Matt McClellan

The holidays are a time for celebration, but company-sponsored holiday parties can lead to legal trouble. The combination of alcohol, dancing and games, along with the perception that the party is not work-related can create a dangerous environment in which the employer can be hit by several types of lawsuits.

“People generally focus on liability that can be created by alcohol and auto accidents because that grabs the headlines,” says Martin J. Saunders, partner with Jackson Lewis LLP. “However, there are a lot of other issues that may create more or potentially larger liability for the company than auto accidents.”

Smart Business spoke with Saunders about how employers can protect themselves and still allow employees to celebrate.

What are some of the legal issues that can arise from holiday parties?

In the discrimination area, there is potential for sexual harassment or inappropriate jokes that are sexual, religious or ethnic in nature. But there is also liability in the wage/hour area, because when people bring suits they don’t generally bring a suit on one particular issue — they lump in everything under the sun hoping that something sticks.

For example, you may send employees out to buy party supplies during their lunch hour. Generally, if you asked the employees if they expected to be paid for that time, they would not have thought it was a big deal. The employees were on their lunch break, the store was on the way, etc. But as a matter of law, if people are engaged in work, then they are supposed to be compensated. At a later time, when the situation between employer and employee has gone south, you end up with another claim.

Sexual harassment is one obvious issue that can come up when people are consuming alcohol and view themselves as being off work and, therefore, believe the company is not responsible for their conduct. The conduct of co-workers (especially if it is a supervisory and subordinate employee) can easily create offensive working conditions and conceivably create the perception of an ‘exchange’ — that sexual favors are expected in exchange for favorable treatment at work.

How can companies limit sexual harassment liability?

Employers should have and disseminate a strong policy prohibiting sexual harassment at work and at work-sponsored events, such as parties, picnics, etc. Employers should also remind employees prior to the event that sexual harassment is prohibited. Policy distribution and enforcement are essential.

In some instances of harassment, there will be an immediate reaction. That is actually quite rare. It’s more common that no reaction happens that day or the next, but down the road when something goes sour between the employee and the company or the supervisor, then what happened at the party becomes one of many instances that are thrown up as examples of a hostile work environment.

How can employers avoid religious discrimination when planning a party?

Although not necessarily unlawful, hosting an office Christmas party where attendance is implied to be mandatory may offend employees who do not celebrate Christmas. It could potentially lead to claims of religious discrimination or a religiously hostile work environment. An office Christmas party in and of itself generally will not support a claim for religious discrimination. However, it may be used as evidence to support a broader claim of religious discrimination. To limit exposure, keep celebrations secular.

What steps can companies take to limit general liability?

The easiest solution is to not have the party. However, if people want to celebrate and go out on their own, the company is still responsible if, for example, a supervisor makes an inappropriate request of another employee outside of the work environment.

Aside from not having a party at all, there are several things the company can do to limit its liability. First, make sure employees know your workplace substance abuse policy and that the policy addresses the consumption of alcoholic beverages in a work-related situation or office social functions. Use every communication vehicle to make sure your employees know the policy. Then, train your employees, both supervisory and rank and file, to make it clear to them that it is a company-sponsored function. The same rules that apply at work apply at the function. Even if alcohol is being served, the same decorum is expected.

What can be done at the party to limit liability?

Consider having the party off-site and have that establishment share responsibility (and potentially liability) for consumption of alcohol. If you do serve alcohol at an office event, consider hiring a professional bartender. The bartenders should have exclusive authority to pour drinks and cut people off if they have had too much to drink. Also, instruct the bartender to stop serving alcohol one or two hours before the party officially ends.

Avoid serving lots of salty, greasy or sweet foods, which tend to make people thirsty. Serve foods rich in starch and protein, which stay in the stomach longer and slow the absorption of alcohol in the bloodstream.

You can consider having someone act as a ‘designated driver’ or the company can reimburse employees for reasonable cab fare. Find somebody who would agree to chaperon the party and ensure things don’t get inappropriate.

Or, you could reinvent the office party concept. Why have the typical office party? Try something new, like an indoor carnival, group outing to an event or volunteer activity with a local charity.

Martin J. Saunders is a partner with Jackson Lewis LLP. Reach him at (412) 232-0404 or

With the vast array of telecommunications choices and unproven technologies available to businesses, how can they determine which solutions will work to meet their unique operational needs and be the most cost-effective?

“The variety of options available to large companies only adds to the complexity. There are too many competing carriers and technologies,” says Shane Heise, president of Simplify Inc., a firm that helps large multi-location corporations simplify and optimize their communications lifecycle management. “It makes for a world where companies are forced into being reactionary and devoting too many resources to deal with the chaos. This is the opposite of any best-practices approach; but it’s the norm that the industry creates.”

Smart Business spoke with Heise about how to make the right choices that fit your telecommunications needs.

What telecommunications challenges are companies facing right now?

There is a lot of uncertainty in the marketplace right now when it comes to telecommunications. Much of that is due to consolidation in the industry. Additionally, the traditional way of buying telecommunications (local, long distance and data products) has changed because of different technologies available today, some to which people have never before had access.

