Health insurance coverage has become a heavily regulated environment that while it has made life complicated for health insurers has made great strides to protect the consumer. Still, a business owner needs to be careful about selecting the right health insurance provider to make sure that the health care coverage is the right fit for the business and its employees.
“Despite it being a heavily regulated environment, a business owner should not throw caution to the wind when selecting a provider,” says Lisa Davies, senior director of corporate compliance for AvMed Health Plans of Gainesville.
Smart Business spoke with Davies about the key issues facing health care at the moment, and the steps a business owner can take in selecting the right health care provider.
Could you name the key issues facing health insurance companies and how they affect businesses?
From my perspective, there are significant challenges related to staying in compliance with state and federal rules, laws and regulations.
In Florida, both the AHCA (Agency for Healthcare Administration) and the DFS OIR (Department of Financial Services Office of Insurance Regulations) receive regular reports from health plans and also perform routine audits of those plans.
On the federal side, insurers who hold Medicare Advantage and Part D contracts are subject to oversight by HHS OIG (Health and Human Services Office of the Inspector General), CMS (Centers for Medicare and Medicaid Services) and its contractors.
Additionally, since Florida insurers must be accredited by an external quality organization (such as National Committee Quality Assurance), health insurance companies need to meet or exceed standards for excellence in operations and support processes and procedures of the plan.
What kind of impact do all these regulations have on the consumer?
They have a very positive impact, as they benefit from having a partner whose operations and performance are closely monitored by any number of external parties.
How can a business go about choosing an insurance company in this environment?
Businesses should either have a strong internal component of their operations or engage a knowledgeable partner, such as a broker or consultant, to assist them with the process of making a selection. Additionally, they should either meet with prospective partners or be active participants in the broker or consultant review and selection.
That said, there is at least one caveat about selecting a broker, particularly for small businesses that need to rely on brokers to buy their insurance products. There have been significant problems in this state with unlicensed brokers. Therefore, business owners need to make sure that the broker they are using is reputable and agency licensed. Do this before you get into a relationship with a broker and find out too late that a business is not covered adequately.
How can a business make sure that a health insurance company complies with all the rules?
As we discussed, health insurance companies function in a very heavily regulated environment. Deficiencies of companies that fall short of meeting their regulatory or accreditation requirements will appear in publicly available reports and plan rankings.
Plans that continue to be poor performers are subject to sanctions, and penalties such as suspension of enrollment, and administrative supervision or plan closure for extreme cases. This is something that can’t be hidden from public view since all of these reports are publicly available. If a plan is not meeting regulatory requirements, the first thing that happens is that agencies will suspend enrollment.
Should a business perform due diligence before selecting an insurance company?
Here are three critical steps.
- Develop a questionnaire that may be used in the pre-selection process. Ask for supporting documentation from the plans. Include in your request the health insurers Code of Conduct; description of the Compliance plan and program; and the formal Notice of Privacy Practices and Confidentiality procedures.
- Look to financial performance rating companies such as AM Best or Weiss for their evaluations of stability and financial strength.
- Visit public and professional sites where information is made publicly available. In Florida, we have several excellent sources for this type of objective data. These include www.floridacomparecare.gov, which provides information on quality of care, member satisfaction, coverage areas, accreditation status and more.
LISA DAVIES is the senior director of corporate compliance for Santa Fe HealthCare and AvMed Health Plans (www.avmed.org) based in Gainesville. Reach Davies at Lisa.email@example.com or (352) 337-8782.
The 20th century created a pantheon of entrepreneurial pioneers whose exciting new products and services came to change our lives. Beginning most notably with Henry Ford, the century ended with Bill Gates, Sam Walton, Steve Jobs, Dave Thomas and countless others who turned good ideas into vast empires.
Dr. Terrell G. Manyak thinks the new century will bring a new type of entrepreneur.
“Instead of creating new products and services,” Manyak says, “this new entrepreneur will focus on making things happen in the public sector to improve the quality of life of our society.”
Manyak is a professor of public administration and management at the H. Wayne Huizenga School of Business and Entrepreneurship. Smart Business asked him to predict the future of entrepreneurism.
Your forecast is certainly bold. How can you make it?
This prediction of the public servant as a 21st-century entrepreneur might appear out of step with our present view of government. Indeed, public service has long been viewed with suspicion, ambivalence and even disdain by most citizens. Rarely do we think of government service as a calling for people with an entrepreneurial spirit.
This perception changed abruptly with the tragic events of Sept. 11, 2001. The heroic efforts of firefighters and police to rescue the victims of that disaster generated a new interest among younger citizens to become a part of the public service sector.
This new interest relates to entrepreneur-ship, because many of these bright, young people will have a very different view of their public service role. They are not going to accept the long-standing 20th-century rule that politicians make policy that civil servants blindly implement.
What virtues must today’s public-sector entrepreneur’s possess?
This new, energized public servant of the 21st century will feel a commitment to shaping and implementing public policies that will effectively address the problems confronting our society.
