Supply chain events are increasingly showing up in business news, whether it’s regarding product shortages that cause customer dissatisfaction and lost opportunities for corporations, or breaches of laws or decency in the supply chain, such as the use of child labor or unsafe labor conditions that damage brand reputation.
From an executive standpoint, risk management through the supply chain has become a mandate. Front page exposure creates tense board room discussions and often dramatic same-day fluctuations in share prices.
What changed? With the global economy came global markets and global suppliers. Second, third and fourth tier suppliers are often in different parts of the world, subject to different regulations, and multi-channel or omni-channel strategies add complexity. Each new supplier, each tier of suppliers and each tier of customers add a heightened level of risk and thus an increased requirement for risk and compliance management.
Corporations are simply not ready for this challenge. So what actions should supply chain executives take?
- First, incorporate a risk assessment into the corporate supply chain strategy that again has been aligned with corporate goals, as well as customer goals. A corporation should start by making a detailed map of the supply chain and identify points of vulnerability. It should examine the viability of each supplier and transit route, and align with current and future customer requirements.
- Second, be proactive. A risk assessment not only identifies that there is a risk, it also reviews the severity of the risk and identifies contingency plans. For instance, having a single source supplier may be seen as a significant risk, but having two suppliers that have no spare capacity or cannot substitute for each other may be equally risky.
Being proactive also means identifying early indicators that risk may in fact be turning into reality. Big data analysis and the ability to discern key indicators of future problems are important to getting a jumpstart on fast resolution.
- Third, know the environment. Regulations influence almost every step in the supply chain and require real-time monitoring and auditing. Since regulations vary from country to country, a company with globally dispersed suppliers faces the herculean task of monitoring supplier compliance across multiple regulations.
- Fourth, think broadly of what constitutes the supply chain. Data integrity and availability are certainly part of the supply chain, as Apple realized recently when its servers overloaded with a release of a new operating system. Order sites, call centers, transportation networks, post-sales service, and reverse logistics are part of the supply chain.
- Fifth, build a corporate culture that is attuned to risk responsiveness. For a high-profile, public company, this means creating a culture of proactive risk management that extends to all stakeholders, internal and external. The board and CEO should communicate a clear message regarding the corporate policy on ethical issues.
Constant vigilance must be part of the corporate culture of risk detection and responsiveness. There will still be surprises, but early indicators and contingency plans will support fast mitigation.
Hannah Kain is the founder, president and CEO of ALOM, a leading global supply chain company headquartered in Fremont, Calif. For information, visit http://www.alom.com.
Throughout 2013, companies expanded and took calculated risks, but the government’s actions — and its gridlock — continue to impact business leaders.
“There’s a lot going on within our midmarket client base that’s allowed them to expand their businesses, but the vast majority of our clients aren’t taking big financial risks because of the continued uncertainties,” says Tullus Miller, partner in charge of the San Francisco office of the accounting and business consulting firm Moss Adams LLP. “I hear a number of businesses talk about these issues.”
Smart Business spoke with Miller about the continuing concerns of companies, and how to be ready for 2014.
What are the top business concerns you’re hearing from CEOs and COOs?
Generally, there’s uncertainty about the economy and increased regulations, as well as concerns about the Affordable Care Act (ACA) and health care costs. Many companies are facing higher health insurance premiums and co-pays. If health insurance costs continue to rise, or the tax burden is too great because the ACA may have unintended consequences, some might consider options like health insurance captives.
Despite concerns surrounding tax and potential interest rate increases, the continued rancor between Congress and the White House, and a sluggish economy, there has been growth. Mergers and acquisitions, new operations opening in China and South America, capital market deals, initial public offerings, debt restructuring and private equity deals all have transpired in 2013. Businesses are taking financial risks, but on a smaller scale.
Looking ahead, what actions should business leaders consider?
Business leaders should look for more efficient tax solutions or structuring, such as tax deferral options. Arranging the deferral doesn’t avoid the tax — it just defers it to a different period or amortizes it. Another example is a better use of tax credits such as the California enterprise zone program, which has been revamped for 2014 and beyond.
