Owners of privately held midsize companies are increasingly using performance-based bonuses as a key way of compensating executives.
“Companies will pay for performance, but they want to see value,” says Tyler A. Ridgeway, director of Human Capital Resources at Kreischer Miller.
“Whether it’s a CEO, CFO, COO, vice president of sales or vice president of marketing, it’s about how they can create value for owners in an organization. If it’s a CFO, for instance, it’s not just about crunching numbers; it’s about being a strategic business partner,” Ridgeway says.
Smart Business spoke with Ridgeway about performance-based bonuses and other trends in executive compensation.
Why has there been a trend toward performance-based pay?
A lot of companies have been through tough times, but they’ve also learned to better operate their businesses. Many have available cash right now and are wondering whether to incentivize the current team, pursue an acquisition, launch a new product or upgrade their talent.
For some who’ve decided to incentivize the current team, one option has been to reward their top performers by creating phantom stock or stock appreciation rights plans. These plans can motivate key executives to stay, and also reward them as the company grows.
If they’re hiring an executive, the interview process is now much longer than it was five years ago because they can’t afford to make a mistake. When they upgrade talent or bring in a new CEO, companies want the entire management team involved in the decision. As a result, the chosen executive candidate can build trust and rapport with management before they even start. This allows him or her to hit the ground running.
Companies want to make new executives happy from a compensation perspective, but they don’t want to give away everything. So, they’re designing packages that provide long-term rewards. They’ll negotiate a base salary everyone is happy with, and then determine how to link the bonus to company performance.
How do phantom stock and stock appreciation bonuses work?
Companies are increasingly using these plans that put a percentage of an increase in revenues over a specified period of time into an executive’s retirement plan.
With these plans, the executive doesn’t own equity in the company but shares part of the increase in value. These vehicles reward executives for growth and profits with a focus on specific goals and objectives that need to be accomplished.
Are companies trending away from any particular types of compensation?
Mid-market companies — $20 million to $500 million — realize there is a talent war and know they need to pay for top talent. However, they want to share risk. One way to do this is by offering more in bonus compensation than salary. Executives might be asked to accept less cash upfront in return for the potential upside in bonus compensation and earn-outs.
Some owners might be reluctant to negotiate upfront agreements relating to severance because they may have been burned in the past, such as having to pay severance to a sales professional who was not driving revenue. While many companies do not proactively offer severance, depending upon leverage, executives can have success in gaining some change of control protection.
Most companies are trying to avoid employment contracts as well. Instead, the offer letter now summarizes expectations and includes some measures of protection.
All of this comes back to companies expecting value creation from their new hires. When an executive joins a company, it’s difficult to know upfront exactly where or how he or she will add value. But if the executive helps generate leads that double revenue, for instance, companies are willing to revisit compensation because they want to reward that behavior.
Companies have become more transparent — owners are more willing to allow key team members to know the company’s cash position, and understand why bonuses are down if it’s not a great year. Their philosophy is that everyone is in this together, and, if the business grows, everyone will win. ●
Insights Accounting & Consulting is brought to you by Kreischer Miller
Anyone surfing the Web has likely come across cybersquatters. The owner of a website stating, “This domain may be for sale,” might not actually have legal rights to the domain name.
“Third parties without any legitimate interest or rights in a domain name will often purchase one knowing that someone else owns the trademark rights to the name. This forces the true owner of the trademark to either purchase the domain name from the third party or seek out another avenue to acquire the domain name,” says Jeff Nein, an associate at Kegler, Brown, Hill & Ritter.
Smart Business spoke to Nein about the process of acquiring a domain name and what to do if someone already has the Web address you want for your business.
What is the most common source of domain name disputes?
Typically, it’s cybersquatters. They’ll buy domain names with the intent to sell them directly to the trademark owner, which is a blatant example of bad faith registration. Another scenario is called typosquatting — a third party will register a domain name that’s similar to the trademark but with a letter or two out of place. In that instance, the third party usually benefits by receiving click-through revenue from links on the page.
