The right partner can help you preserve and build wealth, as well as successfully transfer that wealth to the next generation. However, once you select an adviser, how do you develop a long-term working relationship that is the most beneficial for you?
When establishing a relationship, the adviser should take the time to get to know you and your financial situation, your financial goals and your risk tolerance. However, the amount of personal attention expected as the relationship moves forward frequently is different for different people.
The key to a successful relationship is to establish a clear, mutual understanding about what you want and expect from each other. For the long-term benefit of the professional relationship, discuss your expectations early in the process.
The relationship must be a shared effort between adviser and client. The cornerstone of a successful relationship involves both of you participating in the decision-making process. Setting expectations at the beginning can avoid misunderstandings or dissatisfaction later.
Issues to discuss with your adviser should include:
* Account management. The process of assessing your financial situation, risk tolerance and opportunities is continuous. However, preferences vary widely regarding the degree to which an individual wants to be involved.
Agree on how your plan will be monitored and evaluated to ensure it is helping you progress toward your goals. And clarify how you want to discuss financial questions and possible investment opportunities, including assessing the risk and reward potential of those investments.
* Frequency of communication. Discuss with your adviser how frequently you expect to communicate with him or her regarding your financial situation, your portfolio and its performance. Determine the process for making adjustments to ensure your plan continues to meet your situation and goals. Update your adviser when your financial needs or situation changes. A change in life circumstances, such as the sale of a business, retirement or the birth of a child or grandchild may necessitate an adjustment to your financial plan.
* Preferred form of communication. Discuss your preference for a primary method of communication, whether by telephone, e-mail, fax, in-person meetings or some combination of these.
* Working with other professionals. Most people expect an adviser to provide expert advice about investments, retirement planning and insurance. However, you may also ask your adviser to work with other professionals, including your attorney, accountant, insurance agent or investment fund sales representative. By making your financial adviser a partner with your other counselors, you help ensure the services you receive from each will work in tandem to reach your overall plans and goals.
* Business changes. Clarify with your adviser how he or she will keep you informed of professional issues related to your relationship. Your adviser may have gained new expertise or received a new professional designation. His or her office may have implemented changes in processes, staffing or fee structure. Be confident that your adviser will inform you of changes that may modify your relationship or require you to make decisions regarding your account.
* Protecting client confidentiality and data integrity. Discuss the controls your adviser has in place to protect you. The information shared between you and your adviser should be held in strict confidence according to the law and in keeping with professional trust and ethical behavior.
* Documentation. Your adviser may provide a number of documents, including reports of daily trade activities, monthly statements and quarterly investment reviews. The amount and frequency of information provided by an adviser and expected by an individual can vary widely, so clarify your expectations.
Taking a disciplined approach to managing your relationship with your adviser is of great value. Not only can it help ensure you are informed and consistent with regard to your finances, it can also improve your financial future.
The most successful partnership is one in which you build mutual trust and understanding, and then work together to ensure that your financial adviser has the information needed to act effectively to achieve your long-term financial goals.
Calloway Robertson is a vice president and wealth management adviser for Fifth Third Bank Investment Advisers located at 21 E. State St., Columbus, and can be reached directly at (614) 744-5429 or by e-mail at Calloway.Robertson@53.com.
In the late '90s, he says, the Internet and telecom industries were booming, so the utility construction company's executives took the time to do some strategic planning. Their goal was to leverage the skills and experience of the company and its employees and make the most of numerous opportunities on the horizon.
"Our customers would call us and say, 'Here are all the projects we plan to do in the next two years, pick what you want,'" says Phillips. "The industry was growing so fast we needed to do some planning to identify what we could do to grow and handle the opportunities in the near future."
So Phillips and his management team spent the year 2000 talking to industry experts, customers and teammates -- the name Fishel Co. calls its employees --about the direction the company was headed. The result was a new strategic plan and vision the company rolled out in April 2001.
But shortly after that, the bottom dropped out of the market, and Fishel found itself facing unexpected financial challenges.
"The stock market dried up, and most of our customers experienced financial difficulties," says Phillips. "By the summer of 2001, we were in significant financial turmoil."
Nineteen of the company's top 32 customers declared bankruptcy.
"We were writing off significant receivables," says Phillips. "The telecom industry was a train wreck in 2002."
But Phillips was no stranger to handling these kinds of financial challenges. After working for Deloitte & Touche for two years, he joined Team Fishel in November 1983 as its corporate controller and was promoted to chief financial officer in 1989.
"We went from the penthouse to the outhouse in a short period of time," he says.
