Meredyth McKenzie

Tuesday, 25 September 2007 20:00

Creative differences

When Brian McHale became president of Empower MediaMarketing in 1999, his biggest challenge was sustaining and building upon the culture that Empower’s founder, Mary Beth Price, created when the company formed in 1985. Even as the media planning and buying firm grew in size from four employees in 1985 to 150 employees today, the entrepreneurial, creative and flexible culture has stayed the same.

“We are a different company in many ways, but we’re not,” McHale says. “We want the same types of people working here, we want people to continue to do the same types of things for our clients, we still want people to be ethical and honest, and we want to give people the opportunity to grow at the company.”

Empower’s winning culture has helped employees feel like they are valued and has given them the freedom to be open and creative. McHale says employees who feel valued are more productive and stay in their jobs longer.

This culture has led Empower to other successes, including landing big-name clients, such as Honey Baked Ham and Dick’s Sporting Goods, and increasing revenue almost 45 percent over the last three years. While the company doesn’t disclose revenue numbers, various industry reports state the company had more than $300 million in billings in 2006, and the firm is one of the largest independent agencies in the United States.

McHale says to create a winning culture, you must find the right employees who will take your company to the next level, successfully communicate to them and energize them to make a difference.

Finding the right employees

Finding the right people is a constant challenge, but McHale says Empower’s best source of solid candidates comes from its existing employees.

“We’ve had such good luck with leads from employees that we put a bonus program in place for successful referrals,” McHale says. “The fact is, employees are excellent screeners. They’re not going to refer people who are underperformers or unqualified or difficult to work with. After all, they’ll have to work with them.”

McHale says it starts at the first interview. Empower tries to find candidates who will fit in to the company culture and help it grow and flourish. He looks for people who are curious, creative, open and honest.

“We want people to be honest with each other and direct,” he says. “Honest is honest. We don’t want people to operate internally or externally with our clients or suppliers in any way other than completely honest.”

Candidates meet with employees from different departments, which allows them to get a sense of the working environment and for McHale to see if they will work well with a team. Candidates also complete personality profiles during the interview.

“A personality profile is just one more data point, one more window into the person you’re thinking about hiring,” McHale says. “It’s obviously not something that we depend on solely or even primarily when making a decision. But it can help complete a picture.”

Empower also looks for people who can be future leaders and molds them to become involved.

“We look for people with passion about our business, a drive to understand consumers and what motivates them, and have a pervasive curiosity,” he says.

McHale listens to candidates discuss their past experiences because that’s where the passion and drive often come out.

“We also look for people who have been successful in developing others,” he says. “Leaders are people who are not only good at what they do, but good at helping others be their best.”

McHale says coaching and mentoring is important once a new leader is hired. Employees are given opportunities and room to show their leadership capacity, but you have to step in when your direction is needed. To be effective at this, you have to spend time watching these employees in action and to create opportunities for them to feel valued and to demonstrate their skills.

The end result is employees who can help the CEO spread the vision of the company and can help all employees to work toward common goals.

The open door

A culture cannot be successful if you do not communicate it to all employees and make sure they understand it and buy in to it. Empower strives for communication and has the hardware to prove it. The company was ranked No. 4 on Fortune’s “Best Small Companies to Work for in America” list in 2006.

McHale is a firm believer in keeping his door open to employees but says it takes time and effort to do this.

“You can’t just put a memo out to the company and say, ‘Today, we have an open-door policy,’” he says. “If you just sit in your office and say, ‘We have an open door,’ very few people are going to come find you. But if you’re out of your office and interacting with people on a regular basis, that’s when people will approach you.”

An open-door policy creates an environment where employees are not afraid to go knock on a co-worker’s door if they think he or she can help them solve a problem.

“It increases communication because it allows people to broaden the number of people that they can interact with or who they can tap for information,” McHale says. “But it also gives people permission to talk to people they might not otherwise talk with, just because it’s accepted.”

An open-door policy cannot be successful unless you model it.

“I get out of my office and walk around,” McHale says. “I try to be as visible as I can within the company. Obviously, time constraints don’t allow me to do as much as I’d like, but I try to make the time to get out there and chat with people.”

You also need to be sure that employees know you are doing something with the information they have shared.

“The worst thing that can happen is that they feel like their conversation has fallen into a black hole,” McHale says. “I always go back to the employee at some point and give them an update on what I did.”

Informal and formal means of communication are also ways for you to keep up to date on what’s happening at all levels of the company. McHale has lunch with employees during their anniversary month of when they started at Empower. These lunches allow him to get to know his employees on a personal level and vice versa. It takes away some of the hesitancy if employees need to come to him with an issue and creates greater trust and productivity throughout the company.

“They know me,” he says. “I’m not just someone who sits at the end of the hall and they see at a company meeting once in awhile. It’s important to have a different level of relationship, otherwise I don’t know that the open door would work. No one would know me, and no one would understand my personality.”

The open lines of communication paid off when the company needed to change its organizational structure. The concept was introduced at the companywide level, and smaller meetings then took place with each department to go over specifics.

“These smaller groups allowed us to answer employee concerns, as well as allowed employees to understand what the changes meant to them individually,” McHale says.

