If you don’t know how your business is doing at all times, you’re heading for trouble. An early warning system?
Clearly defined key performance indicators (KPIs).
“A key performance indicator is a metric that allows you to evaluate whether you are meeting a certain goal,” says James P. Martin, CMA, CIA, CFE, CFD, CFFA, senior manager with Cendrowski Corporate Advisors LLC. “Identifying what the KPIs should be for a particular organization is part of the overall risk assessment process, which identifies any number of factors that can stand in the way of success.”
Smart Business asked Martin how companies can most effectively use KPIs to monitor whether business is on track.
How can a company best define its key performance indicators?
Performance indicators differ from business to business. Having clearly defined goals to start with will help the company determine what it needs to monitor. To assist in the process, use the SMART acronym; ask whether the KPI is Specific, Measurable, Achievable, Relevant and Time-bound. A KPI should be all of these.
How can KPIs be used to improve efficiency?
KPIs are used in many industries to monitor and improve efficiency, and thus improve the bottom line. The fast-food industry has the use of KPIs down to a science. It monitors everything how long it takes you to receive your food, how long it takes to cook 100 burgers… the list goes on. Fast-food companies know what needs to be accomplished to achieve their goals, and they identify a measure to make sure it happens. Another example is a call center. Management will monitor how many people it takes to answer how many calls per day to determine ways it can improve efficiency.
How often should a company monitor its KPIs?
It depends on many factors unique to each organization. If you’re a company in turnaround mode with low cash levels in the bank, you might be monitoring certain KPIs daily, such as A/R and average sales per day. If you’re a manufacturing company tracking production on a piece of equipment you’ve financed, maybe you’re analyzing the metrics on a monthly or quarterly basis.
How important are metrics?
Very important. If a KPI is not measurable, it will not be a useful metric. For example, ‘word-of-mouth’ is not a useful metric. In addition, make sure you are measuring things that are relevant. Here’s an example: By using metrics, an organization named pets.com which sold bulk pet food and the like on the Internet determined that many shoppers were abandoning their carts at the time of checkout. Why? Most of the products were too expensive to ship. Pet.com went out of business because its solution was to provide free shipping. It used a metric that revealed a problem with its business model but incorrectly interpreted it.
What is a ‘balanced scorecard’?
That means that you have to look at overall objectives holistically. If you only measure factors related to profit e.g., how many widgets can we produce by how many workers in one hour you might overlook quality, marketing… all the other elements that must work in harmony in order to achieve success. Your KPIs should be set up so that you are monitoring all areas of the business that tie into achieving your overall goals.
What about smaller companies that don’t have KPIs in place; how can they get started?
Small companies do have KPIs in place; they just may not realize it. For example, they intuitively monitor payroll they know how many hours they pay versus periodic revenue. The first step to formalizing the process is to determine what you need to monitor and measure. Look at the current performance, benchmarks and target levels. Think about all the processes you undertake; analyze objectives and risk conditions/pitfalls to avoid.
How often should KPIs be revisited?
At least once a year, as part of the annual meeting to set objectives for the upcoming year. Throughout the year, however, new KPIs may need to be added and old ones removed. To be useful, the KPIs that are already in place must continue to make sense.
JAMES P. MARTIN, CMA, CIA, CFE, CFD, CFFA, is a senior manager with Cendrowski Corporate Advisors LLC, Bloomfield Hills. Reach him at (248) 540-5760 or email@example.com or go to the company’s Web site at www.frauddeterrence.com.
Under a process called eminent domain, the government can take possession and ownership of private property for public use. Typically, the acquired property is used to build or widen roads or to install public utilities like water, sewer, gas or electric lines.
“An experienced condemnation lawyer will be able to identify things that you might not think of as you evaluate the offer, such as what your future plans for the property are and what effects the ‘taking’ might have on your continued ability to comply with things like zoning ordinances,” says Thomas Schultz, partner at Secrest Wardle.
Smart Business spoke with Schultz about eminent domain, how property is valued and the importance of fully understanding a proposed project.
What is eminent domain, and how might it affect one’s business?
