U.S. employers are continuing to struggle with rising health care costs. To limit spending, many are shifting costs to employees while others are emphasizing wellness initiatives or controlling costs through health savings accounts and reimbursement arrangements.
“The biggest area of concern we are hearing from employers today is they can’t manage or predict the cost of health care benefits,” says Randy Narowitz, CEO of Total Health Care. “Having predictable, manageable cost increases is a real value to employers.”
Smart Business spoke with Narowitz about what to ask when choosing a plan.
What factors should companies consider when analyzing their employee benefits?
Typically, you start with the plan design that you offer today then decide if the company can maintain, improve or cut back on the benefits.
It’s important to evaluate alternatives in terms of cost and products offered. There are a variety of ways to differentiate carriers: size and strength of the provider network, plan design flexibility and premiums.
What questions should an employer ask a carrier when choosing a plan?
If you are using the benefits as a tool to attract or retain employees, then you want to evaluate the quality of the benefits and compare them to what else is out there in the marketplace. Features such as co-pays and deductibles are factors in the decision-making process and can be tweaked to be competitive. Also, access to care and a strong provider network are important components to consider.
If you are cost sensitive, then you want to ask about how to optimize the benefits at the lowest possible premiums and analyze the trade-off between the premium costs and the benefits.
What can a company expect from its relationship with its carrier?
Most employers use the services of a consultant or broker to assist them in the decision-making process, and their roles vary.
At one extreme, the consultant is your exclusive liaison to the carrier and can represent several health care plan options, helping the employer understand which products are best for its business. The consultant may also take the lead on administrative tasks including open enrollment, employee education, compliance and communications with the carrier.
At the other extreme, a consultant’s role is limited to the selection process. You can expect your representative to be able to differentiate the plans and the products depending on how you prioritize your decision-making criteria.
As an employer, you should expect your representative to be able to navigate through the decision-making process on your behalf.
Your plan representative, carrier and consultant also need to be able to educate you about the latest changes associated with health care reform.
How can companies save money when they are looking for a carrier?
Shifting the financial burden to employees by raising co-pays and deductibles, and having them pay a portion of the premium are ways to reduce and control your health care costs.
Savings associated with prescription drug costs can be achieved by raising co-pays or by restricting access to branded drugs when generics are available. Employees are very sensitive about changing medications, but there is a real opportunity to save money when you make these adjustments. Contracting with a restricted network, such as an HMO, and introducing wellness initiatives can also reduce costs.
What do employees need to know?
If you change a plan design in any way, it is important that the changes be communicated clearly.
Employees are very resistant to a change in their health care benefits. If you are planning to reduce benefits or shift costs to the employees, make a significant commitment up front to educate your employees.
Simplify the message and commit the time and resources to help them understand the changes before the new contract year begins.
Randy Narowitz is the CEO of Total Health Care. Reach him at (313) 871-2000.
Insights Health Care is brought to you by Total Health Care
You may be paying too much or not offering the right incentives to retain your employees if your company isn’t benchmarking its benefits program annually.
“It’s important to see where you’re stacking up in terms of offering competitive benefits compared to employers that are recruiting and attracting the employment base that you recruit from,” says Daniel Meracle, Employee Benefits Consultant and Wellness Adviser with Benefitdecisions, Inc.
Smart Business spoke with Meracle about the benchmarking process and how it can help in planning business strategy.
What is benchmarking?
It’s comparing the benefits your company offers employees to those of like employers in similar industries, geographic regions and of similar size.
You can compare just about every feature of the benefits, from employee contributions, both as a dollar amount and as a percentage of the overall premium, to total out-of-pocket cost per employee or per family. You can also get into details of the plan regarding deductibles, co-pays, out-of-pocket maximums and so on. Once you have made these comparisons, you can evaluate how your company stacks up relative to your peer companies. Your company may have a specific strategy around benefit levels and can use the benchmarks to determine if you are meeting this strategy. The benchmarks can also tell you where you are out of line with competitors in terms of costs or benefit coverage, or if you’re not offering a benefit that is now common.
Medical cost, coverage and plan design are typically the largest portion of a benchmark analysis because medical insurance is the biggest cost component of an employer’s benefits package. However, you can look at all the ancillary lines, such as dental, life, disability, 401(k), pension plans, wellness programs — even incentives and features within wellness programs.
How are the results used?
