Matthew LaWell

Tuesday, 26 October 2010 20:00

Center of attention

There are so many stereotypes about attorneys. Some of them are true, of course, but most of them are not.

Some attorneys are, for instance, sharp dressers, every bit the models for the top designers that you might expect, with perfect hair and a packed brain to match, but not all attorneys look like they belong on the cast of some courtroom drama that moves through its story arc each week in 44 minutes flat.

Some attorneys are fast and slick and out to make a quick dollar — or a quick couple of thousand dollars — but not many.

And, yes, some attorneys are blindingly intelligent and able to rattle off laws, statutes, regulations and court cases long since decided as if it was their job because, well, it is.

Your attorney is not a heart surgeon, a rocket scientist or a neurophysicist. They might as well be, though, to handle the level of work and degree of difficulty required during the last couple of years. After all, you have probably rarely called your attorney for something casual during these strapped economic times. Calls always seem to be reserved for something expensive and stressful that has to be handled correctly.

“We have seen a lot of companies that have tried to not use their lawyers as much because they don’t want to incur the fee,” says Susan Zaunbrecher, partner, chair of the corporate department and chair of the financial institutions practice group, Dinsmore & Shohl LLP. “Now, for some businesses, that will be an issue, because at some point, it builds up.

“At some point, it would have been less of a problem than it is now.”

You might be in the midst of one of those swelling problems at the moment. A majority of attorneys say this is an opportune time to think, then think again, about your business strategy and to examine the economic landscape, because there are opportunities available right now, even in slower industries, that will not be available for long. If you can afford to, this is the time to move. And if you have a good attorney on your team of advisers — no stereotypes here — you already have about as good an ally as possible to help steer you forward.

Remember the past

The last couple of years have provided you with a new set of challenges. Perhaps you needed to lay off a percentage of your employees, close a branch of your business or just do more every day with an already overworked, if not smaller, staff. Odds are your attorney was with you during many of those moments — because even if you didn’t work more with your attorney in order to save legal fees, you probably called and talked more often.

That is, at least, what many attorneys are saying.

“I think businesses have used law firms less, and that is partly because of a desire on the part of the clients to conserve money and resources,” says David DeNinno, partner, Reed Smith. “But I think the business usage or client usage of law firms is on the increase as the economy improves, which is a bit of a natural cycle. It’s not because clients are more appreciative or the value that lawyers can add; it’s just that there’s more of a need.”

The amount of work and communication required of some attorneys will also likely increase through the rest of 2010 and during the early months of 2011. The type of work might change, too, returning more to what was more prevalent three or four years ago than what has seeped in the last couple of years.

“We’re very much a business law firm, but the big growth areas for us have been family law — primarily custody and divorce — criminal law and corporate bankruptcy,” says Eric Davis, managing partner, Elliott & Davis PC. “All of those are products of a down economy. More people get in trouble, because financial difficulty causes family stress and divorce. We’ve had to be adaptive for our clients.”

But until outliers like that start to fade away, the existing bump in bankruptcy, commercial litigation and corporate reorganization — sure signs of an economy that has seen better days, months and years — will likely continue.

And valuations are still historically low — though not as far in the cellar as they were during much of 2009 — which means now is still a good time to examine and consider estate and succession planning. What will your business do after you’re out of the top spot? Who will own the business? Who will be in charge? And were you able to take advantage of a down market to pass it along at a better rate?

There are plenty of other things you should consider with your attorney before the economy starts to bump up a little more.

“I think the best thing lawyers can do now for clients is help them assess the current risks facing the business and any potential liability issues and cash needs of the business,” DeNinno says. “That includes opportunities to improve the efficiency of their operations, either through better legal management or risk assessment.”

Look ahead and plan

Did you manage to obtain any sort of credit during the last two years? If so, congratulations. That is quite an accomplishment. If not, no worries, because not many other companies did either. That said, some good news for the coming year is that credit is expected to be more available in 2011 than it has been in several years.

More credit is just one of the major points of interest for attorneys during the next six to 12 months. Because of those increased lines of credit, much of the next year will likely include a focus on mergers and acquisitions. Some attorneys say that M&A activity increased during the first half of 2010 before slowing some during the last four months, but no matter your city or region — and Pittsburgh and Western Pennsylvania are expected to be no different — M&A activity will likely be prevalent by the time the calendar turns.

“We look at it like we’re in this awesome market of Pittsburgh, where I still see this economic renaissance going on, and I still see dramatic growth in 2011,” Davis says. Granted, after the dearth of mergers and acquisitions during the last couple of years, it might not be all that difficult to mark an improvement, but an improvement is still a step in the right direction.”

Alternative fee structures and arrangements — or at least discussions about them — are also expected to increase in 2011. Some firms have provided them for years as an option, others have added them only during the last couple of years as clients asked for them, but there does seem to be a split between clients who are more open to alternative fee structures and those who hold tight to the hourly rate.

Even if you have no interest in alternative fee structures and will renew your proverbial subscription to the hourly rate, at least starting a conversation with your attorney or legal team about some other option might not be a bad idea, especially with the economy and cash flow still in flux.

Ensure your value

How can you be certain that you will receive as much value as possible from your partnership with your attorney? Communication, of course — the seemingly simple center of every conversation and great relationship remains the top priority. If you do not talk regularly with your attorney or if you rarely, if ever, ask questions or send recent documents and forms, you need to communicate more.

Most attorneys say they like to talk with clients at least once per month, just a casual meeting for breakfast, lunch or coffee to sit down and talk about you and your company, especially if they work with you more as an adviser than as an auditor — though every relationship is different.

“Business clients should look for a one-stop shop if they can get it,” Davis says. “We actually want our clients to call us, and we want our clients to e-mail us with questions. If it can be answered it 15 minutes or less, we’ll answer it for free, because we want them to look at us as their strategic partner.”

If you don’t have a relationship like that, though, or if you’re just not pleased with the quality or the nature of the relationship you have with your attorney, for any of a number of reasons, the time to consider a move might be now.

“If you don’t trust that your attorney is with you and working with you for the future, then you should absolutely be looking for new counsel,” Zaunbrecher says.

Rates are historically low, and this is perhaps the best buyer’s market of any of our lifetimes.

“There would be a whole litany of reasons a business might want to change its attorney now, and the first might be because of performance — they’re not quick enough to get with you and they’re notoriously old-school with billable hours and so on,” Davis says. “Clients can be sensitive about things like that. In a simple sense, it might be a good time to re-evaluate whether their attorney is someone who is suited to the company’s capabilities and needs and is someone who can deliver results.”

You might want to consider a change if you have just outgrown your firm and need a firm with a larger regional, national or international footprint.

You might also consider asking your attorney about any changes in rules and regulations for 2011 and beyond. Asking whether the firm offers any corporate education that you and your employees might be able to put to use would also be a good idea. And asking for a review of your corporate structure, especially for possible inefficiencies, would not be a bad use of time or money. What are your employees earning? What are your executives earning? What else are you paying for? And is it really worth the cost?

“Recessions create opportunities in many ways, particularly in the knowledge-based model that we have,” Davis says. “Many business models are only secure if they’re intellectual property, and so this is sort of also the time you don’t want to stop making those investments and protecting your ideas and brands with trademarks.

“When things are a little slower from a business perspective, it’s a good time to look back and re-evaluate. It takes a little bit of effort to get all that secure.”

