So you've got a killer Internet start-up and you're ready to take the world by storm. There's only one problem: You don't have any money and the venture capitalists don't seem to be listening.
The problem may be with your presentation, not with your idea. But don't worry, there's hope on the Internet. American Express Small Business Exchange offers these tips on its Web site for Internet start-ups looking for venture capital funding.
1. Ask for the right amount of money.
Low-balling could put you out of the running. Venture capitalists know what a typical dot-com needs to get started and want to be sure you know as well. They'll bristle at firms whose funding needs fall below their threshold. How much to ask for depends on the investor, industry and stage of development.
2. Know the development stages.
Plan your fund-raising strategy through several rounds by presenting a realistic timeline for subsequent financing. The basic VC development stages are:
Seed financing -- Initial investment to get registered and started, hone the business plan and begin development of a sample Web site. Range: $100,000 to $500,000.
First stage/start-up financing -- Used to build a management team, ready site for launch and support the first few months of commercialization. Range: $3 million to $5 million.
Second stage financing -- Funds advertising and marketing once the site is up and running, building a customer base and sustaining fast growth. Range: $10 million-plus.
Third stage/bridge financing -- Used to reach an IPO. Range: $20 million.
3. Build your management team.
Talent is the number one thing VCs look at. Investors want previous start-up success and relevant expertise, as well as plans for how the team will evolve. Consider creating a board of advisers.
4. Financials don't really matter, but ...
Nobody can predict success, especially on the Web. That said, VCs will examine numbers to gauge how seriously you've considered the size of your opportunity and the costs of getting to market. Avoid grand growth claims -- build projections from the ground up, using customer segment data, offline spending habits and the success of similar online firms.
5. Demonstrate multiple revenue streams.
Having more than one revenue stream will provide a fallback position should your initial revenue source not develop as planned.
6. Show high-profile partners.
Strategic alliances that improve your talent pool, provide channels of distribution or increase your visibility demonstrate that respected firms are willing to work with you, reducing the amount of due diligence a VC has to undertake.
7. Sign some customers.
Show that clients support your product and company. No current customers? Establish prospect references -- ones that are willing to work with your business if certain criteria are met.
8. Snowball your funding opportunities.
Offers pending from other investors help sway fence sitters and give you greater leverage to get the best deal possible. Only use this tactic if genuine term sheets are in the works -- VCs will call around to confirm claims.
9. Be prepared to vest.
VCs want assurance that you and your team will be around for the long haul -- or at least until they're able to cash out. Expect vestment requests to key managers to stay with the business for a set time before shares take effect.
10. State the exit strategy clearly.
Investors used to plan their exits four or five years out. For Internet ventures, they look for more rapid paybacks, often as little as two years. Explain where your company will be at that time and provide a rationale for this vision. How to reach: American Express Small Business Exchange, www.americanexpress.com/smallbusiness
Daniel G. Jacobs (email@example.com) is senior editor of SBN.
It was three days before Christmas last year and about two minutes before opening.
Wadi Ina was in the back room of his Chardon-based New York Deli and Grille doing paperwork when one of the restaurant's servers walked into the office and said he was pretty sure there was smoke seeping into the restaurant.
"I peaked through the back door," Ina recalls. "I saw flames coming through the door of the store next door."
The fire department arrived within minutes, but it was too late to save the business next door, Bostwick Hardware, which was completely destroyed and today remains a vacant shell.
For Ina, however, the story was different. His firewall held up and the deli remained largely intact. There was plenty of damage -- firefighters ripped holes in the walls looking for ways to attack the flames, smoke and water marred the restaurant's remaining walls, floors and equipment -- but Ina's real battle was with his landlord.
"I was sitting in the parking lot saying, 'This is not happening,'" he recalls.
And, as he watched firefighters battle the blaze, Ina wondered about the future of his business and his business plan. The lease clearly indicated who was responsible for the repairs; what it didn't define was the time frame in which those repairs were to be completed.
The resulting daily struggle to get his operation grilling again not only hindered business, but also prevented the Lebanese immigrant from implementing his long-term plans, both for the future of his business and for his family.
Ina wanted to retire by age 55, but the young restaurateur was savvy enough to know he needed help to get there.
