Carolyn LaWell

Wednesday, 26 August 2009 20:00

Risky business

This economy probably has your company facing heightened risks — risks that you might not be prepared for and that could ultimately cripple your business.

The global economy is the No. 1 risk businesses say they face today, according to the Aon 2009 Global Risk Management Survey. But the survey points out that less than 66 percent of respondents have formally reviewed their major risks or have plans in place to deal with them, including the economic downturn.

Now is a crucial time to have a detailed risk management program in place. After all, budgets are tight, you’re looking for savings and managing risk can directly influence your bottom line.

“If you look at a typical firm, cost of risk might be anywhere from 2 to 5 percent of their gross revenue; in many cases, that’s going to be their second or third largest expense after rent and employees,” says Jeffrey Cavignac, president and founder, Cavignac & Associates. “So if you can reduce that, you can substantially drive dollars to your bottom line.”

Hiring an in-house executive to focus on risk may financially be out of the question. But a good insurance broker can help you put the puzzle pieces in place, starting with the questions that will lead to true solutions.

Identify potential exposure

Like anything in business, a true commitment to risk management starts with the company’s leadership. Set aside time for your organization’s key players to sit and outline the different risks you might face, such as financial, property and casualty, and legal.

There are a number of assessments you can do — such as risk mapping or enterprise risk management — depending on the amount of detail and commitment you want your program to include. Regardless of what direction you are going, you should include your insurance broker in the conversation. Odds are his or her experience, benchmarking data and outside eye will lead to valuable questions. A good broker has dedicated risk management and claims services and will go through a checklist that will bring your risks to light.

“The broker should have a systematic questionnaire, and it’s time-consuming, but it needs to be done,” Cavignac says. “You’re going to look at any number of things from business plans to financial statements to leases to contracts. You’re going to want to walk the facility. You’re going to want to evaluate the equipment. But if it’s done right, it sets the groundwork for an effective risk management program.”

Once your risks have been identified, your broker can help you develop a strategy to quantify your risks and determine whether you should mitigate or transfer the risk.

The process is fairly systematic, but it’s also continuous. A true risk management plan involves constant monitoring. It’s worth the effort to work with your broker to match a timeline of monthly musts with your plan. Especially in volatile times like today, your company could face different risks than it did six months ago.

“If their brokers completed a full risk-management audit and they stay current with their business operations as well as their industry, probably an annual review for compliance is probably enough,” says Bill Litjen, risk management division president, G.S. Levine Insurance Services Inc. “But I think that review ought to be done probably six months before their insurance program renews because that midterm review will allow changes to be made to the insurance program if any are necessary.”

Review risks

Your risk analysis is a great guideline for your specific needs, but there are a few areas of coverage the economy has made more relevant. And today’s evolving risks can be enhanced by geography and industry.

“Any number of factors will dictate how the company needs to apply resources to mitigate the risk,” Litjen says. “This economy is making it particularly challenging for the strategic and operational side of things.”

Business interruption and trade credit insurance are two areas to review. If a client can’t pay or your operations are halted, how will those scenarios affect your balance sheet if you’re already strapped for cash?

Insurance executives are warning that desperate times produce desperate people. If you’ve decreased your work force or plan to, keep in mind workers’ compensation and employee discrimination claims tend to rise in a down economy, as do employee crime and cyber theft. Now might be a good time to evaluate directors and officers coverage, employment practices liability insurance, crime insurance, cyber insurance and workers’ compensation coverage.

“I think more businesses today need to focus on protecting how they manage their business,” Litjen says. “In economic downturns, lawsuits are more prevalent.”

Find cost-saving solutions

Insurance is one line item that hasn’t been immune to budget cuts. But before you start scaling back coverage, keep this in mind: We’re still in a soft commercial insurance market — meaning insurance is a cheap form of risk capital.

A 2009 benchmark survey by the Risk and Insurance Management Society Inc. shows a lower average in premiums contributed to a 9.4 percent drop in the average total cost of risk per $1,000 of revenue.

If you’re worried about the size of your insurance allotment, call your broker now, review your contracts and review your risks. You don’t have to wait until your renewal in order to find savings or renegotiate your contract. Just remember, before you can responsibly lower costs, you need the details of what you are and aren’t covered under.

“In this economy today, you have to look at expenses as a return on investment,” Litjen says. “Those expenses that don’t have a positive return that you can avoid I think are being cut. Everybody is looking to sharpen their pencil that way, but I think if you look at your expenses in terms of return on investment, it makes it easier to decide what you need and what you don’t.”

Immediate savings can be found by passing risk to others, such as tenants or vendors. You also can play around with increasing deductibles to lower premiums or scaling back nonmandatory insurance. If the latter two are options, first weigh whether you can financially assume the risk or if the cost of managing the risk is cheaper.

One of the only ways to decrease the costs you can control is by reviewing your claims. You should have regular claims review meetings with your broker to see where prevention methods can be put into place. Your insurance carrier can help with loss control, such as safety training. Some brokers say clients recently have seen cost savings of 20 percent.

Part of the answer is building a long-term relationship with your broker and even carrier. Share with them details of your operations. Invite them to tour your facility. The more your broker understands your business, the better he or she will be able to provide holistic advice. And a lasting relationship with an insurance carrier can mean more flexibility and negotiation.

“If you establish a long-term relationship with a broker … and, equally as important, if you establish a long-term relationship with an insurance company, then if you have a bad year or a couple bad years, they’re more likely to stick with you than if you jump insurance companies every year,” Cavignac says. “Insurance companies value loyalty, and they price for it.”

San Diego

Special Report

Wednesday, 26 August 2009 20:00

Business exposure

This economy probably has your company facing heightened risks — risks that you might not be prepared for and that could ultimately cripple your business.

The global economy is the No. 1 risk businesses say they face today, according to the Aon 2009 Global Risk Management Survey. But the survey points out that less than 66 percent of respondents have formally reviewed their major risks or have plans in place to deal with them, including the economic downturn.

Now is a crucial time to have a detailed risk management program in place. After all, budgets are tight, you’re looking for savings and managing risk can directly influence your bottom line.

