Detroit (1202)

Saturday, 26 May 2007 20:00

Value your business

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To business owners, the value of the companies they created, nourished with capital, energy and time, and grew despite personal risks and inevitable market ups and downs, is immeasurable. The businesses and their assets are everything, and they are priceless — to the owners.

What is your business really worth? This is important to understand whether you are in the position to sell or not. “Periodically during your business lifecycle, you should get a business valuation so you have an estimate of the worth of your business,” says Craig Johnson, president and CEO, Franklin Bank, Southfield, Mich.

Johnson turns business valuation, the second step for successful exit planning, over to Franklin Bank’s wealth planning and advisory arm: APB Financial Group Ltd. and its president Mero Capo. “Valuing your business properly enables you to transition out effectively,” Capo says.

Smart Business discussed with Capo what buyers look for and how a seller can properly value a business to maximize gains when it comes time to exit.

When should owners value their businesses?

The key is to start early — well before you anticipate exiting the business. Valuation is a fluid process, and you need to take the time to do it right. So begin as you start your succession plan, at least five years before you want to exit your business.

Before you begin the valuation process, consider your personal finances. How much do you need to get out of your business to maintain your standard of living? Determine this early because the business’s value may not allow you to live as you choose after exiting. In that case, you will go back to the drawing board and increase overall value through growth, by trimming fat or increasing sales.

What are some preparatory measures to maximize the value of a business?

Before you sell your business, you don’t want to be running it out of your home and tracking financials on scrap paper. You need solid records, good, clean profit-and-loss statements and a set of operating systems that are productive, efficient and can be transferred to a new owner. A buyer will need a very clear picture of how your business operates and what kind of return he or she can expect from his or her investment. Your house needs to be in order, and your cash flow must be healthy.

What else will a third-party buyer look for in a business?

Put yourself in the buyer’s shoes and consider what aspects of a company make it attractive. For one, what is the economic outlook for the industry and in what financial condition is the company?

As a seller, you should be able to effectively communicate the nature of your business and its history. Is the company one that can live on without you? Are key managers in place, and will they stay onboard following the transition to new ownership? This is especially important if a buyer from another industry is considering your business. People are a strong asset.

Finally, you’ll provide the buyer with the net assets of your company. This is where a business valuation expert comes in. He or she will present the buyer’s point of view and the true market value for your business.

What happens when owners overvalue their businesses?

Basically, the business sits on the shelf. But keep in mind, depending on your succession plan, you may not want the business to be valued at its highest. For example, if family will purchase the business from you, you’ll want to mitigate tax costs (gift tax and corporate gains tax) and also ensure that the operation is within reach for this person. If it is priced too high, family may not be able to afford the business, and even so, the taxes may be prohibitive. On the other hand, if you will sell your business to a third party, you want to maximize your gains.

Once owners place a value on their businesses, what variables determine whether they will get this value from buyers?

First, consider the economy during the point in time you want to sell. Is your industry in a downturn? This will impact the value of your business to a buyer. Also take a look at interest rates — the availability of money. If interest rates are high, your cash flow should be able to pay the buyer’s debt service.

If you value your business several years before you plan to sell, you can exit at the most advantageous time and maximize the value of your life’s work.

MERO CAPO is president of APB Financial Group, Ltd., the wealth planning and advisory arm of Franklin Bank. Reach him via Reach Craig Johnson, president and CEO of Franklin Bank, at or (248) 386-9860.

Saturday, 26 May 2007 20:00

Constructing a culture

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Paul Hatcher realizes there is a perception — although not an appropriate one — that the business he works in does not have the highest ethics and morals. So, the president of Oliver/Hatcher Construction combats that by making sure his company and its culture are different from others in the business.

“One of the keys to that is having the highest ethics and treating customers the way you want to be treated,” he says. “When people come in, it’s one thing to talk about it and to sell your customers on it. It’s another thing when they come from a different company and start living that part of that culture.”

While Hatcher prefers to keep the company’s revenue private, Oliver/Hatcher does 12 to 15 projects a year, each worth $5 million to $8 million.

Smart Business spoke with Hatcher about how he established his culture and how he conveys a clear message that it is not to be breached.

Q: How did you establish your culture?

It’s pretty easy and difficult at the same time. You need to educate them on the company culture. We aren’t a huge company, but there is a culture here, a way of doing things and a way of looking at things.

