Companies are being challenged to protect vast amounts of proprietary and confidential information. And now, many are being held to an even higher standard when it comes to protected health information (PHI).
“The Health Insurance Portability and Accountability Act (HIPAA) has existed since 1996. It’s well established that covered entities — health care providers, benefit plans and clearinghouses — have a responsibility to ensure the privacy and security of PHI. Recently, the rules have been tightened to also cover business associates — organizations with which a covered entity shares PHI. These changes mean that business associates now have to fully comply and be accountable under the HIPAA security rule,” says Tony Munns, member, Risk Advisory Services, at Brown Smith Wallace.
Smart Business spoke with Munns about the final omnibus rule and what actions businesses should take.
What prompted the new rule?
A significant number of data breaches were from business associates who were not as diligent as they should have been, and covered entities were not selecting business associates with the appropriate rigor. A notable example involved an insurance company that had a business associate who was responsible for off-site storage of sensitive data. The business associate was using a garage, which was left unlocked and wasn’t climate-controlled. That contracting choice has led to separate investigations by both California and federal regulators.
What action should companies be taking?
The Department of Health and Human Services said that it’s not sufficient to just have an agreement, there needs to be satisfactory assurance that the business associate can and does follow proper procedure. Entities covered by HIPAA have until Sept. 23, 2013, to update their business associate agreements. Current agreements do not have to be changed until they’re up for renewal, but in any case all agreements have to be updated by Sept. 22, 2014.
What steps should companies take to comply with the legislation?
- Understand the new requirements and the impact on the business.
- Update business associate agreements.
- Apply the satisfactory assurance mandate.
Review existing agreements and perform due diligence to get comfortable with the practices of your business associates. This might involve requesting that audits be performed, such as Statement on Standards for Attestation Engagements No. 16 reports. In the insurance company example, no one examined whether the person contracted to provide off-site storage was capable of providing it to the level expected.
What are other requirements of the final omnibus rule?
The new rule requires that individuals be informed that their information has been breached. Managing breaches is no longer sufficient. Meanwhile, business associates are not required to provide a notice of privacy practices or designate a privacy official; they only need to comply with the general privacy requirements and all security measures, much like covered entities.
The definition of a breach was also changed from ‘a significant risk of financial, reputational or other harm to an individual’ to ‘an acquisition, use or disclosure of PHI in a manner not permitted.’ Under the old rule, companies that didn’t believe information was compromised didn’t need to classify it as a breach. Now they have to report the breach, but can apply mitigation to demonstrate there was a low probability of harm.
What are the penalties?
There are four categories:
- Ordinary breaches, such as an error or lost equipment — $100 to $50,000 per violation.
- If reasonable due diligence would have revealed the violation — $1,000 to $50,000 per violation.
- Conscious, intentional failure or reckless indifference, but the breach was corrected — $10,000 to $50,000 per violation.
- Conscious, intentional failure or reckless indifference and the breach was not corrected — $50,000 per violation.
For all violations, the cap is $1.5 million. And there will be more enforcement.
Tony Munns is a member, Risk Advisory Services at Brown Smith Wallace. Reach him at (314) 983-1297 or firstname.lastname@example.org.
We can help you with HIPAA compliance.
Insights Accounting is brought to you by Brown Smith Wallace LLC
With employers facing ever-rising health insurance premiums, most are looking to control costs.
They may increase co-pays and deductibles, or decrease benefits. But there are other steps to accomplish that goal without impacting benefits or increasing employees’ costs, says Mark Haegele, director, sales and account management at HealthLink.
“Lowering the cost of health care is driven by managing utilization,” Haegele says. “There are a number of things in your data covering members’ use that you can address to help control costs. Too often, people are not educated about alternatives to the emergency room.”
Smart Business spoke with Haegele about how to lower the cost of health care without modifying benefits.
Where should employers start?
From 1996 to 2006, the annual number of U.S. emergency room visits grew from 90.3 million to 119.2 million, and from 34.2 to 40.5 visits per 100 residents. So, look at emergency room usage and other high utilization data points to identify trends. By focusing on those areas, you can ultimately have an impact.
Identify if overuse of the ER is an issue, and, if it is, what is driving it. Then you can implement action plans to lower costs for that high-cost category.
What should an employer be looking for?
Over the last three years, has the number of visits per member per month gone up year after year? And, has the cost per member per month gone up year after year? If yes, ask why.
Look at frequency of visits per person to identify whether a subset is going to the ER 10 or more times a year. If yes, determine how to address those people. Do you need case management nurses to help them find a better path to care? Do they need help finding a primary care physician? Can you educate them on alternatives?
Also, look at the reasons for ER visits. There are two categories — symptom, injury or poisoning, and disease and virus. If someone breaks an ankle, that person is going to the ER. But the disease and virus category is a different story. More than 60 percent of ER visits are for things such as sinusitis, flu, cough, headache, etc. This category can be managed.
Twenty-four hour nurse lines, urgent care clinics and clinics in pharmacies all are lower-cost alternatives. The cost of the ER averages $800 to $900, versus $65 to $150 for the alternatives. If more than 50 percent of ER visits fall into disease and virus, you know where to focus your energy to modify utilization and create awareness.
