With lower lease rates and the Marcellus Shale boom, commercial real estate in the tri-state footprint is looking up. Greg Sipos, senior vice president, corporate banking manager, at First Commonwealth Bank, has been encouraged by recent commercial real estate activity in western Pennsylvania, as well as in Akron, Columbus and Youngstown, Ohio.
“When I say those names, you’re not like, ‘Wow, that’s a great place to go,’ but, you know what, it really is these days,” Sipos said. “They’ve had some real estate growth and nice projects in those markets. It’s well ahead of the rest of the country, and I’m encouraged by the amount of activity in the last six months.”
Smart Business spoke with Sipos about the state of the real estate market and how bankers are getting back to the fundamentals of lending.
How does the current commercial real estate market look?
When you look at this market, there was limited asset appreciation over the years, and the borrowers never overleveraged the way that it happened everywhere else. People built equity in their real estate by normal amortization of loans. So if they had a 15-year loan and they paid it back over 15 years, they built equity in their real estate. Western Pennsylvania has always been known for that, as opposed to the rest of U. S., where asset appreciation was due mostly to the perception of overall growth through demographics. Problems occurred because assets were overleveraged in a lot of ways. Conversely, Pittsburgh went from being one of the worst real estate markets in the country to being one of the best in the span of three years because of the steady equity growth.
The mood is very strong in this area with some game changers. The growth in the Marcellus Shale area and the oil and gas industry in western Pennsylvania has brought strength to the market through all aspects, from multifamily to the retail businesses and hospitality industry. Another thing that’s happened in the central business district, as far as Pittsburgh is concerned, is a lot of large firms headquartered in other cities realized that the rent per square foot in Pittsburgh is much more reasonable than the rent per square foot in Manhattan and other comparable markets. Companies are relocating to the central business district or to Pittsburgh in general because of favorable lease rates.
Hospitality is known as a good indicator for the economic health in commercial real estate. What is the outlook in the tri-state area?
Yes, hospitality is an indicator, and it is doing very well now. Western Pennsylvania had a lot of older product, but now a lot of newer product is coming online around Pittsburgh and in some of these smaller towns. Morningstar, a financial-data firm, reports that — at least for the next three or four years — it’s definitely an industry to lend in.
When banks make a loan for hospitality, they look at what the drivers will be — why will people be coming and staying here. A lot of the hospitality that got into trouble was in resort areas because, during recessionary periods, people tend to forgo vacation. The hotels that are successful are the ones that have many drivers. For example, is it a flagged property? It’s much easier in today’s market to get a loan for a Marriott, a Hilton, a Holiday Inn or a Choice product because of the reservation system. One hospitality loan was recently done in Latrobe, Pa., the home of professional golfer Arnold Palmer. There’s a lot of industrial around, it has a resort element because of Idlewild Park and the Laurel Highlands, it has St. Vincent College, hospitals, and it has Mr. Palmer’s name attached to it, which results in reciprocating agreements between Latrobe and Florida. So there are drivers for occupancy. You don’t want to open up a hotel where you have to bet on tourism or one industry.
How have lending practices changed, and how much emphasis is being placed on equity?
The one thing that’s different now — that hasn’t come back the whole way — is the lending rules were generally much less stringent pre-recession. Post-recession, it’s back to the fundamentals. When you want to buy something, you need to have a down payment for it and you need to have cash flow to repay it.
Banks are requiring down payments. As a business owner, when you are thinking about making that expansion or when you’re thinking about buying a new building, you need to make sure you have the right amount of equity to go into the project. The bank is no longer willing to take the equity risk it was taking pre-recession.
Having equity shows you can afford it and shows your commitment to the project. If you are able to buy real estate without putting equity into it, it’s much easier to walk away. Some people might be interpreting that as unfair, but it’s not really unfair, it’s just the way it’s always been done prior to the years leading up to the recession.
It’s important to remember there are differing ways to find equity. These include:
- Equity through government programs.
- Investors on the sidelines looking to invest.
- Personally guaranteeing loans, a practice people were always comfortable with. Borrowers have to be willing to guarantee the indebtedness, maybe by pledging other equities in other properties as collateral.
Greg Sipos is a senior vice president, corporate banking manager, at First Commonwealth Bank. Reach him at (724) 463-2556 or email@example.com.
Insights Wealth Management is brought to you by First Commonwealth Bank
Life is full of stressful situations, be they personal or professional. Stress of some kind is often unavoidable, or, at least, a common experience for nearly everyone in the workplace.
Learning how to be resilient is a life approach that helps those who’ve developed it handle stress more effectively. For some, resilience is a way of living, but for all it’s something to learn and incorporate as they develop.
What exactly is resilience? Resilience refers to the ability to adapt, recover and grow stronger from adverse situations. Robert Brooks of Harvard Medical School calls resilience “ordinary magic” because everyone has the capacity to be more resilient.
“Managers and leaders may not realize that what they do contributes to having a more resilient work force. Their job is to create a work environment that makes it possible for each individual to contribute their competencies, to be creative,” says Annette Kolski-Andreaco, manager of Account Services for LifeSolutions, an employee assistance program and an affiliate of UPMC WorkPartners.