He met with Mark Arlen, a planner with the Cleveland Financial Group, and the pair spent months running the numbers. The final plan considered all aspects -- from employee retention strategies and buy-sell agreements to retirement income -- to finance Ina's leisure days.
"We had done the whole plan," Ina says.
Implementation had barely begun when the fire sparked, putting it all in jeopardy.
After the fire, Ina devoted his attention to getting the New York Deli & Grille opened. He likens it to "seven months of being pregnant because you're in labor every day."
Because of the interruption in his business, Ina didn't have the income to support his plans for an employee retirement program. Business interruption insurance helped, but not enough to move forward with other plans. Even when Arlen called to remind him to maintain his life and disability insurance policies, Ina wondered where the money was going to come from.
Ina and his partner survived the seven-month hiatus, reopening the restaurant in August.
For now, Ina's financial plan is on hold until the business and cash flow return to normal and he and his partner settle lingering concerns. The process, which should have been underway, now is likely to be pushed back one or two years. It's problems like this, Arlen says, that reinforce the notion at that preparation is key.
"People need to be more focused on planning ahead and thinking ahead before things happen," he says.
One minute Ina was worried about holiday party trays and juggling vacation schedules; the next, it was how to get the business running again.
"Yeah, you do have insurance, but it's a big, drawn-out process," Ina says. "It's not like they give you a blank check."
The New York Deli is not Ina's only venture. Without another restaurant, the Manhattan Deli in Willoughby Hills, Ina may not have been able to get his restaurant opened, even in seven months.
"If I didn't have another business, it would be very close to bankruptcy," he says.
Ina's partner in the Chardon restaurant wasn't so lucky. He and his wife, who also worked at the deli, were forced to find other jobs while repairs were made, even though the partners had business interruption insurance. Ina, himself, sought outside help.
"We had to go to the bank to borrow money to keep it going," he says.
The main problem was the lease, Ina says. While it did articulate who was responsible for the repairs to the infrastructure (the landlord), there were no stipulations on the time he had to complete them. Without knowing when they would be able do the detail work -- and burning through cash faster than expected -- Ina was limited during negotiations with his own insurance company. Knowing Ina was desperate, the insurance company held all the cards.
That changed when Ina received a bank loan. Once he no longer had to worry about day-to-day money issues, it put him in a better position to negotiate with his insurance company. And, he hired a private adjuster to work with the insurance company to get the claim settled faster. It's something he regrets not having done from the beginning, and will make sure to do if disaster hits again.
Like many business owners, Ina once believed, "It'll never happen to me." He now knows all too well the trouble of falling for that fallacy and follows another philosophy -- it's never to early to start planning, although it might be too late.
To other business owners who aren't yet true believers in preparedness, he offers this advice: "Get started as early as you can because you never know what tomorrow brings." How to reach: New York Deli & Grille, (440) 286-3388; Cleveland Financial Group, (216) 765-7420
Daniel G. Jacobs (firstname.lastname@example.org) is senior editor of SBN.
When the planning process began, Cleveland Financial Group's Mark Arlen asked Wadi Ina what his goals were for the future.
Ina replied, "a comfortable lifestyle."
Arlen asked, "What does that mean?" and kept asking as Ina further articulated his hopes. "Success" and "Peace of mind" followed.
The pair finally settled on "Make a better life for your family -- better than your parents made for you."
To get to that goal, Arlen led Ina through a four-part process -- objectives, assumptions, recommendations and implementation. It's something any business owner setting plans for the future should consider.
Simply put, what do you want to accomplish? Ina wanted to plan for the future of his family and his business. Arlen led him through a variety of issues, including:
- Emergency reserves
- Accumulation goals
- Mortgage analysis
- Education funding
- Retirement planning
- Investment planning
- Risk management, including disability and survivor income needs
- Estate planning
- Business planning
The assumptions were based on information Ina provided about his business. One of his goals was to provide five years worth of education for each of his two children. The assumption was that he would need $25,000 per year for five years in today's dollars, inflating at 5 percent.
Based on their ages, Ina was told to save $731 each month for his 8-year-old son, Jason, and $557 a month for his 4-year-old daughter, Nicole.
The final step of any long-term plan is to schedule the implementation of each of the accepted recommendations. It was that part of the process Ina had barely begun when the fire hit.
