Going to court should never be taken lightly. Even if a company wins its case, litigation may still take a significant financial and equitable toll on a company.
“Litigation has become an unfortunate reality for modern businesses,” says John Mark Jennings, a partner with Shulman Hodges & Bastian LLP. “If a company is contemplating litigation, it needs to have the right attorney, the right culture, the right people and the right financial resources to pull it off. Preparing for litigation beforehand can make a big difference in the case and goes a long way toward keeping the company focused during the fight.”
Litigation is particularly difficult for companies that find themselves embroiled in legal proceedings for the first time.
“In every case, you have to protect and brace your company for what is to come,” he says.
Smart Business talked to Jennings about how a company can prepare for litigation.
How can an executive manage expectations before entering into litigation?
Executives must consider and plan for the worst-case scenario before deciding if litigation is prudent. Many executives feel a moral imperative to seek justice against someone or something that has damaged their company. But just because your company is right, does not mean that litigation is right for your company.
Litigation takes commitment by key personnel to actively participate in the process. The toll litigation has on corporate officers and administrators is often significant. It is often very surprising to executives that their companies are scrutinized thoroughly as the parties in the case strive to find documents and analyze financial data. An executive may wish to consider if the company can withstand the bright light that litigation often sheds on the company’s inner workings.
If a company is about to embark on litigation, it has to be prepared to revisit the past. Looking backward is something at which many executives are admittedly not very good. The company officers will need to prepare themselves for this intellectual paradigm shift [i.e., thinking about things that they are not accustomed to thinking about] and be intellectually, emotionally and financially prepared for the impact that litigation will have on the company.
Another point is that CEOs who are generally not accustomed to being told what to do have to let the lawyers do their job. Executives should ask their attorneys all the questions they need to ensure the corporation is in good hands, but should also feel comfortable letting them handle the case. This will help lessen the burden on the company’s executives.
Why is a litigation budget good for business?
It is important for executives to have a general understanding of what litigation will cost which means you have to know the whole process and what financial impact it will have on the company.
There are essentially two types of litigation budgets those that are specific to a particular piece of litigation and those that are used to plan for future litigation needs. If a company is proposing or anticipating litigation, one of its principals needs to sit down with the company’s attorneys to discuss the potential litigation costs and to develop a budget based upon how the attorney expects the case to proceed. That way, the executive will be better able to justify litigation expenses to the board of directors.
Also, internal litigation budgets may be necessary for companies that compete in particularly litigious industries. Companies that engage in aggressive intellectual property pursuits or other core products are also good candidates to establish a litigation budget.
Some companies have the added benefit of an in-house attorney to assist with the coordinating and overseeing the efforts of outside counsel. Companies that do not have that luxury are forced to rely on their counsel to provide monthly financial and progress reports on the case. That reporting should also include the anticipated fees and costs in the next reporting period.
If a company has used the same attorney for years, should it consider looking elsewhere when litigation arises?
Chief executives are naturally loyal people. Because of that otherwise admirable quality, they tend to turn to the same attorneys regardless of the nature of the particular issue facing the company. That practice can sometimes be harmful when litigation arises. This is particularly true for small companies. Labor law, business litigation and intellectual property disputes are wildly different fields and should be handled by attorneys who routinely handle those types of claims. It is critical for an executive to ensure that his or her go-to lawyer is up to the particular challenge at hand.
It is prudent for executives to use their go-to attorney as a filter for selecting litigation counsel for a particular case. If the future of your company is riding on the outcome of litigation, the selection of which attorney to use may be the single most important decision made in the case.
JOHN MARK JENNINGS is a partner with Shulman Hodges & Bastian LLP. Reach him at email@example.com or (949) 340-3400.
Trust is a cornerstone of any successful business, says Jackie Herr. “You have to be able to trust the leadership of a company because you’re impacting the lives of so many other people and what they do and how their career goes,” says the co-founder and CEO of Ignite Health.
A subsidiary of inVentiv Health Inc., Ignite is a full-service health care marketing agency that seeks to educate and empower chronically ill patients and their caregivers. Just as clients rely on the company for honest information, Herr says employees rely on their leaders to provide honest leadership.
“I don’t have all the answers, but I have a lot of really smart people working here who say these are the trends and this is where things are going,” Herr says. “We listen to them and employ that in our thinking of the business.”
Herr has guided her 90-employee company to revenue growth of about 30 percent each year since its founding in 2001.
