Much of the discussion about oil and gas production in Ohio has focused on hydraulic fracturing used to facilitate production. But fracking, as it’s often called, is only part of the process that takes the oil and gas from the ground to consumers.
“The wells are just one part of the overall industry. You can drill a well and be prepared to produce gas and natural gas liquids, but these materials have no place to go until you have a pipeline and processing facilities,” says Scott Doran, director, Kegler, Brown, Hill & Ritter Co., L.P.A.
Smart Business spoke with Doran about the various stages in the production of oil and gas, and the permits and regulations that govern them.
What permits are required for oil and gas production operations?
In addition to the drilling permits, you generally need permits for the pipelines that will take the gas from the well pad to collection and processing points. The Ohio Department of Natural Resources (ODNR) manages drilling permits; The Ohio Environmental Protection Agency (EPA) has authority to issue air permits. The Ohio EPA, the U.S. Corps of Engineers and other agencies are involved in pipeline projects. Construction of the pipeline may necessitate impacts to streams or wetlands, and you have to consider historical preservation and endangered species issues.
You have to delineate every resource along the expected path of the pipeline, which means sending engineers or field personnel to identify streams, wetlands, historic properties and potential endangered species habitats. Of course, that also involves getting easements and permission from landowners. Those field people prepare voluminous reports, and you identify the best path for the pipeline that achieves project objectives while avoiding as many resources as possible.
If a project does impact streams or wetlands, you can apply for and obtain a permit authorizing the project, but you also have to mitigate those impacts by restoring the streams or wetlands at the site or somewhere else, or buying wetlands mitigation credits. It’s expensive, but there are a number of mitigation options to compensate for these unavoidable impacts.
Why are air permits needed?
Air emission of certain natural gas occurs during the drilling process, and the U.S. EPA and Ohio EPA have established strict permitting requirements regarding how to manage emissions during and after drilling. After drilling, there are emissions associated with the transfer and storage of materials.
It used to be that companies commonly flared off excess gas — they didn’t want to or were not able to manage the gas, so they would burn it. New permit requirements are being phased in that will require the capture of that gas.
What is required regarding wastewater collected from drilling operations?
In Ohio, a regulatory decision was made that the wastewater associated with oil and gas exploration and production is to be injected into permitted disposal wells. These disposal wells are generally off-site and operated by disposal companies that collect waste from tanks at the well pad. They’re injecting the waste 10,000 feet into the ground in porous rock, where it is designed to remain.
Drillers and wastewater treatment companies are working very hard to demonstrate effective mechanisms to treat and recycle that water, because millions of gallons are used for every well and fresh water is very valuable.
Do you expect regulations to change as the industry expands its operations here?
Regulations will undoubtedly continue to evolve, but the basic structure is in place. There is every indication that companies are continuing to make substantial infrastructure investments in Ohio, and there is a regulatory program that is overarching and impacts every step of the process.
This industry is going to have an environmental impact, but it can be done in a very responsible manner. Economically, it will be a good thing for the state. There will be some trials and tribulations along the way, but overall Ohio is doing a nice job to ensure a very substantial long-term benefit while protecting environmental resources in Ohio.
Scott Doran is a director at Kegler, Brown, Hill & Ritter Co., L.P.A. Reach him at (614) 462-5412 or firstname.lastname@example.org.
For more information on Kegler, Brown, Hill & Ritter, please visit www.keglerbrown.com.
Insights Legal Affairs is brought to you by Kegler, Brown, Hill & Ritter
Don’t wait until you want to sell your business to find out you could have done more to make it more attractive to buyers.
Tim McDaniel, CPA/ABV, ASA, CBA, principal at Rea & Associates, says there are eight key factors that determine the salability of a company. Knowing how your business stacks up in these areas provides benefits even if you’re not thinking about selling.
“The more you make your business sellable, the more fun it is. Your business is sellable when it’s less reliant on you, there’s less risk, more cash flow and higher growth. You might work on all of those things and decide it’s so much fun you wouldn’t want to sell,” says McDaniel.
