A 2013 survey of 2,000 U.S. health care consumers found that 83 percent are entirely unfamiliar with private exchanges, according to Accenture, a global management consulting company.
A Kaiser Health poll conducted at the same time found that almost half of respondents didn’t understand that public exchanges are a provision of the Affordable Care Act (ACA).
A year later, those numbers might have moved somewhat, but the confusion and caution about the health care exchange concept is still causing slow initial enrollment for both.
“I haven’t seen a massive uptake on the private exchanges yet,” says Mark Haegele, director of sales and account management at HealthLink. “But I have started to see, for the first time, a few employers say, ‘I’m no longer offering insurance, and you can just go on the public exchange.’”
However, the wait-and-see approach may change soon. By 2017, private exchanges are expected to catch up to public exchanges, with one in five Americans purchasing benefits from a health insurance exchange, Accenture projects.
Smart Business spoke with Haegele about how the two exchange types differ.
How are private exchanges different from the public ones?
The public exchanges, which are mandated by the ACA, allow certain unemployed individuals, individuals with employer-sponsored plans and some small companies to purchase health insurance. The exchanges are sponsored by the government, either state or federal, and cover medical and prescription drugs with four levels of coverage. The individual consumers and small employer groups pay for the coverage, with some eligible to receive government subsidies.
Private exchanges are available to employees of companies who decide to participate. Right now, only a few organizations are offering private exchanges, such as Aon Hewitt, Towers Watson and Gallagher Benefit Services, Inc. The employer sponsors the coverage, but a private exchange has a broad range of coverage from medical and prescription drugs to dental, vision and voluntary benefits. Like a traditional health plan, usually the employer and employee each pay for part of the coverage.
What’s the attraction to private exchanges? Do they help employers control health costs?
Private exchanges are a way for employers to easily establish a defined contribution-type health plan. They can say, ‘I spent $1 million last year on health care for my employees. I’m willing to spend $1 million plus 3 percent next year, but that’s it.’ Then, every person gets an allocation and can choose within the available plans.
Private exchanges create predictability. You’re buying a more budget-friendly solution, that helps employers be one more step removed from insurance, versus managing your own health plan. In fact, it may end up being a stepping-stone to the public exchanges. Once employees get used to exchange-type health plans, some employers may decide to stop health coverage altogether, having them go on the public exchange.
An exchange doesn’t inherently do anything to control health care costs. It’s not a silver bullet. The claims are still the claims. The health status is still the health status. And the insurance companies still have to price each plan with their underwriters. You can build in prevention measures to keep costs down, but that’s like any health plan.
What else should employers know about private exchanges?
So far, private exchanges are structured as a single carrier solution. For example, if Aon Hewitt’s private exchange has Anthem, UnitedHealthcare and Cigna, a 500-life employer can go to the exchange and pick one of those three carriers. Then, health plan members have a menu of plan offerings under that single carrier.
Typically, the majority of employer-sponsored health plans have two or three options. Under the exchange model, you might have upward of 10 choices, as well as ancillary coverages. There are still plenty of choices, but it’s not like each health plan member can decide between UnitedHealthcare, Anthem and Cigna. It basically puts different carriers’ defined contribution plans in a room together, making it easier for employers to choose one. ●
Insights Health Care is brought to you by HealthLink
Some firms owned or dominated by family have achieved monumental success. Others have found the transition process to be more difficult. Relentless competition and struggle for customer loyalty, combined with the thorny issues of family dynamics, prove challenging.
When preparing to transfer a family business, the first step is making certain each successor is fully committed. Talk to them well in advance and explain the benefits and pitfalls from the perspective of an owner.
Prior to joining the family business, outside employment in a related field is beneficial. “Working for an accounting, finance or legal firm can help a member of the younger generation gain confidence and stature while attaining valuable knowledge,” says Howard Greenberg, managing member of Semanoff Ormsby Greenberg & Torchia.
Smart Business spoke with Greenberg about the characteristics of different generations, family dynamics and the importance of outside help.
How would you describe a typical entrepreneurial founder?
Typically, entrepreneurial founders do not have significant resources, but they do have lots of resourcefulness, drive and passion for the business, talent, and willingness to work very long hours with little pay. These characteristics, along with an intense drive to succeed, help an entrepreneur create something that can be passed on to the next generation.
What characteristics does the second generation typically possess?
The second generation watched Dad and/or Mom exert their efforts into their venture, witnessed their passion, and it rubbed off on them. They feel the responsibility to further the business and want to look good for their parents. Although they might not have quite the same drive, they may have the privilege of greater resources and more education. They are often successful at maintaining, growing and managing the business.
What changes with the third generation?
