Philadelphia (1114)

Monday, 25 June 2007 20:00

Bob Kreider

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A lot of executives stress the importance of communication, but how many of them have their own blog? At least one does. Bob Kreider, president and CEO of The Devereux Foundation, keeps and maintains “The President’s Blog,” in which he keeps the organization’s 6,000 employees updated on the current happenings and future goals of the nation’s largest nonprofit provider of behavioral health care services. Kreider touches on everything from the organization’s mission statement to informational briefs on Devereux-relevant legislation in his blog, which is designed to be useful for both clients and employees.

Smart Business spoke with Kreider about why it’s a good idea to smile once in awhile.

Prove you know your business at every level. I don’t think a strong leader can be afraid of going into the details when necessary. You have to give your people room to operate and be successful.

But if it doesn’t feel right, you have to understand your business at the detail level well enough to go after a problem. If you show that willingness once or twice, it makes the quality of information you get in other circumstances better, if people know you can go into the details.

Keep your growth on pace with your resources.

The (pitfall) that seems most tempting in our business is growing too fast. Once you achieve a basic level of success, and you’ve proven your product, and you have access to capital, the temptation is to grow as fast as you can finance.

In our strategic plan, we lay out a 6 percent to 12 percent growth rate as the maximum sustainable rate for Devereux based on an analysis of our financial resources and our human resources. If we outgrow either one, that’s a formula for trouble.

You need an understanding of what limitations you have of your financial resources and human resources, what growth they can sustain as far as capital and additional work capacity.

Smile every now and then. The toughest challenge I faced in a senior leadership role was being a real person to my staff. I was trained as a lawyer, an investment banker, and I also am an introvert.

When I first joined Devereux, I was told by a key person in the organization that people couldn’t read me, and that was a very bad thing. In my prior jobs, that wasn’t a bad thing. But I was told I was scaring people.

So I learned to smile a little more, be more expressive, engage in small talk a little more. It’s made me more effective, and I know it’s made my team more comfortable.

Take the blame. The most critical and difficult times are obviously when something bad happens or a bad decision is made. You

need to acknowledge it, not look through rose-colored glasses; then move on.

Nothing builds a team like the senior person shouldering the most blame, saying, ‘I’m most accountable.’ And telling your team, you’re still batting .800, let’s minimize the damage and move on.

Don’t look in the rearview mirror. Vision is important. We all feel we’re in fast-changing markets, and the demographics of markets are changing.

You have to manage toward where the industry is going, not in the rearview mirror. You can’t manage based on history; you have to see the changes coming. That is important, but even more important is humility.

One of my favorite books is ‘Fooled by Randomness’ [by Nassim Nicholas Taleb]. (Taleb) makes the wonderful point that human beings naturally assume that when something happens, it’s because they caused it. My approach is, you’re never as good as you think or as bad as you think.

That’s a hard thing to do as president of an organization. When things go really well, it’s easy to stand up and take credit for it all. The flip side is if things go poorly, you really got stupid quickly.

Try to keep things in perspective and not react too much to temporary fluctuations.

Get feedback. When I joined Devereux, I had

never been involved in strategic planning. But I found I really enjoyed that process. I used that strategic planning process as a way to communicate with the organization.

I used it both to communicate how I saw the organization and the industry and where it was going, and also to listen to all levels of the organization and where they saw it going. There are a lot of important insights that our staff — who are working with our clients every day — can help me with.

Strategic planning is a wonderful way to create a shared vision of where we’re headed.

Every five years or so, we go back and put together where the vision is going; what are the critical elements we need to be ready to address. Then I go on the road and get reaction from the organization.

We have the process take a full year. It’s an iterative process that gradually hones into something that we hope a good percent, if not all, of the staff can buy in to and feel ownership of.

Offer a career, not just a job. Our strategic plan is focused around three areas. We want to be the provider of choice for the services we deliver, we want to be the charity of choice for our communities, and we want to be the employer of choice. In many ways, that is the most challenging one.

The service industries are going to be very competitive in terms of being able to attract an adequate, high-quality work force. We make a real investment in training and trying to offer all our employees a career path, a way they can see an interesting future at Devereux. Even if they can’t, the training will offer them a solid base for whatever direction they go.

We attract them with what it is we do. For the right idealistic person who wants to save the world helping others who have significant challenges, Devereux is a wonderful opportunity. We attract them with our mission and keep them with the training.

HOW TO REACH: The Devereux Foundation, (800) 345-1292 or

Monday, 25 June 2007 20:00

Wellness counts

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In the current economic climate, employees rank among a company's most important assets. It makes sense that healthy people make for healthy companies. Yet, experts suggest preventable illnesses make up approximately 70 percent of illness and associated costs in the United States.

“Investing in your employees’ health is one of the soundest investments employers can make,” says Eugene Sun, M.D., M.B.A., vice president of Medical Affairs for HealthAmerica. “By initiating a health promotion program, employers can take important steps toward preventing unnecessary sickness.”

Smart Business spoke to Dr. Sun about why employers should be concerned about their employees’ wellness.

Why would a company invest in workplace wellness?

