Crisis brings out the best in people.
CEOs wisely do all they can to avoid it, yet without the intensity of looming losses or a sudden controversy, employees can become lax.
Keeping the troops motivated in good times as well as bad is part of the legacy Bob Moone will leave behind at State Auto Insurance Cos. when he retires this spring.
“Complacency is something we have to constantly guard against,” says Moone, who will officially leave the company in May.
That’s especially true when a company has been doing well.
“We’ve had a pretty good run of good performance,” Moone says, in his characteristically modest style.
How does $1.14 billion in revenue and $125.9 million in net income strike you? How about State Auto’s repeated profits in an industry noted for red ink?
“The last time the industry as a whole was profitable (as measured by underwriting profit) was 1978,” Moone says.
Comparatively, State Auto has generated an underwriting profit in eight of the last 11 years. The company was also named the Best Managed Company in the Insurance Industry this year by Forbes.
Moone credits motivated employees with making the difference. Here are four key strategies he and his company have used to help foster among employees that continued drive to succeed.
Expect good performance
Setting performance goals is an obvious first step to challenging employees to succeed. It certainly isn’t a groundbreaking tactic, Moone says, but it works if done correctly and across the board.
Goals can’t be set by a supervisor and assigned to an employee. They also can’t be vague or unattainable or completely disconnected from the company’s mission.
“The goals, which are typically four or five specific objectives, are determined in conversations between the employee and his or her supervisor or manager so it’s a collaboration,” Moone says. “The goals have to be very quantifiable. They must be designed in such a way that the employee can see that accomplishing these objectives will, in fact, further the company’s overall objectives.
“I think it’s been extremely effective in a number of ways. It makes people understand that they are valuable.”
It also makes them see that regardless of a person’s title or position in the company everyone plays a significant role, and every role affects others.
Take, for example, the maintenance department. The appearance of the corporate headquarters on East Broad Street downtown not only reflects how well the maintenance workers are doing their jobs but leaves a lasting impression on visitors which, in turn, can impact the company itself.
“If you would’ve walked in here and seen dirty floors, unpainted walls, ragged carpeting, that would say something about our organization,” Moone says. “The fact that we have folks that take great pride in maintaining the physical plant I think makes an impression on our agency partners, our policyholders and the community in general. So everyone throughout the organization has a role to play.
“Some people say, ‘Well gosh, I’m not selling insurance,’ but really, you kind of are. The way you answer the telephone can help sell insurance and help paint a picture, a mosaic of what State Auto is all about.”
That’s why developing clear, mutually agreed-upon goals for every one of State Auto’s 2,000 employees has become a critical part of the company’s culture. It reinforces how individual achievement feeds corporate success.
“If constructed properly, the employees themselves really don’t need to have ... a discussion with their supervisors about on-the-job performance,” Moone says. “They know what their objectives are. They know themselves I hit them or I didn’t. I think that’s very useful in maintaining their focus and their motivation.”
Share rewards frequently
Although there is no direct monetary reward associated with State Auto’s employee goal-setting program, a second motivational strategy does connect dollars with performance.
“Of everything we’ve ever done here in my 36-year tenure, I don’t think there’s been a single program that’s had more impact on overall performance than what we call QPB: Quality Performance Bonus,” Moone says. “That’s a bonus that’s paid on profitability.”
Essentially, it’s profit-sharing.
“The premise is if employees work hard, focus on the strategy, execute the strategy and that strategy produces an underwriting profit, we want to share that profit with the people who worked to make it happen,” Moone says. “That’s not unique. What is a little bit unique is that bonus is paid on a quarterly basis. So at the end of every calendar quarter, we calculate where we are, and if there was a profit, the employees share in a percentage of that profit. And, by the way, it is shared equally.”
State Auto has 10 field offices plus a corporate headquarters. Each office is assigned a weight each quarter depending on its contribution to profitability, but employees within each office are given an equal percentage share of the profit.
“So my percentage of participation is the same as everybody else’s in the home office,” he says. “I think that’s an important concept. It says something about the way we want to manage the company. It’s very egalitarian.
“QPB has really affected things because it has given people that tangible and immediate reward,” Moone says. “They did well and they don’t have to wait for 12 months or 14 months or whatever it might be in order to see the benefit of that. They get that immediate feedback that reinforces the positive behavior.”
That’s not to say that every quarter turns out the way employees expect.
“There have been some times when we’ve done everything right,” Moone says, “but a Katrina comes ashore. You’re not going to have a profit in any quarter when Katrina or a Katrina-like event hits.
