Are you ready? To be successful, you need to make informed decisions and a commitment in terms of time, staff and funds. But it's within your reach.
The numbers add up
First, ask yourself, is your product something that foreign consumers or manufacturers might need or desire? If your answer is yes, you should consider the value of exporting.
Are you worried that your company isn't big enough to export? Think again. Size isn't an issue.
Companies looking to increase profits through exporting have at least two options - hold the price of your goods constant in foreign dollars and get more back in U.S. dollars than you would have previously, or keep your price consistent in U.S. dollars and make more in volume. That means that if your product costs $1 in euros, it now takes more dollars to equal a euro. If you hold your price the same in dollars, the lower cost in euros might convince foreign customers to buy more.
Are you ready?
When evaluating the export potential of your business, start with these basic questions.
* Has your product been successfully marketed in the United States? If so, there's a good chance that it will be successful in similar markets abroad.
* Have sales declined locally due to increased competition or the introduction of a more technologically advanced model? Other countries may not need state-of-the-art technology and may welcome another supplier.
* Is your product unique? Does it have important features that are difficult to duplicate abroad?
If your product successfully measures up to these general standards, the next step is to assess your company's commitment to developing a proactive, long-term export business. According to the Pennsylvania Economic Planning and Development Council, additional self-assessment questions include:
* Does exporting fit into your overall marketing and sales objectives?
* Can you give foreign customers the same attention and service you give to U.S. customers?
* Are you willing to modify product packaging and ingredients to meet foreign regulations and cultural preferences?
* Are you aware of the constant change in foreign exchange rates that can impact sales and profits?
Formulating an export strategy based on solid information and proper assessment will help bring success.
Local resources and expert advice
Perceived barriers to exporting, such as foreign languages, foreign currencies and other issues, can be better navigated with input from resources in your own business community, including small business development centers and regional planning and development commissions.
Select financial organizations also can help. From setting up letters of credit and hedging foreign exchange risk to securing financing for your buyer and establishing local banking services, banks work with companies and sponsor trade workshops to spur growth beyond the U.S. borders.
Don't let the "E" word dissuade you. Exporting can be quite profitable, especially in this time of a weaker dollar. With improvements in communications and technology, exporting is a real option for many companies. How about yours?
William Friel is executive vice president and region sales manager for corporate banking in Philadelphia at PNC Bank, National Association, member of The PNC Financial Services Group Inc. PNC Bank is a 2004 Presidential "E" Award winner, honored by the U.S. Department of Commerce for export services. Reach Friel at (215) 585-5242.
This was prepared for general information purposes only and is not intended as specific advice or recommendations. Any reliance upon this information is solely and exclusively at your own risk.
But now there is a medical health insurance plan -- at an affordable price -- for your employees who cannot afford standard packages. Furthermore, thanks to little-known tax advantages, these "mini-med" plans are a way to offer much-needed insurance to the uninsured within your work force at no cost to your employees or you.
Companies already using mini-med plans for their part-time, seasonal employees and low-income workers include PepsiCo, Burger King, Eckerd RX, Clark and Applebee's. What should you know about mini-meds and whether they are appropriate for you?
The benefits of mini-meds
Although less comprehensive than traditional PPO or HMO insurance products, mini-meds provide a wealth of coveted benefits. Most plans feature first-dollar coverage, with no pre-existing conditions or limitations. Covered services may include reimbursement for inpatient and outpatient hospital care, visits to doctors and specialists, surgical benefits, lab and X-ray services, even much needed prescription drug coverage.
Some mini-med plans provide coverage including life and disability insurance, as well as dental benefits.
As important, mini-meds serve as a viable preventive care insurance choice for employees and their families, and help reduce lost productivity due to preventable illness.
Tax advantages render mini-meds free
Mini-meds are significantly less expensive than other insurance options -- average monthly costs range from $20 to $150, depending on a plan's design. Additionally, employees may benefit from the little-known IRS Earned Income Tax Credit (EITC) program, which can make mini-med plans a benefit available at no cost.
An outgrowth of the 1990 Omnibus Budget Reconciliation Act, the EITC is a tax benefit for low- and moderate-income workers.
Families earning less than $34,458 and that have two or more children are eligible to receive a tax credit up to $4,300 per year. Families earning less than $31,338 with only one child are eligible for $2,604 per year.
Even families without children can earn a credit of $390, which means the EITC program could easily subsidize the entire cost for those who qualify.
Mini-med plans can be funded on a noncontributory, contributory or voluntary basis, although most often are paid for using the latter two. Premiums may be payroll-deducted through Section 125, providing both the employee and employer tax savings typically associated with Section 125 of the IRS Code.