More and more health experts are turning that question around and asking, ‘How can a company not invest in the health of its employees?’ The evidence is becoming quite convincing that keeping employees healthy and on the job is worth the effort. After all, if you can reduce the burden of illness among your work force by preventing major causes of sickness, more of your employees will remain healthy and productive. You most likely will save money in the process.

What’s the real return on investment with worksite wellness programs?

That turns out to be one of the most incisive questions of all. In the last decade, large-scale studies on the effects of work-place health programs have shown a dependable bottom line. These studies show worksite wellness programs often result in a reduction of health care and insurance costs, as well as declines in absenteeism, injury rates, and improvements in performance and productivity.

One recent study showed that when employees used fitness facilities at least eight times a month over two years, hospital and clinic claims declined by more than 64 percent, physician claims dropped by 13 percent and claims for prescription drugs decreased by more than 9 percent. It’s encouraging to see when facts match your intuition; healthy people really do use health care less.

Have you seen an increase in companies investing in wellness programs?

Definitely. According to the United Benefit Advisors' (UBA) 2007 Employer Survey, the number of employers of all sizes and industries that are adopting personal health management strategies continues to increase. Roughly, 25 percent of all employers currently provide various wellness or health risk assessment programs, and an additional 50 percent of employers would like to add such programs in the future. In addition, employers now overwhelmingly believe there should be a difference in benefits or costs based on an employee's involvement in managing chronic conditions.

What would you say to an employer who says starting a worksite wellness program is too expensive?

Successful workplace health interventions don’t always need to be big-budget affairs. Most health insurers have a variety of health resources to make it easier for employers to start their own wellness program.

Ask your health insurer about integrating worksite wellness and benefit plan design through consumer-directed health plans. These lifestyle-driven plans reward healthy choices. One study found that employees in consumer-directed programs are 25 percent more likely to engage in healthy behavior and 20 percent more likely to participate in wellness initiatives.

Several excellent Web sites provide free information employers can use. Welcoa at provides employee presentations, incentive campaigns, free reports and much more. Wellness Proposals at is also a good place to start, as is the American Journal of Health Promotion at

Anything else an employer should consider?

Every little bit counts. The most cost-conscious program can help create a health-positive environment. When the goals are well-defined and the approach well-designed, success can be affordable. Furthermore, worksite health programs that appear to have only a modest, immediate result are of great value. Not only will the programs improve performance and satisfaction of current employees, good health and fitness programs tend to attract good applicants.

EUGENE SUN, M.D., M.B.A., vice president of Medical Affairs for HealthAmerica. Reach him at (412) 553-7385 or

Monday, 25 June 2007 20:00

IT as a strategic strength

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Technology in business has evolved from being a tool to help master tasks, such as basic communications and

record keeping, to serving as a critical success factor in a company’s productivity, customer satisfaction, processes and profitability. Owners invest large dollar amounts in information technology (IT), and they expect a sizeable return-on-investment (ROI).

While companies spend considerable amounts on IT, their ROI depends on whether the owner has integrated technology into the business plan, rather than making it an afterthought. “Business owners should ask how technology will impact the company,” says Sassan Hejazi, director of Technology Solutions at Kreischer Miller. “Will it enforce their goals? What value will IT generate both quantitatively and qualitatively?

“Technology projects are really business improvement projects,” he says.

Obviously, investing in must-haves like billing or e-mail systems is critical. These rudimentary “cost of doing business” technologies are baseline components that must be upgraded. But innovative technologies that help a business become more “lean” will separate a company from its competition, Hejazi says.

Smart Business spoke to Hejazi about how to align your IT investment with your business strategy to realize a return through improved profitability.

Explain the difference between ‘must-have’ and innovative IT.

There are certain technologies that are essential to doing business, which should be world-class in terms of uptime, reliability and accuracy. Without them, it’s comparable to not having power. A Web site that isn’t functioning or e-mail that is down will inhibit customer service and your ability to communicate with vendors, customers and employees. Outages and security breaches are serious disruptions to your business. You have to make sure this technology is updated, and doing so is a serious investment for most companies. Still, this ‘must have’ IT won’t set you apart from your competition. That’s where innovative IT comes in. This is technology that will help you improve processes and profitability, and it should be closely linked with your strategic business plan.

How can IT increase a company’s competitive advantage?

First, it’s important to recognize that no two businesses are alike. When you consider ways to integrate IT into your business, you should evaluate the following categories: customers, suppliers, competition, employees and processes. What type of technology will enable your customers to do business with you more easily? Can you attract new customers by offering a certain technology, such as a customer service function on your Web site? What is important to your suppliers? Supplier transactions, shipping, receiving, accounting and other activities can be modified for convenience and ease. What is the competition doing? Also think about your employees and what technology capabilities they require to work productively. From there, review all of your processes and your operation. Are there areas where you could eliminate paper, waste, downtime, etc.? Finally, what ROI do you expect from this technology?

How do you measure a technology ROI?

