Usha Viswanathan

Wednesday, 28 February 2007 19:00

Smart lease renewals

The best way to grow revenues is to keep customers instead of letting them flee to competitors. Usually, the approach works.

Consider the discovery by Equity Office Properties, one of the nation’s largest office building landlords. It conducted an internal study to find the best way to increase revenue. Their report concluded that raising rents across their portfolio by $0.10 per square foot would increase revenues by $4 million. However, increasing their average occupancy by just 1 percent would increase revenues more than $40 million. Clearly, for an office building owner, keeping those properties occupied is a very high priority.

Yet according to Craig Knox, vice president of Irving Hughes, landlords often play hardball when negotiating with existing tenants who simply want to renew their leases on favorable terms.

“It seems crazy, but at lease renewal time, landlords are offering existing tenants above-market rents with little or no concessions. They think they can get away with it because it worked in the past,” Knox says.

Smart Business spoke with Knox about real estate lease renewal negotiations and how business owners can improve their lease terms while remaining in their current building.

Why does it cost a landlord so much more to find a new tenant than to renew an existing one?

When an existing tenant decides to relocate, it really opens up a Pandora’s box of escalating costs and lost opportunity. Obviously, while the space sits empty, there is no rent. Considering that the average time it took to get space leased in San Diego County in 2006 was more than 15 months, that adds up to a lot of lost revenue.

When the landlord finally does find a new tenant, it is unlikely the tenant will accept the space as is, but will rather expect the landlord to build out improvements. Add to that other financial incentives tenants ask for including rent discounts, free rent periods and moving allowances.

Beyond the hard dollar costs, a landlord is taking a risk with a new, unknown tenant. Should that tenant fail to perform under the new lease, you can bet the landlord will regret ever letting the former quality tenant move out over a desire to make a few extra bucks.

Then you are saying it’s a windfall for the landlords when a tenant renews?

Exactly. A huge windfall. Yet they would never want their existing tenants to know that, because then the tenants will naturally expect a share of the savings.

How does the lease renewal process usually work?

Unfortunately, companies often just exercise renewal options contained in their original lease, which provide a right to stay in the space at some form of ‘market’ rent. These options are rarely the best choice because they force the tenant to commit to an extended term before they know what the space is going to cost. Worse is that exercising the option absolutely negates any leverage the tenant may have in negotiating a favorable lease extension.

Even if the landlord offers to discount the rate, the tenant should not be lured into the landlord’s process. The savvy tenant will drive the lease renewal process with the same focus and attention as in the original lease negotiations commanded.

What is the right lease renewal process for a tenant to follow?

We follow a very similar process whether our client believes a renewal or relocation is the most likely outcome. Our process is deliberate and designed to provide our client leverage in all possible scenarios.

In general, we evaluate the tenant’s existing space utilization, identify areas for improvement, and then develop viable scenarios that save money, improve the work-place environment, or both. With alternatives in play, we can begin a dialogue with the existing landlord about the terms under which our client would consider an extended lease. It’s more than just a negotiation about rent. We save money by getting a new base year, negotiating allowances to remodel the space, obtain enhanced signage and parking rights, structure expansion rights and other concessions that the tenant won’t think of.

Can a tenant accomplish the same on his own without a broker?

The best renewal negotiation occurs when the landlord thinks that the tenant has one foot out the door. The landlord’s leverage when we tell him that our tenant is looking at moving and might renew is completely different than when the tenant tells the landlord he has decided to renew.

By not hiring a tenant-rep broker, the tenant is sending a clear signal that relocation is definitely not a consideration — and that dramatically reduces negotiating leverage.

CRAIG KNOX is vice president at Irving Hughes. Reach him at (619) 238-3825 or at cknox@irvinghughes.com.

Wednesday, 28 February 2007 19:00

Health care treatment methods

America is a wealthy country, but its citizens are often cited as being among the least healthy in the industrialized world. A number of chronic conditions — often springing from poor diet, weight gain and a lack of exercise — contribute to the moniker. The nation’s employers, realizing the long-term impact of these lifestyle risks, are looking to their health plans for help.

Holistic and integrated clinical programs that address not only chronic diseases but lifestyle risk are a solution now offered by a number of health plans, such as Pittsburgh-based UPMC Health Plan. Vice president of medical affairs Dr. Michael Culyba notes that disease management is an evolving subset of clinical interventions that emphasizes the management of chronic conditions and the lifestyle risks that lead to these conditions.

Smart Business spoke with Culyba about how health plans implement disease management programs for employers.