How should a business proceed with securing rights to a domain name?
First, be aware that the Internet Corporation for Assigned Names and Numbers (ICANN) has created the Uniform Domain-Name Dispute Resolution Policy (UDRP), which authorizes domain name registrars to forcibly transfer domains in the event an approved dispute resolution service provider determines a domain name was improperly registered. Utilizing this dispute resolution process is quick and relatively inexpensive compared to traditional litigation. Any legitimate registered domain name registrar will be subject to the UDRP, which means almost every domain name falls under the governance of ICANN.
Next, evaluate the circumstances. If someone owns a domain name that encompasses your trademark in whole or in part, determine whether your trademark rights predate the current domain name holder’s registration. If so, examine how the website at the domain name is being used, if at all. If the website is not being used for a legitimate purpose — say, for instance, there is nothing but text that says ‘coming soon’ — this will work in your favor.
If your trademark rights do not predate the current domain name holder’s registration, the likelihood of successful transfer to you from the domain name holder dramatically decreases. Likewise, if the website is being used for a legitimate purpose, and the other party didn’t know you had trademark rights in the name and simply registered the domain name before you, there’s not much you can do. At that stage, the best option may be an offer to purchase the domain name from the other party.
What if they’re not using the domain name?
In those cases, we start by sending a letter outlining our client’s rights in order to effectuate transfer of the domain name without involving any sort of legal authority. If that doesn’t work, we file a complaint under the UDRP rules and start the arbitration process.
At arbitration you will need to show that you own the trademark, that the other party has no legitimate rights or interest in the domain name, and that the domain name was registered and used in bad faith. Once the other party is given an opportunity to submit its response, the arbitration provider will make a recommendation and advise the registrar on a course of action to take, which is often to immediately transfer the domain name to the trademark holder. The entire process only takes two to four months.
How can trademark owners stay ahead of the curve?
In light of the impending release of new generic top-level domains, trademark owners that want to avoid disputes should consider taking action now. Trademark owners have the option to register with ICANN’s Trademark Clearinghouse, which will verify your rights in any trademarks you submit for approval. Once you receive approval, the Trademark Clearinghouse will provide you with a defined window of time to purchase domain names that encompass your trademark at the new, generic top-level domains before they are publicly available. ●
Semanoff Ormsby Greenberg & Torchia: How letters of intent provide a road map for business transactionsWritten by Jayne Gest
A letter of intent, memorandum of understanding or term sheet — all essentially the same — is intended to be a nonbinding expression of the parties’ intended business transaction, creating a framework for putting a deal together.
It’s useful for a merger, acquisition or other combination, stock purchase, joint venture, real estate sale or lease, purchase or licensing agreement, or business contract.
Business owners usually aren’t in the business of doing deals, so it’s better to address the salient, material business points upfront in a simple, understandable way, says Peter J. Smith, a member at Semanoff Ormsby Greenberg & Torchia, LLC.
“The last thing you want is to go through an entire negotiation, do your due diligence, get your financing and then find out there’s an issue that becomes a deal killer,” he says. “You’ve now spent tens of thousands of dollars in time and expense on a deal that doesn’t, or won’t, close.”
Smart Business spoke with Smith about why using a letter of intent makes sense.
What is the purpose of a letter of intent?
It allows the parties to see if there is a basis for, and to document as a preliminary matter, the terms of a deal before expending time, energy and money. It’s better to determine if you can reach an agreement on the basic framework before you and your organization spend significant time, plus out-of-pocket expenses for attorneys, accountants, inspections, application fees, appraisals, travel and more.
The letter of intent also lays the groundwork for the transaction, including areas businesspeople don’t consider at first like non-competes, non-solicitations or indemnification. If it is sufficiently detailed and anticipates all major points, a letter of intent limits future negotiation, surprises and issues that could derail the deal, making the transaction more efficient and likely to close smoothly.
How detailed should a letter of intent be?
