Click on the title of the NEW stories from 2008-2009 below.

Stark & Associates works with local business owners, presidents, and CEOs to hire, train, develop, and evaluate their salespeople and sales managers.

The Stark & Associates team of Ken Stark, Patti Harty, Suzie Andrews, and the newest Associate, John Woodhead, have worked with a number of EO businesses and clients as a resource to assess the current state of the company’s sales organization, train and develop an ‘A player’ sales team, and improve sales performance.

For example, have you considered these three “Hidden Sales Costs” in your business?

Sales Ghosts
Sales Ghosts are sales mis-hires that stick around and haunt your organization. They can cost you 10 times what you’re paying them annually. Selection mistakes can only be fixed by de-selection. And many sales managers get the old rule of “hire slow, fire fast” backwards.

Ill-advised bids and proposals
Premature proposals not only cost money – they cost business. Prospects must earn the right to get your solutions – and your salespeople must earn the right to provide them. Unpaid consulting is expensive.

Extended Sales Cycles
What is the impact on your bottom-line if your sales cycles are 3-5 times longer than they should be? Too many professional salespeople grossly underestimate the power they have to accelerate the sales cycle. There is always an optimum time for a decision to be made. Miss it, and you probably miss the sale.

“Let’s Pretend” Costs”.
Buyers and salespeople love to play “Let’s Pretend” rather than face “Real No’s”. The result: over-inflated pipelines, wasted follow-up time, huge opportunity costs, and big frustration. Insist on real outcomes, not “Let’s Pretends”. Real No’s are not as rewarding as Real Yes’s, but they are far less costly and frustrating than “Let’s Pretends.”

Unqualified prospects.
The moment you allow an unqualified prospect to enter your sales pipeline, you are losing money, time, and resources. Failing to manage the process where “suspects” drop into the pipeline is one of the big costly mistakes that sales managers can make.

Marginal Customers.
Squeaky wheels...Expensive grease. Upgrade them or do yourself a favor and send them to your competitors. But recognize that sometimes marginal customers are marginal because either you trained them to be unprofitable or you’ve allowed them to be.

Check back next Month for the last 4 "Hidden Sales Costs".


Click on the title of the past stories from 2007-2008 below.

by John McClelland, CFP® and Debra Moran, QKA, Acropolis Investment Management, LLC

As the market remains choppy, it is important for investors to maintain a consistent, disciplined approach to their investment portfolio. All too frequently, however, we see just the opposite from investors.

One study published annually by Dalbar Inc., a financial services research firm, shows that the difference between stock market returns, mutual fund returns and investor returns are staggering (see chart.)

In the study, market return is the return of the S&P 500 index. Mutual fund returns are the total returns of equity mutual funds. Investor returns, a less frequently discussed topic, are a measure of how investors actually fared, accounting for the in and out-flow of investor dollars.

For example, if a mutual fund has $10 of client assets and returns 25% in year one, the mutual fund return is 25%. After seeing that terrific return, investors pile $100 into the fund; it now has $112.5 in the fund as it starts the second year.

In the second year, the mutual fund loses 50%. At this point the $112.5 is now worth just $56.25. The mutual fund return looks at the performance of the fund portfolio, combining the 25% gain and the 50% loss to get a total two year cumulative return of negative 37.50%.

The investor return is much worse because so few investors made money the first year and so many investors lost money the second year. The math gets a little complicated, but when you factor in the flow of new assets, the investor return is negative 69.94%, which is far worse than the fund return and more reflective to what happened to investors.

To find a good real world example, we looked at a good quality emerging markets fund. Emerging markets (which are generally developing countries like China, South Korea, Brazil or India) has been one of the hottest segments over the past five years. As you would expect, the flows of dollars into this asset class have been enormous despite the substantial risk that investments in these countries carry.

By looking at the Vanguard Emerging Markets index fund (ticker symbol: VEIEX) we could focus on the difference between investor returns and the fund returns without being distracted by common problems afflicting actively managed mutual funds like high fees, high turnover and style drift. This is a pure investment in emerging markets in a low cost, low turnover structure.

Despite all of the virtues with this particular fund, the difference between the fund return and the investor return is substantial. Over the past five years, the total return of the fund has been 35.44% annually (all data is through Feb 29, 2008). That means that a $10,000 investment five years ago would now be worth $45,576.

