Jessica Tremayne

Tuesday, 26 May 2009 20:00

Healthy returns

Revenue is down, the budget has been hacked away and now you’re edging toward reducing employee health care coverage — or even eliminating it outright. Before taking action, take into account the short-term benefits and long-term effects of your options.

A knee-jerk reaction may be to shift the benefit burden to employees. But those who have been down that road, say there are ways to take a strategic approach to generate value from a shrunken budget and employee pool. The most successful organizations over the long-term will be the ones that cut costs now, while improving the health of their employee populations.

Utilize existing resources to find out how you can save money, starting with your health insurance provider.

“If your insurance provider builds plans on wellness and prevention, you could save money by initiating a wellness program to complement your current employee health insurance plans,” says William B. Caswell, senior vice president of operations for Kaiser Permanente, Southern California Region. “You don’t want to be asking all of the time how you got sick but, ‘How do I get better and stay better?’”

Awareness of the claims filed by your employees will allow you to determine the best health plan move that will work for their needs and devise a health promotion program that will be most appealing to them. While moving to a lower-cost plan may be a necessity, it is a temporary fix and should be complemented with an emphasis on health that will have a more lasting impact.

A 2009 Watson Wyatt report shows that 67 percent of employer respondents to an Annual National Business Group on Health survey say the top challenge to maintaining affordable benefits coverage is employees’ poor health habits. Only by managing these habits can you truly get your costs under control.

Work with your provider

Work with your health insurance provider to decide what the best options to your budget will be. Negotiating rates with insurers isn’t usually effective, as insurers aren’t offering massive discounts because of the economic downturn. The option you usually have is a different plan with reduced coverage.

One option is cost shifting to save the company money while increasing the cost to employees. But altering plans and shifting costs to employees isn’t solving the problem of high premiums. A Hewitt Associates LLC executives’ survey shows that participants found cost shifting didn’t bring out desired behavior changes in employees and that an emphasis on health at the workplace is needed.

Another money-saving health care option is risk sharing.

“You can switch to a plan that only pays when there is a medical event,” Caswell says. “But this is risky because an employee could get a costly ailment or go on maternity leave. You need to couple a doable plan with a wellness program. But when you implement these programs, don’t expect a dramatic immediate change.”

A third option is a health savings account, which takes money out of an employee’s check pretax and the employer has the option of adding money to the account, as well. If the employee switches jobs, he or she will take this health savings plan to the new position and the employer will retract its contribution from the fund.

“The economy will improve, and the way you treated your employees during this downtime will make a difference in your future business,” says Christopher DeRosa, president and general manager, CIGNA HealthCare, Southern California. “You don’t want to drop their coverage or cut them way back at the worst time.”

While health promotion — or wellness — programs aren’t usually at the top of the list when contemplating short-term health insurance savings, a program will have positive results in the short term with the best outcomes in one to three years. Companies that effectively promote health see immediate savings in premiums of 10 to 13 percent with the potential of reducing future medical costs. The investment has a $3 to $6 payback on the dollar.

Your best bet to cut costs will be a two-prong approach. Change your health plan for instant budget relief and initiate a health promotion plan.

“You will see an 8 to 10 percent trend reduction in premium and 2 to 4 percent reduction in program costs when a wellness program is initiated,” DeRosa says.

Design your health awareness plan with consideration of the number of employees that will be participating. A smaller company of 50 employees or less shouldn’t invest more than $25 per employee initially, but should focus on raising awareness by providing educational material that emphasizes preventive care, proper nutrition and health-related Web sites.

A midsized company of 300 or more employees should invest about $90 per person. Providing educational tools, focusing on the population’s main areas of concern and taking a competitive, fun approach is effective. A large company with a willingness to invest about $240 per employee can have a comprehensive program that includes education, financial incentives, the inclusion of spouses and perks like gym memberships.

Your insurance provider may have free online health risk assessment surveys. By surveying your employees you can determine ways to meet the company’s and employees’ financial needs. Ask questions about physical activity, stress management, tobacco use and general disease risk factors.

“People move and take action only when they feel they need to,” says Jim Elliott, vice president, mid/large sector sales, Southern California, Blue Shield of California. “Discuss the economic reason to alter health insurance plans and tell them what benefits a wellness plan can have on not only their health but their finances.”

Discussing what your insurance company provides to you at no cost or at reduced rates is a great first step. Many employers are unaware of fringe benefits included in their plans. If the insurance provider doesn’t offer what you need for free, it should be able to direct you to an organization or local hospital program that does.

The process

After you’ve determined a health awareness focus for your employee population, you can create a plan of action.

“Create a tool kit of ideas to help promote a culture of wellness,” says Cynthia Anderson, wellness coordinator, UC Irvine Medical Center. “Have staff get involved with ideas like healthy vending options, healthy messages to promote wellness, etc.”

You also need to make an assessment of your workplace wellness environment. Identify strengths and areas that need improvement. Enforce no smoking on the campus; provide healthy choices in vending machines and the cafeteria.

“See if you can get a discount for your employees through your local YMCA and do things that can boost morale,” Anderson says. “Help employees see their maximum potential when they focus more on wellness.”

Provide health tips, programs, discounts to gyms and other information through multiple delivery sources. Some employees are more receptive to e-mails or newsletters — or they just need to hear the same message multiple times to get motivated into action.

“If you have 60 to 80 percent participation in a wellness program, you will see serious changes not only in employees’ day-to-day health but in health care costs,” Elliott says. “It will be worth all of your effort, and you’ll wonder why you didn’t start a wellness program sooner.”

Revenue is down, the budget has been hacked away and now you’re edging toward reducing employee health care coverage — or even eliminating it outright. Before taking action, take into account the short-term benefits and long-term effects of your options.

A knee-jerk reaction may be to shift the benefit burden to employees. But those who have been down that road, say there are ways to take a strategic approach to generate value from a shrunken budget and employee pool. The most successful organizations over the long-term will be the ones that cut costs now, while improving the health of their employee populations.

Utilize existing resources to find out how you can save money, starting with your health insurance provider.

“Ask your insurance company to provide you with employee health evaluation surveys,” says Perry Braun, market leader, large group market, Medical Mutual. “Insurers can help you conduct surveys to determine how your individual employees view themselves and then how you can make use of that information.”

Awareness of the claims filed by your employees will allow you to determine the best health plan move that will work for their needs and devise a health promotion program that will be most appealing to them. While moving to a lower-cost plan may be a necessity, it is a temporary fix and should be complemented with an emphasis on health that will have a more lasting impact.

A 2009 Watson Wyatt report shows that 67 percent of employer respondents to an Annual National Business Group on Health survey say the top challenge to maintaining affordable benefits coverage is employees’ poor health habits. Only by managing these habits can you truly get your costs under control.

Work with your provider

Work with your health insurance provider to decide what the best options to your budget will be. Negotiating rates with insurers isn’t usually effective, as insurers aren’t offering massive discounts because of the economic downturn. The option you usually have is a different plan with reduced coverage.