Eminent domain is the right of a governmental entity to acquire property from its owner even if the owner is unwilling to sell that property voluntarily, subject to the payment of just compensation to the owner. The agency can only acquire the property if it intends to put it to a ‘public use,’ though exactly what that means can depend on a number of variables, not the least of which is the specific agency that is acquiring the property and the property’s location. Here in Michigan, there are fairly stringent rules about what ‘public use’ means, so property cannot be taken for what has been called ‘economic development’ purposes or for turning the property over to other private property owners to put to a different ‘private use’ that the government might like better.
What should a company do if contacted by a condemning agency seeking to acquire some or all of its property?
First, consult a lawyer. Even if you don’t object to the proposed project or improvement, you should know what your rights are and what the obligations or responsibilities are of the condemning agency. Second, you may also need to contact a real estate appraiser, who can help you understand the value of the land proposed to be taken.
Third, find out all you can about the project and the reason why the agency wants some of your land for this project. The agency will usually explain the project as part of its initial contact with a business, but if the information you get doesn’t seem like it is complete or you don’t think you’re being told everything, there are plenty of places to get additional information. Your local town or city planning department is often a good place to start.
Any other advice for business owners?
Think about what the loss of the property might do to your business, not just right now but years from now. Will it adversely affect accessibility or visibility or expansion plans or the future marketability of the land? Consider whether the offer from the government has taken into consideration all of the information that you have about your property and your business. If not, make sure that such information is properly conveyed to the agency. Make sure you understand the project and that your voice is heard on whether it should go forward. If you do object, object early in the process to protect your rights as best you can. Also, it is important to pay attention to deadlines contained in paperwork from the condemning agencies. Missing a deadline can have serious consequences on the right to receive proper compensation.
How is property valued in an eminent domain case?
Before contacting a business, a condemning agency is required to come up with a value for the property it intends to acquire, and it has to share that analysis with the property owner. Often, that evaluation process includes a formal real estate appraisal. The agency will at some point make a formal offer to acquire the property and negotiations can then occur. If you reach an agreement on the value of the property, the agency will then usually prepare the necessary paperwork to document the transfer of the property upon payment of that amount.
What type of litigation is typically involved?
If the parties can’t reach an agreement, the agency can then file a lawsuit. Assuming you have no argument that the property isn’t in fact going to be put to a ‘public use’ or shouldn’t be taken from you because it is not necessary to do so, then the agency will usually get the title to the property early in the litigation. After that, the focus of the litigation will usually be the amount of compensation that is owed, the fair market value and/or any damages that might be suffered by a business as a result of the ‘taking.’
THOMAS SCHULTZ is a partner at Secrest Wardle. Reach him at (248) 539-2847 or firstname.lastname@example.org.
Cost segregation studies can help you maximize tax savings and increase cash flows on your current, future or past property purchases by maximizing tax deferrals.
“Almost anyone with an interest in real property whether an owner or a tenant should consider having a cost segregation study conducted,” says Walter M. McGrail, JD, CPA, senior manager at Cendrowski Selecky PC. “Hundreds of thousands of dollars may stand to be achieved.”
Under IRS guidelines, the depreciable tax life of most commercial buildings is 39 years. Accelerated methods can be used to reduce the recovery periods for personal property and land improvements to five or seven and 15 years. A cost segregation study identifies items that can be classified properly into categories with shorter lives.
Smart Business asked McGrail about the benefits of having a cost segregation study conducted.
What is the goal of a cost segregation study?
A cost segregation study is an analysis of the costs a taxpayer has in real property in order to break out the costs attributable into shorter recovery periods for federal and state tax purposes. The benefit is accelerated tax deductions by recovering the costs over five, seven or 15 years, versus 39 years. Depending on how personal and real property is taxed in the locale where the building is located, there can be significant property tax savings, as well.
Eligible properties include new buildings under construction, existing property that was purchased recently or soon will be, and existing property that was purchased after 1986 (the IRS allows for catch-up for foregone savings). It doesn’t matter what the use of the building is; industrial, retail, commercial/office, health care facilities or even residential rental housing qualifies.
How much can be saved?
In general, it depends on three factors: the cost to acquire the building, the money you are going to put into it and how you are going to use the property. It is not inaccurate to say that you could save several hundreds of thousands of dollars. For example, if you spent $10 million on a building, you might save $250,000 to $1 million on a present value basis. We usually see a greater percentage of savings with retail, office and hotel space.
What happens during the process?
