Kim Palmer

Monday, 22 July 2002 09:33

Following in his father's footsteps

It's hard enough to follow in the footsteps of a CEO known worldwide as a master innovator, one who built the company from an $800,000 firm to a $292 million firm over 29 years.

Now imagine that same CEO shaves his head when his company reaches sales goals, spends $50,000 to bring the original cast from Phantom of the Opera to entertain his employees after the company reaches $100 million in profits, refers to his workers as partners, names the street leading to his offices Just Imagine Drive and, oh, by the way, just happens to be your father.

John Kahl, 37, will not have to imagine soon. As of Dec. 24, his father, Manco founder and leader Jack Kahl, 60, will retire, handing over the reins to John and his management team of Dan Brogan, COO, and Dan Perella, executive vice president of sales. Manco, a Henkel Group company best known for its Duck tape and logo, announced the "planned management transition" in October.

SBN spoke with John Kahl and asked him about the transition and what it will be like to take over from his father.

Talk about the transition process. Was there always a plan for you to become CEO?

I don't think it was always the plan for me to become CEO. It was a plan for the most qualified person with the values and the cultural structure of the company to be the next leader of the organization.

I think a lot of that became fair game for debate when we sold our business to Henkel in '98, because now we were part of a much larger multinational global conglomerate. It wasn't just something that was automatically going to roll through because of your last name.

I did have to prove myself, as did my successor and his successor and other members of our management team as they have been promoted into those roles.

Clearly, there are some large shoes to fill. Do you look at it that way, that you are replacing Jack Kahl?

I don't think that anyone can replace Jack Kahl. We are not going to change the whole company. A lot of companies talk about the first 100 days, when you make changes. There will be some things that we are going to want to do different or new and improved with Jack's departure, but this is not a business overhaul in the first 100 days of a new business regime.

This is more about consistency and delivering value to our customers and our partners (as we call our employees here) to make sure we are offering the best world possible to both of those constituencies.

I fully expect we can take advantage of all of the positive things that Jack is leaving in place here and we can try to improve on that. I have 37 years under the tutelage of Jack, and the cultural norms and the values that we want to run this company by are well entrenched in both myself and my brother and the other members of our management team.

We don't know any other way than the Manco way to run the business

If you look at the ages of the people being promoted, 30, 35 and 37, it is a very young top management for a company this size. Are there any perceived problems with this? Does it raise any eyebrows?

It doesn't have to do with age, in our opinion; it has to do with capabilities. Those people are a beautiful example of Jack giving people the opportunity to succeed, empowering people to succeed and grow. He gave them opportunities early on to accomplish a lot more than the big traditional organizations in the world would have allowed.

So that is why I think you get in some of those companies 40-plus, 50-plus managers getting senior seats, because it takes them a longer period of time to gain that experience. Here, it doesn't matter how old you are, it matters how good you are, and your leadership capabilities.

Does your father plan on taking an active role in the company after retirement?

He is going to do some venture capital things and he is serving on a couple of boards of some New York Stock Exchange companies. He is involved with the Cleveland Clinic and their fund-raising activities; he is on their board, so he has a number of things to keep him busy. He is not the retiring type.

Personally, I won't give him the opportunity not to have an influence here. There is no reason why you wouldn't take advantage of all the experience of the founding entrepreneur of the company. It would be crazy to let that walk out the door.

That's why I feel good about where the company is at today vs. 10 years ago. If he had decided to go at age 50, we would have had some people who only had four or five years of experience under their belt ... and that would have left a little more doubt in the industry and our partners.

Are there any radical changes planned? You aren't planning on getting rid of the Duck, are you?

We are not getting rid of the Manco Duck. He is an icon. We are taking the Duck global, and that is one of the biggest changes that we are making. One of the things that the Henkel organization has really afforded us is the ability to grow and serve our customers as they go outside the United States, as they go international.

The most exciting thing is this little yellow duck flying to other parts of the world and helping to solve other peoples' problems. How to reach: Manco Inc., www.manco.com

Kim Palmer (kpalmer@sbnnet.com) is associate editor at SBN.

