New federal rules regulating 401(k) plans will ultimately have the effect of driving down fees — but, in many cases, at a cost. One result of an increased emphasis on price will be a lack of attention to value. The result of this could be a commoditization of plans that makes them less expensive but not necessarily any better for participants, and in some cases worse.
The new rules from the federal Department of Labor (DOL) require employers to determine, and all service providers to disclose, all fees and the services they cover by July 1. Though the DOL has sent plan sponsors reams of documents outlining its requirements under the new rules — and listing fines that could befall them for not complying — many of these employers remain unaware of this deadline.
Those who are dutifully on schedule for this compliance are also probably aware that they must then determine whether these fees are reasonable — that is, where these charges fall in the national market. If employers find that these fees are relatively high, they must make arrangements to assure that they’re reasonable, perhaps by changing service providers.
Previously, federal rules didn’t require these service providers, including the large financial institutions that package 401(k) plans and sell them to companies, to disclose all fees. Though service providers have long been required to disclose fees when asked, mandatory disclosure rules stemming from the Employee Retirement Income Security Act (ERISA) of 1974 haven’t come close to covering the plethora of fees charged by plan providers, investment companies supplying investments for plans and the advisors engaged by sponsors.
Thus ensued decades of murkiness about fees, further beclouded by the benign neglect of overworked HR people at small and midsize companies. Aware that this state of affairs has led to excessive fees in many cases, the DOL is trying to do something about it to stanch the unnecessary hemorrhaging from employees’ retirement accounts. By requiring employers to know these fees and seek out lower ones when appropriate, goes the federal logic, excessive fees will inevitably shrink under the sunlight of disclosure.
There’s little doubt that the new rules will have this effect — accelerated by the entrée of low-cost providers in what will be an increasingly low-cost arena — but they will also have an unintended consequence: commoditizing 401(k) plans, often to the detriment of participants. Like most quantitative analyses, benchmarking fees will inevitably result in apples-to-oranges comparisons. How else can one say, without reams of nettlesome footnotes, precisely where one service provider’s fees land relative to those of its competitors?
The DOL is seeking to retain a focus not just on price, but on value, as the new rules require employers to determine and benchmark fees “for services provided.” Yet in plan sponsors’ rush to benchmark fees — and, in many cases, after getting eye-opening results, to seek lower ones — this stipulation doubtless will receive short shrift unless sponsors steadfastly maintain a quality orientation.
The rationale for preventing excessive fees is to enable employees to accumulate more wealth to get them through retirement. Yet if employers fail to also focus on services, plans won’t be able to serve participants by delivering the best returns for their particular situations: their age (time horizon for retirement), retirement goals, risk tolerance, retirement goals and existing wealth.
It’s entirely possible that after plans’ fees are benchmarked, some sponsors will find service providers who will do the same work as their current providers but at a far lower cost. Or these sponsors might hit the jackpot by finding lower fees accompanied by much better service. Yet the powerful tide of commoditization will surge against the likelihood of these outcomes unless sponsors view the new rules as a wake-up call for positive action; they should view them as an opportunity to lower fees and improve service.
This conscientious mentality compels consideration of what the components of good service might be. These include governance to maintain a steadfast dedication to employees’ interests, investment evaluation to examine the worthwhileness of specific items such as mutual funds, and education to empower employees to make intelligent, unbiased choices for their 401(k) portfolios.
Without sufficient plan education, a 60-year-old employee might end up with the same portfolio risk levels as 25-year-old, exposing him to potential losses from which he will never have time to recover and thus jeopardizing his retirement.
The new rules also require sponsors to make clear distinctions between fiduciaries, who are legally bound to advise clients in their best interests, and brokers, who are prohibited by ERISA rules from advising participants on the suitability of specific investment products.
So, at a time when the lead service provider in many 401(k) plans is a broker whose services may be fraught with conflicts of interest, it’s more important than ever for plan sponsors who want to enhance plan quality to seek the advice of a wholly independent fiduciary. Moreover, in an era when people change jobs and investment markets put on different faces from year to year, such advisors can play a highly beneficial role in assessing the fees of plan providers on a regular basis, preferably every 90 days.
Discipline is essential not only to get plans in shape, but also to keep them that way. Staying in shape may require a personal trainer working with you in your interest; this doesn’t necessarily come with the lowest-price gym membership.
Aside from doing the right thing for your employees, there’s another reason to assure that the rush to lower fees doesn’t eclipse considerations of quality: It’s smart business.
Remember that one reason your company has a 401(k) plan in the first place is to be competitive in the marketplace for skilled employees. Sponsors whose plans have the best returns and best employee outcomes will have an edge as the economy recovers and the labor market gradually ceases to be a buyer’s market.
This is not a lure that you can fashion in short order. To attract the best employees five years from now, you must begin work on your plans today. The new DOL rules present an unprecedented opportunity to do so.
Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Registered Investment Advisory firm that addresses the needs of retirement plans and the employees who invest in them.
An Accredited Investment Fiduciary Analyst (AIFA®) with more than 30 years of experience domestically and abroad, Kippins specializes in providing fiduciary advice to retirement plans on governance, investments and educational services. He also advises individual clients on retirement planning and investment management after retirement.
Kippins also serves as managing director of Institutional Fiduciary Assurance LLC, an organization that provides fiduciary advice to trustees of endowments, foundations, non-profit organizations and charitable trusts. He can be reached at email@example.com.
