Cleveland (5895)

Monday, 22 July 2002 09:47

A trust for all times

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It’s the oldest and second largest community foundation in the country. Created in 1914 through the vision of Cleveland attorney and banker Frederick Harris Goff, the Cleveland Foundation has worked to improve the lives of Greater Cleveland’s residents for 85 years.

In its early days, the foundation’s landmark studies on public schools, parks and recreation and the criminal justice system led to enormous changes. From the creation of the Emerald Necklace, Cleveland’s Metroparks system, to the renovation of Playhouse Square and Severance Hall, there are few projects in Greater Cleveland that aren’t in some way touched by this organization.

The foundation boasts assets of $1.5 billion, and last year doled out more than $47 million. The man appointed to oversee that awesome task as president and executive director is Steven A. Minter.

Minter has a background in public administration, having worked as the commissioner of public welfare for Massachusetts and as Undersecretary of the U.S. Department of Education. He has been director of the Cleveland Foundation since 1984.

He states the foundation’s role simply: “We help donors carry out their dreams, of what they wanted to do.” SBN sat down with Minter to learn the philosophy behind corporate giving.

What role has the Cleveland Foundation played in the make-up of this city?

We were the first community foundation in the United States, established in 1914. The foundation’s mission was to help improve the quality of life for all the citizens of Cleveland.

It was set up in such a way that it would be administered by a local bank, then the Cleveland Trust Co. (later Ameritrust), and it would place emphasis on encouraging persons of considerable means and small means to give something back to the community from which they made their living. Donors could specify how they would like their dollars used in perpetuity.

The foundation has been involved in schools, neighborhoods, housing and economic development. I think we’ve probably been involved in almost anything you can ask about that has gone on in Cleveland — providing some support, or we were involved in early start-up stages.

How important is the role of business to the process?

There’s a very large foundation community in Cleveland, and when you then add in the corporate sector, this is a community that has been very generous in terms of corporate giving. It makes for a lot of difference. In almost everything that goes on in this community, you find a mix of foundation funds and corporate funds and public funds.

Most foundations are giving from endowments and most companies have gone through a process and decided to allocate some portion of their income toward a corporate contributions program. A few of those companies have established foundations.

Cleveland is a partnership community. Public/private partnerships are something this community is quite distinguished about, even across the United States. Groups come here constantly from other cities to try to understand how the Cleveland turnaround occurred.

What is interesting, and a lot of fun these days, is to watch a lot of the smaller companies that don’t have 500-plus employees gradually beginning to pick up a share and do some very creative things. There are some small companies that are establishing school/business partnerships and working with the Cleveland Public Schools.

And there are other small companies which are making contributions to help sponsor a night at the opera and other activities. That’s really where our future lies, the emerging companies.

What role will the Cleveland Foundation play in the future?

We’re going through a period in the nation’s history where we’re going to see over the next 25 to 30 years probably what will be the largest transfer of wealth from one generation to the next — estimated to be in excess of $25 trillion. (We) know that there are a lot of people who today are accumulating wealth in amounts that they never expected that they would have.

Even after making provision for their heirs, there’s money left over and they’d rather not give it to the government. So institutions, whether it is the universities the hospitals, the Cleveland Foundation or others are trying to tell the story: That here is an opportunity in our case for you to help the community forever by making a planned gift in your will.

What we can say with some degree of confidence is that the Cleveland Foundation is going to be here. It’s permanent. It cannot be picked up and moved someplace else. Nobody can come in and acquire the Cleveland Foundation. It’s really the people’s foundation.

How to reach: The Cleveland Foundation, (216) 861-3810

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor at SBN.

Monday, 22 July 2002 09:46

What matters most

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Running a business is like suddenly finding yourself face-to-snout with a snarling dog.

You have several choices: Turn and run, stand still and hope the dog leaves, carefully approach the beast in a friendly manner or snarl back. Your choice reveals something about how you view the world.

According to Hyrum W. Smith, of The Franklin Covey Co., everyone views the world through a filter, a belief window, a combination of experiences and attitudes, and it colors every decision made. Those beliefs also create rules, which govern actions. Choose the wrong action because of an inaccurate belief and the consequences could be painful.

In the case of the aforementioned dog, those actions affect your physical well being. In business, it could ultimately mean the survival — or demise — of your enterprise.

Smith devised the Franklin Reality Model, a system for analyzing beliefs and, if need be, for changing them. Case is point is something that happened in his company. Executives believed that cutting costs “no matter what” would ultimately benefit the company.

The result was the addition of a bad receptionist. Realizing the negative impact she had on the business, the company got rid of the employee and adopted a new belief: “We want the best reputation in the world.”

The basic human needs

How do you know if beliefs are detrimental? Measure them against the four basic human needs: survival, love, variety and the need to feel value. Every action should, over time, support one of those needs.

If one of those human needs is not being met, Smith says, all our energy is turned to the area. That is where addiction come from, he says. Smith defines addiction as “compulsive behavior with short-term benefits and long-term destruction.”

“If my grandpa missed a train, no big deal,” Smith says. “He’d wait 24 hours. If my dad missed a plane, he’d wait five hours. No big deal. If I miss a section of a revolving door, I go berserk.”

The belief window Smith had to learn to change deals with time.

Seven natural laws

The first step to understanding behavior is to recognize the beliefs that influences it. To do that, Smith developed the seven natural laws:

1. If the results of your behavior does not meet your needs, there is an incorrect principle on your belief window.

2. Results take time to measure.

3. Growth is the process of changing principles in your belief window.

4. Addiction is the result of deep and unmet needs.

5. If your self worth is dependent on anything external, you are in big trouble.

6. When the results of your behavior do meet your needs over time, you experience inner peace.

7. The mind naturally seeks harmony when presented with two opposing principles.

Six steps to follow

You’ve done a little self-reflection and realize that you have a few beliefs that need adjustment. Smith suggests applying the following rules:

1. Identify the behavior patterns.

2. Identify possible principles driving the behavior. (Ask why.)

3. Predict future behavior based on those principles.

4. Identify alternative principles.

5. Predict future behavior based on the new principle.

6. Compare steps three and five.

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor at SBN.