There are several phases to the cost segregation study. During the bid phase, the engineering professionals and tax accountants walk through all areas of the property with a site representative to develop a general overview. If granted the engagement, the firm’s engineers examine the architectural renderings or blueprints to produce an in-depth analysis. Next, the tax accountants take the engineers’ work and put it in format acceptable to the IRS. A report with documentation supports how the cost recovery was arrived at. During the process, the firm should examine the purchase agreement to see if it contains any stipulations on allocations. Many times, during the 11th hour of negotiations, the parties will invite their tax professionals in, and the accountants end up allocating part of the purchase price. Quite often we find something. For example, say the building sold for $10 million, but a stipulation specified that $1 million had to be allocated to good will. So you have to be careful stipulations need to be identified and honored.
Are there situations where a cost segregation study would not make sense?
It takes about five to seven years to start recouping the tax savings, so you may not realize the payback period if you plan to sell the property in short order. There may also be challenges down the road if you try to use the building for a tax-free swap, and you’ve already identified personal property through the cost segregation study. In any case, a professional can review the options with you. Every situation is different.
Any final words of advice?
Look at the level of expertise offered by the firm that will do the study. A cost segregation study is not done in a vacuum it represents the marriage of an engineer’s viewpoint with the costs involved with a property. The work needs to be integrated, and the team of engineers and tax professionals must be highly experienced and work well together. You might also want to consider what types of incentives the firm has. Larger or more experienced firms might offer contingencies. For example, they might produce the study for a fixed fee plus a percentage of the tax savings recovered for you.
The recent amendments to the Federal Rules of Civil Procedure highlight the importance of having document-retention policies in place that take into consideration electronically stored records and data. In order to ensure that necessary information is preserved and can be produced in the event of litigation, it is critical to institute a corporate policy relating to e-discovery.
“Defining record-retention protocols in advance and not waiting until after a lawsuit has been filed is the classic avoidance of locking the barn door after the horse gets out,” says John Mitchell, an executive partner at Secrest Wardle. “It protects the credibility of the company, and it protects against the potential imposition of sanctions.”
Smart Business spoke with Mitchell about e-discovery and the importance of being proactive in respect to record-retention protocols.
What effect has e-discovery had on litigation?
We can look at this from two perspectives: the first is technical and the second is practical. Technically, new rules have been established that codify the fact that e-commerce is the order of the day and that electronic storage of documents now predominates. As a practical matter, these rules expand what can be done in discovery, and they create mechanisms for companies to be exposed to what heretofore had been undiscovered internal communication. Sometimes that is a great benefit to someone going through litigation, and sometimes it’s a potential detriment.
What are the recent amendments to the Federal Rules of Civil Procedures in regards to e-discovery?
It’s important to recognize that the rules have been around for decades, long before most people had ever heard the word computer. On the other hand, computers dominated companies’ operations for many years before the rules were changed on Dec. 1, 2006. The amendments define the capacity and the ability to request and obtain documents maintained electronically. The rules also provide very significant requisites for meeting and conferring among counsel prior to the initial mandatory conference with the court. Discussions need to include what is electronically stored, how data may be retained and specific protocols defining not only where these documents are but what can be produced and how.
How have these changes affected the manner in which parties handle written discovery?
At a baseline level, litigants start out with their preliminary requests for production, seeking specific information regarding what is maintained electronically and asking that documents be produced. Creative attorneys can expand their request from the traditional request for someone’s files to asking for what is stored on hard drives, what is available through servers on either the sender’s or recipient’s side and what might be available through the ISP server. The expanded availability of what can be asked for and the permanency of what is electronically stored has redefined the scope of what can be requested.
On the other hand, historic protections and rules for discovery have not changed: The fact that written requests are more expansive than in the past doesn’t change the ability to object on the basis of relevancy and privilege.
Why is it so important to institute a corporate policy that addresses the use and retention of electronic information?
What is in your documents so often defines your potential liability or your defenses. Unlike in days gone by, when everything you had was simply in the filing cabinet, the existence and capacity of anything stored electronically to remain permanently part of your file requires that you have a policy to protect how documents are created, who has the authority to memorialize information on behalf of your company and for how long that material is going to be retained.
How can CEOs and senior-level management be proactive in regards to record-retention protocols?
Management needs to work with counsel, whether it’s corporate counsel or retained counsel, to set up policies and define how document management is going to occur. The system needs to be reasonable, have a systematic approach and a clear definition of how the company is going to define their business needs and how it is going to meet legal requirements.