One option is cost shifting to save the company money while increasing the cost to employees. But altering plans and shifting costs to employees isn’t solving the problem of high premiums. A Hewitt Associates LLC executives’ survey shows that participants found cost shifting didn’t bring out desired behavior changes in employees and that an emphasis on health at the workplace is needed.

Another money-saving health care option is risk sharing.

“Employees have to feel their health is their responsibility,” says Roger W. Sims, director of compensation, benefits and employee health, Health Alliance of Greater Cincinnati. “The cost of their health insurance will go up if they do not do their part to be healthy. Let employees know you are doing your part by paying premiums and giving wellness directives. With encouragement you will get participation. You can also give discounts to nonsmoking employees as an incentive to quit.”

A third option is a health savings account, which takes money out of an employee’s check pretax and the employer has the option of adding money to the account, as well. If the employee switches jobs, he or she will take this health savings plan to the new position and the employer will retract its contribution from the fund.

“A health care savings account can be portable and taken with the employee when they leave or an employer can add to the account and deduct their contributions when the employee leaves the company,” Braun says.

While health promotion — or wellness — programs aren’t usually at the top of the list when contemplating short-term health insurance savings, a program will have positive results in the short term with the best outcomes in one to three years. Companies that effectively promote health see immediate savings in premiums of 10 to 13 percent with the potential of reducing future medical costs. The investment has a $3 to $6 payback on the dollar.

Your best bet to cut costs will be a two-prong approach. Change your health plan for instant budget relief and initiate a health promotion plan.

“People didn’t get overweight yesterday, so it will take time to change the behavior and bad habits that got them there,” Sims says. “It will be worth it in the long run.”

Design your health awareness plan with consideration of the number of employees that will be participating. A smaller company of 50 employees or less shouldn’t invest more than $25 per employee initially, but should focus on raising awareness by providing educational material that emphasizes preventive care, proper nutrition and health-related Web sites.

A midsized company of 300 or more employees should invest about $90 per person. Providing educational tools, focusing on the population’s main areas of concern and taking a competitive, fun approach is effective. A large company with a willingness to invest about $240 per employee can have a comprehensive program that includes education, financial incentives, the inclusion of spouses and perks like gym memberships.

Your insurance provider may have free online health risk assessment surveys. By surveying your employees you can determine ways to meet the company’s and employees’ financial needs. Ask questions about physical activity, stress management, tobacco use and general disease risk factors.

“Savings will come over time,” says Laura Robinson, wellness coordinator, business health, St. Elizabeth Medical Center. “Having screenings will show employees health stats they otherwise may have not known about. This can help prevent the onset of disease.”

Discussing what your insurance company provides to you at no cost or at reduced rates is a great first step. Many employers are unaware of fringe benefits included in their plans. If the insurance provider doesn’t offer what you need for free, it should be able to direct you to an organization or local hospital program that does.

The process

After you’ve determined a health awareness focus for your employee population, you can create a plan of action.

“You have to help employees get rid of the day-to-day baggage they carry around,” Robinson says. “Creating a culture of health will not only promote any health programs you start but will help relieve employees of stresses when they participate.”

You also need to make an assessment of your workplace wellness environment. Identify strengths and areas that need improvement. Enforce no smoking on the campus; provide healthy choices in vending machines and the cafeteria.

“Employees may have trouble focusing at work,” Robinson says. “This can have everything to do with having a sugar rush, then quick depletion of energy. Provide healthy food alternatives in the office.”

Provide health tips, programs, discounts to gyms and other information through multiple delivery sources. Some employees are more receptive to e-mails or newsletters — or they just need to hear the same message multiple times to get motivated into action.

“Many believe the dollars are soft from wellness programs,” Sims says. “But they do come. Wellness programs are part of the solution to high health cost problems. No matter what options employers choose, if employees don’t take care of themselves, everyone’s costs will be higher.”

Saturday, 25 April 2009 20:00

Wheels of change

The transportation industry has taken a hit in the past couple of years — first pummeled by fuel costs, now endangered because of lack of product demand. Even though the economic forecast may be grim, this is a prime time to evaluate your current network to find wasted money and inefficiencies that may be hurting your customer service.

Delivery delays and poor packing and routing methods can all cost your company money.

The good news is that there are software solutions out there that can help you fix your problems with a minimal investment and lower your logistics and transportation costs by 8 to 15 percent.

“Transportation logistics accounts for about 20 percent of the product (cost),” says Min Shi, assistant professor in the department of management at California State University, Los Angeles. “Any savings will directly transfer to profits for the company. Technology is important when used correctly. Software helps eliminate errors by giving you a direct link between all businesses involved in the supply chain and your inventory. Monitoring inventory through your programs will significantly reduce the amount of stock you keep on hand and reduce the chance of business interruption.”

Software programs are available to assist companies from the time an order is placed through the successful delivery of the order. Many executives view their transportation department as a cost center, but through successful management, it can be another way to earn money.

Why logistics software is important

The addition of software to your logistics department will optimize daily and long-term transportation plans and scheduling, carrier selection, route planning, inventory management, and small parcel shipping, which can reduce costs.

While a software investment may cost at least $10,000, improving your shipping processes will allow you to serve more customers and increase profits in the long run.

“Developing a correct and effective logistics strategy means knowing your customers and the company mission,” Shi says. “Connecting this through software will be your best bet to make sure you’re meeting their needs and keeping track of your goods and minimizing your costs. Much of this software used for logistics is Web-based. This means there’s nothing physical to purchase, you simply gain access to the information cataloged and updated digitally. Software also allows you to have a backup plan if plan A doesn’t work out. Relying on one carrier will become your problem if something happens with their fleet or business.”

A common transportation management issue has businesses keeping more inventory on hand than necessary. This typically happens when stock is manually cataloged instead of tracked with software. This means more of your money is sitting in warehouses instead of in your pocket.

“This economy has been like getting bariatric surgery,” says James Moore, vice president of sales for Ryder System Inc. “If you lose 100 pounds all at once, your clothing isn’t going to fit anymore, and that’s what’s happened with many companies’ networks. They are now way larger than what they need to be and their one-time assets are now financially draining them. If efficiency is a problem with your transportation process, software will help eliminate errors and make the most of all efforts.”

Human error is a big part of what can go wrong in logistics. Depending on the volume of orders you are receiving, this can add up. The use of software can eliminate these errors and make your inventory and tracking easier to manage. Software can also determine the best carrier for a particular type of shipment and contractual agreements.

“The implementation of systems and software rapidly changed customer demand,” says George Hynes, president of Logistic Edge LLC. “Companies are seeing smaller orders and more dot.com orders of one or two items at a time instead of mass orders through business-to-business retailers. This changes the way shipping is conducted and there is a software application that can help companies adapt to these alterations and remain flexible.”

