With tough economic times taking a toll on all of us, your first instinct to rising business travel costs might be to eliminate the expense across the board.
Don’t do it.
Travel leads to growth and cutting it is counterproductive. If you’re looking to adhere to a more realistic plan, consider reevaluating your travel policy and consulting with a travel management company to save 20 to 30 percent on travel while keeping worthy trips in the budget.
Travel is the second-largest controllable cost for the average U.S. business, seated between data collection and salaries, yet most companies have little or no management of it.
While your company may have an unofficial policy instructing employees to ‘get the cheapest rate,’ a policy that isn’t managed and enforced is equivalent to not having one at all.
A Smart Business poll showed that 81 percent of respondents’ employees are responsible for making their own travel arrangements. The problem is, if your employees are utilizing online booking agencies or different vendors, your company is likely losing out in the long run. If you lump your travel needs together with selected vendors and submit requests for proposals, your annual negotiated rate will outweigh nickel-and-dime savings earned on a case-by-case basis.
Why travel management is important
If you take steps to retain a travel budget and manage it efficiently, you will most likely see a significant return on your investment.
Sixty-nine percent of companies polled in an October Association of Corporate Travel Executives survey say they will be spending less or the same on travel in 2009.
“Businesses citing lateral travel expenditures in 2009 will likely just be traveling less as the cost of travel has climbed significantly,” says Susan Gurley, executive director, Association of Corporate Travel Executives. “Even those who say they are spending more are barely keeping up with the increase.”
You’d like to think your employees have the company’s best interest in mind, but statistics show companies that place a travel manager or an outside agency in charge of travel finances stay within the confines of their budgets while employee-handled travel has a less successful return on investment.
You need to take a proactive approach to managing your travel costs if you expect to get bottom-line results for a minimum of expense.
But being smart about your budget entails more than waiting for the computerized ping alert of a reduced airline fee like one of Pavlov’s dogs. While airfare is the most costly aspect of travel, you don’t want to arbitrarily eliminate it.
“The first step is to differentiate between strategic and nonstrategic travel,” Gurley says. “Strategic travel generates revenue while nonstrategic travel is anything that results in cost, but has no substantial gain in revenue.”
In most cases, meetings with customers are justifiable, as there is a direct correlation to revenue gains. On the other hand, meeting with the head of the Omaha office may not have much effect on your bottom line this year, so consider cutting that and other trips like it out of the budget. Use videoconferencing or teleconferencing equipment for these internal meetings whenever possible.
Why? Because internal travel can account for about 40 percent of a business’s travel. Don’t worry, technology has come a long way since the early days of choppy robotic movements and out-ofsync voices. Look into Skype and WebEx as a couple of travel alternatives that could save you money while still keeping you in touch with your people in a more personal manner.
“We do a lot of teleconferencing,” says Nancy Johnson, regional director, HCR Manor Care. “We have more than 60,000 employees in offices/facilities nationwide. It wouldn’t be cost-effective to meet in-person, but we can host large meetings, while saving time and money because we have a well-managed process.”
What you need to know
Getting your travel budget under control starts with the assembly of an in-house team of policymakers who vow to prevent travel anarchy while clearly defining your terms and expectations. A good policy will answer why travel management is necessary, detail the value of expectations, cite the requirements and give examples of useful practices.
The team involved in policy planning should include you, a scheduler, travelers and the finance team. After the policy is made, one person should oversee its enforcement and keep up to date on travel industry policy. This could be a part-time or full-time position based on need.
“The ability to work with senior leadership is essential,” says Craig Banikowski, director of global travel management for Hilton and president of the Los Angeles Business Travel Associates. “Cost avoidance is more of the issue now than actual savings, and you’ll only achieve that by planning.”
A realistic travel budget must be based on destination costs versus a flat-rate figure that is impossible to meet in all travel locations. A rate for things like car rental, hotel and food must be figured depending on the median rates in that city.
A policy needs to be revised annually to adjust to economic and company needs, and some flexibility is required in any plan. For example, an employee’s time may be more valuable than the cost savings from putting the person on a later flight, especially if arriving later could jeopardize a meeting with a client.
Also, you want to make sure the employee’s time is used efficiently on any business trip. A policy should entail what is expected of employees during travel and ways they should make the best use of time outside of the office. Meeting with multiple clients during a conference or calling on one located en route are a couple of ideas to maximize the value of a trip.
Some businesses use online booking agencies, believing their rates will be lowest and eliminate travel management company fees, which can account for 3 percent of all travel costs. But the majority of costs 97 percent goes to airfare, hotel and car rental, which is the same arena in which a travel manager will save money.
While travel costs are unlikely to decrease anytime soon, getting through the initial pain may be the biggest challenge facing business.
“The cost increase is felt the hardest initially,” Gurley says. “However, increases and a poor economy have resulted in a reduction in routes traveled about 12 percent fewer flights are available today than even a year ago. This figure will increase and companies that considered reducing travel to be cost-effective will find flying increasingly less attractive into 2009. Optimistically speaking, the economy will eventually level out, but being prepared will mean better opportunities.”
It used to be that a business owner’s banker was a name and a voice on the other end of the phone line. Sure, you met the banker in person when you first opened the account but, barring any problems, probably never saw the person again.
In today’s commercial banking world, the presence of a strong relationship between client and banker is crucial.
“It’s not simply a matter of lending clients money or paying more interest on their deposits,” says Maury Sanchez, vice president and principal relationship manager with Wells Fargo Bank. “It’s about being there for them and having that one-on-one relationship with all of your customers.”