“(Managing risk) gives you a lot more control over your bottom line outcome if you are acutely aware of what your risks are that you face every day and you have a clearly communicated strategy across your organization to deal with those risks,” says Colin MacNab, vice president, MJ Insurance Inc. “It can help eliminate surprises that can impact your bottom line negatively.”

Hiring an in-house executive to focus on risk may financially be out of the question. But a good insurance broker can help you put the puzzle pieces in place, starting with the questions that will lead to true solutions.

Identify potential exposure

Like anything in business, a true commitment to risk management starts with the company’s leadership. Set aside time for your organization’s key players to sit and outline the different risks you might face, such as financial, property and casualty, and legal.

There are a number of assessments you can do — such as risk mapping or enterprise risk management — depending on the amount of detail and commitment you want your program to include. Regardless of what direction you are going, you should include your insurance broker in the conversation. Odds are his or her experience, benchmarking data and outside eye will lead to valuable questions. A good broker has dedicated risk management and claims services and will go through a checklist that will bring your risks to light.

Once your risks have been identified, your broker can help you develop a strategy to quantify your risks and determine whether you should mitigate or transfer the risk.

“There are a number of different tools that can be used for companies to better understand their exposures, and once they understand exposures, they can then determine what the impact of those exposures would be to their company and their bottom line,” says Tom Breiner, managing director and head of the Indianapolis office, Marsh Inc. “An effective assessment process will also help them determine the types of insurance they should carry and the amounts of insurance they should purchase.”

The process is fairly systematic, but it’s also continuous. A true risk management plan involves constant monitoring. It’s worth the effort to work with your broker to match a timeline of monthly musts with your plan. Especially in volatile times like today, your company could face different risks than it did six months ago.

“Although an insurance program may be adequate when it is first delivered, changes in the legal and business climates may cause the coverage to become inadequate as times change and the environment evolves, creating new exposures and challenges,” says Roy Geesa, senior vice president and manager of commercial sales, Gregory & Appel Insurance.

Review risks

Your risk analysis is a great guideline for your specific needs, but there are a few areas of coverage the economy has made more relevant. And today’s evolving risks can be enhanced by geography and industry.

“In the state of Indiana, we clearly have been hit by the economy especially in the manufacturing sector, so there have been a number of risks that have become more significant in this day and age,” Breiner says. “A lot of those relate to business continuity and supply chain exposures, related to the potential insolvency of trading partners.”

Business interruption and trade credit insurance are two areas to review. If a client can’t pay or your operations are halted, how will those scenarios affect your balance sheet if you’re already strapped for cash?

Insurance executives are warning that desperate times produce desperate people. If you’ve decreased your work force or plan to, keep in mind workers’ compensation and employee discrimination claims tend to rise in a down economy, as do employee crime and cyber theft. Now might be a good time to evaluate directors and officers coverage, employment practices liability insurance, crime insurance, cyber insurance and workers’ compensation coverage.

“As the economic situation squeezes employers and as employees are faced with uncertainty, certain areas deserve special attention and certain housekeeping procedures can help reduce your insurance expense,” Geesa says.

Find cost-saving solutions

Insurance is one line item that hasn’t been immune to budget cuts. But before you start scaling back coverage, keep this in mind: We’re still in a soft commercial insurance market — meaning insurance is a cheap form of risk capital.

A 2009 benchmark survey by the Risk and Insurance Management Society Inc. shows a lower average in premiums contributed to a 9.4 percent drop in the average total cost of risk per $1,000 of revenue.

If you’re worried about the size of your insurance allotment, call your broker now, review your contracts and review your risks. You don’t have to wait until your renewal in order to find savings or renegotiate your contract. Just remember, before you can responsibly lower costs, you need the details of what you are and aren’t covered under.

“People worry about being overinsured, but it’s scarier to be underinsured,” MacNab says. “I think in today’s economic climate it’s a good exercise to go through and really analyze the coverages and see if there are any that could be scaled down if cost savings is important.”

Immediate savings can be found by passing risk to others, such as tenants or vendors. You also can play around with increasing deductibles to lower premiums or scaling back nonmandatory insurance. If the latter two are options, first weigh whether you can financially assume the risk or if the cost of managing the risk is cheaper.

One of the only ways to decrease the costs you can control is by reviewing your claims. You should have regular claims review meetings with your broker to see where prevention methods can be put into place. Your insurance carrier can help with loss control, such as safety training.

Some brokers say clients recently have seen cost savings of 20 percent.

Part of the answer is building a long-term relationship with your broker and even carrier. Share with them details of your operations. Invite them to tour your facility. The more your broker understands your business, the better he or she will be able to provide holistic advice. And a lasting relationship with an insurance carrier can mean more flexibility and negotiation.

In the end, it’s your choice as to how comfortable you are with your risk.

“That’s part of the discussion, understanding well how much (does) the insurance costs and is that a good investment, is that a good use of our dollar to transfer the risk,” MacNab says. “And honestly the answer to that question is very personal. It depends on the individual business and the people running that business and what their real appetite for risk is.”

Wednesday, 26 August 2009 20:00

Risky business

This economy probably has your company facing heightened risks — risks that you might not be prepared for and that could ultimately cripple your business.

The global economy is the No. 1 risk businesses say they face today, according to the Aon 2009 Global Risk Management Survey. But the survey points out that less than 66 percent of respondents have formally reviewed their major risks or have plans in place to deal with them, including the economic downturn.

Now is a crucial time to have a detailed risk management program in place. After all, budgets are tight, you’re looking for savings and managing risk can directly influence your bottom line.

“By managing risk, you will increase profits; for you will mitigate losses that you have identified and have some control over,” says John Chaney, president of the Cleveland office and regional vice president of Hylant Group. “Managing risk improves and protects your bottom line — and also increases efficiency within the business — and quite often the top line.”

Hiring an in-house executive to focus on risk may financially be out of the question. But a good insurance broker can help you put the puzzle pieces in place, starting with the questions that will lead to true solutions.

Identify potential exposure

Like anything in business, a true commitment to risk management starts with the company’s leadership. Set aside time for your organization’s key players to sit and outline the different risks you might face, such as financial, property and casualty, and legal.

There are a number of assessments you can do — such as risk mapping or enterprise risk management — depending on the amount of detail and commitment you want your program to include. Regardless of what direction you are going, you should include your insurance broker in the conversation. Odds are his or her experience, benchmarking data and outside eye will lead to valuable questions. A good broker has dedicated risk management and claims services and will go through a checklist that will bring your risks to light.

