Chicago (1685)

Wednesday, 23 March 2005 05:44

Part-time benefits

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Most business leaders have read about the growing problem of the uninsured in America but probably didn't think they could help resolve it -- let alone realized they have a stake in resolving it.

But every business is bearing the burden of uninsured Americans and can help ease the problem by taking some simple, practical steps.

According to the U.S. Census Bureau, there were about 45 million uninsured Americans in 2003, a number that continues to grow. Uninsured individuals commonly forego necessary medical care; nearly 40 percent postpone care due to the cost, according to the Kaiser Family Foundation. In addition, according to The Institute of Medicine, uninsured people receive fewer preventive services and less care for chronic conditions than their insured counterparts.

As a result, the uninsured tend to get sick more often and for longer periods, adding significantly to the spiraling medical costs that show up in every business's annual health care costs.

Hard working and uninsured

Businesses have an even deeper connection to the uninsured problem -- most of the uninsured are, in fact, employed. Six out of 10 have full-time jobs and another 15 percent work part time or part of the year. Some work two part-time jobs without coverage through either employer.

Those without health insurance are working in virtually every American business, uninsured because they are ineligible for benefits or because the cost of premiums or deductibles is too high.

As a result, the working uninsured are prone to missing preventive care and suffering more serious conditions later, resulting in a threefold problem for businesses:

* Short-term presenteeism (being at work but preoccupied with personal matters to the detriment of productivity) as workers struggle through personal and family health issues without seeking appropriate care.

* Longer-term productivity losses as workers leave your employ to seek jobs that provide benefits, wind up in emergency rooms or are lost to disability

* Continuing increases in health plan costs as local care providers pass on the nonreimbursed expense of treating uninsured patients.

According to a May 2004 statement released by the Health Care Policy Roundtable, a cross-industry collaboration of human resources leaders, the economic impact of the lack of health insurance on productivity, absenteeism, turnover and increased health care costs could be as high as $152 billion per year, or about $1,000 for every American worker in 2004.

Plans reduce turnover

Many businesses are taking advantage of a new breed of "limited benefit" plans. In essence, employees gain access to preferred-provider networks, service discounts and other benefits, typically subject to annual benefits caps. In addition, an employer can choose any level of premium subsidy -- including none at all.

Offering benefits to employees who are typically ineligible for company-sponsored benefits can provide businesses with two advantages beyond chipping away at the problem of spiraling health care costs.

First, it helps to stabilize your work force. Offering easy-to-access health care can increase productivity because employees will be more likely to get the treatment they need and thus stay healthy.

Second, high turnover is a major issue in many industries as benefits-exempt employees float from company to company seeking a slightly higher wage. Businesses then spend excessive amounts of money and time recruiting and training replacements. These same employees, equipped with a meaningful differentiator -- access to health care benefits -- will be less likely to slip away to a competitor.

The benefit types and dollar maximums offered under these plans are flexible and may include medical, dental, vision, term life and short-term disability coverage, as well as in-hospital cash benefits. In addition, plan designs could include out-patient expenses for office visits, lab, diagnostic tests, X-rays, surgery, anesthesiology and prescription drug coverage.

If you don't offer access to health benefits for all of your employees, look at these new plans. Your insurance broker or consultant and your company's financial advisers can help you find a plan that fits your budget -- and helps you maintain a more stable and healthy part-time work force.

Paul Martino is vice president of sales and service, covering Illinois and Wisconsin. He is responsible for managing sales and client management for Aetna's middle market segment, which includes businesses with 51 to 3,000 employee lives. Reach him at (312) 928-3754 or MartinoP@aetna.com.

Tuesday, 22 March 2005 19:00

The naked truth

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Christie Hefner inherited far more than her father's famous name. The daughter of Playboy magazine founder Hugh M. Hefner -- idol of young hedonists everywhere -- also acquired his sense of innovation, an ability to recognize where society is headed and the wherewithal to capitalize on those changes.

"As I started to read the magazine, I came to recognize how remarkable it was that my father was advocating philosophy and points of view that were in step with my generation and out of step with his own, whether that was the war in Vietnam, the environmental movement or changes in attitude about sexual behavior and birth control," says Hefner, chairman and CEO of Playboy Enterprises Inc. "As I grew up, I was able to appreciate and be extremely proud of what Playboy stands for, not so much as a business success but really as a philosophy of values about the world."

Coming of age in the 1970s, Hefner adopted that philosophy and followed in her father's journalism footsteps, joining the staff of the Boston Phoenix, an alternative Village Voice-style publication. But she quickly learned she didn't like that side of the notebook.

"It taught me I didn't want to be a journalist because I didn't get to write what I wanted to write about," she says. "(I) had visions of being an Ellen Goodman-style columnist, getting to offer my point of view on the world. And if that were ever going to be an option for me, it certainly wasn't going to be in the early part of my career.

"At that point, I decided I would probably go to law school. But before I could do that, my father persuaded me to come back to Chicago and learn a little bit about the business. Once I got here, I never left."

With Hefner at the helm, Playboy has expanded the venerable men's entertainment enterprise from a staid print publication into an entertainment powerhouse on television, the Internet and now the wireless world.

In 1988, Hefner was elected chairman and CEO of a company in financial distress. And while she has returned Playboy to profitability -- the company reported a $10 million profit last year on revenue of $329 million -- it was quite a struggle.

