Tornados, floods and other catastrophic events can have a devastating impact
on your business. In addition to possible damage to your own building or inventory,
there is the potential for loss of infrastructure services like power, water, or data
and telephone lines. Road closures or even
complete lockdown of devastated areas are
also common after a severe storm.
“The ability to repair, reopen or relocate
your business can be the key to survival,”
says Corry Novosel, director of Catastrophe
Claims Operations at Westfield Insurance.
Smart Business spoke with Novosel
about how to protect and preserve your
business when faced with catastrophes.
How can business owners mitigate risks?
A well-rounded insurance plan should
consider the possible catastrophic events in
your local geography. Tornadoes, floods
and even a terrorist event in a nearby city
can impact nearly any business at any time.
Until this year, Ohio business owners
would have laughed at the idea of being
affected by a hurricane, but the remnants of
Hurricane Ike struck large areas of Ohio on
Sept. 14, 2008. Winds as fast as 75 miles per
hour caused one of the largest storms in the
state’s history with damage estimates as
high as $1 billion.
How can you uncover commonly missed
areas of vulnerability?
First, you need to consider the ancillary
impact of a catastrophic event. What
impact would a tornado or flood have on
your supply chain or delivery? Would you
lose customer traffic or be unable to access
data, records or billing?
Next, you should discuss often-excluded
causes of loss with your agent. Flood damage, for example, is often not covered
under typical commercial policies. Loss
caused by the interruption of power to your
property or by road closures by municipal
authority may also be excluded.
Finally, think about business income coverage. In many instances, the loss of business income exceeds the cost of repairs to
the building. Even if you are a tenant, catastrophic damage to your building or your
area can result in suspending operations for
weeks or months.
What are the best ways to speed the recovery
Provide good contact information when
you turn in your claim; many times, it is difficult to locate individuals in the aftermath
of a catastrophic event. Also, don’t wait for
your claims person to contact you before
working on your own plan of action. The
sooner you have a plan in mind, the sooner
you can be advised on what is covered.
What are some important dos and don’ts following a storm?
- Do report your loss. Contact your agent
or the 800 number for direct claims reporting to your insurance carrier. The sooner
you notify your carrier of your loss, the
sooner you will be contacted and the
process of handling your loss started.
- Do take emergency measures to mitigate additional damage to your business. In
the end, you may not be covered for the cost of removing flood water from your
floor, but leaving it there for a week while
you await your carrier to call will not help
- Do document your loss. Taking photos
is always a good idea. Keep all receipts for
any emergency repairs. Your policy requires damaged property be available for
inspection. If you must throw out damaged
goods before your claims representative
arrives, be sure to document them before
they are hauled away.
- Don’t panic. Your policy is a contract
like any other. If you are covered for loss
caused by wind, you will be paid for covered damages caused by wind. The best
way for you to avoid coverage surprises is
to meet with your agent on a regular basis
and understand what is covered and what
- Don’t assume your claims person is
familiar with the details of your business.
While it is likely the person handling your
claim has an understanding of commercial
enterprises, you can help him or her by
explaining how this loss is impacting your
operations. Good communication can often
alert your claims professional to coverage
you may not realize you purchased.
What else should businesses know?
Most insurers understand that their
response to catastrophic events is an
opportunity to make a very positive
impact. Keep in mind, however, that the
intake of thousands of losses and the
movement of hundreds of claims persons
to an area that may have limited infrastructure available is, at best, difficult to coordinate. Initial focus is usually on making contact with all claimants and assessing the
most severe losses using the triage system.
Less severe losses may be handled later
with instructions to the insured to make
any necessary temporary repairs and begin
the process of finding a repairer who is
willing to come out and write an estimate
CORRY NOVOSEL is the director of Catastrophe Claims Operations at Westfield Insurance. Reach him at (724) 776-7200 or
email@example.com. Westfield Insurance provides commercial and personal insurance services to customers in 17 states.
Represented by leading independent insurance agencies, the product we offer is peace of mind and our promise of protection is
supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.
By definition, accounts that qualify for national account status within the supply chain environment are characterized by several common traits: a centralized, coordinated purchasing organization with multilocation purchasing influences, a complex buying process and a need for customized solutions.
Given the various special requirements, unique demands and extensive demographics encompassing these large, complex accounts, logistics professionals are increasingly introducing national account programs within their organizations to better devote their corporate resources toward serving these valuable customers.
