Philadelphia (1114)

Wednesday, 23 March 2005 09:32

Game-time decisions

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In the great game of sports entertainment -- fan-filled arenas, all-star athletes, decked-out suites and hospitality from box office to box seats -- Ed Snider is a humble host. As chairman of Comcast-Spectacor, his spirit is dedicated to coaching his team; his mind is busy plotting the next strategy.

Ask the sports management industry leader how he nurtured Philadelphia's first hockey team, the Flyers, into a league with a loyal following. Ask him about growth -- his formula for building a business that dips into every entertainment pot from cable television to arena management.

Ask him about the ventures he launched or acquired since 1966 -- he can't remember exactly how many. He sloughs off the question, figuring his start-ups near a dozen. The Wachovia Center, a $210-million state-of-the-art arena, is the company's latest entertainment gem.

Then ask him how he manages the whole act, and he supplies a two-part response that sounds as basic as baking from a box mix.

"You have to have the right idea and the right people," Snider says, passing ovations and overtime credit to his players.

Snider's got game -- and his formula is simple: "Take what you do well and grow it."

He recognizes overlapping opportunities and connects the dots, from teams to television, fans to arenas, ticketing to concessions.

"My thrill in business is to start something from scratch," he says.

And because a company's team is its critical success factor, Snider listens carefully and trains relentlessly. The team, after all, wins the game -- not one player.

"In the business world, [our company] is much like sports," says Peter Luukko, who worked his way up from college graduate rookie and now works closely with Snider as president of one of the company's numerous subsidiaries, Comcast-Spectacor Ventures. "We win together and lose together here. Ed is like your favorite coach. He is demanding, he cares and he's always rooting for you -- always rooting for you."

"You have to have a strong desire to win ... "

Snider recalls the first days with the Philadelphia Flyers. Hockey was new to the city when he founded the team in 1966, and filling the stadium with fans presented marketing challenges he met with ticket giveaways.

"We had to get people into the building to see the sport," he says. "We felt that once they saw a game, a very good percentage of them would enjoy it and want to come back."

Family-focused seat-filling efforts paid off.

"We invited schools as our guests," Snider says. "We worked out a plan so schools could transport kids here in busses. The thing with children is they don't have preconceived prejudices. Adults might say, 'Who wants to go to a hockey game? I'm a baseball fan.'

"Kids loved the game and started dragging their parents to the sport."

Today, tickets for Flyers games are $23 for nose-bleed seats; corporations occupy suites and box seats are a hot commodity.

"We grew every year," says Snider.

Comcast-Spectacor sprouted new businesses from Snider's initial hockey franchise and the Spectrum stadium.

"We are always finding new ventures, but every business is interrelated," he says. "We are not interested in expanding in areas that are not related in any way to our industry. We love what we do and we are good at it, and there are plenty of opportunities for growth in [the businesses] we already have."

Observation is the crux of Snider's growth; entrepreneurs don't necessarily harvest original ideas, he says.

"I didn't invent the arena," says Snider. "I just knew that we needed one in town. It wasn't an original idea, but it was an idea that the city needed."

Still, an entrepreneurial spirit has innate radar for solutions and can design ways to develop, adapt, fit, form and sell a concept to the market, Snider says. Essentially, his acute sense for demand and the innovative means of filling it molded a multibillion dollar arena management business that really picked up momentum in 1996 when Snider merged Specacor and Comcast Corp., selling 66 percent of Spectacor to Comcast.

Today, Comcast still owns 66 percent of the business.

Initially, this venture consisted of the Flyers, the Philadelphia 76ers, Wachovia Center, Wachovia Spectrum and the Philadelphia Phantoms minor league hockey team. Since then, the corporation joined with the Philadelphia Phillies to form Comcast SportsNet, one of the country's top-rated regional sports networks.

Comcast-Spectacor's most recent additions to the business play list include the Flyers Skate Zone, a series of regional ice skating rinks, and Global Spectrum, an international facilities management company. And the corporation provides all of the arena fixings through Ovations Food Services, Patron Solutions box office management, and event and customer communications divisions.

Snider says fans want more than a home-team win; he is providing them with an experience.

"The arena business has changed from just arenas to hospitality," he says. "It's almost like a combination of hotel management and entertainment. We have to cater to suites and box offices and make sure clients have a wonderful experience.

"They bring their clients and entertain in these suites and we, in turn, provide food, beverage and entertainment as necessary."

First-class service is just part of today's game, and winning arena management organizations serve up the finest fare possible for fans. These expectations have created business opportunities for Comcast-Spectacor -- more spokes reaching from this sports entertainment hub into new profit sectors.

"We manage a lot of facilities, and we are good at it," says Snider. "Our concessions and ticketing businesses keep growing."

Arena management possibilities represent a significant growth opportunity, Snider says. Careful management is the key to continued, controlled expansion, as are strong players who want nothing more than to win.

"You have to have a strong desire to win in the sports industry," he says. "You have to do everything in your power and within reason to win. At the same time, you must have financial responsibility and you need two-way loyalty in the organization -- loyalty to the organization's people and people who are loyal in return."

"Fish stink from the head"

Snider learned his first business lessons from his father. Working side-by-side in the family grocery store, young Snider picked up philosophies that shape Comcast-Spectacor's work culture today.

"My father was a man I looked up to tremendously," Snider says, pausing as he considers a bit of wisdom he quotes regularly to employees. "Fish stink from the head. In the grocery business, you know that the head is where the fish starts to rot."

