It’s called employee motivation, and, when achieved, it can transform a business into a dynamic, growth organization.  The question is how…and at what cost?  

Does true motivation come from a big paycheck?  An employee-of-the-month parking space?  A pat on the back every six business days and free donuts by the coffee machine?  Sometimes yes; sometimes no. 

What motivation is not!  

• Benefits are not motivators.  They are retainers.  Health insurance, a 401(k) plan and paid vacations help keep employees from leaving.  However, these are not motivators in and of themselves.
• Friday pizza parties, free use of the company car and other feel-good perks may be great morale boosters, but these, also, are not motivators.  Good morale is part of motivation; however, an employee with good morale may be happy, but not necessarily motivated. 

What motivation is!

Research has shown that motivation is a personal, inner force that gives behavior purpose and direction for an individual.  While there are universal motivators (benefits and rewards that are generally common to all people), the challenge remains that what motivates one person may not motivate another.

Plus, personal motivators change over time.  For example, income may be a great motivator for a young person with a growing family.  However, as income increases, money can become less important as a motivator.  Also, as employees get older, interesting work may become a more powerful motivator than money or even recognition.

Try some proven motivators: Each business owner must decide what works best in the organization’s unique culture.  Nonetheless, here is a list of areas on which to focus that can help translate universal motivators into specifics:

1.  Variety.  If employees do routine work, find ways to avoid the assembly-line mentality.  Build in variety and, if possible, fun. While your company should not be a funhouse, nothing is gained from making it a morgue, either.
2. Choices.  Whenever possible, provide employees with input and choices into how they do their work. 
3. Opportunity.  Encourage responsibility, leadership and initiative within your company.  That 24-year-old receptionist may have great ideas for improving customer service, especially since she is the one who spends her day greeting and talking to customers.  Give her a chance and encourage her to try new ideas.
4. Interaction.  Promote social interaction and business teamwork between employees.  Turn them loose on planning a meeting or solving a project problem.
5. Tolerance.  Morale will not improve while beatings continue!  When encouraging initiative, do not punish mistakes.  Otherwise, there will soon be no initiative. 
6. Input.  This is known as job “ownership.”  Do not treat employees like employees.  Make it clear that they are not just wage-slave hirelings, but key to the success of the organization.  This starts by keeping them informed about the state of the business.  If you are worried about sales, let them know.   As respected team members, they are likely to pitch in and help turn things around. 
7. Goals.  Don’t just give them goals.  Help them set their own goals.  This may mean meeting with them individually to discuss where they see themselves a year from now within the company.  You may be surprised to find they have their own ambitions that can provide win-win results for them and for the business. 
8. Feedback.  Create yardsticks that enable you and them to measure their performance in a quantitative way.  This helps both of you know how well they are performing.  “Increase sales,” for example, is a nebulous, impossible-to-measure objective.  However, “Boost sales by 10 percent this quarter,” creates real goals that can be strong motivators. 

Motivation is not a one-shot deal.  It must be ongoing.  It calls for study of the company’s culture and employee makeup.   However, the effort a business owner or manager puts into motivation can reap a bountiful harvest in terms of increased productivity and company loyalty.
* * *

 Most of the time, the seed of this great misunderstanding is planted during the interviewing process (or lack thereof).  Conducting a job interview may seem simple on the surface; however, it is a highly demanding process, one that requires a great deal of structure in order to achieve a number of complex objectives.  There are a few ways to do it right…and a number of ways to do it wrong. 

TAKE THE INTERVIEWING SELF-QUIZ

 The following self-quiz highlights some of the most common mistakes made during a job interview.  To find out how good you are as an interviewer, respond to each of the following statements by rating yourself on a scale of 1 to 10:  Ten means “always,” or you agree strongly with the statement; 1 means “never,” or you disagree strongly.

1. I like to wing it in the interview and let the conversation take its own course.  Some managers like an unstructured, casual approach.  They feel it creates an informal, open atmosphere that encourages candor.  Unfortunately, this is usually a sign of lack of preparation.  The result, more often than not, is rambling confusion.  While some subjects get beaten to death, other areas can be overlooked completely, as the meeting drifts aimlessly.  (Rating: _______)
    
   A better way:  Keep in mind that ad libbing is for amateurs.  Take the time to prepare for an interview, if  only by developing a discussion outline.  Both you and the candidate will get more out of the meeting.  Most of all, you’ll be sure to cover all important points.  That way you ask all the questions you need answered…and the candidate gets all the information he or she requires.
2. I confess that I do like to dazzle job applicants a bit, impress them with my success and that of the company.  This is usually rooted in the SBO’s  justified pride in the company he or she has built.  Unfortunately, it can come off as blowing your own horn or, worse, shallow arrogance.  As a result, prospective employees may become cautious and defensive…not the best atmosphere in which to conduct a candid discussion.  (Rating: ________)

          A better way:  Be friendly, but not boastful.  Also, make sure that any background or bio information you share about yourself is for the specific purpose of gaining more information about the candidate.
 

