Tag Archives: May 2009

Oath

Thunderbird School Of Global Management Continues To Deliver In-Demand Education

Managers consumed with maximizing short-term profits and the value of their stock options have destroyed billions of dollars in shareholder and taxpayer money. A culture of greed lies at the root of this economic meltdown that has seen banks collapse, markets tank and unemployment rates soar.

The aftershocks of this global disaster continue to claim victims, and companies around the world are scrambling to brace themselves for the uncertain times ahead. The survivors will be those who are properly equipped to navigate the economic crisis with strong, ethical leadership, innovative global mindsets and sustainable strategies that will solidify their long-term viability and create lasting value for their organizations and the communities they serve.

With this in mind, the Thunderbird School of Global Management continues to create innovative ways to deliver relevant and in-demand education to companies and executives in a market where the need for continuing education is great, but company resources are slim.

Thunderbird Corporate Learning, the executive education division of the school, already has begun tailoring its programs to help companies and organizations navigate this financial crisis, including a new global leadership certificate program called Leading and Managing in Turbulent Times. This program helps global leaders understand what elements of management have changed during the economic downturn — and what things never change. A 12-week session began in March, and a three-day concentrated version took place in May.

The program, taught by Thunderbird faculty members who have extensive first-hand experience working with global managers, will help students broaden their understanding of global business issues that are transforming the international landscape. The program will arm students with useful decision-making tools for increased job performance, and help them build more effective cross-cultural relationships by giving them insights into how the economic crisis is affecting different cultures, regions and markets.

The program will also take topics such as corporate social responsibility, international marketing, organizational culture and financial management and relate them to the economic crisis.

Another new executive education program will debut June 9. Communicating and Negotiating with a Global Mindset is a three-day course that will help working professionals develop strategies for influencing people from other cultural backgrounds. Participants will learn their own global mindset profile and develop an understanding of their own negotiating preferences. The need for such skills has been amplified in the global economic crisis as companies scramble for competitive advantages.

Helping social sector organizations get through the crisis is another area in which Thunderbird has extended its offerings. The Thunderbird Social Sector Leadership Program conducted in March with the support of a grant from the American Express Foundation, reached out to nonprofit, governmental and nongovernmental organizations such as Habitat for Humanity, the International Rescue Committee and the Grameen Foundation.

The five-day program guided participants on how to develop new leadership skills in these tough economic times with training in leadership, sustainability, strategy, brand management, fundraising and innovation. The program, designed solely for a group of nonprofits, governmental and nongovernmental organizations, is the first executive education program of its kind for Thunderbird, and the school is hoping to use it as a model for similar opportunities in the future.

Keeping in mind that times are tough and resources are tight, Thunderbird has launched a free, interactive Web site and quarterly executive newsletter, which are both designed to help busy global executives navigate this economic crisis. The Thunderbird Knowledge Network is an interactive, multimedia forum that gives executives open access to the expertise and insights of Thunderbird’s faculty, alumni and other corporate executives around the world on the latest, most relevant global business issues and trends, including the global recession. This content is delivered in stories, columns, videos, podcasts and blogs, including my blog on global leadership. Each posting in the Knowledge Network offers an opportunity for reader comments and feedback.

Executives also can tap Thunderbird’s global business knowledge through the school’s new Executive Newsletter, a free electronic newsletter that is distributed quarterly to busy working professionals, including the school’s corporate clients and alumni.

Michelle Kerrick

First Job – Michelle Kerrick

Michelle Kerrick
Managing Partner
Arizona Practice Deloitte, LLP

Describe your very first job and what lessons you learned from it.
My very first job was waiting tables at a Bob’s Big Boy restaurant in Flagstaff during high school. My sister and I had signed up for a ski trip to Utah, but I needed to earn the money over Christmas break to be able to go. After dropping several meals and breaking the coffee pot, I realized that waitressing was not for me — but I learned several great lessons from that job. First, find the areas where you excel and the things you’re passionate about, and second, don’t let hot coffee land on the polyester uniforms!

Describe your first job in your industry and what you learned from it.
I joined Deloitte, which was named Touche Ross at the time, as a staff accountant in 1985. I was recruited from Northern Arizona University and have been here ever since. My dad encouraged me to study accounting. He felt it would be a challenging field and a marketable career. I chose Deloitte because of the energy and warmth of the people I met. That stands true today. I work with an incredible group of very talented individuals. One of the most important lessons I have learned in my 23 years in this profession is the importance of flexibility. When you are a junior staff member, client, industry and team assignments change frequently, which can be intimidating. You have to be able to react to change in a positive way. I also learned that working hard and maintaining a good attitude not only helps you be successful, it fosters a collaborative environment where everyone benefits from the team’s accomplishments.

What were your salaries at both of these jobs?
My restaurant job paid the industry standard for tipped employees: less than minimum wage. In 1979, it was about $2.50 an hour. When I joined Touche Ross in 1985, I was earning a salary of $18,000, plus a $2,000 bonus, and I was thrilled. Who is your biggest mentor and what role did they play? Two mentors influenced me tremendously. The first is a now-retired Deloitte partner named Dave Martin. I had the opportunity to work with Dave for a great portion of my career. He was an impressive leader with remarkable business acumen and taught me a lot about client service and navigating the Deloitte organization. My other mentor is a friend outside of the accounting profession whom I have known for more than 15 years. He helped me hone my business skills and develop the ability to take a long-term, big-picture view, which is critical for any business leader.

