Cincinnati (1116)

Tuesday, 24 May 2005 06:57

Tightening the rules

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The Municipal Securities Rulemaking Board (MSRB) has proposed amendments to Rule G-37 that would effectively require financial services companies to isolate their municipal securities operations from all company political activities.

The proposed amendments would force political action committees (PACs) operated by bank holding companies or affiliates of municipal securities dealers to impose strict new controls on the way PACs make campaign contributions.

The MSRB adopted Rule G-37 in 1994 to combat the perception that a pay-to-play system had corrupted municipal securities markets by forcing municipal securities dealers to make campaign contributions to state or local officials in order to receive underwriting business. The existing rule does not prohibit dealers from making campaign contributions per se.

Instead, it bars a municipal securities dealer from doing business with any issuer of municipal securities for two years after the dealer makes a campaign contribution to any official with the ability to influence the awarding of municipal securities business. The rule applies to campaign contributions made by municipal securities dealers, the dealer's municipal finance professionals (MFPs), any PAC controlled by the dealer or any of its MFPs.

The proposed amendments are a direct result of a series of articles in the New York Times that reported that campaign workers for New York Gov. George Pataki were exploiting a loophole by soliciting contributions from MFPs and instructing them to send their contributions to the New York State Republican Housekeeping Fund instead of the Pataki campaign.

The Times reported that a J.P. Morgan Chase PAC contributed $100,000 to the New York State Republican Housekeeping Fund in 2002, the same year J.P. Morgan Chase was chosen to be the lead underwriter of $1.8 billion in New York Metropolitan Transportation Authority bonds.

In response, the MSRB issued an extraordinary notice concerning indirect violations of Rule G-37 on Aug. 6, 2003. The MSRB stated that it was "concerned with increasing signs that individuals and firms subject to the rules may be seeking ways around Rule G-37 through payments to political parties or nondealer-controlled PACs that find their way to" issuer officials, and by "significant political contributions by dealer affiliates (e.g. bank holding companies and affiliated derivative counterparty subsidiaries) to both issuer officials and political parties."

The MSRB reminded dealers that Rule G-37 "covers indirect as well as direct contributions to issuer officials" and that "the rule also prohibits MFPs and dealers from using conduits -- be they parties, PACs, consultants, lawyers, spouses or affiliates -- to contribute indirectly to an issuer official if such MFP or dealer cannot give directly to the issuer without triggering the ban on business."

Finally, the MSRB warned that if it learned "of specific problematic dealer practices that it believes must be addressed more directly, the board may proceed with additional rulemaking" to expand the scope of Rule G-37.

On Feb.15, 2005, the MSRB issued proposed amendments to prevent these indirect contributions by effectively expanding the rule to apply to any entity affiliated with the dealer as well as any PAC operated by any affiliated entity. The MSRB proposes to add a new section (c)(ii) to Rule G-37 to prohibit a dealer and certain MFPs from soliciting any affiliated entity or PAC "to make or coordinate a payment to a political party of a state or locality where the dealer is engaging or seeking to engage in municipal securities business."

The MSRB's proposed rulemaking states that this "clarification" of Rule G-37 is "intended to alert dealers and MFPs that influencing the disbursement decisions of affiliated entities or PACs may constitute a direct violation of Rule G-37" and trigger the ban on business.

If adopted, the proposed amendments would effectively require integrated financial services companies and bank holding companies to insulate their municipal securities operations from all company political activities and adopt stringent new controls on campaign contributions by all of the companies' subsidiaries, affiliates and federal and state PACs.

Brett Kappel is of counsel in the Government Relations and Lobbying Practice Group of Vorys, Sater, Seymour and Pease LLP. His practice is focused on government relations and campaign finance law. For more information, reach Kappel at (202) 467-8886 or bgkappel@vssp.com.

Monday, 23 May 2005 12:22

The ABCs of HSAs and HRAs

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Armed with information found on the Internet or delivered via direct-to-consumer advertising, today's health care consumers -- your employees -- are much savvier than ever before about the options available to them. Whether your company employs 50 people or 50,000, it's a fair guess to say that many of them would like to see some changes to your health care offering.

Fortunately, there are many new choices you can deliver that will help bring greater value and customized options while containing costs. Known as consumer directed health plans, two of the best-known offerings -- health savings accounts (HSAs) and health reimbursement arrangements (HRAs) -- aim to make us better health care shoppers by buying services from a pool of funds and trying to conserve those funds as best as possible.

Health savings accounts

A tax-exempt trust or custodial account created exclusively for paying the qualified medical expenses of the account holder, the HSA was created by the Medicare Prescription Drug Improvement and Modernization Act of 2003. The accounts, which must be established with a qualified HSA custodian or trustee, are generally available to any individual who is covered by a qualified high-deductible health plan with very limited first dollar coverage (office visit and prescription co-pay arrangements are not allowed).

HSA contributions must also adhere to these standards.

* Contributions are calculated on a monthly basis.

* Contributions are nonforfeitable.

* Contributions must be made in cash, except for rollover contributions or trustee-to-trustee transfers.

* Contributions are limited, based on the annual deductible amount.

Health reimbursement arrangements

A solely employer-funded account, HRAs reimburse employees for substantiated medical care expenses incurred by the employee and the employee's spouse and dependents (as defined in IRC Section 152) up to a maximum dollar amount per coverage period. These amounts are excludable from the employee's gross income under IRC Section 106 and IRC Section 105(b), assuming all requirements for HRAs are met.

In addition, employer contributions to an HRA may not be attributable in any way to salary reductions. Thus, the HRA cannot be offered under a cafeteria plan, but it can be offered in conjunction with a cafeteria plan.

Ultimately, the decision to use either an HSA or an HRA depends on many factors within your organization, such as corporate culture and average age of employment force.

Tom Colvin is an employee benefits expert with more than 30 years of experience and has spent the past decade with Schiff, Kreidler-Shell as a vice president and manager of the agency's Benefit and Financial Services Department. He is a graduate of the University of Cincinnati and Northern Kentucky University's Chase College of Law. Reach him at (513) 474-5151.

Monday, 23 May 2005 12:15

World smart

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In a global market, barriers to entry are often more basic than building a supply chain or cultivating a customer base. A language mix-up can make or break a deal in the worldwide game of business; even plain English can stump high-level executives who deal in international board rooms, says Gary Heiman, president and CEO of Standard Textile.

"In Israel, 'he' means she, and 'who' means he," Heiman says.

And crossing your legs or showing the soles of your shoes is an insult in some cultures, he adds.

Sometimes, "yes" means maybe, or yes for now, until later negotiations. Other times, "maybe" means no --because "no" can come across as rude, says Heiman, who speaks four languages.