Creating these types of interpersonal avenues allows you to form closer relationships with your employees.

“It’s very difficult to lead a company and develop a level of trust if you have no idea who the people are that are working for you or are the ones you’re asking to help you get to a certain point,” McHale says.

Keeping the energy flowing

Empower certainly lives up to its name by empowering employees to be creative and work independently to reach goals.

McHale says empowerment starts by showing you trust them. This means motivating them through financial and personal compensation and not micromanaging them. Goals are set for the company, and goals are set for each employee, with he or she being held accountable for reaching those goals.

“All of those goals can be, and should be, rolled up to fit with our corporate vision and goals,” McHale says. “Our employees not only understand what’s important for the company, but what’s important for them as individuals and how what they do as individuals ties back to the company as a whole.”

Constant communication helps reinforce how important the employee’s role is at the company. McHale says discuss the company vision when the employee first starts, then reinforce it at monthly and annual meetings. Department leaders also help explain the employee’s role in meeting company objectives and make sure he or she lives the vision each day. Annual reviews are also important for empowering employees because you can tie individual success back to company goals.

But goal setting and accountability are both just one part of keeping employees energized.

Employees at Empower spend countless hours at the office working on projects, and McHale says it is equally important for employees to have fun and interact with each other, so they can better perform on the job.

Empower breaks the tension by sponsoring cornhole tournaments, outdoor happy hours and off-site fun days. Employees also get to try out the latest technology so they are familiar with products and have received iPods, satellite radios and digital video recorders.

“Why shouldn’t they (have fun at work)?” McHale says. “Our clients expect a lot from us because they have a lot on the line. In turn, we expect a lot from our people. But, at the same time, if they’re not having fun, they’re probably not going to stick with it for long.”

Even with these creative outlets, employees get drained from time to time. McHale says you need to have individual conversations with the employee to get to the root of the problem and re-energize him or her.

“If they’re feeling like they don’t have the opportunity to grow, it’s important to talk to them and see if there’s anything you can do to help them get over that or offer them other opportunities,” McHale says.

If the employee has reached a point where there is nothing more he or she can offer the company or vice versa, it may be time to part ways. McHale says individual conversations are good in these situations because if the employee is not energized at your company, you can help him or her find other ways to be energized, be it internally or externally.

McHale says without a winning culture and the right people, Empower would not have achieved the success it has, and it’s important to find and nurture those right people to sustain your culture over time.

“You have to look for those types of things at the very beginning,” McHale says. “If you don’t feel like somebody’s going to be able to operate well under your culture, you’re probably right, and you should find somebody else who you think could. It’s easy to kill a culture, but you have to work to keep it going.”

HOW TO REACH: Empower MediaMarketing, (513) 871-9454 or www.empowermm.com

Sunday, 26 August 2007 20:00

Larry Wind

Teamwork is important to Larry Wind, and it’s something he stresses at Woltz & Wind Ford and Washington Ford. He thinks of himself as a team leader instead of the car dealership’s president and has worked hard to establish the right team to help him lead the company. He says that knowing that they are a part of a team makes all employees feel that their input is valuable and that they can influence the direction and vision of the company. It also creates a sense of loyalty, Wind says. This emphasis on teamwork has allowed Wind to grow the business over the past 28 years from a small dealership into two large car dealerships with 140 employees and 2006 revenue of $84 million. Smart Business spoke with Wind about how following the Golden Rule and nurturing and empowering employees help create a good leadership team.

Look for ambition, honesty and integrity. I don’t know anybody who gets ahead in this world by working 40 hours a week. So if you sense that a person is a 40-hour-a-week person, I would say that person is not ambitious. You need someone who is more interested in doing the job and making a good living than watching the clock.

You want people who are competitive, ambitious, take pride in where they work and want to participate with a winner.

Build a successful team. You don’t start from Day One with the team you have in place today. It takes years of hiring and nurturing and mentoring and terminating to get the right team.

Surrounding yourself with good people and building that good team is a challenge. I like to grow the employees from within when possible, and that’s the best way to get loyalty.

You have to learn to delegate, and you have to learn to trust, and you have to inspect what you expect. So if you’ve delegated something, you have to watch it to make sure that it meets your expectation.

Play by the Golden Rule. Our mission statement is the Golden Rule. We want to treat our customers and each other as we would want to be treated.

It’s running your business for the long haul, wanting the repeat and referral business, treating your employees as team members and important parts, no matter what their job. If you didn’t need them, if they weren’t important, they wouldn’t be on staff.

Make sure they understand the mission statement. We have the statement posted, employees sign it, they understand it, and we turn around and treat them well.

Be attuned to your employees. I don’t make myself a best friend of my employees, but I’m a concerned employer. When you nurture the employee, it’s the entire environment that they work in and making them feel valuable. You don’t necessarily have to be the highest-paying company in your market, but you have to be good in all those areas.

Don’t lose focus. It’s easy to lose your focus, particularly as you become more successful. You have to have a passion for what you do. You’ve got to like getting up in the morning and going to work. So if you’re doing it just to make a living, you’re probably not going to stay focused.

