By Pat Petersen    

Which group of employees would be better for your company: a group of talented and motivated individuals, all diligently working on their own to further the goals of the organization or a group of employees who shared a common vision and common goals—a group that works together and who supports each other in furthering the goals of the company?

According to researchers Katzenback and Smith in The Wisdom of Teams, 1993), “Teams outperform individuals acting alone … when performance requires multiple skills, judgments, and experiences.” What this means is that whole is much greater than the sum of its parts. Many other researchers confirm these findings.

Virtually every organization, regardless of size, mission, product, and/or service can and will benefit by establishing teams. Don’t think that excludes you if you are a sole proprietor, an independent consultant, or a “mom and pop” business. These types of businesses also need teams in order to survive and thrive.

Needless to say, many of us are in a “survival mode” in this economy, and it will take a lot of flexibility and adaptability to thrive. Teaming can be a huge help.

Too often, however, business owners look for a “silver bullet” to solve all of their challenges, especially when it comes to helping people work better together to produce the best possible outcome for their organizations. In doing so you may be overlooking a concept that’s been around for a long time and for good reason. People produce better results when working as a team.

Do you need teambuilding?

How can you determine if teambuilding will benefit your business? If you have ever said or thought any of the following, teambuilding may be appropriate for your organization:

• I thought I explained everything well, but I didn’t get the results I needed.

• I don’t understand how people can sit next to each other and not offer help without being asked.

• Everyone gets his own piece of the pie to complete, but in the end, nothing fits together; we don’t have a whole pie, only separate slices on the same plate.

• Each one of us seems to have a different solution to issues and challenges. If they all achieve results does it matter? Should I set down a single way of doing things or would it be better to let majority rule?

• There seems to be a lot arguing among staff about which is the “right” way to do things.

• I seem to spend a lot of my time redoing everything other people have done.

If any of these situations sounds vaguely familiar, you may want to consider doing some team building, which can be done in a variety of ways, with most of them are relatively “painless.”

Before starting however, first determine what outcomes you want to achieve from these events or programs, such as improved communication, less bickering, more cooperation, on-time completion of projects, or fewer “do-overs.”

The teambuilding process

Here are some of the basic steps in a teambuilding process.

• Determine your starting point. This involves doing a baseline assessment of where the team is currently, prior to any intervention, so you can determine which process would be the most suitable. Then, be certain to conduct a post assessment to see if the results you wanted were achieved.
• Create an unbiased environment. Include the team leader working side-by-side with their team members.
• Assess preferred work styles. Determine work preferences and how those preferences affect teamwork in your environment.
• Do team profiles. Some very simple ones are available, for free, online. Some more sophisticated assessments, such as OPQ, Life Style Inventories, Myers-Briggs, can also be used. Understanding work and communication behaviors of individual team members will provide insights to you and them.
• Decide on the teambuilding exercise. Teambuilding exercises (also called interventions) can range from simple interactive games to group problem solving exercises to facilitator-led events. (See sidebar for examples.)

Many cost-effective teambuilding opportunities are available for any size team. With a little research, you should be able to find a facilitator or program that will fit your organization.

Patricia Petersen

Patricia E. Petersen, MS, MBA, is an organization and human resource consultant with Leadership Development Associates. She can be contacted at 904-631-8219 or

corpleader09@gmail.com.

Sidebar 1

Examples of teambuilding exercises

• Interactive games. These create an environment that may be competitive, but when team-appropriate behaviors are employed, the outcomes change. These can be board games, survival games. ball toss, puzzle solving, or project building, to name a few. The cost for games ranges from free to several hundred dollars.

Remember, though, that the objective of the game is not just to have fun—but to understand and improve teamwork. Consequently, it is important to discuss the game playing in terms of teamwork: What roles did each person take on? How did you decide on your goals? How did you communicate? What frustrations did you feel? How can these experiences be applied to work?

• Participative events. These facilitator-led exercises can range from $200 to several thousand dollars, based on complexity and facilitators needed. Examples include: low and high ropes courses; outdoor expeditions such as, scavenger hunts (orienteering) and sailing; or indoor events such as cooking schools, computer games, or mystery theatre.

Again, remember that discussion about the event (as described above) is critical to its success, otherwise the expense is just a recreational activity.

• Group problem solving. One of the most effective teambuilding events does not cost anything but yields tremendous results. It is employee involvement in solving organizational problems. The key here is to do group problem solving as part of your organizational culture, focus it on real problems as they arise, and act on the team’s solutions.

Sidebar 2

When does a group become a team?

What are the indicators that a work group has turned into a team?

The goal of most teambuilding sessions is to take a group of people who work together and transform them into what Katzenbach and Smith define as a real team: A small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable.

The key phrase here is “… they hold themselves mutually accountable.” In most instances, a team is focused on a specific mission/objective/purpose, which is clearly evident in their actions and behaviors. They use a collaborative, solution-oriented process to come to a consensus about their plan of action, methodology for implementation, and continuous improvement. They have criteria that define success.

When a team is functioning well together, you will see them:

• Interacting with each other often, throughout the day;

• Clarifying and confirming action plans;

• Adapting the plan of action, as new information is shared;

• Helping each other, without being asked;

• Remaining focused on their mission; and

• Celebrating their successes.

From your perspective, the most important result will be that your business will gain focus and improve productivity with fewer headaches for you and much happier, engaged employees.

By Michael R. Clark

The need for managers and supervisors to be able to coach employees effectively is greater today than ever before—for several reasons. Consider, for example:

• Employees in today’s workplaces are being asked “to do more with less.” This means companies are demanding the successful completion of more and different tasks than required in the recent past. Employees need to be taught how to do them.

• Many job applicants lack the literacy and/or math skills necessary for the jobs for which they apply. As a result many teaching-learning moments will occur between the supervisor and employee for acceptable performance to occur.