The challenge of shaping and implementing policy requires an entrepreneur’s skill of identifying problems and bringing together the necessary resources to initiate action. The entrepreneur needs to be a leader, but a leader that cherishes the opportunity to work within the democratic process. To make things happen in the 21st century will require entrepreneurial spirits who are willing and able to marshal three key resources: the bureaucracy, the political elite and the citizens they serve.
Is the public sector not more difficult to master than the private sector?
The entrepreneurial public servant needs all the skills of a management leader to energize the government bureaucracy. Fortunately, management innovations that are transforming the private sector today are finding their way into public service. The concept of performance-based management is rapidly becoming as much the language of the public sector as it is in any business. The new entrepreneur will understand the modern tools of management to create a civil service that is policy-focused.
The entrepreneurial public servant needs to be an honest broker for the political elite that largely set the agenda for policy development. The elite perceive themselves as the stakeholders with the most to gain or lose through the actions of government.
The entrepreneur needs to understand their concerns in order to negotiate viable policy options. The outcome of this political skill is the creation of coalitions that support strong public policies that will lead to a better common good.
The entrepreneurial public servant needs to be a community leader. The skill required in this role is to make citizens a part of the policy-making process. Some citizens may lack awareness. Some citizens may even feel disenfranchised from the policy-making process.
The entrepreneur as a community leader will find new ways to make the voice of the public heard in the policy-making process. While many citizens are often resistant to change, in the long run active citizen participation creates a buy-in and acceptance of policies that will ultimately improve their quality of life.
What rewards will success bring in the 21st century?
The reward for the classical entrepreneur of the private sector is fame and fortune. The reward for the new public sector entrepreneur will be the satisfaction of creating positive change in our society.
Despite this difference in reward, both types of entrepreneurs will have shown a high level of imagination, energy and skill in bringing their dreams to fruition. Moreover, they will both be very much needed as we meet the challenges of the 21st century.
DR. TERRELL G. MANYAK is a professor of public administration and management at the H. Wayne Huizenga School of Business and Entrepreneurship. Reach him at (800) 672-7223.
How might the loss of a key employee affect your business? Will the business survive if a partner becomes disabled or passes? Do you want your legacy to include a business that survives years beyond you, or a business that folded because you didn’t protect yourself against the loss of a key employee or partner?
“Almost every company’s success depends on a few key employees and/or partners,” says Karl Hamilton, senior vice president and regional manager for SunTrust Investment Services in Tampa. “A certain employee’s knowledge is key to the business. One or two sales people may account for a large percentage of sales. A partner’s heirs may have no interest in remaining in the business. It is imperative that business owners consider these eventualities and put plans in place to protect themselves and their business.”
Smart Business asked Hamilton for insight on how business owners can protect themselves should a key employee or partner not be available to the business for any reason.
What consideration should a business owner give to protecting themselves against the loss of a key employee?
While all employees should be, and usually are, important to the success of any business, some are most important or ‘key’ to its success. The owner should analyze who those key employees are. What does each employee bring to the business? What would happen if this one or that one were lost? How would that impact the operation? What would it take to replace that individual? How long and at what cost would it take to find a replacement employee?
As each employee is analyzed, the cost of protecting a potential loss is weighed against the projected cost of the loss if the person were not available for their job. Disability and life insurance should be considered. The amount of coverage will be determined by the analysis.
What additional considerations should be given to the potential loss of a partner in the business?
Besides the potential loss to the business because of the partner’s knowledge and responsibilities, the value of their share of the company must be considered. If the partner becomes disabled or dies, family members may want their share of the business in cash rather than ongoing ownership.
What is the value of the business? Is there sufficient cash available to buy the partner’s share? Most businesses rein-vest their cash into the business rather than placing it in a restricted fund to buy out a partner. Insurance may be a good option to maintaining a large cash reserve. Without proper planning, it might be necessary to sell off assets or the entire business to pay the family.
How are the cash or insurance needs determined?
It is important to do this analysis on a regular basis, especially in situations such as volatile property values or rapidly increasing sales and profits. It is generally recommended that partnerships consider re-analysis of the value of the business when the financial results of each business year are available. Besides profits and potential profits, current property values should be determined. Each partner should be covered by cash or insurance to pay off his or her share on a current basis. In no case should re-evaluations be made less than every two years.
How can a business protect against the loss of a key employee to another business?
Create defined benefit plans and retirement plans that are owned by the business and not portable. Because many of these benefit’s costs are based on age at time of inception, your cost may be much lower than it would be for another company to establish equal benefits when trying to hire a key employee who has been with you for a number of years.
What are the tax considerations on insurance and retirement plans?
In most cases, the cost of insurance and most benefit plans are an expense to the business and are therefore tax deductible. Be sure to discuss those things with your CPA to assure they are set up properly.