Once your risks have been identified, your broker can help you develop a strategy to quantify your risks and determine whether you should mitigate or transfer the risk.

“We have a checklist and we talk about every type of generic risk that a company could face,” says Ed Kraine, executive vice president and chief insurance officer, The Fedeli Group. “I’ll go over it with them. ‘Here’s the example of the risk to you; here’s what could happen to you. Do we have insurance for it? Do you want to insure it; do you not want to insure it?’

“Our job is to get to know the client’s business as well as we can, and then kind of start asking questions and trying to figure out or mention to (the client) stuff that he or she may not realize.”

The process is fairly systematic, but it’s also continuous. A true risk management plan involves constant monitoring. It’s worth the effort to work with your broker to match a timeline of monthly musts with your plan. Especially in volatile times like today, your company could face different risks than it did six months ago.

“You’ve got to manage your insurance program and your risk management component the same way as you would with your accounts receivable, the same way that you would with any other portion of your operation, because if you don’t, then it’s going to be sluggish. You’re going to probably end up paying too much money, and worse yet, you may have a hole in your program where there could be an uninsured event,” says Michael Agnoni, risk consultant, Oswald Co.'s.

Review risks

Your risk analysis is a great guideline for your specific needs, but there are a few areas of coverage the economy has made more relevant. And today’s evolving risks can be enhanced by geography and industry.

Business interruption and trade credit insurance are two areas to review. If a client can’t pay or your operations are halted, how will those scenarios affect your balance sheet if you’re already strapped for cash?

Insurance executives are warning that desperate times produce desperate people. If you’ve decreased your work force or plan to, keep in mind workers’ compensation and employee discrimination claims tend to rise in a down economy, as do employee crime and cyber theft. Now might be a good time to evaluate directors and officers coverage, employment practices liability insurance, crime insurance, cyber insurance and workers’ compensation coverage.

“In many instances, the benefits are higher for workers’ compensation than they are for unemployment, so you’re getting the unwitnessed slip and fall back claim, let’s say, as employees are getting laid off and walking out the door,” Agnoni says. “That’s a different risk than maybe we would have in a more stable economy.”

Find cost-saving solutions

Insurance is one line item that hasn’t been immune to budget cuts. But before you start scaling back coverage, keep this in mind: We’re still in a soft commercial insurance market — meaning insurance is a cheap form of risk capital.

A 2009 benchmark survey by the Risk and Insurance Management Society Inc. shows a lower average in premiums contributed to a 9.4 percent drop in the average total cost of risk per $1,000 of revenue.

If you’re worried about the size of your insurance allotment, call your broker now, review your contracts and review your risks. You don’t have to wait until your renewal in order to find savings or renegotiate your contract. Just remember, before you can responsibly lower costs, you need the details of what you are and aren’t covered under.

“It’s endless the ways in which you can save through risk management,” Chaney says. “It’s first awareness, then it’s acceptance of and perhaps a quantification of what can happen, and then it’s the action (companies) take and implement to reduce or transfer the risk, perhaps to insurance companies.”

Immediate savings can be found by passing risk to others, such as tenants or vendors. You also can play around with increasing deductibles to lower premiums or scaling back nonmandatory insurance. If the latter two are options, first weigh whether you can financially assume the risk or if the cost of managing the risk is cheaper.

One of the only ways to decrease the costs you can control is by reviewing your claims. You should have regular claims review meetings with your broker to see where prevention methods can be put into place. Your insurance carrier can help with loss control, such as safety training. Some brokers say clients recently have seen cost savings of 20 percent.

Part of the answer is building a long-term relationship with your broker and even carrier. Share with them details of your operations. Invite them to tour your facility. The more your broker understands your business, the better he or she will be able to provide holistic advice. And a lasting relationship with an insurance carrier can mean more flexibility and negotiation.

“This is still very much a people business, and it’s still communicating and talking — talking to your broker, talking to your insurance carrier,” Agnoni says. “You don’t want to just wait one time a year and show up and say, ‘What’s new?’”

Cleveland

Special Report

Sunday, 26 July 2009 20:00

Balance of power

You’ve probably met with your executive team and members of your staff to devise ways to weather this economic cycle on sound financial footing. But you may have forgotten to invite a key player to the table: your banker.

Whether you’re seeing red or thriving during this volatile time, it’s always helpful to ask for input from an outsider. Now is the time you should be thinking beyond just the products your bank offers and see your banker in the role that he or she aspires to be — your trusted adviser.

“Businesses really need more than just a bank account from their financial institutions these days,” says Liana Martino, executive vice president for commercial line of business, SunTrust Bank Tampa Bay. “They’re looking for a financial partner that’s going to help them make money and save money by giving them some business advice after they’ve had an opportunity to discuss the business and how the business operates.”

Many businesses don’t think to communicate with their bank on a regular basis, which means missing out on a valuable, free resource, according to industry experts. Think of your bank for ideas and solutions for efficiency, especially now when you’re probably looking for answers.

To take advantage of your bank’s true role as a consultant, you must start by forming and maintaining a strong relationship around trust and communication.

Introduce yourself and your business

The first step in using your banker as an adviser is allowing time for him or her to get to know you and your business. Even if you’ve been partners for decades, invite your banker to your office or place of operation for a meeting.

While it’s important for the bank to learn about your operations, over time, it’s necessary for you to return the favor. A good relationship banker will introduce you to managers and key decision-makers in the bank, but if the introductions aren’t offered, take the initiative and ask for a meeting. The more people you know at the bank, the more likely your company will become a household name, the more likely you’ll know who makes the decisions and how they’re made and the more likely a smooth transition will occur if your contact leaves or is promoted.

Once the initial contacts are made, work to maintain those relationships with open and candid communication. Ask your banker how often he or she wants to hear from you. Is it once a month or once a quarter?

If issues arise in the meantime, don’t be afraid or intimidated to call your banker. One thing all bankers will tell you is that they hate surprises — both good and bad. The more they understand your financials, strategic plan and any changes in the company’s overall operations, the better they’ll be able to provide products and solutions to keep you on the right track.