• A number of research findings show that approximately seven out of ten employees in the 18 to 35 age group believe there are no absolute ethical standards. In their view, honesty or honest actions depend on convenience. This either requires closer supervision or coaching employees to higher ethical standards.

Fortunately there are “tried and true” coaching strategies that managers and supervisors can use to improve the performance of their employees, both quantitatively and qualitatively. If you apply the following coaching principles, you will motivate and modify your employees’ performance towards much higher levels.

1. Expect employees to be successful. There exists a body of research that suggests that employees in general will perform according to expectations. As a supervisor, if you think certain employees will be successful, then they probably will be. But, if you think employees will not succeed, then they probably won’t. The reasons for this generally exist within the relationship between the employee and supervisor.

2. Assess current performance first. You must know the specific levels at which employees are performing, before you can coach effectively. You can usually determine the level through a combination of observation, performance feedback conversations, and normal monitoring of work. A written performance improvement plan is recommended for all employees.

3. Know how to address nonperformance issues. As a supervisor, you have three basic approaches to handle employee nonperformance issues: Avoid the issue altogether, which usually doesn’t solve anything; threaten the employee with a negative sanction, which may stop or fix the performance issue in the short run but only creates other problems between the supervisor and the employee; or collaborate with the employee to fix the issue. Collaboration is the preferred method.

4. Clarify expectations. Employees need to know what success means, as well as what it means to perform at the highest level, the lowest level, and everywhere in between. Show your employees what the expectations are for each level, and then let employees choose to perform at a given level for their own reasons. (Of course, each level of performance comes with its own rewards or consequences.)

5. Check for understanding. Do not assume that employees understand verbal communications, even when they say, “I don’t have any questions.” People differ in many ways and have different life experiences, which affect understanding. Because of these differences, we make mistakes when we communicate with each another. The only way to account for differences is to make sure the receiver (the employee) of a message understands the message, so the sender (the supervisor) must check the receiver’s understanding by asking a few questions about the message.

6. Use the 2+2 strategy. This amounts to talking to employees about their individual performance for at least a couple of minutes every couple of weeks. Supervisors talk to employees about work all the time. They don’t, however, usually talk much about the employee’s individual performance except when an issue arises, or during the annual performance evaluation process. Make it a point to  talk with employees about their performance at a minimum a couple of minutes every couple of weeks.

7. Reward good behavior. Use positive consequences (rewards) for desirable behavior (performance). Identify ways to reward both employee performance and effort. At a minimum, use verbal praise when it makes sense. One way to determine how to reward employees is to actually ask them what would be rewarding to them.

8. Sanction nonperformance. Nonperformance is undesirable behavior. Use negative consequences to change undesirable behavior. A technique called “corrective feedback” can be used to deal with any type of performance issue.

9. Give specific, timely feedback to employees. Give performance feedback to employees, on a consistent basis. Also, it is acceptable to give general feedback, such as, “That was an excellent effort;” however, the feedback is more powerful when it is specific. For example, say, “That was an excellent effort. I especially liked the way you showed empathy to the customer, and then asked how you could help and didn’t pass the person to someone else.”

10. Use the “pull style” coaching as much as possible. Telling employees what to do (“push style”), is easier than pulling the solution out of them through questioning and guidance (“pull style”). But, as a result of using the “pull style,” employees are more likely to be accountable and will also grow much more because they are learning to think on their feet and solve their own problems.

This list of 10 coaching principles is not exhaustive, but if you use them consistently, you will find employee satisfaction and accompanying performance levels will rise to higher levels—which is the point of coaching.

Michael Clark

Michael Clark is a senior consultant/trainer for the Division of Continuing Education, University of North Florida, where he specializes in developing and conducting management/supervision training programs.  He is also owner of MRC Consulting, which specializes in the creation and implementation of both organizational and management/supervision development strategies. He can be contacted by e-mail (mrcconsulting@earthlink.net) or by phone, either 904-620-4200, or 850-545-1451.

SIDEBAR

Want more information on coaching?

The tips in this article came from these reference materials, where you can find more ideas on coaching your employees:

• Why Employees Don’t Do What They Are Supposed to Do, Ferdinand Fournies, McGraw-Hill, 1999.

• Coaching for Improved Work Performance, Ferdinand Fournies, McGraw-Hill, 2000.

Want more information on getting more from your employees? Go to http://advantagebizmag.com/archives/1556.

By Linda Nottingham

Many employers avoid the process of conducting formal employee performance reviews because they are uncomfortable with confrontation. Don’t make that mistake! Handled properly, a performance review can be a fulfilling and satisfying experience for both you and your employee, and it will improve employee loyalty and morale.

As a boss, one of your primary responsibilities is to help your employees achieve success in their jobs and grow more proficient. The compelling reason for taking this responsibility seriously is the reality that every employee is either contributing to the mission of your business, or is not—and you don’t need people on your payroll who are not helping you succeed! Every employee needs to contribute 100% toward this effort. Employees represent your business to vendors, clients, and others; you want them “on-message” and maximally productive.

Start at the beginning: The job description

Giving a performance review that results in good feedback and improved productivity begins with a written job description that details the employee’s responsibilities. You should give a copy of the job description to each employee at the time of hire, and review it with them at that time. As you initially go over the job description, schedule the date and time when the first performance review will take place—such as in three or six months.

Then, stick to the plan. Barring extreme circumstances, don’t change the evaluation date. Moving the date devalues the job and the employee. It sends a message that you don’t think the evaluation is very important. (Employees almost always think performance reviews are important.)

Put ticklers into your own calendar and when the time for the first review is approaching, send the employee a current copy of the job description and ask him or her to come prepared to talk about performance. Give employees a week or two to think about a “self-assessment” based on the job description.

It may be a surprise to you, but almost all employees know what they do and don’t do well, and they are usually harder on themselves than you would be. In all likelihood you will never have to originate a negative point; they will beat you to it.