The benchmarking analysis helps you strategize about what level of benefits you want to offer. Do you want a richer benefits package to improve retention, or is it time for a change that aligns you with your peers?
It also helps you come up with a plan of action rather than just be satisfied with getting a 4 percent increase in health insurance premiums instead of a 15 percent increase. If you have a much higher cost per employee per year than the benchmarks are showing, that means you either have richer benefits or some higher-utilizing employees in your plan. You can then change the benefit plan to shift more costs to the high utilizers, or justify the cost for investing in and launching a wellness program. It’s a strong encourager of wellness programs when you can show that medical costs are 20 percent higher than the norm, for example.
Where do you get the information?
There are benchmarking reports put out annually by various insurance carriers, industry associations and brokers. These reports compile statistics in numerous categories and drill down into plan design and features. For example, reports will show how many employers cover bariatric surgery and what kind of co-pays they put on emergency room visits.
What information is needed for an analysis?
Usually just a copy of your medical plan summary of benefits, the most recent month’s health insurance bill and the schedule of employee contributions.
Can companies do this by themselves?
Usually a broker or benefits consultant puts together the reports and the analysis of your company’s plan relative to the benchmarks. Often there are recommendations for plan, contribution or benefit changes resulting from the analysis. The analysis may also confirm you are achieving your benefits strategy.
It is important to benchmark using the same data source and around many of the same categories each year so you can evaluate changes and progress.
By monitoring benchmarks annually, you can evaluate your plan design to ensure cost-effectiveness, that your benefits’ objectives are being met and you’re providing competitive benefits for your employees.
Daniel Meracle is a Employee Benefits Consultant and Wellness Adviser at Benefitdecisions, Inc. Reach him at (312) 376-0433 or firstname.lastname@example.org.
Insights Employee Benefits is brought to you by Benefitdecisions, Inc.
There had been much talk surrounding the fiscal cliff, or the triggering of automatic federal spending cuts if Congress did not act by the end of 2012.
“It was everywhere — you couldn’t escape a newscast or report without hearing about it as 2012 came to a close,” says Todd Jolicoeur, tax senior at Cendrowski Corporate Advisors LLC.
However, the crisis was averted when the U.S. Congress approved the American Taxpayer Relief Act (ATRA), which paved the way for President Obama to sign the bill into law a day later. While not much has changed because of the bill, it did lay out a plan, freezing some tax rates and deductions that will offer taxpayers some answers as to how to plan for the coming years.
Smart Business spoke with Jolicoeur about the act and its tax implications.
What are some of the highlights of ATRA?
The most discussed is the return of the 39.6 percent tax rate for taxable income above $400,000 for single tax filings and $450,000 for those filing jointly. There is also a change to the tax rate on capital gains and dividends, as well as estate and gift tax. Additionally, there is the needed patch for the Alternative Minimum Tax (AMT). Many enhanced education credits were also extended.
How will taxpayers be affected by the 39.6 percent rate?
The new rate only affects individual taxpayers with bottom-line taxable income above $400,000 — $425,000 for head of household filers, $450,000 for married taxpayers. The other marginal income tax rates, 10, 15, 25, 28 and 33 percent, will remain the same going forward. The 35 percent rate has been carved to include those taxpayers between the top of the 33 percent rate and the income threshold established for the new 39.6 percent bracket.
What about the tax rate increase on capital gains and dividends?
The top rate for capital gains and dividends was increased from 15 to 20 percent. The increase on the top rate comes with the same income threshold that applies to the 39.6 percent ordinary income rate — $400,000 for single filers, $425,000 for head of household filers and $450,000 for joint filers. The previous zero percent tax rate remains as it was. The previous 15 percent rate still applies to those taxpayers between the two income thresholds established for the zero and 20 percent tax rate. Qualified dividends for all taxpayers will continue to be taxed at capital gains rates instead of ordinary income tax rates.
You mentioned a new maximum rate for estate and gift taxes. How has that changed?
The maximum rate for estates of decedents dying after Dec. 31, 2010, and before Jan. 1, 2013, is 35 percent, but has increased to 40 percent for estates of decedents dying after Dec. 31, 2012. In addition, the annually inflation-adjusted $5 million exclusion was extended.
Did the AMT patch become a part of ATRA?
Yes, ATRA contains a provision that ‘patches’ AMT for 2012 and beyond. It has done this by increasing the exemption amounts while also allowing nonrefundable personal credits to the extent of a taxpayer’s regular and AMT tax. The exemption rates for 2012 increased to $50,600 for individual filers, $78,750 for taxpayers filing joint returns or those of a surviving spouse, and $39,375 for returns of married taxpayers filing separately.
