Orange County (1091)

Monday, 26 October 2009 20:00

3 Questions

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Harvey Oringher is the chairman and CEO of Theodora Oringher Miller & Richman PC, where he focuses on managing the firm from both a strategic, long-term perspective as well as on the day-to-day aspects. Oringher understands the firm’s business clients and constantly strives to add the most value to their services.

Q. How can following legal advice save money for a company?

Regular communication between legal counsel and the client will allow for substantially lower legal bills and also will allow dramatically more time for business executives and other officers to devote to their business without being bogged down by legal issues. Early and frequent communication with counsel will allow for the resolution of business disputes before they become larger, more costly issues. Establishing this kind of relationship serves both to avoid current problems as well as help the owners anticipate and avoid future problems.

Q. When should a company seek legal counsel?

A company should seek counsel before it is needed. Unfortunately, most companies avoid seeking legal counsel unless and until it is a necessity and, by doing so, fail to address problems at the outset when costly errors could be avoided. Ideally, the company establishes a relationship with counsel at the beginning, perhaps negotiating a relationship that allows the attorney to provide useful input in exchange for the opportunity to be compensated when the legal tasks require more acute attention. This does not mean that the attorney determines the course of the company, but management can use counsel to weigh in on the potential risks inherent in any corporate decisions and actions.

Q. Can a company negotiate a flat rate for some legal services?

A company may seek a flat-rate retainer that covers some of the day-to-day types of circumstances that come up in the company — issues that can be handled through a quick phone call or e-mail, where the counsel can quickly get the client on the right track. Both our attorneys and our clients have found in the long run that this arrangement dramatically reduces legal fees because the clients are using us more regularly to quickly deal with issues before they are faced with problems that can result in costly litigation.

Monday, 26 October 2009 20:00

Getting lean

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For every business seeking marked improvements, there are scores of management theories awaiting their consideration. Every few years a new solution, buzzword or fad surfaces — from management by objectives, matrix management and total quality management to reengineering, quality circles and even Dilbert’s principle, based on the popular cartoon character’s musings on how to better the workplace.

While theories grow and wane based on their real-life contributions to better management and workflow, one that is appearing to stick is the “lean” concept, a term describing Toyota’s decades-old industrial principles now embraced by many manufacturing companies.

Lean processes are emerging as a significant factor in the delivery of health care services. To learn more, Smart Business turned to Barry Arbuckle, Ph.D., president and CEO of MemorialCare Health System and past chair of the California Hospital Association.

Why is health care turning to lean concepts?

Health care organizations are facing declining reimbursement, escalating costs and a continual demand for increased value, quality and outcomes. The lean approach — when well understood, planned and executed — can add value to those we serve while minimizing waste, eliminating errors, utilizing fewer resources, reducing unnecessary costs and increasing throughput. It provides a meaningful pathway for continuous and prolonged improvements in streamlining processes and improving the quality and efficiency of care delivered to our patients and communities. Patient satisfaction can rise significantly as well.

How does the lean process impact staff?

The lean management philosophy is designed to create a sense of purpose, team problem-solving and long-term thinking by proactively engaging employees, physicians and patients in lean workshops that redesign patient care from the ground up. This significantly reduces redundancies, simplifies processes of providing care and standardizes the workplace environment, while also breaking down bottlenecks and miscommunications.

By implementing lean methodology, we successfully remove barriers experienced by staff as they care for our patients and their families.

What happens in the workshops?

During five-day workshops, participants use a Rapid Process Improvement theory to methodically and rigorously reengineer work processes. This helps to accelerate improvements and produce dramatic reductions in cost and time associated with the countless processes found in the health care setting. We also focus on Rapid Process Design that, after another five-day workshop, results in implementing new or dramatically redesigned processes.

Our Focused Improvement Workshops replicate successful programs from one area into multiple locations throughout our organization. The ideal lean system process designs simple, effective systems, recognizes that there is always room for improvements and continuously enhances the system design.

Can you provide examples of how lean works?

At Saddleback Memorial Medical Center, workshops helped participants identify ways to successfully remove waste and redundancies throughout the processes of scheduling, registration, exam and result report turnaround time in outpatient imaging. Patients now move more smoothly through the system and receive diagnostic results sooner. Lean implementation within the Saddleback Memorial Medical Center’s surgery and patient care units improved time in accessing medications and supplies. At Orange Coast Memorial Medical Center, the workshops resulted in inventory controls that ensure equipment and supplies are available in the right place, at the right amount and at the right time. Our teams created more user-friendly workspaces that support smooth patient flow with reduced wait time. At Long Beach Memorial Medical Center, process improvement impacted patient flow, reduced the number of process steps and distance traveled, thus allowing staff to spend more time on care at the bedside.

Where else have you seen improvements?

There are myriad examples, including improving efficiencies in the discharge planning process for patients discharged to a skilled nursing facilities and reducing the turnaround time for physicians and nurses to receive results when patients have their blood drawn. One of the best outcomes is the impact on the morale, pride and engagement of our staff with 100 percent compliance in sustaining the changes that employees, physicians and patients have helped design.

How has it impacted your bottom line?

In one year, we were able to eliminate 123 unnecessary process steps, make 1,302 square feet available and reduce the distance staff travels in carrying out their responsibilities by 730 miles. Return on investment during this fiscal year should reach $3.8 million, rising to $17.2 million over the next three years. This helps us curb rapid escalating health care costs and notably improve care of our communities. MemorialCare Health System, a lean process innovator in the health care industry, offers expertise to help others adopt these principles into their own workplace.

BARRY ARBUCKLE, Ph.D., is president and CEO of MemorialCare Medical Centers (www.memorialcare.org) and past chair of the California Hospital Association. Reach him at arbuckle@memorialcare.org or (562) 933-9708. MemorialCare Medical Centers include Saddleback Memorial Medical Center in Laguna Hills, Orange Coast Medical Center in Fountain Valley, Long Beach Memorial Medical Center, Miller Children’s Hospital in Long Beach and Saddleback Memorial Medical Center in San Clemente.

Monday, 26 October 2009 20:00

Rebuilding a business

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Ultimately, it was Andrew A. Fimiano’s discomfort that led to a transformational decision. The president and CEO of Southland Industries was squirming after enduring 45 minutes of relentless questioning from business consultant and “Good to Great” author Jim Collins.

