In September 2008, the global economy was on the brink of its historic collapse, about to slip from the precipice to the abyss. In September 2009, the financial challenges posed by that collapse ranked as the overwhelming top risk for businesses, according to several national surveys. And now, in September 2010, well, the inevitable recovery appears to have started and some sense of optimism has seeped back, but the risk that swirled just last year remains heavy, ominous for businesses large and small, for businesses like yours.
If you do not have a thorough risk management and business insurance plan in place now, you should start to develop one as soon as possible. After all, recovery or not, there remains a great deal of uncertainty about the economy, and you should pay attention to and manage your risk. If you do not have a relationship with a risk management firm or at least have an internal executive in charge of that department and those decisions you need to pick up the phone now.
Because just as the economy has changed, so, too, has risk management.
“Over the last decade, risk management has really been maturing toward an enterprise or strategic approach to identifying, analyzing and managing risks,” says Deborah Luthi, vice president of the board of directors, Risk and Insurance Management Society Inc. “This approach really targets key risks, both insurable and uninsurable business risks, that most directly affect organizational performance.”
Those risks can include things like workers’ compensation, property insurance and general liability.
“The financial meltdown and the economic slowdown have really brought a heightened duty of care, disclosure and discussion regarding risk to the board level of organizations,” Luthi says. “So I think putting a strategic risk management process in place provides a framework for the board to consider risk and reward for balancing profit and risk against accomplishing the organizational mission.”Plan and move forward
If you do not work with a risk management firm now, the first question is, of course, “Why not?” The second question is something along the lines of, “Do you really need to work with an external firm?”
Especially today, with revenue and profits just inching up if they are increasing at all and every dollar a precious commodity, would you really benefit more from bringing in more experts from the outside rather than turning to your own internal experts?
“You can keep this process relatively simple, and organizations that are farther down the road in terms of enterprise or strategic risk management have found that you can sometimes get wound up in the process and not get it linked into the planning,” Luthi says. “The response that we hear most often is, ‘Keep it simple and designed and customized for your organization.’ I don’t think any organization that practices risk management uses a cookie cutter. Everyone needs to customize it to their own organization.”
You might delegate the responsibilities to a team of executive leaders, with your chief financial officer or chief risk officer at the helm. As always, keep in mind that so many of your employees are already strapped for time each day and might be overwhelmed by additional tasks especially one so important and intrinsic to the future of your business.
If you do work with an external firm, build a relationship with it as you would with any other business adviser. The firm is on or near the same level as your accountant, your attorney and your banker. The longer and more closely you work with the firm, the more your risk management will actually take effect in your business plans.
“We need to make sure we understand what their key business objectives are,” says Regina Spratt, U.S. national brokerage leader, Marsh Inc. “How are they measuring themselves? Is it growth in the near term? Is it cost containment? We need that underlying understanding of where they are today, the challenges they face, where they want to go. The next step is how to design a risk management or insurance program around that.
“Those two sort of key pieces of discussion really drive what comes next for that company. It’s about building the structure internally, and then, with the support of brokers or insurance carriers, building it in terms of other resources that can help meet their business challenges and those risks that have been identified.”
No matter which route you choose, you will likely want to listen to experts who recommend you chart and graph yes, graph, just like back in geometry and physics a framework to use in order to reach your decisions. Chart both insurable and uninsurable risks your uninsurable is your brand and your reputation in order to be able to make decisions and define your risks.
“It helps to get it down, so you can make some decisions,” Spratt says. “It’s also a tool businesses can use, in the years going forward, to take a look at their risk profile. They need to understand the profile of their business and their risk management. From there, they can design an insurance and risk management program that helps them today and as they attempt to grow in the future.”Invest and remain active
At many businesses, risk management and business insurance were in that first batch of budget cuts back in late 2008 or early 2009. Everyone needed to cut costs, and a good chunk scaled back on insurance. But the commercial insurance market was soft in 2009 and has become even softer in 2010, making this an ideal time to either jump back in or invest even more.
But money is only one part of the plan to take advantage of your risk management and insurance. Talk with either your internal leader or your external firm and determine where you are and aren’t covered. Many businesses have invested heavily in product recall, privacy coverages, and employee health and benefits during recent months. The only way to keep track of all that is to remain involved on a regular basis.
