In 2002, President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) requiring insurance carriers and the federal government to establish a risk-sharing partnership for future losses. It was created as a result of 9/11 as a temporary measure to allow time for insurance carriers to develop their own solutions. Originally set to expire in 2005, the act has been extended twice, and will now expire in 2014.
“The private markets alone cannot and will not provide the level of terrorism insurance our economy demands,” says Marc McTeague, president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck. “The threat of terrorism has become a greater concern for businesses in today’s uncertain and rapidly evolving global climate. It should continue to be part of a comprehensive risk management program.”
Smart Business spoke with McTeague about terrorism coverage today and where problems still occur.
Why was the TRIA created and how does it work?
For property and casualty insurers, 9/11 losses paid out a reported $40 billion from property, business interruption, aviation, workers’ compensation, liability and life insurance lines. As the largest disaster in the industry’s history, carriers were reluctant to continue providing coverage. State regulators agreed to allow carriers to exclude terrorism from policies, and coverage was soon unavailable or extremely expensive.
The TRIA was created as a temporary federal program of shared public and private compensation for insured losses to allow the private market to stabilize, protect consumers by ensuring the availability and affordability of insurance for terrorism risks, and preserve state regulation of insurance. Carriers set the price of coverage within the limits imposed by regulations.
With the federal backstop in place, commercial lines policyholders could choose to purchase or reject terrorism coverage from existing insurance programs; the program doesn’t extend to personal lines policyholders. This offer continues today with most coverage lines, except workers’ compensation policies where insurers and qualified self-insured employers cannot exclude terrorism coverage because of lifetime medical care for on-the-job duties.
What changes were made when the program was extended?
In 2007, the government modified and extended the act through Dec. 31, 2014. Several provisions changed, including:
- Revising the definition of a certified act of terrorism to eliminate the requirement that the individual(s) is acting on behalf of a foreign person or interest. Some property insurers add exclusionary language related to non-certified terrorism coverage.
- Updating the payout cap to $100 billion per year for insured losses.
- Requiring the Treasury Department to establish a procedure for allocation of pro-rata payments in the event that a terrorism loss exceeds the cap.
When purchasing terrorism coverage, how much do premiums increase?
The cost for the TRIA on an average risk is usually a single-digit percentage of the policy premium. Higher risk businesses such as financial institutions, real estate, health care and utility companies tend to be in the double-digit percentages.
Many policyholders, regardless of size, continue to decline terrorism coverage — not considering themselves targets. Larger risks often feel the coverage doesn’t provide enough to protect their exposures.
What are some of the continuing problems with terrorism coverage?
It is the insurance industry’s goal to work with Congress on creating terrorism insurance renewal past 2014. Terrorism coverage provides market stability.
There will be a significant effect on real estate lending if this backstop disappears. Mortgage-backed securities, for example, will be in default. Private markets aren’t able to offer coverage without the federal backstop and cannot offer the level of insurance our economy demands.
The Government Accountability Office is working to assess options and review proposals, and Congress is encouraging greater private market participation. We’re optimistic that a long-term solution will be reached.
Marc McTeague is the president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck. Reach him at (614) 246-RISK or firstname.lastname@example.org.
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Insights Business Insurance is brought to you by SeibertKeck
The Patient Protection and Affordable Care Act (PPACA) mandate for employers to provide employees health care or pay a penalty takes effect Jan. 1, 2014, and many businesses aren’t sure how to prepare.
“We regularly talk with people in various industries about what is important to them. For the past six months, every person from every industry has mentioned the employer mandate. There’s a lot of uncertainty,” says Joseph R. Popp, JD, LLM, tax supervisor at Rea & Associates.
Smart Business spoke with Popp about the employer mandate and steps business can take now to be ready for 2014.
What do employers need to do first?
The first step is to determine if you’re considered a large employer. The test is whether you have 50 full-time equivalent (FTE) employees; if not, the employer mandate does not apply to you. This will be easy to answer for many businesses. However, for some it will be difficult to calculate. Employers will have to add up their full-time workers, which are those who work 130 total hours a month or more, and all the part-time people. Part-time employees must be converted to FTEs by adding up the total hours they worked that month and dividing by 120. When that figure is added to your number of full-time workers, you have your monthly FTE count. Businesses with 40 to 60 FTEs may want to look at how they can stay or get under 50, and they may need to pull in various professionals to help them with that planning.
If they are deemed a large employer, what’s next?
Determine which employees may pose a risk for penalties based on your current situation if you were to make no changes. To do so, you need to look at a number of factors on a case-by-case basis.
One factor is whether the coverage provided by the employer is considered affordable. If an employee’s income is between 133 and 400 percent of the federal poverty level based on family size, you have to provide him or her with affordable coverage. Affordability is based on a sliding scale that starts at 3 percent and goes to 9.5 percent of gross income. There are a number of safe harbors that the IRS has provided to calculate if your coverage is considered affordable to a particular employee.
There’s also the coverage test, which is not concerned with premiums but instead an employee’s actual out-of-pocket medical costs. The minimum standard is 60 percent of medical costs paid by the plan — the new bronze-metal tier plan. If you have a plan with a high deductible, this along with other plan features may disqualify it from being considered adequate coverage. The Department of Health and Human Services (HHS) has released a calculator that allows you to enter details of your plan and it will calculate its value in percentage terms. That will work for most plans. If it doesn’t, you’ll need to have an actuary calculate that value.