Why are disease management programs worthwhile?

The most common and costly medical conditions, such as diabetes and cardiovascular disease, are often modifiable.

Well-designed programs that focus on health education, care coordination — as well as addressing the psycho-social and environmental needs of the member — can improve health outcomes, reduce lifestyle risk and efficiently manage health care resource utilization. These programs are particularly successful when performed in collaboration with the member’s caring physician.

The pay-offs for the employer are controlled medical costs and a healthier, more productive work force.

Why is there a movement away from historic disease management methods?

The prevalence of chronic diseases continues to increase, in part because of an aging population but more importantly because our society continues to engage in unhealthy lifestyle behaviors.

Disease management programs that focus only on chronic conditions do not address the root causes of chronic diseases. Creating programs to encourage people to quit smoking, maintain a healthy weight, and learn to exercise regularly is critical to the prevention and management of chronic diseases.

What kinds of skilled services make such a program?

Most people with a chronic condition have more than one disease. We therefore use a holistic integrated approach, with care teams that consist of nurses, social workers, health coaches, behavioral health specialists and pharmacists. All are trained to provide telephonic and occasional in-person consultation.

Programs for smoking cessation and weight and stress management assist in mitigating lifestyle risks. Many health plans help interested employers provide these programs at the work site. These programs support the physician-patient relationship by collaborating with the caring physician to facilitate and coordinate care.

What employer benefits do these programs produce?

These programs benefit the employer in several ways.

First, they help control medical costs. They also improve productivity by reducing absenteeism and workplace injuries. In addition, these programs provide an opportunity for the employer to maintain a skilled and healthy work force.

This approach is a win-win for all involved — healthier and more active members, employers with managed medical costs and a more productive work force, and assistance for physicians to care for an increasing medically complex patient population.

DR. MICHAEL CULYBA is vice president of medical affairs at UPMC Health Plan. Reach him at culybamj@upmc.edu or (412) 454-5532.

Wednesday, 28 February 2007 19:00

Understanding E&O coverage

Most real estate professionals understand the need for property and general liability insurance to protect their investment portfolios from perils such as fires, thefts, floods, earthquakes, construction defects or slips and falls. Few however, appreciate the importance of purchasing a comprehensive, well-structured errors and omissions (E&O) policy to cover the services they perform for others.

As the Southern California real estate market has grown and matured, firms have become much more diversified. Moreover, their businesses have developed complex organizational structures to address sophisticated tax and liability strategies, and to allow for participation by third-party investors — many of whom are large institutions. This growth has created the need for more advanced risk management and insurance coverage design, particularly in the area of errors and omissions/professional liability exposure. With the financial stakes higher than ever, the probability of a claim by a third party alleging financial damages arising out of the performance of professional services has increased dramatically. The range of risks could include negligence in anything from simple accounting errors related to the collection of rents, to significant failures to perform in construction or development management activities.

Smart Business spoke with Jim Lopiccolo of DLD Insurance Brokers about the importance of including an E&O policy as part of a risk management program.

Why is E&O coverage so important for real estate service firms?

The healthy Southern California real estate market has been fruitful ground for the growth of firms with diversified service offerings. In our experience, very few firms are solely involved in property management any more. Many now offer a full range of services such as property management, asset management, construction management, development management, real estate sales and leasing, appraisal, consulting, notary, and even architectural and engineering. What this means is that fully integrated real estate firms today also are subject to a wide array of potential liability exposures from each of their business lines. This calls for a well-designed E&O insurance program to protect their assets, their investors, and personal assets of the individuals.

Traditional general liability insurance will only protect against claims alleging bodily injury and property damage, but will not offer protection for a claim alleging economic damages resulting from a failure to perform professional services.

How do insurance agents assess risks that real estate services firms face?

The first course of action is for us to thoroughly understand all the various services a firm performs — whether they perform these services themselves or subcontract them to others. We do this by interviewing the client and reviewing customer contracts in detail. An understanding of the full breadth and depth of the organizational structure is also required in order to properly tailor the coverage.

Are they organized as a C Corporation or S Corporation, a Limited Liability Company, or a partnership, for example? Are they involved in joint ventures? How are their project/ownership entities structured, and how does the ownership of these entities flow back through the rest of the organization? This process often entails a review of LLC operating agreements and partnership agreements.

What are some of the ‘hot buttons’ to watch out for in these E&O policies?