Does ATRA affect small businesses at all?
There are a few tax provisions that are applicable to businesses. There is the extension of the dollar limit and investment limit when calculating Section 179 depreciation and the extension of the 50 percent bonus depreciation through 2013. Another business credit that is extended is the research tax credit.
Is that the extent of the ATRA changes?
No. In addition to other provisions that relate to individuals and businesses, the new tax on investment income remains in effect. Also, the employee portion of FICA taxes on wages was restored to 7.65 percent. Ask your CPA to look into the tax rates, deductions, credit, and extenders as part of your 2012 tax preparation and planning for 2013.
Todd Jolicoeur is tax senior at Cendrowski Corporate Advisors LLC. Reach him at (248) 540-5760 or email@example.com.
Insights Accounting is brought to you by Cendrowski Corporate Advisors LLC
Is the confidential information on your network safe? That’s a question every organization should ask itself because network security breaches are common and becoming even more prevalent.
Kristen Werries Collier, a partner with Novack and Macey LLP, says organizations must acknowledge this risk and vigilantly monitor and evaluate their cyber-security safeguards and protocols to minimize it.
Smart Business spoke with Collier about network security breaches and the steps companies can take to mitigate or eliminate them.
How common are enterprise security breaches?
Most large and mid-sized companies have confronted a cyber attack at some point. Network security attacks are a reality you must confront head on. The threats to your network posed by unauthorized access — and the damage caused by a successful attack — will only continue to rise.
Can you prevent a security breach of your network?
While you may not be able to prevent a breach with absolute certainty, you can certainly deter one by proactively assessing and addressing your network’s vulnerabilities. If you don’t have the in-house expertise to do that, consult a security adviser. You want to invest your money in safeguards that deter — if not prevent — the attacks you are likely to face, and a security adviser can identify those for you.
Keep in mind that no system is ironclad because hackers adapt as security measures evolve. Accordingly, you must routinely monitor your layered security measures to make sure you are keeping up with determined hackers. Avoid being the easy target.
What should you do if, despite your precautions, a breach happens?
Undertake these best practices:
- Act fast. Perform a post-attack forensic analysis to determine the ‘who, what, when, where and how’ of the breach. You’ll need to preserve this information to evaluate the damage, mitigate the fallout, structure appropriate remedial measures and build a case against the hacker.
- Promptly notify anyone whose sensitive information may have been compromised.
- Update your intrusion detection and prevention systems and other safeguards to deter future breaches.
- Assess what your legal obligations are in the wake of the infiltration.
What is the potential fallout if your network is breached?
Breaches expose your organization to legal claims and undermine its competitive advantage. As for the legal claims, the law mandates the protection of certain types of information like consumers’ personal and nonpublic financial information, Social Security numbers and medical records. Your organization could potentially face claims predicated on an array of legal theories, including negligence; breach of contract; the Fair Credit Reporting Act, which subjects certain organizations to liability if they fail to safeguard consumer credit information in their possession; and Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive practices affecting commerce.
While you may defeat such legal claims on a motion to dismiss or ultimately at trial, it will cost you money to do so. From a business perspective, a security breach may have financial and competitive repercussions by publicly exposing your organization’s highly confidential or propriety information and by eroding consumer confidence in doing business with you.
What, if anything, is the government doing to crack down on hackers?
The government is cracking down by charging hackers with crimes carrying potential years of imprisonment and hefty monetary fines. However, the deterrence effect of this crackdown is somewhat limited given that numerous hackers operate outside of the U. S., making prosecution difficult, if not impossible. This is yet another reason to deter, if not prevent, a breach of your organization’s network in the first place and quickly mitigate the fallout if one occurs despite your best practices.
Kristen Werries Collier is a partner at Novack and Macey LLP. Reach her at (312) 419-6900 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Novack and Macey LLP
Integrating a comprehensive behavioral health plan into the medical health plan your company sponsors is a win-win. Employees are able to improve their health mentally and physically, and the employer can track cost savings related to direct health care costs and indirect costs through more productive, healthy employees.
“One out of every four adults will experience a mental health disorder in a given year,” says Tom Albert, manager, Behavioral Health Services at HealthLink. “I think few people, in general, realize the rates are that high.”