In a greater sense, the supermarket mantra speaks to leading by example.

"It means an organization is only as good as the guys at the top," Snider says. "Managers have to set standards for everyone."

Company culture filters from the boardroom to the box office, says Luukko.

"We are big hall walkers," he says, explaining that visibility and approachability allow managers to reach an organization's field leads.

Locker-room talk sparks business ideas and cultivates a comfortable culture.

"The first quarter of Flyers games, we have a dinner with people of all levels in the company -- whoever is working that night," Luukko says. "We talk business, we poke fun at each other, we laugh."

Fostering a teamwork culture means leaving corporate doors open. As coach, Snider is a sounding board. He shows interest in employees -- in projects his managers oversee and in ideas that start as hallway chatter and continue as conference-room discussions. Snider leads by listening, and when he likes what he hears, he applauds, Luukko says.

"Ed is my greatest resource," he says. "When I have a deal I think is right and I'm excited about it but it's missing something, I can sit down with Ed and we'll brainstorm. Based on his experience, he'll ask, 'Did you look at it this way?' or 'How about if we tried that?'"

Luukko cites one of the first nuggets he gleaned from Snider.

"Once a deal becomes too complicated, it's really not a good deal," he says, pulling another memorable Snider one-liner from his repertoire. "We are in business to make money and to have fun."

That said, Snider says both characteristics - money and fun -- are why his employees stick around, and how he can recruit talented players. Teams execute strategies, he explains, reverting to his formula of fitting people into appropriate roles.

With players in position, Snider can enjoy the vantage point of watching employees provide animation to company strategies.

"Once you have the idea, you have to find the right people to execute it," Snider says. "Our people know they can grow with us -- the sky is the limit. That's how we get the best."

"...Who can say where the arena business is heading?"

Technology offers a home-team advantage for Comcast-Spectacor, and Snider figures advances will present new and exciting ways to bring Philadelphia sports to fans. Consider concessions, which has matured from yesterday's hot dogs and cotton candy to today's high-class catered fare.

Cable television, high definition TV and digital technology can essentially hot-wire a stadium.

"The way technology keeps advancing, who can say where the arena business is heading," Snider says. "We've gone from color TV to HDTV, which is now being used at most games to make you feel like you are there."

Broadcasting games on computers is another possibility. And with Internet access already available in suites, Snider says that perhaps the next step is connections at every seat.

Keeping up-to-date and constantly seeking ways to connect related businesses to the Comcast-Spectacor core will drive the company's growth, Snider says. Meanwhile, the company will stick to its game plan --providing fans a winning sports entertainment experience. And Snider has his bases covered.

Settled comfortably into the box seats in the game of business, he considers his coaching tactics -- his inspiration, his driving force.

"Entrepreneurs are people who not only have ideas but want to execute them," he says. "Make them happen."

How to reach: Comcast-Spectacor L.P, (215) 336-3600, www.comcast-spectacor.com

Hampshire is a free-lance writer in Cleveland, Ohio. She contributes monthly to Smart Business Philadelphia and Smart Business Cincinnati.

Friday, 25 February 2005 08:25

Pros and cons

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Your colleagues tell you most Fortune 500 companies self-insure, and you've heard that self-insured companies have more control over their claims and expenses, making costs more predictable.

It's all true. It's also true that some companies switched to self-insured programs and increased their costs by $1 million. They lost carrier discounts, increased their risk of ending up with no coverage for run-out claims and increased their internal administration costs.

Self-insuring can be either a great way to reduce expenses or a disastrous path to higher costs and loss of employee satisfaction.

To self-insure

Self-insurance is one method of funding the cost of health care insurance. Self-insured companies do not purchase conventional insurance; instead, they pay for the claims directly, usually through the services of a third-party administrator (TPA), with stop-loss insurance in place to cover abnormal risks. The same kinds of plans, networks, benefits and limitations can be included in both fully-insured and self-insured plans.

Self-insuring can give an employer greater control over benefit designs and costs by avoiding most state mandates and state premium taxes, saving more than 7 percent in costs. That could mean a realized savings of hundreds of thousands -- if not millions -- of dollars in a single year.

Not to self-insure

Self-insuring shifts the risk, onus and potential administrative headaches from a carrier to the employer. Self-insured employers are responsible for selecting a suitably comprehensive health care network, analyzing provider discounts and selecting a reputable utilization review and case management company, as well as a TPA.

Self-insurance may be a poor choice if you have an older employee population that is at greater risk for unexpected, high-dollar claims. These claims can disrupt projected cash flow and affect your bottom line.

Such claims can't be anticipated, and can quickly drain financial reserves. An ideal organization for self-insuring should have more than 100 young, male employees on the plan.

Stop-loss insurance is essential when self-insuring because it protects against higher-than-expected catastrophic claims. However, carriers can "laser" individuals with higher risks, meaning an employer would have to pay a much higher claim before the stop-loss kicks in. Self-insured companies can also lose carrier discounts they previously enjoyed.

There are other hidden risks to self-insuring. A poorly chosen or executed self-insurance plan and network causes disruption among employees and resentment toward management and can affect employee recruitment and retention.

Help

If you decide that self-insurance is the right option for your company, it's beneficial to enlist a benefits broker. A savvy broker knows to evaluate key factors.