“It isn’t that resilient people are extraordinary people,” she says. “It’s that they’ve been tested and learned that they are adaptable.”
Smart Business spoke with Kolski-Andreaco about resilience in the workplace and why it matters to employers.
Why should the resilience of the work force matter to an employer?
The workplace can be a challenging environment for employees for a variety of reasons. They need to navigate complex networks of relationships and continuously adapt to changing work processes to keep up with the relentless competition in the marketplace.
Many employees today can easily feel overwhelmed, fatigued and disengaged due to their work environment. They may come to question whether what they do really matters, and if they can find professional fulfillment and meaning in their work.
To succeed on the job, employees need to acquire cognitive skills through training and education. But equally important for success is the establishment of a solid work/life balance with families, social networks and leisure pursuits. It is that support that enables employees to have a solid foundation from which to better handle stress in the workplace and expand their capacity for change and resilience.
Recent surveys from Gallup polls show that less than 30 percent of employees are actively engaged in their work, while 56 percent are disengaged and 15 percent are actively disengaged. When people are able to change their mindset toward being more hopeful and optimistic, the result is healthier, happier and more productive employees.
Research also supports the idea that when employees and employers actively cultivate a positive attitude, the work environment becomes more optimistic and creative.
How can an employer create an environment that encourages resilience?
The capacity for resilience is there in all people, but there are things that can be done to nurture or reward resilience.
What that means for employers and managers is that they need to realize that their employees respond far more flexibly and readily when they have supervisors who connect with them in an authentic and personal way. When managers are able to see their employees as whole persons with a desire to contribute their talents, if given an opportunity, then both parties will benefit.
Employers need to identify their employees’ positive traits and then work with them to improve and strengthen those positives. Engaged employees who believe their contributions have value are able to be more resilient and are less vulnerable to workplace stress.
Most employees want an opportunity to shine. They also want their employer to be fair, and to give them some control over what happens to them. They want their employers to be respectful and they want to connect with their manager on a human-to-human, personal level.
What are the advantages of having a resilient work force?
A more confident, challenged and interested work force is what every employer wants. The simple truth is that for this objective to be realized, managers need to spend the time and make the effort to know each of their employees as an individual contributor to the overall mission and vision of the organization.
Employees are far more motivated by flexibility, fairness, opportunities to learn and develop themselves, and acknowledgement of their accomplishments, than we realize. Stressful work environments are a fact of life, but a more resilient response by employees and their managers makes all the difference in whether they’ll be overwhelmed and burned out.
Creating an atmosphere for resilience to emerge is something that comes from leadership at all levels. An employer can turn to an employee assistance program to learn different ways to develop resilience in their managers and for their staff.
Annette Kolski-Andreaco is manager of Account Services for LifeSolutions, an affiliate of UPMC WorkPartners. Reach her at (412) 647-8728 or firstname.lastname@example.org.
Insights Health Care is brought to you by UPMC Health Plan
The Health Insurance Portability and Privacy Act (HIPAA) governs the use of Protected Health Information (PHI), and failure to comply with the requirements of the policy can be a costly mistake.
As an employer who sponsors a health plan, it is important to fully understand your responsibilities under the act, as failing to do so can result in severe penalties, says Jessica Galardini, president and COO of JRG Advisors, the management arm of ChamberChoice.
“As an employer, you may think that HIPAA doesn’t apply to you,” says Galardini. “But if you are an employer that also sponsors a health plan, ignorance of the law could lead to fines and even jail time.”
Smart Business spoke with Galardini about what plan sponsors need to know about HIPAA and how to ensure that you remain compliant.
What is the HIPAA Privacy Rule?
As required by the Health Insurance Portability and Accountability Act of 1996, the U.S. Department of Health and Human Services (HHS), in December 2000, released final federal regulations that govern the use and disclosure of personally identifiable health information — the HIPAA Privacy Rule. In most cases, the deadline for compliance with the HIPAA Privacy Rule was April 14, 2003. The rule was then updated by the Health Information Technology for Economic and Clinical Health Act (HITECH Act), which took effect in 2010.
The HIPAA Privacy Rule directly regulates health plans, health care clearinghouses and health care providers that conduct certain transactions electronically, and indirectly regulates plan sponsors.
What information is governed by the HIPAA Privacy Rule?
The HIPAA Privacy Rule governs personal health information, which is defined as information that is oral, written or electronic; individually identifiable; created or received by a covered entity; and relates to the past, present, or future physical or mental health or condition of an individual, the provision of health care to an individual, or the past, present, or future payment for the provision of health care to an individual.
What are plan sponsors required to do?
The compliance requirements indirectly imposed upon a plan sponsor by the HIPAA Privacy Rule vary based on whether or not the plan sponsor has access to PHI. A plan sponsor that offers a fully insured group health plan will be minimally impacted by the HIPAA Privacy Rule if its access to health information is limited to the following plan sponsor functions:
- Assisting employees with claim disputes as permitted by the employees’ written authorization.