Smart Business spoke with Albert about how integrating behavioral and medical health allows employers to better coordinate their members’ care.
How do behavioral and medical health impact employers?
The rate of one in four adults experiencing a mental health disorder annually goes even higher for those with chronic medical problems. Furthermore, employees with untreated psychiatric or substance use disorders can be at a higher risk of on-the-job injuries. This can lead to missed time from work, expensive treatment and a decrease in quality of life for the individual.
Absenteeism is not the only concern for employers. Presenteeism, or the loss in productivity of employees who come to work sick, can also be costly for employers. The Institute for Health and Productivity Studies at Cornell University found that depression and other mental health problems are among the illnesses that have the most significant decrease to productivity.
What’s the advantage of integrating behavioral and medical health management?
Ninety-three percent of Americans believe a health care plan should cover behavioral health treatment, according to a National Association of Psychiatric Health Systems survey. Some workplaces don’t cover behavioral health. Other employer groups cover it but carve out the management, which makes it difficult to coordinate care.
Having one organization manage both medical and behavioral health benefits is gaining popularity among employers. With integration, the health plan’s medical and behavioral clinicians collaborate and ensure that individuals and their families have access to care that best meets their needs.
What are the overall goals of utilization and case management for behavioral health?
Utilization management ensures that health plan members have access to the care they need; that care is delivered in the right setting; that the quality of care meets high standards; and that resources are used efficiently in order to help control costs.
Case management involves case managers communicating directly with members and their families to assist them in navigating the health care system; addressing any obstacles to accessing treatment; and empowering members and their families to maintain an optimal level of health and functioning.
Case management helps the member to stay well so he or she doesn’t have to keep using the same services and missing work.
What is the Mental Health Parity Act?
The Mental Health Parity and Addiction Equity Act of 2008 doesn’t mandate that employers of 50 or more employees offer behavioral health coverage, but it does require that if the health plan covers behavioral health services, the financial requirements and treatment limitations are no more restrictive than medical and surgical benefits.
Prior to parity, employer groups often relied on treatment limits to control costs by limiting the number of days in a hospital or the number of visits for outpatient mental health treatment. Parity is good because the limits often were arbitrary, but it does mean the best way to control costs is to ensure care is only approved when medically necessary.
What are the results of formalized behavioral health management and review?
A Milliman case study of a large private manufacturer found a 10 percent reduction in members with chronic medical and psychological conditions saved $1 million annually and another $750,000 from reduced absenteeism, fewer and shorter disabilities, and increased productivity. An effective behavioral health management organization ensures members receive the right treatment in the least restrictive setting, which reduces costs and time missed from work, while improving overall health.
Tom Albert is manager, Behavioral Health Services, at HealthLink. Reach him at (314) 923-6288 or Thomas.Albert@wellpoint.com.
Insights Health Care is brought to you by HealthLink
Microfilm does the job of preserving your company’s documents and publications for up to 500 years. But content digitalization offers an archival-quality storage method that allows convenient, searchable access to these materials.
“Digitalization allows you to unlock the potential of the content,” says Natraj Kumar, general manager of Business Process Outsourcing (BP0) Services at HTC Global. “The Financial Times, for example, already has the content and most is available in physical form. They wanted the content posted on their website so people can access it and they can make revenue from it.”
Smart Business spoke with Kumar about the process of transferring content to digital form, the value it provides and the types of companies that are benefitting from digitalization.
What businesses are utilizing content digitalization?
The companies that are transferring content to digital form are e-research businesses like ProQuest and Gale, which is part of Cengage Learning. They maintain databases of reference content used by libraries, schools and businesses. Their revenue is based on a subscription model, so they want to have their content on the Internet.
Another set of customers is national libraries, like the National Library of Australia or the Library of Congress.
Content digitalization helps anyone with a huge amount of paper or a large library. When the Enron and Arthur Andersen scandal hit, quite a few legal firms had to go through the paperwork and find liability and assets. The contract to convert that into digital form was for $25 million, so you can imagine how many pages were involved.
How is content digitalized?
Normally, material is scanned from books and microfilms. Sometimes it’s also from digital content. We’re working with National Geographic magazine and they send PDFs of issues.
But conversion from scanned to digital form is only part of the story. The indexing and granularity of the content is the engine behind the digital archive. Scanned images are fine, they’re still accessible, but if the indexing is good it helps people locate their content of interest quickly.