Before you invest in any technology, you need to take a look at the current state of your business. Figure out how long it takes your company to complete a certain process. Survey customers and employees. Learn where the weak points are in your business so you can decide how technology can provide an advantage. If, for example, your current technology enables you to ship orders in two days, how much time and money could you save by cutting this shipping time in half to just one day? From a customer service perspective, perhaps an average service call takes one hour. Can you provide an online tool for customers so they can solve their own problems? And, if so, how much labor, time and money will that save you? This measurement process is tedious, but important to determine the true ROI of technology.

What is the biggest mistake business owners make when investing in technology that prevents them from realizing a substantial ROI?

Often, we forget to include people who understand technology early on in the business-planning process. As I mentioned before, technology projects are business projects. Management has to be aware of technology and include it in their strategies. If you devise a business plan and technology isn’t a part of it, you will put yourself at a disadvantage. Technology sets the stage for your success.

SASSAN HEJAZI is director of Technology Solutions for Kreischer Miller in Horsham, Pa. Reach him at (215) 441-4600 or

Saturday, 26 May 2007 20:00

Power of the people

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For certain businesses, the right people make the difference between a service that’s just average or the kind that’s above and beyond industry standard. So why limit yourself to the types of people you can hire?

Smart Business spoke to Margaret Jones, vice president, corporate secretary at The Graham Company, about how training programs can allow a company to bring in the best and the brightest — regardless of their background.

Why implement a training program?

One consideration might be the ability to hire people from outside of your industry, especially when a lot of good people do not have industry-specific training. Some of the attributes that an employer might look for are things that you can’t really teach.

If you can hire people who have been really successful in their fields, with a strong work ethic and resourcefulness, you potentially have somebody with an aptitude for meeting client expectations. Once you identify the types of people you want for your business, the next step is to design a training program to teach them your industry.

When we started our program 22 years ago, it was almost unheard of for anybody to hire anyone outside of the insurance industry because there was so much technical knowledge required. What we decided was that we had the ability to train somebody in the technical part of the business. In our vision, it was those skills that were trainable. In our people, we looked for the intangible skills that were more innate.

What’s your advice for a business that wants to invest in training?

First and foremost, identify the types of people that you want to attract and determine what kind of training is going to be required for them to be successful.

In our business, we’ve created a three-year training program — six months of classroom training and two-and-a-half years of on-the-job training. Depending upon your business and the level of training required, you may not require this kind of commitment.

You also have to focus on what is the most important component of your business. If it’s your people, you have to invest in them. That’s really the main decision. If your business is such that your people are not your strength — it’s your technology or it’s your product — then extensive training may not make sense. When you’re a professional organization providing a professional service, then your training department is almost like what a research and development department might be for a manufacturer — that’s how we look at it.

Are there certain fields from which you’ve found excellent employees?

We have success in recruiting engineers and people with financial backgrounds, such as CPAs. We’ve also found that a lot of good hires are individuals who have attended military academies like West Point or Annapolis. They’re not really raw talent, because they have been successful in other fields, and they are going to be successful in whatever they do as long as they’re prepared for it. It’s our experience that the only way a business owner can attract these types of people is to not only assure them that they are going to be successful, but to demonstrate that you have invested in the resources to give them the training they need to achieve this success. Somebody like that is not going to change fields and industries without the assurance that they’re going to have the support to be trained.

Why don’t more companies invest in training?

Basically it’s a financial decision. It’s very hard for them to get the support of senior management because of the cost involved. In our agency, we have a ratio of one person in our technical development department that does training, continuing education and quality assurance for every 12 employees. That’s a huge investment. But we didn’t start off like that. We started our training initiative with one person 22 years ago when our company had 42 employees.

Anything else an owner should consider?

As a business owner, you can create a competitive advantage in the marketplace by having better trained, more knowledgeable employees than your competitors. Well-prepared, highly trained employees will make a difference for your clients and your business. Also, with an extensive training program, you’re able to determine whether or not somebody is qualified for the job during the training process, before they are on the front line servicing your customers or clients.

MARGARET JONES is vice president, corporate secretary at The Graham Company. Reach her at (215) 701-5264 or

Saturday, 26 May 2007 20:00

Redrawing boundaries

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Several years ago, Heinrich Kolem’s business had reached its limit.

Growth at the Siemens Medical Solutions Customer Solutions Group had stalled. Avenues of growth were rapidly being exhausted and the company’s progress was grinding to a halt. The company was, to borrow a city-planning term, approaching build-out.

With the company approaching the boundaries of what it could realistically accomplish, Kolem, the company’s president, realized changes needed to be made, or it would stagnate and begin to backslide.

The Customer Solutions Group, which accounts for about half of Siemens Medical Solutions’ approximately $11.2 billion in annual sales, needed to find new ways to grow, and for that, needed a number of changes in how it approached growth, innovation and communication.

“We had to change things to allow the organization to grow again,” Kolem says. “This is part of the changes you have to apply, and changes always cause a lot of disturbances, which is something I have had to overcome.”

Kolem says the best way to change, and to smooth over the wrinkles that accompany change, is for management to listen. He wanted a company of engineers and marketers that excelled at gathering and refining ideas from customers and from each other.