There really are a whole host of coverage issues to address, but several can be easily overlooked. For example, an E&O policy typically only covers the professional services that are expressly listed on the declarations page. As such, before coverage is bound, the proposed service listing should be reviewed with the client in detail to ensure the full scope of services they provide are included.

The policy wording also needs to be carefully analyzed to make sure it will pick up all of the entities throughout the organizational structure, since each of them may be named in a lawsuit. It is not sufficient to just name the parent or main operating entity. Of course, ownership in the property managed or developed always presents a concern, since many E&O policies specifically exclude coverage for claims arising out of a property in which the insured has over a certain ownership interest.

Are there any others you’d like to specifically mention?

Yes. Most standard E&O policies exclude coverage for any claims based upon, arising out of, or in consequence of, bodily injury or property damage. Given the fact we’re dealing with real estate-related services, this exclusion can have a serious impact on the scope of coverage provided in the event of a claim. While the intent is not to make the E&O policy into a general liability policy, modifications can and should be made to this exclusion to ensure true E&O claims are not inappropriately precluded from coverage.

JIM LOPICCOLO is the vice president of Executive Liability & Financial Products at DLD Insurance Brokers, Inc. in Irvine. Reach him at (949) 553-5681 or at jlopiccolo@dldins.com

Wednesday, 31 January 2007 19:00

A biotech conundrum

It costs hundreds of millions of dollars and can take more than a decade for a biotech company to develop a new therapeutic drug. Included in the process are numerous lab and field trials necessary for approval by the Food & Drug Administration (FDA).

Financial performance in the development and clinical trial stages is measured not in returns but in burn rate — how long until the company burns through the money in the bank. For most biotechs, a healthy amount of cash would last 24 months.

In light of this, how does a biotech CEO work through the disparity of a long-term facility commitment versus short-term cash constraints?

Basic research institutions like academic institutions, nonprofits and large pharmaceuticals often own their real estate. Venture-capital backed biotech companies take a new idea, refine it, position it, and seek FDA review and approval.

Smart Business spoke with Shaun Burnett of Irving Hughes to learn how to plan for real estate needs while keeping an eagle’s eye on burn rate.

Why should the biotech CEO focus on the real estate?

One of the first challenges that a biotech CEO must address after the company is initially funded is facilities. The facility cost burden is the second-most-expensive fixed expense after payroll.

Parts of the puzzle the CEO must quickly put together include where to house the company, how large the supporting facility should be, how long the facility will accommodate the company’s needs, and technical and cultural considerations. The CEO must be wise and strategic in how to spend cash so that the bulk of the funding goes toward moving the science forward.

What is unique about biotech facilities?

Biotech facilities usually require a significant build-out of raw space or an extensive remodel. They need to configure plumbing to properly dispose of lab waste; to alter power and HVAC systems to allow the unique cooling requirements; and to engineer water, vacuum and gases to accommodate lab work. Some biotech companies do research using laboratory animals, and that requires an entirely different level of discretion, security and infrastructure.

What is the market like for biotech space?

The shift in the biotech business model away from early-stage discovery to outsourcing of R&D, and also to building management teams around promising Phase II clinical products, has ballooned the supply of wet lab space to a historic high. Most biotech companies today just don’t need traditional wet lab space.

More than 1 million square feet of wet lab space is available in Torrey Pines, UTC and Sorrento Mesa. Average time on the market for these properties has increased to 19 months, and many buildings have been on the market for more than three years. Rents that used to range from $3.00 to $3.50 NNN (triple net) per foot have crashed by 25 percent to 30 percent.

What about the market for the biotechs you mention that don’t need wet lab space?

The office market is similarly attractive for life science companies that require an all-office solution. The availability rate in UTC is 18 percent with an average time on the market of 22 months. While asking rents continue to hover in the $3.00 to $3.30 full service gross per-square-foot range, actual negotiated deals are being struck by Irving Hughes at $2.60 per-square-foot range with parking concessions, and great subleases are even less.

Del Mar Heights, which has been a tight market due to the demand by legal and financial service firms, has availability of 15 percent, and rents are flattening. Sorrento Mesa has an availability rate of 26 percent with an average time on the market of 18 months. This year and next will be a great time for life science companies in San Diego.

Do some brokers specialize in biotech properties?

There is a small community of biotech real estate specialists. However, most of them are dual agents, professing to act as the representative for the biotech tenant but at the same time acting as the landlord’s representative — or as the actual landlord or silent investor of a proposed property. The worst case for the biotech CEO is when the same broker purports to act as a fiduciary for the tenant while at the same time representing landlords. CEOs have to remember that the brokerage firms that have the landlords’ listings are just outsourced marketing and leasing entities for property owners.

