Any business can suffer a loss. Whether losses stem from internal or external sources, all have the potential to seriously impact productivity and reduce profitability.
An example of loss-control planning is in the contrast between two fires that occurred at different industrial occupancies in the Cincinnati area.
One fire occurred in a metalworking plant during the daytime. The plant was in full operation and the fire was immediately discovered, reported and responded to by the local fire department. But the fire grew to five alarms and the dollar loss was immense.
The second fire occurred in the middle of the night when a business was closed. A single automatic sprinkler activated and controlled the fire, and notified the local fire department.
The fire department responded quickly, completed extinguishing the fire and removed smoke from the building.
You may have heard about the first fire, but the second fire did not make the headlines. The critical difference was the presence of an automatic fire sprinkler system.
Always ready and reacts quickly
A properly installed and maintained sprinkler system provides a building owner with a system that is always ready and able to react quickly. Water is applied directly to the fire, thereby reducing its spread. The system also alerts the local fire department to the fire.
The most common sprinkler system is a "wet-pipe" system, which consists of water-filled pipes containing pressurized water. These pipes lead to individual sprinkler heads, which are spaced throughout the facility based on hazards. Fire codes require that the valves are locked open and electronically supervised or routinely inspected. With proper valve supervision and a sound water supply, the system stands ready 24/7.
The automatic sprinkler head incorporates a heat-responsive fusible element which releases the seal on the sprinkler head when the assembly reaches its operating temperature, allowing water to flow. Sprinklers can react quickly because they are spaced at intervals of 100 to 130 square feet -- much closer than a typical smoke- or heat-detection system. Sprinklers are now available with fast-response assemblies that can react even faster to detect the fire and deliver water.
Delivers water directly on the fire
While Hollywood portrays sprinkler systems activating all sprinkler heads at once, the reality is that these systems are much more efficient. Systems activate one sprinkler head at a time, in direct response to the amount of heat produced by the fire. The flow from a typical industrial sprinkler is between 20 and 50 gallons per minute, compared to an estimated 125 and 250 gallons per minute which are dispensed from a single fire department hose stream.
The National Fire Protection Association (NFPA) published a study of sprinkler activations and found that five or fewer sprinkler heads control 90 percent of the fires in protected properties. For wet-pipe sprinkler systems, more than 60 percent of the fires are controlled by one sprinkler head.
This efficiency has translated into an enviable record of controlling fires and reducing losses. NFPA statistics indicate that in business occupancies, reductions associated with automatic suppression equipment are significant.
53 percent for stores and offices (from an average of $25,000 to an average of $11,700 per fire)
64 percent for manufacturing properties (from $52,500 to $18,700 per fire)
Properly maintained automatic sprinkler systems are credited with reducing the chances of suffering accidental death due to a fire by one-half to two-thirds, compared to fires where such systems are not present. Mitigating loss through loss-control planning is one of the best weapons businesses can have in their arsenal.
Chris Beckman, certified fire protection specialist, is a risk control consultant with 18 years experience in the insurance industry. He has experience as a life safety and security manager for commercial developers, and has served on his community's fire department for 20 years, serving 11 years as a chief officer. Reach him at (859) 578-3506, firstname.lastname@example.org or through Schiff, Kreidler-Shell's Web site, www.sksins.com.
That would be a mistake. It's better to start today so you can reduce the cost of compliance resources and, more important, profit from SOX.
The first reason is simple -- supply and demand. Teams are now rolling off projects and lingering remediation efforts in droves, and these individuals are available and fully up to speed. The cost of these resources will spike again as the deadline approaches (or as second-round filers start their initiatives). Sarbanes-Oxley compliance is an arduous journey, especially for smaller-cap public companies with unique business units that have different and inconsistent business processes and controls.
The second reason is less obvious -- Sarbanes-Oxley doesn't have to increase your cost of compliance. If handled appropriately and proactively, it can be turned into a positive-ROI initiative. For many companies, this is the first time they have been forced to take a holistic look at all their processes.
First-time filers who delayed were forced to do the absolute minimum to achieve compliance, often creating additional and ad-hoc processes that increased, rather than decreased, reporting complexity.
Why put systems in place knowing that you're going to spend extra money auditing and later eliminating them? The best way to reduce the cost of compliance is to combine and/or eliminate the processes that need to be audited on an ongoing basis.
Use this extension to plan a SOX compliance program that first maps and minimizes your existing controls processes, and then establishes a compliance roadmap that is repeatable, sustainable and efficient. Seek and lock in a SOX business partner who has core competencies both in SOX and business process optimization (BPO), and who has experience using BPO to control and reduce SOX reporting complexity.
