Cincinnati (1116)

Saturday, 01 September 2012 15:50

How to escape commoditization

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When Jonathan Theders, president of Clark-Theders Insurance Agency Inc., needed a new cell phone but didn’t have the time to drive 45 minutes to the nearest Verizon store that had it in stock, a Verizon employee offered to do it for him.

That salesperson recognized a problem and found a solution that created a lifelong customer.

“I’ve certainly become an advocate for them, which is what you ultimately want your customers to become — those raving fans, those people who spread your selling proposition, who you are and why you’re different,” Theders says. “If you follow the model of identifying an unrecognized problem and delivering an unanticipated solution, you will create raving fans. And they will become your most cost-effective salespeople in delivering referrals to you.”

Smart Business spoke with Theders about three traps businesses run into when failing to differentiate themselves and how to escape commoditization.

What stops businesses from successfully differentiating themselves from competitors?

The three basic traps that every business runs into are the commodity trap, the perception trap and the anxiety trap.

The commodity trap is when there is no recognizable difference between two brands other than price. Businesses like to separate themselves from their competitors with customer service or value-added products, but a lot of times, people don’t understand that difference. The value-added services a company provides are very likely the same ones their competitors are providing. Then it gets down to price again.

Some successful businesses consider their product or service to be a commodity. Think of online retailers that have no personal relationship with their customers; their strategy is to sell in volume, with lower margins to get the price as low as possible and hit their targets through quantity.

When you’re trying to compete with companies using that type of model, you have to come up with a differentiating connection with your customer because if you’re in the commodity trap, why wouldn’t you select based solely on price? If I can buy the exact same product 20 percent cheaper online, why would I not? You need to position yourself so that you can leverage your unique qualities or create unique qualities that allow you to stand out from the competition.

How can businesses escape the commodity trap?

There are two things businesses must do to get out of the commodity trap: Identify an unrecognized problem that the customer or potential new client did not realize it had, and then, in turn, present it with an unanticipated solution. If you’re going to live outside the commodity world, you must do these two things.

Copier paper is a good example. We all need it but it isn’t so drastically important that you have a particular brand. It is easy to obtain and there are a lot of vendors that can supply it. That is an item that you would shop — it’s in that commodity trap area.

But if a copier paper company told you its paper jams 80 percent less than a competitor’s paper, it could change your view on the product as a commodity because there is a solution for a problem that you can’t find one for — if it delivers on that promise.

Things that have the perception of being easily commoditized can still be differentiated in the marketplace based upon delivering that model of recognizing a problem and providing a solution the customer wasn’t anticipating.

What is the perception trap?

The perception trap is the perception that people believe they already know everything about your company before they hear the story. People automatically think they know your business, and it already has a connotation for them. It could be a lawyer, accountant, or someone who manufactures widgets — the prospective customer has a pre-existing perception of each of them.

You have to recognize what that perception is and create bridges to get over that if you’re going to differentiate yourself.

How can you overcome someone’s perception of your company?

You get past perception through addressing three things. I call it I3: issues, implications and interventions. First, identify your clients’ issues. Then allow them to understand the implications of those issues. Finally, have an intervention that ties into delivering an unanticipated solution.

If you can deliver on I3, you can bridge any perception issues that exist. Then people will look to you as a trusted adviser rather than as a supplier of a good or a service.

What is the anxiety trap, and how can businesses avoid it?

The anxiety trap is nothing more than the fear of standing out from the crowd, of thinking, ‘This is what everybody else does and it’s safe.’ Everyone, at some level, has fear and anxiety regarding change. When you realize that different people in an organization will have different levels of that anxiety, you have to address it, and you do that through communication.

Give people comfort. It’s not easy, changing and trying to stand out as the copier paper that is different from just the price-driven model. It’s fearful to put yourself out there and try to differentiate yourself. Recognizing that, understanding it and being able to communicate around it will allow you to stand out.

Jonathan Theders is president of Clark-Theders Insurance Agency Inc. Reach him at (513) 779-2800 or jtheders@ctia.com.

Insights Business Insurance is brought to you by Clark Theders Insurance Agency Inc.

Dan Neyer entered the period of the past three years the same as anyone else running a business: uncertain what to expect moving forward. As president and CEO of Neyer Properties Inc., a commercial real estate company, he saw that his industry was greatly affected due to the economic downturn. While he didn’t have any secret weapons or information others didn’t, he did have something that kept his company pushing onward — a positive approach to a bad situation.

Rather than hunker down or look elsewhere for business, Neyer gathered his employees to explain the situation the economy had created and how the company needed to operate. If they could stick to the plan, the company would come out the other side ahead.

“One of the most important things is you have to look every employee in the eye and be very clear and don’t sugarcoat the facts,” Neyer says. “Just tell them the way it is. Tell them the challenges that will lie ahead and tell them what you’re planning to do.”

Neyer took a strategic approach to business during the recession buying key properties at attractive values and keeping his employees informed.

“I said, ‘Our existing legacy properties are going to go down in value. I know that, the market knows that, and that’s just reality. We’re going to position ourselves to buy undervalued assets, and that’s what we’re going to do to offset the decline in existing values of our existing portfolio,’” Neyer says. “That’s the mantra we have, aggressively pursuing real estate assets.”

Here’s how Neyer used to a dire business environment to create opportunities for growth.

Embrace change

When the downturn hit home for Neyer Properties no one tried to pretend as if the economy wasn’t going to have an effect on business. Neyer told his employees what they could expect to see and what the plan was for moving forward. Doing that proved to be very helpful.

“So many companies like to hide bad things or hide struggles and not inform the employees, and the employees know; they feel it and people are thinking what’s going to happen to me and what are we going to do,” Neyer says. “Just be honest and straight forward. It’s tough in our industry when everyone says, ‘Everything is bad, everything is miserable and the banks are going down.’ It’s hard to stay positive when you’re surrounded.”

Getting through a tough business environment relies heavily on being able to trust your employees and use small victories to build a positive outlook.

