Paul Sarvadi wanted to launch his company’s rebranding from Administaff to Insperity in the right way — in a big way. So he and his team rented Minute Maid Park and invited all 2,000 employees, some friends of the company and guests. Forbes publisher Steve Forbes was the guest speaker and NFL sportscaster Jim Nantz served as emcee.
If all that fanfare wasn’t enough, the rebranding also leveraged the company’s 25th anniversary into the message.
“It was a very high energy and exciting event,” Sarvadi says. “But at the same time, the rebranding was a little unnerving. It was kind of like your foundation was changing. It was like every one of us was having our first day on a new job the next morning.”
By the time employees got back to the company’s 57 offices, the new brand was in effect — not only a new name that better defined what the HR and business services company provided, but also a solidified lineup of the company’s expanded services.
“The reason for the rebranding was partly because of the limitation of the old brand,” Sarvadi says. “Administaff had a connotation of being in the temporary staffing business, which we never were, and we found that it limited our ability to get in the door because people presumed that was what we did.
“However, people who knew us well loved the name because it was our identity. We served customers well for so many years, and we had a lot of advertising that supported that brand. It was a very positive brand in the marketplace among those who knew us.”
But the real reason behind the $10 million rebrand was that Sarvadi needed something that went past the core service that the company originally offered.
“We were known so well for that one product — Workforce Optimization™ — and it was very difficult to use that brand to ever do anything else beyond that,” Sarvadi says.
“So we needed kind of a bigger vessel, something that could really allow us to extend our competencies into other product offerings and into other markets.”
While the huge but short-lived event heralded the arrival of Insperity, the impact was that the company could now take care of customers for life. Here’s how Sarvadi lead the rebranding process for the company that capped a complete business transformation over the last several years.
Transformation precedes the rest
Rebranding often arises out of a negative event that happens to a company; for instance, a scandal or faulty product the company wants to put behind itself. But in the case of Insperity, it came out of the desire to improve how the company performed in the past, and to leverage the strength developed over 25 years of existence.
“We had to make some serious changes,” Sarvadi says. “We really didn’t have cross-selling in our DNA. Now we do. Now we have the ability to look at a customer for life: when they are first in business, when they find out where they are, and then help them as they move through different stages with different solutions that are appropriate for them.”
For most of its life, Administaff sold one product to a perfect-fit customer at just the right time. Customers were receiving administrative relief, better benefits, reduced liability, a technology platform and a systematic way to improve productivity.
“We had been in business for 25 years, and we had tremendous success as a company,” Sarvadi says. “But the one issue that we had was, ‘Why hadn’t we grown faster? Why weren’t we larger? I know $2 billion is pretty good but why weren’t we $10 billion, $20 billion?’
“We just felt like there were a lot of companies that we could have assisted if we had some way to help them get started rather than to just take the leap to the full comprehensive service.”
The first step in such a transformation is to develop complementary businesses that serve as stepping-stones toward the full-service product.
“For example, we use what we call a Build by Partner strategy to either build our own new service offerings or build out of what we had already been doing,” Sarvadi says. “For example, we now do payroll on a standalone basis, recruiting on a standalone basis and retirement services.
“We also bought some companies that helped to fill a gap in our service offerings such as expense management, time, attendance and organization planning.
“So for me as an entrepreneur, it was like entrepreneur heaven because now we had a dozen or so new businesses in different stages of development that were all part of the new brand.”
Start with a name
Once Sarvadi had the package to offer, it was time to brand it. The company went through a two-year process to evaluate the current brand and conduct internal and external studies.
“There was literally a full year before a decision was made to rebrand or not,” Sarvadi says. “Then it took another six months to pin down the approach we would take.”
Administaff hired Addison Whitney, a rebranding company out of Charlotte, N.C., but also did a lot of branding work in-house.
The first step centered on the new name and the promise that went with it.
“We decided to hone the mission of the company even further,” Sarvadi says. “Our mission is to help businesses succeed so communities prosper. With the recent economic upheaval and reversal, you could see the opposite effect that when businesses were not succeeding, the community suffered.
“We chose the word ‘inspiration,’ which is so important in entrepreneurship — having that inspiration about a new product, a new service or a new company to provide an improvement in the marketplace, that particular inspiration in the business owner — and the desire to find ‘prosperity,’ not just financially but to be successful to achieve, to create.
“We took those two words, and we put them together into Insperity.”
Once the name was established, extensive planning was made for all the people involved in the process. A small group within the company had to be fully aware of what was going on because it handled implementation.
“Planning is so important,” Sarvadi says. “Having some advice from people who have done it is always a good thing. We were so deliberate about the process and the steps and the communication, and that is really what paid off most. We could demonstrate the ‘why.’ You know, people want to know what we are doing, but they want to know why we are doing it too. The better you can articulate the need for change and what change you are trying to drive and why that is important, then the more accepted it is.”
The company went through a full education process over the time period.
“We held monthly company meetings,” he says. “We took another step to kind of demonstrate where we were and where we were going, and eventually toward the end of that process, why a new brand was not only necessary, but represented a huge opportunity.”