Knock Knock! Who’s there? Iowa. Iowa who? Iowa lot of money for my marketing programs. Okay, so that might not be the funniest joke ever but it serves well for exploring humor as an effective business tool.
As people communicate more individually in areas of presentation and electronic media, many focus on creating a “professional” image, which simply means making it look like what’s expected. Sadly this often results in boring and forgettable websites, PowerPoint and videos. It doesn’t help the presenter connect emotionally nor differentiate from the other “professional” offerings.
Rarely do you hear people coming out of a business presentation saying: “That person was hysterical!” More often presenters attempt connection by tugging emotional heartstrings creating small trauma. In most film festivals, dramas outnumber, comedies by 20 to 1. Why? The great 18th century actor Edmund Kean answered us as he lay dying: “Death is easy, comedy is hard.”
Still, humor is a worthy aspiration, accomplishing tasks seldom achieved by serious approach.
- Humor establishes rapport – Almost all people love to laugh. Non-offensive jokes can easily establish likeability and trust. A joke related to a difficult situation can disarm a prospect or client when delivering “tough medicine.” Relationships are often built on experiences of shared humor. People do business with people they like, and if they smile and laugh every time you are near they associate you with happiness. Combined with knowledge, humor enhances expertise, demonstrating confidence and strength.
- Humor triggers memorability – Many strive to create “AHA! moments” in customer’s minds. This occurs when one is thinking one way and you turn their head to think another. Those are the very mechanics of a joke punch-line. In our example I suggest a Midwestern state and quickly turn it to a statement of finances. The unexpected wordplay registers in the brain as humor, which triggers endorphins that encode for memory. This is why a childhood joke exists in our repertoire decades after introduction.
- Humor creates alignment – A joke is based upon shared experience. Humor works well when there is communal understanding of the issues at hand. By identifying a common problem and creating a punch-line around it, insiders will adopt the punch-line as a trigger representing the issue. So when no one remembers to turn off the lights when leaving, a giant light switch painted on the wall makes people laugh and remember their responsibility without embarrassment.
Exploring humor research can be beneficial to creating memorable marketing, particularly in video. But suffice it to say if you just want people to like and remember you in a consistent and productive manner, simply follow the words of the late, great Donald Oconnor and “Make ‘em laugh! Make ‘em laugh! Make ‘em laugh!”
An Inc. 500 entrepreneur with a more than $1 billion sales and marketing track record, Kevin Daum is the best selling author of Video Marketing For Dummies. and ROAR! Get Heard in the Sales and Marketing Jungle. Visit him at KevinDaum.com or @awesomeroar
How often do CEOs need to talk to their accountants in order to effectively manage their company’s finances? Obviously, this question can’t be answered with a simple blanket statement: “X times a year for a total of Y hours should do the trick.” There are too many different types of businesses, each with different amounts of expertise and unique needs of their own.
But if you talk to even a small number experts in the accounting field, a couple of themes emerge. One is that when CEOs are contemplating unusual transactions, it’s always better to err on the side of having too much contact with their accountant than not enough. Another refrain is that any time a CEO has any doubts or unease about an upcoming transaction, it’s definitely time to call your accountant to let him or her know you have something you need to talk about.
“Typically, in a larger company, the CFO would take on that role,” says Mark Koziel, vice president of firm services and global alliances for the American Institute of Certified Public Accountants. “But what about the CEO who doesn’t have the C-suite and the finance function inside their organization? That’s where, in particular, we talk a lot about being the trusted business adviser for that CEO. Especially in family-owned businesses, you see this a lot. You need that financial adviser, but you may not need them full time, so you can lean on your CPA on a regular basis throughout the year.
“They should be there for part of the strategic planning sessions. If the CPA knows what’s going on throughout the year and is present for discussions about important things like expansion, employment and succession, then they can be better informed for when they do the year-end planning and consulting.”
The benefits of touching base periodically with clients throughout the year, not just at year end, is a common theme among those with experience in the accounting field.
“When you meet with clients during the year, you can go over their financial statements, among many other things,” says Sharon Cook, president of the National Society of Accountants. “You can make sure they are doing everything properly. And you can make suggestions about some of the other things they need to do, for taxes and for other financial purposes.”
Think, talk, transact
Talking to your financial team throughout the year enables your experts to make suggestions in advance of key transactions that can greatly alter the tax and financial impact of those decisions.
“When you get to year end, depending on what the CPA is doing for you — if it’s a compiled financial statement, an audited financial statement, a tax return — there are definite tax implications that could be affected,” Koziel says. “And maybe some decisions would have been made another way if the CEO had considered the tax implications of what they were about to do.”
Making assumptions on your own rather than asking professionals for guidance can lead to unpleasant surprises. Accountants come across these types of situations frequently in their daily interactions with clients.
“A situation that I find clients often have problems with is, for example, in a year in which they’re expecting a large profit, they want to be able to reduce that,” Cook says. “So one of the first things they think about buying is a car, because they think they’re going to be able to write that car off in full in the first year. Then, by the time you get the books and you’re ready to do the tax return, you have to tell them, ‘Guess what — you’re not going to be able to do that. You’re going to have some limits in terms of what you can deduct this year.’”