You have to lead by example. When you are faced with difficult decisions or decisions that you can go one direction or another, you’d better choose the direction that establishes that your ethics are strong and your morals are in the right place. Your people need to see that. It also goes back to finding the right people. They have to have those personality traits. But, if they come to our company with those traits and see their bosses make decisions in the proper manner, it’s much easier for them to make decisions.

Q: What are the keys to being a good leader?

You have to find the right people. By the right people, I mean those that share the same approach that you do, the dedication to business you have from a customer satisfaction standpoint, business ethics and the willingness to work hard.

It’s important for our groups to work as teams, and as a team overall from a company standpoint. In order to do that, it is important for them to understand the culture of our company.

Also, giving them clear direction. Not necessarily how they should do it but, ‘Here is the goal we want to accomplish.’ Let them develop their own approach to solving an issue, certainly, being part of that approach and, if they need assistance, making yourself available to be part of that approach as they are moving down the path to solving whatever issue it is.

We are always checking in with them to see how they are doing and if they are on track to accomplish their goal, or whether they are making the right progress.

Q: How do you find the right people?

We are always looking and talking to people. It comes from knowing people that know that particular person.

When you know someone in the marketplace well enough that they have a pretty good understanding of what our culture is, and they are recommending someone to come into our company, that says a lot. It’s not just they are a good person or know technical aspects of the job.

We don’t just hire them based on that. The interview process is, they could come through four interviews. It’s going to be me or my partner, it’s going to be their superiors and it’s going to be the people that they are going to work with on a day-to-day basis. Then it would be another interview back with me and their superior before there is a job offer made.

I wouldn’t say there are always four interviews, but there are always multiple interviews for every single position.

Q: How do you make sure you are conveying a clear message to your employees?

Repetition is part of it. It goes back to a bit of the culture, lack of turnover and familiarity with the people I am working with and their familiarity with me. I question myself a lot of times.

Did I give them a clear direction? I’ll come back and ask them questions to see whether they understand whether I gave them a clear direction. I may repeat myself again. But, just repeating yourself time and time again doesn’t mean they are going to get clear direction. It’s trying to find a way to say it differently or understand what they do and don’t understand in terms of the direction you are giving them.

If we do have someone who’s only been here a year or two, they feel comfortable going to someone who has been here 10 years and asking, ‘Is this what he means by this when he gives me this direction?’

HOW TO REACH: Oliver/Hatcher Construction, (248) 374-1100 or

Wednesday, 25 April 2007 20:00

Offense can be the best defense

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While all executives are well aware of the spiraling costs associated with employee health care, some companies have taken a reactive approach to the problem. Rather than establishing programs to keep their healthy employees healthy, they have focused the bulk of their attention on employees with existing health problems.

An effective health management plan, points out Stephen J. Peck, president of Kapnick Insurance Group (Benefits Division), takes a proactive approach. Not only can such a plan positively influence employees’ lifestyles while increasing productivity, but costs can be reduced as well. “If an employer offers a range of programs along with rewards that reinforce healthy behavior, employees remain healthy and the bottom line is improved,” Peck points out.

Smart Business spoke with Peck about health management, the importance of keeping healthy employees in the low-risk category and what types of savings can be realized from having a health management program in place.

What does health management consist of?

Simply put, health management is an effective tool for employers to control medical claims’ cost and utilization through building a healthy work force. A few years ago, we used the term wellness programs, but it’s so much more today. Health management addresses absenteeism, health and prescription drug claims, presenteeism, disability and life claims and workers’ compensation.

Why should employers invest in health management?

In light of the fact that workers spend a significant portion of their waking hours at work, employers are in a great position to positively influence lifestyle choices. Through positive lifestyle choices, an employer and employee can reduce health care claims, lower absenteeism and increase productivity. It really needs to be a two-way street, however, with both employers and employees actively engaged in the process.

How can a company most effectively deploy a health management strategy?

In the past, most programs concentrated almost exclusively on employees with existing chronic conditions with what were called disease management programs. I would deem this to be a reactive strategy. Recent studies have shown that there is a greater return by shifting focus to a proactive strategy of keeping your healthy employees healthy.

Let me illustrate it this way. Businesses value their existing customer base because maintaining loyalty is far less expensive than acquiring new customers. Similarly, low-risk employees, or healthy employees, who already have and maintain good health, can be viewed as an employer’s existing customers. These employees not only have lower health care costs, but they have higher performance and productivity. If an employer does not maintain a relatively low-cost awareness campaign and program, research indicates many of these low-risk employees — 2 percent to 4 percent annually — will inevitably join the higher risk, higher cost employees.

