Marcia Passos Duffy

Tuesday, 28 March 2006 19:00

Due diligence

“Due diligence” is a term thrown around quite a bit among lawyers, accountants and consultants during a business acquisition. But what does it mean for the business professional involved in a commercial transaction? While many business owners may have a vague idea of its implications (that a lot of information needs to be gathered within a certain time frame to protect the company’s financial interests), what they may not know is that due diligence is a prime opportunity to go beyond the numbers and find out if the perceived value of the company is at risk once the deal is done.

“One of the biggest mistakes that inexperienced acquirers make is assembling massive quantities of historical information as opposed to focusing on the specific elements of the transaction that are critical to the creation of value,” says Chris Meshginpoosh, director of consulting services for Kreischer Miller.

Smart Business spoke with Meshginpoosh about due diligence.


What, exactly, is due diligence, and why is it important when purchasing a business?


Due diligence is a process meant to identify risks impacting an acquirer’s ability to achieve expectations. These can include risks from pending litigation, increased competition, negative trends in supplier relationships or the loss of key employees.

While many elements of due diligence are similar across all transactions, effective due diligence involves identifying valuable assets and then designing due diligence procedures that focus on them. This is crucial, because the motivations behind different transactions can vary widely. In one case, the primary motivation might be the opportunity to gain access to a new class of customers; in another, the motivation might simply be to acquire intellectual property. The risks associated with customer relationships are different than the risks associated with intellectual property.


How does the process of due diligence begin?


First, it is customary for both parties to agree to a letter of intent that details terms of the anticipated transaction — such as purchase price, proposed closing date and general obligations of the seller to assist with the acquirer’s due diligence efforts. Once the parties have reached agreement on the terms of the letter of intent, due diligence ordinarily commences very quickly and involves a team of managers, attorneys and accountants.


What can go wrong during due diligence?


A lot. By almost all accounts, the failure rate of mergers and acquisitions is as high as 80 percent. The primary obstacle is the lack of relevant information available to the acquirer. In the vast majority of transactions, the seller seeks to keep the proposed transaction confidential to mitigate concerns on the part of customers or employees. Yet an open dialogue might be critical to identify relevant risks.

For instance, if you seek access to a new class of customers, then the quality of the company’s relationships with its customers is probably a primary area of concern. However, the company might not allow you to contact its current customers for fear of customer losses.

Or, in the case of a service business, the quality of the company’s relationships with its employees might be of critical importance. But again, the target might not want you to talk to the general employee population for fear of increased employee turnover.

In either case, the buyer has a difficult decision: acquiesce and accept the resulting risk, or push the issue and alienate the management team that it might have to rely upon after completion of the transaction.


How can you increase the chances of success?


In addition to experienced attorneys and accountants, it is important to include a multi-disciplinary team of managers that will have to live with the results of the transaction. That means involving sales, operations and human resources in the planning process. Their job is to identify potential risks, challenge preliminary assumptions made by senior management, and design procedures meant to provide insight into these areas of risk.

Once those procedures are planned, don’t take no for an answer. Some of the best acquirers have a policy of walking away from a transaction at the first sign of a seller’s failure to cooperate.


Can you offer any other cautionary advice?


Once due diligence commences, professional skepticism is critical. The seller always puts the best spin on historical results and future opportunities. As an acquirer, it is essential to avoid getting caught up in the excitement of the transaction and to avoid rationalizing away warning signs.

Perhaps the most important success factor is experience. Accordingly, it is critical to ensure that you have a team of experienced people providing you feedback, advice and objective information. Having the advice of experts, combined with the buy-in of team members who have to live with post-merger results, will help you succeed where most fail.


CHRIS MESHGINPOOSH is the director of consulting services at Kreischer Miller, an accounting firm based in Horsham, Pa. Reach him at or (215) 441-4600 x139.


Thursday, 23 March 2006 19:00

Executive ‘dashboards’

Anyone who drives a car knows the importance of a dashboard. It tells you how fast you are going, your fuel level, and if there’s something wrong with the car. This information is the key to making good decisions: Do you need to schedule a maintenance check-up? How far can you go before you fill up the tank? How much should you slow down to avoid getting a ticket from the police officer you just spotted at the corner?

Executive dashboards, while on a desktop computer rather than a car, give the company owner the same real-time, at-a-glance information critical to making decisions, such as how fast revenue is coming in, the expenses for the quarter, inventory levels and more.

“Without the monitoring and instant feedback provided by the executive dashboard, management has to rely on human communication, which can be unreliable,” says Robert Garrett, director of software development for Perpetual Technologies Inc. of Indianapolis. “Problems could go unannounced by employees for days, weeks, or even months before the management team hears about it and formulates solutions.”

