Chelan David

Sunday, 26 August 2007 20:00

Make it easy to stay

Having a top-notch employee benefits plan in place can play a crucial role in attracting and retaining top talent.

After all, in today’s workplace environment, employee benefits represent a significant portion of an employee’s financial security. In addition to having a strong employee benefits plan in place, it is important to educate employees about the program’s virtues. The more informed they are, the more comfortable they will be with the plan, which can ultimately lead to increased job satisfaction levels.

“Employee satisfaction with benefits offered by their employer has a direct correlation with job satisfaction and loyalty,” points out Stephen J. Peck, president of the benefit services division of Kapnick Insurance Group.

Smart Business spoke with Peck about how to effectively design a communications campaign that educates and informs employees about their benefits program.

Why is employee communication in regards to benefits so important?

For many employers, the No. 1 employee benefit objective is to retain employees. Unfortunately, a very small percentage of employees, just 16 percent, believe that their company’s benefit communications effectively educate them about their benefits, according to a recent MetLife study. Couple this with the fact that 63 percent of employees spend less than 30 minutes making a benefit decision and less than an hour researching their options before buying. Employees spend more time, 1.3 hours, researching/buying a pair of shoes.

What can be done to improve employee communications?

First of all, we should not look at employee communications as a one time a year event during open enrollment. Employee benefits is an ever-changing landscape where employers are asking employees to migrate from a passive role to an active participant. Most companies, including the largest, are increasing co-pays and deductibles. As such, employees need communication at different times throughout the year and in different ways. We all process information differently. Therefore, a mixture of print, electronic and in-person communication offers the best chance for success.

How has the Web impacted the way that employee communications are handled?

Online communication can definitely help with disseminating real-time information. It is a very efficient way of providing specific information, such as plan documents, research tools and calculators. Not to overly generalize, but younger workers tend to be more comfortable receiving information through the Web or online. Having said this, I think it is shortsighted to think that Web-based communication is the preferred method. At times, communication through the Web can desensitize the human element. There is still unbelievable power with face-to-face communication, especially when dealing with plan changes or complicated programs, such as an HSA.

How should a company go about designing an effective employee communications campaign?

I have heard the term ‘planned redundancy’ used to describe an effective campaign. What this means is having a consistent message, presented throughout the year, using various channels and mediums. As mentioned earlier, a combination of print, Web/online and in-person communication is the best mix. Therefore, a typical campaign may include quarterly newsletters, bimonthly lunch and learns, an annual benefit fair, periodic payroll stuffers, and Webinars that all supplement the traditional open-enrollment season. The ultimate goal is to improve employee understanding and awareness of the employer-sponsored benefits. When this is accomplished, you can significantly increase employee retention and reduce the internal cost of human resource administration.

Once in place, how should an employee communication campaign be evaluated?

The best way to measure the effectiveness of employee communications is to survey both the employees and the HR manager. We have found it helpful to provide the employees with a short survey, about two to three questions, after an enrollment meeting. Questions like, ‘Do you clearly understand the benefits provided to you?’ and, ‘Did you read the payroll stuffer that was sent to your home about the open enrollment meeting?’ These types of questions make it clear if the communication materials were truly effective. On the other hand, the survey to the HR manager should be given a week or so after the open enrollment meeting. This survey would include questions such as, ‘How many employees came to you and asked questions regarding their benefits after the enrollment meeting?’ and, ‘Did the communication materials provided to you make open enrollment more manageable?’ The answers to all of these questions are the key to tweaking the program for next year to ensure both employer and employee satisfaction.

STEPHEN J. PECK is president of the benefit services division of Kapnick Insurance Group. Reach him at (888) 263-4656 ext. 1147 or Kapnick Insurance Group is a member of Assurex Global, an international network of insurance and employee benefit brokers.

Thursday, 26 July 2007 20:00

Checks and balances

The ability to prevent fraud is crucial in a competitive marketplace. Check fraud, in particular, can have a major impact on a company’s bottom line. Certainly, the use of ACH (Automated Clearing House) transactions to transfer and process electronic funds is on the rise. According to the Electronic Payments Association, 16 billion payments were made in 2006 through the nationwide ACH network, an increase of approximately 14.5 percent over 2005.

Safeguarding against check fraud — both traditional and electronic — requires diligence and determination, but new technologies are making the process simpler and more cost-effective.

“Financial institutions offer tools that allow customers to protect their assets for a relatively low cost,” says Lynnell Harris, senior vice president of Comerica Bank. “It’s very much a win-win situation.”