Most companies today hear buzzwords like VoIP and SIP, but they don’t have anybody on staff with the expertise to even know if those are the best strategies for them. Are they going to save you money long-term? What is the return on investment? Could going to one of these new technologies increase productivity?

Can you really rely on your carrier for these answers? They aren’t going to give you an honest appraisal of their products compared to those of their competitors. The key is opening your mind and saying, ‘I do have those challenges and I know there are a lot of technologies out there, but I don’t know how to uncover what’s best for me.’

How are companies dealing with these challenges?

The traditional telecommunications provider’s tactic is to lock you up in a long-term contract, or try to consolidate all your spend with them as a single provider. They tell you that the more you spend, the better your price points.

However, that’s not necessarily true. You don’t have to give everything to one carrier to get the best price. You don’t have to sign high-commitment, long-term contracts with a single provider. You can consolidate everything into a handful of companies and still get the best solution at the best price, while still doing what is right for your business instead of just doing things the way they’ve always been done.

How can this be done?

Instead of working with an account representative that proposes the same old contract renewal with a few minor changes, consider using a dashboard that identifies trends and assesses your current situation. Then take action to improve technology, reduce cost, etc. You can proactively identify, assess and take action, or reactively work within the constraints of a traditional contract renewal. Which would you rather do? We recommend using a strategic solution process that puts together short- and long-term technical, cost-effective solutions.

How does an executive team ensure that they are optimized?

Great question. You need a collaborative process that leads to a strategic solution. The telcos are not invested in your business. They aren’t meeting as a team and brainstorming new solutions for you. They are proposing options that benefit them but not necessarily you. They may cooperate, but they can’t collaborate. Instead of being in reactionary mode, renegotiating and renewing each contract, companies can ensure optimization by peeling back the layers, assessing all of the telecom spend and bringing an objective voice into the conversation. It’s about collaboration. Ultimately, contract negotiation is part of the process and some renewals may be appropriate. The question is whether you arrive at your strategy based on objective input from a collaborative partner or merely a price quote from a cooperative vendor. The difference is vast. We’re trying to open the eyes of executives to what a collaborative relationship looks like and can mean to the bottom line.

How can you be sure the approach you are taking is truly strategic?

The heart of it is having the right analytics, the right insight into the provider world, and a commitment to an over- arching, specific direction. The dynamics of the industry are continuing to evolve and new technologies are available, but who has time to test all the options? Ultimately, you need to know players in the industry who have both the insight to provide guidance and the accountability to be responsible for the direction they suggest. This goes beyond the average consultant. Companies need a trusted adviser. Most successful executives wouldn’t dare go through life without a trusted wealth manager. Why would they allow the business to go without a trusted adviser for such a critical service as communications? Executives don’t just need a consultant. They need someone whose neck is on the line for any solution they suggest. They need a trusted adviser.

Shane Heise is the president of Simplify Inc. Reach him at (281) 465-6001 or, or visit

The purpose of volunteering is to help other people, but those who are being helped aren’t the only ones benefiting from those efforts. Recent research shows that employees who regularly volunteer improve both their physical health and their mental state of well being.

“Through the work performed and the social ties built by volunteering, employees can positively impact their health and the health of the community,” says Sally Stephens, president of Spectrum Health Systems.

Smart Business spoke with Stephens about the benefits of volunteering and how encouraging employees to get involved can help improve their health.

Why should employees consider volunteering to improve their health?

According to Thomas H. Sander, executive director of the Saguaro Seminar at Harvard University, ‘Civic engagement and volunteering is the new hybrid health club for the 21st century that’s free to join.’ Social capital research shows it miraculously improves both your health and that of the community through the work performed and the social ties built. New research from the Mayo Clinic shows that people who volunteer have lower rates of heart disease and live longer. Employees who regularly volunteer, especially through work, report that volunteering made them feel physically healthier and improved their sense of well being.

In what ways does volunteering benefit your health?

A Duke University study found that individuals who volunteered after experiencing heart attacks reported reductions in despair and depression — two factors that have been linked to mortality in post-coronary artery disease patients.

The benefits of volunteering include:

  • Creating a positive attitude toward employer and coworkers
  • Improving cardiovascular health
  • Lowering risk of death
  • Encouraging higher levels of engagement
  • Providing a deeper sense of pride and purpose
  • Keeping one physically active
  • Helping maintain a strong social network

Researchers say that to reap the health benefits, strive to volunteer 40 to 100 hours a year, which breaks down to just a few hours a week.

How can employers benefit from encouraging their employees to volunteer?

Studies report that employees who are encouraged to volunteer feel better about their employer because of their involvement in their volunteer activities. Employers can reap the same benefits as employees when their work force is stronger, healthier and less stressed.

Employers who encourage volunteerism among their employees recognize that contributing to the community creates goodwill and develops a person both personally and professionally. A workplace volunteer program is one way to earn that employee loyalty.

