With over 90 percent of all medical negligence claims ultimately being settled, why aren’t most claims quickly resolved? Why do parties go to litigation that may drag on for years? A good share of the problem exists with the attitude of the parties involved.
“As a practicing attorney, I believed that professional liability insurers wanted their defense attorneys to delay cases for as long as possible,” says Robert Blasio, president and CEO of Western Litigation Inc. “Only years later, after I had left private practice and entered the insurance industry, did I learn that virtually all for-profit professional liability insurers want their defense attorneys to resolve cases as quickly as possible, thereby allowing those insurers to take down reserves and increase capital and surplus for the writing of new business.”
Smart Business talked with Blasio for his insights on how attitudes can be changed to more expeditiously settle health care claims.
What is the first step to speeding up the settlement process?
The first step is to realize that all parties want to accomplish the same objective. In most cases, the claimants want to know why the adverse outcome happened, what will be done to prevent future occurrences and what compensation they are going to receive for their problem. They want this done sooner rather than later. Most health care providers want to get the matter behind them and get back to the business of providing health care. The insurers want to mitigate their liability and settle as soon as possible so as not to tie up funds that they could use to write new business. All sides are essentially of the same mind.
If the principals involved are all looking for a quick resolution, why isn’t that happening?
Unfortunately, too many attorneys have forgotten that they are supposed to be ‘counselors at law.’ With hourly billing, or contingency fees, it has become too tempting to look at the bottom line for the attorney or law firm and stretch things out rather than look for what is quickest and best for the litigants.
Is it necessary for a case to go into litigation before a settlement is reached?
No. Because of the time and costs, litigation is really a lose-lose proposition. Although there is inherently more emotion involved in the health care arena because of the professional reputation of the defendants, it remains important to impartially evaluate each matter and to make an intellectually honest decision before resorting to litigation.
What are the steps to follow to attempt to resolve the situation without litigation?
The overall situation must first be evaluated. The patient, the health care provider and the insurance company must all be transparent and share information. When everything can be placed on the table at the beginning, there is a much better chance that there can be a quick resolution that will satisfy all parties. When a matter enters litigation, there are automatic roadblocks that prevent this kind of upfront discussion. A case drags on, expenses increase for everyone and, then, just as the case is finally ready for trial, the parties finally see the perils of trial and begin discussing a resolution. It is also important to make each party understand completely the dangers of not settling at the outset of each case.
Do these processes apply only to claims in the health care field?
Actually, no. This approach is applicable in any situation where a person or group feels that they have been hurt in some way by someone else’s actions. The sooner everyone can move on, the better off they are all going to be.
What are the roadblocks that have prevented quicker settlements?
People may not recognize that they have a choice. Once cases enter litigation, the lawyers may not work to satisfy their clients’ true objectives. Also, the court system and its discovery rules prevent sharing of information. Lastly, sometimes simple greed by one or more of the parties creates an obstacle.
Will a quick resolution always be the best?
There will always be cases that need to be tried. However, the general rank and file could be settled very expeditiously to the satisfaction of all. Even if a case must be tried, it is still a good idea for all parties to have as much information upfront, thereby allowing them viable options to the litigation process.
ROBERT BLASIO is president and CEO of Houston-based Western Litigation Inc., a division of Gallagher Healthcare Insurance Services. Reach him at (713) 935-8820 or by e-mail at Robert_Blasio@ajg.com.
The lower the unemployment rate, the harder it is to find and keep qualified employees. But training and focused education can help solve some of those vexing problems.
“Training should not be looked at as an expense,” says Yolanda Levell-Williams, executive director at Hillsborough Community College. “It is an investment that supports your company’s strategic goals. It is not just a class; it is an enhancement to an organization’s strength and longevity. Employees can expand job knowledge and enhance the skills they need to advance while increasing your competitive position.”
Smart Business spoke with Levell-Williams about some of the things to consider in your corporate training programs.
Beyond the obvious, why offer training?
The reason or reasons for employees not performing at their optimum level are varied. For instance, they may not be keeping up due to changes in technology. If you make the investment in equipment and processes but don’t provide employees with the proper training, you are not going to maximize the benefits of that investment.
Organizational refinement is another area that may challenge an employee. If the employee is not told during training why changes are being made and how to best work with them, the benefits of those changes are not going to be fully realized.
