Publicly held companies generally receive greater media attention about scrutiny from shareholders and government regulators than private companies, but that doesn’t mean that private companies are immune to lawsuits regarding management activities that can disrupt operations and create a financial burden for the business.

“People think that privately held businesses and nonprofits do not have much exposure. The reality is that there are many lawsuits that are brought by shareholders, employees, regulatory agencies, competitors and customers that are not covered by general liability insurance. Only a directors and officers policy can provide coverage for an actual or alleged wrongful act, breach of duty or mismanagement,” says Peter Bern, CEO of Leverity Insurance Group.

Smart Business spoke with Bern about the risks private companies face and how directors and officers insurance (D&O) can help limit exposure.

What are some potential D&O claims for private companies?

Regardless of your company’s size, the legal cost to defend a director, officer, or employee is substantial, as are the potential penalties that can be personally incurred. Because of the personal liability risk, which is not covered under a personal insurance policy, protecting these key individuals and the entity itself is critical.

Private companies have investors, shareholders, creditors and employees that can bring lawsuits alleging wrongful acts, mismanagement, breach of duty or neglect. Regulatory agencies, suppliers, competitors and customers can also be plaintiffs.

Types of lawsuits include the following:

  • Breach of fiduciary duty, including self-dealing and conflicts of interest.

  • General business mismanagement and bankruptcy.

  • Failure to deliver services.

  • Failure to disclose information.

  • Disclosing materially false or misleading information.

  • Regulatory agency actions and investigations.

  • Merger and acquisition complications and objections.

  • Shareholder derivative actions suits.

  • Freeze-out mergers forcing minority shareholders to sell stock below fair market value.

How can companies determine what coverage they need?

Because there is no standardized policy, it makes it difficult to comparison shop. There are special endorsements or enhancements that can be placed on these policies. It’s a matter of analyzing needs and selecting the necessary limits and coverages accordingly.

Underwriting factors for D&O insurance include company characteristics such as:

  • Age: Companies with less experience and shorter history of effective management are riskier.

  • Industry: Investment banking and securities expose executive management to more risk than those experienced by board members of a small nonprofit.

  • Financial stability: If a company’s finances are unstable, there is a greater chance of becoming insolvent during a lawsuit.

  • Litigation history: Insurers will analyze a company’s history of previous lawsuits and any adverse business developments.

Is D&O coverage becoming more commonplace?

It’s been around for a long time, but it had been very cost prohibitive. Also, directors and officers thought it wasn’t necessary to purchase coverage if the company wasn’t publicly traded. But even nonprofits have exposure. They have volunteers donating time, making decisions and moving money; D&O covers them if there is mismanagement.

Still, many companies are not aware D&O insurance is available. Without D&O coverage, executives are not protected personally — business pursuits are excluded from homeowners insurance.

Whether you’re a privately held, nonprofit or a public company, it is likely that your business can benefit from a D&O liability policy. Since there is no such thing as a ‘standard’ policy, a professional insurance agent is invaluable when purchasing D&O coverage. He or she will understand your organization and can help design a policy that will meet the needs of the directors and officers, shareholders and the entity itself.

Peter Bern is the CEO of Leverity Insurance Group. Reach him at (216) 861-2727 or

Keep up on issues that could impact your business at Leverity's LinkedIn page.


Insights Business Insurance is brought to you by Leverity Insurance Group

Published in Cleveland

Whether you are looking to manage your own assets, control how your assets are distributed after your death, plan for incapacity or enable your business to continue uninterrupted should something happen to you, trusts can help you accomplish your estate planning goals. By establishing a trust, you ensure that the assets gathered during your life will not disappear because of the inexperience or inability of beneficiaries. A byproduct of that is the peace of mind that comes from knowing your loved ones will continue to be financially protected.

“One of the benefits of a trust is that it’s established based on the unique needs and objectives of the individual and the individual’s family, and tailored to meet those needs,” says Susan L. Nelson, CTFA, Senior Trust Executive and Senior Vice President at First Commonwealth Advisors.

Smart Business spoke with Nelson about the benefits and management of trusts.

What are the different types of trusts?

There are many types of trusts, the most basic being the revocable and irrevocable.  The type of trust you use will depend on what you are trying to accomplish. A revocable trust, often referred to as a living trust, allows the individual establishing the trust to remain in control of the assets and allows them to change the beneficiary, the trustee, the trust terms and even end the trust. The grantor can use the trust for investment management, bill paying, tax planning and avoidance of probate. It can continue on in the event of incapacity, providing seamless financial management for the grantor, and can continue on after death for the benefit of others. Once the grantor dies, the trust becomes irrevocable.

An irrevocable trust is where the grantor gives complete control to an independent trustee who manages the assets for the grantor and beneficiaries. You cannot easily change or revoke this type of trust. It’s frequently used to minimize potential estate taxes by reducing the taxable estate of the grantor because the assets transferred to this trust, plus any future appreciation, are removed from the grantor’s gross estate. Additionally, property transferred through an irrevocable trust will avoid probate and may be protected from future creditors.

What are the benefits of trusts?

Some benefits are:

  • Continuous financial management in the event of incapacity.

  • Professional investment management.

  • Financial privacy — a trust isn’t public like a will.

  • Probate avoidance with no lapse in asset protection and investments — probate can take a year or more, depending on the complexity.

  • Asset management for inheritances.

  • Creditor protection for heirs. If a beneficiary is going through bankruptcy, money in the trust cannot be touched.

Trusts can provide lifetime financial protection for a surviving spouse or disabled child, an inheritance for children from an earlier marriage, can minimize estate taxes and provide a future legacy for charity. Trusts can be used in order to protect, preserve and transfer wealth for the benefit of individuals, families and organizations. While trusts can be used for myriad circumstances, they are not for everyone. Discuss the advantages and benefits of a trust for your situation with a financial adviser.

