There are many pressures on organizations to make the most out of every customer interaction and maximize the return on investment on marketing and sales spend. However, businesses often don’t have the work force necessary to handle these functions as timely and effectively as they would like or the tools and processes in place to measure and track success. Companies that are able to track interaction, engagement, investments and customer patterns and behaviors often enlist the help of a customer relationship management (CRM) tool.
“A CRM tool helps businesses manage sales, marketing and customer service operations without significantly expanding their work force,” says Gina Rosen, a consultant at Columbus. “CRM, in the past, may have been nice to have — a luxury technology, but in today’s marketplace, it’s a must have to stay competitive.”
Smart Business spoke with Rosen about CRM, its applications and how it has helped businesses improve processes to better engage customers, target sales and gauge marketing effectiveness.
What are the typical features offered by a CRM system?
The features offered by CRM are very diverse. It’s primary applications are contact management; marketing automation; sales force automation; sales and lead management; reporting and analytics; call center and case management, particularly with respect to customer inquiries or complaints; workflow automation, or automating manual processes; and social media integrations. Businesses have the option for on-premise solutions where the software is hosted at the business on its servers, or they can utilize a Web-based or cloud option, which involves less initial financial investment. The software can also be customized to meet the particular needs of a business.
Is CRM cost prohibitive for businesses?
No it is not, however, had this question been asked six or seven years ago the answer would have been yes. Previously, enterprise-ready CRM software required significant funds to get the software and hardware in place. But with the advent of cloud-based solutions, even businesses run by a sole proprietor can afford CRM and leverage its applications to optimize processes. The cloud-based model allows business owners to pay through subscriptions that charge per user. The pay per user cloud-based model offers a low-cost opportunity to implement CRM, experience the value and see the return on investment (ROI).
What are the most compelling reasons an organization would implement CRM technology?
A recent survey of 200 top-performing small and medium-sized businesses showed that the number one reason businesses implement CRM software is to establish data-based metrics for sales and marketing. It also provides the ability to show ROI and quantitative key marketing metrics that mean a lot to businesses.
The second reason CRM is implemented is to proactively communicate with customers. Customers expect a lot these days, and one of those expectations is that businesses, whether small or large, interact with them. To stay in front of your customers and offer personal interaction is critical.
Within that same vein, the third reason companies take advantage of this software is for custom-targeted sales and marketing. With CRM you can customize that end user experience, which makes your sales force more effective. Customers can interact directly with your CRM custom solution through your existing website and experience a tailored visit based on previous interactions, or your sales force can utilize the standard feature when interacting with customers and have all of a customer’s history available in one spot.
What are the most important value drivers for CRM?
The top value for a business is the software’s ability to help manage marketing and sales campaigns. CRM can help businesses test marketing and distribution strategies and gauge customer reactions. This information can be applied to future marketing efforts.
Another important value driver is that the software serves as a customer data repository, allowing you to consolidate customer knowledge within the organization in CRM. This includes far more than just contact details, but also customer behaviors and attitudes and price sensitivity. This, combined with personal data, can allow businesses to build more effective and predictive sales models and marketing campaigns that result in higher sales.
Further, CRM systems can help demonstrate ROI. With CRM you can quantitatively show increases in sales, customer referrals and participation in promotions.
What is the most common challenge a business faces when implementing CRM?
Typically the challenge is user adoption — getting your sales force and front line users to embrace CRM. They often see populating the fields as double entry, an extra step, or another way for management to check in on them. But once the sales force sees that using the software results in more sales, they can easily overcome that hurdle.
What are the most common performance metrics?
The top one, hands down, is revenue growth. The faster you can show ROI the better.
Second is growth in a business’s customer base, which means adding new customers or converting leads into paying customers.
The third most common performance metric is aggregating customer data. Many companies have customer data spread out over disparate systems. CRM gives businesses a one-stop shop for their records.
Can you give us some examples of companies that have benefited from implementing CRM?
The Toledo Mud Hens baseball team, which works within the media and entertainment industry, had ticket sales go up 88 percent in one year and their internal operations couldn’t keep up with demand. Adopting CRM allowed them to automate and streamline inefficient processes, which translated into more ticket sales. A customer testimonial is available with more information.
Another example is the human resources consulting firm Findley Davies. Implementing CRM in their call center has given them the ability to manage daily responsibilities and track productivity. It has dramatically changed and improved day-to-day operations within their Benefits Administration department.
Gina Rosen is a consultant at Columbus. Contact her at (248) 850-2195 or email@example.com.
With more than 20 years in the market and 6,000 successful business implementations, Columbus is a preferred Microsoft Dynamics business partner for ambitious companies. Columbus’ key deliverables include flexible and future-safe ERP, CRM, BI and related business applications that deliver competitive advantage and immediate impact.
Polly LaBarre is the co-author (with Bill Taylor) of “Mavericks at Work: Why the Most Original Minds in Business Win.” The strategies, tactics and advice in “Mavericks at Work” grew out of in-depth access to a collection of forward-looking companies. These maverick companies are attracting millions of customers, creating thousands of jobs and generating billions of dollars of wealth.
Here is a portion of my interview with LaBarre about the book, which covers forming strategies, unleashing ideas, connecting with customers and enabling employees to achieve great results.