But it’s almost always worth it, because in a world and an industry filled with so much change during the last couple of years, something needs to hold steady.

In September 2008, the global economy was on the brink of its historic collapse, about to slip from the precipice to the abyss. In September 2009, the financial challenges posed by that collapse ranked as the overwhelming top risk for businesses, according to several national surveys. And now, in September 2010, well, the inevitable recovery appears to have started and some sense of optimism has seeped back, but the risk that swirled just last year remains — heavy, ominous — for businesses large and small, for businesses like yours.

If you do not have a thorough risk management and business insurance plan in place now, you should start to develop one as soon as possible. After all, recovery or not, there remains a great deal of uncertainty about the economy, and you should pay attention to and manage your risk. If you do not have a relationship with a risk management firm — or at least have an internal executive in charge of that department and those decisions — you need to pick up the phone now.

Because just as the economy has changed, so, too, has risk management.

“Over the last decade, risk management has really been maturing toward an enterprise or strategic approach to identifying, analyzing and managing risks,” says Deborah Luthi, vice president of the board of directors, Risk and Insurance Management Society Inc. “This approach really targets key risks, both insurable and uninsurable business risks, that most directly affect organizational performance.”

Those risks can include things like workers’ compensation, property insurance and general liability.

“The financial meltdown and the economic slowdown have really brought a heightened duty of care, disclosure and discussion regarding risk to the board level of organizations,” Luthi says. “So I think putting a strategic risk management process in place provides a framework for the board to consider risk and reward for balancing profit and risk against accomplishing the organizational mission.”

Plan and move forward

If you do not work with a risk management firm now, the first question is, of course, “Why not?” The second question is something along the lines of, “Do you really need to work with an external firm?”

Especially today, with revenue and profits just inching up — if they are increasing at all — and every dollar a precious commodity, would you really benefit more from bringing in more experts from the outside rather than turning to your own internal experts?

“There is a benefit to that partnership,” says Regina Spratt, U.S. national brokerage leader, Marsh Inc. “The tangible benefits include a broker who deeply understands a company’s business — how it’s measuring itself, what its risks are — and who is just going to be able to do a better job of presenting that risk to the insurance marketplace. The more comfortable and better informed the underwriters are, the better the program design and pricing the company will get. There’s a direct translation in terms of being able to be a terrific advocate in the insurance marketplace.”

You might delegate the responsibilities to a team of executive leaders, with your chief financial officer or chief risk officer at the helm. As always, keep in mind that so many of your employees are already strapped for time each day and might be overwhelmed by additional tasks — especially one so important and intrinsic to the future of your business.

If you do work with an external firm, build a relationship with it as you would with any other business adviser. The firm is on or near the same level as your accountant, your attorney and your banker. The longer and more closely you work with the firm, the more your risk management will actually take effect in your business plans.

“Insurance relationships are like all other professional relationships,” says Phillip J. Luecht Jr., executive vice president, Aon Risk Solutions Inc. “If you invest in building solid long-term relationships, those relationships will pay dividends when a major claim or coverage dispute arises. Embrace your broker and insurer as partners; they have tremendous insight gained from working with a variety of clients that will help ensure your business prospers.

“Assemble an internal team including the CFO, treasurer, risk manager and general counsel. Then, in combination with your risk adviser or insurance agent, begin an in-depth identification, assessment and prioritization of the risks inherent in the business today.”

No matter which route you choose, you will likely want to listen to experts who recommend you chart and graph — yes, graph, just like back in geometry and physics — a framework to use in order to reach your decisions. Chart both insurable and uninsurable risks — your uninsurable is your brand and your reputation — in order to be able to make decisions and define your risks.

“Most firms only think in terms of traditional hazard risks, including fire, employee and professional liability,” Luecht says. “However, a comprehensive risk inventory includes financial, operational and strategic risks, as well, so it is essential to inventory all organizational risks. With an inventory complete, assess the likelihood and severity of each risk, and map/graph the results. This is an interesting way to view the holistic risks your organization faces and helps to prioritize which risk to work on immediately. Then, review your past loss history and have your risk adviser compare your results to those of peer companies. Determine if your performance is better/worse than your peer group.”

Invest and remain active

At many businesses, risk management and business insurance were in that first batch of budget cuts back in late 2008 or early 2009. Everyone needed to cut costs, and a good chunk scaled back on insurance. But the commercial insurance market was soft in 2009 and has become even softer in 2010, making this an ideal time to either jump back in or invest even more.

“Most companies purchase property, workers’ compensation, general liability, automobile liability, excess or umbrella liability for catastrophic multimillion-dollar claims and employee benefit coverage,” Luecht says. “[But right now, companies might also want to keep an eye on] many professional liability coverages like directors and officers liability, errors and omissions coverage for professional breaches, crime, fiduciary and employment practices liability.” 

But money is only one part of the plan to take advantage of your risk management and insurance. Talk with either your internal leader or your external firm and determine where you are and aren’t covered. Many businesses have invested heavily in product recall, privacy coverages, and employee health and benefits during recent months. The only way to keep track of all that is to remain involved on a regular basis.

You need to pay more attention to your risks and insurance now than during the best of times, and with the soft market still very much in play, you should probably continue to invest as much, if not more, in protecting your business for the future.

“The clients that any broker can help the most are the ones where that senior leadership is actively and consistently involved in risk management — and I don’t just mean in the concept but in building the principles in the organization,” Spratt says. “You end up working as a provider with both kinds of companies, but the benefits and the returns for those companies are very clear when the leadership is actively engaged and at the tip of t he spear in the process.”

By the time financial markets around the globe started to tumble in October 2008, much of the manufacturing industry was already deep in a recession that had stretched across the better part of a decade. Millions of workers had been sent home, their labor and their experience no longer needed because of more efficient machines and the rise of globalization. Thousands of factories had been shuttered. Whole companies just disappeared. None of it was coming back. It was all gone for good.

Manufacturing was not, of course, the only industry hit hard prior to the start of the larger recession. Publishing and newspapers had been on the decline for years, and the domestic automotive industry, technically under the umbrella of general manufacturing, had been in a slide for a generation. But perhaps no industry was affected more since the turn of the millennium than manufacturing. About a quarter of a million manufacturing jobs were lost over the course of a decade, the large majority of them prior to 2008. As the recession spread from one industry to another, millions of workers were laid off from the collective work force, but manufacturers often still let go of the most employees.

The cycle was vicious, and it continued, month after month.

How is it possible, then, that less than two years after the economy turned, manufacturing is on the rise again? Manufacturing activity increased again in May, according to the Supply Management’s index, the 10th straight month of growth. And even though that growth has started to slow a bit, growth is still growth. Were the 2008 levels just so low that any growth is significant? Or is the sustained increase in manufacturing a sign for the rest of the economy? Nothing is certain, not yet, but all of the indicators do point up, however modest, rather than down.

“But what we’re seeing is that manufacturing is coming back, but it’s not back yet to where it was in 2008,” says Daniel E. Berry, president and chief executive officer, MAGNET (Manufacturing Advocacy & Growth Network). “From what we hear, people are back up to 50, maybe 60, percent of their 2008 production levels and they’re feeling pretty confident but are very cautious. Manufacturers still are not calling employees back in big numbers for the most part. We are seeing some hiring again in the auto sector, so all of this is good and will have a ripple effect, but for the most part, everyone is still cautious.