* Reserves. A company must have enough in reserve to cover run-out claims and other costs that might occur.

* Reinsurance. If the language of your existing reinsurance contract does not match your actual health benefits program, you may be paying for coverage you don't need and can never use. Your broker must be familiar with the intricacies of reinsurance as it relates to your specific requirements.

* TPAs. A TPA is, by definition, an administrator of payment claims. Are its network alliances in your best interest? Is it negotiating sharply to build the best network for you? Is it enough? An objective independent broker can help find a solid TPA that participates in networks that you and your employees need.

Self-insuring can be a viable and money-saving alternative for some businesses. It is possible to control insurance costs, protect your financial investment in your company and provide your employees with the benefits package they deserve.

The key to achieving maximum efficiencies with any insurance program lies is obtaining accurate and objective counsel.

Ron P. Weiss is senior 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 his clients. For more information on the benefits service brokers offer, go to www.corpsyn.com or call Corporate Synergies at (877) 426-7779.

Friday, 25 February 2005 06:36

Online frontiersman

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At a time when every Internet play looked like a winner, Brad Aronson had plenty of offers from potential investors eager to get a piece of i-FRONTIER, the online advertising agency he launched from his bedroom in 1996. He passed on all of them.

"Most of them were interested in investing in us, opening offices all over the country and then having an IPO," says Aronson.

Aronson, on the other hand, wanted to control his own destiny and that of his firm, something he figured would evaporate once investors sunk their hooks into the company. So he endured slow cash flow, lean paychecks and all of the other pains involved in bootstrapping a business.

It paid off, and in a sense, Aronson now has the best of both worlds. In December 2003, 100-employee i-FRONTIER was acquired by aQuantive Inc., a public company based in Seattle that functions as a holding company, with several divisions that provide digital marketing services including software, online marketing and advertising, and purchasing and reselling online ad inventory. It maintains offices in more than a dozen major U.S. markets.

Aronson says some i-FRONTIER clients, among them Alaska Airlines and pharmaceutical giants Wyeth and Aventis, wanted to continue to do business with i-FRONTIER but also wanted to work with a firm with deeper resources to serve their needs. That led to the sale to aQuantive, a deal that gives clients access to the more comprehensive capabilities offered by that firm. Part of the deal, says Aronson, was that i-FRONTIER wouldn't be simply swallowed up by the 800-employee parent.

Aronson retains that autonomy as head of the Avenue A Razorfish Philadelphia office, the name the company adopted earlier this year. Avenue A Razorfish is the online advertising and marketing division of aQuantive. The relationship, it appears, couldn't be better.

Says Aronson: "I told them that to be successful, I need to be able to run the Philadelphia business. I need to have some autonomy, and they have completely delivered on that."

Aronson talked with Smart Business about how i-FRONTIER made a pioneering effort in online advertising, what makes for successful interactive marketing and the importance of taking careful measurements.

What factors were most critical in growing i-FRONTIER?

Something I think that has helped us a lot is that when I've looked at hiring, especially when we were small - we were completely funded through cash flow, never had any investors, never took out any loans, so we grew from my bedroom -- and when I looked to hire people, I tried to hire people who were a lot smarter than me, and I tried to think of what takes up most of my time.

So during the time period when HR took up most of my time, that's when we hired an HR manager, and when negotiating media buys with sites like Yahoo! and AOL took up a lot of my time, that's when we hired a media director. And then those people built their teams so that there are a lot of experts running their departments much better than I ever could.

How did you manage to grow i-FRONTIER during a period that included wild speculation in online ventures, the Internet bubble and a sluggish economy?

Prior to starting i-FRONTIER, I worked in direct response marketing, so when the company was founded, we really took an approach of trying to measure everything we did, so we weren't just trying to do things that were sexy or flashy, but implanting strategies and tactics that would sell product for our clients and deliver bottom line results.

And we've always had a focus on analytics, so we've been able to track that, and that was really helpful because when there was the downturn in the economy, for a lot of our clients, we were able to show the impact we were having so online wouldn't be cut from the budget. However, that being said, we did have a number of clients who went out of business.

We had to supplement that by going out and finding more stable companies to work with.

How did you handle the fast-growth periods?

There were definitely tight periods. We would do the work for a company and we wouldn't be able to bill them until 30 days into doing a job, and they would take 60 days to pay us, so there were cash flow issues. We had a line of credit with our bank and just managed it extremely tightly. And there were some years when I had a very minimal paycheck.

How are the major players like AOL and Yahoo! affecting your business and online advertising in general?

We work closely with publishers like Google and Yahoo! As an example, Google just had an executive summit where folks went to learn about what's next in their business. What we look to do with publications is to give them our input, what types of things would our clients spend more on online.

So when we see that something works really well for us as an ad unit or tactic, we'll go to someone like Yahoo! or The New York Times and see if they would be interested in implementing that on their site as well. So together, hopefully, we're driving the industry by pushing for innovation and really impactful, effective ad units, and also making sure that we have the right measurements in place so we can benchmark how well things work.

How do you integrate online advertising with traditional advertising media?

Actually, I think to really leverage a campaign, you have to integrate it. I think it's something that can be done and something that many people are doing really well. You get a lot from learning about your customer, so when you're doing an ad campaign and they come to your Web site, you can see where they go on the site and see what their interests are.

