While traveling around the U.S. and Canada training managers on the importance of embracing the generational workforce, I have noticed a consistent theme: Managers want to know how they can do a better job engaging their employees.
Every company can’t be like Facebook or SAS, where amenities such as free on-site medical care for employees and their families, low-cost/high-quality child care, a fitness center, a library, and a summer camp for employees’ children are the norm. Or like Google, which provides free food, fitness facilities, massage rooms, hair dressers, laundry rooms and on-site doctors. So what are you to do?
First, you have to understand what employee engagement is and the impact that the lack of employee engagement can have on your company or business.
Wikipedia defines employee engagement as the extent to which employee commitment, both emotional and intellectual, exists relative to accomplishing the work, mission and vision of the organization. Employee engagement has become an area of focus within organizations because it boosts employee retention, thereby helping companies avoid expensive employee replacement costs resulting from staff members who voluntarily quit their jobs.
According to the Society of Human Resource Management, the cost of replacing one $8-per-hour employee can exceed $3,500. Information like this obviously gives companies a strong financial incentive to maintain their existing staff members through strong employee engagement practices.
Organizations that recognize that higher employee retention, increased productivity and reduced absenteeism all have financial impact will see that their employee engagement efforts make sound business sense. Engaged workers tend to complete tasks faster, get higher customer service ratings and demonstrate greater loyalty.
Use these five quick tips to improve employee engagement starting today.
? Build trust: Employees need to be able to trust their managers and their company’s leaders. Clear communication is a key element of trust. To build trust, monitor how and what you communicate to people around you. In organizations under stress, sometimes it’s difficult for leadership to be completely forthcoming. Few people expect everything to be perfect all the time.
? Create connections: People want to have meaning in all aspects of their lives. If they do not feel the importance of what they do, they disconnect. Therefore, it is important to highlight the connections between things and people. Help employees see the big picture of how their role and objectives fit into the organization’s objectives.
? Appreciate people: Recognition is an important part of motivation and engagement, and it can be as simple as genuine appreciation. Praise people when it’s warranted and give credit where credit is due. The best recognition is immediate, specific and personal.
? Motivate others: Motivation is our desire or willingness to do something. An organization where people are willing and able to work toward a common goal is stronger than one where people are badgered, threatened or generally reluctant.
? Support growth: There is nothing more demotivating than feeling you’re in a dead-end job. Talk to employees about the directions they’d like to see their career paths take and help them identify opportunities for personal and professional development that will help them achieve those goals.
You don’t have to be a manager or leader of an organization to build trust, create connections, appreciate people, motivate others and support growth. Anyone at any level can make a difference in the work lives of those around them. The payoff shows up in increased innovation and productivity, lower turnover, lower sickness rates, and higher employee satisfaction. In a world warring for increasingly sparse talent, the importance of a strong employee engagement program should not to be underestimated.
Sherri Elliott-Yeary is the CEO of human resources consulting companies Optimance Workforce Strategies and Gen InsYght, as well as the author of “Ties to Tattoos: Turning Generational Differences into a Competitive Advantage.” She has more than 15 years of experience as a trusted adviser and human resources consultant to companies ranging from small startups to large international corporations. Contact her at email@example.com.
The Patient Protection and Affordable Care Act imposes two new Medicare taxes — one on wages and self-employment income and one on net investment income.
“As a result, executives subject to these new Medicare taxes will now incur a 3.8 percent Medicare tax on most of their taxable income,” says Mark Watson, partner, Houston Tax and Strategic Business Services, at Weaver.
Smart Business spoke with Watson about what this new tax means for executives.
How will the Medicare tax impact wages and self-employment income?
Beginning this year, an additional 0.9 percent Medicare tax is imposed on wages and self-employment income in excess of $250,000 for joint filers and $200,000 for single filers. So, the total Medicare tax on wages and self-employment income is now 3.8 percent, up from 2.9 percent.
If a couple files a joint return, the added tax is imposed on their combined wages and self-employment income. Employers must withhold this additional tax on wages paid to an employee in excess of $200,000 in a calendar year. This withholding applies even though the employee may not actually be liable for the additional tax because, for example, the employee’s wages with that of his or her spouse doesn’t exceed $250,000. Any excess withheld Medicare tax will be credited against the total tax liability shown on the employee’s income tax return.
The $250,000 and $200,000 threshold amounts aren’t indexed for inflation. So, over time, more executives will likely be subject to the additional Medicare tax.
How is net investment income affected?
