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Driving the growth of small business and manufacturing in Pennsylvania

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JANUARY/FEBRUARY 2015

WORKING PARTS magazine

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futur & nt

L T U O

F K OO

e urr c R O

HR BEST PRACTICES

Is that investment worth it?

IN MEMORIAM

Remembering Leo McDonough

MADE IN THE USA? WHAT IS THE INTERNET OF THINGS?


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JANUARY/FEBRUARY 2015

IN THIS ISSUE DEPARTMENTS

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COVER STORY

CHAIRMAN’S MESSAGE president’s MESSAGE

Local business experts cite “cautious optimism” about current and future growth.

SMC HOMEBASE NEWS & EVENTS

parting shot

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THOUGHT LEADERS

Dennis Yablonsky on our region’s growing age gap.

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EXPERT TIPS & ADVICE

How to Improve Your Chances of Meeting Retirement Goals How to feel better about retirement? Have a plan.

Look North for Opportunities There has never been a better time for Pennsylvania companies to do business in Canada.

SECTIONS

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DYNAMIC BUSINESS TODAY’S INNOVATIVE LEADERS

Growth & Succession Planning

Two SMC members team up to plan for future growth.

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E-CORNER ENTREPRENEUR’S ADVICE

Cash is King

Learning about cash flow helps to ensure the success and longevity of your business.

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Made in the USA?

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Healthcare Concierge Services

Pulse WHAT’S HAPPENING NOW

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HR Best Practices

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Health Plan Lingo 101

Is that investment worth it?

Best Compensation Practices Measure and manage the cost of your workforce.

A brief run-down of common health insurance terms.

What is the Internet of Things? Manufacturers can optimize process performance, identify system logjams and ensure optimum employee efficiency.

Companies claiming U.S. origin for their goods must carefully review the origin of components.

Executive concierge health care services can be customized to a company and its leadership.

IN MEMORIAM

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Remembering Leo McDonough Leo McDonough, SMC’s president from 1970-96, passed away on September 5, 2014, at age 88. His vision and drive gave small business a credible and strong voice in Harrisburg and Washington. The tenaciousness he brought to his work stemmed largely from a baseball career which included pitching for a Pirates minor league affiliate.


2015

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CHAIRMAN’S MESSAGE

The Benefits of Benchmarking & Best Practices

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WORKING PARTS magazine

Driving the growth of small business and manufacturing in Pennsylvania

Benchmarking is a good habit for any small business to adopt. Learning from other people’s success is a great way to build on your own accomplishments and capitalize on the “cautious optimism” that local business experts cite in Gina Mazza’s cover story about current and future growth potential in our Commonwealth. My management team and I, for example, have taken advantage of the SMC Salary Survey to develop and benchmark our employee wage scale to fairly compensate and retain our employees. In a similar vein, it’s useful to see how we’re doing compared to others companies in our industry, or of similar size. The insights we get from benchmarking studies can help us manage inventory, cash flow, accounts receivable, collections, staffing, overhead costs, business development activities, and more, with greater precision and focus than ever. As for best practices, I’ve found them to be particularly useful in developing strategies for managing inventory in ways that meet customer demand while maintaining a positive cash flow. In fact, a pair of experts from the Gannon University Small Business Development Center offer some cash flow management tips. If you own or work for a small business, benchmarking and best practices data can eliminate the time-consuming process of “reinventing the wheel” every time you face

a challenge or problem, as others have undoubtedly had to overcome the same obstacles you’re facing. Steve Halliday’s piece about “The Internet of Things” touches on this vital topic. I have gained tremendous insights to managing our company by taking advantage of the many formal and informal sessions available through belonging to SMC Business Councils. Hopefully, I have been able to pass along some useful insights to other small business owners in those same sessions. Likewise, SMC’s government relations programs and strategic alliances with organizations such as the Consulate of Canada in Pittsburgh and the Southpointe Marcellus Shale Chamber of Commerce can help small businesses create export opportunities and make the development of customers or clients outside the region a best practice. SMC’s recent acquisition of Buy Pittsburgh First (BPF) underscores the advantages of “thinking locally and acting globally” as a best practice when it comes to business development and sourcing. Look for more information about BPF in the coming weeks and months. It’s an exciting time to be in business. By adhering to benchmarking and best practices as individual companies and as SMC members, we can channel our enthusiasm into opportunities that keep our businesses – and this region – moving forward to great success!

Mark Shelleby SMC Chairman of the Board of Directors

A Bi-Monthly Publication of SMC Business Councils Publisher: Steven B. Shivak Design & Production: Levy MG Printing: Knepper Press SMC Business Councils Board of Directors Chairman of the Board Mark Shelleby Vista Metals, Inc. Chairman-Elect/Secretary Brian Stein S&S Intersource LLC Treasurer Abraham Moosa Janney Montgomery Scott Immediate Past Chairman Dan Galbraith Solutionist Ray Amelio Fragasso Financial Advisors Anita Brattina AllFacilities, Inc. David Carlson Creekside Springs, LLC Vice Chair/Membership and Member Benefits Bill Ringle Principal, SystemRingel Vice Chair/Government Relations Eric Riske General Window Cleaning, Inc. Vice Chair/Communications George Sackandy Fusionmarx Vice Chair/Human Resources Kelly Scott Manpower Working PArts is published six times per year by SMC Business Councils. Subscriptions: $50 per year to U.S. residents; foreign subscriptions: $100 (contingent upon location). Single copy: $10. Change Service Requested. The companies featured in this magazine and the products and services displayed are chosen to provide information of interest to small business and manufacturers. Working PArts and SMC Business Councils do not specifically endorse any of the products or practices described in the magazine. We reserve the right to reject advertising. Correspondence regarding editorial copy should be addressed to: Editor, Working PArts 600 Cranberry Woods Dr., Suite 190 Cranberry Township, PA 16066 Telephone: 412-371-1500

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President’S MESSAGE

To Raise the Bar, You Need to Know Where You Are This issue of Working PArts has been particularly fun to produce. That’s because people interviewed for, and contributing to, this edition have expressed such thoughtprovoking insights related to benchmarking and best practices. At the start of a calendar year, focusing on that theme is most appropriate. Besides looking ahead, we reflect on the life of Leo McDonough, longtime SMC President, who passed away last fall at age 88. During Leo’s 30-year tenure, SMC became the place “where PA Businesses Go to Grow.” Leo was a “local boy done good.” He fought in World War II, turned his passion for baseball into a minor league career with his beloved Pittsburgh Pirates, and used his leadership and drive to build SMC into the thriving organization it remains today. Every edition of Working PArts makes me consider SMC’s role in assisting businesses, and this one has me focused on how SMC can help members become best-inclass. How do we define best-in-class? Whom do we identify as such? Why is it hard for so many companies to achieve that distinction? As a business leader, before you can recognize which companies are best-in-class, you first need to understand your own business. That sounds easy, but if it were, more mergers and acquisitions would meet or exceed expectations, more change initiatives would sprint rather than limp across the finish line, fewer people would need the myriad “leadership” books that tell us what, deep down, we already know, and fewer businesses would fail.

To raise the bar, you need to know where you are, and who you are – individually and organizationally. Seems so simple, yet misjudgments on those fronts have been the downfall of many established and startup firms alike. Business schools are full of case studies about companies that have lost their way. Some of those firms are no longer around while others toil as shadows of their former selves. Since I began my career, a longtime mentor has barraged me with questions about strategic and tactical issues. At first, I walked away from our lunches with my tail between my legs, taking his constructive criticism personally. C

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Fast forward to today. I’ve had leadership roles for a couple of companies since then. I’ve matured and I’ve been able to bring in some pretty talented people to each organization I’ve led. The most important thing I’ve learned is the axiom of “missiondriven and customer-dependent.” The only way I can look to specific organizations to examine their methods is first to look at who we are as a business and where we want to go. Based on that, we can identify some extraordinary companies with great lessons we can apply to our own businesses. CM

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And as for my mentor? I can’t wait for our next lunch (I owe him a call to get dates on his calendar). I still get questioned and “beat up,” as I called it over 12 years ago, but I no longer take it personally. Instead, I walk away rejuvenated on ways to create an even better organization. What are you doing to raise the bar in 2015?

President, SMC Business Councils SMC.ORG

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DYNAMIC BUSINESS TODAY’S INNOVATIVE COMPANIES

One Member Helps Another by Todd miller “It’s always gratifying to learn that one of our members is helping another,” said Steve Shivak, SMC’s executive director. “It’s even more fascinating when a recently-formed company works successfully with a fourth-generation family business that has been around for more than 90 years.” The organizations to which Mr. Shivak refers are C-Leveled, a Bloomfield-based business consulting and marketing firm comprised of seasoned and successful entrepreneurs, and Sloan Lubrication Systems (Sloan), a Freeport-based manufacturer of lubrication solutions for reciprocating and rotating equipment used

“Despite the fact that we were growing revenues at 10 to 15 percent a year, we were in a rut,” said Walter Sloan, the company’s president and CEO. Mr. Sloan’s grandfather and brothers founded the company in 1922, and his three sons, Brian, C.J. and Eric, and sister Nancy, also work in the business. “We were doing business reactively rather than proactively, and what we were doing was deeply ingrained, rightly or wrongly. I felt there were some things we could be doing a whole lot better, and needed help with how to proceed.” Enter C-Leveled, whom Mr. Sloan called because Andrea Fitting, whose marketing firm was acquired by C-Leveled in late 2013, had previously worked with Sloan on a series of marketing communications projects. Another motivating factor for the collaboration between Sloan and C-Leveled is succession planning. According to Denise DeSimone, C-Leveled’s founder and chairperson, “Walter Sloan wants to make sure the transition to his sons running the business is a smooth one.” After extensive conversations with the Sloan management team, and many of its 37 employees, all ten members of C-Leveled’s executive shareholder team began working with Sloan to develop tools for financial benchmarking, including monthly reporting, assessments and metrics to help ensure that business processes and manufacturing are managed with maximum efficiency.

in the energy industry, cement and general manufacturing, refrigeration, and water and sewage treatment applications. For the past year, the two firms have been working together to re-brand Sloan, as well as develop and implement management practices that can help the company manage its growth systematically. The engagement will continue through the end of this year. 8

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On the qualitative front, C-Leveled has also designed job descriptions and helped Sloan create budgets for each of the company’s operational areas. Mr. Sloan observed that, through his company’s work with C-Leveled, he has come to realize that a “hands-off ” management style does not necessarily make for happy employees.

Walter Sloan (left) and Denise DeSimone are SMC members whose companies have been working together for the past year.

