In response to current economic conditions, many organizations are paying increased attention to carefully managing balance sheets in an effort to remain competitive, or, in some cases, viable. Companies are taking steps to free up capital and cut costs while also trying to keep their work forces engaged and productive.
In this climate, many employers are finding that health care programs present a cost reduction opportunity, as it’s one of their fastest-growing business expenses.
One way to reduce those costs is to make sure that you are only paying for dependents who meet the company’s eligibility guidelines for group medical benefits. Conducting a dependent eligibility audit not only helps reduce your overall costs but also avoids shifting those costs to your employees, or, for public entities, to taxpayers.
Smart Business spoke with Mark Heatley, vice president with Aon Consulting in St. Louis, about how to save money by conducting dependent eligibility audits.
Why should employers conduct audits?
For many years, most plan sponsors operated on the honor system when newly hired employees added dependents to group health coverage and other employee benefits. However, with the financial pressures of our current economy and health care costs continuing to increase at double-digit rates, employers are motivated to look to other options to reduce costs.
A variety of federal compliance requirements, such as Sarbanes-Oxley and ERISA, have also prompted employers to conduct audits on dependents.
What are the potential savings in health care plan costs as a result of conducting a dependent eligibility audit?
By removing ineligible dependents (typically 4 to 8 percent of enrolled dependents), there is the potential for employers to achieve cost savings of 2 to 10 percent of their spending on dependents.
The audit itself is not just a one-time opportunity to remove dependents that should not be covered under the medical plan but should be a part of an organization’s ongoing health care strategy. By implementing a long-term plan, employers can make sure proper controls are in place for future new hires, life events and annual enrollments to prevent the buildup of ineligible participants. These controls can ensure a maximum return on the organization’s benefits investment and help sustain long-term savings.
What are the reasons that dependents are found to be ineligible?
A variety of factors contributes to ineligible dependents covered on the employer medical plan, but the most common reasons are inconsistent or a lack of internal eligibility processes and procedures; poor communication about eligibility requirements; multiple acquisitions and divestitures, leading to multiple plans and eligibility criteria; and a shortage of internal HR resources to manage and/or conduct periodic audits of dependent eligibility.
Consequently, dependents who don’t meet the eligibility requirements set forth by the plan sponsors include overage dependents, stepchildren following a divorce of the natural parent, extended family dependents under no legal guardianship and unmarried partners with no recognized relationship under the plan or with children of live-in partners with no legal relationship.
Do the recent changes mandated by health care reform legislation eliminate the need to conduct a dependent eligibility audit?
There is still value in conducting audits because many plans will be required to cover dependent children longer than they previously would have. As a result, the need to make sure that the plan is only covering those dependents who are truly eligible has increased.
What are the steps to conducting an audit?
First, get executive management buy-in. This is critical. Presenting the facts about how HR is helping to drive cost reductions, improve legal compliance and promote operational excellence establishes the business case for investing in an audit and helps to advance the brand perception of the internal HR team.
Second, arrange options for those removed from the corporate plan. The most successful tactic to combat negative perceptions of an audit is to create coverage options for ineligible dependents who are removed.
You also need to overcommunicate. Employers should communicate the mutual benefits of controlling health care costs for employees and the organization, such as money to invest in research and development, training, etc. The communication campaign should contain a personalized notification letter that includes:
- Explanations of the purpose of the audit, guidelines to protect confidentiality, the name and experience of the company hired to conduct the audit, and information about the call center to answer questions about the audit.
- Information about which dependents are legally eligible and a list of the individuals currently enrolled under the employee’s coverage.
- A list of valid documentation needed to verify all dependents, such as a birth or adoption certificate, marriage license, etc.
- Finally, companies should involve a third party. Using a third party whose core business is the administration of eligibility can ensure that the process includes best practices (such as offering health options for those removed) and adds a layer between you and your employees that can help allay concerns about confronting employees about the legitimacy of their dependents.
Mark Heatley is vice president with Aon Consulting in St. Louis. Reach him at (314) 719-3802 or at email@example.com.
When mortgage companies started to close due to the collapse of the real estate market, Deanna Daughhetee didn’t fear for her own company. Instead, she capitalized on the fact that there was less competition.
“You need to make sure you do think about what kind of opportunity does this present to us,” Daughhetee says about the economy. “It really starts you thinking about things in a different way, and that’s when you come up with new ideas and new opportunities that maybe you hadn’t thought about before.”
The company, which Daughhetee founded and owns and at which she serves as president and CEO, has 31 branches in 25 cities and opened 11 in 2009 alone.
Much of the company’s success venturing into new markets comes from the involvement of her 350 employees in the process. From gathering research all the way to replicating the company culture in each new location, the process must include effective communication and a set of expectations.
Smart Business spoke with Daughhetee about how to involve employees when venturing into new markets.
Decide how to expand. We actually have a team (to do research). Our marketing team is involved in it and our senior management gets involved in it. Then we also do some informal information gathering out of typically our sales force.
We would go out and we research the markets so we’re looking at demographics, we’re looking at competitors what’s the competitive landscape in markets defining what we think our opportunity is in the market to determine whether it’s a good market for us.
The second thing is can we find the right people in that marketplace or can we transfer people from within the organization into that marketplace.
Is there a good labor force there? Are there people that are trained in whatever it is you’ll be hiring them to do? If not, can the training be provided? What’s the unemployment rate in the market that you’re talking about? How many people are you going to need to hire?
Those types of things are all going to factor into your ability to get that off the ground with the right people.