Mini-meds close the insurance gap
Estimates tell us that 27 million full-time employees and 37 million part-time workers are uninsured; the former represents one out of every four full-time workers. Additionally, a study conducted by Blue Cross/Blue Shield of Ohio reported that 94 percent of insured employees use less than $1,000 of medical benefits per year.
The large majority of these services would be covered under most mini-med plans. Furthermore, with the EITC tax credit reaching up to $4,300, mini-meds can easily become a free health benefit for employers to offer.
By incorporating mini-meds into their suite of health benefits choices, employers stand to gain from tapping into and retaining this potential applicant pool of uninsured but valued workers.
Mini meds, max returns
I have met with hundreds of employers looking to provide sensible solutions, strategies and answers concerning their benefit plans. Mini-meds have provided many in the brokerage and consulting community the opportunity to narrow the gap between the uninsured and the insured.
Savvy employers structure their benefit programs in a way that allows them to recruit and retain the best employees. Adding a mini-med plan can increase the value of their overall benefits program at potentially no additional costs to employees. Not only does it provide a well-received benefit, it builds goodwill and helps reduce turnover.
The uninsured are more susceptible to major illness because preventive measures are not available. By providing some level of health insurance, employers create a healthier work force, resulting in less time lost due to preventable illnesses. Ultimately, that means increased productivity.
MICHAEL GAZZARA is vice president for Corporate Synergies Group Inc., a full-service employee benefits brokerage and consulting firm in the Philadelphia region. He has been a benefits consultant for more than 14 years, specializing in short- and long-term strategic planning for clients. For more information on what benefits service brokers offer, go to www.corpsyn.com or call Corporate Synergies at (877) 426-7779.
"The business is evolving and changing -- the dust really has not settled, in my opinion, even though three years have passed since Enron went down," says Smart, founding partner. "The CPA industry is in the midst of tumultuous change. We are simply the beneficiary of these changes."
While people wash out the sour aftertaste from ethical upsets such as Enron, progressive firms such as Smart's prosper. His company focuses on nurturing client relationships, serving up consulting services and recruiting talent to drive new business.
Arthur Andersen's expiration sweetened the talent pool. Smart "drafted the best players when the draft was open," recruiting Andersen professionals, executives and partners to bolster his technology consulting practice. Fall-outs, mergers and legislation continue to open up market share that feeds the firm's growth.
And Smart is picking up plenty of business from compliance consulting. Tagging the Sarbanes-Oxley Act of 2002 "the most important piece of legislature since the FCC Act of 1934," he attributes the firm's growth in business advisory services to its provisions. Under the act, clients that hire "The Big Four" for auditing services no longer can enlist the consulting services of these firms.
"All of a sudden, these executives have to look for other service providers," Smart says.
With its headquarters in Devon, and offices in Atlanta, Chicago, Baltimore/Washington, D.C., and New York City, the firm reaches global clients. Meanwhile, Smart and his partners knit relationships with executives and earn business -- part of an aggressive yet calculated and careful growth strategy.
"Change is good," Smart says.
Smart Business spoke with Smart to discuss the challenges of these strategies and how he plans to keep the growth going.
How did you tap into growth opportunities?
We follow industry changes very closely and we chase opportunities that are presented to us. The biggest part of our growth in 2004 was primarily providing assistance to companies that were implementing the Sarbanes-Oxley Act.
There were provisions that all auditors had to comply with, and the deadline was the end of 2004.
How does your strategy work?
Our strategy from earlier days was to fill what we've always believed has been a huge gap between international and local firms. When we first started the firm, it was The Big Eight, and that gap, by way of market share, seemed huge. The Big Eight consolidated into The Big Four, or Final Four as it is today.
The merger activity in itself has created opportunity.
Layer in the changes that occurred as a result of the Sarbanes-Oxley Act, and you have a recipe and invitation for other firms to step up and compete. That is why I view the Sarbanes-Oxley Act as our invitation to compete with international firms, and compete in a credible way.
Clients are forced to look for other service providers. In the old days, the notion was always that you select an auditor, and once you do that, that firm is your adviser for taxes and consulting. The way of the world was that everyone went back to the auditor for consulting services.
After the Sarbanes-Oxley Act, auditors are truly watchdogs, and that is the only service they can offer clients.
How much of your growth came from the passing of this act?
We were growing rapidly before the act - the act just forced companies to change. We were making inroads to developing relationships with large corporate clients anyway, and we were having some success without the rule change.
The rule change certainly fed our growth -- we've done $8 (million) to $9 million revenue in Sarbanes-Oxley compliance work. It's hard to put a finger on the percentage or what growth would have been if Sarbanes-Oxley did not occur.
I'd like to think we would have continued to grow at the pace we are on, but I have to admit that the marketplace might not have permitted it.
Which areas of your business show promise -- which services are most lucrative?