Fishel survived, thanks in part to Phillips' ability to cut costs across the board and react quickly to the rapid changes in the marketplace. He and his management team didn't throw out the company's strategic plan and start over. Instead, they used the same basic plan and strategic planning process to refocus company resources where they counted most.
Says Phillips, "We identified 14 markets where we could play a major role with our skill sets."
Back to basics
One thing Phillips continues to believe in is the telecom industry.
"For us, the communication industry has been a historically better market," he says. "Ken Fishel started out in 1936 as an AT&T communications contractor, and it has always been our stronger market, our core." Energy and cable companies are also bread and butter markets for Fishel Co.
"Power utility companies are just getting their feet on the ground after Enron. They are starting to look at how to upgrade their systems, especially after last year's blackouts."
But Phillips has learned not to depend too much on any one industry.
"We are diversifying to spread our risk," he says.
The fiber optics industry is one of the most promising in those 14 markets Fishel is targeting.
"Fiber optics to the home is a big opportunity for us," Phillips says. "Verizon is the most aggressive player in that field. They plan to have 1 million homes completed by the end of the year."
Another potential market for Fishel Co. is the WIFI (wireless fidelity) industry, which is just beginning to emerge across the nation. the city of Dublin hopes to be the first in Ohio to go wireless, enabling all who use computer devices to access the Internet and communicate without the need for plugging in.
The $1.5 million project is still in the planning phase, says Phillips, and the city has turned to Fishel Co. for direction.
"The city is purchasing material from us and using as consultants to develop a Request for Proposal for the project," he says.
And he's not ruling out the possibility that the company will be chosen to complete the project.
"It depends on where we come in with the RFP," he says.
The growth potential of Fishel isn't limited to new industries; it also encompasses geographic locations, although the company considers itself conservative when it comes to expanding its boundaries.
"The mantra in our industry and business is that volume kills, profit thrills," says Chairman Jeff Keeler.
If anyone at Fishel understands this, it's Keeler. He joined the company in 1967 and learned the business from the "underground" up. Keeler says because of the risks involved, it pays to grow slowly.
"In our business, you can bite off more than you can chew," he says. "If you try to do too many projects, you can't manage them properly and you end up with losses rather than profits."
That doesn't mean the company is choosing not to grow; Fishel does business in 27 states out of 22 offices, and recently launched operations in Richmond, Va.
"As opportunities present themselves in the right geographic areas, we will consider them," says Phillips. "But we feel it is wise to leverage our current areas."
However, identifying industry and geographic markets alone won't bring in the business that Fishel is looking for. What lands the jobs, say Phillips and Keeler, is the value the company brings its customers.
"It boils down to operational excellence," Phillips says, "being the low-cost provider of quality service."
And both men believe that Fishel can be that low-cost provider because its teammates are always looking for ways to reduce the costs of jobs, which saves the customers money.
"We constantly work at finding ways of doing things quicker, better and faster," Keeler says. "We do believe time is money, and we watch our labor and equipment costs.
"We are able to get more done with fewer man-hours, so we make a profit. We think profit is a beautiful word."
Music to their ears
When Keeler says the company believes in making a profit, he means it. Every employee who has been with the company for more than one year shares in a split of one-third of the profits before taxes on a quarterly basis through its profit-sharing plan.
Keeler developed the plan to foster team spirit, and it has worked.
The plan has been in effect for more than 20 years, and Keeler and Phillips say it continues to provide benefits that have helped the company survive.
"I would say our customers and our teammates are equally our greatest strengths," says Keeler. "Our teammates feel like shareholders. They have an interest in our success. They feel empowered - even though that's an overused word."
Keeler says the company's employees look for ways to cut waste as well as to improve efficiencies, and they scrutinize the company's expenditures carefully.
"Even though we are a privately-held company, we are an open book company - we post our financial results on a monthly basis," he says. "The teammates see how much we made or lost. When we make money, I use green paper, and we use red for losses. Generally, we have two or three of those [red] letters in the wintertime."
Still, Fishel Co. teammates have enjoyed an average of about six-and-a-half weeks' extra pay each year.
"The highest was 26 weeks' additional pay, the lowest was one week's, the first year we started the program," Keeler says.
Thanks to Fishel's ability to get through the tough times, Keeler says many of its customers have stayed loyal to the company.
"We have a lot of long-term customers in the energy and information industries," Keeler says, "as well as telephone companies, electric and gas companies. The customers are the same, although what we do for them may be different."
But in the end, it is Phillips' and Keeler's focus on the company's customers and teammates that remains the one company constant. Both men say they have learned that the rest of the company's strategies need to evolve as it works to meet new challenges.