Emergency room management: Getting care when you need it quickly. Learn when to use the ER, or not.
How can employers create that awareness?
Education is No. 1. Post information, do emails blasts, distribute articles, do payroll stuffers, anything you can to get the word out.
Many employers have penalties, so if an ER visit is not a true emergency under the plan design, it doesn’t pay. But hospitals have ways of getting around that. Typical plan designs waive that penalty if a patient is admitted. Guess what? Now your admissions just went up.
A better approach is to educate people. And explain that if the ER coinsurance is $150, that’s $150 out of their pocket, whereas at an urgent care center the cost is much less. And often the wait is shorter. Sell your members on appropriate lower levels of care that are more easily accessible, less expensive and more convenient.
How do hospitals play into the equation?
Hospitals code ER visits from one to five, with five being the most severe, but some hospitals never code lower than three. As a result, if employers identify overcharging for ER visits, address the issue with the hospital.
The employer, with the insurance company, can co-write a letter with the high coding data, while asking the hospital to reconsider the way it’s coding ER visits and to consider establishing an urgent care center for lower level visits to the facility. One letter isn’t going to result in a new facility, but it does create awareness, and often coding starts to be more appropriate. The employer, the hospital, the member and the insurance company have to work together, as they all have a stake in the game. Everyone shares equal responsibility in managing this.
Mark Haegele is a director, sales and account management, at HealthLink. Reach him at (314) 925-6310 or Mark.Haegele@healthlink.com.
Insights Health Care is brought to you by HealthLink
It would have been easy to hold off on salary raises just a little longer and wait for a clearer sign that the economy had turned a corner.
But Joe McKee and Keith Wolkoff were unwilling to wait. They believed that their employees had worked hard to help Paric Corp. through the recession, and they deserved to be recognized for it.
“The questions do get asked,” says Wolkoff, president at the 234-employee design-build firm. “Is it prudent? Or should we continue to invest in the business? We asked a lot of our people during the very difficult times. It’s just as important to reward those people when you’re starting to see a little more fluidity in the marketplace. It’s the right thing to do.”
The decision was based on the leadership team’s commitment over the past two years to a long-term view and a belief that you can’t let fear guide your decisions, says McKee, Paric’s CEO.
“When you have a crisis, you can circle the wagons or you can choose to move forward,” McKee says. “Most of the times I know when people have circled the wagons; it hasn’t really worked out well for them. Our attitude was to keep moving and be nimble and quick.”
Both leaders wanted to focus on the core things that Paric did well, believing that those skills would be desired by customers even in a tough economy. As they developed a strategy to maximize those qualities and began to see the potential become reality, it became an easy decision to reward the team.
“It was a very painful period in the industry,” Wolkoff says. “But as odd as it is to say, we’re a lot stronger for having gone through it.”
The numbers reflect that assessment. Paric’s revenue grew from $200 million in 2010 to $240 million in 2012. Here’s a look at how the company bounced back so strongly from the recession.
Recalibrate your position
The path to Paric’s better future began with a blunt assessment of what the recession had done to the economy.
“What many people try to do in that environment is to get up and ignore the reality of what’s happening around them, and they don’t speak frankly,” McKee says. “It’s a little bit like what happens when a dog senses your fear. You lose all credibility and bad things happen. So it starts by being brutally honest and by making tough decisions.”
McKee and Wolkoff didn’t hold back in talking about the difficulties the company was facing. They also talked about those opportunities that they believed they could take advantage of. The key is they talked and kept talking to their teams whether the news was good or bad.
“In the absence of us communicating what actions we were taking and how we were addressing the economy, people were going to come to their own conclusions,” Wolkoff says. “We just refused to allow that. We were meeting if not every six weeks, then every eight weeks to give everybody a debrief on, ‘Here’s where we’re headed, here’s what we see and here’s what we’re doing about it.’
“Maybe all the information wasn’t pleasant. But at least everybody knew what was going on. There wasn’t all that chatter that can just be counterproductive.”
The crux of the new plan was to focus on the strengths and stop doing the things that weren’t making the company any money.
“When you have limited resources, there are some things you’ve always done because that’s the way you did it,” McKee says. “You need to figure out what those things are and quit doing them. What do we need to work on to move the organization forward?”
Preconstruction services were going to be a big part of Paric’s offerings to customers. Another was going to be the core markets that the company worked in, such as historic renovation, urban development, senior living and interior construction.
“We don’t service everybody,” Wolkoff says. “We go where we can bring value to our customers. Even in bad times, that’s going to prevail.
“It took a little bit of reinforcing from leadership to say, ‘Let’s hunker down, let’s pick our spots, let’s be smart, and let’s continue to invest, and we’ll be fine when we come out the other end.’ Are you going to cover 10 opportunities with your limited resources or are you going to cover three opportunities and increase your hit rate?”
McKee says you go with the three.
“You get two out of those three versus focusing on 10 and you only get two,” McKee says.
