It is a little known fact that there’s a strong connection between the success of a deal and the team assembled to get it done.
“Management needs to be very diligent about selecting members of its internal and external deal team; it’s critical that the teams have the right fit, experience and industry expertise,” says Goody Agahi, a shareholder at Stradling Yocca Carlson & Rauth.
Smart Business spoke with Agahi about what it takes to assemble a strong mergers and acquisitions (M&A) deal team.
What is a deal team and how is it composed?
A deal team generally consists of key employees at the company, M&A attorneys, accountants and, in certain circumstances, other outside advisers such as investment bankers. The first step in assembling a deal team is to identify the key employees at the company who are intimately familiar with the company’s operations and financial matters. The next step is for the company to identify, interview and ultimately select its M&A attorney and other outside advisers.
In selecting an M&A attorney, the company should be focused on an attorney’s M&A experience, industry expertise, reputation and fit. An experienced M&A attorney will be able to assist the company with identifying other service providers. For example, if the company is considering an auction process to effect a liquidity event, an M&A attorney can refer the company to multiple investment bankers that, based on the attorney’s experience, he or she believes has the right experience and will be a good fit for the company. Investment bankers can assist the company by performing an analysis of the M&A landscape and identifying prospective buyers. The auction process provides the company an opportunity to see how the market values the company and, depending on the level of interest by prospective buyers, gives the company leverage in negotiating definitive transaction documents. An auction process, however, may not always be appropriate.
What qualifications are important to have in each team member?
Extensive deal experience is critical when considering whether or not to hire a particular service provider. An experienced M&A attorney will be able to advise the company on substantive issues, potential exposure and acceptable compromises. An experienced investment banker can help prospective buyers appreciate the investment opportunity, and an experienced accountant or CFO can give a prospective buyer comfort with respect to the company’s accounting methods, policies and procedures, as well as quality of earnings.
Unfortunately, too often we see companies using legal counsel that is ill-equipped to handle an M&A transaction. This is normally the case when management doesn’t fully appreciate the value the right M&A lawyer can bring and, conversely, how costly it can be to use a lawyer with little or no M&A experience.
When should a company begin assembling the deal team?
Once management begins considering strategic alternatives, the company should start the process of assembling a deal team. Even if a sale transaction is years away, it is prudent for a company to engage advisers to position the company for a liquidity event. For example, a company’s M&A lawyer can perform a review of the company’s organizational documents, equity incentive plans, compensation arrangements and third-party contracts in order to identify and address any potential issues. By addressing such issues in advance of a liquidity event, the company can potentially avoid unnecessary delays, valuation adjustments and special indemnities in connection with negotiating a liquidity event. The better organized a company is, the more desirable the company will be to prospective buyers.
Why is a strong deal team important to an acquisition?
An experienced deal team will work closely with one another to showcase the investment opportunity, and identify and address potential diligence issues in advance of a transaction. Seasoned professionals have been through the process; they understand the issues and offer solutions that can bridge gaps between the company’s and a prospective buyer’s positions. As a result, the right deal team can maximize the purchase price, minimize the back-end exposure and facilitate a quick closing. ●
Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth
Semanoff Ormsby Greenberg & Torchia: How to handle employee terminations to mitigate your legal riskWritten by Jayne Gest
The legal exposures that come with terminating employees are always present. But with a troubled economy continuing, increases in certain types of claims, more publicity in the media about employment discrimination cases, and the Department of Labor and state agencies spending greater resources on investigation and enforcement, it’s more important than ever to take potential legal exposure seriously.
“An employer should absolutely take the time to review all circumstances of the employee’s time with the company prior to terminating the employee,” says Alfredo M. Sergio, member at Semanoff Ormsby Greenberg & Torchia, LLC.
Smart Business spoke with Sergio about what to do before, during and after employee terminations.
What considerations need to be weighed before firing someone?