Most of our clients do surveys of the people coming to their site and they find out how to fine-tune the message and what the real hot buttons are, if we're missing them in our advertising, and then also, of course, when you can measure results, it can impact what clients might expect from their other ad buys.

What do businesses need to keep in mind when they are creating an online advertising strategy?

First and foremost, you've got to start with a clear idea of what you want to do and what you want to accomplish. It should be related to your core business. Some of the biggest failures that I've seen are when someone's in one business and they decide, because of the Internet, they could get into a new business.

Companies need to do the things they're good at. If my company sells home improvement products, the focus of my online presence should be selling these products; that's my business.

I need to figure out how I'm going to measure success, and it's not how many people come to my Web site. It's really about how much am I paying for every sell, and what's my profit for every dollar spent for my online marketing effort. A lot of folks think that they should start in a really big way. What's great about the Internet is that you can test. You don't have to start with a giant investment for your advertising.

Companies should think about what works. What works really well is building a house e-mail list and sending out e-mail messaging, because your current customers are typically your best customers for up-selling and renewals.

After e-mailing your house list, we find that search advertising is the best because it's very targeted. So not only are you getting someone, but you getting them at the exact time they're searching for '

'hammer' or 'home improvements' or some other relevant word. So you know they're in the right mindset.

Also, you've got to have a plan for optimizing. What's great about online is you can track results and fairly quickly change to improve on what you're doing.

What technical advances have been most critical in moving online advertising forward?

Targeting and segmenting have been enormous, so instead of just broadcasting your ad, you can really segment your message so that people who are your current customers see a different ad than people who have come to your site and never purchased vs. peopl e who are within your demographic but you haven't done business with them before.

What have you learned about online advertising since you started i-FRONTIER?

If we look at the early days, companies looked at it as an R&D experiment; let's put some money into the Internet and see how it works. And now, everyone knows that it makes money for business. It's at the table when people are making marketing decisions as a main tactic.

We've also learned that, unlike a lot of other media, where the consumer doesn't have control, it's kind of just pushed to them, online the consumer controls whether or not they interact with ads. They decide if they click, they decide if they go to a Web site, they decide if they fill out a form.

So, instead of just pushing a message, what we've seen be most successful is providing value in the ads, and value can be entertainment if that's what a consumer expects from your company ... or it can be a discount or it can be targeted offers relevant to what someone is searching for or relevant to their needs. And I think if you look at trends in offline, it's also going in the direction of more consumer control.

Take Tivo, for example. If you watch Tivo, you can fast-forward through advertisements. Tivo did a study and found that more than 80 percent of their users fast-forward through the ads. It has the ad community really concerned, because as Tivo gets greater penetration, and as other digital video recorder devices emerge that are similar, what we're going to see is more and more people skipping through the ads.

The question becomes, how do we create engaging ads, and for online, that's been the question from Day One.

How to Reach: i-FRONTIER, www.i-FRONTIER.com; aQuantive Inc., www.aQuantive.com

Wednesday, 26 January 2005 09:53

The road to intelligent business

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Unlocking the business value hidden in your enterprisewide data and using it to proactively monitor performance, anticipate outcomes and drive profitability is no longer a dream.

Business intelligence (BI) applications that can automate the process of gathering, storing, analyzing and providing access to data are approaching their maturity. Unfortunately, when it comes to determining which direction to take, many first-time adopters painfully learn that all roads do not lead to Rome.

In your quest to automate the planning, reporting and analyzing process and provide actionable information to support decision-making at every level within your organization, consider this BI Traveler's Roadmap to Success

* Don't start without a roadmap. Develop a strategy. If you don't know where you're going, you're never going to get there. A good strategy aligns long- and short-term information initiatives with your business strategy, objectives and enterprise performance goals. A solid strategy will ensure a financially beneficial deployment of BI within your department or across the enterprise.

* Take along an experienced guide. If you haven't done this before, hire someone who has successfully done it many times. Many of the early adopters of BI applications found themselves getting lost in the journey. A competent BI guide will keep you moving in the right direction, help you to fill in the gaps in your company's information resources and needs, and create an enterprise-level business intelligence architecture that delivers a rapid return on investment on your existing IT assets, as well as a reduced total cost of ownership.

* Make the journey in a series of short hops. Build incrementally with valuable deliverables along the way. Creating an enterprise BI solution in a single effort is enormously difficult and financially risky. Enterprise BI touches all parts of the business, and integrating information from all these parts can be a very complicated process. Businesses have been much more successful building incremental solutions that fit into an enterprise BI strategy. The incremental solutions individually deliver valuable information on a single aspect of the business, and in aggregate provide an enterprisewide view.

* Plan extra time if you take a less-traveled route. New and boutique solutions will probably require more time to implement and support. There is no such thing as out-of-the-box BI. The best BI solutions combine packaged software with customized components, so be prepared to invest the necessary time and resources to do it right. In the end, you will be glad that your BI solution is tailored to meet the demand for your specific information assets.

* Make it a family trip. Ensure a commitment from both business and technical resources. Implementing a BI solution is a major undertaking, so it is critical that everyone understands the business, technical and cultural impact throughout the organization and actively supports its adoption. To be successful, a BI solution must be driven from the business, rather than from the technical team. And since an enterprise BI solution touches all parts of the business, it's important that each of those parts is represented when the solution is being crafted.