Smart Business spoke with Herr about why it can’t just be about the money, developing trust and why she encourages employees to admit their mistakes and move on.
Q: What are the keys to building employee trust?
When people do talk to you, make sure you’re listening. If there is an action that they want, either make sure they understand that it’s an action that you’re going to be able to take or that it’s going to take some time. Be honest.
It gets back to the trust. People want to talk to you, and they will talk to you as long as they believe they are being heard. Whether or not you can act on what they are asking you to do, at least follow up and say, ‘Here’s what we can’t do, and this is why.’
Clearly communicate why you care. It can’t be just about the money. It can’t be just about shareholders. There has to be a greater vision. You have to empower and let people know why you care so much about the company.
If everyone knows that it’s just for the money and it’s not for anything else, you lose the passion in your business and you lose the dedication from your employees. You just lose a lot when money is the total focus.
Q: How do you encourage your employees to take an active role in the company?
You get to this level in an organization and unfortunately, you think because you’ve been at this level, that you pretty much know everything.
Every day I come to work, my guys teach me something new and I learn something new and I learn that listening is far greater than telling people, ‘Here is what you need to do.’ Part of it is that as a leader, you tend to get all the problems. That’s just part of this job. You tend to get, ‘Here’s what’s wrong.’
What we encourage our group to do is, it’s fine to have a problem, but at least have a couple of ideas for solutions to deal with those problems. If you come to us with those, it’s a much more positive conversation than just being stuck in, ‘This is a problem.’
You can’t solve everything because you don’t understand all the intricacies of every level within the company of what’s going on.
Q: How can you maximize employee performance?
We tend to be pretty hard on ourselves in terms of who is good at what.
We try and get people to find their own sweet spot. Find what you’re good at and be OK with that and maximize that particular thing you’re good at. We just have to make sure we help people identify their strengths.
That’s gotten much tougher as we’ve gotten bigger. When you’re in a start-up mode and you have four or five people, then you have 10 people, then you have 12 people, it’s not unusual to say, ‘I went to this presentation, and I totally stunk.’
But as the organization gets bigger, that’s a much tougher thing to do. Our senior staff is charged with trying to make sure that people know that there is an open, honest forum for them to say, ‘Here’s what happened. This didn’t work so well, and here’s what I can do better.’
Q: How do you deal with failure?
Admit it, learn from it and move on. We share successes, and we share failures where things didn’t work quite as well as they should have. It’s important to admit it. A lot of people have a tough time admitting failure. When you admit, learn from it and move on, it makes the whole organization stronger.
Know you can’t please everyone. Don’t be too hard on yourself, and never take yourself too seriously. There are plenty of people out there willing to tell you you’re not doing a great job. Celebrate the successes and enjoy it.
HOW TO REACH: Ignite Health, www.ignitehealth.com or (949) 861-3200
At lease renewal, you have the opportunity to negotiate rental rates and occupancy benefits. But if you don’t take a proactive approach and seek out expert knowledge, you will almost always forfeit valuable concessions.
“Landlords are well aware of their tenants’ lease expiration,” says Brian Bennett, senior vice president with CresaPartners in Orange County. “Generally, they prefer to address lease renewals about six to nine months before a lease is scheduled to expire. They also know that when tenants have fewer options to move, there is less time to execute that move. Thus tenants may forfeit leverage in the negotiations.”
Smart Business spoke with Bennett about how tenants can maximize their leverage and generate optimum results at lease renewal time through strategic planning and expert assistance.
Why is timing so critical in lease renewals?
Many factors affect the outcome of a renewal. This is not an overnight process. Tenants need to allow approximately 18 to 24 months of planning before lease negotiations. It takes time to analyze the relationship between the real estate and the business. Tenants also need ample opportunity to learn about and consider alternatives in case they cannot reach a mutually agreeable extension of their lease.
In today’s environment, occupants have experienced substantial rental increases from their last lease negotiation five or more years ago. Tenants may also want to consider purchase options that could reduce costs and lower facility expenses and take advantage of a growing surplus of space in the market. Another benefit of starting the process early is that tenants may be able to realize landlord concessions prior to their lease expiration. For example, a new, lower rental rate or free rent concession may begin immediately.
What should tenants try to achieve during lease renewal?
