On June 15, Jack Pickard took over as CEO of FedEx Custom Critical. He succeeded Bruce Simpson, who had gained a reputation as one of the region's most accessible and admired business leaders during his 13-year reign.
Even though Pickard had served at a vice presidential level since 1989, he still had huge shoes to fill.
When SBN talked to Simpson days before his retirement, his advice to Pickard was simple.
"I think leadership is a subject that thousands of books are written about every year," he says. "He'll be a good leader. The important thing in this whole process is to continue to perpetuate the culture that we have, that really, in addition to this unique service that we provide, stimulates us."
The essence of the culture, according to Simpson, is "an obsession with the customer."
In an industry in which the product is service, Pickard knows the importance of perpetuating that. It starts, he says, with giving every employee the authority to do whatever it takes to serve the customer. By granting that power, he says, you encourage innovative thinking when employees are faced with problems.
"We promote an atmosphere of empowerment, where employees are encouraged to be creative and uncover new ways of doing business," Pickard says.
"Our customer service agents don't have to ask a supervisor's permission to dispatch a truck or charter an airplane in order to satisfy a customer's unmet needs," he says. "They are empowered to spend whatever amount of money it takes in order to meet our original commitment. It's spelled out in our mission statement."
Pickard says that customer service agents have spent upwards of $15,000 to get a delivery made that cost the customer $1,000.
"They are empowered to do whatever it takes that is customary, ordinary and reasonable," he says.
Pickard admits that level of authority still frightens a lot of people, who want the terms "customary, ordinary and reasonable" defined.
"What's ordinary and reasonable? I can't answer that question for you definitively," he says.
The company promotes innovative thinking by including innovation in every employee's job description. Each job, he says, has a set of core competencies that are expected of the employee.; some expected from every employee are zeal, team spirit, relentless achievement, trust, customer obsession and innovation.
"We expect our employees to use creative thinking to generate new ideas and business solutions," Pickard says. "And to continuously look for ways to challenge the status quo and embrace change as a means of enhancing organizational effectiveness and customer satisfaction."
So, how does one demonstrate that competency?
"You're given unusual situations to which you respond and provide customer satisfaction to meet the needs of both the customer and the company," he says. "In our business, you're as good as your last shipment. And if you failed in any way, shape or form in the mind of the customer, you need to take immediate corrective action.
"How you react when times are tough really builds customer loyalty in the long run."
Pickard says there are three things any company must do well. The first is that it has to perform operational excellence.
"That means quality," he says. "That means doing what you say you're going to do every time. If you make a commitment, you live up to that commitment. It doesn't matter whether it's FexEx Custom Critical or an ice cream stand on the corner."
The second thing any company has to do well is product and service innovation.
"That means bringing new product and new service to the market before your competition does," he says. "That's the innovation part."
The third characteristic of a successful company is what he terms "customer intimacy, or having good relationships with your customers.
"We have to develop a relationship that's so close to our customers that we can begin to anticipate their needs before they even realize that they've got them," he says.
Pickard admits that quality and service are easier to control than innovation.
"Like most organizations, we're doing some things very well, and there are areas that we need to improve on, too," he says. "We need to become more innovative."
He says while every employee hired at FedEx Custom Critical comes into the organization with a certain level of intelligence and creativity, allowing employees the freedom to share their ideas is the difficult part.
"It's my job, as much as anything, to keep the corporate hierarchy from squelching that innovation and creativity that comes naturally to everybody," he says.
"In my prior experience, companies become very stratified and ossified sometimes, and they just don't get the value that they should from all of their employees because the system stifles them. And what I need to do here is constantly guard against that, to make sure that's it's an open environment where people can trust one another." <
B>How to reach: FedEx Custom Critical, (800) 762-3787
Buffy Filippell has never been one to let barriers get in the way of success.
The founder and president of TeamWork Consulting Inc. took an idea that had never been tried and, against the judgment of the experts, developed it into one of the most recognized sports executive search firms in the industry.
Even though most sports fans have never heard of TeamWork Consulting, if you're a key player in the sports world, odds are you're familiar with the Shaker Heights-based firm. Over the past 14 years, Filippell's TeamWork has recruited nearly 300 executives within the sports and event marketing industries.
Her client list is a virtual who's who of sports leagues and includes the National Basketball Association, National Football League, National Hockey League, Major League Baseball, Major League Soccer, NASCAR, the PGA Tour (golf) and the ATP Tour (tennis). She's also done work for dozens of individual sports teams and sporting events.
