Does Your Employer Have Life Insurance on You?

Chief executives are always going on about how employees are their companies’ most valuable assets. They say it even as wages stagnate and executive pay skyrockets. They say it amid layoffs and as non-executive jobs are shifted overseas along with company profits.

And they say it even though it is wrong in a technical, yet important way. For all the talk about what valuable assets employees are, employees do not show up as assets on the company’s balance sheet, for good reason. Because the company does not and cannot own its employees, they are not and cannot be assets of the company.

Yet your employer can put a value on your head.

The NY Times’s David Gelles wrote recently about banks and other companies that buy life insurance on their employees, naming the company as beneficiary. In the process, the company reaps tax-free windfalls:  The company-paid premiums are tax free; the investment returns on the policies are tax free; and the death benefits eventually received by the company, sometimes decades after employees have left the company or retired, are also tax free. To sum up: By purchasing a financial product (life insurance) the company has turned you (your life and your death) into an income generating asset  for the company, and a tax free one  at that.

It’s not illegal, but it’s dubious in the extreme.

One thing is sure: COLI is popular. A federal law from 2006 says that companies can insure only the highest paid 35 percent of employees, who must give their consent. That law slowed the practice, which was growing unchecked before, but companies still go beyond insuring key executives whose deaths might cause economic disruption.

About one third of the largest 1,000 corporations have COLI policies and an estimated $1 billion worth of new policies are put in place every year. As much as 20 percent of all new life insurance is taken out by companies on their employees.

What do the employees get? Banks and companies say the earnings from the policies are used to cover long term health care, pension obligations and deferred compensation. But in many cases they can use the tax free-gains however they want.

Banks, for instance, max out on life insurance for employees because the policies can be redeemed for cash on a moment’s notice, if needed, and are thus counted by regulators as top quality bank capital. Non-bank corporations don’t have to report their insurance holdings so there’s no reliable way to track who is buying the insurance or how it’s used.

At the very least, there needs to be better disclosure; after all, the public subsidizes COLI through generous tax breaks on the policies and so deserves to know what’s going on.

More also needs to be done to thwart the potential for unjust corporate enrichment. The law requires employees to consent to an employer buying life insurance on his or her life. But why doesn’t that consent come with strings attached? Say, that investment profits from the policies are split with employees, and death benefits shared with the employees’ families?

That arrangement would still have a queasy feel to it, but at least employees would be getting some direct benefits, rather than simply serving — alive and dead — as insurable assets of corporate owners.

(This article is excerpt from a NY Times article entitled "What Are You Really Worth to Your Employer - Teresa Tritch).

CIO's, Think Like a Business Executive

The one-two punch of digital technology and massive enterprise disruption has left many CIOs feeling as though they've been unexpectedly dropped into a war zone. What's more, there's a growing recognition that many of the tried-and-true systems and tools of the past are no longer completely effective in running IT and the business of today.

Like business executives, CIOs should actively manage their IT portfolio in a way that drives enterprise value and evaluate portfolio performance in terms that business leaders understand—value, risk, and time horizon to reward. CIOs who can combine this with agility and align the desired talent can reshape how they run the business of IT.
This means tying together disruptive technologies, including crowdsourcing, mobile only, big data and cloud.  Unfortunately, the current tools for managing risk and leveraging assets may not work in this new world,

Here's what business-based CIO thinking looks like and what IT leaders need to focus on:

• Valuation. Understand the quantitative and qualitative value the IT organization contributes to the business.

• Handicap. Grasp how the competitive landscape will likely evolve by more fully understanding product and technology roadmaps.

• Hedge. Develop a strategy to invest and divest technology and assets.

• Promotion. Build an IT brand that is respected, if not admired, within the organization.

• Talent brokering. Identify skill gaps and understand which capabilities the organization can develop internally and how to tap external talent.

• Agility. Balance nimbleness and responsiveness with architectural integrity.

A CIO must possess a complete technology inventory, have the means to evaluate the portfolio (including risk, value and strategic importance of each portfolio item), double down on winners and fold losers, and have direct line of sight to revenues.

Deliberate Practice makes perfect

Simply put, there’s a difference between doing things you already know
how to do and doing things that force you to stretch and improve your
skills.

To get better—and win the promotions and opportunities
most of us dream about—we must set out to intentionally improve our
performance. In studying why some people develop remarkable careers,
this is a key unheralded distinction between the average knowledge
worker and the stars at most companies: the former work hard while the
latter systematically practice hard skills --this type of structured
activity is called deliberate practice!!

1) Deliberate practice
requires clarity. Set a clear goal slightly beyond your current
abilities, but not too far beyond, and list specific actions that
advance you toward your goal.