You have to stay humble and remember where you came from because no one starts out a success. You have to be a student of the business. You’ve got to read the industry publications, attend the yearly meetings and participate when you can in associations.

Be wise with your money. You have to have a little bit of marketing savvy because it takes money to make money, and if you’re undercapitalized, that’s a problem. But if you’re properly capitalized, you’ve got to take the risk at putting the message out there.

Businesses fail because they are not properly capitalized when going in. Not everyone’s going to pay you in 30 days, not every check is going to be a good check, and if you can’t market, you can’t get your message out there, and people won’t know you’re open.

You have to borrow money and take the risk. No money is made without risk capital.

Once you are successful, you’ve got to make sure you leave enough money in the business and you don’t go getting foolish and spending it. You can buy the toy as long as you are leaving enough money in the business.

Park your ego. Partnerships are as difficult, if not more difficult, than marriages. So you have to work at the partnership. And that comes from treating him or her as you want to be treated. And not taking advantage of your position.

Don’t get too involved in your ego where you think you’re smarter than him or her. When I had a partner and I had what I thought was a good idea, I got him on board and to buy in. It would have been real easy to just go do it, but that wouldn’t have nurtured the partnership.

Communicate. Communication is important with your employees, your partner, your customers. You’ve got to put yourself out there and be a good listener, you’ve got to listen before you put your mouth in gear. You have to pick your words so that you’re honest in your communication.

Honesty is the best policy. Any time you sugarcoat something or mislead somebody, it will bite you.

Don’t settle. I follow the saying of, ‘What you tolerate becomes acceptable.’ So we work hard at not tolerating behavior in any employee that is not acceptable. Because at the end of the day, if you don’t stop that type of behavior, you’re the one that’s at fault, not the employee.

If you have a situation where it’s a high-ranking manager on your team and his behavior in some ways was not acceptable, it’s a lot easier to tolerate it than to terminate him. But in the long haul, you have to terminate that employee because if not, you’re just tolerating it and making it acceptable behavior.

HOW TO REACH: Woltz & Wind Ford and Washington Ford, (412) 279-4551 or www.woltzwindford.com

Sunday, 26 August 2007 20:00

The green connection

Green is the word around Executive Caterers, as the company takes steps toward helping the environment by incorporating green practices into its daily routine.

The decision to go green was made after Harlan Diamond, owner and president of the Mayfield Heights-based catering company, learned from employees about recycling and composting opportunities. As a result, the company began working with environmental organizations including Earth Watch Ohio and The Renaissance Group to find ways to become more environmentally friendly, says Michelle Adelman, Executive Caterers’ director of marketing.

The Renaissance Group performed an energy audit at Executive Caterers and came up with suggestions on ways the company could improve its impact on energy usage. Adelman says working with an outside source allowed the company to look at the overall picture and see ways it could improve. Finding ways to go green in an office is simple, Adelman says.

“Businesses should really start by looking at their use of everyday common things, like paper, ink and toilet products,” she says. “There are other minor things that they might not really be thinking about, like switching to fluorescent light bulbs or using motion sensors.”

Turning off computers and other equipment at night and when you’re out of the office can also cut down on electricity bills and save on energy, as can purchasing products locally or that are less harmful to the environment, Adelman says.

Executive Caterers also does its part by donating its used paper to the Mayfield Heights school district, which earns money by recycling it.

“Most of the school districts do have this program in place and would welcome the opportunity to earn additional money,” Adelman says.

But to really make a green program work, you have to get employees involved. You start by working with a small group of people in core areas on key issues, says Charles Klass, executive vice president of Executive Caterers. From there, real changes begin to be made, and the movement spreads throughout the company until it becomes a way of life within the organization.

“It’s an interesting process for a company that has been in business for a long time when you start looking at how you actually operate,” Klass says.

While Executive Caterers is still in the beginning stages of going green, it has already benefited. After installing a new heating, ventilating and air conditioning system, the company has reduced its energy usage by 30 to 40 percent annually and expects the system to pay for itself.

“As a business, it makes sense because they’ll save money in the long run,” Adelman says. “Ultimately, the benefit is to save our environment from our destruction.”

Adelman says going green is a learning process, but it is also a great feeling for the entire company once the movement picks up and the company begins incorporating green principles into its everyday operations.

“Going green’s not just about the trash,” she says. “It’s an overall concept and mind-set about the community coming together and sticking together. It’s really positive for growing relationships.”

HOW TO REACH: Executive Caterers, (440) 449-0700 or www.executivecaterers.com

How to go green

Starting out small is the best way for companies to incorporate the green movement, says Charles Klass, executive vice president of Executive Caterers.

“Try and not change the whole company overnight,” he says. “Try and pick the few areas where you feel you can get some success. From that, gradually build and then start looking at other areas.

“Pick the areas that would be most productive and least disruptive to the organization. You don’t want to make major changes in how they operate in the beginning.”

Getting support from the top is also an important ingredient in going green.

“You need to make believers out of the key people in the company,” Klass says. “If there’s not support from the top, it’s going to be hard to implement. You need a champion in the organization that can drive the process and expand it and get some fellow soldiers within the company.”