“We have a great nucleus of people who believe in what we’re doing, and seeing the results breeds the optimism so you can fight the negativity that may be around,” he says. “It starts with the people. I can’t do this alone, nor do I want to do this alone.”

To overcome uncertain times and difficult business obstacles, you have to have strong employees who believe in the direction you’re taking the company.

“It’s always best to surround yourself with the people who will help get you to that next level,” he says. “If that means changing people, you need to change people and don’t be afraid to do that because what’s best for the organization is always best for the organization. You have to invest in existing people, but if existing people are not functioning properly then you have to change.”

In both good times and bad, the key to remaining successful is being able to anticipate change to keep your business moving in the right direction.

“People say, ‘We embrace change,’” Neyer says. “Well, yeah, you’ve got to embrace change, but you’ve got to pursue change. Embrace means you’re accepting what is happening to you. Pursuing is much stronger. You’ve got to change before you have to change. You have to see around the corners before you come up to the corners and not react. If you’re waiting to react, you’re too late.”

Develop a plan

Instead of waiting for the economy to tell him where to steer his business, Neyer developed a strategy to take advantage of the business environment and real estate market. He focused on keeping things simple.

“I wanted to preserve, protect and position,” Neyer says. “‘Preserving’ was preserving our cash, preserving our existing tenants and the loans that we had. We had to protect our existing assets from too much decline. We’re going to invest in our assets so it doesn’t look like the properties are declining, and we’re going to protect our cash amount and hopefully have that grow with proper cash management.

“Then positioning, it’s really positioning with lenders, sellers, borrowers, banks and other organizations that take the properties back. So we’re going to position ourselves to work with those organizations to be able to acquire the properties. Was it a real long and complex plan? No, but when difficulties arise, you need to focus more and keep it simple.”

To form a plan for the business, Neyer first had to think about what he would want to accomplish if there were no hindering circumstances and then factor in any obstacles.

“You have to step back from your own situation and say to yourself and your team, ‘If there were no limitations, what would we be doing? If finances and personnel were not limited, what would you be doing?’” Neyer says.

“In our case we would be buying as many high-quality assets as we possibly could get our arms on. So step back and initially don’t burden yourself with the current restrictions or hurdles that the organization has. Come up with an approach that is in the best interest without the limitations.

“Then figure out how to pursue the desired results while you work on the restrictions. Don’t start with the restrictions because if you start with the obstacles and the hurdles and the difficulties, you’ll never get to the shining light that’s out there.”

In Neyer’s case the company had a premise that it needed to acquire $40 million to $50 million a year in real estate assets. The company had a plan, and it refused to waiver from it.

“Our MO for our equity is pretty clear: we’re going to pursue and purchase properties in the $1 million to $12 million range within a 100-mile radius at good locations, good accessibility and average about 50 percent of replacement value,” he says. “We stuck with that focus. We had opportunities to look at things outside that geographic range, but we stuck to our homegrown, homespun approach and maximized the potential within.”

In order for a plan to have the best results possible, communication is vitally important to remain aligned with goals.

“We went through our three main areas of focus: preserve, protect and position,” he says. “Then on a monthly basis we would bring everybody in and it would be like a report card — this is what we said, this is what we did, this is what we’re doing, this is what is working or not working, this is how we’re adjusting, and this is how we’re moving forward.

“You have to bring all those elements and people are generally empowered if they know they’re making a difference. It wasn’t easy at times because you always have difficulties, but if you align everybody’s interests you can move mountains.”

Stick to what you know

In difficult times, it’s very easy to stray from your intended plans and pursue different options. The key to success is to find the one path you want to go down and pursue only that path.

“There’s always more opportunities out there than one can ever accomplish,” Neyer says. “When we’re in uncertain times, sticking to your past success and narrowing your focus so you’re pinpoint laser-on is even more important. A lot of times companies that are suffering, whether it’s big or small, they say, ‘If this isn’t working, let’s try something else.’

“Whether that’s a different geographic market or a different product line or whatever the case is, they forget what got them to where they were in the first place and they try something else. I’ve seen too many companies try to do everything for all people and it just never works.”

Because Neyer Properties sticks to its strengths and is prepared to function in any business environment, it has seen its fastest growth periods during recessions.

“You have to be poised and positioned to excel when times are tough,” Neyer says. “You have to be careful when times are prolific that your tools are not sharpened and volume just comes and you don’t have to keep to your principles. You have to be consistent in the good times and the bad times. You have to hopefully excel in the tough times and when things are robust, you put the governor on and you’re careful not to grow too quick.”

Any tough times equals great opportunities and great results. When you make a decision you’ve got to go for it. You can’t be indecisive.

“We are one of the few Ohio commercial real estate companies that have been able to capitalize during the recession,” he says. “Our employment has been constant, but we have grown, and our real estate portfolio is now more than double the size that it was as of the end of 2008.

“Most real estate development companies cannot say that they’ve doubled the size of their business in the last three years. A lot of that is attributed to our conservative, strategic and long-term planning and also being strong stewards of proper financial measures and taking advantage of the opportunities that are out there.”

Over the past few years, Neyer made sure his company never waited for opportunities to arise. His team went out and found properties that best fit the company’s objectives.

“If you buy key properties at attractive values and are able to obtain financing with providing the right mix of equity, there is no better time to purchase real estate,” he says.

“I’ve looked at investing in other asset allocations other than real estate since I’m so heavily invested in real estate. I just have not found any other asset allocation that has the upside that real estate does.”

Since 2008 Neyer Properties real estate has doubled in portfolio size and its ROI has more than doubled in the last three years giving the company 2011 revenue of $55 million. This success is due to both increasing the occupancy level on existing legacy properties and purchasing assets in an aggressive mode.

“Fortunately, we’ve been able to acquire where most people are falling back because they have no choice,” he says. “They are too highly leveraged, they don’t have cash and they’re stuck. Our usual approach is buying things for 50 percent of replacement value and buying properties highly accessible and highly visible. If you have key properties at key locations and your base is much lower than your competition, even though the vacancy might be higher than you want, you win.”

How to Reach: Neyer Properties, (513) 563-7555 or www.neyer1.com

Takeaways

-          Be honest with your employees.