"Keeping pace with technology in relation to serving our customers is a big challenge for us," Keeler says. "We will alter our service offerings to provide what our customers need. And maintaining a quality, trained work force is also a challenge. We need to make the construction industry more attractive to potential teammates."
Explains Phillips, "Developing our strategy and vision is not a static process. It is an ongoing process, and we will continue to give it our best shot."
How to reach: The Fishel Co., (614) 274-8100 or www.teamfishel.com
The Butler Co., the largest veterinary distributor of animal health products in the United States, named Kevin Vasquez president and chief operating officer, reporting to Howard Deputy, chairman and CEO. Vasquez, along with Executive Vice President and Chief Financial Officer Leo "Mac" McNeil, were also appointed to Butler's board of directors.
Vasquez was most recently executive vice president and COO of the company and has more than 25 years of experience in the animal health industry. He has held a number of senior executive positions during his career at Fermenta Animal Health, Boehringer Ingelheim Vetmedica Inc. and The Butler Co. He has served the industry as a member of the board of directors of the National Cattlemen's Association, the American Feed Industry Association and the American Veterinary Distributors Association. He is also a past chairman of the AFIA Animal Health Committee and has been an industry panelist during a number of industry association meetings.
Vasquez holds a B.S.B.A. in marketing from Western Carolina University and an MBA from Central Michigan University.
The Butler Co. was founded in 1953 and is headquartered in Dublin. It employs more than 570 people throughout the United States, and annual sales exceed $550 million.
ERNST & YOUNG
Paul Davison was promoted to partner in Ernst & Young's assurance and advisory business services practice. Davison has significant experience auditing large public and privately held clients in the consumer products and retail industries. He's been instrumental in building the practice in the Columbus market and is heavily involved in Ernst & Young's Entrepreneur Of The Year program.
He has served on the board of The Entrepreneurial Institute, YMCA Board and the Miami University Accountancy Advisory Board. Davison is a certified public accountant and a member of the American Institute of Certified Public Accountants and the Ohio Society of Certified Public Accountants.
NATIONAL HEALING CORP.
National Healing Corp. named Dr. Richard Edward Schlanger to its physician's advisory panel to serve as a resource for the company's wound healing centers, which account for 20 percent of the nation's managed and outsourced wound healing centers.
In addition to consulting with the medical directors and physicians at each NHC wound healing center, panel members are responsible for reviewing the centers' clinical activities, including patient treatments and outcomes, continuity of care and staff training. Additional responsibilities include participating as a member of NHC's speaker's bureau and assisting and advising NHC on various research and educational materials, as well as materials intended for publication.
Schlanger, who was named corporate medical director of wound care for NHC in 2002, also serves as medical director of the National Healing Wound Center at The Ohio State University Hospitals East, where he has been since it opened in 1998. In addition to caring for patients at the center, Schlanger has a thriving general surgery practice at the university.
MCGRAW-HILL LEARNING GROUP
McGraw-Hill Learning Group, a leading K-12 basal and supplemental publishing group, appointed Jeffrey Livingston, a former entrepreneur and high school teacher, as vice president of urban markets.
Livingston will develop opportunities in urban markets for the McGraw-Hill Learning Group, which includes SRA/McGraw-Hill and Wright Group/McGraw-Hill. He reports to Peter F. Sayeski, president of the McGraw-Hill Learning Group, and works closely with the McGraw-Hill Education National Urban Markets team, headed by Dr. Daniel A. Domenech. Livingston will be located at SRA's national office in Columbus.
Livingston sees his new position at the Learning Group as a natural extension of the vision that has guided his career.
"I have spent my life developing creative ways to make a difference in the lives of students," he says. "I was happy to find that, through products like Open Court Reading, Direct Instruction, Everyday Mathematics and Breakthrough to Literacy, the McGraw-Hill Learning Group also shares the same vision of focusing on improving student achievement."
Before joining the McGraw-Hill Learning Group, Livingston was founder of Achieva, a college preparation company that focused on test preparation, admissions advice, and study and presentation skills for high school students. He later sold it to Kaplan. Livingston was also a consultant for EdSolutions, a company that offers strategy consulting for business clients interested in accessing the K-12 market and providing professional development and training for public school districts.
He has teaching experience in high school biology and humanities, and served four years as an associate with Merrill Lynch. Livingston holds a degree from Harvard University in government and economics.
