When Michael Gregoire took over as chairman and CEO of Taleo Corp., he wanted to see better performance.
To do that, he knew the talent management software company couldn’t fall into a trap like competitors where the product cycle was three to seven years. Gregoire developed a technology tenet that focused on Taleo’s software-as-a-service model. The idea was that the software would offer one configuration for products, so as Taleo’s customers grew and desired customization, they wouldn’t need multiple versions of the product to meet their demands.
The concept has given Taleo many advantages. First, it makes it easier and faster for customers to benefit from Taleo’s product innovation. Second, it allows Taleo to constantly enhance its product line with help from customers. Those added advantages have led to profitability that helped Taleo weather the economic downturn.
Gregoire’s innovation has also led to aggressive investments that expanded the company’s product line to include solutions for managing employees. Also, Taleo rolled out a platform worldwide to tap into the industry’s largest collection of customers. The Talent Grid allows customers to drive innovation and growth by collaborating on best practices.
Taleo was busy in 2009. It delivered a suite of new products to the market, reached an all-time high for customer satisfaction, kept up customer renewals and drove growth in profits to stakeholders. Gregoire’s well-planned growth investments have allowed Taleo to become one of only a handful of on-demand businesses that return shareholder profit.
Plans for continual grow and innovation remain in the future. Gregoire developed a three-year plan that invests in the company’s growth along eight axes from product to operations and network. The idea is to place Taleo at the helm of the talent management market and, in turn, put talent management at the front of the company’s business agenda.
How to reach: Taleo Corp., (888) 836-3669 or www.taleo.com
At the age of 12, Pamela Hawley got her first glimpse of extreme poverty. The experience of seeing begging children while on a vacation in Mexico established her lifelong commitment to service through social entrepreneurship.
In 2002, after her first company VolunteerMarch took off, Hawley founded UniversalGivingTM, an Internet platform that provides giving and volunteering opportunities in more than 70 countries. The nonprofit organization allows visitors to pick an issue, such as education or the environment, and a region and matches them with volunteer and giving opportunities. Hawley’s UniversalGivingTM Corporate also manages companies’ strategy, operations and vetting of nongovernmental organizations to provide third-party security for international giving and volunteering.
UniversalGiving’s innovation lies in the adjustments it has made over the years to ensure security and quality experiences. The vetting process has increased from seven stages to more than 15. Basically, it’s a commitment to users that they can trust they’re giving to a good cause.
UniversalGiving offers corporate clients incremental levels of NGO vetting, beginning with financial reviews, a 501(c)≥ assessment and a review of terrorism activity, up to customized due-diligence of in-country standards.
Hawley, the company’s CEO, hopes to expand UniversalGiving’s partnerships through solutions-based journalism. The objective is to provide readers a link below the story that leads to related giving opportunities. It’s a model UniversalGiving hopes to expand beyond its partnerships with Christian Science Monitor and LinkTV.
With that, UniversalGiving is poised to expand its reach. The organization hopes to connect users to more than 100 countries by the second quarter of 2010 and is looking to increase the number of areas it covers. More than 10,000 volunteers have been matched since UniversalGiving’s founding.
How to reach: UniversalGivingTM, (415) 296-9193 or www.universalgiving.org
The original idea for PlaySpan Inc. came from Karl Mehta’s 12-year-old son, Arjun, who was an avid gamer in online multiplayer games. He had become one of the best players and his community members bought virtual goods and currencies from him in the game.
The need for a cross-game global commerce and payment platform for in-game digital goods was apparent, so Karl Mehta invested seed capital (after being rejected by 65 venture capitalists) to develop a core team to build a complete platform from the ground up.
After the platform was built and three major publishers agreed to use the platform, the VC situation reversed.
The game industry is very incestuous and is tough to break into, very much like the movie industry, and Mehta had no prior experience with gaming. The idea of allowing gamers to buy and sell their virtual goods in-game was very radical when it was pitched to game publishers.
The first year, there was huge resistance. It took two years of constantly pitching and demonstrating continuous progress when publishers started taking PlaySpan seriously. Today, every major game company executive knows PlaySpan and Mehta, its CEO.
He was the first person to envision a business model based on selling virtual items in the games between publisher to player and player to player. The business model is like Amazon, eBay and PayPal for virtual goods. It was the first company to build this model and is now recognized by industry players as the most innovative in the multibillion-dollar market.
The company is growing at more than 100 percent year over year and is doubling its employee base. There is strong organic growth as more developers, publishers and gamers use the company’s platform to complete transactions.
How to reach: PlaySpan Inc., (408) 617-9155 or www.playspan.com
Health care reform requires companies to implement near-term mandates and rethink long-term strategiesWritten by Leslie Stevens-Huffman
Although the newly passed health care reform bill exceeds 2,000 pages, employers still lack critical details and guidance to implement many of the unprecedented changes that will affect retired, active and future American workers. For many employers, simply complying and maintaining the status quo is not an option. A recent Towers Watson survey found that nearly three-fourths (71 percent) of employers believe health reform will increase the overall cost of health care services in the United States.
“This bill is a call to action for employers both tactically and strategically,” says Caty Furco, senior consultant and actuary for the health and group benefits practice at Towers Watson. “Employers should evaluate the role of health care within their total rewards strategy and consider long-term strategic changes amid the new regulations.”
