The move met with resistance from employees used to the old way of doing business, and the company’s customers also had not changed their perception of the business. Informing employees about the company’s new direction was the first step to changing their mindset.
“If we can change our thinking internally, we can change the perception of our people, which will, in turn, change the perception of our customers,” Ellsworth says.
Although the process is ongoing, World Micro has had steady revenue growth of about 30 percent each year, with 2005 revenue of $11.7 million.
Smart Business spoke with Ellsworth, president and CEO of World Micro Components, about the importance of clearly communicating to employees, and why you shouldn’t keep secrets.
How do you keep employees involved in the workplace?
We tend to be transparent in our management style. We’re open for employees to see; we don’t keep any secrets. There’s no managers’ meeting. We keep it real clear.
We set real objectives, let them know where they stand and where they’ve got to be. Just keep an open-door policy. Being candid, honest and open-minded with our employees is very important. If we can employ those three characteristics, we’re all on the same page.
We tend to hammer in our mission statement over and over to our employees. We also let them know on a daily, weekly and monthly basis what our goals are as a company. When they know that, we can give them our annual goal and say, ‘This is what we’re trying to do in sales for the year.’
Then we break it down for them. This is what we have to do per month, per week. This is what you, the salesperson, has to do per day, and if you achieve these daily goals, we’ll be able to achieve that annual goal.
Make that clear to them in a consistent and straightforward manner.
How does having an open-door policy benefit both employees and the company?
They know where we stand, we know where they stand, and they’re clearly understanding what management’s goals are. They know our objectives, and we can let them know what they’ve got to do.
Letting everybody play on the same field allows us to keep a real open environment.
People know where they stand. There’s not a lot of guesswork. An employee doesn’t have to say, ‘What do I have to do today?’ Those objectives are in his mind; he knows exactly what he has to do.
The main advantage is there’s no ambiguity, there’s no questions about what a person is supposed to be doing. They know their job, and they do it.
How have you managed growth?
We started with a 100-square-foot office 12 years ago, and we’ve added one person at a time. We’ve done all that and remained debt-free, and now we’re at about 40 people total. I encourage slow and steady growth.
Don’t try to hit the ball out of the park. Be happy with doubles and triples, and even singles. That type of growth doesn’t break your infrastructure, it doesn’t throw you in all this debt, and it keeps everybody sane.
Also, keep the money the company has made in the business. I’m 50 percent owner, and my partner, Chris, is a 50 percent owner. We’ve kept a lot of the capital inside the company. Having an excellent credit history from a personal and business standpoint also helps, because we are debt-free.
When people look at our credit scores, like other businesses, they realize we are a very low credit risk. That helps us to purchase goods at lower prices, because the person we are purchasing from realizes they are going to get paid.
What skills does a successful CEO need?
You have to have the ability to attract people, to lead by example and gather the respect of your employees and your people. If they don’t respect you, you really have nothing. Just give them the ability to look up to you.
Hire people who are smarter than you are. Try to build the company like a manager builds a baseball team. We want to find the best person for the position, and we expect performance out of that person.
One of the pitfalls some managers fall into is they want to keep everybody in the dark. If that person is too smart, they say ‘I don’t want someone smarter than me.’
We’re completely the opposite, we want to hire people who are smarter than we are and who are experts in their particular position so we can have a real solid team and win.
HOW TO REACH: World Micro Components Inc., (770) 698-1900 or www.worldmicro.com
With that in mind, Lisa Kyle, district director for Spherion, a recruitment and staffing agency headquartered in Ft. Lauderdale, says the key thing that companies need to focus on is employee retention and come up with more ways than just raising one’s pay to keep employees around.
Smart Business spoke with Kyle about the characteristics of the emerging work force and how companies might best tap into it.
How does the work force in the modern era differ than any in the past?
For 10 years, we tracked and benchmarked what motivates workers as well as what steps employers were taking to attract and leverage talent. We found that, by the end of the decade, there will be 10 million more jobs available than workers to fill them. We also found that there were a lot of serious misconceptions about retention among employers and their current as well as future employees. There were a lot of areas of disconnect between what employees need and want and what employers were providing.
We also found that employers on average believe that 14 percent of the work force will leave their current job within the next year. But through our survey, we found that over 40 percent were planning on leaving their current jobs within the next year.