This is where problems arise and where some outside help is required. Often, the third generation has more resources, more education and more alternatives than the founding patriarch/matriarch had. But they may have other interests, lack the same abilities, and there are usually more of them.
How should management issues be handled?
You shouldn’t staff your business based on family. Staff it based on talent. Perhaps your family has talented managers, or people in finance. If not, you need to fill the gaps in with non-family members. Similarly, if the third generation isn’t ready to take the reigns, bring in interim managers as caretakers until the younger generation is ready for its role.
What problems can arise with shared third-generation ownership?
The people who run the business often resent producing for the people who just inherited the business. Conversely, those who inherited the business often resent those who run the business because of their salaries and compensation.
It may be better to provide the people not actively running the business with other assets from the estate. To reward long-term performance for a successor generation running the business, it’s advised that the company recapitalize to lock in the current value with preferred interests. This provides the generation ceding control with the value of their interests, and provides the next generation to control with the value of their future contributions. Include these provisions in shareholder and operating agreements as well as employment agreements and continuation plans.
Why use outside consultants?
It’s nearly impossible for the first or second generation to objectively evaluate the talents and value of their children. And if the second generation comprises more than one sibling, there will be arguments concerning rewarding the third generation and picking leaders. And trying to make things equal for everyone is a mistake because people are not equal. Outside advisers can help make those decisions objectively. They can assist in preparing the comprehensive agreements that are carefully tailored to the particular family business. Doing this in advance of the generational transition is highly recommended. ●
Howard Greenberg is a managing member of Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-3042 or email@example.com.
Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC
In our increasingly digital world, meaningful conversation has become a scarcity. However, for those in leadership, discovering the lost art of conversation has perhaps never been more critical.
To harness the power of conversation to strengthen and grow your organization, practice these 10 principles:
1. Converse — even if you think you can’t.
You need not be born as an expert conversationalist. Conversation leadership can be learned and practiced. What’s more, this skill is essential to effective leadership. Practice your conversation skills by beginning conversations with others and seeing them through.
2. Converse across hierarchies.
It is critical that you step outside of your zone to talk to people you oversee — as well as those you answer to. These conversations can lead to valuable insights from different perspectives. Cross hierarchies, silos and barriers to talk to others, and then integrate what you learn into your peer conversations.
3. Converse for intimacy, not efficiency.
If you’re watching the clock, you’re not conversing. Speed encourages an efficient exchange of information, but unhurried conversation bonds individuals and reveals truths. To engage in meaningful conversation, stop watching the clock.
4. Converse as though you are sitting at your kitchen table.
Many of the important conversations had at home offer lessons that can be applied to a business setting as well. Use what you learn at home — such as how to honor traditions, manage conflict and hear both good and bad news — to make your business conversations meaningful.
5. Converse across mediums.
Do not ignore any medium where conversation is happening; instead, embrace it. And beyond that, keep your ears attuned to where the conversation will migrate next.
6. Never stop learning.
Converse with others and watch skilled conversationalists in action as a way to continue learning and growing.
7. The world is our job.
We are part of the matrix that knits humanity together, and we belong in the debates that shape our world. Engage in the global conversation by conversing with people from around the world and exploring other countries as often as possible.
8. The community conversation is ongoing.
Conversation is going on in the communities around you. If you are not participating, you are more than quiet; to the consumer, you are aloof, even uncaring. Engagement is not just an opportunity, it’s a demand. Be sure that you are participating in the community conversation.
9. Time isn’t money; connection is.
Far too often, we assume in business that the bottom line is the driver of all interactions. Everyone wants a great price, it’s true; but everyone needs interaction and connection. Keep your attention focused in the right place: building connections.
10. The best offense is a good conversation.
It’s natural when under attack to want to circle the wagons and go into battle mode. But conversation with an outsider — an individual who can keep emotion out of the discussion and give you the perspective you need to make the best choice — may help you see a new way forward. Call on those outsiders for honest conversations about how to best move forward.
You don’t need an innate gift of gab to put these principles into action. Practice starting and maintaining the conversation, and observe what important insights come to light. As a leader, conversation is a skill you cannot afford to overlook. ●
Jim McCann is the founder and CEO of 1-800-Flowers.com and author of the new book, “Talk is (Not!) Cheap: The Art of Conversation Leadership.” A successful entrepreneur and public speaker, McCann’s passion is helping people deliver smiles. His belief in the universal need for social connections and interaction led to his founding of 1-800-Flowers.com, which he has grown into the world’s leading florist and gift shop, and Celebrations.com, a leading website for expert party planning content and advice.
For most company buyers, taxes are a priority when negotiating a purchase price. However, if tax issues are neglected during the integration phase, the negative consequences can be serious. To improve the likelihood of a successful merger, it’s important to devote resources to intensive tax planning before — and after — your deal closes.
