Archive for June, 2008
June 30th, 2008
I’m always captured by employee and workplace studies. Sometimes the data reinforces what I experience in my own workplace and other times it raises my awareness of issues/situations that have not yet hit my radar screen — a sort of early warning device for issues to consider. The following are some recent study statistics that captured my attention:
- ”55% of employees do not use all their vacation time. Twenty percent do not plan to take an extended vacation this year, intending to take long weekends only.” Hudson survey of time-off trends
- “A new study of 749 working Americans finds that nearly three-quarters (71%) consider themselves ’stressed due to financial concerns,’ with 45% of respondendts reporting that their financial stress makes it harder for them to do their jobs.” Workplace Options and Public Policy Polling, Raleigh, NC
- “In a survey of 1,000 Americans, 30% say starting retirement planning is difficult, a figure that’s almost the same as the number of respondents who say it is difficult to start an exercise routine (29%) or begin a diet (28%).” Braun Research, Princeton, NJ
- “When 1,036 employees were asked, ‘What would most likely cause you to take a mental-health day (an unplanned day off to recover or recharge)?’ 30% reported they would take a day off for family/relationship issues, 20% for work stress/workload, 15% personal issues, 12% for lack of physical energy, 5% for boredom/lack of motivation. Only 18% of employees reported not taking ‘mental health’ days. ComPsych, Chicago
So what? The data reminds me that what goes on in our employee’s lives outside of work have an impact on their productivity (not exactly rocket science, but not exactly always front of mind thinking). It reminds me that change is both necessary and scary and reminds me of the importance of recharging our batteries.
That said — Work hard this week and enjoy a well-deserved Independence Day Holiday!
June 27th, 2008
Batten down the hatches. Whether or not we have talked ourselves into a recession, one is on the way. And it could be a doozy. In my almost 40 years in the banking business, I don’t think I have ever seen anything quite like the perfect storm that is brewing before us.
First, let’s take the meltdown in the financial markets that I have referenced in previous posts. According to published accounts the international banking and investment banking industry will post over $1.1 trillion in losses as a result of the blow-up of the subprime market, the collapse of the residential and commercial real estate markets, and the evaporation of markets for securities backing any kind of real estate, leverage buy-outs or exotic asset-backed securities of any kind. Almost every day, we hear news that suggests that no one has a clue where the bottom may finally rest. It is obvious that commercial and investment banks do not seem to have their arms around the enterprise risk they are exposed to.
The consequences of this mess are many. Record foreclosures and personal bankruptcies. Dramatic declines in real estate values. What will be next is a series of high profile bankruptcies of companies that went private through leveraged buy-outs. Job losses in investment banking, commercial banking, automotive, real estate and construction, restaurant and leisure have been in the tens of thousands. We’ll see more unemployment before it gets better.
Second, inflationary pressures appear to be pushing through the economy and will show up in broad-based price increases beyond just energy and food. Dow Chemical recently announced a 20% across the board increase in the price of their products. They announced yet another increase just the other day. The steel companies have ripped up their long term contracts with the auto companies which will add as much as $500 to the price of a car. Many of our clients cannot get steel quotes beyond a week or two. I read where wholesale prices in May jumped 1.4%.
Upward pressure on food prices has been exacerbated by floods in the
Midwest that have destroyed tens of thousands of acres of crops. The impact of food and fuel price increases has been global and there is no end in sight.
The uncertain financial markets and dramatically weakened economy have caused a bear sized retreat on Wall Street which has sliced billions from stock values.
Third, the sum of all this is an evaporation of disposable income, a decline in net worth and a hit to retirements plans just as the Baby Boomer generation approaches retirement. The evaporation of disposable income is self-explanatory. For the majority of Americans, the largest part of their net worth has been in their home. With the decline in real estate values and the increasing use of home equity for loans, that net worth is dramatically reduced if it hasn’t disappeared altogether. Adding salt to the wounds is a stock market that is at least 20% off of its highs and taking a big bite out of retirement plan balances. It is no wonder that consumer confidence is awful.
