Most employees are far removed from the design and analysis of their compensation plans. Behind the scenes, the employer is investing time and resources in designing the plans that attract, retain and motivate top talent.
While every company plans compensation packages differently, there are some core strategies that can be applied to attain success in recruitment and retention.
You can plan big with these five strategies to building a successful employee compensation plan:
1. Communication is key.
Good intentions behind the design of a compensation plan do not necessarily deliver the intended results. Communication is the driver. Management is responsible for communicating the “why’s” and “how’s” of the plans it has designed. In addition, keeping people abreast of performance — both corporate and individual — is paramount when a company has a pay-for-performance culture.
2. Good corporate strategy equals successful compensation plans.
All too often, compensation plans are in place because “it has been done in the past.” For a compensation plan to be truly successful, it must be tied directly to corporate strategy.
One of the biggest failures of pay plans is they do not take into account all the key drivers that will make the company successful. Without this “linkage,” pay plans can actually promote unwanted behavior that offsets the overall strategy of the company.
3. A sound employee performance evaluation process is essential.
The employee evaluation process may be tedious, but it is the catalyst that drives most, if not all, pay decisions. The employee evaluations and the process utilized should have direct ties with the compensation plans used. It gives the company the ability to show definitively that results impact rewards.
4. Pay is not perceived the same by all.
Abraham Maslow’s theory of the “hierarchy of needs” directly pertains to this strategy. Base salary and benefits are typically essential to all employees in the corporate workplace. These are key “building blocks” of pay.
Beyond these basic building blocks, the “hierarchy of compensation needs” changes as much as the demographics of the organization. Giving appropriate consideration to these unique needs and tailoring portions of total compensation allows an organization to reinforce its culture while maximizing the utility of the total compensation dollars.
5. Recognition, recognition, recognition.
Acknowledgement is a fundamental human need. Compensation is a great way to express appreciation and acknowledgement of a job well done; however, compensation plans are typically based upon milestones in the calendar year.
Remember, everyone wants a “pat on the back” or some form of recognition when they, as an individual or as a team, have achieved something worthwhile. Recognizing and reinforcing top performers through compensation will promote the corporate culture, promote desired work ethic and achieve results.
Well-designed compensation plans have the ability to propel an organization forward. These strategies, among others, should be considered by those responsible for compensation design — the CEO, CFO or vice president of HR — in order to achieve success. Leading organizations are built on talented, committed professionals — competitive, well-planned compensation packages are vital to recruiting and retaining these top performers. ●
Brent Longnecker is chairman and CEO and Chris Crawford is president of Longnecker & Associates, and are experienced in the field of compensation and corporate governance consulting. They have authored 15 books on compensation, including “The Power of Restricted Stock.” For more information, visit www.longnecker.com.
How well thought-out and executed is your customer engagement model? Is it something that has developed by default without proactive and deliberate thought? In your company, does every salesperson and service-delivery team member develop his or her own engagement model?
Simple sales typically involve commodity items such as printers or copiers. The customer’s engagement with the seller ramps down quickly after the sale.
Complex construction projects, medical treatment and legal representation are examples of complex sales. The customer is acutely dependent on the seller’s services once the deal is inked. The service the customer buys has a material impact on the reputation and/or well-being of the customer.
If your company is in the business of complex sales and you have not thought through and designed your customer engagement model in detail, your success is at risk. Consider these points:
Apprehension, confusion and distrust
If a large construction project fails or is derailed, it may cost the customer executive his or her job. Customers involved in a complex sale are understandably apprehensive because of the risk factors and high stakes.
Further, every vendor promises high-quality and superior products. It is often overwhelming for customers to sift through all the claims and counterclaims about vendor capabilities and competencies.
Your job, as a vendor, is to help reduce the confusion and address the apprehensions. If you do that, you will earn the customer’s trust and business.
Reduce the noise
How do you reduce confusion and apprehension? You must develop and detail your customer engagement model. The vendor’s well-thought-out customer engagement process is the customer’s insurance against things going wrong.
You must start with the problem. Develop a model to describe the problems and needs so you and the customer can be on the same page.
Next, focus on the solution. Develop a model to explore possible solutions. Help the customer understand how he or she can influence the solution, and what factors constrain the solution choices.
Remember, you know more about the solution than the customer will ever know. They want to know that you have a systematic process to consider and analyze all the choices, and there is a way for the customer to guide you in aspects that matter to them.