It’s a combination of (then) analyzing the information and talking through it with your team because you really want to make sure you think it through. When you have a team together and people bringing up different aspects, different thoughts, different challenges, I think you end up making a better decision.
Create an expansion team. On that team, have a point person that will coordinate everything and communicate to the team everything that has to happen and the status of what needs to happen.
That tracking that that person needs to do needs to be from finding your facility down to the smallest detail of who is ordering the office supplies in order to make sure you get everything covered so you have a smooth opening that’s the most important.
The point person makes sure that everyone who needs communicated with is getting communicated with on a regular basis because things will happen, things will come up. In order to keep everything coordinated together, there has to be a process to make sure that everyone knows what’s going on because one thing may affect something that someone else is responsible for.
You need to make sure you have the right people on that team that can ensure what needs to happen gets taken care of and that there’s good communication and collaboration among the team.
Then, good communication with me on what the status is and where we’re at if we run into an issue to make sure that I know that, as well.
The point person needs to be a very detailed-oriented person because they will need to track a lot of information. They also need to be someone who can take charge because they are going to be coordinating with a lot of different people, and needing to get updates from a lot of different people and sometimes they need to push different people to make sure everyone is staying on track.
Define expectations. You also need to define very clear ramp-up expectations. As you either hire or promote whoever is going to be in charge of your new branch or your new area, just be very clear on what those expectations are so everyone is on the same page going into it. That’s one-on-one communication.
It puts everyone on the same page with what results we’re looking for. It allows everyone to work together to achieve those results and to make sure they’ve done what they need to do in order to support getting that result. And then it also allows for everyone to celebrate the successes as those results are achieved.
If they’re not achieved, everyone can also get on the same page with looking at what’s gone wrong, why are we off and what do we need to do to fix it? So it doesn’t come as a surprise.
Set a culture. You have to start with a strong culture initially because you really need to build on that.
The best way is if you’re promoting someone from within to go lead that expansion because that person is already immersed in that culture. Whoever the hands-on management in that new expansion might be, they’ve got the primary responsibility of making sure it’s consistent with the rest of the organization.
If it’s not a promotion from within and you’re hiring someone to lead that, you really need to immerse them in your culture.
What we do is we bring them into our corporate headquarters so they get familiar with both the people here, the environment, the culture, get an understanding of how they work, then we’ll send them out to different branches so that they can get that perspective also. It’s a great way for them to really talk to a lot of people and really understand the organization and what the culture is.
Then lastly you have to talk about it. You have to make it clear that your expectation is that they build the same culture, so you’ve got to be able to define it and make it part of what they’re responsible for.
How to reach: American Equity Mortgage Inc., (314) 878-9999 or www.americanequity.com
Gene Toombs does not question the high level of intelligence that his employees at MiTek Industries Inc. bring to their work. They need it to develop new software and improve machinery used by the company’s customers in the building components industry.
But if those employees who develop the products can’t work with the customers to get the most use out of it, this expertise doesn’t do anyone very much good.
“As much as they are brilliantly smart on the computer, they may not know the intricacies of what the guy in the office who uses the software has to do,” says Toombs, the company’s chairman and CEO.
It’s for that reason that everyone of MiTek’s 1,800 employees takes a regular turn interacting with the customers for whom the company is developing new products and services.
“Everybody here, no matter how technical they might be, because we have many computer programmers and very smart engineering guys with professional engineering stamps, they all go out and see a customer,” Toombs says.
“That’s part of our requirement. What we want them to do is basically understand the customer’s business from a sense of how you would be a good supplier to them. We want them to particularly feel the customer’s pain if the software is not correct.”
In this technical age of constantly updated software and new ways of doing things, this interaction is crucial to MiTek’s success. Revenue is only generated when customers know how to use the product they are buying. It’s why Toombs considers everyone at the company, including himself, a salesman.
Here are some of the ways Toombs puts MiTek in a better position to serve its customers through his employees.
Share the burden
You want your employees to build strong relationships with your customers. But make sure you’re not just relying on one person to handle a particular client.
“In too many businesses I’ve been in in my life, you get this environment where you hear from your top salesman that, ‘The customer will only deal with me,’” Toombs says. “I go crazy. That’s the last thing you want is to be held hostage by one of your salespeople who has a relationship and won’t bring anybody else in from the company to see the customer. Then you are in big trouble. We team sell up and down the organization and I think that’s our strength.”
Toombs brings up his vice president of marketing, Gregg Renner.
“The customer knows about MiTek, not so much about Gregg Renner,” Toombs says. “If Gregg were to leave the company tomorrow, we’d miss him dearly, but in fact, life would go on.”
You need to avoid the situation where one person has all the knowledge about a single customer because if that person leaves your company for any reason, you’ll be in a lot of trouble with that customer.
“We have written reports that we publish that literally confirm what’s going on,” Toombs says. “We spend a lot of time together and we talk. As much as we’ve got some exceptional sales guys and they get paid very well, part of their job is to provide access to their customer to anybody who needs to go see the guy from MiTek. That’s good for the customer, good for the company and, at the end of the day, good for the salesman.”
One of the ways that MiTek promotes the team-selling approach and encourages open dialogue and knowledge sharing about customers is through competition. Customers are brought in and provided a demonstration to compare a MiTek product to that of a competitor.
“We’re very big on presenting our products and services in a positive manner,” Toombs says. “To me, that’s the best thing in the world to have a customer say, ‘Show me what you can do.’ We relish those opportunities. You learn like anything else that you do one thing well and you do something else not so well. You get the right people involved and it’s been a very good situation.”
