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August 2015

Airports matter

- Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor

Last year, I traveled to the Raleigh-Durham region on business; the place is a hotbed for biotechnology economic development and I was in town to learn about the region’s approach and to visit with a handful of companies. 

At the heart of the North Carolina Research Triangle, which is perhaps the world’s most successful example of regional, cluster-based economic development, Raleigh-Durham and the surrounding area has for decades come to define success for how regional economies can leverage the public, private and academic sectors to produce globally-competitive economic ecosystems in places where before, little in the way of innovation existed. 

The story of the Triangle, to completely generalize a 50-year transformation of an economy for brevity’s sake, goes something like this: throughout the 1950s, 60s and 70s the furniture and textile industries which had dominated the Carolinas' economy for a century experienced marked decline.  In response, public and private sector leaders worked with the North Carolina Legislature to craft and fund new tools and institutions to enable the region and state to pivot from furniture and textiles to the development of a high-value bioeconomy. It’s been a fantastic success.

The Triangle has found success not only in producing an environment that supports innovation at a scale few regions in the world can compete with, but in managing its reputation as a global economic powerhouse with a level of precision and sophistication seen few other places.

This point was driven home to me the moment I stepped off the jet bridge at Raleigh-Durham International Airport [RDU].  “Welcome to the Research Triangle” read a massive glass and steel sign adorning a highly modern terminal.

Research Triangle branding was present throughout the airport [and, indeed, the region], which was nice, but that’s not necessarily my point. RDU’s design and technology modernity -- its Terminal 1 was updated in 2012, and Terminal 2 is slated for upgrades -- joined with the ubiquity of Research Triangle regional messaging (those signs don’t say ‘Welcome to Raleigh-Durham’, remember). Together, they send a loud and clear message to passengers- particularly business passengers who comprise upwards of 45% of domestic air travelers: you’ve entered a place of global business. From the moment I entered RDU to the moment I jumped in a cab, the message was clear. A heck of a way to start a trip if I’m a business person considering this region for investment, I thought.

Airports, by their very nature, play an outsized role in shaping outside public opinion about a region and a state.  Airport users are captive; if you are flying commercially into a community, you’ve got [with few exceptions] one place to enter and exit: that region’s airport. This means airports, fundamentally, offer an opportunity to contribute mightily to the writing of the critical first chapter and last chapter of a book of impressions for visiting decision-makers. There is a reason that cash-strapped airport authorities like those in Atlanta ($6 billion upgrade project), Las Vegas ($2.4 billion), Philadelphia ($5 billion), New York ($7.5 billion), Dallas ($2 billion) and Los Angeles ($4.1 billion) are nevertheless finding ways to add runways, renovate terminals and upgrade amenities in a modern-day transportation infrastructure boom. 

Airports matter, and leaders on both the north and south anchors of Iowa's Cultivation Corridor understand that. In Ames, the city has approved a plan to build a new terminal at Ames Municipal Airport, which may be the only airport in the country that abuts a major university research park- a major competitive advantage for the entire region. The Ames Economic Development Commission is at work raising funds to add a new storage hanger to the airfield as another component of the major Ames Municipal overhaul. 

And the proposed new terminal at Des Moines International- slated, funding-dependent, for a 2024 opening- offers the Central Iowa region another generational opportunity to redefine its front door to the global community. The $400 million project would be one of the largest in the state’s history -- a price tag befitting the opportunity it represents. 

As thousands of Central Iowans continue their work to grow and recast our region as a truly global one, the attention many are paying to the way in which our global customers and colleagues enter our region and experience its first and last impressions, is apt.

Who should own the bricks?

IMG_1218-Joe Kristan is a founding member of Roth & Company P.C.

So the business is up and running, and you've decided you want to move into permanent space. After careful thought (considering the points discussed here), you've decided to buy the building that houses your business.

Who should own it?

The right answer needs to consider your tax structure and your estate and family planning.

Many older businesses are set up with the business owner having personal title to the real estate and renting it to the business. This remains a useful tactic:

- It gives C corporation owners a way to get cash out of their businesses without incurring taxable dividends. C corporation earnings are normally taxed twice - once on the corporate tax return as it is earned, and again as dividends when distributed.

- A variation of this can help with estate planning. The building is purchased by the next generation on a mortgage and leased to the business. The lease funds the debt service, and the equity buildup goes to the next generation. This can be an efficient estate planning tool.

- It can make it easier to sell your business. A buyer may not want the real estate, for any number of reasons. Getting appreciated real estate out of a business can be a tax nightmare. Closing a business sale is hard enough without complicating it with unwanted assets.

- Iowa's tax rules enable a tax-free sale of business real estate if it has been used in a business in which the taxpayer has "materially participated" for ten years -- if the land has also been held for ten years. A similar exclusion is also available if all of the assets of a business are sold, but that break doesn't apply to sales of part of a business, or to sales of corporate stock or partnership interests. Where the business sale has to be a stock deal, owning the real estate separately can allow at least part of the deal to avoid Iowa tax.

Reading between the lines, you may have deduced that owning real estate in a corporation can be awkward. If you already own real estate inside a corporation, it is probably best to leave it there. If you are acquiring new real estate, though, it is usually best to own it individually or in a partnership (including LLCs).

If your business itself is in a partnership format, including an LLC, it matters less who owns the real estate. It is much easier to shuffle assets into and out of a partnership without incurring tax than it is with a corporation (but not so easy that you should try it without tax advice).

Of course every situation is different. If you have co-owners of your business, ownership of real estate can become a sore point. You have to set a fair rent to keep co-owners and the IRS happy. Your lenders may have something to say about your decision. And you can't let the tax tail wag the business dog. Be sure to work closely with your tax and legal advisers before you commit to anything.

A referral program for electric cars

- Carl Maerz is a co-founder of Rocket Referrals.

I came across an article outlining a new referral strategy Tesla Motors is implementing for their Model S sedan. As might be expected at Rocket Referrals I try to stay atop developing trends in referral marketing. So staying “up to speed” with what Elon Musk is cooking up here only made sense.

This program appears to be consistent with other retail-oriented referral strategies we have seen in the past. It operates on the tell-a-friend-and-you-both-get-something credo.

Tesla_Broadcast_Tower_1904Current Model S owners share a referral link with their friends and, if they buy, both are rewarded with a thousand bucks in Tesla credit. There are other rewards for referring 5 or ten friends, such as an invitation to an premier party and the exclusive right to purchase a souped-up version of their Model X (their SUV variant).

When asked the reasoning behind this referral program, Elon Musk indicated that Tesla is exploring ways to lower its cost of client acquisition. More specifically, ways in which the company can cut down on marketing costs by driving prospects directly to its website to order their vehicle. He indicated that the company could save $2,000 for every prospect who skipped visiting Tesla's physical stores and instead just took their friend’s word for it.

The thing is, Tesla’s marketing budget is already next to nothing. They do none of the traditional advertising that the big car manufacturers do.

OK, so no Super Bowl commercials, but you have almost certainly heard of them. This is due to 1) word-of-mouth 2) leveraging the press 3) no-pressure show rooms

Tesla has been very successful at creating a buzz around its product. They are new. They are exciting. And they are green. I mean, since when have we had fast and attractive looking electric cars? Since 2008 to be exact, when Tesla released its first model, the Roadster. Even the name sounds crisp. They have developed a product known for breaking the mold and innovating on green energy. People talk about this kind of thing. And when they do, those with money consider taking out their pocketbook and placing an order. According to Tesla, this referral program is an effort at incentivizing existing clients to tell their friends, and to reward those who already do. The result would be a lower cost of acquisition.