Late finish is not an option
To help prioritize compliance initiatives, best practices suggest that companies begin by using a risk-based approach to identify areas that are likely to impact financial reporting and their corresponding key controls.
Using this risk assessment, companies can focus and prioritize areas that must be addressed and corrected immediately; where the risks are high, where controls and procedures are not clearly defined and/or documented and where deficiencies are known.
Avoiding common mistakes
Here are the issues most commonly encountered by companies during their first year of compliance.
* Unclear process ownership and weak project management that resulted in huge resource drains, late filings and ongoing remediation efforts
* Poorly constructed risk assessment frameworks that led to ineffective (failed) control designs
* An inadequate understanding of the business and IT controls design resulted in defined controls that were unreliable in supporting the financial reporting process. Again, this led to remediation activities that could have been avoided altogether.
* Hasty and poorly planned remediation efforts that destroyed the value of prior compliance work
* A late and tactical approach to compliance that did not have business process improvement and process elimination as a core tenet
Turn a negative into a positive
Give yourself, your finance and IT teams, and your budget a break. Be proactive. Seek training for yourself and your team from multiple consultancies who have been through the wars and survived, and then engage the appropriate partner immediately -- before the rest of the herd gets moving.
Turn the SOX challenge into a competitive advantage by simultaneously simplifying your control processes and improving your access to timely and efficient business intelligence.
Phillip Long is an engagement director of Sarbanes-Oxley Compliance Optimization and IT risk management for Xperianz, a professional consultancy providing on-demand business expertise to help clients reduce cost, manage risk and leverage people, processes and technology for competitive advantage. Xperianz has offices throughout the Midwest and Southeast. Reach Long at (513) 576-1970, ext. 105.
Lee joined Fifth Third Bank in 2001 following its acquisition of Capital Bank. He began as executive vice president, Commercial Banking Division, Fifth Third Bank (Northwestern Ohio) and was named president and CEO of the Northwestern Ohio affiliate in 2002. He joined Capital Bank co-founders John S. Szuch and Robert A. Sullivan in 1988 and served as executive vice president and chief credit officer.
Lee reports to Robert A. Sullivan, executive vice president, Fifth Third Bancorp, and president and CEO, Fifth Third Bank (Cincinnati).
Lee holds a bachelor's degree from Siena Heights College and attended the Stonier School of Banking. He serves on the board of trustees of the University of Findlay, the Medical College of Ohio at Toledo Foundation and St. John's Jesuit High School. He is a member of the executive committee of the Toledo Area Chamber of Commerce, the Northwest Ohio Scholarship Fund Committee and the Young Presidents Organization.
Fifth Third Bancorp president and CEO George A. Schaefer Jr. says, "Bruce Lee has the vision, commercial banking guidance and insight integral to the continued success of our large and complex organization."
KENDLE INTERNATIONAL INC.
Kendle appointed Andrew Babington as vice president, European sales. He will lead Kendle's business development efforts across Europe.
He joins Kendle from a large international contract research organization, where he most recently was director of business development, Nordic region, and customer relationship director on the global business development team, with responsibility for developing global and local account plans and tactical/strategic sales and account plans for the Nordic region.
His previous industry experience includes sales roles with AB BIODISK Sweden and Sandoz/Novartis Pharmaceuticals.
Kendle also appointed Louis A. Angelucci III vice president, validation, for its AAC Consulting Group Inc. subsidiary. Angelucci will oversee day-to-day operations of the validation unit and maintain the quality and consistency of its service to clients.
POWERNET GLOBAL COMMUNICATIONS
Robert Nilsson joined PowerNet Global Communications as vice president of business development.
Nilsson arrives from Bellevue, Wash.-based WatchMark Corp., where he was vice president of channels. He's also worked for Marconi, Mobile Systems International, Metapath, Convergys and AT&T/NCR Corp.
At PowerNet Global, he is responsible for heading up new business development initiatives and building new partnerships in the telecommunications market.
National City appointed Rick Rokosz small business banking officer for the National City branches in Northern Kentucky.
Rokosz oversees the sales and development of the business banking portfolio for National City in Northern Kentucky. Previously, he worked as a middle-market relationship manager for Fifth Third Bank's commercial division.
Rokosz earned a bachelor's degree in economics from Western Kentucky University and an MBA from Bellarmine University. He served as a member of the Madison E-Zone finance committee and is a member of the Renaissance Covington board of directors and the Covington Business Council board of directors.
National City also appointed Scott Robinson vice president and small business banking officer.
Robinson helps develop small business opportunities and is responsible for the downtown market. Previously, he worked as a business development officer in the financial industry. He is active in the Greater Cincinnati community and serves with the Greater Cincinnati Chamber.