Nearly 45 percent of companies believe that work force planning is a minor initiative. But because of the recruiting crunch, this will have to increase as the baby boomers exit the work force. In addition to providing a contingent work force for our clients, our main goal right now is to try to help our clients focused on the retention of their current employees so they have fewer turnovers.
What are some retention strategies that companies can use?
One of the most important is offering employees solid training and development. The desire for more training and career development has been driven by the digital and computer age where people are trying to gain the skills they need in this new age of business.
Compensation and benefits are always important. We’ve entered a new age of compensation deflation where little or no pay increases are taking place but benefit costs are rising.
Being sensitive to the work/life balance by offering employees flexible hours and vacation time is paramount, too.
How has the increasing number of immigrants affected the work force?
It’s a good thing, in that all companies are focused on diversity. We work with some local organizations that assist immigrants by placing them in jobs comparable to what they did in their native country. Many clients are looking to become more diverse and are thus asking to tap into this work force.
Do you believe outsourcing labor to foreign countries has been good or bad for the labor pool?
I believe it has a positive side and a down side. For example, we never like to see a 500-seat call center moved out of the country because it eliminates jobs for Americans. If you look at it exponentially across the country, that could be thousands of jobs lost. However, when those jobs are moved overseas, suddenly 500 qualified people are looking for work.
With the recruiting crunch employers are facing today, that’s a virtual gold mine of good, experienced people who can be placed. It’s rewarding to help people that way.
How can a company be assured it is receiving quality people?
Companies should set up a list of criteria, including educational background, references, skill sets. Do managers want background screening and drug screening completed in addition to past work experience?
The candidate should not only be qualified for the job but also fit the company’s culture. We funnel candidates through several steps in order to make sure that happens.
Prior to a face-to-face interview, candidates must pass an automated three-tier questionnaire via the phone. If all three tiers are passed, they are then directed to the Candidate Resource Center where they can apply to work with Spherion. That, in turn, allows the pre-screened candidate to become an applicant. A face-to-face interview takes place next, followed by intensive screening, testing, referencing, employment eligibility and any other criteria requested by the client.
LISA KYLE is a district director for Spherion in Atlanta, Ga. Reach her at (770) 960-0607.
Education: Ithaca College, bachelor of arts degree
I sold financial products to banks on behalf of Citigoup.
What is the biggest business challenge you have faced, and how did you overcome it?
My biggest challenge has been this job. We have more than tripled in revenues. Our market capitalization has gone from a little over $400 million to we’ve been over $4 billion recently. In five years, that’s a lot of change, and going from 1,200 employees to 4,200 living in 20 countries.
The biggest challenge has been to make sure that we do keep our values and our vision intact and communicated. It’s dealing with 12 different time zones.
Imagine you are talking to someone at 8 at night and it’s 8 in the morning there. You’re both at very different places. You’re either tired after a long day, or you’re rearing and ready to go in the morning. Those are tough things to overcome. The challenge of dealing with so many different time zones, so many different cultures and so many different countries is daunting.
What is the most important business lesson you’ve learned?
If you can’t understand it pretty quickly, then it’s probably not worth pursuing. If something is so complicated that you really have to focus on it and you can’t explain it, then it’s probably something that is ... not worth pursuing.
The other one is people fundamentally understand the truth. You can spin things any way you want, but the most important thing to be is just honest and factual. Even if it’s bad news, people like it, even customers. Just tell them the truth as honestly as you can.
It’s easier, No. 1, and No. 2, it’s amazing how well that works. So don’t spin things. Just tell it the way it is.
Whom do you admire most in business and why?
I’m an admirer of Sandy Weill for some of the things he’s done. What I admire about Sandy Weill was, this was a guy and his career was basically over, and he bought a little company in Baltimore called Commercial Credit and morphed it into Citigroup. That’s pretty impressive.
And while I don’t flatter ourselves to think that we’re going to become Citigroup, I do, in a small way, try to model Global Payments [after Citigroup]. We took a company that had some very core good things but was relatively small, and we have grown it enormously and morphed it into a much bigger company.
And my aspirations are to keep morphing it into a bigger company.
There are cries of alarm as manufacturing jobs are eliminated and service jobs are sent overseas. This makes for great headlines, but it doesn't give you the whole picture.