“There’s a saying that bad news never gets better with age,” says Mike Gilbreath, senior vice president and West Florida business banking executive, Regions Bank. “It’s always better to hear things that aren’t going well earlier. When a business has a hiccup or a little bump in the road, we have every desire to help them work through it.”

Use your bank for regular counsel

Like your lawyer or accountant, use your banker as a true consultant. Whether you’re trying to stay afloat or even rapidly growing, your bank can help in navigating through this economic downturn and in planning for the future.

Once you’ve established a relationship and your banker understands your business and your industry, ask him or her to review your business plan. It’s one of the best ways to utilize your bank’s resources. And if you don’t have a plan, create one.

“It takes very little time to set this budget, but it can really save a business owner a lot of money every month,” Martino says. “According to our internal research with our clients, surprisingly most business owners don’t have or track a monthly budget. A business owner’s banker or their accountant can often assist in helping them prepare this budget.”

Your banker has a true advantage of having a national, regional and industry-specific perspective on economics.

There are a number of questions about your plan that you should be able to bounce off of your banker. Are the assumptions of your business plan reasonable for the current economic environment? How does it compare with other companies in the same industry? How can the plan be improved? What type of contingency plan should be in place? And finally, what products and solutions can the bank offer to help meet your company’s needs?

“I love all kinds of business operations questions about how they deliver their goods or services, do they have an eye toward efficiency in that, because that has an effect on your bottom line and your margin,” Gilbreath says. “There are any number of questions: product, marketing, distribution. It’s basically Business 101. Anything you would learn in Business 101 is of interest to your bank.”

Take advantage of products and services

At least once a year, you should sit down with your banker to review the products you’re using. Perhaps you’re paying fees for a product you rarely use or technology has advanced and greater efficiency can be had.

A relationship review with your bank can help you tackle ways to save money and save time.

“Many businesses think in terms of, ‘I need a bank to give me a checking account or some place to deposit my money and I need a simple loan,’” says Susan L. Blackburn, Tampa Bay market president, Synovus Bank. “Those products are out there, but they need to turn to their banker to say, ‘What else can you do for me? What really is the right way for money to move in and out of my business, and how can you help me create the most efficient way to do that?’”

One of the main priorities right now is maximizing cash flow. Among popular products today are rapid deposit solutions, a desktop scanner that allows you to automatically deposit checks into your account.

While you might be thinking short term, ask your banker about options that will help you now and in the future. Interest rates have dropped — perhaps you can capitalize on a new loan or refinance. Discuss with your bank how long you’ll need to borrow on a loan and how much money you’ll need to borrow to structure a plan and lock in fixed interest rates while they’re low.

But once again, banks seek to be an adviser. Some banks offer seminars and informational Web sites as additional resources to finding efficiency. And many banks, if you’ve maintained honest communication with them, will honor your need for them to be flexible.

Sunday, 26 July 2009 20:00

Balance of power

You’ve probably met with your executive team and members of your staff to devise ways to weather this economic cycle on sound financial footing. But you may have forgotten to invite a key player to the table: your banker.

Whether you’re seeing red or thriving during this volatile time, it’s always helpful to ask for input from an outsider. Now is the time you should be thinking beyond just the products your bank offers and see your banker in the role that he or she aspires to be — your trusted adviser.

“In a downturn, a good commercial banker will be kind of a consultant, a sounding board, an adviser and, really more than that, a fount of experience for a customer of a bank,” says Frank Gwynn, senior vice president and manager of middle market banking for Union Bank in Northern California.

Many businesses don’t think to communicate with their bank on a regular basis, which means missing out on a valuable, free resource, according to industry experts. Think of your bank for ideas and solutions for efficiency, especially now when you’re probably looking for answers.

To take advantage of your bank’s true role as a consultant, you must start by forming and maintaining a strong relationship around trust and communication.

Introduce yourself and your business

The first step in using your banker as an adviser is allowing time for him or her to get to know you and your business. Even if you’ve been partners for decades, invite your banker to your office or place of operation for a meeting.

While it’s important for the bank to learn about your operations, over time, it’s necessary for you to return the favor. A good relationship banker will introduce you to managers and key decision-makers in the bank, but if the introductions aren’t offered, take the initiative and ask for a meeting. The more people you know at the bank, the more likely your company will become a household name, the more likely you’ll know who makes the decisions and how they’re made and the more likely a smooth transition will occur if your contact leaves or is promoted.

“You don’t want to just know one person at your bank,” Gwynn says. “You want to know maybe that person and his manager and maybe even one level above so that you become institutionalized. How you do that is you invite those folks out for a meeting to review your plan, you play golf, you go to lunch — you do things socially together to build a rapport with some people at the bank that can be key to your future.”

Once the initial contacts are made, work to maintain those relationships with open and candid communication. Ask your banker how often he or she wants to hear from you. Is it once a month or once a quarter?

If issues arise in the meantime, don’t be afraid or intimidated to call your banker. One thing all bankers will tell you is that they hate surprises — both good and bad. The more they understand your financials, strategic plan and any changes in the company’s overall operations, the better they’ll be able to provide products and solutions to keep you on the right track.

“A strong relationship is key to building a mutual trust and working knowledge of the business, which enhances the bank’s ability to help clients run their business more efficiently and effectively,” says Emily Shanks, senior vice president and commercial banking/marketing executive, Bank of America. “Strong relationships are built on such things as open and frequent communication … regular and timely feedback, and candid and timely disclosures of important information by both parties.”

Use your bank for regular counsel

Like your lawyer or accountant, use your banker as a true consultant. Whether you’re trying to stay afloat or even rapidly growing, your bank can help in navigating through this economic downturn and in planning for the future.

Once you’ve established a relationship and your banker understands your business and your industry, ask him or her to review your business plan. It’s one of the best ways to utilize your bank’s resources. And if you don’t have a plan, create one.

Your banker has a true advantage of having a national, regional and industry-specific perspective on economics.

There are a number of questions about your plan that you should be able to bounce off of your banker.

“One is, is my plan consistent with what the bank sees with other industry research,” Shanks says. “Can the bank provide any peer analysis or benchmark comparison as to how my peers are performing?”

Others include: Are the assumptions of your business plan reasonable for the current economic environment? How can the plan be improved? What type of contingency plan should be in place? And finally, what products and solutions can the bank offer to help meet your company’s needs?