Executives interested in incorporating the green movement in their business practices can get involved with Entrepreneurs for Sustainability, or E4S, a networking group of about 4,000 Cleveland-area leaders who put the principles of sustainability into action, share information about the environment and promote the green movement among the business community. The group hosts networking events on the third Tuesday of each month in Cleveland and also hosts other events, including workshops and forums.

HOW TO REACH: Entrepreneurs for Sustainability, (216) 451-7755 or www.e4s.org

Monday, 25 June 2007 20:00

Living by the Golden Rule

Béla Szigethy and Stewart Kohl operate by the Golden Rule. The standard of treating others as they want to be treated was used in creating The Riverside Co.’s 15 business principles, which have helped it grow into a large private equity firm.

The principles include making sure investors’ interests always come first; putting integrity and honesty at the heart of the business; seeking employees who meet high standards and fit into the culture; stressing teamwork; and looking critically at all activities and valuing health, safety and environmental responsibility.

Following these guidelines, Riverside has grown from a small business in a tiny Manhattan apartment to a large firm in Cleveland, with 14 offices worldwide and 120 employees. Szigethy started the firm in 1988, while Kohl joined in 1993.

Riverside invests in premier companies at the smaller end of the middle market and is consistently ranked a top quartile performer in the “Performance Monitor,” published by Private Equity Intelligence. Riverside has focused on buying small niche leaders, growing the companies and then selling those businesses as mediumsized entities.

Riverside has created many unique business models for a private equity firm, including a centralized deal-sourcing team and a marketing and branding program.

Szigethy and Kohl are most proud of their employees and the relatively low turnover rate at Riverside due to careful selection, advancement opportunities and compensation. Employees are encouraged to maintain a work-life balance, and that notion is reflected in incentives such as flextime, remote officing and part-time work arrangements.

Employees are also encouraged to become active in their community. The firm recently created a fund to donate money to organizations that employees work with.

The co-CEOs also conduct weekly meetings with employees to go over the status of and encourage discussion regarding deals.

The two are constantly finding ways to improve the company so it continues to be a fun place to work and provides strong returns for investors.

HOW TO REACH: The Riverside Co., (216) 344-1040 or www.riversidecompany.com

Employee compensation has been a hot topic during the recession. Many employees have taken on additional responsibilities due to downsizing within the company but may not have received additional compensation for these new duties. Some of these employees may have even taken a pay cut just to keep their jobs.

You may run into problems retaining these employees after the recession ends if you don’t properly compensate them or negotiate a fair salary. Offering pay increases or bonuses may not be an option at this time, so you need to develop nonmonetary compensation options, continue to maintain a positive work environment and address any concerns upfront with employees.

“Ignoring salary negotiations only exacerbates an already bad situation,” says Jessica Ford, director of sales and operations with Ashton Staffing. “Employees may feel discontent about their salary and simply not discussing the issue may make them feel that they are not important and their worth is solely based on salary. Try to involve employees when possible and let them understand the company’s current financial situation.”

Smart Business spoke with Ford about key things to include in salary and compensation negotiations and how to develop nonmonetary compensation packages.

What are some key things you should understand about salary negotiations and employee compensation?

Negotiation is not about winning, unless both parties win. If either party feels they have not negotiated, both parties lose. Make every effort to identify the most recent salary and benefits your employee or potential candidate received. Ask an employee candidate to provide a W2 or proof of salary during negotiations instead of simply asking about his or her desired salary. You can also find this out from former employers when conducting reference checks. You may not be able to match the salary, but you will have a good idea of what the candidate will seek during negotiations.

Arm yourself and do your research. Be sure to reference your current internal salary ranges, the salary of current employees in similar positions, the profitability of your company, as well as the job search market in your area and the economic climate.

Even if an employee has positively impacted your company, you need to keep your salary limits in mind. You will save yourself years of headaches and prohibitive costs by doing this, even if you have to start your recruitment process over or tell an employee that salary negotiation is not an option at this time.

What are some common mistakes employers make regarding employee compensation, and how can they mitigate those mistakes?

Some employers have simply blamed the maintenance or reduction in employee compensation on the recession and have not come up with alternative ways to reward employees. Reducing employee discontent due to employee compensation is dependent on the total work environment you offer employees. Think outside of the box. Sometimes the biggest mistake employers make is to think that employees only care about a monetary salary. Offer other incentives that shift the focus away from monetary awards to employee recognition. This can lead to higher productivity.

How can you develop nonmonetary compensation packages for employees?

  • Offer a balance between work and life. Allow flexible starting times, core business hours, work from home options and flexible ending times. Employees will deter from a fixation on salary if they feel like they have a balance and some freedom.
  • Offer an attractive and competitive benefits package, if you are able to, with components such as life and disability insurance and flexible hours. An employee can be content with a low- to midrange salary if a strong benefits package is offered.
  • Select the right people from the beginning through behavior-based testing and competency screenings. Offer performance feedback and praise good efforts and results.
  • Do your best to create a fun work environment, because people want to enjoy their work. Engage and employ the special talents of each individual, and involve employees in decisions that affect their jobs and the overall direction of the company, such as the discussion of company vision, mission, values and goals.
  • Continue company traditions, such as holiday parties. This gives everyone something to look forward to and adds an element of fun into the workplace.
  • Remember to take an interest in your employees. Respect their ideas and listen to them. This small gesture can make an employee feel needed and that he or she has a purpose in everyday tasks, beyond just receiving a paycheck.
  • Provide opportunities within the company for cross-training and career progression. People like to know that they have room for career movement.