Smart Business spoke with McDaniel about salability factors and what buyers are looking for when considering an acquisition.
What are the key factors that determine whether a business is sellable?
There are eight main buyer considerations:
- Financial performance. The better and more consistent recent performance is, the more assurance it gives a buyer.
- Growth potential. Whereas financial performance is more about history, growth potential looks at the future. A future income stream with a lot of potential is very attractive. There are times when past performance might not have been great, but there appears to be a growth opportunity on the horizon.
- Switzerland structure. The business does not overly depend on any single customer, employee or supplier — they remain neutral if there is a loss in any of those areas. For example, one business owner had 80 percent of its business with one customer and went bankrupt when it lost that business. Things like that make the business less sellable.
- Valuation teeter-totter. Essentially, this is about having up-to-date equipment. If your equipment is old, you either have to invest in new equipment or a buyer will pay you less because they’ll have to buy new.
- Hierarchy of reoccurring revenue. Alarm systems sell for a premium because they have monthly reoccurring business, which lowers the risk. Reoccurring income is very important to buyers, and it’s particularly attractive if it’s under contract.
- Monopoly control. Future cash flow is important, and the higher the barriers to entry, the harder it is for a competitor to take away market share. Few people can start a business to compete with the iPhone. However, if you want to compete against a painter, you just have to hire people who are skilled at it and advertise.
- Customer satisfaction. High customer turnover will create ill will in the marketplace at some point and certainly makes a business more difficult to sell.
- Hub and spoke. This addresses how well the business can survive without you. Many small businesses are dependent on one person and will fall apart the day they leave. That makes the business less valuable and difficult to sell. A buyer might have some of the purchase price based on you staying, and have you sign an employment contract. That’s why it’s important to start building a good management team and relying on other people.
How can a business improve its salability?
Not all businesses excel in each of the eight areas above. However, an owner needs to work toward improving those areas where it is weak in order to make the company more sellable. Start by identifying what drivers need attention, and then develop specific action plans to positively impact them. You will watch the value of your business increase dramatically. It’s not something you want to start working on two weeks before you sell. It’s a process that takes time and focus.
Often, business owners are too busy running day-to-day operations to sit back and consider their business’ value. Yet, there is benefit in looking at the business through the eyes of someone who might be interested in buying it.
Tim McDaniel, CPA/ABV, ASA, CBA, is a Principal at Rea & Associates. Reach him at (614) 923-6532 or email@example.com.
Determine your business’ sellability score at www.reacpa.com/my-sellability-score.
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Federal and state laws generally require that employees are paid minimum wage, as well as overtime compensation when they work more than 40 hours in a week. Many white-collar workers are exempt from these rules, but employers need to be careful about how they classify employees.
“There is no system to ask the federal government if a certain position is exempt. So, employers need to make educated guesses about the duties of a particular job and, based on language in the regulations, decide if that position is exempt,” says Stephen P. Bond, a partner at Brouse McDowell.
Smart Business spoke with Bond about how to properly classify employees as exempt or nonexempt, and the risks involved with improper classification.
Does paying a salary mean a position is exempt?
No, although that’s a common misconception among employers. The first test is that the salary must be at least $23,660. Then, the employee’s job duties — not title —must also fall under one of the exemptions in the regulations. The title doesn’t matter because it doesn’t necessarily mean the same thing at different companies.
What job duties can be exempted?
There are three main exemptions:
? Executive — Exactly what it sounds like: primarily being the head of a business or a department, and supervising other employees.
? Administrative — White-collar, management-level worker whose job involves discretion or independent judgment. Clerical work wouldn’t qualify because it isn’t directly related to management of the business operations.
? Professional — This is the most ambiguous area. It requires that the worker have special knowledge or expertise, typically based on a college degree. However, a college degree doesn’t necessarily make a person exempt.
There also are exemptions for certain duties in the computer field and outside sales, as well as one that covers any employee making $100,000 who regularly performs at least one of the duties of an executive, administrative or professional employee.
