Are You Employing Aimless Drifters?

Morale: noun. The feelings of enthusiasm and loyalty that a person or group has about a task or job. (Merriam-Webster.com)

That pretty much sums it up right there. How is your employee morale these days? Are your employees enthusiastic about their jobs and loyal to you? Or are they half-asleep, have one foot out the door, or have stopped caring about their job? It’s easy to see how poor morale can have a detrimental effect on your organization.

It’s in our nature to improve our well-being and have a sense of purpose in life. Without it, we become aimless drifters without any goals. Can you see why that’s a problem in the workplace?
Let’s be honest. Not all jobs are very stimulating. What we can do is explain to our employees how their job fits into the bigger picture. Why is producing that widget on a daily basis vital for the success of the business? Well-being of the country? World? Etc.

By giving employees a sense of their purpose, showing true appreciation for their work, and doing the little things, you can improve morale and productivity in your workplace.
From the August ed. of The Bertram Business Bulletin

The Rise of the Robot

Retirements, Worker Shortage Leads to Increased Automation

Necessity is the mother of all invention. You’ve probably heard the push for higher minimum wage demanded by fast food workers and the arbitrary $15/hr. demand. Knowing that $10 hamburgers wouldn’t sell particularly well, McDonald’s has introduced a “Create Your Own Taste” self-ordering kiosk. Customers can custom order their meals which are delivered right to their table. It’s not just innovative; it helps them keep payroll down by eliminating these obsolete, order- taking positions.
On a much larger scale, manufacturing has led the charge in automation for years. While many large shops have used robots for years, the smaller manufacturers are now getting in on the party as well. A recent article in the Insurance Journal* cited several reasons for the change:

1. Dwindling Workforce – as baby boomers retire, Millennials have chased other careers instead.
2. Lack of Skilled Workers – Workers who are available often lack the skills needed to perform these jobs.
3. Increased Job Satisfaction – Workers can focus efforts on problem-solving instead of the repetitive tasks now performed by the robots.

The employee benefits climate has also changed dramatically since the ACA went into effect. Employers with over 50 full-time equivalent employees are required to offer group health. This can be crippling to retail establishments or those in the restaurant industry. As these costs continue to soar, employers can realize significant savings by utilizing more automation. The one-time price tag is large, but it more than pays for itself after a few years by avoiding these additional expenses.

And robots don’t complain...

This article is from the May publication of The Bertram Business Bulletin. To subscribe, send your request to abertram@cobrown.com to be included in the mailing list.

*http://www.insurancejournal.com/news/midwest/2015/04/23/365475.htm

Spreading Light Duty Cheer and Reducing Work Comp Costs

I love the Christmas season. The thrill of opening presents isn’t the same as when I was four, but there’s nothing like watching my four year olds tear into their presents after the big guy came. Giving is definitely more fun than receiving. I’m convinced of that.

I also enjoy spreading Christmas cheer. The best part is there are so many ways to do it this time of year. First, you have tree hopping which you’ve probably never heard of unless you grew up in eastern WI. Trust me; it’s the best way to spread cheer. Then you have Christmas cards, cookies, music, work parties, family gatherings, you name it. It’s all good stuff.

Now I’m going to ask you a question, and I want you to think long and hard about it. How do you feel about sending Christmas cards? Personally, I love sending the first few Christmas cards each year. At that point I’m still naïve and ambitious, bound and determined that this is the year I get them out by the first week in December. I also enjoy picking out the stamps too. Kind of dorky, but I find it entertaining. This year’s selection included Hermey, Santa, Rudolph and the Bumble. You couldn’t beat it.

Since I have the attention span of a four year old, I lose interest after about ten cards. Ten cards will take about twenty minutes, and when I see the remaining pile waiting for my attention, I find myself thinking of all the things I’d rather be doing. Like ice fishing, shoveling the driveway, having my fingernails pulled out with pliers, or shopping. Okay, definitely not shopping, but you get the idea. IT’S BORING AS HELL!!! I’m always glad I sent them when it’s over, but at least half my list tends to get theirs between Christmas and New Years Day. I’d be better off sending New Years cards instead.

So what does this have to do with your business? Light duty return-to-work programs. Let’s say you are in an industry that doesn’t lend itself to light duty work, i.e. trucking, manufacturing, construction, you get the idea. You can only file papers and push a broom for so long. And sometimes with doctor restrictions, you can’t even push a broom.

Most employers will end up sending their employee home to watch daytime television. You know, the same daytime television where every other commercial is from a law firm asking him if he’s been injured at work. That same group of lawyers also mentions that your employee’s rights are being violated by you, his employer, or the insurance carrier. You know where this one is going, and it’s not going away soon.

Did you know that medical only claims are discounted by 70% when calculating your experience mod? Just by getting that employee back to work in a limited capacity, you can help prevent an ugly lawsuit and keep your experience mod in check. And usually if you keep your experience mod low, your underwriter is going to throw you a few bones as well in the form of schedule credits. But you don’t have any light duty work you say?  I have two words for you: stuffing envelopes.

Think of a local non-profit group that could use some help stuffing envelopes.  Unless your employee has had a severe brain injury, he likely has the capacity to do this and other simple tasks. The savvy employers are doing this for several reasons: 1) it positively impacts their experience mod; 2) it’s great from a PR standpoint; and 3) It will drive their employee to return to normal duties quicker than if he was sitting at home.

Think back to your Christmas cards and how mind numbingly boring it becomes. Now imagine doing this for eight hours a day, every day, for weeks on end. If you’re a welder, plumber, etc. by trade, you’ll be crawling out of your skin and do everything possible to get back to your normal job. Unless you have some strange disease that makes you love envelope stuffing, this is only slightly better than torture. (Okay, I’m exaggerating a bit here, but you get the point.)

If you’re an injured employee, I think it’s safe to say that some of your ambition to return goes out the window as you relax at home watching re-runs of Rocky from your living room couch. If your employee is forced to stay in a routine that brings him out of his house each day to do some charity work, I think you’ll find him much more willing to return to his normal job duties. There is plenty of charity work outside of stuffing envelopes that he could do, but just by engaging your employee you are helping limit the damage and improving the odds that he will return to work sooner than later.

