Fred Koury

Monday, 22 July 2002 09:59

A lesson from Continental

I decided to start the new year in February this year.

It's always been a ritual for me to lay out my New Year's goals and objectives over the holidays. While I usually have a fairly complete list of goals to ponder come New Year's day, they're not the kind of goals that have been carefully planned and plotted. The rushed holiday season just doesn't allow the time or the mindset to put together well thought out, quality plans. Therefore, this year, I decided to take the whole month of January to do diligent planning with my management team.

I came to this decision after reading an article a friend sent me. I was so inspired I decided to use it as a template to move forward with my goals and objectives for 1999. The article was about the turnaround of Continental Airlines, published in the company's December 1998 in-flight magazine.

It was a story of how a corporate turnaround specialist, working with the airline's new president, turned Continental around from losing more than $600 million in 1994 to making a profit of $224 million in 1995. The main advantage the new leadership had is that it came into the company with a fresh perspective. The new people didn't waste their time making excuses or blaming each other for the company's poor performance history. They simply went to work with the knowledge that the company was heading for a nosedive if they didn't turn things around, fast.

"We saved Continental because we acted and we never looked back," wrote Greg Brenneman, the turnaround specialist who is now the airline's president.

While most companies may not be on the brink of failure, an action plan geared toward efficiency and profitability is something we can all benefit from.

At Continental, the two leaders started by making a list of everything that was wrong with the company. It was a very long list. They then organized the solutions to those problems into a strategy they called the Go Forward Plan.

Once I read this article, I knew that I and every other CEO could learn a lot from it. This was a story about how a company that was dead last in its industry and about to file for bankruptcy for the second time, turned into a profitable industry leader-in about a year.

I took this article to heart and scrutinized my company for the New Year. I sat down with my top management and we made a list of all the problems we saw in SBN. Knowing that it's arrogant to think any company doesn't have problems, we scrutinized everything.

But we had two basic ground rules: We had to view each area with a fresh perspective and we weren't allowed to lay blame or point fingers. The purpose was to be solutions-oriented and look forward. Our goal was to reinvent SBN and stay No. 1 in our niche.

We decided to take this long list of problems and break them into four areas, similar to the Continental approach. The areas we looked at were finances, product, market and people. Like Brenneman wrote, "...saving Continental wasn't brain surgery."

Once we targeted all the problems in these areas, we split them up among us to come up with solutions for each one. Those solutions became part of our own Go Forward Plan.

Our mission was simple: to come up with a strategy that everyone in the company could understand. It is important to share your vision so there is unity and cohesiveness within the working environment. Also, it's important to have values on which to base your plan. These are ours:

1. To operate with honesty, trust, dignity, and respect.

2. To treat all people fairly.

3. To have a united team.

It is too early to tell you how the plan is going at this time. However, I'm looking forward to sharing our progress with you. By now, you should be able to assess how well you're meeting your own New Year's goals. If you're like most, and you're realizing you didn't spend enough time on them over the holidays, consider spending this month putting together your own Go Forward Plan.

Fred Koury is CEO of Small Business News. He can be reached at fkoury@sbnnet.com.

Monday, 22 July 2002 09:43

Walk the walk

In the dictionary, a visionary is defined as a person with unusual foresight and the ability to see ahead. Whenever we are in a position of leadership, we carry that responsibility, whether we like it or not.

SBN magazine is all about visionaries. In 1999, we had our first Innovation in Business Conference, which recognized area leaders for their innovation and vision in business. Winners in the visionary category were leaders who recognized trends such as how the Internet would change how books are sold; how software could be broken down and sold as components; how competition in the cable industry would create a need for marking cables; how interactive media could enhance retail sales; and using franchising in a nontraditional industry to grow.

These are all people with the uncanny knack of knowing in which direction their industry is headed before everyone else. Needless to say, the conference was a smashing success. People want to learn what it takes to acquire these skills and apply them to their own businesses.

Here are several questions to consider:

  • Would you consider yourself a visionary?

  • How important is it to be a visionary if I am in a leadership position?

  • How can I tell if I am one?

  • How can I become one if I’m not?

  • What will happen if I never become one?

Here are the four steps it takes to become one. This exercise can be helpful regardless of how you answered the questions above.

