An integral piece of any strategic communication plan is distributing an unambiguous message both internally and externally that clearly defines a company’s identity.
“The principle danger of not aligning internal messages with external messages is that the corporation will eventually lose its focus and not operate as efficiently as it should,” says Edward Clift, assistant professor and chair of communication at Woodbury University. “If your messages are not aligned, then your company will be pulled apart by two different visions of itself.”
Smart Business spoke with Clift about how to effectively deploy strategic communication, the importance of valuing employees’ input and how the Information Age has changed avenues of communication.
How can CEOs or business owners effectively use strategic communication to improve the exchange of ideas within their companies?
Strategic communication involves meta-level discourse, or talk about the nature of talk. It is the outcome of a certain way of thinking about communication in an organization; one that sponsors creativity and engagement as opposed to managerial control. I believe business leaders should model strategic communication by actively experimenting with communication processes in the workplace. They should work to enhance the flow of information and learn from obstacles they encounter or frictions they cause along the way.
What are the benefits of having an organizational structure where the input of all employees is valued?
The fuel of a cutting-edge business today, no matter what it sells, is the modern employee who is always on and always mobile. In the search for opportunistic risk, business owners experience the greatest returns when they successfully urge their employees to imagine new possibilities for the world around us. To remain nimble, a firm must encourage a diversity of perspectives, avoid assumptions about its own actions, and take chances on the people it hires. One example of innovative planning along these lines is the use of “unfocus” groups designed to elicit outlying perspectives and possibilities. Methods like this are a testament to the fact that it is really the people within an organization that keep it viable.
How important is it to align internal messages with those that are distributed to the public?
Transparency builds confidence and trust, plain and simple. There is no substitute for the alignment of internal messages with those that are distributed to the public. Cultures are formed as clusters of coherent messages so that a business, like a family, constitutes a miniculture of sorts. Maintaining separate public and private “faces” produces closed cultures that make it difficult to realize one’s maximum potential in the marketplace.
How has the dawn of the Information Age changed communication methods?
Words are falling out of favor, and simple redundancy is no longer enough to capture and hold people’s attention. I recently met a political operative who told me that he must relay political platforms seven different times in seven different ways before people start to listen. Ideas increasingly have to be communicated much more instantaneously and comprehensively through multiple channels and domains of discourse. Internet blogging, political cartoons, and personalized methods of distribution like the iPod all come to mind as stark reminders of how fast the world can change the way it communicates. The Information Age speeds up this process of change by leaps and bounds. However, CEOs seeking to develop usable and stable methods of strategic communication should not rely solely on technological solutions. They should cultivate instead a fluency in communication that will allow them to better manage the sociocultural roles enacted through such technologies.
When a company is reorganized, or if there is a merger, what steps can be taken to ensure that everyone is still on the same page?
It is true that many reorganizations and mergers look good on paper but fall apart in the real world. Changing business culture from the top down is an extremely difficult task. In fact, organizational culture was initially considered to be an obstacle to productivity after a series of controlled laboratory experiments known as the Hawthorne Studies (1931), which simulated a banking workplace environment. It was determined that employees quickly discover a multitude of ways to resist mandates that may be rational, but still negatively affect their deeper sociocultural selves. Leaders of companies going through such changes need to consider how their internal strategic communication decisions impact the invisible social and cultural selves that must also be integrated into the new business form.
EDWARD CLIFT is an assistant professor and chairperson of communication at Woodbury University. Reach him at (818) 252-5197 or email@example.com.
“When you outsource, you have a business that charges you only for the work that they do. You don’t have to worry about additional payroll overhead,” explains Hormazd Dalal, president of Castellan, Inc.
Smart Business spoke with Dalal about how to best leverage IT budgets, the benefits and drawbacks of outsourcing, and how to find a qualified technology partner.
Where is the bulk of IT budget spent in a small to medium-sized business?
Clearly, the largest expense is human resources: the cost of the engineers and network administrators that support an IT infrastructure.
In what ways do you think these costs can be mitigated?
There are several skill sets that are required to manage your IT infrastructure, which includes employees ranging from a $90,000-a-year highly experienced engineer down to the desktop-level engineer who may be earning $40,000 a year.