Do yourself a favor and check with some local charities. You’ll be a hero to them, and them to your business. Or you can give me a call. I’d be happy to have your employees send out my Christmas cards next year.

Andy Bertram
Risk Advisor
C.O. Brown
abertram@cobrown.com
651-800-6173

MN Sundays and Supply Chain Risk

I’m a planner when it comes to business. Every “I” is dotted, and every “T” is crossed. My personal life is a different story. Outside of work, I usually just go with the flow and let my better half take care of planning. She loves to plan, and most of the time it’s not a big deal. I just have to look at her little planner book to figure out where I need to be, when I need to go to the dentist, and usual stuff like that. Again, most of the time that approach works out pretty well.

Then comes the conundrum. Picture this: it’s Sunday, the Packers are getting ready to beat up on the Bears and Jay Cutler once again, and we’re hosting a football party at our place. The grill is ready to go, we’ve got a good spread inside the house, and naturally my throat is starting to get dry. It’s a good thing I have a stocked liquor cabinet and fridge full of… uh oh.

I completely forgot my brother came by last Tuesday from Green Bay, and the two of us did our best to solve the world’s problems. Not only did my head feel the pain Wednesday morning, but so did my liquor cabinet. It’s 11:34 a.m., and I live in Minnesota which is bad news for this guy. It’s time to pick up some 3.2 beer from the grocery store and some soda (or “pop” I guess they call it here). I’m going to hear about this for a long time…

While that didn’t actually happen, this is a foreign concept to those of you who live in 76% of our great country. If you’re a 24 percenter like me, you start to wonder whether your first state government was filled with Mormons, Puritans and Quakers. Off-sale alcohol is banned on Sundays here in Minnesota. It is either the result of a genius lobby put forth by the bar and restaurant association where on-sale is permitted on Sundays, or it’s an old fashioned law with more noble intentions in mind. Lucky for me, I live right on the border of MN and WI.

In between all this, there is an inherent supply chain problem in my personal life that I’ve solved. While planning ahead would have taken care of this, living in a border town has done the same thing. Knowing the impending supply disruption that comes every Sunday, I have the option of stocking up ahead of time to avoid this issue. I also have alternate suppliers located in WI that I can fall back on in the event I fail to plan ahead and need to restock my inventory on a Sunday.

Supply chain risk is a real problem for many businesses as well. There are hundreds of concrete contractors around Minnesota right now struggling with a cement shortage. Between the packed rail system, delayed barges this spring, and manufacturing disruptions down south, there isn’t nearly enough cement to go around. Many of these fall projects have had to be delayed and or pushed back to next spring. To a business that makes its hay while the sun shines and before the snow flies, this can be devastating.

So what’s a business to do? There are three common approaches to handling this type of risk: inventory management, alternative sourcing/supplier arrangements, and business interruption insurance.

Utilizing inventory management systems provides you the most control in preventing a supply chain disruption. By keeping accurate count of your inventory and analyzing usage trends, you should have a good idea of how quickly you go use up your inventory and how often you should be ordering replacements. You’ll always know what is available and how many days you can work with what you have on hand. As businesses now keep fewer inventories and “just in time” shipping has become more and more commonplace, inventory management is even more important because there isn’t a large inventory stockpile waiting to be used.

Finding an alternative supplier or sourcing arrangement can help you avoid disruption if your main artery shuts down. This isn’t possible in all industries, especially in the cheese world where your suppliers of brine and rennet are very limited. But in most types of business, a little planning and research can help you identify two or three backups should your main source of a certain product no longer be able to meet your demands.

Last but not least, you can purchase dependent business interruption insurance. For those of you in the cheese industry and others as well that rely on a sole supplier for certain products or ingredients, you can purchase this coverage to protect your lost income should there be a covered cause of loss at this named supplier. If you lose two or three months of cheese production because your supplier of rennet had a fire in their plant, you would be reimbursed by your insurance carrier for your lost profit during that time. The same can be applied to other industries as well.

 

It’s time for me to practice what I preach. Supply chain risk is a very real threat to businesses today, and also to those of us who live in Minnesota. You can bet my inventory will be well-stocked every Sunday when the Packers play.

Andy Bertram CPCU, ARM-E
abertram@cobrown.com
651-800-6173

Why Prescott, WI Matters to You

Just across the Mississippi River from Hastings, MN lies Prescott, WI. A town of about 4,300 people in Pierce County, Prescott is more than a small border town filled with Packer and Brewer fans. Prescott is also a textbook example of why you should never ignore what’s going on in the world of politics. You see, Prescott is also home to a brand new industrial park, sprawling with new construction.

In May of 2013, a new set of state business-to-business taxes were approved by the Minnesota Legislature. One of the tax hikes added a state sales tax to business-related warehousing and storage services. It targeted all tangible goods that are sent through third party warehousing and distribution. Essentially, you could argue that the majority of goods produced in our state our consumed in our state would have been subject to some sort of new tax. Minnesota had the dubious distinction of being the only state in the nation implementing a tax on third party warehousing and distribution.

To say tax policy doesn’t affect business decisions is ignorant at best, though admitted ignorance has been a common theme here in MN that last four years. I won’t get real political here, but when several businesses signed up to build new warehouses and distribution centers in Prescott after the tax was passed, it wasn’t a coincidence. (In full disclosure, our legislators eventually repealed the tax this spring, but the damage was already done.) A few of these businesses pulled out, but United Natural Foods (UNFI) is in the process of constructing a 300,000 square foot distribution and warehouse that will add up to 314 new jobs and inject $37.8 million into the WI economy.

Think for a moment what that tax would have meant to their business. Had they ignored what was going on at the legislative level, they may have wound up building here in the wonderful city of Hastings. We have the land available here for them, and we would have loved to see them set up shop in our industrial park. You could argue Hastings was a better location because of our vicinity to the cities and other major highways. Had they ignored our legislation and built here, they also would have been saddled with the burden of paying this extra tax that is not around in 49 other states. That would’ve had a huge impact on their profitability, and it all could have been avoided (and was).