Smart Business spoke with Furco about the call to action for employers following the passage of health care reform.
What makes health care implementation challenging?
Many mandates lack specificity and consequently preclude employers from making key decisions. For example, the 2014 pay or play mandate requires employers to provide health coverage for employees working 30 or more hours per week, but the qualification methodology is ambiguous. A government task force is working to fill in the bill’s missing details, but the additional clarity won’t reduce the amount of time and resources it will take to implement these changes. There’s certainly enough information for employers to begin assessing risks, develop a communications strategy and conduct a strategic benefits review so that they’re poised to act as additional details become available.
What should employers consider during strategic reviews?
Tactical decisions always flow from strategy, so this is an opportune time to revisit your company’s benefits philosophy by asking these questions.
- Should the company provide employee health coverage or benefits? What should our role be?
- How are employer-sponsored health benefits viewed internally and externally? How do they influence our market position and talent strategies?
- What is our return on investment for providing employee health care benefits?
- Should total rewards or benefit packages be rebalanced to offset rising health care costs?
What are the critical action items for 2010?
The 2010 regulations surround retiree plans, so employers must communicate coverage changes and implement new accounting rules, resulting from the elimination of the employer’s deduction for Medicare Part D drug coverage. The communications plan should also touch current employees, since many are apprehensive about reform and have heard that their health coverage won’t change. To avoid surprising them down the road, explain that the company is reviewing the law, even if you haven’t worked out all of the specifics. Finally, employers must prepare for 2011 changes, including a reporting mandate, which requires disclosure of the annual value of employee health coverage on W-2s.
Is 2011 a pivotal year?
Employers will definitely be impacted by 2011 mandates, including:
- Coverage extended to adult children up to age 26
- Elimination of lifetime health benefit caps with restricted annual limits
- Elimination of pre-existing exclusions for those 18 and younger
If your company offers retiree health coverage, be aware that 2011 begins a three-year initiative to lower provider reimbursements through Medicare Advantage plans. This could diminish provider participation and plan availability, ultimately forcing retirees into more costly plans. Employers will need to closely monitor renewals and the underlying assumptions used to develop 2011 premium rates.
Which of the remaining mandates will have the greatest impact on employers?
Major changes occur in 2014 and include: the introduction of the pay or play mandate and employee free-choice vouchers, automatic enrollment for employees, restrictions on coverage waiting periods and new reporting requirements. The wild card in 2014 involves new fees on health insurers, which seemingly will be passed along to purchasers in the form of higher premiums. The looming excise tax on high-cost group health plans beginning in 2018 requires employers to immediately forecast future increases and possibly devise a strategy to avoid the tax by altering plan designs. Every company’s situation is unique and their response to reform will vary. It is imperative to stay abreast of emerging guidance through regular visits to Web sites such as www.towerswatson.com/health-care-reform.
Are there opportunities for employers to mitigate future cost increases?
State-run insurance exchanges launch in 2014, which may entice employers in the long term to offer a stipend in lieu of company sponsored plans as a cost-control strategy. Insurance companies begin selling coverage across state boundaries beginning in 2016, which is expected to increase competition and lower premiums. Finally, the bill increases incentives for wellness programs, and recent studies have shown that participation in wellness programs reduces health care costs. Remember, the legality of the bill has been challenged and there will be two critical elections between now and 2018, so savvy employers will evaluate their options and be ready to act under a variety of scenarios.
Caty Furco is a senior consultant and actuary for the health and group benefits practice at Towers Watson and can be reached at (415) 733-4309 or email@example.com.
In 1995, when Barry Karlin acquired the initial facility that became CRC Health Corp., he did so with a passion to grow the organization and help people heal.
Over the past 15 years, he has grown the company which provides specialized behavioral health care treatments to patients, ranging from alcoholism and drug addiction to eating disorders and weight management issues through a variety of ways, from adding new programs and treatment tracks to simply increasing the number of patients treated. However, acquisitions have also played a key role in its growth. He’s done more than 20 acquisitions at CRC, and he now has more than 140 facilities across the country, which collectively generated $429.6 million in net revenue last year.
“We’ve slowed down dramatically the last couple of years, but we did an acquisition about two years ago,” the co-founder, chairman and CEO says. “We’re now back on the acquisition path right now. Acquisitions have always been a separate element of our growth path, and that will again be the case.”
With that kind of acquisition path, he knows exactly how to successfully complete one.
“When we do acquisitions, we’re looking for great people, a strong referral base and a good reputation,” Karlin says. “Then we add value around that.”
In order to make the best acquisitions, he does his due diligence, communicates the integration plan up front and tolerates cultural differences between facilities.Do your due diligence
Karlin says the first step in an acquisition process is to learn everything about what you are considering buying.
“Look at all the different facets of the organization,” he says. “You’ve got to analyze the clinical side does the organization provide good treatment, are they accredited, what is their history of accreditation? … You’ve got to dive deep into the marketing. How do they market? Do they market through salespeople, through the Internet, what’s their referral base? Do a deep dive into operations. On a day-to-day basis … understand their operation detail.”
But it’s not just about the business side. You also have to look at the people because you’re buying a management team, a referral base and a reputation, so do they run the place well? If Karlin doesn’t like the people in the organization, he won’t buy the company.