"We deal with people who often have different histories and experiences than ours," Heiman says, pointing to Standard Textile's 22 manufacturing plants in 12 countries, with thousands of associates in 49 countries who produce and sell health care, hospital and work-wear products for the half-billion-dollar business. "Countries in which we do business often have different religions, belief systems and codes of honor that we have to respect.

"We like to think that we are 'world smart,'" he says, emphasizing Standard Textile's tagline. "That means being in the right place at the right time with the right resources. Our business model encompasses developing innovative products, and marketing and selling them everywhere in the world."

It would be easy to get lost in translation without a "world smart" attitude, but the culture Heiman has built at Standard Textile is rooted in a commitment to reaching for international resources, tapping into talent around the world and relying on sure-fire systems and a detailed reporting method to ensure the global business revolves smoothly.

We are the world

Heiman's introduction to global markets began miles away from business school. Contrary to the experience of most managers, he broadened his knowledge overseas first.

"It's the flip of most people's background, where they start in the United States and transfer somewhere outside of the country for a number of years," he says.

Heiman was a college graduate fulfilling his wanderlust when he moved to Israel in 1973. Now a dual citizen, he spent 17 years there and served a tour of duty in the Israeli military before joining Standard Textile in 1975, when he launched the company's first vertically integrated manufacturing facility.

In the military, Heiman discovered the importance of systems, infrastructure and reporting strategies.

"I decided that the real key for any country, or company, to grow or prosper and be vibrant and secure is to have a strong, individual infrastructure," he says.

At that time, Standard Textile's operations were based solely in the United States, and functions were limited to distribution, unlike today's comprehensive supply chain model.

"We did not design, develop, research and manufacture our own products," he says.

Today, Standard Textile's scope touches every process, from product development to engineering to yarn and fabric production to sales and marketing. The work force has diversified over the past 30 years, as well. Payroll is comprised of associates from around the world. Training them to communicate and conduct business in foreign environments is critical to the company's success, Heiman says.

"One thing I have learned and built over the years is a well-trained, well-disciplined team that is efficient and has boldness and bearings," he says. "They have a need to take on big challenges in faraway places, almost all the time under adverse conditions. They must accomplish their tasks on time and train a local team and have systems in place before they leave."

In turn, Standard Textile offers employees the opportunity to make an imprint on the global economy.

"Our associates thrive on the possibility of doing things that others have not done," Heiman says.

For Heiman, that means whipping up a manufacturing operation from scratch and following a growth model, gathering information, testing products and building slowly and conscientiously before preparing to produce on a larger scale.

As an example, take China, the most recent addition to the Standard Textile global network.

"We are not going to hire a 25-person marketing and sales staff tomorrow," Heiman says. "We will hire a handful of people who researched and understand the market and its needs, hurdles and opportunities, and then we will approach it in a very well-defined, controlled and disciplined way."

This methodology makes sense to Heiman, who quoted Sun Soo's "Art of War" during a speech in March to honor the opening of Standard Textile's China operation. "Unhappy is a fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise, for the result is waste of time and general stagnation."

The Chinese host was surprised at Heiman's selection, although he later discovered Heiman, a practicing engineer, was a Chinese history major in college.

"At the end of the day, you don't achieve anything through war and battles," Heiman says, explaining in a broader sense the importance of cultivating a work environment where associates cooperate despite political and societal differences. "Cross-cultural training is a significant part of our overall corporate training program. Not only are people spending time in other countries, but we also have people from those countries visit Cincinnati.

"We might ask our employees to be a part of a meeting, and they need to understand the dos and don'ts of dealing with a particular country."

Workshops provide cultural overviews for employees, but most valuable are shared experiences from colleagues who present realistic scenarios and coach associates on how to better handle challenging cultural encounters.

For example, discussing the war in Iraq with a Frenchman is bad idea, Heiman says.

"We bring in associates from France to talk to employees about what they should do to fit into the local environment," Heiman says.

He refers back to Sun Soo, applying his words to 21st century business.

"If you don't follow up by building enterprise, infrastructure and economy, and by giving people a better future, it's all for naught."

Managing across borders

Book smarts and lectures provide valuable lessons, but nothing replaces the real thing. In managing a global business, the sticky situations -- the uncomfortable, uncommon and sometimes downright frustrating times -- mold a hands-on management boot camp for international associates.

Heiman describes a difficult management changeover in a European country that ultimately led to a structural reorganization. Norms in the United States aren't necessarily the same in other countries, and business unusual is business as usual in some cultures, he learned.

"In some countries, a company's success is measured by how big you are, what type of machinery you have and your revenues and sales," Heiman says. "It was shocking to us how little emphasis [the workers] put on the bottom line. We had to teach the associates there that anyone can have volume and compete on generic products and low prices, but at the end of the day, there is no end to the lowest price.

"Someone will come in lower, and you can only compete by developing innovative, exciting new products that better meet customers' needs. And you need to earn a reasonable margin."

After meetings, discussions and attempts to shift mindsets, this bottom-line-focused mentality still didn't register with employees until Heiman appointed a manager who had worked at other international operations and understood the concept.

"We told workers that the former owners didn't sell us the company because they were happy with its results and business was great," Heiman says. "As a matter of fact, they sold it under duress because they weren't producing a bottom line. We had to communicate that the only way there was a future for them was to create a respectable top line, and, as importantly, a respectable bottom line that will fuel development and growth."

That sounds simple, but the lesson taught Heiman that strong infrastructure and an impeccable reporting system are essential for conducting business without running into communication blocks.

In effect, country managers report to the corporate executive committee, which is comprised of senior vice presidents in every functional area. Additionally, companywide goals fueled by incentives gel together departments so that each part works toward the success of the whole.

"We have corporately aligned incentives on a global basis," Heiman says. "For example, we focus on product development by setting the goal that 15 percent of the products we sell in any given year will be new products that were developed and introduced during that year. This means that every six or seven years, we have totally new or re-engineered products across the board. Everyone across every functional area in every country is tied to this goal."

Marketing and sales departments gather field intelligence so they can offer insight to the product development team. The product development team designs new introductions for various markets. Manufacturing personnel focus on ways to weave and produce different products rather than on how to push items off the line as quickly as possible.

The same defined structures apply to the supply chain, which must function 24/7/365, Heiman says.

"When you are involved in a global market, the supply chain is a dynamic process," he says. "You have to react quickly. You can't just say, 'We'll get to it when it's on our clock or when we don't have a holiday or vacation over here.'"

The supply chain operates as like a well-oiled machine, fueled by Standard Textile's research and development teams.

"We tie together every area of the business to innovation," Heiman says. "And we look at waste in every part of the supply chain so the operation is efficient and effective."

Finally, quality control dictates the success of the products, so a global quality control team travels around the clock, visiting company facilities and suppliers.