Smart Business spoke with Garrett about the key elements of a good executive dashboard, and how you can best utilize a dashboard to keep your business on the right road.

What does an executive dashboard look like?

Executive dashboards are data-driven software products designed to perform the same two functions as the automotive dashboard. Much like your car’s dashboard monitors your car, the executive dashboard monitors your business. It provides an up-to-date view of various monitors installed throughout the business process. Indicators might show a company’s revenue, profit, expenses, sales, client satisfaction index, or infrastructure status. The list of possible indicators is endless. Critical alerts triggered by these monitors can appear on the dashboard.

As you might imagine, executive dashboards vary greatly in function, depending on industry and audience.

Why it is crucial for an executive to have a dashboard?

An executive dashboard can provide a view of revenues or alerts for a given infrastructure. A dashboard might inform upper management if sales targets are being met on a daily basis. Perhaps a factory’s Q&A department is not meeting production quota, the web application is performing too slowly to service online customers, or a section of the internal network is down. These are all items that can be reported quickly via an executive dashboard.

Who, in a company, can benefit from using executive dashboards?

Executive dashboards are primarily used in management, but also have an audience of system, network and database administrators. Certain dashboard products can provide very specific views of the infrastructure. These views might allow management to pinpoint problem areas and take appropriate action quickly, thus minimizing financial impact to the organization.

Are dashboards being used only by higher-level executives? What are other applications?

Management is using executive dashboard for quick notification of problems that affect the bottom line. Quick response to these problems is critical to keep a company running smoothly.

Network, system and database administrators use dashboards for notification of problems that affect the infrastructure that they manage. Quick response to infrastructure issues keeps clients and management happy, and the company running smoothly.

Employees can use dashboards as well. An inventory-tracking system notifies the employee when it’s time to reorder a widget.

What are some of the key reasons for a business owner to get an executive dashboard?

By using executive dashboards, managers can:
1) Make well-informed and more-intelligent decisions
2) Generate detailed reports in a matter of seconds (financials, sales results, growth, expenses, etc.)
3) View up-to-date data categorized by region, department, division or nearly any conceivable attribute
4) Identify business or processing areas that tend to be inefficient, and increase profits

The last one is the kicker. Those extra dollars can be invested back into the company to help ensure growth and market position. Usually an executive dashboard solution will provide many times its cost in savings.

What should a business owner look for when selecting a dashboard product?

The right executive dashboard product is a low-maintenance, automated system. These systems analyze business processes, track performance, display and send alerts, build and deliver reports, and provide a business with intimate knowledge of itself. The business owner should review many dashboard products and choose one which most closely provides the type of monitoring needed. Developers can build custom monitors to meet unique needs.

What are some of the advances being made in executive dashboards?

In the coming years, look for software companies to offer intelligent, custom-fit-by-industry dashboard solutions. Custom-fit solutions promise the same benefits with a lower cost of deployment.

ROBERT GARRETT is the director of software development for Perpetual Technologies Inc., an information system service provider based in Indianapolis, specializing in Oracle databases and Oracle applications on Unix platforms. Reach him at or (317) 824-0393.

Monday, 27 February 2006 19:00

Life experience credits

The decision to invest in workers’ education is one most businesses cannot afford to take lightly. Before business managers take the plunge and send an employee back to the classroom, they need to closely assess what knowledge or training the employee already possesses.

An often-overlooked reality is that students may be able to articulate past learning and receive academic credit toward a formal degree program. If so, both the business and worker can benefit by decreasing the time it will take to complete overall degree requirements and the company’s financial investment, which is generally based on a per-credit cost.

Academic credits can be articulated for a wide range of previous training, such as military service, on-the-job training programs and continuing education or credential programs, said Elden Monday, state vice president for Pennsylvania at the University of Phoenix.

Smart Business spoke with Monday about how corporate leaders can translate employees’ past experience into money saved when sending employees back to school.


What are prior learning credits?
Life experience credits represent previous business experience or courses and credentials obtained outside the traditional collegiate setting. Life experience credits are usually given to adult students who have gained college-level learning through professional training courses, licenses, original certificates, transcript coursework, and personal and professional learning. These credits recognize that the individual has amassed knowledge and skills through experience, if not in the formal classroom setting.


How can employees returning to school get credit for prior learning?
First, the employee needs to find out if the university or college offers prior learning credits to its students — not all do. The registrar’s office can provide this information.

Both manager and employee should be aware that although past learning may be deemed creditable, many of the credits earned outside the university setting will be counted as electives, rather than as credit toward specific degree requirements. Even so, elective credits are required for degree completion, and articulated credit can be very valuable in terms of both time and money.