Susan M. Bottiggi was named market executive of the Columbus region of the private client group at National City. She is responsible for growing National City's wealth management business in the region. The private client group serves the needs of high-net-worth individuals and families by providing customized solutions and expert investment guidance delivered through local financial experts.
"Susan is a results-driven manager with a track record of growing and retaining business, and consistently delivers on our commitment to superior client service," says Stephen Hartle, Ohio managing director of the private client group. "We're confident that she will continue to build momentum in comprehensive wealth management in the Columbus and Central Ohio markets."
Mike Gonsiorowski, National City president and CEO, Central Region, says, "Susan is an exceptional individual who makes significant contributions to our business and to the Columbus community, with 24 years of financial services experience in the market. I look forward to having Susan join the senior management team for this area and to working closely with her in our collective efforts to continue to build strong relationships with our clients."
With a 3-year-old son, we watch a lot of television for children, and I've noticed that one network, Nickelodeon, is encouraging children to learn more about the political system and to vote as an adult.
When I was growing up, we were taught the importance of voting both at school and at home. But as adults, we can lose sight of the impact of our vote amid our busy day-to-day work and personal lives, especially during a nonpresidential election year. Despite the fact that the polls are open flexible hours, it can still be hard, especially for younger employees not used to voting, and for parents, to make it to the polls to vote.
That's where employers can help by making it as easy as possible for employees to have the time during the business day to vote. That doesn't mean closing for the day or driving employees to polling locations, but there are things employers can do to encourage employees to vote.
* Post signs a few weeks before the election reminding employees to vote.
* Advise managers and supervisors to give employees extra time during breaks or lunch hours if needed, and let employees know they have that time.
* Remind employees during meetings of the upcoming election and the importance of voting.
* Have interdepartmental contests to see which department has the most voting employees, and give them a reward, like pizza.
* Stay bipartisan -- the goal is to get employees to be more active politically, not twist their arms to vote according to your standards.
I'm sure there are more creative ideas that can be implemented. Developing employees' political consciences is not the job of the employer, but creating an atmosphere that is flexible and encouraging is a great way to plant that seed.
Education: Graduated The Ohio State University, 1955, College of Commerce; attended Dartmouth College 1951-53
First job: Sales clerk at Lazarus Department Stores
Career moves: Hired at R.G. Barry Corp. in 1955, named president in 1965, chairman in 1979 and senior chairman March 2004
Boards: Has served or currently serves on the board of directors of the American Cancer Society, Ballet Met, Capital Club, Children's Hospital, Columbus Jewish Federation, Governor's Business & Employment Council, Ohio Development Center, American Red Cross, United Way of Franklin County, Young Men's Christian Association
What is the greatest lesson you've learned in business?
Beware of your greatest strength because it can ultimately prove to be your Achilles' heel.
What is the biggest challenge in business you've faced?
Taking over the role of president after my father's death.
Past or present, whom do you admire most in business?
Les Wexner. He has been a visionary with the courage and tenacity to pursue his vision. He is not afraid to take risks and is willing to confront adversity and reinvent himself as conditions in the marketplace change. He has demanded respect and has integrity and a commitment to public service.
But these days, it's not just 18-year-olds in the classroom -- it's their parents. This year, a growing number of working adults are packing college classrooms, and the education landscape in Columbus continues to change. In fact, according to the U.S. Census Bureau, there are now 6 million college students over the age of 25, comprising 37 percent of the college student population.
These nontraditional students are seeking practical skills they can use on the job and grow within the community. They are demanding flexible class schedules and taking advantage of new technology that allows them to earn a degree without putting their lives on hold.
Education experts attribute the increasing number of adults returning to the classroom to the realization that the only way to move ahead professionally is to go back school. In addition, more and more adults recognize the value of a master's degree in today's competitive marketplace.
Studies have consistently shown that students with advanced degrees earn more each year. According to the U.S. Census Bureau, people with master's degrees can expect to earn $2.5 million over their lifetime, while graduates with a bachelor's degree earn a lifetime average of $2.1 million. High school graduates average just $1.2 million in lifetime earnings.
Although professional advancement is a primary motivator, there are other benefits of earning an advanced degree.
* Credibility. Not only does a master's degree set professionals apart from their peers and enhance personal reputation, it also reinforces the owner's dedication to his/her profession.
* Networking. Since many classes are filled with working professionals, it is not uncommon for partnerships to be fostered in the classroom that spill out into the business arena. Instructors boast a wealth of contacts from past students or current colleagues and may even own their own businesses.
* Applicable knowledge. The true motivation for pursuing a master's degree should be a desire to learn new strategies, grasp growing industry trends and seek exposure to time-tested models of business success. Most instruction is applicable the following day at work.
