Born: 1947, Waukegan
Education: Bachelor's degree, Western Illinois University
First job: Paul Pettengill & Co., CPAs
Career moves: From Pettengill to Ace; within Ace, accountant to accounting manager; to controller; to vice president, finance; to senior vice president, finance and merchandising; to executive vice president and COO; to president and CEO
Boards: (Advisory only) City of Hope, AHMA
What is the greatest business lesson you've learned?
Be the best you can at whatever your responsibility, focus, be honest and have fun.
What is the greatest business challenge you've faced, and how did you overcome it?
Motivating Ace retail owners to raise the bar day in and day out has been and still is our biggest challenge. We are overcoming it via focused initiatives, measured results and old-fashioned repeated communication.
Whom do you admire most in business and why?
Walgreens. They are a great example of a company that has successfully addressed consumer needs for prescription drugs using a neighborhood, convenience, service-orientated, small-box model. Their team has the details at retail under control at each of their locations, i.e., their retail execution is tremendous.
When time is at a premium, it's easy to put estate planning concerns aside, but it can be difficult when you know that you need to do something, and do it relatively soon.
Addressing these concerns involves a visit to your trust officer, lawyer, accountant, certified financial planner and/or insurance agent. Your visit will be more productive and your time better spent, however, if you have already considered some fundamental issues.
Here are three of the more salient ones.
How much am I worth?
This question needs to be asked not to determine whether you need to do any estate planning but to determine how involved it should be. For example, a husband and wife with assets exceeding $1.5 million should be thinking about planning to take full advantage of the unified credit (the ability to protect a portion of your estate from federal estate taxes), and this may involve a division of assets between you and your spouse.
Those with very large estates may need to consider lifetime transfers of wealth and the use of charitable bequests as part of the overall plan. Although the federal estate tax is being phased out and will be eliminated in 2010, several states have uncoupled themselves from it, and some have already begun or will be shortly implementing an inheritance tax, creating new planning challenges.
Maximizing the amount distributed to your loved ones is a key component of a successful estate plan.
What happens while I am alive?
Is there a mechanism in place to ensure you are cared for in case of your incompetence or incapacity? A revocable trust, along with powers of attorney for property and health care, can protect you and your assets during your lifetime. Your investment strategy should provide for financial security so that you have the capacity to live out your life in relative comfort.
Do not forget that investment decisions made early can have a profound effect on your ability to be self-reliant later in life. Other financial issues, such as the role of life and long-term care insurance, should be considered as well.
Where does my estate go when I die?
The distribution of your assets to your loved ones after your death is obviously a fundamental concern of your estate plan. At a minimum, you need a will with a clear pattern of distribution.
In certain situations, you may wish to restrict the distribution to your beneficiaries for some period after death, and the use of a revocable trust or a trust under will is a great tool to accomplish this.
Dealing with other issues, such as business succession, may require more sophisticated planning techniques.
Effective estate planning is goal-oriented and personal. If you know where you want to go, getting to your destination will be much more efficient. Michael Nylen is vice president, Asset Management and Trust Services for MB Financial Bank, N.A. Reach him at (708) 210-5931 or firstname.lastname@example.org. This article is intended to highlight certain issues on the subject of estate planning and should not be construed as legal advice.
Most contractors who start their own business do so because of their expertise and skill in the field, and generally do not have formal business training. In this business situation, critical issues such as implementing effective bidding procedures and exercising professional management become acquired skills. The following are techniques geared to addressing the issues that your last boss never taught you.
Improve bid-to-award ratios
Increasing the percentage of jobs that are awarded does not guarantee higher profit -- volume does not always equate with profit in contracting or any other field. In fact, the contractor who successfully and consistently underbids the competition without understanding the actual cost will most likely run out of working capital and seriously imperil the health of the business.
The two main components in identifying costs are direct job cost and the application of overhead. The first, direct job costs, are the estimated variable costs associated with completing the project such as labor, labor burden, materials, subcontractors and equipment rental. Those items that vary in cost correlate with the size of the project.
The second component is overhead application. Overhead can be a combination of indirect overhead such as estimating wages, supervisor wages, fuel and oil, and consumable supplies. These costs are job-related, but must be allocated over all of the company's jobs.