Unless there is a specific reason not to, a letter of intent should be as detailed as possible. The more you can include, the less there is to argue about later.
Sometimes business owners want a quick, one-page agreement that doesn’t get too hung up on the details. However, parties tend to be more agreeable and reasonable at the letter of intent stage. Plus, in my experience, the more detailed the letter of intent, the more likely the transaction is to close. Letters of intent also help minimize the ‘difficult lawyer’ problem, when counsel wants to continually negotiate the deal or make so many changes that the deal doesn’t come to fruition.
How can you negotiate important points if you have only done limited due diligence?
You can ask for the information upfront to resolve the issue, which is probably the best solution. If this is not practical, use a range or formula, or you can raise an issue, but leave the details for after due diligence.
What good is a letter of intent if it’s not binding?
Though not legally binding, a letter of intent has a psychological impact. It memorializes the understanding of the parties, and most people don’t want to be seen as breaking their commitments. Parties should sign a letter of intent, even if there are no binding provisions, solely for the emotional effect.
Nevertheless, a letter of intent often contains binding provisions such as confidentiality, no shop, non-solicitation of employees or customers, good faith negotiations or best efforts. It may provide a timeline for deposits, break-up fees or other provisions that become binding over time.
A letter of intent also can be provided to third parties to evidence the parties’ commitment and terms of the deal, perhaps in support of financing applications, approvals, etc.
In addition, you may not want to read a 30-page agreement, line-by-line, that is full of legalese. That’s why you pay a lawyer. With a letter of intent in place, counsel can say, ‘Yes, the agreement says the same thing as the letter of intent, and here are the five additional things you need to know.’ A detailed letter of intent helps you understand the deal better and results in a smoother, more cost-efficient transaction. ●
Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC
The growing prevalence of cloud computing has driven astronomical growth in the amount of data center traffic passing through networks. A 2011 survey projects this traffic to hit 468 Exabytes in 2016. To put that in context, worldwide Internet traffic surpassed one Exabyte for the first time in 2003.
The fuel behind this widespread adoption is cloud computing’s cost-effectiveness. With a “pay only for what you use” pricing structure, midsize companies can ramp up or down with minimal startup costs. In addition, there are tax benefits to having cloud computing as an operating expense, rather than a capital expenditure.
However, one factor stands in the way for many businesses — an outdated network infrastructure that is unable to operate efficiently using cloud-based systems.
Smart Business spoke with Kevin Conmy, regional vice president, Business Services, at Comcast Business, about how businesses can use Ethernet to maximize cloud computing, and the competitive advantage it brings.
Why are some companies unable or slow to take full advantage of the cloud’s potential?
The first hurdle to get over is the trust factor. Business owners are hesitant to hand over sensitive information and transactions to a third party. But as the use of cloud applications becomes widespread and the ease of the applications themselves make them harder to resist, more and more companies are jumping on board.
The second obstacle is often the company’s network and whether they are using the public Internet or a private Ethernet.
While a public Internet service is cost-effective and accessible from just about anywhere, the flipside to that is increased security risks that are a very credible concern.
Latency — the time it takes for data to make a round trip between two points, such as from your office to the data center where the cloud application is hosted and back — is another problem when using a public connection. Some applications, such as email, can tolerate longer latency, but others like video, are latency-intolerant.
How is private connectivity, Ethernet, better matched to cloud services?
For mission-critical applications hosted at a data center or cloud provider, private connectivity provides secure, high availability and low-latency access.
Ethernet technology, which has been around for 40 years, has become the de facto technology in offices around the world, linking computers and servers together in a high-speed local area network (LAN). A metropolitan area network (MAN) can link computers over a larger area, like between buildings in a metro area, with low latency.
One service provider manages the Ethernet traffic and applications within the private network, resulting in better security and performance. Companies still have the ability to integrate Internet traffic, but the low latency causes remote offices, and even those applications hosted in third-party data centers, to feel like they are on the LAN.
