Lisa Murton Beets

Thursday, 26 July 2007 20:00

Intellectual property

There are many shades of gray in the area of intellectual property in this digital age. Google versus the book publishing industry. Apple iTunes versus copy protection for songs. The list goes on.

“There is a tremendous amount of conflict. Filesharing, movies, book publishers, YouTube — there is much disarray,” says Stan Liebowitz, Ph.D., Ashbel Smith Professor of Economics and founding director of The University of Texas at Dallas School of Management’s Center for the Analysis of Property Rights and Innovation. “Staying abreast of news, changes and developments regarding intellectual property laws in other parts of the world where you conduct business will be crucial to future success.”

Smart Business recently asked Liebowitz for his take on some of today’s pressing issues in this arena.

Discuss the concept of trade-off as it applies to intellectual property.

There is an economic trade-off that occurs when we try to induce innovation by limiting competition with the intellectual property owner while the protection is in place. The logic is that people who ‘create’ are providing a service for the economy. The fear is that there would be too little incentive for creating if we didn’t provide such protection. Under the U.S. Constitution, protection is provided for a limited time in order to encourage creativity and innovation. The academic literature is largely in sync with the Constitution in claiming that we don’t need infinite protection for intellectual property, although this is based more on guesswork than careful analysis. In the U.S. the copyright for individual works is the lifetime of the author plus 70 years — it is 95 years for works of corporate authorship. There is much dispute over this length of time. A group of economists submitted a brief before the Supreme Court arguing these terms are too long, but the court rejected the group’s arguments. I wrote a paper suggesting that these economists did not do a careful economic analysis.

Are protections as strong in other countries as they are in the U.S.?

In the U.S., we have strong enforcement on copyright and patent issues. Most other highly industrialized countries have similar laws and enforcement. This is not the case in many less-developed countries, however. As a producer of goods, when you decide to sell in another country, you need to be familiar with the laws — as well as the reality on the ground, which may be very different than the law. In some developing Asian countries, for example, there are strong copyright laws, but they are not enforced.

Provide an example of a current battle. How is it significant to corporate America?

Viacom is suing YouTube [Google] for approximately $1 billion over copyright infringement because YouTube’s users are posting tens of thousands of clips from Viacom’s copyrighted television programs. YouTube argues that it will remove individual clips when specifically asked to. Viacom argues that YouTube should remove them automatically without requiring Viacom to find each case of infringement. The question becomes, “Who should be responsible for finding the infringing work?” The economic point of view is that it is efficient to have the party that can find the infringing works at least cost bear the responsibility for doing so. This would probably be YouTube, particularly since there are thousands of other copyright owners who would need to monitor YouTube at a great potential cost of duplicative effort. But legal cases are based on law, not economics.

When has someone violated copyright?

There is no simple way to know for sure. There is a defense of ‘fair use,’ which is fairly vague. In general, the ‘more you take and the more money you make,’ the less likely your use is ‘fair use.’ If you have doubts, check with a copyright lawyer. If you know what you’re doing is wrong and you are caught, there may be a very steep price to pay. A few years back there was a company that was only purchasing one copy of a very expensive weekly newsletter and then copying it for other employees. When the corporate librarian told management it was violating copyright law, she was ignored. Eventually someone at the firm notified the copyright holder [for a large posted reward]. Because the firm knew what it was doing was wrong, it was potentially liable for very large statutory damages far in excess of the cost of the newsletter, and it ended up settling out of court for a very steep price.

STAN LIEBOWITZ, Ph.D., is the Ashbel Smith Professor of Economics and director of The University of Texas at Dallas School of Management’s Center for the Analysis of Property Rights and Innovation. Reach him at (972) 883-2807 or

Saturday, 26 May 2007 20:00

Customized training

Are your employees up to speed on the latest business trends? Do they have a thorough understanding of their specific job functions? Do they speak a common language? If not, custom training may be the answer.

Customized training enables organizations to reinforce and develop a skill set or specific areas of knowledge. It also enhances morale and encourages teamwork.

“Training can be customized in many ways, providing a strong degree of flexibility based on a company’s specific needs,” says John Fowler, director of New Initiatives, Executive Education, School of Management, University of Texas at Dallas. “A mid-size firm might want to educate a work team on supply chain management. A large corporation might want leadership training geared toward rising stars or that reinforces leadership at the management level or within a department.”

Smart Business asked Fowler how companies can determine whether customized training is right for them.

How can customized training strengthen an organization?