How should a trust be managed?

Every trust is based on your needs and objectives. When setting up the trust, determine what you’re trying to accomplish so you and your financial adviser can decide how to reach those objectives. One of the first things looked at are tax implications and how to reduce pain points. Providing for future beneficiaries should also be examined. After the trust is established, you’ll need to meet periodically to discuss the investment portfolio and life changes to be certain the trust still meets your needs.

Why choose a professional trustee?

Institutional fiduciaries are pros at what they do, have professionals on staff with years of experience, and are on the cutting edge of regulatory and tax law changes.  They may be the best option for reliability, experience, responsiveness, neutrality and arms-length objectivity with beneficiaries, objective investment guidance, convenience and consistency over time. An institutional fiduciary doesn’t age or die.

Susan L. Nelson, CTFA, is a senior trust executive and senior vice president at First Commonwealth Advisors. Reach her at (724) 832-6062 or

Follow up: To learn more, call (855) ASK-4-FCA, or visit


Insights Wealth Management is brought to you by First Commonwealth Bank

Published in National
Wednesday, 01 May 2013 08:40

How to manage third-party risk

Failure to assess and plan for risks associated with third parties can be costly. Of the more than 250 executives surveyed by CFO Research Services, 75 percent were harmed by action or inaction of a third party, resulting in financial loss, supply chain issues and data breaches.

“Companies initially think about risks with high-cost providers. But they may have a $10,000 contract with a small marketing or advertising firm that fails to adequately protect their customer information. Their servers get hacked and experience a breach that in turn raises concerns with their customers and brings reputational and financial risk and penalties,” says Jim Stempak, principal at Crowe Horwath LLP.

Smart Business spoke with Stempak about assessing third-party risk and solutions to limit exposure.

What poses third-party management risks?

Relationships that drive the most risks are:

  • Service providers — processing, accounting, computer services, IT, service centers, advertising and marketing, leasing, legal and collections.

  • Supply-side partners — production outsourcing, research and development, material supplies and vendors, and software development providers.

  • Demand-side partners — customers, distributors, franchises and original-equipment manufacturers.

  • Other relationships — alliances, consortiums, joint ventures and investments.

The Japanese tsunami and Hurricane Sandy illustrated this. If something happens to a single-sourced company, what’s the impact on suppliers or business partners?

What are some gaps that expose risk?

A ChainLink Research study found that 70 percent of organizations reported no resilience and risk mitigation standards for service providers. It also noted that risk assessment often focuses on the easiest risks to quantify, such as financial viability and business continuity plans.

With supply-side partners, vendor risk assessments are hampered by a lack of good data and poor visibility into contractor use.

How often should companies conduct risk assessments of third parties?

Risk assessments should be done at least annually for all vendor relationships that are high risk. Those with moderate or low risk can be done on a rotational basis.

In determining high-risk relationships, consider the financial risk penalty if a supplier has a breach. Another risk is reputational, such as a third party compromising private health information found in hospital records. Other high-risk areas are protection of systems and data, and reliability or continuity of operations. Are there contingency plans if a vendor faces a natural disaster or labor strike?

Many organizations don’t address risk management of third-party relationships until a problem arises. Before that happens, establish ownership for the organization’s third-party risk management framework, and responsibility for review and monitoring of individual relationships.

What other solutions address these risks?

First, establish ownership and buy-in, which requires executive leadership and oversight, with clear goals and objectives. Strengthen the overall relationship with the third party. Then evaluate risks by developing a risk profile of the organization that covers financial, integrity and operational issues. This spurs initiatives to audit, inspect, benchmark performance and costs, verify, and gain assurance or attestation.

A third-party risk management program should have:

  • Risk measurement and monitoring.

  • Performance measurement and monitoring.

  • Incident tracking.

  • Evaluation of the value received from the relationship.

This information guides decisions about when and whether to renegotiate an agreement. Success depends on customizing the assessment to the relationship, using automation to streamline the process, and analyzing trends of incidents.

In the CFO Research Services study, less than half of companies had a formal process for assessing and managing third-party risks, and 97 percent said at least one aspect of their third-party risk management should be improved. Businesses do their due diligence when entering contracts but tend to take their eyes off of it once a contract is signed.

Jim Stempak is a principal at Crowe Horwath LLP. Reach him at (214) 777-5203 or


Website: Learn more about third-party risk management with a webinar, podcast, white papers and more.


Insights Accounting is brought to you by Crowe Horwath LLP

Published in Dallas

Integrating a comprehensive behavioral health plan into the medical health plan your company sponsors is a win-win. Employees are able to improve their health mentally and physically, and the employer can track cost savings related to direct health care costs and indirect costs through more productive, healthy employees.

“One out of every four adults will experience a mental health disorder in a given year,” says Tom Albert, manager, Behavioral Health Services at HealthLink. “I think few people, in general, realize the rates are that high.”

Smart Business spoke with Albert about how integrating behavioral and medical health allows employers to better coordinate their members’ care.

How do behavioral and medical health impact employers?

The rate of one in four adults experiencing a mental health disorder annually goes even higher for those with chronic medical problems. Furthermore, employees with untreated psychiatric or substance use disorders can be at a higher risk of on-the-job injuries. This can lead to missed time from work, expensive treatment and a decrease in quality of life for the individual.

Absenteeism is not the only concern for employers. Presenteeism, or the loss in productivity of employees who come to work sick, can also be costly for employers. The Institute for Health and Productivity Studies at Cornell University found that depression and other mental health problems are among the illnesses that have the most significant decrease to productivity.

What’s the advantage of integrating behavioral and medical health management?

Ninety-three percent of Americans believe a health care plan should cover behavioral health treatment, according to a National Association of Psychiatric Health Systems survey. Some workplaces don’t cover behavioral health. Other employer groups cover it but carve out the management, which makes it difficult to coordinate care.