You do not want your attorney to impart all his legal knowledge to you; all you want to do is understand the process enough so you can provide relevant information and know that the attorney is thinking things through and not overlooking items because he is extremely busy with his other clients.
Project implementation is part of the solution. Educate the customer about the steps involved, what the deliverables are at each stage that will demonstrate credible progress and what the gates/points are that the customer can provide input to fine-tune the project’s direction and thrust. Address the risks involved and explain how you will manage them.
Engage the right team
Your credibility increases as you involve the right experts during the customer education process. It communicates to the customer you are serious. Customers do not always trust sales people and their promises, but they will almost always treat as gospel what your engineers and delivery-personnel say.
Develop a comprehensive customer engagement model to earn credibility and trust. It is the best way to serve your customers. ●
Quoted in The Wall Street Journal, Barron’s and WorldNews, Ravi Kathuria is a recognized thought leader. Featured on the BusinessMakers show, CBS Radio, TEDx and PBS Nightly Business Report, he is the author of the highly acclaimed book, “How Cohesive is Your Company?: A Leadership Parable.” Kathuria is the president of Cohegic Corp., a management consulting, executive and sales coaching firm, and president of the Houston Strategy Forum. Reach him at (281) 403-0250 or feedback@ cohegic.com.
Connect with Ravi Kathuria on LinkedIn http://linkd.in/1cfmLUZ
Ask any number of business leaders if his or her employees are satisfied with their jobs and the word “engagement” will probably be in the answer. It’s not just a coincidence; it’s an accepted fact that employees, who by freedom of choice have a desire to work in the best interests of the organization, will drive positive outcomes for the company.
While employee engagement is not a new concept, it has received considerable attention in the last 20 years as one of the top management techniques that can have a significant impact on a business.
Here are seven tips from Houston business leaders on the importance of employee engagement — and how it works for them so it can work for you.
1. Strip off the badges
Steve Stagner, president and CEO, Mattress Firm
When Steve Stagner and his company Mattress Firm took over the 180-store Mattress Giant, he made the first day of the merged operation a memorable one.
He closed all the stores — temporarily — to host a team-building exercise at seven locations across the country.
“We had about 400 of their sales associates show up along with a couple hundred of our people,” he says. “They spent the first four hours in shorts and T-shirts, running around the community finding things together, creating videos on their phones and trying to help accomplish tasks.”
The modified scavenger hunt was actually a way to develop camaraderie, teamwork and a foundation for a common culture between employees who once viewed each other as competition.
“The idea was that I wanted to take our culture and their culture, strip our titles and our badges, badges meaning what company you work for — Mattress Firm and Mattress Giant — and get people to work together, play together, laugh together and solve problems together for a few hours,” Stagner says.
“We had been fierce competitors for 25 years and by noon, we were all sharing ideas. To me, that is the foundation of how a culture is built. It is built on trust and on a relationship.”
2. Communicate casually
Drew Alexander, president and CEO, Weingarten Realty Investors
Meeting with your direct reports and having them cascade information down to other levels is a common method to communicate, but it shouldn’t be the only one.
“It is important to spend some casual time with employees, to go to lunch with them, to have a cup of coffee with folks and to meet with them in their offices, maybe have a drink after work occasionally and hear what’s going on with them,” says Drew Alexander of Weingarten Realty Investors.
The talk may even include some disagreements about operations. While they are unavoidable — you can’t expect agreement all of the time — you can learn to exercise control in how you respond to avoid making matters worse.
“Always try to walk the talk,” Alexander says. “When somebody disagrees with you and says you’re wrong, or when somebody gives you some difficult feedback or says that something isn’t working, always try not to retaliate in any way, shape or form.
“Don’t get into an argument. Maybe ask a little bit more about why they think that to really solicit other feedback. I may not always agree with it but I learned a long time ago if you want honest feedback then you have to accept it graciously.”
3. Look at it FAIR-ly
Jim O’Neil, CEO, Quanta Services Inc.
Jim O’Neil of Quanta Services found that simple is best, and he made it easy to commit employee engagement steps to memory by using an acronym.
“I call it the FAIR model; F stands for Focusing everyone in the organization on the overall vision and strategy of the company,” O’Neil says.
This takes into account that you have company vision and mission statements already in place. If you don’t have them, it’s time to write them.