How can an employer lose an exemption?
One way is by not being consistent about paying the employee a salary. If you dock someone for missing part of a day, that demonstrates that he or she was not really a salary employee, and cannot be exempt.
However, there is a separate provision that applies if an exempt employee is off work for Family and Medical Leave Act purposes, and allows for deductions that do not affect exempt status.
What are the penalties for incorrect classification?
If an employee’s claim is deemed correct and an exemption did not apply, he or she may be able to claim unpaid overtime for the past two years, as well as collect damages and attorney fees. A disgruntled employee could contact the Department of Labor’s (DOL) Wage and Hour Division and trigger an audit that could result in back pay awards for several employees.
Even when employees are correctly classified as nonexempt, companies can run into trouble in terms of hours worked. If employees work at their desks during lunchtime, that counts as paid time. If you give an employee a smartphone and say he or she has to respond to emails even when at home, that also is work time. Those types of claims can cost a lot of money because employees typically have a record of their hours and the employer doesn’t have anything to contradict it.
How can companies avoid misclassification?
You need to have a qualified human resources person conduct an analysis. It has to be someone who understands all of the implications, and will take the time to consider the various positions and where they fit.
Also, it’s a good idea to re-evaluate exemption status as job duties change, especially if you’re going through a reorganization.
A lot of times, management makes decisions based on what makes economic sense at the time. That’s fine as long as everyone is getting along. But then an employee is fired or disgruntled for some reason and files a claim with the DOL
Stephen P. Bond is a partner at Brouse McDowell. Reach him at (440) 934-8110 or firstname.lastname@example.org.
Insights Legal Affairs is brought to you by Brouse McDowell
Some leaders take an “old school” approach to change management — employees get a paycheck, so they’ll deal with any changes without a need for much explanation. But that sets the organization on a path toward failure.
“The biggest problems are when leadership does not account for the fact that resistance is definitely an option,” says Mark Deans, practice leader in Organizational Development & Change Management at Sequent.
“You could build a perfectly streamlined business process, or add the most efficient tool, but if employees don’t understand how to execute it to meet your expectations, it’s not going to succeed. Try as you might, you can’t make people do things,” Deans says.
Smart Business spoke with Deans about ways to ensure successful implementation of a change process.
What is involved in change management?
It’s supporting a change in business processes or systems, technology, etc. The practice of change management applies to any significant change in an organization, including leadership change as part of an acquisition or divestiture. It’s about how employees are supported through the change process.
The methodology is that there is a journey the organization, departments and individuals go through, and each has a completely different time path. Two people might do the same job, but each has his or her own change capability, and it’s a matter of identifying and managing all of those within an organization to make the change as seamless as possible.
How does the change process work its way through an organization?
First and foremost, leadership must be on the same page. Start with getting leaders aligned so they can be the driving force behind the change, helping each individual understand his or her part.
Organizations are taking a more holistic view nowadays. A change might mean more work for some departments but provides an overall net benefit for the organization. It used to be that each silo fought for its own interests. Now, it’s about how departments operate together, and some teams taking a hit if necessary to ensure the overall organization is as successful as possible.
One of the first steps is acknowledging the need to change, and the benefits. There should be some compelling reason, whether it’s regulatory changes, an attempt to improve market share or boost the bottom line. If the overarching goal is to improve margins, explain what that means for each group, and ultimately for each individual. You have to manage change upfront and get everyone onboard at the start rather than waiting for problems. It’s analogous to going to the dentist. If you see your dentist on a regular basis, keep your teeth clean and get X-rays, you can catch cavities when they start and are easier to fix, instead of not going for a long time and having major damage. The same holds true for change management, if you start a project and haven’t thought about how to communicate it to employees, going back and fixing it is much more difficult.
Is it important to state a desired outcome?
Absolutely. That is where some companies fail as well. They make a change and aren’t sure why. A company buys hundreds of iPads as part of a mobile technology strategy without addressing the intended use. So people are updating their Facebook status or playing Angry Birds because they don’t have a burning business reason to utilize these tools. That might be a ridiculous example, but there are plenty of cases in which companies want to hurry up and do something because it’s a shiny, new object.