“At one point, there was some wishing that perhaps we would exclude those losses. After all, what can I do to prevent a hurricane? But actually, there are some things we can do. We can be aware of and control our exposure to coastlines. It would be very easy to write lots and lots of business up and down the East Coast and the Gulf states. It also wouldn’t be very prudent.
“By controlling those exposures, you make your own luck, in a sense. But at the end of the day, we’re all in this together. We share in the rewards or, in this case, the misfortune.”
Don’t settle for second best
“A third motivator is what I would call a culture of winning,” Moone says. “It seems to me and I’m an old psych major, so maybe I overanalyze this sort of thing that people want to be associated with a winning organization. To come in every day, do your best and work pretty darn hard to make good things happen, and then go home at the end of the day or the week or the quarter or the year and see that the company hasn’t achieved its objectives ... then it seems to me that you invested all that time and energy and creativity for no tangible or quantifiable benefit.”
If, however, you have a culture of winning, the hard work and long hours seem more worthwhile.
“Eight out of the past 11 years, we’ve generated an underwriting profit,” Moone says, noting that one of the three years the company failed to do so was a break-even year, and the other two would have generated a profit if an unprofitable business hadn’t been acquired during that time. “That culture of winning is an important aspect of motivation. It reinforces the kind of behaviors that led to it.”
Too much success, however, can create other problems, so vigilance is key.
“It is possible in the face of continued success to think, ‘Gosh, we’re pretty smart here and we can do just about anything and it’s going to come up roses,’ “ he says. “That’s not the case. You have to look at it every single day.
“By having that kind of attitude and recognizing the downside of complacency, I think we’ve continued to have our successes. But we always balance those successes with the things we still need to do. You’re never perfect.”
For example, Moone says, State Auto has posted record-breaking financial results in nine of the last 11 quarters.
“But if you look at the press releases, it’s almost as if that didn’t happen,” he says. “We say, ‘Yeah, we’re proud of this. It’s another record-breaking quarter, but we still have to concentrate on these things.’ It’s a philosophy of making sure that people feel good about what they have accomplished but never to feel that we are so on top of our game that we don’t need to be constantly vigilant, totally committed to continued execution of the strategy.”
Talk to employees
It sounds so simple, yet few CEOs actually make the time to chew the fat with employees.
“In my mind, there’s nothing more critical than communication,” Moone says. “It’s got to be frequent. But it also has to be varied because you reach different people in different ways.”
Moone knows of what he speaks. He flies all over the country to meet face-to-face with field employees each quarter. He chats with employees via e-mail and through intranet forums regularly. And every new employee is given the direct dial number to his office.
“It’s all a way of building relationships and trust and openness from the very earliest part of their careers,” he says. “We want people to be open and candid. We want to be sure everybody is on the same page.”
Yes, it’s time-consuming. He gets 10 to 12 phone calls and an estimated 150 e-mails a day from employees. He also spends more than 100 days on the road each year.
“It takes a lot of time, but this job is not 9 to 5,” he says. “I suppose some people would argue, ‘Is that the best use of your time?’ In some cases, maybe there could be some filtering that could or should take place, but I’m able to do it and I think people appreciate the fact that they do have that access.”
The proof is in the personnel data.
State Auto’s employee turnover rate for 2005 was 6.4 percent including retirements. That’s nearly half the industry average of 12.6 percent.
“I think part of the reason people continue to stay is because of the open, frank, honest communication,” he says. “I have a feeling that doesn’t happen in every organization.
“It’s an extremely valuable and necessary part of our success strategy. And it gives me enormous comfort. You can sit in your office and you can look at large losses, or you can look at profiles of business and all these things ... but going out into the field and actually seeing and talking about the good work that’s taking place is really uplifting. People are so dedicated and so energized and so creative. So it’s worth the sacrifice in time.”
HOW TO REACH: State Auto Insurance Cos., (614) 464-5000 or www.stateauto.com
First job: At age 12, working on a farm in Kentucky picking tobacco blooms
College: Eastern Kentucky University, bachelor of science degree in mechanical design,; master of science degree in operations aanagement
Greatest business challenge: About 10 years ago, when he was working for another employer and was under consideration for a big promotion.
“When you’re in a public company and you’re not the top person but you’re competing for that job, you’ve got to be very careful and make sure you’re making the best decision for your company and not the best decision for what’s going to get you promoted. I think that was the proudest but the toughest moment of my life, when I had to make a decision like that.”