Built to last

Hefner spent seven years in a variety of roles before, in 1982, assertively seeking the vacant position of president after her father was forced, because of a regulatory dispute, to divest the company's single largest profit center, its United Kingdom casinos.

"I felt (an outside search) would take a fair amount of time," she says. "The person coming in would have to take time to understand the businesses and the organization and develop plans to move forward and rally the troops to move forward.

"We didn't have the time to do that. I felt we could get started right away making the changes that needed to be made in terms of divesting the company of the businesses that weren't profitable and cutting back on costs and trying to refocus."

The board and her father agreed, naming Hefner president, while her father retained the titles chairman and CEO.

She quickly realized the loss of the casinos only added to the company's troubles, which were much larger than she had thought.

"The biggest challenge was that the company was losing a lot of money," Hefner says. "The single biggest profit centers were the casinos in the U.K., and because of a regulatory dispute, it sold those businesses shortly before I became president. It went overnight from being profitable to reporting a loss of $50 million. Given the capital base of the company, we didn't have a lot of time to turn it around.

"I never really stopped to think about the magnitude of the challenges. I just focused on what I thought we needed to do, get as much done every day and every week as we could, and kept my focus on cash, not on earnings or the stock price, which is one of the luxuries we have as a family-controlled company."

Hefner started by restructuring operations and stripping away unproductive parts of the business.

"The turnaround was really a function of being able to shed those businesses that weren't successful -- like the clubs, the record business or the book publishing business," she says. "We focused to make sure the magazine retained its leadership in the men's market and then looked for opportunities for growth."

That led to the only disagreement Hefner ever had about business with her father.

"I was president, not CEO," she says, "and felt since we had sold the hotels and resorts, it was a good time to get out the club business. My father noted there were still half a million people paying us for their Playboy Club key cards every year. How did we know it couldn't be successful if we didn't try and update the business?

"It was impossible to answer without trying, so, in effect, we did. We opened a newer club in New York City, which was in many ways very successful in the sense that it was a neat place and attracted a nice crowd. But it also reinforced the basic problem, which is it is very hard to make money in the club business, especially when the heyday of all night clubs came at time when you could afford for those small venues great live entertainment, which you really can't do anymore. To his credit, when the results came in after the first year, he said, 'You're right. Let's move on.' And we went through the process of closing down the clubs."

The incident highlights the difference between Christie Hefner and the iconic "Hef."

"In terms of differences between my father and me, I think the principle one is that his real focus and genius has always been on the creative and promotional side of it, whereas I've always enjoyed and focused more on the strategic and management side of the business," she says.

As founder and editor-in-chief, Hugh Hefner still decides the next Playmate of the Month, but it's Christie Hefner who decides where Playboy Enterprises will be next month and next year.

One of those decisions helped lead the company onto the small screen with Playboy TV and the purchase of the Spice Channel. Playboy's channels are available in approximately 130 million U.S. households, and its programming reaches more than 70 countries.

And more than a decade ago, Hefner made Playboy the first national magazine with a presence on the Web with its Playboy.com venture. The site is comprised of original content, as well as repurposed content from the magazine and television. Under Hefner, Playboy.com has become a multiple revenue business with subscription sites, e-commerce, advertising and online gaming. It has grown into one of the most popular online destinations for men and is the company's fastest-growing profit center.

"Clearly one of the reasons we've been successful is that we've positioned ourselves as a content creator with strong brands and we're agnostic with regard to making bets on technology," Hefner says. "A lot of our growth has come from new technologies, whether it's digital homes in the television arena -- which is now being further expanded because of the embracing of video-on-demand and subscription video-on-demand as a technology to deliver content to consumers -- or whether it's the growth of accessing of content via broadband online or the growth in wireless."

Eyes wide open

In her 17 years as Playboy CEO, Hefner has made a name for her ability to deliver the Playboy brand to new audiences. She's even trumped conventional wisdom and looked for ways to draw women into the company's demographics.

"Television, as a segment, is our single biggest profit center," she says. "From a financial perspective, it's been very successful. For Playboy itself, it's had additional benefits. Moving from the magazine to Playboy TV gave us an opportunity to expand our market to women because the majority of viewing of Playboy TV is by couples."

And Hefner has capitalized on that.

"We have built on that with our licensed products division, which has a strong base in women's apparel and accessories, as well as in men's," she says. "That was very positive for us. That we have been able to extend the brand into a multimedia opportunity from print to TV was very important because it encouraged us to add the third business segment -- online."

Hefner's vision led Playboy to the Internet far before it was fashionable.

"We were very influenced by the fact that by '94, we were making a lot of money in television and therefore had demonstrated the ability to move the brand from one medium to another, which is not as easy to do as some might think," she says. "It's not just that we were the first magazine to become a successful network. It's that no other magazine has done it, even in categories where, as a result in the growth of the number of channels from cable and satellite, there are strong categories of programming, but they didn't start from their magazine bases.

"For example, Music Television is not called Rolling Stone; it's MTV," Hefner says. "And news television isn't Time or Newsweek, it's CNN. Even sports wasn't Sports Illustrated, but ESPN, which then turned around and launched a magazine after the fact."

Those opportunities for new players caught Hefner's attention.

"One of the reasons we got interested in the Internet space was that we had made the transition into electronic media," she says. "It also seemed to me that part of the potential appeal of the online world was that you wouldn't have to edit for space or time, so you could really let the consumer be the editor in terms of what their interests were and what they wanted more information on."

