Enterprise risk management (ERM) has become a big buzzword in business the past few years. However, corporate governance and compliance, which is how business executives utilize ERM, is really a traditional management function.
“What’s new about it is that there’s market interest and significant value associated with an enterprise that has implemented true ERM,” says Alyssa Martin, a partner in Risk Advisory Services at Weaver.
When an investment company is looking at an enterprise’s value, a consortium of banks are considering giving a syndicated loan, or companies are weighing a merger or acquisition, an ERM program increases the company’s intrinsic value, illustrating the sophistication of its corporate governance. An organization can also use ERM to improve internal decision making, promoting and instilling risk awareness within its culture.
Smart Business spoke with Martin about integrating ERM into strategic, business and financial management processes.
How does ERM differ from other methods of assessing and managing risk?
Risk assessment was more widely implemented during the regulatory increase and Sarbanes-Oxley wave, but companies often assess risks at the process level in silos.
ERM looks at risk across the entity, casting a wide net, incorporating the results of the risk assessment with integration practices throughout the organization. The first step is to perform an entity level risk assessment identifying the most critical risk categories and related events that influence the organization’s success. Then, you drill these risk considerations down into processes and functions.
An ERM program considers the business goals, objectives and strategies at all times, following these steps to monitor and manage risk on an ongoing basis:
- Identify, assess and prioritize business risk.
- Analyze key risks and current capabilities.
- Determine strategies and new capabilities.
- Develop and execute action plans and establish metrics.
- Measure, monitor and report risk management performance.
- Aggregate results and integrate them with the decision-making process.
An organization identifies the risk categories and specific risk events that have the most material influence, which are not necessarily the most common, for current operations and strategic initiatives. So, a domestic company that wants to grow internationally is changing its business condition and risk influences, and in turn, the management of related risks.
One of the advantages of ERM is that business leaders can move from managing negative events that have occurred to managing key risk indicators, which allows you to get in front of identified critical activities. For example, if a retailer that does 60 percent of its sales on credit monitors key risk indicators, such as U.S. consumer credit ratings and credit interest rates, it can modify business practices or promotional tactics before a credit freeze trickles down. Instead of offering customers no interest for one year, the retailer can offer no interest for six months.
Are many companies already following ERM?
Absolutely. ERM practices such as building internal controls, joint venturing with business partners or identifying regulatory requirements are already occurring within management functions. But an ERM program helps bolt decision-making and business tactics together to create cohesiveness within an organization, where everything is based on the same risk profile and agreed-upon risk tolerances.
With that said, companies must align the ERM program with their existing goals and strategies. This alignment is crucial. It ensures that program activities are not just new tasks but rather different ways of executing the tasks that may or may not include additional elements.
Where do companies fall short with ERM?
The most common mistake is thinking that entity level, enterprise-wide risk assessment equals ERM. That’s only the first step. Companies must use what they’ve learned through the assessment to put management tactics and monitoring into place.
An entity level risk assessment also does not instill a risk-awareness culture. Risk must become part of a company’s operations and decision-making processes through business planning, product development and regulatory compliance.
As an example, when considering performance evaluations, managers need to ask: Did you consider risk when you made that decision? Did you incorporate more anticipatory business planning versus reactionary planning? Risk management must become a component of the executive management’s responsibilities while ERM is integrated across the organization. ●
Insights Accounting is brought to you by Weaver
You’ve just launched your product, which has taken months of research and development effort to bring to market. Soon after its debut you receive a notice that you’re infringing on an existing patent or trademark.
You’re now left with a decision: License the technology that you’ve infringed, which you may or may not be able to do, or wind up with a costly infringement suit. You could fight the suit, retreat and try to design around the patent, or scrap the whole thing and start again. Any of those choices come with substantial costs. All the while knowing that with a little bit of due diligence up front all of it could have been avoided.
“Don’t undervalue your business’s IP,” says Jeffrey N. Zahn, an attorney with Fay Sharpe LLP. “Do what’s required to make sure it’s protected and not potentially infringing a third party’s IP rights. This will help you protect your investment in your IP and avoid unnecessary third-party, IP-related expenses down the road.”
Smart Business spoke with Zahn about the intellectual property (IP) mistakes companies most often make.
What IP mistakes do businesses make most often?
The three biggest IP mistakes, in no particular order, are the failure of a business to adequately protect its IP, failure to avoid infringing the IP of other companies and failure to seek the advice of an IP attorney.
There are many ways a company can leave its IP exposed. Those include not using nondisclosure agreements when working with outside parties; forgoing patentability investigations to determine if a patent would suitably protect company technology; failing to file provisional and regular utility and design patent applications when appropriate; allowing trade secrets to leak; not ensuring employees, outsiders and third parties maintain the confidentially of the company’s critical technology; and failing to federally register trademarks to protect brands.
Another major problem is failing to avoid infringing on another’s existing IP rights. This is often the result of not conducting freedom to operate searches for issued patents, as well as published pending patent applications, and trademark clearance searches.
But the one mistake that often leads to all others is failing to seek the advice of an IP attorney. This is a critical aspect of due diligence and developing a solid and secure IP strategy.
Do large or small companies typically make these mistakes?
Smaller companies are more likely to make these mistakes. Smaller businesses often believe an IP attorney is a service they can’t afford, or one is only needed when filing a patent or trademark application. In most cases, it comes down to not recognizing the value of IP to their businesses.