Having one organization manage both medical and behavioral health benefits is gaining popularity among employers. With integration, the health plan’s medical and behavioral clinicians collaborate and ensure that individuals and their families have access to care that best meets their needs.

What are the overall goals of utilization and case management for behavioral health?

Utilization management ensures that health plan members have access to the care they need; that care is delivered in the right setting; that the quality of care meets high standards; and that resources are used efficiently in order to help control costs.

Case management involves case managers communicating directly with members and their families to assist them in navigating the health care system; addressing any obstacles to accessing treatment; and empowering members and their families to maintain an optimal level of health and functioning.

Case management helps the member to stay well so he or she doesn’t have to keep using the same services and missing work.

What is the Mental Health Parity Act?

The Mental Health Parity and Addiction Equity Act of 2008 doesn’t mandate that employers of 50 or more employees offer behavioral health coverage, but it does require that if the health plan covers behavioral health services, the financial requirements and treatment limitations are no more restrictive than medical and surgical benefits.

Prior to parity, employer groups often relied on treatment limits to control costs by limiting the number of days in a hospital or the number of visits for outpatient mental health treatment. Parity is good because the limits often were arbitrary, but it does mean the best way to control costs is to ensure care is only approved when medically necessary.

What are the results of formalized behavioral health management and review?

A Milliman case study of a large private manufacturer found a 10 percent reduction in members with chronic medical and psychological conditions saved $1 million annually and another $750,000 from reduced absenteeism, fewer and shorter disabilities, and increased productivity. An effective behavioral health management organization ensures members receive the right treatment in the least restrictive setting, which reduces costs and time missed from work, while improving overall health.

Tom Albert is manager, Behavioral Health Services, at HealthLink. Reach him at (314) 923-6288 or

Insights Health Care is brought to you by HealthLink

Published in Chicago
Tuesday, 25 December 2012 11:29

4 necessary skills for managing people

According to Merriam-Webster, management is “the process of dealing with or controlling things or people.” While “controlling” is a bit harsh in my book, the definition is correct in it's focus on management of people. To be a good manager or team leader, you have to have an above average interest in people. Success in management is found in the relationship developed between leader and team.

The best managers see themselves as catalysts. They become that agent or force that provokes or speeds significant change or action. These managers get things done quickly by leading with solid people skills.

Here are 4 people skills that every good manager must possess:

1. Understanding the right way to give a critique.

The worst thing you can do if you want to get someone to listen to you is to criticize.

As human beings, we hate to be criticized. When we feel attacked, we usually attack back – even when we are in the wrong. Many of us fall into the trap of thinking “I know I am right and I am going to prove it to you.”

Over the years I have learned that this way of thinking simply does not work.

A good manager has the self-control and presence of mind to put aside the needs of his own ego and say “I've got a problem, will you help me?” Enlisting cooperation in this manner will always lead to better results.

2. Understanding the need to help.

If someone comes in to criticize you or to raise your game, under what circumstances would you be willing to accept the critique?

The answer for me is simple. If I think someone is really trying to help me, then I'll engage and listen.

On the other hand, if I feel that the person is just trying to get the job done or make himself look good, I may listen, but my heart will not be in it. My interest and creative energies will be lost.

The truth of the matter is: Managers will only have influence over their people to the extent that their people think they are sincerely trying to help them. It is simply the way human beings work. Good managers truly care about their team and work hard to help them.

3. Understanding no two people are the same.

As a manager, you do not influence everybody the same way. People do things for their own reasons – not for others and not for you.

Inspiring people to your company vision happens best when you help them to see what's in it for them. This varies from person to person. It is your job to discover what things motivate each member of your team.

Some people are motivated by a challenge, some by money and others by recognition.

It is about reading their needs, desires and wants and then leading in such a way that ensures their success at obtaining them.

4, Understanding the best way to get tasks completed.

An effective manager realizes that each time he has an interaction with someone about a task, there are two things going on:

a. A discussion about the task and how to get it done.

b. The way in which the interaction affects the managers relationship with the collegue.

The first is pretty straightforward, but it's success is determined by the tenor of the second.

It must be said that the task should not be sacrificed for the relationship at all costs. It must also be said that winning on the task is not good if the manager ruins the relationship. Both are important and the manager must do well in each area.

I refer again to the need for the manager to develop relationships with the team in order to understand the best way to get things done according to individual members needs, desires and strengths.

In the end, good managers know how to use their influence and power to help others achieve beyond their wildest dreams.

I like management guru Tom Peters' definition of power:

“My definition of power is understanding that all of managing — and this comes out of the old grade school book — is the notion of doing more than you and I can do by ourselves; that is, doing things through other people.”

He goes on to say:

“If you are interested in getting things done effectively and imaginatively through other people then what you're trying to do in the workplace is exactly what you're trying to do on the football field – which is to get people who work with you to achieve beyong their wildest dreams.”

Workplace managers understand that good people skills determine their success. They work hard to develop the skills needed to lead in ways that shows their interest in people.

DeLores Pressleymotivational 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 or visit her website at

Published in Columnist

As the daughter of her company’s founder, Karen Caplan is a hands-on leader.

That’s a good thing and a bad thing. The good thing is, she has detailed knowledge of everything that happens at Frieda’s Inc., the specialty produce wholesaler she leads as president and CEO.

The bad thing is that knowledge can sometimes draw her into operations-level matters that take time away from matters of strategy and goal setting for the company at large.

At times, it is a challenge for Caplan to simply cruise at 30,000 feet, without the cockpit radio humming to life with a request to dive in for a closer look at a certain project in a given department.

“I’m guessing it’s pretty common for most CEOs, especially if they’re homegrown, as I am,” Caplan says. “It’s so easy for somebody to come in and get you dragged into some detail that you don’t really need to worry about.”