Customers become more familiar with your business through these types of demonstrations and they also have a chance to interact with other people if they only have one primary contact. It’s a fun and effective way to put a different face on your company and get another set of eyes and ears pitching in to help support a customer.
“We actually relish kind of a Pillsbury bake-off,” Toombs says. “And I’m proud to tell you, when it occurs, we win a lot more than we lose.”
You can take your own steps to make sure you’re not falling into the one customer, one touch point mode by getting out and talking to customers yourself. When you do, make sure you’re the one setting up the conversation.
“I always insist on meeting customers,” Toombs says. “What I do, which has been accepted now but initially it’s not popular, is I pick the customer. By that, I mean, I don’t allow our guys, as much as I trust them totally, to set me up with customer friends where I’ll just hear all the good stuff. I’ll say, ‘I want to see this one, this one and this one.’ … Get your customer list, get your prospect list and literally make your salespeople mad at you. But grab the telephone and call these guys and go see them. Believe it or not, the customers are thrilled to death to have the CEO come in and say, ‘Hello,’ and ask, ‘How can we make your life easier?’”
Be ready to learn
When Toombs heads out to meet with a customer, he doesn’t want to just sit in his counterpart’s corner office and exchange platitudes. He wants to make it an effective use of time to learn more about what his customers need.
“I insist he bring his troops in and it’s not just the two of us glossing it over from our helicopters,” Toombs says. “We try to get the guys involved who actually use the products.”
Make sure both you and the people you are bringing into the conversation are ready for a constructive conversation by doing your research beforehand.
“If it’s an active customer and we have a pretty good software program, we know a lot about that customer, maybe more than they know we know,” Toombs says. “I go through all of that and I go through our history and try to analyze what problems they have had relative to what we do for them. So when I walk in the door, I’m prepared at least for what most of the issues would be.”
The catch, of course, is no matter how much research and planning you and your team do, there’s a very good chance the conversation will still hit upon a topic you weren’t prepared to discuss.
“You always get surprised,” Toombs says. “There may be something we didn’t even realize we were doing, and because we have a good relationship, we can fix it. If I have the answer when that objective comes up, and I never bluff in those cases because I’ve been caught bluffing and that’s not a good thing to do. But if I have the answer, I’ll answer it, and if I can’t answer it, I will tell them I can’t answer it. But I make it a point, within at most 48 hours, I get back to them with an answer.”
The key is to approach these meetings with a sense of curiosity and to encourage your employees to do the same. Don’t let not knowing an answer stop you from getting beyond the 10,000-foot conversation.
“It’s amazing when you’re honest and you say, ‘I don’t know, but I
’ll get back to you’ — people like that,” Toombs says. “I don’t care how good you are at your business, and I think I’m pretty good at my business, you’re not going to know every little facet. That’s impossible.”
Your customers can accept that you don’t know everything. In most cases, they just appreciate your concern.
“I don’t care what business you are in today, particularly in this recession, people like to be acknowledged,” Toombs says. “Not just by e-mail, but they like to see people.”
The only limits that Toombs puts on his sales force are that they are selling MiTek products and services. Other than that, if the approach is ethical and it’s done with the right intentions, Toombs supports it.
“If a guy has some talent and some understanding and a good customer relationship, if he can uniquely put a program together and make money at it and it gets the job done, I’m all for it,” Toombs says. “He doesn’t have to follow the script.”
Toombs views a good leader as someone who serves a company as an agent of change.
“We rarely say to ourselves, ‘This is the way it has to be done at MiTek,’” Toombs says. “If we slip in that regard, shame on us because we learn things every day. We learn from our customers, our suppliers and, quite frankly, I learn a lot from our young people. I think it’s very healthy for a company to embrace change.”
Of course, it’s one thing to embrace change and it’s quite another just to give your team a blank check to do whatever they want. That’s a recipe for disaster, especially if you haven’t trained them properly.
“We do a little bit of in-house training and then we get people into their jobs and let them make mistakes,” Toombs says. “But they’re mentored. They are also hooked up with peers, people that are fairly new, but have made the first cut. They’ll learn from the mistakes they have all made together.”
Get your salespeople on the floor learning about how a product or service works so that when they’re out trying to sell it, they can answer questions about it.
“It’s not that we expect him to do complex engineering work,” Toombs says. “But we give him enough to have the basics so when he does get put out in front of customers, he is not just going, ‘Duh.’ He understands a bit about what we do and what they expect. It comes down to training.”
Making time for your people to actually use the equipment or software that you sell is the critical part of the training.
“I know when I’ve learned things myself or I’ve watched other people that worked with me or for me, it’s amazing,” Toombs says. “You get them in an environment where they are participating in what’s going on, not just writing notes in a classroom. They are literally doing things. That’s a better method of training, and we try to do that.”
How to reach: MiTek Industries Inc., (314) 434-1200 or www.mii.com
As the economy soured, so did engagement, as employees watched their workloads increase and their peers pack up their offices.
A recent study by the Corporate Leadership Council showed that employee engagement has declined steadily, in line with economic conditions, quarter by quarter from 2007 through 2009. Having an engaged work force is not simply a “nice to have” for an organization; it is critical, says Darrell Hartke, Ph.D., industrial/organizational psychologist in the St. Louis office of Aon Consulting.
“With employee engagement being positively linked to outcomes such as organizational profit, retention and job satisfaction, it is something that all organizations must manage,” says Hartke.
Organizations that manage their talent well when the economy flounders have a much better chance of emerging as industry leaders during a recovery.