“These programs aim to help customers simplify purchasing, streamline and improve productivity, receive predicable competitive pricing, and deliver supplier reliability,” says John Hagi, director of national accounts for AIT Worldwide Logistics. “Installing a comprehensive national account management approach within a small to midsize business environment requires financial investment, long-term focus and multifunctional capabilities along with realignment of the sales organization.”
Smart Business sat down with Hagi to discuss the risks and benefits associated with implementing, maintaining and managing a successful national account program within a logistics organization.
How is the business relationship enhanced when a customer becomes a national account customer?
As the national account and supplier relationship develops, the extent of information sharing across the organizations advances. Once the relationship moves from that of vendor to partnership, the supplier firm enhances its knowledge of the national account’s business environment, playing a pivotal role in helping to meet the national account’s goals. Customer-centric enhancements often include dedicated customer support, IT synchronization, top account status and executive-level sponsorship.
The supplier will also often be driven by its customer to develop new product offerings. Simultaneously, the national account secures better information on the supplier firm’s competencies and develops technologies to improve its own strategy development. In essence, developing this heightened understanding leads to improved performance and optimization of operations for both organizations.
Critical success factors for a national account program include organizational alignment, senior management commitment, streamlined processes and systems for communications and information management, selecting strategic accounts, account planning and rollout, relationship and program metrics, and the potential to realize the benefits of a mutually profitable strategic account relationship.
How can a national account program benefit the entire logistics organization?
National accounts benefit the entire organization through increased revenue, leveraged purchasing, product and IT development, and overall general synergies across the organization. Furthermore, skill development within the local sales organization is often driven through team selling to national accounts, resulting in a local sales force that sells with skill to both small companies and larger, more diverse organizations.
It’s not unusual for a company to feel bogged down or overwhelmed by the heavy demands of a national account when there are so many other ‘eggs in the basket,’ so to speak. But as with any account, suppliers must maintain a level of internal control as it relates to the service demands of a customer. This becomes even more critical when developing business with national accounts, as the risk of failure increases when venturing into unproven service or market segments. Providers must stay true to their core while also remaining open to venturing into new sectors.
When tackling national account business, how does the sales pitch and cycle have to change?
The ‘sales pitch’ changes dynamically when selling a national account program to a customer. First and foremost, the customer’s purchasing behaviors are different, as the sales take place at many levels and from within multiple departments. The complexity of the sale increases exponentially from a contractual standpoint within the purchasing organization to the end user at the shipping level. This complexity is further compounded by local mores within a national account as well as those of the supplier.
The sales effort must become a well-balanced act between local and national sales. Companies must master the challenges of adapting to this extended sales cycle and degree of supply chain complexity while identifying the individual incremental steps necessary to close the sale and synchronizing collective efforts on the local and national level.
In today’s slowing economy, sales teams must also be ultrafocused on value, not price. Customers are increasingly being faced with challenges affecting their business’s bottom line, and the savvy salesperson identifies opportunities to provide solutions that bring real value to his or her customer without simply taking the ‘do more for less’ approach.
JOHN HAGI is director of national accounts for AIT Worldwide Logistics, Inc., headquartered in Itasca, Ill. Spanning numerous nationwide locations and an ever-increasing network of international partnerships, the global transportation and logistics provider delivers tailored solutions for a wide variety of vertical markets and industries. Reach him at firstname.lastname@example.org or (800) 669-4AIT (4248).
Green is moving from the fringe to the foundation of the real estate business. As the concept becomes more mainstream so have the tools.
“Until recently, there were not as many resources available to help business owners choose green products and services for their real estate and operational needs,” says Amy Mahone, associate in the Real Estate Practice Group at Levenfeld Pearlstein, LLC. “But now there are many new products and services on the market to help business owners go green and there are great improvements in sustainable materials.”
Smart Business learned from Mahone about ideas and resources for going green in the Chicago area.
Why should business owners go green today?
The time to jump on the green bandwagon is now. Within a few years, green will not just be ‘in,’ it will be required by cities nationwide, including Chicago. Already in Chicago all renovated City buildings must be certified under LEED, and new City buildings must achieve at least a LEED Silver rating. Even without achieving LEED status, there are many changes a small business owner can make with respect to Energy Star appliances, conservation, recycling and using green products that can make a difference both to the bottom line of a business and to the environment. Due to the innovation in green options, the United States Green Building Council (USGBC) recently estimated that going green only increased expenses by 2 percent, but saved at least 25 to 30 percent in energy costs.
