Grabbing a quick bite at the airport, dinner meetings and long work days can leave little time for executives to practice a healthy lifestyle. However, even the U.S. Surgeon General is quick to point out that obesity is preventable.
Diabetes, high blood pressure, high cholesterol, asthma, headaches and sleep apnea are just a few of the medical problems associated with obesity. But David Oliak, M.D., medical director of the Chapman Center for Obesity, says that he frequently hears overweight executives complain about fatigue and shortness of breath, and those types of problems can eventually affect job performance.
“I treated one executive who weighed close to 400 pounds and just couldn’t get through his days. Now it has been two years since his surgery, and his life has been transformed,” says Oliak.
While bariatric surgery itself is not new, the procedure has evolved along with the knowledge of what helps a patient achieve long-term weight reduction.
Smart Business spoke with Oliak about what executives should know before considering bariatric surgery.
Who is a candidate for bariatric surgery?
Every day for the last 20 years, more than 4,000 people in the U.S. have become obese. Accompanying this trend, we have seen an increase in the number of patients for whom traditional weight-loss methods have not been effective. While maintaining a proper diet and exercise are still the preferred methods of treating obesity, when those methods are not successful, sometimes the medical conditions caused by obesity can pose greater health risks to the patient than the surgery itself.
Originally, when gastric bypass surgery was first introduced, the standard was that people 100 or more pounds overweight were considered obese and surgical candidates.
Now, we use a combination of factors and a total evaluation of the patient’s health in order to see if surgery might be the right choice. This risk profile which was developed by the National Institute of Health takes into account the patient’s body mass index (BMI) and any personal medical problems. Surgery sometimes is recommended when a patient’s BMI is lower but other conditions are present.
Are bariatric surgeries becoming more common?
Yes. With both increased demand and the change to laparoscopic procedures, more facilities have started to offer both gastric bypass surgery and the lap-band operation.
However, the increased surgical frequency has not always produced positive results. In some cases, patients have not been able to sustain their weight loss, and there is a learning curve for surgeons that accompany the change to the laparoscopic procedure.
What should I consider when choosing a surgeon?
It is important to ask how much experience the surgeon has performing the operation. It is a difficult procedure that requires the work of two surgeons and has an extensive learning curve. A surgeon is not proficient until he or she has completed 75 to 100 operations.
A recent study examined cases where the mortality rate was four times the norm for the procedure. It found that all of the excess mortality occurred when the surgeon had performed fewer than 20 operations.
All physicians should be benchmarking their results and demonstrating their outcomes, such as the types of complications and frequency. You should ask for these numbers and review them before making a decision.
What are the other program elements that correlate to success?
The American Society for Bariatric Surgery has set the criteria for a surgical center to qualify as a Center of Excellence. Because the surgery is a tool for weight loss not a cure it is important to have a program that includes patient education and support, so that weight loss can be maintained over time. Approximately one year after surgery, the body adapts. Then, only good habits will maintain the weight loss. That is why a Center of Excellence must offer a comprehensive program that includes both pre-operative and post-operative counseling.
What are some of the reasons to consider the surgery?
After gastric bypass surgery, 80 percent to 85 percent of the patients with Type 2 diabetes no longer require insulin; in fact, losing weight often eliminates the need for certain medications altogether. The laparoscopic procedures are less invasive and easier to recover from, and the average patient loses approximately 70 percent to 75 percent of his or her excess weight within one to two years after surgery.
Losing weight is not only good for your physical health, it is good for your emotional health as well. I performed surgery on one executive, and a year-and-a-half later not only had she lost almost 150 pounds, she felt so much better that she actually walked an entire marathon.
When Paul Viviano was named chairman and CEO at Alliance Imaging Inc. in 2003, he faced the challenge of reversing a slide resulting from a reliance on a single service providing mobile magnetic resonance imaging units, mainly to hospitals.
In the 1980s, mobile MRI units allowed even small hospitals to offer the advanced diagnostic imaging service. But as hospitals built their volumes of MRI tests, they found it more profitable to acquire their own units. Fixed-site clinics also started popping up, further softening the demand for Alliance’s mobile unit services.
If Alliance was going to survive, Viviano had to make it into a company that provided a wider range of emerging health care services. “When I arrived at the company, we had a single product that we were offering to our customers, and it was a product, unfortunately, that was in decline after 15 to 20 years of growth,” says Viviano.
In 2002, the company posted net income of $35.9 million. The next year, it posted a net loss of $31.6 million.
Something had to change.
Viviano didn’t take the approach of simply slashing costs to revive the ailing company. Instead, he took a multipronged approach to put it on a new strategic path.
He put together a new management team, evaluated existing and potential lines of business, and realigned how the company operates across its geographic footprint. “While you have to be efficient that much is clearly true it’s the investment of your capital into product lines and new businesses that will lead you to success,” says Viviano. “So for us, it was all those things new investments, new management teams and we’re going to invest our capital differently.”
