Katherine Kleski, co-owner and founder of Katherine's Collection Inc., received the 2002 Governor's Awards for Excellence in Enterprise. The Women's Excellence in Enterprise Award recognizes women-owned businesses that have shown outstanding financial and operational strength. Gov. Bob Taft selected Kleski in the Wholesale/Retail category based on the growth Katherine's Collection has experienced over the last 11 years.
The Akron-based integration solutions firm hired programmer Brian T. Phelan to work in its Akron office.
COHEN & CO.
Bob Brahler was promoted to manager at Cohen & Co. He is based out of the firm's Alliance office in the tax and accounting and auditing department. Nevin Nussbaum was promoted to manager. He is based out of the Akron office's accounting and auditing department. Lisa Caraballo was promoted to senior staff accountant in the accounting and auditing department of the firm's Akron office.
Superior Staffing, with offices in Akron and Canton, hired Liz Kehn, executive recruiter.
DOCTORS HOSPITAL OF STARK COUNTY
Angela M. Boyle was hired as human resource director of Doctors Hospital of Stark County. Boyle most recently worked for Humility of Mary Health Partners in Youngstown.
SPECTRUM SURGICAL INSTRUMENTS CORP.
Patrick Benz was hired as sales representative and technical service guide for the Stow-based company.
INNIS MAGGIORE GROUP
The Canton-based communications firm hired Roya Long as senior media buyer and Shane Brown as graphic designer. Megan Hartong was promoted to senior account executive.
THE HOOVER CO.
Hoover named Clarke Van Dyke as LeanSigma project manager, Joseph M. Wagner as manager of budget and Dennis W. Williams as manager of general accounting.
Kristi Provance was promoted to regional manager for the family-owned Canton company.
BUCKINGHAM, DOOLITTLE & BURROUGHS
Craig S. Marshall was named managing partner of the Akron office. He joined the firm in 1986 and represents a wide variety of privately-held business throughout the area.
CHILDREN'S HOSPITAL MEDICAL CENTER OF AKRON
Marilyn Espe-Sherwindt was named director of the Family Learning Center in Tallmadge.
Carole Gifford was promoted to insurance operations officer, Jeannine Tate to vice president, Janice Holzopfel to assistant vice president and William Nappi to assistant vice president. Lucia Pileggi joined the bank as vice president, team leader of private banking.
HOMETOWN HEALTH NETWORK
Scott D. Price joined the Massillon health network as managing director of self-funded projects.
The Wooster-based company hired Brad Hochberger as western regional sales manager for industrial products.
ROETZEL & ANDRESS
The Akron-based law firm added James D. Kurek as partner in the labor and employment law group.
As editor of an automotive repair magazine, Patti Renner longed for a more feminine way to express herself. A colleague suggested she try selling wedding invitations on the side, and the idea blossomed into a business that continues to flourish six years later.
In 1996, Renner started the wedding invitation business out of her family room. Two years later, she moved to a small space in the Wallhaven Building on West Market Street in Akron.
She expanded her product line to include invitations for all social events, gifts and business stationery. When she outgrew her space, she moved into the 2,000-square-foot space of her former competitor, PIP Printing, which had just closed its doors.
Today, Renner continues to expand her invitation business (she has picked up lines of greeting cards and journals) while trying out another entrepreneurial idea: Coco's Coffee Bar, a shop she opened in April that specializes in espresso and chocolate.
She says the coffee shop "was a natural extension" of Renner's, because she found that the gift her Renner's customers were giving most often was chocolate.
She researched her idea thoroughly, visiting coffee shops on the West Coast which were selling both espresso and chocolate, then hiring Starbuck's original consultant, who came to Akron to help her open the shop.
She stresses that while she wants the coffee/chocolate concept to grow, she is sticking to the business principles that made the Starbuck's shop -- not the Starbuck's franchise -- a success.
"It's interesting to see what they've had to change to make the business as large as it is," she says of Starbuck's. "We are more of a purist."
She is also applying to the coffee shop many of the business principles that made Renner's a success. Like her invitations, the coffee and chocolates she sells are hand-picked to be the best in the world.
She also pays impeccable attention to customer service.
"We like to do the little unexpected acts," she says.
Her goal for both businesses?