What are some of the ways to develop environmentally conscious buildings?
There are a multitude of opportunities to increase the green factor in buildings. These include:
Sustainable site development: Location, layout and features of real estate, including locating a building near public transportation, creating space for bicycle storage and changing rooms, and providing priority parking for hybrid cars and carpools;
Water efficiency: Potable water use reduction in sewage by choosing water-conserving fixtures and decreasing use inside the building;
Energy conservation: Using Energy Star-certified products, replacing fluorescent lamps with incandescent light bulbs (saves close to 75 percent in electricity costs) and installing skylights;
Green roofs: A green roof is one that is either partially or completely covered with vegetation and soil or another type of growing medium, planted over a waterproofing roof membrane. This design greatly reduces stormwater runoff, urban heat island effect and energy requirements, and makes Chicago small businesses eligible for $5,000 grants and density bonuses;
Indoor air quality: Healthier, less-polluting products, such as paints and carpets with low volatile organics, windows that open, and natural ventilation systems.
What Chicago project incorporates many green strategies?
The Merchandise Mart in Chicago is the world’s largest green commercial building and achieved a LEED Silver certification by completing several actions. According to the Mart’s Web site, it ‘installed motion sensors in restrooms and lower wattage fixtures wherever possible, made an I-Go hybrid car available to tenants and employees 24 hours a day, retrofitted exit lights to require less energy, and implemented an exterior and dock lighting schedule.’ The Mart has also cut water consumption by 35 percent, or roughly 20 million gallons, since 2001 by fixing leaks and reusing nondrinking water, and reduced air pollution by more than 120,000 kilograms since 2006, the largest single reduction by any commercial building, according to company officials.
What are some government initiatives to support green building?
- The Illinois Solar Energy Rebate
Program allows certain businesses to
claim a rebate of up to $10,000 for solar
energy systems purchased or installed
after Jan. 1, 2007.
- The Illinois Solar Thermal Incentive
program provides funding for the purchase
and installation of solar energy systems
that collect and transfer heat for space
heating and cooling and water heating and
electric generation, as long as the project
cost is in excess of $50,000.
- The Federal Energy Policy Act of 2005
provides a tax deduction of up to $1.80 per
square foot for new commercial buildings
that reduce energy use by 50 percent.
Existing buildings can earn a deduction of
$1.20 per square foot for upgrading lighting
and HVAC systems.
- The EPA offers small businesses
grants for monitoring and control of air
pollution, safe buildings and water security, wastewater management, etc.
- The Chicago Green Permit Program
expedites permits on projects that incorporate innovative green building strategies.
- The Chicago Green Roof Grants award
grants of up to $5,000 to help with the cost
of installing a green roof. The Chicago Cool
Roof Grants offer rebates based on the
amount of surface area and the coating
AMY MAHONE is an associate in the Real Estate Practice Group at Levenfeld Pearlstein, LLC and a member of the firm's Green Development Initiative. Reach her at email@example.com or (312) 476-7591.
When it comes time for Shelly Sun to hire a new employee at BrightStar Healthcare LLC, she’s done plenty of research to help her reach a decision with her team.
That’s because the founder and CEO spends months sometimes even a year networking to find the perfect match for her $12 million health care franchising company. And almost everyone she knows hears about her hunt for the smartest people in the field.
“It’s about talking to as many people as possible,” she says.
Smart Business spoke with Sun about hiring employees and creating a culture that keeps the business running smoothly, even when she’s on vacation.
Q. How do you create a culture that keeps the company running smoothly?
I wouldn’t have been ready to put this culture into my company three years ago. I’ve evolved there by putting together an advisory board of people that are smarter than me and having to listen to them to be the most successful.
Really look at the core functional areas of the company and who your department head is for that and have them put together their own strategic plans for their division and present it to all their fellow team members. And as hard as it is, don’t say anything. If I start interjecting my opinion, it’s going to be Shelly’s strategic plan for their department, not their strategic plan for their department.
I intentionally don’t attend some interim meetings because everybody’s looking to take a cue from the CEO. If I’m squashing it or asking questions as though I don’t support it, everybody else will follow suit.
I want to have my say at the ninth step of 10 in the process, but having my say in steps one through three means nothing happens in four through eight other than what I already came up with.
Q. How do you find those self-starters for your team?
The old saying, ‘Hire slow; fire fast,’ is probably one of the smartest sayings ever created. I don’t know who said it first, but it’s probably one of the best guiding principles in any organization at any level.
