If you’ve been running a business for some time, then I’m sure you know some CEOs who are struggling to keep their business going or have already closed their doors.
In some cases, the cause might be the economy. Maybe they were in an industry hit particularly hard and were crippled by the drop off in sales or maybe a large customer folded or took its business elsewhere.
The most troubling aspect in many of these situations is that the person in charge didn’t necessarily do anything wrong. The leader made all the right calls and did everything by the book but still ended up with a struggling business.
After you’ve been running a business for a while, you realize that even doing everything right doesn’t guarantee success. The harshest lesson to learn is that you can’t control everything and bad things happen to good people and good companies.
The real test for many begins not with how they deal with success but how they deal with setbacks. Most have never tasted defeat before, and it can be a difficult experience. One day they are the CEO of a successful and respected company, and the next day they are sitting at home wondering what they could have done differently. The experience can be depressing for some and overwhelming for others.
But there’s a saying that as one door closes, another opens, and that certainly holds true with business. If you find yourself in the situation of leading a struggling business, you need to approach it as a challenge. Don’t waste time lamenting what could have been; focus your energy on what could be. Maybe you need to tweak your business, or maybe you need to completely reinvent your company, but the key is to do something.
Take McDonald’s for instance. In the early 2000s, the company was distracted by multiple acquisitions, a massive expansion plan and a menu cluttered with items consumers didn’t necessarily want. The stock price dropped to $12. The company reinvented itself by returning to its roots, divesting of the distracting side businesses and revamping its menu and restaurants to appeal to consumers. The results changed the perception of McDonald’s from a restaurant in decline to the undisputed king of the industry with a stock price in the $80 range.
Another example is IBM. The company was saddled with low growth after trying to dominate the consumer and business hardware and software segments, and its stock dropped to $10. The leadership refocused the company on business software, a few key business hardware components and IT services. It now dominates the business IT services category and its stock commands almost $200 per share.
While you may not be as large as IBM or McDonald’s, the point is that business is constantly evolving. Sometimes it means getting back to your roots, and other times it means abandoning one line of business in favor of another.
Take a hard look at your company and think about what you could do differently. Are there some product lines that are better than others? What if you focused on your core products and did them better than anyone else? Can you follow the lead of McDonald’s or IBM to chart a new course?
If it’s too late for that, look at your current situation and find a new path to success. You led a successful business once, so you can surely do it again. Reach out to friends and colleagues to find out where the opportunities may be in the market and think about a way they could invest in your new venture. You never know who may be able to lend a helping hand. One door may have closed in your career, but with some entrepreneurial thinking, the help of some friends and prayer, another will open. The best is yet to come.
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.
Tony Mercurio had a lot on his mind just a few months after he became CEO at Vanliner Insurance Co.
He had a group of employees who were looking to him for both direction and for answers to their many questions after his employer, National Interstate Corp., had bought their company.
In addition, Vanliner had been purchased from UniGroup Inc., which just happened to be its largest customer. To make it even more fun for Mercurio, UniGroup was now his landlord at Vanliner’s offices in St. Louis.
“Their CEO is down the hall from me,” Mercurio says, referring to the CEO of UniGroup. “That entered into the perspective of how we went about the first six to eight months managing and changing the company.”
The due diligence process took a little under a year and confirmed to National Interstate that the acquisition of Vanliner was a good idea. But that was on paper. It was up to Mercurio to make it happen in the real world and seamlessly blend the things Vanliner did well with the practices that worked best for National Interstate.
“Neither culture or approach to the business was good or bad, per se,” Mercurio says. “But the way we run our business, certainly the way we’ve run it out of Ohio and now how we do it in St. Louis was very different than how old Vanliner had handled its business in the past.”
Tough choices would need to be made as Mercurio worked through those differences to build one cohesive organization. Personnel redundancies were one of the first issues to be addressed, but there were other concerns that he faced in trying to bring everyone together at the company, which now has about 125 employees.
It was enough to leave him feeling a little scared but not enough to make him question for even a moment his ability to make it all work in the end.
“It’s OK to run scared a little bit,” Mercurio says. “Sometimes people think it’s the opposite of confidence and it’s not. I was running scared, but I decided if I just kept getting up every morning and going to bed late at night and kept putting the time in, as long as I didn’t skip my 4-mile run because that’s where I kept my sanity each day, as long as I did all that, we’d get through it.
“In hindsight, I don’t think I’d do it any other way. I’m glad I was afraid. Being afraid to fail and having that be your motivator is not always a bad thing. I felt it, absolutely I did.”
Live your plan
As Mercurio saw the uncertainty in the eyes of his employees a few months into the integration process of the new Vanliner, he remained confident. He had a plan in mind for how the new company would come together, and he believed in it. He just needed to convince everyone else that it would work.
“I had a seven- or eight-page outline that I did that took us all the way through Dec. 31, 2011, down to what our final results would be on the first full year of ownership,” Mercurio says.
“Several things changed along the way, but if you don’t set the expectations, if you don’t have the objectives, if you don’t write them down and if you don’t hold yourself accountable, it’s much harder to achieve the success you’re looking for.”
Despite the extensive planning, he knew that success wouldn’t be easy to achieve. If anyone understood impatience, it was Mercurio.
“It’s not in my personality to stay patient,” Mercurio says. “I feel urgent about performance and about accomplishing our objectives. But this was a situation that needed time. It wasn’t going to be years, but it needed to be months to let it play out and let the people here who I knew, ultimately, we could trust and depend on see it and feel it and be part of it as we steered it in a different direction.”
Mercurio made two promises that he felt very confident could be fulfilled.