How can a manager help determine what opportunities exist for prior learning credit?
Any time a corporation is investing in the education of its employees, there should be a solid plan that outlines the degree program and expected outcomes for both the individual and the business. Before sitting down together to define this plan, the manager should ask the employee to create a list of all learning and training he or she has encountered in the professional, post-secondary setting.

Good sources of this information include resumes, certification and completion certificates, transcripts and personnel records. It is important to realize that this list will be a starting point — the school the employee plans to attend will need to conduct a thorough prior learning assessment to determine whether academic credit can be awarded.


How do schools determine what prior learning experiences are credit-worthy?
Life experience learning in any form must be evaluated by the university or college to determine how much, if any, credit can be awarded. Factors such as content, duration and accreditation factor heavily into this decision. The employee should be prepared to provide certificates, course syllabi or curriculum, and other relevant information about any classes, seminars or workshops he or she has taken. In some cases, a detailed application, portfolio or even a test to assess knowledge may be required.

To evaluate whether past learning merits degree credit, many universities work closely with an organization called the American Council on Education’s College Credit Recommendation Service (CREDIT). The service helps connect workplace learning with universities by helping adult students get academic credit for courses outside traditional degree programs. This is especially true of corporate training programs in which employees are receiving specialized instruction to enhance on-the-job performance.


How can more companies and their employees take advantage of prior learning credits?
While many corporations are becoming savvy about life experience credits, the opportunities are not widely known. Business managers may want to consider connecting with the American Council on Education’s CREDIT network to determine academic credit eligibility for in-house training or courses.

In addition, it is worth noting that it does take time for an employee to gather all the necessary background information, and doing so can be inconvenient (especially if the company’s corporate training programs have not been well-documented). Creating a robust filing system with a detailed description of internal training programs is a great first step toward increasing the rewards and diminishing expense for both employees and the company.


Elden Monday is the state vice president for the Pennsylvania campuses of University of Phoenix, a national leader in higher education for working adults. Reach Monday at (610) 989-0880, ext. 1131 or




Monday, 30 January 2006 19:00

Online mortgages

If you’re in the market for a home, and the last time you applied for a mortgage was 10 or more years ago, you are in for a pleasant surprise. Back then, you had to manually fill out tedious forms and wait days (if not weeks) to get a reply and close on the loan. But today, with online mortgages, an application can take less than 15 minutes to fill out and can be approved instantly.

While online banking has flourished in the past five years and the majority of mortgage applications are now submitted via the Internet, there are precautions consumers should take before pressing the send button, advises Patti Krajewski, vice president, community lending at MB Financial Bank, a Chicago-based banking and financial services company.

Smart Business spoke with Krajewski about how applying for an online mortgage differs from a traditional mortgage application, and how consumers can ensure they are getting a loan from a reputable company.


How do online mortgages differ from traditional mortgages?
The loan itself is identical to a traditional mortgage, but the time and convenience factor are worlds apart. An online applicant can sit down and fill out the forms, lock in a rate and get online approval in 15 minutes or less. All the estimates — down to the monthly payment — can be calculated using any points, and local and state fees.

In fact, the vast majority of lenders today — including banks and other financial institutions — are submitting online mortgage applications, even when the applicant comes into the bank to apply in person.


What are the benefits of applying online for a mortgage?
Today there are so many mortgage options, it can be overwhelming. Many online mortgage applications walk you through the process by asking specific questions and, depending on your answers, offering a variety of mortgage options that may fit your needs.

If the process still feels too overwhelming, going to a bank and working with a lender face-to-face to fill out the online mortgage application is a lot like having your own lending expert sitting next to you. It’s much easier for the experienced lender to conduct the interview, help you get through the online application and assist you in making the right choice.


What are the downsides of applying for a mortgage online?
Consumers need to exercise caution with online mortgages, just as they do when purchasing anything else on the Internet. There are a lot of mortgage lenders out there and you need to be sure that the company you are dealing with is reputable.

It is tempting to apply to the lowest rate, but take time to shop around before you apply. Remember that the lowest rate doesn’t necessarily mean the lowest annual percentage rate, which is what you really want.


How can people make sure that an online mortgage company is legit?
Don’t give an online lender any information until you carefully look into the company. Be careful with mortgage companies that solicit your business through spamming via your e-mail address with too-good-to-be-true offers and rock-bottom rates.

Check out their Web sites and make sure they are not dead sites. You can determine this by looking at the site and making sure the online application page mirrors the company’s main page. You don’t want to be bounced to another Web site.