I think that when you rush it, you hire the wrong people. You hire out of desperation versus true fit.
Assess your own culture. For any CEO, depending on what their culture is if it’s a more formal culture, then they want to look to network people that are more formal, and not everybody will be, so that’s why I start early. Any hiring manager should start early.
It’s always a stronger hire to network (with others) to a hire than find them cold because you can find out true information about them. Because I’ve gotten them as a reference from someone, and that someone knew them typically in some kind of work setting, I can find out what makes them tick.
That’s important information you can’t get by calling the human resources department.
Q. Once you have the right people, how do you turn them into a unified team?
Not only do we have the culture and have everybody know each other already in our organization, but everybody has buy-in to who we hire. I don’t want them just looking at only a 12-month horizon; they need to be thinking about the people they’re going to hire with the skill set that’s going to grow with them, as well.
I think peer interviewing is very overlooked in most organizations. It’s probably the most important. We’ll get [candidates] in for a full-day, in-person interview. All of those people that are presenting their strategic plans? They’re interviewing with all seven of those plus me.
What I typically see from my peers is that the person comes in and interviews with human resources and then they interview with the CEO or whoever is going to hire them, and they don’t hire with all the other departments. From our organizational standpoint, I think that would be a mistake in our organization to not have all the departments involved in those key hires.
Q. What are the key aspects to creating a sustainable business?
That is only accomplished by hiring the best and creating a culture where they feel comfortable being able to run a company as though they owned it. What I’ve tried to do is establish that kind of entrepreneurial culture. If they don’t all win together, nobody wins.
I don’t feel like I have to be the one to step in and make sure they’re staying on the right track. I would if I needed to, but I try to bite my tongue and not, because the group will self-correct without me having to.
For the first time, I feel like I [can] go away for 10 days’ vacation with my family, and I don’t have to check in with the office at all. That’s truly the benefit of being an entrepreneur. It’s taken me seven years to have the right culture and the right team to feel like I can do that.
Megan Tackett also contributed to this story.
HOW TO REACH: BrightStar Healthcare LLC, (866) 618-7827 or www.brightstarhealthcare.com
Almost every company has experience with IT projects that exceeded costs, were delivered late, didn’t align with the business’s objectives or failed to improve productivity. The question then becomes: Why are these problems so common?
“IT projects demand time-intensive investigation and planning to be properly implemented,” says CIMCO Communications’ Chief Information Officer Dave Braner. “Too often, the time needed to properly assess the project and its risks is unavailable and is therefore not built into the plan.”
Smart Business asked Braner about identifying and mitigating the risks associated with IT projects.
How do you begin in identifying risks?
Many times, people become so enamored with the technology and automating a process that other important aspects are not studied. Financial risk models are common, but they don’t address the other types of risks. Standard checklists are used, but IT projects are anything but standard. I recommend creating a SWOT (strengths, weaknesses, opportunities, threats) analysis as part of the risk identification process. It requires working cross-functionally and receiving input from disparate and impacted functions to clearly identify all possibilities.
As part of this process, it’s critical to ask if employees will really do their jobs using the new technology. If employees are averse to the technology change, they can sabotage the usefulness and productivity gains when a technology is deployed by creating their own work-arounds. These professionals can also help identify risks and opportunities that an IT person would not usually consider. Good change management and two-way communications throughout the project can bring employees along, get them engaged in the technology and use their feedback for early detection of potential hurdles. Plan and incorporate your change management and communications strategies from day one.
Where’s the greatest danger of risk?
First, it’s important to be forthcoming about the risks involved with a project. If you do not acknowledge the risks, you could find your project in serious trouble down the road. Be honest with your executive sponsor and leadership about the risks in the beginning.
Another key area involves the process used to develop your project plan. Always ask your team and impacted users, ‘What could go wrong with this project?’ Encourage people not to be afraid to bring up the wildest possibility. There is a lot of subjectivity and different perspectives in looking at risk. For example, perhaps a new technology captures more information or presents it differently than previous technology. Suddenly, the historical data used in making important decisions changes, which could impact business strategy, regulatory oversight, and employee roles and responsibilities.
Scope creep is the single biggest risk and requires discipline. A superb, detailed project charter is critical. It is your contract and your blueprint, and the project must be managed against the framework established in the charter. Too often, people forget to review the charter after the project is underway or only when the project is conflicted. If the scope goes beyond the project charter, you may need to make the difficult decision to close out the project and start over with a new, larger project.