1. Think like one. Don’t operate in a vacuum. Get educated on your industry and understand what is happening around you. With the right information and research, you can pick up on trends before anyone else. It is important to know what your competition is doing and how it is doing it. Think long term and get away from the daily crisis mode that too many of you operate in. Establish goals and work toward them.

2. Talk like one. Delegate responsibility to free up more of your time for long-term strategic planning. Spread the message throughout the organization so everyone knows what the goals are. Continue to reinforce the message.

3. Act like one. Implementation of your plan to reach your goals is up to you. You’ve done the research, identified the trends that will affect your company and established goals to make your company the leader.

4. Be like one. Results will speak for themselves. If you are successful in being a visionary, revenues, earnings and market share will increase. Your hard work and visionary skills will have paid off.

To be a true visionary, you have to keep moving forward. Like a high-profile coach, you are only as good as your last game. Once you’ve reached one set of goals, you need to formulate your plan for the next ones.

Failing to be a visionary can hurt your business. If you don’t have a vision, it will be hard to retain your top people. With no clear goals, they’ll see the company as stagnant and move on to more promising positions.

Without a vision, it’s hard to convince bankers and investors to give you enough capital to grow your business. As you remain stationary, your competition will pass you by with visions of their own.

Become a visionary now, before your competitors do.

Fred Koury (fkoury@sbnnet.com) is president and CEO of SBN.

Monday, 22 July 2002 09:41

Growing at e-speed

Plenty of fortunes are being made today by growing companies at e-speed — the blinding pace of the Internet economy — but at what potential cost?

It is very important that we always evaluate our motives and measure our potential loss compared to our potential gain. If things are not done for the right reasons, you’ll get nothing but trouble for your efforts.

People have many reasons for wanting to grow a company at e-speed. Some primarily want to go down in history for making a name for themselves, some are looking to get rich quick, and still others are trying to be a good steward of their money.

So what’s the right answer? Consider this:

There have always been people who have wanted to make a name for themselves in history, such as Alexander the Great, Napoleon Bonaparte and Adolf Hitler. All died a miserable and lonely death regardless of what they conquered in life.

Some business people of our time, including Henry Ford, Walt Disney and Andrew Carnegie, have a name that is equated with success, but what price did each of them pay?

In get-rich-quick schemes, everything tends to be built on sand. There is hardly ever a solid foundation, as all energies are put toward the accumulation of wealth. Other important factors that play into the success of the company, including employees, product or service and customers, become secondary, which can ultimately lead to disaster. It’s important to think of the potential outcome in advance, because you may not get a second chance.

We are told to be good stewards of our money. This reminds me of the parable of the talents: A man going on a journey called his servants and entrusted some of his wealth to them. To one, he gave five talents of money, to another, two talents, and to the last servant, one talent, each according to his ability. He then went on his journey.

The man who received five talents went at once and put his money to work and gained five more. The one with two talents gained two more. But the man who received one talent went off, dug a hole in the ground and hid his master’s money. When the master returned, he generously rewarded the first two for their faithfulness.

However, the last servant, who was afraid to risk his master’s money and buried it in a hole, was forced to return it to his master. This shows we are not to be lazy with our talents and should make the best use of them.

I feel growing a company today at e-speed is fine if it is done with the right intentions. Here are five steps to ensure success when growing a company at e-speed:

Think of the customer first. Create a demand by offering a superior product or service. You will build loyalty, and success is sure to follow. The customer is the foundation of your business.

Think of your investors. It is important to be good stewards of your money. Your reputation is everything. When you stay true to you word, you can always go back for more.

Think of your employees. When you have a great team of people, it will allow you to achieve your goals.

Think of family. Quite often, family members can be affected the most. Don’t wait until it’s too late and you grow apart to put a value on them and the relationships you have.

Think of yourself last.

This is a sure recipe for success, even at e-speed. The rules might have changed, but the principles are still the same.

Fred Koury (fkoury@sbnnet.com) is president and CEO of SBN.

Friday, 19 July 2002 07:13

Searching for options

Whether you are a bricks-and-mortar business or a dot-com, all owners of growth companies need to attract, retain and motivate key management to elevate their businesses to the next level.

As a growth company, using large amounts of cash to achieve this is often not an option. One alternative being utilized more and more is stock options.