-          Develop a strategic plan to achieve your goals.

-          Once you know your direction, stick to it.

The Neyer File

Dan Neyer

President and CEO

Neyer Properties Inc.

Born: Cincinnati

Education: Attended Miami University and received a degree in finance and accounting

What was your first job and what did you learn from that experience?

I worked as a bus boy at Perkins Restaurant in the early mornings, which made me realize I had to get up early and as soon as I arrived, I had to work hard. At times I had to work at breakneck speed because back in the ’70s. Perkins was the place to go.

What is the best business advice you have received?

Follow your passion and realize that if you work hard, good things will happen. People always say, ‘You’ve been really lucky.’ Well, I’ve been really fortunate, and I’ve had some good luck, but good planning almost always gives good results. You can call that whatever you want, but planning equals results, equals opportunities, equals luck. Stick with what you believe. Don’t deny your gut feeling.

Whom do you admire in business?

One is my father, who taught me the importance of detail. I also appreciate the creativity of somebody like a Steve Jobs. He created history by following what he believed was necessary even though he may have been the only one on earth that believed it. He made people believe the impossible.

What was the toughest thing about the recession for your company?

It was the uncertainty from the lending community. They were in a state of total chaos, and what were they going to do? They could have just pulled the plug (and some did) and found reasons to basically cause the total demise of commercial real estate because if you eliminate credit, you eliminate all value. Fortunately, for the most part, they kept their head on. They could have effectively wiped out the economy of the U.S.

What are you looking forward to in the future of real estate?

What I see on the horizon is great, valuable, long-term enduring real estate assets growing over the future. With the boom of natural gas in this country, I think you’re going to see a tremendous influx of investment in the U.S. because this place is still the biggest buying power. The cost to manufacture now is the same as it is in China because of their increasing inflation and cost to ship goods. So I see a tremendous upswing in the future of the U.S. in the next number of decades.

Friday, 31 August 2012 20:00

Tom Nies: Dream the Impossible Dream

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We recently celebrated what we call “Quixote Day” at Cincom. It’s the day where we recognize our top performers of the previous year and inaugurate them into our “Quixote Club.”

Ever since I saw the Broadway musical “Man of La Mancha,” I’ve admired the story of Don Quixote. The musical is so inspiring, and I brought its ideals back to Cincom where we’ve adopted the Miguel de Cervantes character as a sort of corporate mascot.

Anyone familiar with the 17th century novel or the 1960s musical may be scratching their head in confusion. Isn’t Don Quixote the story of the crazy man who jousted with windmills?

Yes, it is, but the story of Quixote can teach us so much more if we look a little closer.

The impossible dream

Quixote may appear crazy to the casual observer, but the man of La Mancha stands for everything an entrepreneur should. He dreamt the impossible dream. He ran where the brave dared not go. He continued to try even when his arms were too weary and fought to reach the unreachable star.

These words, these modified lyrics from the theme song “The Impossible Dream” from the musical, are an overly formal way of saying Don Quixote possessed the characteristics of perseverance, creativity, vision and endurance.

Creativity and vision

Entrepreneurs need to be able to see things no one else can. For Quixote, that meant seeing windmills as giants, monks as enchanters and inns as castles. For me, it meant seeing the rise of the importance of software when everyone else in the technology industry was focused on hardware.

While Quixote’s creativity and vision might not have led to the birth of industries or new products and services, his imagination follows that of a true entrepreneur. He could look at an object and see it in a new, unique way.

Perseverance

Quixote’s creativity often got him in trouble. The “giants” break his lance and throw him to the ground, and he receives multiple injuries during a great “battle” in which he slew sheep. But even so, Quixote does not sway from his vision.

His ideal of not dismissing what he saw even though others pleaded with him and tried to show him “the truth” is a key component of an entrepreneur’s personality. How many goods and services wouldn’t exist if their creators had listened to those who couldn’t see their vision and design?

Endurance

Throughout the epic tale, Quixote is broken, beaten and scoffed at. When he isn’t being physically harmed, it appears as though he is mentally harming himself by forgoing sleep to reminisce about his lady Dulcinea del Toboso as he believes any good knight-errant should, among other activities. None of this stops him from trying to reach his goal to honor Dulcinea with his knight-errantry.

The same is true of many entrepreneurs. There are very few, if any, stories of anyone creating something new in which they weren’t opposed in some way. Entrepreneurs can meet road blocks at every turn, be they a lack of understanding of the product, a lack of funding, a competitor moving at a faster rate, and even their own potential to be burnt out.

Products and services don’t come to market in an instant. It takes time, effort, buy-in from friends and family, money and what some might consider a bit of craziness to be an entrepreneur.

I urge you to take a lesson from Miguel de Cervantes’ epic knight-errant. Persevere, endure, and see things that others don’t see. Allow your mind to run wild and always dream the impossible dream and reach for the unreachable star.

Thomas M. Nies is the founder and CEO of Cincom Systems, Inc. Since its founding in 1968, Cincom has matured into one of the largest international, independent software companies in the world. Cincom’s client base spans communications, financial services, education, government, manufacturing, retail, healthcare and insurance. http://tomnies.cincom.com/about/

Many companies sponsoring 401(k) plans may not be aware that they’re facing a critical regulatory deadline on August 30.

That’s the federal deadline for disclosing to employees the amounts of fees that they’re paying for their plans. The overwhelming majority of these investors don’t have the vaguest idea how much they’re paying in fees.  If you’re an employer at a small or mid-sized company, there’s a good chance that you don’t either.

That’s right. Fees, one of the biggest determinants of whether 401(k) plans make or lose money for investors, are a big question mark. For decades, this has been neglected by employers, employees and federal regulators. This state of affairs has been fine for service providers, including the large insurance companies that package up these plans and supply them to employers. After all, less disclosure means less attention paid by investors, and higher fees for lack of comparison shopping.

Because of new federal rules that expand and reinforce existing regulations and reverse years of lax regulatory enforcement, all of this is changing. Employees will soon be informed exactly how much money is being deducted from their 401(k) accounts to pay fees. They’ll learn of these fees this fall in their account statements, as required by the new federal rules.