Smart Business spoke with Hartke about how to engage your top talent to ensure that your company comes out on top.
What is employee engagement?
While the work environment is a critical component of employee engagement, it is the interplay between the individual and the environment that drives engagement — i.e., does the individual fit with the environment, and does the environment meet the individual’s unique needs and expectations?
In recent years, dialogue around employee engagement has exploded. Yet, when organizational leaders are asked what they mean by employee engagement, they give a multitude of responses. But engagement really is the mental, physical and emotional attachment that an employee experiences with regard to his or her work. Engaged employees are:
- Passionate and enthusiastic about their work
- Devoted to getting the job done right
- Immersed fully in the task at hand
- Focused and concentrating intensely while on the job
- Driven to do whatever it takes to complete the task
How are leaders driving engagement?
Leaders are the people who have a disproportionate influence on the business, influencing the products and services offered, competitive positioning and the performance, satisfaction and engagement of employees. While there is no longer a leadership shortage when you look at the raw numbers of talented people in the job market, there is still a leadership shortage when it comes to finding the right leaders. Organizations take a chance when they don’t keep a pipeline of future leaders filled. If you scaled back on leadership development programs last year, revitalize them. One of the most basic practices in building pools of leadership talent is to systematically assess and develop it to ensure leaders have the skills to fit within your organization, drive employee engagement and fuel growth.
How can front-line managers engage direct reports?
Most employees don’t want to work where they aren’t wanted. With today’s organizations often facing large-scale changes such as mergers, acquisitions and divestitures, employers often ask how to keep good employees engaged and prevent them from leaving.
Some may be surprised by the degree to which front-line managers impact the engagement of the rank and file. The recovery is the perfect time to engage in straight talk with front-line managers, equipping them with messages and managerial techniques to keep employees informed and focused on a common organizational goal.
When employees receive honest information from their managers and feel heard, engagement goes up. Engagement isn’t just about the organizational environment. Employees also bring a perspective and skills that either fit — or don’t fit — an organization or role. Traditionally, organizations have focused on finding the best and brightest talent, only to sometimes have those people flounder because they didn’t fit in. Leadership experts agree that the reason that 50 percent of new executives fail is due to poor culture fit, so it is important to find people who are the right fit.
How do you help ensure that employees fit your organization?
First, if roles have changed due to restructuring, tell them what their new roles are. Communicate to prospective employees, new hires and incumbent employees the benefits of any new ways of doing business, as well as the warts associated with ever-changing roles.
Assess for fit when filling positions and make a special effort to retain employees whose attributes and abilities match the demands of the role. Research shows that job fit is associated with higher satisfaction, engagement, lower turnover and stronger job performance, making it well worth the investment.
What are the risks of disengagement?
Employees probably saw their organizations at their worst last year. Seeing friends laid off may have your ‘A’ team poised to leave when opportunities arise. Yet your ‘A’ players are mission critical. Without them, your organization can’t navigate the recovery and you will lose your competitive advantage. Your ‘A’ players own the key customer relationships, are the sources of innovation and hold irreplaceable intellectual property in their heads.
How can a company retain its best people?
Continue to invest in them and help them develop their skills. Training budgets are tight and organizations cannot afford to develop employees if there is not a direct and measurable value. To limit your costs, focus development dollars on your ‘A’ team, customize training and embed it in the work context through coaching. Research shows that the effectiveness of management training is enhanced by 50 percent when personal executive coaching accompanies it.
Darrell Hartke is an industrial/organizational psychologist in the St. Louis office of Aon Consulting. Reach him at (314) 719-3806 or firstname.lastname@example.org.
Changes in regulatory requirements, tax enforcement and claims activity around the world have heightened the interest in compliance with respect to global insurance placements.
This discussion is not just limited to the traditional international lines of insurance, such as property and liability, it also encompasses any cross-border placement, including directors and officers, errors and omissions, and even excess liability insurance.
“Increased compliance may lead to significant additional costs, but there are a number of options,” says Chris Gloriod, Global Client Network account executive at Aon Risk Services Central Inc.
Smart Business spoke with Gloriod about the increased focus on global insurance programs and how to make sure your business is in compliance.
What is driving the increased focused on compliance with respect to global insurance programs?
Corporate governance-related directives, such as Sarbanes-Oxley in the United States or the Turnbull Report in Europe, have created an increased awareness of compliance issues at senior management levels. Attention has turned to insurance where coverage arranged centrally for risks in multiple countries raises questions of compliance with regulations.
Recent changes in legislation, and case law in Europe and elsewhere, have expanded exposures to international firms and there has been a resulting increase in claims activity in areas such as D&O and E&O. Increased claims potential has raised concerns that global insurance programs may not work as intended, with potential problems in both the administration and settlement of claims.
Global insurers have also identified compliance as a key issue. Insurers are concerned with protecting the status of their operating license in developing territories but also with practical issues such as managing their ability to collect and pay appropriate premium taxes. Insurers are now more insistent on arranging local policies as part of any global program.
One key driving factor for these concerns is the legality of nonadmitted insurance. Each country has its own rules and regulations regarding the use of nonadmitted insurance, or insurance written with companies that are not licensed to write business within a particular jurisdiction. Roughly 85 percent of all countries have prohibitions on the use of nonadmitted insurance. Violations of nonadmitted insurance requirements can range from fines/penalties to prosecution and potential jail time. Historically, compliance with nonadmitted insurance requirements has been focused around traditional property & casualty lines of insurance, and these concepts are now being expanded to encompass other lines of insurance, as well.