Smart Business spoke with Harris about methods that can be used to help prevent check fraud, the benefits of Positive Pay and what distinguishes ACH Positive Pay from other fraud-protection products.

What types of companies are most susceptible to check fraud?

All types of companies. In today’s environment, anyone who sends out checks or transacts business with partners or consumers is subject to fraud and should take precautions. Companies across America, regardless of their size, are at risk.

What are some methods that companies can utilize to help prevent fraud?

There are a variety of safety measures and financial tools. For example, employees can help protect sensitive information by making sure items such as checks, account numbers, bank statements and other sensitive financial information are locked up and stored away. A system of checks and balances can be employed within the company to ensure appropriate access and approval authority.

In today’s environment, electronic transfers offer more control, as systems enable companies to set up various layers of authority based on dollar amounts or transaction types. Other tools include online account review and Positive Pay.

How does Positive Pay work?

Essentially, the bank delivers information to the customer regarding checks or ACH transactions that will be posted against his or her account. The customer then has the opportunity to review the information and determine if they are valid items. The customer authorizes the posting of the transactions and notes any unauthorized transactions. When notification is returned to the bank prior to the deadline, unauthorized transactions are returned to the depositing/originating financial institution.

Tools such as Positive Pay significantly mitigate risk for the company without requiring a huge investment in technology.

How can a business utilize ACH Positive Pay to accept or reject ACH transactions before they are posted?

In a manner similar to checks, the bank will present to the customer, before posting, all ACH transactions. The customer then has the opportunity to identify any unauthorized ACH activity. The customer authorizes the posting of the transactions and notes any unauthorized items prior to the notification deadline. The bank will return those items before posting to the customer account.

What distinguishes the ACH Positive Pay service from other fraud protection products?

Solutions that enable a business to protect and control electronic activity on its accounts isn’t commonplace. Debit blocking provides one level of protection, but doesn't offer the full range of decisions that true ACH Positive Pay solutions do. By reviewing and making decisions on all ACH activity before it posts to the account, ACH Positive Pay offers a greater degree of control and information management.

If a business detects suspect items using either Positive Pay or ACH Positive Pay, what course of action can it take?

For ACH Positive Pay, simply make a decision on your items online by the deadline. You can also contact your bank to place stop payments on any item you've rejected as a second level of prevention. For check positive pay, contact your financial institution. Typically, the information regarding suspect items is available first thing in the morning. Customers pull information electronically, review it and authorize payment of the valid items. If there is an unauthorized item, they would notify their bank in that response. The bank would then return those unauthorized transactions before they post to the customer’s account.

LYNNELL HARRIS is senior vice president of Comerica Bank. Reach her at (734) 632-4989 or

Thursday, 26 July 2007 20:00

Getting the best deal

An experienced mortgage banker can help a company secure optimal financing for commercial real estate projects. Through his or her extensive lender relationships and ability to put together intricate financing solutions, a mortgage banker can provide access to debt and equity financing that might be unavailable through other avenues.

“Whether a client is looking to raise equity or place debt, a quality mortgage banker should be able to provide an effective combination of a consultative market perspective with innovative financing strategies,” says Brian Finley, vice president of CBRE | Melody, the mortgage banking arm of CB Richard Ellis.

Smart Business spoke with Finley about mortgage bankers, the services they provide and how recent events in the capital markets have affected debt and equity financing.

How can borrowers benefit from using a mortgage banker?

While it is well known that commercial real estate owners can access remarkably cheap debt and equity through the capital markets, it is becoming increasingly difficult for these investors to navigate them. There are a myriad of investors that include insurance companies, government agencies, pension funds, banks and conduit lenders; each investor having a unique investment criteria and a variety of loan programs. By leveraging their extensive lender/investor relationships and market insights, mortgage bankers can provide their clients with a sense of clarity to the capital markets process.

Why should a company use a mortgage banker instead of a traditional lender?

For two reasons, really. First, traditional lenders, such as local and national banks, typically offer loan terms that differ significantly from capital market lenders. For example, banks generally offer short-term money [five years or less] on full recourse terms compared to conduit lenders that offer long-term money on a nonrecourse basis. Moreover, due to their access to cheaper capital, these lenders can provide a lower cost of debt to borrowers than can commercial banks.

Second, while some capital market lenders will lend directly to borrowers, direct negotiations between lenders and borrowers tend to favor the lenders due to their size and experience relative to the borrower. Borrowers can level the playing field by engaging the services of a mortgage banker who has a fiduciary responsibility to their clients and possesses considerably more experience in negotiating loan terms than individual borrowers.