Previously, these statements merely showed investment account totals after fees were taken out, so employees likely attributed low returns to poor investment performance rather than damage done by fees.

The amounts of these fees shown in the statements will doubtless come as a rude surprise to many employees, sending them streaming into your company’s HR department. They won’t be smiling.

If you’re following federal rules, however, your employees will already know about these fees when they receive their accounts statements. The new rules require employers to send employees a simple document showing fees in an easy-to-understand format by August 30. This way, the fall account statements won’t come as a shock to employees. Employers are also required to determine whether these fees are reasonable relative to the broad market.

By adopting and enforcing the new rules, the U.S. Department of Labor (DOL) is shedding light on not only the fees service providers are charging, but also the quality of these plans.

For example, if plans are paying a service provider substantial fees but employees receive little, if any, education on how to construct and maintain their portfolios within their plans, this makes for the worst of all possible scenarios: high fees and poor service, resulting in low potential for good investment returns.

Without reasonable fees and knowledge of how to use their plans, employees can’t be effective in serving as their own financial planners, which is essentially their role as 401(k) investors.

Employers are required to prepare the disclosures due this month from information that they should have received by now from service providers.

But many employers, doubtless, will be between a rock and a hard place. While employers are on the hook for clear disclosure this month according to a set format, the new rules don’t require service providers to provide this kind of clarity when they supply the fee information to employers.

Regardless of their size, companies that fail to comply with the new rules may be hit with severe fines and other sanctions. This prospect is intimidating, but the sweeping new regulations should be viewed as an opportunity to make your plan work better for workers and management alike, possibly while lowering fees.

After determining what your plan’s fees are and what you’re getting in return, you’re required to determine whether they’re reasonable by benchmarking them against the current national market.

You may well find that you can get better service with lower fees – improving employees’ understanding of plans and increasing net returns after fees are taken out of their accounts.

But first, employers face rigors surrounding the disclosures of the coming weeks.

To deal with these challenges:

1. If you haven’t done so already, get to work pronto on the fee disclosures due August 30. The first step is to determine whether your service providers have fulfilled their regulatory obligations by supplying the fee information – including the specific services being provided for each amount – to your company.

2. If you’ve received this information, set to work interpreting these documents. This can be a lot tougher than it sounds, as some plan providers are burying pertinent information in lengthy documents. If, at the outset, this task seems too difficult or time-consuming, consider hiring an independent fiduciary advisor to assist you with this, as well as with benchmarking your fees against the market. Using a fiduciary can significantly reduce your company’s liability.

3. If service providers have failed to supply the required fee information, document this by writing to them and requesting speedy submission. This can insulate you from liability for not disclosing the information to employees on time. If these providers don’t respond immediately (after all, the deadline is fast approaching), protect your company by blowing the whistle on them with the DOL.

4. Prior to making the fee disclosures this month to employees, notify them in meetings and/or in emails of what is coming their way. Tell them this is the first step in a process to review – and, possibly, to lower – fees and to improve service, including the provision of better plan education. Again, an independent advisor can help with this.

5. Throughout this notification/disclosure process, document all questions that employees ask and the answers they receive. This helps manage your legal and regulatory liability, and it helps you develop the best answers to give when the same questions come up again.

If you haven’t started this process or are behind schedule, don’t think about water that’s passed under the bridge. Instead, look upstream. Even the sternest of regulators will acknowledge that well-meaning efforts to comply, however belated, are far better than inaction or ignorance of the new rules.

Anthony Kippins is president of Retirement Plan Advisors, Ltd., a Registered Investment Advisory firm that addresses the needs of retirement plans and the employees who invest in them.

An Accredited Investment Fiduciary Analyst (AIFA®) with more than 30 years of experience domestically and abroad, Kippins specializes in providing fiduciary advice to retirement plans on governance, investments and educational services. He also advises individual clients on retirement planning and investment management after retirement.

Kippins also serves as managing director of Institutional Fiduciary Assurance LLC, an organization that provides fiduciary advice to trustees of endowments, foundations, non-profit organizations and charitable trusts. He can be reached at rpa@retirementplanadvisorsltd.com.

Wednesday, 01 August 2012 13:53

Why not use a book to tell your story?

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Being able to tell your story is critical in today’s fast-paced world, where cutting through the noise to be heard gets harder each day. With so many media options fighting for attention, it’s imperative to identify new channels where you can stand out.

That’s why as part of our expansion last year, we saw an opportunity to tell entrepreneurs’ stories in greater detail and share lessons learned by launching a book division.

Our book division is unlike traditional publishers, because we do all the work for you. We develop the story and outline, conduct the interviews with the author and other contributors, and then write the book and handle all of the other elements through publication of an e-book and hardback editions.

The time commitment from you is minimal. Once the story is determined, we will conduct a series of short interviews to get the information we need to write the book. You approve everything that goes into the story and have final say on every aspect of the project. We help you take an idea for a book and turn it into a reality that you can share with others.

As an example, last year, we worked with auto dealers Rick and Rita Case to produce “Our Customers, Our Friends.” In the book, the Cases lay out their theory that the secret to successful retail sales is through building long-lasting relationships with customers and treating them as you would your best friend.

Whether your goal is to use a book as a business card for your organization by sharing knowledge with others or to further a cause and help raise awareness for something you believe in, we work with our author-entrepreneurs to identify what makes them unique and what insight they can share with others. We also build an author’s website and set up social media channels to help them promote the book. And, we’ve recently established an authors’ speakers’ bureau that will help extend the reach of sharing that entrepreneur’s knowledge across the national footprint of Smart Business Network.

So far this year, we have eight books in various stages of production. Among them are books for the CEOs of three publicly traded companies on topics ranging from mergers and acquisitions to building sustainable businesses to how to conduct successful turnarounds. We’re also publishing books that introduce exciting new business theories, as well as one that explains how to lead with a philosophy of giving back to the community.