How do you manage and monitor risks as your project progresses?
In my experience, it’s just as critical to understand how to mitigate each risk once it’s been identified. Then, qualitatively assess each risk and rank it by what is most probable. This places a value to each risk involved and helps you determine the point of diminishing returns.
A risk response plan should be developed for each risk. Since neither assessment nor mitigation is static, the risk response plan should be incorporated into the project management discipline for review and status as events change. Just as you keep a log of technical changes, you should keep a similar risk log and assign a person the responsibility of keeping an eye on it throughout the entire project. Risks are deleted from the log when they are no longer possible, and new ones added as events impact the project.
How can you anticipate all the possible risks that a project may encounter?
You can’t. It’s a best guess. There are both internal and external influences as well as technology and business process elements to consider. That’s why working cross-functionally and at all levels of the organization better helps in the guessing game. Will a major weather event impact deployment? Will a corporate reorganization derail progress? What if your executive sponsor suddenly is gone? Or, how many times do you think about the legal implications of an IT project?
The bottom line is to minimize surprises to keep the project on track and within budget. Managing risk is challenging, but doable with structure and discipline.
DAVID BRANER is Chief Information Officer of CIMCO Communications, based in the Chicago metropolitan area. Reach him at (630) 691-8080 or firstname.lastname@example.org.
If you invest in the stock market, you should pay close attention to Federal Reserve actions. “Investors need to consider Fed monetary policy to help guide investment decisions,” says Gerald Jensen, professor of finance at Northern Illinois University and an author of a number of studies that track security returns and Fed policy decisions.
In a recent CFA Institute study, Jensen and his co-authors showed substantial benefits associated with following a rotation strategy predicated on Fed policy.
According to the study, when Federal policy is expansive, i.e. when the Fed is decreasing rates, stock values generally increase, while stocks tend to perform poorly when the Fed is increasing rates (a restrictive Fed policy). These patterns are exaggerated for cyclical stocks, which creates the potential for investors to gain from a sector rotation strategy.
Smart Business spoke with Jensen about his research and its implications in the current market environment.
During the period of the study, how did stocks perform when Fed policy was expansive versus restrictive?
Between 1973 and 2005, during expansive policy periods — that is, when the Fed was lowering rates — the return averaged 17.4 percent. In contrast, during periods of restrictive policy — returns averaged 5.3 percent. So, when the Fed was lowering rates, stock returns were more than three times higher than the returns earned when the Fed was raising rates.
Has the relationship between Fed policy and returns held true during the recent turbulence in the financial markets?
The relationship has been surprisingly consistent throughout history but has broken down considerably in recent months. This can be attributed to several unforeseen developments. First, financial institutions greatly expanded the leverage of their operations through the use of financial instruments, such as collateralized debt obligations (CDOs). Over the last few years, these instruments experienced tremendous growth, which was then followed by a dramatic unwinding as credit concerns caused investors to lose confidence in the instruments. The Fed’s effectiveness in influencing the financial markets was diminished by the rapid development and ultimate collapse of this market. Second, after many years of increase, real estate prices dropped substantially over the last couple of years. Finally, commodity prices, and especially oil prices, experienced an unprecedented increase in the last two years. These three factors combined to create a ‘perfect storm’ situation, which has been devastating for the financial markets.
What future relationship do you project between Fed policy and security returns?
U.S. financial markets are extremely resilient, and I expect that markets will resolve the problems that currently exist. Some stabilization has already occurred. Yet, it will take at least six months before we completely recover from the extreme shock that the markets faced over the last several months. I believe we’ve hit bottom and are on our way to recovery. I expect that the effectiveness of Fed policy in impacting financial market activity will gradually return to normal.
What does research suggest about investing in precious metals and other commodities as a hedge against all this instability?
People have always viewed precious metals, such as gold, as a good safety net during periods of uncertainty. But precious metal prices, like stock prices, have traditionally exhibited a strong link with Fed policy.
Historically, the return on commodities, in general, and precious metals in particular, has been poor when the Fed has been decreasing interest rates. So despite the fact that many people are feeling jittery and want to put their money in a ‘safe’ investment, investors should be wary of increasing their allocation in commodities and precious metals during the current period. History suggests that the time to buy commodities, including precious metals is when Fed policy is restrictive, that is when the Fed is raising rates.