How can you handle employees who are not happy with their salary and the negotiation process?

Remember to always be honest with your employees and never promise them anything that you cannot offer. Tell your employees upfront if it’s absolutely impossible for your organization to address salaries at this time. Be sure to balance this with some kind of nonmonetary reward. This is necessary in order to maintain a healthy and happy work environment. But if you are confident that your company will have a good year, set a date as to when your employees can expect a raise or bonus.

Jessica Ford is the director of sales and operations at Ashton Staffing. Reach her at (770) 419-1775 or jford@ashtonstaffing.com.

Deciding whether to promote an employee from within or hire from outside the company can be a difficult decision, with many factors to be weighed. Promoting from within allows you a significant reduction in recruitment, hiring and training expenses but does not allow you a fresh perspective or new ideas. Hiring from outside the company gives you a renewed perspective and potentially different skill sets but can result in an adjustment period for the new hire and current employees.

“You must make an honest evaluation of your company’s needs and consider if those needs can be met with current talent,” says Michelle Elson, corporate director of operations with Ashton Staffing. “Consideration of company structure and politics must also be made, as well as if internal changes would harm or inspire company morale.”

Smart Business spoke with Elson about the pros and cons of promoting from within and hiring from outside and how to make the best decision regarding hiring.

What are the pros and cons of hiring from within?

Pros include:

  • The current employee’s familiarity with the company and a reduced adjustment period should allow for a faster transition.
  • Significant reduction in recruitment and training expenses, which is a benefit for any company.
  • An increase in motivation and loyalty from internal employees, which boosts company morale.

Cons include:

  • A fresh perspective is sometimes lost if an employee has preconceived ideas or thoughts on the position.
  • A reduction in morale may occur if other employees feel slighted by a colleague’s promotion or lateral move.
  • Internal hiring reduces the size of the prospective talent pool, limiting your access to the broad experience base available.

What are the pros and cons of recruiting from outside your company?

Pros include:

  • Access to a larger talent pool, with knowledge and skills that are not currently available in the company.
  • New hires bring in a fresh perspective and do not have company-specific experience to cloud their outlook.
  • The combined experience of recruiters and access to an established pool of prescreened candidates makes an agency a good resource for external hiring.

Cons include:

  • An increased expense to the company for advertising, recruiting and screening.
  • Potential resentment from current employees.
  • An increased adjustment period, learning of company culture, and training on specific software and products.

How can you decide which route would be best for your company and particular hiring need?

Consider the following:

  • What is your budget for this hiring?
  • Is there a viable candidate already established within your company?
  • Is your company in need of new ideas and fresh perspectives?
  • How will company morale be affected by an internal or external hiring decision?

Each company will have different answers to these questions and careful thought will ensure that an informed decision has been made. If you are on a tight budget, internal hiring would be the most cost-effective solution. An internal hire generally does not require a large monetary investment, other than a possible salary increase. Costs such as advertising, screening and more in-depth training would need to be planned and budgeted for if you choose to hire from outside the company. You also need to prepare for a training period and allocate necessary staff for either promoting from within or hiring from outside.

How can you deal with any backlash if you decide to recruit from outside the company?

Careful planning can neutralize the potential for unhappy employees. Post the position both internally and externally for a reasonable period of time, and make the job description as specific as possible. Make sure all skills, education and requirements for the position are outlined carefully. Interested employees may initially feel like they are qualified for the position, but may decide to include or preclude themselves after being presented with well-written qualifications. Be open-minded; an internal employee may be qualified and should be considered, as well, for the position. Establish trial periods, set reasonable goals and plan an evaluation at the end of the probation period. This allows you to cite an impartial process and feel confident in your decision if backlash does occur.

Bringing new people in or moving someone internally can affect company morale, both positively and negatively. You can’t control people’s feelings. You can minimize the impact by making fair hiring decisions and making sure the management team is proactive and addresses negativity with positive statements.

How do you make sure employees are well-trained and prepared so you are able to promote from within?

Cross-train and reward your talented and committed employees. Don’t let talent go to waste. You would be foolish to dismiss an employee’s initiative if he or she is interested in learning a new skill. Mentoring also establishes a culture of teamwork and preparation. Offering reimbursement and recognition for the completion of relevant continuing education classes will encourage employees to sharpen and maintain their skills.

Michelle Elson is the corporate director of operations at Ashton Staffing. Reach her at melson@ashtonstaffing.com or (770) 419-1776.

Some employees at your company may be hiding a big secret from you: They’re legally not allowed to work for you or even in this country. Over the past several years, there has been an increase in people using sophisticated fraudulent information to secure employment, whether through false documents, false benefit applications or even identity theft.