What type of savings and/or return of investment is typical with an effective health management program?

The numbers are very compelling. When an employee maintains his or her low-risk status, there is a potential savings of $350 per person per year compared to a savings of a $153 per person per year when an employee migrates from the high risk to the low risk. Additionally, the return on investment to establish and implement a health management program averages about $3.50:$1 in reduced health care costs, absenteeism and productivity.

What types of programs are there and how does one start a health management program?

Some of the programs that can be implemented include needs-and-interests surveys, health-risk appraisals, educational classes, communication campaigns, walking programs, incentive-based programs, newsletters, spousal meetings and fitness challenges. There has to be support and buy-in from the highest level of the company. Without that, most programs will not be successful. There is an overwhelming amount of information available to employers. More often than not, employers establish an internal wellness committee to help identify which programs are useful and to coordinate the responsibilities of managing these programs.

STEVE PECK is president of Kapnick Insurance Group (Benefits Division). Reach him at (888) 263-4656, ext. 1147 or Kapnick Insurance Group is a member of Assurex Global, an international network of insurance and employee benefit brokers.

Wednesday, 25 April 2007 20:00

Talent showcase

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Claudine George has no problem assigning employees a job they wouldn’t normally do during the day.

It’s not that George, owner of professional consulting firm ICONMA, wants to throw them off, she just likes to give them a chance to showcase their special skills. By spotting unique talents in her employees, George is able to assign them tasks to keep them engaged and upbeat. The strategy has kept employees motivated, as ICONMA has grown quickly since its opening in 1999, expanding to six branch offices on its way to more than $21 million in 2006 revenue.

Smart Business spoke with George about how she finds the right people and keeps them motivated.

Q: How do you motivate your staff?

My job as a leader is to understand everyone’s strengths and what they bring to the company and make sure those strengths are utilized in the best possible way. I believe that everyone wants to feel like they did a good job and that they actually contributed something and made a difference for the company.

I target the unique skills an employee has, and I can remind them I appreciate that by assigning jobs to their unique skill set. Now, it’s not possible to do that every day, but once in awhile, it helps if people really feel like, ‘Oh yeah, that’s what I’m good at, that’s what makes me different than the guy in the next office.’

Let’s say our bookkeeper, she does the usual routine of her job, but I know she’s also good at research, so every once in awhile I can do something where I say, ‘I’m not really sure our current bank has the best security, can you go online and research that and see what our bank is doing and see what others are doing?’ That takes her out of that routine, and she’s putting some of her other skills to work. That reinforces her confidence.

Q: What’s the key ingredient to communicating with your staff?

I have a background in psychology and that has helped me listen to people — not just listening to our customers and what they want, but listening to what people need to do their jobs effectively.

One of the things I do when I’m dealing with customers or employees that have a problem is, I validate what they’re thinking. It immediately placates any situation, and only from there can you work on a resolution.

If you automatically try to come up with a resolution and say, ‘Problem solved, here you go,’ they’ll be put on the defensive because you haven’t really heard what the problem is.

You have to make sure that they know you understand exactly what it is that’s going on that’s not working. You have to let people complain and then, once they get it off their chest, come back and say, ‘OK, so you’re saying blah, blah,’ and try to relay back what it is you think they’re going through and express some empathy.

Q: How do you find the right people?

A proven track record of stability is always apparent on their resumes. The first thing you look at is whether they’ve been jumping around different places.

But I also look for their drive and their motivation. A lot of times you can hear it in their voice how hungry they are. They have to be driven and motivated to be successful. It’s not enough to just have them say they’re OK with what we do; they have to show something to us that lets us know they are willing to go the extra mile, work more hours, do what it takes to get the work done.

They have to say something to you that really lets you know they’re going to try hard. We also have extensive, extensive checks that we go through, and many of the things we do even require tests. We also check all their references — they have to have at least three good ones that check out — and we check their driver’s license and do drug testing.

Q: How can you be sure employees have that drive?

Sometimes you have to dig in, and not get too personal, but you have to ask very open-ended questions and really get them talking, almost rambling on, so you can get more information.

You can’t ask yes or no questions. You have to really give them a chance to expand and come across in a way that builds a rapport and lets them feel like they’re talking to a friend, because that’s the only way you’ll get information out of them.

Q: How do you make sure you’re getting the most from your employees?