Data centers and cloud providers generally don’t provide dedicated network infrastructure with their cloud offerings, but they are reporting that clients are increasingly purchasing dedicated high-speed fiber connections from separate service providers for accessing these cloud services.
Do businesses leaders understand how important it is to have the right network services?
A recent CIO/Computerworld survey found that 70 percent of IT executives considered reliable, high-capacity bandwidth as a transformational or strategic asset, up from 42 percent two years ago. The majority of respondents believe high-performance connectivity increases productivity and efficiency. It’s clear that business owners increasingly view high-performance network services as a prerequisite for future growth. ●
Insights Telecommunications is brought to you by Comcast Business
Your company doesn’t need to have laboratories filled with beakers to be eligible for tax credits provided for research and development (R&D) activities.
“Many people don’t think they’re doing the type of research that qualifies. But in this context, research is a tax definition. And while there may be similarities to the laboratory sense of the word, it covers a wider range of activities,” says Christopher E. Axene, CPA, a principal in tax services at Rea & Associates, Inc.
Smart Business spoke to Axene about activities that qualify for credits and the application process.
What is the credit?
It’s an income tax credit available to U.S. companies for R&D activities within the U.S. While companies conducting research are already deducting those expenses, the credit is better because it’s a dollar-for-dollar reduction in their tax liability.
The credit has been around since the early 1980s, but has expired many times and continues to be extended by Congress every year. It’s set to expire again at the end of 2013 unless Congress takes action.
There are three main categories of credits:
- Labor or the wages of people involved in R&D activities.
- Supplies expended as part of the process.
- Costs relating to hiring an outside company to assist with research, provided that the company paying for the services is at risk regarding the success or failure of the work.
For most companies, only the first two categories would apply.
There are two types of credits, a regular credit and a simplified credit. The regular credit is often referred to as a 20 percent credit, which is something of a misnomer because there’s an adjustment to prevent double dipping. Since companies are already deducting the expenses on their tax returns, the net credit given is 13 percent. Few companies claim this credit because of the detail required with the filing. The simplified credit is more common and is 4.5 percent of every R&D dollar spent.
Is the credit just for manufacturers?
No, it has wide potential applicability because it’s not limited to a particular industry. It’s truly about whether a business is performing qualified research. Lean manufacturing and Six Sigma certainly qualify, but so do other activities. For example, a software company that averages $10 million in annual revenues routinely gets $80,000 a year in credits because it continually upgrades and enhances its products.
There’s a four-part eligibility test for the credit:
- There must be some uncertainty that the activity is undertaken to eliminate. If you know the result before you start a process, it wouldn’t qualify.
- It must be for a permitted purpose, such as to develop or improve a product or process.
- There has to be a process of experimentation. Failure is a good thing — it shows a process.
- It must be technological in nature, which means it relies on a hard science. It’s physical, biological or computer engineering rather than one of the social sciences.
Why don’t more companies apply for the credit?
Many aren’t aware of the credit because advisers haven’t informed them or they don’t use advisers. Others don’t think they do R&D because they don’t have employees wearing lab coats.
There also are owners of pass-through entities who don’t bother applying because the tax credit is not available to individuals who are subject to the alternative minimum tax (AMT). If it were allowed as a credit against AMT, the percentage of people taking the credit would skyrocket.
Keep an open mind, have a conversation and determine whether the benefit is worth the time and effort to file the necessary paperwork. Also explore the state-level R&D incentives that can apply regardless of whether or not the federal credit is claimed. ●
The employee benefit procurement process, sometimes called marketing, has changed little over the past 25 years. This continues to frustrate many organizations looking for transparency, and potential cost savings, when procuring life, disability stop loss, dental, vision or pharmacy benefit management coverage.
Formal Requests for Proposals (RFP) may travel by email, but the underlying process is the same; insurance carriers simply send an image of the paper proposal that they would have dropped off years prior. The interpretation, presentation and, most importantly, negotiations haven’t changed, says Matthew R. Huttlin, vice president in the Employee Benefits Division at ECBM.