During deal negotiations, you and the seller will likely discuss issues such as deductibility of transaction costs and the amount of local, state and federal tax obligations the parties will owe upon signing the deal. Often, deal structures such as asset sales can benefit one party and have negative tax consequences for the other, so it’s common to wrangle over taxes at this stage, says Sean Muller, partner-in-charge of Houston Tax and Strategic Business Services at Weaver.
“With adequate planning, companies can be spared from costly tax-related surprises after the transaction closes and integration of the acquired business begins,” Muller says. “Tax management during integration can also help your company capture synergies more quickly and efficiently.” You may, for example, have based your purchase price on the assumption that you’ll achieve a certain percentage of cost reductions via post-merger synergies. However, if your tax projections are flawed or you fail to follow through on earlier tax assumptions, such synergies may not be realized.
Smart Business spoke with Muller about tax planning after the deal closes.
What is one of the most important tax-related tasks in a deal?
Integrating accounting departments is critical, and there’s no time to waste. The seller may have to file federal and state income tax returns or extensions either as a combined entity with the buyer or as a separate entity within a few months following the transaction’s close. Companies must also account for any short-term tax obligations arising from the acquisition.
To ensure the two departments integrate quickly and are ready to prepare the required tax documents, decide well in advance of closing which accounting personnel to retain. If different tax processing software or different accounting methods are used, choose between them as soon as feasible. Understand that, if your acquisition has been using a different accounting method, you’ll need to revise previous tax filings to align them with your own accounting system.
What are the major areas of concern for companies related to tax planning and operational synergies?
Before starting to integrate products, personnel and facilities, examine the tax implications of those actions. Major areas of concern include:
- Supply chain integration. Combining the logistical operations of both companies may make fiscal sense on paper, but there could be tax consequences. Say, for example, that you’re planning to close your seller’s main warehouse and fold operations into your company’s existing warehouse facilities. What if the acquisition’s warehouse is domiciled in a more favorable tax locale than your warehouse?
- Divestitures and sell-offs. Buyers often spin off unwanted divisions or products when they acquire a business, but from a tax standpoint such moves can be costly. For example, selling a segment could eliminate certain tax write-offs or protections. You also need to plan for the tax consequences of selling newly acquired assets.
- Global implications. International acquisitions can be a tax minefield. Companies should keep in mind the kinds of new exposures the deal carries, such as value-added taxes. Also, consider how a foreign purchase may affect your company’s effective tax rate. Be sure your M&A advisory team includes people who are knowledgeable about the relevant tax laws.
- Enterprise resource planning (ERP). If the two companies’ ERP systems aren’t merged and synchronized, data collection could slow or you could lose tax data. This could affect the accuracy and speed of the combined organization’s financial reporting.
When acquiring a company, your to-do list will be long, which means you can’t devote all of your time to the deal’s potential tax implications. However, the tax consequences of M&A decisions may be costly and could impact your company for years. So, if you don’t have the necessary tax expertise in-house, work with outside advisers that do. ●
Insights Accounting is brought to you by Weaver
Gordy Opitz had to find a way to keep ComDoc’s employees focused after they lost what took 21 years to accomplishWritten by Adam Burroughs
When Gordy Opitz talks about ComDoc Inc., he starts at the beginning, explaining matter-of-factly that Walter G. Griffith founded the business equipment sales and service company in Akron in 1955. He traces its financial growth into the millions of dollars and outlines its industry’s evolution.
But the part of the story that elicits the most enthusiasm from Opitz involves the ComDoc employee stock ownership plan, which took 21 years to make its 615 employees 100 percent owners.
“We took an unbelievable amount of pride in being able to say to people that when you are working with ComDoc, you are working with people who own the company,” says Opitz, the company’s president and CEO. “That was an incredibly exciting time for us.”
Those exciting times, however, would come under threat. ComDoc was facing two serious obstacles in 2008: The great financial chill that had befallen the economy, and the loss of its largest product supplier, Ricoh, which was acquired by ComDoc’s biggest competitor, ostensibly pitting the former partners against each other.
Here’s how Optiz lead ComDoc through a turbulent period by ignoring the noise that could have silenced the company.
As ComDoc was moving toward 100 percent employee ownership, it was keeping its eye on Xerox, the industry leader, benchmarking with it to determine a fair share price for its own stock.
“As long as we could stay within 5 to 7 percent of that share price, we were going to keep it as an employee-owned company, which we were able to accomplish,” Opitz says.
ComDoc, at the time, was generating about $125 million in annual revenue. It had a great 2007 and was having a great 2008 when mid-year, Xerox inquired about ComDoc’s interest in being acquired.