Rising productivity is the root cause of much of the ruckus, generating higher profits, lower inflation and a strong housing market, and increasing stock prices. But productivity generates wealth before jobs.
Earlier this year, consumer net worth hit a new peak of $45 trillion -- up 75 percent since 1995. Corporate profits as a share of national income are at an all-time high, and so is the net worth of many individuals. So what's all the negativity about the economy?
According to Business Week, offshoring isn't really a problem. Unlike in most previous business cycles, productivity has continued to grow at a fast pace right through the downturn and into the recovery.
One percentage point of productivity growth can eliminate up to 1.3 million jobs a year. With productivity growing at an annual rate of 3 percent to 3.5 percent rather than the expected 2 percent to 2.5 percent, the reason for the jobs shortfall becomes clear: Companies are using information technology to cut costs -- and that means less labor is needed.
Of the 3 million jobs lost over the past three years, only 300,000 have been because of outsourcing to another country, according to Forrester Research.
As for those 3 million jobs, that number comes from a Department of Labor survey of mainly larger companies. This figure can be somewhat misleading because the department measures job loss in several ways. One survey of workers showed a job gain of more than 750,000 between January 2001 and January 2004. So it is reasonable to conclude that there may be 3 million jobs lost, but most are coming from large corporations.
Smaller and mid-sized firms are adding these employees back to the work force and driving the economy forward. It is the smaller enterprise that is the job-growth engine that hires the people Fortune 1000 firms cast off.
Don't believe the hype. The economy isn't as bad as it's made out to be. If your business isn't performing, then start looking for productivity gains before you fall hopelessly behind.
What exactly are the laws? They could be unchanged from previous years or they could be radically different by winter. No one knows for sure what the future will bring, because - at presstime <m> Congress was still debating whether to change the existing law or implement a new law.
“Here’s the quick summary,” says Robert N. “Bob” Greenberger, CPA, PFS and principal at Tauber & Balser P.C. “You die. The IRS gets about half of your entire net worth.”
Smart Business talked to Greenberger about the old law and possible changes to it, pending Congressional decisions.
Can you give us an overview of the estate tax?
The Economic Growth and Tax Relief Reconciliation Act of 2001 was the first step toward totally eliminating the estate tax. Prior to the law, the top estate tax rate was 55 percent; taxpayers could exempt from estate taxes $675,000 of their assets in 2001 and $1 million in 2002.
The 2001 law changed the tax rates and exemption amounts over the years 2002 to 2010. Through 2009, the top tax rates have a gradual reduction to 45 percent, and the amount exempt from tax rises to $3.5 million. The maximum tax rate for 2006 is 46 percent with a $2 million exemption in effect. In 2010, there is a one-year repeal of the estate tax with a reversion to the old rules (with a top 55 percent tax rate and $1 million exemption) in 2011.
What is the status of the potential permanent repeal of the estate tax?
The House has voted for estate tax repeal in every session of Congress since 2000. The House approved legislation to repeal the estate tax (H.R. 8) in April 2005. Supporters of estate tax repeal were dealt a blow on June 8th as a procedural motion on H.R. 8 was defeated in the Senate by a 57-41 vote. On June 22nd, the House passed an estate tax reform proposal by a vote of 269-156. As of this writing, the bill has not been sent to the Senate for consideration.
What proposals are on the table now?
Sen. Charles E. Grassley (R-Iowa), the Senate Finance Committee chairman, has proposed a $5 million exemption and 15 percent estate tax rate plan with a 30 percent rate for estates over $30 million. Sen. Olympia Snowe (R-Maine) has a $7 million exemption with rates starting at 15 percent and topping off at 28 percent for estates over $15 million. Many Democrats want to keep the exemption at a lower amount, perhaps $3.5 million, with a 35 percent tax rate. Sen. Joseph Lieberman (D-Conn.) said that he might support a permanent solution that would keep the tax at 2009 levels that would be a top 45 percent tax rate with an exemption of $3.5 million.
The estate tax reform passed by the House on June 22nd, H.R. 5638, the Permanent Estate Tax Relief Act of 2006, would increase the estate tax exemption to $5 million. Estates between $5 million and $25 million would be taxed at the same rate as capital gains, currently 15 percent, while estates over $25 million would be taxed at twice the capital gains rate. The proposed rates and exemption level would go into effect on January 1, 2010. H.R. 5638 also added a timber provision, creating a new 60 percent deduction for qualified timber capital gains, to entice the votes of several Senate Democrats.