Monday, 22 July 2002 09:46

The Rockefeller legacy

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Cleveland first met John D. Rockefeller when he was a 16-year-old youth who spent his days scouring the lumber mills and iron foundries along the banks of the Cuyahoga River looking for work.

After more than a month of searching, he finally landed a job at Hewitt and Tuttle in September 1855, earning roughly $500 a year.

Forty-five years later, at the turn of the century, Rockefeller was one of the wealthiest men in the world. He was also one of America’s most despised business leaders, due largely to the efforts of muckraking journalists like Ida Tarbell. In newspaper columns, Rockfeller’s Standard Oil Co. was often painted as a monopolistic octopus that controlled 90 percent of the U.S. market and put honest people out of work.

“When Rockefeller was accused of hurting other people and driving them out of business, he would argue he was simply offering them a fair deal for their property,” explains John J. Grabowski, director of research at the Western Reserve Historical Society. “What he did by buying them out was avoid mass confusion and stabilize the market.”

No matter how one views Rockefeller’s business practices, there is no question the success of Standard Oil, headquartered at the time near Public Square, had a profound impact on Cleveland. By the time Rockefeller moved to New York in 1885, Cleveland had been transformed from a merchant village to a roaring industrial hub filled with steel, shipping and chemical companies.

Meanwhile, Rockefeller donated millions to local charities and invested in other businesses that cropped up across the city. He became a one-man engine of change and the history of Rockefeller and the history of Cleveland are tightly intertwined.

“We’re talking about the person who became the richest man in the world,” says Darwin H. Stapleton, director of the Rockefeller Archive in Sleepy Hollow, N.Y. “Almost everything he did, over time anyway, affected Cleveland one way or another.”

After spending a few years at Hewitt and Tuttle in the 1850s, a young Rockefeller opened his own commissions house and generated a small fortune during the Civil War.

Then he turned his full attention toward oil, a risky and unpredictable industry.

“There was heavy pollution of the river, and oil refineries went up in flames one after another,” says Grabowski. “The oil fields in Pennsylvania were either boom or bust in terms of price. The bottom would fall out because of overproduction, then they’d cut back and the price would go up.”

Rockefeller bought into a small oil company, Andrews, Clark & Co., in 1863. Seven years later, and firmly under his control, it was reorganized as the Standard Oil Co. Rockefeller quickly captured the bulk of the industry through aggressive acquisitions of smaller companies, a move that finally started to balance the unpredictable market. At the same time, he implemented business practices that were previously unheard of in the wildcat oil industry.

Grabowski tells a well-known tale of Rockefeller’s visit to the factory where his workers made barrels to ship kerosene. When Rockefeller noticed the employees used 22 drops of solder to seal each barrel, he asked if they could use 20 instead. When the new barrels leaked, he instructed them to use 21 drops of solder. Those barrels didn’t leak, and Rockefeller saved one drop of solder on every barrel made.

“That was the type of mentality that drove him,” says Grabowski. “I think what epitomizes the late 19th century is rationalization, order and scientific management of business. The thing Rockefeller brought to Cleveland, and to the industry in general, was a rationality and focus.”

Once Rockefeller established his company as an industry giant, other businesses that supplied — and relied on — oil flocked to Cleveland in the hopes of cashing in on Standard Oil’s market dominance.

In 1866, Eugene Grasselli, the owner of Cincinnati’s Grasselli Chemical Co. (known then as E. Grasselli & Son), built a plant on Independence Road near Broadway to manufacture the sulfuric acid needed by the city’s growing number of oil refineries.

“The presence of chemical manufacturing in Cleveland then makes it a lot easier for Glidden and Sherwin-Williams to produce paints,” says Grabowski. “There’s all these little connections that come out of Standard Oil.”

In 1873, Sherwin-Williams bought Standard Oil’s cooperage building on Canal Street for its first factory, where it manufactured paints, paste, oil colors and putty. Although Sherwin-Williams executives closed the 100-year-old Canal plant in 1982, the company still has 3,200 of its approximately 18,000 employees in the state of Ohio, primarily in Cleveland. Since 1930, its corporate offices have been located at the Midland Building on Prospect, which was once the Cleveland headquarters for Standard Oil.

Forest City Paint & Varnish came to Cleveland in 1875 before later becoming Glidden Varnish Co. and then Glidden Co. The company operated in Cleveland as an independent company until the 1960s, when it merged with Smith Corona Machines. Glidden’s aging Cleveland paint plant was phased out in 1976.

Many of the links between Standard Oil and other companies, however, were not the result of dependence upon oil. Instead, they were created by Rockefeller’s deep pockets. He invested in the Cleveland Arcade Co., Otis and Iron Steel (later absorbed into U.S. Steel), Euclid Avenue Bank and the Merchants National Bank.

Rockefeller also loaned money to Marcus Hanna, an iron and coal merchant who bought the Euclid Avenue Opera House in 1870 before forming Cleveland City Railway Co. in the 1880s.

“It was a time when, often for the really big money, you turned to another person instead of the banks,” says Stapleton. “In many ways, JDR was acting as a private banker by the 1880s. He was loaning out big chunks of money.”

Rockefeller’s impact on Cleveland stretches beyond the business world. As his wealth grew from his success in Cleveland, the amount he invested back into the community increased as well.

As a young businessman in 1856, he donated $19 to local charities. That figure grew to $250,000 by 1887, and $1.3 million by 1892. The lengthy list of organizations that benefited from his generosity often included ones in which Rockefeller himself was a member, such as the Euclid Avenue Baptist Church, Western Reserve Historical Society, Early Settlers Association of the Western Reserve and the YMCA.