Our business advisory services department is the area that includes the Sarbanes-Oxley consulting work, which has been the No.1 driver of growth in our firm. But a close second is the technology practice. We started this in July 2002 with 13 people -- a fledgling group.
In July 2004, we had 64 people in that group, and they went from doing $1.5 million to more than $15 million in 2004. The budget for 2005 is $18 (million) or $19 million. More than 70 percent of our revenue comes from consulting services, and I estimate that the business consulting part of the practices did about $22 million in 2004.
Was your revenue always so strong in advisory services?
I've always enjoyed advising our clients beyond handling year-end filings that were required for Uncle Sam and bank audits. Inconsistent with other firms, helping clients with mergers and acquisitions has always been a big part of our practice.
Even in the early days -- 1990 and 1991 -- almost half of our revenues were from consulting. That has grown, and that is where the growth will continue to be.
As you continue to thrive in the consulting sphere, how do you manage this rapid growth?
Pepto Bismol. (laughs)
Does the pink stuff always work?
Here's how you know you are a partner: I really don't have a client load any more. From time to time, I work with a few clients, but I delegated my client relationships to my partners several years ago.
Somewhere along the line, someone offered me the best advice I ever received: Are you working in the business or on the business?
If you are going to grow in a service business like ours, you have to manage it and step back from the day-to-day fray. So I delegated the vast majority of my client relationships to other people five years ago to build a management structure that is more corporate than the traditional partnership model. I have a COO and CFO now, and we spend the time to manage the business.
It's the only way to do it. I can't possibly grow this business if I am also working day-to-day.
It's a big leap, and a leap that a lot of firms don't make. It's against your nature to pass on your clients because you spend time building relationships with them, and then to transition and hand off these relationship to your partners because you don't have time to manage them can make you pause and think.
Accountants hold on to relationships -- that is our security blanket. If all else fails, you always have your clients.
What is rewarding about working on the business rather than in it?
The growth, the challenge of growth and enjoying the success. We are building an environment that allows people to grow and progress through the firm to partner.
It is exciting to see people who have been with us for seven or eight years grow into partners. And it is satisfying to mentor other people -- and that is a big part of my job.
How do you target the right people for hiring?
The key is to hire the best players in the draft when the draft is open. I hire good people, and work follows good people. We don't hire because we have a backlog -- we hire talent.
Our business is a service business -- the only asset that matters is our people. We provide vibrant career paths with opportunities for growth and development.
Where do you expect your company to be next year at this time?
We always have this discussion, and I said to our executive board at our retreat: We can't expect to grow at the pace we have in the past. All of a sudden, the green eyes come out and we all get conservative and say we'll grow by 20 percent.
Then, I say: We haven't grown only by 20 percent in eight years. I challenge the conservative nature of my partners and push them to suggest that we will grow more than that.
Realistically, I will be disappointed if we don't bill at least $80 million in revenues in 2005. We didn't do many mergers in 2004, and I have some optimism that that could change in 2005, and we could bring on some new players that will feed the growth engine beyond what you can budget.
How do you maintain perspective when considering the avenues your business could tap into in the coming year?
The key for us is that we have focus. For reasons beyond our control, we find ourselves in an industry with extraordinary opportunity. When opportunity knocks, you have to take advantage and open the door. We are doing that with gusto.
But, it takes time to grow, and you need to take the time to manage your growth. You cannot work in the business and grow at a pace that resembles ours. It is physically impossible.
If you hire great people, you will not be afraid to delegate responsibilities. That is the key.
How to reach: Smart and Associates, (610) 254-0700. www.smartassociates.com
"I have been impressed by how Comcast has managed their rapid distribution growth through skilled operational execution, innovation and ability and willingness to compete," said Shell. "I am excited to join their team and hope to continue the growth and success that the company has experienced."
Shell was most recently CEO of Gemstar TV Guide International, where he successfully navigated Gemstar through a number of legal and operational challenges. Before that, he held a number of positions within News Corp., including president of the FOX Cable Networks Group. There, he oversaw the operations of FOX's entertainment and sports cable programming businesses, including FOX Sports Net, FX and the National Geographic Channel. Shell also worked in the Strategic Planning Group at the Walt Disney Co. and at Salomon Brothers Inc.
Shell received his bachelor of science degrees in economics and applied mathematics from the University of California, Berkeley and his MBA from Harvard University
THE AMERICAN RED CROSS BLOOD SERVICES
Brigid O'Neill-LaGier assumed the role of CEO with The American Red Cross Blood Services, Penn-Jersey Region. Formerly the COO, O'Neill-LaGier fills the vacancy left by Stanley C. Roberts, who assumed the position of vice president for business strategies for American Red Cross Biomedical Headquarters.