There are a number of questions to ask before terminating an employee. Employers may still choose to terminate, but should proceed carefully. For example, consider whether the employee:
- Is in a protected class such as age, race, religion, national origin, disability, gender, sexual orientation or veteran.
- Suffers from a medical condition, disability, is pregnant or is taking care of a family member with a disability.
- Has ever requested a disability-related accommodation, or taken or requested pregnancy or medical leave.
- Has ever made a claim of discrimination, sexual harassment or retaliation, or has ever threatened to sue.
- Is subject to an employment contract, a non-compete, non-solicitation, confidentiality and/or inventions agreement.
- Needs to cooperate with the company after being separated, e.g., in other litigation or on a project.
If any of these apply, you may want to consult with your attorney before you proceed with termination. Of course, if the soon-to-be terminated employee is violent or threatens anyone, immediate termination may be warranted.
What else might employers do to prepare before terminating an employee?
Employers should document the decision to terminate when the decision is made, and accurately document employees’ conduct and performance throughout their employment. This will help the company prove its legitimate reasons for termination and put the company in a better position to defend itself.
Before the termination discussion, employers should think about how, where and when they will communicate the termination, and be prepared to answer questions about pay and benefits. Employers should think about changing passwords, getting back keys, security badges, computers, tools, equipment, customer lists and/or obtaining summaries of current projects.
How should the termination be handled?
Consider whether there are any written policies regarding termination. Treat the employee with dignity and be professional, and keep the meeting brief. The supervisor communicating the termination may also want to have a human resources representative present. At the meeting/in a separation letter, set forth the reasons for termination. Remind the employee of his or her obligations if the employee signed a non-compete, non-solicitation or other agreement. In some instances, it may be appropriate to obtain a release of claims from the employee through a severance agreement, which may provide protection and deterrence against future claims.
What do employers need to do afterward?
Employers should pay the terminated employee’s final paycheck within the required time periods, and should be careful they provide the separated employee any notices required under COBRA. Also, plan how to communicate the termination to other employees, since rumors or gossip can have a negative effect on employee morale.
In the end, reviewing possible legal exposure and practical concerns before firing an employee best positions the employer for a smoother transition. ●
Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC
For-hire trucking companies have unique risk exposures, so the right insurance is crucial in today’s environment.
In the trucking industry, it’s important to fully understand the nomenclature, nuances between each industry sector and the differing coverages provided by each policy and each insurance company.
“It isn’t an all-encompassing package that is given to every company. Insurance companies are going to want to limit their exposure, so they won’t offer if it’s not requested,” says Scott Nuelle, vice president at ECBM. “If the company is not insured for what management believes it should be, you might not find out until the time of a loss.”
Smart Business spoke with Nuelle about how transportation firms can determine how much excess insurance to buy.
Why is it necessary to buy excess insurance?
The key reason is to protect your assets. Anytime you’ve got trucks on the road, you don’t have as much control of the environment as you’d like. Regardless of your driver safety programs, driver training methods or vehicle technology, an accident could still occur. And the more trucks and miles traveled, the greater the exposure.
The primary layer of a liability policy is usually only $1 million, so excess insurance may be necessary in many cases. Then, if one of your drivers has an accident and is sued, you’ve protected the business.
How does a transportation company know how much excess insurance to buy?
Cost is a big factor in how much excess insurance to carry. Right now, prices are increasing, making it difficult for smaller companies to carry higher limits of liability. But many companies don’t have a choice because shippers may require the higher coverage limits in contracts.
You want to buy enough insurance to reflect the company assets you are trying to protect. Although many businesses have structured the organization to protect assets, you should at least consider what would happen if plans failed.
Then, measure your level of risk aversion. Some people want to completely cover the company and all assets, referring to it as ‘sleep insurance.’ Others perceive the exposure of not buying excess insurance as minimal, gambling on the outcome.
How do recent court cases necessitate the need for more insurance?