Almost a decade ago, a major insurance scandal in New York uncovered bid-rigging and anti-competitive activity within the opaque procurement process.
“The industry agreed to reform and become more transparent, which they did to some extent, but procurement activity remains a bit of a ‘black box’ process that continues today,” Huttlin says.
Smart Business spoke with Huttlin about the future of employee benefits procurement — a reverse auction.
What problems still exist today?
The process is clearly still antiquated and fraught with opportunities for mistakes. Business owners often negotiate without solid documentation. Broker/consultants, as well as their clients, continue to see proposal mistakes, missed deadlines, inaccurate proposals and presentation revisions.
Also, insurance carriers market to their strengths, as opposed to conforming to client requirements, which may lead to misinformation, more work, mistakes and increased costs.
How can business owners better obtain employee benefit coverage lines?
An online version of a reverse auction, or Dutch auction, cuts to the heart of the problem by introducing technology to the process while maintaining the business owner’s control of the outcome. This type of auction works opposite of a normal auction — instead of bidding up the price of an item, the auction bids the price down.
What are the benefits of this method?
This process is:
- Prescriptive — RFPs are standardized, specifying the client requirements. Carriers respond using pre-determined plan specifications.
- Efficient — Carriers get complete, consistent data on which to act with agreed upon timelines.
- Transparent — Clients receive documentation on every step from the initial offers to the final pricing.
- Effective — The online system delivers the RFP to more markets, garnering more accurate quotes that are immediately posted for analysis.
How exactly does this reverse auction work?
There are four phases to the procurement. In the RFP development/submission phase, the RFP is placed on a secure website under a standardized format and peer reviewed to ensure accuracy. Once released, carriers are notified to go to the website to obtain all of the relevant information to prepare their proposal.
During the technical evaluation/initial-pricing phase, carriers post proposals into the system for evaluation. The broker/consultant reviews the vendor confirmations and deviations to the requested scope of services, confirming plan design features, alternatives and administrative capabilities. The carrier also posts its initial pricing.
Then, all carriers receive feedback as to their ranking by their initial pricing in the financial evaluation/secondary-pricing phase. Actual rates aren’t shared. Over the course of a set period, usually two days, carriers can revise their pricing offers. Every time a new offer is submitted, all carriers are notified of the new ranking order.
Once the financial evaluation is complete, clients review the detailed results in the evaluation/selection phase. This review can include finalist presentations, site visits, etc. The client maintains full control over the selection process. Business owners aren’t required to select the lowest bid, but rather the carrier that best fits their requirements.
This high-tech approach is an efficient and effective way to handle procurement that provides accurate, transparent and documented results while driving prices down in a timely fashion. ●
For more information about risk management, visit ECBM's blog.
Insights Risk Management is brought to you by ECBM
Business banks can provide more to their clients than financial products. With all of their connections, bankers can steer businesses toward resources such as government entities and industry organizations that can help them grow and thrive.
“Their bankers should be introducing them to the people and organizations that know their industry like the back of their hand, and can offer assistance in everything from tax benefits to manufacturing locally,” says Gloria Ferguson, senior vice president and market manager of the Corporate Banking Division at Bridge Bank.
Smart Business spoke with Ferguson about the various resources available to local manufacturers and other businesses.
Why go to a bank for industry resources?
Choosing a bank that has extensive experience in your industry can be the difference between your bank offering you traditional banking services and your bank playing a vital role in the growth and success of your business. Part of the role of a consultative banker is to ensure clients are aware of the various resources available to them. When you become a client with a banker who knows your industry, he or she can help your business thrive. A banker who knows your industry is more likely to have a network of industry professionals and organizations and will also know the ins and outs of government resources available to you. Bankers have connections to a vast network of people from CPAs to lawyers to industry leaders.
As an example, the Bay Area participates in an annual manufacturing week during which people tour manufacturing companies in order to understand those businesses and help them take advantage of resources.