Smart Business talked to Sanchez about the importance of a good banking relationship.
What is the definition of a good relationship in the commercial banking world?
I think it’s crucial, especially in today’s market, to have a strong relationship with your clients. As a banker you have to understand your customers and their business. You need to understand what their needs are and provide them the proper solutions and products that they can utilize to help their business get ahead. That doesn’t mean just selling them something as a way to get them into the bank, but actual services and products that will help them in their daily activities.
It’s important to provide the proper services and be there for the customers when they have a need, but it’s just as important to understand what that need is. We try to visit our customers at least once a quarter, physically sitting in front of them and letting them know we are there for them. If they have any questions or concerns, they know they can call us any time.
Being in front of your customers these days is critical. With all of the competition vying for your customers you really need to be on top of things and understand your clients’ businesses. I believe a customer really appreciates it when you identify and provide them the proper services they need, especially when they weren’t aware the services were available in the first place. I believe that relationship banking is key to customer retention and loyalty.
Have those needs and services changed over the last 10 years?
I’ve been in banking for eight years and began my career as a business banker. In the past, it was more about bringing in loans and deposits. Today as a relationship manager, I work closely with my clients to find the best products and services for their businesses. With the competition like it is today it is very important to establish a relationship with your customers. It’s not just about tying customers to the bank, but it’s about making sure you’re aware of their needs and finding products and solutions to meet those needs.
So the banking relationship is more one on one today than it was in the past?
When I introduce myself to new customers or prospects, I’m offering them a one-on-one relationship with the person who will be their main contact. I am also providing them the assurance that they can contact me with any questions or concerns they might have. If I don’t have the answers, I will find the answers for them. We have many departments and partners within our organization that specialize in various areas and I can guide the customer in the right direction and make sure they contact the right person to help with their particular issue. That is the best way to resolve any issues or questions the customer might have.
It is especially important in today’s turbulent economy to get out in front of clients and let them know that you are there and that you care about them.
How do you keep each client’s relationship personalized with so many clients?
We are not able to get in front of every client, every month. We go through our portfolio and determine who we haven’t contacted in a while and get with them to see what’s going on. There are also some clients who call me on a daily or weekly basis so I don’t have to initiate a contact. And if I’m out of the office when they call I return their call as soon as I can. My clients know who I am, have my office and cell phone numbers, and they know they can reach me whenever they need me. I am always accessible.
MAURY SANCHEZ is vice president and principal relationship manager with Wells Fargo Bank. Reach him at (713) 209-6676 or Mauricio.A.Sanchez@wellsfargo.com.
If your IT guru has told you that something called search engine optimization is the way to go, but you’re still foggy about what it is or why you should care, consider this: When done right, SEO could double your return on investment and help you acquire scores of new customers.
Search engine optimization in its most basic form is simply about making your Web site appear higher up in search results from sites like Google and Yahoo.
Search engines are the starting point of almost all online activity, second only to e-mail, yet more than half of readers surveyed by Smart Business say search engine optimization isn’t part of their current marketing strategy. Search engine optimization has a rightful place in every company’s budget, yet few companies ‘get it,’ and they don’t allocate serious funds into the development of a program.
It all starts when a potential customer enters a search term into Google. Two types of search results are displayed: natural and pay-per-click.
Natural search, which are the results shown on the left side of any search page, are based on merit and validity to the keywords used. The results in the narrow column on the right are pay-per-click results.
When you optimize your site for natural search, it can take three months to see progress in your rankings. The better the optimization, the higher up your site will appear in relevant searches, increasing your chances for a sale.
Pay-per-click gets immediate results by displaying your ad when someone searches for a particular keyword that you choose, but you are charged every time someone clicks on your site. This is an advertisement and a temporary fix.
Why optimization is important
The name Google is so widely used that it’s the newest verb in the English language. Everyone knows of the search engine because it has a commanding market share (various online sources cite 60 to 70 percent on average), so the connection is easy to make: If your Web site ranks high on Google, that’s the best way to reach an audience that’s looking for your goods or services. SEO gets your name in front of consumers at a time they are looking to buy what you sell.
SEO creates compelling information on your site, makes it easy to find and spreads your name around the Internet as much as possible. In the process, your site will be placed ahead of your competition when keywords are searched related to your business.
“About 71 percent of consumers now look to search engines as the No. 1 informational source to buy,” says George Bogle, president, eNET Technologies. “With SEO, it’s not a victory unless your site ranks on page one organically. You must have confidence the firm you choose will be able to get you there.”
Competition plays a role in the difficulty in ranking high, but a series of criteria installed by Google and implemented by SEO firms help make the ranking determination.
“You may think something similar to the ‘Field of Dreams’ theory regarding your business site, ‘If we build it, they will come,’ but this isn’t true without SEO and compelling information on your home page,” says Aldie Beard, president, Find IT Engine. “We live in a microwave society that wants what they need now. If you aren’t ranking, the consumer will go elsewhere.”
The longer you wait to take action, the more difficult it will be to get your site ranked higher.
“You have to keep in compliance with demand as a business,” Beard says. “Considering how long it took some businesses just to get a Web site, it could take three more years for them to get on board with SEO, but they’ll regret not doing it sooner.”
What to look out for
Although understanding the intricate details of what makes search engine optimization work would require two Advil and a clear schedule, knowing the basics and what questions to ask will minimize the use of your mental reserves. There’s no accreditation program for SEO firms, but getting a brief education of the process will allow you to know your opportunities instead of becoming one.