In contrast, the larger a company is the more likely the company is educated about IP and has in-house counsel and/or a relationship with an IP firm to address these issues.
Is there a particular time when a company is more vulnerable to IP issues?
Businesses are typically more at risk during the early stages of their existence. That’s why companies should take stock of their IP and look into the market to identify the IP of the relevant third parties, such as competitors, early on. This can save a lot of time and expense if it’s done up front.
Companies are also vulnerable during the early stages of a product development cycle. Bringing a potentially infringing product to market may require the company to license the infringing technology or trademark, or rebrand or redevelop the product if the technology or trademark can’t be licensed. That’s why it’s critical to conduct freedom to operate searches and trademark clearance searches during the initial stages of a product’s development.
What can help businesses prevent these errors from happening?
The best tool is education and a proactive IP management program. Have conversations with those who know the issues — someone who works in the IP field regularly, whether that’s an in-house attorney or an IP attorney at a firm — because affected parties must be aware of IP issues. Then continue to talk with an IP attorney as your business grows, new products are developed and new markets are served. Many businesses would be pleasantly surprised how valuable an initial consultation with an IP attorney is relative to the expense.
An ounce of prevention is worth a pound of the cure. This is especially true in the area of product design and branding where a little due diligence to investigate third party IP rights can help you develop your product and brand strategy so it doesn’t potentially infringe existing rights. This can help you avoid potential infringement issues, such as a costly patent or trademark infringement suit.
Jeffrey N. Zahn is an attorney at Fay Sharpe LLP. Reach him at (216) 363-9168 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP
Regardless of its size or sector a company works within, all businesses have certain common threads. For instance, the need to communicate effectively and efficiently — both internally and externally — is something every business deals with. However, it’s also important to note that every business has a unique communication DNA. A phone system that works for one company might not make sense for another.
“Every business is different,” says Alex Desberg, sales and marketing director at Ohio.net. “They shouldn’t be shoehorned into an off-the-shelf phone solution.”
Smart Business spoke with Desberg about the importance of customization, and how VoIP can be tailored to serve various industries.
How can VoIP be designed to fit different markets that have different needs?
Different industry segments have characteristics that are only seen within that space. By deploying a customized VoIP system, a company can gain advantages from certain functions that are designed to fit that industry’s specific needs. It’s important to avoid trying to fit a square peg into a round hole.
How can VoIP be tailored to serve the manufacturing sector?
Manufacturing facilities typically have two different components. First is the headquarters, which serves as the hub of communications and houses accounting, sales and administrative personnel. The sales team, which generally uses headquarters as their home-base, need a phone system that can help them keep in touch with their main facility while they’re out pounding the pavement. Then there are remote manufacturing and warehouse facilities that are often spread throughout the country or world. Not only is there a need for fluid communication at the administrative level, but the remote facilities must also be able to correspond effortlessly with headquarters. A VoIP system can be tailored to meet the disparate needs of a manufacturing facility, enabling that facility to become more accessible, and ultimately, more efficient.
How can VoIP support the needs of CPAs and financial institutions?
Typically, in these types of businesses, the staff are housed in a single location. If there are multiple locations, the phone needs are often identical. Employees are usually on the phone a good part of the day and there is a need for continual customer contact. The basic administrative functions are the most important components for such businesses. Because the workforce is stationary, there is rarely a need for remote or mobile applications.
How can VoIP streamline calls for the medical sector?
Most small to midsize doctor’s offices are structured so that during the day inbound calls go through a receptionist. During the evening, medical practitioners utilize absentee services where callers are redirected through phone numbers that lead to on-call personnel or forwarded to hospitals in the case of emergencies. A VoIP system can redirect, or triage, phone calls as needed.
How can VoIP allow a virtual company to appear as if they are well grounded?
More and more companies are shedding their brick and mortar locations in favor of having their employees work remotely. By having a front-end VoIP configuration, organizations can present a unified communications system that will give the appearance of a solid business. Functions like call forwarding, voice mail and conference calling are available so employees can stay connected without being tied to an office. Also, VoIP can eliminate the need for companies to utilize traditional phone lines and equipment, so overall cost savings and service enhancements can be significant. ●
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
The environmental due diligence process can be time-consuming, which is why buyers should get started early when entering into negotiations to purchase property.
“Depending on when environmental due diligence begins, environmental issues might not be discovered until close to the end of the deal. That could result in a transaction not closing for months after initially planned, which was the case in a matter we had this year,” says Meagan Moore, a partner at Brouse McDowell. “Be ready to begin a Phase 1 assessment when you initiate discussions regarding a purchase.”
Smart Business spoke with Moore about Phase 1 and Phase 2 environmental assessments, and the protections they provide buyers regarding potential liability related to contamination.
What is the first step in the environmental due diligence process?
Hire an environmental consultant to perform a Phase 1 study. That will give you a better understanding about the property. Because of the way certain environmental regulations are written, even a purchaser that has no culpability for what is on the property could be responsible for cleanup costs. Therefore, it’s best to know what you’re getting in advance so you can plan for it during the transaction.
Phase 1 is a report intended to identify potential environmental issues associated with the presence of hazardous substances or petroleum products on a property. It involves a review of federal, state and local records, government databases, interviews with people familiar with the property and an on-site inspection by the environmental consultant. The review provides an overview of the property’s history and whether there is any information or visible signs of a release or contamination on the property.