On the day of the evaluation, set aside adequate time and don’t allow any interruptions. Put your Blackberry or phone on silent and hold all calls. For higher level employees, consider doing the review off-site over a long lunch. This is your chance to reiterate the mission of the organization and share your vision.

Begin the review by identifying something you believe the employee does really well and speak about the value of that to you and the company. Give specific examples. Then move to the self-evaluation and go over the job description, allowing the employee to identify and explain strengths and weaknesses—again in terms of specific examples.

When an employee identifies a weakness or deficiency, ask what you can do to assist in resolving the problem. For example, does he need more access to you or better clarification? Does she need in-house training? Are there external training programs which would help? Make note of these deficiencies; they become the basis of employee performance goals.

As you discuss the job, you may find that the job description needs to be revised because of changes in actual practice—additional or fewer duties or different responsibilities. This is also a great chance to explore cross-training opportunities, as well as the employee’s long-term and short-term goals.

As you complete the performance discussion, review with the employee the items you both agree need to be improved and decide how and when they can be achieved. Write out the review immediately after the meeting. Give a copy to your employee and put an original that each of you has signed into their file. And set the date for the next review in writing.

Then follow-up. The employee’s success is your success.

Linda S. Nottingham is president of JAX Realty Advisors, Inc., and is a member of the Jacksonville chapter of SCORE. She facilitates several of the Business Advisory Councils for the Jacksonville Women’s Business Center. She can be reached at lnottingham@bellsouth.net or 904-534-1283.

SIDEBAR 1

Write SMART performance goals

As you and your employee go through a performance evaluation, you should be noting things he or she did (and continues to do) well, as well as things he or she could and should improve upon in order to optimize their contribution to the organization. These improvement areas are the basis for employee performance goals.

For example: Assume the employee has a problem getting projects properly organized so that they are completed on time. A solution you both agree would rectify the problem is for the employee to learn how to use Microsoft Project Management software.

A SMART employee performance goal (that is, one that is Specific, Measurable, Achievable, Realistic, and Time-based) might read: John will complete a four-day computer-based training on Microsoft Project 2010 Essentials by October 1, 2010.

SIDEBAR 2

Performance and compensation

In some organizations, performance reviews are divorced from compensation discussions. In others, employees expect that at the end of the performance discussion, adjustments to wages or salary will be discussed.

If you do not want to discuss compensation in the review, make that clear as you prepare the employee for the review. If, however, you link performance evaluation with compensation, come prepared to discuss any adjustments.

You may want to take advantage of this discussion to review other perks your company offers, such as healthcare insurance plans, life insurance, or 401(k ) plans. Most employees—even those who pay a portion of their health insurance premiums—are not aware of the value (cost) of their benefits. Paint a complete picture of what the employee is receiving.

Even if you cannot offer an increase in wages because of economic circumstances, don’t put off the performance review. The review becomes even more important because it gives you the opportunity to discuss the company’s plans to turn things around. Employees may not have a guaranteed right to a raise, but you’ll be a smart boss to communicate honestly with them.

Furthermore, people work for more than just money. Your employees need to know that they are contributing to the success or growth of the business and that you value their contributions. In advance, consider whether you may be able to offer non-monetary incentives to your employee, such as a change in title or flexible work hours.

If it is not financially possible to give a raise at the time of the performance review, be prepared to indicate when the compensation for that individual will be reconsidered. For example, if you think new contracts will bring in additional revenue in six months, tell your employee you will revisit the compensation issue then. Set a date, and then do it, even if you have to defer the raise again.

The key is trust and communication. Your employee needs to believe that you have the ability and the desire to balance what is good for the company, along with what will benefit or promote them.

Experts tell us the economy is in recovery. They also admit that hiring will probably be the last economic indicator to improve. If you are uncertain if you should hire (or rehire) employees, even though business is picking up, consider an alternative: temporary employees.

These employees can be used for special projects or to address increased activity during a peak season or as business begins to increase. Temps supplement your regular workers; they go to work for you with the knowledge that the job will last only a short, specified duration.

Alex Campbell

Another way to hire and use temporary employees is “contract to hire.” This is a “try before you buy” option offered by staffing firms, says Alex Campbell of Capital Staffing Solutions (www.capitalstaffingsolutions.com). “It’s the best way to build your staff. You use a contractor (temporary employee) for an agreed period. If you like the contractor, after the contract is over, you can make an offer of regular employment for no additional costs.”

This type of temporary employment situation provides a win-win-win situation: You win, because you get a tried-and-true employee. The staffing agency wins, because it earned a fee while the employee was on contract; and the employee wins, because he or she gets to work for a known entity.

How to hire temps

Hiring temporary employees requires careful consideration. Here are several things you should do to ensure the best outcome:

1. Prepare a job description. The job description validates your need for extra help; it also identifies the skills, knowledge, and abilities needed on the job. Campbell suggests, “The better the job description, the better the staffing firm will be able to find employees who are a good fit for you.”

2. Find a staffing agency that understands your business. Some agencies specialize in particular industries; others may have recruiters who have worked in your industry. Once you find a possible fit, invite the recruiter to tour your business and talk with you onsite. Knowledge is power in making good matches.

3. Discuss your goals. As you explore the possibility of using an agency, discuss your business goals, long and short. “Find a firm that is interested in helping you work with your budget, interested in you hitting your numbers, and understands what you are trying to accomplish,” advises Campbell.

4. Negotiate the contract. Beware of sticker shock; you will be paying a premium to use the agency, so be prepared for it. The contract you sign with the agency should designate the responsibilities of each party, including outlining the hiring process (who will interview; who will make the final hiring decision). You’ll also want to make sure it indicates how the contract can be terminated; who is responsible for withholding taxes and payment of taxes for the employees; who is responsible for workers compensation insurance; and any benefits that will be provided by the staffing agency.

