Amy Dison

Monday, 25 June 2007 20:00

Another choice

As health care costs continue to grow at double-digit rates, employers have become increasingly interested in ways to cut costs. Many are looking to the potential benefits of Consumer-Driven Health Plans (CDHPs).

In most cases, a CDHP is a high-deductible health plan combined with one of two tax-advantaged spending accounts: a Health Savings Account (HSA) or a Health Reimbursement Account (HRA). Plan participants use money from their spending account to pay for medical care, including prescription and nonprescription drugs. Plan members who deplete their account must pay for medical care out-of-pocket until the plan’s high deductible is met.

“Once the deductible has been met, the high-deductible health plan functions like a traditional major medical plan,” says Sally Stephens, president of Spectrum Health Systems. “CDHPs can be described along a continuum of health plans with varying degrees of employer/sponsor and employee/participant responsibility. The most common type is a catastrophic or high-deductible insurance plan combined with a health care spending account.”

Smart Business spoke with Stephens about the benefits and potential risks of CDHPs.

Why should business owners look into this type of coverage?

A CDHP controls costs through reduced demand on the health care system. The increased cost-sharing associated with a CDHP shifts costs from the plan to the employee, resulting in lower premiums for the employer.

The whole idea is that employees have an incentive to spend more carefully when purchasing health care services because most plans allow unused funds to be rolled over from year to year. This is not the case for traditional health plans. In this way, the consumer can benefit from using fewer and less costly services. This built-in incentive plan combined with consumer decision-support tools relating to cost, treatment and quality, is a key cost-containment strategy of a CDHP.

Supporters of these plans also claim that giving health care consumers more of a financial stake in their medical care decisions will create more competition in the health care market place and better contain costs.

What benefit does this type of plan provide the employee?

Because the HRA or HSA value can increase over time, when unused balances are allowed to be carried over, employees who consistently incur low levels of spending can actually increase their plan benefits in subsequent years.

In addition, the most successfully designed CDHPs include resources to assist plan participants in improving their health and in making smart medical decisions.

What tools must employers provide employees to make such plans effective?

Employers electing to offer CDHPs are essentially asking their employees to get into the driver’s seat and share a greater percentage of the costs while also getting more involved in their health care.

The success of CDHPs depends on providing employees the Web-based decision support tools needed to research and select network offerings and benefit packages. These tools, similar to what employees are already familiar with, enable employees to actually gain visibility into what their health care costs will be and give them the power to better manage those costs. When coupled with the well-researched benefit options presented by employers, these tools greatly raise the probability of CDHP acceptance and enrollment.

These online tools help educate employees, enabling them to become better health care consumers. By making it easier for employees to understand their health care options, they can automatically take an active part in controlling health care costs.

Is there a risk with this plan? Could overall health care decrease?

The availability of information upon which participants can make their health care decisions is critical. Such information may be unavailable due to lack of credible data and systematic, comprehensive methods for accumulating and disseminating such data. Even if the data is credible, it might not be easily accessible to all users. In addition, some users may not be that savvy to access the Web-based technology. This can result in poor plan choices made at the time of enrollment as well as poor ongoing treatment and choice of providers at the time of the service.

Another potential concern is that even if the appropriate information is successfully gathered, some participants might not have the necessary skills to evaluate what they have gathered. Some participants may also actually postpone treatment until the plan has enough available funds to cover the employee gap or until it is funded next year.

It could also affect employment decisions if low users who have accumulated high balances over several years see this as a cost of changing jobs or provide an incentive to incur elective services prior to leaving.

SALLY STEPHENS is president of Spectrum Health Systems. Reach her at or (317) 573-7600.

Monday, 26 March 2007 20:00

Estate business succession

Entrepreneurs spend most of their time, energy and sometimes life savings developing a business. As these people work and plan to make their business successful, they rarely consider what they will do with the business when they want to retire, when they die or how estate taxes attributable to the business will be paid. Business succession planning is necessary to developing a business and must be outlined as soon as a business is developed.

To transfer a business successfully from one owner to the next, succession planning should commence as early as possible. “I have never seen a business fail due to payment of estate taxes when there was proper succession planning,” says Richard Kissel II, a director with Sommer Barnard and chair of the Estate and Business Succession Planning Group.

Smart Business spoke with Kissel about the planning options business owners have and what factors should be considered when developing a succession plan.

What options do business owners have when planning the future sale of their business?