“The clients we can help the most are the ones where senior leadership is actively and consistently involved in risk management and I don’t just mean in the concept but in building the principles in the organization,” Spratt says. “You end up working as a provider with both kinds of companies, but the benefits and the returns for those companies are very clear when the leadership is actively engaged in the process. I suspect that’s not news, but that’s how we see that play out time and time again.”
You need to pay more attention to your risks and insurance now than during the best of times, and with the soft market still very much in play, you should probably continue to invest as much, if not more, in protecting your business for the future.
“I think it’s valuable no matter what size the company,” Luthi says. “All companies serve a purpose. They have stakeholders or shareholders, they’re there to provide a service or a product and organizations often do this intuitively. But there’s something about having a process that facilitates, that documents, that gets this process down on paper or on the computer.”
Ron McPherson and his employees at The Antigua Group Inc. were gearing up to celebrate three decades of business.
The company had become a familiar name with followers of the PGA tour and sportswear consumers alike. Many employees were close to their 15 or even 25-year anniversary with the company.
Then, perhaps not so suddenly, hints of an economic crisis became too great for anyone to ignore. McPherson knew that the merchandising industry and, therefore, the company were in for a huge fight.
“Our type of business, you know businesses that are based on disposable income of consumers,” the president says. “Buying a golf shirt at a pro shop or buying a shirt or a jacket at a retail (store) is a disposable income item.”
Instead of panicking, he turned to his employees to come up with a course of action.
“The first thing is, you bring your team together, you know your key managers and you put together a consensus and get everybody on board as to what has to be done to ensure that the business continues,” McPherson says. “The first thing we did was get each manager to buy in; so that there wasn’t a manager that was out there going ‘This is wrong.’ We had everybody agree on the plan.”
Listening to your managers will help when reaching a consensus. Recognize that not everyone is going to think or work the same way.
“Trying to mesh all of those personalities together into a team is a challenge, so having the one on ones, listening as opposed to just talking to people and hearing what they need to do their jobs well has been successful for us at Antigua,” McPherson says.
Once everyone agreed in regards to what he or she needed to ease the pain of a recession, he made sure everyone knew how the plan worked.
“Unfortunately, we have to make ourselves a little smaller, we have to make inventory smaller, we have to work on significant expense reduction,” he says. “All those things a company does when there is a downturn.”
McPherson continues to talk with managers and employees to let them know how the plan is working.
“We have continued communication with the entire associate base, where we would bring groups into our main conference area and show them graphically where we are,” he says.
As a result, Antigua is emerging from the economic slump ready to secure an eagle. While many companies are still anxious about the future, McPherson and his team are looking forward.
Antigua celebrated its recent anniversary by signing with the PGA tour for another three years.
“We’ve been in business 30 years and those things are part of business. The peaks and valleys of business and the ups and the downs of the economy affect all businesses,” he says. “The good thing is that while it appears the economy is still a little tough we may have turned a corner a little bit.”
How to reach: The Antigua Group Inc., (623) 523-6000 or www.antigua.com
Facing a severe and protracted economic downturn, chief financial officers are worried about controlling costs, sales executives are worried about retaining and motivating sales staff, and everyone is worried about declining revenues, customer defections and eroding market share.
To alleviate the concerns, seasoned sales executives dipped into their stash of proven recessionary tactics to set interim sales goals and revise compensation plans before hunkering down for the duration. Now that the economy is stabilizing, those recession-induced plans may yield unintended consequences such as over-rewarding lower-tier performers while shortchanging their hard-charging counterparts. Employers must take steps to recalibrate sales compensation programs and revise performance expectations to comport with 2010 market conditions.
“Companies don’t want to be stuck with a 2008 sales compensation program in 2010,” says Matthew Lucy, senior consultant with the Sales Effectiveness and Rewards practice at Towers Watson. “Companies are realizing it’s time to reassess their incentive plans in light of the new economy and build for growth.”
Smart Business spoke with Lucy about the hazards of latent sales compensation plans and the best ways to motivate and reward top performers in a recovering economy.
What should employers consider when reassessing sales compensation programs?