What advice would you give to a person just entering your industry?
Work hard and keep a positive attitude. Be flexible to the many changes that will come your way, since every new experience is a learning opportunity. Keep things in perspective: life will go on, and everyone makes mistakes. Strive for balance between work and your personal life — you can’t give 100 percent at work if you don’t take the time to stay healthy and fit.

If you weren’t doing this, what would you be doing instead?
I had always thought about med school; however, given some of the issues facing the health care system, I have no regrets! One of the great aspects of my job is the support and encouragement I receive from the firm to give back to the community. That is certainly something I am passionate about and I hope to always stay active in our community. I currently work with Fresh Start Women’s Foundation, the Maricopa Partnership for Arts and Culture, Greater Phoenix Leadership, Saint Mary’s Food Bank and the United Way. I want to see Phoenix become the metropolitan area that will attract viable companies and great talent.

Bob Matia Managing Partner Squire, Sanders and Dempsey

CEO Series: Bob Matia

Bob Matia
Managing Partner
Squire, Sanders and Dempsey

What impact has the current recession had on the legal profession?
With the credit markets being down as much as they were this time around, the flow of corporate legal business was definitely affected more than in past recessions. A lot of people view law firms as recession proof, and to some extent some of the practice areas within a law firm are recession proof. Litigation, for example, seems to go on and on whether there is a recession or not, and that is in fact happening now in our firm. But this time around, the corporate group was affected much more than in the past and that has caused different challenges.

Do you foresee any long-term changes in how law firms conduct the business side of their operations as a result of the economic crisis?
It’s been a wake-up call for the law profession … I think there was a complacency that had developed among law firms about how carefully they had to watch developing trends. But I think this has been a good wake-up call, so I think you’ll find law firms staying more conscious of staffing and not trying to get too far ahead in staffing; maybe slightly curtailing the kinds of lead hiring we used to do. We hire every year out of law school. We’re having in Phoenix six new lawyers joining us out of the class of 2009.

They were originally scheduled to arrive in October. We’ve deferred that arrival to January of 2010. I think you’ve probably seen in the paper a number of other moves by other law firms, some taking different forms of action. … I think you’ll see tinkering here and there. I don’t think you’ll see vast changes in the way we do things, but we’re looking at it. We’re looking at it on a monthly basis, checking the numbers, trying to see if we see a trend in one practice area or another.

You have represented the city of Phoenix in its dealings with developers of its downtown mixed-use complex. How would you describe the evolution of Downtown Phoenix from a governmental and legislative aspect?
The change in 30 years has just been remarkable. It’s great. … During the course of 30 years, we got a bill passed that established economic development as a major public purpose in Arizona, which has significant implications in that we feel it probably was the turning point in permitting condemnation for economic development purposes, a subject which is not popular in all sectors of the economy. But certainly there were instances where a single property owner could hold up an entire, major, new downtown development, and the governmental units simply had to have a way of dealing with that. Condemnation was one of them and we’re pleased about that. But there’s a new challenge, actually, to the subsidies that cities have made available to developers, both downtown and in other kinds of zones that are created for economic development. The (state) court of appeals has just thrown out part of the subsidy the city of Phoenix gave to CityNorth. Whether that goes to the Arizona Supreme Court depends on the Supreme Court.

For years, we were operating under another court of appeals case, known as the Wistuber case, and I always thought it struck a very good balance between hard consideration and soft consideration on what cities were getting for their subsidies. The problem is that the Arizona constitution has a gift clause in it, which says public bodies can’t give away their money to private interests without getting value back for that money. TheWistuber case made it clear that you could look at things like increased tax revenues and improving job availability, but you also had to have some hard considerations for what you were spending your money on. I always thought  that was a great balance. We’ll see how this comes out.

Given the current economic climate, what changes have you made to future workforce planning?
I think law firms will stay closer to the break-even point on need, on staff. We had the luxury of delaying responses to ups and downs in the economy in the past. Law firms are being much more conscious today of the cost of legal services to clients. Even the largest corporations are getting our attention in terms of trying to give them the very best service we can for the lowest cost. So we’re going to pay a lot more attention, probably, to having balanced legal teams in terms of experience level. For example, on a typical corporate transaction or litigation matter, we will probably pay a lot more attention to what the blended hourly rate would be if you looked at all the people who are working on the account.

    Vital Stats




  • Started with Squire, Sanders and Dempsey in 1966
  • Opened Phoenix office in 1979
  • Listed in the 2009 edition of “The Best Lawyers in America”
  • Selected for inclusion in the 2007 inaugural edition of “Southwest Super Lawyers”
  • Designated a Center of Influence by Arizona Business Magazine in 2008
  • Received law degree from Case Western Reserve University
  • Works with the Arizona Business Coalition, the Arizona Justice Foundation and the Phoenix Community Alliance
  • www.ssd.com
Prime Bone In Ribeye

J&G Steakhouse Makes The Former Mary Elaine’s Location Its Own

Over the past two years, the dining scene at the Valley’s top resorts has undergone an extreme makeover. The most high profile of those makeovers took place at The Phoenician, where that staid first lady of dining for 20 years, Mary Elaine’s, was shuttered last year. Now occupying the spot where Mary Elaine’s once stood is the far trendier and far less formal J&G Steakhouse.

Gone are the high-backed chairs and linen tablecloths. In are butcher-block tables and modern designs. Out is French cuisine; in is a new take on steak and seafood. But one thing has remained the same — those fabulous views Mary Elaine’s was so famous for.