Take advantage of products and services

At least once a year, you should sit down with your banker to review the products you’re using. Perhaps you’re paying fees for a product you rarely use or technology has advanced and greater efficiency can be had.

A relationship review with your bank can help you tackle ways to save money and save time.

“For example, there are ways we can help companies reach their cash sooner so they can pay their bills sooner or to keep their cash longer,” Shanks says.

Among the popular products for cash flow today is the rapid deposit solution, a desktop scanner that allows you to automatically deposit checks into your account.

“Fraud protection right now is probably one of the biggest things that a company needs to be looking at,” Shanks says. “The current environment has increased that significantly and many companies don’t think about it.”

While you might be thinking short term, ask your banker about options that will help you now and in the future. Interest rates have dropped — perhaps you can capitalize on a new loan or refinance. Discuss with your bank how long you’ll need to borrow and how much money you’ll need to borrow to structure a plan and lock in fixed interest rates while they’re low.

“In a down economy, looking ahead two or three years, what we might all see is the fear of inflation and much higher interest rates perhaps coming a couple of years from now,” Gwynn says. “You would want to work with your bank now to structure a plan so you have some visibility for the next several years.”

But once again, banks seek to be an adviser. Some banks offer seminars and informational Web sites as additional resources to finding efficiency. And many banks, if you’ve maintained honest communication with them, will honor your need for them to be flexible and will be committed to providing sound advice.

“(Some companies) maybe for the first time are going through a downturn or maybe the second time in their careers,” Gwynn says. “So the smart ones, the ones that I think are approaching it correctly, will say, ‘Yes, I’d like to get the experience of anybody that can help me think my way through this and give me valuable feedback.’”

Sunday, 26 July 2009 20:00

Balance of power

You’ve probably met with your executive team and members of your staff to devise ways to weather this economic cycle on sound financial footing. But you may have forgotten to invite a key player to the table: your banker.

Whether you’re seeing red or thriving during this volatile time, it’s always helpful to ask for input from an outsider. Now is the time you should be thinking beyond just the products your bank offers and see your banker in the role that he or she aspires to be — your trusted adviser.

“I would tell you it’s the same role they should be playing in any economy, but it’s probably more critical in a challenged economy like the one we have right now,” says Elaine McMahon, senior vice president, department manager for small business banking in Southeast Michigan, Comerica Bank. “We have a much broader perspective on the marketplace than usually they do, particularly if we’re talking smaller companies, small businesses. We can provide them consultation relative to what’s going in the marketplace, we can provide them advice as it relates to their specific companies, and ultimately, we can help by providing solutions, the financial products and services that banks offer that can assist them.”

Many businesses don’t think to communicate with their bank on a regular basis, which means missing out on a valuable, free resource, according to industry experts. Think of your bank for ideas and solutions for efficiency, especially now when you’re probably looking for answers.

To take advantage of your bank’s true role as a consultant, you must start by forming and maintaining a strong relationship around trust and communication.

Introduce yourself and your business

The first step in using your banker as an adviser is allowing time for him or her to get to know you and your business. Even if you’ve been partners for decades, invite your banker to your office or place of operation for a meeting.

While it’s important for the bank to learn about your operations, over time, it’s necessary for you to return the favor. A good relationship banker will introduce you to managers and key decision-makers in the bank, but if the introductions aren’t offered, take the initiative and ask for a meeting. The more people you know at the bank, the more likely your company will become a household name, the more likely you’ll know who makes the decisions and how they’re made and the more likely a smooth transition will occur if your contact leaves or is promoted.

Once the initial contacts are made, work to maintain those relationships with open and candid communication. Ask your banker how often he or she wants to hear from you. Is it once a month or once a quarter?

If issues arise in the meantime, don’t be afraid or intimidated to call your banker. One thing all bankers will tell you is that they hate surprises — both good and bad. The more they understand your financials, strategic plan and any changes in the company’s overall operations, the better they’ll be able to provide products and solutions to keep you on the right track.

“I think communication is key, sharing information and communicating,” McMahon says about developing the relationship. “It’s human nature that people don’t like sharing bad news, but we encourage our clients to come to us regularly, whether the news is good or bad because it’s our goal to try to work together with them to help them be successful.”

Use your bank for regular counsel

Like your lawyer or accountant, use your banker as a true consultant. Whether you’re trying to stay afloat or even rapidly growing, your bank can help in navigating through this economic downturn and in planning for the future.

Once you’ve established a relationship and your banker understands your business and your industry, ask him or her to review your business plan. It’s one of the best ways to utilize your bank’s resources. And if you don’t have a plan, create one.

“The bank will sit down and analyze that information and engage the customer in conversation relative to trying to get a better understanding of where the company has been and where they are going,” McMahon says. “A good bank uses this communication to build a relationship with a company and to provide them counsel as to where they see the strengths and where they see the challenges of opportunity for the company to become more efficient or become stronger. And, oftentimes, providing them a financial product is part of that equation.”

Your banker has a true advantage of having a national, regional and industry-specific perspective on economics.

There are a number of questions about your plan that you should be able to bounce off of your banker. Are the assumptions of your business plan reasonable for the current economic environment? How does it compare with other companies in the same industry? How can the plan be improved? What type of contingency plan should be in place? And finally, what products and solutions can the bank offer to help meet your company’s needs?

Take advantage of products and services

At least once a year, you should sit down with your banker to review the products you’re using. Perhaps you’re paying fees for a product you rarely use or technology has advanced and greater efficiency can be had.

A relationship review with your bank can help you tackle ways to save money and save time.

One of the main priorities right now is maximizing cash flow. Among popular products today are rapid deposit solutions, a desktop scanner that allows you to automatically deposit checks into your account.

While you might be thinking short term, ask your banker about options that will help you now and in the future. Interest rates have dropped — perhaps you can capitalize on a new loan or refinance. Discuss with your bank how long you’ll need to borrow on a loan and how much money you’ll need to borrow to structure a plan and lock in fixed interest rates while they’re low.

But once again, banks try to go beyond just selling a product and act as an adviser.

“We’ve tried over the years to identify key areas where small business owners could need assistance and where we could provide value,” McMahon said. “We’ve developed this cache of seminars, most of which are free or for a really minimal amount to cover a breakfast or lunch.”