What types of services does a quality mortgage banker provide?

Mortgage bankers assist real estate owners with the capitalization of their real estate asset through various forms of financing: permanent financing, bridge loans, mezza-nine debt, structured equity, joint venture equity and construction financing.

A mortgage banker is more than a broker linking two parties, rather, they serve as an adviser acting in their clients best interest throughout the capital procurement process. This includes advising clients on an optimal financing strategy, marketing the financing request, identifying the best debt/equity investor, application, document negotiation and transaction closing.

What type of debt and equity financing is most suitable for a company’s needs?

The process starts with a thorough situational analysis of the company's capital requirements taking into consideration total project costs, existing capital resources, desired return on investment and duration of holding period, among other things. CBRE | Melody provides this analysis free of charge. Based on this analysis, we customize innovative strategies and focused implementation to provide clients with their optimal capital solution.

How have recent events in the capital markets affected debt and equity financing?

While the capital markets remain primed with a surplus of cheap debt and equity, a series of events over the past four months have created some turbulence and volatility in the marketplace. First came the bursting of the residential sub-prime mortgage bubble in February. Although the residential and commercial mortgage securitization markets are fundamentally separate, many investors link the two. As a result, investors have increased their return expectations.

Second, in April, Moody’s Investor Services, the definitive credit rating agency for securitized loans, issued a report warning investors of loose underwriting standards and historically high uses of leverage. Shortly afterwards, collaterallized mortgage backed securities (CMBS) investors reacted adversely by excluding a handful of loans from the collateral pool of a $4.2 billion CMBS issuance.

Although these events are generally heralded by most market participants as a return of prudence and discipline, the short-term affect is one of uncertainty and volatility. While still relaxed and cheap relative to historical measures, underwriting standards are tightening and credit spreads are on the rise.

BRIAN FINLEY is vice president of CBRE | Melody. Reach him at (513) 369-1307 or

Monday, 25 June 2007 20:00

No surprises

A financial plan serves as a road map for where a company hopes to go. When creating such a plan, it is important to spend time reflecting on potential future activities — such as capital expenditures and liquidity events — rather than just assuming a specific growth rate.

By taking into account both past performance and future expectations, a company and its bank can work hand in hand to properly structure products and services that will meet current as well as future needs.

“Having a financial plan in place that outlines the financial expectations of your company enables a bank to suggest products and services that complement business strategies going forward,” explains Melissa Pollard, senior vice president in Comerica’s Orange County Middle Market Banking Group.

Smart Business spoke with Pollard about financial plans, how often they should be prepared and why they are so invaluable to bankers.

What are the benefits of financial planning for a business?

Financial planning is often associated with individuals, but it can be an invaluable tool for businesses as well. In addition to providing a clear-cut road map for where businesses hope to go, a business financial plan can reap significant dividends when used as part of discussions with one’s bank. The more information a banker has, the better he is able to provide customized solutions that truly meet a company’s current needs and its needs going forward.

Bankers hate surprises, and being able to review a company’s financial plan allows them to establish financial covenants collaboratively, so that they’re really working with a client as opposed to taking an off-the-shelf solution and imposing it upon the client.

How do financial plans differ from financial statements?

Financial statements provide historical information whereas financial plans offer a glimpse into the future. At the very least, a financial plan should include a projected income statement and balance sheet. Companies wishing to be more sophisticated may also include a cash flow projection.

Not all banks require financial plans, but we have found that by going the extra step and asking for additional information, we’re better able to put the right financial components in place from the beginning.

How often should financial plans be prepared?

We require financial plans, at a minimum, on an annual basis. Most often, however, financial plans are prepared quarterly, or sometimes even monthly, if it’s a company that is impacted by seasonality or cyclicality.

Our existing clients provide us a financial plan when they submit their year-end financial statements. This allows them to use the year-end historical information as the foundation from which they build their plan looking forward.

We might ask for the updated plan once a year, but in terms of how much detail is provided it is a case-by-case basis.

At the macro level, a financial plan should take into account a company’s strategies of what it plans to do in the years going forward. At the micro level, the plan should outline how business strategies will impact the different line items on a balance sheet.

What are some common mistakes that companies make when preparing financial plans and how can these be avoided?

In a banker’s eyes, it is always better to under-commit and over-deliver. Some companies have several versions of their financial plans — reflecting best-case, worst-case and most-realistic scenarios — using the most aggressive one as an internal tool that sets themselves up to exceed the banker’s expectations. When a company meets projections, it makes it easier for a banker to increase its loan amounts in the future; when it falls short, the opposite occurs.