Know when it is time to get on board
It takes a tremendous amount of communication to nurture people in a rebranding, giving them a chance to come on board and then ultimately just saying this is the way it is.
“At some point, you just have to say, ‘This is what we are doing,’ Sarvadi says. “People normally are going to stay in their comfort zone absent a significant reason to get out of it. So after you try all the different positive ways to do that, eventually you just have to say, ‘You know what? The train is leaving the station. If you’re staying on it, you’ve got to get with it. If you’re not, the best to you, and thanks for your contribution.’ But at some point you have to get on board.”
While Sarvadi and his team did have a few bumps along the way, trying to make sure that a company could still have consistent predictable results while going through a massive transformation like this was no small feat.
“I’m not sure it could have been done faster, but my gut is if we would have spent more time with the field leadership people to get them along faster, they could’ve helped us get to the frontline people faster, but that’s all under the bridge, and you just got to go from there now,” he says.
“It was almost like we were refueling an aircraft in midair, or changing the tires while we were going 60 miles an hour.”
The rate of unaided awareness was one of the sure signs that the rebranding was working.
“We developed some very powerful television commercials to have a big impact initially to get the brand out there, and the effort has been very successful,” Sarvadi says. “In fact, in about a year and a half, the old brand disappeared. It was amazing how much work we had to put in on an ongoing basis just to keep that brand alive. The new one almost doubled the recognition in 18 months.” ●
- Transformation often precedes the rest.
- Start with a rebranded name.
- Know when the train is leaving the station.
The Sarvadi File
Name: Paul Sarvadi
Title: Chairman and CEO
Born: Aurora, Ohio
Education: I attended Rice University and the University of Houston, but I never completed college. I got the entrepreneurial bug about halfway through and never finished — much to the chagrin of my mother. But I think she got over it.
What was your first job and what did you learn from it? The first one I would call a job was caddying. My brother was the caddy master, so that taught me never to work for your brother. But the other thing was that you learn to serve people. With caddying, you actually learn a lot about personalities and people when you are watching them play golf. Golf has a way of bringing it all out of you. You learn the value of service, and I think that is always a very important thing for young people to learn.
Who do you admire in business? There have been a lot of folks that I have admired over time. Early in the development of our company, I was particularly intrigued with Compaq. They had been the fastest growing company, $1 billion at the time. Rod Canion ran that business, and he really spent a lot of time and effort on the culture of the company and getting discretionary effort and creativity. He had kind of a consensus-style management that works a lot, but depending on different times, it can be effective, or not as effective.
What is the best business advice you ever received? I think the best advice any business owner could have ever received is about persistence and perseverance — you just can’t give up. Believe me, when you own a business, the thought of giving up does enter your mind periodically when the challenges are great. That is really why we started our company, because I felt like the success equation for business owners was going the wrong way. It was getting harder to be successful, both in the level of success, the degree if you will, and the likelihood, and we wanted to provide services and support to improve that success equation.
What is your definition of business success? The beautiful thing about business is that there is a report card — financial success is certainly an integral part. But I don’t agree that is the only part that makes you successful. I think you can be successful financially and leave a wake behind you, if you will, that was not of benefit. And that to me is not success, just having financial results without making something better. You have to make your community better, help employment, help individuals be successful. To me business success means that you contributed in your community in a way that has been uplifting. You have provided a good product and service, your customers benefited, your employees benefited, your shareholders benefited and all of them throughout your community.
How to reach: Insperity, (866) 715-3552 or www.insperity.com
After nine successful seasons, NBC’s “The Office” called it quits earlier this year. Catch an episode in syndication, though, and the administrative missteps of Dunder Mifflin’s branch managers and the valiant efforts of the paper company’s downtrodden HR guy to counsel his misguided bosses will still leave you laughing. HR mishaps and insensitive gaffes make for timeless television comedy, but in reality, a disregard for employees’ rights can be high-stakes drama.
Government regulations dictate how companies treat their employees and potential employees. A systemic disregard for these regulations, or “noncompliance” in HR-speak, can have costly consequences. Below is a sample of some common violations along with their consequences.
A small business owner works her hourly, non-exempt employees nearly 50 hours each week, but only pays them for 40 hours. A competing business owner also works his employees 50 hours each week, and although he pays them for 50 hours, he only pays the regular straight time rate rather than incorporating any overtime pay.
Consequences: Several employees file Wage and Hour charges, which in turn lead to audits of all payroll records. Both employers are found to be non-compliant under the Fair Labor Standards Act. One is required to repay two years of back pay, while the other is required to repay three years of back pay because it was determined that the violations were knowingly and willfully committed.
A small company terminates an employee for work-related misconduct. The company, however, never provided the employee with an employee handbook, so he never signed a policy and procedure acknowledgment. In addition, the company neglected to maintain a written file of the employee’s misconduct.
Consequence: Because the company cannot present documented evidence of the employee’s misconduct or demonstrate that the employee should have known of the company policy, the company is charged with a wrongful termination claim that it cannot dispute.
During a job interview, an owner of a small business casually asks the applicant if he has children. The applicant is not hired, and he assumes it is because he responded that he has three small children.
Consequence: The applicant files an EEO charge and ultimately a suit against the business. The business owner is forced to pay extensive legal fees to defend against the suit.