When a company provides its own training programs, it strengthens its educational culture, creating an environment where employees truly want to do a better job. Custom programs enable a company to create collective learning environments focused specifically on areas that will benefit the organization. The company will have more control over the content because it can take information from a very general sense and make it very specific.

What type of balance should there be between classroom and online training?

It depends on the company’s needs and structure. Classroom training provides a great opportunity for team-based interactive learning. For example, a class might focus on business principles in the morning, and then in the afternoon, the participants work in problem-solving teams to reinforce the principles they learned earlier. In-person training, however, can be expensive if you have multiple locations. Online training can provide a cost-effective solution — it’s a good option for large organizations with multiple branches and/or those operating in different time zones. Indeed, hybrid training also makes sense in certain situations, as does the incorporation of the emerging virtual classroom. Numerous corporations have already set up virtual classrooms at Second Life, for example.

Please provide a few examples of customized programs.

A management development client, United Supermarkets, employs store directors with varying levels of formal education, but they all have one thing in common: they understand the supermarket industry. United Supermarkets wanted to get all the directors to speak the same business language and show them how their jobs relate to the big picture. Approximately 75 employees participated in a custom-designed, eight-session course held once a month over eight months. The course imparted basic business principles related to the supermarket industry, but also covered areas such as marketing, customer support, supply chain networks and finance.

Another example is a hybrid program that a bank is developing in order to build relationships with its small business banking customers. Customers are invited to attend classroom courses where they learn how to use online courses designed to educate them on numerous areas of small business management. The content is tied to programs and products the bank offers to help these customers succeed.

How can a company measure the success of a customized training program?

Measuring success begins by assessing the performance of the individual. How has the individual manager or executive changed since he or she took the course? Is he applying the lessons? Is the company providing opportunities to reinforce what was learned? Has the execution and implementation of new or existing programs improved after the training took place. How smooth was the implementation? How is the team working together as a group? Keep in mind that while some training impacts revenue or results in reduced costs, training programs can produce intangible benefits that impact the organization. Is there a general sense that the people have a better understanding of how their performance impacts the organization?

How can a company best evaluate a custom program provider?

What are the skills you’re looking to develop? If they are soft skills, a seminar company may be the better option. If it’s a particular management skill or area of corporate specialty, university training is the best answer. When selecting a university, look at the strength of the university in the topic area. Can it provide a comprehensive solution — one that might require components such as marketing, finance or accounting in addition to the primary subject matter?

JOHN FOWLER is director of New Initiatives, Executive Education, School of Management, University of Texas at Dallas. Reach him at (972) 883-4697 or

Monday, 26 March 2007 20:00

Factoring in tenant improvements

If you’re in the market for industrial real estate (or will be soon), a broker who specializes in this area may be able to save you thousands of dollars over the term of your lease. These professionals can quickly identify suitable options, work with you to produce a comprehensive request for proposal (RFP) and negotiate with the owner to get you the best rate possible.

“Over the last few decades, the real estate industry has become segmented. Working with a broker who specializes both in product type and geographically will save you money in the long run,” says John C. Dunphy, CCIM, SIOR, managing director, industrial services, Colliers Arnold.

Dunphy cautions that you need a comprehensive plan up front. “Not doing your homework and failing to keep an eye on the tenant-improvement side of the equation will drive up your lease rates.”

Smart Business asked Dunphy for tips on negotiating rates when tenant improvements are required.

What are some common misconceptions prior to entering into an industrial lease?

Many tenants believe that if they focus primarily on obtaining a low rate per square foot they will get a good deal. That’s not necessarily true. You have to consider the functionality of the space and the build-outs that will be required. A 10,000-square-foot space that is laid out effectively, fits your specific needs and requires few build-outs might end up being a better deal than a 12,000-square-foot space that is priced lower per square foot but that will require more build-outs.

How does one go about identifying the right space at the right price?

Working with a specialist will provide a tremendous advantage. This person will know all the nuances of the lease language, legalities and tax implications.

Working with a generalist can cost you a lot of extra money. A generalist may not have access to all the listings that a specialist does. The specialist is always networking. He knows what is coming and going — whose lease is expiring when, what properties are coming up. The specialist also keeps things moving along quickly. He can usually identify suitable options for you within one or two phone calls.