Of course, that implies that you bought the fund five years ago and held it straight through for those five years. The investor returns, as calculated by Morningstar, were 30.53% for the same time period. While that is still a good return, the ending value of the same $10,000 investment was $37,892. While that is still an outstanding result, it means that investors left $7,684 on the table. They could have done 20% better simply by sticking with it throughout the whole period.

What are the root causes of this differential? The first and most prevalent problem is that most investors chase performance. In hot markets, most investors plunk money into what has recently been hot. Take an honest inventory of your own investment history – did you buy technology stocks in 1994 before the run up or in 1998 after three years of strong performance, but just in front of the bubble bursting?

What is the best way to close the gap between investor returns and market returns? Start with a sound asset allocation policy. This allows for proper diversification and helps stem the natural desire to go after hot markets after the fact. It isn’t always easy to listen to someone talk about their hot investment at a dinner party when you have a dowdy diversified portfolio, but in the end, there is clear evidence that the tortoise beats the hare.


Founded in 1999, Acropolis manages over $850 million for clients in the St. Louis area and nationwide. Acropolis serves individual investors, institutions and endowments and retirement plans.

Acropolis Retirement Plan Solutions, a division of Acropolis Investment Management, takes a distinctive approach to assisting retirement plan investors. Our unique service model focuses on investor returns. We are committed to outcome based education that truly influences investor behavior. In addition, unlike most providers, we provide one-on-one participant level advice, follow-up contacts when participants are not taking full advantage of their plan provisions, not contributing adequately to reach income replacement goals or asset allocating strategically. We believe that participants deserve this long overdue advice and support and desire that participants achieve investor returns commensurate with the market.


Information technology is becoming increasingly critical for most companies to achieve their strategic goals. CIO’s and CTO’s are no longer behind the scenes; they now report directly to the CEO or Chairman and have been “invited to the table” as important members of executive teams within their respective organizations. The focus of the IT department has shifted from maintenance of existing infrastructure, to growth of the company through technology.

CIO’s must now focus upon technology that brings value to their enterprise. IT is no longer just desktop support. It is infrastructure that plays a critical role in the strategic growth of a company with the ability to significantly affect the bottom line.

Infrastructure management is one obstacle to this crucial role. Day-to-day management of servers, applications, and datacenters is distracting IT departments from focusing upon their essential roles of research, development and implementation of new technology to grow the organization. At the same time, systems are becoming more complex and high-availability is more and more critical.

Research indicates infrastructure management is one of the largest line items within an IT budget. A recent report produced by Microsoft states 70% of the $140 billion spent every year on IT budgets is spent on administrative costs for IT personnel, reactive patches and IT infrastructure maintenance. In times of economic downturn, IT budgets are often reduced and critical projects put on hold while the expectations to produce greater results still exist. These shrinking budgets and limited resources have become a roadblock for many executives.

How can business owners, executives and leaders best leverage technology to support the strategic objectives of their business?

Take a strategic focus on IT by off-setting the infrastructure management through partnership with a provider of managed infrastructure as a service. A managed infrastructure solution allows a company to place the management of critical operating systems, applications, and hardware systems in the hands of a partner so their internal IT department can focus on implementation of new technologies to more positively impact the profitability of the organization by helping the company fuel growth through technology.

In a recent interview with the Wall Street Journal, Frank Modruson, CIO of Accenture Ltd., predicts that IT will split into two segments over the next ten years: strategy and operations. A successful CIO will focus on the strategic impact technology can have on the business while operations “. . . will be industrialized and outsourced to providers that are at market-efficient, scale and have the ability to invest and attract top IT talent to operate the technology.”

“The companies we partner with have recognized the value of a managed infrastructure solution,” says Brad Pittenger, CEO, XIOLINK. “These companies have been in the trenches trying to keep up with technologies in their business with limited budgets and staff. As the role of technology becomes more vital, determining how companies will advance, IT departments need to focus on tasks and projects to better their organization and use partners for the infrastructure management.”

A recent success story for such an offering is the partnership between St. Louis based RehabCare and XIOLINK to provide infrastructure as a service. The two companies worked as a team to design an approach for the migration of equipment and data to XIOLINK’s facilities based on criteria RehabCare defined. “We don’t want to take over an IT department for a company or become a complete outsource,” explains Pittenger. “We want to help a company grow their business using technology. We manage the resource intensive work that is necessary, but not adding value, so their internal team can work on the initiatives to advance the organization.”