Know who you are
In working through the plan and defining what set Paric apart from the competition, Wolkoff says the company’s leadership unearthed a problem that they felt needed to be addressed.
“We started to ask ourselves, how do we define our business as it looked at that point in time,” Wolkoff says. “While we all had great things to say about ourselves, none of us were telling the story exactly the same way. And it really caused us to question, ‘Well, if we’re having that much trouble defining who we are, what are our customers saying?’”
It was with that thought in mind that Paric’s leadership team set out to interview customers, vendors and employees. The goal was to hit on a theme that would accurately and clearly define what the company is all about.
“In everything we do, every opportunity we have to touch each other, at a meeting, even if it’s an outside social event, there needs to be a consistent theme in how we talk to each other,” Wolkoff says. “Every company meeting we have, it has to be the central talking point over and over again.”
After talking to people at all these levels, the theme they arrived at was “Experience Excellence.”
“It doesn’t mean we’re perfect, but we strive for perfection, and that’s the piece we hit on,” Wolkoff says. “At every station we touch, whether it’s a client, vendor or internal employee, we have to strive for that perfection and that excellence.”
When money is tight with customers, the key to making a sale can be the perceived extra value that the customers believe they are getting with your business.
“You could say on the one hand that a building project is a very daunting task,” Wolkoff says. “But it shouldn’t be. If you have the right partner, it should be something that is exciting. It’s changing your organization. So we have to make sure that everybody who touches it from our end makes it the most satisfying experience it can be.”
The goal was to take these words that could easily become a cliché or something that is forgotten soon after it is brought up and embed it into the company’s culture.
McKee compares it to a quote he remembers from retired Denver Broncos quarterback and NFL Hall of Famer John Elway.
“He said on a Super Bowl winning team, they hold each other accountable,” McKee says. “If the guy next to you wasn’t doing his job, the guy to the right of him would say, ‘You better get with it and do your job.’ The coaches weren’t telling him. The players were doing that. We work really hard to try to create that kind of culture with people to where it’s a real team environment.”
When you’re just trying to get a motto or slogan like that to sink in, you can just ask the question.
“With a younger person, you might say, ‘What have you done today to create experience excellence?’” McKee says. “They’ll look at you the first couple of times like you have two heads. But after a while, they’ll begin to understand what you’re getting at. It’s about that discipline to do it right every day.”
One of the things that Paric began during its battle through the recession and has continued to this day is a weekly senior leadership team meeting. It consists of five people: Wolkoff, McKee, the company’s CFO and the senior vice presidents of sales and operations.
“That’s the one meeting that doesn’t get moved off people’s calendars,” Wolkoff says. “It’s the most important meeting we have in a given week.”
The challenging of opinions and belief is not only accepted, it’s encouraged, says Wolkoff.
“There are five people sitting in that room and if one of the five is not voicing an opinion and challenging something, you need to consider, ‘Do they need to be in the room?’” he says. “We’ve been fortunate that there are five very strong leaders in the room.”
The idea isn’t to create tension but to make sure every angle is being explored so the company can make an informed decision. Once the meeting is over, the conflict, if there is any left, must stay in the room.
“Once we leave the room, we’re unified,” Wolkoff says.
McKee says the elimination of secrets and unspoken concerns is one of the keys to success in any business.
“If you’re going to lose, lose doing the things you think you need to do rather than getting to the end and thinking, ‘I wish I would have done that,’” McKee says. ?
How to reach: Paric Corp., (800) 500-4320 or www.paric.com
The McKee and Wolkoff Files
Joe McKee, CEO, Paric Corp.
Born: St. Louis
Education: Bachelor of science degree, civil and environmental engineering from Vanderbilt University; MBA, Washington University, St. Louis.
Did you think about becoming a CEO some day?
I always knew I wanted to build, so that much I knew. But I’ve succeeded well beyond my wildest dreams. I was the kid who designed the clubhouse and treehouse and built go-carts. That’s what I love doing, besides hunting.
Who has been your biggest influence?
It starts with good parents. My parents were absolutely amazing. After that, Rick Jordan helped me a great deal and the current chair of our board, Larry Young. They are both on our board and have been good mentors to me through the years.
Keith Wolkoff, president, Paric Corp.
Born: St. Charles, Mo.
Education: Bachelor’s degree in architecture, Washington University, St. Louis.
Did you think about becoming a company president some day?
No way; it was the furthest thing from my thoughts. I thought more in the now and whatever I was doing, I wanted to do it to the best of my ability. When I saw an opportunity, I had the mindset that I’d rather try and fail than not try at all. By some good luck and some hard work, I find myself where I am today.
Who has been your biggest influence?
Very early on I had an English teacher. Maybe my spelling wasn’t always the best, maybe my attention wasn’t always the best, but I was always a good writer, and I enjoyed it. That particular teacher focused on what I was good at and that empowered me to excel in other areas.
Don’t sugarcoat your problems.
Know what you stand for.
Keep looking to do it better.
A colleague of mine used to live in Russia and was stuck in more than a few traffic jams on those rare occasions when he wasn’t on the subway or a bus. Moscow, a city of more than 10 million people, had a highway system built for fewer cars.