“Since providing our employees with job descriptions, I have found that people are much happier and more confident in the decisions they make,” said Mr. Sloan. “That happiness and confidence should make for happier customers who are more loyal to us than ever before.” Mr. Sloan is also pleased that his company is now more proactive than reactive, especially in dealing with established customers and prospects. He characterizes the future as being “very bright” despite the fact that most of the company’s business is in the extremely volatile energy sector. “When production and energy profits are up, the company benefits from a capital improvement perspective. When they slack off, we benefit from our ability to quickly satisfy critical maintenance requirements as energy companies keep machines running,” Mr. Sloan explained. “Our work with C-Leveled, combined with our membership in SMC, has allowed us to make more progress in 2014 than we have in previous years. I believe that our commitment to putting systems in-place positions us better than ever to take advantage of opportunities that we create.” While his company has been working with C-Leveled, Mr. Sloan has also found it valuable to be an SMC member. “Through the organization, I’ve learned that the challenges we face aren’t unique, and that there are many resources available to help our company thrive as we transition to fourthgeneration ownership.” WP


e-corner ENTREPRENEUR’S ADVICE

Cash is King by Tom Cholak & Jill Newcomer Cash flow may not be at the forefront of the entrepreneur’s mind, but it really needs to be. That’s because it can make or break the company and can show a business owner the strength of, or potential warnings about, the company’s health. Learning about cash flow also helps you understand the accounting side of your business. Here are a few critical questions you should consider: What is a cash flow statement? It is the summary of a company’s operating, financing, and investing activities over a specified period of time. In other words, it shows what cash is coming in to the business and what expenditures (or cash) are being paid out. This includes loan payments, owner withdrawals, estimated taxes on revenues, and capital expenditures for the business.

cost of goods; administrative, selling, and operating expenditures; debt service payments; owner distributions; company-financed capital projects; and any other anticipated cash disbursements such as the funding of reserves. What is the role of receivables and payables? Consistently compiling timely and accurate receivables and payables reports is very important. Following up on aging receivables is extremely important and is usually pushed aside for another day. How quickly you are being paid and how quickly you are paying vendors can create a significant burden on cash flow if customers are paying in 60 to 90 days and vendors are expecting payment within 30 to 45 days. What tools for financing can be used? Supplemental sources of working capital include lines of credit, contract loans, receivables factoring, asset-based loans, and loans accessed through one of several federal, state

and local economic development agencies and community development financial institutions. What should I strive to plan for? Knowing your cash flow is key (and king) for financing needs, financial planning, and overall growth and sustainability of business. The information discussed in this article is a starting point for looking at your current cash flow practices and integrating cash flow projections with your other planning activities. In doing so, you will help to ensure the success and longevity of your business. WP ABOUT THE AUTHORS Tom Cholak and Jill Newcomer are business consultants with the Gannon University Small Business Development Center (GUSBDC), based in Erie. For more information, and to contact the authors, visit www.sbdcgannon.org

Why is it critical to your business? Basic factors include timely satisfaction of payables, payroll, and tax balances. A positive cash flow also positions a business to take advantage of favorable purchasing opportunities, accommodate large customer orders, maintain financial viability during periods of revenue decline, deal with financial challenges (such as the loss of a major customer or a change in customer payables practices) and respond to emergencies (such as a major repair, fire or flood damages). Moreover, effective cash management practices enable a business to maintain a favorable Dun & Bradstreet rating, provide capital projectrelated cash infusion capability and facilitate owner distributions. How should you monitor it? A cash flow projection begins with a detailed “sources of cash” projection, including an operating revenue forecast, along with specifying any supplementary sources of cash such as planned borrowings, owner infusions, or asset sales. Cash disbursement projections or “uses of cash” are then detailed. These typically include planned and expected SMC.ORG

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FINANCIAL

How to Improve Your Chances of Meeting Retirement Goals by Michael D. Freker, CFP®, ChFC Enterprise Strategies Group AXA Advisors, LLC

Retirement readiness is important both to individuals and to enterprises of any size. For a business owner the desire to offer a competitive plan is part of the need to attract and maintain the best qualified workforce in order to maintain competitive advantage. How often have I heard local business owners say things like: “Finding and keeping good employees is one of my biggest headaches … it takes time and money, plus it’s terrible for morale because we all have to struggle to cover the vacancy while we try to fill it.” or “I’m a small business owner; my employees can make or break me. I can’t afford to lose a great employee to one of the big companies out there that can offer better benefits.” And, we all know that saving for retirement is not easy and that many of us -- employers or employees – are not saving enough! In article after article, one reads that large numbers of people may outlive their savings and that the Social Security system may not be able to make up for the shortfall. People are going to be depending more on personal savings and retirement accounts to support them as seniors. A well designed 401(k) plan can attract and keep talented employees and is a very popular employee retirement plan benefit, allowing them to put away part of their pay before taxes into a tax-deferred account until the money is actually used, usually at retirement.

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A Putnam Investments whitepaper produced with Brightwork Partners concluded that “factors like access to workplace retirement plans and higher deferral rates have an enormous impact on retirement preparedness.” The research also stated: “our data offer confirmation of the idea that achieving retirement preparedness is fundamentally a behavior issue. Although income and investable assets tend to correlate with retirement preparedness, they are not the only remedy. Even lower income households that make a habit of saving can get on track to being financially prepared for the future.” Research produced by Principal Financial Group on retirement readiness uncovered many concerns across a broad spectrum of employee savings behavior. Two figures in their report titled “Will My Participants Be Ready?” indicated that 58 percent of employees have not calculated their financial needs for retirement (EBRI, 2012). Also, 48 percent of workers have less than $10,000 in savings and investments, not including pensions or the value of their primary residence. The average savings rate in a retirement plan was 5.3 percent as of 2010 and that number was the same then as it was in 2001 (Plan Sponsor Council of America (PSCA) Sept 2002-2011) According to the research from the Employee Benefit Research Institute’s (EBRI) 2014 Retirement Confidence Survey (RCS), workers reporting that they or their spouse have money in a defined contribution plan, an individual retirement account (IRA), or a defined benefit plan are more than twice as likely as those without any of these plans to be very confident (24 percent with a plan vs. 9 percent without a plan) in their retirement preparedness. Additionally, workers without a plan are four times as likely to say they are not at all confident about their financial

security in retirement (11 percent with a plan vs. 46 percent without a plan). The conclusion we draw from these studies is that, left to our own devices, people generally do not take the necessary action to build a nest egg, let alone maintain it and protect it. There are many variations of retirement plan options that one can investigate. It might be helpful to consult a financial professional about these options. If your business has a retirement plan in place, what are some ideas to consider acting on? For starters, you should review your plan to compare features, options and fees. A benchmark review may uncover areas of opportunity to improve participation in the plan or lower costs or both. A review may also be a good time to evaluate the Investment Policy Statement to determine if it accurately describes the plan’s objectives. How do we put ourselves in a position to “feel better about retirement?” To quote the Employee Benefit Research Fast Facts publication from July of last year: “Have a plan!” WP About the Author Michael Freker, CFP®, ChFC is a principal in Enterprise Strategies Group which offers AXA Advisors retirement planning products and services. He may be reached at 412.279.8411 or michael.freker@axa-advisors.com


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LEGAL

Made in the USA? by Lara A. Austrins ClarkHill

Consumers have long associated the mark “Made in U.S.A.” with high quality goods produced right here at home. However, the requirements for making an unqualified “Made in U.S.A.” or equivalent claim are difficult to satisfy and are often misunderstood. More importantly, improper use of the mark can be costly and damaging to a company’s reputation. While nothing requires companies to make a “Made in U.S.A.” claim for their products, any such claims must meet FTC’s “all or virtually all” standard. Thus, where a product is labeled or otherwise advertised with an unqualified claim, it should contain only a negligible amount of foreign content. There is no bright line test to establish when a product is or is not “all or virtually all” made in the U.S. The factors FTC considers in making this determination includes 1) the site of final assembly or processing; 2) the portion of the product’s total manufacturing costs that are attributable to U.S. parts and processing; and 3) how far removed any foreign content is from the finished product. While an unqualified claim can be used only where a product satisfies FTC’s standard, the FTC does permit use of “qualified” U.S. origin claims, such as “Made in

U.S.A. of U.S. and imported parts” as well as claims about specific processes or parts and comparative claims, as long as such claims are truthful, can be substantiated by documentary proof, and all such qualifications and disclosures are clear, prominent and understandable. The FTC may bring enforcement actions against companies making false or misleading claims of U.S. origin, which usually involve cease and desist orders, although the FTC may seek injunctive relief, redress, or civil penalties. In addition to the FTC requirements, many states have their own laws covering

Improper use of the mark can be costly and damaging to a company’s reputation.

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U.S. origin claims with California having an even stricter standard than the FTC, i.e., no foreign content. The California statute examines every “article, unit or part” of the product. These guidelines have resulted in a litany of class action lawsuits against manufacturers, resulting in large legal expenses and monetary penalties. Companies claiming U.S. origin for their goods must carefully review the origin of components used in their products as well as the production processes they employ to ensure that use of the claim is permissible under both federal and state laws. If such use is not permissible, it should explore use of a qualified U.S. origin claim. WP

ABOUT THE AUTHOR Lara A. Austrins is a Senior Attorney in the Customs and International Trade Practice Group of Clark Hill PLC. For more information on Clark Hill’s legal and professional services visit www.clarkhill.com.


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HEALTHCARE

Executive Healthcare Concierge Services Help Business Leaders Remain Fit & Productive by DAVID WEIR

No company – large or small – can afford to take the health of its leadership team for granted. While an executive might be most concerned about the health of the company he or she works for, it is, of course, equally important for that executive to be concerned about his or her personal health. However, time demands on executives that result from a heavy work commitment can sometimes make this difficult. This has led to the development and increasing popularity of a new set of services – known as executive concierge healthcare services – that allow top executives to have streamlined, easy access to high-quality, efficient care. By providing executive concierge healthcare services, companies make a statement that the health of their executives is important. By offering these services, a company ensures that their executives get the care that’s needed and the leader can focus on successfully leading the company.

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What Are Executive Concierge Healthcare Services? Executive concierge health care services are a convenient, efficient, and effective way to assist and support a busy executive in the management of his or her health. In our experience, we have found that executives appreciate being able to receive preventative exams, health consultation, and advice all in one day. These tests can include vision testing, audiograms, comprehensive laboratory testing, pulmonary function testing, EKGs, bone density testing, and chest x-rays. A busy executive can secure the preventative care needed in one day and in one place as opposed to having to take multiple days and time off work for appointments. A desire not to miss time from work often leads to an executive choosing to not get required care. In addition, executive concierge services include a private waiting area with amenities such as Internet access, which enables a busy executive to keep tabs on work while also receiving essential medical services.