There are two types of stock options -- qualified (e.g., incentive stock options, commonly referred to as ISOs) and nonqualified. There are numerous factors to consider prior to adopting either type to ensure that both the company granting the options and the employees receiving them can take advantage of the corresponding tax benefits.

There are advantages and disadvantages associated with both. Here are a few of the major differences, including key factors to consider when deciding which type of option to adopt.

Qualified options (ISOs)

  • Recipients of the options are taxed at the time of the ultimate sale of the stock acquired on exercise, not at the time the option is exercised, delaying tax liability.

  • Recipients are taxed at the capital gains rate rather than at the ordinary income rate, assuming the minimum statutory holding requirements are met.

  • ISOs are limited in the amount of stock that can become exercisable in any calendar year.

Nonqualified options

  • These are not limited in the amount of stock that can be awarded on an annual basis.

  • They allow the company issuing them to take a tax deduction for employee compensation.

  • Recipients are taxed on the appreciation in value of the stock at the time the option is exercised, rather than at the time of the ultimate sale of the stock. This may leave the employee with an income tax liability with no means to pay for it if the stock is not sold at the same time the option is exercised.

  • Recipients are taxed at ordinary income tax rates on the appreciation.

Regardless of the type of plan implemented, there are several issues to keep in mind when evaluating and adopting a stock option plan.

Size of the option pool. While there is no hard and fast maximum amount, many companies typically set aside 10 to 20 percent of the equity to be granted to key management and employees. When calculating the total percentage to be allocated for the option pool, don't forget to account for future employees who will be hired to round out the management team.

Awarding the options. Typically, options are awarded based on performance measures that will result in the company achieving its overall business strategy and growth/profit goals. The primary goal of options is to use equity ownership to align the interests of employees with those of the company and to motivate employees to reach the company's long-term goals.

Vesting of options. Typically, options will vest (become exercisable) over a period of time. By utilizing a vesting schedule spread over several years, companies can lock in key employees. However, the plan or the option should also include forfeiture provisions in case an employee leaves before the options vest.

Stockholders' agreement. Recipients of the options should be required to execute a stockholders' agreement at the time of exercise of the options. This may contain a number of restrictions on the stock (e.g. forfeiture provisions, buy-back provisions for the company, restrictions on transfer, etc.) and virtually any other terms the company desires within the bounds of the law.

Noncompetition/nondisclosure agreement. When adopting and implementing a stock option plan, business owners are presented with the perfect opportunity to have their key employees execute a noncompetition/nondisclosure agreement. As a potential stockholder in your company, following exercise, recipients of options will have access to valuable and proprietary corporate information. The noncompetition/nondisclosure agreement serves to protect companies from the potentially damaging scenario of losing a key employee and his or her intellectual capital to a competitor.

Numerous factors and laws govern stock option plans. A company's decision to implement a plan should be made only after careful consideration of its circumstances and financial position and consultation with legal and tax advisers.

Whatever the route, employers should feel out their key management and employees to see what will motivate them. Employers and employees often have opposite views on this subject.

The goal is to motivate, not aggravate. The good news is that the "options" are many. Lee Koury (lkoury@arterhadden.com) is an attorney at Arter & Hadden LLP and a member of the firm's E-Group and Growth Group. The Growth Group is a multidisciplinary group of attorneys which focuses its practice on entrepreneurs and emerging growth companies. He can be reached at (216) 696-5677 or through the company's Web site at www.arterhadden.com.

Friday, 19 July 2002 05:53

The measure of our success

In most cases, when we evaluate ourselves against the rest of the business world, we tend to compare ourselves to those above us.

We might look at people who are making more money than us, those we perceive to have a better job or those we aspire to be like. In doing this, we will always conclude we are not as successful. We will always be a notch below where we think we should be.

The real deception is there are always going to be people who run larger companies, make more money and are deemed more successful. No matter how far you move up the ladder of success, there's always going to be someone on the rung ahead of you.

It is a race that cannot be won, and there's a steep price to pay for entering it. We will never have a real sense of purpose if we use this as our barometer of success.

Here are five steps to help put things in perspective:

1. Many people ask if what they are doing today is what they should be doing. The answer is yes. If this weren't true, they wouldn't be in that job. You are where you are supposed to be, so quit wondering and start working.