What are some of the local organizations dedicated to helping businesses?
California is a great example of a state with a strong support system for local businesses and manufacturers. Cities and the state of California have worked to attract and retain manufacturing companies by providing resources and benefits, things such as tax incentives and support for their labor force.
Manex has consultants that provide services to small and midsize manufacturers in Northern California. It has an edict to meet with companies to determine their needs and help create efficiencies in their business, whether that’s teaching them lean manufacturing methods or working with companies in foreign trade zones that may enable companies to receive tax advantages.
The East Bay Manufacturing Group seeks to educate manufacturers through sponsoring events with CEOs and CFOs on how to successfully run companies and solve common business problems.
SFMade supports San Francisco start-ups and manufacturers through industry specific education and networking opportunities, while connecting companies to local resources.
Also, there are additional resources provided by coalitions dedicated to innovation. The Bay Area Council, Innovation Tri-Valley Leadership Group and East Bay Leadership Council, and Fremont’s Innovation District and the Fremont Advanced & Sustainable Technology strategy explore common issues for manufacturers and seek solutions.
Why is manufacturing a particular area of focus?
Manufacturing covers such a broad spectrum of companies. It can be anything from semiconductor production to food processing. When you look at the Bay Area it’s very diverse in terms of manufacturing; there is everything from steel fabrication to bio companies, large-scale candymakers to industrial bakeries.
This is an area of focus because of the large amount of manufacturing that has moved overseas because of costs and regulations. In an effort to bring manufacturing back to California, cities and the state have worked to provide incentives and support to these companies. That’s why a lot of these organizations have been created — to attract and keep more manufacturing companies.
Although I’ve focused on manufacturing, it’s equally important to find a banker who knows your industry, no matter what business you’re in. There will be industry organizations, tax incentives and industry professionals that will be able to help your business, and your banker can be the person introducing you to this valuable network. ●
Insights Banking & Finance is brought to you by Bridge Bank
Ropers Majeski Kohn & Bentley PC: How civil cases can be settled with alternative dispute resolutionWritten by Roger Vozar
Civil courts, trying to manage busy caseloads with reduced staffs, are pushing litigants to seek alternative means of resolving their differences.
“Alternative dispute resolution (ADR) is the debt that all civil litigants pay. One way or another, everyone has to pass through some form of ADR during the life cycle of his or her litigation,” says Brock R. Lyle, a partner at Ropers Majeski Kohn & Bentley PC. “Everyone has the right to a trial by a jury of their peers, but most cases can be resolved without one. Courts cannot force you to resolve your case through mediation or some other alternative means of resolution, but they can, and will, strongly encourage you by placing settlement stops and incentives along your path to trial.”
Smart Business spoke with Lyle about the various trial alternative methods available.
Do you need to attempt mediation or some form of ADR before a case can go to trial?
There are several nets in place to catch cases before trial. The first is often mediation, a formal negotiation assisted by a neutral professional. At the initial case management conference, the court will inquire whether the parties are willing to go to mediation. If so, the court will set a completion date and follow-up hearing. If one party refuses, the matter is generally set for trial.
There are instances where parties are willing to enter into mediation even before a case is filed, a good way to save money on legal fees. But you run the risk of resolving a case before the parties fully understand it. The parties can conduct as many mediations as they believe would be helpful. Some mediators keep working with the parties after the formal session ends. Certain courts also offer no-cost mediation for simpler cases.
In place of, or sometimes in addition to, mediation, the parties can submit to an early neutral evaluation or an early settlement conference, both of which involve an impartial lawyer or judge evaluating the case and pushing both sides toward a resolution.
The final net is a mandatory settlement conference, where the judge meets with both parties separately to remind them of the costs and uncertainties inherent in trial, and to push them once again to settle. Depending on the type and size of the case, settlement through ADR can help avoid tens of thousands or even hundreds of thousands of dollars in attorney fees.