“Unfortunately, that sophistication has made it next to impossible for employers to be sure they’re not employing illegal aliens,” says Jessica Ford, director of sales and operations at Ashton Staffing. “Even companies with the best of intentions often find themselves open to fines and civil penalties if they’re audited.”

Smart Business spoke with Ford about how employers can use the E-Verify and IMAGE certification programs and what to do if you find a problem with a new hire.

What is E-Verify?

E-Verify is an online system operated jointly between the Department of Homeland Security and the Social Security Administration. Participating employers can check the work status of their new hires by comparing information from an employee’s I-9 form against what the SSA and DHS have on their databases. E-Verify is free, and currently, in Georgia, it’s voluntary unless you are a state agency or provide services to a state agency.

After registering, companies sign documents stating that they will post written notice in their hiring facilities; this allows applicants to know you’re currently enrolled in E-Verify. E-Verify can only be used on new hires. If a company wants to verify its current employees, it must electronically submit its payroll to the SSA via the Social Security Number Verification Service.

What is IMAGE certification?

IMAGE is short for ICE (Immigration and Customs Enforcement) Mutual Agreement between Government Employers. It is a joint initiative between the government and businesses to strengthen hiring practices in the private industry by reducing the size of the illegal work force. IMAGE certification is a free service.

How can companies implement these programs into their business practices?

Companies who are interested in E-Verify can log on to DHS’s Web site (www.dhs.gov/index.shtm) and register, print off a few forms and mail them in. After you’ve registered, DHS will contact you and provide online training. Once you’ve completed the training, your employees must pass an exam before utilizing the Web site.

Enrolling in IMAGE is a bit more extensive. Companies must currently use E-Verify and agree to an audit of their I-9s by ICE. Companies also must agree to submit their current payroll to the SSA and implement a few ICE-suggested programs. Interested companies may log on to ICE’s Web site (www.ice.gov) and register for information. You may then request an in-person meeting with an IMAGE coordinator.

What should an employer do if it finds an employee mismatch?

The beauty of E-Verify is that it not only alerts you to a nonconfirmation of eligibility but it also guides you through the process. If a nonconfirmation comes back, you print a letter to the employee that lets him or her know that there has been a mismatch. The employee either chooses not to contest the results and self-terminates or goes to the local Social Security office and speaks with someone there. If the employee chooses to contest, he or she has eight days to return with proper paperwork. During the eight days, you must continue to employ that person. If he or she does not return, you may terminate the individual.

What makes a fraudulent document stand out?

Check Social Security cards carefully. Many times fraudulent documents have misspelled words, the font is different or is an irregular color. If the back of the card is blank, it is fraudulent.

What are the benefits of using E-Verify and IMAGE certification?

E-Verify almost completely eliminated our Social Security mismatch letters. It has also improved the accuracy of wage and tax reporting and ensures companies are maintaining a legal work force. E-Verify has recently implemented a photoscreening tool, so when you are verifying your employee’s right to work in the U.S., it has a photo of what the person should look like, which eliminates identity fraud, as well.

With IMAGE certification, there are several benefits, one of which is free training to your staff. You also receive a two-year respite from any I-9 audits after you enroll. If for any reason your company faces civil penalties for employing illegal workers, the good faith participation in IMAGE is considered when fines are assessed.

Jessica Ford is the director of sales and operations at Ashton Staffing. Reach her at (770) 419-1776 or jford@ashtonstaffing.com.

The current credit environment has changed drastically from what it has been in past years. Credit is tighter than ever, making it more and more difficult to obtain loans. Lenders are risk adverse regarding whom they lend to, although recently there has been some improvement in lenders’ attitudes.

“Lenders are looking very closely at their customers and potential borrowers,” says Paul R. Anderson, the director of assurance services with GBQ Partners LLC. “They’re asking a lot more questions about borrowers’ financial situations and their outlooks going forward. Most of this is driven by banks’ risk aversion and wanting to avoid potential losses.”

Smart Business spoke with Anderson about how to work with lenders in this credit environment and what new loans are available to borrowers.

What should you understand about working with lenders in this credit environment?

The first is to understand that the environment is not like it was a few years ago, when credit was easier to obtain. You need to have a greater degree of patience for the process. The bank is also going to go through a lot more due diligence on its part, so you have to be prepared for many more questions and be willing to provide a lot more information. You need to be willing to work with the lender to help them be prepared to answer the questions they will receive as the loan moves through the approval process.

What new loans are available to businesses?

One new loan that has become more prevalent in Central Ohio is an asset-based loan. The lender will agree to advance funds based on specific assets owned by the company, primarily accounts receivable and inventory. The total amount that can be borrowed is determined based on applying the advance rate, which is a percentage usually between 40 to 70 percent, to the amount of qualifying accounts receivable and inventory. Both the advance rate and what are qualifying accounts receivable and inventory are specified in the loan agreement.

The lender will require periodic verification of these assets, since the loan is tied directly to these balances and accounts. One of the bank’s internal auditors or sometimes a third-party auditor will perform certain tests to verify the accuracy and completeness of the qualifying accounts receivable and inventory.