“By partnering with XIOLINK, we are able to focus our efforts on initiatives and projects to grow our business,” says Dick Escue, CIO for RehabCare. “Our skilled team isn’t spending valuable time building servers and maintaining systems, we are implementing programs to provide value to our customers, employees, vendors and shareholders.”

As the importance of technology grows exponentially, organizations are being forced to focus upon the tasks which can positively impact their organization while looking to partners to provide the incredibly important routine tasks which are becoming increasingly complex.

A managed infrastructure solution allows an organization to maximize its technology investment to ensure it meets the growing needs of the business. By teaming with a technology partner to manage mission critical, management intensive infrastructure, companies can focus on more strategic initiatives to bring value to the organization. For more information on managed infrastructure as a service, contact XIOLINK at 314.621.5500 or www.xiolink.com.


By Michael Berger

It has been hailed as one of the most popular administrative trends of the past decade – human resources (HR) outsourcing. From payroll processing and health care benefits to retirement services and recruiting, there are many reasons to consider taking the HR function to an outside source.

When it comes to outsourcing various elements of HR on a piecemeal basis, there are a variety of choices. However, hiring a professional employer organization (PEO), which serves as a one-stop-HR-shop, is an attractive option for an increasing number of small and medium-sized businesses.

Managed Colocation May Help You Realize A Greater Overall Return.

It might be easier to start with what a PEO is not – a PEO is not a temporary firm, a staffing agency, a simple payroll service or a placement agency. A PEO serves as an HR department for small and medium-sized businesses. By entering into a relationship with a PEO, companies receive assistance with payroll processing, employee benefits management and compliance with the growing number of federal and state employer-related laws and regulations.

With a PEO at its side, a small or medium-sized business is in a better position to compete with much larger companies, especially when it comes to employee benefits. Benefits provided by full-service PEOs such as Administaff, the nation’s leading PEO, rival those of big corporations, making them an essential tool in recruiting talented employees. Those benefits often include medical, dental and vision coverage, retirement programs, life and disability insurance, on-site and online training programs, tuition reimbursement, credit union services and adoption assistance.

Besides providing and managing a wide range of employee benefits, a PEO typically handles all personnel-related functions such as payroll processing, payroll tax filings, assistance with developing employee handbooks, employment tax filings, and workers’ compensation coverage and claims resolution.

Most small companies simply don’t have the budget or staff to perform all of those functions. By using a PEO to provide those value-added services, business owners, in effect, multiply their capabilities without increasing labor costs, freeing them to concentrate on their core business.

What should business owners consider when selecting a PEO?

  1. Is the PEO licensed in your state and do they have a local office?
  2. Is the PEO a member of the National Association of Professional Employer Organizations (NAPEO)?
  3. Have complaints been filed against the PEO?
  4. Does the PEO offer all the services your organization needs?
  5. How are services delivered? (e.g. in person, via the Web, through a call center or a combination.)
  6. What kind of assistance does the PEO provide on strategic HR issues such as recruiting highly qualified executives and employee training?
  7. What are the fees and how are they determined?
  8. Can the PEO handle growth in your workforce?
  9. Will the PEO provide you with client references to contact?
  10. Does the PEO have the staff needed to deliver on its promises?
  11. Is the PEO accredited by the Employer Services Assurance Corporation (ESAC)?

PEOs can bring much-needed relief to small and medium-sized businesses that want to spend more time building their entrepreneurial dream and less time coping with HR issues. With HR in the capable hands of a team of specialists, business owners can sleep well knowing that their employees are being taken care of and their clients are getting the time and attention they deserve.

Michael Berger is a regional manager for Administaff (NYSE: ASF), the nation’s leading professional employer organization (PEO), serving as a full-service human resources department that provides small and medium-sized businesses with administrative relief, big-company benefits, reduced liabilities and a systematic way to improve productivity. For additional information about Administaff, call 800-465-3800 or visit http://www.administaff.com.


Ken Stark
Stark & Associates

A Sales A-Player “Gut-Check”

If you can answer all five of these gut-check questions with a strong “Yes,” the chances are good that you have an A-Player (or a solid potential A-Player) salesperson.