- Receiving Summary Health Information (SHI) for purposes of obtaining premium bids or modifying, amending or terminating the plan.
- Conducting enrollment and disenrollment activities.
A plan sponsor that has access to PHI in order to perform plan administration functions must amend the plan documents to include a description of permitted uses and disclosures of PHI by the plan sponsors; certify to the group health plan that the plan documents have been amended; and comply with all of the administrative requirements contained within the HIPAA Privacy Rule.
What are the administrative requirements of the HIPAA Privacy Rule?
In general, the HIPAA Privacy Rule requires plan sponsors with access to PHI, together with the group health plan, to comply with all of the administrative requirements contained within the HIPAA Privacy Rule. For a summary of requirements, contact your benefits advisor or visit www.hhs.gov.
What are the penalties if an organization fails to comply with the HIPAA Privacy Rule?
Failure to comply with the HIPAA Privacy Rule may result in civil or criminal penalties. HIPAA’s civil penalties were increased by the HITECH Act but may not apply if the violation is corrected within 30 days. For violations in which the individual is not aware that the violation has occurred, the minimum penalty remains $100 per violation, up to $25,000 per calendar year for identical violations.
If the violation is due to reasonable cause, the minimum penalty is $1,000 per violation, up to $100,000 per calendar year. For corrected violations that are caused by willful neglect, the minimum penalty is $10,000 per violation, up to $250,000 per calendar year.
The maximum civil penalty for any type of violation and the minimum penalty for uncorrected violations caused by willful neglect is $50,000 per violation, up to $1.5 million per calendar year for identical violations.
The criminal penalties are:
- $100 per violation, up to $25,000 per year, per standard, for disclosures made in error.
- $50,000 and/or one year in prison for knowingly obtaining or disclosing PHI.
- $100,000 and/or up to five years in prison for obtaining information under false pretenses, and $250,000 and up to 10 years in prison for obtaining PHI with an intent to sell, transfer, or use it for commercial advantage, personal gain or malicious harm.
Taking the time to understand the rules will ensure that your organization is complying as it should under the law.
Jessica Galardini is president and COO of JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7231 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice
Charles Bunch has seen firsthand the resilience of the Pittsburgh region through both thick and thin. As its local businesses have started to rebound from the recession, so too must the region.
The founders of Pittsburgh Plate Glass, or PPG Industries Inc., as it’s known today, were attracted to the Pittsburgh region because of the coal supply needed as an energy source, the sand and mineral resources, and the river transportation system that were critical for the manufacturing and sales of those first plate glass products.
Today, the 129-year-old company, led by Bunch, who is chairman and CEO, is coming off a record year of nearly $15 billion in revenue and the company is still proud to call Pittsburgh its global headquarters.
However, much like how PPG transformed from strictly a plate glass manufacturer into a manufacturer of glass, coatings and specialty products, Pittsburgh itself has had to transform to continue thriving in an ever-changing business environment.
As part of the Vision Pittsburgh speaker series, Bunch spoke to local businesspeople about what PPG has and is doing to aid the region in the matter and what initiatives Pittsburgh needs to focus on to build up its economic development and attractiveness for new business.
“We have a strong presence in the Pittsburgh area as do many other companies,” Bunch says. “U.S. Steel, PNC, Heinz and Wesco are all Fortune 500 publicly traded companies still headquartered in Pittsburgh. If you include local companies like Mylan, CONSOL and Dick’s Sporting Goods, the Pittsburgh region rises to fifth place on the Fortune list for company headquarters.”
With that said, Pittsburgh still needs to work hard to attract and retain business investment and economic development.
“We need to foster small business, but I believe we also need to foster big business as well,” Bunch says. “Big business provides technology, innovation and supports many of these smaller businesses, leading to a healthier overall ecology for growth and now we’re creating that environment here in our region.”
With the help of the Allegheny Conference and local business leaders looking to keep Pittsburgh on top of its game, Bunch outlined key areas of focus for the region moving forward.
Companies must help the region
In order for a specific region to prosper, its companies and business environment must also be doing well. PPG Industries is a company that has stayed true to Pittsburgh and has helped the region grow as it has grown.
“Over the past several decades, PPG has evolved from a diversified manufacturer of glass, coatings and chemicals and is a more focused leader of paints, coatings and specialty products,” Bunch says.
“We still maintain some of those glass manufacturing roots here, but in the 1980s, through a technological invention developed in our Allison Park Research Center, PPG revolutionized the automotive paint industry with electro-deposition coatings for corrosion protection. Rust is no longer an issue, and that comes from PPG’s invention more than 25 years ago.”
PPG has brought its technologies and products to customers around the world and is now the global leader in automotive OEM and aftermarket coatings and in aerospace, industrial and marine applications for customers such as General Motors, Mercedes-Benz, BMW, Boeing and Caterpillar.
“PPG has strategically chosen to focus on paints, coatings and specialty products due in large part to the global growth potential in those businesses and because we view coatings as our strongest suit where we could best apply our technology and innovation in a business in which we could become an industry leader,” he says.