What you need to know

Before making a software purchase, you need to assess what areas of your process are in greatest need of assistance. While some companies package their software options, others individualize the programs for specific areas of interest, such as shipping and loading.

To figure out where you need help, you will need to perform an audit that tracks products from production to delivery.

Start by making a checklist. Are your shipments on time? Are your trucks traveling with full loads? What are your current fuel expenditures? Are you utilizing the best routes? What rates are you paying carriers? Are you paying your employees overtime? Are your orders accurate? If you don’t know how to obtain this information or you’re finding inconsistencies, software can probably help you reduce errors and delays.

“Investigate if you are effectively controlling your costs,” Hynes says. “If shipping isn’t part of your business’s core competency and you don’t plan on making it one, then you could benefit from a third-party logistics firm. A third-party logistics firm can replace or complement your internal logistics operations. The supply chain can be made or broken with the use of software. This is really a necessity in today’s industry.”

After you’ve determined the area you need the most help with, choose a software company you feel comfortable working with. Find a company that will be accessible when you need them. If you decide handling everything in-house is too expensive, find a third-party logistics firm that handles the details while you focus on your core competencies.

“Do a cost-benefit analysis to see if a third-party logistics provider will benefit your operation,” Shi says. “After you configure what areas you currently do not have software but need it, price that and compare it to a third-party firm. Make the decision if you want to invest in the man-hours it will take for employees to learn the programs and the costs involved.”

Today’s economic climate may be tough, but by looking for savings in every area of your business — including transportation — you can find money that can be better used elsewhere in your organization.

“Monitoring every aspect of business is key,” Shi says. “When you can’t monitor what is happening, you can’t measure the effects, delays, inaccuracies and other issues like fuel use have on your bottom line. Software has assisted businesses in every aspect, yet it isn’t used as much as it could be in transportation logistics. I think it will one day be a given to have software, but for now, the top companies are using it and the rest will likely follow.”

Saturday, 25 April 2009 20:00

Wheels of change

The transportation industry has taken a hit in the past couple of years — first pummeled by fuel costs, now endangered because of lack of product demand. Even though the economic forecast may be grim, this is a prime time to evaluate your current network to find wasted money and inefficiencies that may be hurting your customer service.

Delivery delays and poor packing and routing methods can all cost your company money.

The good news is that there are software solutions out there that can help you fix your problems with a minimal investment and lower your logistics and transportation costs by 8 to 15 percent.

“Transportation logistics is all about time and efficiency,” says Tony Alexander, operations manager, Momentum Transport and Momentum Freight. “Most of a company’s proposition is value and customer service. If you aren’t using software or a third-party logistics service, which for sure is using technology, then you won’t be maximizing your efforts to serve the customer.”

Software programs are available to assist companies from the time an order is placed through the successful delivery of the order. Many executives view their transportation department as a cost center, but through successful management, it can be another way to earn money.

Why logistics software is important

The addition of software to your logistics department will optimize daily and long-term transportation plans and scheduling, carrier selection, route planning, inventory management, and small parcel shipping, which can reduce costs.

While a software investment may cost at least $10,000, improving your shipping processes will allow you to serve more customers and increase profits in the long run.

“Saving money is important, but if you focus on a small savings, you won’t win in the long run,” Alexander says. “If you have software, you can see companies’ on-time record and rates they are offering on a daily basis. Keep in mind, saving $100 for a load with a company with a late reputation may cost you on the back end. All of this can be quantified through software.”

A common transportation management issue has businesses keeping more inventory on hand than necessary. This typically happens when stock is manually cataloged instead of tracked with software. This means more of your money is sitting in warehouses instead of in your pocket.

“If your routes aren’t planned accurately, you’ll be paying for employees’ ill planning and poor use of fuel,” says Jesse Rodriguez, terminal manager, Houston branch, White Star Delivery Inc. “You get what you pay for and if you’re not using technology to help create routes, load trucks and plan through the process, you’ll see customers go slowly but surely elsewhere. Computer applications make [for] easy access to information, and (they make) everything run smoother. When your information is clear, you will maintain customer loyalty.”

Human error is a big part of what can go wrong in logistics. Depending on the volume of orders you are receiving, this can add up. The use of software can eliminate these errors and make your inventory and tracking easier to manage. Software can also determine the best carrier for a particular type of shipment and contractual agreements.

“Efficiency means better customer service,” says Jamison Day, professor, University of Houston, C.T. Bauer College of Business. “Software helps you move through the process better, faster and cheaper. If you don’t have the capabilities to purchase all of the necessary software, but your company relies heavily on shipping, you should consider a third-party logistics firm.”

What you need to know

Before making a software purchase, you need to assess what areas of your process are in greatest need of assistance. While some companies package their software options, others individualize the programs for specific areas of interest, such as shipping and loading.

To figure out where you need help, you will need to perform an audit that tracks products from production to delivery.

Start by making a checklist. Are your shipments on time? Are your trucks traveling with full loads? What are your current fuel expenditures? Are you utilizing the best routes? What rates are you paying carriers? Are you paying your employees overtime? Are your orders accurate? If you don’t know how to obtain this information or you’re finding inconsistencies, software can probably help you reduce errors and delays.

“There are a fair amount of laws that must be obeyed in shipping, as well,” Day says. “Software will keep you abreast of what is necessary when sending out loads. You will, of course, have to keep upgrading your software, but this cost is much lower than fees and penalties that can be accrued when you don’t have paperwork in order. This delay will also make your customers unhappy.”

After you’ve determined the area you need the most help with, choose a software company you feel comfortable working with. Find a company that will be accessible when you need them. If you decide handling everything in-house is too expensive, find a third-party logistics firm that handles the details while you focus on your core competencies.

“Computers tend to find ways that reduce driving time and improve loading of shipments,” Day says. “The technology doesn’t replace the humans; it augments them, making everything more efficient. Depending on the industry, a third-party logistics firm will be a must. Calculate the rate to bring this service in-house compared to that of a logistics firm. Make sure that you find the right company to fit your needs. Don’t partner with the first guy holding a hammer looking for something to hammer even if it’s not the right tool. Look for a tool-independent firm.”

Today’s economic climate may be tough, but by looking for savings in every area of your business — including transportation — you can find money that can be better used elsewhere in your organization.

“Shipping still happens without software, but the time element and accuracy software can bring to an operation can’t be compared to those companies operating without it,” Alexander says. “Technology is used throughout most companies and stops at the shipping room door. This isn’t an area you want to skimp on. Keep customer service a priority and you’ll be one of the companies that sees it through the downturn.”

Thursday, 26 March 2009 20:00

Debunking diversity

The million-dollar question about making an investment in diversity is: Will it pay back?

While experts say diversity in the work force is a business imperative, defining diversity by employees’ physical attributes won’t foster a functional or profitable environment.