With the upcoming election, are there any political factors that investors should take into account?
People like to tie market performance and politics together, but my recent research reveals links that are surprising. A commonly held belief suggests that stocks do better in periods of political gridlock. But our research shows that the gridlock theory is a myth, and market performance doesn’t differ significantly whether the government is in gridlock or harmony (where all branches are controlled by the same party).
We’ve also found that the third and fourth year of a presidential cycle are traditionally good years for investors. Why? It turns out that Fed monetary policy provides a reasonable explanation. Specifically, Fed policy has historically been expansive in the last years of a president’s term and restrictive at the start of the term. This pattern prevailed during the most recent presidential cycle; however, the perfect storm scenario may have caused returns to deviate from the normal pattern.
GERALD JENSEN is professor of finance at Northern Illinois University. Reach him at (815) 753-6399 or email@example.com.
Born: Bronx, N.Y.
Education: St. John’s University in New York City
What was you very first job?
When I was very young I used to stuff inserts into newspapers at the local store, then I would work as a newspaper kid delivering newspapers.
What is the best business advice you’ve ever received?
Identify the best people, hire them, and do your best to keep them. It makes your life infinitely better when you have good people hired. That might sound very simplistic, but everybody comes up with these whiz-bang type [of] strategies to get ahead, but that’s it, you hire the right people and keep them because people want to be part of that winning team and will gravitate toward that.
If you could be one superhero, who would you be and why?
I would say probably the superhero that’s the epitome of truth, justice and the American way is Superman. Now, I’m not doing that as an ego thing, but when I take a look at this guy, what does he stand for? He’s a man of principle. I think I try to be consistent with principles; I don’t live in the gray area.
Many companies require the services
or goods of another company to
make their product or to run their business. As a business owner, your company may never experience a tragic loss or
damage, but what would happen to your
business if one of your suppliers experienced
such a loss? Do you have the proper insurance to cover your loss if your sole supplier
can no longer provide goods or service?
Business income provides for the business
what it cannot provide for itself. Dependent
property takes this coverage to the next level
to protect the business even if the loss happens to a third party on which it relies, says
William V. Reedy CIC, AU, The Learning
Group, Westfield Insurance. Business owners who understand the protection offered
with dependent property coverage and recognize their need are considered savvy insurance consumers and risk managers, he adds.
Smart Business spoke with Reedy about
the need for dependent property coverage,
how it can help protect your business and
how to evaluate your company’s risk to determine if such coverage is needed.
What is dependent property coverage?
Most businesses depend on other businesses to supply them with the raw materials or
finished products they will sell. Conversely,
supplier businesses rely on having other businesses that will buy their product. In both
cases, the business is dependent on another
entity to conduct its business. When a business cannot get the materials or product to
sell, it will experience indirect financial loss.
The fact that it is indirect does not lessen
the loss. Conventional business income
insurance reimburses a business for income
and expense after its own loss. Dependent
property coverage is used to protect a business when the loss takes place at a business
on which it relies.
Why is this type of coverage so important?
Dependent property coverage is extremely
important because the actual physical loss
(fire, wind, etc.) may happen to the business
you depend on and not your business. The
fact that this coverage responds on your
behalf relieves you of the financial loss you
would have had. These losses can be debilitating to a company.
Most business owners and insurance
agents readily identify buildings and business
personal property when they consider property exposures. Business income is sometimes overlooked in this process. Business
income coverage without the dependent
property endorsement will not respond to
the dependent property exposure. It requires
both business income along with the dependent property endorsement to make sure all
dependent exposures are addressed.
Who requires such coverage?
Any business that relies on another business is a candidate for dependent property
coverage. This coverage is especially important and most often provided when there is a
single or short list of key contributing or
recipient dependent property businesses.
For example, perhaps the insured business
makes wooden rocking chairs that are
known for their craftsmanship and quality. It
may only use one particular supplier of hickory that provides the best wood. Since the
chair company bases its reputation on quality, it is dependent on this particular wood
supplier. If the chair company added the
hickory supplier as a dependent property and
a fire occurs at the hickory supplier’s location
(rendering it unable to supply the insured
company with top-quality wood), it is considered a covered peril, since fire is a covered
peril under the policy.
The business income policy endorsed with
dependent property would pay the insured
company the amount it would have earned
until the wood supplier is back in business.
With dependent property coverage, the company is indemnified for the business it normally would have done, and it does not have
to resort to using inferior wood and potentially damaging its reputation for quality.