A supervisor at a midsized manufacturing company continually makes sexist comments and tells subordinates off-color jokes that offend a number of employees. One employee complains, but the company does nothing and the negative behavior continues.
Consequence: The employee files an EEO charge, and later, a harassment suit. After incurring sizable legal fees, the company ultimately agrees to a significant settlement.
The most effective way to ensure your business is complying with today’s complex employment laws is to retain knowledgeable HR professionals. Whether you hire in-house or outsource HR, having access to experts whose job it is to stay current on HR issues and help train and monitor your managers can help you avoid costly pitfalls and prevent poor practices that could damage your company’s reputation. If you think you can’t afford a professional HR adviser, ask yourself whether you can afford not to have one, because the cost of noncompliance is no laughing matter. ●
John Allen, is president and COO of G&A Partners, a Texas-based HR and Administrative Services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information,
Companies that at one time thought they were immune from technology innovation now must decide when, where and how to incorporate such advancements to meet ever-growing consumer expectations.
Evolving to meet customer needs and demands in order to retain and attract buyers is essentially the bottom line for all successful businesses — and today that inevitably means incorporating technology.
Businesses not typically associated with heavy technology use — contractors, plumbers, mechanics and mom-and-pop shops — now must have a pulse on innovation in order to maintain a competitive advantage. Those in service businesses often have relied on their skilled labor and quality, coupled with a healthy dose of advertising and word-of-mouth referrals to stand apart.
Tap into new technology
Although these tactics and differentiators are still essential to success, organizations increasingly must tap into technology in new ways to attract consumers.
Consumers are gravitating in greater numbers to businesses that make processes simpler, efficient, more accurate and less costly.
Technology incorporation can be minimal or vast. It all depends on the needs of your customers and business capabilities. So, when and where should your business incorporate technology to better serve clients and end users?
- Communication. How can you improve communication? Perhaps an online option for service requests, a downloadable phone app, real-time updates or enhanced follow up are in order.
- Automation. Can any current processes be automated to improve customer service? Examples include leveraging technology to determine and send promotions based on past purchases or schedule email follow-ups based on service dates.
- Organization. Can you help customers manage or access information seamlessly? Customers may appreciate having secure access to their service history, work orders and records through an online or mobile platform.
- Accuracy. How can you ensure higher quality? Technology may be able to help provide more precise measurements, detailed records or even aid with scheduling.
- Cost. Both the business and consumer can see the return on investment from technology. Time equals money, and technology can help save unnecessary efforts across multiple facets of your business, including your end product.
Technology doesn’t have to be out of reach. There are many services and products available to help your business better meet customer demands. Marketing agencies and technology consultants can help you build customized solutions.
But if you can’t afford these services, there are relatively inexpensive options out there. Tap into your local chamber and small business association for access. Or leverage turn-key platforms like MailChimp and Salesforce for automation and communication needs. Your business and your customers both will benefit in the end. ●
Leo Ruberto is president of the Columbus-based residential and commercial exterior solutions company, Feazel Inc. An advocate for customer service, Ruberto developed the online portal ServicePoint™ to empower Feazel customers to easily track, organize and request services in one secure location. For more information, visit www.feazelinc.com.
A rather gruesome quote has been attributed to Sean Parker, entrepreneur and Facebook’s first president: “Running a startup is like eating glass. You just start to like the taste of your own blood.”
While that analogy is certainly descriptive, it does ring true for many entrepreneurs. I find startups both energizing and exhausting, and I’d compare the thrill to the adrenaline rush a runner gets. In fact, it’s the rush that inspired me to jump into the startup arena after a foray into the corporate world.
My path to entrepreneurship started in the least risky of ways. I went to the University of Waterloo for electrical engineering, and then I did what most Canadian engineers do, I went to work for one of the big guys — Nortel.
I quickly realized that I was a terrible engineer and found myself wondering more about product pricing, sales models and addressable markets. This curiosity didn’t go over too well with my manager, but definitely helped make me a better entrepreneur today.
Work with wicked smart people
The entrepreneurial path can be full of bumps and jumps. During the height of the dot-com craze, I had the great fortune to connect with a group of amazing entrepreneurs, and we founded Cbeyond. Over the course of 12 years at Cbeyond, the team experienced a lot of great and challenging times.
I learned a valuable lesson at Cbeyond — work with great people that do what they say they’re going to do, have a passion for serving customers and give back to their communities. You and your co-founders will spend every waking moment together, so make sure they’re the kind of people you want to hang out with at the airport bar.
Cbeyond survived the dot-com and telecom busts, completed an IPO in 2005 and grew to more than $450 million in revenue.
In early 2012, while an Entrepreneur in Residence at Georgia Tech, I met the partners for my new company, Springbot. We provide an e-commerce marketing platform to help smaller online retailers compete against giants like Amazon.com Inc. The growth of Springbot has been rewarding and has relied heavily on our team, committed investors and the great startup ecosystem in Atlanta.
Tips from an experienced risk taker
When asked about starting a new business venture, I offer the following advice:
• Avoid running alone. If you are considering diving headfirst into the entrepreneurial waters, run with a pack. The aforementioned “rush” is 10 times better.