Why is a company’s financial plan so invaluable to its banker?

A lot of people throw around the term ‘relationship banking.’ Having a company’s financial plan allows us to take it a step further and practice collaborative banking. We are able to provide our clients with a deeper understanding of how the bank views financial transactions and we develop a deeper understanding of our clients’ motivations and interests.

When a company shares financial expectations with its bank, it will benefit by providing the banker with the opportunity to recommend other services — including treasury management and private banking — that may be appropriate based on its future outlook. Collaborative banking benefits everyone involved; the company receives the support it needs, and the bank has the opportunity to add value by providing targeted banking solutions.

MELISSA POLLARD is senior vice president in Comerica’s North Orange County Middle Market Banking Group. Reach her at (714) 940-6751 or

Monday, 25 June 2007 20:00

Environmental protection

Over the past couple of decades, there has been a surge of environmental liability claims brought against property owners. Fueled in part by environmental statutes and state environmental cleanup laws, the claims are often in the millions of dollars.

The failure to have environmental insurance in place can lead to serious repercussions. “Currently, companies are under even greater scrutiny when it comes to the environment and can be faced with an ever-expanding list of environmental liabilities,” points out Chris Falbo, area vice president, environmental specialist for Arthur J. Gallagher & Co.

Smart Business spoke with Falbo about environmental insurance, the benefits that this type of coverage provides and how to go about selecting a suitable policy.

What is environmental insurance?

Environmental insurance provides an insured protection from remediation (or clean up) of pollution conditions and from bodily injury or property damage that may result from those pollution conditions. Obvious examples include leaks from past unknown underground storage tanks or from past dry cleaner operations that may have affected subsurface soil or groundwater and are required to be cleaned up. Property damage claims may result if sub-surface contamination migrates from an insured property and affects an adjacent third party's property, reducing the value of that property. Indoor air quality, including mold infestation can generate claims for bodily injury. These are some of the more obvious examples that may trigger pollution liability. However, I've also seen coverage for claims for hydraulic oil releases in elevator shafts and for releases from sewage lines that have required clean up — situations that are less obvious to most people.

How can having environmental insurance benefit a company?

Pollution liability coverage benefits a company by reducing its risk to environmental exposures. Prior to the 1970s, most companies could not have anticipated the environmental liabilities that would occur from the results of their operations and previous waste disposal practices. Pollution liability insurance can protect the assets of a company faced with these risks.

What types of environmental insurance policies are available?

Essentially, pollution liability policies break down into two categories: Those that are considered fixed-site policies and those that apply to service providers. Fixed-site policies include pollution legal liability, remediation stop loss, storage tank liability and closure/post closure. These types of policies are designed to address contamination that is located at, or emanating from, a specific property.

The policies that apply to service providers include professional liability and contractor's pollution liability (C.P.L.) types of policies. Professional liability polices typically cover environmental consultants, professionals conducting environmental site assessments or designing remediation systems. Contractor's pollution liability covers both environmental contractors and nonenvironmental contractors — companies with operations ranging from road construction to steel framing.

How should a company go about selecting a policy that is right for its needs?

There are a number of companies currently offering these types of pollution policies. All have strengths, weaknesses and specific appetites for the types of exposures for which they're willing to offer terms. We recommend soliciting competitive bids from all appropriate markets for review. From there, the specific policy forms and terms and conditions for coverage should be analyzed to identify potential gaps that need to be addressed. This is the point where a broker experienced in placing environmental insurance coverage can be crucial. An experienced broker knows where to look for those coverage gaps and the best ways to address them.

How long should the policy term be?

It depends on the exposure to be covered. For professional liability policies and contractor's pollution liability policies, you typically will have a one-year policy term, although on C.P.L. policies, two-year policy terms may be available in some instances. For fixed-site pollution liability policies that would cover a portfolio of properties, policy terms range from one to three years. Most clients opt for a three-year term, which eliminates the need to address renewal of the coverage each year. If a pollution liability policy is designed to address a specific transaction, such as the sale of a property, you would choose a longer policy term, either five or 10 years.

How much does environmental insurance typically cost?

Premiums can range widely, depending on what the exposure is and the type of policy concerned. A minimum premium for a contractor's pollution liability policy is $5,000, and premiums can range from three to more than seven figures for policies covering more complicated land transactions and large portfolios.