“Do they have a strong management team?” he says. “What are their holes, strengths and weaknesses? What about the financial side of the equation? What’s the growth potential?”
He also has to make sure that the company is a cultural fit, which is easier said than done.
“Everyone is going to say they have good values, and, of course, it’s easier to write down good values, but the trick is writing down values is one thing, but the question is, ‘Do you live those values?’” Karlin says. “Are those values reflected in everything you say and do on a day-by-day basis?”
So if one of your values is excellence, Karlin then wants to know if you are an excellent facility and how you strive toward excellence.
“I’ll ask the management team, if that’s one of your values, can you give me specific examples of how you actually try to be an excellent organization?” he says. “Give me some examples of how the value of excellence translates into specific things you do in the intake and admissions function or give me an example of how excellence translates into, let’s say, the maintenance function. Can they answer that question? … If they have examples, that’s a terrific sign to me. That’s an indicator that they are doing something to try to translate that value into daily activities.”
After looking at all of these elements, then you can have the right information to make an intelligent decision. If you don’t have experience doing these things, then Karlin suggests enlisting help.
“If you are a smaller company and you don’t have experience in doing acquisitions, you’d be well-served to bring in consultants who are,” he says. “You want to bring in accountants, lawyers, forensics experts.”
In addition to knowing what you’re buying, you have to have a good reason for buying. The why part often trips people up when it comes to acquisitions. Karlin has some tips for determining good and bad reasons for making deals.
“A good reason is, first of all, it offers significant growth potential above and beyond what you would otherwise have to the extent that it offers growth potential in an arena in which you don’t have that potential, it, of course, translates to strong financials,” he says.
Another good reason is if the acquisition would fill a big gap in your product offering. Or perhaps you need to diversify your product offerings more, and the acquisition would accomplish that goal. In all of these cases, they have to also make economic sense.
But on the other side, there are bad reasons for acquisitions, too.
“It’s incompatible culturally, it has a very different philosophy culturally, but hey, this is not too far from you, in the same state, you have some connections there, and you have the opportunity to buy it, and you buy it,” he says. “But there is no operational synergy or clinical synergy or financial synergy, but you’re buying it so you can have another one. That’s just your ego playing out.
“Another bad reason for buying it is because you’ve convinced yourself that you can save a ton of money and you really don’t prove that out ‘I now have two facilities, so I can cut my cost structure.’ You don’t prove it out, but you convince yourself you can do it, right? That’s not a good reason.”Communicate the blueprint
Even after Karlin has done all of his research and made sure that there’s a cultural fit, he then outlines all of the post-acquisition details about how he wants to improve the business before the deal is done.
“When you do your due diligence, a big part of that is developing a blueprint for what you’re going to do after the close, and it’s a great idea to do that in advance of the close so that everyone is on board … [and] everyone already knows what the plan is going forward so there’s no big surprises,” he says. “The worst thing you can do is go blasting in there after the close and implement all kinds of changes, which people don’t like. It’s guaranteed, of course, to hurt morale and antagonize people. It’s much better to be straightforward, upfront, open, honest in advance. … If they’re discussed in advance and there’s an openness about it, people almost always buy in.”
He sits down with the founder or owner and talks about the program’s strengths, weaknesses and how he’s going to work with the acquired party to improve the program.
“No matter how confident either party is that it’s going to work out fine, you want to have a very detailed discussion and talk about expectations post-close,” he says. “That’s the best thing you can do. And do not rationalize to yourself that it’s going to work out OK.”
In addition to detailing the changes to the company after the acquisition, you also want to do the same for the owner or leader’s role, too.
“Go through all expectations that you have for the founder after the dea l is done, and if you’re completely straightforward about that, a couple things will happen, and you’ll learn a great deal from their reaction,” he says. “They will learn a great deal from you because they’re now facing reality about what this thing actually means.”
The reaction can be mixed, but it will help you determine the best way forward. Sometimes the founder will decide he or she doesn’t want to work for a large organization so the founder decides that he will help you with the transition and then he’s done. Sometimes the founder gets nervous and questions whether he or she should do the deal because that person doesn’t want to lose control.
“They might just kill the deal,” he says. “You take some chance that you won’t get to buy what your heart is set on, but you’re much better off that way because if you go forward with the deal, things will go south, you’ll have a difficult time because that founder isn’t ready to make the change.”
Lastly, assuming the founder or owner understands everything and wants to stay on board, you also have to protect yourself and your larger company.
“It’s also important to have a mechanism agreed upon regarding the founder’s role and what would happen if things don’t work out,” Karlin says. “For example, if things don’t work out, you ultimately have to have the right to separate from the founder. If the founder doesn’t work out, you can’t have a situation where the founder has a right to stay on indefinitely or for an infinite period of time, so there has to be a mechanism whereby you have the right to separate from the founder.”Tolerate cultural differences
If your doctor tells you that you need to have an appendectomy, you’d likely ask him or her to refer a surgeon, and you would likely call that recommended surgeon. Upon talking to that surgeon, you learn that you could have your surgery at one of two hospitals. Hospital A is a little further from your home and you hear that the care there is OK but not great. Hospital B is closer to your home, and you hear that the care there is great, so you choose Hospital B to have your surgery at.