Taxes have motivated some companies to open operations in more efficient tax states, such as Nevada or Texas, although workforce and client proximity factor in.
Organizations also are working on profitability improvement during slow growth periods, which relies primarily on being as efficient as possible — for example, by increasing accounts receivable terms to improve cash flow or initiating technology enhancements.
As the baby boomer generation ages, there are wealth transfer solutions and succession scenarios to consider for 2014 and beyond, which can create more efficient tax positions for wealthy families. High net worth individuals are limited in the amount of money they can transfer without being taxed. Wealth transfer strategies need to be considered well in advance of an individual’s retirement or transition out of the business.
What will higher interest rates mean, and how can businesses prepare?
The Federal Reserve has been buying $85 billion in bonds per month in an effort to keep rates low. Once the Fed decides to slow and then cease the buying program, interest rates could increase quickly. Putting inflation aside, as rates go up, so does the cost of borrowing, increasing the cost of doing business and the cost of goods and services. Consumers may have less discretionary income because they’re paying more interest on credit cards, student loans or home loans, if those have a variable rate.
Recent economic reports suggest that rates should stay down for 2014, possibly going up in 2015. Many companies have or are working on fixing debt, terming it out over a long period. Then, when rates rise, it won’t adversely affect their cost of borrowing.
Planning is very industry specific, but those who are ready will be much better off. ●
If you were to assemble some of the world’s outstanding business leaders in one place and ask them their secret to sleeping well at night amid the pressures of running a successful business, you might think you’d collect the best tips to handling anxiety in the business world.
The truth is that top business leaders often don’t have a secret to reveal — they rely on the strength and confidence they’ve developed over the years.
At the EY World Entrepreneur Of The Year conference, held earlier this year in Monaco, EY Entrepreneur Of The Year country winners assembled to compete for the World Entrepreneur Of The Year title.
We took the opportunity to collect the thoughts of the world’s most accomplished entrepreneurs — innovators, futurists, turnaround specialists and problem solvers — about dealing with worries. ●
“There’s nothing that keeps me up at night. I sleep very well. The challenge we have as a company is to keep delivering the culture we have created and expand it, keep evolving at the speed our customers expect us to evolve and keep creating value for them as we have for the past 10 years.”
Entrepreneur Of The Year 2012 Argentina
“The main thing is to make sure that we are always looking for new, creative ideas that keep our business updated with new technology and creativity. The other thing is making sure we are working faster than before.”
Lorenzo Barrera Segovia
founder and CEO
Entrepreneur Of The Year 2012 Mexico
“Business has its highs and lows, because let’s face it, it’s not easy. It has its challenges. They asked Steve Jobs what was the most important thing in business and he said, ‘Passion.’ If you don’t have passion you would give up when things get difficult. We have so much passion and love for what we do that it becomes a part of our life.”
founder, president and CEO
Entrepreneur Of The Year 2012 United States
2013 World Entrepreneur Of The Year
“What if the stock market crashes? What if there is some unknown thing that happens? What if there’s another 9/11 type of situation? Companies need to carry on, but maybe they don’t need to do events. Maybe they cut back on entertainment and speakers. The worry is what happens if something happens that I can’t control.”
President and founder
SME Entertainment Group
“We are in recovering times. I feel very positive about the economy in general, but I’m still very worried about Europe. And while we are recovering, it’s still choppy and choppy times are times when there are more needs out there.”
Retired global chairman and CEO
"I guess there is a point in my life where I thought it is all about me, and I am going to be the guy that guides everything and controls everything. What I have learned is that the best thing that I have done for our business is learn to let go and learn to get people who are better equipped to manage specific areas, do their thing and not get in the way."
Dr. Alan Ulsifer
CEO, president and chair
Entrepreneur Of The Year 2012 Canada
“Nothing keeps me awake at night becase my work is solid.
