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Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Technology... Trust... And The Need To “Stay Connected” As We Look Toward 2010

Our Annual Interview With Ellen Philip, Of Ellen Philip Associates.

Carl: It’s been a roller coaster of a year, to say the least. All of us in the shareholder service space are wondering how everything will shake out, eventually. From your perspective, as a sort of niche player, how has the economic implosion affected business realities in our small corner of the financial industry? Do you notice any differences?

Ellen: If you duck into a bomb shelter during an air raid, the first thing you do, after the all-clear, is sniff around to see who and what has been left standing. The financial storm has been a bit like a bombing raid, for all of us. It has changed many things and shaken up lots of others.

There is something I’ve noticed – something that’s been happening to an unprecedented degree. I can’t pinpoint exactly why, but in the last six months or so, among the companies we’re in contact with, there’s been an upsurge in process re-evaluation. A lot of companies seem to be taking advantage of a slack time by rethinking the way they’ll get things done, once things start opening up.

Cost-cutting seems to be one strong motivation, as always. Risk mitigation is another. In any event, there’s a lot of reassessment in the air – a lot of zerobased thinking, on an operational level. Many companies seem to be going back to basics, including taking a fresh look at strategic relationships. New connections are being explored and made. And trust seems to be back in fashion. You deal with who you know - the tried and true.

I think all of this is very healthy. Certainly it’s encouraging for a business such as ours. I know that the need to take a fresh look at processes has been a constant theme in the Optimizer.

Carl:Your clients, for the most part, are companies far larger than yours, with far greater financial resources and people resources – sometimes infinitely greater. Have you ever wondered why such companies turn for help to yours?

Ellen: It’s something we’ve asked ourselves, almost from Day One. We’re now in our 31st year, and we continue to ask it all the time. Keeping the question in mind is part of why we’ve survived.

The reason why companies turn to us is certainly not because they believe we have a proprietary black box we can work magic with. There’s nothing we can do that most of our clients couldn’t do themselves – providing it made business sense for them to make the investment and expend the effort. We know this, and our clients know it, too.

If you were to look at the applications in which our services are put to work, you’d find a common thread running through them. We shine in situations that most of our clients would like to avoid - situations classified as “non-routine”. We’re specialists in exceptions processing. Our meat and potatoes are in situations that can’t be readily adapted to regular, day-to-day, high-volume systems. Or situations a company might encounter only once a year or every now and then – not frequently enough to justify gearing up and staffing for.

Carl: So what is it you’ve kept in mind? What has made it possible for a small company like yours to survive?

Ellen:We’ve survived, I believe, because we’ve always kept in mind that technology – as vital as it is – isn’t the answer to everything: In fact technology frequently causes as many problems as it solves. In financial services, technology is the easiest of all things to replace.

As a small company, you’d be nowhere without technology – which is a great leveler, by the way. Both the big and the small have access to it. But technology alone isn’t going to ensure business success. A big company dealing with a small company expects something more.

Keeping this reality in mind colors your way of thinking. It influences the way you respond, for instance, to a call at 6 P.M. on a Friday evening, just as you’re about to leave for dinner. It influences how particular you are about being accessible and keeping commitments. It influences how hard you press yourself and your staff to meet or beat a deadline, or how hard you try to accomplish something new.

I’m trying to say, without actually saying it, that only service can provide the edge for a small company.

The word “service” however has become so trite, so shopworn, that people cringe when they hear it. Everyone talks of their great service, even if they don’t really know what the concept entails.

Carl: Is there something else you bring to the table, apart from service and processing flexibility?

Ellen:There’s trust, of course- without that you have nothing. But something else has struck me hard in recent years - even more so in the last year or so. All around us, in our industry, production teams are being torn apart, for any number of reasons. Older and more experienced hands have been especially hard hit. As they’ve disappeared, their knowhow has disappeared with them - at a rate that replacement cannot match. Hardly any of what they carry in their heads has ever been documented, so that others could follow.

There’s been an enormous brain-drain. As companies merge, shrink or simply disappear, institutional memory – the collective understanding of how processes work, and, more importantly, the reason why they should be done in a particular way – has taken devastating blows. The shortfall in seasoned judgment has not only led to operational bottlenecks, but, in many instances, to practices that carry wider exposure to risk.

The collective memory of our production team is something important we bring to the table. Our team has been intact for a long, long time. Two key members have been with us for over 20 years, and others are not far behind.

Carl:You mentioned something about technology sometimes causing as many problems as it solves. What did you have in mind?

Ellen:Automated telephone systems, as a technological advance, are near the top of my list of mixed blessings. Not that they are mixed blessings, intrinsically, but because of the way in which so many of them have been implemented. The same would apply to many Internet sites - sites supposedly dedicated to customer service.