Finally, overseas governments are placing a higher emphasis on the receipt of insurance premium tax (IPT). The European Courts of Justice ruling in 2001 on Kvaerner plc v. Staatssecrataris van Financien has had a significant impact on the application of IPTs under global insurance programs.
Kvaerner, a United Kingdom company, was a global engineering firm. It arranged for a global professional liability program with premium taxes paid in accordance with U.K. requirements. As the parent company, Kvaerner then internally allocated a portion of the total premiums to various subsidiaries, including its subsidiary in the Netherlands. The Dutch tax authorities assessed the Netherlands subsidiary for insurance premium tax on the proportion of the premium relating to the risk based in their jurisdiction. The European Court of Justice ruling upheld the tax authority’s right to assess Dutch taxes on the level of benefit provided under the global policy. Consequently, European Union states are becoming more vigilant in the assessment and collection of IPT.
Although the Kvaerner ruling specifically related to European Union taxes, other jurisdictions, such as Canada, Puerto Rico and several African territories, have taken an interest in premium tax collection under global programs. As countries become more aggressive in their search for revenue, it is reasonable to review any global program for compliance with the relevant insurance premium tax rules.
How can businesses address these compliance issues?
Solutions exist to address both regulatory and premium tax obligations created under global programs. Traditional methods of arranging for local policies to be issued, either as standalone placements in the local insurance market or as part of a coordinated program through a multinational insurer, in problematic jurisdictions are often the easiest approach. However, local market and/or global carrier limitations may not completely resolve all problems.
Alternative solutions include arranging for euro policies or petitioning local insurance regulators to approve the use of global programs where local market options are limited. Of course, each of these solutions can significantly increase the cost of any international program.
How seriously do businesses need to take the compliance of their global insurance programs?
Some may state that the issue of compliance is overblown. The lack of a significant level of case history does make reaching a clear consensus on the level of potential risk arising from noncompliance difficult. However, the situation is dynamic and no two companies will have the same view on compliance risk tolerance.
The level of regulatory and tax compliance in a global insurance program is an individual decision based around particular objectives and constraints for each firm, and there is no one-size-fits-all arrangement. There is no substitute for an in-depth discussion on the issues involved around compliance to help your company make informed decisions on the optimal program design. <<
Chris Gloriod is Global Client Network account executive at Aon Risk Services Central, Inc. Reach him at (314) 854-0775 or Chris_Gloriod@ars.aon.com.
Business intelligence is a top technology initiative today for most organizations.
The ability to immediately access data pertaining to finance and cost management, operational performance, and sales and marketing trends can improve a company’s efficiency and give it a competitive edge. Ultimately, effective business intelligence can boost a company’s bottom line.
“One of the biggest driving factors for business intelligence is the need to access information quickly to make fast decisions based on current market trends,” says Dave Winkler, business intelligence practice leader at Brown Smith Wallace LLC. “Organizations need to turn all of the data they’re collecting into usable information.”
Smart Business spoke with Winkler about how companies can use business intelligence to harness their data to improve sales, cut costs and improve efficiency.
What is business intelligence?
Business intelligence (BI) includes the skills, processes, technologies, applications and practices that help support decision-making. It’s a combination of applications and business processes that put critical information into the hands of business users so they can do their jobs more effectively and make faster, better decisions.
BI goes beyond standard weekly or monthly reporting on activities taking place within an organization to convert data into usable information for faster decision-making. Systems implemented in a BI initiative today typically provide key measurement criteria for managing your business more closely so you can act immediately when you see positive or negative trends.
How can business intelligence improve a company’s efficiency?
In the past, BI was regarded as a tool for top-level executives, but this is no longer the case. More businesses are immersing their entire organizations in BI so that employees at all levels can harness the power of information to perform their jobs more efficiently. This can translate into increasing sales, reducing downtime, improving operational effectiveness, cutting costs and improving the bottom line.
It is also a tool that can help streamline processes. Now more than ever, businesses are seeking ways to cut the fat out of their organizations so they can compete in this tough economy and BI is a key tool that can help in doing this. Further, BI with scorecards can be implemented within work groups or departments to measure individual/group performance.
How does a business begin evaluating what processes and/or data are essential to implement BI?
Typically, we examine the internal processing of an order for your product or service. This detailed examination generally reveals certain measurement criteria that equate to the efficiency of your business processes. Harnessing that information and turning it into performance criteria is the objective of a BI initiative. How can an organization make implementation of BI a smooth process?
Ultimately, a cultural change will take place as an organization adopts BI methodologies, so it’s important to get buy-in at every level during the design process. For this reason, managers should reach out to employees and include them in the process. That way, everyone takes ownership and implementation becomes much easier and faster. BI is a tremendously useful tool for all employees, so begin by developing department-oriented objectives for a BI solution as well as a companywide objective. Create key performance indicators (KPIs) for that department or perhaps individuals within the department. Create enterprisewide KPIs. And, most importantly, design your BI solution to measure your performance against that objective. Following this approach, a BI system can make a profound impact on a business’s operational improvements and cost management.
What mistakes do companies make when implementing business intelligence?
Not allowing enough time to implement a BI system can contribute to failure. A business cannot expect to implement an enterprisewide solution in weeks. Again, the process must be taken step by step. Companies must invest the time to take inventory of existing systems and do some soul searching to uncover the organization’s operational and data-collection weak spots before jumping into a solution. It’s critical to tailor a solution, since no two companies will require the same BI system. Implementation can take as little as eight weeks or up to a year depending on the complexity of an organization. The best advice is to avoid rushing the process.
