.
“The Chinese and other low cost manufacturers ... are eating our lunch and the bag it comes in,” says Gerster, president of the company.
He clearly needed to make some changes if his company wanted to compete. His prior company had been in the process of exploring lean manufacturing, so when he left in 1998 to come to WIKA, a pressure and temperature instrumentation manufacturer, he brought a basic curiosity about it with him. Upon starting at the company’s U.S. headquarters in Atlanta, he started sending his people to lean manufacturing seminars, but they always came back with the same response.
“I don’t know what’s in it for us, Michael.”
But in 2001, that finally changed. WIKA worked with one particular company that was able to really explain the benefits it would experience from going lean.
“The results were so earth-rocking that everybody was instantly convinced that this is going to be the future for us, and the way we wanted to do business,” Gerster says.
So he and management began working with the outside company to make changes, but even with people on board, implementation is much more difficult. The entire plant was rearranged so everybody had to do things differently and embrace a different thought process.
“Two or three years followed where we moved the furniture,” Gerster says. “We broke all of these departments a-part and created manufacturing cells.”
But after all of that, he realized the new layout wasn’t very efficient, so af-ter 18 months, they finished moving everything again to optimize efficiency.
His patience and persistence have paid off. As a result of all the changes that have taken place during last five years, productivity increased by double digits, market share doubled, and they’ve saved 20 to 30 percent of space. WIKA’s lead time has also dropped from about six weeks to just five to 10 days. That all yields real results the U.S. headquarters’ profits and revenue doubled in the last five years, bringing the entire global revenue to $480 million and the Atlanta plant’s revenue to $100 million last year.
“We are well-conditioned for the future,” Gerster says. “There are things that are under our control and there are things that are not under our control, and even the things that are not under our control, we have a level of agility that we can react to those real quick.”
Making major changes in a company requires a lot of planning, communication and work to succeed. Here’s how Gerster conquered some of the challenges of driving change through an organization.
The first stage of any change is having a reason to do so, which starts with knowing how your company competes.
“Clearly understand the value proposition to the customer,” Gerster says. “When you compete in a batch world with other customers, same lead times, same quality service, etc., the only thing you have to differentiate yourself is price. Then if you have a competitor coming through globalization that brutally undercuts you in price, you lose your value proposition to your customer.”
He spends about one-third of his time with customers and says to ask questions, “then shut up and let him talk” to learn their needs.
Gerster asks about what challenges they face, their biggest expenses, how WIKA can help their profitability beyond lowering price, and what they expect from suppliers.
While these questions help surface spoken demands, sometimes you have to dive deeper to find needs they don’t even think about.
“If you ask the right questions, you’re going to find, hopefully, unarticulated demands that the customer would have never told or asked you to do,” Gerster says. “If you offer that to the customer, all of a sudden the light bulb goes on and they say, ‘Yeah, that would be important for us.’”
After listening, WIKA made some changes. To start, it changed its methodology in pricing to be customer-friendly.
“If you tell a customer, ‘Here’s a price for five pieces, and here’s a price for 50 pieces, and here’s a price for 500 pieces,’ you are enticing the customer to do the wrong thing because he’s going to have one eye on the low price,” Gerster says. “Then he’s buying more than he actually needs and puts the rest in his inventory.”
Inventory costs a company a lot of money to maintain, often negating the lower price it paid, so whether a customer needs five pieces or 500, WIKA charges the same price. WIKA also realized it could save customers time, money and manpower by monitoring their inventories for them by linking their IT systems and automatically shipping when a product was low.
None of this would have happened if Gerster hadn’t tried to create a true partnership, which he says many companies don’t understand.
“Nobody ever really understood what partnership means,” Gerster says. “In the past, it was who had the lowest price. If there’s no dependency between the customer and the supplier, and the supplier and the customer, then you don’t have a relationship.”
Real relationships are key to a successful business. “The customer must, at some level, depend on WIKA in a good sense, not in a blackmailing sense to meet their goals while leveraging the capabilities of an agile supplier,” Gerster says. “That creates a dependency, and that dependency cannot be thrown out or competed with just because somebody walks in there with a lower price because we offer more than a lower price.”