For many types of nonroutine transactions, getting advice beforehand from your accountant or finance team is almost always the wisest course for business executives to follow.
“Some of the types of transactions that should be discussed ahead of time would be, for instance, any type of big-dollar purchases that they’re looking at,” Koziel says. “Buying versus leasing is one that needs to be looked at carefully, such as whether you want to buy or lease a building. Another important one is business expansion: If they’re looking to buy a business or even sell their business, the whole M&A transaction and how that will take place is a very important thing to consider.
“Major investment decisions along the way could have significant impact. And succession of the business — that’s another huge issue. You should be having big-time conversations about that early on.”
Other nonroutine transactions that should be reviewed carefully ahead of time include borrowing money, major equipment purchases and like-kind exchanges.
“Before you do a like-kind exchange, you should definitely talk to your accountant to make sure it’s done properly so it won’t be disallowed somewhere down the line,” says Cook. “There are many types of like-kind exchanges. It could involve property that they own. A lot of times, especially in smaller businesses, it may involve cars or equipment that they have around, where they can exchange it and therefore not pay the tax that they would have had to pay if they had sold it directly to someone else.
“Any time a CEO wants to make a big expenditure on any kind of equipment, they need to talk to their accountant to make sure they’re getting the benefit of everything they have, especially if they want to borrow money to pay for it. Because if they want to borrow money, they’ve got to figure out, ‘What is that going to do to my bottom line? Is this something I really need to do, and is it right for me?’”
An accountant’s value to a CEO or a client company isn’t limited to figuring out the tax effects of transactions before they’re entered into. There are many other types of general business issues for which an accountant can provide valuable advice.
“Strategic planning is a big one,” Koziel says. “One of the best services a CPA can provide to a CEO is to just get them in a room for a day and sit down and talk about the business. Do a strategic planning session. Make it formal, kind of like a board of directors meeting.
“Having frequent conversations throughout the year is useful in many ways. The beauty of the CPA environment is you gain a lot of knowledge about particular industries. Take construction, for example. Typically, the CPA has more than one construction contractor client, so they see good habits and bad habits that are out there, based on other businesses in that market. And they also can sometimes translate things to other types of businesses. Maybe it’s a customer service strategy in a certain retail business that could be replicated in, let’s say, a not-for-profit that you might have as a client.
“The ability to observe how a variety of different businesses operate and being able to assess the good habits from the bad habits and recommending the good habits to other types of businesses that are in their client base — these are valuable services that CPAs are in a position to offer.”
Another important service that accountants can provide is keeping tabs on key financial line items to watch for significant changes, then investigating those changes to determine the factors that are causing them, and, if needed, recommending ways to counteract the changes.
“If you keep in close contact with your clients, especially if they’re doing their own accounting in-house, one of the things you can do is review their gross profit percentages,” Cook says. “Are they staying consistent? Are they changing dramatically from one period to another? What’s the cause of that? And you can sit down and go over that with them and see if there’s a problem. It may be in their inventory control, if they have inventory. Or is the cost of their regular purchases going up? And if so, what do they need to do to offset that? Does that mean that they need to find a way to increase sales? Or do they need to have better controls on what’s in inventory and how it’s coming out of inventory?”
The definition of trust
One of the accountant’s main goals is to achieve trusted business adviser status with his or her clients. It’s a prestigious standing, and it must be earned over time.
“It’s about giving your clients the absolute best service you can provide,” Cook says. “To be able to review and make sure they’re handling their affairs properly, to produce good financial statements, to have the best possible relationship between the accountant and the CEO, and ultimately, to make sure that their business prospers. That’s the key. That’s what you aim for.”
Koziel concluded by telling a story — “the ultimate story of a CPA as a trusted adviser,” as he calls it.
“I was at lunch with a CPA friend of mine about a month ago, and he says to me — because he’s heard me say time and again: ‘Trusted adviser, trusted adviser’ — he says, ‘You know, I never really understood the meaning of “trusted adviser” until just this past weekend. I got a call from the wife of a client of mine. The client is a construction contractor; he owns a construction business.’
“This guy was a huge car buff and had a warehouse full of antique cars. He was in the warehouse tinkering one day, and he fell to his death off of a ladder — changing a light bulb, of all things. So he says to me, ‘I’m sitting there last weekend, and this client’s wife calls me. … A little while later, I’m in her living room. It’s the wife, the two daughters, the two son-in-laws and me.’ He says, ‘That is the trusted adviser relationship. That’s exactly what you’ve been talking about. The only one that they felt comfortable enough with — the only one they felt confident enough with as the outside consultant to the family — was me. It’s almost like I was part of the family.’
“That’s the type of relationship that you start to see in these businesses with their CPAs,” Koziel says. “And as a CEO, if you don’t have that trusted adviser relationship now — well, we’re talking about your life’s savings. Whether it’s invested all in the business or whether it’s held in other types of assets — these are your life’s savings. Who are you going to trust with those types of decisions? And you’d better have that person with you year-round, to help you make better decisions all along the way.”
HOW TO REACH: American Institute of Certified Public Accountants, www.aicpa.org; National Society of Accountants, www.nsacct.org
As an executive, your overall well-being consists of your effectiveness combined with your happiness. Effectiveness means that you are able to produce desired results; happiness means that you are in a state of well-being and contentment.