“No matter what job position you are in with an organization, you work as hard as you can to make a difference,” he says. “You listen and you learn from those around you.”
A stands for holding employees Accountable for their performance.
“You have to hold people answerable and watch for complacency,” O’Neil says. “How do you know whether people are complacent or not? One of the main ways is to set financial targets. Also set employee development targets for them to develop talent within their organization.”
I is for Involving every employee in the mission of the company.
“A CEO must always remember that employees are his internal customers,” he says.
“You have to be a good listener. More than 95 percent of all problems brought to my attention deal with the need for better communication. People often require a sounding board to talk it out. Some problems are complex and require a collective approach to a solution.”
R stands for Recognizing people for their results.
“It means understanding what each person brings to the table in the way of value, knowing that you may have people at the table who are new, and they are there just to learn,” O’Neil says. “But just the experience of sitting through that type of exercise is invaluable to anyone. I learn every day. It’s a continual process.”
Employees who are involved are more likely to generate ideas in the suggestion box.
“They’ll pretty much tell you if you empower them that, ‘Look, I know I’m responsible for A, if you let me go pursue B, I think I could improve value to both our organization and the customer,’” O’Neil says.
4. Consider salary bands on merit
Jason Bernal, president, YES Preparatory Schools
When it comes to the subject of wages and salaries, it’s one topic no company or organization can afford to ignore. Some companies put a salary cap on positions, limiting advancement, but often denoting a dead-end job.
YES Prep realized that there are some people who just want to teach and be great teachers, so a pathway called Teacher Continuum was created, a system on how teachers are paid based on performance and not tenure.
“With the Teacher Continuum program, we have teachers who start out in a certain band; if you are a first-year teacher, you start off at the novice level,” says Jason Bernal of YES Preparatory Schools. “Then you can move throughout the bands to mastery teacher. So based on how your performance is throughout the year, you can move into a higher position.
“A big part of this is that we don’t want to lose great teachers and people who don’t necessarily want to go on to be administrators,” he says. “They just love teaching. We want to keep those teachers. It gives teachers the incentives just to continue doing really, really well in the classroom.”
5. Get inside their head
Taseer Badar, president, CEO and co-founder
It’s been said many times: Managing employees takes a good bit of psychology to be successful — and to grow your business. The first step is to consider the way the employee looks at the job.
“It’s important to understand that when you are dealing with people’s psyche, dealing with human emotions when you are a leader of a company, you’re dealing with their families, you’re dealing with what is going on in their home life,” says Taseer Badar of ZT Wealth Inc./Altus Healthcare Management Service.
He uses the analogy of an airplane to describe how to manage a company and its growth.
“Make sure you don’t fly too high,” he says. “You take off in an airplane, and there is nothing underneath you. If it crashes, you can’t save the plane. When you grow too fast and you don’t have a foundation underneath you, it’s the same thing.”
The foundation is not only some statements describing the company core values or its mission, but a real knowledge and awareness of what’s going on with employees.
6. Engaging in a virtual world
Dana Sellers, CEO, Encore Health Resources
When Dana Sellers realized there needed to be a process to keep Encore Health Resources’ employees up-to-date on new tools and methods, she instituted monthly “lunch and learns” at the virtual company. These videoconferences cover educational topics and are recorded so they could be accessed on Encore’s Web portal. This way, a consultant on the road can stay up-to-date with training topics while relaxing in his or her hotel room.
In addition, about every 18 months, Sellers, holds a retreat that includes team-building and training exercises.
“That retreat is really important in a virtual world because it is where you do come together and actually get to spend time with people,” she says.
The personal connection is also important to retain when there are grievances or problems. Sellers devised a virtual “open door” policy that may rival those of her non-virtual peers.
“We are very, very conscious that we are virtual so we make sure we do a lot of things to keep people engaged,” she says.
“The policy is this: We will make certain that you are face-to-face, personally, with that person, whoever you reach out to, within two business days somewhere in the United States. We don’t guarantee where. You may have to fly to them, or maybe they will fly to you. We will figure it out. There won’t be any retribution; we don’t guarantee you’ll get the answer you want, but we will take your issue seriously and we will look into it, and we will follow up.
“We will hear your issue. And there never, ever will be any retaliation. That’s how you do it.”