“Not for one second do you say to yourself, ‘Who’s the giant corporation headquartered in New York that actually owns Hospital B?’” Karlin says “That didn’t even occur to you. All you thought about is the quality of care. You were focused on the quality of treatment by the surgeon, and does this hospital provide good quality care?”
Because that’s typically the focus for most patients when deciding upon a health care facility, Karlin doesn’t look to make everything the same as the larger CRC organization after he does an acquisition.
“The important thing is don’t go in there and say, ‘Everything you learned, I want you to forget about we’re going to show you the right way to do things,’ because all you’ll do is you will destroy the very thing you paid for in the first place,” he says.
Instead, he says that CRC is accepting and embracing of cultural differences between facilities.
“What we don’t do is try to force every organization to have the same culture as the parent organization,” Karlin says. “We have honesty as an overall corporate culture, but we have a very high tolerance for nuances in culture, and that’s been crucial for us in acquisitions because people like to sell to us because they know that we’re not going to go blasting in there and try to shift the culture in a fundamental way. If the culture is completely different than ours and is incompatible, then we won’t buy in the first place.”
For example, Karlin says that some smaller facilities have more of a laissez-faire approach to things because that’s how the founders have been. In that situation, he would need to shift the culture a little bit to be more focused on accountability and responsibility, so he’ll put in place mechanisms for assuring true accountability in the staff. Another example is switching financial systems because all of the CRC facilities need to be on the same system.
On the other hand, perhaps a facility has a clinical approach that none of the other CRC facilities has taken, so it’s somewhat different, but it has proven effective. As long as it’s scientifically proven and meets his quality standards, he’s inclined to not mess with changing it.
“We might say, ‘Hey, it’s working, it’s helping people, we can see the outcomes, let’s leave it alone,’” he says. “Why change that? Why coerce them into changing what they do clinically that’s working well for their patients? There’s an example of an area that we have high tolerance. Now, if they’re doing some witch-doctor things, that’s different, but we wouldn’t buy them in the first place.”
Another example of tolerating differences comes in the name of the facility. While most leaders are quick to change the name of the acquired organization, Karlin takes the opposite approach and leaves the name as-is.
“I’m a huge believer in legacy,” he says. “ … Legacy is the quality; it’s the essence of the facility. You see, most facilities were founded by individuals, right? Not giant corporations. … The very essence of that facility is vested in the founders and has a lot to do with the culture.”
Instead, he takes a multibranding approach, so when you walk into the facility, in large letters on the wall, you’ll see the primary name of that business. But then in smaller letters underneath the original name, it will say, “A member of the CRC Health Group.” Karlin likens it to a car customer purchasing a Lexus.
“The brand you’re buying is Lexus, but you also know it’s ultimately owned by Toyota, so you get the benefit of both,” he says. “Same with us. The brand is the facility, which I preserve, but ultimately, there is a company called CRC behind that, which assures continuity and stability and assures that there are plenty of resources to make certain that that facility does things right.”
How to reach: CRC Health Group Inc., (877) 637-6237 or www.crchealth.com
What’s in a name? Quite a bit if you ask Daymond John, founder of clothing manufacturer FUBU and star of the hit TV show “Shark Tank.”
“Having a strong brand, whether corporate or personal, always creates a halo effect,” John says. “A lot of time, that’s the only thing that separates you from everybody else.”
Standing out from the pack was John’s intent when he named his nascent company FUBU, an acronym for “For Us, By Us” that conveyed the business’s original, largely African-American target market.
John has since stretched the FUBU brand to reach a broader market and expanded into entertainment-related products and services. Yet, he has always remained true to serving the company’s core customer.
“It always comes back to the mission statement and the base,” he says. “Like a building, if you have a weak base, the building will crumble. Whatever the identity and the product you’re building, you have to stay true to that first.”
John’s new book, “The Brand Within,” hit bookshelves in April. In it, he explains how branding relationships have become integrated with everything we do from buying products and services to determining which television shows we watch, what music we listen to and the food we eat.
Smart Business caught up to John, the 2003 Ernst & Young Entrepreneur Of The Year Award winner in the retail category of the New York City region, and discussed the importance of personal brands, how to nurture a company’s identity and why you better sum your identity up in three words.Q. How can a company benefit from having a strong brand?
In a tough time like this, when everybody is holding their purses and wallets very close, (what) they will end up spending the money on are the brands they are comfortable with because the brand is portrayed as something that gives them a comfort level.Q. Should CEOs view their brand identity as an asset that can be managed, nourished, invested in and leveraged?
A lot of people or companies try to chase the market. If you chase the market, then you’re behind the market. ... So you always have to stay true to your customer base and what you created, but you have to come up with innovative ways and take those leaps and bounds and chances to improve the brand you have.
I believe that every brand should be able to be spoken about in three words. Whether it’s BMW fine German engineering or any other company, you need to be able to wrap up your whole mission statement and identity in three words.Q. In your book, you detail how people are brands just as much as companies are brands. What does that say about the power of a personal brand?
A personal brand is actually more effective than a corporate brand because everything starts with a person. Think about it. If Steve Jobs gets sick, the brand itself, the stock, goes down 20 percent.