What other ADR options are available?
Another option is arbitration, which is like a private trial. It can only occur by agreement of the parties or a prior written agreement, because it involves a waiver of the right to a jury trial. Arbitrations can be binding or nonbinding, though the latter is often more informational because one or both parties can disagree with the ruling and disregard it.
At arbitration, a retired judge hears evidence from both sides with exhibits, witnesses and many elements of trial. The arbitrator then issues an award that the prevailing party has confirmed by the court.
Of course, either attorney or party can always discuss settling the case and try for an informal resolution over coffee or lunch.
How do you know what ADR method is best?
In many cases, the contract or agreement at the center of the case will require mediation, arbitration or both. For example, most real estate contracts include mediation provisions. As an added ‘incentive,’ California case law cuts off a party’s entitlement to have attorney fees reimbursed if the party is unwilling to mediate, or starts a case without first offering to mediate. If no ADR process is spelled out in a written agreement, the posture and progress of a case often dictates the best fit.
What are some pitfalls to avoid with ADR?
One concern is going through an ADR process before the case is ready. If essential information needs to come forward in written discovery, depositions or expert testimony, an early mediation may be a waste of time and money.
The ADR process also creates pressure to settle that can force a disadvantageous position. After investing time, money and energy in preparing for and attending the ADR session, parties often feel they should settle. There is no shame in walking away.
Finally, parties can abuse ADR by going through the motions without any intent to settle, delaying the matter and racking up attorney fees. It is useful to see if the other party is ‘in the ballpark’ before the cost and effort of preparing for an ADR session. ●
Insights Legal Affairs is brought to you by Ropers Majeski Kohn & Bentley PC
If you have three qualified job candidates with equal experience who interviewed well, how do you choose? Ask yourself how the new hire will fit in — will they enhance or disrupt your current team? The culture is critical anytime there is a personnel change, whether hiring, promoting or planning for succession.
“If you put a tiger in a group of lambs, what’s going to happen?” says Ricci M. Victorio, CSP, CPCC, ACC, managing partner at Mosaic Family Business Center. “Tigers need to prowl on their own. They aren’t usually good team players.”
Smart Business spoke with Victorio about the importance of “casting” people in the right roles to magnify their strengths.
What’s key to know about personality traits?
There are five basic traits most personality assessment tools use to define how people naturally perform. Each trait has two opposite styles with a midline where people are more flexible or adaptable. They are:
- Dominance. Is the person more control-oriented, competitive and ambitious; or a team player who prefers collaboration?
- Communication. Is the person more persuasive and energized by people; or reserved, preferring one-on-one conversation?
- Procedural. Is the person more process-driven, organized and a good listener who needs time to make decisions; or flexible, creative and enjoys spontaneity?
- Organization. Is the person more detail-oriented, wanting things done correctly; or strategic, big picture and concept-oriented?
- Logic. Is the person more analytical, or intuitive when making decisions?
It’s interesting to note that leadership styles are determined by whichever trait is the highest. Many corporations recast CEOs depending on the stage of growth. A start-up could need an innovative, confident leader to make swift decisions and take calculated risks, while a more mature company might need a road builder or process-oriented leader to maintain the business.
How useful are personality assessments?
The surveys measure self-perception — how people see themselves and how they perceive the expectations of others. When hiring, you can’t rely solely on this feedback; it’s just one part of your vetting process. Also, results are dynamic and change as people evolve and their environment changes.
Personality assessments help create a baseline for understanding who we are and what we are experiencing. For example, in a demanding sales environment, you can increase success by looking for high communicators who are energized by personal interaction and adaptable. They need to be go-getters who can think on their feet and close the deal. Most assessments provide questions that offer greater insight during the interview.
What are signs your workforce isn’t gelling?