First, there are different forms of SEO, none of which comes with a guarantee. There are two main types of search: local and global and you’ll also hear the term “universal search,” which encompasses both, plus video. A business like a restaurant would probably be interested in a local search only, so would focus on keywords and phrases that include the city name.
One of the easiest ways to measure what keywords might help you rank high is Google Analytics (www.google.com/analytics). It’s a free service provided by Google that allows you to test the current value of your Web site and gives you detailed reports on what keywords are being used to find your site.
But keywords are not the only measure of success.
“Link building is the big thing now,” Beard says. “Google has about 30 ways to rate sites and link building is one that is getting weighed into the mix more than ever.”
Web site design also plays an intricate role in the process. Your site may have an impressive appearance, but spiders software robots that “crawl” the Web indexing data must be able to understand information on the page, or it will not be efficiently indexed, dropping your Web site’s ranking.
Mobile search is the newest type of optimization and sometimes it’s referred to as “third screen.” In the U.S., mobile marketing is largely used for local search, but foreign markets rely on mobile Web access heavily for all facets of search.
Getting the most return from your site requires a balance of compelling information, easy access and optimization that gets it to the top of the search engine rankings. Most professional firms will be able to handle all of these needs, but again, ask questions before signing anything.
Ask the SEO firm if it performs link building, which places a link to your site from other reputable sites. Also ask what techniques it uses to create incoming links to ensure they follow search engine guidelines.
Also, ask the company how it tests, measures and reports results. Think about what you want to know, such as how many people visited a page and if they made a purchase, and make sure the firm can provide that data. The SEO firm must provide updates that mean something to you. Also ask to see samples of its work and see where those clients rank.
Once you find a company you are comfortable with, think long term.
“If you are thinking of hiring an outside company, you should definitely engage in it for a year,” says David Roth, director of search marketing, Yahoo. “SEO is a long, iterative process with delayed results; you’ll want to keep the agency around so they can maximize the benefit to your company and hold them accountable for their actions.”
Like anything else, SEO gets you what you pay for and that means hours of work and a decent chunk of your marketing budget. Since a feasible figure depends on your budget, factor at least a quarter of your marketing budget for SEO.
“The good news is, once SEO is put into place, the cost of attracting a new user is practically zero,” Roth says.
You go to your child’s soccer game, and as you are standing on the sidelines, you strike up a conversation with another parent. During the course of the discussion, you discover that this person is unhappy with the service he or she receives from his or her bank. As a banker in the community, you know this person could benefit from your expertise. A result of smart networking or simply a neighbor helping a neighbor? Why not both?
“I enjoy meeting other people in my community that I volunteer with,” says Michelle Parnell, principal relationship manager and vice president, Wells Fargo Bank, N.A. “In these relaxed environments, such as soccer games and swim meets, there is always an exchange of personal information with those you feel comfortable with. Typically, once my new acquaintances learn I am in the banking industry, they perceive me as a trusted adviser, friend and confidant. They do not feel pressured and begin sharing freely with me, since they have a personal connection.”
Parnell concurs that community events can fulfill both personal and business objectives.
Smart Business spoke with Parnell about the importance of getting out in the neighborhood to get a pulse for the business community.
How important is it to live in the same community where you work?
Extremely important. Originally, I did not work in the same community in which I lived. My remote location hindered the level of service I was aiming to accomplish for both my client and employer. I enjoy seeing those I serve on a regular basis. When you work with individuals in a volunteer capacity, you become a resource person for those people. This allows you to maintain a consistent business image.
When I finally had the opportunity to live and work in the same community, I capitalized on it, which opened many doors for me. I immediately participated in the chamber of commerce as well as my child’s activities. This enables me to meet other business people. In these neighborly conversations, I discover what they are interested in, their life goals and career objectives. In these zero-pressure atmospheres, a rapport is established and my new acquaintances open up to share concerns they have regarding their banking or financial needs. A combination of this community involvement and sincere human interest contributes to my success.
For example, while attending my child’s swim meet, I ran into an old acquaintance and learned that he owned a business. He had some concerns about his current banking situation, and he started talking with me on a hypothetical basis. It gave him a comfort level that I was not just trying to win over his business but, instead, that I sincerely cared about him and his problem. We had a great conversation and later he moved his business to us, simply because he trusted me. I had given him some ideas and encouraged him to ask his bank certain questions. If they had answered those questions in a way that satisfied him, he would probably still be with that bank. As a result of his satisfaction, he has referred multiple corporate clients to me. Transactions like this occur frequently. The ability to live and work in one community is an invaluable resource. At face value, I would not consider a swim meet a corporate networking event, but you do meet executives in need there.
Do you approach these situations as being a possible networking opportunity?
No. I never lead with the expectation that these community events will yield a networking opportunity. I have a genuine interest in people. When you approach an encounter as if you are trying to obtain someone’s business, the lack of sincerity will become transparent.
So what makes someone a good networker?
Aside from having the skills and industry knowledge, being outgoing, articulate and well-spoken are crucial attributes. Proving you are an exceptional listener and someone who enjoys building personal relationships with others are also key to effective networking. Regardless of whether or not they are a close friend, acquaintance or client, I always try to help others even when there is no direct benefit.