Many executives also will be subject to a new Medicare tax on their unearned income in 2013. This new tax, commonly called the ‘net investment income tax,’ applies to individuals, estates and trusts when income exceeds $250,000 for joint filers, $200,000 for single filers and $11,950 for estates and trusts, and equals 3.8 percent of net investment income.
Net investment income equals investment income less properly allocable deductions. Investment income includes:
• Gross income from interest, dividends, annuities, royalties and rents.
• Gross income from a passive activity.
• Gross income from a trade or business of trading in financial instruments or commodities.
• Net gain from the sale of property.
• Gross income and net gain from the investment of working capital.
However, gain excluded from taxable income, such as gain on the sale of a personal residence and gain deferred through a like-kind exchange, isn’t included in investment income. Similarly, gain from the sale of certain property used in a non-passive trade or business isn’t included.
Properly allocable deductions include:
• Deductions allocable to rent and royalty income.
• Deductions allocable to income from a passive activity and to a trade or business of trading in financial instruments or commodities.
• Penalties imposed on early withdrawal of funds from a certificate of deposit.
• Investment interest expense.
• Investment adviser fees.
• State/local taxes on investment income.
In the case of an estate or trust, deductions also are available for distributions of net investment income to beneficiaries.
How can these taxes be minimized?
Executives subject to the net investment income tax and the maximum federal income tax rate — applying to joint filers with annual income in excess of $450,000 and to single filers with annual income in excess of $400,000 — will face a 43.4 percent federal tax rate on ordinary income and 23.8 percent federal tax rate on long-term capital gains and qualified dividends. Minimize taxable net investment income by:
• Documenting and claiming all allocable deductions.
• Making distributions from an estate or trust to beneficiaries with income below $250,000 or $200,000 who are not subject to the tax on net investment income.
• Investing through tax-sheltered investment vehicles such as 401(k) plans, Individual Retirement Accounts, annuities and life insurance policies.
Businesses have been given more time to prepare for changes in the way they account for expenses related to tangible property, but it might be advantageous to get an early start.
The U.S. Department of the Treasury issued temporary regulations that were to be effective in 2012, but the Treasury and IRS revised the effective date to Jan. 1, 2014. Final regulations that include the new effective date are expected in 2013.
“The regulations focus primarily on whether an expenditure is for immediately deductible repairs and maintenance or for capital improvements that must be depreciated over time. An expenditure on tangible property can be a current deduction if it’s considered incidental in nature and doesn’t add to the value of the property or prolong its useful life,” says Tom Tyler, partner at Crowe Horwath LLP.
“The temporary regulations are of particular interest to businesses with significant amounts of brick-and-mortar properties or to machinery-intensive businesses,” he says.
Smart Business spoke with Tyler about the regulations and what businesses should do to prepare for the change.
Should businesses act now or wait for final regulations?
The IRS announced the change to the effective date on Nov. 20, 2012. The revised date covers tax years beginning on or after Jan. 1, 2014. However, taxpayers can early-adopt the regulations for their 2012 and/or 2013 tax years. The early adoption allowance is an acknowledgement on the Treasury’s part that taxpayers might have already expended resources in order to adopt the temporary regulations. Taxpayers still can apply the temporary regulations as long as they file an accounting method change if the final regulations turn out to be different.
Potential corporate tax reform also could affect decisions regarding tangible property. Because of that, it’s advisable to evaluate the effects of the final regulations now, regardless of whether you’re going to adopt them in advance of the required date.
Is the final version expected to vary much from the temporary regulations?
There were sections of the temporary regulations that generated a lot of feedback from taxpayers and practitioners, and the Treasury likely will incorporate that feedback into the final regulations. For example, there is a new de minimis rule that exempts certain acquisitions from capitalization. If it’s under a certain threshold dollar amount, a taxpayer can deduct the purchase price of the property for tax purposes as long as it follows a written expense policy and has an applicable financial statement. Under the rule, the amount paid and expensed must be less than or equal to the greater of 0.1 percent of gross receipts for income tax purposes or 2 percent of the total depreciation and amortization expense for the tax year.
Treasury officials have suggested the de minimis rule might be expanded to taxpayers without audited financial statements, and they may revise the way the ceiling limitation is computed. Temporary regulations regarding dispositions and safe harbor for routine maintenance also are likely to be revised.
What steps should businesses take now?