Most business owners work very hard to build a successful business. Therefore, the decision to give up control of their investment can be very difficult and require much planning and research. Typically, there are three primary options for the future of a business. Owners can begin to structure a plan to pass control to their children, pass control to an inside management group or they can sell the business to a third party with whom they are not affiliated.

In most cases, it is human nature for business owners to want to pass their investment to their children. This option depends on whether business owners have children who are willing and capable to run the business. This option is not always feasible, so other options are often utilized.

What factors must business owners consider when selecting a future owner?

Business owners need to take a realistic look at the situation as a whole. Pride and emotion are involved with companies that individuals create. The key is to take an outside look to see what decision is best for the future of the company as well as the owner’s personal future.

If children are involved in the business, the owner must evaluate their managerial skills and their capabilities to run the company in the future. If they are going to successfully operate the business, the children must have knowledge of the industry and must be able to keep developed relationships with customers and others for future business.

Cash flow from the business must also be evaluated. Business owners must know how much cash flow is needed to support them comfortably in retirement and to provide reasonable compensation for the new owners.

A seller’s interest in the future success of a business often depends on how the seller is being paid. If they are selling to a third party, they should try to obtain almost all the purchase price upfront. In that case, they can be less concerned with the future success of the business. While the former owner may be disappointed, they are not affected financially and have less at stake if the business should come to an end. On the other hand, if they sell to their children or a management group with little money paid upfront, the failure of the business could have catastrophic effects on the seller’s personal future.

The owner should also determine how much input, if any, he or she will have in the business after the transfer. If a business is being sold to a family member, the amount of input the seller has following the sale usually depends on the family dynamic and the payment plan. If the seller is being paid over a period of time, he or she usually has some right to be involved in the business after the sale. In other situations, there may be a need for the seller to let the new leaders have complete control. The decision should be made based on the future of the business.

How can business owners design a financial plan for the successful future of their business as well as personal needs?

The longer period you have to plan, the better. The senior generation can make gifts of stock or other interests of the business to children over a period of time. This is less stock that children may have to buy at the time of the transfer to them. The less strain there is on cash flow because of the sale, the greater the chance of a successful transition.

If a third party is purchasing the company, the plan depends on the owner’s cash needs for retirement and the business’s ability to generate cash. If a business is being sold to someone unrelated to the current owner, it can be crucial to obtain as much upfront cash as possible.

Succession planning funds the senior generation’s retirement, it creates wealth for many generations of the family, and — if done correctly — helps the business succeed for generations to come. It also preserves the business that the senior generation has spent much of their life developing.

RICHARD KISSEL II is a director with Sommer Barnard and chair of the Estate and Business Succession Planning Group. Reach him at or (317) 713-3500.

Wednesday, 28 February 2007 19:00

A fixer-upper

In a state such as California, where newly constructed homes are increasingly more complex and built at a rapid rate, construction defects are bound to arise from time to time. This is not to say that homebuilders are not working hard at quality control, but construction is not an exact science, and — despite a builder’s best efforts — unintentional mistakes can occur.

California homebuilders now support the new Fix It Law that applies to all homes sold in California after Jan. 1, 2003. The Fix It Law was designed to give builders a chance to fix defects before customers can file legal claims against their company, says John O’Hara, a partner at Newmeyer & Dillion LLP.

Although many states now have right-to-repair statutes, the Fix It Law was one of the first legislative schemes enacted and is the most complex, says O’Hara.

Smart Business spoke with O’Hara about the terms of the new law, the benefits of the law and the overall effectiveness of the law for homebuilders.

How does the Fix It Law benefit the home-building industry?

The major benefit is that homebuilders now have a statutory right to repair defects before homeowners may initiate a court action or arbitration proceeding. The right to repair is important for most builders, because it is consistent with their corporate philosophy to provide excellent customer service and retain homebuyers as customers for life.

Builders are in the business of building homes, not litigating construction defects. Litigation is extremely expensive; it creates uncertainty and often lasts for several years. This law allows developers to control their own destiny and focus on what they do best: building homes and serving customers.

What steps must a company take to abide by the Fix It Law, and does this law work?

The lengthy and complex Fix It Law contains numerous requirements that the builder must abide by in order to preserve the right to repair. Accordingly, any builder who wishes to invoke the right to repair must read the Fix It Law very carefully.

As a general overview, a builder must provide a copy of the Fix It Law to home-buyers, designate an agent to receive claims, provide copies of any maintenance obligations and schedules, and be prepared to access project documents, notify sub-contractors, conduct inspections and complete repairs immediately after receipt of a notice of claim.