Not only has Hefner given consumers the ability to become their own editors, she has also given up control of the magazine -- virtually speaking, that is, following the launch of the company's first-ever video game, "Playboy: The Mansion."

"Ten years ago, (video gaming) was a business for young boys," she says. "It is now very much a young adult market. And that, we think, plays to our sweet spot. So we got interested in moving into that as another category of entertainment and looked for a partner that we thought had a good creative vision for what the first Playboy game could be."

Hefner confesses she isn't very good at the game. Then again, she runs the real thing and learned from the real "Hef."

"One of the most important lessons is, don't compromise on the quality of what you're doing," she says. "He's a very strict taskmaster in that regard, as I think entrepreneurs often are. And I think that's how companies sometimes get in trouble. When they grow so large that they can't be run any more by their entrepreneurial founders, some of that passion for the quality of what you do and frankly, also a passion for the culture you're creating, gets lost.

"Hopefully, I've been able to keep that from happening here. We've been able to grow by professionalizing how we make decisions and how we allocate capital and how we've developed strategies for growth. But at the same time, we've preserved the qualities of the pride in what we do and the respect for the individuals that make good people want to come and do their best work here."

And for that, Hefner just might make the magazine centerfold -- of Fortune.

HOW TO REACH: Playboy Enterprises Inc., (312)751.8000 or www.playboy.com

Thursday, 24 February 2005 06:47

The PR effect

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Properly implementing public relations efforts can make your company stand out from its competition.

PR is an important part of business -- publicity, promotions and community relations help businesses build prestige, recognition and better images. When PR efforts co-exist in business with marketing and merchandising initiatives, companies can increase sales and profits.

And by using PR to interact with clients, other businesses and your community, you will enhance your company's business and the industry in general.

Every aspect of your company affects its image. When clients see your offices, warehouse or even trucks, they instantly form opinions about your company. How you present your company and employees is important to your image and is a direct reflection of your company's work, which plays a role in the success of your business.

One way to favorably present your company is to contribute to your community and publicize your efforts -- clients and consumers will be more likely to use your company's services if its name is familiar.

Because the majority of your business comes from surrounding communities, it is logical to involve your company in community programs or local organizations, such as a professional society, civic organization or park district. When your company's name is linked to noteworthy causes or organizations, it enhances credibility and may be the name remembered when services are needed. Networking opportunities also can arise from community involvement.

When deciding how to become active in the community, consider the amount of effort, time, money, equipment and resources you have available. Also, look for organizations that will benefit from your professional expertise. Contact local schools, park districts and religious institutions for volunteer opportunities unrelated to your industry, such as working at a homeless shelter or spending a day at a retirement center.

Speaking engagements are also an opportunity to give back to the community, as well as impress potential clients. Use your speaking engagements as a way to share information about your industry. Contact your local chamber of commerce and other business-related organizations to determine whether speaking opportunities are available.

Positive exposure can also result from fund-raising events. If you fund-raise for charitable organizations, the community will recognize your concern for a cause, and local newspapers may report about the human interest story.

Publicity can play an important role in creating positive images for your business and industry and should not be considered self-serving. People enjoy learning about local companies that help their communities, and it is to your advantage to be known as a company that gives.

In additions, urge employees to get involved with community opportunities, such as fund-raising events or community programs. Rewarding employees for community involvement helps motivate them to participate in events and increases morale.

There are many ways to gain publicity, including the basic PR tool -- the news release. A well-written news release can provide the media with background information and the who, what, when and why of a potential news story. A benefit of a press release is its low cost.

Consider the following as potential news release topics.

* Company or personal awards received

* Personal elections to boards of directors or memberships in associations

* Educational seminars in which the company has participated or that it has provided

* Anniversaries or events, such as the commencement of business

* Introduction of innovative services

* Special events, such as food drives, blood drives, fund-raisers or other volunteer projects

Brochures, flyers, newsletters and handouts are other inexpensive ways to raise awareness about your company. These methods can be as simple as a photocopied page of information or as elaborate as a professionally printed pamphlet. Handouts can be given to clients, potential clients and the media.

Another way to gain publicity is to maintain a company Web site. A Web site is a good place for potential clients to research your company and see examples of the work you have done.

Public relations can help build company name recognition, increase profits and improve company image. When done correctly, efforts to gain publicity can play a vital role in your company's success.

Jennifer Valencia Cumbee is director of corporate communications for International Profit Associates. IPA's 1,800 employees offer consulting services to businesses throughout the United States, including Alaska and Hawaii, as well as Canada. Reach her at Jennifer.Cumbee@ipa-iba.com or at www.ipa-iba.com.

Thursday, 24 February 2005 06:37

Plastic burns paper

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In 2003, the number of electronic payment transactions in the United States was, for the first time, greater than the number of checks written, according to the Federal Reserve Board.

That year, people used credit cards, debit cards and automated clearinghouse transactions to complete 44.5 billion transactions totaling $27.4 trillion. During the same period, they wrote 36.7 billion checks totaling $39.3 trillion.

Checks may not be on the endangered species list yet, but there is no reason to believe the trend toward plastic will dwindle. On the contrary, there is every reason to suppose it will continue to pick up speed as baby boomers grow into their relatively affluent and mobile retirement years.

That means businesses -- including small businesses -- must accept credit and debit card payments if they are to remain competitive. It also means that businesses must be smart about finding the best possible provider for credit/debit card services, whether they are just starting to accept such payments or have been doing so for years.