Xerox’s midmarket customers had been a target for ComDoc. According to Opitz, “We built our business by going after Xerox placements.” But Xerox adjusted its strategy.
“Xerox recognized that the independent dealers, the ComDocs of the world, were closer to the street, closer to the customer, more effective, more efficient, had better billing processes and better service to their clients — all the things that we had done in building ComDoc,” Opitz says.
Simultaneously, the economy was cooling and ComDoc’s primary product supplier decided to sell direct to the customer. It was then that Xerox made its offer.
“Xerox put something in front of us and we knew it was our fiduciary responsibility to do the right thing for all of our shareholders,” Opitz says. “And we sincerely believed, given the circumstances in front of us, that making sure that our people who had been a part of this organization for many, many years were going to be secure. And that’s exactly what happened.”
ComDoc agreed to be acquired by Xerox, and the deal was finalized in February 2009.
It was a difficult decision to let go of the ESOP the company had worked so long to achieve, Opitz says, but the acquisition had a strong appeal.
“Our employees never had to worry about whether that stock price was going to decrease by 15 or 20 percent in one year, and how long it would take to recoup that drop,” he says.
Xerox was going to allow ComDoc to operate within the culture it had developed over the years, though it was under the new corporate ownership. The move, however, wasn’t without some turbulence.
“As we made the transition, I would say for the leadership group, there was angst involved because we had built succession plans moving forward for the future. Many of us on the leadership team had worked together for 20-plus years. We had been excited about what the future held for ComDoc,” he says.
For the most part, the company was able to retain its key people. Though there was some loss.
“I could probably count on one hand how many people ended up leaving ComDoc because of the transition,” Opitz says.
The hardest transition
While it was able to retain most employees as it transitioned from ESOP to corporate ownership, ComDoc was still facing the loss of its No. 1 product supplier, Ricoh, which, at the time represented about 80 percent of ComDoc’s business.
IKON Office Solutions, a multibillion-dollar company, and ComDoc’s biggest competitor bought Ricoh. Having lost its primary supplier, ComDoc got to work learning the product line of its new corporate owner, Xerox.
Technicians on the service side of ComDoc’s business were somewhat accustomed to servicing different products because there had been many iterations to the company’s product line, which foundationally was 3M, transitioning through Harris 3M, Lanier and Ricoh.
“So we had been used to selling and servicing different products. It was always at our speed, though. In this case, the race came to a quick halt in February 2009, and we could no longer sell Ricoh, so we immediately had to switch to the Xerox product line,” Opitz says. “That was the hardest transition, and I’m going to call it the learning phase — learning the product and then training all our service technicians in being able to service it.”
The task of servicing a brand new product line in a very short time was daunting. Coupled with the company’s sagging morale and the challenge was even more difficult. To get his company headed in the right direction, Opitz had to help his employees manage the problems individually and keep the lines of communication open.
“If you think about communication, it isn’t about all the times when things are going right, it’s also about finding out how people are feeling, what they’re thinking, being able to listen to them and help them understand and provide perspective,” Opitz says.
By having those conversations, he found that what was an issue to some people was irrelevant to others.
“But you’d never know unless you really stopped and asked the question,” Optiz says.
The next step was to reduce all the challenges the company faced into manageable tasks.
“You can’t allow it to become so overbearing that it consumes your thought process,” Opitz says. “We’ve always approached business that way — break it down into its simplest form and take these factors as they’re given to you. What are the pluses? What are the minuses? How do we sort through it? What are the strategies and tactics to push through it? And when you really break a task down, it sure becomes a lot easier to get after it.”
Learning to walk again
That philosophy was applied to training. Service technicians learned the product line at ComDoc’s service training center where they’d work on the product for three to five days to become proficient, and then follow up on their training in the field.
To train its sales force, the company utilized training webinars and developed matrixes of e-learning for each product.
“We would set matrixes up for each of our people with the products. They could do e-learning two hours a night from 5 to 7 p.m. So there was a lot of personal pride, there was a lot of time commitment by our people to get that accomplished.
“We had more than 200 technicians who had fully trained on certain products. I believe the first year we had more than 12,000 hours of training,” he says, which includes both the sales and service sides of the business.
“We had a big vision of what to do and we continued to break that down into small tasks, small focus areas, and we just made our mind up that we weren’t going to let external things influence our company,” Opitz says.
Though it’s a simple philosophy, it was still a very difficult transition. The year the company was acquired was flat compared to the prior one. But once the company started to understand Xerox and its product line, it started to expand, seeing its managed print business grow exponentially during that period.