"That everyone who leaves is a raving fan for us," she says. How to reach: Renner's Invitations & Stationery, (330) 836-0377.
Emerson starts by crediting his firm's success to two recent major changes in intellectual property law. First, he says, was the addition of a provisional patent, a "more informal" patent that can be obtained for about $1,000 instead of the usual $4,000 to $5,000.
This type of patent was created to help people try out their ideas to see if they merit a bigger investment. The patents last only one year instead of 10, but many times they are more practical, Emerson says.
The second change that has affected his business was the emergence of the business method patent. In the past, patents were usually only granted for technical or scientific inventions. Now, specific ways of doing business can be patented, and many companies are taking advantage of that protection.
When asked about his own success, Emerson cites these changes, with the reminder that "a rising tide lifts all boats." But common sense says that while these changes would certainly help a firm specializing in intellectual property law, patents, trademarks and copyrights, there has to be an HR factor that plays a role in a company's success or failure.
As an attorney who likes to sell, Emerson is in a minority.
"I enjoy the selling, the process of meeting new clients, trying to persuade them to use our firm for their intellectual property business," he says.
As a member of Leadership Akron and other local civic organizations, Emerson makes a point of being involved in the community in which he does business.
In addition, the other 24 employees of the firm, who include seven patent attorneys and two patent agents, have been hand-picked to meet the specific needs of the firm's client base, Emerson says.
Emerson, who worked as an engineer for Goodyear Tire before getting his law degree, says it's very difficult to find good patent attorneys because of the requirements involved in becoming one.
To specialize, attorneys must have an undergraduate degree in a related science or engineering field and must pass a federal patent exam in addition to the state bar exam.
Emerson says many law firms are unable to maintain their practices in the area because of the expense involved in staffing them.
"Many larger firms have (patent and trademark) divisions, but can't afford to staff them for the amount of business they get in patent law," he says.
There are approximately 11,500 ESOPs in place in the United States, covering 8.5 million employees who own some stock in the companies they work for. The legislation that encouraged the establishment of ESOPs is part of the Employee Retirement Income Security Act of 1974.
While an ESOP can have its drawbacks -- especially if it is not specifically tailored to the company putting it in place, experts say -- it can also be a great way to maintain a motivated, bottom-line-oriented work force, as well as provide tax benefits to the company.
The Ruhlin Co., a construction management company based in Sharon Center with an estimated $92 million in revenue, has had an ESOP in place since 1977. When it was established, the plan held 15 percent of the company's stock. Today, 88 of the company's salaried employees own 81 percent of Ruhlin's stock. (The other employees -- whose number ranges from 100 to 300 depending on the season -- are hourly, unionized workers who don't qualify for the plan.)
According to company President James Ruhlin, the ESOP's benefits outweigh any problems that might come along with the plan.
"It's an excellent vehicle to share the wealth," he says. "No one person in a company this size makes a company go or not go. They get to share in the rewards of their efforts."
Ruhlin, who has been president since 1996, says the company's current ESOP fits with his family's long-time philosophy of sharing profits with those who have helped make the company a success. Ruhlin's father, Jack, and uncle, Bill, started a profit-sharing program in the 1960s, before ESOPs existed.
The Ruhlin Co.'s ESOP is set up so that shares in the company are distributed yearly to employees. Those shares are allocated to individual employee accounts within a trust account, and cannot be disbursed until an employee retires or otherwise leaves the company, after a vested amount of time.
The shares' value depends on how well the company performs, and typically, the stock must be valued by an independent appraiser before shares are put into the ESOP.
"The ultimate benefit to the company is that you have employees who have a financial interest in the company, other than just a paycheck," Ruhlin says. "When people know they're going to own a piece of the pie, it's going to make a difference."
Ruhlin says the ESOP gives him a competitive advantage when it comes to luring qualified workers in an industry that has "typically not been popular with the younger generation."
Only about 10 percent of companies in the construction industry have ESOPs in place, he says.
"It gives us an advantage in our hiring ability."
But while an ESOP has its advantages, it's critical that company leaders put certain programs in place to help employees understand how the plan works and what their rights are as stockholders, advises Steve Clem, program coordinator for the Ohio Employee Ownership Center at Kent State University.