Now, because everything is being pushed back, the numbers will have to be adjusted, Ina says.
Patrick Hergenroeder doesn't understand what all the buzz is about. Although he knows he is a Pillar Award honoree for his work with youth sports groups, he still contends that he's done nothing special.
Bill Dieterle disagrees.
A close friend, Dieterle nominated Hergenroeder for the award without telling him. It was Dieterle who brought to the judges' attention all the things the orthopaedic surgeon and owner of Chagrin Falls-based Hergenroeder Orthopaedic Clinic has done for the community.
Conceding his efforts are noteworthy, Hergenroeder still says he's disappointed -- he sees so much that can be done to make the world a better place, but he's only one person who can do only so much. It's that attitude that underscores the doctor's commitment to making a difference.
For instance, does someone who calls himself "nobody special" donate 500 footballs every year to underfunded athletic organizations? Hergenroeder gives 10 to 15 new footballs to between 33 and 50 high schools and organizations each year.
And does someone who argues that he is "just one person" donate autographed footballs and baseballs to area high school athletic booster clubs so they can raffle the items off to raise money for their organizations? The autographed pieces he donates have sold for $500 to $900 apiece, becoming key tools for school funding.
Hergenroeder says he doesn't have the time or the money to do all that he wishes he could, yet he finds enough time to offer free CPR training. After he read an article that said many heart attack deaths could be prevented with the use of CPR, he decided to teach it to schoolteachers, store managers, office receptionists, librarians and anyone else who comes in contact with the public every day.
Some would say that Hergenroeder has more than done his share. Yet he says he'd like to do much more.
"Your record here on Earth has to stand for itself," he says. "When you die and go into the box, nothing else goes with you."
Hergenroeder says the world is definitely a better place today than it was a hundred years ago. We continue to conquer disease; we have electricity. But, he says, it's imperative that people not take modern conveniences for granted if that trend is to continue.
"We have to excel," Hergenroeder says. "If we don't go forward, we go backward. We have to put in more than we take out and make the world better for the people who will be here after us."
Hergenroeder continues to put in more than he takes out. Each June, he lines up 14 retired Cleveland Browns players to aid area high school and college coaches with a youth football camp that trains 100 to 150 inner-city students. The former pros talk with students about drugs, drinking, smoking and the importance of staying in school.
So does Hergenroeder make a difference? It's a safe bet that the world probably seems a little better to those kids after the camps than it did before. How to reach: Hergenroeder Orthopaedic Clinic, (440) 247-2644
Courie Weston (email@example.com) is a reporter at SBN.
Investors on the West and East coasts have lost millions of dollars the last couple of years on technology companies which had an idea, but didn't know how to use it to actually make money.
Some of these aimless companies were lucky and made hundreds of millions of dollars, but more lost it all, causing the market to dry up. The ripples were felt even in the Midwest.
Investors are a little more wary these days when it comes to start-up technology companies, so it's important to show that you have a solid, proven business plan.
"The first thing we needed to show our investors is how they could make money," says Stephen McHale, CEO of Everstream, an application service provider that allows businesses to deliver targeted rich media content and advertisements over the Internet and wireless devices. "Once we could show them that not only would it not cost them anything, but it could make them money, that really got their attention."
At the Northeast Ohio Software Association's second Seed Capital Initiative, McHale and the CEOs of other rapidly-growing technology start-ups in Cleveland shared advice and war stories about raising capital in the marketplace after the investment feeding frenzy.
Here are a few of things they've learned.
Once the plan is in place, it's important to find investors who know something about your field. If the idea is very high-tech or complex, it's unlikely there will be investors who are experts; however, a knowledgeable investor will add much more value to the company than someone just looking for a dividend.
"There's nothing better than getting an e-mail from an angel (investor) that has information that actually pertains to my business that I can go follow up on," says Ken Applebaum, CEO of Embedded Planet, which provides software and hardware platforms for manufacturers and developers of embedded systems.
The economy is not driven by steel and widgets anymore, it's about ideas and information. For both investors and entrepreneurs, networking is the key to finding out about opportunities to grow a company. Internet chat rooms, list servers and Web sites are also ways to network, so don't forsake them to concentrate solely on traditional face-to-face methods.