* Keep a flexible schedule, allowing for short side trips. Some of the most rewarding parts of a journey aren't on the itinerary. The discussions about the business that are part of designing BI solutions often lead to surprising insights into the business. Take advantage of those insights and adjust your plans as necessary.

The bottom line is that there is a whole world of information available for companies to use to profitably grow their businesses. With the proper preparation, the right attitude and the right traveling companions, any company can reap the benefits of following the BI Traveler's Roadmap to Success.

Bryan McClain (bmcclain@icimail.com) is the business intelligence practice manager at Innovative Consulting, a leading provider of IT Strategy, Business Intelligence and eBusiness solutions to Fortune 1000 and middle market enterprises. Reach him at (610) 725-2101.

Wednesday, 26 January 2005 09:45

The Boscia File

Written by
Name: Jon Boscia

Born: Pittsburgh

Education: Point Park College, degree in psychology with minors in math and Spanish; Duquesne University, MBA finance and information technology; University of Pittsburgh, MBA

First job: Consolidated Natural Gas Service Co., office services. "The position was called a key operator -- putting toner in the printer, delivering mail and driving executives in the company car," he describes. "I wasn't allowed to talk to them then."

Involvement: Serves on boards for the Philadelphia Orchestra, Philadelphia Police Foundation, Hershey Foods and Temple University; member, Committee to Encourage Corporate Philanthropy; chairman, CEO Steering Committee on Financial Services for the American Council of Life Insurers

Whom do you admire most in business and why?

Peter Drucker's intellect and insight is incredible. He walks the line between tactical and strategic thinking and has an enormous ability to transition a business to be a bottom-up organization.

What is the most important business lesson you have learned?

All of my lessons come back to the value of employees and people. I cannot get beyond how important people are to the success of a corporation.

What has been your toughest business challenge?

Changing the company infrastructure and separating sales functions from manufacturing.

Describe your leadership style.

I am collaborative and I love and encourage responsible debate. I ask a lot of questions and delegate a lot of authority. Also, I have a high demand for excellence and accountability.

Tuesday, 21 December 2004 19:00

Domestic bliss

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The recently enacted American Jobs Creation Act of 2004 has been touted as the most significant revision to how businesses are taxed since the Tax Reform Act of 1986.

The seed for this legislation was the decision by the World Trade Organization in January 2002 that the Extraterritorial Income Exclusion (ETI) provided to U.S. taxpayers under the Internal Revenue Code constituted a prohibited subsidy under international trade agreements.

As a result, the European Union began imposing multimillion dollar sanctions in March 2004, and it was projected that U.S. businesses would have faced $475 million in tariffs by March 2005 if the ETI rules were not effectively replaced. The new act repeals the ETI provisions on a phased-in basis, with 80 percent of the benefit retained in 2005 and 60 percent retained in 2006.

In its place is a new Domestic Production Deduction. It only indirectly impacts taxpayers formerly benefiting under the ETI subsidy, as the benefit is not based on export activity but rather on domestic production. As such, any taxpayer, even those with no international activity, may qualify for the new deduction provided he or she engages in qualifying domestic production activities.

Congress has defined qualifying production activities very broadly. Many taxpayers will be pleasantly surprised to find that their business activities will qualify. For example, construction activities performed in the United States will qualify, including activities directly related to the erection or substantial renovation of residential and commercial buildings and related infrastructure. Engineering and architectural services performed in connection with construction projects will also qualify.

The new deduction will be phased in beginning in 2005 and be fully implemented in 2010. The tax incentive yielded by this new deduction will effectively reduce the top tax rate applicable to qualifying income from the current 35 percent to 31.85 percent (33.95 percent for 2005 and 2006). Taxpayers eligible for the new deduction include C and S corporations, LLCs, partnerships, estates and trusts, as well as sole proprietors.

The new deduction will add an incremental layer of complexity to the tax system. It is capped at 50 percent of W-2 wages paid during the year, and calculations are to be carried out by including all members of an affiliate group.

In general, the deduction is equal to a percentage of qualified production activities income or taxable income, whichever is lower. Initially, the percentage will be set at 3 percent for 2005 and 2006, increasing to 6 percent from 2007 through 2009 before increasing to 9 percent in 2010.

"Qualifying productions activities income" is defined as equal to the difference between domestic production gross receipts and the costs of goods sold, as well as the direct and indirect costs allocable to the production of such receipts.

It is in carrying out these calculations that the rubber hits the road in regard to potential complexity and controversy with the IRS. Maximizing tax benefits from the new deduction will typically heavily rely on maximizing qualifying receipts while minimizing the offsetting costs that are allocated to same. Terms such as "domestic production gross receipts" will likely give rise to lengthy, and in many cases, confusing regulations and other pronouncements from the IRS, as well as an entirely new area for litigation in the courts.

It is not too early to begin to consider planning opportunities that may impact the available deduction. For example, the new deduction will represent one more factor favoring the choice of S (pass-through) corporation over C (regular) corporation structure.

In a C corporation environment, owners often resort to salary as a means of sharing corporate profit while avoiding a second level of tax that would otherwise arise on corporate dividends. Owner salaries, however, will potentially reduce the available deduction compared to a comparable S corporation business paying relatively lower salary to its owners (with the owners receiving nontaxable distributions to make up any difference).

Recordkeeping is often the Achilles' heel of taxpayers having disputes with the IRS. Maximizing the new manufacturer's deduction could require modification or tightening of internal accounting and reporting procedures with a focus upon identification of qualifying activities and their related income and costs.