GREAT AMERICAN INSURANCE CO.
Great American Insurance Co. promoted Michael D. Pierce corporate senior vice president. Pierce assumes the role of group reporting officer for the executive liability division, the bond operations and the foreign credit insurance business. Previously, he was divisional president of Great American's executive liability division.
In addition, the company named Gary S. Powers divisional president of the alternative markets division, Bruce R. Smith Jr. divisional president of the executive liability division and Kevin P. Gadbois divisional executive vice president of the executive liability division.
LCA-Vision Inc. appointed William F. Bahl and Thomas G. Cody to its board of directors.
Bahl is co-founder and owner of Bahl & Gaynor Investment Counsel, an independent registered investment adviser. Prior to founding Bahl & Gaynor in 1990, he held executive positions with Northern Trust Co. in Chicago and Fifth Third Bank in Cincinnati.
Cody is vice chairman of Federated Department Stores. He joined Federated in 1982 from Pan American World Airways Inc., where he served as senior vice president, general counsel and secretary.
Education: Washington University, St. Louis, undergraduate studies; Georgia Institute of Technology and the Saurer Institute, Arbon, Switzerland, post-graduate studies
First job: Standard Textile, 1975
Civic involvement: Chairman of the board, Jewish Hospital of Cincinnati; executive committee and board, Greater Cincinnati Chamber of Commerce; board of directors, Medpace Inc.; officer and board of trustees member, Jewish Foundation of Cincinnati; vice president, Jewish Institute for National Security Affairs; officer of the Israel Policy Forum; previous board member, Health Alliance of Greater Cincinnati
Whom do you admire most in business and why?
I admire leaders who successfully lead global organizations and sustain their leadership and success year after year. I admire Jack Welch because I understand the issues he dealt with regarding innovation, people, marketing and sales for not just one country, but on a global basis.
What is the most important business lesson you've learned?
Surround yourself with the best people you can possibly find. Also, cut nonperformers quickly. Admit that you made a mistake and move on, otherwise the effects are costly, painful and demoralizing to others in the organization. On the other hand, quickly reward those who perform well.
What has been your toughest business challenge?
Ensuring that all Standard Textile associates in offices around the world understand and work together to meet the company's greater goals.
"As a member of the executive leadership team, Manuel will ensure that corporate responsibility continues to be woven into every major decision we make as a company," says Fernando Aguirre, chairman and CEO. "Manuel has been a driving force behind the development and implementation of the labor rights framework agreement we signed in 2001 with the International Union of Foodworkers and COLSIBA, the affiliation of banana workers unions in Latin America.
"This landmark agreement has been widely recognized as a model for workers' rights."
Rodriguez will report to Aguirre and will communicate on important policy issues with the nominating and governance committee of the board of directors.
"Manuel has long been an outspoken advocate for high standards of environmental and social performance, including labor rights, both within Chiquita and in the industry," Aguirre said.
One hundred percent of Chiquita's banana farms in Latin America, which cover more than 15,000 hectares and employ approximately 14,000 people, have achieved certification to the stringent standards of the Rainforest Alliance and SA8000.
NATIONAL UNDERGROUND RAILROAD FREEDOM CENTER
The National Underground Railroad Freedom Center appointed Love Collins III as vice president - advancement. Most recently, Collins was vice president of development at Florida A&M University (FAMU) in Tallahassee, Fla., and executive director of the FAMU Foundation.
Thomas McKenna joined AK Steel as vice president of labor relations. He is responsible for the steelmaker's labor relations functions and its union-management relationships.
Most recently, McKenna was deputy chief of staff for policy for former Indiana governor Joseph E. Kernan. McKenna held several other positions with the state of Indiana, including chief of staff for the Office of Lieutenant Governor and executive director, Indiana Department of Commerce, where he also oversaw the Indiana Steel Advisory Commission and was a member of the Indiana Parole Board.
Prior to his public service, McKenna was managing partner of law firm Bamberger & Feibleman and operated his own human resource consulting firm. From 1979 to 1984, he was director of human resources for the Midwest Steel Division of the former National Steel Corp. At Midwest Steel, he designed and implemented numerous employee involvement and cost improvement initiatives.
"Tom McKenna is an outstanding addition to the executive management team of AK Steel," says James L. Wainscott, president and CEO of AK Steel. "Tom's integrity, boundless energy and unique perspective will serve our company well in this extremely important role."
McKenna holds a bachelor of arts degree in English, and a juris doctorate degree, both from the University of Notre Dame.
Lockfast named Andrew Simmons general manager for London-based Lockfast Europe Ltd. Simmons assumes full responsibility for unit operation and sales, effective immediately. Lockfast Europe Ltd. is a wholly owned subsidiary of Lockfast Inc., a major U.S. supplier of exhibition and assembly products headquartered in Mason.