In the more than quarter-century that Caplan has led Frieda’s, which produces revenue in excess of $50 million annually, she has learned how to keep her distance from matters that don’t require her attention by delegating responsibilities, building a sense of mutual trust with her employees and, quite simply, learning to say no.

“I don’t quickly react when someone asks me something or requests I get involved in something,” Caplan says. “Earlier in my career, my knee-jerk reaction was to solve the problem. But I’ve found that’s not the best way to lead a company. I’ve been very vocal throughout the company that I’m not a detail person. I say it to myself; I say it out loud. It’s going to mess things up when you get me involved in the day-to-day stuff.”


Set it down

Caplan’s mother, Frieda Caplan, who now serves as the company’s chairman, founded Frieda’s in 1962. Caplan joined the business in 1977, followed by her sister and COO, Jackie Caplan Wiggins, in 1983. With the business developing into a family affair and Karen taking the reins as president and CEO in 1986, she began to take stock of herself as a leader and how the mother-daughter leadership dynamic at Frieda’s would behave moving forward.

Caplan says the tendencies of her mother and sister initially spurred her to develop boundaries regarding leadership responsibilities. As a young executive, she enrolled in a Dale Carnegie leadership course, which gave her the initial framework for effective delegation.

“My sister and mom are both ‘knee-jerk reaction, everything is urgent, solve it now, do it now’ kind of people,” Caplan says. “I remember taking the course, coming back to work, and I remember saying to them, ‘When you have a really urgent issue, write it down on a piece of paper, set it aside and let it sit there for seven days.

“‘If, after seven days, you look at the paper again and the problem is still a problem, I want you to mention it to me at that point.’ That eliminated 99.9 percent of the issues, right there.”

Caplan also learned to stay away from areas of the company that didn’t overlap her background in sales and marketing. Through trial and error, she quickly learned that if the issue involved pricing or logistics or other areas apart from her background, she was more apt to make a problem worse by getting involved in the matter.

Over time, and through repetition of the message, Caplan has empowered her employees to tell her when she’s complicating matters through her involvement.

“Pricing and logistics are very tactical matters in our business,” she says. “I give direction, but when I get involved any deeper than that, it’s just not a good thing. And my employees know it. Everyone gives me that look that says ‘Karen, stop.’

“I’ve given everyone around me permission to tell me to stop. I feel very strongly that I can’t just have a bunch of ‘Yes, Karen’ people around me. If all you’re going to do is tell me yes, I don’t want you here. I want you to stand up and tell me what is going on. You’re not going to get fired for it. In fact, I’ll actually respect you more.”

Make it cultural

To ensure that the strategy people aren’t dragged into tactical or operations matters, you need a clear organizational structure with a separation of responsibilities. Often, the most effective way to create and maintain a firm organizational structure is to incorporate it into your strategic planning and core values.

If the concepts of personal and team accountability are promoted as part of the culture you live each day, they stand a much greater chance of taking root as foundational principles that everyone in the organization embraces.

“Everybody knows their responsibilities,” Caplan says. “The key is to have a high level of trust with the people you work with.”

Caplan says the best strategic planning processes are often homegrown. Third-party consultants can help you craft your strategy, mission and vision, but if they aren’t leading you in the direction you want to take the business, you’re probably wasting money and time.

“About five or six years ago, I said I was sick of strategic planning and tired of hiring consultants to take me and a group of my high-level people off-site to form a consensus around the company strategy,” Caplan says. “I cannot tell you how many times that did not work.

“So my sister and I decided that we knew what we wanted to accomplish. We worked with our CFO, who is excellent in strategy, and the three of us met for about two hours a week over the span of a few months, creating our company vision, mission and strategy.”

Caplan and her sister centered the company on four key values: personal accountability, service orientation, trust and playing fair.

“Those are what we stand for,” she says. “If you cannot trust the people on your team to do what they’re supposed to do, to go the extra mile and show personal accountability, you have the wrong people on your team. And that is how I feel confident in delegating the tactical issues. There is a very high level of trust in our company. We talk about it every day, and we show it through our actions.”

Hire for trust

Effective delegation requires a sense of trust throughout your organization, and trust needs to develop as a pillar of your culture. But the pillar will crumble if you don’t hire trustworthy people who align with your company’s values.

Finding and hiring those people means putting job candidates through a thorough, exhaustive interview process — particularly for management-level positions. And if you hire people who don’t fit with your culture and values, you need to either find another place for them in the company or send them packing.

“A good mantra is ‘hire slow, fire fast,’” Caplan says. “We spend a lot of time in the hiring process. Our standard is we interview people three different times, by three different people, in three different places. Every time you bring someone back, they look worse. They always look fantastic on the first interview.

“You bring them back, someone else interviews them, and suddenly, they don’t look so fantastic. By the third or fourth interview, you’re probably starting to see the real person. So you don’t get hired at Frieda’s very quickly.”

During the interview process, Caplan and her team don’t want to know just about a candidate’s professional accomplishments. The interview process delves into the candidate’s personal life and personal motivation.

“In interviewing people, you can ask them about why and how they made certain decisions or how they prioritized their life,” she says. “I don’t want to simply talk about someone’s work life. I ask them about their passions in life, about the last book they read, about the things they do on the weekends. That tells me a lot.”

Once a hire is made, the pressure is on to take the raw materials that prompted you to offer the candidate a job and cultivate them in a way that allows you to get the most out of that person. You can plant the best seeds, but they won’t grow without adequate sunlight and water.

“The thing to remember is, your core values can’t be somebody else’s core values,” Caplan says. “They have to be your own. If I didn’t live personal accountability every day, if I wasn’t prepared for all the meetings I’m called to attend, if I didn’t respond to emails quickly, everyone would say, ‘It might be listed as a value, but it doesn’t apply all the time. Karen doesn’t live it.’

