Business Insider Magazine - Volume 3 - Issue 2 - 4th Issue 2007

8/14/2019 Business Insider Magazine - Volume 3 - Issue 2 - 4th Issue 2007

1/40

The HR Balancing Act

BUSINESSinsider

INSIDE: No Recession Says Los Angeles County Economic Development Corporat

The South Bay Los Angeles B2B Magazine Fourth Issue 2007 Volume 3, Issue 2 www.BusinessInsider.us Complimentary Copy

Tips

FromSouth Bay

Human

Resources

Professionals

BETTER OFFER

$PINKSLIP

PRESORT

ED

STD

U.S.POSTAGE

PAID

PERMIT40

GARDEN

A,CA

401(k)Plans

usewith

care WillWork

ForHigher

Premiums


2/40

We end 2007 and ring in 2008 bybringing you timely information on oneof the most timeless topics in businessmanagement human resources. Icant think of a better way to judgehow well a business is run than byhow well it manages its people. Wedecided to theme this issue The HRBalancing Act and found that to bean accurate description for the ever-toughening challenges that confrontSouth Bay businesses. Companiescontinually need to find better waysto hire people and to motivate themto maximize their productivity. Thehealth care crisis has brought topicslike health and wellness out of the gymand into the workplace. CorporateAmerica now faces potential liabilityfor how it manages employee 401kplans, something rarely thought about

just a few years ago. And with a tight

employee-driven job market, com-panies are challenged to recruit andretain the right talent like neverbefore. Employers need to pay moreattention to how they appraise theiremployees and think about how it willaffect company morale and perform-ance. And many businesses are sub-

jected to greater scrutiny to ensurethey are not hiring undocumentedworkers. It truly is a balancing act thatrequires great dexterity to performsuccessfully and our professionals

who submitted articles for this issuewould surely suggest you dont workwithout a net. We also ran an in-deptharticle on the economic forecast for2008 and I personally want toencourage readers to research andfactor in global monetary policy,which is very precarious at themoment, in any predictions about thefuture of the economy. With thedollar dropping rapidly on the worldmarket, it is wise to focus on morethan local economic factors like oursolid employment base and briskregional manufacturing, which werethe kind of indicators the LosAngeles County Economic Develop-ment Corporation used to determinetheir prediction that the South Bay isnot facing a recession in the comingyear.

David WhiteheadPublisher


3/40


4/40

In This Issue

COVER FEATURE:The Great HR Balancing ACT 1729, 3234Tips From South Bay Human Resources Professionals

Appraising Employee Performance 17Guiding a Companys Most Precious Assets for Long-Term Success

Employee Retention Strategies 20

Transform Workplace Stress Into Strategic Advantage 22

A Healthy Workforce is Worth Your Investment 25Corporate Wellness in the Workplace

Fiduciary Responsibility of Handling My Companys 401 (k) Plan 27

Do I need an Independent Investment AdvisorWhere Have all the Accountants Gone? 32Candidates Market Creates Recruitment Challenges for Accountancy Firms

Employers Face Tougher Regulations for Hiring Undocumented Workers 34Proposed Regulations Could Impose Hefty Fines on Employers

Health Care Solutions for Small Business Owners 36

Technology Insider

Corporate Compliance 6IT Requirements with HIPAA, SOX and Other Regulatory Governances

Techno-Ignorance 8Corporate Illiteracy for the Information Age

The Real Deal 9Mortgage Money is Back if You Can Qualify

WHO Comes First 10

Why it Matters to Put Who First in Hiring Decisions

No Recession for the South Bay 12Says the Los Angeles County Economic Development Corporation

How to Recession-Proof Your Business 14

Community Announcements and Business Events Calendar 3031

Meeting, Event And Banquet Resources 39


5/40

BUSINESS insiderMAGAZINE

The South Bay Los AngelesBusiness-to-Business Magazine

Publisher & EditorDavid Whitehead

Contributing WritersKathleen M. Branconier,

Lori D. Burzminski, Pat Byrnes,Tom Fuszard, David Holper,

Ken Roberts, Karl Schmidt, Brian Simon,Tony Traven, Duncan Tooley,Bob Volkel, David Whitehead,

R. Boyd Zack

Graphic Design & ProductionDavid Whitehead & Susan L. Wells

Copy Editing & ProofingBrian Simon

Advertising Sales ManagerDavid Whitehead

Assistant to the PublisherAlexandra C. Hart

BUSINESS insiderMAGAZINEWelcomes Input From The Community:All Letters to the Editor should be concise andinclude the writers name, address and phonenumber. BIM will publish select letters address-ing relevant issues and topics discussed in themagazine. We will not publish street address,email address or phone number. If the editorcomments about a letter, the reader mayrespond with at least as many words as wereused by the editor. We would like to stimulate asincere dialogue. All letters become property ofBUSINESS insiderMagazine and are subject toediting for length, content, grammar, punctua-tion, etc. Letters may be submitted by email to:

[email protected] mailed to:

BIM Letters to the EditorP.O. Box 1032

Palos Verdes Estates, CA 90274

(310) 872-9732www.BusinessInsider.uswww.TheBizBoard.net

BUSINESS insider MAGAZINE makes everyattempt to provide business decision-makerswith current and accurate information. How-ever, BUSINESS insiderMAGAZINE disclaimsany implied warranty about the correctness oraccuracy of information published in BIM andwww.BusinessInsider.us or its appropriatenessfor a particular purpose. You assume full

responsibility for using the information andunderstand and agree that BUSINESS insiderMAGAZINE is neither responsible nor liable forany claim, loss, or damage resulting from itsuse. Opinions and/or claims of BIM contribut-ing writers and advertisers do not necessarilyreflect the opinions of BIMs publisher.

2007 BIM Publications& BUSINESS insiderMAGAZINE

All Rights Reserved


6/40

4 T H I S S U E 2 0 0 76

S O U T H B A Y B U S I N E S S I N S I D E R M A G A Z I N E

d) The CEO and CFO handle the internal controls.e) The CEO and CFO report any deficiencies in internal controls

or fraud involving the management of the audit committee.f) The CEO and CFO indicate any material changes in inter-

nal controls.

Sect 404(a) Internal Control ReportsEach annual report must include an internal control reportstating that management takes responsibility for an adequateinternal control structure and an assessment by management ofthe controls effectiveness. The report must note any shortcom-ings in these controls.

Sect 404(b) External Auditors AttestationRegistered external auditors must attest to the accuracy of man-agements assertion that internal controls are in place and areeffective.

Sect 404(a) Internal Controls Report is the area in which asignificant IT play takes place. Internal controls include auditability of systems both manual and automated. InformationTechnology systems that derive or provide information tofinancial systems used for reporting must include checks andbalances to ensure consistency from one point to the next and

C O L U M N I N S I D E RT E C H N O L O G Y I N S I D E R

SO WHAT IS ALL THE HYPE ABOUT HIPAA AND SOXanyway? Does your company need to be concernedwith the regulations? Are you in danger of being out ofcompliance? Do you need to hire a consulting firm to come inand perform a compliance audit on your company?

If you are working in the health care industry, then you mustconcern yourself with both regulations. HIPAA enables healthcare providers and insurance institutions to exchange informa-tion in a standardized and secure manner that is easy and uni-form. Privacy of Individually Identifiable Health Information isregulated by entities covered by HIPAA.

But what about organizations that are not part of the healthcare industry? Must we expend our IT resources and dollars onthe HIPAA regulations? To answer these questions, we need torefer back to the regulations and guidelines set forth. As clearlystated in the United States Department of Health and HumanServices website (http://www.hhs.gov/ocr/hipaa/bkgrnd.html),the HIPAA regulations do not apply to companies outside the

health industry.SOX is a completely different beast altogether. The Sarbanes-

Oxley Act (SOX), enacted in 2002, helps improve corporate gov-ernance of American public companies. An offshoot of theEnron and WorldCom financial scandals, this law increases thelevel of scrutiny of public companies. More importantly, itmakes CEOs and CFOs personally accountable for any financialmisstatements. Public companies now realize that unlike anyother regulation, SOX compliance is a state not an event.

SOX compliance requires continuous monitoring andreassessment of financial risks and controls to close any loop-holes that could potentially lead to misstated financial state-ments. The key element of the SOX regulations is therequirement that companies must establish and then maintain bulletproof accounting procedures that eliminate any possi-bility of creative accounting. The new systems must promptlyidentify any personnel who attempt to alter established account-ing methods or any existing financial records in an effort toenhance their companys financial performance reports.