Taxes are just a small portion of the red tape and other legislative issues that can impact your business. Different bills and amendments get passed into law each year, sometimes under the radar, and it is important to know how they affect you so you can plan for the future. Rather than ignoring politics, you should be actively involved trying to put people in office who are going to support your interests. As a small business, there are many different trade associations or business interest groups who will do the lobbying for you and keep you in the loop about what’s coming through the pipeline. You could also have someone on your staff tasked with staying up to speed on any and all laws and pending legislation that will affect your business. Regardless of what you do, do something!

Before you vote this year, remember the story about Prescott, WI. If you haven’t previously done so, make a conscious effort to pay more attention and get more involved in your local politics. The future of your business depends on it.

Andy Bertram CPCU, ARM-E
abertram@cobrown.com
651-800-6173
www.northriskpartners.com

Be the Best Boss and Save Your Business

I have one bit of advice that will make you the best boss ever, and at the same time, I could save your business. What is that magical advice you may ask? Mandatory vacation. No, that is not a typo.

Wouldn’t it be great if your employer came in and told you that you were required to take five consecutive days of vacation? I can just imagine him saying, “Andy, you’ve been working too hard. As a condition of your employment here, I am requiring you to take a five day vacation. Forget about those financial reports and the payroll you planned on doing. It’s non-negotiable. I don’t want to see or hear you at all next week.”

As an employee, I’m thrilled that I’m “required” to take five days off because let’s face it, I doubt I’d do it on my own. I hate doing payroll at the end of the month. Not to mention that balancing the books often means late days at the office.

As an employer, my boss is very shrewd. He probably isn’t real concerned that I never take a day off. In fact, he loves it. And he also doesn’t have some sick desire to do payroll and balance the books. What he does want is to make sure that the numbers are the numbers are the numbers.

We typically put individuals in charge of our finances that we have a great deal of trust in. Whether it’s a family member or employee, if we were concerned about them embezzling money, fudging numbers, etc, we wouldn’t put them in that position in the first place, right?

Because of this trust, it can be easy to ignore the possibility of malfeasance. Make no mistake. Payroll fraud is real.  According to the Association of Certified Fraud Examiners, it’s the number one source of accounting fraud and employee theft.  According to an article in Forbes:

• Payroll Fraud happens in 27 percent of all businesses
• Payroll fraud occurs nearly twice as often (14.2 percent) in small organizations with less than 100 employees than in large ones (7.6 percent).
• The average instance of payroll fraud lasts about 36 months. That’s three years of paying ghost employees or overpaying existing ones.

http://www.forbes.com/sites/matthewgarrett/2013/09/10/payroll-fraud-a-big-threat-and-how-to-avoid-it/

Trust is an important aspect of every successful business. You need to be able to delegate to thrive in your career, and you need to be able to provide your employees the flexibility to do their jobs well. Great things can happen if you let them. Trust, but verify.

So go ahead, be the best boss around. Let your trusted employees know they deserve a vacation. It may just save your business.

 

Andy Bertram CPCU, ARM-E

Risk Advisor

C.O. Brown

651-800-6173

abertram@cobrown.com

Dash to the Finish Line - Ensuring a Successful Transition Starts Now

You’re out on a walk on a peaceful summer morning. There is a cool breeze blowing off the Mississippi, and you’re soaking up the early morning sunshine. The soothing lapping of the water on the rocks is suddenly interrupted by a steady thump, thump, thump of a running animal pounding the pavement behind you. The thumping keeps getting closer and closer, harder and harder, until suddenly you can hear the breathless panting of the grizzly bear running you down from behind. Just before you take off in a panicked sprint, praying for dear life, you turn around only to see this guy drop a quick wave as he lumbers by on his early morning run. That’s right, no grizzly, just me.

To say I’m not a graceful runner is an understatement. While I may not be much of a runner, I am stubborn, competitive and determined. I also enjoy a good challenge, so when I saw the Warrior Dash was coming to Afton, MN this year, I didn’t hesitate to sign up. After months of training and prep work, race day was here. The first 200 yards went as planned, and then came the first unexpected obstacle. That’s right; this one was not on the list. We had to run from the bottom of the ski hill all the way to the top. And then back down. And repeat again, and again. I don’t know how many hills and wrenches were thrown my way that day, but I’ll bet my thighs could tell you.

Regardless, I managed to power through and finish the race within two minutes of my goal. Did it go as planned? Not exactly. Did I consider it a success? Absolutely. I had mentally and physically prepared to finish the race, and that’s what I did.  Even though it wasn’t perfect, all of that preparation paid off and I was able to cross the finish line. After the first hill, I had to adapt and switch gears. In a perfect world, unexpected hills and twists would never happen. In the real world, you need to be practical and realize that things won’t always go as planned. If that sounds a lot like running a business, it’s because it works the same way.

I’d guess that when you took on the challenge of starting your business, you had a general goal in mind on where you wanted it to go. That goal probably didn’t include working every day for the rest of your life. By being flexible and creative, you persevered to get where you are today. As you’ve had to switch gears, it can be easy to forget to do so in other areas too. What does your final game plan look like? Are you so caught up in the day to day that you haven’t spent any time on your exit strategy?

Succession planning is a talent and organizational improvement initiative that enables an organization to grow and thrive now and in the future. Having a clear picture of the future of your business will allow steps to be taken now to ensure the future success and direction of the company. Your business can neither succeed nor grow without a clear understanding of how the business will continue after the departure of key leaders of the business, including yourself. Not only is it imperative for the long-term success of your business, but I’d assume you want to make sure you’ll be getting paid for your investment when you retire.