As to the latter, and even if it needs to be done by something as basic and fundamental as a literal checklist, there must be a definition put in place that defines when legal requirements create the need to retain documents that otherwise would be disposed of. This requires somebody with authority to define what immediate action needs to be taken, when requisite notice of impending or potential legal action comes in, and what steps will be taken to maintain the integrity of what is retained.
JOHN MITCHELL is an executive partner at Secrest Wardle. Reach him at (248) 851-9500 or email@example.com.
Who wouldn’t want an office of experts managing their financial affairs and planning for their family while also providing relief from the mundane aspects of wealth?
“With the creation of multifamily offices, the benefits of a traditional separate family office can be achieved at a substantially reduced cost while at the same time keeping the financial affairs of each family completely separate and confidential,” says Steven Y. Patler, JD, CPA, managing director with The Prosperitas Group LLC in Bloomfield Hills, Mich. “It provides a solution for families who don’t want the administrative burdens or can’t justify the costs of establishing their own family office. Objectivity and independence are key indicators that separate a real multifamily office from an organization that claims to be a family office.”
Smart Business asked Patler what types of families would be best served by a multifamily office.
Why would someone want to use a multifamily office rather than a single-family office?
The most obvious benefit is cost efficiency. Single-family offices generally will not make sense for families with a net worth of less than $100 million. On the other hand, multifamily offices have much lower net worth thresholds. In fact, many existing single-family offices have closed and their families have become clients of multifamily offices. Besides the obvious cost efficiencies, a multifamily office has greater buying power. This makes it possible for clients to have greater access to investment vehicles and potentially with lower fees. Furthermore, the multifamily office advisers typically will have broader and deeper experience because they are regularly exposed to the challenges faced by many different families.
Describe a good candidate for a multifamily office.
Basically, a multifamily office can be beneficial to most high-net-worth families/individuals. This could range from a widow or widower with significant investment assets to a large multigenerational family that runs its own business, to a business executive who does not have the inclination or time to properly attend to his or her own financial affairs. Those experiencing a liquidity event, such as selling a company, are also good candidates. Furthermore, a multifamily office can serve an important role in providing much needed continuity for the family at times of illness or death.
What types of services does the multifamily office provide?
The specific services provided by a multi-family office should be tailored to help achieve each family’s particular goals. A multifamily office serves as a CFO or quarterback of the family’s financial affairs in addition to the role of high-level concierge. It protects the family, manages what they have and helps them plan for the future. Specific services can include integrated financial, estate and tax planning; risk management; family governance and philanthropy; monitoring third-party service providers; bill paying; and consolidated reporting. Not all multifamily offices are the same. Some are heavily investment-oriented and outsource most of their tasks, while others are more comprehensive and have employees from a broad range of disciplines. Many are ‘open shops’ that are able to coordinate and integrate with a family’s existing professionals to produce a team approach.
Why don’t more people use multifamily offices?
Most significantly, many people are unaware of what a multifamily office is and how it can help their family. Although the concept of family/multifamily office is not very well known, the number and size of multifamily offices has steadily grown throughout the country in the last 10 years, mainly through word of mouth from multi-family office clients and estate-planning attorneys.
Some people attempt to manage their own affairs or mistakenly think someone else is actually ‘looking out’ for them. We have seen examples where someone dies and his or her spouse, with no financial experience, is left vulnerable to unethical behaviors by some so-called advisers.
Another reason people may not consider a multifamily office is because they think you have to be extremely wealthy. As mentioned earlier, this is not necessarily the case. A multifamily office makes it significantly more affordable to get independent and objective professional assistance.
What is the fee structure?
Some firms charge an hourly fee, while others charge an asset-based fee. For some clients, a more attractive alternative may be to set a fixed fee based on the nature and complexity of a family’s situation. A fixed fee promotes increased communication and trust since the family members will not feel like the meter is running every time they call their multifamily office advisers. I know I am best able to serve my families the more frequently we talk.
STEVEN Y. PATLER, JD, CPA, is a managing director of The Prosperitas Group LLC, Bloomfield Hills, Mich. Reach him at (877) 540-5777 or firstname.lastname@example.org. For more information, go to www.prosperitasgroup.com.