"Quality, consistency and overall efficiency of operations are addressed here day in and day out," Heiman says. "Quality control is wired into the DNA of all of our associates -- it's second nature to them."

Made to order

Customers demand innovation and functionality at the lowest cost per serving, Heiman says. Towels are simple; incontinence pads for hospital beds are basic. So to meet these orders, Standard Textile designs fibers that withstand industrial use, provide comfort for patients and guests, and are easy to use.

"Customers want greater longevity so their cost per use will go down dramatically," Heiman says.

Because cost cuts must come from somewhere, Standard Textile relies on its supply chain to usher products to the marketplace with as little waste -- travel time -- as possible.

Then, the company turns to field intelligence to identify ways to reduce costs and provide the best products possible to customers -- items the market really wants.

"Being a person with a past in the military, I have a great respect for field intelligence," Heiman says. "That means not just hiring a consulting firm or getting market information, taking that as gospel and turning that into products. We gather field intelligence from our marketing and sales people. We find real opportunities and what our potential customers need."

From there, Heiman and his team highlight promising growth sectors. Hospitality is offering substantial growth, and Heiman hopes that sales from products in this department increases 50 percent this year. The company recently re-entered the U.S. hospitality market after a nearly 30-year hiatus.

And institutions are willing to spend on textiles that provide guests with a luxurious experience.

"That falls right into our lap," Heiman says. "When [hospitality] customers look for new, exciting products that their guests will be happier with, that is exactly our strength."

Growth is calculated and conservative, but still a little risky, Heiman says. Following consumer trends carefully allows Standard Textile to prepare and produce products before competitors introduce options, he adds, comparing the tactic to a hockey game.

"If you are a good hockey player, you get to the puck just in time," he relates. "If you are an excellent hockey player, you anticipate where the puck will be, you get there ahead of time and you wait for it."

On the world clock, the game is always on for Standard Textile. This urgency translates in all cultures in which the company operates, and Heiman takes his commitment as ambassador to its success quite seriously.

"We have to bring the world to Cincinnati, and we have to bring Cincinnati to the world," Heiman says. "It works in both directions."

How to reach: Standard Textile, (800) 999-0400 or www.standardtextile.com

Friday, 22 April 2005 10:56

Clicks and risks

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It seems difficult to remember life without the Internet. With more than 60 million people accessing information through the estimated 4 million available Web sites, it is no wonder companies heavily use the Web to promote and market their products and services.

Risk managers are faced with new challenges as the business world changes from bricks and mortar to clicks and orders. So, how does a company with emerging Internet exposures deal with the increased liability hazard?

Here are some points consider when reviewing your organization's policies and usage of the Internet.

* Trademark. Are you participating in cybersquatting? Do your Web links provide unauthorized access to other Web sites? Do your links allow inappropriate deep linking capabilities?

* Copyright. Have appropriate copyright licenses been obtained? Is copyrighted material being duplicated without permission? Do you have a terms of use agreement with your Web partners?

* Security. Does your Web site contain a posted privacy policy? Do you adequately protect credit card information obtained from customers? Is your site secure from unauthorized access to your database?

* System failures. Do you have a plan in place if you experience a security breach? Have you adequately protected your site and system from a virus attack? What impact would a site or system shutdown have on your business income?

Seeking protection through insurance

Some of today's best protection against cyberliability exposures comes from insurance products. Two cyber-specific coverage examples are:

* Cyberliability. Coverage can involve both first-party and third-party losses. First-party losses relate to the information in computer systems and provide reimbursement for losses such as altering, copying, corrupting, destroying, damaging or stealing information assets -- whether the action is criminal or accidental.

Third-party losses involve unauthorized use of or access to a company's network and provide liability coverage arising from a system security failure to prevent unauthorized use or access to its network, transmission of a computer virus or theft of a customer's information.

* Media liability. This addresses the losses associated with libel, slander, invasion of privacy and infringement of copyrights. Media liability coverage is needed if your employees have e-mail capabilities and access to the Internet. Establishing an e-mail and Internet usage policy is a must to properly defend against liability claims.

Cyberrisk analysis

Traditional insurance products that have long served bricks-and-mortar businesses should not be overlooked. The following list of noteworthy exposures includes a few coverage items to consider in your cyberrisk analysis.

* Employment practices liability insurance (EPLI)

* Directors and officers (D&O)

* Errors and omissions (E&O)

* Patent infringement

* Computer virus transmission

* Electronic Data Processing (EDP)

* Product liability

* Crisis communications coverage

While there are many things about cyberspace that can cause apprehension for today's risk managers, there are appropriate insurance tools to mitigate the risks involved. Speak to your insurance agent to properly analyze your risk and to tailor an insurance program specific to your needs.

Dan Driehaus of Schiff, Kreidler-Shell represents clients in a variety of industry sectors, including nonprofit organizations, public entities and new economy technology firms. Driehaus, who has nearly 10 years of experience in solving insurance issues, specializes in helping clients solve their executive risk exposures. Reach him at (513) 977-3180.

Thursday, 21 April 2005 20:00

Down on the farm

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There's a tale that circulates around Eureka! Ranch about Doug Hall cutting the tie off of an executive from one of the nation's largest beer producers.

Hall is the founder and CEO of Eureka! Ranch, an 80-acre "farm" that grows ideas and harvests innovation for some of the America's top companies. Whether the story is fact or fiction, it represents Hall well -- he's a nonconformist who is unimpressed with the price of a tie or the size of an organization.

Hall's inventiveness and rebellious nature have driven Eureka! Ranch's success over the past 18 years. And while you may not recognize his name, you know his work -- Hall's patented scientific system for generating ideas, innovation and marketing has been the genesis for the development of thousands of products and services for clients including PepsiCo., AT&T and Frito-Lay.

With rates starting at $15,000 for one, two and three-day workshops, Hall and his team of innovation gurus boast an almost unheard of 88 percent customer repeat rate. In a nutshell, Hall's process of inspiring and developing business-building ideas that are more effective and measurably less risky works.

A chemical engineer by education and an alumnus of Procter & Gamble, where he was master marketing inventor, Hall is in the business of fostering creativity. Suits are forbidden at Eureka! Even Hall's tax attorneys have to shed the formal wear when they visit.

What started as a creative rebellion against the stifling corporate red tape that can suck the life out of even the most enthusiastic executive has become a revolutionary movement, attracting followers across the globe. That demand resulted in Hall opening an Oxford, England, location to serve his European clients.

For a man who is unimpressed with corporate America's constraints, Hall has created and nurtured a rather large business empire. The difference between him and Corporate America, he says, is that he created a system that's grown by fostering the creativity of a few rather than expanding by adding employees.