“More recently, we have accelerated that transformation through organic growth and more than 30 acquisitions around the world to strengthen our global position over the last 15 years.”
Today, PPG is the largest global manufacturer of coatings to all of the industrial end-use markets and is the second-largest manufacturer of paints and coatings in the world. In addition to these coating successes, PPG’s R&D efforts in its chemicals group developed the first plastered photochromic optical lenses, which have grown into a $1 billion optical lens business under the brand name Transitions.
“At the same time that we’ve transformed our business portfolio, we’ve also expanded our geographic footprint,” he says. “In 2001, 74 percent of PPG sales were in the U.S. or Canada. Today, that’s less than 45 percent. Ten years ago our sales in the Asia-Pacific region accounted for 3 percent of our company.
“Now Asia-Pacific has grown to 17 percent of PPG sales. Today, 28 percent of PPG sales are coming from emerging regions such as Asia, Eastern Europe and Latin America. We have developed an improved geographic profile and have truly built PPG into a global enterprise.”
This global growth does not come at the expense of jobs in Pittsburgh or in the U.S. and the explosion of growth PPG has seen is great for the local region.
“Ten years ago, at the end of 2001, PPG posted revenues of $8 billion and net income of $387 million,” Bunch says. “In 2011, we delivered revenues of $15 billion and an all-time record of net income of $1.1 billion with earnings per share last year of $6.87, which was more than a third higher than our previous all-time record. We nearly doubled our sales and tripled our net income in 10 short years.”
As a result of that success, PPG is having a positive effect on Greater Pittsburgh and giving back to the community to help it flourish.
“In 2011, PPG spent some $100 million with vendors, suppliers and consultants in the Pittsburgh area,” Bunch says. “We employ some 2,500 people in the region and our foundation provides more than $5 million in funding for nonprofit organizations, much of it in the Pittsburgh region.
“Our success has enabled us to support key regional assets, and this past year, PPG renewed its commitment to the Pittsburgh Zoo and the PPG Aquarium for another 10 years.”
While much of the company’s recent growth has been overseas, its headquarters and almost all of its research and development activity is taking place in Western Pennsylvania. That commitment is what other businesses need to be willing to do to continue to build Pittsburgh’s economic development.
Identify the challenges
Pittsburgh is far from being down in the dumps, but there are certainly areas of the region that can improve to attract more business and opportunities available to aid in that mission.
“I believe that there are three significant challenges but also opportunities to attracting and retaining businesses in our region,” Bunch says.
“The first is energy. I believe this is a key challenge for most global manufacturers throughout the world, and more pointedly, here in the United States there is growing competition to access abundant, reliable, affordable and environmentally sustainable energy and feedstock sources.
“We’re on the cusp of an energy revolution here in the United States.”
New drilling technologies have enabled access to natural gas and oil reserves that are quickly turning the country into a globally competitive low-cost energy power. The Pittsburgh region has a lot of expertise in this industry.
“We are at ground zero in the shale gas story, but we have important technologies and roles to play in the development of sustainable energy sources like solar, wind and nuclear where our universities and our small and large technology companies are leading the way,” he says. “The expanding energy industry is creating jobs and supporting growth in other sectors from manufacturing to financial services.”
The second challenge for Pittsburgh is the need to continue to invest in the region’s transportation infrastructure and the availability of access to the region by air.
“We’ve clearly seen a reduction in air traffic and flights through the Pittsburgh International Airport,” he says. “As we become more global it’s important that we have an airport that can serve the needs of our employees and our customers.”
In many cities and regions, airports are the most important asset in community development. Pittsburgh has a modern but underutilized airport that is not living up to its potential. As a result, the Allegheny Conference along with the airport authority and the Allegheny county executive formed the Regional Air Service Partnership.
“This joint initiative demonstrates to the airline industry that the airport, the elected leadership and the business community are working together to improve air service,” Bunch says. “This initiative is paid off with such airline investments as United’s nonstop service to the West Coast and Delta’s nonstop service to Europe.”
The third clear obstacle to economic investment groups is Pennsylvania’s tax structure. The major state tax, corporate and income tax is uncompetitive. At 9.99 percent, it is the second highest in the country.
“This creates a very negative first impression for potential investors,” Bunch says. “In addition, Pennsylvania is the only major state that taxes the amount of net operating losses that a company can carry forward and offset against its tax liability.
“Pennsylvania’s corporate net income tax proportionate formula penalizes companies for expanding their physical presence and hiring employees in Pennsylvania because it does not utilize the single sales factor as utilized by many other states. The Pennsylvania state tax burden on business is a major in hindrance.”
Leverage strengths and opportunities
While there are several challenges that the Pittsburgh area needs to improve upon to make the region more attractive for businesses, the city, surrounding areas and local companies are making plans that address the weaknesses.
“Some people will tell you that Pittsburgh can’t compete with larger cities or Sun Belt states and there’s nothing we can do about it,” Bunch says. “I don’t believe this is true. I do, however, believe that in order for the Pittsburgh region to be more successful, we must work to leverage our strengths.”