• Avoid naysayers, doubters and those who say that being a technology entrepreneur is too risky. Perhaps that’s their reality. But, I say that the real risk is never discovering what makes you happy. Ask “why” three times. The answers will guide you.
• Entrepreneurship is not for everyone but it can be great.
• Starting a business is a rewarding and exhilarating experience that requires a ton of work, dedication and risk-taking. Given the recent challenges at Nortel and BlackBerry, however, it certainly looks like being a technology entrepreneur may not be as risky as the more traditional and so-called “safe” route — plus being a technology entrepreneur certainly beats working for a living. ●
Brooks Robinson is co-founder and CEO of Springbot, a technology start-up that leverages big data and marketing automation to deliver an e-commerce marketing platform for smaller online businesses. He can be reached at firstname.lastname@example.org.
John Wells launched a cultural revolution to sustain the bottom line and the environment at Interface AmericasWritten by Leslie Stevens-Huffman
Carpet made from discarded fishing nets? It may sound far-fetched, but not to John Wells, president and CEO of Interface Americas, a wholly owned subsidiary of Interface Inc., the world’s largest manufacturer of modular carpet tile.
The company recently launched an eco-friendly collection made exclusively from recycled Philippine fishing nets, thanks to a newfound penchant for risk-taking, innovation and social responsibility.
“We see innovation as a way to lower our manufacturing costs, give customers the products they want and reduce our environmental impact,” Wells says. “It’s a way of doing business — not a stand-alone initiative.”
If you think carpet manufacturers and environmentalists make strange bedfellows, you’d be right. The carpet industry has garnered criticism for its environmental footprint based on widespread use of petroleum and fossil fuels in manufacturing and the fact that some 5 billion pounds of carpet and padding end up in U.S. landfills every year.
Interface’s epiphany and massive mid-course correction started in the mid-1990s when its late founder, Ray C. Anderson, acknowledged the industry’s errant ways and vowed to eliminate any negative impact on the environment from its operations by 2020.
In Interface’s case, viewing the carpet manufacturing process through a green lens has led to an expansion of ideas, profits, cost savings and new markets.
“In many respects, innovation has become a survival strategy for us because we’re not a low-price, commodity player,” Wells says. “It’s led to reductions in operating costs and greater value for our customers, which is critical when you make a high quality product.”
For instance, using renewable materials instead of petroleum-based ingredients reduces energy usage by 30 percent and greenhouse gas emissions by 60 percent when compared to the production of nylon carpet. And since eco-friendliness is now a priority for about 65 percent of carpet shoppers, Interface Americas has been able to expand its reach by introducing sustainable product lines.
Wells, whose U.S., Canada and Latin America operations account for $575 million of Interface’s $932 million in annual revenues, has been instrumental in directing the company’s mid-course correction and fulfilling Anderson’s promise.
Here’s how the industry veteran reinvented Interface Americas by focusing on footprint reduction, innovation and cultural change.
Build an innovation framework
A company’s culture has a profound impact on business innovation. The key to success? Deliberately shaping the environment to inspire creativity and invite risk-taking across the enterprise.
“Culture is critical to innovation, and it exists whether you do anything to influence it or not,” Wells says. “Executives have to lead the way by being intentional in their actions as part of a comprehensive and orchestrated effort to foster creativity.”
Wells and the Interface executive team studied the philosophies of author and researcher Marcus Buckingham and extensive research from the Gallup organization before deciding that a strengths-based culture would provide the ideal framework to encourage innovation.
In a nutshell, the strengths-based concept promotes the idea that people get the best results by recognizing and maximizing their strengths while downplaying their weaknesses or perceived deficiencies.
“We all have inborn talents,” Wells says. “Our managers are charged with drawing those out as part of our strengths-based development program. It helps our people maximize their talents and from what we’ve seen, it’s driving results.”
Furthermore, strengths-based hiring debunks the idea that creativity is limited to engineers. Workers are hired for their strengths, placed into roles that leverage their talents and assigned to teams based on an inventory of their personal assets. As a result, all employees — from managers to shipping clerks — across the Interface enterprise are involved in the quest for new and better ways to manufacture and distribute carpet.
“The journey toward change starts with a vision and a mission statement; ours is ‘Mission Zero,’” Wells says. “It creates engagement by giving our workers a sense of purpose. They honestly believe that they can change the world.”
For instance, one engineer became so enthralled with the idea of recycling Philippine fishing nets that he developed the Net Effect concept, engaged conservationist groups in the pilot and helped develop the new product line.
Finally, the Interface executive team invited cultural change by developing “Play to Win” training, which teaches employees to view sustainability as a challenge, not a threat, and encourages them to change their thinking and behavior to foster individual and collective success.
“We changed our culture by changing what people do every day,” Wells says. “Our employees don’t see themselves as manufacturing carpet; they see themselves as making a difference, and that’s weaving innovation into our DNA.”
Champions of organizational innovation must demonstrate enthusiasm for risk-taking and foster a penalty-free environment. But too many mistakes may give executives cold feet, especially when they have to please fashion-conscious customers such as architects and designers who live on the cutting edge of trends.