My father married at 60 and my mother was 23. They had four children. Then he died, and we quickly had to start thinking about what to do. There was no money — nothing. We had to leave the little town we lived in because of violence there. Thanks to that, I am where I am right now because I still could be on the streets of my village selling tobacco. There is no wrong that can do good. That's what I have to teach people.”
founder and president
Entrepreneur Of The Year 2012 Colombia
The idea of driving aimlessly seems glamorous in movies and songs. In reality, few of us get in a car without knowing how to reach our destination. We’ve created smartphone apps, GPS devices and satellite mapping to make our trips as efficient as possible and to avoid what we know to be an inconvenient, expensive outcome — getting lost.
I bring up this idea because many companies using social media have inadvertently become lost drivers. They start using social platforms with the goal of reaching some number of likes, retweets or shares, but as they embark on their social media strategies, many experience a disconnect between the content they post, blog and tweet and their progress on measurable business goals. These companies are driving without a roadmap; they just don’t know it.
Sound familiar? If social media isn’t working for you, your social media approaches may be missing a fundamental component: an effective content strategy. Here are three ways a solid content strategy will enhance your company’s social media success.
A like is just a like
All social media engagement is not created equally. To be successful, the social media activity that you generate needs to support your marketing goals — whether you want to improve employee engagement, boost customer conversions or build interest in a new product.
Creating a content strategy before you engage in social media will help your business clarify the specific marketing goals you want to achieve through content, as well as what messages you need to communicate to reach those goals. This process will ensure you get the right likes, shares and retweets from social interactions.
Social is a vehicle
Social media is a vehicle for sharing compelling content with your audience, and it doesn’t work if you don’t know what issues, topics and trends your audience finds compelling. Part of developing a content strategy involves learning how those you are trying to reach want to be talked to. Where do they go for information? How much time do they spend online? What kind of content are they looking for from your industry?
By getting to know the interests and pain points of your audience (customers, employees, shareholders, etc.), you can develop tactics to reach your online audience more effectively, saving you time and enhancing your company’s social influence.
Relevant content is meaningful
Kings of social content don’t become that way by luck. They use strategic tactics to connect with their audience through the right channels at the right times. More importantly, they make these connections meaningful and memorable by posting and sharing strategic, relevant content that their audiences desire.
When you deliver social content that your audience members find valuable or interesting, they’ll reward you by sharing your content, engaging with your business and, ideally, helping to promote your reputation as a thought leader in your business or industry. A content strategy allows you to do that by providing a roadmap for what kinds of informative, helpful, educational or creative content you need to make meaningful interactions.
As a recent Huffington Post article put it, the golden rule of the web is clear: “To know us better is to sell us better.” Ultimately, being successful in the social media space means taking the time to map out what success looks like. In this sense, a solid content strategy is not only an important component of any social media strategy, it’s the key to driving the results your business wants.
Michael Marzec is chief strategy officer of Smart Business and SBN Interactive. Reach him at email@example.com or (440) 250-7078.
When Albert “Chainsaw Al” Dunlap was the CEO at Sunbeam in the late ’90s, he had a reputation for ruthlessness. Besides massively downsizing the company, he was also known to intimidate everyone around him and resort to yelling and fist pounding.
While extreme, Dunlap’s behavior is an example of the type of “dictator” leadership that used to be fairly common in the C-suite. Rules were rules, there were no exceptions for anything and people were just a line item on a budget. Need to cut thousands of jobs? Don’t think twice about it.
On the other end of the spectrum is the Christ-like leader. This leader focuses more on building people up rather than tearing them down. This type of leader understands that there are rules, but sometimes to do the right thing, the rules need to be broken. For example, during the economic downturn, some Christ-like leaders went well beyond what was called for to make sure laid-off employees were taken care of.
They made sure they had the use of office resources to look for a new job and did everything they could to lessen the hardships. They weren’t required to do this; it was just the right thing to do. They saw employees as human, not just numbers on a spreadsheet.