You have to have measures that show their productivity. We’ve got everything from spyware on computers to see if they’re working to systems set up to show how many resumes get submitted and which ones are just junk and which ones work.

We have measures of quality. We tell them, ‘Your computer is for work use only.’ And if people don’t know, they find out because we let them know.

HOW TO REACH: ICONMA LLC, or (888) 451-2519

Monday, 26 March 2007 20:00

A family affair

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United States business ownership is starting a dramatic and long-term transition. The amount of owners who will try to sell their businesses will grow 500 percent from 2007 to 2011, according to one study; another found that 40 percent of CEOs of family-owned businesses expect to retire in the next five years. It’s clear that family businesses will soon pass from one generation to the next.

But will outgoing owners also pass down a large tax bill and debt burden with the sale? Not necessarily, depending on how the transaction is structured. There are four strategies commonly used to transfer the family business: Installment Sale to a Defective Grantor Trust (see our Article in Smart Business, March 2007), Self-canceling Installment Note (SCIN), Private Annuity, and Grantor Retained Annuity Trust (GRAT).

Self-canceling installment notes, or SCINs, provide a way to transfer a family business that can protect the buyer from burdensome payment schedules and protect the seller from estate taxes.

In Part 1 of a two-part series, Smart Business spoke with Rick Appel of Advanced Strategies Group to learn more about how to use SCINs and structure them for maximum advantage.

What is a SCIN?

A self-canceling installment note is a structured payment plan with special provisions if the seller dies. SCINs are used to transfer family businesses from one generation to the next. The seller (who is referred to as the senior family member) sells the business to the junior family member (buyer), who agrees to make regular payments until the full price is paid or the seller dies, whichever comes first. The transaction is considered a contingent sale because it is based on the contingency that the seller will die before the note matures.

There are some legal restrictions on the terms of a SCIN. An IRS regulation states the period specified for the junior family member to make payments must be less than the senior family member’s life expectancy. Otherwise the transaction may be treated as a private annuity.

How is life expectancy determined?

The IRS has life expectancy tables. However, in situations where death may be imminent, the tables don’t apply and the IRS makes a judgment as to the reasonableness of the deal and the appropriate taxation. The IRS judgment takes into consideration the seller’s health, length of the payment contract and the down payment amount. If the payment schedule is longer than the seller’s life expectancy, the IRS treats the transaction as a private annuity.

Can the seller use a SCIN to give the buyer a ‘sweetheart deal’ or ‘family discount’ on the sale?

There are IRS requirements in place to prevent that. If the value of the self-canceling note that the seller receives from the junior family member is less than the fair market value of the business, the difference is considered a taxable gift and subject to the gift tax. The gift tax can be easily avoided by valuing the business fairly and structuring the payment terms accordingly. The IRS will take the seller’s health into consideration when determining the reasonableness of the transaction.

What are the income tax consequences of a SCIN?

For qualified SCINs, the seller reports income from the sale as a gain, which is calculated as the maximum sales price. It assumes the transaction will be paid in full before the seller dies. The seller’s reported gain includes return of basis, capital gain and interest income. If the seller dies before all payments are received, the gains are accelerated and reported as income for the deceased’s estate tax. The buyer can deduct interest from SCIN payments from his or her personal income tax. Various events can also trigger a stepped-up basis for the buyer.

How else do SCINs impact estate tax?

Remember, the ‘SC’ in SCIN stands for ‘self-canceling.’ The debt can be canceled by the seller’s death. SCINs can be structured so the value of the canceled payment obligation is not counted as part of the estate for estate tax purposes. This exclusion is available if the buyer paid an adequate premium. However, any SCIN payments that were received but not spent before the seller died are a taxable part of the estate. In short, income from past payments is taxable, future payment obligations don’t have to be.

Watch for Part 2 next month with information on the new rules for the Private Annuity as well as information on Grantor Retained Annuity Trusts (GRATs).

RICK APPEL is a CPA and senior vice president at The Advanced Strategies Group, which specializes in wealth preservation and transfer. Reach him at (248) 359-2480 or

Monday, 26 March 2007 20:00

Workplace safety

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Congress created the Department of Labor’s Occupational Safety & Health Administration (OSHA) under the Occupational Safety and Health Act, which was signed by President Nixon on Dec. 29, 1970. OSHA’s mission is to prevent work-related injuries, illnesses and deaths by enforcing rules, or standards, for work-place safety and health.