Building a new team
Alliance Imaging would have to enter new lines of business and re-evaluate the way it did everything, so Viviano went about building a management team that could carry out the plan. A new COO was recruited along with three of four regional executives, and a new CFO was identified from within the company’s ranks.
Viviano says a turnaround requires a different type of person than would be needed at a company at another stage in its development, say in a rapid-growth period. “It was looking for the right person who wanted to work in a turnaround set of circumstances,” says Viviano. “A lot of executives love turnaround circumstances, a lot love a growing business in a different cycle. You really have to be especially focused on these turnaround efforts, and it requires the right kind of team member.”
Viviano says identifying those team members was mostly a matter of looking at track records. “The best predictor of how people will perform tomorrow is how they’ve performed historically, so it’s looking at footprints, looking at the performance results of a candidate,” he says. “Most of it’s evaluating and really drilling down on results and performance. Equally as important, the next step down the path is the behavior of how they’ve done it, outcomes that they contributed to, not just they worked at a good place or for a good company, but that they contributed, they headed up teams, they were responsible for projects, they got things done.”
Viviano says even with a strong team, the leader must set the tone to get its members to perform at their optimal level by setting clear expectations and delegating authority. “There’s only so much you can do as an individual,” he says. “You have to empower a team and you have to delegate and you have to hold people accountable, and they, in turn, need to do the same thing. That’s the only way to turn around a national company with businesses in 45 states. I could work 24 hours a day, and it wouldn’t make a difference. “But if you have a team that holds their team members accountable and they have the resources to get things done, then you can leverage that.”
Finding new business
Viviano’s new team set about determining what specific new business lines the company should enter, based on its core competencies and experience.
Alliance Imaging opted to offer the new positron emission tomography, or PET scan technology, in mobile units, to open fixed-site MRI centers and to invest in radiation therapy facilities, all businesses related to its core competencies. “From a strategic perspective, we developed a mini business plan for each new possible discipline, so for fixed sites, we developed a strategic plan, we looked at the market, we looked at the return, the growth possibilities,” says Viviano. “We looked at our strategy, how we would do it, the team it would require, the capital it would require, and built a business plan around it. Then we’d discuss the implications of going into the business. “We’ve done that for all the new businesses we’ve entered, and we’ve done it for a lot of businesses we decided not to enter but still went through the process of planning. That was driven by the executive team and just a lot of input from our regional executives.”
When it comes to decisions about which businesses to pursue or other major choices, Viviano and his team make them only after a broad discussion that includes the entire management team. “We make decisions by including the entire team in the discussion and the decision-making process about what it is we do,” says Viviano. “My sense is that our team works well because their opinions are valued, and there’s an opportunity for everyone at the table at the same time to weigh in on whether we should offer this benefit plan, should we sell that enterprise, should we go into this business, whatever the big question of the day is. And there is no right or wrong, or, ‘I’m going to defer to the old man because he’s the CEO, or to the finance guy because he knows all the answers.’ “We’re not deferring to anybody. We’re all at the table, we all have something to learn, say, contribute, and we’re going to shape the answer that’s best for our organization, that’s best for us. That’s motivating.”
Viviano says a good example of that is when his company decided to enter the cancer therapy business. “We did a lot of work and analysis of our public competitors, analysis of our site visits, talking to the manufacturers, talking to doctors, talking to hospitals, a whole collection of information, and then everybody brings what they have to the table. We lay out the implications, the pros and cons, here’s what it means if we go into the business, here’s the upside, here’s the downside, here’s the capital, here’s our management bandwidth,” says Viviano. “At the end of a long, well-orchestrated session, the answer came in thumbs up. It could have come in thumbs down, and that would have been the end of the discussion. “It wasn’t me saying, ‘Hey, I’ve got a great idea, we’re going to go into the cancer therapy business, you guys go figure out how to do it, and I’m not going to take “no” for an answer.’”
As if a single-product approach was not enough of a challenge for Alliance Imaging, Viviano found that it had acquired more than a dozen companies but had never fully integrated them into a single, cohesive, efficient corporate structure. “Our company was a roll-up,” says Viviano. “We had done about 13 acquisitions from the mid-’90s to 2000, so a lot of those companies were never fully integrated. A lot of them were still independent and autonomous in a lot of ways. They just became regions of our company. So we focused on a single strategy, but with a lot of autonomy in each, so the strategy became unified, not 10 strategies.”
Viviano saw an opportunity to not only reduce costs but to restructure the company into a more efficient management structure by reducing the number of territories from 10 to four, three of them with new vice presidents heading them. “We wanted teams with broader responsibility, with a span of control we thought was reasonable,” says Viviano. “Each region has roughly $125 million in revenue and enough size to have a strong team to feel like it has a significant amount of responsibility.
So we save some money. Think of a regional team with 10 guys sitting around the table. Think of a team with four people. It’s much more efficient in terms of dialogue and decision-making capabilities.”