5. Don’t forget your supervisors. Your supervisors should understand how the temp process works, their role in selection and training, and their role in supervising the work performed by temporary agencies. They need to know who to notify in case of an accident and workers’ comp claim and how to handle problem employees.

Finally, supervisors should have a role in evaluating worker performance and give feedback to the temp agency about its performance. Your supervisors are in the best position to judge if the agency met your needs.

SIDEBAR

After the hire, what’s next?

Although by definition a temporary worker will only be with you a short time, that person(s) still needs orientation and training in order to accomplish what you need to have done.

Here are some tips on how to use a temp worker effectively:

1. Ask the temp to report late the first day. The beginning of the work week is often chaotic. On the first day, ask the temporary employee(s) to come in 30 minutes after regular starting time. This will allow you or your supervisor to give the attention the person needs that first day.

2. Orient the new employee. Although the person will only be with you a short time, give him an overview of the work that your company does, and go over in detail the job description. Make sure he can see how the job fits into the big picture. Give a tour of facilities; tell him where he should park, eat lunch, and take breaks. And then introduce him to fellow workers.

3. Assign a trainer or ‘go-to’ person. Tell the temp who she can go to for more information and additional how-to information.

4. Train. Even if the temp comes into your workplace with experience in a similar company, take time to train him on your equipment and—just as important—your expectations.

5. Check back. Don’t park the new employee and forget her. Check back during the day to see how she is doing.

6. Make the agency earn its keep. Although you determine the work that is done, the agency is responsible for any problem areas, such as attendance issues or tardiness. Don’t hesitate to call the recruiter and discuss the problem as soon as it arises.

By Brad Long       

Small-business owners are a special breed, willing to take on financial and professional risks for the promise of building a great enterprise from the bottom up.

If coping with the “normal” problems of a sluggish economy weren’t enough, small business owners have another concern to be weary of—litigation. Employees who have been laid off are turning to the courts to find recompense by filing discrimination and wage and hour claims in record numbers, said attorneys Nancy A. Johnson and Scott S. Cairns of McGuireWoods LLP (www.mcguirewoods.com) in a recent workshop sponsored by the law firm.

In 2008, the Equal Employment Opportunity Commission (EEOC) received the largest number of claims ever—95,402, which was 13% higher than the previous high in 2002, and every category of discrimination experienced a double-digit percentage increase from 2007 to 2008.

Scott Cairns

Age discrimination claims went up 29% from 2007 to 2008, said Johnson. Retaliation claims increased 23% from 2007 to 2008. “Retaliation is the most dangerous type of claim,” said Cairns, explaining that people are human, and it can be hard not to let employee allegations taint judgments, or at least to convince a jury to believe that judgment was untainted.

In addition to discrimination claims, wage and hour claims—that is, claims concerning unpaid or underpaid overtime or working off the clock—are also on the rise, with a 77% increase since 2004. Alleged job misclassification—erroneously classifying an employee an exempt from overtime

Nancy Johnson

 provisions and therefore not paying that employee overtime —is one of the most common types of wage and hour claims, but claims concerning falsified time cards are also common and are increasing.

The reasons for increased activity in employment claims are believed to be directly related to the recession. More terminations, demotions, denials of promotion—in other words, adverse employment decisions—create a greater risk for disgruntled employees to lodge complaints. Also, when workers are unemployed for long periods of time with little prospect of gaining employment, they look for other means to acquire money and take a harder look at available remedies which might otherwise not be worth pursuing.

Cairns explained that often terminated employees rush to an attorney with allegations of discrimination not necessarily knowing if it was discrimination or not. “Even if people don’t have a discrimination claim,” said Cairns, “an attorney they consult may convince them that they have a [wage and hour] claim.”

How to avoid litigation

Florida is an at-will state, explained Cairns, but that status does not give employers the freedom to do whatever they want. All employment decisions should be made with care to avoid inviting litigation down the line.

Johnson and Cairns outlined a number steps small business owners can take to ward off claims:

• Review each layoff or termination decision. Always use objective and measurable criteria before terminating someone, and document the decision process. You don’t have to tolerate poor performers, said Cairns, but document feedback and decisions.

“One of my clients does not permit any termination on the spot,” he said. “The supervisor can put an individual on leave with a recommendation to terminate. This gets the employee off site and gives the company time to examine the termination decision.”

Best bet: Consult an attorney before making any decisions. This is especially important if you are terminating employees who are in a minority in terms of a protected class such as race, gender, religion, age (at least age 40) or disabiltiy.

• Examine exempt job classifications. The Fair Labor Standards Act (FLSA) defines exempt and nonexempt positions. Make sure you have employees classified properly.

“It’s the exempt classification that gets you into trouble,” said Cairns. “I recommend every employer take a look at exempt classifications. This isn’t that hard, because if you have 100 jobs, you probably only have five or six jobs that need to be reviewed. Remember, though, that it’s not the job title; it’s the duties that affect exemption.”

“If you find you’ve made a mistake in classification, you want to correct it as soon as possible,” said Cairns. “The Department of Labor can be cooperative if you are trying to fix things.”

• Review your timekeeping procedures. Make sure you keep records of hours worked for each nonexempt employee—even if you pay them a salary.  

• Train supervisors in appropriate timekeeping. Do not tolerate working “off the clock” or any other falsification of time cards.

Scott S. Cairns is a partner with McGuire Woods in Jacksonville. He can be reached at scairns@mcguirewoods.com or 904-798-3223. Nancy A. Johnson is an associate. She can be reached at njohnson@mcguirewoods.com or 904-798-3234.

 SIDEBAR

Beware of theft

Employees are human, and when fear of layoffs or other economic stressors weigh on them, they may resort to “getting back” at their employer by whatever means they can, such as by taking things that don’t belong to them.