Michael Viens, CPA, is a director specializing in tax, CBIZ Accounting, Tax & Advisory Services, Philadelphia/Plymouth Meeting. CBIZ, a publicly traded company and the 10th largest accounting firm nationally (Accounting Today), provides a wide range of assurance, tax and consulting services to small and mid-sized companies. Reach him at mviens@cbiz.com or (610) 862-2204.

Friday, 19 November 2004 10:27

Honesty and integrity

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The amount of executive leadership training is increasing as demands for productivity and profitability grow in a global and highly competitive business environment. The importance of leadership and how employees view business leaders are at the center of many training sessions.

The increasing importance of leadership across business organizations was highlighted in an April 2004 survey, "AMA 2004 Importance of Leadership Survey" by the American Management Association, which found that by a margin of nearly four to one, employees have increased the time spent on leadership functions.

The reasons for the increase focused on competitiveness, decentralized decision-making, value and generational differences, the complexity of organizations and globalization.

Yet determining the key leadership traits on which training should focus has not been easy. Here is some insight into this issue to assist executive and corporate educators and trainers in establishing a strong leadership training program.

Leadership qualities

What do employees look for in a leader?

Not financial acumen. Not vision. Not creativity. What employees want most from their leaders are basic principles in practice such as honesty, integrity, ethics and caring, according to the results of a survey conducted by Right Management Consultants, the world's largest career transition and organizational consulting firm. Right asked 570 full-time, white-collar employees in the United States, "What is the most important trait or attribute that the leader of your company should possess?"

"Employees today are looking for strength of character in their leaders," said Chris Pierce-Cooke, worldwide director of Right's Organizational Consulting practice. "They want to shake off the hangover of the last several years' corporate scandals and financial sleight of hand and be reassured that their leaders are honest, ethical and caring individuals."

Pierce-Cooke notes an irony in the results of the study.

"Employees are confronted with continued layoffs, a spotty recovery and three years of stock market declines. But they are not looking for leaders with a magic wand or a quick fix.

"Instead, they seem to be yearning for fundamental leadership principles, lessons on honesty and goodness that they were more likely to have learned in elementary school than in business or law school."

Most valued

Survey respondents cited 28 attributes they felt were most important for their leaders to possess. The top five are below, with the percentage of respondents who mentioned them as the first or second most important characteristic.

1. Honesty (24 percent)

2. Integrity/morals/ethics (16 percent)

3. Caring/compassion (7 percent)

4. Fairness (6.5 percent)

5. Good relationships with employees, including approachability and listening skills (6 percent)

These traits were generally consistent between male and female, as well as white and black respondents. One significant difference was seen between two age groups. Honesty was mentioned as the top trait by 38 percent of 55- to 64-year-olds versus 16 percent of the 18- to 34-year-old group.

The bottom five attributes, including some traditionally associated with strong and well-respected leaders, were:

24. Creativity (1.2 percent)

25. Decisiveness (0.8 percent)

26. Flexibility (0.6 percent)

27. Good personality/sense of humor (0.5 percent)

28. Attention to detail (0.4 percent)

"I don't believe that employees are disregarding the need for such things as creativity and decisiveness," said Pierce-Cooke. "But they are saying that CEO character is critical, as is the ethical tone he or she sets for the organization. This study has important implications for companies when it comes to both hiring and developing leaders.

"The ideal leader will already have an internal moral compass that is guided by ethics and caring. Companies need to select those individuals carefully, and then ensure their internal culture is one that nurtures and rewards that type of leadership."

Chuck Rumford is director of corporate programs for West Chester University's College of Business and Public Affairs. West Chester University serves the educational and training needs of students and corporate clients from its off-campus, state-of-the-art Graduate Business Center. For more information on Corporate Programs, visit training.btcwcu.org or call (610) 425-2695. Anne Dunn is vice president, client services consulting for Right Management Consultants (www.right.com) and a member of the advisory board member for West Chester University's College of Business and Public Affairs. Reach her at (610) 251-9250.

Thursday, 28 October 2004 20:00

Six for the road

Written by
Many things make businesses successful. Here are six strategies to consider.

 

The laminated tab story

When I started working years ago, I took a training course taught by a Harvard MBA that stressed the need to have laminated tabs on the reports I issued as a consultant. My first reaction was to think that Harvard MBAs were overrated, and that the advice in the report was much more valuable than the lamination of the tabs that organized the report.

In a few short years, I began to appreciate the need for laminated tabs. Talent in business is a blend of perception and reality. It is not only what you can do (or what you can make), but also how you package it.

The laminated tabs represent a product superior in every way when compared to other products -- a product that, upon presentation, looks different, better and more valuable. First impressions matter, as does any presentation or representation of the value of your product or service.

 

Stick to your knitting

When I left my first real job to start a consulting practice group at a large international accounting firm, a mentor advised me that my biggest challenge would be to keep focused on my goal. When starting a business or launching a new product line, there are all kinds of things you can do, but trying to accomplish everything at once is counterproductive.

When I began to more crisply define my goals and focus my time and efforts on areas where I could sell and add value, I found success. Know your goal and focus your time and effort on the achievement of that goal.

 

Be a spider, man

I know; you are wondering what a spider has to do with business, or in this example, selling. A spider will spin a web to catch its prey. The next day, it will spin a web to catch its prey. And the next ... and the next.