Ongoing Benefits Coordination of care, priority appointments with specialists, and direct access to medical professionals are all equally important benefits of executive concierge healthcare services. Executive concierge health care services facilitate coordinated care by making it easy for the executive to communicate with the concierge team 24/7 via phone or email. The ability to make appointments on the same or next business day is another big advantage, as is coordination of specialty and hospital care. In our experience, another benefit for executives is the personal relationship that develops between the executive and the physician and staff. This ensures timely service and personalized attention. Executive concierge health care services can be customized to fit the specific needs of a company and its leadership. Depending on the plan, extra services can include priority dermatology appointments, travel consultation and vaccination, and services for spouses and domestic partners. Why Executives Like It It is easy to understand what executives like about these services – the personalized care and attention is a big plus. In our experience, we find that our health care providers enjoy having the time to develop personal relationships with patients. Companies that offer executive health care concierge services ensure that their executives receive the preventive healthcare they need to continue to stay in good health and to lead the organization. Executive concierge health care services can also be a strategic tool in the recruitment and retention of executive talent and ensuring leaders remain healthy as they lead their organizations to success. WP

ABOUT THE AUTHOR David Weir is President, UPMC WorkPartners. For information about the UPMC Executive Health Program, contact UPMC WorkPartners at 1-866-229-3507, or info@workpartners.com.


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SALES & MARKETING

Know Why You Do Before You Decide on What and How You Do by SEAN COYLE President, Sandler Training by Peak Performance Management

We’ve all experienced the frustration of setting a goal and not reaching it. Projected sales growth for an upcoming quarter comes to mind. New Year’s resolutions stand at the top of the list Let’s face it. Goal setting is the easy part. Goal achieving is the tough part. But maybe our inability to achieve the goals we set lies in the way we envision these goals. Look at it this way. The last time you wrote down a goal or two – and writing them down is critical – did you write down what you wanted to accomplish? That’s what most people do. They first write down the what, or content, of a goal, like “boost next quarter sales by 15 percent.” Then, they list the how, or strategy, they’ll follow like expecting to boost sales quotas, making more cold calls, or more telephone calls to arrange meetings with prospects, and the like. Very few start with the why of goal setting. An effective why is critical, because it tells you your motivation will move you to reach your goal(s). If on closer inspection, your why doesn’t really move you positively and energetically to commit to your goal, you likely won’t reach your goal. Once you’ve nailed down your effective why, then, define your what and your how. Consider asking yourself these, three questions as you introspect and examine your why:

• Is your current why your true one? Be totally honest with yourself on this. If your motivation doesn’t fit you and your situation, your what and your how won’t meet your expectations. • Is your why finite and practical? Better to be highly focused, not general. Wanting to become a better salesperson” is general. Wanting to boost sales by 15 percent next quarter is specific. • Can you meaningfully quantify results that stem from your why? If you can’t quantify the results that stem from your why, you can’t measure your success at reaching your goal. • Is your why for the short term or long term? A deeper, longer-lasting why will motivate you more strongly and for longer periods of time Once you’ve answered these questions, test your new goal-setting process by setting a goal for yourself within a preset

time. Take some time early this year and set goals for yourself. Make sure they are challenging but realistic. Prepare yourself for the challenges that will undoubtedly come up as you try to achieve these goals. Map out a plan to achieve your goals and be prepared to fight to get there. If you take time now to plan and prepare you can avoid being a wimp later this year. Choose at least one goal you’ll commit to and measure your results in the next 30 days. Success is the result of persistent effort skillfully applied to appropriate strategies. What are you doing to achieve success? WP ABOUT THE AUTHOR Sean Coyle, President, Sandler Training by Peak Performance Management can be reached at www.peakperformance.sandler.com or sean.coyle@sandler.com

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SPECIAL REPORT

Look North for Opportunities by TODD MILLER “There has never been a better time for Pennsylvania companies to do business in Canada.” So said Ana Maria Rodriguez, Trade Commissioner at the Canadian Consulate in Pittsburgh, at the recent Niagara Business Pittsburgh Trade Mission held at the Sheraton Station Square and organized by PNC and the Southpointe Marcellus Shale Chamber of Commerce. “For companies that want to do business outside of the United States, establishing relationships with customers in Canada is a highly sensible strategy.” Ms. Rodriquez’s contention is based on several factors, including Canada’s proximity to western and central Pennsylvania, the stability and transparency of its banking and

Canada is Pennsylvania’s

#1 Customer

337,400 JOBS

in Pennsylvania depend on trade & investment with Canada 16

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legal systems, lack of a language barrier, and access to a skilled labor force and lucrative market that can be a springboard to other markets outside of the United States. The U.S. and Canada trade with each other more than any other two nations in the world. Each year, more than $700 billion in goods and services heads north, with more than 30 states sending the majority of their exports to Canada. Our neighbor to the north is also the top export market for Pennsylvania companies, which record about $12 billion a year in sales to Canadian customers – more than double what Commonwealth firms send to China, and more than they send to the next five countries combined! Exports to Canada include chemicals, machinery, transportation equipment, primary metals, and oil & gas. One-third of U.S.-Canada trade is within companies’ own operations, one-third is within wellestablished supply chains in the automotive, aerospace and food processing sectors, among others, and another one-third is with small- to mid-sized companies such

as manufacturers and services firms belonging to SMC Business Councils. Banking on Opportunity According to Bill Hines, PNC’s Regional President for Canada, “Pennsylvania is in the heart of the world’s largest trading relationship. There are growing opportunities in many product and service categories, including government procurement; wastewater management; energy, such as power generation, mining and oil and gas drilling and production; automotive, and information and communications technologies.” Mr. Hines also noted that, for seven consecutive years, the World Economic Forum has rated Canada’s banking system as best in the world. Since 1923, the heavily-regulated system has experienced only three bank failures. In Canada, there are 81 banks nationwide, compared to 7,000 in the U.S. – a country with ten times Canada’s population. Five large banks account for more than 90 percent of the country’s financial assets. Mr. Hines believes that, if the U.S. Dollar continues to be worth more than


the Canadian Dollar (the current premium is 13 percent), it could make sense for Pennsylvania manufacturers to establish a presence in Canada to export goods to the U.S. relatively inexpensively. If a company decides to establish a presence in Canada, it can be advantageous to use the same bank on both sides of the border to streamline credit management and treasury (payables and receivables) functions and avoid potential disagreements between banks on which one has priority over specific collateral. Keeping It Legal The U.S. and Canadian legal systems are similar, but not identical. The sometimesoverlooked reality is why Pennsylvania companies wanting to establish a presence in Canada need to make sure they have legal protections in-place before launching their Canadian operations. Those protections include intellectual property agreements, sales agreements specifying fees and commissions and sales contracts stating explicitly what the designated sales and distribution channels are. In contrast to the U.S., Canadian companies use few outside sales representatives due to customs and tax considerations, and most firms use local Canadian partners. “In Canada, it’s important to get to know customers and partners,” says Dan Ujczo, an attorney with Dickinson Wright in Columbus, OH, who concentrates his practice in U.S.-Canada trade. “There, as in many other parts of the world, people like to develop a comfort level with their trading partners to make absolutely certain they’re a good fit.” Mr. Ujczo also stressed the need for U.S. companies to obtain Labor Market Opinions that give them the right to bring U.S. workers across the border, as well as North American Free Trade Agreement (NAFTA) Permits and Letters of Invitation that state with whom they will be doing business in Canada. “I can’t begin to count the number of times I’ve received calls from clients at Pearson International Airport [in Toronto] saying they’ll be turned away if they don’t

have a Letter. Many top and senior management people fall victim to this oversight which delays their entry into Canada unnecessarily.” Another potential stumbling block regarding Americans entering Canada is criminal admissibility. A U.S. citizen with a driving under the influence (DUI) or a driving while intoxicated (DWI) conviction can be turned away at the border, and can also be denied a temporary work permit.

Pennsylvania

exports $11.6 billion to Canada annually Exports by industry Equipment & machinery (29%) Minerals & metals (16%)

As for NAFTA considerations, most products and service are allowed to cross the border duty-free. Nevertheless, Mr. Ujczo recommends that Pennsylvania companies “research any duty-related considerations before entering into agreements with Canadian partners.” Likewise, companies need to make certain that their trade agreements comply with the International Chamber of Commerce’s Incoterms, or rules of international commerce. Such compliance includes harmonization of tariff schedules and labeling of all goods entering Canada with a full, ten-digit North American Industry Classification System (NAICS) code. In the often-confusing realm of taxes, Regulations 102 and 105 are paramount. Regulation 102 is the Canada Revenue Agency’s exemption for non-resident workers, meaning an employer does not need to withhold and remit applicable payroll taxes from affected employees. Regulation 105 requires a 15 percent withholding of fees paid by Canadians to non-Canadian service providers rendering services in Canada, in anticipation of tax due to the Canada Revenue Agency. Tax rates in Canada are comparable to that in the U.S. with a federal rate of 15 percent and provincial rates ranging from 10 to 16 percent. Potential Canadian Trading Partners The closest part of Canada to western and central Pennsylvania is Ontario’s Niagara Region. Bordering Lake Erie to the south, Lake Ontario to the north, and the Niagara Continued on next page >

Chemicals (10%) Transportation (10%) Agriculture (9%) Plastics & rubbers (8%) Other (17%)

Canada & Pennsylvania:

$23.1 billion

in annual bilateral trade

Pennsylvania:

imports $11.5 billion from Canada annually imports by industry Energy (23%) Minerals & metals (19%) Agriculture (14%) Forest Products (10%) Chemicals (9%) Equipment & Machinery (8%) Other (17%) September 2014 Unless otherwise mentioned, all trade figures are based on 2013 data in U.S. dollars. U.S. Census Bureau: trade, Canada’s export ranking (2/2014 release). U.S. Bureau of Economic Analysis: goods and services trade (3/2014 release). Services trade data not available at a sub-national level. Statistics Canada: 2012 tourism, based on combined same-day and overnight travel (5/2013 release, US$1.00=C$0.9996). Figures may not add up due to rounding. SMC.ORG Produced by the Embassy of Canada in Washington, DC.

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SPECIAL REPORT

Pennsylvania contributes to the

World’s Largest Trading Relationship TRADE

River and Buffalo, NY, to the east, the area has more than 150 metal fabricators, driven largely by growth in the oil and gas drilling and production sectors. Other industries with a strong presence in the Niagara Region are manufacturers of automotive and aerospace components and equipment; food processors, including juice producers and 70 wineries; and high technology firms, several of which manufacture original equipment for wind energy systems. According to Tim Reynolds, the Niagara Region’s Manager of Business Attraction, there are numerous incentives that are attractive to Pennsylvania companies looking to establish an international presence.

