States looking to add revenue to tight budgets are upping efforts to collect sales and use taxes from businesses that may not know they owe money.
“Sales tax is one of the largest revenue producers for many states, second only to personal income tax. Since there are so many transactions involving the exchange of property and services, the states are getting more creative in their attempts to collect the tax due on these transactions,” says Susan Nunez, J.D., LL.M., a principal in Tax Services at Brown Smith Wallace.
Smart Business spoke with Nunez about who owes the taxes and what to do to ensure you’re complying with state laws.
How are sales and use taxes different?
Sales tax is a transaction tax imposed on sales of tangible property and certain services. Use tax is a compensating tax to sales tax. If a transaction isn’t subject to sales tax, it will be subject to use tax.
Typically the sales or use tax is due when the final consumer purchases and uses the asset. A company that buys components or machinery and equipment to manufacture a product may be able to purchase them exempt from tax, but ultimately someone will pay the tax when the product is made, sold and consumed.
How are states trying to collect these taxes?
One way is by sending out nexus questionnaires to out-of-state sellers. These notices are used to determine whether an out-of-state company has a filing responsibility. For example, if a manufacturing company from another state is selling product to customers in Missouri, the state may send that manufacturer a letter to determine whether it has sufficient presence in the state to require a tax filing. The state can also obtain federal records of imported products to determine if they were shipped into a state and, regardless of whether the company paid tax on that asset, send a notice that says tax is owed.
These are fishing expeditions; you may not owe tax. But it can be threatening to get a letter saying you owe $100,000.
Is not remitting taxes owed common?
Usually we see it in reverse — clients overpay taxes because of the complexity of the tax laws. Taxpayers err on the side of being conservative and pay tax on items that may very well be exempt.
It is difficult to determine what state has the right to the tax and who is responsible for remitting it. For example, drop shipments are particularly problematic. Say a Missouri company has a customer and a supplier in Illinois. An order is shipped directly from that supplier’s Illinois facility. It’s taxable in Illinois, but the question is, who is liable for that tax? It varies on whether the Missouri company is registered in the destination state, whether the supplier has a valid resale certificate from its customer and other factors.
Should companies determine if they owe tax or wait until they receive notification?
It’s best to calculate your liability and make a decision. If a business has a nexus in a state and its tax liability is $30, the amount is most likely immaterial to the company. But if the company is making $10 million in sales in a state, it should want to take action and ensure it’s in compliance.
Many states are conducting amnesty programs to bring in more money. Amnesty periods are attractive to taxpayers not only because they often abate penalties, but they also limit the number of years the state can assess tax.
The most important steps for businesses to take is to get a handle on how tax decisions are made, and to develop efficient processes to manage and streamline their sales and use tax compliance burden. People making tax decisions aren’t usually in operations and don’t understand how purchases will be used, so they can’t apply the laws to see if those items will fall within an exemption.
You can increase tax compliance, and ensure you’re not overpaying, by developing a customized sales tax decision tool. This enables the person who procures items or prepares the invoices to determine what is taxable and what may be exempt. It also provides your company the control needed to make good tax decisions. ●
Insights Accounting is brought to you by Brown Smith Wallace
If you were to assemble some of the world’s outstanding business leaders in one place and ask them their secret to sleeping well at night amid the pressures of running a successful business, you might think you’d collect the best tips to handling anxiety in the business world.
The truth is that top business leaders often don’t have a secret to reveal — they rely on the strength and confidence they’ve developed over the years.
At the EY World Entrepreneur Of The Year conference, held earlier this year in Monaco, EY Entrepreneur Of The Year country winners assembled to compete for the World Entrepreneur Of The Year title.
We took the opportunity to collect the thoughts of the world’s most accomplished entrepreneurs — innovators, futurists, turnaround specialists and problem solvers — about dealing with worries. ●
“There’s nothing that keeps me up at night. I sleep very well. The challenge we have as a company is to keep delivering the culture we have created and expand it, keep evolving at the speed our customers expect us to evolve and keep creating value for them as we have for the past 10 years.”
Entrepreneur Of The Year 2012 Argentina
“The main thing is to make sure that we are always looking for new, creative ideas that keep our business updated with new technology and creativity. The other thing is making sure we are working faster than before.”