Thirdly, generational communications can present problems. The more diverse the work force, the more important it is to train and educate your employees to be better communicators. If they can’t communicate, they can’t get the work done.
On the positive side, employees who receive training as needed to keep up with changes will be more comfortable in their jobs. They will enjoy their jobs more and they will perform at a higher level, thus supporting your company’s strategic plan and strategic goals.
Is training an ongoing process?
A strategic plan for any company is an ongoing process. If training is going to support that plan, it must continue to evolve and provide employees with the skills needed to properly do the job.
The training can be specific to changes in your organization, or it can be general, such as time management or team building. Either way, it provides an impetus for your company to elevate itself.
Should training be on company time?
Generally, yes. If the training is to support the company’s goals and to increase productivity, it should be on company time.
Who pays the costs?
The company should. Any company that invests in its employees has a much better chance of reaping the benefits of a more efficient, flexible and stable work force. These employees also will provide better customer service and maximize their resources.
Your business goals should be aligned with staff competencies. The better they are trained, the more competitive they and the company will be. There are resources in the market to help your management team. For example, Tampa Bay WorkForce Alliance works with local companies through its Competitive Edge Award and On-the-Job Training initiatives. These programs assist with training for existing and new employees and can increase overall productivity and competitive advantage.
What can be done to keep well-trained workers on the job?
Training helps employees be more productive and confident. A well-trained, confident employee is a tremendous asset.
Companies that establish career paths help employees know where they stand. Give them incentives to stay and let them know how any training is going to keep them on track with planned upward advancement.
Will incentives help?
Yes, but they don’t necessarily need to be financial. Time off awarded for accomplishing a certain number of hours in training can be a good incentive, in and of itself. If the training results in some type of certification, degree or award. An individual plaque for display can be even more effective.
Because employees want to feel good about where they work, personal relationships gained through group training can be an additional incentive. Competitive wages are important, but recognition and feeling like they’re a part of an important, well-trained team will help convince them that your company cares about them.
It’s a fact: organizations that are able to sustain the highest levels of productivity and financial success are those with the most engaged and loyal work force. Companies that don’t provide training are going to lose competitive advantages. Which one are you?
YOLANDA LEVELL-WILLIAMS is executive director of Hillsborough Community College and partners with Tampa Bay WorkForce Alliance for training initiatives. Reach her at (813) 259-6010 or firstname.lastname@example.org.
Because people are a company’s most valuable asset, they should be treated that way. When you, as a top manager,treat them with the care and respect they deserve, you can greatly reduce the cost of continually replacing them and training new employees.
According to a November, 2005, U.S. Job Recovery and Retention Survey, more than 75 percent of employees say they are looking for a new job. So what can you do to reduce that percentage in your business?
“People don’t leave companies, they leave people,” says Seymie Wilkerson, area vice president at All Medical Personnel in Tampa. “Most people leave because of a bad relationship with their direct supervisors. Building good relationships with employees is critical for managers.”
Smart Business talked with Wilkerson for her insights into retaining the best talent.
What are some important reasons to retain the best talent?
Good, long-term employees are always in the best position to provide high-quality customer service. They also help their coworkers feel more secure, and secure employees are better employees.
Another advantage of long-term employees is that they can develop better relationships with customers, and their retained knowledge is going to impact every aspect of your business. The more employees you keep on board, the less it’s going to cost you to hire and train new people.
What are some key ways to retain good employees?
You must make employees feel invested from day one, starting with the hiring and orientation process. To accomplish this, you have to work with each individual employee to develop a career path for him or her. This lets them know the company values them, will invest in them, and has plans for them.
Let employees see the big picture. Make sure they know what is expected of them, and tell them how important their job is and how their performance relates to the company’s overall success.
Train all managers and supervisors, and at the minimum find out what training might help other employees and encourage them to go for it. When possible, provide the time and funding as well.
Finally, when employees do leave, conduct exit interviews. Find out what you might have done to keep them and then see how that applies to the rest of your team.
How important are salaries to retention?
Salaries are an important factor but not the most important. Make sure that your salaries are competitive. At least average, but not necessarily the highest in town.
Benefits, working conditions, recognition, the knowledge of an individual’s importance to the company, and his or her belief in the company are more important than salary.
If your company is not recognized as the employer of choice in your community, strive for that status by:
- providing wellness programs
- providing ‘lunch-and-learns’
- inviting area professionals to make presentations, perhaps on financial planning, diet programs, insurance plans or working with a bank.