Start by reviewing your company’s revised go-to-market strategy and ensure sales rewards and compensation plans are aligned with the company’s current goals (as opposed to the goals of a few years ago). For example, companies may choose to scale back heavy discounting practices in order to bolster margins, after bowing to market pressures for nearly two years. Include profit elements in revised sales compensation plans to encourage representatives to raise prices and sell value over cost. And though there’s rarely a shortage of opportunities for competent business developers, expect increased competition for their talents in 2010. It will be critical to compare your company’s compensation plan against competitors to ensure you can stave off turnover or acquire additional sales talent to meet post-recession business objectives.
Which additional design elements drive performance?
Employers need to ensure that their plan mechanics (for example, thresholds and targets) are set appropriately for the new economy. Companies often lower bonus thresholds during a recession to motivate employees, or they link sales bonuses to company results in order to control costs. But those tactics may simply increase total compensation without increasing revenues and, worse yet, they may benefit poor performers at the expense of top performers. Additionally, payouts for meeting team goals or MBOs can fail to encourage personal performance, which is fundamental to healthy revenue growth. Consider modifying quotas or individual performance goals to benefit sales representatives at all performance levels without compromising plan integrity; use contests and spiffs to help fill the gaps if the recovery sputters.
How can sales managers establish realistic measures and quotas in an uneven economy?
Accurate quota setting is the most overlooked way to reduce costs. Simply setting accurate quotas may reduce overall compensation costs by 10 percent to 20 percent without altering plan designs. Use these tactics as part of a comprehensive quota development methodology.
- Shorten time horizons. Setting quarterly quotas or allowing midterm adjustments on annual goals will enable more accuracy in a shifting economy.
- Bottom-up quota development. Individual sales goals are often apportioned from full company objectives, which can lead to unrealistic targets. Quotas need to be a collaboration of top-down and bottom-up quota development. This process should uncover territories that can shoulder more of the growth burden as well as those that may be tapped out.
What’s the best way to use contests and spiffs?
Competitions are the perfect tool to launch new products and services, bolster eroding margins or ease the sting from a temporary setback in the economy. Contests should last three to six months and offer winners a modest reward, because they should not be used as a substitute for effective sales compensation plans and quota setting practices. In fact, set aside no more than 5 percent of the total incentive budget for contests and spiffs at the beginning of the year and consider limiting awards to representatives achieving most of their sales quotas or exceeding performance thresholds to reinforce the importance of meeting goals. Drive the point home by centralizing contests to keep renegade managers from offering rewards that deviate from the company’s core strategy or diminish fundamental sales achievement.
What other tactics drive sales performance?
This is the perfect time to revisit the productivity of your sales force. Finding ways to force sales personnel to decrease administrative tasks and increase face-to-face selling time and other revenue-generating activities is a sure method of driving sales. Companies may have eliminated sales support personnel during the downturn or delayed investments in tools like CRM software, mobile devices or lead databases, but it’s easy to assure the return on these investments as long as sales quotas are increased proportionally.
Matthew Lucy is a senior consultant with the Sales Effectiveness and Rewards practice at Towers Watson. Reach him at (310) 551-5603 or firstname.lastname@example.org.
A visionary is defined as a person with unusual foresight and the ability to anticipate things before they happen. Whenever we are in a position of leadership, we carry the responsibility of being a visionary, whether we like it or not.
Smart Business is all about visionaries. In 1999, we hosted our first Innovation in Business Conference, which recognized leaders for their innovation and vision in business.
This year, the featured speaker at the conference is Jim McCann, the founder and CEO of 1-800-Flowers.com. Jim started with one flower shop in New York in 1976, and by 1986, had acquired the 1-800-Flowers number and changed his company name to match the phone number. By 1999, the company went public and added the dot-com to the name. Today, Jim sells more than $700 million in flowers and gifts annually. He anticipated the demand for quality products that could be delivered anywhere in the country and made moves to put his business at the forefront of that trend. When buying shifted to online, he was once again ahead of the curve.
Jim and others like him have the uncanny knack of knowing which direction their industry is headed before everyone else. The Innovation in Business Conference has been a smashing success because people want to learn what it takes to acquire these skills and apply them at their own business.
Failing to be a visionary will put you out of business. If you don’t have a vision, it will be hard to retain your top people. With no clear goals, they’ll see the company as stagnant and move on to more promising positions.
In the end, it’s all about accountability. It doesn’t matter whether you are running a $50 million company or a $1 billion company. It’s about the morale of the people, whether your top performers are being rewarded and whether everyone understands your long-term vision.
