When business owners think about intellectual property, it’s often in the context of products or manufacturing processes. But other forms of intellectual property can be just as valuable, and should be protected accordingly.
“For 12 years I worked in the electronics field where product and process development and the protection of that work through the application for and enforcement of patents was a central part of the business,” says John Kilgarriff, account manager at The Graham Company. “Intellectual property protection doesn’t just work in high tech it can be applied to a broad range of industries.”
Smart Business spoke to Kilgarriff about why companies should consider protecting their business assets.
Why should companies protect their intellectual property?
Virtually every company relies on proprietary or confidential information to develop and grow their business. For most organizations, this information is the company’s most valuable asset. It needs to be protected in order to preserve the company’s competitive advantage. Intellectual property includes all kinds of intangible assets, including processes, procedures, formulas, copyright, trademarks and trade secrets. In many industries this protection is essential for the continuation of a business.
Consider a media company’s protection of the rights to their music; a software company’s protection of its applications from piracy; or even a baker with a great recipe for chocolate chip cookies. All of them have the need to protect their proprietary information. Many other companies with less obvious intellectual property assets also have a strong interest in protecting their rights.
How do companies protect their intellectual property?
The initial way to protect intellectual property is to have good internal controls on the distribution and the access to materials that differentiate a company’s services or products from its competitors. For example, use non-disclosure agreements whenever sensitive details are being disclosed to others. The next step is for companies to take action to patent or copyright proprietary information that is destined to be widely distributed, such as their products or published materials. It could be marketing materials, an innovative way to solve a technical problem, published analytical work, or some other form of their work product. These are things that are patentable or can be copyrighted and can secure a competitive position against others.
The Graham Company, for example, has copyrighted the standardized framework that we use to evaluate the insurance programs of our clients. Our work product is something that we’ve spent a significant amount of effort, time and resources to hone and develop. The copyright enables us to protect our rights in the event someone sought to use this material without permission.
What should companies know about infringement of intellectual property?
The increasing number of U.S. patents issued and the never-ending availability of electronic content via the internet have dramatically increased the risk that a company could unintentionally infringe on someone else’s intellectual property. Companies can reduce this risk by being careful about the material they publish and by not engaging in certain activities that could lead to infringement. Businesses should have documented internal procedures that make sure that their employees research the sourcing of information before it is distributed or used in the business.
A final way companies can reduce risk is to transfer it by requiring indemnification from others who work on their behalf or by purchasing insurance.
A standard general liability policy provides a very limited amount of protection, mostly related to how businesses might infringe upon intellectual property of others in their advertising. But, if it’s a company that has a Web site or that does any kind of development of work product, be it training manuals or marketing materials, there is an increased exposure. And depending upon the nature of what they do, the protection afforded in a standard general liability policy may not be sufficient. Insurance products that will provide broader coverage for infringement on the intellectual property of others are available in today’s marketplace.
How does a background in technology relate to being an insurance broker?
The best parallel I can draw is that when I worked in semiconductors, my role involved enabling communication among people of a variety different backgrounds technical, marketing, finance. At the end of the day everyone needed to grasp the issues in order to proceed no matter how obscure they may have been.
Being able to work through details and still deliver concise, effective programs to clients is something that my previous background in technology development has really allowed me to do effectively in the insurance world.
JOHN KILGARRIFF is an account manager at The Graham Company. Reach him at (215) 701-5425 or email@example.com.
The days of departmental reports as thick as novels and endless scrolling through electronic documents are over for businesses that adopt an information dashboard. How effective is a paper report, really? By the time managers compile and distribute information, it is outdated. And while electronic reports save trees, they are tiring to navigate. The solution is a reporting tool that compiles key performance indicators on a daily basis.
“The next generation of reporting is summarized, concise and customized for each user,” says Sassan S. Hejazi, Director of Technology Solutions at Kreischer Miller.
In many ways, an information dashboard is like the dashboard in your car. It displays key information and allows the user whether CEO, manager or employee to gauge his or her performance. “That information is presented in real time,” he says.
Information dashboards can monitor sales, production, accounting any business functions that managers want to track.
Smart Business discusses with Hejazi how these systems work, why they benefit businesses and how to get started.
How does an information dashboard work for businesses?