Lorenzo Barrera Segovia
founder and CEO
Entrepreneur Of The Year 2012 Mexico
“Business has its highs and lows, because let’s face it, it’s not easy. It has its challenges. They asked Steve Jobs what was the most important thing in business and he said, ‘Passion.’ If you don’t have passion you would give up when things get difficult. We have so much passion and love for what we do that it becomes a part of our life.”
founder, president and CEO
Entrepreneur Of The Year 2012 United States
2013 World Entrepreneur Of The Year
“What if the stock market crashes? What if there is some unknown thing that happens? What if there’s another 9/11 type of situation? Companies need to carry on, but maybe they don’t need to do events. Maybe they cut back on entertainment and speakers. The worry is what happens if something happens that I can’t control.”
President and founder
SME Entertainment Group
“We are in recovering times. I feel very positive about the economy in general, but I’m still very worried about Europe. And while we are recovering, it’s still choppy and choppy times are times when there are more needs out there.”
Retired global chairman and CEO
"I guess there is a point in my life where I thought it is all about me, and I am going to be the guy that guides everything and controls everything. What I have learned is that the best thing that I have done for our business is learn to let go and learn to get people who are better equipped to manage specific areas, do their thing and not get in the way."
Dr. Alan Ulsifer
CEO, president and chair
Entrepreneur Of The Year 2012 Canada
“Nothing keeps me awake at night becase my work is solid.
My father married at 60 and my mother was 23. They had four children. Then he died, and we quickly had to start thinking about what to do. There was no money — nothing. We had to leave the little town we lived in because of violence there. Thanks to that, I am where I am right now because I still could be on the streets of my village selling tobacco. There is no wrong that can do good. That's what I have to teach people.”
founder and president
Entrepreneur Of The Year 2012 Colombia
The idea of driving aimlessly seems glamorous in movies and songs. In reality, few of us get in a car without knowing how to reach our destination. We’ve created smartphone apps, GPS devices and satellite mapping to make our trips as efficient as possible and to avoid what we know to be an inconvenient, expensive outcome — getting lost.
I bring up this idea because many companies using social media have inadvertently become lost drivers. They start using social platforms with the goal of reaching some number of likes, retweets or shares, but as they embark on their social media strategies, many experience a disconnect between the content they post, blog and tweet and their progress on measurable business goals. These companies are driving without a roadmap; they just don’t know it.
Sound familiar? If social media isn’t working for you, your social media approaches may be missing a fundamental component: an effective content strategy. Here are three ways a solid content strategy will enhance your company’s social media success.
A like is just a like
All social media engagement is not created equally. To be successful, the social media activity that you generate needs to support your marketing goals — whether you want to improve employee engagement, boost customer conversions or build interest in a new product.
Creating a content strategy before you engage in social media will help your business clarify the specific marketing goals you want to achieve through content, as well as what messages you need to communicate to reach those goals. This process will ensure you get the right likes, shares and retweets from social interactions.
Social is a vehicle
Social media is a vehicle for sharing compelling content with your audience, and it doesn’t work if you don’t know what issues, topics and trends your audience finds compelling. Part of developing a content strategy involves learning how those you are trying to reach want to be talked to. Where do they go for information? How much time do they spend online? What kind of content are they looking for from your industry?
By getting to know the interests and pain points of your audience (customers, employees, shareholders, etc.), you can develop tactics to reach your online audience more effectively, saving you time and enhancing your company’s social influence.
Relevant content is meaningful
Kings of social content don’t become that way by luck. They use strategic tactics to connect with their audience through the right channels at the right times. More importantly, they make these connections meaningful and memorable by posting and sharing strategic, relevant content that their audiences desire.
When you deliver social content that your audience members find valuable or interesting, they’ll reward you by sharing your content, engaging with your business and, ideally, helping to promote your reputation as a thought leader in your business or industry. A content strategy allows you to do that by providing a roadmap for what kinds of informative, helpful, educational or creative content you need to make meaningful interactions.
As a recent Huffington Post article put it, the golden rule of the web is clear: “To know us better is to sell us better.” Ultimately, being successful in the social media space means taking the time to map out what success looks like. In this sense, a solid content strategy is not only an important component of any social media strategy, it’s the key to driving the results your business wants.