"Networking is what this whole technology business is all about," Applebaum says. "You will find other people out there who can add value."
The founders of many of start-ups left behind their steady 8 to 5 jobs with handsome salaries, benefits and corporate perks. To say goodbye to all that and go out on your own requires tremendous passion and a complete devotion to the idea, not just the desire to get rich, says Rebecca Braun, CEO of SupplierInsight, an online qualification and ratings guide of industrial suppliers engaged in digital procurement.
"It is raw passion that pulls you through to the final stretch that gets you funding," Braun says. "I know it happens all the time in all walks of life, but I can't fail to mention this step because I think it's the one thing that absolutely pulled us through to getting funding." How to reach: Everstream, (440) 498-8899 or www.everstream.com; Embedded Planet, (440) 646-0077 or www.embeddedplanet.com; SupplierInsight, (216) 781-1100 or www.supplierinsight.com
Morgan Lewis (firstname.lastname@example.org) is a reporter with SBN.
Medical Mutual of Ohio
As one of Ohio's largest health care insurance providers, Medical Mutual of Ohio devotes its community service efforts toward health-related and educational issues.
Last year, the company was a major sponsor of the MS Walk for the Multiple Sclerosis Society and the American Heart Association Heart Walk.
The co-founder and title sponsor of the Pillar Award for Community Service, Medical Mutual contributed 92 volunteers to the Meals On Wheels program and provided Christmas gifts for 210 underprivileged children.
"We're a long-time Cleveland company," says Jared Chaney, Medical Mutual's vice president of corporate communications. "The health and well-being of a community is what our business is all about."
Under the leadership of its S.H.A.R.E. volunteer committee, which stands for Share, Help, Aid, Reach and Educate, the company encourages its 2,500 employees to get involved in causes they support. In upper management, 27 executives serve on 48 nonprofit and charitable boards.
The impact of community service hit Xerox Connect employees last year when they treated 65 children from one of Cleveland's YMCA centers to a Cleveland Cavaliers game and dinner at Gund Arena.
"When it was all done, we had a couple of the employees here with tears in their eyes because the kids had such a good time," says Dave Fazekas, Xerox Connect Great Lakes Region vice president. "They were hugging them when they were leaving. A good number of these kids had never been to a Cavs game before."
Xerox Connect, an information technology consulting, outsourcing and systems integration subsidiary of Xerox, also provided technical expertise to set up computer kiosks free of charge at the Great Lakes Nature Center in Bay Village. Projects like these are not only the right thing to do, but good for the company, Fazekas says.
"It makes the employees feel good to see good things happening, and we can make a mark within the community," he says.
Xerox Connect is in its second year of sponsorship for the Pillar Award.
Mars Employment contributed its job hunting and placement expertise to help residents at the Women in Transitional Housing center in Cleveland. By teaching the women resume writing, interview skills and personal presentation, Mars Employment helped give them a second chance at life.
"We should give back because I think we're so fortunate," says Marilyn R. Sims, president of Mars Employment. "We've been very lucky, but I don't know that it's all luck; a lot of times you have to do it yourself."
Other than providing job-hunting skills, Mars gives employees time off to help clean and paint rooms in the women's shelter in between tenants. Sims also sits on the board of directors.
"I didn't want to be the kind of a person who sits on the board of directors and not know what really happens," she says.
Mars Employment is involved in annual events to raise money for Alzheimer's disease, diabetes and the Ronald McDonald House. This is its first year of involvement with the Pillar Award program.
The environment you work in is important to all businesses, big and small. COSE knows this. Its been helping Cleveland-area small business owners with health insurance and purchasing programs since 1972.
"I think that we are out there every day with lots of players trying to make this place a better place to live, and a better place to work," says Steve Millard, executive director of COSE. "It's important to recognize the efforts of businesses of all sizes. But when you look at some of the smaller businesses whose efforts sometimes go unnoticed, it's good to be able to highlight some of the interesting things they're doing."
COSE, a nonprofit organization, is designed to be a resource. Not only does it provide resources for its members, nonmember companies also receive COSE's help, so the organization can try to improve the places they work and live.
Outside the company, employees provide tutoring for local elementary schools and speak for Junior Achievement. COSE also encourages them to get involved in local boards and helps them schedule time for community service efforts.