The other overhead component is the total fixed cost related to the operation of the business. Administration, wages, insurance, rent, utilities and owners wages are components of the fixed cost.
The overhead rate is calculated from the annualized budget. The formula is overhead expense divided by direct job cost, which gives you an overhead rate that can be applied to all of your projects. To calculate the break-even point for a given project, the overhead rate is added to the direct job cost.
This number allows the contractor to cover the estimated job cost as well as the actual overhead expense. If the project is sold for less that this number, there will be a loss associated with this project.
The remaining factor in the equation is profit. The amount of profit you add to the job is dependent on factors such as how the project fits into your existing workload, competitive environment and pay history of the client. Using break-even calculations in your bidding process will help you understand your true cost of doing business and provide a return on your risk.
Develop incentive systems to increase profits
You or your designee may sign the checks, but your employees spend all the money. The best incentive programs take that simple fact into consideration.
There are also other factors that must be taken into consideration when developing an incentive plan.
* If you do not provide an incentive program, employees will develop one on their own by cheating hours or stealing materials.
* If employees do not understand how the program works, they will not be motivated by it. It must remain simple.
* Incentives must be tied to specific cost areas that the employee has control over.
* The incentive plan must reward the group as a whole. Performance will improve each employee's work affects the bonuses as a whole. This method tends to reinforce good behavior onto themselves.
* Supervisors should be compensated at a higher rate than laborers, as they have direct responsibility for the performance of the crew, including financial accountability.
* The incentive plan must have positive and negative components. This forces the employees to focus on costs.
* The incentive payout should occur often enough to provide motivation, but not become an administrative burden.
Using these simple techniques will allow you to apply better cost controls in the field from the ground up rather than after the fact from the management team.
Learning to improve bid-to-award ratios and develop incentive systems to increase professional management skills can play a vital role in your company's success. When done correctly, these steps can substantially increase productivity and profit. Mike Rudd (email@example.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 Rudd at (847) 808-5590 or at www.ipa-iba.com
Well, now you can, thanks to a relatively new tax deduction that was signed into law last year. The Jobs and Growth Tax Relief Reconciliation Act of 2003 is stimulating technology sales and encouraging companies of all sizes to make considerable investments that they've wanted to make for years.
If you haven't heard of this provision in the law, you're not alone. Section 179 of the Jobs and Growth Tax Relief Reconciliation Act was specifically designed to give businesses the ability to increase their spending on new equipment and generate growth in order to stimulate the economy. The amount of investment that may be immediately deducted by small to medium-sized businesses increased dramatically, from $25,000 to a whopping $100,000.
This means that a company can purchase new technology and expense $100,000 from the total cost in the year it is purchased. Deductions can be taken on new technology, machinery, equipment, telecommunications infrastructure, transportation equipment and furniture. Additionally, the definition of property for Section 179 now includes off-the-shelf computer software.
The amount of investment qualifying for the immediate deduction begins to phase out for investments of between $400,000 to $500,000, and will be indexed for inflation in 2004 and 2005. Companies need to take advantage of it now because the deduction is only good through Dec. 31, 2005, and could change any time after that.
There are other benefits designed to encourage new spending. Section 179 also increased the first-year bonus depreciation deduction from 30 percent to 50 percent for investments acquired and placed in service after May 5, 2003, and before Jan. 1, 2005. This is a one-time deduction of 50 percent of the cost of the investment in the year of the purchase. There is no limit on this deduction.
Businesses are getting a tremendous push with these changes. The law is quadrupling expensing deductions and almost doubling first-year bonus depreciation. Companies that are aware of the deductions are scrambling to ensure they are taking the appropriate steps because it means hard dollars going directly to their bottom line. Surprisingly, many business owners have either never heard of the law or don't know how to take advantage of it. Educating business owners on this powerful act is a slow process, but one that can truly benefit their companies.
There has never been a better time to make an investment in your business. For example, most organizations haven't made any changes to their telecommunications systems during the last five or six years. Much has changed in technology over that time, such as the development of Voice over IP (VoIP), speech-enabled technology, call accounting and Web data conferencing. These are examples of new technology that could make your company the dominant player in your marketplace.