The Russian word for traffic jam is probka — which also refers to a “cork,” which one might encounter in a bottle. When you think about it, that’s an apt description for a traffic jam.
In a similar way, our thinking and the organizations we lead can get “bottled up” too if we don’t have an effective system for reining in our attention and focus.
Thinking can be a bottleneck
One type of bottleneck that can occur is with our thinking. We have all experienced what one psychologist calls a “response selection bottleneck.” This happens when our brains try to react to multiple stimuli at the same time. For example, the “multitasking” CEO allows bottlenecks to occur when he or she believes that it’s possible to effectively tackle two conscious tasks at once.
We know, of course, that most of us can walk and chew gum at the same time. But, as John Medina states in “Brain Rules,” we are “biologically incapable of processing attention-rich inputs simultaneously.” Medina suggests that we really can’t listen effectively to the conference call and respond to email at the same time.
What is actually happening when we think we’re multitasking is that we’re doing what some call “switch tasking” — we’re switching our attention from one task to another. Some of us may do it more quickly than others, but our brain isn’t really processing two tasks at once.
The most common contemporary example of this fight for attention in our everyday lives is — you guessed it — talking on a cell phone while driving. Medina points out that those talking on the phone are a “half-second slower to hit the brakes in emergencies” because our brains have to switch tasks, and this eats up critical time. He adds that “50 percent of the visual cues spotted by attentive drivers are missed by cell-phone talkers.”
Not only are there limits for individuals, but the organizations we lead have similar limits. Are there organizational decisions stuck at a bottleneck because you have too many competing priorities?
Our organizations are often very complex, which makes it hard for employees to focus on what will lead to individual, team and organizational success. We’re all working longer hours, often feeling like we’re moving from treading water to drowning.
How do we distinguish the imperative from the important?
Here are five tips to get started:
? Identify what you’re best at.
? Figure out what your key stakeholders value and need most.
? Identify where your answers to 1 and 2 intersect.
? Define how you deliver value differently than your competition.
? Develop a clear and authentic way to communicate your value.
As one psychology professor puts it, “We’re really built to focus.” What are you giving your organization to focus on?
P.S. As a bonus tip, when meeting with your senior team to discuss the tips above, are there at least portions of your meetings when everyone’s smartphone can go into a black box until you’re finished? ?
Andy Kanefield is the founder of Dialect Inc. and co-author of “Uncommon Sense: One CEO’s Tale of Getting in Sync.” To explore how to promote organizational sync through greater focus, you may reach Kanefield at (314) 863-4400 or email@example.com.
Decent bosses typically try to lead by example. As a leader, you must model appropriate behavior to promote the greater good and to send a constant message with teeth in it.
The French term “esprit de corps” is used to express a sense of unity, common interest and purpose, as developed among associates in a task, cause or enterprise. Sports teams and the military adopt the sometimes-overused cliché, “One for all and all for one.” “Semper Fi” is the Marine Corps’ motto for “always faithful.” We commonly hear, “We’re only as strong as our weakest link.”
However, the real test of team-building and motivational sayings is that they are good only when they move from an HR/PR catchphrase to a way of doing business — every day.
As soon as you put two or more people in the same room, a whole new set of factors comes into play, including jealousy, illogical pettiness and one-upmanship, all of which can lead to conflicts that obstruct the goals at hand. Certainly, much of this is caused by runaway egos. Perhaps a little bit of it is biological, but most of it is fueled by poor leadership. Everyone has his or her own objective and it’s the boss’s responsibility to know how to funnel diverse personal goals in order to keep everyone on track. This prevents employees from straying from the target and helps avoid major derailments. Essentially, it all gets down to the boss leading by example with a firm hand, understanding people’s motives and a lot of practicing “Do as I say and as I really do myself.”
Communicating by one’s actions can be very powerful. A good method to set the right tone is stepping in and lending a hand, sometimes in unexpected and dramatic ways. This shows the team that you govern yourself as you expect each of them to govern their own behavior. In my enterprises, I constantly tell my colleagues that the title following each person’s name boils down to these three critical words: “Whatever it takes.” Certainly, I bestow prefixes to this one-size-fits-all, three-word title, such as vice president or manager, but I consider these as window dressing only.
After speeches, when I explain this universal job description, I always get questions from the audience about how I communicate this concept. I follow with a real-life experience that played out in the first few months after I started OfficeMax. As a new company, we had precious, little money, never enough time and only so much energy, which we preserved as our most valuable assets in order to be able to continually fight another day.
In those early days, too frequently, I would see what looked like a plumber come into the office, go into the restroom and emerge a few minutes later presenting what I surmised to be a bill to our controller. I knew whatever he was doing was costing us money and probably not building value. The third time he showed up, in as many weeks, I immediately followed him into the restroom (much to his shock and consternation). I asked him what in the world kept bringing him back. He then proceeded to remove the john’s lid and give me a tutorial on how to bend the float ball for it to function properly. That was the last time anyone ever saw this earnest workman on our premises. Instead, after making known my newly acquired skill, whenever the toilet stopped working, I became the go-to guy.