Wells developed a three-pronged strategy that encourages risk-taking by creating safeguards that take the sting out of failure.
“You tend to have more failures when you develop products or ideas in silos,” he says. “We give people a common goal and utilize blended or cross-functional teams to keep people from competing against each other or having to grapple with divergent interests when developing new products or green manufacturing processes.”
Next, he installed a mass customization production system in Interface Americas’ U.S. plants. That way, the company can offer customers a wide array of products and fill orders on demand, eliminating the pitfalls of inaccurate sales forecasting, overstocking or purchasing delays.
“We only expect a 20 percent take-up rate on new products,” Wells says. “But that’s OK, because we have the ability to manufacture product on demand so we don’t maintain large inventories. Ultimately, our production system lets us introduce more products because it gives us a fairly low investment on the front end.”
Finally, by narrowing the supply chain and creating more products from the same raw materials, he reduced the cost of beta testing. Having fewer feeder inputs hastens the product development process, lowers raw materials costs and makes it easy to fulfill specific customer requests.
“We’ve taken steps to facilitate risk-taking, but you really need to take a long view and test, test and retest before you launch a new product,” Wells says. “Otherwise, it’s easy to slip back into old habits when you fail.”
A cultural shift is a work in progress, and to keep up the momentum, it’s a smart idea to utilize collaborative tools. Interface’s latest effort involves the sharing and development of ideas with diverse, global teams through the use of a social collaboration tool called Jive.
“We’re using an open architecture system to connect people in various capacities all around the globe,” Wells says. “It’s fascinating to see the energy it creates and the speed and execution of ideas as we discuss specific customer problems.”
Wells initiated the collaboration process by posing questions to a small group of participants through the tool. He slowly broadened the talent circle, organizing staffers into project teams and assigning them specific problems as discussions took on a life of their own.
“Online collaboration accelerates the innovation process because you can socialize ideas quickly, gauge feasibility and decide where to invest,” Wells says. “We’re able to solicit feedback from engineers, R&D, product development and sales people all over the world, which eliminates silos, hastens decision-making and reduces the risk of developing new products.”
Since the launch of “Mission Zero,” Interface Americas’ employees have developed the world’s first carbon neutral carpet, selling more than 204 million square yards, and retiring more than 2.9 million metric tons of verified emission reduction credits through 2012.
The company has reduced both the face weight and backing weight of its carpet tile products, decreased the amount of raw materials to produce a square yard of carpet by 10 percent and invented a glueless carpet tile installation system. In addition, seven of nine Interface factories now operate on renewable electricity while the plant in LaGrange is powered by methane gas harvested from a local landfill.
“Our mantra is to innovate and achieve our business goals but to do that through a lens of sustainability,” Wells says. “We’ve done it by changing our culture, using our talent to drive innovation and literally doing more while taking a whole lot less from the environment.” ●
How to reach: Interface Americas (800) 336-0225 or www.interfaceglobal.com
Build an innovation framework to re-invent your culture.
Farm innovation through online collaboration.
The Wells File
Name: John Wells
Title: President and CEO
Company: Interface Americas
Birthplace: Wells was born in Dalton, Ga., which is often called the carpet manufacturing capital of the U.S. Mills within a 65-mile radius of Dalton control more than 80 percent of the U.S. carpet market — which supplies 45 percent of the world’s carpet.
Education: He received a bachelor’s degree in industrial management from the Georgia Institute of Technology; he also completed the executive education program at UNC, Chapel Hill.
What was your first job and what did you learn from it?
I did accounting and engineering work for a carpet manufacturer as part of a co-op program during college. They offered me a full-time position in R&D and product development after graduation, but I soon realized that I wasn’t wired to be an engineer. I moved into sales and was hired by Interface in 1994 as vice president of sales.
What was the best business advice you ever received?
I was fortunate to work for a number of great managers early in my career. Those who developed their people to their greatest potential tended to be the most successful, so I make a habit of following their lead and their advice.
Who do you admire most in business and why?
That would be Ray C. Anderson, the founder of Interface Inc. He was a beacon in the industry who had the courage to stand up and say we’re doing this all wrong. He launched the greening of the carpet manufacturing industry.
What is your definition of business success?
For me, it’s the ability to combine financial success with a noble purpose. When a company meets its fiduciary and social responsibilities, then I believe it has achieved success.
The vast amount of public funds and programs in federal, state and local governments can make it difficult to keep track of expenditures. Far too many people seize this opportunity to commit fraud, which in turn halts intended improvements or services.
For example, the Houston-based Dubuis Health System and Southern Crescent Hospital for Specialty Care Inc., in Riverdale, Ga., were accused of overcharging Medicare. The hospitals allegedly hospitalized patients longer than necessary to obtain larger reimbursements from the government. They agreed to repay the U.S. government $8 million to resolve various False Claims Act (FCA) allegations dating back to 2003.
“When fraud involving public funds occurs, the amount of goods or services those funds can purchase diminishes, and taxpayer dollars are wasted. Constituents see declining value. Public officials and stakeholders face questions regarding the use of tax dollars or other people’s money,” says Trish Fritsche, a senior manager in Forensics and Litigation Services at Weaver.