  1. When you debrief them after a bad outcome, do they look for ways to improve their performance rather than make excuses and blame others?
    The A-Players don't whine and complain about things that are out of their control. They find the best ways to respond to adversity and learn from it.
  2. Do they consistently do the day-to-day behaviors that are necessary to exceed their sales targets - without fail? The typical professional salesperson is about 17 percent effective day-to-day primarily because they do not unconditionally commit to doing those core behaviors that are absolutely required for success. A-Players are simply willing and able to make that crucial unconditional commitment.
  3. At any time, can they tell you what the top ten opportunities are in their pipeline, where they are in each of those sales processes and what the next step is for each one? The problem with most sales pipelines is that they are filled with “Let’s Pretends” rather than real sales opportunities. A-Players go for and get real outcomes - yes's or no's. They don't play "Let's Pretend."
  4. Do they have written, clearly defined personal and compelling goals and a plan to achieve them? One of the top requirements for success in sales is a burning desire to achieve. When a professional salesperson has a clear vision of their personal and professional goals and sees sales as the path to achieving that vision, success won’t be far behind. You can't be it if you can't see it.
  5. Can they tell you what their major selling weaknesses are and what they are doing to overcome them? Just a few critical weaknesses can negate even the most formidable sales strengths in the critical moments of the selling process. A-Players know this, identify those weaknesses, and are constantly working to overcome them. Many promising sales careers are ruined, or trapped in mediocrity because of a failure to recognize these critical weaknesses.

By definition, only ten percent of those salespeople available to you at any given time are A-Players. Go on a mission to seek them out and then create an environment for them to climb their path to professional mastery as a top performer in their chosen profession.

A-Players...Find them. Build them. And keep them. It changes everything.

Managed Colocation May Help You Realize A Greater Overall Return.

The IT world has long been known as a birthplace for new names and terminologies such as Google, iPod, Blackberry and others. Many of those made up words are now common in our daily vocabulary and have even become listed in the dictionary!

Another emerging new term is Managed Colocation. This term is fast becoming common in the small and medium business sector. Colocation is an old term which means placing your equipment in someone else’s facility or datacenter. Managed Colocation is an expansion of traditional colocation where the host manages the equipment and software as if it were their own.

As solutions become more complex, management requires more and more specialized expertise. As a result, many IT departments are finding themselves overworked and less skilled in specific applications. A perfect example is email. Just a few years ago email was just one part of a business’ communication toolbox. Today, it’s a critical part of an overall business solution, integral to order processing, scheduling and communication with customers. Email is no longer a luxury, it is now mission critical to the operation of your business. As a result, it has evolved from a traditional POP email solution to a full featured Exchange or similar application serving as the communication platform for email, scheduling, tasks and collaboration. Its complexity makes it highly specialized and difficult to manage and maintain.

Managed Colocation allows companies who have already made a significant investment in their hardware to continue to use their own equipment while utilizing engineers with the specialized skills required to manage the applications. This allows your IT staff to continue supporting their internal operations while having a third party manage specific complex applications.

“The cost to build and staff an in-house datacenter, complete with back-up power, redundant network and redundant environmental controls, along with 24x7x365 on-site engineers is cost prohibitive for most businesses. And the companies that can afford it will have a difficult time justifying it” says Mike Palmer, CTO of XIOLINK. “Most IT staffs are overworked, usually consisting of a few techs trouble-shooting desktop issues while also trying to maintain the behind-the-scenes systems. There is little time for strategic discussions on how new technology implementations might help a company grow. Most IT departments are busy just trying to keep up with their daily operations.”

Managed colocation allows a company to place the management of critical operating systems, applications, and hardware systems in the hands of highly trained engineers to help your staff become more productive. Datacenter engineers should be trained and/or certified in the software and systems you are using and should be onsite 24 x All-the-Time. If your email, website or application goes down on a Saturday night, how long does it take before you find out? On Monday? When a customer calls because they can’t place an order? In a managed colocation environment, the engineers should be available around the clock to answer support questions, manage issues that arise, and proactively maintain your equipment to prevent future issues. They should be notifying you when your site or application is down and letting you know what they are already doing or have done to correct the problem. The challenge for most companies is this type of support staff can easily cost $150-350K+ per year.