What are the penalties for not providing affordable or adequate coverage?
If you provide coverage to 95 percent of full-time workers, but it fails one of those tests for some employees, the penalty is $250 per month per full-time employee or $3,000 annually. If you don’t provide adequate coverage to 95 percent of full-time workers, the penalty is $166 per month per full-time employee, or $2,000 annually. On this $166 penalty, you’re not penalized for the first 30 employees each month.
Based on analysis we’ve done for companies, in most cases the least expensive option as an employer/employee group is for the employer to enhance health insurance payments to correct affordability and adequacy test failures. But that’s the most expensive option for employers.
Many employers will most likely make some plan changes so coverage is more affordable to the employee group as a whole, and then pay penalties on the outlying employees. In many cases, paying those annual penalty amounts for some employees will be cheaper than implementing a 100 percent compliance plan. Early planning will give businesses adequate time to build the best course of action.
Joseph R. Popp, JD, LLM, is a tax supervisor at Rea & Associates. Reach him at (614) 923-6577 or email@example.com.
Webinar: Our free webinar, ‘Bracing for Impact: What You Need To Know About Health Care Reform,’ offers more on this topic.
Insights Accounting is brought to you by Rea & Associates
It’s tempting to do whatever it takes to generate more business, but global companies are increasingly at risk of getting caught if an employee violates the Foreign Corrupt Practices Act (FCPA).
“There has been a tremendous increase in the amount of enforcement from the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) in the past five years,” says Luis M. Alcalde, of counsel at Kegler, Brown, Hill & Ritter. “In addition to that greater emphasis, the Sarbanes-Oxley Act of 2002 and whistleblower legislation expanded the ability to bring illegal activities within companies to the forefront.”
The FCPA, passed in 1977, was prompted by widespread bribery of foreign officials by U.S. companies and is intended to level the playing field and let market forces dictate business contracts, Alcalde says.
“It really addresses two pillars of our capitalist system — free markets and transparency. When companies win contracts through corruption, it’s a distortion of the marketplace. The best services and best prices should win the battle,” he says.
Smart Business spoke with Alcalde about anti-corruption laws, and what companies should do to comply with laws and avoid the significant financial sanctions and legal fees that could result from violations.
How do you know what is and isn’t acceptable?
Most people can agree it constitutes bribery when a company pays $20,000 to a government official to make sure that it gets a contract. Where it gets difficult is when dealing with a culture where personal relationships are important and everyone’s wining and dining public officials. The FCPA does not have a de minimus rule, so the central issue becomes the intent behind the gift or entertainment.
What steps should companies take to stay out of trouble with the FCPA?
The most important step is to instill a genuine belief system throughout the organization, starting at the top with the board of directors, to pursue business in an ethical manner. It’s not enough to simply have a code of ethics, all employees must understand and accept that in some cultures and situations being ethical might result in some loss of business.
Secondly, develop a process of internal controls and due diligence that covers how business will be conducted and how financials will be recorded. This includes everything from purchasing supplies, advertising expenses, to hiring consultants, etc. Have a protocol that lays out the criteria and documentation that is expected — information about the vendor’s financials, time in business and ownership, as well as getting prices and at least two or three bids. Be able to monitor these transactions and conduct audits.
Finally, you have to do something to punish the wrongdoer when a violation or risk is detected. If you find out a top salesperson was paying bribes to public officials, you have to take action against the wrongdoer and possibly disclose the wrongdoing or face worse anti-bribery sanctions if caught.
Can you provide examples of the costs of FCPA-related settlements?
Siemens was one of the more famous, it had an $800 million settlement in 2008. In 2011, Alcatel-Lucent settled for $137.4 million with the DOJ and SEC. Wal-Mart is involved in a bribery investigation in Mexico and is reported to be paying an average of $600,000 a day in legal fees to deal with the issue.
After the government imposes criminal penalties, companies could also face civil penalties. It looks great when a company shows a 12 percent increase in profits in China, but not if it turns out that was based on bribes to government officials. Those officials are going to jail and the contracts are voided. Then shareholders are angry that the company lied and shares lose value, so the company will face shareholder lawsuits.
Companies must ensure legal compliance even if it means a short-term loss of business. The price of getting caught is too high. Operating ethically is always the best long-term strategy. Walking away from a deal that compromises the company is the only smart business.
Luis M. Alcalde is of counsel at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5480 or firstname.lastname@example.org.
Alcalde is a global business attorney and team leader for the Cuba, Latin America and Caribbean area at Kegler Brown.
Insights Legal Affairs is brought to you by Kegler, Brown, Hill & Ritter
Russ Gertmenian had just taken over as managing partner of Vorys, Sater, Seymour and Pease LLP when his first leadership challenge arose — the financial downturn of 2008-09. He realized that not only did he have an immediate problem of how to keep the company’s legal nose above water, but that there was a larger problem looming on the horizon.
“I’m not smart enough to know where the future is going, but what I know is that business is not going back to where it was,” he says. “I’ve been trying to remodel us in a collegial way so the next generation will have the most flexibility and be able to act in a very agile way fitting within our culture, to be able to adapt to whatever direction the marketplace goes.”
Gertmenian had to deal with changing the mindset that had developed over years of traditional experience and traditional thinking.