“Hollow promises are about the worst thing,” Mercurio says. “Making a promise that you can’t pull through if you have a group that is looking to you to be their leader, that’s about the worst thing that can happen. The promises we made were pretty calculated.”
Mercurio wanted to put something on the table that his people could point to and shoot for that would make all the work and struggle they were going through in the transition process seem worthwhile.
The first promise involved a new targeted alternative risk solution for moving agents aligned with the Allied Agents Association. He promised that this new product would be a success and make the company better.
“The other thing I promised was that within six months, the workload and results, the numbers, would improve if everybody hung in there and believed in what we were doing,” Mercurio says. “That was at the same time that we took away flex hours and did some other things that were just different organizationally. So it was hard to get people to buy in. There were a few sleepless nights as you make promises like that.”
Fortunately, the new product and the idea that things could get better soon proved to be great motivators and a great way to identify who was truly on board with Mercurio’s vision for the new company.
“The best people love to be challenged and love to be pushed to what they believe are their limits,” Mercurio says. “Sometimes, they do not give themselves enough credit to know that their limits are higher than where they have set them. I’m not just talking about workload. I’m talking about being challenged to be creative, to take a little risk and get outside of their comfort zone. Those kinds of things, especially when the results go along with it, are rewarded in our system.”
Give people a chance
Mercurio had the power and wherewithal to take over this new company and fill spots with his own handpicked employees brought over from National Interstate. They would be people he worked with before and was comfortable with and he wouldn’t have to spend time getting to know them.
But that couldn’t be further from the approach that Mercurio took in this particular situation.
“We only brought four people from the National Interstate office to the Vanliner Insurance Co.,” Mercurio says. “We needed to leverage the talent that is here. A lot of people on the staff had several years of moving and storage experience and the people from Cleveland had zero. We had other insurance experiences and captive alternative risk transfer experiences to bring.
“But we decided that we weren’t going to integrate with 30 people.”
Mercurio knew he had talent at his disposal that had worked for the previous Vanliner entity. Who was he to come in and tell people they didn’t cut it just because he had never worked with them before?
“We brought in the claims vice president from the parent company to help interview and assess the claims people,” Mercurio says. “We brought in the IT management and project management people to help assess the IT people. We did that in every area. My background is marketing, underwriting and sales, so I took that lead. But we had other folks I knew we could count on assess individuals as we went through the first six months of the tenure.”
His philosophy in appraising the skills of these people was to find out what they could do for the company. Mercurio gave them a chance to sell their skills or their ability to learn new skills and took that into consideration when decisions needed to be made.
“The way to empower employees, whether they’ve worked for you for three days or 13 years is let them write their own objectives,” Mercurio says.
“Let them tell you what they’re going to do for the organization. You may have to tweak them and you sit down and go through a collaborative effort and you get to the end result that both believe would be the right set of objectives for the year.
“But let them take the first crack. It’s amazing how people own what the objectives are and hold themselves accountable if they are the ones who get to come up with it.”
He adds that you might be surprised how similar your list is with the list of objectives your employees will come up with, if you give them the chance to do it.
“You’ll be surprised as to how close the two lists are if they’ve lived in your culture for even a short amount of time,” Mercurio says. “But secondly and more importantly, the ownership level goes way up. Too many managers miss that. They tell people what they have to do instead of letting their people tell them what they are going to do.”
By taking this approach, Mercurio was able to find jobs for people in the company who didn’t fit in their previous roles.
“So instead of them going elsewhere to seek employment or us letting them go, we decided because they were talented, because they were eager and we felt like they were motivated and objective-driven, we put them in a different role,” Mercurio says. “They are flourishing. They love it, and we’re getting from them the effort and result we need to be successful.”
Mercurio did not miss many opportunities to get in front of his people and in front of potential clients and customers to talk about the future of Vanliner Insurance Co.
“I did most of the large sales calls with some of our salespeople with me, I did all the shareholder presentations to the various Vanliner boards, I was the speaker on most of the agendas at the conferences for the major moving van lines in the country,” Mercurio says.
“I was the one out shaking hands. It certainly wears on you, and ultimately, I probably could have spread a little bit of that out. But we were going to have a certain complexion in the marketplace and I wanted that to be my responsibility.”
It’s one thing, of course, to be exuberant and excited about your company and polished in your speaking style. If there is no substance behind it, no results to match your promises, it will wear thin with your people very quickly.
So if the pressure had not eased and the work had not gone from overwhelming to just busy as Mercurio had promised it would, he would have had a problem. Fortunately for him, his vision came true.
“The claims group really had it tough for a while,” Mercurio says. “But we just asked them to hang in there and it was like clockwork. Once we reached that six-month mark, the number of new claims coming in was dropping dramatically and the number of files that were closing was going up dramatically. It was shrinking by the day and they could feel it. They felt the relief.”
As he looks ahead, Mercurio says he prefers “urgent” over “running scared” when describing his philosophy on how he and his employees get things done.
“If you’re urgent about what you’re doing, you’ll succeed in our organization,” Mercurio says. “We have a saying that I’ve used for a lot of years. Effort keeps you in the lineup. If you work really hard, you’ll stay in the lineup. But results move you up in the batting order.”
How to reach: Vanliner Insurance Co., (800) 325-3619
The Mercurio File
Tony Mercurio, CEO, Vanliner Insurance Co.
Born: Lorain, Ohio
Education: Bachelor’s degree in business and economics, University of Mount Union, Alliance, Ohio; MBA, Cleveland State University
Who has been the most influential person in your life?