You also need to accept it if a change didn’t work. Evaluate the success of the change, including what happened and didn’t happen as planned. Change projects always take longer and cost more than expected. Organizations that handle change well go back and figure out what they did well, and what could have been done differently. Then they remediate anything that did not get executed as well as planned. They learn from the experience so the process can be improved next time.
Mark Deans is a practice leader in Organizational Development & Change Management at Sequent. Reach him at (614) 410-6028 or email@example.com.
Website: Visit our website to understand how to successfully incorporate change at your company.
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Today’s workforce is unique in that there are now four generations of people working together — traditionalists born from the 1920s to the 1940s, baby boomers, Generation X and millennials.
That presents challenges to employers in bridging generational gaps and getting workers on the same page.
“There are now four generations of people in the workforce, and they all bring something very different to the table. They have unique characteristics in terms of values and what is important to them personally,” says Liz Howe, Director of Business Development at Benefitdecisions, Inc.
“There is a lot of buzz about the lack of communication among the generations. They come from different places and have different ways of doing things. It’s about getting them to play in the same sandbox, if you will.”
Smart Business spoke with Howe about the differences between generations and the affect it has on the workplace.
There have always been multiple generations in the workforce, how is it different now?
It’s that there are still people born in the ‘20s to ‘40s in the workforce in high, C-level roles, along with baby boomers, Generation X and young kids out of college.
Combine that with the progress made over the last 20 or 30 years in technology and the Internet. The world is a completely different place and that can pose challenges in getting things done. One segment of workers says, ‘This is how it’s been done,” while another says, ‘Why do we do it this way?’
How can you bring them all together?
Companies need to consider what’s important to each group. The traditional generation was raised in a really hard time and tends to revert to how things used to be done; Generation Xers don’t identify with that. If you have a Gen Xer managing a traditionalist, he or she needs to think about what is important to that person — a flexible work arrangement, succession planning and teaching them technology.
That same manager would handle a millennial differently. Priorities to a millennial are having a work/life balance and having a relationship with his or her supervisor that doesn’t involve micromanagement, but more of a team-oriented approach. So it might be more of a mentorship than just being a work manager.
With baby boomers, no news is good news. If a manager isn’t calling and asking questions, they’re in good standing.
What is the danger of managing everyone the same?
You lose the employee engagement factor, which is a hot topic these days. Millennials aren’t as loyal to companies as baby boomers, and if they’re not happy they will leave for a company that better fits their culture. That has become more socially acceptable and other generations are seeing that. Ten to 15 years ago it wasn’t acceptable to have four or five companies on your resume, now tenure is three years before people want a promotion or a different role.
You need to be thoughtful about managing employees and what types of benefits you’re providing by catering to what they find important. There’s been a real push toward wellness programs. Some businesses provide different types of insurance — pet insurance is huge. Other companies will match charitable contributions to an organization of the employee’s choice rather than just giving a cash bonus. People today are much less monetarily driven than they’ve ever been.
What are the benefits of having all of these generations together?
It brings some depth and breath of knowledge to an organization, along with a wide variety of skill sets. It’s an advantage to have people raised at a time when there was little or no technology all the way down to people who don’t know anything but technology and the Internet.
The challenge is to get them to communicate with each other so you can take full advantage of their knowledge.
Liz Howe is director of Business Development at Benefitdecisions, Inc. Reach her at (312) 376-0452 or firstname.lastname@example.org.
Insights Employee Benefits is brought to you by Benefitdecisions, Inc.
Lawsuits can pose a considerable threat to businesses, and actions related to employment practices should be a particular area of concern to business owners. According to researchers, about 60 percent of employers can expect to be sued by a prospective, current or former employee.