“The demands on him for charity were extraordinary,” says Grabowski. “As he got wealthier and wealthier, thousands of letters came in saying, ‘I need help.’ He hired someone to handle that, almost like a giving department . . . What’s interesting is this was in a tax-free world, where there was no benefit to giving your money away.

“It’s often said that Rockefeller and (Andrew) Carnegie competed with each other to see who could be the most benevolent.”

Other benefactors of Rockefeller’s charitable donations included the Children’s Aid Society, Bethel Union, Women’s Christian Temperance Union and the Dorcas Home for invalids and Children’s Fresh Air Camp. Later, Rockefeller donated $850,000 worth of land for use as public parks. He established the Rockefeller Institute for Medical Research in 1901, the General Education Board in 1902 and the Rockefeller Foundation in 1913.

Even after such a lengthy relationship with Cleveland, Rockefeller’s last days in Cleveland set off a bitter tax dispute with county officials.

During the winter of 1913-1914, Rockefeller lived at his Forest Hills estate on the East Side of Cleveland, tending to his ailing wife Cettie. Although he had paid taxes as an official resident of New York since the 1880s, he could not leave Cleveland by the Feb. 3 tax deadline because of his wife’s frail condition, a move that triggered rabid pursuit by county tax collectors.

“To Cuyahoga County, this obviously looked like manna from heaven,” says Grabowski. “Here’s the world’s richest man and he’s suddenly liable for personal property taxes. They went after him with a vengeance. When Cettie died, he left and he never returned after that, except to be buried.”

The dogged persistence with which county officials trailed Rockefeller during the tax dispute, which was ruled illegal by the courts, seemed to taint Rockefeller’s relationship with Cleveland. In Ron Chernow’s voluminous biography “Titan,” he cites an archived interview in which Rockefeller compared his new home of New York to his hometown: “New York has always treated me more fairly than Cleveland, much more.”

But he also admitted that despite this tainted mark, Cleveland offered one business benefit few other commerce centers at the time could — access to different transportation networks. For a business that moved its product in large volume, Rockefeller found Cleveland strategically located. He often played the railways against the waterways, with a low transportation price his valuable prize.

Stapleton does not buy into the fact that Rockefeller ever really deserted Cleveland.

“The whole idea that he somehow abandons Cleveland is nutty from my perspective because he had a love for it,” says Stapleton. “It’s not true that he ever abandoned Cleveland, just that his wealth became too large for the city.”

As Stapleton points out, the tax dispute did not entirely sever Rockefeller’s ties to the city. In 1918, he started the Laura Spelman Rockefeller Foundation in honor of his wife, while art owned by his son, John D. Rockefeller Jr., resides at the Cleveland Museum of Art to this day.

But the truest statement of the millionaire’s love for Cleveland can be found along Euclid Avenue. Inside the gates of Lake View cemetery, among rows of grave markers, is an enormous Egyptian obelisk that towers above them all. Engraved on its base is one word: Rockefeller.

How to reach: The Western Reserve Historical Society, (216) 721-5722; Rockefeller Archive, (914) 366-6308

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:46

The business of family

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It wasn’t the kind of cutthroat, bare-knuckled advice business owners often hear from a seminar presenter. But then, Stephen Covey is no ordinary speaker.

With a soft, delicate cadence more reminiscent of a therapist than a best-selling business guru, Covey opens his presentation with, “Good morning. Why don’t you give your spouse a hug and a kiss? Now, why don’t you tell them how much you love them?”

Covey introduced his newest empowering philosophy, The 7 Habits of Highly Effective Families, to a collection of business owners at the national Ernst & Young Entrepreneur Of The Year Institute in Palm Desert, Calif. Too many business owners face the same problem, Covey says. They’ve reached the top of the ladder of success, only to find it’s been leaning against the wrong wall.

Studies show that, when asked, 75 percent of people say the most important role they will have is that of parent. And 80 percent respond that the most influential person in their life is a family member. So why is it that business owners often ignore their families in favor of their businesses?

“No other success can compensate for failure in the home,” Covey says. “You are not a product of your conditions, you are a product of your choices.”

Even knowing the role of family and putting it first isn’t good enough, explains Covey. Families, like everything else, require work. Like a plane which is headed in the right general direction but gets pushed slightly off course by wayward air currents, families are off track 90 percent of the time.

The important thing is having a sense of destination and knowing what the track looks like, and getting to the proper destination, he says.

Included in Covey’s seven habits are three important things a family can do to help it become highly effective.

Create a mission statement

Many businesses, whether they abide by them or not, have mission statements hanging on their walls.

“Developing a family mission statement will be the single most important and far-reaching leadership activity you do,” Covey says.

Every member should participate in the creation of a family mission statement, Covey says. Once the wording is agreed upon, a mission statement needs to be more than a piece of paper that hangs on the refrigerator door. Covey suggests families identify ways to remind members about the goal.

Date your family

The family needs to have dates. Before you became a husband and a wife, you were boyfriend and girlfriend. You developed a closeness that led to marriage. Those same ties need to be strengthened with each other and with other members of the family.

“One-on-ones are where most of the real work of the family is done. This is where there is the deepest nurturing of the heart and soul,” Covey says.

Hold a family counsel

By talking to your family, you begin to understand.

“I think the deepest hunger of the human soul is to be recognized, valued and appreciated and understood,” Covey says. “When you acknowledge others and adapt yourself in an effort to reach them, in effect you say to them, ‘You are a person of worth. You have intrinsic merit, and I’m not comparing you with anyone. You are precious. And if you allow me into your world, I know that I’m on sacred ground.’”

It’s important to understand, not just hear, he says. The key is empathic listening. Covey defines five types of listening. The first four are from one’s own frame of reference, the final from the other’s frame of reference:

1. Ignoring — making no effort to listen;

2. Pretend listening — appearing to listen;

3. Selective listening — hearing what interests you;

4. Attentive listening — comparing what you hear to your own experiences;

5. Empathic listening — listening and responding with both the heart and the mind to understand words, intent and feelings.