As the visionary for your organization, you have to keep everyone working toward that end goal that you set. You have to put back into the business as much as you take out. There are too many companies where the CEO is living good but no one else is.
Being a visionary isn’t easy, but if you carefully define where you want to go and how you are going to get there, you’ll already be ahead of most of your competitors.
For more information about the 11th annual Innovation in Business Conference held in Cleveland, Ohio, please call (866) 582-7011 or e-mail Caroline Calfee Zerbey at email@example.com.
Justin Nelson’s biggest challenge isn’t exactly a problem. His company, dash Carrier Services LLC, is growing fast.
The provider of emergency and public safety services and wholesale voice solutions grew by more than 60 percent in 2009 to about $15 million in revenue. But that means Nelson needs to hire more employees so he must attract and retain the right ones.
“Until maybe the last 12 months or so, we felt like we were underemployed,” says Nelson, the CEO. “We were struggling to bring on the people that would accelerate our growth.”
Nelson, now with about 25 employees, found the solution in an unlikely place: Denver’s nonprofits. With a community involvement program that rewards volunteer hours with paid time off and bonuses, he attracts and empowers the employees he wants to have.
Smart Business spoke to Nelson about how philanthropy builds a better business.
How does community involvement attract good employees?
Typically, when you talk to [potential] employees about the community involvement plan, you can tell pretty quickly if they’re engaged and interested in that because they’ll, quite often, share what they’re doing outside of work. So we look for that as part of our interview process.
When employees talk about where they’re volunteering or where they’re spending their time, that’s an indication that they aren’t fully focused on themselves. In a company, people have to understand that there’s other people that they’re working with.
Honestly, I think it has helped us hire employees that we probably would struggle to bring on board. They look at all the aspects of employment: salary and benefits, etc. I think we’re competitive in the other aspects of employment, but we’re definitely a leader in community involvement and that’s helped us get employees who value that and frankly, those are the employees we want.
When you talk about, ‘Not only are we looking to encourage you to hit your internal targets; we’ve got external targets and goals that we want to participate in,’ they see that we’re not just solely here to grow the company. We may not be bringing the perfect salary package to you or the perfect benefits to you, but when you look at the overall ecosystem of what we have, we’ve won candidates that way.
How does community involvement tie back to the work environment?
This is almost the quickest way that you can get somebody integrated to your team. They’re going to, very quickly, be working and communicating with other employees outside of work, which carries over to work.
You build teamship because they’re interacting with each other outside of work. That’s when you get good communication between employees. It’s pretty interesting how stepping out of the office can lead to better communication. On a day-to-day basis, you get stuck in the rut of typical communication mechanisms between people you work with. People can often be nervous about communicating across that structure. By doing it in the community environment, it almost eliminates those barriers to communication. Our employees have been doing events where they’re participating with other employees … from different teams and different levels of management.
You get a sense of camaraderie from volunteering and giving back. I don’t think anyone walks out of a volunteer event without feeling good that they’ve done something. And that directly ties back into the company because employees feel like they’re making a positive change, both outside the company and inside the company.
The core goal is community involvement and giving back. That drives employees that are interested in helping others that’s the core value we want back in the company. In turn, you’re getting the benefit of them realizing ownership in the company because they know that we’re successful. We talk about how important it is to the company and how that helps us keep growing as a company because the culture is better.
How can you tie community experiences back into work?
The challenge is to try to put those in concrete terms. I’m a firm believer that it’s happening all the time, and we’re seeing the benefits and that’s why we’re successful. But to try to prove that to my board, it’s probably a little more difficult. There aren’t easy ways to track how that’s happening.
But one thing you can build on is that through those programs, we’ve seen people take more and more ownership. We started the program a couple of years ago. There wasn’t as much volunteering going on so, as a company, we decided, ‘Well, let’s tie it into the bonus.’ What you saw, over time, was that, because people are interacting with other individuals in the company and they’re building teams slowly, people sort of take ownership of volunteering. Our target is six hours [per employee] a quarter, and last quarter, the employee that did the most did 13 or 14 hours and we had 100 percent participation. We didn’t need 100 percent participation to get to our bonus. The target this year is 80 percent.
Often, an employee will say, ‘I have this volunteer event that I’m thinking about going to. Is anybody interested in participating?’ The employees are encouraging other employees to join in.