SHAUN BURNETT is a principal and senior vice president at Irving Hughes. Reach him at shaunb@irvinghughes.com or (619) 238-4393.

Sunday, 31 December 2006 19:00

Work force stability

Finding the right people and keeping them grows increasingly difficult. Believing that the current crop of workers seeks the ability to move fluidly between employers after years of massive cost-cutting, firms have failed to recognize that most workers look at employment from a total rewards perspective.

“The right combination of rewards will keep a valued worker from leaving,” says Laurie Bienstock, Compensation Practice leader at Watson Wyatt Worldwide in San Francisco. “It comes as a surprise to many companies that 22 percent of employees in a recent survey said that the quality of an employer’s health care program would figure strongly in their decision to leave.” Smart Business spoke with Bienstock about the employment landscape and what businesses need to consider if they want to attract and retain a strong work force.

What is the most significant change in the employee-employer relationship?
Generally, we have a more portable work force today. However, after the dot-com bust here in the Bay Area, it became harder to move around in jobs. Our survey shows that the majority of employees now want job stability — something that many employers cannot offer.

There is a disconnect between employers who continue to think that employees want job portability and their employees, who are saying that what matters most is the opportunity for a long-term career.

In addition, there is a rise in the value placed on certain benefits that come with staying with one employer for a long period of time. Workers now place a greater premium on the quality of their health care packages and the quality of a firm’s pension or retirement plans.

Interestingly, companies we surveyed said they did not think their top employees would leave just because another firm offered a better health care package. Higher pay is of utmost importance to most workers, probably because many understand that they now must contribute to their own health care and retirement savings.

How can employers bridge that disconnect?
Understand who your employees are and what they want from a ‘total rewards perspective.’ No single factor creates an environment that makes employees want to stay with a firm; it is a combination of elements that includes a work environment that fosters commitment and employee engagement. Firms with no retention problems report that their cultures support work/life balance, and that managers do a good job of clearly linking individual employee performance with the success of the organizations themselves.

With competition increasing in the Bay Area and a consequent low unemployment rate, employers need to recognize that a valued worker may leave for more money and a better benefits package from someone else, but also that the environment in which they work remains a key factor in retaining top talent.

What are some managerial assumptions that do not correspond with reality?
One myth that employers hold dear is that promotion opportunities and a solid manager-employee relationship help retain top performers. We see that, while these factors are important, they are taking a backseat to some immediate, tangible needs, such as pay, health care and retirement benefits.

The current state of affairs in this country is that we have an aging work force, and it is getting savvy. It’s becoming increasingly important to look at who is in your work force now and who will be in it 10 years from now.

More and more, companies will discover that they need to find workers in their 40s and 50s to replace retirees. And some of those replacements could include people who have left the working world, such as women in their childbearing years, who may now also need flexible hours. So a firm needs to consider what kind of program it may need to motivate people to join the company and stay there while also creating a program that fits with the economic realities of the organization.

Is there one overarching consideration that most employees especially value?
We call it creating a ‘line of sight.’ Can an employee see how his or her contributions make a difference to the firm’s success? A short-term incentive plan or a bonus plan can be fiscally advantageous methods to link individual performance to the success of an organization. This is where companies need to develop and communicate measures of success. Many incentive plans establish a scheme that pays out at a certain level if the firm hits a particular profit level. Employee payouts are linked to both an organization’s success and having met individual goals.

LAURIE BIENSTOCK is the Compensation Practice leader in Watson Wyatt’s San Francisco office. Reach her at (415) 733-4311 or laurie.bienstock@watsonwyatt.com.

Sunday, 31 December 2006 19:00

Virtualizing servers

One consequence of running vast computer networks is the greater energy needed to keep systems operating and cooled. Recognizing that computing capacity and power are wasted when a data center runs multiple servers, technology companies are re-configuring data centers so that they run cooler and simplify disaster recovery.

California electric companies today offer substantial rebates to firms that reduce their number of servers. This is possible as enterprise software leveraging storage area networks allows servers to be deployed as files that can be distributed across a of pool of servers. Because a file need not be housed in a single server and is now decoupled from the machine, far fewer servers are needed to run multiple programs.

Smart Business spoke with Omar Yakar of Agile360, a technology-consulting firm, about the impact the development will have on data centers.