Institutions in Columbus are now making education accessible to even the most time-crunched students. With convenient night and weekend courses, professionals no longer need to put their lives on hold for an education.
Another way universities are catering to the busy business professional is by offering online coursework. Institutions are utilizing both in-class and online instruction. In fact, nearly 75 percent of colleges and universities have some sort of online program. In response to this growing trend, schools are offering "online courses with class" that require only one or two days of on-site instruction, giving students the ultimate in flexible education options.
Working adults are redefining the landscape of education in Columbus. They are not just debating academic theories in the classroom.
Instead, they are discussing with other working professionals how those theories are applied in our business world. It's a paradigm shift that is making education accessible and relevant to more people than ever before. Eric Ziehlke is associate campus director for the University of Phoenix-Columbus Campus. The University of Phoenix is the nation's largest private university, with more than 200,000 students at more than 142 campuses in the United States, Canada and Puerto Rico. Reach him at (614) 433-0095 or Eric.Ziehlke@phoenix.edu.
A friend of mine recently left a large company because the job he was doing was not the job that was in his job description. And no one had mentioned a possible discrepancy during the interview process.
He didn't leave without first discussing the situation with his supervisor, who told him that eventually, the job would develop into a match with the description. But the supervisor could not say when "eventually" would be.
Another friend was hired as a marketing/public relations professional when the company actually needed a graphic designer.
These discrepancies not only lead to disgruntled employees; the company also winds up short on the skills it needs. For example, in the marketing example, my friend had basic graphic design skills, but her real expertise lies in marketing. The longer she worked for the company, the more it became evident that her basic design skills were not enough to satisfy the job requirements.
You can avoid this problem by identifying company/department needs before you start the search for an employee. Perhaps your needs have changed since you created the position, and the job has morphed into something different.
During the current employee's exit interview, ask if the job responsibilities changed over time or if he or she expects the job to change in the future. When a person leaves a key position, it provides a prime opportunity to look at your current and future needs and revise the job description and even title.
And if you require different abilities, determine which are most important to the company. In today's specialized world, it is harder to find a jack of all trades. If you feel it is most important to have a person with marketing strategy skills in that position, then outsource your graphic design needs, for example.
And don't forget to advise the potential employee if you expect the job responsibilities to change, and accurately portray the current job responsibilities. You'll not only retain an employee, you'll make sure that employee has the skills you really need.
"It (unawareness of potential risks) can be really damaging to a company," says William Failor, executive director of Marsh Inc.'s Columbus office.
He says one of the most damaging situations arises when a company doesn't have enough coverage or is uninsured against certain risks.
Companies conducting business outside the United States must consider the risks of doing business overseas and how to manage them, says Failor. For example, if your company purchases a factory in France and wants to cut costs by reducing or eliminating employee benefits, you could run into trouble.
"In France, you have to have the agreement of the employees to reduce benefits," says Failor.
Risk management consultants such as Marsh can reduce these risks because they have local offices around the world, and the employees who staff them are versed in the local employment laws and risks.
"If you think you can apply American business philosophies, you could be in error," Failor says.
There are no limits to who might sue your company, says Failor. It's not just shareholders who can instigate a lawsuit; in today's post-Enron environment, employees, customers or vendors could get involved in a class action suit against a company's directors and officers if they feel they misrepresented the company's financial picture.
Failor says that although directors and officers insurance premiums have risen substantially in the past five years, it is still a good investment.
Smart Business spoke with him about the risks companies face and how they can address them.
Which insurance products are most popular with businesses today?
Our principal business is risk management. We serve a consulting role. We analyze a company's exposures and determine its insurance needs, and we go to the marketplace to find carriers that meet the company's needs.
We serve as an intermediary between the client and the insurance marketplace. The consulting arrangement is successful for companies because of our size. We have leverage with the carriers to get things done and get better pricing than smaller companies could get on their own. And this service is also our most profitable.
We provide all kinds of services, like claim management, but risk analysis and management is our signature capability -- it is certainly our bread and butter and one of the things we're known for.
Many companies don't consider liability issues until it's too late. How damaging can it be for a business to neglect risk management?
Uninsured losses can be damaging. A company would have to have significant cash reserves on its books to cover a loss. If you don't pay attention to risk, it will hurt you.
The thing about Marsh is that our services grow with the size of the client. We have professionals that can take a company through its infancy and expand with it. As a company grows, its needs can be more significant than a smaller company.