Some sellers may conduct a Phase 1 study in order to expedite the transaction. It is important to note that Phase 1 is only valid for 180 days and typically the environmental consultant must grant third parties authority to rely on the report.
There are some environmental issues that the Phase 1 investigation does not cover, including whether the property has wetlands or the building contains asbestos. Those can be added to the scope of a Phase 1 if a buyer envisions potential issues with a property. Any documented or visible signs of contamination noted in the Phase 1 are considered a recognized environmental condition (REC).
If the Phase 1 report includes a REC, what should a potential buyer do next?
A Phase 2 assessment should be conducted, which typically involves a subsurface investigation. Soil and groundwater samples are taken for lab analysis to determine if there is hazardous material present. It’s not going to delineate the extent of the contamination, but it will confirm or deny the presence of hazardous materials.
If the contamination is confirmed, you’ll have to determine how it should be addressed — whether remediation should be done or if the material can be left in place.
All these concerns can be factored into the negotiation process with the seller. You could include indemnity agreements with the seller and establish an environmental escrow account to pay for any issues that arise.
Do any former uses require a different approach?
A Phase 1 assessment should be done for any industrial or commercial property. But you definitely need an assessment if there was a gas station, dry cleaner, auto repair shop or industrial use of the site. Phase 1 assessment requirements are the same no matter what type of business; it doesn’t matter if it was a textile plant or gas station. But if you’re looking at a property that had historical operations that could have led to contamination, a Phase 1 assessment is necessary to determine the condition of the property so you’re aware of what you’re buying. As a buyer, you want to know everything upfront so that can be a part of the negotiations and you can limit your liability. ●
Meagan Moore is a partner in the Environmental Practice Group at Brouse McDowell. Reach her at (216) 830-6822 or email@example.com.
Insights Legal Affairs is brought to you by Brouse McDowell
In continuation of the “Billion Back” campaign from the summer of 2013, the Ohio Bureau of Workers’ Compensation (BWC) has announced additional changes to come this year and in 2015.
“As we begin 2014, it is important for employers to be aware of impending changes and understand how they can further impact the protection of their workers as well as their bottom line,” says Randy Jones, senior vice president of Ohio TPA Operations at CompManagement, Inc.
Smart Business spoke with Jones about the upcoming changes and their potential benefits to the employers of Ohio.
What is ‘A Billion Back?’
‘A Billion Back’ is a one-time dividend equating to $1 billion for private employers and public taxing districts. It was made possible because the financially strong Ohio State Insurance Fund exceeded the target funding ratio of assets to liabilities established by the BWC Board in 2008.
Checks were released to eligible organizations in June 2013. For private employers that participated in a group retrospective rating program for the July 1, 2011, policy year, dividends were calculated and paid following the 12-month retrospective refund calculation that occurred in October 2013.
What other program benefits may employers utilize this year?
The BWC has also expanded its safety grant program from $5 million to $15 million to further promote workplace safety, workplace wellness and encourage investment in protecting Ohio’s workers. It has modified the program to be a 3-to-1 match with a maximum grant of $40,000 per employer. The BWC has also expanded the program to allow for various types of previously excluded equipment.
Now is the time to minimize your out-of-pocket expense for new equipment that may be eligible under the safety grant program. For example, your out-of-pocket cost of $13,333 would be matched with the BWC’s $40,000, which equates to a 300 percent return on your investment in safety.
According to BWC statistics, every dollar spent on safety equipment equates to a $3 reduction in claims costs.
What can employers expect in 2015?
The BWC will be transitioning to a billing system that will align it with a standard industry practice, enabling them to collect premiums before extending coverage. The transition will become effective July 1, 2015, for private employers and Jan. 1, 2016, for public employers. The BWC has indicated that a change to a prospective billing system could have an overall base rate reduction of 2 percent for private employers and 4 percent for public employers, and provide an opportunity for more flexible payment options of up to 12 installments.
The BWC envisions a few changes as it implements prospective billing, including:
- Earlier deadlines to sign up for incentive/discount programs. Beginning in the fall of 2014, employers wishing to participate in programs such as group rating, group retrospective rating or other discount programs will have to make those selections sooner.
- One-time credit. A one-time premium credit will be given in July 2015 to the average private employer to cover its August payroll report, which includes the January to June 2015 premium as well as the July and August prospective premium. Public employers will receive a 50 percent credit for 2015 and a 50 percent credit for 2016 within the March 2016 invoice.
- A new payment schedule. Private employers will receive their invoices in June and begin paying premiums before July 1. While that’s earlier than in the past, employers will be able to make quarterly payments, with some employers able to choose as many as 12 installments. Public employers will need to pay at least 50 percent of their annual premium for both 2015 and 2016 by May 2016.
- A true-up process. Since the BWC will be providing workers’ compensation coverage based on estimated payroll, it will ask employers to report their actual payroll for the prior policy year and pay any shortage, or receive a refund for any overage in premium. This begins in August 2016.
- Employers should contact their third-party administrator for workers’ compensation to discuss the transition process. ●
Randy Jones is senior vice president of Ohio TPA Operations at CompManagement, Inc. Reach him at (800) 825-6755, ext. 65466 or firstname.lastname@example.org.
Insights Workers’ Compensation is brought to you by CompManagement, Inc.