Indexing is a painstaking process; when it’s scientific, medical or biology related content it’s important to have people with degrees in those fields read through the material and do the indexing because it’s not just about English, it’s about subject knowledge. You have to know which terms to index.
What are the advantages of going digital?
Looking up all pictures of Mount Everest that appeared in National Geographic magazine would be a tedious task if you have to sift through 50 years of magazines. With the type of metadata utilized and the indexing that is done, a search brings out all of the details. These photos are not available on Google; this is copyrighted material and not available in the public domain.
It makes research materials so much easier to find. For example, Cengage has a platform featuring different content sources. When you search the term ‘Wall Street crash of 1989,’ you’re going to get articles from The Economist, the Financial Times and quite a few newspapers that they are hosting.
What should you consider when choosing a company to transfer content to digital form?
There are a lot of companies that offer this service and throw people into the job. It’s important that the company apply technology wherever possible, because of the cost benefit and speed to market. The typical archiving project runs from 750,000 to 1.5 million pages. If the project takes two years, your product could become irrelevant. You need a company that can get the job done in six months.
The company also needs to know what they’re doing to the extent that they will not be asking a lot of questions and tying up your employees. In short, they need the capability to deliver good quality and a large volume in a short period without engaging most of your resources.
Natraj Kumar is general manager of BPO Services at HTC Global. Reach him at email@example.com.
Insights Technology is brought to you by HTC Global Services
Businesses must change in order to maintain a competitive advantage.
However, employees at any level can become an impediment to change as John Kotter noted in a 1995 Harvard Business Review article on leading change and why efforts may fail. The problem is employees might not understand why they need to do things differently and what the benefits of the change will be.
Here are some steps you can take to ensure that your entire organization supports necessary change:
Understand the dynamics of change
Be aware of the stages that people tend to experience throughout the change process so you can effectively guide your employees. Jeanie Daniel Duck noted the following significant stages in her 2002 book, “The Change Monster.”
* Getting stuck in old thinking
* Recognizing the need to change
* Preparing for and implementing
* Following through with gains made
Unless you address feelings and concerns of employees in each of the above stages, any desired changes will likely fall short.
Adopt effective leadership approaches
Leaders who tend to take a nonproductive approach, such as what we’ll call “The Winner” or the “The Avoider,” have to be aware of how their actions can affect their employees’ ability to accept the change.
The winner will take an attitude of winning at any cost and impose his or her authority on employees. It is better, instead, to focus on the process of building and maintaining relationships with employees. This approach will highlight the importance of the change and build collaboration.
On the other hand, the avoider will not want to make any waves. This risk-averse approach discourages employees who want to align with a progressive organization. Be up front and straightforward with employees about the upcoming transition.
Keep employees informed
As you develop your leadership strategy for the change, remember that open communication is crucial. Employees at all levels need to see and hear from senior executives to believe the change is important.
Employers should continue to promote and discuss the change, even after there is support from employees. This will help sustain the high level of energy and excitement needed for the change to be successful.
Align people of influence
Though it’s your responsibility to lead the change, it’s not all on you. Employers should engage respected leaders and other influential team members. If leaders take the time to sell the value and the benefits of the change to influential people, their support can help lower resistance from more hesitant employees.
Don’t assume which leaders will easily accept the change and which ones will combat it. The employees whom you think are least likely to accept the change might become your best allies.
Make the change sustainable
Finally, if you do not build the change into processes that ensure a consistent and routine approach, then old habits might resurface. It is important that employees do not see this change as the flavor of the month, but rather as a lasting one that will improve the long-term success of the company.
Change won’t happen right away. But with dedication, focus and clearly outlined strategies, you can cross the finish line with your employees at your side.
Jay Colker, DM, MBA, MA is core faculty for the master’s in counseling and organizational psychology program at the Adler School of Professional Psychology. Dr. Colker also maintains a human capital consulting practice and may be reached at firstname.lastname@example.org or at (312) 213-3421.
It was a bitter pill for Robert Pasin to swallow.
Radio Flyer Inc. had spent decades producing millions of its iconic red steel wagons for children across the United States. The children who grew up with them had bought them for their children and those kids bought them for their kids. It was a tradition that could go on forever, or at least that’s what the company had let itself believe.
But as the 1990s began, a new wagon, one made out of plastic, had begun appearing in stores and was an instant hit with consumers.