Consult with your tax adviser to see how the Jobs and Growth Tax Relief Reconciliation Act's tax savings opportunities apply in your situation. Making a new investment will give you a competitive edge and increase your profitability.
Randy Wear (firstname.lastname@example.org) is president of Decision Systems Plus Inc., a member of the Technology Assurance Group (TAG). It provides voice, data,and convergence solutions that are based on integrated, open systems that work with a variety of organizational and technology environments and structures. Reach him at (847) 699-9960.
The strong desire to retain employees and the high cost of replacement workers are important drivers behind growing employer interest in integrating medical and disability benefits. A Mercer Human Resource Consulting study found that companies spent 15 percent of payroll on employee absence in 2002.
In addition, chronic diseases are on the rise in the United States. According to the American Diabetes Association, almost 17 million people in the United States have diabetes, yet about one-third don't even know they have the disease.
Researchers have estimated that diabetes cost the country $132 billion in medical expenses and lost productivity in 2002.
Return to productivity
By combining health and disability data to get an overall picture of a patient's health, physicians can help their patients remain healthy and productive. An integrated health and disability management approach can't necessarily prevent disease, but it can help a patient manage the progression of the disease and open up new options for workplace accommodations.
Here's an example. Bob, a 41-year old employee who works at a manufacturing plant, has a nonwork related injury and visits his doctor. His doctor determines that he's having lower back pain, says he should be out of work for a week, prescribes a muscle relaxant and anti-inflammatory medicine, and recommends physical therapy.
When Bob files his disability insurance claim, he agrees to join the integrated health and disability program and signs an authorization allowing the medical and disability staff to share information about his condition.
Over the weekend, Bob complains of frequent urination, thirst and hunger. He becomes disoriented, passes out and is admitted to the emergency room. His attending physician discovers that Bob is suffering from diabetic ketoacidosis and has very high blood sugar.
Bob's wife calls his disability insurance specialist and explains that Bob was taken to the hospital due to disorientation. She does not mention diabetes to the disability specialist. However, the disability insurer requires a statement from the attending physician and contacts the doctor's office.
The nurse tells the disability specialist that Bob was admitted to the hospital in a diabetic coma. The disability specialist explores the matter further and discovers a history of depression (a common, co-existing condition) and the new diagnosis of diabetes.
At this point, the disability specialist can continue with approval of the disability claim, and because Bob has previously granted permission to share information between his medical and disability case managers, she also makes a referral to the medical case management team responsible for Bob. When Bob is discharged, he is still experiencing lower back pain and is a newly diagnosed diabetic, so his doctor advises him to remain off work for four more weeks.
In the meantime, his medical case manager has also received a referral from the hospital. The medical case manager refers the case to the insurer's behavioral health and diabetes disease management area for follow-up.
In this scenario, Bob would get case management assistance from a care team that reviews his case in its entirety, develops a common plan to understand the link between his depression and his diabetes, and synchronizes the efforts of the medical and disability staff to help him return to work earlier than otherwise expected.
This holistic management approach focuses on the root causes of absences that generate health and disability claims. It links health effectiveness to functional outcomes, return-to-work and work/life issues. The total health model also enables employers to measure the value of health care products, at least partially, by their impact on productivity. Dr. Burton VanderLaan is a board-certified oncologist. He serves as regional medical director for Aetna and is responsible for quality and utilization activities for a 16-state region. He is a member of the board of governors and a past president of the Institute of Medicine of Chicago, and has served as a member of the board of trustees of the Illinois Hospital Association. He also is a fellow of the American College of Physicians. Reach him at (312) 928-3580 or VanderlaanB@aetna.com
Tribune Publishing named Tim Landon president of Tribune Interactive and Classifieds, a newly established division that combines the operations of Tribune Interactive (TI) and Tribune Classified Services (TCS). Landon had been president of the TCS unit. He is responsible for overall interactive and classified advertising strategy, technology and operations, including the company's print and online classified businesses and interactive operations of more than 50 news and information Web sites.