This became an object lesson to my team about how to save money. At that time, 50 bucks a pop was a fortune to us. It got down to people knowing that all of us in this nascent start-up were expected to live up to their real, three-word title. This was our version of how to build esprit de corps. Others began boastfully relaying their own unique “whatever it takes” actions, and it became our way of doing business.
The lesson I learned in those early days was that it wasn’t always what I said that was important but rather what I did that made an indelible impression. A leader’s actions, with emphasis on the occasionally unorthodox to make them memorable, are the ingredients that contribute to molding a company’s culture.
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. Reach him with comments at firstname.lastname@example.org.
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Steve Jobs was the master of spotting trends and the opportunities that go with them. He was so good at it that he could see trends when they were still in their infancy. This allowed him to create products that kept his company at the front of the waves of change and ultimately drove massive profits and stock growth for Apple.
While not many people possess the uncanny sixth sense that Jobs had, it’s important to spend time studying your industry and what’s happening at various levels, from customers to suppliers to competitors.
You need to recognize when the trend is pushing positive growth and when it’s not. The additional challenge is to know the difference between a trend and a fad. A trend is more long-lived and drives a lot of long-term opportunity, while a fad tends to burn out quickly. This isn’t to say that trends last forever, because they don’t. An important part of studying trends is to know when to jump off the wagon and find the next opportunity, because if you ride a trend too far, you may find yourself in a rapidly declining industry or an area of waning interest.
For example, Y2K was a fad. For those who don’t remember, the Y2K boom was caused by old computers that only saw years as two digits instead of four, and widespread computer issues were predicted if systems weren’t upgraded. A giant boom in computer consulting and sales resulted from this issue, but it was short-lived. The moment 2000 rolled around, the need for Y2K upgrades dried up.
The dot-com boom, which was partly fueled by Y2K, was a trend. For a number of years, a ridiculous amount of money was being thrown at any project that contained the word “Internet,” regardless of its business model or competitive factors. While it was active, there were plenty of online growth opportunities for businesses to take advantage of.
Those who recognized the trend were able to capitalize on it, and more importantly, those who recognized the end of the trend were able to cash out before it went bust. Not every trend will be as big as the dot-com boom, and depending on your industry, they may not be so obvious.
Finding and recognizing trends starts with studying your industry. You need to stay in tune with what’s happening with competitors and constantly read about not only your industry but related ones as well. Talk to suppliers and vendors to get their opinions as to what direction your markets may be headed. But the most important thing may be to have an open mind. Don’t assume that because something hasn’t changed for 20 years that it isn’t ever going to change.
With an open mind, you are more likely to recognize an emerging trend before everyone else has rushed to capitalize on it, putting you ahead of the curve. Once you are exploiting a trend, you have to be equally diligent to know when it’s going to end, and that’s done in a similar fashion to identifying it in the first place: Stay plugged in to your industry.
These are exciting times and change is all around us. Look for the hidden clues that can lead you to the next big opportunity, and never stop challenging your own beliefs. The CEOs who do the best over time are the ones who don’t accept the status quo.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
Steve Phillips succeeds by leading Phillips Furniture with core values integrity, honesty and service to othersWritten by
Steve Phillips doesn’t understand why customers in today’s world wouldn’t want help from a salesperson. But he’s not so stubborn that he refuses to believe it is true.
“My son keeps talking about stranger danger, that customers don’t want to be approached by salespeople anymore,” says Phillips, president and CEO at Phillips Furniture Co. and six Ashley Furniture HomeStores in the greater St. Louis area.
“As a leader in my position, this is where I’m going to have to rely on these young people to make decisions that will put us in a great position for younger customers.”
Phillips Furniture is a family-run business that launched in 1937. Phillips doesn’t see things the way his father did. His son, Michael, the company’s vice president of advertising and merchandising, doesn’t always agree with his father’s point of view.
But it’s their ability to respect each other’s differences and then reach a consensus on how to operate the business in today’s world that allows the company to succeed.
“I’m hearing what they want, and I’m OK with what they want,” Phillips says of the younger generations that are becoming a larger part of both his customer and employee bases. “It’s just foreign to me. But as a leader, I have to be willing to let them try things that I’m not familiar with.”
Phillips says it’s not always easy to move away from behaviors that you’ve grown up with and used to achieve success. And he doesn’t always believe it’s necessary to shift away from something that has become a proven success. But if it is necessary to change, doing so beats the alternative every time.
“It is tough,” Phillips says. “But it’s tougher if you fail. If I keep dictating policy and how we’re going to do things based on how we did it in the past, I know we will die and that’s not good. So I just really trust these young people, and I trust the organization. If we truly have the customers’ best interest at heart, we’re going to do what they want, not what we want.”
It’s that idea of constantly seeking a better way to please customers that drives Phillips and his 330 employees.
Set a foundation
Perhaps one of the reasons Phillips is more agreeable to accepting new ideas is that he has been reluctant to follow the crowd when it comes to furniture salesmanship.
“The furniture business has not had the greatest reputation for integrity,” Phillips says. “A lot of people give false high prices and fake savings, and I didn’t want to do business that way. We have one price on a piece of furniture.”
