Cleveland (5895)

Friday, 28 June 2002 05:59

Financial independence

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As the the consolidation wave washed over the financial services industry, Brown Gibbons Lang & Co. held fast to its status as an independent investment banking firm and continues to grow.

In 1989, then-35-year-old co-founder Michael Gibbons left behind a successful career as president and CEO of a Houston-based investment firm to return home to Cleveland and launch an investment house. With a close business associate, Kevin Brown, he formed Brown, Gibbons & Co.

The two were just setting up shop when Brown suddenly passed away. But Gibbons carried on, focused on what he knew best -- middle market investment banking.

Early success helped Gibbons expand both the firm and its client roster. He attributes that success in part to keeping the firm focused on investment banking.

"We're doing only one thing for our clients," Gibbons says. "We're representing them in a financial advisory position without regard to any other products or issues."

Scott Lang arrived in 1996 from a large Chicago capital investment firm, where he was executive vice president and managing director of investment banking. Today, he oversees BGL's Chicago office.

Gibbons and Lang both believe that investment banking firms and corporate financial institutions do not mix. That's why BGL remains independent, resisting numerous buyout offers from larger organizations.

The pair also credits the firm's success to the loyalty of its 40-plus investment bankers.

"It's a difficult process to keep people," says Gibbons. How to reach: Brown, Gibbons, Lang & Co., (216) 241-2800

Friday, 28 June 2002 05:48

Chasing venture capital

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As the economy improves, your business is poised for growth, but you need more money.

Unfortunately, with your earnings history, no banker, investor or traditional lender is interested. Friends, family and angel investors are tapped out, so venture capitalists could be your best option. Or are they?

VCs will risk their money, advice and resources when your business needs them most. Their cost, owning part of your business, seems minimal in light of what they say it will be worth.

The problem with using VCs is that their need to earn quick, big returns conflicts with your goal of building your business. To sell your company, the VC must find shortcuts to creating customer value.

VCs fund one out of 1,000 business plans they see. They need two of 10 portfolio companies to succeed to earn the 100 to 1 payoffs their investors expect. Therefore, VCs only stay committed to healthy businesses because problem companies are cheaper to close than fix.

Another challenge is dilution. After successive rounds of equity financing, you can end up with neither ownership nor a big payday. And every minute you spend writing business plans for investors is time you could spend building a customer base.

If your company must create a completely new business process before it can sell anything to anyone, you're probably well-suited for venture financing. But, you should still be cautious.

Pay more for less money if it comes with fewer strings. Realize that venture capitalists exist to make their partners wealthy.

The more customers you grow, the more of a real business you have and the less equity you have to give away to get funding. If you plan on building and managing your business for the long run, focus on finding, keeping and growing customers. No business survives without a strong and well-developed ability to get new customers. Put all your efforts into creating salespeople, channels and proposals.

Reinvest the money from your early sales into customer services, benefits and products. And remember, customers get you money better than money gets you customers.

If you focus on this, you will be in the driver's seat and will live and retire to tell about it. Andy Birol (abirol@birolgrowthconsulting.com) is president of Birol Growth Consulting, a Solon-based firm that helps grow businesses by growing their best and highest uses. He can be reached at (440) 349-1970 or at www.birolgrowthconsulting.com.

Friday, 31 May 2002 12:11

How much is enough?

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Do you find yourself always wanting more? Sales are great one month and poor another. Cash flow is hit and miss. Some employees have great attitudes and others don't. Some days you just want to give up. Many of us live in an idealistic world with the perfect idea of what we would like life to be about, but we need to be more realistic.

Maybe what we really need is a good case of an attitude readjustment. I know it's easy to look to the left and to the right and see something that appears to be so much better than what we have. Each one of us has a certain lot in life and it is important to make the best of it. The first thing that happens when we look to one side or the other to see what we don't have is we forget what we do have. Discontentment sets in and we become ungrateful.

Eventually this leads to a bad attitude.

How should we view the discontentment that appears from time to time? As an enemy, and try to avoid it, or as a friend we can learn from?

I see four ways to move closer to a better attitude.

1. Appreciate what you have before you lose it. You or your business may not be where you want to be, but it is important to appreciate what you have or it could be taken from you. Don't look at what you could have, but rather appreciate what you have accomplished.

2. Appreciate what you don't have before you get it. Everything isn't always as good as it seems. Don't wish something upon yourself that appears to be good, but turns out to hurt you. Difficult economic times can lead to poor decision-making as companies take high risks to try to turn bigger profits.

3. Lead by example. A great attitude is contagious and people want to be around it. If you see how much differently you can view life with the right attitude, you'll never have a bad attitude again.

4. Learn from your mistakes. A bad attitude can only be your friend if you learn from it. Change your tone and watch how much better people respond to you. Communication and morale will improve as your attitude changes.