Not only can promoting volunteerism affect the health of employees, it can have a significant effect on the organization’s reputation, as the employees who volunteer become ambassadors for the company. Employees want to feel as though their company is making a real difference in the world. The impact of that goes well beyond profits.

What types of volunteering should employees consider?

It’s not as if people have to look for a voluntary association. It starts with a shift in thinking, from, ‘I am the center of the world,’ to a willingness to act toward others in helpful ways.

A few tips to start:

  • Be open-minded. It’s important to do something you love.
  • Make realistic commitments.
  • Consider volunteering time to something that the employer or employees are passionate about.

What can employers do to encourage their employees to volunteer?

Employers interested in promoting volunteerism can start by encouraging the company’s leadership to get involved. Leadership throughout the organization is necessary to really create the environment of volunteerism as a corporate value.

Some effective practices include:

  • Setting up an employee volunteering Web site, where employees can post stories and pictures, and comment on others’ volunteer work
  • Customizing messages for middle managers that show support for volunteerism and explain its benefits to the company and its employees
  • Getting HR to advocate for volunteerism. Volunteer projects can be used for employees looking to develop project management or related skills
  • Considering an all-company, single-day volunteer event to motivate employees to become more involved. OfficeMax, for example, shuts down nearly its entire company one day every October to give back to local schools in more than 1,000 cities nationwide
  • Establishing a systemized process where employees can search volunteer requests from nonprofit organizations
  • Offering skill-based volunteering
  • Running a campaign to help build a spirit of volunteerism in the workplace culture
  • Creating special events where employees can volunteer together

The workplace is an excellent place to promote volunteerism and recruit volunteers. Whether large or small, local or national, any business can be a source of volunteer power in the community. And volunteer programs in the workplace are most successful when they are based on integrating the priorities of the company, the interests of the employees and the needs of the community.

Sally Stephens is president of Spectrum Health Systems. Reach her at (317) 573-7600 or

So you’ve decided to switch to an integrated telecommunications solution. What next? Many businesses are choosing unified/integrated solutions with phone, video and Internet in a combination package that provides flexibility and cost savings. The conversion process can be daunting, especially if your current system hasn’t recently been upgraded, but Call One president Chris Surdenik says hiring a good, knowledgeable team can make the process go smoothly.

“It’s never the technology that causes problems during the conversion,” Surdenik says. “It’s always the people behind it.”

Smart Business spoke with Surdenik about what the process entails and how to ensure that your move to an integrated telecommunications solution goes smoothly.

Once you’ve decided to switch to an integrated/unified telecommunications solution, what’s the next step?

The first thing you need to do is an analysis of your current network. You need to check everything from physical connectivity, meaning cabling, and you need to ensure switches are up to date and that your data network will be able to handle the additional stress of an integrated solution.

If you find that you are lacking on the network side, you are going to have to have network design done and put together the architecture for your network.

Is that an intensive process?

It depends on the size of the organization and how much effort and how fast you want to run with it. Typically, for a small organization, an analysis like that could be done in two days. For a large, multilocation organization, it might take a month or two months.

And if your data gear is outdated, it’s more than likely you will have to upgrade it.

If network is ready to go, what’s the next step?

Then the conversion process involves either migrating to a new hardware solution within the organization, meaning an in-house, on-premise, VoIP-integrated solution, or migrating to a cloud-based solution.

The conversion process for both of those would typically involve new wide-area network connections, different new pipes brought into the premise to connect to the outside carrier that is going to carry your traffic to the rest of the outside world.

How long does that take?

The conversion process for the installation of the new pipes, for the porting of telephone numbers, typically could take from 90 to 120 days. A lot of it can be run in tandem, so you’re not just installing equipment, then doing the pipes; you can do a lot of these simultaneously. Once the network analysis is done, it takes the same amount of time to get everything implemented and reach a smooth conclusion.

You mentioned migrating to an integrated or cloud-based solution. How do you know which choice is best for your organization?

It comes down to how much flexibility an organization desires in this integrated communication solution. The in-house systems will typically allow a customer to be more flexible or customized, whereas a cloud-based solution will tend to be a bit more cookie-cutter.

What should organizations expect from a high-end provider during the conversion process?

Expect to have a dedicated team for this project. If you hire a top-notch company, it will provide a project management team to ensure all the wiring, equipment and the wide-area network connections are working and being installed according to the timetable that was agreed upon at the beginning of the project. The technology, frankly, is a bit of a commodity now. The implementation of it and how that process is handled is really what separates the men from the boys in this business.

How can you know the company you choose will have a dedicated team running the conversion process?

You need to demand it. You need to make it one of the requirements for a project of this scope. You cannot let the organization you are working with dictate whether you are going to have a team or not. That has to be a requirement. Also, you will want to check references. Check with the Better Business Bureau to ensure the company you are going with is reputable and has treated its clientele the way you want to be treated.

Once the integrated telecommunication solution is in place, how can you measure the return on investment?

That will vary from organization to organization. I recently read a case study about an NHL hockey team that implemented a unified solution. When inbound callers came into the customer service queue, it linked the incoming phone number and did a search in the billing database for that number. If it was a season ticket holder, or someone who had spent a lot of money on skyboxes, entertainment, etc., it prioritized those calls and put the people it felt were higher priority at the front of the line.