There is not much you can do to change the economy, but you can aggressively manage your business to the circumstances. In previous blog posts Terri and I have both shared with you ideas on how to control costs, manage your credit exposure, help employee morale, and improve your finances.
Good luck and wear a life jacket.
June 25th, 2008
There has been much in blogs and traditional media lately about a company’s ‘brand.’ Much of the content is tailored to the process of understanding your brand, but as important is how to engage employees in ‘living the brand.’
- What is your brand? If you don’t know, you really need to find out. How do you do that? You could hire a marketing firm that specializes in branding to help you. Too expensive? No problem, you can figure this out on your own! Ask long term customers why they are your customers. Granted, they may have initially come to you for something specific or because of a particular price/rate, but that’s not why they stay (and if it is, you better be prepared to provide the best pricing forever or risk losing them!). Find out why they stay with you and you will probably learn a lot about your brand. Do they stay with you because your products are innovative, because the products make them somehow successful, because you and your staff care about them? Find out because that’s what you want to keep doing.
- Remember that your brand is all around you. It isn’t just your advertising. It’s everything your customers SEE, everything they TOUCH, and everything they HEAR in relationship to you. The cleanliness of your location says something about who you are as does the way your staff answers the phone, they way the staff dresses and the tone of their voice. Are all of these things reinforcing your brand or are they diminishing your brand? For example, do people come to you because they know you care about them? If so, what message does it send when a staff members answers the phone with a tone that expresses an interruption. EVERYTHING SPEAKS!
- Make sure your employees understand your brand and know how to behave in ways that reinforce it. For example, do your customers come to you for innovative solutions? If so, do your employees act flexibly or do they do things ‘by the book?’ Doing things only ‘by the book’ may demonstrate a rigid position and diminish your brand of being innovative. Let employees discuss how they reinforce the brand in their work. It’s a great exercise to get everyone aligned with the brand and to remind them that everyone in an organization has a part in its success!
- Your employees are your company to everyone who knows them! Take the time to insure they understand what your clients expect from you and what they can do to reinforce the value your company brings!
June 20th, 2008
We’ve looked at not filling open positions and reducing training as ways to reduce employee costs during tough economic times. Another area for cost-cutting consideration is the area of employee benefits. Medical, dental, vision, life insurance, 401k contributions, continuation of salary during medical disabilities and paid time off add up to very real dollars. Are there opportunities for savings by reducing/eliminating these benefits?
Like our other cost-cutting solutions, the easy answer is, “of course!” The more correct answer is, “be careful!” There is much to consider when deciding to reduce/eliminate employee benefits:
- Employee benefits are emotional and as important to an employee as their wage. In some cases even more important because benefits are there to provide health, salary continuation and a future for their FAMILY!
- Depending upon how your employee benefits are established, there may be tax implications to changes you are considering. Be sure to evaluate these changes with your insurance representative and/or tax advisor.
- Stay abreast of what benefits are really important to your employees and don’t provide benefits they don’t value. Keep your benefit dollars focused on the benefits most important to them. For most employees this means health coverage and paid time off, but it varies by employee group. If you don’t know, there’s no better time to take a survey to find out! This knowledge may point you in a direction for savings.
- Take the time to shop your current plans to insure you are getting the very best price. Also consider looking outside your current plan design for a more effective product or plan design. For example, consider a Health Savings Account qualified health plan, a narrower provider network and incentives designed to reward good health as ways to control medical plan costs.
A final word on medical insurance – take extraordinary care when evaluating a reduction in this benefit. Reducing medical benefits typically impacts an employee or family member with medical need – a child with diabetes, an employee with a heart condition, a spouse in need of a kidney transplant, etc. Your very reputation as an employer and as a business could be impacted by your decision. Don’t make a short term cost decision that damages you for the long term.
What practical ways are there to reduce employee costs and not damage a company for the long term? Stay tuned…we’ll keep exploring….