Fimiano went to Collins in 2002 for advice on improving his mechanical engineering, construction and service firm. Although he’d grown revenue from about $10 million when he came on board in 1982 to $323 million in fiscal 2001, the company was starting to lose financial traction.

Collins’ interrogation revealed that Southland was splitting its focus across two business models. It lost 22 percent of its profit doing traditional “plan and spec” work, which involves bidding to build another firm’s design and charging customers for adjustments to those designs during construction. The company relied on “design-build” projects — designing and constructing its own plans at a set price — to make up for the loss.

Collins’ final question led to Fimiano’s revelation: Why would you keep offering a service that eats up nearly a quarter of your profit, causes the bulk of your legal problems, fosters customer dissatisfaction and burns out your employees?

Fimiano didn’t have an answer, so he knew change was crucial. He vowed to make the company 100 percent design-build in the next three years.

“Until you really look at the metrics, until you really look at it the way Jim Collins looked at it and the way we started to look at it, you think you’re doing OK. The overall company’s making money. One component of it isn’t, but it’s OK,” Fimiano says. “It caused us to really focus on what we did best rather than just being OK.”

This new direction wasn’t just a change for the 1,750 Southland employees but for the entire marketplace, as well. Fimiano knew it would take relentless effort to convince employees and customers alike that OK wasn’t good enough.

“We were always good,” he says. “But how do we get to the next level? How do we become really great?”

Help employees visualize change

Fimiano knew he had to drive the change throughout the company and beyond. But first, he had to topple the initial domino by getting his employees on board.

“Before they can go out and explain it to a customer, they’ve got to believe it,” he says.

He started by communicating why the change was an improvement. This was easy to explain to the handful of executives who sat in on the Collins consultations; they had already examined the data and debated over the options with Fimiano. But when the message came down to the employees who would be most impacted by the change, he had to pump up his powers of persuasion.

“There’s got to be a lot of frequency and a lot of metrics and a lot of telling the story over every chance you get,” Fimiano says. “Every time I get a group of employees today, I tell them why we want to do design-build and the benefits of it. It is the best thing for the customer, it is the best thing for our employees and it is the best thing for our stockholders. You weigh all three of those things.”

To prove that the change was the best thing for each group, Fimiano looked at data from the company and beyond. Using both internal and national statistics, he compared the time and money demanded by both types of projects as well as the results in terms of price, quality and satisfaction.

But a change this big is overwhelming enough without a deluge of statistics. Condense the data to make it digestible for employees. The more you can convey through a quick glance — as opposed to wading through pages of numbers — the better.

“We try to look at big items in bar graphs so it’s not so much statistics,” Fimiano says. “We try to keep it simple. Honestly, a lot of numbers and statistics get crunched to make the bar graphs, but what they ultimately see is usually pretty simple.”

But repetition and statistics alone might not be enough to propel employees into execution mode. To motivate them to internalize the change, you need to make it seem tangible by painting a picture of what it will be like to reach your goal.

“When you get to utopia, what’s it going to feel like?” Fimiano asks. “We sat down with our crystal ball, if you will, and said, ‘What’s it going to be like when we get there?’”

That prediction comes partly from hopeful aspiration but mostly from data. Fimiano, for example, looked at satisfaction ratings from the two types of work to create his visualization that a design-build firm would sustain happier customers and happier employees.

“That’s helped a lot, just saying, ‘OK, here’s what we want to do and here’s our goal, but here’s what it’s going to feel like when we get there. Here’s why we want to get there,’” he says.

Zoom in on resistance

Driving change isn’t just about securing buy-in but also recognizing who’s on board and who needs a more intimate nudge.

For Fimiano, it’s an easy distinction to make.

“The key to getting on the same page is a lot of rigorous debate,” he says. “If there isn’t somebody challenging and asking questions and being the devil’s advocate, then you’re not going to get there.”

“The people that are on board will ask the toughest questions,” he says. “They want to make sure that they understand it. ‘What about this? Did you think about this? How are we going to do this?’ They’re trying to figure out how they’re going to execute this plan.”

The employees who aren’t buying in to the change usually stay quiet during meetings. Those are the ones Fimiano approaches one-on-one.

“It’s not going to be as bad as you think,” Fimiano told them. “Let’s just take this one step at a time. You don’t try to eat this three-year goal in one gulp. Every three months, let’s try to improve.”

The employees who had the biggest changes to make were generally the most reluctant. The division leader of Southland’s Southern California region — a location that relied on plan-and-spec work for about 85 percent of its business — was one of the most noticeably upset. He feared the change would put him out of the job completely.

That’s where you need to step in. Get involved to make the change a team effort rather than survival of the fittest.

“It’s into frequency and into details and into time spent face to face with a lot of the people that have concerns,” Fimiano says. “Show them with actual circumstances and actual statistics that they can make this change and that you’ll help them make it. [Tell them], ‘You’re not going to do it alone. We’re not just going to say do it. We’ll get you help to make this change.’”

To bring them aboard, you have to make the goal achievable. Help them break the endpoint into more tangible steps.

“You don’t try to climb the mountain in one day,” Fimiano says. “You have base camps. We actually use the term base camp, where you set out small goals along the way. If we ’re 15 percent design-build today, in three months we would like to be 22 percent. If you see that progress, it stimulates more progress.”

Drive change beyond your office

If getting employee buy-in is the first domino, then your next task is to keep that momentum rolling outside of your office. Equip employees to get customers on board, as well.

“Most of it is spending time with people one on one, spending time showing them how to do it,” Fimiano says. “I would take on the customer that had the most resistance and show them how to do it.”

Fimiano had plenty of opportunities, because the change faced significant resistance in the marketplace. Many hospital builders, specifically, shied away from the idea of design-build. So Fimiano went straight to the CEO of one of the largest builders and asked for only 30 seconds of his time.

It’s important to keep your message simple and succinct with your customers. Instead of diluting your presentation with pages of background and reasoning, jump straight to how the change affects them.

Fimiano laid down two floor plans — one design-build and one plan-and-spec — and let the difference speak for itself. Instead of just telling, he showed the customer how the change would improve the quality and lower the price of a project. That short-and-sweet approach has already manifested into several projects with that builder.