Q: Describe what you mean by “maverick.”
A: Mavericks are different, edgy and independent of spirit. Their personal style or message may not appeal to everyone. But that’s precisely the point. Mavericks are defined by the power and originality of their ideas. They stand out from the crowd because they stand for something truly unique. What’s more, they take stands against the status quo, in defiance of the industry elite and offer compelling alternatives to business as usual. Mavericks may be fighters, but they’re not rebels without a cause. Their sense of purpose is not only powerfully distinct (Think: Southwest Airline’s quest to democratize the skies); it’s provocative and disruptive (Think: HBO’s declaration of originality, “It’s not TV. It’s HBO”).
Don’t confuse mavericks’ unswerving commitment to a cause and their lack of patience for the status quo with the egotism, monomania and power mongering modeled by too many celebrity CEOs and moguls. Mavericks, in fact, have a sense of humility.
Q: Are mavericks born or made?
A: It’s probably a little bit nature, a little bit nurture. We wrote this book to nurture the maverick in all businesspeople. What red-blooded working person wakes up in the morning, looks in the mirror and says, ‘I think I’ll stand for business as usual today’? We all want to make a mark, forge our own path and express ourselves in the world. It’s just that some of us need more of a nudge down that path than others.
Hopefully, the maverick individuals and ideas we present are inspiring and instructive enough to move people. The 32 companies we feature have vastly different histories, cultures and business models. We examined glamorous fields like fashion, advertising and Hollywood, as well as old-line industries like construction, mining and household products. The maverick leaders of these organizations are young, old, women, men, Americans, Europeans, charismatic and preacher-like, retiring and almost reticent. They just don’t fit any one mold.
Q: How does a maverick survive within a traditional company?
A: We encountered a bunch of mavericks inside big traditional companies. They all seemed to have a couple of survival strategies in common: They unleashed tough questions and critiques of their organization without losing their sense of loyalty to it. They’re the kind of questions every CEO should be asking. For example, Jane Harper asked of IBM, ‘Why would great people want to work here?’ And Larry Huston, now vice president of innovation at Procter & Gamble, argued, ‘The current business model for R&D is broken. How can P&G possibly build all of the scientific capabilities we need by ourselves?’
Mavericks don’t just ask questions, they act. We saw this again and again: They just got started, usually without a budget or formal permission, by designing an experiment around their question. Jane Harper launched an experimental Extreme Blue lab in Cambridge and spent a couple of years begging and borrowing resources until the program’s impact became clear.
Mavericks look for peers and fellow travelers outside the boundaries of their company. Not surprisingly, mavericks tend to click when they meet other mavericks. They’re great networkers and learners and are always looking for kindred spirits for support and ideas.
Q: Who is the quintessential maverick in American business?
A: Herb Kelleher and the team at Southwest Airlines. In the midst of the financial carnage and heartaches of the airline business, there’s one company that keeps growing, keeps creating jobs and keeps generating wealth. And that, of course, is Southwest. Southwest didn’t achieve these results because its fares were a little lower than Delta’s or its service was a little friendlier than United’s. It achieved those results because it reimagined what it meant to be an airline. If you ask Herb Kelleher what business he’s in, he won’t say the airline business or the transportation business. He’ll say that Southwest is in the freedom business. The purpose of Southwest is to democratize the skies, to make it as easy and affordable for rank-and-file Americans to travel as it is for the well-to-do. That’s a pretty commonplace idea today but largely because Southwest fought the entrenched conventions of the industry so doggedly in pursuit of that purpose. Its unrivaled success is based on its unique sense of mission rather than any breakthrough technology or unprecedented business insight.
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of ten books including Enchantment, Reality Check, and The Art of the Start. He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at firstname.lastname@example.org.
It seems that every other week there’s a major story in the media about a company claiming that one of its competitors has purloined a cherished secret that provided an unfair competitive advantage. This is all part of running a business in today’s fishbowl environment, where sensitive information is too abundant and can be obtained by almost anyone and everyone who is so inclined.
In this era of heightened visibility, some of the best companies, especially high-tech firms, play everything incredibly close to the vest, particularly when it comes to providing information about current sales trends, new products and projects that they are exploring or developing. This is because such information is a coveted company asset. In today’s “victory at almost any cost” world, too many are looking for that edge to leverage whatever they can to stack the odds in their favor.
We also read too frequently about how easily these secrets have somehow wound up in the wrong hands. Sometimes a loose-lipped employee simply talks too much to too many people in the wrong places. Occasionally, someone simply leaves a briefcase or smartphone, jam-packed with confidential information, in a bar, at a restaurant or on a plane.
What’s not talked about much is the frequent practice of competitors simply asking what appear to be innocuous questions of lower-level personnel in a company in order to garner nuggets of “inside information” usually without risking the perils of violating any legal statutes. It’s also common practice for Wall Street security analysts to simply walk into a retail store, as an example, and begin asking questions about trends, what products are selling and which aren’t. It all gets down to the reality that it never hurts to ask a question because one never knows when a valuable tidbit will be revealed.