If you experience how many companies have implemented these automated systems you get the feeling they were designed, specifically, to eliminate the possibility of human contact, rather than to expand the range of what a human staff could possibly handle. You get the feeling that many companies see their phone systems and Internet sites as a way in which to hide away from pesky customers and clients. Perhaps it’s convenient. Maybe it’s even efficient. But hiding from your customers, I believe, is a big business mistake. It’s a fact that no one system can be programmed to accomplish everything. So, it seems to me, in a system that’s well thought through there has to be a light at the end of the tunnel – a point at which you can reach out for human help, if need be. That this cannot be done, all too frequently, is not just programmer error. It seems that many companies believe there are X number of customers, or potential customers, they can simply kiss off. In a small company, this is not an attitude you can afford to take.

Carl:The theme of this year’s magazine is “Staying Connected”. Can you share your thoughts on how smart companies should “stay connected” in 2010, and with whom?

Ellen: I think 2010 will turn out to be “The Year of the Shareholder” in a wide variety of ways. Many shareholders are disillusioned and some are downright angry at what they perceive to be widespread disregard by corporations, and by corporate managers and directors, of their own best interests as shareholders. We have seen signs of this already, in terms of much lower participation in the voting process than we’ve ever witnessed in our 31 years as proxy processors.

We have also witnessed higher than ever numbers of votes being withheld from certain directors - even when there is no formal recommendation against them from proxy advisory firms.

Clearly, smart companies will want to try to stay better-connected with their investors, and to do their best to restore a sense that their interests are tightly connected, and to restore the level of trust that most of us used to take for granted.

We are specialists in Employee Plan voting, as you know, and here too we think that smart companies will make special efforts to stay connected to their employee voters. Many employee-owners are at least as disillusioned, and as distrustful as outside owners are, and some are a lot more so.

Especially important to note, the “mathematics” of proxy voting will change dramatically in 2010 – not just with the loss of the “broker votes” that were always in favor of management positions, but because the really angry voters will always vote while, as noted, the disillusioned or “unconnected” voters are voting less and less often. So employee votes – which really should be in your favor if you have done your job right – will be more critical than ever to round up.

And this brings me back to technology, which should really be our very best friend when it comes to “staying connected”.

We need to be sure that the technologies we employ will expand connectivity, and will be welcoming to share owners, and will meet their needs and improve their levels of involvement and participation in the voting process – and, above all, not be “turnoffs”.

So, as I said earlier, there probably is a need for process re-evaluation at many companies. And certainly, if the goal is to stay closely connected with shareowners, the need for public companies and their key suppliers to stay connected – both in terms of systems and procedures, but more importantly in terms of culture and “approach” – is more important than ever before.

Our annual interview with Ellen Philip, of Ellen Philip Associates.

Carl: It’s been a roller coaster of a year, to say the least. All of us in the shareholder service space are wondering how everything will shake out, eventually. From your perspective, as a sort of niche player, how has the economic implosion affected business realities in our small corner of the financial industry? Do you notice any differences?

Ellen: If you duck into a bomb shelter during an air raid, the first thing you do, after the all-clear, is sniff around to see who and what has been left standing. The financial storm has been a bit like a bombing raid, for all of us. It has changed many things and shaken up lots of others.

There is something I’ve noticed – something that’s been happening to an unprecedented degree. I can’t pinpoint exactly why, but in the last six months or so, among the companies we’re in contact with, there’s been an upsurge in process re-evaluation. A lot of companies seem to be taking advantage of a slack time by rethinking the way they’ll get things done, once things start opening up.

Cost-cutting seems to be one strong motivation, as always. Risk mitigation is another. In any event, there’s a lot of reassessment in the air – a lot of zerobased thinking, on an operational level. Many companies seem to be going back to basics, including taking a fresh look at strategic relationships. New connections are being explored and made. And trust seems to be back in fashion. You deal with who you know - the tried and true.

I think all of this is very healthy. Certainly it’s encouraging for a business such as ours. I know that the need to take a fresh look at processes has been a constant theme in the Optimizer.

Carl:Your clients, for the most part, are companies far larger than yours, with far greater financial resources and people resources – sometimes infinitely greater. Have you ever wondered why such companies turn for help to yours?

Ellen: It’s something we’ve asked ourselves, almost from Day One. We’re now in our 31st year, and we continue to ask it all the time. Keeping the question in mind is part of why we’ve survived.

The reason why companies turn to us is certainly not because they believe we have a proprietary black box we can work magic with. There’s nothing we can do that most of our clients couldn’t do themselves – providing it made business sense for them to make the investment and expend the effort. We know this, and our clients know it, too.

If you were to look at the applications in which our services are put to work, you’d find a common thread running through them. We shine in situations that most of our clients would like to avoid - situations classified as “non-routine”. We’re specialists in exceptions processing. Our meat and potatoes are in situations that can’t be readily adapted to regular, day-to-day, high-volume systems. Or situations a company might encounter only once a year or every now and then – not frequently enough to justify gearing up and staffing for.

Carl: So what is it you’ve kept in mind? What has made it possible for a small company like yours to survive?