Becoming an effective family takes work. It means being proactive, Covey says.

“The most important work we will ever do is in the four walls of our home.”

For more information about Stephen R. Covey’s The 7 Habits of Highly Effective Families, call (800) 372-6839.

Daniel G. Jacobs (djacobs@sbnnet.com) is senior editor at SBN.

Monday, 22 July 2002 09:46

Roaring into the new millennium

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In the 1920s and ’30s, the Ford Motor Co. was king. It had five times the market share of rival General Motors.

“Ford was the Intel of that industry,” says Harry Dent Jr., author of The Roaring 2000s.

But it wasn’t long before that changed. Why? GM understood the people and the market. But more important, GM won the race for innovation. That allowed it to pass Ford and snare a greater share of the market.

So how important was it to win that race for innovation? Important enough that three straight decades (the 1970s, ’80s and ’90s) of poor management at GM couldn’t undo what had already been done, Dent says, adding, “Could anybody have run it worse during those years?”

The same race to innovate is taking place today in other industries, and the winners will ensure their future business survival.

“The Internet is to the new economy what the assembly line was to the old economy,” Dent says.

The business that becomes the first in its industry to master the new paradigm will become the leader.

Dent cites former Entrepreneur Of The Year winner Michael Dell, founder of Dell Computers, as an example of this new wave. He was the first to sell his product directly to the consumer, and although there are now dozens of imitators, Dell owns the lion’s share of the market.

But the true change isn’t in the Internet itself. The Internet is just the means to facilitate the changing way of business, Dent says. The paradigm shift is a network model of business. It’s a drastic difference from conventional theories taught in business schools, such as the top-down model.

“Nothing in nature runs this way,” Dent says.

The Internet is the epitome of the network principle.

“Why does it grow so fast?” Dent asks. “Because there’s no management to slow it down. It’s run by the end users.”

Financial markets are the same way. Investors, Dent says, drive the markets.

“Every morning, some poor guy runs up, rings the bell and then gets the hell out of the way.”

Today’s business revolution is in the organization. Technology is just the tool. To become a leader within your industry, Dent says you must first adopt four principles.

Develop a strategic focus. The first step is to figure out what you do best. Give your employees focus, train them to do their jobs and then let them go. To achieve this, business owners should ask themselves: “What role do we need to play in the market?”

Once you’ve decided on your area of expertise, stick exclusively to it. Outsource or partner with another company for areas that are not your specialty.

Organize behind your customers and front lines. Business owners need to start with the question, “Why can’t this be done on the front line?”

The front lines of your organization can react faster and add more value than by letting things filter down the food chain. Create a team with cross-functional skills. If you can’t automate it, outsource it.

Make every individual or team a real business. Now that you’ve created cross-functional teams, they need to be held accountable for their roles. Judge every team on its own profit and loss, Dent says. But in applying culpability, you must also allow your employees the freedom to work unencumbered.

Link everyone together on a real-time information system. Now that the human organization is working, it’s time to make an investment in technology. Start by linking the system that’s been created to automation. The company that is successful will be able to solve its clients’ problems quickly and effectively, Dent says.

“Sell a total solution. That’s what your customer wants.”

Daniel G. Jacobs is senior editor of SBN.

Monday, 22 July 2002 09:46

Newsclips

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Dave Moore, game over

Crystal Mortgage Co.’s nearly two year battle with the city of Amherst came to a close rather unremarkably as company CEO David Moore agreed to drop his civil suit against officials there. After spending $100,000 to fight a relatively inconsequential tax dispute with the city and running a campaign that successfully ousted city Law Director Allan Anderson from office, Moore agreed to call off the dogs in exchange for a simple public apology. With it, he proved that the pen is mightier than the sword.

Acquiring mind strikes again

Terrence Profughi doesn’t know the meaning of the word standstill. The acquiring mind CEO of Hi TechMetal Group (profiled in SBN’s August 1998 issue) purchased two more companies last month: IMT, of South Carolina, and Fusion Engineering Co., of Columbus. HTG is comprised of 22 strategic business units that have been started or acquired over the past 15 years. Under Profughi’s leadership, HTG has grown from $1.2 million in sales and 38 employees in 1984 to $55 million and 700 employees in 1999.

Knowledge is power

In a sign that Cleveland area businesses take software, hardware and the Internet seriously, six local organizations were the recipients of the first annual Cleveland-Area Knowledge Industry awards in November. TMW Systems Inc., PlanSoft Corp., Cleveland Live, Flashline.com Inc., Perritech, Lorain County Community College and Cuyahoga Community College were honored by the Northeast Ohio Software Association for their commitments to the emerging knowledge industry. For more information, visit NEOSA’s Web site at www.neosa.org.

Going rates

Ever wondered just how your company’s salaries stack up in comparison to the average? Do you get the employees you want in this tight labor market or do prospects choose your competitor’s firm over yours? Two Web sites let you benchmark your employees’ paycheck against the going rate. Baker, Thomsen Associates (www.SalariesReview.com/freedata) and the ERI Economic Research Institute (www.erieri.com/doltrends) offer insight into competitive pay rates for more than 3,000 jobs defined by city, state, region, experience and job responsibilities. Be prepared for a surprise.

Working the niche

QuickChange, the 10-minute oil change chain Tim LaGanke has built over the past four years, grew by 50 percent last year, with similar growth anticipated this year. LaGanke, who formerly co-owned Lube Stop chain, plans to open another six oil-change shops by the end of 2000.

LaGanke targets secondary markets and installs his patented modular 10-minute oil change buildings on affordable, often unusable lots about the size of four parking spaces. In addition to 12 QuickChange stores in the Cleveland market, there are 18 others around the country, which are owned and operated by private investors.