How can a manager formally recognize outstanding performances?
First, make sure the lines of communication are open. Provide suggestion boxes or some other method to allow employees to have anonymous input. Openly encourage them to make suggestions, then let them know where their ideas stand.
If you implement the idea, recognize the employee. If, after completely analyzing an idea, you decide not to implement it, let the employee know why not.
Another way to show your appreciation is by recognizing birthdays and other special events. Find out what individual employees like and surprise them. Some like flowers, others don’t. Some like candy or fine dining. Different departments might be motivated by different things. Younger people might appreciate something family oriented. Older employees might prefer prescription plans or home health care plans.
One other idea is to create loyalty programs, like 100-percent paid health insurance after four or five years on the job.
In all your dealings with employees, it is important to be fair but flexible. Most of all, be creative.
What are some pitfalls to avoid?
One pitfall is ignoring good employees because too much time is spent with problem employees or on other issues. You can’t assume that a person who never complains doesn’t need attention. So spend time with everyone.
Finally, not keeping communication lines open is perhaps the worst offense of all. The lack of regular, positive feedback is a frequent reason why an employee decides to leave. The worst thing to do is guess at what an employee wants or needs, so get clarification whenever necessary.
SEYMIE WILKERSON is area vice president with All Medical Personnel in Tampa. All Medical Personnel won the Tampa Bay WorkForce Alliance Business Excellence Award for excellence in hiring practices in 2006. Reach her at (913) 289-4474 or email@example.com.
It is becoming increasingly common for businesses to be audited not just by the IRS but also by state and local taxing agencies as well. Whether or not the taxing agency is right, how the business handles the audit and, if necessary, the appeal, will have a tremendous bearing on the outcome.
“In addition to federal tax audits, state and local taxing jurisdictions are becoming more aggressive and sophisticated in finding both potential taxpayers (especially those out-of-state) and potential taxes due,” says David C. Blum, tax partner at Chicago’s Levenfeld Pearlstein, LLC. “You must be proactive and take every step of the audit seriously.”
Smart Business talked with Blum for his insight on handling tax audits and appeals — referred to as “tax controversies.”
What are the steps in a tax controversy?
It starts when the taxing authority notifies the taxpayer of its intent to conduct an audit, usually via a ‘notice of audit’ sent through the mail. The scope of the audit will be set out in the notification. This will generally include who is conducting the audit, the type of tax involved, tax years at issue and the proposed start date of the audit.
In most instances, the auditor will go out to the taxpayer’s business to review its books and records. If the auditor determines that additional taxes are due, the auditor will generally provide the taxpayer with a notice of proposed assessment. At that point, the taxpayer can choose to pay the assessment or protest some or all of it by filing an appeal. The form and procedure for a proper appeal, as well as possible settlement opportunities, will depend on the particular taxing agency.
What should be the initial response to an audit?
Upon receipt of a notice of audit, the taxpayer should contact its tax advisers. This is because there are many things that a business should and shouldn’t do before and during an audit. In certain circumstances, an audit may be inappropriate or a taxing authority may not have constitutional authority to impose a tax in the first instance thereby obviating the need for an audit. A good adviser will be able to identify this. Additionally, there are things that can be done during the audit to either eliminate a proposed assessment or to set the tone and position it for a successful appeal.
What is the best advice during the audit?
Be prepared, responsive and cooperative. The taxpayer should demonstrate a willingness to work with the auditor and provide him or her with the requested information. If an auditor feels that the taxpayer is hiding something or he or she is not getting all of the requested information, the auditor may be more willing to dig and could become uncooperative or unreasonable for legitimate issues or concerns raised by the business. Ultimately, auditors generally have the power to subpoena information relevant to the audit. So you will likely have to provide the information anyway.
How should you make sure that you are prepared?
The business should go over its books and records first and essentially do its own audit. Next, the business should strategize with its advisers with respect to any issues or questions that an auditor may raise, and if necessary, do the appropriate tax research in advance. This way, if and when the auditor raises the issue, you’ll have a ready response. Also, by preparing in advance, the business can focus on its strongest arguments and explain its rationale and legal authority to the auditor if a position is challenged.
What about the appeal process?