So the organization is better able to satisfy big-spending clients, rather than making them feel like part of the pack. The ROI can be measured by how many of those large clients are retained. Also, you can measure how much more those big-spending clients spend in the next few years.

There is a very real customer service experience change when you utilize a unified solution properly. It will give you a leg up on your competition because so many people aren’t able to do that right now. That differentiation — distinguishing yourself and your organization — that is what this is all about. Make your clients feel they are getting the best service possible, whatever the business is. With some imagination, you can achieve that with a unified communications solution.

Chris Surdenik is president of Call One. Reach him at (312) CALL-ONE.

Editor’s note: This is the first of a two-part series. Next month’s article will look at the use of specialty drugs.

Employers’ health care costs are skyrocketing, and a major reason is employees who rely on expensive brand-name drugs when other effective options are available at a fraction of the price.

But employers can counter that tendency by implementing a well-designed and managed pharmacy plan, which can provide incentives for employees to use lower-cost options instead.

“A managed pharmacy plan takes advantage of multiple levers that are used to manage pharmacy costs, while at the same time delivering a benefit that provides safe and effective medication options for providers and members,” says Steven Marciniak, director of pharmacy for Priority Health.

Smart Business spoke with Marciniak about how a properly designed pharmacy plan can improve your bottom line while keeping your employees healthy and happy.

How does a managed pharmacy plan work?

A managed pharmacy plan breaks down most therapeutic categories and does a comparative analysis of the drugs available in each class, taking into account factors such as the relative effectiveness, side-effect profile, route of administration and cost.

Most plans have a pharmacy and therapeutics committee made up of pharmacists and practicing physicians who do the analysis. The committee starts with a therapeutic category, such as drugs that treat high blood pressure, and lays out the drugs available, including any subgroups. Then the committee analyzes those drugs — do all the drugs do the same thing, do they all have the same side effect profile, are there generic brands available? The therapeutic class is managed based on the committee’s decisions. Management may consist of step therapy, quantity limits, or other utilization management protocols.

What are the benefits of using a managed pharmacy plan?

The benefits are an absolute essential. While many plans are approaching an 80 percent generic use rate, about 80 percent of the cost is still attributable to brand-name drugs. A managed pharmacy plan positions drugs on the formulary in a way that drives utilization to the most cost-effective products.

How do tiered formularies work?

A tiered formulary works by assigning every drug on the formulary to a specific tier, and then creating co-pay or coinsurance levels that align with each tier. The most cost-effective drugs are placed on lower tiers, while more expensive drugs are placed on higher tiers. A typical five-tier formulary designation would be generic, preferred brand, non-preferred brand, preferred specialty and non-preferred specialty. The employees’ out-of-pocket cost would usually increase at each step of the tiered formulary.

For example, within the PPI (proton pump inhibitor) class of drugs, there are brand-name prescription drugs like Nexium and Aciphex. Also, Prilosec is sold over the counter, and Protonix is available generically. Clinically, the drugs all deliver similar results. There is no evidence that shows one is any better and all have a similar side effect profile. So, the company looks at cost and sets up step therapies. In a managed plan, that means you will first have to use an over-the-counter drug, and the company will pay for it.

If that doesn’t work, you move to the next step, to the generic and, if that doesn’t work, to the brand-name drug. But you have to go through these steps so you’re not using the most expensive product right out of the gate.

However, a drug would never be unavailable to a patient if it were better for him or her, even though it is more expensive. That’s why there is such detailed analysis that allows the plan or the employer to make these decisions.

How can using a tiered formulary benefit a company’s bottom line?

Tying higher member cost to higher cost of care often leads to a better-informed consumer. A tiered formulary tends to drive utilization toward lower-cost, just-as-effective medications. Not only do plan sponsors/employers have lower costs as a result, but members spend less, as well. And lower out-of-pocket costs can lead to regular refills and better compliance, resulting in a healthier work force.

For example, with conditions such as high blood pressure or cholesterol, people feel OK and are not as inclined to get a prescription filled, especially if it is $40 a month. But it’s obvious that if they get it filled every month, year after year, that person is going to be healthier, leading to a healthier work force and better productivity. However, if that person is paying $10 for a generic as opposed to $40 for a brand name, it’s easier on the wallet and he or she is more inclined to get that prescription filled every month.

Do tiered formularies work for every company?

There’s no reason a company shouldn’t utilize a tiered formulary, but communication is important to making it work. Showing treatment alternatives for a particular condition can raise employee awareness of those alternatives. Employers have a lot of latitude in establishing member cost share across the tiers. And a tiered formulary allows for more detailed utilization reports that employers can use for trending, forecasting and fine-tuning benefit structure.

Can a company create its own managed pharmacy plan?

Few companies have the expertise to develop their own managed pharmacy plan. Add to that the fact that the pharmacy benefit is very dynamic, with new drugs available every week, patent expirations and what’s around the corner, and employers should look for expertise on these topics with their insurer or pharmacy benefit administrator.