My father, who passed away a few years ago. He was never afraid to take a risk. He ran a lot of different kinds of companies and tried a lot of things. He was never a 9-to-5 guy. It was a different time and different types of businesses that he ran. It was probably more that I saw him be excited about what he did for a living all the time and live it.
I don’t mind being defined at least somewhat by who I am at work and what I do for a living. That was my biggest lesson. You can enjoy what you do and be successful at it, even if it wasn’t being the starting left guard for the Cleveland Browns.
What did you love about playing football?
Football is hard. I love that not everyone could do it. Everybody has a different role on each play. They all have different steps to take each day but in the end, if we want to score more points than the competitor, everybody has to do their job.
How do you relax away from work?
My wife and two kids, that’s just been a blessing. I married up. Beyond that, just a couple of personal things.
I used to think I was an athlete back in my college years and maybe my first few years after college. These days I don’t feel that way, and I don’t care necessarily if I run fast. It’s the mental release and the confidence that I get out of exercise.
Take the time to get your plan in writing.
Don’t underestimate the abilities of your people.
Don’t promise what you can’t fulfill.
Your intellect may be confused, but your emotions will never lie to you.
? Roger Ebert, film critic
The 2012 State of St. Louis Workforce Report says that the No. 1 shortcoming of recent hires is the “lack of communication or interpersonal skills.” Also in the top 10 were a “lack of teamwork and collaboration” and “lack of willingness and ability to learn.”
Commissioned by Workforce Solutions Group of St. Louis Community College and conducted in partnership with the Missouri Economic Research and Information Center, the report seems to suggest that elements of what we often call emotional intelligence are valued but lacking in recent hires.
Why is this important to leaders? There are several reasons.
First, it should give us pause to examine how well we as leaders stack up. Are we exhibiting the qualities we deem lacking in others?
Secondly, it suggests that we should seriously think about whether or not these are the talent deficits we see in our business. If these are the deficits, what will we do about them? How do our attraction efforts need to change? How do our employee development initiatives need to change?
What is emotional intelligence?
In “Primal Leadership: Learning to Lead with Emotional Intelligence” by Daniel Goleman, Richard Boyatzis and Annie McKee, the authors’ definition of “how leaders handle themselves and their relationships” is expanded through the explanation of four domains of emotional intelligence and their associated competencies.
At this point, some leaders may think that while this is interesting, they still just need to hire smart leaders who want to work hard.
Fair enough, as we certainly need to do that. But, the authors suggest that emotional intelligence “contributes 80 to 90 percent of the competencies that distinguish outstanding from average leaders — and sometimes more.”
They admit that this is a “rule of thumb” and a precise measure is dependent on many factors. But we know, as leaders, that we’ve seen great ideas flounder or die because advocates weren’t aware of how they were coming across or hadn’t built up the people capital necessary to support the idea.
Regardless of the ratios involved, the authors are onto something: Emotional intelligence is a significant aspect of leadership.
So, how does one incorporate recognition of the importance of emotional intelligence into leadership development efforts? If a leader needs to develop an aspect of emotional intelligence, is it even possible for that person to change?
What are emotional styles?
Dr. Richard J. Davidson and Sharon Begley, authors of “The Emotional Life of Your Brain: How Its Unique Patterns Affect the Way You Think, Feel, and Live — and How You Can Change Them,” suggest that it is possible for people to adapt certain emotional patterns.
Using his 30 years of research in affective neuroscience, Davidson has identified six “emotional styles.”
Resilience: How rapidly or slowly does one recover from adversity?
Outlook: How long does positive emotion persist following a joyful event?
Social Intuition: How accurate is one in detecting the non-verbal social cues of others?
Context: How well do you regulate your emotions to take your context into account?
Self-Awareness: How aware are you of bodily signals that constitute emotion?
Attention: How focused are you?
Even a cursory review of the six emotional styles will lead one to see connections to important dimensions of emotional intelligence. What if you could help your team members bounce back more quickly from setbacks? What if you could keep a positive attitude that helps keep the troops motivated and promotes creativity? How could you become either more focused or less single-minded? Each point should have relevance to you. Would that be worth some time and effort for you to explore?
Andy Kanefield is the founder of Dialect Inc. and co-author of “Uncommon Sense: One CEO’s Tale of Getting in Sync.” Dialect helps organizations improve alignment and translation of organizational identity. To explore how to use the principles of neuroscience to promote better organizational alignment, you may reach Andy at (314) 863-4400 or email@example.com.
Missouri is focused on attracting and retaining businesses by creating a positive economic environment. One way the state has worked to enhance its economic position is by implementing tax laws that benefit the business community. For instance, during 2012, three bills were passed by the state legislature that expand current exemptions and deduction opportunities for businesses that meet certain criteria.
“Missouri is attempting to assist businesses during this time of economic recovery,” says Susan Nunez, the state and local tax principal in the Tax Services Group at Brown Smith Wallace LLC, St. Louis, Mo. “The state is looking for ways to enhance business and the passing of these tax laws demonstrates those efforts.”
As a result of the recently passed bills, purchasers now have a more direct avenue for obtaining refunds of overpaid taxes, more businesses may take advantage of expanded transportation asset exemptions, and partnerships and S corporations now can claim a job creation deduction that was previously only available to corporations.
Smart Business spoke with Nunez about the bills that were passed and what opportunities these tax laws may introduce for businesses.
How is Missouri streamlining the process for obtaining refunds for overpaid taxes?