Smart Business spoke with Fritsche about how public sector officials and other stakeholders can respond to fraud schemes with the help of forensic accountants.
What are the most prevalent fraud methods used in the public sector?
Common ways to divert public funds from intended use are asset misappropriation, corruption and financial statement fraud. Although internal controls can be put in place to prevent fraud, in reality, fraud is potentially as unlimited as the human ingenuity to circumvent those controls.
How should organizations respond?
Once an incident of suspected fraud is identified via a hotline or other source, questions to ask include:
- Should the investigation be handled internally or externally?
- Who are the stakeholders?
- What are the resources needed?
- Should the entity self-report fraud?
At this time, attorneys and forensic accountants may need to become involved. Forensic accountants possess the skills necessary to appropriately respond in a crisis. They understand how to discover and develop information that can be used by governmental entities, boards and others with fiduciary responsibility. Forensic accountants also provide consulting services or expert testimony. They work closely with law enforcement and others to properly address the fraudulent conduct.
What laws can assist with addressing fraudulent conduct?
The Fraud Enforcement and Recovery Act of 2009 (FERA), enacted just after the American Recovery and Reinvestment Act, seeks to reduce fraud involving federal money and property. The act expanded various civil and criminal fraud statutes to include mortgage businesses, as well as entities associated with recovery act funding.
Liability under the FCA was originally limited to individuals or entities that directly or indirectly induced payment by the federal government. FERA, however, expanded that. Now, the FCA not only applies to direct recipients of government funds, but also to any contractor or other entity receiving funds. It explicitly prohibits the retention of government overpayments to individuals or entities.
The Racketeer Influenced and Corrupt Organizations Act (RICO) was enacted in 1970 to combat organized-crime activities. It has since been used to prosecute other offenses, including fraud cases involving government funds. Under RICO, anyone who has committed any two crimes from a list of 27 federal and eight state crimes —such as bribery, embezzlement and money laundering — within a 10-year period can be charged with racketeering. RICO allows a U.S. Attorney to temporarily seize a defendant’s assets and prevent the transfer of potentially forfeitable property. In addition, private parties are allowed to file civil lawsuits under certain circumstances.
Each fraudulent act involving public sector funds not only decreases the funds available, it also causes constituents to lose faith in officials. Effectively combatting fraud enables entities to do the greatest good for the greatest number, while establishing trust among all stakeholders. ●
Insights Accounting is brought to you by Weaver
Deborah Byers loves the word engagement — as in employee engagement — and the new managing partner of the EY Houston office will be focusing on it now more than ever as she takes the wheel at one of the corporation’s largest offices.
“What may happen in a big organization is that you have very strong connections within small pods — and that is great as long as those pods are all connected through somebody in a leadership role,” she says. “You have to bring all those smaller connections together so they have a common vision.
“You could end up with a lot of connectivity in smaller groups that are isolated and not talking to each other — and you are not going to be as effective. So to start in the right direction, the buy-in effort begins with having empathy to understand what the people in the office are concerned about,” Byers says.
“It’s about what makes them feel good about their jobs, or happy to come to work because a happy employee is going to be much more productive.”
While Byers has been with EY for 27 years, most recently as M&A managing partner for the Transaction Advisory Services Group for the Southwest Region, one of her initial steps has been to meet — or get reacquainted — with the movers and shakers of EY Houston.
One of the conclusions she has reached is that as a leader, it is your job to constantly refresh and remind everybody: “This is the vision; this is what we are all marching toward.”
“Then you relate it back to, if we achieve this vision, why it is good for you?” she says. “That is what people want to know: ‘How does this impact me personally at this level?’ One of the primary critiques of leadership is, ‘Oh, they are in their ivory tower. They don’t understand what is happening in the trenches,’ so you need to be able to connect the vision with how it will improve their day-to-day working lives in the trenches.
“Then you want to connect it back to what does it mean to build a better working world: ‘How does that impact me down here when I’ve got a deadline that I’ve got to meet in 24 hours, and there are not enough hours in the day to get it done?’” she says.
In an organization as large as EY Houston, with about 1,200 employees, parts are going to be moving fast but others may be falling back.
“Your job as a leader is to be connected enough to know when you need to go in and help them tweak things a little bit,” Byers says. “You’re not dictating, ‘Hey, go do this. You should be doing this.’ It’s, ‘Hey, you may be a little off track, so let’s do this, and let’s tweak this.’ And then it is not a matter of coming in and saying, ‘What are they doing wrong?’ It’s what are the barriers and finding ways to help them find a solution.
“And that is why it is so important to be connected,” she says. “While it is important to have these goals and visions and be connected with the broader leadership, you know EY is a huge organization in itself, but you have to connect that back and know what each team is doing, down to the engagement level.”
How to reach: EY Houston, (713) 750-1500 or www.ey.com
Dana Sellers built Encore Health Resources into a multimillion-dollar company without a place to call homeWritten by Dennis Seeds
When Dana Sellers started Encore Health Resources with Ivo Nelson in 2009, they did it without office space. Four years later, they have an office, but no one actually works there on a daily basis. There’s no receptionist or office manager. There isn’t a single office for any of Encore’s employees, not even Sellers, the CEO. Rare activity can sometimes be seen on a Friday in the form of meetings, classes, orientation or interviews.