Viviano says Alliance Imaging is still in a turnaround phase, but there are some key indicators that suggest that its strategy is working. “The results aren’t just in the financials,” says Viviano. “The results are customers calling us, our sales are improving. We’re recognized by customers, patient satisfaction, customer satisfaction surveys, we’re certified by a number of accrediting bodies, and the feedback from them is really positive.”
And on the financial front, the measures that shareholders watch the closest, the curve is on the upswing. Revenue for 2004 and 2005 was more than $430 million, and net income in 2005 was nearly $20 million after two years of losses. And the performance of its new businesses is already rivaling that of its MRI business on a revenue basis.
Says Viviano: “After about three-and-a-half years of this, our revenue from our two new businesses, fixed site MRI and PET ... the revenue for these two businesses will be greater than it was for our exclusive business four years ago.”
HOW TO REACH: Alliance Imaging Inc., www.allianceimaging.com
If you play an integral role in your company’s real estate decisions, why delay the process when there is so much at stake? Why begin negotiations without clearly defined business objectives so that by the time due diligence is completed, leverage has diminished in relation to a foreseeable lease expiration date?
“Far too often, companies employ a reactive approach to their real estate needs because of the temptation to focus on day-to-day activities or because they find it challenging to identify the right service provider,” says Kevin Mitchell, a vice president at Cresa Partners LLC. “By being pro-active about your facility requirements and beginning the process early, you can ensure that your next lease operates as an asset rather than a liability at a reduced cost.”
Smart Business talked to Mitchell about leveraging your real estate decisions.
When making commercial real estate decisions, what is actually at stake?
A company’s real estate impacts its efficiency, productivity, flexibility, culture, image and ability to recruit and retain employees. To the extent that your business objectives drive your company’s real estate and the two are properly aligned, your lease is an asset. If, on the other hand, your business must adapt to your real estate, your lease is a liability.
Numerous steps can and should be taken, in advance of negotiations, to ensure that your next lease is an asset.
- Define your company’s culture.
- Engage an architect to help establish space standards and conduct a programmatic analysis of your space needs.
- Benchmark your space standards against the rest of your industry.
The savings associated with these exercises often dwarfs the savings associated with even a properly timed negotiation.
Consider an example. Based on your preliminary work with an architect, you determine that you can increase the productivity among a subset of employees by as much as 5 percent by restacking your space. It may cost $300 to $500 per employee to conduct a boxed move, but assuming an average annual salary of $40,000, this exercise and minimal investment can generate a benefit of $2,000 per employee.
What are the benefits of starting early?
Because of the impact that your real estate has on your company’s overall objectives, the decision-making process needs to be initiated prior to the negotiating period, so that you have a more specific understanding of what you need.
Once your business objectives are established and you understand how your real estate can impact them, negotiations can begin. In the context of the negotiation process, the benefit of starting early is leverage.
A good real estate decision requires time for internal investigation and to investigate the market. One of the most common mistakes is that the market due diligence phase is not started early enough. By the time a company is poised to make a decision, its leverage has been compromised and less favorable economic terms result.
In the context of a renewal, the landlord faces significant costs to re-let your space in the event that you move. If you renew your lease, the landlord avoids the costs associated with marketing downtime and a new-tenant improvement allowance. However, this cost reduction will not be reflected in your new lease unless you have maintained your leverage by starting the process early and keeping the threat of moving credible.
Starting early has other benefits. You have time to engage in other leverage-generating activities such as lease auditing. To the extent billings have been miscalculated in the past, there is a strong basis for concessions in the future. You can also use this time to increase competition by enticing additional landlords onto the landscape of your negotiations. When you are poised to strike early, your credibility in the marketplace is bolstered, perhaps enticing other landlords to submit unsolicited offers.
Finally, you can impose your leverage on a broader scope of issues. For example, when you have the ability to integrate the project/construction management side of your facility into the upfront negotiations, you can impose your leverage in the context of the work letter.
While it is easy to become focused on day-to-day tasks and often challenging to identify the right service provider, the decision to start early will have a real profound impact on your next lease.
KEVIN MITCHELL, Esq., is vice president for Cresa Partners LLC. Reach him at (949) 706-6656 or firstname.lastname@example.org.
However, a recent Financial Accounting Standards Board communication, FASB Interpretation No. (FIN) 48, will make life a little easier for readers of financial statements by clarifying the potential tax liability that firms face. This guideline addresses tax reserves that business entities claim and requires them to acknowledge in the notes to their financial statements whether such positions will “more likely than not” be sustained upon a tax audit.
The interpretation follows the Sarbanes-Oxley Act passed by Congress in 2002, which is directed at improving the quality and transparency in financial reporting and independent audits.
“There was a lack of guidance on what constituted an uncertain tax position and how to present such a situation,” says John M. Wyson of Haskell & White LLP.
Smart Business spoke with Wyson about the impact the new interpretation will have on accountants and their clients.
What impact could FIN 48 have on consolidated financial statements?