The true test of a person's character is not when things are going well, but how that person handles challenges. The people with winning attitudes are the ones I want on my team. Those with bad attitudes always get thrown off the team in the end because no one wants to play with them.

Friday, 31 May 2002 12:01

Less for Max CEO

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What do you do when your company is in the midst of a strategic redevelopment plan and you're looking over your shoulder at an investor who seems to be swooping up stock?

If you're Michael Feuer, CEO and chairman of OfficeMax Inc., you keep your focus and take no bonus.

According to a proxy filed with the Securities and Exchange Commission, Feuer received no bonus in the fiscal year ending Jan. 26. It's the same approach he took the previous year, when OfficeMax stock hit a low point and analysts began to question his management plan.

Since then, Feuer has developed and begun to integrate a strategic plan that includes re-evaluating the office supply retailer's growth initiative and lowering fixed costs. As the company's stock price rose, its largest single stockholder, Orient Star LLC, stopped its aggressive acquisition strategy (it had closed in on the magic 15 percent) and began selling off OfficeMax stock for large profits.

Unlike many of his CEO peers, Feuer did not reward himself for the first-year plan efforts. He received a salary of $950,000 in the year ended Jan. 26, down 1.9 percent from his salary of $968,269 the previous year.

Additionally, OfficeMax granted him 295,000 stock options, compared with 400,000 the prior year. Assuming the company's common stock appreciates 5 percent each year for the next nine years, the value of the options is $578,200. The options have an exercise price of $3.12 a share and expire April 4, 2011.

The executive received no restricted stock award in the year ended Jan. 26, compared with a restricted stock award of $14,871 the previous year.

Friday, 31 May 2002 11:45

Breach of trust

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A healthy doctor-patient relationship must be based on complete trust and candor. If patients don't have complete faith that their disclosures will remain confidential, they are less likely to reveal information that might prove vital to their treatment.

A doctor who breaks the bond of nondisclosure may be held liable under certain circumstances. Medical professionals can and have been sued for breaking this faith. But if you're not a doctor or a patient, this issue doesn't have an impact on your business. Or does it?

Assisting or inducing someone to break the law is illegal, and this third party liability can now be applied to a breach of doctor-patient confidentiality.

In 1965, an Ohio court held a third party liable for inducing such a breach. In Hammonds v. Aetna Casualty & Surety Co., the court found liable an insurance company that had induced a physician to reveal confidential medical information about a patient. An Ohio district court expanded the confidentiality issue by holding an employer liable for inducing the disclosure of medical information regarding one of its employees.

At that point, knowledge of patients' protected rights of privacy became an issue of importance to all employers.

Defining liability

An employer can be liable for breach of confidentiality even if the breach is accidental. For example, revealing medical information to spouses or other family members can be illegal, even if no harm is intended.

Even a wavier or release won't always provide full protection to the employer; often, the forms lack the required legal elements to achieve that result.

How do employers run afoul of the rules regarding medical confidentiality? Typically, problems arise from otherwise routine situations. For example, let's say your HR staff contacts a physician to get a list of an employee's prescription drugs. The reason may be perfectly innocent. It may even be an attempt to be helpful.

But that doctor should not, without the patient's explicit consent, give that information to anyone, and the employer can be held liable for inducing the information without consent. Suppose the employer has a policy of drug testing and the results are put in the wrong place. Suppose the HR staffer learns the employee is taking an antidepressant, and mentions this to someone in the office.

It's easy to imagine how employees would react to having their medical information available to anyone other than their physicians. And you, as the employer, could be held liable for the breach of confidentiality, or the inducement of another party's breach.

Potential liability can arise even if you're not a doctor and have no physician-patient relationship with the individual whose information has been revealed. Worse, the liability is not limited to actions taken by management; virtually any member of your work force can make a mistake that can result in a judgment against your company.

Preventive measures

Strict procedures and staff training can alleviate potential problems. The best solution is simple: No information about a person's medical history should be shared without an explicit written release from the individual, specific to the particular disclosure.

Always verify any information you share is covered by the language in the release. The release should clearly indicate what information is being requested, with whom it will be shared, and for what reason.

In addition to being cautious about how you release information, make sure records are stored securely. Always keep information securely locked away, and train your staff regarding disclosure procedures and the liability that can be incurred when records are handled improperly.

Start with a training session led by an attorney to train higher executives and HR staff about preventive techniques and the legal ramifications. These individuals can then institute training for other employees and new hires.

If questionable situations occur, seek an attorney's advice as a precaution to attempt to avoid liability. The small amount invested in preventive measures could save an exorbitant amount later.