Tenants should be informed and should understand the motivations and desires of the landlord. Doing so will allow the tenant’s adviser to better position the tenant to negotiate more favorable terms. The objective should be an overall below-market effective cost. From the tenant’s perspective, the renewal should result in an economic outcome that is less costly than relocating. Renewal should also include a lower cost to the landlord than what it would cost to secure a new tenant. It is important to consider current market conditions and occupancy alternatives. Landlords are fully aware that there are inherent costs to them if their tenants choose to relocate. These costs include:
- Lost rent from unoccupied space
- Tenant improvement costs required by a new tenant
- Additional economic incentives and/or concessions required to secure a new tenant
A tenant should always consider current market trends and market concessions that could ultimately be calculated back into reduced cost. When tenants leverage their options, they can often achieve equal or more incentives than a new tenant would receive. Additionally, at the end of a long-term lease, tenants should negotiate space improvements. Whether improvements include major renovation or minor improvements, such as carpet replacement and painting, the cost should come at the landlord’s expense.
From the tenants’ perspective, the overall goal of a successful renewal is to eliminate as many increases in their real estate costs as possible while securing and maintaining the right environment necessary for efficient operation.
How can tenants avoid common pitfalls?
The biggest mistake tenants make is negotiating from a limited information and/or knowledge base. Circumstances and/or market conditions that impacted a negotiation three or five years ago are irrelevant today. Tenants should retain detailed information on their respective markets as well as appropriate strategic advice from which to create maximum leverage. Even when tenants know that relocating is not the best solution, a well-executed plan will create unexpected and significant concessions resulting in measurable economic savings.
Can companies represent themselves in this process?
Yes, of course they can. However, over the years fewer and fewer companies choose do so. Like the legal profession, high-end representation is key to realizing optimum results. It is no different in the real estate industry. Companies with more than 50 employees looking to realize maximum economic savings and mitigate facility-related risk should first interview and then retain a professional adviser that they are comfortable with and whose experience, focus and professional history aligns specifically to the companies’ stated objectives.
BRIAN BENNETT is senior vice president with CresaPartners LLC in Orange County. Reach him at (949) 706-6600 or firstname.lastname@example.org.
Born: Tallahassee, Fla., 1951
Education: Bachelor of building construction, University of Florida; master of business administration, Auburn University.
First job: I have always worked in construction. My very first job was digging ditches at $1.35 per hour. My first construction project after graduation was the Fairmont Hotel in Atlanta.
Person whom you admire most in business and why: I admire Sam Walton because of his big dreams, his hard work, his tremendous success and his ability to remain humble through it all.
What is your favorite thing about being a leader?
It gives me an enormous sense of accomplishment, as a leader, to see complicated construction projects get completed on time and on budget through the dedicated efforts of our project employee teams.
Emerging technologies in the banking sector, such as remote deposit capture services, enable companies to reduce costs while improving efficiencies.
The image capture solution allows businesses to scan checks at their office location and deposit them by transmitting an image file. By eliminating the need for delivery or mailing of paper items, transmitted deposits can enter the collection stream faster and with less effort, cost and risk than with traditional methods.
Customers taking advantage of this technology have longer processing hours as well as improved funds availability and deposit reporting all without leaving their office.
“Now is the ideal time to take advantage of the benefits that remote deposit capture has to offer,” says Joy Gilmer, senior vice president of treasury management for Comerica Bank’s Western Market. “As more and more banks are exchanging check images rather than paper checks, remote deposit capture puts a business in the right position to take advantage of the savings and convenience of image technology.”
Smart Business spoke with Gilmer about advances in banking technologies and the benefits that remote deposit capture provides to businesses.
How have advances in technology improved the ways that businesses can handle their banking needs?
Through technology, businesses are able to quickly communicate financial information to and from their financial institution. With the advent of remote deposit capture, companies are taking advantage of later deposit windows, better processing float, simplified deposit creation and better record-keeping.
How does the concept of remote deposit capture work?
The concept is simple. A scanner is installed at the company and customers access the Web-based application from their PC workstation or laptop. Checks are scanned and an electronic deposit ticket is created. Once the information is loaded into the deposit capture system, the information is transmitted to the bank and made available for deposit processing. Since it is data versus paper checks being delivered to the bank, processing/desk float and manual processing errors are reduced significantly. Remote deposit capture services have proven to be a significant value in disaster recovery plans. Recent fires in California, for example, caused road delays that impacted the ability to deliver paper checks to the bank. With remote deposit capture, there are no ties to commute-related issues.
In what ways can this function improve record-keeping?