If you hire a high-dominant, low-extrovert manager to lead a collaborative team that is accustomed to brainstorming, the indirect ‘teller’ style of the new manager will be perceived as unfriendly and bossy. Team members will feel less valued, become disenfranchised and frustrated, leading to increased tension, absences or resignations. It is important to consider the desired behavioral attributes each position requires for optimum results, such as having outgoing, creative problem-solvers in people-oriented positions, and detail and process-orientated caretakers for more analytical roles.
How can you better understand your own behavior and management style?
Self-awareness is the first step in self-management. If you know you tend to make decisions hastily, never make an important decision without sleeping on it.
You also might struggle without knowing why you are feeling drained, stressed or anxious. In one case, an executive was proud of her open-door policy, but was feeling unsatisfied. She learned that it was causing her significant energy drain. She discovered that as a process-oriented, reserved communicator, it was more energizing to limit open-door interruptions to certain times.
Every personality is valuable and dynamic. It’s a matter of finding the right role that suits who you are and being able to adapt successfully to the world around you. ●
Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.
Business owners have been watching the slow rollout of the Patient Protection and Affordable Care Act (PPACA) for a while now. But that doesn’t mean they have a firm grasp on the breadth of the challenges, requirements and decisions that are inherent to its wide-reaching health care and insurance changes.
“If you’re like most business owners, you have already spent significant time gathering and processing information,” says Bill Norwalk, tax partner-in-charge at Sensiba San Filippo LLP. “Very soon, you will make vital decisions that will have significant effects on the future success of your organization.”
Norwalk says it’s critical for business owners not to get too caught up in the political maneuvering and analysis that fills the news coverage.
“Regardless of emotion or political leanings, business owners must understand that the PPACA is a reality and needs to be addressed like any other challenge,” he says. “Taking an unbiased, strategic look at the law and its ramifications for your business will allow you to make decisions that aren’t clouded by emotion or outside factors.”
Smart Business spoke with Norwalk about the PPACA, its ramifications and how businesses can adapt to its effects.
How will businesses be affected by health care reform implementation?
The PPACA will have an impact on benefits planning, tax planning and your ability to compete in a challenging labor market. Making the best decisions will require you to understand all of the decisions and consider their varied consequences.
Taking a decision-and-consequences-based approach to your analysis will help you understand the potential effects of your choices. Many businesses are considering the pros and cons of offering qualifying health insurance versus dropping health coverage and allowing employees to utilize newly established insurance exchanges. While the analysis of direct costs may be straightforward, you need to understand how your employees will view a change in coverage. Changes in health care benefits could have a substantial impact on your ability to attract and retain talent.
What are the potential tax effects and what can businesses and individuals do to plan?
Tax implications of the PPACA are wide reaching for both businesses and their shareholders. New taxes were introduced that could result in significant tax increases — especially for business owners and managers who don’t plan ahead.
Corporation shareholders and shareholders of pass-through entities could both be affected by the 3.8 percent tax on net investment income. An additional 0.9 percent Medicare surtax was also introduced by the PPACA. Shifting from investment income to regular income could be an effective strategy, but the analysis is often far more complex. Depending on your wage level, an additional self-employment tax on regular income could more than offset potential savings from decreasing net investment income. Alternative minimum tax considerations can further muddy the waters. The PPACA simply makes tax planning more convoluted. Fortunately, qualified professionals will have the tools and resources needed to help you consider various scenarios and develop a plan to minimize your liability.
Where should business owners turn for guidance?
Decisions related to PPACA implementation will affect human resources, tax strategy and the broader organization. Business owners must first identify the key decisions and then weigh the consequences of each. If your strategic plan related to the PPACA isn’t complete, it’s time for you to speak with someone who can help.
Work with an insurance or benefits adviser. He or she can help you understand your coverage alternatives and the associated costs. An experienced accountant can offer assistance with compliance, tax and organizational planning. The right information, advisers and analysis will allow for decisions that can minimize negative consequences and maybe even provide a competitive advantage. ●
For more health care reform information and tax tips, visit Sensiba San Filippo's blog.
Insights Accounting is brought to you by Sensiba San Filippo LLP