The idea of a sports-based executive recruiting firm germinated in Filippell's days at Mark McCormick's IMG, where she represented former tennis stars Andrea Jaeger and Ken Rosewall, and in the years she spent as a traditional headhunter at Korn/Ferry International, one of the country's largest executive search firms.
In the mid-1980s, when she was recruiting senior-level executives for Korn/Ferry, she noticed the sports industry only used executive recruiters for searches at the CEO level. She recognized an opportunity to create a niche market by recruiting mid- to senior-level executives in the sports and event marketing industry. In 1987, when her bosses at Korn/Ferry weren't interested in the idea, Filippell left the firm to found TeamWork Consulting out of her basement.
With few resources at her disposal other than her background, her Rolodex and the seed of an idea, Filippell made her first mark on the industry by recruiting the new commissioner for the Big West Conference in the NCAA. He stayed with the Big West for 11 years.
Then, in 1988, Filippell landed her first high profile client -- the NBA expansion Minnesota Timberwolves franchise. The Timberwolves were just entering the basketball league and sought a senior vice president to help market the team's new arena. Filippell placed Tim Leiweke in the role and Leiweke responded by setting a record for the amount paid for the naming rights of the Target Center.
Today, Leiweke is president of the Anshutz Entertainment Group, owner of the Los Angeles Kings NHL franchise and the Staples Center, and has moved from candidate to client, using TeamWork to fill mid- to senior-level slots.
"To have clients come back for 10 and 12 years is unheard of in this business," explains Jennifer Proud Mearns, TeamWork executive vice president and Filippell's partner in the business. "But for Buffy, she really feels the business is about relationships. To her, those are the most important part."
Filippell says she builds those relationships by listening to others.
"You find you're able to meet their needs if you understand what exactly those needs are," she says.
That's a skill that's helped Filippell innovate at every level and earned her the distinction of being named Visionary in the 2001 Innovation in Business awards.
In late 1999, she was hired by the NFL expansion Houston Texans to staff the team's front office. To meet the Herculean task, she developed a software solution, which worked so well that she decided it could be used with other clients. In the spring of 2000, she launched TeamWork Online LLC.
The company licenses Internet-based software designed to help professional sports teams and leagues to recruit entry-level to mid-level executives through their Web sites. It was used to staff every front office job in the XFL, and is currently being used by teams in the NBA, WNBA, NHL and MLS.
How to reach: TeamWork Consulting, (216) 292-9266
When North American needed improved technology to remain competitive, Tim Wojciechowski and his marketing team turned to Japan.
North American, a ceramics manufacturer, supplied the steel industry and other capital-intensive industrial firms, so it was no surprise that customers were a little nervous.
"We were the first supplier to those industries to go outside the United States for technology from Japan," recalls Wojciechowski.
But the process improvements that came from the initiative helped North American become more competitive. And, he says, "That's where I learned you have to keep your product technology fresh and go wherever that is."
Throughout his 20-year career, Wojciechowski has been a risk-taker. Some risks led to success, others to failure. It was those triumphs and tragedies that prepared the native Clevelander for his biggest challenge -- taking technology that had only been made in the lab and commercializing it. That same vision has earned him a 2001 Innovation in Business Rising Star award.
Ahead of his time
Through his years in lead roles at manufacturing and engineering firms, Wojciechowski saw one common theme -- the need for consolidated electronics material suppliers.
While running a division of Oglebay Norton, he risked his career by formulating a plan to reduce his division's dependence on the steel industry, which accounted for 80 percent of Oglebay's revenue, and branch out into electronics material supply. He wanted to consolidate the fragmented industry and develop multimillion dollar suppliers to offer bundled packages.
The plan fizzled at the board level; the board not only rejected the idea, it sold Wojciechowski's division.
"It was the right plan at the right time, only we were trying to execute it maybe at the wrong company," he concedes.
So armed with the belief that the greatest worldwide market impact would come from electronics, he trudged forward. An introduction to Neil Lubart and a new liquid crystal display film cemented that idea, and he put his energy source into the creation of Trivium Technologies Inc.
The perfect match
While Wojciechowski was out mastering the corporate world of manufacturing in Ohio, Lubart was busy specializing in the human interface side of technology at IBM.
Lubart co-created the first notebook computer marketed by IBM and says today's laptops have the same design flaw: an inability to use light from two different sources. That means the liquid crystal display screens can be seen only in the most optimum lighting conditions.