“If you can just show them the difference, there’s lots of data that will demonstrate that what we’re doing is superior to the old way,” says Fimiano, who equipped employees with statistics to support the case with customers.

“The point we’re making is (the change) is much better for the customer, ultimately,” he says. “The final product is going to be less expensive, it’s going to be faster and it’s going to be better quality. So we keep track of all those metrics so that our people, when they talk to a customer, can say, ‘We’re not just doing it because it’s good for us. It’s good for you, and here’s why,’ and we back that up with a lot of statistics.”

If you just handed employees stacks of statistics and set them free, you’d be giving them bullets but no gun. You must also train them how to use the data. For Fimiano, this included role-playing and prepping for the worst-case scenario.

“Typically, you know what a customer’s going to say: ‘I’ve always done it this way. Why would I want to change?’” he says. “Ask yourself, ‘What are the worst questions that they could ever ask me?’ and be ready for them. And then usually the other ones are easier.”

Fimiano asked employees to list the queries that would freeze them. When you talk through the best answers for those, you build their confidence. If employees are prepared for curve balls, their responses to basic questions will become second nature.

Don’t stop

Change has to start at the top. But Fimiano says the biggest mistake would be assuming that you could just set the change in motion and walk away, expecting it to transpire unassisted.

Executive involvement is key throughout the entire process. You have to stay persistent and committed until your employees reach the goal.

“You can’t take a step back,” Fimiano says. “A lot of people tried me along the way: ‘Do we have to do it in three years? Can we do it in three and a half years? Can we do it this way?’

“You’ve got to be really steadfast. You’ve got to be black and white. And you’ve got to say, ‘No, this is what we’re doing. We’re going to help you get there, but this is what we’re doing. We’re not going to change the goal.’”

Fimiano set the pace by cracking down on the company’s project selection. He gave employees time to phase out of plan-and-spec projects in progress, but then took a disciplined approach to future plans. Working against the goal simply wasn’t allowed because the company stopped accepting plan-and-spec projects.

Even after the company stopped doing plan-and-spec work in 2005, Fimiano continued watching metrics to illustrate the progress.

“The best [monitoring tool] for a lot of people is metrics,” he says. “When they start to see the metrics, it’s hard for them to fight that we’re doing the right things.”

From 2003 to 2008, for example, Southland’s net income rocketed from just more than $600,000 to $44.6 million, and its gross profit margin grew from $27.6 million to nearly $98 million. In the same time frame, return on equity increased from 3 percent to 67 percent. And last September, Southland ended fiscal 2008 with $471.6 million in revenue.

“Because we pushed so hard,” Fimiano says, “we were able to actually change the market and change the way they looked at things.”

How to reach: Southland Industries, (949) 440-5000 or www.southlandind.com

Monday, 26 October 2009 20:00

Multisite organization

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No matter what business you’re in or where you’re located, every business needs to communicate. If your customers can’t reach you and/or your employees can’t reach your clients, your business is at a standstill — no matter how great your product may be.

Every business knows it needs to communicate, but many don’t spend the time or the effort to put together a truly functional communications plan. Telecommunication technology is constantly changing, and the next generation of communications solutions and services are revolutionizing the way in which businesses are communicating. Because of this, businesses need to evaluate their systems and services to make sure they are being as productive and efficient as they can and should be.

Over the last 20 years, many companies with multiple locations have realized the vast benefits of combing and centralizing their data communications systems (databases, e-mail, customer relationship management, etc.) across their multisite locations. Today, Voice over Internet Protocol (VoIP) is the new underlying technology for the next generation of voice communications systems.

VoIP helps an organization centralize its voice communications well beyond the corporate office to any and all remote locations. Many organizations have deployed a centralized voice communications solution over the last 10 years, and those companies are already reaping the many benefits of having all employees and offices under a centralized system.

“There have been more changes in the voice communications industry in the last five years than the previous 25 years,” says Monty Ferdowsi, the president of Broadcore. “It is well worthwhile for multisite organizations to proactively evaluate these solutions, as they can greatly benefit their businesses.”

Smart Business spoke with Ferdowsi about multisite integration and hosted telephony, how to implement it at your organization and how it can benefit your business.

How can organizations benefit from centralized voice communications systems?

Traditionally, organizations purchased separate telephone systems for each site and used telephone lines from the local telephone companies. For the most part, every office existed in silos and voice calling across sites was the same as an outsider calling into the office. These communications were slow, costly and inefficient. It generally created a feeling that each office was a separate organization when associates wanted to talk to one another.

However, there are many benefits to centralizing your voice communications system, including:

  • Easy and quick extension calling between users site-to-site
  • Easy call transfers across sites and users
  • Easy monitoring of users’ phone status at local or remote sites (busy lamp field)
  • Elimination of usage cost across sites
  • Centralized answering of calls for all sites (as needed)
  • Single system to administer and maintain via Web browser
  • Easy movement of associates’ phones between offices
  • Single vendor for all systems and services
  • More robust disaster recovery when hardware and services fail
  • Central call accounting of all voice calls (in/out)
  • Easy deployment of remote workers (telecommuting)

There are many other tangible and intangible benefits in centralizing voice communications across a multisite company. These benefits can be summarized in cost savings, efficiency gains and productivity boosters, particularly when a professional in a company’s specific field conducts a good evaluation.

When implementing multisite connectivity, what options do you have in terms of telephony?

There are two distinct choices for deploying a central voice communications solution for a multisite company. First is a premise-based voice communications system solution that companies purchase, deploy and maintain at their sites. Second is a hosted voice communications service. In the last 10 years, a new unique concept of hosted voice communications systems has emerged that has been growing rapidly. Both premise-based and hosted services have their benefits, but the new trend emerging in both voice and data communications services is pushing the services into the cloud (cloud computing, hosted PBX, etc.). This promises to eliminate the need for companies to invest into expensive new technology and to subscribe to the service providers who offer them ‘as-a-service.’

Hosted communications service providers generally eliminate the need for system purchase, system upgrade and system maintenance, and generally most of the additional cost associated with ongoing training and support services.

How can a company evaluate the best telephony services for a multisite organization?