What business owners and chief information officers need to carefully manage is where these resources are spending their time. You don’t want your high-level person running around taking care of small desktop issues. On the other hand, you don’t want your low-level desktop engineers trying to fix complex issues that are related to your server and the basic core of the network. One of the better ways to mitigate this is by deciding what you need in-house and outsourcing the other part. If you are very satisfied with one high-level engineer’s strong skill set, you should outsource the desktop support. Or if you have lower-level engineers who are handling the desktops of a larger organization, you should outsource the core engineering.
How would you define outsourcing, and what are some of the benefits of using this approach?
By outsourcing, I mean hiring a consultant or service company that can come in and handle either your desktop or higher-level support needs. One benefit is that it can be extremely lucrative. When you outsource, you only pay for the actual hours that your support is required for. Another benefit is that there is no risk of network engineers leaving the job and taking all of your intellectual property with them. When you outsource, you are working with a company whose engineers are cross-trained.
When outsourcing, what specific items should be included in a contract?
I don’t think that you should be forced into a long-term agreement. Make sure that your contract is short-term or month-to-month. If you’re unhappy with the company you hired, you should be able to fire them on the spot. Make sure that there is a guaranteed response time to your needs. A contract is just a piece of paper, so I think that the more important thing is checking references. When you’re looking for an outsourcing partner, call companies that they are currently working with and find out if they are happy or not.
What are the drawbacks of outsourcing?
One drawback of outsourcing is that you need to match the company that is coming in and taking over with your culture and application needs. If you’re strongly into ERP (enterprise resource planning) or if CRM (customer relationship management) is one of your major applications, then you want to make sure the company you hire has that expertise.
The other concern is that many business owners feel that they lose control and that their intellectual property can be accessed by outside employees. That’s a distinct risk. You need to trust your network outsourcing company.
How should you choose the right company for your IT needs?
You need to match them with your applications. For example, if you have a wide-area network that’s connected with Cisco routers, then you need to make sure that they have that skill set. If you are a Microsoft shop and your primary servers are running Microsoft Exchange, Microsoft CRM and Microsoft SQL, then hire a Microsoft Gold Partner or someone who has the backing of the software manufacturer and is authorized, trained and skilled in working with these applications.
How important is it to have the support of the manufacturers when you outsource?
It is important to outsource to a company that has access to the support of the software manufacturers. A Microsoft Gold Partner has direct access to top-tier support at Microsoft for mission-critical troubleshooting.
HORMAZD DALAL is president of Castellan, Inc. Reach him at (818) 789-0088, x202 or firstname.lastname@example.org.
Kathy Holmes, vice president and manager in employee benefits for Sander A. Kessler & Associates Inc., is keenly aware of the burden employees face. “The inflation factor is three times higher for health care than earnings over the past 15 years,” she says. “It’s a huge concern and will take a complicated solution to fix the problem.”
Holmes spoke with Smart Business about why health care costs have risen, the best practice to safeguard against higher insurance costs and how changes to an existing plan should be handled with employees.
What are the reasons behind the rising costs of health care?
We’ve summarized what we consider to be the top 10 reasons for the premium increases and rising cost of health care.
- Increased utilization. There has been a dramatic increase in the use of health care services.
- Pricing catch-up. Insurers are seeing pent-up demand by providers for increased payments to compensate for past shortfalls in their budget.
- Expensive disease treatments. People are living longer with chronic diseases.
- Consumer demands. Many Americans feel entitled to unlimited, unrestricted access to any doctor, technology or treatment available.
- Pharmacy advertising campaigns. These raise demand for prescriptions that may be medically unnecessary.
- New technologies. America leads the world in expensive diagnostic and therapeutic procedures.
- New laws and regulations. State and federal governments are increasingly intervening in health care requiring HMO’s and other managed-care carriers to provide specific specialty and ancillary services.
- Overcapacity. Research shows that growth in hospitals and medical specialists lead to an increase in medical services provided.
- Increased lawsuits. Malpractice lawsuits have skyrocketed during the past 20 years.
- Persistent variation. There is a variation in the type of medical services provided in any given region.
What best practices can businesses use to help control health insurance costs?