What are some ways an applicant can investigate an online lender?
Investigating an online mortgage company is not much different than looking into any other business. Are they listed in the Yellow Pages? How long have they been in business? Do they have an 800 number where real people answer the phone?

Google them and see what comes up, and remember that just because a company advertises does not mean (it is) reputable. You may also want to check the company out at the FTC’s Web site (; if the institution is federally insured, check the FDIC’s Web site ( If it’s a credit union, check the National Credit Union Administration site (

Your best bet when looking for an online mortgage loan is to get a recommendation. Call your local bank, business associate or friend who has recently purchased a home in your area for ideas.

Start locally because, despite the thousands of mortgage rates and products available, the most competitive rates for the property in your community are probably right in your own backyard.



Patti Krajewski is the vice president, community lending, of MB Financial Bank, a Chicago-based banking and financial services company. Reach Krajewski at (708) 225-3846 or




Tuesday, 27 December 2005 19:00

Changing the guard

A business owners’ serious illness, disability or death will catch a company by surprise if there is no succession plan waiting in the wings. The result is often chaos, and, most likely, failure of the business that the owner worked so hard to make successful.

Data shows that while more than 90 percent of businesses in the United States are family-owned, 70 percent of these businesses fail in the transition into the second generation; and 85 percent fail at the third-generation level.

Smart Business spoke with Jason Cain, head of Barnes & Thornburg’s Chicago wealth management practice, about the importance of creating a business succession plan.


What are the first steps to creating a succession plan?
The first step is for the business owner to admit that he or she will eventually retire and die. This may seem laughable, but its true that many entrepreneurs don’t believe it will ever happen to them.

Once you get a business owner to face this reality, the next step is to take a hard look at what the business is going to look like once the owner is gone. Does the business owner plan to retire, and if so, when? Will the business stay intact with the next generation running it, or will it be sold?

If the business owner plans on handing the business down to the next generation, intense succession planning is needed. Business owners need to realize that a succession plan isn’t a document set in stone and filed away until it’s needed.

Succession planning is a process that is similar to the way a business evolves. It is a unique combination of business planning, tax planning and family psychological planning.


When is the best time to create a succession plan?
A good rule of thumb is to start about 10 years before you think you want to retire. By five years out, you ought to have a succession plan in place. The plan needs to include all your expectations and goals for the company. You need to share that information with your family members and others in the company you are grooming for succession.


How difficult is it to separate family and business in order to create a good succession plan?
It is very tough to segregate those issues because of the nature of families and the desire for senior members not to hurt their children’s feelings. They naturally want their children to succeed. But there will always be a day of reckoning.

Business owners need to take a hard look of what is good for the business. And it is critical they separate family issues from business issues. It may even mean removal of family members from the company in order for the business to remain successful.

In a good succession plan, all employees — even the children — are evaluated at every stage of life in their careers.


How can senior members ease the burden of making those difficult decisions?
If senior members can take a little bit of the pain upfront and be honest with family members who are in the business about their roles, responsibilities and expectations, it becomes less burdensome to those left behind. While that means some toes will get stepped on along the way, from my perspective that is better to deal with when the business owners are alive rather than when they are gone.

With no succession plan, what often ensues is an intense power. Not to mention the erosion of family harmony and the shift of energy away from the successful management of the business.


What advice can you give to businesses looking to set up a good succession plan?
Business owners don’t need to go through it alone. There are many professional to help guide businesses through the process, such as consultants, advisers, accountants, estate-planning attorneys. An outside board of directors may also be helpful in providing unbiased advice.

Business owners also need to be clear and keep the lines of communication open with employees. If you have children or key employees and expect to transition the business to them in 10 years, let them know this. These people need to understand the role they are being groomed for and they need to be a participant in this process if it is going to be successful.

Tax planning is also an integral part of succession planning. There are many tools available that can ease the estate tax including long-term gifting strategies, sales transactions, employee stock option plans and charitable giving. All these need to be done while the business owner is alive.


Jason M. Cain is the head of the Chicago office’s wealth management practice for the law firm of Barnes & Thornburg LLP, a large Midwest-based law firm. Reach him at (312) 214-8337 or




Tuesday, 25 November 2008 19:00

Insurer security and you

If you have a commercial insurance policywith AIG, you are no doubt wonderingwhat the challenges of this insurance behemoth mean to you and your business.

Before discussing this important issue,businesses need to first understand that AIGis a parent financial company whose subsidiary insurers are separately capitalizedand regulated by state insurance departments, which have capitalization requirements and monitor insurer solvency.