Driven to improve on his original creation, Lubart invented an LCD film that utilizes ambient light when it's available and battery generated backlight when it's not. The technology allows users to read a laptop computer screen in the sun and could extend battery life.
"The LCD industry is slow but it's still expanding," Wojciechowski says. "It's a $70 billion business expected to grow to over $100 billion in the next few years."
Recognizing the impact of Lubart's technology -- a decrease in power source dependency could impact everything from watches and road signs to avionics, cell phones and TVs -- Wojciechowski realized he could take the technology to market.
"Neil is a gifted scientist and can communicate with the very sophisticated investor without talking down," Wojciechowski says. "Neil's able to bridge that gap from the technology side to the business side."
Lubart says it is Wojciechowski's passion and experience that has moved Trivium in the right direction.
"There are some business executives that don't have the vision; he does," Lubart says. "If you don't have the vision, you miss the opportunity."
How to reach: Trivium Technologies Inc., (216) 574-6225
It could be advice from any business leader at any conference or presentation, but this is the philosophy of Mark H. McCormack, founder, chairman and CEO of International Marketing Group (IMG), the largest sports representation, marketing and licensing company in the world and winner of Ernst & Young's Entrepreneur Of The Year Award as the 2001 Master Entrepreneur.
As the story goes, IMG had a simple yet poignant beginning. It consists of a young lawyer from Arter & Hadden, a handshake and a rookie golfer named Arnold Palmer. And it begins with McCormack's idea that golfers could earn extra money off the course to supplement what they earned on the course. The reasoning was that business owners would pay athletes to endorse their products.
From that beginning, and an early client list of Palmer, Rod Laver, Jean Claude Killy and Jackie Stewart, McCormack came to recognize and capitalize on what he saw as "the enormous potential of sports as a corporate communications medium."
As the father of sports marketing, McCormack devised innovative ways to package and market every aspect of the game. Thus, the sports marketing industry was born.
IMG represents some of the most famous and most highly paid athletes in the world, including Tiger Woods, Joe Montana, Monica Seles and Wayne Gretzky. But that's just the tip of the iceberg. Since the mid-'60s, McCormack has practically cornered the market on as many entertainment venues and performers as possible. Performing artists, writers, models, broadcasters, cultural institutions and corporations from all over the world look to IMG to negotiate deals, market events and manage licensing agreements. Clients include Wimbledon, the British Open, Itzhak Perlman, Rolex and the Nobel Foundation.
With 85 offices in 33 countries and 3,000 employees, IMG is involved in an average of nine major events around the world every single day. The size and scope of IMG has surprised even McCormack.
"If someone had told me 30 years ago, when I was traveling the golf circuit with Arnold Palmer, that my little management company would one day be booking violinists and singers in Malaysia, or, for that matter, that we would be involved in classical music at all, I would have shaken my head in disbelief," he says.
Despite IMG's size and perpetual expansion, McCormack has stayed the course when it comes to his core business.
"It all starts with the clients," he says. "They're the core of our business. Without this core, the fringe opportunities have a way of passing us by. It's no different in any other operation. If you don't know your core business, everything you do will inevitably become a fringe business."
For McCormack, it all goes back to learning the business and applying what you already know. Even as the company expands into new markets and business divisions, McCormack stresses the core value of the company is its relationships.
"IMG understands far better than anyone in the world the relationship between the athlete and their fans, between television and sponsorship and between events and marketing," he says.
McCormack's business ability has not gone unnoticed. In May 1999, ESPN's Sports Century listed him as one of the Top 10 "Most Influential People in the Business of Sports." Sports Illustrated called him "The Most Powerful Man in Sports." Golf Magazine and Tennis Magazine proclaimed him, respectively "the most powerful man in golf" and "the most powerful man in tennis."
Founding and running the largest and most innovative sports conglomerate in the world hasn't take up all of his time. McCormack has found some free time to write a number of books, including "What they don't teach you at Harvard Business School," which spent 21 weeks on the bestseller list.
But the best place to see McCormack's business knowledge in action is to simply look at what IMG does besides represent athletes. The company continues to bolster its core business by developing or representing every aspect of the entertainment industry.
For example, McCormack has successfully used licensing to add revenue streams, enhance consumer awareness and create stronger brand loyalty. Since 1962, licensing has been one of IMG's core business activities. Today, it is the world's largest independent licensing agency. In 1997, IMG Licensing was responsible for more than $5 billion in worldwide retail sales of licensed product.