The problem for Phillips is that many employees who have worked in the industry for a number of years were trained to take the misleading approach.
“There was a very specific way we wanted to do things that was not normal in the furniture business,” Phillips says. “That’s why we don’t necessarily want people who have been in the furniture business because we don’t know what their training background is.”
The solution for Phillips was to create a training program that new employees must go through before they are allowed to speak to a customer.
“So everything that we do structurally and integritywise is ingrained before they talk to their first customer,” Phillips says. “As a matter of fact, we probably don’t spend enough time talking about product. It’s more about how we do things. We have leadership round tables every month also. We have our leaders come in and we just go through what’s important to our customers.”
The goal is to have a sales team that doesn’t just talk a good game when it comes to pleasing the customer, but they can actually show how they’re going to do it.
“They have to role-play to show us, not just tell us, but show us they know how to service customers the way we want them to,” Phillips says.
That’s the end result. The steps for getting to that point where employees have the ability to display those skills must be dutifully followed if training is going to work.
“You can’t train or correct anything until you can measure it,” Phillips says. “We know how many pieces per hour some of our furniture assemblers can do and what the standard is. We know how many pieces per hour one man can unload on a truck. You can’t manage and train until you know what the issue is, which is only done through measurement.”
Once you have that data to work off of, you’ve got to put what you want to do in writing and then make sure you do it.
“If it’s not in writing, it’s not real,” Phillips says. “So everything is in writing, and you just go over it step by step. They can’t be promoted until somebody observes and there is a physical check-off that this is what they can do.”
If you don’t believe you have time to conduct training with an already cramped schedule, you’ve got to find a way to make it work.
“Training has to be a priority,” Phillips says. “If you get caught in the treadmill of doing business all the time, you’ll never get off the treadmill and start training. If you train and make it part of your culture and your business religion, you don’t think about it as being a disruption of your normal process. It is your normal process.”
Take a visible role
Many leaders will talk about how important a training program is, but then they personally move on to other things and leave the team to figure out the best way to make it work.
Phillips says you have to do more than that as CEO.
“Every training class we have for salespeople, I’m the first presenter,” Phillips says. “I take the first hour or so and tell them about the company and what we stand for.”
The company’s COO tackles the next segment and then training responsibility shifts to Phillips’ brother, Matt, who heads up training at Phillips Furniture.
“What we want these people to see is that everybody at the top also believes in everything we do,” Phillips says. “The fact that we spend so much time with them, we certainly hope that’s what they believe.”
As a way to encourage leaders to want to take part in the training process, Phillips suggests rewards for leaders whose direct reports receive promotions.
“A lot of leaders withhold knowledge or training for fear of somebody rising above them,” Phillips says. “Our managers are rewarded for having someone promoted from beneath them. We love store managers who want their assistant managers or their team leaders to be promoted. They don’t feel threatened by it.”
Focus on core values
The other piece of the puzzle for Phillips is core values. While he is open to changing training methods and operational policy, he leaves no wiggle room on his commitment to the company’s core values.
“No matter what processes or changes you make in your business, you can still hold tightly to your core values,” Phillips says. “That’s the one thing I will never negotiate — how does it look with our core values. You have to keep that out there in front.”
Arriving at the three core values that define Phillips Furniture was no easy chore. Phillips and a team of more than a dozen leaders left the company’s headquarters and headed to a remote cabin in the Ozarks. Once they arrived, it took three days to finish their work.
“There were a lot of great ideas,” Phillips says. “I just didn’t want a lot of them. We could have had 10 great core values, but I wanted to be able to sink our teeth into three or four. Once you get past three or four, they start becoming a little redundant. These were three that nobody could ever argue with.”
The three core values they decided on were “integrity above all else, honesty in all we do and service to others first.”
“If you can get your entire organization to buy in to those three things, you have a much easier time finding great leaders because leaders want to buy into something greater than a dollar,” Phillips says.
Some companies consider “making a profit” a core value and Phillips says he understands, even if he doesn’t agree with it.
“We think that’s the result of doing the first three,” Phillips says. “So we wanted the core values to produce the results that we were looking for.”
Phillips says his company wants to make a buck as much as anyone. But by focusing on other things, such as the customer experience, employee readiness and job satisfaction and giving back to the community through charitable efforts, everybody comes out ahead.
“It’s imperative that a company stand for more than a dollar,” Phillips says. ?
How to reach: Phillips Furniture, (314) 966-0047 or www.phillipsfurniture.com or Ashley Furniture HomeStore, (314) 845-3084
The Phillips File
President and CEO
Phillips Furniture Co. and Ashley Furniture HomeStores/St. Louis
Born: Dayton, Ohio
Education: I went to the University of Missouri for three years. I got married when I was 20, and I got tired of being broke, so I quit school and took a job.
What was your very first job?
Raising vegetables and selling them door-to-door. I’m an avid gardener, and I still am to this day. My first full-time job was in the furniture store while I was going to school at Mizzou.
What got you into gardening?