This new guidance will create more consistency and comparability between reporting periods. Uncertain tax positions sometimes get a bad rap. It’s not necessarily that taxpayers are taking risky positions, it’s that the tax code is complex and sometimes convoluted and you (the preparer) may not know and the IRS may not know with 100 percent certainty what a tax position should be.
What this guidance does is ask companies to re-evaluate all of their tax positions (e.g. R&D credits, utilization of net operating losses, etc.) and apply a consistent ‘more-likely-than-not’ standard in determining whether to recognize such tax positions. That is, the firm must ask itself, If the IRS audits this tax position, will it more likely than not hold up? The interpretation will affect quarterly statements as well as annual statements, as the evaluation of tax positions must be made in each reporting period.
Can a company consider broadly accepted conditions to determine that its tax position will more likely than not be sustained?
FIN 48 is fairly specific in this area. The rules now require the taxpayer to assume that every tax position will be scrutinized by tax authorities based on tax law (i.e. tax codes, supporting regulations, court cases and the like). Those positions deemed uncertain may need to be disclosed under the new rules.
How will this rule improve financial reporting?
More information will have to be broken out to achieve the goal of consistency and comparability among companies. For example, there will be new disclosures in the tax footnotes to financial statements. These include the total value of uncertain tax positions; any additions and deletions to those positions in the current reporting periods; and the disclosure of open tax years (the years during which a return is subject to audit because, per the statute of limitations, the tax authority could still assess additional tax liabilities on the taxpayer).
For most companies, the new rule will affect how their 2007 financial statements are prepared. Among other things, they must report whether they are being audited. Prior to this ruling, it was vague as to what information had to be disclosed.
Why is there so much diversity in interpreting the more-likely-than-not standard?
There was not enough guidance from either the FASB or the IRS on it. The phrase could be interpreted in different ways, and this ruling provides more guidance. It provides more specificity in what ‘more likely than not’ means and gets us closer to 100 percent clarity.
Does this new rule lay out an audit plan for the IRS to use against companies?
The FASB considered this and, in essence, said that its purpose is not to protect taxpayers against the IRS, but to protect readers of financial statements. This interpretation is not requiring you to lay out the details of every tax position. The FASB’s message is that if you are taking a tax position that is so risky you are worried about the IRS seeing it, you shouldn’t be taking it in the first place. In the end, the FASB wants companies to provide valuable and consistent information to readers of financial statements. These rules get us ever closer to that.
JOHN M. WYSON is a corporate tax partner in the Irvine office of Haskell & White LLP, which provides a full complement of tax, accounting and auditing services to public and private middle-market companies. Reach Wyson at email@example.com or (949) 450-6200.
Alfred University, bachelor of science degree, ceramic engineering; MBA, University of Southern California
First job: Entry-level engineer
Whom do you admire most in business and why?
Marlin Miller, former chairman and CEO of Arrow International Inc. He’s a terrific human being, a major philanthropist, very smart, and he’s a very nice guy.
What is the most important business lesson you’ve learned?
You’d better be technically competent. You can survive a lot if you’ve got the goods.
What has been your toughest business challenge?
The early days of Ceradyne, when we had to ensure that we had the proper capitalization.
Describe your leadership style.
It’s generally informal, very entrepreneurial, very marketing-focused. I have a great deal of respect for people. I delegate responsibility to my key people.
For many CEOs, that ratio creates angst because businesses need to engage and manage relationships with attorneys, and there is a large pool from which to choose.
In fact, attorneys are needed to start, run and protect all businesses, says Mark Himmelstein, partner with Newmeyer & Dillion LLP. He says that even if a CEO views the need for attorneys as a necessary evil, an attorney can actually be a competitive advantage for your business when you have the right one.
Smart Business spoke with Himmelstein about what criteria CEOs should consider when selecting an attorney and the best practices for successfully managing the relationship and performance of lawyers and their firms.
What are the criteria that CEOs should consider when selecting an attorney?
First, the CEO should consider the experience and qualifications of the attorneys to make certain they are skilled for the area of need. Lawyers have become extremely specialized. Even within an area of expertise, you must make sure that the lawyer is right for that matter. If you have been sued and you foresee that you will be trying the case, you will want not only a litigator, but one who has significant trial experience with similar types of matters. In addition to technical skills, many lawyers have connections, whether with governmental entities or potential adversaries, that can help facilitate a positive outcome.
Second, meet with prospective attorneys face to face, as a means of evaluating the match between you, the culture of your organization and the attorney’s style. Remember that publicly, this person becomes an extension of your organization from a communications standpoint.
Third, make certain the law firm has the ‘horsepower’ and the time for your project and inquire as to who will actually be performing the work. Prevailing positively in some cases requires a team approach. You are entitled to know who will be working on the case and just how much time the lead attorney (usually the person you hired) will devote to the matter. This will avoid the scenario in which you hire the big name lawyer and then are disappointed to later learn that he or she may not have the necessary time to devote to your case and have delegated much of the work to an associate with less experience.