The question to ask is if SOX applies to your company. Asenacted, SOX applies to: All publicly traded companies in everyindustry in the U.S., each of their divisions, and all of theirwholly owned subsidiaries as well as any non-U.S. publicmulti-national company engaging in business here. While notrequired by law as yet, private firms may also comply with the

SOX financial framework requirements in preparation for initialpublic offerings (IPOs), private funding or simply to achieve abest practices benchmark.

The SOX elements below require actual certification or spe-cific public actions by companies to remain in compliance.

Sect 302 CEO/CFO Certification of Annual andQuarterly Reports

a) The CEO and CFO review the entire report.b) The report contains no misrepresentations.c) The company presents its financial information fairly.

BYR. BOYD ZACK


7/40

S O U T H B A Y B U S I N E S S I N S I D E R M A G A Z I N E7

4 T H I S S U E 2 0 0 7

to prevent a single individual from falsi-fying that information.

What does SOX compliancerequire?Public U.S. corporations across entire

enterprises must establish a financialaccounting framework producing finan-cial reports that are readily verifiablewith traceable source data. The sourcedata must remain intact and not be sub-

ject to undocumented revisions. Anychanges to software application pro-grams within the enterprise that have anybearingon the corporate financial condi-tion must include documentation as towhat was changed, why the change, bywhom, and when.

Because financial data and financial

applications are all embedded within acompanys IT enterprise, the responsibilityfor compliance to SOX requirementsdivides almost equally between the cor-porate finance and IT departments. SOXcompliance requirements for IT rely onthe Control Objectives for Informationand related Technology (COBIT), estab-lished by IT Governance Institute (ITGA).The framework guidelines defined byCOBIT dictate all major accounting firmsinitiatives to audit company IT infrastruc-ture compliance or shortcomings to SOX.

SOX compliance essentially requiresa complete change in corporate mindsetfrom an IT perspective. It entails adoptingand adhering to a structured approach tosoftware and database systems. Some ofthe software change management objec-tives established with COBIT include thefollowing:

Software changes must regulate inaccordance with the organizationschange management procedures.

Procedures to control the handoverof software from development to testto production environments shouldbe set.

Development personnel cannotmigrate applications and data fromthe test environment to production.

A similar software management pro-cess is in place whether developinga new application or modifying an

continued on page 13


8/40

C O L U M N I N S I D E R

4 T H I S S U E 2 0 0 78


T E C H N O L O G Y I N S I D E R

Managers facing techno shock did everything they could todelay or sometimes sabotage the implementation of technologyuntil they realized they couldnt hold back the tide long enoughto reach their retirement. Others tried to fake it by pretendingthey knew about technologies where they had no training oreducation, and gave bizarre directives as a result. Some still do:Why waste time booking your flight on line when you can callmy travel agent? Or, Why dont you want to use those beauti-ful paper forms with the triplicate carbons I spent good moneyprinting for you? To the tech-savvy generation, these kinds ofdirectives seem moronic, but there are still Neanderthals outthere giving them and enforcing archaic systems.

For those of us who have spent our careers coping withtechno-phobic bosses and co-workers, it has been a frustratingexperience indeed. Ive had to deal with people with authoritywho didnt understand the tools I used to do my job. Mostimportantly, they didnt understand the quantum leap in pro-ductivity gained by automating systems and thought we werebeing less productive when problems crept up while we weredeveloping and troubleshooting our new procedures. Forcingemployees to continue with tedious low-tech systems they

know are less efficient harms morale in the long run andcauses younger tech-savvy staff to lose respect for manage-ment. These sorts of problems are still with us and wont goaway anytime soon.

So if you have been covering up your own techno-illiteracyfor years and it has been causing problems in your workplace,its time to face up to it even if you are an old dog. If youre notready to retire, you are going to have to learn some new tricksto maintain your position of authority and keep the respect ofyour subordinates.


T

HERE WAS A TIME WHEN THE RICH

AND POWERFUL DIDNT NEED TOKNOW HOW TO READ OR WRITE IN

ORDER TO RULE. But can you imagine anyonedoing so today without higher education? Letalone basic literacy. Imagine a time shortly afterthe invention of movable type when mass liter-acy overwhelmed society and those too old tolearn had to fake it lest they seriously compro-mise their credibility and authority.

Well, the new information age has done itto us again. Techno-illiteracy is the greatknowledge gap of our time that is torpedoingproductivity in the workplace. Unfortunately,a large part of the problem is with senior man-agement and older employees. Personal com-

puters started popping up in workplacesacross America in the mid-eighties, captivat-ing the young and curious while drawing con-tempt from the not-so-young in corporatemanagement who thought this computer thing was justanother passing fad. This contempt finally turned to fear thathas carried into the 21st Century, where it is still impeding theproper implementation of technology in the workplace.

If you can relate to this, dont feel bad. You are not alone.This is something that always happens when technology takesa quantum leap ahead of decision-makers capacities to learnwhat it really is and how to make intelligent decisions regard-ing its use. It all makes sense when you think about it. Whenthe technology wave started in the mid-eighties, early babyboomers had begun to dominate corporate management. Thevast majority of them never used computers when they weregrowing up. Unless they majored in computer science or atechnical field that required them to use mainframe computers,they were educated on paper and most of them spent decadeslearning how to manage paper-driven systems while the com-puter work was done on mainframes by those mysterious nerdslocked behind the glass doors. Business people were largelyinsulated from the emerging technologies. However, that insu-lation disappeared rapidly about 20 years ago and many olderbaby boomers still havent recovered from the shock or

adapted to the tools they must now use to conduct business.And oh how their subordinates have suffered as a result.

The paper chase rapidly morphed into a megabytechase, then to a gigabyte chase and is now on the verge ofbecoming a terabyte chase. Its not surprising that pre-techeducated managers went into panic mode when they realizedthey had no competence to manage this stuff and its just get-ting worse every year as they become less trainable. Now weknow why those old nerds who pioneered computing thoughtit was a better idea to keep the real computers with thembehind locked glass doors.

BYDAVID WHITEHEAD


9/40


4 T H I S S U E 2 0 0 7

amortized payment. Most interest-only loans are essentially adjustablerate mortgages. They usually have a fixed interest and payment rate forthe first three, five, seven or ten years. After the fixed term of the loan,

they change into an adjustable rate mortgage. There is no negativeamortization, and they are tied to an index like the six-month LIBOR(London Inter-Bank Offered Rate) plus a margin (lender profit). As ofthis writing, the six-month LIBOR is 4.853 with a typical marginbetween 2.25 and 2.75, depending on the lender. To calculate thefully indexed rate, you add the index value to the margin, say 2.5, and

your fully indexed interest rate is 7.353%. That is what your interestrate would be after the first adjustment at the end of the fixed term ifthat were occurring today. The fully indexed, fully amortized payment

on our $400,000 loan example at 7.353% is $2,757 per month. Soborrowers must qualify for a payment that is $757 per month higherthan their actual payment. That would require an annual income of

over $100,000! So today, the borrower who makes $78,000 can onlyqualify for a $290,000 loan and a $390,000 purchase price with thesame $100K down payment. With borrowers qualifying for less, youcan imagine the impact on the real estate market.

For those interested in the negative amortization, absurdly lowteaser rate loan programs sometimes called Pay Option Arm or Pick-A-

Pay, guidelines are also changing and rightfully so. These loans giveyou the option of paying less than you owe; meaning much less thanthe interest-only payment. If you use the minimum payment option,your loan amount actually increases rather than decreases in the firstseveral years. Originally designed to help well-heeled borrowers man-

age their cash flow more effectively, these loan programs have single-handedly caused more mayhem than any other. The low startingpayment rate, (as low as 1%), has been used to sell an abnormally lowmonthly payment to unsuspecting borrowers without fully disclosingthe pitfalls. That and it being used by people buying more house thanthey can clearly afford has been a lethal combination. Imagine paying

1% and owing 7.5% or more. When loaded up with a three-year pre-payment penalty and high margin, this loan could have a 9% fullyindexed rate! The only safety valve is a negative amortization life cap.When the loan amount increases to 110%125% of the original loanamount (lenders vary), the borrower loses the option to make mini-

mum payments. The good news is that it stops eating up your equity.The bad news is you end up with a payment thats triple what it was!From our $400,000 loan example, a 1% payment rate requires a mini-mum payment of about $1,287 per month. If there were a 110% neg-am cap reached within two years of taking out the loan, the newminimum payment would be $3,093 per month at 7.353%. At 9%, its$3,592 per month or almost three times the original minimum pay-

ment. New guidelines require borrowers to qualify at the negativeamortization loan amount cap (110125% of your actual loan) andthe fully indexed, fully amortized rate. So they are taking the worst

A R E A L E S T A T E P R O S P E R S P E C T I V E


The Real Deal:Mortgage Money is Back if You Can Qualify

BYKEN ROBERTS

In the never-ending saga of theMortgage Meltdown, CreditCrunch, Sub-Prime Fallout and

corresponding Real Estate Market Cor-rection, lets take a break and see where we are. Certainly we havenot seen the worst of losses and write-downs from hedge funds, pen-sion funds and bank exposure to sub-prime investments. Estimatesproject as much as $400 billion in losses by the time the smokeclears. This is a drama that will unfold slowly over the next year. The

creation of a $100 billion superfund as a stopgap measure ensures toprolong the coming agony, at least until after the elections nextNovember. More on this later

The good news is that mortgage money is back. The secondarymarket investors for Jumbo loans, those over $417,000, have returnedto the marketplace. Real estate loans are bundled together into mort-

gage-backed securities and sold to pension funds and other investors.A large part of the trauma of the credit crunch that started in Augustwas the inability of lenders to sell mortgages they funded off ware-house lines extended by banks. Investors pushed away from the tableand refused to purchase Jumbo mortgages. The ability of lenders to

fund and then sell off loans means they will not run out of money tolend. I am thrilled to report that rates for Jumbo loans have returned tonormal. We are back to a more traditional spread between Conform-ing and Jumbo loan amounts, about .5%. So while rates are verygood again, underwriting guidelines are dramatically different.