What that shows is that employees are taking ownership. And I think anytime employees take ownership regardless of if it’s directly related to work they’re going to take more ownership internally.
How do you encourage employees to get involved?
Start small. We started with a target of four hours per quarter and 60 percent participation two years ago. Starting with a low threshold … takes the pressure off people. If they don’t want to participate, they can choose to not do so.
Since we’re rewarding with PTO and talking about it as part of the bonus, these are all upsides for employees. Right now, one-fourth of the calculation of the bonus is determined (by meeting community involvement targets). So instead of making it mandatory or trying to push it down, we’ve given additional bonuses for participation.
That’s the way you avoid ostracizing employees that don’t want to volunteer. Make it flexible enough especially when you start out the program that people see that we’re not trying shove it down on them but we’re giving them an upside.
How to reach: dash Carrier Services LLC, (800) 815-5542 or www.dashcs.com
The training was a failure. All of that time, all of that
effort, all of that money, just gone, just out the window and gone. What other
explanation was there, after all, for drop after drop in the hard numbers from
a talented sales team in the wake of a training and development session?
It could have happened at any business, but for the purposes
of this story, it happened at a large technology company with headquarters in
the Midwest. The top executives, frantic for answers, called a corporate
training firm. “Our sales are down,” the executives said. “We need training.”
That technology company was part of a large percentage of
businesses that continued to invest in corporate training, education and
development during the last couple of years. Thousands and thousands of others
turned away from training, unable or unwilling to spend more money during the
But a panel of more than 30 industry experts and academic
professionals agreed that it would have been far better for businesses to
continue to spend on training during those tough times to invest in their
employees and to show the extent of that investment, to improve the business
and keep it up to date, to be in a better position when the economy ultimately
turns around than to tighten the budget. The same rule applies now, too.
“The question is not, ‘Where should I be training?’ but,
‘Where should I be spending my dollars on people in the organization?’” says
Alec R. Levenson, research scientist, Center for Effective Organizations,
Marshall School of Business, University of Southern California. “In terms of
the choices you have, you can choose to pay people more, you can choose to
train them, you can choose to increase benefits.
“What is the return to you of increasing the ability or
abilities of the people you have?”
Make a plan
Members of the corporate training firm arrived the next day
and talked with as many employees as possible at the technology company, from
executives to engineers to those slumping sales representatives and everyone
else in between. They prodded and probed and asked questions. They were curious
about what, exactly, had happened.
They wanted to know, before they embarked on another
training session, whether another training session was actually necessary.
This is what you should do when you’re in the process of
determining whether to invest in training and development for your employees.
You should prod and probe and plan, because just as you shouldn’t approach a
new business venture without a model and a solid idea of what you want to
accomplish, neither should you approach training without thoughts of what you
need to tackle.
“What should companies focus on for their employees?” says
Newt Margulies, professor emeritus and associate dean, executive education,
University of California Irvine. “Companies are taking a harder look at their
strategy, and whatever flows out of that strategy becomes the areas they would
like to focus on for education and training.”
And even though those needs will vary from business to
business, from industry to industry, there are a number of common training
areas on which almost all businesses should focus.
I go, I hear about five things, and the first is leadership,” Margulies says.
“Leadership means different things in different companies, but 90 percent of
what we do in those programs is helping people do an assessment of how they
lead. I also hear a lot about operations excellence. How do we improve the way
we deal with customers and how we respond to customers?
“The third is
management strategy. What is it and how do we formulate a management strategy?
The fourth is project management. How do you really manage an effective project
team? What are the elements that contribute to project success? The fifth is
really teams, in every sector. How do we become more effective? And how do you
make judgments about the effectiveness of teams?”
Open your wallet
Those members of the corporate training firm remained in the
offices for a couple of days. They wanted to follow every lead and turn over
every stone. They wanted to find out what had happened to the sales team after
that apparently disastrous training and development session. And the technology
company executives had no problem paying to keep them around. They wanted to
find out what happened, too.
Do you want to keep your top employees after the job market
opens again? Do you want all of your employees to be happy and to enjoy their
work right now? Investing in training and education is an important part of
helping you do just that. The average business spends about $1,060 on training
and education per employee per year, according to research by ASTD.