Fourth, ask for project cost estimates, hourly rates and references. Much like hiring other consultants, it is important to actually check the attorney’s references and ask why that law firm was originally selected and how it performed.
How should CEOs establish and communicate performance expectations to an attorney?
There are two aspects to the attorney’s performance. First are the goals for the outcome of the matter. Second are the client’s reporting and procedural requirements that the attorney must satisfy. The attorney and client should develop these goals at the outset and revisit them throughout the engagement. Establishing deadlines that keep in mind those items that are within the attorney’s control, and communicating in advance your company’s process for decision making will help assure that results and timeliness expectations are met.
What types of on-going communication should a CEO require from an attorney?
The CEO should establish up front the frequency of expected communications and the best means to communicate such as phone, fax or e-mail. Many companies require scheduled written communication such as a monthly report that is supplied to the board updating them on all pending legal matters. By communicating those requirements at the outset of the engagement, you will ensure that your attorney sets aside adequate time each month to meet the deadline.
In order to get the most out of your phone calls, try to schedule them in advance. This avoids the potential for ‘voicemail tag’ or an unproductive call with an unprepared counsel and potentially helps to lower costs in that the calls are less frequent and more efficient.
What types of information should a CEO supply or not supply to an attorney?
Tell and give your lawyer absolutely everything. Don’t leave anything out. Even if some of the facts are detrimental to the case, it is important to know those up front. Your communications with your attorney are privileged, so err on the side of telling everything. The bad facts usually come out eventually, so you want to formulate a plan to deal with them at the beginning.
MARK HIMMELSTEIN is a partner with Newmeyer & Dillion LLP in Newport Beach. Reach him at (949)271-7217 or firstname.lastname@example.org.
“We’re serving a very large unmet need in the market because most technology companies, particularly smaller and mid-sized companies, simply don’t have the scale or expertise or experience to build their own in-house licensing companies,” Ryan says.
With the patent-licensing industry estimated to grow to $500 billion, there is a lot of opportunity for Acacia to grow. In the first half of fiscal year 2006, the company has already matched 2005 revenue of $19.7 million.
Smart Business spoke with Ryan about how he defines success and how he finds the right people to help him get there.
How have people played into your success?
You hire people much smarter than yourself at all levels. You can’t do everything yourself, so you have to surround yourself with very experienced, motivated and talented people.
The top management of the company is very much a believer in a horizontal company and giving the people the stake and the responsibility and the rewards. The key thing is to empower the people who are in charge ... but by the same token, incentivizing them very well for their performance and not trying to micromanage or overmanage.
Find the right people who want to take responsibility and grow the company, and give them the authority to do that.
Why do you do that?
The best people are ultimately what makes a company succeed. Many CEOs don’t want anybody in the company who’s going to upstage them or look better than them, so from a defensive standpoint, they tend to hire down as opposed to hire people that have more experience than they do in every area and listen to what they say.
The biggest failure I’ve found, particularly in small companies, is the originator of the company just wants to do everything and assumes that they know how to do everything better ... (or) you have a dominant person in charge and, really, the key people are intimidated from taking risk. And usually those companies don’t grow very well.
The key for a CEO is to be the catalyst, help identify the unmet need in the marketplace and make sure the company stays on its path of serving that market. You’ve got to empower highly motivated people to be willing to take some level of risk. Otherwise, your company is going to stagnate.
What else can prevent growth?
The biggest one in history has always been not being adaptable to change. Great companies are very adaptable to change. They see new market opportunities, and they’re willing to take risks and move quickly.
If you go back to the railroads, they thought they were in the railroad business. Well, they were really in the transportation business. You have to look at your business in a broader spectrum of the customer, not necessarily how you, at that moment in time, are serving the customer.
Your business is always serving the customer. And if you can do it better and at a more innovative basis than anyone else, then your company is going to sustain. Seek out the opportunities and modify your business accordingly.
How do you build a good reputation?
We pride ourselves, when we’re in discussions, on giving the other side all of the information they need, as opposed to trying to withhold the information. If you’re willing to be all-cards-up with somebody and lay everything out, we feel that’s building a great reputation as opposed to companies who act in their own best interest.
If you’re going to have a sustainable business ... it comes down to the real simple thing: Treat people like you’d want to be treated. That goes a long way, and it’s amazing how many companies can along the way forget that basic premise.
How do you define success?
A motivated group of people with a common goal. The energy that comes from that and the inspiration that comes from that is what really builds great companies. There are some companies that make money.
There are some companies that serve a market adequately, but I think there’s certain companies that just have an energy. They’re on a mission. Their mission is to simply serve customers better than anybody else.
A company like Starbucks, when you think about it, they weren’t really serving an unmet need there were coffee shops around but they did it in a way that made people want to go to Starbucks.
HOW TO REACH: Acacia Technologies Group, www.acaciatechnologies.com
But there are some risks associated with such projects. There are numerous laws and regulations surrounding the issue, and the vital need for investors and developers to be sure they have sufficient risk transfer.