SunTrust Investment Services, Inc., Sun-Trust Banks, Inc., their affiliates, and the directors, officers, agents and employees of SunTrust Investment Services, Inc., Sun-Trust Banks, Inc. and their affiliates are not permitted to give legal or tax advice. Clients of SunTrust Investment Services, Inc., SunTrust Banks, Inc. and their affiliates should consult with their legal and tax advisor prior to entering into any financial transaction.
Securities and insurance products and services are not insured by the FDIC or any other government agency. They are not bank guaranteed. They may lose value.
Services provided by the following affiliates of SunTrust Banks, Inc.: Securities, insurance and other investment products and services are offered by SunTrust Investment Services, Inc., an SEC registered investment adviser and broker/dealer and a member of the NASD and SIPC. Insurance products and services are offered by Sun-Trust Insurance Services, Inc., a licensed insurance agency.
KARL HAMILTON is senior vice president and regional manager of SunTrust Investment Services in Tampa. Reach him at (813) 224-2517 or firstname.lastname@example.org.
So let’s say you get it all right. You’ve worked diligently for some time to put together what you think to be a great marketing program. You now have an extensive marketing plan that you feel will work, which includes great creative ideas and a communications timeline. Your plan is put together in a professional presentation, you have great visual images, a catchy and compelling campaign, radio spots, TV commercials, print ads, flyers, posters, direct mailers, billboards and nifty promotional items. And you’re now ready to reach out to your public…
Stop. Your plan may be flawlessly designed, but are you truly prepared to walk your talk? Have you consulted with your staff and conducted essential internal research to ensure your plan’s success? Now you might say, “Malcolm, we don’t need to do any of that touchy-feely stuff; none of that matters. Our marketing plan is perfect and really ‘pops.’” I’m here to tell you that, unfortunately, your plan is seriously flawed.
One of the biggest failures of a potentially successful marketing plan is neglecting to consult with your internal customers, conduct employee research or communicate the plan to your employees. Do your employees have a copy of the plan? Did they have input or help write it? Do they know anything about the plan better yet, do they even care?
Chances are you probably guard this “strategic information” like the Fort Knox treasury. Don’t destroy yourself before you even begin. You may have the external and media touch points well addressed, but not thoroughly addressing your internally affected touch points is the express lane to a business dead-end.
Every touch point to a customer or potential customer matters nothing matters more. What is a touch point? Everything from the vocal inflection when answering phones, office dcor, personalities, customer-centric attitudes and actions, to the bathroom being cleaned and condition of the walkways and windows. Everything about your business is a reflection of who and what you are as an organization. The easiest way to blow a successful plan is to ignore some of these minute details. On the other hand, fine-tuning and orchestrating those details help take marketing and your business to another level.
Get your left and right talking
Systematically address this internal marketing and alignment. Survey your internal staff; talk to key players that deliver and execute on the claims made in your marketing. Be sure to include all of your employees. Dig a little deeper to see how even staff who don’t interact with your customers make an impact on customer deliverables. You may be surprised to find just how many ways that everything they do can help (or hinder) your marketing results. This process isn’t just about the CEO’s opinion; it’s about everyone involved in the day-to-day processes. These are the people who are ultimately responsible for your customer’s happiness.
Use their perspectives to better gauge the approach that you want to take to satisfy your customers. This is a formative process that allows you to look at the company as a whole and pinpoint specific pieces that allow you to figure out the company’s best alignment to deliver what is called your “brand promise.”
Do all of the employees know the 2007 goals? It’s the CEO’s job to set the vision, and share the goals. Creating the goals of the company and having a great marketing plan are useless in your desk drawer or attracting dust on the bookshelf. In fact, your plan should reflect the goals and vision of the company and be integrated into the daily tasks throughout the ranks.
In order to achieve a goal, you have to put some effort into it. Simply setting goals is not enough. The goals should be acknowledged and shared with everyone in order to achieve them. In addition to the overall goals of the company, each employee should have a record of their goals and objectives to check frequently and make sure that they are on the right track. Everyone is accountable.
Once you’ve been able to share and align your vision, goals and infrastructure, your brand delivery will be turbocharged and your marketing plan destined for success. Taking these steps will allow everyone to get a better grasp on your company’s direction and help motivate your employees to better address the expectations of your customers. It’s not just about having good ideas, it’s what you do with them that matters. We’re only two months into the year, so it’s not too late to take out your marketing plan from the desk drawer and start using it.
MALCOLM TEASDALE is the principal and “Big Idea Catalyst” of Teasdale Worldwide, a strategic marketing firm headquartered in Tampa, Fla. Reach him at Malcolm@TeasdaleWorldwide.com. To obtain a new direction, increase revenue, and the expertise to facilitate your customers UBAs, call Kathi Kasel at (813) 868-1520 or e-mail Kathi@MarketingofDistinction.com. To view additional articles, register at www.MalcolmOutLoud.com.
Can you name something that refers to a liquid, exists only in the ozone, must be continually defended, and is worth more than $67 billion? It’s the brand name Coca-Cola, one of the most well-known brands on the planet.