It is always a struggle for managers and executives to translate how day-to-day activities contribute to the business’s overall vision and strategy. A dashboard allows employees and managers to gauge their daily performance. It also enables managers and C-level executives to evaluate this data in terms of what the company must accomplish to achieve its goals. The hallmark of an information dashboard is its ability to siphon information from other software programs pulling sales data, production information, accounting details, etc. to produce a convenient report that appears like a ‘dashboard’ on the computer. Information can be compiled into various types of graphs; the dashboard is customized for each person. For example, a financial administrator’s dashboard will reveal key information about receivables or payroll. A CEO’s dashboard filters all information from managers’ dashboards into a report so he or she can take the pulse of the entire business at any time.
What type of business will benefit from an information dashboard?
It is imperative for every organization to manage its business performance to achieve goals and objectives. This is true for nonprofit and for-profit businesses of any size, in any industry. If you do not know where you stand today, how will you make changes in the business to improve and grow? Any business that has various departments or divisions by scale and size will also benefit from information dashboard capabilities. Top managers and executives can use this software tool as a way to regularly check performance so they can lead their departments. For example, in a manufacturing company, managers can use information dashboards to stay on top of orders, track the productivity and yield per employee or department, and report on accounts receivables, cash flow, etc., and see a daily summary of all activities.
How does a business get started?
Buying the software is the easy part. You’ll choose a program that fits best with your technology platform. Your IT manager or a consultant who understands information dashboard systems can guide you toward the right software. But the program will be useless if you do not do some preliminary soul searching to evaluate your business’s goals and key performance indicators. What do you want to measure? Where does that data reside in your existing system? Are you already tracking this data, or will you need to devise a system for collecting that information? What does each manager need to know about his or her department’s performance on a daily basis? Once the information dashboard produces daily reports, how will managers act on that data? Will they design performance-based incentives for employees? How will this data reporting be used to propel the business toward its overall goals? All of this planning precedes software installation. It goes back to the old rule about input and output.
How can an information dashboard affect the culture of a company?
Daily reporting makes everyone in an organization aware of his or her performance and how his or her contribution directly relates to the company’s success. Managers can see how their departments measure up against the goals set for them. Everyone knows where he or she stands on key performance indicators. This can help unify employees’ efforts toward achieving established goals. The daily report is a progress checkpoint and employees can determine how they can work smart to stay on target. With performance information constantly available, there are no surprises. If used correctly, information dashboards can be a basis for incentives. Most companies have annual reviews for employees, but the information managers share during these meetings is usually after the fact. It’s too late for employees to change or improve. With real-time data, managers can continually review performance and keep employees informed.
Considering the significant investments businesses make in technology and data systems, an information dashboard is one way to harness this investment and use that data to improve everyone’s performance.
SASSAN S. HEJAZI is Director of Technology Solutions at Kreischer Miller in Horsham, Pa. Reach him at firstname.lastname@example.org or (215) 441-4600.
The market’s recent turbulence signals the need to revisit short-term cash investments. Not long ago, investors were flocking to high-yield instruments. Now the pendulum has swung back in favor of less risky strategies. Successful liquidity management involves striking a balance between retaining accessibility to cash and earning predictable income from excess funds.
“Organizations need to understand what their cash needs are to determine how active or passive they want to be with their investments,” says Scott Horan, Vice President and Group Product Manager for Treasury Management at PNC Bank.
Smart Business spoke with Horan about the different types of liquidity, how the investment approach varies for each type and how to best strike a balance between risk and return when making short-term investments.
How has recent market turmoil affected how organizations manage their short-term cash?
When you look at what clients were investing in six months to a year ago, there was a lot of talk about higher yielding instruments, such as enhanced cash funds, cash plus funds and auction rate securities. However, auction rate securities had problems in that they were no longer considered cash equivalents. And enhanced cash funds and cash plus funds have had their liquidity problems. In response, clients that were the most aggressive have generally backed up one level on the risk scale.
The other thing that we’ve seen clients do is reorder their short-term cash investment criteria. It used to be that No. 1 was return, liquidity was a distant second and safety a very distant third. Now the order has been completely reversed: No. 1 is safety, No. 2 is liquidity and No. 3 is return. People are more concerned about the return of their money than the return on their money.
What are the different types of liquidity, and how does each investment approach vary?