Smart Business spoke with Hall about how to step outside the board room and get the creative juices flowing.

What are the best ways you've seen CEOs and business leaders demonstrate innovation?

If I'm talking about CEOs, I think of them as Chief Energy Originators. They've got to be the energy source for change, not the brakes on change. Their primary mission is to anticipate the future.

How? By making sure they're out there making sales calls, talking to customers, understanding the market place and understanding competitors -- not by listening to reports. They have to be [on the] front line, out there doing it.

They also do it by asking their managers the all-important questions, such as what do they anticipate the future will be like in five years? And, if that's where it's going, what are we doing about it now?

We have a tendency to be like Lucille Ball in the candy factory -- fighting today's issues but not looking out and asking, 'Where are we going?'

What's the biggest mistake business leaders make when they're trying to be innovative?

They assume a straight line. They assume that last year's results will be what will happen this year. The second mistake is that they believe the problem is people, not systems. They believe that if they just hire a different sales manager, despite the fact that five sales managers have failed, a miracle will occur.

It doesn't work that way. It's the system, and they are responsible for the system. If they're having trouble with sales, maybe their product offering isn't worth selling. Maybe the marketing message isn't worth hearing. Maybe it's not price.

In other words, if you're not getting the sales you need, yes, there's a problem. Don't beat up the workers; take responsibility for it.

The biggest mistake CEOs make is not taking responsibility for their company. They need to ask how the system is wrong and how to change it.

Who should a CEO involve in the idea development stage?

Every one of his direct reports. So if it's technology related, if it's legal, if it's finance, if it's manufacturing, if it's sales, those are the people who need be involved. [John] Deming said 94 percent of all problems are management related, meaning they're related to the system. And the only people that change the system are those in management.

What's the most effective form of brainstorming?

There's a real science to brainstorming. The old approach was ... everybody gets in a room, and the logical, rational people, which are three-quarters of the people, turn around and become right-brained, free-wheeling creatives.

That's gone. It doesn't work that way. Instead, what we have to do is build systems that leverage all of our people -- the logical people as well as the emotional/creative people -- and we need to bring them together in a system.

That's what the system that we've put together does. It allows us to bring them in. And the simple thing that people can do is make sure they're answering one of three questions: Why should I care? What's the dramatic difference? What's the wow that should get me excited? If it doesn't answer one of three questions, don't bother.

Second, what's in it for me, as in me the customer? What am I going to receive in exchange for investing my time, my money, my trouble?

And third, why should I believe you? There are a lot of snake oil salesmen out there. Why should I really believe you?

So if you go into your brainstorming and you just say OK on a new product and you don't answer one of the questions, you've missed it.

How do you know when you've got a breakthrough idea?

If you're not sure, you already have your answer.

The truth is that many people have never, ever had one that they believed enough in, one they'd be willing to fight to the death for. When you have those, you know it. So if you're asking the question, you already have your answer.

We think shallow. In our USA Today world, our McPaper McMessage world, we don't commit ourselves. The only way you're going to commit yourself is if you truly have a passion for doing something.

When does good marketing start?

Marketing is facilitation. Marketing is the Henry Kissinger of the corporate world. Marketing's job is to build the alliances between the customers' intentions, anticipating the customers' needs, the product development and the packaging. Marketing is there to give the salespeople the materials that allow them to very efficiently accomplish the company's mission.

Marketing is not something that is done to something. It is the hub of the wheel. Done right, it is leadership; not leadership as in telling people what to do, but leadership as in facilitating technology and sales. It's taking the wonders the technology people have and figuring out a way to articulate it in such a way that the salespeople can help customers see its value in an instant.

Marketing is not a separate task -- it's facilitation, a communication, an interpretation role. It is communicating with true integrity exactly that which you are promising.

Who benefits most from idea generation sessions?

Anybody that's trying to sell something. In general, the strongest reaction has been from the more technical community because the system is a system that allows left-brain people to truly get the marketing idea for the first time. It really rocks with the more logical folks as opposed to sales and marketing people, who tend to not want to have that much discipline.

Is it fun to see people get involved and excited for the first time?

It is beyond comprehension how quick and how fast they immediately see ideas. The reason why I'm at a stage where I'm bringing the program up is that the wow is just unbelievable.

This is my heart and my soul. And I truly believe I have a revolutionary heart and that we can change the systems -- we can win and make a difference. But the emperor's first got to be told that he's buck naked.

We have revolution, not evolution. It's not time for evolution. The time for evolution's gone. It's time for the revolution. We have to change our thinking systems radically. And that scares some people, especially people in the Midwest. They either get it or they don't. But survival's not mandatory.

How do you see the innovation process shaking out over the next decade with global competition?

I think we're going to have a death of companies that's beyond comprehension. We're already seeing it; they're all buying each other out. Selling out your company to another one, that basically says loser in my mind.

Maybe it's good for the people in between, but the consolidation that we're seeing today, in the future, I think we're going to see some megacorporations go down. We're going to see a lot more of the bankruptcies we saw with Enron and WorldCom because the larger corporations are propped up right now.

Procter & Gamble says 50 percent of their new products are expected to come from outside the company. Fifty percent. That's one of the most encouraging things for small and medium-sized businesses. So the opportunity for the entrepreneur to create a business, get it running and make it to the seven-to-10-year point has never been better. Then, when they get tired of it, they can sell it off.

I truly believe it will be the small entrepreneurs and this younger generation that are going to have to do it. There are some baby boomers out there that somehow forgot the 1960s. They forgot the concept. They sold out, and frankly, I don't see them being willing to change. They like what they've got too much.

They like their lives and they're not willing to change. So it will be the youth that will have do it.

HOW TO REACH: Eureka! Ranch, (513) 271-9911 or www.eurekaranch.com

Tuesday, 22 March 2005 06:40

Employee handbooks and labor law

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Employers of all sizes often maintain, for a variety of reasons, an employee handbook. These handbooks usually summarize, in varying degrees of detail, employment policies, procedures and rules applicable to employees.

When done properly, employee handbooks are a positive employee relations tool, helping to explain the employer's expectations and policies, and, in turn, allowing the employer to better maintain order and discipline in the workplace.

While employee handbooks are generally positive tools in the workplace, they can also raise a number of legal issues. In addition to contractual and other employment law issues, employee handbooks pose a potential area of employer liability under the National Labor Relations Act (NLRA).

The NLRA governs the conduct of employers and labor unions with respect to employees' right to join -- or not to join -- a labor union and to engage in "concerted activities."

In a number of areas, decisions under the NLRA will dictate what can or should be contained in an employee handbook. If not carefully drafted, an employee handbook policy, statement or rule can violate the NLRA.