Smart Business spoke to Rob Ranallo of DLD Insurance Brokers Inc. about this growing trend and how businesses can avoid the hazards that could follow.
How has the need for insurance covering condominium conversions changed over the past 10 years?
It seems to have increased or at least resurged greatly. Clients are seeing more opportunities linked with, hopefully, a better rate of return on their investments by buying apartment projects and then rehabbing them into condominiums for sale in today’s tougher marketplace, where there continues to be a high demand for affordable housing in Southern California.
But there is a very limited insurance marketplace, and carriers are closely underwriting the exposures due to heavy litigation in the past on condominium development. California laws have changed recently, making carrier underwriting standards a bit less tough. Carriers mandate brokers to send complete applications that include the claim history for owner/developer and general contractor if an outside general contractor is used, as well as a detailed forensic physical property inspection report and budgets on each location to be remodeled.
What are the major liabilities and risks facing developers of condominium conversion projects?
Courts have yet to determine the full extent of liability a developer would face on condominium conversions, so conservative clients and their counsel are very cautious and treat the projects like new construction. This translates in the purchasing of multi-year wrap-up/Owner Controlled Insurance Programs for liability insurance that include the owner, general contractor, most subcontractors and a 10-year products-completed operations extension to protect them from the 10-year property damage statute in California.
It is important that policies are purchased without any prior work exclusions. Also, some limited coverage for the architects and engineers is added when possible as their policies like most subcontractors’ will exclude work done on condominiums or apartments.
Wrap-up policies take more effort on behalf of the broker as well as the developer, as there is more administration of the subcontractors as well as contract amendments that must be made with counsel’s insight.
How fast is this business growing?
We are quoting quite a few risks, but only about 10 percent of them have come to fruition. The cost of these programs can be expensive, so the acquisition cost of the existing project versus insurance costs must be closely reviewed.
What liability statutes are in place?
Various statutes are in place dictating the period of time in which an owner, developer or contractor is liable for bodily injury and property damage to third parties. State statues appear to apply to new construction, but again there are a lot of unknowns as to whether the original work will be brought into a claim. The gray area is whether the statute will apply if the renovation does not involve structural changes: Is it a facelift or does it qualify as new construction?
How can developers protect their assets?
Consult with counsel in respect to setting up an LLC as well as how the statute may apply in respect to the scope of remodeling they are considering.
Consider strict contract indemnity wording with sellers as well as arbitration clauses with potential homebuyers.
Consider self-insuring to a certain level that they are comfortable with, to keep insurance costs down.
Buy appropriate limits, since condominium projects have the potential to generate large construction defect settlements, at least in the past or in a depressed economy.
Excellent customer service and warranty call follow-up after the unit is sold can go a long way with buyers as well to deter potential claims.
Are there any other concerns businesses should be aware of?
Make sure the property/fire/builders risk insurance coverage is placed correctly. This involves obtaining coverage for the entire project term, usually beyond one year; being sure coverage is there for existing structures as well as work to be done; and making sure coverage stays in place until the actual unit sells versus when the remodeling work has been completed. This last issue is especially important in this slowing economy when standing inventory may increase considerably.
ROBERT RANALLO is an assistant vice president at DLD Insurance Brokers Inc., responsible for marketing and risk management services to Southern California-based clients involved in residential construction and property management. Reach him at (949) 221-1788 or email@example.com.
Given the wide spectrum that this discipline covers, neurosurgeons must be well-versed in a wide array of surgical treatments. “On top of experience and residency at a trauma center, I’ve also undergone fellowship training in cerebrovascular surgery as well as skull-based neurosurgery,” says Peyman Tabrizi, M.D., a neurosurgeon at Western Medical Santa Ana.
Smart Business spoke with Tabrizi about neurosurgery, neurovascular emergencies and technological advances in the neurosciences.
What types of conditions do neurosurgeons typically treat?
We deal with various types of intracranial hemorrhages. We also work with spinal trauma which includes fractures or dislocations of the spine. When dealing with trauma you have two forms: penetrating trauma and blood trauma. Forms of penetrating trauma include gunshot wounds or stab wounds to either the head or the spine. Forms of blood trauma include automobile accidents, motorcycle accidents and falls.
As far as non-emergency cases are concerned, there is a whole gambit of pathologies that a neurosurgeon deals with: brain tumors, spine tumors, brain aneurysms and hemorrhagic strokes to name a few.
How does a neurosurgeon treat spinal cord trauma?
With spinal trauma we try to take pressure off of the spinal cord. If there is any fractured portion of the bone that is pinching the spinal cord, we remove the fragments so that the patient can become mobile again. When a trauma patient comes in with a spinal injury, he or she has to be bedridden until the spine is stabilized. If it’s a thoracic or a lumbar spine, then a vascular surgeon or a trauma general surgeon is needed to help with the exposure. Once it’s exposed, the neurosurgeon can address the situation by determining the degree of damage.