Most executives spend a good amount of their time worrying about effectiveness. They set tough goals and push hard each day to achieve them in the most effective manner. They are results driven, and any thought of happiness comes only after the results are achieved.
This begs the question: Can a busy, hardworking executive be both effective and happy?
I believe the answer is yes. In fact, I am convinced that better results stem from increased happiness. With this in mind, here are some tips to consider that will increase your happiness as an executive:
Start with a happiness exercise
Take out a piece of paper right now and list all the things in life that make you happy. DO NOT censor them. List them as they come to mind. Let it free flow from your mind and heart. List as many people, places, situations, causes, activities, feelings and opportunities as you can possibly dream up.
Now, get in touch with your mind and heart and begin to narrow the list down. In the end, you want to have a list of no more than four things that make you happy.
You now have within your grasp the areas where you should focus your energy, time and resources. The items on the list are at the very core of your personal happiness.
Happiness in all areas of your life is the key that unlocks great measures of effectiveness. Once discovered, your personal happiness will have a direct effect on your business effectiveness.
Take this exercise seriously. Be open, honest and determined. You will be surprised at the results.
Stay happy through ongoing education
Never stop learning.
We must be surrounded with people who know more than we do. They must be a part of what we do with our life and business.
Successful, effective executives know that education does not have an expiration date.
When was the last time you put a teacher or coach into your business goals and plans?
What new thing have you learned lately? Are you willing to stretch your mind to consider more than you already know?
Happiness can be found in a good teacher, trainer or mentor. Look for someone who helps you develop new skill sets and fosters your growth. Allow them to push you to consider new ideas, thoughts and ways of working, acting and leading.
I know this is easier said than done, but consider the fact that stress is the #1 killer of a healthy body and mind. Stress eats away at the foundation of your happiness. It distracts you, wears on you and drags you down.
Meditation, yoga, hiking, exercise and deep breathing exercises help reduce and even eliminate stress. Each of these has been shown to reduce the risk of heart disease, diabetes and other ailments.
Do not overwhelm yourself with the thought of adding each of these to your life. Pick one that interests you and do it. Make a deliberate choice to incorporate a stress reducing activity into your daily life.
Consider this: The absence of stress brings on the presence of happiness.
Have an attitude of gratitude
Our attitude of gratitude serves to focus our minds on the things we have and the things we want, desire and need to live an even fuller, more meaningful and happier life.
In the end, gratitude is not just an attitude – it is a choice.
When we choose to be grateful and to express that gratefulness, we find our lives being shaped by its power. When that happens, we move our life to greater heights of happiness and effectiveness as an executive.
The basis of this article is that a hardworking, results-driven, empowered executive can find ways to be both effective in his or her work and experience happiness in their life. Although we see it far too often in the workplace, the two do not have to be mutually exclusive.
An executive that takes the time to think and dream about the things that truly make them happy, who is willing to stay fresh through ongoing education and who works hard to eliminate stress is an executive who has found the secret to being both happy and effective.
I wish you all the best.
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.
She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email firstname.lastname@example.org or visit her website at www.delorespressley.com.
If you’re like most CEOs, your day is spent rushing around from appointment to appointment, both internal and off-site, meeting people, solving problems and plotting strategy. The hours fly by, days blur into weeks, and the years start to blend together into a nonstop race against time.
Take a moment to ask yourself if this lifestyle makes any sense. What race are you hoping to win? What’s the reward when you get to the finish line, assuming you even know where the finish line is?
John Ortberg, author of “The Life You’ve Always Wanted,” says it’s important to ruthlessly eliminate the hurry from our lives. If you are in a hurry, there is little time to care about people. We need to slow down, even to the point of solitude.
While we are running our nonstop race, the people that suffer the most are those around us. Friends, family, colleagues and employees are often ignored as relationships are neglected in favor of the next big deal.
Ortberg suggests forcing yourself to slow down and put yourself in a position to wait. For instance, pick the longest line at the grocery store or take the long way to work. Doing so will help train yourself to slow down and be patient.
You are the person that sets the pace in your company, so if you slow down and make sure things are done right, others will do the same.
Working at a pace that’s too fast typically results in things being overlooked — things like employee recognition. When you don’t recognize and reward your employees, their job satisfaction can decline and they may leave. For every person who leaves, you and your staff have to dedicate more time to finding a capable replacement, resulting in an even faster pace as time is lost to recruiting and training. It can quickly become a vicious cycle.
Enjoy life by slowing your pace and being more productive, both at work and at home. Slowing down doesn’t mean you aren’t getting things done, it means you are doing things right and building relationships with people.
Not every transaction will turn a profit in business, but you can bet that almost every relationship you have with people will pay off in the long run. Isn’t it time you started investing in those relationships by taking the time to slow down and build them?
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
The art of buzz: Reasons people talk about products and services and the best ways to seed discussionsWritten by Guy Kawasaki
Emanuel Rosen is the author of the national bestseller “The Anatomy of Buzz” (Doubleday, 2000) and “The Anatomy of Buzz Revisited: Real-life Lessons in Word-of-Mouth Marketing” (Doubleday, 2009). Prior to writing these books, he was vice president of marketing at Niles Software where he was responsible for launching and marketing the company’s flagship product, EndNote. He holds an MBA from the University of San Francisco. In this interview, he brings us up to speed on the techniques for generating buzz that every small business owner must master.
Q: Going back to fundamentals, why do people talk about products and services at all?