Michael Marzec is chief strategy officer of Smart Business and SBN Interactive. Reach him at email@example.com or (440) 250-7078.
When Albert “Chainsaw Al” Dunlap was the CEO at Sunbeam in the late ’90s, he had a reputation for ruthlessness. Besides massively downsizing the company, he was also known to intimidate everyone around him and resort to yelling and fist pounding.
While extreme, Dunlap’s behavior is an example of the type of “dictator” leadership that used to be fairly common in the C-suite. Rules were rules, there were no exceptions for anything and people were just a line item on a budget. Need to cut thousands of jobs? Don’t think twice about it.
On the other end of the spectrum is the Christ-like leader. This leader focuses more on building people up rather than tearing them down. This type of leader understands that there are rules, but sometimes to do the right thing, the rules need to be broken. For example, during the economic downturn, some Christ-like leaders went well beyond what was called for to make sure laid-off employees were taken care of.
They made sure they had the use of office resources to look for a new job and did everything they could to lessen the hardships. They weren’t required to do this; it was just the right thing to do. They saw employees as human, not just numbers on a spreadsheet.
Does it cost money to take the more humane route with your leadership? Yes and no. From a short-term, bottom-line perspective, it probably does cost a few more dollars to help people through a hardship. But long term, it can pay dividends. By treating people with respect and doing the right thing, it helps eliminate animosity toward you and your company from both the ex-employees and current ones. Maybe there are some good employees who you wanted to keep, but couldn’t afford. By showing compassion, when the economy turned around, they were far more likely to consider coming back than if they had just been shown the door with little regard to their well-being.
And what happens when these ex-employees end up in key positions in companies that could be customers? Do you think an ex-employee who you mistreated is going to buy anything from you or recommend your company to someone? It’s a small world, and what goes around often comes around, so it’s always best to treat people as best you can.
You can lead like a dictator and still get results. But do the ends justify the means? Will you conquer all, only to find yourself alone with no friends, the equivalent of Ebenezer Scrooge in “A Christmas Carol?” Or will you have an epiphany and realize there’s a better way to do things?
During this holiday season, think about your leadership style and the long-term effect it has on people’s lives. If this exercise makes you uncomfortable, then maybe it’s time to change how you lead. ●
What would it take for a company to succeed if its leader could effectively do only one of the following: innovate, instigate or administrate? We all know that an innovator is the one who sees things that aren’t and asks why not? The instigator sees things that are and asks why? The administrator doesn’t necessarily ask profound questions but, instead, is dogged about crossing the “t’s,” dotting the “i’s” and making sure that whatever is supposed to happen happens.
Ideally, a top leader combines all three traits while being charismatic, intellectual, pragmatic and able to make decisions faster than a speeding bullet. Although some of us might fantasize that we are Superman or Superwoman, with a sense of exaggerated omnipotence, the bubble usually bursts when we’re confronted simultaneously with multiple situations that require the versatility of a Swiss army knife.
Business leaders come in all shapes and sizes with various skill sets and styles that are invaluable, depending on the priorities of a company at any given point in time.
Every business needs an innovator to differentiate the company. Without a unique something or other, there isn’t a compelling reason to exist. Once those special products or services that distinguish the business from others are discovered and in place, it takes an instigator to continuously re-examine and challenge every aspect of the business that leads to continued improvements, both functionally and economically. It also takes an administrator — someone who can keep all the balls in the air, ensuring that everyone in the organization is in sync and delivering the finished products as promised to keep customers coming back.
As politicians and pundits of all types have pounded into our heads in recent years, “It takes a village to raise a child.” All who practice the art and science of business have learned that, instead of a village, it takes a diverse team working together to make one plus one equal three.
On the ideal team, each member possesses different strengths, contributing to the greater good. The exceptional leader is best when he or she is an effective chef who knows how to mix the different skills together to create a winning recipe.
In many companies, however, leaders tend to surround themselves with clones who share similar abilities, interests and backgrounds. As an example, a manufacturer may have a management team comprised solely of engineers, or a marketing organization could have salespeople who came up through the ranks calling all the shots.