Does your crystal ball predict a full estate tax repeal?
It’s unlikely because Congress faces difficult choices with budgetary implications. In recent years, the estate tax revenues have provided $30 billion per year with the amount expected to increase. Some estimates put the cost of full repeal at $80 billion to $100 billion per year. The Center on Budget and Policy Priorities estimated the 10-year cost at $800 billion. It is expected that the cost of H.R. 5638 would be about 75 percent of the cost of full repeal, which may prevent many Senators from supporting that bill.
So what should taxpayers do during this time of uncertainty with the estate tax laws?
I cannot emphasize this more: Do not sit on the sidelines and wait. It is imperative that taxpayers meet with their advisers before any tax law changes are implemented to take full advantage of any existing tax laws and to plan for expected changes.
ROBERT N. “BOB” GREENBERGER, CPA, PFS, is a principal at Tauber & Balser P.C. in charge of the tax department. He has served as an instructor on complex tax topics including “Buying and Selling a Business in Georgia.” Reach him at (404) 814-4949 or firstname.lastname@example.org.
“She was the catalyst,” Chaudhry says. “She said, ‘You keep on talking about it. Either do something, or shut up.’”
So Chaudhry and his wife quit their jobs and founded SecureIT, the first of several Internet security companies that Chaudhry would start.
Today, he is founder, CEO and chairman of Alpharetta-based CipherTrust. Since its founding in 2000, the company has become the fastest-growing security software corporation in North America, posting a revenue increase in 2004 of 80 percent over 2003.
Smart Business spoke with Chaudhry about how he’s succeeded and the importance of hiring good employees.
What does an entrepreneur need to do to be successful?
Lots of people want to start and succeed, but not too many of them have the passion and burning desire to be successful. I think that’s the difference between real entrepreneurs. We all want to be successful, but the willingness and the desire to put the time and effort to do it is really what’s needed, and many times, that is what lacks.
Secondly, what has worked for me is I have never chased money. I had a desire to build something and have a sense of accomplishment, knowing that money follows if you do good work. Too many people chase money and it doesn’t come that easily, and then they get disappointed.
How did you find your niche?
I got into Internet security with my first company SecureIT, so I actually had no prior understanding of security at all. But I wanted to start a business in an area that’s a new business opportunity.
When you look at a new business opportunity, you have less competition. You are the trailblazer out there.
If you go back to late ’96 when I put that business plan in place, the Internet was all over, security was beginning to hit the front page of publications. No one really knew how to ... architect these security products. So we said, ‘Here’s an opportunity to learn and go and do it.’ That’s what got me going — the newness of it. Once you get into it, security has its own appeal, and not too many people want to leave it because it brings new challenges every day.
I have stayed in this niche because I haven’t gotten bored. And the problems have not been solved. They keep them coming.
What challenges come with fast growth?
The biggest challenge is you fix two things each month and then you break three, because you are seeing new opportunities and you are trying to tackle them. That’s a good thing.
What’s needed is a good team that understands that that’s how young, successful companies work. There aren’t that many processes in place, because processes can be stifling.
The biggest thing for me ends up being having people who have the right mindset to work with start-ups, who really aren’t too bureaucratic coming from a big company background and are keen to figure out the new challenges as they encounter them.
That’s what I look for from the team. You can only do so much. It’s the team that makes the biggest difference.
How do you attract a good team?
People who want to learn and grow are always attracted because the kind of stuff we do at these new companies is a lot more exciting than what they’re doing at their present jobs. I take pride in the fact that most of the people who come to work for me tell me that they learned more here in three months than they did in three years at their previous job.
Attracting is easy. Finding people who are really committed and passionate is a lot harder. I interview a half a dozen people every week whether I have an opening or not, just looking for somebody who is an A player.
How do you make sure that you don’t grow too fast?
I see some of these companies trying to go from 100 employees to 300 employees in six months. I call that indigestion. If I hire 200 people in six months, I know that my quality is going to suffer. I can’t hire that many good people, and I can’t train them and get them up to speed.