The best tool is employee education teaching them how to utilize their programs better. Although the insurance companies are paying for the services, it is important to be sensitive that there is a cost related to the services. When those costs go up, or if utilization goes up, then the premium is also going to go up. So primary employee education is the best practice.
What advice would you give to businesses struggling to provide insurance benefits for their employees?
The employer needs to look at benefits and payroll as a total compensation package. They should be projecting into their budget what those costs are going to be and integrating those costs into their future business plans in terms of what they may need to do to increase their income to cover these costs and still remain competitive with like businesses.
How should changes to an existing health plan be conveyed to employees?
We find it very effective to do employee announcement pieces. Typically, these show what the previous program covered, and then side-by-side to that, what the changes are so they have a true understanding of what exactly changed.
Also, have group meetings with employees, as well as one-on-one sessions, so it gives them a better understanding of the plan and how the changes personally affect them. With the group meeting, a representative of the health care provider should be present for legal purposes and to make sure that the benefits are represented accurately.
What are some of the pros and cons of managed care versus fee-for-service?
The pro for managed care is cost containment. This doesn’t sound logical when you look at the costs continuing to increase; however, without managed care there would be much higher increases.
For fee-for-service there is a much greater freedom of choice for the employee to go out and receive care from whichever provider that they please. But there is a higher cost affiliated with it.
Kathy Holmes is vice president and manager in employee benefits for Sander A. Kessler & Associates Inc. Reach her at (310) 309-2276 or email@example.com.
“The key benefit is the depreciation. That’s the depreciation you don’t get when you lease, but you do receive when you buy,” explains Joe Yurosek, senior vice president and regional group manager at Comerica Bank.
Yurosek spoke to Smart Business about commonly overlooked real estate financing options, the pros and cons of fixed and variable rates, and why a business that already owns property might want to consider refinancing.
What factors should a CEO or business owner consider when looking at commercial real estate?
No. 1, does the CEO or business owner want to participate in any appreciation of a building which they wouldn’t participate in if they leased it? That’s a principal advantage that should be taken into consideration when deciding whether to lease or buy.
The second consideration is there are some tax advantages, as the building itself is depreciable over the useful life of the asset. The owner gets to depreciate the building and the improvements over the useful life of the building, but they don’t get to depreciate the land. Sometimes it’s critical for an owner to make sure that they secure a location.
When you own a property, you guarantee yourself the security of long-time location. This can be important in certain industries if you are near a port or close to a freeway. Or you might have [invested] excessive costs into a building so you would rather own where you already are than lease somewhere else.
On the other side of that there is the possibility, although in California it hasn’t been too prevalent lately, of price depreciation.
What are some methods that businesses can use to finance real estate?
The most active method used today is where the buyer is required to put down up to 25 percent and then they retain long-term financing for the remaining 75 percent. An alternative product that is really attractive when it comes to current interest rates would be industrial revenue bond financing.
There are also Small Business Administration products that offer benefits as well, including programs that require as little as 10 percent down. Also, everyone should contact their local municipalities, because often they have economic development programs and are willing to pass on financing support by way of low-cost money or loan-guarantee programs.
You mentioned industrial development revenue bonds. What types of businesses can benefit from this financing method?
There are some limitations on eligibility. Usually you have to be a manufacturer, but you can also be a nonprofit organization.
The buyer will be utilizing the credit strength of the bank or financial institution that issues the letter of credit support for the bonds. The bank then takes a deed of trust of the subject real property.
What are some factors that a business should consider when deciding whether to use a fixed or variable rate?
The buyer’s tolerance for risk is the key. When you choose a fixed rate versus a variable rate, you are hedging against increasing rates. If they don’t go up, you may be better off with a variable rate.
If you are inclined not to take risks, or if your business doesn’t support potential interest rate risk in the future, most people choose to lock in and know what their rates are.
Alternatively, variable rates allow for repayment flexibility. Some people like to pay off their loans early. By not locking in, it gives you flexibility to make early repayments.
What advice would you give to a business that wants to refinance the property that it already owns?
Today’s rates are at historically low levels, so a business with a variable rate might want to lock in and reduce future interest rate risks. It’s a very good time to lock in and move from variable to fixed.