A wide range of policies in employee handbooks could raise labor law issues. Three areas in which employee handbook policy statements frequently clash with the NLRA are confidentiality, solicitation and distribution, and misconduct policies.

In each of these areas, employer policies can unwittingly go further than the NLRA permits.

Consider first confidentiality policies. Employee handbooks often advise employees that there are certain items that they must keep confidential and not discuss with each other or with outsiders.

Employees have an NLRA-protected right, however, to discuss their wages, benefits or other terms or conditions of employment with co-workers and union organizers. To the extent, therefore, that an employer's policy prohibits discussion of these topics, the policy is unlawful.

The second employee handbook policy that often raises legal issues is the employer's policy on solicitation and distribution. Under the NLRA, an employer may only prohibit solicitation by its employees during working time. It may only restrict distribution of literature by employees during working time or in working areas.

An employer's statement of its solicitation and distribution rules in an employee handbook that exceeds these general guidelines and others that the law provides is automatically unlawful. Supervisors or managers who enforce an overly broad solicitation and distribution policy against union-oriented conduct will create further legal liability for the employer.

Finally, nearly all employee handbooks contain a list of work rules, the violation of which can result in discipline for the employee. These rules can also cause potential liability for the employer.

For example, under the NLRA, an employer policy that prohibited "false, vicious, profane or malicious statements" was found unlawful because it could be read to prohibit "merely" false statements that were not malicious. Likewise, employer policies restricting off-duty employee access to the work site are also limited under the NLRA.

While the maintenance of an employee handbook can be a positive part of an employee relations strategy, it is not without legal risks if drafted improperly. Employers should ensure, therefore, that their handbook is regularly reviewed by labor and employment counsel to ensure that they do not unwittingly adopt or enforce rules that violate employee rights under the NLRA.

Nelson D. Cary is an attorney in the Columbus office, where he practices in the labor and employment group. Cary is experienced in representing management in a broad range of labor and employment matters. Reach him at (614) 464-6396 or ndcary@vssp.com.

Thursday, 24 February 2005 08:51

Movers & Shakers

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Jeffrey S. Shoskin joined national law firm Roetzel & Andress as a partner in the Labor and Employment Group.

Shoskin focuses his practice on labor and employment litigation, regulatory compliance and union avoidance. He assists clients in the drafting of employee handbooks, employment forms and noncompete, confidentiality, employment and separation agreements. He also represents employers in collective bargaining negotiations, union organizing campaigns and arbitration proceedings, and provides in-depth counseling and training on employment and labor topics.

He is a member of the American and Ohio State Bar associations, as well as the Cincinnati Bar Association, where he is a board of trustee member and past chair of the Labor and Employment Law Committee. He is an executive committee member of the Potter Stewart American Inn of Court.

Shoskin earned an AV rating from the Martindale-Hubbell Law Directory. He was selected as an "Ohio SuperLawyer" in 2004, an honored member of Strathmore's Who's Who and master of the bench for the Potter Stewart American Inn of Court (2003-2005).

He earned a juris doctorate degree, cum laude, from Temple University's James E. Beasley School of Law, and a bachelor of arts degree, magna cum laude, in business administration/political science from Grove City College.

Comerica Bank

David Alexander has joined the Middle Market Banking team at Comerica Bank, a commercial banking subsidiary of Comerica Inc. Alexander, a Comerica vice president with nearly 14 years of banking experience, will focus on meeting the lending and other financial services needs of Cincinnati-area companies.

He earned his bachelor's degree at Muskingum College and his master's of public administration from The Ohio State University.

FIFTH THIRD BANK

Todd F. Clossin was named president and CEO of Fifth Third Bank (Northeastern Ohio). Clossin, a Cleveland native, joined Fifth Third as president and CEO of Fifth Third Bank, N.A. (Tennessee) in 2001 after an 18-year career with KeyCorp.

He replaces President and CEO Robert J. King Jr., who is retiring. King joined Fifth Third in 1975 and held several key leadership positions, including senior vice president, retail administration, executive vice president - Fifth Third Bancorp, president and CEO - Fifth Third Bank (Northwestern Ohio), and president and CEO - Fifth Third Bank (Northeastern Ohio). He also serves on the boards of the Cleveland Orchestra, United Way, Greater Cleveland Council Boy Scouts, Achievement Centers for Children, Gilmour Academy, Greater Cleveland Partnership and Ursuline College.

Dan W. Hogan replaces Clossin as president and CEO, Fifth Third Bank, N.A. (Tennessee). He began his career with National Commerce in Memphis as a management trainee and held several key leadership positions in retail and commercial banking, including serving as president of NBC in Knoxville for 10 years.

ROETZEL & ANDRESS

Law and Politics magazine and Cincinnati Magazine identified two members of the Cincinnati Roetzel & Andress office as "Ohio Super Lawyers." Eric Bruestle and Geraldine Johnson both received this honor; Jonhson's award was given posthumously.

"Ohio Super Lawyers" are nominated by their peers as being outstanding in the profession, based on first-hand knowledge of the top lawyers within the state. The final selections are reviewed by a blue ribbon panel representing more than 50 areas of practice. The winners represent 5 percent of the Ohio Bar and are among the very elite of the profession.

THE KROGER CO.

Robert J. Hodge, president of the Cincinnati-Dayton Division, retired from The Kroger Co. after 40 years in the grocery industry. He will be succeeded by senior vice president Geoffrey J. Covert.

Hodge began his career with Kroger in 1964 as a management trainee in St. Louis. He served as a meat buyer and merchandiser for Kroger marketing areas in St. Louis and Cleveland from 1964 until 1974, when he left the company to work for Ralph's Grocery Co. He returned to Kroger and his hometown of St. Louis in 1977. Ralph's Grocery Co. was acquired by Kroger in 1999 as part of the Kroger-Fred Meyer merger.

Hodge held various positions with Kroger, including president of Kroger operations in Atlanta, St. Louis and Florida, and vice president of Dillon Cos. He was corporate senior vice president of Kroger merchandising and manufacturing from 1988 until 1992, when he became president of the Cincinnati-Dayton marketing area.

Covert succeeds Hodge as president of the Cincinnati-Dayton marketing area. He joined Kroger in 1996 after 22 years with The Procter & Gamble Co. He held several positions with Kroger, including vice president of grocery products, group vice president and president of Kroger manufacturing and senior vice president.

Thursday, 24 February 2005 08:42

Writing the rules

Written by
There are two types of readers, Thomas Nies says, dividing those who start and finish one book -- reading from cover to cover, beginning to end -- and those who start one selection, only to be tempted by another title, another author, another topic.

Some read just one book. Others digest several simultaneously.

There are single-serving thinkers and multicourse minds.

As president and CEO of Cincom, a Cincinnati-based $100-million commercial software conglomerate, Nies likes to digest many books at once so the information from all of them can mingle in his brain.