There are primarily three different types of short-term cash: operating cash, reserve cash and strategic cash. Operating cash is not very predictable and tends to be what a client has in his or her checking account or in very short-term investments. Usually, with this type of cash, investments are pretty conservative and somewhat passive. Reserve cash is the amount of cash outside of operating cash that a client always wants to have on hand. For example, clients may know they need $1 million on hand in cash from an operating perspective, but they never want to be below $5 million because they want a little bit of cushion, or reserve. Typically, reserve cash is kept close to hand but may be directed to short, liquid investments like a money market mutual fund. Strategic cash tends to be longer term but not normally out past a year. Perhaps you have a certain amount of cash that you know you’re going to use to buy a building or equipment. You don’t want that cash to sit idle, so in this kind of situation you might be willing to lock up the cash in order to get a better rate of return.
What are some typical investment options for short-term cash?
There are three broad categories to choose from when investing short-term cash. The first category is individual-type securities, such as Treasuries, U.S. Government agency bonds, variable-rate demand notes, auction rate securities and commercial paper. The second type is a pooled investment, such as a money market mutual fund. With this option, the risk is diversified and you receive a blended return. The third type of category is bank liabilities. This includes bank repurchase agreements, bank time deposits, including certificates of deposits, and bank money market deposit accounts.
How can a business strike a balance between risk and return with short-term investments?
It is important to document your investment guidelines and policies. We talked earlier about return, liquidity and safety. An organization needs to determine what is most important to it. By understanding how to manage these three criteria and understanding the investments themselves, a company can effectively balance risk and return.
In the current environment, what steps should a company take to re-evaluate its short-term cash position?
If a company has already established its investment guidelines and policies, it should revisit them. If this information isn’t documented yet, it is important to start the process. This includes defining desired maturities, comparing current investments, understanding the ratings of the investments and examining diversification within the portfolio. These steps help to ensure that an organization’s investments are appropriate. <<
This article was prepared for general information purposes only. The information set forth herein does not constitute legal, tax or accounting advice. You should obtain such advice from your own counsel or accountant. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Opinions expressed herein are subject to change without notice. Bank deposit accounts are provided by PNC Bank, National Association and PNC Bank, Delaware, which are Member FDIC. Certain non-deposit investments are not insured or guaranteed by the FDIC or other government agency, are not deposits or other obligations of, or guaranteed or endorsed by, any bank and may lose value. © 2008 The PNC Financial Services Group, Inc. All rights reserved.
SCOTT HORAN is Vice President and Group Product Manager for Treasury Management at PNC. Reach him at (412) 768-9910 or email@example.com.
Steven Altschuler believes the most successful organizations are mission-driven organizations.
He says mission-driven organizations are easy to distinguish from organizations motivated by something else if you know where to look. They are able to unite everyone, regardless of the role he or she performs, around a uniform set of goals and objectives.
It’s the type of organization Altschuler has built and maintained at The Children’s Hospital of Philadelphia, where he serves as president and CEO.
Throughout The Children’s Hospital of Philadelphia (commonly referred to as CHOP) system, Altschuler has strived to rally doctors, nurses, administrators and support staff around the systemwide goal of remaining on the cutting edge of pediatric medical care.
It’s much easier said than done. For any business to climb to the summit of its industry and stay there, ambitious mission statements are a starting point. To get there, Altschuler says you need persistence and an unquenchable thirst for improvement both self-improvement and the improvement of your company.
At CHOP which has 7,000 employees and an estimated $1 billion in 2007 revenue according to Hoovers.com it means Altschuler must tirelessly communicate with many different groups of people, keeping messages consistent and easily understood. He must foster teamwork among departments that perform completely different tasks, and he must run a hospital enterprise like a business while accomplishing a health-care-oriented mission.
“In order for us to be successful and meet our goals, we have to operate like a business,” Altschuler says. “We have to have the same principles, we have to operate within the margins so we have the money to invest to take care of kids.
“In your business, you have to maximize profit. That’s your obligation. Our obligation is to the kids we take care of and their families, to maximize their health and development.”
Altschuler says it’s a juggling act that requires both skill and stamina. You will never totally perfect it, but over time, you can get better at it.
If you want to have a goal-oriented organization, you first have to define what your goals are. For Altschuler, that process begins with a well-defined strategic plan.
“We are very disciplined in terms of strategic planning,” he says. “We recently began a new strategic planning process for the next seven years. The elements of the strategic plan really determine our yearly operating plan, which is developed in conjunction with the budget. So the operating plan is really built from the ground up.”