If the taxpayer has represented itself up to this point, he or she is well advised to involve a tax professional to navigate the appeals process. Separate and apart from the audit strategy, the taxpayer must have an appeal strategy. This includes how and where to appeal the audit, what issues to focus on, what issues to concede (if any), whether settlement is an option, how much to offer and what are the hazards of litigation.
Generally, you must first exhaust your administrative remedies and then go to court, but in other circumstances, you may be able to go right to court and skip the administrative appeal. The particular circumstances of each audit will dictate what makes most sense. The answer will also depend in part on whether the appeal involves a federal or state tax issue.
Any final thoughts?
Nobody wants to be audited. Defending tax audits can be stressful and challenging for a business. A good adviser can help a business navigate its way through the audit and appeal process while providing some sanity along the way. Being prepared and proactively addressing each step of a tax controversy could help avoid unintended, adverse and costly consequences.
DAVID C. BLUM is a tax partner at Levenfeld Pearlstein, LLC in Chicago. Reach him at (312) 476-7557 or by e-mail at firstname.lastname@example.org.
“The risks faced by hospitals and health care organizations are continuously changing at an incredibly fast pace,” says Philip Reischman, CPCU, ARe and president of Gallagher Healthcare, a division of Arthur J. Gallagher & Co. in Houston. “While insurance pricing has recently stabilized, health care providers continue to find themselves exposed to new risks arising from technology, new treatment protocols and the increasing demand on the part of consumers for a perfect outcome. In this environment, it is important for providers to consider all possible avenues for risk management and mitigating losses while providing quality patient care.”
Smart Business talked to Reischman about some of the insurance challenges and solutions facing the health care industry.
What areas of risk management should health care providers be cognizant of?
Medical malpractice is the most volatile and expensive risk to which health care providers are exposed. This risk can be partially addressed through proactive measures to improve the quality of care and enhance communication with patients and their families, so expectations can be managed. The cost of medical malpractice claims can be financed in the worldwide insurance and reinsurance marketplace.
Health care organizations also face claims arising from the management of their businesses, such as claims against directors and officers for financial mismanagement or claims from employees arising out of the work environment.
Finally, health care providers have the same property and casualty risks as many other businesses and should procure insurance for their business property, general liability, auto liability, workers’ compensation and other exposures.
What special concerns should business managers and executives be aware of?
In the health care industry, business managers and executives are experiencing dramatic changes in the legal, regulatory, economic and social climate in which they operate. Society is expecting high-quality health care without regard to a person’s ability to pay. Thus there is increased scrutiny of all types of health care organizations by various stakeholders that can lead to increased litigation or regulatory actions against them. Organizations are mitigating these risks through the development of corporate compliance programs and ongoing training and education of all employees.
How does commercial auto risk for health care providers differ from other industries?
Procuring auto liability coverage can be more challenging due to such loss-sensitive exposures as those associated with patient transport or hired and non-owned liability. Whether they are ‘911’ providers, home health agencies or executive fleet managers, they need comprehensive commercial auto liability programs combined with comprehensive loss-control support.
How does employee dishonesty exposure differ in the health care industry?
While other industries experience mergers, acquisitions, downsizing and other forms of restructuring, the rapid growth of the health care industry exacerbates these areas even more.
Regulatory uncertainty has increased the challenge of maintaining a strong system of internal controls. Likewise, the expansion of technology has drastically changed the speed with which fraud can occur.
Health care companies face unique fidelity exposures beyond the theft of money, securities and cash on hand. Larger thefts created by white-collar criminals involve elaborate check kiting or duplicate accounting schemes that are often perpetrated by long-term employees. Employee dishonesty losses can encompass inventory fraud and manipulation, drug theft, accounts payable and receivable scams, computer theft and vendor collusion.
Given these unique and potentially catastrophic crime exposures, it is important to look beyond traditional ‘package’ crime policies and evaluate sophisticated loss-analysis and valuation tools.
What are some of the keys to managing risk?
Obtain expert help in developing internal procedures, programs and service tools to address the risks. Determine what risks you can cover internally and which need insurance coverage. Consider self-insurance and purchased insurance options.
Review not only costs, but stability, financial security, experience and reputation. Determine what services should be outsourced and which are best handled internally. When claims are made, make sure that you obtain the services of professionals who will proactively manage the claims and litigation process in a manner that has the best potential of reflecting positively on your business.
PHILIP REISCHMAN, CPCU, ARe, is president of Gallagher Healthcare, a division of Arthur J. Gallagher & Co. Reach him at (713) 935-8872 or email@example.com.