Steven Marciniak is the director of pharmacy for Priority Health. Reach him at (248) 324-2820 or

The use of health information technology has radically changed the medical industry, as the widespread use of electronic medical records and other tools will attest.

However, if a company wants to implement health IT, it should look for a carrier that has developed and executed a plan to unlock the benefits of that technology.

“The first step is to change patient care — the whole patient experience — so we can take better care of patients without the hassle of bringing them into the office when we don’t need to,” says Dr. Nabil Chehade, the assistant medical director of medical specialties and the director of medical informatics for Kaiser Permanente. “To be more efficient, basically. The second step is focusing on preventative care.”

Smart Business spoke with Chehade about how health IT has changed the way physicians care for patients, and why these changes matter.

What type of health IT do you use in your work?

All of our physicians do complete documentation of patient information on a common platform. Patients can send secure messages to their doctors as all doctors participate 100 percent. There is no opt-in or opt-out.

We also have a portal called Affiliate Link for our affiliated providers who aren’t part of our medical group. We make it so they can see the clinical documentation even though they are not part of our internal organization and they can respond back and forth as needed.

In addition, we have a homegrown electronic disease registry tool. It pools all the data directly from EMRs as well as other data, like claims, pharmacy, labs and radiology, and puts them together so a physician can take a look at specific patient populations. This allows the physician to look at the prevalent diseases in a population or to see lab results for a population rather than only being able to see data on an individual patient basis.

How does health IT change the way physicians do their job?

In the first couple of years, our physicians were getting acquainted with how to use these tools to replace old processes. Initially it created quite a bit of inefficiency. Suddenly, they had to use a computer; they had to do computerized order entry for labs, x-rays, and prescriptions.

Then we started leveraging the technology to change the way we care for the patient. We started using the tools in a different way.

What has been done?

First, we’ve leveraged these tools to improve the way physicians review a patient’s chart. Electronic medical records are easier to use: Physicians don’t have to carry a big chart everywhere, they don’t have to hunt through the chart to find the information they want. Sometimes the chart wouldn’t show up at their desk when the patient showed up.

Now it doesn’t matter which office they are in — they have access to the chart, even if they’re working from home. We give our physicians access to the medical records at any point of service, anywhere.

So the chart is easily accessed and user-friendly; it’s very well-organized electronically. That is a big plus for workflow and for better patient care.

Second, we’ve changed the way we care for patients. Instead of thinking about how an office visit works — how to fit everything into a 15- to 20-minute window — we can think about patient care differently, because the boundaries of paper charts and face-to-face visits don’t always have to be in play.

We are able to do a lot of things differently because, as an integrated health system, we are not bound by a lot of the criteria for generating income. In other words, physicians do not necessarily have to have a face-to-face visit with a patient in order to generate income.

So if a face-to-face visit isn’t required, we try to schedule telephone encounters. If you know ahead of time you want to follow up with a patient in six months because they need to get an X-ray, instead of scheduling them for a face-to-face visit, you schedule them for the X-ray and a telephone follow-up a few days later.

Their name will show up on your schedule with a notification that the patient is expecting your call at a certain time. You call the patient, review the X-ray with them, see if they need any other follow up, and document it in the EMR. You saved the patient the trip, you took care of the patient, and you solved their need. It’s a win-win situation for everybody.

How does health IT affect preventive care?

We have a couple big initiatives, including several tools we are using to proactively care for patients. One is called best practice alerts. When a physician sees a patient face-to-face that the system knows is potentially diabetic and has not had a recent blood test, an alert will pop up saying the patient is overdue for blood tests.

These alerts don’t just pop up for the primary care physician, but at all points of care. For example, when a woman who is overdue for a mammogram is seeing a urologist, our system will alert the urologist to order a mammogram. We make sure that not only the urologist gets the results, but also the primary care doctor, as well as the patient.

And, these alerts don’t just pop up for primary care. It’s across all points of care. Even if it’s a diabetic issue and the patient is seeing an orthopedic surgeon, the surgeon is still going to order the necessary tests.

Why is this so important?

Because we know that some patients have many more visits to specialty care than primary care. If we rely only on the primary care physician to do this work, we are going to miss a lot of opportunities for preventative care for chronic diseases. Everyone who interacts with the patient has the information to be able to help with screening and prevention.

Dr. Nabil Chehade is the assistant medical director of medical specialties and the director of medical informatics for Kaiser Permanente. Reach him at

Many companies have crumbled under the weight of their own infrastructure when their revenue stream slows to a trickle.

But just because your business comes to a halt doesn’t mean your expenses vanish, as well. If your business is interrupted, are you prepared so that interruption doesn’t lead to the demise of your company?

“Business interruption can lead to catastrophic losses,” says Philip Reardon, director of Aon Risk Accounting Management and Administration. “Unless you have adequate insurance that has transferred the risk to insurers, it can leave a heavy impact on the balance sheet and ultimately lead to the failure of an organization.”

Smart Business spoke with Reardon about how business interruption coverage can protect your company in times of crisis.