In fact, the definition of diversity is always evolving. Twenty years ago, the word spurred thoughts of gender issues since men held a high majority in the work force, while today the gender gap is narrowed and is less of a concern. Diversity’s definition has expanded, and diversity of thought, education, socioeconomics, religion and life goals are only a few of the seemingly endless list of terms people use when defining the term for themselves. These differences in your employees can make or break your business. If you foster an inclusive environment, where all employees can contribute thoughts and plans to improve your product or service in confidence, you will improve your bottom line.

A February 2009 Groundbreakers report by Ernst & Young defines diversity as an equation for success and notes that research has proven diverse groups outperform homogenous groups even in cases where the nondiverse groups have heightened abilities. Scott Page, a professor of complex systems at the University of Michigan at Ann Arbor, created the diversity prediction theorem, which says the collective ability of any crowd is equal to the average ability of its members plus the diversity of the group, claiming diversity is a sure way to attain a strategic advantage.

“Diversity is an important consideration when hiring new employees,” says Bahaudin G. Mujtaba, chair and associate professor of management, H. Wayne Huizenga School of Business and Entrepreneurship, Nova Southeastern University. “Managers should look for the best candidates first; try to create a team that brings diverse skills and characteristics as to complement the existing knowledge and abilities of the group in the department. Assess what the company already has and hire to fill gaps.”

Still, the return on investment is the hard evidence you want to justify devotion of time and money. Some say it’s difficult to quantify diversity ROI, but metrics are attainable. If you start with a plan that establishes your company goals and maps out a strategy, you can document the benefits and obstacles of a diverse team’s functionality that will best benefit your business.

Why it’s important

Since the country’s demographics are continually changing, a failure to branch out and move past your comfort zone when hiring and communicating with employees will ultimately result in financial punishment for the business.

“Consumers want someone they can communicate with,” says Rob Steward, vice president of sales, LatPro Inc. “LatPro.com is a niche job board for Hispanic and bilingual professionals — we post positions and network so employers and those seeking employment can connect. These types of sites are increasing because the population is changing in the U.S. Don’t stop recruiting even if there’s a hiring freeze. Gather a group of diverse candidates you’d like to employ — and be honest with them, noting your interest in connecting in the future.”

U.S. Census Bureau reports show Hispanics are the fastest-growing population, with an increase of 121 percent since 1999. The Asian population nearly doubled since 1990 and the African-American population is predicted to increase to 65.7 million strong by 2050, an increase of 15 percent since 2008.

“The demographics are changing,” says Amparo Bared, vice president of human resources and talent management at Ryder System Inc. “You need to play a key role in accountability and ownership and that means being flexible enough to have employees that can best serve your customers. Create deliberate initiatives and goals that support your strategy.”

Affinity networks — employer-recognized employee groups who share a common race, gender, national origin or sexual orientation — are a great way to attract and retain diverse employees. Networking by affinity groups reduces turnover and gives companies insights to consumers they otherwise may have never understood.

General Motors Corp.’s People with Disabilities Affinity Group has been a consistent resource for providing input and support relative to accessibility of products and services. The group played a role in helping OnStar develop the addition of TTY capability, the text telephone for the hearing impaired, for OnStar-equipped vehicles. Another example of diversity was witnessed in PepsiCo Inc.’s Hispanic professional organization called Adelante. Its Hispanic employee network provided insights that resulted in the development of the guacamole chip. In the first year of distribution, PepsiCo’s Frito-Lay division sold $100 million in Lay’s guacamole chips.

“If you have a Spanish-speaking customer base or want to reach a specific demographic, it would be smart to have staff that can effectively communicate with them,” Steward says. “With Web sites being used so frequently for daily business function, companies can do business anywhere they want. Having a diverse team will provide insights to reaching people around the globe. Age diversity is equally important. In an interview, you’re not allowed to ask a person’s age, but they’re gender and race are very apparent. Try not to allow age to have a negative impact on your decision because your customers are old and young.”

What you need to know

Diversity isn’t about being politically correct; it’s about keeping your business competitive.

“If you are playing catch up, you’re behind the eight ball,” Bared says. “You want to see diversity all of the way into your management ranks. Even if diversity isn’t a requirement or necessity, it’s good business sense. It will help your company grow by doing a better job.”

Keep in mind the customers who you want to attract and then investigate opportunities in markets in which you want to expand or improve business. If you’re interest is in attracting a broader customer base, employees should mirror the communities in which you want to expand. Forge relationships with diverse community organizations and let them know about opportunities in your organization. Sponsoring events that interest diverse groups makes your company more attractive to diverse candidates. For example, host events in coordination with Cinco de Mayo, Chinese New Year or Disability Awareness Month, and make your business’s diversity interests and job openings known.

If you’ve established affinity groups within your company, they can also help with recruiting. They may be able to give you suggestions that will help your business attract more diverse candidates and offer ideas of where to post positions.

Starting an affinity group is easy.

“Once you have a diverse team, you’ll want to utilize their skills,” Steward says. “Having affinity groups is the best way to encourage brainstorming among employees. You can provide employees with a specific project that you need help in reaching the customer. In an affinity group, employees may feel more relaxed to speak their ideas, too — then as a group, they can present the consensus on how to approach the issue, which makes employees feel they’ve helped their community and employer, while the company can potentially profit.”

Hiring managers also need to keep in mind how to motivate and manage their staff as part of a recruiting plan. Experts encourage incentives for staff contributions to a diverse work force, considering employees’ job satisfaction can be your best advertising.

“Diversity when managed effectively, can be beneficial for all industries in all departments,” Mujtaba says. “Diversity should be seen by customers and integrated behind the scenes for critical decisions regarding product manufacturing, marketing, expansions, strategies, recruitment and human resource development. If you don’t take advantage of the benefits of a competitive work force, your competitors will.”

Thursday, 26 March 2009 20:00

Debunking diversity

The million-dollar question about making an investment in diversity is: Will it pay back?

While experts say diversity in the work force is a business imperative, defining diversity by employees’ physical attributes won’t foster a functional or profitable environment.

In fact, the definition of diversity is always evolving. Twenty years ago, the word spurred thoughts of gender issues since men held a high majority in the work force, while today the gender gap is narrowed and is less of a concern. Diversity’s definition has expanded, and diversity of thought, education, socioeconomics, religion and life goals are only a few of the seemingly endless list of terms people use when defining the term for themselves. These differences in your employees can make or break your business. If you foster an inclusive environment, where all employees can contribute thoughts and plans to improve your product or service in confidence, you will improve your bottom line.

A February 2009 Groundbreakers report by Ernst & Young defines diversity as an equation for success and notes that research has proven diverse groups outperform homogenous groups even in cases where the nondiverse groups have heightened abilities. Scott Page, a professor of complex systems at the University of Michigan at Ann Arbor, created the diversity prediction theorem, which says the collective ability of any crowd is equal to the average ability of its members plus the diversity of the group, claiming diversity is a sure way to attain a strategic advantage.