Rising health care costs have driven up insurance premiums, straining employers’ funds and leaving less money available to invest in their businesses, hire employees or award pay increases.
“Any time costs go up, there’s less money to spend on other things that are important to the growth of a business,” says Ross Farro, a principal at Benefits Resource Group. “It comes down to companies deciding how they will pay the increased expenses and continue to offer health care benefits.”
Smart Business spoke with Farro to learn about strategies employers can utilize to effectively deal with rising health care costs.
Are certain types of businesses hit harder by these changes than others?
Generally the size of the business determines how it’s treated under the Affordable Care Act (ACA). For instance, the new law means community rating is used to determine premiums for companies with fewer than 50 employees, which eliminates medical underwriting. This has driven up rates for companies with healthier workforces — sometimes as much as 50 to 120 percent. They are also obligated to provide minimum essential benefits to meet the plan design requirements under the law.
Also, employers that offer group benefits are being hit with fees and higher taxes that come with the ACA. Large employers are also still awaiting final U.S. Department of Health and Human Services guidance for measuring the eligibility of employees during 2014 for required coverage in 2015.
What are the most troubling issues for employers as health care costs rise?
Employers are concerned with controlling costs without reducing employee benefits. The taxes and fees that come with the ACA are substantial. This year, taxes and fees are roughly 5 percent of fully insured premiums, and are expected to increase next year. Employers paying $1 million for health care premiums will have $50,000 in associated fees. For many companies, that’s the equivalent of one potential new employee’s annual salary.
What should employers do to better control health care-related expenses?
Wellness plans and an emphasis on consumerism are two approaches that can help employers better afford the health insurance benefits they offer employees. Negotiating with or changing providers really doesn’t work. A better solution is to focus on things that can be changed, such as addressing obesity and chronic disease within your employee population since these are factors that increase costs. Wellness initiatives not only have an impact on insurance premiums over time, but can improve productivity and mitigate disability claims.
Health care consumerism is fundamentally about restructuring an employer’s health benefit plan into one that puts economic purchasing power in the hands of its employees. To leverage this approach, companies should consider programs such as a health reimbursement account or a health savings account paired with a high deductible that pays for health care expenses with pretax dollars from the employee, employer or both. Either strategy brings attention to the costs of services and prescription medications, encouraging employees to be more cost conscious.
Self-insuring allows employers to pay the costs of claims rather than pay for a fully insured premium, offering a more transparent look at costs. It also can substantially reduce the amount of new ACA fees and taxes. Self-insuring is becoming a viable option for employers with fewer than 100 employees, as insurance carriers are developing products for groups as small as 25 employees.
If employers do only one thing to deal with the challenge of rising health care costs, what should it be?
Employers need to work with a consultant, not a broker. It’s not only about shopping your benefits with other insurance providers; it’s about being creative and knowledgeable. You need a proactive consultant who understands the laws and can develop strategies to help you. As much as employers might want to wait to see if something comes along to derail the ACA, they must realize it’s not going anywhere at this time. ●
Ross Farro is a principal at Benefits Resource Group. Reach him at (216) 393-1820 or email@example.com.
Insights Employee Benefits is brought to you by Benefits Resource Group
Few challenges are thornier for family business owners than preparing for a transition of ownership. It’s a time for facing tough choices about the company’s future leaders and how the new owner will finance the transfer.
“About 70 percent of family-owned businesses will change hands over the next 10 years as the baby boomers retire,” says Krista Dobronos, senior vice president and Akron market leader for Westfield Bank. “Unfortunately, too many business owners have not planned sufficiently for this transition.”
At a minimum, this planning process should begin three years before the targeted ownership shift, Dobronos says, though five years in advance is ideal.
Smart Business spoke with Dobronos about transitioning family business ownership.
What elements should be included when planning an ownership transition?
About half of all family businesses don’t have any kind of succession plan on paper. The starting point should always be identifying who will take ownership of the business, whether it’s a key employee, a family member or an outsider.
A business owner should also consider to what degree they want to remain involved in the business. Do they want to remain an investor in the business or get out entirely? They also need to consider the best option for financing the ownership transition.
Exit planning isn’t only about the owner’s retirement. Ownership transitions can also be triggered by divorce, disability, an extended illness or unforeseen death.
What are some of the best financial options for family business ownership shifts?
It all depends on the company, its industry and those who will take over the company.
Some buyers may wish to pursue a traditional bank loan for the company, which is usually a seven-year term loan using a 10-year repayment schedule. The buyer of the business can also take out an individual loan that is guaranteed by the company.
When there is a gap between the purchase price of the company and the value of collateral to back a bank loan, the buyer may need to secure gap financing. Mezzanine financing, for example, is becoming increasingly popular, and usually takes the form of subordinated debt or an equity investment like preferred stock. The seller can also provide financing referred to as a ‘seller note’ for the buyer to cover that gap over a period of time.
What about transitioning ownership to a company’s employees?
An employee stock ownership plan (ESOP) can successfully finance an owner’s exit strategy, but it requires a longer planning process than other financing options.
An ESOP is a way that an owner can transition shares of the business to the company’s employees at a lower after-tax cost, providing employees an opportunity to build wealth.
How can business owners take emotion out of the equation when planning?
It’s important to make a decision that’s based not on emotions but on the sustainability of the business long term.