Succession planning isn’t limited to retirements only. Think of your critical employees, yourself included, and how your business would be affected by their loss. A life insurance guy would talk end of the world type stuff, but let’s consider more likely scenarios – disability, retirement, moving away, joining a competitor. Life and Disability policies are available for two risks, but for the others it’s critical that a backup plan be established that includes cross-training your employees. Good planning is good business, and failing to do so could put your future and the future of your business in jeopardy. Succession planning should be part of a broader enterprise risk management plan. That’s right, not just insurance risk management, but a holistic approach to address those risks you can’t insure for. If your broker isn’t helping you with this already, it’s time to find someone that will.

Flying by the seat of your pants has a time and a place for certain things. Solidifying your future plans and protecting your business does not make the list. If you haven’t already done so, now is a great time to start as you make your dash to the finish line – your retirement.

 

Andy Bertram CPCU, ARM-E

651-800-6173

abertram@cobrown.com

Tracking Employee Performance and Man Points

Inspired this past weekend by my boys, I decided that it was a good time to
restock my supply of man points. While no one significant event comes to mind, I’m sure I’ve done
enough things since getting married that would get me close to the break even mark. I had an 8 foot
diameter tree stump in the middle of my backyard, and it had been taunting me since I moved in last
summer. This stump had outstayed its welcome, and it was time for it to go.

Burning this stump into oblivion looked better on paper than in practice.  My fire hardly turned the stump black. Dynamite would have worked well, but the city doesn’t appreciate that sort of fun.  This tree was probably around when the Vikings landed here, so it’s taken on the worst nature could throw at it and was probably laughing at my feeble attempt to take it out.  Enter plan b): it was time to man up and rent a stump grinder. I could have gone with the Cadillac of stump grinders, but instead fought the stump for eight hours with the more primitive, manual grinder. That’s right, eight hours of abuse to my body so I could earn some of those man points back.

That got me wondering. Did I earn a hundred man points? A thousand? Several thousand?
How do I track that, and how do I know where I stand? For something as important as this, it may be
necessary to keep some sort of tally so I don’t ever fall behind.  Then I started thinking about those of you who are running a business. Hopefully you see your employees working hard every day. Maybe you see them taking an unexpected or extra break that was not approved, perhaps for a smoke. Was it a onetime deal, or does it happen quite frequently?

I’ve heard from many business owners that they are considering cracking down on these non-approved breaks for many different reasons. Well there’s a simple reason that sticks out in my head – money.  If your employees are taking extra breaks throughout the day, you’re not getting what you paid for.  Let’s say you pay an employee $20/hour, 40 hours/week. Instead of working the 40 hours you are paying the employee for, you are actually only getting 35 hours of service due to these extra breaks or other distractions from the job. At $20/hour, 52 weeks/year, you are losing $5,200 per year on just that one employee alone.  And that doesn't even include what you are paying in benefits.  When was the last time you saw those costs go down?  I thought so.

My buddies seem to keep track of my man points, though sometimes I think they shortchange me a bit.  Lucky for you, you can keep track of your employee performance to make sure you're getting your money's worth.  How often do you do performance reviews?  What does your review process look like?  Are there incentives to improve performance such as bonuses, extra vacation days, you name it?  I suppose if you were getting an extra $5,200 out of your employees that you didn't get last year, a $100 performance bonus gift card or extra day of vacation is probably a win-win situation.

Just like your financial planner will give you updates on your stocks, mutual funds, and other investments, it's time you do the same with your company's biggest investment - human capital. 

Good luck!

Andy Bertram CPCU, ARM-E
C.O. Brown
651-800-6173
abertram@cobrown.com

Untangling Your Fishing Line - Delegating in Your Business

My family and I went on our first family vacation this weekend.  By family vacation, I mean a work trip with some family time squeezed in there as well.  Since my two little men are now well on their way to the age of four, I knew it was time for them to start collecting some man points.  While I’m not sure how many man points I’ve accumulated over the years, I know I’m fairly certain I’m still in positive territory.  Since it’s never too early to start, I wanted to make sure that they had a solid bank of man points at an early age.  It’s a precautionary thing just in case they have a moment of weakness and drink pink cocktails or go clothes shopping with their girlfriends when they get a little older.

As part of their christening, I did what any proud father would do – took them to Fleet Farm to pick out their first fishing pole.  Now from my recollection of fishing with my dad, I remember having a knack for creating the most unimaginable rats’ nests ever.  Whether it was operator error or a problem with the reel, I’d like to place blame solely on the equipment.  With that in mind, I found every “cool” open faced reel I could locate.  It didn’t matter.  Hunter found a mini Star Wars kiddie combo, and Jack found the Spiderman equivalent, each with the dreaded closed face reel.  While my memory isn’t clear, I probably had nightmares that night about fishing line wrapped and tangled and knotted and looped and the worst possible rats’ nest you could imagine.

With the rods ready and our bags packed, we headed up to the resort to relax and catch some fish.  My boys have the attention span of, you guessed it, a couple of three year olds, so I wasn’t sure how long they’d last out on the boat.  When we got to our first spot, it wasn’t more than five minutes in that we had our first tangle.  Hunter’s pole was a mess, so I spent some time cleaning that up.  The next thing I know, Jack’s line was tangled around the back of the boat, and repeat the process.  I had my line in the water for a little bit, but not too long.  The fish weren’t biting there, so we packed up and moved to another spot.  After what seemed like milliseconds, I was already untangling some more lines.  I’m not sure why I thought I may actually get some fishing in.  I remember being a kid myself and wreaking havoc on my dad’s poles, leaving him no time to fish. 

If you’re a business owner, many of your days, weeks, and months are probably spent untangling the fishing lines in your business.  There are a lot of important things that can help you succeed and grow that you probably want to do, but somewhere in between the idea and actually following through another rats’ nest came your way to untangle.  Have you put off a long-term business model and set goals to work towards?  Did you plan on attending some of your industry’s top trade shows but instead had to put them off?  Maybe on the safety and risk management side you recognize the need to implement a culture of safety to reduce your workers compensation costs and boost morale.  Risk management sometimes can be the toughest thing to devote time to because your ROI may take a year or more to materialize, and with other coals on the fire it often gets pushed back.