The buzz around worksite wellness programs continues to grow and with good reason. More and more employers are looking to incorporate health promotion and disease prevention into their business strategy and culture. These companies are seeing the link between a healthy work force and a healthy bottom line.
The shift that’s occurring, according to Wendy Wigger, director of wellness for Priority Health, a Michigan-based health insurance plan, is a move from focusing solely on the cost of health care to looking at the bigger picture of the total investment and value of health. Many employers are seeking to better understand not just their costs. They’re also identifying some of the key drivers to their health care costs and the impact that can be made on them. They’re focused not only on the 20 percent of their employees who may be driving 80 percent of their health care costs, but they’re also focused on keeping the 80 percent of their “healthy employees” healthy.
Smart Business spoke with Wigger about the benefits a company can reap by implementing a workplace wellness plan.
Does wellness really work?
The cost benefit of worksite wellness has been well documented over the past two decades. For example, according to the American Journal of Health Promotion in a review of 73 published studies of worksite health promotion programs, there was an average $3.50-to-$1 savings-to-cost ratio in reduced absenteeism and health care costs. And, based on work conducted by Larry Chapman in a meta-review of 42 published studies of worksite health promotion programs, there was an average 28 percent reduction in sick-leave absenteeism, 26 percent reduction in health costs, 30 percent reduction in workers’ compensation and disability management claims costs and a $5.93-to-$1 savings-to-cost ratio.
If we’re going to be successful in affecting overall rising health care costs and health outcomes, we need to focus on the root cause of disease and that’s our unhealthy lifestyle behaviors. Wellness is a key prevention strategy designed to impact the health and cost equation.
What lifestyle choices have the most impact on health care costs and why?
Evidence points to the fact that more than half of all health care costs are attributable to lifestyle behaviors factors we can control to a significant degree. In fact, 33 percent of United States deaths per year can be attributed to tobacco use, physical inactivity and poor eating habits.
The number and type of health risks an individual has can greatly amplify his or her overall health care costs. Smoking, lack of exercise and obesity are the three greatest modifiable lifestyle behaviors that drive increased health care costs. These particular lifestyle behaviors are associated with increased risks for cardiovascular disease, certain types of cancers, diabetes and other diseases. Beyond the increased health care costs, there’s also the impact on employee productivity in the work-place, work limitations, absenteeism, the level of engagement in work, as well as the individual’s overall quality of life.
What tangible steps can employers take to support their employees in making healthier choices?
Core components of an effective wellness program rely on education, behavior change interventions, and strategies for creating supportive and healthy work environments. The primary goal of such programs is to positively influence health behaviors, reduce health risks and optimize health and productivity. In addition, there’s also the economic goal of lowering or helping to manage long-term health-related costs.
While an effective worksite wellness program will vary based on the needs and environment of the organization, there are common elements. First, you must begin with a solid benchmark of the health of your employees and your company’s commitment to health and wellness. Second, develop an evaluation system to measure program impact and outcomes. Third, include health education programs that provide employees with the information and skills to change their lifestyle behaviors. Fourth, consider health screens, including a health risk appraisal that can help employees assess their current health risks and set the stage for focused health improvement. Fifth, create a healthy work culture to reinforce and support sustainable lifestyle behavior changes. Sixth, build wellness as a business strategy to fully integrate your health promotion programming efforts into your organization’s overall values, mission and vision. Finally, create linkages between your wellness efforts and other employee support services, such as benefits, employee assistant programs and work-life balances to optimize the value and results from each program. Following these results, you can achieve better health for your employees and a healthier bottom line for your business.
WENDY WIGGER is the director of wellness for Priority Health, a Michigan-based health insurance plan. Reach her at (616) 464-8758.
Title: Chairman of the board, president and CEO of ArvinMeritor Inc.
Education: Bachelor’s degree, mechanical engineering, Cornell University; MBA, University of Michigan
Military service: Lieutenant in the U.S. Navy from 1975 to 1979, serving aboard the destroyer USS Luce
What is the best business lesson you’ve learned?
You have to like what you are doing. An expression I learned years and years ago was that if you have a job where you like going to work three out of five days a week, you have a pretty good job. In my view, I’d have to say it’s four and a half out of five or six and a half out of seven. I always leave that one-half day for if I’m having a lousy day. But I really like what I’m doing, and what I often say to people is you have to find something where you like what you are doing and to be passionate about it. At the end of the day, no matter what industry you are in, it’s a tough industry. We’re in automotive and heavy truck, right now the banking industry is going through some challenges. So there are always going to be challenges, and you have to like what you are doing.