Simmons previously served as sales manager for a major European supplier of components to the industry.
THE PROCTER & GAMBLE CO.
Paul Polman, group president-Western Europe of The Procter & Gamble Co., is retiring effective June 30. Until then, he will work on special projects, including aspects of the Gillette transition in Western Europe.
"Paul Polman has led a strong turnaround in P&G Western Europe business over the past four years," says Chairman, President and CEO A.G. Lafley. "He has built a strong Western European team and laid the foundation for further growth. He has also been an inspirational leader for his organization. We thank him for his 25 years of service to P&G."
P&G's board of directors elected Laurent L. Philippe group president - Western Europe, succeeding Polman. Previously, Philippe was president-Greater China.
The board also elected Daniela Riccardi president-Greater China, from her position of vice president-Eastern Europe.
Achieve Inc. named Kentucky Gov. Ernie Fletcher to its board of directors. Achieve Inc. is a nonprofit organization created by the National Governors Association to help raise education standards and achievement levels for students nationwide.
The Achieve board is composed of six governors: three Republicans and three Democrats. The board also has six CEOs from private-sector companies. Fletcher will serve a two-year term.
"I am honored to be asked to serve on the Achieve board," Fletcher says. "Whenever I am among my fellow governors, I am struck by how many face similar education issues."
OHIO CASUALTY INSURANCE CO.
Paul Gerard joins Ohio Casualty Insurance Co. as senior vice president of investments. Gerard replaces Richard Kelly, who left in April 2004.
Gerard comes to the company from GE Asset Management and Genworth Financial in Stamford, Conn., where he held several portfolio management roles. Prior to that, he was senior investment officer with Principal Capital Management in Des Moines.
At Ohio Casualty, he oversees all activities of the company's investments department, including managing investments and working with outside vendors.
Cox knows a thing or two about great leadership. Not only is he the pacesetter at his own company, he is also active on the boards of several well-known Ohio organizations, including Canton's The Timken Co., the Federal Reserve Bank of Cleveland and Cincinnati Bell, where he serves as chairman.
And while leadership is more of a natural talent for Cox than an acquired skill, he still struggles with how to create an environment of openness and candor.
"You have to understand that it's important to be candid," he says. "It's important to have an environment of trust [and] hear what people really think."
That kind of environment depends entirely on one vital skill - the ability to listen.
"A good leader has to be a good listener," Cox says. "You don't chide somebody when they say something you don't like. You don't show disapproval for a divergent point of view. You listen.
"Leadership is about listening, asking and questioning, and developing heroes at every level. [When you do that] people get a sense of trust, a sense of openness and a sense of candor."
Developing heroes at every level is an ambitious goal, but Cox sets the bar high. He looks for particular traits, the foundations of company heroes, in all of his employees, whether they're coming in as senior management or at entry level.
"The traits remain the same at every level," he says. "Loyalty, trust, mental dexterity - the ability to go from one thing to another and still be on point. People who are constantly questioning, 'How can we do it better?' Not what you do, but how can you do what you do better? [You also need] people who bring order when there is time of great change and people who can bring change when there's a time of order."
The concept of company loyalty is almost old-fashioned. After all, a study conducted by the Bureau of Labor Statistics found that baby boomers have held an average of 10 jobs by the time they reached age 40. Cox recognizes this and takes a realistic approach to achieving his goals. Loyalty must be created. And for the most part, it is earned, not expected.
"You expect people to say, 'OK, I'm here. I'm on the team. I'm [going to] be loyal to the team,' and then you build from there," he says. "They can't come in saying, 'I'm going to jump ship the minute something goes wrong.' But you have to earn it. Loyalty is constantly growing."
So how does Cox build loyalty? By being consistent.
"Do what you say and say what you mean," he says. "When you tell somebody something, it happens. If it can't, you deliver the worst news the quickest. You tell them it didn't happen and why. I think that's what builds loyalty - a sense of safety and trust; a sense that somebody's going to be fair with me and I don't have to watch my back."
One foot in front of the other
Creating and keeping loyal employees may be one challenge Cox faces no matter where he goes, but it's not his greatest one. As an African-American, Cox finds that his greatest challenge is not over-analyzing his interactions with others.
"I think people who are minorities have a tendency to misunderstand," he says. "You can spend a lot of your time focused on things that don't exist. There's enough of it that does exist.
"My biggest business challenge is making sure that as I interact and work with people and things happen, that I don't attribute it to the wrong thing. That I don't take it to a place that is inappropriate [and] that I don't dwell on it, even when the reason was clear to me."