Despite its lack of office space, the health care consulting company of 400 employees had $90 million in revenue last year. Sounds a little far-fetched, doesn’t it?
Success like that, according to Sellers, is more likely to occur when you have a razor-sharp focus on strategy — called “smart skinny data” at Encore — and you have to embrace the concept of a virtual office in order for it to become the optimal way to operate.
For Sellers, once she determined the focus, the solution was right behind.
“The biggest problem that our clients need to solve is how to get value out of their data and our answer is a solution that lets them do that in a smart skinny way,” Sellers says. “Really, there is no reason these days, with technology, that you have to have an office. I don’t have any phone number besides my cell phone number. Why should we be held back by big, bulky offices that tie us down to one place?”
Not every business is a good fit for a virtual office, Sellers admits. Companies that deal with a niche, requiring talent from all over the nation, indeed, the globe, have a good shot.
“For our business, it was the only way we could do it,” Sellers says. “It just doesn’t make sense to move everyone into Houston and then have them fly somewhere every week anyway.
“We tell them, ‘Look, you can stay where you want, as long as you are willing to get up and get to an airport and be at your client’s site at a reasonable hour on Monday morning, and as long as you understand you’re not going to get home until really, really late Thursday night. You still work on Fridays — just by conference call.’
“In my business, to be virtual, you have to make a conscious effort to understand how you are going to engage people.
“And I’m really proud that we have been named to Modern Healthcare’s list of best places to work in health care every year that we have been eligible — and we are a virtual company!”
Here’s how Sellers drives Encore Health Resources to develop integral data management systems — virtually — to move the industry forward.
Focus, and then proceed
Sellers and Nelson had a vision when they started Encore and knew that if it were to include helping clients get value out of their data, they had to have replicable tools and assets, as well as ways of being able to help them with that problem. But they didn’t know what it was going to be, and they couldn’t invent it in a conference room — they didn’t have one.
Just as records are to be broken, challenges are to be surmounted. And Sellers was familiar with the health care IT business, having previously worked with Nelson in launching Healthlink, a health care IT consulting company.
Data was being collected and crunched but the outcomes and efficiencies were less than optimal. A breakthrough eventually came and an ingenious solution was reached involving only the most relevant information — smart skinny data.
With the focus now in hand, Encore proceeded to figure out the details.
Sellers had been given advice from Rod Canion, co-founder of Compaq Computer Corp., to hire great people for Encore. With that in mind, Sellers recruited passionate, self-directed people — 60 percent who were clinicians and 75 percent having worked in the health care industry in the past.
These were the types who could flourish in a virtual office setting.
Decide if virtual is for you
Once Sellers had the breakthrough, she could move on with her virtual company plans. She had seen how well Healthlink had worked with its two major locations, Charlotte and Houston. And another plus — the savings in overhead was returned to clients.
“We had merged two companies; we agreed that we weren’t going to relocate people so we had some over there, and some people in Houston,” Sellers says. “We figured out, ‘Hey, that works out pretty well. We didn’t have to have everybody in one office.’ So we began the process then, and over time, we became more and more virtual.
“When we started Encore, we went all the way. We said, ‘Why do we need an office? For training, for recruiting, to do interviews and we need an office to meet.’ But other than that, we only needed an office originally for our bank of servers. Well, at Encore, we don’t own a server. We run Outlook on the cloud; we have an email service. All our IT services are done in the cloud, and we have a virtual P.O. box.”
But there has to be a structure capable of keeping the invisible seams of the organization together. One such method Sellers uses is a company “lockdown.”
Encore consultants keep an eye out for procedures and discoveries that clients are seeing that would be good to share companywide.
“Lockdowns are very intensive; we bring them to Houston, and they will work on a specific topic for a week,” Sellers says. “For example, the concept of smart skinny data — how do we leverage that concept for an Epic software implementation [software for health care, including offerings such as MyChart].”
The lockdown group, which meets in a room for a week, includes people who understand the tools Encore has, who understand smart skinny data and who understand Epic implementation methodology.
“They will work morning to night; they will have a great time; they will laugh; they will work really hard; they will have fun,” Sellers says. “And when they get done, we will have an electronic document that is amazing, that tells a client, ‘Without slowing down an Epic implementation, here’s how you make sure you get the right data captured so that when you get done, you’re going to have all the quality data in the right format so that you can do all the reporting that you need, to make sure that you are capturing the right insurance reimbursement.’”
Be conscious that you are virtual
Without a doubt, within a sizeable company, virtual or not, there will be times when discussions have to be held with a large number of employees. Encore developed a learning portal on its website to offer several options to help deal with the situation.
“You don’t have to send out an email to all 400 people, but you can participate in a community and their wikis [websites that allow collaborative editing of content by their users],” Sellers says. “There are various ways of enhanced sharing of information that we have worked very hard to do well in a virtual environment.”