The changes intend to right past wrongs in loose lending stan-

dards that allowed people to overextend themselves. The goal is toprotect consumers from themselves or anyone else who might abusethe system. This tightening of guidelines will dramatically reducefuture defaults, but on the flip side make it much more difficult foreveryone to qualify.

As I have said before, the interest-only option loan is a very power-

ful financial planning tool when used properly. When coupled with afinancial plan to invest what would normally be principal reductionpayments to get a compounded rate of return (as opposed to payingdown simple, tax- deductible interest), it is the way to create wealth.With interest-only loans, instead of allowing borrowers to qualify at

the interest-only payment, new guidelines require bank underwritersto use either the fully amortized payment or the fully indexed, fullyamortized payment. The fully amortized payment is principal plusinterest. Lets take a $500,000 purchase with 20% down. That wouldmean a $400,000 loan with, say, 6% for the rate of an interest-onlyloan. The interest-only payment is $2,000 per month. The fully amor-tized payment is almost $2,400 per month, a $400 difference. Toqualify for the interest-only payment, the borrower needs about

$78,000 in annual income. The same borrower needs about $90,000to qualify for the additional $400 fully amortized payment.

Now lets see what happens when we use the fully indexed, fully


10/40

WHO,WHAT, WHEN, WHERE AND WHYAnd you will notice it starts with the WHO. As business lead-ers, we focus on the WHAT, WHEN, WHERE and WHY, butseldom do we understand the WHO part of the equation whenhiring or assigning people to specific roles.

I work with several businesses and it is common for a personto be hired for WHAT they are, looking into their background,education and experience. And then be fired for WHO they are.This may seem like an oversimplification, but it can have a hugeimpact on your business.

So lets talk about the WHO. Every individual possesses mea-surable talents or work traits that are unique. These are not skillsthat can be learned, but rather represent the way a person actu-ally views the world and processes information. For instance,there are individuals who are extraordinarily intuitive and caninstantly relate to people. Throughout their lives, they have beenable to connect with people. In this case, their social skills arehigh on the work trait scale. Therefore, they would be wellsuited for face-to-face customer service or some form of sales.

If you combine that work trait to relate to and interact withpeople along with that of someone who is organized, caninstantly recall a great deal of information andcan work in a fastpaced environment, then you have a person who would be ideal

for the restaurant industry or event coordination.Also, hiring managers assume this type of person would work

well at any position. Lets think about this for a moment.In any job or role, there are specific responsibilities and dif-

ferent types of work that need to be done. If the vast majority ofthe work to be performed requires a person to focus forextended periods of time while entering information into a com-puter and double-checking the information for accuracy, thenwould you want to hire someone who needs to interact withpeople?

What would happen if you hired someone who loves to

interact with people and then set them down at a computer forthe majority of the day? Do you end up with a happy employee?Or does this person constantly get up during the day and wan-der around the office in order to chat with co-workers?

So what normally happens in this case? You establish a policythat limits breaks and then you have a formal discussion with theemployee in question and explain the need to bear down andfocus on the job at hand. Does this sound familiar? Now whenthe problem continues and they keep getting up and wanderingaround the office, then further action is taken and soon you arelooking for someone new.

Of course, during this period you invested a significantamount of time, energy and money in the recruitment and train-ing process. More importantly you have seen a loss in productiv-ity an expensive proposition no matter how you slice it.

There is a way around this problem. You can definitivelyidentify the type of work a person does best through the use ofan assessment tool.

Furthermore, you can use this information to better under-stand existing staff and reallocate the work, based upon whateach person is naturally good at, as a way to maximize work-place performance while also improving morale.

The mind-set shift causes you to stop managing the process

and trying to change employees behavior. Instead, you canorganize tasks to suit a persons work traits by understandingWHO they are and the kind of work you are assigning them.

Once your organization is focused on WHO people are andwhat type of work they are best suited for, then the conversationstarts to change in relation to managing people. Managers startfocusing on a persons strengths, instead of trying to overcomeweaknesses. They start assigning work based upon what an indi-vidual does best and keep an eye out for training programs inalignment with these work traits. In this case, the employeesenhance their skills through targeted training geared toward

4 T H I S S U E 2 0 0 710


C O L U M N I N S I D E RR E C R U I T M E N T I N S I D E R


11/40


4 T H I S S U E 2 0 0 7

what they inherently do best and enjoythe most. This concept applies to everyposition and any type of company.

Now managing people becomes lessstressful and more enjoyable. Why thisoccurs is quite remarkable. When man-

agers are no longer investing theirenergy fighting to change the naturalbehaviors of their staff, managing peo-ple requires less effort. Think about this.How much time does it take to manageyour best people? Then how much timedoes it take to manage those who aremisplaced?

Extremely progressive /proactive com-panies know you can measure work traitsand gain a significant insight into theWHO when making hiring decisions andclearly matching the type of person with

the position. This applies equally whencreating project teams using existingemployees. The distinction is: KnowingWHO people are and how they willrespond in specific roles instead of guess-ing. Knowing comes from measuringwork traits using an accurate assessmenttool and then developing the skills andknowledge to apply it.

Also, excellent companies measurethe effectiveness of their hiring practices.Im going to refer to this as a companysbatting average. Great companies notonly measure employee retention, butalso how effective they are at hiring peo-ple that make them better. They keepscore.

The best way to keep score and seehow effective you are at hiring people isto use standard performance criteria forany position and compare the job perfor-mance of new hires with existing staff.

How many singles do you hit? This iswhere new hires rank in the top 50%How many doubles? Top 25% How

many triple and home runs? This iswhere new employees statistically rankin the top 10%.

Out of all the employees hired in yourcompany in the last year, what is you bat-ting average? Are most of your employeeshappier and more productive and is thecompany more profitable? There is noneed to make excuses for market condi-tions, but are you getting better and areyou growing.?

The best employers really care aboutcreating a positive work environment.They are balanced. Of course you have tobe profitable to stay in business, but withthe right balance both objectives can beaccomplished.

Finally, they understand WHO peo-ple are through the use of an assess-ment tool and train the front linemanagers and supervisors on how to

use this knowledge. Then they can traintheir staff on how to measure battingaverage and have some fun figuringhow to maximize potential and bringout the best in people.

Tony Traven is a licensee for CultureIndex in the Los Angeles metro area.Tony can be reached at 310- 683-3607or at [email protected].


12/40

D

ESPITE GLOOM AND DOOM PROGNOSTICATIONS

across the country on the heels of the sub-prime col-lapse, the South Bay economy is not heading into

recession, according to the annual forecast released at the end ofOctober by the Los Angeles County Economic DevelopmentCorporation. The report anticipates marginal area economicgrowth of 0.9% in 2007 and 0.7% in 2008, thanks primarily tofavorable short-term prospects for key South Bay economicdrivers, including the defense/technology, recreation/tourism,international trade, transportation and manufacturing sectors. Italso predicted brighter long-term outlooks for so-called bou-tique industries such as automotive, biomedical and oil (refiner-ies). Workers payrolls should also increase by 4.7% this yearand 5.4% in 2008.

Despite the relatively good news, the South Bay faces severalchallenges in the near future, the report concludes. These include

dealing with shortages of both land and housing; finding ways toease traffic congestion, particularly on the 405; and resolving neg-ative perception surrounding future Los Angeles International Air-port upgrades as well as environmental obstacles to portexpansions.