If everyone in an organization comes from the same mold, what tends to happen is, figuratively, one lies and the others swear to it. This builds to a crescendo of complacency and perpetual mediocrity.
There is a better way. Good leaders surround themselves with others who complement their capabilities, and savvy leaders select those with dramatically different backgrounds who will challenge their thinking because they’re not carbon copies of the boss. This opens new horizons, forges breakthroughs and leads to optimal daily performance.
Strange bedfellows can stimulate, nudge and keep each other moving toward the previously unexplored.
To have a sustainable and effective organization, you can’t have one type without all the others. While everyone on the team may not always agree, each player must always be committed to making the whole greater than the sum of the parts.
The single most important skill of the leader who has to pull all the pieces and parts together is to have the versatility of that Swiss army knife — selecting the precise tool to accomplish the objective at hand. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
More than 800 years ago, medieval philosopher Maimonides outlined eight levels of charity, the greatest of which was supporting an individual in such a way that he or she becomes independent. In Maimonides’ view, support was defined as a gift or loan, entering into a partnership or simply helping that person find employment.
Few things are more powerful than philanthropy — especially when its end goal is to better the lives of others. These days, philanthropy, and corporate philanthropy specifically, has assumed a broader role in society.
Today, companies give back more strategically than ever before. They align themselves with nonprofits that foster missions they believe in. The wealthiest people on the planet have even coordinated the Giving Pledge (www.givingpledge.org), where they’ve committed to dedicate the majority of their wealth to philanthropy.
At last count, more than 115 people had taken the pledge. Warren Buffett and Bill Gates may be the most prominent names on the list, but others include Spanx Founder Sara Blakely, Cavs Owner Dan Gilbert, Progressive’s Peter Lewis and Netflix Founder Reed Hastings.
Last month, one member, David Rubenstein, CEO and co-founder of The Carlyle Group, discussed the importance of philanthropy during a presentation at EY’s 2013 Strategic Growth Forum.
In his pledge letter, Rubenstein explains why: “I recognize to have any significant impact on an organization or cause, one must concentrate resources, and make transformative gifts — and to be involved in making certain those gifts actually transform in a positive way.”
One way Rubenstein is being transformative is through “Patriotic Philanthropy.” He has given $10 million to help restore President Thomas Jefferson’s Monticello home and underwrote renovations to the historic Washington Monument. Yet Rubenstein’s most noteworthy initiative is the whopping $23 million to acquire a rare copy of the Magna Carta, ensuring it remained in the United States. After its purchase, Rubenstein gifted it to the National Archives.
Not everyone has Rubenstein’s vast resources. But every organization and any individual can make their own impact.
In the workplace, for example, organizations that give back elevate their status perception-wise among competitors and peers. It doesn’t take much. But by being a company that cares, prospective employees want to work for you. For your existing team, deliberate and well-organized corporate philanthropy programs quickly take on a life of their own, becoming a rallying point.
Think strategically and get started by finding your cause. We all have them. They exist at our very core, forming the belief system we live by every day. So why shouldn’t our philanthropy follow that same course? Consider aligning your giving or volunteerism with something you personally believe in or care about; something that fits with what your company does or something that is close to your employees’ hearts.
Most important, get involved and just make a difference. It really comes down to that. One initiative that has always impressed me has been the annual CreateAthon event undertaken by WhiteSpace Creative, a member of the Pillar Award class of 2005. You can read a first-hand account of this year’s program here.
Being a good corporate citizen goes well beyond making good business sense. When you align yourself with causes you care about, whether big or small, you make a difference in someone’s life. And the bottom line is this: It is all of our duties to get involved. It’s no longer a question of if, but rather of what, when and how. ●
Dustin S. Klein is publisher and vice president of operations for Smart Business. Reach him at email@example.com or (440) 250-7026.
Growing up on military bases, Suzanne Sitherwood felt right at home when she started in the oil and gas industry as a co-op college student working as a field worker for Atlanta Gas Light Co.
“I was out on trucks, in the dirt, with pipes and meters and so forth,” Sitherwood says. “Growing up on military bases it was an easy connection because of the men, trucks, uniforms, barbed wire fences and pipes. It all felt very familiar.”