Cost is the biggest deterrent for businesses in starting or expanding their credit/debit card services. However, costs can, to some extent, be controlled.

Typically, credit or debit card transactions cost businesses anywhere from 2 percent to 4 percent of each sale. The bulk of the expense -- as much as 66 percent -- is dictated by MasterCard and VISA associations. Businesses can reduce these expenses by working with their service providers to be sure they are following the correct procedures, such as verifying billing addresses or asking for the code on the back of the card when taking orders by phone or Internet.

Not only do such precautions help minimize costs, they are safeguards against the other major concern of business owners -- that they will become entangled in fraudulent transactions for which they ultimately will be held liable. Some basic precautions, including verifying identification during terminal-swipe transactions, are the first line of defense, but shrewd selection of a merchant services provider is additional protection.

No business can overlook the importance of doing business on the Internet, and a good service provider can make recommendations to keep businesses safe in that high-risk world. For example, a provider that takes the time to learn about each company's way of doing business can make suggestions that will minimize credit/debit card transaction fees while maximizing customer accessibility.

Additionally, a good provider will be sure businesses are protecting cardholder data. That includes being sure full account numbers are not printed on receipts and that data is stored where it can't be hacked into from the outside -- meaning it is not stored on computer terminals in the store or office.

Finally, a good provider will have an excellent service reputation and will fully disclose all monthly and transaction fees. Businesses must understand that the lowest presumed cost is not always the lowest pricing and should look for hidden fees. A good provider also will offer round-the-clock technical support that businesses can rely on for help when a problem arises.

With the use of checks on the decline, businesses are required to offer customers a full range of the best payment options, including credit/debit cards. Credit and debit card transaction capability can increase sales and reduce receivables. Businesses should take the time to find the right provider to be sure those sales come with more pleasure than pain.

The right merchants' services provider can help even the most experienced business negotiate the often-confusing byways of electronic transactions, but it's incumbent on businesses to be as diligent in managing credit card fees as they are in managing any other finances. Finding the right provider may require some legwork, but it can save serious headaches in the long run.

Pat Bazley is vice president of merchant banking solutions at MB Financial Bank. Reach her at (847) 653-1980 or www.mbfinancial.com.

Thursday, 24 February 2005 06:29

Fabricating a business

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The former owners of Akorat Metal Fabricators had retired and were sunning themselves in Arizona, enjoying the monthly checks from the new owner. Then, one month, no check arrived.

It wasn't too much of a worry; the metal fabrication business had its up and down cycles like any industry. But when one month stretched into several, and phone calls went unreturned, the pair returned to Chicago to find the operation closed down.

"Basically, the business was shut down," says John J. Dombek, owner of JJD Industries Inc., the umbrella corporation under which he owns five companies. "Whoever bought it from them couldn't make a go of it for whatever reason. (The owners) came back and brought back a few of their customers."

They then put the business up for sale again.

"My father actually saw it in the (Chicago) Tribune and said, 'I looked at this business a few years ago, and it might be something you're interested in.' That's how I got started."

Single and just 27 years old at the time, the man who had been a consultant at Peat Marwick (now KPMG), bought Akorat Metal Fabricators, which has since been rolled into Dombek's Smithco Metal Fabricating. Now 41 years old, Dombek owns five enterprises in and around Chicago under the umbrella of JJD Industries Inc., and he is looking to expand his offerings.

"I went into consulting because I wanted to look at a variety of different businesses to get a broader-based background," he says. "I always wanted my own business. (This opportunity) came along at the right time. The longer you stay in the world of consulting sometimes, the tougher it is to actually leave.

"You don't make a lot when you start off in your own business. It's tough to give up that income. I was single at the time, so I had a big advantage. If you're married with kids, going into a business with one employee is a big commitment."

Smart Business spoke with Dombek, a 2003 regional finalist in Ernst & Young's Entrepreneur Of The Year awards, to learn how he turned a small metal fabricator with one employee into a $70 million enterprise.

Did Akorat's troubled history concern you?

No, I figured it was a platform to build off of. The former owners and I got some of the customers back. Then I went out and bought a laser.

There weren't a lot of them around at the time. That opened a few more doors. It already had some form of structure in place -- customers and accounting systems -- no matter how basic they are.

Has your goal always been to be a one-stop shop or did that plan evolve?

It's been a little bit of both. The goal has always been to have businesses that can meet a variety of customers' needs. I've diversified from what I was planning when I started.

I was looking more for the metal products side, with maybe some electrical assembly along with that. We've gone more into some of the plastics. The basic plan was there. The details are being developed as time goes on.

What drives those changes?

I view manufacturing as a service business. I know that's the wrong terminology for it, but it really is. To differentiate yourself -- it's really the level of service and quality you can provide -- especially with the off-shore competition.

I never want to compete strictly on price. We (earned) a number of vendor awards because we really focus on trying to service the customers.

What makes a company attractive as an acquisition?

A couple of things, and they don't all have to exist on every deal. The first thing we're looking for is, does it advance us in the marketplace a little bit? Can it help serve some needs, or does it tie in to what we already do? Does it make sense financially? And then there is the intangible side, which is, is it a good business or not?

Just because they have sales volume doesn't mean they're in a position where they can make money. That doesn't necessarily stop you, but going into a deal, you have to know you've got to replace a lot of their existing structure. Some businesses we buy just to pick up the volume and move it in.

It's a whole variety of things. I guess the first thing you look at is, can you make money at the business. The second thing, is it a business you want to do.