Jobs and PopulationAssuming the inclusion of San Pedro and Wilmington as well ascommunities in the Harbor Gateway area, the South Bays totalpopulation will swell to just under one million people by January2008. According to 2006 stats, there were about 486,000 jobs in


4 T H I S S U E 2 0 0 712


The presence of LAX,

two ports, Los Angeles Air Force Base

and attractive coastal communities

continue to foster the South Bays

economic prospects.

Still, though the LAEDC forecast

predicts continued growth,

the projected figures for the South Bay

actually fall short of those anticipatedfor the state and county.

BYBRIAN SIMON

E C O N O M I C I N S I D E R


13/40


4 T H I S S U E 2 0 0 7

the South Bay, with the highest concen-trations in professional and business ser-vices and manufacturing.

Job losses are expected in manufac-turing, construction and informationover the next year. However, the areas

thriving aerospace and high tech sector,centered primarily in El Segundo andRedondo Beach, will keep manufactur-ing afloat and in better overall shapethan elsewhere in the County, the fore-cast notes. Retail sales are also expectedto jump by 4.6 percent.

Business StatsThe 2005 census lists 26,553 businessesin the South Bay, with retail leading theway (with just over 12 percent of thetotal), followed closely by professional/sci-

entific/ technical services, and healthcare/social assistance. More than half thebusinesses have four or fewer employees,while just 27 have over 1,000. More thanone-third of the total businesses in theSouth Bay are based in Torrance and Gar-dena.

WagesAccording to 2006 data shown on thereport, the South Bay boasts the thirdhighest annual average wage ($51,689)among LA Countys 14 regions, trailingonly the Westside and Central/Down-town LA. Among South Bay cities, ElSegundo ranks number one by far inannual average wage at $81,621,thanks to the presence of the high-pay-ing aerospace and technology sectors aswell as more than a dozen Fortune 500companies. Among industries, the pro-fessional/scientific/technical sector paysthe most on average ($96,008).

Real Estate

Like everywhere else, the South Bay willcontinue to suffer from the current hous-ing downturn which is not expected tobegin recovery until at least 2009, theforecast states. Default notices and fore-closure rates are also expected to growin the foreseeable future.

The areas intrinsic appeal continuesto fuel housing demand, but new con-struction is limited by the scarcity ofavailable land.

On the other hand, industrial realestate is thriving, with vacancy rates of

just 2.2 percent, primarily due to theSouth Bays favorable location situatedbetween two major ports and LAX. Thevacancy figures are expected to remain

low due to the shortage of land to buildlarger warehousing complexes.On the office side, the South Bays

overall vacancy stats are higher thanthe rest of the County (13.2 percentversus 9.5 percent), but the numbersare notably skewed due to two inordi-nately troubled areas (the 190th Streetcorridor adjacent to the 405 Freewayand Century Boulevard next to LAX).The report lists several key recentexpansions into the area, mostly in ElSegundo where IT and co-location

firms have begun to flock as an alterna-tive to Downtown Los Angeles. Thoughasking leases in the area continue torise, they are still significantly lowerthan those of the Westside.

InsiderSummaryThe presence of LAX, two ports, LosAngeles Air Force Base and attractivecoastal communities continue to fosterthe South Bays economic prospects.Still, though the LAEDC forecast pre-dicts continued growth, the projectedfigures for the South Bay actually fallshort of those anticipated for the stateand county.

Not everyone is as optimistic as theLAEDC. Just before the release of the eco-nomic forecast, a Los Angeles Business

Journalarticle suggested that a recessionwas more likely in Los Angeles than inthe country in general. Declines in homesales, decreased construction, weakretail/wholesale activity and financialmarket upheaval prompted the pes-

simism. Yet, as writer (Anderson Centerfor Economic Research at Chapman Uni-versity Director) Esmael Adibi explained,These outcomes should not be surpris-ing. Significant economic slowdown andpossibility of recessions are the naturaloutcome of prolonged periods of growthand years of risk-taking behavior. Theadjustment period will be painful in theshort-run but will ensure a long-rungrowth.

existing application. Staff must follow procedures that

ensure all requests for change getassessed in a structured way for all

possible impacts on the system. Formal procedures that ensure sign-offs or approvals should govern therelease of software revisions andreleases.

Installation of software changes mustaddress data conversion.

An independent (from developers)group must test changes prior toinstallation into the production envi-ronment.

Back-out plans for software changesshould be in place.

Internal control measures shouldensure distribution of the correct soft-ware element to the right place, withintegrity and adequate audit trails.

The software management frame-work should require that a test planbe created for every development,implementation and modificationproject.

For SOX compliant companies, goneare the days of the quick change to IT sys-tems made by the development staff. Inmany respects, the pressures SOX exerts onthe IT side of an organization force a higherlevel of control and ultimately a higherlevel of overall software quality. With inde-pendent testing required of all changes andnew systems as well as management sign-off, the likelihood system bugs appear willdiminish. Effectively implemented, SOXcauses the IT enterprise in US corporationsto grow up and act like real software devel-opers/Implementers.

Additionally, COBIT establishes several

measures to ensure security of systems anddata integrity. The list below is a subset ofthe security measures required by SOX.

Create security measures in line withbusiness requirements, includingtranslating risk assessment informa-tion to the IT security plan.

Control, monitor and log the use ofsensitive software utilities.


CORPORATE COMPLIANCEcontinued from page 7



14/40

4 T H I S S U E 2 0 0 714


The recent housing downturn,drought and escalating costs for oil andenergy have prompted mumblings of arecession on the horizon. Yet accordingto the latest forecast by the Los AngelesCounty Economic Development Corpo-ration, this is unlikely to occur.

In the business world, recessionarycycles tend to cause a shake-out notunlike evolution: the strong survive andthose who cannot adapt becomeextinct. Whether a recession is comingor not, it is always prudent to be pre-pared in the event of any economicdownturn.

While some business owners seecutting expenses and laying off staff as a

quick fix, that mindset often does moreharm than good, especially when con-sidering the long-term goals of a givencompany.

First, the bad news: Nothing is com-pletely recession-proof. That said, thereare a number of wise safeguards busi-ness owners can implement to ensurethat the hard times wont be crippling.Then again, in the words of South BayEconomic Development Partnership

RELIABILITY HAS ALWAYS BEEN THE FOUNDATION of the

American economy. Even in the face of various wars,

acts of terror, natural disasters, market crashes, political

turmoil or other cataclysmic events, one could always bank on

the fact that over the long haul the stock market goes up, homesappreciate, wages increase and the economy grows. Then again, all

bets may be off in the wake of 9/11 and given that the long-term

effects of the increasingly global economy remain to be seen. Yet so

far, nothing has altered this tried and true formula.

HOW TO

RECESSION-PROOF

YOUR BUSINESS


BY BRIAN SIMON


15/40


4 T H I S S U E 2 0 0 7

Executive Director Joe Aro, You dontneed a recession to put you out of busi-ness.

Many of the following quick tips are just as valid during economic booms.After all, it is better to plan for the

worst-case scenario so you are alwaysready for it if and when it arrives.

Keep a Cash ReserveWhile its imperative to monitor spend-ing and to keep a watchful eye onexpenditures and revenues, its also crit-ical to set some additional monies asidefor a rainy day. Even some extremelywell-run businesses shut their doors inthe wake of 9/11. Why? They didnthave a cash reserve to carry themthrough the lean periods. How much is

enough? Theories vary, but (as is thecase in personal finance), at least sixmonths of operating expenses is recom-mended.

Keep Your Customersat the ForefrontWhen it comes down to it, there isnothing more important than your cus-tomers. According to statistics from theU.S. Small Business Administration, farand away the biggest reason customersleave a business is not because of priceor product quality, but because they feelunappreciated.

Stay in contact with your clientelevia newsletters, mailers, e-mails or peri-odic phone calls to keep them currenton any new products or services, butmost importantly to make sure you arenot forgotten. Additionally, customersurveys are a useful way to invite inter-action and ask for input on how yourservice can improve.

Stay Ahead of the CurveThe rule in business is to obsolete your-self before someone else does, says JoeAro. Keep a close eye on any and allnew technology you can incorporate intoyour business, whether that means inte-grating time-saving software, upgradingyour product, or using Web 2.0 applica-

tions to streamline communications.

Diversify Your Customer BaseThough its important to remain focusedon your core business products and ser-vices, it doesnt mean you should pigeon-hole yourself. Find new applications foryour product that can re-invigorate rela-tionships with existing customers. Thenlook beyond the tried and true to deter-mine if you can appeal to a previouslyuntapped market. You cant run yourbusiness in a vacuum not in a globalmarket, Aro says. You have to ask your-self who else can use that product?