“It’s the increasingly litigious nature of our society,” says Derek M. Hoch, president of Leverity Insurance Group. “These lawsuits really started to trend upward when the market plummeted to its lowest point in combination with the state of the economy over the past four to five years. Desperate times can sometimes lead to desperate actions. When people couldn’t find employment, they filed suits against employers who let them go during that period of recession.”
Smart Business spoke with Hoch about how employment practices liability (EPL) insurance can help businesses manage risks associated with such lawsuits.
What are the most widely recognized types of employment-related lawsuits?
- Wrongful termination — Discharging an employee for invalid reasons.
- Discrimination — Denial of equal treatment to employees of a protected class.
- Sexual harassment — Workers subject to unwelcome sexual advances, or obscene or offensive remarks.
Lawsuits can also be based on things such as wrongful failure to employ or promote, wrongful discipline and religious discrimination.
How can EPL insurance protect employers?
More than half of all claims for employment-related liabilities are against businesses with fewer than 50 employees. Claims can be costly, especially if a case has the ability to go on for an extended period of time. The average cost of an employment lawsuit exceeds $270,000. Even if the lawsuit is frivolous, it still takes time away from operating your business.
An EPL policy will help to pick up these defense costs and any judgments or claims assessed against your business. In some instances, these cases are settled before they even go to court; EPL will pay for settlement costs as well.
EPL also covers claims filed with the U.S. Equal Employment Opportunity Commission (EEOC). In 2012, the EEOC reported 99,947 charges for harassment, and costs of resolving these claims were $364.6 million.
Why is purchasing third-party EPL insurance so important?
Third-party EPL addresses the coverage gap that leaves employers vulnerable to discrimination and harassment lawsuits from customers, clients, vendors and suppliers. Standard EPL policies only cover actions related to employees or prospective employees, and most general liability policies specifically exclude harassment and discrimination.
More insurance carriers are including third-party coverage as part of EPL policies because every company is at risk. It’s vital for any business that deals with customers on a daily basis.
Other than insurance, what approaches can companies take to protect themselves?
Have a legal professional review your employee handbook to ensure it contains all the necessary information, including policies covering sexual harassment, discrimination, equal opportunity, grievances, discipline, termination, performance evaluations, Internet usage, pregnancy leave, hiring and employment at-will. Then make sure employees sign off that they’ve read it.
If you don’t have a handbook, you may not be able to secure EPL insurance because insurance carriers take this very seriously. They want to see that you’ve taken proper steps in terms of risk management and providing a safe workplace.
You can protect yourself even more by making sure you’re following proper procedures regarding hiring, firing, performance reviews and even interviewing prior to hiring someone.
Taking these steps also reduces risk, which will generally translate into lower insurance premiums. EPL insurance works hand-in-hand with your internal employment practices to provide necessary resources to defend your company against a lawsuit or claim.
Derek M. Hoch is the president at Leverity Insurance Group. Reach him at (216) 861-2727 or email@example.com.
Request a quote on employment practices liability insurance or any other corporate coverage.
Insights Business Insurance is brought to you by Leverity Insurance Group
Much attention has been given to the fees and expenses of qualified retirement plans. Many questions are being asked about the reasonableness and quality of the current 401(k) landscape.
For decades, service providers have been charging excessive, and often hidden, fees to a countless number of plan participants. Similarly, plan investment options came under fire shortly after the 2008 financial crisis, which saw millions of workers lose significant portions of their retirement savings. This unfortunate combination — excessive fees and poor returns — was the driving force behind the recent regulatory changes.
Smart Business spoke with Eric N. Wulff and Christopher D. Bart, managing directors and principals at Aurum Wealth Management Group, about the Department of Labor’s (DOL) plan to address these issues.
What are some of the company’s fiduciary responsibilities relating to their retirement plan?
The three main concerns revolve around fees, service and investments.
On Feb. 3, 2012, the DOL issued a final regulation under the Employee Retirement Income Security Act of 1974 (ERISA). This regulation requires a 401(k) plan’s service providers to disclose all fee and compensation arrangements, effectively known as ‘full fee disclosure.’