It is probably too early to tell whether the Fix It Law will work to provide builders with a meaningful right to repair. Builders are committed to making it work, but plaintiff attorneys in California are equally committed to undermining the right to repair because it effectively cuts them out of the deal. I expect that there will be some legal battles fought over the next few years but that the California courts ultimately will interpret the Fix It Law to provide for a meaningful right to repair.

The entire Fix It Law can be found at

How can developers and builders avoid defect claims?

There are two basic ways to avoid defect claims. The first is to build better houses by implementing strict quality control programs during construction. Most builders have been operating quality control programs for years and continue to improve these programs while learning from their mistakes.

The second way is to implement an effective customer service program. After a home is built and sold, there must be a team in place ready to respond quickly to complaints and inquiries from buyers.

Why is it important for builders to invest in protective measures or hire a Fix It Law claims agent?

Protective measures increase customer satisfaction and reduce construction defect litigation. Increasing customer satisfaction means that the customer and the customer’s family and friends are more likely to purchase another home from the builder. Reducing construction defect litigation means that the builder is cutting litigation costs, allowing management to focus on building and reducing insurance premiums.

What steps should a builder take if presented with a claim?

Assuming that the builder’s philosophy is to invoke the right to repair and to avoid litigation, the first thing a builder should do is to make sure it has amended its documents to conform to the Fix It Law. These documents include construction contracts, purchase and sale documents, title documents, CC&Rs, homeowner manuals, construction and maintenance standards, warranties, sales and customer service procedures, and insurance requirements.

Next, the builder should establish a comprehensive response plan and be prepared to spring into action to implement the plan as soon as a Fix It Law claim is served.

JOHN O’HARA is a partner at Newmeyer and Dillion LLP. Reach him at or (949) 854-7000.

Sunday, 31 December 2006 19:00

Data mining

In any competitive market, companies are constantly trying to get ahead of the competition with sure ways to increase profit. Data mining is a process that helps companies advance in markets with little risk.

Data mining helps people outpace the competition, attract consumers and move consumers to make supplemental purchases. Since data mining is a real-time system, companies are able to see trends as they happen rather than finding out at the end of the quarter that products were mismatched to the needs of the market. “We have literally seen companies put their competitors out of business with the proper use of data mining,” says Larry Kucera, senior sales consultant for Premier Technologies.

Smart Business spoke with Kucera about data mining and how it can help a company pull ahead of competitors in the market if properly used.

How do companies use the data mining process?

Data mining is a broad set of technologies and applications used to extract market information, to analyze the data and use the aggregate to make timely business decisions. Data mining looks at the buying behaviors of an industry as well as determines consumer trends and advertising approaches. This analysis shows what items consumers are attracted to and how quickly their desires change.

Data mining is used in all markets and throughout the entire year, but during holiday seasons this process can make or break a company. On Black Friday, a store using data mining will be able to see what product is sold the most in real time. This means it can predict hot items and have those items available in its stores before competitors. Other forecasting processes only give market numbers at the end of the month or quarter, so they lose out to the competitor who uses the real-time system.

How do companies implement data mining?

Companies run numerous applications to collect enormous amounts of information on their market, products and consumers. To use this information properly, all the information collected from all locations needs to be gathered in one central database warehouse and then used to help forecast the company’s future. This helps meet the demands of the market, outpace competitors, and go to market quicker with new product capabilities and offerings.

To implement data mining, an assessment is completed of the company and the current market. It is necessary to determine the platforms and technologies currently in use and the purpose they serve. Then an ETL tool is used to extract, translate and load the data that is analyzed on a day-by-day basis. Finally, a permanent tool is put in place that best fits the company to monitor the business in real time. Many companies do not have the knowledge and resources to put these technologies and applications into their companies to see the end result. Companies with experts in the analysis of this data should be utilized to get the best possible outcome.

Why is this process better or easier than other research methods?

Data mining uses your company’s data and your value to market. Typical market research data looks at all competitors in the market; this data is more accurate because it reflects why people make purchases from a behavioral standpoint and it allows business owners to extract trends specific to their market.

All of the data is time-sensitive. This process is much more effective than other options but some companies simply don’t know how to use the data collected.

Some companies use spreadsheet analysis; while that can show you similar trends, it is not in real time so by the time data is assembled and trends are determined their competitors using mining data have jumped ahead in the market and are stealing consumers.