The Pittsburgh region has some of the best educational institutions and hospital systems in the country, and as a result, research and development is more than $3 billion in the local economy.
“This is clearly a home for innovation here in the Pittsburgh region,” he says.
Bunch, who is chairing the Allegheny Conference this year, believes the organization dedicated to improving economic growth is in a unique position to build on these strengths for the betterment of the region.
“Beginning in March of last year, the conference convened 26 planning sessions across the region that involved more than 750 individuals, members of our regional investor’s council and partners,” he says. “We took stock of our progress to date and discussed an agenda for the three years to come.”
The conference developed a plan that includes three strategic priorities designed to take full advantage of what the region has to offer today.
“First, we wanted to enhance the opportunity for individuals and employees,” he says. “We will work to help connect diverse individuals to jobs and careers by identifying the skills needed and by increasing awareness of these opportunities among educators, students and workers.
“We will help employers by marketing the region globally and by building the capacity of existing businesses to succeed including the creation of a new venture capital fund to support the success of entrepreneurs and start-up companies.
“Second, we want to strengthen our communities by bringing together partners to take a fresh look at places in our region that have languished. We will seek to champion needed improvements to state laws and policies and work across political boundaries to streamline things to better integrate transit and transportation.
“Lastly, we want to energize tomorrow’s economy. We will work on improving our tax and regulatory climate, including creation of a site development fund to ensure that our region can provide competitive locations to accommodate business expansion and relocation.”
A focus on these strategic priorities will lay the groundwork for sustainable prosperity in the region.
“We’ve made a lot of progress on many of the fronts,” he says. “To succeed, partners across our region must come together to make it happen.” <<
How to reach: PPG Industries Inc., (412) 434-3131 or www.ppg.com
The Bunch File
Chairman and CEO
PPG Industries Inc.
Education: Received a degree in international affairs from Georgetown University and a master’s in business administration from the Harvard University Graduate School of Business Administration.
Facts: After joining PPG in 1979, he held positions in finance and planning, marketing and general management in the United States and Europe during his first 12 years with the company. He was named general manager of architectural coatings in 1992, vice president of that unit in 1994, and vice president, fiberglass, in 1995. Bunch was elected senior vice president of strategic planning and corporate services in 1997, and executive vice president, coatings, in early 2000. He was named president, COO and board member in July 2002; CEO in March 2005; and to his current post in July 2005.
Bunch is a member of the board of directors of the H.J. Heinz Co. and the PNC Financial Services Group, as well as a member of the University of Pittsburgh’s board of trustees.
Organizations and their people always try to avoid uncertainty, unpredictability and ambiguity. To create an environment of safety, sense and rationality in terms of the choices they make and the goals they set, they impose routines, standard operating procedures, decision-making recipes and risk-avoiding agreements.
Scholars’ traditional views about organizational routines explain their existence with the need for “cognitive efficiency” and the reduction of complexity. This view suggests that routines arise because they are functional, they minimize costs, they increase managerial control and they create stability in the organization.
Therefore, routines are an important element of a firm’s social system and its decision-making process.
However, rules and routines can be seen as repetitive and inflexible, fixed and mindless, and as creating inertia in organizations. They mechanize decision-making and choices, they create a “business as usual” mindset, and they put the organization into “automatic mode.”
Thus, there is a consensus that routines are generally detrimental to innovation and change in organizations. Inertia and “business as usual” form strong barriers to change and tend to comfort employees in their views that “It was never done in the past”; “Why change if it works?”; “If it ain’t broke, don’t fix it,”; and, finally, “This is not the way things get done around here.”
Sound familiar? So how do you break this business-as-usual phenomenon and wake up your organization before it becomes too complacent or before the next crisis arrives?
I conjecture that it is the role of top leaders in organizations to create disruption and create proactive mini “revolutions” in order to bring about incremental change, increase the sense of urgency and encourage people to embrace change.
The great challenge is to do this when times are good and when the organization is successful.
In my career, I have embraced Sun Tzu’s saying in the “Art of War for Managers”: “When you are at peace, prepare for war.” In other words, when times are good, prepare for bad ones, and vice versa.
I often characterize myself as an agent of disruption by trying to break organizational routines, release mental locks and create a climate of change by encouraging breakthrough thinking.
Here are a few disruptive approaches I have used to create organizational change and to accelerate organizational transformation:
Constantly challenge your business model and reject complacency
Think outside the box, release your creative potential to constantly reinvent yourself even when you are successful and achieving your goals. Are you anticipating disruption five years from now? Are you tracking mega trends? Are you scanning other industries and companies for potential failures?
You can do this by breaking the organizational equilibrium and bringing about change when least expected. Take your organization’s pulse and avoid organizational fatigue by designing changes in teams in advance of issues and in tune with organizational needs.
Are you suffering from too many meetings, too many PowerPoint presentations, long decision-making discussions? Experiment with new meeting formats, PowerPoint-free zones, casual Tuesdays, fun Fridays, decision-making blitzes, rapid innovation processes, creative speed-thinking, etc.