My dad had an extra lot next to the store. I always wanted to be a farmer my whole life, and now I do own two farms. There is something really neat about getting your hands in the soil. He gave me this plot of ground, and I had a wagon. I would load it with vegetables I grew and picked and I would take them door to door to our neighbors. I didn’t have prices. I always said pay me what you think they are worth and I got taken advantage of quite a bit. So I learned not to do that the next year.
Who has been the most influential person in your life?
It would have to be my mother and my father. From a business point of view, it would have to be my father. He was the most patient and kindest man you ever met. I never saw him raise his voice ever. I don’t know that I got those traits from him, but I’ve always admired those traits. My mother had six kids and she’s a phenomenal woman.
Don’t be afraid to change.
Make the time to do training.
Don’t choose too many core values.
Corporate entrepreneurship is picking up a few nicknames as it becomes a trending topic in discussions. “Intrapreneurship,” a term used by Steve Jobs in a Newsweek article in 1985, will still drive your autocorrects and spell checks crazy.
But a quick online search of the term will find an increasing number of articles racing to define the buzzword for the current era. Why the refreshing discussion on the topic of entrepreneurship inside the walls of a corporation? When well-run, these efforts can be a virtual lottery of profit for the company who manages it correctly. Let’s take a stab at addressing the concept and what it means today.
Jobs was, of course, referring to the Macintosh team, the virtual garage band of loyal workers who were long on hours and ingenuity and provided the basis of a new line of computer products that began to lead the company in new directions.
The Mac team exemplified a culture of innovation and made a good case for a strong investment in talent, coupled with a healthy budget for research and development. In the view of many, this remains the current model for companies today.
But daydreaming about inventing the next Mac, iPod or iPhone might be mitigated by reminders of failures, such as New Coke, Clear Beer, Crystal Pepsi or Netflix spinning off their DVD business to Qwikster, the most recent major blunder by a corporation.
Here are a few steps to take on your path to becoming more tolerant of risk while never forgetting to keep a close eye on the costs.
Empower a team.
Keeping the lines of communications open will inform you of breakthroughs before they happen. Define the goal and how success should be measured. Then establish a funding level and clarify your time horizon to reaffirm the commitment. It will help you monitor progress or regress directly and you’ll be able to spot pitfalls while there’s still time to react.
Consider meeting with different people so that you can gain multiple perspectives. Walk the group’s area and they’ll know they have the interest of top management.
Recognize and cultivate top performers.
Support them with complementary people who think like they do but consider fostering an environment of teamwork, not necessarily one of competition with each other.
Resources for the project need to be ample but not extravagant. The team will understand the venture itself should be considered like a start-up, and while they’ll enjoy the same benefits as your other employees, they may relish the opportunity to “rough it” and be considered noncorporate types.
Reward extraordinary performance.
An opportunity for the team to be compensated based on viable success must be a part of the equation.
Entrepreneurs will be highly motivated to share in the long-term value and upside they create. This also will aid in retaining the capability and high-quality talent in your organization. It will come back to your bottom line in spades, so don’t forget to share. Reward efficiency and frugality as well.
Set the pace.
Set, monitor and share data on progress against agreed upon milestones. Hitting goals will energize the team and provide the necessary information to tweak their overall plan and make adjustments. The allocation of resources can also be measured at this time, and if you’re knocking on the door of a breakthrough, you’ll know it. ?
Tony Arnold is founder and principal of Upfront Management, a St. Louis-based management and executive consulting firm. He can be reached at (314) 825-9525 or firstname.lastname@example.org.
The financial impact of the Patient Protection and Affordable Care Act (PPACA) may seem to be its most challenging aspect. Mitigating that impact may seem like the most practical solution. However, Ron Present, health care industry group leader at Brown Smith Wallace, says, “There are a lot of strategic implications to what you do and how you do it. Management should avoid just calculating the math and saying, ‘This saves us money so it’s what we’re doing.’”
To that point, Bill Goddard, principal, insurance consulting at Brown Smith Wallace, says, “You should consider many potential solutions before making a decision that could drastically diminish your ability to retain and acquire talent, and keep your workforce engaged.”
Smart Business spoke with Present and Goddard about dealing with health care insurance after the PPACA from a cost and strategic perspective.
How has the PPACA affected private insurance?
Starting Jan. 1, 2014, employers with 50 or more full time or full-time equivalent employees, considered large employers, must offer health insurance that fits certain affordability and coverage criteria or face a penalty. This could have an immediate impact on an employer’s cost to provide health insurance because a group of employees that had not had insurance may enroll in the plan and because of pre-existing conditions or high use of care, will cost the employer a significant amount of money.
Also, the health care law changes the status of some who had been considered part timers for insurance purposes to full-time employees. In some industries, many employees have not historically taken health insurance, sometimes as much as 66 percent of a company’s workforce. These employees will need to be offered coverage, potentially tripling costs.
How might that impact employers?
Companies are calculating their potential risk to cost. However, that’s only one aspect. The other is the strategic impact.
Some companies have considered limiting their variable hour, or part time, employees, to less than 30 hours per week to reduce the number of employees considered full time. To maintain an adequate workforce, such changes can require hiring additional employees, or changing existing employees’ workloads and job descriptions to keep up production and prepare for 2014.