How did ‘virtualization’ of servers come about?
The concept has been around for maybe 20 years, primarily in Unix and mainframe applications. But for four years now industry has software that will run on X86 servers, the ones that run Windows and Linux programs. One company in particular, VMware Inc., has taken a leadership position.

The challenge businesses face is to manage its increasing appetite for information technology cost-effectively and, just as importantly, to quickly and effectively replicate not only data, but entire systems during disaster recovery. In our world today, this has meant a new server every time we need a new application. What has resulted is that data centers now are chock full of servers, which often are under-utilized, but needed nonetheless, to support numerous functionalities. It is not unusual to see that the addition of one new software application results in the addition of many servers to support the program. The consequence is crowded server racks; vastly higher energy costs from running so many machines and from cooling increasingly heated data centers; and the vastly complicated data replication efforts that result when disaster strikes.

How does virtualized software help retrieve data and reduce energy costs?
Although it comes as a surprise to many IT managers, electric companies report that an average data center today consumes as much electricity as 700 houses. Adding to the problem, the cost to cool a server is estimated to consume 1.2 to 1.3 times as much electricity as the server itself.

In a virtualized word, what used to be known as servers are now logical representations of servers in the form of files and sit on a storage area network, allowing software, such as VMware, to sever a file’s wedded tie to a single server, thereby, allowing a file to be accessed from any server within a data center. Because a file can now be distributed across a pool of servers, fewer physical servers will be needed to support a broad range of computing needs. Our experience shows that a company can achieve a 10- or 15-to-1 consolidation ratio through the use of virtualization software, and in the process, reduce power consumption to run and cool a data center while decreasing the strain on power plants.

PG&E offers rebates to data centers that reconfigure their servers by using virtualization software, and SDG&E soon will. This is on top of the $300 to $600 in annual energy costs that the electric company expects a customer to save for each server that is removed. Those savings can more than double when reduced data center cooling costs are also taken into account.

The potential for savings in capital equipment is huge. In one study we undertook for an area hospital, we concluded that the facility’s 117 servers could easily be pared down to 14. With fewer servers running, the replacement costs of those servers will be cut to a fraction of what it now is, because not only are fewer units needed at a primary location, the size of the secondary back-up facility also shrinks. The gains to industry are enormous.

How can most companies achieve the benefits of such a scenario?
You need someone who can implement the software, know how to apply for the electric company rebates, redesign the architecture of a data center and possibly how the procurement of servers is now cost allocated, select the kind of servers needed, figure out the many finer points of reconfiguring a network, and, finally, train the in-house IT staff.

With virtualization software, disaster recovery grows exponentially faster and massively cheaper. It becomes reasonable even for the little guy to operate a back-up center. And, significantly, we calculate that the provisioning process of setting up a data center also can be dramatically reduced. That happens once we study a data center’s operations and map out a new plan that consolidates computing operations to run on the fewest possible units. The result: a four to six week process can now be completed in as little as four hours.

OMAR YAKAR is the co-founder and CEO of Irvine- headquartered Agile360. Reach him at (949) 253-4106 or omar.yakar@agile360.com.

Sunday, 31 December 2006 19:00

Why go to court?

As court dockets swell with caseloads and the cost of litigation climbs steadily higher, parties to a disputed contract increasingly seek an alternative to often lengthy (and, consequently, expensive) trials.

Alternative dispute resolution (ADR), long a feature of California’s legal system, has gained greater prominence during the last 15 years as an effective means of resolving disagreements between aggrieved parties. The benefits to the approach can be significant. These include arriving at a decision far sooner than would occur in a court trial. And, significantly, the ability to present the facts of a case to a subject matter expert — who decides on the merits of a claim — rather than judges or juries whose generalist knowledge could make them unprepared to effectively evaluate the technical features of some lawsuits. Mark Himmelstein, a partner at Newmeyer & Dillion LLP, says that ADRs can offer many advantages to both sides in a dispute.

Smart Business spoke with Himmelstein about how legal issues could be solved without resorting to a trip to the courthouse.

What are some of the key benefits to be gained by using alternative dispute resolution?
One of the most important features of ADR is that it is a cost-effective way to litigate, and, in fact, that is the primary goal of ADR.

Theoretically, you should get to arbitration sooner than you could go to trial because you are not at the mercy of the court’s calendar. You can select an arbitrator who has the time to see you. Also, the discovery process can be streamlined and the hearing itself should be shorter than a jury trial.

Another key feature is that you can select an arbitrator who appeals to both parties, whereas you do not select the judge who will listen to your case. Here, you have the confidence that someone with knowledge of the area in dispute will weigh your argument, that the process will be completed quickly, and that you will receive a just result.