The restaurant’s interior is swathed in purple and gold, a palette the establishment’s owners say was inspired by steak and wine. A tempesta onyx wraparound bar welcomes patrons as they head into the main dining room. There are also two private dining areas and the terrace has oval banquettes and fire pits.

J&G Steakhouse, which opened in December, is the creation of Michelin-starred chef, Jean-Georges Vongerichten. He has developed a menu in which the classic fare of a big city steakhouse is re-imagined with a modern twist.

After getting over the initial wonder of how the space that had once housed Mary Elaine’s has been transformed, I was pleasantly surprised by the variety of food on J&G Steakhouse’s menu. For a steakhouse, it has a generous selection of seafood.

Our dining party started the meal with J&G’s specialty cocktails. While most of the drinks were variations of more familiar libations, such as a grapefruit gimlet, others were of the kind I thought went out with the Rat Pack. Case in point is the Sazerac, made with 100-proof Rittenhouse rye whiskey, Pernod Absinthe, Peychaud’s bitters and Angostura bitters. You don’t want anyone lighting a match around this drink.

The appetizers were an unexpected treat. Many restaurants fail to find a balance with their appetizers; they are either afterthoughts or so good they overshadow the main menu. At J&G, the appetizers are inventive and tasty. The restaurant succeeds in not overwhelming the main courses by keeping portions small. Of the four appetizers we chose, every one was a winner. Special mention goes out to the savory French onion soup, the rich sweet corn ravioli in basil butter and the salmon tartar, served diced with warm garlic toast and mustard oil.

With so much good seafood on the menu, we couldn’t resist splitting our orders into two meat dishes and two fish entrees. First up was the 8-ounce filet mignon, which, good thing for a steakhouse, did not disappoint. The milk-fed veal porterhouse was also a treat. Normally, I won’t eat veal because I don’t like the taste, but J&G’s rendition of the cut may make me a convert. The first fish entrée was a roasted striped bass encrusted with chilies, herbs and lime.But the true star of our evening at J&G was the sautéed Dover sole grenobloise. Carved tableside, the sole was light and flavorful, and was a wonderful alternative to the meat dishes.

Like many steakhouses, J&G is a la carte, so if you want side dishes you have to order them separately. The sides at J&G are pretty straightforward fare, but they don’t take a backseat to the entrees. Of particular note were the roasted mushrooms with herbs — if you have a large party, make sure to double your order.

construction companies

Construction Companies Can Be Exposed To Lawsuits When Assisting The Government During An Emergency

Imagine that you own a construction company and one of your employees comes in and tells you that the two largest buildings in town have collapsed. You receive a phone call a few days later from a government official who informs you that the police and fire department need your construction company to send heavy equipment and demolition crews to the site of the collapsed buildings to help remove large pieces of debris in order to save people’s lives.

Some large construction companies in New York were faced with that exact situation after the Sept. 11 attacks. The construction companies that helped clean up the World Trade Center disaster site were responsible for removing one-and-a-half-million tons of debris that covered many city blocks. Before long, the workers who were removing the debris started getting sick, as did police officers and firefighters who were stationed at the disaster site. Many of them have filed lawsuits against numerous entities, including the construction companies that were called upon to help with the debris removal effort.

The construction companies failed in a recent attempt to dismiss the lawsuits on grounds that they were immune from liability because they responded to an emergency situation.

Any business that decides to help in an emergency must protect itself, or face the legal consequences of the almost inevitable mistakes and accidents that will happen. With careful planning and prudent oversight, you can protect your business from lawsuits related to its help in an emergency or disaster situation in the state of Arizona.
Arizona’s immunity statute

The statute A.R.S. § 26-314(A) provides immunity for the state of Arizona and its political subdivisions (i.e., counties, cities and other local governments) for the actions or inactions of its “emergency workers.” The statute states that “emergency workers” shall have the same immunities as agents of the state of Arizona and its political subdivisions performing similar work. The term “emergency worker” is defined in part as “any person who is … an officer, agent, or employee of this state or a political subdivision of this state and who is called on to perform or support emergency management activities or perform emergency management functions.” Therefore, the only way to be sure your business is immune from lawsuits related to its assistance to the state or city government in a disaster or emergency situation is to wait until the government “calls on” your business to provide help.

Your business must always operate as an “agent” of the government to be considered an “emergency worker” and maintain its immunity. Your business will be considered an agent of the government if the government has the right to control the conduct of your business as it performs its work. Thus, you should determine who is in charge of the emergency site, and you should offer assistance to that person. You should seek detailed instructions from the person in charge and make sure it is clear that your business is operating under that person’s authority.

Should your business enter into a contract with the government to perform emergency services, then the rules change significantly. The provisions of the statute would still apply; however, a business that enters into a contract with the government would be considered an independent contractor. An independent contractor is an “agent” only if the government instructs the independent contractor on “what to do, not how to do it.” Therefore, when your business enters into a contract to help the government in an emergency situation, you must make sure the contract provides your business with control over the process and/or methods that it uses to do its work.

Of course, the Arizona Legislature can amend the statute to include immunity for any business entity that renders assistance during an emergency. If businesses were provided with clear protection under the statute, there would be no need for them to worry about being an “agent” of the government, and it would persuade more businesses to render assistance to the government in an emergency.

Stimulus Effect

Infrastructure Companies Are Big Winners Under Plan To Jumpstart Economy

Construction companies, big and small, figure to be the primary beneficiaries of some $4.2 billion in federal stimulus money that will flow into Arizona in the months ahead. But economists and industry officials say businesses across the board will share in what could be a spending bonanza.