Friday, 19 July 2002 06:21

Spread the risk

You would be hard pressed to find a financial adviser who says it's OK to have 85 to 90 percent of your assets in one investment.

But often, this is exactly what business owners do when they have 100 percent of their assets on the line with the company.

Risking personal assets this way may be a necessary evil in the beginning growth stages of a company, but once the dust has cleared, it is a good idea to re-evaluate your net worth and its relation to the net worth of your company.

"In most cases, their (the business owner's) largest asset is their business, and oftentimes, they are looking to diversify and get into new investments," explains Steven Stiffler, director of BC Corporate Strategies Ltd. a financial consulting firm that specializes in middle-market companies. "The owner may have a net worth of $6 million, but $5 million of it is concentrated in this one area. That constitutes a lot of risk -- when the majority of your net worth is at risk in respect to this one business."

Stiffler suggests cashing out a percentage of the business's assets. That can involve taking on outside investors, removing capital and replacing it with different equity sources, or even developing a spin-off venture.

The key to a successful cash-out is proper analysis, Stiffler says.

"What is the financial position of the company?" he says. "What are the trends in the industry?"

And, he warns, don't forget to evaluate the ability of the business to generate income and maintain a positive cash flow.

After a cash-out, you don't want to leave the company in a position where it is unable to operate. For example, explains Stiffler, "It would not make sense for an owner to take a big chunk out of the company and then need to buy new equipment."

Instead, analyze the areas within a firm that compete for capital and weigh them against the projection of future cash needs. It's important to leave adequate equity in the business to continue a healthy cash flow.

Stiffler suggests that when in doubt, always remember the golden rule.

"The golden rule is that a closely-held company is the goose that lays the golden egg," he says. "And you don't kill the goose." How to reach: BC Corporate Strategies LTD, 330-497-2000 or www.brunercox.com

Kim Palmer (kpalmer@sbnnet.com) is managing editor of SBN Magazine.

Friday, 19 July 2002 05:25

Better days

The daunting prospect of baby boomer retirement will soon be an overwhelming reality, and it is slowly sinking in for 50- and 60-somethings who find themselves faced with the option of early retirement.

The bottom line is simple: Whether you are considering early retirement or waiting it out, have your plan in place now.

Vivian D. Hairston, a financial consultant with Merrill Lynch, is well aware of the problems facing this next retirement generation. When you add in the special consideration women encounter when contemplating retirement, you've got an issue Hairston says requires immediate attention.

"The fact of the matter is that women now make up around 50 percent of the work force," says Hairston, who counts women as 70 percent of her client base. "A lot of times, that is the first time we (women) are introduced with investing. You're met with this 401(k) plan, they tell you to pick out your investments options and you don't know what to do."

Working women face other issues. On average, they make only 70 cents to every dollar that a man makes and are more likely to take time off from their careers to care for their family. Often, women contribute less to their retirement than men.

And when you consider that women tend to live longer than men -- an average of seven years -- it's even more important to take investing seriously.

Hairston advises clients both male and female to "look at a financial goal and attach a cost." Here are a few of her ideas on how to start the process.

Safe beginnings

"There is a misconception about Social Security," says Hairston. "Social Security should only be about 18 percent of retirement income."

That's why she advises clients to do a few things to ensure they have enough saved to live comfortably.

First, make the maximum contribution to your 401(k). At the very least, she says, contribute what the company will match. Another option, especially for women trying to catch up on their retirement savings, is to set up an IRA or Roth IRA. A traditional IRA contribution is a pretax option, while a Roth has no tax implications at the time of distribution.

Also, revisit your retirement investments at least once every year to make sure you are contributing all you can. If your finances change, don't think of it as extra money.

Says Hairston, "Every dime should be allocated."

Be prudent

The best bet for your retirement is to invest wisely.

"You want the highest return for the least amount of risk," she says.