"I am a voracious reader," says the 40-year technology veteran, rattling off titles of three books in progress: "The World of Nations" and "The Narcissist," by Christopher Lasch, and "The Seekers: The Story of a Man's Continuing Quest to Understand His World," by Daniel Boorstin. "I like to read several books concurrently so I can assimilate ideas."

Nies adopts a similar strategy when commanding Cincom, which, despite a series of software market misfortunes, has posted record calendar years since 2001. Even in hard times, the company grew in size by 50 percent and marked 20 percent revenue increases each year. And after 19 years of more than $100 million in revenue, Nies' company, which builds, sells and supports software for commercial giants including BMW and Citibank, is positioned to expand even more, five years after the technology boom and bust.

"I constantly read and study because the demands are great today," Nies says.

He also designs operations decisions based on his archive of software knowledge. Nies' customer-driven product approach is no mistake; for mid-sized software firms that focus on the "soft side" of software -- customer demands, product value, ease in implementation and return on investment -- the pot is generous.

"Software is right at the heart of all advanced societies," Nies says.

Slimming down, getting smart

Customers didn't flinch when their technology tabs skyrocketed before Y2K. Implementation fees for millennium compliance cost companies up to 12 times the price of initial software license fees but people spent with frantic enthusiasm, Nies says.

"Tens of billions of dollars of additional capital was floating in the industry during that euphoric period that Alan Greenspan called irrational exuberance," Nies says..

But when the bubble popped, Y2K passed and companies were rewired with updated systems, price tolerance dropped.

"Customers are not willing to throw away money anymore," Nies says. "They are more demanding of buying rationally and, in addition to that, they also recognize that there is significant excess supply in the software industry and that supply is far greater than demand."

This realization shook the pricing baton from the hands of software companies and passed the power to customers.

"Customers no longer allow vendors to control the buying cycle," Nies says, revealing the crux of Cincom's value proposition -- its secret growth weapon. "They demand better deals, so to speak. They want more for less."

This meant skimming fat from the operation - identifying areas in which customers were compensating in cost for inefficient or unnecessary processes. Essentially, the scale-down effort resulted in removing implementation costs -- fees customers pay when they must adapt software to meet their specific business requirements. Most software packages are standard. Once purchased, the provider tweaks the program to run according to the customer's corporate setup; those implementation costs can increase software package prices tenfold.

"Our goal was to slash the waste out of customer implementation and support, and we have done that," Nies says. "That now gives us a value proposition radically different and better than our competitors."

In other words, Cincom "got smart" and introduced a software product that listens to customers. Smart Software is standard, yet personalized; customers elect software requirements, and Cincom delivers a product modeled from its package.

"The software takes the intelligence customers provide -- their wants and needs -- and we deliver to them something very close to their specific requirements without massive implementation costs to modify the software," Nies says. "Cincom offers value to customers by subtracting the human capital required for software implementation and eliminating the need for companies to alter their business models to accommodate software setup."

Risky business

Nies wasn't completely confident that his model would rake in revenue, but trusting his instincts about consumer trends toward value and price-driven buying, he learned that doing the right thing for customers can pay off handsomely.

"With any plan, there is a vision," he says. "You hope it is good and correct, and you have to make sure you aren't falling in love with your own ideas."

Substantial risk accompanied Nies' decision to cut out implementation costs and trade that revenue for a customer value proposition that he hoped companies would embrace.

"We saw attraction from customers, and our investment in new ideas is behind us," he says.

The company's lean operations approach and subsequent software introduction, which mimics the idea of "more for less," is paying off. Customers like the price -- several times lower than competitors' packages -- and once they're hooked, they stay loyal, Nies says. Trust and technology have resulted in repeat customers and initiated word-of-mouth sales.

The company he launched in 1968 with a card table and a dream has turned over its share of wild cards, generating over its lifetime more than $3 billion in revenue -- $5 million for every dollar invested. And the game's not over; Cincom will add 100 employees this year.

"We have a system and a value proposition that customers like, and now we have to find ways to link that to as many people as we can, and that takes more staff," Nies says. "No company adds an extra cost today unless it is well justified, and we are not unlike any other company. We only add costs if we need to support a significant demand."

That said, Nies presents a financial snapshot of Cincom's earnings per share, which have increased tenfold since 2001.

"We probably have the highest rate of return on investment capital in the industry of any of the top 10-percent companies," Nies says, adding that while Cincom averages more than 80 percent ROI, the largest competitors average less than 10 percent, and very few software companies earn more than 20 percent ROI.

But Nies isn't concerned about the others.

"If we continue to give customers more of what they want at a lesser cost, we don't have to worry about the competition," he says. "There are enough customers out there who want this value proposition that we won't have to worry about competition for a long time."

CinCommunity

Acquisitions force Darwinism on the industry, not a bad proposition when shaving 40 percent to 50 percent capacity from large companies leaves more room for mid-sized firms such as Cincom.. But Nies is leaving this type of expansion to conglomerates. Rather than buying revenue to grow, he prefers to invest in technology.

"The best way for some companies to grow is to buy revenues, so they purchase other companies," Nies says, referring to the boom years. "Now they have to justify the economic cost, so they will cut large numbers of staff to rationalize the excessive price they paid to buy the revenues."

Nies' approach focuses on nurturing Cincom's core - its staff and technology -- and growing organically. "That is not to say there won't be an acquisition here or there," he says. "We are always looking for additional technology, but we are not trying to buy revenue growth. We buy technology and use technology to grow our company organically."

This means investing in employees.

"I have spent almost 40 years trying to help people learn how to be more productive, capable and able so they can better serve Cincom," Nies says. "But as they become more productive, they not only serve Cincom but they become economically more valuable to us and can earn higher compensation levels."

Rewarding employees with earnings hikes is just one example of "Giving Forward" -- a central component of Cincom's culture. Nies' tags the concept CinCommunity, accenting unity.

"People want more enjoyment, more opportunity, more compensation, a better life," he explains. "Our objective is to help people receive more by helping others get more."

This philosophy returns to customers. Offering companies the best software packages eventually will turn profit for Cincom, earnings for employees and satisfaction for all.

"We share the wealth we create with our people," Nies says.

Besides, sharing the pot keeps employees planted at Cincom. High retention marks are proof that people-minded policies matter to workers. Nearly 25 percent of the company's staff members are 15-year-plus veterans, contradicting the high-turnover industry norm, Nies says.

"Retaining people is a very large part of the value equation," he says. "It makes very little sense to help people learn and develop their capabilities, only to see them leave your organization."