Central communications systems are generally more complex to evaluate, design, deploy and support. Companies should take a more methodical approach in the evaluation of solutions in order to get the exact services that are required for their multisite offices. A good approach to evaluate any solution is to invite solution and service providers to conduct a thorough review of your current voice communications systems as well as any new requirements that you feel would improve your communications.

A good solution and service provider should also provide recommendations based on best practices in the field on how to further optimize the voice communications, both internally and externally. Generally, an overhaul of the way companies communicate with their clients can lead to more business and happier customers.

Monty Ferdowsi is the president of Broadcore. Reach him at (800) 942-4700 or info@broadcore.com. Broadcore (www.broadcore.com) has more than 20 years of telephony experience with five years of deploying advanced hosted telephony for major U.S. companies.

Friday, 25 September 2009 20:00

3 Questions

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Stefan Rogers is a senior associate at Voit Real Estate Services and runs the company’s commercial tenant solutions team that assists clients in Southern California and across the United States. Rogers has more than 12 years of experience in commercial real estate in the United States and the United Kingdom and has handled major international accounts.

Q. How can a business save money on real estate?

Almost any tenant with a lease expiring within two years has a good chance of negotiating early and renegotiating a significant reduction in rent and operating expenses in return for signing a longer lease. Alternatively, if a tenant has a space surplus they could attempt to sublease the space to reduce overhead.

Q. Is now a better time to buy or lease office space?

It is a better time to lease. Average commercial office lease rates have fallen more than 30 percent in the past 18 months in Orange County and are likely to decline slightly and remain flat for most of 2010. Average office vacancy rates are approximately 17 percent in Orange County, so there are plenty of options for tenants. Sale prices have fallen dramatically, however, options are limited due to the lack of inventory. If you are starting to gain confidence in your business prospects and can commit to signing a long-term lease, there has never been a better time to lease and lock in low occupancy costs for the long term.

Q. How can a business use leverage with a current landlord to get a better deal?

Hire a tenant representation broker to uncover competitive alternatives and create leverage to achieve the most concessions. This can be done in a professional manner that won’t damage your relationship with the landlord and will ultimately result in a win-win situation. Renewal terms offered to existing tenants are rarely as attractive as terms offered to new tenants. Landlords know that a tenant without representation to advise them is more likely to accept the landlord’s terms and less likely to take advantage of more beneficial lease opportunities elsewhere.

Friday, 25 September 2009 20:00

A healthy advantage

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They’re called “invincibles” — the millions of uninsured young adults who decide against enrolling in their employer’s health insurance. Even though many can afford the premiums and out-of-pocket expenses, they deny coverage, believing their age offers protection from injury and illness or that the cost is beyond their reach. Adding to this dilemma is lack of information on the importance of health insurance and a mistaken belief they are still covered by their parents or school.

Unfortunately no one is ever invincible when it comes to his or her health.

Smart Business learned more from Barry Arbuckle, Ph.D., president and CEO of MemorialCare Medical Centers and immediate past chair of California Hospital Association.

How serious is the issue?

Upward of 13 million uninsured are young people — the largest age group without health coverage. While health benefits remain a financial burden for employers and their work force, about 25 percent of employees who can afford coverage opt out of the company’s offerings. The results are numbing. Young adults without health insurance are less likely to have a family physician or visit a clinic, sometimes turning instead to a hospital’s costly emergency care for medical needs. Delaying or postponing care, screenings and comprehensive physicals places individuals and families at risk for potential health problems, while increasing insurance costs. What they may not realize is that health coverage is one of the best ways to protect against large financial outlays, especially during economic downturns.

Where do the problems start?

Challenges often begin when children become adolescents and teenagers and outgrow their pediatricians and may wait years before selecting an adult physician. Vaccinations and quick sports physicals are not enough. A teen’s lack of exercise, unhealthy eating and risky behavior typically continue into adulthood, posing potential lifelong damage. More than half of adult deaths are tied to health-related behaviors that began as teenagers, with an estimated eight Californians dying each day because they are uninsured and received care too late.

Can hospitals and doctors help?

Hospitals and physicians can partner with schools, parent-teacher associations, school nurses and public health departments. Working together, we can better transition students to a primary care physician, institute education and counseling programs on prevention and the difference between healthy and risky behaviors, emphasize the importance of lifelong health coverage and encourage age-appropriate screenings. A study at University of California, San Francisco recommends these preventive measures be directly addressed with young people: dental care, healthy eating, regular exercise, wearing a seatbelt and bicycle helmet, and exposure to secondhand smoke.

Miller Children’s Hospital — the state’s largest children’s hospital and a leader in preventive care — links with Long Beach Memorial Medical Center, its sister hospital on the same campus, Saddleback Memorial Medical Centers in Laguna Hills and San Clemente as well as the Orange Coast Memorial Medical Center in Fountain Valley to ensure the health care of children transitions seamlessly into adulthood.

What is the role of employers?

A healthy work force is critical to productivity and success. Advocate for insurance for all Americans. Encourage legislation that allows parents to claim young adults as dependents to maintain insurance coverage until age 30. Convince employees of the importance of accepting medical coverage. Show how a health plan provides access to preventive care and that just one night as an inpatient could equal a year or more worth of out-of-pocket expenses. Make it clear that visiting a physician at the onset of an illness can result in fewer days absent from work. For employees with both spouses at jobs offering health coverage, demonstrate how to compare which coverage best meets their needs and how staying in the physician and hospital network further reduces expenses. And remind workers to keep medical and health-related receipts for a possible tax deduction should they exceed their deductibles.

What else can be done?

A study by United Healthcare shows that lack of information can keep young adults from accessing health insurance. While they realize the importance of health coverage, many enter the work force not knowing what to look for in a health plan, how to select coverage that best meets their needs, the availability of short-term insurance to fill the gap between parental or school coverage and their new job, and that joining a health plan saves money and keeps them healthy in the long run. All of us — hospitals, doctors, schools, health plans, employers and the government — must ensure this message is clearly understood and continue to be advocates for quality, accessible health care for everyone.

BARRY ARBUCKLE, Ph.D., is president and CEO of MemorialCare Medical Centers (www.memorialcare.org) and past chair of the California Hospital Association. Reach him at arbuckle@memorialcare.org or (562) 933-9708. MemorialCare Medical Centers include Saddleback Memorial Medical Center in Laguna Hills, Orange Coast Medical Center in Fountain Valley, Long Beach Memorial Medical Center, Miller Children’s Hospital in Long Beach and Saddleback Memorial Medical Center in San Clemente.