Should employers not provide coverage?
Let’s say a large employer decides not to offer health insurance and instead pay the $2,000 per employee (minus 30) penalty, which may seem cheaper. However, the law requires individuals to have insurance regardless of employer coverage, so employees may leave for a competitor that provides it. Those who stay out of necessity may always be looking for another employer that provides coverage, lessening their productivity and loyalty while raising turnover, which is a significant expense.
Counsel employees. Let them know that they can refuse insurance coverage from the employer and either purchase insurance through a public exchange/marketplace or instead pay an annual penalty. Employees may prefer to pay the penalty instead of paying far more each month for coverage.
How can employers that provide insurance cope with rising premiums?
Large employers offering health insurance to a population of purely full-time employees can potentially control premium costs by forming a captive insurance company. This is an insurance company that non-insurance companies with 50 or more full-time employees can start. It is generally owned by the company that forms it and insures a limited population, typically just its own employees.
Another potential solution is to form a private exchange, which may be complementary to forming a captive insurance company, in that the entity forming it creates its own marketplace, which means it may qualify as providing insurance with a defined contribution that may help control costs.
Bill Goddard is a principal, insurance consulting, at Brown Smith Wallace. Reach him at (314) 983-1253 or email@example.com.
Ron Present is a health care industry group leader at Brown Smith Wallace. Reach him at (314) 406-5105 or firstname.lastname@example.org.
WEBSITE: For more on this topic, visit http://bswllc.com/industries/health-care.
Insights Accounting is brought to you by Brown Smith Wallace LLC
To avoid elements of the Patient Protection and Affordable Care Act (PPACA) adversely affecting fully insured health plans, growing numbers of employers — especially smaller ones — are self-funding their plans.
“The problem is that everybody has been in a wait-and-see mode for two years, but now we’re starting to see the impact,” says Mark Haegele, director, sales and account management, at HealthLink. “I expect a lot of fully insured employers to make a change this year, mid-year. There are just so many compelling reasons to entertain it because self-funding policies still protect small employers and allow them to avoid many forthcoming taxes and rules.”
Smart Business spoke with Haegele about why the PPACA has prompted more employers to explore self-funding or partial self-funding.
How does medical loss ratio (MLR) reporting drive employers to self-funding?
MLR reporting requires insurance companies to spend 80 or 85 percent — depending on their size — of premiums received on health care claims. Plan administration, such as overhead, payroll, sales efforts, network contracting, etc., comes from the remaining 15 to 20 percent.
MLR gives insurance companies an incentive to squeeze administrative services to make more profit. Some insurance companies have changed staffing and service models. One company had service people out to help with claim issues and problems for different segments — health insurance groups with two to 40 members, and 40 to 100 members. They recently bundled the segments into one, cutting staff and decreasing field service.
What will community rating rules do to health care costs?
Effective Jan. 1, 2014, insurers must comply with community rating factors based on geography, age, family composition and tobacco use. This means all fully insured small employers in an area or industry will pay the same for premiums. The idea is to get everybody to an affordable and stable price point, but many fully insured groups will be hit with big increases.
Here’s an example: in Missouri and Illinois, groups of fewer than 50 employees will be underwritten based on community rating rather than the specific group’s risk. A small, healthy employee group in Chicago can expect a 173 percent increase in 2014, according to the American Action Forum Survey of Insurance Companies. At the same time, a small Chicago group with older, less healthy members could have its premium decrease by 21 percent.
Under self-funding, healthy small groups are able to maintain rate stability based on the health of their own population.
How will the insurance tax affect health premiums for fully insured employers?
Starting in 2014, insurance carriers will be assessed a tax, projected to be $8 billion to $12 billion. The federal government will use this money to subsidize poor uninsured. However, insurance is a cost-plus business, so carriers will pass this on to employers. It’s still unclear how much the fully insured’s premium will increase as the tax is shared across the industry; it depends on your insurance company’s market share.
How will minimum essential benefits make self-funding more attractive?
Fully-insured plans sold in the small group market — fewer than 50 employees for Missouri and Illinois — will be required to limit annual deductibles to $2,000 for single coverage and $4,000 for family coverage, as of Jan. 1, 2014. This places upward pressure on premiums. If your current deductible is greater than $2,000, in order to decrease it premiums will go up because the insurance company faces more risk.
Also, for the past five years, many small employers’ deductibles have increased, which keeps premiums down, but employers haven’t passed it on. For example, because most members don’t use their deductibles, the employer could give employees a $1,000 deductible and use self-funding to cover the gap for the remaining $4,000 when the insurance company requires a $5,000 deductible to keep premium increases low.
Small employers could consider a self-funded platform in order to maintain their current deductible and keep rates stabilized.
Mark Haegele is a director, sales and account management, at HealthLink. Reach him at (314) 753-2100 or email@example.com.
VIDEO: Watch our videos, “Saving Money Through Self-Funding Parts 1 & 2.”
Insights Health Care is brought to you by HealthLink