ComDoc increased its revenues and profitability every year between 2009 and 2013. It grew from $125 million to $155 million in revenue during that time frame and its employee count has increased to 675 employees. ComDoc’s customer base continued to renew and grow year-over-year.
“And every year we just continue to challenge ourselves to continue to get bigger and stronger,” Opitz says.
A tough lesson
Once a company suddenly has the odds stacked against it, there are some simple steps to take to address the issue.
“Communicate early and often with your people,” Opitz says. “Make sure you have shared buy-in for what you’re trying to accomplish, and help people break down their challenges or tasks into small pieces and work hard at getting a resolution to them.
“Don’t let people become overwhelmed with what they believe might happen or what they believe might change.”
Opitz says he just tried to do the best he could every day and tried not to make the circumstances out to be an alarming issue so his colleagues didn’t become overly concerned.
“In my mind, at that time, ComDoc had more than 20,000 customers that had been great, loyal, ComDoc customers who knew our people personally,” Opitz says. “And if we were doing all the right things by our customers while in a product change, I just truly believed in my heart of hearts, that our people would find a way to work through it.” ●
- Communicate early and often.
- Breakdown challenges into manageable tasks.
- Do what’s best for the company and its employees no matter how difficult.
The Gordy Opitz File:
Name: Gordy Opitz
Title: President and CEO
Company: ComDoc Inc.
Birthplace: Meadville, Pa.
Education: He received a bachelor of arts in education from Westminster College.
What did you learn from your days as the assistant general manager for the Atlanta Braves AA team? It’s very simple. Be willing to do anything. I was a shortstop and third baseman for the Westminster Titans. The front offices for minor league teams 30 years ago were small, so, when I say be willing to do anything, I mean there were some days where we did all the marketing for the club. There were days we helped sell tickets. There were days that if it rained we helped cover the field. It was a ton of fun. I realized it doesn’t matter what your title is. If the job needs to be done, you’ve got to figure out a way to go accomplish it.
Who has done the most to inform your perspective on business? Retired ComDoc Chairman Riley Lochridge and former ComDoc President and CEO Larry Frank. They taught us the business, and all the things I’ve talked about before — let’s make sure we continue to do things the right way, make sure we continue to attract and retain the right people in the organization. And ask, ‘Are we building a culture that is going to allow us to grow and sustain our growth?’
How would you like to be remembered at ComDoc after you retire? I’d like to be remembered as somebody who helped make a difference and helped make ComDoc become a better place; somebody who helped fulfill our vision of being a great place to work and a great place to be a customer.
Learn more about ComDoc at:
Global branding has become increasingly popular in the past few decades. Companies are more often seeking to expand overseas into tempting and lucrative developing markets. Furthermore, the Internet has given global branding a heightened importance as websites can be accessed from anywhere. This is why international trademarks have become a necessity for companies operating in the global marketplace to ensure as much protection for their brands as possible.
Smart Business spoke with Namit Bhatt, an associate at Fay Sharpe LLP, about protecting brands when advertising abroad.
What should a company consider before expanding internationally?
One of the first steps is making sure the brand is protected at home. In the U.S., this means registering a trademark with the U.S. Patent and Trademark Office (PTO). Securing a federal trademark registration with the PTO offers the strongest protection by helping to fight dilution and infringement of the brand marks used on the company’s products and in any advertisements.
Before a company expands into a foreign marketplace, it should conduct a trademark search to look for any marks in that country that could be confused with its brand. Fighting against a conflicting trademark is costly and time consuming to a growing company; a search helps avoid that cost.
How can a company achieve international protection?
When dealing internationally, take advantage of international agreements between countries because multi-national treaties and agreements can determine branding protections. The World Trade Organization is a useful source for treaties dealing with intellectual property (IP) standards. The World Intellectual Property Organization (WIPO) is also a useful resource for determining the IP rights available. WIPO manages the Madrid Protocol, which assists the international registration of trademarks. More than ninety countries have acceded to the Madrid Protocol with India, Rwanda and Tunisia becoming members in 2013.
The Madrid Protocol allows companies that own trademark applications or registrations in a member country to expand the trademark application to other member countries with a single application. For example, a company with a registered trademark in the U.S., a member country, that desires to expand to India, can electronically file an international application with WIPO under the Madrid Protocol. The designated member countries are then notified of the international application and can examine the application for any conflicts within the local trademark system. Using this method is a convenient way to expand into a global marketplace quickly, efficiently and with one set of fees instead the expense of applying to each country individually.
Another international treaty that is helpful for global branding is the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS agreement establishes a minimum level of IP protections including trademarks. This means that any member country of the treaty must adopt at least the amount of protection set forth in the treaty and can choose to give more protection than the minimum.
How can a company maintain international protection?