Does it cost money to take the more humane route with your leadership? Yes and no. From a short-term, bottom-line perspective, it probably does cost a few more dollars to help people through a hardship. But long term, it can pay dividends. By treating people with respect and doing the right thing, it helps eliminate animosity toward you and your company from both the ex-employees and current ones. Maybe there are some good employees who you wanted to keep, but couldn’t afford. By showing compassion, when the economy turned around, they were far more likely to consider coming back than if they had just been shown the door with little regard to their well-being.
And what happens when these ex-employees end up in key positions in companies that could be customers? Do you think an ex-employee who you mistreated is going to buy anything from you or recommend your company to someone? It’s a small world, and what goes around often comes around, so it’s always best to treat people as best you can.
You can lead like a dictator and still get results. But do the ends justify the means? Will you conquer all, only to find yourself alone with no friends, the equivalent of Ebenezer Scrooge in “A Christmas Carol?” Or will you have an epiphany and realize there’s a better way to do things?
During this holiday season, think about your leadership style and the long-term effect it has on people’s lives. If this exercise makes you uncomfortable, then maybe it’s time to change how you lead. ●
What would it take for a company to succeed if its leader could effectively do only one of the following: innovate, instigate or administrate? We all know that an innovator is the one who sees things that aren’t and asks why not? The instigator sees things that are and asks why? The administrator doesn’t necessarily ask profound questions but, instead, is dogged about crossing the “t’s,” dotting the “i’s” and making sure that whatever is supposed to happen happens.
Ideally, a top leader combines all three traits while being charismatic, intellectual, pragmatic and able to make decisions faster than a speeding bullet. Although some of us might fantasize that we are Superman or Superwoman, with a sense of exaggerated omnipotence, the bubble usually bursts when we’re confronted simultaneously with multiple situations that require the versatility of a Swiss army knife.
Business leaders come in all shapes and sizes with various skill sets and styles that are invaluable, depending on the priorities of a company at any given point in time.
Every business needs an innovator to differentiate the company. Without a unique something or other, there isn’t a compelling reason to exist. Once those special products or services that distinguish the business from others are discovered and in place, it takes an instigator to continuously re-examine and challenge every aspect of the business that leads to continued improvements, both functionally and economically. It also takes an administrator — someone who can keep all the balls in the air, ensuring that everyone in the organization is in sync and delivering the finished products as promised to keep customers coming back.
As politicians and pundits of all types have pounded into our heads in recent years, “It takes a village to raise a child.” All who practice the art and science of business have learned that, instead of a village, it takes a diverse team working together to make one plus one equal three.
On the ideal team, each member possesses different strengths, contributing to the greater good. The exceptional leader is best when he or she is an effective chef who knows how to mix the different skills together to create a winning recipe.
In many companies, however, leaders tend to surround themselves with clones who share similar abilities, interests and backgrounds. As an example, a manufacturer may have a management team comprised solely of engineers, or a marketing organization could have salespeople who came up through the ranks calling all the shots.
If everyone in an organization comes from the same mold, what tends to happen is, figuratively, one lies and the others swear to it. This builds to a crescendo of complacency and perpetual mediocrity.
There is a better way. Good leaders surround themselves with others who complement their capabilities, and savvy leaders select those with dramatically different backgrounds who will challenge their thinking because they’re not carbon copies of the boss. This opens new horizons, forges breakthroughs and leads to optimal daily performance.
Strange bedfellows can stimulate, nudge and keep each other moving toward the previously unexplored.
To have a sustainable and effective organization, you can’t have one type without all the others. While everyone on the team may not always agree, each player must always be committed to making the whole greater than the sum of the parts.
The single most important skill of the leader who has to pull all the pieces and parts together is to have the versatility of that Swiss army knife — selecting the precise tool to accomplish the objective at hand. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
More than 800 years ago, medieval philosopher Maimonides outlined eight levels of charity, the greatest of which was supporting an individual in such a way that he or she becomes independent. In Maimonides’ view, support was defined as a gift or loan, entering into a partnership or simply helping that person find employment.