Clearly not everyone is in construction. Yet, as major projects move from drawing boards to construction sites, laborers and management teams are in a better position to perhaps buy a car or get an old one repaired, purchase a needed washer or dryer, go out to dinner, or shop for clothes for their kids. That’s what many see happening as the money flows downstream.

Industry experts say estimates of the multiplier effect range from 3.5 to 5.5, meaning that for every dollar spent on construction, the impact on the rest of the economy is $3.50 to $5.50. Others say that every $1 billion spent on construction results in 35,000 to 40,000 jobs.

Other businesses in line to benefit include those related to health care, energy efficiency and home improvement. And it will help if a business is savvy about coping with government bureaucracy.

There are debates about whether the Obama administration’s $787 billion stimulus package involves too much government or not enough government, but everyone seems to agree that government has to do something to pull the nation out of the worse economic downfall in decades.

Economics Professor Dennis Hoffman, director of the L. William Seidman Research Institute at Arizona State University’s W. P. Carey School of Business, is among those who expect stimulus money targeted for indigent health care to have a ripple effect, impacting hospitals and health professionals. But, says Hoffman, who has done projects for Del Webb Construction, the Arizona Department of Transportation, the Arizona Department of Environmental Quality and APS, there is more.

“Any private sector business that supports K-12 and to some degree higher education, will benefit,” Hoffman says.

He includes suppliers, and maintenance and construction firms that serve the education field. Above all, construction companies involved in infrastructure and road building will receive what Hoffman calls “a needed shot in the arm.”

“The general contractors have been begging for this,” Hoffman says. “They were absolutely on the front lines working for this injection, because their businesses were dead in the water.”

Of the $4.2 billion in stimulus money, $522 million is allocated for transportation.

David Martin, executive director of the Associated General Contractors, Arizona Chapter, echoes Hoffman’s assessment. “All highway and heavy construction firms will be beneficiaries,” Martin says.

Additionally, contractors who work on education facilities, particularly in lower-income areas, and those that build water-treatment facilities, emergency shelters, and public infrastructure projects, such as streets and sidewalks, should benefit. Martin calls it “neighborhood stabilization.”

David Jones, president and CEO of the Arizona Contractors Association, says companies with experience in public works projects will benefit, especially those that “historically understand red tape and the bureaucratic levels of federal contracting.”

Utility companies should be able to take on energy-related projects, and work should be available for companies that retrofit residential, schools and government buildings to solar energy, Jones says. Women, minority and disadvantaged business enterprises, plus businesses run by war veterans “will have a place at the table,” he adds.

Homebuilders could benefit from projects on military bases, such as single-family units or replacing aging barracks.

Doug Pruitt, president and CEO of Sundt Corp., says contractors such as Sundt are positioned to do well in the stimulus world because of the company’s broad market diversification.

“We do highway work, industrial, water and sewage treatment, university work, K-12 — a whole host of building work,” Pruitt says.

He doesn’t expect much school construction, however, because nationally only 8.3 percent of the $143 billion allocated for construction is set aside for schools. Most of the money will go for highways, bridges and water-related projects, with funds funneled through such federal agencies as the General Services Administration and the Army Corps of Engineers.

Pruitt says Sundt is focusing on its federal divisions and moving personnel from other units that have suffered because of the economy.

At Sunstate Equipment in Phoenix, which rents a full line of hand tools to heavy equipment, CEO Benno Jurgemeyer says it all comes down to “job creation and getting consumers back in a spending mode.” He says his company would benefit directly from highway or vertical construction, and indirectly if the stimulus package keeps office buildings and retail centers rented and full of employees and customers, thus accelerating the development process.

Jeff Whiteman, president and CEO of Empire Southwest, an authorized Caterpillar dealer for heavy equipment including off-highway tractors and trucks, says his firm should see some benefits, but adds: “I think it falls far short of being a true stimulus package and truly creating jobs. What we have is better than nothing. It will help us as construction picks up and hopefully some highways are built.”

Typically, businesses such as Empire Southwest are the first in and the first out of a recession. When housing construction stops, site preparation and development stops, and when housing is ready to resume, site preparation resumes. But in today’s economy, so many improved lots are ready for building that Whiteman says his industry’s recovery will be tied to heavy and highway construction.

Investing man

Changing Investment Management Firms Can Be Costly

Patience, it turns out, can be indeed a virtue — especially for retirement plan sponsors. Sunil Wahal, professor of finance at the W. P. Carey School of Business at Arizona State University, and his co-authors compiled a database of hiring and firing decisions made by more than 3,700 plan sponsors between 1994 and 2003. The reasons plan sponsors change investment management firms vary, but often the sponsors hire firms that have recently earned significant excess returns.

However, Wahal and his team found that those high fliers do not perform as well after they are hired, and the fired firms sometimes go on to turn in impressive numbers. If plan managers had stayed with their original managers, Wahal says, their excess returns would have been larger than those delivered by the newly hired managers.

“When firing decisions are made, one needs to be very careful and cognizant of the costs involved,” Wahal says.

Factor costs into decisions
Wahal’s study of the selection and termination of investment management firms by plan sponsors looked at 9,684 hiring decisions by 3,737 plan sponsors between 1994 and 2003. The plan managers hired by the sponsors were responsible for delegating $737 billion in investments. The study also examined 933 firing decisions by 515 plan sponsors between 1996 and 2003. Nearly $117 billion of investments were impacted by those decisions.