That’s fine, but I think there is a much larger objective behind this referral program: to further the exclusivity of owning a Tesla.

Let’s be honest, $1,000 seems like little more than a pat on the back when compared to a price tag upwards of six digits. Let’s just say that the demographic that purchases a Model S sedan is probably not jumping through hoops to get a relatively small kickback. And thus is the real genius behind the referral program.

A small incentive is Elon Musk’s way of showing his appreciation to his customers who are actively referring their friends, while also promoting the establishment of an exclusive group of Tesla owners.

Exclusivity is felt throughout the Tesla brand. There’s no negotiating on price. There’s no network of franchised dealers. There’s a backlog of car orders lasting for months, or even years. Those who refer many friends get an invitation to an exclusive party, or the right to purchase an exclusive Tesla model.

This referral program is just another way that Tesla is creating a network of owners from a chosen demographic.

Why delegating authority increases your company’s value

- John Mickelson, Managing Partner Midwest Growth Partners, is IowaBiz's blogger on succession planning. Read more about him here. 

Many business owners have a difficult time delegating authority.  Fear of losing control, believing that they are best for the task, and a lack of time to adequately explain what needs to be done are all reasons not to delegate. In a perverse sense, many of these traits are what made them successful in the first place. 

However, all business owners will hit a point that in order to grow or transition ownership to the next generation, they need help. Finding and trusting employees who can carry out critical functions will allow for that growth. 

As a potential business buyer, Midwest Growth Partners likes to ask if business owners are able to leave their business for two weeks and not be needed. If the answer is yes, this shows the business is not built on one person. We find tremendous value in that and in turn businesses receive better valuations because less risk is associated with the business. 

We have seen several trends for business owners who delegate successfully including setting clear expectations for employees, letting employees know how they will be evaluated, that it is OK to make occasional mistakes, and then properly rewarding employees for outstanding performance.  

The most important thing though is giving your employees the authority required to do the job. Delegation is not really occurring if the employee has to check in with the business owner before they make a decision. 

Delegating authority can have a great impact on a business. It can also make the life of a business owner less stressful. Although it can be hard to give up some control of the business that you started, the potential rewards are worth it. 

Customer service chat done right

 chat icon

- Tom Vander Well, executive vice president of c wenger group, is a recognized customer service authority in the contact center industry.

I've been blogging for almost a decade both personally and professionally, and have published on at least three different blog platforms over the past 10 years. I'm savvy enough to be dangerous and can troubleshoot most basic problems, but there are times when I simply don't have the expertise to figure things out.

I've recently been doing some major rework to my personal blog which is on Wordpress. They utilize a chat service for premium users and over the past couple of months I have utilized chat to get pesky problems remedied and some sage advice on things I was trying to do.

Chat as a customer service tool has been around a long time, but the use of chat compared to voice and e-mail has been relatively small. That seems to be changing with the times as more and more users get used to it. My personal take is that chat customer service has become increasingly popular as mobile texting has grown to become the communication medium of choice for the coming generations.

I realized last week that I was extremely satisfied with the customer service chats I've had with Wordpress, and am increasingly willing to use the service for the most basic of questions that might strike me as I'm blogging.

Here are a couple of things they do well:

  • Real conversation. Many of the chats I've had with businesses in the past seem to be with agents for whom English is a second language as they clumsily switch between cut and paste answers and poor communication that are rife with spelling and grammatical errors. My experience with Wordpress has been that I've had actual, articulate, interpersonal chat conversations with knowledgable agents who express themselves clearly and well.
  • Focused Attention. Another age-old frustration with chat is that agents are sometimes carrying on multiple chats at the same time, so there's this lag time between responses in which you wonder if they've abandoned you. I always get the sense with Wordpress chat agents that they are totally focused on helping me. If they are going to take a few minutes to investigate and respond, they generally tell me ahead of time so that I'm prepared for the delay.
  • Expedience. The agents at Wordpress always have quick access to my site, can see what I'm doing or trying to do, and I never have to waste a lot of time providing them with account, site, or profile information before we get to the actual issue at hand.
  • Positive Attitude. One of the difficult things to do in chat is to convey a sense of courtesy and positive attitude. Voice allows for intonation and inflection, but text is a more difficult medium to quickly establish a feeling of rapport. Wordpress chat agents always greet me personally, phrase themselves courteously, and convey a willingness to serve in the way they welcome me to come back to them with any other questions or needs I might have. On occasion the agents have complimented my blog or acknowledged my years of regular posting, which they didn't have to do.

Many companies have tried and have given up on chat as a medium of Customer Service communication, and my previous experiences have led me to be thankful that companies have done so. Wordpress has changed my attitude. If more companies can do customer service chat with that level of quality and professionalism, then I believe that we will see some companies using chat as a key differentiator and a contributor to customer satisfaction and loyalty. 

Let there be (natural) light!

I’ll be the first to admit it – I’m a sucker for movies with Tom Hanks and Meg Ryan.  No, I’m not talking about “You’ve Got Mail” or “Sleepless in Seattle”…I’m going waaaay back to the 1990 cult classic “Joe Versus the Volcano”. 

Poor Joe Banks, played by Tom, develops a terminal “brain cloud” from years of slaving away in a windowless workplace - the flickering fluorescent lights casting a sickly blue-green hue as the electric ballasts hum and buzz.

Well, hopefully we don’t have those kinds of environments anymore. Large buildings are typically designed with broad spans of exterior windows, high ceilings and open workspaces -- and that’s great! We’ve all heard about the benefits of natural light by now; increased employee productivity, shortened patient recovery times, boosts in retail sales and decreased rate of absenteeism.

Just a few problems here. Natural light also brings with it intense heat and blinding glare, often resulting in blinds being drawn by those near the window, robbing all other occupants of the light’s benefits. Last year 3M introduced a product to solve the dilemma; a light redirecting film that is placed in the upper portion of exterior windows. 

To most it looks like little more than frosted glass. Instead the film has a series of micro-prisms that optically diffuse and redirect 80 percent of the daylight upward, washing across the ceiling and throwing natural light deep into the building for the benefit of all.

Maybe…just maybe…if Joe had worked here, he wouldn’t have jumped into that volcano!

Phishing can cost you hundreds of thousands of dollars

Dave Nelson, CISSP is president and CEO of Integrity

Here’s a scenario for you to consider. An accounting team member receives an email that appears to be from your CEO, and the email reads something like this:


Spear-phishing“Good Morning Mike, You may or may not know, but Mary (CFO) and I are in Atlanta working to close a deal with our partners XYZ Company and ABC Limited on a $70 million dollar contract with Our Big Payday, Inc. In order to get the contracts signed, I need for you to wire $85,620 to XYZ Company and $67,980 to ABC Limited. Mary says this should come from our Bank Name Here account number 123456789. The routing and account number for XYZ is 12345678 – 7788994455 and for ABC is 98765432 - 336699774411”

“Because Our Big Payday, Inc. is a publicly traded company, the terms of this agreement cannot be disclosed until they file their SEC reports for the quarter, so your absolute discretion is expected. Under no circumstances are you to discuss this transaction with anyone in the department. A leak could result in SEC fines or imprisonment for both of us for insider trading. If you have any questions about this, please respond to this email with your direct line and I’ll call you when I’m out of the negotiation meetings. I appreciate all you do for us, which is why I’m trusting you with this key project. Keep up the good work. Sandy (CEO)”

This is what we call a spear phishing email, an email sent to a selected individual in an organization. Information about the employee, the company, its executives, potential deals or partners they are working with and other timely, accurate information is included in the email, which lends to its apparent authenticity. The sent from address, reply to address and other properties such as logos and signatures may also appear to be authentic.