7. Seek and enhance relationships
Ric Campo, chairman and CEO, Camden Property Trust
While many businesses feel their most important relationship is between the company and its customers, equally important are employee/employee relationships. You have to have the second one before you can even think about developing the company/customer relationship.
Camaraderie is your lifeblood and without it, work and even life in general may be rather dull.
“One of your core values should be to have fun,” Ric Campo says. “If you can’t have fun with the people you work with, why bother? We try to make it feel like employees want to get up in the morning and come to work for Camden. And they want to have fun doing it.”
Creating a culture of fun starts with researching and borrowing ideas from fellow companies’ successful efforts. Once you have some plans in mind, roll out an initial one — a good time is during the first part of the year.
“One of our big ones is at the beginning of the year. Starting in February and running throughout March, we have what are called ACE awards, which is Achieving Camden Excellence. It’s basically an employee recognition event,” Campo says.
Employees vote for other employees on how they emulated Camden’s values in the last year, and winners get prizes.
“It’s a really big deal,” he says. “Some people get up and cry when they win. They also get money, like $2,500, a trophy and a watch.”
You can try different formats and vary the locations. Campo finds an all-day employee event effective for rehashing how everyone did last year and what is going to go on in the new year.
“But if you think about what you have — a lot of people, maintenance people and service people and so on — don’t communicate in corporate speak,” he says. “Communicate in normal language. For example, when we talk about how we did over the last year, we don’t talk about balance sheets, income statements, earnings per share or multiples on stock.”
Talk about normal things that people understand. Incorporate some well-produced videos and other types of presentations if you can.
“We use a lot of fun stuff, so that creates a camaraderie with the employees; it gives them a sense of pride where they work,” Campo says. “Spend a fair amount of time talking about what you do.”
As the discussions are carried on, it’s important to follow through when suggestions or requests are made. Those can be turned over to a committee structure which you would have in place by that time. ●
If you were to assemble some of the world’s outstanding business leaders in one place and ask them their secret to sleeping well at night amid the pressures of running a successful business, you might think you’d collect the best tips to handling anxiety in the business world.
The truth is that top business leaders often don’t have a secret to reveal — they rely on the strength and confidence they’ve developed over the years.
At the EY World Entrepreneur Of The Year conference, held earlier this year in Monaco, EY Entrepreneur Of The Year country winners assembled to compete for the World Entrepreneur Of The Year title.
We took the opportunity to collect the thoughts of the world’s most accomplished entrepreneurs — innovators, futurists, turnaround specialists and problem solvers — about dealing with worries. ●
“There’s nothing that keeps me up at night. I sleep very well. The challenge we have as a company is to keep delivering the culture we have created and expand it, keep evolving at the speed our customers expect us to evolve and keep creating value for them as we have for the past 10 years.”
Entrepreneur Of The Year 2012 Argentina
“The main thing is to make sure that we are always looking for new, creative ideas that keep our business updated with new technology and creativity. The other thing is making sure we are working faster than before.”
Lorenzo Barrera Segovia
founder and CEO
Entrepreneur Of The Year 2012 Mexico
“Business has its highs and lows, because let’s face it, it’s not easy. It has its challenges. They asked Steve Jobs what was the most important thing in business and he said, ‘Passion.’ If you don’t have passion you would give up when things get difficult. We have so much passion and love for what we do that it becomes a part of our life.”
founder, president and CEO
Entrepreneur Of The Year 2012 United States
2013 World Entrepreneur Of The Year
“What if the stock market crashes? What if there is some unknown thing that happens? What if there’s another 9/11 type of situation? Companies need to carry on, but maybe they don’t need to do events. Maybe they cut back on entertainment and speakers. The worry is what happens if something happens that I can’t control.”
President and founder
SME Entertainment Group
“We are in recovering times. I feel very positive about the economy in general, but I’m still very worried about Europe. And while we are recovering, it’s still choppy and choppy times are times when there are more needs out there.”
Retired global chairman and CEO
"I guess there is a point in my life where I thought it is all about me, and I am going to be the guy that guides everything and controls everything. What I have learned is that the best thing that I have done for our business is learn to let go and learn to get people who are better equipped to manage specific areas, do their thing and not get in the way."
Dr. Alan Ulsifer
CEO, president and chair
Entrepreneur Of The Year 2012 Canada
“Nothing keeps me awake at night becase my work is solid.