CHRIS FALBO is area vice president, environmental specialist for Arthur J. Gallagher & Co. Reach him at or (818) 539-1320.

Monday, 25 June 2007 20:00

Making your presence felt

In many sectors, the need to establish a physical real estate presence overseas has never been greater. Improved technologies and efficiencies have made the world a bazaar of economic activity and those without an international presence may be missing out on valuable opportunities.

“If you are in certain businesses such as communications, financial services, or the technology industry, you either have a global presence or your competition is passing you by,” says Ken Murawski, managing director of CB Richard Ellis.

Smart Business spoke with Murawski about the importance of establishing an international presence, how to decide between owning and leasing commercial real estate overseas and what types of services a quality real estate professional can bring to the table.

Why is establishing an international presence so important in today’s marketplace?

As we all know, the world has gotten much smaller over the past several decades as technology has progressed. Many companies today feel that in order to service their clients as they expand internationally, they too need to establish or expand their physical presence overseas. In the commercial real estate business, having people on the ground in such areas as India, China and Europe has allowed us to service our clients appropriately in those marketplaces as well as increase our own profitability.

Many of our clients have recognized the vast opportunities that exist for them in emerging marketplaces and want to participate in the expected growth, which is anticipated to be much greater than their existing market. I don't think this trend will slow down for quite some time, if ever.

What factors should be considered when deciding between owning and leasing commercial real estate overseas?

The answer to this varies from market to market. In some countries, the decision to lease versus own is a similar decision process to leasing or owning in the United States, meaning it is, in most instances, based upon a company's cost of capital. However, in China where the government owns the land, owning in the traditional sense is not an option. Doing business can vary greatly from market to market due to cross-cultural differences so it is very important to have local expertise and local influencers on your team if you are looking to enter a new market.

How should a company proceed when purchasing real estate internationally?

I think that anyone working to lease, build or buy commercial real-estate internationally absolutely needs to engage the services of qualified professionals in the specific marketplace they want to be in. If it is a United States company that doesn't have a qualified real estate service partner, they need to start locally by contacting a commercial real estate services firm with true international capabilities. This allows the U.S.-based real estate professionals to get a clear understanding of the company's needs and make the proper introduction to their foreign partner to ensure the client is in good hands and that any cross cultural differences are addressed.

What type of services does a quality international real estate professional bring to the table?

A quality professional representing a company that is looking at going international will always connect with local associates in specific foreign markets to ensure that they have accurate, current data as well as an understanding of such things as political climate, cultural differences, taxes, incentives, etc. The professional would bring high level analytical and financial capabilities, as well as a team of other professionals with expertise in such areas as project management, facilities management, transaction management, all with experience in the target market. It all depends on the nature of the assignment, but having all these service capabilities can be critical.

What does the current environment look like for international real estate?

It varies greatly by country and region. We are seeing many U.S.-based companies, particularly manufacturing companies, looking to the Asia Pacific area to establish an operating presence. With the political climate changing in China, it is an "untapped" market in many respects and given the vast population there, it offers huge growth potential for US companies.

KEN MURAWSKI is managing director of CB Richard Ellis Cincinnati. Reach him at (513) 369-1349 or

Saturday, 26 May 2007 20:00

Safe, not sorry

Disasters, both man-made and natural, can occur at any place, any time. If unprepared, a business could be faced with devastating consequences.

John E. Watson, executive director, higher education practice group for Arthur J. Gallagher & Co., says creating a disaster plan is essential to ensuring a company’s well-being in the wake of a catastrophe. “A disaster preparedness plan, or a crisis management plan, is intended to establish policies, procedures and an organizational structure for an effective response to emergencies,” he explains.

Smart Business spoke with Watson about how to craft a disaster preparedness plan, the importance of business interruption insurance and what other types of coverage should be in place.

How should a business go about creating a disaster preparedness plan?

A well-designed plan will describe the roles and responsibilities of each of an organization’s operating units during exigent situations. This includes natural and man-made perils, as well as domestic and overseas situations. A plan should define actions that target a safe, effective and timely response and recovery. The overar-ching focus of the plan should be to protect lives (the primary goal) and other assets of the firm.

What are the potential consequences of not being prepared for a disaster?

The absence of a response plan increases the losses from every angle and extends the length of a business interruption considerably. If employees are well-educated in response scenarios and feel that they are a vital part of saving the business and their livelihoods in the event of a crisis, the responses are much more effective. This can lead to improved shareholder value, community standing, brand image, customer satisfaction and employee confidence.