If everyone understands the importance of keeping medical information private, your business will go a long way toward avoiding painful complications and side effects. Jacklyn J. Ford is a partner with Vorys, Sater, Seymour and Pease LLP, where she practices in the field of labor and employment law with an additional practice in health care systems, behavioral health and privacy. Kimberly L. Rathbone is an associate in the Cleveland office of the firm where she practices in the litigation group. They can be found on the firm's Web site at www.vssp.com.

Friday, 31 May 2002 11:38

Understanding e-service

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When considering the importance of service to the success of your business, look at all areas that are service driven, including your Web site. A Web site is a powerful marketing, sales and service opportunity that many companies waste.

What consumers want online and offline isn't that different. They want the basics -- good customer service, product information and accurate pricing. Whether they're buying online or just going to your site for information, e-service is service.

You must think like your customers and know their expectations in order to satisfy them. If your site is e-commerce-enabled, it is critical that the same service and sales standards used in face-to-face transactions occur online.

* Transactions should be fast and painless, order fulfillment quick and efficient, and return options simple.

* Assign specific employees the responsibility of supporting Web site requests. Give them the tools and power to meet online customer requests and needs without wasting time getting approval.

* Human interaction should be an option for online customers. Make contact information easy to find. Include names, titles and extensions.

* Identify moments of truth, which occur when customers come in contact with any part of your business and use that contact to judge the quality of the organization. Walk through your Web site with the eyes of a customer. Is it easy to navigate? If you have to work to find information, your customers do, too.

* Work with your partners, in this case your Web designers, to deliver consistent service and quality. A site is not any good to anyone if it can't be updated. Stale content won't bring customers back.

* Provide timely e-mail responses. It doesn't do any good for a customer to leave an e-mail request if you are slow to respond. Win your customers' trust through ease of contact, speed, accuracy, frequently asked questions and personalized e-mail responses. The little things create positive customer experiences.

Good service from your Web site delivers the same positive results as effective face-to-face communication. Your customers will refer you to their peers.

The only difference is it will be by word of mouse instead of word of mouth. Pam Schuck (pschuck@strivetraining.com) is president of STRIV=E Training, which specializes in motivating customer service for businesses. She can be reached at (330) 273-8790.

Tuesday, 30 April 2002 07:03

Marsh madness

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Cleveland is built on wetlands. Part of the reason it grew so quickly in the late 19th and early 20th centuries was an absence of laws affecting construction on lands with watersheds that fed into the Cuyahoga River and Lake Erie.

In hindsight, there probably should have been a bit more environmental regulation. Not only would it have prevented widespread pollution, it might have spared the city from becoming a national punch line for every environmental joke.

But that's ancient history. Today, when an Ohio company wants to build on raw land, there are two governmental bodies looking over its shoulder. The Ohio Environmental Protection Agency and the U.S. Army Corps of Engineers demand strict adherence to environmental regulations affecting undeveloped land. What's good for the environment, however, adds considerable time and cost to any construction project on wetlands.

"It can take six to nine months dealing with the government before you can even start the project," says attorney Steven Marrer, a partner at Taft, Stettinius & Hollister LLP in Cleveland. "In some cases, it might not be worth it. You'll just have to look elsewhere."

If there is a piece of undeveloped land that's too perfect to pass up for your next construction project, here are the steps you must follow.

Step One: Get a wetlands delineation survey

Most companies need to hire an environmental consultant to perform this kind of survey, which will determine where wetlands are on the property, how they are configured and their category. The consultant will also serve as a representative when negotiating with the government later in the process.

Step Two: Fill out permits

If the construction project disturbs less than a half-acre of wetlands, your company will not usually need a special permit from U.S. Army Corps of Engineers or the Ohio EPA. If the project will disturb a half-acre or more, you'll need to complete two permits -- a Section 404 Permit for the U.S. Army Corps of Engineers and a Section 401 Permit for the Ohio EPA. Both ensure that your project meets federal and state wetlands regulations.

Step Three: Submit your plans

The wetlands permits require you to submit three versions of your construction project to the government. The first version is your ideal plan. The second is an alternative plan that will disturb fewer wetlands. The third is for the project not to disturb any wetlands.

"The third plan is usually something that can't exist," Marrer says. "It would just be too difficult to complete."

Once you have the two permits approved, you can start building. How to reach: Taft, Stettinius & Hollister LLP, (216) 241-2838

Categorical denial

There are three categories of protected wetlands.

Category one

These wetlands are very low quality and easily replaceable. You will not need to alter your construction project much, if at all, with this category.

Category two

These wetlands are more closely protected. They might include a water source or plant life that will be more difficult to replace. This category requires a more drastic change to the construction plans.

Category three

You can't touch these wetlands. They are considered irreplaceable.

There are Wetlands Mitigation Banks, like Trumbull Creek in Ashtabula County, where companies can purchase wetlands as a swap for the wetlands destroyed during building. Once purchased, the lands in a mitigation bank are blocked from development. Prices usually run $20,000 an acre.