What direction your book takes is up to you. It can tell the story of how your business started small and grew into what it is today, or it can explain the details of what you see as the keys to being successful in business.

Breaking through the clutter of information is tricky, and writing a book is one way you can make yourself heard. It’s also a great way to explain your philosophies to employees, customers and your peers.

There’s a widespread belief that everyone has at least one book within them. In the business world, that’s even truer. If you think that’s you, we’d be happy to help you turn your ideas into reality.

If you are interested in learning more about publishing a book, please contact our publisher, Dustin Klein, at dsklein@sbnonline.com or (440) 250-7026.

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

Wednesday, 01 August 2012 10:32

Why smart companies do dumb things

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Not a day goes by when I don’t ask myself, “Why do smart companies do such dumb things?”

A sweeping answer is that companies are run by smart people, and smart people do dumb things. However, when smart people assemble in companies, they are still capable of doing dumb, if not even dumber, things. Here are some reasons why.

Consensus. When it comes to doing dumb things, the sum of the parts is less than the whole. Throwing more minds at the problem means more data, more perspectives, more possible solutions, more critiques of these solutions and more minds (and hands) implementing the solution, right?

Possibly, but there’s also the downside of more people: Once consensus starts to build, it’s harder to alter a decision. It’s one thing to argue against a few people; it’s much more difficult to argue against the wisdom of a crowd. Individuals who hold out, question or disagree are labeled as clueless, uncooperative and not team players.

Conviction. Consensus rears its ugly head during the decision-making process. The situation can get worse once implementation occurs because the organization marches along with a firm belief in what it’s doing. At that point, a decision takes on a sacred life of its own, and a company cannot see flaws. Conviction is not inherently bad, and truthfully, it’s an important component of success. The trick is to combine conviction with open eyes and open minds to reduce the likelihood of having a conviction in the wrong thing.

Experts. If there’s anything smart people worship it is other smart people. It’s tough to be strong enough to not defer to an expert. Most experts have a tough time accepting surprises that are outside of their comfort zone.

Good news. A company is constantly assaulted by its competition, customers, governments and schmexperts (schmucks + experts). Faced with this onslaught, good news is an addictive, illegal and dangerous drug. It makes you crave more good news, and you refuse to communicate bad news up the chain of command. Ultimately, it may even make you refuse to hear bad news at all.

Lofty ends. Lofty ends can justify all sorts of weird and inappropriate means. Look no further than the quests for peace that produce mayhem and violence. Or, the desire to make a profit (something that is genuinely good for shareholders and customers) that warps a company’s code of ethics even though the company is made up of smart, honest people. Companies trying to achieve a lofty goal can start believing that any means to achieve it is OK.

So what can you do to prevent doing dumb things?

• Say, believe and act in a way that convinces employees that differences of opinion and diversity of thoughts are good things. Frankly, a couple of curmudgeons is a good thing for a company.

• Don’t be in a rush to meet consensus. In particular CEOs should not rush into a decision even though the image of decisiveness is so seductive.

• Spell things out. It’s not enough to say, “Plug this leak in our company,” and assume that it will be done legally. You should say, “Plug this leak in our company by using only legal, ethical and reasonable methods.” That’s when you’re done.

• Move the crowns. When employees go around saying, “We need to do it this way because Bill/Steve/Carly/Larry wants it this way,” you’re in trouble. It means that employees are making decisions based on what they think will make kings and queens happy, as opposed to what’s right for the customer, employees or shareholders. Good CEOs put the crown on the heads of customers, not themselves.

• Restrict the use of experts to narrow areas. Never use experts to create your product roadmap or marketing plans unless you want MBAs who have never run anything larger than a school snack bar to decide your fate.

• Ask for bad news. Don’t assume it will find you — you have to find it. You should allocate a time that’s specifically for communicating bad news.

• Don’t shoot the messenger who brings the bad news unless he or she caused it.

• And finally, don’t reward the messenger who brings good news unless he or she caused it.

Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the Web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of 10 books including “Enchantment,” “Reality Check” and “The Art of the Start.” He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at kawasaki@garage.com.

We’ve all seen it before, where co-workers in a company recognize a problem performer, but these same people can’t understand why the boss hasn’t yet taken action or has taken so long to come to grips with the issue.

Conversely, as the boss, how many times have you made what you considered to be an extremely difficult personnel decision and have done so only after protracted analysis, a fair measure of agony and more than an adequate amount of second guessing yourself?

Case in point: One of your top managers has hit the skids, and in your gut, you know that a change is needed. Fearing the worst, you play over and over in your mind the potential negative consequences that could occur if you were to fire this individual. Finally, after all else fails, you pull the trigger and decide to part ways with the onetime A player. Before you tell associates, you rehearse in your mind how you will explain your decision. Once you gather your lieutenants together and finally utter the previously unthinkable, the reaction is almost a unanimous, “What took you so long?”

After you breathe a sigh of relief, your team members start making not-so-subtle comments suggesting that they weren’t surprised, followed by a litany of examples of why your now fallen superstar wasn’t hacking it.

This begs a bigger question: Were you really the last one to realize that there was a problem? Furthermore, did it actually take you too long to make that final decision that, as they say in spy novels, this person was “beyond salvage”?

This provides a good opportunity for introspective analysis. The end result just might help you understand that you were not the last to know, but in fact, you may have been the first to recognize what was looming on the horizon.

Virtually every leader has to rely on experience, combined with instincts, to decide when to either cut and run or try to rectify a problem. Being an executive requires being a very good teacher. When a pupil is not measuring up, the first question is how can you help and what can you do to improve a person’s performance? Most everyone at one point in his or her career hits a rough spot, and with a bit of mentoring, a fair number of wayward employees can turn the corner and again blossom. Also, it’s more economical to at least try to turn someone around after investing time and money in developing the individual. After a certain period, the employee has gained valuable empirical knowledge about the ins and outs of the company and, just maybe, a little extra coaching can make the difference.

However, in some situations, your optimism for achieving Mother Teresa status through patient mentoring wanes, and you begin to come to grips with the fact that it’s time for a change. You then map out your what-if scenarios. Not only one but several. You ruminate over your game plan until you have the best probable solution locked and loaded in your mind for that moment when you have concluded that you’ve run out of road.

