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New DOL overtime rules: One good outcome and seven bad ones

Do you have employees who are on salary? Do those employees ever work more than 40 hours in a week, for whatever reason? If the answer is yes to these questions, your world is about to get more complicated and probably more expensive.

Please stay with me. I need to get into the weeds, but just for a minute.

The current Department of Labor (DOL) overtime exemption threshold for “white collar” employees is anyone with a salary of at least $23,666 annually, or $455 per week. Exempt means the employer is not required to pay overtime if and when this class of employee works over 40 hours per week. This threshold applies to all businesses, regardless of size or number of employees.

Here’s the news: The DOL has announced that as of December 1, 2016, that overtime exemption threshold will essentially double, to $47,476 annually, or $913 per week. So anyone currently receiving a salary of less than this new amount will soon convert to non-exempt status, and must be paid overtime when they work more than 40 hours a week.

The reason I’m concerned about this change is because of the size of the increase. I feared this new threshold is going to catch and hurt a lot of unaware small businesses in its net. So I took this concern to my small business audience in our online poll recently and asked if they knew about the new overtime exemption changes. Alas, with less than three months before taking effect, my concerns were justified: Almost three-fourths of our respondents said they either didn’t know about the change or how it would impact them, or they knew about it and it was going to be detrimental to them. The rest, just over a fourth, said they either had determined the change would not affect them or they were prepared.

Here’s the good outcome: You might be surprised to hear me say that I think a new threshold is not unfair. In 2016, a weekly salary of $455 is too low to be expected to work overtime without additional compensation, unless it comes with a leveraged compensation factor that allows them to earn more if they work more.

But while an increase in the overtime exemption threshold is not unreasonable, doubling the threshold all at once is. And like so many government creations, the devil’s in the details. And this devil will create more problems for both employees and employers than it will solve. For example:

1. Increased recordkeeping burden: Because the doubling of the overtime exemption threshold will significantly increase the number of salaried non-exempt employees in Main Street jobs, small businesses will be burdened disproportionately with additional time and attendance record-keeping.

2. Increased payroll expense: For small businesses in a lower cost-of-living area, an immediate doubling of the exemption threshold will create an employee re-classification burden that by definition will result in increased payroll expense, perhaps prohibitively.

3. Flexibility becomes expensive: If an employer requests of a non-exempt salaried employee to work over one week and take off those hours the next, or that employee makes the same request of the employer, under the new rules, that goodwill gesture will cost the employer overtime for the week with the extra hours. A good deed should not be punished.

4. Employee hours cut: Businesses in certain industries will respond by splitting a previous 50 hour/week job into two 25 hour/week jobs in order to prevent their payroll from increasing, hurting the original employee.

5. Bad news for managers: I’m already aware of companies that will react to the new threshold by laying off some managers while increasing the responsibility of a smaller number of exempt managers, without increasing their compensation.

6. A morale downer: Being put “on salary” has been considered a professional accomplishment by generations of employees. But HR professionals tell me they’re recommending converting any employees with salaries remaining below the new threshold to hourly status. There are millions of Main Street employees whose weekly income falls between $455 and $913.

7. More lawsuits: Because of the steps some businesses will have to take to prevent these new government-imposed costs from getting out of hand, experts I’ve talked with are predicting an increase in Fair Labor Standards Act lawsuits.

When the federal government does things like doubling the overtime exemption threshold in one fell swoop, it hurts Main Street businesses disproportionately. In this case, it will create a new administrative burden, increase payroll expense without adding a penny of new productivity, and possibly hurt morale.

For four years, polls show small businesses reporting that the mandates of Obamacare disproportionately hurt them. Within a year, small businesses will regard the new DOL overtime exemption threshold increase as the little brother of Obamacare. Another example of the ham-fisted regulatory overreach of the federal government that hurts the job creators and suppresses the economy.

Write this on a rock … Buckle up, small businesses. If you like your current payroll structure, you won’t be able to keep it.

Can you sell your leadership product?

What is a leader? A mentor once told me a leader is someone who can find others who will follow him (or her).

But as we all know, followers can be high-maintenance folks, requiring constant tending to whatever it is that attracts them; most of the time “it” is something intangible. Napoleon is reputed to have said, “A soldier will fight long and hard for a bit of colored ribbon.” Intangible.