A graduate of The State University of New York at Binghamton, O'Neill-LaGier has a bachelor's degree in business/leadership and organizational studies, and an associate's degree in medical laboratory technology. She is an MBA degree candidate at Drexel University, with an expected completion date of June 2005. Her credentials include certification as MT(HEW), MLT(ASCP) and HT(ASCP).
She began her career as a medical laboratory technologist in clinical hospital laboratories in upstate New York, specializing in general laboratory science, microbiology and histology. After joining the American Red Cross in 1993, O'Neill-LaGier held leadership positions at Biomedical Headquarters in Washington, D.C., the New York-Penn Region in West Henrietta, N.Y., and the Penn-Jersey Region in Philadelphia. During her five-year tenure as COO for the Penn-Jersey Region, she served as acting CEO for 18 months.
O'Neill-LaGier is a member of the American Association of Blood Banks, the New Jersey Society of Blood Bank Professionals and the Blood Bank Task Force of New Jersey.
One of 35 American Red Cross blood regions, the Penn-Jersey Region provides lifesaving blood and blood products to more than 125 hospitals in southeastern Pennsylvania and New Jersey.
THE CHEST FOUNDATION
The CHEST Foundation, in association with the American College of Chest Physicians, awarded Mehboob K. Chaudhry, MBBS, one of 22 Governors Community Service Awards. These awards are given to medical professionals who demonstrate outstanding dedication to improving the health of communities and people in need through their volunteer work with health care projects worldwide.
Chaudhry's project provides free tobacco prevention programming and services to assist teens and adults in quitting smoking. The project also trains health care providers in tobacco cessation interventions at no cost and boasts an 80 percent short-term quit rate for adults, 66 percent after there months and 55 percent thereafter. As medical director, Chaudhry advises and provides instruction for the program team and other participating health care professionals.
The Governors Community Service Awards Program encourages volunteer service by ACCP members to improve the health of individuals and communities through advocacy, direct patient care and/or patient education activities. In addition to honoring the recipient, The CHEST Foundation also grants a monetary award to the organization each recipient supports.
FIRST FINANCIAL BANK
Martha Hilty joined First Financial Bank, a subsidiary of Chester Valley Bancorp Inc., as assistant vice president and branch manager of its Brandywine Square office.
Hilty earned a B.S. degree in finance from Penn State University in 1985. She also holds Series 6 and 63 licenses and Pennsylvania State Life & Health Insurance. Prior to joining First Financial Bank, she worked with Wachovia Bank as a financial specialist. Hilty also worked with Bank of America and Wilmington Trust of PA.
First Financial also hired Patricia Hartnett as business development officer and vice president, community banking. Hartnett will work with small businesses throughout Chester County.
She holds an MBA from Rutgers University and earned her B.A. degree in international relations and French from Johns Hopkins University. Previously, she spent four years as a small business banker with Wachovia Bank, and in positions with The Bank of New York and The Bank of Baltimore.
THE CHILDREN'S HOSPITAL OF PHILADELPHIA
The Children's Hospital of Philadelphia appointed Gavin R. Kerr as executive vice president and COO.
Previously, Kerr was president and CEO of Mercy Health System based in Philadelphia and southeastern Pennsylvania, and senior vice president of Catholic Health East. He also served as chairman of the board of directors for Keystone Mercy Health Plan, one of the nation's largest Medicaid managed-care plans. Prior to his role at Mercy, Kerr served for five years as vice president for Planning and Organizational Effectiveness at the University of Pennsylvania Health System.
Kerr holds an undergraduate degree in economics from Colgate University and a master of divinity in counseling degree from Princeton University. He served for a year in the United States Peace Corps as a marketing adviser in Kenya and serves as chairman of the Urban Health Care Coalition in Philadelphia.
After all, the CEO is often expected to be, among other things, the visionary, strategist, cheerleader and spokesperson of the enterprise -- almost its living embodiment as represented by executives such as Steven Jobs, Sanford Weill, August Busch and Ed Whitacre.
At the same time, consultants and business writers identify, appropriately in my view, the need for and the virtues of a strong senior team supporting the CEO. This senior team, however, is often characterized as a collection of functional specialists -- the COO, the CFO, the CIO, the CMO -- and little else. They are often the "no names" of corporate success.
But what skills beyond functional expertise do these senior players and potential CEO successors, need to bring to the enterprise to deliver on corporate objectives and ensure their own success? The following are essential requirements.
* A strong bottom line orientation. Profits and cash flow do really count
* Directly applicable experience to the task at hand (been there, done that)
* A genuine bias toward flexibility. In the information age, external variables can change the fundamentals of your business overnight, and a C-Level executive has to be able to cope, survive and thrive.
* The ability to think both strategically and executionally, as the need dictates
* The attributes of a magnet. Magnets are executives who can attract and retain other strong players. Business is too complex and interrelationships are too numerous for the sole practitioner executive to make a lasting mark in a business; other supporting cast members are a critical need.