The payoff for doing what was right for the company?
“I didn’t get the job.”
Most important business lesson: “Companies are really like families. You can’t just care about them the employees when you need them. You have to take the time, whether you have the time or not, if they have an issue. That’s a tough lesson to learn.”
Dunn has taken this lesson to heart with a handful of employees who were dispatched to Iraq in 2005. He e-mailed them regularly until they returned home.
“You’ve got to continue to treat them as a work friend and an employee. You’ve got to still take the time to let them know they’re important to you and when they come back, there’s an opportunity here for them. Whether you agree with the war or not, it doesn’t change what your responsibilities are to the people who work for the company.
“I worried about all of them. It was a relief when I’d send them an e-mail and I would get one back. Then I knew they were OK.”
I think it's safe to call that excessive
By Nancy Byron
My co-workers put on the pressure, but I was insistent: This cellular phone thing just wasn't for me. I didn't need one. I wouldn't use one. Nevertheless, our company issued me a slick black mobile phone with all the attachments last winter. The box sat in my bottom desk drawer for months.
Then it happened. I got horribly lost on my way to an out-of-town editors' meeting. After driving around the shadier parts of Cleveland for nearly an hour in the dark, I began to reconsider my staunch opposition to mobile technology. Maybe I could use a phone in my car.
I unboxed my cell phone the next day.
Now I'm hooked. I check messages and return phone calls en route to downtown meetings. I leave myself voicemails about story ideas that pop into my head as I drive through vibrant business districts. I call the office to say I'm running late, but haven't forgotten my 3 p.m. appointment who should be arriving any moment. For someone so hellbent against trying this technology, I'm amazed at how much I use it. I've never felt so efficient.
Some state lawmakers don't see it that way. Rep. Jack Ford (D-Toledo) wants to ban the use of mobile phones while driving. Although his House Bill 627 may be on a road to nowhere-it was introduced in November and has yet to get a committee hearing-it's an idea that could senselessly crush productivity if its backers manage to refuel the issue this fall.
I understand the safety concerns associated with cellular phones and driving. I'll admit there were times early on in my cell phone experience when I made calls in situations that could have been dangerous-merging onto busy highways, navigating through traffic at rush hour, turning corners while I downshift.
But experience has taught me to keep my cell phone off and my attention fully on the road in such circumstances. I wait until I'm safely cruising on the open highway before I dial the first number. Under these self-imposed guidelines, using a cell phone becomes no more distracting than talking to a passenger as I travel. I'm not scheduling appointments as I propel myself down the highway at 65 mph.
In fact, using a cell phone to leave myself verbal notes on voicemail is actually safer than my previous habit of holding the steering wheel with one hand while I precariously scrawled story ideas on a notepad in the seat next to me. I'm glad to be done with that admittedly dangerous practice.
Banning the use of cell phones for all drivers is an overreaction. What about those who use such phones to report traffic accidents? What about those who travel alone and rely on having a cellular phone at their disposal in emergency situations? What about those who conduct business on the road, but can discipline themselves to hang up in heavy traffic or hazardous road conditions? These people shouldn't be penalized. It's the drivers who can't act responsibly or who demonstrate reckless disregard for the safety of others who ought to have their cellular phone use regulated. That can be accomplished without an all-out ban. Instead, let's:
- Create a more serious offense-with stiffer penalties-for driving recklessly while using a cellular phone. I know I can spot these people from 10 car-lengths away. Certainly Columbus' finest can do likewise-and deter them from continuing their dangerous ways.
- Require the owners of manual-transmission cars to display a special sticker restricting cellular phone usage to highways where shifting gears is not necessary. I drive a five-speed and know how difficult it is to balance a cell phone on my shoulder so I can steer and shift at the same time. It requires a third hand or a hands-free feature-neither of which I possess.
- If statistics bear out the idea that youths are more prone to auto accidents when using cellular phones, prohibit drivers under age 18 from using them.
- Consider launching a public service campaign to encourage drivers to use the hands-free feature that comes on some car phones and to exercise extreme caution when using a handheld phone in transit.
This is a common-sense issue; it calls for a common-sense response. Don't penalize the many for the sins of the few. Educate the few about how to make their cell phone use less hazardous so we can all get down to business safely on the road.
Nancy Byron, editor of Small Business News Columbus, can be reached by phone at 848-6397, by fax at 842-6093, or by e-mail at email@example.com.