How does business interruption coverage work?

It’s essential to understand that BI coverage is a component of a property policy, which covers the physical assets of an organization and the business interruption element that goes with it.

In order to have a business interruption claim, your property policy must be triggered by physical damage to an asset. Damage triggers the policy, and as a result of that damage and its impact upon the business, BI coverage comes into play.

There are two components of BI coverage; the first is a loss of gross profits, and the second is an extra expense component. The loss of profits component covers the revenue of the organization, less any variable expenses that may cease during a period of interruption. Its purpose is to protect the bottom line. Gross profits coverage is designed to cover all the fixed costs that continue on in the event of a loss, plus the net profits of an organization. Rather than generate revenue from the sale of products, for example, the insurance company will pay the gross profit element and those costs will be covered.

In addition to that, there is an extra expense element to the policy that covers the additional costs associated with trying to mitigate that loss of revenue.

What are some expenses that occur as a result of business interruption?

There are several fairly common expenses. If your organization recently had a major fire and leased temporary premises, the extra leasing cost is covered under the policy. Also, if an organization has more than one manufacturing site and loses one, there may be the opportunity to increase the production coming out of the remaining sites. You can work around the clock at those remaining sites and ideally maintain the same level of production. Obviously, there is additional cost and labor associated with the increased production, and those costs are covered under the extra expense component.

Some organizations may be faced with the opportunity to contract with a competitor. If competing companies have a fairly amicable relationship, they may have an agreement that if one has a business interruption, the other will help out. This gives a client the opportunity to continue to manufacture its product and maintain its customer base. But certainly the competitor will make hay while the sun shines and charge you a premium to use its facilities and equipment. If it does that, the additional cost of going to a competitor is covered under the extra expense component.

What are some things companies can do to cover extra expenses?

Clients are obliged to mitigate their losses to the best of their ability under the terms of the policy. So more often than not, an organization will have some level of mitigation it can employ in the event of a major interruption.

Insurers actually prefer to spend money on mitigation than to hand out money on a loss of profits claim, because a loss of profits claim will invariably go on a lot longer than an extra expenses claim. Insurers prefer to have that extra expense coverage implied and utilized by the client.

There are two elements of extra expense. The first is expense to reduce loss, which basically means you can spend a dollar in order to avoid losing a dollar. Of that potential lost gross profits, you can spend that amount in order to prevent losing it.

The second element is a separate extra expense clause best defined as a separate sublimit — it’s a separate bucket of cash. If there is anything that falls outside the realm of the expense for reduced loss, then it falls into that extra expense category. It’s a safety net for additional spending that a client may incur trying to mitigate its losses.

Also, a client may potentially elect to insure extra expense only. An organization may be comfortable with its own mitigation options that it elects not to have coverage for gross profits and will only cover extra expenses.

In doing that, an organization must be comfortable with its mitigation options because any loss of revenue is subsequently not covered.

How can companies determine what their plan should be?

It is essential for organizations to regularly review their business interruption coverage because there are changes every day in business, and if you don’t change, you’re going to fall by the wayside.

Many organizations have diversified or made acquisitions, and they must make sure these changes are reflected in the business interruption values provided to insurers. In the current economic climate, if an organization simply provides the same values to the insurer it did the prior year, it may well be missing out on a premium reduction. If revenue and profits have gone down, the values you provide to insurers should go down. All other things being equal, the premium associated with that should also go down.

When companies receive a request for a SAS 70 audit, their first question is often, “What is this, and why am I being asked for it?”

A SAS 70 audit (statement of auditing standards No. 70) is one function of auditing that assesses the internal controls of a service organization. When a service organization has access to important information, such as employee banking information, Social Security numbers, etc., it needs to be determined that the manner in which this information is stored and shared is safe and secure.

“Imagine you are a big company and another company handles your payroll,” says Robert B. Brenis, CGEIT, CISA, MCP, PMP, a principal with Skoda Minotti Technology Services. “The payroll company has your employee names, Social Security numbers and access to your money, so it would need a SAS 70 because they are a service provider for your organization. A SAS 70 audit will ensure that the information shared is secure.”

Smart Business learned more from Brenis about SAS 70 audits.

How does a SAS 70 audit benefit a service company?

Being compliant opens doors for more work. A lot of companies are getting inquiries from prospective clients asking, ‘Are you SAS 70 compliant?’ If they say no, that’s the end of the conversation. It’s a great marketing tool for a lot of organizations, and it helps you identify areas where you have weak controls.

What differentiates SAS 70 from other audits?

A financial audit is the same procedure over and over again, it stays the same, every time. A SAS 70 is not a financial audit, so there is no boilerplate procedure; each audit is different.

If you have access to client data, such as employee or customer information, or financial transaction information, or if you are controlling any of your customers’ information, odds are you are going to need a SAS 70.

An example would be any company that houses other companies’ servers. They need a SAS 70 because they are controlling the backbone of your company.

Because they are different every time, does that make SAS 70 audits more difficult to prepare for than regular financial audits?