* An impact player whose presence makes a meaningful difference in the core drivers of a business
* High-quality communication skills, orally and in writing, with a keen ability to listen, assimilate and synthesize
* An executive who really gets involved in the mission of the business, not just a mercenary or hired gun
* A broad world view and a student of trends and developments that can profoundly affect the business
* High integrity, honesty and consistency (yes, ethics are a must)
There are two other factors that are not often directly associated with C-Level success, usually because they aren't easily quanitifiable and measurable -- soft stuff and cultural fit.
The soft stuff is aligning compensation systems with company performance, motivating large groups of employees, dedication to team-building and team alignment, insisting on and modeling cooperation and collaboration, focusing on human capital development and slotting people in the right positions, and the willingness to sublimate personal interests to organizational imperatives.
Cultural fit in a business setting requires an understanding of and compatibility with the beliefs, values, behaviors, and reward and penalty systems of the enterprise. It implies an acknowledgement and respect for the heroes and myths that are embedded in the fabric of an organization and the willingness to build on such culture with today's stories that can add new chapters, contemporizing both the visible and virtual guideposts that shape behavior.
It's perfectly understandable that the spotlight frequently is on the CEO. It allows us to simplify and understand complex dynamics and creates a center of accountability.
However, the trend of only looking at the CEO rather than at the significant others who really drive business success -- that essential collection of high-performing senior executives who genuinely support and enable the singular leader -- must be reversed in organizations that want to achieve consistent business success over the long run.
Mitch Wienick is a WCU College of Business and Public Affairs Advisory Board member and a partner with Kelleher Associates, Inc., a premier career management and executive coaching firm in Wayne.
Premiums continue to climb, and companies dedicate significant time, money and human resources to provide employees and their families with health insurance. Employers continue to pay more than they realize for a number of reasons, chief among them that many business owners don't work with a benefits services broker.
A good benefits services broker acts as a direct insurance advocate, an aggressive benefits partner that can leverage experience and clout for more than just great rates. Insurance carriers and benefit plans are loaded with loopholes and complicated clauses and faults that cost employers dollars.
According to an industry billing study, 3 percent to 4 percent of total premium costs are wasted due to incorrect billing. Carriers overcharge companies, or worse, charge for employees who are no longer employed.
Employers don't realize that they are writing checks that are too large. Benefits services brokers can streamline paperwork and help HR personnel manage benefits plans effectively by assisting in services such as billing consolidation and reconciliation.
Minor paperwork mistakes can morph into major liability issues that cost companies thousands of dollars in court -- another indirect expense. Employers shoulder far too many responsibilities to keep track of legal logistics.
In fact, many employers overlook legal issues simply because they do not understand laws such as HIPAA (Health Insurance Portability and Accountability Act). Designed to reduce industry inefficiencies and fraud, the legislation also places parameters on business owners' hiring (and firing) decisions.
For example, if an owner opts to release an employee and knows about the worker's extensive medical costs, the employer could be held liable. An employer is not permitted to fire an employee knowing that person might be responsible for high insurance claims.
A broker can ensure that employers know the rules and are following regulations in order to avoid potential lawsuits. Penalties are serious for employers who neglect personnel policies or paperwork concerning insurance. In the worst case scenarios, CEO and HR managers can wind up behind bars.
Industry lingo and complicated plan provisions create confusion and stress for employees, as well, which ultimately contributes to the cost. A benefits services broker can run interference for employees.
Employee productivity, retention and satisfaction ride on a business owner's ability to provide workers with an effective benefits program. Companies lose worker productivity every day because of ineffective benefits programs.
Having to hold on 800 numbers and waiting for return phone calls from claims representatives waste an employee's valuable work time. When employees are forced to resolve benefits issues in an inefficient administrative process, employers pay the price.
When a benefits services broker acts as an employee advocate, it alleviates employees' stress and delivers value to a company's bottom line by saving workers time. For example, when employees turn to HR personnel to help solve insurance snafus, complicated claims paperwork can bog down the department.
HR departments often work with multiple carriers, thereby further complicating the administrative process with redundant activities that consume time and, ultimately, money.
The bottom line is that efficiency, protection and employee satisfaction can have a positive impact on the bottom line. Effective insurance services brokers design and implement creative solutions that pay off for employers.
Eric Raymond, CLU, is founder and CEO of Corporate Synergies Group Inc., a full-service employee benefits brokerage and consulting firm in the Philadelphia region. He is a frequent guest speaker at insurance and HR conferences and serves on the board of directors of Philadelphia Trust Corp. and Albert Einstein Medical Center. For more information on what benefits service brokers offer, go to www.corpsyn.com or call Corporate Synergies at (877) 426-7779.