Some owners are looking for additional funds. If they already own the property, this could be a good time to cash out by refinancing the building and using the cash proceeds to reinvest in the business. Refinancing is an alternative to selling a building if you need capital.
Joe Yurosek is a senior vice president and regional group manager at Comerica Bank. For more information, visit www.comerica.com.
- For employees, the law provides a no-fault system requiring a safe workplace environment and financial compensation in case of injury.
- For employers, it provides a system whereby an employer can fulfill their requirement to provide protection for employees and have a better way to budget a cost for workers’ compensation injuries.
However, due to increased litigation, costs for employers have skyrocketed in recent years in California. The key to avoiding exorbitant costs, says Ken Kessler, president of Sander A. Kessler & Associates Inc., is to create a safe environment.
“If an employer subscribes to running a safe organization, no matter what type of market we have in California, they will be able to obtain the best rates that are available. Creating a safe environment should be the guiding light for all employers,” Kessler says.
Kessler spoke to Smart Business about the effects that litigation has had on workers’ compensation rates and steps that a business can take to minimize this outlay.
What are some of the factors that are pushing up workers’ compensation costs?
First, realize in California today prices are going down. For the last year and a half, the California market has been adjusting. Previously, the cost of workers’ compensation rose substantially. The days of open rating (1995) and rate slashing brought workers’ compensation premiums below the cost of the workers’ compensation claims.
Carriers did not anticipate the expansion of what was considered a claim in the scope of employment. Costs rose and carriers in turn tried to pass the increase cost to employers.
What part did litigation play in the rising costs?
Litigation was a key factor in the rise of premiums.
Litigation helped drive a disability claim from an average cost in the State of California from $17,000 to $55,000. This, as well as other factors, caught several carriers off guard and as a result several carriers folded or severely restricted their writings in California.
Prices rose to cover costs and California became a difficult state for insurance carriers as well as employers who had to pay the rising cost of the workers’ compensation.
What are some steps that a business can take to minimize workers’ compensation costs?
Workers’ compensation costs are driven by claims. The higher the cost of claims, the higher the premium. To minimize the cost, I would suggest the following.
- Top management must become committed to creating a safe place in the work environment. This should become the culture of the organization.
- Appoint a safety organization with accountability and authority that can implement ideas and actions to create a safe environment.
- Look to identify hazards or conditions that may lead to unsafe acts, and correct them.
- Monitor results to be sure that the organization is moving in the right direction.
In addition, there are several financial alternatives available today that could minimize the cost of workers’ compensation, including deductible programs (partially self-insured), retro programs and group self-insurance
These are three considerations that, if your company is qualified, can substantially reduce the cost of workers’ compensation.
What is your forecast for workers’ compensation costs in 2006?
On January 1st, 2006, an additional 15 percent rate decrease was suggested both by the California Commission and the Workers’ Compensation Bureau.
Premiums will continue to go down for much of the 2006 year.
However, a word of caution: As the result of the losses of Katrina and Rita, the reinsurance market has begun to raise prices. Some of the reinsurance carriers also reinsure workers’ compensation carriers and we may see some pressure to increase prices.
More probable is the fact that the reforms provided in the recent legislation for workers’ compensation are under attack by applicant attorneys. Should they win some of their arguments, claims costs will increase leading to a rise in premiums.
The best safeguard for controlling workers’ compensation costs continues to be creating an organization that has minimal losses. That way, you can prevent human loss as well as take advantage of the insurance marketplace, regardless of the fluctuations in the insurance market.
Ken Kessler is president of Sander A. Kessler & Associates Inc. He functions as the leadership liaison in charge of the Commercial, Personal Lines and Claims departments, and actively participates on advisory councils for several major carriers as well as professional organizations. Reach Kessler at (310) 309-2225 or firstname.lastname@example.org.
It is important, says Mary Ann Quay, the co-managing partner of Vicenti, Lloyd & Stutzman LLP, to be cognizant of this law.
“People really need to be aware that the possibility is there,” she says. “Without knowing that, you can unwittingly do some things that you think are going to save you taxes but don’t.”
Smart Business spoke with Quay about why the AMT was originally implemented, the difficulty in minimizing this tax and why she doesn’t expect lawmakers to make any radical adjustments to it anytime soon.