Leadership, like beauty, is in the eye of the beholder. So we asked our radio and online audience which of five characteristics is THE most important to being a successful leader. Two of the leadership traits we offered, courage and perseverance, got the lowest ranking, each in single digits.  The highest ranking went to “ability to communicate,” with about 40% choosing this one, followed by “ethical behavior,” chosen by almost one-third of respondents,  and “vision” selected by a little more than one out of four.

At first, I was surprised that courage and perseverance didn’t rank higher, because it’s my belief that both of these are defining traits of a successful leader. But surprise turned to clarity when I realized that our poll had revealed what we all know but don’t always remember: There are two faces of a leader. One is the face leaders see when looking in a mirror, and the other is the one followers see. When seeking the definition of a leader, we have to be clear about which point-of-view is being sought: leadership traits we seek in ourselves or those that attract followers.

The face in the mirror knows courage and perseverance are definitely among the imperatives for leadership success. But to followers, these are merely raw materials used to manufacture the product they demand of leaders - that intangible “bit of colored ribbon” delivered by communicating a vision that is executed based on mutually held values.

Turns out, being a leader is a lot like being a business owner. To be successful in business, it’s not enough to offer quality products you’re proud of - customers drop the gavel on that judgment. Similarly, it’s not enough for leaders just to please the mirror - followers are the customers of your leadership product.

In order to get others to follow you, both faces of leadership must be in evidence. Nurture those traits that success requires of you personally, like courage, perseverance, faith, commitment, etc., while simultaneously delivering what followers expect: ethics, communication, vision and performance.

Write this on a rock … Are you finding followers for your “bit of colored ribbon?”

When trust is a best practice, profit margins increase

Few contemporary prophecies have stood the test of time better than this one by John Naisbitt, from his 1982 watershed book, Megatrends: “The more high-tech, the more high-touch.” I call that, “Naisbitt’s Razor.”

The reason for Naisbitt’s accuracy is simple: High tech, by definition, means digital. But you and I are not the least bit digital; we’re 100% analog. And our analog nature manifests as a desire to connect with - or as Naisbitt says, “touch” - other humans. So the value of touch increases proportionally with the increase in the velocity of our lives.

Digital is fast; analog is not. We may transport ourselves virtually at the speed of digital, but once there, we touch -eye, ear, hand - at the speed of analog. So how do we reconcile the fact that as high-tech consumers who desire and eagerly adopt each new generation of digital, we’re still, and will always be, analog beings? One word: trust.

Nothing is more capable of accelerating with high-tech while simultaneously governing down to high-touch than trust. Naisbitt didn’t directly address the concept of trust in his book. But I interviewed him twice on my radio program and I think he wouldn’t mind if I expanded his razor to: The more high-tech we have, the more imperative trust becomes.

In another of my favorite books, Built On Trust, by co-author and frequent guest on my radio program, Arky Ciancutti, M.D., I found this: “We are a society in search of trust. The less we find it, the more precious it becomes.” For millennia, customers did business with the same businesses because they wanted to deal with the same people. We trusted the people first and the company second. In an era where erosion of the high touch of trust is often lamented by customers and employees, there are still places where it not only exists, but was actually born. Where, in contrast to the rest of the contemporary marketplace, trust is still found in abundance. Those places are almost all on Main Street in the form of small businesses.

With trust now more precious than ever, build the foundation of your small business’s culture on it. And when you can deliver on trust as your North Star, you’ve earned the right to go to market with it. Here’s an example:  Reveal the combined industry tenures of your leadership team (101 years), or the average tenure of your staff (18 years). When prospects see those numbers, they hear T-R-U-S-T.

In one interview on my show, Arky said, “An organization in which people earn one another’s trust, and commands trust from customers, has an advantage.” Since contemplating that, I’ve maintained that being devoted to trust is not only the right thing to do, it’s a business best practice. Let me explain.

As the velocity of the digital marketplace increases, our business has to move faster, and our stakeholders - employees, vendors, etc. - have to keep up. As one of my vendors, if I can trust you to keep up, that’s a relevance value worth more to me than the competitive price of a low-bidder I don’t know. You just converted trust into higher margins.

In the greater marketplace, where devotion to trust is no longer ubiquitous, small businesses have been handed a rare gift. And all they have to do to claim it is create and leverage the relevance advantage Arky means when he says, “The advantage trust gives your organization is there for the taking, waiting to be harvested. It’s not even low-hanging fruit. It’s lying on the ground.”