Don’t hold off on implementation plans; instead, proceed while bearing in mind the effect of potential revisions. If the de minimis rule is expanded but retains the written policy requirement, businesses should establish a written capitalization policy for financial reporting purposes by the first day of the tax year they want to apply those rules.
Additionally, taxpayers might need to file an accounting method change if the final regulations differ from the temporary ones, even if no changes are made to the deductions claimed under the temporary regulations.
Taxpayers should weigh the pros and cons of the options outlined by the Treasury and IRS to determine the most advantageous approach. Those options are:
- Adopt the final regulations in 2014 with their 2014 tax return.
- Early adopt the final regulations with their 2012 or 2013 tax return.
- Adopt temporary regulations with their 2012 or 2013 tax return with the possibility of filing a second method change to adopt the final regulations for the 2014 tax year.
Tom Tyler is a partner at Crowe Horwath LLP. Reach him at (214) 777-5250 or firstname.lastname@example.org.
Insights Accounting is brought to you by Crowe Horwath LLP
When I meet with business-to-business and professional service clients to discuss their marketing strategies, one comment that consistently arises is “No one buys professional services through the Web.”
While that may be true — you don’t typically buy an accountant online as you would a product through e-commerce — how your brand is perceived most definitely will impact a prospect’s buying decision.
Decisions to work with professional service firms don’t happen overnight. They take time. And because of this, any B2B organization must ensure it is “seen” in the strongest possible light before the sale actually occurs.
In fact, it’s just as important to not lose prospective customers because your organization is perceived as weak or subpar as it is to convert a prospect into a client.
The simple truth is that you never know at any given time who is researching your brand and through what channel. Having a consistent brand message, whether they’re looking to engage you now or somewhere down the road, helps you to not lose them before they need your solutions.
To accomplish this, you must get your brand messaging across in a consistent manner across multiple channels.
So how do you that?
First, a solid marketing strategy must include a website that clearly articulates the brand message and value proposition of your services — and it has to be on the home page.
It also should include supporting content that allows a prospective customer to quickly understand who you are, what you do and why you’re different.
For example, let’s say you’re an accounting firm. Being able to articulate why you are the best at providing risk management solutions for clients can help you differentiate yourself in the marketplace.
Providing and highlighting content that explains your service, along with case studies and client examples that include measurable results, is a smart move. It allows prospects and site visitors to get a feel of what it would be like to work with you.
Additionally, your website should offer prospective clients an easy way to contact you — either through a phone number or a simple contact form that includes a name, email address, phone number and short explanation of the prospect’s business problem.
Beyond your website, other channels to consider include social media, which includes LinkedIn, Facebook, YouTube and Twitter. In these social media channels, you need more than just simple company pages. Instead, you should offer visitors relevant and current content that consistently supports the brand message and your organization’s value proposition, along with company information and executive profiles. And it’s extremely important to continually be “active.”
Using the same accounting firm as an example, it could utilize consistent content around recent changes to government policies, updates on recent business wins or sharing a solution that helped one of its clients overcome a business challenge across all social media channels.
And when that information isn’t timely, something as simple as new hire announcements or employee promotions will show visitors and followers that there is activity within your brand — and your organization. It makes you “active,” which makes you more attractive to prospects.
Other channels to think about include mobile or tablet experiences, print marketing and event sponsorship. Every channel you can imagine should be used to express your organization’s brand message because there are always people watching.
So while your clients may not choose or buy their professional services online, they will evaluate your brand even prior to consideration. And while it’s impossible to measure what clients you may lose by not having this strategy in place, it is clear that a solid marketing strategy of this type can save you from losing consideration — even when you don’t know you’re being considered.
David Fazekas is vice president of digital marketing for Smart Business Network. Reach him at email@example.com or (440) 250-7056.
According to The Business Dictionary, attitude is: “A predisposition or a tendency to respond positively or negatively towards a certain idea, object, person, or situation. Attitude influences an individual's choice of action, and responses to challenges, incentives, and rewards (together called stimuli).”
The words that jump out as important in this definition are:
- Positively or negatively
In light of this, we can say that when we respond to things with a positive attitude, that response influences positive action in us and others. We can also say that the opposite is true.
We could end this article right now by simply saying – As a leader, manager or executive in business; do the former and not the latter. But if you are like me, I bet that you could use some “how to” examples and tips.
Here they are, six tips for having a positive attitude in business:
1. Keep an open mind. Always be open to the possibility that a life change you have refused to consider might be the key to transforming your life for the better.