"When you go into one of these things, management has to be careful not to oversell," says Clem. "If this is something that management wants, and they want the employees to go along with, they have to be careful not to oversell and have people thinking that they're going to have input on every little decision that comes down the pike -- because that doesn't happen.
"Sometimes it's sold as though you're going to be in charge, and you can fire the supervisor that's been treating you badly all these years -- it isn't how it works," Clem says. "It runs just like a regular company, except that the employees who are part of the ESOP have an opportunity to have some input and to accrue an extra benefit."
Ruhlin agrees difficulties can arise when employees take the word "ownership" literally and falsely assume they can make direct decisions about how the company is run.
"The hardest part is that when you use the term 'employee owner,' the word 'owner' carries a connotation in peoples' minds that they run the place," he says. "That's not always a negative thing, but they are really a stockholder. You get all the rights of a stockholder, but not an owner."
Ruhlin says at The Ruhlin Co., shareholders elect the seven-member board of directors, which then makes executive decisions such as appointing the company president.
"People need to understand that an effective board provides advice to management -- it's not an employee watchdog group," he says.
Ruhlin, an engineer, was hired by the board six years ago to run the company, after it decided he was the best candidate for the job, regardless of his family name.
"I had to pass that test, or I'd just be a Ruhlin," he says.
His performance is evaluated by the board every year, and while he is the third generation of Ruhlins to run the company, there is no guarantee that a Ruhlin will always occupy the corner office. (Prior to 1996, a nonfamily member ran the company for two years.)
Ruhlin says some of the complications of an ESOP can be worked out through ongoing education of employees and management. As a member of KSU's Ohio Employee Ownership Center, Ruhlin participates in roundtable discussions with leaders of other ESOP companies, and Ruhlin's employees attend training classes.
When asked if he would recommend the ESOP structure to other businesses, he says only if it fits the needs of the ownership and is carefully crafted.
"We're basically a private company, but I've had to learn to run the company as a public company," he says. How to reach: The Ruhlin Co., (330) 239-2800; Ohio Employee Ownership Center at Kent State University, (330) 672-3028 or www.kent.edu/oeoc
Congress has granted a number of specific incentives meant to promote increased use of the ESOP concept.
Deductibility of ESOP contributions
As with all tax-qualified employee benefit plans, contributions to ESOPs are tax deductible to the sponsoring corporation up to certain limits. Contributions can be either in cash (which is then used by the ESOP to buy employer securities) or directly in the form of employer securities.
When employer securities are contributed directly, the employer may take a deduction for the full value of the stock contributed.
The deductibility of contributions to an ESOP becomes even more attractive in the case of a leveraged ESOP. Under this arrangement, an ESOP takes out a cash loan from a bank or other lender, with the borrowed funds being paid to the sponsoring employer in exchange for employer securities.
Since contributions to a tax-qualified employee benefit plan are tax deductible, the employer may thereafter deduct contributions to the ESOP which are used to repay not only the interest on the loan, but principal as well.
This makes the ESOP an attractive form of debt financing for the employer from a cash flow perspective. Each year, the company can deduct contributions of amounts up to 25 percent of the covered payroll, plus any dividends on ESOP stock, which are used to repay the loan.
Any contributed amounts used to repay interest on the loan are deductible without any limit.
An additional incentive allows a shareholder, or shareholders, of a closely held company to sell stock in the company to the firm's ESOP and defer federal income taxes on the gain from the sale.
To qualify for this "rollover," the ESOP must own at least 30 percent of the company's stock immediately after the sale, and the seller(s) must reinvest the proceeds from the sale in the securities of "domestic operating corporations" within a year. The seller, certain relatives of the seller, and 25 percent shareholders in the company are prohibited from receiving allocations of stock acquired by the ESOP through a rollover.
Deductibility of Dividends
Employers are also permitted a tax deduction for cash dividends paid on stock which has been purchased with an ESOP securities acquisition loan, to the extent that the dividends are passed through to the employees. The dividends are taxable as current ordinary income to employees.
A deduction is also available for dividends paid on ESOP leveraged stock to the extent that the dividends are used to reduce the principal or pay interest on an ESOP loan incurred to buy that stock. Source: The ESOP Association, www.esopassociation.org
That's because it typically takes banks six months to react to an economic downturn, so businesses are feeling the effects of the recession that began 18 to 24 months ago, depending on whom you ask.