Boring perhaps, but if the last year didn't illustrate this point, nothing will. Hairston says a balanced and diverse investment strategy will prevent overexposure to market volatility. And, depending on where you are, some risks are not worth taking, even for a high return.

Hairston warns of getting overly excited.

"I had a 70-year-old client come to me wanting to invest a lot of his money in a dot-com start-up," she says.

Don't be seduced by high growth, get-rich-quick investments, she says. But, at the same time, don't be frightened of sound investing.

The magic number

Don't think of your retirement fund as a means to pay off debt. If you are younger than the magic number -- 59 1/2 -- taking money out of a 401(k) or IRA may be costly. For example, if you fall into the 28 percent tax bracket and withdraw $100,000 from either account, you'll receive only about $80,000. Then, there's a good chance that $80,000 will count as extra income and force you into a higher tax bracket. And, don't forget the 10 percent penalty for early withdrawal.

Hairston says when it's all accounted for, you've paid approximately 38 percent in penalties and taxes. Unless the APR on your mortgage is higher, you're shooting yourself in the foot.

Ensure your comfort

"Think about it this way; something that costs $50,000 today will cost $100,000 in 20 years with a 4 percent rate of inflation," says Hairston.

The inevitable rise in consumer goods prices will catch many people off guard. A new car, washing machine or refrigerator can stymie the best budget with a steady income, so imagine the ripple effect it can have when income is fixed.

And, with the uncertain future of medical costs, health care is an unknown variable. You can't control rising costs, says Hairston, but you can prepare for them.

"More and more of my clients are getting long-term health insurance," she says.

For women, this is especially important because 70 percent of all nursing home residents are women 65 and older.

Cover the bases

Hairston suggests investing in long- and short-term disability insurance. Your ability to make money is your greatest asset, but if something happened that prevented you from performing your job, what would be your source of income?

Some compensation plans provide disability insurance, but the devil is in the details. Make sure you opt for the package you need.

When you leave before the ninth inning

"I see more and more of my clients taking early retirement," Hairston says.

In this age of consolidation and work force reductions, employees are finding themselves faced with ending their current careers sooner than expected.

While receiving a nice chunk of severance in one lump sum may be appealing, Hairston warns that it's important to factor in what the tax implications will be. If a year's worth of severance comes on the heels of nine months of salary, you could find yourself jumping up a bracket into a hefty April tax bill.

One way to avoid the tax crunch is to structure your severance so it is paid out in monthly installments. If that's not possible, Hairston says you may want to attempt to defer payment until after the last year you work. How to reach: Vivian D. Hairston, 216-363-6564

Kim Palmer (kpalmer@sbnnet.com) is managing editor of SBN Magazine.

Friday, 19 July 2002 05:11

Reflections on the future

Employers nationwide continue to bemoan the stark truth that there is a dearth of skilled employees. Adult training and education has been -- and promises to be -- one of the biggest issues to tackle.

"The valuable employee is going to be the educated employee," explains Arnold Tew, who is intimately acquainted with the needs of the adult student.

For 33 years, at Cleveland State University and then as president of David N. Myers College, he was involved in training adults to enter the work force.

At Myers, he concentrated on bringing the school to the forefront of adult and interactive electronic learning. SBN Magazine sat down with Tew to reflect on what his experience has taught him, and what employers can learn from it.

You recently developed a one-year MBA program at Myers. What are the requirements, and how is it working?

The MBA traditionally has been a two-year program. But if people had an undergraduate degree and had experience, it made sense to structure a one-year program. The requirement is that people bring five years business experience, have a decent undergraduate average and have a major in business administration.

It is now 1 year old and about 30 (people) have completed their degrees. We are getting students that would otherwise not go back for their MBA.

What other innovations has Myers made to assist the adult learning skills?

For the last six years, (Myers) really has gotten a head start in online learning. We've been doing it for a while at the undergraduate level, and we now offer the MBA online. Now it is possible to get an MBA totally online. Someone could earn an MBA while in Stuttgart (Germany). Last year, 200 of our 1,200 students were enrolled in online courses.