As a personal brand, you’re judged hundreds, thousands and, if you’re on television, millions of times a day. You’re selling every single action you take and every single word you speak. You’re selling yourself, and that is the brand you represent or own. That’s why that’s more important than anything else.Q. Are there warning signs you’re stretching your brand too far?
Yes. Once you put it out there in that space and you have to find creative ways to put it out there these days and people just don’t like it, support it or ... are appalled by it.
The days of focus groups ... are over because you have the Twitters of the world. These people don’t owe you anything. You’re trickling it out there and putting out test balloons and seeing what happens.
You can’t have thin skin. People fall in love with their brands and ideas and don’t want to listen to anyone else and hear that they do have an issue. ... Egos have taken down way too many companies.
How to reach: Daymond John, www.daymondjohn.com
As the regional winners from Ernst & Young’s Entrepreneur Of The Year Awards are announced later this month at awards recognition banquets across the U.S., it’s not too early to be thinking ahead for the CEO invitation-only Ernst & Young Strategic Growth Forum 2010, which will be held Nov. 10-14 in Palm Springs, Calif.
This program convenes more than 1,500 of the nation’s top CEOs, entrepreneurs, advisers, investors and other senior business leaders and is the country’s most prestigious gathering of high-growth, market-leading companies.
The forum delivers leading business advice designed to help entrepreneurs master strategies for company growth, discuss ideas on the transaction market and available capital, learn the critical success factors of mergers, acquisitions and IPOs, hear inspiring stories from game-changing entrepreneurs, and meet potential customers, investors, partners, acquisition targets and buyers.
It concludes with the 24th national Ernst & Young Entrepreneur Of The Year® awards, the largest gathering of entrepreneurs in America, hosted by Jay Leno.
This year’s speaker lineup includes a who’s who of business, such as:
- Muhtar Kent, chairman and CEO, The Coca-Cola Co.
- A.G. Lafley, former chairman of the board, president and CEO, Procter & Gamble
- Deepak Chopra, co-founder, The Chopra Center for Wellbeing
- Tom Adams, CEO, Rosetta Stone
- Arthur Levitt, former chairman of the United States Securities and Exchange Commission
- Jeffrey Joerres, chairman and CEO, Manpower Inc.
- Rob Enslin, president, SAP North America
- Christina Lampe-Onnerud, founder and CEO, Boston-Power Inc.
- Debi Fine, president and CEO, Direct Brands
- Greg Norman, professional golfer and entrepreneur
Learn more at www.ey.com/us/strategicgrowthforum.
After years of cost shifting, pay cuts and layoffs, employees have accepted their new roles as chief overseers of their own careers and financial security, according to a Towers Watson study exploring the post-recession attitudes of employees. But the burden of these added responsibilities on top of a stressful work environment is taking an emotional toll as employees doubt their ability to handle their expanding responsibilities.
Executives should not ignore employee worries or overlook their unfulfilled expectations. Instead, company leaders should take steps to help employees be successful in the context of an evolving employment relationship.
“In reality, the cost-saving measures enacted by executives during the recession are not cost-free decisions because they add stress to employees,” says Tom Davenport, senior consultant with Towers Watson. “These changes have drained employee confidence with potentially damaging consequences.”
Smart Business spoke with Davenport about the threats to employee engagement and why executives should intercede before productivity suffers.
What did the study reveal about employee attitudes?
In our survey of 20,000 workers in midsize to large companies, employees expressed angst about their futures. They’re worried about saving enough money for retirement as companies retreat from defined benefit pension plans, and about affording health care coverage as employers shift costs. They crave an emotional connection with their leaders and support for their careers, yet they sense a growing gap between their expectations and leader behavior.
Employees also said that executives often bend to the demands of shareholders and Wall Street analysts at their expense. In fact, employees say they rank third on executives’ list of priorities after shareholders and customers.
Overall confidence in senior leadership was disturbingly low with only 50 percent of employees reporting a favorable view. It’s time for executives to rebuild trust and help employees manage their diverse responsibilities in order to bolster their confidence.
How can employers boost employee morale?
Start by selecting the right managers and empowering them to make a difference. Executives often believe that line managers need more technical expertise than relational skills because they wear many hats. They think middle managers create additional expense and impede the lines of communication. In reality, supervisors and middle managers play a vital role in implementing major initiatives like cost reductions. They can communicate the reasons for change and take action to reduce stress in the work environment. Promote managers who possess a full range of competencies, and don’t overload line managers so they can be thoughtful leaders who spend quality time with direct reports.
Has the role of human resources changed?
HR must enable employee self-reliance by providing the tools and resources they need to survive under post-recessionary employment relationships. This new role requires an HR organization that can adapt swiftly to change, one that uses a holistic approach and addresses employee needs via a comprehensive plan. Traditionally, HR has been structured in functional silos, which leads to disparate data collection and programs. When you break down the internal barriers, HR can respond to signs of dwindling employee engagement, like increasing absenteeism or declining productivity, with coordinated and connected wellness programs, incentives or training.
While many companies offer self-service financial management tools, employees also need stress management skills, health management resources and career planning strategies to be fully self-sufficient. This is the perfect time to connect with employees and offer new services to boost their confidence.
How can employers use compensation, given smaller annual raises?