Secondly, given all that’s occurred in thefinancial markets over the past few weeks,AIG is not alone in facing challenges.Therefore, while the focus of this article isAIG, these comments hold true for many ofthe major commercial insurers common tothe middle and major account markets.

AIG, along with its commercial insurancecompanies, services hundreds of thousandsof businesses throughout the U.S. and hasbeen a major insurer to the U.S. financial system. While the hope is that AIG will get control of its complex financial problems withthe help of an $85 billion federal loan, whatshould business owners do in the meantime?

“Everyone is concerned about AIG’s future:brokers, investors, insurance agents andclients,” says Jerry Kysela, a resident management director for Aon, one of the nation’slargest brokers of insurance to AIG and othercommercial insurers. “But, we are not making specific recommendations to stay or go.”

Smart Business spoke with Kysela abouthow AIG’s crisis may affect your commercialinsurance and steps to take right now toensure that you and your business are protected in case AIG’s situation worsens.

What should AIG commercial clients do, rightnow, to protect themselves?

First, don’t panic. Clients need to understand, with clarity, the AIG situation and notlisten to spin or hearsay. What is importantare the facts that have occurred, and whereAIG stands at the moment. This is information that AIG commercial clients should bereceiving from their broker or insurance professional. Talk to your broker and make sureyou completely understand the issues. Yourbroker or insurance professional shouldalready be giving you lots of up-to-date information about AIG’s present situation andplans for the future.

Should the AIG insureds be asking the brokerto help them make a decision?

A good insurance broker will provide thenecessary information for the client to makean informed decision to stay or move toanother insurance company. To assess AIG’sfinancial stability, I would recommend doingyour own due diligence using the industrydata available, such as Moody’s, Standard &Poor’s, and A.M. Best Company, just to namea few.

Should AIG customers be looking at otherinsurance options at this point?

Your broker or agent should be giving youadvice about other insurance options, butthat doesn’t mean you should, in a panic,switch to another insurance company, even ifyou could. Instead, if your business is facinga renewal during this turbulent time, you andyour broker should carefully researchoptions as part of your renewal strategy. Yourbroker or insurance professional ought to beproviding the facts about AIG and helpingyou make a comparison of the AIG situationversus a competing insurer, many of whichare having their own financial challenges.

It is a complex decision to change insurance companies and cannot be made hastily.

There is a lot at stake — important balancesheet protection, complex coverage issuesand cost. Commercial insurance is not acommodity and insurers will not take on newcommercial clients without a completeunderwriting process. Most insurers are cautious and don’t necessarily want to add aflood of commercial policies without assessing the risks, even if they are opportunistic asa result of your current insurer’s challenges.

If you are even considering switching yourinsurance companies, you need to start getting your underwriting data together early toget a full and concise submission.

Work with your broker to form a strategythat will enable you to completely evaluateall options, including an AIG renewal. Makesure your broker has significant relationshipswith the new insurers, in order to increaseyour chances of negotiating viable options.

When comparing AIG to another insurancecompany, what should a customer look for?

Price is one consideration. AIG fills animportant role in the commercial insurancemarket. It understands complex risks and foryears has filled this niche as a very competitive insurer from both a cost and coverageperspective. Replacing AIG insurance mayactually cause a client an increase in costs.That kind of increase in premiums will notwork for many businesses in this tough economy. Accordingly, AIG, under current circumstances, remains a very viable option.

Customers also need to look at thespecifics of the other insurance company’sproduct including coverage, program design,deductibles, claims knowledge, underwritingknowledge and longevity in the business.

Your broker should be able to make a recommendation about the strengths of the various insurance coverage options, includingprice, coverage terms and conditions, claimspayment history, financial rating and otherfactors you would want to consider beforemaking your choice of carrier.

The important thing right now is for customers to do the following: understand thesituation, get options and evaluate the data.That alone is a huge undertaking and willtake longer than you think. It’s best to startthat process sooner rather than later.

JERRY KYSELA is the resident managing director for Aon ( Reach him at (216) 623-4150 or

Thursday, 25 September 2008 20:00

Exit interview intelligence

Saying goodbye to good employees when they leave for greener pastures is not always easy. Along with a going away party, a gift and a handshake, businesses should also conduct an exit interview to find out deeper reasons why an employee has left for another company. Gathering this kind of information, if done properly, is a good way to learn how to improve staff retention.

“Gathering data to address areas of decreased employee satisfaction can give an organization the tools it needs to identify trends and patterns,” says Bette Puffer, Corporate Recruiter for Talent Tree Inc., a staffing company based in Houston.

Smart Business spoke with Puffer about the benefits of conducting exit interviews and what you need to ask your employees before they leave for good.