That doesn't mean that they were exclusively online, but they chose to take some of the courses online. Students that have a computer and an ISP register for classes and draw down their assignments. The assignments are on the Web, they go to the assignments and, depending on the instructor, sometimes have problems (to solve), lectures, references to book material and hotlinks to sites where people can go to and look at the information.

What students are best suited for the online classes?

They are targeted for working adults and people who are on the road and can't keep regular classes or are on time constraints (and) need to be able to study at their time rather than at a scheduled time. What online learning has done is to give us a tool that (previously) we were substituting correspondence for. The Web brings much more immediacy to the learning experience.

Do you ever see online education replacing the traditional classroom?

It is too early for any of us to know that. In the National Education Press, people are talking about whether online in the long run will bring a change to the core of the college experience. For the 18-year-old college age student in the U.S., college is seen as a whole culturating experience, a socializing experience.

It's hard to imagine that online education is going to replace that. Twenty-five years ago, everybody thought that TV and film would replace the classroom. For life-long learning, online may replace the seminar, continuing education and the CLE experience. It is clear that we have to keep relearning skills throughout our careers.

Do you see employee training and learning getting more specific in the future?

It is happening already. It is happening with the whole Microsoft Network Engineer Training and even at levels way below that if you look at the Microsoft certification for Office that people are bringing to the workplace. I'm certain that is going to develop in more and more areas. People will bring specific skills certificates, too.

That is separate from the issue and education and the whole tension between education and training that goes on. There is real tension between the need to provide for the job market and the need to provide education for life and to provide education for career. In my 42 years in higher education, I've just had to relearn so much and pick up whole new sets of skills that when I started, nobody dreamed about. That is going to continue accelerating.

How do you see this affecting the employee/employer relationship?

We are on the cusp of a new situation with the economy looking to do what it seems to be doing. There has been an increase in employer flexibility; getting people to come to work. It will change only for the short-run.

In the long run, the valuable employee is going to be an educated employee. If the educated employee is a woman with children, the employers are going to make compromises that they never dreamed of before in order to keep a skilled professional.

What skills will employees need to have in the future?

You need a way to be able to change direction as the business world changes, and only educated people are going to be able to do that. An educated work force gives a corporation a better chance at learning its next wave of tasks. That is what we have been seeing happen in the business world in the last few years.

There has been enough movement that people recognize that you have to be able to stop and turn quickly. To do that, you need a highly sensitive group of employees who not only understand what they have to learn to do, but why.

One of the problems is that some of the employers want to define training narrowly, and don't see that an educated work force works for them. How to reach: David N. Myers College, 216-696-9000

Kim Palmer (kpalmer@sbnnet.com) is managing editor of SBN Magazine.

Thursday, 18 July 2002 13:16

Multitask to the max

As consolidation and globalization increase, HR managers find themselves responsible for managing multiple offices in different locations.

That often translates into extended workdays to compensate for different time zones and requires an understanding of various state and local laws, as well as the ability to juggle multiple projects with different deadlines.

When faced with such challenges, an HR manager needs to be prepared to get friendly with a travel agent and keep a few fundamentals in mind.

Communication

Technology such as e-mail, voice mail and intranets has made it easier to communicate among multiple locations, but it is important to designate a primary contact at each location. Because the bulk of HR duties includes payroll and benefit management, an administrative assistant or someone in the accounting department is a likely choice.

But it is equally as important to look for someone who has time, good people skills and some personnel training.

Don't forget to delegate certain HR functions. That and cross-training at remote locations are key. Hourly hiring, community involvement, job skill training and workers' compensation issues are usually best dealt with by local employees.

Presence

"People feel more comfortable talking to an HR person if you visit frequently," explains Pat Peroni, former human resource manager at Fusion Inc.

Technology is a wonderful way to communicate, but e-mail, voice mail and video conferences can't completely replace a traditional site visit. To retain that human touch, Peroni suggests visiting each location at least twice a year.