This type of attitude impresses your colleagues. Why? Because most of them have been faced with the same challenge and chose to not change. Their attitude towards the change has been clouded with self-doubt and lack of courage.
When you are willing to keep an open mind, you are responding positively to the challenge of a life change that has the possibility of a great reward.
Be different than those around you. Be open.
2. Be proactive, not reactive. A reactive individual is at the mercy of change. A proactive individual sees change as a part of the process and takes action to make the best of it.
Having a proactive attitude requires work. You must be able to think ahead and anticipate. It involves being involved.
In business (and life) you cannot simply sit back and let things just happen as they will. In truth, you could, but that attitude is a negative response that influences negative action, namely, reaction.
Do a little mental work beforehand. Get in the game and be proactive.
3. Go with the flow. Present an easy, casual and friendly attitude that shows your flexibility, yet at the same time portrays your persistence in the face of obstacles and adversity.
This is not the negative “sit back and let things happen” attitude described above. Persistence in the face of obstacles and adversity is what sets it apart.
Having an attitude that is easy and casual, without stepping outside the bounds of proper etiquette and being friendly, is some of the best advice I can give to leaders in business.
Be persistent while going with the flow.
4. Think big. If you think small, you will achieve something small. If you think big, then you are more likely to achieve a goal that is beyond your wildest dreams.
When we allow ourselves to have an attitude that pushes boundaries and explores possibilities, we draw in people who have the same attitude. In other words, by thinking big we find big thinkers.
Want to have a team full of big thinkers? Want to have meetings where ideas are shared and positive plans are made? Want to grow leaders out of your team and promote them to new heights in their career? It all starts with your big-thinking, boundary-pushing, dream-inspiring attitude.
Go ahead – think big.
5. Be persuasive, not manipulative. Use your persuasive talents to persuade others of your worth. Don’t use it to convince someone that others are worth less than you.
Have you ever had a manipulative boss? Have you ever had a persuasive boss?
6. Enter action with boldness. When you do something, do it boldly and with confidence so that you make your mark. Wimping out is more likely to leave you stuck in the same old pattern and immune to positive change.
In the end it’s all about getting things done – with a positive attitude. As leaders, we need to be able to move and work with a certain sense of boldness. A boldness that inspires us and those around us to reach for new horizons in all we do.
It’s obvious, action is better than no action – but bold action that leaves a mark is what we should be doing in our life and business.
Do something and do it with a bold attitude.
Attitude really is everything in business. It is the force that empowers us to respond positively to the challenges we face on a daily basis. It allows us to enjoy what we do as we do it. It builds us and our teams.
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.
She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email firstname.lastname@example.org or visit her website at www.delorespressley.com.
Should hard-nosed, thick-skinned, ice-water-running-through-their-veins executives who live and die by facts and profit and loss statements believe in things they can’t totally understand and certainly can’t explain?
We have all been there. At various times, for virtually inexplicable reasons, an undertaking that has been struggling suddenly takes a 180-degree turn and begins an upward trajectory. There was no indication from the numbers, substantively nothing extraordinary was changed, but all of a sudden, it’s as if the sun, moon and stars all aligned and you are heading toward Fat City.
Of course, we’ve all experienced the converse, when everything seems to be jelling and all of a sudden out of the blue your project takes a nosedive, plummeting to earth faster than the fastest falling star — or the stock market crash of 2008.
Even though you fancy yourself as tough as nails, you must hope against hope, experiment with unusual fixes, devise out-of-the-box solutions — do just about anything, including making promises to a higher power, along the lines of, “Let me get through this, and I’ll never ______ again.” (You fill in the blank as it is best kept between you and the great power in which you believe.)
Don’t get me wrong I don’t really believe in the good fairy or the ability to make everything better with the wave of wand, but I do very much believe what the famous New York Yankees manager Yogi Berra once said, “It ain’t over till it’s over.”
There is “magic” when some inexplicable ingredient kicks in that enables the best leaders to continuously generate “what if I try this” scenarios and then, out of nowhere, one of those ideas turns sure defeat into a salvageable success. Is this skill and intelligence at play? To a certain extent, yes, but there is more to it than that. The only thing I believe about unadulterated pure luck is the explanation from that overused phrase, “The harder one works, the luckier he or she gets.” The real answer more likely is a combination of knowing how to run a business: using your head, your heart and your gut to tackle a dilemma, recognizing that on any given day one of these faculties will get you through a difficult issue. On a great day when all three kick in, it’s almost as if it were magic, and you start hearing sounds that become music to your ears as the needed solution suddenly emerges.