House Bill 1504 (HB1504) creates an avenue for a purchaser to obtain overpaid sales and use tax directly from the Department of Revenue and sets forth steps on how to obtain refund claims. Prior to the passing of HB1504, if a purchaser realized that it overpaid taxes to a vendor, the purchaser was required to contact the vendor and request the vendor to file a refund claim with the Department of Revenue on behalf of the purchaser. If a vendor was not willing to cooperate, the purchaser lacked authority to pursue a refund of the overpaid tax with the Department of Revenue directly and thus lost the opportunity to obtain the refund of taxes it erroneously paid.
Meanwhile, if the Department of Revenue sent a notice to the vendor in response to a purchaser’s request for a refund, that purchaser may have missed its opportunity to respond or appeal due to the lack of due diligence on the part of the vendor. Overall, it was a struggle for purchasers to obtain refunds for taxes they paid to their suppliers. Additionally, vendors who did cooperate with their customers request to submit refunds potentially had an additional risk of being audited by the state.
With the passage of HB1504, the purchaser receives its refund from the state, not the vendor, so the process is more efficient and effective. A purchaser who has overpaid taxes must contact the vendor in writing requesting the vendor to assign its right to the refund. If the vendor agrees and signs the letter, the purchaser can file a refund claim directly with the state and include a copy of the letter. Once the claim is filed, reviewed, and approved by the Department of Revenue, the state will notify the vendor and, upon approval, will refund the overpaid tax directly to the purchaser.
Because the refund is paid directly from the Department of Revenue to the purchaser, the process is streamlined and can easily be audited. In addition, it relieves some of the vendor’s burden because it does not need to utilize its own resources to obtain such refunds.
How has Missouri expanded the exemption for transportation assets?
Historically, there have been transportation asset exemptions that applied to assets used for the transportation of persons or property for hire by common carriers. Since the original exemptions were adopted, the U.S. Department of Transportation has changed the rules regarding common carriers, and many businesses have obtained and now operate their own fleets of qualifying assets. To allow more businesses to take advantage of the exemption, the new law enhanced the existing exemptions by the addition of a transportation asset exemption.
The new exemption applies to purchases or leases by all motor carriers that operate motor vehicles that have a licensed weight of 54,000 pounds or more. Additionally, this new exemption is a bright line exemption. If a business operates as a motor carrier, with a truck licensed for the requisite weight, the exemption requirements may be met.
How can partnerships and S corporations now take advantage of a job creation deduction?
When original legislation was passed providing a deduction from income tax for new jobs created in Missouri for certain qualifying small businesses, the language in that bill limited the tax opportunity to corporations. It did not apply to partnerships or S corporations because those are pass-through entities that do not pay income tax, as they are taxed at the owner level. Missouri recently passed a remedy to correct this oversight in the original law, which allows owners of partnerships and S corporations to pass the deduction through to their owners. This change is reflected in House Bill 1661, and it is great news for small businesses of all types that are creating jobs in the state.
What steps should a business take to determine eligibility for these tax advantages so it can reap the benefits?
First, business owners should present their fact patterns to their attorneys or accountants when discussing whether these opportunities will apply to them. Do they operate a fleet of trucks that transports goods? Are they currently claiming a transportation exemption? Are they creating jobs in the state?
A knowledgeable professional can provide guidance by reviewing a business’s operations, its tax posture, understanding the scope of the particular law and how these laws may affect the taxpayer’s everyday business.
Susan Nunez is a state and local tax principal in the Tax Services Group at Brown Smith Wallace LLC, St. Louis, Mo. Reach her at (314) 983-1215 or firstname.lastname@example.org.
Insights Accounting is brought to you by Brown Smith Wallace LLC
In some grocery stores, your smartphone uses GPS to ping you when you’re near items on your shopping list. Other retailers allow customers to order something online, and when they arrive to pick it up from the store, the item(s) is already bagged and ready to go. Others still provide customers with options of where to buy, where to pick up or have delivered, and have price guarantees in order to create a positive customer experience and resulting sales.
With the retail industry facing challenging times, savvy risk managers are helping their companies understand how to manage costs and allocate capital strategically while finding ways to stay ahead of market trends, says Lynn Serpico, managing director at Aon Risk Solutions.
“These risk managers have the opportunity to help shape the business as they manage operations and costs,” says Serpico. “At most retailers, risk managers are responsible for mitigating — for keeping the operation efficient, making sure that the use of insurance, self-insurance and alternatives are in line with overall company objectives and that the treatment of risk is agreed to by all internal stakeholders. At a retailer, these stakeholders can include treasury, legal, logistics, marketing, merchandising or IT.
Smart Business spoke with Serpico and Todd A. Dillon, senior account executive at Aon Risk Solutions, about the current risks that retailers face and the best ways to mitigate them.
What is new in the retail industry with risk?
Aon compiles a retail industry analytics report annually, collected from proprietary data and client interviews, identifying the top 10 risks. Retailers say the global economic slowdown is the No. 1 risk. With consumer discretionary spending as the biggest driver of retail sales, the industry constantly battles variables that are out of its control, such as gas prices.
Second, retailers worry about damage to their reputation or brand. For any retailer, the worst possible scenario is that customers stop shopping in their stores. The third-biggest risk is a market of increasing competition. This is one of the biggest trends in retail. How are people making their shopping decisions? What does this mean for retailers, and how can they respond? For example, how do they prepare for a situation in which a customer walks into the store, and tries something on before buying it at a lower price on their mobile device?
Other risks include:
- Distribution or supply chain failure
- Regulatory and legislative changes, particularly surrounding workers’ compensation, normally the largest contributor to a retail risk manager’s total cost of risk.
- Technology failure
- Failure to innovate and meet customer needs
- Failure to retain top talent and, therefore, manage crime, theft, fraud and employee dishonesty. With plenty of turnover, there is a need for safety training and internal loss control to ensure not only a good store experience for customers but also employee safety and that employees are behaving in ways beneficial to the company.