Canada & the U.S. trade $734 Billion in goods & services That’s an average of $1.4 Million in bilateral goods & services crossing the border every single day PRODUCTION

On average, Canadian goods sold to the U.S. contain 25% U.S. Content

“Our subsidies for worker training and plant construction make us highly competitive,” said Mr. Reynolds. “Coupled with our proximity to the Welland Canal that provides easy access to the Great Lakes and overseas markets through our link to the St. Lawrence Seaway, the Niagara Region can make sense for a lot of companies in western and central Pennsylvania.” Plentiful Resources Western Pennsylvania companies looking for business opportunities in Canada do not have to “go it alone.” Instead, they can draw upon a vast array of resources. The Consulate of Canada’s Pittsburgh Office is able to assist with visa regulations,

passport requirements, and labor and tax considerations. The Export-Import Bank of the United States can help companies gain access to financing for exports, and legal and tax professionals can provide expertise related to conducting and documenting business activities in a manner that is profitable while conforming to U.S. and Canadian laws and regulations. In addition, logistics professionals can help businesses with preparing commercial invoices which are acceptable on both

sides of the border, and can also ensure that NAFTA Certificates of Origin are valid for intermediate and finished goods originating outside of NAFTA regions. Given the economy’s increasingly global nature, and western Pennsylvania’s proximity to Canada, exporting to Canada or establishing a presence there are possibilities that closely-held companies should consider. Because Canada is a next-door neighbor that has similar banking and legal systems, as well as a highly-skilled and educated workforce, doing business in Canada is easier than trying to establish an international presence elsewhere. As the old saying goes, “Nothing ventured, nothing gained.” WP

jobs

More than 8 Million U.S. Jobs depend on trade and investment with Canada 18

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Doing business in Canada is easier than trying to establish an international presence elsewhere.


Make an

IMPACT on Your Business!

Trade Mission to Mexico & Colombia, June 14-20 Trade Show in Chile & Trade Mission to Peru, October 18-24 If you’re looking for opportunities in Latin America, join the Duquesne University Small Business Development Center (SBDC) on a pair of trade missions this summer and fall.

The International Marketing to Pacific Alliance Countries for Trade (IMPACT) initiative gives Pennsylvania companies the opportunity to develop customers or clients in Mexico, Colombia, Peru and Chile — the Pacific Alliance Countries. These nations have signed a Free Trade Agreement among themselves and with our country, eliminating or reducing tariff barriers on at least 80% of products, and on many services.

To achieve the growth you need to stay competitive, contact Brent Rondon, Duquesne University SBDC, at 412.396.5670 or rondon@duq.edu or visit www.sbdc.duq.edu/impact

If your company is in one of these sectors, participating in the upcoming trade missions could pay off: > Construction & Infrastructure > Engineering > Equipment Manufacturing (Transportation & Power Generation)

> Mining > Oil & Gas > Petrochemical

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COVER STORY

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I

STATE OF THE STATE By GINA MAZZA

It’s that time of year in the northeast when we can pretty much bank on seeing snow, ice and frigid temperatures, but the question on the minds of many Pennsylvanians is, “When will the business climate start heating up?” are concerns at the top of business owners’ minds — including those of SMC member companies — going to abate during 2015 and beyond? According to a recent SMC membership survey, respondents cited these top three issues as being most important regarding doing business both in the country and the Commonwealth: 1) Cost of health insurance and healthcare, 2) Tax burden on businesses and 3) Regulatory constraints. (Comprehensive federal tax reform was also a major concern.) Notoriously, Pennsylvania has been perceived as having one of the highest corporate tax rates in the country, a major deterrent to business attraction and expansion, but that trend may be reversing. “We’ve improved in the last few years as far as the tax burden in Pennsylvania, but there’s still concern about tax environment,” says Larry Barger, assurance director of manufacturing and distribution services for BDO USA (formerly Alpern Rosenthal) in Downtown Pittsburgh, a professional services firm that offers assurance, tax, financial advisory and consulting services. “If you look at surveys and rankings over the years, Pennsylvania actually falls in the middle of the pack with its business tax climate.” According to the Tax Foundation’s 2015 State Business Tax Climate Index, Pennsylvania ranks 34th. The index is designed to show how well states structure their tax systems and it enables business leaders, government policymakers and

taxpayers to gauge how their states’ tax systems compare. Pennsylvania continues to phase out its capital stock tax, but while the tax was supposed to be eliminated in 2014, policymakers have extended the length of the phase-out until 2016. The rate was 0.067 percent in calendar year 2014, and will be 0.045 percent in 2015. “Pennsylvania is still not good compared to other states based on the rate of business startups because the tax structure is still not competitive, and the startup scene is not getting the support that it should,” says Catherine Mott, president and CEO of BlueTree Capital Group, a venture capital firm based in Wexford. “The state hasn’t put a lot of energy into encouraging companies that create steady, long-term job creation. The focus has been on the Marcellus Shale natural gas play, which is a 10-year boom that will be gone forever; whereas, jobs created by small, emerging businesses will be here long-term. So, it’s a fine balance between short-term and long-lasting opportunities for growth, while focusing more on supporting manufacturers and other startups.” The other top concerns — regulatory impacts and the cost of health insurance and health care — are also being felt by businesses locally and across the state, according to Dick Singer, best practice chair for the CEO and executive coaching firm Vistage, and owner of RDS Associates in Gibsonia. “The new healthcare laws are giving companies a lot of issues, especially small businesses,” Singer says, adding that at least one of his client companies has stopped offering healthcare for its employees altogether because it’s cost-prohibitive. Continued on next page > SMC.ORG

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cover story As always, politics plays into the attitudes of business owners and the confidence — or lack thereof — the corporate sector has in government to create a favorable environment for commerce. “While many things have improved in the business climate, the fact that we have a new incoming administration brings a level of uncertainty,” Mr. Barger comments. “People are waiting to see

what their priorities will be, what initiatives they undertake and what it will mean for the tax situation.” Finding good people is also high on the list of business owners’ concerns, especially in the manufacturing industry. “The single-most mentioned challenge that I hear from businesses is the availability of skilled workers,” Mr. Barger says. “There are a few reasons for it: the decline of the steel industry decades ago and the exodus of workers from the region; the large bubble of Baby Boomer retirements on the very near horizon, which will exacerbate the problem; and historically, the negative image of the old days of ‘dirty’ manufacturing.” Reversing that image begins at the high school level with future young workers and even their parents. “I tell them that today’s manufacturing is not your grandfather’s or even your father’s manufacturing,” Mr. Barger explains. “Today, 22

SMC.ORG

we have very clean workspaces, CAD design, high tech equipment that’s highly automated, and what’s needed are people who have the training in those areas through the technical schools. Parents sometimes steer their children to college instead of skilled trades but college isn’t for everyone, and there really are some well-paying jobs with benefits out there that don’t require a four-year degree.”

In southwestern Pennsylvania, there have been jobs lost in the manufacturing sector, but those were mostly unskilled positions. With the advent of robotics and sophisticated manufacturing equipment that has enabled companies to increase productivity, there is now a robust need for skilled workers. Companies are looking to young workers who are on the verge of entering the workforce. “There’s a lot of discussion about the millennial generation,” Mr. Singer says. “The question becomes, ‘How do you attract them and keep them engaged?’ They’re a very independent generation. They don’t care if their resumes show that they’ve had six jobs in two years.” Advisory Boards: A Best Practice for Today’s Biggest Challenges As a Vistage chair, Mr. Singer has noticed that, especially since the recession,

an increasing number of CEOs have begun to realize that there are a lot of things they don’t know. They’re reflecting back on 2008 and making changes based on what they’ve learned over the past six years. Company leaders are coming to the conclusion that they need help they can’t necessarily get from inside their own companies, or even their own industries. “As a result, they’re more open to advisory groups, and organizations like Vistage are much better known than they were five or six years ago,” he comments. “I’ve seen good results with Vistage.” “Advisory boards are very helpful and I definitely recommend that small- to midsize businesses create this non-voting type of board,” Mr. Barger concurs. “They can bring an open, honest look at your operations and make good suggestions to the owners.” The key is to keep the board to eight or fewer members and invite professionals with varied expertise in marketing, sales, finance, HR, legal and so on; or, if your company has a deficit or challenge in any particular area, bring in someone who can fill that gap. Also consider bringing in entrepreneurs from outside of your industry who can add a fresh, out-of-the-box perspective. Once the advisory board is pulled together, the next important thing is for the owners to share with the board the company’s goals, vision and strategic plan, so that the board members’ expertise can be best leveraged. “When I talk to companies about being a Vistage member, the pushback I get consistently is that they don’t have time,” Mr. Singer comments. “The reality is that it’s rare for owners to spend time taking the 30,000-foot view of their business and thinking strategically about where their business is going when they’re typically dealing with tactical issues and putting out fires every day.” Yet the speed of business continues to accelerate, making it even more imperative that companies have a handle on the big picture. “If not, one day they wake up and say, ‘We don’t know where we are’.” Mr. Barger concurs that more business owners than ever are realizing they don’t have all the answers. “It does take some time to set up an advisory board, but once the investment is made, the outcome is well worth it.”


“Cautious Optimism” is the Watch Phrase Despite challenges and concerns, there are some bright spots in Pennsylvania’s business climate. “There’s a lot for a business person in the state of Pennsylvania to be contending with, but companies are beginning to hire workers, reinvest and make capital expenditures,” Mr. Barger says. “They are just being very cautious about their decisions.” Many companies are seeing some growth and profits coming back. “One client of mine in construction who was going out of business just a few years ago now can’t get out of the way of business coming in,” Mr. Singer offers as an example. “A few years ago, the overall sentiment about the climate would have been pessimism; now it’s cautious optimism.” As people have realized the shortcomings of government, the silver lining is that owners are doing for themselves what government has failed to do, which creates a favorable climate for investing, according to Ms. Mott. She points out that, in 2003, there were three support organizations in Pittsburgh: Idea Foundry, Innovation Works and Life Sciences Greenhouse. Today, we have more than 18 incubators/accelerators and shared work spaces that have been created by entrepreneurs themselves.