“There is an enormous amount of money that is invested in the market by plan sponsors. These organizations make a lot of decisions about who gets to manage the assets for the beneficiaries,” Wahal observes. “Sometimes the hiring and firing decisions they make work well. Sometimes they don’t. The frictions involved in these decisions are costly to beneficiaries.”

The rationale for a change varies. Plan sponsors usually fire investment management firms for poor performance, but sometimes they act because of an organizational change. For example, the investment management firm may have gone through a merger, or a star stock picker or portfolio manager may have left. The plan sponsor also may decide to change direction with its investments, such as switching from running a large-cap stock portfolio to a bond portfolio.

Factors that point to success
Wahal found that consultants are hired to assist plan sponsors in nearly two-thirds of all hiring decisions. Excess returns from consultant-supported decisions are higher, consistent with the notion that a consultant’s expertise adds value when selecting managers. But there’s a downside to consultants. They often take the blame, in place of the firm’s treasurer, when a company with a defined benefits plan selects a plan manager that performs poorly. Even so, using a consultant led to a 3.7 percent increase in three-year, post-hiring returns.

The researchers also found that returns were higher as the size of the plan increased, presumably because the sponsors of bigger plans have more experience selecting investment managers. In addition, they discovered that plan sponsors like to hire investment management firms within their own states. The study found that those in-state, post-hiring returns were positive.

Despite evidence that a number of factors can predict success, plan sponsors typically selected investment management firms by screening their performance based on excess returns. Firms are usually hired after investment managers have done very well, with an average excess return of 13.8 percent three years before the hiring decision.
Yet, after an investment management firm was hired, the study found the excess returns were close to — or below — zero.

“It’s not that they do poorly,” Wahal explains, “they don’t do as well as they had been doing prior to being hired. In other words, when you chase returns, you chase hot hands. But those hot hands don’t seem to persist.”
Wahal also learned that three years after the firing decisions, excess returns were sometimes up, with performance-based firings resulting in bigger return reversals. In fact, it was discovered that had plan sponsors stayed with the fired investment managers, excess returns would be more than what the newly hired managers delivered at some horizons.

Transition costs can add up
When a plan sponsor decides to fire an investment manager, the sponsor then has to take those funds and provide them to the newly hired investment management firm. This process entails what are commonly referred to as transition costs, that is, the cost of selling the old portfolio and creating a new one. Wahal says that “such costs can frequently be as much as 2 percent, and add to any other losses that the plan sponsor might suffer.” So, the newly hired manager is expected not only to deliver superior returns, but also perhaps to recover the 2 percent transition costs. Wahal argues that “to the extent that we do not live in Lake Wobegon, this is quite a challenge.”

“What’s really important is that the firing and hiring process be set up very well,” he says. “You can’t be too quick to jump the gun on firing and hiring because those costs have to be factored into the decision. Someone’s going to bear that loss and typically it’s the beneficiaries of the plan sponsors.”

Phoenix_skyline_Arizona_USA

A Voyage Of Discovery In Phoenix

Facing a down economy, shrinking budgets and significant pressures to outperform the year’s commitments, how do you find time for sustainability? Let’s face it, if there is no payback within the current year, it’s unlikely you can get capital or modify your operating budget to make any kind of significant difference toward a green program, right? Wrong!

In a recessionary environment there’s more than one way to cut costs and leverage those savings to support other initiatives. In addition to pure cost savings, a little bit of planning and adjustment of current policies can yield results with little or no additional expense.

Our approach at the Greater Phoenix Chapter of IFMA, beginning in August 2008, was to establish a Facility Managers’ Green Peer Group (FMGPG) to foster open information exchange and provide a forum for sharing best practices.

What FMGPG has done is to create the environment for the peer group to be successful. A facilitator who is familiar with the subject matter is the primary pivot point; we manage and develop the agenda, secure the location and communicate through the FMGPG to the group members. The facilitator then leads the meeting and keeps the group focused on the agenda and future goals.

The initial goal of the peer group was to educate the members on the five major categories of LEED (Leadership in Energy and Environmental Design) as they related to the Existing Building Operations and Maintenance structure, or EBOM.

The LEED-EB system focuses on building maintenance and operations. Unlike the other LEED standards, points are awarded for established programs and policies with measured results over time. Metrics are taken during a performance period lasting from three to 12 months.

As with the LEED for new construction products, points are awarded in six categories: sustainable sites, water efficiency, energy and atmosphere, materials and resources, indoor air quality, and innovation in operations

There are 92 available points, with a minimum of 34 required for the lowest level of certification. Most organizations nationwide appear to be striving for Silver or Gold certification based on the initial condition of the building.

We established a yearlong program that was based on the following formula:
General Discussion and Checklist Review + Facility Examples and Benchmarking + Site Visit = A Solid Foundation of Understanding.

So, what’s the bottom line on the benefits of the peer group:

  • Approaching sustainability concepts with minimal or no impact to your FM resources and budget.
  • Marketing your FM organization through sustainability involvement.
  • Taking advantage of LEED benefits without certifying your site.
  • Decoding the myths and fears of LEED.
  • Strengthening your FM position by demonstrating sustainability initiatives.
  • Demonstrating the hidden value of your FM organization by introducing and achieving sustainable initiatives.
  • Educating your staff, customers and stakeholders, as well as yourself, on sustainability and the workplace.
  • One LEED case study, managed by an IFMA CFM (Certified Facility Manager), has shown the following validated results:

    • Effectively reduced electricity use by 35 percent.
    • Effectively reduced natural gas use by 41 percent.
    • Reduced domestic water use by 22 percent.
    • Reduced landscape water use by 76 percent.
    • Diverted up to 85 percent of its solid waste.
    • Reduced total pollution by 26 percent.
    • Reduced CO2 emissions by 17 percent.