IMG has also developed its own sports distribution channels. Through its broadcast division, Trans World International (TWI), IMG is the world's largest independent producer of television sports programming and the world's largest distributor of sports television rights. IMG's television production operation in India produced more than 70 percent of all sports programming shown on Indian television. IMG was also the first company to introduce virtual advertising (VA) technology during live televised matches.
McCormack isn't stopping there. How do you ensure that, as a company, you always have business? Why not create your own client base?
With a strategic merger in 1980, IMG began its comprehensive sports academies. Thousands of potential clients from more than 70 countries attend IMG academies on a multiple week basis throughout the year. The academies cover 190 acres and are used by 700 to 800 elite athletes per week. Nearly 400 students take part in the full-time academy semester programs each year.
It all comes back to McCormack's ability to innovate and grow with the changing sports business landscape, and is a testament to his ability to find and recognize good ideas and talent.
"To me, Arnold was a pioneer in the spirit of Thomas Edison or Benjamin Franklin," he says. "Tiger is a pioneer in the spirit of Bill Gates."
And for McCormack, the idea remains simple.
"The core foundation of IMG's success has always been and will always be the representation of individual athletes," he says. "Because it is they who have the power to advance sport to a new level."
How to reach: International Management Group, (216) 522-1200
A CEO was hired based on a very impressive resume and recommendations. But in just a short time, this new chief executive started to show signs of serious problems.
The company began losing a great deal of money --about $10 million. These losses couldn't be explained by a simple downturn in the market. At that point, the board of directors began to look at the business decisions the individual was making. Not only were the decisions questionable, but it seemed as though he did not understand the business.
Finally, the board asked William Penrod of KlinkFarley Inc., a business security and investigation firm, to look into this man's background. What he found was staggering.
First, the CEO claimed he was working on his MBA at a prestigious university. Penrod, Cleveland director at KlinkFarley, found he was never enrolled in the MBA program there.
The previous work experience claims proved even more troubling. He claimed he had served as vice president of a large division at a publicly traded corporation, reporting directly to the CEO. It turned out no one at the executive management level even knew the man.
He also claimed he had held the following positions at another large corporation: vice president -- business development and manufacturing; general manager; director of regional sales; and senior sales executive.
The company's human resources director could only confirm that applicant had held the position of strategic sales manager, but none of the others.
There were other claims, but rest assured, Penrod found they were greatly exaggerated or just plain false. The decisions made by this CEO cost the company hundreds of thousands of dollars and set it back years.
''It's amazing that a company will automatically spend from $100,000 to $500,000 on a relocation package for a high-level management hire, but will not budget $5,000 for a serious due diligence background investigation,'' Penrod says. ''Let's face it, no one gives bad references anymore. Everyone is a star because you are either talking to references who are friends or mentors or someone who is afraid of a lawsuit and won't tell you or HR the truth. Does the information kill the hire? Sometimes, but often it doesn't.
''Instead, it enables the interviewing process to be more informative and honest.''
Background screenings are already common in the Northeast Ohio area, according to a Workplace Practices Survey by the Employers Resource Council and SBN Magazine. And pre-employment drug screenings are on the rise. Last year, less than half -- 44 percent -- of employers reported using drug screenings. This year, about 52 percent said they use the tests.
The number of those who make reference and other background checks remained stable, with about 90 percent of employers saying they investigate a job applicant's past.
''The trend is a lot more companies are outsourcing the reference interviews and the employment verification, instead of just the criminal record,'' says Jason Morris, president of Background Information Services Inc. in Beachwood.
Morris says his investigators find discrepancies on resumes and job applications on about 40 percent of the thousands of checks they do every week. Like Penrod's firm, one of the biggest exaggerations they find is on previous salary and qualifications.
Despite the popularity of background checks, psychological tests do not seem to be popular with Northeast Ohio employers. Only about 29 percent of employers say they use them, and many noted they were only used for top executive positions. Twenty percent of employers reported performing the tests last year.
''I'm not a big believer in them,'' Morris says. ''People take those tests in different ways, so I don't think they hold much water. I'm more of a believer in skills testing.''
How to reach: KlinkFarley Inc. (216) 589-9750; Background Information Services Inc. (216) 514-2800
Morgan Lewis Jr. (firstname.lastname@example.org) is senior reporter at SBN Magazine.