What traits or skills are essential for a business leader?
First of all, you have to be results-oriented. The expression I use is, ‘You don’t measure activity, you measure results.’ You also have to be positive in what you are doing, have a passion and enjoyment for what you are doing. You need a commitment to excellence.
This company is also much more powerful with 19,000 people pulling in the same direction, so I really have to drive the team, give our people the purpose going forward and recognize when people have successes. You also have to recognize when people aren’t performing and step up to that. You have to give people fair and candid and real-time performance feedback. It’s not always going to be great. If someone is not performing, go address that. If someone makes a mistake over and over, there is either an issue with the individual or the system, and you have to go fix that.
What are several universal truths you’ve learned about leading a business?
First and foremost is integrity. When you communicate, it has to be transparent. Whenever I talk to anyone in the company, I always say that what we discuss, I should be comfortable putting on the banner on the front of the building. I believe leading with integrity is absolutely critical.
Another thing I like to say is that my title tells me what I’m responsible for. I learned that the title ‘CEO’ stands for ‘customer, employees and ownership.’ Those are the three groups I’m responsible to serve. But I kind of modified it to ‘C-squared-EO.’ The other ‘C’ stands for community.
Also, you should make sure you have a good work-life balance. If you have family things, go to them. My kids are in college now, but I went to a lot of my kids’ sporting events in my career. People define having a good work-life balance differently, but you have to find that balance in your life.
In today’s ultracompetitive job market, it’s hard to find a good fit. It’s difficult for applicants to find a good job, and it can be equally difficult for companies to find good employees. If both sides are looking for similar qualities, shouldn’t it be easier to find common ground?
“Finding the right candidates can be easy, if a company knows what it’s looking for and how to attract it,” says Deborah Phillips, chief administrative officer of Priority Health. “It’s worth the effort because having quality people in your company will help you secure better financial results. Smart companies know they must find, develop and keep the people who keep them competitive.
“Securing the right human talent is essential. Identifying and developing high performers for future leadership positions as well as developing effective planning methods to ensure that you have strong leaders in the pipeline are key to a company’s future. The best way to sustain continued growth is to increase the number of people in the leadership pipeline who can intelligently look at the business and find ways to accelerate your performance.”
Smart Business spoke to Phillips about strategies to attract and retain the best and brightest.
How do you define ‘high performers’?
High performers are people who are eager to get ahead and who have the skills to move themselves forward. They are committed to meeting or exceeding customer expectations, have a positive attitude, excellent communication skills, and a strong desire to contribute. They have an aptitude for continuous learning, enthusiasm for the organization and their role in the organization, and the ability to transfer knowledge to ensure the success of others. High performers are not happy until the job is done and goals are met. They are solution focused, they accept accountability, and they demonstrate emotional maturity. Finally, they are technically competent. They have exceptional industry or business knowledge, think organizationally, and rapidly bring new skills and information into use. High performers are people you know will be the future of your company.
What are strategies to recruit them?
In most cases, the best candidates are not looking for positions, so to locate these hard-to-find candidates you have to work harder and smarter to find them.
Finding, recruiting and screening candidates can be a very time-consuming process, and it can be expensive if you make a mistake. Utilizing outside recruiting specialists who understand your business, networking with colleagues and encouraging employee referrals are ways companies can effectively find good applicants without wasting valuable time and money. Technology (Web sites, Internet postings, resume searches, blogs, etc.) is also an effective tool.
Companies can also try calling contacts or just cold-calling prospective recruits. If you know what you’re looking for and your reputation is solid, letting people know in a very direct way that you’re interested in them can pay off.
What are strategies to retain them?
If a company wants to keep high performers, it needs to create a culture that attracts the best and brightest. You don’t want your company to be a steppingstone for employees; you want it to be a place where employees want to stay.
Again, smart companies have a succession management and leadership development program in place for their high performers. High performers, or high potentials, demand a development program. Do not develop a list of high potentials if you do not have the resources to develop the program.
What are strategies to develop them?