Planning for an impending hurricane, a retail client and I developed a plan of action that both my company could deliver on and his company could execute under the compromised circumstances. In the storm’s aftermath, I was in daily contact with him assisting with unexpected issues. My client was thrilled not to lose incremental business and even more so with the service we provided. I am confident that he is out there promoting the level of commitment we provided and spreading positive word-of-mouth networking, as well.
MICHELLE PARNELL is a principal relationship manager and vice president with Wells Fargo Bank, N.A. Reach her at (281) 913-2764 or email@example.com.
Ron Whitley is fully aware that theworld’s appetite for steel is insatiable. Steelis built into cars, buildings, bridges and ahost of other things that make modern lifepossible.
Armed with that knowledge, a companythat makes and distributes steel could follow any number of paths to profit. AsWhitley charted a course for Ranger SteelServices LP in the early ’80s, the optionswere almost too numerous. Ranger hadbecome involved in a variety of steel markets since Whitley’s father, Roy, foundedthe company in 1958, but as Whitleyworked his way up through the ranks, hebecame concerned that Ranger wouldspread itself too thin.
“In the earlier years, Ranger was involvedin other product lines, which at the timedid work for Ranger,” says Whitley, thecompany’s president. “But since then, asthe world has changed and become morecomplex, so have the items and the sourcing of these items. So, in 1982, I made thedecision that we were going to focus onplate products.”
Ranger pulled out of other markets, someof which were putting them into directcompetition with their customers, andbegan focusing on delivering differentsizes, grades, thicknesses and widths ofsteel plate.
The new approach allowed Whitley tofocus Ranger — which earned $328 millionin 2007 revenue — on delivering two thingsto customers: steel plate and service. Withjust two overarching goals placed in front ofthe entire company, Whitley has been ableto focus everyone at Ranger on becominggreat at both of them, loading the company’sfinancial and manpower resources into oneniche instead of attempting to cast a widenet. But keeping it simple doesn’t meaneverything stays the same at Ranger, year inand year out. Focusing on a niche marketmeans having the ability to adapt to continue serving that market.
Not every company can home in on a narrowly defined niche and cast everythingelse aside, but Whitley says keeping yourcompany’s approach to business as simpleas possible is a goal for which you andevery business leader should strive.Simplicity helps your people stay focusedon building within your niche. It also helpsthe transition process in a time of change.
Whitley has had to help his company doboth at various times.
“We keep the model simplistic so we can behands-on,” he says. “A lot of companies mightoperate in a more complex fashion, and thatmight be right for their business model. But,for us, it would be totally disruptive.”
Stay ahead of the curve
Change is a fact of life in business, andthe only way you’re going to be able to stayon the basics of drilling down on your company’s core competencies is to make sureyou’re going to understand what in themarket is going to affect your company inthe coming months and years.
Whitley received some firsthand experience with that in the late ’90s when customer demand was shifting from importsteel to domestic.
“At that point, the majority of Ranger’sinventory was made up of mostly an importorigin, and there had been a continual trendby customers to demand more steel manufactured in the United States,” Whitley says.“We charted this, plotted this and realized thetrend was becoming more cumbersome tobuy large quantities of imported steel, so weshifted our focus to buying a majority ofdomestic steel. Today, 95 percent of ourinventory is made in America.
“If we had just continued to stock 100percent import, we would have lost a significant portion of our customer base.”
The key to reacting to market changes isto not waste time. If your research says themarket is shifting, prepare to shift alongwith it — or even beforehand, if possible.
“If you meet and react to these changesearly on, you’re more able to maintain control of your business,” he says. “New eventsare going to happen constantly. That’s justthe nature of business. In Ranger’s business, that’s been our blueprint. When theseevents do happen, we look to see howthese events might interact with or compromise our blueprint. Then we relate tohow we’re going to change to that. We’revery careful.”
Keeping ahead of market trends requireskeeping up on the latest industry news viathe media outlets that serve your industry,but your knowledge base shouldn’t beginand end with trade journals, newspapers orwhat you see on television. You need eyesand ears on the ground.
Representatives of Ranger Steel cultivateand maintain relationships with customersand vendors both in the U.S. and abroad.The representatives in the field stay in frequent contact with their superiors, whichallows information to well up within theorganization, giving Whitley and his management team a view of where the marketsthey serve might head in the near future.
“Staying ahead of the curve on purchasing requires our purchasing department to,at times, look nine to 12 months in advanceon buying commitments,” Whitley says.“You have to have a lot of exposure whenyou’re looking that far down the roadbecause the market can make changes upor down in a certain time period.
“We spend a lot of time nurturing partners,the people who make steel, and we try towork with them and communicate withthem very closely through face-to-facemeetings where we exchange frank andhonest market information about what isgoing on in the steel industry. We have beenable to nurture a reliable group of vendors,both domestic and foreign, that we continueto depend on for our product line.”
Keep people informed
At first glance, it might seem like something of a contradiction: Build a work forcethat stays focused on what it is you do well,yet is open to change.
In order to continue to stay focused onyour markets, you need adaptability within your company’s ranks, people who are willing to change theirapproach to meet the needs of the people you serve.
Whitley has a basic rule pertaining to thinking ahead: Informedpeople are motivated people, and motivated people are muchmore likely to be willing to do what is asked of them.
“It requires a balancing act to stay on what it is you do well whilestill accepting changes,” Whitley says. “Because we eat and sleepplate steel 24-7, we feel like we’re going to know the changesbefore anybody else does.”
But it still takes communication and education to achieve buy-inwith an employee base that wants to know where the company isheaded and why.