Ellen:We’ve survived, I believe, because we’ve always kept in mind that technology – as vital as it is – isn’t the answer to everything: In fact technology frequently causes as many problems as it solves. In financial services, technology is the easiest of all things to replace.

As a small company, you’d be nowhere without technology – which is a great leveler, by the way. Both the big and the small have access to it. But technology alone isn’t going to ensure business success. A big company dealing with a small company expects something more.

Keeping this reality in mind colors your way of thinking. It influences the way you respond, for instance, to a call at 6 P.M. on a Friday evening, just as you’re about to leave for dinner. It influences how particular you are about being accessible and keeping commitments. It influences how hard you press yourself and your staff to meet or beat a deadline, or how hard you try to accomplish something new.

I’m trying to say, without actually saying it, that only service can provide the edge for a small company.

The word “service” however has become so trite, so shopworn, that people cringe when they hear it. Everyone talks of their great service, even if they don’t really know what the concept entails.

Carl: Is there something else you bring to the table, apart from service and processing flexibility?

Ellen:There’s trust, of course- without that you have nothing. But something else has struck me hard in recent years - even more so in the last year or so. All around us, in our industry, production teams are being torn apart, for any number of reasons. Older and more experienced hands have been especially hard hit. As they’ve disappeared, their knowhow has disappeared with them - at a rate that replacement cannot match. Hardly any of what they carry in their heads has ever been documented, so that others could follow.

There’s been an enormous brain-drain. As companies merge, shrink or simply disappear, institutional memory – the collective understanding of how processes work, and, more importantly, the reason why they should be done in a particular way – has taken devastating blows. The shortfall in seasoned judgment has not only led to operational bottlenecks, but, in many instances, to practices that carry wider exposure to risk.

The collective memory of our production team is something important we bring to the table. Our team has been intact for a long, long time. Two key members have been with us for over 20 years, and others are not far behind.

Carl:You mentioned something about technology sometimes causing as many problems as it solves. What did you have in mind?

Ellen:Automated telephone systems, as a technological advance, are near the top of my list of mixed blessings. Not that they are mixed blessings, intrinsically, but because of the way in which so many of them have been implemented. The same would apply to many Internet sites - sites supposedly dedicated to customer service.

If you experience how many companies have implemented these automated systems you get the feeling they were designed, specifically, to eliminate the possibility of human contact, rather than to expand the range of what a human staff could possibly handle. You get the feeling that many companies see their phone systems and Internet sites as a way in which to hide away from pesky customers and clients. Perhaps it’s convenient. Maybe it’s even efficient. But hiding from your customers, I believe, is a big business mistake. It’s a fact that no one system can be programmed to accomplish everything. So, it seems to me, in a system that’s well thought through there has to be a light at the end of the tunnel – a point at which you can reach out for human help, if need be. That this cannot be done, all too frequently, is not just programmer error. It seems that many companies believe there are X number of customers, or potential customers, they can simply kiss off. In a small company, this is not an attitude you can afford to take.

Carl:The theme of this year’s magazine is “Staying Connected”. Can you share your thoughts on how smart companies should “stay connected” in 2010, and with whom?

Ellen: I think 2010 will turn out to be “The Year of the Shareholder” in a wide variety of ways. Many shareholders are disillusioned and some are downright angry at what they perceive to be widespread disregard by corporations, and by corporate managers and directors, of their own best interests as shareholders. We have seen signs of this already, in terms of much lower participation in the voting process than we’ve ever witnessed in our 31 years as proxy processors.

We have also witnessed higher than ever numbers of votes being withheld from certain directors - even when there is no formal recommendation against them from proxy advisory firms.

Clearly, smart companies will want to try to stay better-connected with their investors, and to do their best to restore a sense that their interests are tightly connected, and to restore the level of trust that most of us used to take for granted.

We are specialists in Employee Plan voting, as you know, and here too we think that smart companies will make special efforts to stay connected to their employee voters. Many employee-owners are at least as disillusioned, and as distrustful as outside owners are, and some are a lot more so.

Especially important to note, the “mathematics” of proxy voting will change dramatically in 2010 – not just with the loss of the “broker votes” that were always in favor of management positions, but because the really angry voters will always vote while, as noted, the disillusioned or “unconnected” voters are voting less and less often. So employee votes – which really should be in your favor if you have done your job right – will be more critical than ever to round up.

And this brings me back to technology, which should really be our very best friend when it comes to “staying connected”.

We need to be sure that the technologies we employ will expand connectivity, and will be welcoming to share owners, and will meet their needs and improve their levels of involvement and participation in the voting process – and, above all, not be “turnoffs”.

So, as I said earlier, there probably is a need for process re-evaluation at many companies. And certainly, if the goal is to stay closely connected with shareowners, the need for public companies and their key suppliers to stay connected – both in terms of systems and procedures, but more importantly in terms of culture and “approach” – is more important than ever before.