Break the level of market predictability
By surprising competitors with breakthrough innovative products and surprise moves, the traditional cycles for price increases, product launches and customer events become a moving target that is hard to predict and that will bring excitement to markets at different times.
Make breakthrough thinking a core competency
Train your leaders on what breakthrough thinking means and how you can bring about soft and mindful disruption. Look to hire people in leadership who have great change-management skills but who can also lead change. Also, hire creative and nonconventional thinkers and embrace humor and fun at work.
Embrace skeptics and eliminate organizational bottlenecks
Make change successful, irreversible and anchored in the organization’s DNA. Remove any bottlenecks in breakthrough thinking and pockets of resistance to change. Listen to skeptics about the relevance of change and about where things need to change.
By creating these proactive changes during good times you prepare your organization for potential difficult times ahead — but most of all, you put yourself in a position to avoid the next crisis by removing complacency and business-as-usual. Give it a try. Become your organization’s “agent of disruption.”
Stephan Liozu (www.stephanliozu.com) is the founder of Value Innoruption Advisors. He specializes in disruptive approaches in strategy, innovation and value management. He is also a Ph.D. candidate in management at Case Western Reserve University and can be reached at firstname.lastname@example.org.
Empathy is the ability to experience and relate to the thoughts, emotions or experience of others. Empathy is more than simple sympathy, which is being able to understand and support others with compassion or sensitivity.
Simply put, empathy is the ability to step into someone else's shoes, be aware of their feelings and understand their needs.
In the workplace, empathy can show a deep respect for co-workers and show that you care, as opposed to just going by rules and regulations. An empathic leadership style can make everyone feel like a team and increase productivity, morale and loyalty. Empathy is a powerful tool in the leadership belt of a well-liked and respected executive.
We could all take a lesson from nurses about being empathetic. Time and again, nurses rate as the most trusted profession. Why? Because they use proper empathy to make patients feel cared for and safe.
Over the years I have discovered that most people who score high on assessments for empathy have no idea why. They do not completely understand what it is they actually do that makes others see them as empathetic. They can only express that they:
- Like people.
- Enjoy working with and helping others.
- Value people as individuals.
In order to facilitate a deeper understanding of the importance of empathy in the workplace, I will pose four questions regarding the nature, role and benefits of empathy.
1. Why does it matter for us to understand the needs of others?
By understanding others we develop closer relationships.
The radar of every good executive just went off when they read the word “relationships.” This is not a bad thing since most people understand the problems that happen when improper relationships are developed in the workplace.
This being said, the baby cannot be thrown out with the bath water. In order for a team of workers and their leaders to work powerfully together, proper relationships must be built and deepened.
When this happens through empathy, trust is built in the team. When trust is built, good things begin to happen.
2. What traits/behaviors distinguish someone as empathetic?
Empathy requires three things: listening, openness and understanding.
Empathetic people listen attentively to what you’re telling them, putting their complete focus on the person in front of them and not getting easily distracted. They spend more time listening than talking because they want to understand the difficulties others face, all of which helps to give those around them the feeling of being heard and recognized.
Empathetic executives and managers realize that the bottom line of any business is only reached through and with people. Therefore, they have an attitude of openness towards and understanding of the feelings and emotions of their team members.
3. What role does empathy play in the workplace? Why does it matter?
When we understand our team, we have a better idea of the challenges ahead of us.
To drive home the above point, further consider these:
- Empathy allows us to feel safe with our failures because we won’t simply be blamed for them.
- It encourages leaders to understand the root cause behind poor performance.
- Being empathetic allows leaders to help struggling employees improve and excel.
Empathy plays a major role in the workplace for every organization that will deal with failures, poor performance and employees who truly want to succeed. As leaders, our role is simple—deal empathetically with our team and watch them build a strong and prosperous organization.
4. So why aren’t we being more empathetic at work?
Empathy takes work.
- Demonstrating empathy takes time and effort to show awareness and understanding.
- It’s not always easy to understand why an employee thinks or feels the way they do about a situation.
- It means putting others ahead of yourself, which can be a challenge in today’s competitive workplace.
- Many organizations are focused on achieving goals no matter what the cost to employees.
Each of these reasons can be seen as true.
Let me ask a question though: What distinguishes average to mediocre leaders from those who excel?
In my opinion, the distinction comes through the ability of the leader who actively works against all the so-called “reasons” and incorporates an attitude of empathy throughout his or her organization. That type of leader will excel.
By spending more time learning about the needs of their employees, leaders can set the tone and approach taken by their employees to achieve their organization’s goals.
When writing about empathy I am reminded of the famous quote from Theodore Roosevelt:
“Nobody cares how much you know until they know how much you care.”
This is a truth that has long stood the test of time. It is true for our relationships in and out of the workplace.
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.
She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email email@example.com or visit her website at www.delorespressley.com.
Roadblocks abound in business. Most business owners have been told, “No, we won’t fund your great invention.” Most executives have been told, “We’re not ready yet” to enter that wide-open, new market. But how they respond to those obstacles, the “no”s that are inevitable, is often a good indicator of who will ultimately succeed.