“Manufacturing is recovering. It’s still a little bit wounded, but folks are feeling a little bit better — just not enough to jump in and hire back everyone they laid off.”

Prepare for more change

What was normal two years ago will almost certainly not be normal during the second half of 2010 or even during the first months of 2011. What was normal then, in fact, might never be normal again. Even though it might be a cliché, change really is the new normal in manufacturing — and plenty of other industries, too.

Among those changes are the new gaps in the supply chains of some larger original equipment manufacturers, the result of smaller companies closing during the last couple of years, which might cause delays and problems in receiving supplies in a timely manner. A number of industry experts say the availability of credit will also likely change, with banks starting to somewhat relax their requirements for the first time in two years. But the biggest change might be the addition of manufacturing jobs.

“Manufacturing is now the only business sector that has been adding jobs for five months,” says Emily Stover DeRocco, president, The Manufacturing Institute. “Manufacturers have added 126,000 new jobs.

“But the focus is going to continue to be more on what we call mass customization, as opposed to mass commoditization. This reflects, again, the industry’s response to globalization, which is that U.S. manufacturers, in order to maintain their global leadership, have had to move to a higher quality and a higher value product.”

And that higher quality product will almost certainly lead to more changes in the way manufacturers and so many other companies plan and do business. It is the ripple effect across industries.

For example, if you have not already reassessed your vision and your plan for your company — especially in terms of innovation and new opportunities — that should move to the top of your priority list.

“We believe helping companies become more innovative in what they’re doing is an important strategy for avoiding, to some degree, the problems of the past — helping them develop new products that create new markets and growth opportunities is an important strategy,” Berry says. “The market diversification and new product development are areas where we want to be more helpful with companies, with helping them look to the future and avoid the past.”

It can also help you better position yourself and your company for the continuing changes and the eventual uptick in the economy and the industry.

Keep the long term in perspective

Two years ago, few manufacturers — few companies at all, really — were prepared for the recession. But you can prepare for the ascension, however slow and modest it might be, by being smart during these coming months and years.

You might think about researching how to best tap in to loans, grants or tax credits that are available from various levels and departments of federal, state and local government to help increase business during challenging times. You might also consider your risks, especially over the long term. And you will likely want to diversify your product lines into other markets, so you aren’t as dependent on single-source customers, and, more generally, diversifying your portfolio.

“Company executives really need to come to fundamental recognition that things are really not going to be the way they were,” Berry says. “Facing that reality means they’re going to have to embrace a strategy to changing how they do business. That’s an important first step — recognizing that the ground has shifted and we need to find different ways of doing things. What we’ve been saying is that companies need to be looking seriously at how they take their instinct product lines and adapt them and diversify them to other markets so they’re not so dependent on single-source customers.

“Diversifying their portfolio is an important strategy for avoiding the kind of massive negative impacts we’ve seen over the last year.”

Technology and education, as would be expected, can also play a role in increasing your business. Several experts discussed how the advantage of companies that are owned and operated in the United States is the technology that is developed in the United States. Domestic manufacturers continue to be at the forefront when it comes to utilizing technology in their processes, a trend that will only continue. To ensure that the technology is operated correctly and efficiently, workers should be more educated than they were 40, 20, even 10 years ago, and with so many quality workers still unemployed, there is a deep talent pool from which to hire.

How you handle all of that now might be the difference between a quicker return to profitability and increased production, and the far less appealing option of a long struggle back to respectability and some small sense of comfort in the market.

Most important, though, is to do everything with the long term — and that refers to years and decades, not just months and quarters — in mind.

“One of the big unknown changes that everyone is tracking is what the (oil spill in the Gulf of Mexico) means,” Berry says. “It means that we’re more likely to see some more impetus from the federal government on green initiatives and sustainability and probably some more of a push for alternative energy sources and maybe the price of petroleum will go up and have an effect on the economy, too. There is a little bit of uncertainty around the effects of the Gulf and more manufacturing particularly.”

Ask questions

As you prepare for the last months of 2010 and the first months of 2011, it will be important to keep any number of questions in mind. Write them down. Type them and print them out. Keep a copy on your desk. Distribute copies to your executive team, perhaps even all of your employees. Just keep them in mind. No matter how well you know your business and your industry, that list of questions will be as important now as it has ever been.

And just what questions should make the list? Well, a lot will depend on your industry, your goals and your financial standing at the moment, but there are some questions that all businesses need to be asking right now. And those are: What is happening in your industry? Is it expanding or contracting? Is your company expanding or contracting? Where do you see your company in 2015? In 2020? Is your company in the right market? Is it in the right position in the market? What are the strengths and expertise that your company has that could be adapted to another market or product line? Where can you turn to think through your situation? Will your company be able to receive a large enough line of credit during the next year? Will you be able to fund your growth? How sustainable are the current demands? And, the great unknown, how will global events affect your company?

“It depends on what happens in global markets, the value of the euro, whether our companies are disadvantaged,” Berry says. “I think we’re going to see a slow, gradual recovery that’s threatened by what’s happening in Europe. Folks are kind of cautiously optimistic.”

With all of that in mind, you will also need to consider whether your supply chain will be able to respond to the innovative approaches required for future growth and success, which means supply chain capabilities and locations become more important. The demographics of your work force are also important, especially with a generation of baby boomers still on the brink of retirement. And innovation is important, too. How will you move ideas from the collective mind of your company to the drawing board to the marketplace? Live in the present but remain focused on the future.

“Eyes on the future, but remember the volatility of this market,” DeRocco says. “There’s a constant threat to every business sector and there are some very large factors in play right now that will determine manufacturers’ cost structure for continued operations, so they’re keeping an eye on all of those — public policy, the global impacts around the world, certainly the European financial crisis.

“Every one of those issues has an impact and creates new challenges for manufacturers operating in that environment.”

By the time financial markets around the globe started to tumble in October 2008, so much of the manufacturing industry was already deep in a recession that had stretched across the better part of a decade. Millions of workers had been sent home. Thousands of factories had been shuttered. Whole companies just disappeared. None of it was coming back. It was gone for good.

Manufacturing was not, of course, the only industry hit hard prior to the start of the larger recession, but perhaps no industry was affected more since the turn of the millennium. About a quarter of a million manufacturing jobs were lost over the course of a decade, the large majority of them prior to 2008. As the recession spread from one industry to another, manufacturers often still let go of the most employees.

The cycle was vicious, and it continued month after month.

How is it possible, then, that less than two years after the economy turned, manufacturing is on the rise again? Manufacturing activity increased again in May, according to the Supply Management’s index, the 10th straight month of growth. And even though that growth has started to slow a bit, growth is still growth. Were the 2008 levels just so low that any growth is significant? Or is the sustained increase in manufacturing a sign for the rest of the economy? Nothing is certain, but all indicators do point up, however modest, rather than down.

“It’s really an opportunity, after you’ve survived the last two years and you’ve streamlined your business, to leverage off of those hard decisions you had to make and to figure out how to do business better,” says John Fenton, partner of assurance services, BDO Seidman LLP. “Do you want to go back to normal, where you were two years ago? Or do you want to build off the efficiencies you’ve already gained?”