“People almost always take something with them when they leave an employer,” said Cairns. Generally, they steal by taking:

• Property and/or products. They may take things that don’t belong to them, from stationery supplies to laptop computers.

• Money. They may embezzle, take cash, accept illegal kickbacks, or even falsify sales transactions.

• Company data. Company data is particularly difficult to control today, since people can download databases and customer files onto an inexpensive thumb drive or a Blackberry.

• Time. They stop working but don’t clock out.

To anticipate theft:

• Do thorough background checks prior to hiring;

• Put into place controls on merchandise, cash, and assets that can be converted into cash;

• Perform audits;

• Talk to employees about the situation and let them know what steps are being taken.

By Daniel C Dearing    

True or false? Retirement plans are a benefit only large companies can afford. The answer is false. Small businesses can afford to offer their employees a retirement plan—and it makes good business sense to do so.

Having a retirement plan helps you recruit and retain good employees (and thus cut down turnover costs), and it can be a way for you to defer a large amount of tax liability—always a nice “surprise” at the end of the year.

The more difficult decision to make is not if you should offer a retirement plan, but what kind of plan should you offer? A number of different kinds of plans are available such as 401(k), profit sharing, defined benefits, SIMPLE, and SEP. (Others are available but these are the most common types.) Each of these plans has its pros and cons; here are some to consider:

• 401(k) plans. The most common type of retirement plan offered by employers today, a 401(k) allows employees to make tax-deferred contributions to their retirement account. Some plans—a Roth 401(k) — also allow for contributions to be made on an after-tax basis. Each employee is permitted to defer up to $16,500 ($22,000 for employees over age 50) into their account in 2009.

Note: The employer may match employee 401(k) contributions, but this is not required, so it is possible to offer a 401(k) plan without incurring expenses other than administrative costs.

In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA). This act benefitted small businesses by creating the Safe Harbor 401(k). In a Safe Harbor 401(k), the company offers a specified amount of contribution for each employee (3% to 4%, depending on plan type) in exchange for being exempted from discrimination and top-heavy testing. A Safe Harbor 401(k) thus allows an owner over age 50 to defer the full $22,000 into a 401(k) plan regardless of the voluntary participation of their staff.

The typical annual administrative fee for a 401(k) plan with 15 employees ranges from $800 to $1,500 and some pension companies offer a discount for using the Safe Harbor provisions.

• Profit sharing plans. These plans are very popular among companies whose revenues fluctuate, because the business has the flexibility to make significant contributions in good years and little or no contribution in lean times. (If a plan makes a $0 contribution for too many years, the IRS may terminate it; however the IRS does not have a set rule concerning termination.)

In a traditional profit sharing plan, the company makes a contribution of an identical percentage of salary for every eligible employee.

In 2001, EGTRRA created an improved version of this plan called a “New Comparability Profit Sharing Plan,” which allows employers to give certain classes of employees—typically owners or managers—a higher percentage of contribution than they give to other classes. The disparity is limited by certain non-discrimination rules and requires the work of a third party administrator (TPA), but this type of profit sharing can be very attractive in companies in which the owner is older than most of the staff.

The contribution limit on a profit sharing plan is 25% of the total eligible employee payroll, up to a maximum contribution of $49,000 per participant. Contributions to a profit sharing plan can be placed on a vesting schedule of up to six years before an employee becomes 100% vested in the employer contribution.

Profit sharing is commonly used in conjunction with a 401(k). This combination allows the employee to defer income and the employer to make contributions in good years. Surprisingly, a company does not need to have profits to be able to make a profit sharing contribution.

• Defined benefit (DB) plans. DB plans give a specific benefit (for example, 50% of an employee’s final salary) to an employee at retirement.

The amount of the annual contribution by the employer is whatever amount an enrolled actuary calculates to be sufficient to fund the prescribed benefit. Needless to say, the calculations and administration of DB plans can be complex.

Although these plans are much less popular than their 401(k) counterparts, they are still very useful in certain circumstances. Defined benefit plans have no annual contribution limits. The only limit in a DB plan is the limit on the amount of retirement benefit provided to an employee ($195,000 per year for 2009).

An important disadvantage in all types of DB plans is their rigidity. A company does not have the choice of not funding the plan in a down year. For this reason, you should certainly consult with a pension specialist and your accountant before proceeding with a DB plan.

Tax law changes in the 2006 Pension Protection Act (PPA) gave a big boost in popularity to a specific type of DB plan called a cash balance plan. Although cash balance plans are complex, they are likely to replace traditional defined benefit plans in small to medium companies that want to make higher contributions to a retirement program.

• Savings Incentive Match Plans for Employees (SIMPLE). This type of plan allows employees to defer some of their salary—up to $11,500 annually ($14,000 if over age 50). Employers must make contributions of 2% to 3%, depending on plan options chosen, and all employer contributions are immediately vested.

If you are looking to offer an employee benefit at the lowest possible administrative cost, SIMPLE is a good choice. The lower contribution limits and inability to pair this with any other type of plan are disadvantages that should be considered, however.

• Simplified Employee Pensions (SEP). This plan closely resembles traditional profit sharing since each employee receives an identical percentage of salary from the employer. Employees are not permitted to make salary deferrals. All contributions are immediately vested, and most part-time employees must be included once they have enough tenure.

Similar to a SIMPLE, this plan can be offered with almost no administrative costs, but there is also no opportunity to take advantage of the design benefits offered by EGTRRA and PPA.

Which of these five types of plans—or others, which are also available—is best for your company? To help you decide, you should consider:

• Do you want the plan to be primarily for the benefit of employees or will it be used mostly to provide tax deferred savings for the business owner?

• Can you fund the plan at a consistent level each year, or do your revenues fluctuate such that you will need significant funding flexibility?

• Is it important to allow the employees the ability to defer some of their own income into the plan?