That may sound easy but it requires a commitment to sticking to it.
"You put it behind you," says Cox. "You just do it every day. You put one foot in front of the other and you go through that exercise."
Much of what Cox knows about leadership has been fine-tuned by his experiences serving on boards. While there are great similarities between running your own private company and running a public company, there are great differences as well.
"[In the role of] chairman," Cox says, "You are more a statesman, more a diplomat, more a mentor. As CEO, you set the strategy, you direct the strategy, you execute the strategy, and at the end of the day, you are accountable for its outcome."
These differences have given Cox a new perspective on his own business.
"[My board responsibilities] help me stay better prepared in my own company, help me be more thorough and help me take advantage of the pace, the rapidity with which we can change a decision, make a decision, adjust a decision. You can't [do that] in corporate America today.
"And I think [it's taught me] governance; how to lead an organization in a fashion that is fair to everybody else. As [Rudyard] Kipling says, 'All men count with you, but none too much.'"
All men count in both private and public businesses, but in the latter, employees aren't the only concern. There are shareholders to consider, and sometimes there are conflicting interests.
"You're trying to make sure you do the right thing for all of them," says Cox. "The employees, the management team, the people who buy your stock, the shareholders. All those people count."
The key, Cox says, is to "get on the page of right thing, right reason. If you do that, you will serve everybody well. Nobody can ever criticize you if you do the right thing for the right reason."
When Cox is faced with tough decisions regarding conflicting interests, he asks himself three questions. What is the situation? What's the right thing to do? Why would I do this?
"You can't look like you're favoring one group or interest over the others," he says. "So if you can look back and see right thing, right reason, you'll come out pretty good all the time."
Again, that's easier said than done. Leadership brings with it several downsides. It is the leader who must make unpopular decisions. And it is the leader who has to present and defend these decisions to employees and shareholders. As such, Cox approaches his decision-making logically.
"When I have a tough decision to make, I try to first define the problem," he says. "Someone once said 'Fanaticism is redoubling your effort after you've forgotten your aim.' Sometimes people forget what the problem is. So the first thing you have to do is define the problem, not get an answer."
Once you really know what you're facing, Cox says, "The solution becomes very clear. It may not be one that you like, but it becomes easier. You have to ask yourself, 'Am I real comfortable with it or am I not?' If you're not always comfortable with it, you have a chance of it being a better solution.
"Solutions are not normally comfortable things. You might be happy that you made one, but somebody isn't going to like it."
Cox cites an example from his own experience.
"We closed an office in Columbus once. That was difficult," he says. "We are a small dog running with big dogs, and we've got to do certain things to compete. So making those decisions about where you put your resources outside the company and in the community and still stay a viable player, that's tough."
Cox asks himself, "What is the problem? Who is it going to impact the most? Why is it going to impact those people? What would happen if I did nothing about the decision? And what happens when I make the final decision?"
And when it comes time to deliver the news, "You stand up straight and tall. You don't blink and you tell people, 'This is what I've come to and this is why. And now I need everybody to buy into it.' It may not have been your best decision, but having been made, we've got to go this way together.
"And you get everybody to join you in that, because that's what the leader does."
Cox speaks about getting everyone to join in on his missions as though it's the natural course of things. But he knows it's not. To get people on board, he uses the Gestalt theory - the whole is greater than the sum of its parts.
"We try to get employees to understand that's the key to being happy in life," he says. "All of us have this innate feeling, whether we understand it or not. All of us want to be a part of something that is greater than we ever could be individually."
Cox believes that when people understand that the organization they're working with can help them get there, they'll buy into its mission.
"If the organization reaches its goals, [they] will ultimately have the things that they want," he says. "The part, no matter who that part is, can never be greater than the whole."
He includes himself in that. Cox measures himself not by his personal accomplishments but by the impact his accomplishments have on others.
"I measure success in terms of [the community]," he says. "Have I created good citizens of my children? Can they go out and become good contributors to society, as opposed to takers? Are people changed and improved and better people as a result of interacting with me and knowing me? Have I created a business where other people and families can do those same two things?
"And do I have something that will go on and live after I am gone, so that that entity, that business can continue to do those things for generations that I won't even live to see? If I've done that ... then I'm a successful guy."
Cox Financial, (513) 621-1771 or www.coxfinco.com
Unfortunately, violence in the workplace doesn't just happen at one type of organization. Companies in all industries -- big or small, anywhere, at any time -- can be affected. And workplace violence is not limited to highly publicized tragic events.
According to published information from the FBI, workplace violence falls into four broad categories.