If you're in a business of distributing products, there is more exposure to the producer's liability. Our relationship is like that of a CPA and lawyer's; we guide the company through the landmines so the company can do what it does best -- running the business.
Directors and officers liability issues have become more prominent, partially due to Sarbanes-Oxley. How has this impacted Marsh's business, and with how much understanding does your typical public client come to you?
It has had major impact. Enron has caused an upheaval, and more people are looking for solutions than ever before.
Most companies never thought they were susceptible to suits. The average claim against a company in 2001 was $7 million; now it is $23 million. Obvious causes are injury to a representative of the company.
Lawsuits put companies in a difficult position. They take the focus off running the company as it defends itself. Companies were aware of shareholder class action suits, but now know that employees, customers, vendors and regulatory firms can also get involved in directors and officers claims.
If a company overstates its earnings and then restates its financials, it opens a can of worms and the potential for a D&O suit. D&O coverage is grossly misunderstood. We do presentations to boards describing what it is and what it isn't, how to avoid the pitfalls and craft coverage that minimizes exposure.
Along with the size of claims, the cost of coverage has gone up. Publicly traded companies will have a substantial outlay of money for the premium. But that is starting to slow down a bit. The premium is still substantial but is less than the significant potential costs involved in a suit.
What can businesses do to better mitigate international risk?
As an international broker, we can provide a great deal of information in each domicile. We also put the company in touch with local officers for cultural concerns.
A client wanted to buy a company in France and determined he could cut its costs by reducing or changing employee benefits. He then discovered that, in France, a company has to have the agreement of its employees to reduce benefits, so the cost reduction was never going to occur.
We obtain accurate information from local governments and provide cultural resources.
How have your clients' needs changed over the past five years, and how have those changes affected your services and operations?
We have come through a very hard market the last three years. Prices have gone up, and availability of products and limits were reduced.
But the economy is getting better moving forward. Clients have been looking for better ways to manage risk over the last four years. Some larger companies have set up a number of captive insurance companies -- wholly owned subsidiaries that act as an internal insurance company. These captive companies take the burden of risk off the company in a more cost-stable way.
Have more companies initiated crisis plans since Sept. 11?
Yes, but we've also seen this as an outgrowth of Sarbanes-Oxley, changing management practices and how one company relates to another. Because of Sept. 11, we all learned that we need a better understanding of where our employees are and that we should develop a plan to get back in business after something horrible happens. How to reach: Marsh Inc., (614) 460-8152 or www.marsh.com
He didn't like it.
Six months later, Walter left and bought his own company.
"I just wanted to find and run my own business," he says. "I never thought too deeply about the level of success. And I could never have envisioned what transpired over the past 30 years. When I purchased a food distribution company in 1971, I could have no way of knowing we would become such an integral player in the health care industry."
Like any budding entrepreneur, Walter did his homework. He researched how to raise money, write a business plan and other Business 101 essentials. Looking back, he admits that what should have been his two greatest weaknesses -- youth and inexperience -- actually worked in his favor.
"I had never started a business before, so nothing seemed insurmountable," he says. "I had no preconceived ideas of how it should work."
Walter spent a considerable amount of time studying business in the library, but also hit the streets and talked with successful business owners.
"As a result, I raised the capital necessary to purchase the company that would become Cardinal Foods," he says. "I found a way to work through each new challenge. This doesn't mean that I didn't make mistakes. But I learned from them and tried not to make them twice."
It definitely was no mistake when Walter decided to shift the company's focus from wholesale foods to health care. He says he looked around and believed there was little room to grow in an already crowded wholesale food industry. But, he realized the company's distribution expertise could be leveraged in a different marketplace.
"The food distribution industry had already consolidated by the time I entered the market in the early '70s," Walter says. "We had a great business, but opportunities for growth were limited, whereas the pharmaceutical distribution industry was fragmented and had tremendous growth potential. Around 1980, we decided to apply our core distribution skills to the pharmaceutical industry, and soon thereafter, purchased The Bailey Drug Co."
Over the next 15 years, Walter invested heavily in Cardinal's new drug distribution business.
"Through greater automation, innovative logistics changes and a focus on our customers, we are now responsible for distributing a major portion of the nation's drug supply," he says.
While that sounds impressive, it is an understatement. Cardinal Health distributes 2.5 million pharmaceuticals every day -- a statistic Walter does not take lightly.
"We take very seriously the important role Cardinal Health has to ensure the safety, cost-effectiveness and easy access to pharmaceuticals in this country," he says.