Consistency

HR managers are in part responsible for "getting the message out about how they want to operate and what is the culture of the company," Peroni says.

One of the most important jobs of any head office, when it comes to dealing with remote locations, is to introduce and reinforce the core values of the company. Always maintain a central location to ensure consistency and avoid duplicating efforts.

The bulk of administrative duties should be centralized to maintain consistency and take the burden off smaller offices.

Equality

"It's important to be working from the same page at all the different locations, making sure the problems that arise are dealt with in the same manner," Peroni says.

General employee relations, including policy and procedures, can lose consistency and create morale and legal problems. Centralized and comprehensive databases are a good way to maintain equality across the board for salary, benefits and pay ranges.

Often, employees at remote locations complain the home office doesn't know what's going on in the field. It's important to stay connected, especially after a big change.

Road shows, video conferencing and newsletters are effective for engaging employees and receiving feedback. How to reach: Employer Resource Council, 696-3636

Kim Palmer (kpalmer@sbnnet.com) is managing editor of SBN Magazine.

Friday, 12 July 2002 11:11

Ms. Manners

Catherine Holloway knows which way to pass the bread, what all the forks are for and which bread plate to use.

And if you ask her, she will tell you. Holloway runs Etiquette Consulting Services, a business that teaches customized corporate business etiquette courses.

Holloway equates manners with power.

"Etiquette gives us such power to do what we need to do," she says.

In our increasingly global and diverse workplaces, understanding deportment can help us out of difficult situations, Holloway says as she quotes Eleanor Roosevelt: "A woman is like a tea bag -- you don't know how strong she is until she gets into hot water."

There are plenty of opportunities to find yourself in hot water. Take, for example, the seemingly harmless business cocktail party. Holloway discussed the pitfalls and opportunities of the business cocktail party at the Women's City Club of Cleveland "Wednesday's Women" luncheon.

Eating and drinking

Just because the word cocktail is on the invitation doesn't mean you have to have one. Holloway suggests keeping the drinking to a minimum, or avoiding it all together.

"Get an orange juice or a tonic water with a lime so you have the appearance of having a cocktail," she says.

Controlled consumption or abstinence goes for food, too.

"Try and eat before you go to the party," she says. "Make sure it is not your first or last meal of the day."

Yes, there will be food and, for the most part, it will be good food. But you don't want to be so busy grazing that you miss a business opportunity. Watch how much time you spend at the buffet table. The minute that chicken wing goes into your mouth, great business contacts will come over to introduce themselves.

Speaking of chicken wings -- often among the cocktail party choices -- the rule of thumb is just don't do it, Holloway says. They are saucy and drippy, and there's a big chance you'll go home with some of the wing on your shirt, under a fingernail or in between a couple of teeth.

Even if you have the will power to abstain -- and Holloway hopes you do -- you may still find yourself needing to wipe your hands, so always have a napkin handy. Holloway suggests placing your plate and your drink in one hand, with a napkin readily available to use prior to shaking anyone's hand.

"You should practice if you need to, but make sure you always have a hand available," she says.

That brings us to the infamous double dipping. George Costanza couldn't get away with it, and neither can you.

"If you want more dip, just put some on your plate," Holloway says.

But what if you eye another guest committing this awful crime?

"Don't go around correcting other people's manners," warns Holloway.

Two wrongs don't make a right, and correcting strangers is a no-no.

Meeting and greeting

So you can't gorge yourself, get drunk or make fun of others' lack of manners. What can you do?

Meet people.

That doesn't mean the people you came with or your co-workers. A business cocktail party isn't the junior high prom. There should be no wallflowers.

"Introduce yourself to complete strangers," says Holloway.

And, as with anything, there's a proper way to meet and greet. Holloway says there are two things to consider -- appearance and deportment.

Even if the appearance part is under control, don't forget the importance of a proper greeting.

"It's a package," Holloway says. "One has to go with the other."

You've probably been told 100 times, but be firm with your handshake. This goes for women as well as for men. Don't hurt the other person but, Holloway says, "a handshake is very important. It shows confidence."