"The GE advanced manufacturing plant and the Marcellus Shale cracker plant would be a huge investment and psychological boost for our area." Larry Barger, BDO USA “Go and do it yourself is the culture, and we will find the resources,” she says. “At Blue Angel, we’re getting calls from venture capitalists like I’ve never gotten before. I’m pleased to see that. Good people with great ideas are doing things without government help, just like how Silicon Valley started.” Citing an Ernst & Young survey from May/June 2014, Ms. Mott reports that, in 2013, Pittsburgh attracted $338 million in angel/venture capital for 148 deals. A total of 120 venture firms invested in the region, and 34 exits at more than $3 billion occurred. “This speaks highly of what’s happening in Pittsburgh, but nobody’s tooting their horn about it,” Ms. Mott says. Another good indicator is that local companies are not offshoring as much to get things manufactured. “Instead, they are building manufacturing facilities here and outsourcing to Erie instead of China,” Ms. Mott comments. “And because wages have been depressed for so long, we can price competitively, export products and be in a good position worldwide.” So, while the cost of doing business in China is going up, manufacturing jobs are coming back to the United States, which is a positive development. Next to re-shoring, the single biggest driver of the manufacturing resurgence taking hold locally and nationally is the development of shale plays and the boom they are fueling in oil and gas production. With the United States poised to surpass Saudi Arabia and Russia as the global leader of oil production by 2015, the supply

of domestically produced gas is surging, and so are opportunities the fast-growing energy industry is bringing for economic growth. “We are experiencing a reasonably strong economy because of gas exploration; however, with oil prices dropping the way they are, that could change dramatically,” Mr. Singer advises. “Declining oil prices are good for individual consumers, but it will eventually come back to bite us. The good news is that it will be a long time until the US dollar isn’t the world standard of currency.” The Future So what does the future hold? “The crystal ball is a little murky on that, but my best guesstimate is that it will be ‘steady as she goes,’ with probably a slow, gradual improvement,” Mr. Barger indicates. “Particularly in southwestern Pennsylvania, we have expansion happening, with GE talking about building an advanced manufacturing plant near Pittsburgh International Airport, and the Marcellus Shale cracker plant being talked about for Beaver County. These things would be a huge investment and psychological boost for our area. I don’t feel that we’re going to see a decline in the business climate in Pennsylvania. It’s more of a mixed bag: ‘steady as she goes but not going gangbusters,’ either.” While small business owners are a bit more pessimistic than their larger brethren because more energy and focus are expended on the larger companies, these entrepreneurs have organizations like SMC through which they can channel their collective voice and be heard by people of influence at the regional, state and federal levels. WP

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Pulse WHAT’S HAPPENING NOW

HUMAN RESOURCES

HR Best practices

Is that investment worth it? by David J. Baker, SPHR

Managing Director/CEO Human Capital Advisors

you that the biggest challenge on the path to success wasn’t the product or service, it was the people who produced or delivered it!

Today the focus on people within any organization has been much maligned. Generally there are two schools of thought, either you look at your people as an asset or you look at them as a liability. The asset class view their human capital as a critical element in their formula for success while the liability side view people as a must have — only because they can’t do all the work themselves so they need someone to help. Both organizations will survive but one will thrive while the other will limp along continuously facing regular challenges. Let’s face it, any long term business owner will tell

Let’s focus on the Asset class for a moment. These are companies who approach their people with the same attention and care as any other capital investment. Consider that a $20,000 position will cost the company more than $100,000 in five years (i.e. allowing for the burden costs of benefits, taxes and state mandated insurances like workers compensation and unemployment compensation). As such there is a significant investment in this needed resource, in this case it just happens to be human. These companies take special care to insure that the acquisition, maintenance and long term care of this

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SMC.ORG

investment is done with significant attention. After all spending $100k on anything should result in some sort of positive ROI – shouldn’t it? One of the most important aspects of their initial process is to ensure that they only invest in the best asset – as such they’ve developed or use proven acquisition (aka Talent Acquisition/Recruiting) methods to ensure that only the best of the available resources is brought to meet that need. The responsibilities and outcomes and expectations are well defined (aka job descriptions and performance management methods) before the asset is purchased. Researchers have shown that if a company improved just this one area, i.e. using an exceptional selection process, the quality of hire improves by more than 50% and the quality of that outcome, the performance of the asset, is at least 50% better. Isn’t that better than filling the position with an oxygen consuming, carbon producing partially researched, poorly purchased standard asset (aka a schmuck!) Defining the role and carefully selecting the asset the company knows exactly what the deliverables will be, how they need to manage it and what ROI they should get for it in the next year and beyond. Interesting thing about this investment though, it needs a little more care and attention than a physical capital investment. Why? This one can get up and leave! It’s been a long time since I saw a CNC machine leave out the back door for lunch and never come back! And guess what, unlike your machine, there are a lot of other companies that are looking for this same ‘human’ asset that you’ve invested in. And because this one can leave there are two critical keys to success in retention of this asset – a) are they managed well? This is critical as 80% of employees leave their supervisor/manager, not the company they work for! b) Their basic maintenance must be done well — they have to be paid a competitive wage, have decent benefits, and see some purpose to their work. We’ll be looking to provide greater insight into several people best practices including Leadership, Talent management, and Training and Engagement! WP


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Pulse WHAT’S HAPPENING NOW

HUMAN RESOURCES

BEST Compensation

Practices by RODNEY COTTRELL

If the cost of labor (compensation, benefits and taxes) is one of the largest – if not THE largest – item on your P&L statement, then it makes perfect sense to measure and manage the cost of your workforce. In doing so, you should use four criteria to help you determine how much to pay your employees, and what level of benefits you should offer. Pay Philosophy How much you pay employees (and independent contractors) should align with the prevailing salaries and wages in your industry, current and projected market conditions over the next 12-24 months, and your desire, based on your “world view” or “philosophy of work,” to provide compensation that is better than, equal to, or less than, what competitors are paying. Market Data The SMC Compensation Survey is the best source for Pittsburgh labor market data because it has more data points about the 10-county southwestern Pennsylvania region than any other survey of its kind. By using the Survey’s data yourself, or with assistance from compensation experts, you can develop pay structures that are tied to performance management systems and the resulting annual merit increases. This strategy can help you manage labor expenses most effectively by helping to ensure that you are rewarding people based on quantitative metrics rather than on perceptions or assumptions which may be false. Pay Structure By connecting compensation strategies to well-defined performance management

systems and merit increase formulas based on the SMC Compensation Survey, you will be able to manage labor expenses effectively because the amount you invest in your workforce will be more predictable than ever. By having such valuable knowledge at the beginning of the calendar or fiscal year, you can adjust marketing strategies, capital investment and bonus payments to optimize production schedules and cash flow. Incentive Programs These compensation plans are being used increasingly to manage labor costs by basing pay on performance rather than attendance. If designed properly, incentive plans can drive business performance to unprecedented heights. Conversely, ill- conceived incentive programs can hinder growth and deflate morale throughout the company. While watching television shows featuring acrobatic stunts or other high-risk activities, you’ve probably heard the expression “don’t try this at home.” When it comes to developing and implementing compensation strategies, the same rule should apply. It’s easy for a business owner or manager who’s not an expert in the realm of compensation

to think that he or she can develop a compensation system that is mutually beneficial to the company and employees. In the vast majority of cases, however, I have found that the do-it-yourself approach does more harm than good. Clearly, developing the best compensation practices is a task that’s best left to professionals, like those at Corporate Compensation Partners, who have the knowledge and experience to help business owners strike the ideal balance between morale-crushing stinginess and enterprisecrippling extravagance. For a copy of the SMC Compensation Survey, contact Rosann Linza, SMC’s director of human resources, at 412.342.1604 or e-mail rosann@smc.org WP ABOUT THE AUTHO R odney Cottrell is president of Sewickleybased EHResearch Data Services and Corporate Compensation Partners. He advises domestic and international clients on developing and implementing compensation strategies and incentive packages for executives, employees and directors. SMC.ORG

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Pulse WHAT’S HAPPENING NOW

INSURANCE

Shopping for Health Care Services: Finding a Price for Blood Tests Made EASY? by Eileen Anderson Director, Government Relations

As the popularity of high deductible health plans with health savings accounts increases it will become more important than ever to learn how to shop for health care services. Here’s a recent experience that shows the challenge of finding prices for a routine service. I have had a high deductible health plan with a health savings account since 1997. Shopping for health care is something I’ve done out of necessity for my family to make sure we get the best value for our money. Our deductibles have ranged from $1,200 per person/$2,400 per family to $10,000/ $20,000. Price shopping has included mammograms, colonoscopies, and deals have been struck for payment plans for hernia surgery, child birth, MRIs etc. Some people like to WATCH sports; I’d rather PLAY sports and for me the greatest sport on earth is shopping for health care. I am pre-diabetic and keep it under control by diet, exercise and a prescription drug. My physician requires a checkup

Test

BMP LIPID HEPATIC FUNCTION HEMOGLOBIB A1c CK or CPK Lab Draw Totals Total A + B 26

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every 6 months along with a panel of blood tests.For several years I had the tests performed at the local hospital outpatient lab. The most recent Explanation of Benefits (EOB) from July 2014 said the tests cost $615 and the patient liability amount (negotiated rate) was $109.92. When we switched to UnitedHealthcare (UHC) I went to their website and shopped for a new lab. The first step was to agree to a disclaimer which warned that all prices are estimates and can vary. I located a lab within 10 miles of my home. I looked for a facility that could do both the blood draw and analysis to avoid shipping charges. If a test is taken in one location and shipped out for analysis a shipping charge can be tacked on. I chose LabCorp in the North Hills and then shopped for the price of each test. For a Lipid panel the UHC website said that the AVERAGE local, in-network, total cost was $22.00, $9.00 was below average cost, and $36.00 was an above average. When I clicked NEXT it said the price at LabCorp was $22. I clicked NEXT again and it said “Your Final Estimate: Cholesterol Test Estimated out-of-pocket cost is $7.00.” What I couldn’t tell from the information was what I would finally owe; was it $27, or $96 or the sum of the two, $123?

I took my notes to the lab. They asked for a credit card and said that the maximum amount that could be charged was $178.00. I objected to the price since that was higher than the quoted price on the website. They offered a discounted price of $139.20 if a cash payment was made immediately. However, paying cash usually means that the cost of the tests won’t run through insurance or be applied to the deductible. After I had the blood tests I called UHC customer service. They said that $178 was a global price and that the final price would be discounted but they couldn’t tell me by how much. They said that the single digit prices were probably facility charges; they weren’t quite sure about the double digit prices. When the Explanation of Benefits arrives in the mail I will finally know the costs of the blood tests. That’s information that should be available before the service. Take note that the challenge to obtain the prices was not in comparison to other labs and facilities; this was just simply to find what LabCorp charges. Here are the four rules for successful shopping; 1) be patient; 2) be persistent; 3) document everything; and 4) know the name of the test or procedure. Good luck. You’ll need it. WP

Estimated out-of-pocket cost

In-network total average cost (UHC estimator)

LabCorp cash price not run thru insurance. will not go to deductible

$5 $7 $5 $5 $4 $1 $27 A

$22 $22 $23 $7 $20 $2 $96 B $123

$22.60 $40.80 $21.80 $27.00 $17.00 $10.00 $139.20

LabCorp estimate if run through insurance

$178


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Pulse WHAT’S HAPPENING NOW

INSURANCE

Health Plan

For example, if your plan renews July 1st, your deductible will reset every July 1st.

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Copayment (Copay) A flat dollar amount a patient must pay a provider for medical service.