3.      I’ve been known to let the applicant run the interview.  Some people are masters of the interview process.  They know how to control the meeting, say what the interviewer wants to hear and make a good impression by focusing on what makes them look good, while sidestepping negative information.  (Rating: ______)
 

 A better way:  Go in prepared, with your own agenda.  Then, if the applicant begins to drift or becomes evasive, keep returning to the question and bird dog for complete answers.

4.      I’ve been known to beg the question, help applicants find the “right” answer.  For instance, you might ask: “There will be some evening work at first, but I’m sure you won’t have any problem with that, will you?”  Astute applicants will quickly learn how to go with the flow and let you point them in the direction of the “right” answers.  (Rating: _______)

 A better way:  You will get more accurate, honest responses if you ask open-ended questions.  For example: “How do you feel about evening work several days a week?”
5.      I sometimes fail to follow up and get more details on important questions.  Most applicants expect to be questioned; in fact, they’ll probably enjoy talking about themselves.  But they also may be concerned about talking too much.  (Rating: _____)

A better way:  Be willing to follow up, even if it involves using such stock statements as “tell me about that” or “why do you say that?”

6.      I fail to take adequate notes.  Some interviewers believe that taking notes discourages candor and puts the candidate on guard.  Unfortunately, it also leaves the manager with no written documentation of what took place during the meeting.  If you’re interviewing a significant number of people each month, it won’t be long before you have difficulty keeping all your information straight. (Rating: ________)

 A better way:  Applicants expect you to take notes during the interview.  If you’re uncomfortable with this, jot down key phrases and ideas.  Then make sure to go back as soon as the interview is over and make detailed notes. 
 
7.      I tend to take too many notes.  Inexperienced managers, especially, may go overboard when it comes to taking notes.  If you write down every word, this will make the candidate uneasy.  At the very least, he or she will begin talking slowly and waiting while you record answers.  All spontaneity will be lost as the conversation gradually comes to a standstill.  Worst of all, the candidate’s answers will become clipped and formal — accurate, perhaps, but far from insightful. (Rating; ______)

 A better way:   As with all things, moderation is the key.  Take notes.  However, don’t let it become the focal point of the interview.  

8.      I generally form an opinion of the applicant during the first minute or two of the appointment.  Whether it’s love at first sight or an instant sense that this person is all wrong, such first-impression conclusions will skew your ability to be objective and effective during the rest of the interview.  Regardless, you should remain open minded. (Rating: _____)

 A better way:  Allow yourself to make NO judgment whatsoever about the candidate or his or her qualifications until after the meeting is over and you’ve had an opportunity to review your notes.

 HOW DID YOU DO?  Go over your answers and circle those with the highest ranking.  These are the areas on which you need to focus and work to improve.
 Recommendation:  Practice your interviewing skills with another manager or a friend.  Or you may wish to record an interview (but be sure to get the candidate’s permission first).  Then review how you conducted the interview and look for ways to improve.

Those few words have struck fear into Generations of Americans. One recent instance is the notion of further forcing employers to help employees build retirement nest eggs, need it, or not.

The trouble is, a great many American workers need it! A July 2007 Wall Street Journal Start Up Journal report by Kelly Spors announced the news this way: “Growing calls among lawmakers and economic researchers to create ‘automatic’ Individual Retirement Accounts (IRAs), which would require employers that don’t offer a retirement-savings plan to automatically deduct a portion of full-time employees’ paychecks and deposit it into IRAs under the employee’s name.”

The Basic Problem; A Proposed Solution

Personal saving as a percentage of disposable personal income in the U.S has fallen from over 10 percent in the early 1980s to rates of 1 to 2 percent over the past four or five years. According to the Commerce Department’s Bureau of Economic Analysis, the U.S. personal saving rate has fallen into negative territory. Automatic IRAS are intended to address these national problems.

Two bills introduced in the House and Senate support creating Automatic IRAs and mandating employers adopt them.