Brand names are often more valuable than the combined physical assets of a company, a key reason that companies fiercely police their brands. Words like “aspirin” and “elevator” were once brand names owned by successful entities.
“The initial cost of brand protection may seem daunting for many companies,” says J. Todd Timmerman, administrator, Intellectual Property Law Department, Shumaker, Loop & Kendrick LLP. “But it pales in comparison with the value that a brand may ultimately possess.”
Smart Business spoke with Timmerman about how to establish, police and protect a brand name, and why it’s money well spent.
What is a brand?
A brand, or trademark, is whatever in the marketplace distinguishes goods or services originating with one source from those originating with another. It can be a word, a design, a symbol or a combination of these elements, among other things. Using our Coca-Cola example, consumers are familiar not only with the product’s name, but also the design elements on its cans, slogans like ‘The Real Thing’ and others.
What steps should a company take prior to adopting or using a brand?
First, you must ensure that when you choose a brand, you’re not going to infringe on the rights of others. To determine this, you should conduct a thorough search of all available records in the United States. The search should include the federal trademark register, all 50 state trademark registers, as well as common-law databases. Many law firms have access to online searching tools and also regularly call on searching companies that specialize in these kinds of searches. Both sources can generate reports very quickly and efficiently.
Second, adopting a protection and registration strategy concurrent with the use of a new mark is extremely important. All trademark rights in the United States arise as the result of use. These rights can be expanded or enhanced by federal or state registration, but those registrations are also tied back to use. A company should take steps to preemptively protect the mark by seeking a federal registration of the mark, or one or more state registrations in areas where they might conduct business not to mention international registrations.
How can federal registration protect a brand’s future value?
Common-law rights are based on the use of a mark and extend geographically as far as the trademark has a reputation.
For example, let’s look at two companies named ABC Corp. one initially based in Florida and another in Washington state. Over time, if both companies’ rights expand, they could find that one has rights in certain areas of the country, while the other has rights in the other parts, and neither has the right to invade the territory of the other. This is why a federal trademark registration is so important. It takes what could be a local or regional right, and expands it to what essentially amounts to a prior nationwide right, even absent nationwide use.
What could result from an incomplete search or a failure to register?
If you are forced to change your brand after the public has come to know you or your product by a certain name, a number of substantial expenses come into play. A name change usually involves new signage, collateral materials and most likely a public relations campaign to let the public know you are assuming a new brand.
You could also be liable for monetary damages from an infringement suit, as well as disgorged profits that you’ve earned with the brand. At the very least, you could be forced to pay off the original user of the brand name.
How can a company protect established rights in a brand?
It is extremely important that companies continually police their brands. A grass-roots policing program can be used where the sales force keeps its eyes open for potential infringers or misuse of the brand. There are also services that monitor the Internet and the marketplace for brand abuse.
Once infringements are identified, they must be addressed. If you allow infringement to continue, you may ultimately be stripped of your trademark rights. This can be an expensive and painful process. You are generally much better off dealing with infringements promptly, rather than letting them linger and putting your company in a position where it has to explain its delay.
J. TODD TIMMERMAN is administrator of the Intellectual Property Law Department of Shumaker, Loop & Kendrick LLP. Reach him at (813) 227-2243 or email@example.com.
Advancements in the medical industry create many opportunities for physicians to participate in nonstandard procedures. Examples of these opportunities can be seen in the pages of most metropolitan daily newspapers where advertising seeks participants for clinical trials and new medical processes.
As technology evolves and new procedures become standard, a physician needs to be conscientious that the medical liability he or she carries provides coverage for these new procedures. Some policies will limit the scope of operations the physician practices in, and anything outside of this scope is not covered in the case of a loss.
Physicians may believe they are well versed on their insurance policies, but often they are not up to speed.
“I find many physicians engaging in nonstandard procedures which, due to advancements in technology, seem as daily protocol to them,” says Tara Williams, business account executive at Hilb, Rogal & Hobbs of Southwest Florida. “However, the insurance carriers writing the restrictions on their policies are not looking through the same eyes as today’s physicians, and many of the modern procedures are not covered by the standard professional liability policy.”
Smart Business spoke with Williams about the unique insurance exposures generated by evolving technology, nonstandard procedures and clinical trials.
What are examples of nonstandard procedures that might create insurance problems for physicians?
In today’s medical industry, we are seeing an increase in outpatient surgery procedures, teller-radiology and teller-medicine exposures, anti-aging procedures and clinical trials. There have been an increased number of physicians working in walk-in clinics and retail shops like Wal-Mart and Target. The exposures outside of the standard office and hospital environment can be of concern. Many times, these types of exposures are not covered under the physician’s professional liability policy.
What kinds of insurance issues are created when a physician engages in a new clinical trial?
A major area of growth in the health care industry is a result of clinical studies. Physicians see this as a way to further their education and participate in the evolution of medicine.
Even though these studies can bring significant improvement to the health care industry, many times they generate unexpected results and financial loss to those involved. Participation in clinical trials involves multiple parties of interest and therefore insurance coverage becomes very intrinsic.