How can companies maximize such a system?

A company should determine how it wants data mining to work with its strategic plan. If the strategic plan is to expand the company to new markets and locations, it needs to learn how to use the data collected for that purpose. Other companies may want to introduce new products or services.

A company should determine where it has been, where it is today, and where it wants to go in the future; it is necessary to determine the steps to reach that ultimate goal.

Data mining can also help determine advertising methods to reach target audiences.

How can investing in these programs help companies expand?

Data mining is predictive. Why roll the dice when this process can determine the path that will lead you to the best result? Some companies waste money with advertising for possible consumers as they try to push their way in to markets; this is expensive and there is no guarantee there will be any additional profit from the investment. Data mining is used to anticipate the market and grow a company according to trends.

LARRY KUCERA is a senior sales consultant and domain expert in business continuity planning for Premier Technologies. Reach him at (412) 788-8080 or

Sunday, 31 December 2006 19:00

Election aftermath

With the first Democratic majority of both the House of Representatives and the United States Senate since 1994, many small business owners and advocates are unsure how this administration and Congress may affect the small-business economy in the years ahead.

“With a Democratic Congress and Republican administration, there probably won’t be too many changes with the 110th Congress, as far as small business legislation goes,” says Gary Storie, a wealth adviser and vice president for NexTier Wealth Management.

Smart Business spoke with Storie about how small business owners can best plan for potential changes and uncertainty in the political environment, at both the federal and state levels.

How can the new composition of Congress potentially affect small business owners?

Currently there are many laws in place, as a result of the Bush Administration tax cuts, that are designed to help small business owners. The problem is they are not permanent. Many are in place until the year 2010 and will require Congressional legislation to make them permanent. Many business owners fear that these temporary laws will simply expire in the year 2010, leaving them without much relief and potentially higher taxes.

A big concern for many business owners is the federal estate tax. If no further legislation is passed in 2011, deathtime exemptions will be reduced to $1 million per person, and the top tax rates will exceed 50 percent. The estate tax can create a serious liquidity crisis when a small business owner passes away, often resulting in liquidation of the business as the only option.

Additionally, the reduced 15 percent tax rate on eligible dividends and capital gains, previously scheduled to expire in 2008, has been extended through 2010. However, after 2010, new legislation will have to pass to continue these favorable tax reductions.

How can business owners prepare to deal with such tax changes?

It is difficult for business owners because there is a general level of uncertainty. As they try to plan for the future of their business, they must also try to predict the future of the general economy and potential change in laws affecting business. It is beneficial to plan for the worst-case scenario. For example, if a business owner plans to sell the business in 2011, he or she may consider moving the sale up to 2010 to take advantage of the lower capital gains tax rates.

It is important to put a plan together now so owners can take advantage of any breaks they may qualify for before such acts expire. Part of a company’s strategic plan should be to take advantage of tax breaks, health care cost reductions and expensing plans. A professional adviser should be utilized to make sure a plan is designed to take advantage of all possible breaks in this time of uncertainty.

How does expensing investments help a business and how should business owners plan to take advantage of this tax break?

Section 179 of the Internal Revenue Code allows small businesses to deduct all or part of the cost of certain qualifying property in the year it is placed in service, instead of over a specified recovery period. Enhanced Section 179 expensing now is at the base level of $100,000 with that level indexed for inflation for the last several years. However, the enhanced level is scheduled to revert back to the pre-law level of $25,000 in 2010. Small businesses should plan to take advantage of this tax deduction. For example, if a company is planning for a major computer buy in 2010, it might want to reconsider the plan and make the purchase in 2009 so it can qualify for Section 179.

What are some critical changes, other than tax relief, should business owners and advocates push to receive from Congress?

The Small Business Health Fairness Act of 2005 (H.R. 525) would make health insurance more affordable for small business owners and their employees by allowing them to band together through Small Business Health Plans.

Recent years have brought on a litigation explosion, where the typical cost of a lawsuit going to trial exceeds $100,000. In many cases, even a small lawsuit can spell doom to a small business. Through pressure from small business advocacy groups and owners, Congress needs to prioritize small business liability reform.

Why is it so important for small business owners to plan for the coming years?

Small business owners simply cannot wait until 2010 to plan for their futures —they should start now. The tax relief we now enjoy could easily come to an end in a few years. A carefully designed strategic plan could save a business owner thousands of dollars, which could make or break the business in the long run.