With that in mind, the senior managers started listening to ideas from various parts of the company about how improvements could be made and what was possible to achieve.

Finding a new path

Kolem says the organizational change followed one underlying theme: More decentralization. Kolem wanted his field workers and managers to have more latitude in dealing with customers, and in order to do that, they needed to be enabled to make their own decisions more often.

That, he says, is why frequent meetings early in the process were so important.

“You involve some other teams in preparing the changes, discussing in an open way what needs to be changed and what could be done,” he says. “By involving more and more people, you get a feeling of what could be done.”

However, if you want to get different perspectives, you have to be careful how many perspectives you are getting. Brain-storming is good, but when dealing with issues of steering the company, know when to say when.

“Of course, you can’t involve 5,000 people, but maybe at least pick 25,” he says. “After you talk to 25 different people, you can get a real feeling of what the needs are and then you can start in on it.”

Kolem began a program last August in which he brought together a cross section of the company’s various departments, creating a kind of think tank of decision-makers. Over the span of about 10 meetings between August and December, Kolem and his senior leadership began to form a long-term picture of where the company needed to go.

Through the input received from those meetings, Kolem began to see where the Customer Solutions Group would be in three to five years if new and expanded growth avenues were not found.

“I basically let them ask the questions themselves,” he says. “What is the situation we are in? Why do you think we need to grow significantly? We had meetings where we listed the strengths and weaknesses of the organization as is.

“From there, we looked at the projections of the business volume and intended growth from our side, and then at what would be the challenges in 2010 and 2012. From there, it was clear the current organization structure would not be able to handle that. I asked them to just think about that, and I got a lot of ideas.”

Kolem says that organizations tend to either centralize or decentralize a little more or less than what they should. By empowering the people under him to take more of an active role in generating ideas and steering the company, he says he aimed to take some of the decision-making burden off of central management and put it in the hands of the people who are most familiar with the customers.

Kolem uses customer response times to gauge how centralized his company is.

“If you find out it takes too long, it probably means you have too strongly centralized an organization,” he says. “If the customers always have to go to a certain central office, or your main headquarters, it probably means it’s too strongly centralized. Then it becomes very clear what you have to do.”

By enabling the people who deal with your customers, Kolem says you can make your business more maneuverable and able to react to changes.

Innovate to grow

On matters of innovation, you need to not only be working for your customers, you need to be working with them, taking their ideas and concerns, and splicing them into your innovation process.

An innovation that does not address a customer need is an innovation that was created in a vacuum and will probably have no real growth effect on your business.

“An innovation is only a successful innovation if it is successful in the market,” he says. “For us, that was a key ingredient, to make sure everyone understood that.”

Kolem says it has been important for his employees to view customer relationships as partnerships, as opposed to being merely transactional. Engineers at the Customer Solutions Group meet with customers regularly, exchanging ideas and feedback and above all, listening, which contrasts with some of the traditional models of customer interaction, centered on “We talk, you listen.”

“The very simple thing is just that: Listen,” Kolem says. “Very often, people go out to the customer and tell them, ‘This is what you need to do and this is how we’re going to do it,’” he says. “We first go out, listen to them, what is their environment, how they see their challenges, and ask them to describe the situation they are in. Often, they come up with a lot of ideas of what they think should be done, along with little things that are small side remarks.”

Kolem says to keep your ears open when a meeting turns to casual banter. The side remarks in a meeting can also be harvested for small innovations at times.

“Often, if you listen to those small side remarks, they are ways we can easily improve and help (the customers),” he says. “So we go through, at the beginning, these certain small steps, which help establish our relationship with customers for further future projects. A lot of things are about developing long-term relationships and starting to be successful in smaller steps.”

With an eye toward fostering long-term relationships with customers, Kolem’s staff discusses with customers the landscape of the medical solutions industry as it might appear five or 10 years from now. Through that, they begin to paint a picture of where Siemens Medical Solutions sees itself in the coming decade versus where the customer’s company sees itself, and begin to form a plan as to how they can best fit customer needs.

Kolem’s philosophy is to consider every idea, no matter where it came from, so the Customer Solutions Group interfaces with customers on three different levels, each designed to refine a project based on who came up with the original idea.

The first level deals with innovations that were directly inspired by a customer need. The engineers work with customers to make sure the project has a hand-in-glove fit with what the customer is seeking.

The second level deals with innovations that were sparked by internal brainstorming sessions. For those ideas, Kolem’s staff assembles focus groups comprised of representatives from customer companies. The focus groups are asked in a structured fashion for their feedback on the idea, and whether it would adequately address their issues.

The third level requires employees in the field to develop and maintain close working relationships with customers, then feed what they learn up the organizational ladder to the decision-makers so the company can react quickly to an emerging need in the marketplace.

Kolem says experience has taught him that a company’s fact-finders always need to dig deeper and learn a little bit more than what they already know. You do that by going beyond the business-speak at the conference table and really getting to know your customers and their day-to-day business lives.

“If you just do this in a structured way and people are only getting specification requirements instead of talking directly to the customers, there are still a lot of details that are open for engineers to solve,” he says. “Once that relationship with customers is established, it is very helpful for an engineer to just be able to ask and refine the product to the optimum. Once we had done that several times, we just started to make it a part of our regular process.”