Are there different types of dependent properties?
There are four main categories of businesses that may require this coverage.
- Recipients: businesses that rely on others
- Contributors: businesses that rely on others to whom they sell their product
- Manufacturing locations: businesses that
sell a product on behalf of a manufacturer
- Leader locations: businesses that rely on
other businesses to draw traffic to their location. An example would be a card shop located near a large retail chain store. The card
store benefits from the traffic and would
experience a downturn in revenue if the
chain store were to close.
How can one determine risk of exposure?
If a business has a number of potential suppliers or available markets in which to sell its
product, then the need for dependent property coverage is not as great as if it depends
on a more limited and thus more important
few. The questions any business owner
should ask are: On what other businesses do
I depend? What would happen if they were
forced to shut down for a month, six months
or a year? Would I lose income as a result? If
the answer to these questions results in identifiable companies that would cause financial
loss if they were out of business, then one
may conclude that dependent property coverage is necessary.
WILLIAM V. REEDY, CIC, AU, is with The Learning Group, Westfield Insurance. Reach him at firstname.lastname@example.org or (330) 887-0859.
Like many other industries in today’s global economy, environmental responsibility is an issue that the entire supply chain has both progressively and collectively embraced.
In light of the financial fuel crisis currently crippling the industry, airlines have desperately been searching for ways to reduce their fuel consumption, and it’s no surprise that their efforts have led them to a greener doorstep.
“Going green has resulted in a double win for the forwarding community,” says Joseph Hoban, director of international air services for AIT Worldwide Logistics. “The airlines have significantly reduced fuel consumption, thereby drastically lowering operating costs while simultaneously supporting the industry’s need to reduce harmful emissions and preserve the environment.”
It is this mutually beneficial duality that has prompted all modes of transport — trucking, rail, ocean and air — to take proactive measures in minimizing the global supply chain’s collective impact on the environment.
Smart Business asked Hoban to discuss how the air cargo industry is playing its role in the eco-friendly movement with great, “green” gusto.
What factors contribute to the success of the ‘going green’ movement?
While there’s no precise moment in time or defining incident when the so-called ‘green light’ went off and the industry scrambled to become environmentally conscious, I am confident that the groundswell stemming from individual involvement is the driving force behind the movement’s phenomenal success.
Al Gore’s highly publicized, award-winning efforts in the movement undoubtedly brought about an increased level of visibility and heightened awareness among the general public. Sparked by insatiable interest, individuals brought the hot-button issue to work with them, initiating watercooler conversations centered on the topic, thus driving the ‘greening’ of their behaviors into their own homes and organizations.
Quite simply, this isn’t a corporate initiative being imposed on employees — rather, it’s been fueled by individuals who are feeling compelled enough to ask, ‘What can I do?’
Discuss the industry’s current ‘going green’ efforts.
Like IT improvements, ISO and other standards that customers demand, going green has quickly become the cost of doing business in today’s world. Because it has transformed into one of the minimum expectations of the global consumer marketplace, customers are inquiring what our industry is doing to decrease our carbon footprint. In looking at the supply chain as one green line from door-to-door, they are opting to partner with and support the companies who align themselves with green initiatives.
Whether it involves powering aircraft with fuel derived from algae, coordinating test flights using biofuels or purchasing carbon offsets to mitigate greenhouse gas emissions, the airline industry is taking various measures, all in the name of ‘greening’ the operations of its business.
In addition to replacing planes with more fuel-efficient aircraft, the airlines have begun taking measures on a smaller scale, all contributing to the much larger picture: less fuel-burning holding patterns, using one engine to taxi the aircraft, towing from the gate and less idling, among a variety of other eco-friendly tactics.
Organizations have also implemented programs encouraging the industry’s ‘going green’ efforts. For example, the eFreight initiative introduced by IATA (International Air Transport Association) aims to free our industry processes of paper documents, while the SmartWay Transport Partnership led by the Environmental Protection Agency aims to reduce between 33 and 66 million metric tons of CO2 emissions and up to 200,000 tons of nitrogen dioxide emissions per year.
Are you encouraged or discouraged by the ‘going green’ trends you see in the industry today?
I am encouraged by the ‘going green’ trends I’ve closely examined and observed in this industry. These trends demonstrate that we are a vital component of the global village. Rather than standing on the sidelines and pointing fingers or playing the proverbial blame game, we are taking an active role in promoting the planet. Not only are we recognizing the fact that we’re depositing vapor trails and contributing to the harmful emissions lingering in the atmosphere, but we’re actually doing something about it.