Importantly, the specialist knows how to prepare a comprehensive RFP, rather than go to a landlord piecemeal. Many deals slow down because of piecemeal. Landlords want everything thought out, all at once. Huge time consumption can kill a deal. Our industrial market is fairly tight (about 5 percent vacancy rate). If the tenant is not prepared to come out of the box with a well-thought-out plan, the space will be leased out right from underneath them.

How far in advance of a lease expiration date should a tenant start thinking about moving?

Tenants beware. Florida statute allows landlords to increase your rent up to 200 percent per month if you go into holdover.

Smaller companies should start talking to a broker about six months before their lease expires. Larger companies need more time, probably around nine months. This will enable them to take advantage of possible opportunities with newly constructed buildings or other factors that could be in their favor.

Generally speaking, it can take 30 days to look at space and begin the initial stages of the RFP, 30 days to negotiate a deal and get the first draft of a lease and 30 days to review. So we’re already at 90 days if all goes well. Then you have to allow 30 to 60 days for permits on improvements, 30 to 90 days if build-outs are required … so the process takes many months.

If improvements or changes are required, how do you negotiate who pays for what?

You can have the landlord do the improvements or you can arrange to hire your own general contractor.

Many landlords prefer to make the improvements themselves so they can control what goes into the building. To provide this service, most landlords will build in oversight fees, usually from 4 percent to 6 percent. If the tenant goes this route, he needs to be clear on what will be included in the build-outs and for what fee.

Tenants should be aware that some landlords also own their own construction firms, which they operate as a profit center, to make improvements in the buildings they own. If this is the case, the tenant should ensure the prices are in line with what he could find for equivalent services elsewhere.

The tenant may be able to save money by hiring his own general contractor and reviewing the bids himself. This will not only reduce some of the fees but also speed the process. In some cases, the owner may be willing to offer a discount if the tenant takes this path.

On another note, there may be tax benefits to both the landlord and tenant if the landlord provides the funds for the tenant to make the improvements; for example, in the form of an improvement allowance such as six months’ free rent. These are among the many options a well-versed broker can help you explore.

JOHN C. DUNPHY, CCIM, SIOR, is managing director, industrial services, Colliers Arnold. Reach him at (727) 442-7184 or

Monday, 26 March 2007 20:00

The power of video

Young people joining the work force today have been raised with gaming technology. What will these “gamers” bring to the table?

Not only will it be important for companies to understand what motivates these workers, but they need to embrace the fact that game technology will be the information medium of the future, says Debra Schneiger, dean of the School of Media and Communication at National University.

“We are becoming an increasingly sophisticated media society that is demanding sophisticated media presentation and tools to produce our own media and — more importantly — to distribute information,” Schneiger says.

Smart Business spoke with her about how gaming will affect the workplace of the future.

Describe the gamer’s learning style.

Video games are learning tools. They enable rapid learning of concepts by engaging and immersing a game player in a specific environment. There is a wide range of information that players must absorb. They can proceed at their own pace and performance can be measured. Along the way, a great deal of feedback is provided. This creates a player who is very competitive, who wants to learn the game and who wants to learn within the context of different scenarios for each new game.

These factors will change the way training is presented. If training is not adapted to meet rapid learning styles, students will have little patience for the information being presented.

What about problem-solving?

Video games enhance problem-solving by allowing for scenario casting. A multitude of solutions can be played out in a game scenario and the implications of the solutions can be observed.

Scenario casting also creates buy-in from a diverse group when solutions to challenges can be arrived at by consensus in game play. In the workplace, we’ll see more of this. Information will be displayed using game technology. The ability to monitor complex sets of information, which are now displayed on multiple screens, will be available in an immersive environment. This will enable people to observe and understand events as they occur. In the not-so-distant future, for example, analysts will be able to monitor multiple financial markets simultaneously using gaming technology.

What social skills are gamers developing and how will these apply to work life?

Massive multiplayer online (MMO) games such as ‘World of Warcraft’ enhance team work. Different roles have different functions to make the team go forward. Gamers develop a verbal shorthand for communicating with one another. In the gaming environment, communication is just as important as skill itself.

Through the ability to create their own worlds, affect outcomes, and be heroes and winners, gamers develop a strong sense of self-esteem. The idea of failure has changed. In game play, there is the concept of reset. This means starting over and learning from one’s errors and building on those mistakes to move forward.

How do gamers respond to changes in technology?

Gamers need to learn to make decisions quickly. They expect and embrace rapid changes in technology, which they incorporate quickly into their lives. This makes them flexible employees who move quickly to respond. In addition, gaming enhances hand-eye coordination, dexterity and multitasking capabilities.