While you are enjoying a good, firm handshake, be sure to make eye contact. Eye contact is important, but for some people, it is difficult.

"If you are uncomfortable with looking someone in the eye, look at the eyebrow or the top of the head," she says. "And don't say 'Hey' instead of 'Hello.' It says to the other person that you are not as polished as you look."

Proper grammar and good manners are essential in any and all business situations, whether a cocktail party or a corporate meeting.

"How we treat other people is how you will be treated," Holloway says.

Finally, always hand over your business card with your name facing the person receiving it. Develop a system so you don't have to think about what you're doing. Your business card should always be clean and crisp -- it is the last impression you'll make.

If you don't have a business card with you, think of it as a good opportunity to make contact again by sending one later. If you can get your name into someone's Rolodex, you're in good shape. How to reach: Etiquette Consulting Services, (440) 442-3039 or jcholloway@aol.com

Kim Palmer (kpalmer@sbnnet.com) is managing editor of SBN Magazine.

Friday, 28 June 2002 06:29

Medicine woman

In the expensive world of drug discovery and development, consolidation and creative strategy are keeping companies like Ricerca afloat.

Originally, Ricerca was a contract specialty chemical company, a manufacturer of other company's product. Enter Dr. Prabhavathi Fernandez, a scientist and business woman whose job it was to covert Ricerca from a company that made things for other companies to a drug discovery and development company with its own commercialized product.

Fernandez came to Ricerca in October 2000 with two decades of experience in drug discovery and development acquired during her career at three major pharmaceutical companies. But even with her background, she had her work cut out for her.

As a contract service business, Ricerca didn't have the entrepreneurial experience it would need to bring its own product to commercialization. Fernandez's job was to change the focus of the company and that of its more than 200 employees, to transform "an Old World corporate culture into an entrepreneurial biotech company."

Fernandez established a complete overhaul of the promotion process, replacing the senior management reviews process with a peer review promotions committee, where staff forwards petitions for promotions.

Another challenge was finding the most experienced people and convincing them to believe in Ricerca's potential and move to Cleveland. So an employee stock option plan was instituted, as well as a plan that pays employees a percentage of all revenue from their inventions.

With the framework in place, Fernandez went in search of partnerships with major drug firms and now offers preclinical drug development services to a number of global biotech and pharmaceutical companies.

The success of biotech and drug development is important to Fernandez both on a personal and business level. She says her "end goal and that of Ricerca, as well, is to help mankind." How to reach: Ricerca, (440) 357-3300 or www.ricerca.com

Monday, 29 April 2002 20:00

Where the heck is our biotech?

 According to Biotechnology Industry Organization (BIO), there are 1,379 biotechnology companies in the United States, and the industry has doubled in size since 1993.

Of those biotech companies, the Midwest has 68. That may not sound so bad, until you compare it to the fact that North Carolina alone has 86 biotech firms and San Diego and San Francisco have 120 and 176 respectively.

There are, however, biotech success stories. One of the best examples is Athersys Inc. and its president and CEO, Gil Van Bokkelen. Van Bokkelen is everything Northeast Ohio is looking for -- he's a scientist with an MBA, he's a Cleveland transplant, his company is based on solid and commercially viable science and he's a passionate advocate for biotech success in Cleveland.

According to a recent poll, 5,886 people in the Cleveland-Akron area are employed in the drug and medical device industry, constituting only four-tenths of 1 percent of overall employment. But if Van Bokkelen has his way, those numbers will rise.

He takes a "Why wouldn't people want to move to Cleveland?" attitude and is a staunch supporter of attracting, funding and mentoring entrepreneurs from all over the country.

SBN asked Van Bokkelen about the future of biotech and what Cleveland should do to attract companies.

A lot of time and effort have been spent mapping the genome and understanding gene expression. What is the next step in research and/or development?

(Last) year was a significant transition year for the industry in many respects. With the completion of the initial phase of the human genome project last year, attention has turned squarely toward the next phase -- characterization of the biological role of specific proteins.