After a company achieves trademark registration in the new marketplace, it is important to maintain and enforce the rights granted under the trademark registration. Generally, the company should maintain continuous use of their trademark to not relinquish any rights for the brand. Also, the company should watch out for any marks that could dilute the protection of a registered mark. These methods will ensure that the global branding can be used for many years after registration.
Ensuring global protection of a company’s brand has become easier as the need for international protection has increased. Companies looking to enter new markets should be mindful of the options available and consider using them. Before advertising a product in a new marketplace, a company should look to gain protection of its brand in the marketplace. •
If your organization is using social networking sites to search for potential job candidates, it is not alone. Social networking sites have become an increasingly popular recruitment and screening tool because of the ease and efficiency they allow for finding new talent. However, in the absence of an existing evidence-based model for using social networking sites, organizations must find a way to balance the risks and rewards as research catches up to practice.
Recent surveys tell us that LinkedIn is the most frequently used social networking site for recruiting and screening potential candidates. Perhaps this is because LinkedIn was developed for professional networking purposes and offers the most structure and consistency in what and how potential candidate information is presented. The challenge, however, is that depending on the job, both relevant and non-relevant information can be found on LinkedIn.
Smart Business spoke with Rosanna F. Miguel, Ph.D., SPHR, an assistant professor of Human Resource Management in the Department of Management, Marketing and Logistics in the Boler School of Business at John Carroll University, about the effective use of social media for hiring.
How are organizations using social networking sites to reap the most rewards?
Many organizations are using social networking sites to search for passive candidates who possess a specific skill set, which may be difficult to find. For example, an organization may be interested in finding bilingual candidates with leadership skills, or candidates with a background in health care and management. Other uses include looking for active job seekers, posting job information, or participating in discussions to spur interest in the organization and increase employer brand. Most often, organizations seek out individuals to fill salaried mid- to upper-level management or director positions.
What guidelines should organizations follow to minimize legal risks?
The structure and consistency offered by LinkedIn is a substantial advantage over sites such as Facebook and Twitter that do not allow for a highly disciplined approach to the use of available information. Structure and consistency lead to higher validity and help ensure organizations are meeting the professional and legal guidelines that have been in place since the 1964 Civil Rights Act.
While the use of social networking sites for screening purposes is relatively new, the potential pitfalls associated with this approach are not. The guidelines that apply to the use of the standard resume and application blank, for example, apply to the use of social networking sites. In fact, LinkedIn has been described as a new version of the traditional application blank. Problems arise when organizations use LinkedIn or other social networking sites haphazardly, without a formal policy or concern for professional and legal guidelines. Most importantly, organizations must ensure the use of job relevant information about potential candidates by focusing their search on the requirements of the job based on a recent job analysis. Information that may discriminate against protected groups or that is not job relevant must be avoided (e.g., photographs, age, personal information, etc.).
How can the use of social networking sites positively and negatively affect an organization’s pool of potential candidates?
Organizations are looking to social networking sites to expand the population of high potential candidates, particularly when organizations demand a specific skill set that may be in high demand by employers. Some of the most talented individuals can be found on social networking sites, and their identities are just a few clicks away. However, research tells us that social networking sites do not adequately represent the true population of potential candidates. That is, fewer Hispanics and African-Americans use social networking sites. This means that relying exclusively on social networking sites to search for potential candidates is not effective for increasing employee diversity and ensuring that minorities have a fair chance of being selected. This puts organizations at risk for discrimination lawsuits. Organizations can avoid this potential pitfall by including other methods to source candidates, such as job boards, job fairs and magazines. More specifically, methods that have a higher chance of targeting minority groups can be selected to widen the demographic representation of potential candidates.
Why should organizations create social networking policies to screen job candidates?
Surveys suggest that more than half of all organizations using social networking sites to screen job candidates do not have a formal policy for doing so and do not intend to create one in the near future. If one of the goals is to ensure social networking sites are used according to professional and legal guidelines in a consistent and fair manner that leads to the identification of job relevant information, a policy to describe those guidelines to the users of social networking sites is a must. An EEOC or OFCCP audit should not come as a surprise to organizations; organizations must be prepared to support their recruitment and selection procedures in advance of a potential discrimination lawsuit, regardless of whether that procedure involves social networking sites or not. •
Rosanna F. Miguel, Ph.D., SPHR, is an assistant professor of Human Resource Management in the Department of Management, Marketing, and Logistics in the Boler School of Business at John Carroll University. Reach her at firstname.lastname@example.org.
Insights Executive Education is brought to you by John Carroll University
Overseas sales and exports can really help business owners grow their companies. But, when the company gets its first international inquiry, an owner might say, “I always deal cash in advance. Send me a check. I’ll send you the product.”