Landon was named president of TCS in June 2000, with responsibility for Tribune's overall classified advertising strategy and operations. He has been instrumental in Tribune's investments in online classifieds partnerships with CareerBuilder.com and Classified Ventures; and led the company's efforts to bring print and online recruitment products to Tribune's newspaper markets.
From 1999 to 2000, Landon served as vice president/business development of Tribune Interactive. Before that, he was vice president/general manager of Sun-Sentinel Co. in Fort Lauderdale. Previously, he served as vice president/strategy and development for Tribune Publishing and acting CEO of Classified Ventures.
He began his Tribune career in 1986 as a classified advertising representative at the Chicago Tribune, and later held a number of advertising positions.
Boeing Inc. named Kevin Brown to head its Air Traffic Management (ATM) business as Boeing's vice president, air traffic management. Brown previously was ATM's vice president for strategy and deputy to ATM President John Hayhurst, who retired April 1.
Since joining Boeing in 1978, Brown has worked on numerous military, space and commercial airplane programs, including B-52 programs, the 777, International Space Station, Joint Strike Fighter and the Next Generation 737, where he was program manager. He joined ATM shortly after its inception and was its business director, then vice president of programs, before advancing to his most recent position.
Asset Allocation & Management Co.
Randall K. Zeller will assume the role of chairman of Asset Allocation & Management Co. LLC, effective April 30. Zeller will transition from his day-to-day management responsibilities as president to a broader corporate perspective in his new role as chairman. He will continue to be involved in the future direction of AAM.
Zeller joined AAM in 2002 as president and COO, and was responsible for operational activities, including sales and marketing, human resources, compliance and related areas. He's formalized many operational and financial processes, improved staffing of the sales and marketing team, implemented compliance procedures and worked directly with many of the firm's current and prospective clients.
Executive search firm Crist Associates appointed Thomas R. Kolder president. Kolder, 39, arrives from Russell Reynolds Associates, where he was a managing director and head of the global manufactured products practice, focusing on board, CEO, COO, CFO and other senior officer searches for industrial, consumer durable and industrial technology companies.
Prior to joining Russell Reynolds, Kolder was an executive with the General Electric Co. in the Corporate Business Development organization, and later, in the Medical Systems business unit.
He received a B.S. degree in mechanical engineering from the University of Illinois and an MBA from the J.L. Kellogg Graduate School of Management at Northwestern University.
Chicago Mercantile Exchange Inc.
Rick Redding was named managing director, products and services, of the Chicago Mercantile Exchange Inc., a position he held on an interim basis since Jan. 21. He is responsible for developing and executing the company's global product development, sales and research strategy.
Redding has been with CME for 16 years, including the past 10 as head of the exchange's equity product line. He helped develop its stock index futures and options complex, and it now has a 95 percent market share in stock index futures trading. He earned a bachelor's degree in economics and finance from Houston Baptist University and an MBA in finance from the University of Houston.
Krish Prabhu was appointed president and CEO of Tellabs. Prabhu, 49, brings 24 years of telecom experience that includes roles as COO of Alcatel Telecom and CEO of Alcatel USA. He most recently was a partner at Morgenthaler Ventures, a communications and information technology focused venture capital firm. Prabhu also joins Tellabs' board of directors.
He began his telecommunications career in 1980 with AT&T's Bell Laboratories as a member of the technical staff. In 1984, he joined Rockwell International's Network Transmission Division, where he served in various positions in research and development, as well as management. After Rockwell's Network Transmission Division was acquired by Alcatel in 1991, Prabhu became vice president of business development and chief technical officer at Alcatel Network Systems, where he oversaw research, product development and business development. He served as president of Alcatel Broadband Products for Alcatel Europe, until being promoted to CEO of Alcatel USA in 1997. In 1999, he was named chief operating officer of Alcatel Telecom. In 2001, he became a venture partner in Morgenthaler Ventures, a venture capital firm based in Menlo Park, Calif., and Cleveland.
RR Donnelley & Sons Co.
RR Donnelley & Sons Co. named Richard Marcoux president, magazines, of its Long-Run Print Solutions business unit, which handles work in Asia, Europe and Latin America. George Zengo was named president, catalogs & retail inserts.