There are also effective ways to spend a little less, if your
revenue is still down or if you opt to not invest as much in training. Turning
toward local colleges and universities to design a custom program for your
employees is often less expensive than sending them to open enrollment courses,
as are distance learning and online courses. Some businesses opt to look within
for employees who are experts in a specific area and can train the rest of the
“This is a good time to begin thinking seriously about it,”
Margulies says. “Now is the time to ready yourself for the upswing, because the
upswing is coming. I can’t tell you that it’s coming in 2011 or 2012, but you
know it’s coming. Here’s the opportunity for you to help develop your internal
talent so that you’re ready. Whatever you want to do, how do you ready your
folks for that?”
Keep an eye on results
At last, an answer for our corporate training firm and our
technology company in the Midwest. That previous training session, as it turned
out, was not to blame for lower sales numbers. No, the culprit was instead the
fact that the technology company executives had recently installed a drastic
restructure of the compensation program. That program encouraged the sales team to try and sell only one of their
many products, and that is what
The training had not been the problem at all.
In fact, without that recent training session, the
technology business might have planted itself in more trouble because of the
new structure of the compensation program. The best money spent might well have
been the money spent on the training and the worst might have been the money
that was about to have been spent unnecessarily correcting that training.
The only way to know where you are is to know where you were.
In order to receive a more relevant return on your investment, watch the
progress from the planning stages through the training itself, then during the
months, even years, beyond.
“The larger macroeconomic trends are both in
favor of and against training, paradoxically,” Levenson says. “The argument
against is that, when you have such high unemployment, it should be easier to
reach outside the organization and buy the capabilities you need in the
external markets. The argument in favor is that it almost doesn’t matter what
happens in the external market, that by investing in training, you’re showing
them you are investing in them, that this is a shared destiny for the
organization and the individual.”
I was speaking to a doctor recently about customer service and I said, as I always do to anyone in the medical industry, that many times doctors provide the worst customer experience. The doctor took exception and replied, “I have asked at least a hundred people would they prefer a doctor who diagnoses the symptom and cures the problem but maybe doesn’t spend time chatting or would they like a very polite, outgoing, engaging doctor who cannot resolve their medical problem? And every single person said they would like the competent doctor over the friendly noncompetent doctor.”
To which I replied, “Why can’t it be both?”
The recession has been a very positive thing. As a result of the economic downturn, customer service (as a tangible, financial asset on the balance sheet) has finally gotten the recognition it deserves. A one-point improvement in a company’s satisfaction scores can result in as much as a 7 percent increase in cash flow.
As a result, we no longer have to accept a knowledgeable attorney who never returns calls or a dry cleaner who does great work, yet the counterperson has a bad attitude. Why bother with a receptionist who determines how soon you get your appointment based on the mood of the day or an award-winning hairdresser who makes you feel like you are on an assembly line?
While the gap has widened between the haves and the have-nots with regard to companies investing in delivering a better customer experience than before, there are more companies getting worse and the “average” is disappearing.
I always say I am glad I have a qualified CPA who knows how to utilize the accounting laws and saved me $25,000 last year. However, I am pretty sure there are a number of excellent accounting firms with well-trained, up-to-date CPAs who know the same changes in the accounting world. So whether it is financial brilliance, medical, legal or whatever, the following statement applies. (Add your own technical expertise to this sentence.)
“_______________ brilliance is a commodity.”
John R. DiJulius III, known as the authority on world-class customer experiences, is the best-selling author of “Secret Service: Hidden Systems that Deliver Unforgettable Customer Service” and “What’s the Secret? To providing a World-Class Customer Experience” (April 2008). He is also president of The DiJulius Group, a firm specializing in giving companies a superior competitive advantage by helping them differentiate on delivering an experience and making price irrelevant. Reach him at firstname.lastname@example.org.
Manny Avramidis is senior vice president of global human resources for the American Management Association, where his responsibilities include strategic leadership and direction of the company’s national and international human resources function consistent with its mission, value and business goals. He also directs the development and implementation of global policies and programs for HR management.
Q. More and more companies seem to be training their employees in project management. Why is that?
As the nation has moved away from manufacturing toward a more knowledge-based economy, it hasn’t been unusual for a manager today to be asked to manage a project that spans across divisions. With today’s sophisticated technologies, there are tools and techniques that can help to manage that project better. Now if we were to think back 20 or 30 years ago, managers usually managed a staff, they knew their job very well, and they weren’t asked to manage projects or people outside of their immediate area. That’s no longer the case for many organizations. I think project management has just become a reality in every job description and, unfortunately, not everyone’s trained to do it well.