Although legal rulings vary by state, when people are hurt, courts generally seek to compensate them. Increasingly when a truck is involved in an accident, trucking companies are paying, whether the driver was at fault or not. For example, if a third party under its own authority is hauling a trailer with your name on it, your company might still have to pay. The exposure could go well beyond what you believe.
What else has changed with the pricing and underwriting?
The general market hardening is having an impact on insurance prices, and there are fewer carriers offering excess coverage. Therefore, even those with good experience are seeing increases because of the decreased number of players in that market.
From an underwriting standpoint, more underwriters are utilizing the compliance, safety, accountability (CSA) scores from the new grading schedule for trucking companies. It measures things like driver out of service, driver safety and vehicle maintenance. As a result, companies must be very active at monitoring and trying to control their scores, which will very likely impact the premium you pay on the excess and primary liability coverage.
If a company has a private fleet of trucks that delivers its own goods, do these exposures still apply?
These companies face similar issues, especially on the liability side. It is more common for the parent company with a private fleet to buy umbrella coverage. However, the umbrella carrier may hesitate to take on the trucking portion, because of the exposure level. Then you would need to get an excess buffer layer to cover the trucking exposure.
The decision of how much insurance to carry is fluid, but you should have a discussion annually with your broker. Don’t be lulled into a false sense of security because a large loss hasn’t happened. Evaluate your exposure, the legal climate and the state of the market to make an informed decision. ●
Get more information about risk management, on ECBM's blog.
Insights Risk Management is brought to you by ECBM
Many closely held private companies are organized as partnerships or S corporations — pass-through entities with no material tax implications at the organization level. For owners of such businesses, tax planning predominantly focuses on the individual. To properly plan for those taxes, you need to start well before the end of the year, says Michael R. Viens, a director in the Tax Strategies group at Kreischer Miller.
“Although it can be difficult to precisely forecast results for the entire year, a reasonable estimate, along with identification of the material differences that will exist between financial and tax reporting, should be developed,” says Viens.
Smart Business spoke with Viens about key considerations in developing an effective tax planning process.
What is involved in year-end tax planning?
It starts with a solid foundation — just like an unstable foundation can be problematic with a house, tax planning based on inadequate information can lead to a bad outcome.
Some things to consider when developing your forecast are year-end activities that can affect tax reporting, items such as fixed asset additions, the cash basis tax reporting impact of the collection of receivables and seasonal swings in profitability.
It’s also important to take into account tax considerations unrelated to the business. Key components of a business owner’s personal tax obligations are W-2 wages and share of business income listed in a Schedule K-1. But you also need to consider other aspects of the personal tax puzzle. Acceleration of tax deductions is frequently part of tax planning; however, you have to consider what the ultimate tax benefit will be. Too much acceleration of deductions in a particular tax period may result in limiting the related tax benefit to a lower tax bracket than if taken at another time.
So it’s sometimes better to pay taxes earlier rather than defer payment?
Much of tax planning involves a question as to timing when to pay. If there is no material direct or indirect interest charge for deferring payment, that is normally the recommended course. However, a ‘pay as you go’ approach can lead to a better outcome when economic circumstances are not ideal for the accumulation of a significant tax payment deferral.
Another concern with a deferral of tax liabilities is that it can be difficult to monitor future tax payment obligations. Because pass-through entities are not required to identify those liabilities in finance reports, those reports will not help you keep track of when tax obligations may come due.
How does wealth transfer impact tax planning?
Effective estate tax planning may run counter to income tax strategy. You may be able to defer payment of tax due on business profits, but you might not want to do that from an estate tax standpoint. When it’s time to transfer ownership to children, they might not be aware of the need to handle payment of deferred tax obligations. An owner may want to pay the tax, thereby reducing his or her taxable estate and leading to a higher amount of wealth passing along to his or her children.
Should your tax strategy change every year?