Like it or not, this is just the way it is, and there will always be people who ask and others who tell. What can you do to protect your coveted information? The answer is basic: mandate that providing revealing responses to specific questions is a violation of company policy and could result in draconian consequences for anyone who spills the beans, no matter if well-intended. Once your employees and suppliers know the ground rules and the consequences, you’re one step closer to closing the possibility of vital information inadvertently slipping through the sieve.
The best way to accomplish this is to establish, enforce and continually reiterate a “one voice, one company” policy. This translates into all hands within your organization knowing what can be told to outsiders and, more importantly, what can’t. This policy must be in writing and must state what types of questions are off limits. It must also explain how the questioner is to be handled when the interrogatory is posed. In my retail chain experience, we often had competitors, vendors and industry analysts visit stores and ask all types of questions. Candidly, I don’t blame them, but with a clearly understood policy, employees know how to respond by referring the questions to headquarters and a specific department or individual. Ninety-nine percent of the time the person asking the question never follows up with the corporate office because he or she knows the desired answers will not be forthcoming.
Most employees want to please their employer and most want others to think they are in the know. When you create an ironclad policy, it takes the pressure off of your people and adds another layer of security about things no outsider needs to know. For your suppliers, require that each sign a confidentiality agreement and specify that you have a simple “one strike and you’re out” policy. Also use your own secret shoppers to test your vulnerability by having them ask the forbidden, just to verify that the company veil is not being lifted by the unauthorized.
This protocol is certainly not foolproof, and periodically, there will be lapses — the most frightening of which are the ones you’ll never learn about. It all gets down to a numbers game. Confidential information, just like the cash, equipment and other assets on your balance sheet, can never be taken for granted and must be protected. Anyone can look in your fishbowl in this day and age, but it is your job to make sure that what they think they might find is not what they get.
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 email@example.com.
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Are we grateful for the things we have? Are we grateful that we live in a country where the government can’t seize our businesses, where there’s no threat of rebellion and where we can go home to the comforts of our modern homes?
Many people in the world don’t have any of those luxuries. Some can’t even look forward to a good meal or clean drinking water. Most of us here in the United States don’t have to worry about such problems because the people that came before us worked hard to create a nation that has an amazing standard of living. The generation before us rose from the troubles of the Great Depression, led the fight against Nazi aggression that killed millions and returned home to finish making America into a superpower, but do we ever pause to think about the contributions our mothers and fathers made to make things easier for us today? They lived in small houses, often sheltering multiple generations, and worked long hours to make a better life for their children and grandchildren and selflessly went off to war to protect our freedom.
Do we ever think about any of that? The answer for many is no. Gratitude is in danger of becoming a lost art as we focus on accumulating money and possessions, always looking to be better or richer than the next person.
How many times have you read about or talked to someone who had everything you could ever ask for — nice home, nice car and no money problems — lamenting the fact that he or she doesn’t have as much as or more than someone else? We sometimes catch ourselves comparing who has more instead of who has less.
As business leaders, we should have some sense of moral obligation to help those within our sphere of influence, whether it’s our peers, employees or the person who lives down the street. We should be doing our best to look out for those around us, but too often, our days are consumed with the details of business.
Our world may be built on information, but wisdom is lacking. Business has been boiled down to statistical analysis and quarterly earnings reports while people are just another line on the ledger. There is often little room for gratitude in corporate America, and that’s a shame.
When our focus is on accumulating things, we can never enjoy it, because we don’t know how. How can we enjoy something when we’ve already raced off to try to get more? Like a kid tearing through a pile of Christmas presents, we never really take the time to appreciate each gift.
In this season of giving thanks, we should take a moment to think about those who came before us and who helped us get to where we are. Let’s thank those around us for a job well done and consider reaching out to someone who could use a helping hand. But most importantly, let’s consider putting our lives in perspective by thinking about those who are less fortunate.
When we focus more on gratitude, we’ll make a difference that’s far more effective than any business plan. It will allow us to take the time to celebrate success and enjoy the fruits of our labor. Gratitude doesn’t require a giant donation or a huge event; sometimes the little things are more effective.
In the end, we’ll find that the only things truly worth accumulating are good will and happiness. It’s in our control to start helping everyone around us get their fair share, and that’s something all of us can be thankful for.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or firstname.lastname@example.org.
Like any pair of siblings, Neil and Gary Jaffe each view the world very differently. While Gary is focused on people and the quality of dialogue he has with his leadership team at Booksource, Neil tends to look at things from a more strategic perspective.
“I think about the challenges we have faced as a company in the industry,” says Neil, president of Booksource. “A big one was our transition away from the bookstore market, which historically has been our largest revenue stream, and focusing on the school market.”
The brothers are looking to keep Booksource, which is owned by GL group Inc., in a position to drive maximum revenue. The move to the educational market is part of that, as is the integration of digital media and e-books.
Managing such a transition is not easy, and that’s where Gary’s biggest challenge comes in. When he took over as CEO at GL group a couple of years ago, it was important to him to have the right people in place to help him with the transition process. Unfortunately, that wasn’t the case.
“They weren’t giving me any advice and guidance when it came to some of the decisions we had to make as a leadership group,” Gary says. “It was getting the proper feedback that I was looking for that those people weren’t giving me.”