Altschuler says you have to get the people on your company’s ground levels involved in the process. During the planning process, Altschuler both actively and passively seeks input from his employees, both by engaging them through various communication channels and by letting everyone in the organization know that his office door is open as often as possible.
“We solicit every level of the organization for what should be our goals for the next year,” he says. “I have an open-door policy where anybody in the hospital can come and see me all the time and about any issue. Our senior executives, our medical leadership, act in a very similar way.”
He says that face-to-face communication is the most effective form when trying to disseminate a message and get instant feedback from many people at once. But since your opportunities to communicate with many employees at once might be limited, you have to make each chance count.
When seeking input and feedback from employees on issues that affect the entire organization, Altschuler says you must know your audience. That’s easy if someone stops by your office to chat or ask a question, but it gets exponentially more difficult when you are trying to speak to dozens in a particular department or hundreds throughout your organization.
“An open-door policy typically involves a one-to-one interaction with an employee,” he says. “But when you get out and talk to people, typically you might be speaking to a larger audience, many different constituencies throughout the organization. You can say the same message, but you have to tailor it in a way that fits the constituency.”
However, Altschuler says you shouldn’t try to outsmart yourself. Remember that everyone in your organization is probably interested in producing a good product. What you have to do when communicating with members of a specific group or department is show them how they relate to the topic on the table.
“Everyone wants to attain the same results, but the issue might look different to the nursing staff than it does to our physician staff or our resident doctor staff or to our researchers,” he says. “Getting out really allows me to talk to a group in detail, to try and tailor a conversation that would be most appropriate and most effective in communicating what I want to get across.”
A case for change
Achieving buy-in is enough of a challenge when your goal is maintaining the status quo. When your goal is change, it becomes that much more difficult.
CHOP is currently in the midst of a $2 billion infrastructure expansion to deal with increased demand for the hospital’s services, due to a drop in the number of pediatric care facilities in the Philadelphia area. It has forced Altschuler to become something of a salesman to his people, attempting to sell everyone from doctors to nurses to office staffers on the benefits of growth and change.
Altschuler says a period of rapid growth can become a confusing time in a business. You are trying to keep the people in your company focused on the same mission and goals while everything is changing around them.
That’s why, if change is in your organization’s future, he says you need to start communicating the need for it as soon as possible or you run the risk of allowing your employees to lose sight of the bigger picture.
Regardless of the business, he says there is a need for employees to develop something of an entrepreneurial, risk-taking spirit.
“In many ways, people here have to have a competitive, entrepreneurial spirit, so if you can show them what the outcome is going to be by embracing change, you can get them to where they need to be,” Altschuler says. “Part of change in an organization is that when you want to perform change and see it through, you have to see it through to the success of the change. Once your people see success, they are more likely to embrace it.”
As a leader, Altschuler says you will sooner or later be forced to put a stake in the ground when making a major change to your company. You will have to make the statement that change is inevitable, and in the end, your employees are either coming on board or they’re not.
However, he says the best way to minimize the difficult personnel-related decisions you’ll have to make goes back to enabling employees to take ownership in the decision-making process.
Even if you’re the one drawing the line in the sand, Altschuler says it’s always better if the employees who accept change feel like they’ve reached that conclusion themselves.
When the time came to sell CHOP’s employees on the need for expansion, he once again led his senior managers out among the people, meeting with them, proposing ideas, soliciting feedback and refining the vision.
“What I and my senior leadership do is really try to engage people in the decision-making process,” he says. “You can get to a strategy, but if you can’t implement the strategy, it does you no good. So it’s really critical for individuals in leadership positions to really be able to engage the work force and make the part of the process to induce the change.”
Altschuler has implemented some formalized methods of soliciting feedback from staff members within the CHOP organization. Aside from frequent electronic communication, such as e-mail, he holds large organizational meetings four or five times a year where he’ll lay out the current state of the hospital and the direction in which he wants to take the hospital in the near future.
Altschuler also tries to place what is going on in his organization within the larger context of the industry. He says any larger perspective you can give your employees will give them a better understanding about where they and the company stands.
“I’ll always try to give people an update on what is happening out there, how could the presidential election affect health care, things like that,” he says. “It’s always good to get out there and catch up with people and tell them what is going on. I think that develops trust in the leadership, which is critically important. There has to be trust in the vision and the ability to manage through difficult situations.”