What risks are critical priorities to manage?
Most retailers have gotten really good at managing the more traditional risks — property, workers’ compensation and general liability. For example, they know how to get their stores running after a natural disaster and they have programs to get associates back to work after an injury.
Emerging and changing risks are the new focus. These include network security, products liability for vendors, and wage and hour litigation. Network security is key, as this feeds in to a retailer’s reputation. It has customer data, employee data, financial information and, in some cases, medical data, and the risk is ever evolving because bad actors are getting craftier and losses are high profile.
Vendor/supplier contract management also is critical. A store might have products from 50 countries, so how does it control and manage contracts and litigation while understanding its exposure? Additionally, employment practices liability policies exclude wage and hour claims. However, this often drives a retailer’s exposure. Finally, retailers must continuously innovate and drive down costs so savings can be passed on to customers.
What best practices address common mistakes for retail risk managers?
As an industry, margins are thin, so retail risk managers need to carefully analyze their portfolios to determine the best use of capital. For example, should you have higher retentions on certain programs because the loss history is predictable? Or perhaps you might be buying too much insurance on other programs. Maybe there is a way to self-fund a certain amount of loss and buy excess capacity, which could reduce fixed costs. Is there an alternative that has not been considered?
If you have a loss that is not insured, have you vetted the process internally? Do you know how it will be funded? Risk managers are asking these questions as they work to create operational efficiencies for their companies. Asking questions helps avoid buying too much or too little insurance. Risk managers can also identify maximum capacity for loss across multiple lines of business. For instance, a $10 billion retailer may be able to absorb a penny per share of loss in a given year. However, you need to know what would happen if you have losses totaling five cents a share in a worst-case scenario year with a fire in your main distribution center, a customer death in a store and a security breach that compromises customer data. It is important to get feedback internally and ensure that all stakeholders understand decisions being made around insurance and the effect those have on the business from a financial perspective.
Know your overall retentions and whether they are aligned with the corporate strategy. Some companies are extraordinarily risk averse, so retentions are low, while others are very comfortable managing their own risk. It is up to risk managers to know the appetite of their company and make decisions that align with the financial objectives. In addition, whenever there’s a loss, multiple internal stakeholders need to be involved in the process.
Lynn Serpico is a managing director and the National Retail Practice Leader at Aon Risk Solutions. Reach her at (203) 326-3464 or email@example.com.
Todd A. Dillon is a senior account executive at Aon Risk Solutions. Reach him at (314) 854-0864 or firstname.lastname@example.org.
Insights Risk Management is brought to you by Aon Risk Solutions
Employers — and subsequently, their employees — are becoming more savvy about the decisions involved in choosing and administering a health plan, often a business’s second- or third-biggest cost of operations. Just as safety initiatives can help reduce property and casualty insurance premiums, health insurance savings can often be achieved through self funding, says Mike Debo, senior sales and renewal executive at HealthLink.
“By instituting wellness programs and encouraging routine physicals and post-condition care for not only employees but for covered dependents, employers can reduce premium and claims costs while increasing productivity,” Debo says. “Instituting wellness programs, encouraging routine physicals and promoting post-condition care are especially beneficial to self-funded groups as they see the savings in the form of fewer claims spent, which can reduce reinsurance costs.”
Smart Business spoke with Debo about how increased involvement on the part of employers and employees can lead to lower health plan costs.
What is driving employers to be more involved with their health plans?
For many employers, the No. 1 reason they are becoming more involved is that they have no other option. They may have already maxed out what they can do from a plan design perspective with greater participant out-of-pocket costs. In addition, fully insured employers are constantly getting rate increases, but over the years, often no one has been able to fully explain the increases.
What are some tools an involved and educated employer can use to lower health costs?
An employer’s decisions are only as good as its information. That is why many business owners move into self-funding, where there is greater reporting about their group and its claims, whether medical or pharmacological.
One of the first tools businesses use is to have participant biometric testing, which provides the employer with information on how many people in the group have high cholesterol, hypertension, weight or smoking issues. From that — combined with reporting and claims — employers can create wellness programs and condition management programs. Wellness programs eventually save money from a claims perspective, but it might take a year or two to absorb the initial cost of testing.
With a year’s worth of information from claims and wellness programs, businesses can begin to change their plan design to address health conditions, utilization patterns or provide unique coverage for their plan participants. For instance, a business may find its participants are frequently visiting chiropractors because of their job type. With that information, they can look at not only how many visits they are allowing for chiropractors and the cost but also institute a condition management program strictly for back injury care.
Then, they can look at pharmacy claims. Are participants using generics as often as they can, brand names as necessary or mail order whenever possible? What does the employer need to do regarding the pharmacy benefit to not only ensure that people get the drugs they need but also to make it cost effective for the group?
By changing the plan design and addressing the specific needs of a group, employers often find they don’t need a particular program, such as condition management or a 24-hour nurse line, further cutting costs.
How can employers overcome initial resistance to wellness programs and other initiatives?
Most people aren’t going to participate in biometric testing, a smoking cessation program, a weight loss program or a condition management program unless there are cost differentials to participants in the form of incentives or disincentives. Plan participants often think such programs are an invasion of privacy or that they require too much of a time commitment, but when there is a 10 to 30 percent difference in premium costs, they get involved.
How can employers communicate to employees the true costs of health care?
One of the easiest ways is to use a plan with no co-pays, where everything goes toward deductible/coinsurance, so that participants understand how getting an X-ray at an outpatient facility versus a hospital can mean the difference between a bill of $700 or one of $1,800.