My father married at 60 and my mother was 23. They had four children. Then he died, and we quickly had to start thinking about what to do. There was no money — nothing. We had to leave the little town we lived in because of violence there. Thanks to that, I am where I am right now because I still could be on the streets of my village selling tobacco. There is no wrong that can do good. That's what I have to teach people.”
founder and president
Entrepreneur Of The Year 2012 Colombia
The idea of driving aimlessly seems glamorous in movies and songs. In reality, few of us get in a car without knowing how to reach our destination. We’ve created smartphone apps, GPS devices and satellite mapping to make our trips as efficient as possible and to avoid what we know to be an inconvenient, expensive outcome — getting lost.
I bring up this idea because many companies using social media have inadvertently become lost drivers. They start using social platforms with the goal of reaching some number of likes, retweets or shares, but as they embark on their social media strategies, many experience a disconnect between the content they post, blog and tweet and their progress on measurable business goals. These companies are driving without a roadmap; they just don’t know it.
Sound familiar? If social media isn’t working for you, your social media approaches may be missing a fundamental component: an effective content strategy. Here are three ways a solid content strategy will enhance your company’s social media success.
A like is just a like
All social media engagement is not created equally. To be successful, the social media activity that you generate needs to support your marketing goals — whether you want to improve employee engagement, boost customer conversions or build interest in a new product.
Creating a content strategy before you engage in social media will help your business clarify the specific marketing goals you want to achieve through content, as well as what messages you need to communicate to reach those goals. This process will ensure you get the right likes, shares and retweets from social interactions.
Social is a vehicle
Social media is a vehicle for sharing compelling content with your audience, and it doesn’t work if you don’t know what issues, topics and trends your audience finds compelling. Part of developing a content strategy involves learning how those you are trying to reach want to be talked to. Where do they go for information? How much time do they spend online? What kind of content are they looking for from your industry?
By getting to know the interests and pain points of your audience (customers, employees, shareholders, etc.), you can develop tactics to reach your online audience more effectively, saving you time and enhancing your company’s social influence.
Relevant content is meaningful
Kings of social content don’t become that way by luck. They use strategic tactics to connect with their audience through the right channels at the right times. More importantly, they make these connections meaningful and memorable by posting and sharing strategic, relevant content that their audiences desire.
When you deliver social content that your audience members find valuable or interesting, they’ll reward you by sharing your content, engaging with your business and, ideally, helping to promote your reputation as a thought leader in your business or industry. A content strategy allows you to do that by providing a roadmap for what kinds of informative, helpful, educational or creative content you need to make meaningful interactions.
As a recent Huffington Post article put it, the golden rule of the web is clear: “To know us better is to sell us better.” Ultimately, being successful in the social media space means taking the time to map out what success looks like. In this sense, a solid content strategy is not only an important component of any social media strategy, it’s the key to driving the results your business wants.
Michael Marzec is chief strategy officer of Smart Business and SBN Interactive. Reach him at email@example.com or (440) 250-7078.
When Albert “Chainsaw Al” Dunlap was the CEO at Sunbeam in the late ’90s, he had a reputation for ruthlessness. Besides massively downsizing the company, he was also known to intimidate everyone around him and resort to yelling and fist pounding.
While extreme, Dunlap’s behavior is an example of the type of “dictator” leadership that used to be fairly common in the C-suite. Rules were rules, there were no exceptions for anything and people were just a line item on a budget. Need to cut thousands of jobs? Don’t think twice about it.
On the other end of the spectrum is the Christ-like leader. This leader focuses more on building people up rather than tearing them down. This type of leader understands that there are rules, but sometimes to do the right thing, the rules need to be broken. For example, during the economic downturn, some Christ-like leaders went well beyond what was called for to make sure laid-off employees were taken care of.
They made sure they had the use of office resources to look for a new job and did everything they could to lessen the hardships. They weren’t required to do this; it was just the right thing to do. They saw employees as human, not just numbers on a spreadsheet.
Does it cost money to take the more humane route with your leadership? Yes and no. From a short-term, bottom-line perspective, it probably does cost a few more dollars to help people through a hardship. But long term, it can pay dividends. By treating people with respect and doing the right thing, it helps eliminate animosity toward you and your company from both the ex-employees and current ones. Maybe there are some good employees who you wanted to keep, but couldn’t afford. By showing compassion, when the economy turned around, they were far more likely to consider coming back than if they had just been shown the door with little regard to their well-being.