First, to Bill Gates. Then, George Fisher, former CEO of Kodak. He contacted John Chambers at Cisco, Andy Grove at Intel and stock investor giant Warren Buffet.
And he didn't leave his mentor -- Peter Drucker, renowned business economics writer -- off the list.
"I called them up and told them, 'You never met me. I'm going to be starting as CEO of a Fortune 500 company, and I'd sure love the opportunity to get your thoughts,'" Boscia says, reciting his casual prompt without a hiccup or stammer.
His smooth talk sounds like he simply dialed up his old college cronies. No big deal.
"I had several years of stints in sales, and I was used to calling people and having them hang up," says Boscia, who has spent the last seven years as Lincoln Financial's CEO and the last four as chairman of its board. "What was remarkable was not a single one of them said, 'No.'"
Boscia is not afraid to ask questions, analyze feedback and even stare at the ceiling from 2 a.m. until daybreak, allowing his mind to exercise the possibilities. After six months dedicated to travel, more than three dozen face-to-face conversations with business executives and countless tours through company departments from human relations to marketing and sales, Boscia had plenty to think about and a marathon ahead of him.
That's to be expected when the company you run -- a leading provider of wealth accumulation and protection products -- has $110 billion in consolidated assets, annual consolidated revenue of $5.3 billion and more than 5,600 employees. But Boscia leads the way undaunted by the task.
Avid for advice
Boscia's presidential training breached traditional succession practices. Rather than shadowing his predecessor, Ian Rolland, Boscia clocked miles on the road and studied other companies' systems.
"Ian said to me, 'Jon, the typical transition would be for me to move into the chairman and CEO role only, and you would become president and COO,'" Boscia recalls of his conversation with Rolland, whose tenure exceeded 20 years.
This was 1998, when Lincoln Financial was based in Fort Wayne, Ind.
"He told me if we did it that way, I would spend seven days a week tied up with the most detailed decisions,'" he says.
Rolland warned Boscia that employees would ask him, "What are your plans?" Putting out fires consumes time that is necessary for concentrated business decisions, Rolland told him.
So Boscia selected executives to work on his team and spent the six-month transition period traveling and learning the following business lessons that steer the Lincoln Financial's success today.
* Tap technological talent.
Lincoln Financial Group is not a technology company, but smart systems are crucial to delivering products, serving customers and efficiently doing business in a competitive market. Boscia wondered, should we hire tech wizards or outsource?
He asked Bill Gates.
"Imagine you are at MIT," Gates told Boscia. "You've got Microsoft recruiting tech people, you have Intel recruiting tech people and you are recruiting tech people. Where do you think the best will line up to go to work?"
Boscia won't outsource everything -- "You have to be selective in how you utilize outsourcing in technology," he says. But he reconsidered his stance on hiring outside firms to handle technology projects, and today he depends on outside resources for a significant portion of technology development.
* Think big picture.
Business issues cross industries, Boscia learned. This insight prompted him to drop his perception that the best corporate advice for finance companies comes from peers in the industry.
"Best practices exist in almost any company, and they are transferable to your company and industry," he says. "You need to have a broad view of business."
* People power success.
Quality counts when hiring workers to drive a company toward growth goals. Boscia always placed priority on people, but during his conversations with other executives, he confirmed the importance of recruiting the best in class and keeping them professionally challenged and personally fulfilled.
"Employees really are the only major sustainable source of competitive advantage a business has," he says.
This reality resulted in many all-night cram sessions for Boscia. He thought about some of Michael Porter's economic studies. The author of "Competitive Strategy: Techniques for Analyzing Industries and Competitors" presents a competitive analysis of nations and sparked a serious question: Should Boscia move Lincoln Financial headquarters from Fort Wayne to a region with a financial services hub and a greater chance of finding the best and brightest?
"Innovation occurs when people can leave one company and go to another without hardship," Boscia says, referencing Porter's work. "A constant stream of going from one company to the next gives employees fresh perspective."
* Tackle tough decisions first.
At the time, Boscia didn't realize the value of Dick Fisher's commentary on dealing with demanding issues. The former CEO of Kodak asked him, "Are there any emotional issues that you are grappling with or any hard decisions you have to make?"
Boscia thought about the potential move.
"I said, 'Yes,'" he says. "Fisher said his advice was to make them as soon as you take on the leading role. Get it behind you and move on."
The financial services cluster is bracketed by Boston and Washington D.C., with Philadelphia resting right in the middle, Boscia says, explaining how he narrowed his search for headquarters locations.
"There was a lot of emotion with moving the company out of its birth place, and I was right on the fence as to whether or not to make that move," he says. "But after I talked with Dick, it became clear to me that if I didn't move the company right away, it would be almost impossible to do it later."