An effective tax planning process generally includes some constant elements, such as deferral of revenue recognition and acceleration of deductions. But you need to be flexible to address new challenges.
For example, the new Medicare tax on net investment income will adversely affect owners who do not materially participate in a business, as well as rental arrangements in which commercial property is owned under separate entities. An effective tax plan will consider such changes and adapt to the extent possible. ●
Insights Accounting & Consulting is brought to you by Kreischer Miller
One of the toughest challenges facing managers is how to plan for profitable growth in an uncertain future.
Look back ten years at your customers and their needs, your employees, market structures, delivery systems, regulatory policies, social systems, the economy and technology, and it’s clear how much things have changed. It’s a safe bet that at least that much change can be expected in the next ten years, but what kind of change will occur?
Compounding the uncertainty is the necessity to keep managing current activities for efficiency and growth while planning for a future that may call for different activities altogether.
Smart Business spoke with Dr. Jaume Franquesa, visiting assistant professor of strategic management, and Dr. James Martin, associate dean and professor of marketing, both at the Boler School of Business at John Carroll University, about ways businesses can position themselves to take advantage of tomorrow’s opportunities.
How do you get started?
Success in the long run is all about marshaling the right capabilities and resources and using them to create sustainable competitive advantage for the future. Start by identifying and assessing your current capabilities. Generally, there are two categories of capabilities that allow you to do both the day-to-day activities and plan for an uncertain future.
The first category is operational capabilities, which are the things you currently do that give you a competitive advantage in your current markets. That is, the skills, competencies and resources that you use to try to satisfy your current customers’ needs better than competitors or at a lesser comparative cost, leading to higher profit.
The second category is dynamic capabilities, which are the capabilities that will help you to plan for the future. There are generally three types of dynamic capabilities.
The first is the ability to do environmental scanning and sensing. Being able to identify and track trends, and understand how they might be important to your business is a critical competency to develop.
The second dynamic capability is being able to turn the trends that you identified as important to your business into opportunities that can be pursued further. Innovative thinking is the cornerstone of this capability.
The third dynamic capability is being able to quickly re-configure your internal resource base in a way that creates a sustained competitive advantage for pursuing the opportunity. Understanding which resources are valuable, along with adaptive resilience and flexibility in your organization are key ingredients for this capability.
The stronger you are at each of the dynamic capabilities, the better your strategy and its implementation.
How can a manager foster adaptation and flexibility with regard to long term strategic direction?
As you think longer term, the uncertainties about investments in strategic direction can cause significant anxiety. This is really tough, but it is at the heart of building an organization for the future.
One useful approach to navigate this uncertainty is to apply ‘real options’ logic to investments for the future. Instead of making early choices under uncertainty and committing significant resources to a particular strategic direction, consider engaging in multiple directions that will keep several windows of opportunity open. In this way, you can delay commitment to any of them until more information is available and some of the uncertainty is resolved.
To do this, you must design the program of investment in each strategic initiative as a series of sequential experiments, with a continue/discontinue evaluation point at the end of each experiment. That is to say, at the end of the period you have the option of continuing to invest as planned, narrowing the scope of the project, or abandoning the project.
The goal is to create and manage a portfolio of alternative strategic options. You do this by investing in multiple stage-gated projects designed to seed the development of new capabilities or to explore potential new markets. The keys to the management of this portfolio of strategic options are:
- Project selection.
- Design of investment stages in a way that maximizes learning while minimizing the cost of each strategic option.
- Portfolio diversification.
The dynamic capabilities that you develop give you the foundation for creating this portfolio of
strategic options. ●
Dr. Jaume Franquesa is a visiting assistant professor of strategic management at the Boler School of Business at John Carroll University. Reach him at email@example.com.
Insights Executive Education is brought to you by John Carroll University
The government has increased tax rates and implemented other changes for 2013. However, companies may be able to employ tax-saving options — deductions, depreciation provisions or deferrals — prior to Dec. 31.