“Changes are about how they are presented to employees,” hesays. “It’s a matter of education, to explain what I call result outcomes, to explain to people that this is why we’re going to changeand this is what we see as the result of that change.
“If people know where you’re going with it, it’s a lot easier forpeople to accept changes. Changes are uncomfortable for everyone, myself included, but if you aren’t changing, you are growingstagnant and going nowhere.”
Keeping your company both focused and nimble starts with youand the communication you deliver. If you don’t keep your employees informed about the direction of the company and the industry,you can’t expect to easily justify your future plans to them.
Whitley says communication is the first and most importantingredient in paving your company’s future path. Without it, no onegets on board with you.
“You can’t force change if someone doesn’t know why you’remaking the change,” he says. “The result of that is negative.Communication is No. 1, and showing them the outcome is No. 2.Show them why you’re going to make the changes and ask for suggestions. People might come up with different things to add thatwill make the whole situation better.”
Developing a culture of communication can become a lengthyprocess. It’s something that can only be accomplished over time asyou continually take steps to keep your employees in the information loop.
“It’s kind of like being married — that level of trust doesn’t comeovernight,” Whitley says. “It takes a lot of years of work. If you aretelling someone to trust you, you have to demonstrate it. If management says something to employees, they’d better back it up anddo it.
“It’s something that grows over time. It’s not something that youcan come in and write down on a piece of paper.”
Let others help you lead
As the person who leads change in your company, you have tosee to it that your vision and mission isn’t lost as the companyevolves.
But just because you have to keep the overarching goals of thecompany in mind doesn’t necessarily mean that you need to control every aspect of the process.
At Ranger Steel, which is projected to earn $500 million in revenue this year, Whitley lets others in the organization step up andassume leadership roles, helping to cut the paths that will serve asthe means to the end goals. Every employee at Ranger knows thatthe goal is to stay adaptable and profitable — which the companyhas for each of its 50 years — and the foundation is built on theproduction of plate steel. Those facts serve as the boundary linesfor Ranger’s future. Beyond that, Whitley wants others to deliverinput as to how Ranger will meet their customers’ plate steel needsin the future.
It’s part of having a culture of communication. After you havecommunicated from the top, you need to be willing to listen towhat everyone else wants to say.
“People come in here looking for answers,” he says. “Sometimes,I don’t have all the answers. I don’t pretend to be the brightestleader here, but I think I do quite a respectable job of it. If I don’tknow about something, I ask people what they think we should doand listen to what they have to say. Listening is a very importantpart of being a leader. You have to lead by example, and if you sayyou’re going to do something, again, you’d better follow throughand do it.”
If you want employees to take a genuine interest in where thecompany is headed, and take a genuine interest in helping youlead, you need to take a genuine interest in informing and teachingthem, then take a genuine interest in their input.
It’s a lesson Whitley learned long ago, and something he continually reinforces to his managers.
“Any information that needs to go lower down than management,such as market information, customer information or anything thatwould affect sales, is immediately passed down through the company, whether it be in formal meetings or e-mails,” he says. “Everybodyhere is well informed, because the days of telling people things on aneed-to-know basis are long gone.
“A company team is like a football team. They have to work together and jell together. They might not all go out to dinner or lunch witheach other, but at work, they need to develop into a true team.”
HOW TO REACH: Ranger Steel Services LP, (800) 231-5014 or www.rangersteel.com
However, Burnett’s 104 employees were determined to recognize the company anyway and recently surprised her with a framed piece of art: photos of the employees at each corporate office with the caption, “Texas’ Best Place to Work, From Your Dedicated Staff.” They also gave her a book that included a letter from each employee, explaining why Burnett was a great workplace.
“My staff said, ‘Since we can’t be a nominee, we wanted to let you know that we think we’re a winner,’” Burnett says. “And that meant so much to us.”
In spite of the recession, Burnett’s staffing firm posted $77 million in 2007 revenue.
Smart Business spoke with Burnett on how to show your employees your appreciation.
Play ball. We have a plan called Base Hits and Home Runs. At the beginning of each quarter, each employee gets four base hits to give out to anybody in the company; it doesn’t have to be someone in their division.
This is a little card, and they can write on the card what they felt that this person did to deserve a base hit. It can be that they’re doing a great job or maybe an employee wants to thank them for something they did. Once an employee receives four base hits, they can turn those in for a $25 gift card for a department store, restaurant or gas station.
Then, the managers can give out a home run to an employee if the person has done something above and beyond their job. They may have done something they didn’t have to do or came in really early or stayed late. The employee can exchange the home run for a $25 gift card. Some employees save up their home runs to get a $100 gift certificate.
I’ve already written 85 base hits so far this year and about 25 home runs. I’m constantly writing them, but I can only do so much, and I didn’t want people to just get one a year. I wanted them to get them from their co-workers because there are a lot of times that people do things that their managers don’t know about. It’s a nice way for people to be able to pat each other on the back.
You have to motivate your employees by incentives, not by fear. If you manage by fear, then you’ve got people that aren’t happy. Long-term employees aren’t happy working in a fearful environment. Certainly the millennials, the younger generation, have a very low tolerance for anything that makes them unhappy. You certainly don’t want to have that kind of environment, or they’ll simply move on.
Recognize the extraordinary. We have an award each month called Whatever It Takes, and anyone can be nominated. These people have gone way above the call of duty and have done something really extraordinary, like working all weekend on a project.
We send out an e-mail with the names of all the nominees, and then one is selected. They receive a $50 gift certificate on top of their home run, so they get $75.