The spider knows instinctively that it must be disciplined to spin a web each day to survive. In selling a product or service, emulate the spider's discipline. You must continually create an environment where you can survive and thrive.

Selling is not a once-in-a-while activity but a daily routine, like brushing your teeth.

 

The node knows all

A friend of mine jokes that there is a society of 30 people who know everyone on the planet. Have you ever met one of those people? They know everyone and can get anything.

Sales opportunities often come from the most surprising contacts -- the more contacts you have, the more surprising opportunities you will find. Actively seek networking opportunities, professional organizations and community involvement.

While some networking opportunities are better than others, the more you participate, the more you connect with potential customers. As with publicity, any networking is good networking.

 

You University

The more you educate people, the more they think you know. I sell my services as value, and there is nothing more helpful in making my sales than helping others through educating them.

It makes the sales prospect smarter, it creates an atmosphere where they independently reach a conclusion that they need your value and it makes you feel not like a slick salesperson but like someone who is helping the customer.

 

The gold standard

Watching the Olympics this summer reminded me that gold is the standard for the very best athletes. Business is no different. You do not receive gold medals, but the best get more business than their competitors.

Some work harder, some have more talent and some are better coached. But like the athlete who chooses the sport in which he or she is best, we also should chose the area in which our product or service can be the best -- the gold standard.

Sometimes it takes years to perfect or new technology comes along and allows us to compete differently, but striving to be the gold standard is what sets a successful business apart from its competitors. Define your business and set the gold standard to match your competitive advantage.

 

Bill Harris leads the Commercial Damages and Corporate Investigation Services Practice of CBIZ in Philadelphia. He has 15 years of experience providing financial and economic analyses, forensic investigative services, compliance assistance, damage assessments and related advisory services to attorneys, corporate management and governmental agencies. CBIZ, a publicly traded company and the 10th largest accounting firm in the nation, provides a wide range of assurance, tax and consulting services to small and mid-sized companies. Reach Harris at weharris@cbiz.com or (610) 862-2737.

Wednesday, 20 October 2004 18:04

Universal truths

Written by
Alan Miller performs a routine check-up of Universal Health Services' corporate vitals. The balance sheet is healthy and kicking plenty of returns to investors.

Growth spurts are nourished by revenue that rises each year. The hospital management company's reputation is squeaky clean. And its backbone -- talented people -- supports a skeleton of 100 acute care, behavioral health, ambulatory surgery and radiation oncology centers.

"Business involves three keys: good people, access to capital and opportunities," says Miller, the health care giant's founder, president, CEO and chairman of the board. "If you have those ingredients, you will do well."

Miller figures he passes his own test with flying colors. He coaches his staff to succeed and provides a workplace where employees flourish, investors profit and business thrives, even in an economic landscape pitted with challenges.

Many independent hospitals struggle to fund technological upgrades, retain physicians in the face of costly malpractice suits and deflect rising insurance costs. Miller's chain approach, on the other hand, embraces strength in numbers. A national web of health centers shares best practices, enjoys purchasing clout and gains access to technological resources, allowing it to provide quality service at a profit.

"The key to any business is profitability," Miller says, a statement underscored by UHS' $3.6 billion revenue in 2003. "If you provide great service on an honest basis and take care of your patients, they will send you more business. If you have a lot of business, you can maintain a profitable profile, and then everything else rolls in line. You get good credit, you can buy additional facilities and you can raise money through equity markets."

UHS' facilities were founded on quality service, affordability and community relationships, Miller adds, illustrating a healthy business pyramid of sorts, with integrity and people at its foundation.

"But it all goes back to how well you do your job," he says.

 

Healthy choices

Miller is uncomfortable with any job that isn't well done. He is uncomfortable with adequate. When he helped found UHS in 1978, he shifted gears from the advertising world, where he worked at New York City firm Young and Rubicam.

His college roommate from the Wharton School at the University of Pennsylvania told him community hospitals represented a lucrative career path. At first, Miller wasn't so sure.

"During the transition, I came home and said to my wife, 'I don't know what I'm doing here. I went from knowing a lot to knowing practically nothing,'" he says. "But the basic business skills were there. And three years later, I ran the company."

Miller credits his military background for his orientation to the board room.

"The basic skills of communication, motivating people, leadership, building trust and having integrity are an integral part of someone's character and personality," he says. "You can apply these skills to any business."

With his experience as chairman of American Medicorp from 1973 to 1978, Miller wasn't a complete novice in the medical field. And heading up a health care chain like UHS was an enticing proposition for the driven businessman, a chance to fast-forward his career and pave paths for others.

"I was a young man, and I saw an opportunity to have equity and build a company," he says.

Miller didn't stall in the start-up of the company, purchasing four hospitals in Texas, Florida, Nevada and California right off the bat.

"We connected the dots and filled in the map," he says of the company's rapid expansion into suburban markets.

Success in the first hospitals earned UHS attention from investors, who noticed the management group's aggressive growth.

"If you do well with your first hospital, there are plenty of people out there who are anxious to back a high-quality management group," he says. "Just as we need [investors'] capital, they need us. They need to put their money to work effectively -- it's a two-way street. If you have a solid management team and you can communicate your goals and measure your performance, you will do well, people will believe in you and you will have a following."

Interest in the company ballooned and so did its business. Investors fed the organization, and UHS continued to perform, increasing revenue at an average of 11 percent each year. Miller reverted to his three basic principles.