If companies review before year-end, they are better able to maximize potential savings, and it may even spur thoughts for future tax planning, says Sean Muller, partner-in-charge, Houston Tax and Strategic Business Services at Weaver.
Smart Business spoke with Muller about the opportunities to save on your 2013 taxes.
How can businesses utilize enhanced Section 179 deduction limits in 2013?
Enhanced Section 179 deduction limits were enacted for 2013, which allow companies to immediately deduct up to $500,000 of equipment purchases made, rather than depreciating over a number of years.
The deduction applies to 2013 equipment purchases of up to $2 million. The deduction is slowly phased out for taxpayers with $2.5 million or more in purchases. Section 179 deductions can be applied toward tangible property purchases, but real property doesn’t qualify.
In 2014, the Section 179 limitation will decrease to $25,000. Companies that plan to make large capital expenditures in 2014 may wish to purchase in 2013 instead. The deduction can be used to reduce tax liability to zero, but it cannot put you in a net loss position.
How does bonus depreciation differ?
Taxpayers in some states may be able to utilize a 50 percent bonus depreciation rate for qualified property placed in service during 2013. Unlike the Section 179 deduction, bonus depreciation is not limited to net income and does not limit the deduction amount.
Bonus depreciation applies to new, original use U.S.-based property with a recovery period of 20 years or less.
The 50 percent bonus depreciation and Section 179 deduction can be used together.
What savings are available through like-kind exchanges?
Another tax-saving opportunity to consider is like-kind exchanges. IRS Code Section 1031 enables a taxpayer to defer capital gains tax if the property sale proceeds are reinvested in similar property within a relatively short time. The exchange may be a simultaneous swap of properties or a deferred exchange. With a deferred exchange, one property is disposed of and the proceeds are then used to buy one or more like-kind properties.
Section 1031 exchanges exclude inventory, stocks, bonds and partnership interests.
Who can take domestic production activity deductions (Section 199)?
In 2013, businesses with qualified domestic production activities may be able to receive a 9 percent tax deduction. Qualifying activities include the manufacture, production, growth or extraction of qualifying production property within the U.S., as well as real property construction, oil and gas drilling, and engineering and architectural services related to real property construction.
Generally, a taxpayer is allowed a deduction equal to the lesser of:
- Qualified production activity income (QPAI), which is a modified calculation of income related to qualifying production activities.
- Taxable income.
- 50 percent of the form W-2 wages deducted in arriving at QPAI.
The level of complexity in calculating the appropriate deduction depends on the nature and structure of the business.
What are other year-end tax strategies?
Companies also should consider potential residual tax-saving activities, such as:
- Deferring income to 2014 if cash flow and current income permit.
- Making additional charitable donations.
- Writing off and disposing of damaged or obsolete inventory to reduce carrying costs and garner tax deductions.
- Writing off bad debt that cannot be collected. Companies should keep supporting material like phone logs, correspondence, collection agency contracts, etc., to prove a reasonable effort was made to collect.
Invest the time now to plan for your 2013 taxes and reap the benefits later. ●
Insights Accounting is brought to you by Weaver
The use of cloud computing is surging in the business world. Against such a backdrop it only makes sense that companies would want to emulate this model with their phone services — that is, make themselves available no matter their location. While traditional phone services have been slow to respond to the requests, VoIP providers are jumping at the opportunity.
“Telecommunications is a 100-year-old technology,” says Alex Desberg, sales and marketing director at Ohio.net. “Things have changed, and now it’s more important than ever for customers to get through to businesses quickly and effectively.”
Smart Business spoke with Desberg about how innovation is reshaping the telecommunications landscape and why it’s so important to always be available to customers.
How is innovation changing the telecommunications landscape?
Businesses are looking for different characteristics associated with their phone system that will help set themselves apart from their competitors. This goes beyond just having a business phone system designed to answer calls or put people in voice mail. In terms of innovation, these can be simple changes or complex changes — it depends on what the business is looking for.