Getting on the same page

A big part of spurring growth is to get your idea-makers to start thinking outside the box, but in order to do that, you need to get them to think together.

As with customer interaction, Kolem says listening is the most important thing a business leader can do, and the most important example he or she can set for the rest of the company.

At the Customer Solutions Group, it’s as simple as pizza pie. “What you can do is from time to time have one-on-one conversations with different levels in the company,” he says. “What we have had are pizza meetings where you just invite people for a pizza lunch and say ‘Let’s just talk.’ You let them talk and listen to what they have to say, and thereby, also have a chance to correct some of the misunderstandings that always happen when you communicate over several lines of hierarchy.”

When Kolem needs to communicate something throughout the company, he says he relies on keeping the message somewhat simple so that it can reach the largest possible audience, and reach them quickly.

But there is such a thing as making a message too simple. “It’s very helpful if you can keep a message simple, but you don’t want to keep it too simple because certain parts of the organization will dismiss it as the same old marketing-speak that they don’t want to hear,” he says. “It has to be the right level.”

Kolem walks the line between simple and not too simple by keeping his messages broad and basic to begin with, and then delving into more narrowly focused and complicated matters as employees become more familiar with the issue.

“You come out with some leading simple words like, ‘What do we want to achieve?’ and words that describe the goal like, ‘We want to achieve more customer intimacy,’” he says. “These are the things you should repeat, things your people should know. Then on the second level, you fill it out with certain content and you try it out. Then, you find out, as we do through our pizza meetings, is this too simple or too complex? Then you have to adjust the communication as to what the feedback is.”

Kolem describes the effort to refocus the Customer Solutions Group as a work in progress, but says the company is far better at listening and communicating than when the process started, and is continuing to grow.

When it comes to communicating with employees, Kolem says he has learned never to underestimate what your employees are capable of. As the head of your business, you might like smooth sailing, but don’t forget that should you encounter choppy waters, many of your employees might like a challenge.

“It shouldn’t be too easy because then they’ll say, ‘If it’s so easy, why are we here?’ It wouldn’t be a good company if we didn’t have complicated problems to solve.”

HOW TO REACH: Siemens Medical Solutions Customer Solutions Group,

Wednesday, 25 April 2007 20:00

How to use health care news

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What does the latest study, the flashiest ad or the scariest headline really mean? If there is one subject Americans can’t seem to get enough of, it’s health information.

“Web sites devoted to health care are among the most popular sites on the Internet,” says Eugene Sun, M.D. “Everywhere you turn, there is information about every known topic related to good health.”

Smart Business spoke to Sun about how to sort out the good information from the bad on the Web.

What are some precautions we should take when evaluating medical information from the Internet?

Knowledge is a good thing, but you have to be careful. As you bounce from Web page to Web page, be sure to check who is in charge of the site. You might start on a reputable page, but a link might take you to a site run by someone with a very different agenda.

How can we tell if a report or health care study is reliable?

Check where the study was published. The most reliable studies are found in peer-reviewed clinical journals, such as The Journal of the American Medical Association or The New England Journal of Medicine. Also, find out if a company that could benefit from the results funded the study. That’s not always a warning sign, but it can be.

What are some examples of reliable sources on the Internet?

The U.S. Food and Drug Administration recommends sites that end in ‘.gov.’ They are sponsored by the federal government, like the U.S. Department of Health and Human Services (, the FDA (, and the National Institutes of Health (, to name a few.

Look for ‘.edu’ sites, which are run by universities or medical schools, such as Johns Hopkins University School of Medicine, or maintained by other health care facility sites, like the Mayo Clinic and Cleveland Clinic.

Other reliable sources are ‘.org’ sites maintained by not-for-profit groups whose focus is research and teaching the public about specific conditions, such as the American Diabetes Association, the American Cancer Society, and the American Heart Association.

Be aware that sites whose addresses end in ‘.com’ are usually commercial sites and are often selling products or services.

What other types of things should we be checking with the sites?

MedlinePlus ( is an excellent place to start on the Internet. It is a service of the National Library of Medicine (NLM) and the National Institutes of Health (NIH). MedlinePlus offers high-quality information on more than 700 diseases and conditions. It does not advertise nor endorse any company or product on its site. I recommend referring to the following checklist from MedlinePlus to avoid unreliable health information when you’re surfing the Web.

Be a cyber skeptic. Does the site make health claims that seem too good to be true? Does it promise quick, dramatic, miraculous results? Beware of claims of a ‘breakthrough’ or one remedy to cure a variety of illnesses. Ask your personal physician for an opinion.

Check for currency. Is the information current? Look for dates on documents. Click on a few links on the site. If there are a lot of broken links, the site may not be kept up-to-date.

Beware of bias. Who pays for the site? Consider how that might affect the information offered. Be cautious of sites that do not identify their affiliation, perspective or source of information.