The part that was most painful to accept for those who worked at Radio Flyer was that they had not made this new plastic wagon. Even worse, as they looked at the way their company was set up, they weren’t even capable of competing by making a plastic wagon of their own.
“We were a manufacturer, a steel stamper, and that’s what we were really good at,” Pasin says. “The way we were running the business was we were looking at what we could make in our factory and then figuring out if we could sell it.”
This mindset led the company to start a line of wheelbarrows and garden carts in the 1950s to go along with its wagons, all of which were made out of steel.
“We weren’t in touch with the external environment as much as we needed to be or should have been,” Pasin says. “So we weren’t talking to consumers. We weren’t asking moms what they wanted in a new wagon. That’s why we were really caught off guard.
“If we had been doing those things, we would have known that this is something that consumers wanted.”
This was the challenge that faced Pasin, grandson of company founder, Antonio Pasin, less than a year after taking over the company as its CEO.
“There was justifiable fear,” Pasin says. “We were scared that we weren’t going to stay in business.”
Accept the challenge
The fear was palpable around the offices of Radio Flyer. Complacency had played a role in where the company now found itself, but Pasin and his team had to find a way to get past that. They needed to act quickly if they were going to save this company that had become such a symbol of 20th century Americana.
“We had to come out with a plastic wagon if we were going to stay in business because this was where the market was going,” Pasin says. “The challenge was that we really never had sourced a product before. Everything we had ever done, we made it ourselves. We didn’t have anybody in our company who knew anything about plastic, and we didn’t really have a product development team.”
Pasin didn’t try to sugarcoat the daunting challenge that Radio Flyer faced.
“We were just really honest, and we said, ‘Here are the facts, here’s what we’re going to do, and we’re going to keep treating people here as well as we possibly can,’” Pasin says.
It was an urgent time, no doubt about it. But Pasin didn’t feel it was time to panic, and he wanted to make sure his people didn’t feel it either. Plastic wagons were on everyone’s mind, but Pasin was also thinking about mission, vision and values. These things would play a big part in the company’s approach to making plastic wagons.
“We went through a process that included everyone in the company,” Pasin says. “The best way to achieve change is to involve everyone in the change as much as possible. In our case, we were changing the culture, and we asked everyone a lot of questions over the course of a year.
“We had a companywide discussion and it started with, ‘What was the company like on the first day you started?’ We got vastly different answers from people who had been here for 40 years and people who had been here for months. But while the answers were different, there were these recurring themes that kept coming out.”
Those themes were integrity, passion and excellence. Radio Flyer had indeed dropped the ball by not staying in touch with its customers as their needs and desires changed. But the products the company was making were as well-made and strong as they ever had been. And that was something to build upon.
“It just became very evident that we had this great bedrock of a culture to build on, and it was really powerful,” Pasin says. “No matter what, there’s got to be some gem in a business or hopefully more than one gem. Otherwise, you’d be out of business. There’s got to be something good in there. The task of the leader is to find that gem. Figure out what’s unique or different about it and then build on it.”
Pasin saw how strong his team was and the talent that each person brought to the table. He just needed to figure out how to take all of those pluses and use them to build a process to make plastic wagons and then stay in touch with consumers to be more proactive and less reactive about the next big thing.
“If the leaders can go through in a very methodical and thorough way and unearth all that information, it becomes very clear what needs to be done,” Pasin says. “It doesn’t mean what needs to be done is easy. It’s very difficult or it already would have been done.”
Set clear goals
Pasin wanted goals to be much more structured and clearly stated at Radio Flyer. It would help the company make a great plastic wagon, and it would ensure that, decades later, the company would not find itself in a similar situation of being out of touch with its consumers.
“Everybody in the company has five goals,” Pasin says. “Those five goals line up with the team goals and the team goals line up with the company goals. So there’s tremendous line of sight and alignment throughout the company for what we’re working on. ‘Here’s what I’m working on and here’s how it’s impacting the success of the business.’”
As a business, when you set goals, it’s critical that they align and that they be meaningful. Otherwise, what’s the point?
“They have to meet the SMART criteria,” Pasin says. “S is for specific. M is for measurable. A is for achievable. R is for return on investment. T is for time-bound. We work really hard to make sure everybody’s goals are smart in that way.”
There were some people in the company who provided evidence that they weren’t a good fit for what needed to be done going forward.
“I had a couple of guys say, ‘OK, now that we’re going to have these goals, how much more am I going to get paid?’” Pasin says. “I said nothing. These goals are not above and beyond. They are not extra. This is the most important stuff you’re supposed to be doing in your job. Those people aren’t in the company anymore.”