Lingo by Alicia Linsenbigler

Director – SMC Insurance Agency Inc.

The trend of employers moving to plans with higher deductibles, coinsurance and copays continues to grow; forcing employers and employees to become better consumers. It is more important than ever that the proper education be provided, and employers and employees have a strong understanding of how their plans work. Here’s a brief run-down of common health insurance terms, what they mean and tips to help you better understand your plan. Benefit Period The coverage time-frame when benefit maximums, deductibles and coinsurance accumulate. It is typically a consecutive 12-month period either based on a calendar year or policy/plan year. Tip Keep track of your healthcare spending so you can effectively plan your care. Know what your deductible accumulations are and when your benefit period begins and ends: Calendar Year — The plan begins on January 1st and ends December 31st. Deductibles and other out-of-pocket accumulations reset every January 1st. Policy/Plan Year — The plan begins on the renewal date of your health plan. Deductible and other out-of-pocket accumulations resent with the renewal date.

Allowed Amount The highest amount your plan will cover (pay) for a service. Providers that participate in your health plan’s network are prohibited from charging you more than this amount.

Tip If you are covered on a compliant Affordable Care Act (ACA) plan, in-network routine preventive care is covered at 100% and is not subject to copays, deductibles or coinsurance. Deductible The amount the patient must pay for eligible services before the health insurer pays for benefits. Tip Know if your deductibles are imbedded or non-embedded: Imbedded — The deductible is capped at the individual deductible amount for each person covered on a family contract. Non-imbedded –The full family deductible must be met before services are covered. Tip Keep track of your deductible accumulation. If you meet the deductible in a benefit period, consider getting other costly procedures done within the same period to avoid having to meet your deductible all over again. Coinsurance The shared cost between the patient and the health plan for covered services. A common coinsurance amount is 80%/20%. The health plan covers 80% of the medical services and the patient is responsible for 20%.

Out-of-pocket max The money you pay before your plan pays 100 percent for covered services for the remainder of the benefit period. The outof-pocket max can include deductibles, coinsurance, copays, prescription drug copays – every healthcare expense that was your responsibility accumulates towards the out-of-pocket max. In-Network Doctors, hospitals and other providers who contract with your health plan. They provide services at a negotiated rate of payment and cannot charge you more than this allowed amount. Tip Seek care at in-network providers. Care received out-of-network may be covered at a lower level, with higher deductibles and coinsurance, or may not be covered at all. Prescription Drug Formulary A list of prescription medications covered by the health plan. Tip Ask these questions: Are prescription drugs subject to the medical deductible on my health plan? If they are, the cost for your drugs will be your responsibility until the deductible is met. Your Rx costs plus medical expenses combined will be applied to the deductible. Once the deductible is met, they may be covered at 100% or covered after a copay. Is there a separate deductible for Rx on my plan? On some plans, scripts are not subject to the medical deductible, but there is a separate deductible that must be met just for prescription drugs. By understanding your plan and how it works, you avoid financial surprises. You are able to plan for out of pocket expenses and shop around for the best price...and in the process, you have become a better healthcare consumer. WP

Tip Copays and Coinsurance are separate from each other and from the deductible. They do not count towards the deductible. SMC.ORG

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MANUFACTURING

What is this

Internet of Things? by Steve Halliday

The IoT — a cyberworld in which physical objects are connected to the Internet and can identify themselves to other devices using RFID, other sensor technologies or wireless technologies — is here now. People, companies, cities, and even countries, are implementing parts of the IoT. This new reality is not just being debated in academia, it is here and available. With many names (M2M, Industrial Internet,Internet of Everything), the IoT provides the means to connect everything in your home, life and business. Although many IoT references are about “smart homes” and “smart health,” manufacturing is where big changes and big savings or profits will be made. Using IoT, manufacturers can optimize process performance, identify system logjams and ensure optimum employee efficiency. IoT also allows you to communicate with suppliers and customers at previously unseen levels. Here’s a scenario that explains how the IoT can change your business: Your best salesman just closed a deal for that premium widget. The order is far bigger than expected, and he is unaware of the resulting issues. From his car, he enters the signed order into the system. Now the system swings into effect. It immediately connects to the design system and gathers information from product spec sheets. It then compares this information with current inventory and identifies which components must be ordered. The system then orders new components and schedules deliveries to match the anticipated production schedule.

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Manufacturing schedules are updated automatically and a memo is sent to the production manager highlighting the need for extra people to meet delivery requirements. Simultaneously, the accounting system is updated to reflect the payment terms for components ordered and extra staffing required. Next, memos are sent to C-level executives to keep them in the loop, a bonus for the salesman is identified and sent to the vice president of sales for approval. And to think that all this activity was triggered by the salesman’s entry into the sales ledger! Of course it doesn’t stop there. Once manufacturing begins, systems watch the order being fulfilled and keep needed parts in stock, identifying any hiccups along the way. Machines making parts are also monitored, and signs of wear or trouble are reported before they delay production.

Still not convinced? Your competitors are. John Chambers, CEO of CISCO, has said, “Our analysis indicates that there is as much as $14.4 trillion of potential economic value at stake for global private-sector businesses over the next decade…[this could] boost overall corporate profits by 21%”. You can capture some of that value by using IoT to increase efficiency, improve communication and reduce waste. WP

About the Author Steve Halliday is the CTO of Implement IoT LLC, a firm that helps companies understand the potential of the IoT. He is a recognized expert in AIDC (Automatic Identification and Data Capture) who sits on many ISO standards committees and has received numerous industry awards.

"Our analysis indicates that there is as much as $14.4 trillion of potential economic value at stake for global privatesector businesses over the next decade."


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Pulse WHAT’S HAPPENING NOW

GOVERNMENT RELATIONS

Grassroots Lobbying SMC: Fighting for a permanent solution to Section 179 of the IRS Code, the Direct Expensing Allowance Could you effectively and prudently manage your family budget and plan for the future when the rules are constantly changing? That’s what SMC grassroots lobbyists asked members of the Pennsylvania Congressional delegation in June when they traveled to Washington D.C. SMC has repeatedly asked for a permanent solution to section 179 of the IRS code, the direct expensing allowance. It is one of the most important provisions in the tax code for smaller firms, particularly those manufacturers in more capital-intensive industries. In 2014 it languished along with many other items in the expired tax extenders package. Section 179 allows businesses to deduct, up front, a certain amount of equipment and asset purchases, such as computers, vehicles, machinery, and office furniture in the year of purchase instead of depreciating them over several years. When the total purchases in a year exceed a specific total amount or cap, the direct expensing allowance cannot be used. Thankfully, before Congress adjourned in late December they did manage to pass an extension of the tax extender items, H.R. 5771, the Tax Increase Prevention Act of 2014. The Act provides for a oneyear retroactive extension of business and individual tax provisions that expired at the end of 2013. The Act increased expensing limits for Section 179 property to a $500,000 write-off with a $2,000,000 purchase amount cap. Without action in 2014, the amounts in Section 179 were scheduled to revert to pre-2001 levels of a $25,000 write-off with a $2,000,000 purchase amount cap. That’s a difference

of $425,000! Businesses were left guessing until the very last minute what action, if any, Congress would take. The problem for businesses is that Congress has temporarily extended Section 179 multiple times. SMC tracked ten changes to Section 179 since 2003. The result is a tax policy that discourages investing in small business and places an enormous tax burden on those trying to grow. The annual termination, change in limits and delay in extensions makes it difficult for businesses to plan, interferes with business efficiency improvements, and harms the economy both for buyers and sellers of goods.

The last minute passage of H.R. 5771 left companies and accountants scurrying to take advantage of the tax extenders. To compound difficulties, the extenders were renewed for only 1 year, retroactive to 2014. The tax extenders expired again on January 1, 2015 so now we are back to square one. That means that heading into 2015 SMC will prepare for another push to fight for a permanent solution to Section 179. Our goal is a $1,000,000 write-off, phasing out for property exceeding $2,000,000with both thresholds indexed for inflation. Tax reform is likely to be at the forefront of the political agenda and SMC will be ready to incorporate permanency of Section 179 into a push for business tax reform. WP

Legislative History of Section 179 Summary Year

Direct Expensing Allowance

Purchase Amount Cap

2001 2002 2003 2004 2005 2006 2007 2007 2008* 2008* 2009* 2010* 2010* 2011* 2012 2012* 2012 2013 2014

$25,000 $25,000 $100,000 $100,000 $100,000 $100,000 $100,000 $125,000 $128,000 $250,000 $250,000 $250,000 $500,000 $500,000 $125,000 $139,000 $500,000 $500,000 $25,000

$200,000 $200,000 $400,000 $400,000 $400,000 $400,000 $400,000 $500,000 $510,000 $800,000 $800,000 $800,000 $2,000,000 $2,000,000 $500,000 $560,000 $2,000,000 $2,000,000 $200,000

* Indexed for inflation

Adapted from the Small Business Legislative Council Issue Papers

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GOVERNMENT RELATIONS

Benchmarking

the Commonwealth of Pennsylvania by Dave Patti President & CEO Pennsylvania Business Council

It’s critical that businesses locate and expand in a region that provides a good climate for production, sales, and profitability. For those who make public policy, it’s important to measure and benchmark the competitiveness of their state or region if they hope to attract, retain and grow jobs. The Pennsylvania Business Council (PBC) Foundation, at the end of 2014, unveiled a tool to do just this: www.pascorecard.com. John T. Tighe, III, founder and CEO of TMG Health, explains, “This is a unique project. Groups in other states do something like it, but never before have Pennsylvania policymakers, media, and the public been provided with a collection of objective and transparent data to form a picture the state’s business climate.”

Legislative Update FALL 2014 SMC Government Relations staff and members worked on the following legislation to improve the business climate in Pennsylvania.

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“PBC developed the Pennsylvania Scorecard to make readily available relevant and timely data that display Pennsylvania’s absolute and relative position consistently over time, says Tighe. “We sought to identify broad-based metrics, with a focus on those influenced by state policy. The website also provides complete data sets that allow researchers to download data and perform their own analysis.” PBC plans to update the database continuously. The website uses a database of 51 metrics to assess state competitiveness on the eight factors: budget and spending; education and workforce; energy and natural resources; healthcare; infrastructure; labor; legal and regulatory climate; quality of life; and taxes explains Tighe. The metrics were chosen from factors used by site selection consultants and validated by the senior executives who make-up the PBC Policy Roundtable.

House Bill 91 – PASSED

HB 91 which will allow public career and technical schools to be eligible for two nationally acclaimed tax credit programs that create student scholarships.* Previously, only traditional schools were eligible to receive the donations. This new law is one more step to fill the workforce pipeline; it will provide funds enabling career and technical schools to improve their facilities, add programs, and increase enrollment. *Under the state’s Educational Improvement Tax Credit and Educational Opportunity Scholarship Tax Credit programs, eligible businesses that contribute to scholarship organizations affiliated with a public or private school receive a tax credit equal to 75 %of its contribution, up to a maximum of $750,000 per taxable year.