“The law profession was in an envious position over the period of time that I have been in practice; I got out of law school in 1972,” he says. “The law profession, and for large law firms in particular, was a growth profession. Firms were staffed with the idea that there would be additional growth year after year.
“We had an ability to price-power, meaning we could raise our rates as our expenses went up with relatively little pushback from our clientele because everybody was doing it. That all started to change, and 2008-09 really brought that into focus.”
Gertmenian had to look at his business model, which was geared to “we are going to be 10 percent bigger every year,” the company’s hiring expectations and morale among people who weren’t seeing the same kind of growth opportunities that they once had — “and managing people who never had to struggle to find work because there was always more than enough work to do.”
“That all has been a tremendous challenge in terms of what the law firms including mine needed to do. We needed to change our approaches so we had a mutually beneficial relationship in which our clients got what they needed and we were able to provide the services in a way where it made economic sense for us.”
Here are some of the tools Gertmenian used to develop a mindset to the new normal so the firm would survive for posterity.
Figure out your model
When the economy went into recession in 2008, it caused a lot of unrest in the business world, to put it mildly. Companies cut back their expenses, hoping that economizing would see them through. The thought was that in time, the economic climate would get back to where it had been; the decline was just cyclical.
“We never worried much into 2007 and 2008 about a downturn,” Gertmenian says. “We just assumed that bigger is coming. More, more and more. But I don’t think that is a valid assumption today.”
Once Gertmenian realized that point, he knew he had to figure out how to model the law firm, to modify it within the purview of what it was. This was so the next generation of lawyers there and the next generation of leadership would have the most flexibility to deal with the direction of the marketplace.
Rather than feeling adrift alone in an ocean of uncertainties, he searched for other professions having similar experiences in order for him to gain insights.
“Something similar was happening in the medical profession,” Gertmenian says. “People who were my age, in their 60s, entered a profession that operated in a certain way. Medicine has been transformed much more dramatically than law, in terms of how they operate. That just creates great anxiety and uncertainty among some of the older doctors, causing them to retire or to be unhappy — whereas the kids coming out of medical school today understand the gig.”
What he could see was that things evolve, and he had to view his job as getting his staff comfortable with evolution and change.
“I don’t believe you do that in most instances by simply decreeing from the top, ‘This is the way it is going to be,’” Gertmenian says. “So we don’t move as quickly as some of my partners would like us to move and perhaps as some other law firms move, but as we morph into what we are doing that’s different, we do it over a reasonable period of time when people are buying in to it.
“That has been good for us, and we have not jumped at all the newest fads. On the other hand, when we make some changes, over a period of time, there is real buy-in to it, and I think that gives us culturally tremendous strength.”
Talk about the situation
One of the first steps to take to change mindsets is probably no surprise to management or staff. It’s to communicate.
“You just talk a lot; I mean you really do,” Gertmenian says. “You talk about the realities of what is going on.”
If that takes rearranging the company structure to make it easier for dialogue, take that step.
“Reorganize the structure so that the people who are in charge of your substantive work groups are more than caretakers; they are really responsible for trying to operate their groups in a way that makes sense for the marketplaces they are in,” he says.
Those people, called group heads, are empowered to be stewards of their areas, having significant input to the requirements and direction of the group.
“For instance, they need to decide how many people they need,” Gertmenian says. “What are their future hiring needs? Where do they see the opportunities? Where should our people be most active in terms of trying to develop skill sets and where should they be most active in terms of trying to penetrate the market for new work? Where is the market going to be in five years?”
Gertmenian charged the group heads with making those determinations.
Be patient, however. He says it took two to three years to get the concept sold and in place so that today it is absolutely accepted.
“They are responsible in a very real sense for the direction, size and emphasis within the group,” he says. “Also, they are responsible for getting their people to understand how to best provide the services in those areas and the particular clients that can be done in an economical way yet that satisfies the needs of our clients,” he says.
The “group heads” structure broadens the management responsibility.
“I think we are getting really good communication with our lawyers at those levels,” Gertmenian says. “You just simply can’t talk to 350 or 400 people on a regular basis about what’s going on in their practice.”
Recast the mold of your customer
Another necessary step in making over mindsets is to relook at what your customer wants. If you’ve always had a picture that your customer liked A, B and C, in the new normal today, that customer might prefer D, E and F instead.
“Today, I don’t think clients are willing to pay for overkill,” Gertmenian says. “And we have a generation of lawyers that wasn’t schooled that way, that wasn’t trained that way. We’ve got to get them to accept the new workplace reality in a way that is constructive and a way that, frankly, allows them to train younger people to accept that.
“It is difficult for them to train people that way because that is not their gut instinct.”
If you have been delivering overkill to a client who may be satisfied with less, those procedures might well need to be revised.
“You have to understand that there are things the client really cares about and things that are just part of the cost of doing business,” Gertmenian says. “You have to provide excellent services that meet your client’s needs or you will lose your clients.”
In two words, it’s about “working smarter” — putting in the time efficiently to fill the customer’s order so that he or she is satisfied.
How do you decide if you are so efficient in trimming down costs that it may affect your customer service?