That’s not how the world works, says Art Rice, vice president and manager of International Operations and Product Management at FirstMerit Bank.
“The world rarely operates on cash in advance anymore. So, it may be days, weeks or months between the actual sale of the merchandise or service and the resolution of the accounts receivable,” he says.
This extended sales cycle can strain your working capital, but the U.S. government has several programs to help, Rice says, including the Export-Import Bank of the United States (Eximbank) and the Small Business Administration (SBA).
And your banker can be very helpful as you get into international sales or expand into new markets, says Frank Pak, vice president, International Division, at FirstMerit.
“We can serve as a great referral source to other professionals involved in supporting exporters, and also referring them to government assistance centers like the U.S. Export Assistance Centers or the SBA, an international lawyer, a freight forwarder, export insurance broker, etc.,” he says.
Smart Business spoke with Rice and Pak about available export support programs.
What are some export support programs?
The Export Working Capital Programs of the Eximbank and the SBA provide an exporter with funds for things like materials and payroll while producing the product. Banks receive a 90 percent guarantee on the loan’s principal and interest, because the government wants to encourage U.S. job creation. Also, the work in process can be included in the advance funding calculations.
It’s better to work with a bank that has Delegated Lending Authority from the Eximbank or Preferred Lender designation from the SBA for this program as it can expedite the process and assures that you’re working with an experienced lender.
Credit Insurance on foreign receivables is when an exporter purchases protection against non-payment of its foreign receivables from Eximbank or a private insurance company. Normally, banks don’t allow the foreign accounts receivable to be included in a company’s borrowing base because of the perceived heightened risk when buyers are located in a foreign country.
With insurance, an exporter has the opportunity to offer longer repayment terms. For example, a company, that typically offers no more than 60-day terms to its customers, sees its competitors in foreign markets offering 120-day terms. With export credit insurance, the exporter is able to take the risk of longer terms that will enable it to be more competitive. Also, if it assigns the insurance policy to its bank, the bank can advance against those receivables, improving cash flow.
For larger export sales, buyers in higher interest rate countries often look for some form of extended payment terms. Typically referred to as buyer financing, the exporter can decline and lose the sale, offer unprotected terms or use a form of insurance to protect its medium term receivable. The U.S. government supports such sales with programs called Medium Term Loan Guarantees. A bank is willing to participate because repayment is guaranteed by the U.S. government. The exporter benefits because it satisfies what the buyer needs and receives payment from the bank almost immediately after shipping its product. While there are restrictions, successful exporters have used such programs for 70 years.
What’s important to know about using export programs like these?
You don’t have to go it alone. Your banker is an advocate who can help you find the right resources as you set up your export program and understand the advantages and disadvantages of available payment methods.
Contacting your banker early in the process, as you’re developing your business plan and researching markets, will shorten your learning curve and help you become successful sooner. Banks can also direct you to government resources, which have additional tools available to support exporters as they expand into new markets. Reach out to your bank now, even if you’re just thinking about exporting overseas, because your banker will be happy to share his or her expertise. ●
Art Rice is vice president and manager of International Operations and Product Management at FirstMerit Bank. Reach him at (330) 384-7178 or email@example.com.
Frank Pak is vice president, International Division at FirstMerit Bank. Reach him at (216) 317-7399 or firstname.lastname@example.org.
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Overhauling an office phone system is often a necessary part of growing, improving and updating an organization’s technology. Voice over Internet Protocol (VoIP) is a common upgrade that offers a variety of options to fit a business’ needs, whether it has a small, medium or large employee base.
Each VoIP system can be custom built to fit the specific requirements of a company, says Alex Desberg, sales and marketing director of Ohio.net. A specific VoIP product is chosen based on the company’s specific needs, and its implementation is ramped up in a way that’s manageable.
“When you’re talking about your phone system, it can be pretty painful when you don’t know what to expect,” Desberg says. This is why companies have the option of switching everything over at once, or taking a step-by-step approach when switching to VoIP.
Smart Business spoke with Desberg to examine the ways companies can integrate VoIP.
When converting to VoIP, is there one best way to transition or are there options?
Each VoIP-based phone system is meant to work uniquely. Some companies don’t know what’s available out there, and really aren’t ready to jump in with both feet to a brand new phone system and service provider. If a company knows that over the next few years they’re going to grow, they’re going to change, or they’re going to move, then there are specific opportunities that arise.
When does it make sense to use a step-by-step approach?
Unlike traditional telephone service, a step-by-step approach can be used as opposed to transitioning everything when improving communications using VoIP. In many situations, dial tone from traditional telephone providers can be duplicated and moved to the VoIP realm. It’s then offered back in a cost-effective way.