Why did Congress originally institute the AMT?
The alternative minimum tax, which was started in 1979, came at a time when tax rates were fairly high. Congress was concerned that there were a number of wealthy taxpayers who were not paying their fair share of taxes by...taking deductions that were allowable and that were generally only available to the wealthy.
Things like depreciation, depletion and high deductions for state income taxes and property taxes that normal people don’t get. There were enough people in the wealthier category who weren’t paying very high taxes. So in order to remedy that situation and get more tax revenue, they passed the alternative minimum tax.
Why are people in the middle-class tax bracket now being hit so hard by this tax?
Over time several things have happened. One is that in 1986, the tax laws changed so there were fewer brackets and the rates went down. As a result, the wealthier taxpayers, and even the people in the middle tax brackets, are not being taxed at as a high a rate on the top side as they used to be.
At the same time, peoples’ incomes have gone up due to inflation and general increases in earnings. So people have higher incomes and the exemption amount, the amount that’s allowed as a deduction for alternative minimum tax purposes, has not been indexed to inflation.
The level at which taxpayers are being hit by the alternative minimum tax has decreased so that middle-income people are now being hit. There are projections that by the year 2010, one-third of all taxpayers will be paying alternative minimum tax.
How can people plan ahead to minimize tax liability?
The way the AMT works is there are two tax calculations that everyone needs to do: the regular tax and the AMT tax. If the AMT is higher, then you pay it. The things that you do to reduce AMT also increase your regular tax. So you really don’t plan to minimize AMT so much as you plan to find the crossover point where your taxes are the lowest they can be and at the same time not lose the deductions that you end up losing with AMT.
What you try to do is make sure that you know whether or not you’re going to be in the AMT situation for the year, and if you are, you defer or put off those types of deductions so you don’t lose them. Hopefully you can put them into the following year so you can use them when you might not be affected by the AMT.
How can a company help to protect its employees from the AMT?
If a company requires employees to pay for certain things on their own like automobiles, computers and travel, the employees do have the ability to deduct those on their tax returns, but they’re usually itemized deductions. If you have a large amount of those, you end up losing them to AMT.
What a company can do to benefit their employees is pay those things for the employee rather than have them pay it directly. Even if you do that, while at the same time reducing wages, the employee comes out better in the long run and it’s the same out-of-pocket total for the company.
How does a small corporation qualify for the AMT exemption?
If they have average earnings in three years prior to the tax year of under $5 million in revenue, then they are exempt from the alternative minimum tax.
What changes do you expect to see in regards to this tax law in the future?
There has been a lot of talk about repealing the AMT, but I don’t think that is going to happen, especially with the budget being like it is. It would be giving up a huge amount of revenue for the government. In fact there are projections that by the year 2008, the AMT is going to be more tax than the regular tax; it would be cheaper to eliminate the regular tax than to eliminate the AMT. So I don’t think it’s going to be eliminated.
Mary Ann Quay is co-managing partner of Vicenti, Lloyd & Stutzman LLP. Reach her at MQuay@VLSLLP.com.
Sandy Harbrecht has applied her teaching skills to the business world by incorporating a lesson plan that brings out the best in other people.
The strategy has proven remarkably successful. Paul Werth Associates, the public relations firm she took over from her father in 1985, is one of the largest firms in the Columbus area, and during her tenure, the shop has won eight Silver Anvil awards -- the Public Relations Society of America's highest award.
You are a former banker and educator who made the switch to public relations. Was it a difficult transition?
It happened such a long time ago, it seems like it was a natural thing. My father owned and operated this business, so he really was a huge help in training me, coaching me, encouraging me.
He was my mentor and he also introduced me to other good mentors early in my career with the company. I felt that the transition was made easier by people I had the opportunity to work with, who had the experience, who wanted to see me be successful.
What strategies do you use in managing your employees?
We have a philosophy, or set of values, that really underpins everything that I try to do in working with my colleagues, and that is we try to be a learning organization and we try to be an organization that brings out the best in others.
We try to keep things interesting for people that work here, keep it challenging, encourage them to stretch and to do things that might be a little bit out of their comfort zone, and provide lots of opportunities for them to work on interesting assignments.