One of the toughest things in business and personal life can be delegating some of these less important tasks to someone else.  Do you have someone in your business who may be equipped to untangle some of those lines you’ve been dealing with?  If you don’t, could you train them?  Correct me if I’m wrong, but I’m going to take a wild guess and assume that you didn’t hire someone you didn’t think you could trust.  If that’s the case, stop hesitating and start delegating.  You’ll appreciate your newfound time, and you’ll probably find yourself enjoying your time at work a lot more doing the things you want to be doing. 

We all know that no one can do certain things as well as we can.  Some things though can be done by someone else close to our perfection, and that’s usually okay.  The things that really need our expertise should get our undivided attention, but prioritizing is a good place to start.  By letting go a bit, putting your trust in your employees and delegating those less important tasks to them, you’ve now given your business another chance to succeed.

So think about your business and your personal life.  What types of rats’ nests are you dealing with that would be better off being handled by someone else?  If you were to hand off one or two of these time consuming, menial tasks to someone else today, think of the things you could accomplish.  If you don’t, you’re risking not reaching your full potential in the future, missing those opportunities to grow and improve your profitability.  You aren’t in business to fail, so stop running it that way.

In today’s day and age, you’re either growing or you’re dying.  Start focusing on what really matters, and don’t get caught up in the day to day.  If you haven’t already, today is looking like a great day to start delegating. 

 

A big thanks to the MSBOA for putting together a great conference this past weekend.  And by the way, Jack did manage to catch his first smallmouth bass and wanted me to put it on the wall.  I think that’s worth a few man points.

 

Andy Bertram CPCU, ARM-E

abertram@cobrown.com

651-800-6173

An Ode to the Fake ID: Identity Theft, Data Breach and Cyber Liability

I’ve lived in either Wisconsin or Minnesota my entire life.  However, during different periods in college I actually grew up in Oregon and South Dakota as well.  I couldn’t tell you the names of the towns in either state that I purportedly lived in now, but I sure knew them back then.  I also knew the liquor stores and bars that weren’t real careful when they checked IDs (with the exception of one fateful day when I had to give up my Oregon residency and take up South Dakota).

It seemed in college there was always a guy who could hook you up with a bad fake ID for the right price.  No one was ever hurt while we were out having a good time, and they served their purpose for a few years.  Was it illegal?  Absolutely, and it was also very dumb for a guy majoring in Criminal Justice with full intentions of becoming a peace officer.   I’m not going to talk right now about the importance of training your bouncers, checking IDs or liquor liability.  What I am going to scratch the surface on is the up and coming threat of data breach, identity theft and cyber liability.

While our guy in college may not have been very sophisticated, today’s identity thieves are and have gotten very good at what they do.  It seems just about every week we hear about a large data breach – Target before Christmas and Ebay more recently.  What we don’t often hear about is some of the attacks on small or medium sized businesses.  78% of small and medium sized businesses experienced a data breach in the past two years.  Every year, cybercriminals steal $1 billion from these businesses in the U.S. and Europe.  And of those that suffer a major data loss, 72% shut down within 24 months.

Not all of these data losses were the result of a data breach.  Some were the result of poor backup procedures, but many of them were.  And unfortunately for you, their guy is a lot more sophisticated than our guy was in college.  With our world being more interconnected than ever, there are more and more ways where they can steal your information.  Point of sale computers.  Credit card machines.  Online databases.  Physical breach of confidential records in storage.  Employment records.  Hacking into your computer or mainframe.  Your smart phone.  Online payment systems.  The list goes on.

So how do you fare?  What are your true exposures?  For most people, when they hear data breach they only think of cyber liability.  Cyber liability is very important for many businesses, but it’s also important to understand what your coverage actually entails.  While many businesses may not have a true cyber liability exposure, they still face the possibility that confidential information could be compromised.  It could be by a current employee in good standing.  It could be someone breaking into your business.  Disgruntled employee.  Or it could be someone you know and trust and would never expect.  Regardless of who is a suspect, it is a very real threat to businesses today.

While the cyber liability may not apply in these situations, data breach does and could be used to cover a claim.  It’s important for you to know that coverage is available, it covers a huge exposure, and not all things are created equal.  Even if you do not have the online presence that many businesses do today, you still could fall victim to one of these very sophisticated, 21^st century criminals.  It’s important to know what your policy does and does not cover.

Identity theft is a much more lucrative business than selling fake IDs to college kids, and it’s here to stay.  The best thing you can do is take steps to prevent a breach, and in case it does happen, making sure you have the coverage you need to ensure your business’s survival.  Good luck!

Andy Bertram CPCU, ARM-E
abertram@cobrown.com
651-800-6173

What's In a Name?

I used to work at an ice cream factory, and the difference between Lick’n Good, Zurheide’s, and Old Wisconsin vanilla ice cream was nothing more than the packaging we put it in and the price we charged.  I’m firmly convinced the coffee companies do the same thing.  To prove my theory, I experimented several years ago with some of my old roommates.

I love a good cup of coffee.  There’s just something about waking up to that sweet aroma that gets me going every day.  I think Folgers was onto something.  To the dismay of my wife and friends, I also enjoy a bad cup of coffee.  Have you ever had reheated coffee?  Broke down and made a cup of instant “coffee”?  Enjoyed a cup after it’s been sitting on the burner all day?  Yes, yes, and yes for this guy.  Even so, I can still tell the difference between a good cup and a bad cup.

In our house, we’d burn through a can of coffee about every week and a half.  I was adamant that the generic Columbian roast tasted just like the name brand.  Since we all split the cost, I bought the generic one time and never heard the end of it.  It “didn’t taste right” and “just wasn’t as good”.  After that fiasco, we went back to the name brand coffee and all was good in the world.  Or so they thought.  Somewhere between opening the new can and the end of that new can, I bought the generic brand and filled the brand name can back to the top.  And as I heard, you would never believe how good the “brand name” coffee tasted in comparison to the stuff I bought!

Let’s switch gears to you business.  If you produce a product or offer a service similar to your competitors, why do your customers buy from you instead? Have you won awards?  Are you known for providing the best widget or building the best home?  If you’re a trucker, do you have a top notch safety record and history of being reliable and always delivering on time? With all the similar options available, why should I buy from you?