From a service perspective, companies are required by the DOL to determine the reasonableness of fees. Industry best practices indicate the most effective means by which you can evaluate the reasonableness is to place the plan out to bid. Conducting a request for proposal process allows you to compare not only the cost and compensation arrangements, but also the nature and level of the service. If the service provider does not provide a level of service commensurate to its fee, it is the company’s fiduciary duty to terminate the provider.
As for investments, companies are required to maintain a documented process on the selection and monitoring of the investments in the 401(k) plan. Specifically, the DOL recently put out an advisory bulletin on target date funds requiring them to evaluate the absolute risk of these types of investments. Target date funds became a popular investment strategy because plan sponsors were given fiduciary relief if they offered them as a qualified default investment alternative. This turned out to be somewhat problematic when the market crashed in 2008 and 401(k) participants saw their investments drop by 20 percent or more.
How can companies minimize their fiduciary responsibility?
There are different types of advisers companies can engage to assist them with their responsibilities, and companies can do a better job understanding those options.
The two most common levels of fiduciary status under ERISA are 3(21) and 3(38). As a 3(21) fiduciary, the adviser serves as a co-fiduciary to the plan; in this role, the adviser monitors plan investments and makes investment recommendations to the plan sponsor, but does not have discretionary control of plan assets. As a 3(38) fiduciary, the adviser takes control of plan assets, makes all investment decisions and insulates the plan sponsor from fiduciary liability as it relates to plan investments. Hiring a 3(38) fiduciary is the highest level of fiduciary protection under ERISA.
Where do participants stand in all of this?
With most retirement plans, a big problem is that participants are not allocating assets correctly. So, many 401(k) plans are starting to implement more help features for participants. Studies show the average participant can earn an additional 2 or 3 percent per year by getting professional help. Unfortunately, the average participant tends to chase performance when determining their investment allocation.
Hopefully, these increased responsibilities on plan sponsors will continue to bring much needed change to help fix the nation’s structural problem with retirement savings.
Aurum Wealth Management Group is an affiliate of Skoda Minotti.
Eric N. Wulff is a managing director and principal at Aurum Wealth Management Group. Reach him at (440) 605-1900 or firstname.lastname@example.org.
Christopher D. Bart is a managing director and principal at Aurum Wealth Management Group. Reach him at (440) 605-1900 or email@example.com.
Insights Accounting & Consulting is brought to you by Skoda Minotti
Computing personal property taxes can be a chore for businesses, particularly if the company’s locations cross various state and local jurisdiction boundary lines. Each state has its own statutes, due dates, assessment ratios and instructions that must be adhered to for a company to be considered “compliant.” These property tax requirements vary greatly and most often have late penalties for missing deadlines. However, digging into these very statutes and instructions can also provide an opportunity to minimize your company’s tax burden.
“Many will run the fixed asset ledger right out of the system and that’s what they’ll report,” says Jenna R. Kerwood, CMI, a principal in Tax Services at Brown Smith Wallace.
However, that usually results in paying more taxes than what is owed because not all assets are taxable. Often, fixed assets are capitalized at a project level, which results in inaccurate reporting for property tax purposes. There may be costs that are not taxable or components of the cost that should be removed. The taxability of these assets can be determined by examining the state and county websites, statutes, assessor manuals and return instructions.
Smart Business spoke to Kerwood about what constitutes personal property and why it’s worth the effort to keep an accurate track of assets.
What is the difference between real estate and personal property?
Real estate refers to land and buildings. Personal property is defined as tangible property that’s movable. It can be difficult to distinguish between the two, especially with manufacturing facilities, and each state has different rules and instructions.
Most states have a three-prong test:
- Can the item be moved without destroying the real estate?
- What is the primary purpose the item serves? The more special its use, the more likely that it will be considered personal property.
- What was the owner’s intent?
The key is whether it would destroy or cause permanent damage to the building if you were to remove the item.
What is the basis of property tax assessments?