The first step is to step back and assess the causes of the opposition. That likely requires asking probing questions to get insight about the reasons and reasoning behind the rejection. The banker who rejected your idea may have valuable insight into your industry sector, information that could affect how you choose to proceed.
While data gathering, also probe for guidance on how to make your proposal stronger, when to re-pitch your proposal and who else may have decision-making or decision-influencing authority. The goal should be to identify possible avenues for future appeals.
Armed with the new information, it’s useful to then take a look back at where you are in relation to your goals for the project. Review and celebrate your successes. It will give you the energy to continue onward. But measuring your results, as well as who helped you accomplish the past results, also may shed light on who may be able to guide or assist you in your next steps.
Now, modify your strategy. Every rejection should be viewed as an opportunity to improve. Your planned adjustments should be listed and scheduled. Then, as you progress in making changes, you will be able to see your accomplishments and have a record of how you responded to different scenarios for future reference. It also will give you a clear return on investment in time and energy spent and keep you centered on progress.
Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.
There are many pressures on organizations to make the most out of every customer interaction and maximize the return on investment on marketing and sales spend. However, businesses often don’t have the work force necessary to handle these functions as timely and effectively as they would like or the tools and processes in place to measure and track success. Companies that are able to track interaction, engagement, investments and customer patterns and behaviors often enlist the help of a customer relationship management (CRM) tool.
“A CRM tool helps businesses manage sales, marketing and customer service operations without significantly expanding their work force,” says Gina Rosen, a consultant at Columbus. “CRM, in the past, may have been nice to have — a luxury technology, but in today’s marketplace, it’s a must have to stay competitive.”
Smart Business spoke with Rosen about CRM, its applications and how it has helped businesses improve processes to better engage customers, target sales and gauge marketing effectiveness.
What are the typical features offered by a CRM system?
The features offered by CRM are very diverse. It’s primary applications are contact management; marketing automation; sales force automation; sales and lead management; reporting and analytics; call center and case management, particularly with respect to customer inquiries or complaints; workflow automation, or automating manual processes; and social media integrations. Businesses have the option for on-premise solutions where the software is hosted at the business on its servers, or they can utilize a Web-based or cloud option, which involves less initial financial investment. The software can also be customized to meet the particular needs of a business.
Is CRM cost prohibitive for businesses?
No it is not, however, had this question been asked six or seven years ago the answer would have been yes. Previously, enterprise-ready CRM software required significant funds to get the software and hardware in place. But with the advent of cloud-based solutions, even businesses run by a sole proprietor can afford CRM and leverage its applications to optimize processes. The cloud-based model allows business owners to pay through subscriptions that charge per user. The pay per user cloud-based model offers a low-cost opportunity to implement CRM, experience the value and see the return on investment (ROI).
What are the most compelling reasons an organization would implement CRM technology?
A recent survey of 200 top-performing small and medium-sized businesses showed that the number one reason businesses implement CRM software is to establish data-based metrics for sales and marketing. It also provides the ability to show ROI and quantitative key marketing metrics that mean a lot to businesses.
The second reason CRM is implemented is to proactively communicate with customers. Customers expect a lot these days, and one of those expectations is that businesses, whether small or large, interact with them. To stay in front of your customers and offer personal interaction is critical.
Within that same vein, the third reason companies take advantage of this software is for custom-targeted sales and marketing. With CRM you can customize that end user experience, which makes your sales force more effective. Customers can interact directly with your CRM custom solution through your existing website and experience a tailored visit based on previous interactions, or your sales force can utilize the standard feature when interacting with customers and have all of a customer’s history available in one spot.
What are the most important value drivers for CRM?
The top value for a business is the software’s ability to help manage marketing and sales campaigns. CRM can help businesses test marketing and distribution strategies and gauge customer reactions. This information can be applied to future marketing efforts.
Another important value driver is that the software serves as a customer data repository, allowing you to consolidate customer knowledge within the organization in CRM. This includes far more than just contact details, but also customer behaviors and attitudes and price sensitivity. This, combined with personal data, can allow businesses to build more effective and predictive sales models and marketing campaigns that result in higher sales.
Further, CRM systems can help demonstrate ROI. With CRM you can quantitatively show increases in sales, customer referrals and participation in promotions.
What is the most common challenge a business faces when implementing CRM?
Typically the challenge is user adoption — getting your sales force and front line users to embrace CRM. They often see populating the fields as double entry, an extra step, or another way for management to check in on them. But once the sales force sees that using the software results in more sales, they can easily overcome that hurdle.
What are the most common performance metrics?
The top one, hands down, is revenue growth. The faster you can show ROI the better.
Second is growth in a business’s customer base, which means adding new customers or converting leads into paying customers.
The third most common performance metric is aggregating customer data. Many companies have customer data spread out over disparate systems. CRM gives businesses a one-stop shop for their records.
Can you give us some examples of companies that have benefited from implementing CRM?