Now that the genome has been mapped, we have a general idea of how the human genetic landscape is organized but we still are a long way off from understanding the specific role of all the proteins and how they impact human growth and development or disease. It will take at least several more years and hundreds of millions of dollars to get to the point where we have cloned and isolated every individual gene.

As proteins are being characterized and new drug targets are identified, the next phase will become the focal point, which is using that information to develop new, safer, more effective therapeutics -- pharmaceuticals, proteins, therapeutic antibodies. As a result, those companies that develop more efficient and cost-effective ways to develop safer, more effective drugs will have an enormous advantage.

Every major city wants to develop biotech as its next new industry. In your opinion, what are Cleveland's prospects for developing a significant biotech industry?

I think the prospects for future success in this region are pretty solid, provided we have a good game plan and then we invest for success. We also need to think and implement solutions that are long term -- we can't simply fix this problem in a year or two.

By "we" I mean the city, county, state and various organizations, including prominent institutions in the business community that would fundamentally benefit from accelerated economic growth and development in the region.

Specifically, I think we need to do five or six things to improve the regional economic infrastructure. First, and most importantly, we need to do a much better job of attracting entrepreneurial talent, as well as mentoring and supporting the aspiring entrepreneurs that are already here. We cannot effectively grow our future economic infrastructure without competing nationally for talent, capital and new technologies.

In order to do a much better job of attracting entrepreneurial talent, we need to do something bold and visionary. For example, I suggest that we hold a national annual business plan competition, focusing on specific technology areas that we feel are high-impact, high-growth opportunities for the region. The winners of the competition could be provided with access to facilities for free for up to two years.

Second, each entrepreneurial team would be given access to a formalized network of mentoring entrepreneurs and executives, made up of experienced professionals in a variety of disciplines.

Third, the winning entrepreneurial companies could also be given access to professional services that are provided pro bono or at a substantial discount from the world-class professional service firms located here in Cleveland, like the leading law firms, consulting firms, accounting firms. Many firms will do this for early stage, high-growth potential clients anyway, as part of their client development programs. It makes sense, since they are building their client base of the future.

Fourth, we could provide access to a regional network of venture capital firms.

Fifth, we should create broad-based internship programs at each of the region's academic institutions, and then provide access to these entrepreneurial companies.

Finally, I think we should create economic incentives for these companies to stay in Ohio long term, and for them to hire students out of Ohio's academic institutions. If we do these things, I think we can accelerate economic growth.

There has been a lot of talk about facilitating technology transfer, but we as a city are still behind others in bringing our academic research and industry together. Any suggestions on how to get the two to work together?

The efficient transfer of technology out of academic research institutions into the commercial sector is critically important for our long-term economic growth and development. Historically, this region has done a poor job of technology transfer, and we need to change that.

We can't fix it from the outside -- improving the process is really the primary responsibility of the regional academic and research institutions that receive many millions of dollars of research funding from the federal government each year. Ultimately, those dollars come from taxpayers, and we as taxpayers expect that institutions that receive those dollars will accept the responsibility that goes with it.

This isn't just a nice idea -- it's actually a federally mandated law, and is critical for our regional and national economic growth and development.

Improving technology transfer, however, is not enough, in my opinion, to fuel our regional economic growth and development. For every $30 million to $50 million dollars of research funding, we may see one new company formed, and that only after several years.

So to form 10 new companies a year, we need to be spending $300 million to $500 million in research funding each year, far more than we are now. I would suggest that it is far more cost-effective to attract entrepreneurs here at the earliest stages, because they will stay here more often than not because of the great quality of life in Northeast Ohio.

We need to compete nationally and globally for entrepreneurial talent and ideas, and then those companies will attract investment dollars on a national and international basis. That will help build our economic foundation for the future. How to reach: Athersys Inc., (216) 431-9900 or www.athersys.com; Biotechnology Industry Organization, www.bio.org

Friday, 26 April 2002 04:31

Competitive compensation

Everything is relative, but how relative your business’ compensation is could have a profound effect on your ability to attract and retain employees.