Some banks offer seminars, while others provide informational Web sites as additional resources to finding efficiency. If you have a responsible banker, he or she will be proactive and committed to seeing you achieve success.

“The banker has to ask questions, too,” McMahon says. “We can’t just expect our customers to be coming to us first. We’re the ones that understand the products and services, so we’re the ones that need to go out there and know how we can uncover the needs so we can try to meet them.”

Detroit

Special Report

Thursday, 25 June 2009 20:00

Being prepared

When Mary Alice Ryan is interviewing for new members of her executive team, she thinks about her siblings.

As one of 10 children, she says it’s OK for a group of people to have different personalities, but it’s essential that everyone has the same values.

“It’s important you hire people not only because they have the best qualifications but because they also have the ability to fit into your culture and your team,” says Ryan, president and CEO of St. Andrew’s Resources for Seniors, a $65 million company that owns and manages housing and care facilities.

To find a surefire match for her team, Ryan prepares for interviews with the candidates by first narrowly defining the position. First, you first have to identify the position, its mission and its qualifications to use as a guide throughout the process. Second, you have to understand the leadership traits that your ideal candidate would possess. For each interview, Ryan uses a list of 15 traits that, she says, has “turned my whole world around.”

Smart Business spoke with Ryan about how to prepare for interviews to ensure you find the ideal candidate.

Decide what the position calls for. I start off the process by writing and then rewriting what I call a position profile. This is one page — almost in a way, an ad — but it’s a simple one page that tells what’s the position, what’s the mission of the position, what are the qualifications, what are the core responsibilities and a little bit about who we are.

We use it to enthuse a person or attract them so that every word in this is not only what you need to have, but it’s written in a way to attract them to get excited about this kind of position.

It’s the document I use as I go through the entire process, so everything that I want is really defined in here.

You’ve got to write it very tight. Every word needs to convey something so that they’re not supercilious because people don’t like to read a lot. Any executive is skimming things, so what you want to do is minimize code words. A lot of people, unless I’m getting someone who is very technical in my field, may not know those code words.

I also want to say it in a wording that is simple; that way, everything that they want is on here. What is the mission of this job? It’s really a one-sentence-type thing that says what we really want you to accomplish in the world is this.

This has worked out really well for me because if you just put a simple, little paragraph that you send out to all of your networking friends and you say, ‘I’m looking for a person to do billing,’ or, ‘I’m looking for a CFO,’ that doesn’t say enough.

Determine the position’s needed characteristics and questions to verify them. Then, along with (the position profile), what I’ve done is I’ve defined what the superior candidate is going to be and how I can state that in some sort of quantifiable language. What are the behaviors, what are the skill sets, how do they need to fit into my organization, who they are?

(I have) a list of 15 leadership traits, they’re like problem solving, technical learning, consumer focused. Each type of job needs different traits. I re-rank these traits to what are the most important ones to the least important ones for this job. When I’m looking for a CFO, I may be looking for something different than the head of my charitable foundation because of the traits they need to do the job. So when I interview people, I use these traits in my interview.

If I know I’m going to be interviewing more than one person, I try to use the same questions in each interview. So if one of these traits is problem solving, if that’s a really important one, then I want to ask them questions about telling me about situations where they might have to deal with X type of problem and how did they deal with it. If it’s presentation skills, they’re really going to make a lot of presentations, ask them about how do they prepare for a presentation, what are they at ease with, how do they go about giving a presentation. Taking any of these qualities and just trying to bring those back in to using their work history along with the leadership traits.

Understand your own culture. Finding the right fit is so important. There are a lot of people out there with wonderful backgrounds and skills. If it’s the CFO they probably know accounting, they probably have done management of people before, they’ve probably done major financing.

Those are almost the easier things to find out about a person because it’s quantifiable. What’s hard is the value system of how do you find that they could be a good part of a team. Every person’s team has their own traits — they work differently, they have a different culture.

You need to understand your own culture, and the people not who will be working for that person, but the people that will be working with that person, the other executives that they will have to interact with. Know how that person, or get the best feel of how that person, would react with those personality types.

So you really need to know the personality types of each of your executives that are on your team. That’s why you interview to the leadership traits.

After you’ve found out the person can do the job, they know the books, then you say what are the traits that are most important.

Thursday, 25 June 2009 20:00

Multiple choice

Let’s face it, when you’re in a budget crunch you’re looking to slash any line item that doesn’t show an immediate return. In today’s recession, training is becoming that item more and more.

The U.S. corporate training market shrunk from $58.5 billion in 2007 to $56.2 billion in 2008, according to research firm Bersin & Associates. The average training expenditures per employee fell 11 percent from 2007 to 2008, and small and midsize businesses were hit the hardest, averaging 33 percent fewer training hours per employee.

You may think trimming or even axing training is justifiable — training takes time and money and doesn’t usually have an immediate return on investment. But educators say now is a prime time to enhance your employees’ skills, whether it’s taking advantage of slower business to cross train employees or supporting your employees in the additional responsibilities that they took on following company layoffs.

“Today, there’s a proliferation of people in the job market, and most companies are working with a lean staff, and usually that staff (is made up of) their highest performers,” says Donna VanRooy, director of professional development at Baldwin-Wallace College. “Training and development is one way that a company can ensure that they retain that work force now and also in the future when the market changes, [so] that that work force now feels that there is a commitment from the company investing in them.”

Eliminating your training or education budget can be detrimental. But there are ways to maintain productivity with fewer dollars, and it starts and ends with efficiency.

Track your spending and its returns

One place to start is looking at the training or education you’ve done in years past. Did you see results that directly improved your bottom line? If not, look closely at what you’ve spent money on. Maybe you’re paying for employees to get advanced degrees that are useless to your company or maybe you lack the resources needed for your staff members to fully implement what they learned in training.

There are multiple ways to track training, the most popular being pretesting and post-testing to grasp the change in employee knowledge. Whether or not you measured your employees’ change in skills, a follow-up assessment to gauge retention and whether more training is needed can provide positive feedback. Questions to think about are: Did they learn something from the training? If they learned something, can they apply it on the job? If they can apply what they learned on the job, did it have a positive financial effect on the company?