No, that’s one area in which your accounting firm can help you. They sit down with clients and prospective clients and help them figure out what it is that they need to be concerned about. They then help them identify what controls need to be tested.

What about the companies whose data is in question, do they need to worry?

No, and the reason they are asking for the SAS 70 audit of their service providers is that they want to prove that data is secure. The SAS 70 audit proves that data is under control and everything is good. It gives them a level of assurance. Going back to the original example, the payroll company having a SAS 70 audit tells you that the dollars and social security numbers you have trusted them with are safe, that everything is under control.

Are there different types of SAS 70 audits?

There are two different types. Type I is simply a report on controls placed in operation. All it really says is the service company says controls are in place, and the auditor has looked and agrees with them that controls are in place, but no testing has been done.

A perfect example is if someone says they have a lock on their server room door. For a SAS 70 Type I audit, the auditor would go over, take a look and say, ‘Yep, there’s a lock on that door.’ The auditor doesn’t try to open the door or come back unescorted to see if the door is open. The auditor just makes sure that there is a lock on the door.

How does that differ from a Type II?

Type I is as of today. A Type II audit is done over a period of time. The auditor will come in and test to see if things are in place and have been in place during that period of time. So, the auditor would try to open the door and would go back unescorted to see if that door was open.

Or, to look at another example, say you have visitor logs. The auditor will go through them and see if the people signing in or out have appropriate badge ID numbers. If you have visitor badge numbers one through five and somebody signs in with badge three at 9 a.m., then somebody else signs in with badge three at 9:15 a.m., there’s a problem.

How would a company determine which kind of audit it should have?

A Type I audit is enough to be SAS 70 compliant. Many customers often request a Type II audit from their service provider, though, to show greater evidence that controls are in place. A Type I is done when a company wants a SAS 70 audit because their customers are asking for one. Once the proper policies and procedures are put in place, a Type I audit is conducted.

Six months later, they have built up a history of following those policies and procedures. Then you do a Type II.

How often should a SAS 70 audit be done?

Minimally, they should be done once per year. It’s more common to have them done once every six months.

Are there any predefined controls that are required to be in a SAS 70?

No, as each SAS 70 is different. First, the auditor identifies the controls in place, and then identifies the tests that need to be done to prove those controls. A payroll company will be concerned about dollars and employees and all the data they have while a company that houses servers will be worried about people tampering with the servers or coming in off-hours — completely different things.

Robert B. Brenis, CGEIT, CISA, MCP, PMP, is a principal with Skoda Minotti Technology Services. Reach him at (440) 449-6800 or

MBA programs are changing just as much as the professions that they service. Tom Kennedy, director of MBA program and assistant professor of business administration at Delaware Valley College, says there are several major challenges that have forced the change.

“A lot of people have MBAs that were used to enter into investment banking and consulting careers, and the economic collapse has created a lot of questions about our curriculum,” Kennedy says. “Another challenge we face is that a lot of people are recruiting people without MBAs because they’re concerned about trying to retain them. Some people even think an MBA is a waste of parchment. Many people are starting to worry that the business school professors are more concerned with theory than with practical application.”

Smart Business spoke with Kennedy about how MBA programs have adapted to face these new challenges.

What steps can MBA programs take to meet the current challenges?

We need to revitalize our curriculums to make them more practical in application. We have to rely on the professors reworking their curriculum and syllabi to reflect that.

That’s important, because customers are requiring a shorter learning curve.

The cost of business today requires that, if executives hire you to join their business, they are expecting you to be able to jump right in and start helping the business right away.

The training cycles have been shortened. Businesses expect people with an MBA to be able to integrate into their company and think very quickly about big-picture implications, whether it’s in finance, accounting, marketing or operations. That’s the essence of a generalist MBA degree. Because of your education, you can break down those silos of business and look for the strategic solution the corporation is searching for.

In the graduate division and MBA programs, we are constantly looking at ways we can meet the market’s needs quicker, be more flexible and produce a real, value-added curriculum based on practical applications.

The academic world can be remarkably flexible. Graduate schools are evolving all the time. You’re going to see much more integrated curriculums going forward.

We’re at a crossroads, too, just like the organizations that we serve.

The final component is the ever-increasing awareness and need for getting the students out in the global marketplace. As companies become more global in their perspective and operations, MBA programs need to reflect this.

How are courses fighting the perception that they focus too much on theory and not enough on the practical?

One way is by doing more consultant work for local companies instead of the traditional case study management. Case studies mostly revolve around things that have happened already.

Forming consulting partnerships works especially well with small or medium-sized enterprises. The company comes in and explains its business problem to the students. Then, they begin to work on it and present their solutions to the company.

Helping small or medium-sized companies in real time makes the learning process livelier, timelier and more integrated.

The students can help them with anything from developing a marketing plan to a business plan. Sometimes nonprofits need help, as well, so MBA students can step in and provide consultancy to those companies to provide another perspective and another set of eyes to look at their situation.

It reinforces the idea of practical application. Here’s a real-world situation; chew on it, and present the company with alternatives to find solutions.