A: Buzzing is in our genes. We are programmed to share information with friends about where to find our next meal and about the tiger who’s about to have us as his next meal. We talk to connect, so when my daughter tells her friends about the new sweater she bought, she’s also establishing and maintaining her social ties. We buzz to talk about ourselves. If I tell you about a 10-day dog sledding trip in Alaska, I’m also telling you how adventurous I am.
Q: Which comes first, buzz or ink?
A: Usually it starts with some buzz that is followed by press coverage, which can take the buzz to a whole new level. Grassroots support can actually help you get ink — sometimes buzz is the best press release because it gives journalists this warm and fuzzy feeling that your story is for real and that there’s true excitement for it. Don’t get me wrong, if CNN calls you before your product is out, don’t tell them that you’re waiting for some grassroots buzz to build, but usually it doesn’t happen that way.
Q: Which comes first, buzz or sales?
A: There are some highly anticipated products — Halo 3 comes to mind — that get tons of buzz before a single sale. This is the exception. Since product recommendation usually starts with product experience, you need to have some people out there who use the product and hopefully get excited about it. How do you get these early customers? Part of it comes from word-of-mouth marketing methods, like seeding and sneak previews, but it also comes from traditional sales and marketing techniques. If your product is contagious in some way, then these early users will start buzzing about it.
Q: What are the essential elements of seeding a product?
A: The key point to understand is that although we’re all connected to each other, information about new products rarely spreads like a wild fire. Information tends to get stuck because we live in somewhat isolated social clusters. To accelerate buzz, companies seed their product in many different clusters. The ideal seeding campaign is done on a large scale and lets people have a firsthand experience with the product. You want to reduce the price barrier as much as possible, so the product is given for free or at a reduced price.
Q: How do you seed a website or free service?
A: The good news is that the price barrier doesn’t exist. The bad news is that the thing you’re seeding is less tangible. The basic idea is the same. You identify clusters of people by geography, area of interest, by academic discipline or whatever other classification makes sense in your case. You then approach some people in each cluster trying to engage them with the service. This is a challenge that is shared by other products. The fact that a publisher seeds the market with advance copies of a book doesn’t guarantee that people will read it. But with some follow up and encouragement and some buzz from fellow users, some more people eventually try the product and start buzzing about it too.
Q: What are the characteristics of a contagious product?
A: The best buzz comes not from publicity stunts but rather from the product itself. A product or service that makes you say, ‘Wow!’ when you use it for the first time is the classic contagious product. Other examples: products that evoke strong emotions — “The Blair Witch Project” — or reward you for talking about them — Facebook.
Products that are visible can be contagious as well — think of the first time you saw someone with an iPod. Even abstract ideas can become contagious this way. The idea of living with cancer was translated into the LiveStrong yellow wristband, which started millions of conversations about the topic.
Q: What can stop the spread of buzz?
A: Since I just mentioned LiveStrong, let me tell you about an interesting study. A research team at Stanford sold LiveStrong wristbands to students who lived in one dorm on campus. A week later, they started selling these wristbands in a neighboring dorm that had a reputation as a ‘geek’ dorm with a stronger academic focus.
What happened once the ‘geeks’ started wearing the wristbands? A week later, the research team measured a 32 percent drop in students wearing the bands at the first dorm. So sometimes, when we detect that ‘the wrong people’ are using your product, we stop using it and buzzing about it. This is true especially for products that have to do with our identity.
The most common forces that block buzz are noise, inertia and forgetting. We’re distracted by competing messages, we like to stick to ‘the good old way’ of doing things, and we forget what our friends told us. It is one reason why buzz needs to be accelerated. Even delighted customers might forget about your product and run out of opportunities to talk about it.
Q: What should you do if someone who has never used your product is bad mouthing it?
A: One of the things that surprised me most as I was working on the new edition of my book was that this type of negative buzz is quite common. One study found that 30 percent of negative word-of-mouth was by people who never owned the product. If you can identify the person who’s bad mouthing your brand, you might want to let them try the product. The problem is that you usually don’t know who they are, which brings us to another reason for why word-of-mouth marketing is so important. You have to counterbalance this constant trickle of negative comments with honest, positive recommendations from happy customers.
Q: What should you do if someone who has used your product is bad mouthing it?
A: First, listen to what they are saying. Our natural tendency when we’re attacked is to fight back, but negative comments may come from an actual bad experience. This gives you an opportunity to do two things. Solve that customer’s problem, which will often turn her from a detractor to a promoter. Even more important, it may help you identify a problem in your system, fix it and reduce negative buzz from others.
Q: Who is more likely in these Internet days to talk about your product: someone who’s had a good experience or a bad one?
A: There are two types of bad experience. There’s ‘I didn’t like this hotel too much,’ and there’s ‘The guy at the reception insulted me when I asked for towels and then sent up a dirty one.’ Frustrated customers are very likely to share their experience. However, it turns out that most buzz among consumers is positive. This may seem like a contradiction, but it has some simple explanations. One of them is that most of our experiences as consumers are actually positive.
Q: What is the role of old-fashioned advertising these days?
A: It is fashionable to say that advertising is dead, but I don’t agree. Very few products can live on buzz alone. Advertising can help a lot — at least good advertising can help a lot. First, in creating awareness and building the pool of people who can buzz about the product. Second, a good ad can prompt me to tell my friends about the product. Third, a good, authentic ad that brings in real people can stimulate buzz.