In fact, even if you start litigating in court, many judges today will tell parties in a lawsuit to seek ADR instead of proceeding to trail because they have seen that this method often allows disputes to resolve quickly and in a manner that is satisfactory to both parties.

What is the difference between arbitration and mediation?
A mediation is a non-binding settlement meeting in which the parties informally present their cases to a mediator who does not pronounce judgment; rather, he attempts to assist the parties in arriving at a mutually agreeable resolution. In arbitration, the parties put on evidence formally, witnesses testify, and arbitrators arrive at a binding decision that generally is not appealable.

In many of our firm’s cases, whether we are litigating in court or in arbitration, we counsel our clients to first seek mediation in an attempt to resolve the matter before incurring the expense and the risk of further litigation. And, of course, if the parties agree to a settlement in the mediation, we will make sure that a settlement agreement is immediately signed in front of the mediator, which holds both parties to the terms of the settlement.

Describe an instance when you might want to seek arbitration.
Many contracts contain a clause that requires all disputes to be resolved in arbitration instead of a jury trial. We see this often in purchase and sale agreements, employment agreements and construction contracts. For example, in real estate and construction contracts, disputes concerning breach of a sales contract, defective work or payment issues would be arbitrated. The aggrieved party would initiate an arbitration proceeding instead of filing a complaint in Superior Court.

How does someone go about finding an experienced arbitrator?
Most law firms, including ours, maintain a list of experienced arbitrators and mediators in various fields. Additionally, there are several large independent organizations that offer arbitration services through their list of retired judges, lawyers and subject matter experts.

Importantly, since an effective arbitration agreement must be fair to both sides, most agreements dictate that both parties have to agree on the choice of an arbitrator. The provisions of an arbitration agreement should clearly state that the process will be conducted in a manner that considers each side with equal weight. And, generally speaking, the greater the disparity in the bargaining position of the parties, the more detail must be contained in the agreement.

MARK HIMMELSTEIN is a partner in the Real Estate, Insurance and Litigation Practice in the Orange County office of Newmeyer & Dillion LLP. Reach him at Mark.Himmelstein@ndlf.com or (949) 854-7000.

Friday, 24 November 2006 19:00

Helping business grow

What does it take for a company to scale up fast? It takes good people committed to meeting productivity gains through the smart use of technology.

Small to mid-size companies need increasingly sophisticated world-class enterprise technology solutions. Unlike their behemoth corporate counterparts with staffs in numerous specialties, the smaller business owners’ strengths usually rest only in one or a few functional areas. Planning the IT effort to deliver productivity gains at a lower cost is often not among their skill sets.

Pitted against giant firms with their retinue of in-house staff and paid consultants, smaller firms lose out on experiencing faster returns on investment and the far lower operating costs that result from a smartly integrated technology platform.

“Small and mid-size companies need solutions that increase IT performance, security and business processes while improving the bottom line,” says Omar Yakar, CEO and co-founder of Agile360, a technology consultant and engineering firm.

Smart Business spoke with Yakar about how smaller companies can level the playing field, allowing them to compete with large players with their powerhouse-computing infrastructure and seamless flow of information, yet with the agility inherent in a small and nimble player.

How do better access strategies help a business grow?

First, you need to define the term ‘access’ within an IT context. Access refers to how you get to the information on your hardware and software. The question then becomes, who is capable of accessing the applications and what data ought to be available to them, regardless of the location? Can your constituencies retrieve the information they need from a variety of locations?

A good adviser can consolidate all your different applications, whether they are Windows applications that must reside on a local desktop, Web-based, client/server or a mainframe application into one simplified, common-access strategy.

The result: the right people — whether they are your employees or business partners — can view information deigned for their eyes only, wherever they may be located.

In many cases, must the way an IT department interacts with users be redefined?

In a way, yes. A firm’s IT department will put together a network of computers with a reasonable understanding of the costs of building and maintaining the data center, but it often does not understand the cost savings that a centralized access delivery strategy will provide.

While it’s convenient for a user to access an application from anywhere, you must also have a handle on who is trying to retrieve information and for what lengths of time. This is critical to an efficient operation. You need to know the speed and the effectiveness of how information is delivered. Such information influences how much you will spend buying and maintaining servers, storage space and a network.

If the benefits of a desktop refresh can be realized in 10 percent of the time and at one-third the cost, imagine the impact that can have on the economy at large.

How important is it to be able to control access?