Many companies are moving to larger performance-based incentives and smaller annual raises, but it is still possible to raise confidence and limit turnover by designing a flexible compensation system that rewards high achievers and affords every employee the opportunity to increase income. This is treacherous territory, however, because competitive base pay is still the primary attractor of new talent according to our survey, and 61 percent of employees said that making more money was very important after several years of limited promotional opportunities and small raises. The stakes are high, so HR needs to take the time to get it right.
How can executives rekindle employee trust and sustain engagement?
Now that the economy has improved, executives need to focus internally rather than externally; in fact, 44 percent of surveyed employees said that senior leaders should be more visible and were conspicuously absent during the recession. Simply spending time with employees and giving them a chance to voice their concerns can be therapeutic after the prolonged downturn. Leaders are expected to care about the well-being of others, so if morale seems low, it may be time to take a stand and declare an end to cost cutting. Some CEOs have recently declared their companies fat-free, such as Mark Hurd, president and CEO of Hewlett Packard. His bold actions received kudos from his employees. Rebuilding employee confidence takes time and a plan, but the key is trustworthy leaders who keep their promises and advocate for employees.
Tom Davenport is a senior consultant with Towers Watson. Reach him at (415) 836-1127 or firstname.lastname@example.org.
“My life was really an endless travel from one recruitment to another,” he says. “I traveled all across the world. I did all of the recruitment of the company well into 2006. The reason I did that was I wanted to make sure that the people joining initially, those were the people I would know really well, the people that I knew would be the future managers and the role models and carrying on the culture and the company values as the company was growing. I think that has been an extremely invaluable investment, and I could see that clearly as the company was growing.”
While a lot of new businesses may focus solely on the business plan and meeting financial targets, Lyseggen instead chose to focus primarily on the people side of his business, which delivers business solutions based on search engine technology, cloud computing and biometrics.
“One of the things I’ve always been thinking about in growing our company is management,” the CEO says. “Growth has been linked closely to our ability to attract, train and develop managers. With management, you also create infrastructure to build an organization.”
In order to successfully grow Meltwater, Lyseggen had to hire, coach and train the right people — and sometimes had to make hard decisions, too.
Hire the right people
Without great people, your business isn’t going to flourish, which is why Lyseggen took such an active role in this process early on.
The first thing he looked for were people who really embraced the world around them.
“That can be very different from you in personality,” he says. “That can be very different from you in terms of skill sets — that is all very valuable. [But] it helps to embrace the world in a somewhat similar fashion — that you have the same perspective on life and the world. Some people can be very negative or positive, to use a very simple differentiator, but if you look at the world in a somewhat similar fashion and you’re striving for somewhat similar objectives in life, then it’s much easier to work together and much easier to create an aligned approach and an overall aligned strategy.”
He also looks for people who care about others.
“If the person has an interest in other people, then that person is caring for that person and interest naturally develops and relationships naturally develop, and you get the manager that builds teams and structures, and … they create a much stronger organization than if you had a manager that only wants to get to the targets and isn’t particularly interested in people,” Lyseggen says.
To get these kinds of people, he had to carefully listen during the interviews.
“If you’re listening to what that person says, how they describe people they interact with both in the interview process but also in that person’s life, how they value what perspectives of people that come into their life, people they’re working with, how they describe friends, family, [then] you quickly get a feel for whether that person has a feel for people or not,” he says.
Ask the right probing questions that will help you get to the heart of these issues in the interview process.
“Encourage people to talk about things that they’re proud of, that they did that was an accomplishment, and who they would share that with and why was that so important and significant for them,” he says. “Another question I really like is what is the biggest challenge of your experience, perhaps a major setback that really shook you, and it was really a, perhaps, fall for yourself. Have that person describe that, and get a sense for how that person described the situation himself or herself and for other people involved is often very insightful.”
Then the last question you have to ask is actually directed toward yourself.
“At the end of the day, is this a person I would like to go out and have a beer with or is this a person I would like to invite home for dinner or stuff like that,” Lyseggen says. “Is there a fundamental personal chemistry? If there is that, then there is a good basis for a good, strong professional relationship, as well. At least it’s much easier if you have that chemistry. All the other things come easier and faster. When I say I ask myself, it’s not only myself but it’s as much the team as well that I use to recruit.”
Coach and train
When Lyseggen went to his children’s school to hear a teacher speak, he was surprised to hear her say that teaching children to read and write was easy because all they need is two things.
“One, they need to feel loved, and two, confidence grows from a sense of accomplishment and mastery,” he says. “I thought that was so profound and universal, and that is one of the things I try to live by in coaching, as well. That applies to people at all levels and all ages. People need to feel safe and loved somehow and have confidence to continually grow as they feel the sense of accomplishment and master of the topic at hand.”
This starts by spending time with people.
“First, I think the most valuable thing you can give anyone is your time,” Lyseggen says. “There is nothing as precious as your own time. Sometimes you don’t need to know what to say to a person; you just need to sit down and listen to that person and give that person attention. That person will know you care and are willing to take up your time. Even if you don’t have anything insightful to say or answers or solutions to the problem they have, it’s the fact that you were there and gave them your time. That actually goes a long way.”
Then you also have to be honest with people.