How are companies integrating their telecommunication features into their business model?
Cloud computing is becoming very popular. People are pushing their data away from their facility so it is available anywhere. However, they haven’t done this with their phone system because of traditional phone service capabilities. This is starting to change. Now, instead of being subject to the capabilities of a phone system, businesses are dictating how they want to communicate with their customers.
Why is it so important to be readily accessible to customers?
Customers have short attention spans, and they want to be served quickly. They don’t have the time to leave a voice mail message and wait for someone to respond a half-day later or the next business day.
Much like the traditional way of finding a business in the Yellow Pages, if the first company didn’t answer, you’d simply call another one. A lot of consumers are doing that now because time is money. If they can’t immediately reach the person that they want to talk to, they will move on. You don’t want that to happen to your business.
How is VoIP helping incubated businesses that are not as moveable as they might think?
Business incubators are starting to crop up all over the place. Such entities support the development of entrepreneurial companies through an array of business support resources and services. When the companies grow and need to move out of the incubator, they realize that they can’t easily take the phone number that they’ve been using to conduct their business transactions.
Now VoIP providers are working with incubators to provide VoIP services that can be moved quickly and easily with a business when it’s ready to graduate from an incubator and expand its footprint.
Why is reducing system duplication becoming such a big trend?
Reducing system duplication is particularly popular with businesses that have multiple locations. When such businesses start pushing data out to the cloud and they are remotely accessing the information, they realize that every facility they own doesn’t need a server or duplication of other resources like phone systems.
It makes sense for these businesses to have centralized communications. Everyone accessing the phone system can share centralized voice mail and four-digit dialing between locations. Not only does this make sense economically, but also from a unity standpoint in terms of a single telecommunications presence. ●
Alex Desberg is sales and marketing director at Ohio.net. Reach him at firstname.lastname@example.org.
Insights Telecommunications is brought to you by Ohio.net
By ruling that part of the Defense of Marriage Act (DOMA) was unconstitutional, the U.S. Supreme Court also set in motion some changes regarding federal income taxes.
The June decision struck down Section 3, holding that same-sex individuals who are married under state law also must be treated as married for income and estate tax purposes.
“The court’s decision will have an impact on many tax laws in states that recognize same-sex marriage,” says Tom Tyler, a partner at Crowe Horwath LLP. “Though being treated as married for federal tax purposes might provide certain tax benefits, it might also result in increased tax liability.”
Smart Business spoke with Tyler about the tax implications of the DOMA ruling and what they mean for employers.
How many states have legalized same-sex marriage, and which ones recognize those marriages from other states?
In addition to the District of Columbia, 13 states allow same-sex marriage: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington. Thirty-five states, including Texas, have banned same-sex marriage, either through legislation or constitutional provisions. New Jersey and New Mexico have no laws either banning or allowing same-sex marriage. Five states — Colorado, Hawaii, Illinois, New Jersey and Oregon — allow civil unions or domestic partnership between same-sex couples, but not marriage.
What affect does the ruling have on federal income tax returns?
Joint returns can be filed for federal income taxes in states that recognize same-sex marriage. If not filing jointly, each spouse will need to file using married filing separately status. Affected taxpayers should review their 2013 filing status and adjust withholding and estimated payments as necessary, keeping in mind the marriage penalty for joint filers.
Generally, the statute of limitations for federal income taxes is three years, so the 2010, 2011 and 2012 tax years are open and returns can be amended. The IRS is expected to issue guidance regarding amending returns under the court’s decision. Taxpayers should wait for this guidance before amending returns.
How have strategies regarding estate and gift taxes changed?