This type of loan is generally used for manufacturing companies but can also be used for service companies with a sizeable amount of accounts receivable. We’re seeing this loan being used more as an alternative, as businesses are being challenged on servicing more traditional lines of credit, financing or term notes.

What are the benefits and risks of asset-based loans?

The primary benefit is that these loans are usually granted to companies that might not receive other financing. There is also less concern about the company’s operating results, since most of the focus is on the change in assets that determine the loan value.

The disadvantage is that the loan is tied to just those account balances. So if the company’s need for working capital or permanent financing is greater than what might be advanced under an asset based loan arrangement, it may be difficult to obtain that additional financing. These loans are also tightly structured under a strict formula, based on certain criteria of qualifying accounts. For example, if a certain portion of accounts receivable is more than 90 days old, the entire account may be excluded from qualifying. There’s no ability to negotiate or change that. If an account kicks past 90 days old, the company is going to lose the benefit of that account in its collateral base.

What should you expect during an asset verification audit, and how can you prepare for this?

It’s the same as preparing for a mini year-end audit. You need to communicate with the auditor when he or she contacts you about the records that are needed. You need to be organized and have those records available when they arrive.

Provide the auditor with a place to work on-site and be available while he or she is there to quickly answer any questions that may arise. The worst thing is to be tied up in meetings during the verification, and the auditor can’t get to you to get questions answered. Try to schedule it away from your normal monthly close, so you’re not busy with that project. The verification usually takes between two to four days to complete for an average size company.

Where do you see the credit environment heading in the future, and how can you prepare for this?

Hopefully we’ll return to a more stable lending environment, so the economy can begin to grow and fully recover. I do not expect the pendulum to swing all the way back to before, where lenders were very aggressive. But surely they’re going to have to become more aggressive than in the past year.

Companies will also need to obtain working capital in order to grow, and not all companies will be able to self-generate this money. These companies will be looking to lenders to help provide them with that working capital to fund their growth.

Paul R. Anderson is the director of assurance services at GBQ Partners LLC. Reach him at (614) 947-5203 or panderson@gbq.com.

Sunday, 25 April 2010 20:00

How to compete in a global marketplace

Markets are becoming global. This can present great opportunities with extreme rewards. However, customers and entire markets can be won and lost in the blink of an eye. In order to reap the rewards and manage the risks, a business first needs to understand the global forces affecting supply and demand.

“Customers, vendors, partners and shareholders no longer live in isolated pockets and are becoming more interconnected. Physical market boundaries mean very little nowadays. This is the core of globalization,” says Paul Prabhaker, Ph.D., associate dean of Graduate Programs in the College of Business at Northern Illinois University. “Globally efficient markets relentlessly drive human resources, capital and materials. These markets do not respect national boundaries, traditions or cultures.”

Smart Business spoke with Prabhaker about how businesses can deal with these interconnected marketplaces and globally networked supply chains to stay competitive in a furiously evolving marketplace.

What are some key things business leaders need to understand about doing business globally?

Be aware of the underlying trends driving the two sides of globalization: the supply side and the demand side. You ultimately need to proactively place bets around the future you want. This means you’d better understand the fast-changing global trends well enough because the future of your business is at their mercy.

Understand and accept that these global trends affect not just large, multinational firms, but, in fact, present greater risks and rewards to small local businesses. Be intentional in adapting your business on the supply side and demand side. Do you wish to serve markets locally by leveraging the efficiencies of a global supply chain? Or do you wish to serve markets globally by leveraging the nimbleness of a local supply chain?

How can companies deal with the interconnected marketplaces and the rise of networks?

An interconnected world creates customers who are at least aware of what other markets have access to. This awareness is heightened by the proliferation of technologies that provide information on demand to the global population. People all across the world are touched by the same information — information co-generated by providers and users simultaneously. It’s then just a matter of time before behavior starts becoming similar.

For example, teenagers in Asia want to look and act like Western teenagers. They mimic television programs and movies and align their purchases and behaviors to the Western model. Awareness is everywhere now, and that’s the difference. Because people are more aware, their behavior conforms to the new global model.

Markets are also no longer respecting national boundaries. Capital increasingly flows in the direction of wherever the market returns are higher. Human and material resources also do not have much respect for national boundaries, for example, the shift of technology skills and manufacturing skills from the West to the East. Businesses now have to rethink their capital-sourcing and human resource management strategies for a global marketplace.

What factors drive global business trends?

A number of significant paradoxes are occurring. The first is that the power distribution has shifted substantially. Currently, the world’s total output is around $40 trillion, with one-quarter of that generated in the U.S. The United States used to generate two-thirds of the world’s output and was viewed as the global economic power in the 1950s.

Thus, the rules that govern the world markets have changed from a predominantly U.S.-centered model to a model centered around multiple countries. Businesses need to understand that the sociopolitical dimensions underlying economic markets are fundamentally different now.

Another paradox is the shift from free-market, open-economy models that create wealth to state-directed economies. The notion that government-directed markets are inefficient is being directly challenged as countries such as China, India and Russia rapidly move up the global economic ladder. As a business, you will need to align your future around these markets that grow in newer economic systems.