The right kind of communication
Even if the concept of keeping your organization goal-focused might seem obvious to you, Altschuler says that’s only half the battle. Whether you want to keep everyone steadfast on consistent objectives or whether you’re trying to change course and take your company in a new direction, it’s not just what you say, but it’s how you say it.
At CHOP, Altschuler underscores the importance of a multifaceted communication approach. General messages are mass-distributed through e-mail or the Internet. If an issue requires more specific attention, he will make time in his schedule to meet with a person or group.
“A good communication strategy has many different facets,” he says. “If I’m trying to get out to the entire organization with a good message, we will typically do an e-mail message to everyone. We have a very robust Internet site for our organization, and our (chief operating officer) does a monthly blog. So it’s really multifaceted, and as companies grow, the ability to communicate through electronic media becomes more and more important.”
At CHOP, Altschuler shares a challenge with the leaders of many publicly traded companies: the need to communicate frequently and clearly with a board of directors. Altschuler needs to relay health-care-related concepts to board members who don’t have a medical background.
If you have to translate industry jargon for a board filled with members who come from diverse professional backgrounds, Altschuler says the only thing you can really do is streamline the language and prepare yourself to answer a lot of questions.
“We have to make sure that our board understands what we’re going to be doing because they are typically community and business leaders who don’t necessarily appreciate the nuances of health care,” he says. “They’re good, smart businesspeople, but health care is a bit of a peculiar business.
“My style with the board is to talk with as many people as possible on a personal basis. That’s not the most efficient style, but the board is so important, and the ability for them to understand what is going on is so important to our success; I really have believed over the years that it’s worth the time.”
HOW TO REACH: The Children’s Hospital of Philadelphia, www.chop.edu
Interviewed by Matt McClellan
Tim Abell is a survivor. The first nonfamily member tobe named president of Firstrust Bank survived multiple acquisitions and mergers at some of the publicly owned banks he previously managed. Those days were difficult, he says, because just when your team started to get on the right track, someone came in and switched all the uniforms when the organization was sold to distant shareholders and much of what that team worked to build was lost.
He hasn’t missed the constant ups and downs at all since 2004, when he joined Firstrust, where he serves as president and chief operating officer. The bank, which has $2.2 billion in assets and 24 locations, was founded 74 years ago by the grandfather of the current CEO, Richard Green.
Smart Business spoke with Abell about how to create a winning team and how to keep your employees excited about coming to work every day.
Let your team learn from mistakes.Listen to your team. You need to be willing to empower them, you need to be engaged and be engaging.
For me, having come up through the ranks in the organization’s trenches, you earn your team’s respect by working hard and caring about the people you work with. I try to be open to doing different things. In doing that, you need to recognize that some mistakes will be made on the path to progress.
Richard Green, the owner of the bank, his grandfather used to say, ‘If you’re going to fall, fall forward. If you’re going to make a mistake, make a new one.’ So we try to recognize that in empowering people, they are going to make some mistakes, but you need to learn from those and develop other leaders in the company. Keep a focus on a team approach.
They need to feel comfortable that making decisions, if it turns out to be wrong, we’re going to learn from it. They need to know we’re not going to chop their heads off.
It’s important for them to know that we’re going to support them and allow them to learn.
Give your employees the power of responsibility. I know that I always feel least empowered when someone is second-guessing or micromanaging the decisions I’m making. So I want to be there for them if they need it.
I want to make sure we’re moving in the right direction, I want to be guiding it, but it has to be a shared vision. So others have to feel that they have a part in shaping it.
I let them be accountable for their decisions. If they’re successful, they’ll be rewarded; if they aren’t, we’re going to have conversations about it. We let them do their craft, and they appreciate that.
We welcome people who are talented and want to make sure we give them a chance to grow here and have an impact and feel the days they’re spending here are meaningful.
Make work more fun. People want to be on a winning team. Once you start to have some success, you get other people who want to join in.
The way you treat employees is the difference. I’ve worked at banks that have been sold five times. So to come to a family bank was a significant difference. Especially in this marketplace, where there has been so much consolidation. Employees get a little tired from that.
Richard Green has said, ‘If you’re building a house to live in, you’d use different materials than if you’re building a house to sell.’ I think there’s a lot of truth to that.