Deposit information, including images of deposited checks and electronic deposit tickets, is stored and available for retrieval as needed. Having quick access to this information improves response time to customer inquiries and reduces research expense. The capture process gives a company the ability to update account receivables systems directly. Reports can be accessed from anywhere using the Internet.
How can utilizing remote deposit capture increase productivity while reducing costs?
Remote deposit capture enables a company to make deposits without the checks physically leaving the office, thus, reducing expense associated with time out of the office, courier services and/or third-party depository banks. Deposit preparation time is reduced as information is scanned versus keyed or written. With the recent enhancements in the marketplace to Web-based solutions, deposit capture functionality is improved even further. A company with multiple locations can review consolidated reports, perform research functions and approve transactions remotely from any location. A company can now utilize the convenience of browser-based remote deposit technology.
What role do you envision technology will play in the future for banking?
Technology will continue to play a significant role in the financial arena. The movement and management of financial transactions is a complex process. Timing of obtaining and reporting information is critical to the health of a business. Having the right systems in place to improve processes is necessary to the ever-changing needs of the financial community.
JOY GILMER is senior vice president of treasury management for Comerica Bank’s Western Market. For more information on deposit capture technology or Comerica Bank's Business Deposit Capture, you can reach her at (714) 435-3931 or email@example.com.
Observe then act. To be a great leader, you must first step back and assess the culture and the current state of your company before blindly applying your own experience, says Jim Cragg, president and chief operating officer of MegaPath Inc. Having spent his adolescence moving from country to country with his father, an executive with Pan American World Airways, Cragg speaks with some authority. Whether in Tokyo, Munich or London, he patiently immersed himself in the culture before becoming an active shaper of his surroundings. That approach has served him well at MegaPath, a 480-employee communications provider, where Cragg oversaw three successful mergers while leading the company to 2006 revenue of $160 million. Smart Business spoke with Cragg about communication styles, culture and why you have to invest in your employees.
Adapt your communication style. The definition of leadership is the ability to get people to willingly follow. We have [nearly] 500 employees, and they’re at different stages of their careers. You have to find a leadership style that addresses that stage in their career or that particular role that they play in the business.
The four quads of that leadership are: Telling. Some people do like to be told, ‘This is what you need to do,’ and, ‘This is how you do it.’
Selling. Some people like to be sold on an idea so that they feel more a part of the decisions.
Participating, which is a more participative leadership style.
And then delegating. Some people have all the get-up-and-go that they need. They just need to be given an assignment, and they’re off to the races.
It’s not overly transparent. To lead effectively, you have to have flexibility in how you communicate. You have to understand the group that you’re communicating to or the individual. You have to allow them the opportunities to talk and ask questions, and you have to give them a level of comfort that they can tell you what they think.
Validate change. We communicate that change is inevitable as we grow as a company. People have to see change as bringing a value. If you just zig and zag and zig and zag, they don’t perceive that as value. You have to validate on an ongoing basis.
It will be challenging at times. If we change, and it doesn’t work, we’ll acknowledge that we made a mistake. When you do change, if you make a mistake, that’s OK.
Keep adjusting the formula to really get customer satisfaction to the point it needs to be that the business grows.
Find a common theme. The culture is the company. You have to find very common themes in order to get a culture to change.
You can say things like, ‘You’ve got to be profitable. You’ve got to grow revenues.’ But that is kind of nebulous. People don’t see the financials necessarily in depth.
Our approach is to enable people to feel like they make a difference. The way that people can make a difference is with a cando, positive attitude about getting things done for customers.
You definitely have to lead by example. You have to be involved in the challenges of just about every aspect of the business to show that you’re willing to participate in getting through those challenges and hurdles in order to be successful. You have to stay engaged and close to some of the things that are being changed.
I think the real benefit is that you get through your projects in an agreed-upon time frame and you accomplish goals.
Show people they’re important. People have to feel like what they’re doing is important in order for them to feel like they’re participating in the success of the business. When they’re working for a company, they want to know that they’re making a difference.
There is a lot of recognition involved. There’s weekly recognition for jobs well done. I always respond to the job-well-done notes. Any time a sales rep wins a deal, I’m notified, and I acknowledge and thank them for that.
We have employee of the month, in which we recognize [employees] and give gift certificates. That is acknowledged on a companywide call. We acknowledge team performance, and we acknowledge salesperson of the month. There’s always the opportunity to give stock options, which we give to every employee in the company.
You have to continue to make sure that they recognize that what they are doing is an important piece of the business. If everybody feels that way, the endgame is happy customers.