Small businesses are extremely important to our overall economy. Small businesses create two-thirds of the new jobs in the United States, and 40 percent of the gross domestic product in the U.S. comes from small businesses.

GARY STORIE, MBA, MS, CFP, is a wealth adviser and vice president for NexTier Wealth Management. Reach him at or (888) 262-6331.

Friday, 24 November 2006 19:00

Homestyle security

Security threats are ever-changing. New viruses, spam and spy-ware — as well as methods of attack — are constantly surfacing. Companies must invest in up-to-date products and partner with technology companies that can provide solutions and services for the best security protection possible, says Doug Godwin, director of technology services for Premier Technologies.

Software companies have shifted their goals in recent years to create confidence in the security as well as the efficiency of their programs. Companies should take advantage of built-in offerings of the computer systems with which they are working as well as implement their own security policies and procedures, says Godwin.

Smart Business spoke with Godwin about what security risks to be aware of, and how to protect company data and assets.

What are some of the risks companies should work to protect against?

One of the most overlooked issues is physical security. In many companies, PCs are out in the open. People who use lap-tops often walk away, leaving it out in the office or in a public place. Cleaning crews and maintenance staffs come in and out of offices, possibly providing people with access to the physical hardware lying out unattended.

Consumers are aware now more than ever of security breaches such as viruses, spy-ware and spam. One of the newest breaches that companies need to be prepared for are phishing scams. This is where intruders look to steal information more than the hardware.

How can PC and laptop security benefit a company?

Proper security can protect a company’s investments: the infrastructure itself as well as data, information and ideas. If information or exclusive company secrets leak, there are potential public relations and legal nightmares.

Company networks that are not standardized or secure allow employees to use and manage the systems however they wish. Inconsistencies in program installation, utilization and regulation create an increase in system downtime, in turn creating a decrease in productivity.

A lack of security allows employees to make changes to data or software they are not permitted to alter. It also allows for employees to explore Web sites and materials that are not work-related, slowing computer systems and creating distraction from work. With proper security, a company can see improved computer systems as well as an increase in employee productivity.

How can a company test the effectiveness of a security program?

Internal testing should take place. A company should not assume that, because a security program is installed or policies implemented, they will work properly. Each business is different, and programs need to be altered to fit the needs of each company. Testing should take place on a regular basis to ensure that programs are effective, as security needs change within a company.

Technology consultants can be utilized to run penetration tests on software security systems. These consultants identify weaknesses that are sometimes hard to see by the company. The consultants also are aware of vulnerabilities that are associated with programs.

Consultants offer a staff of experts to help diagnosis problems and provide experts to help solve such issues. They are aware of best practices and industry standards so they can use the most up-to-date programs.

Why should business owners invest in the most up-to-date software and protection?

The loss of company-exclusive data can be devastating. There have been cases where businesses have lost members’ personal information such as Social Security numbers and credit card numbers. Compliance regulations are in place that require such companies to disclose that information to consumers, so they know their data is at risk.

The public relations ramifications that can occur if a business’s data is stolen can put a company out of business. There can be a general loss of confidence by consumers.

What steps should a company take to provide the best security?

Analysis should be used to determine the needs of the company. The most important thing is to be proactive. Company polices should detail how data should be stored and what should be on a server versus a desktop machine. Identification processes should be on computers to ensure only legitimate users are logging on to systems. Encryption programs and new programs that track the location of a missing laptop with a device similar to a GPS system and then wipe the system clean of information are on the market. It is important to have these procedures outlined before an incident occurs.

DOUG GODWIN is the director of technology services at Premier Technologies. Reach him at or (412) 788-8080.

Friday, 24 November 2006 19:00

Generic drugs

If two different brands of medications made of similar formulas treat an illness with equal effectiveness, but one costs less, which would you choose? The answer seems obvious, yet many people and companies pay extra for brand-name drugs.

“There is a lack in confidence that generic versions will have equal effectiveness,” says Chronis Manolis, vice president of pharmacy services with UPMC Health Plan. FDA-approved generic drugs are just as effective as brand-name drugs and benefit both an employer and an employee by reducing cost without compromising care.

Smart Business spoke with Manolis about how the combination of well-designed benefit plans and increased generic drug utilization can benefit employers and employees.

How can an employer maximize the financial performance of a pharmacy benefit plan?