This is one of the reasons it’s so important to have trusted advisers you can turn to. Sit down with your attorney, banker, accountant, financial adviser and other professionals you trust to help you develop a sound perpetuation plan.
What do banks look for when they consider backing such an ownership transition?
With regard to the company, banks want to ensure there’s adequate cash flow to service debt related to the ownership change. Banks look at the industry the company operates in and how market forces might impact it in the future. In the new owner, banks want to see a track record of experience with that company or industry.
When considering supporting an ownership transition, banks spend time in the company’s facility or office to see them in action, observe the approach to staffing and understand their clients. This interview process is critically important for both sides. It’s like a courtship — the business owner should feel as comfortable with their banker as he or she is with them. ●
Krista Dobronos is senior vice president and Akron market leader at Westfield Bank. Reach her at (330) 668-6420 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by Westfield Bank
The lifeblood of business growth is innovation — but knowing this is the easy part. It’s a whole other ballgame to actually drive innovation within your organization on a consistent basis.
Your company could suffer if you’re the only one who comes up with the next big idea. Smart leaders build organizations that think for themselves with the right people and channels to spark ideas.
In order to move your organization to the next level, here’s some tips from Pittsburgh business leaders who drew on their teams’ full potential to find new ways to enhance processes, procedures and products.
1. Use internal and external channels
Nicholas DeIuliis, president of Consol Energy Inc., looks inside and outside his industry to bring the best innovation to the forefront of the company’s operations.
Consol Energy Inc. is a more than $6 billion, publicly-owned producer of coal and natural gas and one of the leading diversified energy companies in the U.S. DeIuliis and Consol have been focused on new technologies, new energies and, above all else, staying one of the leading producers in its region.
“There are two broad groups I look to over time for help and insight,” DeIuliis says. “One is the management team that we work with and around. They’re the best and brightest in the industry. Getting that comfort level and that trust level with the exchange of ideas and thoughts as time goes on is the lifeblood of any successful organization.”
The other group DeIuliis looks at is almost the mirror image of his leadership team. He looks toward entities and individuals with insights and experiences outside the industries Consol works within.
“It’s amazing how many already established processes, technologies and concepts are out there in entirely different industries that are being viewed as innovations and ground-breakers with the coal, natural gas and fossil fuel industry that we operate in,” he says.
“Every time we tend to look outside our box and outside our industries, we always come away with an injection of innovation that keeps us going.”
2. Focus your R&D
Bill Byham, chairman and CEO of Development Dimensions International Inc., places so much energy into the company’s research and development the problem isn’t a lack of good ideas, but more ideas than he knows what to do with.
So, the DDI management team works to narrow the options for the company, which is a leader in talent management, leadership development, hiring and talent acquisition.
“We have a series of meetings to cut them out and usually it’s not hard to get it down to eight,” Byham says. “But then to get it down to two or three new projects is tougher. R&D to us is brand new, game-changing products or a big change in what we’re doing.”
He looks at R&D as a 50/50 balance between customer suggestions and being able to develop products out in front of clients before they know they want it.
“We do a lot of customer surveys. We’re out with our customers a lot and they’ll say, ‘We want a training program on this.’” Byham says. “However, I think it was Steve Jobs who said, ‘If you only give your customers what they ask for, you’ll always be behind.’
“What I’ve always noticed is you have to be out in front of the customer because sometimes it takes us several years to develop these things.”
In addition, the R&D process isn’t just about finding the next new product, but also devoting effort to keeping well-performing, existing products up-to-date.
“The more products you have, the more it costs you to keep the old products good,” Byham says. “The ratio for us is around 60 to 70 percent old products and 30 to 40 percent new. You have to look at the sales of the old product. If you’re still going up with the old product, you will want to keep investing in it.”
3. Place a well-informed bet
Early in BodyMedia Inc.’s growth, the company struggled with a lack of focus, waiting for the market to tell it where the best place was. CEO Christine Robins, however, says that with an early-to-market technology, you have to create the need — and place a bet.
“If you’re running a company, you’re making decisions every day that have risk,” Robins says. “But if you’re running a smaller company, you’ve got to place a bet and it’s got to be a focused and well-informed bet. Then you have to go with it and be willing to listen to the reactions of people and figure out how to be a continual learner.
“You have to get a product or service built that satisfies your hypothesis of the market and who you’re going after, build your messaging and get it to market to get real feedback. You can iterate in an office and give your opinions until you’re blue in the face, but if you don’t put it out in the real world and it doesn’t sell, it doesn’t matter what you think.”
But it wasn’t just a clear focus for the product that launched BodyMedia into growth mode. Once the company turned to the consumer market, it had to turn its attention toward making the product more functional and attractive in terms of design. This ultimately increased sales volumes and led to San Francisco-based Jawbone acquiring the company in 2013.
4. Watch marketplace trends
Flemming Bjøernslev, president and CEO of Lanxess Corp., has found that the company’s production and product base is extremely quick with regard to innovation, technology and the right ideas to make new products that will propel the company.
He couldn’t decide where to focus the company moving forward, however, without listening to what was happening globally.
“First, you have to listen to your customers,” he says. “Secondly, make sure that you assess the entire value chain. You want to make sure that you reach out and listen to the customers of your customers. You want to make sure that you’re integrated in the right manner in order to cost-effectively and profit-effectively cater your products to the market.
“You have to make sure that you read the signs of your time, meaning the trends in the marketplace. You have to live in a global world. Today, it would be very risky to only focus on the U.S. or North American markets.”