How will these factors affect the way companies manage?

Members of this generation are not motivated by a fear of failure. They want to be recognized as experts. Salary and bonus structure will be important, but most of all they want recognition and reinforcement. The traditional hierarchy will no longer work. Gamers are used to creating their own worlds — setting their own goals, working together. Their playing field is based on skill and learning, not hierarchy. They respect knowledge and experts.

These workers will want flexibility and the best tools to work with. Because they want to be seen as experts, they will work hard but they will also want a life outside.

What can companies do now to prepare?

Managers should play games themselves to understand the experience. Observe MMO games or try ‘Me & My Katamari,’ a game that lets you recreate the universe on the PlayStation portable. Or try ‘Tiger Woods PGA Tour 2007’ for Xbox 360.

Also, look for ways to promote team building in the workplace. Try scenario games or encourage employees to form teams to play MMO games together.

A growing number of companies are also setting up space on sites such as ‘Second Life,’ a virtual online community. It’s important to understand what motivates these workers and to measure and reward them for their success in meaningful ways.

DEBRA SCHNEIGER is dean of the School of Media and Communication at National University. Reach her at (858) 642-8434 or

Wednesday, 28 February 2007 19:00

Internal auditing

Internal auditing involves much more than accounting. The Institute of Internal Auditors (IIA) International defines internal auditing as “an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.”

“There is a common misconception that internal auditors are focused primarily on accounting,” says Mark Salamasick, CIA, CISA, director of the Internal Auditing Education Partnership (IAEP) at The University of Texas at Dallas (UT Dallas) School of Management. “In fact, internal auditors examine many processes and procedures throughout an organization. Understanding risk and controls is important for all employees and helps them become better managers for the enterprise.”

The IAEP at UT Dallas is one of the country’s premier institutions for internal auditing education. Smart Business spoke with Salamasick about the IAEP and its vision: to provide an internationally recognized internal audit program that provides well-trained internal audit candidates from cross disciplines.

What does an internal auditor do?

Internal auditors do much more than examine an organization’s accounting procedures. The profession is much broader than that. Internal auditors examine many processes and procedures, help solve problems, confirm the accuracy of information, help improve the company’s effectiveness, investigate fraud situations and more.

The internal audit group helps ensure that the organization is in compliance with rules and regulations, as well as abiding by best business practices. These valued employees help management understand risks and internal controls available to mitigate the risks, and they add value by providing objective opinions from an independent viewpoint.

What skills are required?

This field requires a high degree of communication and language skills. There is a great deal of focus on business processes and interviewing. The field is cross-disciplinary in nature, so diverse educational backgrounds are extremely valuable.

The typical candidate at most schools is an accounting major who takes internal audit coursework. Our program is different. Our students come from many backgrounds including IT, engineering, marketing and finance. Some of our students are in career transition, in their 50s — very valuable assets to corporations because of their previous work experience.

What makes internal auditing such an attractive career choice?

There are tremendous job opportunities, which are only going to increase worldwide. The demand for internal auditors is far greater than the current supply. All corporations listed on the NYSE are now required to have an internal audit group, so there is greater demand than ever. The salary is typically higher than other professional positions coming straight out of school in business, accounting and technology.

Many students who go into this field will find their careers moving quickly. They might start out in internal auditing and then move into a management position. Internal auditing is a good avenue for moving into other areas of an organization, because the internal auditor becomes knowledgeable about so many different aspects of the organization.

What challenges face this profession?

The biggest challenges have involved getting the word out about the profession and clearing up the misperception that it’s an accounting field in order to attract a more diverse base of students. Also, more universities are needed to meet the needs in providing internal auditors for the future. Professional organizations such as IIA are working diligently to promote the understanding and education of internal audit.

What differentiates your program?

We have more IT requirements and IT integration into the program. About 20 percent of our students specialize in IT. We are also closely tied to IIA International and have strong university and local IIA chapter support.

The IIA has developed criteria for internal audit education and has accepted 30 schools into its program. All UT Dallas students must take the Internal Audit course and four additional courses related to internal audit aspects, then sit for the Certified Internal Auditor (CIA) exam or the Certified Information Systems Auditor (CISA) exam.

MARK SALAMASICK, CIA, CISA, is director of the Internal Auditing Education Partnership (IAEP) at The University of Texas at Dallas School of Management. Reach him at (972) 883-4729 or

Wednesday, 31 January 2007 19:00

Treasury management

Simply defined, treasury management is a set of tools that can help streamline business operations and enable companies to operate more efficiently.