In fact, in “The Wealth of Nations” (1776), Adam Smith writes that individuals hired to manage companies in favor of shareholders may instead pursue their own self-interest. The Enron, Tyco and WorldCom fiascos of the early 21st century are the more recent examples of the problems noted by Smith.
“A combination of the changes in the ways in which executives are compensated and, in some cases, the lapse of oversight by boards has led to many instances of the gross mismanagement by some and the over-compensation of executives, especially as it relates to overall company performance,” says Dr. Asghar Zardkoohi, Department of Management at Mays Business School.
Smart Business talked with Zardkoohi to find out what can be done to provide a balance between governance, compensation and stockholder interests.
How has executive compensation changed over the years?
Prior to 1985, U.S. executives received almost all of their compensation in cash, as salary. In 1985, only 1 percent of the median CEO compensation was in some form of equity, like shares of stock or stock options. That number has gone up steadily ever since and reached 66 percent by 2001. The median cash compensation has gone from just under $1 million in 1980 to about $2.5 million in 2001 while the total median CEO compensation has increased to more than $7 million.
Companies started relying more on stock options to tie compensation to performance beginning in 1993 when Congress made any amounts paid to a CEO above $1 million per year a nondeductible business expense unless it was tied to performance.
Has the significant increase in executive compensation been tied to performance?
Some of the increase in compensation is tied to increased performance. Another factor is increase in corporate size. The larger the company, the more difficult it is to manage; thus, managers ‘deserve’ higher compensation. Also, the industry mix of the corporation is a factor. Corporations that enter different industries are harder to manage than those that focus in one industry only.
Still, compensation has far outpaced performance.
What are the explanations for this?
There are several. In about 80 percent of corporations, the CEO serves as the board chair. Since the board determines the compensation of the CEO, and in most cases the CEO is influential in determining who will serve on the board, the board favors the CEO over the stockholders in determining the CEO’s pay.
Second, the board generally hires compensation consultants to help determine the CEO’s pay. In general, consultants, knowing the average compensation of CEOs in the market for comparable firms in the industry, will suggest compensation above the market average. No consultant will suggest compensation that is below the market average. The game of beating the average tends to ratchet up the average over time.
Last, but not least, is the influence of fraudulent performance signals that some firms send to financial markets.
What mechanisms might be used to motivate efficient management and less fraudulent behavior?
One effective set of corrections is to allow only a fraction of stock options to be exercised at any given point in time; the time between any two exercise events be specified; the fraction of the exercised option be replaced by the same fraction of stock options; and that the options that are exercised be replaced with new stock options.
For example, allow only 10 percent of stock options to be exercised at any given point with at least three months between any two exercise events. And stipulate that the exercised options are replaced with new ones at the current price of the stock. This correction has the effect that at any given point in time the executive will have a significant number of options unexercised, in this case 90 percent. This may effectively deter any incentive to engage in fraudulent reporting of financial statements because the stock price takes a beating if and when the market learns about the fraud. The executive will be punished based on 90 percent, while benefiting from only 10 percent of the stock options. The three-month lapse between any two exercise events allows the market to learn about any fraudulent activities that may have caused price change of the stock.
A second correction would be to index the price of the stock based on the average stock price of different stocks from the same industry. If the stock price does not beat the average, then the manager should not be rewarded for performing below average.
DR. ASGHAR ZARDKOOHI is the T.J. Barlow Professor of Management for the Mays Business School at Texas A&M University. Reach him at Zardkoohi@tamu.edu or (979) 845-2043.
The Gartner Group estimates there will be 30 million virtual desktops by 2010. This development, coupled with the advent of Microsoft’s new Vista operating system, are raising questions about updating systems. How hard is it to upgrade? How long will it take? What will it cost? Will my present applications run on the new system? Are the new features worth the cost and effort?
“With desktop virtualization it can be a simple, quick process to make changes in any part of your computer system,” says Omar Yakar, CEO of Agile 360. “Without desktop virtualization, each PC must be worked on individually or complex and inconsistent distribution tools must be used. The downloading and setup takes time. Another advantage of desktop virtualization is the immediacy of disaster recovery and the ability for employees to work from anywhere.”
Smart Business asked Yakar for more insight on desktop virtualization.
Exactly what is desktop virtualization?