As Gary viewed the situation, he was confident his leadership team knew what he wanted from them.
“We have a saying around here to give people explicit expectations,” Gary says. “Those people knew their role. They knew what we wanted. But for whatever reason, they just didn’t have the business acumen to give me the proper answers.”
Both Neil and Gary needed to find a way to solve their problems if Booksource was to perform to its full potential. The best course of action was to attack both problems and move ahead with a renewed sense of focus.
“If you have to do this and you have to do that and then you have to do this, why not just do it all at the same time?” Neil says. “People are going to be going through change. At the end of it, it’s all done.”
And so the brothers set out to make the changes they believed would put Booksource in a better position to grow.
Assess your team
Gary was very frustrated with his leadership team and the lack of feedback it provided. But despite that frustration, he still found himself questioning whether it was really a problem.
He got with his business coach and told her that one of his key people was doing his own job quite well. He just wasn’t offering much in the way of guidance to Gary.
“He’s just not giving me advice,” Gary says. “And she turned it around and said, ‘By all means, I feel like he is hurting you. You’re not able to get what you need from him, therefore he is hurting you.’ And I totally agreed with that. The person can be hurting you if they are not doing the extra that we are expecting them to do.”
Neil is quick to add that Gary is not lacking in the ability to do his job or make decisions on his own. Rather, it’s one of his strengths that he is eager to gather feedback and use that to make even better decisions.
“Gary always has a natural inclination to listen a lot,” Neil says. “Unfortunately, he wasn’t getting helpful answers. That’s where he recognized what needed to change. When he asked, he needed to get much better answers from people who were engaged or thoughtful or had different ways of thinking about things.”
Leadership is a very fluid process. If you’re not at least thinking about how you interact with your team, you’re not using that team to the best of your ability.
“You have to make changes with people who don’t listen enough or don’t lead from engagement among the staff,” Neil says. “You can either listen too much and not get the feedback and have a problem or you cannot listen enough and have great people giving you feedback, and you’re not moving things forward.”
In Gary’s case, it was the former and that needed to change. Once he made the decision that he had to replace some of his people, he had to determine what qualities and attributes the replacements would need to have.
“It’s the qualities that you are searching for that are most important,” Gary says. “Determine what those criteria are. That’s more important than having the person available that you’ve picked out.”
In other words, you can’t just pick a person who is different than the one you’re trying to replace. You’ve got to take time to know what qualities you are looking for and then go out and find that person.
“You’ve got to listen, you have to have this person meet other people and you have to get other people’s feedback and opinions to see if it’s really the right fit,” Neil says. “Get a lot of feedback from a lot of different people. Make sure you look at the criteria and go off the job description. Do all the things you would normally do when hiring.”
As he proceeded with his changes and found people who had the qualities he was looking for, Gary learned that he wasn’t the only one who had noticed a problem on the leadership team.
“One of the guys after he was terminated, one of the guys who worked on his team came up to me and said, ‘I knew it was only a matter of time. I’ve worked with you for 15 years, and I know you can only take so much,’” Gary says.
It’s OK to try to help a person to try to get them to provide you with what you need. But trust your gut when you think you’ve gone far enough and reached a point where it’s not going to happen.
“For me, it’s always a matter of, ‘Have I done everything to get this person to understand what I’m looking for when it comes to giving me feedback?’” Gary says. “If my gut is saying, ‘I’m not going to get them to understand,’ it’s time to make the change.”
Engage your team
As the personnel issue was being addressed, both Gary and Neil were assessing Booksource’s strategic direction. It was key that everyone be part of the changes that were occurring and be kept apprised of what was happening.
“If you’re strategically focusing on the right stuff, it’s going to make the staff better too because they will have less to worry about,” Neil says. “They are all focused and engaged and passionate about the right thing that is leading to good rewards. A busy facility is an energetic place and it creates a morale boost, a staff boost, an engagement and they feed off of each other.”
Booksource had always been open with its financial data and numbers, but Neil wanted people to feel like they had a real part in affecting those numbers.
“The first step is to get people engaged,” Neil says. “If you have the potential to get a bonus, you’re going to work a little harder to make sure that we as a team achieve that goal. ‘If we achieve that goal, I might get a little more money.’ It teaches the staff that a big order is a good thing.”
Neil says there is a lesson to be learned for management when incentives are introduced into an organization.
“It teaches the owner that that bonus and that engagement and showing them the number and giving them a goal and a target is a very positive thing for the organization,” Neil says. “People will work harder and faster and you need less people, and it all builds on itself.
“There are dozens of other ways to open the books to give people an opportunity to see what’s happening and to participate. Start small with opening it and providing some kind of incentive to people and then you’ll see the benefit.”
You’ve got to follow up beyond introducing incentives and sharing information. If you just do it once and let it fade away, your people will lose a lot of faith in you as their leader. But if you steadfastly follow up and stick to it month after month, year after year, you’ll earn strong loyalty.
The key is setting expectations and then meeting them.
“I want to know what the end result that is my expectation is going to be and try to figure out how to get there,” Gary says. “What would it mean? What would it look like? We do a lot of follow up to see if the decision we made is right or wrong. If it is wrong, what do we need to do to go back and get it on track and get to that desired end result?”