Have you made troubled companies a specialty?

We feel that's one of our strengths. Because of the size of the businesses that we target, there isn't a huge (number) of people targeting businesses that size, at least around Chicago. We had some pretty good success doing that. As we get some of those foreclosures, then other business deals make sense fitting in with them.

I feel we've got a real strength to go in and identify what are the real key drivers to the business and how can we address those between personnel and equipment. We take, maybe, a little different approach to turnarounds.

There's the typical financial aspect, but we're looking at it in terms of driving the business forward. What are the core strengths, and how can we bring those to the marketplace? Turnarounds are all different; they all have a life of their own, but you usually can get the assets at a pretty good price.

Then it's just how much additional funding and resources are going to have to be put into the business to get it going again.

Is it a challenge to meld the business cultures?

Some businesses we've taken over we've kept pretty much the entire management staff, with just a little change here and there. And then there are other businesses where pretty much everybody was gone.

We put some of our personnel in place in certain positions, but we pretty much leave who's there -- give them direction, give them our management philosophy, our reporting structure, and see how they operate, see how they fit in or not. It's not uncommon to have someone that we take out of a company that we take over and move them into an existing business. They may not fit with what we need for a turnaround, but they might be a good day-to-day manager.

They just work at two different paces. They may have a skill set we have lacking. Sometimes, the management group just doesn't fit in with the philosophy or they don't like what we do.

Will you ever look outside Illinois for acquisition opportunities?

There're a couple of out-of-state possibilities that we're looking at. We're looking into moving into adjoining states to give ourselves a little more geographic presence, along with something possibly in Mexico and something off shore. We're going to be customer-driven in terms of doing those things.

How has manufacturing changed in the past several years?

Manufacturing is not going away. It's going to be around and it's going to be strong going forward. It's just going to be different than what you saw five years ago or from what you see today. I'm betting my future on it.

There's a lot of manufacturing that makes sense in Western Europe and the United States -- the high labor-dollar countries.

Where will your business be three years from now?

We're definitely going to be consolidating some of the operations over the next few years. As we grow, we're consolidating into some larger facilities to handle some of that growth all in the same geographic area. There's definitely going to be one, possibly two, international plants or locations that we'll have.

We've been doubling our revenues every 24 months (for the last six or seven years). We've done a little bit better than that during the (recent) economic downturn. I don't see any reason why that can't necessarily continue. Part of that is internal growth and part of that is through acquisition.

We're not going to force that issue. If we can't keep the profitability up, I'm not interested in growing just for the sake of having more dollars going through.

HOW TO REACH: JJD Industries, www.jjdind.com or (847) 678-1600

Monday, 24 January 2005 08:51

Business methodologies

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Many small to medium-sized businesses display similar unfavorable management techniques that can be threatening to the business. Here are five of these so-called "business killers" to avoid.

* Lack of strategic planning. The tendency to react to each circumstance without the advantage of a strategic plan is a downfall for any business. Without a plan, owners jump from crisis to crisis without control, teaching employees to do the same.

A strategic plan must be designed to increase the chances of success, not simply reduce the likelihood of failure. It must identify a competitive advantage by differentiation and value.

* Inaccurate financial information. If there is a lack of truly useful financial information, it is impossible for executives to manage or make solid decisions. Without accurate information, owners are unaware of the financial impact of their decisions and how those decisions impact the break-even rate, overhead application and pricing matrix. A business owner who relies on gut feeling leads with a false sense of security.

Solid financial information is developed by analyzing critical functions. Based on this information, specific productivity goals should be set, along with a reporting mechanism to monitor costs to enhance profitability.

* Insufficient liquid assets. Business owners who use U.S. Government Trust funds to cover costs put tremendous pressure on themselves to resolve financial crises. Often, this leads to making expedient short-term decisions, to the detriment of the long-term survival of the company.

Understanding the true cost of running the business is the first step in gaining control of the company's finances and, ultimately, the success of the business. Utilizing break-even for pricing and competitive advantage, understanding the impact of indirect and administrative overhead and making profit the first item of expense allow the company to generate enough cash flow to meet its needs and generate a substantial profit.

* Inability to measure employee productivity. A business owner who is not able to measure employee productivity is forced to discipline negative work habits based upon visual observations. If a company has not defined employee performance standards or has not quantified the desired results, it will have a difficult time providing incentives to employees.

The lack of a system to measure productivity leads to an inverse pyramid organizational structure, with the owner spending less time on long-term planning and more time on daily crisis situations. This structure can lead to discouragement and poor performance among the best employees.

Incentive programs and performance job descriptions allow management to motivate employees, shift responsibility to a lower position within the structure and hold employees accountable for overall performance.

* Inability to identify company costs. When no system is in place to identify costs, business owners must rely on visual observation to determine how each section of the company is managed. This can lead to a wasted budget or time, in turn leading to a decrease in billings or costing the company clients.

Business owners should identify the critical variables within the company, such as revenue, direct job cost, margin contribution, indirect costs, administrative and general overhead.

Each business is unique in its cost structure, employee and management profile and market, but owners must follow the principles of sound business management and learn to adapt these techniques to their specific industry. Each category works in conjunction with the others to provide the necessary information to make cogent decisions that are critical to the success of a company.

For business owners to realize their profit potential, they must understand that every decision has an impact on profit. If owners are diligent in the execution and follow-through of sound management techniques, they will achieve their predetermined profit.