Eighty-three percent of businesses utilize employee handbooks and 56 percent also have a dedicated company intranet to disseminate vital business information and policies, according to the second annual Workplace Practices Survey.
The survey was conducted by the Employers Resource Council and SBN Magazine.
The importance of sharing goes far beyond the old grade school lessons when it comes to using information to drive and implement company policy and culture. For many companies, sharing information is an integral aspect of doing business.
Seventy-six percent of survey respondents distribute job descriptions to workers in an effort to map out company goals and expectations, while 55 percent see an advantage to an organizational newsletter to communicate the current business climate, customer changes and technology improvements that affect the work force.
Recently, Accu-Tech Manufacturing, a 5-year-old Mentor company, felt the pain of failing to communicating. According to office manager Susan Sweigert, employees, for the most part, knew and understood the company's mission statement, but the benefits and expectations were not so clear.
"We had a problem with an employee; that's what really made us go back and look at the existing handbook and modify it," says Sweigert.
The problem, centered around a vague attendance policy, led to the employee's dismissal. One of the problems was that the founders of this young entrepreneurial effort wanted to keep the atmosphere informal, fostering what they thought would produce a team approach. So policy was kept to a minimum.
In theory, a laid-back atmosphere contributes to employees stepping up, but not only did the casual treatment of policies lend itself to abuse, "it kind of backfired. You have to let everyone know what you expect of them," Sweigert says, adding that otherwise, the business relationship deteriorates.
After the incident, Accu-Tech's policy manual was rewritten to be up-to-date and thorough.
CorVel Corp. of Cleveland, with locations in 49 states, also stresses spreading the word to its employees. By incorporating multiple intranet databases into its system, which includes training on information retrieval, the company keeps personnel in the loop. According to CorVel, 15 percent of employees are promoted within the company, proving the success of the communication policy.
Brian Bartunek, an accountant with the 26-year-old firm, says CorVel's communication system is very efficient, with databases set up and categorized by departments. Rather than being inundated with e-mail messages that may not apply to everyone's work, employees are assigned to specific databases determined by their specialty. Information within the databases is updated throughout the organization.
Staff members receive training on the system and on how to incorporate data searches into their workload.
"Everybody gets indoctrinated into it, even if they switch departments," says Bartunek.
How to reach: Accu-Tech Manufacturing, (440) 205-8882; CorVel Corp., (440) 885-7377
Deborah Garofalo (email@example.com) is associate editor of SBN Magazine
A company mission statement is like that small fifth pocket on a pair of Levi's blue jeans: Everybody's got one, no one's really sure what it's for, but we're all glad it's there.
Northeast Ohio companies fare no better. About half, 48 percent, of employers say not everyone in their company even knows the company's mission statement, if they have one at all, according this year's Workplace Practices Survey from the Employers Resource Council and SBN Magazine. That figure is the same as in last year's survey.
But there are company owners out there who put more emphasis on their mission statement. Instead of just a generic statement about how they will "dominate the market" or "demand the best," they try to make the words an active part of their business plan.
To make your statement more significant, the first step is to make it part of a larger strategic concept, says Gary Fitzgerald, president of Meister Publishing Co. in Willoughby. In the early 1990s, Fitzgerald and a group of employee volunteers designed the Team Meister program. It not only includes a mission statement, but also a seven-point "Blueprint for Success," seven principles of how employees should treat each other, customers and the company.
The Team Meister concept includes a community outreach committee for charity work, as well as committees for employee training and development, awards and recognition, and service excellence.
One way to make sure your employees don't care or that they forget your company's mission is to have it come down as an edict from the top executive or human resources office. The key to Meister's success is that the entire company was involved in the program's design.
Fitzgerald held companywide meetings to talk about where his employees thought the rapidly growing and diversifying company was headed. He assembled a task force of volunteers from those meetings.
"That group reached out through the organization to identify what were the key elements that made us unique as a company," Fitzgerald says. "That's why it's been so well received. It's really been a companywide program in terms of the name of the program, how it would develop and its scope."
Keeping it alive
The real challenge was not designing the Team Meister program but keeping it in employees' minds. Keeping it fresh wasn't just a matter of putting up big signs reminding people, although the Blueprint for Success is placed throughout the corridors of Meister Publishing.
Fitzgerald and his volunteers also keep the program active through charity events including Harvest for Hunger, for which Meister's 105 employees last year collected 4,259 pounds of food for the needy.