Q: How has technology changed buzz and word-of-mouth marketing?
A: It hasn’t really changed what we talk about. We still talk about ourselves, we brag, we seek advice, we gossip, we connect. The Internet’s biggest effect is that it accelerates buzz. In addition, it doesn’t only let us tell our friends about the products we use, but also lets us show them these products through videos and photos. It has enabled aggregation tools such as Yelp or TripAdvisor. In essence, it gives more people more opportunities to share information with others, which directly translates to more buzz.
Q: How can a company effectively measure the buzz it’s generating?
A: The simplest method is to ask your customers how they heard about you. You can measure the daily mentions you get on blogs and on Twitter. You can supplement this with traditional marketing research to learn what customers who don’t use these services are saying. Whatever method you choose though, you need to measure on an ongoing basis, if you want to detect any effects. Companies such as ChatThreads, The Keller Fay Group and Nielsen Online provide buzz measuring services. WOMMA, the Word-of-Mouth Marketing Association, offers lots of resources on the subject.
Q: Do you believe that there are key influencers who companies should focus on because of their insight, power and prestige — that is, an ability to lead a market as their wisdom trickles down?
A: The importance of influencers varies by industry. I suspect that they are more important in the pharmaceutical industry than in the yo-yo industry. Regarding the ‘trickle-down’ theory — this is not the way that buzz flows — especially today, buzz flows in all directions. I use the term hubs to describe people who talk more than average, and I make a distinction between social hubs and expert hubs. Both can definitely help a company spread the word, but companies should encourage everyone to talk, not only hubs.
Q: Where do you draw the ethical line on generating buzz and word-of-mouth marketing?
A: One key idea here is disclosure. Word-of-mouth marketing is not about tricking people. It’s about openly inviting them to try the product and talk about it. WOMMA offers a code of ethics that can help. When you’re trying to build buzz, you want to push the envelope and think outside of the box. And when you look for original ideas, you can’t police your thoughts. But after the brainstorming, you have to change your attitude dramatically. This is best done the morning after — over some strong coffee. Think again about your wild new idea. Ask other people what they think. Ask your customers and people in the community if you are crossing the line.
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the Web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of 10 books including “Enchantment,” “Reality Check” and “The Art of the Start.” He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at firstname.lastname@example.org.
There’s a classic line from the 1970 movie “Love Story” that has become a part of our popular culture. In the drama, the dying heroine played by Ali MacGraw says to her husband, played by actor Ryan O’Neal, “Love means never having to say you’re sorry” as he apologizes for his anger. It is certainly a memorable and tear-jerking line, but is saying, “You’re sorry” all that bad if it can soothe a wound caused by someone speaking or acting out before thinking?
Disagreements and anger are a reality in the workplace and in life in general. Various people react in different ways when under pressure. Some lose their cool completely and say things they instantly regret, while others launch into tormenting the perceived offender with the silent treatment. No matter the technique used to punish, all of these methods quickly become tiresome and, more importantly, adversely affect the workplace.
Too frequently in the work environment, many people just can’t suck it up and utter the two simple words, “I’m sorry,” even when they know they’re dead wrong. It’s not a macho thing either, as women don’t behave much differently when they feel put upon. What’s a boss to do when this stubbornness becomes problematic?
In a word: intervene. When not controlled, these unreasonable, obstinate antics can become time-consuming and disruptive. It could all start with an impetuous negative e-mail or a less-than-mature voice mail left in the heat of battle that cascades into a futile distraction, as otherwise effective and seemingly sensible employees act out as if they’re in a 20- or 30-year time warp, behaving as if they’re back in the third grade rather than adults in the workplace.
The most expeditious method that works with either the protagonist or antagonist in an office drama is to call a spade a spade, so to speak, and get the feuding parties together and cut to the chase, making each person agree to bury the hatchet but preferably not in each other’s skull. If employees’ anger management issues are left to fester, they can easily result in other people in the same work environment taking sides, and in short order, you will find yourself in the midst of a Civil War. The only thing guaranteed when this occurs is that there will be casualties. It is incumbent on the ruling manager to make sure that the company doesn’t wind up as the victim, incurring a loss of productivity and causing everyone around the two factions to feel as if they’re walking on pins and needles.
While many times it would be easier for the boss to ask one of the warring participants to approach the other to work out their differences, this tactic just takes too much time and the outcome can be iffy. It really doesn’t matter who is right or wrong but that the nonsense is stopped dead in its tracks. The best way to accomplish this is to make it more than abundantly clear that anger in the workplace is a nonstarter and could be a career-inhibitor.
Allowing employees to exhibit a lack of civility will cause a domino effect that will lead to no good. Civility does not just apply to peers. Instead, it’s applicable to all who must work together, including superiors, subordinates and even fellow board members. Don’t confuse civility with agreeing or disagreeing with someone. It also doesn’t mean one has to believe that someone is effective in his or her role. Instead, what must be required is that those within an organization, no matter what level, simply take the higher road and respect not necessarily the person but the role and make the assumption that everyone has a part in working toward shared goals, until it is proven otherwise.
Once everybody knows the rules of engagement, many times the negative engagement suddenly ends and it’s back to business as usual. When that doesn’t happen, it’s time for offenders to be forced to go to their respective corners so as not to do each other or the company any more harm.