Meanwhile, as Cincom bolsters its human core to handle increasing demands, Nies considers ways to preserve his nest egg. Now that the company is stretching beyond its modest capacity and reaching for greater returns, how will he avoid producing a "watered down version of what we are," Nies wonders?

Teaching, training, developing and investing in employees will feed a recurring cycle that breeds enriched, loyal employees, he hopes.

"We reinforce our ideas and goals, and we quickly try to give people as much responsibility as they can cope with," Nies says. "We actually give them more so they grow up to the responsibility.

"I've spent 40 years trying to help people learn," he adds, peeling off his president layer to reveal the professor - the avid reader, the curious student. "I don't know if I ever taught anyone anything, but I try to create an environment where employees can learn and succeed."

Nies listens to employees -- and they help him tremendously. He listens to customers, who signal to him their demands for software and service. He listens to peers, and he watches their successes and challenges. Then, he acts on his instincts.

"I think everyone in every pursuit has to begin with the end in mind," he says. "What is the end we want to accomplish? We must keep ourselves fixed on that end and not deviate from that.

"I think one has to make sure those ends are worthwhile, and that they will stimulate what is best in people, and that people believe in these ends and strive for them. It is important to set these goals and include every stakeholder in the endeavor."

Success is measurable for Nies, who says efficiency and effectiveness weed out software companies that surge forward and those that disappear.

"We help our customers grow their businesses faster and more profitably with far less upfront investment, much less risk and much greater and quicker ROI," he says. "Simple rule. But it has worked so well for 36 years, why change now?"

How to reach: Cincom, (800) 2CINCOM or www.cincom.com

Monday, 31 January 2005 11:50

IT spending

Written by
What do these three client cases have in common?

* A large law firm in the Midwest improved its cash flow and liquidity position by millions of dollars with a simple three-sentence policy change.

* An auto insurer dramatically improved customer service response time while cutting personnel by quantifying service objectives and defining an incentive system surrounding objective measurement.

* A health care provider reduced staffing costs and improved patient care by hanging a $300 white board over the front desk to display open rooms and nursing shifts.

In all three cases, the organizations made significant improvements in their operations without a large investment in information technology.

The 1997 study by the Gartner Group that said more than 70 percent of IT projects fail to deliver the expected benefits is probably understated. In fact, the trend toward rising failure rates has been accelerating in recent years. While there are dozens of reasons IT project outcomes are often disappointing, two root causes are common to nearly every failure -- inadequate planning and resource commitment, and the fact that even the best systems cannot cure broken and ineffective underlying business processes.

Truly great operational improvements are almost always the result of truly great process improvements, which may -- or may not -- be driven by breakthrough technologies. Let's look at two distinct, non-IT techniques that you can use right now to identify improvement opportunities without the risk, disruption and expense involved in major IT investments.

Workflow reviews

Implementing a new ERP system? Complying with Sarbanes-Oxley? These are just a couple of the potential drivers that spur an organization to begin documenting its workflow, some for the first time.

The problem with these efforts is that they are not geared toward improvement. They're geared for compliance, i.e., ensuring processes comply with system requirements or regulations. This is in stark contrast to Business Process Optimization, which is the discipline of reviewing your workflow for the express purpose of improving one or more aspects of operations (quality, costs, customer response, efficiency, management information, etc).

If you haven't taken the time to document your organization's basic business processes or fully harvested a return on the processes you have documented, a workflow review is an excellent springboard to target improvements. For a minimal amount of effort, a professional process analysis will identify bottlenecks, performance benchmarks, critical resources, redundancies, unnecessary hand-offs, error rates and re-work loops, and myriad other processing inefficiencies.

Furthermore, a workflow evaluation can provide the basis for any good continuous improvement program, with which leaders can assign teams to regularly monitor and make ongoing improvements in business processes.

Performance management reviews

Are you paying for performance or paying employees to just show up? What gets measured gets done. If your organization's measurements are weak or misaligned relative to your corporate strategy, you may have a substantial opportunity to effect immediate, high-impact change with very little cost.

An inexpensive technique to ratchet up performance is to evaluate the effectiveness of your performance management approach. Performance management is the collection of benchmarks and incentives your organization uses to shape employee behavior.

If your management team doesn't have the performance information it needs to pay for performance, chances are you're losing some great performers.

Without an effective performance management system, organizations allow managers at any level to guess what might be the most important goals, how their function relates to overall corporate objectives and subjectively evaluate each employee's contribution.

When your entire organization is aligned, measured and rewarded for achieving the most important goals, the ROI on the resulting performance gains might represent the best investment you can make.

There are lots of valid reasons to invest in technology, and many systems do lead directly to operational improvement. There are many powerful tools that businesses of all sizes can use to improve quality, cash flow, margins or customer satisfaction without an army of technologists.

So plan before you spend. A solid review of workflow, coupled with a well-designed performance management approach can often lead to breakthrough results at a fraction of the cost.

Steve Shoemake is the national practice leader of business process optimization for Xperianz, a unique professional services firm specializing in real-world financial, operational and strategic technology solutions. Xperianz is one of the fastest growing firms in North America with offices throughout the Midwest and Southeast. Reach him at (513) 576-1970, ext. 113.

Sunday, 30 January 2005 19:00

A new flavor

Written by
Not long after Richard Graeter and his cousins, brothers Bob and Chip, purchased the family business from their parents in late 2003, effectively ensuring fourth-generation ownership of Graeter's Inc., the trio sat down with a business consultant to determine how to guide the ice cream company's future.

The meetings focused on three things -- streamlining Graeter's image, beefing up its online sales and establishing an expansion plan for the 135-year-old company's long-term future.

"Brand management, brand identity, logos and all that nonproduct-oriented type of thing was stuff that my father and uncles (didn't worry about)," Richard Graeter says. "They were just making the ice cream and getting it out in the stores. My aunt was worried about getting the doors opened on time.

"They were so close to the day-to-day operations of the business that they never had the time to pull back and look at the strategic part. That's what the three of us are doing."

Graeter, who pursued an accounting and finance degree at Miami University before earning a law degree from the University of Cincinnati, recognized early on that a successful past didn't guarantee a successful future. In fact, less than 3 percent of family-owned businesses ever reach the fourth generation.

Graeter's, itself, almost didn't make it. The company's ownership transfer to Richard, Bob and Chip required more than three years of planning and a family business consultant to end the squabbling among the third generation of Graeters.

But that's all in the past. Today, more than a year after Richard, Chip and Bob reached an agreement among themselves and with their parents, business is booming.

Richard, who serves as president and CEO of Graeter's Franchising Corp. and Graeter's Inc., oversees a two-fronted operation -- a 12-store ice cream retail business that employs more than 300 people and generates nearly $14 million each year; and a 25-store franchising operation.