What are the benefits of conducting an exit interview?

The biggest benefit is the data gathered from the interview, which can shed light on areas where employees are dissatisfied. This data can be used to:

  • Put strategies in place. If you can spot the trends of why employees are leaving, you can put into place strategies that address these problems, which in turn can reduce turnover.

  • Increase morale. Decreasing turnover rates increases the productivity of an entire work unit or team, since high turnover means increased workloads for other employees, stress, tension and decline of corporate morale.

  • Save money. Replacing employees is expensive. If you learn why employees leave your company and work to correct any problems, you can save money in advertising, training, interviewing time and relocation costs.

Are there any downsides to conducting exit interviews?

If an exit interview is conducted face-to-face there is a tendency for employees to be reluctant to reveal the real reasons for leaving, and instead offer a ‘politically correct’ reason for leaving. A typical answer might be ‘better pay’ or ‘better job opportunity,’ when, in reality, it might be that the manager or supervisor is a micromanager and the employee does not work well under that kind of scrutiny. Or perhaps there has been some sort of harassment that the employee is hesitant to divulge for fear of future negative action.

The traditional method of having an assigned HR representative or the employee’s supervisor conduct the exit interview (usually on the last day), can provide a number of challenging difficulties: It is time-consuming, difficult to tabulate and not always executed consistently.

If face-to-face exit interviews don’t necessarily give businesses the honest answers they need, what is the alternative?

Many employers have found that using a third party to conduct the exit interview works as a best practice. Online survey companies will either provide useful questions or allow you to customize your own exit survey. They will also provide an analysis of the data, which can be both time- and cost-effective.

Whether using a third party or conducting in-house interviews, some common principles for planning should be applied.

  • Use a universal form or questionnaire. All voluntary departures should be given an appropriate questionnaire.

  • Use standardized questions. Ask consistent core questions to ensure comparability throughout the organization and across time.

  • Make data accessible to managers. Make sure any data gathered is available to the appropriate managers and supervisors to increase the likelihood that the data is used to address any problems.

  • Monitor and create strategies. Data is only good if it is put to use. Make sure that this data is reviewed and used to create policies and procedures that will help turnover.

  • Ask the right questions. The interview or questionnaire should include feedback on the work environment in addition to reasons for leaving.

Are there any tips for creating an interview or questionnaire that will elicit honest answers from the departing employee?

Do not focus solely on the employee’s reasons for leaving. Although this is important information, it is also critical to include a broader scope, which includes the employee’s attitudes and experiences, to identify the deep-seated reasons for making the decision to leave.

Ensure that there is more than one way for employees to express their reasons for leaving and include several open-ended questions for them to elaborate.

To get beyond the decision itself, ask questions that address the employee’s satisfaction with the job itself, such as: assessment of the organization’s work culture, the effectiveness of lines of communication, how well the employee’s job responsibilities were defined, perceived opportunities for advancement and the employee’s perspective on the amount of training, feedback and recognition received.

BETTE PUFFER is the Corporate Recruiter for Talent Tree Inc.,, a staffing company based in Houston. Reach her at (713) 361-7511 or

Tuesday, 26 August 2008 20:00

A more temporary solution

If you use a lot of temporary help in your business, you probably are juggling two or more staffing agencies to fill a variety of positions: from administrative help to information technology personnel to those in managerial functions. You may have wondered if there were a better way available by using technology to manage this work force, streamline costs and optimize your time.

“Businesses are talking about VMS (vendor management system) and how this new technology is making life easier for those in charge of managing temporary staff,” says Michael Reyes, Director of Enterprise Accounts for Talent Tree of Houston.

Smart Business spoke with Reyes about VMS, what it does and how to select the VMS vendor that is right for your business.

What are the benefits of implementing a vendor management system?

The biggest benefit is having one point of contact, one organization to manage all temporary staffing needs. It’s ‘one-stop shopping.’ The technology allows you to manage time entry flow, invoices and requisition all online. It eliminates dealing with multiple vendors with multiple rates, and it broadens the pool of temporary workers. It eliminates the risk of being price gouged.

What if a business likes the staffing vendors it works with? Does it have to change over to one vendor with a VMS?

No. Often many temporary staffing firms participate in these systems so you have a wide pool of vendors that temporary personnel will come from. The difference is that you only pay the vendor that is managing the particular VMS program, which maximizes efficiency. Some VMS vendors are the staffing companies themselves who own the technology; some VMS vendors are technology companies.

What does the ideal VMS do?