We also encourage them to take some risks; not wild risks, but calculated risks with their abilities, and provide a work environment that is pleasant and comfortable.
How do you foster creativity within the company?
It starts by trying to recruit people who are creative or enjoy the creative process. The other piece is encouraging them to collaborate with each other.
I think the best ideas don't come from sitting in your office all by yourself all the time. You can meet with clients who value your creativity, as well as colleagues who are also creative, like the creative process and want to be in an environment where ideas are stimulated by each other.
You recently acquired the Haunty Agency. How do you position this acquisition when pitching new business?
It's helped us because the people who came with the Haunty Agency are very much aligned with our business philosophy, which is that communication is about integrating and aligning everything you do. It starts there.
From that, I think it is important for our clients to understand the quality of work that they bring to the table is on par with the quality of work that people have come to expect from our firm.
That quality message is important. If people understand that what the advertising agency brings to the table is very much in sync with what they have always valued in Paul Werth Associates, then that's the best place to start. From there, they have to get comfortable with the creative side on the Haunty agency.
Once they have the opportunity to interact with those people, they see it, believe it and get excited about it.
What is your strategy for continued growth?
We have taken on more and more national clients over the last five years. We want to keep and grow the national clients that we have. The second part is we want to selectively add national clients that are a good fit with our company.
It can be in the kind of work that they require, it can be in the way they value public relations from a strategy perspective. It's several things that make a national client a good fit for us. We don't want to add hundreds of clients, we just want to add really great clients.
What has been the most rewarding part of your job?
The most rewarding part of my job is using my business and my teaching skills to help bring out the best in other people. To see organizations succeed and have a belief that you contributed even a small part to their success is extremely gratifying, and to see people grow and flourish and prosper in our client organizations or in our company is a tremendously rewarding experience.
How to reach: Paul Werth Associates, (614) 224-8114 or www.paulwerth.com
Innovations in the banking sector have transformed the way that business is conducted. In order to fully take advantage of such technological advancements, it is imperative to partner with a bank that communicates how new products and services on the market can improve your company’s efficiencies.
“If it’s been over a year since you’ve had a conversation with your bank about new innovations and the banking services you should have at your disposal, then you are probably being underserved,” says Syd Saperstein, senior vice president, division manager of Comerica’s Special Corporate Financial Services Division.
Smart Business spoke with Saperstein about what products and services should be expected from one’s financial institution.
How would you define the term ‘underserved’ as it relates to banking?
The banking industry has grown, as all industries do, and has come up with innovations, new cost-effective services and labor-saving solutions to handle problems that businesses face in the electronic age of the 2000s. We have consolidated and developed a lot of services that used to be spread around many different banks or many departments within a bank — now they are often seamlessly available in one place. Most customers, however, have not been given a road map on how to interface with their financial institution. And most financial institutions have done a relatively poor job of educating their customers about what improvements have been made. Consequently, customers are not getting the full benefit of the banking relationship that they could.
How can a business determine if it is being underserved by its bank?
Start by asking some questions: When was the last time my bank spent the time to educate me on the improvements in their world? When was the last time they pointed out improvements to the interface between businesses and banks? How can changes in treasury management services and the work that banks do internally translate into cost savings for me by taking over some of my work?
If you haven’t had a conservation like that, then chances are — just by the sheer increase in new products and services that banks develop and the passage of time — you are probably being underserved.
What advancements in the industry have occurred in the past decade or so?
Complicated multilevel transactions are now handled electronically, and there are advanced methods for batch file handling and consolidation. Internal accounting and subaccounting systems have developed within the most progressive banks. These sophisticated systems enable a bank to slice and dice their customers’ business and deposit relationships into regions, territories and sales offices, for example. In the past, a company’s employees used to have to keep track of all this information. Now, it can be handled within the bank, which saves the customer on personnel expenses.
What specific industries are most commonly underserved?
The ones we find most underserved are either the newest industries or the oldest industries. A company that starts today may ‘think small,’ go to a local branch and find the expertise that exists on the street level within a banking structure is not sophisticated enough to handle its needs.