    A new study by CoStar Group, the commercial equivalent of MLS, has found that sustainable “green” buildings outperform their peer, non-green assets in key areas such as occupancy, sale price and rental rates, sometimes by wide margins.

    The results indicate a broader demand by property investors and tenants for buildings that have earned either LEED certification or the Energy Star label, and strengthen the “business case” for green buildings, which proponents have increasingly cast as financially sound investments.

    According to the study, LEED buildings command rent premiums of $11.24 per square foot over their non-LEED peers, and have 3.8 percent higher occupancy. Rental rates in Energy Star buildings represent a $2.38 per square foot premium over comparable non-Energy Star buildings, and have 3.6 percent higher occupancy. And, in a trend that could signal greater attention from institutional investors and the C-level, Energy Star buildings are selling for an average of $61 per square foot more than their peers, while LEED buildings command a remarkable $171 more per square foot.

    At the end of the day — even in a down economy — you can make a difference, even with little or no budget.

    Hidden Tax Revealed Chart

    Hidden Health Care Tax Hits Workers

    The Arizona Hospital and Healthcare Association (AzHHA) and the Arizona Chamber Foundation are joining forces to stop what we call a hidden health care tax on businesses and consumers. According to a study released by the Arizona Chamber Foundation, which is associated with the Arizona Chamber of Commerce and Industry, Arizona employers and the state’s 3.5 million privately insured consumers pay 40 percent above cost for hospital services, primarily because the state and federal governments significantly underpay hospitals for those same services.

    “This study shines a light on what Arizona business and health care leaders refer to as the hidden health care tax,” says Suzanne Taylor, executive director of the Arizona Chamber Foundation. “The study demonstrates that when state or federal lawmakers reduce hospital payment levels to below their costs, Arizona businesses and consumers pick up the tab in the form of higher health insurance premiums.”

    The study, An Analysis of Hospital Cost Shift in Arizona, was conducted by the nationally recognized Lewin Group. It found that in 2007, private insurance payments for Arizona hospital services exceeded costs by $1.3 billion in order to offset underpayment from:

    • State government — The Arizona Health Care Cost Containment System (AHCCCS), Arizona’s Medicaid program that paid 79 percent of hospitals’ costs for providing services, underpaid Arizona hospitals by $407 million.
    • Federal government — Medicare, which paid 89 percent of Arizona hospitals’ costs for delivering services, underpaid Arizona hospitals by $481 million.

    Uncompensated care — Arizona’s hospitals absorbed $390 million in 2007 — 4.4 percent of their total costs — for services they delivered, but for which they received no compensation.

    Public insurance programs such as AHCCCS and Medicare are the primary drivers behind the hidden health care tax, paying hospitals below what it costs to treat patients. To cover these costs, hospitals shift the burden to private health insurers by negotiating higher rates to provide coverage.

    “In this downturn, the hidden health care tax is particularly harmful to the economic well-being of our state,” Taylor says. “Employers throughout Arizona are grappling with incredible challenges ranging from declining revenues to shrinking credit. The hidden health care tax is another weight on businesses that want to continue providing employer-based insurance to their employees.”

    Arizona employers and their employees typically share the cost of health insurance coverage, with employers paying an average of 81 percent of a single policy and 75 percent of a family policy for workers enrolled in their respective health plans. According to the study, in 2007 inadequate payment by AHCCCS and Medicare, as well as uncompensated care, increased private health insurance premiums in Arizona by 8.8 percent or $361 for every privately insured person.

    The study revealed that public program underpayment in 2007:

    • Added $1,017 — $324 of which is due to AHCCCS underpayment — to the annual price tag of a typical family health insurance policy, bringing the cost to $11,617.
    • Increased by $396 — $126 of which is due to AHCCCS underpayment — the annual cost of a single health insurance policy, bringing the price tag to $4,519.

    Underpayment by public insurance programs for hospital services exacts a steep price on employers, their workers and private purchasers of health insurance. In 2007, the cost shift due to AHCCCS, Medicare and uncompensated care cost: employers an additional $941.7 million, $301.3 million resulting from AHCCCS underpayment; employees an additional $292.8 million, $93.7 million of it due to AHCCCS underpayment; and private purchasers of health insurance an additional $41.4 million, $13.2 million of it resulting from AHCCCS underpayment
    AHCCCS payment rate freeze.

    • Five percent AHCCCS payment rate reduction.
    • Disproportionate share hospital payments.
    • Graduate medical education.
    • AHCCCS payments to rural hospitals.
    • State savings of  $95 million.
    • Lost federal funds of $250.4 million.

    Total dollar increase in private insurance premiums due to the cost shift of $1.48 billion in 2009 and $1.63 billion in 2010.
    Individual increase in premiums of 19 percent for privately insured Arizonans due to the cost shift.

    Loren Siekman

    Travel Company Sells Self-Guided Cycling And Hiking Tours Throughout Europe

    Loren Siekman
    Discover France Adventures
    Title: Founder and general manager
    Est.: 1994 | www.discoverfrance.com

    If trekking through the countryside of France is your idea of a dream vacation, then Discover France Adventures is your ticket to a satisfying holiday.