Stay involved. Develop a clear set of standards and objectives about what it takes to succeed in the organization, and ensure there is a clear connection between what you require of your leaders and how you can win in the marketplace. Define the ‘critical experiences’ required to be a high performer, i.e., what experiences are necessary to prepare the employee for the future role? Plan for outside coaches. If you don’t have the skills internally to develop the individual or don’t have the time, you risk losing the high performer. Create individual development plans. Remember, one size does not fit all! Include critical timelines, action steps, metrics and measures of the program. Teach business acumen. Ensure that your high performers are well grounded in the business.
Finally, make sure you involve the high performer in the development plan. Remember, more than anything else, high performers thrive on challenges. If you keep them stimulated, it’s a win-win: They’re more likely to stay, and your company will continue to benefit from their efforts.
DEBORAH PHILLIPS is the chief administrative officer of Priority Health. Reach her at (616) 464-8135 or email@example.com.
Mike Gauthier wants his employees to set high goals for themselves, even if their aim is so high it means they will leave his company.
Gauthier, founder and president of SAVE On Everything, explores the goals of his estimated 150 employees by asking direct questions.
“I believe in the walk-around theory, but not just walking around and saying, ‘How are you doing today?’ But to ask specific questions directed toward their division and what is working and not working, and get some opinions from them,” says the leader of the direct-mail coupon magazine company, which posted 2006 revenue of about $30 million.
Smart Business spoke with Gauthier about how he makes employees comfortable with change at a growing company and why you shouldn’t get into an unrelated business just for the sake of growth.
Q: What are the keys to being a good leader?
One of the things we struggle with as I continue to grow the company is for (employees) not to forget that their job is the second most important thing in their life, and family comes first. We try to make time for them to do family stuff.
What that shows is that we care as a company. We take vacations, like the Fourth of July, we give extra days off, paid. Between Christmas and New Year’s, we always take that time off, and give it to them paid and not a vacation. Making sure they understand we care about what happens to them.
Q: How do you make employees comfortable with change?
The biggest thing you can have is clear communication. I used to think clear communication was verbalizing it, but that is not communication at all.
You need to have that person that can communicate, all the way around the ranks, the purpose of the change a clear definition of what the change is and how it is going to affect them. If you can show what the advantages are and how it’s going to affect them and what they need to actually change in the day-to-day world, and it’s clearly outlined, they will do the best they can with change.
Most people resist change. One of the things I tell people when they are hired is if you don’t like change, then this isn’t a good
company for you. My belief system is you have to grow and stay in front of the competition.
Q: How do you handle failure?
I don’t look at failure as failure. As a salesperson, failure and rejection is part of your daily life, and that’s really where I came from. Someone said, ‘You only have to be right 51 percent of the time to be a success,’ and I think that is probably true.
I see failure more as a learning experience. I see failure as an opportunity to practice what I do and perfect my performances. It’s sort of like the Babe Ruth story. People don’t think of him as the strike-out king but the home-run king.
You aren’t judged by the number of times you fail, but you are judged by the number of times you succeed. That’s sort of in direct proportion to the number of times you actually fail and can keep trying.
People ask me what is the key to success, and I say perseverance. If you can keep going and learning, you can probably get there.
Q: What advice would you give business leaders trying to grow their companies?
Stay with your core competency. One of the worst things, and I see this, and I’ve done it, is a company their core competency is advertising and they want to get into another unrelated type of business just because what we like to do is grow.
I have a friend who has a window film company, for example, and he starts a company that replaces glass. You might think, ‘Jeez, he puts window film on glass, and he’s got glass; it’s the same thing.’
But, it’s another whole set of rules. It’s another whole set of customers. It’s something totally different. What happens is, it’s not that he couldn’t be successful with that, but he diverts his attention away from what he is supposed to be doing.
For example, we opened a magazine, and we have a direct-mail product. And we opened a magazine with editorial, and I said, ‘It’s still advertisers; it’s printing and subscriptions.’ A $2.5 million loss later, I said, ‘Maybe I don’t know what I am doing here so much.’
Not only did I lose the money there, but I lost the opportunity; I should have had another city open. The city we started in, Detroit, it hurt that whole market because our attention was diverted away.
So stay with the core competency. Figure out what you are the best at, and do that.