And what happens when these ex-employees end up in key positions in companies that could be customers? Do you think an ex-employee who you mistreated is going to buy anything from you or recommend your company to someone? It’s a small world, and what goes around often comes around, so it’s always best to treat people as best you can.
You can lead like a dictator and still get results. But do the ends justify the means? Will you conquer all, only to find yourself alone with no friends, the equivalent of Ebenezer Scrooge in “A Christmas Carol?” Or will you have an epiphany and realize there’s a better way to do things?
During this holiday season, think about your leadership style and the long-term effect it has on people’s lives. If this exercise makes you uncomfortable, then maybe it’s time to change how you lead. ●
What would it take for a company to succeed if its leader could effectively do only one of the following: innovate, instigate or administrate? We all know that an innovator is the one who sees things that aren’t and asks why not? The instigator sees things that are and asks why? The administrator doesn’t necessarily ask profound questions but, instead, is dogged about crossing the “t’s,” dotting the “i’s” and making sure that whatever is supposed to happen happens.
Ideally, a top leader combines all three traits while being charismatic, intellectual, pragmatic and able to make decisions faster than a speeding bullet. Although some of us might fantasize that we are Superman or Superwoman, with a sense of exaggerated omnipotence, the bubble usually bursts when we’re confronted simultaneously with multiple situations that require the versatility of a Swiss army knife.
Business leaders come in all shapes and sizes with various skill sets and styles that are invaluable, depending on the priorities of a company at any given point in time.
Every business needs an innovator to differentiate the company. Without a unique something or other, there isn’t a compelling reason to exist. Once those special products or services that distinguish the business from others are discovered and in place, it takes an instigator to continuously re-examine and challenge every aspect of the business that leads to continued improvements, both functionally and economically. It also takes an administrator — someone who can keep all the balls in the air, ensuring that everyone in the organization is in sync and delivering the finished products as promised to keep customers coming back.
As politicians and pundits of all types have pounded into our heads in recent years, “It takes a village to raise a child.” All who practice the art and science of business have learned that, instead of a village, it takes a diverse team working together to make one plus one equal three.
On the ideal team, each member possesses different strengths, contributing to the greater good. The exceptional leader is best when he or she is an effective chef who knows how to mix the different skills together to create a winning recipe.
In many companies, however, leaders tend to surround themselves with clones who share similar abilities, interests and backgrounds. As an example, a manufacturer may have a management team comprised solely of engineers, or a marketing organization could have salespeople who came up through the ranks calling all the shots.
If everyone in an organization comes from the same mold, what tends to happen is, figuratively, one lies and the others swear to it. This builds to a crescendo of complacency and perpetual mediocrity.
There is a better way. Good leaders surround themselves with others who complement their capabilities, and savvy leaders select those with dramatically different backgrounds who will challenge their thinking because they’re not carbon copies of the boss. This opens new horizons, forges breakthroughs and leads to optimal daily performance.
Strange bedfellows can stimulate, nudge and keep each other moving toward the previously unexplored.
To have a sustainable and effective organization, you can’t have one type without all the others. While everyone on the team may not always agree, each player must always be committed to making the whole greater than the sum of the parts.
The single most important skill of the leader who has to pull all the pieces and parts together is to have the versatility of that Swiss army knife — selecting the precise tool to accomplish the objective at hand. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
More than 800 years ago, medieval philosopher Maimonides outlined eight levels of charity, the greatest of which was supporting an individual in such a way that he or she becomes independent. In Maimonides’ view, support was defined as a gift or loan, entering into a partnership or simply helping that person find employment.
Few things are more powerful than philanthropy — especially when its end goal is to better the lives of others. These days, philanthropy, and corporate philanthropy specifically, has assumed a broader role in society.
Today, companies give back more strategically than ever before. They align themselves with nonprofits that foster missions they believe in. The wealthiest people on the planet have even coordinated the Giving Pledge (www.givingpledge.org), where they’ve committed to dedicate the majority of their wealth to philanthropy.
At last count, more than 115 people had taken the pledge. Warren Buffett and Bill Gates may be the most prominent names on the list, but others include Spanx Founder Sara Blakely, Cavs Owner Dan Gilbert, Progressive’s Peter Lewis and Netflix Founder Reed Hastings.