“It is certainly a possibility, but frankly, I think our lawyers will tell us that,” Gertmenian says. “Our clients will tell us that too. The biggest obstacle to some of the changes that we’ve put in that way has been our lawyers who have been concerned. We’ve looked at it, and we have massaged it, then we put it in and when we are not getting that negative feedback saying, ‘I told you so,’ I have a pretty good feeling we are not losing clients and we are not losing market share. I’ve got a pretty good feeling it is working.
“In fact, we have been able to attract some additional business because of the basic health of our law firm and the changes that we have been instituting in terms of being becoming more efficient for them.” ?
How to reach: Vorys, Sater, Seymour and Pease LLP, (614) 464-6400 or www.vorys.com
The Gertmenian File
Vorys, Sater, Seymour and Pease LLP
Born: New York. I was raised primarily in New Jersey. My family spent six years in Minneapolis, but my wife and I are both from the East Coast.
Education: I went to college at Rutgers University and Columbia Law School.
What was your first job and what did you learn from it?
I used to caddy when I was real young, and I think I got paid $2.50 a golf bag. The first real job I had as far as punching a time clock was when I was a bagger at a grocery store at eighth grade or ninth grade. I learned that you needed to pack the bags carefully because otherwise if you put eggs at the bottom, they broke and you had customers coming back to complain. It made me go to work on time. I felt pretty lucky to have the job.
Whom do you admire in business?
I was trained primarily by the late Art Vorys, senior partner here. He had more impact on me than anybody in our law firm in terms of my approach to the practice. He was a ‘can-do’ guy. He had a kind of a Marine mentality: listen to your clients and help them get to where they want to get to. And don’t tell them why they can’t get there. Your job is to figure out how to get there. John Elam, who was a managing partner in this firm, really influenced me in terms of culture of the firm, how to look to the law firm in terms of promoting our roles within the community, how to give back to the community and how to try to meld lots of people into one unit.
What is the best business advice you have ever received?
With Art, it was, ‘Work hard and help your client get to where they want to get to.’ With John it was, ‘The institution’s the most important thing we’ve got going here. It’s the reputation of this institution which we cannot allow to erode in any way or it will have an impact on the law firm long term.’ From my parents, it was, ‘Look in the mirror, and if you can say, “I am trying to do the right thing and I am working as hard as I can work at it,” that is all you can do. Be happy with yourself.’
What is your definition of business success?
In my view, sitting in the law firm, I would say it is maintaining and increasing the reputation, the integrity and the continued vitality of my firm. If I can posture it in a way to develop the next generation of management, and model it in a way that gives the law firm and its future lawyers the greatest ability to deal with the marketplace successfully, I will consider what I have done to be successful.
Maintaining a culture aligned with brand requires constant effort to keep it in sync. So if this is what you are hoping to achieve, remember it is not a road trip you can cross off your bucket list — it’s a journey for the life of your organization.
So how do you get started? Let’s begin by reviewing some travel tips. As CEO, you don’t need to do all of the driving, but you do need to lead the charge and keep the journey on track.
It will take you longer to get there than you think. It will require ongoing resources: time, training, communication and celebration, even at the expense of short-term profit.
Define your brand
What is your brand? You need to know what “living the brand” means for your organization. If you are not sure if you have a clear brand position, start with a brand discovery. It will be well worth it. Your brand is already alive within your organization — it is a part of its core. You just need to uncover it. Defining the brand and making it the company’s primary focus helps clarify for employees what is brand behavior and what is not.
Conduct an employee survey to determine what beliefs exist within the organization that will either help or hinder you in achieving the brand culture you are seeking. What will emerge from this survey are alignment gaps that will need to be addressed.
Employees want to believe their company has a meaningful purpose. They want to know their job is important. They want to make a difference. Employees need to feel a sense of pride and ownership in what they do and they want to understand their personal connection with the company’s brand and its customers. When this exists, there is a natural excitement and passion for their work because it has purpose.
Conduct an organizational assessment to determine how brand is being conveyed at every touch point within the company. Again, what will emerge from this assessment are brand delivery gaps that will need to be addressed.
Employees who interact with customers on a regular basis will play a lead role in delivering the brand, but it will require all employees to adopt brand behavior in order to truly deliver the brand effectively. It has to become a part of the company culture to succeed.
What long-term delivery requires
Delivering on the brand for the long term requires priority, organizational structure, and ongoing communication and monitoring. The importance of brand focus needs to remain top-of-mind. It must constantly be reinforced by the CEO.
To become a part of company culture, brand delivery needs to be woven into the company’s operating procedures — including hiring for the beliefs and core values that drive the desired brand behaviors.
Senior leadership needs to have the authority to make changes or remove any barriers that prevent employees from delivering the brand promise to customers. Financial as well as strategic decisions will need to be made to continue to deliver a high impact brand experience as technology and social patterns change.
It will take an internal team to monitor brand delivery, manage associate training and plan the celebration of successes.
When culture aligns with brand, customers notice and become more likely to interact with your company and recommend it to others. The best time to start the journey is now. ?
Kelly Borth is CEO and chief strategy officer for Greencrest, a 22-year-old brand development, strategic marketing and digital media firm that turns market players into market leaders. Borth has received numerous honors for her business and community leadership. She serves on several local advisory boards and is one of 30 certified brand strategists in the United States. Reach her at (614) 885-7921, email@example.com, @brandpro or for more information, visit www.greencrest.com.