In reality, the “magic” is having faith in the people with whom you work, maintaining a strong belief that for most of the seemingly insurmountable questions there are answers, trusting that good things do happen to good people, and knowing that every once in a while the good guys do win. This doesn’t mean becoming a naive Pollyanna. Instead, it all gets down to not throwing in the towel until you have exhausted all possibilities and logically and systematically explored all the alternatives, some of which may be very nontraditional.
This approach is also a direct reflection of positive thinking and mindfulness, which is the practice of purposely focusing your attention on the present moment and ignoring all other distractions. In essence, some psychological studies have shown that when one is committed to success and has the discipline not to let the mind travel down a negative path, the brain can focus on producing unique solutions. Using positive psychology techniques can result in intense absorption that can lead to coming up with unlikely fixes. Some shrinks call this increasing mental flow. I call it a little bit of magic.
My simpler explanation for this phenomenon, which I’ve written about many times, is that success is achieved when you combine preparation, persistence with a bit of perspiration, along with a few ingredients that can’t always be explained, including having a little faith.
My advice is don’t always worry about your image of being a buttoned-up, corporate type. Instead, when the going gets particularly tough, it’s OK to become a Dorothy, as in the “Wizard of Oz,” click your heels twice and quickly repeat to yourself, “I believe, I believe.”
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at email@example.com.
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Also available wherever books and eBooks are sold, and from Smart Business Magazine and www.SBNOnline.com. Contact Dustin S. Klein of Smart Business at (800) 988-4726 for bulk order special pricing.
Effective content strategies empower you to get the right message to the right people through the right channel at the right timeWritten by Dustin S. Klein
Everybody’s telling you that you need a content strategy, but what exactly is content strategy?
An effective content strategy coordinates all of your organization’s messaging — internally and externally — and gets the right message to the right people through the right channel at the right time.
When it works, people are motivated to interact more with your company. You attract new prospects. And you increase opportunities to secure new clients and expand existing business relationships.
Your content may consist of feature stories, press releases, videos, Web content, blog posts, books, whitepapers and even case studies. Essentially, it is everything and anything that discusses your business, professional expertise and ability to solve clients’ problems. It includes news about your organization and human-interest stories that feature your employees.
You can deliver your content through traditional media (newspapers, magazines, radio or television), a corporate website, YouTube channel, Facebook page, e-book, TV show, movie or social media. It is quite literally every single way you digest information online, offline and on the go.
Any content strategy starts with understanding your audience. Learn who that audience is, what different groups are in it and what messaging resonates most with each group.
Every audience comprises two unique segments — those who support you, such as vendors, investors or employees, and those who use your services, including clients and engaged prospects.
It’s also important to take a hard look at this list and ask, “Who is missing from this picture?” By doing so, you may identify new prospect streams to target that you previously had overlooked.
Next, identify your key messages. What is it that you want people to know about your organization and why?
Start at the most macro level so that your brand message becomes part of the content — the part everyone receives. Then get into the specifics. As you do this, you create a series of customized messages for each specific group in your audience.
Third, recognize that not everyone digests information the same way. Learn the best channel or channels to use for each group. Some like to read it — in print or online. Others prefer to watch or listen to it — live in-person or through a mobile video. And still others prefer their information delivered in 140 characters or less.
What works for your website visitors doesn’t necessarily resonate face-to-face with people at a trade show or conference. And print ad messaging may not be aimed at the same people who devour industry whitepapers or read thought leadership articles in trade publications.
The actual format of the content won’t matter as long as it provides the “why” people should care about your organization, frequent your establishment, buy your products or services, or use your solutions. If you accurately match message with audience and channel, you’ll do just fine.
Effective content strategy can quickly become a powerful tool in moving your business forward. Treat it as you would any highly critical strategic business initiative.
Dustin S. Klein is publisher and vice president of operations of SBN Interactive, publishers of Smart Business magazine. Reach him at firstname.lastname@example.org or (440) 250-7026.
When the economy dips into a recession, companies have two basic responses: hunker down to weather the storm or be aggressive by attacking weakness in competitors and opportunities in the market. I have always preferred the latter approach.
During the past two years, our company made several important acquisitions and recruited top talent to forge a new business that positions us as a leading provider of a full range of marketing services for clients ranging from manufacturers and professional service firms to nonprofits and consumer products companies. I am pleased to announce the official launch of SBN Interactive, our content-driven interactive marketing firm.