Prepare for more change

What was normal two years ago will almost certainly not be normal during the second half of 2010, or even during the first months of 2011. What was normal then, in fact, might never be normal again. Even though it might be a cliché, change really is the new normal in manufacturing.

Among those changes are the new gaps in the supply chains of some larger original equipment manufacturers, the result of smaller companies closing, which might cause delays and problems in receiving supplies in a timely manner. A number of industry experts say the availability of credit will also likely change, what with banks starting to somewhat relax their requirements. But the biggest change might be the addition of manufacturing jobs.

“Manufacturing is now the only business sector that has been adding jobs for five months,” says Emily Stover DeRocco, president, The Manufacturing Institute. “Manufacturers have added 126,000 new jobs.

“But the focus is going to continue to be more on what we call mass customization, as opposed to mass commoditization. This reflects, again, the industry’s response to globalization, which is that U.S. manufacturers, in order to maintain their global leadership, have had to move to a higher quality and a higher value product.”

And that higher quality product will almost certainly lead to more changes in the way manufacturers and so many other companies plan and do business, the ripple effect across industries.

For example, if you have not already reassessed your vision and your plan for your company, that should move to the top of your priority list.

“Reassess your priorities and really have a vision for what you want the company to be five or 10 years down the road,” Fenton says. “Keeping a lid on costs is important, so technology and investment are important, as is investing in employees.”

Keep the long term in perspective

Two years ago, few manufacturers were prepared for the recession. But you can prepare for the ascension, however slow and modest it might be and whenever it does become more noticeable, by being smart during these coming months and years.

You might think about diversifying your product lines into other markets, so you aren’t as dependent on single-source customers, and, more generally, diversifying your portfolio. You might also research how to best tap in to loans, grants or tax credits that are available from various departments of federal, state and local government. And you will likely want to consider your risks, especially over the long term.

“You can help yourself by really developing a business plan or a manufacturing strategy that embodies the risk associated with the business, with a customer-centric focus and the quality of the products, exploring existing markets or looking at other markets where you can expand,” Fenton says. “Consider your supplies. How do you manage the possibility of wild swings over time in the prices of commodities? How do you plan for significant variations?”

Technology and education, as would be expected, can also play a role in increasing your business. Several experts discussed how the advantage of U.S. companies is U.S. technology. Domestic manufacturers continue to be at the forefront when it comes to utilizing technology in their processes. To ensure that the technology is operated correctly and efficiently, workers should be more educated than they were 40, 20, even 10 years ago, and with so many quality workers still unemployed, there is a deep talent pool from which to hire.

Most important, though, is to do everything with the long term — and that refers to years and decades, not just months and quarters — in mind.

Ask questions

As you prepare for 2011, it will be important to keep any number of questions in mind. What those questions are will depend on your industry, your goals and your financial standing at the moment, but there are some questions that all businesses need to be asking right now. And those are: What is happening in your industry? Is it expanding or contracting? Is your company expanding or contracting? Where do you see your company in 2015? In 2020? Is your company in the right market? Is it in the right position in the market? What are the strengths and expertise that your company has that could be adapted to another market or product line? Where can you turn to think through your situation? Will your company be able to receive a large enough line of credit during the next year? Will you be able to fund your growth? How sustainable are the current demands? And, the great unknown, how will global events affect your company?

“Analyzing and determining what events in the global workplace impact you and how they impact you is important,” says Scott Yancey, senior manager of assurance services, BDO Seidman LLP. “For instance, there will be increased regulation for those companies that operate or sell near the Gulf of Mexico, just because of the failure of the oil spill. That’s something that used to be confined to one or two industries, but companies are going to have to start looking at things like that.”

With all that in mind, you will also need to think about innovation as much as ever. How will you move ideas from the collective mind of your company to the drawing board to the marketplace? Live in the present but remain focused on the future.

“Eyes on the future,” DeRocco says. “But remember the volatility of this market.”

The training was a failure. All of that time, all of thateffort, all of that money, just gone, just out the window and gone. What otherexplanation was there, after all, for drop after drop in the hard numbers froma talented sales team in the wake of a training and development session?

It could have happened at any business, but for the purposesof this story, it happened at a large technology company with headquarters inthe Midwest. The top executives, frantic for answers, called a corporate trainingfirm. “Our sales are down,” the executives said. “We need training.”

That technology company was part of a large percentage ofbusinesses that continued to invest in corporate training, education anddevelopment during the last couple of years. Thousands and thousands of othersturned away from training, unable or unwilling to spend more money during therecession.

But a panel of more than 30 industry experts and academicprofessionals agreed that it would have been far better for businesses to continueto spend on training during those tough times — to invest in their employeesand to show the extent of that investment, to improve the business and keep itup to date, to be in a better position when the economy ultimately turns around— than to tighten the budget. The same rule applies now, too.

“Training is always important but even more so in times likethis,” says Pat Galagan, executive editor, ASTD. “This is when you really haveto come out of the gate running. It’s a big mistake to cut your training budgetwhen times are tough because it leaves you unprepared for better times.”

Make a plan

Members of the corporate training firm arrived the next dayand talked with as many employees as possible at the technology company, fromexecutives to engineers to those slumping sales representatives and everyoneelse in between. They prodded and probed and asked questions. They were curiousabout what, exactly, had happened.

They wanted to know, before they embarked on anothertraining session, whether another training session was actually necessary.

This is what you should do when you’re in the process ofdetermining whether to invest in training and development for your employees.You should prod and probe and plan, because just as you shouldn’t approach a newbusiness venture without a model and a solid idea of what you want toaccomplish, neither should you approach training without thoughts of what youneed to tackle.

“Typically, businesses start by looking at their goals andtheir objectives for a period of time, usually the coming year,” Galagan says.“Some companies will do what’s called a skills audit to see if they have theskills to support the direction. Then if they don’t, they will try to train tofill any gaps that they find.

“It’s a very comprehensive process of looking at the skillsthat employees have in key areas and matching that against the skills you feelyou need.”

And even though those needs will vary from business tobusiness, from industry to industry, there are a number of common trainingareas on which almost all businesses should focus. Leadership development,project management and team building are all increasingly important because ofthe changing demographics and economy and because general communication andtechnology skills are as important now as always.

“It’s important for leaders to first reassess their valueproposition and be clear about corporate performance objectives and how thosemay have changed because that then informs your training strategy,” says RodNunn, vice chancellor for workforce and community development, St. LouisCommunity College. “We view training specifically as a way to close the gapsbetween the performance needs of specific jobs and the employee performancecapabilities.”

Open your wallet

Those members of the corporate training firm remained in theoffices for a couple of days. They wanted to follow every lead and turn overevery stone. They wanted to find out what had happened to the sales team afterthat apparently disastrous training and development session. And the technologycompany executives had no problem paying to keep them around. They wanted tofind out what happened, too.

Do you want to keep your top employees after the job marketopens again? Do you want all of your employees to be happy and to enjoy theirwork right now? Investing in training and education is an important part ofhelping you do just that. The average business spends about $1,060 on trainingand education per employee per year, according to research by ASTD.

There are also effective ways to spend a little less, ifyour revenue is still down or if you opt to not invest as much in training.Turning toward local colleges and universities to design a custom program foryour employees is often less expensive than sending them to open enrollmentcourses, as are distance learning and online courses. Some businesses opt tolook within for employees who are experts in a specific area and can train therest of the staff.