A physician needs an insurance professional’s help to evaluate the exposures created by participating in a clinical trial, as well as securing the appropriate policy to cover such a nontraditional exposure.
A few years back, many physicians were electing to not purchase professional liability coverage. Is this still the trend?
As we all know, the current insurance crisis in Florida has now evolved from medical malpractice to increased property rates and lack of capacity. In fact, medical malpractice is not even on the agenda for legislative session this year. The insurance market is currently considered ‘soft’ on the casualty side of table. Liability rates have been reduced and coverage offered has been broadened. Medical malpractice liability continues to be pricey in comparison to other states, but this is just a result of the litigious mentality in Florida.
There are physicians who continue to go bare but other options are available to those who chose to do so. One of these options is a called Medical Legal Defense Reimbursement, a product that received an XI rating by the popular A.M. Best Co. The coverage protects a physician’s assets by providing reimbursement for legal expenses incurred by having a medical malpractice claim. It is a type of partial coverage that is accessible for a reasonable premium.
Are there any additional exposures that physicians need to protect themselves against?
Yes. Today in the health care industry, patient privacy is very important and legally mandated. Physicians possess and must secure for their patients a significant amount of personal information stored electronically as well as in paper files.
The exposures present in a physician’s office are substantial in terms of personal identity theft, cyber extortion and network security. This coverage can be obtained through many of the carriers focused on the health care industry. Each carrier has its own unique terms and conditions, so it is important for a physician to make sure the privacy protection insurance that he or she chooses completely addresses the needs of the individual’s practice.
Physicians may believe that patient identity theft could not happen at their practice because they have adequate precautions for dealing with personal information. That may be the case. What they might not think of are the costs they would incur to investigate or defend themselves against an allegation, even if it is unfounded.
TARA WILLIAMS is a business account executive at Hilb, Rogal & Hobbs of Southwest Florida. Reach her at (941) 554-3112 or Tara.Williams@hrh.com.
Historically, commercial real estate markets follow residential. However, that’s not currently the case in Florida. While there is excess inventory in housing, the commercial market has remained steady.
“The slowdown in the residential market is really just a readjustment to normalcy,” says Tom Bible, vice president of operations at Colliers Arnold, Tampa. “We had an extremely active, investor-driven market that artificially inflated demand. This caused builders to step up the supply side of the equation, resulting in an 11- to 12-month supply of housing. A normal balanced market is a six-month supply. So with demand remaining constant as all true indicators show and new construction on hold for the moment, the market should readjust in six to seven months.”
Bible adds that over the last 18 months, there was very little commercial speculative building that would create an excess in inventory. “Therefore, prices and investor activity are holding ground,” he says.
Smart Business asked Bible why he thinks the outlook for commercial real estate in Florida will remain positive.
Discuss the outlook for Florida’s real estate market over the next decade.
With baby boomers approaching retirement and the appeal of Florida’s climate and lifestyle, we predict the state to continue its growth well into the next decade with a possible shift in demographics as land scarcity drives prices further north, especially along the coastline.
The current unemployment level in the Tampa Bay area and the state of Florida is 3.1 percent, compared to the national average of 4.1 percent. Our active work force, growing population and increase in technology, medical and professional services should continue to fuel demand.
As people continue to migrate to the Southeast, Florida’s retail and professional services markets will continue to grow to serve them, and the work force that fills that demand will boost Florida’s population further, continuing the demand for housing of all price ranges. Distribution and warehousing naturally follow, and so continues the relationship between commercial and residential real estate. Both markets depend upon one another but do not necessarily follow the same trends when the market is influenced by unnatural demand stimulus, such as it was with the investor-driven boom in residential housing.
Is real estate investment still an attractive alternative to the stock market’s volatility?
Yes. And due to Florida’s inherent land scarcity, values will continue to rise well into the future. We still remain a value as compared to other markets, such as California, New York, D.C. and Atlanta.
Ever since Sept. 11, news developments are constantly affecting the stock market. That’s not the case with real estate. When you look at long-term investments even with Florida’s insurance and property tax issues real estate is still a bargain and a good investment.
What are the biggest challenges in Florida’s real estate market?
Property insurance and tax rates are the primary concern in both the residential and commercial markets. Insurance rates have risen dramatically over the last two years, especially in certain areas along the coasts. Simply put, Florida needs more competition in the insurance arena. There are many ideas being explored, such as investor cooperatives and increased equity positions, and some investors are beginning to self-insure. Lee Arnold is very involved in a state council currently addressing the issue.
As for property tax, you experience increases any time there is a spike in the demand curve. There are fixed-income homeowners here who can no longer afford their property tax bill because their home’s value has risen so dramatically. These homeowners may have to sell their homes and leave, as builders convert older properties into higher-value homes to attract the many wealthy baby boomers migrating to Florida. Many options are being explored statewide to mitigate the impact of property tax spikes on Floridians.
How should commercial investors choose a brokerage firm?