The Deductible Program was implemented in 2009 by the Ohio Bureau of Workers’ Compensation (BWC) as another alternative for employers to control their costs while promoting workplace safety. Over the past few years, the program has been enhanced to include a small and large deductible program so that employers of different sizes, hazard groups and risk tolerance levels have options that best fit their organization.
“The Deductible Program can be financially beneficial for those employers that have a focus on their safety efforts and are able to keep their claim costs low,” says Mark MaGinn, vice president at CompManagement, Inc. “An employer should consider having a feasibility study performed by their third-party administrator prior to participating in order to analyze the deductible levels available and ensure it is the best program for their organization.”
Smart Business spoke with MaGinn about how this alternative rating program works.
How does the Deductible Program work?
Similar to other insurance deductible plans, an employer agrees to pay the portion of a workers’ compensation claim that falls below their selected deductible level in exchange for an upfront premium discount. Claims costs are paid in full by the BWC, then the employer reimburses the BWC for the claim costs up to the selected deductible level. The employer will receive monthly invoices from the BWC until the selected deductible level is reached. All deductible bills must be paid within 28 days of the invoice date.
What deductible amounts are available to choose from?
Deductible levels range from $500 to $200,000. The small deductible program includes levels of $500, $1,000, $2,500, $5,000 and $10,000. The large deductible program includes levels of $25,000, $50,000, $100,000 and $200,000. There is no deductible level available between $10,000 and $25,000. An employer is limited to 25 percent of its annual premium if the deductible selected is less than $10,000, and 40 percent of annual premium if the deductible is $25,000 or more.
How does an employer join the Deductible Program?
An employer must complete a BWC Application for Deductible Program (U-148) to enroll in the Deductible Program, and meet eligibility requirements. The enrollment deadline for private, state-funded employers is the last business day in April for coverage beginning July 1, and for public employers it is the last business day of October for coverage beginning Jan. 1. Changes to the deductible level or withdrawal from the program are not allowed until the next policy year.
Is there any method to cap the annual out of pocket?
Employers selecting a deductible level of $25,000 or more have the option to request an annual aggregate stop-loss limit of three times the deductible, allowing them to cap the potential annual out-of-pocket expense that may arise from participating in the program.
How is the Deductible Program savings projection calculated?
Based on the deductible level chosen and the employer’s hazard group, which is based on the employer’s manual classifications and risk level, the BWC will establish the savings percent. This discount can range anywhere from 1.4 to 26 percent for small deductible options and is applied to the employer’s standard premium.
An example for a mid-sized service company selecting a $5,000 deductible within the small deductible program:
• Payroll — $5,000,000.
• Individual premium — $460,000.
• Deductible discount savings — $32,000.
• Premium with discount — $428,000.
• Plus estimated deductible billing — $10,000.
• Net premium — $438,000.
• Net savings — $22,000.
In addition to this savings, deductible payments under the small deductible program will not be charged to the claim, therefore possibly reducing future rate calculations.
Savings reflected above do not include the additional savings that can be realized by also participating in programs compatible with either the small or large deductible program, such as the Go Green or Safety Council discounts.
Mark MaGinn is vice president at CompManagement, Inc. Reach him at (800) 825-6755, ext. 65868 or firstname.lastname@example.org.
Save the date: Deductible Program enrollment for private employers ends April 30 for the 2013 policy year.
Insights Workers’ Compensation is brought to you by CompManagement, Inc.
What is economic freedom? It’s the ability to decide how to produce, sell and consume without unnecessary government interference. Economic freedom powers prosperity and is the key to greater opportunity, more jobs and a better quality of life for all Ohioans.
Since 1893, the Ohio Chamber of Commerce has been aggressively championing free enterprise, economic competitiveness and growth for the benefit of all Ohioans. Our united voice in the state’s legislative matters speaks for the thousands of individual businesses that we represent, thus strengthening the business climate in Ohio.
At the beginning of each new General Assembly, the Ohio Chamber crafts a legislative agenda. These are the goals that our governmental affairs team will strive to achieve in the next two years. These goals help us to fulfill our mission of improving our state for the benefit of all Ohioans.
With an unwavering focus on improving Ohio’s economy and a thorough understanding of the need for public policy supporting business growth and job creation, policymakers tackled many long-ignored problems in state government during 2011-12. And the result has been an improving business climate, a healthier economy and fewer unemployed Ohioans.
Now, we must build upon this positive momentum to further boost Ohio’s economic recovery. More still needs to be done to enhance the ability of Ohio businesses to compete, and we must not allow the state government to return to the old ways of doing business.
The Ohio Chamber of Commerce’s 2013-14 public policy priorities reflect an emphasis on these goals, and all our priorities serve to advance the important objective of fostering economic freedom. We are committed to working with lawmakers and Gov. John Kasich’s administration during the 130th Ohio General Assembly to achieve an enduring economic renewal through the following:
Maximize the economic potential of Ohio’s domestic energy resources and cultivate a diverse portfolio of energy sources and technologies.
Unleash the job-creating potential of Ohio employers by reducing the cost and complexity of doing business in the state.
Provide businesses with the freedom and flexibility to operate and innovate without intrusive government mandates.
Government red tape
Maximize regulatory benefits in the most cost-effective manner.
Enhance and protect a fair and predictable civil justice system with common-sense reforms that control litigation costs and eliminate lawsuit abuse.