• What are the demographics of your company? Are you much older or younger than the average age of your staff? Do you have high turnover? Do you employ a number of part-time or seasonal workers?

Answering these questions (in consultation with a pension specialist and your accountant) is the first step in deciding which type of plan is best for your business. Other issues to consider include ongoing operation of the plan, employee education, and investment monitoring. Although these issues may sound intimidating, most of them are resolved by choosing a good plan record keeper and a servicing agent who specializes in retirement plans. These individuals can help you avoid making basic mistakes that could trigger an IRS audit.

Daniel C Dearing, MSM, CRPS, is president of Professional Retirement Services, Inc. and is a Chartered Retirement Plan Specialist. PRS (www.professionalretirement.com) is a full-service financial service company located in Jacksonville, Fla. Dan can be reached at 866-479-401K or 904-381-9080.

By Bob McKenzie    

New businesses know they must have an accountant, insurance agent, attorney, and other business advisors to operate their businesses efficiently. The often missing piece of the management team is the human resources expert, usually because hiring a full-time HR specialist is not cost-effective.

Unfortunately, if you don’t comply with governmental regulations you place your company in a position of risk of lawsuits and government fines. Fortunately, maintaining compliance is not difficult. Once you “know what you don’t know,” you can fix your greatest risk problems—negligent hiring, I-9 documentation, new hire reporting, and wage and hour compliance.

Negligent hiring

Don’t jeopardize your business with negligent hiring, which can occur if you hire someone who has a criminal history of theft or violence and put them into a position of trust involving customers. If that employee steals from a customer or commits a violent act on a client, your company may be liable for negligent hiring.

For example: A small business owner wanted to hire a computer technician, who would be required to go into customers’ homes and businesses to set up and repair computer systems. The business owner made a conditional offer of employment to the technician, and then ran a criminal history background check. The background check found that the applicant had convictions for domestic violence, kidnapping, employee theft, violations of his probation, and several other charges. Needless to say, business owner rescinded the job offer and dodged a major bullet.

To protect yourself from negligent hiring:

1. Have the applicant complete a job application. Be sure the application answers all questions about convictions.

2. Interview the applicant. Take at least 30 minutes to talk to the individual and ask open-ended questions that elicit responses from the applicant.

3. Do reference checking. Make a reasonable attempt to call past employers for references and document what they tell you.

4. Run a criminal background check on the applicant. This is best done before offering the applicant a job. To reduce your liability for negligent hiring, the state of Florida recommends a minimum of a Florida Department of Law Enforcement (FDLE) check, which can be done online at https://www2.fdle.state.fl.us/cchinet/ or through a reputable background screening company. It is recommended, that you check an applicant’s background for the last seven years, including a check in other states where he or she lived.

If the job requires the employee to drive a vehicle, check the driving record of the applicant. If the driving record does not meet your minimum standards, then the applicant is not qualified for the position.

I-9 documentation

According to the Immigration Reform and Control Act of 1986, employers can hire only individuals who show proof of eligibility to work in the United States. Proof of that eligibility is a review of certain documents and the completion of an I-9 form, which you are required to keep on file. Examples of eligibility documents include a U.S. passport or permanent resident card or a combination of documents, such as a driver’s license and Social Security card. (The full list of accepted documents is listed on the back of the I-9 form.) 

I-9 documentation is enforced by the Department of Labor and the Immigration and Custom Enforcement (ICE) offices. The fine for non-compliance is $1,000 for each missing I-9 form. Since it takes no more than two minutes to complete the form, there is no excuse for not having these on file. ICE is hiring an additional 600 investigators to randomly inspect I-9 forms. The newest version of the I-9 form is available at www.uscis.gov/files/form/i-9.pdf. Learn how to complete the entire form. If there are questions, contact an HR expert.

New hire reporting

Whenever you put someone on your payroll, you must report that hire to the state. The reason for this requirement is to track individuals who have not paid child support. Again, this is an easy thing to do and the information on how to do this is available at http://newhire-reporting.com/FL-Newhire/default.aspx.

If your business is using a payroll service, the service usually does this reporting for you. If you do your own payroll, make sure you report new hires to the state. The reporting can be done online or via fax. Just make sure to do it.

Wage and hour compliance

Nearly half of the wage and hour lawsuits filed in the United States originate from the state of Florida. The Wage and Hour Division of the Department of Labor (DOL) estimates that 75% of the companies in the country are in violation of the wage and hour laws. With smaller businesses, that percentage is probably closer to 90%.

Personal injury attorneys seeking to increase their business are also aware of the high rate of noncompliance and are now advertising on television. Their commercials ask, “Are you not being paid for overtime when you work more than 40 hours a week?”

Compliance with wage and hour laws, known as the Fair Labor Standards Act (FLSA) is critical for every business, and virtually all organizations are bound by its regulations. Unfortunately, this law is complicated and misunderstood because of its many rules and exemptions.

To help unravel some of its mysteries and avoid wage and hour violations, here are some guidelines to staying out of trouble:

1. Salaried employees must be paid at least $455 per week. If they are paid less than that, they must be paid on an hourly basis.

2. Putting an employee on salary does not automatically make an individual exempt from overtime. FLSA specifies that duties determine if an employee is exempt—not being on salary or having a job title (such as “manager” or “supervisor”). (See www.dol.gov/esa/whd/regs/compliance/fairpay/fs17a_overview.htm, a basic overview of determining exemption status.) If you are audited, the wage and hour investigator will review the work that is actually performed to determine exemption status.

3. Do not dock exempt employees for hours not worked within a workday. For example, if an exempt employee leaves an hour early, you should not dock her pay for that hour. However, if you have a paid time off program, you can charge the time off to the employee’s sick, vacation or paid time off bank.

4. Do not let nonexempt employees work “off the clock.” Employees who clock out because they know they are not allowed to work overtime and then go back to work to finish a job are not doing you any favors. Make sure your employees get paid for all hours actually worked.