Marcoux has 23 years of experience in magazine printing at RR Donnelley, World Color Press and, most recently, at Quebecor World North America, where he served as president of the magazine group. Zengo has nearly 20 years of experience in catalog and retail insert printing, most recently as president, catalog group, at Quebecor World North America.
According to the survey, U.S. businesses lost about 6 percent of their revenue, or $600 billion, to fraud in 2002. The ACFE asserts that this probably underestimates the true costs because a lot of fraud escapes detection and reporting. But businesses may be able to minimize their fraud-related liabilities by familiarizing themselves with the factors and conditions that often lead to fraud.
Identifying and combating risk factors
Businesses should begin by assessing their baseline risks. Many organizations possess certain intrinsic traits that render them particularly vulnerable to fraud, including:
- The handling of large amounts of cash
- Inventory items or assets that are susceptible to removal and/or resale
- Overly ambitious earnings demands from investors or creditors
- Complicated financial operations
In some cases, there's little a business can do to eliminate such characteristics; a company that manufactures pocket-sized widgets will necessarily carry an inventory of easily misappropriated items. Organizations must therefore develop quick-response plans that they can immediately deploy upon discovery or suspicion of fraud.
The plan should include mobilization of an investigative team composed of a white-collar crime attorney, a certified fraud examiner and a forensic technology specialist, among others.
Recognizing the fraud triangle
Studies indicate that fraud is most likely to occur in businesses where the fraud triangle -- motivation, opportunity and rationalization -- is found.
- Motivation. A perpetrator's motivation may grow out of financial need caused by greed, addiction, gambling, poor investments, business reversals or an extravagant lifestyle. It may be work-related, rooted in employee dissatisfaction or the perception of questionable management integrity. A perpetrator also may find motivation simply in the challenge of outsmarting the system.
- Opportunity. Opportunity represents the only element an organization has any chance of controlling; removing the opportunity may derail potential frauds. Opportunities can come in the form of insufficient job applicant screening, inadequate policies and procedures, overly broad access to information, failure to segregate financial duties and ineffective monitoring of controls.
- Rationalization. Rationalization allows a perpetrator to reconcile his unethical actions with his own values. The perpetrator must be able to neutralize the fraud in his mind and push aside any consideration of the possibility of inflicting injury on others. Employees who hold a grudge against their employer, for example, find it easier to commit fraud based on rationalizations such as, "They don't pay me what I'm worth; I'm only taking what I deserve," and "Management is dishonest, so I can be dishonest, too." Others rely on rationalizations such as, "I'm only borrowing the money and will repay it as soon as I can," "The company doesn't need the money," or "The company can afford to write it off."
Formal anti-fraud programs, including adequate internal controls, can go a long way in preventing and controlling fraud. According to the ACFE survey, the single most effective method of detecting fraud is through a tip line.
The ACFE also recommends internal audits, background and reference checks on employees and applicants, and external audits. Management should develop and implement a clear antifraud policy before fraud becomes a problem, and make the consequences of noncompliance, for both the company and the perpetrator, well known to all employees on a regular basis.
Mari Reidy can be reached at (312) 899-7005 or email@example.com.
The law authorized a new funding arrangement known as Health Savings Accounts, which, when paired with a high deductible health insurance plan, let employees set aside dollars for medical expenses on a tax-favored basis.
Although the ink on the law is barely dry, insurers are already rolling out new HSA products in response to employer demand for cost-efficient solutions that provide employees with greater choice and tools to help them better manage their health care dollars. HSAs may be particularly attractive to smaller employers because they can cost less than other managed care plans.
Employees under the age of 65 who are covered by a "qualified high-deductible health plan" are eligible to participate in HSAs. Contributions to the account can be made by the employer or employee, with employee contributions coming through payroll deductions.
To encourage widespread participation among both plan sponsors and employees, Congress built several tax advantages into HSAs. For example, employee contributions are tax-deductible, and employer contributions are not considered taxable income for employment tax purposes.