What’s an employee to do? The CEO and CFO specifically requested this transfer of funds and obviously know our bank account information. Nobody else would know that information, right? Wrong. Everything in this email could be public record or obtained from other legitimate or fraudulent practices. And the routing and account numbers are on the bottom of every check you send out.

If your employees are not trained to handle suspicious emails, they have been setup to fail, and an information security breach is much more likely to occur. Hackers using our humanity against us is called social engineering. We train employees to follow instructions and act in certain ways. Hackers know this and try to put employees in situations where they can predict the outcome. Social engineering attacks, including phishing, are on the rise. According the recent reports as much as 30 percent of all breaches have a social engineering component. We have to invest in employee education and awareness if we stand any chance of fending off information security breaches.

Oh, and if you are wondering, yes this is a real example, that worked.

 

Dave-Nelson-2015-biz-blogDave Nelson is president and CEO of Integrity. 

Email: dave.nelson@integritysrc.com

Twitter: @integritySRC | @integrityCEO

Website: integritysrc.com

Five minutes of absolute terror

TerrorImage

Dr. Anthony Paustian is the provost for Des Moines Area Community College in West Des Moines and the author of "Imagine" and "Beware the Purple People Eaters."

As someone with an intense fear of open-air heights, I’m not exactly sure how I rationalized standing, tethered to a “pilot,” in front of the open door of an aircraft 2 and 3/4 miles off the ground.  Although I took slight comfort knowing the pilot was one of the best in the world––a U.S. Golden Knight with over 9,000 jumps––I seriously questioned my decision in that moment. 

Perhaps I wanted to prove to myself I could let go of my fear.  Or, maybe, I felt baited into it by my Army friends who kept calling me a wimp, among other things. Whatever the reason, there I stood, terrified and mentally frozen, with my heart pumping like it would explode in my chest.

I had no choice but to trust my pilot, a man half my size. As I hung out the door while he held on to make final preparations, I resisted looking down for these few seconds as I had absolutely no control. I tried to ignore the sudden urge to clutch something––anything––to save my life; especially since grabbing something at this point could cause serious injury.

The pilot tapped my shoulder indicating we were about to jump.  After three forward lunges, we began our free-fall descent of 9,500 feet at about 120 miles per hour.  Breathing was difficult, and my cheeks flapped from the massive intake of air.  Because I was traveling so fast at such heights, I didn’t realize I had allowed myself to flap my arms like a large, prehistoric bird. Perhaps it was the lack of context. When I saw the curvature of the earth, the ground looked like a blurred mass of color and undefined features. At 5,000 feet, the pilot deployed the main chute. Our speed and descent slowed, which allowed us the freedom to circle, twist, and glide as the pilot wished.

Then came the most terrifying question I’d ever heard: “Would you like to take the controls and fly the chute?” 

When the main chute deployed, I had clenched my straps for dear life; the decreased speed and increased clarity of detail on the ground below reminded me of my fear of open-air heights.  No way was I going to let go and grab the steering controls.  Letting go of the straps would have meant abandoning my false feeling of security. I was convinced if I let go, I would certainly fall to my death.

Of course, that thought was ludicrous; I was skydiving with an expert. Yet we all struggle with “letting go” of what feels safe at times, whether we’re clinging to unnecessary fears, flawed thinking, insecurities, bad habits, or something as simple as a parachute harness. 

Creativity is about making connections––sticking things together in new ways that frequently deviate from the norm. At its very essence, creativity is typically at the center of change, which often brings about a variety of emotions in people, not the least of which is fear and all of the “what if?” scenarios that come with it. Fear is typically a function of the unknown, and our inability to let go of it keeps us from experiencing new things or taking advantage of positive opportunities––in this case the opportunity to control the chute and the direction we were taking. Once we are able to take a first step forward, however small, the unknown becomes a little less so, and each step thereafter builds confidence to take the next.

While the skydiving experience didn’t cure my fear of open-air heights, I did grow as a result. If nothing else, I took another step (albeit a 2 and 3/4-mile one) toward facing—and letting go of—my fears, one of many steps to come.

STAY TUNED! Over the next few blogs, I will be addressing the various aspects of change and its relationship to creative thinking.

Practice Challenge:  What do you fear? What keeps you up at night? The next time you find yourself up against it, take a baby step. Challenge your fears one at a time by continuously reducing the unknown surrounding it. The more you know and the more experience you have with it, the less you will fear it.

©2015  Anthony D. Paustian

PaustianLargeHeadFor more information about Dr. Anthony Paustian, provost for Des Moines Area Community College in West Des Moines, please visit his website at www.adpaustian.com

The value in values

Joe Benesh is a senior architect with Shive-Hattery and President + CEO of the Ingenuity Company, a strategic planning, diagramming, framework development, and design thinking consulting firm.

In business school, we learn a lot about creating value for customers. You would think that would be enough – create a killer product and customers will come. If that is so -- and so many of us work so hard to create great and innovative products -- why do more than 50 percent of businesses fail in a year or less? Are those business owners misguided about their own product? Do they not understand their customer base or market segment?

My theory is that those questions are not at the root of the problem. They may be symptoms and in some cases cause the failure of the enterprise, but I think it’s something more intrinsic to the foundation of what makes a company successful.

When I talk about values, I think about the values of the companies I work for and how important those are to me. I think about the ways they are perceived outside of the company. I think about how employees, reports, and colleagues engage with those values.

When we started the Ingenuity Company, my partner and I spent (and still spend) a lot of time talking about the type of company we want to be. We discuss things that have happened to us, both positive and negative, and how we wish to replicate or avoid those practices as our company grows. We feel that this time is important; it allows us to think about the sustainability of our company in the long term, which is rooted in the value system we use to collaborate with new and existing clients.

For example, when we talk about offering services that are meant as transformational, we look inward first. What can we offer our clients that are built on our skills, knowledge, and abilities? Why would they want to work with us? How do we self-actualize in a way that allows us to adapt, be flexible, and provide the best possible service? Since our company is built on these types of values, we feel we are able to add value and build lasting and productive working relationships with our clients.

More broadly, I feel that any company that wishes to succeed can do so more fully by defining its own distinct set of values. I have worked with organizations that do not spend time developing their values structure, or feel that this type of exercise is not a worthwhile effort. These organizations tend to lose their way when adversity strikes, as they do not have those core principals to support them. This may seem daunting, but I think some simple questions can start this conversation and grow from there:

        What do we stand for as a company?

        What is something we will never do as a company?

        What is success defined as?

        What are we really good at?

        What makes us better than our competition?

        Who can we collaborate with - that will make both of our organizations better?

Knowing who you are as an organization and what things are at your unshakable core creates a business ecosystem that allows there to be belief as well as profitability. This belief, by you in what you stand for, and by your clients in their trust in you, will make your company what it is. This trust is the foundation for innovating in more robust and purposeful ways.

When I think about those 50 percent of businesses that fail, I always wonder if they took the time to ask themselves questions about who they were or how they were going to stay where they were once they got there. It’s easy to lose your way when you don’t take time to fully understand where you are going or why.