When Sellers realized there needed to be a process to keep employees up to date on new tools and methods, monthly “lunch and learns” were instituted. These are videoconferences with educational topics, which are recorded so they may be accessed on the Encore portal. For instance, a consultant on the road can stay up-to-date with training topics while relaxing in his or her hotel room.
It’s also important to involve the entire company in training exercises. Every 18 months or so, 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 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 developed 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.” ●
- Focus on your goal and figure out how to proceed.
- Decide if a virtual office is for you.
- Be aware that you are virtual, and it takes effort.
The Sellers File
Name: Dana Sellers
Company: Encore Health Resources
Born: Austin, Texas
Education: University of Texas at Austin. I studied chemical engineering. I wandered into health care accidentally and I’ve been here ever since.
What was your first job?
I did an internship at IBM manufacturing typewriters.
Who do you admire in business?
There are a lot of people I admire. I probably would say I admire Ivo Nelson, whom I have worked for much of my career. I am blessed to have worked with so many great people, but if I had to pick one I would probably say Ivo.
What is the best advice you ever received?
When we were starting up the company that later became Healthlink, Rod Canion, co-founder of Compaq Computer Corp., said ‘First of all, you need to always, always deliver great quality to your clients. Secondly, you need to hire great people. And third, you need to create a company where they can raise their hands and ask for help.’ So, I have always tried to live by those three pieces of advice.
The first piece Rod said about always delivering quality, we phrase that as 100 percent reference ability. We have a set of core values, and one of those core values we call 100 percent reference ability. Our goal is we know we will stub our toe, we know we will make mistakes, but our goal is that every client is reference-able at the end of the day. We will do whatever it takes to make them happy. We know it is a lot easier to make them happy if they stay happy from the beginning, or if consultants can raise their hand and said, ‘Hey, I think I need help,’ than if we wait until the end and find out that the client is not happy. So we want to create an environment where any consultant at any time can just raise his or her hand and ask for help and is not punished for that. We have a whole quality program that is built to support that kind of attitude.
What is your definition of business success?
There are lots of elements there. Obviously you have to meet the expectations of your shareholders. You’ve got to create a great place for the people who work for you and you have to meet the needs of your clients. I think that when I retire someday, I would like to look back and know that Encore made a difference in health care. To me, that would have been a real success. I think health care has huge challenges ahead of it right now. No one company is going to solve all those challenges, but to me, I would like to feel that Encore has been a huge success if when I retire, I can look back and say Encore played a role in helping make a difference.
How to reach: Encore Health Resources, (877) 787-1010 or www.encorehealthresources.com
Does your company struggle to reconcile its short-term needs with its long-term imperatives? Is there a silent and sometimes not-so-silent war between those who push a short-term driven agenda versus those who take a longer-term view?
In many companies, the tug-of-war between short-term and long-term causes confusion and distraction. The company finds itself in an endless loop of course corrections, stuck in a circular motion as opposed to moving forward.
Short-term vs. long-term
Short-term challenges are often, but not always, driven by some crisis. Strong customer dissatisfaction, hot new sales opportunities, competitive threats, key employee turnovers and cash-flow crunches are just a few of the examples that can cause a company to focus on the endless array of “urgent” situations and neglect long-term needs.
To satisfy an irate customer, a company may go against its core business model and make decisions that might haunt it later. However, many within the company would justify it by arguing the company must do what is necessary to live to fight another day.
Long-term imperatives are often driven by the need to take the company to the next level. It is about improving and transforming the company so it is stronger and vibrant and can grow at a faster, more reliable rate.
Those imperatives typically involve a significant commitment of time and investment. They involve deliberate considerations and difficult decisions at multiple stages and dimensions. These initiatives require a lot of effort to sell internally, and the benefits are often obscured due to the long turnaround-time required to produce benefits and the high number of variables and risk factors.
Executives who tend to favor short-term solutions are often doers and operational in mind-set. They get satisfaction from getting it done. They feel compelled to do something quickly as opposed to holding themselves back to develop a more rigorous and long-lasting solution.
On the other hand, executives who favor long-term solutions are often big-picture thinkers, who like to consider all angles, develop comprehensive and holistic solutions. Developing the right solution to them is more important than doing something fast.
Executives with these different mind-sets are similar to the two men standing on either side of a precipice engaging in a tug-of-war. Neither can afford to let go.
Two sides of the same coin
Your company cannot afford to sacrifice either the short- or long-term. The million dollar question then is how do you reconcile seemingly competing sets of imperatives?
You must ensure there is no competition between the short- and long-terms. They must be two sides of the same coin.
The issue of misaligned imperatives arises because companies fail to clearly develop and articulate their long-term initiatives. As a result, the organization pursues short-term imperatives that are contrary to long-term imperatives. The short-term projects become difficult to discontinue because of the expectations created for different stakeholders from customers to employees.
The long-term imperatives must provide the context, an umbrella if you will, for the shorter-term thrusts. Shorter-term initiatives and projects must form an intricate pattern within the tapestry of the longer-term quilt. Your company must develop the discipline to ensure that even in the case of a crisis, the response does not violate the firm’s core business DNA.
Do not fall in the precipice. Ensure your short-term and long-term imperatives are cohesive and congruent. ●
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 email@example.com.