We are coming full circle from the days of the mainframe. Back then, there was a finite set of applications and user interface drawn to a green screen terminal, there were high fixed costs and change took forever. This drove business units needing more agility to the first PCs, and the revolution was born.
One side effect, however, is that we moved a secure and controlled infrastructure to the equivalent of the Wild West, and cost and security risks of managing individual user environments skyrocketed along with the productivity gains.
Essentially, desktop virtualization is moving information each employee needs to function in their job from individual personal computers at each desk to their own virtualized desktop file on a central server (traveling users can also run this on a laptop or disconnected workstation). IT becomes like the cable company, where each user has a cable box and remote. Each user gets his or her own desktop, but it’s all managed from the security of a data center. Office moves are simplified because all cable boxes and remote controls are the same; anywhere you go, you still get your own desktop environment.
How do you go about setting up this virtualization?
Picture four components of a desktop computer. First is the hardware. Second is the operating system (for instance, Microsoft XP or Vista). Third is the combination of applications (Microsoft Office, etc.). Fourth are the settings that make the computer your own PC. This could include the background with the family ski vacation, the configuration of icons that work best for you and how you want your system to open.
Now decouple these four and picture them in individual boxes. Any one box can be replaced without affecting the others meaning I could change the operating system box without any affect on the hardware, applications or personal settings.
The next time an organization upgrades even some of its PCs or operating system, a centralized environment is built. The desktop hardware is converted into the equivalent of a cable box, and the monitor, mouse and keyboard become the remote. From this point forward, the operating costs start a downward slide, while employees still experience their own desktop environment.
Are there other advantages to desktop virtualization?
The big one occurs if there is a need for disaster recovery. You don’t have individual pieces of data stored on a variety of desktops around the offices. Everything is on your company servers and, of course, a copy runs at your disaster recovery site. Because the two are running in tandem, the data added by and needed by any individual is always there and accessible at the data recovery site if something happens to the accessibility of the main company server.
Another advantage is a physical change of location within the office, where everyone has an identical ‘remote.’ There is no longer a need to move the users’ PC. Laptop users that need to work disconnected can still run local copies of a centralized desktop that updates once plugged back in.
As an executive, how can I look at this and see how I’m going to save money?
Centrally managed desktops bring us back to the security and lower cost model of the mainframe while still allowing individual desktop environments. Your systems can be upgraded in minutes or seconds, so something new that can be used to take advantage of a business opportunity can be added immediately.
If disaster recovery is needed, there is always a copy standing by. The best news of all is that if it is done properly it can cut in half the real cost of delivering information to end-users.
OMAR YAKAR is CEO of Agile360 in Irvine. Reach him at (949) 253-4106 or firstname.lastname@example.org.
How prepared is your business? Are you confident that operations will continue if you are unexpectedly absent? Can your business resume its operations quickly after severe weather or other emergencies strike?
Being prepared means having a plan that addresses any business scenario outside “business as usual.”
“There are too many situations,” says Liana Martino, senior vice president at SunTrust Bank, “where business owners don’t prepare a comprehensive post-disaster contingency plan or give no thought to what would happen to the business if something happens to him or her. A good contingency plan can help mitigate losses and keep a business operating.”
Smart Business talked with Martino about some of the things business owners should consider as they develop contingency plans.
What are some of the reasons a business owner should develop a contingency plan?
We never know what might happen to us. It can be a fatal or incapacitating accident, weather emergencies, fires, vandalism, terrorist attacks. It can be anything that interrupts the normal course of business.
Proper planning will enable your organization to resume business quickly, either by rerouting operations or implementing work-around solutions. These back-up procedures and systems reduce business interruption and associated costs, improve client retention, and can help ease emergency-related hardships for employees.
How do you start the process of setting up a contingency plan?
First, consider and list every possible worst-case scenario that you can imagine. Determine who would be affected by each of those cases and how they would be affected. Now, what do they need to know to continue the business?
Also consider emergencies such as fires that might affect the business while you’re the one that needs to keep things going. Where is information stored? Are there off-site backups? Is there a predetermined command post where key leadership can gather if the office is uninhabitable?
What are some of the things that should be included in your contingency plan?
Develop a playbook outlining action in the various what-if situations. Who is responsible for what? Who is contacted for what information? List names and contact information for all key people, inside and outside the organization. This list should include accountant, attorney, insurance agent, banker, key contacts at major suppliers and customers, family members and key employees.