• Federal, state and local government employers and churches or church associations would be exempt, as would two additional groups;
• Employers with fewer than 10 employees paid $5,000 or more in the past calendar year, and employers under two years old that, in the past two years, had 100 or fewer employees paid $5,000 or more.

The intentions are noble — According to Craig Copeland’s, “Employer-Based Retirement Plan Participation: Geographic Differences and Trends: Employee Benefit Research Institute: Making saving easier by making it automatic has been shown to be remarkably effective at boosting participation in 401(k) plans, but roughly half of U.S. workers are not offered a 401(k) or any other type of employer-sponsored plan. Among the 153 million working Americans in 2004, over 71 million worked for an employer that did not sponsor a retirement plan of any kind, and another 17 million did not participate in their employer’s plan.

Automatic IRAs – The Mechanics

Checking under the hood of both Automatic IRA proposals, Heritage Foundation Employee Benefits guru, Craig Copeland summarized what he learned:

• Investment management, record keeping and other administrative functions would be contracted to private sector financial institutions as much as practicable.
• Costs would be minimized through a no-frills design, economies of scale, and maximum use of electronic technologies.
• When participant accounts reached a predetermined balance (e.g., $15,000) sufficient to make them sufficiently profitable to attract the interest of other IRA providers, account owners would have the option of transferring to IRAs of their choosing.
• Automatic IRAs require no employer contributions, no employer compliance with qualified plan or ERISA requirements; no employer liability or responsibility for IRA investment or provider selection, or for opening IRAs for employees.
• Also avoided, adverse effects on employer-sponsored plans or incentives encouraging firms to adopt new plans. The intent is drawing small employers into the private pension system.
• Copeland explains Automatic IRA contributions for the self-employed and those with no employer would be handled in one of ways:
(1) Extending the direct deposit option to independent contractors who work for employers (other than the very smallest businesses);
(2) Allowing participants to direct the IRS to make direct deposit of a portion of their income tax refunds; and
(3) Opening access to automatic debit arrangements, such as on-line and traditional means through professional and trade associations, which help arrange for automatic debit and direct IRA deposits.

“Automatic debit models the power of payroll deduction by continuing automatically once initiated,” Copeland concludes. Contribution incentives such as matching IRA deposits may be added: with private financial institutions maintaining these accounts delivering matching contributions are reimbursed through tax credits.

Largess is Grand, but So is Forethought!

Without question, jacking up Americans’ dismal savings rate is worthy: Hence the growing calls among lawmakers and economic researchers urging creation of Automatic IRAs requiring employers not offering other retirement-savings plans automatically to deduct a portion of full-time employees’ paychecks and deposit it into IRAs in their employees’ names.

Similar to automatic-enrollment in 401(k)s, where employees are automatically enrolled in their employers’ 401(k) plans unless they opt out – employers without retirement plans would automatically invest employees’ money in an IRA, though employees could elect a default option with investments geared toward the individual’s expected retirement age. Employees would also have the choice to opt out entirely.

Count on small businesses to be most effected by these rules, assuming they ever pass our increasingly deadlocked Congress. Still, that pesky low savings rate and lack of retirement planning resources plaguing many working Americans persists! Of firms with fewer than 100 employees, reports the retirement group. AARP, just 9% offer defined benefit retirement plans, with 41% offering defined contribution plans, such as traditional 401(k)s. While only 37% of employees at small firms participate in any plan employer-sponsored retirement plan, states the AARP report.

A supporter of both proposed pieces of legislation, however, AARP believes Automatic IRAs would bring retirement savings to those sorely lacking it. Spor says, adding: “The report finds that a $1,000 annual savings into an automatic IRA with a modest 4% annual return would create $31,000 after 20 years and $58,300 after 30 years.”

Automatic IRA critics are concerned small businesses will be discouraged from establishing their own, more-generous retirement plans by automatically directing employee money into these IRAs; and the AARP concedes the administrative costs alone of tracking of Automatic IRA withdrawals could be a show-stopper, especially among small, non-exempt SBOs. Though bills encouraging cost-offsetting employer tax credits are proposed, many small employers not facing annual tax bills will reap few if any benefits of those credits.

Traditional IRAs – The Downside

The operative term associated with tax-deferred retirement plans, such as IRAs, 401(k)s and 401bs, tax-deferred, not tax-free! Tax-deferral is good, but it’s not the panacea it was once thought to be. While we recognize the benefits of tax-deferred retirement savings: because the money grows untaxed until withdrawn, and IRAs are more flexible than other retirement plans such as 401(k) or 403(b) plans, etc. because you can invest it in almost anything, from stocks and mutual funds to bonds and real estate.