The Toledo Mud Hens baseball team, which works within the media and entertainment industry, had ticket sales go up 88 percent in one year and their internal operations couldn’t keep up with demand. Adopting CRM allowed them to automate and streamline inefficient processes, which translated into more ticket sales. A customer testimonial is available with more information.
Another example is the human resources consulting firm Findley Davies. Implementing CRM in their call center has given them the ability to manage daily responsibilities and track productivity. It has dramatically changed and improved day-to-day operations within their Benefits Administration department.
Gina Rosen is a consultant at Columbus. Contact her at (248) 850-2195 or firstname.lastname@example.org.
With more than 20 years in the market and 6,000 successful business implementations, Columbus is a preferred Microsoft Dynamics business partner for ambitious companies. Columbus’ key deliverables include flexible and future-safe ERP, CRM, BI and related business applications that deliver competitive advantage and immediate impact.
Polly LaBarre is the co-author (with Bill Taylor) of “Mavericks at Work: Why the Most Original Minds in Business Win.” The strategies, tactics and advice in “Mavericks at Work” grew out of in-depth access to a collection of forward-looking companies. These maverick companies are attracting millions of customers, creating thousands of jobs and generating billions of dollars of wealth.
Here is a portion of my interview with LaBarre about the book, which covers forming strategies, unleashing ideas, connecting with customers and enabling employees to achieve great results.
Q: Describe what you mean by “maverick.”
A: Mavericks are different, edgy and independent of spirit. Their personal style or message may not appeal to everyone. But that’s precisely the point. Mavericks are defined by the power and originality of their ideas. They stand out from the crowd because they stand for something truly unique. What’s more, they take stands against the status quo, in defiance of the industry elite and offer compelling alternatives to business as usual. Mavericks may be fighters, but they’re not rebels without a cause. Their sense of purpose is not only powerfully distinct (Think: Southwest Airline’s quest to democratize the skies); it’s provocative and disruptive (Think: HBO’s declaration of originality, “It’s not TV. It’s HBO”).
Don’t confuse mavericks’ unswerving commitment to a cause and their lack of patience for the status quo with the egotism, monomania and power mongering modeled by too many celebrity CEOs and moguls. Mavericks, in fact, have a sense of humility.
Q: Are mavericks born or made?
A: It’s probably a little bit nature, a little bit nurture. We wrote this book to nurture the maverick in all businesspeople. What red-blooded working person wakes up in the morning, looks in the mirror and says, ‘I think I’ll stand for business as usual today’? We all want to make a mark, forge our own path and express ourselves in the world. It’s just that some of us need more of a nudge down that path than others.
Hopefully, the maverick individuals and ideas we present are inspiring and instructive enough to move people. The 32 companies we feature have vastly different histories, cultures and business models. We examined glamorous fields like fashion, advertising and Hollywood, as well as old-line industries like construction, mining and household products. The maverick leaders of these organizations are young, old, women, men, Americans, Europeans, charismatic and preacher-like, retiring and almost reticent. They just don’t fit any one mold.
Q: How does a maverick survive within a traditional company?
A: We encountered a bunch of mavericks inside big traditional companies. They all seemed to have a couple of survival strategies in common: They unleashed tough questions and critiques of their organization without losing their sense of loyalty to it. They’re the kind of questions every CEO should be asking. For example, Jane Harper asked of IBM, ‘Why would great people want to work here?’ And Larry Huston, now vice president of innovation at Procter & Gamble, argued, ‘The current business model for R&D is broken. How can P&G possibly build all of the scientific capabilities we need by ourselves?’
Mavericks don’t just ask questions, they act. We saw this again and again: They just got started, usually without a budget or formal permission, by designing an experiment around their question. Jane Harper launched an experimental Extreme Blue lab in Cambridge and spent a couple of years begging and borrowing resources until the program’s impact became clear.
Mavericks look for peers and fellow travelers outside the boundaries of their company. Not surprisingly, mavericks tend to click when they meet other mavericks. They’re great networkers and learners and are always looking for kindred spirits for support and ideas.
Q: Who is the quintessential maverick in American business?
A: Herb Kelleher and the team at Southwest Airlines. In the midst of the financial carnage and heartaches of the airline business, there’s one company that keeps growing, keeps creating jobs and keeps generating wealth. And that, of course, is Southwest. Southwest didn’t achieve these results because its fares were a little lower than Delta’s or its service was a little friendlier than United’s. It achieved those results because it reimagined what it meant to be an airline. If you ask Herb Kelleher what business he’s in, he won’t say the airline business or the transportation business. He’ll say that Southwest is in the freedom business. The purpose of Southwest is to democratize the skies, to make it as easy and affordable for rank-and-file Americans to travel as it is for the well-to-do. That’s a pretty commonplace idea today but largely because Southwest fought the entrenched conventions of the industry so doggedly in pursuit of that purpose. Its unrivaled success is based on its unique sense of mission rather than any breakthrough technology or unprecedented business insight.
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of ten books including Enchantment, Reality Check, and The Art of the Start. He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at email@example.com.