If a company is planning to move to a new facility it is a great opportunity to start down the path of new technology. The organization can take the phone numbers that it currently has and move them to VoIP services. Then in the new location, deploy what looks like traditional phones. When the company is ready, it can retire its old phone system and slowly step completely into VoIP. It eases the process for the company and its employees.
Remote workers or remote offices that are using separate phone systems raise more opportunity to investigate VoIP options. Those multiple environments can be brought together so that they look and operate like a single phone service. It can be a mix-and-match environment, offices and workers can be spread out across the country, deploy individual phones and systems for them while the main office is still working off of the traditional phone configuration.
In what circumstances is it better to switch all at once?
When a company is growing, often its phone system is something that’s an afterthought. Either the current phone system can’t handle more employees, the voicemail is always full or the technology is in need of updating. A good option at that point is to move to a platform that doesn’t have those limitations. Hosted VoIP, where all services and all phones are provided, has basically unlimited growth potential. So there is a great opportunity for a company to avoid continuously reinvesting in old technology.
How can a company determine what’s best for its situation?
The best and most important part of the process is planning. It’s based on what a company needs going forward. Not only is the company preparing for new hardware, but also new expectations on the IT staff and the network itself. It’s important to make sure that the VoIP provider offers training as part of its service. And financially, a company has to make sure that it is a good way to go and a good investment. ●
Alex Desberg is sales and marketing director at Ohio.net. Reach him at email@example.com.
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The JOBS Act, passed in 2012, changed rules to make it easier for small businesses to secure funding from investors.
“The Securities and Exchange Commission actually has three initiatives related to the JOBS Act. Crowdfunding has received most of the attention, but the SEC also amended Regulation D to allow small businesses to use general advertising and offers the Regulation A option, which is sort of a mini registration,” says James S. Hogg, a partner at Brouse McDowell.
Smart Business spoke with Hogg about how these JOBS Act options work and what they offer small businesses looking to raise funds.
What has changed with the amendment to Regulation D?
In the past, a private placement had to be done without general advertising, so you would either use a broker to find wealthy investors or you would find them; it was more or less word of mouth. Once you found investors, you would do a conventional private placement.
According to the SEC, $900 billion was raised that way in 2012. Of that, about $8 billion was raised in offerings of less than $5 million each. The amended regulations are intended to allow more small businesses to participate by expanding the pool of investors they can reach. But when you use general solicitation — Internet, newspapers, radio — you can only sell to accredited investors and there are more rigorous procedures to follow to ensure buyers are accredited.
To be accredited, an investor must have a net worth of $1 million or annual income of $200,000. You can still raise funds the old way under Regulation D, which allows for up to 35 non-accredited investors and an unlimited number of accredited investors. But if you use general solicitation, all investors must be accredited.
How can small businesses use crowdfunding?
Nothing is set until the SEC adopts final rules, but based on the proposal, companies are limited to raising $1 million in a 12-month period.
Crowdfunding has hit a couple of snags. One involves regulation; the proposal doesn’t allow for state regulation and some regulators would like to see more safeguards, while other people want to get money to small businesses as quickly as possible.
The SEC proposal requires use of a funding portal such as Kickstarter or Indiegogo and limits purchasers — a person with net worth of less than $100,000 can’t spend more than $2,000 or 5 percent of their net worth a year, and someone with a net worth of more than $100,000 is restricted to 10 percent of their net worth.
Crowdfunding would also require annual reports, although they would be basic — including financial statements that may have to be reviewed by a CPA firm, and if the amount raised was more than $500,000, you would also need an audit. As proposed, the rules might make crowdfunding unattractive. I’m sure that’s part of the comments the SEC is wrestling with.
What is happening with Regulation A offerings?
Historically, if you did a Regulation A offering, which is like a mini registration, it would not be given an exemption from state registration. As a result, only 0.2 percent of offerings under $5 million used Regulation A.
The SEC has made it a two-tier system by adding a new rule that allows an exemption from state securities law registration. You can still raise money the old way, but if you elect to do so under the new rule, there are reporting requirements in return for the state law exemption. The maximum amount that can be raised would also increase from $5 million to $50 million.
This is still in the proposal stage, and comments are being accepted through March 24.
How do businesses decide what route to take?
If you’re really small and raising funds entirely in Ohio, you can sell to up to 10 investors without any filings, but make sure you meet the requirements for this exemption. Most companies with larger offerings will probably continue to opt for Regulation D, but when the regulations are finalized they may consider crowdfunding or Regulation A if those are exempt from state securities registration. ●
James S. Hogg is a partner at Brouse McDowell. Reach him at (330) 434-4106 or firstname.lastname@example.org.
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