This is COSE's first year of involvement with the Pillar Award.
Renaissance Worldwide, an information technology and business consulting firm, formed The Renaissance Community Project in October 1996 and has contributed to the efforts of more than 150 charities, including The American Cancer Society, The Juvenile Diabetes Foundation, Make-a-Wish Foundation, American Ireland Fund, the National Multiple Sclerosis Society and others.
Though many are national charities, the company encourages participation in local causes such as homeless shelters, schools, community arts programs and food pantries.
"Part of our culture has always been an awareness of our community and a dedication to contribute to its well-being," says Melissa Blatnik, Ohio branch recruiting manager for Renaissance Worldwide. "We encourage the participation of our employees, families, consultants, business associates and friends in making a difference in our world."
This is Renaissance Worldwide's first year of involvement with the Pillar Award.
It's a problem many business owners encounter the first time they try to set up a computer network.
What starts out as a simple task connecting a few PCs to a server turns into one complication after another until setting up a network to improve the business takes over the business.
Lack of time and problems like these have created a $70 billion untapped market providing information technology services to small businesses. TechPlanet founder and CEO Matthew Klein set out to tap into that well in January 1999.
Less than two years later, Klein has claimed more than $20 million in venture capital and spread the Menlo Park, Calif.-based franchise to 23 U.S. cities, with plans to be in all major U.S. cities in the near future.
"Business owners normally are pretty sharp people, but they have to wear a lot of hats," says Harvey Gilchrist, who helms TechPlanet's Cleveland office, which opened in July. "Say you're an attorney. You're smart enough to set up your own network, but it would probably take you two or three days to do it. And if your fee is $150 an hour, how much are you losing by playing network administrator?"
TechPlanet generally works with smaller offices, because once a company has 35 to 50 computers, it usually has its own IT department. Most smaller offices don't want to spend $70,000 year for an employee to administer its network, says Gilchrist.
To avoid wasting time and money and to set up a computer network that protects valuable data, Gilchrist offers three basic tips:
Broaden your horizons
If you're still using a dial-up modem, you are dealing with unnecessary hassles and your business isn't taking advantage of what the Internet can offer. Businesses should be using high-speed DSL or a T-1 line, at the minimum, Gilchrist says.
"I compare dial-up to DSL as I would compare television before there was cable. You had your three network channels and everything kind of came in fuzzy, and then you got cable and you have 150 channels and everything comes in crystal clear."
Watch your back up
Many companies worry about outsiders breaking into their networks, but few are concerned with a much more crippling and common computer disaster -- losing all their records.
"Most people don't back up when they really should," Gilchrist says. "If you have a fire or equipment failure, everything could be lost, when you could have had all your data stored on a little tape."
Sure, the 20 computers in your office need to be networked now, but what about in three years, when you have 40 or 60 computers? That's one of the most important questions to answer when designing your network, Gilchrist says.
"Instead of giving you a solution for right now, we'd rather give you a solution that will adapt to your business growth. We could set somebody up with a server, where if they get two more computers next year and six more the year after that, all we'd have to do at that point is come and add them, create an account for them and they're on." How to reach: TechPlanet, (216) 986-7400 or www.techplanet.com
Morgan Lewis Jr. (email@example.com) is a reporter at SBN.
There seems to be increased interest in performance-based compensation programs, a result of the difficulty many business owners face in attracting and retaining employees.
The right performance-driven compensation program can be a powerful tool for achieving both objectives. As with anything affecting employees' earnings or their sense of security, a program needs to be well thought out and carefully designed.
Many academic explanations and justifications have been written in support of performance-based systems. However, the reason for implementing a program simple: To motivate employees to think and act like owners.
These programs should be designed to give employees a feeling of ownership by rewarding them for behavior and performance that is directed toward achieving the vision and goals of the company. The program can, by defining the requirements for bonuses and added compensation, clearly communicate to employees what is important to the success of the company.
One size doesn't fit all
As with most management tools, performance-based compensation must be customized to fit the company, the type of work performed, the level and skill of employees, the overall culture of the organization and the ultimate objectives of the program. If you are considering an incentive program, the first step is to clearly define the objectives of implementing the system.