And Walter's efforts over the past 10 years have underscored that belief, helping Cardinal Health grow considerably, diversify its products and services portfolio, expand to offer drug development, delivery, packaging and manufacturing services to health care and biotechnology companies. His company has become a global leader in the health care industry, boasting annual revenue of $56.7 billion and 55,000 employees worldwide.
Despite his position as the founder and head of a multibillion dollar world leader, Walter remains steadfast in his dislike for large corporations. He has spent the last three decades fighting bureaucracy in his organization and working to maintain the atmosphere of a smaller, more nimble company.
"We still operate with this entrepreneurial spirit today," Walter says proudly. "We try to keep bureaucracy to a minimum. We take calculated risks. And we tend to be relentless in efforts to improve. I believe it is good to have a healthy fear of the future, and that notion keeps us on our toes."
Walter, who has been compared to Wal-Mart founder Sam Walton, keeps this entrepreneurial spirit alive by focusing on customers and the company's employees.
"I'm very proud of the success of Cardinal Health," he says. "But what is most gratifying is to see how thousands of people have worked so hard to shape the company into what it is today. We have a culture geared toward success and helping customers."
Tony Rucci, Cardinal's chief administrative officer, says this is a common mindset among the company's senior executive team.
"We are always on guard when it comes to maintaining our culture," Rucci says. "We talk about it at executive committee meetings. We ask, 'Have we done anything too bureaucratic? Are there too many approval levels?'"
And, Rucci says, preserving the entrepreneurial culture is a primary consideration when evaluating potential acquisitions.
"We spend even more time and energy to determine whether a company we are interested in acquiring is a fit with our culture and values than any other factor," he says. "We have walked away from deals that fit our strategic and financial criteria but aren't a cultural fit."
Ascending the health care food chain
For most of its life, Cardinal Health focused on its biggest strength- distribution. But Walter has relied on acquisitions as his primary means of achieving growth.
"Cardinal has been extremely active," says Rucci. "Especially in the last 10 years."
But Walter doesn't discount the company's ability to delve deeper with existing relationships.
"We have acquired a number of companies (nearly 100)," he says. "But we have also experienced strong organic growth in key business segments."
It was just about 10 years ago when Walter and his executive team decided to diversify.
"Acquisitions have helped diversify the business and grow in important markets," Walter says. "In 1995, we made an important decision to diversify our business and provide more value to health care customers than just distribution services. At the time, this was a real strategic challenge."
Walter says about the time the company started this transition, its earnings were $60 million, exclusively from drug distribution. In its most recent fiscal year, earnings had increased to about $2.5 billion. More important, Walter says, 60 percent of those earnings came from businesses Cardinal built to complement the drug distribution side. Today, the company has four business segments -- provider services, pharmacies, manufacturing,g and research and development - each of which make a strong contributions to the company's bottom line.
Walter's acquisition strategy has ensured that the companies Cardinal acquires blend in well with the existing corporate structure.
"Our strategy is simple," Walter says. "First, an acquisition must be a strategic fit in the health care industry. We see a lot of interesting proposals, but if they fall outside health care, we aren't interested. Second, the company we acquire must have a culture and values that fit with Cardinal Health. We are an ethical, performance-driven company, and we want to match with people that share those values. And third, it must make financial sense for our shareholders. We look for market leaders, which typically aren't bargains. But that's OK, as we expect to add value to the acquired company."
Rucci puts it another way.
"The companies blend easier because they share similar values," he says. "And because of those values, we can trust the newly folded company's leadership to choose to do the right things. That is the key that distinguishes our strategy and why we've been so successful integrating companies we've acquired."
But this strategy is not without its challenges. Rucci says even as Cardinal continues its growth mode, it is in the midst of a radical shift in its drug distribution model.
Previously, because of its size, Cardinal enjoyed deep purchasing discounts from the big pharmaceutical companies.
"We could buy product and hold it, then sell it at a later time," says Rucci. "As a result, we realized gains because of price increases."
But recently, he says, drug manufacturers have reversed their policies, saying that too much product has been pushed into the distribution channel and, therefore, are no longer allowing advance purchasing. To counter this trend, Cardinal is transitioning to a fee-for-service business model.
"We have met with 63 of our largest suppliers and shown them the improvements we can offer," Rucci says. "Faster service and more information. We have found that they are gratified with what we are offering."
Despite this business model transition, don't look for Walter's acquisition appetite to dwindle. Rucci says the health care industry is expected to grow, comprising up to 18 percent of the country's Gross National Product over the next 10 to 15 years. Cardinal's financials (the company expects this year's cash flow to be $1.3 billion) have put it in great position to purchase more companies. And Walter is confident that his acquisition strategy will translate into more successful purchases.