Protect your privacy. Health information should be confidential. Does the site have a ‘Privacy Policy’ link? Does it tell you what information is collected? If it states ‘We share information with companies that can provide you with useful products,’ then your information isn't private.

Consult with your health professional. Information that you find on a Web site does not replace your doctor’s advice. Patient/provider partnerships lead to the best medical decisions. Review the information with a health care provider who knows you, and can help you put what you have learned into perspective. And never change anything about your health care unless your doctor says it’s OK.

For more information, check out MedlinePlus’s Web site at thywebsurfing.html.

EUGENE SUN, M.D., M.B.A., vice president of medical affairs for HealthAmerica and HealthAssurance. Reach him at (412) 553-7385.

Wednesday, 25 April 2007 20:00

Reduce compliance costs

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Sarbanes-Oxley turns five this year, marking a zero-tolerance response to corporate scandals like Enron, and a new era in auditing and internal controls reporting designed to protect investors and help companies establish more effective systems.

But complying with Sarbanes-Oxley, more casually known as SOX, is costly and redundant when you figure that outside auditing firms must perform double audits, first on managements’ assessment of internal controls, then again by testing the controls and forming a conclusion about the effectiveness of internal controls.

“New guidance from the SEC and Public Company Accounting Oversight Board (PCAOB) is the first major step toward addressing excessive compliance costs,” says Chris Meshginpoosh, director of Management Advisory Services for Kreischer Miller, Horsham, Pa.

Indeed, cost-prohibitive assessment and auditing procedures have driven some smaller companies to avoid an initial public offering, or to go public in overseas markets instead. Large public companies spend hundreds of thousands of dollars complying with SOX, and companies with market capitalization of less than $70 million confront similar costs — a disproportionate burden.

Smart Business spoke to Meshginpoosh about ways companies can mitigate SOX compliance costs even before final guidance is expected to be passed in mid-2007.

What exactly does the proposed guidance mean by a ‘top-down, risk-based’ approach to internal controls assessment?

Basically, this approach involves starting at the financial statement level and working your way backward through internal control processes as opposed to beginning from the ground up. During their first year of compliance, many large companies started by asking process owners to document every process, with almost complete disregard to the size or risk profile of the related account balances or disclosures. In other words, even if the controls in these processes failed, it would be of no concern to investors and, ultimately, would have very little impact on the company’s bottom line. Given the size and geographic dispersion of many large companies, this type of an approach was exhausting.

Instead, the SEC and PCAOB are once again stressing the importance of a top-down risk-based approach. Which account balances are material? Which accounts involve a high degree of risk? Are there high-level controls such as detailed variance analyses that address the risk, or do I need to rely on lower-level process controls?

Where might relying on entity-level controls might be appropriate?

Let’s take payroll. Most companies rely heavily on employees to conduct operations and, as a result, payroll balances are generally material to financial statements. But let’s take an example where a company primarily employs salaried workers and experiences very little employee turnover. Because payroll balances would be relatively predictable, detailed budget versus actual comparisons performed by management that require investigation of variances in excess of defined thresholds might represent a highly effective entity-level control associated with certain payroll assertions.

However, if the company employs a large number of hourly employees, has a high rate of turnover as well as substantial cyclicality, a budget-to-actual comparison might not be as effective. Therefore, the company might need to rely on lower-level controls such as supervisory reviews of timesheets.

Are there areas where companies need to spend more time?

One of my biggest concerns is that companies have spent a considerable amount of time on low-risk areas, but have not focused closely enough on areas that require an understanding of complex accounting issues. However, if you look at the nature of material weaknesses disclosed by public companies, a substantial majority involve errors associated with the application of complex accounting pronouncements.

If companies employ effective top-down, risk-based approaches, they should identify these types of potential issues in the planning process. Once identified, companies should think long and hard about the qualifications of their personnel and decide whether augmenting internal resources with outside accounting expertise is warranted.

What resources can companies refer to as they consider ways to implement the proposed guidance now?

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission established a framework a decade ago that still serves as the de facto standard for internal control assessments. Also, the SEC's proposed guidance is available on its website, Finally, companies can always consult third party advisors to assist them in their evaluation efforts.

CHRIS MESHGINPOOSH is director of Management Advisory Services for Kreischer Miller in Horsham, Pa. Reach him at or (215) 441-4600.

Monday, 26 March 2007 20:00

A captive audience

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In an effort to reduce costs and take control of their property and casualty insurance program, some companies are forming their own insurance companies. These insurance companies, called captives, are set up primarily to insure the risk of their owners.

“Instead of purchasing their insurance from traditional insurance carriers, some companies are forming a captive insurance company either by themselves or with other companies,” says Bill Selman, a producer for The Graham Company in Philadelphia.

Smart Business talked to Selman about how captive insurance works and who can take advantage of it.

Is captive insurance a new concept?

Captives are not new. In fact, they’ve been around for a long time. There are over 5,000 captive insurance companies in existence today. Fortune 500 companies have independently owned captive insurance companies for decades.

What about group captives?