5. All overtime over 40 hours in a workweek must be paid—even if it is unauthorized. If an employee works unauthorized overtime, he/she must be paid for the extra time worked even though it was not approved. However, you can discipline the employee for working the extra unauthorized hours.

6. Don’t let nonexempt employees eat lunch at their desks. Nonexempt employees who eat lunch at their desks and answer phones or do other work while eating are considered working. They must be paid for their time.

7. Make sure employees record all hours actually worked.

8. Piecework does not exempt employees from overtime compensation.

9. If nonexempt employees are required to attend training programs, they must be paid for the time spent in the training.

10. Nonexempt employees who must travel must be paid for the time traveling from one job to another. Time spent traveling to work or to a work site is not paid, but if they are required to travel after getting to work, that time is paid travel time.

11.  Florida does not require you to give breaks to employees 18 years of age or older. Therefore if an employee works through a lunch break, it is counted as time worked and there is no violation of any law.

These are just the basic wage and hour laws. The bottom line is that the HR compliance is becoming increasingly complex. In this world, what you don’t know can hurt you. To ensure you are in compliance, have an audit done by a human resources expert. Fix the things that need to be fixed and then you will have one less thing to worry about and the peace of mind a government official knocks on your door.

Bob McKenzie is president of McKenzieHR, www.mckenziehr.com, a full-service human resources management firm. He can be contacted at 904-861-2903 or by e-mail at bobm@mckenziehr.com.

Benefits are good for employee relations. They also give companies a competitive edge in recruiting and retaining the best employees. Benefits, however, come at a cost, which too often is a well-kept secret, Serrena Bennett, an account executive with Colonial Life (www.coloniallife.com) , told an audience of small business owners at the September Jacksonville Advantage Knowledge Is Power breakfast workshop.

“Many times employees don’t understand that their employers are paying a large portion of their health premiums,” she said. And, they don’t know they are receiving many other benefits, let alone the value of those benefits.

Medical coverage is the first thing that comes to mind when people talk about benefits. Unfortunately, the cost of traditional medical benefits is escalating at a rapid pace. And that presents a dilemma to employers: How to offer benefits yet keep costs under control?

 One way is to provide a consumer-driven healthcare plan, said Randy Hallman, district manager with Colonial Life and co-presenter at the workshop. These plans require a higher deductible. Since consumers (employees) manage their own healthcare dollars, they quickly learn that a doctor’s visit costs much more than the $25 co-pay they were used to paying when they had a traditional medical plan, Hallman said. “What a consumer-driven healthcare plan is designed to do is to put responsibility for healthcare back on the employee so that they make good choices in spending their healthcare dollars.”

Another option available to employers who want to offer benefits to their employees is voluntary benefit ancillary products, said Bennett, who explained that these are stand-alone products that are paid out to the insured directly. They are in addition to any other plan an employee has. One example of an ancillary product is a hospital confinement indemnity insurance plan, which acts as a bridge to offset a high deductible medical plan. Other examples include accident insurance, disability insurance, cancer and critical illness coverage, and life insurance.

All of these ancillary products are paid for by employees, through payroll deduction. “Most of these are portable,” said Bennett. “Employees can carry these wherever they go. They own them.”

Employees may wonder how they can pay for these benefits. If your company is set up to take advantage of Section 125 of the IRS code, which allows employees to pay their contributions to benefits with pre-tax dollars, employees can use these savings for ancillary benefits, said Hallman. It’s like “found” money. (Click here to see chart.) Section 125 itself is a benefit and should be communicated as such, said Hallman, since it saves employees money. “Most employers have section 125,” he said, “but they aren’t getting credit for it as a benefit.”

Communicating your benefits

The value of the benefits you offer your employees should not be a secret; it should be communicated at least annually, as well as at the time of hire.

Conduct group meetings during your annual enrollment period, said Hallman. At that time go over any changes you are making to your plan and give an overview of the ancillary benefits available to employees. Group meetings are also the time to highlight all of the other benefits you offer. These may include, for example, dental, vision, 401(k) and pension plans, disability insurance, paid-time-off and sick leave, as well as the value of cell phones, laptops, uniform allowances, and other similar things. These benefits make up your comprehensive compensation plan, he said.

As important as they are, “group meetings are not enough,” he said. “Because plans are complicated, a few days after the group meeting, schedule one-on-one sessions with employees to go over the plans and answer questions.” The benefits provider should be able to handle these personal counseling sessions for you.

The individual meetings should have a couple of objectives. One is to help employees make elections, such as for ancillary products. “It’s important to show employees how the election would affect their paycheck,” said Hallman. And, assuming you have complied with Section 125 and employees can pay for benefits with pre-tax savings, another objective is to show what their salary would look like with and without the pre-tax savings for the elections they make.

Another objective of the individual meetings is to provide a single statement to the employee, listing anything you consider part of the compensation package. “Showing the value on an individual basis allows employees to have a better appreciation of their total compensation,” said Hallman.

Serrena Bennett can be contacted at 305-742-1236 or Sarrena.Bennett@ColonialLife.com. The Knowledge Is Power workshop was sponsored in part by Eola Capital, www.EolaCapital.com.  

SIDEBAR

Fill your benefits gaps

1. Assess, with the help of a benefits professional, your current benefits. List each benefit and its value.

2. Identify the gaps. In which areas are you weak?

3. Find products to fill the gaps. Many are available at no cost to you; they can be benefits voluntarily purchased by employees.

4. Look for a benefits provider who can conduct group meetings, provide individualized and customized counseling, and provide enrollment services.

If your employees are not giving you the results that you want and need, take a look at what you are assessing. “Change your measure, and you change employee behavior,” said Harold S. Resnick, PhD, CEO of Work Systems Associates, Inc., a Ponte Vedra Beach, Fla.-based consulting firm.