You may have heard me say that the Price War is over and small business lost. Well, the Trust War is on, and small business is winning.

Write this on a rock … To claim that victory you must operate at the speed of trust.

Arnold Palmer was in reality what he appeared to be

Golf legend, Arnold Palmer, is dead. No ordinary man: He was called “The King,” he had an army, and he was beloved by all.

Twenty-five hundred years ago, Socrates said the greatest way to live your life is to be in reality what you appear to be. That was Arnold Palmer. The charismatic person you saw on television - the impish smile, the twinkle in his eye, how he treated people - wasn’t a persona. That was the real Arnold.

Arnold and I weren’t BFF (best friends forever), but over almost a quarter century we had many different interactions: helping him as a driving range volunteer at a pro golf tournament; interviewing him more than once while broadcasting my radio program from his Bay Hill Golf Club in Orlando; as a member of the National Advisory Council of his beloved hospital; and he provided the foreword for my second book. Whenever I was around him I thought of Socrates, because Arnold Palmer truly was in reality what he appeared to be.

Someone else warned that you never want to meet your heroes, lest you come away disappointed. If you were a member of Arnie’s Army, once you had the privilege to meet him, any subsequent reappraising was to increase your emotional investment in him. People idolized Arnold because his golf game and personality were both blue collar: straight up and unpretentious.

When asked to briefly compare himself to Arnold, longtime friend and frequent nemesis on the tour, Jack Nicklaus, said, “I love golf. Arnold loves people.” Clearly, no one loved golf more than Arnold Palmer. But seeing how he interacted with others, all the way down to a member of the gallery he was in front of for seconds, anyone could see how much Arnold loved people. Jack is known to never autograph a golf ball. Arnold signed whatever you handed him, and he always told young pros, “Sign your name so people can read it,” as he always did.

The only thing about Arnold that saddened me was something many people didn’t know: For probably the last third of his life, he had significant hearing loss, even with hearing aids. When you saw Arnold deliver his patented thumbs up response with those massive hands, that was his way of coping with the fact that he heard someone addressing him, but didn’t hear what was said. It was troubling to me that someone might think he was being arrogant or dismissive by not answering, when nothing could be further from the truth. For the most notoriously approachable living legend on the planet, who truly couldn’t get enough of people, his hearing loss was the cruelest disability.

Everyone wanted a piece of Arnold and he never disappointed. A couple of years ago, my wife and I were in attendance at a dinner celebration prior to the Insperity Invitational that Arnold had promised to attend. Even though he was obviously struggling with back pain, he fulfilled his promise. As people came by his table during the evening, old friends and not-yet-friends, with great difficulty Arnold stood up to shake the hand of every one. Years before, in one of our interviews, Arnold quoted his father, Deacon, about that: “Son, whatever you do in your life, turn the table over and treat others like you want to be treated when you’re on the other side.” Treating people like they mattered ran very deep in Arnold Palmer, sometimes even at his own physical expense, whether you were a big deal or a bus boy.

The Orlando hospitals that bore his and his first wife, Winnie’s names, were extremely important to him. Once while Arnold joined several of us for a tour of the Arnold Palmer Hospital for Children, a doctor was describing the new and expensive, life-saving device of which they were so proud. Literally in the middle of that demonstration, I heard Arnold say, “Isn’t it great that it doesn’t smell like a hospital in here?” That detail was important to him, because he believed the antiseptic smell of medical facilities was frightening to children who were already under stress. By the way, one of Arnold’s edicts for the hospital was that no one would ever be turned away because they can’t afford the care. Arnold wasn’t just a golf legend, he was a human legend.

The story is legend of successful golf pros who failed trying to replicate their on-course success in business. That wasn’t Arnold’s story. He made a good living playing golf, but he became rich in the marketplace. In one interview I asked him for a success tip for business owners and he said, “Be trustworthy, be frank and straight-up.” I’m calling that Palmer’s Business Razor.

As “The man who saved golf,” and “The man who reinvented professional golf,” every touring pro in the modern era should thank Arnold Palmer, because they stand on his shoulders. And everyone who values sportsmanship, good manners, kindness, graciousness, humility, and class should thank Arnold Palmer. More than anyone else, Arnold not only demonstrated those values whether he won or lost, but you were inspired by him to demonstrate them yourself, if for no other reason than you wouldn’t dare risk disappointing him.