A case in point is the damage caused when an employee’s PC with valuable personal information, such as customers’ Social Security numbers, is lost or stolen. Should such information be stored in a PC, or would it be better to access the data from a centralized system where the data will sit? Or — if it must be stored on a PC — can we encrypt the data so that it cannot be compromised?

Today, government auditors increasingly ask businesses whether their vendors have implemented security efforts that prevent the unwarranted release of information. The tight regulatory constraints that big firms face now have trickled down, forcing smaller operations to adopt industry-standard security mechanisms.

What should companies look for in an IT adviser?

One option is to look for a holistic approach. That is, how existing technology affects your productivity.

Also, look for thoroughness. A good adviser will come in with project management discipline; provide a methodology, or a plan of action; and offer documentation that illustrates how a system is configured and how to keep it running.

The adviser should be affordable. Gartner Research claims that the industry average for deployed application access per desktop costs about $3,500. That is more than three times what it might cost — $1,100 — for a company like us to do a centralized application delivery.

Make sure the adviser will get in and out quickly. There should be no need to keep the adviser under contract for extended periods, other than requested assistance with ongoing maintenance and support.

Finally, look for a company that is empathetic to your needs to accelerate your business agility.

OMAR YAKAR is the co-founder and CEO of Irvine-headquartered Agile360. Reach him at omar.yakar@agile360.com or (949) 253-4106.

Friday, 24 November 2006 19:00

Electronic communications

For a litigator, nothing compares to finding a juicy document that provides a sound bite he can repeatedly parade before a jury. Today, as letters and memos are displaced by the widespread use of e-mail, discovering documents that could have a big impact on a claim becomes at once easier, and cost-lier, for determined litigants.

The benefit of technology’s speedy communication is a double-edged sword. Ideas and sentiments are disseminated rapidly and often are produced without much forethought. As messages are forever captured in both the sender’s and recipient’s hard drives, they can offer unshakeable evidence of a position taken or a state of mind that cannot be retracted later.

Smart Business spoke to Tom Newmeyer, founding partner at Newport Beach-based Newmeyer & Dillion LLP, about the consequences of e-mail communications.

How do you protect yourself in your electronic communications?

By being careful in everything you write. E-mails are fraught with danger because they offer clear-cut and damning evidence for a litigator. In this regard, anyone who regularly communicates through e-mail could learn a valuable lesson from attorneys skilled at taking depositions. In a deposition, lawyers will calculate their questions in the hope that the deposed party will slip up — reveal something that fits perfectly with their client’s argument. In effect, they’re searching for a ‘sound bite.’ Similarly, e-mails offer the same potential to trip you up if you do not carefully consider everything you write. You cannot allow a casually rendered thought or phrase — the ‘e-mail sound bite’ — to eat up your defense.

How is e-mail subject to discovery?

California defines discovery broadly. If something is reasonably calculated to lead to the discovery of admissible evidence, it is subject to discovery. This means that courts could, and do, allow requests to obtain the entire contents of hard drives.

In the case of e-mails, it is hard to argue that a request for copies of electronic communications pertaining to the litigation is irrelevant. E-mails offer a permanent record of communications. Plus, attorneys are not necessarily looking for that one smoking-gun e-mail; it’s all the responses that rise from an initial communication or that pertain to a claim that could be subject to discovery.

Is there a hidden cost that arises when individuals and businesses prefer using e-mail?

The most obvious change from a decade ago is that there is more information to retrieve because so much communication is done electronically. It’s not unusual to find tens of thousands of pages of documents, mostly consisting of e-mails, to back up an allegation.

The cost of a lawsuit, consequently, rises drastically, because you now must find, produce and review a large volume of communication. And as each e-mail is provided on a single sheet of paper, the number of pages offered in a defense literally runs into the thousands. The result is that the cost of defending a lawsuit is dramatically higher than it was a decade ago.

What advice do you offer the business community in protecting itself?

It’s extremely important to teach your employees how to write an e-mail. The old saw — never write anything you wouldn’t want your mother to read — has never been truer than it is today. Don’t disclose information in an e-mail that you normally would not include in paper form. Also, always assume that someone other than the recipient will read your mail, perhaps even a judge or juror.

Be bland and dispassionate. Don’t be funny because jokes do not translate well in a courtroom. Stay away from emotional words, such as, ‘I’d love to do it.’ Say, instead, ‘It seems like a good opportunity at the moment.’