The agency recently released its top 10 list of most frequently cited standards in fiscal year 2006 (October 2005 through September 2006).

Companies can guard against accidents and OSHA citations by understanding the regulations that apply to them and implementing and managing programs to meet their needs, says Jim Kapnick, president of Kapnick Insurance Group. “Analyze the claims and incidents you’ve had, do walk-throughs and examine your operations. Then custom-tailor a program to those specific areas to maintain compliance,” he explains.

Smart Business spoke with Kapnick about OSHA standards, how to best identify and correct potential hazards and the importance of communicating safety standards to employees.

What were the most cited OSHA standards in 2006?

Falls have been a leading cause of occupational death for several years, so it is not surprising that scaffolding and fall protection were the top two most cited standards in FY 2006. OSHA standard 1926.451 requires employers to provide scaffolding at heights of 10 feet or more. OSHA standard 1926.501 protects construction workers working over 6 feet by providing rules for fall protection.

How do the cited standards vary by industry and company size?

OSHA cites the standards based on exposures. They prioritize the most significant exposures first because they want to provide the most impact for their inspections. For example, a steel forging operation is likely to get more attention than a restaurant, even though both have the potential for accidents.

The standards are based both on the industry and company size. A good example of this is construction. The construction industry represents about 4 percent of the work force nationally, but about 50 percent of workplace fatalities. The result is that there tends to be more inspection targeting construction and construction-related operations.

Targeting can be re-prioritized, however, which may affect smaller companies or less visible industries. In Michigan, there is a special-emphasis program on companies that apply spray-on truck bedliners, largely due to a worker inhalation fatality a couple of years ago. In this instance, these employers tend to be smaller mom-and-pop operations that otherwise might not have been targeted for inspections because of their size and their industry, but are now receiving enhanced focus.

How can a company best identify and correct potential hazards?

One of the best things that can be done is a formal safety program audit. This should be performed by an independent source; someone who can objectively look at what’s going on. It is easy not to see ‘the forest through the trees’ when you walk through your operations or review your program documentation.

Having a credentialed safety/loss control professional objectively examining the situation is often very helpful and can dramatically reduce your potential for fines and other losses.

How should an employer communicate with employees about safety standards?

The most important thing is that every new employee has a strong and well-documented orientation program that includes safety. Existing employees should be kept up to speed through ongoing refresher courses. As your organization evolves over time, you need to make sure that your employees are properly trained in safety issues, as their tasks or jobs change or are modified.

What resources are there for business owners about OSHA standards?

OSHA has valuable resources on its Web site ( and also provides classes and consultation. Michigan is one of 26 states that has its own state OSHA plan, called MIOSHA.

In addition to compliance inspections, MIOSHA provides a wide array of consultative and educational services. The MIOSHA Consultation, Education & Training Division (CET) puts on seminars throughout the state, provides free on-site nonpunitive mock inspections and has numerous resource materials. Recently, the organization put together a safety training awareness CD-ROM that you can receive free of charge by visiting the Web site at

JIM KAPNICK is president of Kapnick Insurance Group. Reach him at (888) 263-4656, x132 or Kapnick is a member of Assurex Global, an international network of insurance & employee benefit brokers.

Monday, 26 March 2007 20:00

Holistic assessment

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An operational review is a powerful tool that offers insights into the way your organization really works on a current basis. More importantly, it shows you how well it is prepared to meet future challenges.

“The holistic approach — looking at the function of the system as a whole as a way of determining its impact on the efficiency of the parts — provides the basis for a blueprint to raise your organization’s performance to the next level,” says Harry Cendrowski, CPA/ABV, CFE, CVA, CFD, the president of Cendrowski Corporate Advisors LLC.

“Operational reviews give you a comprehensive assessment of governance — defining expectations, granting power within the organization and giving feedback as to whether the job is being done the right or wrong way,” adds Cendrowski.

Smart Business spoke with Cendrowski about what companies should expect from an operational review.

Of what benefit is an operational review?

The objective of an operational review is to help organizations learn to act, instead of just reacting to the challenges of growth and change.

Because the information provided is practical from both a financial and operational perspective, it leads to very practical recommendations to help a company achieve its goals. The review identifies the extent to which your internal controls actually work and enables you to identify and understand your strengths, weaknesses, opportunities and threats.

How does the process work?