“Diversity shouldn’t be separated into a policy,” says Jeffery L. Smith, associate director, global diversity and inclusion, Procter & Gamble Co. “Looking at diversity as a strategy allows you to be the best in your class. Consider having a diverse work force to be a strategic and competitive advantage and a way to build and sustain your business. To be the best in your class, you have to know who will be purchasing your products or services and keep evolving with your customers. Insights of diverse employees make that process possible.”

Still, the return on investment is the hard evidence you want to justify devotion of time and money. Some say it’s difficult to quantify diversity ROI, but metrics are attainable. If you start with a plan that establishes your company goals and maps out a strategy, you can document the benefits and obstacles of a diverse team’s functionality that will best benefit your business.

Why it’s important

Since the country’s demographics are continually changing, a failure to branch out and move past your comfort zone when hiring and communicating with employees will ultimately result in financial punishment for the business.

“Getting past your circle of influence might be the most difficult part of recruiting or being part of a diverse work force,” says Valarie S. Boykins, director of diversity, TriHealth. “If companies operate with that, they’ll block out other opportunities. You’re not helping the business being myopic in your thinking.”

U.S. Census Bureau reports show Hispanics are the fastest-growing population, with an increase of 121 percent since 1999. The Asian population nearly doubled since 1990 and the African-American population is predicted to increase to 65.7 million strong by 2050, an increase of 15 percent since 2008.

“You can have three generations of people working side by side,” Boykins says. “The differences and similarities of employees is what makes a great business, but ineffective communication between employees will not drive quality. Diversity isn’t a bucket you set aside and think about sometimes. It should be interwoven into everything the business does.”

Affinity networks — employer-recognized employee groups who share a common race, gender, national origin or sexual orientation — are a great way to attract and retain diverse employees. Networking by affinity groups reduces turnover and gives companies insights to consumers they otherwise may have never understood.

General Motors Corp.’s People with Disabilities Affinity Group has been a consistent resource for providing input and support relative to accessibility of products and services. The group played a role in helping OnStar develop the addition of TTY capability, the text telephone for the hearing impaired, for OnStar-equipped vehicles. Another example of diversity was witnessed in PepsiCo Inc.’s Hispanic professional organization called Adelante. Its Hispanic employee network provided insights that resulted in the development of the guacamole chip. In the first year of distribution, PepsiCo’s Frito-Lay division sold $100 million in Lay’s guacamole chips.

“There’s not one aspect of diversity that is more important than another,” says Jamie Richardson, vice president of corporate relations for White Castle System Inc. “The uniqueness is what makes a company great. Having an array of perspectives and talents helps us all practice prudence and patience with diversity. Not seeing benefits of diversity is shortsighted.”

What you need to know

Diversity isn’t about being politically correct; it’s about keeping your business competitive.

“A strong retention rate has everything to do with hiring the right people to begin with,” Richardson says. “A diversity of employees keeps us in touch with customers and alert to a wide spectrum of ideas so the business can stay a quarter step ahead.”

Keep in mind the customers who you want to attract and then investigate opportunities in markets in which you want to expand or improve business. If you’re interest is in attracting a broader customer base, employees should mirror the communities in which you want to expand. Forge relationships with diverse community organizations and let them know about opportunities in your organization. Sponsoring events that interest diverse groups makes your company more attractive to diverse candidates. For example, host events in coordination with Cinco de Mayo, Chinese New Year or Disability Awareness Month, and make your business’s diversity interests and job openings known.

If you’ve established affinity groups within your company, they can also help with recruiting. They may be able to give you suggestions that will help your business attract more diverse candidates and offer ideas of where to post positions.
Starting an affinity group is easy.

“You need to allow and support group thinking,” Boykins says. “Promote (employee resource group) meetings by allowing time for meetings in the workday — make sure there is structure to the meetings, goals. It’s possible to go too far with diversity if you don’t understand it. These groups can tell managers multifaceted recruitment techniques. Keep in mind different generations communicate in different ways. Some prefer blogs like Facebook while other stick with the traditional newspaper. You can’t have diversity without inclusion — the very objective is for engagement. A variety of thoughts, perspectives, ideas is what makes you stand out.”

Hiring managers also need to keep in mind how to motivate and manage their staff as part of a recruiting plan. Experts encourage incentives for staff contributions to a diverse work force, considering employees’ job satisfaction can be your best advertising.

“Diversity and inclusion is more important now that ever,” Boykins says. “Companies are asking employees to work more, have more responsibilities with less people. Everyone has their aha moment or something that triggers them into negative or disparaging thinking so we have to open up the line of communication with dialogue over this issue so everyone feels included in the conversation. We might [not] always agree, but we shouldn’t be disagreeable when we disagree.”

Monday, 23 February 2009 19:00

The science of service

If you’re looking at your budget and considering cutting back on support for customer service, you might want to reconsider. About 96 percent of unhappy customers don’t take the initiative to tell you they’re unhappy with your service, but they will tell nine other people and not return.

Customer service should be as important to you as it is to your customer, and customer service is second in importance only to product quality when it comes to satisfying customers.

The difference in today’s market is that brand loyalty isn’t what it used to be. Businesses are making a new promise every day without credible reasons for the consumer to believe the promise. Customers make purchases because they believe you’re selling something they need, but they also know they have many options. A single bad experience with you can result in your customers making purchases from the vendor down the street next week. The products may be similar but the quality of your customer service can be why they prefer to make purchases with you.

“The quality of your customer’s experience is one of the most important sustainable advantages a company can have, particularly in a competitive environment,” says Andy Bodea, senior vice president of global operations, Equifax Inc. “Senior leadership must be behind the initiative in order to provide the right tools and all elements of providing customer service need to be adopted throughout the company for it to work well. It’s OK to admit that you’re not perfect with customer service, but you should have an execution focus on how to make it happen.”

If customers have a good experience with your business, they’re more likely to return and spend money again. Positive word-of-mouth is one of the cheapest and most effective means of growing your business. It’s also much less expensive to retain a customer you already have than to attract new ones.

“Customer service overall is mediocre and inconsistent,” says Adolfo Perez, vice president of worldwide reservations, Carnival Cruise Lines. “One day you may have an incredible experience when dealing with a company, and the next time, you have an issue [and] the experience causes a headache and heartburn. You wonder how those very different people could be working for the same company. The work force has changed over the past few decades. Things an employee might say to a customer or even a supervisor today would never have occurred 20 years ago. It seems that there is an overall lack of respect in the work force, but this can be harnessed with the right mix of salary and environment.”

Customer service in today’s market entails doing business where and when your customers want. The trick is to cut costs while being flexible with your ways of improving customer service quality across all avenues, including online and by phone.

There’s an easy formula for this, yet it’s not utilized. It starts with paying better wages. Then you have to invest in your employees’ ability to perform through education and train them to respond to customer needs.

Why a customer service program is important
Your customer service representatives have unlimited access to your customers, products and equipment, yet they’re largely considered dispensable and are often treated as such. This is the wrong approach. You can’t personally know who your regular customers are or what their preferences entail, but your employees do, so it’s important to retain them. Investing in customer training and rewarding them with a pay increase upon completion of the course or offering another benefit, such as time off, makes for a more enthusiastic employee.