Ameritech New Media strikes again

Northeast Ohio cable companies should be afraid, very afraid. After popping up to do battle in 11 local communities, Ameritech New Media — the nation’s largest competitive cable company — is introducing a new fiber optic service in Garfield Heights. Boasting a “razor sharp picture,” 99.9 percent reliability, an interactive television listings guide and 24-hour customer-care line, Ameritech New Media may quickly catch the attention of other city leaders hoping to breath a little life into their communities’ dusty cable packages.

Not fading away

For anyone still thinking the Linux operating system is going to be a passing fad, there are solid new numbers showing its popularity is on the rise. In a national survey by California-based RHIConsulting, 57 percent of chief information officers polled believe use of the Linux system will increase over the next three years. Three percent projected a decline. The survey polled 1,400 CIOs from a stratified random sample of U.S. companies with more than 100 employees.

Export growth

Ohio companies expect a dramatic increase in exports over the next five years, according to a joint study conducted by Xavier University and Cleveland State University, and sponsored by the U.S. Department of Commerce. Of the business owners who responded, about two-thirds saw a substantial increase in exports over the past five years. Almost three-quarters expect an export volume increase of more than 50 percent.

The forecast is good news because it seems to be just the opposite of the national trend, according to Dr. William J. Lundstrom, Professor of Marketing at CSU’s College of Business and a co-author of the report.

The U.S. has a growing trade deficit caused by the purchase of more goods and services imported to the U.S. than U.S.-made goods and services exported to other countries,” Lundstrom told Global Vision, a publication of the World Trade Center Cleveland. “The situation worsened rather than improved over the past several years.”

For more information on the report, visit www.wtccleveland.org.

Join the revolution

Small Business Survival Committee — a Washington D.C.-based nonprofit organization geared toward protecting the small business owner — released a disturbing report on the local telephone industry and its unfair treatment of small companies even after the Telcom Act of 1996.

“A thorough study of the current state of local telephone service leads to a simple conclusion: Even after the promises of the Telecom Act of 1996, the local telephone industry remains one of the most anti-competitive industries in America,” says SBSC Chair Karen Kerrigan. “With repeated attempts to gain access to local telephone customers being fought by Bell monopolies in practically every state, markets remain closed or difficult to penetrate.”

The SBSC is trying to convince lawmakers that small businesses need more local telecommunication choices to compete against large corporations, since upgrades promised by providers, the report points out, have gone largely unfulfilled. To obtain a copy of the SBSC report on local phone competition, click on “What’s New” at www.sbsc.org.

Lamson & Sessions on the defense

A U.S. District Court judge in Illinois in November denied Cleveland-based Lamson & Sessions’ request to set aside a jury’s decision to award Illinois-based Intermatic $12.5 million in damages in resolution of a patent infringement case. The court also ordered Lamson & Sessions to pay $1.5 million in prejudgment interest to Intermatic. The ruling came two months after a jury’s ruling that Lamson & Sessions infringed on Intermatic’s patent for an outdoor electrical outlet cover.

Passing the bell to generation three

Jess A. Bell Jr., grandson of founder Jesse G. Bell, has been named chairman and CEO of Bonne Bell Inc., a Lakewood-based cosmetics and beauty aids manufacturer. Bell takes over from his father, Jess A. Bell, 74, who assumes the post of vice chairman of the 72-year old company.

“We are now officially in the third generation,” says Bell, whose innovative use of senior workers was profiled in SBN’s April 1999 issue. “Very few private family businesses make it to the third generation.”

Hospitals get creative

Nine out of 10 of the 185 hospitals and other health care organizations surveyed by HR consultants William M. Mercer Inc. reported turnover among RNs was a problem. Organizations exceeding revenue of $500 million rated the problem as significant. Not terribly surprising, given today’s tight labor market. The shortage has forced health care organizations to sweeten the pot to keep RNs on the payroll.

Increasing base pay was the most common approach and rated as very or somewhat effective by 96 percent of respondents. “Pay raises are often excellent as a short-term solutions, but may be insufficient as a long-term approach unless employers also make other changes to the work,” says Mercer pay expert Jose Paogoaga.

Continuing education was rated as very effective by 30 percent of health care organizations, while flexible scheduling and shifts was at 28 percent. Although it looks like showing employees the money may be the most dependable option, Pagoda says it is an issue that can’t be avoided when an RN shortage means longer response times, a reduced capacity to treat patient or even errors.

“At some point, these negative outcomes will have an effect on a hospital’s bottom line,” he says. “It costs an organization one-and-half to two times annual salary to find and train a replacement for an employee who leaves.”

Do-it-yourself business valuations

You want to know the value of your business, but don’t want to hire a high-priced business consultant to do the work for you. Companies are cropping up with products allowing entrepreneurs to determine a value for their business in the comfort of their own homes. Colorado-based Innovative Professional Software Inc. offers a program to value your business for a mere $200. VALUware, a different business valuation program, is for sale at www.bizbookssoftware.com for $330. The only question seems to be whether any of these means of business valuation would hold water with the IRS.

Health care compensation blues

CEO pay packages at the nation’s largest publicly owned, for-profit health care companies remained flat in 1998, reflecting Wall Street’s continued skepticism of an industry troubled by a stunning drop in market value, according to a new study by William M. Mercer Inc.

From fiscal year 1997 to 1998, the median increase in total cash compensation, which includes base pay and bonuses, among health care CEOs was 5 percent, due largely to a median salary increase of 9 percent. However, total CEO pay packages at the largest health care companies declined — due mainly to poor stock performance — but nevertheless a rare phenomenon in the world of executive compensation.

A lesson in self-promotion

A survey at Chicago’s O’Hare and Dallas/Ft. Worth International airports found 72 percent of business travelers were carrying at least one promotional product imprinted with a company’s name, logo or message. Even more incredible was the fact that 77 percent of those polled said they used the promotional product once a day. Pens and pencils topped the list of favorites, followed by clothing. But, before you go rushing out to buy those fleece pullovers bearing your company’s logo, consider that the Promotional Products Association International conducted the survey.