To promote coexistence when no one wants to take the first step and say, “I’m sorry,” it’s up to the adult in the room — and that would be you, the boss — to step into the fray with your whistle to call a permanent timeout to these types of disruptive shenanigans.
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 email@example.com.
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Launching a new venture is probably one of the most thrilling moments for any entrepreneur. It’s a birth that often brings forth a long-standing dream for the founders and is steeped in joy, pride and egotism. However, for many new captains of industry, the dream vanishes like smoke shortly thereafter. In fact, just half of all businesses survive the first five years, and only one-third survive 10 years, according to U.S. Small Business Administration statistics. Thus, it’s worth investigating why projects fail.
In a large majority of cases, the business owners failed to raise sufficient capital to fund the labor, marketing, taxes, insurance, legal expenses, bookkeeping, supplies and costs of goods for the business. Oftentimes, they underestimated expenses and overestimated how quickly revenues would increase. In other cases, they knowingly entered the market with insufficient cash because of limited credit and savings.
Other failures are caused by an implosion from within. Specifically, the founding partners reach a point at which they disagree on how to build the business and then fail to come to a consensus that leaves all parties feeling invested in the project. Or the business develops naturally in a way that calls for the founding partners to take on roles they don't want to assume. In either scenario, the remaining partners must buy out the exiting partners in order to stay in business or fold up shop.
In the worst collapses, the venture was just poorly conceived. The founders developed a business concept based mostly on their own personal experiences or anecdotal evidence. They failed to conduct or acquire scientific research on whether there was sufficient demand for their proposed products or services. They made a cursory study of the competition. Or they made assumptions about what drives potential customers to buy when designing marketing campaigns, rather than collecting data that revealed true trends in buyer motivations.
In these cases, the founders could have mitigated their chances of failure with some thoughtful planning before the shingle was hung. Would-be entrepreneurs should clearly write out their vision with detailed specifications and the cash that will be needed to complete it. They should plan contingencies for overcoming potential obstacles.
They also should identify the strengths and weaknesses in any potential management team and seek out individuals who can fill the holes. For instance, a visionary leader who prefers to focus on the big picture will usually need someone on board who loves the details in order to ensure the project is thoroughly vetted and structured.
Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.
Network reliability is vital for any business. With so many systems and departments being dependent on your company’s network, it’s vital that your systems are up 100 percent of the time.
As most of us already know, network outages can potentially cost a company thousands and, in some cases, millions of dollars. One way to prevent outages is by doing a proper network assessment and finding out where your network’s weaknesses are.
A company’s network architecture includes hardware, software, connectivity, communication protocols and the mode of transmission, such as wired or wireless. You need to assess your network architecture routinely to ensure that everything is current and in line with your ever-changing business model, says Mark Giles, wireless design engineer at PowerNet Global. If not, you’ll want to begin integrating changes to ensure your network is running efficiently. Conducting an assessment also allows you to see if your company’s security has been compromised, allowing you to fix any problems and prevent these breaches from happening in the future, he says.
“When you go through an assessment, you end up with good documentation and can find where your weak spots are,” says Giles. “A lot of companies have single points of failure, meaning there’s no redundancy if a portion of their network fails. A network assessment can help identify those single points of failure so that a plan can be put into place to fix these issues.”
Smart Business spoke with Giles about what you need to understand about a network architecture assessment and how to implement any changes.
What is involved in a network architecture assessment?
It starts with a site survey done by a network engineer or network consultant who will look at existing drawings and documentation of how the network is set up. Nine times out of 10, companies don’t have documentation or their documentation is outdated. This means the first step in the assessment will be to map out how the network is currently run.
Next, your network engineer or consultant will look at the current hardware and bandwidth utilization to see if your circuits are overloaded or your hardware is maxed out. Then they’ll review your routing to see if that’s being optimized and how your configuration is set up. This will help determine whether you need to upgrade or just optimize how traffic is flowing and configure your equipment accordingly.
Very often, it’s less likely that you need new hardware or circuits, and more likely that your current equipment needs to be configured more efficiently. This is where many companies fail to do a proper network assessment. They will pay top dollar for hardware but go cheap on the person configuring and maintaining the hardware. You could have the best hardware possible, but if the person configuring it has little to no experience, it will end up costing you more money in the long run.
What are some key items business leaders need to understand about their network architecture and implementing a plan?
A lot of it comes down to what your benefits will be and the costs associated with them to determine if it’s going to be worthwhile. If you’re going to be upgrading a piece of equipment, you need to understand why you are upgrading it and if the cost outweighs the benefit.
You’re also looking for service-impacting changes during the implementation portion while ensuring everything is designed well and that your implementation plan is solid. You should ask whether the network changes are going to be service or customer impacting. That’s the big one people want to know — who will be affected? Is there going to be an outage when you’re implementing or upgrading? How long is that outage going to be?
Who should be involved in the network architecture assessment and what are the costs?
Your network engineer or consultant should be the one doing the assessment and it should be conducted any time you’re coming into a new business environment or making changes. Then every six months to a year, depending on how rapidly your network is changing, you’ll want to go through it again. Check everything within your network and make sure the drawings and documentation are current. You’d be surprised how quickly things can change and become outdated.