Meetings are held with management, and then quarterly with employees to provide updates with how the company is faring in meeting its goals.
“They can look and ask questions and say, ‘Oh yeah, at the beginning of the year, you said you were going to do 40 brochures, three new catalogs and this, that and the other,’” Gary says. “They know what we said we were going to do. The staff has to OK the plan from the managers.”
Getting your team involved in what you’re doing can only help you as an organization.
“It all goes back to that involvement issue,” Gary says. “Listening and taking feedback. We don’t feel you can make a better company if it’s straight from the top down. We need it both ways.”
Transparency also puts pressure on you to really think about the decisions you’re making for your business.
“You’re showing yourself so if you’re not doing everything right, people might realize, ‘Oh my God, they’re going to see my weaknesses,’” Gary says. “We all know we have weaknesses. That’s why we need the support of others to figure out how we can get over those weaknesses.”
As Neil and Gary look at Booksource today, they see a company that is much more focused on and much more engaged in what needs to be done.
“We’re having one of our busiest months in the history of the company,” Neil says. “And we’re renovating the big break room that we have, so there are tables out in the warehouse and a refrigerator out there, but it’s all tremendously organized. People don’t complain about it, people don’t grumble about it. They just have a tremendous amount of engagement and it’s because of the changes we made.”
Gary says employees feel just as much a part of the success or failure of the business as management does and that’s a good thing.
“By understanding it and getting people involved in reporting those numbers, I’m not responsible for the budget,” Gary says. “We all are responsible for certain areas of the budget and people have to watch it. They are accountable for it.” <<
How to reach: Booksource, (314) 647-0600 or
The Jaffe Files
Gary Jaffe, CEO, GL group Inc.
Neil Jaffe, president, Booksource
Gary: St. Louis
Neil: St. Louis
Gary: Bachelor’s degree, human development and family life, University of Kansas.
Neil: Bachelor’s degree in marketing, University of Illinois; MBA, Washington University in St. Louis
What was your very first job?
Gary: Camp counselor. It was a sports camp. This was their summer, and I needed to make sure that they enjoyed it. If the activity wasn’t engaging, we’d change that activity to find something that was fun for these kids.
Neil: My first real job was a busboy at a hotel restaurant. It taught me that you have to wake up early and work hard.
Who has been the biggest influence on your life?
Gary: No. 1 is my dad. I’ve been around him so long and I’ve listened to these stories and he’s preached these things over and over again, and I’ve had 30 years of training from him. It all boils down to character. He’s shown the character that Neil and I have taken not only in our jobs, but in our family life as well.
Neil: It would definitely be my father, but I would also say my older brother, Gary. He has taught me a lot about life and leadership.
Who would you like to meet, or have met from the past?
Gary: We spend a lot of time at Disney World and it was in the ’60s when Walt Disney had the vision of a place where families can go. I’d love to see what his reaction would be today.
Neil: George Washington. I’m reading his biography now.
Know what you want from your leadership team.
Get your people involved in meeting company goals.
Be accountable to your employees.
Contracts and legal agreements can play a key role in determining whether a company flourishes or flounders, but it’s easy to skip over the details when more urgent matters come into play. Those who don’t come back to those details when the fire has been put out, however, run the risk of bigger problems down the road.
But sometimes the perceived urgency to get the deal done becomes the driving force, undermining the effort, quality, judgment and scrutiny needed to pen a solid contract that’s in the company’s best interest. If the analysis and due diligence takes more time than anticipated, impatience grows and the decision may be made to just get it finished so you can move on.
With so much on the line, you can’t afford to do that. You need to do what it takes to ensure that every agreement is in the best interest of your company and that your rights are safeguarded for the agreement’s term.
Do you sign, or are you responsible for, the contracts your business concludes? Savvy leaders keep their focus on getting the right deal and then they watch for potential pitfalls and red flags in the fine print. They conduct reviews, ask probing questions, understand the terms and financial impact of the deal and are alert for liability issues and balanced termination provisions in the contract.
Here’s some advice that will help safeguard your company’s future:
Put all business dealings
Do this even with your partners, family and employees. When there are modifications or changes to your agreement, put them in writing so both parties are aligned. Not only will having a written agreement prevent issues and misunderstandings in the future, in certain situations, verbal contracts can be legally binding.
Clarify the scope of
What rights do you have? What can you do? And often more important, what can’t you do? Be sure the boundaries are very clear. Describe geography, markets, improvements and noncompete terms.
Define all of the important contractual terms
Be sure that performance criteria, metrics, timelines and detailed services required by both parties are set out clearly, as well as the consequences of nonperformance along with remedies. Define price, cost, volume by product, forecasting, payment terms, licenses or permits required, registration cost, etc.
Understand the legal terms and their implications
Don’t be embarrassed to ask your colleagues who negotiated the agreement or to ask your legal team the same question multiple times. As a check, ask an individual who hasn’t been associated with the contract to review it and point out potential areas of concern.
Don’t assume anything is obvious or clear
As the saying goes, the devil is in the details. Include formulas, definitions and examples of calculations. Set out potential problems and disputes and how they will be resolved. Define it in a manner where someone not familiar with the business could fulfill and understand the terms of the agreement.