I am, however, discouraged by the companies out there who are only greening their business for the sake of survival and profitability — their true heart is not vested in the cause. In a perfect world, these companies would be motivated by more altruistic intentions; however, the positive results and necessary progress remain consistent, regardless of their incentive to rally around the cause and receive the ‘green’ thumb of approval from their customers and counterparts.
JOSEPH HOBAN is director of international air services for AIT Worldwide Logistics, Inc., headquartered in Itasca, Illinois. Spanning numerous nationwide locations and an ever-increasing network of international partnerships, the global transportation and logistics provider delivers tailored solutions for a wide variety of vertical markets and industries. Reach him at email@example.com or (800) 669-4AIT (4248).
Research shows that 43 percent of employers use technology to block the popular social networking Web site called Facebook. Other organizations go further, limiting or banning additional sites, including the online career boards.
While removing these distractions may be a not-so-subtle strategy to increase productivity and retain key employees, it begs a serious question: If your employees were more engaged, passionate and proud of the work they did, would you need to enact such restrictions?
“An organization that controls too tightly the manner in which its professionals think will come up short on innovation and will stagnate,” says Michael Tuchman, partner, Levenfeld Pearlstein, LLC. “It’s the objective-driven employees who drive the highest value outcomes.”
Smart Business asked Tuchman how to read covert symptoms that indicate unfulfilled potential and how to create an environment where motivation is organic and filters are minimized.
How can companies create an environment to intensify employees?
The best management and professional employees operate within organizations that have an identifiable culture and embrace it. Culture is not how the organization projects itself externally. Culture is about how the organization views itself. Effort should be devoted to articulating your culture and promoting it within the company. Shared pride in company culture ties directly to motivation. A culture that embraces change and looks for ways to challenge and educate its people, without trying to measure only by the bottom line, will increase the bottom line. Think of continuing education not as a perk but as part of a culture of learning and betterment for staff. Think of challenges not in terms of higher objectives for an employee, but in terms of how much stronger that employee will be for having met the challenge. By connecting organizational objectives to culture, motivation will be organic rather than externally imposed, and your people will be stronger for it.
Should leaders place an emphasis on objectives or processes?
The emphasis should be around instructing employees on objectives, not processes. The organization will, of course, have its processes, but good employees know what those are. Respect for intellect and initiative is evident when you articulate the desired objective and let the employee think through the paths to getting it done. If you look at what creates value in professional organizations or what are the attributes of the best management, it is the ability to think creatively and adapt to changes. Processes are useful for refining efficiency and are a necessary part of an organization educating itself. But only objectives-driven employees will have the motivation to realize the highest value outcomes.
What is the most productive role for feedback?
Feedback — it can be constructive yet perfunctory and thus pointless. Or it can be part of a culture of teaching and learning.
Feedback is not so much about what someone did right or wrong on the last undertaking but about how to better tackle the next one. It is about making the employee a better professional, not merely about preventing mistakes. An employer who reminds himself of this before providing feedback will tone the message in a powerful way.
It is a common refrain that we too often forget to say, ‘Thank you; good work.’ But the frequency of positive feedback is not a substitute for meaningful substantive feedback. At an individual level, substantive feedback motivates because it evidences the organization’s commitment to and respect for the employee. Finally, at an organizational level, celebrate wins. This takes feedback to the next level and emphasizes the team and challenge aspects of company culture.
What are the benefits to minimizing filters?
Productivity is enhanced when employees interact with outsiders on behalf of the company or outside of their group and do not merely push things to someone else in the group. Here I can draw parallels to my own professional experience as a lawyer. In my early years of practice, I would research and write memos on points of law. The work was interesting and challenging, to be sure. I recall the first time I was told I would present my findings and recommendations directly to a client. My work, myself and my firm as a whole now were to be judged by this client. As a result, the way I saw my firm, myself and my motivation to perform changed markedly as my role was externalized. The best employees thrive when representing their company or group. The intensity of an employee’s commitment and the quality of his or her work is at its highest when the employee is exposed to the organization’s constituents and filters are minimized.
MICHAEL TUCHMAN is a partner in the Corporate Practice Group with Levenfeld Pearlstein, LLC in Chicago. Reach him at (312) 476-7550 or firstname.lastname@example.org.