How does a company measure its return on investment on a system that gathers business intelligence?
ROI is a key factor in any strategic decision. Especially in today’s business environment, an organization must realize ROI for spending the time, expense and resources required to properly implement BI.
First, assess the cost of current business processes and compare those results with the cost of automating processes through BI. This comparison should be conducted across the organization in every area that will be touched by the BI initiative. Then, set key performance indicators on these targeted savings and measure when targets are reached. Essentially, the ROI a company realizes is dependent on the input/output equation: the more time and energy a company invests into proper implementation, the more benefit that business will discover.
Dave Winkler is the business intelligence practice leader for Brown Smith Wallace LLC. Reach him at email@example.com or (314) 983-1375.
Are you paying too much for insurance? If you’re like most companies, the answer is yes, and you are looking for ways to cut those costs.
“You don’t want to trade dollars with the insurance company because the insurance company usually wins that game,” says Bill Goddard, director of insurance consulting at Brown Smith Wallace LLC. He serves as an independent insurance consultant, advising companies on where they can cut insurance costs while best protecting their businesses.
As a CEO, you probably don’t have time to burrow through the paperwork and translate the small print to determine whether you’re getting the best deal and buying enough protection for your business. Business owners without an in-house risk manager don’t have the time or expertise to gather and analyze bids, and that’s where an independent insurance consultant can help. Businesses can engage this type of expertise and essentially have an on-call risk manager to help them identify insurance savings and ensure they are protected.
Smart Business spoke with Goddard about how to identify the most cost-effective way to buy insurance and protect your company, and how an independent consultant can help you do both.
What factors do business owners overlook when purchasing insurance?
Most companies go through the process of bidding their insurance. However, just bidding your insurance doesn’t guarantee you end up with the most cost-effective program. There are hidden costs that business owners might not recognize.
Also, business owners often do not take deductibles that are right for their business. Each business has its own risks, some unique, and an analysis by an independent adviser (someone not selling insurance) can help you identify the correct coverage and cost for your business.
What questions should a business owner ask when evaluating insurance options?
To make sure you buy enough protection in the right areas for your business, consider these questions: Do you have business interruption coverage that will protect your income? What if your business burns down? What if one of your suppliers’ buildings burns down and prevents you from doing business?
Do you have safety programs in place that can reduce the cost of workers’ compensation coverage? Are there people enrolled in your health insurance plan who are not eligible? Do you have the right health insurance plan design? Does your health insurance plan design encourage employees to be smart consumers?
Does your company provide wellness programs that can reduce the cost of medical premiums? Is your third-party claims administrator paying claims properly? Can this person be more efficient? Getting insightful answers to these questions can lower costs and ensure that you have proper protection for your business.
Can establishing a captive insurance company save you money?
Captive insurance companies work for small and medium-sized businesses as well as Fortune 500 companies. There are both insurance and tax benefits to forming a captive insurance company.
Essentially, you can finance your insurance costs more efficiently by using your captive to insure your business the profits stay in your insurance company.
You can finance traditional insurance, like workers’ compensation deductibles or insurance risks that are more complicated and hard (expensive) to purchase, such as pollution liability. An independent consultant can determine whether a captive insurance company will work for you and help you take advantage of this lower cost method of buying insurance.
How can a company assess whether its insurance provides enough protection at the best price?
All companies can benefit from the services of a risk manager to help figure out how to best purchase insurance. You may want to consider outsourcing to an independent risk manager who can evaluate your current policy and bid on competing policies. To be cost effective or to acquire higher-level expertise, you could bring in an independent consultant once each quarter or as needed to review your insurance plan.
Most companies don’t review their policies often enough. Even if you think you have a great insurance program and you trust your broker or provider, you don’t know what you don’t know.
I’ve never walked into a company and not found money lying on the table in this arena.
How can an independent risk manager work with a company’s CPA or accounting department during this process?
An independent risk manager can help your accounting department or CPA identify potential areas for insurance savings. The review will identify the low-hanging fruit that can reap immediate savings.
Engaging a risk manager will save your team time since he or she will know exactly where to look for unnecessary costs and how to execute a savings plan. With creative insurance structures, such as captive insurance companies, a business can realize significant savings.
Bill Goddard is director of insurance consulting at Brown Smith Wallace LLC. Reach him at (314) 983-1253 or firstname.lastname@example.org.
You’re about to purchase a piece of property or buy a business, and you’ve done your research. But have you remembered to do your environmental due diligence to uncover any environmental conditions attached to the property?
These conditions can be big or small, but you need to make sure that you know about them before completing the transaction. Doing so can help protect you from any liabilities associated with the conditions and allow you to address or minimize these issues from the outset.
“You can run into project delays if you find an environmental issue that you hadn’t planned for,” says Eugene P. Schmittgens Jr., of counsel with the litigation and environmental practice groups at Greensfelder, Hemker & Gale, PC. “If that happens, that’s going to result in a delay. You need to take time for this due diligence to find any problems and determine if a deal still makes sense or if you need to walk away from it.”
Smart Business spoke with Schmittgens about doing environmental due diligence in transactions and why environmental conditions may not mean the end of the road for your deal.
What environmental due diligence do you need to do before completing a transaction?
The first step in performing proper due diligence is a Phase I, which is a study of the property by an environmental professional. This helps identify conditions that may exist on the property that could lead to liabilities. No business or property is the same, but the requirements for performing a Phase I are specifically spelled out. While a proper Phase I contains the same elements, every approach to an environmental condition is different, based on what you’re trying to accomplish in the deal.