There’s also data that show that substantial wealth has shifted from the West to the East over the last 20 years and that this trend is not abating in the near future. This is usually a predictor of where future demand will be. U.S. businesses need to emotionally accept this, even though it is hard to give up years of legacy and history. Once you accept it, you can implement your practices around this new phenomenon.

How can business leaders help their companies stay competitive and win in the global arena?

Stay vigilantly aware of the rate at which globalization is happening. Leverage every global development on the supply and demand sides of your business. Track customers and understand how they make choices in this global marketplace. Watch your suppliers and vendors closely and align your business with those who have the flexibility and scale to extract maximum global supply-side gains.

A contrarian way to success in this relentlessly globalizing world is for businesses to stay strong in their own corporate character and business model. This helps your customers and shareholders understand who you are and provide that all-important confidence in your products and business practices, and what you stand for.

The challenge for businesses is to either keep riding the powerful globalizing waves, with the ups and downs, or set their own standards and character, and choose the less-trodden path to success.

Paul Prabhaker, Ph.D., is the associate dean of Graduate Programs in the College of Business at Northern Illinois University. Reach him at (815) 753-6176 or prabhaker@niu.edu.

Tuesday, 23 February 2010 19:00

Protect your assets

Trade secrets are crucial information that helps one business distinguish its products or services from the competition. Even if not actively used by a company, the mere ownership of trade secrets can provide tremendous value to the owner.

For example, the formula for Coca-Cola is perhaps the classic trade secret. Less obvious examples, however, are formulas tested by the Coca-Cola Co. that are not used in marketed cola. Those formulas are likely trade secrets because the Coca-Cola Co. gains value by preventing its competition from reaping the benefits and know-how of its trial and error. Critically, information once considered trade secret may lose protective status if reasonable protective measures are not taken.

Smart Business spoke with Steven R. Press, shareholder with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, about information considered trade secret, how best to protect trade secrets and what to do if your secrets have been misappropriated.

What is considered a trade secret under Georgia law?

Georgia law defines a trade secret as information including, without limitation, formulas, programs, devices, methods, techniques, financial data, product plans, or a list of actual or potential customers or suppliers that is not commonly known by or available to the public and which (1) provides economic value from not being generally known by or readily available to others who could benefit from its disclosure and (2) is protected from disclosure by reasonable efforts.

Trade secrets are protected under Georgia law without a contract. Unlike trade secrets, confidential information in most circumstances may only be protected by an enforceable contract.

What are some procedures that should be in place to protect trade secrets?

  • Require background checks on potential new hires to confirm reasons for termination and past adherence to nondisclosure obligations.
  • Require nondisclosure agreements as a condition to employment.
  • Circulate an employee handbook describing information claimed as trade secret and the duty to protect such information, with each employee acknowledging in writing that he or she has reviewed it.
  • Frequently remind employees about what is considered trade secret and obligations to maintain secrecy.
  • Restrict access to certain paper documents.
  • Password protect computers and restrict access to certain parts of the server.
  • Restrict physical access to certain offices and cabinets, and lock cabinets and offices containing trade secret information.
  • Mark documents, either paper or electronic, as trade secrets.
  • Restrict out-of-office access to trade secret information.
  • Install standard office security, such as locks or alarms, and place protection devices on certain or all software.
  • Only include employees with need-to-know information in meetings during which trade secrets will be discussed.
  • Develop nondisclosure agreements with suppliers, vendors and customers.
  • Remind terminated employees of their post-employment trade secret obligations and provide a copy of the nondisclosure agreement upon termination.
  • Conduct forensic investigations on computers used by terminated employees.
  • Hire outside firms to conduct a trade secret audit of your company’s trade secret policies and procedures.

While all of these alternatives have value and are achievable, at a minimum, there is no good excuse for failing to require every employee to sign a nondisclosure agreement.

How can you develop nondisclosure agreements, and what should be included?

You have to think about what gives your business a competitive advantage over others. In most circumstances, your agreement should cover a number of different areas, including:

  • Information about customers or potential customers
  • Corporate financial information
  • Vendor and service provider information
  • Information about current and future products including projected sales figures, project timelines, inventory reports and cost and expense reports
  • Marketing strategies and long-term goals
  • Technology used by your company

How will you find out a trade secret has been misappropriated?

The three most common ways are (1) a current employee shares a conversation had with the former employee regarding the former employee’s intentions; (2) a competitor that hired your former employee discloses that your former employee offered to share your trade secrets; or (3) a competitor employs your former employee and starts marketing products quicker than fair competition would allow.

What do you do if a trade secret has been misappropriated?

Trade secret status may be lost if you find out secrets have been misappropriated and you take no legal steps to prevent further misappropriation. The most common action is to sue your former employee and former employee’s new company seeking damages for past misappropriation and injunctive relief to prevent further misappropriation. Depending on the circumstances, criminal charges for theft of trade secrets may be warranted. The best approach is to take all steps possible to prevent the misappropriation from happening and, if necessary, aggressively litigate against all who participate in the misappropriation.

Steven R. Press is a shareholder with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. Reach him at (404) 221-6534, (678) 662-7388 or spress@bakerdonelson.com.