Often, it’s your name and reputation.  If you’ve taken over an existing company, they have been molded and crafted for generations.  Or if you are a startup, yours are still fairly fresh in comparison.  It takes a long time to build a solid name for yourself or business, but it can take just an instant to take all that goodwill away.  What have you done to protect your name or your image?  If you’ve lost that good name, what would it do to your revenue?

Ryan Braun.  ENRON.  Anthony Weiner.  AIG.  Alex Rodriguez.  Pete Rose.  Exxon.  Washington Mutual.  Martha Stewart.  The Dixie Chicks.  What is the first thing that comes to your mind as you read these names?  1) Cheater.  2) Fraud.  3) Sexting.  4) Bailout.  5) Cheater.  6) Disgraced Gambler.  7) Exxon Valdez environmental disaster.  8) Fraud.  9) Insider Trading.  10) Unpatriotic has-beens. 

I’ll bet you didn’t even consider all of their accomplishments or their history prior to the one day that sticks in your mind.  And that’s the point.  There are a lot of thriving companies out there who have built a solid reputation over the years.  Luckily for Exxon, they eventually recovered after years and years of PR work and trying to rebuild their reputation.  I’ll bet it wasn’t easy, especially with how the oil companies are vilified in today’s society.

Think about your current situation.  What would a poor decision, mistake, or bad PR do to your company?  If you don’t have a PR recovery plan in place, it’s probably time to start thinking about it.  Good planning is good business, and it would be foolish not to consider the impact that unexpected bad press could do to your business.  You buy insurance on your building to protect it in case it would be destroyed, and this isn’t very probable.  Bad press is more likely, and it could cause you to lose significant revenue including possible failure of your business.   

I was born with it.  It defines who I am, and my dad and those before him made it strong.  It takes a lifetime and generations to build a solid name, and seconds to lose it.  The Bertram name does not have a price tag.  So I’m going to keep it how I got it, as solid as it came.  It’s my last name.   Can the same be said about yours?

Andy Bertram CPCU, ARM-E

Risk Advisor

C.O. Brown

651-800-6173

abertram@cobrown.com

"The Entitlement Generation" and Keeping Good Employees

The best defense is a good offense.  Most of us have heard that phrase used in one way or another.  It originally applied to military combat, but it’s become cliché in the sports world today.  It's simple - by staying actively engaged in pursuing your competition, you’ll spend less time defending yourself.

Your business isn’t in a combat zone, but this phrase can apply to one of the biggest risks facing it today – your employees. I have the same conversation with business owners like you just about every day.  Their business has a solid core of employees in their 40’s and 50’s, but they’re having a tough time attracting younger talent.  Those they do do find are often unreliable and do not have the work ethic of their more experienced employees.  Let’s dissect this a little further.

The millennial generation is a far cry from our baby boomers parents.  Our well-intentioned parents worked hard so we could be better off than they were growing up, but it has led to some unintended consequences.  We should almost be referred to as the “entitlement generation” because it seems many of our peers feel entitled to just about everything these days. 

In our parents’ quest to give us a better life, many in our generation did not learn the value of working hard because things they wanted were simply handed to them.  Whether it’s free healthcare or free tuition, they have become accustomed to getting something for nothing.  They've sadly become the quintessential basement dwellers of their parents’ homes, staying on their parents’ health plan until they turn 26 because they don't have a real job, and playing video games in all of their spare waking hours instead of trying to find a way to get out on their own.

For those of us millennials whose parents taught us the value of hard work, this is baffling.  Chances are if you’re reading this blog, you aren't living in your parents' basement.  While it presents additional opportunities for those of us willing to work hard, it also causes some issues when we get into positions of running a business and needing to hire reliable employees.  That brings me back to my original point – the best defense is a good offense.

All things considered, it usually costs a lot more to hire a new employee than it is to retain a good one.  Whether it’s money for job posting, training, and lost productivity while that new employee gets to the same level as the former employee (plus many others), it won’t be cheap.  Did I forget to mention that this person who you have just hired may fall into the “entitlement generation” category?  And if they do, guess what you’ll be doing in a few weeks or months… (see above).  Sometimes you have to hire because of growth or opportunity, but I’ll save that for another day.

If you haven't already, now's the time to go on the offensive to keep your employees happy.  What type of benefits are you currently offering?  Are there any incentive programs?  Wellness?  What other perks are available for your workers?  Are you doing more than your competitors?  When was the last time you offered a raise or a bonus for a job well done?  All things considered, wouldn’t it be less expensive to do one or two of these things a year than to try and replace your best workers?

You and I show up every day because we either love what we do, enjoy our work environment, or we are working hard for a greater cause.  Be it our family, ourselves or a future opportunity, we’re here because we want to be.  Put yourself in your employees' shoes – what gets them up in the morning and excited to come to work for you?  If you can’t answer that question honestly, then it’s time for a gut check. 


Go on the offensive to keep your employees happy, and save yourself the added headaches and expenses that comes with replacing them.  It's a worthy investment in the future of your business.


Andy Bertram
Risk Advisor
abertram@cobrown.com
651-800-6173

Don't Be "That Guy"

On February 14, 2013, I was “that guy”.  You know who I’m talking about.  It was pouring rain, 33 degrees and flirting with freezing.  I had a five hour drive ahead of me that was looking like eight, needed to be home in six hours, and I was on a mission to make up some lost time after a late start.  A little earlier in the trip I noticed that my tires had lost a little grip on the road, but being invincible that didn’t deter me.  I just let off the gas and watched the speedometer drop about five ticks lower than normal.  No big deal.

After getting off the state highway and onto I-94, it only made sense to make up for some lost time.  I was west bound and down, passing cars left and right.  Now I was in full “that guy” mode.  You know, that guy you all wish would either a) wind up parked on the side of the road with blue and red lights flashing behind it; b) down at the bottom of a ditch, far enough to not drive out but not bad enough to get hurt; or c) all of the above. 