She enjoyed what she was doing so much that following college graduation she decided to continue with the gas company. After 30 years at Atlanta Gas Light Co., where she had become president, she was recruited to The Laclede Group Inc. in late 2011 as president, and became CEO in February 2012.
The Laclede Group Inc. is a public utility holding company. Its primary subsidiary, Laclede Gas Co., is the largest natural gas distribution utility in Missouri, serving about 631,000 residential, commercial and industrial customers in St. Louis and 10 other counties.
With Sitherwood’s expertise in the industry and The Laclede Group poised for growth, the combination sparked a period of change.
“Part of the reason we created The Laclede Group was for growth,” Sitherwood says. “That was one of the reasons the board recruited me here. I was one of the architects with the prior company I had worked for, and it became the largest in its peer group.
“So the board was interested in bringing me here and growing The Laclede Group so we weren’t just one gas company, but could become several gas companies.”
Here’s how Sitherwood got The Laclede Group off and running toward growth mode.
Prepare for change
Having built her previous employer into the largest in its peer group, Sitherwood knew how to grow a business. Now, she was joining a new company that she had to get acquainted with before making any sudden decisions.
“I came here in September 2011 and that gave me a chance to lay low and meet the executive team, get to know the strength and talent that existed here, and begin to formulate that 90-day plan,” Sitherwood says. “I had a great opportunity between September and February to do just that, so when Feb. 1 rolled around, we were ready to move forward.”
Even more than getting up to speed, Sitherwood was pleased to see that The Laclede Group had balance sheet strength and strong leadership already in place.
“If you’re going to have a growth plan, you need to have a strong balance sheet,” she says. “It was nice to see a 150-year-old company ready for growth. The other piece was the senior leadership. There was a very strong team in place. However, it wasn’t organized in a way that it could integrate other gas companies.”
In order for The Laclede Group to bring in other gas companies to grow its portfolio, Sitherwood led a reorganization to line-up talent in specific roles and build the company into a business unit structure that could integrate additional gas companies.
“I needed to restructure the company to be business units with shared services,” she says. “The other challenge was technology. We’ve implemented a three-year technology plan to have enterprise systems so we can scale our technology to those other companies.
“We also needed to have standardized policies and procedures. They existed from an institutional perspective and generally the company knew how it operated around certain policies, but they weren’t documented, transparent and available. So we did that.”
Lastly, the way Laclede communicated and engaged the rest of the company was very insular because it was just a single gas company. Sitherwood needed to change that mentality.
“If you’re going to have a growth strategy, you need to talk to your employees,” Sitherwood says. “You need to be able to explain your industry and why you’re doing that, and they need to believe in it. But also, there are external stakeholders. We needed to be very proactive about talking to the investment community, regulators, our board and our shareholders.
“We needed to make sure that we were saying the same thing to our employees that we were telling the regulators and investors. We’ve spent a lot of time on that endeavor and quite frankly, I think we’ve done a nice job on that.”
What was most crucial for Sitherwood in those first few months at Laclede was the ability to get acquainted with the company and then create a vision for growth.
“You have to do your homework the first 90 days,” she says. “Don’t come in assuming one thing or the other. Come in and do your homework, but then chart that vision and stay focused on it to keep it alive.
“Sometimes you can come in with a lot of energy and then slow down instead of keeping that pace. If you back off the pedal after six to eight months, it quits feeling real to people.”
While you have to remain focused on your vision and growth objectives, you might also have to adapt to certain circumstances as you go.
“If it’s anything like it is around here, you’re changing the tires while you’re driving the car,” Sitherwood says. “You’ve got to keep the energy and the pace up, but at the same time not overwork people and keep them energized around it.”
Embrace your growth
Soon after Sitherwood came to The Laclede Group, the company had entered into negotiations to buy a company called Missouri Gas Energy. Sitherwood’s restructuring was a big reason the company was a front-runner in those negotiations.
“Had we not restructured, yes, we could have grown, but going through that due diligence process, that bid process, we had a clear line of sight to what that would look like because we already had the organizational structure in place,” Sitherwood says. “If I had closed that transaction and brought that company in while having to reorganize at the same time, it would be more chaos that’s not necessary.”
Some would argue against putting the organization in place first, because there is either an expense to that or there is a danger you won’t grow.