Few things are more powerful than philanthropy — especially when its end goal is to better the lives of others. These days, philanthropy, and corporate philanthropy specifically, has assumed a broader role in society.
Today, companies give back more strategically than ever before. They align themselves with nonprofits that foster missions they believe in. The wealthiest people on the planet have even coordinated the Giving Pledge (www.givingpledge.org), where they’ve committed to dedicate the majority of their wealth to philanthropy.
At last count, more than 115 people had taken the pledge. Warren Buffett and Bill Gates may be the most prominent names on the list, but others include Spanx Founder Sara Blakely, Cavs Owner Dan Gilbert, Progressive’s Peter Lewis and Netflix Founder Reed Hastings.
Last month, one member, David Rubenstein, CEO and co-founder of The Carlyle Group, discussed the importance of philanthropy during a presentation at EY’s 2013 Strategic Growth Forum.
In his pledge letter, Rubenstein explains why: “I recognize to have any significant impact on an organization or cause, one must concentrate resources, and make transformative gifts — and to be involved in making certain those gifts actually transform in a positive way.”
One way Rubenstein is being transformative is through “Patriotic Philanthropy.” He has given $10 million to help restore President Thomas Jefferson’s Monticello home and underwrote renovations to the historic Washington Monument. Yet Rubenstein’s most noteworthy initiative is the whopping $23 million to acquire a rare copy of the Magna Carta, ensuring it remained in the United States. After its purchase, Rubenstein gifted it to the National Archives.
Not everyone has Rubenstein’s vast resources. But every organization and any individual can make their own impact.
In the workplace, for example, organizations that give back elevate their status perception-wise among competitors and peers. It doesn’t take much. But by being a company that cares, prospective employees want to work for you. For your existing team, deliberate and well-organized corporate philanthropy programs quickly take on a life of their own, becoming a rallying point.
Think strategically and get started by finding your cause. We all have them. They exist at our very core, forming the belief system we live by every day. So why shouldn’t our philanthropy follow that same course? Consider aligning your giving or volunteerism with something you personally believe in or care about; something that fits with what your company does or something that is close to your employees’ hearts.
Most important, get involved and just make a difference. It really comes down to that. One initiative that has always impressed me has been the annual CreateAthon event undertaken by WhiteSpace Creative, a member of the Pillar Award class of 2005. You can read a first-hand account of this year’s program here.
Being a good corporate citizen goes well beyond making good business sense. When you align yourself with causes you care about, whether big or small, you make a difference in someone’s life. And the bottom line is this: It is all of our duties to get involved. It’s no longer a question of if, but rather of what, when and how. ●
Dustin S. Klein is publisher and vice president of operations for Smart Business. Reach him at email@example.com or (440) 250-7026.
If your business has benefited from California enterprise zone credits, the next few months might shock your system.
AB 93, signed into law by Governor Jerry Brown on June 12, 2013, effectively eliminates the enterprise zone program. In its place, three new tax incentives will take effect beginning Jan. 1, 2014. Will these new incentives bring the same value to the California economy? Will your business lose benefits that it has come to rely upon, or will it find new benefits?
Smart Business spoke with Marcus Halluin, CPA, tax manager at Sensiba San Filippo LLP, to find out more about these incentives, what’s coming in 2014 and what businesses can expect moving forward.
What was the enterprise zone program and what did it do for businesses?
The enterprise zone program was a long-standing state incentive designed to encourage specific business activities in designated ‘economically depressed’ areas. The program provided lucrative hiring credits, sales tax credits, net interest deductions, business expense deductions and net operation loss deductions.
What new incentives does AB 93 create?
AB 93 creates a statewide sales tax exemption, which will be available for equipment purchases made by businesses engaged in manufacturing or biotechnology research and development. It will significantly modify and restrict eligibility for the hiring credit. AB 93 also creates a new investment tax credit based on a competitive application process.
How has the California sales tax exemption changed?