Mike Rudd (mike.rudd@ipa-iba.com) is director of client services for International Profit Associates. IPA's 1,700 employees offer consulting services to businesses throughout the United States, including Alaska and Hawaii, as well as Canada. Reach him at (847) 808-5590 or at www.ipa-iba.com.

Monday, 24 January 2005 08:42

Teamwork pays

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Owners and key executives of middle-market businesses know where to go for legal and tax advice, but too often, they aren't getting the personal financial guidance they need.

Most money managers tend to disregard owners of middle-market businesses (private firms with annual sales of $5 million to $150 million). That's because, in most cases, the company is by far the largest asset the owner has, and it is neither liquid nor diversified.

Typically, middle-market business owners rely on their attorneys and accountants for financial advice, turning to their commercial bankers as required for business banking needs. Unfortunately, those advisers may not have the complete spectrum of personal financial services business owners need to chart their courses for the future.

How, for example, should owners transfer their nonliquid companies to successors when they are ready to sell or retire? Should business owners consider corporate trustees if and when they are no longer able or willing to manage their own assets?

Even getting a mortgage can be problematic for self-employed business owners. Their tax returns show business income that may not accurately reflect what they really earned in a particular year.

Middle-market business owners' personal and business finances are so closely interwoven that their financial advisers ideally should be able to address needs in both areas. But in today's complex financial environment, it is virtually impossible for a single banker to be familiar with even the key elements of every area of banking, let alone the nuances of each.

The solution lies with banks using a team approach to serving their clients. Commercial bankers have not always been trained in personal finance; private bankers may not be sensitive to the needs of the business. Why can't the commercial banker and private banker work together to meet all of a client's needs?

A collaborative approach to managing customer relationships can benefit both business owners and their banks. This team approach can give business owners the expert assistance they need, regardless of what they need at any given time. Banks that use collaborative teams to provide financial services to middle-market business owners view those owners as clients for life, working to address the needs of clients as they progress through their financial life cycles.

Typically, the business owner accesses the bank through a key contact who may be a commercial banker or a private banker. That go-to person understands enough about general banking issues to ask the right questions, but doesn't attempt to answer all the questions unassisted.

Instead, he or she acts as a quarterback, bringing in colleagues from other departments to collaborate on how to best meet the client's needs, whether the needs are largely commercial, mostly personal or a combination. Private bankers, for instance, can call upon trust, investment and specialized banking services as well as their commercial banking colleagues to assemble a team whose members may change as the business owner's needs change over time.

The service remains seamless to business owners, who continue to rely on their trusted key contacts to understand their needs, work with the people best suited to address those needs and then implement and communicate the strategies required to meet those needs.

For business owners, a banking team means having their financial questions answered promptly, professionally and personally -- even though they may not see or even be fully aware of every member of the team. It means banks make decisions based on every owner's true financial position, rather than simply on the condition of the business.

Bankers who think of their clients' complete financial requirements are offering services that middle-market business owners will appreciate throughout their lives -- and show their appreciation with a long-standing relationship to match.

Brian Wildman is senior vice president in the wealth management group of MB Financial Bank. Reach him at (847) 653-2150 or bwildman@mbfinancial.com.

Monday, 24 January 2005 08:34

The consultant

Written by
At an age when many consider retirement, Robert D. Blackwell is 12 years into his start-up enterprise and has his sights set on having his business mentioned in the same sentence as IBM.

Blackwell knows a little something about IBM; he worked for the company for more than 25 years before venturing out on his own.

"I'm out of college and someone offers me a job, I take the job," says Blackwell, chairman and CEO of Blackwell Consulting Services Inc. "IBM taught everybody they hired skills, which they don't do anymore. (Today), they go out and hire computer people. When I came along, nobody knew anything about computers."

During his first 18 months at IBM, Blackwell spent as much time in school as he did working for the company -- and he did it on IBM's dime.

"I thought I had died and gone to heaven when I was working for IBM," he says. "They were -- and still are -- a fabulous company to its employees. Over the years, I fell in love with the place and would probably have never left except for the fact that IBM got into a lot of trouble in the '80s."

By then, Blackwell had reached upper level management, "high enough up that you can see the company making decisions," he says. "It was clear that IBM was on the ropes. I thought the products were priced in a way that seemed silly. You can talk about price elasticity, but nobody can sustain 40 percent differences in product price."

Blackwell was in his early 50s then, and "in the worst possible place that anybody could be -- a well-paid middle manager in a company that's got real problems," he says. "The first guys they let go are middle managers."

Knowing it was only a matter of time before he saw a pink slip, Blackwell left IBM and started his own consulting firm.

"I felt like I'd better prepare myself to do something else," he says. "IBM was getting into the services business, and I said, 'There's the place to be.' It immediately became obvious that there were very low barriers to entry. In the hardware business, the barriers to entry were gigantic. (In) the service business, all you had to do was get one contract for a few million dollars, and you're on your way."

Today, the company has grown to approximately 300 professionals and has become one of the largest minority-owned IT and management consulting firms in the United States.

Smart Business spoke with Blackwell about where that first contract came from (the answer may surprise you), how he survived the dot-com bust and how he plans to take his company from $36 million today to $100 million by 2008.

How is working for yourself different from working at IBM?

There are some things that you worry about when you're in business for yourself that you don't worry about when you work for IBM. When you work at IBM, you wake up in the morning, you worry about your targets.