    Discover France Adventures, based in Scottsdale, is an adventure travel company that sells self-guided cycling and hiking tours throughout France and Europe. Discover France caters to clients who are seeking a more challenging experience. Not only do self-guided tours allow for more hands-on sightseeing, the price is often half the cost of guided tours.

    The company got its start when founder Loren Siekman moved to Paris. Siekman received his bachelor’s degree in construction management from Arizona State University and worked for four years at an engineering/construction company before quitting and moving to the City of Lights. There he met his future wife, Florence.

    “Bottom line — boy quits job and travels around the world, lands in Paris. Gets a job, works, and meets girl. Boy and girl decide life is better together and move back to the USA and start a business based on mutual interests,” Siekman says.

    The couple purchased a travel agency in Tempe, and in 1994 switched gears to focus only on the adventure travel market. Launching a business in a market that was largely unknown in the United States was a risk, but one that has ultimately paid off for the entrepreneur.

    “I am an adventurer and traveler, as well as a competitive cyclist, so my business is all about my passions,” Siekman says.

    The company has six employees and two offices in the U.S. and France. Surviving tough times despite factors that are out of his control (terrorism, airline failures, economic downturn, etc.) has strengthened the company.

    “After 15 years, we have seen so many businesses in the travel industry come and go … our longevity is starting to speak much louder about our operation,” Siekman says.

    Wise business decisions and smart planning have also kept them ahead. The Siekmans sought the help of a family member to co-sign on a Small Business Administration loan to get the business started, but paid the loan off as soon as they could. They then began reinvesting in the company to avoid borrowing more in the future.

    “We’ve always tried to have a diversified market base, so we have clients from different regions, different countries and different demographics. We also save our nickels and so far, have been able to draw cash in slow times,” Siekman says.

    When asked about the future of Discover France Adventures, Siekman has one word: “grow.” His plans include creating a multilingual Web site that will better reach the European market, expand business in the thriving Australia and New Zealand markets and target the “baby boom demographic with more challenging trips, more multisport trips, and more adventures that are unique experiences,” Siekman says. “There is a great future for active and adventure travel. They want to feel a part of wherever they’re going instead of just passing by.”

    Nursing Shortage Still Plagues Arizona’s Health Care Industry

    Nursing Shortage Still Plagues Arizona’s Health Care Industry

    Arizona’s nursing shortage is a very serious problem and it is not going away any time soon. The state is going to need approximately 49,000 new registered nurses by 2017 to keep pace with population growth, RNs retiring and nurses lost to attrition, according to the Arizona RN Shortage: 2007 Results, a report published by the Arizona Healthcare Data Center. The data center was started by the Arizona Hospital and Healthcare Association (AzHHA) in 2007 to study health professions in Arizona.

    “I think people are tired of hearing about the nursing shortage,” says Bernadette Melnyk, dean of ASU College of Nursing and Healthcare Innovation. “They don’t understand the adverse effects until they or a family member is hospitalized and they see for themselves the effect it has on the health and safety of people they love.”

    Of the approximately 49,000 RNs that will be needed by 2017:

  • 20,000 will be needed to keep pace with the state’s growing population, as well as to close the gap between Arizona’s current average of 681 RNs per 100,000 residents and the U.S. average of 825 RNs per 100,000 residents.
  • 10,000 nurses will be required to replace retiring RNs. More than one-third of Arizona’s current RNs are older than 55 and will retire over the next five to 10 years.
  • 19,000 RNs, or 3.5 percent annually, will be needed to account for the profession’s attrition rate.
  • Twelve of Arizona’s 15 counties also fall below the national average of RNs per 100,000 people, according to the Health Resources and Services Administration (HRSA). The national average is 3.3 RNs per 100,000 people, and Arizona has 1.9 RNs per 100,000 people. The three counties that exceed the national average — Coconino, Pima and Yavapai — still face shortages of RNs.

    Adda Alexander, RN, MBA, former executive vice president of AzHHA, says Arizona colleges have increased their capacity and are graduating more nurses, but it is not enough. Arizona’s nursing programs need to graduate an additional 2,235 students per year just to keep pace with the state’s population growth.

    To help address the nursing shortage, Arizona hospitals contributed $57 million between 2006 and 2007 to the state’s education programs in the form of tuition reimbursements, loan forgiveness programs and in-kind giving (providing space for nursing education programs, sponsoring faculty salaries and tuition reimbursement). In 2005, the Arizona Legislature passed the Arizona Partnership for Nursing Education (APNE) bill, which provided $20 million over five years to double the capacity of Arizona’s college and university nursing education programs by increasing the number of nurse education faculty. As a result of the APNE funding, the estimated number of additional nursing graduates in 2010 will be 1,242. Alexander said APNE was a crucial step in helping the nursing shortage, but it sunsets in 2010 and the funding stops.

    According to Annual Reports from Nursing Education Programs, 2007, Arizona Board of Nursing, there were 41 vacancies for full-time Arizona nursing faculty in 2006, which was a 13 percent increase from the previous year. In addition, there were 38 vacancies for part-time nursing faculty in 2006, which represented a 600 percent increase in vacancies from 2005.

    The report also indicated that due to the lack of capacity, more than one-third of nursing students are wait-listed each year by Arizona nursing programs even though they have met all course prerequisites.