“We often talk about the blended learning, but some of thebest training is provided by direct supervisors on an ongoing bas

is,” Nunnsays. “Work-based learning doesn’t have to take three hours out of our day togo over to a classroom.

“You build skills as you tackle real problems and get realresults that are used in the course of the business.”

Keep an eye on results

At last, an answer for our corporate training firm and ourtechnology company in the Midwest. That previous training session, as it turnedout, was not to blame for lower sales numbers. No, the culprit was instead thefact that the technology company executives had recently installed a drasticrestructure of the compensation program. That program encouraged the sales team to try and sell only one of theirmany products, and that is whatchanged everything.

The training had not been the problem at all.

In fact, without that recent training session, the technologybusiness might have planted itself in more trouble because of the new structureof the compensation program. The best money spent might well have been themoney spent on the training — and the worst might have been the money that wasabout to have been spent unnecessarily correcting that training.

“You can create dashboard indicators.” Nunn says. “If you’veidentified that there’s a process within your business that needs improvement,you want to make sure that training intervention is helping that processimprovement.

“Everything we do in training should impact the bottom linewith respect to productivity as measured in either revenue or sales or somespecific process we can drill down into.”

“We know that organizations that are not learningorganizations are losing ground every day,” Nunn says. “It’s just modernbusiness. Things change so fast, companies that are not investing into thelearning environment and creating a learning culture are not able to keeppace.”

The training was a failure. All of that time, all of that

effort, all of that money, just gone, just out the window and gone. What other

explanation was there, after all, for drop after drop in the hard numbers from

a talented sales team in the wake of a training and development session?

It could have happened at any business, but for the purposes

of this story, it happened at a large technology company with headquarters in

the Midwest. The top executives, frantic for answers, called a corporate

training firm. “Our sales are down,” the executives said. “We need training.”

That technology company was part of a large percentage of

businesses that continued to invest in corporate training, education and development

during the last couple of years. Thousands and thousands of others turned away

from training, unable or unwilling to spend more money during the recession.

But a panel of more than 30 industry experts and academic

professionals agreed that it would have been far better for businesses to

continue to spend on training during those tough times — to invest in their

employees and to show the extent of that investment, to improve the business

and keep it up to date, to be in a better position when the economy ultimately

turns around — than to tighten the budget. The same rule applies now, too.

“Training is always important, but even more so in times

like this,” says Pat Galagan, executive editor, ASTD. “This is when you really

have to come out of the gate running. It’s a big mistake to cut your training

budget when times are tough because it leaves you unprepared for better times.”

Make a plan

Members of the corporate training firm arrived the next day

and talked with as many employees as possible at the technology company, from

executives to engineers to those slumping sales representatives and everyone

else in between. They prodded and probed and asked questions. They were curious

about what, exactly, had happened.

They wanted to know, before they embarked on another

training session, whether another training session was actually necessary.

This is what you should do when you’re in the process of

determining whether to invest in training and development for your employees.

You should prod and probe and plan, because just as you shouldn’t approach a

new business venture without a model and a solid idea of what you want to

accomplish, neither should you approach training without thoughts of what you

need to tackle.

“Typically, businesses start by looking at their goals and

their objectives for a period of time, usually the coming year,” Galagan says.

“Some companies will do what’s called a skills audit to see if they have the

skills to support the direction. Then if they don’t, they will try to train to fill

any gaps that they find.

“It’s a very comprehensive process of looking at the skills

that employees have in key areas and matching that against the skills you feel

you need.”

And even though those needs will vary from business to

business, from industry to industry, there are a number of common training

areas on which almost all businesses should focus. Leadership development,

project management and team building are all increasingly important because of

the changing demographics and economy and because general communication and

technology skills are as important now as always.

“All employees,

in order to be successful in the new workplace, will have to have the ability

to adapt and to learn,” says Paula Yoder, director of the Tandy Center for

Executive Leadership at the Neeley School of Business at TCU, referencing a

recent paper by Sandy Dutkowsky, “Trends in Training and Development — The New

Economy, Training in U.S. Companies, Who Does the Training in Corporations?”

“This is part of

a developmental organization. Those who have ‘learned to learn’ will become

most valuable in the new economy. The role of education and training is

becoming more important in the American workplace. Employees are recognizing

the need to improve and broaden their skills to remain employable.”

Open your wallet

Those members of the corporate training firm remained in the

offices for a couple of days. They wanted to follow every lead and turn over

every stone. They wanted to find out what had happened to the sales team after that

apparently disastrous training and development session. And the technology

company executives had no problem paying to keep them around. They wanted to

find out what happened, too.

Do you want to keep your top employees after the job market

opens again? Do you want all of your employees to be happy and to enjoy their

work right now? Investing in training and education is an important part of

helping you do just that. The average business spends about $1,060 on training

and education per employee per year, according to research by ASTD.

Businesses that have the most success tend to spend between 2

and 3 percent of their total payroll cost on training, education and

development. The average is in the middle, of course, right around 2.3 percent.

There are also effective ways to spend a little less, if your

revenue is still down or if you opt to not invest as much in training. Turning

toward local colleges and universities to design a custom program for your

employees is often less expensive than sending them to open enrollment courses,

as are distance learning and online courses. Some businesses opt to look within

for employees who are experts in a specific area and can train the rest of the

staff.

“We cannot forget about our internal subject matter experts,”

Yoder says. “Companies that leverage the expertise of those internal leaders,

even if those leaders need polishing or extended training, are truly honoring

their resources.”

Keep an eye on results

At last, an answer for our corporate training firm and our

technology company in the Midwest. That previous training session, as it turned

out, was not to blame for lower sales numbers. No, the culprit was instead the

fact that the technology company executives had recently installed a drastic

restructure of the compensation program. That program encouraged the sales team to try and sell only one of their

many products, and that is what

changed everything.

The training had not been the problem at all.

In fact, without that recent training session, the

technology business might have planted itself in more trouble because of the

new structure of the compensation program. The best money spent might well have

been the money spent on the training — and the worst might have been the money

that was about to have been spent unnecessarily correcting that training.

The only way to know where you are is to know where you were.

In order to receive a more relevant return on your investment, watch the

progress from the planning stages through the training itself, then during the

months, even years, beyond.

“It is

imperative that leaders ask their employees about the benefits and outcomes of

training,” Yoder says. “There is no excuse for a company to not know the return

on investment for training. Even at the most basic level of understanding

without using any assessment tools, you can at least ask, ‘What did you get out

of it? How did it impact what you do on a daily basis? How does this impact

your effectiveness in your job?’”

The training was a failure. All of that time, all of that effort, all of that money, just gone, just out the window and gone. What other explanation was there, after all, for drop after drop in the hard numbers from a talented sales team in the wake of a training and development session?

It could have happened at any business, but for the purposes of this story, it happened at a large technology company with headquarters in the Midwest. The top executives, frantic for answers, called a corporate training firm. “Our sales are down,” the executives said. “We need training.”

That technology company was part of a large percentage of businesses that continued to invest in corporate training, education and development during the last couple of years. Thousands and thousands of others turned away from training, unable or unwilling to spend more money during the recession.

But a panel of more than 30 industry experts and academic professionals agreed that it would have been far better for businesses to continue to spend on training during those tough times — to invest in their employees and to show the extent of that investment, to improve the business and keep it up to date, to be in a better position when the economy ultimately turns around — than to tighten the budget. The same rule applies now, too.