"I believe our track record speaks volumes," he says. "We have an excellent history of successful acquisitions, which has helped us build market leadership and deliver great value to customers." How to reach: Cardinal Health, (614) 757-5000 or www.cardinal.com
The Walter file
Born: 1945, Columbus
Education: Bachelor of science, mechanical engineering; MBA, Harvard Business School
First job: Engineer with a large corporation.
Career moves: Tried a large corporation (left after six months); in 1971, started the company that became Cardinal Health
Boards: American Express, Cardinal Health, Viacom, Battelle Memorial, Ohio University
What is the biggest challenge you've faced in business?
Our challenges today are around attracting and retaining great people, ensuring we have a motivated and diverse work force, staying abreast of the changes in our vast industry and challenging ourselves to always look for ways to increase the value we can bring to customers.
What is the greatest business lesson you've learned?
The seller always knows more than the buyer. We started Cardinal Health as an acquisition, so I've always been comfortable acquiring companies.
What I learned early was that the seller always knows more about their business than the buyer ever will. For this reason, it is important to pair with market leaders and ensure there is a strong cultural fit between the two organizations. Through nearly 100 acquisitions over more than 30 years, I've tried to never forget this simple rule.
Check 21 will lead to dramatic changes in the payments industry by encouraging banks to reduce the amount of paper in the banking system. Instead of paper checks, banks will exchange electronic images. However, check fraud can still occur if you do not take simple steps to mitigate the risk.
The Association of Certified Fraud Examiners' Report to the Nation found that fraud and abuse cost U.S. organizations more than $400 billion annually. The report also found the most costly abuses occurred in organizations with fewer than 100 employees. Increased affordability of personal computers, laser printers, color copiers and scanners enable criminals to easily perpetuate check fraud.
Losses not only include the amount of the fraudulent check(s), but also administrative time and paperwork, considerable aggravation and worry, and the cost of any efforts to recover lost funds. A single incident of check fraud is likely to cost a business more than the basic fraud prevention measures that could help avoid it.
Recent changes to the law make it extremely important for a company to actively protect itself against check fraud. Businesses now share responsibility for preventing fraud. For example, if checks are stolen from a company and cashed, the company may have to absorb the loss.
Businesses that can demonstrate actions have been taken to prevent fraud are better protected against liability in loss disputes.
There are several steps you can take to lessen the risk of fraud. Here are a few.
* Know your employees. The Report to the Nation found that the average organization loses about 6 percent of total annual revenue to fraud and abuse committed by its own employees. Regular open communication between managers and employees about how fraudulent activities can be prevented can significantly reduce losses from check fraud.
* Maintain a secure location for all checks, deposit slips and monthly bank statements, and restrict who has access to them.
* Find a reputable check printer that offers security features such as a basic watermark. Do not use generic blank check stock, which can be duplicated easily by fraud artists. Your financial institution can recommend trusted vendors.
Check 21 will make it even more important to have the proper type of checks printed to enhance the electronic image of the check you will receive from the bank.
* Ensure strong internal accounting controls are in place. Separate check writing and reconciliation responsibilities so that one person does not have access to the entire process.
* Reconcile your bank accounts each month. If a discrepancy is discovered long after the check was issued, your company could be liable for the loss. Talk to your banker about how you will receive your check and account information, since eventually paper checks will not be part of the reconciliation process due to Check 21.
* Set dollar limits on checks, and require more than one signature on high-dollar checks.
* Watch for checks made out to cash or checks that are cashed out of sequence, which could indicate there are renumbered, counterfeit checks.
* Shred documents that contain account numbers or other sensitive financial information.
There are also fraud prevention steps you can take through a partnership with your bank. Positive Pay is an automated service that monitors checks written and detects unusual or unauthorized activity. The bank reports any suspicious or unauthorized items to the business customer, who determines if a check should be paid. Historically available to larger organizations, Positive Pay is now also available to small businesses through online banking programs.
Consider direct deposit. Direct deposit of payroll will lessen the possibility of an employee losing a paycheck that can later be used to craft a counterfeit check, and will reduce the number of checks issued by your company. And direct deposit is much more cost-effective than issuing payroll checks.
Prevention is a small business owner's best weapon against fraud. Understanding the impact of Check 21, taking simple steps and investing in a few effective tools to fight fraud will pay big dividends in the long run. Ryan Burgess is Vice President of Corporate Treasury Management and Public Funds for Fifth Third Bank. Reach him at (614) 744-7583 or firstname.lastname@example.org.