Type 1. Violent acts by criminals who have no other connection with the workplace but enter to commit robbery or another crime
Type 2. Violence directed at employees by customers, clients, patients, students or others for whom an organization provides services
Type 3. Violence committed by a present or former employee against coworkers, supervisors or managers
Type 4. Violence committed in the workplace by someone who doesn't work there but has a personal relationship with an employee, such as an abusive spouse or domestic partner
Arm your company against violent acts
Prevention of workplace violence, as with most other risks, begins with formulating a plan. An organization will be better able to recognize the danger signs and defuse them before violence erupts if its executives have taken time to consider the issues.
Preparing policies, practices and structures to deal with workplace violence will allow for better crisis management and response should an act of violence occur. According to the FBI, effective plans are:
* Supported from the top down
* Customized to the needs, resources and circumstances of a particular employer and a particular work force
* Proactive rather than reactive
* Based on a multidisciplinary team approach that includes expertise from a number of perspectives
* Actively communicated throughout the workplace to ensure that everyone is aware of the warning signs, the violence prevention plan and response measures, and feels empowered to seek advice and assistance when a problem arises
* Rehearsed. No matter how thorough or well-conceived, preparation won't do any good if an emergency happens and no one remembers or carries out what was planned.
* Continually updated
What to include in your plan
Typically, workplace violence plans include the following elements.
A statement of the company's threats and violence policy. Created in writing and distributed to all employees, this statement defines what constitutes acceptable workplace behavior, which behaviors fall into the category of workplace violence and the penalties should an offense occur.
Procedures for preventive practices. Preventive measures can include pre-employment screening, identifying problem situations and risk factors, and security preparations.
Addressing threats and threatening behavior. This part of the plan identifies warning signs and the measures required to detect, assess and manage threats and behavior.
Designation and training of an incident response team. To encourage reporting, employers must create a climate in which all employees -- including management -- feel free to report disturbing incidents or possible danger signs.
Threat assessment. An employer's workplace violence prevention program should specify the personnel who will be specifically responsible for overseeing the organization's policy. Teams should have the authority, training and support needed to meet their responsibilities and access to outside threat assessment professionals as needed.
Training of different management and employee groups. Training should be provided on a regular basis to all employees and cover topics, including the workplace violence prevention policy, reporting requirements, risk factors, early recognition of warning signs and response plan.
Updates. All plans should be monitored and updated on a regular basis.
From decreased employee morale and productivity to an increase in the number of lawsuits and liability costs, workplace violence can negatively impact a company's ability to operate. In that sense, everyone is a victim when a violent act occurs. To encourage a workplace free of fear, develop a proactive work place violence program today.
Glenn Drees, one of the 27 employee-owners of SKS, the Midwest's leading independent insurance agency, has nearly 15 years of experience in risk management and loss prevention. Reach him at (513) 977-3171 or email@example.com.
You'll sift through page after page of listings for museums, foundations, institutes, PBS documentary Web sites, online tools and business professionals dedicated to fostering and honoring innovation. And it's no wonder -- with ever-expanding global competition and a slow domestic economy, creative new ideas and products are more valuable than ever.
Just ask Jack Gordon. After serving for eight years as a military intelligence analyst, he launched a civilian marketing career, working for companies such as Procter & Gamble, Beatrice and My Own Meals, and introducing more than 50 new products to the marketplace. He gained first-hand understanding of the make-or-break effect new product and service launches can have on companies and of the pressure on employees to come up with bright new ideas.
In 1991, Gordon joined consumer research company AcuPOLL Research Inc. in its founding year as its CEO.
AcuPOLL uses the Internet and local polling stations to gather the thoughts and opinions of consumers, introduce them to potential new products and provide clients with feedback. The company also offers comparative data pulled from an extensive database and actionable advice based on research results.
Over the past decade, AcuPOLL has tested more than 30,000 product concepts, advertising campaigns and services from clients including The Coca-Cola Co., Johnson & Johnson and Colgate-Palmolive. With its headquarters in Cincinnati and offices in Mexico, Brazil, the United Kingdom and Hong Kong, AcuPOLL has its finger on the pulse of markets worldwide.
Smart Business spoke with Gordon about the secrets to creating the next great innovative idea and tried-and-true tips for making that product a market success.
What makes for a successful product rollout?
We're a concept testing company, to a large degree, so we test the basic idea before [the client] even has a product. The biggest mistake manufacturers make is that when they develop the idea, it's not complete. It doesn't have consumer insight behind it. There's no wow factor, where the consumer says, 'I really have to have something that does this for me.'
The second thing is if they do have the consumer insight, they don't state the benefit well enough. There's not a very clear benefit to the consumer coming out of the idea.