Just when you thought it was over
Ohio's year-old tort reform law is in the midst of its second court challenge-and this one is going straight to the Supreme Court.
By Nancy Byron
It was considered a coup for Ohio's business community in 1996 when legislation aimed at curbing frivolous lawsuits and enormously high jury awards survived staunch opposition at the statehouse.
Less than a month after the so-called tort reform law took effect in January 1997, however, the National Lawyers Guild of Cleveland challenged it. The case was dismissed by the Franklin County Common Pleas Court, but the signal sent by the challenge was clear: This battle is not over.
In November 1997, the same month the Cleveland lawyers' challenge was thrown out of court, a statewide group stepped up to the plate. The consortium led by the Ohio Academy of Trial Lawyers and the Ohio AFL-CIO swung hard and aimed for the wall-filing legal action directly with the Supreme Court of Ohio. The group contends that the tort reform law violates the Ohio Constitution by:
- Infringing on the authority of the Supreme Court to establish rules of civil judicial procedure.
- Restricting the right to trial by jury by limiting damage awards.
- Prohibiting due process of law.
- Creating special privileges that violate equal-protection clauses.
- Including multiple subjects in one bill.
Supporters of tort reform not only disagree with these contentions, but claim that the trial lawyers and labor groups are circumventing the legal system by filing the case with Ohio's top court right off the bat. Legal challenges typically go through a trial court and appeals court before advancing to the Supreme Court.
Apparently, this irregularity didn't bother the high court, which agreed to hear the challenge. Harry Franken, communications director for the Ohio Supreme Court, says the case is not scheduled to be heard before the court recesses for the summer later this month.
"But they've surprised me before," he adds. The court will reconvene in September.
Should the challenge be successful, it wouldn't be the first time the Supreme Court has stricken down a tort reform law. A 1975 statute limiting the length of time in which legal claims could be filed and the amount of damages that could be requested was previously overturned by the court.
Scores of business and trade organizations throughout the state are pushing for the case's dismissal.
"This is a blatant attempt by personal-injury lawyers to ignore the will of our elected state representatives and perpetuate a growing litigious society," says Linda S. Woggon, president of the Ohio Alliance for Civil Justice, which is leading the charge to dismiss the case, along with Attorney General Betty Montgomery.
Richard Mason, executive director of the Ohio Academy of Trial Lawyers, declined comment, indicating he'd prefer to make his case directly to the seven justices on the bench.
The stakes in this case are high for Ohio businesses. A reversal would once again allow joint and several liability lawsuits, remove the cap on punitive damage awards and remove comparative fault principles from product-liability cases, among other issues.
Should the law be upheld, however, the trial lawyers and labor groups would have little chance of recourse-short of lobbying for another law change by state legislators-since the Supreme Court is the court of final judicial review in the state.
How to get involved
Ohio Alliance for Civil Justice
Position: Supports current tort reforms
Contact: Linda Woggon with the Ohio Chamber of Commerce
Phone: (800) 622-1893
Web page: www.alliancecourtwatch.com
Ohio Citizens Against Loss and Abuse
Position: Supports current tort reforms
Contact: Dana Smith, executive director
Phone: (800) 668-5266
Position: Opposes current tort reforms
Contact: William Burga, president
Phone: (614) 224-8271
About a year ago, Dave Bianconi did something many business owners wouldn't even consider. He turned down what could have been a huge corporate account for his 12-year-old pharmaceutical, electromedical and durable medical equipment supply firm.
"Nationwide [Insurance] approached us to work with them as a provider, but their requirements did not fit our true capabilities and strengths," says Bianconi, president of Progressive Medical Inc. in Westerville. "So rather than trying to take on business for the sake of taking on business, we declined."
Bianconi's decision was not as easy as he makes it sound. After all, Progressive's sales grew from $1 million in 1994 to more than $10 million this year, thanks in part to new business.
"It was difficult from the standpoint that you never want to turn away business," Bianconi admits. "But it was not difficult from the standpoint that we weren't a good match."
Progressive's expertise lies in serving workers' compensation claimants, he explains, not general health care clients. Maintaining that niche, he adds, is what makes his company successful.
"To maintain quality, sometimes you have to turn away business," he says. "There's an opportunity out there for someone. It just wasn't for us."
Talk about repositioning. Last year brought a new name, a new director of marketing position and a diversification of products to RFC Capital Corp. Its the only way Chairman and CEO Steve Jaffee says RFC could capitalize on all the potential business opportunities in the fast-growing telecommunications industry.