“I find that very interesting, because if I have a growth strategy and we all believe in it, we’re going to grow,” she says. “Why wouldn’t you organize around that? Why wouldn’t you put the fundamentals in place from a financial perspective and policy perspective and then stay focused on your vision?”
Laclede acquired Missouri Gas Energy from Energy Transfer Partners LP in September 2012.
“Energy Transfer Partners was clear from day one that Missouri Gas Energy was not strategic to them and they were going to divest this gas company,” Sitherwood says. “So we started working through a very competitive bid process and at the end of the day we were the bidder of choice.
“This is not a one-and-done. We’ve got a pretty strong corporate development group and we’re constantly modeling and analyzing other opportunities, and we hope to continue to grow the gas business.”
As of August, Laclede Gas Co. served 631,000 customers and with the Missouri Gas Energy acquisition it added north of 500,000 customers.
“When you add the two utilities together, we serve around 1.2 million to 1.3 million customers,” she says. “Why that matters to us is because we’re here to serve those customers as a gas company.
“The other metric I look at is how interested are institutional buyers and retail buyers in us? When we went to market to issue our equity, we ended up having a very strong offering. What that told me was people were very interested in us, had done their homework on our financial metrics and that was validating to me that we had the right strategy.”
In addition to a focus on acquisitions, The Laclede Group started a brand called Spire, which is all about natural gas-powered vehicles, further expanding the company’s services.
“This could be the future of natural gas in our country,” Sitherwood says. “Out of all the hydrocarbons, natural gas is 30 to 40 percent cleaner. The supply is long because of shell gas, about 100 years. The prices are low and volatility is non-existent. There’s a $1.50 spread in terms of a per gallon equivalent. Natural gas vehicles today seem to make sense.”
Spire was launched in partnership with Siemens and is just another part of Sitherwood’s grand vision to grow The Laclede Group.
“I enjoy the idea of growing this company,” Sitherwood says. “We’re now off and running.” ●
- Do your due diligence when acquiring a new company.
- Construct a vision for growth and follow it.
- Find opportunities that expand on your vision.
The Sitherwood File:
Name: Suzanne Sitherwood
Title: President and CEO
Company: The Laclede Group Inc.
Born: Norfolk, Va.
Education: Received an industrial engineering degree from Southern College of Technology and a master’s in business administration from Brenau University.
What was your first job and what did you learn from it? I was a lifeguard working for the military. I taught individuals to swim who joined the military. I was always amazed the number of people who joined the military and never learned to swim. Living on a military base, I saw how leaders would take young individuals and build a team and inspire them to do the things they needed to do.
What is the best business advice you have ever received? You learn more from your mistakes than you ever will from your successes. You’ve got to take calculated risks and learn from them.
If you weren’t CEO of The Laclede Group, what would you want to do? I would want to take time off and travel around the world. It’s not so much about the travel for me, but about immersing myself in different cultures and appreciating different people and what’s important to them.
If you could speak with one person from the past or present, with whom would you speak? Barack Obama, since he has a few years left there are some critical issues our country has to deal with on an international level and a grass roots home level, and I’d enjoy talking to him about that. I don’t think he’s going to find the time on his calendar for me, but you never know.
Sitherwood on leadership: Leadership to me is not management. It’s about people and really inspiring them to do things individually and collectively that they didn’t think they could do. That’s what gets me up every day.
The Laclede Group Social Media Links:
How to reach: The Laclede Group Inc., (314) 342-0873 or www.thelacledegroup.com
Neil Sedaka’s song “Breaking Up Is Hard to Do” was obviously aimed at personal relationships, but when a new hire has to be dismissed, breaking up is hard to do.
No one hires a new team member with failure as the goal. In terms of real world situations, 46 percent of new hires fail in the first 18 months, according to a 2012 report by PR News. And when CareerBuilder researched the cost of a bad hire in 2012, 41 percent of companies reported costs to the organization in excess of $25,000.
Those are substantial monetary costs, not to mention the costs in ways that aren’t so measurable, i.e., loss of credibility of the individual responsible for the hire, negative employee morale, loss of customer/client support and lost productivity. Why does this happen, and what can be done to significantly lessen a negative outcome? Let’s look at three stages that can help avert a bad hire.