Mark Haas, director of state government affairs for Philadelphia-based PECO, says, “This project provides a tool for policymakers and the citizens of Pennsylvania to engage in a serious conversation about our economy and job creation. We can’t do everything at once, but this tool offers many ideas for improving our jobs climate.” Scott C. Rogers, president of The Glatfelter Agency, says the Pennsylvania Scorecard, as the name implies, “… really tells us how we are doing as a state and the impact of public policy decisions on the competitive of Pennsylvania. The data will show the impact of public policy. With blogs and commentary we will suggest to policymaker how proposals could help or harm Pennsylvania’s standing among the other states.” Two state Senators who co-chair the Pennsylvania Economy, Business and Jobs Caucus -- Robert Mensch (R-Montgomery) and Lisa Boscola (D-Northampton) say they will use the model and accompanying analysis to supplement and inform the deliberations of their General Assembly colleagues. “This is very helpful information,” commented Mensch. “This report outlines a blueprint and measurable goals for that work.” WP

House Bill 1846 – PASSED

HB 1846 amends the Workers Compensation (WC) Act. It establishes reasonable limitations on a new and growing practice of physicians dispensing repackaged drugs that they have prescribed to injured workers — a practice lucrative for the dispensers but which didn’t produce better care for injured workers. The loophole allowed some physicians to overcharge for prescriptions by as much as several hundred percent, driving up health care costs — and the medical insurance portion of WC premiums. The savings realized will be used to provide an immediate reduction in rates applicable to the employers’ WC policies. Estimates are that the law will reduce prescription costs for injured workers as much as 15%, and save employers $33 million annually.


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Pulse WHAT’S HAPPENING NOW

GOVERNMENT RELATIONS

PHC4 Provides Health Care Benchmarks by Joe Martin Executive Director of the Pennsylvania Health Care Cost Containment Council (PHC4)

Using benchmarks to analyze health care quality and cost is an evolving process that gains in effectiveness as new strategies are developed and new applications are applied. As more tools are developed, both cost and quality will continue to be affected. The Pennsylvania Health Care Cost Containment Council (PHC4) offers many benchmarking tools for consumers and industry to compare the cost and quality of the health care they receive. Through PHC4, Pennsylvania remains a national leader in the use of benchmarks in public reporting of heath care data as a means to improve quality and contain costs.

The CSR can be used by many constituencies as a tool to examine hospital and surgeon performance for CABG/valve surgery. Patients and Consumers, in conjunction with a physician or other health care provider, can use the CSR to aid in making decisions about where and with whom to seek treatment involving CABG/valve surgery. Group Benefits Purchasers/Insurers can use the CSR as one aid to help determine which hospitals and surgeons provide quality care for employees, subscribers, members or participants.

Health Care Providers can use the CSR to help identify opportunities for quality improvement and cost containment. Policymakers/Public Officials can use the CSR to enhance their understanding of health care issues, to raise public awareness of important issues and to help constituents identify health care options. The CSR is not intended to be a sole source of information in making decisions about CABG/valve surgery, nor should it be used to generalize about the overall quality of care provided by a hospital or a surgeon. All efforts of PHC4, an independent state agency, are directed at helping to restrain the health care costs consumers, employer and providers face while identifying ways to improve the quality of the health care delivered. WP

Two specific benchmarking efforts PHC4 undertakes are the annual Hospital Performance Report (HPR) and the Cardiac Surgery Report (CSR). The latest HPR, released in December 2014, evaluated hospital mortality and cost for 17 common medical conditions and surgical procedures using hospitalspecific data. PHC4 uses a complex mathematical formula to risk adjust the mortality and readmission data in the report, with hospitals receiving credit for treating patients who are more seriously ill or at a greater risk than others. The HPR noted that in-hospital mortality rates decreased significantly statewide between 2008 and 2013. Overall mortality rates in Pennsylvania hospitals dropped below national averages between 1991 and 2010—years mirroring PHC4’s public reporting. PHC4 estimates a savings of about 72,000 lives and $2.8 billion in hospital charges can be attributed to this trend. SMC.ORG

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HOMEBASE NEWS AND EVENTS

IN MEMORIAM

Leo McDonough Deserves Lion’s Share of Credit for What SMC is Today by TODD MILLER When Leo McDonough passed away on September 5, 2014, at age 88, a visionary man of tremendous accomplishment departed this earth. Leo, which is Latin for “lion,” was the undisputed king of his domain. The indelible impressions he left on board members and successors continue to influence the work of members in their own business dealings, and of SMC. As SMC’s president from 1970-96, Leo’s vision and drive gave small business a credible and strong voice in Harrisburg and Washington. His ability to establish strong relationships with elected officials, and motivate members and galvanize them to take action, are traits that former chairmen of the board and presidents continue to admire. “Leo was an iconic type of guy; fair but tough, and very driven” says Ron Mock, a partner in Mock Bosco & Associates, a Carnegie-based accounting firm, who served on the board of directors from 1995-97 during the final years of Leo’s presidency, chaired the SMC Board of Directors from 1998-99 and currently serves on the Audit Committee. “His strength was the ability to organize a group of strong-willed people and get them to come together as a group for a common purpose. By listening to others and staying focused on the goal, he helped members individually and collectively.” Mr. Mock remains impressed with Leo’s ability to handle SMC’s merger in the early 1990s with the Tri-State Employers Committee (TEC), another small business advocacy group. “Leo had the skills to 32

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reach out to the TEC people and integrate them with SMC so that a merger really became an acquisition. He spent a lot of time with members trying to get them involved in activities and did a great job of motivating people to work for the good of the organization. To this day, I consider him a mentor because he taught me how to lead people by finding common ground and getting consensus.”

As an aide to Sen. Heinz, Cliff Shannon met Leo in 1977. “He was gregarious, savvy and professional, and always good to work with,” says Mr. Shannon, who succeeded Leo as SMC president in 1996 and served in that capacity through 2007. “Leo created a culture that relied on a strong executive, and the board looked to the executive for leadership and vision. His ability to function as an equal among

Harold Hall, Sr., chairman emeritus of Hall Industries in Ellwood City, who served as chairman of the board from 1985-86, recalls Leo as being “a very aggressive individual who led the charge to make SMC important in the community.” That community consisted of legislators in Harrisburg and Washington, and local, state and national news media. “Leo was well-versed in politics and knew all the right people,” continues Leo with current chairman emeritus of Hall Industries, Harold Mr. Hall, who established Hall, Sr., (left) presenting entrepreneur award to Bill Hinchey, Hall Industries in 1966 as a who now owns Allentown,Pa.-based LaunchFarm Apps. Hall says contract screw machine shop Leo put SMC on the map in Washington. serving the steel industry. Today, the company performs contract presidents and owners of companies manufacturing for customers in the aviahelped me establish myself quickly. I also tion, transportation, automotive and heavy appreciated his patience as he never tried industry sectors. “He kept the political to impose his thoughts or legacy on me, channels open for us and opened up vennor reach around me to the board; he was ues that I wouldn’t have experienced othcontent to make the handoff and let me erwise. He helped our business and SMC manage things in the way I thought best, in a number of ways, and his relationship and was only interested in the strength of with the late [U.S.] Sen. [John] Heinz was the organization.” extremely close and effective, and really Mr. Shannon, who currently serves put SMC on the map in Washington.” as staff director of the U.S. House of Leo’s successors have equally high Representatives Science Committee, also praise for his personal attributes and leadremembers Leo’s words of wisdom that ership skills. still resonate with him: “Always keep up


the government relations work. Revenueproducing programs come and go; issues come and go, but government relations is the activity that cuts across all industries at all times. “Leo left the organization with a good staff that was sensitive to the concerns of small manufacturers and service companies. I’ll be forever grateful that I didn’t need to make a lot of changes coming in.” Lee Taddonio, a member of the Pennsylvania House of Representatives who represented the Monroeville area from 1973-82, met Leo while serving in Harrisburg and succeeded Mr.Shannon as SMC president from 2007-10. He began worked for the organization in 1990 as head of SMC’s government relations program and also served as Mr. Shannon’s deputy. “Leo was a strong individual and the right guy to run SMC,” says Mr. Taddonio. He grew the organization from 1,000 companies to over 5,000. He used his background in insurance [sales] well, and that turned out to save the association because, instead of giving commissions to an agency, he thought SMC should have its own agency.” Mr. Taddonio also recalls Leo as being “masterful with the board and always in control.” In that vein, he remembers that, on one occasion, Leo disapproved of the person whom the board designated as its chairman-elect and asked the board at the proverbial last minute to prevent that individual from becoming chair. The board complied with Leo’s request. Recalls Mr. Taddonio, “I had never seen anything like that before, even during my time in politics, but Leo’s actions

The late Pirates manager Danny Murtaugh (left), and pitcher and current Pirates broadcaster Steve Blass, at Forbes Field with Leo, a passionate Pirate fan, holding a rendering of Three Rivers Stadium.

were good for the organization because that person would not have been a good chairman.” He is also grateful for Leo encouraging him to further his professional development. “With Leo’s support, I earned my CAE (Certified Association Executive designation from the American Society of Association Executives) and took other courses that helped me throughout my time at SMC.” Since becoming SMC president in 2012, Steve Shivak developed a close relationship with Leo and his wife Margaret. “Meeting the man who led the organization for nearly 30 years was a great experience for me. After reading his works, hearing stories from staff and board members it was a privilege for me to visit with him, his wife Peggy and family over lunches. Our

“Leo was an iconic type of guy; fair but tough, and very driven.” Ron Mock SMC Chairman of the Board, 1997-98 & Partner, Mock Bosco & Associates

entire time together was focused on issues impacting small business such as taxes, healthcare and regulatory burdens as well as our shared fondness of the Pittsburgh Pirates.” Origins & Accomplishments At a young age, Leo learned what playing fair and being part of a team were all about. As the youngest of nine children, he learned the importance of family while growing up in Swissvale, four years ahead of baseball and basketball legend Dick Groat. Leo acquired his leadership skills when organizing teams throughout the neighborhood. From that time on, he dreamed of playing for the hometown Pittsburgh Pirates. After graduating from Central Catholic High School in Pittsburgh, Leo joined the Navy during World War II and served in its Mobile Construction Battalion. Following his honorable discharge in 1946, he landed a contract with a Pirates farm team in upstate New York. Although Leo’s talents weren’t enough to carry him to Forbes Field, his experiences playing baseball taught him the best lessons he ever learned on how to be competitive and a team player, a pair of Continued on next page > SMC.ORG