“Time is money, and companies want answers now,” says Terry Wallace, vice president and principal business relationship manager for Wells Fargo in Houston. “With access to instant information, companies can make faster, more informed decisions at less cost.”

Technology has created a new set of treasury management tools including online banking access, the ability to wire monies, Internet ACH (Automated Clearing House) options, in-house deposit capabilities and more.

“Banking as we used to know it has changed drastically over the last few years,” says Wallace. “With the significant increase in competition, we must now be creative with our clientele and be able to offer products that enable them to do business faster and more effectively. Treasury management services is an area that offers solutions.”

Smart Business spoke with Wallace about some of the treasury management tools available today.

How can companies take full advantage of treasury management products?

Treasury management is a sophisticated tool that makes it much easier to manage money. There are a number of different areas where treasury management can be an essential tool and vital to the progress of a company.

Whether it’s for cash flow, access to information or streamlining processes, treasury management continues to be an important banking solution. With the popularity of the Internet and the availability of instant up-to-date information, online banking portals through treasury management can enable a client to check accounts and transfer funds from anywhere, at any time.

What is the typical customer profile?

We’re seeing a wide range of companies from start-ups to well-established organizations with large sales volumes request treasury management products. Access to accounts via online banking is probably the most-used tool. Through the online banking portal, the customer has access to wire funds, stop payment, photocopies, etc. We also have sweep accounts where internal processes sweep funds from a checking account each night into overnight investments. The money is actually returned to the business account by the next day.

How secure is online banking?

Wells Fargo prides itself with having the most advanced technology in the market. That doesn’t mean that the business customer should not take any precautions or have internal controls. With the more enhanced online banking platform, the business can specify and designate which individuals or employees can be given access to account information. They can further indicate specified functions of those individuals with the use of passwords and security tokens. Those functions could include outgoing wires where one user is allowed to create a wire, but a second user would have to approve and initiate that wire before being sent.

Fraud protection products such as image positive pay help to identify fraudulent activity by matching presented checks against a file of issued checks. If, for some reason, a check does not match, the customer is contacted for a decision to either pay or return.

On the electronic side, treasury management can offer a filter to guard against unauthorized electronic transactions.

What are some of the newer, value-added options?

The purchasing card is a single credit card issued to key employees for day-today purchases. This is an extremely useful expense management tool because it can provide customized reporting information. It reduces the time to prepare invoices and purchase orders. The company can set up controls such as control limits and specific merchant authorizations.

Internet ACH allows the customer to originate a broad range of ACH transaction types quickly and easily online. Direct deposit payroll, federal and state tax payments and vendor payments are some of the services available. Most of our customers use this service for payroll processing. Also, checks can be lost or stolen, so ACH processing is much safer in preventing fraud.

How have the banking laws impacted the use of treasury management?

Check 21 has made a major impact on a number of areas. Most people do not realize it, but on Sept. 11, 2001, the behind-the-scenes operations of the banks basically stopped. No one was allowed to physically transport checks throughout the country, so Congress passed Check 21, which allows a photocopy or image of a check to be presented in lieu of the original check. So now some banks have a product through treasury management that allows a company to make deposits in their office without having to take the time to make a trip to their bank.

TERRY WALLACE is vice president and principal business relationship manager for Wells Fargo, Houston. Reach him at (281) 587-3036 or

Friday, 24 November 2006 19:00

Managed service considerations

Is your company still calling its system integrator whenever there is a problem? What if there were no problems

in the first place? Wouldn’t your IT people have more time to work on all new projects, rather than having to spend their time putting out fires every day? Sound good? If so, you may want to consider working with a managed service provider.

“Managed service is not a new concept,” says Clay Price, senior consultant with Systems Evolution Inc. in San Antonio. “It’s the practice of providing complete accountability for a company’s networked system. What is different, however, is the way providers structure and present their offerings.”

Price says that managed service is the wave of the future. “Under the old model, a systems integrator would wait for the client to call with a problem,” he says. “The new model is proactive, designed to ensure that the client remains productive and profitable at all times.”

Smart Business spoke with Price about the value proposition of managed services.

Can you define managed service?

Managed service is often bandied about. It is rarely well-defined. At Systems Evolution, we define it as infrastructure management and optimization to provide the highest level of productivity and accountability to the client.