Review criteria for the position
Urgency to fill a position is cited as the primary reason new hires fail. Under urgent conditions, a review of job requirements has seldom been accomplished, making the likelihood of the interview process being done well improbable.
If the individual responsible for the hiring process does not have a complete understanding of what this new hire is responsible for, as well as the ability to communicate corporate culture attitudes relative to this position, the interview process will operate under less than ideal circumstances. Taking time for a complete review of the position and establishing skills and attributes necessary for a successful hire is imperative for success.
Create a brand ambassador
The first day a new hire enters the work place offers a unique opportunity for him or her to become a brand ambassador. While getting all the proper documentation for employment is absolutely necessary, it doesn’t need to take place in the first hour.
Imagine how nice it would feel to walk into a new office with signage ready to go, branded golf shirt/pen/mug on the desk and business cards already done.
The on-boarding process is too often relegated to filling out forms, introductions and handshakes. What a wasted opportunity to tell a new hire how he or she is a valued member of the team.
Establish goals and objectives
Of course, the reason someone is hired is to perform certain tasks, achieve goals and contribute to the success of an organization. When CareerBuilder asked about the definition of a bad hire, 67 percent of respondents reported that the quality of work was “lackluster.” This tremendously high percentage begs further questions concerning the process for establishing expectations and goals.
If expectations and goals are not discussed, agreement cannot be reached. Unless they are written down, along with identifying dates when they are to be accomplished, too often the parties involved assume everyone is on the same page.
Have the discussion, write down the goals and objectives using SMART criteria (specific, measurable, attainable, realistic, timely) and monitor the progress.
While there are no guarantees in the hiring process, take the time to review the job criteria, create a brand ambassador from day one, establish SMART goals and objectives from the beginning and beat the 46 percent that fail. ●
Julie Nimmons serves as a chair for Vistage International in the St. Louis area. Vistage provides professionally facilitated peer advisory experiences that help CEOs, business owners and key executives grow their business. She can be reached at (314) 301-9823 or firstname.lastname@example.org.
For more information on Vistage International, like its Facebook page www.facebook.com/Vistage and follow on Twitter @vistage. Connect with Julie Nimmons on LinkedIn www.linkedin.com/in/julienimmons
Have you ever been caught in the trap of using the words “performance” and “results” interchangeably? The distinction between the two is important to consider if you want to get the best out of both. It’s pretty simple, actually. Results are the outcomes you produce and performance is how you get there.
However, here’s something you may not have considered. In fact, it might even seem counterintuitive. If you’re focused mainly on bottom line results in what you measure and reward, that will eventually lead to the deterioration of both performance and results. Here’s why.
Outcomes vs. inputs
First, we all know that people tend to repeat behaviors that are reinforced positively. Likewise, people tend not to repeat behaviors that produce a negative response. Next, it’s important to realize that no one has direct control over results — unless the game is fixed or there’s a deliberately unfair advantage. People can only control performance.
Now, if bad performance always led to bad results, and good performance always led to good results, it wouldn’t matter which one you rewarded — results or performance. But that’s not always how things work. Sometimes you don’t get good results even when you give your best effort. Other times, the opposite is true.
That’s not how things usually happen, but look at what you get when they do. If you fail to reward people for good performance because they had bad results, you discourage them from repeating the good behavior. If you reward them for good results in spite of poor performance, you reinforce poor behavior in the future. The cumulative effect over time is inevitable. Every time you focus on results in a way that either reinforces poor performance or discourages good performance, you take a step backward with long-term results.
Performance is the bottom line
Of course, you have to add up the numbers on the bottom line eventually. Even if winning in the world of business means producing results, lasting success still requires focusing on the drivers of those results, and it’s important to reward effective execution regardless of the outcomes in the short term. Think of it this way: Winning is the name of the game, but performance is the bottom line.
Clearly, if effective execution isn’t producing the desired long-term results, you need to find the problem. It serves no purpose, however, to penalize people for poor outcomes if they’re doing the right things in the right way at the right time. If that happens, you need to fix the strategies or systems, not the people. Otherwise, you’ll destroy trust in your organization.