Instead of simply shifting costs to employees, an employer should look for a partner with innovative ideas to promote appropriate and cost-effective utilization. A comprehensive pharmacy benefit that balances care quality and cost can create confidence in an employer and increase morale among employees from a benefit perspective.

Maximization starts with choosing a pharmacy benefits manager who has comprehensive strategies and capabilities that address utilization and net cost. Those two pillars of benefit design will define financial performance.

Net cost strategies include maximizing network and channel discounts as well as tactics to address drug mix. Utilization management programs should be evaluated to ensure alignment with the goals of the employer.

What are sensible ways a company can reduce drug cost?

There are two main strategies to control drug costs. The first is utilization management, which ensures the appropriate and safe use of a drug. This management strategy includes intelligent formulary design, prior authorization programs, quantity management and step therapy. For example, step therapy may require a patient to try a generic form of a drug before having access to an expensive brand-name drug.

The second strategy involves lowest net cost. Strategies should include proper drug mix such as brand versus generic or preferred brands versus non-preferred brands. Generics provide a tremendous opportunity to reduce drug costs while providing the same care and treatment as name-brand drugs.

How can increased awareness of generics reduce costs?

There is still a general lack of confidence in generic drugs in regard to safety and effectiveness. Generic drugs save patients money as they begin to foot the bill for health care costs that their employers can no longer cover. They also treat illnesses with great effectiveness. For the first time, almost all of the major therapeutic categories such as lipid-lowering agents, proton pump inhibitors (PPIs) and anti-depressants have highly effective generic products as alternatives.

The ultimate goal is to get plan members talking to their physicians about therapeutic alternatives. This inquiry into generic drugs will provide a shift from brand-name to generic drug utilization and help reduce benefit costs. For every 2 percent increase in the generic dispensing rate, employers can save 1 percent in drug costs.

Some companies are choosing to raise the co-pays on brand-name drugs while keeping the co-pay for generics the same or lower, as a way to encourage members to use these alternatives. Another strategy is brand-only deductibles that require members to meet a deductible if they choose a brand-name drug, but provide an exemption if they use a generic form. Additionally, a benefit plan partner should provide educational materials to help convey the message of generic effectiveness and reduced cost.

What features should employers look for when selecting a pharmacy plan and provider?

A pharmacy benefit partner should provide a transparent offering that clearly reveals defined costs and coverage. Aggressive network discounts should be included in a plan as well as an all-inclusive administrative fee.

The all-inclusive administrative fee is crucial because a company will get the most value out of the plan without many of the extra, hidden charges. Hidden charges that are sometimes added to an administrative fee may include customized reporting, clinical program development, and Drug Utilization Review fees. Furthermore, comprehensive clinical, formulary and benefit trend offerings should be aligned with the company’s goals and needs.

Lastly, data integration capabilities by the partner between pharmacy and medical claims can provide a company with powerful information to improve clinical and financial outcomes. In summary, a partner that combines robust clinical and unit cost capabilities is critical so an employer can be confident that their plan is being managed properly.

CHRONIS MANOLIS is the vice-president of pharmacy services at UPMC Health Plan. Reach him at or (412) 454-7642.

Friday, 24 November 2006 19:00

Difficult times?

Never expecting or planning for change is a major risk for a business. Families who own a business should expect and embrace change. They should also control change as much as possible and then communicate why a change is taking place and the plan to make the change effectively, says Rich Snebold, co-founder of The Family Business Center at NexTier Bank.

Change can be difficult for family businesses because relationships and emotions are involved, says Snebold. Some of the most successful family businesses utilize the outside advisers to help them work through changes. Outside advisers can benefit a company because they are looking at a situation with an unbiased opinion and they understand both business and personal issues and the investments involved.

Smart Business spoke with Snebold about how to plan for the unexpected and to utilize the proper sources for guidance to ensure the success of both the business and the family.

How do personal changes such as death or divorce affect a family business?

It is necessary to plan for key events that may occur — such as the death or disability of a business owner — to create a peace of mind for the family and the business.

A set of documents sometimes referred to as a ‘family answer book’ should be developed to alleviate some of the questions and stress of unexpected change. This book should include a letter of direction describing the future of the business. Copies of all important documents such as a will, business agreements, tax returns, etc. should be in the book.

A buy/sell agreement is needed if there is more than one owner that details what will happen to the deceased or disabled owner’s share of the company.

These decisions should be communicated to the family as soon as the book is developed. Conversations explaining the decisions and the rational need to occur so the family understands.