Friday, 25 September 2009 20:00

Reporting results

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Terry Horne had a why. He just needed a how.

He knew newspapers had to change because of the trends he’d watched during his 30-plus years in the industry. He saw Internet competition creep up, combating newspapers’ recruitment advertising revenue with free job listing sites like Monster.com and CareerBuilder.com.

So when Horne stepped in as president of Orange County Register Communications Inc. in September 2007, he’d already been touting his case for several years. He called his presentation The Perfect Storm. At industry gatherings, he repeated the message that newspapers must diversify because of Internet innovation and changing readership patterns.

In his new position, which included the role of publisher for the Orange County Register newspaper, he introduced himself with that presentation. He adapted it to the Register with local data that showed classified revenue and audience levels spiraling downward while advertising prices scaled up.

He shared his vision of the Register — like any newspaper that would be successful in the future — becoming a multimedia corporation, stretching its Internet base as it diversified advertisers.

“When you’re expecting an organization to change, you have to create a vision of what it looks like when the change is complete,” Horne says. “You’ve got to create a vision of what happens if the change doesn’t happen.”

He was blunt about the alternative, using the worst-case scenario to motivate employees.

“You have to say there will be [companies] that go out of business,” he says. “My commitment is that this change is definitely going to happen because it has to happen. You have to express confidence that you know what needs to be done in big, broad brushstrokes — maybe not specifically —because they’re in a better position to know that.”

So Horne’s missing piece was his base of about 1,300 employees. He knew the industry had to make changes, but he turned to them for the details, like how the company would fulfill that broad vision and what changes would take it there.

“Most people that make big changes in businesses that are effective are not coming in [saying], ‘I’ve got answers. You guys go do them,’” says Horne, whose company saw estimated 2008 revenue of $245 million. “They’re saying, ‘We need answers. You help me find the answers,’ and then you help make them reality.”

Bring employees up to speed

Horne spent his early days at the Register explaining the problems they faced and, very broadly, what the solution might look like. He says that debriefing must be transparent. You can’t steer away from bad news; it can remind employees why change is so crucial.

“It’s a little easier to create change when people are clearly aware that a lot of bad things are going on,” Horne says. “It’s harder to do change when a business is pretty successful and you’re anticipating difficult times so you’re trying to pre-empt it. It takes really strong communication and transparency to create urgency in people, because change happens from urgency.”

For example, when Robinsons-May department stores merged with Macy’s, Horne explained to employees that meant a $3 million advertising loss for the Register.

When you deliver bad news, articulate which factors are out of your control. Then turn your message to the things you can control, encouraging employees to tackle those instead.

Horne used the Macy’s merger to illustrate why the company couldn’t depend solely on large customers. He took the chance to remind employees that one of their goals was diversifying by broadening their advertiser base.

You can keep these sessions from becoming overwhelmingly negative by motivating employees. For Horne, that meant giving them the power to find and implement solutions.

“Rather than an executive team sitting in a room handing down edicts, we decided to communicate with people and help them understand why change was necessary and that, in fact, they were going to have to help lead the change,” Horne says. “They were going to have to help determine what the change was specifically, and they were going to have to implement it.”

By telling employees that they will be responsible for the change, you stir passion that you’d lose if you forced them to follow your mandate. Involving them in the creation of the plan gives them a stake in the company’s success.

“You should make sure your associates know what’s going on with the core business and why we are making changes,” says Horne, who sees failure to do so as the root of most job dissatisfaction. “The best way to do that is to have a continuing dialogue and involve them in solving the business problems.”

That approach also eliminates the step of securing buy-in from everyone. When employees create the plan, they’re already committed to it.

“When it’s time to implement, you have a bunch of willing followers — in fact, you have a whole lot of leaders — within the organization forcing the change, as opposed to a handful of managers trying to force the change,” he says.

Charge teams with change

Horne created eight “transformation teams” to take responsibility for the change. He looked for peer-respected opinion leaders from every area of the business — sales, marketing, finance, etc. First, he considered candidates who had contributed to changes and special projects in the past. It’s also good to include several managers who visibly lead decision-making, although they won’t necessarily head these groups.

Above all else, attitude is a key factor in identifying change leaders. You shouldn’t have to convince people; just go after the ones who express willingness to participate in the organization’s success.

Even though you’ve worked to bring everyone into the same change-driven mindset, these cross-functional teams require additional training. These “boot camps,” as Horne calls them, should reiterate the urgency and teach the groups what to change and how.

Horne brought about 50 or 60 people into each of three two-day boot camps. Although this is the third time he’s been brought into a company to lead a change like this, he still relies on a hired consultant for this training.

Open the camp with a definition of how you’ll view the coming change to get everyone on the same page.

“We view it as a gateway to innovation and something with phenomenal upside potential, rather than focusing on the potential downsides and simply sticking to what we know,” Horne says.

Although optimism is key, you have to be honest about the problems. Keep reminding the groups why change is necessary, providing data as proof.

“Part of our shift is about understanding the realities,” Horne says. “Delivering news and information is a business just as much as it is a community service. And as a business, we have to make money. If we don’t, we have to rethink any cost-draining processes or products.”

Empower employees to change

By including employees from all departments on each team, you already have eyes looking at each issue from all sides. But you need to equip them to ask the right questions to identify breakdowns and improve efficiency.

“Every decision we make is about providing more value to our customers,” Horne says. “If weȁ 9;re not producing products that are cheaper, better and faster than anyone else, we will not remain relevant. Our associates have to ask themselves one simple question in everything they do: Is it growing audience or revenue? And if not, it’s time to stop doing it. It’s that simple.”

If employees uncover a process that meets those criteria, Horne trains them to ask whether it can be done cheaper, better or faster by partnering or outsourcing.

Give the teams additional frameworks for each issue you charge them to examine. Put their task in context of what you expect the outcome to look like and what types of solutions are acceptable.