Similar to Individual Retirement Account (IRA) contributions, HSA contributions and any earnings on those contributions grow tax-free. But unlike an IRA, HSA withdrawals are also tax-free if the money is spent for "qualified medical expenses" incurred by the employee or his or her spouse or dependents, such as doctor visits, prescription drugs, hospital costs, and vision and dental exams.
Tax-free withdrawals are also allowed for long-term care insurance premiums, COBRA premiums and other purposes specified in the law.
Over time, employees have the potential to accumulate significant amounts in their HSAs that can be used to pay for medical expenses in retirement. The account funds can be invested in interest-bearing assets, including mutual funds or stocks, where they can grow on a tax-free basis.
Additionally, any unused account balance can be carried over from one year to the next and from employer to employer, as long as a high deductible plan accompanies the HSA in the new plan offering.
Of course, like any group benefit regulated in part by the tax code, HSAs come with several qualifications. For instance, the health insurance policy must have a minimum annual deductible of $1,000 for an individual and $2,000 for a family. Contributions are limited to the amount of the policy's annual deductible, subject to a cap of $2,600 for individuals and $5,150 for families.
These limits are indexed for inflation in future years. HSAs can also be used to pay for nonqualified health expenses or withdrawn in cash, but will become taxable income and subject to an additional 10 percent tax penalty.
HSAs compare favorably in some respects to flexible spending arrangements (FSAs) and other health spending mechanisms. For example, there is no "use it or lose it" provision (common with FSAs), so funds can be rolled over from year to year. Additionally, since HSAs are owned by the employee, not the employer, they go with the employee who changes or loses his or her job.
Although they have just been hatched, HSAs offer a promising option in today's consumer-driven health care marketplace.
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. For more information, contact him at MartinoP@aetna.com or (312) 928-3754.
But as the years passed, the family-owned business did not evolve with the times.
Attempts to update its systems failed until the early 1990s, when then-CEO Robert Don composed his "View from 2001," a mission statement of how he wanted the company to evolve technologically.
"[He] put out the goal of us being a technology leader," recalls Steve Don, 38, who in 2002 became the third generation to lead North America's largest family-owned distributor of food service supplies and equipment. "He didn't put out the specifics of how to get there; he just said we would be the leader in technology in the food service industry. And, from there, we executed against it."
To achieve Don's vision required four years of planning, design and implementation. At the end, Edward Don & Co. had a $15 million integrated, synchronized enterprisewide computer system to track sales, inventory and distribution of 15,000 products to its 70,000 customers worldwide. Crucial to the project was the development of the company's first Web site, Don.com, which launched in 2000 and now accounts for 10 percent of its $400 million in annual sales.
But more than finding the right technology, the real key to the success, Don says, was the buy-in and participation of its 1,200 employees, who needed to focus on the day-to-day operations of the company but at the same time, commit to an ambitious project that would take the company even further.
"It's all about people," Don says. "You can have the greatest plan in the world, but it's the people that get it accomplished."
Steve Don had a freshly minted MBA from Northwestern's Kellogg School of Management in 1992 when he joined the family business. Don, who had worked at JMB Realty Corp. and Salomon Brothers, was planning on returning to Salomon when Edward Don & Co. made him an offer. But despite his last name, Don didn't start at the top.
"I took a threefold pay decrease," laughs Don. "Long term, it was the right decision. I'm a major shareholder; it wasn't about the short-term payoff."
Starting as a sales rep, Don worked his way up to positions of more responsibility until 1996, when he was named vice president of business development. At the center of his new duties was to design and implement -- along with COO Jim Jones and Jim Lyman, at the time a consultant for Ernst & Young -- a new enterprisewide computer system for the distributor.
"We had five different locations that were operating like five independent companies," says Lyman, now director of e-commerce and customer connections for Edward Don & Co. "We had computers all over the place, and it was a hodgepodge of systems that weren't talking to each other and everything else. Now we have a single database. (A sales rep) can be down in Florida, and when the computers here in Chicago scan a box, it will go back down there as a confirmation within less than a third of a second."
The first step in the project was deciding what they needed the software to do. To do that, Don assembled what he terms the "core team," or the top leaders from each department, including inventory, operations, finance, marketing and sales.
"For these projects, you usually get the people who have the most free time," Don says. "But we said that wasn't acceptable. We needed the best person from each department."