2. Do the best job you can in whatever you do.

3. Do not compare yourself to others. This only causes ungratefulness and focuses on what we don't have rather than what we do have. This causes envy and jealousy.

4. Be thankful for the position you are in. This isn't always easy, and some days or years are better than others, but keep in mind that more than 2 billion people in the world live on less than one dollar a day. While many of your problems may seem severe, take a step back and re-examine them.

There are so many people that go each day without the basic necessities like food and water. Is what you're worrying about really a crisis? It is very important to always keep things in perspective.

5. The goal is to achieve a sense of contentment and happiness. When that happens, a sense of purpose is realized. You will start to enjoy the fruits of your labor. This is a sign of strength, not of weakness. It doesn't mean you are not ambitious, just that you are enabling yourself to enjoy the ride.

These steps will help you live in the present. Too often, people are thinking about the future. They spend too much time focusing on their next pay increase, promotion or career change. Just because you're not on the top rung of the ladder doesn't mean you haven't been successful.

Slow down and enjoy some of your accomplishments. If we are always living for tomorrow, we can never really experience the true joy of today. Fred Koury (fkoury@sbnnet.com) is president and CEO of SBN Magazine.

Thursday, 18 July 2002 13:20

Taking measure

As businesspeople, we have a fiduciary responsibility to ourselves and to our companies to measure the investments we make.

Investments include inventory, office space, equipment, even employees. Too often, we don't have benchmarks in place to really measure the return on these investments.

By not measuring the success or failure of the ideas we implement, we put ourselves in a vulnerable position. If too many investments are made at once, cash flow can quickly dry up if they don't pay off. People and resources will be diverted to unproductive projects, while money-making ventures sit idle or never become as lucrative as they should.

With no tangible measurements, it becomes easy to spread our resources, especially capital, too thin while working on too many projects at once.

Here are several suggestions to help you avoid this mistake.

 

1. Set goals and establish a timeline for a return on each investment. Be realistic, because some things take time to mature. Make sure the company is financially sound and can handle the downside of any investment you make.

Be prepared for the worst-case scenario. You'll be able to manage better knowing that your company is prepared, allowing you to focus on creating success rather than avoiding failure.

2. Put it in writing and share it with the right people. Give employees the information they need to do their jobs, and let them know how you want them to measure progress.

Employees need to understand your goals. If they are not clear about the goals, you risk them pushing the idea in the wrong direction.

3. Make yourself and your employees accountable through key performance measures reported on a periodic basis to assess your progress. This helps keep key people informed on how the company is progressing toward achieving its goals. Keep regular tabs on why projects are or are not working as predicted, and make the necessary adjustments.

4. If you are not receiving a return on an investment, weigh your options. If the return is there, continue funding. If it is not, don't delay in making the difficult decisions. There are many reasons something looked good to start with, then soured. Economic conditions change, key employees leave, new competitors enter the field.

5. Make decisions that are in the best interest of the companies well being. Leadership falls on you. Reassess why things aren't working and pull the plug, if necessary, then refocus that capital on more promising projects.

As your company grows, the need to establish benchmarks to measure progress grows with it. Benchmarks provide vital information on which to base your business decisions, and give you quantifiable data as to which projects are worth pursuing.

With a tightening economy, it's more important than ever to carefully manage every dollar. Take the time to establish benchmarks now, so you can continually evaluate performance.

If push comes to shove, you'll know exactly what needs pushing and what needs shoving. Fred Koury (fkoury@sbnnet.com) is president and CEO of SBN Magazine.

Tuesday, 30 April 2002 07:08

Taking credit

When was the last time you looked at your credit rating?

People take for granted that the information on their credit reports -- personal or business -- is accurate. That's a big mistake. These reports are plagued with errors and inconsistencies. Each day, business owners are taken advantage of because no one speaks up.

Credit ratings are more important than you realize. As SBN Cleveland reported in "The credit crisis" in November 2001, a business owner can make a significant amount of money and have millions of dollars in the bank, but neither his income nor his assets are listed on a credit report.

Another point we noted: If you have a credit card with a limit of $5,000 and your balance is $4,000, your credit score will be lower because it looks as though you are overextended, regardless of your payment history. (To read the article, go to www.sbnonline.com and click on Executive Briefing.)