We’ve been able to attract good people because we recognize their efforts. We pay well for people who perform well. You have to have good compensation programs, but it’s important that we try to make it fun, and the family atmosphere is something that is true and meaningful. We’ve had people leave and come back, and we welcomed them back.
So whether it’s the softball games, the holiday parties or the other things to recognize people’s efforts even though it’s work, we try to keep it something people look forward to coming to every day.
Don’t forget what got you to where you are now. You always have to look at things from a customer’s perspective. Sometimes if you get larger, you forget that. We don’t ever want to get away from the customer.
Spreading yourself too thin so that your quality erodes is a risk. As you’re growing, you want to make sure it’s good, quality, sustained growth but not so much that we have some quality issues. You just have to stay focused there.
As a leader, you have to remember to not take too much credit from all the successes. Realize that really comes from the efforts of your employees. So we spend a lot of time recognizing a wide level of employees.
If you’re in touch with your customers, if you spend time with them, ask them what they like about what we’re doing and what they don’t like about what we’re doing. The president’s breakfast is a good way for me to hear from the employees if there are any issues.
I have spent days in the call center to hear what customers are calling in and asking about. If you’re engaged, you’ll get a pulse of it.
HOW TO REACH: Firstrust Bank, (610) 238-5000 or www.firstrustbank.com
M. Gordon Daniels strives to lead by example at Land Services USA Inc.
“I think you have to set a good example,” the founder and CEO says. “I think it’s not necessarily what you say, it’s what you do that people follow.”
Daniels also works to be open, honest and direct with people.
“If people know what their expectations are, if you are very clear in setting those out, I think that is half the battle,” he says.
Daniels has led the title agency, which has about 30 employees, to 2006 revenue of $10 million.
Smart Business spoke with Daniels about how he sets the example and how being honest helps his company succeed.
Q. How do you make sure you’re setting a good example?
It’s a relatively small business. If they understand and they watch you and practice customer service, then hopefully that sinks in. It’s not just lip service.
You work hard to solve problems instead of passing those problems or issues off onto other people. If they see you actively involved in resolving things, I think that sets a good example. Even the mundane stuff hey, we are busy or crazy, that means I have to be the guy at the copy machine doing things. It’s all the sort of mundane, trite things, but it is the truth.
Like, ‘Oh, yes, I am hands-on,’ but then when the time comes, you are dumping it on other people. No. When it has to get done and you have exhausted your resources, no, I am going to do whatever it takes. Hopefully, those things become contagious in a positive way.
Q. Is being open, honest and direct as easy as it sounds?
No, it is very difficult. It is very difficult. Sometimes I have to reiterate that.
We are all human beings, and that’s one of the most difficult tasks is when you’ve given somebody an opportunity and they aren’t meeting those expectations that hopefully you’ve laid out. When you have to have those conversations, it’s very awkward.
So, no, it is not an easy thing to do. Everybody has feelings. I try not to treat my employees as digits on an Excel spreadsheet. There are probably some folks, after a month or two, that [think], ‘Gosh, this is not going to work. It’s not what I thought it is.’ That is part of the maturation process of being the owner of the company. You really try to give people every opportunity. But, at a certain point, you have to make those decisions.
So, it sounds a lot easier than it is. I joke around, you want to be very careful in your hiring process because, at the end of the day, people have mortgages, people have children, people have health insurance things, and you try to make sure you do it right, but sometimes, unfortunately, you do not.
Q. Do you encourage you employees to be honest with you in return?
Absolutely. We have hired some more senior-level people and some very stressful weeks have (transpired). But I view them as very positive. And, when we sit down, we say, ‘Hey, listen, we aren’t personalizing things.’
Those open, honest discussions again, it is very hard ... not to personalize it. The focus is what is in the best interest of Land Services. If we look at that as the common denominator, we are all sharing the same goal, so let’s not personalize things. Let’s look at what’s in the best interest of Land Services. I think we are getting there. It is always a constant struggle, but you always have to focus on that.
Q. How do you deal with things when they do get personal?
What happens is when you are driving home or laying up in bed at night, you start to think, ‘Wait a minute, this is starting to teeter in a direction.’ My approach is to sort of grab those parties back together.
Now, what happens is, the e-mails go bouncing back and forth. ‘Whoa, whoa, wait guys. Let’s stop it. Let’s all sit down in the conference room together. Let’s all sit down somewhere.’ Maybe it is running down to a coffee shop. Let’s get out of the heat of this thing. Let’s really sit down.