The third thing is, if they do have the benefit, they often don't have the support for the benefit. They'll make wild statements like, 'We're going to clean better than anything you've ever had,' and then they don't tell them what they put in the product to make it clean.
Those are just common pitfalls that can keep you from getting trialed, because it's the idea that gets you trialed. Then, of course, it's the product that gets you repeat (customers). Once you get the idea and you understand that you have a winning idea, it becomes a matter of, 'Can you develop a product that will deliver all those benefits to where the consumer isn't disappointed in the product?'
And then you've got all the problems of execution. Can you build awareness? Can you make advertising that's really going to support and elevate this product?
What's the best way to get your advertising noticed and build that product awareness?
Some point of uniqueness you can leverage is the best way, because if there's nothing unique about your idea, if you haven't added anything new, why would somebody switch from what they're using?
I use Tide as an example. If you're introducing a new detergent, and your detergent cleans well, and you say, 'We have this really good-cleaning detergent,' consumers might say, 'Yeah, I'd like to try that. I would buy that.' But there's nothing unique about it.
So when they're are out there in the grocery store looking at that shelf, they see your new product and they see their Tide, and they say, 'You know what, I've been using Tide for 20 years. My mom used Tide. I trust Tide; I know it's going to work. Why should I switch?' And they won't pick (the new product) up.
Now, all of a sudden, you change the category parameters and introduce something unique. You introduce the very first detergent that has fabric softener in it. OK, so now you've got two products in one, and you've got a unique detergent in the marketplace.
Now they're standing there looking at their Tide, and they know they're going to have to go buy another product with it. Or, they've got your product, which says it cleans ... and it softens as well as anything on the market, and it's the same price as Tide.
Those are the kinds of products that tend to do well. If you don't have uniqueness, if you don't have a point of difference, your chances of having a profitable introduction are very slim. Without that uniqueness, what you have is a commodity. And the only way you're going to get trial is to promote it on price.
Are there products that have done well in consumer testing but not fared well on the market?
The most famous one, unfortunately, is Crystal Pepsi. Crystal Pepsi is a classic example of an idea that did well, and a product that did very poorly. Truth of the matter is that Crystal Pepsi got all of the trial that we predicted it was going to get, but what Crystal Pepsi didn't get was any repeat.
And there's two reasons for that. One of them is that the company did not make a product that delivered what they were promising. But the second piece with that is I don't know that they could have. What somebody should have done is caught that idea and said, 'This is not a product that can be made in the first place.'
The promise for Crystal Pepsi was that it was kind of halfway between a cola and an uncola, or a lemon-lime drink. People kind of think that there's a big gap between those two products, but there isn't. The truth is that a cola is just a lemon-lime cola with additional flavoring in it. So, of course, they famously missed.
What are the best ways you've seen companies innovate?
When they use an outside innovation expert. A lot of companies try to innovate year in and year out internally. And they do a very poor job of that because they're not really trained. They call these meetings, and people come to these meetings with the same ideas they had last year, that nobody accepted last year.
When a company tries to innovate internally, they just resurface old ideas. Or, a lot of companies will try to use their advertising agencies for innovation. And ad agencies aren't very good at this, either, because advertising people are very good with words.
What works for a basic concept or a basic new product idea is a simple-to-understand, straightforward statement of the benefit of why it works. And as soon as you turn it over to your advertising agency, it tends to become this long thing with lots of great words, and nobody can understand what the benefit is.
So the best people at it are the people who do it for a living. And there's a lot of those people around. Doug Hall at the Eureka Ranch does a very good job. Marco Polo, also in Cincinnati, does a very good job. Some of the design agencies actually do a pretty good job of doing new product work when they're turned loose.
When a CEO has a great innovative idea to implement, who should he or she get involved in the project?
Well, you have to have internal people involved. And the people that are usually best at that are marketing people, product development people. The people that understand what it's going to be like to make the product, because that kind of grounds you in reality and won't let you go out too far.
And then marketing people, who are usually better at seeing the big picture and the objectives behind the whole thing. Those two groups are very critical to get involved.
Once that great idea is ready to roll out, how do you get everyone in the company to buy in?
That's the $64,000 question. That's what leadership is all about. There are many, many techniques for doing that. I think the most successful way of doing that is to create ownership in the people that you want to help you get there.
What you have to do is not hand them a finished idea and say, 'Go do this.' If you do that, they may do it because they're afraid of you, but they're not going to say, 'I really believe this is the right way go.' What you have to do is convince them it's the right way to go and let them help craft the finished idea.
Then they'll have ownership. And if they have ownership, they'll do a heck of a lot better job of executing.
What was the most valuable lesson you learned when you were at Procter & Gamble?