An example of a success is Wal-Mart; following Hurricane Katrina they were able to bring 70 percent of their stores back into operations within 48 hours. This wasn’t the result of having a crystal ball and being able to anticipate a Category 5 hurricane. It was because they had a well-defined crisis response and recovery plan in place.

Why should a crisis communication plan be implemented?

Employees are critical to the success of a crisis response and business continuity plan. Therefore, having alternatives to the traditional communication methods such as e-mail and other data systems is important, especially if those systems are taken out as a result of a disaster. Without clear direction from senior management and the crisis management team, it is impossible for employees to know exactly what direction they should be taking.

How important is it for companies to back up their computer data frequently?

The more frequent the backups are, the less likely that you’ll be presented with a loss of critical data. Not only should you make frequent backups, but you should also store them appropriately so they do not become damaged during the crisis situation. If a company is located in an earthquake zone in Southern California and they store their backups at a site that happens to be on the same earthquake fault, then they haven’t created the security they need for that data. They need to find a way to locate the backups off the same earthquake fault.

What is business interruption insurance and why is it so important in the event of a disaster?

Business interruption insurance is a time-element coverage that pays for loss of earnings and extra expenses that a business incurs due to a disaster. It is a property insurance form so there must be damage that would be covered under the property insurance policy. An extension to that coverage is off-site time-element coverage. Let’s say a firm relies heavily upon electricity for the operations of their infrastructure and doesn’t have an on-site generator. If their off-site power grid goes down, and stays down for the required length of time for the deductible, then they are eligible to collect from their property insurance the resulting income loss from not being able to provide their services. The extra expense provision would allow them to bring in portable generators or other equipment to help reduce the size of their overall financial loss.

As related to disaster preparedness, what other types of insurance coverage should a company have in place?

To some extent that is dependent on the type of operation. If a firm has overseas operations or has employees traveling extended distances, executive assistance programs can help them be repatriated if they are impacted by a civil disturbance in a foreign country. Similarly, kidnap and ransom coverage can help firms with overseas operations. Obviously, anywhere in Southern California there is the potential need for earthquake coverage or other financial models to prevent a loss from earthquake damage. Flood insurance is also something that should be considered.

JOHN E. WATSON is executive director, Higher Education Practice Group for Arthur J. Gallagher & Co. Reach him at (818) 539-1445 or

Saturday, 26 May 2007 20:00

Should you stay or go?

Companies that renew their real estate lease agreements often pay a premium for the convenience of not relocating.

After all, lease renewals are not conducted on an entirely level playing field; the landlord is in the business of real estate and the tenant is not. With a well-thought-out strategy in place, however, it is possible for tenants to negotiate a discount.

“The tenant that understands lease expiration and relocation can capture savings, which otherwise would be a major windfall for the landlord,” explains Scott Yards, senior associate, office properties for CB Richard Ellis.

Smart Business spoke with Yards about the office lease renewal process, common mistakes that companies make and how to go about getting an optimal lease renewal.

How does the office lease renewal process typically work?

Before the process begins, the first reality that the tenant must accept is that achieving maximum value from a lease renewal is not necessarily quicker or easier than finding, negotiating and moving into a new space. The methodology for companies to strategically work through the lease renewal process can be divided into three phases: phase one is situational analysis, phase two is option development, and phase three is project implementation.

The first phase is for the tenant and its-broker to collectively discuss and understand the tenant’s current and future corporate goals, as well as existing and pending real estate requirements. Secondly, in the option development phase, the tenant must develop building/site alternatives and make the landlord aware they are pursuing them. An aggressive search by a credible real estate professional from outside the company hierarchy is strong evidence that the threat to move is real. In the final phase, project implementation, the objective is to bind both parties to the agreed-upon transaction and to arrange and manage all work necessary for the tenant’s space.

What are some common mistakes that companies make during the process?

Tenants think that because there is no operational need to relocate, the lease renewal is essentially just a straightforward administrative matter. Relieved not to have to address all the operational, logistical and cost issues associated with moving, tenants typically feel they come out ahead. More often than not, however tenants should be getting a discount that reflects the savings the landlord realizes from their decision to stay.

Another mistake that tenants make is entering the renewal process without a clear strategy. Tenants sometimes do not see the renewal as an opportunity to gain a competitive cost advantage, and subsequently do not commit adequate resources to the transaction. Finally, tenants often fail to understand the economics of the renewal situation from the landlord’s perspective.

What specific strategies should be utilized to get an optimal lease renewal?