Increase Advertising andMarketingIt may seem to go against the grain tospend more when you have less. Thus,many business owners make the mis-take of cutting back on advertisingwhen times are tough, stating that theyhave to reduce expenditures. Yet this is

precisely when companies should stepup and evaluate their marketing plansand look to broaden their effortsthrough both existing and new print,online and other media options. At thesame time, be careful to focus that efforton your core target market and not towaste advertising dollars by simply get-

ting your name out to whomever.

Cut Waste, Not WantReducing fixed operating expenses those not affected by sales revenues can help ease financial woes during adownturn. Examples may include secur-ing better deals for printing services andhealth insurance and eliminatingunnecessary extravagances such as cor-porate limousines and expensive meals.If cutting staff becomes necessary, itshould not mean unreasonably increas-ing the workloads of those employeeswho are left.

Maintain Open Communicationwith StaffKeep your employees abreast of what ishappening with the company keep-ing them in the dark spawns distrust and look to them for important and cre-ative input that can make a difference.Enlisting employees to develop creativeideas that can streamline operations not

only helps the bottom line but alsoincreases morale.

Sources:7 Surefire Strategies to Recession-Proof Your

Businessby Collin Almeida

(PowerHomeBiz.com):

Recession Proof Your Business

(Blogbusinessworld.blogspot.com)

Surviving a Downturn by Ross Hall

(PowerHomeBiz.com)

Kevin Donlin (Guaranteedmarketing.com)


Though its important to remain focused

on your core business products and services,

it doesnt mean you should pigeonhole yourself.

Find new applications for your product that canre-invigorate relationships with existing customers.

Reducing fixed operating expenses those not affected by

sales revenues can help ease financial woes during a downturn.

Examples may include securing better deals for printing services

and health insurance and eliminating unnecessary extravagances

such as corporate limousines and expensive meals.


16/40

case scenario and making you qualify for that upfront. Its a good thing!It will return this loan program to its intended use those that canafford it.

Lending guidelines still change daily. Finding what we callexpanded criteria loan programs like stated income and 100% financ-

ing is much more difficult. They both require higher credit scores, andstated income requires lower loan-to-value ratios. But they do exist.Now more than ever, you need an expert who is approved with mul-tiple lending sources and who is also a fiduciary to help structure any

real estate financing. Experts say 50% of mortgage originators willlikely leave the business. That should leave more seasoned profession-als to advise you without personal financial gain as the primary moti-vating factor. There are proposals for legislation requiring everyoneoriginating a mortgage loan whether a broker or bank employee to be licensed and obligated to adhere to business standards and

continuing education requirements. Currently, a bank loan officer hasno licensing or experience requirements. Some states have no licens-ing requirements for mortgage brokers. The public deserves better.

Raising the threshold of entry into the mortgage business is certainly anecessary step. Next, professional standards of conduct and educa-

tional requirements need to be implemented.A slowing economy and declining consumer confidence make an

economic downturn a greater possibility. That should keep rates lowmoving into next year. The real estate market continues to slow. There

are some areas and property types declining faster than others. It is notan even, across-the-board correction. The credit crunch in Augustreally accelerated softening prices because it took buyers withoutviable financing out of the market. With the return of good financing

options, albeit tougher guidelines, buying opportunities galore nowexist for well-qualified buyers and investors. A growing number of fore-

closures and bank owned (REO) properties coupled with desperate,motivated sellers will create a big win for those with the capacity tobuy. The logic is simple. When is the best time to buy good stocks?When everyone is selling. When is the best time to purchase good real

estate? When no one wants to buy. Ive seen it many times. The lastsubstantial real estate market correction ended at the beginning of1998. Prices bottomed out, bounced back and then increased $50,000within a few months. And it only took 18 months for prices to surpassthe 3040% decline we experienced. The only way you knew the

market hit bottom was after you already missed it! This downturn willend and values, as always, will increase over time. If I were contem-plating a real estate purchase in the near future, I would get pre-approved, have money in hand and be patient. Just the right property

at just the right price is the right recipe for long-term gain. Excuse me! Ithink I hear someone knocking. I think its Mr. Opportunity!

Ken Roberts is a mortgage planner with nearly 30 years experi-

ence in the South Bay real estate market. Ken can be reached

at (310) 792-7090.

A R E A L E S T A T E P R O S P E R S P E C T I V E

4 T H I S S U E 2 0 0 716


KEN ROBERTS continued from page 9


17/40

WHILE SOME MANAGERS DREAD giving a perfor-mance appraisal, others see the process as onemore opportunity to ensure a companys success.It empowers employees to stretch beyond their comfort zonesand realize their full potential. A formal performance appraisalis a platform from which to summarize the informal evaluationsthat have occurred during the past year, praise the employee fora job well done and discuss areas for improvement.

Feedback on employee performance, both positive and nega-tive, is most effective by continuing throughout the entire year asneeded. Waiting for the annual performance appraisal to pro-vide feedback is a disservice to the employee and to the entireorganization. Bringing performance problems to an employeesattention as they arise also prevents unnecessary surprises duringthe appraisal meeting as tend to happen when such problemsare saved up over the course of the year.

An evaluation system functions as a valuable tool providingconstructive comments and suggestions for positive change. Agood evaluation system represents an important investment inan organizations most important asset: Its employees!

The Appraisal Process

Keeping a written memory file is an effective way to trackand refer back to information about an employees perfor-mance during the past 12 months. Reviewing the memory filefor positive or negative performance that occurred during theyear allows that information to be objectively incorporatedinto the performance appraisal. This could be in the form ofnotes on specific behavior. Copies of exceptional documentssuch as letters of appreciation or warnings should also go intothe memory file.

As a tool to prepare for the performance appraisal, the mem-ory file provides evidence to support ratings, increases the accu-

racy of the performance appraisal by basing the information ondocumentation rather than memory, and ensures the managerwill look at an employees performance during the entireappraisal period rather than just the most recent events. Asimportant as this information is to the process, having a record ofbehaviors to back up ratings generally helps a manager feelmore confident going into the performance appraisal meeting.

Be Truthful. When conducting evaluations, it is critical topresent an objective and accurate analysis of the employeesperformance and resist the temptation to give false praise. Onthe other hand, evaluations should never contain insulting,defamatory or inflammatory language either. Never sugarcoatthe review, but at the same time be diplomatic and tactful.Managers should choose their words carefully!

Be Fair and Consistent. This may require some soul-search-ing on the managers part to make sure employees are treatedequally in the review process. Imposing stricter requirementson one employee because of personal feelings, be they posi-tive or negative, limits the ability for that employee to growand contribute to the companys success. Likewise, ignoringproblems because a person is well-liked or the manager isafraid to upset them creates similar problems.

Set realistic goals. Unrealistic objectives are surefire waysto set up employees for failure. If additional training or guid-ance is necessary, make sure that arrangements are made toprovide employees with the opportunity to expand their skills.Give employees every reasonable tool to ensure their success.

Common Rating MistakesHalo and Horns. The tendency here is to generalize ratingsbased only on one or two specific traits. The shortcomings of anemployee who is especially cooperative may be overlooked as


4 T H I S S U E 2 0 0 7


BYLORI BURZMINSKI

Guiding a companys most valuable assets to reach its potential

creates a platform for long-term success


18/40

4 T H I S S U E 2 0 0 718


may the strengths of an employee whofrequently argues.

Clones. The manager thinks that byextremes they will avoid problems by rat-

ing all employees high or low. The man-ager justifies the high rating becausetheyre all good or the low ratingsbecause they really need to be chal-lenged.

Similar-to-Me. The tendency to giveslightly higher ratings to employees whoare similar to you in attitude, workhabits, etc. than to employees who aredifferent from you.

Contrast. A manager rates anemployee high (or low) because anextremely high (or low) rating is given

to another employee. This tendencycompletely misses the mark of focusingon the requirements of the job.

Most Recent Events. A manager givesan undue amount of weight to what theemployee has done in the last few weeksrather than what the employee has doneover the entire appraisal period.

SuggestionsUse Examples. Specific examples pro-vide the backup to support anemployees performance rating, makethe appraisal more objective and givethe employee clear examples of bothpositive and negative performance.There should be a balance in the use ofexamples to support both positive andnegative behaviors.

Outline Future Goals. Although aperformance appraisal is designed to

lished for the meeting, try not to post-pone or reschedule. The performanceappraisal is an important meeting and

needs to be treated as such.At the meeting, the manager should

explain the purpose of the discussion.Putting the employee at ease by explain-ing that the purpose of the evaluation isto look at overall performance, assist theemployee to develop and grow and not

just to find fault sets a positive and con-structive tone for the meeting. A man-ager may want to give a copy of theappraisal to the employee to read imme-diately before the meeting starts. Thisgives the employee some private time todigest the information before sittingface-to-face with the manager.