Recently, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) published its National Compensation Survey, allowing employers and employees to see just how relative their wages are.

The survey questioned businesses with 50 workers or more and included goods and service industries as well as state and local governments. It included 480 occupations from the Cleveland-Akron area and questioned business in Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage and Summit counties. Data was collected between June 2000 and July 2001.

According to the survey, the average wage of an employee in the Cleveland-Akron metropolitan area was $17.38 an hour; white-collar workers averaged slightly more than $20 an hour, while blue-collar workers, who represent 30 percent of the work force, averaged $15 an hour.

Ronald M. Gyzicki, regional economist for the office of Economic Analysis and Information, says these numbers are important to businesses.

"Data provided by the survey can be used by businesses for establishing pay plans, making decisions concerning plant relocation and in collective bargaining negotiations," he says.

Survey results are broken out by occupation and include differences in union vs. nonunion positions. In the Cleveland-Akron area, "union workers in blue collar jobs averaged $17.91 per hour, while their nonunion counterparts make $12.91."

The survey also points out regional wages differences.

Cleveland beat out Cincinnati-Hamilton, Dayton-Springfield and Youngstown-Warren by as much as $1 an hour on average. Youngstown came in at $16.17 on average for all occupations ,while its blue-collar wages were, on average, the highest of the five regional areas at $17.15.

Employers can review pay scales for a wide variety of occupations in more than 100 regions across the country.

"With this information, companies can target where they want to be," says Gyzicki.

Among the other information available from the BLS are consumer price index, producer price index, consumer expenditure survey and census of fatal occupation injuries. Local and regional reports are available from the Chicago regional office at www.bis.gov/ro5home.htm and on the Midwest economy at www.bls.gov/ro5econ.htm.

The best thing about the survey, according to Gyzicki, is that "a lot of companies pay thousands for wage surveys. Our material is free."

How to reach: Bureau of Labor Statistics, (312) 353-1880 or www.bls.gov

Bureau of Labor Statistics

Thursday, 28 March 2002 08:51

Country clubbed

As if it didn't already cost enough to play golf, the Ohio Department of Taxation is making sure it gets its cut of fees, which may mean higher dues for some club members and payment of back taxes for others.

Recently, the IRS caught up with some regional country clubs, claiming they neglected to pay the appropriate sales tax due on initiation fees.

"The country clubs didn't collect tax, and they got audited," says Charles M. Steines, an attorney at Jones Day in the tax group.

In the case, Akron Mgt. Corp. v. Zaino (2002), the Ohio Supreme Court decided that Firestone, Quail Hollow, Barrington and Glenmoor country clubs were required to pay sales tax on an "initiation deposit," which the clubs called an "interest-free and refundable thirty-year loan."

The clubs in question set up a refundable deposit and claimed it was a loan, not a tangible good or service subject to tax. According to the Ohio Revised Code chapter 5739, a tax is required on each retail sale made in Ohio, including all transactions in which a membership is granted, maintained or renewed. In Ohio, most clubs already pay sales tax on initiation fees, but those fees are nonrefundable.

"It has been the law for 10 years, but this particular case raised the issue of whether or not loan and equity contributions are subject to tax because that is not crystal clear," says Steines. "In this case, the court said we don't care what you call it, you have to pay tax."

The end result is that the country clubs are liable for the back tax and most likely will pass that on to their members.

The 5 to 7 percent sales tax will be an unwelcome addition to an already expensive initiation fee for most club members. Not all states require sales tax to be paid for country club initiation fees, but "Ohio expanded the scope of sales tax for a lot more services," Steines says.

"Today, members of clubs are more mobile and it becomes important to get out of your arrangement to join a club in another city."

This case, in addition to the federal government's attempts to chip away at entertainment deductions, promises only to make it harder for individuals and business to afford club memberships.

How to reach: Jones Day Reavis Pogue, (216) 568-7211