State constitutional reform
Modernize Ohio’s system of government and safeguard the Ohio Constitution from abuse by special interests.
Foster a more competitive tax system that encourages business investment, expansion and location.
Improve government efficiency, effectiveness and accountability to achieve better results at a lower cost to taxpayers.
Strengthen the link between education and workforce development programs and the skills needed by employers in today’s competitive, mobile and high-tech economy.
As the voice for business in Ohio and the state’s most diverse business advocacy group, the Ohio Chamber has several information outlets. Follow the Ohio Chamber of Commerce on Facebook (search Ohio Chamber), Twitter @OhioChamber and on the Web at www.ohiochamber.com. The Chamber’s blog “Talking Policy” reports on legislative and regulatory issues that impact Ohio’s business community. The “Ohio Pro-Biz Politics” blog follows Ohio’s political happenings. ?
Keith Lake is the vice president of government affairs for the Ohio Chamber of Commerce. He oversees the day-to-day operations of the Ohio Chamber’s legislative advocacy program, directs the activities of the lobbying team, follows health care legislation and oversees the political and grassroots programs. Lake is also the principal contact for members of the Ohio House and Senate. He can be reached at email@example.com or (614) 228-4201.
Decent bosses typically try to lead by example. As a leader, you must model appropriate behavior to promote the greater good and to send a constant message with teeth in it.
The French term “esprit de corps” is used to express a sense of unity, common interest and purpose, as developed among associates in a task, cause or enterprise. Sports teams and the military adopt the sometimes-overused cliché, “One for all and all for one.” “Semper Fi” is the Marine Corps’ motto for “always faithful.” We commonly hear, “We’re only as strong as our weakest link.”
However, the real test of team-building and motivational sayings is that they are good only when they move from an HR/PR catchphrase to a way of doing business — every day.
As soon as you put two or more people in the same room, a whole new set of factors comes into play, including jealousy, illogical pettiness and one-upmanship, all of which can lead to conflicts that obstruct the goals at hand. Certainly, much of this is caused by runaway egos. Perhaps a little bit of it is biological, but most of it is fueled by poor leadership. Everyone has his or her own objective and it’s the boss’s responsibility to know how to funnel diverse personal goals in order to keep everyone on track. This prevents employees from straying from the target and helps avoid major derailments. Essentially, it all gets down to the boss leading by example with a firm hand, understanding people’s motives and a lot of practicing “Do as I say and as I really do myself.”
Communicating by one’s actions can be very powerful. A good method to set the right tone is stepping in and lending a hand, sometimes in unexpected and dramatic ways. This shows the team that you govern yourself as you expect each of them to govern their own behavior. In my enterprises, I constantly tell my colleagues that the title following each person’s name boils down to these three critical words: “Whatever it takes.” Certainly, I bestow prefixes to this one-size-fits-all, three-word title, such as vice president or manager, but I consider these as window dressing only.
After speeches, when I explain this universal job description, I always get questions from the audience about how I communicate this concept. I follow with a real-life experience that played out in the first few months after I started OfficeMax. As a new company, we had precious, little money, never enough time and only so much energy, which we preserved as our most valuable assets in order to be able to continually fight another day.
In those early days, too frequently, I would see what looked like a plumber come into the office, go into the restroom and emerge a few minutes later presenting what I surmised to be a bill to our controller. I knew whatever he was doing was costing us money and probably not building value. The third time he showed up, in as many weeks, I immediately followed him into the restroom (much to his shock and consternation). I asked him what in the world kept bringing him back. He then proceeded to remove the john’s lid and give me a tutorial on how to bend the float ball for it to function properly. That was the last time anyone ever saw this earnest workman on our premises. Instead, after making known my newly acquired skill, whenever the toilet stopped working, I became the go-to guy.
This became an object lesson to my team about how to save money. At that time, 50 bucks a pop was a fortune to us. It got down to people knowing that all of us in this nascent start-up were expected to live up to their real, three-word title. This was our version of how to build esprit de corps. Others began boastfully relaying their own unique “whatever it takes” actions, and it became our way of doing business.
The lesson I learned in those early days was that it wasn’t always what I said that was important but rather what I did that made an indelible impression. A leader’s actions, with emphasis on the occasionally unorthodox to make them memorable, are the ingredients that contribute to molding a company’s culture.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.
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Steve Jobs was the master of spotting trends and the opportunities that go with them. He was so good at it that he could see trends when they were still in their infancy. This allowed him to create products that kept his company at the front of the waves of change and ultimately drove massive profits and stock growth for Apple.
While not many people possess the uncanny sixth sense that Jobs had, it’s important to spend time studying your industry and what’s happening at various levels, from customers to suppliers to competitors.
You need to recognize when the trend is pushing positive growth and when it’s not. The additional challenge is to know the difference between a trend and a fad. A trend is more long-lived and drives a lot of long-term opportunity, while a fad tends to burn out quickly. This isn’t to say that trends last forever, because they don’t. An important part of studying trends is to know when to jump off the wagon and find the next opportunity, because if you ride a trend too far, you may find yourself in a rapidly declining industry or an area of waning interest.
For example, Y2K was a fad. For those who don’t remember, the Y2K boom was caused by old computers that only saw years as two digits instead of four, and widespread computer issues were predicted if systems weren’t upgraded. A giant boom in computer consulting and sales resulted from this issue, but it was short-lived. The moment 2000 rolled around, the need for Y2K upgrades dried up.