Q. Realistically, how much should companies set aside for a training budget?
It really depends on the organization. Is it a start-up? Is it a mature organization? Has there been turnover? Are new products and new technology being introduced? There are just a slew of things that a training manager or the head of HR has to assess before they set a budget. What I have seen is somewhere in the range of $2,000 to $2,500 per person per year; not every person will spend that much. Most experienced organizations have employees participating in at least two weeks of training per year, and employees should attend at least one external training event per year not just for newfound instructional knowledge but also for networking and benchmarking.
Q. What is the importance of corporate training in this economy?
From a corporate training standpoint, it’s simple: Well-trained employees often give organizations the edge they need to outperform the competition. It’s a corporation’s job to give their employees the tools they need to realize their full potential. Otherwise, the organization is cheating itself.
Imagine an office where employees walk laps during lunch, their pedometers clipped to their waistbands. Imagine an office where employees snack on fruits and nuts rather than candy bars, drink water instead of another can of soda, and have managed to kick that pack-a-day habit.
Imagine an office where health and wellness are a priority.
Is this anything like your office? Perhaps it will be during the months and years to come.
There is little doubt that health and wellness are hot topics. Just turn on the television and watch reality shows about weight loss, or pick up a magazine and read the articles on wellness published recently in Time and The New York Times Sunday Magazine. Or turn your eyes to Washington, D.C., where President Barack Obama signed the health care reform legislation in late March.
Our parents are overweight. Our children are overweight. We are overweight. And as we work our way through the recession, our days are packed. We tend to eat poorly and not exercise, and our poor decisions are costing not only our bodies and our minds but also our health care costs and our office productivity. A wellness program just might help to turn the overwhelming tide of fat and frustration.
“This has to be a business strategy,” says Tom Carter, vice president, sales and broker relations, Kaiser Permanente California. “And just like any other business strategy, investing in the health of your work force is a good business decision, but it requires discipline. You have to understand that this has to be part of the leadership endorsement; it has to be part of the culture. You have to have a shared vision with the rest of your employees, and you have to measure the results year after year.”
If you don’t have a program at your business, why should you bother to install one now? If you do have a program, why should you aim to improve it as we continue to move through 2010? Well, plenty of research proves that healthier employees are more productive and actually cost you and your business less in total costs. And there is an impressive return on the investment, especially after a year or two.
But you have to plan and install the program first.Take the first step
Are your employees overweight? Are they obese? Do they smoke? Not long ago, you would have been well within your rights to avoid the answers to any of those questions. If your employees worked hard and produced, who cared about their health? But after years of medical research, those are important and relevant questions. If the answer to any is yes, you’ll want to consider a wellness program.
The question you have to ask yourself, though, is why do you want to install a program?
There are no wrong answers, but if there is no why, the program will flounder.
“You need to determine what your budget is per person and whether you want to do executive wellness, as well,” says Dr. Steven Schnur, CEO, EliteHealth.MD LLC. “Then interview several companies and see what fits in that budget.”
And if you and your executives don’t support the program from its first breath, neither will your employees. So take the time to work with a private company for you and your employees to take a health risk assessment and a biometric screening.
“Screening usually involves biometric testing, which is blood pressure and body fat analysis and screening blood work,” Schnur says. “This is what I call an M.D. review, which is where someone actually reviews the screened blood work and the biometric testing.”
HRAs, which are often free online or cost between $5 and $25 per employee if performed in person, and biometric screenings, which cost between $50 and $150 per employee, highlight symptoms and conditions that might develop into larger problems in the future, both among individuals and your employee base as a whole. If you work with an outside company, the information will also be anonymous and in compliance with the Health Insurance Portability and Accountability Act.Consider your employees
Because of the general complexity of HIPAA laws, you might be better off turning to an outside company to ensure that your wellness program remains in compliance.
No matter your choice, your employees do need to feel a sense of inclusion in, perhaps even some ownership of, the program, so involve them as early as possible. Tell them about the program as you develop it, and if you build a wellness planning committee, make sure you bring in people from as many departments as possible and allow them to participate.
“You have to create the shared vision,” Carter says. “People have to feel inspired about it, and they have to feel like their values and ideas are also incorporated. You have to have a champion or a leader. Then you include people on the committee and in the discussion about how to deploy it to the work force. As people feel incorporated, they support it a little more easily.”