SBN Interactive is the culmination of months of planning and hard work. It combines our long-standing expertise in creating award-winning content with our intimate knowledge of the latest marketing trends and tools. More importantly, it allows us to leverage our expertise in offline and online marketing to drive measurable business results for our clients across the full range of marketing channels: Web, mobile, video, social and print.
Today, customers move seamlessly across online and offline channels and expect the experience to be consistent, connected and available when they want it and how they want it. What does that mean in practical terms? It means that businesses need to deliver a consistent brand across the spectrum of marketing channels that their customers use. Some prefer print, others video, still others social media. Regardless, marketers need to present the right message to the right customer through the right channel.
Our team of interactive marketing strategists, content strategists, content creators, designers, developers, optimization experts and technologists understand and embrace this. They collaborate to develop strategies and solutions that meet the specific business goals of our clients. From custom magazines and website content optimization to social media strategies and fully outsourced marketing services, they have the expertise — and dozens of proven tactics — to help move the needle for a business.
At the heart of everything we do is our core competency: content. Content drives differentiation, and there are few organizations that exist or are organized in a way to efficiently deliver relevant content in the context of the connected world we live in. But we, at Smart Business, live and breathe content on a daily basis.
We have spent more than two decades working with and writing about some of the most successful business people in America, from iconic business builders like Wayne Huizenga and Les Wexner to maverick billionaires like Ted Turner and Mark Cuban. Now, we are putting those same skills — and many more we have developed over the years — to work for other companies.
We will still continue to bring you management insight, advice and strategy from the best and brightest business minds in the pages of Smart Business. However, thanks to SBN Interactive, we now have a more direct way to help businesses like yours meet their goals and prosper.
I invite you to learn more about SBN Interactive by visiting our website at www.sbninteractive.com or by contacting me directly at email@example.com or (440) 250-7034.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or firstname.lastname@example.org.
During the first four years of his now decade-long stint at the helm of Tenet Healthcare Corp., Trevor Fetter spent a lot of time putting out fires. The company was embroiled in a couple of delicate litigation issues left over from its previous regime, and those cases drained the newly appointed CEO’s energy and focus.
Unfortunately, the legal entanglements left Fetter with little time to address a significant problem that had begun to affect both his company and the health care industry at large: a long-term growth slump that began in 2003 and persists to this day.
“From 2003 to 2006, I was focused most intensely on fighting fires and resolving legacy problems,” Fetter says. “But you could see the early signs of the slowing of growth in our industry around the beginning of 2003.”
The slowdown was largely being driven by a conscious initiative of employers and insurance companies to reverse the tide of ballooning health care costs. Companies were beginning to shift a portion of the health care costs they had traditionally borne onto their employees by increasing out-of-pocket payments such as co-pays and deductibles.
“Behind the scenes, employers’ HR departments were fixated on the percentage of total health care costs being borne by the company versus the employee,” Fetter says. “They were trying to move it from, say, an 80-20 ratio to a 70-30 ratio. And that made a big difference in the take-home pay of employees across American industry.”
It also started to make a dent in the revenue of companies such as Tenet, which owns and operates 49 hospitals and about 100 outpatient centers in 11 states and generated $9.58 billion in revenue in its most recent fiscal year.
“That and other factors have resulted in a prolonged reduction in the growth rate for our industry,” Fetter says. “And if that weren’t enough, when the recession came along in 2008, the suppression of growth expanded, and it has persisted. So our big challenge over the past few years has been how to overcome these pressures against growth.”
Tenet has faced that challenge by launching a handful of initiatives that, taken as a whole, have transformed the company into an innovator and a model for a more sustainable way to deliver health care services in the coming decades.
React to shifts
The first of these new programs, kicked off in 2007 and was dubbed the Target Growth Initiative. The program’s goal was to revise the Tenet hospitals’ menu of services to better fit the changing demographics of their communities, thus making them more competitive in their markets.
“What we did was to deconstruct our hospitals and look at them as a collection of service lines within a fiscal infrastructure,” Fetter says. “When you look at a hospital that way, you realize that some of the services you’re providing to the community are in a permanent state of decline, generally fueled by demographic trends.”
As an example, Fetter cites a hospital serving an aging community. In that type of market, the demand for maternity services will naturally decrease while the demand for cardiac services will naturally rise.
Tenet’s Target Growth Initiative enabled it to get out in front of these types of trends by investing more in service lines for which the demand was growing, even though that often came at the expense of cutting service lines for which the demand was shrinking.