The dot-com boom, which was partly fueled by Y2K, was a trend. For a number of years, a ridiculous amount of money was being thrown at any project that contained the word “Internet,” regardless of its business model or competitive factors. While it was active, there were plenty of online growth opportunities for businesses to take advantage of.
Those who recognized the trend were able to capitalize on it, and more importantly, those who recognized the end of the trend were able to cash out before it went bust. Not every trend will be as big as the dot-com boom, and depending on your industry, they may not be so obvious.
Finding and recognizing trends starts with studying your industry. You need to stay in tune with what’s happening with competitors and constantly read about not only your industry but related ones as well. Talk to suppliers and vendors to get their opinions as to what direction your markets may be headed. But the most important thing may be to have an open mind. Don’t assume that because something hasn’t changed for 20 years that it isn’t ever going to change.
With an open mind, you are more likely to recognize an emerging trend before everyone else has rushed to capitalize on it, putting you ahead of the curve. Once you are exploiting a trend, you have to be equally diligent to know when it’s going to end, and that’s done in a similar fashion to identifying it in the first place: Stay plugged in to your industry.
These are exciting times and change is all around us. Look for the hidden clues that can lead you to the next big opportunity, and never stop challenging your own beliefs. The CEOs who do the best over time are the ones who don’t accept the status quo.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
Ruscilli Construction didn’t panic as the recession roared and now has pre-downturn volume levels to show for itWritten by Dennis Seeds
It was 2008, times were tough, and Ruscilli Construction Co. Inc. saw that many contractors were submitting rock-bottom bids just trying to keep their heads above water. While it may have been tempting to follow suit, the family-owned company refused to throw away what four generations had built into a total construction resource. It was a calculated risk.
“There was a lot less work out there to go after, and as a result, we witnessed a lot of our competitors change their approach to the business and their culture,” says Lou Ruscilli. “They were doing this in an attempt to survive.”
Before 2008, the business of Ruscilli Construction was hitting record highs as far as the volume and the number of projects. Then it appeared the plug had been pulled.
“In our industry, just like a lot of other industries then, we all took a lot of things for granted,” he says. “I hate to say that the phone would ring, and you would pick it up — don’t pass up the opportunity. We were always providing fantastic customer service. But how that was communicated down to the project level and how we evaluated our project teams, as it relates to how that experience was for the client, I don’t know if we were drilling down quite that far.”
The company, operated by Jack Ruscilli, chairman, his son Lou, CEO, and his nephew Tony, president, took a frank look at its culture, saw what needed to be done and is now actually back to pre-recession levels in terms of volume.
“We feel that our company is busier than the majority of our competitors,” Lou Ruscilli says. “The work that we have is good work and with very good clients. In 2012, we were in five states. In 2013, we will be in at least 10 states. Our increased workload has allowed us to attract very talented professionals from all over the nation.”
Here’s how drilling down farther brought substantial benefits for the 72-employee company, which tallied $100 million in revenue for 2012.
Find the right route
Once a recession hits and business drops off, a business has to act — and fast if it wants to cut its losses. But the knee-jerk reflex action may not be for everybody.
“Our competitors tried to keep the same number of people, the same number of volume and just go after just about everything,” says Tony Ruscilli. “It became more of a conflicting relationship than a team relationship. That wasn’t the approach we wanted to take.”
“We made a very conscious decision at that point not to change the way we did business but rather to find new ways to bring value to our clients,” Lou Ruscilli says.
If a company has been around for some time, looking at its history may give a clue about how the current problem could be handled. Take for example when Ruscilli Construction drew up its core values in response to some concerns during the 1980s when the company saw a big growth spurt.
“We probably had hired about 100 people,” Jack Ruscilli says. “I remember sitting at a table with the managers, a lot of people I didn’t personally hire. I saw a leaking culture, and I didn’t like it.”
This was an opportunity to lay down the company’s core values, what is called The Ruscilli Way. The values include safety, integrity and honesty, but more importantly, they are what the company stands for.
“We had some people who didn’t have the same values that we did,” says Jack Ruscilli. “They came from other companies, and we weren’t doing things in unison. But today, The Ruscilli Way is used when we are hiring someone. It is discussed with them to make sure we are up front, that they understand how we intend to do business.”
Customer satisfaction would be something that was openly discussed throughout the company and constantly reinforced.
“You have to go out and challenge your associates to enhance your clients’ experience, primarily through better communication and responsiveness,” Lou Ruscilli says.
To do that, one of the most effective methods is to create a sense of ownership.
“That meant our project managers, our project engineers, superintendents and field labor had to take ownership as if they were owners of the company and were responsible for how the clients would be treated,” Tony Ruscilli says. “Go the extra mile; do whatever it takes.”
Focus and communicate
Communication in any form motivates people. That’s an accepted observation inside and outside the business world. The key to using it effectively to achieve your goal is narrowing your focus to find the most effective forms of communication.
Once Ruscilli Construction realized its best route out of the recession was through a refocus on its core values, it was a simple but extensive task.
“It really started with communicating with our associates — sitting down with them, taking them to lunch and really making sure that they understand our definition of client satisfaction and that they understand our definition of responsiveness,” says Lou Ruscilli. “And the folks who didn’t understand it, well, they pretty much are gone.”