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“Leo’s vision and accomplishments are a legacy that we treasure and build upon each and every day.” Steve Shivak President, SMC Business Councils traits that served him well as head of SMC. After hanging up his spikes, he retained a passion for the Pirates by being an active member of the team’s alumni association for many years. Leo’s first “civilian” job was insurance representative – a path that would lead him to SMC. Following a slow start, he hit his stride and was promoted to staff manager after three years, leading the eastern

Leo’s networking ability and political savvy created opportunities for small business; pictured here with the late Pittsburgh mayor Richard Caliguiri.

region in sales. He was then promoted to assistant manager and general agent. Years later, in the spring of 1967, Leo was introduced to the Smaller Manufacturers’ Council and joined the staff as assistant executive director and

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editor of The Smaller Manufacturer, a predecessor of this magazine. At the same time, his insurance background helped SMC become the first association in the Pittsburgh region to offer health insurance to members at reduced rates through a group plan. In 1970, he became SMC’s third executive director upon the retirement of Earl W. Erickson. Two of his first acts were to change the title of the organization’s leader to “president” and implement a program known as The President’s Group which facilitated meetings among member companies’ presidents to discuss solutions to business problems over dinner. Those sessions became a fixture during Leo’s tenure, and he described them as “the most successful educational and networking meetings we’ve ever had.” During Leo’s first decade at the helm, he was instrumental in organizing Washington-based and regional small business organizations into a cohesive small business advocacy movement called the Coalition of Small and Independent Business Associations (COSIBA). The organization evolved into National Small Business United, “The Voice of Small Business in the United States.” According to Leo in an interview published in the September 1996 issue of Dynamic Business, a couple of months before his retirement, “COSIBA opened the doors to the White House and the [rest of the federal] government, and no other president, before or after, has paid

Former president Jimmy Carter presented Leo with a certificate of appreciation for his contributions to a White House Conference on Small Business in 1980. Leo believed that no other president advanced small business the way Carter did.

attention to small business the way Jimmy Carter did. He really listened. He was a decent man.” In reflecting upon his career in that same Dynamic Business interview, Leo said, “Everything prepared me for where I’m at right now because I had the guts to do it. Even the bad experiences prepared me in developing the skills that became important to know. You only get as much as you give, and I always did my homework, but the Association gets all of the credit.” Leo’s signature accomplishments during nearly three decades of leadership include offering small companies affordable health insurance; establishing an electronic bulletin board and information retrieval service to help members meet their economic and business development needs; achieving meaningful legislative victories in Pittsburgh, Harrisburg and Washington; assisting with creation of the Office of Advocacy at the U.S. Small Business Administration; and expanding the membership base to include manufacturing, commercial and professional services firms to reflect the increased diversity of the TriState Area’s economy. Under Leo’s leadership, the number of SMC members more than doubled from 1984-96 to some 4,800 firms representing 123,000 employees. WP


SMC Business Councils A D V A N C I N G

T H E

A N D

B U S I N E S S

S M A L L

M A N U F A C T U R I N G C O M M U N I T I E S

Calendar of Events Feb 12 IMPACT Export Briefing SMC Offices, Cranberry Twp., PA Feb 19 Fluid Power Challenge Workshop Penn Center – Fayette Campus Lemont Furnace, PA Feb 24 Fluid Power Challenge Workshop Carpenter’s Training Center Pittsburgh, PA Feb 24 Coffee Connection – Greensburg Panera Bread Greensburg, PA

Apr 1

Creating a Successful Internship Program for both the Employer and the Intern SMC Offices Cranberry Twp., PA

Apr 10 Fluid Power Challenge Carpenter’s Training Center Pittsburgh, PA April 16 Open House Rivers Club Pittsburgh, PA Apr 17 Fluid Power Challenge Penn State Fayette Campus Lemont Furnace, PA

June 9 SMC Pirates Night 4:30-10:30pm PNC Park Pittsburgh, PA June 29 SMC Golf Outing Fundraiser Event 8:00-4:00pm Field Club Country Club Fox Chapel, PA Aug 25 SMC Golf Outing 8:00-5:00pm Seven Oaks Country Club Beaver, PA

Mar 24 Business Health Breakfast Cranberry Twp., PA

Apr TBD Open House Pittsburgh, PA

Sept 24 SMC Annual Legislative Reception 4:00-8:00pm Rivers Club Pittsburgh, PA

Mar 27 Town Hall Meeting – Uncovering Employers’ Issues from A-Z SMC Offices Cranberry Twp., PA

May 4 Harrisburg Grassroots Lobbying Trip

Oct 7 Open House Cranberry Twp., PA

May 21 SMC Golf Outing 8:00-4:00pm Tom’s Run Golf Course Blairsville, PA

Oct 8

SBA National Ombudsman Regulatory Hearing SMC Offices Cranberry Twp., PA

For more details and to register, please visit smc.org/calendar


HOMEBASE NEWS AND EVENTS

SMC Welcomes these New Members

This list includes new members through 1/31/2015

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Axenics www.axenics.com

Freedom Search & Settlement, LLC www.freedomsettlement.net

Maintenance Controls, LLC www.maintcon.com

B S Smith Services, Inc. www.bssmithservice.com

Grau & Associates, LLC www.grauandassociates.com

Media Post, Inc. www.mediapostinc.com

Babst Calland P.C. www.babstcalland.com

Hartz Info Tech, Inc www.hartzinfotech.com

Norcomm Communication Services, Inc. www.norcommbts.com

Clearview Federal Credit Union www.clearviewfcu.org

HRResource Force www.hrresourceforce.com

Peterson Cartridge Company www.petersoncartridge.com

Eastern Gateway Community College www.egcc.edu

Ice Qube, Inc www.iceqube.com

Pittsburgh Child Guidance Foundation www.pittsburghchildguidancefoundation.org

Ectobox, Inc. www.ectobox.com

Imagebox www.imagebox.com

QED Logistics

Equipco www.equipco.com

Jennison Manufacturing www.jennisonmfg.com

Filtech Inc. www.filtechinc.com

L & S Machine Company, LLC www.lsmachineco.com

Fishbone Consulting Group www.fishboneconsultinggroup.com

Landon and Acosta, LLC www.landonandacosta.com

SMC.ORG

Sloan Lubrication Systems www.sloanlubrication.com solutions4networks www.s4nets.com Steelton Family Practice www.steeltonfamilypractice.com Wepfer and Associates, LLC www.wepferassoc.com


HOMEBASE NEWS AND EVENTS

Upcoming Legislative Events Harrisburg Grassroots Lobbying Trip May 4, 2015 7:30 a.m.-10:30 p.m.

This is a high priority event due to the changes in the Administration, a new Governor, a projected $1.85 billion dollar deficit in the 2015-2016 budget, and the enormous pressure to increase taxes on every facet of business.

Washington, D.C. Grassroots Lobbying Trip with the National Small Business Association (NSBA)

Annual Legislative Reception September 24, 2015 The Rivers Club, Pittsburgh, PA This long standing tradition provides you with an excellent opportunity to meet elected officials in south western PA and build relationships in a social setting.

Hearing with the National Ombudsman, Small Business Office of Advocacy October 8, 2015 SMC offices, Cranberry, PA Brian Castro is back to SMC in 2015 after a very successful roundtable in May 2014. This is the next step in formally identifying regulatory issues that are impacting employers so that he and his staff can seek solutions for small employers.

TBD, Spring 2015 Visit the offices of the Pennsylvania Congressional delegation to deliver the small business message; Tax extenders must finally be made permanent and lawmakers must understand the impact of business tax reform on those businesses who file as pass-through entities.

Town Hall – “Uncovering Employers’ Issues from A – Z” Friday, March 27, 2015 8:00-10:30 a.m. The meeting will be held at SMC offices in Cranberry, PA and via audio for members in central PA. Representatives from the offices of Senators Patrick Toomey and Robert Casey, Jr. have confirmed attendance. What are your pain points? What keeps you up at night? This is an excellent opportunity for you to come and speak about the laws and regulations that are impacting you as an employer. If SMC doesn’t understand your issues then we can’t work on them. SMC.ORG

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PS

PARTING SHOT THOUGHT LEADERS

The Region’s Next Big Challenge:

Its Population by Dennis Yablonsky CEO, Allegheny Conference on Community Development

The Pittsburgh region has come a long way. From double-digit unemployment 30 years ago, there are now more people employed here than ever before – and our available labor force is at an all-time high. There are signs that we’re getting younger too, with the median age in the city of Pittsburgh now below the national average. And those young people are better educated than their counterparts across the country. In fact, the region has the third-highest concentration of young people in the labor force with graduate or professional degrees, right after Washington, D.C. and Boston.

As a region, we are well positioned for future success. At the same time, we must be mindful of today’s challenges, particularly related to our population and demographics. Simply put, there are not enough younger workers in the pipeline to replace the Baby Boom generation as they retire. There’s a nearly 137,000 person gap between the population in the region aged 45-65 and the younger generation, aged 25-44, that must replace them over the next 20 years. In some industries – in energy, manufacturing, construction, and even some health care occupations – the gap is even larger. For example, in manufacturing, more than half our region’s workforce is in their 50s and younger workers don’t have and aren’t getting the skills required to replace them. The region also has one of the least diverse populations among major metros in the United States. For a variety of reasons,

Percentage of Population, 65 and Older

Despite a growing young adult population, Pittsburgh remains one of the oldest metropolitan regions in the nation.

we missed out on recent immigration waves and our racial make-up is impacted as a result. Compared to the nation as a whole, we are home to more whites and fewer African Americans, Latinos and other minorities. The United States is on a path to becoming a “minority/majority” country. And the talent pool we must attract needs to come from this increasingly diverse group of people. We must dedicate ourselves, as a region, to address these challenges head-on. We must connect people to opportunity. We must educate, train, and attract people to fill the jobs that are being created and the jobs that are being vacated by the retiring Baby Boom generation. And we must become a more welcoming region to newcomers and encourage them to stay. Through the same spirit of publicprivate partnership and collaboration that has worked for us over the past two generations, we can meet and overcome this challenge. If we are proactive and become a magnet for talent, we have the opportunity to have one of the youngest, best-skilled populations in the nation. WP ABOUT THE AUTHOR Dennis Yablonsky is Chief Executive Officer of the Allegheny Conference on Community Development and its affiliated organizations – the Greater Pittsburgh Chamber of Commerce, the Pennsylvania Economy League of Southwestern Pennsylvania and the Pittsburgh Regional Alliance.

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WHEN YOU BUY LOCAL, EVERYONE WINS! Buy Pittsburgh First exists to bring awareness to local industrial companies in the Western PA region. We are a grass roots movement that encourages companies to examine their buying habits and support local manufacturers, suppliers

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financial win for every person, community or business that calls this great area home.

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SMC Working PArts - Jan/Feb 2015  
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