The new sales tax exemption created by AB 93 targets industries and activities rather than geographic areas. Specifically, the exemption will apply to manufacturers and biotechnology R&D companies. Qualifying businesses can exclude the first $200 million of eligible purchases per year from state sales and use tax. At least 50 percent of qualified purchases must be used in the process of manufacturing or R&D.
How will the hiring credit change in 2014?
Beginning in 2014, the hiring credit will be decidedly more restrictive and will apply only to the net increase in jobs. The expected effect of this change is significant. Many businesses that previously relied on hiring credits may no longer qualify or may see their benefits significantly reduced. The new law also makes changes to the definition of qualified jobs, including reducing the number of qualifying target employee groups and requiring hourly wages between $12 and $28 per hour.
What is the investment tax credit and how will it be administered?
The investment tax credit will be based on a competitive application process and will be awarded by a newly established California Competes Tax Credit Committee. Competitive criteria have been outlined and include the number of jobs created or retained, the compensation paid to employees, the total value of the investment made in the state, the level of unemployment in the area of proposed business locations and the overall economic impact in the state of the project or business. The Governor’s Office of Business and Economic Development will negotiate agreements with applying businesses, subject to approval by the committee.
What do California businesses need to know before these changes take effect?
Businesses need to understand that the game has changed. Just because your business qualified for credits in the past doesn’t mean it will in the future.
If you were relying on enterprise zone credits, you should sit down with your accountant or tax adviser and analyze the effects of the changes. Getting caught by surprise with an unexpected tax bill could have a negative long-term effect on your business.
The new incentives are certainly worth investigating. Manufacturers and R&D companies will likely qualify for new sales and use tax exemptions. And the investment tax credit could be very lucrative for businesses that qualify and participate in the application process. ●
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The Check 21 Act, passed in 2003, had a dramatic impact on businesses’ cash flow by allowing banks to send digital versions of checks — eliminating the need for physical copies. Similarly, important developments are on the horizon to further enhance payment capabilities, says Tom Hoffman, senior vice president and manager of the Treasury Management Services Division at Bridge Bank.
“We’re seeing a lot of start-up technology companies focused on creating better ways to process payments, and adapters to allow accounting systems to interact with bank services,” Hoffman says.
Smart Business spoke to Hoffman about methods to help manage cash flow and services that may be available in the future.
How can a business tell what treasury management services might be needed?
A good banking partner should conduct initial assessments when clients start working with the bank, and also meet with clients on a regular basis to review needs.
For example, a growing business wanted to see if any changes could impact its treasury management needs. It had acquired a health insurance business in Southern California that processes COBRA payments, and payments were being mailed to central accounting at the company’s headquarters in Northern California. That’s a slow process. The business was able to set up a remote deposit capture (RDC) scanner to process checks electronically. There also are fields in the RDC platform for record keeping — for a payment of $100, the insurance company is paid $95 and $5 is kept for processing. Deposits are now made immediately, which speeds up cash flow and improves the flow of transaction data to the accounting system.
It’s a good idea to meet with your bank’s treasury management adviser at least annually to review your account. Look over the fees you’re paying, determine whether the services are worth the cost and see if there are other services you could be using.
Do businesses often pay for services that aren’t utilized?
It happens all of the time. There might be a base charge for Automated Clearing House (ACH) service and no activity. Maybe the business thought it was necessary, not realizing that if you’re not the party originating the ACH transaction, you don’t need the service. That can be confusing to many people. One of the benefits of treasury management consultation is that your bank should catch these oversights and alert you to save your business money.
How can business owners benefit from new solutions on the horizon?
Many start-up technology companies are working on adapters to create better ways to use existing payment rails such as the check clearing system, ACH, ATMs, and debit and credit cards. If you’re overseas, you can use your ATM card at a bank in London; so, why can’t you send a payment to an international vendor through this network and have an immediate settlement?
Technically, it can be done, but there are a lot of issues — international transfers are done through the Office of Foreign Assets Control. However with such efficiency, those things will be addressed. It can take two to four days to send a wire transfer internationally. It would be attractive to deliver a system to settle that immediately.