Another very important factor to consider is security, both physical and network. Many companies are bound by Sarbanes-Oxley, Gramm-Leach-Bliley and HIPAA compliance requirements. Your hosting partner should be able to assist you in meeting these legislative requirements. Physical security should include cameras, restricted access using a key card system, access controls and logging, and might even include biometrics for added security. Also look at other security features such as fire detection/suppression, security guards, perimeter control and internal controls. For example, background checks on all persons with access to the facility. Network security needs to include intrusion detection, DDoS mitigation and constant monitoring for anomalies.

“Today's growing global economy is being fueled by technology and in this environment, we simply cannot afford to be out of contact with our customers, prospects or staff,” says Dennis Barnes, president of Marketing Direct, a local database marketing company. “In response to our changing business needs we considered building our own datacenter. Our analysis determined the cost to lease, build-out, add power, and add networks and equipment would have required a capital investment in excess of a million dollars. This still didn’t include full redundancy on all the equipment we would purchase, and it didn’t include staffing, or the costs involved to back-up our data to another off-site facility in case of disaster. We also determined that another critical function was the maintenance, testing and repair of all our equipment. This needed to also be calculated in our overall cost of ownership. In comparison, we found we could locate our servers at a regional, high-availability datacenter for a fraction of the cost it would take to build our own comparable facility.”

Managed colocation datacenters not only make sense, they're a fast growing segment within the exploding IT industry. To find out how managed colocation can help you realize the most return on your infrastructure investment, contact XIOLINK at 314.621.5500 or www.xiolink.com.

By Jeremy Degenhart, CFA

The venture capital environment has undergone significant evolutions over the last several years. A saner pace of investing and a decline in competition for deal flow now allows venture capital firms more time to conduct crucial due diligence. VCs try to find out everything there is to know about the proposed business. Evaluations that were occasionally compressed into two or three weeks a few years ago are now often spread over a period of months, allowing a greater sense of perspective on how the business is progressing over time.

Now more than ever, successfully pitching venture capital firms requires knowledge, confidence and an outstanding business plan. Following are ten suggested do’s and don’ts for small business owners to follow when presenting an investment proposal to a venture capital firm.

Do: Read the book.
Venture Capital Due Diligence, by Justin Camp (Wiley & Sons, 2002), is a valuable read. This book will help potential entrepreneurs prepare for meetings and coach them in the most pertinent areas for venture capitalists, including business model, competition, management and financials.

Don’t: Ignore venture capitalists’ time constraints.
Venture capitalists are just as busy as entrepreneurs, and they do not make quick decisions when it comes to their money. It would be exceptionally rare to secure a meeting with a VC based on a single phone call or conversation. On average, venture capitalists see 100-plus business plans a year, and informally discuss an additional 100 to 200 business ideas. VCs will appreciate an entrepreneur’s follow-up and continued interest, so long as their time and work constraints are respected.

Do: Have an elevator pitch.
This 30- to 60-second speech should convey the entrepreneur’s interest in pursuing a venture capital firm, hit the high points of the business model, and focus on the firm’s competitive advantage. Mention of big markets and/or big margins and any successful exit events in the management team’s background is also impressive, as time permits. If the entrepreneur senses interest, he should request a meeting, conference call or e-mail opportunity to present the business plan in detail.

Don’t: Be surprised by tough questions.
Entrepreneurs already have a mental list of things that could potentially go wrong with their new business venture. Unfortunately, so do venture capitalists--and their list is usually more comprehensive and includes a variety of outside factors. Entrepreneurs should be prepared to answer even the toughest of questions. Entrepreneurs without a ready answer should offer to research the question and get back to them in a timely manner.

Do: Understand the goal.
The prospective entrepreneur’s goal in the first meeting is simple: get a second meeting. Again, the entrepreneur should offer to research solutions to tough questions and provide additional detail if requested. Executing in a timely and efficient fashion on early requests, even simple ones, will not go unnoticed; unfortunately, this is a rare trait.

Don’t: Push for a decision.
Most venture capitalists make decisions through an investment committee that meets weekly. They need to discuss the deals and its risks and advantages informally within the firm before seeking final approval. They also conduct exhaustive research on all aspects of the business plan at this time, to ensure accuracy. Consequently, they never offer a term sheet in the first meeting and rarely, if ever, in the second meeting.