Customer cloning?

Ever wanted to find a batch of new clients just like the ones you already have? InfoUSA.com, a widely popular business-to-business Web site, is offering a “Customer Analyzer” that helps find new prospects free of charge.

“(It) takes the mystery and guesswork out of prospecting for new customers,” says Bill Chase, CEO and president of InfoUSA.com. “It answers the age-old question: How do I find really good sales leads for my business?”

Web site visitors are asked to supply the phone numbers of existing customers and click a specific geographic area to build the profile of new customers. The user can then search, sort and print the results. The list of prospects includes contact names, fax numbers and credit ratings. Impressive results for a few minutes of work.

Another chunk of medal for the collection

Cleveland’s youngest microbrewery, Western Reserve Brewing, added another national medal to its quickly growing collection — a silver at the Great American Beer Festival in the category of Belgian & French Style Specialty Ales for its Cloud Nine beer. More than 400 breweries from around the nation competed in the festival. The beer joins other Western Reserve winners American Wheat Beer, Amber Ale, Nut Brown Ale and the seasonal Lake Effect Winter Ale.

Small companies and health care

Maybe it’s because small business owners have to look at

their employees every day, but recent numbers about employee health care costs are a bit startling.

Only 75 percent of employers with fewer than 250 employees require their workers to pay part of their health care coverage. Meanwhile, 94 percent of large companies with 2,500 or more employees require employees to pay part of their health care coverage, according to Watson Wyatt’s 1998/99 ECS Survey Report on Employee Benefits.

What drug abuse costs your company

If one of your employees is using on the job, it could be costing you as much as $10,000 each year. That comes from Cyndy Cook, director of marketing and sales for Clinical Health Laboratories Inc.

“In addition,” she says, “the Bureau of Workers’ Compensation discounts premiums from 6 to 20 percent for organizations that develop a drug screening program in support of a drug-free workplace.”

The best care everywhere

A research corporation announced that the Cleveland Clinic Foundation is one of the nation’s top 126 hospitals, according to the 1999 Consumer Choice Award winners. Hospital consumers selected the clinic as one of those having the highest quality and image in 101 markets throughout the United States.

This is the fourth year National Research Corporation (NRC) has bestowed awards on hospitals. NRC President and CEO Michael Hays says the company expanded winning criteria this year to reflect composite scores on multiple quality and image ratings provided by consumers in NRC’s annual Healthcare Market Guide Study. Of the 2,500 hospitals rated by consumers, the winning 126 rank highest in their Metropolitan Statistical Areas, defined by the U.S. Census Bureau.

The 1999 study surveyed more than 170,000 households representing more than 400,000 consumers in the contiguous 48 states and the District of Columbia.

Monday, 22 July 2002 09:46

Legal blind spot

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Passed by Congress six years ago, to labor’s delight and the business community’s chagrin, the Family Medical Leave Act struck something of a mom-and-apple-pie chord for most people.

Who, after all, could really argue with mandating that employers afford some scheduling flexibility for families coping with new children or chronic ailments? Hillary Clinton might have lost her battle for health care reform, but on this issue, almost equally dear to her, she won the day while Congress was still controlled by Democrats.

But like any piece of far-reaching legislation which tinkers with the balance of power between employers (in this case of 50 or more) and employees, the details have proved far trickier than the grand outlines of the law initially suggested. Implementation of the act has been plagued by a number of problems, say employment-law attorneys, not the least of which is wide employer ignorance of what the law requires.

“Believe it or not, it’s been around for six years, the Department of Labor took two years to enact it, and people still don’t have any idea what it means,” Calfee Halter & Griswold’s Rick Goddard recently said at an employment-law conference.

Looking back, he said, it’s clear that many employers have used the law to raise employee morale. “But it also raises significant areas of possible abuse.”

One key problem arises from understandable employer desire to build flexibility into interpreting the law. The trouble with flexibility, of course, is that it opens the door to charges that the rules were wielded by employers with more flexibility for some than for others.

“You can have a woman who takes 13 weeks of maternity leave (one more than specified under the law), and she’s fired. And then you have old Joe who’s worked forever, and he has a heart attack, takes four months off, and you welcome him back. Well, you have a classic sex-discrimination suit on your hands, and you will lose,” said Goddard.

“People see this as a game,” he warned. “When you bend over backward to accommodate someone, you can open yourself up” to suits from those for whom the rules weren’t bent quite so far. “If you’re clear as to how you’re going to define the exceptions, you’re going to do yourself a lot of good.”

To complicate matters further, the U.S. Sixth Circuit Court of Appeals in Cincinnati ruled in a recent case that the Department of Labor’s regulations implementing the FMLA are too complicated and thus should be revisited. But the D.O.L. didn’t back off, saying it will continue to enforce the regulations as they are while the matter is thrashed out between the agency and the courts.

One of the biggest areas of confusion has been over the matter of what precisely constitutes “serious health conditions” that would trigger the sanctioned leave. Actually, there’s not that much gray area. According to the statute, a serious health condition is defined as any illness, injury impairment or a physical or mental condition that involves:

  • Inpatient care. Any period of incapacity of more than three consecutive calendar days that also involves two or more treatments by a health care provider or one treatment that results in continuing treatment under the provider’s supervision.

  • Any period of incapacity due to pregnancy or prenatal care.

  • A chronic, serious health condition, such as asthma, diabetes or epilepsy that continues over an extended time period, requires periodic treatment or comes up episodically.

  • Any period of incapacity which is permanent or long term for which treatment may not be effective.

  • Any period of absence to receive multiple treatments or restorative surgery after an injury.

The act does not, in most cases, cover voluntary or cosmetic treatments which aren’t medically necessary, routine preventive care, nor maladies such as colds, flu, ear aches, upset stomach, minor ulcers or headaches (other than migraines).

The law does, however, make it incumbent upon employers to train their supervisors especially well to listen for trip wires, says Calfee Halter’s Wendy Stark.