In terms of treasury management, the next step is to integrate enterprise resource planning systems with banking services. That’s already happening at Fortune 500 companies. The future is finding technology to create adapters that will connect the company’s banking services with its accounting platform. Businesses will be able to evaluate cash needs and reconcile the accounting system on a daily basis, rather than waiting for paper statements. It’s just a matter of creating an interface with whatever accounting software is being used.
One start-up company has a platform to upload accounts payable — all of the invoices a business receives — so payments can be reviewed and approved via tablet. CFOs want the ability to see every invoice and approve payment, even when traveling.
We’re going to see a lot of innovation. It might not be as dynamic as a new payment system, just modifying the ways existing systems are used to make cash flow more streamlined and free up working capital. Check 21 was a good example of that, and the efficiency, economic and environmental gains were tremendous. ●
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Some companies can’t afford or simply don’t perceive the need for in-house legal counsel. However, many are seeing the benefits of using outside legal help regularly, rather than when a problem is at hand, says Enrique Marinez, a partner at Ropers Majeski Kohn & Bentley PC.
“Smaller and midsize businesses need to be proactive and preventative in addressing issues that could lead to litigation problems. The role of general counsel should be one of collaboration and proactive planning to address some of those eventualities before they become problems,” Marinez says.
Smart Business spoke with Marinez about how to best utilize outside counsel to provide a level of service that replicates having in-house expertise.
Why has the role of outside counsel changed?
There’s been a proliferation of the use of electronic media and technology, which brings additional challenges that not all companies have kept up with. One problem that’s prevalent now concerns the handling of electronic media — how to store backup tapes and how often backups should be run. Companies need to have polices and procedures in place to put holds on emails and electronic information when a claim or other circumstance arises.
Another problem area is dealing with employee complaints. You need to have policies to address complaints about the workplace environment — someone claims they’ve been sexually harassed or discriminated against because of age or race. There should be a procedure for how to investigate claims.
Other employment issues can range from someone not being paid proper overtime, providing for proper meal and rest breaks or items like smartphones. If you send employees work-related texts, should you be paying for the phone?
If you have policies and procedures to guide you through these issues, you can follow those when a problem arises rather than responding in the heat of the moment.
Can’t these policy needs be determined by meeting with counsel on a regular basis?
Exactly. Risk management should be part of every company’s business plan. Part of that is meeting with a legal professional who can guide them so they’ll be better positioned when a problem arises. That should be on the agenda at meetings.
Often, counsel attends board meetings or company leaders visit to address issues such as policies and procedures for handling complaints and other employment issues. Believe it or not, there are a lot of companies that do not have employee handbooks.
Meet with counsel on a quarterly basis to make sure risk management procedures are in place and to ensure you have proper liability insurance, including directors and officers, and employment liability coverage. Make it part of the business plan to discuss preventative measures, so you’re better able to address situations as opposed to being reactive.
Do companies just not think about using outside counsel that way, or is it that they don’t want the expense?
It’s a little of both. Some people think that you use a lawyer only when you have a problem. But much of the problem can be ameliorated on the back end when there are preventive measures taken upfront. And, yes, there is a cost, but it’s often much less than waiting until a problem requires litigation. For example, if you don’t change your car’s oil, then the engine blows out and you’re paying $3,000. That type of analogy fits exactly for the use of outside counsel.
Plus, establishing an ongoing relationship with a law firm provides additional benefits. Counsel has experience dealing with other companies and exposure to how they have addressed employment issues. For example, a multiservice firm deals in many different disciplines and can help with insurance issues, obligations in real estate contracts and things of that nature.
Outside counsel should be viewed as an extension of your company that can provide assistance similar to in-house. It’s unfortunate that many companies don’t have a dedicated attorney to work with them and only seek legal assistance when there is a problem. When you reactively act on the defensive, things do not go as well as they could. Address issues head-on before they become the subject of litigation. ●
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