When making changes within an org-anization, leaders must get buy-in from everyone in the company, otherwise the changes won’t yield success.
“The top management support is the oxygen that is blown into the candle all the time to keep it alive,” Gerster says. “At the same time, the whole organization has to become more self-sustained. In other words, the employees have to pick up the DNA and the way we want to do business.”
Doing that is pretty straightforward. “You must be honest, and you must give people a reason why change is imminent,” Gerster says. “In order to do that, you should have some urgency.”
But that’s not enough. Top management has to follow up with the low-level employees. He attributes Toyota’s success to this.
“Those guys know what they are talking about because they know what’s going on, on the shop floor, and they make sure things are right on the shop floor,” Gerster says. “If you make sure things are right on the shop floor, everything else will fall together. Don’t start at the top start at the bottom.”
It’s also important to keep the senior team excited and focused. That will filter down the organization and help employees buy in to changes.
“People on the shop floor have seen many different programs over the years, and they know, management says yeah, yeah, yeah, and then six months later, nobody talks about it anymore,” Gerster says. “It needs constant nurturing through top management, and top management needs to be excited about it, and they should be because it brings you the results you’re looking for, but they don’t trust it, and they let it go too quick.”
Leaders need to get and keep everyone on board through continuous training and mentoring, and if they don’t like those activities, let them go. He also keeps them in the loop by standing in front of everyone each quarter and giving a state of the company address. He both looks back at what the company has accomplished and also spells out the top five issues needing work as they move forward.
“That’s a certain set of information that I repeat over and over again,” he says. “Then you just need to engage with people. You need to tell people that while they are changing, mistakes are going to happen, and it is OK to fail.”
Most people have had a moment where they look at a policy or procedure and say, “That’s complete nonsense. Why do we do it that way?”
Around WIKA, Gerster rewards people for asking that question because it shows they’re paying attention and looking for improvement. He calls it the “Utter nonsense” award, and it comes with a $100 reward. It’s a way of getting people to continuously improve the company.
“Sometimes you set up business processes and never look at them again until they kick you in your rear end,” Gerster says. “What we’re trying to do is set up a process that looks at everything and anything continuously and try to capture opportunities for im-provement.”
Offering incentives to those who choose to get involved and offer ideas motivates and ignites enthusiasm. For example, Gerster’s lean transition completely re-energized his people and propelled WIKA forward.
“It’s an employee-driven process, and it puts people on steroids,” he says. “The morale is totally different than what it was years ago. Give the people responsibility. ... Just trust them, and they will deliver for you.”
It’s also crucial to watch what you reward. “Often, people get a bonus for increasing sales or increasing profitability, but they only measure the sales or only measure the profitability, so at the end, you either have it or you don’t, or you’re somewhere in between,” Gerster says. “You need to focus on the internal activities that drive sales and drive profit, so you know much earlier if you are on track or not.
“If you focus on these activities, you don’t worry about sales or profitability because you know it’s going to come together anyway, because you’re doing the right thing. You’re looking through the wind-shield and not through the rear mirror.”
WIKA also sets benchmarks for employees by averaging the previous two years’ performances and then raising that number slightly. If they hit the new goal, the company splits its profits 50-50 with employees, so they reap the benefits of their hard work.
“You need to define an expected outcome for a certain business process, and you need to make sure you raise the expectation every now and then in order to push the limit and start people thinking, ‘How do I do better?’” he says.
When they get a cut, they’ll look at how to be more efficient to increase their share of the prize.
“If people want to make more money here, it’s not about working harder, it’s about working smarter,” Gerster says. “You can’t get it done if you work harder. You need to do it differently.”
While change can often seem slow and people can be skeptical, Gerster says to plunge forward and let success get people on board.
“If the changes work, and they see that it works, and they get a share of it, why would they get frustrated with it?” Gerster says. “They must be part of the success, and we make them part of that success.”
HOW TO REACH: WIKA Instrument Corp., (888) WIKA-USA or www.wika.com