Experienced teams interview and observe. Actually watching how employees carry out their responsibilities is a key part of the process. It also is important that the team gain the employees’ trust and confidence. In this regard, they must be assured that whatever they say will be kept confidential. Therefore, management must guarantee anonymity to anyone who offers critical information. Otherwise, employees will filter their responses and the data will be much less useful.

What are some of the areas of assessment?

Governance and ethical guidelines — Responsibilities, authority and the scope in which an employee has the freedom to act must be clearly defined and documented. Employees must actually have the authority to carry out the general responsibilities and specific tasks they have been assigned.

Strategic planning and tactics — Without clear strategic direction, there likely will be different expectations between ownership and management. The corporate structure must be designed to best leverage business and tax opportunities. Customer service standards must be clearly defined and understood by the employees, who must actually agree with them. You might be surprised to discover how often this is a problem.

Communication and reporting standards — If there is confusion in these areas, there could be lapses in internal controls, putting the company and/or its assets at risk. Reports must be useful, and the flow of information and how it is processed must keep pace with the company’s growth.

Contingency planning, testing and recovery — Contingency plans must not become outmoded. An organization must be really prepared to react to disruptions. This includes establishing a formal process to review transactions processing during both disruption and recovery.

Information technology (IT) and security controls — Every organization must have safeguards to ensure system transactions and information are restricted only to authorized users. Proper IT security policies must be in place, state-of-the-art protection techniques employed, and everything be documented, periodically updated and continually monitored. Management’s objectives for the protection and integrity of the data must be met.

What sort of report is presented?

It defines objectives, describes the current conditions in which those objectives must be met and recommends whatever changes are necessary. The plan has three levels of recommendations: one for executives, another for management and a third for staff.

The executive summary concentrates on strengths, weaknesses, opportunities and threats to the organization as a whole. It contains recommendations for any needed changes in policy or governance.

The management plan is based on employee feedback coupled with our expertise and includes areas of immediate improvement as well as suggestions of potential problem areas.

The staff report deals with nuts and bolts, like charting the hierarchy of the organization, and spelling out specific control objectives that are critical to the mission and to which personnel must pay close attention to if they wish to engender both organizational and personal success.

HARRY CENDROWSKI, CPA/ABV, CFE, CVA, CFD, is president of Cendrowski Corporate Advisors LLC, Bloomfield Hills. Reach him at (248) 540-5760 or or go to the company’s Web site at

Wednesday, 28 February 2007 19:00

Bill Hermann

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The Golden Rule — do unto others as you would have others do unto you — isn’t only appropriate for school; it can work at the office, too, says Bill Hermann, managing partner at Plante & Moran PLLC. To drive the message home at the accounting and business advisory firm, every employee is given a 6-inch golden ruler as a reminder of the company’s commitment to the rule, and Hermann says he’s been pleasantly surprised to see how many are sitting out on people’s desks. The rulers serve as a visual reminder of doing the right things, such as smiling, holding open the door and being pleasant, he says. Hermann has used this simple idea to lead the company of more than 1,400 employees to 2006 revenue of about $240 million. Smart Business spoke with Hermann about the advantages of good communication and establishing a caring corporate culture.

Listen and communicate to the max. You find the best ways to communicate, and you just do everything you can to be out and be with the people as much as you possibly can.

Face-to-face meetings are very effective. We’ve got about 15 to 17 offices. I try to get to each of them a couple times a year. I’ve found small groups are effective.

I’ve found what I want to communicate isn’t necessarily what they always want to hear. Everything you have to cover is not always pleasant news. You can be as direct as you possibly can be without beating someone over the head. It’s getting the right tone and the right message and explaining things that may be uncomfortable.

It sets a tone for the way you do things. The way you treat other people helps communicate the intent you have. You don’t have to make it uncomfortable to deal with things you might disagree on. It really supports an idea of working together.

If you want to make a change in the culture, start with yourself. My dad always used to tell me, ‘The fish stinks from the head.’ The CEO has to model what they want to see.

If that means they have to walk around, smile more and do some management by walking around, then that’s where you have to start. But it really starts with the leadership of the firm or the company.

It might come from the leadership group, and if they see something that might not fit, then they have to call it out and let people know that’s not acceptable.

People are going to slip, and you have to realize that. But if someone is always slipping, that’s a problem. You have to identify it, deal with it and correct it. If it’s not corrected, you might have to ask somebody to leave.

Say ‘no’ sometimes. The most difficult thing is to put your foot on the brake every once in a while. Opportunities tend to come in bunches. In our case, it is merger opportunities. A lot of people knock on our door, but we have regional growth we’d like to experience.