June 18th, 2008
Our blog focus this week is on reducing employee costs. Yesterday we examined the impact of not filling open positions. Today we turn our attention to the area of employee training.
Cost Cutting Idea # 2: Eliminate/Reduce Training – Another easy way to reduce employee expenses is to stop sending them to outside training, discontinue bringing experts in-house to train and stop taking them away from their work duties to learn new stuff. If you don’t spend the money for training, it’s there for other important things, right?
Well…maybe in the short term, but be careful! Tough economic times are the best time to demonstrate your expertise and solidify client relationships. You must be careful not to diminish training in a way that makes your competition more attractive. These are times to distinguish yourself as the best choice, not second best.
I know…much to think about….let’s get together again soon to look at more considerations for controlling employee costs. We’ll figure it out together. Be sure to share your thoughts!
June 17th, 2008
We are headed into a recession. I am often asked how is it any different this time?
The housing market has been soft before. This time around, the price weakness coupled with record volumes of refinancing and home equity borrowing over the last few years has today’s homeowner a little spooked. The erosion of home equity, inflationary pressures from fuel and food prices, and the threat of job losses, have pushed the consumer to the sidelines.
It will probably be well into 2009 before we can expect any recovery in the local housing market. As long as gasoline prices remain high and the Chicago real estate market soft, we should not not expect the shot in the arm for local real estate from relocating suburbanites that we have enjoyed in the past.
What disturbes me most about the current environment is the sytemic chaos and near collapse in the financial markets. The troubles in the investment banking community are unbelievable. Bear, Sterns is gone. Merrill Lynch and Lehman Brothers have been crippled with huge losses. Many of the major national, international and regional banks have posted billions in red ink due to over-exposure to subprime mortgages, various exotic debt securities and losses in commercial real estate and other lending. Credit of all kind has been harder to come by.
Economic activity and the financing of an economic recovery depends on helathy flows of credit. It is going to take a while for the gaping wounds to heal. Against the backdrop of rampant inflation, it won’t be easy.
In this environment, what should the small business person do?
- Be very agressive in managing your accounts receivable.
- Pass on your escalating costs in the form of price increase and surcharges?
- Sell, sell, sell to diversify your customer base and reduce your reliance on the transportation, real estate and construction, restaurant and leisure industries.
- Adjust your overhead and balance sheet to fit the times and your circumstances.
- Make sure you have a good banker, one who has been through a recession or two and knows that the world isn’t coming to an end.
June 16th, 2008
Regardless if you think we’re in a recession or not, it’s hard to ignore the rising costs of just about everything around us. In our homes we control those costs by staying home more, eating out less, turning up/down the thermostat, and more. At work too, we’re looking to reduce costs and for most of us that somehow involves employees. We love employees, we need employees, but they’re expensive and when the going gets tough, they are among the first places we look to control costs.
With employee salary and benefits as the number one or number two cost for most employers, it’s a natural and correct place to look for cost containment. It can also be a fairly risky place to look for savings. Over the course of this week, we’ll look at three favorite areas of potential employee cost savings and discuss the pros/cons of each.
Today we’ll focus on not filling open positions. We’ll follow with an evaluation of cost cutting in the areas of training and employee benefits. Based on your input, we’ll add to the list and at the end of our discussion, we should have an overview of the best options to position our companies for the short and long term.
1. Not filling open positions.
Wow, that’s easy – when someone leaves, we just share the work with all the remaining employees. Cool…more work with less people = cost savings! Yep, but it can also mean a whole host of unintended consequences. Greater work loads can result in reduced accuracy, increased stress and absentee rates, and increased worker injury. Not only might this increase your overall costs, but it may also result in decreased client satisfaction and a loss of business. YIKES! Maybe we better look a little harder at this suggestion.