5. Get the right talent
Fred Potthoff, co-founder and co-owner of Kroff Inc. attributes the company’s success — more than 80 employees in eight different businesses under the Kroff name with annual revenue of more than $50 million — to finding the right talent.
In fact, each of the leading water and wastewater treatment and recycling services company’s businesses started with ideas from sales associates.
“Aside from the original company, my partner and I didn’t come up with any of the other ideas,” Potthoff says. “It was people in our organization coming to us, and us listening to them and running with that idea.”
When Potthoff interviews candidates, he is interested in trying to spark that kind of enthusiasm and interest in the company.
“It doesn’t mean that everybody who comes here is going to run their own company, but it’s part of our culture,” he says. “People who fit in well here think that way and look for opportunities.”
And one way to encourage those true difference makers is to do a good job of listening to ideas.
“It’s one thing to give lip service to somebody, but if somebody comes to you with a good, creative idea, you can’t summarily dismiss it because maybe you tried it before or it seems a little harebrained,” Potthoff says. “You have to be willing to listen and trust the people, and if you think it’s a great idea, be willing to move and invest in it. When you do that, the culture responds to it.”
6. Leverage the region’s strengths
Charles Bunch, chairman and CEO of PPG Industries Inc., says the founders of Pittsburgh Plate Glass were attracted to the Pittsburgh region because of the coal supply needed as an energy source, the sand and mineral resources, and the river transportation system that were critical for the manufacturing and sales of those first plate glass products.
Today, the region has different strengths to offer.
The Pittsburgh region has some of the best educational institutions and hospital systems in the country, and as a result, research and development is more than $3 billion of the local economy, Bunch says.
“This is clearly a home for innovation here in the Pittsburgh region,” he says. “Big business provides technology, innovation and support to many of these smaller businesses, leading to a healthier overall ecology for growth. And now we’re creating that environment here in our region.”
Organizations like the Allegheny Conference, which are dedicated to improving economic growth, are in a unique position to build on these strengths for the betterment of the region.
Bunch says they can help employers by marketing the region globally and supporting existing business with venture capital funds to support the success of entrepreneurs and startup companies.
7. Break assumptions
MARC USA, a full-service advertising firm, has a history of doing things differently and bringing innovation to the industry. Behind Michele Fabrizi, president and CEO, the company even created an off-the-wall word to describe its unique capabilities.
“We’re using breakthrough research techniques and new technologies to drive innovation every day,” Fabrizi says.
“At MARC we say what we do is a word we made up because there is no word for what we do. It’s called ‘wezog’ and it’s how we think. It’s what we expect from our people. It’s a critical component of our long-term client relationships. It means doing things the way they haven’t been done before — thinking outside the box.”
The firm builds successful brands and drives sales through its creativity, insights and technology.
“It’s really about not doing things the way they’ve been done before, being highly collaborative with clients and finding ideas to break assumptions and challenge conventions,” Fabrizi says. “This is the kind of thinking that really helps brands strive in good times and in bad times.” ●
A mathematical approach: RMU professors built predictive modeling tools to help place natural gas stationsWritten by SBN Staff
It’s a moment of panic for drivers: You suddenly notice the warning light on your fuel gauge, but you don’t know when it came on or how close you are to the nearest gas station.
Now, imagine you drive a compressed or liquefied natural gas-powered vehicle. The Pittsburgh region, for example, has only five natural gas fueling stations. That scarcity is a barrier to more people adopting cleaner, more fuel-efficient natural gas vehicles that could also reduce dependence on foreign oil.
Three professors at Robert Morris University have developed a mathematical model that determines the optimal locations for natural gas fueling stations in Pittsburgh, based on existing traffic flow and traffic density. The paper, authored by Tony Kerzmann, assistant professor of mechanical engineering; Gavin Buxton, associate professor of physics; and Jonathan Preisser, assistant professor of mathematics, predicts the optimal locations for up to 128 fueling stations in Pittsburgh. The paper is being published in the journal Sustainable Energy Technology and Assessments.
A step toward energy independence
According to the U.S. Department of Energy’s Alternative Fuels Data Center, 14.8 million natural gas vehicles operate worldwide but only 112,000, including buses and trucks, operate in the United States.
Yet as the RMU professors note in their paper, while the U.S. imports 45 percent of its total petroleum consumption, the nation produces nearly 90 percent of the natural gas it consumes.
“A transportation sector dominated by natural gas vehicles would provide a huge step toward energy independence, but this is not the only advantage of natural gas vehicles,” the authors write. “Natural gas vehicles significantly lower carbon monoxide, nitrogen oxide, non-methane hydrocarbon, particulate matter and greenhouse gas emissions.”
Taking a look at the model
As a first pass, the authors considered the total vehicle miles traveled through each location as the numerical variable with which to optimize the distribution of natural gas fueling stations. The fueling stations are treated in the model as wandering around, trying to find the regions with the higher numerical variable.
The computer model finds the optimum locations for a large number of natural gas fueling stations simultaneously, while penalizing the overlapping of natural fueling station locations — fueling stations that are close enough to one another that potential customers will be divided, and use both.
However, the numerical variable used to optimize the distribution of natural gas fueling stations is at present too crude. The authors, therefore, are looking at the socioeconomic factors that might make a given location a sound investment for placing a natural gas fueling station.