 For more information:Joe _Benesh_2011

 Contact : joe@ingenuitycompany.com

 Please follow : @ingenuitycmpny

 

Iowa State Fair knows value of strong brand, unique experience

- Kelly Sharp is owner at Heart of Iowa Market Place

It’s that time of year again. Where tens of thousands of people gather each day to celebrate the great state in which we live -- and there's not a corn dog, pork chop or any other food on a stick that's safe from the happy horde that descends on the Iowa State Fairgrounds.

What's not to love about the Iowa State Fair? There are rides, games, concerts, a cow sculpted out of butter and all the aforementioned, oddly satisfying foods on a stick. But the main reason I love going to the fair, is to because of what it represents about the value of community.

Growing up in Des Moines, I always made it to the State Fair. I still do. As an eastsider, I have a special love for the fair, and worked there in my teen years.

I can always get inspired by the energy, familiar and new sights and sounds of the fair and feel good about supporting my community and state. Niche businesses can benefit, too, from taking time to see how a niche venture like the Iowa State Fair also survives and thrives.

The State Fair is Iowa. It's rural and urban, business and fun, substance and style. The State Fair benefits from the strong brand it has created and its close bond with its target audience.

People who go to the fair do so year in and year out for a unique experience. Its staff knows what the fair is and what it means to Iowans. They know how to create excitement. They know the importance on consistent messaging. They know how to effectively market their product. And, they have a lot of fun while they do it.

In order to stand out from chain stores and other big retailers, it's more necessary than ever for specialty retailers to create strong brands for themselves and deliver extraordinary service and unique shopping experiences so that their bond with customers is unbreakable.

See you at the fair!

Slow down and stretch

- Bill Leaver, CEO, UnityPoint Health

Summer is typically a time when the office slows down a bit, and it’s a great opportunity to take stock of projects, goals and efforts. With increasing responsibilities and the need to “do more with less,” business leaders are finding ways to streamline their health and fitness activities and focus on the next project, deadline or crisis of the day.

When it comes to prioritizing, it’s easy to select the exercise options that yield noticeable results instead of stretching. However, stretching at least 20 to 30 minutes a week can provide lasting benefits, especially as you get older. According to the American College of Sports Medicine, we should stretch at least two days per week.

Stretching offers many perks, including improved flexibility, circulation, balance and coordination. If you need structure and encouragement, participating in a class is an excellent way to get started. Our own City of Des Moines can help with its free “Yoga in the Park” Saturday morning sessions at Gray’s Lake this summer.

Stretching also holds importance in today’s business world, and I think it’s time to revisit the “stretch goals” philosophy of Jack Welch, former CEO of General Electric. Stretch goals, by definition, seem beyond reach at the present time, and can be used to inspire employees and encourage innovative ideas.

Using Welch’s goal-setting theory, consider these questions when evaluating professional stretching:

1. How has the stretch goal helped improve performance relative to past performance?

2. What impact has the stretch goal had on your level of performance in comparison to your competitors’ performance?

3. If not yet achieved, how close have you come to the stretch goal? Was the progress meaningful?

Make time to stretch. As in exercise routines, striving for stretch goals may not be an immediate priority, but working toward them can have a tremendous positive benefit on your future.

Trump's breaking all the "PR rules" on his way to nomination

Claire Celsi is a communications consultant in West Des Moines, Iowa.

I've conducted media training sessions for clients for years. From nonprofits, to educational institutions to businesses, there are some PR constants that remain fixed no matter what. Tell the truth, be prepared, never insult people. Trump has destroyed these rules in his gold-plated shredder and adopted his own personal style in this campaign. There are several well-known PR platitudes that people spout when referring to publicity. PR Rules

I've seen Trump turn this conventional wisdom on its head. Perhaps you've heard of some of these rules.

  1. "There's no such thing as bad PR": This commonly-used platitude is actually quite false on its own, but Trump has taken it to a new level. His bombast on subjects like immigration have shined a bright light on his bigotry. Since his outrageous comments were recorded for posterity, chances are his views will bite him in the culata during the primaries.
  2. "Tell the truth": Surveys have indicated that people like Trump because he "tells the truth" about things that the other candidates are afraid to vocalize. This would probably be refreshing, but he also says things that are flatly false on a regular basis. If people like him for being bold - that is awesome. But liking him for making up stuff is a completely different story. I ran across this quote recently and it's my new mantra for this campaign. "You are entitled to your own opinion, but not your own facts."
  3. "Rise above the fray": Trump is the head of a large organization, and didn't get there by poking people in the eye. Since announcing his candidacy, he's much more interested in retaliation against those who criticize him than he should be. He's just calling attention to some of his most vile behavior, like name-calling.
  4. "Don't take the bait:" Until Trump's entry in the race, the only candidate who showed this flaw was Chris Christy, who can't resist telling hecklers to sit down and shut up. Much to Christy's relief, Trump has taken over in this area. He never misses an opportunity to insult, belittle or embarrass a rival - or even a complete stranger. My dad would diagnose this phenomena as "diarrhea of the mouth."
  5. "Credibility is key": Trump's credentials as a "business leader" seem to unduly impress a lot of people. Nevermind that he was born with a silver spoon in his mouth and was busy rollerskating at Studio 54 while John McCain was in the Hanoi Hilton. And his flip-flops on some key conservative issues will surely get more scrutiny as the race gets more serious. All that old footage of him saying he is pro-choice, supporting gun control and praising Hillary Clinton will definitely hold him back.

Trump's got some serious PR counsel on board - Hope Hicks - PR royalty from a swanky firm. She has wisely deleted all her social media accounts. And I'm sure she's tried to tame the Donald. But the Donald will do what the Donald wants to do. Rules be damned. Perhaps she can convince him to get a new hairdo.

Claire Celsi is a communications consultant in West Des Moines, Iowa.

Take the first meeting

- Meridith Freese is the marketing manager for the West Des Moines Chamber of Commerce and the West Des Moines New View Young Professionals coordinator.

Coffee-meetingAs a marketing manager, it is important for me to have relationships with people in the media industry, as it is my job to promote the West Des Moines chamber events and get the word out about all that we do. I wanted to expand my media circle but did not know where to start.

A friend of mine and fellow blogger, Danny Beyer, suggested that he was going to meet someone with the Business Record the following week and that I should be there when his meeting wrapped up so that I could meet them also.

I had just graduated college only a few weeks prior and this was going to be my first coffee meeting with a stranger. I was nervous. The introduction through Danny went very well and I was able to turn that new relationship into a productive one. This one casual after-coffee meeting ultimately turned into the opportunity I’ve been given to write this blog today.

In college you take classes about how to successfully manage your time, develop a professional persona, and how to work collaboratively. No matter how well you master these skills -- and they are all important -- there is nothing that will drive your success as a young professional more than going out and meeting people.

I was not an honor student while at Iowa State. I did not have a perfect attendance record. I did, however, have the ability to speak confidently to people face-to-face. Even if you are not naturally outgoing, the more you network and put yourself out there, the more comfortable you will become.

Meeting people and being interested in them is a great life skill, especially when you are beginning to build your professional circles. Never doubt that you have something to offer and always take that first meeting. You never know where the opportunity will take you.

-Meridith Freese 171A6085

Connect with me!

Facebook: meridith.freese
Twitter: @MertFreese
Email: Meridith@wdmchamber.org
Blog: The-Write-Of-Passage.com

Small business for-sale listings reach 6-year high

BizBuySell recently released its Second Quarter 2015 Insight Report which shows small Phoenix logo onlybusiness financial performance on the rise, and more small business owners are ready to cash in by selling.