Of course, you can always report errors to the appropriate credit bureau, which has 30 days to investigate disputed items and resolve them. But you still have to go through the aggravation and legwork. The approach to credit scoring needs to change.

Here are four steps you can take to make a difference.

1. Contact your congressman. I know this is a hassle, so I'm making it simple. Listed below are the names and contact information for your local representatives. Let them know if you've been affected by the current method of credit scoring.

2. Contact the Better Business Bureau. While the BBB doesn't wield legal authority, it has a significant voice in mending broken business practices.

3. Check your credit rating. Until the guidelines of these companies are changed, we have to play by their rules. Order a copy of your credit report each year to check for accuracy. If there are mistakes, put your complaints in writing.

4. Send me an e-mail. If you have had a legitimate complaint regarding a credit bureau in recent months please forward it to me and I'll make sure they are all consolidated and forwarded to the right people.

SBN Cleveland contact info

Sherrod Brown: (440) 934-5100 sherrod@mail.house.gov

Paul E. Gillmor: (419) 734-1999 www.house.gov/writerep/

Dennis J. Kucinich: (216) 228-8850 www.house.gov/writerep/

Steven C. LaTourette: (440) 352-3939 steve.latourette@mail.house.gov

Stephanie Tubbs Jones: (216) 522-4900 stephanie.tubbs.jones@mail.house.gov

Better Business Bureau: (216) 241-7678

Tuesday, 26 February 2002 12:20

Reap your harvest

We reap what we sow and we sow what we reap.

What do you think this expression means?

The word "sow," according to the Webster dictionary means, to scatter for growing; to plant seed; to spread or scatter for growth.

You are always sowing either for good or for bad, whether you realize it or not. All things come to light in due time -- maybe not in the timeline we would like to see it in, but in God's timeline.

One recent example is the Enron fiasco. This energy company, with its accounting firm and others, was not honest with the way it reported its finances. What you may not know is that several years ago, it got rid of its core value statement it was using as the foundation for its management principles.

We all know what happened next: Disaster for the company, its leadership and its employees. They were sowing bad seeds. We must take responsibility for our actions. Too often we look outside ourselves and blame others. If you sow blame, you will reap it as well.

It's time to quit passing the buck. Start taking responsibility for your own happiness.

Listed are five areas we sow each day in the business world. We need to be aware of what kind of seeds we are sowing because the seeds we sow today will affect us tomorrow.

1. Treat your employees well. Your employees are a reflection of yourself. If you treat them badly, they will treat your customers that way. Show them the dignity and respect they deserve, and those ideals will take root throughout the company.

2. The customer is always king. Are you treating customers the way you should? Remember, the most effective advertising is word-of-mouth, and the only way to get that is to treat every customer like royalty.

3. Treat vendors as partners. If you treat them fairly, they will do the same for you.

4. Be happy for your peers. Don't sabotage the success of others with petty jealousies.

5. Be grateful to God for your lot in life. We have a much better life than many others in this world.

The measure you use with others will be the same one used with you. Treat others the same way you'd want to be treated if your positions were reversed.

Today is a good day to start making sure you are sowing good seeds.

Saturday, 25 September 2010 20:00

Attitude is everything

If you surf the evening news or the cable news networks, one thing is certain: All news is bad news. If you create your perspective from television, you probably think the world is going to end tomorrow. This attitude of despair has crept into the workplace. The constant bombardment of negative messages, combined with a challenging economy, has not only the employees in a panic but some CEOs, as well.

While there may not be a “good news” channel on TV, you need to create the equivalent in your organization. You will be the anchor and will explain how there are no problems, just opportunities.

The CEO sets the tone for the office, and an attitude that’s focused on the glass being half-full is contagious. You have to put forth the energy to constantly be positive, because it’s too easy for people to focus on the negatives. A positive attitude can rally those around you, and conversely, a negative attitude can be destructive. Words have power — they can boost someone up or cut someone down. You have to create the vision that pushes people toward the positive and keeps them from fixating on the negative and constantly reinforce this message every opportunity you get.

Where they may see only bleak outcomes, you must see challenges that can be conquered. Not only must you identify the challenges, you also need to share the positive energy it will take to overcome them.