“The assessment on the front and the back sides is an absolute must to create metrics, versus just doing box checking: team-building, check; diversity, check,” says Jim Potantus, vice president of Corporate College, a division of Cuyahoga Community College. “It’s really finding what those long-term deliverables can be in regards to ROI.”

If you haven’t seen the results you were hoping for, don’t continue to throw the same training program at the problem and hope for a different outcome. It’s important to remember that training isn’t always the solution and that people learn in different ways. The best thing to do is either sit down with a training provider or internally spend time evaluating the best solutions moving forward.

Find solutions now, while planning for the future

Effective training that gets to the core of the problem starts with an analysis of what the issue is and having a sense of what you want to accomplish through training. A common mistake is assembling training for a particular reason but never defining the why and a quantifiable outcome.

An internal training department can outline the company’s objective, but you can always look to the experts at consulting firms, colleges and universities to do a needs assessment and align an educational plan with the results.

“What’s most important is for them to align their training with the strategic goals of the organization or the goals of the department or the division,” VanRooy says. “It’s working directly with their managers and the customers to make sure the training aligns the goals of the organization and the department.”

External providers can offer objective advice to what your company’s priorities should be when it comes to training and carryout implementation. And while you may be thinking short term in this economy, a long-term plan is essential to be a step ahead of your competition and execute successful training.

The best ways to assure you’re meeting your company’s needs and spending your money wisely are to link training to your strategic plan and your performance management system — each job description and employee annual review. That guarantees a regular evaluation of your training program and your employees’ skills, and if you’re working with a provider, it keeps them abreast of your company’s future plans, which can lead to identifying problems and solutions earlier and faster.


Determine training that suits you and your budget

There’s a plethora of external sources to partner with, whether it be sending administrators to pursue master’s degrees or training employees on communication techniques. Colleges and universities tend to be the best bang for the buck, offering a one-stop shop with consulting, full implementation and a broad range of courses.

When it comes to training, the costs that add up are flying in topic experts, sending employees to out-of-town conferences or even holding training off-site. If you’re hoping to trim your training budget — and it seems many are — then think locally. Look at the office training and online services offered by local community colleges and universities.

Tough times call for creativity. Think about internal and external resources that lend themselves to free training. Check professional associations for round tables and seminars. Survey your employees on their areas of expertise and hold brown-bag lunches on those topics. If you’re bringing training in-house, just make sure you’re using a variety of techniques to meet each employee’s learning styles.

“I see more from the training managers that I’m speaking with, now that they’re looking at more informal learning opportunities and knowledge-sharing opportunities,” VanRooy says. “There’s time invested on somebody putting that together, but it also builds employee engagement. It’s an opportunity, if you to have one of your executives lead some of these, to give your executive some face time with people so they also feel more engaged with what’s happening with the company.”

And look for funding sources — federal, state and local organizations offer training grants, whether it’s the U.S. Department of Labor or one of your local economic development corporations.

If you’re thinking about dramatically cutting your budget, first think about why you have training in the first place: to improve your retention, customer satisfaction, corporate culture and the overall growth of the company.

“Those [companies] that you look at that are participating in training or investing in training, whether it be with the colleges or other organizations, typically their productivity — in metric terminology — is much further ahead than a lot of their competitors that are just looking for sole cost reduction,” says Potantus, adding the No. 1 asset of a company is its employees. “If you invest in that group, the residual return on your investment is probably limitless. 1D;

Tuesday, 26 May 2009 20:00

The long haul

One of the first things Tom Kraska talks to potential employees about is the tenure of his staff.

His 12 superintendents have all moved up through the general contracting firm, and the company’s 60 employees average 15 years at K&S Associates Inc.

Those numbers are a result of Kraska’s commitment to growing leaders from within the company, which posted revenue of $104 million last year.

“When people come here, I ask them what’s different about places you’ve worked in the past,” says Kraska, the company’s president. “One of the things they like about K&S is that we provide the best possible lower-level management staff we can find. We are developing new managers, future managers within our own system.”

Keeping people for the long haul means hiring employees who are dedicated to the industry and who complement your culture, says Kraska. From there, you have to provide training that will serve them throughout their careers and increase responsibility as it’s earned.

Smart Business spoke with Kraska about how to grow your employees into your company’s future leaders.

Look for people devoted to the industry. We look for people that have made a commitment to this business. And one of the ways you judge that is what type of college courses they’ve taken and what type of degrees they’ve obtained.

We are strictly looking at the college, the degree program. We know a little bit about the construction management programs that are available, and if we don’t, we do a little bit of research to find out what the courses center around, if it’s the type of work we do.

Set expectations during the interview. We look for people that are interested in starting from the ground up and learning the business. We’re not really interested in the prima donnas that come out of school with the attitude that you owe them something.

We look for humble people that are willing to learn, that have a good work ethic. Then we assign them to some of our top managers as assistants … and they learn the business from the bottom up.

I have a tendency to be completely open and honest with people about what they should expect. I generally invite them to spend a day here while we’re working and get a feel for us. While they’re doing that, I watch their expressions, I listen to the questions that they ask and get a gut feeling for whether it’s a fit or not, while they’re doing the same thing.

Generally within the interview process and the job offer, there is a job description that is attached that sets not only the basics out but also the long-term goals and gives people some idea of what we’re looking for and how they’ll be graded or judged, if you will.

Being open and honest about the company is very important, and I think that if you try to sell the position that it’s something that it’s not, you’re just setting yourself up for failure.

Teach new employees the business by working as a team. They usually are assigned to a project manager or senior project manager as support staff, which ties back to that solution of, how I keep my senior people is to provide them good support staff. It’s a nice circle.

The support staff helps me keep my senior-level people so they’re not overwhelmed, and at the same time, the junior people are getting that experience and I’m growing them from within the organization.

(You learn) the business from on-site experience, hands on. Being on site, have your office in a construction trailer, dealing with the trades and seeing the building being built, being part of that team.

As a manager who will later spend most of their time in the office that part of your career that’s spent out in the field is invaluable. I don’t think you can succeed without a good handle on that.

Slowly hand out responsibility. You have to be patient with people. You can’t expect too much right off the bat. You have to limit their authority so that they don’t make any mistakes that get you in trouble. At the same time, you have to give them some freedom so that they can make mistakes and learn from them.