Define the duration of the agreement and the terms for early termination
All business relationships have an end point, so it’s critical that contracts between business entities or individuals make provisions for unwinding the relationship when all obligations are fulfilled. Carefully define each party’s rights and obligations after termination.
Monitor performance and fulfillment of the terms of the agreement
Make sure the company lives up to its responsibilities under the contract to protect its reputation and business relationships.
A solid contract answers all of the “what ifs.” What if the other company goes out of business or is acquired? What if your contractual partner doesn’t fulfill its obligations under the contract? What if there’s a truckers’ strike that prevents ground shipment of the raw goods you need?
Become practiced in setting out and answering all the “what ifs,” and you’ll find yourself among the gold medalists in the contract game.
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 email@example.com.
The Patient Protection and Affordable Care Act is well named, as its aim is to make health care providers accountable for delivering better care. As a result, the reforms make skilled health care risk management even more vital.
“The Patient Protection and Affordable Care Act has initiated a fundamental shift in the manner in which health care providers are going to be paid,” says Ron Calhoun, managing director and national health care practice leader with Aon Risk Solutions. “We are beginning a transition from volume-based methodologies to outcome-based methodologies. Prior to this, we have been on a fee-for-service model, as health care providers were compensated for volume.”
Smart Business spoke with Calhoun about how risk management integrates with health care in an age of reform.
What effect is health care reform having on the health care delivery system?
One of the consequences is that reform is creating the need for delivery systems to more fully integrate and provide a broader continuum of services. To take a bundled reimbursement, as opposed to the old pay-for-volume model, health care providers will be compensated based on outcomes. That creates a need for them to more fully integrate. On the front end, they will need to build out their ambulatory capabilities, and on the back end, they will need to improve post-acute capabilities.
How will the shift to outcome-based compensation affect providers?
The Centers for Medicare and Medicaid Services has implemented a compensation mechanism called the value-based purchasing program for providers to measure quality. There are 12 clinical process measures and nine patient experience measures. This program, which took effect in fiscal year 2013, is about 70 percent weighed toward the 12 clinical processes and about 30 percent weighed toward the nine patient experience measures.
If health care providers have Medicare or Medicaid reimbursements in 2013, they can participate in this program. Then, those measures will have a real impact on their reimbursement thresholds. The measurements, plus the overall shift away from volume toward getting paid for outcomes, makes risk management programs even more critical than their historical place in patient safety.
How can a risk management program help with those measures?
Nationally, our health care delivery system does not have a standardized, systemic quality measuring process. When The Institute of Medicine issued its 1999 report, ‘To Err is Human,’ it started the patient safety movement.
Risk management has been proactive in patient safety since 1999, but we still have negative outcomes in our health care delivery service. After a six-year decline, we are starting to see an increase in the frequency of health care professional liability claims.
What factors affect the frequency and severity of health care liability claims?
From 2000 to 2006, there was a decrease in the frequency of health care professional liability claims, driven by three factors. One was the proliferation of tort reform. Second, there was an investment in patient safety systems at the provider level. Third, the provider community did a good job managing the perception of there being an availability-of-care crisis because of malpractice costs. Those have contributed to a downward pressure on health care professional liability claims.
From 2007 to the present day, there have been continued investments in patient safety initiatives, but we are seeing an increase in claims because of two factors. The first is tort reform erosion. In some states, tort reform bills have been either reformed or weakened. The second factor is economic stress.
There is an interesting correlation between the unemployment rate and an increase in health care professional liability and medical malpractice claims frequency. For every 1 percent increase in the unemployment rate, there is a corresponding 0.3 percent increase in health care professional liability and medical malpractice claims frequency, with a three-year lag. We are starting to see the post-2007 unemployment rate as a contributing factor to increasing claims frequency.
Unlike claims frequency, claim severity has increased at a steady rate, 4 percent over the past six years. That is cause for concern.
What can be done to improve outcomes and reduce medical claims?
One of the biggest barriers to improving risk management and patient safety is the ability to measure outcomes and the speed with which outcomes can be measured. One feature of the Patient Protection and Affordable Care Act is providing financial incentives to hospitals and physicians to further the meaningful use of electronic medical records (EMRs). The proliferation is dramatic, but it is still a fractured business.
There are three levels of sophistication in EMRs. The first level is simply making a paper file electronic. The second is computerized physician order entry, or CPOE. The third and most complex level is platforms with clinical decision support data. That third level will be necessary going forward to drive down the incidence of preventable medical errors.
More sophisticated EMRs will improve outcomes because physicians will have clinical decision support to help them adhere to clinical protocols at their fingertips. This is important because one of the biggest variables for integrated delivery systems to manage as they make the shift from volume-based to outcome-based methodologies is their ability to narrow physician practice pattern variation.
This technology comes with liabilities. If physicians have clinical decision support at their fingertips and depart from protocols, and an adverse event occurs, these errors could have a greater financial consequence than in the absence of such technology.
Ron Calhoun is managing director and national health care practice leader with Aon Risk Solutions. Reach him at (704) 343-4128 or firstname.lastname@example.org.