Invest in your employees. If you’re asking your employees to deal with change and accelerate growth, you’re asking a lot of them. You’re asking them to make a difference and work very hard. That’s their investment in the company.
The company has a reciprocal investment that it has to put in place for the employee. We need to show employees that we’ll build company newsletters, and we’ll give them good benefit plans, and we will give them career-path opportunities and encourage them to look at internal postings. We’ve got a budget going into ’08 for a lot more training.
You need to make sure as executives that you acknowledge and have a reciprocal investment that at least matches the efforts that your employees are putting in.
Share success stories. That’s a common theme in our all-hands call. I will acknowledge individuals’ performances from our customers’ view.
Since I get out and meet a lot of our customers, I touch base with them, and I get very positive feedback on our employees. I pass that on either through e-mails or through acknowledgement on company calls. We’ve got a newsletter ... that will have a large part (about) employee recognition.
The benefits really are the culture. People want to know that they’re making a difference. They want to know that the customers like and appreciate our products. They want to know that we are successful as a company. And they want to know that they are growing as a businessperson.
HOW TO REACH: MegaPath Inc., (714) 327-2000 or www.megapath.com
When the door to competitive energy sales swung open in the most populous state in the union, there was every reason to believe that a company focused on selling electricity to consumers and businesses in the Golden State would succeed.
Commerce Energy Group Inc. was conceived and founded in 1997 following the passage of California’s energy deregulation plan, but the door of opportunity slammed shut following the energy crisis of 2000, the subsequent Enron debacle and when California’s energy deregulation policy was abruptly placed on hold.
Commerce Energy floundered for several years until Steven Boss joined the company in July 2005. As the new CEO, Boss was charged with repositioning the firm and finding the open windows to new business and new markets outside of California.
“The company was in a large state of disarray for a couple of years,” Boss says. “Without leadership, there was turmoil in the executive suite, and there was conflict between older and newer management in the firm. The employee base had become divided between the two management camps, and they were loyal to their hiring managers. The problem was really not hard to spot. Fortunately, there were many capable people on board they just suffered from a lack of direction.”
Unable to capitalize on the original opportunities afforded by the California marketplace, the firm was losing money. Boss would need to find new sources of revenue to produce a profit. However, increased sales alone would not fix all of Commerce Energy’s problems.
In order to get new business, he would need to make certain that in-house conditions would be conducive to attracting and nurturing customers and that he had a unified team behind him, ready to succeed with the challenges of building the business. While he worked on repositioning the firm’s sales and marketing efforts, Boss simultaneously worked on eliminating internal barriers to growth and replacing the current climate with a more open and customer-focused culture.
Achieving a unified culture
Getting his house in order didn’t require a lot of assessment as to what the root of the problem was.
“It was very clear to me that we had two individuals in control of the organization that were taking things in the wrong direction,” Boss says. “The problem was also acknowledged by the board. We needed to develop a new direction as an organization and a corporate culture designed around achieving maximum performance.”
Boss says that the employees were divided, and there was little communication or teamwork going on between the two groups. To alleviate the problem of divergent managerial direction in the organization, Boss says he terminated the two senior employees who represented the newer management camp.
“I prefer an environment where there’s a more open culture and a greater flow of information,” Boss says. “In order to achieve success, I think that you need to have more cooperation between the various functions. People had built silos around their functions, and as CEO, breaking down those barriers is very important because, otherwise, there’s no ownership, and people point fingers when something goes wrong.”
Boss says that the firm’s business was negatively impacted from management operating in silos. For example, at Commerce Energy, if the customer billing function runs in isolation without information supplied by the commercial sales unit, the knowledge transfer of customer-specific billing requirements won’t happen. That results in incorrect billing formats on customer invoices and late payments from large users.
For Commerce Energy, eliminating delayed customer payments is vital because under its business model, the firm purchases most of its energy 12 months in advance on the open market after a customer signs a contract for service. Then the customer is billed in monthly increments based upon their consumption. Because the firm finances the cost of the initial energy purchase, any delay in payment increases their finance costs and decreases margins.
Following the exit of the two senior managers, Boss says that his efforts to change the culture were actually enhanced by greater-than-anticipated staff turnover.
“In the year that followed, we had a considerable amount of staff turnover, around 50 percent, which was a positive thing in this case,” Boss says. “The people who stayed wanted a more open environment, greater cooperation and a free flow of information within the organization. Those that stayed were supportive of the environment we were trying to achieve.”