Make tough decisions
As the company got into the details of making plastic wagons, Pasin gradually began to realize that a big change was going to have to be made: Radio Flyer was no longer going to be a manufacturer.
It happened over a period of years, but it was clear if the company was going to make plastic wagons and branch out into tricycles and scooters too, something had to go.
“There is no way a company our size can be great at all those things,” Pasin says. “One of the questions we asked ourselves to help us get clarity was if we weren’t doing this today, would we start doing it? And the answer was so clearly no.”
Pasin wanted to build relationships with design firms and have product development teams that would have their fingers on the pulse of consumers. In order to do that the right way, manufacturing would have to be cut.
“What are we passionate about?” Pasin says. “What can we be best in the world at? What drives our economic engine? Those three questions are huge questions. We decided that what drives our economic engine is profit per product. Not profit per product line. We had a lot of products we were losing money on.
“We decided we’re not going to do that anymore. We’re going to be much more rigorous on making sure that here’s a revolutionary idea for the business. We’re going to make money on everything we sell.”
Twenty years after the company faced its demise, Radio Flyer is flying high. Sales that were only $20 million in 1992 now top $100 million and the 70-employee company’s debt is minimal.
Pasin credits the success to a methodical approach that has the company positioned better than it’s ever been to continue growing.
“I would just sit down and list out on paper what I thought all the biggest problems in the company were and then I would do a ranking of what are the biggest problems,” Pasin says in offering advice to other leaders who find themselves in a tough spot. “Usually the biggest problems relate to the biggest opportunities. Then I would go to my team and say, ‘Hey guys, here’s what I think are our biggest problems and how we can make them opportunities.’” ?
How to reach: Radio Flyer Inc., (800) 621-7613 or www.radioflyer.com
The Pasin File
Education: Bachelor’s degree in history, University of Notre Dame, MBA, Kellogg Graduate School of Management, Northwestern University.
What was your very first job?
My first job was working on the packing line in the factory. I was 18.
Did you see yourself becoming the CEO?
I would say no. I was starting to get very interested in the business, and I saw myself working in the business, but not necessarily as CEO.
What one person would you like to have met in the world and why?
The first person that comes to mind would be my grandfather — I could have lunch with him and talk to him about what’s happening in the business and ask him questions about his early experiences. I never got a chance to do that while he was alive. I think it would be fascinating at this stage of my life to be able to do that.
Pasin on building a good team: The most important thing is are the people committed to where the company is going and are they highly committed to doing a great job. If I were ever to go into a turnaround situation, that’s the first thing I would do. For the ones who aren’t, move them out of the company as fast as possible. It’s the best thing for the company and it’s the best thing for those people. If they are not committed and into their jobs, they are just dying a slow death of meaningless work. I’d much rather have them do that somewhere else or find meaningful work that will make them happy.
How often do you go to market without a solid business strategy? Probably never, right?
The reality is that if you’re like most organizations, then you’re doing this right now — and you don’t even know it.
That’s because most organizations do not have a well-thought-out marketing strategy. Instead, most are doing what somebody told them they should do. This includes creating a mobile website, engaging in social media and advertising.
All of these are “smart” marketing initiatives. But if they’re done in a vacuum, there’s no way to measure what results those initiatives are intended to accomplish. Worse, you’re chasing tactics instead of delivering results.
There is a significant difference between marketing tactics and marketing strategy. Marketing tactics are ways to bring channels to life. This could be a new website or a mobile-optimized version of your site. Or it could be creating new sales collateral. Tactics should be used to bring your brand message and value proposition to life.
Unfortunately, if they’re not tied to a cohesive strategy, you will not achieve the results you desire.
A marketing strategy, however, allows you to understand the results you should achieve. It also keeps everyone aligned with what you’re trying to accomplish and where you are in the process.
As an example, there are three main reasons for a website: to verify your organization’s brand message to potential customers, to deliver your value proposition and conversion.
Conversion can mean different things for different industries. In retail, it might mean picking out a product, putting it in your shopping cart and making the purchase. In business-to-business, conversion might mean picking up the phone to contact the company, providing a name, email and phone number, or signing up to receive a newsletter.
Without understanding how consumers behave, you may be selling your marketing efforts short. You might not be providing enough information to clearly articulate your brand message or value proposition or you might not be offering users an easy experience that allows for conversion. So how do you ensure that a consistent brand message, value proposition and the ability to target customers converts across all marketing channels?