“I tell them what I want from an outcome, either from audience or revenue or expense, and then I tell them what they can and can’t do,” Horne says. “For example, if I’m telling a revenue group to grow revenue any way you can, [I’d say], ‘Come up with $1 million a month in new revenue next year.’ I might say, ‘But you can’t open a Starbucks drive-through. You can’t go out and do something that’s totally outside of our core competencies. But you can invest money in a product that serves our customer base better.’”

Then step back and let the teams do what you trained them to do.

When teams present their proposed solutions to Horne, they have to verify that it meets each facet of the framework he gave them — for example, the team would include research that shows how its plan would bring $1 million in revenue every month. The team should also figure the cost of implementation.

There may be some back and forth as you ask for additional details or rethinking. But once you give approval, send the plan back to the team for implementation.

“That’s why I don’t allow them to be called committees — committees talk about it and recommend, and somebody else implements,” Horne says. “These are teams that solve the issue and implement the issue.”

Communicate progress

Your effort to involve certain employees in change teams can multiply across the rest of the organization. Group members can serve as missionaries, passing their passion to other employees. But for that to take root, you have to communicate transparently.

“We can reiterate a sense of urgency to meet financial goals, but it requires more than that to achieve a change-driven mindset across the organization,” Horne says. “In the face of adversity, we’ve improved interactions with one another to help reach a collective goal.”

Horne holds five town-hall meetings every month or two to keep the company updated on the progress of the transformation teams. Encourage the teams to do their own presentations so employees can hear success stories straight from their peers. You can also use those settings as a stage to reward players who have been pivotal to the plan’s success.

Solidify their testimonies with hard facts, sharing financial information to show effects objectively. For example, one change the teams instigated was a redesign of the Register’s Web site that lets readers customize their content. While print readership stayed flat this year with the previous year, the number of unique online users increased 92 percent.

In 2008, the teams helped Orange County Register Communications Inc. reduce expenses by $22 million, and the company is tracking to meet its goal of eliminating another $40 million this year. The company achieved operating profit margin every month for the first half of 2009, exceeding their six-month profit goal by 25 percent.

As other employees hear accounts of change transpiring, more of them will buy in.

“When actual change happens, people see they’re empowered because they see they’re doing it, not me,” Horne says. “People begin to believe that real change is happening when it’s coming from within the organization as opposed to coming from the CEO.”

To totally drive the change, you should also take the message outside to customers. Regardless of the audience, Horne says he’s trying to send the same message about why the company does what it does and why it is changing what it does.

For each group, you should focus on how the changes affect that group specifically, rather than bogging all groups down with unnecessary details. Show employees how the company will be more effective and poised for growth, and provide evidence of that along the way. For the end users, explain the changes they’ll see in products and why those are occurring.

“Talking directly to customers is still the most effective way to communicate, and I’m very comfortable doing that,” says Horne, who holds open houses for advertisers and readers to explain changes and answer questions. “If you’re doing things to customers that you don’t feel comfortable enough to stand in front of them and talk about, you might be doing the wrong things.”

Just like your cross-functional teams can be ambassadors to other employees, educated customers can carry your message further than you alone could. But for the message to take hold, you must consistently provide proof of your success.

“[Change] doesn’t happen with the flip of a switch,” Horne says. “It’s definitely not a matter of just talking differently. It’s a matter of walking the talk, doing business differently.”

How to reach: Orange County Register Communications Inc., (877) 469-7344 or www.ocregister.com

Wednesday, 26 August 2009 20:00

3 Questions

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Steven Mosier is the co-owner of Garrett/Mosier/Griffith/Sistrunk Insurance Services. He has more than 30 years experience in the insurance industry, including seven years with an international brokerage. Mosier has extensive experience in property loss control and evaluating occupational disease exposures.

Q. Are companies facing different risks in the present economy?

Yes, due to the economic downturn, many companies have to do layoffs, consolidate branches or go out of business. There is risk associated with each of these situations. A client may have a layoff and get a post-termination workers’ compensation claim, or an employee says they were discriminated against when they were discharged. When people feel desperate, there may be employee theft issues. If a business is consolidating their operations, they may have a vacant building that could be subject to vandalism.

Q. How can a company manage risk?

When it comes to managing risk, there are three principles to consider. The first is you could avoid the risk by possibly shutting down different operations that aren’t as profitable. Next, you could transfer the risk, which is what a lot of businesses choose to do through insurance policies. Third, you could assume the risk by self-insuring or other measures, such as taking a higher deductible. This reduces the cost but may not manage the risk as well as other options.

Q. What are ways to save money on risk management?

The key is to have a proactive safety department and prevent a claim from occurring. A business needs to analyze the risk associated with a new product or project prior to beginning work. When a company is looking to cut costs, generally the first to go are the safety people. If a company chooses to do so, the management must be committed to safety and risk management to maintain the current safety environment. Also to save costs, a business could take on higher deductibles and reduce coverage. However, they may expose themselves to a catastrophic loss. A company should be aware of various levels of coverage and use that information to make an educated decision on how they will manage their risks.

Wednesday, 26 August 2009 20:00

Real reform

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Health care premiums for California businesses skyrocketed 138 percent between 1999 and 2008. Last year, premiums jumped 8.3 percent — compared to a 3 percent increase in consumer prices. The annual premium for a family plan is $13,427, with single coverage at $4,906. Transferring these costs onto consumers is not easy, especially in an economic recession when families seek ways to tighten their purse strings.

Smart Business talked with Barry Arbuckle, Ph.D., president and CEO of MemorialCare Medical Centers and past chair of California Hospital Association, to learn more.

How serious is the situation?

The number of California’s uninsured and underinsured nears 14 million. This means nearly half the state too often ends up in crowded, costly emergency rooms instead of a doctor’s office where their health can be monitored and conditions identified before they worsen. Employers are reducing or eliminating health benefits to stay afloat. About 25 percent of workers go without health coverage because of an inability to pay out-of-pocket expenses or belief they will not need medical care, which rarely occurs. Of the uninsured, 30 percent are eligible for government subsidized programs yet do not access them. While workers’ compensation insurance rates have dipped, rate hikes are looming, as are tax spikes. Meanwhile, businesses cannot risk raising prices in fear that may turn away customers.

What’s the impact on hospitals?