Perhaps a better approach would be to systematically review all positions. What does the position do? Does it need to be done? Are the tasks properly placed with that position? Is there a better way to complete the tasks? This evaluation often occurs naturally when staff leaves. Dragging your feet in the hiring process allows a new set of eyes to pick up the work of a separating employee. Most departments can work ‘short’ for a while without compromising accuracy, safety or client satisfaction. Challenge remaining staff to use this time to review and strengthen process. Reward them if they can figure out how to get the work done effectively without having to fill the position. It’s always easier to add staff than subtract. Make sure you need to fill the position and with what type of talent.
If your evaluation indicates you need to fill the position. DO IT and fill the position with the very best talent you can find!
June 9th, 2008
Financial times are tough and unlike other times in our history, we’re ALL impacted.
- Rising fuel costs impacts everything from gasoline to energy to food
- Declining home sales result in a decline in home construction and all the trades involved in building homes.
- And don’t get me started on the impact to our investments…
And that’s just the tip of the iceberg — people are losing their jobs, overtime is being eliminated, layoffs are being discussed. Everyone is stretching their dollars farther than before and the stress of it all ends up in your place of business! Stressed employees are less productive and less attentive to your customers than non-stressed employees.
So what can you do?
1. Recognize it! Your employees are looking for support and ideas on ways to make their money work even harder. They are talking about it with each other even if they aren’t talking to you. It may be healthier and more productive in the long run to find a way to encourage these discussions and let them help each other with resources – like where they are finding ‘cheap’ fuel, who has the best food prices, etc.
2. Be flexible! Consider flexing schedules to make it easier for employees to car pool or use public transportation.
3. Be creative! If you normally reward employee performance, consider rewards that ease financial burdens or provide ‘treats’ we have had to cut back on: gas cards, grocery store cards, massage gift certificates.
What else? I know there are employers out there doing things to help employees navigate tough economic times. At Blackhawk Bank we will be hosting lunch hour seminars about the foreclosure process, nutritious meals on the cheap and consumer credit counseling to name a few. Our thoughts are to educate our employees so they can help themselves and our clients.
Share your ideas! We’re all in this together!!
June 9th, 2008
Whether or not it is blamed on the subprime meltdown, the collapse of the residential real estate market, record bankruptcies or the demise of the automobile industry, the financial markets are in turmoil.
What does this mean to you, the small business person, trying to eke out a profit in a chaotic economy?
First, credit is going to be harder to come by and make take longer to get. The availability of credit typically tightens up as we enter a recession. Money that was once plentiful for things like leveraged buy-outs, land acquisition and development loans, commercial real estate and business expansion has virtually disappeared or is severely restricted. You may find your customers wanting to stretch out their receivables with you or, even worse, asking you to carry their inventory.
JUST SAY NO. A customer bankruptcy could bring your business to its knees. We have had all too many examples of old time companies asking their suppliers to help them through tough times only to have them rewarded in the end with a write-off. Your loyalty to your customer is all about delivering a quality product on time at a competitive price and not about becoming his banker of last resort.
Second, communicate proactively with your own banker. Does the financing you have available fit the current reality of rapidly escalating material and inventory costs? Does it accommodate a lengthening of your receivables turnover rate or equipment acquisition to stay competitive? Lastly, recognize that your banker may ask a few more questions and take a little longer for things to get approved.
June 9th, 2008
Hi! I am Rick Bastian, president of Blackhawk Bank. I would like to welcome you to our BizNavigator blog.
I have had almost 40 years of banking experience in a variety of cities, with a slew of different industries and in a variety of economic environments. The management team joining me on this blog adds another 70 years of banking and non-banking experience to the equation.
Don’t fret, though. We won’t be talking much about Blackhawk and we certainly won’t be talking just about banking. As the moment and events move us, we will talk about developments in the economy and what we think they mean. We won’t predict interest rates because that always seems like a losing proposition. We will, however, be sharing some insights into how to navigate the turbulent financial markets as a business and as an individual; provide some tips on managing your customers, suppliers, employees and even your bank; share formulas for success that we have seen elsewhere and maybe weigh in from time to time on what ought to be happening to promote economic prosperity.
This is a new experience for all of us. We all would welcome your comments and suggestions.