Most times, trying yet failing is not a bad thing; actually, it is a good thing and the way a responsible leader must approach an important human resource decision. You can never forget that you’re dealing with the life and livelihood of a person and his or her family, which can be adversely affected by the decision. Many top employees who veer off course and don’t work out were, at one time, effective and loyal contributors to the organization. It’s mandatory to make the effort not only to try to stem the negative tide of poor performance, but also to develop an alternative replacement and transition strategy. This takes time and can be a very solitary task depending on the level of the person to be replaced.

In reality, the boss knows in his heart of hearts before most, if not all, others when something ultimately has to give. Being the boss requires making the difficult decisions after meaningful deliberation and then living with them and making them work.

The boss the last to know? Highly unlikely. Instead, he probably is the first to know when the time to act was finally right.

Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at mfeuer@max-wellness.com.

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Stephen Hightower hasn’t had to stress over challenges faced by many during the recession, but that’s not to say he doesn’t have business challenges. He is just facing challenges of a better kind — growing pains.

In the past three years, Hightowers Petroleum Co. has grown by more than 25 percent a year — and it’s still growing. As president and CEO of the $227 million petroleum distribution company, Hightower has had to decide how best to ensure the longevity of the organization.

“We’ve had exponential growth over the past four to five years where we’ve grown anywhere from $50 million to $60 million a year over the last three years and we’re anticipating that kind of growth again this year,” Hightower says. “That has obviously offered management challenges as well as organizational challenges to maintain the integrity and the quality of the day-to-day performance while absorbing the new additional business on a daily basis.”

What makes this growth and the decisions that come with it more challenging than usual is the fact that Hightowers Petroleum is a family-owned business. Decisions as to where to steer the company are not always easy to make.

“We started as and still are 100 percent family-owned,” Hightower says. “As a family-owned, three-generation company, that has its own set of unique issues as it relates to culture, keeping that family feel while growing into a corporate atmosphere is always thoroughly challenging.”

While the family certainly has a say in how the company grows, it is ultimately up to Hightower to make the final decision as the 100 percent stockowner and CEO. Here’s how he has positioned the company to reach the next level.

Keep up with growth

Gasoline is a fuel that has to be available to its users. It is crucial for Hightowers Petroleum to be able to keep up with customer demand. To do so, the company stays focused on its core business.

“Never take your focus off of the current business,” Hightower says. “Make sure as you grow and you do alternative activities that your core is well taken care of and not distracted. Add to your organizational support as you bring on new business without sacrificing the core because if you lose business as you gain business then you’re not going to grow.”

One key to the company’s ability to keep pace with its growth has been its decision to be ISO certified.

“When you first put a quality system in place, it literally is no more than a manual that someone has written,” he says. “It takes two or three years of being tested and actually being forced to utilize those processes or you’re not able to get recertified.

“If you utilize those processes then it becomes a part of your culture and once it becomes part of your culture, then your operations begin to change. It’s not automatic just because you have a quality system that you’re going to operate in a quality manner. It’s a gradual adaptation of your everyday natural life.”

Having those processes and systems in place allows you to bring on new employees without having to recreate anything.

“It’s all written, it’s all documented and it’s all practiced such that when you bring new people with new ideas and ways that they’ve done business at other organizations, it’s a lot easier for them to adapt to the new processes that we already have in place,” Hightower says.

With the pace at which Hightowers Petroleum has grown, the company’s success has relied on good employees.

“You have to measure when your people are at 110 percent to add that additional person in that particular department to support the accounting side of that growth as well as the execution of that business on the other side,” he says. “So it’s making sure that you continue to have quality individuals that know their job right up front. They may be trained to your system, but they are quality people walking in the door to be able to adapt to your business and your system and be able to become part of the team very, very quickly.”

Quick adaptation is key in maintaining fast-paced growth. Hightower makes sure he sets the pace of his organization.

“When you set the pace as a leader in terms of working hard, working long, working accurately and not having or accepting mediocrity in your organization, then the culture of your people falls into that same rhythm,” he says. “Once you’ve established the rhythm of your organization, it becomes pretty easy to identify individuals that cannot keep up with that pace. Either they stick out and they perform or the fellow employees support them and correct them or they are the ones who weed their own peers out of the system.”

Get in position

When growth is the primary focus of your business, it is important to plan how your company can best benefit from that growth.

“Succession planning has been a very key part of our future planning process,” Hightower says. “We elected an outside board of directors about a year ago. In doing that, part of the reasoning was from a succession-planning standpoint; those that would take over the business in the future would have to have an outside board. We felt that it was proper to begin to exercise and practice with a quality outside board so that if something were to happen to myself or if we were ready for a change, that process is already in place.”

To fill the board, Hightower brought in senior people from Shell, Marathon, Eli Lilly and other businesses of a similar size and nature to his own in order to take the company to new heights.

“If you’re a privately owned company, there’s typically a lot of fear of outside boards because there’s fear about giving up control,” he says. “There was a decision that we had to make whether or not we wanted an advisory board, or whether we wanted an actual board of directors.”

The decision to go with an outside board of directors proved to be the right one in the long-term.

“We’ve got some quality people and some expertise that will hopefully balance our growth as I go into water that I’ve not necessarily been into from a size standpoint,” he says. “When you’re trying to get to a billion dollars, you’re in territory you’ve never been before. Having that type of advice and support from an outside board that’s committed to the success of the organization has been a good experience for our company.”

Most privately held companies have family and friends as board members so they can remain in control of the organization. Hightower says it’s been advantageous having an outside viewpoint.

“Don’t be afraid to have people know more than you know, people who are smarter than you and people who can contribute to growth and not just be a yes man to you as a CEO,” he says. “The fear of someone being better, taking over, or learning something that you may think is proprietary is narrow-minded as it relates to long-term growth. If you don’t want to grow and you want to maintain a lifestyle business and just do enough to get by, that’s one thing.