“One of the most effective ways to really show that you care about people is to be honest and tell them about their weaknesses and their shortcomings when you see those,” he says. “People really take a real liking to that when it’s done in a respectful way and it’s done on a foundation of trust and integrity.
“People get to hear things that perhaps a lot of people are thinking, and it can be down to their personality or the way they do things, things that people in general wouldn’t comment on because it would be awkward. But if you are able to share that with them in a friendly, loving and caring way, I think that really helps people improve and grow and it also shows that you care and that you’re looking after them and looking after their best interest.”
You also have to know when to have that conversation.
“You should be cautious — be very careful and not do it too early,” Lyseggen says. “Only do it when you feel really comfortable that there is a mutual trust established. The situation is you give somebody … honest feedback, and sometimes honest feedback can hurt. Even as glowing and caring as you can be, it can still hurt. The most damaging thing is if it’s not based on a trustful foundation, so you can never do that unless there is a fundamental trust present.”
When you can have that honest conversation, you open up the door for improvement in your people.
“It starts with the person saying, ‘That’s an area that I feel lots of confidence in,’ or, ‘I think that is one of my weaknesses; I think I can perhaps do it, but I don’t have the confidence to do it,’” he says. “The first step is a
dmitting that that is an area that they don’t have confidence in or that is an area that feels wonderful. Admit it, and then you have to embrace it. Once they admit it and are able to talk about it, then you can work on that.”
You have to ask them probing questions to find out how to help them develop that area.
“What are the situations that you feel more confident?” he says to ask. “What are the ingredients that you’re looking for that will help you feel strong in that area? What situations do we need to expose you to so you can get the training to get the mastery to accomplish this? … Just talk about it. Then you can actually deal with it.”
Once you talk about the problem and the possible solutions, then move forward.
“Basically, you create a plan,” Lyseggen says. “Often what is the case is the person actually actively pursues or seeks situations where their experiences are more exposed. Often, if you have a weakness and you want to hide it and you want to not deal with it, you avoid situations where your weaknesses are exposed, but if you are able to talk about it and get a commitment and decide you want to turn it around, then you’re in a mode where you try to find situations where you are exposed to it.”
He says to follow up on that plan formally each quarter, but you can informally check in with that person on a monthly basis just to see how they’re progressing.
He says, “On paper, it can seem simple, and on paper, it can seem like a good thing, but it needs to be followed up on and executed and scrutinized on to deliver the results you’re looking for.”
Make the tough choices
Even after doing all of these things, Lyseggen has come to realize that not everyone he hires actually works out, and that’s the last piece of building the right team in your organization.
“That is something you should feel very sad about, but I also think that is part of building the company,” Lyseggen says. “If you build the company, there are people who join the company that it’s not the right place for them, so you have those experiences, as well, which is part of being a manager.”
This is especially heartbreaking for him because it often destroys relationships that started out well, but just like the other aspects of finding and coaching talent, there is a right way to go about it.
“Part of it is to really be honest — to be honest and to be sincere,” he says. “There is a difference between criticism of that person as a human being and criticism of that person in terms of what they do.
“There should be a clear distinction between the two. … You can create that love and create very personal strong feelings. As long as you’re able to distinguish between the person and the actual work produced by that person, and you can do that in a loving, caring way and honest, then in my experience things are working out well.”
It’s also critical that you act quickly in making these decisions.
“Do not to wait too long because if you wait too long, things can entangle and it becomes an irritation to both parties, and both parties enter the dialogue irritated with the other person and frustrated, and that irritation and frustration then can color the conversation,” he says. “If irritation and frustration is colored with disappointment, (then) it is, of course, not positive for the outcome. If you let the process go too far, I’ve seen that frustration and irritation can color the conversation and create that hard situation.”
So when’s the right time to let somebody go? It varies based on every person, position and company, but Lyseggen has a general rule of thumb.
“If you start to talk about that person too often, and when you talk about that person, it’s typically not in a positive way, it’s more about problems, if that happens too often, then that’s a good indication that you have to act on it,” he says. “It’s probably good for both parties, as well, because it’s not in that person’s interest to be in that position where their skills and potential aren’t fully appreciated or it’s not a good match with what the company needs, and then it’s better for that person to move on to a different company where they can blossom and really reach their full potential.”
By focusing on recruiting and coaching people as well as making the tough people decisions, Lyseggen has seen his business grow from nothing to 700 people across 50 offices and $100 million in revenue last year.
“That’s all done organically and with home-grown management,” he says. “When I think of what we’ve done, that is something that I’m very proud of and [it] is the most rewarding thing.”
How to reach: Meltwater Group, (415) 829-5900 or www.meltwater.com
Born: St. Louis
Education: MBA from Fontbonne University; B.S. from the University of Missouri, Columbia
What’s your favorite movie and why?
One of my favorite movies would be ‘Remember the Titans,’ which I think is a great leadership lesson on bringing together teams on a common mission.
What’s the best advice you’ve received?
I’ve received a lot of great advice from many good mentors over time, but the best is you have to trust yourself and trust your own judgment. In the role I sit in, you actually have to bring a certain degree of confidence because you’re going to be faced with choices and decisions that you’ve got to make where you won’t have all the facts, so you have to rely on a combination of your experience and the homework that you can do, and you ultimately have to trust yourself and make the best choice.