Setting the tone
As he continued his pursuit of a cultural shift, Boss says that he demonstrated the importance of making changes to the staff by setting the tone from the top of the organization and leading by example.
For instance, Boss initiated and maintains an open-door policy where anyone can offer feedback to him. While many CEOs give lip service to having an open door and an open ear to comments and new ideas, Boss says that he uses technology to open up the communication between himself and a wide array of constituents as a demonstration of his commitment to accessibility.
“We’ve developed an investor chat room that allows the investors to send e-mails to our board, and those communications are also shared with me, and it is monitored by the SEC, as well,” Boss says, “I can answer their questions, or they can also get feedback directly from the board.”
He also wants to hear comments from his customers. Boss says that at one time during an extended power outage in his own neighborhood, he attempted to phone the electric company to relay his frustrations over the situation to the utility’s management. To his amazement, he was advised that it wasn’t possible to get a message about service concerns to the company’s CEO. Now that he’s the CEO of an energy supplier, Boss develops his philosophies about CEO responsiveness from his own experiences as a customer.
“We’ve included a link on our Web site that allows anyone to send me a comment whether it’s a complaint or an ‘atta boy,’ and I read all of those,” Boss says.
As further validation that he has been successful in achieving a cultural shift within the organization, Boss says that a receptionist in the Dallas office recently identified a problem with an outsourced sales channel and brought the issue to the attention of the sales and marketing department. The situation was addressed, and, according to Boss, that’s exactly the way it should be.
“It’s important that individuals at any level in the organization can express a concern to management or to the CEO, so you need to be accessible,” Boss says. “I always think that a person can learn something from everyone, and you can’t learn unless you are listening.”
Boss says that when he arrived, the firm was still struggling to finish digesting a recent acquisition. But despite that recent influx of new business, the firm still had excess capacity that would allow for new customer acquisition without increasing infrastructure and costs.
His financial analysis further showed that Commerce Energy was close to breaking even, given the current overhead and revenue, so rather than reducing head count, which would leave the firm unable to handle additional organic and acquisition-based growth, he decided to focus on adding new customers.
In keeping with his open culture, he launched sales and marketing efforts to entice new business based on customer input, and then he developed superior customer service that would entice new customers to stay once they became users of the service.
“Our excess capacity makes it feasible for acquisitions, but inorganic growth is somewhat serendipitous, and you have to be careful not to overpay when you acquire new customers, especially when you are brokering a commodity,” Boss says. “When I do the analysis on some deals, I find that I could add a comparable number of new customers organically within six months, so doing that analysis is part of the litmus test when it comes to deciding if the acquisition makes sense.”
Boss uses demographic feedback for each marketing campaign to validate his build-or-buy decisions and to achieve cost-effectiveness with organic growth. He also uses the data to further hone his customer acquisition messages, tailoring radio campaigns to each individual market based upon customer feedback.
“One of the metrics that we monitor is our new customer acquisition cost, and we further break down the costs by each marketing campaign we run,” Boss says. “We constantly take surveys within our tele-sales group to see who’s paying attention to our ads. As a result of customer feedback, we decided to offer a line of green energy. At the end of the day, customers vote with their pocketbooks, and our survey information indicated that customers were open to paying more for green. We want to listen to our customers and give them as many choices as possible because that’s what differentiates us in the marketplace.”
Boss says that retaining customers is more cost-effective than constantly seeking new ones and customer churn is too expensive for a firm struggling to get their total customer count up to a level that will make Commerce Energy profitable.
He has also instituted new customer service metrics and processes to reduce customer loss. He measures service metrics such as the wait time before customers are able to speak with an agent, and he also believes in investing in customer service training for his agents. Boss says that agent responsiveness often dictates whether the customer will continue to purchase the service from Commerce Energy or move to a competitor, which is always a possibility, now that consumers have a choice about where they can buy their gas or electricity.
“We billed 164,000 customers last year, and we become profitable when we bill around 200,000 customers,” Boss says. “So it’s important that we strive to keep customer churn down as low as we can. We’ve invested in a new phone system for customer service as well as training for all of our agents, and we monitor all of our service metrics so we can be more responsive. Every organization I’ve ever been associated with has been customer-centric, and so for me, it’s just intuitive that it should be that way.”
The firm added 100,000 new customers last year, with a 10 percent increase in new customers coming during the fourth quarter. Fiscal 2006 net revenue for Commerce Energy was $247 million, and although the company’s bottom line for the full year was in the red, the firm earned a profit in the fourth quarter showing that things were headed in the right direction.