Do: Focus on the milestones.
Milestones are events that significantly improve the risk/return profile of the deal. Milestones vary by industry, but some examples include: proof-of-concept/prototype completed, first paying customer signed up, and/or a major strategic alliance concluded.

Don’t: Promise that prosperity is just around the corner.
Venture capitalists have a healthy skepticism toward prognostications of entrepreneurs. They’ve heard claims of the large customer or crucial strategic partner that is about to sign on the dotted line from many prospective investments. Such claims do not increase chances of funding and, in fact, may elevate the VC’s antennae with respect to other parts of the business plan.

Don’t: Have unrealistic valuation expectations.
As one might imagine, venture capitalists have strong opinions about what a particular venture is worth. Some use sophisticated models when valuing an opportunity, while others use less elaborate rules of thumb. Regardless of the process, all venture capitalists know that a business with no employees, no product, no revenue and no history is not worth $25 million.

When someone offers you money, take it!
Venture capital is extremely difficult to obtain; less than 1 percent of submissions turn into investments. This means that no matter how demanding a venture capitalist’s terms are, they are, almost without exception, better than the alternative: insufficient capital to create and sustain a successful venture.

About the Author: Mr. Degenhart is a vice president with Advantage Capital Partners, a diversified venture capital, private equity, and small business finance firm with offices or other operations in eight states. Mr. Degenhart has responsibility for managing the Missouri investment portfolio, as well as for special projects including new fundraising efforts. He earned the Chartered Financial Analyst designation and holds a bachelor’s degree in finance from Washington University.

By Eric Biess
Greensfelder, Hempker & Gale, P.C.

You can’t appreciate another’s problems until you experience them yourself. Likewise, your business and its owners can’t appreciate the potentially catastrophic effects of divorce, death, deadlock, incapacity, bankruptcy, key employee or customer departure or a third party or creditor claim until they experience them. By taking the following simple legal steps, you can avoid many issues.

Without a simple stock restriction agreement and stock legend, you and your partners’ ownership in your business and its profits are subject to claims by ex-spouses, kids, brothers, sisters, girlfriends, boyfriends, creditors and other third parties. A one-page fictitious name filing with the state prevents you and your personal assets being subject to claims by your businesses creditors, customers and other third parties. A short shareholder agreement, protects your business from risk of judicial dissolution upon operational disagreement between you and your partners and can prevent you from being fired by your own company.

With an inexpensive state trademark / tradename filing, you can prevent your competitors from using your name or mark anywhere in your state (and without it, you can’t). With a federal trademark filing and a URL search service, you can prevent competitors from using your name or mark anywhere in the U.S. A properly drafted enforceable confidentiality, trade secrets and non-solicitation agreement can protect your business and your customer and employee relationships as effectively as an unenforceable non-compete.

The documents described above are five or fewer pages. If you haven’t addressed these issues, you may be open to liability. If you’ve addressed them longer than three years ago, revisit them for sufficiency (e.g., a once enforceable non-compete may no longer be enforceable if not properly tied to trade secrets and confidential information).

Please plan to join us on October 24 at the Missouri Athletic Club West, as Greensfelder addresses these issues. We also continue to offer free strategic planning sessions for EO members to discuss these issues among others that can save you, your assets and your business. Call Eric Riess at 314-241-9090 or e-mail him at err@greensfelder.com to set up your free session.

By Ken Stark Stark & Associates

One question that we’re asked all of the time is “Where do you find the good salespeople?” That’s actually an easy one to answer...they’re everywhere. But only if you know what you are looking for.

Here are five core traits that we believe are common to A-Player Salespeople:

  1. They are willing and able to unconditionally commit to consistently do what it takes to exceed their performance goals.
  2. They know their strengths and weaknesses and are systematically working on them to climb their path to mastery as a professional salesperson.
  3. They have an unshakable sense of self-worth that can’t be dampened by the sometimes harsh realities of the profession.
  4. They take personal responsibility for their shortcomings and failures rather than whine, complain and blame those forces that are beyond their control.
  5. They are grounded in a fundamental approach to selling that allows them to control the sales process for win-win outcomes.

Look for these “A-Player” traits in your own salespeople or in the next candidate you interview for a slot on your team. A-Players or future A-Players are everywhere. You just have to know what to look for.