Some of the highlights of the report are:

1. The number of small businesses listed for sale grew more than 12 percent from the same time last year and has reached levels not seen since 2009.

2. The increasing number of owners ready to sell comes as revenue and cash flow are rising, allowing sellers to both ask for and receive more for their businesses.

3.  The median small business asking price grew 13 percent in the past year, while the median sale price increased 12 percent.

4.  Manufacturing businesses led the recent growth spurt with a 29 percent uptick from the same period last year. Business listings in the restaurant (12 percent), service (11 percent) and retail (9 percent) industries also experienced year-over-year supply growth.

5. The increase in small business listings this quarter correlates with a number of factors, most notably growing small business financial performance and resulting sales prices, as well as the volume of Baby Boomers reaching retirement age.

6. Owners are finding 2015 to be a good year to sell as median sales prices remain at high levels. The median sale price of a business in Q2 remained at $200,000, the same as in the first quarter and still the highest mark since mid-2008. Higher sale prices can be attributed to improving financials as well.

7. The median revenue of sold businesses increased to $450,000 this quarter (the highest on record since report inception in 2007), and the median cash flow rose slightly to 102,995 from $100,000 at the same time last year.

Note:  The full results are included in BizBuySell.com's Q2 2015 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.

 

Good Luck!

Steve Sink

Certified Business Intermediary

Mergers and Acquisition Master Intermediary

ss@phxaffilaites.com

 

The value of a strong work culture

- Katie Patterson is the Owner/Founder at Happy Medium.

At Happy Medium, culture is a top priority for us. We not only think of it as an integral part of how we hire new employees but we work really hard to ensure that we are emulating an amazing culture on a daily basis. In this blog, I want to share what culture at Happy Medium means to us, some things we’ve learned along the way, our company values, and some feedback from the rest of the team on what the importance of strong work culture means to them.

WHAT CULTURE MEANS TO US:

We think culture is one of the most important pieces to a successful company. When specific focus is given to the happiness and well-being of a team, the outcome is a bright one. When you give to your employees they give back to the company. It’s really that simple. This starts at the hiring process and trickles all the way to the CEO of the company; everyone has to be a culture fit. Hiring based solely on skill is going to cost you a lot of time, money and unhappy employees. Don’t believe that’s the case? Check out a couple favorite articles here and here.

WHAT WE’VE LEARNED ALONG THE WAY:

  • Nothing can ever be perfect and sometimes you have to roll with the punches. Striving to be the best is admirable, but being rigid and disappointed with anything less does not help.
  • Our Culture Team and I have both been hyper aware of everything going on in the office, trying to get a read on everyone and their situation. This has really helped us avoid issues before they turn into bigger issues. It also shows us what works and what doesn’t (this is especially helpful when we’re working on implementing something new in the office).
  • Communication is key. 
  • Onboarding is crucial to the success of a new employee.
  • Failure is always going to happen, but we’ve learned to fail quickly so it doesn’t have as big of an impact on everything else that's going on.
  • We’ve got to keep culture top-of-mind all the time. We reward people for going above and beyond, ring a bell when a new website launches, talk about wins (both professionally and personally) in our weekly and monthly meetings, and are constantly incorporating our values in our day-to-day life. These things help remind people who we are and why we work so hard every day. One of our values is happiness and we want to make sure everyone feels that way.

OUR COMPANY VALUES:

We recently sat down and defined our company values. These values are at the core of everything we do. I think it’s imperative that a company with any number of employees has a defined set of values. It has opened up some great team conversation and helped to make the whole HM Team think about if we’re living and breathing all of our values on a daily basis. Company culture exists whether you define it or not, so to ensure that everyone is on the same page and working towards the same goals, you have to put those values into words. Take the feeling of working somewhere every day and write it down.

Having a core set of values can also help with hiring decisions and ensure that you are hiring the right people every time. These are the four values that we live and breathe here at Happy Medium:

  • CURIOSITY

  • HAPPINESS

  • INTEGRITY

  • TEAMWORK

A strong work culture is essential for me and has always been a top priority since starting the company. What fun things go on around your office? Give us a shout, we love to hear new ideas! 

Katie Patterson is the Owner/Founder of Happy Medium, a full service interactive advertising agency based in Des Moines. Follow her on Twitter - @_klpatterson

What's your positivity ratio - and why does it matter?

Dr. Christi Hegstad is a Certified Executive & Leadership Coach, president of MAP Professional Development Inc, and founder of the annual Spark event.

Think about your typical day. I know – “typical” probably doesn’t exist in these ever-changing times, but humor me for just a moment.

Fredrickson - Positivity bookOn a typical day, how many positive acknowledgments do you receive? Praise from your colleagues, sincere gratitude from your leader, “You’re the best parent in the world” from your kids, that kind of thing.

Now, on that same typical day, how many negative acknowledgments do you receive? Perhaps criticism, expressions of disappointment, “You’re the meanest parent in the world,” and the like.

Would you say your negative number is usually equal to or higher than your positive? On some days, the ones that have you reaching for your TV remote or vice of choice, the negative might really outweigh the positive.

But what can we do about it? And is it really necessary to do anything at all?

According to Barbara Fredrickson, researcher and author of the book Positivity, YES. The amount and quality of positivity in our lives impacts our relationships, well-being, even our physical health. We must consciously invite more positivity into our work and lives if we, and those we lead, are to flourish.

Positivity is more than simply replacing negative thoughts with positive ones or becoming more “Pollyanna-like,” asserts Fredrickson. It runs deeper, tapping into true joy, gratitude, hope, inspiration, and more. Just like a flurry of complaining and frustration can lead us into a negative spiral, conscious positivity creates an upward spiral that benefits not only you, but transfers to those around you as well.

I first learned about the book Positivity while attending an executive coach training in Santa Barbara, CA. After a few instructors mentioned it, I picked up a copy at a local bookstore and devoured it on my entire flight home. Even if you shy away from “researchy” books, Positivity is a rare breed: thoroughly based in science but also entertaining, engaging, and pertinent to anyone who wants to lead with joy and purpose.

Positivity shares powerful research and applicable tips on everything from boosting one’s own positivity to dealing with negative people to bouncing back from challenges. One of the most intriguing takeaways from the book involves the positivity ratio: Fredrickson encourages us to shoot for a positivity ratio of 3:1; in other words, three positive, uplifting experiences for every one negative or heart-wrenching experience. While the examples I offered in the opening sentences mostly include experiences that happen “to” you, keep in mind that you are the leader in your own positivity. You can create, seek out, and inspire positive experiences at any time, and you have a lot more power in this realm than you might think…especially as a leader!

You don’t have to be peppy, hyper, and happy-go-lucky all the time in order to experience the benefits of positivity; remember, the ratio is 3:1, not 100:0. You do, however, need to consciously cultivate positive moments into your daily experience. Check out Dr. Fredrickson’s quick online quiz to see how you presently fare: www.positivityratio.com.

Tipping the scales in favor of positivity is not always an easy thing to do, but your life will never be the same once you make this your habit!

Christi Hegstad MAP Inc HeadshotCOACH CHRISTI’S CHALLENGE:

This month, start every meeting – staff meetings, 1-on-1 meetings, performance reviews – on a positive note. My favorite way to do this is to allow each person to briefly share a win they’ve experienced since the previous meeting. Don’t let people off the hook; everyone shares something, even if it’s “I kept my tomato plants alive another week”!

By starting positively, you raise the energy and mindset of everyone in the room, which will prove helpful when delving into important topics and challenges later in the meeting. Give it a shot and let me know how it goes!