Reporting is extremely important because it provides the knowledge to make wise decisions. Communication is equally important, whether via traditional posters and payroll stuffers or new technology smartphones, emails and blast texting.
To be effective, the communication must address how to get the most out of plan benefits and programs while avoiding unnecessary costs to the participant and the group.
How do self-funded plans give employers so much more control of their health program?
Employers have full control, outside of federal mandates, to do what is best for plan participants and plan costs. For example, if an employer has a population with an average age of 45 and people taking off work for elderly parents going into nursing homes or going to the doctor frequently, the employer can bring in a vendor to work with employees on how to make decisions about their parents. This takes pressure off employees. They show up to work more regularly and are more committed to the company because of the service their employer provided.
With self-funding, it’s at least a three-year commitment of time and effort to cut costs and provide better benefits for employees. The employer has to sit down on a quarterly to semi-annual basis to go through reports and have someone scrutinizing claims. Employers with healthy groups may stay fully insured because they think there is no risk involved, but the risk is that they pay $2 million for something that costs $1.5 million. With self funding, employers have a program that they are in charge of, a program better suited for them and for their plan participants.
Mike Debo is a senior sales and renewal executive at HealthLink. Reach him at (866) 643-7094, ext. 1, or email@example.com.
Insights Health Care is brought to you by HealthLink®
In business, as in life, there’s a benefit to having guidance that’s tried and true. Most successful business owners can cite mentors who have directed their paths along the way. As companies grow, those informal relationships are usually replaced by formal boards of directors. A board of directors is a very useful method for allowing significant shareholders to feel they have a say in the strategic planning for the company.
It’s my opinion that all companies – regardless of size – need to have a board. In this two-part series, I will explore the benefits that a small company can gain from having a corporate board and how a small business owner can establish a board.
First, let’s examine the benefits:
1) A good board of directors will do what employees often are afraid to do: challenge the leader. Most employees don’t feel empowered to speak up when they think a strategy is misguided or out of sync with customers or a target market. Board directors should be willing to openly question ideas and the assumptions that guide strategic planning to help the president or CEO suss out their soundness.
2) A board can provide accountability – particularly in family-run businesses where it can be hard for an unbiased assessment of the business without familial issues clouding judgment.
3) Boards can help with recruiting, evaluating and selecting top job candidates, as well as setting compensation criteria that are fair and transparent. Since directors are removed from the daily running of the business, they can help with succession planning.
4) For companies considering a public offering, setting up a board early can help acclimate the owners to the enhance scrutiny that they will face once the company is publicly traded.
5) A board of directors is legally required for registered corporations.
Next column: How to create your own board.
Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.
When Andrew Dorn, Industry Leader, Information Intensive Business, Acxiom Corporation, was recently researching the top manufacturers in the United States, one topic kept coming up — the strong growth expectations focused on the world's emerging markets. With the economies of the U.S. and Europe in flux, Dorn felt that, now more than ever, manufacturers need to be attentive to those emerging markets.
"The world is now flat," says Dorn. "Competition comes from everywhere, so manufacturers need to be everywhere."
Because of that, Acxiom has partnered with Smart Business to present a special one-hour webinar: "Driving Global Sales for Manufacturers: Why global growth for manufacturers is more important than ever."
During the webinar — on Wednesday, September 19 at 1:00pm EST — we will discuss why global sales for manufacturers is critical, what factors should be considered in developing or refining the international strategy, and, finally, present a roadmap that can be employed to optimize chances for success.
Featured panelists will be Zia Daniell Wigder, Vice President and Research Director, Forrester Research; Jennifer Barrett Glasgow, Global Privacy and Public Policy Executive, Acxiom; and Michael Biwer, Managing Director, Acxiom.
"As you enter the global market, it is imperative you understand the privacy laws in each country as they are quite complex and some are very stringent, for example, having criminal penalties for some violations," says Barrett Glasgow.
Other topics to be discussed include:
- How to determine which countries to enter and what data to gather to understand regional customer requirements
- Recommended approaches to building country-specific strategies that can help facilitate smooth transitions, lowest possible cost-of-entry, and consistent performance
- Considerations for navigating the complex web of country-specific data protection and privacy laws companies must adhere to in their efforts to connect with customers and prospects
- Best practices used by leading companies that have successfully entered new markets
"The U.S. and European economies are still recovering and the balance of growth is constantly shifting," says Dorn. "For example, China and Brazil have been experiencing strong growth. They are encountering a maturity curve, but that doesn't lessen the importance of the issue — manufacturers need to be diversified and have a presence in all major world markets."
The webinar, "Driving Global Sales for Manufacturers: Why global growth for manufacturers is more important than ever" will be held at 1:00 pm EST on Wednesday, September 19.
It was a project that had Michael J. Perry more than a little nervous. He trusted his employees at HBD Construction Inc. and had a high level of confidence in their abilities. But this was something completely different from anything they had ever done before, and Perry wanted to proceed carefully.
Perry had been introduced to a Charlotte, N.C-based company that had expertise in blast- and ballistic-resistant technology, but lacked the building skills that HBD had as a general contractor in the construction industry.
“They had worked on barriers and things like that on military bases,” Perry says. “And while they had done some work on nuclear facilities, they had not done anything that was a structure.”
The two parties discussed the project and decided to put their respective skills to use to build a structure for a nuclear facility that needed it.
“It certainly took analysis and thought because we didn’t just say, ‘Oh sure, it’s a project. Let’s go for it,’” Perry says. “But we quickly adjusted. We have a great staff here, both in the field as well as in our office. We turned them loose to use their abilities and to tackle this new market, and we did it successfully.”