Ken Stark is President of Stark & Associates, a St. Louis-based EO sponsor specializing in sales force development. Contact them today for a complimentary copy of Why Salespeople Fail...and what you can do about it!

Recent changes to 401(k) laws allow for significantly better 401(k) solutions.

By Debra Moran, QKA & John McClelland, CFP®

The 401(k) has become the standard for company sponsored retirement plans. But the responsibility that employees have to direct their own retirement investments with no control over the fees has left many confused, angry and, in some cases, seeking legal action against their employers.


Employees want help. Employees need help. According to Hewitt Associates, 94% of 401(k) plan participants believe that “unbiased investment advice is important or very important,” yet only 6% feel their employer is doing an excellent job of providing these services. If employees are expected to achieve adequate retirement savings, they must understand the importance of investing in a properly diversified portfolio. Additionally, to maximize their return, expenses must be minimized.

So, why haven’t employers provided investment advice to their employees given that general investment education has long been allowed? Fear of fiduciary liability led most 401(k) plan sponsors to err on the side of caution and avoid providing needed specific advice to participants.

The provisions of the Pension Protection Act of 2006 (PPA) eradicate this concern. The PPA allows companies to engage an investment adviser to offer personally tailored investment advice to their employees. According to the Department of Labor (DOL)“a plan sponsor or other fiduciary that prudently selects and monitors an investment advice provider will not be liable for the advice furnished by such provider to the plan’s participants and beneficiaries.”


In addition to understanding how to properly diversify and position their investments, employees need to be able to evaluate the effect fees have on their return. Most employees (and some employers, particularly small to mid-size) have no idea how fees, obvious and hidden, are eating into their retirement savings.

But, many employers absorb all administrative costs – or think they do. A trick of the trade is to entice plan sponsors with lower administrative fees, then use funds with higher expenses in the plan and share the revenue arising out of the higher priced funds with service providers. “Revenue sharing is the ‘big secret’ of the retirement industry. This practice has created an environment that makes it difficult for employers and employees to understand the true cost of their retirement services. Gross inequities can exist for both plan sponsors and participants.”1

Plan sponsors should not count on non-disclosure of fees and revenue sharing to be tolerated for much longer. In 2008, the DOL will require 401(k) providers to reveal more information about all plan expenses and revenue sharing -- how they get paid and whom they share revenue with -- in their annual reports. That information must get passed to companies and their employees.

Litigation concerning excessive fees charged to employees by their 401(k) plans is heating up. The buzzword for 2007 is "transparency." Retirement plan fiduciaries need look no further than the recent lawsuits to remind them that the situation is serious. Since September, 2006, a St. Louis law firm has filed 13 class actions alleging that several of the nation's largest companies with 401(k) plans breached their fiduciary duties by allowing third parties to charge undisclosed fees to employees who participate in the plans.

The suits come amid stepped-up investigations by a congressional committee, the DOL and the Securities and Exchange Commission (SEC) into inadequate disclosures of administrative fees charged to employees in 401(k) and other retirement plans. While the first round of suits has focused on undisclosed fees charged for mutual funds and annuities, still others challenge the prudence of employers that invest in funds that charge high fees -- even if they're fully disclosed to employees.

Finally, there is an answer. There is a “new” unbundled 401(k) option that is available through some investment advisors who offer a globally diversified line-up of low cost funds combined with individual participant level advice. It is a win for both plan sponsors and participants.

So, two questions you can ask today:

  1. Are your participants receiving the specific investment advice they need?
  2. Do you understand the fees, expenses and revenue sharing arrangements for your plan? If not, ask for full disclosure by October 31st.

This gives you time to address any concerns before the end of the year since the DOL will require that your employees get full disclosure of the fees in 2008. Plan sponsors who proactively address unreasonable fees and revenue sharing arrangements will be much less vulnerable to litigation.

1Financial Executive’s International Research
  Foundation


Acropolis Investment Management, a fee-only registered investment advisor, is offering a free financial health check-up to all EO members to ensure that they are on track to meet all of their personal and professional financial goals. Members can sit down with an Acropolis portfolio manager or retirement plan specialist to review their personal financial circumstances, investment needs and priorities, and current investment portfolio. We will also review their company’s current 401(k) or other retirement plan, and assess their retirement planning needs.