HOW TO REACH: SAVE On Everything, (248) 362-9119 or www.saveoneverything.com
In her first six months on the job, MaryAnn Rivers not only had to familiarize herself with the operations of Entertainment Publications Inc. and transition through tenuous business decisions, she also had to develop a management team essentially from scratch. In September 2006, when Rivers was named president and CEO of the $196.8 million company that produces the Entertainment coupon book and handles other merchant promotions, only one person remained from the previous management team. While many would try to fill the open positions in a hurry, creating opportunities to make mistakes, Rivers instead took her time to find a team that was diverse but had the same common value system. Smart Business spoke with Rivers about how she drove change at Entertainment Publications Inc.
Get employee input. When I first came to the company, I spent the first two or three months on the road with salespeople and in the field just sitting down and giving every salesperson a half an hour to share what their challenges were, what they thought should change, and what were the problems and opportunities they saw.
I took all of that information, boiled it all down, and gave an overview to the folks back here and to the sales organization, and then we made decisions off those things. The turning point was when we did what we said we were going to do. We actually put ideas into action, as opposed to just paying lip service.
We put some key goals out and, for example, said, ‘By this date, you will have a new compensation plan or key goals for the upcoming year, three months earlier than you did previously,’ then delivering on it.
It comes down to, ‘We heard what you said. We can’t fix everything today, but here are the things we are going to do.’ When you say you are going to do something, you make darn sure you do it, regardless of what obstacles get in the way. That develops trust, and the more trust you develop, the more they open up and talk.
Know your shortcomings. I spontaneously quiz people when I’m out talking to them about, ‘Tell me about the vision of the company, and what are the three key goals?’ I can almost tell immediately what is getting through and what’s not.
When they can’t articulate back a certain part of the vision or the goals or strategy, I know we missed there, and we need to go back to the drawing board and either reposition in a way they do understand it or communicate by a different means. It’s sort of a test period to see that they are picking up on it.
I will go into a new-employee orientation session, in which they may have heard through the interview process or their first couple of days in training on what the vision is and what the strategies are. By that time, they may have heard a few things or maybe they haven’t heard much at all, but through the process, they should have been in touch with vision and where we are headed.
I will address maybe a room of 30 people and say, ‘Here’s the vision, but can you tell me what that means or what the three goals are for the year?’ When they can’t say that, I’ll often turn that back around and say, ‘I really missed on that and didn’t communicate it clearly enough.’
That’s really the only reason it’s done. It’s not to catch them not knowing. The onus is on myself and the leadership team to make sure that it is inspiring enough that they understand it. If we can’t get our employees to understand it, and the people that are in our organization living and breathing it every day, how are we going to change externally?
Reward excitement. You are dealing with short-term challenges and with the long-term challenges and balancing those two things. Sometimes, the day isn’t long enough to handle the world we are living in today and create and dream about the world we want to live in tomorrow.
It really comes down to keeping people excited about it and energized enough. That’s one of the things in change leadership is to determine which people are really excited and have the extra energy. A lot of times, it comes down to employees thinking about tomorrow at their kitchen table or while on a run and in off time. That needs to happen to have enough people excited to generate that excitement all the time.
You need to make sure you are recognizing those achievements every day that people do.
Make sure they know that, even if it is a scenario where they made a mistake or where they failed at something, you want to try to encourage and reward people who are trying new things and taking risks.
Changing is about a lot of risks, and some go well and some don’t. In those cases, where there are huge wins, make sure those people get rewarded and recognized, and open up those lines of communication. Make sure they are hearing about the vision and focus in the here and now but also thinking about tomorrow.
Encourage different opinions. People are generally fearful when there are times of change to bring up that they don’t agree or don’t buy in. We try to encourage people to express their opinions.
I like to hear contradictory evidence and debates because what makes an organization healthy is that constant challenge and internal debate that makes us all smarter and allows us to continue to learn. It’s not about expressing an opinion that is counter to what the thought is.
It’s more about attitude. Can you have that debate in the room, and, at the end of the day, can that team make a decision and move forward even if everyone doesn’t agree?
Here, it is people who have been here for a long period of time, who are passionate and enthusiastic and have the right attitude, integrated with people that have been here with external perspective. They are both equally important, and make sure people understand that. You say it again and again that everyone is valued as long as they take the right attitude, approach, openness, and willingness to try and make mistakes, and respect each other’s opinions, and get in alignment where we need to go.
HOW TO REACH: Entertainment Publications Inc., (888) 231-SAVE or www.entertainment.com