California hospitals lost $11 billion last year due to nonpayment of medical bills. Government reimbursement is less than it costs to provide care. Hospitals receive only 87 cents on the dollar from Medicare and 67 cents on the dollar from Medi-Cal. More cuts are likely. Hospitals will be forced to further cost shift to private payers or join the dozens of facilities that closed over the last decade due to financial losses and inability to pay for unfunded state mandates like earthquake compliance regulations. While mandates may be necessary, lack of outside or government financial support is breaking the backs of our critically needed health facilities — 56 percent of which are posting losses.

How can employers trim costs?

Businesses should partner with their employees, health plans and hospitals to identify solutions. While raising employee deductibles and premiums works in the short term, other approaches are available. Rather than lose customers, some payers are willing to renegotiate rates and arrange ways to reduce costs. One way may be to lower premiums by offering more than one health plan option with a fixed dollar contribution no matter which plan is selected. Qualified, high-deductible health insurance plans without co-pays for office visits or prescriptions have generally lower premiums than traditional plans. Some employers do provide raises for employees to purchase their own health coverage or possibly join their spouse’s employer-sponsored plan.

What other services are offered?

The MemorialCare business outreach services do include employer programs that reduce your health benefits burden and improve employee health. Benefits audits identify savings and can lower workers’ compensation claims. Executive and employee physicals spot health issues before they become serious and provide wellness regimens to stay fit. Programs in the community and at your business ensure a healthier, more productive work force. Memorialcare.org has free online tools, calculators, guides and referrals to physicians to help your work force achieve a healthier life.

What’s in store for health reform?

Per his campaign promise, President Obama is now addressing the extremely complex issue of health care financing. We will likely see movement among issues of the uninsured, requirements for health plans to offer a basic coverage option, limitations on refusal of coverage for pre-existing conditions, competitive prescription drug pricing and regional variations on how health care is offered. Those of us entrusted with care of our communities agree that what is also needed is a systemic reform in how patients are cared for.

MemorialCare’s President’s Partnership informs and engages employers large and small on issues all organizations face and seeks solutions to address the challenges and costs of health care. Working together, businesses can identify improvements and advocate for better care for the communities they serve.

MemorialCare is hosting a program Oct. 20 on how health care affects your bottom line. It brings together business leaders like you with experts to discuss solutions to the crisis we all face. Those interested in this complimentary program can call (714) 377-2909 or register at memorialcare.org/prespartnership.

BARRY ARBUCKLE, Ph.D., is president and CEO of MemorialCare Medical Centers (www.memorialcare.org) and past chair of the California Hospital Association. Reach him at arbuckle@memorialcare.org or (562) 933-9708. MemorialCare Medical Centers include Saddleback Memorial Medical Center in Laguna Hills, Orange Coast Medical Center in Fountain Valley, Long Beach Memorial Medical Center, Miller Children’s Hospital in Long Beach and Saddleback Memorial Medical Center in San Clemente.

Wednesday, 26 August 2009 20:00

Rock-solid competitor

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Manu Shah doesn’t measure success in a vacuum. When it comes to setting and achieving goals, he believes that comparison fuels improvement. So he uses competitors as benchmarks and even encourages employees to stack themselves against each other.

“We try to look at our competition, and then we can tell pretty much whether we are growing or whether we are not growing,” says Shah, who founded M S International Inc. after he emigrated from Bombay, India.

That quest for superiority fuels Shah’s goal-setting. He sets targets that push his 400 employees to improve, driving growth for the natural stone distributor.

Educated as a mechanical engineer, the chairman and CEO is understandably meticulous about those goals — not only in setting them but also in measuring progress along the way. For example, he gives his employees access to a slew of statistics — measuring MSI’s gross profit margin on more than a dozen different scales and a handful of various timelines — so they can monitor their own progress.

By empowering employees to adapt the company’s long-term goals, Shah taps into their potential.

“Employees are the most important assets you have as a corporation,” he says. “It’s up to the management to use the assets the best possible way.”

He maximizes that asset by involving employees in goal setting, which he says is one of the most important priorities of a CEO.

So by using one to achieve the other, Shah makes the most of both — and unlocks his secret to success.

Find adaptable people

If you’re going to trust employees to break down a broad goal, you need to start with the right kind of people. Shah looks for adaptable employees who will be able to make adjustments as they track their progress toward a goal.

“Because the world is changing so fast, we wanted to make sure that the people we hire are adaptable to the changes and they don’t mind multitasking,” he says. “If you have adaptable people, you can adapt them to the changes much faster.”

Look for signs in candidates’ backgrounds that suggest they’ve had to adapt before: transferring colleges, relocating for jobs, being promoted to a new position at the same company or simply switching jobs.

During the employee’s first three months, Shah keeps a close watch to determine their strengths and reveal their weaknesses.

“When an employee’s new to the company, most people don’t realize that that’s the time they are ready to adapt to the company’s core culture and make whatever changes are necessary,” says Shah, who uses the three-month evaluation to ask employees to work on one or two weaknesses. “If you don’t pay attention to the first three months, a lot of things get set in their mind, and then it becomes more difficult to change what they’re doing.”

During that first evaluation, Shah also listens to employees’ self-assessed strengths. If those aren’t being tapped, he may give them additional tasks to test their aptitude in other departments. You know they’re in the right spot when they stop requiring much help and instead start encouraging other employees in their tasks.

“Every musical instrument vibrates at the natural frequency and produces beautiful sound. You don’t need much energy when somebody dances at natural frequency,” says Shah, borrowing from his mechanical engineering terminology. “It becomes the source of energy. So similarly, rather than consuming energy, [employees] become a source of energy to other employees.”

Once they’re in place, Shah teams employees up by specialties: sales teams, which are generally geographically based; product teams, which are determined by end use, such as countertops or landscape; or service teams, which are divided into functionalities like accounting or shipping. Each is decked with a fancy name — like Topaz Team, Emerald Team or Sapphire Team — to give employees a sense of ownership when they talk about their team.

Shah designates a leader in each team. To find your top players, go back to the initial hiring criteria of adaptability and multitasking. Shah examines how they’ve performed so far, looking beyond execution to examine how well they’ve adjusted to new product lines or new customers.

Shah does consider the chemistry of the people he puts together, but the team’s needs trump personality types. He relies on their adaptability to make up for it. Beyond that, the common goal glues each team together.