How else might you bring positivity to work? Share your ideas below.

 

Dr. Christi Hegstad coaches leaders and executives to succeed beyond their expectations while bringing meaning and purpose to work. Learn more at www.meaning-and-purpose.com, on Facebook at www.facebook.com/MAPIncFan, and via Twitter at www.twitter.com/DrChristiCoach.

Positivity by Barbara Fredrickson, Ph.D. (Crown Publishing Group, 2009).

The emotional side of change

“Any change, even a change for the better,

is always accompanied by drawbacks and discomforts.”

Arnold Bennett

 

Man_changing expressionsYou’ve probably heard the saying “Leave your emotions at the door.” 

The saying implies a hierarchy of fact over emotion and further implies that the workplace is no place for emotions. Although it’s difficult to trace the exact roots of the saying, it’s possible that it arose during the Post-Enlightenment period of Taylorism—a time when theorist Frederick Taylor viewed employees as machines that could be studied for time and motion efficiency and tweaked or tuned to maximize output.  The view at the time was that the scientific method was absolute and would eventually perfect a process if applied consistently.

Since that time, management and leadership theory has evolved to incorporate the humanity of humans.  Some residual strains of the theory continue to prevail.  “Leaving one's emotions at the door” is one such strain. The truth is that the more we know about the science of the human brain, the more we’ve learned that it’s not only impossible to separate a human from his or her emotions, it’s not even desirable.  Eliminating the capacity for emotion would serve to destroy the same motivation, passion and interest that leaders covet and credit for success in reaching goals.

In the mid-sixties, researchers Thomas Holmes and Richard Rahe concluded that all change—good and bad—takes an emotional toll due to the transition it requires. They found that even when the change is a good thing (like the birth of a child or a promotion), letting go of old expectations, habits and patterns and moving through the uncertainty of transition can be frightening, confusing, and ultimately correlated to higher risk of illness.

Leaders who dismiss or underestimate the emotional response people have to change or believe that they need only provide the logic to “make the case” for the change are destined for change results that fall far short of goals. 

4 Tips for Handling the Emotional Impact of Change

The important thing to remember is that change does exact a significant emotional toll which cannot be underestimated or ignored. The type of emotions can run the gamut from anger to sadness to confusion to denial and everything in between.  As you build your skills for leading change, do the following:

1. Validate the emotional process of change. Reassure people that their emotions are normal. Model this by talking about your own emotional reactions to the transitions. It will speak volumes when they see that you too struggle with the feelings of sadness and loss.

2. Pay attention to the ways individuals deal with their emotions. Some people will want to talk about them over and over and over. For them, talking about their feelings helps make sense of them—as though getting them “out in the open” provides for a type of verbal organization process. Others will need time to retreat into their own reverie of solitude to think things through and process their feelings internally. Expect variety and provide opportunities for people to process their emotions in a variety of ways.

3. Recognize (and communicate to others) that energy and morale levels will be lower during the change process as people’s emotions get redirected toward assimilating the change. Energy and morale will return if you manage the process effectively. You will have to be patient.

4. Remember to take care of yourself (and others) before you and/or they think it’s necessary. Often, competent professionals report that they feel “fine” (and therefore not in need of pampering, decompression or relaxation) until they reach maximum stress levels that precipitate a crisis. 

What EXACTLY is private equity and how does it help with succession planning?

- John Mickelson, Managing Partner Midwest Growth Partners, is IowaBiz's new blogger on succession planning. Read more about him here. 

Outside of major financial centers, the image of private equity is usually associated with a pop culture reference and that connotation is typically negative. Think of Richard Gere in Pretty Woman breaking up a family business or political ads accusing Mitt Romney of cutting company health care. 

While the private equity industry has bad actors just like every industry, these perceptions are generally unfair and the private equity industry – especially the type of private equity funds in the Midwest – provide a critical function to orderly business succession planning. 

At its core, private equity is simply another asset class that investors can invest in to diversify their portfolio. Most private equity funds are a pool of capital made up of dollars from pensions, trade groups, foundations and, to a lesser extent, wealthy individuals. 

Through these vehicles, many people are invested in private equity and may not even know it. The pool of capital in a fund is managed by a fund manager who seeks out investment opportunities in private companies whereby the fund becomes the owner of part or all of that company. 

Private equity is different than venture capital and public equity. Unlike venture capital – which invests in start-up companies – private equity invests in established companies that are seeking capital for succession or growth.  As a result, private equity does not seek huge investment wins with the expectation of a majority of its investments failing.  Rather, private equity seeks stable, predictable cash flow. 

Likewise, unlike the publicly traded equity market (like buying a share of Principal), the market for private companies is illiquid and inefficient.  This creates challenges in finding good investment opportunities, but also a unique chance to own profitable private businesses that investors typically could not access with their own time or capital unless they invested via a fund.  

John.mickelson@mgpfund.com

515-421-4803

www.mgpfund.com

The workforce generation that will save the world

- Brent Willett, CEcD is Executive Director of Iowa's Cultivation Corridor

By now, the figures may be familiar.

  • The first: a global population of 9 or 10 billion by 2050, a 22 to 30 percent increase from today’s 7 billion.
  • A second: that in order to satisfy the skyrocketing protein and energy demands of this global population, we are going to have to produce more food in the next 35 years than we have as a human race in the last 10,000 combined.
  • A third: astonishing global energy challenges are in store as we face a two-fold increase in global energy demand, along with population growth trends as the three most powerful drivers of our energy today – demand, supply, and environment effects – undergo forecasted massive change
  • Fourth: environmental challenges which make the word 'unprecedented' somehow inadequate are in store as we experience and address the effects of global climate change in earnest as up to 5 billion of the 9 billion on earth potentially experience ‘an entirely new climate' by 2050.

As we stare down the monumental challenges facing the global community in the next 35 years, we agree as a global population on very little. From the indispensability of genetically modified crops to address coming nutrition challenges to the role of man in the changing climate, decision makers and everyday people across the planet are participating in an extraordinarily rigorous debate about the future of our world. It's enough to make you toss your head back and laugh -- or cry -- at the tenor and the levity of it all. 

However, in the midst of a ferocious debate, an emerging accord is coming into focus: agricultural science and technology lies at the solution’s nexus of each of the three major challenges we face moving forward -- food, energy and environmental sustainability. And that’s where young people come in.

This year, the millennial workforce generation [generally defined as those born between 1980 and 1997] will surpass the Baby Boomer generation as the largest in America at just over 75 million and growing. And they know what they want in a job.

If we join an emerging consensus that the role of agriculture in the coming decades is perhaps the most important in the world with what we are coming to know about the next workforce generation, something awfully promising pops up.

A 2015 study found that when it comes to careers, the top millennial priorities included their growth and development as an employee while -- and this is the key -- making a positive contribution to their local communities and society. Another report which surveyed more than 1,700 currently enrolled university students spanning three generations found that students consider making a positive social impact on the world as a result of their work more important than having children, a prestigious career, being wealthy or even being a community leader. 

The same report found that 45 percent of millennials would take a 15 percent pay cut for a job that makes a social or environmental impact.  Even taking the latter figure with a grain of salt -- we were all 22 and ready to vow poverty and solve the world’s problems once -- if it’s only half right: would a quarter of your generational colleagues spin off a significant chunk of change for social good?  It’s a bit of a new paradigm. 

Here’s a new generation whose members are deeply interested in food and where it comes from, who have been heavily influenced by technology since birth and who cares -- albeit a bit choppily -- about the future of environment. Enter the future of agriculture.