 

By Dan Bean
Partner, CMA

Organizational success requires profitable top-line growth. The most important way companies generate growth is through their sales organization. The spotlight of accountability continuously shines on sales. There is no room for mediocrity. There is no room to hide. Successful sales organizations depend on the effectiveness of PEOPLE and PROCESSES.


Selling is: guided movement toward an objective… a step-by-step process, guided by the salesperson, to the final objective of closing the deal. Successful salespeople have a process they follow, even if it has never been documented. If an effective sales process is not documented and managed, salespeople invent their own. An important job of a professional sales executive is to make sure that a process reflecting best selling practices for the company is defined and followed. A defined, thoughtful process brings tremendous value to the salesforce. The process will vary depending on your product/service, the customer’s buying patterns and cycle, geographic differences, etc. Sales processes must be defined to fit the marketplace, and then monitored, measured and revised based on even small changes in the marketplace. As shown in the July-August 2006 HBR article, “Understanding What Your Sales Manager is up Against,” organizations that use effective sales processes and that also monitor and measure them have vastly superior performance as opposed to those organizations that do not.


Once a process is established, the organization must staff with talent. The combination of process and people aligned with the marketplace provide the sales organization with the power to get results.

Selection of Salespeople
Ask any sales executive what they would like to learn more about and one response comes up more than any other: how to make good hiring decisions. Yet, most companies know surprisingly little about the unique blend of behaviors and motivation that create sales success. Yesterday’s sales manager’s anthem of, “I know a good salesman when I see one” is belied by 80% of sales coming from 20% of the sales force. A bad hire in sales has geometrically profound and highly visible consequences within the organization and its customer base.

“Most employers will recite over and over that people are the secret to their success… and given that turnover costs about 1.5 times the salary of the employee who moves on, according to Pricewaterhouse- Coopers, they better mean it. But it is astounding how few companies bother with more than improvised, all-but-meaningless interviews to hire their people.” (The New Science of Hiring, INC. magazine, August 2006)

Many of the characteristics and behaviors that are critical for an organization to achieve its sales goals cannot be seen or uncovered by just interviewing the sales applicant and reviewing resumes. For example, what is the person’s ability to exceed sales goals? Will he/she prospect and pursue new leads? Will he/she follow your sales process? What is the level of empathy and how will it be balanced between your organization and the customer? Can the person question and listen, without which sales cannot happen? What motivates and drives the person? What is the person’s level of aggressiveness? What is his/her critical thinking and problem solving capability? How does she/he excite and persuade prospects? Does he/she have management potential?, etc.

Both research and experience confirm that a professional Selection Assessment of the candidate by a licensed psychologist is, by far, the best predictor of future performance. The assessment process should include:

  • Understanding by the psychologist of the company’s culture, sales process, sales role description, the customer functional areas the salesperson works with, and the various levels of contact.
  • Multiple sources of data:
    • Resume review
    • In-depth behavioral interview
    • Administration of a series of well researched, validated and normed questionnaires
  • Integration and analysis of all data
  • Verbal feedback to the hiring manager on strengths and developmental needs relative to the role, sales process and culture, including a hiring recommendation
  • Preparation of a written report
  • If requested, feedback to the selected candidate on their assessment results which is both motivating and begins the development process

Development of Salespeople
As pointed out in a recent Business Week article (Business Week, April 9, 2007) “The job U.S. employers say is hardest to fill is sales representative.” This shortage of qualified sales reps makes it essential that the organization continuously develops internal sales talent. An organization rarely, if ever, has the opportunity of managing a sales force composed of all “A players.” At any given time, the sales force will be made up of people with various levels of selling talent and skills. A critical management task is to develop those who are capable of developing into more efficient and productive salespeople.

Developmental Assessments of internal sales representatives provide the organization with objective, data-based information about each person’s current skills and capabilities as well as their potential for growth. The manager now has the data, which provides the foundation for individualized, focused coaching, training and development.

A developmental assessment of the star salespeople provides an objective profile of their skills, capabilities and behavioral characteristics. The profile provides an excellent benchmark against which assessment data of others can be evaluated to determine specific, individual development needs or the selection of additional talent.

And, how often have we taken our best salespeople out of the marketplace and “promoted” them into sales management only to find they did not have the skills needed for a management position. This “lose-lose” experience could have been avoided if we had advance knowledge of the person’s management potential provided by an assessment.