When we make our business plans, we look for aggressive goals, but we don’t look for growing from $10 million to $100 million in revenue in a year. That type of growth can break it. We look at bottom up and top down to see how we can get to a level that is a digestible growth plan.
HOW TO REACH: CipherTrust, (877) 448-8625 or www.ciphertrust.com
What do I do about all my data and files?
If my server(s) or my computers are lost or ruined, am I ruined?
Do I back up all of my data each day?
Do I back up incrementally each day between full backups?
Are my backups secure and off-site?
Do I have proprietary software that is required to recover backed up data? If so, are there copies of that software off-site? Without it, the backed-up data is useless.
“These are just a few of the key questions,” says Steinberg, “and if you answered ‘no’ to any of them, then you need to revisit the issue.”
Smart Business talked with Steinberg about corporate disaster preparedness.
Not all disasters are natural like hurricanes with advanced warning. Fires, for example, happen without warning and can be more destructive. What should a business do if forced to relocate without the ability to recover anything from its original facility?
If relocation is necessary, is there a predesigned plan in place as to where the business will relocate to? As an example, a company that requires many work stations can have a contingency to take excess capacity at facilities that lease work station availability. A manufacturing facility can coordinate with another facility that uses similar machinery as excess capacity and is not competitive. A call center could possibly cut a deal with another call center that has available seats.
The second is to think about mission-critical data and documents required from day to day operations and to have access to those in the event of total or partial loss. What must be kept offsite and where would the business relocate to?
What is the negative impact of not having an evacuation plan in place?
During the unexpected, everyone in the company should know what to do in a subconscious manner in order to dramatically reduced loss, whether in life or key business necessities. The key to a successful evacuation plan is practice. Have the entire company get to the point of reacting with a similar response. Develop a plan, practice it, and if it is ever needed, execution will be easy.
What insurance policies are necessary to assist in the business recovery process?
Each business has critical variables that are necessary to ensure its daily operating success. Many of these can be covered with the appropriate insurance coverage. Coverage should include business interruption, theft, property and casualty, product liability, errors and emissions, directors and officers plus others. It is imperative that a business consult with its insurance professional to review whether or not the right coverage is in place. Many business-ending disasters could have been be averted if only the right coverage had been chosen.
Is it possible to remain cash-positive during a surprise downturn or loss? If so, how?
A business must think as part of its preparedness planning what key sales materials and data they must keep offsite in order to maintain operations during a disaster, and what financial and accounting information must be accessible.
As an example, a company that does not have access to its vendor or customer data will be unable to aggressively collect on its receivables in order to maintain ongoing cash flow. Likewise, it will not be able to maintain vigil over what it owes to vendors and may get taken advantage of by an unscrupulous person or business.
It is also important to plan for a ‘rainy day.’ A business should, as part of its preparedness plan, work through the exercise of what cash flow will be necessary to operate at a base level for at least 30 days. This includes a plan without typical cash and sales inflows or product and service delivery outflows.
What are the steps to obtaining a small business recovery loan?
All of the documents necessary to obtain a loan should be maintained offsite so as to ensure the minimal amount of delay due to the inability of producing required information. Inventory lists, equipment lists, IT requirements and key personnel data all may be needed in order to obtain a business disaster recovery loan. If those are not easily accessible at times of loss, replicating the information in some cases may not be possible, therefore reducing dramatically the probability of successfully securing financing.
GREGG STEINBERG is president of International Profit Associates. IPA’s 1,800 employees offer consulting services to businesses throughout the Unites States, including Alaska and Hawaii, as well as Canada. Reach him at (800) 531-7100 or at www.ipa-iba.com.
Education: Bachelor’s degree, economics, Wake Forest University
First job: When I was growing up in my family’s real estate business, I worked the front desk at one of my parents’ hotels.
What was your biggest business challenge, and how did you overcome it?
It was really waking up on Sept. 12, 2001, and having the reality of the unknown that was there. It was the first time that I really didn’t have a full grasp on what it was that we were going to have to do.
That was one of my most difficult times. It was also one of the greatest times when I look back on it, because that’s when I come back to my team of executives. I had a group of executives that all showed up in my office Sept. 12, all carrying the dashboard ... and all of us sitting by and saying, ‘We don’t know what’s next, but let’s talk about what we have to go do and accomplish.’