Last month, one member, David Rubenstein, CEO and co-founder of The Carlyle Group, discussed the importance of philanthropy during a presentation at EY’s 2013 Strategic Growth Forum.
In his pledge letter, Rubenstein explains why: “I recognize to have any significant impact on an organization or cause, one must concentrate resources, and make transformative gifts — and to be involved in making certain those gifts actually transform in a positive way.”
One way Rubenstein is being transformative is through “Patriotic Philanthropy.” He has given $10 million to help restore President Thomas Jefferson’s Monticello home and underwrote renovations to the historic Washington Monument. Yet Rubenstein’s most noteworthy initiative is the whopping $23 million to acquire a rare copy of the Magna Carta, ensuring it remained in the United States. After its purchase, Rubenstein gifted it to the National Archives.
Not everyone has Rubenstein’s vast resources. But every organization and any individual can make their own impact.
In the workplace, for example, organizations that give back elevate their status perception-wise among competitors and peers. It doesn’t take much. But by being a company that cares, prospective employees want to work for you. For your existing team, deliberate and well-organized corporate philanthropy programs quickly take on a life of their own, becoming a rallying point.
Think strategically and get started by finding your cause. We all have them. They exist at our very core, forming the belief system we live by every day. So why shouldn’t our philanthropy follow that same course? Consider aligning your giving or volunteerism with something you personally believe in or care about; something that fits with what your company does or something that is close to your employees’ hearts.
Most important, get involved and just make a difference. It really comes down to that. One initiative that has always impressed me has been the annual CreateAthon event undertaken by WhiteSpace Creative, a member of the Pillar Award class of 2005. You can read a first-hand account of this year’s program here.
Being a good corporate citizen goes well beyond making good business sense. When you align yourself with causes you care about, whether big or small, you make a difference in someone’s life. And the bottom line is this: It is all of our duties to get involved. It’s no longer a question of if, but rather of what, when and how. ●
Dustin S. Klein is publisher and vice president of operations for Smart Business. Reach him at email@example.com or (440) 250-7026.
In 2012, the energy sector spent $17.9 billion on global research and development, more than $6.6 billion of which was conducted in the U.S. Assuming small and midsize businesses perform 20 percent of the U.S. energy sector’s R&D, these companies could incur up to $1.3 billion in R&D expenditures, the benefits of which may not be fully realized because they underutilize the R&D tax credit, says Robert Henry, a partner in Tax and Strategic Business Services at Weaver.
In addition, the R&D tax credit represents a permanent tax benefit; it reduces the overall effective tax rate as presented in generally accepted accounting principles basis financial statements.
Smart Business spoke with Henry about new ways to utilize R&D tax credits.
What is the R&D credit?
The federal R&D tax credit is a mechanism to spur technological advances and hiring in R&D fields. It has expired and been extended multiple times, but has most recently been extended through 2013. With support in both political parties, it is likely to be continued.
In addition, many states offer R&D tax incentives in the form of state income, franchise, or sales and use tax credits and exemptions. Texas’s R&D credit will come back into law effective Jan. 1, 2014. Texas HB 800 provides a sales and use tax exemption or a franchise tax credit related to qualified R&D activities taking place within Texas. This will greatly increase the potential tax benefit available to taxpayers conducting their R&D within Texas.
How is qualifying R&D activity defined?
Internal Revenue Code section 174 describes research and experimental expenditures as activities intended to discover information that will eliminate uncertainty concerning the development or improvement of a product. The activity must:
- Be related to the development or improvement of a product, inclusive of a technique, invention, formula or process.
- Address uncertainty regarding the appropriate method or design for the product.
Activities deemed eligible by section 174 qualify for immediate tax deduction. They also may qualify under section 41, where they must:
- Be technological in nature, based in hard sciences, such as geology or engineering.
- Contain a sufficient degree of development uncertainty.
- Contain the process of experimentation.
- Have a permitted purpose that improves a business component, which includes a product, process, software, technique, formula or invention.
What oil and gas activities may qualify?
‘Wildcat’ exploration, the drilling of a well, the development of logistical infrastructure — really the entire exploration and production process — may qualify for the R&D credit. That also includes improved analytics and software that enables more accurate interpretation of reservoir studies. A pipeline company in the industry’s midstream sector may be more efficiently monitoring flows of oil and natural gas or overcoming adverse field conditions in placing a pipeline. Downstream companies may benefit from improved processes for purifying or refining natural gas or oil.