“People will respond to whatever it is you are measuring,” Resnick told a group of business leaders at a recent meeting of Executive Advantage (www.theexecadvantage.com), a professional- and business-development group for Jacksonville-area CEOs. “Measurement is your most powerful feedback and control tool,” he stressed.

But, measurement cannot be done haphazardly. He told the group about an organization whose accounting department provided monthly reports on 35 different measures. “Unfortunately,” he said, “they had no projective sales measurement, no operational performance measures of any substance, no human-factor measures, no customer-satisfaction measures at all.”

What that organization needed—and all organizations need, he said—were measures to assess the organization, individuals, and departments. These types of measurement are essential to entrepreneurial companies because:

• It’s not possible to understand something until you can measure it;

• You have to understand something before you can improve it; and

• You cannot respond to threats and opportunities unless you know where you stand.

“People respect what you inspect,” he summarized, “and what gets measured gets better.”

Organizational measurement

“Folks don’t realize how much their success in the company is driven by measurement,” said Resnick. “Most companies unfortunately drive behavior only from financial results. The problem with financial results is that they tell you nothing. Financial information does not tell you why your performance was great or poor. So financial measures by themselves don’t give you any guidance about what actions to take — or prevent — in the future. It’s like driving a car with no windshield and only a rear view mirror.

So, if financial measures by themselves are not the answer, what is? Resnick said businesses should first identify and assess their critical success factors. “To figure out what these factors are, ask yourself what you would want to know first about your company if you had had no contact with it for three months. What would be your first questions?” Those questions identify your critical success factors.

For each critical success factor, ask yourself:

• What will this measure tell me about my business?

• How can I use this information to impact the future?

• What behaviors will the act of measurement likely create?

• What are intended consequences of this measurement?

• What are the likely unintended consequences of this measurement?

“The act of measuring changes behavior,” he explained. “So for every measurement you take, consider, ‘How are the people in my organization going to start to behave? What are the intended consequences of what I want? What are the unintended consequences?”

Some of the most common key measurement categories include:

• Financial progress and results,

• Sales and/or revenue and/or margins,

• Market share,

• Customer base and customer satisfaction,

• Cost of manufacturing,

• Operational performance (cost and process),

• Human resource measures,

• External benchmarking, and

• Other special categories peculiar to your business.

Resnick said that measures should be objective, obtainable without great difficulty, generated automatically output from existing systems whenever possible, and able to be tracked over time so that trends become apparent.

Individual performance

The second type of measurement every organization should make is individual performance. “If you could shift the performance of your organization one standard deviation to the right,” said Resnick, “you would get a 34% improvement in productivity!”

And it is possible to get that gain, he emphasized, stating that on average, employees spend about 1.5 hours each day not working. Instead, they are shopping online, updating their Facebook page, or answering personal e-mails. “Are they doing these things and falling behind in their work? Or, are they doing these things because they do not have enough productive work to do?”

Only a small percentage of people get fired because they are not performing to the standards set for them, said Resnick. The problem is that the standards are set at a baseline level—the minimum employees have to do to keep their jobs. “The assumption is that a worker’s performance should improve over time,” he said. “Your job is to raise the bar with every employee every year, because you are paying more for that employee every year.”

Peer measurement

Individual measurement is further strengthened by adding peer assessments to the process. “If you have a number of employees who do the same or very similar work, it is statistically impossible for their performance not to resemble a bell-shaped curve,” said Resnick. What this means is that some people will be low performers, some high performers, and most will be “average” performers. The implication of the bell-shaped curve is this: First, you should either get dramatic short term improvement or remove the lowest performers. Second, you should focus on the high performers; that is, leverage your best people to give you really great performance. Then work on consistently raising the bar and performance levels for the middle third.

Honest peer assessment depends on understanding and factoring in three variables: talent (skills and attributes an employee inherently brings to the job), competence (the ability to perform), and performance (what is actually done).

A relatively new employee may have low competence (because she has a lot to learn), but high performance, judged relative to her competence. On the other hand, a 10-year veteran is probably highly competent, but if he is delivering the same amount and quality of work as the one-year person, his performance should be considered low in comparison to his peer group.

When you look at employee performance in this light, said Resnick, you are then able to compare experienced employees with less experienced ones. And, if you have a number of employees who do the same type of job, you can create a forced bell curve—something that is critical if you want to reward people for their actual performance.

Harold S. Resnick, PhD, is CEO of Work Systems Associates, Inc., www.worksystems.com, located in Ponte Vedra Beach. He can be reached at 904-273-2558.

Executive Advantage is a business development and networking group. For more information on joining a group, call 904-704-5058.

SIDEBAR 1

Align your mission and measurements

Although having a vision for your company and a stated mission are important to success, making sure that you are measuring the right things is crucial, says Resnick. “If your measurement system is different from what you are intending to accomplish, then your measuring system is going to control behavior more than your vision statement. That’s a pretty compelling message that people don’t really think about.”

A story illustrates: A company boasted that it focused on quality, but its employees were incentivized by the number of completed shipments they made.  Employees knew their pay depended on sending out complete orders, so they made sure each order had the necessary number of boxes. Unfortunately, some of the boxes were empty or partially filled or filled with defective parts. Customer complaints pointed out that quality was not driving employee behavior, despite the company’s mission verbiage. The company’s measurement (and reward) system was in conflict with its mission.

SIDEBAR 2

Common measurement errors

Many companies make a number of common mistakes in their measurements, said Resnick. Their measurements:

• Focus on the financial and do not look at other criteria;

• Are historical, but the past data provides no future-focused help;

• Count transactions, but do not show trends over time;

• Are easy to capture, but are not necessarily important to the business’ success;

• Look only at hard data and ignore soft data;

• Focus on final results, but do not explore process for improvement.