My executives treat our business like partners. When times are great, we all are the beneficiaries, and when times are tough, everybody digs in and gets it done.
The reason that we’ve been so successful over the history of our organization, and we’ve had a lot of success recently, is because our team knows how to survive. They know what they’re doing. They’re talented professionals and they’re committed to the success of our organization.
What has been the greatest business lesson you have learned?
Maintaining the commitment to your company’s ideals will allow you to achieve whatever it is you want to achieve. When you start wavering from those company ideals is when you start getting in trouble. Maintaining those has been the greatest lesson because we’ve really achieved and learned from that, and it’s made us the company that we are.
Whom do you admire most in business and why?
My dad gave me an opportunity in the early ‘90s to a kid who hadn’t accomplished nearly as much to be afforded that opportunity, which was to invest the family’s entire savings and earnings. People may say I’m still a kid now at my age, but I really was a kid then.
My dad taught me the value of quality and metrics before there was a balance scorecard. He ran quality control for RJ Reynolds, and he taught me the value of measuring and quality. He also taught me the value of surrounding yourself with great people and giving them the keys to be your partners and treating them like partners.
I’ve made him chairman emeritus of our company because people love him so much. The business things he has taught me and what he gave me at such an early age to start this business, I doubt I could search and find anybody else who would do that given the circumstances.
We didn’t know we were coming out of a major recession. This was the recession of ’91, ’92. These were very difficult times in our business.
“Darren’s success is a result of his multifaceted pharmaceutical experience, high energy, high intensity and creative ability to find solutions,” says Jeff Thompson, chief operating officer of Stiefel Laboratories, a strategic partner of Glades. “These are excellent skill-sets and qualities that make Darren a spectacular choice for his new role.”
Alkins has a strong background in the pharmaceutical industry. He started his career as an intern at Bristol-Myers Squibb and spent the next 15 years with the company gaining expertise in both brand and generic sales, marketing, operations and business development. He then joined Glades Pharmaceuticals in 2004 as vice president, business development.
“Glades is built around a philosophy of maximizing the life cycle potential for pharmaceutical brands,” Alkins says. “We are always looking for new partners who have a shared goal of improving the lives of patients and optimizing product value. We believe in equitable, balanced relationships. Glades will continue to invest long term in both its business and its partners.”
Mitel appointed Ray Jimenez regional director of the company’s new Southeast region headquarters.
He brings experience in sales and marketing in the IT/Telecom market, primarily with AT&T, Nortel Networks and Symbol Technologies, where he succeeded at both the field and executive levels. His experience in selling through channel partners plays a critical role in the company’s expansion.
ALVAREZ & MARSAL
Alvarez & Marsal appointed James D. Decker managing director to help build the firm’s footprint and capabilities in mergers and acquisitions, financings and corporate restructurings.
He previously worked as managing director at Houlihan Lokey Howard & Zukin.
WILLIAM MILLS AGENCY
William Mills Agency promoted Kevin Denver Banks to account supervisor.
He has been with the company since 2000 and has managed media relations programs for dozens of clients in the banking, credit union and mortgage industries.
He earned a bachelor of arts degree in English literature from the University of Georgia. He has also studied at Keble College, Oxford University in England and is a member of the Business Marketing Association.
MedAssets made several promotions within its executive team.
Rand Ballard was promoted to chief operating officer of the company and president of North American sales.
Nicholas Sears of Aspen Healthcare Metrics was promoted to chief medical officer of MedAssets Inc.
In another move, the company promoted Dan James to president of MedAssets supply chain systems.
Also within supply chain systems, Maureen Gender moved up to senior vice president of implementation and Gary Green took over as senior vice president of sales for supply chain systems’ alternate care market.
In addition to these changes, Sandra Green became president of MedAssets supply chain systems’ Southeast region after working as president of shared services health care.
Rounding out the company’s promotions, Bob Fink moved from shared services health care to senior vice president of sales for MedAssets supply chain systems’ Southeast region.
KITCHENS NEW LLC
Kitchens New LLC named Jeffery M. Cleghorn a partner in the firm.
He previously worked in the U.S. Army’s military intelligence corps and on the joint staff for the Defense Intelligence Agency at the Pentagon. After leaving the military, he earned a law degree from The George Washington University and began his practice in Washington, D.C. He returned to his native Georgia in 2003 to enter private practice.