Boscia became CEO in July 1998 and announced the move the following November. Thirty people moved with Lincoln Financial -- there were 60 at the Fort Wayne headquarters at the time. Today, Lincoln's four companies employ 1,300 workers in Philadelphia.
Rearranging the house
While moving the business challenged Boscia emotionally, reorganizing Lincoln Financial's corporate structure was by far the most trying task, he says. He paints a snapshot of most companies' back-stage operations, a model Lincoln mirrors, as well.
Sales, marketing, product development and research are silos in this vertical structure.
"They are totally independent business lines with complete vertical integration," he says.
Boscia drew some lines. He separated sales from manufacturing so each could concentrate on delivering 100-percent performance.
"We centralized sales, so rather than being a product vendor, we could bring a wider solution set to the organizations and people we deal with," he says.
Business lines dedicate efforts to ensuring products are competitive and customers are cared for after the sale. Sales focuses on customer needs and on differentiating Lincoln Financial's products in the marketplace.
Manufacturing doesn't sell or cold call. The department concentrates on producing quality investment products.
"Last year, Barron's named us the No. 4 family of mutual funds," Boscia says proudly. "Five years ago, Delaware Investments was literally named one of the 10 most dysfunctional fund families in the marketplace. In five years, we went from 10 most dysfunctional to one of the four best."
Boscia attributes this to a focused company structure, although he didn't reassemble the corporate clockwork without careful consideration.
"If I had been wrong ... " he muses, weighing the potential consequ ences.
No one had advice for Boscia when he shook up operations.
"There was no other visible business model at that time to support the decision," he says. "So, it was a combination of business judgment and intuition."
And plenty more late nights, he adds. Boscia knows his ceiling quite well.
Boscia is particularly light on his feet after flipping through a copy of National Underwriter magazine on the train ride to his office. An article posted year-to-date results for variable annuity sales.
"Lincoln Financial is a pretty big variable annuity company," he says, noting that the industry average was 6.5 percent. Lincoln was up 83.7 percent. "I note that not to highlight variable annuities, per se, but we have gained market share in all of our primary product categories, whether mutual funds, insurance products or 401(k) products."
Strong business results are due to a three-tiered success model Boscia relies on to drive growth. The lucky charms are quality products, broad and deep distribution, and a strong brand.
"If you don't do any of these three well, you will not be successful," he says. "If you do one of the three well, you will continue to exist, and if you do two well, you will be very successful. If you are fortunate enough to excel in all three, you will be tremendously successful."
The model works. Lincoln Financial posted $511 million in net income in 2003 and reported $317.6 million for the first three quarters of 2004, compared to $317.2 million the first three quarters of 2003.
"The sales success in variable annuities is coming on the heels of some exciting product innovation we introduced in mid-2003 through 2004," Boscia says, pointing to the first tier in his success model. "We have competitive products that are well-positioned."
Boscia expects 401(k) products and mutual funds to take off in the next five years as baby boomers retire. He says many will seek out investment options that allow them to draw regular paychecks, and creative insurance products will allow clients to do just that,.
The trick is to deliver these products to the market. So the company launched Lincoln Financial Distribution four years ago to identify attractive relationships in the stock, bank and independent financial planner channels. A team of 400 wholesalers targets these customer groups.
"Their job is to get in touch with the stockbroker sitting inside an AG Edwards & Sons office or the personal trust banker at Wachovia or the independent financial planner," he says.
But if customers don't recognize the brand, they are not likely to buy its products, Boscia points out. He considers advice from his mentor, Peter Drucker.
"He said to me that there are two things you should never reduce your budgets for, and they are the first two things that virtually everyone on your staff will tell you to reduce spending on," he says. "One of them is training dollars for your employees, and the other one is advertising. It's like heroin, where you get addicted to saying, 'I don't have to spend because my results didn't go down.' That's a very slippery slope to step on."
Boscia remembers watching Lincoln commercials on television in the 1950s, but since then, the company had invested little in advertising. Today, the picture is quite different -- Technicolor, actually. Lincoln Financial is the naming rights sponsor for the state-of-the-art stadium that houses the Philadelphia Eagles football team, a $139.6 million investment over 20 years that pays off generously in name recognition.
"It's important for financial intermediaries to know who we are," Boscia says.
Lincoln representatives don't have to do a lot of explaining these days. An annual familiarity and awareness survey showed that 95 percent of financial intermediaries know Lincoln, compared to less than 50 percent a few years ago, Boscia says. The company spends $30 million each year on advertising; $7 million of this goes toward the stadium sponsorship and a majority of the rest goes toward TV advertising.
Tending to these three tiers will continue to drive the company forward as it deals with industry challenges -- an economy that is out of any CEO's control, rising interest rates and unpredictable consumer confidence.
Even CEOs aren't immune to worrying over uncontrollable variables.