Reducing taxes on IRA withdrawals. As in anything to do with our personal finances, however, education is critical to successful retirement planning. Even now, many IRA and 40l (k) participants fail to realize taxes are due on their tax-deferred retirement money at withdrawal. What was originally conceived of as an advantage–funds were expected to be taxed at lower rates after retirement–may turn out to be wishful thinking.

In proposing Automatic IRAs, Congress may be a day short and a dollar late once again! For example, in “Helping You Avoid IRA Distribution Mistakes,” Tampa, FL financial advisor, David Siracusa, of Carlton Associates, Inc. makes the following observations: “You own two pots of money: The money that has already been taxed (let’s call it ‘regular money’) and the money that has not been taxed (let’s call this ‘retirement money, such as IRAs, 401b,etc.). When you spend a dollar of regular money, the cost to you is exactly $1. When you spend $1 of retirement money, the cost to you is could be as much as $1.54 (1.65) because you have to pay off Federal income tax on the amount you withdraw. Therefore, if you want to reduce your taxes,” consider not taking more than the required distribution from your retirement money.

“Some people think they should never spend their principal, but this can be a mistake if you want to save taxes,” Siracusa continues:”It could be better to spend some of your regular assets first, so that you can take advantage of the tax-deferral benefits associated with IRAs and qualified plans.

Want to know More? The Carlton &Associate report is available free-of-charge from Mr. Siracusa by emailing: dsiracusa@carlton.com
or phoning (813) 267-4087).

Or as Tampa financial strategist, Joseph De Paulo puts it to seminar audiences: “Are you planning your retirement or Uncle Sam’s? You should be aware that your IRA, pension and 401 (k) benefits will be taxed at a higher rate at retirement.”

Large employers already do their share for employees through qualified retirement plans and matching 401(k) contributions; the Feds pitch in through Social Security Retirement benefits (though for various reasons that program is immune to annulment, younger Americans should not bet the ranch on retiring in comfort on Federal money alone). Also available, an already generous assortment of Individual Retirement Accounts: all discretionary to participants, but carrying the tax caveats described above.

If Automatic IRAs become law, businesses that have no other retirement plan would now automatically invest a portion of their employees’ money in its mandatory IRA. Workers can stick with the automatic plan or elect default investments based on their expected retirement ages: or simply pass on the whole deal.

Though you may be surprised by the extensive level of benefits provided, many SBOs concede being in a “David-and-Goliath” struggle with the big boys and girls. “They do not have the advantages of gigantic human resources departments and marketing departments, and can’t always match their competitors’ salaries and benefits,” wrote Dave Siminoff in The Tampa Tribune in July. When that happens, small employers can find themselves in a very tight financial bind.

Forget the Age of Aquarius. How About the Age of Infinity?

This whole issue is moot for the many older workers who have been saving the bare minimum, dragging down US saving rates to new lows while recklessly living only for today. They’ve already dropped the ball on retirement planning, and retrieving it won’t be easy! The problem is, many of these folks are expected to live decades longer than their forebears, and, if they hold true to form, can be counted on to spend millions more in retirement than anticipated. We Baby Boomers never did do things the easy way!

“What? Me retire? Heck, no!” It may be too late to do much about that now, which is why so many Boomers are scrambling to secure late-in-life careers: reinventing themselves by becoming born-again SBOs or returning to work in so-called “bridge” careers. Of course, they “love” every minute of it (or so it says here): But then that’s one reason Freestyle Entrepreneur was created!

Automatic IRAs – A Forecast

A do-nothing Congress focused squarely on the 2008 presidential race, with both parties awash in acrimony over Iraq, the influences of radical Islam, and defending America in the international War on Terror, is not expected to produce much new legislation this term or next: Automatic IRAs included.

That government is best that governs least, Thomas Paine famously said. Help or hindrance, or otherwise, our current state of political ennui may allow the pros and cons of Automatic IRA measures before Congress to be more fully debated (among the key provisions benefiting from further discussion: collective v. individual responsibility; the very backbone of democracy), which considering the long-term impact of these proposals, may be the best way to go.

Meanwhile, perhaps the wheels of retirement planning education and awareness will continue spinning in America, wising up workers to their hapless state of financial preparedness, and the need to act sooner than later to set things straight.