The estate tax exclusion was increased earlier this year to $5.25 million, meaning an estate equal to that amount will not pay any estate taxes provided the decedent has the full $5.25 million exclusion remaining. In addition, the exclusion was made portable such that a deceased spouse’s unused exclusion amount carries over to the surviving spouse upon his or her death for use by the survivor. Therefore, a married couple could shelter up to $10.5 million by simply leaving everything to a surviving spouse. Same-sex couples can now take advantage of these rules as a result of the DOMA ruling. Before the ruling, they couldn’t.
For gift tax purposes, same-sex couples will be able to elect gift splitting, which treats gifts as made half by each spouse. Splitting gifts often allows each spouse to claim the full annual exclusion for gifts made to each recipient, currently $13,000 per person. This allows a spouse to gift up to $26,000 to a recipient without paying gift tax.
What should employers do in response to the DOMA ruling? How does it differ in relation to their state’s legal position on same-sex marriages?
Employers should review the decision with legal counsel to determine its impact. For example, employer-provided medical insurance is now available to same-sex couples on a tax-free basis. Prior to the court’s decision, these benefits were taxable to the nonemployee spouse. Employers might be able to claim a refund of payroll taxes paid on these benefits on a taxable basis, and individuals might be able to claim a refund of income taxes paid on these amounts.
As stated previously, Texas is one of the states that bans same-sex marriage. However, if a Texas business has employees in any of the 13 states or District of Columbia that recognizes same-sex marriage, it could be affected. ●
Insights Accounting is brought to you by Crowe Horwath LLP
Lean and Six Sigma were developed for manufacturing, but are gaining momentum within service industries.
“Both Lean and Six Sigma have been used almost exclusively in manufacturing. Now you’ll see black belts in all fields, from IT to financial services to health care,” says Chris Liebtag, a Lean Six Sigma Black Belt with Rea & Associates.
Smart Business spoke with Liebtag about Lean Six Sigma, a program that melds the two disciplines for maximum benefit.
What are the origins of Lean and Six Sigma?
Six Sigma originated at Motorola, but its roots can be traced through the Quality Circle Movement of the ’70s to the Total Quality Management teaching of the ’50s. It is a project-based methodology seeking quality and consistency. Lean, on the other hand, has a very complete toolkit and is mostly concerned with identifying and eliminating waste or non-value-added steps.
Lean Six Sigma combines the basic tenants of both to look at ways to remove non-value-added steps in a process and improve quality.
What types of businesses can be improved by implementing Lean Six Sigma?
It’s been very strong in health care and financial services. An emergency room might want to look at the process of admitting patients, or a medical billing organization that sends bills to multiple entities might want to determine how long it takes and ways to accelerate the process.
There must always be a business rationale; clients define the value and you’re looking to satisfy their needs and remove wasteful steps.
Should everyone in the company be trained?
It’s important to at least be exposed to the concepts. It does involve a cultural change within an organization, so implementation will require everyone to adopt the mindset of always looking for ways to continuously improve. Select employees should be trained as facilitators, but everyone should be thinking about how to better serve clients.
The results likely will be increased customer satisfaction, an enhanced business reputation and a competitive advantage. If you can deliver your product or service faster than competitors at a higher quality or even a lower price because of operational efficiency, it provides an enormous advantage.
Does that require Lean Six Sigma?
Efficiency and customer satisfaction initiatives can be tackled without Lean and Six Sigma. However, these techniques have been proven to be very effective when it comes to controlling costs and improving satisfaction among clients and employees. Employees are empowered to better their work environment, which eliminates turnover and produces a happier workforce. In turn, that leads to improved customer satisfaction. Lean Six Sigma provides a framework to generate these gains.
Does Lean Six Sigma need to be adjusted to fit the company?
The most successful projects are tailored specifically to address industry- or business-specific circumstances. The 30,000-foot view concepts and methodologies can be applied almost universally — define a problem, measure the variety of steps within that problem or process, and then analyze and improve it. However, the best results are produced by combining the tools and methods of Lean and Six Sigma with industry expertise. That industry expertise component also helps generate buy-in among employees.