If a great opportunity comes up in another part of the country, and it looks really good, then you have to have the discipline to say ‘no.’ Fortunately, we’ve talked about it enough, agreed what we want to do and how we want to do it.

Our goal is to grow incrementally into the balance of the country. If it is someone from California or Texas, we have to have the discipline to say, ‘By having that much distance between our offices, we think we would lose the value of our culture and the opportunity to work together.’

You have to believe the plan you laid out is worth sticking to. If you can’t come to reconciliation, you have to get a group together and say, ‘I can’t get to the answer myself ,and I need help.’

Find balance for yourself and your staff. Any time you do too much of something, you’ve gone too far and you are probably going to step off the tightrope.

The Personal Tightrope Action Committee is about how to create balance in life, whether it is as a parent or as a professional. Part of what we learned is everybody has a different balance. We try to take things that we have learned as a group, gather information and make it available.

Any one of our staff members that is having a child for the first time, we have information that we’ve gathered and recourse we have come in contact with. The goal is to help them with information and support so going through that first-time experience is a little easier.

We also assign a buddy to anybody that joins the firm. Their purpose is to help them get the lay of the land and develop a level of comfort within the firm to figure out how this big machine works

Optimize activities and events as opposed to maximizing them. There’s a lot of ways you can maximize profitability, but when you do that, you are stealing from the future. You need to strike a balancing act between profitability, investing in the future and sharing the rewards that come.

My goal is to optimize our position as opposed to maximizing it. A lot of it is more art than it is science. It is a little bit of feel. You can tell if you haven’t made enough investments. You can feel it from the business. You just have to have a pulse of what is going on.

It’s a feel you develop from being involved with people and the various leaders throughout your organization. I probably ask for input, if not every week, it’s monthly. I have a management team and I find it’s beneficial to have a group evaluate situations, and it helps to get a different perspective.

It is laying out a long-term plan with different parameters.

HOW TO REACH: Plante & Moran PLLC, (248) 352-2500 or

Wednesday, 28 February 2007 19:00

Business education

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Business is always changing, and it seems today those changes happen faster than ever. Right now, it’s more global than ever before, and those who want to succeed need to recognize that and educate themselves on global business principles.

Communication is the number one skill demanded by companies recruiting employees who can make an impact right away, says Dr. David D. Long, chancellor and COO of Northwood University in Midland.

Smart Business spoke with Long about the importance of modern-day businesspeople getting a global business education and the avenues available for them to do so.

Why is business more global today than ever before?

Technology changes in the last decade, and particularly the past five years, have allowed even the smallest of business operations to engage in the global marketplace through the Internet and other technologies that are instantaneous. Plus, our economies around the world have become more open. As these economies become more free and markets open to trade, all the aspects of business and management bring into play the fact that even a very small business entity, say in a rural area to use an extreme, can be shipping product or services internationally with a couple keystrokes. So the competitiveness of that market has been thrust into our environment in many ways.

When you see the outsourcing that’s come into play in many corporate entities in the past five years, that’s another indicator that business functions are being spread throughout the world.

What kind of tools or skills do businesspeople need to cope in the global business world?

Whether you’re an undergraduate or graduate student, you need strong math skills such as calculus and statistics.

Also, students need to understand how to prepare spreadsheets and be able to do analyses and projections. If they will be in management roles some day, those kinds of math-based analytical skills are very important as a way to measure the enterprise’s performance, if nothing else. The technical skills needed to operate computers are a given at this point.

But most employers would say today that the skill set that is still in high demand is communication. Can you formulate your thoughts? Can you express them in a concise manner, both verbally and in written form, so you can communicate your ideas? Can you show leadership through transposing those ideas through all forms of communication?

How important is it to have entrepreneurial skills today?

Entrepreneurial acumen also is important today. You can teach a person to be an entrepreneur, because many people already have some innate capacity for this. Entrepreneurs are hard-working and have interesting ideas, but they’re also very creative. Getting individuals to understand their creativity and being able to follow that through and expressing it is more challenging. Creativity is something most people have some skills for, and sometimes just recognizing it and how to apply it are critical skills in the business world.

It’s important to understand that — in the decision-making process and in marketing — various cultures approach the marketplace differently, solve problems differently, and usually come to reasonably common solutions. But they don’t always come to those solutions in the same fashion. In a negotiation or exercise where you’re trying to compete with other companies regarding a bid or implementation of a strategy, you need to know those cultural aspects as you work your way through the complexities of each project.