As the face of production agriculture continues to change, transformative social and economic opportunities are emerging. Technological innovation has helped spur farm consolidation -- far fewer people can now manage much larger production operations -- and helped create new ag jobs away from the proverbial growing field, a trend which many argue will more than offset the contraction in traditional farm jobs. Farmers are generally getting older; the average U.S. farmer is now 57 years old and over half of U.S. farmland is owned by those over the age of 55. Meantime, agbioscience and agtechnology job trends are skyrocketing. While the profile of those tending the land is expected to trend younger in the coming decades, most of the job growth in the ag sector will be in the office or laboratory.

From major companies like John Deere, DuPont Pioneer and Climate Corporation to successful start-ups like Ames-based AgSolver, high-value jobs in the agtechnology and agbioscience sectors are driving growth in the agriculture job market in exponential fashion relative to the previous generation of ag job creation.  Ag technology -- both hardware and software research and development and agbioscience, including plant science and biology -- are not only exploding fields of opportunity for today and tomorrow’s graduates, but they both possess those two characteristics so important to the millennial generation’s perception of a good job. 

Cross-pollinate technology and a positive role in addressing global food, energy and environmental challenges and what do you get? One in agriculture. And an ideal job profile for a many a millennial. 

Central Iowa is better positioned to leverage this looming trend into high-value ag job creation and young workforce interest in the field than many parts of the world, owing to the convergence of blossoming private sector opportunities in the industry in the region and Iowa State University’s position as a leading ag school globally.  It’s already happening; ISU reported job placement rates ranging from 98.6 percent to 100 percent in programs such as ag business, agronomy, ag systems tech and industrial technology. And the university’s College of Agriculture and Life Sciences breaks enrollment records year after year.  DMACC, too, is spinning more and more graduates well-prepared for jobs in the ag field into the region's workforce.

We all stand on the precipice of a golden era of agricultural science and technology- one which, fortunately for them, offers fantastic career opportunities for millenials and fortunately for everyone else offers solutions to both global economic and social challenges we are staring down in the ensuing decades.

There will be winners and there will be losers in the chase for the investment, talent and research which simultaneously supports and follows advances in the field, and we are certainly not the only state and region jockeying for position, but I’d rather be us than them any day, thanks in no small part to the promise of the newest workforce generation which is beginning to see agriculture in a new light. 

Begin building team trust

Rita Perea is president and CEO of Rita Perea Leadership Consulting Associates, specializing in working with Senior Leaders to successfully engage employees, lead teams, manage change and balance work and life.

Trust and people image for Iowa Biz blogWhen working with company leaders to build high-performing teams, I share my mantra, “Culture is created by default or by design.” This means that either a culture’s values and expectations are clearly defined, designed, lived and reinforced daily or the culture just sort of bubbles up from the depths of who-knows-where, creating itself. As leaders and managers I think that we can all agree that defining what we want our organization’s culture to be and then taking steps to achieve and reinforce that design is a much better alternative than leaving it up to chance. It is hard to manage chance. 

In our capitalistic society where we have seen a trend of greed-fueled profits being created at all costs, it is now more important than ever to deliberately add the value of trust to our teams. We have good teams but we want to make them really great high-performing teams. What makes the difference between good and great? Trust. It is hard for people to perform at their very best when there is an absence of trust and a feeling of always looking over your shoulder while working with team mates.  

Teams that lack trust tend to exhibit these behaviors:

  • Spreading gossip as truths with the intention of hurting others
  • Creating a scapegoat: someone to take the blame for the team problems
  • Creating a scapegoat: someone who becomes the center of team jokes
  • Deliberately hiding or misconstruing information
  • Showing a lack of respect for others demonstrated through words, actions or both

As a leader who wants a high-performing team, what is one step that you can take or one action you can model that will begin to build trust?  The answer is simple but not easy- “Be impeccable with your word.”  

“Be impeccable with your word” comes from the wisdom of Don Miguel Ruiz, author of The Four Agreements. “Be impeccable with your word” means that as a leader you will model:

  • Speaking with sincerity  
  • Telling the truth as you know it  
  • Not elaborating, embellishing details but accurately portraying a situation
  • Saying only what you mean
  • Following through on what you promise
  • Avoid using words to devalue yourself or to gossip about others
  • Use the power of your word to move things in a positive direction, not tear things or people down or create negativity and fear 

Simple, right? To begin building trust, monitor and evaluate the words that you use and the things that you say. Can you honestly say that you are “impeccable” with your word and building trust with your team? If not, make a change. Reflect on the words you are choosing. Which words can you use instead to be more inspirational, motivational, respectful, truthful and trustworthy?  

Model being “impeccable with your word” with every interaction and you are well on your way to creating the high-performing team and trusting culture that will support exceeding goal expectations. 

 

How much indebtedness does Iowa really have?

- Gretchen Tegeler is president of the Taxpayers Association of Central Iowa.

The Governmental Standards Accounting Board (GASB) is a national organization that sets generally accepted accounting principles (GAAP) for state and local governments.  Among the reasons such standards are useful is for comparability (everyone’s financials can be compared) and transparency (we know what we’re getting).  

This year, new national standards for public pension reporting are being implemented following nearly ten years of development and much controversy. Now, for the first time, its share of total net pension liability (the amount by which liabilities exceed assets) will be reported on the face of the balance sheet of individual government entities as a long-term debt, right along with other long-term debt such as outstanding general obligation (GO) or revenue bonds. In addition, alternative estimates of net pension liability using different return assumptions will be provided. This is important because the estimated return on investment of pension assets has a huge impact on the calculation of total net pension liability.  A small downward adjustment in the assumed return results in a giant expansion in estimated net pension liability.

In requiring governments to disclose net pension liability as a long-term obligation, among other things, GASB hopes to help the public recognize that unfunded pension liability is much like any other kind of debt – it represents an obligation that must be paid off over a period of time in the future for something that has already been purchased/built/consumed, in this case retirement benefits earned for past service.

Not enough principal has been set aside to pay for benefits already earned in Iowa's four state pension plans: Iowa Public Employees Retirement System (IPERS), the Municipal Fire and Police (MFPRSI), the Peace Officers Retirement System (PORS) and Judicial Retirement System. The shortfall that must be made up through future annual payments into the pension funds amounts to $400 million per year.

In disclosing the sensitivity of pension debt to the choice of investment return, GASB hopes to help policy makers better understand the risk that goes with these plans. Unlike GO or revenue bonds, where the interest rate is known up front, pension debt can be larger or smaller than the estimate depending on whether the assumptions turn out to be correct. So it’s useful to see a range of estimates based upon different return assumptions. In Iowa, the big public pension models mostly assume a 7.5 percent return over the next 30 years. Under GASB rules, the calculation is now also made based on a 6.5 percent and an 8.5 percent return. (No one has suggested that pension models should use a rate higher than 7.5 percent, but many have suggested the use of a lower rate. While its pension model is based on 7.5 percent, the ten-year projection for IPERS’ current investment portfolio is 5.95 percent, meaning the 20 years after that would need an 8.3 percent average annual return.)

While the comprehensive annual financial reports (CAFR’s) for fiscal year 2014 won’t be issued until December 2015, we are now beginning to see the data that each local government is being given regarding their share of total net pension liability. To put the information in perspective, we have made a comparison of these estimates to the total amount of all other indebtedness, or the total debt we thought we had, for a few local governments.