“Salary increase isn’t the main motivator for employees,” says Jason Few, senior vice president of smart energy and residential for Reliant Energy. “The most impactful incentive is having an ability to move forward in the company. Survey your employees in the same fashion in which you survey customers to get a snapshot of their satisfaction level and make changes where necessary to improve their job satisfaction.”

Although many customer service positions are considered entry level, giving the employee the option to advance within the company will be an incentive for the employee to stay and can help you reduce employee turnover, which on average costs businesses 20 percent of an employee’s annual salary to replace that person.

“If you have different levels of customer care positions in your business, those who are working at the lowest level get bored easily because their job entails performing simple tasks,” Bodea says. “These positions are typically filled by the newest hires and have a 20 to 60 percent turnover rate. The next tier requires more knowledge and has a lower turnover rate. The third tier is considered specialists that have special knowledge of the company’s workings. This position has less than 5 percent turnover.

“If the workers are interested in advancing and given the opportunity, they will make the best employees because they’ll have gathered the most information on your business and your customers. These employees are very valuable and may not be with the company if not provided the opportunity to advance.”

When you are looking at data, make sure you are getting the whole picture.

“When you are considered a provider, you must maintain communication while meeting and exceeding expectations,” says Robert Smith, senior vice president of marketing and membership, American Management Association, a professional development firm. “You must always take into consideration that your actions are being done profitably, but when speed is the only measure you are looking at when analyzing an employee’s performance in solving a customer’s problem, you’re looking at the situation wrong.

“If an employee gets off the phone with a customer in three minutes but hasn’t answered all of his or her questions, good customer service wasn’t performed. The customer may have to call back or decide not to use your services again. Another error is customer service representatives asking the customer if there’s anything else they can help them with. For the most part, the employee should be able to provide the customer, without him or her asking, everything they can offer them to resolve the issue. What do you train your employees to say if a customer asks, ‘I don’t know, what else can you do?’”

You may see investing in customer service training as a luxury in today’s economy, but experts warn that not doing so could lead to your company’s demise.

What you can do
The biggest error you can make is getting too caught up in cutting costs and other internal workings to see your business from the customer’s point of view. Customer service is what keeps the lifeblood of your business — customers — coming back. Even when inevitable mistakes are made, customers return if the error is handled properly.

“Make it easy to do business with your company,” Perez says. “Layers upon layers of rules, multiple layers of escalation, poorly trained and unempowered employees make for a poor customer service experience and negatively affect your sales. Simplify your business process and obsessively train your staff upon hire and on a reoccurring basis. Empowered employees can handle customer’s issues directly. You don’t have to give up all the control, but it’s better to trust your employees, than manage exceptions.”

Another mistake is investing money in loyalty programs focusing on drawing in new customers, while losing focus on appeasing your current customers. If you don’t ask customers about their experience with your business, they’ll likely not tell you — but they will go home and tell others. If you stay flexible and listen to what they say by acting on their feedback, you can best design a customer service program that works for you.

“If you get to know your customers like Amazon does, for example, you’ll be able to make suggestions to them on purchases based on their past experience with you,” Smith says. “Customer service has improved dramatically over the years in the sense that businesses have a better idea of how to understand their customers and the competition to win their loyalty, [which] makes it an essential business practice.”

What many companies don’t understand is that good customer service is rare. If you already have brand recognition, you can further your competitive advantage by listening to customers’ concerns and acting on them. You need to define what good customer service means to your specific set of customers before you can best meet their expectations. This can be achieved by polling them in a variety of ways — comment cards, e-mail or an online form.

Even with well-trained employees and a list of customer recommendations, you still need your managers to be an integral part of your program. They should point out positive behavior and not just the negatives. Successes should be noted to encourage employees to do more than the bare minimum, and negative incidents should be handled immediately instead of waiting for an evaluation.

“Employees may repeat a behavior they’re not aware is undesirable,” says Liz Tahir, an international marketing consultant and speaker. “Having the proper communication with employees is essential. If you treat them well on a regular basis, they won’t react negatively when a manager points out an area that needs improvement.

“Employees treat customers the way you treat them. Ask yourself if you greet employees enthusiastically, interact politely and try to accommodate them in their requests.”

Making sure employees have the correct set of tools to perform their jobs is another important step in ensuring good customer service. Proper training and empowering employees to handle customers’ concerns or problems will build employee confidence while expediting the customers’ requests.

“Always putting yourself in the customer’s shoes when determining how to best resolve issues or respond to a request is the best way to resolve issues,” Tahir says. “All of the great companies have incorporated customer service in their core business philosophy, helping to brand their business as one known for great customer service.”

Monday, 26 January 2009 19:00

Sustaining momentum

Sustainability isn’t about saving the planet. It’s about saving your business.

Conducting business in a sustainable manner means you can spend less and increase revenue.

While sustainability does help the planet, the incentive of reducing your business costs by half is a strong reason to pay attention. The buzz is that traditional energy and other resources will be in tight supply in the future, resulting in volatile prices. By investing in sustainable efforts now, you can help ensure your business’s long-term success.

“Corporate sustainability isn’t just something to consider anymore; it’s a necessary way of conducting business,” says Lee Broughton, director of corporate sustainability, Enterprise Rent-A-Car. “Companies that are managed sustainably is what everyone’s talking about — and everyone wants to be a part of the discussion.”

Americans compose 5 percent of the world’s population, yet contribute almost 25 percent of the greenhouse gas pollution, which scientists believe causes global warming. If everyone used and wasted energy and other resources this way, we’d need four planet earths to keep up with the demand. Consumers are finally taking notice of this egregious waste and are looking to buy from sustainable businesses, while more and more businesses are looking to obtain products from other businesses using sustainable practices. This is a time when your business can not only streamline production but also increase revenue by drawing in new customers.

“Barack Obama was so specific about forming an energy plan, we’ll be seeing things change soon,” says T. Boone Pickens, founder and chairman of BP Capital Management. “This means businesses have to get going on where they’ll be standing when this comes in to play.”

Ninety-six percent of readers polled by Smart Business say being green is an important part of their corporate philosophy, yet 45 percent report that they’re not willing to invest in greener practices. Experts say spending money on green initiatives isn’t paying for an image it’s a direct investment in a more economic way of running your business.

Why sustainability is important

Think of sustainability like the Internet. Fifteen years ago, when the Internet was emerging, it wasn’t pervasive, but now it’s everywhere. Eventually, sustainable business will just be called business and green building will just be known as building. Experts say that is the way it’s going to be and you have to adapt now.

If you want to know the value in sustainable management, think about the Dow Jones Sustainability Index. For almost a decade, Dow Jones has been providing sustainability indexes of businesses, which shows objective benchmarks for financial products linked to economic, environmental and social criteria. Sustainability indexes offer a performance baseline and an investment value for mutual funds, certificates, separate accounts and other investment vehicles based on the concept of sustainability. To date, the assets managed amount to approximately $6 billion.