There is also once a year a weeklong company event called Team Meister to encourage employees and management to recommit to the program and its values.
Lead by example
Once you and your employees commit to a mission statement or a set of values, the pressure is on you and your management team to act. A surefire way to breed cynicism is for employees to see that you put no stock in your company's mission statement, especially when it uses words like honesty, teamwork and enthusiasm.
"You have to test all your business decisions and how you conduct your activities in your organization based on these values," Fitzgerald says. "There can't be a disconnect between the executive management and the rest of the organization. Otherwise, a certain insincerity would develop within the organization."
How to reach: Meister Publishing Co., (440) 942-2000
Morgan Lewis Jr. (firstname.lastname@example.org) is senior reporter at SBN Magazine.
Newsflash: Most Northeast Ohio employers have found the workers they need.
Now, if they can just hold onto them.
The once-troubling dearth of qualified workers has eased, but business owners still face a daunting task -- keeping these valued employees in the face of a slowing local and national economy.
Employee retention aside, the challenges facing business owners across the region are markedly different than those they faced last year, according to the second annual Workplace Practices Survey conducted by the Employers Resource Council and SBN Magazine. The 92 CEOs, presidents and human resource directors who responded to the survey voiced new concerns about doing business in Northeast Ohio, with results showing a more cautious, almost pessimistic business climate.
But throughout the answers to the 55 questions on employment practices, benefits issues and workplace environment, employers showed their tenacity and preparedness for today's topsy-turvy economy. The results reflect the euphoria and hangover of the previous 18 months and reveal the stability of a region unruffled by market whims.
Patrick Perry, president of ERC, can see the lighter side of these economic conditions, even though it's dark in his office.
"We're having the air-conditioning repaired today, so we're trying to keep everything as cool as possible," says Perry on a balmy June morning at the ERC's Warehouse District offices.
It was fitting that the lights were off. It was a small gesture but one that certainly made the office more comfortable for Perry's employees. And that's exactly what employers in the region are trying to do during these tougher times. Employees are acutely aware that the big cash bonuses and trips to the Bahamas will be nixed for a while, but employers and managers are still doing the little things, granting noncash perks and smaller cash perks to make this storm a bit more bearable for everyone.
Above all, Perry says, it is not a time for gloom and doom.
"This is a very, very exciting time," he says. "People thought it was exciting a year-and-a-half ago how all that money was being made. Well, all that was really masking was that (the) cliff was just getting higher and the fall was going to be significant. Now, we're rebuilding the cliff, and the exciting part is there are going to be some organizations that are going to utilize this time very well and are not just surviving today but preparing for next year or the year after.
"Those are going to be your winners. Those are going to be the kings of the hill."
Improve your people
Two challenges frequently mentioned by employers in last year's survey were growth strategies, which ranked second, and change, ranked third. This year, those issues didn't even break the top five.
Competition and increasing sales are the second and third largest concerns of employers this year, followed closely by economic conditions. But retaining qualified people topped the list of concerns.
When times are good and orders are flying out the door, it's easy to take employees for granted. Sometimes you forget they helped in your company's success. Now is the time to show your appreciation and listen to their concerns, because when the economy revs up again -- and it will -- you and your work force will be better prepared.
"An organization that has been moderately impacted (by the economy) is looking at ways to enhance the skill sets of their employees, using this slower time as an opportunity to retrain their existing work force," Perry says. "They're looking at ways to enhance their ability to retain the great employees they've recruited over the last year or so. They've worked so hard to find these people, now they want to keep them.
"And they want to keep them during a period where sales might not be so robust."
Fight the hikes
Cost containment is a perennial challenge for business owners. This year, like last, it was ranked the fourth most crucial issue on the survey. Of those costs, health care is the usually the steepest and the least predictable.
Donna Luby, president of Cleveland-based Self Funded Plans Inc., a third-party administrator of employer health insurance, says several of her clients saw their companies' health premiums jump 100 percent in one year before they decided to self-fund their health coverage.
"When the economy tightens up, more people look at self-funding their benefits for their employees," Luby says. "They see it as a way to enhance the choices and keep the costs contained."
Nationwide, 65 percent of employer-based health plans are self-funded. That number is expected to rise as insurance rates jump again this year. Often, an employer will buy insurance from a major carrier and carry a large deductible -- usually $2,000 to $5,000 --then self-fund the difference. That ensures the employer remains covered for major claims, but it can still slash premium costs with a high deductible.