Walt Disney always saw the glass as half full. When he opened Disneyland in 1955, it was the world’s first theme park. It was a huge risk investing in something that had never been done before. A decade later, people thought he was even crazier when he bought up a bunch of swamp land outside of Orlando, Fla., to build Disney World. Where some people saw worthless land and risky business ventures, Disney saw places where families could go and have a good time.

Facing challenges with a positive attitude doesn’t mean you become overly optimistic. It just means you focus on the positive and build outward from that. One person can look at a business and see it as doomed to fail. Another person looking at the same business can see a great opportunity. It all depends on your attitude.

Within an organization, it’s important to have everyone working together. The saying about a little bad yeast spoiling the dough rings true when it comes to the people who work for you. The naysayers will spend their time complaining about their jobs and the bleak future of the company rather than working to do something about it. They become a cancer that spreads through the organization, crippling it. You have to take whatever steps necessary to rid yourself of these types of people; otherwise you’ll never make progress. Sometimes bringing in people with fresh perspectives is all it takes to get a department or an entire organization looking at things in new ways.

If you find yourself starting to fall victim to negative thinking, then you need to get a little perspective. Even with your troubles, you have it much better than most people in the world. It’s a privilege to be in a position of leadership, and you’ll always have a chance at another venture, even if your current one fails. Great leaders can go from boom to bust and then back again. You may have problems, but this is a country of second chances.

No matter what happens, you have to remind yourself to be positive and work toward solutions. If you see the glass as half full, those around you will start to do the same.

Monday, 26 October 2009 20:00

A matter of law

A man invested in a piece of real estate many years ago as part of a partnership in which he was the majority owner. The agreement stated he had pretty much free-ranging authority to do whatever he wanted, including amending the basic agreement. Recently, he moved the property into a trust.

The problem is, there was a caveat in the contract that stated that if the property were ever moved into a trust, the minority owners could buy out his majority share at book value.

As a result, he’s probably going to lose control of the future of the property that he’s managed all these years.

The lesson is simple: When it comes to legal matters, it’s the little things that can get you.

The contract hadn’t been reviewed in years, and a few sentences buried in the agreement completely changed everything.

While all of us would much rather be thinking about how to grow our businesses rather than quibbling with attorneys over the wording used in the second-to-last paragraph of a contract, a simple oversight could lead to disaster.

When you are making deals, it’s easy to get excited and start overlooking the details. But over time, circumstances change. It doesn’t matter whether it is taxes, partnerships, mergers or estate planning. It pays to have an attorney review all of these documents not only before you sign them but also from time to time so you don’t make any missteps that would jeopardize the contract, regardless of whether you are a Fortune 500 company or a family business.

Spend a little money upfront to prevent having to spend a lot of money later on. You have to look at a relationship with a law firm as an investment in your company. For many mundane services, you can negotiate a flat fee to fix your costs and avoid any surprises.

If you take the time to build a relationship with a firm or firms, you can get a lot more value out of it. As they get to know your business better, they can advise you of potential risks that you may not be aware of.

Attorneys can also help you out in other areas, such as assembling a board of advisers to help guide you to your growth goals or preparing your business for an initial public offering. They also often have great connections throughout the business community and can help you network, as well. As you build the relationship, your lawyer can become a trusted member of your inner circle.

Make sure you talk about costs upfront, regardless of whether you are working with a single attorney on a routine matter or with a multinational firm on a major acquisition. A big reason why executives often avoid lawyers in the first place is because of the fear of costs. In this economy, every nickel counts, and being handed a legal bill that is four times what the estimate was is not something you want to deal with.

Try to get as many services as possible done for a fixed rate to control your costs. There are some services, such as litigation, that have to be done at hourly rates. If that’s the case, then ask for an estimate upfront and demand regular updates on hours worked and how far the case has progressed so you have a better idea of what your costs are going to be. If a firm won’t work with you on cost control, then it’s probably time to look elsewhere.

Laws are the rules that govern the game of business. While it can be expensive to make sure you are playing by the rules upfront, it can be even more expensive if you find out that you made mistakes later on. As the old saying goes, an ounce of prevention is worth a pound of cure.

FRED KOURY is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or fkoury@sbnonline.com.