Is it intended to reward employees for specific job-related performance or reward them for overall company performance on a monthly or annual basis? Is it intended to reward individual performance or build teamwork by rewarding overall team performance?
Next, determine what type of program to pursue. Is the organization ready to convert its overall compensation program to a performance-based one or would it be better to move slower by trying smaller, more specific incentives as add-ons to your existing system?
Implementing a total performance-based compensation program will require more initial effort to ensure the system achieves the objectives. It also requires much more effort directed at the organizational and employee issues associated with changing a compensation structure.
A less extensive specific reward program can be implemented more quickly with less risk.
One of our clients took a pioneering leap into a companywide performance bonus program nearly 10 years ago. The company was young and had few employees, but management wanted to reinforce its desired company culture and provide a tool to retain key employees.
Today, with a company that is four times larger than it was 10 years ago, the system is still based on annual payouts for every employee in the company. Over the years, it has been adjusted to fit the company's growth and to enhance it by utilizing improved information systems.
The annual bonus is now based on achieving three key performance indicators in addition to the original profitability targets.
What hasn't changed is the employees' excitement and enthusiasm for the end-of-year bonus and their commitment to the company's vision, goals and the bottom line. They have ownership.
Factors to consider
A performance based compensation system can make your employees behave more like owners and stop asking themselves questions like, "Why should I work harder? What's in it for me?"
But, it must be done right to achieve your objectives and avoid major turmoil. It will require considerable time and thought but will be worth the investment. Here are two important factors to consider before starting the design of your system:
- A performance-based system cannot be a solution in itself. It should only be a part of the overall culture of the organization.
- Performance goals must be realistic and the employees must be able to directly affect their outcome.
With that in mind, you're well on your way to determining what's best for your organization. Joel Strom (firstname.lastname@example.org) is director of Joel Strom Associates LLC, the Growth Management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve their growth objectives while maximizing their profitability and value. He can be reached at (216) 831-2663.
In today's tight job market, some business owners are content to simply find a warm body to fill an open position.
However, in this highly litigious environment, some are realizing that hasty hiring decisions can be costly -- not just in terms of money, but also in time and reputation.
A business can be held liable for negligent hiring, which occurs when an employee with a history of violence harms a customer or another employee, either physically or emotionally.
If the employer is aware of an employee's violent or criminal history -- or should have been after conducting a reasonable search -- the company may be liable. For that reason, more and more businesses are opting to do preliminary background checks on prospective employees.
"About 30 percent of businesses now do pre-employment screening," says Jason Morris, president of background information services inc., a pre-employment screening company. Those searches -- which can cost from $35 to $275 -- include Social Security number verification, a driver's license search, employment and education verification, local and federal criminal record searches and a consumer credit check.
When considering background reports, Morris says to keep in mind they are contingent on the candidate's written approval and subject to ADA, EEOC and the Fair Credit Reporting Act (FCRA) rules and regulations. No search can be conducted without the written consent of the applicant.
Even so, background checks are becoming more popular.
The resume game
According to a recent study, more than 30 percent of resumes contain false or misleading information, Morris says. Some industries report that two out of every 10 searches reveal job candidates who have a criminal record they neglected to mention on the application.
A simple verification of an applicant's Social Security number, education history and references absolves prospective employers of liability.
Studies show a 15 percent increase in internal losses that costs U.S. businesses $4 billion annually. Employee theft is estimated to be responsible for 30 percent of business failures.
Morris suggests checking credit reports and searching for public filings, including notices of bankruptcy, liens and other judgments. A federal criminal check will uncover any felony or misdemeanor filings in the last seven years and allow your firm to protect itself against employee fraud.
A federal search will also reveal charges of tax evasion, embezzlement, counterfeiting, bank robbery and other white collar crimes.
"According to the U.S. Department of Justice, 54 percent of violent workplace crimes reported were committed by acquaintances or individuals well known to the victims," Morris says.
It's possible for a new employee to put a company at risk by exposing other employees, clients and customers to someone who has a history of violence. Conduct a county criminal search to screen out high-risk candidates with convictions for violence, drug abuse or theft.
Pre-employment screening can prevent redundant and unnecessary training. As the cost of training employees rises, it's not cost-effective to spend time and money to train an employee who will have to be let go due to a criminal record or lack of experience.