Being a member of the core team, however, didn't just require a couple extra meetings a weeks. It was more like taking on another job.
"They probably spent 50 percent of the time for a two-year period devoted to the project," Don says. "The director of inventory, he still had to manage all his people and all the replenishment processes, but still, 50 percent of the time he was working on this."
Don and the core team came up with 1,200 requirements for the enterprisewide system - everything from how the order is entered into the system to how the customer is billed -- and sought out software vendors that could meet those demands. The group narrowed the list of 40 possible vendors down to Rhode Island-based daly.commerce, formerly Daly & Wolcott.
"We wanted something that was going to be scalable," Don says. "And one that was an integrated system, which, in 1997, there weren't a whole lot of integrated systems out there. We wanted it to be robust, but not so complicated that our people couldn't figure out how to use it."
"From a management team perspective, we were looking at saying, this is our foundation from which we can build," Lyman adds. "For everyone else that was involved in it, they were saying, 'I'm having input, and it's my chance to fix these things that are wrong.' Inherently, people want to do the right thing."
Once Don and his team had customized the system, they needed to implement it companywide. That included bar-coding the company's $30 million in inventory at its headquarters and five nationwide distribution centers, then training the rest of the work force. Once again, attaining employee buy-in with the core team at the beginning proved to be crucial to the implementation success.
"We wrote all of our own training manuals," Don says. "So by the end of it, our team was very good at going in to one of our buildings and very quickly implementing the system."
Don installed the system at its Dallas distribution center first. After it was up and running, Don flew in and trained the rest of his regional managers at the Dallas location so they could see a working model of the system.
"The weekends before we went live, we performed a couple mock dry runs." Don says. "When you train people, it's one thing, but when you actually go live, it's a lot more challenging. You can train people, but they don't use it for a couple weeks, then you go live and the retention is not as high. So by doing these live training sessions, they really got some good practice."
In the past, sales reps without Telxon units would phone into customer service at the end of the night, and get their sales reports at the end of the week by fax or mail. Usually, their sales order history was a month old, and their accounts receivable was a week to 10 days old.
Now, the company's 350 sales reps are equipped with laptops and wireless Internet cards, and they can place orders in the customer's office, view the inventory and track their sales in real time. The new process saves each member of the sales force from 45 minutes to an hour a day, according to company estimates.
"This core team really helped in terms of the sense of teamwork to keep people motivated to keep going," Don says. "Our people were working nights, weekends, but they were extremely motivated because they felt like they were really part of something."
Edward Don & Co. began in 1921 with 10 family members who walked door-to-door to Chicago restaurants, with the guarantee that an order would be filled the next day. One family member, who had worked for clothing retailer Spiegel & Co., decided to copy Spiegel's idea of using catalogs to sell its merchandise. Until that time, restaurant owners needed to go to a showroom to view food service products and equipment.
By 2000, the food service industry was starting to use more online ordering. But Edward Don & Co. couldn't reach those customers, not just because it didn't have any e-commerce capabilities but because it had no Web site at all.
So after the implementation of its enterprisewide system, Don and the core team brainstormed and designed its Web site, Don.com, over a two- to three-day period.
"All the decision-makers were in a room where we did all of the prep work, and answered all the questions and set up all the requirements, and then the people started programming after that," Don says. "What usually takes eight to 12 weeks, we did in about two to three days."
But this time it wasn't just employee input that was critical for the internal system; customer feedback also helped create the Web site.
"Between our own people, consultants and customers, over 100 people were involved in giving their input to the Don Web site," Lyman says. "We clearly heard from our customers, 'I want it easy, I want to get online, place my order and get off.' That's the way we designed it."
With technology moving at the pace that it does, Steve Don may soon have to write his own vision of where the company will be 10 years from now. For now, though, Don says he's looking into improvements including global positioning systems for his fleet of more than 100 delivery trucks.
"We'll continue to stay ahead of technology," says Don. "But I don't want to get too far. We want to be leading edge, but not bleeding edge. You could spend and spend and not get any return on it." How to reach: Edward Don & Co., (800) 777-4366 or www.don.com