“The frightening thing is they [employee] only have to give you enough information [that they’re invoking the FMLA] for you to figure it out. What’s even more frightening is that notice to supervisors constitutes notifying the employer. You have to train your supervisors on this; I can’t stress that enough.”

And just in case supervisors still take a lax attitude, she offered a tip to get their attention.

“If you need a scare tactic to wake up your supervisors about the FMLA, here it is: They can be individually liable [for damages] if they exercised sufficient oversight over the employee.”

How to reach: Calfee Halter & Griswold, (216) 622-8200

John Ettorre (jettorre@sbnnet.com) is a contributing editor at SBN.

Monday, 22 July 2002 09:46

Emotional minefield

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When the youngest brother assumed the reins of the family business, he ruled with the tenacity of his father, never mentioning the word family within the walls of the company and referring to his siblings merely as “shareholders” in the corporation.

Now, as some of the siblings look toward retirement, the younger brother is running a campaign of intimidation. He is trying to convince his brothers and sisters to give him their shares in the company. He argues they couldn’t possibly sell their stake in the family business to an outsider and would be foolish to subject themselves to the outrageous taxes that would follow a company buy-back of the stock.

Sound outlandish? Cruel, perhaps? A made-for-TV movie? Think again. This is the scenario evolving at one Cleveland business and, although Dr. Sherrod Morehead, a clinical psychologist, wants to protect the identity of the company, he uses it as an example of how dirty family business can get.

“He’s intimidating them, beating them up, making them feel frightened nervous and scared,” explains Morehead, who is working with the family members to find an amicable solution. “That’s how it works and it is just one example. There are people who do a lot worse things than that to their ‘shareholders’ to get more.”

Bullying and treachery are not what one expects when it comes to charting the future of the family business. However, Morehead and Peter Calfee, a certified accountant and financial planner, have seen it all before. In fact, the emotional struggles that often accompany family business succession planning are the reason they joined forces to found Family Business Advisory Partners Inc. Their goal is to help guide companies through the often-difficult transition.

“What Peter was finding was you can have all the financial documents properly planned and executed and nothing happens or conflict continues,” says Morehead. “The documents are basically superfluous. I was finding I could get everybody settled down and then, if we had to go outside and bring somebody in to start (preparing) the documents, it flared the whole thing up all over again.”

Even the most honest attempts at succession planning, Morehead explains, can be derailed by differences between generations and personalities. Calfee and Morehead say there are, however, several ways to improve the chances for success when family members sit down to chart the future of their business.

Create a mission statement

Business owners may labor tirelessly over the mission statement a company presents to its customers, but may give little attention to a similar declaration when it comes time for a succession plan. Morehead says it is crucial to get the company’s wishes, problems and values on the table, so they can be included in a type of road map as the process evolves.

“Somewhere in the continuum of that discussion comes the real heart and soul and reality,” says Calfee. “You should look at this piece of paper to guide you, but it can take some days, weeks and months for the leaders in each generation to come down to say, ‘That is us.’ There’s a lot of time spent building that platform.”

Identify the “emotional CEO”

Morehead uses an example from his days at Baylor University in Texas to explain the phenomenon of the “emotional CEO.” He was close friends with the owner of the Houston Oilers and would go to his house on Sundays to watch out-of-town NFL games.

“One day we were looking at the game and analyzing what everybody was doing, and the wife of the owner said to the group, ‘You know, I just never have liked that guy’,” recalls Morehead, explaining that she had singled out one of the team’s linemen. “Two weeks later, for some reason, that guy wasn’t on the football team. That’s what I’m talking about.”

Incorporating the thoughts, beliefs and prejudices of off-site influences such as spouses is crucial to drafting a long-lasting succession plan. Although it may not always be easy to glean the information, Morehead says success can be hindered if the factor of an emotional CEO is ignored.

“If we’re working with an owner and his executives, and leave out this off-site influence, it’s likely that our effectiveness is reduced 50 percent,” says Morehead. “We find ways to make that discovery and include, not in person, but in attitude, that individual.”

Recognize the generation gap

Much of the friction generated during the succession process is due to the communication gap that exists between generations. A son may think his $33,000 a year salary is much too low, while the father remembers being paid only $7,000 for the same job early in his own career.

Many times, a translator whom everyone trusts is needed to help bridge that gap. Calfee says often, the stress of the family business will lead sons and daughters to adopt certain roles when dealing with the business because they feel they cannot say what they really think.

“You begin to play act certain stylized behaviors and that’s what saps the energy from a company very quickly,” he says. “It begins to draw you down physically very quickly, because you’re not being true. They may think, ‘We don’t interface about this naturally, so I get into this role,’ and that may not be healthy for the company.”

Evaluate the plan

After spending the better part of a year drafting a plan, some business owners may not want to tinker with it. But, Morehead says, evaluating the plan and how it is working is a crucial element of the process. He says meeting once every quarter should be enough to make sure the company is staying on track, or to determine whether the plan needs to be modified.

The bottom line, he says, is ensuring the process is as smooth as possible. Otherwise, the squabbles could grow to legendary proportions.

“We come in on a periodic basis just to check signals about how the fit is between where they are now and where they wanted to go and how the mission statement is working,” he says. “Every time you make a new hire or somebody leaves the company, it impacts the culture. So, if there’s been three of four changes in a short amount of time, you may need a culture check.”

How to reach: Family Business Advisory Partners Inc., (216) 328-2271

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:46

Blind faith

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Whose who passed through downtown Cleveland one afternoon last August may still be wondering what 100 management and sales executives from Anthem Blue Cross and Blue Shield were doing in the middle of Public Square with a box of ropes, props and blindfolds.

But for those attending Anthem’s annual sales conference, the afternoon of problem-solving exercises was much more than simple fun and games. It was a way to illustrate the power and innovation which can be developed through teamwork.