“If you’re really committed to growth in your organization, then you need people better than you on top of you and people better than you below you and that may or may not be someone in your family. If it’s not someone in your family, get the best person for the job.”

Often, just giving up control in aspects of the business is the hardest thing for a family-owned company to come to grips with.

“Many people remind you of the horror stories of CEOs being fired by their board and being locked out by their board after they’ve ran a business and built a business and then their door locks are changed one day when they come in,” Hightower says. “That’s the worst case scenario, but yet one that was presented over and over again from a fear factor. As a CEO who is the leader of the organization, I had to overcome those fears not just myself, but for family members and others in the organization who do not have the same level of no fear.”

For the betterment of the business there has to be someone willing to take the chance and take the risk to push forward.

“As a leader you’ve got to be the one who pushes the organization in a way that’s good for the organization and overcome those fears in the process,” he says. “Having done that, one year later, all of those that were nervous and not necessarily for having a strong outside board have now come around to say, ‘It’s not that bad after all.’ They’ve begun to see the value in the selection that was made.”

Take advantage of opportunities

While bringing in an outside board to help the company reach higher levels was crucial, it has also been important that the company keep looking for opportunities. Hightower started with technology.

“In our distribution model early on we adapted technology and we also adapted procurement methods of managing the entire enterprise versus just managing a site,” Hightower says. “We developed a national strategy very early to be able to adapt to corporations when they began to have a single supplier supply the entire commodity versus having 10 suppliers managing that one commodity. By adapting to that procurement process a long time ago, we were able to move as corporations were changing how they purchased to be able to be the single supply chain manager for those corporations for the fuels area.”

Being privy to the changes in supplier thinking and the new opportunities those changes could create has contributed to the company’s success. Finding new areas for your business to expand into is crucial for exponential growth.

“There’s a concept similar to football were you say, ‘You go wide or you go deep,’” he says. “If I was going to go wide from fuel I think if I got into electrical and got into HVAC or started doing fasteners, that’s going wide. I suggest that you go deep. If you’re selling gasoline and diesel, you add monitoring and equipment in the gasoline and diesel area and you add lubricants and oils and then you do things that are complimentary to your industry so that you get deeper into your industry versus going wide and trying to get into other products that are not complimentary to your industry.”

When the company adapted technology it got into technology relative to fuels. When the business began to look at expanding the supply chain into freight and transportation, it was in the fuel-related area.

“Going deep versus going wide is one of the key focus areas that an entrepreneur should look at when expanding what they do next,” he says. “Make sure that what you do next deepens your position in that industry versus trying to start all over into a new industry sector. There’s very little benefit in going wide because you have to now become familiar and an expert in a whole new area and a whole new set of people and suppliers and buyers. You want to stay within your industry and add components that will deepen that industry.”

To take full advantage of the opportunities that can be presented to your business, you have to set goals for what you want your company to become.

“We want to become a billion dollar company,” Hightower says. “We said that when we were only doing $50 million and now we are doing a quarter of a billion dollars. You’ve got to want to grow your business. You’ve got to have a deliberate effort in growing your business to scale and size because it won’t happen by itself. If you’re not talking about it and not trying to get there, then you probably have no chance of succeeding.”

HOW TO REACH: Hightowers Petroleum Co., (513) 423-4272 or www.hightowerspetroleum.com  

Takeaways

-          Make sure your company is doing the right things to keep up with the pace of growth.

-          Plan and position your company to best benefit from what growth can provide your business.

-          As you continue to grow be on the lookout for areas of opportunity.

The Hightower File

Stephen Hightower

President and CEO

Hightowers Petroleum Co.

Born: Middletown, OH

Education: Attended Wright State University and majored in management and communications.

What is the best business advice you have ever received?

Never stop pursuing your dream. There are many days and many times that it seems like tomorrow, but there is no tomorrow. You go to bed and you wake up and there is another day. Problems always get solved by waking up and meeting those challenges head on, regardless of how bad they are. Face your issues and never stop, because when you stop it’s over with.

Who is someone that you look up to in business?

The most important person in my business career has been my father. When I was a teenager I got to actually sit down in sales meetings and do sales calls with my father. That was probably the most impressionable. As I began to grow there were people like Bill Mays with Mays Chemical and Vernon Stansbury with SCSC and these were companies doing $300 and $400 million worth of business. I would see their boats and their 10-story office buildings and that’s what let me know it was possible for me to go out and have the same thing. If you don’t see that it’s possible for a young African American to have that size and scale of business, then you don’t know that it’s possible. It was seeing other African American CEOs that were young, aggressive and accomplished that I knew I could do the same thing.

What are you most looking forward to in your company and industry?

I’m looking forward to an event that will either take part of my company public allowing us to maintain majority ownership, but put me in a position where I can semi-retire from the organization and/or an event where I could sell the entire company.

Wednesday, 01 August 2012 10:39

Matt Kornau: Empowering Global Change

Written by

A new brand of soap lands at Whole Foods Market, ready to fill the shelves. Its arrival may not seem revolutionary, but the very existence of fair-trade Paruva Kaalam soap represents the culmination of a unique journey, one that illustrates how broad-minded corporations can bridge the gap between big industry’s ability to leverage resources and the need for socially responsible change.

And it’s a journey that can result in shared value for both communities and clients.

At Kaleidoscope, one of our core values is partnership. We partnered with Design Impact, a nonprofit organization that works with resource-poor communities to drive innovation where it’s needed most.

Through an ongoing fellowship, Design Impact selects seasoned designers for 10-month, embedded engagements in India. By living and working with their community partners, the fellows gain deep familiarity with the area’s most pressing problems and the resources available to create solutions.

Supported by Kaleidoscope’s researchers, designers, engineers and other specialists, the first Design Impact fellows developed clean-burning charcoal briquettes that replace pollution-emitting cooking fires. In addition, they created the Paruva Kaalam soap business that uses the glycerin byproduct of local biodiesel production.

The benefits of these two products are easy to see: cleaner air, maximized natural resources, new understanding of scalable business models and a revenue stream for an impoverished community.