That premise has particular significance for managers in the “people” side of the business. For HR professionals, it’s pretty obvious. Some compensation and bonus programs are notorious for focusing solely on immediate, bottom line results without regard to how they’re produced. That kind of practice often leads to short-term success with negative long-term consequences. Good programs encourage performance that looks at the long haul.
You have to communicate effectively about the steps to success. If it’s results you’re after, you’d better be talking a lot more about what it takes to produce them, because in the end, it’s how you get there that counts. ●
Les Landes is president of Landes & Associates. The firm provides management consulting services in the areas of organizational communication, employee engagement, marketing, public relations and continuous improvement systems. They are the creators of the “ImaginAction System,” a tool for getting employees engaged in systematic continuous improvement. Landes is also the author of multiple articles, as well as a recently published book, “Getting to the Heart of Employee Engagement: The Power and Purpose of Imagination and Free Will in the Workplace.” For more information, visit www.landesassociates.com.
Connect with Les Landes on LinkedIn http://www.linkedin.com/in/leslandes or find out more about Landes & Associates on Facebook https://www.facebook.com/LandesandAssociates and follow on Twiter @LandesAssocs.
Although some aspects of the Affordable Care Act remain uncertain, the act overall is driving the health care market to figure out ways to control costs and allow employers to continue to offer health plans, says Mark Haegele, director of sales and account management at HealthLink.
As a result, managed care companies are increasingly utilizing three tools —reference-based pricing, Domestic Centers of Excellence and narrow networks.
“Some of these concepts are still new, so an employer might tackle one thing at a time,” Haegele says. “Maybe you start with narrow networks, and then move into reference-based pricing or Domestic Centers of Excellence.”
Smart Business spoke to Haegele about how each strategy can drive down costs and the overutilization of health plans.
How does reference-based pricing work?
Within a managed care network, you identify facilities, procedures and/or services that have low costs and high quality, and then establish a plan design that drives plan members to them. If, for example, you’ve identified that
Provider A performs knee replacements for $5,000, then members who go to that provider have their costs covered at 100 percent. If a member goes to another more expensive provider, he or she is responsible for the difference. This schedule could cover a whole host of surgeries and procedures.
Reference-based pricing, which is cutting edge in both contracting and plan design, can have a major impact on costs.
What are Domestic Centers of Excellence?
With this model, you identify high-quality providers across the country to be the hub for a certain procedure type. For example, all transplants might go to the Mayo Clinic, while all knee, hip and shoulder replacements go to Mercy Springfield Missouri. The health plan promises to pay 100 percent for the procedure and the travel for the member and a caregiver, as opposed to just giving a deductible and coinsurance.
The value isn’t just with price points, but also aligning incentives. Providers are willing to offer preferred pricing based on the exclusivity and volume, and employers achieve savings on unit cost. In addition, unlike the traditional fee-for-service model, providers objectively review for appropriateness first. The contract includes a performance component to eliminate waste. So, Mercy, which performs 30 percent fewer back surgeries than the national average, keeps members from getting inappropriate surgeries.
Originally only used by large employers, this model has become more prevalent. Smaller employers can piggyback on either large employers or a managed care network that develops this for its entire block of business with specialized contracts.
How do narrow networks lower health costs?
Depending on your geography and population, you may be able to partner with your managed care network to customize your network. In a rural or smaller market, this may mean exclusively driving the members to one facility. In turn, typically the hospital will provide a better managed care contract.
You may get pushback from members who prefer one facility to another. The employer must convey that this is about looking at cost and quality to find the right facility, which then has an impact on premiums.
Narrow networks have been around for a while, but now managed care companies are starting to wire together narrow networks across a region to create a sub-network.
Can these strategies be used in conjunction with any type of health plan?
Although there is some overlap, you can use a combination of strategies, depending on your readiness for change. The difference is more of a degree of granularity — Domestic Centers of Excellence and reference-based pricing are broken down by procedures, while narrow networks are more geographic-centric.
Self-funded health insurance plans may use any of these tools. Fully insured carriers are now implementing narrow networks and referenced-based pricing. With the health exchanges, narrow networks should become more common as carriers look for ways to keep costs down. ●
Insights Health Care is brought to you by HealthLink