How can an MBA prepare executives-in-training for globalization?

One way is to send MBA students on study tours. The students get immersed in a country, and executives from the country they’re visiting talk to them about the challenges and issues they face. The use of telecommunications technology, such as Skype, to broadcast back and forth with other businesses is another way.

Third, some faculty works jointly with other colleges or universities to give the students a blend of what they need to know. For instance, I also teach at the University of Ulster in Northern Ireland, team-teaching with another professor on international marketing classes.

Americans need to understand more about how relationships are built because that’s the primary driver in global business. Americans are used to purely transactional activity. But you have to develop a relationship with people before they’ll do any business with you. We try to reflect that in our lectures.

That helps Americans understand there are different aspects and ways of doing business. You have to understand the cultural implications, the economic implications and the political implications. There is no better way to see that than to go out there, touch, feel and sense it. That really adds value to their education.

Down the road, when they get into situation where they are in a room with fellow professionals from Europe or Asia, they will have a sensitivity and awareness of where they’re coming from with their perspectives. That’s a huge challenge, harnessing those global employees into one team. It’s critical for the executives of the future.

Tom Kennedy is the director of MBA program and assistant professor of business administration at Delaware Valley College. Reach him at (215) 489-2322 or

The concept of health coaching is evolving and becoming more and more a part of mainstream health care. While health coaching once may have been viewed as something designed to help individuals address specific health risk behaviors — quitting smoking or losing weight, for example — it is now seen as an effective method to manage wellness concerns across the full spectrum of health care, from prevention to managing chronic conditions such as diabetes or asthma.

Not only will your employees benefit from improved health, but employers can benefit from health coaching, as well, says Sally Stephens, president of Spectrum Health Systems.

“Studies show that individual coaching may be the key to implementing successful worksite health promotion programs,” Stephens says, which can help improve the health of your employees, reduce absenteeism and boost productivity.

Smart Business spoke with Stephens about the role health coaching plays in health risk management, and how your company can find its own health coach.

What is health coaching, and why should companies include it in their health risk management programs?

It is much easier to prevent most diseases than to cure them. Today, more and more employers are discovering that if they can help their employees better manage their own health, they can save on future medical expenses.

Health coaching is becoming recognized as a new way to help individuals manage their lifestyles, as well as manage any chronic conditions they may have. In fact, researchers from the Centers for Disease Control indicate that ‘individual coaching may be the critical component for effective worksite health promotion programs.’

What do health coaches do?

As with traditional coaching, health coaches utilize goal-setting, identification of obstacles and use of personal support systems. Health coaches work with participants, evaluate their personal health risks and help them develop a personalized health plan, with direct involvement in reaching their goals.

Dedicated health coaches also develop a relationship of trust with the individual employee to help them work through issues that are often very personal.

How does working with a health coach benefit employees?

Most people desire optimal health but may have multiple barriers for effectively managing their chronic conditions or maintaining healthy behaviors. These barriers can include finances, family, work and issues with children. In the coach/participant relationship, the reason for health behavior change comes from the participant, which increases the likelihood that any ambivalence toward making a change will be replaced with a readiness for change.

The coaching process provides motivation, encouragement and health education in an atmosphere where full attention is given to the participant and where the way to self-discovery is paved.

What are the different ways to work with a health coach?

The most traditional way to work with a coach is face to face. But telephonic coaching has increased in popularity, as well, as it is often prohibitive to physically meet in person. Often, telephonic coaching is ideal, as participants might be more willing to share honestly when they are not face to face with the coach. Other avenues include e-mail and Web-based coaching. Ideally, the participant is able to choose the method that works best for that individual.

Whatever the method, it is critical that the coach can guide participants to talk about what is most troubling to them about their conditions, what they most want to change, what support they have to foster change and what obstacles or difficulties must be removed or minimized to promote healthy behaviors. Health coaching focuses on the special issues and concerns unique to each individual that fit into the context of his or her life.

What qualifications are needed to become a health coach?

Health coaches often come from health care or health-related fields. Typically, individuals who value people and who enjoy healing and relationships make excellent health coaches. Health educators, health practitioners, fitness instructors, massage and body work practitioners, yoga and movement teachers, nurses and doctors can become health coaches.

An ideal coach is someone who is seeking to learn how to listen, connect with his or her intuition, help people change and master their emotional wellness. People seeking a high level of wellness for themselves and others, who enjoy self-development, who are proactive planners and evaluators in the service of others also make excellent health coaches.

A health coach:

  • Is a facilitator for physical, mental, emotional and spiritual growth
  • Helps guide the individual to achieve a balance between doing and being
  • Is an aide in encouraging aspects of the person that are filled with wisdom
  • Is a resource for learning about self-care and natural health practices
  • Listens for choice-making and truth-seeking
  • Is a teacher who promotes higher energy and improved success in the coaching relationship

The health coach helps participants develop a plan for change and provides the support and resources to move toward a more vital, purposeful, enjoyable and satisfying life.

Sally Stephens is president of Spectrum Health Systems. Reach her at (317) 573-7600 or