In an industry that had been hit hard by the recession, the project was a great opportunity for the 130-employee company. But it also reinforced for Perry the importance of doing your homework before you take on a project, no matter how much you may need the work.
“The real issue is if you’re going look at other sectors, do it in a slow, methodical way,” Perry says. “It can hurt you if you just decide, ‘I’m going to go over there,’ and you don’t know all the peculiarities of working in a certain environment. The knee-jerk reaction, particularly in a downturn, is the wrong move.”
Here’s how Perry has found ways to make decisions that both fit his team’s talents and make sense for HBD’s growth plans.
Look for a match
Perry and his team put in a lot of time talking about what’s happening in the construction industry. It’s work that takes time, but pays off when opportunities present themselves and decisions need to be made.
“We get input from all our project managers and field their opinion on where they see the market going,” Perry says. “Certainly, multiple heads are better than one.”
The idea of the constant dialogue is to measure what’s happening in the industry against their own capabilities and talent and look for matches.
“You just can’t pursue every opportunity that is out there so you try to make strategic decisions on what is the best fit for your company,” Perry says. “What is profitable work and who are good customers to work for? Our whole philosophy is customer service that ultimately yields repeat customers.”
When you can find customers who you have a good rapport with and you can build on that relationship, it can only mean good things for your business.
“We look for solid customers who are connoisseurs of construction that don’t just consider it a commodity and something to get the cheapest, bottom-of-the-barrel and quickest way to get it done,” Perry says.
“Those types of relationships usually end up in adversity and struggle and do not end pleasantly. We like to work with owners who understand construction or at least want to enjoy the process and want to have a contractor who is going to be looking out for them and build the best product for them of the highest quality within their financial needs.”
The work that HBD did on the nuclear facilities is a great example of the fruit that can be gained from a strong and committed relationship.
“We had to learn and educate ourselves, but we’re good at that,” Perry says. “We’re nimble because of our size, and we were able to provide a service that the larger companies these nuclear facilities were dealing with could not provide.
“We analyzed what it would take in terms of our resources and our abilities. Is this something within our ability to do? We just decided that it was, and in fact it worked out. We have six or eight successful projects under our belt now.”
One of the underlying keys that you should never lose sight of in your pursuit of work is your ethics and your values.
“It is very easy in this recession to see people bidding out of desperation,” Perry says. “It’s very easy to take shortcuts and do things that ethically you wouldn’t have done in a better market when you’re very busy and flush with work. Those will all come back to haunt you. That’s what the leaders of our company prior to me, that was their philosophy, and that’s what we’re continuing on today.”
Perry says it’s just as important during a recession, even one as tough as the one in 2008, as it is during the good times.
“We’re not going to compromise the way we do business, and we’re not going to compromise our product,” Perry says. “If that means we might miss a project or two and possibly our volume might decrease a little bit, then so be it. We’d rather have that and be in a strong position when the market comes back.”
Know who you need
It would be easy if Perry could hire a specialist to handle each aspect of running his company. Unfortunately, he doesn’t have enough room on his payroll for that many employees, so he needs people who can handle multiple tasks.
“Our project managers have to have the ability to go out on a sales call with me, they have to be able to estimate, schedule, run the project and close out the project and have interface,” Perry says.
“We can’t have a one-dimensional employee. So other companies, bigger companies than us, are more departmentalized and so they can have a person who is just good at scheduling, just good at estimating or just good at project management. That’s not the way we’re set up here.”
So to ensure that he has as many well-rounded people on staff as he can, Perry emphasizes opportunities for employees to learn new skills and grow their talent level.
“We tend to make sure all our project managers and superintendents in the field try to get as much experience in various types of work so that they are not one-dimensional,” Perry says.
“If you take a superintendent who has always done new work out of the ground and has never done a renovation project, he is somewhat limited and unavailable for renovation work. So while we do have folks who have more experience, and we will strategically place a guy in his best position, that doesn’t mean he can’t be trained.”
Encourage your people to continue their training and give them the time to learn new skills that can help them be better employees for your business. When you’re looking for new employees, look at their desire to learn and go after the ones who have the energy to broaden their abilities.
When you do that, you end up with people you can count on.
“My guys that I have here — I feel confident I could put them on almost any type of project,” Perry says.
Set employees up for success
If you have a project on the table that you feel your employees would have trouble completing, you’ve either got to find a way to train them or turn down the project. Otherwise, you’re going to have a very frustrated group of workers.
“You don’t want to set up an employee for failure,” Perry says. “As a leader, if you know an employee is weak on a certain thing, you try to shore up his weaknesses and show off his strengths. You don’t want to send a person into a task that you don’t believe they are up to.”
If you choose to train people, you’ve got to take a firm, yet patient approach to get good results. Perry says this has been particularly necessary when it comes to the influx of technology into the construction industry.
Instead of presenting changes as a burden or something else that a person has to do, present it as an opportunity to make their jobs easier to perform.
“The dawn of the tablets is a pretty good example,” Perry says. “We’re integrating the tablets out into the field now. Our guys, probably our biggest hurdle was getting field people used to computers period. That was a big learning curve and was met with some frustration. But to a man, everybody that gets over the fear of doing it can’t believe how they could ever do without it.”
The frustration that comes about when learning a new task or a new piece of equipment is natural. If you try to force someone to get up to speed quickly or make a sudden change in the way they do their jobs, that frustration is only going to grow.
“We have some new technologies that we are utilizing and admittedly, the young guys tend to take to it faster than the older guys,” Perry says. “That’s great because we have a good mixture in our office or young and experienced guys.