Time: Landlords know how much time it takes companies to make decisions and how such decisions can be readily delayed. The window must open early enough to convince the landlord that there is time enough to make both the decision and the move. For projects of significance, the process should begin at least two years prior to lease expiration and for very large projects where build-to-suits may be an option, even more time is required.

Objectives: Tenants need to clearly define their objectives to convey a focused approach on the landlord's income stream.

Understanding of landlord: Tenants need to understand the landlord’s position and objectives. Landlords vary by types of investments, portfolios, and financial and risk profiles. An entrepreneurial developer has different objectives than institutional owners.

Credible motivation: The landlord must be convinced that the tenant can find an alternative that meets and exceeds its objective(s).

Credible market search: The landlord needs to be aware of the tenant’s alternatives. An aggressive market search by a leading real estate firm from outside the company is proof the threat to move is real.

How much value can be extracted during the renewal?

It depends on the market, the landlord and the team on the tenant’s side. Tenants who negotiate their own renewals seldom fail entirely. They usually gain some concessions, although they may have little idea what they are worth or what they have received. The landlord will give up only enough to make the tenant happy.

How can a company benefit from engaging a real estate professional to help out with the renewal process?

The importance of strong outside support to plan and execute a renewal strategy cannot be overstated. A real estate professional will have sophisticated knowledge of the market, will be well-versed with the current economics of leases in and around the subject building, and will be familiar with landlord tactics and vulnerabilities.

SCOTT YARDS is senior associate, office properties for CB Richard Ellis. Reach him at (513) 369-1313 or

Wednesday, 25 April 2007 20:00

Feeling good inside and out

Mindful awareness has scientific support as a means to reduce stress, improve attention, boost the immune system and promote a general sense of health and well-being.

Since opening in 2005, the Mindful Awareness Research Center (MARC) at UCLA has focused on identifying, evaluating and disseminating the most effective mind awareness practices to assist individuals in both clinical and non-clinical settings.

“The center’s mission is to foster mindful awareness in daily living using research and education,” says Dr. Susan Smalley, founder and director of MARC and professor of psychiatry at UCLA.

Smart Business spoke with Smalley about mindful awareness, how it has influenced her work with ADHD and why self-help tools could ultimately lead to treatment models based on prevention.

What is mindful awareness?

Mindful awareness is a moment-by-moment awareness of one’s experiences as they occur. This means paying attention to where your are at the present moment.

That can include things like what you’re feeling, what you’re thinking, your body sensations, and so on. Many of these practices are drawn from Eastern traditions like Tai Chi, yoga and meditation. Some people use the term ‘mindfulness,’ which can be used synonymously with mindful awareness.

How has this practice influenced your work with ADHD?

As an awareness training methodology, mindful awareness practices centered in meditation seem to help individuals regulate their attention. You take something that is automatic like watching your breath and you give it your full attention. Through this process of meditating and learning how to regulate your attention to your present experience, you start to discover a lot about how your mind works. For example, it is easy to lose interest in the process of paying attention to your breath and your mind wanders off. In the process of becoming aware that your mind has wandered and attempting to bring it back, there is a training of attention that occurs.

A colleague (Lidia Zylowska, M.D.) and I conducted a study using mindful awareness to work with individuals who had attention disorders. The pilot study we conducted looked at attention deficit disorders among teenagers and adults and found promising changes in attention as measured by computerized tasks of attention and other objective measures. This pilot study suggests that these tasks will lead to attention regulation and may be very useful as a complementary tool in working with individuals who have attention disorders.

You founded the Mindful Awareness Research Center. What challenges have you faced with this project?

The biggest obstacle has been getting scientists to appreciate ‘looking within’ as a tool of discovery. Mindful awareness can be studied using objective tools of Western science, but trying to get scientists to actually have the experience themselves (a subjective experience) as well as investigate it has been a challenge.

In order to understand mindful awareness, it really requires a first-person experience, which means you have to do it. As scientists are trained to look outside themselves and objectify experiences for study, it’s challenging to introduce subjective experience as an alternative method of discovery into the culture of science.

What does initial research reveal about the possibilities of using mindful awareness to help treat behavioral and psychiatric disorders?

Most of the research has been done with adults, and a lot of it has been conducted in a clinical population — individuals with depression and anxiety disorders. Those studies are very promising in that there are clear improvements in mood and reductions in anxiety. Also, new studies are investigating biological and physiological correlates. These findings will be of vital importance in helping people self-regulate their own emotions and their own attention.