The Phase I is also very limited in scope and only addresses whether there’s been a potential release of a contaminant or petroleum product on the property. It won’t address if there’s asbestos, mold or lead paint in the building, which you also need to know about before a renovation project. The Phase I also won’t identify whether someone has a proper air or water permit or if the waste operation is handled properly. If you are purchasing an ongoing business that may require permits, you must request this additional review because it is outside the scope of a Phase I but still can impose liability on the purchaser.
If you do find an environmental condition, you may need to perform a Phase II investigation. This is invasive sampling of the property to figure out whether contamination exists. This is like throwing a dart at a dartboard you may or may not hit your target. So just because you didn’t find anything during sampling doesn’t mean there isn’t any contamination; you might have to do several iterations to find it.
What are some key things that need to happen when doing environmental due diligence?
You need to put your team together before entering a transaction to help guide you through the process. You need real estate and/or corporate attorneys, together with environmental lawyers. Then you need technical people, including a consultant who is familiar with the area and the state’s voluntary cleanup program to help you make good business decisions and understand the risk involved.
These people can help you understand what makes those liabilities exist under environmental law and how to avoid them. You can solve a lot of problems early on by using this team.
You also need to determine the future use of the property or business, because that will affect whether a recognized environmental condition will cause a major problem. For example, if you want to put in a development that includes a day care center, your requirements for remediating the property will be different than if a factory were going in.
What is CERCLA, and how does it affect businesses?
CERCLA is the Comprehensive Environmental Response Compensation and Liability Act, or Superfund, which was passed to address primarily abandoned contaminated properties. This made owners of contaminated property liable for the cleanup of these sites and provided for retroactive liability, so anyone with dealings on the site could be liable. This had a lot of people scared that they would buy property and not know it was contaminated, and then have to pay to clean it up.
A number of amendments have been made to the original law, and Congress has given up some Superfund liability if people purchase the property and address the contamination. This may involve remediating the property in a voluntary cleanup program. This allows the contamination to be addressed depending on the best use of the property.
How can you prepare for the liabilities and costs associated with environmental conditions?
To a large extent, people are afraid of properties that may have environmental conditions. But you need to break the issue down into the simplest terms what will it cost to address this, plug those costs into the pro forma and determine whether the deal makes sense. The problem with environmental matters is that we see big news stories about companies incurring millions of dollars to clean up a problem on property purchased.
You need to think of environmental problems as just another piece of the business transaction puzzle and have your team help you walk through this and understand the real risks. The risks can be significant, but some are not so big as to make you walk away from a deal.
Eugene Schmittgens Jr. is of counsel with the litigation and environmental practice groups at Greensfelder, Hemker & Gale, PC. Reach him at (314) 345-4776 or email@example.com.
Even if your company does not currently deal with unions, passage of the Employee Free Choice Act could have a negative impact on your business.
The EFCA would amend the National Labor Relations Act, changing the way in which companies are unionized and requiring a new strategy for dealing with unionization and employee relations. And because any business with two or more workers can be unionized, you could be subject to the requirements of the bill should it pass.
“The EFCA was initiated to make organizing easier,” says Mary Beth Ortbals, a member of the labor and employment practice group at Greensfelder, Hemker & Gale, P.C. “Disadvantages of it include the elimination of secret ballots, an expedited election process and binding arbitration in the event that both parties are unable to reach an agreement.”
In preparation for the bill’s possible passage, you need to stress communicating with your employees now to educate them about your position on unions.
“You need to establish a union avoidance plan before the Act is voted on,” says Dennis Collins, chair of the labor and employment practice group at Greensfelder, Hemker & Gale, P.C. “You need to communicate to employees your position on unionization and the potential risk factors in advance of a union organizing campaign.”
Smart Business spoke with Ortbals and Collins about the Employee Free Choice Act and how to prepare for its possible passage.
What is the Employee Free Choice Act?
The proposed act has three provisions. The first authorizes a card check procedure, where a union can be certified without a secret ballot election if 51 percent of workers sign authorization cards supporting the union. There may be a compromise bill to retain the secret ballot election, but this would require quick elections and mandatory arbitration.
The proposed act also puts further restraints on businesses, with triple back pay to employees who are discriminated against or terminated while involved in union organizing activities or in the time leading up to the first union contract. It also imposes penalties — up to $20,000 per incident — on employers that engage in willful or repeated unfair labor practices.
It takes away the rights of the company and the union to agree or not agree to collective bargaining agreement provisions if the first labor contract is not reached within 120 days from the start of bargaining. Instead, an arbitrator will establish matters such as wages and benefits for the first contract, which will be in effect for two years. You then will no longer be able to say no to the demands of the union.
How does a card check procedure negatively impact a business?
This procedure could take away the right of an employer to require that workers vote in a secret ballot election to determine whether they want to be unionized. The union can be certified without an election if more than half the work force signs authorization cards.
You may have no idea that a union is trying to organize your work force until after the union obtains authorization cards from 51 percent of employees. This does not give you an opportunity to present your views on unionization before your business is unionized. A signed authorization card is valid for one year, so this gives the union a long time to collect cards.
A compromise has not been reached to remove the card check provision from the bill. Some efforts have been made to reach a compromise because of the opposition to the elimination of secret ballot elections, but the AFL-CIO has not signed off on this compromise.
Do business leaders still have reason to worry about the EFCA, even if the card check provision is dropped?