 

Comparison of Net Pension Liability With All Other Long-Term Obligations
(June 30, 2014, $ in Millions)

 

 

            Entity

Treasurer’s Report of Outstanding Debt  
(Does Not Include Pension Debt)
Net Pension Liability
(Assumes 7.5% Return)*
Comparison of Net Pension Liability vs. All Other Debt (7.5%)  Net Pension Liability
 (Assumes 6.5% Return)*
Comparison of Net Pension Liability vs. All Other Debt (6.5%)
City of Ankeny 171.2 11.3 6.6% 21.4 12.5%
City of Des Moines 464.2 105.2 22.7% 200.6 43.2%
City of Urbandale 50.3 11.3 22.4% 21.4 42.6%
City of West Des Moines 75.8 20.3 26.8% 38.7 51.0%
           
Ankeny Community School District 145.0 35.2 24.3% 66.6 45.9%
Des Moines Indep. School District 196.0 121.0 61.7% 228.7 116.7%
Urbandale CSD 93.1 16.5 17.8% 31.2 33.6%
West Des Moines CSD 78.6 34.6 44.0% 65.5 83.2%
           
Total IPERS and MFPRSI (Statewide, Non-Regents)  13,365  4,328  32.4%  8,492  63.5%
 

Sources:
Outstanding Debt: Treasurer of Iowa, Outstanding Obligations Report June 30, 2014
Pension Debt: Iowa Public Employees Retirement System (IPERS) and Municipal Fire and Police Retirement System of Iowa (MFPRSI)

* Pension debt calculations vary depending on the assumption made for average annual return on investment over the next 30 years.  Both systems assume 7.5%.  

Statewide, the total net pension liability for the two largest systems, the Iowa Public Employees Retirement System (IPERS) and the Municipal Fire and Police Retirement System of Iowa (MFPRSI) is $4.3 billion, representing 32.4 percent more than the total of all other outstanding debt for governments in these systems.  In other words, if we thought we had $13.4 billion in total debt, we really have 32.4 percent more than that. 

The chart also shows the net pension liability for the two largest systems assuming a rate of return of 6.5 percent rather than 7.5 percent. The result is nearly a doubling of the net pension liability, in which case it is a 63.5 percent increase compared with all other debt. So our actual level of indebtedness is more than 60 percent higher than what we thought it was.

Individual government entities are also shown in the chart. The figures range from a low of 12.5 percent in the City of Ankeny to a more than doubling of the long-term obligations in the Des Moines School District.

Iowans are traditionally very conservative when it comes to debt. It is typically used for long-lived assets, where the payments are spread into the future but they match the long service life of the asset. In the case of public pension debt, we are in effect borrowing from future generations to pay for past operating costs – services that were rendered in the past by employees of state and local government. And we have a lot more of it than we thought. 

The 5 reasons to take on a role

Max Farrell is the co-founder of Create Reason, an innovation experience firm that instills a culture of intrapreneurship inside established companies. Why-are-we-here-mystery-human-meaning-purpose-existence
 
We’ve all heard of the mid-life crisis (or quarter-life crisis for millennials like myself), but do we ever think about the mid-role crisis? To elaborate, this is the evaluation we put ourselves through based on the role we currently occupy. It’s asking that big question: “Why am I doing this?"
 
This is asked by leaders all the way down to the folks starting their careers. Whether for work or community efforts, it’s essential to periodically re-evaluate the roles we occupy and the benefits it brings to our personal and professional lives. But measuring it has always been tricky beyond “gut feeling”. 
 
I’ve been in this position as well, wanting to measure my effectiveness in a professional role mixed with my desire to continue in that role. Based on this evaluation we always give ourselves, I thought through the “boxes” we use to justify career decisions. Ultimately, I think there are 5 reasons why we fulfill a role, either in a company, as an entrepreneur, as a student or as a community member. 
 
Some tie directly to the traditional growth expectations of a role, others are more personal. Either way, I think you’ll find value asking yourself, “why do I occupy the role I’m in and what am I gaining from it?” Hopefully you can evaluate the roles you occupy based on the 5 reasons below: 
 
1. Financial gain - This is one of the most obvious reasons we pursue a role — we make money doing so. This reason could be because we want to pay down debt, care for our families, increase our savings or buy something desirable. Whatever the case, this kind of gain means we may be willing to sacrifice in the interest level we have with a role to roll up the sleeves and have a greater financial gain. 
 
2. Knowledge gain - Sometimes we want to learn in order to propel ourselves to the next level. This often takes form when we “go back to school” to pursue an MBA, but knowledge gain happens at offices every week. Have you ever taken on a task at work and treated it like a puzzle? Then you’ve probably sought knowledge gain. This sort of approach can help with other gains like financial or reputation, but a genuine curiosity has to be the initial guide. 
 
3. Reputation gain - In the midwest we’re humble, but it’s no secret many of us strive to do things to boost our reputation, our clout, our status or our ego. It’s why some of us take on board seats on non-profits or lead a less-desirable project at work. We want the recognition, as it can tie back to benefits beyond reputation. 
 
4. Network gain - I’ve heard “your network is your net worth”; it often holds true. Sometimes we do things to grow our network of connections (beyond just adding someone on LinkedIn). Before we can connect the dots (and add value to relationships), we have to collect the dots. Building an arsenal of good people that you can use to learn from or to do business with is essential in growing oneself. You need good people to take on tasks at a company, within an organization or in the community. 
 
5. Intrinsic gain - The final reason we take on a role is simply because it feels like the right thing to do. Many board seats are secured this way — it feels good to help out an organization with a worthy cause. Others may be serving as a mentor or advisor to a fledgling professional or project. Intrinsic gain is often used for personal satisfaction, but winds up having far reaching positive impact. 
 
The next time you’re thinking of taking on a new role or evaluating your own? Check the list above and evaluate whether you’re doing it for the right reasons or any reason at all. 
 

Do you think there are other reasons people take on roles? Share your thoughts below or by email: max@createreason.com 

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Do equal, 50/50 shareholders owe each other fiduciary duties?

SealIAMatt McKinney is an attorney at BrownWinick Attorneys at Law

Fiduciary duties are often described as the highest duties recognized under the law. Their application, however, is often challenged by litigants in court.  In a recent case before Iowa's Business Court, the Honorable Judge John Telleen was tasked with determining whether equal, 50/50 shareholders in a corporation are charged with exercising fiduciary duties in their dealings with each other. 

Judge Telleen began the June 4, 2015 opinion by explaining Iowa's long history of applying fiduciary duties: (1) by directors and officers of a corporation to the corporation and its shareholders; (2) between a majority shareholder and a minority shareholder; (3) between joint venturers through the life of a venture and its dissolution; (4) between partners in a partnership; and (5) between shareholders in closely held corporations.  After reviewing and explaining Iowa's well-established history of applying fiduciary duties in numerous business settings, Judge Telleen concluded, "[e]qual shareholders owe each other a fiduciary duty" (emphasis added).  In support of this holding, the court explained

[i]f equal partners, joint venturers and shareholders in closely held corporations owe each other [sic] fiduciary duties, the Court sees little reason why those same duties should not be required of equal shareholders.  

Based upon the holding in this June 2015 opinion, 50/50 shareholders in Iowa corporations should consider exercising caution in their dealings with one another consistent with the fiduciary duty concepts adopted and imposed upon Iowa shareholders.

Click here to learn more about the who, what, when, where, and why of fiduciary duties.  

Download a copy of the June 4, 2015 Opinion.  A special thank you to Ben Weston, of Lederer, Weston, and Craig for providing a copy of the opinion.  

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