Sources

• Start-Up Journal, Automatic IRAs for Small Employers? Kelly Spors, http://www.startupjournal.com/howto/management/20070712-memos.html?mod=RSS_Startup_Journal&sjrss=wsj

• Employee Benefit Research Institute, Employer-Based Retirement Plan Participation: Geographic Differences and Trends, By Craig Copeland, http://www.ebri.org/about/team/index.cfm?fa=CraigCopeland

• KirkWalsh.com, Automatic IRAs — a Quick Fix for Workers Without Pensions? http://www.kirkwalsh.com/blog/2006/03/03/automatic-iras-a-quick-fix-for-workers-without-pensions/

• Heritage Foundation, Automatic IRAs — a Quick Fix for Workers Without Pensions? http://www.heritage.org/Research/SocialSecurity/tst062906a.cfm

• Washington Post, Automatic IRAs — a Quick Fix for Workers Without Pensions? By Albert B. Crenshaw, http://www.washingtonpost.com/wp-dyn/content/article/2006/02/18/AR2006021800130.html

• Market Watch, Shifting IRAs to automatic — A plan for workers with no other retirement-savings vehicle, By Robert Powell, http://www.marketwatch.com/news/story/new-push-automatic-retirement-savings-plans/story.aspx?guid=%7BD7C2CAB4-C363-4A5E-AA37-67AFF7BB8BD4%7D

Bill Willard is a freelance writer in Clearwater FL. Email him at billw15@verizon.net, Call 727 724-8338, or visit his Website at http://www.writergazette.com/WillardAssociates.shtml

If you’re going into business, one of the big questions you must answer is, “What should I do about my health care benefits?” For me, an HSA was the answer.

As a small-business owner in good health, I was paying more than $4,400 a year in medical insurance premiums, with a huge deductible and big co-pays. This year, my premiums are around $1,700, and I get to pay my deductible with pre-tax dollars.

I did it by switching to an HSA (Health Savings Account). HSAs are the new kids on the block, introduced back in 2004. When I first started reading about them, I figured they’re too good to be true. They’re not. In fact, they’re one of the best deals to come down the pike in ages for self-employeds and small-business owners.

Available to everyone not covered under another plan – individuals as well as business owners – they combine tax-deferred savings accounts (that can be converted to IRAs at retirement) with high-deductible health insurance.

Here’s how they work: You buy an HSA-approved, high-deductible medical insurance policy. Your deductible must be at least $1,000 for singles, $2,000 for families; the maximum is $5,000 and $10,000.

Then find a bank or credit union that will set up an HSA account, which works the same as an IRA. Most pay an embarrassingly nominal interest rate, but you can also put your money into mutual funds. (Caution: The few package deals I encountered either had overpriced insurance or accounts with high fees, so I built my own plan, getting my insurance from Anthem (formerly Blue Cross/Blue Shield) and my account from the HSA Bank in Sheboygan, Wisconsin. That’s not an endorsement; just where I found the best deal for me.)

The best part: Under current law, you can contribute — and deduct from taxable income – deposits for 2007 up to $2,850 for singles and $5,650 for families. These numbers will go up for the 2008 tax year.

Your HSA comes with a checkbook or debit card. The money can be used for everything from Acupuncture to X-rays, as well as bandages, dental treatment, eyeglasses, weight loss programs, and more.

When you turn 65 and become eligible for Medicare, your HSA converts to an IRA, so the money left can go to toward retirement.

In short, an HSA can be one heck of a deal. Still, HSAs are only slowly catching on. Two reasons: First, few insurers or banks have figured out how to work together. Second, no one is sure how to really make money from HSA sales.

On the insurance side, HSAs can cut deeply into insurance company pockets. High-deductible policies are not big money makers for them. Plus, few agents have an incentive to discuss them. It took me about a dozen phone calls and a few hours online to get the details. In all fairness, part of the problem is that few companies know what to do with them or how to set them up. You’re pretty much on your own

Is an HSA right for everyone? Of course not. If you already have a good health care plan, may have trouble getting insured for health reasons, or generally have high medical bills, you may be better off sticking with what you have.

Still, do some homework, just to make sure. If an HSA meets your needs, you could shave thousands of dollars off your medical insurance bills, reduce your income taxes, pay your deductibles with pre-tax dollars, and even build long-term equity.

What about you? I don’t claim to be an expert on HSAs, so I’d like your input and feedback and experiences as well. Also, if you have an HSA and you like it, tell the rest of us about the provider and other details.

Thanks. As always, work hard, make money, have fun.

– JRIngrisano
The Freestyle Entrepreneur