Disability Insurance in Mid-Sized Companies

In a prior post, I shared the all-too-common dilemma of business owners with a now-disabled employee and no disability insurance or company policy on disability: Disability Insurance -- CEBI Member Feedback

This was such a meaningful response, I thought I'd share it as its own post. It's from a long-time friend of Chief Executive Boards International, John Robie, of Benefit Plan Alternatives. Here's what John had to say:

"In our practice we have this issue come up frequently. No one seems to make the decision on company policies...employment policies (not insurance policies) until they are faced with the dilemma of an employee being off work. The decision they make is frequently made based on the personality of the disabled person..."we like this person", or "this is someone that we'd like to get rid of." Hence the past practices policy begins to form.

"If the disabled is a key employee or someone that is liked, there is an inclination to continue their wage. It might be a bit of a burden but after all...the disabled person is important and "liked". Two things usually happen. Most often, they return to work and all is well until the next time someone is disabled. Or, the person isn't coming back and the gut wrenching decision of when to stop the paycheck has to be made. Many business owner crumble when faced with telling the spouse of a disabled employee that they can no longer continue wages to the family...,contrary to popular belief, many tough business owners are softies in disguise.

"The offshoot of the first thing happening...returning to work and all is well...is that the next employee to become disabled is the guy that you were ready to fire for incompetence. Now what do you do? You have set the stage to continue his wages since you established your ad hoc/past practices disability policy that says you will continue wages to disabled employees. After all you continued wages for the guy you "liked" so now all employees will expect similar treatment. You think employees don't know you did that but they do...everyone knows...you just think they don't. You tell Mr. Incompetent that his wages are done and the first thing he does is go to the lawyer. Not just any lawyer, but the one on the back of the telephone directory. How do you think this is going to work out? Oh, I forgot to mention, Mr.. Incompetent was in a drunken car accident , is a quadriplegic and will never return to work. Since you continued to pay the pervious disabled employee until his disability ended, Mr. Incompetent expects his wage to continue until he is better...he thinks he will get better with the right medical care. (Read that sentence as CATASTROPHIC CLAIMS ON YOUR INSURANCE EXPERIENCE AND THE RATE INCREASES THAT FOLLOW).

"Our recommendation always is to make decisions about disability wages before the fact, before personalities cloud the decision and when cool business-focused heads can prevail. From there, decide what the business can afford in the way of insurance. We mostly recommend insuring the catastrophe (long term disability) and self-insuring the nuisance (short term disability). If funds are an issue, I would suggest Long Term Disability coverage with a 90 or 180 day waiting period and communicate to employees exactly what they can expect if they become disabled. Many clients then will offer a Voluntary Short Term Disability plan (fully paid by employees) to the group. Employees that feel the need will cover their risk with the voluntary plan. Employees that can go 90 or 180 days without a paycheck (until the LTD begins to pay) do not buy the voluntary plan. Everyone makes the appropriate decision for their needs with a full understanding of what to expect from the company. No guilt, no hard feelings, no tough decisions. This kind of fore thought to the issue really takes the monkey off the back of the business owner.

"The issue that comes up even more frequently is when to terminate disabled employees or laid off employees from the medical plan. That is another issue that is best decided now rather than in the heat of the moment. A little proactive planning would make life so much easier."

Thanks, John, for this excellent "how-to" on the subject of disability insurance in mid-sized companies.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
864 527-5917

Reframing the Whole Thing in My Own Head

A Chief Executive Boards International member made a profound comment in a recent Local Board meeting.

He was talking about his challenge of handling a business downturn, requiring that he cut capacity (equipment) and staff (people) to do the right thing for his business -- take it down to fighting weight to survive a (hopefully temporary) reduced level of revenue.

Add to that the currently skittish nature of lenders and surety (bonding) companies, both of whom have made a fine art of closing barn doors after all the horses have left. Faced with a few non-performing customers, they generally want to withdraw financial support of those still standing. This member decided to take that position head-on, making the case that reducing credit lines and reducing bonding capacity would be exactly the wrong thing to do with a customer taking a proactive approach to a general industry downturn.

So, he needed a script that would sell to both employees and outsiders (bankers and bonding companies). Not to mention suppliers and customers.

The profound thing he said was "I found I had to REFRAME the whole thing in my own head before I could properly frame it for anyone else." Fascinating observation. He realized that if he hadn't fully come to grips with the current situation, internalized it, and gotten himself 100% believing it, he wasn't going to make any credible presentation at all to anyone.

How often does that happen? We fail to "reframe the whole thing in our own heads", thereby resulting in non-committal, non-convincing statements to employees, customers, suppliers and financial entities. On the other hand, all of those folks have trusted us before. Does it not follow that if we approach them with conviction and commitment, they'll trust us now, even if the realities of "now" are causing the business great stress?

The happy ending to this story is that this member successfully persuaded the bank and bonding company to maintain his credit and bonding capacity, laid off some employees, and planfully sold some excess equipment to raise cash. He's now conserving, rather than burning cash while seeing his market begin to stabilize and improve.

What is it right now that you need to reframe in your own head to be successful? Have you been kidding yourself about the market, an employee, a customer, a successor? Click "comments" below to let others know of something you reframed in your own head and then were successful in handling.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
864 527-5917

The #1 Planning and Organizational Troubleshooting Question

In an earlier article, I mentioned my personal favorite strategic planning question. It's also my personal favorite organizational troubleshooting question. Particularly when working on a problem that's not new -- something you've been working on for some time without meaningful progress.

The question is: "What's getting in the way?" Asked exactly that way -- verbatim -- "What's getting in the way?" It works for several reasons. First, it depersonalizes the issue. It's not somebody's fault (that would be WHO's getting in the way?"). It's just a question of symptoms.

There's a second reason it works -- it doesn't require a solution. It's not "What's the problem here?" That question requires analysis and troubleshooting -- something not many people are very good at. It's not "What do we need to do about this?", which not only requires analysis and troubleshooting, but also invention of a solution -- something even fewer people are good at. Certainly not on the fly.

Have you ever noticed, particularly in a management meeting, how something comes up -- maybe just an idle comment -- and someone else jumps in with "What you ought to do about that is .....", and then the conversation spirals off into a debate of the first proposed "solution" -- to something that may not even be a problem, and also unlikely to be a root cause? In fact, this "jump to solution" is generally a poorly-thought response to a poorly-defined problem. Or a non-problem. Curiously, this behavior is most endemic in organizations populated by problem-solvers.

By asking "What's getting in the way?", and then keeping the dialog on that plane -- asking "What else?" and then "What else?" again, you start getting the full picture of all of the symptoms. Avoid letting others (or yourself) shut down or divert the conversation by responding to or denying the asserted symptoms. Or debating solutions. Just keep the conversation going until the potential ideas of what's getting in the way are exhausted.

From that point (especially if you've had a white board handy to write down the answers), you're positioned to drill into causes -- asking for each symptom "And why do you think that is?". Again, asking for an opinion, not an analysis or a solution. Continuing along this line, you start to home in on the root cause. Problem-solving techniques such as a "fishbone diagram" are sometimes helpful in working your way from symptoms and asserted causes to root causes.

Then you have something to work on. You have a long list of symptoms, a list of suspected causes and a suspected root cause. You probably also have a decent list of what's not the problem.

Try this the next time you confront a repetitive, persistent problem. Ask "What's getting in the way?", then "What else?" and keep that dialog going. Share your experiences with this technique with others by clicking "comments" below.

For an article on a different way to look at effecting change in your business, see: Newton Was Right -- Effecting Change in Your Company

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
864 527-5917