Witness Systems appointed Greg Higham vice president, information systems and technology.
Before joining Witness, he worked as vice president of worldwide customer services for Epiphany (now SSA Global). He has also held leadership positions with Inovis, Peregrine Systems, Harbinger, Premenos and Tandem Computers. He brings more than 25 years of leadership experience in fast growing global organizations to the company.
NEWELL RUBBERMAID INC.
Newell Rubbermaid Inc. appointed Steven J. Strobel to its board of directors. He also serves on the audit committee.
He works as senior vice president and corporate controller of Motorola. Prior to joining Motorola, he worked for Owens Corning for seven years. Before that he worked for Kraft Foods for 10 years.
He began his career as a CPA after earning his bachelor’s degree from the University of Illinois and an MBA from the University of Chicago.
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As in the movie “Kelly’s Heroes,” once you know you are in the mine field, you can work your way out. Don’t wait until you hear the click of the land mine to start taking these seriously. Remember, even seasoned veterans sometimes miss land mines until they explode.
- Informing an employee a benefit will or will not be paid. It’s common to find an employee asking a human resource manager whether a benefit is covered or not. The H.R. manager, in good faith, looks at the benefit summary or even the certificate booklet and, in good faith, tells the employee that the benefit will be paid. The employee takes action ... and the claim is denied.
Although a certificate booklet is the contract that determines if a benefit will be paid, you may misinterpret that language. Certificate booklets or SPDs are often 50 to 100 pages of disclaimers, definitions, restrictions and requirements. The best answer an H.R. manager can give is an opinion on whether the benefit will be paid and to instruct the employee to contact the carrier or plan administrator before services are rendered.
In addition to contract language interpretations, there are always exceptions to the contract. We have seen time and time again where a carrier will pay outside of the contract based on circumstances surrounding a claim. Many appeals that are filed with the insurance carrier after claims are denied are paid based on these circumstances.
- Failing to distribute certificate booklets. This task can become a monster project, because most insurance carriers do not send the certificates to employees’ homes. Most employers have benefits administered by multiple carriers. When your supply of booklets comes in at different times and in the event that booklets are delayed 60 to 90 days or longer after open enrollment, a host of serious problems can occur.
The law is very clear on the necessity to distribute certificate booklets to all enrolled parties in a timely manner. Although employers are encouraged to post the certificates on their company Web page, that may not satisfy compliance requirements unless 100 percent of your employees have access to the Internet. It is important to have proof that you have distributed certificates. Getting employees to acknowledge receipt of their certificates is ideal. Too many times we find employers with unopened boxes of certificates in a closet. An employee can have a valid claim against an employer for a denial of a claim if a certificate booklet was not distributed.
- Failure to audit payroll records against health care benefit invoices. Although the best time to audit payroll and carrier invoices is immediately following open enrollment, it is also important to audit these throughout the year. Changes occur throughout the year: new hires, terminations and qualifying events.
Auditing is a time-consuming project, but you will find that most audits will reveal mistakes. Carriers will typically allow only 60 to 90 days for retroactive credits. In addition, employees typically will not volunteer that they are being under charged through payroll deductions.
Auditing will save you headaches and company money.
- Not collecting enrollment forms from new hires and all employees during open enrollment. We all know how painful openeEnrollment can be in collecting enrollment forms from every employee. Some employers have taken the stand that if the employee fails to return a form they will not be enrolled in a benefit. This approach is acceptable only if your employee communications clearly indicate the consequence of failing to return forms. Even this approach is dangerous, because an employee can claim that he or she did return the forms.
The best solution to nonreturned forms is a letter back to the employee indicating his or her form was not received and the consequences of this lack of action. Keep this letter in the employee’s file. An even better solution is a post-enrollment confirmation letter of all benefit elections. These letters can resolve other issues, including confirmation of correct enrollment elections and payroll deductions.
The landscape of employees can be filled with land mines. Make sure you get your benefits agent to help you identify all of them before you enter the field of employee benefits.
BRUCE BISHOP (firstname.lastname@example.org) is director of marketing and managing partner of KYBA Benefits. The company provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 to more than 7,000 employees. Reach Bishop at (770) 425-6700 or (800) 874-2244 x205.