The plan should include who has various bits of information. Who has which passwords to get into your systems? Who has authority over what situations? Where are various bits of office information located? Information on insurance policies and credit lines also should be included.
Once the playbook is compiled, who should receive copies?
Everyone that has a stake in the ongoing business and will be in a position to make decisions about what to do next should have a copy. Because of the sensitivity of the information, take care in deciding who is involved and what information is included. For example, don’t list passwords for your computers, but do identify who has them and who can change them.
Involve all of those people who will receive a copy of the plan in the process of developing it. If you have separate insurance agents for the business and personal coverage, they should both be involved. The same holds for attorneys, accountants and bankers.
What other things should be considered as you develop your plan?
Is your insurance up to date? Are all contingencies adequately covered? Do you have a buy-sell agreement with partners? Do you have insurance to cover that? If you are the sole owner, do you have any key employees who could continue the business? You may want to give them some stock in the company so they have a vested interest. If your spouse is part of the business, how might that affect the other partners or owners? If your spouse is not involved, how will she or he be compensated for your share of the business?
How will payroll and other expenses be covered until cash flow starts again or insurance payments are made? Do you have a line of credit established that hasn’t already been expended?
Talk about all of these things now while you are able to be involved in the decisions and stage dress rehearsals. Beyond what is discussed above, your insurance agent, attorney, banker or accountant can supply you with forms that will help you get started.
LIANA MARTINO is senior vice president and Business Banking Line of Business manager for SunTrust Bank. Reach her at (813) 224-2254 or Liana.email@example.com.
Wrap-up insurance programs are being used more and more on large commercial, residential and public construction projects.
A wrap-up policy is a liability insurance program that combines the elements of several major risk types into one policy and covers multiple entities such as contractors and sub-contractors. The program sponsor, owner or contractor can realize some definite advantages using a wrap-up over a conventional insurance program. The most significant advantages include: potential insurance cost savings, broader coverage, higher limits, better claim management, and more effective safety and loss control.
“As in all aspects in the construction industry, planning is a critical component of a successful wrap-up insurance program,” says Sandi Sikora, vice president and director of the Real Estate Division at DLD Insurance Brokers Inc., in Irvine. “Any owner or contractor evaluating the feasibility of implementing a wrap-up should seek help and guidance from a competent insurance and risk management professional.”
Smart Business asked Sikora for more information about wrap-ups.
Why would a wrap-up be beneficial to me?
There are many reasons that an owner or general contractor would decide to go into a wrap-up. One of the main issue is when the sub-contractors are unable to meet the requirements needed for the exposures at risk. This usually comes about when their insurance program does not extend to the type of project being undertaken, such as condominium construction. By purchasing a wrap-up, the owner, general contractor (GC) and subcontractors are all named insureds on a policy that is dedicated to the project. The owner or GC does not have to worry if appropriate insurance coverage has been put into place.
Are all subcontractors covered under the wrap-up?
No. A wrap-up generally excludes drafting/design work, hazardous waste removal and/or transport, extermination/pest control, vendors, suppliers, fabricators, material dealers, drivers and others who merely transport, pick up, deliver or carry materials, personnel, parts or equipment or any other items or persons to or from the project site.
Can I use the same Master Subcontractor Agreement for the subs that are included on the wrap-up?
No. You will need to amend the Indemnity Agreement since the subcontractor will now be a part of the named insured. There also will need to be a section that spells out what responsibility each subcontractor has relative to its deductible participation in the event of a loss.
Will certificates of insurance still be needed for the subcontractors that are included in the wrap-up?
Yes. You will still need to show evidence that the subcontractor has workers’ compensation and automobile liability.
Are the subcontractors automatically added to the wrap-up?
No. Many companies require that each covered subcontractor be enrolled in the program. To accomplish this, they will require that the purchaser of the wrap-up hire an approved wrap-up administrator to handle the initial subcontractor meeting and enrollment process. They will also advise as to how the Master Subcontractor Agreement is to be amended. It is important that when you are evaluating the various quotes you clearly understand what each insurance company is mandating in regard to this process.
Does this administrative service result in additional premiums over the cost of the policies?
Yes. Cost can run anywhere from $10,000 to $25,000, depending on what services you want the administrator to handle.
Can there be other costs besides administration?