Remarks should be based strictly onperformance that is relevant to the job.Anything else is inappropriate.

Being a good listener, trying not to getdefensive if the employee gets argumen-tative or emotional and asking clarifyingquestions will help defuse a potentiallyemotional situation. Remain calm!

In discussing each of the evaluationfactors, the manager should point out

positive skills and accomplishmentswhenever possible before addressing theareas requiring improvement. Clearlyunderstanding how the ratings work andeffectively explaining those to theemployee helps create an objective envi-ronment.

In closing the meeting, the managershould summarize the evaluation, reviewspecific goals and standards of perfor-mance and offer training opportunities

review past performance, the manageralso needs to give an employee a visionfor future performance. Establishing

goals gives the employee something tostrive for in the long-term. Reviewingthese goals helps end the appraisalmeeting on a positive note.

Performance targets should be clearand specific. Some examples are illus-trated in the figure above.

Before, During & After theAppraisal MeetingThe manager needs to spend time think-ing about and planning the items tocover in the discussion. Sufficient timeand privacy should be allowed to con-duct the meeting and interruptions keptto a minimum. To give the meeting andeach other the attention deserved, thedoor should be closed, cell phonesturned off and the office phone notanswered unless absolutely necessary.

Once the date and time are estab-

PERFORMANCE APPRAISALScontinued from page 17


19/40


4 T H I S S U E 2 0 0 7

for the next review period. It is critical tohave the employee participate in the goalsetting and have a clear understanding ofthe expected results and ramifications ifno improvement occurs.

After the Appraisal MeetingThe manager must make time to follow-up on what has been agreed upon byboth parties. This demonstrates thatboth the manager and the company areserious about empowering employeesto improve and reach maximum poten-tial. Both the manager and employeeshould schedule a follow up meetingwithin 30 days or even sooner to reviewthe employees progress.

Any required training should be setup quickly to ensure the employee is

getting the appropriate training andskills to get the job done.

If any interpersonal problems are dis-covered involving other employees, themanager should set up a meeting withboth employees to address these issues,getting HR involved if necessary.

When employees continue to per-form poorly, they must be made awarethat consequences may include furtherdisciplinary action up to and includingtermination. When improvements inperformance are seen, the managerneeds to provide positive feedback andmake note in the memory file.

Additionally, as part of a supervisorsor managers growth, counseling andcoaching from the HR department, orfrom a seasoned human resources advi-sor, helps a manager become moreeffective and ensure a positive outcomein the performance review process.When properly structured, the perfor-mance review process is a valuable toolfor supervisors and managers to create a

positive work environment, foster careergrowth and development and continueto build a successful company.

Lori Burzminski operates South Bay HR,providing outsourced Human Resourcesservices, expertise and recruiting forcompanies that do not have an HRdepartment or those that wish to supple-ment their current HR team with an out-side advisor. Visit www.southbayhr.comor call (310) 921-3805.


20/40

DOES YOUR COMPANY FIND IT CHALLENGING torecruit and retain quality personnel? Recruiting,retaining and rewarding the right people are chal-lenges employers face in every economic climate. Manage-ment usually knows who the right people are. They are theones producing, and sometimes pushing, more than anyoneelse, and keeping the company on track.

Here are five steps to developing a retention strategy thatworks. The first place to start is with an honest evaluation of yourorganization.

Step 1: Define Your Values SystemWhat are your organizations behavioral value standards andvision? Where do you want your company to be in five yearsand 10 years from now? What behaviors do you tolerate? Whatshouldnt you tolerate? Identifying and writing down these val-ues, serves as the foundation for determining whom you hire,whom you keep, and whom you reward. To maintain consis-tency in the organization, its important for these values to guideyour company. Your vision helps identify the employees whodesire to move in the same direction as your business.

Step 2: Establish Trust Within All Areas of the BusinessWe all seek security in our jobs. However, most of us recog-nize this is something we must create ourselves. Securitycomes from trust, and trust comes from honesty and commu-nication. The bottom line is that employees want to knowtheir employer will be straightforward with them. Employeeswant to know when things are going well and when thingsarent. To help build trust within your organization, establish aprocess for sharing important information related to your busi-

ness with your employees. This can be as simple as a quar-terly letter from the president or a weekly e-mail from depart-ment heads. The goal is to keep people apprised of the healthof the company and aware of vital issues. In addition to build-ing trust among your workforce, it will also help employeesmake positive decisions that are supportive of your organiza-tions vision.

Step 3: Assess Employee PrioritiesOnce you know who the real keepers are, survey them to deter-

mine their priorities, both work- and life- related. Is your work-force comprised of risk-takers? Do they have long-term goals ordo they value short-term incentives? The answers to these ques-tions will help you structure effective reward programs that sat-isfy these employees needs.

Step 4: Do Your Homework in Your IndustryNow that you have an idea of your internal value system andwhat is important to your employees, its essential to find outwhat compensation and benefit programs are being imple-mented throughout your industry, especially by your primarycompetitors. This gives you a clearer view of what is commonlyaccepted in the industry and gives you a comparison of whatsimportant to your employees vs. the rest of the industry.

Step 5: Create Compensation and Benefits Packagesthat Support Company Values and Employees NeedsYour research should pinpoint the key areas that are important toyour employees in terms of compensation and benefits pack-ages. Map this information to your overall plans and budget sothat your program adds value to employees.

4 T H I S S U E 2 0 0 720


BYPATBYRNES


21/40


4 T H I S S U E 2 0 0 7

Key Areas to Include in YourCompensation and Benefitsprogram:The foundation for any compensationpackage is cash compensation. Most em-

ployees receive two forms of cash com-pensation: Base salary and a periodicbonus. Your competitive analysis shouldhelp you determine ranges for cash com-pensation. Taking into considerationemployee expectations, as well as organi-zational goals and budgets, you candetermine a target quartile for basecompensation for your employees. Bonusand incentive systems tend to be moreeffective if they are based mostly onobjective criteria; although each systemnormally incorporates some subjectivity

as well.

b. Retirement PlansMany companies offer employees long-term incentives, including qualified retire-ment plans for all employees, andnon-qualified deferred compensationplans for selected highly compensatedemployees.

Qualified plans, such as 401(k), profitsharing, and defined benefit pensionplans, offer tax advantages. Employercontributions are tax-deductible, andemployee contributions are made on apre-tax basis. Participant accounts growon a tax-deferred basis and are exemptfrom creditors. Qualified plans can bestructured to focus contributions on thebasis of performance, age, and/or tenure.

Non-qualified plans permit significantlyhigher contributions, but do not enjoy thesame tax treatment as qualified plans.These types of plans are generally targetedtowards senior executives and have earnedthe nickname Golden Handcuffs due to

the large payoffs that accompany long-term service. Like short-term cash incen-tives, these programs are successful if theycontain the right mix of objective and sub-

jective criteria.

c. Health and Welfare PlansBenefit plans may be critical to youremployees and these kinds of benefitsgenerally fall into two categories: Health



22/40

4 T H I S S U E 2 0 0 722


WORKPLACE STRESS IS HIGH on the worry list of everyHuman Resources manager. The negative impact of workplacestress on business is tremendous in terms of profits lost. Stud-

ies show that employee illness, absenteeism and turnover, customer dissat-isfaction, lost productivity and creativity, and sometimes even workplace

violence are very often the result of workplace stress (see figure 1).To understand how to best utilize stress to advantage, it is helpful tounderstand the energy exchanges at work within the enterprise. Stressaffects the energy level of the company and the individual.

What is Energy?Energy is the ability to do work. This definition comes from thephysics definition of work as force moving through a distance. Iftime is specified, energy becomes power, as in horsepower.Workplace energy is usually different as it is based on a sharingof the human life force. Think of it as the electricity we bring toeach moment by our connection with the immaterial cosmic lifeforces. It is the essence of being alive! It is what gets sapped out

of us when we feel exhausted!Every business enterprise, when abstracted from its unique

products, its distinctive services, its mission statement, its logo,its workforce all of its unique flavor and color, is an energyconverter. It converts the potential energy of a customers moneyinto the chemical and/or kinetic energy of products and servicesfor its customers. The company does this by employing workers inanother energy exchange. The employment contract is an agree-ment for a continuing set of energy exchange transactions betweenemployee and employer.

Employment Energy ExchangeThe employment contract involves energy exchange transactionsfrom both sides. Employees provide energy in manual labor,teamwork, intuition, social interaction with colleagues and cus-tomers, mutual support, attitude, demeanor, creativity, mental skillsand laughter, among other areas. Employers exchange their energyin money, health care, future security (retirement), work environ-ment, praise, recognition, companionship, meaningful tasks,respect, and more.