“Say you are BP and you wanted to change some of your existing gas stations to supply natural gas. Our computer program could tell you where to distribute the natural gas stations that would make the most sense, that would increase the likelihood of customers switching over to natural gas vehicles,” Buxton says.
The typical customer of a natural gas-powered vehicle might prefer to see natural gas fueling stations near his or her neighborhood, where he or she is likely to be refueling his or her vehicle, than in areas of high vehicle traffic. Therefore, while vehicle miles traveled through a given location may be an important variable, it is not the only variable to consider.
The number of residents in a given neighborhood might influence the decision of where to place a natural gas fueling station, along with the average household income — with customers from more affluent neighborhoods being more likely to purchase a new vehicle.
Furthermore, the typical political persuasion within a neighborhood might also influence the customers’ likelihood to purchase a natural gas-powered vehicle. For example, might it be possible to consider the type of customers that are more likely to buy a more environmentally-friendly vehicle, or a vehicle that reduces our dependence on foreign fuel?
The presence of existing gasoline fueling stations that could be converted to also provide natural gas refueling capabilities would be another influencing factor. For example, currently no gas stations are located in downtown Pittsburgh, making the Golden Triangle an unlikely destination for natural gas fueling stations.
However, it’s important to remember that ultimately a robust network of natural gas fueling stations could ease the transition to even cleaner hydrogen fuels. The infrastructure that we invest in now to transition to natural gas-powered vehicles is the same infrastructure required to store and transport hydrogen for hydrogen-fueled vehicles. ●
Natural gas basics
Natural gas is an odorless, nontoxic, gaseous mixture of hydrocarbons — predominantly methane. Because of the gaseous nature of this fuel, when stored onboard a vehicle, it must be in either a compressed gaseous (CNG) or liquefied (LNG) state. Both CNG and LNG are clean burning, domestically produced, relatively low priced and widely available for fuel vehicles.
› There are three types of natural gas vehicles:
- Dedicated vehicles are designed to run only on natural gas.
- Bi-fuel vehicles have two separate fueling systems that enable them to run on either natural gas or gasoline.
- Dual-fuel vehicles, traditionally limited to heavy-duty applications, have fuel systems that run on natural gas and use diesel fuel for ignition assistance
› Natural gas accounts for about a quarter of the energy used in the United States.
› About one-third goes to residential and commercial uses, such as heating and cooking; one-third to industrial uses; and one-third to electric power production.
› Only about one-tenth of 1 percent is used for transportation fuel.
Source: Alternative Fuels Data Center, part of the U.S. Department of Energy’s Clean Cities program
An army of volunteers: Katie Carter built a strong team with passionate and engaged partners at Komen ColumbusWritten by Jayne Gest
Katie Carter, executive director of the Columbus Affiliate of Susan G. Komen for the Cure, hears stories all the time from volunteers about how they or someone in their lives have been touched by breast cancer. But one in particular sticks out.
A Columbus-area woman with young children was struggling with her stage IV breast cancer, undergoing chemotherapy and radiation. She received a drug that was developed in part through the donations of Susan G. Komen for the Cure.
“She’s doing well now,” Carter says, “but when you’re talking about a drug that Komen was a part of — that saves someone’s life and continues to make them live longer — that’s what it is really about.”
Susan G. Komen for the Cure, which seeks to help find a cure for breast cancer, is the largest non-government funder of breast cancer research in the world, having donated $58 million to research last year.
“We’re here to save lives, but we’re also making an impact from a local level,” she says.
Komen has been involved, at least in some way, in every one of the breakthrough cancer treatment drugs, according to Carter.
“Again, there are lots of collaborations, so you need the researchers, and you need the pharmacy to create it and mass produce it and get it back into the hands of the patients, but it’s a fact that everyone who was a part of that breakthrough helped save her life. And we had a small part in that.
“That’s what really matters, and the impact we make every day in the lives of so many that we don’t hear stories about. We know that we’re continuing to do great work, and we do make a difference.
“But we need help,” she says. “We need to continue to make that help through our community and continue to raise more money, so we can give more to research, and we can give more to our local programming to continue that.”
Such goals and the many volunteers at Komen Columbus helped the affiliate win the Affiliate of the Year award for 2013 from the national organization.
The affiliate strived to diversify funding, increase awareness and expand outreach communication activities to be visible throughout the year. Through the collaboration with corporate sponsors, community support and dedicated volunteers, Komen Columbus was able to fund 20 breast health programs in Central Ohio and invest its 20 millionth dollar toward the organization’s mission — to save lives and end breast cancer.
Here’s how Carter and her staff manage 1,000 volunteers as a team and engage them on the mission of one of the most widely known brands in its field.
Getting in position
One of the keys to keeping a workforce engaged is finding an opportunity for employees to exercise their talents. “Do the work you love, and love the work you do.” is more than an aphorism — it’s the attitude the employees at a successful organization exhibit.
Likewise, Carter finds matching volunteers with a role that makes the best use of his or her aptitudes leads to successful outcomes.
“As long as you place everyone in the right position and in the right seat, you’re going to be successful,” Carter says.
The Columbus affiliate has new people coming in all the time who want to be involved. Carter says they don’t just say, “Great, thanks for joining. Here’s a job for you.”
If they aren’t in the right position, the volunteer might get bored or lose interest.