How can self-help tools like mindful awareness ultimately lead to a treatment model of prevention rather than intervention?

In the past, research has focused on intervention rather than prevention. But this will shift because we’ll be able to identify individuals who carry susceptibility genes for different kinds of traits, such as a predisposition toward anxiety and depression.

Mindful awareness practices will increase in importance as early detection of predisposition occurs. This is what we’re seeing with genetic knowledge around chronic physical illnesses like diabetes and heart disease. Even though genes play an important role, preventive steps like diet and exercise will play a very important role in preventing mental health illnesses in the future.

DR. SUSAN SMALLEY is founder and director of MARC and professor of psychiatry at UCLA. Reach her at (310) 206-7503 or For more information please visit

Wednesday, 25 April 2007 20:00

Size doesn’t always matter

The high-profile corporate fraud cases of Enron, Tyco and WorldCom made front page news. However, it is not just large conglomerates that are susceptible to fraud. Companies of all sizes and across all sectors, including governmental agencies and nonprofit organizations, can be affected by fraud.

To avoid fraud, it is important to institute an anti-fraud program that creates a culture of honesty and high ethics. Such a program, says Linda Saddlemire, partner at Vicenti, Lloyd & Stutzman LLP, should be spearheaded by the management team. “Management is responsible for developing an effective anti-fraud program and should be heavily involved in assuring the proper measures are in place,” she explains.

Smart Business spoke with Saddlemire about fraud, how anti-fraud programs should be structured and what course of actions should be taken if fraud allegations occur.

What type of fraud risks do companies face?

The most common type of fraud is mis-appropriation of assets, which is any scheme that involves the theft or misuse of a company’s assets. The Association of Certified Fraud Examiners (ACFE) reported that over 90 percent of frauds reported in its 2006 ‘Report to the Nation on Occupational Fraud’ were in this category. Less frequently, companies may be subject to corruption and fraudulent financial statement frauds. Corruption involves a person using his or her influence in a business transaction to obtain an unauthorized benefit, such as accepting a bribe or engaging in a transaction where there is an undis-closed conflict of interest. Fraudulent financial statements are when a company falsifies its financial statements to make it appear more or less profitable.

What is the typical loss for a company that has been defrauded?

As reported in the 2006 study by the ACFE, which includes reported frauds from 1,134 companies, the median loss caused by occupational fraud was $159,000 and it is estimated that U.S. businesses lose 5 percent of annual revenues to fraud. Nearly 25 percent of the cases reported lost over $1 million or more and there were nine reported cases causing losses of at least $1 billion.

How should an effective anti-fraud program be structured?

Major elements of an anti-fraud program include (1) creating a culture of honesty and high ethics, (2) having proper internal controls and procedures in place and evaluating the effectiveness of these programs, and (3) having proper oversight in place.

Creating a culture is accomplished by having clear codes of conduct, conflict of interest policies and ethics policies. It also includes creating a positive work environment by having recognition and reward systems, equal employment opportunities and quality professional training. Hiring practices should include thorough background checks, and promotions and evaluations should emphasize the importance of high ethics and values.

Proper internal controls include having good segregation of duties, internal audit checks and clear authorization policies for expenses. A measure commonly taken, and required for public companies by the Sarbanes-Oxley Act, is to have an anonymous reporting mechanism in place for reporting wrongdoing.

Tips are the most common means of fraud being detected.

The oversight process may include an audit committee or board of directors. Oversight roles should include evaluating management’s identification of fraud risks, implementation of anti-fraud measures and the creation of setting the ‘tone at the top.’

What considerations should be taken into account when implementing an anti-fraud program?

The first thing to consider is to identify the acceptable level of risk. Costs versus benefits of controls always need to be considered and attention should be given to those areas in which the risk of fraud is greater. Computer security is often a critical element and experts should be consulted. Knowing your business and where the risks of fraud exist is the first step.

If a business suspects a case of fraud, what course of action should be taken?

When allegations of fraud exist, it is critical to take immediate actions. Developing a team should be the first step, which should include legal counsel, trained fraud investigators, such as a Certified Fraud Examiner, and human resources. A plan of action should be developed and agreed to by all parties. In some instances, you may want to include local law enforcement at the onset of the investigation. Assuring that a thorough and fair investigation takes place is critical due to the fact that these matters are highly sensitive and litigious. Taking the proper steps is imperative in protecting the integrity and reputation of your company.

LINDA SADDLEMIRE is partner at Vicenti, Lloyd & Stutzman LLP. Reach her at (626) 857-7300 x256 or