Managed service should entail a proactive approach, encompassing:

Computer, device and server management, including basic proactive and preventive management, as well as preventive maintenance through monitoring and reacting to pre-failure conditions.

Security and networking, providing physical and logical security barrier implementations.

Data protection and recovery, ensuring all user and business data are properly backed up.

Communications and collaboration, unified messaging, e-mail, voice, etc.

Why would a company want to consider a managed service arrangement?

First, it allows the company to move IT from a variable cost to a fixed, predictable expense. It allows the company to leverage its IT staff’s time and knowledge by freeing them up to focus on strategic, productivity-enhancing projects and training, instead of the daily minutiae of desktop support.

Next, managed service provides faster response time and less downtime. Under the old model, systems integrators would make money while the client was losing money. Under the new model, managed service providers make money while the client is making money — a mutually beneficial proposition.

Importantly, a managed service agreement can provide greater peace of mind. Networks are vulnerable. Managed service providers ensure that all workstations are up-to-date and fully protected from viruses, hackers and system crashes. Today’s businesses are now highly dependent on IT to conduct business. System failures can seriously derail a company’s operations and possibly even put some companies out of business. For example, consider the consequences of a major system failure for a CPA firm on April 1.

How do managed service providers differ in their approach?

One approach is a business proposition based on the Microsoft Operations Framework (MOF). Simply stated, this is a suite of best practices and business processes designed to facilitate the optimization of a client’s infrastructure. The purpose is to increase productivity while decreasing costs through identification and automation of key business tools and processes.

MOF provides guidance for a managed service provider aiming to assist its clients in the following areas.

Optimization — helping to guide the company into more effective service-level management, capacity planning and other long-range planning efforts.

Support — supporting the organization to help it better align its IT services with its business processes.

Change — managing IT services to the same level that a company expects from the rest of its business processes.

Operations — improving operational efficiency, allowing the company to free up internal IT staff resources, expand and align services with the business, and achieve a stronger infrastructure ready to meet the ever-increasing demands for availability and security.

What should a company look for in a managed services provider?

What is the provider’s value proposition? Does it plan to get deeply involved in your business procedures? Is it going to take the time to truly understand your business, or does it just fix problems? Look for a vendor that comes in, asks questions and helps you understand the realities of your system and its future potential. Make sure the vendor will be accountable for providing fast response, quick resolution and stable costs. Ask about its monitoring equipment and remote management tools. Overall, the vendor should provide a proactive service program to maintain a secure, reliable and optimized system.

CLAY PRICE is a senior consultant with Systems Evolution Inc., San Antonio. Reach him at or (210) 734-2664.

Friday, 24 November 2006 19:00

Health care banking

Physicians are incredibly busy people. However, taking the time to meet with their banker once or twice a year can pay off in big dividends.

“The lending environment for health care is good right now, and will only remain that way,” says Steve Lucas, business banking manager for Wells Fargo in Beaumont. “Now is the time for physicians to make any equipment purchases they’ve been considering. But first, they have to spend time with their banker to discuss their present needs.”

Technology has been one factor that has made banking much faster for health care practices. Other factors, such as Medicare and insurance costs, are also affecting the business side of medicine.

Smart Business asked Lucas about banking issues of concern to physicians today.

How are politics and insurance costs affecting medical practices?

With the costs of health insurance spiraling out of control, national health care may be a topic revisited by Congress sooner than later. Medical and insurance costs will continue to rise, and as baby boomers age, more and more people will need medical care. Medicare follows indexed increases, and other insurance companies follow suit.

The premiums for malpractice insurance take up a significant portion of a physician’s revenues, even with the tort reform taking place in states such as Texas. These days, it’s very difficult for a physician to be in practice alone, to the point where it’s near impossible financially.

How can a banker help physicians access the capital they need to grow?

Historically, long-term interest rates are higher than prime. However, fixed rates are currently more cost-effective than adjustable rates. So now is the time for physicians to finance equipment purchases.

New doctors need working capital to get started. Many graduate from medical school with substantial debt, and if they are trying to start a practice they will need to heavily invest in assets and equipment. Their commercial banker can help. Banks want the business, and there are opportunities to finance 100 percent of the equipment that new doctors need to get started.

Established doctors may be looking for opportunities to grow. One way they were doing that in the past was by building hospital-like care facilities in conjunction with their practices, so they could receive the same level of payment that hospitals received for the same services through Medicare. This is no longer an option, so we find many physicians looking back to more traditional ways to grow their revenues.