“Training is always important but even more so in times like this,” says Pat Galagan, executive editor, ASTD. “This is when you really have to come out of the gate running. It’s a big mistake to cut your training budget when times are tough because it leaves you unprepared for better times.”

Make a plan

Members of the corporate training firm arrived the next day and talked with as many employees as possible at the technology company, from executives to engineers to those slumping sales representatives and everyone else in between. They prodded and probed and asked questions. They were curious about what, exactly, had happened.

They wanted to know, before they embarked on another training session, whether another training session was actually necessary.

This is what you should do when you’re in the process of determining whether to invest in training and development for your employees. You should prod and probe and plan, because just as you shouldn’t approach a new business venture without a model and a solid idea of what you want to accomplish, neither should you approach training without thoughts of what you need to tackle.

“Typically, businesses start by looking at their goals and their objectives for a period of time, usually the coming year,” Galagan says. “Some companies will do what’s called a skills audit to see if they have the skills to support the direction. Then if they don’t, they will try to train to fill any gaps that they find.

“It’s a very comprehensive process of looking at the skills that employees have in key areas and matching that against the skills you feel you need.”

And even though those needs will vary from business to business, from industry to industry, there are a number of common training areas on which almost all businesses should focus. Leadership development, project management and team building are all increasingly important because of the changing demographics and economy and because general communication and technology skills are as important now as always.

“Some of the things that we’re finding demand for and that make sense are strategy and leadership programs, especially managing in turbulent times, managing through transition,” says Barbara Kahn, dean of the School of Business Administration, University of Miami. “There’s also a lot of emphasis on innovation. How companies can try to innovate to stay competitive and survive.”

Open your wallet

Those members of the corporate training firm remained in the offices for a couple of days. They wanted to follow every lead and turn over every stone. They wanted to find out what had happened to the sales team after that apparently disastrous training and development session. And the technology company executives had no problem paying to keep them around. They wanted to find out what happened, too.

Do you want to keep your top employees after the job market opens again? Do you want all of your employees to be happy and to enjoy their work right now? Investing in training and education is an important part of helping you do just that. The average business spends about $1,060 on training and education per employee per year, according to research by ASTD.

“That’s an average, not a recommendation,” Galagan says. “In that pool of companies, some are large, some are small, some are government, some are private.”

There are also effective ways to spend a little less, if your revenue is still down or if you opt to not invest as much in training. Turning toward local colleges and universities to design a custom program for your employees is often less expensive than sending them to open enrollment courses, as are distance learning and online courses. Some businesses opt to look within for employees who are experts in a specific area and can train the rest of the staff.

“Some of the trends that we’ve seen are that companies have been opting for more customized programs rather than sending employees to open programs, which are more generic,” Kahn says. “When budgets are tight, you see an emphasis on more customized programs that are tailored to the specific needs of the company.”

Keep an eye on results

At last, an answer for our corporate training firm and our technology company in the Midwest. That previous training session, as it turned out, was not to blame for lower sales numbers. No, the culprit was instead the fact that the technology company executives had recently installed a drastic restructure of the compensation program. That program encouraged the sales team to try and sell only one of their many products, and that is what changed everything.

The training had not been the problem at all.

In fact, without that recent training session, the technology business might have planted itself in more trouble because of the new structure of the compensation program. The best money spent might well have been the money spent on the training — and the worst might have been the money that was about to have been spent unnecessarily correcting that training.

“It’s really important as you go into these programs that you set specific goals at the beginning of the program and then monitor it say every three months, every six months,” Kahn says. “Make sure things are still on target and whether there’s a need to go back and reinforce certain points.”

The only way to know where you are is to know where you were. In order to receive a more relevant return on your investment, watch the progress from the planning stages through the training itself, then during the months, even years, beyond.

“One of the things that’s very, very important for a company to achieve in a competitive world is make sure they have a strong employee base that’s constantly changing with the changing times,” Kahn says. “You want to have ways for employees to develop their skills and move up.

“If you don’t invest in continuous learning and continuous innovation, obviously employees are going to stagnate.”

The training was a failure. All of that time, all of that effort, all of that money, just gone, just out the window and gone. What other explanation was there, after all, for drop after drop in the hard numbers from a talented sales team in the wake of a training and development session?

It could have happened at any business, but for the purposes of this story, it happened at a large technology company with headquarters in the Midwest. The top executives, frantic for answers, called a corporate training firm. “Our sales are down,” the executives said. “We need training.”

That technology company was part of a large percentage of businesses that continued to invest in corporate training, education and development during the last couple of years. Thousands and thousands of others turned away from training, unable or unwilling to spend more money during the recession.

But a panel of more than 30 industry experts and academic professionals agreed that it would have been far better for businesses to continue to spend on training during those tough times — to invest in their employees and to show the extent of that investment, to improve the business and keep it up to date, to be in a better position when the economy ultimately turns around — than to tighten the budget. The same rule applies now, too.

“Training is always important but even more so in times like this,” says Pat Galagan, executive editor, ASTD. “This is when you really have to come out of the gate running. It’s a big mistake to cut your training budget when times are tough because it leaves you unprepared for better times.”

Make a plan

Members of the corporate training firm arrived the next day and talked with as many employees as possible at the technology company, from executives to engineers to those slumping sales representatives and everyone else in between. They prodded and probed and asked questions. They were curious about what, exactly, had happened.

They wanted to know, before they embarked on another training session, whether another training session was actually necessary.

This is what you should do when you’re in the process of determining whether to invest in training and development for your employees. You should prod and probe and plan, because just as you shouldn’t approach a new business venture without a model and a solid idea of what you want to accomplish, neither should you approach training without thoughts of what you need to tackle.

“Organizations need to focus on what their strategic objective is,” says James Craft, professor of business administration, Joseph M. Katz Graduate School of Business & College of Business Administration, University of Pittsburgh. “How do they plan to create value in the market for their consumer? What do we have in terms of talent to meet the kind of objectives we say we want to meet? Do we have enough people, and do we have the skills necessary to meet the objectives we have in mind? After you have that analysis, you can begin to think about what gaps exist.”

And even though those needs will vary from business to business, from industry to industry, there are a number of common training areas on which almost all businesses should focus. Leadership development, project management and team building are all increasingly important because of the changing demographics and economy and because general communication and technology skills are as important now as always.

“Get input from both your employees and from their supervisors in terms of what it is they say they need,” says Reggie Overton, executive director of the Center for Professional Development, Community College of Allegheny County. “Surveying, that is a good tool, in terms of looking at where they might say, ‘If we have the opportunity to provide you continuing education, where are the areas that you think you need assistance?’”

Open your wallet

Those members of the corporate training firm remained in the offices for a couple of days. They wanted to follow every lead and turn over every stone. They wanted to find out what had happened to the sales team after that apparently disastrous training and development session. And the technology company executives had no problem paying to keep them around. They wanted to find out what happened, too.

Do you want to keep your top employees after the job market opens again? Do you want all of your employees to be happy and to enjoy their work right now? Investing in training and education is an important part of helping you do just that. The average business spends about $1,060 on training and education per employee per year, according to research by ASTD.

“That’s an average, not a recommendation,” Galagan says. “In that pool of companies, some are large, some are small, some are government, some are private.”