The cost of an assessment depends on the size of your network and the accuracy of your documentation. It also depends on what you are looking to do. If you need new equipment, it might be more expensive than updating drawings. If you hire a consultant to run the assessment, the cost will typically range anywhere from $125 to $200 an hour.
How often should you implement changes to your network architecture and how should this be accomplished?
You should never stop making changes to your network; you should always try to improve it. According to CISCO’s model, you need to prepare your network, develop a plan to assess your company’s readiness to support any changes and create a detailed design to address any technical and business requirements. Then, implement any new technology, operate and maintain the most up-to-date network systems on a day-to-day basis, and optimize your network by making ongoing improvements to ensure that you have the most efficient network running.
Once you find you’re at the optimization stage, go back to step one. You need to go through this process continuously to make sure your network is up to date and running efficiently.
Mark Giles is the wireless design engineer with PowerNet Global. Reach him at (866) 764-7329.
Insights Technology is brought to you by PowerNet Global
In Ohio, group and group retrospective ratings remain the highest discount programs offered by the Ohio Bureau of Workers’ Compensation (BWC) for employers to reduce their annual premiums. Sponsors of public and private employer workers’ compensation group rating, or group retrospective rating programs, are in the evaluation process to determine eligibility for the Jan. 1, 2013, policy year for public employers and the July 1, 2013, policy year for private employers.
“Now is the time to have your program evaluated,” says Mark MaGinn, vice president for CompManagement, Inc. “Employers should submit the BWC AC-3 form (Temporary Authorization to Review Information) to the workers’ compensation third party administrator of the sponsor’s program of interest to evaluate the many different discount programs available to impact their costs.”
Smart Business spoke with MaGinn about what an employer should consider regarding a sponsor’s group rating or group retrospective rating program before deciding to participate.
What is the discount range available for group rating and the refund percentage range for group retrospective rating?
Group rating discounts typically range between 15 percent to the maximum discount available from the Ohio BWC which, for policy year 2012, was 53 percent for private employers and 65 percent for public employers for the 2013 policy year (59 percent with break-even factor included). The BWC board of directors evaluates the maximum discount on an annual basis setting it typically in the fall for private employers for the upcoming July 1 policy year and in the spring for the upcoming public employer policy year that begins Jan. 1. For group retrospective rating, most groups can expect to save between 5 and 45 percent with claim costs included.
Why is past performance history of the sponsor’s group important?
Past group performance is a good indicator of future results. Asking about this will help determine if the projection provided in the quote will meet the performance of the group. A group sponsor should be able to produce a history of obtaining the quoted discount, versus just an estimate designed to attract business. Employers should be leery of sponsors that consistently overproject but fail to deliver, as this creates loss savings that would not be forecasted in your annual operational budget.
How does having a large number of policies in a group impact an organization?
Large groups offer stability and allow sponsors to achieve projected savings, which, in turn, delivers the maximum savings available to your organization. Be wary of programs that do not have a substantial number of enrolled policies in its group. A low number of policies in a group may impact the possibility of the group actually being formed, and therefore, force your organization to find another group sponsor before the BWC filing deadlines.
Why is it essential to understand how a company’s claims experience compares to that of other group members?
Proper placement within the correct savings level of a group program will ensure that your organization is getting the discount rate that it deserves. If your claims-to-payroll ratio is substantially better than other members in the group, your organization may not be properly placed and should be moved to a higher-discount tier. However, if your claims-to-payroll ratio is significantly lower than other members, the group savings quoted may suffer with your enrollment. If the sponsor allows other prospective group members to enroll with similar low ratios, the savings level that you have been quoted may not be realistic.
When comparing quotes, is it crucial to have the payroll estimates utilized be the same?
Payroll figures may vary based on when the information was received from BWC.
Because different payroll estimates can skew quoted savings, it is important to make sure that the payroll is consistent on all quotes. If the payroll estimates are not consistent or do not reflect future budget impacts, be sure to contact the program’s administrator for an updated quote before making your enrollment decision.
What other critical factors should be considered when choosing a group sponsor?
Group savings may be the first factor your organization looks at in determining which group to join. The maximum possible discount an employer in the group rating program may receive is 53 percent.
However, it is just as important to know what else is being offered to protect your eligibility for future discounts. Employers should ask questions regarding the sponsor’s chosen program administrator’s services and the average length of experience its colleagues have in the workers’ compensation industry.
Full-service administrators with an experienced staff offer far more beyond group formation, such as claims administration, cost containment strategies, hearing representation, data trending, online system access, and in-house safety and loss control services.
Can a company stack discounts on top of a group rating or group retrospective rating discount?
Recent changes made by the BWC allow for the following stacking options while participating in either group rating or group retrospective rating.
- Group Rating — Destination Excellence, Drug-Free Safety Program, $15K Medical Only Program, Early Payment and Safety Council (performance bonus only)
- Group Retrospective Rating — Safety Council (participation rebate only) and Early Payment
An employer should contact the group sponsor’s program administrator to evaluate the options and discount percentages allowed, as well as be informed of the different eligibility requirements and expectations to be met for continued participation in the programs.
Mark MaGinn is vice president of Ohio state fund program management and business development for CompManagement, Inc. Reach him at (800) 825-6755, ext. 8168, or Mark.MaGinn@sedgwickcms.com.
Insights Workers’ Compensation is brought to you by CompManagement, Inc.