The benefits to Kaleidoscope are clear, too. We have enabled design fellows to learn through doing and can scale that experience, apply it elsewhere, and repeat. Kaleidoscope’s in-depth knowledge of these emerging societies and the changes occurring in those regions can be shared with our clients. This expertise gives us a competitive edge.  

Is your company ready to empower global change and benefit from shared value? Consider taking these steps: 

Evaluate your company’s mission. Our first step was to make sure our mission aligned with the goals of the potential non-profit partner. This alignment ensured that the partnership would be compliant with both our staff and clients.

Create a realistic plan. Design Impact worked with our legal and accounting firms to develop a business plan that we could support with both financial and in-kind resource support. With these benchmarks in place, we agreed to fund the pilot project for two years. This allowed Design Impact the time and experience to develop its model before reaching out to other corporate funders.

Choose a cause that inspires your staff. Our relationship with Design Impact has grown from a small idea to a close collaboration that has energized our team and increased our capabilities. Our employees realized they could make an impact by participating. Because they understand our company’s business plan and how our organization works, they are able to manage their time in terms of company business goals and their involvement with the non-profit.

Leverage the benefits for all. The ideal outcome is to create positive social change, help clients better understand opportunity spaces, and provide an engaging outlet for employees to develop new skills. Through this partnership, we’ve created shared value between Design Impact, our clients and the Kaleidoscope team.

Big Business’ belief that emerging economies represent a ready market for Western packaged goods may prove to be a false hope. However, with global economies in flux, we may be able to catalyze opportunities for once-disconnected areas to one day fully participate in open, worldwide markets.

Until then, corporations can move socially responsible change forward using their resources of personnel, expertise and funding. Helping to teach someone how to fish is the way to go. I hope you’ll join me in finding innovative ways for your company to do the same.

Matt Kornau is CEO and co-owner of Kaleidoscope, a 23-year-old product development and design consultancy. By leveraging expertise in design, research, engineering, and brand engagement at its locations in North America and China, the company provides a spectrum of services from product inception through to manufacturing. You can reach Kornau at (513) 766-1056 or mkornau@kascope.com. For information, visit www.kascope.com or www.d-impact.org.

In today’s economic environment, businesses have to get the most out of their employees and remote banking allows employees to focus on tasks that benefit the business. By eliminating the need for them to leave the office to make deposits and handle other banking tasks, businesses can save time and increase productivity, says Stephen Klumb, senior vice president and chief lending officer for National Bank & Trust.

Remote banking also offers a high degree of accuracy and control because you’re handling your own transactions, you are able to keep a close watch on which transactions have occurred and when they are finalized.

“It’s almost like being your own banker,” says Klumb. “You’re making transactions, moving your money around, setting up automatic bill paying and handling your own deposits, all from your own office.”

Smart Business spoke with Klumb about the benefits of remote banking and how it frees businesses to customize their banking relationship.

Are companies limited to banking at the nearest location?

Some people have the mindset that walking into a physical location to service their banking needs is necessary. That may be true for retail customers, but from a commercial perspective, it really isn’t. Our commercial team goes to customer locations, and thanks to technology, we can do far more for them. Commercial customers can, for example, use a remote capture system to make deposits. With remote capture, a small machine at your business allows you to run checks through and get credit for the amount at your bank the same day.

Another remote banking option is Automated Clearing House, or ACH. This secure payment system allows your customers to send payments they owe you electronically from their bank directly to your bank account, speeding up your accounts receivable. You can also set up the reverse, allowing transactions to leave your account and be automatically received by your vendors.

How can a business keep track of its remote transfers?

Commercial banking customers can track their transfers with online banking. Those customers can sit at their computer, sign onto the bank’s website with total confidence that their information is secure and discrete, and transfer money and make payments.

When it comes to payroll, Positive Pay is an option in which no checks are paid until you release them, which helps eliminate the possibility of fraud. You can also get involved in Bill Payer, which sets up regular, automatic payments of bills, similar to what consumers use for personal use. Further, just as consumers can access cash and make deposits 24 hours a day through ATMs, so can businesses. Commercial customers can also use mobile banking on a phone for their business needs, and new apps are making this method increasingly popular.

Is there any reason a business owner would need a physical bank?

In regard to having a need for a physical bank, your commercial lender should set up meetings once per quarter to keep up with what’s going on with your accounts both past and present. But you can also go online, pull up your accounts, your transactions and your balances, and you’ll see the same things a branch manager sees. This service, and others, like Remote Capture, will minimize the trips made to a banking office.

In the event that you’d like to discuss a grievance, there is a number you can call that will put you in touch with a representative to handle it.

Most borrowers don’t call a branch if they have a problem with their commercial loan, they call their commercial lender. Your assigned commercial loan officer is available to handle any issues, typically within 24 hours, and can be accessed by cell phone and email.

Today, when closing loans, many lenders will go to the customer, as a lender’s office is usually his or her cell phone. Lenders will most often meet business owners where they work to close loans or review documents. There also may be occasions when a business owner might not want employees to know he or she is working with a bank, so lenders can meet them anywhere they’d like.

Are there costs associated with remote banking services?

Often, the costs associated with remote banking services are absorbed by the time and extra costs often incurred when not performing these activities electronically. Other costs may vary depending on banking activity and account relationships. Overall, most customers find remote banking services to be a very cost effective part of their financial practices.

How computer savvy do a company’s employees need to be to utilize electronic banking services?

Most companies on the commercial side have accountants or managers who are very knowledgeable when it comes to these things. And once they’re trained to use the systems, the benefits most often outweigh any anxiety.

However, to ensure a smooth transition, when a bank sells the service, it generally teaches customers how to operate them. For example, with remote capture, bank representatives will explain how to operate the machine when they bring it to the client’s place of business and they’ll leave a phone number for questions.

With online banking, there is a tutorial available to walk the user through the program, and in some cases, the person selling the service will take along a laptop to show those at the business who will be using the service how the programs work.

Stephen Klumb is senior vice president and chief lending officer with National Bank & Trust. Reach him at (800) 837-3011.

Insights Banking & Finance is brought to you by National Bank and Trust