Yes. Many insurance companies will also require that you contract with an approved third-party peer review for all aspects of the construction process. This could run $350 to $550 a unit, depending on what level of service is required. In addition to this, many insurance companies are now mandating that the purchaser of the wrap-up retain the services of a third-party administrator for all claims within the self-insured retention.
Are my liabilities over once the wrap-up is completed?
No. Even though the wrap-up placement might have an extension for completed operations, you still will have premises exposure for warranty/repair work that is undertaken after the policy expiration. When you negotiate the initial wrap-up placement, you should ascertain whether the insurance company could extend coverage for a designated time period on warranty/repair work. If it will not, then it is important to factor in the possibility of additional expense to purchase a separate placement at expiration that will provide the coverage needed.
SANDI SIKORA is vice president and director of the Real Estate Division at DLD Insurance Brokers, Inc. in Irvine. Reach her at (949) 553-5666 or firstname.lastname@example.org.
The “new media” is having an impact on all avenues of marketing — and forcing marketers to be more analytical and creative than ever. As marketers attempt to woo consumers in this information age, they encounter increasing competition from the onslaught of images and messages vying for people’s attention. Known as “clutter,” this onslaught is encountered on virtually every surface or air wave available, from clever copy on billboards to screaming images on Web ads. One estimate is that this exposure exceeds 1 million impressions per person per year.
So how do marketers convert their impressions into sales in this new-media jungle? By making those impressions more meaningful to potential customers, says Bruce Ramsey, program chair of undergraduate marketing at Franklin University.
According to Ramsey, in today’s marketplace there is a certain amount of clutter in each area of both the new media and traditional media, and marketers need to quickly determine what is best for their company and make adjustments — as rapidly as possible.
Smart Business asked Ramsey how corporate marketing departments should react to meeting their increasingly difficult goals.
What is the new media?
New media is communication that is enabled by digital technology, such as the Internet, Web sites, e-mails, electronic kiosks, blogs and podcasts.
These areas — in particular the Internet, Web sites and e-mails — have grown so rapidly and garnered so much attention that it is now difficult to find new ways to market products that are not already in use. Plus, the line between new media and traditional media is blurred because the old media, such as print, have been recreated to work in concert with technology.
For example, not only does the corner gas station advertise with video on the pump, but there is also a product advertised on the pump handle. The sleeve that goes over your coffee cup at the corner coffee shop contains an ad for a cell phone, and ads surround you in doctors’ offices, on menus, outdoor video screens, and just about anything else that you can think of.
What changes do you see in the traditional media?
Subscription numbers are going down for print media. We are also seeing more consolidations. It is not that people aren’t looking for more information; rather, they are simply looking in new places. We’ll be seeing more creative ways to mitigate the decline of readership, listenership and viewership.
What is the impact on marketing programs?
Companies are putting more emphasis on branding as they look for more creative ways to get their messages out.
Related to this, there is exceedingly more pressure on marketing departments to measure costs and effects as those companies venture into new modes of advertising. Even more pressure is exerted because it is so much easier to measure with the Internet and Web sites.
How does a company make the most of marketing?
To quantify marketing efforts, marketers can look at their statistics, analyze what is working and what is not, and then maximize return by tweaking messages almost instantly in response. This type of analytical process needs to be built into each marketing campaign in order for it to be effective — and therefore successful. To accomplish this, marketing firms need to have employees who have more than just great creative minds; they need to have an analytical skill set.
How does a company make the most of customers?
Firms need to look even harder at the lifetime value (LTV) of the customer, as well as Customer Relationship Management (CRM). Some companies have looked at the C and the M and have completely ignored the R, or relationship part. The relationship you build to keep your customers is essential, because reaching a customer through today’s clutter can be a monumental task. Keeping customers also helps gain new customers. As satisfied customers talk to noncustomers, some of them are more likely to try your product or service.
How do we educate for the demands of new media?
As the new media emerged as a factor in marketing, universities stayed in step. We thoroughly studied the Internet and developed ways to use that media in marketing. Now, as the electronic formats have become so pivotal to marketing, we are looking at the total marketing picture and teaching students how to use and measure the various media holistically.
BRUCE RAMSEY is program chair of undergraduate marketing at Franklin University. With more than 18 years of professional experience in the field of marketing, Ramsey also holds an M.S. in communication from Indiana University and an M.B.A. from Ohio University in addition to being a doctoral student at The Ohio State University. Reach him at email@example.com or (614) 947-6147.