RFC Capital Corp. is not a telecommunications company itself. Rather, it provides financing to such entities. And with the ever-increasing number of smaller, undercapitalized telecom service providers across the countryand the mandated break-up of state-run telecom services in Europe by the first of next year1999 could be a huge year for RFC.
Its incredible how many opportunities there are in this telecommunications industry, Jaffee says.
Jaffee expects his two newest financial productsmezzanine capital and equipment lendingto boost his customer base by at least a quarter in the coming 12 months. In addition, RFC will roll out a new program, tentatively called enterprise value loans, in the very near future.
We generally advance cash only when we have 100 percent collateral in the form of receivables, Jaffee says, But when we like the company, when we like their management and we like their financial condition, we can advance cash based on the enterprise value of the organization. Such flexibility should make RFC a more attractive financing alternative to traditional funding sources such as banks, which tend to adhere to strict collateral requirements.
RFC is also pondering a move into an investment banking type role where it could help telecom companies interested in a sale or merger find a suitable deal.
The more [financial] solutions you can offer, the more likelihood youll be the provider of choice, Jaffee says.
Jaffee will take that message abroad in 1999 as he actively solicits customers in European markets, where telecom competition is in its infancy. Already hes finding ways to give RFC an edge over would-be competitors by joining the European Competitive Telecommunication Association, a trade group formed specifically to address the needs of telecom companies trying to break into newly deregulated areas.
Were the only finance player that is a member of ECTA, Jaffee says. As new entities are formed, theyll come to us.
To prepare for this anticipated onslaught of business, Jaffee is close to raising a third round of equity for RFC valued at $10 million to $20 million.
Look for RFC to cut deals in Germany, Spain, France and possibly Italy this year, en route to doubling its sales volume for the second time in two years. This might also be the year RFC signs its first Central Ohio customer.
RFC Capital Corp.
130 E. Chestnut St., Columbus
Top officer: Steve Jaffee
Estimated 1998 revenues: (Would not disclose)
Revenue growth, 97 to 98: 100%
Revenue growth, 96 to 97: 600%
Major Clients: Genesis Communications International; Network Communications International Corp.; NewTel Inc.; Mobile One of Ft. Lauderdale, Fla.; Access One Inc.
There are few things I dread more than preparing for a move. No matter how appealing the new neighborhood, no matter how much better the new floor plan may suit my needs, no matter how exciting it is to select new carpeting and paint colors, I cant stand all the disruptionand the anxietya move creates.
I thought things would be different this time. It was our office that was moving, not my home. We signed our new lease nearly six months before the move date, rather than just a few weeks ahead of time. We were using a professional moving company, too, not my fathers 1978 Ford Econoline van, a rented U-Haul and a handful of well-meaning, but hurried friends whod rather be sipping cold beer and watching sports than unloading lamps and boxes on a Saturday afternoon.
This time, we even had a godsend of a moving coordinatorour very own Kim Vucelichwho painstakingly tracked every detail, from when to defrost our office refrigerator to how many boxes wed need to pack up our files. Talk about organization. I didnt have to worry about a thing.
So why, then, did I dread this move so much? I didnt even have to send out scores of address change notices or arrange for our phones to be forwarded to the new number. Kim handled all that.
Perhaps my anxiety came from the fact that moving preys on one of my weaknesses: my reluctance to make quick decisions. I like to have time to ponder ideas and data. That may not seem so bad until you realize how much paperwork can stack up in the process. Organizing for a move forces me to make decisions Ive been putting off. Long-forgotten, buried files stare me in the face and demand action: either toss it or act on it. No indecision allowed.
More than once, as I packed the contents of my desk drawers, I was dismayed at the number of ideas I shouldve picked up and run with months ago. By putting them off, the decisions were made for me. In most cases, theyd collected too much dust to salvage. Shame on me.
I often blame my busy schedule for this nasty little habit. But everyone is busy these days. That excuse just wont cut it anymore.
Although Ive never been big on New Years resolutions, this looks like a good one to me. Its time I held myself accountable for my indecisiveness.
After all, a delayed decision is a missed opportunity. And missed opportunities can kill you in thisor just about anybusiness.
So heres to less pondering and more decision-making in 1999. And heres to Kim, for making this move one of the smoothest on record.
Nancy Byron, editor of SBN Columbus, welcomes your comments by mail at 2193 City Gate Dr., Columbus, OH 43219; by fax at 842-6093 or by e-mail at firstname.lastname@example.org.