There are also effective ways to spend a little less, if your revenue is still down or if you opt to not invest as much in training. Turning toward local colleges and universities to design a custom program for your employees is often less expensive than sending them to open enrollment courses, as are distance learning and online courses. Some businesses opt to look within for employees who are experts in a specific area and can train the rest of the staff.

“The data I’ve seen is that 70 percent or more of all of the learning that goes on in an organization is informal,” Craft says. “In other words, it isn’t designing a training program — it’s creating an environment where people are willing to work with others to help them learn on the job.”

Keep an eye on results

At last, an answer for our corporate training firm and our technology company in the Midwest. That previous training session, as it turned out, was not to blame for lower sales numbers. No, the culprit was instead the fact that the technology company executives had recently installed a drastic restructure of the compensation program. That program encouraged the sales team to try and sell only one of their many products, and that is what changed everything.

The training had not been the problem at all.

In fact, without that recent training session, the technology business might have planted itself in more trouble because of the new structure of the compensation program. The best money spent might well have been the money spent on the training — and the worst might have been the money that was about to have been spent unnecessarily correcting that training.

“If a company is investing money, they need to make sure the learning experience has been successful and it’s transferred to the work context,” Craft says. “Classically, there are several levels of measurement assessment of whether the learning has been effective — and the final level for assessing it is results.”

The only way to know where you are is to know where you were. In order to receive a more relevant return on your investment, watch the progress from the planning stages through the training itself, then during the months, even years, beyond.

“In order to always stay on top of what your company needs to be doing to work at its best, your people need to have the skills required to do the job that needs to be done,” Overton says. “How do you go about doing that? You can set up a training program.”

Wednesday, 26 May 2010 20:00

Creating a wellness program

Imagine an office where employees walk laps during lunch, their pedometers clipped to their waistbands. Imagine an office where employees snack on fruits and nuts rather than candy bars, drink water instead of another can of soda, and have managed to kick that pack-a-day habit.

Imagine an office where health and wellness are a priority.

Is this anything like your office? Perhaps it will be during the months and years to come.

There is little doubt that health and wellness are hot topics. Just turn on the television and watch reality shows about weight loss, or pick up a magazine and read the articles on wellness published recently in Time and The New York Times Sunday Magazine. Or turn your eyes to Washington, D.C., where President Barack Obama signed the health care reform legislation in late March.

Our parents are overweight. Our children are overweight. We are overweight. And as we work our way through the recession, our days are packed. We tend to eat poorly and not exercise, and our poor decisions are costing not only our bodies and our minds but also our health care costs and our office productivity. A wellness program just might help to turn the overwhelming tide of fat and frustration.

“A wellness strategy is really a subset of a human capital strategy,” says Paul Martino, vice president, health and wellness solutions, WellPoint Inc. “If an employer has a long-term horizon and views human capital in a particular way — that it’s valuable, that you want to retain your highly valuable and efficient people — you want to allow people to be at their job and functioning well.”

If you don’t have a program at your business, why should you install one now? If you do have a program, why should you aim to improve it? Well, plenty of research proves that healthier employees are more productive and actually cost you and your business less in total costs. And there is an impressive return on the investment, especially after a year or two.

But you have to plan and install the program first.

Take the first step

Are your employees overweight? Do they smoke? Not long ago, you would have been well within your rights to avoid the answers to those questions. If your employees worked hard and produced, who cared about their health? But after years of medical research, those are important and relevant questions. If the answer is yes, you’ll want to consider a wellness program.

The question you have to ask yourself, though, is why do you want to install a program?

There are no wrong answers, but if there is no why, the program will flounder.

“A one-size-fits-all wellness program is likely to not be cost-effective because a lot of the people won’t need so much intervention,” says Dr. William B. Stewart, medical director of the Institute for Health & Healing, California Pacific Medical Center. “Part of developing a successful wellness program relates to not overdelivering. There’s a low-risk group of people and there’s a high-risk group of people, and we do better if we recognize the difference between those groups and don’t overdeliver.”

If you and your executives don’t support the program from its first breath, neither will your employees. So take the time to work with a private company for you and your employees to take a health risk assessment and a biometric screening.

HRAs, which are often free online or cost between $5 and $25 per employee if performed in person, and biometric screenings, which cost between $50 and $150 per employee, highlight symptoms and conditions that might develop into larger problems in the future, both among individuals and your employee base as a whole. If you work with an outside company, the information will also be anonymous and in compliance with the Health Insurance Portability and Accountability Act.

Consider your employees

Because of the general complexity of HIPAA laws, you might be better off turning to an outside company to ensure that your wellness program remains in compliance.

No matter your choice, your employees do need to feel a sense of inclusion in —and perhaps even some sliver of ownership of — the program, so involve them as early as possible. Tell them about the program as you develop it, and if you build a wellness planning committee, make sure you bring in people from as many departments as possible and allow them to participate.

“There needs to be somebody in-house who is a champion,” Stewart says. “That doesn’t mean you have to do everything in-house, but I think it’s important to have somebody who will be both a cheerleader and a champion for this kind of work.”

A key to increased participation is to offer incentives, especially now as we continue to recover from the recession and every little bonus bears the glint of gold. Perhaps your employees would react to paid time off or reduced premium costs. Both are common incentives, according to a panel of more than two dozen industry experts.

“One of the critical pieces of success is to engage employees,” says Dr. Christopher H. Coulter, chief medical officer, Precept Group. “And it’s not enough to tell them that you want them to behave better or to have marketing materials. You have to show them what’s in it for them. People follow the money, and a structured incentive program will greatly enhance the participation rates and the success of the program.”

Monitor your results

The fruits of an effective wellness program will take time to develop and spread throughout your business. Give it a couple of months to notice the first signs of change, a year to really see an improvement and a couple of years to watch as the culture changes.

Over time, you can measure the collective pounds lost and the decrease in cholesterol and blood pressure levels. You can also measure the decreased rate of absenteeism because of injury or illness, improved productivity, and perhaps even lower figures for workers’ compensation claims and turnover rate.

The program might also pay for itself during that first year — thanks to employees being able to work more hours and to a possible decrease in health care costs — but you’ll likely have to wait until at least the second year to see any real positive return.

“An employer who could get a wellness program, in a traditional sense, to pay for itself in the first year or two would be a pretty good result,” Martino says.

When that change starts to filter in, you’ll likely see the average wellness program will be worth about $3 for every $1 you invest. Some experts say you can expect more than that — $5, $6 or even $8 for every $1 you invest. But $3 is a fair figure on which most experts agree.

“A wellness program isn’t like buying a good or a service in the marketplace,” Coulter says. “You’re not going to look at three and pick the one with the best price and move on to the next issue. A wellness program really only works where there is a high level of commitment that flows from senior management down.

“Companies that are successful at wellness programs end up adopting some of those metrics related to employee health, related to the impact of various health-promotion programs, as important business metrics.”

Wednesday, 26 May 2010 20:00

Creating a wellness program

Imagine an office where employees walk laps during lunch, their pedometers clipped to their waistbands, clicking off each step up and down the stairs and through the halls and around the cubicles. Imagine an office where employees snack on fruits and nuts rather than candy bars, where employees drink water instead of another can of soda, and where employees have managed to kick that pack-a-day habit.

Imagine an office where health and wellness are a priority.