“An example of this was at one of our hospitals in Los Angeles where they needed more space for operating rooms and equipment related to treating cardiac disease, while they had excess capacity for maternity and obstetrics,” Fetter says. “Another factor we had to consider is that in Los Angeles it takes forever to get permission to change a physical facility. It’s very difficult and very expensive.”
Tenet’s leaders also realized that there were competing hospitals nearby that had large, established maternity and obstetrics departments. So the company solved the puzzle by shutting down its maternity services at the Los Angeles hospital and using the freed-up space and resources to expand its cardiology capabilities.
“We repurposed those facilities to satisfy the need of the growing cardiology business,” Fetter says. “A change like that can make a huge difference if, for example, someone is having a heart attack. It might shorten their ambulance ride by 10 to 15 minutes. That can make a real difference in saving lives.”
Another program launched by Tenet in 2008, the Medicare Performance Initiative, is aimed at motivating physicians to standardize their treatment methods to cut costs, increase efficiency and improve patient outcomes.
Fetter and his team put together this initiative to address a number of inefficiencies they had observed both at Tenet’s hospitals and at other health care providers’ facilities: wide variations in the treatment of patients with the same condition, physicians ordering duplicate tests, overuse of supplies, keeping patients hospitalized longer than necessary and keeping patients on medication longer than necessary.
“Basically this initiative, which is ongoing and permanent, is a massive exercise in collecting data in order to show physicians that there’s tremendous variation in the ways they treat one person versus another who have the same medical condition,” Fetter says.
“In our business, lower cost usually equals better quality. Getting somebody out of the hospital sooner is better than leaving them in longer. You get them active again; you get them out of an environment where there are other sick people. The same goes for excessive amounts of tests and medications and everything else.”
The result at Tenet’s hospitals has been a gradual standardization of physicians’ patterns of care and treatment and the emergence of a set of best medical practices.
“What we are trying to do is to look at those variations, and where the variations do not help patients or help the cost of care, we are addressing them,” Fetter says.
With a system as large as Tenet’s — the company estimates that its hospitals and treatment centers amass 4 million patient encounters a year — the resulting standardization and efficiencies have produced a bounty of positive results for Tenet.
“We’ve had some staggering results,” Fetter says. “From 2009 to 2011, we saved $145 million. And we project that over a six-year period, going all the way through 2015, the cumulative savings will be about $375 million. So we’re talking about a tremendous amount of money.”
Go inside out
Among the other initiatives Tenet has launched in recent years, the company in 2008 formed a subsidiary, Conifer Health Solutions, to offer revenue-cycle services and patient communications to other hospitals and health care providers.
“Conifer represents a significant part of how we’ve dealt with our growth challenge,” Fetter says. “The idea for this came from the recognition that our company — and our headquarters in particular — was basically a service center serving 50 hospitals across the United States with a variety of services, and there was no reason we couldn’t provide those services to hospitals other than ours — and that this could be a vibrant business for us.”
The Conifer subsidiary has indeed proven to be a vibrant business for Tenet. Bolstered by several acquisitions, the fast-growing unit now serves almost 400 health care entities across the United States.
“Sitting here today, we have built the leading company in our industry that serves hospitals in the revenue cycle,” Fetter says. “This company that we started out of Tenet is on track to do more than $150 million a quarter in revenue, and it’s growing very rapidly.”
A lesson to be drawn from Tenet’s Conifer venture is that business leaders would be wise to keep their eyes peeled for opportunities to convert an in-house service into an outside revenue generator.
“The idea for taking these services outside of our company really germinated here within the leadership of our company,” Fetter says. “I’d had some prior experience doing something similar to this, and we decided to take it outside in a serious way at the beginning of 2008.
“So I’d advise other CEOs to examine the skills you have within your company and ask yourself if those skills can be used as a stand-alone line of business. That’s a concept that could work well in a lot of different markets.”
Ultimately, Fetter attributes his company’s emergence as an innovator in its field to his leadership team’s laser-like focus on Tenet’s customers’ needs and wants.
“It’s imperative to understand your overall business environment from the customers’ perspective,” Fetter says. “There’s no point of view more valuable than your customers’ point of view.”
To reach that point, Tenet’s leaders had to accept that the company’s customers were dissatisfied with both the high prices and the low quality of the services they were receiving and then put together an action plan to deal with that blunt realization.