This is the truth -- the first thing I learned at P&G was if you get the product right, you can make a lot of mistakes in sales and marketing and still sell a hell of a lot of product. So what I learned is the importance of the product.
It's nice to have the messages, but if the message is off-base, you can fix it. But the hardest thing to do is to get retrial. Trial is a difficult thing to get on a new product. But once somebody's tried it and they're disappointed, trying to get them to buy it a second time, even though you've changed it, is one of the hardest things in the world to do.
If you get the product right, then you can experiment with all the other marketing angles to find the right message and the right way of delivering the message, and you can do all of those things over time. But if you don't get the product right the first time, you've killed it.
How to reach: AcuPOLL Research Inc., (800) ACUPOLL or www.acupoll.com
Approximately a dozen Ohio trade associations, including the Ohio Bankers Association, the Ohio Farm Bureau Federation and the Ohio Grocers Association, have established federal PACs. Other Ohio trade groups may want to consider creating a federal PAC if the FEC adopts the proposal.
The proposed rule would allow trade association federal PACs to collect contributions through automatic payroll deductions from employees of member companies. Ohio trade associations have long been able to collect contributions to their state PACs from member company employees via payroll deduction.
The use of automatic payroll deductions could allow trade associations to boost their annual fund-raising by as much as 100 percent. Corporate PACs have enjoyed dramatic growth in recent years, fueled by the use of automatic payroll deductions; during the first 18 months of the 2003-04 election cycle, 32 corporate PACs reported receiving more than $1 million in contributions.
The FEC proposal may enable smaller trade associations in Ohio to establish federal PACs for the first time. This may be especially true for trade associations representing service industries, whose lower-wage workers are more likely to contribute $10 to $15 per pay period via an automatic payroll deduction than to write one annual check for $500.
FEC regulations have long stated that there are no limitations on the methods that a trade association may use to solicit and collect contributions. However, since 1977, the same regulation has specifically prohibited member companies from using a payroll deduction system to collect contributions for a trade association's federal PAC.
Citing this inherent contradiction in the regulation and noting the widespread acceptance of automatic payment processes in the workplace over the last 25 years, America's Community Bankers (ACB) filed a petition for rulemaking with the FEC in August 2003 seeking an end to the prohibition. The FEC was required by statute to seek public comments on the ACB petition and was apparently surprised by the overwhelming support for lifting the prohibition.
Twenty-two trade associations submitted comments endorsing the ACB proposal. The FEC conceded that the ACB petition "raise[d] a reasonable question as to whether the regulatory prohibition against payroll deduction and check-off systems continues to make sense." As a result, the FEC sought comments on a proposal to eliminate the prohibition on the use of payroll deduction mechanisms.
The FEC proposal goes beyond the ACB request to affirmatively authorize a corporation to "provide incidental services to collect and forward contributions from its employee[s]. . .to the [PAC] of a trade association of which the corporation is a member, including a payroll deduction or check-off system, upon written request of the trade association."
Comments on the FEC proposal were due Jan. 21. At least one political Web site (www.blogesque.com) erroneously denounced the proposed rule as a special rule for bankers and urged its readers to submit comments to the FEC opposing the proposal. Nevertheless, FEC adoption of the proposed rule is likely, but not certain. The FEC could take final action by the summer of 2005, giving Ohio trade association PACs and businesses in the Buckeye State plenty of time to expand their operations before the mid-term elections in 2006.
Brett Kappel is with the law firm of Vorys, Sater, Seymour and Pease LLP. His practice is focused on government relations and campaign finance law. Reach him at (202) 467-8886 or firstname.lastname@example.org.
Education: University of Cincinnati, bachelor's degree in marketing, master's degree in finance
First job: IBM
Recognitions: Profiled by the Smithsonian Institution's Division of Information Technology and Society as a software industry pioneer; recognized by former President Ronald Reagan as "the epitome of entrepreneurial spirit of American business;" Entrepreneur Of The Year Hall of Fame; Ernst & Young Entrepreneur Of The Year regional technology winner
Involvement: Served on board of the Federal Bank of Cleveland
Whom do you admire most in business and why?
I was lucky to get a job at IBM at the dawn of modern computing. They had a wealth of brilliant managers and executives, and there were several mentors that looked after me and helped me, including Bob Sales, Andy Fogarty and Terry Lachenbach, who rose to become president.
What is the most important business lesson you have learned?
To quote Socrates, the more I learn, the more I realize how little I know.
What has been your toughest business challenge?
Coping with success. Success leads to arrogance. Sir Edmund Hillary, who first climbed Mt. Everest, said, 'We don't conquer the mountain, we conquer ourselves.' You have to conquer yourself, and then you get your people to see that is their greatest challenge, too.