“Most teams work together much better if there is a bigger enemy, and that bigger enemy is the goal,” Shah says. “By working together, we will meet that challenge.”

Lay outlines for goals

Before you can empower employees to reach a target, you need to meticulously define each goal.

Shah’s goal for MSI never really changes. He always wants to outdo — or at least contend with — the biggest competitors in any given realm. And by defining that realm, he clarifies the overarching aim.

“We like to have the goals be something we can measure in a small geographic area or small product line,” Shah says. “Twenty years ago, we said our region was California and our business was monuments. When we become a little bigger, we find out that now, not California, but we want to be national in monuments. Then you say national in granite. Then you can say national in slate.”

“So our goals, our definable measure, kept expanding,” he says. “But in each case, we had a very clear goal that we should be the No. 1, 2 or 3 player within that goal, within that region or territory, or that product line.”

Because competitors don’t just hand over their information — and conducting your own research can be unreliable — Shah also uses easily accessible national data, like import statistics, to broadly set his goals. He relies on industry standards, such as average revenue generated per employee and average sales per square foot of material, to estimate competitors’ financials.

By giving employees the role of gathering this data, you automatically involve them in the goal-setting process. Using the data they gather, helps them set the end goal by defining specifics, like the timeline.

“The definable goal should be achievable within six months to three years,” Shah says. “The company doesn’t change in less than six months. If you say, ‘Next month I want to double your sales,’ it’s just not going to happen. It’s better to set goals which are measurable but achievable.”

In addition to the timeline, Shah defines goals in a range. For example, import goals are set between the third-place importer’s numbers and at least half of the top competitor’s imports.

“It’s always a range. We don’t set up fixed criteria,” he says. “We say we should, in the first three months, import five to 10 truckloads. Then we bring up what is the best another importer is doing.”

But breaking those broad goals down into steps — that’s up to the employees.

Teach employees how to fish

Don’t just tell employees how to reach a goal; give them tools to figure it out themselves.

Shah’s goal-setting meetings with team leaders go beyond recaps of what the data revealed and where the targets are. He asks them to plan how they’ll achieve that goal, from breaking it into monthly targets to requesting the manpower and equipment they’ll need.

“Don’t just solve the problem; create people who can solve the problem,” Shah says. “Give them tools to solve the problem. Teach them how to use those tools and show how those tools can help solve one or two difficult problems.”

As the adage goes, it’s the difference between giving a man a fish and teaching him to fish. So, for example, Shah doesn’t break the main goal into quarterly objectives. He gives employees access to their performance measurements, empowering them to make adjustments by seeing how far off they are — and where everyone else is.

“We never give individual sales goals to a salesperson. … We set the goals by measuring and comparing with others,” Shah says. “The best solution is a tool in which they can compare with somebody else. Then it becomes a yardstick from which they can measure. Let them be judged with the data they can see.”

These performance metrics should be available to everyone on your intranet or some other accessible medium. And they should measure as many things in as many ways on as many timelines as possible.

“We measure everything by every different way, and we allow everybody to see it,” Shah says. “We measure sales and gross profit margin by individual item, by product line, by warehouse, by salesperson, by team, by branch, by customer, by channel of distribution, by region, by state, by ZIP code, by vendor, by country of import, all of that.”

Employees should be able to see these stats in context, so provide trends across the last week, month, quarter and year. It’s also important that the data is updated in real time so employees can continuously track their progress and monitor how much slack they have to pick up.

“We don’t believe in annual or quarterly goals but rather long-term goals, missions and making real-time changes to achieve those missions,” he says. “We believe that having annual or quarterly goals means we are taking too long to assess what changes need to be made. Changes should be made in real time: weekly, monthly, quarterly.”

Giving employees the power to make those adjustments increases productivity all around.

“We let people compare with other teams how much other people are shipping per employee,” Shah says. “And pretty soon, those who were ahead were feeling proud and wanted to stay ahead. Those who were behind want to see what they can do to [improve].”

That’s where you should step in, guiding employees to self-improvement while trying to dodge the jealousy this kind of comparison can foster. Shah works one-on-one with employees to reveal personal growth opportunities, but mostly, he relies on the incentive system to curb competition.

“That’s the risk we are taking,” he says regarding jealousy. “The power we get by letting people make their own decision is too powerful for the occasional bad apple we may lose.”

Reward employees’ initiative

Complete the process by rewarding employees who meet their goals. That means striking a balance to recognize individual achievement while fostering the teamwork that makes it possible.

Shah breaks his bonus plan into individual results — which determine the largest percentage of the incentive — as well as team and companywide results. That way, bonuses are pretty consistent across the board. But the weighted system still motivates employees to improve.

“Any plan should have a component where everybody wins when one area or product or team wins,” Shah says. “So if they lost sales but another team got it, they still win. Not as much as if they got their own, but they still get it.”

Companywide rewards ingrain a mindset of teamwork in employees. It will help them think of success in terms of the company rather than just themselves. But the comparison piece also lets them see what role they play in that.

“Plans should have a component in which individual performance, team performance and company performance are measured and visible,” Shah says. “I can see what I did, what my team did, what the company did.”

While results drive the bulk of employees’ rewards, Shah also looks a layer deeper by conducting 360-degree reviews for everyone. Have people who work with, under and above each employee evaluate that employee’s performance. Shah divides the review into 15 categories, from oral skills to market knowledge to planning and organization.

Shah makes those reviews available on the intranet, as well, where ratings are compared against groups and the entire company.

This transparency and comparison encourages employees to look beyond themselves and consider how they can make the company successful.

“Before we do any firing, we really encourage them to change, and change based on the numbers, based on visibility and transparency,” Shah says. “We are not asking him to change because we think he could have done better. We are asking him to change [by saying], ‘Look what other people have done.’”

By motivating employees to meet goals through empowerment and rewards, Shah fuels his company to keep growing.

“It took the first year to reach $1 million. Another 10 years to reach $10 million. Another 10 years to reach $100 million in revenue,” says Shah, whose company has grown for 14 years and reported 2008 revenue of $261 million. “And we are on the way to some day becoming a billion-dollar company. We are still growing.”

How to reach: M S International Inc, (714) 685-7500 or www.msistone.com