What is the procedure for someone who has suffered a skull fracture?
If the patient is involved in a motor vehicle accident, or falls and sustains a skull fracture with internal bleeding, then he or she is taken to the operating room immediately. A skin incision is made in the area of the bone that is fractured and the brain is visualized. Bleeding is controlled, and any minimal blood clots are evacuated. Then the bone is replaced and secured, the fracture is repaired, the skin is closed, and the patient can return to the ICU.
There are some instances in trauma where the brain tissue is so damaged that there is significant brain swelling. In such conditions, the bone flap which is the portion of the bone that is removed and set aside in the operating room until the brain is addressed may need to be stored until the patient has recovered from the acute phase of insult.
What kinds of advances in neurosurgery have occurred over the past few years?
There have been many advances. We have better equipment and improved instruments to deal with neurological cases such as spinal and brain injuries. For example, we now use a navigation system that allows surgeons to navigate within the brain to a specific location. When a patient is taken to an MRI or CAT scan suite, special markers are placed on the scalp which transfers images to the data base in the operating room. The data is used to form a 3-D image, which allows for various views of the brain. During the operation, the images that are obtained are used to help a surgeon hone in on a lesion with more precision.
Also, significant advances in research, associated with both trauma and nontrauma neurosurgical issues, have been made. For example, the appropriate management and approach to stabilization of spinal fractures has transpired through many years of research.
How has the development of minimally invasive techniques aided neurosurgeons?
These days, the amount of skin tissue that is needed is quite small to perform the removal of herniated disks as well as performing spinal fusion. In the past, a neurosurgeon would normally need to make a long incision to be able to perform the operation. Now, with minimally invasive surgery, a very small incision is made, and through that small hole, the same operation can be performed.
How important is continual innovation in the field of neuroscience?
Without continued research and progressive innovation, we would not be able to see increased survival rates and increased improvement in functionality of patients. Ongoing research and advancement in both science and technology helps provide better patient care.
PEYMAN TABRIZI, M.D. is a neurosurgeon at Western Medical Santa Ana. Reach him at (714) 834-0439 or firstname.lastname@example.org.
Bob Deuster, chairman and CEO of Newport Corp., more than doubled the size of the company in one of those single swings, but he is quick to point out that a successful acquisition isn’t a just a matter of signing contracts and cutting checks.
“If you think it’s just a deal, and just buying a company without all of the other pieces being thought through, it’s a 50-50 chance,” says Deuster.
Newport’s 2004 acquisition of a complementary laser products company took its annual revenue from $118 million in fiscal 2003 to $404 million in 2005.
Founded in 1969, Newport developed as a company that provides the enabling technology, optics, motion controls technology and optical tables that are combined with the light sources produced by other companies that are used in laser devices.
Two principal trends the introduction of laser technology in defense systems and the use of fiber optics and laser technology to speed communications helped boost laser applications from the research lab to more broad commercial markets.
Those changes made it clear to Newport that there were lucrative opportunities for companies that could take advantage of the expanding demand for laser devices in the commercial marketplace. And that potential was the impetus for Newport to grow into not just a bigger company but into an integrated solutions provider, the first in the laser industry.
“I came into the company in the mid-’90s, when our company was still primarily focused on research, and our board of directors saw this trend and said we need to turn this company into one that can serve the industrial markets as well,” says Deuster.
The company was well-positioned to provide solutions into various markets, relying on other manufacturers to continue to provide the light source itself.
“So we developed our business model around this integrated solution strategy in the mid-’90s ... not really caring whose light source was used, but we incorporated all of our technology into the solution,” says Deuster. “But as we tracked into the early 2000 timeframe, we saw that we were going to be inhibited in our growth unless we actually had light technology to supply along with it. So we got interested in looking at what laser manufacturers were out there so that we could augment our company through acquisition or partnership so that we could build a strategy, a platform for growth for the next 10 or 20 years.”
Identifying a target
The solution came in the form of Spectra-Physics, a company whose forte was the development of the light sources used in laser instruments, the complementary technology piece to the equipment manufactured by Newport.
“We looked at Spectra-Physics as a prime target for us because they were a company that provided state-of-the-art laser technology, they covered most of the same markets that we did ... plus, they have a lot of factors that were important to us, such as a similar heritage, legacy and brand,” says Deuster. “Their culture was not too different from ours in terms of how it grew over the last 40 years, so we saw that as an important catalyst for building an integrated company going forward.”
Deuster initiated the acquisition talks with Spectra-Physics with a tightly drawn group of executives from both companies to flesh out what the company might look like after the two combined.
“Part of the success was we kept the negotiations at a very small group level, just the senior management level,” says Deuster. “It started in the discussion phase early on, meeting with Spectra-Physics’ management team, having an understanding of how organizations might be shaped, what the growth objectives might be, assuring that we were executing clearly.”
Once a deal was in hand, Deuster and his team hit the ground running the following day to communicate the news to the entire organization.