"Experts say the recession started two years ago, and six months later, credit started tightening," confirms KeyCorp Akron District President Tom Tulodzieski. "Any time the economy goes into a recession, it's quite natural for banks to start tightening their credit standards. Throughout the last 12 to 18 months, nonperforming loans at all banks across the county have been going up significantly, and that causes a credit tightening."
There is hope, whether you're applying for a new loan or having trouble meeting the terms of an active loan. In either case, Tulodzieski says, you can help your situation by communicating with your banker. If you already have a loan:
* Be up front and candid. Keep your banker up-to-date on what's happening within your company and your industry.
"If a company is going through a difficult time, that should never be a big surprise to their banker," Tulodzieski says. "When it is a surprise, that's when things can start going sideways."
* Discuss measures you've taken to try to curtail the downturn. For instance, tell your banker the recession has affected sales, and share what you're doing to combat that.
"Have a good game plan as to what you're going to do to enable your company to get through this," he says.
If you're applying for a loan:
* Give your banker historical financial data that show a track record.
"We always like to see the last three years of financial statements and their most current interim financial statements," Tulodzieski says. "That gives the banker a barometer as to what kind of performance they can expect from that company."
* First approach the bank with which you already have a relationship.
"During a recession is probably when your relationship with your banker is tested the most," Tulodzieski says. "It's very easy when we're in a boom economy to go to your banker and ask for money. It's during times like this that if you do have an established relationship with a banker that it pays dividends." How to reach: KeyCorp., (330) 379-1446
The enforcement rests in the reasonable nature of the agreement. A noncompete agreement is defined as being reasonable if it is (1) required for the protection of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.
The general rule in Ohio is that noncompete agreements that are reasonable can be enforced. Those that are unreasonable, however, may still be enforced to the extent necessary to protect an employer's legitimate interest.
Courts have the authority and discretion to modify unreasonable agreements. Thus, one of the important components of noncompete agreements is the existence of a legitimate business interest.
Common legitimate business interests are:
* Trade secrets
* Valuable confidential business or professional information
* Substantial relationships with prospective or existing customers, patients, or clients
* Extraordinary or specialized training
Trade secrets are generally any formula, device, pattern or compilation of information that affords a business an advantage over its competitors and that is kept secret through consistent vigilance. Valuable confidential business or professional information refers to documents, videos and other materials which are used in the day-to-day function of the business and are kept secret.
Courts view any training as extraordinary or specialized that is unique and particular to the business and that is not an ordinary, common and widely known practice in the industry. They view client access, involvement and contact that is continuous and business-driven as a business interest.
Noncompete agreements can be an excellent tool to protect a company's legitimate business interests. However, before one is utilized, these factors and others should be considered. Any business or company considering the use of a non-ompete agreement should consult an attorney. David L. Drechsler practices Buckingham, Doolittle & Burroughs LLP in the Litigation Practice Group. He specializes in commercial, intellectual property and employment-related litigation. He can be reached at (330) 376-5300.
While ethics classes are also a mandatory part of most business schools' curriculums, we are finding lately that many business owners could use a refresher course. Maybe they took it so long ago, they've forgotten its value, or, like many entrepreneurs, they never went to business school.
Or, as the case may be with Enron and WorldCom's CEOs, they probably took the class, but found out through practice that monetary success and high ethical standards are not always correlative.
So just as the economy recovers from the external attacks of last September, the stock market is spiraling again in response to domestic attacks from these CEOs, which are proving to be just as damaging.
Consumers are losing confidence in corporate America and investing elsewhere. But it's not too late to reverse the trend. Whether you are at a private or public company, you can help stop this downturn by taking a hard look at the ethical standards by which you run your business.
Many leaders in Washington are calling for a stricter watch over CEOs by proposing tougher penalties for rule-breakers, CEO certification of financial statements and a mandatory listing of stock options offered as compensation as an expense.
In addition, many have suggested that businesses keep a stricter watch over their relationships with their accountants. If you use an outside firm to audit your books, you should scrutinize more closely its role as a consultant to your business.