Divorce is difficult to deal with in a business, so an attorney should be utilized when developing a company to plan for such events. Expert approaches can direct a company on what should be done if someone who is no longer part of the family still owns a share of the company or prevent it before it happens.

How can a family-owned business prepare for the retirement or loss of an executive member?

So often, business owners put everything they make back into the business to make it successful. Most owners would not have enough money to live the lifestyle they are currently living if they had to retire today.

Business owners cannot look at the business as their sole source of retirement income. If a family business is passed down to children, they should not be responsible for financing their parents’ retirement. That can be too stressful and strain family relationships.

Planning for retirement is easier the earlier you plan. A portion of the income should be set aside in a retirement plan and outside investments to provide retirement options in the future. Outside advisers can help owners determine the best plan for their future.

For business owners who have not planned properly for their retirement, there are plans that allow owners to put large sums of money away for their retirement. The IRS has also approved the 419 plan which allows business owners to have their companies pre-fund their future health insurance premiums with tax deductible business dollars.

How should a family decide the direction in which the company is headed?

The most enlightened families put together a team of both family members and business experts to make decisions about the business. They should determine what products are needed to further the success of the business.

New family employees are often the best at developing new ideas because they are looking at the business with a fresh set of eyes. A forum should be developed to test these ideas.

Only the key business owners should be involved in the planning process. It may also benefit a family business to bring in employees who are not family members as business decision-makers. After the planning process is complete, the plan should be shared with all family members.

How can a company successfully separate business and family?

There is no real way to separate the family from the business. The business becomes a family identity. It is important to enjoy the positives of a family business, such as a family working together. A family should separate things that may have a negative influence. Communication is necessary to make a family business successful.

RICH SNEBOLD is the co-founder of The Family Business Center at NexTier Bank. Reach him at

Thursday, 21 September 2006 20:00

Military leave

Many United States service men and women do not serve in the Armed Forces 365 days a year. Rather, they are our teachers, our doctors and our industry workers.

Because they work to protect us, federal guidelines ensure that a member of the uniformed services is not put at a disadvantage due to military leave, says Mark Goldner, an associate in the Pittsburgh office of Jackson Lewis LLP.

Smart Business spoke with Goldner about the guidelines that protect people in the uniformed services and how employers can ensure they abide by such guidelines.

What employment guidelines do employers need to be aware of when dealing with members of the uniformed services?
The federal statute is known as the Uniformed Services Employment and Reemployment Rights Act (USERRA). Individual states may also have their own statutes that cover employees serving in the military.

USERRA prohibits discrimination and retaliation against employees who serve in the military. The protected service includes active and reserve duty, actual or potential service, whether the service is voluntary or involuntary. Employers cannot use military service as a factor in making employment decisions.

USERRA also provides reemployment rights to anyone who leaves a place of employment to participate in military service.

This statute also sets standards for treatment of employees who serve in the military. An employee on military leave must enjoy the same benefits given under the employer’s policies to employees on a similar leave, such as the accural of vacation time for an employee on an educational sabbatical.

They also must enjoy benefits based on seniority as if the employee had been continually employed.

What steps can employers take to avoid a violation of the guidelines?
Employers cannot make any employment decisions based on an employee’s service or potential service in the military. An employee can decide that one week a month they wish to serve in their Army Reserve unit, and an employer is required to honor that request.

An employer that understands its obligations under USERRA is less likely to violate the statute.

The U.S. Department of Labor (DOL) provides information on USERRA and employers’ obligations on its Web site. The U.S. Department of Defense has an organization called the Employers Support of the Guard and Reserve (ESGR) that assists employers in complying with their obligations under USERRA. Among the services offered by the ESGR is an ombudsman program in which volunteers assist employers and employees to resolve military leave issues.

What should an employer do, if accused of a violation?
Employers must remember that under the statute the employee has no obligation to accommodate an employer. An employee only has to give reasonable notice of military service to his or her employer and then the employer must abide.

Military units are required to work with employers to resolve problems due to an employee’s military service, and are often eager to assist the employer. Employers, therefore, should first attempt to resolve any dispute with the employee and the employee’s unit. For example, if the annual training for an employee is scheduled during your company’s busy time of the year, an employer is allowed to contact the Reserve unit to see if the employee is permitted to complete the training at another time. Ultimately, however, it is the unit’s and the employee’s decision as to when to complete the training.