We try to recognize our staff members as much as possible. Recognition means more to a lot of people than money, and it’s certainly cheaper. There are many times that people would rather be recognized in an e-mail to the entire staff than to even receive $100. I have people that work hard all year long to be top consultant or top account executive of the year — not because they get $1,000 but because they were recognized.
There are two people in my company who have been recognized as the top producer in the state. I’m very motivational to these people, and we all go to the state convention together and cheer each other on. For both of these individuals, they’re already making good money with their commissions, but it’s the recognition and the award — it’s being No. 1 that really has driven them, and I’m right there beside them, supporting them all the way.
Follow the Golden Rule. If you treat your staff the way that they want to be treated — and the way that you would want to be treated — then I think that will come back to you. We’ve got a lot of very long-tenured employees and management. If your management doesn’t turn over on the top, that makes people feel more secure and stable.
The secret is that you may want to be treated one way, but others may want to be treated a different way. If you’re working with someone who’s not a morning person, maybe you would treat them differently than the way you would treat a person who is chatty and likes to talk in the morning. It’s getting to know your co-workers.
One of the things that we’ve done is give personality tests to our staff and have meetings to discuss the results. Each employee goes online, takes the test and then the test comes up with the employee’s score. Someone on our staff is certified to meet with people concerning the different personality types.
Some of our groups have very different personalities in them, like opposites, so it’s helped them to know how to communicate with different personality types.
HOW TO REACH: Burnett Staffing Specialists, (713) 977-4777 or www.burnettstaffing.com
Business owners have learned to be leery of fraud, thanks to the high-profile cases of Enron, Tyco and WorldCom and the resulting increase in accountability via the Sarbanes-Oxley Act. Despite heightened awareness, fraud remains all too prevalent in today’s business world.
The Association of Certified Fraud Examiners’ 2008 Report to the Nation on Occupational Fraud and Abuse reports that U.S. organizations lose 7 percent of annual revenues to fraud. That translates to approximately $994 billion in fraud losses as applied to the projected 2008 U.S. gross domestic product.
And don’t assume that major corporations are the most affected. The same report cited that businesses with 100 or fewer employees post a median loss of approximately $200,000 each year.
“Fraud affects all companies, and it’s not going away,” says Ed Gojara, CPA, CFE, an audit manager with Briggs & Veselka Co. “It is imperative that companies implement fraud prevention programs that feature thorough auditing procedures and frequent communication with employees.”
Smart Business spoke to Gojara about the types of fraud companies face and what measures can be taken to reduce risk.
What are the main types of fraud?
There are three primary types of occupational fraud: asset misappropriation, corruption and fraudulent statements.
- Asset misappropriation involves the theft or misuse of a company’s assets. For example, an employee opens an account and subsequently forges company checks payable to the account. Reduce the risk by mandating a review of every endorsed check. Also, be sure sensitive job duties, such as accounts receivable and accounts payable, are not assigned to the same employee.
- Corruption involves the wrongful use of influence in a business transaction to procure some benefit for the perpetrator or someone else, contrary to his or her duty to the company. For example, one of your employees is in cahoots with one of your vendor’s employees to retain or increase assets purchased. They work together to perpetrate the fraud and then split the funds. To reduce your risk, rotate purchasing responsibilities among employees or appoint someone outside the purchasing department to frequently review invoices.
- Fraudulent statements are the falsification of a company’s financial statements, either for personal gain within the business or to deceive external parties for the company’s gain. For example, an employee reports revenue sooner than it’s realized or fabricates it to qualify for an incentive. Reduce your risk by conducting thorough background checks and hiring a qualified professional to regularly perform a full-scale audit of your company. The auditor will closely study your finances and recommend specific internal controls.
Besides those specific methods, what other ways can a company avoid fraud?
You’ve got to build fraud prevention measures into your company policies. Implement a code of conduct and organizational protocols that explicitly define the company’s policies as well as the penalties for violating them. With policies and procedures in place, you’ll show employees that the organization is serious about fraud. You’ll also remove the excuse, ‘I didn’t know I couldn’t do that.’
Create a code of conduct handbook that every employee must read and sign. You’ll have legal documentation that employees know the rules and the consequences of breaking those rules. Also, address fraud issues with your employees regularly. Show your employees the challenges the company faces through an annual presentation. Help your employees understand that if the company is hurting, the employees will be hurt, as well. Don’t forget that honest employees are your best assets. Create an anonymous tip line so employees can report wrongdoers.
Finally, assign someone, preferably someone in a senior management position, to have the responsibility of assessing fraud risks throughout the company. This person may or may not delegate some of his or her responsibilities, but in the end, he or she has the ownership.
Should companies seek outside assistance in preventing fraud?
Your CPA firm and attorneys should have experience with fraud risks and can help you identify issues. No matter how strong you believe your internal control system to be, outside assistance is advised. Think about the locks on your doors. You can have the most sophisticated locks and security systems, but if someone has the key and knows the codes, he or she can get inside.
Remember, too, that people in your organization can get too friendly with one another. As a result, checks and balances may be overlooked. Even honest people can do dishonest things if put in the right situation. An outsider can help you examine your company’s structure and suggest the segregation of duties where appropriate.
ED GOJARA, CPA, CFE, is an audit manager with Briggs & Veselka Co. Reach him at firstname.lastname@example.org or (713) 667-9147.
For the last 20 years, Howard Tellepsen Jr. has been seeking professional help, not only for himself but for every employee in his company.