When looking for professional guidance in either market, seek out the counsel of a specialist in that business line. The increased number of residential agents practicing commercial brokerage in the last two years also added to the investment frenzy and over-inflated values, particularly in the multi-family and local investor-controlled retail property markets. Many investors over the last year were left holding the bag when their full-service agent in a residential shop decided not to play in that field anymore. Ask for their rsum and check references to ensure you are working with a commercial specialist.
TOM BIBLE is vice president of operations for Colliers Arnold, Tampa. Reach him at firstname.lastname@example.org or (813) 205-9497.
When you are constantly pulled in many different directions, being the boss can be painful.
Tony Holcombe has found that communication is one of the cures, and he tries to divide his time in thirds. The president and CEO of Syniverse Technologies Inc., a provider of technology services to wireless telecommunications companies, makes it a priority to spend equal time with employees, customers and investors.
Holcombe keeps in contact with investors to answers questions, and he holds informational meetings with employees.
“We do small group lunch-and-learn meetings,” he says. “We have a small group of employees, without managers, to have a free exchange of information with me.”
Holcombe also sits down with customers to achieve a personal level of communication. “It’s important for me to get a lot of face time with customers to see what customers are thinking, what they like about us and what they don’t like about us,” he says.“More importantly, where are they going with their business, so we understand what we need to do to support them.”
Holcombe has been at the helm of Syniverse since early 2006 and has been on the board of directors since 2003. Previously, he was president of Emdeon Corp., formerlyWebMD, and president of Emdeon Business Services.
Throughout his career, Holcombe has relied not only on communication but also on employee empowerment, finding the right people and acquisitions to drive success.
With 1,000 employees, Holcombe realizes he couldn’t do his job effectively if he was micromanaging.
“You really have to build a team who are philosophically in line with where you want to take the company and understand how to deliver results against key objectives,”he says. “Then you have to let those people go do their job.”
Holcombe says he is very results-driven and not so concerned about the activities that lead to those results. Once an agreement is made on the target results, Holcombehands it off to the management team. He then expects managers to hand it off to their teams, and if there aren’t results, Holcombe gets involved.
“I really try to give them the key objectives and let them get it done,” he says.
Holcombe is instituting Six Sigma at Syniverse, which ties directly to employee empowerment because everyone has a part in finding a solution, which keep them involvedand up-to-date.
A management team identifies areas where there is potential for better efficiency or better productivity. The team leader, or black belt, goes to those areas and talks topeople who work in that process about what doesn’t work well.
“Through statistical analysis, we will be able to find where the problems are associated with that particular process,” he says. “The black belt will present some solutions back to the team, and the team will help the black belt to find what will work. Then the team and black belt will come back to senior management and say, ‘Hereis the problem we have identified, and here is the solution. We either need resources or capital or a change in process to implement it,’ and we will sign off on it.”
At a previous company, Holcombe saw firsthand the power of empowering employees to find solutions when a problem arose with an automated call directory system.After the system was installed, the number of calls handled by a human increased, defeating the purpose of the system.
Using Six Sigma, a black-belt team and employees of the call unit jumped on the problem and discovered the system was installed improperly, with a key directionalstep missing.
“One of the really exciting things is you not only help employees solve problems they deal with day in and day out, but they actually come up with the solution,” hesays. “They own the solution at their level, and that is a tremendously powerful concept. Not only did we get rid of the increased calls, but we got rid of the number ofcalls we thought we were going to have to handle manually, anyway.”
Finding the right people
Syniverse’s revenue was $341 million in 2005, and the company is looking to increase that with growth opportunities through the Asia Pacific and European marketplaces.Two years ago, succeeding internationally was much tougher because Syniverse lacked brand recognition. That problem was slowly solved as the company built new business relationships outside of the United States.
Holcombe says succeeding internationally comes from having the right people working for you.
“You’re constantly looking for people,” he says. “If you had an entire team in place and you didn’t want to hire any new people, you’d still be looking for new people. It’s hardto find the top people because they are in demand.
“When you get ahold of a person, you work hard to get them on board and sell them your story. Basically, court them to come work for you and put them in a place they cansucceed.”
Internationally, Syniverse hired local people who had industry expertise and good contacts and who understood their regions. That paid off as Syniverse went from having zero market share in Europe to about 25 percent over a two-year period.
“We invested for the long term, and we waited a couple of years for all that to play out,” he says.
Growth through acquisitions
One way to achieve rapid growth is through acquisitions. But the companies have to be methodically chosen, and the integration has to be handled with care.
If a company is to be acquired by Syniverse, it must meet five criteria: It must have the ability to extend the range and scope of services offered; it must expand and leveragethe customer base; it must increase profitability; it must improve strategic positioning; and it must allow Syniverse to enter new markets and increase the scale of business.Currently, Syniverse is focused on acquiring technology-based companies that can provide products and services to customers not already in the company’s portfolio.