Searches only take one to three days to complete, compared to FBI fingerprint tests -- required for some employment -- which can take up to eight weeks to receive results.
Disclosure is the key word when discussing an employer's responsibility in requesting a search and subsequently acting on any information uncovered, Morris says. Employers must receive a signed waiver before they can request any search.
And, an applicant must be told in writing that the information requested may result in adverse action, such as denial of employment or promotion, reassignment or termination.
Morris says that if that happens, an employer is required to give the applicant an adverse action notice, a copy of his or her consumer report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act."
If employers neglect these responsibilities, the FCRA has ruled they can be sued for damages in federal court, he says. And an employee, if successful, may be entitled to recover court costs and reasonable legal fees, and may even seek punitive damages.
Morris predicts that pre-screening and background checks will become more the rule than the exception. He cites examples of insurance companies awarding discounts to companies that perform background checks, recent awards in liability lawsuits and the rising cost of training as just a few of the reasons these services are becoming more popular.
And for some businesses, it is more than just a cost issue. It's a public relations issue. Explains Morris, "If someone steals, you can recover. But you cannot recover your reputation." How to reach: background information services inc., (800) 235-3954 or www.employeescreen.com
Kim Palmer (email@example.com) is associate editor at SBN.
The word sends chills down your spine.
Several months ago, hackers attacked the servers at E-trade, the online company that allows individuals to buy and sell stocks from their personal computers. Apparently, no information was compromised and there was no damage other than a temporary suspension of service.
But the PR problem could have been huge. In an electronic age of instant communication, reports of blocked and delayed trades seemed to instantly circumnavigate the globe.
E-trade -- and companies like Yahoo, Amazon.com and eBay, which were also attacked -- spent time and money to reassure clients while the public relations department geared up for a massive spin session. It had to get the word out that the system was working properly and answer questions raised by news media around the country.
But first, it had to know what was being said about its operation. And for that, E-trade turned to VMS, a company that monitors and retrieves information about business from television and radio.
"We were able round up media coverage from across the country and e-mail video to them, give them hard copy videocassettes from all across the country, literally within hours," says Rodger Roeser, general manager for the Ohio office of VMS. "They were able to take a look at this and perform a content analysis to understand how they were being portrayed in the media, so when they did put together a satellite feed, they already knew what was being said. They understood how it was being portrayed.
"They could spin it accordingly and they could help the public understand that everything's going to be OK. And that's very, very important."
To do that, E-trade needed to see reports from the major networks, from MSNBC, CNBC and CNN and even see how the huge news radio stations were presenting the story. In emergency situations, VMS can provide access to the top 75 magazines and newspapers around the country.
"That we were able to provide a company in San Francisco with a videocassette from New York two hours after it aired, I think is just phenomenal," Roeser says.
Whether it's a problem that must be explained or simply a vehicle for better public relations, knowing what is said about your company and how it's being perceived is critical. For E-trade, the importance went right to the bottom line.
"It affects whether people are going to advertise on their Web site; it affects whether people are going to use them or put their trust and faith in them," Roeser says. "We're there to give our clients a boost and get coverage and provide CYA to them. We're their 'cover-your-ass.'"
The walls of VMS' offices are lined with VCRs and banks of videocassettes. The tapes contain hours of recorded programming from local stations. Each of the more than 65 VMS offices is responsible for its own airwaves and at least one of the national channels.
"Among the VMS collective, we have virtually every television and radio station, every cable, every syndicated broadcast in America," Roeser explains. "I am in charge of all of Ohio, so any client, any corporations, any entities inside Ohio, I would take care of. We record all of this data. It's sort of a collective matrix. The office in Ohio is responsible for capturing all this Ohio coverage and certain syndicated, cable and network programs."
Among his clients, Roeser counts local governments, professional sports teams and many public relations firms.
"The vast majority of PR firms, and hopefully PR executives, have been so well trained that they need to be getting proof of performance," he says. "They need to know what kind of coverage they're getting (for their clients) and where they're getting coverage."
A couch potato's dream come true
Recording the programs isn't the problem. A bank of televisions and VCRs handles that. But someone has to watch all those programs and listen for references to local entities -- businesses, area governments, sports teams.