Also, never write anything in a state of excitement. Remain constantly on guard for what could later be construed as a threat, a promise to enter into an agreement, slander, discriminatory practices or any number of conditions that could be subject to a lawsuit.

Unlike letters, e-mails are produced almost spontaneously, written informally and delivered instantly. I’ve seen language in e-mails of a kind that never could appear in letters, which generally are sober, reserved and lack colloquialisms.

A cautionary note here: many people don’t know this, but there are ways to search a document by using meta data, a method that allows the viewer to see all previous changes to a document. As attorneys have grown savvier about the available technology, they increasingly have used meta searches on key documents to back their arguments.

TOM NEWMEYER is a founding partner at Newmeyer & Dillion LLP based in Newport Beach. Reach him at (949) 854-7000 or at tom.newmeyer@ndlf.com.

Wednesday, 25 October 2006 20:00

Gelfo vs. Lockheed Martin

In daily life, most of us make judgments about others based on their appearance. Recent clarifications to a California State Code caution employers against making assumptions about a person’s ability to do a job even where a disability is clearly visible.

Don’t presume you can judge a person’s fitness by eyeballing their obvious handicap, says a Second District Court of Appeal. A higher level of due diligence is needed, noted the jurists — one that demonstrates that an employer has engaged in an “interactive process” with an applicant or employee with an actual or perceived disability before deciding whether he can or cannot perform a job.

Significantly, the decision also establishes that an employer has a duty to provide reasonable accommodation to a worker who is merely perceived as disabled, even if he or she is not actually disabled.

The court’s June 2 ruling in Gelfo vs. Lockheed Martin Corp. establishes that an employer cannot rely on outdated medical records, workers’ compensation records, or its perception of an individual’s disabilities to determine whether an employee is able to perform the essential functions of a job.

Relying on the California Fair Employment and Housing Act (FEHA), Gelfo emphasizes that an employer has an affirmative duty to engage in the interactive process with an employee or applicant with a known disability. The court interpreted “known” to include those instances in which an employer is aware or perceives a disability, whether such perception is erroneous or not. The court noted that although it is the employee’s burden to initiate the process, “no magic words are necessary, and the obligation arises once the employer becomes aware of the need to consider an accommodation.” Interestingly, this appears to contradict the plain language of FEHA, which provides that an employer must engage in a “timely, good faith interactive process ... for a reasonable accommodation in response to a request for reasonable accommodation by an employee or applicant ...”

Smart Business spoke with David P. Wolds at Procopio, Cory, Hargreaves & Savitch LLP, about the decision’s impact on California employers and their work force.

How important is this decision?
This decision is extremely important because no published California case before it has ever considered whether an employer has a duty under FEHA to provide a reasonable accommodation to an applicant or employee who is not actually disabled. The Gelfo ruling answers this question in the affirmative. The decision also clarifies that an employer has an affirmative duty to engage in an interactive process to determine whether an applicant or employee needs an accommodation even if the employee does not request it. An employer’s obligation appears to be triggered if it merely suspects that an individual may be disabled.

How does this case expand on the term ‘reasonable accommodation’?
The case does not expand on the term ‘reasonable accommodation’ but rather expands the class of persons who are entitled to it. Now applicants and employees who are merely perceived as disabled but do not actually suffer from a disability are entitled to a reasonable accommodation under FEHA.

How important is this ruling for employees?
As I mentioned, Gelfo expands the class of employees who are entitled to reasonable accommodation. It’s also important because this ruling entitles such employees to a greater level of evaluation regarding their fitness to work. It says that employers need to focus on current information about a candidate’s qualifications, not an obvious evidence of a disability, when deciding to offer or deny employment. In doing so, a firm must engage in a timely, good faith discussion with the person — in other words, conduct an individualized analysis of a person’s ability to do a job. Both the applicant and the employer need to discuss potential accommodations the candidate might need to perform the job, and the hiring firm has to provide these if it is needed.

What kind of mindset must an employer possess when reviewing disability issues?
Practically speaking, employers must be careful when evaluating an applicant or an employee returning to a current position or applying for a new one. The bottom line is that employers should not unilaterally refuse an employee work based on an actual or perceived disability. Employers should engage in the interactive process and obtain current medical data and be cautious about relying on old information. Whether the employee can be reasonably accommodated in the new position must be determined on the basis of a current fitness review.

DAVID P. WOLDS is the Labor, Employment and Benefits Practice Group Leader in the San Diego office of Procopio, Cory, Hargreaves & Savitch LLP. Reach him at (619) 525-3875 or at dpw@procopio.com.

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