For Tellepsen, owner, chairman and CEO of Tellepsen Builders LP, this help comes in the form of an industrial psychologist who has become an essential member of the Tellepsen team.
This outsourced counselor performs compatibility tests with job candidates, facilitates team building and visits the company two days each month to help Tellepsen’s 345 employees manage personal and professional issues.
“It’s an ongoing commitment to have this industrial psychologist as a resource for our employees,” Tellepsen says.
The fourth-generation owned and operated construction company posted 2007 revenue of $283 million, and Tellepsen says that making a counselor available to employees has reinforced his company’s philosophy: Treat everyone with mutual trust and respect. He says this leads to a feeling of ownership, which fosters an atmosphere of empowerment.
Smart Business spoke with Tellepsen about how he builds the foundation for his company’s greatest asset its employees.
Hire to fit your culture. We work closely with our industrial psychologist in terms of recruiting employees in the first place. Culture is very important here, and it’s based on values.
The most important value mutual trust and respect is how you treat your employees, and it’s how you get that same trust and respect from them in return. Mutual trust and respect is how you want them to conduct their business with the people they deal with internally and externally.
These tests that are given by our industrial psychologist have allowed us to identify people who have a high probability of fitting into our culture and growing with the company. We have very low turnover because we spend time on the front end making sure that we are the right culture for them. It’s important to make sure that employees are going to fit into our culture because our company was built in 1909, and our culture is well established.
When you have that kind of culture and you have employees who fit that culture, it makes it easier to be able to empower them because you can trust them. Somebody certainly might be smart enough to work here and they might have experience, but they may not be able to thrive in our culture.
When they understand the culture, it allows us to empower them to be responsible for their actions, and holding them accountable is part of the empowerment. You have the right people in the first place, and then they understand that’s how we function in terms of giving a lot of responsibility to the employees. We allow them to make decisions because we want them to take ownership and to be held accountable.
Don’t take chances. If an employee isn’t compatible with a company’s culture, especially when the company has a very strong culture, you risk a low-performing, unhappy employee, and that is not healthy to the rest of the employees. You then risk a short-term employee who does-n’t stay.
Try to make long-term decisions rather than short-term decisions. Our people are our most important asset, so it’s a long-term decision to spend that time on the front end having them test with our industrial psychologist. It’s a real investment.
You’re only as effective as your people. I don’t know how you could not make a long-term decision on your people because they are the ones who are representing you every single day to your clients. Your company becomes in the eyes of your clients who your employees are, how they conduct their business and how they treat their customers.
Provide opportunities for feedback. Employees appreciate the time that we’re taking on the front end, and then every single month, there’s an opportunity to see this industrial psychologist. Not every employee gets to see him each time he’s here, but we continue to provide that resource throughout their career at Tellepsen and show them that we have a caring environment.
Each session that employee has with our industrial psychologist is confidential, but if there are growth issues from a personal side or a business side and the employee gives the approval, the industrial psychologist will double back to the employee’s supervisor, and then all three of them will sit down and talk about it.
Having a counselor available to our employees provides another avenue for them to communicate their interests and share what’s on their mind. Over a period of time, a confidential environment is created where the employees are comfortable, and they feel that the company cares about them.
Use that information as a springboard. We translate input we receive from the industrial psychologist, and then during our annual evaluation with each employee, we discuss the employee’s development what they would like to learn about and what areas they would like to grow in and we establish a plan for them to take courses, attend seminars, go to conferences whatever it takes for them to accomplish the agreed-upon growth issues that the company feels would be helpful for them.
This continuous process is reviewed on an annual basis to see how we’re doing, and that’s the accountability part. The company is accountable to the employee; we need to help them and give them the tools to continue to grow personally and professionally.
HOW TO REACH: Tellepsen Builders LP, (281) 447-8100 or www.tellepsen.com
If you’ve acquired, constructed or improved a building in the last three years, you may want to consider a cost segregation study. A cost segregation study identifies and reclassifies personal property assets (nonstructural elements, exterior land improvements and indirect construction costs) to shorten the depreciation time for taxation purposes, which reduces current income tax obligations.
Analysis of capital expenditures is used to determine appropriate asset classifications. Cost segregation identifies building costs and reclassifies them to permit a shorter, accelerated method of depreciation for certain building costs. Costs for nonstructural elements (wall coverings, carpet, accent lighting, portions of the electrical system) and exterior site improvements (sidewalks and landscaping) can often be depreciated over five, seven or 15 years.
“Cost segregation studies can be very beneficial,” says Kevin Lovins, CPA, a tax shareholder with Briggs & Veselka Co. “Tax depreciation deduction is accelerated, which reduces income taxes and increases cash flow. It should be noted, however, that income taxes are only deferred, not eliminated.”
Also, component costs are usually not easily identifiable and the IRS will not allow a taxpayer to estimate the components.
Smart Business asked Lovins about cost segregation studies, how to conduct one and why they are so helpful in today’s economy.
What problems can a company face when acquiring, purchasing or improving real estate property?
When the individual component costs of a building are unavailable, the costs are generally classified as a 27.5- or 39-year property. The acceleration of depreciation expense is missed when the entire costs of a building is classified this way. Generally, the individual component costs of acquiring, constructing or improving a building are not readily available. When purchasing a building, the cost is usually just a lump-sum amount. Since depreciation expense is missed, taxes are accelerated and cash flow is negatively impacted.
How does a cost segregation study work?