“So, whatever you say the company values are, those are the real values. You hire to those values, you live those values, and if someone isn’t living the values, you move them off your team — no matter how wonderful they might be in their position.”

How to reach: Frieda’s Inc., (800) 241-1771



The Caplan file

Fast fact: Frieda’s introduced the kiwi fruit to the U.S. in 1962. The company now distributes more than 600 varieties of fruits, vegetables and specialty food products throughout the country.


What is the best business lesson you’ve learned?


To treat all people with respect. Everyone gets treated the same, regardless of the role they perform in the company. When someone enters the office and I see them, I say good morning to them by name. You have to make sure that no one is anonymous. If you can address your people by name, you’ll have a much higher level of engagement.


Caplan on firing fast: It is never easy to fire someone. That is something else I learned at the Dale Carnegie management course. If you ever aren’t affected when you have to fire someone, you should probably get out of management. But if you are fair, if you have given someone every opportunity to correct their behavior, you can stick by your decision.

I remember with one individual — she hadn’t been with the company long — and I sat her down and said, “You’re not happy, I’m not happy, and we can’t continue this way.” That was pretty straightforward.

You know immediately if someone isn’t a good fit. What happens when you hire someone, within the first week, you know if you’ve made a good hire or bad hire. Every manager, every CEO will tell you the same thing. And if they weren’t what you expected, your gut feeling is to give them more time. We are so ingrained in this country to give everybody every opportunity to correct their behavior. But unfortunately, one week of tolerating becomes one month becomes a year. Soon enough, you have someone who has been on the team for more than a year, and you’re saying to yourself, “I knew they weren’t right for us from the first day on the job.”

Published in Orange County

Companies typically want to do what’s right for those they serve. Key priorities should be customers, investors, employees and the communities in which the company is located — but not necessarily always in this order. The dilemma, however, is that many times short-term decisions can prove to be long-term problems that cause more pain than the initial gain.

It’s difficult to make all constituents happy every time. As a result, management must prioritize decisions with a clear understanding that each action has ramifications, which could manifest themselves in the short, intermediate or long term. Seldom does a single decision serve all of the same timelines. There are no easy answers and anyone who has spent even a short amount of time running a business has already learned this fact of life. So what’s a leader to do?

It’s a sure bet that investors want a better return, employees want more money and benefits, and customers want better quality products, higher levels of service and, oh yes, lower prices. This simply all goes with the territory and is a part of the game. The problem can be that, most times, it’s hard to give without taking something away from someone else. Here are a couple of examples.

Take the case of deciding to improve employee compensation packages. Ask the auto companies what happened when they added a multitude of perks over the years, as demanded by the unions? The auto titans thought they didn’t have much choice, lest they run the risk of alienating their gigantic workforces. History has shown us the ramifications of their actions as the majority of these manufacturers came close to going belly up, which would have resulted in huge job losses and an economic tsunami.

Basic math caused the problems. The prices charged for cars could not cover all of the legacy costs that accrued over the years, much like barnacles building up on the bottom of a ship to the point where the ship could sink from the weight. Hindsight is 20/20, and, of course, the auto companies should have been more circumspect about creating benefit packages that could not be sustained. Yes, the employees received an increase to their standard of living for a time anyway, but at the end of the day, a company cannot spend more than it takes in and stay in business for long.

Investors in public companies can present a different set of problems because they can have divergent objectives. There are the buy-and-hold investors, albeit a shrinking breed, who understand that for a company to have long-term success, it must invest in the present to build for the future. The term “immediate gratification” is not in their lexicon; they’re in it for the long haul. Another type of investor might know or care little about a company’s future, other than whether its earnings per share beat Wall Street estimates. These investors buy low and sell high, sometimes flipping the stock in hours or days. And, actually, both types are doing what’s right for them. The issue becomes how to serve the needs and goals of both groups. When a company effectively articulates its strategy, it tends to attract the right type of investors who are buying in for the right reason. This will avoid enticing the wrong investors who turn hostile because they want something that the company won’t deliver.

When interviewing and before hiring employees, it is imperative that candidates know where the company wants to go and how it plans to get there. Many times, this means telling the prospective newbie that the short-term compensation and benefits may not be as good as the competitors’ down the street, but in the longer term, the company anticipates being able to significantly enhance employee packages, with the objective of eventually outmatching the best payers because of the investments in equipment being made today.

The key to satisfying employees (present and prospective), investors, et al, is communicating the types of decisions a company will make over a specific period of time. Communication from the get-go is integral to the rules of engagement and can alleviate huge problems that can otherwise lead to dissatisfaction.

Knowing what is right for your company, based on your stated plan that has been well-communicated, will help ensure that you do the right thing, at the right time, for the right reasons.

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

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Published in Akron/Canton

Human resources departments provide two kinds of services: administrative and strategic. Russ Elliot, senior vice president, human resources director at Bridge Bank, says initially, it’s critical to develop effectiveness and efficiencies on technical aspects of human resources. The next step is to develop an understanding of the core business and use your combined knowledge of HR technical competencies, the business and its employees to influence the business direction, its goals and ability to perform.

“The key initially is listening to understand that each area of an organization is slightly different, requiring an unique set of resources and support,” Elliot says.

It’s important to understand the culture and subcultures, the direction the business leaders want to go in and the vision of the CEO so that the HR employee can assist in the journey to get to that vision.

“It’s a lot of listening at all levels, one-on-one with employees from across the organization, and taking all of that in to really understand the patterns,” he says.

Smart Business spoke with Elliot about developing your HR department to have the greatest impact on your company.

What makes HR effective?

It’s a complex role because you have to pay attention to the company’s needs and goals while ensuring employees’ rights and needs are met. The department’s responsibilities vary from benefits and compensation to training and organizational effectiveness.