How important is it to set goals for improvement?
You should always start with the end in mind, even if that goal might not be immediately achievable. If you want to reduce costs by 10 percent, process changes are designed to produce that result. You might only get to 8 percent — that doesn’t mean it wasn’t a worthwhile enterprise, it just presents an opportunity to continually improve toward that goal.
The idea behind Lean Six Sigma is continuous improvement. It isn’t designed to be a ‘one-and-done’ initiative. It’s a change in culture whereby employees embrace the mindset that the business needs to get a little better each year and sustain the gains. Lean Six Sigma is more than a technique or a process, it’s a discipline and approach to running your business. ●
Chris Liebtag is a Lean Six Sigma black belt at Rea & Associates. Reach him at (614) 923-6586 or email@example.com.
Insights Accounting is brought to you by Rea & Associates
Technologies such as smartphone apps offer quick access to information, which leads to better decision-making. But technological improvements are only part of a solution to any given problem.
“You don’t start by simply adopting technology. You start by seeking a solution to a problem,” says Keith Stump, vice president of sales at Blue Technologies.
For example, the cost of labor is a business’s most significant expense. The more a company can influence what its employees do, how they do it and the time it takes, the more productive and cost-effective the business becomes, he says. And often technology can help achieve that goal.
Smart Business spoke with Stump about coupling technology and processes to create efficiency.
How do process improvements and technological upgrades intertwine?
Consider the problem you’re trying to fix, and then examine all aspects of the surrounding process to understand it. You should start to see how everything fits together, and if there’s a better solution. For instance, you may have excellent hardware for copying, printing and faxing, but the software managing the information and devices is in need of an upgrade.
Attack the problem piece by piece. Determine your outcome and develop a strategy to work toward that goal. There must be milestones along the way, as well as consistent, structured reviews.
How might technology boost productivity?
It’s common for some technology to be well structured within the business. For example, a company has specific IT help desk procedures, remote monitoring and data backup. However, the print management could be unstructured. Employees may be buying printer supplies from several stores. There’s no typical process for toner delivery. Support comes in a variety of fashions.
Nationally, on average, 19 percent of service calls to internal help desks are related to printers. If your IT department is supporting printers, it means high-paid people are doing a low-paid activity, which isn’t cost-effective. With the right service provider, software can automate your print management with supply alerts and service triggers. Now, toner is automatically shipped. If there’s a problem, the machine notifies the provider to send a repairperson.
How can companies better integrate mobile devices?
Today, there’s a greater proliferation of tablets and other mobile devices in the workplace, especially for employees operating in the field or at multiple locations. However, it’s still necessary to print and scan documents. There are free, downloadable apps that enable mobile devices to automatically sync with the multi-functional scanner/printer as soon as the device is brought into the facility.
What can be done to improve document management?
There are software applications that allow users to search for business documents, similar to how information from the Web can be pulled up through a search engine.
The information is housed within an infrastructure, and a software application allows you to easily access business documents, such as contracts, packing lists, invoices, copies of checks, etc. It’s a huge advantage in terms of speed and efficiency.
Also, when scanning, it’s important that everything ends up in the right place, accessible to the right people. With auto-capture software on multi-functional devices, an employee hits a speed dial button and the machine routes the scan to the appropriate storage place. Documents are more accessible and secure with fewer errors.
What is key to successful change?
Business technology — and the processes it improves — touches many areas. All employees must embrace changes that are implemented to enhance productivity, whether in the IT infrastructure and support, hardware or software applications. Designate champions within your staff to help employees understand why change is necessary. Having C-level support and a well-designed rollout is critical.
Buying hardware, software or managed services is a part of doing business. But the best companies ensure each purchase decision starts with an effort to improve processes and create cost efficiencies. ●
Keith Stump is vice president of sales at Blue Technologies. Reach him at (216) 271-4800 or firstname.lastname@example.org.
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