Group captives are a newer concept. When companies aren’t large enough to own their own captive, many of them partner with other mid-sized companies to form a group captive. Group captives involve anywhere from a handful to over 100 middle-market companies that come together with a set of service providers to provide primarily three types of insurance coverage. They are normally workers’ compensation, general liability and business automobile coverages.

For what kinds of companies would group captives make sense?

Size matters. Premiums should be at least $400,000 for the coverages discussed earlier. The organization should have good safety and loss-control procedures in place, and at least a little bit of an entrepreneurial spirit. These companies have an interest in taking greater control of their insurance program as opposed to simply placing the insurance coverage and forgetting about insurance for the rest of the year. These owners want to actively engage themselves in safety programs, claims programs and hiring practices. They recognize that if their losses are favorable they can take advantage of the profits that are associated with that performance.

What are some of the benefits of captive insurance?

There are three primary benefits of captives: increased control, reduced cost and greater stability.

Captive ownership provides increased control over your destiny. You choose your own partners, select your claims administrator, your re-insurer, etc. You have closer control over how specific things will be managed and you can customize your loss control and safety services to meet your needs.

Second, you can reduce the overall costs of insuring your risks. Your contributions are based on your own expected losses. If you have favorable losses, after approximately four years, you begin to take the underlying profit and the interest income as a dividend.

Third, as a group of insureds you are generally able to negotiate broad coverage terms and stable pricing despite the inevitable swings of the marketplace.

Are there disadvantages?

Yes, at least perceived disadvantages. One, if you’re not committed and do not have a good loss performance, your costs could be higher than they would be had you simply bought a traditional guaranteed cost insurance program. Companies that aren’t able to adequately control losses over the long term will suffer.

It’s really only suited for companies that want to get involved with owning an insurance company. It’s not a dramatic additional amount of time spent, but there are typically two board meetings a year and some new loss control efforts. And on some level you do have an exposure to other member’s losses. There is some shifting and sharing of losses among members, although it should be structured in a way to minimize that exposure.

Are all captives the same?

No — each captive is a least a little bit different. Before moving ahead, it’s very important to thoroughly analyze a potential captive solution to be sure that you understand its structure and the character of the other members. It is also important that all members be big enough to pay their own major claims without creating loss sharing after a single ‘shock loss.’ If you are in a captive with 50 or 100 other companies, you will not achieve your objective of being a real ‘owner.’

BILL SELMAN is a producer for The Graham Company. Reach him at (215) 701-5233 or

Monday, 26 March 2007 20:00

Spanning the globe

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As business has grown and evolved, Richard Bolte Jr. says those two words have almost become synonyms. Managers are consideredleaders, and if a leader isn’t yet a manager, he or she could be one day.

But Bolte says the two terms are not interchangeable. Managers lead based on what is already written in the rule book. Leaders effectchange by revising and rewriting the book itself.

At BDP International Inc., the global logistics firm started by Bolte’s father more than 40 years ago, Bolte made it a priority to transition himself from a manager to a leader upon becoming BDP’s president in 1996. “That’s the most transformational activity that occurred in my entire career,” says Bolte, who also assumed the role of CEO in 2006.

“It’s mainly due to the fact that some of the aspects of becoming a successful leader really cause you to give up and forget about someof the things that made you a success as a manager.”

Bolte says the head of a company needs to be a leader. He or she needs to oversee the company rule book by creating a visionwith clearly defined objectives and spread them to the far corners of the company with strong communication skills.

Without strong leadership, a company risks going stagnant and missing out on opportunities that might help the business grow,and ultimately, survive.

BDP has locations in more than 100 countries, and keeping them on the same page requires relentless communication from thosein the company’s Philadelphia headquarters.

A global family
Many CEOs want their employees to have meaningful, personal working relationships with each other and with management. Themetaphor of “one big family” has been used by CEOs so many times, it has become a cliché of business culture.

Bolte has a unique perspective on the concept because BDP — a company with about $1 billion in annual revenue — actuallyis a family business, passed down from his father to him and his brothers. Bolte says he knows having a business that behaveslike a family is about more than just company picnics and handing out greeting cards during the holidays.

It’s about communication. It’s about forming a communication structure that keeps employees in the know and maintaining itconstantly.

Bolte says it all starts with the leader’s actions. If you are upfront and honest with your employees, others in the company willfollow your example.

“When I became president, that was one of the primary planks by which we decided to run BDP,” he says. “Specifically, we travel around a lot. I think the best way of communicating is when we go to our offices and talk about exactly what we’re up to.”Bolte says there is no substitute for face-to-face communication, so you need to make the time to hit the road and go to a fieldoffice to personally address your employees.

“I’ll say I’m going into a city for a couple of days and I’d like to address the employees maybe for an hour,” he says. “Maybe I’llhave a customer dinner with a supplier, and so on. But I think it’s the highly personal contact that really gives you an understanding of what is going on in the various markets, and it gives employees an opportunity to see your strategy firsthand.”

Bolte says there is more to it than just popping your head into one of your field offices now and again. Take the time to preparea presentation and open up the floor to questions afterward. He says it could be the difference between employees dismissingyour strategy and messages as a series of platitudes, and employees really buying in to what you have to say.

Employees will respond to not just what you say, but how you say it.