How is technology affecting the way physicians manage their billing and banking operations?

Medicare is now on an electronic direct-deposit payment system, and many insurance companies are following suit. This allows physicians to receive payments faster.

The way medical practices are depositing money is also changing. One of the newer technologies is the desktop deposit system. The billing person has equipment on his or her desk that allows the capture of digital images of the fronts and backs of checks and processes them electronically. This eliminates deposit-slip paperwork and time spent traveling back and forth to the bank.

What types of financial products are available to physicians?

In addition to the electronic deposit and payment systems mentioned above, options include automated account reconciliation; controlled disbursement (a file is sent back to the billing staff person confirming check numbers and amounts); checks imaged on CD; complete payroll services; Wells Fargo Membership® banking (discounts for the practice’s employees); merchant services (credit cards); 100 percent financing and leases; insurance; private banking; small business 401(k) plans, and others.

How can physicians and bankers best work together?

Physicians should spend time with their bankers, perhaps once every six months — similar to the way they spend time with their CPA. It just takes 30 minutes or so. Ask what the banker can do to help. Give the banker good information so you can get better output.

Ask, ‘What do I want from a bank?’ Walk the banker through your operation. Explain how you pay your bills and deposit checks. Ask about integrating the bank’s software with your accounting software. Ask about balancing your checkbooks.

Bankers have a lot to offer and can put the doctor in the right products and services once they have a clear understanding of the physician’s needs. Developing that understanding requires a commitment to the relationship and maintaining an open, two-way dialog.

STEVE LUCAS is a business banking manager with Wells Fargo in Beaumont. Reach him at or (409) 861-6362.

Saturday, 25 April 2009 20:00

Operating in difficult times

In these difficult times, many companies are striving to become leaner.

But to do so, you can’t just make random cuts. Instead, running lean requires you to take a hard look at all areas of your company to assess how changes will affect your operations.

Whether you’re looking to cut costs by improving efficiencies, renegotiating contracts or reducing your work force, it is important to consider the big picture. You also have to involve those at the highest levels of your company.

“It is essential that the directors become more involved in the day-to-day operations of the firm,” says Adam Wadecki, manager of operations, Cendrowski Corporate Advisors LLC.

Doing so is important, Wadecki says, because the directors bring a different perspective than the management team and can help the firm’s members see issues from another angle.

Smart Business spoke with Wadecki about how to become a leaner company and streamline your operations.

How do you define a lean organization?

A lean organization is one that can quickly convert its resources into cash. The time it takes to convert resources into cash is equivalent to the time it takes the firm to convert raw materials into finished goods, finished goods into receivables and, finally, receivables into cash.

An organization becomes lean by decreasing the time between each of these steps. Many organizations track the average time spent in each of these conversion processes; however, a more thorough analysis will look at not only the mean time spent in each process but also at the distribution of the time spent in each process.

This should be included in an organization’s risk management strategy. Decreasing this time will help the organization improve its working capital management.

What steps can an organization take to start becoming leaner?

With respect to production processes, lean manufacturing and Six Sigma are probably the most widely used tools.

Each of these has gained in popularity in the last 20 years. Accountants also have developed tools to use when assessing operations, generally under the guise of internal control. For a long time, the accounting profession largely concentrated on what it called internal accounting controls within a business.

However, the profession has since moved to a broader definition of what it labels internal control, emphasizing that operations are indeed a part of an internal control assessment.

What types of analyses can management perform to improve a company’s operations?

Historically, managers in crises have placed great emphasis on cash management at all levels of the organization. This emphasis is underscored by the need of management to understand the day-to-day finances of the firm’s operations and also the ability of the firm to service any outstanding debt obligations. However, it also is important to quantify the risks to these cash flows based on the probability and magnitude of potential events. This should be an essential part of the organization’s risk management process.

How can an organization quantify risks to cash flow?

This is a process that both management and the board of directors must be involved in. Cash flow risk assessments must be performed with accurate and timely information.

It’s also important to consider the human element in the risk assessment process. For instance, when directors receive risk assessments from management, they should consider management’s track record in providing these assessments.

Are risks generally understated? How tolerant is management of low-probability risks? How does management test its risk assumptions? How are probability and magnitude estimates quantified? Management can pose similar questions to the company’s support staff.

By understanding risks, organizations can identify with a laser focus operations in need of improvement. This process is especially important for organizations that have lean operating strategies or those that are attempting to improve their leanness; such organizations often rely on steady, predictable operations to maintain high profitability.