The system should have the ability to generate real-time reporting, consolidate invoicing and set up any type of electronic fund payments. Most important, it is necessary to have someone within the organization understand the VMS and know how to use it. The VMS also needs to have a solid roster of temporary staffing agencies across the nation who want to sign up to the program. It must have a national — as well as regional — footprint.

The VMS must also be able to accommodate requests from all job niches: from janitorial help to administrative staff, from IT personnel up to CFOs. That is truly the luxury of a system like this — to sit down at the computer and create a job description and simply click a button to fill a request. These requests can be for short assignments to cover vacationing or sick employees, or long-term assignments for special projects.

How can a business best evaluate VMS providers, and what does it cost to get started?

VMS programs should have good relationships with third-party vendors; they should also be able to provide references and case studies. A VMS program should also have a national presence and the provider should understand the staffing industry and not just be a technology provider. The software should be able to manipulate information in the system and allow customization of job requests.

Cost to implement a VMS ranges from $50,000 to $100,000 for the software and training cost. The specific cost depends on how much customization is required. After that, there is a yearly maintenance fee to cover IT expenditures, depending on volume. That fee is about $12,000 a year.

Is VMS for every business?

It is only for large organizations that work with multiple staffing vendors and want to streamline the process. It is not a tool for small organizations since this is for high temporary help volume — $10 million-plus spent in temporary help. It is also a tool for temporary help only — those with direct-hire needs don’t need this kind of ongoing technology tool to manage these employees. Large businesses with multiple offices across the country are ideal candidates for VMS.

MICHAEL REYES is the Director of Enterprise Accounts for Talent Tree,, a staffing company based in Houston. Reach him at (972) 361-0123 or

Tuesday, 26 August 2008 20:00

Ethics, front and center

In the post-Sarbanes-Oxley world, ethics policies, by necessity, have taken a front seat in many companies. While many companies believe they have business ethics under control with documentation, what is happening to the culture of business ethics?

“Businesses are often ruled by ‘thou shall nots,’” says Denise Schoenbachler, dean of the College of Business at Northern Illinois University. “This, of course, is critical, but it is also important to stress the ‘thou shalls.’”

Smart Business learned more from Schoenbachler about the state of ethics in today’s businesses and what companies can do to create a truly ethical business environment.

Businesses are creating business ethics policies, but how is this different from creating an ethics culture?

The majority of businesses are run ethically and with good principles, but several major scandals have broken the public trust. While the more stringent rules and regulations are a good thing — and necessary given the criminal misconduct of executives in these high-profile cases — these restrictions are reactive. Defining an organization’s character through ethical behavior is a proactive approach. That’s where culture comes in. Culture is really a set of shared values — a belief system — that shapes behavior. The significance of a culture of ethics is that it both defines an organization and also impacts everyday issues within the organization. As a simple example, employees are more likely to share the belief that it is not OK to pad expense accounts. And these employees will influence the behavior of their peers. But because companies have spent so much time, energy and money on government compliance, the practice of viewing ethics in a culture-based way may be taking a backseat.

Are there other reasons that fundamental business ethics are falling by the wayside?

Time, and in more than one way. Employees are more likely to engage in ethical behavior if they know they are in the company for the long haul. The lack of company/employee loyalty in this global economy has a big impact. Another element is the enormous pressure many employees are under to show short-term results and financial gains. This leads to the feeling of ‘deliver at any cost’ because Wall Street’s quarterly earnings expectations have compressed companies’ long-term performance into an extremely narrow three-month performance window.

What happens in businesses when there is a weak or nonexistent ethics culture?

Sound ethics are at the core of any successful business. The compliance route leads to after-the-fact policy-writing and mandated training programs. Those are all fine and well, but without an ethics culture, the business may open itself up to questionable or even criminal activity within the company, in spite of all the policies. It’s also extremely expensive. Existing research finds that companies spend approximately $1.1 trillion per year in systems costs just to comply with standards, notwithstanding the costs associated with lawsuits or judgments.

How can businesses make sure they have an ethical business culture?

The culture of an organization has to be lived and breathed at the top on a daily basis. Leaders must personify an ethical business culture and make it a visible reality. If it is not a leadership initiative, it will fail. It can be as simple as being very clear and direct about what the organization’s character is, what the policy is, the consequences and what is considered right and wrong. Business leaders should explain the financial consequences for lapses in ethical behavior. Business managers cannot turn a blind eye to even seemingly minor infractions. There must be consequences. Because if employees get away with the little infractions, it is reinforced behavior and can lead to bolder unethical behavior.

Along with the ‘thou shall nots,’ reinforce the ‘thou shalls’ — that is, explain what to do when faced with an ethical dilemma. This can be done through education and role-playing, for example. While you need to make it clear that improper behavior will be called attention to, you also need to reward good behavior and choices and publicly recognize achievements.