What are we trying to accomplish? I’ve got to tell you, sometimes, and I don’t want to embarrass myself too much, but, the people hiding behind the e-mails and the chain, let’s take 10 minutes and discuss it face to face. I think a lot of times, the voice inflections, the raised eyebrows make such a big difference than the battles going back and forth in cyberspace.
HOW TO REACH: Land Services USA Inc., (215) 563-5468 or www.landservicesusa.com
Are you really prepared to navigate the peaks and valleys of commercial real estate? Current and anticipated changes will likely require adjustments in how both tenants and owners approach the market.
“It depends on the specific geography you’re operating in or the product type that you intend to occupy whether it’s retail, office or industrial,” says John Behm, managing principal at CresaPartners. “But, in general, the statistics are indicating that the markets are peaking.”
Smart Business asked Behm for more insight into what to expect over the next several quarters.
Has the commercial real estate market peaked?
We believe that the market has actually peaked. However, it is not a sharp peak followed by an immediate decline. Rather, we are looking at the future as being a plateau, and it may stay flat for a few years. There are certain markets and specific properties within these markets that experienced a rapid increase in rents, and these have now become difficult to substantiate. A correction here is inevitable, and we see that happening over the next 12 months.
What does this mean for tenants?
That there is opportunity as well as consequences for getting it wrong. Tenants should see rents that don’t reflect the same rapid annual increase that they’ve been experiencing, if they know where to look. It’s not likely that all tenants are going to see a substantial decline in rates, but certain decreases will be significant if you can identify the opportunity. However, there’s a catch. The current reduction in rental rates is good news, but overall economic stagnation is not. The goal is to develop a clear plan to align the company’s forecasted needs with the market conditions, and this requires some careful coordination involving both the business and real estate professionals.
Can tenants prepare for the shift?
Yes. Every tenant can have an effective response to market adjustments. It sounds unusual, but a good real estate transaction is one that includes an exit strategy. This can be the ability to terminate the current obligation, a right to contract or expand, a right to renew, or a right to sublease or assign, as examples.
In addition, regardless of whether the market is peaking or declining, companies with a good understanding of their business needs will make real estate decisions on sound metrics, such as real estate costs as a percent of revenue, revenue generated per square foot, cost per employee, etc.
Planning into the right commitment will result in the real estate supporting the company’s operations and not creating a situation where the business is needing to support the real estate.
What about businesses that own buildings?
These changes are primarily going to affect their ability to obtain capital that will be required for the ordinary operations of those buildings for the fit out of new tenancies, needed capital improvements or unanticipated maintenance items.
What affects these market changes?
There are a number of factors that affect the commercial real estate market. Employment growth, as one example, has been declining since 2006. The number of office jobs has also been declining in the region and nationally since 2006. As of late, the subprime issue with its subsequent credit crunch is really beginning to show itself in the marketplace as companies large and small become increasingly cautious with decisions involving any long-term financial commitments.
What can owners and tenants do to keep up with the changing market?
Scenario planning is important. This is a simple answer that is often hard to execute. Leases are most often longer-term commitments (three to 10 years) and, while forecasting operational needs can be difficult, it is helpful to model a few different scenarios that overlay business needs with the realities of the real estate market. This discipline can help you actually get out in front of markets and provide an opportunity for savings or cost avoidance.
JOHN BEHM is a managing principal with CresaPartners in Philadelphia. Reach him at firstname.lastname@example.org or (610) 825-3939.
History: President and CEO of Yoh Services LLC since 2003. Grandson of Harold Yoh Sr., who founded Yoh Services in 1940.
Education: Bachelor of arts, Duke University; MBA, Wharton School, University of Pennsylvania
Yoh on motivating employees: If people can’t motivate themselves, it’s going to be very difficult for someone else to motivate them. But through the interviewing process and the initial employment phase, you can see how motivated they are. Are they showing up to work early, are they leaving late, are they asking questions, are they open to feedback and criticism? But the flip side of that is people might not have previously worked in a place where spreading the vision and strategy is key. It could be that they’re not accustomed to being in a place where they’re offered the opportunity to participate in that. So there are times when you can draw that out of people, but first and foremost, you have to start with the fire within.