January was always the worst, says Goldstein, owner of Costume Specialists Inc. in downtown Columbus. That month often contributed as little as 5 percent to her companys annual revenues, she says, while sales in October always her busiest month with the Halloween rush typically accounted for more than 50 percent.
If you had a bad October, you were done or struggling or looking for refinancing, she recalls.
That annual adrenaline rush, coupled with Goldsteins regular scramble to keep workers busy during the frequent lulls, quickly grew tiresome. But instead of begrudging her plight, Goldstein set out to change it.
You see so many people who spend so much time bemoaning whats happening to them that they dont look around at what they can do, she says. Theres a natural ebb and flow of any business. I have to be smarter. I have to find things that fill the time periods to even that out.
Filling the seasonal voids in her nearly 19-year-old company with complementary niche businesses was a formidable, sometimes perplexing, task, she admits, but one that appears to be paying off. January sales now account for more than 10 percent of Costume Specialists annual revenues and the companys reliance on Octobers income to turn year-end profits has been cut almost in half. Nevertheless, Goldstein isnt ready to kick back and relax.
Just because your business is stable, that doesnt mean you should be comfortable, she says, noting that her $1.4 million company still does a substantial portion of its business in the fourth quarter. I hope I never lose that scramble, that hustle for a new niche. As soon as I do, Im dead in the water.
Creating the monster
Goldstein has always pushed herself to do more.
When she was a buyer for Lazarus Department Stores in the mid-to-late-70s, she sewed life-sized character costumes on the side for company sales meetings and special events. On a whim, she even bid on and won a $20,000 job to build a cast of Nutcracker-themed costumes for the annual Lazarus holiday display. It was then that Goldstein decided this hobby of hers could become a full-time business and she set up shop in her basement.
Although she soon won other corporate jobs from The Limited, Royal Doulton and New York-based Eden Toys, Goldstein had to take in some subcontracting work from a local childrens wear designer to keep herself and the couple of sewers she hired busy. Even in those early days, the need to diversify her business was already clear.
In an effort to bring in additional cash flow, Goldstein opened a small retail shop on the East Side in 1981. Although most of the stock was geared toward traditional Halloween costumes, the store also carried some theatrical garb and themed outfits for corporate sales events.
The shop brought Goldstein more customers, but fell short of being the regular or reliable revenue stream shed expected.
We went through the normal start-up retail peaks and valleys, she says. We struggled to get to Halloween.
In fact, Goldstein soon realized the store was running so much red ink in the early parts of the year that her business was lucky to get back to zero by the end of October. That scared her a bit.
It was such a seasonal business, she says. To remedy that, she added tuxedos to her offerings in 1984.
That had a good summer wedding business and prom season, she says. That bumped up business.
So much so, in fact, that Goldstein opened a second store the following year this one on the North Side, near Graceland. Then she further diversified her retail line by adding dancewear, which brought in customers during the August back-to-class rush and in April and May during dance recital season.
Expanding the variety of items she offered at the retail level worked like a charm. Store sales were becoming more constant and her theatrical offerings were drawing big-name clients like The Ohio State University, Otterbein College and Columbus Light Opera. Unfortunately, Goldstein couldnt say the same for the other side of her business, which remained dedicated to making team and corporate mascots like Max & Erma for the similarly named Columbus-based restaurant chain and PéPé the Penguin for The Kroger Co. It was still feast or famine in that area.
We were doing two or three costumes at a time, Goldstein recalls. Then, in 1989, Goldstein landed a gem of an order from Boston-based Childs World. The company wanted 176 Peter Panda costumes and wanted them in eight weeks. Goldstein was scrambling again.
I called everybody I knew with any talent whatsoever and we worked 12 to 14 hour days. It was an insane period in my life, but we got it all done and they were happy with the costumes.
Although the success of that project certainly was a feather in her cap, it left her with a slew of workers she had trouble keeping busy until the next big order came in.
When we had lulls, Id flip people over to sewing costumes for the retail store, she says. I always tried to keep my employees, but there were times when I had to lay people off.
Three or four times, to be more specific, between 1989 and 1995, she says. That made Goldstein gun-shy in recruiting highly skilled workers, for fear she couldnt keep them. It also pushed her to overextend herself.
Many times, Id spend all night sewing, she says. It was horrible. Id go home, put the kids to bed and come back here and sew the rest of the night. I wanted to hire someone that could do what I did, but that someone was a skilled person looking for a career and I didnt feel like I had a career spot to offer.