The ideal is for each party to see the employment arrangement asa beneficial and balanced energy exchange. In such an environ-ment, energy flows freely like conversion of potential energy intokinetic energy in a well-oiled machine. When either side perceivesan imbalance, dissatisfaction drains energy in the form of friction.

Friction is energy waste. If not remedied, friction leads to eventualbreakdown (employee termination or resignation).

STRESS = Energy-Wasting FrictionWhat can a company do about this problem? The answer, just like foran engine, is to minimize the effects of friction. Friction in the work-place is called STRESS. Although a minimum of stress is necessary forgrowth and strength, too much stress for any organism becomesdebilitating. Stress is another name for the emotionally triggeredstate known as the fright-flight-fight survival response. We are trig-gered when we become fearful; we sense that we are in danger.

Where does this threat come from? Itarises from a real or perceived imbalance

in our energy transactions. For example, wesense that a manager, colleague or customer

wants to suck out our energy and give little or nothing in return; wethink our workload grows to exceed our energy capacity; we believemanagement is unilaterally reducing its energy contribution, etc.

Of itself, the survival response is a good thing for our preserva-tion. However, when triggered in the workplace, the response inter-feres with the desired energy exchange (except in response to firealarms and similar dangerous situations). Our blood pressure rises,adrenaline (epinephrine and norepinephrine) is massively dumpedinto our bloodstream, and resources are diverted from the digestiveand immune systems to our muscles. Sometimes workplace-unac-ceptable flight or fight behavior erupts. Most often, that type of

response is stifled, but our emotions and our energy transactionswith others are still affected. If these chemicals stay in our body toolong, they cause illness.

High workplace stress levels often lead HR to use outside consul-tants to identify stress-reducing policy changes or employee motiva-tional programs. Both of these approaches are like polishing theparts of an engine that interface to one another good first steps,but the real answer is the OIL!

Wheres the OIL?What is the OIL that will reduce friction in the employment trans-


23/40


4 T H I S S U E 2 0 0 7

actions and who has it? The oil is foundwithin each employee and is triggered byeach stressful event. The oil is adrenaline,converted under direction of the mind!Theenergy exchange transactions of the work-place can be lubricated and optimized by

an alchemist-like conversion of adrenaline,resulting in stellar performance.

Use Your MINDThe best solution to stress is to direct themind to use the adrenaline to boost posi-tive performance. Although science is stilladvancing in its understanding of themind, there is a useful distinction betweenthe conscious and sub-conscious mind.The conscious, or rational, mind we uti-lize in most of our waking hours. It is themind that we use for thinking, speaking,

reading, computing, evaluating, writing,etc. The sub-conscious mind is responsi-ble for intuition, habits, autonomic bodyfunctions, total memory, self-image, emo-tions, aspirations, dreams, and limitingbeliefs. Although our rational mind maybelieve it is in control of everything aboutus, our life is greatly affected by our sub-conscious mind.

Since our sub-conscious mind runs ourbodily processes and chemical reactions, ithas the power to convert the adrenaline anddirect it toward a positive outcome. Direct-ing the sub-conscious to do this is not diffi-cult, but it does take technique and practice.The conscious mind has developed a protec-tive screen around our sub-conscious that fil-ters incoming information and rejects ideasthat do not match our core beliefs. Becauseof this filter, easy conversation with the sub-conscious mind requires distraction of theconscious mind from its filtering task. Sincedeep relaxation alters the brainwave patternand distracts the conscious mind, it is thepreliminary step. Then conversation with the

sub-conscious consists of three parts: inten-tion, imagination and affirmations.

IntentionWe have up to 60,000 thoughts each day.Without a specific focus, these are like alight bulb sending energy in all directions.As a society, we generally work withintention-deficit-disorder. By contrast, athoughtfully considered intention for our



24/40

4 T H I S S U E 2 0 0 724


actions focuses our mind and harnesses ourenergy into a narrow laser-like beam.Clarifying our intention is a requirement forharnessing our adrenaline response.

ImaginationWe can use our imagination to direct oursub-conscious. This works because the sub-conscious cannot tell any differencebetween information fed to it from immedi-ate sensory input (what is happening in realtime) versus what is coming from our imagi-nation. Successful athletes know this and useit before every competition. They imaginethemselves performing flawlessly; they useall their senses to perceive themselves win-ning. Similarly, employees can imaginethemselves succeeding, dealing with a diffi-

cult customer, completing a challengingwork assignment, or being energized andinvigorated. Once an event is accepted byour sub-conscious mind as reality (comingfrom senses or imagination), it directs allactivity to achieve the envisioned outcome!

I love this customer.I am healthy and well.I am trustworthy.I have fun working smart.I relish challenges.

I accomplish this challenging task per-fectly.

Keeping my work area neat and safegives me pleasure.

Kind words are all I speak abouteveryone.

I respect others.I enjoy and have fun at my work.The sub-conscious accepts these state-

ments and puts them into effect.

Alchemist ProcessThe alchemists sought to convert lead intogold. The workplace Alchemist Processconverts stress into success. It involves foursteps: 1) Take several deep breaths for atotal body relaxation. 2) Set a positiveintention as the desired outcome of theprocess. 3) Imagine calm and completesuccess in the next tasks. 4) Recite a fewkey affirmations (aloud or internally). It isquick, taking only 30 to 90 seconds. It isthe true alchemistprocess because it trans-forms adrenaline into the focused positiveenergy to perform the triggering transaction

perfectly. It is the OIL that lubricates thebusiness energy exchanges! The employeeusing this process both performs better onthe job and goes home happier because alladrenaline is consumed in well-performedtasks. A significant secondary benefit is thatthe employee who learns this techniquewill also use it for converting stresses out-side the workplace, resulting in fewer off-the-job problems.

AffirmationsAffirmations are short declarative sen-tences to confirm to our sub-conscious ourdesired self-image. These affirmations mustbe in the present tense (as if they are true

NOW) and positively stated (no negativeword allowed). The more descriptive andemotion-charged, the more effective theyare. Examples are:

I am calm and competent.I can do this!

STRESS continued from page 23



25/40

What is a corporate wellness program?

A corporate wellness program is an integrated strategy devel-oped to improve the health behaviors of employees. Relyingon initiatives designed to drive and motivate employees, cor-porate wellness programs are a main staple for Fortune 1,000companies because of the economic value they deliver in amultitude of areas.

For every $1 invested, employers can expect areturn of up to $10 through lower medical claims,reduced absenteeism, improved productivity andother factors, according to a survey published inthe American Journal of Health Promotions.

Small and mid-sized employers can yield similar returns andcreate a competitive employment advantage using scalablestrategies. There are seven key components to engagingemployees in a corporate wellness program.

Executive Support Any corporate wellness program mustbe embraced by company executives.Design A properly designed plan encourages, equitablymeasures, and rewards all employees regardless of where theycurrently fall in the health spectrum.Inspiration Employees need to understand the motivationbehind the employers investment into the corporate wellnessprogram and the rewards for employees if they are successful.Education While access to health information is readily


4 T H I S S U E 2 0 0 7

BYBOB VOLKEL

THE SOUTH BAY IS WIDELY KNOWN for its healthy

lifestyle. Walk down the Strand on any given day andits obvious how we got that reputation perfectlytanned and toned people participating in a variety of activitiesfrom biking and blading to surfing and swimming. But take amoment to look around your office. Is your workforcehealthy?

We all know the importance of leading a healthy lifestyle;one based on exercising regularly, eating a well-balanced dietand living in a tobacco-free environment. Unfortunately,statistics show that the majority of Americans do not leadhealthy lifestyles, and more importantly, do not know the sim-ple steps to become healthier individuals.

Current smokers missed more days of work and experi-enced more unproductive time at work overall across11 health conditions compared with former smokersand non-smokers. Journal of Occupational andEnvironmental Medicine, 2006

As an employer, you can be an active participant in helpingyour employees adopt more healthy lifestyles. Imagine thevalue of a program that increases productivity, reduces absen-teeism, lowers workers compensation costs, lowers health-care costs and reduces employee turnover. It may surprise youthat a corporate wellness program can help you achieve allthese goals. In addition, it can bring employees together, cre-ating a culture of belonging and achievement a bond thatcannot be easily replicated by contending employers.

A Healthy Workforce is Worth Your Investment


#1 Why bother? National Health Care will be implementedshortly.Should a national healthcare program be enacted, it will notaffect productivity, absenteeism, team building or employeeengagement all of which are positively affected by theimplementation of a Corporate Wellness Program.

#2 Our company is too small.