“I like to believe I have a passion for what I do,” Bolte says. “When you put yourself in those types of (presentation) situations,you really have the opportunity to demonstrate the passion and commitment you have to running the business. I think those arethe things that leave employees with a much better perception of the leadership of the company than if they sat there and justsaw a video or something.”

The importance of face-to-face communication is something Bolte learned early in his management career.

“As I came up through the ranks, I ran several operations that were outside of company headquarters,” he says. “I always feltlike the people in corporate were up to something. I didn’t know what, but I felt that if I had the opportunity to have a significantrole in the corporate leadership that I was going to do everything possible to communicate our strategy out in the field.”

The culture gap
“There are two things you can never do enough of,” Bolte says. “Train and communicate well.”

That’s especially true when it comes to overseas operations.

Training and communicating become exponentially more difficult when the learning curve includes a trek halfway around theworld to China or Singapore. Not only must you educate new recruits in the ways and means of your company, you are also getting an education in a different culture.

If you want your presence overseas to be a success, Bolte says it is imperative that you learn as much — if not more — abouttheir world as they learn about yours.

“Every culture in which you’ll do business is unique,” he says. “Running a business in China is distinctly different than runninga business in India, especially with regard to the type of human resource challenges.”

Finding Asian employees with a solid English background and technical background is the primary challenge in Asian markets.

In North America and Europe, where language isn’t as much of a barrier and the standard of living is higher, in many cases, theemphasis falls elsewhere.

“Our HR group in a hot-growing market like Shanghai would focus on attracting talented people with good English skills,”Bolte says. “In Europe, where there is a more managed growth rate, it’s more about how you form the right quality of life. Thoseemployees would be more interested in benefits and things like that, so our HR groups in Europe need to concentrate on creating the right sort of atmosphere for our employees.”

Bolte says he makes it a point to get as much background as possible on an overseas market by meeting with the field leadership prior to addressing employees, then weaving what he learns from the managers into his presentation. “I’ll meet with the management in Singapore to find out what is going on there,” he says. “Then I’ll use that to give the presentation a more local feel to show how what we’re doing could impact you and the operation in your country.”

Cultural differences can also come into play when the time comes for employees to ask questions. Not every employee is goingto be willing to stand up in front of his or her peers and solicit m ore information from the head of the company. When that happens, Bolte says you will have to find other ways of answering the questions, including using your field managers as a kind ofintermediary.

“The types of questions really depend on the type of culture,” he says. “I’ve found that in Asia, no matter how open the culture,employees ask very few questions of me, but they might go to their supervisor afterward. In Europe, however, they are very questioning. They’ll ask me about anything.”

Bolte says there are two schools of thought when it comes to staffing an office abroad. Some companies like to bring theircountrymen with them to a foreign land. Some, like BDP, prefer to hire locals.

Bolte says staffing your international offices with local talent and attempting to bridge the culture gap might seemlike more work than simply bringing American workers with you, but U.S. companies that simply staff their worldwide officeswith Americans are missing out on a valuable resource: the insider knowledge that a local worker can bring.

“We’ve watched some European companies not do so well with that strategy,” he says. “Their strategy has been to sendEuropeans to different parts of the world, and we’ve seen them struggle with that. So we had that as a background.”

Bolte says your company might be American, but don’t assume that every employee in every office you might have around theworld needs to operate like they’re based in Anytown, USA.

“Some companies are very American, some are very German, some are very Chinese, but I think if your culture gets toodominating, it can crush and crowd out the voices of folks from a different culture,” he says. “You don’t want to be so dominant that you drown out the voices that you really need in order to develop strategies in different markets.”

The right people
Communication in business is a two-way street. You can do everything in your power to try to get your employees on thesame page with your company vision, but some just aren’t going to buy in.

In that case, Bolte says it’s a bad match of employee and company. It’s unfortunate, but at times unavoidable.

“We’ve had some very talented people come through here, but they either didn’t believe in our culture or didn’t understand it,and as a result of it, they didn’t succeed,” he says.

There is no magic formula for finding the right people that will buy in to and carry out your company’s vision. Bolte says thetried-and-true method of a sit-down interview is usually the best gauge, but even that isn’t an exact science.

Your chances of hitting the nail on the head during the interview process go up along with the number of interview rounds,so Bolte enlists the help of many of BDP’s most experienced managers to conduct many rounds of interviews with applicantsfor higher-level positions.

“After the rounds of interviews, we’ll all put our heads together,” he says. “But to a certain extent, it’s about risk-taking, it’sabout making an assessment. Sometimes, you do have to trust your gut that you are making the right choice. If you do makea mistake, more often than not, it quickly becomes apparent.”

If you make a mistake in evaluating a candidate, he says to acknowledge it quickly and form a plan of action for dealing withit. The longer you let a mistake linger, the worse it’s going to be to fix.

“It’s OK to learn from mistakes,” he says. “Sometimes you make a bad decision, and you hang onto it and hang onto it, you tryto make it work. But you have to acknowledge mistakes quickly and then do something about it.”

HOW TO REACH: BDP International Inc.,