2) Deliberate practice requires
feedback. Assuming you don’t reach your goal on the first try, you need a
source of objective feedback so that you can improve on your next
iteration. Without frank, even harsh, feedback, your progress will
likely stall.

3) Deliberate practice is unpleasant. You have
to stretch yourself beyond where you’re currently comfortable—not a
pleasant feeling. To make deliberate practice work, you must not only
tolerate unpleasantness (and stick with the task, regardless of your
urge for relieving distraction), but learn to seek it, like a
bodybuilder seeks muscle burn.

True standouts systematically
develop rare and valuable skills. Building these skills requires
practice, and it is not something that you gravitate toward naturally.

3 Practical Ways to Become An Innovative Leader

Innovation doesn't require genius, luck, or magic--but it does require talking to the right people, being able to clearly articulate a vision, and putting the right partnerships in place. Having a practical guide can help anyone develop into an innovative leader. Here are my top three steps:

Step #1. Talk to the Right People
Your most important asset is your mind. Your experience, expertise, and know-how governs your understanding of what is possible, the options you see, the strategy you formulate, and your assessments of the environment around you. To expand your vision, meet with other minds! Make it a habit to identify and visit the people who will provide you with fresh ideas, key learning, new tactics, and strong strategies.

Step #2. Articulate the Way Forward
People rely on their leaders to craft a vision of the future that makes sense and can guide their everyday decisions. Some of the leaders I have met improvise this activity and many do it badly. And yet articulating a rousing vision of the future isn’t difficult. It can be your secret super-power, if you just master three tactics:

• Be explicit about your conclusions and how you came to them. Speak in terms people can understand and relate to. Do more than share judgment--provide insight to your reasoning. 

• Give people the opportunity to ask questions. Encourage diverse points of view and different backgrounds. Let people react, inquire, challenge, and extract the information they need to satisfy their understanding. Then you will be in the best position to move forward together.

• Customize your message to your audience. Include something useful in their day-to-day work--utility helps information stick. 

Step #3. Build Informal Partnerships that Generate Synergy
Leadership today is largely about identifying the partnerships that will lead to broad, powerful impact and growth. I’m talking about supportive and symbiotic relationships here, not contractual business partnerships.

Some many leaders shy away from informal partnerships, fearing the vulnerability that comes with relationships. If you overcome that fear, you get the benefits. Here are tips to help you master the third step of innovation leaders:

• Be clear about what you hope to get out of the partnership. Take the time to articulate the value to both parties that makes it worth pursuing.

• Share the goals of the partnership with others who have a stake in its success. Initiate informal conversations, over the phone, via email, or over coffee, with the clients, vendors, industry experts, investors, and others who can share their perspectives how to get the most out of your partnership. Then share what you learn with your partners.

• Take the lead in coordinating partnership activities. Be the one who identifies and handles important issues as they arise. Take responsibility for planning and facilitating joint events. Foster joint development. Provide regular assessment of the partnership that prove its value. 

1+1+1 = > Sum
These three tasks required of innovative leaders--talking to the right people, articulating the way forward, and building informal partnerships--work together. The interaction of these contributions produces a total effect that is greater than the sum of the individual components. Together they ensure your leadership is well informed, a source of unambiguous guidance, and reinforced by powerful allies.

Are you using these steps to become an innovative leader? What steps do you find most successful?

Innovation's Magic Is In The Turn, Not The Prestige

I recently attended a conference where the keynote was entitled "Innovation is Analogous to Magic" and it reminded me of the opening dialogue of Christopher Nolan’s 2006 film, The Prestige:

"Every great magic trick consists of three parts or acts. The first part is called “The Pledge”. The magician shows you something ordinary: a deck of cards, a bird or a man. He shows you this object. Perhaps he asks you to inspect it to see if it is indeed real, unaltered, normal. But of course…it probably isn’t. The second act is called “The Turn”. The magician takes the ordinary something and makes it do something extraordinary. Now you’re looking for the secret… but you won’t find it, because of course you’re not really looking. You don’t really want to know. You want to be fooled. But you wouldn’t clap yet. Because making something disappear isn’t enough; you have to bring it back. That’s why every magic trick has a third act, the hardest part, the part we call “The Prestige”.

It made me think that innovators take something ordinary, do some extraordinary things to it, and then make it re-appear in grandiose fashion. It’s a great trick. It’s so good, in fact, that I think it’s fair to call it true magic. 21st Century innovation remains focused on The Turn, the process by which they make the ordinary extraordinary.

While it lacks the pomp and circumstance of a Prestige on stage at some big event, this interaction is much more intimate, and as such, much more powerful. You may not perceive it directly, but the care and craft of The Turn percolates through your hands and eyes. Within minutes or even seconds, you just know this is something different. Something far beyond what others are doing with their false magic. You want this. You need this.

As an innovative leader are you focused on The Turn or The Prestige??