HR is most effective when run by a skilled and well-rounded staff with a reputation of being trusted with important confidential information. An effective HR department helps the company culture grow with the business and becomes the path to honest and valuable feedback from the employees to the leaders of the business. HR directors need to understand the whole business and deliver approaches on attraction and retention to meet business needs. Finally, an effective HR department must look ahead. With knowledge of the whole business, it can use that to contribute to the growth and strategic direction of the entire company.

What are good sources for finding qualified candidates?

Employee referrals are often the best source because employees understand the demands and culture of the organization to know good candidates. It’s a wise recruiting approach to have employees network with industry peers, so if there is an opening they can find a good fit. There also are posting resources such as the company website, LinkedIn, CareerBuilder and Craigslist. The key is to identify the best resource for each job because IT candidates will likely not be looking at the same websites as sales employees. Also, college recruiting is important for entry-level professional positions. Regular presence on college campuses helps to develop the company reputation.

How can human resources become a strategic business partner?

Only after HR has shown it can handle, with little or no issues, the administrative side can it begin to influence the strategic side of the business. An HR professional must first develop consistent trust and confidence with the leadership over time. Then, HR professionals can work with executives on the business direction and performance expectations and actively contribute to deciding what tactics are required for managing talent to achieve those goals. They also must offer C-level executives different strategic solutions. HR has a unique perspective of the entire organization and best offers ideas involving all departments and divisions. Becoming a strategic business partner requires a high level of competency on the HR issues and a strong understanding of the business issues.

What are the keys to an effective and efficient business?

It’s critical for organizations to understand how they’re different from other businesses delivering similar products. In other words, organizations need to know and utilize their unique culture to maintain a competitive advantage. Other critical aspects of organizational effectiveness that HR can impact are:

  • Hiring employees who thrive in that culture.

  • Ensuring there are common systems that provide honest and valuable feedback to all levels of the organization.

  • Creating methods of engaging employees to use their best talents.

  • Ensuring employees understand the company goals with regular updates and how the employees can affect those goals.

  • Providing an environment of continuous improvement, collaboration and teamwork.

For service businesses, it is important to ensure every employee understands the importance of being customer centric.

What can HR do to assist companies in becoming more innovative and leading edge?

HR needs to partner with leadership on innovative programs that could include:

  • Leadership development programs  combining theory and practice with assignments.

  • Finding opportunities to give visibility to CEOs from the employees’ perspective, such as a monthly lunch with small groups.

  • Culture and internal customer service surveys that regularly measure effectiveness and progress.

  • Cross development and continuous development teams that solve real problems in effectiveness and efficiency.

  • Mentor programs.

  • New hire onboarding that provides new hires with a clear picture of company culture, history and goals of the organization.

Cultural surveys help depict the work environment. Ask employees a series of standard questions, repeated every two years, to see what has improved and what hasn’t. When employees rate something low on a survey,  work to understand the meaning behind the words. Pull a group together to understand why it rated low and then you’re able to tackle the real issues and make an improvement in the culture.

Russ Elliot is senior vice president, human resources director at Bridge Bank. Reach him at or through LinkedIn.

Insights Banking & Finance is brought to you by Bridge Bank

Published in Northern California
Thursday, 01 March 2012 03:00

How to be an effective leader

The concept of effective leadership has been changing over the years. The traditional concept of a leader being the directing chief at the top of a hierarchy is incomplete at best, harmful to the organization or company at worst. In today’s world, this view simply does not truly appreciate the very nature of true leadership.

Leadership is also misunderstood to mean directing and instructing people and making important decisions on behalf of an organization. Yes, leaders make decisions. Yes, leaders instruct and teach. Effective leadership involves much more than these.

The very nature of effective leadership is seen in an understanding of the difference between "management" and "leadership." They are often mistaken as one and the same, which they are not.

Here are the distinguishing differences:

  • Management is concerned with processes.
  • Leadership is concerned with behavior.
  • Management relies on measurable capabilities like systems, goals, planning and evaluation.
  • Leadership, while involving many management skills, relies on less tangible and measurable things like trust, inspiration, motivation and personal character.

While a bit simplified, we can boil down the main difference between management and leadership to be: Leadership is about leading people and influencing behavior. Management is about managing processes and securing results.

With this difference in mind, let’s look at five tips for effective leadership:

1. Become a servant. Effective leadership involves serving. Too many leaders go about this backwards. They see the role of their people as servants to them as the leader. Good leaders see themselves as a servant of the organization and the people within it.

Ineffective leadership takes. It sets itself up to garner favor or personal gain. Servant leadership is an opportunity to give and to give in such a way that fosters growth in people.

2. Understand that leadership is about people. While leadership does involve making decisions and taking action, it is centrally concerned with people and behavior.

Strong leaders are able to see and understand vital relationships even within large and complex networks of people. These leaders then focus on building those vital relationships in such a way that adds to the trust level between them and these networks.

People follow leaders they trust. They also are drawn to leaders who possess positive qualities like:

  • integrity
  • honesty
  • humility
  • courage
  • commitment
  • sincerity
  • passion
  • confidence
  • positivity
  • wisdom
  • determination
  • compassion
  • sensitivity
  • character

When it all comes down to it, effective leaders can express their humanity in such a way that fosters trust and builds commitment from those they seek to lead.

3. Be an engaging conversationalist. Smart leaders spend their time starting and advancing conversations within their organization, not running away and hiding from them.

It is nearly impossible to engender the necessary confidence, trust and loyalty a leader must possess without being fully engaged.

A leader spends as much time out of the confines of the office engaging in real conversation with people as they do in their office planning, decision making and organizing.

Whether in person, over the phone, via email, through the social web, or even by sending a good old fashion "thank you" note – be an engaging conversationalist.

4. Listen. This tip piggy backs off of the former one. As you are an engaging conversationalist, listen.

Great leaders realize that there is far more to be gained by surrendering control of the conversation than by dominating it.