“Our strategy for addressing that was to institute major improvements in quality and to attack our costs aggressively so that we could provide a cost and quality advantage relative to our competitors,” Fetter says. “That’s applicable in any business. You have to understand the customers’ point of view, understand what your competitive advantages and disadvantages are, and design strategies in order to build competitive advantage.” ?
How to reach: Tenet Healthcare Corp., (469) 893-2000 or www.tenethealth.com
The Fetter File
President and CEO
Tenet Healthcare Corp.
Born: San Diego, Calif.
Education: MBA, Harvard University; bachelor’s degree in economics, Stanford University
Looking back at your years in school, can you identify a business leadership lesson you learned there that you use today?
The most important thing that applied to business and to my work is fact-based analysis — the importance of seeking the facts and trying to make decisions based at least partially on factual analysis. In the end, it doesn’t mean that every decision can be reduced to something analytical and quantitative, but you ought to have the best possible fact-based information you can get before you make an important decision.
What was your first job, and what business lessons did you learn from it?
My first job out of college was as an analyst in an investment banking firm inNew York. Among the lessons I learned, and this sometimes drives some of my colleagues crazy, is the importance of making a great presentation and having it be accurate and delivering it on time. When you’re in a customer service business, presenting your ideas in a coherent, persuasive and high-quality way is really important.
Do you have a main business philosophy that you use to guide you?
I think it’s embodied in the values we have at Tenet, which are very transparent: The patient comes first; having integrity in everything we do; and the fact that we don’t mind being measured. We are eager to provide quality data to every legitimate organization that wants to measure it. We welcome that degree of examination and transparency.
What’s the best advice anyone ever gave you?
One pithy bit of advice came from a gentleman early in my career, a wise investment banker whose name I can’t remember. He said, “A perfectly good way to answer to a question is, ‘I don’t know, but I’ll find out.’ ”
Company culture is an amazing thing. It shapes the way your organization is perceived. It sets the pace of work and the way decisions are made. It impacts the people you are able to recruit. It is the responsibility of everyone and no one at the same time.
How can it be no one’s responsibility? That may be an overly simplistic statement, but the point is that no single person can declare, change or be held responsible for the corporate culture. The culture does start at the top, because how the leaders treat their co-workers and their employees will resonate throughout the organization.
An individual treated with respect and trust is more likely to treat others with respect and trust. An individual berated by their boss is far more likely to turn around and do the same thing to others. But a single person can’t stand up and declare that a new culture will begin like they could with a new budget or product strategy.
So how do we impact and shape our corporate culture?
Assess your culture.
What is your culture now? How do people treat each other? How quickly do they respond? What is the pace of work? How willing are people to set deadlines? Are deadlines met? How do employees describe the company?
Evaluate the value of the current culture.
What parts of the current culture are productive? What parts of the culture appear to be creating problems? This is the delicate part. Beware of quick assumptions. Ask questions until you have the real answers to what is working or creating pain.
Reward the right behaviors.
When you recognize and reward behaviors, you will get more of that same behavior. Do you want speed? Reward the fastest producers. Do you want teamwork? Reward team players for helping others. Do you want innovation? Announce innovations that are added to the products or services you provide and innovations that help the company run better.
Communicate carefully but authentically.
Plaques and posters that don’t ring true to the team will destroy your efforts. But when you see a good thing happening repeatedly, promote it as part of the culture. Tie the stories of those successes to the culture of the business that helps make them happen. Tie the elements of the lore of the organization to the desired elements of the culture. This will reinforce the positive.
Hire for culture.
It often takes more effort to assess someone’s cultural fit in the organization than it does to test their skills, but the effort is worth it. Seldom do you hear stories about someone quitting or being terminated because they just didn’t have the right skill. It is almost always about their approach to dealing with others or the pace and style they use. If you can assess an individual’s ability to meet the cultural expectations of the organization, the result will be a more successful hire.
Trickle the good stuff into everything.
Unless the positive elements of the culture are widely agreed on and articulated, you are not ready to put a description of it on your coffee cups. But you can infuse the desired traits through all your areas of business. If speed is your need, then shorten your meetings and push the comfort zone to speed up the delivery of information. If innovation is spotlighted, then continually allow for new ways of doing things while applauding the risk-takers for even their small leaps of faith.
When a concerted effort is made to enhance the best parts of the culture, you will be rewarded with a stronger culture. ?
Lois Melbourne is co-founder and CEO of Aquire, a workforce planning and analytic solution company based in Irving, Texas. Visit www.aquire.com for more information.