A key to increased participation is to offer incentives, especially now as we continue to recover from the recession and every little bonus bears the glint of gold. Perhaps your employees would react to paid time off or reduced premium costs. Both are common incentives, according to a panel of more than two dozen industry experts.Monitor your results
The fruits of an effective wellness program will take time to develop and spread throughout your business. Give it a couple of months to notice the first signs of change, a year to really see an improvement and a couple of years to watch as the culture changes.
Over time, you can measure the collective pounds lost and the decrease in cholesterol and blood pressure levels. You can also measure the decreased rate of absenteeism because of injury or illness, improved productivity, and perhaps even lower figures for workers’ compensation claims and turnover rate.
The program might also pay for itself during that first year thanks to employees being able to work more hours and to a possible decrease in health care costs but you’ll likely have to wait until at least the second year to see any real positive return.
“Usually, you have a 60 percent return on investment in the first two years,” Schnur says. “You probably reach around 100 percent in years three of four.”
When that change starts to filter in, you’ll likely see the average wellness program will be worth about $3 for every $1 you invest. Some experts say you can expect more than that $5, $6 or even $8 for every $1 you invest. But $3 is a fair figure on which most experts agree.
“The thinking that got us into high costs and health care reform and lost productivity is not the same thinking that will get us back to healthier communities and healthier populations and better business outcomes,” Carter says. “You have to rethink the way you’re packaging benefits, the way your culture is set up in the workplace.
“To do nothing is just not going to work. When you take a little more charge of the work force and work site health and safety, you can improve your outcomes and really change the culture, which is good for everybody.”
When it comes to wellness, it’s hard to beat Motorola. The company started a pilot project a decade ago and turned it into a global initiative that is now run by more than 50 employees and is funded with an annual grant.
Individual programs are continuously assessed on effectiveness for the 30,000 workers, family members and retirees.
The company either provides free membership to its wellness centers or pays for memberships at qualifying fitness centers. It has provided flu shots and offers a variety of health education plans each year.
The results are impressive. For workers that regularly used a fitness center, the company saved $3.93 for every $1 it spent, and participating workers cost $6.5 million less in lifestyle-related medical costs than nonparticipants. Those in the program saw health care costs rise 2.5 percent annually, compared to 18 percent for nonparticipants.
While you may not have the resources that Motorola has, there are some things you should consider. Healthy employees, whether it’s through a formal wellness program or an informal encouragement for healthier living, help your bottom line. And more importantly, a commitment to health is the right thing to do.
Each person has a sphere of influence. As CEOs, it is our responsibility to get involved to do what we can to help those around us live healthier lives. Any health initiative has to start at the top. If you aren’t serious about it, then it’s going to be much harder to achieve any results. This isn’t just about absenteeism, it’s about doing what’s right for ourselves and our companies.
Motorola’s commitment shows what can be done when you have a lot of resources at your disposal. Most middle-market companies, particularly in the current economic environment, can’t match that level of funding. But there are some things you can do to make a difference.
Once you decide to make a personal commitment to health, you need a champion for your program. It can be you, but if time constraints prevent that, then find someone who strongly believes in the effort. The key to health initiatives is getting buy-in from every level so that each employee’s success helps generate other successes. Healthy living is contagious, and by getting a lot of people involved, you will be able to start to see significant results sooner rather than later.
As time goes on, the commitment to good health will become part of the fabric of your culture, making it easier to launch new initiatives and build on prior success.
Motorola has its own fitness centers in some of its locations, a luxury you probably can’t afford. But these programs do not have to cost a fortune. Check with your insurance provider and/or your local hospitals. Many have either free or low-cost programs that can help you get started. Some have consultants or health coaches that can do initial assessments and advise you on how to set up a program that is right for your company.
Experts will tell you that you won’t see returns for probably two or three years, but if you are doing it because it’s the right thing to do rather than from a strictly economic motivation, this won’t matter. Healthier employees are happier and more productive.
Not everyone will be interested in participating in whatever program you set up, but don’t worry too much about participation rates. If you lead the way, you are giving people who are interested in good health a means to reach their fitness goals, and participation will increase as people see the successes of those around them.
In the end, it’s all about your health. Because if you don’t have that, what do you really have left?