The basis of value for real estate and personal property is fair market value — the amount a willing buyer would pay in a market when there’s no duress, such as a bankruptcy or foreclosure. Fair market value is subjective, which gives you an opportunity to analyze all of the capitalized cost to determine how best to reflect the ‘fair market value’ of the asset.
When reporting assets for property tax purposes, you need to understand their physical life, use, maintenance schedules, etc., in order to depreciate correctly. Items with a short life have faster depreciation. Manufacturing equipment might have computerized components that can be placed on a shorter life with a more reasonable depreciation schedule.
How can businesses lower their tax burden?
Start with fixed asset accounting records. When filing personal property tax returns, you report the original cost of the asset by year of acquisition. Companies might have a retirement policy by which they dispose of, melt down or cannibalize an asset, but that’s not reflected on the books.
It’s best to address problems on the front end. Review the asset ledger for listings that don’t look right — focus on the high dollar items or assets with ‘miscellaneous’ as the description. Scrutinize asset invoices and review them with the people who know them; it might be the plant manager for the manufacturing facility, facilities person for the furniture and IT people for the computer asset listing. Another area to consider is depreciation. The county will tell you the rate, but that may not be accurate and is negotiable.
How much can be saved?
Conservatively, businesses can lower personal property taxes by 20 percent. Most state rates are at 2 percent. When you tell a company that cleaning up asset lists can save $30,000 or more, it gets their attention.
Jenna R. Kerwood, CMI, is a principal, Tax Services, at Brown Smith Wallace. Reach her at (314) 983-1360 or firstname.lastname@example.org.
For more on this and other tax topics, visit Brown Smith Wallace's Tax Insights.
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Can you prove the ROI of employee engagement? According to a Gallup survey, companies with world-class engagement have 3.9 times the earnings per share growth rate compared to their competitors with lower engagement. The challenge is planning a route to get employees engaged.
“Our research has shown that there are three buckets — the engaged group, the disengaged group and the people in the middle. Ideally, we want all employees to be engaged. The first step is to move the disengaged group to the middle bucket,” says Kelly Pacatte, MBA, SPHR, senior human capital consultant at TriNet, Inc.
Smart Business spoke with Pacatte about strategies to move workers forward to becoming engaged employees.
How can companies motivate disengaged employees toward that middle bucket?
There are four basic tips to follow:
- Pay according to market value. Many executives don’t like to hear it and would rather offer training or take similar steps. But paying accordingly is critical in moving disengaged employees up.
- Limit organizational reductions in force. While hard to do, it’s impossible for employees to become engaged if they fear losing their jobs.
- Manage organizational changes. Whether a market change or leadership change, proactively communicate it to move disengaged workers into the middle.
- Increase trust. Make sure all employees see the value in their company and believe in the brand. Executives must be visible and accountable.
While paying accordingly is important, pay isn’t necessarily a motivating factor; it’s a baseline. Employee motivation is like Maslow’s hierarchy of needs. People need to be taken care of, have the supplies needed to do the job, know what their job is and be paid accordingly. Once those baseline needs have been met, you can move employees to becoming engaged.
Does engagement strategy differ by company?
To have an engaged workforce, every company needs to deliver key components:
- Leadership that clearly communicates goals and where the organization is headed.
- Leadership that connects with employees.
- The jobs employees are doing must provide meaningful work.
Implementation varies by company, but those are factors that all companies use to increase engagement. Sometimes, that may mean increasing employee development or focusing on mentoring opportunities; the ways these are done differ by company and industry.
How do you decide which programs will accomplish these goals?
The process starts with an employee engagement survey to determine what areas need work. The survey provides a baseline for how engaged the workforce is. To achieve best results, develop the survey with experts from a third party who understand what motivates employees. In addition, employees are more likely to respond because there’s no fear of retaliation.
When you receive the results, company management needs to realize you can’t change everything. Based on responses, develop a plan for areas that require immediate attention. If there’s something that can be done, work on a plan to change that. If not — and this is key — explain why. It’s important for employees to know that action is taken regarding a survey. Maybe there was overwhelming feedback that more training is needed, but you don’t have the ability to do that right away. Senior leadership needs to let employees know they were heard. While leadership can’t work on a development strategy immediately, it will take specific steps to deliver on the request.