What costs are eligible for the credit?
Wages for employees engaging in qualified research, directly supervising qualified research or supporting it are eligible. A company may also deduct 65 percent of contract labor costs associated with qualifying R&D activities.
Tangible property costs used in the R&D process or in the construction of a prototype can be qualifying expenditures. Supply expenses, though, cannot include land or land improvements, or property subject to depreciation. Expenses for royalties, shipping or travel also cannot be included. In addition, special considerations apply for internal-use software.
In order to capture all eligible credit when R&D activities are identified, companies must track and record labor costs of internal employees, contractor and vendor expenses, and supplies or materials costs. A business that is aware of the manner in which these costs are tracked and accounted for will more accurately define what it can claim for an R&D tax credit. ●
Insights Accounting is brought to you by Weaver
Twelve years ago, EY decided to go global with its Entrepreneur Of The Year awards and establish the World Entrepreneur Of The Year program — and the results have been, shall we say, an international success. The conference, held annually in Monaco, features Entrepreneur Of The Year country winners competing for the World Entrepreneur Of The Year title.
Assembling business leaders from around the world in one place to be honored is a huge accomplishment — the wealth of experience, as well as the variety of successful leadership styles, is outstanding.
Here are some thoughts from the collection of the world’s most accomplished entrepreneurs — innovators, futurists, turnaround specialists and problem-solvers — about leadership styles. ●
“I built the company based on people, not on experience from before. They were willing to learn and try anything. We had a bunch of people who had never done this before. None of us had run companies. None of us had worked in high levels of companies. None of us were from Fortune 500s. Chobani not only became a business that grew, but Chobani was like a school to us, including myself.”
founder, president and CEO
Entrepreneur Of The Year 2012 United States
2013 Entrepreneur Of The World
“Early on, the business was centered on me, and I had to make all the decisions alone. Now I share those decisions with my 10 main directors. If there are differences in opinion, I make the last decision.
The other thing is that I have had to ensure that the people who are invited to work here are people with principles, values, integrity, responsibility and passion. If I don’t see a person with passion, they don’t hang around the company very long.”
Lorenzo Barrera Segovia
founder and CEO
Entrepreneur Of The Year 2012 Mexico
“I’m a very passionate person, which will never change. When you grow, you gain more experience and the kind of problems you face change. As you grow, you need to grow with your organization.”
Entrepreneur Of The Year 2012 Argentina
“In the startup days, you have to be very innovative, hire and retain talent, refine your business as you deploy in the marketplace, and you learn things from it. Today, with a solid track record of business success, I can focus on what’s next and think more strategic and long-term than you’re allowed to in the early days. My style has evolved as the business has matured.”
Chevron Energy Solutions
“Entrepreneurship and leadership is about always having ideas, knowing that it is possible even though everyone says it is too difficult. Maintain the positive and always have new ideas.”
Mario Hernandez, founder and president, Marroquinera
Entrepreneur Of The Year 2012 Colombia
“To keep the entrepreneurial spirit and entrepreneurship alive once you've got past the startup base, I think it is making sure people understand why they are there. There are always things you can do to improve your business. You should be rethinking and retooling it every chance you get. The key thing is to make sure everybody in the organization understands the story, where are you going — how are you going to get there? And the belief that you are doing the right thing —people want to know their purpose. Keep the energy going, keep a strong sense of purpose.”
Dr. Alan Ulsifer
CEO, president and chair
Entrepreneur Of The Year 2012 Canada
“The skill sets of an entrepreneur involve understanding how to create business. Why not work with kids who need it the most and actually teach them and help them to be entrepreneurs? That’s what is going to grow our economy and create stability where otherwise we’re going to have a lot of social unrest.”
President and CEO
Network for Teaching Entrepreneurship
“I like to be involved. I want to know everything that is going on. But I have to delegate to my team. That was the biggest adjustment for me, and it’s not an easy thing to do. It’s that delegating to others, trusting them and reinventing yourself. Now that we’ve grown, I put more responsibility on my team and rely on my team more than I once did.”
President and founder
SME Entertainment Group
“If someone makes a mistake, what do you do? You laugh with them. You don’t yell at them. You laugh. It just keeps things light and lively and people want to do their very best. You let them know they screwed up, but you also let them know it’s OK.”
National Heritage Academies