“Sustainability doesn’t cost anything,” says Joseph Fiksel, principal and co-founder of Eco-Nomics LLC and co-director of the Center for Resilience at The Ohio State University. “Any investment you make is done for business reasons. Sustainability will save money and increase stockholder value in your company.”

The need for sustainability has already created thousands of jobs stemming from business consultants to waste managers. Experts say we’ve only scratched the surface of what sustainable practices can do for businesses. While solar and wind power commonly come to mind, sustainability includes using recycled products when building, collecting rain for watering purposes and designing your business’s landscape in a way that minimizes the need for upkeep and conserving resources.

While reducing waste has its obvious benefits, reduced insurance rates are another benefit to sustainable businesses. In fact, sustainability consultants predict business insurance will be more difficult to procure as nonsustainable practices are looked at as a risk.

In a 2008 report by SAB Miller, one of the world’s largest breweries, a survey of 4,000 senior executives showed 70 percent place corporate sustainability at the top of their priority list. That still leaves more than a quarter of businesses delaying action.

What you need to know

When initiating a sustainability plan, think about who your customers are and what they want. Consider how implementing sustainable practices can lead to more business. The challenge is making decisions that are financially, socially and environmentally intelligent. While there isn’t a one-size-fits-all plan, having a sustainability expert evaluate your business is a jumping-off point.

The Global Reporting Initiative is another ally for businesses seeking a sustainable route. It’s an organization that provides a framework companies can follow to measure and report their economic sustainability performance and monitor the performance of other companies. The organization sets the principles and indicators that businesses can use to measure and report their sustainability performance. GRI is growing as an international standard for corporate sustainability reporting.

“CEOs need to get an education on this now,” Pickens says. “Sustainability isn’t just wind or solar, you’re going to have to get off the foreign oil. Wind and solar do not replace the foreign oil, so we’re going to have to put it together and use all of them to have a more sustainable business. This should be something in businesses’ plans to work their way into understanding what the future holds.”

Another source for information comes from the U.S. Business Council for Sustainable Development, which was established in 2002 as a member-led, nonprofit organization that presents projects to demonstrate the business value of sustainable development. Projects featured by the council create value through economic returns and environmental and social benefits.

A sustainability consultant can help you identify what sustainable methods are available. After an assessment, you, along with department managers or those hired for the assignment, can construct an operational analysis that

details your plans with set goals and deadlines. This will include your estimated ROI time frame. Make sure your sustainability plan describes how sustainability topics relate to long-term organizational strategy, risks and opportunities, including supply chain topics.

Even if you don’t implement everything in your sustainability plan today, you can re-evaluate and implement more sustainability methods in the future.

Make sure you are meeting all local and national protocols while setting some of your own standards. Define sustainability issues for your business based on your industry and the department. For example, if your business uses a lot of water, utilize rainwater recycling to minimize the amount of water you must purchase.

“We didn’t move out of the Stone Age because we ran out of stones,” says Tim Center, vice president of sustainability initiatives, Collins Center for Public Policy and director of the Council for Sustainable Florida. “Business is about innovation, and that’s what sustainability brings.”

Monday, 26 January 2009 19:00

Sustaining momentum

Sustainability isn’t about saving the planet. It’s about saving your business.

Conducting business in a sustainable manner means you can spend less and increase revenue.

While sustainability does help the planet, the incentive of reducing your business costs by half is a strong reason to pay attention. The buzz is that traditional energy and other resources will be in tight supply in the future, resulting in volatile prices. By investing in sustainable efforts now, you can help ensure your business’s long-term success.

“Not investing in sustainability will eventually define a company as being out of touch and not caring how they’re perceived in the marketplace,” says Tom Kemper, founder and CEO, Dolphin Blue. “The planet’s population is projected to grow to 10 billion in the next 50 years. Being sustainable today means competitive advantage, higher employee retention, good will to the communities you serve and savings.”

Americans compose 5 percent of the world’s population, yet contribute almost 25 percent of the greenhouse gas pollution, which scientists believe causes global warming. If everyone used and wasted energy and other resources this way, we’d need four planet earths to keep up with the demand. Consumers are finally taking notice of this egregious waste and are looking to buy from sustainable businesses, while more and more businesses are looking to obtain products from other businesses using sustainable practices. This is a time when your business can not only streamline production but also increase revenue by drawing in new customers.

“Barack Obama was so specific about forming an energy plan, we’ll be seeing things change soon,” says T. Boone Pickens, founder and chairman of BP Capital Management. “This means businesses have to get going on where they’ll be standing when this comes in to play.”

Ninety percent of readers polled by Smart Business say being green is an important part of their corporate philosophy, yet 69 percent report that they’re willing to invest nothing or less than $5,000 in greener practices. Experts say spending money on green initiatives isn’t paying for an image it’s a direct investment in a more economic way of running your business.

Why sustainability is important

Think of sustainability like the Internet. Fifteen years ago, when the Internet was emerging, it wasn’t pervasive, but now it’s everywhere. Eventually, sustainable business will just be called business and green building will just be known as building. Experts say that is the way it’s going to be and you have to adapt now.

If you want to know the value in sustainable management, think about the Dow Jones Sustainability Index. For almost a decade, Dow Jones has been providing sustainability indexes of businesses, which shows objective benchmarks for financial products linked to economic, environmental and social criteria. Sustainability indexes offer a performance baseline and an investment value for mutual funds, certificates, separate accounts and other investment vehicles based on the concept of sustainability. To date, the assets managed amount to approximately $6 billion.

“Lack of time and resources keeps more businesses from investing in sustainability,” Kemper says. “They don’t know the advantages of sustainability, but early adapters are seeing that they have the most to gain with both revenue and competitive advantages.”

The need for sustainability has already created thousands of jobs stemming from business consultants to waste managers. Experts say we’ve only scratched the surface of what sustainable practices can do for businesses. While solar and wind power commonly come to mind, sustainability includes using recycled products when building, collecting rain for watering purposes and designing your business’s landscape in a way that minimizes the need for upkeep and conserving resources.

“Sustainability should be part of your corporate philosophy,” says Jack Hill, stadium general manager for the Dallas Cowboys, who are building their new stadium using sustainable methods. “Being sustainable can make you feel good about what you’re doing for the environment while enhancing your product and saving money.”

While reducing waste has its obvious benefits, reduced insurance rates are another benefit to sustainable businesses. In fact, sustainability consultants predict business insurance will be more difficult to procure as non-sustainable practices are looked at as a risk.

In a 2008 report by SAB Miller, one of the world’s largest breweries, a survey of 4,000 senior executives showed 70 percent place corporate sustainability at the top of their priority list. That still leaves more than a quarter of businesses delaying action.