Despite cost increases, employers aren't passing them on to employees, according to the survey. In fact, there was a slight dip in what the average employee pays toward health insurance coverage, from 23.1 percent last year to 21.7 percent this year. Perry says that means one of two things: Company owners are absorbing the costs, or, more likely, they are jumping from provider to provider, seeking out whichever company offers the best rate that particular year.
"The real crux of this has been the fact that most of these employers get hit with this by surprise," Perry says. "They get notified two to three to four weeks before their actual renewal. Most of these brokers are not providing a satisfactory explanation as to why to people are getting between 20 and 35 percent increases in their premiums."
In 1999, Perry started work on a project to alleviate health care pains for employers in the 22 counties that make up Northeast Ohio. Two years later, he delivered ERC Health. The insurance program is geared toward the middle market, companies with 50 to 400 employees that are too big to qualify for small business programs offered by Council of Smaller Enterprises (COSE) and Northern Ohio Area Chamber of Commerce (NOACC) but too small to wield power with big providers.
Leveraging the 400,000 employees that make up the ERC's 920 member companies, the large insurance carriers took notice. Anthem Blue Cross and Blue Shield is underwriting the ERC Health plan. Perry says it offers low rates, a ceiling on premiums and a unique wellness program to help prevent future claims. Informational meetings leading up to the release of the program were often standing room only.
"In two weeks, nearly 100 of our member companies who have attended the educational briefing were already receiving quotations from us," Perry says. "That's in a matter of two weeks, which is unbelievable. It is a reflection of the pent-up demand for product or programs that actually makes sense for this forgotten market and market segment."
E-mail, Application Service Providers and fax machines make it much easier for those of us who stare at a computer monitor all day to do so in our bedroom slippers with a view of the backyard out the window. It's a trend that's catching on. More than half of Northeast Ohio employers who responded to the Workplace Practices Survey reported they have flexible schedule arrangements available for their employees, a slight increase over last year.
"If there are some things that don't need to be done during business hours, a lot companies are asking, 'What's the difference?'" says Joe Vitale Jr., business unit director of finance and accounting for Cleveland-based kforce.com, an online recruiting firm.
One of Vitale's clients in Cincinnati had its entire corporate accounting team work from home. Even payroll information was sent from the payroll director's home computer via a secured Internet line to a payroll processing center, where the checks were printed and mailed.
"Really, what did they need to be there for?" Vitale says. "It's cheaper to keep people at home. People are more happy there and tend to be more productive."
But it's not just flexible schedules.
A tempering of the former ironclad corporate rules on vacations, sick days and time off is sweeping the area. Today's progressive employers are looking at results, not just time spent in the office. Almost 18 percent of employers responding to the survey say they are moving to a time-off bank -- with which employees can use days off for whatever reason they choose -- instead separating vacation, personal and sick days. They're even letting employees overdraw their accounts if they deserve it.
"Let's say your superstar is getting married," Perry says. "They've run out of vacation. They get two weeks, and they need one more day. Are you really going to tell your superstar that they have no vacation time left? But you have to employ a responsible, mature, focused staff who can handle that."
Regroup and recharge
It's fun when you're making a lot of money, but it's not always conducive to creativity. Sometimes the happiest, most innovative times for companies are when everybody is just trying to rub two nickels together.
When people are using old stationary and both sides of paper, and saving paper clips, there's much more of a community atmosphere: Us against the bad times. It's a time when employees realize that they'd better be part of this team because not only will it save their jobs, it also might help save the company.
It looks like business owners won't have a problem creating a community atmosphere, or at least they won't have far to go. Almost 20 percent of employers said that everybody in their company was equally as important, just a couple percentage points lower than the number of those who said the CEO or president was the most important position.
So the bottom line is, hang in there together and be patient. This won't last forever.
"The analogy I heard from one CEO, anyone who has ever broken an ankle, when they're laid up, that first week or so, they've found their life has slowed down because they've physically have slowed down," Perry says. "They're finding that they're actually having conversations again, that they're actually reading their mail, they're actually taking more time with people on the telephone because they're slowed down.
"We have a slightly injured ankle right now in corporate America, and we should relish the opportunity to get back in touch with who we are as an organization and get in touch with what made you successful in the first place."
How to reach: Employers Resource Council, (216) 696-3636; Self Funded Plans, (216) 566-1455; kforce.com, (216) 643-8119