Since 1974, the Cleveland Heights-based Institute for Creative Living has staged these programs for more than 400 organizations and corporations, including NASA, KeyCorp, Leadership Cleveland and Ohio Aerospace Institute.

Adding the teambuilding exercises to Anthem’s annual sales conference earned high marks from participants, says Jeanne Hauer, Anthem director of regional marketing. And it left those who did not take part with the sense that they had missed out on a valuable experience.

Some may wonder about the real-world benefits of these types of exercises, but Hauer is an advocate of their ability to unlock a strong team mentality that carries on long after employees return to the office.

“I have participated in the team-building exercises where you sit around and have a boat with five guys and only three can survive,” says Hauer. “I don’t think they have the lasting value that actual physical, experiential teambuilding has. I think it breaks down some of the barriers more effectively than just talking about team.”

The August program in Public Square was the nonprofit organization’s first major off-site teambuilding session. The sessions usually take place at the Institute’s training and conference facility in the heart of the Cuyahoga Valley Recreational Area.

Director Marcia Mauter, who has headed the organization since 1981, says the content of the programs depends on what a company hopes to gain from the experience.

“Sometimes a group will say, ‘We’re really having difficulty building consensus, do you have anything that will help us with that?’ or, ‘We’re having a difficult time with communication blocks,’” explains Mauter. “Our groups may say, ‘We really need help in how we give feedback to each other,’ or, ‘We don’t understand it enough to know how to do it effectively.’”

The Institute’s staff helps remove these obstacles through unique curricula and outdoor challenges in which co-workers must pull together to figure out how to accomplish various physical tasks. Level one exercises begin with solving problems at the ground level. The second step often involves obstacles of seven to 10 feet in height. The third level offers aerial challenges more than 30 feet off the ground.

“The initiatives, all of them, tap your intellectual capabilities, your social abilities to pull things together and your physical abilities to a smaller degree,” says Mauter. “It reveals the diversity of thoughts, the diversity of experience and what everybody has to offer and draw upon. That’s what people are here to discover.”

Participants can choose to focus on a range of topics, including teambuilding and leadership development, facilitator training and diversity training. Mauter says some executives conduct programs for their workers each year as a way to continuously strengthen relationships with and between employees.

“Building on your leadership and team development skills is like a race without a finish,” says Mauter. “(These programs) are an opportunity to help individuals and groups collectively understand what is it they do or don’t do that helps or hinders what kind of outcomes they want. Within that simple statement are lifetimes of struggle.”

How to reach: Institute for Creative Living, (216) 932-3785

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.

Monday, 22 July 2002 09:46

An $80 billion dollar revolution

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When Jerry M. Hultin was named Under Secretary of the Navy in 1997, he brought a no-nonsense business background that helped him quickly realize the military is not a perfect model of business efficiency.

In fact, the Navy’s business practices seemed to be drifting ever further from how executives in the private sector keep their organizations healthy.

Buoyed by an $80 billion annual budget, however, the cracks in the system were not immediately apparent. Hultin initially had a difficult time convincing military brass that it was time for change.

“When I walked in with the plan, all the admirals said, ‘It isn’t broke, why do you want to fix it?’” Hultin recently told a lunchtime crowd at The City Club of Cleveland.

Nevertheless, he kept plugging away and ultimately drafted a plan titled “Revolution in Business Affairs: Department of the Navy Business Vision and Goals,” which won the endorsement of Secretary of the Navy Richard Danzig, as well as Adm. Jay L. Johnson, Chief of Naval Operations. Inside of 24 months, Hultin has instituted sweeping changes on the business side of running a fighting force that he believes will lead to a more efficient Navy for the United States to take into the 21st century.

Here are a few tips on how Hultin set his revolution in motion:

Streamline your operation

One of the first problems Hultin noticed was inefficiency in the staffing of Navy destroyers. The ships routinely held a crew of 300 — about three times the necessary size — while most of the men and women on board spent their days completing menial tasks.

“They were chipping paint and peeling potatoes when we’ve spent $100,000 training them to be fire control technicians,” says Hultin. “They are professional young men and women and we ought to treat them that way.”

Now, new Navy destroyers are built for streamlined crews of 100, Hultin says, which provides enlisted personnel with actual quarters in which to live, rather than the traditional bunk and locker way of life.

Give your employees a voice

What would you do with a blank piece of paper, 30 days to think and $80 billion? Thanks to Hultin’s influence, the Navy now asks its newest recruits how they would spend its massive budget to build a better fighting force.

The idea behind the exercise is to breed innovation, and ultimately, improve the Navy’s business process as new ideas are suggested.

“I tell them to build the Navy they think we should take into the 21st century, not the one they have been given,” explains Hultin. “I may not adopt every idea, but I’ll learn a lot from them.”

Don’t overextend your resources.

Since the fall of the Berlin Wall, Navy missions have increased 500 percent, a figure that Hultin finds very disturbing in an age in which the Cold War exists only in history books.

“We’re trying to cram too many missions into what looks like an enormous amount of money,” he says. “But here we are trying to keep up with all we used to do and all the new. It doesn’t work.”

Hultin says it comes down to deciding to strategically invest time, resources and money where it will have the biggest impact. For him, that means a future in which the Navy will try to settle disputes before they mushroom into full-blown conflicts, which always costs more money, time and resources.

“We must learn to shape the world before the conflict occurs,” he says. “When conflict results, we have many times failed.”

Sell your vision to others

As the Clinton administration enters its final stretch, Hultin realizes he may be out of work once a new administration takes up residence at the White House. He realized this long ago, however, and devised a plan to get others on board so his overhaul of the Navy’s business practices would be carried on long after he left.

“I invested the time to go to the admirals who are there and say, ‘We need this.’ It’s now being run by a committee of admirals and generals, not me. That means it will persist when I’m gone.”

How to reach: Department of the Navy, www.hq.navy.mil

Jim Vickers (jvickers@sbnnet.com) is an associate editor at SBN.