Human resources and hiring personnel should always ask candidates about their training in ethical business practices. Academia is part of the solution, as well. Business schools that are AACSB-accredited (The Association to Advance Collegiate Schools of Business) now must include business ethics within the curriculum. Some are taking this a step further by teaching business ethics in an applied sense. So, the next generation of working professionals will have had vast exposure to business ethics as a skill set.

DENISE SCHOENBACHLER is the dean of the College of Business at Northern Illinois University. Reach her at or (815) 753-6225.

Saturday, 26 July 2008 20:00

Environmental liability

Environmental disasters are not confined to just headline-grabbing oil or gas spills. There are many ways in which every business is exposed to environmental liability — from asbestos and groundwater pollution to property transactions where pollution already exists in the land or facilities. These hazards can be subject to serious violations of federal legislation to protect the environment.

“Environmental losses tend to be severe and significant to a business,” said Brian Slife, vice president and account executive for Aon Risk Services Inc. “However, some businesses are not aware that their general liability policies exclude pollution liabilities. Businesses are often entirely uninsured.”

Smart Business spoke with Slife about the dangers of environmental exposures and what you can do to protect your business.

Do all businesses need to be concerned with environmental liability?

The obvious industries that are at high risk for environmental liabilities are the old guard businesses, such as oil, gas and manufacturing. But all kinds of businesses — even service companies — can be exposed to environmental liabilities through different aspects of their operations. For example, hospitals and other health care companies have biohazard and radiation issues. An even less obvious example would be a real estate portfolio manager — not considered an environmentally hazardous occupation — who is involved with transaction of properties that have historic environmental issues.

Regardless of the industry, every business should evaluate its exposures to environmental liabilities, make the appropriate disclosure of those liabilities on its balance sheet and make an educated decision about whether or not to purchase environmental insurance.

What types of environmental liabilities can put a business at risk?

There are two major types of environmental risks, operational and transactional. Operational risks are hazards that revolve around the operation of a business, including spills, leaks, waste disposal, transportation of products or wastes, and historic or gradual pollution. Transactional risks are unknown pollution issues that come to light after a property or business is bought or sold. If environmental due diligence was not conducted before the purchase, both the new owner and previous owner can be liable for environmental problems associated with the site.

What problems can a business face if it does-n’t have environmental liability insurance?

The business could suffer hits to its income and possible long-term liabilities to its balance sheets. Fines and lawsuits related to environmental liabilities tend to be very costly. There is also a cost related to public perception of an organization’s brand, which can be very difficult to recover from.

What legislative changes pressure businesses to examine environmental exposures?

Increasing enforcement of existing environmental laws, such as the Clean Water Act, Clean Air Act, RCRA and Superfund, are the most notable. There are increasing pressures on the Securities and Exchange Commission (SEC) to adapt more stringent rules and procedures when publicly held companies evaluate and disclose their environmental liabilities and exposures to climate change.

Accounting rules are also evolving related to the measurement and disclosure of environmental liabilities. The Financial Accounting Standards Board (FASB) issued Interpretation Number 47 (FIN 47) in March of 2005, which changed the way organizations must report environmental liabilities related to an asset’s ultimate end life, signaling a possible end of an organization’s traditional ‘don’t ask/don’t tell’ approach to potential environmental problems. FASB also issued FAS 141R, which will go into effect December 15, 2008. FAS 141R requires a buyer of business assets, or a party acquiring a controlling interest in business assets, to recognize and/or disclose the fair value of contingent assets and liabilities acquired or assumed in a business combination. FAS 141R presents an opportunity for environmental risk management techniques and environmental insurance to be effectively used to mitigate environmental liability risk exposures related to business combinations, particularly mergers and acquisitions.

How can business risk managers make sure they have their bases covered?

Environmental risk management is not just about pre-loss environmental loss control. Risk managers need to focus on how their organization controls the loss post-loss from a severity standpoint, and then how it will pay for the loss when it occurs. They must also be actively involved in, and the organization must have a procedure for, disclosing environmental losses. Environmental risk management is particularly effective when multiple disciplines work together in the organization (risk management, operations, environmental management, legal and finance) and when a business utilizes environmental insurance, which mitigates financial effects. Environmental liability insurance products are the best tools an organization can use to mitigate the potentially devastating financial consequences that occur because of an environmental problem.

BRIAN SLIFE is a vice president and account executive with Aon Risk Services Inc. (, a risk management, human capital and reinsurance consulting firm based in Cleveland. Reach him at (216) 623-4112 or