What are some mistakes organizations make when proceeding toward lean?

Organizations need to ensure that they are, in fact, ready for change before they begin implementation. To borrow a phrase from the accounting profession, a proper tone at the top needs to be set, and employees must buy in to the process.

This tone is set not only by management but also by a firm’s directors. If these individuals are not able to garner worker support, any initiative is likely to fail. Where possible, it may be advantageous to tie employee performance with company profitability in order to make sure everyone is properly incentivized; workers must believe the benefits of their activities will exceed the costs.

However, organizations must be careful not to create incentives for workers to optimize myopically, rather than over the long term. This was a central problem at the heart of the current fiscal crisis — improper incentives that led to socially suboptimal decisions. Remember the adage, ‘What gets measured gets done.’

ADAM WADECKI is manager of operations for Cendrowski Corporate Advisors LLC. Reach him at or (866) 717-1607 or visit the company’s Web site at

Sunday, 26 October 2008 20:00

The benefit of wisdom

If you don’t have older people on staff, you could be losing out on a valuable way for your company to save money and improve competitiveness.

With people living much longer, retiring at 62 or 65 is no longer an attractive option for many. Many older people want and/or need to keep working. Over the next decade or so, this changing landscape in the work force will require new ways of thinking.

“Many companies are passing up a very valuable resource — our older adults,” says Jerry M. Bladdick, a gerontology instructor and vice president for graduate and adult enrollment at Fontbonne University. “Older adults bring knowledge, experience, dedication and loyalty to the workplace that is often lacking in younger people today. There are many benefits to hiring older workers, and it can be a win-win for everyone.”

Smart Business spoke to Bladdick about what companies need to know about older workers and how they can begin to take advantage of this tremendous opportunity.

Why are older people looking for work or to re-enter the work force after retiring?

Many older adults don’t want to retire in the first place but feel compelled to do so because it is the normal thing to do when one reaches 55, 62 or 65 years of age. Some older adults are even forced out of work, and some become semi-retired or what is also known as part-time retired.

Regardless of what you call it, there are as many reasons why older adults want to come out of retirement as there are older adults. Many seniors use part-time or even full-time employment as a form of socialization, others need additional income or benefits, and some simply just want to work, saying it keeps the mind, body and spirit from decaying.

We are living longer and healthier than ever before, and, for some, the thought of spending 20, 30 or even 40 years in a state of retirement is just not an acceptable alternative.

How do companies benefit by hiring older workers?

Older workers are in hot demand by companies that recognize their value. Many companies realize that paying a senior saves money because they don’t have to train new hires. Older workers have a history of being on time for work, take less sick days and, very often, don’t have to contend with the domestic matters that younger employees have to deal with. When compared to many younger workers, older workers are more productive, have a higher sense of pride and loyalty, and have outstanding customer service skills. Often their schedule is flexible. They don’t mind working early in the morning or on weekends.

How can companies attract older talent?

The best place for a company to find older employees who are most familiar with their line of work/business is to start in house. Look at who is getting ready to retire and invite them to stay. Second, contact former employees to see if they have any interest in coming back to work on a temporary, part-time or full-time basis.

Do older workers have any special needs?

Most of the time, older adults want a fair wage and some flexibility in regard to where they work, when they work and how much they work. And, in some cases, they may ask for benefits, summers off, no weekends or maybe they only want to work weekends. In order for this to be a win-win for the employer and employee, both will need to do some giving.

Can older workers give a company a competitive edge?

They sure can. First, many older workers have experience they want to share with their younger co-workers — that knowledge base saves time and money. Second, having several generations in the work place makes for a diverse setting, and diversity increases competitiveness. Finally, contrary to what some might believe, older workers are not afraid of technology. When you tap existing knowledge and fuse it with today’s technology, can you imagine the possibilities?

Where do you see this trend heading in the future?

Some statistics state that as many as half of all individuals over 45 believe they will work well into their 70s, if not until they die, and four out of 10 seniors say the same thing. As we continue to live longer and run the chance of out-living our retirement savings and with inflation running wild these days, I see more and more older folks wanting to work. In addition, I want to believe that corporate America will welcome these very talented and hard workers and, when necessary, make special accommodations for them. I truly believe that companies that don’t embrace an older work force are just plain missing the boat.

JERRY M. BLADDICK is a gerontology instructor and vice president for graduate and adult enrollment at Fontbonne University. Reach him at (314) 719-3670 or