Boss says that effectively managing growth is still a challenge some days, and despite the improvements in the company, Commerce Energy is still a work in progress.
“It’s impossible for one individual in the organization to have complete control of everything,” Boss says. “You have to develop a culture and an ethic in the organization where the employees believe in the mission and want to accomplish it for you. As the CEO, you have to be a leader first and remember that every individual in the organization helps you in achieving your goals.”
HOW TO REACH: Commerce Energy, www.commerceenergy.com
With the myriad of federal and state laws protecting employees, employment-related lawsuits have steadily increased in our litigious society. Since anyone can file a lawsuit and allege anything, lawsuits by current and former employees cannot be completely avoided. However, they can be reduced in number and potential exposure can be minimized.
“Certain claims are completely fabricated,” says J. Ronald Ignatuk, a partner in the law firm of Shulman Hodges & Bastian LLP. “But other cases present egregious conduct, not only by employees and supervisors but by the very HR department charged with investigating and remedying the improper conduct.”
These lawsuits are significantly impacted by the policies and procedures instituted by the employer and whether or not those policies are strictly followed.
Smart Business spoke with Ignatuk about ways that employers can minimize discrimination and wrongful termination lawsuits by former employees.
Please explain what is meant by ‘wrongful termination.’
While an employer can terminate an ‘at-will’ employee for no reason or for any number of reasons, the employer may not terminate an employee for an improper reason, such as age, gender, race, disability, religion or national origin. If this occurs, the employee has a claim against the employer for wrongful termination.
However, the employer does not have to fire the employee to be subject to a claim for wrongful termination. If the employee is subjected to a hostile environment in the workplace that would be intolerable to a reasonable person, such as continuous and severe sexual harassment, and this causes the employee to quit his or her job, the employee can bring a lawsuit for ‘constructive termination.’ In other words, the law treats this situation as if the employer actually fired the employee. If the employee proves that the work environment was intolerable, the employer is liable to the employee to the same extent as if the employer fired the employee for an improper purpose.
What exposure does an employer face when sued for discrimination or wrongful termination?
First, unless the employer has insurance coverage for these types of claims, the employer may incur significant attorney’s fees and costs in defending the lawsuit. If the case goes to trial and the employee prevails, the employer could be held responsible for all damages caused by the discrimination or wrongful termination. These damages could include emotional distress, lost wages both past and future and medical care, including psychiatric treatment. If the conduct is sufficiently egregious, the jury could award punitive damages against the employer, which are above the amount to compensate the employee, and serve as a form of civil fine to punish the employer and make an example in order to deter others from similar conduct. Finally, the employer could be required to pay the employee’s legal fees.
How can the employer minimize discrimination and wrongful termination cases?
First, the employer should establish a zero-tolerance policy regarding all forms of discrimination. The policy should explicitly state that violation of these polices will result in immediate discipline, up to and including termination.
Second, the employer should have a procedure for reporting discrimination that does not involve the alleged perpetrator and that is handled as confidentially as possible under the circumstances. Employees should be informed that there will be no retaliation for reporting discrimination.
Third, the human resources department should have a procedure in place to promptly investigate all forms of discrimination, including interviewing the victim, perpetrator and all witnesses.
Fourth, the HR department’s response is critical. When there is a complaint, the employer has an obligation to promptly investigate and take remedial action. The appropriate remedial action depends on the nature of the complaint and what the investigation reveals.
These policies and procedures should be contained in the employee handbook distributed to all employees. The employee should sign a receipt after the handbook is provided to him or her.
Finally, every employer should retain a knowledgeable employment law attorney who can create materials or review materials created by the HR department.
What should the employer do if it intends to take a negative job action against an employee for a legitimate reason?
In order to minimize the chance that a lawsuit will be filed or if it is filed, to maximize the chance of obtaining a favorable outcome the employer must document the legitimate reasons for the negative job action.
If the employee is performing poorly, chronically late for work, insubordinate, etc., written warnings should be provided to the employee by the HR director or stated in the employee’s file. The warnings should be specific, provided to the employee with another witness present and signed by the employee. Then if termination is necessary, the employer has a well-documented legitimate defense to a claim of wrongful termination. These warnings may make the employee reluctant to claim discrimination and will serve the employer well in court should a lawsuit be filed.