Yes. If the card check procedure is dropped, there will, in all likelihood, be a provision granting unions the right to force fast elections — within five to 10 days — after 30 percent of workers sign authorization cards. Now, union campaigns typically run for two months. This time frame gives you little opportunity to communicate with workers regarding your stance on unionization.
Another possible condition that may be included in the compromise bill is a requirement that union organizers be allowed access to workers at your office location. This would be a further intrusion on management’s rights.
Another compromise provision would bar you from holding work-time meetings to present your views on unionization. These alternatives take away a level playing field and disrupt business operations. However, the EFCA, as proposed, requires mandatory arbitration, and an outsider would then impose an employer’s wages and benefits for the first two years of the agreement.
How can you prepare for the possible approval of this act?
You need to establish a union avoidance plan and inform workers about your view on unionization. Employees need to be educated on the tactics unions will use to impose unionization on a company without an employee vote. Make sure employees also understand that signing a union authorization card is the same as a vote for the union.
Even if the card check provision is removed from the final bill, the fast-track election compromise provision would only give you several days to communicate your stance against unionization to workers. The compromise bill may also prohibit you from requiring workers to attend these meetings.
Dennis Collins is chair of the labor and employment practice group at Greensfelder, Hemker & Gale, P.C. Reach him at (314) 516-2648 or firstname.lastname@example.org. Mary Beth Ortbals is a member of the labor and employment practice group at Greensfelder, Hemker & Gale, P.C. Reach her at (314) 516-2646 or email@example.com.
Every industry needs to reduce costs in this economy. Therefore, it is essential for organizations to approach this demand in a forward-looking manner, no matter the urgency placed on immediate results.
Risk management tools and practices provide a company with the opportunity to identify areas where improvements can be made, ranging from the coverage held by a firm to its staffing practices, says Patrick M. Lawton, strategic account manager and vice president for Aon Risk Services Central Inc.
“By taking thoughtful and strategic steps forward, you will secure a determined grip on your firm’s future and position your business for continued success,” he says.
Smart Business spoke with Lawton about how companies can identify the areas that need to be fixed and how they can fix them.
In these tough economic times, how can companies meet the needs of a recessed economy?
Organizational and operational priorities are being driven more than ever by the current difficult economic issues. Cost reductions in all aspects of a company are at the top of the list. Three key byproducts of the recessed economy are:
- Organizations are struggling with reduced product demand, high costs and limited access to capital.
- The cost of credit will be high for the near term as economists suggest the credit market will remain tight.
- Most economists believe that corporate profits will decline in aggregate by as much as 50 percent for the year.
Operating in such an environment, companies have little choice but to cut capital spending and reduce the cost of sales. Indeed, recent surveys show a significant number of organizations plan to continue to aggressively manage both costs and staff in the months ahead. Although experts have varying thoughts on how long this downturn will last, most are in agreement that we are not out of the woods yet.
Unfortunately, many companies address these challenges too late in the game, often by drastically implementing only one solution. Instead, they need to strategically integrate these various components, so costs are optimized and managed in an appropriate and realistic fashion. Having a plan in place prior to instituting change is critical.
What are some of the critical factors companies should consider while implementing a plan?
The keys to a successful cost reduction initiative include, but are not limited to, the following:
- Alignment with organizational strategy: Focus on the organization’s mission and values with an integrated approach across human resources, operations and risk management.
- Legal defensibility: Follow established internal policies and adhere to local statutory issues at any given location affected by the strategies.
- Risk mitigation: Identify hidden risks, such as unplanned attrition, sabotage, workers’ compensation and disability claims.
- Metric-driven approach: Continuously monitor exposures and opportunities in a cost-effective manner. Constantly review newly reported losses and changes in property exposures as the minimum.
Ongoing sustainability recognizes and quantifies exposures such as accidents and disabilities associated with your organization’s workplace, while addressing new and ongoing claims and anticipating future liabilities. Additionally, the incorporation of a standard planning approach to review future decisions in anticipation of change, coupled with ongoing risk assessment, will support the organization’s goals and interests. This is easily accomplished with the engagement of a specialized advisory service and senior executive-level facilitators.
With these mitigation strategies firmly in place, you’ll benefit from maintained sustainability in the following ways: stabilized productivity; ability to meet continued customer needs or expectations and, therefore, satisfaction, loyalty, revenue and cost of sale; retention or transfer of outstanding employees; management and control over employee morale; and minimized disruption of benefits to current disabled workers.
Predictive analysis projects future impacts and estimates future liabilities through statistical analysis. In order to allow an organization the flexibility to consider a number of options in deciding how best to manage costs, it is useful to engage in actuarial analysis. By reviewing historical losses, trends and expert opinions as to future considerations, you accrue for future balance sheet liabilities.
How can a well-designed plan help mitigate the risks companies face?
A well-designed plan will support significant value creation for the organization, delivering a sustainable approach to ensure that resulting workers’ compensation and disability claims costs are handled proactively, grievances are minimized, productivity is not negatively impacted and customer and shareholder confidence is maintained.
Specific to the above facts, data supports that an organization may have increased costs of 30 percent in workers’ compensation alone. This does not consider productivity issues, unplanned attrition and other costs directly affecting the balance sheet in various ways. Therefore, it is imperative to plan for the cost reductions by incorporating all aspects that may prove costly or that were previously not contemplated as a cost. By benchmarking an organization’s data against its peers, it quickly becomes evident where the firm is thriving and where some additional attention may be required.
PATRICK M. LAWTON is a strategic account manager and a vice president for Aon Risk Services. Reach him at (314) 854-0734.