Small companies are generally at a disadvantage as bigcompanies usually offer higher salaries, better benefits andmore opportunities for promotion. However, programs likethis can actually even out the playing field. CorporateWellness Programs usually have a huge effect on employeeretention as they foster employees bonding with otheremployees, thereby helping to retain key workers.

#3 It takes too long to see ROI.While it can take two or three years to see a meaningful returnon healthcare expenses, 80% of the benefits to an employees

health occurs in the first 20% of their progress! In a goodprogram, employers see impressive productivity gains/absenteeism results (47.5% drop in absenteeism over a six-yearperiod for participants in the DuPont wellness program).

#4 We already have a disease management component inour health insurance program.A disease management program is not the same as a

wellness program. A wellness program is a proactive andpreventive initiative to improve the health of all employees.A disease management program is a defensive program thatmanages chronic claimants who are already ill.

#5 I dont want to spend any money on a corporatewellness program.The dynamic of individual or team achievement isoftentimes more than the tangible dollar value of the rewardsthat drive results. Done right, bragging rights and a movieticket or Starbucks gift card can go a long way.

Top 5 Myths of a Corporate Wellness Program


26/40

available, employers may want to increase motivation to useavailable resources by bringing in health care coaches whohelp employees build a customized exercise and nutrition plan.Partnership It is most effective to create an environmentthat allows employees to improve their health without the risk

of being judged and embarrassed. A good wellness program

will create partnerships that allow workers to retain a degreeof anonymity while still providing personalized services.Accountability Employee accountability and reinforcementwith milestones keep progress on track and solidify the resultsof the new healthy behaviors.Rewards The most effective corporate wellness programs

include rewards to motivate healthy behaviors. Rewards varygreatly and need not be extensive or expensive to generateresults. Conversely, it is not uncommon to see disincentivesbuilt into a corporate wellness program for those who choosenot to participate.

What type of investment will a corporate wellnessprogram require?No Cost. Moderate Cost. High Cost. The chart below showssample solutions at various cost levels. The fact of the matter isthat corporate wellness programs are fully-customizable to yourbudget, corporate culture, history and values. Furthermore, itenables you to start small and expand the program over time.

Those that have and maintain a corporate wellness pro-gram will tell you that it is simply the right thing to do. Thecomfort of a do-nothing strategy is far outweighed by the eco-nomic benefits and cultural advantages of a well-built corpo-rate wellness program.

To learn more about developing a new, or enhancing an exist-ing, wellness program, please feel free to contact Bob Volkel atABD Insurance & Financial Services ([email protected]) or310/543-9995). Mr. Volkel is Executive Vice President,Employee Benefits, for ABD Insurance & Financial Services, aWells Fargo Company located in Torrance. Widely recognizedfor its collaborative, client-focused culture and unparalleledcustomer support, ABD provides innovative employee benefits

consulting and risk management solutions to its diverse,nationwide client partners.

4 T H I S S U E 2 0 0 726


HEALTHY WORKFORCE continued from page 25

Smokers take an average of almost 11 days more of sickleave every year than their non-smoking colleagues. Tobacco Control Journal

Chronic diseases such as heart disease, stroke, cancer anddiabetes are among the most prevalent, costly and pre-ventable of all health problems and account for more than75% of the nations medical care costs. Centers for Dis-ease Control

55% of adults in California are overweight or obese. California Health Interview Survey, 2006

40% of all cancers are caused by the typical Americandiet, lack of exercise and obesity. Harvard Report onCancer Prevention, 1996

78% of Americans do not meet basic activity level recom-mendations. Wellness International Network Ltd., 2006

A Duke University study comparing the costs of the heavi-est to those of recommended weight found the number oflost workdays was almost 13 times higher, medical claimscosts were 7 times higher, and indemnity claims cost were

11 times higher. Archives of Internal Medicine, 2007

Wellness Facts


27/40

THE RECENT SIGNING OF THE LARGEST REFORM ofAmericas pension laws in 30 years has caused manyplan sponsors to be rightly concerned about their roleas a fiduciary of their companys 401(k) plan. The Pension Pro-tection Act of 2006 is causing the world of retirement plans todrastically change due to focus on fee disclosure, participanteducation and fiduciary responsibility. It is raising awareness ofsituations in which employers have little or no idea that theircompany (and sometimes personal) liability is increasinglyexposed. Now is the time for all employers to revisit how their401(k) plan is being managed. The good news is that employ-ers can meet the governments requirements while reducingcosts and increasing employee satisfaction.

AS A PLAN SPONSOR, WHAT DO I NEED TO DOTO MANAGE MY FIDUCIARY RISK?

Plan fiduciaries (which include all decision makers andliaisons for a 401(k) plan) are held to extremely high standardsof care. ERISA (Employee Retirement Income Security Act)requires fiduciaries of retirement plans to administer and man-age their plans prudently and in the best interest of the plansparticipants and beneficiaries. There is only one way to man-age this risk and that is to engage in a prudent, well-docu-mented process for gathering information, making decisionsand communicating regularly and effectively. In essence,employers must prove that they are doing the right things fortheir people.

Understand the Distinction Between a Broker andan AdvisorA 401(k) plan brokerrepresents prepackaged offerings from aninsurance company or mutual fund family. The investment selec-tions are typically limited and many times there is no assignedresponsibility for determining the appropriateness of the invest-

ment choices on a regular basis. Brokers are paid commissions,and sometimes additional fees, that are taken from the partici-pants account and are not required to be explicitly disclosed.After the product is put in place and everyone goes back to whatthey were doing (i.e. running a business), it is often implicitlyassumed that things will run on automatic pilot.

By contrast, an advisoracts as a consultant to the plansponsor, facilitating a process that considers the consultant tobe a co-fiduciary on an ongoing basis. This presents a greateropportunity (but does not guarantee it) for the plan sponsor toreceive objective information and advice, independent of anyobligation or incentive toward a particular investment offer-ing. Fees may be a flat dollar amount or a percentage tied to

assets. They can be paid directly by the plan sponsor orcharged to the participants, or a combination.

It should not be assumed that having an investment advisoris automatically a better way to go. Whether you use a brokeror an independent advisor, plan sponsors must not forget thatthey need to manage the process and hold all other partiesaccountable to deliver on the services that were promised. Like-wise, it is equally imperative to recognize and negotiate thecompensation being paid. This does not have to be compli-cated or overwhelming plan sponsors can become equippedto determine an advisors qualifications with confidence.

Evaluate and Understand Plan ExpensesThe Department of Labor (DOL) explains that fiduciaries arerequired to know and evaluate the fees paid for services providedto their plan. Plan fiduciaries must assure that the compensationpaid directly or indirectly by the plan is reasonable, taking intoaccount theservices provided (DOL Advisory Opinion 97-15A). A cost analysis of your plan that includes a comparison ofother providers would be needed to properly evaluate and makean informed decision on the reasonableness of the plan costs.Plan expenses include advisory fees, investment managementfees, administration, participant education, investment custodyand recordkeeping. In most cases these can be negotiated sepa-rately or as a bundle. In allcases the fees are knowable when the

fiduciary makes it a point to demand the information.

Employ a Defined Investment Management ProcessA sound investment management process is also necessary for afiduciary to prudently oversee the 401(k) plan and stay out oftrouble. A process that includes the use of a formal investmentpolicy statement, careful evaluation and selection of invest-ments and ongoing monitoring of investment performance isessential in controlling fiduciary risk. The key to this process isthe documentationof the evaluation and basis for the deci-


4 T H I S S U E 2 0 0 7

BYKATHLEEN M. BRANCONIER, AIF

(ACCREDITED INVESTMENTFIDUCIARY TM)


Fiduciary Responsibility of

Managing My Companys 401(k) Plan

Do I Need to Hire an IndependentInvestment Advisor?


28/40

sions made. It is very common (but danger-ous and unacceptable) for employers tolook the other way simply because this maybe intimidating and distractive. Yet with

competent advice it need not be so. Andthere are certain default strategies thatinclude layers of fiduciary protection identi-fied by the Pension Protection Act of 2006.

Communicate With and EducatePlan ParticipantsGovernment wants employers to help issuea wake up call According to the 16thannual Retirement Confidence Survey pub-lished by the Employee Benefit ResearchInstitute in April 2006, many Americanworkers arent ready to undertake the task

of financial planning for their own retire-ment and face the prospect of having to work much longerthan they expect. Government pressure is mounting, and willcontinue to increase, on employers to encourage and make iteasier for employees to take responsibility for themselves.

Higher participation rates

Business Insider Magazine - Volume 3 - Issue 2 - 4th Issue 2007

Documents

Transcript of Business Insider Magazine - Volume 3 - Issue 2 - 4th Issue 2007