Employees may file a charge with the DOL, alleging the employer violated USERRA. Although employers can respond to the DOL directly, it is often wise to obtain the assistance of legal counsel. If the DOL charge is not successfully resolved, litigation may follow and the DOL charge should be handled with potential litigation in mind. Employers should consider the advantages in using counsel who have military experience. A lawyer who is a Reservist will have a better understanding of military requirements and can more readily assess the merits of an employee’s USERRA claim.

How can an employer respond if an employee is not qualified for a job when he or she returns?
USERRA uses the ‘escalator principle’ to determine the job to which an employee must return after military leave. This states that an employee must return to the job that he or she would have if he or she had been continuously employed during his or her military leave.

If an employee is not qualified for the ‘escalator’ position on his or her return, the employer is obligated to take reasonable measures to train the employee to fill the position. If, after reasonable efforts and training, the employee is still unqualified, the employee may be given the job he or she had when he or she left for military leave.

MARK GOLDNER is an associate in the Pittsburgh office of Jackson Lewis LLP. He can be reached at (412) 232-0135 or

Wednesday, 20 September 2006 13:29

Bridging the gap

When a company starts to feel the pain and burden of outdated software or systems within their business, it only then realizes the importance of information technology. The use of an IT company is usually a reactive approach to technology problems.

“Today, it seems that businesses live or die based on the software they use, but success or failure usually has more to do with the way systems are developed and executed,” says Jim McAllister, practice manager - software engineering at Systems Evolution.

Smart Business spoke with McAllister about how a company can work to bridge such gaps, the benefits of doing so successfully, and reasons why it shouldn’t follow only on the heels of a lost opportunity or unsuccessful IT project.

How does a company bridge the gap between business and IT?
First, it is important to realize that there are two gaps. The first is the traditional concept of gaps between existing system capabilities and the operational needs of the business. The second — and often overlooked — is the gap between IT and business users’ understanding of the desired end product.

In order to bridge both of these gaps, both the business users and their IT counterparts need to work together to identify and ensure agreement on what is needed to satisfy both functional and technical requirements. IT employees use practiced techniques in gathering or eliciting these gaps by observing company operations and by speaking with business process owners.

Product teams should align the solutions they develop with true business needs or requirements. Requirements should be articulated by employees representing the lines of business. It is also important to speak with all stakeholders when trying to develop an effective software plan. Requirements should be elicited from all groups, and their dependency on a system should be determined and factored in to the iterative and final versions of the software or product.

How does bridging the gap benefit a company?
While it costs business money to develop new, efficient programs or products, it can cost much more to spend money on a solution that does not successfully deliver the desired results.

The discipline known as ‘requirements management’ is aimed at first identifying and understanding the problems or opportunities that a business is facing. In executing this process, problems are translated into information as a set of requirements that an IT team or outside vendor can use to develop a solution that appropriately addresses the highest priorities. Failing to first identify such problems can lead to technology solutions that may not deliver any true business value.

During the requirements management process, all departments of a company must agree on the system’s objective. If the objective is not determined properly and outlined specifically, a company risks wasting money developing a program that does not provide the features necessary to operate the company effectively and efficiently.

Why should companies invest time and money into an IT department?
A business that is currently operating without an IT department or a trusted outside consultant is likely not operating as effectively and efficiently as possible. With proper programs and systems, a company can increase productivity and reduce manpower, enabling a larger portion of the business to focus on its core competencies.

A business should routinely evaluate its operations systems and determine what processes could be enhanced and where the challenges or pains are. Similarly, high-performing IT departments should continuously research and investigate new technologies and processes.

What should a business look for in an IT department or partner?
A company should research the success of its internal or external IT capability by assessing its track record. Internal departments should be expected to demonstrate success and consistently deliver acceptable ROI relative to their fully loaded cost to the company.

Furthermore, a business must understand the approach an IT department or outside vendor takes to implementing programs and systems. Team leaders should be defined before a project is started, and they should meet with the business to better understand the needs of any new or updated solution.

A business should look for what makes an IT vendor company different from its competitors. This may include the department or vendor’s ability to innovate around a new or complex problem, a demonstrated track record of successfully delivering projects of similar size, scale and scope, or best-in-class processes.

Mature businesses may also look for features, such as a comprehensive set of services to help manage a company’s infrastructure, or consulting services in an area such as software engineering where building extensive in-house expertise may not be cost-effective.

JIM McALLISTER is practice manager - software engineering for Systems Evolution, Inc. Reach him at (713) 979-1600, ext. 101, or