Tuesday, 30 April 2002 06:52

Wetlands on the Web

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Here are some Web sites that can help you plan your next construction project involving wetlands.

U.S. Army Corps of Engineers

http://www.usace.army.mil

This site tells you the steps you need to follow for building on undeveloped land, who to contact and background on the Corps of Engineers.

Ohio Environmental Protection Agency

http://www.epa.state.oh.us

The Ohio EPA's site has its Wetland Permit Application available online in PDF format. It also includes useful information about what not to do during your project -- for example, removing trees and shrubs around wetlands, since that promotes erosion.

The Ohio Wetlands Foundation

http://www.ohiowetlands.org

This nonprofit group offers wetlands mitigation bank credits with which you can buy wetlands in protected areas to replace land disturbed during construction. There is a database of available lands and how many wetlands credits are left in each area.

Eco-Pros.com

http://www.eco-pros.com/wetlands_resources.htm

If you want to learn everything possible about wetlands, the environmental education Web site Eco-Pros.com has assembled a list of resources that will make you an expert.

HzW Environmental Consultants Inc.

http://www.hzwenv.com

This Mentor-based environmental firm touts its wetlands assessment experts. The site also includes environmental legislation updates.

Ohio Association of Realtors, Wetlands White Paper

http://www.ohiorealtors.org/legal/white_papers/wp_wetlands.html

This site has an interesting but dated (1990) white paper on wetlands by the Ohio Association of Realtors. While it may not be up-to-date, the study includes a great, simply written overview about how to develop in areas with wetlands.

Compiled by Morgan Lewis Jr.

Tuesday, 30 April 2002 06:17

Ups and downs

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Ups to the Convention and Visitors Bureau of Greater Cleveland. Its new "2002 Fun is Free" campaign offers visitors free tickets to Cleveland-area attractions such as the Rock & Roll Hall of Fame and Great Lakes Science Center for every room night they book in Cleveland. It's a smart marketing move to generate increased tourist traffic.

Downs to Rep. James Traficant. The convicted felon says he plans to run for re-election to the U.S. House of Representatives as an independent. Traficant should resign, sparing his constituents the embarrassment of his actions, and leave a modicum of respect in Congress for all the good he actually did for his region.

Ups to Flight Options CEO Ken Ricci. First, Ricci pioneered the concept of fractional jet ownership for pre-owned jets. Then he engineered a merger with Raytheon Travel Air. Now Ricci has developed a unique pricing structure that reflects the real cost of operating airplanes. Ricci's Flight Options is a true Cleveland success story that's rarely reported on.

Ups to OfficeMax. After more than two years of corporate and strategic restructuring, CEO Michael Feuer says he expects the office supply retailer to show a profit with its first quarter results. Coupled with the sale of more than 2 million (of about 15 million) shares of stock by Orient Star Holdings, which had been accumulating stock for what many believed a potential hostile takeover, it appears the company has finally turned the corner.

Tuesday, 30 April 2002 06:08

Choosing your cause

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Later this year, SBN Magazine and Medical Mutual of Ohio will celebrate the fifth anniversary of the Pillar Award for Community Service. We developed the program to, among other things, underscore the importance of giving back to the community.

As business leaders, it's imperative to recognize the impact your company can have upon the neighborhood, the environment, the residents and even your industry.

This commitment stretches beyond writing checks, organizing volunteer days and other corporate philanthropic missions. It includes personal involvement, either self-generated or through activities such as COSE's Serve-A-Day on May 11, when business leaders and their families are invited to pitch in and help improve Cleveland's neighborhoods.

As the annual reports of regional nonprofit organizations reflect, many of you sit as trustees on nonprofit boards, lending your business expertise and acumen to the efforts of those groups. But the number of young executives taking leadership roles is small compared with the efforts of the traditional, more established guard.

It's time that changed.

A few months ago, I decided to put my money where my mouth was and find a way to increase my involvement in the community -- beyond my monthly columns, SBN's coverage of corporate philanthropy and our annual Pillar Awards.

I met with Alice Korngold and Shawn Nemeth at Business Volunteers Unlimited, an organization that matches executives from its member companies with nonprofit boards. After learning more about BVU, I began the process of placement on a nonprofit board of trustees.

My goal is twofold: To use my background and expertise to make an impact upon an organization whose mission I believe in, and to share my experience with SBN readers, whom I hope will decide to step up their personal involvement.

Beginning in June, I will chronicle my experiences in the pages of SBN. My diary will appear every few months in the features section of this magazine to provide you with a behind-the-scenes glimpse of what it's like to get involved with a nonprofit organization. More important, I hope to offer concrete examples of how you, as business executives, can do more to help the Cleveland area community.