Under his leadership, Graeter's has updated its image, strengthened its foundation and expanded its reach. To accomplish this, he recognized essential components that simply had not been previously necessary. He, Chip and Bob have rebranded the venerable Cincinnati icon and set it on a solid path for its next phase of growth.

Streamlining the brand

There are few companies in Cincinnati with more name recognition that Graeter's.

"I could probably put it in a brown paper bag and wouldn't have a problem (selling it)," says Graeter.

However, knowing the Graeter's name and being able to identify its logo are two different things.

"Our brand appeared probably five different ways in our stores," Graeter says. "The Columbus stores had their look and feel, we had ours. The Kentucky ones were a little different, even the stores in the same city were a little different. Our Kenwood store looked different than our Western Hills store."

And that, he says, created identity problems that had the potential to hamper expansion.

"We thought that if we were going to franchise, we needed to have those essential foundation blocks - the brand ID and the store look and feel. In a very big way, the projects my partners and I have worked on are building blocks."

The idea of developing building blocks for a 135-year-old company may sound strange, but for any consistent growth strategy to succeed, the brand is an essential component. Companies go to great lengths to protect their brands - consistent brands provide consumers with trust and reassurance that if they purchase a product, it will be the same quality no matter where they buy it. The same goes for consumables, such as ice cream.

So last May, with the help of Cincinnati-based branding firm Libby Perszyk Kathman Inc., Graeter adopted various components from existing logos and compiled them into one streamlined version, rolling out a new corporate logo and an updated package design.

"We now have a very high-end, classy, professional-looking logo," Graeter says. "Our pints carry that logo and our candy and bakery product line will soon be carrying it. We also have gift cards that have that identity."

This achieved Graeter's most important building block -- a consistent, upscale look that could compete nationally.

"(The) brands now look and feel the same caliber as the quality as, say, Godiva chocolates," he says. "There is a big difference between one that has been well-thought-out and executed and one that has been done on the side, as a secondary product or project, over a hundred years. That's what we had. We haven't had a real brand other than the quality of the product.

"People recognize Graeter's, but I wanted them to recognize the brand and identify it together with the ice cream."

Reaching the masses

Even with a new brand identity in tow, for Graeter, as with his parents and grandparents before him, the business remains about one thing -- the ice cream.

"It is what it is because it's special," Graeter says. "It's made two or three gallons at a time."

The process, called the French Pot method, is the backbone of the company's long-term success. But because of its manufacturing limitations, Graeter's French Pot method for making ice cream is its greatest weakness as well as its greatest strength.

"You can't make our ice cream on a modern machine," Graeter says. "We basically had to design our own machine that gave the same quality of the French Pot ice cream as machines made before 1908. It still only makes two gallons at a time."

And in a world where mass production rules and competitors can churn out hundreds, if not thousands, of gallons of ice cream quickly, having to manufacture your own machines one at a time for franchisees or company-owned stores presents another set of growth challenges.

"We're not going to build a giant plant somewhere to ship our ice cream across the country. That defeats the purpose of Graeter's ice cream," Graeter says. "The product doesn't travel well. It's not meant to sit on a shelf in a warehouse, to be shipped in trucks and then sit in a back room waiting to be stocked. National brand ice cream actually has a shelf life of a year. I can't imagine and don't want to eat ice cream that's more than a few weeks old. Ours isn't.

"At any one of our stores, at any Kroger's store, you can get ice cream that's days and maybe a couple weeks old, at most."

This helps explain why, despite numerous requests, Graeter and his parents have not expanded nationwide as quickly as other specialty ice cream shops.

"People ask why we're not coast-to-coast," says Graeter. "That's because we're making about as much ice cream as we can make here. Our goal is to be the very best ice cream. The other ice cream companies are all about franchising. Their No. 1 goal is to sell another franchise."

So while Graeter gets calls almost daily from entrepreneurs who want to introduce the Graeter's brand to markets beyond Cincinnati, Columbus, Dayton, Northern Kentucky, Lexington and Louisville, he and his cousins have settled on a more controlled process for adding franchises.

In the meantime, Graeter is reaching the masses in a more high-tech and targeted way -- through his company's Web site at www.graeters.com.

Relaunched in late 2003, just before the purchase agreement that transferred ownership of the company to Richard, Bob and Chip, Graeter's online store provided an immediate ability to compete nationwide, albeit in a somewhat limited manner.

Consumers can purchase the company's ice cream in specially made six- or 12-pint reusable shipping coolers and have it shipped via next-day air across the continental United States. The company's other products -- candy and gift certificates -- are also offered through its online operations.

"We use old-world technology to make the ice cream," says Graeter, "and new-world technology to deliver it."

Expanding the company

One of the biggest mistakes generational owners commit is trying to run the family business the same way their parents or grandparents did. Graeter and his cousins refused to fall into that trap.

"Our consultants were very adamant about that," Graeter says. "They said, 'Look, you guys, if you are out there driving and loading trucks and making ice cream, you can't possibly plan where you want the business to go five or 10 years down the road because you're worried about the next five or 10 minutes.' That's the real critical difference between our fathers' generation and ours."

Instead, they've set up a management structure that allows them to focus on their strengths. And, for the first time, they've hired nonfamily members to fill out the senior management team.

"In the past, you had employee members and you had Graeters, and that was that," Graeter says. "There was no in-between."

Graeter sought to fill that "in-between" with strong team members who could serve as a link between the family members and the company's other employees.

"The most important thing was (to find) someone who was as dedicated to the quality of the product (as we were)," he says. "Someone who cared about it, who looked at that ice cream or candy or bakery item as it's going out the door, knowing that they were wrapped up in it. Our name is on that, and we want the best to be out there carrying our names."

Graeter says he found two of those people already inside the company -- one managing the bakery and another in ice cream operations.

Adding them to the team -- and having them oversee those key aspects of the business -- allowed Richard to focus on his role as company leader, managing the accounting, legal, finance and marketing functions of the business. Bob oversees all plant operations and Chip is the trio's natural salesman, designing and managing the company's retail sales.

The moves led Graeter to work on developing incentives beyond ownership for the new senior managers. "That's another project we're working on," he says. "Obviously, with a small corporation, there isn't stock, so you look to use other ways to benefit them -- salary and bonus. You're basically trying to give them the incentive to stay for a long time. If they stay for 10 years and contribute to the company's success, at the end of that time period, there'll be a nice pool of wealth created for them."

But despite all the changes, all three Graeters are interested in one thing -- ensuring the product's quality.

"We could try to do 100 different things, extend our brand to different product areas," Graeter says. "But Graeter's is ice cream. And when you get back to the product, it requires hard work and staying true to who you are."

HOW TO REACH: Graeter's Inc., (513) 721-3323 or www.graeters.com

Amanda Wurzinger contributed to this article.

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