Roeser hires college students, housewives -- anybody with a little bit of time on their hands -- to turn their attention to the tube. Viewers are trained on how to watch and record references to a company. So if Cleveland's Drew Carey talks about your company, you'll know.
There are no subscription fees or contracts. VMS' account representatives contact a company when it makes an on-air appearance.
"The client can then decide whether he needs to get a product," Roeser says.
Those products include transcripts, monitoring reports, broadcast schedules, audio and videocassettes and laser boards.
For Roeser, the significance of the service is clear.
"It's so intrinsically important to be able to provide the feedback that you receive from the public and the media to make your product better," he says. "We provide that feedback, so they can align their clients, align their companies, to make things in line with their image or to usurp their image and make it better so they can grow the company.
"If you don't know what's going on out there, you're really in a lot of trouble." How to reach: VMS, (216) 579-4103
Daniel G. Jacobs (firstname.lastname@example.org) is senior editor of SBN.
Teamwork is a popular buzzword, but just because you say you are a team does not necessarily make it so.
Developing a quality team takes hard work, development of team skills, time and patience. It is not something you can decide to have one day, then achieve overnight.
What is a team? The entire organization is part of the same team working toward meeting the requirements of your customers. Whether management, front line or behind the scenes employees, everyone's work contributes to the end result. There are also specific work unit teams (departmental) with specific goals and assignments.
Why do we need teams? Teams working together can and should be responsible for identifying problems not previously recognized; finding the root causes of problems; suggesting who should work on problems; solving manpower assignments and scheduling improvements; and providing communication throughout the organization.
To be effective, teams in the workplace must develop standards and skills, then implement ongoing training and coaching to ensure they are put into practice.
Company policies, procedures and rules
If policies are ineffective, employees lack comprehension and it is difficult to explain to customers the why of the policies. Policies are only good if everyone understands them and can explain and defend them.
Planning is deciding in advance what to do, how to do it, who will do it and when it will be done.
If your employees don't know why your business does what it does, where the business is going and how you will measure success, how can they communicate your business value to your customers?
Integration and value of different personalities
Teams are successful when team members complement each other. We need to respect each other's differences. There is nothing wrong with team members having different personalities because differences can be a strength.
Each brings unique and different perspectives to the team. If teams don't respect each other, they do not respect your customers' differences, and it will show.
Develop strong communication skills
Strong communication skills are made up of myriad other skills: focused listening, the ability to collaborate on projects, a vision to reach team consensus and effective problem solving skills.
Consider developing a continual feedback process. It will allow team members to learn, from each other and from the customer, what is going right and wrong and what needs to be changed.
Stress consistency in communications. Customers hear consistent messages and feedback, so walk the talk. If team members have different perceptions of what they are supposed to do, how it is to get done, who is to do it and what the deadlines are, there is a communication problem.
Trust -- Have trust in others and their commitments. If your employees don't trust each other, your customer will know it and will not trust your business.
Empowerment -- Give responsibility and the power to influence outcomes. If your staff doesn't have the empowerment to influence outcomes, customers feel like they are getting the runaround.
Decision-making skills -- Encourage creative thinking to find innovative solutions. You must meet your customer's needs through effective problem-solving by creative thinking and by finding innovative solutions, then deciding on the best solution.
Constant awareness of change and the need for it -- Whenever possible, involve the people who will be affected by the change.
Ability to deal with conflict -- The same skills needed to resolve internal conflicts are needed to deal with conflict with your customer. Unresolved internal conflicts between departmental teams all too often create the customer conflict.
To be really successful, teamwork must exist at all levels of the organization, including the very top. The advantages of teamwork on the lower levels of an organization also produce benefits on the top levels. Working as a team should be viewed as a management philosophy that greatly benefits everyone in the organization and your customers.
Most businesses do not do enough to ensure their workplace teams practice good team skills. What happens internally happens externally. Practice of good team skills internally will transfer to the relationship with external customers.
If your teams are ineffective, they produce ineffective service for customers. Ineffective teamwork adversely affects your service culture. Pam Schuck (email@example.com) is president of STRIV=E Training, which specializes in motivating customer service for businesses. She can be reached at (440) 235-5498.