Being a leader doesn’t give license for you to talk just to hear your head rattle.  Powerfully effective leaders realize the value of what can be gleaned from the minds of others.

Know when it is time to stop talking and start listening. People want to be heard. They need their voice to be affirmed.

5. Lead yourself. It's important that leaders have the ability to focus and motivate themselves as they motivate others. In fact, without this ability securely fastened in your own life, you cannot be a truly effective leader of others.

It is often said that we lead by example, and we do. It is vitally important that we have a handle on the leadership of ourselves so that we have a positive, strong and trustworthy example for those we lead.

Leaders know that while some people can be considered “natural born leaders,” most have to learn the art. Therefore, effective leaders seek opportunities for personal growth. They seek out books to read, seminars they can attend or personal coaches to foster their growth.

Leaders never stop learning for their benefit and the benefit of those they serve.

Leadership is an exciting thing. It can be the most joyous and personally fulfilling work you do. It is my hope that you find these tips helpful along your journey.

DeLores Pressleymotivational 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 or visit her website at

Published in Akron/Canton

Bill McCarthy thinks the construction industry still has some difficult days ahead.

The recent recession really belted the segment on the chin, and in some locations, half of the area’s construction workers were unemployed. Depending on the region, there have been some sparks of activity, but a return to previous levels is still in the distance.

“When people ask, we really don’t see the construction economy returning to some sort of normal until 2014 or 2015,” says McCarthy, president of Pepper Construction Co. of Indiana. “There are still tough times for the industry.”

During a downturn, it’s a chance to learn some things about your company, develop some new strategies, build better relationships with your customers ? and even reinvent yourself.

“What we’ve tried to do is use this opportunity to go back and reinvest in the company so that we are a better company coming out of this economy than we were going into it and positioning ourselves for long-term growth,” he says. “That’s really been our kind of mantra and what we’ve done.”

To start looking at matters from a strategic planning standpoint, McCarthy had a SWOT analysis done at the senior level of the company that involved a significant portion of the employee population, questioning what were the company’s strengths, weaknesses, opportunities and threats and posing what should be done about those findings.

“We developed from that a kind of a reinforcement to continue working on some ongoing strategic initiatives and develop some new ones, some of which I’d say are more tactical and short-term things that really look at the challenges that we have right now with the economy and being able to address those in the more immediate term,” he says. “Most of what we do, however, is really focused on the long term.”

Here are some of the major initiatives McCarthy is using to engage employees, weather the tough times and give Pepper Indiana a larger share of the market.

Reinvest in employees

With 150 employees and 2010 revenue of $227 million, McCarthy was feeling the need to groom future leaders from the existing work force. But at the same time, he needed to build up the existing management team if the company was going to grow its market share.

“I was trying to come up with a plan to strengthen and invest in developing emerging leaders,” McCarthy says. “One of our good clients and friends ? Bob and Doug Bowen of Bowen Engineering ? recommended a program.”

McCarthy instituted a leadership development series with their advice. At Bowen, the program had been done three times already and had resulted in phenomenal success.

The heart of the 18-month effort at Pepper was the book and program, “The Leadership Challenge,” created by Jim Kouzes and Barry Posner. The program takes the approach that when leaders are at their best, they follow five practices: model the way, inspire a shared vision, challenge the process, enable others to act and encourage the heart.

One of the most effective methods to optimize the benefits of “The Leadership Challenge” was to involve senior management in the teaching efforts.

“We asked pairs of our senior leaders to teach a session, and it was really engaging, very successful,” McCarthy says. “That old idea that you really don’t learn something until you have to teach somebody about it is very powerful.”

In addition, exercises which expand the comfort zone of the participants were beneficial.

“We paired up one of the senior leaders in a better protégé relationship with one of our emerging leaders, so you couldn’t have a direct reporting relationship with that person,” he says. “It was only people who didn’t work directly with each other. The protégés chose the mentors and again ? a highly successful and kind of career development and coaching resulted ? and I think it was really good for our senior managers as well because it indirectly created some accountability for them.”

You might consider driving the program to levels lower that those at the leadership level.

“Also, develop a program as sort of a companion to this for your project assistants, the old word would be secretaries, who are vital communication elements for your projects between your client and all the other superintendants ? they are like the critical hub in all of that and could really benefit from this,” McCarthy says.

Another effort to get employees involved included obtaining a volunteer leadership position. McCarthy adapted this idea from one the Bowens developed. You need a certain size of management if you really want to let everyone do their job and also teach, but with some tinkering, you can find a way that works for your size of company.

“Ask each of the participants to find something they are passionate about in the community and take a volunteer leadership position,” McCarthy says. “It gave people the extra nudge to take that extra step to lead the baseball league.

“You can imagine it’s enriching for the person, it’s great for our company to get our people out in the community, and it was really a nice add-on to that program. You get to put into practice some things that maybe you don’t get an opportunity to do every day in your work life or your personal life.”

Do 360-degree feedback reviews of each participant and map those on the leadership challenge traits to measure those against the key leadership traits that authors Kouzes and Posner developed through their research.

“As we got to the end of the program, we redid the 360 and saw in a composite as we looked at each participant really significant improvements in all the measured areas,” McCarthy says. “For some of the individuals, some outstanding improvements occurred.

“In a competitive work environment, as we come out of this recession, I also think we’ve got people more engaged here than they have been. I’ve got lots of little stories that I’ve seen happen, but for me, it has really helped me in my leadership to go through the program. I think it has really been transformational to our company and will continue to be.”

Use peer teaching

While McCarthy was pleased with the leadership development progress, he needed to find a way to engage more employees to help grow market share. Using the peer-to-peer teaching method again, he put into effect a type of mentoring that would teach junior employees some of the knowledge senior employees have learned.