Don't wait for these ideas to become mandates; put them into action at your company while you still have a choice.
Tangier resists peddling its logo
By Teresa Dixon Murray
When Tangier Restaurant & Cabaret opened in the World War II era, management developed a logo because that's what businesses were supposed to do.
The simple script logo had a half-dome built into the T, which identifies the restaurant's Mediterranean roots.
Forty-five years later, the logo is one of the most recognizable in the Akron business community. But items bearing the logo are hard to come by. You don't see Tangier ballcaps or dome-covered T-shirts or keychains with a sea-blue T.
"If you're an exclusive restaurant or exclusive anything, it's probably not a good idea to have your logo splattered everywhere," says Ellen Zban, director of customer relations and marketing. "But with the entertainment aspect of what we do, we have a little bit of leeway to be more lavish."
The restaurant had a gift shop until about a year ago, which featured Tangier merchandise, including a coffee mug with the logo and a wine with the Tangier label.
The only other premium products-existing in a few customers' cupboards-are practically collector's items: sherbet-style dessert dishes the restaurant once gave away with lavish desserts.
The famous logo was nearly dumped about 10 years ago, when owner Edward George agreed it was time to tweak it with a more modern look.
The T in the logo was stripped to eliminate the dome. Executives thought maybe it was cleaner and they began using it on some internal documents. But the new logo was ditched because it just didn't feel like Tangier.
When you've got a good thing, George decided, keep it.
While Tangier has resisted mass marketing its logo in the past, it might start distributing some premium products in the future, Zban says. Management has toyed with distributing Tangier pens or other items at various travel shows.
The closest the restaurant comes now, Zban says, is new buttons for the staff with the logo and the employees' names. Management developed the large buttons to help customers know who can help them navigate through the 50,000-square-foot complex. "This place is so huge, we really try to make it as personal as possible."
While the size could be an intimidating, executives bring the concept full circle back to the logo. Marketing efforts carry the familiar image and the slogan: "You'll find everything under the dome."
Introducing a new feature-about fun
By Robert G. Rosenbaum
All work and no play, as they say, makes Jack a dull boy. To help Jack lighten up, I'm pleased to introduce a new feature, which you'll find every month on the last page of the magazine.
Akron After 5 is about what you do after (or instead of) work. To make sure we're highlighting the kinds of places and events that interest you, we've tapped two of Akron's most out-and-about businesspeople to write it.
Each month, Linda Truby, of Above The Crowds Travel & Meeting Planning, and Claudia Bowers, of The Conflict Management & Mediation Center, scour the Akron area to give you a heads-up on what to do when you head out. We're pleased and proud to have them aboard as contributing editors.
Among the topics they plan to cover are: Benefit events, cultural offerings, nightlife openings, weekend outings, high-end retail offerings, special events and short profiles of people in your social circle who are doing interesting things outside of work.
If you have any events you'd like to see highlighted, just send a fax or letter to Small Business News containing details of your event, to the attention of Akron After 5. We can't promise to get everything into print, but we'll try our best.
I hope you'll like this new departure from our regular package of business information. Its goal is to entertain you, help you entertain yourself, and help all of those businesses and institutions throughout Greater Akron that work so hard to show us a good time.
If you do enjoy it, please reserve your thanks for the Akron Summit Convention & Visitors Bureau. As the sponsor for this feature, it's their support that makes it possible.
Now go out and play.
But before you do...
How much are you like a high-performing Entrepreneur Of The Year? Working with Ernst & Young LLP, the founder of the annual Entrepreneur Of The Year program-of which SBN is a proud sponsor-we surveyed all previous Northeast Ohio award winners.
Our questionnaire mirrored a study done late last year among Entrepreneurs Of The Year across the United States, allowing a meaningful comparison between all the best and the best around here.
If you assume that these people have succeeded by developing some of the best management practices, you'll be interested to find out where they get financing, how many times they capitalize, where they ultimately plan to take their businesses and much more. It may give you some ideas on what to think about next.
As for us, we've already moved on to the next Entrepreneur Of The Year feature: full coverage of Akron's players in this year's awards program. You'll find that in the July issue.
Bob Rosenbaum can be reached at (216) 529-8587, or by e-mail at email@example.com.