"If you are a good management group, you won't have problems accessing capital," he says, referencing an auction four years ago when Charter Behavioral Health Systems LLC closed its doors. UHS purchased 13 of its hospitals for cash.

"Many of the other buyers were unable to pay cash; they wanted to give bank notes," Miller says. "They were on the phone calling their investors and venture capital groups trying to get investments."

Bidding closed at 4 a.m., and UHS walked out with the top facilities and no debt.

"There you go," Miller says. "That's good management and access to capital. The opportunity was there, and we capitalized on it."

Chain reaction

Access extends beyond board room buying power. Miller sets up a winning match by acquiring and building in markets where growth is a given.

"For the most part, the United States grows about 1 percent each year," he says. "Our markets grow at about 2 percent each year. We are well above the U.S. average; therefore, our markets will have more people, and that is what we are looking for."

UHS settles in suburban environments of all sorts: booming exurbs, crowded inner ring metro areas and planned communities, such as its most recent debut in Manatee County, Fla. -- Lakewood Ranch Medical Center.

The patient mix at its facilities varies depending on demographics, and UHS caters its facilities to communities' needs. Core services -- heart and lung care, for example -- are constants.

"We are all alike," Miller says, explaining why the chain model is effective. "We all have the same hearts and the same lungs. We are all subject to the same diseases and injuries, and we all give birth. Hospitals treat all of these, but we tailor the facilities, the services and the size and number of rooms and equipment based on the amount of business we expect the hospital to do in that market."

UHS constructed the 120-bed Lakewood Ranch facility -- whose opening Miller attended in late August -- with the option of expanding to 300 beds if necessary to meet demand. Ancillary areas, labs and emergency rooms can be super-sized to fulfill the area's forecasted population surge. This is just the type of growth UHS expects to model corporately, sticking to its pattern of steady increases.

But Miller is more satisfied with integrity than statistics. By opening the doors at Lakewood Ranch, he fulfilled his promise to the community. After planning, construction and preparation, he delivered health care to the area's families.

That matters.

"We are going to be members of that community," he says. "We know that we are going to do what we promise to do. Unfortunately, the world is such that when that happens, people are overwhelmed with the fact that you did what you said you were going to do. We don't change because times change."

Though simple and altruistic, this philosophy captures a key advantage of operating a hospital network. When times change for the worse in one community, business booms in another.

"You spread your risk around," Miller says. "It's like any investment portfolio. You have 20 stocks, and if one goes down and it is worthwhile and you hold on to it, you can still have money to pay your expenses until it comes back up."

Besides balance, there is sharing. A hospital in Washington, D.C., can learn from a facility in Laredo, Texas.

"We disseminate best practices so all hospitals can take advantage of our empire," he says.

Then there are financial rewards and cost savings associated with being part of the "in" group. UHS employs specialists for every arm of its operation, from construction and legal to accounting and purchasing. And having in-house help pays off.

"We have the economies of having all of these specialties in our organization," Miller says. "And we get purchasing economies."

Meanwhile, holding the No. 1 or No. 2 rank in every market it' is in positions UHS to secure competitive arrangements with insurance and equipment providers. Maintaining this status requires service -- and, of course, a job well done. Miller isn't interested in performing any other way.

"You have to provide great service, and you have to be able to attract a lot of business," he says. "Therefore, you have to have the latest in equipment and a very talented staff."

 

Key character

Miller glides through his team's accomplishments like a proud father rehashing his child's first steps.

"Many people have been here more than 20 years --you can go through the line," he says.

The 25-year-old company employs 30,000 people and has groomed a sizeable class of performers.

"We have people who are in charge of hospital groups who started out as assistants," he says. "The head of development has been with the company for 25 years -- he was our first employee, and he started out as a purchasing assistant."

The company's CFO climbed to his position from the accounting department. His treasurer started as a clerk. The head of the behavioral health division moved up from marketing.

"That is what the plan was all about," he says. "Give people room to grow the company, let people go as far as they can, and watch them develop. They can go as far as their talent carries them if they work hard and exhibit a solid character."

UHS' numbers back the story.

"If we did not have the best record over the last 12 years in terms of total return, you'd say, 'There are a lot of underperformers, and they are still working at the company -- big deal. Lots of companies have people who have been there for years, and they don't perform,'" he says. "But in our company, put together the profitability and employee longevity, and you have a collection of performers who produce the best results in our industry. They stay with the company."

Miller is a hands-off manager, but he believes in goals and measured performance.

"I work hard, and I'm always available," he says.

Show him integrity, and he lends his trust. Prove skills with results, and he offers reward.

"You have to believe in the people you hire," he says. "Provide them an avenue to grow."

He illustrates his point with an observation he made at a Villanova basketball game, where the coach was hassling a guard, spouting orders at him mid-game.

"I thought, 'This is not going to work,'" he says, laughing. "Do that in practice. Tell them what to do, show them what to do. But when it's time to play the game, you can't run along the sidelines."

Trust and integrity produce a winning record -- a sustainable brand. Miller notes that UHS' name hasn't changed since its inception, an exception in the health care industry.

"We are proud of our name and our record," he says. "When all is said and done, you want to have accomplished something with your career and life, and we all want to have that feeling that we have added measurably to the quality of people's lives in the community. That is a good feeling."

How to reach: Universal Health Services, (610) 768-3300 or www.uhsinc.com