Yoh on understanding the vision: You do want everyone to have that common understanding of the vision. From the first time you talk to them, you want to be very clear on what it’s like to work here, what the expectations are, so there are no surprises. But the second part is that you’re really putting a puzzle together, and everybody has to understand what their piece of the puzzle is. How what they do on a daily basis impacts the whole, whether they are a salesperson, a recruiter, a manager, in an administrative role. Letting people know where they fit in the universe is a very important way to keep them motivated.
Yoh on telling stories: People can identify with stories. From the time you are a young child, you are read stories at home, you’re telling stories around the campfire. Stories have a way of identifying and personalizing ideas, as opposed to a textbook ‘here’s how’ message. It brings it to life and gives it color. Storytelling is a very important way to get your message and vision across.
Health care is expensive. Even with insurance coverage, we are paying more out of our own pocket these days. But as with any other product or service be it home repair, entertainment options or airline tickets health care costs can be lowered. The smart health care consumers keep more money in their pocket.
Smart Business spoke to Eugene Sun, M.D., MBA, vice president of medical affairs for HealthAmerica, about practical ways to save on health care costs.
What are some ways the average consumer can save on health care costs?
The easiest way to save money is on medication. Prescription drugs are expensive, but there are values to be had. I advise people to shop around. Consumer Reports Best Buy Drugs (www.bestbuydrugs.org) is a free public education service from the nonprofit Consumers Union, publisher of Consumer Reports. Its Web site can help you research the effectiveness, safety and cost of many widely used prescription drugs. Discuss what you learn with your doctor or pharmacist.
Can we really save money through preventive services?
Prevention is cheaper than treatment. Common sense tells us that avoiding serious illness, or catching it in its early stages when it is less severe and easier to treat, will cost less. Yet, fewer than half of all Americans are taking advantage of colon cancer screenings, smoking cessation programs, blood pressure screenings, daily aspirin and other preventive measures that can save both lives and health care dollars.
Of course, living right to begin with is vital. An apple a day, and these other basic rules of health, will help keep the doctor bills away:
- Get eight hours of sleep each night.
- Eat breakfast every morning.
- Cut down on snacks between meals.
- Keep within 10 pounds of your recommended weight. If you’re unsure what your weight should be, check with your doctor.
- Exercise aerobically for at least 30 minutes three times per week.
- Don’t smoke.
- Don’t drink more than two alcoholic beverages per day.
- Take recommended dosages of vitamins and supplements.
How can someone work with his or her health plan to save costs?
I recommend reading your plan documentation. What’s covered? How much is covered? How much comes out of your pocket? Take emergency coverage: Do you know what your co-payment or deductible is for emergency room care? Do you need prior authorization? Is there a lower-cost option for urgent care? Learn the answers now, before you need emergency or urgent care.
If you have a medical problem that is not a true emergency, be sure to call your primary care physician or doctor first. Doctors are often on call 24 hours a day to advise you. Your doctor knows you, your medical history and the best place to go for your care.
How about getting something for free? Is there any such thing?
There is free advice out there and smart consumers use it. Does your plan offer a 24 hour hot line for free medical advice? If it doesn’t, the government does. Call the National Health Information Center toll free at (800) 336-4797. Ask about anything, from hearing aids and cancer to Alzheimer’s disease and pregnancy issues.
You can also find many free services. Hospitals, clinics, employers and other organizations often sponsor blood pressure checks, shots for your children, free contraceptives and/or advice, and other preventive health care at little to no cost.
What else can we do to save money on our health care?
Staying safe at home not only makes sense, but it’s also a way to save money. Inexpensive home supplies can prevent falls, fires and other accidents that could send you to the doctor or hospital:
- Make sure the stairways are adequately lit, with nonskid stair surfaces and handrails.
- Bathtubs should have nonslip surfaces or bath mats.
- Area rugs should have nonskid backings, or should be anchored to the floor with double-sided or masking tape. Or do not use them at all.
- Have smoke alarms on every level of your home. Make sure a smoke alarm is inside or near every bedroom.
- Never store gasoline or highly flammable liquids inside your house.
- Keep a fire extinguisher on every floor.
- Install a carbon monoxide detector if you don’t already have one.
- Keep medicines and cleaning supplies out of the reach of children.
For more ways to save money, visit www.healthinsurance.org and click on ‘Reducing Health Care Costs.’
EUGENE SUN, M.D., MBA, is vice president of medical affairs for HealthAmerica. Reach him at email@example.com or (412) 553-7549.