It just so happened that somewhere between Mauston and Osseo the temperature dropped a few degrees.  My car doesn’t have a temperature gauge, so I first noticed the temperature drop when we were flying backwards down the interstate at about 60 MPH.  I suppose the rain turning into snow was a dead giveaway, but I didn’t really notice it until we were parked safely at the bottom of the aforementioned ditch.

So all of those who were rooting for option “c”, they got their wish.  The WI state patrol is thicker than mud in the Mississippi, so we had a trooper there within seconds for a very unpleasant experience.  I got the last laugh though and somehow managed to drive the car out of the ditch without getting a “too fast for conditions” ticket.  Me = 1, other drivers = 1, state patrol = 0.  We’ll call it a draw.

If you’re like me on most days, it seems like “that guy” who flies by you on the interstate always gets away.   The same goes with insurance as well.  Fraud amounts to roughly 10% of all property and casualty claims paid in the U.S. each year.  Whether it’s stretching out a work comp injury, adding some fluff to a property claim, or exaggerating damage from an auto accident, all of these add up throughout the year.  Many people consider these things harmless and find ways to justify it to themselves.  In reality it’s illegal, and the costs are getting passed on to you and me.  Believe it or not, the insurance companies are not charity organizations.  They are there to make a profit, and if their costs are going up they will look to their policyholders to make up the difference.

When was the last time that you heard about someone getting caught?  Well I came across this example today and thought I’d share.  http://www.insurancejournal.com/news/midwest/2014/04/23/327127.htm.  In a nutshell, an Ohio woman was ordered to repay more than $32,000 in connection with working while collecting workplace injury benefits.  She got her hand caught in the cookie jar, and she could wind up spending some time in the big house as well.  She’s not the first and certainly won’t be the last to cheat the system, but it’s nice to see that every once in awhile the bad guys get caught. 

“That guy” will keep getting away with it unless we all work together to put an end to the problem.  So the next time you hear of someone who may be playing the system, stretching a claim or double dipping, speak up.  Insurance fraud affects us all, and we all wind up paying for it in the end. 

Andy Bertram CPCU, ARM-E

Risk Advisor
C.O. Brown
Phone: 651-800-6173
abertram@cobrown.com

Fun With Stats - Key Person Disability Planning

Let's start our Monday with some fun statistics...

The Brewers have a 5.6% chance of winning the World Series this year according to Las Vegas.  The Cubs have a 0% chance due to my unofficial odds-making.  They always manage to screw it up (Right Steve Bartman?).  3.3% of all births result in twins.  0.5% of the U.S. population has run at least one marathon.  8.5% of the people in the world own a car.  Less than 5% of the world’s population owns a computer.  You have a .02% chance of being struck by lightning in your lifetime.  .08% of high school football players will play professional football. 

Here’s two more: Just over 1 in 4 of today’s 20 year olds will become disabled 3 months or more before they retire.  1 of 8 workers will be disabled for five years or more during their working careers.

Being invincible, I’m more concerned about the Brewers winning the World Series this year.  I’ve already been a statistic with the twins, marathon, car, and computer.  Surprisingly enough, these are all very much less likely to happen than missing significant time at work.  A U.S. Social Security Administration study shows that 64% of wage earners think they have a 2% or less chance of being disabled during their working career.  Where do you fall? 

If you’re a business owner, think about who you can’t afford to lose for three months or more at a time and start there.  Is it you?  Your business partner(s)?  Shop foreman or office manager?  Chances are good that at least one of you will miss some serious time before you retire.  What have you done to protect your business from something like this from happening?  Aside from a disability, what if that person leaves the company to pursue another career or worse, death?  I’ll cover the latter two a different time.

Let’s consider maternity leave for a minute.  Everywhere I’ve worked, when we knew someone was close to maternity leave we had a well-defined plan in place to figure out who would split the workload, cover the phones, do some other quirky stuff, etc.  When that person would leave and be out for twelve weeks, we were a little swamped but not overwhelmed.  We had a well-prepared plan and a little cross-training before that person left, and that helped us get by until the maternity leave was over.  It also helped from a career development standpoint to learn more jobs.

While we all get a bit of a heads up before someone has a baby, let’s think about what we did to prepare for that person’s absence.  It was nothing overwhelming or time consuming, but it was very effective in helping us keep our service standards while that person was gone.  Now’s the time to ask yourself what sort of cross-training or plan do you have in place to cover the absence of some of your other key employees or yourself.  Are there jobs so important and difficult that cross-training is not an option, or are you not large enough to assume that sort of void?  For these types of situations, a key-person disability insurance policy might be a good investment for you.  It’s relatively inexpensive, and it can help you pay bills, cover overhead, and make up for lost revenue as you wait for that person to return or need to hire and train a replacement.  I’ve worked with businesses that have lost a key employee and have seen the results.  It can take several years to get things back to the old normal if you even manage to survive.

I’m not a doom and gloom type of a guy, but I am realistic.  Cross-training is the most inexpensive way to manage an unexpected leave of absence.  As a bonus, it can also prepare employees for future leadership positions.  If cross-training in your situation doesn’t make sense, it’s probably time to think about how key-person disability insurance can help keep you afloat while you manage to find a temporary or permanent solution. 

I’ve been on this earth for 28 years, and I still have yet to see my Brewers win a World Series.  Our odds are 18/1 this year.  Your odds of you or an employee being disabled are much higher than that.  I can cheer until my face turns blue, but I can’t affect the outcome.  Lucky for you, you can.  If you haven’t already, today is a good day to start planning for the future.  And if you’re like me, be happy – you’re not a Cubs fan J

(Disability statistics are from: http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp.  For those of you English majors out there screaming that I didn’t cite my source correctly, my apologies

Andy Bertram CPCU, ARM-E

Risk Advisor

 

Phone: 651-800-6173

 

abertram@cobrown.com

   

The Monday Morning Quarterback: Product Recall Coverage

Have you ever said or done anything that you instantly wanted to take back?  Maybe you got talked into staying for “just one more round” which we all know never ends at just one.  Perhaps you were trying to distract someone in a basketball game and did something embarrassing?  Said something you wish you hadn’t at a work golf outing?  Or if you’re like me, you walked into a business and asked for “Bill” only to find out that “Bill” passed a year and a half ago.  That wasn’t the first time that one’s happened to me, nor will it be the last.  Actually, all of these things have happened to me in the last few years.