If you could have dinner with any three people from history, whom would they be and why?
One of my favorite leaders early in my career would have been Green Bay Packers football coach Vince Lombardi, and for me, it would be just the fact that he has such a tremendous history of winning and fielding great teams so early in my career I would have been an avid reader of Vince Lombardi quotes, and the likes of that, so that would be one.
Martin Luther King Jr. would be another. Just his focus on making our society much better, and he did it in a very purposeful, calm fashion, so that would be an absolute pleasure to be able to do that.
Then somebody today that I have a great deal of admiration for is Warren Buffett. He’s arguably one of the best businesspeople on the planet, and he’s understated, plain-spoken and just brilliant in what he’s accomplished as a businessperson.
If you don’t know what you’re paying for and getting from your 401(k) plan, you could be facing a potential employee lawsuit. While plan sponsors aren’t required to choose the lowest cost plans, they are expected to know what they are paying and select ones with reasonable fees, says Mike Rogers, director of pension services at Burr Pilger Mayer.
“It’s not about the lowest fees, it’s about the reasonableness of the fees for the services being provided,” Rogers says. “If you have one payroll, no special enrollment needs, everyone works in the same building and you have a tech-savvy work force, a vendor should charge you X. But if you have six offices, run four different payrolls, have English and Spanish enrollment needs and need someone to be at each of your offices once a quarter, that should cost X-plus. But if both companies are paying identical fees, a case could be made that the first plan is overpaying and you could be open to a lawsuit from participants.”
Smart Business spoke with Rogers about fee transparency, benchmarking, and how a 401(k) specialist can lower your fees and help keep you out of legal trouble.
How important is fee transparency?
Fee transparency is the No. 1 issue. As a plan sponsor, when you select a vendor and your fund lineup, you need to know how much you’re paying each of the parties. The vendor should fully disclose upfront every component of the fees so that you don’t get hit with a lawsuit down the road on something that you didn’t know anything about.
The 401(k) plan lawsuits today aren’t like those against Enron, where someone bought stock at $90 a share and it fell to $2. These lawsuits are about whether you, as the plan sponsor, picked a fund or a vendor that costs too much. It doesn’t matter that the mutual fund was up 40 percent last year; it’s that there are less expensive versions of that fund available. As a plan sponsor, you need to be able to justify why you’re using a fund with a more expensive fee class.
The Bush administration said, ‘We are going to mandate how fees are disclosed both to the plan sponsors and to the participants so they know where their money is going.’ The proposed regulations got tabled but are expected to be finalized this year. What participants and plan sponsors really want to know is how much they’re paying for their plan and the funds. As a fiduciary, the plan sponsor is responsible for monitoring fees, but getting fee transparency is akin to sighting the Loch Ness monster.
How can a 401(k) specialist help reduce fees and share fiduciary duties?
A specialist can match your needs and expectations with those of an appropriate vendor. There are so many vendor options that it is hard for anyone that doesn’t specialize in this area to properly match your needs, expectations and costs with the various providers. The best answer for your company may be a plan that doesn’t pay commissions and uses low-cost mutual funds.
In addition, simply hiring a 401(k) specialist can cause vendors to be more proactive. Once you bring in a specialist, vendors realize that person knows how the game is played, and they may be more open to looking for ways to save you money or renegotiate fees.
As a fiduciary, the plan sponsor is personally liable in the event of a failure to fulfill his or her fiduciary responsibilities. But there’s no reason a plan sponsor should have to go it alone. Because 401(k) specialists focus on this area, they are typically a named fiduciary right alongside that sponsor. The two main differences between brokers and consultants are how they are paid and whether they can cross the line to fiduciary status. Many existing contracts specifically state that the vendor or broker will not be acting as a fiduciary.
What are the benefits of fixed pricing versus asset-based fees?
Historically, this has been an asset-fee business that charged on the size of your assets. If you have $1 million in your 401(k) plan and someone charges 50 basis points, that’s a $5,000 fee. When the plan grows to $2 million in assets, that fee goes to $10,000 regardless of whether your provider did any more work for you. The industry is seeing a switch to more fixed pricing despite the objections of many of the providers.
Fixed pricing allows for cost certainty and cost containment in your plan. If you pay $5,000 today on $1 million, and the plan goes to $2 million and you still pay $5,000, then the fee, as a percentage of assets, is declining as your plan assets continue to grow. Fixed pricing also allows your 401(k) specialist to focus on doing what’s best for your business instead of chasing the highest commissions.
How can benchmarking help you keep tabs on fees?
Benchmarking lets the plan sponsor see what it is paying in fees against comparable companies in its industry and of similar size. You need to distinguish between how much you are being billed and how much the vendor is charging participant accounts. The average plan sponsor, if the vendor doesn’t send a direct bill, may think the plan is free. But it’s not free. Everybody has to get paid, and if you’re not being billed directly, the expenses of the investments are higher and the participants are paying for those fees. Considering company executives typically have the highest balances, reducing asset-based fees is a win-win for everyone. When you start benchmarking, it becomes very apparent that your fees are X and they really should be X-minus.
Mike Rogers is director of pension services at Burr Pilger Mayer. Reach him at (408) 961-6336 or email@example.com.