Usually, an accountant and an engineer will analyze architectural drawings, mechanical and electrical plans and other blueprints to segregate the structural and general building electrical and mechanical components from those linked to personal property. The study also allocates ‘soft costs,’ such as architect and engineering fees, to all components of the building. While the building itself and any structural components are required to be depreciated over 27.5 or 39 years, parts of a building, including tangible personal property and land improvements, may qualify for an accelerated deprecation method over a much shorter recovery period (five, seven or 15 years). A cost segregation study identifies costs eligible for accelerated depreciation method over a shorter recovery period. By identifying costs eligible for accelerated tax depreciation expense, current taxes are reduced, which improves cash flow. Taxes are only deferred, not eliminated.
What are the benefits?
Cost segregation studies are performed by trained tax and engineering professionals.
The professionals separate the individual cost components by analyzing the construction drawings and methods and applying their knowledge of the internal revenue code, revenue rulings and court cases. A cost segregation study not only identifies the component parts of a building, but also substantiates the allocation of cost of a building among the individual components.
In addition to providing tax relief, a cost segregation study can benefit businesses by maximizing tax savings by adjusting the timing of deductions. When an asset’s life is shortened, depreciation expense is accelerated and tax payments are decreased during the early stages of a property’s life. This, in turn, releases cash for investment opportunities or current operating needs.
A cost segregation study also creates an audit trail. Improper documentation of cost and asset classifications can lead to an unfavorable audit adjustment. A properly documented cost segregation helps resolve IRS inquiries at the earliest stages.
Finally, taxpayers can capture immediate retroactive savings on property added since 1987. Previous rules, which provided a four-year, catch-up period for retroactive savings, have been amended to allow taxpayers to take the entire amount of the adjustment in the year the cost segregation study is completed. This opportunity to recapture unrecognized depreciation in one year presents an opportunity to perform retroactive cost segregation analyses on older properties to increase cash flow in the current year.
What can go wrong if a cost segregation study isn’t done?
If a taxpayer does not obtain a cost segregation study from a qualified professional, the taxpayer may not be able to substantiate his or her tax position upon challenge from the Internal Revenue Service (IRS). The IRS does not allow the taxpayer to estimate the individual component costs.
KEVIN LOVINS, CPA, is a tax shareholder with Briggs & Veselka Co. Reach him at email@example.com or (713) 667-9147.
U.S. staffing firms employ almost 3 million people per day across all industries, according to a survey conducted by the American Staffing Association (www.americanstaffing.net). This vast work force can provide a pool of talent that can be tapped into by businesses to fill a variety of part- and full-time jobs from secretarial to middle-management positions.
“Tapping into this resource allows a business to ramp up at a moment’s notice,” says David Lemoine, Regional Vice President for Talent Tree, a staffing company based in Houston.
Smart Business spoke with Lemoine about the steps you can take to select the right staffing firm for your business.
In what industries/jobs do staffing firms typically specialize?
The main categories are as follows:
- Office and clerical
- Accounting and payroll
- Information technology
- Nursing and health care
Light industrial (jobs such as forklift driver, picker, packer)
- Skill craft workers (such as manufacturing plant workers)
- C-level executives
Staffing firms can sometimes specialize in two or three of these areas. But it is rare that a staffing company can provide qualified employees for all these positions. Often, a business may have to rely on more than one staffing company for all its needs.
What are the steps to consider when selecting a firm?
Your human resources department can go through these steps. For smaller firms, this responsibility can fall to the general or office manager.
- Meet face-to-face with representatives of the staffing firm. This is important to start developing a relationship with the firm and for its representatives to get a good understanding of your business and its culture.
- Get references of current customers. Ask current clients how the staffing firm has helped, particularly with customized solutions to unique problems.
- Make sure the firm is stable and credible. Do not select a firm that has just started in the business. Make sure there is low turnover internally so that you can ensure that you will have continuity with representatives.
- Have the firm give you a checklist of what it provides with its services. Some important elements include: background and reference checks, social security verification, drug screening, workers’ compensation certificates, standard terms and condition of contract.
What are some red flags to look out for when selecting a staffing firm?
The biggest red flag is when a staffing firm competes solely on price. The fact is that costs and profit margins are pretty much the same for all staffing companies. If a staffing firm is coming in at 15 percent less than its competitors, you bet they are cutting costs and making shortcuts somewhere, such as not providing drug screenings or background checks.
What can a business owner do if the firm is not the right fit or the people they are sending are not a good fit?
This is why it is important to take time with the staffing company on the front end. If a fit isn’t right, you need to call the staffing company right away and have the employee replaced.
You also need to have a conversation about what went wrong and why. Was there a miscommunication? How did the staffing company miss the mark? Was more training needed? Did the employee not have enough experience? You can opt to give the staffing firm another chance to correct the situation. If the same mistake happens again, you need to move your business to another firm.
What distinguishes an average staffing firm from one that is superior?
Many businesses don’t really understand what a staffing firm can offer. They believe staffing firms exist to offer short-term solutions to pressing employment needs. But businesses need to realize that the best staffing firms can provide a wealth of advice that is outside the realm of simply filling a job slot.
For example, firms can provide a wealth of reporting statistics, such as how much a business is spending on overtime (and if the money would be better spent in hiring more employees) and the cost of vacancy. The key is to mine the firm for this information; a representative can often help a business uncover problems involving human capital issues, such as high turnover rates. This opens up possibilities for business owners to understand their business at a deeper level, and make human capital decisions based on the numbers, rather than instinct.
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