You don't worry about money, you don't worry about whether your employees are going to get paid next week or not, you don't really worry very much about the creation of your products and the development of your brands. All I had to worry about was selling the product that had been placed in my hand.

When you have a business of your own, you've got to create the products. You've got to worry about all parts of the business. The most difficult thing that I've encountered since I've been by myself is the creation of a brand.

In cases where we absolutely know we're better than an IBM, where we're clear about it in our own minds and we're objective, the fact is we will lose eight out of 10 of those deals because people buy brands.

The only way you make a living is that you've got to be better than IBM every time so that you win two out of 10.

If you are viewed as no better than IBM -- or if you are viewed as not as good as IBM -- then you lose 10 out of 10. That is the biggest lesson that I've learned since I've been in business for myself -- the devastating impact of brand on small firms.

How did you get your first customer?

I was leaving (IBM) and I had a customer that liked me a lot and liked IBM a lot. He said, 'We don't want you to go.' I said, 'Go talk to IBM. If they're interested in continuing on with me, I'd love to do it.'

My heart is beating 100 beats a second, hoping we can pull this off. We did. IBM did all right and I did all right. I walked out with a job, and that sustained me through the first year.

Then I worked like crazy to build the business up because I knew that IBM would probably leave me.

A friend of mine at IBM gave me some advice when I walked out the door. He said, 'Always remember that your friends would rather make a stranger rich.' That really stuck with me. He was warning me -- don't depend on IBM to sustain you. Get some other customers.

You've won a number of awards. Of which are you most proud?

That's easy -- Ernst & Young (2003). It's really a prestigious award; it talks about being an entrepreneur, and you're in fast company. I don't want to pooh-pooh any of the others; they all matter.

But the Ernst & Young Entrepreneur Of The Year, I am a huge fan of that award because I think that they are careful about it. They look over the companies very carefully. You have to submit your financials. And then, when you go to the nationals, the guys that win at the nationals, which we have not, the year that I won (locally, the national winners were) Jet Blue, the airline, and Whole Foods, the grocery chain.

You're just in really fast company. It was wonderful. It's great what they do; it's kind of like an entrepreneur's dream to get mentioned.

How did you survive the dot-com bust and the down economy?

I think that the problem was in the boom, there were some companies I saw that believed some things that just couldn't be true, that I never believed. They were treating venture capital money as though it were revenue. That was the big one that I observed.

The thing I kept wondering was, how many customers do you have? How much business do you have? What are your costs? They acted like cost didn't matter. It's nuts.

The second thing -- I went to a venture capital meeting; I was trying to understand venture capital. The guy said, 'What we want, basically, is a 40 percent return on our money, compounded every year, and at the end of the fifth year, we want our money back.'

I thought, 'I don't know that a service business like mine could generate that. That's a tremendous scaling exercise.' I questioned at the time whether a service business could scale that way. Somebody said, 'Venture capitalists are making a bet, and if one out of 10 or one out of 12 hits, those guys are in great shape. And I'm thinking, 'What happened to the other nine guys?'

I was very cautious and conservative about that because I couldn't see where my business could meet those requirements.

9/11 killed us, and the economy, it was just a very difficult thing. We were fortunate that we had a couple of really good customers. The downturn did not impact our business with these clients. We were able to survive. A big piece of our business was not impacted at all by any of these things.

Where will the company be three years from now?

I always say to people, 'I want Blackwell to be spoken in the same sentence with a lot of the companies that I really admire.' If, three to five years from now, you could imagine there was a CEO having a conversation with a CIO, and the CEO was saying, 'We've got this problem, and we need to find some company to help us with it; who would you recommend?' And the CIO says, 'I think we probably ought to talk to Andersen (Consulting), IBM and Blackwell.'

Then I will have thought that we've finally achieved something.

HOW TO REACH: Blackwell Consulting Services, (312) 553-0730 or www.bcsinc.com

Tuesday, 21 December 2004 10:52

Movers & Shakers

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The Knockout Group Inc. has added Coleman Peterson, former executive vice president of people for Wal-Mart Stores, to its seven-member board of directors. Peterson retired from Wal-Mart after 10 years as chief human resources officer.

"Coleman Peterson has a sterling reputation as one of the most revered names in the retail industry," says John Bellamy, chairman and CEO of The Knockout Group Inc. "His addition to the board catapults the Knockout Group onto the upper strata of the retail landscape and gives the Knockout brand significant stature and credibility."

Peterson is president and CEO of Hollis Enterprises, which he founded in 2004 after retiring from Wal-Mart Stores. The firm supports businesses in improving their organizational effectiveness through leadership development, diversity achievement, succession planning, human resources and general business issues.

From 2000 to 2004, he served as executive vice president of Wal-Mart's people division, after functioning as senior vice president in that position. As the company's chief human resources officer, Peterson presided over the world's largest private work force, with 1.5 million associates. He was responsible for associate recruitment, retention and development for the retail giant. He also presided over Wal-Mart's global growth in Mexico, Canada, Germany, the United Kingdom, Asia and South America.

Prior to joining Wal-Mart, Peterson spent 16 years with Venture Stores of St. Louis, with his last role being the senior vice president of human resources.LITTELFUSE INC.

Littelfuse Inc. named Gordon Hunter chairman, president and CEO. Hunter was appointed COO in 2003 and has served as a director of the company since 2002. He succeeds Howard B. Witt, who retired.

Hunter joined Littelfuse from Intel Corp., where he was vice president, Intel Communications Group, and general manager, Optical Products Group. Prior to Intel, he served as president of EloTouchSystems, a worldwide leader in the manufacturing and sales of computer touch screens.