There’s a fine balance there of how much authority you can give them so mistakes don’t have a severe impact.

There are some givens within our management group, [like] our management duties that you don’t let the assistant project manager handle. We categorize the work from experience as to what is safe to be handled, what needs to be reviewed by senior project management, and we just assign those tasks based on that.

Slowly, as people prove themselves, you start to increase their responsibility, increase their authority and, eventually, increase their job description.

It’s the comfort level from the way they’re handling their assignments and feedback we get from our subcontractors, owners, representatives of our clients that we work for. It’s a combination of gut feeling and customers.

Look at employees’ track records to determine whether to promote someone. Look at the success of the employee, the success of their projects, the success of their tasks.

I am not a tenure person. I strictly respond and promote due to their success, and depending on a position, that’s measured in so many different ways.

There are criteria that you have that are completely different than someone in an estimating role or an administrating role or a superintendent role. There are separate criteria that you (use to) gauge their success.

How to reach: K&S Associates Inc., (314) 647-3535 or www.ksgcstl.com

Tuesday, 26 May 2009 20:00

Healthy returns

You’re looking at your expenses, and that health care cost is just glaring at you. If only you could chop that number.

In fact, many employers are. The economic downturn has caused 60 percent of employers to change their health plan or strategy, according to a National Business Group on Health/Watson Wyatt Worldwide study. With the median health care cost per employee estimated to reach $7,400 this year, many employers are transferring costs to their employees.

That may be an idea of your own or a route you’ve already taken. But insurance providers and health care experts are cautioning you to think twice if you want true savings and you want to hang on to your employee base.

Cutting or renegotiating benefits can save on monthly expenses.

“The real question is, ‘Does it save money in the long run?’” says Vic Buzachero, corporate senior vice president of human resources for Scripps Health. “Really, what we find is that if people are foregoing care, eventually they’re going to have some major health incident, and frankly, they’re going to miss work and that may end up costing the employer more.

“People are forgoing care, so to speak, because of the cuts the employer makes, but the costs may actually be higher in the long run.”

More than 75 percent of employers’ health care costs and productivity losses are linked to employee lifestyle choices, according to the Centers for Disease Control and Prevention.

Cutting or renegotiating your health benefits can save money. But until you understand what’s driving your costs — your employees’ bad habits — you’re not going to reach the root of the problem. The bottom line is, the more your employees use their insurance, the more you’re paying.

Understand what you’re paying for

To really control costs, you have to understand what they are.

Sit down with your broker or third-party administrator to discuss your claims. You need to understand the specifics of your population and how employees are using their insurance, meaning what services they’re seeking, what medications they’re on and perhaps discern the top illnesses they suffer from.

Larger companies dedicate time every week or once a month to go line item by line item and chart trends, but for smaller companies, it may take months to paint a clear picture. The overall goal is to carve out a specific area your employees are using a lot of and try to find a more efficient way of dealing with the health need. For example, finding out your employees use the emergency room as a physician’s office or pay three times the price of a generic drug for brand-name medication can empower you to seek cost-saving solutions for you and your employees.

Once you have a better understanding of where you’re spending money, don’t be afraid to look to your broker or health plan provider for advice on the next step. Much of your costs can be deterred by simply educating your employees, and most health insurance providers and local hospitals offer informative tools and programs as aids.

“It’s quite interesting the different dynamic that employers give toward their benefits,” says Bob D’Angelo, regional vice president of Health Net of California. “Some are so committed that they spend a lot of time and energy helping their employees understand their benefits. And some do it because they have to do it. To the greater extent that an employer is involved in the process is to the greater extent that we have outcomes that are favorable.”

Understand what to educate your employees on

You don’t need to know the specifics, like the annual median cost increase for health care is estimated at 7 percent for 2009, to know costs are rising. And your employees probably notice the difference in their paychecks.

There’s no better time to proposition your employees with ideas that can better their health and save them money. Plus, emphasizing healthy living can quickly boost workplace morale and productivity, which can’t hurt in these uncertain times.

In order to provide your employees with pertinent information, you have to understand what risks they face. Many employers are opting to screen their employees, hiring a local clinic or hospital to come to the office and perform body mass index tests. The anonymous results are later given to you as a snapshot of your employees’ health.

Costs for the screenings vary dramatically. But another option is having your employees fill out a health assessment, which may cost nothing and take little time. Most insurance providers offer online health assessments, which may even be an incentive connected to your health plan. If you opt for an assessment, the provider then takes the information and directly contacts your employee with wellness information and advice.

Either route you go, the group you seek out can help you devise techniques that will speak to your employees’ needs and interests.

Step into action

Now you know the services your employees are using and the health risks that force them to seek care. However, you’re pinching pennies, and investing in a full-blown wellness program, which is estimated at the high end to cost $400 per employee, to support healthy living is the furthest thing on your mind.

But some food for thought: Wellness programs tend to see a 2-to-1 or sometimes even a 3-to-1 return on investment. And results usually can start to be seen in a year.

“We find by helping people identify their health risk factors — things such as high blood pressure, high cholesterol, whether they’re overweight, sort of habits they have in assessing that — we can encourage them and help them seek healthier habits and decrease those risk factors,” Buzachero says. “What we find is people who have lower number of risk factors use health insurance and need patient care at a much lower rate than others. We find that cost is as much as 25 percent less than that of those people that are not practicing healthy lifestyle habits.”

Some behaviors can be directly changed at work with no added cost by changing vending machine options, starting a walking club or banning smoking. Ask your broker or a local health association to hold monthly seminars at your office. Ask your provider what free services it offers.

To really get employees to perform, the need for incentives still holds true. Companies have seen immediate savings in paying for employees’ medication if they buy generic.

Another idea is linking an employee’s program participation to his or her health plan. If employees reach lower targets in weight and cholesterol, consider paying for their insurance. Their healthier lifestyle means less risk for chronic diseases and probably fewer medications and doctor visits.

Research will tell you there’s room for creativity. But whichever route you take, you must see it as an investment in your employees and you must find ways to directly get them involved.

“I think over the course of time that it’s been proven that any time you can get an employee vested in the cost of his or her health care that they’re going to pay more attention to the outcome,” D’Angelo says.