Clearly, Arnold Palmer lived a charmed life, but he also charmed our lives. For seven decades, wherever Arnold traveled around the globe, the world wanted a piece of him. I never met anyone who had so much to give, and who wanted so much to give it. The truly great human beings have one thing in common: They stand for something greater than themselves. During one of our interviews Arnold told me, “The reason I started traveling internationally was to promote golf as an agent to help make nations to be more friendly.”

The King is dead. Long live the King’s legacy.

Can you make teleworking work for you?

Here’s a scenario that every small business owner fears: A key employee resigns because he or she cannot continue to come to your place of business to work for reasons out of their control, such as an illness or a family issue. Is there another answer besides accepting the resignation?

With the exciting recruiting resources available today, you might discover that the best prospect for a job opening you have lives in another state, or even another country. What if they don’t want to move? What’s your next move?

One word answers both questions: Teleworking.

New technology and evolving management paradigms make stories like these have happy and productive endings through teleworking.

A marker of the 21st century workplace, teleworking is where an employee works off-site full or part-time (aka tele-commuting), most often from home. But in order for such an arrangement to be successful, two things must happen:

First the easy part: You must have the necessary technology and tools, which you will have to provide your teleworker.

  • Computer capability and Internet connection are the minimum.
  • Your teleworker will need the right set up, like office furniture, etc., to make their off-site working environment as productive as possible. And it’s not unreasonable to ask to see how the space is organized.

Now the hard part: Can you handle such a management relationship? Consider these four ground rules to execute a teleworking relationship.

  • Find out if, and what work can realistically be done off-site.
  • Determine how to coordinate all work, off or on-site.
  • Establish expectations for scheduled communication, plus production, execution and delivery of work.
  • Talk with other employees about why this employee is being allowed to work remotely, so they can support the new plan. If handled properly, you’ll get major points for being such a cool, 21st century manager.

Execute your teleworking plan with the expectation that adjustments will almost certainly have to be made. So schedule periodic reviews with your teleworker to discuss how things are going.

By the way, if you’re still having trouble imagining having an employee who’s not sitting under your roof, add up how many hours in-house employees work and communicate without actually seeing each other. I’ll bet that number will surprise you.

It might make you feel better knowing that the teleworking model is now being implemented by thousands of small businesses like yours every day.

Write this on a rock … Teleworking can work. Can you make it work for you?

Four IP questions to tell if you get it

One of the most interesting aspects of the marketplace is the evolution of how businesses leverage assets. For most of history, business leverage came from these three categories in this order:

1. Muscle power (human or animal);

2. Tangible stuff (raw material, inventory, tools, etc.);

3. Information (intellectual property, or IP).

Historically, the strongest cavemen, the biggest horses, the fastest ships, the largest factories, all had an advantage over lesser competitors. We’ve all seen this: “Largest inventory in the region.”

But here’s the interesting part: As the marketplace has evolved, the order of importance and the value of assets has inverted. Studies show increasing emphasis is being placed on IP and the ability to leverage it with less emphasis on leveraging tangible assets.

And what about muscles? Increasingly in the global marketplace, human brawn is number four on a list of three.

The good news is small businesses are joining this global trend of leveraging IP more and tangible assets less. They’re increasingly using technology in exciting new ways, doing more virtual business and are as likely to develop a strategy for doing business across an ocean today as they did across town 20 years ago.

Regarding how essential IP is to a small business’s 21st century competitiveness, more and more small businesses get it.  The bad news is there still are far too many who don’t. As an example, incredibly, almost half of small businesses still don’t even have a website.

To see if you “get it,” consider these four questions:

1. If I gave you for free (a) a truckload of inventory or (b) a special technology that would help you serve customers better, which would you choose?

2. Do you spend more time (a) thinking about products and services or (b) finding technology to more effectively serve new customer expectations?

3. Do your employees (a) use the same technology in the direct performance of their jobs today that they did 5 years ago or (b) different technology (not just new machines)?

4. If you purchased another business, which would be more valuable to you: (a) the inventory and equipment, or (b) the digital records of their customers: names; contact info, including email; what they buy; when they want it; why they buy it; and how they use it?

If you chose (a) for any of these questions, it’s likely your business’s performance is on a declining trajectory. But if you chose the (b) options, congratulations, you get it about IP.

Write this on a rock … In the 21st century, leverage intellectual property more and tangible assets less.




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