“What we are looking for are companies that have leading-edge-type technology and services that we can not only take and develop, but sell on a worldwide basis wheremaybe we didn’t have the reach to get into a world wide marketplace,” he says.
Holcombe says the company also keeps its eye on competitors that exit the industry.
“There, what we are acquiring is customers,” he says. “We want to bring those customers over to our platform, our services, and build a strong, long-term relationship withthem.”
At that point, Holcombe says it’s important to understand what the customer wants.
“It’s really important you sit down with the customer and go, ‘What are the things that cause you pain? What are the areas where you are trying to control your cost or increaseyour ability to increase your revenue?’ You have to listen very carefully to what they are telling you. Then you have to create a solution for them.”
Holcombe says that once you get past questioning whether you have a good product set or a good financial deal, the thing that can make or break the success of a deal is thecultural integration component.
“It’s something that I, as all CEOs do, have struggled with,” he says. “When we acquire somebody, we want to get to know the management team of the company and the culture of the company pretty intimately.”
Syniverse has weekly integration meetings chaired by Holcombe, at which the company walks through the issues between Syniverse’s people and the people of the ac quiredcompany.
"We have laid out plans, so we are checking off against that,” he says. “We are trying to make sure if there are issues, we deal with it.”
Syniverse recently acquired a company in Hong Kong, and Holcombe spent time there with its senior managers to understand how they work. He says it’s important to spendtime in the offices of the acquired company to answer questions and show support. And potential problems should be addressed immediately.
“When you close that acquisition, my approach has been you really selectively put the pieces of the companies together where it makes sense, and really build some wallsaround areas where you can have some cultural clashes,” he says.
Holcombe wants to leverage the Hong Kong-based company’s development capabilities for product sets in a specific marketplace.
“We build some walls around them and make them more of the development engine for us because that is where their expertise is,” he says. “Rather than us coming in andtelling them how to do things, they’re going to tell us how to do things. We leverage their strengths and give them a bigger role and a bigger marketplace to play. That helpsthem feel like, ‘There is no one here to pound me to tell me how to do stuff.’”
As far as branding acquired companies, Holcombe said that’s decided on an individual basis. The company in Hong Kong will keep its brand but be branded a division ofSyniverse. Time will determine what brand is most advantageous based on what the customer wants to see.
“It’s what is going to give us the best marketplace presence and the best expectation factor from the customer base,” he says.
HOW TO REACH: Syniverse Technologies Inc., (813) 637-5000 or www.syniverse.com
For years, Tony Leung has taken a proactive, thorough approach to safety and cleanliness at Sanwa Growers Inc. Leung, president of the $85 million, 230-employee produce company, says being proactive in business may cost money up front, but ultimately it benefits the company. Such was the case with Sanwa and the E. coli contamination of spinach this fall. While years of taking more thorough measures initially cost Leung money, he was confident his product was safe, making the extra money spent well worth it. Smart Business spoke to Leung about how he grows his company, promotes from within and finds balance.
Prepare for growth. Growing fast is not a problem; it’s not being ready for it. When you try to grow in my business, it’s easy to buy or rent a new warehouse. But to get a number of experienced personnel in the new facility in a short period of time is very difficult.
The business is there, but you do not have the support team to manage it. In the past, I did the growth first. Sometimes it can be very painful. The first few years are not profitable because you do not have the right people and right staff.
For example, I opened a farm in 1992 or 1993 in North Carolina, and it was about 500 acres. We were also farming 2,000 acres in Ruskin, Fla. My problem was we did not have enough personnel. We were spread too thin.
The operation, after five years, was not profitable, and we lost money. We decided to close that because we did not understand the area, the weather or the timing. The next time around, I was a little bit smarter and made sure those were things I looked into a little bit further. When I opened the next location, I took more time to calculate all the risks.
We now try to hire the management first and have them trained so they know exactly what we expect and how we operate before we find a location. All the managers that we have were part of the company. We move them up and train them as a manager.
Once (we) have the personnel stable, then we increase our capacity, which increases our infrastructure. Then build the market share. Once you have your bigger infrastructure, you increase the market share to the full capacity.
You have a team of people that are aggressive who will go out and get you market share and more of a customer base. Then you go back to the first step and increase your personnel. You repeat it over and over again.
Retain employees for a productive future. This is very important in our business. It’s a very basic business, buying and selling. We really require people to stay a long time to do a good job and identify our customers’ needs. If they stay two, three, four or five years, their later years will be the productive part (for) the company.
Pay is obviously important. We have an incentive program. We have bonuses and profit sharing. They know they will be rewarded on their performance. That is very important. When they do a good job, they know what their return is on their good performance.
However, money is not everything. When you work in an office you don’t like, it’s more painful than the monetary compensation for the long term. It is really important when you get up in the morning you look forward to going to work, instead of not feeling like going in because it is not pleasant.
Find balance. Since I delegate the work to my employees, they know not to bother me at home or on my cell phone when I’m not in the office. I don’t work weekends. I dedicate that time to my children and my wife.