When some employees suggested a quarterly education session at job sites, McCarthy liked the sound of the idea and furthered reasoned that if a good suggestion such as this was put into play, that very act would help with engagement and buy-in.

This involves the junior employee who is at a job site who would give a mini-seminar to fellow junior employees about a special aspect of the job, or there might be a subcontractor come in and describe a procedure. The education session ? an opportunity to network with fellow younger employees ? is followed by a mixer or other event at the end where some of the more senior employees are invited to join in.

“I love it that these guys had the moxie to come and propose this thing and then go run it,” he says. “We’ve now handed it off because the two guys who thought of it are moving up a little bit, so they recruited two new young guys to do it. It is something that I think has been pretty neat for our company.”

This mentoring type program uses two effective tools to increase knowledge and build better teamwork: the peer method of teaching and the advantages of networking.

The peer method uses employee who are on the same skills levels to help create bridges to span gaps in learning. Since the peer teacher is on the same level, he or she can relate to other peers on a different level than would a manager, using examples that have a relationship with the job at hand.

For the peer teacher, he or she has to have the correct information to teach, and thus benefits are seen from the extra preparation. Formal lines are not likely to exist between peers as they do between a teacher and a student, and with less inhibition, information is more likely to be shared.

The benefits of networking are well-known: making yourself known and learning what others have to offer through a relationship you build and deepen over time.

One example of a mentoring opportunity involves using a tablet computer, such as an iPad, on the job site to check off quality completion points. Instead of sheaves of paper blueprints, builders work with computer files ? and up-and-coming employees as well as any employees can learn the latest methods from a peer tutor.

“Some of our young guys are using a lot of new technology; they have iPads, they have Internet-based programs that they are using to track what’s going on, and it’s just a great opportunity to explain to the other guys what are we doing on this project that could have application to our other jobs,” McCarthy said.

Reward the ideas

In an industry such as construction, there are many opportunities where an operation can be improved or a process can be altered to save time and money. McCarthy wanted to encourage innovations and reward the best ones while also making use of others that were proposed. If the ideas were coming from the frontlines, market share would increase as innovations cut costs and improved efficiency.

A quality group led by two journeyman project managers holds an annual quality concept of the year competition that recognizes the best innovative ideas. Winners are chosen by secret ballot among the employees.

“It says: that’s what happens when you innovate,” McCarthy says.

The competition is open to all employees. This year’s winner was a 25-year-old engineer who designed a device that could be put in windows being replaced from the time the current window is taken out to the time the new window went in to keep the area weather-tight.

While not only recognizing the idea, the process of innovation may open doors to other possibilities.

“Another interesting thing that happened over the course of this, the engineer came to my partner and said, ‘Hey, I would really like to switch career tracks into more of a field supervision career track,’ and I think part of it came from his experience on that project,” McCarthy says. “So we’ve switched him over to working with one of our senior guys on a large project where he’s developing his skills there.”

The winner for the previous year also moved up the ladder. He re-engineered the entire concrete process used at a hospital construction site.

“I remember when he won this thing, he stood up and said, ‘Boy, I think I’m winning an award for messing with something,’” McCarthy says. “So, it was great to see how that went. That guy is now one of our quality leaders. It’s impressive how that develops.”

As for the ideas that don’t win, their value is recognized, and they are distributed throughout the company as alternative valuable concepts. About 50 entries were received this year.

“Even though they didn’t win, they’re good ideas,” he says. “It’s amazing. Many of them were inspired after we had a challenge, after something didn’t work right or what did we do in the face of some adversity or difficult challenges. People are stepping back and saying, ‘OK, what can we learn from this so that we do get better?’”

How to reach: Pepper Construction of Indiana, (317) 681-1000 or

The McCarthy File

Bill McCarthy


Pepper Construction Co. of Indiana.

Born: Chicago, Ill. I worked for 15 years for Pepper Construction there. We had started a large hospital project and wanted to really to expand our presence in Indiana, so the CEO of the company at the time, Stan Pepper, asked if I would move here with my family to have a more full-service presence. So I moved here in 1995, and I absolutely love it. We had three boys at the time; we now have four. This is home to us. We absolutely love it. I visit Chicago probably once a month because that’s where our corporate headquarters is, my wife’s family lives there and so forth. But we just love Indiana, and it’s been a wonderful move for us.

Education: University of Illinois, degree in architecture. I also have a master’s in business from Northwestern University, from the Kellogg School of Management.

First job: I was a paperboy at age 11, and I loved it. My first professional job was with Pepper. I started with the company right out of college.

Who do you admire in business?

David Pepper. He is the CEO of our company. He’s a very different kind of leader than I am. I really admire that. To use a ‘Good to Great’ term, he is probably a Level 5 leader. He’s very authentic. He is a humble man, a very humble guy; down to earth. He doesn’t look like he’s a CEO out of central casting, but he’s a terrific leader. I think he does that by empowering others to lead. He always has an opinion on things, but he lets other people say their piece and gets some consensus out there before he puts his foot down on things. I think he does that extremely well. I think he has been a great leader.

What is the best business advice that you ever received?

Probably one of my more admired leaders is Richard Pepper. He has been involved in the company for probably the last 60 years, so he started with the company right out of college. He always says if you focus on the customer and serving the customer, that will lead to repeat business, and repeat business will make sure that you are profitable. It’s such a simple concept, but it’s one that really just says it all. So I would say in tough times that what I think is even more meaningful is to continue that level of commitment to client service.

What is your definition of business success?

Doing the right thing and meeting and exceeding the expectation of our clients. A job well done, win or lose, is what counts. We try to make sure that regardless of our challenges in meeting their expectations or meeting our own financial requirements that we first deliver the best job we can for them, because I think that’s what we owe everybody. Sometimes, even on a job that is a very successful job for us, there are other jobs I can think of that financially weren’t very successful but the client viewed them as successful.

Published in Indianapolis
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