Insights Risk Management is brought to you by Aon Risk Solutions
Tax planning is especially complex this year given the turbulent political environment and a litany of tax laws due to expire at the end of 2012. From bonus depreciation to capital gains tax rates, if Congress fails to act and these provisions and others are allowed to expire, taxpayers could carry a significantly heavier financial burden in 2013.
“We know that tax laws are going to change, but we’re just not sure how,” says Cathy Goldsticker, CPA, member, tax services, at Brown Smith Wallace, St. Louis, Mo.
This year, more than ever, it is critical that businesses/business owners consult with their tax advisers as early as possible to discuss the what-ifs so they are prepared in December when we have a better idea of what 2013 tax law will bring, she says.
“All you can do with this level of uncertainty is plan, plan, plan,” says Robin Bell, CPA, member, tax services, at Brown Smith Wallace. Businesses and individuals should have several options depending on the outcome of the election.
Smart Business spoke with Goldsticker and Bell about tax provisions due to expire in 2012, and how business owners can best prepare and be flexible in light of the uncertain tax environment.
What measures can business owners take given tax law uncertainty?
Businesses that have not yet met their Section 179 threshold 2012 of $560,000 can invest in qualifying equipment and furniture so they can take the full write-off this year. Until the calendar year turns, the bonus depreciation of 50 percent still applies, and we’re not sure what will happen to this tax advantage next year.
Along the same lines, consider taking advantage of the current 15-year depreciation rate on qualified leasehold improvements, which fall into the three categories of commercial, retail and restaurant. This could roll back to the traditional 39-year depreciation tax write-off if the provision is not extended for 2013.
What could happen to the current low capital gains and dividend tax rates that are due to expire in 2012?
If nothing is done to extend current tax rates into 2013, the existing lower capital gains rate will expire. The 15 percent extended tax rate bracket changes to a 20 percent tax rate. Dividend income reverts from a 15 percent tax rate to a taxpayer’s ordinary income tax rate, which could be as high as 39 percent.
For business planning purposes, it may make sense to pay out dividends, if your corporation has accumulated earnings and profits, before the end of the year so those are taxed at the current 15 percent rate.
A potential capital gains and dividend tax rate hike could drastically affect retirement and investment planning, as well. Individuals may want to reconsider their investment strategy in dividend-paying stocks and choose exempt or fixed-income bonds, depending on projected rates of return.
What is known for certain about the 2013 tax situation?
Tax rates will not decrease, but it is not known how much they may increase or if possibly they may stay the same. That depends on how tax legislation shakes out at the end of 2012 following the presidential election and the decisions that Congress makes before new legislation starts during the lame duck session or afterward.
What we do know for certain is that the Medicare surtax is current law as part of the Patient Protection and Affordable Care Act. This 3.8 percent tax on net investment income will be imposed starting with the 2013 tax year on the lesser of an individual’s net investment income for the tax year or the amount by which their modified gross income exceeds the threshold amount that tax year — $250,000 for joint filers, $125,000 for married filing separate and $200,000 for all other filers. Essentially, this is a double tax that applies to individuals since this is a non-deductible tax.
Additionally, the 2 percent decrease to the Federal Insurance Contributions Act (FICA) rate that has been in effect for the past two years expires on Dec. 31, 2012, restoring the rate to 6.2 percent on wages and self-employment income. This will affect the take-home pay of all employees and owners.
For closely held businesses, it is important to consider salary management — look at payments and strategize the source of those payments in the most tax-efficient way.
Finally, the 3 percent ‘haircut’ for itemized deductions and personal exemptions is also set to expire in 2012. Bear in mind that itemized deductions and exemptions are phased out as income increases, so taxpayers will not get the benefits of all of their deductions as they have in the recent past. This calls for income management; if your income will increase in 2013, that may disallow some of your tax benefits and, theoretically, could put you in a higher tax bracket.
What additional tax provisions should individuals keep on the radar as they plan for 2012 and beyond?
For those taking advantage of the Refundable Alternative Minimum Tax (AMT) credit, this is set to expire in 2012. Also, the $1,000 child credit will revert to $500 if the provision is not extended.
Beyond these provisions, there is a laundry list of tax law changes that could occur in 2013 if there is no tax bill passed in 2012 or early 2013. We know there will be at least some change. To know what these changes will be, we need to see how the tax structure shakes out after the election and final congressional session of 2012. That said, the best way for business owners and their families to prepare is to plan carefully, including working out several tax scenarios. Then, wait to act until there is a clearer picture of 2013 tax legislation.
Last but not least, remember, there is an opportunity to transfer significant family wealth without incurring gift tax before the end of the year, and those opportunities might go away if the estate/gift tax structure is not extended.
Cathy Goldsticker, CPA, is a member, tax services, at Brown Smith Wallace LLC, St. Louis, MO. Reach her at email@example.com or (314) 983-1274.
Robin Bell, CPA, is a member, tax services, at Brown Smith Wallace. Reach her at firstname.lastname@example.org or (314) 983-1217.
Insights Accounting is brought to you by Brown Smith Wallace LLC
Whether employees smoked used to be a hands-off subject for employers; that was their own business. Today, however, a cultural shift is driving management to take on employee smoking as a way to reduce health care costs and increase productivity, and smoking cessation programs are increasingly being rolled out as part of an organization’s overall wellness program.