What you need to know

When initiating a sustainability plan, think about who your customers are and what they want. Consider how implementing sustainable practices can lead to more business. The challenge is making decisions that are financially, socially and environmentally intelligent. While there isn’t a one-size-fits-all plan, having a sustainability expert evaluate your business is a jumping-off point.

The Global Reporting Initiative is another ally for businesses seeking a sustainable route. It’s an organization that provides a framework companies can follow to measure and report their economic sustainability performance and monitor the performance of other companies. The organization sets the principles and indicators that businesses can use to measure and report their sustainability performance. GRI is growing as an international standard for corporate sustainability reporting.

“If the Pickens Plan or another similar plan is adopted by the government, the price of oil will drop, but if a new alternative energy source isn’t incorporated, the prices will continue to spike,” Pickens says. “Supporting this sustainability plan means helping yourself, your customers and the country.”

Another source for information comes from the U.S. Business Council for Sustainable Development, which was established in 2002 as a member-led, nonprofit organization that presents projects to demonstrate the business value of sustainable development. Projects featured by the council create value through economic returns and environmental and social benefits.

A sustainability consultant can help you identify what sustainable methods are available. After an assessment, you, along with department managers or those hired for the assignment, can construct an operational analysis that details your plans with set goals and deadlines. This will include your estimated ROI time frame. Make sure your sustainability plan describes how sustainability topics relate to long-term organizational strategy, risks and opportunities, including supply chain topics.

Even if you don’t implement everything in your sustainability plan today, you can reevaluate and implement more sustainability methods in the future.

Make sure you are meeting all local and national protocols while setting some of your own standards. Define sustainability issues for your business based on your industry and the department. For example, if your business uses a lot of water, utilize rainwater recycling to minimize the amount of water you must purchase.

“Responsible businesses will be rewarded with consumer dollars going their way,” Kemper says. “Many customers are boycotting businesses that aren’t compatible with their initiatives. There’s a lot of power in that, and it’s not a point a company wants to get to.”

In 2010, T. Boone Pickens will receive his first order of wind turbines, a step he hopes will set a new era of energy efficiency into motion. Pickens, the iconic founder and chairman of BP Capital Management and the star of his own commercials touting the “Pickens Plan” and the benefits of wind energy, is hoping to ride the winds of change to a more sustainable future for America.

Pickens is advocating for a commitment to wind energy production on a large scale through tax subsidies and other measures. This will interject more renewable energy into localized power grids, and Pickens estimates that 2,000 jobs will be created initially — and grow to 138,000 over time. He says committing to wind energy will get the U.S. out of the current economic downturn and will increase security while reducing costs. Although Pickens has made his fortune in oil, he says decreasing foreign oil dependency by creating a renewable energy network will place U.S. businesses in a better financial position. Smart Business spoke with Pickens about sustainability and how all businesses can profit from investing in it.

 

Q. How can a business improve its bottom line by investing in sustainable energy?

I don’t know that they can immediately. It’s going to take several years to get renewable energy into the system to a level that will make a difference. It will eventually lower the price of your power. It’s just going to take some time for that to happen. Other sustainable practices will suffice until then.

 

Q. Will the businesses that haven’t invested in sustainability now lose future benefits?

The hope is that a business won’t be able to say, ‘I’m on renewable, and my competitor isn’t.’ Hopefully, a more efficient power grid will be implemented and all energy sources will be incorporated. But you have to be planning ahead, and if you haven’t already, you have to start that plan today. To quote my father, ‘A fool with a plan can outsmart a genius with no plan any day of the week.’

 

Q. How can CEOs bettereducate themselves on sustainability in ways that will help their industries in the future?

They need to know we have to do something about our own energy and [that] there are several components to the plan for it to be successful. Sustainability isn’t just wind or solar. You’re going to have to get off the foreign oil, but wind and solar do not replace the foreign oil. Foreign oil isn’t used for power generation, so we’re going to have to put it together and use all of them to have a more sustainable business. Replacing foreign oil with natural gas will be step one. This should be something in businesses’ plans to work their way into understanding what the future holds. Using natural gas for transportation fuel will reduce the need for foreign oil.

 

Q. What will it take for the majority of businesses to operate at a sustainable level?

The government is going to have to show that they’re ready to go with different opportunities in energy. With that, they’re going to have to put a production tax credit in, which would show the world that we are behind wind and solar. When they do that and put a 10-year tax credit in, that will bring the manufacturers into the area to use the forms of energy and help better develop the process. But if things work according to plan, you’ll be getting your energy from a source that pulls from all energy sources and businesses won’t be able to pick and choose what they use. This source will include renewable, coal, natural gas and nuclear. This will come with upgrading to a national grid. You wouldn’t be able to identify which one’s which — it would be a single energy source that it is pulled from. A national grid upgrade could make energy efficiency 20 percent better than what it is now.

 

Q. Is the issue less pressing for businesses that were pushing for sustainable energy now that gas prices have decreased?

That way of thinking won’t work because we’re importing almost 70 percent of our crude oil now, regardless of what price we pay for it. If you’re paying $70 a barrel, it’s half the cost it was, but the percentage of imports remains the same, and I perceive that to be the most critical problem that the country has from a security standpoint. We’re relying on half of the oil we import coming from the Mideast and Africa, the two most unstable places in the world.

 

Q. Why should businesses care about U.S.dependency onforeign oil? How does the dependency directly affect them?

The price of oil will continue to go up, and businesses won’t have any choice but to pay the price. By using sustainable energy from the U.S., there won’t be a price hike. There’s been a yo-yo effect over the last 40 years that started in the ’70s. When the price of gas runs up, they over-supply the market, drop the price and any idea about using renewable is stopped. You can look back and the pattern is the same except the price never goes down as low as it was before. So now you’re working off a price that was up to $140 a barrel, which is now down to $60 or $50, but do you like paying $50 a barrel knowing the price is going to go back to at least $140 at some point? You don’t have any control over your destiny using foreign oil. As a businessperson who sees a fuel that runs cleaner, is domestic and creates more jobs in America, I would say that certainly beats buying foreign oil. With foreign oil, the money’s gone, no jobs came with it, no taxes were paid, and it didn’t help the economy. It’s just a drain on us.

 

Q. Why should businesses care about the Pickens Plan?

Businesses should see the Pickens Plan as a great opportunity to take advantage of cheap gas and oil. This is a once in a lifetime deal for us. Cheap oil has caused us to be addicted. Every time we talked about renewables, every time we started up new U.S. drilling, the Mideast oversup-plied us and drops the prices. If we don’t do anything more than what we’ve done in the last 40 years, then in 10 years forward, we’ll be paying $200 or $300 a barrel and we’ll be importing 75 percent of our oil. And then we’ll be broke. You can’t think the future is foreign oil. The future is sustainables. Businesses also need to consider plans that aren’t just for their business, but a way to improve America. That’s part of good business practices.

HOW TO REACH: T. Boone Pickens, www.pickensplan.com