"You have images that executives are 100-percent confident and certain in what they do," he says, reflecting on his numerous conversations seven years ago. "The reality is, they are human beings struggling with the same decisions and issues as anyone else. When you realize that, you have increased confidence.
"You don't have this insecurity blanket wrapped around you -- you can show your humane side and make mistakes and errors, as long as you learn from them."
And if Boscia gets stumped, he'll just pick up the phone.
How to reach: Lincoln Financial Group, (877) 533-0003 or www.lfg.com
The answer is Six Sigma.
Many companies are looking lean and competitive these days because Six Sigma is transforming the way processes are aligned with customer needs and expectations. "Sigma" refers to the extent of variation or deviation from an ideal operating target. One example is the number of days it takes for product delivery from the date of an order. If the company is delivering at an average of 35 days from date of customer order, when customers are expecting deliveries in 15 days, the probability is high that many customers will go to a competitor for the same product and service next time. Whereas, in a Six Sigma focused organization, the customer requirement of 15 days is considered up front, and internal business processes are streamlined to meet that ideal operating target.
Although process capability techniques have been used extensively in both manufacturing and service sectors for more than 50 years, a major breakthrough occurred when Motorola applied a common bar of excellence (3.4 defects per million opportunities) to manufacturing and service processes alike in the late '80s.
As a result, improvements of 10 to 100 times in Motorola's business processes were realized in as little as two years. Word spread quickly. Before long, manufacturing powerhouses such as General Electric, Honeywell, Allied Signal and Eastman Kodak were saving hundreds of millions of dollars across their international operations.
Once General Electric Capital began applying the methodology to its 28 service businesses, the results proved without a shadow of a doubt that companies of all types could successfully apply Six Sigma and count on its fact-based, objective application of continuous improvement to not only eliminate errors but to also focus on isolating and rectifying the root causes of errors.
There are operating costs associated with bad quality. Those are due to the quantifiable factors associated with rework, lost customers, extended cycle time and increased work force demands. Many companies operate at an efficiency of a little above Two Sigma, which is approximately 45,600 errors per every million opportunities.
An opportunity is the number of times a mistake can happen with an item under investigation. Operating at an accuracy of Two Sigma, the cost of rework could be very high. That level of inefficiency destroys an organization's attempts to be profitable, presenting a bottleneck to both current operations and new business growth. Six Sigma has a perfection target of 99.99967 percent, meaning there is very little room for error.
These days, if you want General Electric or other true believers as customers, you will be asked if you use Six Sigma. If your company does not, chances are that you will not land the order. Six Sigma-focused companies have so improved their processes that they do not want to introduce an outside margin of error. In fact, Six Sigma has improved the bottom line of companies to the extent that Wall Street analysts are considering the methodology as part of a company's value equation.
So what is the best way to introduce Six Sigma into your company? The answer is to focus on your customers, Six Sigma training and driving improvement into your business.
Chuck Rumford is director of corporate programs for West Chester University's College of Business and Public Affairs. For more information on corporate programs visit training.btcwcu.org or call (610) 425-2695. Thomas Mc Nellis, Ph.D., PMP, CQM, CMPI, is a certified Six Sigma Master Black Belt trainer and consultant with the Harrington Institute and a trainer for West Chester University's Six Sigma training efforts. He has extensive international experience in the development and implementation of quality programs for major corporations. Reach him at email@example.com
Education: Central Connecticut State University, bachelor of arts degree in biology; MBA, Adelphi University; Advanced Management Program, Harvard University
First job: Associate scientist in the Research & Development Group at E.I. du Pont de Nemours and Co. in 1973
The board room: Director and trustee, Christiana Care of Delaware; director, board of Christiana Care Health Initiatives, serving as chair of the human resources committee and vice chair of the performance improvement committee; boards of trustees of the St. Louis College of Pharmacy and Drexel University, Philadelphia; adjunct professor, University of Delaware Executive MBA program; director, advisory board of the Healthcare Businesswomen's Association; board of directors, Greater Philadelphia Chamber of Commerce
Awards: CEO of the Year, Eastern Technology Council; Greater Philadelphia Ernst & Young Entrepreneur Of The Year Award in Health Sciences
Whom do you admire most in business and why?
Judy Luwent, the CFO at Merck. She has the perfect combination of a strong science background and astute business skills. She was one of the earlier women to break the barriers and rise to a senior level. She is innovative, scientifically smart, a great thinker from a business perspective and an early role model for women.
What is the most important business lesson you've learned?
Keep the organization as flexible as possible and move as quickly as possible to close business deals.
What has been your toughest business challenge?
In the early days, we felt like children in a candy shop -- there were so many directions to go in. It was a challenge to make sure we stayed focused, and I knew if we did, we would be successful. It was better to have a smaller top line and stay focused, have more profit and be recognized as a leader in pain management.