“The key is the culture within that employer’s organization — really taking a top-down approach, having the business owner or CEO promote, champion and buy in to the program,” says Steve Martenet, president of HealthLink.
Employers also need to take a long-term approach to the effectiveness of smoking cessation programs because it is difficult to quit, and payback on the investment won’t happen in the first year. Additionally, the program needs to be tailored to each organization’s unique needs.
Smart Business spoke with Martenet about how to effectively employ smoking cessation programs and how doing so can impact the bottom line.
Why should employers care if employees smoke?
First, they should care from a humanistic standpoint, as caring about whether your employees smoke gets to quality-of-life issues. Smoking is the cause of nine out of 10 deaths from lung cancer, three out of 10 deaths from all cancers, nine out of 10 deaths from chronic obstructive pulmonary disease, such as emphysema, and one out of five deaths from heart disease, according to the Campaign for Tobacco-Free Kids.
From a business and cost perspective, there are very real costs in terms of health care and lost productivity as a result of having a work force that smokes. Each smoking employee costs an employer $1,000 per year due to direct medical claims, absenteeism and additional building maintenance, according to National Cancer Institute data.
And when compared to nonsmokers, the Mayo Clinic found in a seven-year study of 30,000 of its workers that the average health care costs of its smoking employees and retirees was $1,275 more per year than those of its nonsmoking employees.
How can employers encourage employees who smoke to quit?
There are steps employers can take to decrease the number of employees who smoke.
- Educate employees about the dangers of smoking.
- Create an environment that discourages smoking, which includes not allowing smoking in the building and/or on your property.
- Offer smoking cessation programs as part of a corporate health and wellness strategy.
What are some best practices for smoking cessation programs?
A number of tools can be used as part of a smoking cessation program, such as:
- Ongoing support and motivation.
- Personalized plans to quit.
- Rewards for participation and achieving milestones.
- Integrating cessation efforts with health care benefits, such as paying for nicotine replacement therapy.
- Having customized data that reports on the program’s effectiveness.
Each situation is different, depending on how big an issue smoking is for an employer and on the workplace culture, so use these variables to customize the program to meet your specific needs. With self-funded insurance, it is easier to create unique one-on-one lifestyle management programs. For fully insured employers, some insurance companies will offer — depending on state mandates — smoking cessation as part of wellness programs, either embedded into the basic offering or sold as an add-on or rider.
Many employees won’t quit in the first year, so be persistent. Every year, 17 million adults attempt to quit and only 1.3 million succeed, according to AllOneHealth Group. Smoking cessation programs require a three-year investment to break even, with benefits exceeding costs after five years when it has become ingrained in the culture of that organization.
Are cessation programs more effective than charging smokers more for health insurance?
There is a carrot-and-stick approach, and charging more is certainly a stick approach. However, a lot of employers combine the two approaches because it is easier to charge a smoker more if you are providing them with an opportunity to quit. Employers should consult with corporate attorneys before they differentiate what they charge for smoking and nonsmoking employees, as some state laws may prevent fully insured companies from doing this. In fact, the federal government thinks so much of the practice of differentiating that it is built into the health care reform act.
Smoking employees cost more and from an employer’s perspective, the ability to charge more could help offset that health care cost. Still, the addictive nature of smoking means such penalties are more of an incentive not to smoke than a reason to quit.
How does tobacco use impact employers’ costs?
Tobacco costs the U.S. $96 billion in health care expenditures and another $97 billion in lost productivity each year, according to the Centers for Disease Control. There is a huge opportunity for employers to find the right smoking cessation program for the organization. There is already incentive for many employees, as studies have found that 68 percent of smokers want to quit.
An example of the impact on cost is Illinois, which recently more than doubled its cigarette taxes. As a result, 72,700 Illinois kids will not become smokers and 53,400 adults will quit, according to the Campaign for Tobacco-Free Kids. In Missouri, voters will decide Nov. 6 whether cigarette taxes should be raised by 73 cents. HealthLink supports increasing the state cigarette tax, which is the lowest in the nation at 17 cents. Through the tax code, the health of the community will improve. Employers can do this on a smaller scale through an effective smoking cessation program.
Steve Martenet is president of HealthLink. Reach him at (314) 923-4474 or email@example.com.
Insights Health Care is brought to you by HealthLink®
On November 28, the 2012 Midwest Social Media Summit will be held at Executive Caterers at Landerhaven in Cleveland, OH. This one-day-conference will offer tips and insights from social media experts and top business leaders who will help you reconsider your strategy or validate your approach.
For more information and to register, click here.
And as a special bonus to our Smart Business readers, we're giving away five FREE tickets to the event! To enter the contest, simply do one of two things:
- Visit the Smart Business Twitter page and follow us. Then just send out a tweet that says, "I don't want to be anti-social. I want to attend the 2012 @Smart_Business Midwest Social Media Summit!"
- Visit the Smart Business Facebook page and like us. Then post to the page, "I don't want to be anti-social. I want to attend the 2012 Smart Business Midwest Social Media Summit!"
We'll draw the winners on Monday, Nov. 19.
For additional information, please contact Anne Hydock at firstname.lastname@example.org or (440) 250-7041.