Littelfuse also named Elizabeth Calhoun vice president - human resources. Calhoun assumes responsibility for all worldwide human resources activities at the company.

Previously, Calhoun was director, human resources - home services for Sears Roebuck and Co. She has also worked at Pepsi Bottling Group Inc., Colgate Palmolive Co. and TRW Inc.

HURON CONSULTING GROUP INC.

Huron Consulting Group Inc.'s board of directors elected Gary E. Holdren chairman and CEO. Holdren had served as the company's president and CEO since May 2004. He also serves as CEO of Huron Consulting Services LLC, Huron's operating subsidiary.

LEE HECHT HARRISON

Michael Buckman was named national practice leader for Signature Service at Lee Hecht Harrison. He was most recently general manager of the company's Lisle and Schaumburg offices and regional leadership specialist for the Greater Chicago area.

Julie Beck was appointed executive vice president of the company's Central region. She has served as senior vice president of the company's Northwest region. She has also worked in management at Sylvan Learning Corp.

CNA FINANCIAL CORP.

CNA Financial Corp. named D. Craig Mense CFO. Mense succeeds Robert V. Deutsch, who served as CFO from 1999 to October 2004.

Mense previously worked at St. Paul Travelers, where he served most recently as president and CEO of its Global Run-Off operations. From May 2003 to May 2004, he was COO of the Gulf Insurance Group.

INNERWORKINGS

Steven E. Zuccarini was named CEO of InnerWorkings. He served most recently as president of global solutions with R.R. Donnelley. Previously, he held the title of president of catalog and retail solutions as he led a team responsible for more than $1 billion in revenue across multiple channels for more than 400 customers worldwide.

CDW

CDW Corp. elected Stephan A. James to its board of directors. James holds the advisory position of international chairman at Accenture. Most recently, he served as COO - capabilities and was a member of the office of the CEO.

Prior to being named COO in 2000, James was managing partner of two of Accenture's operating groups -- Resources, where he led the firm's business focused on the energy, chemicals and utilities industries, and Financial Services, where he was responsible for all business in the banks, insurance and health care industries. He joined Accenture in 1968 and was named partner in 1979.

HIGHBEAM RESEARCH INC.

Keith Powell has joined HighBeam Research Inc. as vice president and chief technology officer.

He was previously senior manager for BearingPoint Inc. (formerly KPMG Consulting). Powell has authored or co-authored more than 10 books on several of the popular Microsoft software tools and operating system products.

AON CORP.

Aon Corp. named Craig A. Streem vice president and head of investor relations. Streem was most recently vice president of corporate relations and communications for Household International, now part of HSBC Holdings.

Tuesday, 21 December 2004 10:40

Errors and inefficiencies

Written by
An underlying theme in any business is keeping costs at a minimum in order to spur growth and increase the bottom line.

As companies attempt to streamline their costs, an area that frequently gets overlooked is telecommunications. This critical function of an organization is oftentimes plagued with errors and inefficiencies, especially if it has not been given the proper attention.

Problems include not knowing what services you have, who is providing the service, how much you're paying and whether you're paying too much. Recognizing whether or not you have a problem is a difficult task. However, there is a unique tool that companies can take advantage of to fully understand their current telecommunications environment.

Just as a retail store takes an inventory of what products are on their shelves, companies need to do an inventory of their telecommunication services. Conducting a telecom service inventory enables you to proactively manage your telecom environment so you know where every penny is going and the value you're receiving in return.

It's easy for unnecessary services -- which in most instances go unused or provide little value -- to creep into your telecommunications mix. A telecom service inventory gives you a 360 degree view so you can accurately gauge your situation, determine whether service changes need to be made and whether it's feasible to reduce costs.

A telecom service inventory is essentially an analysis of where a company's telecommunications infrastructure is today and what modifications can be made to improve the organization tomorrow. There are a number of items that should be covered in a telecom service inventory by a leading telecommunications provider to uncover errors or inefficiencies.

Below are a few key components.

* Location inventory. An analysis of voice, data, and video services by location

* Line inventory. A complete inventory of all voice lines

* Cost distribution by service Type. Cost breakdown by voice, wireless, and data services

* Vendor distribution. Cost breakdown by telecommunications vendor or carrier

* Rate plan report. Identification of each rate plan by usage per user

* Contract plan. An inventory of service pricing versus invoice pricing to determine accuracy

* Wireless report. A breakdown of wireless users by number

The end result of gathering this information is to help those individuals responsible for their company's telecom environment to make educated decisions about what they actually need. Additionally, the data enables them to more effectively manage adds, moves or changes to equipment and services as their company expands. It basically puts users in control of their services, which, properly managed, can reduce costs and save significant amounts of money.

Worry about whether you're being billed correctly or utilizing your system to full capacity will go away once you engage a telecommunications provider that can perform a telecom service inventory. Once completed, you will know what services you're paying for, their true costs and the value they're delivering to your organization.

In order to survive in today's business environment, you must find ways to increase profitability, improve productivity and obtain a competitive advantage A telecom service inventory provides you with some additional help to achieve this objective.

Randy Wear is president of Decision Systems Plus Inc., a member of the Technology Assurance Group (TAG). DSP provides computer and telephone technology infrastructure sales and support nationwide, to increase client's productivity and profitability. Reach him at rwear@dspi.com or (847) 544-5818.