On the other end of the spectrum are old companies with a lot of mature management, such as law firms or insurance companies. Law firms are often run by a management committee composed of the most senior partners. While their skill sets were probably well suited to manage a banking relationship 25 years ago, they may be very different from the skill sets that are being taught and used most effectively today. In order to keep their company as progressive as possible, they could very well benefit from partnering with a bank that is able to give them some up-to-date advice about what should be improved.
What products and services should be expected from one’s bank?
First, businesses need to take a look at the nature of the relationship. If they’re not having a conversation with their bank about innovations at least once every six months then something is wrong. Innovations within the banking world happen that frequently.
Second, you should investigate how the bank can take over labor-intensive transactional activities that are currently being handled internally. A specific example is processing 1099 Interest Income statements. Law firms frequently have to dedicate lots of staff time or even add staff in January and February so they can handle the processing of 1099 forms for the individual taxpayers whose funds are sitting in trust accounts with them. In today’s world, the 1099 work can be done by the bank for each component of a trust account. What’s worse is that, based on our experience and what we have learned by survey, the error rate on 1099 work done by nonfinancial institutions is around 20 percent, which can be very costly. Our error rate, for example, is far less than one-tenth of 1 percent. This is an area where businesses could avail themselves of using a bank’s services at low or no cost and replace a cost that is very high to them.
SYD SAPERSTEIN is senior vice president, division manager of Comerica’s Special Corporate Financial Services Division. Reach him at (415) 477-3246 or email@example.com.
Disasters, both natural and man-made, can arise anyplace, anytime. That is why it is so important to have adequate commercial property coverage in place and a plan of attack should an unfortunate event transpire.
“As a first step, have a plan in place ahead of time to deal with various situations in the event of a catastrophic loss,” says Henry Emrich, partner at Secrest Wardle. “Also, have a specific person(s) in your company familiar with the plan and charged with the responsibility for dealing with damage or loss so that they can coordinate activities needed to get the business back up and running again.”
Smart Business spoke with Emrich about commercial property claims, the importance of thorough documentation and what guidelines should be followed.
How should a company go about making sure it is adequately covered for commercial property claims?
I would encourage a company to inventory its assets on an annual basis. This should include reviewing the values at which properties are carried on the books as well as appraising their market value. These values should then be communicated to the insurance agent so that any coverages can be updated accordingly. Current and accurate valuation of insured properties is critical as commercial policies often contain provisions that can negatively impact an insurance claim. Maintaining copies of any valuations and/or any documents supporting the same is also a must.
In the event of a claim, why is it so important to provide thorough documentation?
First, the policy likely requires that such documentation be produced as a condition to any consideration of the claim by the insurer. Second, the insurer won’t pay you what you believe your property is worth unless you provide proper documentation supporting your valuation of the loss. To the extent that proper and current documentation exists and is easily accessible and understood by the insurance company, the more likely it is that your claim will be promptly adjusted and paid.
How can a company expedite the process of getting its operations up and running again?
The first step in the event of a loss that affects the operation of the business would be to immediately contact the agent and advise them of the loss and the need for immediate mitigation efforts. Advise the agent of the impact on your business’s operation and your need to immediately get the business back on track. Most insurance companies have access to a whole range of providers who can provide you with the kind of help you need to deal with any kind of loss and loss mitigation efforts. Because the policy of insurance places certain responsibilities on the insured at the time of the loss, the sooner this notice is given, the sooner any investigation will be completed so the company can move toward getting things up and running again.
What guidelines should be followed in order to minimize any problems with the claim?
Know what the policy requires from you in the event of loss and be certain these requirements are followed. The first requirement after a loss is to provide prompt notice of the loss to the agent. Following up oral communications to the agent or insurer with written communications is recommended. Designate one person who has sufficient knowledge and experience with the business operation and the applicable insurance coverages, policies and procedure to handle the claim. In connection with this, be certain that when the actual claim is submitted that it be as accurate as possible and thoroughly supported with accurate documentation. Don’t try to inflate or overstate the claim, as that is the quickest way to derail prompt adjustment and payment of the claim.
The policy may require a great deal of information to be submitted that you may not think is appropriate. However, the policy is often quite broad in what the insured can be required to provide in the event of a loss and compliance with any policy requirement in this regard is typically viewed as a condition precedent to the insurer’s liability. Thus, providing whatever is requested by the insurer as well as any other supportive documentation is the best way to minimize any problems with the claim.