To achieve that understanding, a key point to make is that it is a win-win situation.
“It is much easier to manage and be a part of the team that is a team working together for the same goal,” Tony Ruscilli says. “We are all working toward the same end, and it is more of a team atmosphere than it is an adversarial relationship. So for them, it’s an easy buy-in, an easy way to say, ‘Hey, this is the way I always want to be a part of any project or any team.’”
There is one point to remember about customer satisfaction versus making money — profit isn’t everything.
“Stress to your associates so they all understand and appreciate that profit isn’t the No. 1 driver around,” Lou Ruscilli says. “It is customer satisfaction. It is relationships. You satisfy those two criteria, and at the end of the day, the profit will come — even more so, in the form of repeat clients.”Ruscilli Construction didn’t panic as the recession roared and now has pre-downturn volume levels to show for it
A new emphasis on core values, as it were, can repair broken links in the chain of success.
“As we started building the volume again, we just have had a wonderful selection of other new hires that have come to work for this company because of the fact that it’s really a revitalized company and it’s progressing and doing more and more business,” says Jack Ruscilli.
Happy customers mean more business. One of the best tools to determine customer satisfaction is a client survey. Ruscilli Construction makes note of accolades or beefs about its managers and associates with surveys throughout the entire project. If there is something that is a problem, it can be addressed at the time.
“All throughout the project we give them a chance to say, ‘Hey, I don’t like this, or should we consider this?’ says Jack Ruscilli. “The objective is that when we are done, we have a perfectly happy client. And if there is something that comes up wrong, it is addressed, and it is taken care of immediately so there is no excuse for us or the client not to have a great project.”
If your company is serious about improving its perception among clients, you should be able to accept criticism given in a survey or by other means.
“I can remember one engineer saying, ‘You mean you would actually put yourself up to that kind of scrutiny?’” Jack Ruscilli says. “And we said yes! You want that. You cannot improve if you don’t know what you are doing wrong. You want to nip problems in the bud, and that’s what we to do on the job site, every step of the process.”
The results of the refocus on Ruscilli core values have been beyond expectations.
“It has been amazing,” Jack Ruscilli says. “I have had some of our associates even say that it has affected them at home; they are taking a different look at how they are acting and how they are treating people.”
To carry that one step further, re-examine the prospective clients.
“Now we are looking for those same values in our clients,” Lou Ruscilli says. “We are more selective today than we probably have ever been with these types of projects that we pursue the clients who we want to.”
Keep in mind that relationships build over time, and can be lost in a second.
“With any organization, when you engage with your client, you are making at some level some sort of investment in that relationship,” Lou Ruscilli says. “What we have learned over the years is that the folks you have interacting with that client need to really understand what their expectations are and how they are going to be evaluated. You need to be caring for those same requirements, those same beliefs, to your clients or to the people you are working with. If they are not going to appreciate the investment you are making, it is probably not the right arrangement.” ?
How to reach: Ruscilli Construction, (614) 876-9484 or www.ruscilli.com
The Ruscilli File
Jack Ruscilli, chairman
Lou Ruscilli, CEO
Tony Ruscilli, president
Born: All are from Columbus.
Tony: I went to Michigan State University and received a degree in business.
Lou: I went to Clemson University and earned a degree in construction management.
Jack: I went to Findlay University and graduated with a degree in marketing.
First job: All worked for the company as teenagers. Jack started at 12, Lou at 14, and Tony at 15. Jack: We all had experience in the field. There probably wasn’t anything that I asked somebody to do that I probably hadn’t done myself.
What was the best business advice you received?
Jack: Mine is probably from my grandfather, Louis Ruscilli Sr. Years ago he would see me as a young man struggling with a big decision, and I can always remember him in his common way saying, ‘Hey, you do the best you can. You be honest. And don’t worry about it. Quit worrying about these things.’ In his way, he was saying do what you can do and back off. One of the things I remember my father always saying is, ‘Little profit is no loss.’ I remember when he first said it. I thought what is the big deal about that? What he was really saying was, ‘Don’t be greedy. Treat the customer right and ask for a fair profit and everything will work out.’
Lou: When I first got in the business, I would get nervous a lot. We were going into a meeting with a client, or we had an important meeting coming up and my father would always say to me, ‘Just be yourself. At the end of the day, just be yourself and everything will work out.’
Tony: My dad, Bob Ruscilli, was vice president, and he kind of oversaw all the guys in the field, So having worked with him for many summers as a kid growing up, I saw that he was willing to get in and do whatever he needed to do to make things happen. If it meant getting in the trenches, he would get in the trenches. So as my uncle alluded to earlier, the one thing he taught me was, ‘Don’t ask somebody to do something that you are not willing to do yourself.’ I’ve lived by that pretty much all through growing up and watching him.
What’s the secret of a family business success?
Jack: I think it is straightforward honesty. We all tend to be pretty blunt, myself and Lou in particular; Tony sometimes is the mediator. But we put it out on the table and walk away, and we are still family.
Tony: I would say one of my Uncle Jack’s strongest attributes is he embraces family and finds ways to bring us all together as a group.
Lou: I would just reinforce what both my father and my uncle said. It is about communication, and it is about, at the end of the day, we are family. We all have to look out for each other’s interests and that’s what we do. There are no divided lines in this. We are going to succeed as a team or we will fail if we are all individuals.