If you answered “no” to that question, you’re lying to yourself or you’re Chuck Norris.  Of course we’ve all done things at least once in our life that we wish we hadn’t.  It might not be something we regret today, but it can make you feel pretty foolish for awhile.  While we may not be able to take these things back in our personal life, there is a silver bullet available that gives some businesses the ability to do this at a minimal cost.

Product recall coverage is a beautiful thing if you are a manufacturer.  For our sake, let’s say you are a manufacturer of an incredible device that doubles the fuel economy of a car while at the same time boosting its horsepower.  It’s such a great product that my Chevy Impala now sprints like a Ferrari while getting the fuel economy of one of those ridiculous Smart cars.  There’s one problem with this miracle product – it has a tendency to cause cars to explode due to an electrical short in this new product.  Luckily for you, this problem was detected early, but because it was such a hot item you’ve already sold over 500,000 units.  Or in the case of GM, a real world example, you saved a few pennies on an ignition switch that has caused irreparable damage to many families.

Instant regret right?  In our example, had you spent another $.10 on the better electrical circuit, you wouldn’t have had this issue.  In hindsight, that extra $.10 is looking like quote the bargain right now.  Luckily for you, your broker had done a nice job of helping you plan for something like this.  You conduct mock recalls throughout the year and also have a solid recall plan in place.  Additionally, not only has he helped you put together a PR recovery plan to handle the bad press, but he also suggested you purchase product recall coverage.

What does product recall coverage protect you against?  While coverage depends on the carrier, it usually includes costs such as customer notification, shipping costs and disposal costs. Coverage generally applies to the firm itself, though additional coverage can be purchased to cover the costs of third parties.  Essentially, it covers those instant regrets that you and I only wish we could for ourselves. 

From personal experience as an underwriter, I can tell you that these costs add up real fast.  I’ve seen a small manufacturer rack up $750,000 in recall expenses in one week.  If you’re a manufacturer and have never discussed this with your broker, it’s time to find a new one.  You should at least know this option is available so you can make a conscious decision as to whether you want it for your business.
 

We’ve all said and done things we wished we hadn’t.  So the next time you do something truly embarrassing, just think about how great it would be to be a manufacturer.

 

Andy Bertram CPCU, ARM-E

Risk Advisor

C.O. Brown

Phone: 651-800-6173

Fax: 651-388-8443

www.cobrown.com

abertram@cobrown.com

 



 

 

Beating the House – Betting on Yourself

Winning is one of the best feelings in the world.  Whether it’s a sports bet, at the casino, or beating your competition, it always puts a smile on my face.  Because I love to win, I avoid the casinos.  They can smell my money like a shark smells blood.  During my first trip to a casino, I got cleaned out playing blackjack after only making it through five hands.  Being broke, I decided to go watch a friend who was playing slot machines.  He had finally broken even, and I tried my best to convince him to quit while he was ahead.  It’s a good thing he didn’t listen because he walked away with about $700 that night.  True story.  That was my first and last time at a casino.  For the fishermen out there, I am a human cold front.

The reason I don’t like the casinos is not because I’m a terrible gambler (I am).  It has more to do with the fact that there aren’t a whole lot of things I can do to increase my chances of winning.  It’s like betting on the Broncos to cover a 2.5 point spread in the Super Bowl – you have no way to affect the outcome of the game.  You can’t get out there and play the shutdown corner on Doug Baldwin (not that it would help in your case) to help keep Seattle out of the end zone.  You’re completely relying on someone or something that you have absolutely no control over. 

Here comes a much safer bet – you, your business, your drive and passion to succeed in whatever you are doing.  It’s a great way to gain an edge on your competition.  Congratulations!  Either by choice or by necessity, you’re one of about 10% of Americans who had the audacity to start their own business.  Venturing out on your own was a gamble in its own right, but a calculated risk for sure considering you can affect the outcome. 

You cannot control all the factors that will affect the success of your business.  What you can control is your greatest asset – you.  Your hard work, skill, dedication and drive all are going to play an integral part of your business’s success.  As such, you have probably planned or have strategic actions you are taking each day to help improve your odds.

Gambling has a place in risk management as well.  There is such a thing as “over-insurance”.  I’d describe it as buying coverage for anything and everything you can think of while at the same time assuming very little risk.  While your agent or broker would probably love you for purchasing all of this insurance, there are plenty of risks you would be better off retaining yourself. 

By assuming some of the risk, several things are likely to happen: 1) You’ll be more proactive in risk management.  Either through preventative maintenance, training, or strategic planning, your additional buy-in will help decrease the chance of certain losses from occurring.  2) Your insurance carrier’s underwriter is going to appreciate this.  Knowing you’ve assumed more of the risk, he or she is likely to cut you some slack on the premium.  3) You’ll find these actions will cross into other areas, i.e. you’ve taken steps to prevent auto accidents by implementing driver training, and at the same time you are reducing workers compensation claims because the employees won’t be getting injured in these accidents.  4) By assuming more risks, the insurance company is paying less towards claims, and as a result you are more likely to see your premiums decrease.

Insurance at its core is meant for catastrophic risks.  If the risk is something that would put you out of business or create a severe setback, it’s probably one that you should buy coverage for.  These will be different for every business, so it’s important to know where you stand and what you can afford to do.  Remember that by just taking on a little risk yourself, you can realize some significant cost savings that you can reinvest in other areas of your business. 

Betting on yourself can be a great way to save money and help you gain an edge on your competition.

Andy Bertram CPCU, ARM-E
Risk Advisor
620 Main St
Red Wing, MN 55066
Phone: 651-800-6173
Fax: 651-388-8443

www.cobrown.com