What value does a global-business-educated person bring to a company?

Most companies are realizing today that their competitors aren’t just local or regional concerns in the U.S. but they’re international as well. As they’re hiring people to work for them and represent them and negotiate different opportunities for them, I think obtaining people with a global perspective is a prime order. There’s a maturity and confidence most employers recognize quickly in someone who’s received a broad business education with firm ethical values, and they realize this is a person who will not only grow and continue to learn but be able to impact their operations right now.

Companies are struggling because they’ve had to engage these markets and work with people already on staff who may have no understanding of international cultures or economic systems or the legal and ethical ramifications of their decisions. Therefore, new people coming into the organization with a global business perspective is essential.

DR. DAVID D. LONG is chancellor and COO of Northwood University in Midland. Reach him at (989) 837-4367.

Wednesday, 28 February 2007 19:00

Global insurance programs

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More companies are expanding their presence overseas. With emerging markets springing to life and improved technologies making the world a bazaar of economic activity, those with an international presence have an opportunity to earn tremendous rewards.

However, there are corresponding risks to the rewards associated with conducting business abroad. One potential hazard is not having a suitable insurance coverage and employee benefits plan in place for workers overseas.

“It’s important to really understand a global insurance program and not just rely on independent decisions in each country,” points out Jim Kapnick, president of Kapnick Insurance Group.

Smart Business spoke with Kapnick about insurance and employee benefits for companies doing business abroad.

How should a company go about implementing insurance coverage and employee benefits for workers abroad?

The important item to keep in mind when designing an international program is the need for strong communication. Insurance coverages and employee benefits differ greatly in each country and it is important to seek out strong local knowledge of the marketplace. Having a relationship with a local service provider can prove to be invaluable when structuring program design, compliance with local laws and regulations, and — most importantly — providing knowledgeable assistance in the event of a claim.

What are some of the logistical hurdles and how can these be overcome?

The two obvious ones are language barriers and time differences. The biggest logistical hurdle is the effective coordination of an international insurance program. It is important to have a centralized understanding of a global insurance program while still allowing for local (abroad) knowledge and servicing.

Too often, people do one of two things: Either they control the entire program from the U.S., which is not good since they don’t get local servicing and/or knowledge; or they let the operation abroad directly purchase the insurance and employee benefits, which is not a good idea because often the coverage limits are inadequate and it is not coordinated to protect the global company.

It is important to deal with an insurance/employee benefit adviser that has an established global network with formalized operating standards to assure proper understanding and communication of the program.

How has the Sarbanes-Oxley Act affected global insurance programs?

Sarbanes-Oxley has made management more accountable for understanding what’s going on. Too often, people with foreign locations take an out-of-sight-out-of-mind stance in regard to insurance and employee benefit placement. With Sarbanes-Oxley, you can’t do this because there is a responsibility for management to protect assets for investors.

Most overseas locations are very small — just a salesperson or a couple of people abroad, so it is tempting to say, ‘It’s no big deal, let’s just let people take care of it locally.’ But it is a big deal because you’re subjecting the corporate assets. With Sarbanes-Oxley, somebody within the organization has to have a global understanding of the insurance and employee benefit programs being offered.

What factors should a company consider when analyzing its global employee benefits program?

Employee benefits are just that … benefits to employees that entice them to join or stay at a firm. In order to offer a competitive compensation package and attract and retain the best employees, one must have a thorough understanding of the local market.

In some countries, employee benefits are simply providing transportation, a uniform and lunch. In others it involves programs more typical to the United States. Also, in global companies there often are foreign nationals working on assignment in other countries. It is important to coordinate employee benefit package programs to determine which countries’ coverages will respond.

If, upon inspection, the program could be improved, what steps should be taken?

Every global program should be fully customizable; there should never be a cookie-cutter approach. In my opinion, the steps involved include discussing the corporate philosophy regarding ultimate control of the program and then evaluating the local service providers to assure that the improvements can be implemented properly.

How should a local service provider be selected?

One option is to do business with people who have an established network and have experts locally. Another way is to have your people in foreign countries seek out local representation with the understanding that information has to roll up through a master program.

JIM KAPNICK is president of Kapnick Insurance Group. Reach him at (888) 263-4656, ext. 132 or Kapnick Insurance Group is a member of Assurex Global, an international network of insurance & employee benefit brokers.