First, understand who the target consumer is and their needs, attitudes and behaviors. This can be discovered through research, including focus groups or through industry-based segmentation.
Then, conduct a deep dive to understand your business goals and objectives. In retail, this might be the number of sales you want to drive. In B2B, it could be increasing the numbers of prospects in your pipeline.
Finally, evaluate your company’s existing marketing tactics — your website, marketing collateral and overall brand message.
Only then will you be well-equipped to evaluate your overall tactics and compare them to marketing best practices and the competitive landscape. This results in recommendations that include expected business results and return on investment.
Prioritize these by measuring the highest impact against investment levels, and then create a timeline to implement them over a one- to two-year period. Share this strategy throughout the entire organization so everyone understands what will be accomplished and what the expected results are.
Without strategy, and an understanding of everything that goes into it, any money you pour into tactics tends to be money poorly spent. Done correctly, your marketing strategy suddenly becomes your organization’s key driver and leads to tangible and measurable business results.
Dave Fazekas is director of digital marketing for Smart Business Network. Reach him at email@example.com or (440) 250-7056.
What is the best way to motivate employees? Some successful CEOs treat employees as friends, while other equally high-achieving leaders regard employees as merely hired hands, giving them a day’s pay for a day’s work and nothing more.
What’s the best approach to produce the best results for the company, the employee and the employer? Much of the issue lies with one’s definition of a friend and the culture of the organization. Many companies boast that their employees are like family. This sounds great, but can it work?
If either party crosses the fine line that separates the difficult-to-define business and personal space, both employer and employee can become disenchanted or worse. One way to think of it is that friendship is more unconditional. We accept a friend for what he or she is or isn’t. On the flip side, the reality is that most bosses embrace or reject employees for what they do on a consistent basis.
The military has its own way of handling fraternization between officers and the enlisted by making it a possible court martial offense. This stance is predicated on the belief that socializing between these two levels is “prejudicial to good order, discipline and partiality.” It is well recognized that business relationships without boundaries can produce too much drama.
Perhaps what we need is a new definition for a nonemotional, congenial, enjoyable and productive day-to-day relationship between leader and follower. This moniker could be employee-friend, or “e-friend” for short. “E-friend” isn’t an app but would describe an employer/employee relationship where there is mutual respect and a genuine appreciation of one another, underscored by an understanding, albeit perhaps unspoken, that when the time for talking is done, the boss has the final word on matters that occur between 9 a.m. and 5 p.m. Using these ground rules, both sides can have it both ways by using good judgment and treating each other as they would want to be treated if their roles were reversed.
The employee should expect from the boss that, when the chips are down, either on a business basis or when the employee has a personal problem, he or she knows that the boss will be there for him or her, providing understanding and advice and, when requested, helping the employee maneuver through rough patches. From the employer’s perspective, the employee would be someone who, through thick and thin, is there for the company and can temporarily put personal needs aside when there is a business issue that can’t be postponed.
The e-friend boss should know as much about the employee as the employee wants the boss to know, which can include sensitive professional problems or even family or medical issues. In a good relationship, the boss could certainly know, as one example, what the subordinate’s kids are up to in their lives and be the first to say to the employee that it’s more important for him or her to go to an offspring’s ballgame or play, rather than putting in extra time on the business project du jour.
Instinctively, employees know if a boss truly cares or is just going through the motions to be politically correct. They know if the head honcho is sincerely concerned about them as a person, not just another set of hands.
Not everything and everyone in the workplace are created equal. There will always be a pecking order; however, there is nothing wrong with truly enjoying the people with whom you work every day and sharing meaningful experiences, all of which lead to a more fulfilling role for both the employer and the employee. The best criterion to avoiding problems is using generous doses of plain common sense. There is a much-quoted line from the 1987 movie “Wall Street,” starring Michael Douglas as the ruthless tycoon Gordon Gekko, who proclaimed, “If you want a friend, get a dog.” This provoked both laughs and sighs, but in the real world, this attitude makes for a very lonely Ebenezer Scrooge-type life for the boss and a shallow existence for employees who must spend more than half, at the very least, of their Monday through Friday waking hours working.
At times, people can be difficult, both to work for and with. However, it’s the people who make the company and relationships that combine respect and a form of e-friendship that can make the real difference.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.
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