If the employer is truly concerned about a lawsuit, he or she can offer the employee a severance package in exchange for a release of all claims. It is advisable to have an attorney prepare this document.
J. RONALD IGNATUK is a partner at Shulman Hodges & Bastian LLP. Reach him at firstname.lastname@example.org or (949) 340-3400.
Birthplace: Spokane, Wash.
Education: Attended the University of Southern California; University of South Florida, bachelor’s degree in communications; Golden State University, master’s degree, public health and health care administration
First job: University Community Hospital, Tampa, director of marketing
What is your most important business lesson?
Surround yourself with great people, whether they’re executives, medical staff or board members.
Whom do you admire most in business and why?
Jack Welch because of the phenomenal business insights he’s shared with people around leadership and success.
What is your favorite business book?
‘Good to Great’ by Jim Collins. I think he’s done a good job of staying current and contemporary.
How would you describe your leadership style?
I’m very passionate about our mission, and I hire people with the same kind of passion and commitment.
How would you describe your leadership philosophy?
There’s no way to get a big job done by yourself.
Insurance industry surveys have confirmed that consumers would like to purchase all the insurance they need from the same insurance agency/broker. With all the different types of insurance and carriers out there, this is much easier said than done.
Most firms specialize in either personal, commercial or employee benefits insurance. Commercial insurance providers are often excited to inform people they do not provide personal insurance coverage, says Jim Sim of Westland Insurance, as if they have graduated from the personal insurance industry.
If a firm does provide several types of coverage, it is often difficult to find any firm that has adequate staff and services, says Sim. There are more than 30,000 agencies that provide insurance; 90 percent provide personal lines insurance, such as homeowners and auto, and only 10 percent provide commercial insurance or employee benefits insurance.
Smart Business spoke with Sim about one-stop shopping for insurance and the benefits of one firm providing all types of coverage.
What should a consumer look for in an insurance firm?
While consumers would like a firm that provides many different types of insurance, they do not want a personal lines agency providing commercial insurance. Often, the problem for consumers is finding a firm that provides all types of coverage from numerous providers.
A consumer should ask a firm if it provides all lines of insurance and how many employees staff each department. Proper staffing is crucial to great service. You should also ask how the employees communicate among the team. You may end up with three different insurance companies, but you want one firm that communicates well with all the companies, among themselves and with you. This ensures everyone is on the same page and that you are receiving the best coverage possible.
Finally, you want to look for a competitive firm. Insurance is a competitive industry, and you want to make sure the firm is always offering the best coverage for a competitive price.
What types of insurance should a consumer make sure a firm provides?
The three main types are personal, commercial and employee benefits.
Personal insurance: This is a very common type of coverage and includes, but is not limited to, homeowners insurance, auto, umbrella, yachts and planes.
Commercial insurance: This type of insurance is common for business and property owners. It includes liability, auto, workers’ compensation, commercial property and umbrella insurance.
Employee benefits: This type of insurance is more specific for business owners. It includes group health, long-term disability, 401(k), etc.
What is the benefit of using one firm to provide all types of insurance?
If you can use the same firm for all types of insurance, it will know you and your account. The team with which you work will know where personal stops and business starts. Using a firm that provides all types of insurance provides coordinated insurance and coverage. This helps prevent gaps or overlaps in coverage. With a team that works together to make sure you have the correct insurance, one receives efficient and cost-effective coverage. Discounts may also be offered to consumers who purchase different types of coverage from the same insurance company or provider.
Why is it important for business owners to research insurance firms and look for good customer service?
As a business owner, you want to make sure all of your assets personal and commercial are properly covered, as you have so much time and money invested in these items. With a professional firm, a consumer will be able to consult a broker or insurance agent to answer any questions you may have. You do not want to have to call an 800 number to get service from numerous different firms in various places and time zones most are out of town, state or even in another country. Rather, you want one contact team that can be reached at one number.
If you are using numerous providers from different insurance firms, is it difficult to switch to one firm?
No. The new firm should be able to review your needs and assist in the transfer, taking pressure off of you, the business owner. Once you have selected a firm, you want to make sure you meet with your team to conduct annual reviews to ensure new assets are not overlooked or forgotten. With a constant contact at an insurance firm, you can make a simple phone call or send an e-mail prior to each purchase to make sure you are always covered. With a single firm, a daunting task, such as selecting insurance providers, becomes simple.
JIM SIM is president of Westland Insurance Brokers. Reach him at (619) 584-6400 or email@example.com.