Something more had to change and quickly.
Theres got to be another way
Goldstein took a hard look at her income statements, the structure of her company and her prospective customers. She saw the potential for a lot of new corporate work, but she knew her company wasnt set up to handle large jobs on an ongoing basis. Her choice was clear: remain small and accept the highly seasonal nature of her business, or ramp up for bigger projects and get more aggressive about finding customers that needed life-size character costumes on a regular basis.
She knew what she needed to do to be successful, says Dennis Shaffer, vice president of commercial banking for The Ohio Bank, who has been Goldsteins banker for nearly seven years. She knew she needed to diversify her client mix and her business. It was just how she was going to go about doing it.
Goldstein opted for the leap of faith and leased a loft-style warehouse building on North Fifth Street which would accommodate the full-scale production department shed need to handle the big orders she was determined to land. Then she began actively pursuing contracts from large publishing houses such as Houghton Mifflin and Harcourt Brace, figuring there was money to be made in childrens book character costumes. Little by little, the orders started flowing in.
The larger warehouse space not only gave Goldstein more room for her still-small staff to sew popular costumes such as Curious George, Felix the Cat and Babar the Elephant, it offered her a more expansive storage area. That became particularly important when Goldstein stumbled upon her next big business opportunity in 1993.
While visiting a marketing assistant at one of her publishing house clients in New York that year, Goldstein noticed a cubicle stacked with large trunks of costumes waiting to be clea ned and repaired. A flip comment by the marketing assistant about how she hated that part of the job gave Goldstein an idea. I said to her, Would you pay somebody to do that? The instant, grateful affirmation was all Goldstein needed to hear; another facet of Costume Specialists was born.
Its been a huge stabilizing factor in the business, Goldstein says of the costume management division, which brings at least 25 costumes through her facility weekly for cleaning and refurbishing and requires the tracking of more than 200 other costumes each week as they move about the country making appearances.
Although it took a couple years for Goldstein to work out a reliable scheduling system, by 1995 shed won her first big costume management contract with Barnes & Noble and shed seen her last real sales slump. Now she had a career opportunity to offer her workers.
I have to laugh, Goldstein says. Despite all my design skills and creativity, the business stabilized doing laundry.
The companys revenues have grown more than 30 percent annually since adding the costume management division, Goldstein says, and its profit margins have increased.
Goldstein still sells Halloween costumes, tuxedos and dancewear through her Costume Specialists retail store, but shes consolidated to one location and no longer relies on that revenue stream to make or break her business each year.
I think she has a pretty good balance now, Shaffer says. As a business owner, you continue to experiment and find out what works and what doesnt. But she may have hit her little niche where she can be most profitable.
Preventing another slump
Diversification may have evened out Costume Specialists revenue stream and made the company more profitable, but that doesnt mean Goldsteins quest for stability is over. She recently began a marketing push to drum up more business outside the publishing arena, which brings in the majority of her revenue now.
I dont want all my eggs in one basket, she says, noting that about 90 percent of her costume management business and 75 percent of her production work is tied to publishing clients. I hit that industry at the right time with all the megastores growth, but the profitability of those companies is very iffy. Its an unstable industry and Im looking to diversify prior to any other changes or downswings in that industrys business cycle. If it were 25 to 30 percent [of my business], Id feel most comfortable.
To broaden her clientele, Goldstein is reaching out to restaurant chains and amusement parks.
Weve been somewhat involved in both of those, but not to the same extent as the publishing industry, she says. Amusement parks are naturals because almost all of them have characters now. Besides, the summer months are still a bit slow for Costume Specialists and thats a hot time in these industries.
Its the greatest thing in the world to get a client that is so forward thinking, says Ron Hagan, an accountant and adviser to Goldstein. Wendy has tremendous talent...and she can see the opportunities in her business to continue this expansion.
That's important since it's the only way Goldstein can stay in control and prevent her business from becoming too dependent, once again, on a particular season or industry.
Now our line of credit is focused on getting jobs not getting through a month, Goldstein says. It's a huge relief. It still gets light and we get slammed sometimes, too. It's just that kind of a business. But at least I can sleep at night in September now. "
Its OK if you dont understand or care about stranded costs and retail marketing areas. These terms may lace the vocabulary of those embroiled in Ohios electric restructuring debate, but the reality is deregulation hinges on something far more familiar: cold, hard cash.