How should a business proceed if it is unhappy with its insurance company’s proposed resolution?
If you haven’t already retained an independent commercial adjuster or other professional with sufficient knowledge to value your loss, you might want to do so. Additionally, the policy often provides for an appraisal in the event of a dispute over the amount of the claim. This would typically require the insured and the company to retain an appraiser to evaluate the loss, and if they are unable to agree on the amount, obtain an umpire to make a final decision on the amount being claimed. Retaining counsel with experience in handling insurance matters to file a lawsuit is also recommended particularly if your resolution is not acceptable.
HENRY EMRICH is a partner at Secrest Wardle. Reach him at (616) 285-0143 or firstname.lastname@example.org.
Choosing the right bank is critical in today’s gloomy economic climate. As credit markets tighten, it is more important than ever to have a banking partner who can provide the financial resources necessary to grow your business.
Finding a new financial institution is not a task that should be taken lightly, however. It is important to be thorough during the vetting process.
“Get three reference names of a bank’s current clients and call them to see how the bank has been acting in these uncertain times,” advises Joseph Yurosek, senior vice president and regional group manager at Comerica Bank. “Also, get references on the individual at the bank that you would be working with. These are the times that you want to work with someone who has been with the bank for years.”
Smart Business spoke with Yurosek about selecting a bank in uncertain times, how to make a seamless transition from one financial institution to another and the importance of communication.
How should a business go about selecting a bank in uncertain times?
Business owners should make sure that they are keeping up with current events. They should spend time checking, probing and asking questions so they can be prepared for issues that could possibly impact their business. The days of ‘only relationships matter’ or ‘only pricing matters’ is changing dramatically. In today’s environment, knowing that your bank will be financially stable for the next two to five years is extremely important. We service the middle-market, and prospective clients of ours should be doing all of the due diligence that they might not have done in the past, even a year ago. Find out what the bank’s business is, what its capital position is, what its approval process is and get names for references.
Why is it so important to look for a bank that has a history of supporting its customers through various business cycles?
You want to make sure that the way the bank acts in good times is not dissimilar to how they will act when the economic outlook is not clear. You should look for consistency with people, bank decisions and, ultimately, a history of support, which would allow you to navigate through your own tougher times.
Once a selection has been made, what steps can a business take to maximize the relationship with its bank?
Companies should be following up with everything that was discussed during the courting or selection process. We make sure that we maximize our relationship with the borrower when we complete the courting stage and clients should do the same thing. Clients should make sure that the bank is following up on all of its promises, products and service levels that it indicated it could provide. Also, new clients should take advantage of meeting the bank’s senior executives. If I’m a client today, I want to know who I’m dealing with — in a business unit, in a credit function, on a product function — so I can gain all of the advantages that I need from the financial institution.
How can a company most effectively transition from one financial institution to another?
It is important to have someone who is paying attention to all of the details. The last thing you want to do — and I hear this from CEOs and comptrollers all the time — is go into a transition not having thought everything through. This includes the timing where you start depositing checks into your new account, the day you start writing checks against your existing account, the day you start sending wires out on your new bank account and the day you go into your branch to make your first deposit. You should spend time with the bank’s transition team and go through all of the logistics in order to ensure a smooth transition.
How important a role does communication play in sustaining a positive working relationship?
Communication plays a huge role. Any successful client-bank relationship is based on a partnership. The way to get the most from your financial partner is to communicate your outlook, your needs and the performance of your business — good, bad or other. Sometimes customers don’t feel like they should be communicating everything with us; they want to absorb it first. If they provide information to us early on, however, we can help them out earlier by providing suggestions and ideas in an advisory role. Customers should take advantage of the fact that banks have multiple clients, maybe in different industries, maybe with different organizational structures, but who might have faced similar issues. Banks can use the history they have to advise customers in meeting their needs. If the bank doesn’t know what’s going on, it’s tougher for it to deliver that service.
JOSEPH YUROSEK is senior vice president and regional group manager at Comerica Bank. Reach him at (714) 435-3998 or email@example.com.