If you’re doing a survey, some changes have to be made. Employees don’t want to spend time filling out a survey, only to find out nothing has changed.
After you implement changes, measure to see if there’s been an increase in revenue or productivity. Generally, a baseline is measured before the survey and six months to a year later to see if those factors increased.
Engagement takes a long time. But if you are genuinely trying to increase employee engagement, you will get a return on your investment.
Kelly Pacatte, MBA, SPHR, is a senior human capital consultant at TriNet, Inc. Reach her at (972) 789-3960 or email@example.com.
See how companies grow their business and engage their employees, or follow us on Twitter: @TriNet.
Insights Human Resources Outsourcing is brought to you by TriNet, Inc.
“Relationship” might be the most overused word in banking these days, but it sums up the difference between providing a commodity and truly serving a customer’s needs.
“It really is about having a relationship with someone who comes to know and trust you,” says Jeffrey M. Whalen, senior vice president in the Specialty Markets division at Bridge Bank. “What we do in this industry is serve the needs of clients.”
Smart Business spoke with Whalen about how banks stay involved with clients and build mutually beneficial relationships.
Where should price fit into the decision when choosing a bank?
Most business owners say that, when it comes to choosing a bank, developing a long-term relationship in which owners feel empowered to achieve their goals is their highest priority.
Sole proprietors, closely held corporations and family owned businesses in particular want to get to know their banker, and they want their banker to know them and the ups and downs of their industry. They still want a competitive price, but more often than not, they are seeking a partner who can add real, tangible value to their business in the form of sector expertise, advisory services, etc.
Certainly there are business owners who do prioritize pricing above other aspects of a banking relationship, but in those instances, the owners shouldn’t be surprised if the relationship with their banker doesn’t yield much in terms of value-added services.
By nature, some businesses are very transactional and may not require value-added services. In those cases, business owners may look to other criteria to evaluate a potential banking relationship, such as how active the bank is in supporting their industry or business ecosystem, or how the bank’s core values align with theirs.
Some also want to deal with independent banks, as opposed to larger national banks, because they often have direct access to decision-makers. At a large bank, your account might be managed from a region far from your own, and local representatives can’t help you if there is a problem. For example, if you want to increase a line of credit or need help optimizing cash flows, a regional or independent bank may be able to respond faster because of its locale and relationship with you.
How can banking relationships provide additional benefits to the customer?
Relationship benefits depend in large part on what kind of bank you have chosen to partner with. Banks with a broad range of capabilities can, for example, accommodate an equally broad range of needs a business owner might have as his or her company moves throughout the business cycle. And banks with broad sector knowledge can bring a unique and valuable perspective to the table when helping a business owner evaluate options for growth and expansion, for example. Also, a bank should be able to bring forward a network of professional service providers who can help the owner with other issues that inevitably arise, such as how to establish an employee stock option plan, tax audit and preparation, etc.
So, the right relationship can yield a multitude of additional benefits, and it is important that these conversations are held prior to committing to a bank.
How frequently should bank personnel and clients meet?
It should be every month for larger, more complex client relationships and at least every quarter for smaller ones. Those guidelines, however, are general. Every business should be viewed as unique — because it is.
Therefore, the frequency of interactions with a banker should be driven by the needs of the client, and the dynamics of its business. It’s important for clients to know that a bank should have their best interests at heart and is there to solve problems. Sometimes a client might have problems it isn’t even aware of, but if its banker has the right experience and perspective, and if the communication in the relationship is frequent, the banker should be able to catch these problems before they impact the client’s business.
Communication in the relationship, combined with expertise on the side of the banker, is the key to getting the most in terms of value for the business owner. It really becomes a strong partnership if that can be achieved.
Jeffrey M. Whalen is a senior vice president, Specialty Markets, at Bridge Bank. Reach him at (408) 556-8614 or firstname.lastname@example.org.
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