It’s very difficult. I’ve been doing this for almost 30 years, and a few years back I decided to cut down my working hours. It feels a little bit uneasy, but when I start looking at my numbers, that’s where it has been improving.
The less I am involved, the better the numbers turn out. The employees know this is their company, and they are the ones who make sure they are keeping their jobs. I’m not the one keeping their job.
Understand your industry. I read a lot of the trade magazines. I get in touch with the people in the industry. I don’t get involved with the day-to-day operation, but I do get involved in the industry.
The support team is important because I am not doing their work. I only give them the idea, and then they have to perform.
The day-to-day operations are very routine, and my people can handle it a lot better than I can. As far as the trend and the future of the industry, I think I understand it better than my employees do. That’s why I give them ideas to change the company to what the trends call for.
Trust employees to carry out the organization’s goals. I’m setting those goals. They are the ones who find a way to achieve them. We go back to the first phase of what we do.
I am going to assess my infrastructure and capacity. If I see there is only 80 percent capacity, then I insist there will be growth next year. Now, if it’s my assessment that my infrastructure is not able to handle more growth, then I will ask for an increase in profitability. Not necessarily growing in revenue, but growing in profitability, so next year I can add on to the infrastructure.
You have to trust your employees. We have multiple locations and we don’t have a very advanced system to keep track of all the activity. So we build it on trust. I trust everybody until they prove otherwise.
HOW TO REACH: Sanwa Growers Inc., (813) 642-5159
Most merger and acquisition deals (M&A) start with a letter of intent, with one party (usually the buyer) submitting its proposal to the other, to lie down the foundation of the transaction. Letters of intent are generally short and informal, and, accordingly, often are drafted and negotiated directly by the principals to the transaction. However, parties would be well-served to consult their lawyers prior to executing the letter.
“All too often, clients give up significant negotiating leverage by signing a letter of intent without running it by their lawyer,” says Julio C. Esquivel, a partner at Shumaker, Loop & Kendrick LLP.
“These miscalculations can often complicate and prolong negotiations and sometimes lead to the failure of the transaction or even to litigation.”
Smart Business talked to Esquivel about the importance of the letter of intent and how it can most effectively be used in M&A transactions.
What is the purpose of the letter of intent?
The letter of intent memorializes the preliminary agreement of the principals and in that fashion allows them to take their negotiations to the next level. It does so by not only summarizing the parameters of the proposed transaction, such as price and closing conditions, but also by setting forth certain safeguards that promote continued dialogue such as nondisclosure and no-shop provisions.
Additionally, letters of intent may allow the parties to begin the process of obtaining governmental and other third-party approvals necessary to close the transaction.
What is the most common mistake that parties make when it comes to the letter of intent?
Often, having reached a handshake agreement, the parties want to maintain the momentum of their negotiations, so they rush to sign the letter of intent. This is especially true when one of the parties is eager to publicly announce the agreement. But even though the letter may be meant to be preliminary, the words in that letter can have a profound impact on the subsequent negotiations, providing one party with a psychological if not legal advantage over the other.
For example, sellers often sign letters of intent that contemplate an asset sale without fully appreciating the tax implications of such a structure. Later, having conceded that point in the letter of intent, it becomes very difficult to convince the buyer to restructure the deal.
Are letters of intent generally nonbinding?
They can be drafted to be either binding or nonbinding, but most commonly are a combination of the two, with some provisions being purely a reflection of the parties’ preliminary intentions and others having the weight of contract. It is critical that the letter specify which provisions are intended to be binding and which are not; otherwise, the parties may find themselves litigating this issue.
Which provisions are typically binding?
Typical binding provisions include confidentiality and other limitations on a party’s ability to publicly disclose the negotiations, as well as the standstill or no-shop provision, which is a provision that limits the seller’s ability to solicit or accept competing offers for a certain period of time. This allows the buyer time to complete its due diligence and to negotiate the definitive documentation without fear that the seller may simultaneously be negotiating with others.
What about the purchase price?
The purchase price in the letter of intent is typically nonbinding. Yet, for the reasons already mentioned, and because it is usually the key term to the deal, particular attention should be paid when drafting this provision.
In an all-cash deal, drafting the purchase price should be straightforward. However, when the circumstances merit it for example, when the purchase price is complicated by the existence of an earnout, holdback or equity kicker the parties should carefully consider how much additional detail should be included so as to avoid later disputes. Should the letter include the strike price, vesting schedule and termination date for any warrants to be paid at closing? Additionally, should the parties specify whether the earnout will be calculated before or after interest and taxes or based on generally accepted accounting principles (GAAP)?
Legal counsel can assist clients in identifying these and other significant issues that may need to be addressed in the letter of intent and can ensure that the letter meets the client's objectives. For these reasons, parties should discuss their objectives with their counsel prior to signing a letter of intent.
JULIO C. ESQUIVEL is a partner at Shumaker, Loop & Kendrick LLP in Tampa. Reach him at email@example.com or (813) 227-2325.