Is this anything like your office? Perhaps it will be during the months and years to come.

There is little doubt that health and wellness are, if nothing else, a hot topic across the nation. Just turn on the television and watch a reality show about weight loss or any of what seems like a dozen syndicated talk shows where a photogenic doctor fields questions and concerns. Or pick up a magazine and read the features on wellness recently published in Time and The New York Times Sunday Magazine. Or just turn your eyes to Washington, D.C., where President Barack Obama signed the health care reform legislation in late March.

Our parents are overweight. Our children are overweight. We are overweight. And as we work our way through the recession, our days are packed. We tend to eat poorly and not exercise or even move nearly enough. We are in the dregs of a pandemic. All of our poor decisions are costing not only our bodies and our minds, but also our health care costs and our office productivity. A wellness program just might help to turn the overwhelming tide of fat and frustration.

“A wellness strategy is really a subset of a human capital strategy,” says Paul Martino, vice president, health and wellness solutions, WellPoint Inc. “I think if an employer has a long-term horizon and views human capital in a particular way — that it is valuable, that you want to retain your highly valuable and efficient people — you want to allow people to be at their job and functioning well.”

If you don’t have a program up and running — pun intended — at your business, why should you bother to install one now? Or if you do have a program, why should you aim to improve it as we continue to move through 2010? Well, because plenty of research proves that healthier employees are more productive and actually cost you and your business less in total costs. Oh, and there’s an impressive return on the investment, especially after a year or two.

But you have to plan and install the program first.

Take the first step

Are your employees overweight? Are they obese? Do they smoke? Not long ago, you would have been well within your rights to avoid the answers to any of those questions. If your employees worked hard and produced, who cared about their health? But after years of medical research, those are all important and relevant questions, and if the answer to any is yes, you will want to consider a wellness program.

But why do you want to install a wellness program?

There are no wrong answers, of course, but if there is no why, if there is no vision, the program will flounder.

“Do you want to build benefits? Or, as the management team, is your goal to affect claim costs? Is it a combination of the two?” says Sally L. Stephens, founder and president, Spectrum Health Systems, Indianapolis. “Senior management, or whoever initiates it, needs to ask what they want to accomplish by putting a wellness program in. Too many people think it’s a solution but don’t think through clearly what their goals are.”

And if you and your executives do not support the program from its first breath, neither will your employees, so take the time to work with a private company for you and your employees to take a health risk assessment and a biometric screening.

Those highlight symptoms and conditions that might develop into larger problems in the future, both among individuals and your employee base as a whole. If you work with an outside company, the information will also be anonymous and in compliance with the Health Insurance Portability and Accountability Act.

“Some employees hesitate to give all their personal information to the insurance company,” Stephens says. “They don’t want the insurance companies to know they smoke or any of these other things. Working with a third-party provider ensures 100 percent confidentiality. They manage all the data, they manage the security, and the employer doesn’t have to worry about the data management.”

HRAs are often free, though if performed in person rather than on the Internet, they can cost between $5 and $25 per employee, depending on the quality and depth of the analysis. Biometric screenings typically cost anywhere between $50 and $150 per employee. You might also need to offer your employees an incentive, like a gift card or cash, for them to give their time to take the tests — because anything less than 70 to 80 percent participation leaves the results skewed and of less use for your business.

That cost might seem steep, but the information that is revealed can change your business. Do you want to know the overall health risk for your employees? Their weight and body mass index? Their exercise, nutrition and smoking habits? Even their levels of stress at work and at home? All of those figures are available and can help lay the groundwork for what you need to know to start a wellness program.

Consider an outside company — and your employees

When you have the results of the HRAs and screenings, you’ll want to work with your insurance company to perform an annual claims review. At that point, you’ll be able to plan for the installation of a wellness program.

But you might not want to keep that plan under your own roof.

Because of compliance regulations and the general complexity of HIPAA laws, you might be better off turning to an outside company to ensure that your burgeoning program remains legal. After all, you already work with a law firm to handle your legal matters, an accounting firm to handle your numbers and a bank to keep everything in order, so why not work with professionals when it comes to the literal health of your business?

“Running these programs is difficult,” says Michael Nadeau, president and chief executive officer, Viverae Inc., Dallas. “There’s a lot of work that goes into coordinating it and making it all happen. And it’s just as easy to coordinate a program for 1,000 employees as it is for 50 employees. That’s why the spend tends to be a little higher per employee for smaller companies.”

No matter your choice on that matter, your employees do need to feel a sense of inclusion in —and perhaps even some sliver of ownership of — the program, so involve them as early as possible. Tell them about the program as you develop it, and if you build a wellness planning committee, make sure you bring in people from as many departments as possible. And when the program is prepared to launch, make sure you pass along that information well in advance.

The key to increased participation is to offer an incentive, especially now as we continue to recover from recession and every little bonus bears the glint of gold. Perhaps your employees would react to paid time off or reduced premium costs. Both are common incentives, according to a panel of more than two dozen industry experts.

“You need to show someone you’re thinking about their health,” Nadeau says. “This is where you need to provide the right information at the right time and at the right frequency, because you need to have specific programs designed for a specific population.”

Monitor results and look forward

The fruits of an effective wellness program will take some time to devel op and spread throughout your business. Give it a couple of months to notice the first signs of change, a year to really see an improvement and a couple of years to watch as new habits spread from employee to employee.

Those new habits, of course, are part of the return on your investment. There are other intangible returns, too, including employee reports that they feel better and look better and now have a success story to tell their friends and family. But without hard numbers, all of those intangibles are nothing more than what one expert referred to as “warm fuzzies.”

Good thing a wellness program is far more than warm fuzzies. After a couple of months or a year or two, you can measure the collective pounds lost, the drop in body mass index, and the decrease in cholesterol and blood pressure levels. You can also measure the decreased rate of absenteeism because of injury or illness, improved productivity, and perhaps even lower figures for workers’ compensation claims and turnover rate.

“Where all the cost is in the system is for people who are at risk for either a chronic illness or acute episodes,” Martino says. “Those are the people who cost all the money, so if you point programs at them, it’s much easier to get a return on the investment. If you look at people who are your working well, generally about 80 percent of the population, those are the people who, because they aren’t sick and don’t have as high a risk for illness, they naturally have lower costs.”

And there are the dollar figures for the return on your investment. Those are as important as any number on any scale.

Similar to those first trips to the gym and those first months of the program, you should not expect to see any sort of large return during the first year or so. The program might pay for itself during that first year — thanks to employees being able to work more hours and to a possible decrease in health care costs — but you will likely have to wait until the second year, perhaps even early during the third year to see any real positive return.

“Improvements in health can take a little longer,” Stephens says. “But what we say an employer should expect is stabilization of their health care claims within three to five years — meaning their claims will trend below industry average, assuming they don’t have a lot of outliers like cancer or automobile accidents, things that a wellness program isn’t really going to impact.”

When that change starts to filter in, you might be surprised at what you see. Over time, the average wellness program will be worth about $3 toward your bottom line for every $1 you invest. Some experts say you can expect more than that, $5, $6 or even $8 for every $1 you invest. But $3 is a fair figure on which most experts agree.

“If you believe in the value of your human capital and you want to keep the people who are healthy now healthy in the future, then keep them engaged,” Martino says. “Keep them happy at work.”

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