“We went on the road to share with everybody in the company this vision of a company that had an integrated solution as its strategy, and we did that by myself personally as well as my staff touching the organization, but also having Spectra-Physics people talking to Newport people, so there was an understanding of what the organizational impacts would be,” says Deuster.
A video of Deuster explaining the rationale for the deal was broadcast to everyone in both companies the day after the announcement. He and his senior managers followed up with face-to-face meetings at several major company sites around the world and had several follow-up meetings leading up to the closing.
Deuster structured the transition to a single company so that both sides had a hand and a stake in the outcome.
“My strategy was to effectively balance the management team on both sides,” says Deuster. “This wasn’t viewed as a Newport takeover of Spectra-Physics. We put the best talent we could in jobs and in some cases, those individuals had to change roles, so we had a balanced management team from a Spectra-Physics and a Newport point of view.
Deuster changed his own role in the corporation, moving away from the day-to-day, hands-on operation to a more strategic role in the much larger company. Deuster says he created a chief operating officer position within the company to drive operational excellence and keep the company focused on its goals and objectives.
“I tend to focus on the bigger picture, the longer-range objectives, involvement at the business development level side, acquisitions side and with key customers,” says Deuster.
One of the obstacles to mergers in the laser products industry has been the specialized nature of the technology and the relatively narrow body of expertise that individual companies tend to possess, making it difficult to bridge the gap between the two to produce an entity that can create synergy with two different competencies.
“We had to bring two companies together that had distinctly different product lines, and we had to combine our sales teams so that they appeared as what we call one voice or one face to the customer,” says Deuster.
Rather than create a sales force in which each member was versed in all aspects of the technology, Deuster leveraged the expertise of each organization’s sales reps in a team concept.
“There’s no question that our Newport sales force was very much oriented toward the optics, motion controls and vibration isolation products, and the Spectra-Physics team’s was light source,” says Deuster. “We knew right up front that we didn’t want super salesmen who had all the knowledge that they could explain to the customer any time of the day.”
Newport teamed up, either regionally or by top-tier accounts, Newport product specialists with Spectra-Physics reps. Goals for the teams were consolidated so that everyone shared responsibility for success, making each dependent on the other, says Deuster.
“We introduced a selling strategy I call hybrid selling that created integrated solutions for customers. Where you normally had a sales team that would sell lasers and then the Newport team would sell the other products, we now have account teams that will go in and sell the customer a complete light system. And that we did mainly because there’s a lot of value captured in the total solution.
“We take responsibility for the customer for the performance of that solution. We gave our sales teams a much stronger competitive advantage in selling that way than we did before.”
Creating the hybrid selling model required a lot of cross-training to build awareness on both sides of how laser products sales transpired and how the sales of the follow-on optics and motion control occurred. Deuster points out that each side of the sales team was able to share leads very quickly and get earlier indications that there would be a larger sale available because the Newport people were involved at the very first stage of a laser inquiry.
“Within six months after the deal was announced and done, we had sales teams that were account selling into all the target markets we had identified,” says Deuster. “I think that’s one of the key success factors.”
The role of technology
While much of the emphasis when it comes to combining companies is placed on the people factor, Deuster heavily emphasizes technology as a means to glue two entities together.
“We’ve moved off those days of only talking about integration and starting on our growth track two years ago to even more tightly couple the company, not through just people and management, but we’re changing our information system within Newport that literally breaks down all the walls between the divisions,” says Deuster.
The heart of it is a new material resource planning system that integrates the companies’ systems into a single global information system that can facilitate design and manufacturing functions in any of Newport’s locations worldwide. That gives the company the capability of planning and launching production of its products in any of its plants for customers in those locations. It also provides that sales team with better information on market dynamics and customer needs.
“Systems can help amplify the pace at which companies become more tightly coupled, and we believe that communications is everything if you’re going to operate on a global scale,” says Deuster. “So it’s more than people; it’s building your business around information technology.”
While integrating two companies can be a complex process, Deuster warns that letting the process drag on can impede progress and limit its success.
“I believe very much in speed of execution once you decide what you’re going to do, because what it does is it tends to get everyone focused on the end goal, as opposed to what they’ve got to give up along the way to get there,” Deuster says. “Usually, that’s the hardest part of a change process: ‘What am I giving up as opposed to what am I getting?’”
That’s why Deuster created a COO position that went online the day the deal was closed. The COO and the CFO led a team to focus on the main deliverables that were the most important integration factors, including cost reductions, organizational change and realization of synergies that would be necessary to make the deal work optimally.
“It’s easy to buy companies,” says Deuster. “It’s very hard to make them productive very quickly. One of the things that we believe in here is you need to envision how the business is going to operate after the deal, and you need to let the management team know what to expect. Eliminate the uncertainty.
Whether they like it isn’t the point. The point is there has to be this clarity of where we’re going and how fast we need to get there.”
How to reach: Newport Corp., www.newport.com