“The younger guys are helping us older guys with some of the new tools and so forth that are out there. Not forcing everybody on something immediately gives a little more time and somebody that maybe would be more anti-whatever, they’ll look over and see someone else doing it successfully and it makes it easier to implement.”
It really comes down to working with your team rather than fighting with them. You’re the boss and there are things that they need to do that aren’t optional. But if you proceed with that attitude, you’re just going to turn your people against you.
“It’s a communication business,” Perry says. “When you’re running a business and you have employees, the key with your employees is to communicate with them. Hear what’s on their mind, what’s worrying them, how they are doing personally and in their business environment, how they view you and how you view them.”
One of the ways business has changed over the years is the tilt toward more acceptance of work-life balance in the workplace. Perry says it’s something he accepts and has integrated into the way he runs HBD.
But he makes it clear that whatever culture you want to have in your business, there is no substitute for hard work.
“In the construction business, there is not an easy short cut to hard work,” Perry says. “It takes long hours, it takes a lot of time and a lot of patience. There’s not a way to hit the one big home run. It’s not like picking a lucky stock and you win big. It’s a lot of projects, a lot of time and that, I don’t see changing. So if you’re looking to click your mouse, do your thing and go home in a short work day, there are jobs that can answer that. But that’s not the construction business.”
How to reach: HBD Construction Inc., (314) 781-8000 or www.hbdgc.com
The Perry File
Born: St. Louis
Education: Bachelor’s degree in civil engineering, University of Missouri-Rolla in Rolla, Mo.
What was your very first job?
I had a little grass-cutting business that evolved into construction. That’s really what I did all the way through college, just about any kind of handyman work that you could think of. Building out basements, porches, fences. I always enjoyed building things with my hands. I do kind of miss that because I don’t have much chance to do that anymore.
What project stands out that you helped build?
When I was at the tender age of 14, my uncle had a very large house in a wealthy area of St. Louis. He turned me loose on his entire basement to design and build it out. I brought in one of my buddies and we single-handedly over the summer and into the winter did that. That was the first soup-to-nuts turnkey project that I did and that evolved to doing other things around his house.
Perry on having pride in your work: I can remember working on that basement and toiling for hours and hours wondering what it’s going to look like. It’s the same thing today when we cut the ribbon on a project that we just completed. It’s the thrill of having a happy customer and being the one who put the whole project together.
Who has been the biggest influence on you?
Without a doubt, my father. What he was able to instill was being fair with people that you deal with, both from the subcontractors beneath us to the owners above us. He always did that and always had a great reputation in St. Louis and I’m hoping to have the same.
Look for the right opportunities.
Don’t compromise your ethics.
Build relationships with your customers.
Does your company have alignment between its mission, its vision and its strategy? If you don’t, you may want to ask yourself if everyone on your team is on the same page as to what those terms mean to your business.
Maybe you’re like a former client of ours who knew that having a clearly stated and motivating mission was important, but wasn’t sure what a “mission” was or how to lead his team to either create one or uncover the one they were already living.
It may be that “mission” is not something that motivates you as a leader. It’s perfectly natural that some aspects of an organizational identity are not equally motivating to us as leaders.
At the same time, as leaders, we need to recognize that we work with and lead others who do find “mission” to be important. They will evaluate us as leaders and our organization based on whether or not we have a clear mission and whether or not we can deliver on that mission.
One of the most common definitions for mission is to answer the question, “Why do we exist?” For example, Nestlé Purina PetCare has a mission to “enrich the lives of pets and the people who love them.” Notice they didn’t declare a mission to sell the best (or most) pet food or pet care products. While we can safely assume that they want to do both, they’ve chosen to declare a reason for being that connects to those they serve: pets and consumers.
Answering the question of why you exist is helpful to many, but it can sometimes be too abstract for certain organizations and people who prefer the concrete. It can sound like you’re about to launch into a discussion of Socrates’ view of virtue rather than address concrete business issues. There are alternatives that get at the same concept in more concrete ways.
The first is to ask a broad cross section of employees the question, “What problems do we solve for our clients/customers?” Of course, one can also ask your clients/customers directly, “What problems do we solve for you?” This phrasing often helps employees and clients describe the value that you bring in a more concrete form. From that data, one can begin to see patterns that demonstrate the value that you bring to your external stakeholders.
You could also ask employees and customers, “How do we help you?” or “What difference do we make in your life/business?” Follow it up with, “Tell me about why that is important to you?” and you can get to answers that resonate more on an emotional level.
Imagine someone asking a consumer, Mrs. Johnson, who buys Nestlé Purina’s Dog Chow the following series of questions:
Interviewer: Tell me about why you buy Purina Dog Chow.
Mrs. Johnson: Our dog, Butch, likes it.
Interviewer: What other reasons are there?
Mrs. Johnson: He’s been very healthy eating Dog Chow, so that’s important to us.
Interviewer: So tell me why that is important to you and your family. The answer may seem obvious, but go ahead and tell me anyway.
Mrs. Johnson: Well, I know that when I buy Dog Chow, Butch is going to be happy, healthy and ready to play with our family. He has brought immense joy to our family, and we want that to last for as long as possible.
You have a choice when you describe your mission. You can make a laundry list of things you do, or you can describe the difference that you make in the lives of those we serve.
Andy Kanefield is the founder of Dialect, Inc. and co-author of “Uncommon Sense: One CEO’s Tale of Getting in Sync.” Dialect helps organizations improve alignment and translation of organizational identity. To explore how to better align your business to an inspiring mission, you may reach Kanefield at (314) 863-4400 or firstname.lastname@example.org.