    Joey Ridnour, executive director of the Arizona State Board of Nursing, contends that the lack of clinical space also contributes heavily to the nursing shortage. Thus, many states are looking at using simulations in combination with clinical experience to teach students.

    “This may be a good combination to consider in the future, but faculty needs to figure out how to maximize it so students get a good education,” Ridnour says. “When I was a student, I would have valued doing some of the procedures through simulation rather than on live patients. It would have given me a better understanding and more confidence.”

    Melnyk believes the state has to hit the nursing shortage from two angles: (1) produce more nurses and (2) help them feel satisfied and empowered in their role. She says between 35 and 60 percent of new graduates leave their positions in the first year due to stress from staffing shortages and patient acuity levels.

    “I think nurses get out in the real world and don’t expect their jobs to be so stressful,” she says. “People in hospitals are very sick and oftentimes what the nurses are expected to juggle is too much for them to handle.”

    Melnyk also thinks nurses and other health care providers should be educated in evidence-based practice (EBP), a problem-solving approach that integrates the best evidence from research studies and combines it with patient preferences and the clinician’s expertise.A number of medical studies show that when nurses, physicians and other health care providers deliver care in an evidence-based manner, the quality of care is substantially better and patient outcomes improved.

    “Studies also show that nurses practicing EBP are more satisfied with their role, feel more empowered and make less medical errors,” Melnyk says. “A lot of people don’t realize that 99,000 patients die annually in the U.S. due to medical errors. That’s a staggering number of patients.”

    pill to swallow

    Arizona’s Health Care Industry Must Adapt To New Compliance Procedures In 2009

    The current economic downturn and the prospect of dramatic changes to the nation’s health care system under a new administration are making 2009 one of the most challenging years ever for Arizona’s medical industry.

    If that weren’t enough, however, our state’s hospitals, clinics, and diagnostic and out-patient centers — and the physicians who serve them — are getting a crash course on how to administer sweeping new compliance procedures and regulations recently issued by the Centers for Medicare and Medicaid Services (CMS).

    Last year, CMS posted the 2009 Final Hospital Inpatient Prospective Payment System (IPPS) rule, which is having an impact on hospital operations and policies, as well as physician arrangements. Included were several changes to the so-called Stark Law (named for U.S. Rep. Pete Stark, D-Calif.) covering Medicare and Medicaid.

    The impetus for the new provisions was a worthy one — curbing physician self-referrals and stopping kickbacks. Nevertheless, Arizona doctors and health care entities are scrambling to alter their ways of doing business. The downside for not doing so: denied payments, or penalties, from Medicare and/or Medicaid.

    Some of the provisions went into effect last October and others begin this October. They will result in the significant restructuring of many physician arrangements, particularly joint ventures between doctors and facilities. Some of the rules are providing more flexibility in these arrangements, while others have become more restrictive.

    Stand in its Shoes
    One area of flexibility is CMS’ decision, effective last October, to decline adopting tougher “stand-in-your-shoes” procedures. This would have mandated that when physicians’ organizations contracted with an entity such as a hospital, each physician in those groups would have been deemed to be part of that contract as well.

    Under the finalized rules, only physicians who have an “ownership or investment interest” in such an organization will be considered to “stand in its shoes” for purposes of compliance with the Stark regulations.

    Percentage-Based Compensation
    Soon to be a thing of the past is percentage-based compensation arrangements for space and equipment rental lease arrangements. CMS initially proposed a broad prohibition for using percentage-based compensation formulas to calculate revenue from services performed or business generated in leased office space or from leased equipment.

    This October, the final rules will take a more targeted approach, specifically addressing CMS’ concerns with percentage-based compensation regarding lease arrangements.

    Per Click: Lease Arrangement Payments
    Also this October, the new procedures will significantly limit the use of unit-of-service, or “per-click,” payments in the context of physicians’ space and equipment lease arrangements. This pertains to physicians leasing time on diagnostic equipment to perform tests on Medicare and Medicaid patients.

    Specifically, CMS revised exceptions for such leases, determining fair market value, and for indirect compensation arrangements to prohibit “per-click” payments to a physician lessor where the payments reflect services on patients who had been referred to the lessee by the physician.

    Furthermore, the prohibition applies regardless of whether the physician is the lessor or whether the lessor is an entity in which the referring physician has an ownership or investment interest.

    CMS states that the new rule does not prohibit physicians from leasing equipment or space to entities on a per-use basis for services rendered to patients who were referred from others. In most cases, CMS will not prohibit time-based deals in which a physician rents time on a CT or MRI scanner.

    Services Provided Under Arrangements
    Entities, including physicians, that provide services to hospitals “under arrangements” (for example, when a hospital bills for services but arranges for another entity to provide the services), will now be considered DHS (designated health services) entities themselves for Stark Law purposes.

    Previously, only the person or entity that billed for DHS was deemed to be “furnishing” the DHS. CMS’ new definition of entity, effective in October, is that a person or entity is considered to be “furnishing” DHS if it has (1) performed the DHS even if another entity bills for the services; or (2) presented a claim for Medicare benefits of the DHS.

    As a result, physicians will be limited in their ability to refer patients to “under arrangement” service providers in which they have an ownership or investment interest. Restructuring of existing joint ventures between physicians and hospitals will be needed.

    This is only the start. There are several other provisions — including malpractice insurance, physician retirement plans, disallowed referrals, compliance requirements and other hospital-physician agreements. Hopefully, this gives you an idea of the issues and challenges facing Arizona’s health care industry during the rest of 2009.