Instead, a Komen Columbus staff member interviews the volunteer, a procedure that is almost like a job interview, to get an understanding of his or hers passion and why the person is interested in volunteering. Finding out the story is the first step.
“Usually the volunteer has a story — my mom was diagnosed or my aunt or my grandmother or my wife, or I myself am a survivor,” Carter says. “And they say, ‘I just want to give back,’
“Anytime you have a volunteer, they have to be engaged in your mission, and believe in it and entrust in it, and know that they are there to help,” Carter says.
The second matter is asking what the person has done, and finding out about his or her background and interests.
“I think we all know that whether you’re in a job or volunteering, you have to love what you do. And if you don’t, then it’s very hard to motivate someone,” Carter says.
“You want to sit down and ask the right questions, and make sure that it’s a good fit for the organization and that it’s a good fit for that volunteer.”
Although communication skills are helpful because there are a lot of jobs where volunteers interact with other people, there are other ways to make an impact, Carter says. Whatever roles they fill, volunteers, staff members, board members and corporate partners know the strength of the organization’s mission.
Keeping the engagement
The mission and vision statements of a company, when used properly, guide an organization to inspire employees to reach its goals.
But how you maintain inspiration in any organization, for-profit or not-for-profit, where burnout is a concern, may be a large factor in your success.
Susan G. Komen for the Cure allows people to help in many ways, whether by donating money, participating in events or donating their time and talents to make the organization grow and be what it is today, Carter says.
That flexibility keeps the nonprofit strong — as long as it stays true to its vision of a breast cancer-free world.
The affiliate works with volunteers’ schedules, and seeks to let them know that whatever they can give helps.
“As organizations grow, people come and go, and they serve their time. But they are still always connected by it,” Carter says.
“And once you leave, you don’t really leave. It’s one of those things where you’re always connected by Komen or breast cancer,” she says. “So we always say that even though people maybe don’t stay with us every day, they are still with us in spirit, and support the organization.”
For example, the Columbus affiliate’s founders still come to the annual race and are engaged with overall community support, even though they may not be involved with day-to-day operations.
Carter says it’s just like anything else, whether it’s a job or an organization, you’re going to have turnover in terms of people coming and going. As others get involved, however, new ideas and innovation can come out of it.
“That’s OK with us as long as we know that we always have a core volunteer base, as our go-to,” she says. “Then as people move on, they get replaced and that’s OK. It’s good to have change and get others involved.”
Stay true to your mission
There are always potential challenges facing an organization. They can range from financial woes to straying away from the mission. But once you notice a growing challenge, it’s time to execute your response.
“I think everybody always has challenges,” Carter says. “I think you have to adapt, and I think that’s the biggest thing. You have to know why things are changing, whether it’s good or bad.”
The next step is to take an introspective look at the situation.
“Evaluate where you’re at and what needs to happen to make those changes, because in any organization, whether it’s nonprofit or business, things do change,” Carter says. “Whether it’s through financial crisis, the economy has issues, or there are changes in laws, or there are just changes in how people give — you have to adapt.
“Make sure that your vision and your mission are true. It’s the same vision, but the way we’re going to adapt is we’re just going to do it a little differently. But our vision stays the same, and we just adapt and make those changes that we need to make to continue that vision and make sure it goes forward.”
In any organization you are going to have times that are difficult or challenging.
“You just have to make important decisions that go toward that vision,” Carter says. “And I would hope that our organization shows that. We are great stewards of our funds, and we try to continue to say that to the public, and to our sponsors and to everyone that we serve. We do it the right way, and make sure that it goes right to the mission, which is research as well as providing direct service and funding that money here to keep it local.” ●
- Matching the right person with the right job allows you to succeed.
- Be flexible, and know that new ideas can come out of change.
- Adapt, but stay true to your mission.
The Carter File:
Name: Katie Carter
Title: Executive director
Company: Columbus Affiliate of Susan G. Komen for the Cure
Education: Undergraduate degree in psychology from Capital University, and a master’s degree in public administration from Ohio University.
What was your first job and what did you learn from it? I worked at an IGA grocery store. When you’re young, you’re happy to have a job and finally have your own money, but as you grow you realize those first jobs were stepping-stones that added to the experience of your life. One of the great things about it was interacting with people.
I think that’s what I love about my job now and what I’ve always loved about jobs — the interaction with individuals, whether it’s employees, volunteers or corporate partners.
From every job I’ve ever had, one of the most important takeaways has been treating people with respect.
Who do you admire in the business world? I’ve been surrounded by great board members in our community, and I think from each and every one of them you learn something different. Being here 13 years, I’ve been engaged with probably a few hundred people. So, I would probably have to say they’ve been a big influence on my life — some more than others — but I think you have certain people who you’ve taken more from. They’ve made me grow as a person. How do you repay that? It’s really hard to.
What’s the best advice you’ve ever received? The biggest advice that I’ve always tried to emulate is to just treat others how you want to be treated; work hard and good things will happen. It’s simple but true.
What’s your definition of success? I think for me, success is if you’re looking around the room, knowing that you’ve got the right people in the right place, and they support you every day. You love working with them, and they love working with you for one common goal — and that is to end breast cancer. It’s not just one person. It’s thousands of people that make it all possible.
Learn more about Komen Columbus at:
How to reach: Columbus Affiliate of Susan G. Komen for the Cure, (614) 297-8155 or www.komencolumbus.org