It is a fight between the utilities and customers over money. Thats what this is all about, says Luther Heckman, former chairman of the Public Utilities Commission of Ohio. Utilities that currently get money from customers dont want to lose it and customers who have to pay utility bills would like to pay less.
Heres a look at two of the main money struggles:
1. Taxes As a regulated utility, the electric company passes all its taxes on to its customers. While passing along costs to customers is not so unusual in the business world, the fact that utilities are assessed at higher tax rates than other companies is a bit odd. For example, most businesses are taxed on personal property based on 25 percent of the value of the property. In utilities, however, property used to generate power is assessed at 100 percent of its value and property used to transmit and distribute power is assessed at 88 percent.
How those tax rates were set is not at issue in the deregulation debate; what to do about it is the question. Reducing the rate may seem like the obvious answer, but to do so could cripple dozens of school districts and local governments that rely on these tax dollars. According to Jim Henry of the Ohio Council of Retail Merchants, taxing utilities on 25 percent of their personal property value would take $189 million away from local coffers annually.
There are 30 school districts in the state with major generating plants [in the area]. In some cases, almost half of their revenue comes from the electric utility tax, he says.
Alternative solutions are likely to include some sort of replacement tax, but who should pay it remains a political hot potato.
2. Rates Politicians are also scratching their heads over the prices customers are being charged for electric service.
Regulated rates are higher than market rates, Heckman says. Regulation is supposed to mirror the market.
That isnt happening. How to fix it is sticky. So much so that no fewer than six legislative proposals offering various cures have been introduced in the Ohio General Assembly during the past two years.
If regulation accurately reflected the prices in the market, we wouldnt be having this argument over money, Heckman says. Regulation has failed.
Sen. Bruce Johnson, who co-authored one of the leading electric restructuring proposals in conjunction with Rep. Priscilla Mead, says the debate is coming to a head.
I think were going to definitely pass restructuring this year, he says. Last year we focused on educating the General Assembly on what electric restructuring was ... Now legislators have to come to the decision to cut the baby and move on.
For more details or to offer your input on the electric deregulation proposals pending at the statehouse, contact Johnsons office at (614) 466-8064.
When Kamlesh B. Trivedi immigrated to the United States in 1975 from his homeland of India, hed probably never heard of Miami Valley Punch Inc., a small, Dayton-area maker of precision punch products. Eighteen years later, he became its owner.
Although Trivedi traveled a long and winding path to business ownership, he didnt go into it blindly. Trivedi, who holds a masters degree in engineering, sought advice from the Service Corps of Retired Executives, attended dozens of business seminars and spoke extensively with other business owners before taking the plunge.
Apparently, all that research did the trick. Within a year after purchasing Miami Valley Punch in 1993, Trivedi had brought the struggling company back to profitability after five years of financial losses. He did it, in part, by expanding the companys product lines a change reflected in the companys expanded name: Miami Valley Punch & Manufacturing.
In 1996, the Dayton Area Chamber of Commerce named Trivedis company its Small Business of the Year in the one- to 19-employee category.
The success Trivedi has experienced as a business owner hasnt stopped him from becoming involved in his community. Trivedi is a board member for the State of Ohio Rehabilitation Service Centers Advisory Council, which creates jobs for people with disabilities.
He is also a board member of the Industrial Advisory Council for the Manufacturing Engineering Department at Central State University, an advisory group member for Goodwill Industries and a board member of the Minority Business Enterprise Input Committee with the Dayton chamber. In this last role, Trivedi was instrumental in the development of a new program to provide minority suppliers access to procurement opportunities in automobile manufacturing, says Robert R. Lowe, executive director of the development council.
Trivedi has also found time to mentor other aspiring business owners such as Rom Kedhar, now president and owner of RK Die Casting Inc. in Dayton.
As I expressed an interesting in developing my own business ... I became overwhelmed by the accounting terms, labor procedures, tax requirements, insurance needs, capital security and many other details of establishing a new business. Kam came to my rescue, Kedhar recalls in a letter supporting Trivedis SBA award nomination. His advice and mentoring me, another minority, helped me to overcome some of the obstacles and gave me the confidence to proceed in establishing my business.
In addition, Trivedi has gotten involved in The Governors Initiative on Jobs for People with Disabilities, a program which has allowed him to find and hire a blind sales manager, who has provided Miami Valley Punch & Manufacturing with potential sales of more than $250,000, and a quadriplegic systems administrator who has implemented a shop-management system for the company.
Trivedi, who is now a U.S. citizen, is married and has two children.